Hanoi surpassed other localities in terms of public investment spending in the first five months of the year, according to the General Statistics Office (GSO).
It was estimated at VND6,096 billion by May 2011, up 17.3 percent against the same period last year.
According to the Hanoi’s city People’s Committee, the total amount of investment capital sourced from the state budget this year is around VND16,000 billion. In order to stabilize economy and contain inflation, Hanoi has cut back VND825 billion on the funding for 253 projects.
Dialogue with Korean businesses
The Ministry of Finance and the Republic of Korea Embassy in Vietnam co-organized a dialogue in Hanoi on June 2 to help RoK businesses better understand and solve difficulties related to tax and customs procedures in Vietnam.
At the meeting, Minister of Finance Do Hoang Anh Tuan said that this was an opportunity for Korean enterprises to openly discuss new policies on tax and customs and administration reforms with Vietnam’s relevant agencies.
Tuan pledged that the Ministry of Finance is willing to help Korean enterprises solve their difficulties during their operations and enjoy equal treatment as Vietnamese counterparts.
The General Department of Taxation and the Vietnam Customs first presented policies, tax administrative procedures, and customs management procedures, which have been applied since June 2010. Then RoK businesses raised questions about preferential tariffs, value added tax, and regulations on customs procedures, etc.
More than 70 percent of Korean investors in Vietnam are small- and medium-sized enterprises; therefore, they have no departments in charge of tax and customs-related issues. The Vietnamese Ministry of Finance is planning to coordinate with RoK relevant agencies to facilitate RoK business operations in Vietnam.
EVN boosts hydroelectric power project in Cambodia
EVN International JSC, a subsidiary of Electricity of Vietnam (EVN), has laid out its plan of compensation and resettlement for local residents living around the new hydroelectric power project in the Cambodian province of Stung Treng.
The Han Se San II hydroelectric power project, a joint venture between EVN International and Cambodia’s Royal Group, is located in Sesan district and will have a total capacity of 400 MW. The five-turbine plant will be built with an expected capital of US$800 million.
At a meeting with provincial and local leaders in Phnom Penh on June 2, EVN International JSC representatives presented steps including compensation and resettlement and the execution of relevant parties’ rights, as well as the form of a Compensation and Resettlement Committee (CRC) and a Working Group (WG) headed by Cambodian state officials.
EVN International Deputy General Director Nguyen Thanh Huan said he hopes the CRC and WG will start their jobs in October.
Dying oysters leads to $30 mln in losses
Oyster farmers in Mekong Delta provinces are experiencing heavy losses as their oysters die in large numbers along the Ngang and Lieu rivers due to disease caused by poor weather conditions, according to local officials.
Farmers in Co Cong District of Tien Giang province have recorded 1,200 hectares worth of oyster loss from the total 1,900 hectares of oyster farms in the district.
The total loss in the district is estimated at 12,000 tons worth nearly US$11 million.
Local authorities are considering lowering the rent for land and providing US$100 to US$200 of support for each affected oyster farmer.
Oyster farmers in Ben Tre have experienced more than 1,560 hectares of total oyster in the province’s 2,300 hectares of oyster farm area, with an estimated loss of US$18.9 million.
Experts said disease caused by poor weather conditions, high amounts of salt in the farms and extreme differences between day and night temperatures are responsible for the oyster deaths.
In 2010, total oyster output in the Mekong Delta was more than US$105 million.
Too many banks in Vietnam, says Stanchart chief
Vietnam’s banking industry is too small to support its 80 plus banks and the number should be scaled down to boost efficiency, Louis Taylor, general director of Standard Chartered Vietnam Bank, has said.
In an online interview to the Vietnam Economic Forum about the Vietnamese economy, he said it was also necessary to have appropriate policies to create a healthy banking system.
The State Bank of Vietnam’s move to increase banks’ minimum chartered capital to VND3 trillion and their capital adequacy ratio to 9 percent was sound.
It would be relatively difficult for Vietnamese banks to raise the money and would help purge weaker banks.
Earlier this year Standard Chartered Bank had forecast Vietnam's economic growth this year at 7.2 percent. But following some new developments, it had adjusted its forecast to around 6.3 percent," not a bad sign for the Vietnamese economy”.
In the short term the central bank's anti-dollarization policy was essential. The government could not control the supply of dollars and gold but could control the flow of dong into the market.
The dong could drop slightly in Q3 and Q4, falling to VND21,800 by end of the year.
"Only 15 percent of the [Vietnamese] population have bank accounts. So this is a promising market."
The entry of international banks would not threaten local players because they have close relationships with business and retail customers.
Telecom market sees slower growth
Vietnam’s telecom market moves into a slower development phase after many years of enjoying annual subscriber growth increases of 170 to 200 per cent.
The General Statistics Office revealed there were a total of 127.8 million telephone accounts nationwide, down 11 per cent from last year, with the number of fixed telephone accounts at 15.5 million, decreasing 5.2 per cent, and the number of mobile phone accounts standing at 112.3 million, down 11.8 per cent.
This was the first time since early year the number of telephone accounts had fallen after four months of rises.
The ADSL broadband market has also seen the number of subscribers in February fall from January levels.
According to telecom specialists, the situation was predictable as the services of network suppliers were improving, so users only needed to use the services of one operator, instead of two.
VNSteel to launch IPO next week
Vietnam Steel Coporation (VNSteel) will sell 66 million shares in it initial public offering on June 10 at the starting price of VND10,100, the company’s CEO said on Tuesday.
At the company’s road show in HCMC, Le Phu Hung, general director of the State-owned company, said the company would auction nearly 66 million shares, or a 9.7% stake, via the Hanoi Stock Exchange. This is the initial step for the company to go public.
After doing the IPO, the company’s chartered capital will be VND6.8 trillion, of which the State will hold a 90% stake. The mobilized fund will be used to finance VNSteel’s projects in 2011-2013 including exploiting Quy Sa mine in Lao Cai Province and Thach Khe iron mine in Ha Tinh Province, a two-million steel project, and Thi Vai International Port in Ba Ria – Vung Tau Province.
Hung was confident the auction would be successful despite the current gloomy stock market given the company’s transparency in evaluating assets. In addition, the starting price of VND10,100 each is an attractive price, he added.
After changing to a shareholding company, VNSteel will increase its capital from VND6.8 trillion to VND8 trillion by issuing 120 million shares to strategic foreign investors.
Hung said the company was considering four foreign investors which were big steel producers and had keen interest in the company’s shares. He said VNSteel expected to sell a 15% stake to the first foreign investor and sell another 10% to the second investor.
VNSteel is a leading steel producer in Vietnam with a market share of 30%.
ADB finances two water-related projects
The Asian Development Bank (ADB) last Friday signed two loan deals worth US$198 million to help improve the people access to clean water supply and complete a water resources project in HCMC and surrounding provinces.
In the first credit agreement, the regional lender commits to provide US$138 million as part of the US$2.8 billion investment program involving the bank, the Vietnamese Government, development partners and water company financiers to improve tap water supply.
The program’s first subproject targets HCMC and is expected to benefit over half a million city residents in the city and connect almost 20,000 families for the first time to piped water. It is aimed to help HCMC complete its goal of increasing the piped water coverage from 82% to 95% by 2025.
In addition, the subproject is expected to help improve the operational efficiency and the financial performance of the Saigon Water Corporation.
Meanwhile, the US$60 million loan provides supplementary financing to Phuc Hoa Water Resources Project prepared in 2003. Together with a loan of US$25 million from the French Development Agency (AFD), the supplementary loan will enable Vietnam to complete the water resource project’s original scope including the construction of two new irrigation systems for agricultural development and intensification by March 2014.
The project is aimed at providing additional water in the Saigon and Vam Co Dong river basins for irrigated agriculture and to supplement existing water supply to HCMC and neighboring provinces.
The project will supply water for agriculture, domestic, municipal and industrial uses. Besides, it will develop management skills in government oversight agencies and community water user groups.
Earlier delays in implementation and high inflation, however, increased the total cost for this project, resulting in a financing gap of over US$131 million. Accordingly, in 2008, the original project was divided into two phases, and with the successful completion of the first phase, ADB and AFD agreed to provide additional support for the irrigational project’s second phase.
Money transfer among banks via ATMs workable in 2015
Several banks in HCMC are trialing the service of money transfer via automated teller machines (ATMs), and the service will be widely available at all banks between 2013 and 2015, said the central bank’s HCMC Branch.
Nguyen Van Dung, deputy director the State Bank of Vietnam’s HCMC Branch, told a seminar on Tuesday that cardholders would not have to perform the money transfer service at banks’ transaction offices in the coming years. The ATM-enabled money transfer is part of the banking service development plan in HCMC from now to 2015, he said.
At this time, most customers have to go to transaction offices to transfer money from their accounts to another bank’s accounts or use the Internet Banking service provided by a few banks.
This year and next, Dung said, banks in the city will finish connecting points of sale (POS) networks as well as expand these networks. Payment made via POS is expected to account for 20% of the total trade revenue at those points by end-2012 from the current of 5%-7%, and the ratio is expected to increase to 40%-45% in the 2013-2015 period, Dung added.
At the seminar, Dung suggested that the central bank ask relevant authorities to order goods and service providers to use non-cash payment methods.
He said the Government should ask retailers to install payment card acceptant machines as well as give incentives to those with increasing non-cash payment revenues. The central bank should also suggest the Finance Ministry to lower tax for people using non-cash payment in order to encourage this method, he added.
As of end-2010, there were 6.67 million cards in HCMC, of which 85% were local payment cards, or ATM cards, while the transaction revenue related to cards totaled VND131.4 trillion, nearly four times higher than in 2006.
At the same time, there were 20 million individual banking accounts in HCMC, a strong increase from 5.5 million in 2006. At this time, non-cash payment accounts for 85%-87% of total payment made via banks.
* In related news, Vietnam Cards Association said its bank members haven’t yet applied higher fee for other banks’ cardholders withdrawing cash at their ATMs from June 1 as planned earlier.
Earlier, the association said its members will increase this fee from VND3,300 to VND5,500 for each single transaction since June 1. However, there have been strong protests from customers when the information was released.
Nguyen Thi Thanh Hang, vice chairwoman of the association and director of card center of Vietcombank, told the Daily on Tuesday that all members of the association agreed on a higher fee but they thought this was not a suitable time.
Meanwhile to support individual clients, some banks like Eximbank, Saigon Commercial Bank, and Trust Bank have announced that they would not charge fee on customers when they withdraw money at another bank’s ATMs.
Tran Minh Khoa, head of Individual Division of Eximbank, said that other banks would charge Eximbank VND3,300 for one transaction of cash withdrawal at their ATMs by Eximbank’s customers, but the bank would not charge this fee on other customers.
New rule forces Vietnam telcom giant to make divestment plans
State-owned telecom giant VNPT said it has submitted to the government a plan to divest its stake from one of its mobile phone subsidiaries, Vinaphone or MobiFone, according to news website VnExpress.
The move comes on the heels of a new regulation on ownership in telecom firms taking effect June 1. The regulation stipulates that an investor holding more than a 20 percent stake in one telecom firm cannot own more than a 20 percent stake in another.
VNPT, as Vietnam Posts and Telecommunications Group is known, now owns both Vinaphone and MobiFone.
To avoid violating the new rule, VNPT plans to sell shares of either of the two mobile networks. The group is also considering two other options: merging the two firms or selling shares of the group as a whole.
VnExpress cited VNPT Deputy General Director as saying that the company has not made its final decision yet and is awaiting instructions from the authorities.
Market analysts have said the group is caught in a dilemma because both Vinaphone and MobiFone are too lucrative to give up. The latter in particular contributes half the profit that VNPT earns.
They also said merging the two networks would create a giant mobile phone company that could hurt competition in the market.
Pham Hong Hai, director of the Telecommunications Department under the Ministry of Information and Communications, told VnExpress that it would take a long time to either sell shares of the companies or merge them. “I can’t tell how long because a final decision can’t be made in just a month or two. But the process must not go on for years.”
The sale of shares in MobiFone had been scheduled for the second quarter of 2009, but has been delayed since.
Initial positive results of the Government Resolution 11
The effective implementation of the Government’s Resolution No. 11 has resulted in some initial achievements, said Minister, Head of the Government Office Nguyen Xuan Phuc.
Mr. Phuc, who is also a Party Politburo member, said this at a press conference in Hanoi on June 3 to announce the results of the Government’s regular May meeting.
Minister Phuc emphasized that Vietnam has succeeded in managing monetary and credit growth, maintaining and developing production and business, promoting exports, and ensuring social welfare. He said political security and social order have also been ensured.
The Government urged ministries, agencies, and localities to strictly implement the Government’s directions for curbing inflation, stabilizing the macroeconomy, and ensuring social welfare in the coming months.
Deputy Minister of Industry and Trade Nguyen Thanh Bien provided information related to the ministry’s circular 20/2011/TT-BCT which imposes measures for tightening import of automobile, mobile phones, and cosmetics, as well as the ministry’s flexible management of monetary and credit policies and other issues related to exchange rates, attracting investment and controlling inflation.
Imports of under-nine-seat cars have significantly increased by 46 percent in quantity and 75 percent in value, he said.
Regarding the future management of monetary policies, Governor of the State Bank of Vietnam, Nguyen Van Giau, said credit growth had reached 6.92 percent by the end of May.
Deputy Minister of Planning and Investment Cao Viet Sinh said, although the number of new FDI projects licensed in the first five months decreased, the total registered capital saw a sharp increase.
In order to attract more foreign investment, Vietnam intends hold investment promotion campaigns in other countries.
Robusta experiences big month on futures exchange
Vietnamese robusta coffee had a big month on the London International Financial Futures and Options Exchange (LIFFE) in May, with most stocks managing to meet quality specifications.
LIFFE’s statistics show that 7,853 lots (equivalent to 78,530 tonnes), or 97 percent of the more than 8,050 lots of Vietnamese robusta coffee submitted for inspection last month, met the futures market’s specifications.
They also accounted for 73 percent of all robusta coffee from around the world.
In the period from October 2010 to May 2011, Vietnam exported 1.1 million tonnes of robusta, which is used mainly for blending, to become the biggest producer and exporter of this type of coffee.
Vietnam also exports around 25,000 tonnes of arabica coffee, which defines the aroma and taste of the beverage.
Forum discusses ways to improve ODA use
The Ministry of Planning and Investment (MPI) held a forum in Hanoi on June 3 to discuss ways to raise the efficiency of ODA and its role in the sustainable socio-economic development of Vietnam.
Ho Quang Minh, Director of the Foreign Economic Relations Department under the MPI said Vietnam is working out a project to attract, use and manage ODA capital effectively for the 2011-2015 period.
He said the project would create favourable conditions for the private sector access to ODA with preferential and less-preferential interest rates, especially through public-private partnership, for the national socio-economic development in the principle of sharing benefits and risks.
Deputy Minister of Planning and Investment, Cao Viet Sinh, said Vietnam continued to take the lead in implementing initiatives to raise the efficiency of ODA at regional and international forums, under the Paris Declaration and Hanoi Core Statement on Aid Effectiveness.
According to the MPI, there are currently 51 donors in Vietnam, including 28 bilateral and 23 multilateral donors, who contributed 3-4 percent of Vietnam’s GDP during the 2006-2010 period. Up to 53 percent of them operate in agriculture and rural development while the remaining 46 percent work in State management.
Over the past five years, donors have pledged a total of US$31.7 million in ODA to Vietnam, up 21.5 percent from the previous five-year period.
During this period, the disbursed capital reached US$13.8 billion, a rise of 17 percent, which was used for developing socio-economic infrastructure, poverty reduction, institutional and human resource development as well as coping with climate change.
New model needed to maximise aid effectiveness
Focused efforts to strengthen the way aid is used were necessary as Viet Nam becomes a middle-income country.
These efforts should be clearly reflected through the revision of the Official Development Assistance (ODA) Strategy Framework and the replacement of Decree 131/2006/ND-CP on ODA management and utilisation, participants at the third Aid Effective Forum held in Ha Noi yesterday were told.
Max von Bonsdorff, head of development co-operation at the Embassy of Finland, said that to maximise the effectiveness of aid during a time of transition, one important issue that should be addressed was how donors would complement each other and divide labour between themselves.
Victoria KwaKwa, director of World Bank Viet Nam, said: "It is extremely difficult to make progress if two [Government and development partners] don't come together. We need some fundamental changes to achieve it."
Cao Manh Cuong, deputy director of the Foreign Economic Relations Department under the Ministry of Planning and Investment, said one of the main constraints was the lack of a strong national aid architecture that could link aid effectiveness and development effectiveness.
He said another challenge that still remained was institutional challenges including complex legal processes, deficits in planning and budgeting and complexities of decentralisation were currently complicating development partners' harmonisation in the implementation of aid.
Thomas Beloe, a Governance and Aid Effectiveness Advisor from the United Nations Development Programme Asia Pacific said that as Viet Nam became a middle-income country, it would have to deal with distinctive challenges such as more selective needs for aid and relatively strong bargaining power and less appetite for division of labour exercises.
He said Viet Nam should take the opportunity at the fourth High Level Forum on Aid Effectiveness which will take place in Busan, South Korean, in November to share lessons during the process of adapting the aid effective agenda to its own conditions.
One of the key objectives of the forum would be to consider the quality of aid in the broader context of development effectiveness and Viet Nam, in particular in the context of a new middle-income country, was well positioned to have a strong influence in the global debate.
PM applauds VN's initial progress
Viet Nam has achieved some initial success in stabilising the exchange rate, controlling the gold market and increasing foreign reserves and exports to save nearly VND3.9 trillion (US$191 million) in funds that will be earmarked for social welfare.
Prime Minister Nguyen Tan Dung noted the successes yesterday at a monthly meeting of the Government that saw participants discuss the national socio-economic situation after three months of implementing Government Resolution 11.
Dung asked ministries, sectors and localities to continue to implement measures to curb inflation, and strive to reduce imports by 16 per cent this year to ensure a reasonable growth rate.
Chairman of the Government Office Nguyen Xuan Phuc said that the resolution had brought effective results to monetary policies.
Specifically, foreign reserves increased by more than US$1.2 billion; nearly VND4 trillion ($196 million) was saved from public investment production and the Gross Domestic Product (GDP) increased by 5.6 per cent this year.
Reports at the meeting showed that ministries, sectors, localities and State corporations cut investment capital by VND80.5 billion ($3.9 million) since early this year, accounting for 9 per cent of the total social investment capital in 2011.
About 910 projects run by economic groups and State corporations with total investment capital of VND39.2 trillion ($1.9 billion) were delayed or extended, accounting for 10.7 per cent of this year's development and investment capital.
The foreign exchange market has improved positively, a development reflected by the large amount of foreign currencies that banks purchased from individuals and enterprises and the gradual decrease of the exchange rate. Total export turnover reached $34.7 billion in the past five months, an increase of 32.8 per cent compared to the same period last year and three times the amount compared to the Government target.
At the meeting, the Prime Minister asked ministries, sectors and localities to continue implementing the resolution to control inflation at 15 per cent and ensure a stable growth rate of 6 per cent.
State banks were asked to conduct flexible monetary policies to ensure the rate of credit growth stayed below 20 per cent while giving priority to credit capital services for economic development.
Dung also called for the real estate market to be controlled tightly and urged discussions on ways to restructure the banking system.
He required relevant authorities to control prices, avoid speculation and curb hikes in prices for gasoline, electricity and coal, which must be controlled to help work on lowering the inflation rate.
Dung also said public investment should be reduce further reduced so that funds that are saved can be used instead for urgent projects on social welfare, national security and natural disaster prevention.
At the meeting, many members discussed emerging challenges such as high inflation, the large trade gap between exports and imports and ways to improve living standards for poor people living in disadvantaged areas.
Industrial clusters fail to lure investors
Despite receiving privileges and developing quickly, industrial clusters have not attracted a sufficient number of investors.
Many of them have completed infrastructure construction and begun operations, but customers comprise only 30 per cent.
In addition, service supply, management, waste treatment, environmental protection and social security have created problems for the industrial clusters.
HCM City's master plan included 30 industrial clusters with total area of 1,900 ha.
However, except for six under construction, only 10, with 750ha, have had investors. The remaining, covering 760ha, are operating but have no customers.
According to the city's Industry and Trade Department, some industrial clusters have started up quickly, with no owners or detailed master plans, no investors and no waste treatment systems.
Ha Noi faces similar problems, with 56 industrial clusters covering 518ha. Forty-four clusters, with 382ha, have come into operation, but many have been used for different purposes.
In the northern city of Hai Phong, the Vinh Niem industrial cluster has officially operated for 10 years, but the management board and investors have worked independently. Meanwhile, infrastructure has deteriorated, along with social stability.
"We have been sending our complaints about the situation for a long time, but until now there has been no management board. We had to manage it ourselves," said Nguyen Huu Loi, director of VIC Ltd Company.
The northern province of Bac Giang has 30 clusters but only 14 are operating.
The number of customers for such clusters are very few. However, these clusters are going to expand, although some have been used for rubbish dumps.
By the end of 2010, 1,872 industrial clusters with 76,520ha had been approved, with half of them operating. At the provincial level, up to 2020, there will be more than 1,643 clusters covering 73,000ha.
Clusters have the potential to attract 500,000 small – and medium-sized enterprises nationwide, but only one-fourth of the land is currently occupied by investors.
The proportion is much lower than 50 per cent of industrial and export processing zones (IP/EPZ).
Meanwhile, clusters are planned for another 20,000 – 25,000ha, with total investment of VND100 trillion (US$500 million) from the State budget.
"Localities have developed industrial clusters without strict calculations or close co-operation within regions or provinces. Such projects spent a lot for land for agricultural cultivation and did not base this on real economic development. This is the reason for pollution, traffic jams and social instability," said Pham Khoi Nguyen, minister of Natural Resources and Environment.