Local companies were unwilling to expand their businesses in the first three months of the year due to a financial crunch, but most of them opted for restructuring their operation to curb the issue in the second quarter.
Many businesses at the end of last year expected the economy would rally from the global turmoil in 2011, but they soon found themselves surrounded by many challenges including a high inflation, increasing input costs and strong US dollar.
Some exporters earlier lost out all their profits by transferring dollars with low foreign currency exchange rates to foreign suppliers and selling their imports for an amount in dong, which was converted in accordance with the central bank’s lower exchange rates.
To curb the losses from the exchange rate risk, they opted for payments in other foreign currencies including Singaporean dollar (SGD) and euro (EUR), which have higher exchange rates.
They also raised their selling prices in accordance with the exchange rate they had relied on to pay for foreign suppliers and tried to improve their products’ quality.
Trinh Huu Minh, general director of the My Chau Packaging and Printing JSC, said the firm was focusing on diversifying the product range and improving the output in an effort to capture more market shares.
The Ho Chi Minh City-based company was also speeding up the progress of the plans on equipping more machinery to boost its production, Minh told Dau Tu Tai Chinh Newspaper.
“Many bankrupt firms in foreign countries are dumping their machinery with very low prices. However, local companies should only choose energy-efficient equipments,” noticed Duong Duy Viet, director of the plastic products maker Nhat Tien.
Nhat Tien has sought many different material suppliers in an effort to find out the best price, Viet said. Other firms also followed a similar pattern, asking the overseas suppliers to send their samples before making purchase orders.
Nguyen Huu Dung, vice chairman of the Vietnam Association of Seafood Exporters and Producers, said local businesses should cooperate with each other to overcome the difficult time.
“Vietnam’s exporters have achieved large sales from foreign markets, but the profit margins were very low due to the fact that they competed with each others,” Dung said.
Nguyen Huu Bieu, general director of medical equipment manufacturer Bao Viet Xanh, said Cambodia was among the potential markets that are located next to Vietnam.
“Vietnam’s businesses can save a lot of money by setting up plants in those countries. However, they should partner up with each others before foraying into new markets,” Bieu said, adding his firm owns lands in Laos and Cambodia and is willing to cooperate with other companies to expand businesses.
Vietnam’s automobile industry undeveloped
Vietnam’s automobile industry remains underdeveloped in the last 20 years, with the fledging auxiliary industries and expensive prices compared to other countries.
Statistics from the Ministry of Finance show local automobile joint ventures imported most of components from abroad.
Since the Vietnamese auto industry came into being in 1991 with the licensing of the first two joint ventures Mekong and VMC, it has benefited from many preferential policies.
However, analysts say local manufactures have not made full use of these policies to develop a strong industry and the industry is still having to import most of the components it needs.
The ratio of locally produced parts by Toyota Vietnam stands at a measly average of 7 percent. However, the Japanese joint venture was required to achieve the rate of at least 30 percent 10 years after it was licensed to operate in Vietnam, which was in 1996.
The ratio of another Japanese automobile joint venture Suzuki is even lower, reaching 3 percent compared to the required rate of 38.2 percent by 2006 in accordance with the requirements in the operation license.
According to the automobile industry’s development plan, its ratio of locally produced parts should have been 40 percent in 2005 and increased to 60 percent last year.
“Most goals of Vietnam’s automobile industry are undone, of which the most important target of increasing the ratio of locally produced parts was the biggest failure. The rate is very low until now, while local automobile assemblers still cannot produce key components,” said Le Quang Duong, deputy minister of Industry and Trade.
Unofficial statistics show the sales of automobile increased to more than 100,000 cars from 5,000-7,000 cars in the last 10 years.
However, local automobile assemblers specialize in painting and assembling some simple parts, while the number of firms in supporting industries amounts to more than 100 units only.
“We should focus on making engines of a car, instead of setting the target of producing a whole new car. We should also aim at contributing hi-quality products to the global value chain as much as possible,” said Tran Ba Duong, chairman of automobile assembler Truong Hai.
Laurent Charpentier, general director of Ford Vietnam, told Dau Tu Tai Chinh Newspaper that Vietnam’s auxiliary industries were still at a fledgling stage compared to other countries.
Dr. Phan Dang Tuat, director of the Industrial Polices and Strategies Institute, said the supporting industries played the most important role of the automobile industry’s development, with export turnover reaching more than US$1.6 billion in 2010.
Vietnam’s auto sales have risen ten-fold over the past decade as the local market continues to expand, according to the Vietnam Automobile Manufacturers’ Association (VAMA).
The association now has 18 members, compared to 11 when it was established ten years ago. VAMA said its members sold 99,798 vehicles, including cars, trucks and buses, in the first 11 months of this year, down 4 percent from the same period last year. In November alone, it sold 11,198 vehicles, down 9 percent over the same period last year.
Vietnam may disclose foreign reserves data in 2012
Vietnam, which has kept the precise level of its foreign reserves undisclosed, may publicize the data regularly next year via its national statistics office, VnExpress reported.
The General Statistics Office in Hanoi has announced a new national statistical indicator system which has 76 additional indicators, including statistics on money supply, credit, interest rate, budget deficit, government debts and foreign reserves.
The foreign reserves data will be calculated from foreign currency holdings at the central bank, deposits and loans to other countries, and the special drawing rights holdings – an interest-bearing asset created by the International Monetary Fund, news website VnExpress said.
Around half of the brand-new indicators will be announced this year while the rest, including that of foreign reserves, will be publicized later.
Central Bank Governor Nguyen Van Giau said at the Asian Development Bank’s annual meeting in Hanoi last week that the State Bank was considering the disclosure of national foreign exchange reserves, a policy already adopted by many other central banks. But he noted that such a plan needs to be approved by the government.
International institutions like IMF and ADB regularly announce the data for Vietnam. Vietnamese officials at times mention the forex reserves, but they often just comment on whether the level is safe.
Vietnam’s foreign exchange reserves last year dropped 12 percent from 2009 to US$12.4 billion, ADB said in its Asian Development Outlook 2011 April report. The country’s reserves were enough to cover 1.9 months of imports at the end of 2010, the Manila-based bank said.
Truong Hai aims to top Vietnam car market
Vietnamese car assembler Truong Hai says it has captured 27.7 percent of the domestic market and is on its way to become the market leader this year.
The company, which assembles vehicles including South Korean KIAs and Hyundais, topped April sales with 3,104 units, beating Toyota for the second month in a row.
Truong Hai, which has a 35-hectare factory in the central province of Quang Nam, is targeting sales of at least 34,500 units this year and revenues of VND12.4 trillion (US$603.7 million). Passenger car models like Kia Morning, Cerens and Forte are now its bestsellers.
Nguyen Mot, the company's media manager, said they entered the market only four years ago and the current market position proved that their business strategies have already paid off.
The company has also said it will increase investment in car parts production and establishing retail outlets.
Car sales in Vietnam between January and April rose 20 percent from the same period last year to 37,305 units, according to the Vietnam Automobile Manufacturers’ Association.
Toyota Vietnam has been dominating the local market for many years, until March. It sold 2,553 cars in April, up 27.3 percent from a year ago. Production at its facility was reduced to 30 percent from April 25 to June 3 due to a shortage of parts following the earthquake and tsunami in Japan.
Inflation impact on poor needs check
The Government needs to closely monitor the impact of inflation and macro-economic instability on the poor, as many more people may fall below the poverty line due to rising prices, said a United Nations official.
John Hendra, the outgoing UN resident representative in Vietnam, said that rising food prices and housing, transport and energy costs are the main factors driving up inflation in Vietnam, and it is the poor who suffer the most.
Hendra told the Daily on Thursday shortly before leaving Vietnam for a new position at the United Nations that while certain poor people may benefit from current Government policies, inflation in the long term will drive many back into poverty.
“As for the rural poor, some may be in a position to recoup some additional income as net food producers. In the longer term, inflation has the potential to drive households back into poverty,” he said.
Hendra appreciated the Government’s strong commitment in fighting the inflation by issuing Resolution 11 with various measures to stabilize the economy, including tightening money supply and phasing out subsidies for certain sectors. He, however, suggested that caution be taken to minimize impacts on the poor.
In the decision to cut 10% of regular public expenditure, some poverty reduction and social assistance policies that are funded by the State Budget will be affected, thus the move would directly hurt the poor, he said.
“The phasing out of subsidies to the energy sector under Resolution 11 will only exacerbate this impact,” Hendra said.
The UN official referred to past lessons when high inflation had pushed more people into property and slowed down poverty reduction programs.
Studies on the impact of high inflation in 2008 show that when inflation rose by 19.9%, the poverty rate increased by 2.1%. Due to high inflation in that year, poverty reduction slowed down in 2006-2008, by only 1.5% compared to 3.5% in 2004-2006 and 19.5% in 2002-2004, he said.
Long-lasting inflation and lower growth will likely cause Vietnam to experience a return of higher unemployment and underemployment as experienced in the wake of the recent financial crisis, said Hendra.
Stable goods lose attraction
Many city residents are opting not to buy goods sold under the city's price stabilisation programme because they find no significant price or quality advantage, local reports say.
However, several participating retailers and distributors insist that comparisons being made between goods sold under the programme and those outside it are not apt.
Despite the abundant supply of many price-stabilised products at supermarkets compared to two months ago, especially sugar and cooking oil, demand is very low, according to the Nguoi Lao Dong (The Labourer) newspaper.
The paper quoted Hong Nga, a District 8 resident in HCM City, as saying the price of the Thanh Cong sugar brand was VND21,500 per kilo under the price stabilisation programme, but its quality was not as good as the Bonsu brand sugar priced at VND21,900 per kilo or the Bien Hoa sugar at VND22,500 per kilo.
"I have decided to buy Bien Hoa sugar, it's only VND1,000 more expensive than the price-stabilised sugar but the quality is better," Nga said.
A similar argument seems to prevail for other products like cooking oil and eggs.
Eggs sold by Ba Huan and Vinh Thanh Dat companies cost VND2,250 each for chicken eggs and VND2,750 each for duck eggs, but these are almost the same as eggs sold in traditional markets outside the stabilisation programme, the paper reported.
In fact, at the BigC supermarkets, "Wow" brand chicken eggs are priced at VND19,100 for 10 eggs, significantly cheaper than the price-stabilised eggs.
The story remains the same for cooking oil, with prices of VND35,000 and VND38,700 per litre not much lower than non-stabilised products like the Marvela and De Nhat brands at VND40,900 and VND41,000 per litre respectively, while Cai Lan cooking oil is available for just VND36,000 per litre.
Thanh Thuy of District 3 in HCM City said: "I read the local newspapers and know that the prices of stabilised-price products are supposed to be at least 10 per cent cheaper than market prices, but I could only find a few promotional products at reasonable prices.
"Other products like sugar, eggs, cooking oil and pork are not significantly cheaper than market prices, so I've decided to go to the market near my house since it is more convenient."
The director of a retail chain in HCM City, who wished to be unnamed, told the Lao Dong newspaper that it was significant that demand for price-stabilised goods was falling even as prices of many products were rising and looked set to rise further.
Officials from the city's Department of Industry and Trade reiterated that the prices under the stabilisation programme were always 10 per cent cheaper than market prices at the very least.
Pham Thi Huan, director of the Ba Huan Ltd Company, a supplier of clean eggs, said comparing the price of goods under the price stabilisation programme with those outside, it was not rational because the former guaranteed quality as well as food safety and hygiene standards.
Le Ngoc Dao, deputy director of the Department of Industry and Trade, said such comparisons had to be made between products of the same kind with the same specifications.
HCM City began implementing the price stabilisation programme with nine essential items on April 9.
The volume of products under the price-stabilisation programme this year has soared by between 14 per cent to 41 per cent compared to last year.
The capital outlay for the programme has also increased by VND32.6 billion (US$1.55 million) over last year to VND412 billion ($19.61 million), said Nguyen Thi Hong, deputy chairwoman of the HCM City People's Committee.
The number of businesses participating in the programme has also increased to 22 this year from last year's 14, she said.
Labour export rights waived
Several general corporations have returned their labour export licence as they restructure and focus on their core operations, according the Ministry of Labour, Invalids and Social Affairs (MoLISA).
A Nguoi Lao Dong (The Labourer) newspaper report last Saturday cited the Deputy MoLISA minister Nguyen Thanh Hoa as saying the ministry has accepted the withdrawals.
The corporations that have returned their export license include: Hydraulic Construction Corporation No.4 (Hyco 4); Song Da Holdings; Constrexim Holdings; Civil Engineering Construction Corporation No.4; and Agriculture and Irrigation Mechanisation Electrification-Construction Corporation.
Hoa said the corporations were withdrawing from the labour export business because they had already assigned this function to subsidiary companies.
Hoa stressed that the ministry had not applied any pressure on the corporations.
"This is their initiative and it will become a trend soon," he said.
In the near future, the subsidiary firms that have been engaged in the labour export business will be granted the license directly instead of the function being delegated by corporations, he added
The move would help resolve the existing situation where license holders only signed off on paperwork without really knowing what was happening with the business.
Hoa said the distance had caused a lot of difficulties in solving problems that arose in the conduct of labour exports.
The subsidiary firms that used to perform the labour export function for corporations would now have to apply for a permit by themselves from the Overseas Workers Management Office before executing labour export contracts, he added.
Corporations and member enterprises should also have a signed agreement on the hand-over of labour export business by the former to the latter, he said.
Distorted banking ‘needs reforming'
The banking system needs to be reformed, an economist told a seminar held in HCM City last week.
Speaking at "Ireland – South East Asia Business," Dr Le Xuan Nghia, deputy chairman of the National Financial Supervisory Commission, said: "Use of too many administrative orders instead of market tools has seriously distorted interest rates."
The State Bank of Viet Nam had resorted to measures like limiting lending to restrict credit growth to fight inflation, rather than adopting monetary and other policy tools.
But it could not curb interest rates on the inter-bank market, which were at a very high 22 – 24 per cent.
"Therefore, banks, especially small ones, have reacted by using two financial accounting systems. A fake one is used showing an interest rate of 14 per cent while the real one shows much higher interest rates of 17-18 per cent."
It was easy to understand why small banks resorted to this since borrowing on the inter-bank market would cost them 4-6 per cent more.
"This severely distorts the banking system and makes the Government's supervisory system ineffectual. The lack of transparency is becoming more and more serious."
Interest rates should follow market demand.
The smaller banks faced a liquidity crunch unlike big ones that had ODA funds, deposits from the big corporations, and the proceeds of Government bonds.
In the last three years there had been a slowdown in banking reforms and restructuring, with some banks even relinquishing international standards.
Vietnamese-made goods gain foothold
Sales of Vietnamese goods in Cambodian market, especially household utensils and processed food, have been robust in the past several months.
So Naren, who represents Vietnamese enterprises in Cambodia, said these items held a rather large market share.
Plastic household utensils, for instance, have surpassed similar Thai goods to account for 80 per cent of the market share.
Duy Tan Plastic Co Ltd, which officially opened its distribution system in Cambodia more than three years ago, reported a sharp increase in sales.
It has expanded its distribution system to all of Cambodia's cities and provinces.
Currently, Cambodia has become one of the country's key plastic export markets after Japan, the US and Germany.
At Satra supermarket in Phnom Penh, invested in by the Sai Gon Trading Corporation, fish sauce, soya milk, soya sauce and coffee sold out after two weeks of opening.
Tran Thanh Nam, deputy director of the Sai Gon Trading Corporation, said the company would increase transportation of Vietnamese goods to the supermarket to meet consumption demand.
"Vietnamese products' price, design and quality attract Cambodian customers", So Naren said.
Other Vietnamese sectors, following the success of processed food and household items, were expected to penetrate the market, So Naren said.
In addition, Cambodia was fostering agricultural production, offering a huge opportunity for Vietnamese fertiliser makers.
Vietnamese enterprises entered the Cambodian market later than their counterparts from Thailand and China.
However, with efforts of both countries, bilateral trade increased from US$950 million in 2006 to $1.65 billion in 2008 and more than $1.83 billion last year.
Viet Nam enjoys a trade surplus with Cambodia, earning $1.55 billion in exports last year.
Expert charts growth path for Viet Nam's economy
A trade expert has suggested the path Viet Nam should take to develop its economy and the problems it needs to overcome as it integrates globally at a seminar held in HCM City yesterday.
"Viet Nam should continue to strengthen laws related to various sectors like finance, labour, investment, and agriculture to develop the economy," Dr Pham Van Chat of the Viet Nam Arbitration Centre told the meeting held to review four years of the nation's membership of the World Trade Organisation.
"It should intensify administrative reforms, improving transparency in declarations, simplifying procedures, and penalising offenders to reduce red tape and fight corruption."
Strong development of e-commerce and its widespread application in management and business was an immediate need.
The Government had to develop support industries to enable value addition, make domestic businesses competitive, and create an attractive environment for investors.
In a report on evaluating the impacts of economic integration, the Central Economic Management Research Institute had pointed out that there was less investment in education and training than before WTO accession.
"Viet Nam needs to develop a strategy on training human resources."
Businesses needed to ensure there were no trade lawsuits and should have thorough understanding of international and domestic laws when doing foreign trade.
For deeper integration with the global economy, businesses had to develop distribution channels, and for this had to use Vietnamese people living in foreign countries.
There are around three million Vietnamese in more than 100 countries, of whom 400,000 had bachelors or master's degrees and successful businesses.
The Government also had to strengthen promotions to popularise the country's products in both the domestic and foreign markets, Chat said further.
The integration process had also exposed some challenges Viet Nam faced such as the low quality of economic growth, economic instability, adverse trade balance, lack of skilled workforce, and poor infrastructure.
A recent survey by the World Bank had found that natural resources only accounted for 60 per cent of GDP in a country, with the remaining 40 per cent coming from training and use of human resources.
"The lack of skilled workers remains a challenging issue for Viet Nam. As a result, it has failed to meet the demands of businesses, especially foreign businesses."
Domestic businesses showed their competitiveness only by offering low prices and not quality or design.
Viet Nam had many things to do to turn into a market economy, like effecting market reforms and achieving economic stability and a transparent legal system.
So far 22 countries had recognised Viet Nam as a market economy, including Germany, South Korea, Australia and Singapore.
Advertising industry targets $3bln revenue by 2020
Vietnam's advertising sector targets to reach $3 billion revenue by 2020, Vietnam Advertising Association (VAA) said at a recent meeting held in Hanoi.
As reported by VAA, currently, Vietnam has about 5,000 advertising enterprises mainly operational in Hanoi and HCMC.
Average revenue of the industry during recent years kept surging steadily with $555 million in 2008, $736 million in 2009 and $840 million in 2010, of which, advertisements on mass media accounted for 80 percent.
However, so far, most Vietnamese advertisers still remain in small scale, accounting for only 30 percent of the market share, while the rest is dominated by foreign advertisers.
Local firms worry about market openness next year
Vietnamese businesses may face challenges when Vietnam fulfills its WTO commitments to market openness next year, said an expert in economic integration.
Speaker Pham Van Chat of the Ministry of Industry and Trade told local businesses at a conference in HCMC on Monday that local enterprises should rapidly prepare themselves to cope with the challenges arising from for the country’s market openness as committed to the World Trade Organization (WTO).
Chat, who is also an arbitrator at the Vietnam International Arbitration Centre of the Vietnam Chamber of Commerce and Industry, told the Daily on the sidelines of the meeting that Vietnam would nearly fulfill its tariff cut commitments early next year.
Most of the goods imported by Vietnam will enjoy the lowest tariffs from January 1 next year as per the country’s commitments to WTO, he added.
“About 60% of tariff lines will be cut as committed. We have seven months from now to open up the market,” Chat said. “It’s urgent now for local enterprises to make preparations to compete on the home market.”
He added foreign companies had been trying to expand their retail sales networks to rural and remote areas of Vietnam after having set up their distribution channels in major cities, such as Hanoi, HCMC, Danang and Can Tho, since 2009.
With an increasing local market share held by foreign firms, coupled with further market openness, domestic companies will face fiercer competition, he said.
An assessment by the Government, he said, shows local businesses have remained weak since the country joined WTO four years ago. The weaknesses found in the local corporate sector are difficult access to loans and lack of skilled labor, competent managers, materials for production and updated technology.
In line with the market openness commitments, foreign businesses are allowed from this year on to buy rice in Vietnam for export, instead of having to set up a joint venture with local partners.
Next year the right to export activity will be expanded, with more products in Vietnam to be added to the list of items which foreign companies can buy locally for export. This means local firms’ monopoly of export operations will be over.
An Giang develops sustainable Tra fish farming
Tra fish farmers in An Giang Province are using an enhanced sustainable farming model by cooperating with enterprises to secure consumption sources.
Under the model, enterprises will advance money for farmers to buy feed, give them technical training, provide feed breeds and purchase all output.
This will help secure profits for farmers and export markets for enterprises, said Pham Thi Hoa, deputy director of An Giang’s Department of Agriculture and Rural Development.
The model makes up 98% of Tra fish farming area in the province, which has increased to 1,100 hectares, up 300 hectares against 2009. Tra fish are around VND27,000-28,500 per kilo and farmers earn VND3,000-4,000 each kilo on those prices.
The Tra fish farming area is expected to reach 1,400 hectares at the end of next year.
EU boosts import of Vietnam pineapple
The European Union market’s rising demand for canned pineapple has spurred Vietnam’s export of the fruit, with total outbound sales in April reaching a record high of US$1,300 per ton.
The nation’s export of the fruit is forecast to continue climbing in the second quarter. The strong demand, particularly of the Netherlands, makes the current export price to exceed last year’s level by US$100 to US$1,300 per ton.
But the supply does not meet the demand, according to the Research and Forecast Bureau of the Industrial and Commercial Information Center under the Ministry of Industry and Trade.
Most pineapple processing facilities are running at full capacity but unprocessed pineapple supply is falling short.
In May, the Southern Fruit Research Institute (SOFRI) in the Mekong Delta province of Tien Giang suggested farmers of pineapple, together with other fruits like dragon fruit, mango, durian and longan, should be given access to World Bank funds to develop specialized farming areas.
With an area of more than 12,000 hectares, Tan Phuoc Commune in Tien Giang Province has the largest pineapple acreage in the Mekong Delta.
According to the ministry, the export value of pineapple in the first quarter increased by nearly 60% year-on-year to US$9 million. The EU market imported US$4 million worth, up 82% year-on-year. Canned and sliced-frozen pineapple items are the major exports to the EU.
Caution needed if reserve ratio is to be raised: experts
Experts have preemptively suggested the central bank take a cautious approach towards raising the required reserve ratio for Vietnam dong at banks as part of the monetary tightening policy, saying the inflationary pressure is no longer at the high pitch to require such a tough stance.
The warning from experts is seen a response to a widespread rumor last week about a possible move from the State Bank of Vietnam to fight inflation, which almost hit 10% as of end-April, having risen by 3.32% last month alone.
Nguyen Minh Phong, an expert from Hanoi Institute for Socio-Economic Development Studies, said May could start seeing a slowdown in inflation for the rest of the year, so a higher reserve ratio for banks is not urgent. Phong predicted the May consumer price index to hover around 2% against April.
Phong said the central bank should be relentless in its monetary tightening policy to avoid the situation of loosening the policy after gaining some positive signals in dealing with inflation like in 2008. However, the central bank’s stance should be maintained in an acceptable manner.
Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee, said that if the central bank resorts to the instrument of compulsory reserve ratio in Vietnam dong, it should rethink regulations in Circular 13 that dictate a loans to deposits ratio not exceeding 80%.
Similarly, Le Tham Duong, head of Business Management Faculty at HCMC Banking University, said the reserve ratio should be the last vehicle to be used by the central bank as it would create big impact on banks especially small ones.
“If the reserve ratio is to be raised, some small banks will suffer. That’s why I think the central bank will not resort to this instrument yet to curb inflation,” Duong added.
In the first quarter of this year, the central bank increased key rates for three times but the April CPI still rocketed to over 3%, the highest month-on-month increase in the past three years.
Duong noted that in other countries, when applying the reserve ratio, they will have another policy to ensure liquidity for small banks so that the impact will not spread to other healthy banks.
“The central bank can use the compulsory reserve ratio instrument but should not apply the same level for all banks,” he added.
Top leaders of the central bank have not made their points about the reserve ratio, but a mid-ranking official from the central bank asserted that such a move was not considered now.
A new ratio can only be considered after the May CPI is available, she said, reassuring that if a higher reserve ratio applies, the central bank will have policy to support smaller banks.
Experts also suggested the central bank to raise the deposit rate cap to higher than the current 14% to support banks in mobilization.
Le Xuan Nghia, meanwhile, called for the central bank to look at money supply now because it is quite stagnant now. The money supply growth target this year is 15%-16% but by middle of the second quarter, it had increased a mere 1%, Nghia said.
“The authority should not tighten money supply too much in the first half this year then loosen it in the second half,” Nghia added.
Gas dealers vow to freeze prices
Members of the Vietnam Gas Association committed themselves to freeze gas prices from now until the end of May, said chairman Nguyen Si Thang.
There were no factors affecting gas prices so member companies had pledged not to increase prices, Thang said.
The association also asked their members to examine their sales prices.
Thang said that domestic gas prices depended on the world market, despite the country being able to meet 40 per cent of domestic demand.
Gas demand on the world market in May and June was often low, Thang said, adding that prices in the domestic market would remain stable in June and July if the world market remained unchanged.
Gas prices have twice risen this month, with Saigon Petrol in Ho Chi Minh City following the VND30,000 (US$1.44) hike in 12-kg canister on May 1, with a VND4,000 increase to VND382,000 ($18) per canister on May 11.
Due to the hike, industrial companies especially pottery and ceramic tile producers are facing a number of difficulties.
Ly Huy Sang, deputy director of the Minh Long I Company Ltd which produces ceramic products said his company's operation had been strongly affected by the hike in gas prices as it was a key input in pottery production.
Current gas prices now accounted for 40 per cent of total production costs, marking a 10 per cent rise, Sang added.
Agreeing with Sang, deputy director of the Italian Home Ceramic Tiles Company Ltd Nguyen Van Vu said that his company now could not compete as the input costs had surged after the new gas price was announced.
He also bemoaned the fact that the company could not store gas because of safety concerns and high cost
Facing such obstacles, companies are finding ways to cut expenditure.
According to Sang, his company had reduced production processes for some products while retaining quality.
Some products were now just baked once, rather than twice in order to save gas and time, he said.
Italian Home had also adopted alternative energy solutions.
His company now used low-pressure gas instead of gas and coal to produce ceramic tiles, Vu said.
This energy was much cheaper than gas, he added.
Increasing gas prices have not only affected industrial companies but also gas suppliers as industrial gas sales had declined by 10-20 per cent in recent months.
Industrial gas suppliers have sometimes resorted to accepting break-even prices in order to retain their customers.