BUSINESS IN BRIEF 21/4

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Domestic building equipment sector to get $355m injection



Viet Nam would invest US$355 million in the building equipment sector with the aim of producing advanced level equipment by 2020.

Under the Ministry of Industry and Trade's plan to develop the industry by 2020 with a vision to 2025, the country would enhance the production of building equipment to serve domestic demand, gradually replacing imported products and eventually exporting its own.

Do Huu Hao, chairman of the Viet Nam Mechanics Association told the Saigon Times that domestically produced building equipment met 15 per cent of total demand.

Hao said Viet Nam had been able to produce concrete mixers for the sector, but the majority were imported.

He added that because of this, construction enterprises remained passive, pushing building costs higher.

The plan would focus on key products such as cranes to service multiple industries and cement related equipment.

The ministry would invest around $50 million in a bulldozer plant in the southern province of Dong Nai's Long Thanh District with annual capacity of 255 units, and a plant to produce self-propelled cranes with annual capacity of 40 units in the northern province of Hung Yen.

There are also plans to build heavy mechanics plants in Hai Phong City and Quang Ninh Province, and four plants to produce electric motors, hydraulic equipment, ball-bearings and brakes in northern provinces.

Measures aim to restrict bad debt

Credit institutions, including foreign bank branches, which have high bad debts or violate the regulations on capital contributions or share purchases from other ventures, will have their credit growth restricted, according to a circular from the State Bank of Vietnam.

Under Circular 10/2012/TT-NHNN, issued by the State Bank on Tuesday, credit institutions which have had minimum capital adequacy ratios lower than 8 per cent for six consecutive months won't be allowed to expand their credit.

Also, commercial banks whose bad debts go above 10 per cent of their total outstanding loans for three consecutive months will have their credit growth rates lowered. They will also be barred from expanding their lending operation.

Banks which violate regulations on investment in fixed assets might be applied capital adequacy ratio higher than the regulated rate.

Credit institutions that violate three times in a fiscal year won't be allowed to expand their operations for six months of the following fiscal year.

The circular will come into effect from May 30.

The State Bank reported that credit shrank by 1.96 per cent in the first quarter of the year compared with the end of last year.

Of this, the proportion of outstanding loans to discouraged sectors reduced from 11.02 per cent at the end of last year to 10.77 per cent by the end of February.

By March 26, total money supplies were estimated to have increased by 1.06 per cent in comparison with the end of last year.

During the first quarter, total deposits rose by 1.39 per cent.

During the same period, the lending interest rates of loans made for agriculture, rural development and exports ranged from 14.5 per cent to 16 per cent per year. The lowest rate was 13.5 per cent applied for corporate customers committed to selling foreign currency revenues to banks.

Rates for the production sector were commonly set from 15 per cent to 20 per cent per year.

The non-production sector was offered rates from 20 per cent to 25 per cent.

The overnight interest rate in Vietnamese dong was set at 8-9 per cent on the inter-bank market. Meanwhile, one-week, two-week and one-month term rates were 9-10.5 per cent, 10-11.5 per cent and 12-13 per cent, respectively.

Garment makers review strategies

The domestic textile and garment industry needs to devise new measures to realise its development plan for the 2010-15 period, the Vietnam Textile and Apparel Association (VITAS) has said.

The deputy general secretary of VITAS, Nguyen Van Tuan said yesterday at a conference held by EU-Vietnam MUTRAP and the Vietnam Chamber of Commerce and Industry that one of the biggest problems facing the industry is the reliance on import materials.

Under the industry's current plan, it would have to achieve a growth rate of 25 per cent and total turnover of US$25 billion to reach its 2012 targets. At least US$19 billion of that total figure would have to come from exports.

The industry's growth rate is targeted to be 25 per cent in 2013 and 15 per cent in 2014 and 2015, with total turnover estimated at US$31.25 billion, US$36.94 billion and US$42.48 billion, respectively.

After 20 years of achieving a growth rate of 20 per cent, in 2011 the domestic textile and garment sector became one of the country's biggest industries, with 4,000 enterprises and a turnover of US$20 billion, accounting for 15 per cent of the national GDP.

"The industry is also the country's biggest export earner and one of the world's five biggest exporters of apparel and textile products. It has also created jobs for 2.5 million people," Tuan said.

It was able to record such growth because of several reasons, including international integration, proper development strategies, and equitisation of textile and garment enterprises, among others.

However, it still imports a great deal of raw materials. With a need of 400,000 tonnes of natural cotton per year, the industry receives only 3,000 tonnes or 0.75 per cent from domestic resources.

About 400,000 tonnes of artificial fibres are needed, but domestic resources can provide only 120,000 tonnes.

In addition, all equipment and parts needed in the textile industry are imported.

Last year, enterprises in the apparel sector had to import 5.2 billion metres of fabric of the total 6 billion metres needed for production activities.

Seventy-five per cent of accessories used in garment enterprises originated from other countries.

The domestic textile and apparel industry has about 4,000 enterprises, 650 of which are foreign-invested. Most foreign-invested enterprises use original branding manufacturing (OBM), or Original Designing Manufacturing (ODM), while domestic enterprises choose the mode of Cut/Make/Trim (CMT).

Because of this method, Vietnamese companies have been unable to directly export their products and have had to ask for assistance from middlemen. As a result, profits have dropped.

Tuan cited other limitations, including outdated production equipment and machinery, weak management ability, poorly skilled employees, and an unstable financial ability.

To take full advantage of its potential, the industry should further develop distribution networks in addition to building brandnames for their products, according to Tuan. "In addition, to reduce dependency on imported materials, companies should pour more investment into the production for raw materials and accessories, including natural cotton, artificial fibre and dyeing," he said.

HCMC Housing Development Fund, a hope for low-income groups

Eight years ago Ho Chi Minh City had established a HCMC Housing Development Fund (HOF) to support low-income groups to purchase an affordable house, keeping in mind the high rates of inflation.

However, even after eight years, around 55 per cent of teaching staff in Ho Chi Minh City have to live in rented houses, according to a survey conducted by Sai Gon Giai Phong Newspaper.

Most of them are living in the suburban districts 9, 12, Thu Duc, Go Vap and Binh Chanh. Teacher Huynh Hai Ng, wishing to remain anonymous, of Lam Son Senior School in Go Vap District, said he used to hear about the fund that supports low-income earners like teachers in buying a house of their own. But when applying, each person was approved only VND400 million, a sum so small that it will not buy a house.

According to the latest HOF report, it has just mobilised approximately VND1 trillion from sources over a period of eight years since it was established. However, recently the fund reported it has lost its main source of revenue as there are hiccups in selling warehouses, vacant land plots and also with a downturn in the real estate market.

The sum of VND1 trillion is only a drop in the ocean compared to the demand for housing by nearly 30,000 teachers and civil servants. Accordingly, the fund only cleared 100 documents out of thousands in 2011, explaining that many documents had failed to meet requirements.

Nguyen Ngoc Thach, deputy chief of the fund, said around 1,000 civil servants, 480 teachers, 150 medical workers, and employees of other sectors, are receiving support from HOF.

The benefit of the fund to support low-income groups is clear, but it needs to relax its loan policies, credit lines, and reduce monthly interest rates to help low-income people access the fund.

Presently, people have to pay interest rate of 0.75 per cent a month if they are given loan amount of VND400 million for a 15 year term. Consequently, people repay principal and interest of VND6 million a month, while their income remains small.

Understanding the demand of a house among low-income state-run staff the city People’s Committee ordered the Department of Construction to implement several housing projects to meet increasing need.

Currently, the city has over 100 projects of social houses and low cost houses. Last year, six projects were implemented and 17 others approved.

The fund also organised a hand-over ceremony of 84 apartments in District 12. The apartments were over areas of 51 square metres and 66 square metres ranging from VND500 million (US$24,000) to VND650 million (US$31,400).

Pig breeders face losses in Dong Nai Province

The discovery of banned lean-meat substances in pork have caused immense losses to many breeding farms in the southern province of Dong Nai, especially the pig-breeding farms, according to the Dong Nai Livestock Association on April 17.

The damages to the breeding farms are estimated around VND500 billion, due to fall in pork prices in markets throughout the country.

Dong Nai Province has 1.2 million pigs being raised in 1,261 farms, with 4,000 pigs being sold each day. After news spread that pigs are being fed with banned chemicals, customers stopped eating pork, which caused a sharp drop in pork prices throughout the country.

Currently, the price of live pigs in HCMC and surrounding areas has dropped by VND10,000 (US$ 0.48) per kg to VND42,000 per kg, a loss of VND5,000 per kg for pig-breeders.

Pham Gia Hai, chairman of the Standard and Customers’ Right Protection Association in Dong Nai Province, said concern has grown among customers and their rights are seriously being encroached when they pay for substandard produce. Consequently, he proposed a harsh penalty on illicit breeders to protect customers’ rights.

Recently, test results from 33 pork samples from 12 breeding farms in Thong Nhat and Trang Bom Districts contained banned substances.

Banned lean-meat agents such as salbutamol, chlenbutarol and ractobamine belong to the group of beta-agonists, which stimulate growth and quickly develop lean meat in cattle. Since 2002 these have been banned in Vietnam because of harmful side-effects on humans.

HCM City drives cooperation with Japan

Ho Chi Minh City is seeking support and cooperation with Aichi prefecture of Japan in auto manufacturing, as the locality is seen as Japan ’s centre of the auto industry.

Vice Chairman of the HCM City People’s Committee Le Manh Ha was speaking with visiting Aichi Governor Ohmura Hideaki and businesses on April 18.

Ha said he hopes that businesses from Aichi will gain more information and increase their investment in the city.

According to the HCM City official, about 500 Japanese businesses are operating in the city, with a total capital of about $2 billion.

Two-way trade between HCM City and Japan reaches nearly $4 billion annually, Ha said, adding that the city welcomes over 300,000 Japanese visitors each year.

On this occasion, Ha expressed thanks to Japan in general and Aichi prefecture in particular, for their contributions to his city’s construction and development process.

He cited the East-West Avenue project, including Thu Thiem tunnel, which uses official development assistance from Japan , as a bright example of successful cooperation between the two countries.

For his part, Ohmura Hideaki said Aichi hopes to further enhance ties with HCM City and with Vietnam at large.

Aichi has paid attention to investment in Vietnam and created conditions for small and medium-sized enterprises to seek cooperative opportunities in HCM City .

Aichi Governor Ohmura Hideaki committed to the expansion of cooperation between the two localities in industrial production, tourism and education.

Former Hoa Sen Group CEO sues company for slander

The former CEO of Hoa Sen Group (HSG) has sued the company for slander after the corporation accused him of dubious business practices.

Former HSG CEO, Pham Van Trung is currently CEO of the Nam Kim Steel Company officially filed a lawsuit against HSG at Di An Town’s People's Court in Binh Duong Province on April 16. He also requested a public apology from the company.

In the complaint, Trung stated that in April 2011, he was appointed CEO of HSG due to his excellent achievements in boosting company profits and revenues. Trung cited a letter to shareholder issued by HSG Chairman Le Phuoc Vu in which he wrote, "Mr. Pham Van Trung is an honest, professional leader that has created a consensus around his appointment this position."

But after just 18 days in office, Trung resigned for personal issues. In March, Vu announced to the press that the former CEO was dismissed for a lack of transparency in his work. Trung was accused of raising transport fees from 10-30% and receiving illegal kickbacks from HSG supply companies.

To shore up the accusation, on April 10, 2012, HSG revealed shipping fees data to the State Securities Commission during the time Trung was in position and after he was dismissed. Vu was quoted in the evidence as saying, "Trung used his position for personal gain, causing heavy damage to the company."

The former CEO countered that the numbers prove nothing since he was not the one who directly signed the transport contracts.

The People's Court of Di An Town said on April 17 that it had received Trung's complaint and would review the case and announce a ruling on April 24.

Loss-ridden coffee firm eyes brand sale to Chinese company

The People’s Committee of Dak Mil District in the Central Highlands province of Dak Nong has recently ordered relevant local departments and agencies to recommend solutions to prevent the Duc Lap brand of coffee from being sold to foreign companies.

A man is examining a Duc Lap coffee pack in front of a series of awards and trophies the brand achieved

The departments and agencies are also asked to evaluate the current operation and financial state of the Minh An cooperative -- the owner of Duc Lap, the people’s committee said in its directive.

“China’s Guangzhou Buon Ma Thuot Coffee Co Ltd has eyed purchasing the Duc Lap brand name,” said the committee’s deputy chairman, Pham Tuan Anh.

This is the same Chinese company that has been involved in a dispute with the Dak Lak People’s Committee over the Buon Ma Thuot coffee brand name, added Anh.

“Earlier the cooperative had also intended to sell its brand to an overseas Vietnamese in Australia, but the district people’s committee maintained its view that Duc Lap should be kept in Vietnam, since it is a local mutual property,” Anh told Tuoi Tre.

Meanwhile, Nguyen Van Toan, head of the managing board of the Minh An cooperative, said the organization has encountered a number of difficulties due to losses.

“We have no capital for operations left, and we are owe 90 tons of coffee to 115 farmers and VND10 billion ($480,000) to two credit institutions,” said Toan.

The cooperative decided not to declare bankruptcy since it wanted to keep the Duc Lap coffee brand, which is protected in Vietnam, China, and the US, he added.

“If we are granted a VND5-billion loan, the cooperative will transfer its brand to local authorities without asking for any fees,” said Toan.

He added that a similar demand was made last March, when the cooperative sought permission from the provincial people’s committee of Dak Nong to borrow VND5 billion from the provincial Fund for Investment and Development.

The credit aid would help the cooperative to avoid transferring its brand to foreign partners, he explained.

“But the provincial Department of Agriculture and Rural Development told us in their response that they are not authorized to approve bank loans or brand transfer activity,” said Toan.

“The department also asked the cooperative to transfer the Duc Lap brand to local authorities to develop a mutual brand for Dak Nong province.”

Commenting on the cooperative’s demand for bank loans to transfer its brand, the district people’s committee deputy chairman said it will receive the brand at a negotiable price with Minh An cooperative.

“The district committee has also called on its provincial counterpart to assist the cooperative with credit support, but has yet to receive any response,” added Anh.

While neither of the cooperative’s problems and demands have been solved, Toan said the Chinese company has proposed to buy the brand for VND18 billion ($864,000).

“We have yet to reply to their proposal as we want to keep this brand for the locality,” said Toan.
The Duc Lap coffee brand emerged in Duc Lap District of the erstwhile Quang Duc Province, which is now Dak Mil District of Dak Nong Province, before 1975, and is as well-known as its Buon Ma Thuot counterpart in Dak Lak Province.

After 1975, though the locality’s names were changed, Duc Lap remained the local coffee brand of Dak Mil District.

In 2004, the Minh An cooperative was granted brand registering certifications from the Ministry of Science and Technology’s Intellectual Property Department.

Petroleum wholesalers seek approval for price hike

Four local petroleum wholesalers are seeking approval from the Ministry of Finance to increase retail prices, according to the Price Management Department under the ministry.

Accordingly, Vietnam National Petroleum Group (Petrolimex), PetroVietnam Oil Corp (PV Oil), Saigon Petro, and Dong Thap Petroleum Trading Import Export Co (Petimex), have submitted requesting documents to the ministry.

Among them, Petrolimex accounts for 55 percent of the local market share.

The representative of the four enterprises said the retail fuel prices should be increased since the base price is higher than the retail price, forcing them to take losses.

The firm also said in documents sent to the Ministry of Finance that it is not proposing any specific price increase range, it only suggested that the ministry consider the issue.

According to Nguyen Tien Thoa, head of the department, the average price of petroleum products in the last 30 days was still as high as around $134 a barrel.

As current import tax rates of petroleum products are at zero percent, the Ministry of Finance is considering the matter to ensure harmonization between the interests of consumers and businesses.

Coal price for electricity generation raised

The Government Office has issued a written document giving the green light to a price increase of coal for electricity generation, according to Document No.421/VPCP-KTTH sent to the Ministry of Finance.

The specific roadmap for the future price increase has been assigned to the Ministry of Finance for calculations.

With the approved guidelines for coal prices, an electricity price increase has also been cleared.

The new coal prices will make up just 51- 55 percent of the current production cost, said the Coal and Mineral Industries Group (Vinacomin).

Currently, the electricity sector is the largest customer of the coal industry, with about 10 million tons of coal bought per a year.

The latest price hike of 5 percent for coal dust occurred last April, and met 51- 55 percent of coal production costs in 2011 and 57- 63 percent of the audited coal production cost in 2010.

The fact that the price of coal for electricity production is always lower than the cost of excavating coal has caused a loss of thousands of billions of dong in profits for Vinacomin.

As a result Vinacomin has repeatedly proposed price increases to ensure the health of the sector development plan, which requires some VND42 trillion of annual investment for coal production.

Recently, Vinacomin proposed a 30 percent price surge of coal for electricity generation in 2012, after which they will proceed at the market price.

According to the General Department of Energy under the Ministry of Industry and Trade, if the price of coal for the power sector rises 70- 80 percent compared to the cost of production in 2010, electricity prices will increase by VND18 per kWh.

If the coal price increase meets the market mechanism in 2012, electricity prices will rise by VND200 per KWh.

The Ministry of Finance's calculations show that power prices will affect the consumer price index (CPI) twice. A 1-percent electricity price increase will push CPI up by 0.0246 percent in the immediate impact, while later price hike will hit related goods and services, raising CPI 0.153 percent.

"If coal prices increase, electricity prices will certainly increase because this is one of the three inputs of electricity prices", economist Vu Dinh Anh said.

According to Decision No.24/2011 of the Government, with an input power increase of 5 percent, the corresponding price increase will occur once every 3 months.

So, along with the approval for the increased price of coal, the electricity price increase was a given.

"At this time, many agencies and economists think that the ability to restrict inflation under a single-digit rate is quite optimistic. However, I think the price of electricity is one of the most important factors in determining the inflation rate by year-end", Anh told Nguoi Lao Dong newspaper.

Consumers turn their backs on expensive milk

In what could be considered a protest against milk producers and importers who have repeatedly raised the prices of their products, local consumers are now switching to buying brands with lower prices, while also waiting for more effective price management from authorities.

A can of imported power milk is now sold at a price nearly double that of a domestic product, which have driven many consumers to buy the latter, milk sellers said.

“This is a good sign, as it shows that local residents no longer focus on imported, expensive products, but will turn to those with reasonable prices that are appetizing to their children,” commented a milk trader in Ho Chi Minh City’s District 10.

Sales of the foreign products that have experienced increased prices this year have dropped by 20 – 25 percent, while those of other new brands with softer prices soared, he said.

“By turning their backs on imported milk, consumers have proven that their awareness about product brands, prices, and quality has increased,” said Bui Thi Huong, director of public relations of Vinamilk.

However, some industry insiders noted that the market is still dominated by imported products and international players.

Many international brands have been on shelves in Vietnam over two years, including Nactalia of France, Babaskino of Russia, Japan’s Morinaga, and Korean companies Angelac and Angelgrow.

Some of these have officially entered the Vietnamese market through comprehensive investment and distribution plans, enabling them to gain a considerable market share, milk dealers said.

“Domestic milk products have only managed to win the trust of average-income and white-collar consumers, while the high-income earners have yet to be persuaded,” explained Tran Huu Duc, director of public relations of Nutifood.

Local milk producers are rushing to improve their products in order to improve their reputation in consumers’ eyes, added Duc.

“Some are also working with international research and development centers and institutes to produce higher-quality products.”

Milk prices in Vietnam have, over the last few years, been moving in only one direction -- upwards, complained both sellers and consumers.

“I was stunned to learn that the Meiji Gold 3 I used to buy for my two kids is now on sale at VND385,000 for a 900g can,” said Nguyen Thi Nga, from Phu Nhuan District.

Despite the increased price, Nga said she still has to buy the product, since it is not easy to change her children’s tastes.

Repeatedly soaring prices have slowed down consumption, especially for those products whose prices are between VND400,000 and VND600,000 ($20-30) a can, many milk dealers in HCMC said.

“With two cans of milk now costing nearly VND1 million, many consumers purchase fewer products, and less frequently,” said a seller.

Milk prices on the global market in the first quarter of this year dropped by $50 - $200 a ton against the same period last year.

“Imported products have to raise prices due to the foreign exchange rate fluctuation, and the rising labor and operation costs,” said a director of an imported milk distributor, in explaining why milk prices in Vietnam have been running counter to the world trend.

Rice and motorcycle trader Angimex eyes Q3 Vietnam listing

Vietnam rice exporter and Honda motorcycle dealer Angimex plans to sell shares on the Ho Chi Minh Stock Exchange in the third quarter of this year, seeking to continue expansion to new markets, the broker advising on the listing said on Wednesday.

Viet Capital Securities said it is advising the firm on the listing to sell all of its 18.2 million shares.

"The debut is expected in the third quarter, while the final decision rests with the company," said a Viet Capital official who declined to be identified by name. An Angimex official, who also declined to be named, said the debut could be in the last quarter of 2012 as the latest, pending a licence from market regulators.

Rice is Vietnam's top farm export, generating US$3.64 billion in earnings last year. Angimex said rice shipments of 195,000 tonnes abroad accounted for nearly 76 percent of its business in 2011, with around 20 percent coming from selling Honda motorcycles and spare parts.

An Angimex listing would raise capital on the Ho Chi Minh Exchange which has so far been Asia's best performing bourse this year and as the country is poised to overtake Thailand to become the world's top rice exporter in 2012.

The VN Index lost 0.14 percent to close at 472.16 points on Wednesday, having gained 34.3 percent since the end of 2011.

Angimex based in southern An Giang province forecasted revenues to rise 23 percent to 3.2 trillion dong this year and gross profit at 72 billion dong, down 16.4 percent from 2011, it said in a resolution after a shareholder meeting in late March.

Angimex also forecasts rice exports in 2012 to rise nearly 13 percent to 220,000 tonnes, or 3 percent of Vietnam's total of 7.2 million tonnes, by expanding sales of high-quality rice in Hong Kong, Singapore and China.

Once listed, Angimex shares would join two other major rice exporting firms, Vinh Long Cereal and Food Corp and Dongthap Trading Co on the exchange. ($1=20,800 dong)

State-run firm to be Bianfishco's new creditor

Debt and Asset Trading Co (DATC) under the management of Ministry of Finance will be the new creditor of the debt-stricken Bianfishco in the Mekong Delta city of Can Tho, according to a recent meeting between DATC, Bianfishco and the related individuals.

Pham Thanh Quang, DATC general director, has also worked with the company to survey the situation and debt statistics.

After the survey, Quang and Bianfishco acting CEO Tran Van Tri, have met with over 10 farmers to map out a plan to settle down the VND220 billion debts the company owes them.

Quang told the farmers not too worried over the unpaid debts since they would get paid after DATC buy up all the debts.

“After paying the farmers, DATC will be the new creditor of Bianfishco,” he said.

Regarding financial resources to repayment, Quang said DATC had rescued hundreds of local businesses with the some VND5 trillion spent to buy all the bad debts so far

At the meeting, Quang offers some options for the company and the farmers referring to the future decision.

DATC will directly inject money for Bianfishco so that it can repay the debts to the farmers, and then DATC will buy up all the debts of the farmers in local financial institutions.

Another option is that DATC will work directly with the farmers to buy the debts and give them all the money needed.

Thai Ba Thi, representative of the farmers, said he was delighted that the debt sale company to remove difficulties involved Bianfishco and the farmers.

Regarding the debt purchase plan, Thi suggested the company buying all the debts Bianfishco owed the farmers.

As for the interest rate incurred during the past time, the farmers will talk with Bianfishco for an agreement on the rate, even reducing it for the debt-burdened company.

Quang said the suggestion is good for the farmers since they can use the money to settle their debts with other creditors and banks soon, and all the necessary money is available at DATC.

It is just a small step ahead, the disbursement plan for all the money, which will be discussed later.

Regarding bank loans, Quang said DATC would have its own plan.

After the meeting, Quang said he had recorded the opinions of all the related people to report to the Minister of Finance for final approval and solutions.

On the plan after purchasing the debt, Quang said there would be more talks to discuss appropriate options for the restructuring of the company.

Tri required farmers to quickly make the debt comparison documents as a basis for the repayment. He said he will order some facilities of the firms, including the value-added plant, the collagen plant, and the fisheries research institute to resume operations in the next few days.

Although not confirming a specific time, Tri said the fish processing plant will operate soon after making all the payments to farmers in April. The firms need some VND200 billion working capitals to buy 300 tons of fish a day for the plant.

20pct of seafood firms likely to face stagnancy, bankruptcy in 2012

About one-fifth of local seafood enterprises will probably face stagnancy, and possibly even bankruptcy, this year, said a senior official of the Vietnam Association of Seafood Exporters and Processors (VASEP) in a recent meeting.

“It is very unusual that several seafood enterprises have filed for bankruptcy since early this year, and the situation is expected to worsen,” said Nguyen Huu Dung, vice chairman of VASEP at the meeting titled, "Applicable solutions in resource management and planning for the fisheries industry", held in the Mekong Delta city of Can Tho.

“The situation has been caused by subjective reasons including the lack of effective policies to support companies and the shrinking of both foreign and local markets,” he added.

The prices of raw catfish in the provinces of the Mekong Delta, such as Dong Thap, An Giang, and Can Tho, continue to fall, with prices ranging from VND20,000-21,000 per kg for first-grade fish, and VND19,000 -19,500 per kg for second-grade products.

“The government should change the way it operates the economy by channeling low-interest capital to save the businesses and offer tax breaks to help them boost production,” Thoi Bao Kinh Te Sai Gon newspaper quoted Dung as saying.

“The arbitrary increase of charges on businesses should also be stopped.”

“However, the most important task, restructuring and renovating operational models, must be done by businesses themselves,” he said.

Many local lenders are finding it hard to lend even though the State Bank of Vietnam (SBV) last week started to cut many main policy rates in an effort to boost the economy.

The main problem is that the lending rates are still considered out of reach for many businesses, while lenders find that those who really want to borrow do not meet the lending standards, said Trinh Van Tuan, general director of Orient Commercial Joint Stock Bank OCB.

According to Tuan, the current available working capital of many banks, including OCB, is plentiful, but banks still cannot lend out.

Asian Commercial Bank last week told the press that their surplus capital in Vietnamese dong which cannot be lent amounted to around $3 billion.

Total outstanding loans of the local banking industry fell in the first three months; at OCB specifically by negative 2 percent.

"If banks do not carefully select clients for loans, the risk of bad debt will increase.”

“Meanwhile, the lower credit growth caps for the banking sector this year will also be a measurement for the development of each bank, so all have become very careful when they offer loans, Tuan said.

Many have wondered why interest rates have yet to be dramatically reduced even after the ceiling interest rate was lowered to 12 percent a year, and Tuan attributed this lag to latency in capital mobilizing and lending activities.

Banks need more time consume all of the capital previously mobilized at high rates so that they can then start to ease the lending rate as soon as they cut depositing rates.

On the other hand, in order to reduce interest rates, banks must have input sources at reasonable costs.

But as banks have to compete fiercely to attract capital at the ceiling depositing interest rates of 12 percent , they cannot cut the lending rates so aggressively.

Despite the fact that the dong mobilization ceiling rate was decreased one percentage point to 12 percent on April 11, the lending rate has stayed stubbornly high, making cheap credit inaccessible to enterprises.

There have been massive closures and dissolution among small enterprises, subsequently leading to spillover effects on other firms.

Several enterprises believe that the rate easing has principally brought some sentimental impact, but such rates are still beyond their reach.

Lowering lending rates could strengthen businesses’ confidence to overcome difficulties, according to Do Duy Thai, general director of Viet Steel Corp, in an interview with Nguoi Lao Dong newspaper.

Similarly, Tran Quoc Manh, vice chair of the Ho Chi Minh City Wood Processing and Handicraft Association, assumed that the capital movement would be symbolic rather than practically influential given the modest one-percent decrease.

Since the wood industry is plagued by a large number of bankrupt enterprises, it is the interest rate rather than inventory that has dramatically driven up input costs.

According to Pham Nhu Bach, CEO of Mai Lan Paper Co, although the mobilization cap rate has dropped, he has yet to receive any announcement of a lending rate adjustment from the lender.

Currently, loans mortgaged by their own products and assets are charged 20 percent and 18.5 percent per year, respectively.

Likewise, Le Thanh Construction and Trading Co. Ltd could not access bank loans until now, said director Le Huu Nghia.

As expected, the stagnant economy along with soaring interest rates have pushed many garment and textile enterprises to the verge of bankruptcy, said Pham Xuan Hong, vice Chair of the Vietnam Garment and Textile Association.

Despite the mobilization rate easing, businesses have yet to receive much assistance in the light of plentiful difficulties said Do Thi Loan, general Secretary of the HCMC Real Estate Association.

For months, some who could not access bank loans, even with collateral available, have been forced to seek other channels for capital, usually with high interest rates.

Additional measures should be carried out so that the lending rate dips further, to somewhere between 10 and 11 percent.

The mobilization rate of 12 percent would enable lending rates to moderate to 15 -16 percent, rather than the current 18 -19 percent.

While the majority of businesses have experienced disappointing operational efficiency, including various difficulties and excess inventory, the banking industry has enjoyed substantial profits with, return on equity (ROE) of 20 percent, said the retired Le Xuan Nghia, former vice chair of the National Financial Supervisory Committee.

PVN could have contributed more to state budget

While the Vietnam National Oil and Gas Group, commonly known as PetroVietnam (PVN), always prides itself on the fact that it accounts for 30 percent of the state’s total budget collection, it has in fact contributed only 56 percent of its revenues from oil extracting activities to the budget.

The rate is much lower than that of other oil and gas enterprises in other countries.

In Russia, Vietnam’s main partner in oil extracting, the rate is as high as 72 percent, according to an official from the Ministry of Finance.

This means that while they are operating in the same sector, the budget contribution the Russian oil and gas enterprises have to give is 16 percentage points higher than that of their Vietnamese counterparts, he said.

“It is a huge disparity,” commented Doctor Le Dang Doanh, former member of the Prime Minister’s research board.

When PVN reaped around US$9 billion in revenues from oil and gas extracting activities in 2010, the difference was already as large as $1.4 billion, or VND30 trillion.

“We should review the case to ensure economic effectiveness for the country,” he urged.

The 56 percent contribution could be appropriate at a certain time, but amid these hard economic times it should be revised, said Doanh, adding that the country’s oil and gas reserves also show signs of becoming exhausted.

Even in Indonesia, a developing country like Vietnam, the budget contribution rate for the oil and gas sector is between 55 and 85 percent, Sanjeev Gupta, Oil and Gas Leader Asia Pacific Region at Ernst & Young, told Tuoi Tre in an interview on April 12.

“Only the areas with special preferential policies from the government can have the 55 percent rate,” he said.

Meanwhile, Malaysia-based Petronas also has to contribute 50 – 60 percent of revenues to their national state budget, he added.

The levy depends on not only the location of the reserves, but also how long they have been extracted from, he said.

With the new oil reserves, the rate can be low due to the high risks they pose.

“But with the long-extracted ones, as risks have reduced, the government should levy a higher rate,” he said.

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