Japan endorses historic Vietnam trade deal

Vietnam Government Website

Japan has endorsed a historic trade deal with Vietnam to reduce import taxes on the majority of goods traded between the two nations.

The Japanese parliament approved the Vietnam Japan Economic Partnership Agreement (VJEPA) on June 24, allowing the pact to take immediate effect.

The agreement sets a schedule for import tariff reductions over the next 10 years that will apply to a range of sectors, including as agriculture, industry, trade, investment, human resource development, tourism, environment and transport.

Vietnam’s National Assembly endorsed the agreement in May, after officials from the two nations concluded their negotiations on the terms of the trade deal last year.

Under VJPEPA, 92 percent of goods traded between Japan and Vietnam will not attract any import taxes.

Tariffs on as much as 86 percent of aquatic, agricultural and forest products and 97 percent of industrial items Vietnam exports to Japan will also fall.

Japan will slash the tax on cuttlefish and shrimp imported from Vietnam to 1 to 3 percent, while Vietnam’s mineral exports will be levied at zero percent tax.

The trade pact with Vietnam contains the biggest tariff reductions Japan has ever committed to with an Association of Southeast Asian Nations (ASEAN) country.

In return, Vietnam agreed to reduce import tariffs on nearly 88 percent of goods imported from Japan within 10 years.

Import taxes on spare parts for flat screen TVs and DVDs will fall to 3 percent, while the import taxes on digital cameras, color TVs and automobile spare parts will drop to between 10 and 20 percent.

VJEPA is the first bilateral trade deal Vietnam has committed to with another nation since being admitted to the World Trade Organization (WTO) in 2007.

Vietnam-Japan trade turnover reached more than US$15.5 billion last year, with Vietnam’s exports to Japan reaching $8 billion and Vietnam importing $7.5 billion of goods and services from Japan.

The two nations have agreed to lift two-way trade to US$17 billion by 2010.

Vietcombank shares jump on debut, index down

Reuters

Shares in Vietcombank, Vietnam's largest partly private lender, jumped by the maximum 20 percent allowed on their domestic debut on Tuesday, but the small size of its listing limited the impact on the main index, which ended lower.

The stock closed at VND60,000 in a partial listing of the Hanoi-based bank on the Ho Chi Minh City Stock Exchange, at the top of a range of investors' bids that started at VND59,000, Reuters data showed.

"Vietcombank's listing had no influence on the market at all because the bank only listed part of the IPO shares so its market capitalisation is very small," said Bui Hai Nguyen, a trader at Hanoi-based Bao Viet Securities.

The exchange's VN Index closed down 2.63 percent at 448.29 points as domestic investors took profits. The market has risen 42 percent this year.

Vietcombank, the first state-run bank in Vietnam to have an initial public offering, raised US$652 million from its IPO in December 2007.

The lender, also known as the Commercial Joint Stock Bank for Foreign Trade of Vietnam, is now valued at around $4 billion, based on its share close.

Stock market regulators have said foreign investors could buy all 112.3 million shares now listed, which represent 9.2 percent of the total shares of the lender, below the government's foreign ownership cap of 30 percent of a Vietnamese bank.

Vietcombank's listing after the June 25 debut by Vietnam's top insurer, Bao Viet Holdings, and ahead of VietInbank scheduled for July 16 could give the market a fillip after a slump last year.

But dealers said Vietcombank shares, along with those in Bao Viet Holdings, could face selling pressure.

"Vietcombank's starting price is high and after the first few 'market welcoming' sessions, it will pull down the index in the longer term," Nguyen said.

Most financial shares lost ground on Tuesday after the central bank announced it would keep its base rate steady in July at 7 percent.

Bao Viet Holdings closed up 4.95 percent at VND53,000, but Saigon Securities dropped 4.47 percent to VND64,000 and Sacombank fell 2.78 percent to VND34,900.

On the Hanoi Stock Exchange, Asia Commercial Bank, Vietnam's largest listed firm by capitalisation, eased 1.2 percent to close at VND49,000.

Fitch Ratings downgraded Vietnam's local currency sovereign rating to BB-minus from BB on Tuesday, citing sustained fiscal decline and structural economic weaknesses.

Finance Ministry expert says price increases are ‘no surprise’

VietNamNet Bridge – Three straight months of consumer price increases (0.35%, 0.44% and 0.55%) have raised public apprehension that another inflationary period is beginning. However, Dr. Vu Dinh Anh, Deputy Head of the Market and Price Research Institute at the Ministry of Finance is not worried. “The CPI increases are not a surprise at all,” he says, and predicts that they will not exceed 10 percent for all of 2009.

Vu Dinh Anh: “The CPI increases are not a surprise at all”

Anh told the online journal VnEconomy that “we can say for sure that the consumer price performance in the first six months of the year was according to economic laws. It followed exactly the same path that prices did in the first six months of 2007. The price went up in the first two months of the year (the Tet holiday – ed.), went down in March and then went up again for the next three months at an increasing rate.

However, the price increase every month so far this year was lower than that of 2007. For example, in May, the CPI increased by 0.44 percent, compared to 0.77 percent in May 2007. This month (June), the CPI will rise by 0.55 percent, while it was 0.85 percent in June 2007.

The CPI increases are not a surprise at all. We should be glad because the increases are relatively low.

Why is the CPI performance in the first six months of the year is similar to that in 2007?

Let’s recall the economic situation of 2007. That year, we strived to obtain a high economic growth rate of 8.5 percent. We loosened monetary policy, and finished the year with 8.48% growth.

The situation seems to be similar in 2009. We are striving to obtain a “not too low growth rate” instead of striving to obtain a “high growth rate.” I mean we still strive for economic growth, and similar policies have been applied.

The Ministry of Planning and Investment has announced that the total money supply (M2) has increased by 16 percent and the outstanding loans have increased by 17 percent compared to the end of 2008. How have these factors affected prices in the first half of the year?

The four percent interest rate subsidy program has caused a large amount of cash to be put into circulation. But that was a one time stimulus. If the increase in the money supply is held to 25 percent from now to the end of the year, there will be no possibility of inflation.

In general, an increase in the money supply will push up prices six months later. Thus the money supply increase of 2007 led to considerable inflation in 2008.

Do you mean that we will face high inflation in 2010 if we put a lot of money into circulation in 2009?

Money supply is just one factor that can cause high inflation. We still have to consider the spending of the state. The state budget deficit has been set at eight percent. If the state’s investments are effective, this will not cause high inflation.

Let’s me explain this. If the State spends money on building a road, it seems at first that this will cause inflation because the state puts money into circulation. However, if the state’s investment brings an economic benefit that stimulates additional production, this will not cause inflation.

In the first three months of the year, some 70 tons of gold were exported, which brought in $2.3 billion in cash. Do you think that the influx of cash will affect the CPI?

As far as I know, the $2.3 billion has gone to gold trading companies and banks and has been staying there.

Bank interest rates have been going up. Will this lead to interest rate increases by making capital costs higher and goods prices higher?

Think this way. When the interest rates go up, this will help reduce inflation because it will help lessen the supply of money in circulation.

Businesses will think twice before deciding whether to borrow money, and, if they borrow less, their production is likely to be less too.

Some experts have warned that high inflation is going to return. Do you agree?

It’s not worth worrying about, in my opinion.

We have implemented demand stimulus packages and we have hit our target for increased consumption (the total retail turnover of goods and services in the first six months of the year increased by 20 percent over the same period of the last year). This is a good thing. If we were to think that prices go up because of higher consumption and try to reduce consumption, of course that would undercut the objective of stimulating demand.

How high will be the inflation for 2009, then?

I think that the inflation will be held to below 10 percent.

VietNamNet/TBKTVN

Fertiliser industry needs strategy

VietNamNet Bridge – Viet Nam was importing up to 100 per cent of its fertiliser requirements, the Information Centre for Agriculture and Rural Development (Agroinfo) said.

Domestic fertiliser prices depend on fluctuations in world price, which often sit at high levels.

About 90 per cent of the urea used, 70 per cent of the potassium diammonium phosphate (DAP) and all the sulphate ammonia (SA), as well as potassium fertiliser, is imported to satisfy domestic demand.

The Ministry of Industry and Trade has estimated the demand for fertilisers for the coming summer-autumn rice crop of about 1.84 million tonnes will include 400,000 tonnes of urea, 170,000 tonnes of SA, 200,000 tonnes of potassium, 160,000 tonnes of DAP and 910,000 tonnes of NPK.

Domestic fertiliser prices depend on fluctuations in world price, which often sit at high levels. Fertilisers often accounts for 30 to 40 per cent of agricultural product prices.

Retail fertiliser prices in some regions have risen VND100-500 per kilogram. Urea price in the Southern provinces of Kien Giang and Dong Thap rose VND240 to VND6,540 (US$0.37) while that of potassium is between VND12,800-13,000 after rising VND200-500.

Demand for the summer-autumn rice crop is increasing sharply, which will have a negative influence on farmers' incomes.

Agroinfo manager Pham Quang Dieu said the industry would continue to operate without long-term growth strategies and management while policies remained passive.

Agroinfo's database on fertiliser industry shows Viet Nam has since 1999 had about 60 legal documents regulating the industry. All are continuously replaced and have limited use.

"To minimise dependence on imports, the ministry is boosting research on advanced fertiliser production technologies while encouraging farmers to use bio-fertilisers to reduce production costs," said the head of MARD's Cultivation Department, Nguyen Tri Ngoc.

Demand for fertiliser is expected to increase throughout the world and especially in many developing countries during the coming decades.

"Prominent fertiliser corporations worldwide will pour significant capital into developing countries and Viet Nam needs a long-term growth strategy for the industry," Ngoc said.

VietNamNet/Viet Nam News

Beer sales surge as mercury rises

VietNamNet Bridge – Vietnamese have been spending up large on beer and soft drinks during the summer, much to the delight of distributors.

Since the end of last month, sales of beverages and beer have increased sharply, as have prices in many areas.

"I could sell 25 to 35 cases of soft drinks a day," said a store owner from the central city of Da Nang. A retailer in Hai Chau district said his shop had its orders trebled compared to previous summers.

"Every summer, we ordered beer and soft drink delivers once a week. Now, we have to order every two days," he said.

Demand for beer also surged in Ha Noi; to meet demand, alcohol and beer companies have increased capacity, said Nguyen Van Hung, general secretary of the Viet Nam Alcohol Beer and Beverage Association.

The Ha Noi Alcohol, Beer and Beverage Company increased daily capacity from 160,000 litre of draught beer to 180,000. Some days, productivity was more than 200,000, Hung said.

Along with beer, demand for soft drinks and fresh beverage like sugar cane juice and coconut juice increased significantly.

"It is the season for soft drink sales, but this year the demand has strongly increased," said Le Duc Truong, an official of Sen Le Company, a soft drink distributor in Da Nang city.

"Every day, we supply about 1,200 cases to Hai Chau district. All of us had to run to meet demand," he said. Despite the efforts to hold prices, beer and soft drink prices have increased nationwide.

At a Ha Noi market, the cost of a case of 24 Ha Noi beer bottles has risen from VND125,000 (US$7) to VND240,000 ($13), while in central regions bottle prices are up about VND14,000 ($0.70).

Sugar cane juice

Nguyen Duc Phu, deputy director of the Ha Noi Alcohol, Beer and Beverage Company, said distributors increased prices, which affected the company's prestige and trademark.

Like beer, bottle prices for soft drinks have increased about VND2,000.

During some sweltering days in Ha Noi, the price of some cups of ice tea trebled to VND3,000 while cups of sugar cane juice doubled.

Ice producers can't match demand, so prices increased. That's why we have to increase the price of sugar cane juice, said Hoa, a seller in Ha Noi.

The association has demanded companies stabilise prices and has asked them to manage their systems so distributors can't raise prices by themselves.

VietNamNet/Viet Nam News

Time-share vacation apartments and villas multiply on central coast

VietNamNet Bridge – Wealthy Vietnamese are buying villas and apartments in coastal resort projects and using them to serve both their vacation and investment needs.

Purchasing apartments and villas both to stay in and to earn money

In years past, rich people in big cities would buy land in the countryside or at the beach and build villas where they would stay just a few days a year on holiday. However, these days, they choose to purchase apartments and villas at tourism complexes and then assign management to the project developers who arrange to rent the properties to other vacationers for short periods. With these investments, the owners can have a a place to stay during holidays, while their property still can earn money when they are in the cities.

Doan Duc Hoa, Deputy General Director of Thu Thiem Investment Company said that investment in resort real estate is taking shape in Vietnam and it will flourish in time to come.

Hoa said that having realized the high demand, his company is building a 21 hectare eco-tourism resort in Mo Cay district of Ben Tre province. The project is capitalized at 250 billion dong. The company will build apartments and villas for sale and lease. If the clients purchase villas and apartments but only plan to stay for just a few days a year, the company can manage the apartments and villas on the owners’ behalf. The profit from the leasing will be divided equally.

Indochina Land recently offered 150 apartments and 30 two story villas at the Hyatt Regency Da Nang Resort & Spa at $180,000 for each apartment and $1.3 million for each seaside villa. Within a month, more than half of the apartments and villas in the ‘time-share’ project have been sold.

Micheal Piro, an Indochina Land executive, says the buyers of the apartments and villas can stay in them at no cost for one to three months a year. The apartments and villas will be managed by the company in the remaining time and leased to visitors. In this case, investors act as ‘shareholders’ of the resort projects, while they do not have to spend tens of millions of dollars to build the whole resort.

Developers promise high profits

Also according to Indochina Land, the apartments will rent for $300-400 per night, and a villa will rent for $500. If an apartment is rented for 70 days a year, the apartment buyer will be able to recover his capital within seven years. And during that time, the buyers will be able to use the apartment for up to three months each year.

Thien Thai Hotel and Tourism Company is developing another Danang beach project, Ariyana. It has committed to rent the villas on behalf of buyers at some $1,000 per month.

Real estate developers said that if the resorts have good business and can attract a lot of vacationers, the owners of the apartments and villas will have high profits at the same time the value of the apartments and villas will increase. If so, they can easily resell the apartments and villas to other wealthy people who also like beach vacations.

Another real estate developer, CBRE, judges that investors can profit from time-share developments in Nha Trang, Mui Ne, Da Nang and Hoi An, well known vacation destinations with ideal natural conditions. However, CBRE doubts that beaches like Do Son (near Hai Phong City) will support the same sort of investments, because Do Son mostly serves middle class vacationers who can’t afford luxury rental charges.

VietNamNet/DV

Stocks tread water as trading volumes slow

VietNamNet Bridge – The VN-Index closed off a hair yesterday, June 29, to 460.02, a loss of just 0.21 per cent, as trading volumes on the HCM City Stock Exchange slowed to 27 million shares, worth a combined VND1.1 trillion (US$61.8 million).

Last week, capital began flowing away from real estate shares, and there were signs that it was being poured into the banking and finance areas.

Foreign investors finished the day as net buyers of 532,000 shares, with a net value of VND52 billion ($2.9 million) and an overall volume of 8 million trades.

On the Ha Noi Stock Exchange, the HNX-Index also dropped by 1.25 per cent to end the day at 153.80. The value of the day's trades on the northern bourse was VND505.5 billion ($28.4 million) on a volume of 14.3 million shares. Foreign investors there accounted for more than 3 million of this total, worth a combined VND140.3 billion ($7.9 million).

Banking shares continued to lead both markets, with Sacombank (STB) generating orders for 4.7 million shares, or 17 per cent of the total volume on the southern exchange, and Asia Commercial Bank (ACB) a volume of 2.1 million shares, 15 per cent of the trades on the northern bourse.

Last week, capital began flowing away from real estate shares, and there were signs that it was being poured into the banking and finance areas, said Sai Gon-Ha Noi Fund Management Co analyst Ngo Van Minh.

Meanwhile, domestic stock indices were still in a downward cycle of adjustments that began in mid-June, Minh said. Market moves were now "complicated and hard to predict [as] market psychology is a mix of hesitation, caution and hope".

All eyes have turned to the listing of shares by Vietcombank. Many investors expected the listing would support market growth, but "there are many opinions expressing concern that market increases will be opportunities for major organisations and funds to unload their holdings," Minh said.

He noted that Dragon Capital and PetroVietnam Finance had dumped large quantities of shares from their portfolios recently.

The spike in the price of Bao Viet Holdings (BVH) immediately after the shares were listed - with Vietcombank likely to turn in a similar performance - was "not very likely to be good for the market at this time," he added. Immediately before and after the BVH listing, he noticed, shares were gradually withdrawn from other insurance shares including Bao Minh Insurance (BMI), PetroVietnam Insurance (PVI) and Viet Nam National Reinsurance (VNR).

Minh predicted the market would play out the week with mixed developments and on overall downward trend. "Weakened demand during last week is truly hindering market increases," he said.

But Viet Capital Securities Co analysts wrote in a report that if capital flows remained stable this week with an average trading value of VND1.5 trillion per day, they could sustain the market. Below that level, he said, "the market would likely experience a phase of adjustments before second-quarter business results are announced."

The fledgling unlisted public companies market (UPCoM) continued to struggle, following another 6.89 per cent yesterday to 81.83. Only Phong Phu Pharmaceuticals (PPP), up 1.2 per cent, and cable producer Truong Phu Co (TGP), up 1.2 per cent, managed gains on the day.

Market value on UPCoM fell 20 per cent from the previous trading session to VND4 billion ($224,700) on a volume of nearly 278,000 shares. Market leader SME Securities (SME) accounted for 60 per cent of the volume, but with only about 170,800 shares traded.

VietNamNet/Viet Nam News

Positive signs for VN’s textile, garment sector

Wokers have jobs when textile and garment companies have orders. (Photo: SGGP)

VietNamNet Bridge - Due to the world economic downturn, businesses in the textile and garment sector faced a decline in exports and a lack of orders in the first few months of the year. However, there are clear signs of recovery, with the number of orders improving.

Increasing orders

At the end of this year’s second quarter, the number of orders at textile and garment businesses in Ho Chi Minh City have increased by 15-20 percent compared to the first few months of the year.

Most businesses have orders from foreign partners, which will keep them busy until the third of quarter.

According to Phung Dinh Ngo, director of Binh Hoa Garment Company, the company has had recent orders, with exports to the EU showing satisfactory results in the second half of the year.

Pham Xuan Hong, chairman of Sai Gon 3 Garment Joint Stock Company, said his company has earned US$25 million from garment exports this year. Exports to Japan accounted for 65 percent, with orders from America and the EU stabilizing.

Vietnam has achieved remarkable growth in garment and textile exports to Japan at a time when exports to its major markets, like the US and the EU, plunged.

According to textile and garment companies, many importers stopped orders or hastily cut orders during the economic downturn. When the world market began to improve, traders did not have enough goods to sell, leading to the recent increase in orders.

The quick recovery of Vietnam’s textile and garment industry has shown its particular advantages compared to other countries.

Chairman of The Vietnam Textile and Apparel Association (Vitas) Le Quoc An said Japanese importers are switching their orders from other countries to Vietnam, as they appreciate the consistency in the quality of Vietnamese made clothes and the skill of its workers.

Vietnam’s textile and garment exports in the first six months of this year totaled more than $4 billion, a decrease of 1.3 percent compared to the same period last year.

The decrease is much lower than the forecast of 15 percent and was relatively lower than other countries.

Textile and Garment exports still achieved growth rates in Japan, Korea, Taiwan and Norway.

The highest growth was for Japan at 25 percent.

The recent signing of the Vietnam-Japan Economic Partnership Agreement is expected to help further increase Vietnamese clothing exports to Japan.

Under the treaty, from July 1 Japan will eliminate import tariffs on Vietnamese textiles and garments that use raw materials of Vietnamese, Japanese or ASEAN origin.

Taxes are currently five to ten percent.

Pham Xuan Hong, deputy chairman of Vietnam Textile and Garment Association, said exports increased to Japan due to Vietnam’s quality orders and reasonable prices.

Increasing orders, decreasing workforce

Orders and workers are two the most difficult aspects at the current time for the textile and garment sector.

With the positive signs from the market and stable long term contracts, businesses do not have enough workers.

Many companies have had to outsource to fulfill contracts.

The serious shortage of workers has forced many garment companies to recruit untrained workers and offer attractive salaries. This compares to the number of job losses in the clothing industry worldwide.

At some businesses, there has been a 50 percent drop in the work force since the end of 2008.

Pham Xuan Hong, a member of the association, said some companies laid-off workers when they had no orders, but when they have orders they face difficulties in recruiting workers.

In the first few months of the year, many companies cut down on workers when they had no orders. This resulted in many of the trained workforce returning to their hometowns. Companies do not know where to find them in order to resume normal production.

Ho Chi Minh City based textile and garment companies, on average, are 10 -15 percent short in employees.

Many companies have offered more than VND2 million per month and ensured rewards for Tet, but are still struggling to recruit enough workers.

With the problems in hiring enough staff, the industry expects to make $9.1 billion compared with the initial target of $9.5 billion this year.

VietNamNet/SGGP

Car importers accused of bringing used cars by air

VietNamNet Bridge – More and more luxury cars are coming to Vietnam by air instead of by sea. However, automobile dealers believe that many car importers are ‘dodging the law’ as used cars are not allowed to be brought to Vietnam by air.

The Vantage Roadster, which arrived in Noi Bai airport on June 24

A lot of luxury cars of different brand names, including Porsche, Cadillac, Rolls Royce Phantom and Bentley, have been flown to Vietnam. Analysts say that it costs some $4000 to 10,000 to bring a car to Vietnam by air, a ‘reasonable level’ compared to the cost of being brought by sea, while it is faster and safer.

However, in fact, car importers and owners do not have a choice on whether they can bring cars to Vietnam by air or by sea. Current laws stipulate that only brand new cars can be brought to Vietnam by air, while used cars must be shipped by sea.

A car with the mileage of 10,000 kilometres is considered a used car.

Meanwhile, a well-known car importer in HCM City is claiming that many luxury cars which have been imported recently by air are used cars. “I’m afraid that if this is not stopped, it will create a bad precedent,” he said.

Deputy General Director of Department of Customs Nguyen Van Can said that he had not heard about shipments of used cars by air. However, he has promised to check and clarify the issue.

According to Can, used cars only can enter Vietnam through Hai Phong port, Cai Lan port in Quang Ninh province, HCM City and Da Nang.

Customs procedures must be followed by importers right at the local border gates where importers register for customs clearance. Used imports only get cleared after their quality is assessed by the Vietnam Registration Administration (VRA) and importers pay tax.

VietNamNet, VNE, TT

Dollar price to climb to $18,500/US$ this year?

VietNamNet Bridge – While US$ interbank interest rates have been decreasing, the VND/US$ exchange rate keeps rising.

US$ interest rates decreasing slightly

According to the State Bank of Vietnam, VND lending interest rates last week were more stable than the previous week. The lending rates applied by state-owned banks last week were between 8.5-10 percent per annum for short-term loans and 10-10.5 percent for medium- and long-term loans.

Meanwhile, the VND lending interest rates offered by joint-stock banks hovered around 10-10.5 percent per annum. Those clients who can borrow money under the 4 percent interest rate subsidy programme only had to pay 4.5-6 percent per annum.

The average VND overnight interest rate was 5.44 percent per annum, a decrease of 0.1 percent over the previous week, while the rates of other terms of loans were between 6.3-8.6 percent.

Meanwhile, the US$ lending interest rate decreased by another 0.3-0.5 percent last week to 4-6 percent per annum. The interbank US$ interest rates also decreased last week from previous weeks.

Deputy Director of a joint-stock bank said that commercial banks had to slash US$ interest rates further in order to push up loans in the context of profuse US$ capital. However, he said that the interbank’s US$ slight decreases would not have big impacts on US$ loans. He said that this is a factor for which commercial banks may consider slashing deposit interest rates further in the time to come, though the current US$ deposit interest rates are considered relatively low.

The expected exchange rate at VND18,500/US$1

Commenting about the VND/US$ exchange rate’s performance recently, Dr Nguyen Dai Lai, senior analyst from the State Bank of Vietnam, said that the exchange rate was stable in the first six months of the year.

Considering import and export turnover decreased sharply in the last few months, one would think that the exchange rate would go down. However, in fact, the VND/US$ exchange rate was stable and sometimes heated up in early May and late June.

In the market, commercial banks have quoted exchange rates at the ceiling allowed, even since the exchange rate trading band was raised from +/-3 percent to +/-5 percent. The fact that commercial banks quote a single level for both purchasing and selling prices and quote at the ceiling levels show that the market is expecting the VND to devaluate more than 5 percent, the ‘quota’ which the State Bank granted for the exchange rate in 2009.

Currently, the VND/US$ exchange rate applied by commercial banks is always at the ceiling level round 17,800-17,802 dong per dollar. The cautious and hesitant exchange rate loosening by the State Bank in the last two weeks brings hopes that the exchange rate may be loosened more towards the year’s end.

According to Dr Vo Tri Thanh, Deputy Director of the Central Institute of Economic Management (CIEM), people expect the VND/US$ exchange rate to climb to 18,500 dong per dollar.

VietNamNet/VnMedia, LD

Securities companies to raise profit targets on recovered market

VietNamNet Bridge – Many securities companies are considering adjusting their profit targets for 2009, expecting this year’s profit to be higher than the goals they made earlier this year.

The recent ‘strong waves’ in the market have made securities companies more self-confident

The stock market has witnessed ‘strong waves’ in the second quarter. In the last three months, the VN Index and HNX Index have increased by over 100 percent with many records in trading volume and value set. Though indexes have been decreasing for a few trading sessions, analysts still believe that these are just momentary decreases and that the market will prosper in the time to come.

Securities companies, emboldened by the warming of the stock market, have decided to increase profit targets.

When setting business targets, a lot of securities companies were in bad condition due to the continued decline of stock indexes. Many of them just set moderate targets for this year, while others just dreamed of breaking even.

However, the recent ‘strong waves’ in the market have made securities companies more self-confident.

Trang An Securities Company, for example, earlier this year said it would just strive to balance the accounts in 2009, a year that economists warned would be very difficult for all businesses. However, General Director of Trang An Le Ho Khoi has said that if the VN Index returns to around 400-450 points, the company will earn 7-9 billion dong in profit this year. He has even predicted a higher profit level if the stock market prospers even further.

Nguyen Tho Phung, Deputy Director of Vietinbank Securities Company, has predicted that the company will have obtained 50 billion dong in profit by the end of June, or 83 percent of its yearly profit plan, while profit in the second half of the year will be the same at least.

Nguyen Van Dung, General Director of Tan Viet Securities Company, said that if the market keeps rising, the company’s profit will be double the planned level.

“The brokerage service of Tan Viet has been doing very well. We foresee that the yearly plan will be fulfilled in the first six months of the year,” he said.

Not only securities companies, enterprises in other business fields have also obtained impressive profit figures. The Da Nang Rubber Company, for example, earned 122 billion dong in profit in the first five months of the year, fulfilling 305 percent of its yearly plan. Bao Viet insurance group earned 842 billion dong in profit during the same period, fulfilling 108.6 percent of its yearly plan.

As such, it is expected that enterprises in different business fields will heighten their profit targets after considering the better signs of the national economy.

Le Thi Mai Linh, Deputy Chairwoman of SeaBank Securities Company, said that as securities companies greatly depend on the market’s performance, they always have to set business strategies suitable to different moments. Linh said that it is now the right time for companies to reconsider their business plans as they have the business results for the first half of the year.

VietNamNet/DTCK

The bond ‘test’ finishes

VietNamNet Bridge – There has been a sudden shift in the bond market: After a series of unsuccessful bond bids, the latest bond issuance succeeded thanks to reasonable interest rates.

On June 24, 1,500 billion dong out of 2,000 billion dong worth of two-year bonds issued by the Bank of Social Policies were sold in the bond bidding. The two institutions which joined the bids purchased the bonds at the rate of interest at 9 percent per annum.

In the last four months, 13 Government bond bids in VND failed or were not as successful as expected with limited volumes of bonds sold. The interest rates of the bonds being lower than the interest rates on the secondary market made institutions turn their backs.

“The last four months tested the patience of issuing institutions. The test has finished with the fact that issuance institutions have accepted raising the bidding rates of interest,” said director of a state-owned commercial bank.

This was the first time in many months that the rate of interest on 2-year bonds was raised to the 9 percent per annum threshold (it was 8.7 percent per annum at maximum previously). The 9 percent per annum level is now equal to the rates at which Government bonds are being traded on the secondary market. A question has been raised about why the institutions joined the bids if they could purchase the same bonds on the secondary market at the same price.

The answer is that on the secondary market, where investors trade issued bonds, it is not easy to purchase big lots of bonds worth several hundred billion dong. If institutions want to purchase bonds in big quantity, this may have big impacts on the market and push bond prices up, which means that bond yield will decrease. Meanwhile, by joining bids, institutions can purchase bonds in big lots while they do not bear the risks of price fluctuations.

It is clear that raising the interest rates of bonds is the only way to attract institutions to Government bonds. It seems that the task of issuing 55 trillion dong worth of bonds in 2009 has caused pressure, forcing issuers to accept higher rates of interest.

The Vietnam Development Bank (VDB) is expected to issue 500 billion dong worth of 2-year bonds and 500 billion dong worth of 10-year bonds in some days. Sources say that VDB will offer reasonable rates of interest to ensure the success of the issuance.

With 1,500 billion dong worth of bonds sold on June 24, the total volume of issued bonds has reached 7,500 billion dong so far. However, the volume proves to be small compared to the targeted volume of 55 trillion dong.

However, analysts believe that if issuers set reasonable interest rates, the Government will still be able to fulfill the bond issuance target. The Hong Kong and Shanghai Banking Corporation (HSBC) earlier this year predicted that the Government of Vietnam would issue bonds on the international market this year.

Prior to that, the Ministry of Finance announced that it will have to reconsider the plan on bond issuance after a series of failed bond bids recently.

Deputy Minister of Finance Tran Van Hieu said that the ministry will take necessary measures to fulfill the bond issuance plan set for 2009.

VietNamNet/DTCK

Ministries anticipate price increases of some kinds of goods

VietNamNet Bridge – The Ministries of Finance and Industry and Trade have forecast that the prices of dairy products, petroleum, rice and animal feed will increase towards the year’s end, but affirm that they will be controllable.

An official from the Price Control Agency under the Ministry of Finance said that the agency believes dairy products will increase by another 6-8 percent by the end of the third quarter or early fourth quarter in comparison with the first quarter of the year. Meanwhile, the price of fresh milk, which is an input material for dairy products, is expected to increase by 3-4 percent.

Dairy product prices are expected to increase because of the higher animal feed prices and the dollar price increases, which may push imported dairy product prices up. The Ministry of Finance is now proposing putting dairy products onto the list of products the prices of which can be stablised by the state.

According to the Ministries of Agriculture and Rural Development and Finance, the rice price is also expected to increase because of higher demand from rice-importing countries.

Director of Tien Giang Food Company Nguyen Ngoc Nam said on June 28 that the paddy price in the Mekong Delta has been increasing sharply these days, especially scented rice. The rice price has increased by 200-300 dong per kilogramme over the last one week on average, while the scented rice price has increased by 800 dong per kilogramme in comparison with early June 2009. The price of low-quality IR50404 has also increased, having exceeded the threshold of 4,000 dong per kilogramme, though sales have been going slowly.

Experts say scented rice prices have increased because exporters have signed contracts to export big volumes of rice to Africa, Hong Kong and Singapore.

A lot of economic institutions in the world have raised the forecast crude oil price to $85 a barrel by the end of the year. If the world’s oil price increases, this will lead to the sharp price increases of many other products including ingot steel and materials for industrial production. The petroleum price increases will lead to the increases of transport service fees.

According to the Ministry of Finance’s Price Control, the LPG price in July in the world may increase by $20-30 per tonne. The retail domestic LPG price will increase accordingly by 5,000-7,500 dong 12kg tank.

Market research agencies under the ministries still keep cautious when analysing the price tendency of many products, including cement, steel fertiliser and sugar.

According to the agencies, though the demand for cement, steel and construction materials is high, the profuse supply (some big factories plan to become operational in the time to come) will stabilise these products’ prices. Meanwhile, rains and storms in the upcoming months are believed will limit the demand for these products.

Food prices are not expected to see big changes in the time to come. Regarding medicine, state management agencies have forecast the price increases of some kinds of products, but have affirmed there will not be any sharp price hikes.

VietNamNet/VnMedia

Viet Nam drops on global retail index

Customers shop at Thanh Do supermarket in the northern city of Lang Son. Inflation and slowed consumer spending caused Viet Nam to fall out of the top five in the latest survey of the world’s most attractive retail markets.

VietNamNet Bridge - Viet Nam has fallen out of the top five in the latest survey of the world’s most attractive retail markets, according to global management consulting firm ATKearney.

Viet Nam earned only 55 points on the 2009 Global Retail Development Index (GRDI), 21 points fewer than it earned in 2008 and dropping from the first to the sixth position on the survey, behind India, Russia, mainland China, the United Arab Emirates and Saudi Arabia.

ATKearney attributed the decline to inflationary pressures in the latter half of 2008 and a significant slowing in consumer spending in a largely export-driven economy.

Nevertheless, the firm acknowledged that many global retailers were now well established in Viet Nam, including South Korea’s Lotte, Japan’s Seiyu, Malaysia’s Parkson, Hong Kong’s Dairy Farm and Germany’s Metro.

"Viet Nam has some short-term challenges, but our long-term outlook for the country remains positive as it continues to open its doors to international investors," said Hana Ben-Shabat, ATKearney partner and co-leader of the study.

"With economic conditions in developed markets improving so slowly, emerging markets are becoming much more important sources of growth for global retailers," said Ben-Shabat.

Conducted since 2001, the GRDI study is based on a set of 25 variables, including economic and political risk, retail market attractiveness, retail saturation levels, and differences between GDP growth and retail growth, according to ATKearney.

The GRDI also focused on opportunities for mass market and food retailers, which are typically bellweathers for modern retailing concepts in a country, the firm said.

Viet Nam Retailers Association general secretary Dinh Thi My Loan refused to comment on the survey results yesterday until speaking further to other association members.

VNN/VNS

Buyers advised rational behavior in real estate market

Residential apartment complexes in District 4.

VietNamNet Bridge - As the real estate sector warms up and anxiety rises about inflationary prices, Deputy Minister of Construction Nguyen Tran Nam says buyers should rely on professional advice and not bank on market rumors.

“After a long freeze [over the past year], the number of property transactions and prices have edged up. It is inevitable,” Nam said.

He said the real estate market recovery is backed by high housing needs and signs that the economy has bottomed out.

“Demand for housing is strong and there is still a big gap between demand and supply,” Nam said. “In Vietnam, the per capita housing area is 12 square meters while it is 30 square meters in other countries.”

Markets of soft-price apartments and land for construction projects in Ho Chi Minh City and Hanoi have been heating up in recent weeks.

Immediately after the Dat Xanh Real Estate Service and Construction Corporation launched the first phase of its Babylon Residence project in HCMC’s Thu Duc District with 100 apartments last Sunday, it sold 96 at VND14.5 million (US$816.2) per square meter.

Also last week, Tan Binh Construction Investment Company sold 100 apartments of its Tan Mai Building project in HCMC’s Binh Tan District at VND10-12 million per square meter.

In the first week this month, land prices at several projects in new District 7 development areas rose 4-6 percent compared to May.

“The residential market is improving because a large volume of mid-income people have found current prices much lower than the overheated prices of 2006-07,” Vietnam News quoted Pham Si Liem, vice chairman of Vietnam Federation of Civil Engineering Associations, as saying.

“Everyone is trying to manage credit to buy a piece of land or a house. They are worried about not be able to own if the market overheats again,” Liem said.

Questioned why Vietnam’s real estate market is not developing normally as it either freezes or becomes overheated, Nam said it was psychological buying that was driving the market.

“Vietnamese people are easily affected by rumors [about the market trends] and lack analysis, and not just in the property market,” he said.

Nam said though the real estate market could generate high profits, it was very dangerous if investors were to buy properties based on market rumors.

He said while the government is responsible for perfecting legal documents to prevent speculation and giving enough information on the market to direct home buyers, the buyers themselves should “adjust their behavior.”

If home buyers do not know enough about the property market, they should access consultants, he said.

“We are running on a trial basis (the calculating of) the real estate market’s indicators – such as indices of trading volumes and prices – to measure the temperature of the market so that individuals and entrepreneurs can use them for their trading or investment decisions,” Nam said.

He said the market freeze over the past year made such “measuring” a challenging task.

“As the market warms up, we will accelerate this work to release the indices soon,” he said.

Housing prices in Vietnam are very high compared with residents’ incomes, Nam noted.

He said while residents in foreign countries need 15 years of work to buy a house or apartment, Vietnamese people need 30-40 years.

Nam said the National Assembly has recently ratified amended construction-related laws which cut investment time and costs, helping lower housing prices.

The Deputy Minister of Construction also said the government is supporting the development of the low-income housing market to reduce the gap between demand and supply.

Earlier this month, the ministry reported 20 low-income housing projects nationwide will break ground in June, and several others in the third quarter of the year that are expected to be completed in late 2010.

Viet Kieu housing rules good for market

Nam said the newly approved legal amendments to grant greater home ownership rights to overseas Vietnamese would have “positive impacts” on the local real estate market.

The amendments would not only tighten relationships of overseas Vietnamese, known as Viet Kieu, with their home country, but would also “help the property market grow.”

From September 1, certain categories of Viet Kieu will be allowed to own an unlimited number of homes in the country under amendments to the Housing Law and Land Law passed last week by the National Assembly.

It includes those who still retain their Vietnamese citizenship, overseas Vietnamese investors, scientists, and others with special skills.

The Vietnamese diaspora is estimated at about three million people with many in the US, Canada, France and Australia. But during the three years since the Housing Law took effect in 2006, only 140 have bought houses in Vietnam.

“Many people have shown concern that the amendments would lead to speculation, but they shouldn’t worry,” Nam said.

“We have enough instruments to prevent any attempts to hoard real estate, like taxes. Meanwhile, as I have said, property prices in Vietnam are high now, so it’s not profitable to speculate on real estate.”

VietNamNet/TN

VietNamNet Bridge - Vietnam is forecast to post gross domestic product growth of 3.9 percent in the first half of this year, compared to that of 6.5 p

VietNamNet Bridge - Domestic and international experts worked together to improve the regulation and development of finances at the first-ever regulatory reform conference in Ha Noi yesterday.

Vietnam is a big rice exporter

The two-day conference was organised by the International Finance Corporation, a member of the World Bank Group, to enable experts in South and Southeast Asia to share experience on regulatory reforms.

IFC was supporting the Vietnamese Government’s implementation of national Project 30, a key step in administrative reform, said Charles Schneider, a senior official at the IFC.

Monique Bennema, senior official at the Netherlands Embassy, said "complicated administrative procedures are always a barrier for enterprises, preventing development."

Participants from South Korea, Bhutan, Cambodia, India, Indonesia, Laos, the Netherlands, Tonga, the US, Britain and Viet Nam agreed that keeping regulations up to date was essential for a better business environment and that the withdrawal or cut of unnecessary regulations was a must.

Nguyen Minh Man, director of the Department of the Administration and Civil Services, said: "Viet Nam is working hard for administrative reform, however, the result is still far from expectations."

According to Nguyen Thi Kim Thoa of the Ministry of Justice, many legal documents are impractical and ineffective. As a result, they conflict with the current legislative system and are not suitable with socio-economic development in Viet Nam.

The reason for this was lack of staff, finances and support from the local people, who often know nothing about the process of making the regulations, Thoa said.

Nguyen Minh Man, also deputy chairman of the Advisory Council of Project 30, expressed his hope for the project, which was kicked off last year to increase transparency and simplify administrative procedures (APs) in Viet Nam. The success of the project means Viet Nam can attract more investment and improve its integrity and access to information, he said.

Ngo Hai Phan, deputy director of the Prime Minister’s Special Task Force for Administrative Procedures Reform said the project, which has been successful in other countries, would benefit the 87 million Vietnamese citizens, as well as international investors working in Viet Nam, when it finishes next year.

There are more than 5,000 APs at the ministerial level and more than 52,000 others at the local level, said Phan, adding that unnecessary and complicated APs will be axed.

The project has been implemented in all ministries and provinces of Viet Nam, as well as the three central agencies of the State Bank of Viet Nam, Bao Viet Bank and Social Policies Bank, which often complained of complicated APs.

According to the official website of the project, it is being carried out in three steps: inventory, review, and implementation of simpler APs.

Responsible people and enterprises will be involved in the process of recommendation and inventory, said Man, adding that this will not only boost the transparency of the work, but ensure all amendments are correct.

Most of the interviewed citizens, especially businessmen, welcomed the project but questioned its effectiveness.

Nguyen Thi Luong, owner of an export weaving workshop in Ha Noi, said she had to wade through a lot of complicated tax and customs procedures before she could trade her products with foreign partners. As a result, her business is less competitive than her counterparts in Thailand.

Luong said that the project would improve her business by eliminating unnecessary and complicated APs.

Expert Nguyen Minh Man said that Viet Nam’s project "will be a success as it is not only emulating the success developed countries have had in cutting unnecessary APs, but taking into account others’ failures."

VietNamNet/VNS