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2Sep/140

Experts: Inflation target obtainable this year

02/09/2014

VietNamNet Bridge – Local experts have more grounds to believe that the Government’s target of curbing inflation at 6-7% this year is achievable given a slight consumer price index (CPI) rise this month as announced by the General Statistics Office (GSO).

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Le Dang Doanh, former head of the Central Institute for Economic Management (CIEM), said aggregate demand remains low while industrial goods stockpiles are high and retail sales are lower than in the previous year due to weak purchasing power.

In addition, the nation has posted a low credit growth rate in the year to date. Fuel price drops in the world market have led to gasoline price cuts in the country but shipping charges, goods and service prices have yet to follow suit.

Therefore, low inflation has brought about positive signs but reflected a stagnation of the economy, Doanh told the Daily after GSO put the national CPI growth at 0.22% this month against the previous month and 4.73% over the same period last year.

Doanh projected inflation would stay at around 5.5% this year given no sudden changes in credit growth and global oil prices.

Dinh Tuan Minh from the National Institute for Science and Technology Policy and Strategy Studies said CPI usually goes up slightly in September and October and fluctuates strongly in the last two months of a year. This year, the nation’s CPI is expected at around 5%.

It is a good sign for Vietnam to maintain inflation at 5-6% after running high inflation in many years. “This supports macro-economic stability and structural reform,” Minh said.

This month, the national CPI has increased by a mere 0.22% against July and only 1.84% over late last year, according to GSO. This month’s CPI rise is the lowest level recorded for August in the past nine years

Do Thi Ngoc, deputy head of GSO’s CPI Department, said as numerous factors have curbed price increases this month.

The world prices of numerous essential goods remained stable or declined while domestic petroleum prices decreased thrice in nearly a month since July 18, Ngoc was quoted by Vietnam News Agency as saying.

In August, there are month-on-month decreases of 0.16% in fuel prices, 0.15% in public traffic service prices and 0.31% in housing and building material prices.

Meanwhile, food costs and restaurant services are up by 0.45% from the previous month due to higher rice demand for export. Rice exporters in the south have increased rice purchases to fulfill their contracts amounting to two million tons.

Festivals in August and rising breeding costs have caused food prices to go up by 0.54%, and greater demand for clothes, shoes and school materials also pushed up the prices of garment and footwear products by 0.32% beyond the new school year.

Gold prices have declined by 0.34% month-on-month and by 0.06% year-on-year. The U.S. dollar likewise fell by 0.26% month-on-month and 0.07% year-on-year.

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2Sep/140

Optimism drives stock market gains

September, 01 2014 09:30:59

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Investors watch index developments at IRS Securities in Ha Noi. The VN-Index jumped 2.7 per cent to reach 636.65 points last week.– VNA/VNS Photo Tuan Anh

HA NOI (VNS) — The stock market continued to gain strongly last week. On the Ha Noi Stock Exchange, the HNX-Index jumped 4.4 per cent compared with the previous Friday's close to 87.04 points.

The average trading value and volume reached VND3 trillion (US$141.7 million) and 165.8 million shares.

On the HCM City Stock Exchange, the VN-Index added 2.7 per cent to end at 636.65 points. Trading value averaged VND1.1 trillion on a volume of 87.7 million shares daily.

In some of the first trading sessions last week, profit-taking took place, weakening the indices' increase, but the selling pressure was not widespread and buying power in general was retained.

Shares of the oil and gas sector joined those of real estate, pharmacy, rubber and blue chips to lead the market. On Friday, large-cap stocks such as those of PetroVietnam Gas (GAS), property developer Vingroup (VIC) and Vietcombank (VCB) assisted the VN-Index.

One of the sources of support last week were foreign investors, who were net buyers on the southern exchange. Their net purchases reached nearly VND913 billion ($43 million), largely because of VIC buying activities. However, they were net sellers in Ha Noi.

"The VN-Index is testing its resistance of 635 points," said FPT Securities Company's Le Thi Bich Hang.

With high liquidity, a positive investor sentiment, repeat purchases of foreign investors and favourable economic factors, Hang predicted that the market would maintain its momentum this week. However, if it reaches another resistance point at 640-650 points, trading could become rocky.

"Short-term investors may consider selling if the index comes to 640 points, while medium- and long-term investors should buy after that," she said.

The economy has signaled recovery. The consumer price index in August rose by 0.22 per cent compared with the previous month, a 4.73 per cent increase over that of the same period last year and a 1.84 per cent increase compared with that of last December. This has been the lowest rate in the last 13 years.

Meanwhile, a number of banks have reduced their deposit rates. On August 25, Vietcombank reduced rates for deposits in the dong by 0.2 per cent. The lowest deposit rate belongs to the Bank for Investment and Development of Viet Nam, with a one-month rate of 4.5 per cent per year. Banks are also expected to reduce lending rates in the coming months. — VNS

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2Sep/140

Phu Quoc island to welcome luxury cruise ships

02/09/2014

VietNamNet Bridge – A modern passenger terminal will be built on Phu Quoc island, a tourist destination in the south and Kien Giang province, to accommodate luxury cruise liners.

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Phu Quoc island is a stopover of the 19 cruise ships departing from Singapore and traversing Thailand, Vietnam and other countries in North East Asia.

Without a port terminal, Phu Quoc receives small cruise ships bringing less than 1,000 passengers and crewmembers.

Recently Saigontourist, a leading travel operator in Vietnam, implemented a pilot scheme to bring 516 passengers and a 370-member crew aboard five-star Europe 2 ashore.

However, Europe 2 had to anchor off the coast and small boats were used to transport passengers to the island, causing inconvenience and security problems.

The Vietnam Maritime Administration is completing its review of detailed planning documents for the Phu Quoc Passenger Terminal for submission to the Ministry of Transport for approval in August 2014.

The terminal will be built at an estimated VND1,257 billion with the first phase alone costing VND400 billion.

The terminal is designed to receive luxury ships carrying 5,000-6,000 passengers such as Allure of the Seas, and Mariner of the Seas.

The sheer size and magnitude of the project requires a careful and comprehensive review, said Pham Tuan Anh, Deputy Director of Portcoast Consultant Corporation, which is hired to provide consultancy for planning.

At a recent working with the Ministry of Transport, Vice Chairman of the Kien Giang provincial People’s Committee Nguyen Thanh Nghi vowed to allocate land for the project.

It is forecast that the number of international sea travelers to Phu Quoc is likely to reach 105,000-190,000 each year by 2020, and even to 350,000-550,000 by 2030.

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27Aug/140

Real-estate companies rush to invest in agriculture: a good sign or worrying trend?

Last update 12:39 | 27/08/2014

VietNamNet Bridge – Some real estate developers have decided to invest in agriculture, usually considered a risky and unprofitable business field. This is seen as a positive sign by some, but others see the trend as worrisome.

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The 2013 finance report of Hoang Anh Gia Lai showed that sugar projects brought VND840 billion in turnover just after the first year of implementation. The group has a vast sugar cane growing area of up to 10,000 hectares and a sugarcane pressing plant with the capacity of 7,000 tons of sugarcane per day.

Duc Long Gia Lai, the group well known for its real estate and hydropower plant projects, has surprised the public with the announcement that agriculture production will be one of its main business fields.

Duc Long Gia Lai has set up a subsidiary, Duc Long Gia Lai Agriculture, with the chartered capital of VND360 billion, which would develop projects to grow maize, sugarcane and rubber.

Thu Duc House is reportedly boosting forestry exports to Japan, including wood shavings for paper manufacturing and cassava for alcohol making.

The Tan Tao Group, a big industrial zone developer, has also jumped into agriculture production by setting up a company making fragrant rice. Tan Tao creates new rice varieties, provides varieties and capital to farmers, and takes responsibility for product sales.

The decision by the big real estate firms to invest in agriculture projects, in the eyes of economists, who had repeatedly warned that the state investments in agriculture were too modest, is a good sign.

Agriculture production, which is thirsty for capital, can benefit from real estate firms, which are very financially powerful.

Small developers jump on bandwagon

Licogi 14, a company which lists its shares on the Hanoi Stock Exchange, has made public a resolution of its shareholders’ meeting that besides real estate development, which is a core business field, it will also invest in agriculture production as well, especially aquaculture and seafood processing projects.

The announcement of Licogi 14 has caused a big surprise to everyone. Agriculture is quite unfamiliar for Licogi 14. It would be risky to invest in the sector, especially as a small enterprise.

Sources said some other real estate developers are also considering injecting money into agriculture projects. Since the real estate market is still sluggish with very weak demand, companies think profits are to be made in agricultural production.

However, some experts call the movement to invest in agriculture as an “abnormal tendency”. Agriculture is a risky production sector which brings low profits, and therefore, will be a tough playing field for small enterprises that lack experience, money, land fund and advanced technologies, which are all needed to achieve success.

An economist said it was time to ring the alarm bell over the “agriculture rush”, warning that overproduction would lead to poor sales of farm produce and the collapse of businesses, which would then adversely affect the entire economy.

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27Aug/140

Hanoi’s largest wholesale market sells mostly Chinese goods


Last update 10:00 | 27/08/2014

VietNamNet Bridge – The merchants at Dong Xuan Market, the longest-standing wholesale market in Hanoi, and domestic manufacturers are trying to come up with a solution to boost the sale of Vietnamese goods at the market.

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The Dong Xuan Market.

The Dong Xuan Market, familiar to every Hanoian, is the largest distributor of Chinese goods in the city.

A report of the market’s management board showed that 80 percent of the souvenirs available in the market are sourced from China. The figures are 60 percent for clothes and fashion products, 80 percent for children’s toys, 70 percent for leather products and handbags, and 60 percent for porcelain. No underwear products are sold.

Dinh Thi My Loan, chair of the Retailers’ Association, admitted that covering the Dong Xuan Market with 90 percent of Vietnamese products was an “impossible mission”.

“Chinese goods are very cheap, while Chinese businessmen, who understand Vietnamese consumers and merchants well, always offer high discounts and deferred payment methods,” Loan said.

In fact, a merchant at the market said that she mainly distributes Chinese products. “We also want to distribute Vietnamese goods as well, if we can receive products from the manufacturers at original prices, but we cannot,” she complained.

Big Vietnamese manufacturers like Viet Tien (garment), Tien Phong (footwear) and 8/3 Textile Factory, while having showrooms at many retail points, have not set up showrooms at Dong Xuan, a big distribution channel.

Nguyen Ngoc Phan, the owner of a sundries kiosk at Dong Xuan Market, said that Vietnamese manufacturers do not think they need to introduce their products to Dong Xuan’s merchants.

Meanwhile, according to Nguyen Thi Dung, a footwear retailer, the merchants there “have been treated with consideration” by Chinese suppliers.

“They (Chinese businessmen) come to Dong Xuan to see the market and the kiosks themselves,” Dung said. “They accept all orders from us, even if we only order two or three pairs of sandals. Meanwhile, domestic manufacturers only accept big orders with hundreds of pairs of sandals.”

Nguyen Luong Duc, chair of the Phu Yen Footwear Craft Village, confirmed that he would rather display his products at supermarkets than at Dong Xuan Market.

“The merchants there only place small orders,” he said. “Therefore, Dong Xuan is not our top priority.”

A representative of a garment company said they had once tried to sell their products at Dong Xuan, but later “gave up the game” because of low sales.

“Hanoians believe that Dong Xuan Market is a place that sells Chinese goods only. Therefore, they do not go there if they want Vietnamese products,” he said.

Vietnamese manufacturers continue to complain about slow sales. Vietnamese consumers complain they have to travel dozens of kilometers to reach Vietnamese goods’ sale points. Meanwhile, Dong Xuan Market, a big distribution channel, is ignored.

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27Aug/140

Foreign companies taking bigger slice of retail pie


Last update 14:00 | 27/08/2014

 

VietNamNet Bridge – While Vietnamese economists have repeatedly sounded the alarm over the expansion of big foreign retail groups in Vietnam, the Ministry of Industry and Trade (MOIT) has kept calm, saying that 70 percent of the products available at the retail chains are made in Vietnam.

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Pham Chi Lan, a renowned economist, expressed her concern about the overly high investment incentives the government offers to foreign-invested retail chains, warning that investment incentives, plus foreign groups’ powerful financial capability, would block Vietnamese retailers in the home market.

“I can see a very tough period for Vietnamese retailers ahead. Foreign investors have been flocking to Vietnam,” Lan said soon after Metro Cash & Carry reportedly was sold to Thai BJC Group.

The Thai player, after taking over Metro, will be a formidable rival in Vietnam with two large distribution networks of supermarkets and convenience stores. It now has over 140 convenience stores in Vietnam.

An analyst, agreeing with Lan, noted that “the Vietnamese distribution network is being attacked in both the modern distribution channels (supermarkets) and traditional distribution channels (retail shops and traditional markets)”.

According to the analyst, Thai retail groups, like other foreign distributors, have been following a business strategy under which they establish both supermarkets and small retail shops in Vietnam.

“Their retail shops and convenience stores will be direct rivals to Vietnamese shops and supermarkets that have a small scale,” he noted.

Meanwhile, it is very difficult for Vietnamese manufacturers and suppliers to have their products displayed at big supermarket chains like Big C and Metro, because the chains always require very high discount rates.

What will happen to local shops? The analyst said that foreign distributors will step by step increase the percentage of foreign-made products sold at their supermarket chains.

“Lotte will mostly distribute South Korean products, while Metro, after falling into the hands of a Thai group, may focus on distributing Thai products,” he commented.

Responding to the warnings given by the economists, an official of MOIT noted that the the problem has been “exaggerated” and that there is no need to worry too much about the presence of foreign retail groups in Vietnam.

The official said that 70 percent of the products available at big supermarket chains are Vietnamese-made products.

Foreign distributors have to fulfill the commitments on the percentage of Vietnamese goods to be distributed through their distribution network. This means that market control is within the Vietnamese agencies’ reach, the official said.

However, Lan doubts the figures released by MOIT. She said there exists a misconception about “Vietnamese products”.

The problem is that the products made by foreign-invested enterprises in Vietnam are also counted as “Vietnamese products”.

Although Unilever and Procter & Gamble, which dominate the detergent market, are foreign-invested enterprises, their products are considered “Vietnamese” because the products are made in Vietnam.

Another problem exists as well. While foreign invested distribution chains have seen their revenue increasing rapidly in Vietnam, they still have reported losses. Metro, for example, reported losses for the last 12 years. And because of that, it did not have to pay any dong in corporate income tax.

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6Aug/14Off

Decree focuses on foreign exchange activities

August, 06 2014 08:17:00

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In Viet Nam, all payment and remittance money relating to current transactions of residents and non-residents is conducted freely. Residents and non-residents are permitted to purchase, remit and carry foreign currency overseas.— Photo vietstock.vn

Foreign-exchange activities by residents and non-residents have been guided under Government Decree No70/2014/ND-CP (July 17, 2014). The Decree applies to organisations and individuals undertaking foreign-exchange activities in Viet Nam and controls the inspection of and dealing with breaches of foreign exchange activities.

Remittances and currency transactions

In Viet Nam, all payment and remittance money relating to current transactions of residents and non-residents is conducted freely. Residents and non-residents are permitted to purchase, remit and carry foreign currency overseas. They are responsible for presenting supporting documents, but are not required to present certificates of tax completion to the State of Viet Nam when they purchase, remit or carry foreign currency overseas.

Imports, exports of goods and services

Residents having foreign currency revenue from the export of goods and services or from other current revenue sources overseas must remit the foreign currency amount into a foreign currency account opened at the authorised credit institution in Viet Nam. All payments and remittances relating to the import and export of goods and services must be conducted via remittances at the authorised credit institution.

One-way remittance from overseas or vice versa

1. From overseas into Viet Nam. Foreign currency of resident organisations having one-way remittance is placed in the foreign currency account at, or must be sold to, the authorised credit institution. Foreign currency of resident individuals having one-way remittance is deposited in a foreign currency account or withdrawn in cash to use in permitted cases.

2. From Viet Nam to overseas. Resident organisations are permitted to conduct one-way remittances overseas to provide financial support or aid or other purpose specified by the State Bank of Viet Nam (SBV). If the residents are Vietnamese citizens, they are permitted to buy, transfer and carry foreign currency overseas for study or have medical treatment overseas, work, tour, etc.

Non-residents and residents being foreigners having foreign currency in their accounts or other lawful foreign currency revenue sources are permitted to remit or carry foreign currency overseas. If they have lawful revenue resources in Vietnamese dong, they are permitted to purchase foreign currency to remit or carry it overseas.

Foreign direct investment capital

Residents being foreign invested enterprises (FIE) and foreign investors participating in business co-operation contracts (BCC) must open a direct investment capital foreign currency account at the authorised credit institution to implement revenue and disburse transactions. If the investment is implemented in dong, then FIEs or BCC foreign investors must open a direct investment capital dong account at the authorised credit institution where FIEs or BCC foreign investors have already opened a direct investment capital foreign currency account.

Foreign investors remitting lawful income in dong from direct investment activities in Viet Nam can purchase foreign currency and remit it overseas within 30 business days after the date of purchase of foreign currency.

Issuing securities overseas or in Viet Nam

Resident organisations are permitted to issue foreign currency securities overseas in the form of bonds. If the residents issue foreign currency securities overseas in the form of shares, investment fund certificates or other types of securities, they must open the foreign currency account at the authorised credit institution.

Non-residents being organisations are permitted to issue securities in dong in Viet Nam. They must open one dong account to conduct revenue and disbursement transactions in dong relating to the issuance of the securities.

Offshore foreign currency accounts

Resident organisations can open and use offshore foreign currency accounts when (1) economic entities have branches or representative offices overseas or need to open the offshore foreign currency account to receive loan capital - or to perform agreements with foreign parties; or (2) Vietnamese agencies operating in Viet Nam need to open the offshore foreign currency account to receive foreign financial support or aid or in cases permitted by Vietnamese competent authority.

Foreign currency cash by individuals

Residents and non-resident individuals having foreign currency cash are permitted to store or carry it personally, donate it or receive inheritances, sell it to an authorised credit institution, remit or carry it overseas, and to pay it to entities permitted to collect foreign currency cash. Residents being Vietnamese citizens are permitted to use foreign currency cash to deposit in savings accounts at authorised credit institutions, and to withdraw the principal and interest in the currency deposited.

The Decree takes effect on September 5, 2014, and replaces Government Decree No160/2006/ND-CP (28 December 2006).

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6Aug/14Off

Russia ‘ green light ‘ for investment in Vietnam to Russia

06/08/2014 10: 46

(TBTCO)-radio station voice of Russia (5 nights/8) does Russia ranked third in the world in terms of the volume of foreign investment. Only in 2013, Russia has attracted more than 94 billion dollars of foreign direct investment.

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General Director of the Vietnam national oil and gas group do van Hau exchanging text has just signed with the President of Gazprom OAO a. b. Miller of Russia. Photo: PVN

The experts said that in Russia the investment performance may be over 1.5-2 times in comparison with the similar projects in many other countries. Thus, the majority of foreign investors who have negative attitudes toward the economic sanctions of the United States of America and the European Union (EU) against Russia.

At the same time, the application of the sanctions provided more opportunities for investment from countries not to follow the directive of the United States of America. Including Vietnam.

Although the volume of Vietnam's investment into the Russian economy is not yet on the high level, but right now, Russia ranked third in a list of 68 largest country attracting investment from Vietnam, the only two neighbors Laos and Cambodia ahead of Russia in this list.

Counselling Service in Asia and Africa of the economic development Ministry of Russia Pavel Kochkin said: "Vietnam investors are very interested in the Russian market. In mid-2013, the Netherlands has implemented 16 projects with the participation of Vietnam, would have 40 companies with investment capital of Vietnam. All of the businesses that are members the Association of Vietnam business in Russia ".

The largest investment project with the participation of Vietnam's two joint venture companies in the oil sector.

First of all have to say about the company "Rusvietpetro" action in the North of the European part of Russia, to date, the company's experts have declared thá́c few million tons of oil were first frozen grounds on the eternal. In the near future, oil extraction volume in this enterprise will compare with that produced by Vietsovpetro, a joint venture company to go top in Vietnam's oil extraction industry.

One other major investment projects worth 200 million US dollars is the center of culture, Commerce and hotel "Hanoi-Moscow". The construction work was completed, the hotel began to welcome the first customers, the complete job shopping centres are at the final stage.

Says Kochkin said: "these projects clearly shows that Russia has created the most favorable conditions for the operation of the investor to Vietnam. The success of this project has attracted the attention of businesses to Vietnam to the Russian market. They are particularly interested in such sectors as trade, restaurant, producing clothing, footwear, agricultural products, and even electronic applications ".

Vietnam investors also want to develop partnerships with the mining and shipping of coal from Russia, to form the cluster of timber and fishing in the Primorsky region of the Russian Federation. According to Vietnam's initiative, the two sides are discussing the development of production technology of rubberized fabric, which uses the Silk of Vietnam.

In the opinion of the experts in Russia and Vietnam, Vietnam investment volume in Russia and Russian investment into Vietnam will continue increasing./.

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6Aug/14Off

More banks to take over finance companies under new decree


Last update 10:00 | 06/08/2014

VietNamNet Bridge – Analysts predict a new wave of commercial banks taking over finance companies following a new government decree.

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Decree No 39, which took effect in late June, will help finance companies become more “attractive”. They will be able to issue deposit certificates, short- and long-term bonds, treasury bills, provide guarantees, and issue credit cards.

Banks, which are expanding their retail banking market share, are anxious to buy finance companies.

In late June, the State Bank gave the go-ahead to the VP Bank to buy 100 percent of Vinacomin Finance Company’s shares.

Prior to that, at the shareholders’ meeting held in April, the Saigon-Hanoi Bank’s board of directors submitted a plan to buy a finance company.

Meanwhile, some banks takeovers of finance companies were wrapped up many months ago. These included HD Bank purchase of SGVF from the French Société Générale, and the merger of PetroVietnam Finance Company (PVFC) with Western Bank to create PVcomBank.

According to Nguyen Thien Bao, former CEO of PVFC, as soon as becoming a commercial bank, PVcomBank could begin providing many kinds of services to its potential customers, the workers of enterprises that were the subsidiaries of PetroVietnam.

In theory, commercial banks can expand their network by setting up more branches and transaction points. However, it would be less costly and less time consuming to buy operational finance companies to reach the same goal.

Under current laws, banks have to allocate at least VND300 billion to every bank branch and meet a lot of other requirements on staff and facilities to run the branches.

Meanwhile, if they buy finance companies, they can take full advantage of the companies’ existing networks and services, especially consumer lending, which is the biggest advantage of companies.

Analysts believe that it is now the right time to buy finance companies because the companies are inexpensive now.

Many finance companies, after a period of development, have fallen into decay with high bad debt ratios.

Meanwhile, their shareholders, many of which are state-owned corporations, now try to sell their shares out to withdraw capital from the companies as per the request from the government.

As there are many sellers, analysts say, commercial banks would be able to buy finance companies at low prices.

Truong Van Phuoc, deputy chair of the National Finance Supervisory Council, noted that banks now tend to develop retail banking services (they previously focused on lending money to businesses). Thus, buying finance companies is a good choice for them to implement the plan.

VIB’s retail banking director Rahn Wood also said that commercial banks are now eyeing finance companies because the companies mostly have small capital, so they are inexpensive to purchase.

Finance companies have been earning their living by lending internally. Therefore, the banks which can take over finance companies will automatically “inherit” large numbers of potential customers. Vimico, for example, is a subsidiary of Vinacomin, but it also has subsidiaries of its own, including four dependent companies, 13 subsidiaries and seven joint ventures.

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30Jul/14Off

Vietnam asked to stabilize exchange rate to minimize risks of public/private projects

Published On: Wed, Jul 30th, 2014

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Vietnam is considering new policies on foreign exchange management in order to help minimize exchange rate fluctuation risks for PPP (private public partnership) project developers.

Hiroshi Wantanabe, general director of JBIC, the Japan international cooperation bank, said at a meeting on July 16 with the Ministry of Planning and Investment that Vietnam should apply measures to stabilize the exchange rate to attract foreign investment for infrastructure projects implemented under the mode of PPP.

He said while the Vietnam’s foreign exchange reserve has increased to $35 billion, the risks in the exchange rate fluctuations and the restrictions in foreign currency conversion remain big barriers that keep private investors away from infrastructure projects.

In principle, investors will consider the exchange rate fluctuation risks when calculating the prices of the products. However, with PPP mechanism, the risks should be allocated to the parties which can handle the problems in a best way. Therefore, he said, Vietnam needs to consider applying reasonable mechanisms to be sure that the foreign exchange risks can be minimized.

Wantanabe from JBIC also said that foreign investors want the State Bank of Vietnam to ensure the stability and the predictability of the exchange rates.

If policies change regularly without predictions in advance, investors find it difficult to calculate expected profits and figure out the measures to apply when necessary.

The current strict regulations on foreign currency conversion have also caused foreign private investors to hesitate to implement projects in Vietnam.

When developing thermal power projects in Vietnam, investors have to borrow money in foreign currencies and pay debts in the same currencies. However, under the current regulations, they can only receive VND when selling electricity to Electricity of Vietnam.

This means that investors will have to convert VND into foreign currencies to transfer profits abroad and pay bank debts. Meanwhile, they face many difficulties in converting dong into other currencies due to current strict regulations.

This is the reason why foreign institutions have been insisting that the government of Vietnam guarantee currency conversion, since international financial institutions cannot take this work as well as Vietnamese agencies.

Le Van Tang, Head of the Bidding Management Agency, said the responsibility of the government of Vietnam related to foreign investors’ currency conversion is being considered by competent agencies and will be legalized in a decree on PPP project management.

However, Tang said Vietnam will have to think carefully about ensuring exchange rate stabilization.

“We have referred to international laws and consulted with experts and found that no one can ensure the exchange rate would not fluctuate after 40 years, and that it is the job of investors to consider risks before making investment decisions,” Tang said.

An expert who asked to remain anonymous also commented that no government in the world can commit to keep the exchange rate unchanged for many years.

He said it would be better for investors to count on the exchange rate risks when calculating the contracts’ value.

VNE

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