Imported goods’ prices drop as dollar depreciates

As the greenback has lost as much as 8 percent of its value against the Vietnam dong since early this year, many imported goods have become cheaper.

At an electronic store on Ho Chi Minh City’s District 1, for instance, prices of certain imported products such as headphones, mobile phones and other electronic components have dropped by 8 to 10 percent as the greenback has slumped to VND20,600 per dollar from VND22,600 per dollar since January.

An employee of the store said most electronic stores and supermarkets in HCMC are adjusting their prices on a daily basis based on the constantly changing exchange rate in order to stay competitive.

Many food importers have also announced their price reduction.

Doan Ngoc Tho, director of HCMC-based THO Company, said wholesale prices have fallen by 15 percent since late June as the exchange rate has declined by 7 percent to 8 percent since the beginning of the year.

In the children’s toys sector in which 90 percent of the products available on the market are imported, prices have also gone down by 6 percent to 7 percent.

Other products such as cosmetic, beverage and agricultural products have also been priced down.

Nguyen Vu, a trader of cosmetic products imported from Malaysia, said since he used to buy dollars at the black market to import products, he would certainly have to reduce prices when the greenback depreciates.

But he said with certain products such as shower gel and shampoo, traders would only reduce prices slightly because of rising transportation costs.
 
NA passes tax incentives

The National Assembly yesterday passed a resolution which will offer numerous tax incentives to individuals and businesses.

According to the resolution, from now until December 31, individuals who earn less than VND9 million (US$438) a month will be exempted from personal income tax.

Personal income tax will be not levied on dividends earned from investments in the stock market or businesses and a 50 percent reduction of this tax will be applied to income from securities transfer.

The resolution also offers a 30 percent deduction in corporate income tax to small-and medium-sized enterprises and labor-intensive businesses in infrastructure, manufacturing, outsourcing, food processing, seafood, textile and garments, leather and shoes, and electronic appliances.

In addition, individuals or households that lease their houses or rooms to students and workers or provide food rations to workers for the same prices as the prices at the end of last year will receive a 50 percent deduction in lump-sum VAT, personal income tax, and corporate income tax.

Chinese firms get $1.3 bln power plant deal in Vietnam

State utility Vietnam Electricity (EVN) group has awarded a $1.3 billion contract to a consortium of Chinese companies to build a coal-fired power plant in Vietnam's southern region, the official Vietnam News Agency reported on Friday.

EVN signed the engineering, procurement and construction contract with the Chengda-Dec-Swepdi-Zepc consortium on Friday to build the 1,245 megawatt Duyen Hai 3 thermal power plant in Tra Vinh province, 250 km (155 miles) south of Ho Chi Minh City, the report said.

Chinese banks will provide loans worth 85 percent of the plant's investment, and the remaining 15 percent will come from EVN's funds, the report said without giving specific details on Chinese companies and banks involved.

The plant with two generators will start operation in the third quarter of 2015, using 3.5 million tonnes of anthracite coal annually from the northern province of Quang Ninh, Vietnam's coal hub, to generate 7.5-8 billion kilowatt hours of electricity per year.

Duyen Hai 3 plant is part of the Duyen Hai coal-fired power complex, which has a total capacity of 4,200 megawatt. EVN began construction of the $1.5-billion, 1,245-megawatt Duyen Hai 1 plant last September.

Coal will take over from hydro power as the leading fuel for new generators in Vietnam in the next five years, EVN has said.

A power master plan projected that thermal plants in Vietnam will need 67.3 million tonnes of coal a year by 2020, when the fossil fuel may account for almost half its power mix.

In a separate development, Japan's Marubeni Corp said on Friday it had agreed in principle to sell up to 2 million tonnes of Australian or Indonesian coal a year to Vinacomin, Vietnam's top coal mining group, and hopes shipments can start in 2015-16.

Vietnam PV Gas in talks with Qatargas on LNG import deal

PV Gas, the gas trading arm of Vietnam's state oil and gas group Petrovietnam, has been in talks with Qatargas over a contract to import liquefied natural gas (LNG), the Vietnamese company said on Friday.

Hanoi-based PV Gas met a delegation from the world's biggest LNG producer in late July for "negotiations on a contract to buy LNG" under plans by PV Gas to buy the fuel, the company said in a statement on its web site (www.pvgas.com.vn).

It gave no details of potential volumes or timing of a deal.

Knight Frank VN starts managing Nha Trang property

Property consultant firm Knight Frank Vietnam has been appointed as the exclusive property management agent for the five-star luxury residential development, The Costa Nha Trang Residences, in the coastal resort city of Nha Trang in central Khanh Hoa Province.

Knight Frank Vietnam will provide property management services including building maintenance, owner and tenant support services, purchasing and supplier management and leasing management.

The $147 million Costa Nha Trang invested by TD Corp will house for 244 luxury apartments, a luxury spa, a fitness center, a swimming pool, a kids club and restaurants.

The 29-story property, located on the beachfront Tran Phu Street, is expected to be in place next year, with the hotel to be managed by InterContinental Hotels Group.

"Nha Trang is the new booming destination in the residential sector. We are very pleased to manage this prestigious project with its outstanding quality design and excited working together with TD Corp," said Holger Molendyk, head of property and asset management of Knight Frank.

Food agency dispels rumor on Chinese stocking up rice

The Vietnam Food Association (VFA) Friday rejected the rumor that some Chinese traders have recently purchased Vietnam’s rice at large quantities and illegally exported it back to China.

VFA also required exporters to ensure their rice reserves to stabilize domestic prices.

Speaking at the meeting on rice exports held Friday in Ho Chi Minh City, Truong Thanh Phong, VFA’s chairman, said most of Vietnam’s rice exports to China this year are legal and no Chinese traders have come to buy rice right on the rice fields as rumored.
Also at the meeting, Phong required VFA’s members to ensure rice reserves to prevent prices from soaring, causing difficulties to domestic consumers since Vietnam has signed many large contracts to export rice at high prices in the second half of this year.

Phong said Vietnam had managed to export 4.62 million tons out of the 6.2 million tons of rice it had contracted as of last July.

He said rice prices would continue to rise as Thailand recently imposed a new policy on rice purchasing prices and other Asian countries also had high demands to buy rice at large quantities.

According to VFA, Thailand has hiked its domestic rice prices to US$850 per ton for white rice and $1,400 for aromatic rice.

Phong said Vietnam had contracted to export a record amount of 1 million tons of rice in July, half of which was bought by Indonesia.

He added that Indonesia would continue to buy more in the second half of this year, while other countries including the Philippines, Malaysia, and Bangladesh were also in demand.

Vietnam needs 1.564 million tons of rice for export as of August, but there is only 1.4 million tons on stock, he informed.

He thus suggested the VFA’s members to be careful in selling their products based on market prices.

Moreover, he also required rice exporters strictly follow the government’s decree No. 109, which stipulates that rice exporters must set aside certain rice reserves to have adequate supply for domestic demand and keep prices stable.

“The companies can continue their exports when they have ensured the reserves.”

Moon cake market starts early with higher prices

The moon cake market for this year’s mid-autumn festival has made an earlier start over last year with higher prices due to rising input costs and soaring prices of food, rice and cooking gas.

Many well-known bakeries including Kinh Do, Dong Khanh, Bibica and Thanh Long have started production for the moon festival since mid July, two months ahead of the festival.

Most of the moon cake makers said prices this year would be 15 to 30 percent higher than last year since input cost soared.

“Flour, sugar and salted duck egg prices rose by 40 percent, 60 percent and 77 percent respectively,” Thanh Long Moon Cake Company said.

Kinh Do, Bibica and Dong Khanh all announced price hikes of between 10 and 20 percent over last year, standing around VND65,000-120,000 (US$3-6) a cake.

However, Tuoi Tre found out that prices could actually be higher as the producers have reduced the cake’s weight.

A 210-g moon cake with ham, for instance, is sold at VND72,000 each, while consumers had to spend only VND66,000 for a 300-g cake of the same kind last year.

This week (August 1-7) also sees many price hikes in essentials including rice, pork and cooking gas.

Rice prices increased by 10 percent over last week, why grain prices of this year’s summer-autumn crop surged by 54 percent over last year.

The director of a Tien Giang-based rice exporter attributed the price increase to the 15-percent hike in the rice exporting contracts of the domestic rice firms.

“Since a large amount of rice has been exported, there is not much [rice] left on stock,” he said. “The exporters have to increase prices of the summer-autumn crop to have rice for exports.”

Meanwhile, prices of pork, beef and poultry meat have also surged by up to 40 percent as of August.

The 12-percent increase of feed prices and the 30-percent hike in maintenance cost have sent food prices skyrocket, many producers said.

For their parts, cooking gas suppliers Saigon Petro, Petrolimex Saigon have announced a retail price increase of VND8,000 per cylinder early this week, after two reductions in the last two months.

The move was made after global contract price has surged by $25 per ton.

Vietnam has fewer counterfeit banknote cases

The counterfeit money detected in the bank systems and state treasury in the first half of this year has seen a decline over the previous years, newswire VnExpress reported.

According to the State Bank of Vietnam, the amount of fake bank notes this year has fallen by 24 percent and 60 percent over 2010 and 2009.

Polymer bills account for 97 percent of the fake notes, 44 percent of which is VND50,000 notes while the VND100,000 bills take up 28 percent.

It is recommended by the central bank that the public can detect fake money on certain security features including watermark images, security threads, and ink colors.

People can also try tearing the note’s edge to check whether it is fake since the counterfeit note is nylon-made, which is easily torn than the real polymer one, the central bank said.

Vietnam - Laos bilateral trade: US$2 billion by 2015

The target was planned at  a meeting between Vietnamese Deputy Minister of Industry and Trade Nguyen Thanh Bien and his Lao counter part Khemmani Pholsena, in the Lao capital city of Vientiane yesterday (August 5th).  

According to the memoir, the two sides agreed to boost coordination with relevant ministries and branches to organize trade fairs in Laos in 2011 and the coming years. The two countries’ businesses also contact regularly through seminars and conferences.  

They will continue granting tax incentives to their businesses and consider the expansion of the list of goods benefiting from tax incentives and implement projects on border trade development.  

In 2010, two-way trade between Vietnam and Laos reached US$490 million , up 17.2 percent over 2009. In the first half of this year, the figure stood at US$349.8 million, a year-on-year increase of 65.8 percent.
 
USD 1.3 bln to build Duyên Hải 3 thermal plant  

An engineering, procurement and construction contract, worth of 1.3 billion USD, for the Duyên Hải 3 Thermal Power Plant was signed in Hanoi on August 5 between the Electricity of Vietnam and a Chinese partner CHENGDA-DEC-SWEPDI – ZEPC.

The contract also covered insurance for the installation process of the plant, which had a total designed capacity of 1,245MW with an annual output of 7.5-8 billion kWh.

The plant will be located on 62.28 hectares in Dan Thanh commune, Duyen Hai district, in the Mekong delta province of Tra Vinh.

Once finished in the third quarter in 2015, the plant will help to meet the substantial power demand of the southern region.

RoK, Vietnam businesses cooperate in auto engine production

The Truong Hai Auto Joint Stock Company (Thaco) signed an agreement with Hyundai Motor Corporation of the Republic of Korea on August 4 to jointly manufacture auto engines.

Under the agreement, Thaco and the RoK partner are to set up a joint venture to build an automobile engine manufacturing factory at the Chu Lai Open Economic Zone in the central province of Quang Nam.

The factory will be built on an area of 20 hectares with a total investment of US$165 million. It will be capable of producing 25,000 products per year.

Construction of the project is scheduled to start in later this year and expected to be completed by the end of 2012.

It will focus on manufacturing three of five major parts of a 4 litre diesel engine of Huyndai, which will be installed in light trucks or serve other industrial purposes, including export to southeast Asian countries.

RoK, Vietnam businesses cooperate in auto engine production

The Truong Hai Auto Joint Stock Company (Thaco) signed an agreement with Hyundai Motor Corporation of the Republic of Korea on August 4 to jointly manufacture auto engines.

Under the agreement, Thaco and the RoK partner are to set up a joint venture to build an automobile engine manufacturing factory at the Chu Lai Open Economic Zone in the central province of Quang Nam.

The factory will be built on an area of 20 hectares with a total investment of US$165 million. It will be capable of producing 25,000 products per year.

Construction of the project is scheduled to start in later this year and expected to be completed by the end of 2012.

It will focus on manufacturing three of five major parts of a 4 litre diesel engine of Huyndai, which will be installed in light trucks or serve other industrial purposes, including export to southeast Asian countries.

Vietnam among top gold-consuming countries

Vietnam ranks eighth in the world in terms of gold consumption, announced the World Gold Council.

According to the WGC, Vietnam has about 81.4 tonnes of gold.

The council also said India now has the most gold (963.1 tonnes), followed by China (607.1 tonnes), the US (233.3 tonnes), Germany (126.9 tonnes), Turkey (114.6 tonnes), and Switzerland (91.7 tonnes).

Singaporean investment in VN hits 23.2 bln USD

The flow of Singaporean investment in Vietnam had reached 23.2 billion USD by July 2011, making it the third largest foreign investor in the country.

The figure was released at ceremony, which was co-hosted by the Ho Chi Minh City chapters of the Vietnam Union of Friendship Organisations and the Vietnam – Singapore Friendship Association on August 6 to celebrate Singapore’s 46 th National Day (August 9).

Singaporean Consul General in HCM City Pong Kok Tian said bilateral relations, which were officially established 38 years ago, have been developing strongly at all levels and expanded in many fields, from politics to economics, trade, investment, finance – banking and people-to-people cooperation.

Singapore has become a favourite destination of many Vietnamese tourists, welcoming 323,000 Vietnamese holidaymakers in 2010 and 119,000 visitors in the first five months of this year.

Laos-Vietnam Bank to get technological facelift

The Corporation for Financing and Promoting Technology (FPT) of Vietnam will help the Laos-Vietnam Joint Venture Bank (LVB) to transform the latter’s CorBanking software system.

A contract to this effect was inked between FPT and LVB in the Lao capital city of Vientiane on August 5 in the witness of Chairwoman of the Lao National Assembly Pany Yathotou and many other senior officials of both nations.

Addressing the signing ceremony, LVB General Director Nguyen Kim Dieu said the 4.31 million USD contract will help the bank improve the efficiency of using resources and brand name, save expenditures and supply modern products and services.

Founded in 1999, LVB has become a symbol of cooperative and investment ties between Vietnam and Laos . By the end of June, the bank’s total assets exceeded 330 million USD, a 30-fold increase compared to the first years of operation. The bank has recorded an annual average growth of more than 25 percent.

Deposit interest rates on downward trend

The deposit interest rates for VND in July decreased about 0.5 – 0.8 percent over the past month, according to the State Bank of Vietnam (SBV).

At present, the annual VND deposit interest rates were ranging between 16 and 18 percent, instead of previous levels of 19 – 21 percent.

A Eximbank executive said that due to massive purchase of USD for reserve, the SBV had supplied a large amount of VND to the market. Additionally, banks successfully mobilised a considerable amount of capital that eased liquidity concerns.

Le Duc Tho, Deputy General Director of Vietinbank said that tightened credit in real estate and securities was also a factor to cool down input interest rates.

Declining deposit interest rates pushed lending rates for the production sector down slightly from 0.1 to 0.3 percent a year, to 18.64 percent a year on average. Meanwhile, lending rates for the non-production sector rose about 0.5 percent a year, standing at 20 – 25 percent a year.

According to some commercial banks, deposit interest rates were unlikely to fall much in the near future as banks must maintain liquidity, while inflation was forecast to remain at more than 17 percent.

Expressway toll collection time to be reviewed

Bank for Investment and Development of Vietnam (BIDV) and BIDV Expressway Development Company (BEDC) will have to reconsider the toll collection time on the HCMC-Trung Luong Expressway at the request of the Ministry of Transport.

BEDC’s financial scheme done in 2009 has become outdated given the volatile exchange and interest rates, said Deputy Minister of Transport Ngo Thinh Duc. Therefore, it must be reworked with the higher exchange and interest rates factored in so as to work out a more appropriate capital recovery plan.

The annual deposit rate is 14% and that for loans is 17% at the moment, which will fall in coming years. In its financial plan for the expressway, BEDC estimated a toll fee of VND1,000 per kilometer as calculated by the Ministry of Finance.

If BEDC declines to take over the maintenance of the roads linked to the expressway, this job will be handed over to the provinces which the roads pass through. If this is the case, the Ministry of Finance will deduct management and maintenance fees in the toll collection plan.

The new financial plan will go before the Government. Previously, BEDC got government approval to collect tolls after all the toll stations are built on the HCMC-Trung Luong Expressway while the ministry also issued a circular detailing toll fees.

Pending an independent audit of the expressway financing report, BEDC will have to hand in 80% of toll revenue to the State budget.

In late 2009, BEDC acquired a  25-year toll collection right to the HCMC–Trung Luong Expressway.
 
Local footwear, textile industries sluggish

Due to a sharp rise in input materials, the local textile and footwear industries witnessed stagnation in production activity, a report from the Ministry of Industry and Trade said.

According to the report, the textile industry’s growth in July remained stable but lower than that of previous months.

In July, apparel output of Vietnam increased 12% compared to June, higher than the growth level of 7.9% in June over May.

Nevertheless, the price hike in natural materials resulted in fabric and yarn production in July only rising 4.3% from last month, while June’s figure climbed 18% over May.

From January to the middle of July, Vietnam imported over 12,200 tons of various cotton, worth a total of US$676 million, the General Customs Office said.

In the same period last year, the country only imported 11,800 tons, worth US$337 million in total, stated the Office.

The growth of the footwear industry in July slightly surpassed that of June with a rise of 20% of imported input materials compared to the same period last year blamed for the poor performance, the source added.

At present, footwear makers have to buy most of their leather materials from China and Taiwan, accounting for 70% of total input cost.

Every time the price of gasoline goes up, the cost of imported materials increase accordingly, a producer explained.
 
FDI to HCMC surges 70%

Foreign direct investment (FDI) into HCMC in the January-July period soared a staggering 70% year-on-year while that of the whole country dropped considerably in the past seven months, the HCMC Department of Planning and Investment said.

In the period, the city issued licenses to some 175 FDI projects with total fresh capital of over US$1.73 billion, up over 57% against last year. The past seven months also saw the city attract over US$2 billion of additional capital for 61 operational projects, pushing the total pledged capital to US$3.73 billion, or 70% higher than that in the year-ago period.

Notably, the processing and manufacturing industries topped the list of foreign investment within the past seven year, accounting for approximately 62% of the total pledged capital of HCMC via 25 licensed investment projects.

Though FDI in the property sector went down year-on-year, it still made up 19% of the new total investment in this year’s past seven months, with US$334 million in seven licensed projects.

The sectors of wholesale and retail and automobile repair service attracted 47 investment projects but attained just US$141 million of pledged capital while the education and training sector had only one project worth US$200,000.

Also according to the Department of Planning and Investment, FDI mainly flowed into industrial and processing zones in HCMC with US$1.2 billion through 10 newly-licensed projects.

The Management Authority for Southern Development (MASD) had 12 newly-licensed projects in this period with total registered investment of over US$202 million while Saigon Hi-Tech Park (SHTP) had only two projects worth US$27.3 million.

Meanwhile, Thu Thiem Management Authority and Tay Bac – Cu Chi Urban Management Authority obtained no project in the past seven months.

Trade deficit numbers deceive

A cooling recent trade deficit is unlikely to be sustained as import-export mechanisms require more work.

July marked the lowest monthly trade deficit of 2011 hitting $200 million, equivalent to 2.4 per cent of total export turnover, according to the General Statistics Office (GSO). The trade deficit in the seven months of this year was $6.64 billion, equivalent to 12.9 per cent of total export turnover.

“The re-export of gold was a key reason for the trade deficit reduction,” GSO said in a report.

If gold was excluded, the GSO estimated the deficit till the end of July was $8.4 billion, equivalent to 16.9 of total export turnover.

According to the GSO, gold was increasingly exported as traders cashed in on rising global gold prices that exploded nearly 10 per cent in 30 days till August 4, 2011.

Nguyen Minh Phong, economist at Hanoi Institute for Socio-Economic Development Studies, said this trend could not be sustained as Vietnam’s gold reserves were not big.

“The trade deficit will bound back in next months when the volume of gold export reduces and traders start importing gold for local demand. There is no sign for a sustainable reduction in the trade decifit,” he said.

Vietnam’s unreasonable production structure has seen the country labour under weighty trade deficits for two decades.

While Vietnam has to import most of its input materials, equipment and machinery for production and investment, most of its export products are unprocessed agricultural products, minerals and low-value industrial products. Those export products account for 84 per cent of the country’s total export turnover during January-July, according to a Ministry of Industry and Trade (MoIT) report.

The report also points out imported materials, equipment and machinery make up 81 per cent of total import turnover, a 24 per cent year-on-year increase.

Nguyen Van Nam, former head of Vietnam Institute for Trade, said these figures showed that Vietnam  relied more on imported materials, equipment and machinery from other countries, especially China.

Vietnam Customs statistics indicate that China has continuously been the largest exporter to Vietnam with $11.1 billion in the first seven months of this year, accounting for 22.4 per cent of Vietnam’s total import turnover. Vietnam’s export turnover to China during the period is just $4.588 billion.

Although the goverment announced to curb the trade deficit by limiting unnecessary imports and pushing local production for exports, analysts said this measure was insufficeint. The more enterprises increase production, the more they have to import input materials and equipment.

“The trade deficit issue comes from the country’s production structure which we should change. One important thing is that the government must have measures to encourage enterprises to produce import substitutes,” said Nam.

Bankruptcy looms large for firms

Numerous domestic enterprises face bankruptcy due to a dearth of working capital.

For example, Viky Plast Joint Stock Company (VKP) reported a VND13 billion ($634,000) loss for second quarter of this year, the ninth consecutive quarter it had taken a hit.

Due to two years of losses, its owner’s capital fell 45 per cent to VND44 billion ($2.2 million) from its chartered capital of VND80 billion ($3.9 million).

According to VKP’s audited financial report, its short-term debts were higher than short-term assets after deducting its bad debts and losses.

VKP is one of many firms struggling to obtain bank loans due to high lending rates, which account for a half of its total monthly expenditure.

Share prices of the Cadovimex Seafood Import-Export and Processing Company (CAD) also plunged to the floor for several consecutive sessions due to the poorer business results against last year. CAD suffered losses for two consecutive years and its shares were put under control by Ho Chi Minh Stock Exchange.

CAD chairman Vo Thanh Tien said bankruptcy had been considered.

The reasons for CAD’s difficulties were that banks reduced lending to the company and clients did not want to buy CAD products, while some suppliers refused to sell input materials to CAD.

Vo Tan Minh, chairman of BASA Company (BAS) also thought of going bankrupt in May. BAS suffered losses during 2009 and 2010 and in the first six months of this year, BAS reported a VND8 billion loss, resulting that its owner capital has fallen to VND75.5 billion from earlier VND96 billion ($4.7 milion).

Full Power Company (FPC) reported losses for three consecutive years and is to be de-listed. MHC, VSG, SHC, IFS, FBT, VSP, VSG were also expecting bankruptcy.

Market analysts said enterprises’ losses were due to high interest rates, a volatile exchange rate and fierce business environment.

According to the Bankruptcy Law, enterprises were considered bankrupt if they could not pay debts that were due to be paid and the debt owner took the issue to court.

Foreign banks continue flying high

HSBC last week announced its 2011’s first half pre-tax profit in Vietnam soared 116 per cent, far exceeding the 70-90 per cent growth of a few leading Vietnamese lenders like Vietinbank and Eximbank and much higher than the average of 10.5 per cent of local banks.

The profit stood at $82 million, including that of wholly foreign locally incorporated HSBC Bank Vietnam Ltd, the Vietnam-based branch of Hongkong Shanghai Banking Corp. Ltd and HSBC’s investments in Bao Viet and Techcombank.

The $82 million pre-tax profit is higher than $58 million of leading state-owned lender Vietcombank and equal to domestic private bank Eximbank, despite the foreigner’s much smaller scale.

Mac Quang Huy, deputy chief executive officer for major brokerage Thang Long Securities, said foreign banks’ the main advantage in Vietnam was their cheap funds from parent banks.

“In situation of fund constraints, foreign banks can make high profits via the money market such as lending on the interbank market,” said Huy.

Sumit Dutta, country head of HSBC in Vietnam, told VIR that the bank chose not to join the interest rate war in attracting deposits.

“We have been always been strictly following the deposit rate cap set by State Bank and this has helped us to lower our lending costs as well to benefit our customers,” said Dutta.

Meanwhile, an executive from a local large-scale joint-stock bank said that with much lower mobilisiation interest rates in other markets at 2-4 per cent per year, foreign banks could bring in dollars then converting into dong for lending.

Huy added that foreign banks in Vietnam, like HSBC, normally use around 40 per cent of their fund for credit.

“The rest is funneled to money market such as the interbank market. This helped minimise loan-loss provision figures. Moreover, their total outstanding loan is not as big as local lenders,” said Huy.

In the interbank market where local lenders borrow short-term funds, in February-April period, lending rate was pushed up over 20 per cent, per year.

Dutta said that in line with the directives from the State Bank, HSBC stayed away from securities lending as well as speculative lending and focused on lending to important industries that serve Vietnam's development such as airlines or telecommunications.

Finance Minister: Transparency needed in calculation of petrol prices

Newly-elected Minister of Finance, Vuong Dinh Hue, said transparency and close supervision are desperately needed in calculating energy and petroleum prices.

“I will work with the Ministry of Finance’s Price Management Department and auditing agencies to scrutinise the petroleum trade and take into account all costs that are included during the calculation of petroleum prices," said Hue, who formerly served as Chief Auditor of the State Audit of Vietnam (SAV).

According to Hue, the SAV is looking into the petroleum price stabilisation fund. The results of this investigation could confirm whether or not Vietnam National Petroleum Corp (Petrolimex) has been making profits or not.

In addition, further efforts would me made to clear up any questions about pricing in the electricity industry.

"We have to closely supervise the management of enterprises that trade in 'sensitive goods', such as petroleum and electricity," he emphasised.

In order to ensure transparency, prices would be adjusted based on changes in the market, which should help to curb inflation, he said, adding that any price increases should be applied along with policies to support the poor and families with members who were injured or killed during the American War.

Hue said that the state-owned Electricity of Vietnam Group's (EVN) accumulated loss is expected to be about VND35 trillion (nearly $1.7 billion) by the end of this year. This figure is lower than previous estimates, which were over VND60 trillion ($2.91 billion).

He affirmed that EVN’s loss this year would be surely be much lower than last year's because of a higher capacity for hydropower generation.

To alleviate people's worries about an impending power price hike, he said that any increase would be carefully assessed before its application in relation to the effect it might have on inflation.

Farm export value falls below targets
 
Some key farm export products are struggling to reach targets this year due to a lack of raw materials and disadvantages on the world market, the Ministry of Agriculture and Rural Development has said.

The ministry has reduced expectations in export value for seafood, coffee and rubber.

Export prices on the world market were expected to fall by the end of the year compared to the first half and export volumes would not increase due to lack of raw materials for processing, the ministry said.

Thus, the total export value for the year was expected to fall by US$80 million to $6.1 billion for seafood and from $3.739 billion to $3.7 billion for rubber and the volume of coffee exports was estimated to fall from 1.3 million tonnes to 1.2 million tonnes for the year.

By the end of this year, seafood exporters are likely to face difficulties in accessing raw materials and export markets while a limited domestic supply of coffee would reduce export volumes, the ministry said.

Nguyen Nam Hai, secretary of the Viet Nam Coffee Club, said that coffee export volumes had reduced to half their normal amounts over the past two months due to low stocks.

The seafood industry experienced a lack of raw materials, reducing production capacity by 50-60 per cent, according to the Viet Nam Seafood Exporters and Producers Association.

The ministry planned to follow market developments to effectively manage the export of agricultural and seafood products while updating regulations regarding quality and food safety.

Viet Nam earned $13.9 billion from agricultural, seafood and forest exports during the first seven months of this year, a year-on-year increase of 33.4 per cent.

The ministry expected the country to gain $23 billion from agricultural, seafood and forest products this year, an increase of 20 per cent over last year.

Meanwhile, Viet Nam is set to ship 800,000 tonnes of rubber this year for a turnover of $3 billion, according to the Viet Nam Rubber Association.

This compares to corresponding figures of 782,000 tonnes and $2.3 billion in 2010.

Rubber production this year could increase by 4 per cent over last year, the association said.

The International Rubber Study Group (IRSG) estimates world demand this year at 26.1 million tonnes, a year-on-year rise of 1.7 million tonnes. VRA General Secretary Tran Thi Thuy Hoa said Vietnamese enterprises should focus on improving the quality of their products in order to exploit the existing opportunity to promote rubber exports.

The association has asked the Finance Ministry to defer the 5 per cent export tax on rubber in order to help enterprises access capital for expanding cultivation areas and boosting exports.Hoa said the tax relief was particularly necessary now because transportation charges were very high.

She also said demand from China, the major market for Vietnamese rubber, was not stable, causing many difficulties for local firms. The rubber industry planned several promotion campaigns in order to expand its markets to other countries, she added.

VRA members would also expand areas under rubber cultivation in the provinces of Binh Phuoc, Dong Nai, Tay Ninh and Ba Ria-Vung Tau.

They would also work to improve the quality of their products and build new processing plants in areas where there were a lot rubber plantations, Hoa said.

In the northwestern and northeastern provinces, it is planned that another 60,000ha are placed under rubber cultivation, bringing total area across the country to 800,000ha.

Vietnamese scientists will work to develop better varieties of rubber trees with high yields and less time before producing latex. They will also advise farmers on improved cultivation methods.

Viet Nam plans an output of 1.1 million tonnes of rubber by 2015 and 1.2 – 1.4 million tonnes by 2020.

To attain an annual export turnover of over $2 billion, the industry needed to increase production of value-added rubber products, Hoa said.

No end in sight for inflation
 
Consumer prices will continue to surge at a rate of about 1 per cent in August, predicts the Ministry of Finance, bringing cumulative inflation since December to around 16 per cent so far this year.

With inflation for the entire year targeted at 17 per cent, the director of the ministry's price management department, Nguyen Tien Thoa, admitted that it would be difficult to meet the target, explaining that there remained both domestic and international economic factors that could negatively affect consumer prices through the end of the year.

While the prices of some goods could be continually adjusted under State management, the Government needed to draw up a roadmap for overall prices increases in order to avoid economical shock, Thoa said.

"It could be quite difficult to reduce inflation very quickly seeing as the current situation has been caused by inherent economic shortcomings several years in the making," Thoa said.

Newly named Minister of Finance Vuong Dinh Hue also said last week that his first priority upon taking office would be to work closely with the State Bank of Viet Nam to strictly implement tight monetary and financial policies in combination with market controls in order to better curb inflation.

Meanwhile, rising food prices and declining supplies were having the greatest impact on the inflation rate, the ministry said.

"The supply of fresh meat, fruits and vegetables is likely to decline this month, pushing prices up," the ministry warned in a statement published on its website last Thursday.

The blue-ear epidemic has taken its toll on the nation's pork supplies, reducing pig herds by 3.7 per cent.

High consumption of sugar and other raw materials used to produce traditional cakes for the upcoming Mid-Autumn Festival was also expected to boost food prices this month. The ministry said it would enhance price label inspections to more strictly manage the domestic market as well as keep a closer watch on business input costs, distribution and sale prices, ensuring timely action against violations of regulations.

"Timely and accurate market and price forecasts will also be made to help ministries and relevant agencies take suitable measures as needed to stockpile goods and stabilise the market," the ministry said.

"Export taxes on food and food products, especially those of which the country is facing a shortage, will be also considered."

Interest heats up in commodities trading

Commodity trading has become an essential investment channel for enterprise production, according to experts attending a conference held in the capital on Saturday.

Commodities have been traded in Viet Nam since 2001, with some banks offering hedging services.

Many agree that commodity trading has struggled to gain popularity due to businesses not seeing its full potential, some even withdrawing from the market following initial losses.

"Managing trading risk will always play a very important part in a trader's success," said Frederick Wee, an exchange and brokerage expert at Ong First Tradition in Singapore.

"Just like bond or stock markets, the commodity market is populated by those who speculate in commodities to benefit from arbitrages," Wee added, warning investors of fraud risk and advising them to "be extremely vigilant in thoroughly researching commodity companies."

Wee pointed out various mistakes that companies normally make, the four largest ones including having no trading plan, inadequate trading assets, improper money management and unrealistic expectations.

"The commodity market is where trading meets the needs of society, it cannot but develop," said Nguyen Duy Phuong, general director of the Viet Nam Commodity Exchange (VNX).

"On stock and real estate markets, investors profit by purchasing at low prices, making sales when prices again increase. Unlike these two channels, commodity trading creates profits when the market goes both up and down," Phuong added.

While businesses had the opportunity to purchase and use each other's products more easily via commodity exchange than imports, Phuong said, Viet Nam still had export advantages in terms of coffee and rubber. "In exporting coffee and rubber, trading through commodity exchange will help reduce costs, vital for surviving in a difficult economic period."

Seeing as the VNX now implements margin trading, investors who wish to participate do not need large amounts of capital.

"Amidst restricted money supply, commodity trading is very suitable," Phuong stressed, adding that to further develop Viet Nam's commodity market, in addition to seeking funding from financial institutions, the VNX was co-ordinating with enterprises to boost operations.

The VNX currently exchanges rubber, coffee and steel on the basis of forward and future contracts while also planning the deployment of option contracts in the near future.

PV