Currency rates to spike in late 2011

Financial experts have warned the dong-dollar exchange rate may hike in late 2011 on the back of soaring local demand.

The dong-dollar exchange rate in the unofficial market and that set by central bank is now in a tight range. Accordingly, the inter-bank exchange rate continues to be stable at around VND20,620 per dollar, and the actual rates at some local state-owned and joint stock commercial banks currently fluctuate from VND20,530 to VND20,640 per dollar.

The exchange rate is forecast to remain stable at least in the upcoming period. However, the State Bank statistics show that the banking sector saw 22.2 per cent growth in dollar outstanding loans while dollar deposits just hiked 8.9 per cent in 2011 by June 10.

Financial experts said serious imbalance in dollar lending and deposits in the first half of the year would be a significant threat to future dollar supply and potentially pressurise the exchange rate when dollar credit contracts come to maturity by the year’s end.

Ho Chi Minh City Open University’s Accounting-Finance-Banking Faculty head Nguyen Van Thuan assumed central bank policies had positive impacts on the foreign exchange market.

“However, it takes time for the dollar lending amounts to gradually go down since it had earlier shot to a high level,” Thuan said.

In fact, dollar credit currently accounts for around 19-23 per cent of the banking sector’s total outstanding loans.

“Vietnam status as a country facing a high trade deficit is still the fact of life and this will pressurise the dollar supply, especially on the back of current rising trade gap,” a National Financial Monetary Advisory Council member Dr. Tran Du Lich said.

From early 2011 until June 10, the State Bank reportedly bought around $3 billion to consolidate the national foreign reserves.

State Bank governor Nguyen Van Giau recently asserted that the central bank would further efforts to strictly control the forex market, gradually pull down trade deficit and basically stabilise the payment balance to keep the exchange rate stable.

Giau said outstanding dollar loans would drop in the wake of recent monetary policies such as those associated with dollar reserve requirement hiking, dollar ceiling deposit rate easing or restricted dollar loan provision.

Japan woos contract labourers

Vietnamese workers going to Japan rose sharply in the past months.

According to Ministry of Labour, War Invalids and Social Affairs’ Overseas Labour Management Department (OLMD) figures, over 200 Vietnamese labourers left for Japan to work each month in the first three months of 2011. The figure sharply hiked to around 600 in April and slightly fell to around 500 in May.

The number of orders placed at the OLMD relevant to bringing Vietnamese labourers to work in Japan accounted for more than 70 per cent of labour export contracts local firms submitted to the department in recent months, according the OLMD.

“Vietnamese workers are generally appreciated by their Japanese employers. After the earthquake and tsunami disaster in March 2011 in Japan, their image in the eyes of Japanese employers was significantly enhanced,” said general director Nguyen Xuan Vui at Airseco, a labour export firm.

According to Vui, when the horrendous earthquake and tsunami took place in Japan, scores of Vietnamese labourers were calm and willingly shared difficulties with their enterprises. “That was why there was a sharp rise in the number of local labourers leaving for Japan in the past months,” Vui said.

“This is a good time to promote labour export to Japan,” said OLMD’s deputy head Le Van Thanh, adding that the department had just forwarded dispatches to the labour, war invalid and social affairs departments in a number of Central Highlands and Mekong Delta provinces such as Dak Nong, Soc Trang, Gia Lai, Kon Tum and Tra Vinh asking them to prepare each location 20 applicants to join the upcoming session to select manpower for further training and work in Japan.

Local labour export firms have reportedly signed contracts on supplying hundreds of labourers to Japanese firms. For instances, Airseco needs to enroll 200 labourers to work in diverse areas of auto spare parts manufacturing, metal plating, welding, food processing and garment in Japan. Besides, the Labour Overseas Development Joint Stock Company (LOD) wanted to recruit 300 labourers to work in shipbuilding, agricultural product processing and mechanical engineering areas in Japan.

Under the Vietnam-Japan trainee cooperative programme, when working in Japan, Vietnamese labourers do not have to advance deposits but only have to pay passport, visa and health check fees.

During three years in Japan, the labourers enjoy a trainee allowance of around $800-$1,000 per month in the first year, from the second year they will receive a monthly pay of around $1,000-$1,500 per month (not including extra pay for additional working hours) under contracts signed with the employers.

After completing three years in Japan, each labourer will be entitled to a bonus of JPY600,000 (VND153 million) given by the Association for International Manpower Development of Medium and Small Enterprises (IMM Japan).

Suspension of operations at Dung Quat to cost $1 million a day

Vietnam’s first oil refinery, Dung Quat, will suspend its operations for 2 months for the first planned maintenance period, beginning July 15.

The suspension may result in a daily loss of around $1 million in revenues, said the head of Binh Son Refining and Petrochemical Co. Ltd (BSR), the facility’s operator.

He emphasised, however, that the maintenance is needed to ensure smooth and safe operations of the plant.

BSR has signed contracts with five local and foreign contractors worth $25 million in order to provide maintenance services, including three from South Korea and one from Singapore.

BSR forecast that Vietnamese petroleum wholesalers would have to import one million tonnes of petroleum during suspension.

Since it became operational in February 2009, the Dung Quat plant has turned out over 10 million tonnes of refined fuels, and had revenues of over VND160 trillion ($7.73 billion), according to BSR.

The state-owned Vietnam National Oil and Gas Group (PetroVietnam) was the investor of the Dung Quat, which cost more than $3 billion.

The facility was designed to have a capacity of 6.5 million tonnes per year, which would meet 30 per cent of domestic petroleum demand.

PetroVietnam plans to raise the refinery’s capacity to nearly 10 million tonnes per year by 2015.

Hoa Lac hi-tech park expands foreign cooperation

The Hoa Lac Hi-tech Park has been cooperating well with the Asian Science Park Association (ASPA) to reach investment opportunities with a wide range of foreign partners.

In cooperation with the Ministry of Science and Technology, the Park and ASPA organised meetings between Vietnamese businesses and Republic of Korea (RoK)’s partners, which sought partnerships in electronics, information technology and other fields.

The activity contributed to supporting enterprises of Vietnam and the RoK to promote trade, expand markets and create more opportunities for business cooperation.

In June, the Park also helped the RF Micro Devices Inc (RFMD), a big group of the US operating in wireless semiconductor device production, visit and seek investment opportunities in Vietnam .

With its need of business and production extension, RFMD has been carrying out market surveys and research to pave the way for building its factory in Vietnam .

In the framework of cooperative activities with foreign partners in 2011, the Hoa Lac Hi-tech Park and the Tai Zhong Science Park of Taiwan signed a memorandum of understanding (MoU) to boost cooperation in information and technology exchange through transfer of technology, enterprise establishment and investment.

Under the MoU, the two sides will develop partnerships between enterprises of both sides as well as enhance cooperation in staff training.

Established in 1997, ASPA is a non-government organization working to promote development of science –technology, industry and economy in Asia as well as supporting enterprises to seek new partners and markets.

The Hoa Lac Hi-tech Park has become an official member of the ASPA since 2008.

Rural waste disposal plant comes on line

Ha Tinh's Farmers Association has completed construction of a waste disposal facility that turns organic waste into fertiliser.
The plant, in Can Loc District's Thien Loc Commune, can process 29 cubic metres of waste in 30 days.

The plant cost VND500 million ($2,500) to build.

Firms get loans to store disaster relief goods

The Ha Noi People's Committee has decided to offer interest free loans totalling VND85 billion (US$41 million) to three companies to store disaster relief goods for residents.

The companies have been instructed to store cereals, water, candles, meat, fish and milk to cover potential needs this year.

The city's Department of Finance is in charge of transferring the money to the companies.

Trade villages face challenges
 
Lack of capital and poor market demand are among the biggest challenges faced by Viet Nam's trade villages, said State officials at a workshop held in Ha Noi yesterday.

Trinh Quoc Dat, head of the Training Section of the Viet Nam Trade Villages Association, said that 60 to 70 per cent of trade villages lacked capital for production, leading to difficulties in securing adequate production materials and improving product quality.

"The Government has a policy to offer loans to trade villages, but it isn't so easy to get them," said Dat.

Speaking at the workshop on development of trade villages, Dat cited the high interest rates charged by banks and complicated loan procedures as reasons that limited trade villages from accessing much-needed funds.

Many trade villages also suffer from poor demand for their products. Dat said their products were not competitive enough in both the domestic and international markets due to poor quality and limited range of designs.

Officials said that a large proportion of craftsmen working in trade villages were not young and some were even disabled.

"The youth in trade villages are not very interested in pursuing their ancestors' trade," said Luu Duy Dan, deputy chairman of the Viet Nam Trade Villages Association, citing low incomes as the main reason for young people looking elsewhere for work.

Dan said young people preferred working for factories and plants to earn more stable incomes.

Even trades with popular products faced many problems, with one of the biggest challenges being a lack of skilled craftsmen.

Artisan Nguyen Van Trung, director of the Ha Noi-based Phu Vinh Vocational Training Centre for Bamboo Products, said the market for bamboo products was now growing thanks to some creative designs and artful production, but export companies still grappled with a lack of these products.

The lack of skilled craftsmen poses a challenge to officials working on expanding vocational training to workers.

Participants at the workshop agreed that offering training, especially in the making of craft work for people in rural areas, was of great importance in order to both ensure stable incomes and help preserve and develop traditional trades, which were acknowledged as part of the country's cultural values.

The Government is taking measures to tackle the problems in a range of ways.

According to Chairman of the Viet Nam Trade Villages Association Vu Quoc Tuan, the total expense allotted by the State to vocational training under the Plan on Vocational Training for Workers in Rural Areas until 2020 was up to VND24.7 trillion (US$1.2 billion).

Under the instructions of the Ministry for Labour, Invalids and Social Affairs, the General Department for Vocational Training and Trade Villages Association is working to supervise the operations of 20 vocational centres and companies participating in a pilot programme to offer basic training in 26 traditional trades.

More than 2,610 workers in 10 cities and provinces are involved in the programme.

The Trade Villages Association is also developing new training models for the piloted areas.

These include training to create and develop new trade villages as well as on developing existing villages. The training will also focus on the importance of developing trades in villages that suit the availability of resources in the area.

At the workshop, representatives from vocational training centres asked for the Government's continued support and favourable policies, and called for tax cuts and more support to access loans.

According to the Ministry of Agriculture and Rural Development, trade villages have created jobs for about 24 per cent of workers in rural areas.

Agricultural exports to reach $12b in first half

Agricultural and seafood exports will total US$2.1 billion in June, according to the director of the Ministry of Agriculture and Rural Developmnt's Planning Department, Trang Hieu Dung.

"The high export turnover in June has helped raise the export turnover for the country in the first six months of 2011 to nearly $12 billion – an increase of 38.7 per cent against the same period last year," Dung told a meeting in the capital city yesterday.

Earnings from primary agricultural products in the first half were about $7 billion, an increase of 52.9 per cent over the same period last year, while seafood exports totalled $2.6 billion – an increase of 28 per cent – and forestry products an additional $1.9 billion – an increase of 16.8 per cent.

Nguyen Tri Ngoc, director of the Department of Crop Production, said that farmers in the north were expecting to have a bumper winter-spring rice crop – 19.74 million tonnes in yield, an increase of 260,000 tonnes over the previous winter-spring crop.

The southern yield was estimated at 12.54 million tonnes, an increase of 110,000 tonnes over the previous crop.

Faced with harsher weather, farmers want to put 7.37 million hectares under rice cultivation for the next crop, with an expected output of about 41 million tonnes – an increase of 1 million tonnes over 2010.

Hoang Kim Giao, head of the Department of Livestock Production, said the long cold spell in early 2011 resulted in the loss of nearly 100,000 heads of cattle. Diseases such as foot-and-mouth, blue-ear and avian flu also wreaked havoc on farmers.

"Since September 2010, foot-and-mouth disease has killed 160,000 cattle nationwide," said Giao.

Addressing the meeting, Minister of Agriculture and Rural Development Cao Duc Phat urged all localities to focus on improving the quality of agricultural products and the efficiency of production rather than in higher yields. He also called for greater uses of high technology in agricultural production.

He said he hoped that the nation's agricultural productivity would increase by 20 per cent over the next decade, and reiterated the Government's commitment to continue to support farmers in finding markets for agricultural products, including rice and coffee.

"Government has decided to buy 1 million tonnes of rice to help keep the market price at the level of VND5,000/kg," Phat said.

The buying up of rice was designed to sustain the rice market during bumper or poor crops, he added.

Electronic firms switch to services
 
The domestic electronics industry is facing big challenges as businesses commence to switch between different strategies, according to the Viet Nam Electronics Association.

Many companies have opted to supply services instead of producing electronic products in order to increase profits, said Tran Quang Hung, the deputy secretary of the association, .

Hung attributed the challenges that companies face to the low tax rate applied to imports, which, for spare parts, is currently around 6 per cent and around 0 per cent for complete products.

Due to the weak support industry and low tax rates, most companies preferred importing and distributing spare parts to achieve higher profits, Hung said.

Chairman of Minh Viet Investment and Industry JSC Nguyen Nhu Thang said that his company has been losing contracts due to many State-owned companies cutting down on expenditure, high banking rates necessitating the import of products, opposed to producing them, in order to meet market demand.

Similar to the Minh Viet Company, many other producers and assemblers have imported volumes 3-4 times higher than the volumes they produce.

Traders believe that the situation would worsen if regional countries cut prices and export taxes.

In May, the General Department of Customs reported that Viet Nam had poured US$471 million into importing computers, electronic products and spare parts, a month-on-month increase of 4.9 per cent.

During the first five months of this year, the country spent $2.23 billion on electronic imports, a year-on-year increase of 25.6 per cent.

China remained Viet Nam's largest partner, followed by South Korea, Japan and Malaysia.

Projects to boost garment industry

A series of projects begun recently will enhance production capacity and help maintain Viet Nam's position as one of the world's major garment and textile exporters.

The projects were mainly in developing raw materials like yarn and value-added finished products like suits, the Dau Tu (Investment Review) newspaper said, citing industry insiders.

The raw material issue was a headache for the garment and textile sector, said Tran Van Pho, general deputy director of the Viet Nam National Garment and Textile Group.

Therefore, investing in expanding production of raw material and high quality products was a step in the right direction because it would increase local material content and Viet Nam's garment and textile products competitiveness, he said.

This would also help the sector develop in a sustainable manner, he added.

One of the major projects to enhance production of raw materials was the VND1.3 trillion (US$63 million) Nam Dan garment and textile cluster project developed by the Ha Noi Textile and Garment Joint Stock Company (Hanosimex) in central Nghe An Province's Nam Dan District.

The project is divided into two phases. Costing VND850 billion ($41.2 million), the first phase will involve in building support facilities and two fiber factories producing about 300,000 spindles of spun yarn each.

The first phase of the project is expected to be completed in 2013.

With an investment capital of VND500 billion, the second phase will include a factory producing high quality yarn and two garment factories each with an annual capacity of 2.4 million pieces, apart from infrastructure facilities.

Another project has been invested in by the Nha Trang Garment and Textile Joint Stock Co, an affiliate of the Phong Phu Corporation. This factory, estimated to cost VND350 billion ($16.98 million), will be able to produce 40,000 spindles of spun yarn.

Tran Quang Nghi, chairman of Nha Trang Garment and Textile JSC, said they were speeding up construction of the project so that it can be put into operation by the end of this year.

Once put into operation in the central province of Khanh Hoa, the factory will supply polyester and TC yarn (65 per cent polyester, 35 per cent cotton) as well as other high quality threads for domestic consumption and export, he said.

However, local traders told Viet Nam News that, while the new projects were indeed good for the local industry, Viet Nam was far away from being able to substitute imported materials with those that were domestically produced.

The establishment of the Dung Quat refinery would certainly supply raw materials needed to make polyester fibre and yarn, but as of now, 70 per cent of the materials needed by the industry were being imported, and this was unlikely to change significantly in the near future, they said.

They noted that the yarn produced here still had to be exported to other countries to produce quality fabric needed to make garments.

Meanwhile, the Hoa Tho Textile and Garment JSC has started work on the Hoa Tho Veston Plant in central Da Nang City.

The VND86 billion ($4.17 million) plant will be capable of producing 400,000 suits per year, and will be the first deluxe suit manufacturer in the central region.

It is projected to be put into operation by the end of this year and bring more than $10 million in export revenues annually.

Auto imports increase sharply ahead of restrictions

The importation of completely-built-up (CBU) cars in the first half of this year increased strongly as traders sought to avoid restrictive measures imposed by the Ministry of Industry and Trade.

In the first half of June alone, the number of CBU cars imported surged by 42% month-on-month to 3,133 units, according to statistics of the General Department of Customs.

In the year to June 15, according to the customs, nearly 30,000 automobiles worth US$561 million had been imported, including more than 20,000 cars of less than nine seats worth US$259 million.

The soaring import is attributed by experts to Circular 20 recently issued by the Ministry of Industry and Trade, which requires automobile importers to fulfill more procedures when trading in vehicles under 10 seats as from June 26, 2011. These restrictive procedures include a letter of attorney from producers, agent contracts legalized by Vietnamese diplomatic offices overseas and auto maintenance certificates granted by the Ministry of Transport.

Unauthorized auto importers who have thousands of showrooms nationwide said that the ministry’s Circular would force numerous import car companies to go bust because they will find it difficult to obtain the documents as required. So they had rushed to import cars before Circular 20 came into force.

The owner of an imported car showroom on Nguyen Oanh Street in the city’s Go Vap District said that his company just imported more than 20 cars from South Korea to avoid the preventively stringent requirements specified in the circular.

Many unauthorized auto importers said that up to now they cannot fulfill the requirements.

Nevertheless, the ministry insisted on the need for car importers to disclose the legal origins of vehicles because consumers need to be better protected.

Some unauthorized auto importers said they will shift to importing used cars. But, the Ministry of Finance is compiling a draft decision raising the tax on used passenger cars. If the draft document is approved by the Prime Minister, luxury cars will find it harder to penetrate Vietnam.

Auto importers said that it was difficult to do car business now given all the new restrictive policies, including a decision by the Government in the middle of this month to raise the registration fees for cars of nine seats or below to the 10-20% range from the current 10-15% with effect from September 1 this year.

Traders said import and excise taxes are already high, so the higher registration fees would pile more pressure on car prices. There is a high possibility that the market could contract this year, they said.
 
Sugar prices down, fertiliser prices up

The price of sugar had gone down while those of six other essential goods had gone up in the first four months of the year, the Ministry of Finance said.

Chemical fertilisers showed the highest price increase, up 25 per cent, while the lowest was animal feed, up 1.05-2.56 per cent.

Enterprises in Ha Noi and HCM City adjusted the price of oil and gas five times, up 4.55 per cent to 11.92 per cent. Prices of other commodities like milk powder, cement and steel also increased.

The ministry detected four out of 21 enterprises had set unfairly high prices. For example, Hoang Mai Cement Joint Stock Co increased its average selling price by 18.95 per cent or VND163,600 per tonne, while input material prices rose 16.3 per cent compared to last year.

Many enterprises had not followed regulations in registering, declaring and listing prices, the ministry reported and it had found cases of tax law violations, collecting more than VND20.7 billion (US$1 million) in unpaid taxes and fines.

The ministry said it had asked enterprises to maintain reasonable prices.

Money still flows into city’s economy amid uncertainties

Investment capital into HCMC in the year’s first half have still risen strongly despite numerous macro-economic uncertainties, with the domestic private sector seen as the driving force, authorities said at a review meeting on Monday.

The total domestic investment capital in the January-June period is up a staggering 30% year-on-year to VND172.7 trillion, or roughly US$8.4 billion, including VND100 trillion of funds injected into operational projects, according to the meeting presided over by HCMC chairman Le Hoang Quan.

The foreign direct investment (FDI) sector has also posted a substantial increase in pledged capital, at US$1.467 billion, growing by 66% year-on-year, the city’s Department of Planning and Investment said at the meeting. However, if additional funds pledged by operational projects were included, the total amount would rise 73% over the year-earlier period to nearly US$1.7 billion.

Even investments sourced from the State budget are up a robust 15.9% to VND51 trillion, or roughly US$2.5 billion, despite the Government’s demand to slash State projects to help fight inflation. Meanwhile, projects funded by official development assistance (ODA) has seen as much as VND2 trillion disbursed, with some VND450 billion being local counter capital and the remainder of VND1.54 trillion being foreign funds, or 280% of the target for the first phase.

Bank credits are still the dominant source of investment capital, as the total amount of outstanding loans has grown 23.8% to VND756.4 trillion, with slightly over half being short-term loans, said the central bank’s HCMC Branch at the meeting. However, funds from banks will certainly decline in the rest of the year as the central bank is resolute to enforce the credit growth cap of 20% for this year, meaning banks will have to tighten their purse strings in the rest of 2011.

Overseas remittances have picked up 27% to US$2.47 billion.

High investment in the year’s first half has helped the city maintain its growth momentum.

The city’s total gross domestic product value in January-June is estimated at VND200 trillion, rising 9.9% against the same period of last year.

The service sector has remained the key pillar of the economy, accounting for 52.4% of the total, or some VND105 trillion, while industrial manufacturing and construction as a whole makes up 46.6%. Agriculture makes up a tiny VND1.82 trillion, or less than 1% of the city’s GDP.

Regarding foreign trade, import expenditure growth outpaced export value growth, although the balance was tight. Import spending in the first half increased 28.6% to some US$12.8 billion, while export revenue rose 14.7% to US$12.5 billion, according to a report from the city’s Department of Industry and Trade cited by Chairman Quan at the meeting.

Several officials at the meeting showed concerns that the economic outlook for the rest of the year remained grim, especially the high interest rate that will choke off funds for enterprises. Some said that if the lending rate – currently hovering above 20% - was not reduced, many enterprises would go bust before the year is out.
 
Vietnamese drink more milk

The milk consumption of Vietnamese has increased from eight to nearly 15 litres per person per year during the last decade, figures from the Department of Food Safety and Hygiene have shown.

Despite the increase, 21.7 per cent of the total number of children are undersized and 30 per cent are underweight.

Nguyen Cong Khan, head of the Ministry of Health's Department of Food Safety and Hygiene, said most Vietnamese did not understand the ads about milk and the instructions on how to use milk or dairy products.

They had no idea how to choose the best milk for them, Khan noted.

Rice exports rise in first six months

Viet Nam exported 3.5 million tonnes of rice in the first six months of this year compared to 2.9 million tonnes for the same period last year.

This year's exports to date earned US$1.7 billion, according to the Viet Nam Food Association (VFA).

It said farmers in the Mekong delta, Viet Nam's largest rice bowl, had harvested more than 210,000ha of rice out of a total cultivated area of 1.6 million hectares.

The average yield was 5 tonnes per ha, up 0.2 tonnes over last year's yield for the same period.

Cabinet factory opens in north

Hawee Manufacturing and Trade Company has opened an electric cabinet plant in Tien Son Industrial Zone in the northern province of Bac Ninh.

The plant, covering 10,000sq.m, costs VND42.3 billion (US$2 million).

It has been designed to manufacture cabinets and cable ladders with high-quality input from international corporations.

Petroleum imports climb in first half

Petroleum imports for the first six months of this year totalled US$5.5 billion, a year-on-year increase of 67.6 per cent, the General Statistics Office reported.

The total amount of imported petroleum reached 6.12 million tonnes, up 16.5 per cent against the same period a year ago.

Imports of liquefied gas amounted to 359,000 tonnes, costing $334 million.

Auto imports soar in H1

Automobile imports in the first half of this year reached US$1.6 billion, beating last year's figure by 16 per cent, according to the General Statistics Office.

About 36,000 completely-built motorbikes were imported in the period at a cost of $52 million, down 8.3 per cent compared to last year.

Clinker, cement exports up 13.6%

The Viet Nam Cement Industry Corporation (Vicem) exported 610,000 tonnes of clinker to Bangladesh, Myanmar, Hongkong and Singapore in the first half of the year.

Another 30,000 tonnes of cement were exported to Laos and Cambodia during the period.

The total export value of the two products for the period amounted to nearly US$20 million.

This was an increase of 13.6 per cent compared to the same period a year earlier.