Vietnamese Dong News VNC – the currency that could.

An employee of Agribank counts cash to make loans for customers. The  outstanding loans during the January-April period rose 2.11 per cent. — VNA/VNS  Photo Tran Viet

HA NOI (VNS)— The outstanding loans given by commercial banks have increased  2.11 per cent since December, according to the State Bank of Viet Nam (SBV).

Foreign currency loans declined by 7.2 per cent, but dong-denominated loans  climbed 4.15 per cent.

Lending to agriculture and rural areas rose 3.1 per cent during the  four-month period, as Government policies to support agriculture and rural areas  helped farmers and rural traders increase borrowing to expand production and  business.

Real estate loans also went up 1.1 per cent in the first four months and both  yearly deposit and lending interest rates were reduced by roughly 2-3 percentage  points against early this year

To further help businesses, the central bank required four State-owned  commercial banks to bring all their yearly lending rates below 13 per cent.

SBV also asked credit institutions to boost lending to prioritised  industries, including agriculture, exports, supporting industries and small- and  medium-sized enterprises. The lending interest rate cap for the industries is 10  per cent.

Total deposits by the end of April also expanded 5.2 per cent from last  December.

Meanwhile, the SBV plans to carry out inspections at 18 Vietnamese lenders  and seven foreign banks this year.

In the first quarter of the year, the central bank conducted 301 inspections,  of which 145 were scheduled, 39 were unscheduled and 117 were examinations.

During a planned examination of BaoVietBank in May, the central bank branch  in HaNoi will examine the bank's credit activities, finances and prudential  ratios. — VNS

Illustrative image/Photo laisuat

HA NOI (VNS)— Sustainable interest rates and risk management were the hot  topics during a seminar on the country's micro-finance institutions held  yesterday in Ha Noi.

The event was organised by the International Finance Corporation (IFC) in  collaboration with Switzerland's Ministry of the Economy, Tinh Thuong One Member  Liability Limited Micro-finance Institution (TYM) and the Viet Nam Micro-finance  Working Group (MFWG).

International and domestic experts said the seminar had offered an insight  into the issues surrounding the application of interest rates in micro-finance  institutions.

Through practice and experience, the IFC's working group concluded that the  interest rates of micro-finance institutions were not really higher than other  credit institutions and did not adversely affect their customers.

They said that the specific characteristics and activities of micro-finance  institutions should be considered in order to assess and develop appropriate  interest rate policies.

Risk management procedures were also discussed by the experts. Andrew  Pospielovsky, an IFC's consultant, said that managing risks to any financial  institution required risk identification, assessment, measurement, reduction,  monitoring and evaluation.

Andrew Pospielovsky said the building of risk management culture was  something micro-finance institutions had been urgently doing, particularly in  the period of transition and growth.

The seminar reflected that micro-finance has been officially recognised in  Viet Nam and is now part of the national financial system and has contributed  towards the country's economic development. The sector is growing sustainably in  accordance with standards and social responsibility. — VNS

VietNamNet Bridge – A lot of people have fallen into a trap set by  finance companies. Promising simple administrative procedures, but the companies  overcharge borrowers with exorbitant interest rtes.

Commercial banks, which have been burdened with the high bad debt ratios,  have been trying to tighten their lending to control the credit quality.  Meanwhile, individuals can easily borrow money from finance companies, if they  accept to pay the high interest rates.

Dung, an officer of a software firm in Cau Giay district in Hanoi, said he  receives a lot of calls from finance companies these days which invite him to  borrow money from the companies.

A credit officer told him that with the monthly income of VND10 million, he  would be able to borrow VND60-100 million without having to mortgage for the  loan. Especially, the officer promised to disburse money within 3 days since the  day Dung submits necessary documents.

“The required formalities are very simple. You just need to show some  documents and receive some calls from competent officers who will to clarify  some information,” the officer said.

Duong has been told that he would have to pay 2.63 percent a month in  interest rate, or 31.5 percent per annum. The rate is double the consumer loan  interest rates being applied by some commercial banks.

Explaining the sky high interest rate, the officer said the loans remain very  attractive to people with the fixed interest rates, simple procedures and no  required collateral. The 31.5 percent per annum interest rate would be applied  to the whole life of loans. Meanwhile, commercial banks now tend to float the  interest rates from the 4th month of the loaning.

Duong, like many other office workers, who are believed to have stable  monthly income, have been “hunted” by finance companies, because they prove to  be the potential clients of the lenders.

A finance expert has warned that people may fall into the “interest rate  trap” set by the finance companies. The simple procedures promised by the  companies would prompt people to borrow money, even if they don’t really need  capital at this moment.

“I know that a lot of people have fallen into insolvency. Their monthly  income is just enough to pay the principals and interest rates, while they don’t  have any money left for the daily needs,” he said.

Dung said he cannot understand why legal finance companies can lend at such  sky high interest rates and they are not punished by the State Bank.

He was explained that finance companies don’t bear the control of the State  Bank. “We are a foreign invested enterprises, and we don’t have to follow the  State Bank’s regulations on interest rates,” a credit officer said to him.

The 2005 Civil Code stipulated that lending interest rate must not be higher  than 150 percent of the prime interest rate – the rate set up by the State Bank.  However, at present, the credit contracts do not bear the regulations any more,  and they have been covered by the 2010 Law on Credit Institutions.

A banking legal expert affirmed that the 30 percent per annum interest rate  is overly high, but this does not come contrary to the current regulations,  because the rate is set on the basis of negotiations between lenders and  borrowers.

A banker said finance companies are not allowed to mobilize capital;  therefore, the input interest rates of the companies may be as high as the  banks’ lending interest rates. The high capital mobilization cost, plus the high  expenses on the retail network force them to set up high interest rates to cover  expenses.

VNE

VietNamNet Bridge – The economy showed positive signs in the first  quarter of this year, the National Assembly (NA) Standing Committee was told  yesterday, May 14. It was also told that GDP growth hit 4.89 per cent, up from  4.75 percent in the same period last year.

After increasing for seven consecutive months, the consumer price index (CPI)  in March decreased 0.19 percent over the previous month and it rose slightly at  0.02 percent in April, the lowest rise for the period in four years.

The report was made when the Standing Committee convened its 18th session in  Ha Noi yesterday under the chair of NA Chairman Nguyen Sinh Hung.

During the session, delegates will discuss preparations for the fifth sitting  of the 13th National Assembly.

Addressing the session, Hung asked committee members to focus on evaluating  the socio-economic situation and State budget this year, while seeking  breakthrough measures for socio-economic tasks.

He suggested deputies continue reviewing the agenda for the fifth sitting of  the NA, especially draft amendments to the 1992 Constitution and the draft  revised Land Law.

He asked deputies to continue giving opinions on the draft amendments to the  1992 Constitution, focusing on people's rights to know. Besides, NA Standing  Committee members should discuss several laws to be submitted to the NA.

The NA chairman said there was a need to conduct votes of confidence on  persons holding positions elected or approved by the NA or People's Councils  before the NA's fifth sitting. He described the work as a significant activity  to realise NA's supreme supervisory rights.

The session went through several reports, including the Government's  supplementary reports on the results of the implementation of the socio-economic  development plan and State budget in 2012 as well as the first months of this  year.

The NA Committee also discussed the report on the implementation of budget  estimates in 2013 as well as evaluation reports of NA agencies on the issue.

Source: VNS

VietNamNet Bridge – The box office revenues in Vietnam increased from $7  million in 2008 to $43 million in 2012. With the increase of 514 percent in four  years, from 2008 to 2012, the Hollywood Reporter ranked Vietnam as one of the 13 “hottest” growing cinema markets in the world.

"Iron Man 3" collected nearly VND20 billion ($1 million) in the first  four day in Vietnam.

In Vietnam, where the law and business practices have not yet forced movie  distributors to make public their box office revenues in a transparent manner,  the data released by the Hollywood Reporter (USA) on May 9 is rare and  considered reliable.

According to the report, Hollywood Reporter ranked Vietnam in the list of the  13 emerging markets with the hottest growth rates in Southeast Asia, the Middle  East and South America. Specifically, for a period of four years, the growth  rate of total box office revenues in Vietnam is up to 514 percent, from $7  million in 2008 to $43 million in 2012.

With a population of 92 million people, ranking 14th in the world, there is  an ongoing race to build theaters between domestic and foreign firms in Vietnam.  The appearance of new movie distributors has helped enrich the source of  imported films.

Recently, Megastar announced to earn nearly VND20 billion ($1 million) from  "Iron Man 3" – the opening film for the summer movie season - in Vietnam in the  first four days. This is really a huge gap compared with VND7.6 billion  ($364,000) which was considered a record that "Kung Fu Panda" made in the entire  2008 summer.

Photo: "Kung Fu Panda" took the whole 2008 summer to earn $364,000 in  Vietnam.

Vietnam has the highest growth rate among the 13 emerging markets, followed  by Indonesia - with a population of 251 million and a 171 percent increase. The  following names are Taiwan, Malaysia, Ecuador, the Philippines, Columbia, Oman  ... At the same time, the revenue in Europe and North America is on a decline or  leveling off. These are the major markets of Hollywood, besides the world's  second largest market - China.

Although Hollywood has to face some legal issues such as piracy and  censorship in the emerging markets, overall, these are very potential  markets.

Minh Chanh

VietNamNet Bridge – Importers and exporters have urged the State Bank of  Vietnam to slash the dollar interest rates further to 5 percent per annum. A  senior executive of the central bank once promised to find the way to force the  rates to 4-5 percent.

A report of the State Bank of Vietnam showed that since late January, the  mobilized capital has increased again. By April 23, the deposits had increased  by 5.34 percent in comparison with the end of 2012, or 50 percent higher than  that of the same period of the last year.

The report pointed out that the dong mobilized capital has been increasing  more rapidly than the foreign currency deposits. This, in the eyes of the State  Bank, comes in line with the bank’s plan to encourage businesses to purchase  foreign currencies from banks instead of borrowing from banks. This also shows  the increase in the people’s confidence on the banking system.

The State Bank of Vietnam has affirmed that the foreign currency market has  been going on a right track. By April 25, the average buy price had increased by  0.4 percent in comparison with the beginning of the year. The stabilized  exchange rate and the dollar mobilized capital decrease are the good signs for  the macro economy.

However, analysts have found that the slowdown has put a hard pressure on the  dollar credit. Though the State Bank has tightened the dollar lending by  restricting the subjects that can borrow in foreign currencies, the demand for  dollar loans remains high, especially from export companies.

The director of a joint stock bank said in previous years, the lent capital  in dollars was always higher than the deposits. However, the gap has been  narrowed because of the decrease in the dollar loan demand.

Nevertheless, the sharp fall in the dollar mobilized capital has hindered the  growth of dollar lending. Banks now hurry to mobilize more dollar capital by  dodging the laws and attracting deposits at the interest rates higher than the  ceiling rate stipulated by the central bank.

The current ceiling interest rates are 0.5 percent for the institutional  clients and 2 percent for individual depositors. However, if banks really need  capital, they would be willing to pay 3-4 percent per annum. The high deposit  interest rates still can bring profits to banks, if they lend at 5-6 percent per  annum.

In general, banks now lend dollars at the interest rates of 7-8.5 percent per  annum, while only a few rice, coffee and rubber export companies can borrow at 5  percent per annum.

Import and export companies believe that when the national economy has shown  positive signs, the imports and exports have bounced back, the exchange rate has  been stabilized and the foreign currency reserves have increased significantly,  it’s now the right time to slash the dollar interest rates.

Dao Hong Chau, Deputy General Director of Eximbank, said the bank now lends  at 3.2-3.5 percent only to big and loyal clients, and 5-6 percent per annum to  small and medium import-export companies.

Meanwhile, the foreign banks in Vietnam can lend at 2-3 percent per annum  only. They can borrow dollars at low interest rates from foreign finance  institutions and then re-lend to domestic enterprises at the rates of 5 percent  and lower. This means that in order to compete with them, domestic banks need to  offer more competitive interest rates.

NCDT

The Ministry of Industry and Trade has proposed a State  investment of VND8.5 trillion (US$404.7 million) to develop the industrial  sector during the 2013-2020 period.— Illustrative image/VNS File Photo

HA NOI (VNS)– The Ministry of Industry and Trade has proposed a State  investment of VND8.5 trillion (US$404.7 million) to develop the industrial  sector during the 2013-2020 period.

The State funds set aside for the development of both the large and  small-scale industrial sectors is 10 times as much as invested during the  2007-2012 period.

Of the sum, VND5 trillion ($238 million) will be allocated to the  ministry to manage and implement programmes aimed at stimulating industrial  production. The rest will be used to build national and local industry promotion  centres.

The new National Industry Production Stimulation Plan until 2020 will  see a change in that the ministry also proposes the funds to be used to  encourage enterprises to apply clean production technology to protect the  environment.

Polluting enterprises will be given financial support to move to  industrial zones and complexes.

The plan targets to create 300,000 jobs at rural industry  establishments, and construct waste water treatment systems for 215 industrial  complexes. – VNS

VietNamNet Bridge – The Richest has put Vietnam into the list of the five  markets with the cheapest labor cost in the world with $0.39 per hour. However,  the actual labor cost could be higher.

The salary and the income

With the average pay of $0.39 per hour as reported by The Richest, every  Vietnamese worker receives VND1.687 million a month for a 8-hour working day and  26 working days a month. The level is equal to the minimum wage being applied in  the region 4 (VND1.650 million).

The Region 4 is the remote and underdeveloped area. Meanwhile, the other  regions (1,2 and 3) have the minimum wages of VND2.35 million a month.

However, the pay mechanism in Vietnam is quite complicated. There exist the  big differences between the minimum wage and basic wage and the laborers’ income.

Minimum wage is understood as the floor wage set up to protect the laborers  in disadvantageous conditions. It has been referred to when calculating the  social insurance premiums enterprises and laborers have to pay.

Basic wage is calculated by the product of the minimum wage and the  coefficient, plus allowances (lunch fee, petrol for motorbikes and telecom  fees…).

Meanwhile, income means the total sum of money a laborer can receive from the  employers, which comprises of the wages, extra income from extra working hours,  allowances.

As such, in fact, the enterprises in Vietnam have to pay to their workers  higher than the level reported by The Richest.

The latest report of the Vietnam Labor Union released after a survey in 10  cities and provinces in June and July 2012 showed that the average total income  of every laborer was VND3.623 million a month.

The actual income of laborers in Region 1 (big cities) was VND4.232 million a  month. The figures were VND3.787 million in Region 2, VND3.495 million in Region  3 and VND3.001 million in Region 4.

The average wage paid to Vietnamese laborers is on the rise. The Ministry of  Labor, War Invalids and Social Affairs (MOLISA) is now consulting relevant  ministries on the plan to increase the minimum wage from now to 2017. It is  expected that the average minimum wage would increase by 15-23 percent per  annum.

Every time when the minimum wage increases, the labor cost would increases  accordingly.

Vietnam pays heavy price for cheap labor force

Le Xuan Thanh, Deputy Head of the Labor and Wage Policy Department under  MOLISA, noted that the low labor cost policy pursued by Vietnam in the last many  years helped much in attracting investment.

However, the wage ground has been continuously heightened since 1993 with 11  adjustments made. This shows that the policy on maintaining the low wages to  attract foreign investment to Vietnam may fail.

In principle, in order to ensure the benefits for both businesses and  workers, the wage increase should be proportional to the productivity. However,  in Vietnam, while the wage increases by 10 percent every year, the productivity  increases by 3.5-5 percent only. This has prompted businesses to cut down their  labor force.

The 2012 annual report of the Vietnam Chamber of Commerce and Industry (VCCI)  has pointed out that the labor force at businesses has decreased sharply.

VCCI’s Secretary General Pham Thi Thu Hang said in 2002-2007, every dong paid  to workers could bring 18 dong in turnover. Meanwhile, in 2008-2009, the figure  dropped to 16 dong.

SGTT

VietNamNet Bridge – The lending interest rates are on the decrease, which  is hoped to help businesses more easily access bank loans. However, the efforts  by the banks to slash interest rates would be useless if the bad debts suddenly  increase.

At a recent working session with the State Bank of Vietnam, leaders of the An  Giang provincial authorities insisted on the bank’s measures to rescue  businesses, or they would die because of the lack of capital.

One of the measures they suggested was the delay of the implementation of the  new method on bad debt classification. If the new regulation takes effect on  June 1, 2013 as initially planned, businesses would not be able to borrow  capital, because of their unpaid debts.

The problem is that if the Circular No. 02 is implemented, a lot of the  businesses’ loans may be classified as bad debts, which would make businesses  ineligible for borrowing more money from banks. If so, even if the lending  interest rates go down, the capital would not reach out to businesses to ease  capital thirst of the enterprises.

Tran Luc Lang, Deputy General Director of BIDV, one of the biggest commercial  banks in Vietnam, said the Circular No. 02 stipulates the regulations on  classifying loans in accordance with the international practice, which can help  banks better manage their loans. However, Lang said, it would be a barrier for  businesses to approach bank loans.

The new method of debt classification comprises of the stricter regulations  for debt management. Therefore, it may happen that the businesses’ debts would  be moved to the higher groups of bad debts, which would bring disadvantages to  businesses.

“In general, a business can borrow money from many different banks. If a bank  lists the business’ debt as “bad debt,” other banks would also have to give  similar assessments. This would make it difficult for businesses to obtain  loans,” he explained.

A senior executive of Vietcombank also said that if the new regulations are  applied as of June 1 as previously planned, the banks’ bad debt ratios would be  higher, which means that they would have to make higher provisioning against the  risks.

However, more seriously, once the bad debts increase, commercial banks would  have to say “no” to the businesses which ask for loans. If so, businesses would  die because of the lack of capital.

Deputy President of Lien Viet Post Bank Nguyen Duc Huong has warned that if  the high requirements are applied as planned, a lot of farmers would become  homeless, because they are the big debtors of banks. The failed crops and the  market price fluctuations have made farmers incur big losses over the last few  years.

Huong said that the application of the new regulations would mean no more way  for farmers, because they cannot borrow capital to resume farming, while their  assets would be taken away by the banks to compensate the unpaid debts.

Huong went on to say that though banks have been trying to slash the interest  rates, he is not sure if businesses can borrow money at lower costs. The problem  that when the banks’ bad debts increase, they would have to make higher  provisions for the loans, which would lead to the higher capital costs. If so,  banks would not be able to lend money at low prices.

Ngoc Son