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25May/150

Vietnam economic growth prospect in 2015 bright, but unsustainable: report

UPDATED : 05/25/2015 09:09 GMT + 7

 

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Vietnam’s economic growth prospect this year is bright, but still on an unsustainable trend given the current development of many sectors of the economy, according to a report of the economic committee under the law-making National Assembly (NA).

The country’s economic growth is still mainly based on low value-added industries and the exploitation of natural resources, whereas its other strengths, like agriculture and tourism, are being constrained, Nguyen Van Giau, chairman of the committee, said at the opening session of the NA meeting on Wednesday.

According to the report, growth in the first quarter was mainly due to higher contributions from the low value-added processing, manufacturing and mining (crude oil and coal) industries, while the growth rate of agriculture, forestry and fishing was still low, only about 2.14 percent, down 0.54 percent over the same period last year, Giau said.

Labor quality has not improved much as the national economy suffers a shortage of skilled workers, he added.

Some committee members are also concerned about the large trade deficit in the first months of 2015, Giau said.

According to the latest data, the trade deficit of the country topped US$2 billion in the first four months, chiefly caused by a decline in many key export items, including agricultural and fishing products, he said.

Meanwhile, the prices of commodities, including those Vietnam is good at making, also went down in the world market, he said. At the same time, imports remained largely dependent on a number of markets, particularly China.

"We forecast that export in 2015 will remain difficult, especially considering weak external demand and the devaluation of many currencies against the U.S. dollar, which may result in a rising trade deficit this year," Chairman Giau said.

Another worry is that the public debt continues to grow at high speed, in parallel with large debt repayment obligations, he said.

The equitization of many large state-owned enterprises have been carried out at a snail’s pace, making the process hard to be completed in the 2014-15 period as planned, he added.

Foreign direct investment (FDI) has continued to rise, but the impact of FDI on raising the production capacity and technology transfer for the Vietnamese economy is still unclear.

There is concern that if the FDI sector gradually withdraws from the market, it will be harmful to the sustainable development of the national economy, Giau said.

The bright side

A supplementary report of the government presented at the 38th session of the National Assembly Standing Committee around a fortnight ago outlined the bright prospect of the local business situation in 2014 and the first months of this year.

Minister of Planning and Investment Bui Quang Vinh, authorized by the Prime Minister to present the report, said the 2014 picture was rosier than in the previous year with 74,842 newly-established firms having a total registered capital of VND432.28 trillion ($19 billion), down 2.7 percent in volume but up 8.4 percent in registered capital.

In 2014, there were 9,501 enterprises completing the dissolution process, down 3.2 percent from the previous year. Most of this dissolved firms were small with a registered capital of less than VND10 billion ($461,400) each.

Meanwhile, 14,419 enterprises resumed their operations after suspending them, up 7.1 percent year on year.

"These numbers are encouraging, showing a positive signal of the economy in creating more investment opportunities for local firms,” Minister Vinh said.

Assessing the situation in the first quarter of 2015, the minister said there were still positives when the establishment of new businesses increased both in numbers and registered capital compared with the 2014 figures.

Specifically, there were 19,049 newly registered enterprises with VND111.2 trillion ($5.1 billion), an increase of 3.8 percent in quantity and 13.5 percent in capital.

Meanwhile, total decommissioned firms were 18,740, accounting for 3.6 percent of all operating companies, lower than the normal proportion of the market, at 12-14 percent, according to the government report.

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25May/150

ACV & VN Airlines: The giants of VN aviation industry

 25/05/2015

 

VietNamNet Bridge – The IPO (initial public offering) of the Aviation Airport Corporation of Vietnam (ACV) will be one of the largest IPOs this year, and is expected to generate a lot of interest.

 

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Last year, the IPO of Vietnam Airlines attracted the attention of investors. This year, another aviation corporation will be the focus –ACV.

ACV along with Vietnam Airlines and the Air Traffic Management Corporation of Vietnam (VATM) are three pillars of the airline industry in Vietnam.

Vietnam Airlines is in charge of air transport with a fleet of over 80 aircraft; VATM provides air traffic control services; and ACV manages a total of 22 civil airports.

The equitization plan of ACV has been submitted to the Prime Minister.

Both ACV and Vietnam Airlines designed the equitisation plans with 75% of chartered capital held by the state and 20% to be sold to strategic investors.

The shares for the auction will account for just over 3% of charter capital.

The large proportion of state ownership is one of the factors that reduce the attractiveness of the IPOs. Half a year since the IPO, Vietnam Airlines has not yet found a strategic shareholder.

Comparison of financial indicators of ACV and Vietnam Airlines:

Due to the nature of operation, turnover of Vietnam Airlines is much bigger than ACV.

Vietnam Airlines now has to share the market with many domestic and foreign airlines.

Meanwhile, ACV holds a monopoly of airport business. The plan of sale or franchise of some airports is being considered.

Turnover of Vietnam Airlines is currently seven times higher than ACV.

In terms of profit, it is always a major matter of Vietnam Airlines. Profit of Vietnam Airlines' parent company is always at a very low level. Consolidated profits are higher but they are still low compared to ACV.

Pretax profits of ACV in the past two years reached VND3 trillion/year. This result partly came from the depreciation of the Japanese yen.

Regarding organization, Vietnam Airlines has dozens of subsidiaries, and associated companies operating in the aviation sector and ancillary services.

Some unit members of Vietnam Airlines have very high business efficiency; for instance, Noibai Cargo has larger profits than the parent company.

Meanwhile, ACV’s structure is simpler. The parent company directly manages 22 airports and some subsidiaries.

ACV has a number of key subsidiaries like Tan Son Nhat International Airport Service JSC (SASCO), Saigon Ground Service Corporation (SAGS), and Saigon Cargo Service JSC (SCSC).

Both ACV and Vietnam Airlines need to mobilize a huge amount of capital to serve investment and development activities.

In 2015, Vietnam Airlines needs about $1 billion to pay for new aircraft.

ACV is mobilizing capital for the Long Thanh airport project which is scheduled with tens of billions of dollars.

To implement these projects, the two firms will need to add a significant amount of equity and loan capital.

The sale of shares to strategic shareholders is an important part in the capital raising plan.

The ratio of debt to equity of ACV is much lower than Vietnam Airlines.

By December 31, 2014, liabilities of ACV parent company were just over 10% of the equity. Meanwhile, by June 30, 2014, the liability of Vietnam Airlines was five times more than its equity.

Vietnam Airlines has operated in the form of a joint stock company with registered capital of VND11,199 billion (excluding the shares to be issued to strategic shareholders), corresponding to a market capitalization of approximately VND25 trillion based on the average auction price.

Meanwhile, with expected charter capital of VND22,431 billion and a starting price of VND11,000 in the upcoming IPO, market capitalization of ACV is at approximately VND25 trillion - 10 times over the after tax profit in 2014.

With similar market capitalization and better business efficiency, it is most likely that the IPO of ACV will attract more investors than that of Vietnam Airlines.

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25May/150

Vietnam president urges businesses to double Russia trade value target

UPDATED : 05/25/2015 15:46 GMT + 7

 

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Vietnamese businesses should all contribute to boosting trade ties with Russia so that the bilateral trade value in 2020 can be double the target set by the two governments, State President Truong Tan Sang said Sunday.

Vietnam and Russia have targeted a bilateral trade value of US$10 billion in 2020, but enterprises should do even more to send the number to $20 billion, President Sang said as he met the business community in Ho Chi Minh City.

Local businesses should try to grab every chance to invest in the Russian market, the president said.

The government has exerted efforts to facilitate penetration into the Russian market for Vietnamese businesses, he added.

Vietnamese enterprises still face some hurdles in terms of procedures when exporting their products to Russia, but these obstacles will be cleared once Vietnam signs free trade agreements of which Russia is a member, according to the state president.

One such trade pact is the FTA between Vietnam and the Eurasian Economic Union, which is slated for signing by the end of this month.

Prime Minister Nguyen Tan Dung is scheduled to leave for Kazakhstan on Thursday to attend the signing ceremony for the Vietnam – EEU Free Trade Agreement, according to Dau Tu(Investment) newspaper.

The EEU consists of Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, and Russia.

After this trade pact is signed, Vietnamese businesses should try to raise the value of Vietnam’s exports to Russia to $20 billion in 2020, President Sang urged.

Vietnam is also expected to sign a trade pact with the Eurasian Customs Union, which Russia is also a member of, next month, according to the Ministry of Industry and Trade.

The FTA between Vietnam and the Customs Union of Belarus, Kazakhstan, and Russia will be closed following eight negotiation rounds, the ministry said.

The trade pact will help boost the export of Vietnamese agricultural produce, seafood, textile and garments, and footwear to the three markets, according to the ministry.

It will also create more conditions to boost bilateral ties between Vietnam and the Eurasian Customs Union.

Last year Vietnam and Russia posted $2.6 billion in bilateral trade revenue. Russia, meanwhile, is the third largest country for Vietnam’s outbound investment.

In 2008 Vietnamese businesses only invested $100 million in Russia, but the figure is expected to rise to $2.5 billion this year with 19 projects, according to the Vietnam News Agency, which cited the Bank for Investment and Development of Vietnam.

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22May/150

Confidence up among local consumers

May, 22 2015 08:15:00
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The consumer confidence index in Viet Nam increased by six points to 112 points during the last quarter. — Photo vietstock.vn 

HA NOI (VNS) — The consumer confidence index in Viet Nam increased by six points to 112 points during the last quarter, according to Nielsen's reort for the first quarter of 2015 released on May 20.

This was the third third consecutive increase and the country's highest score since 2010, making Viet Nam the sixth optimistic nation in the world.

The report showed a continued trend towards saving money by 86 per cent of interviewees over the past year. More than half (56 per cent) said they had cut spending because they believed the country was in economic recession.

More than 60 per cent said they cut spending on new clothes and tried to economise on electricity and gas use, and 57 per cent skimped on entertainment.

Vietnamese are now among the world's best savers. Seventy eight per cent put their spare money into savings, the report said. However, 44 per cent were still ready to pay for holidays and 40 per cent wanted to spend on hi-tech gadgets.

Health was the biggest concern for Vietnamese, not the state of the economy or job security, according to the report. One in every five were worried about their health, while 15 per cent were concerned about the economy and only 16 per cent anxious about job security.

The quarterly report showed consumers in Southeast Asian were the most optimistic. Three out of five countries with the highest consumer confidence scores were Indonesia with 123 points, the Philippines with 115 points and Thailand with 114 points.— VNS

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22May/150

CPI keeps rising throughout Viet Nam

May, 22 2015 08:22:46

 

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Customers purchase vegetables a supermarket in HCM City. May's consumer price index (CPI) in Ha Noi and HCM City showed continued growth, according to the cities' statistics offices. — VNA/VNS Photo Vu Sinh

 

HA NOI (VNS) — The consumer price index (CPI) for May showed continued growth in Ha Noi and HCM City, reported the cities' statistics offices.

The Ha Noi Statistics Office announced yesterday that the capital city's CPI showed a month-on-month increase of 0.12 per cent over April and a year-on-year surge of 0.93 per cent.

The office said the increase was mainly due to a surge in petrol price since May 5 that pushed many commodity prices up, especially transport items, which jumped 1.06 per cent since last month.

Housing, electricity, tap water, fuel and building materials jumped 1.44 per cent in the last month because of the rising price and demand for electricity and tap water in the summer, the office said.

Other goods also showed growth - 0.47 per cent for drink and tobacco; 0.3 per cent for garments, hat and footwear; and 0.28 per cent for cultural, entertainment and tourism services.

Only restaurant and catering services had a price reduction, which was 0.43 per cent compared to April.

In contrast to the CPI, the price of gold in Ha Noi continued its decline by 0.13 per cent in the last month and the price of the US dollar went up 0.44 per cent against last month.

The HCM City Statistics Office said the city's CPI only had a slight increase of 0.3 per cent over April.

Goods with price growth included garments, hat and footwear up 0.1 per cent; home appliances up 0.02 per cent; transport services up 1.05 per cent; and cultural, entertainment and tourism services up 0.07 per cent.

Housing, electricity, tap water and fuel jumped 2.18 per cent against last month because of the new electricity rates and increase in demand due to the hot summer weather.

Some goods items reduced in price. Like Ha Noi, restaurant and catering services went down 0.06 per cent. Postal and telecom services declined 0.02 per cent, and the other-goods and services group fell 0.04 per cent.

Of note, rice continued its reduction by 0.13 per cent and general food products went down 0.13 per cent.

In HCM City, the price of gold also dropped 0.4 per cent. — VNS

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22May/150

American investors see Vietnam as strategic market

 22/05/2015

 

VietNamNet Bridge - Ranked No. 7 of 101 countries and territories investing in Vietnam for the past five years, the United States has invested more capital in the country through new brands.

 

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In late March, P&G started construction of a Gillette razor factory in Binh Duong province with $100 million. The factory will be completed in 12 months and will create jobs for more than 300 local workers.

According to P&G Vietnam CEO Emre Olcer, the group had considered the construction of a Gillette razor factory in neighboring countries, but finally they chose Vietnam.

The reason for this choice is because "Asia takes an important role for the group’s future. And compared with other countries in the region, Vietnam is outstanding for the consumption potential and new opportunities".

More specifically, Vietnam has a high economic growth rate, young population and rising incomes.

The advantages have been confirmed by the two-digit growth of this group’s brands in Vietnam, such as Ariel, Pampers, Downy, Pantene, Tide, and Head & Shoulders.

The advantages of TPP (Trans-Pacific Partnership agreement) (in the final stage of negotiation), low labor costs, favorable conditions in macroeconomics and consumption have encouraged a American companies to come to Vietnam for investment opportunities.

In 2013, only 22 US companies visited the country to learn about the business environment in Vietnam but in the first half of 2014, there were three business delegations, including many big corporations such as Boeing, Apple, AIG Exxon Mobil visiting the country. Most recently, a group of more than 30 enterprises of the US - ASEAN Business Council travelled to Vietnam to find opportunities for cooperation in the field of construction.

At a press conference in January 2015, US Ambassador to Vietnam Ted Osius spoke optimistically about the impact of TPP on the Vietnamese economy and US investment.

"The TPP agreement will allow the US to become the No. 1 investor and partner of Vietnam," he said.

During a visit to the Ford factory in Hai Duong on April 4, the US Ambassador said that the US and Vietnam were increasingly close and had more comprehensive cooperation.

This is motivation to elevate the relationship between Vietnam and the United States as well as to confirm the ongoing efforts of the United States for rebalancing relations in Asia - Pacific.

In the automotive industry, Ford is mentioned with serious investment and a positive contribution to the community. In 1997, Ford became the first foreign automaker with an automobile assembly line in Vietnam with an investment of $123 million.

In 2014, Ford invested an additional $6.1 million in its factory in Vietnam to prepare for assembly of the small SUV Ecosport.

In 2012 and 2013, despite the fall of Vietnam's automobile market, Ford Vietnam saw impressive growth with an increase of 71% and 69%, respectively, and was in the top three automotive brands in Vietnam.

In 2014, Ford continued to grow by 71%, with 13,988 vehicles sold. In the first four months of 2015, Ford Vietnam set a new record with 5,588 vehicles sold, maintaining its position as the fastest-growing automobile firm in Vietnam.

US investors are diverting investment from China to Vietnam. In late 2014, Microsoft shifted its smartphone factories from China to Vietnam.

To date, 39 production lines from plants in Komarom (Hungary), Beijing, Guangdong (China) and Reynosa (Mexico) have been moved to Bac Ninh province, turning Vietnam into a key point in the global supply chain of this group. With this shift, export sales of Microsoft Vietnam in 2014 reached $2 billion.

Microsoft has 15,000 employees in Vietnam but recently the company announced that it would invest $3 million in three years for staff development and support of young leaders in Vietnam.

Vu Minh Tri, CEO of Microsoft Vietnam, said: "We see Vietnam as a strategic market and for the long-term benefits. Besides offering software, devices and solutions, we proactively work with the government and the business community to support the development of technology, contributing to the development of skills and IT resources of Vietnam.”

Intel is also disbursing $1 billion of capital in Vietnam. Sherry Boger, CEO of Intel Products Vietnam, said that since January 2014, SOC (system on a chip) products for tablets and smartphones of Intel have been produced at its factory in Vietnam.

The company has reached a capacity of 36 million SOC products a year and will increase to 40 million in the future. It is expected that by the end of 2015, 80% of the chips used in computers worldwide will be manufactured in Vietnam.

Sherry Boger said that Vietnam is an attractive destination for foreign companies, including Intel. Intel has closed its assembly/test site in Costa Rica to shift to Asia, including Vietnam.

In late 2014, dual-core CPUs for fourth generation computers were manufactured at Intel Vietnam factory.

Another American company, Jabil Vietnam (specializing in manufacturing electronic devices) is now located in Ho Chi Minh City Hi-Tech Park (SHTP) and it also plans to raise capital from $200 million to $1 billion to expand the scale of production.

In the field of food and beverage, large brands like KFC, Burger King, Pizza Hut, Starbucks, Coffee Bean & Tea Leaf, and McDonald's have opened and are developing in Vietnam.

According to the Foreign Investment Department (of the Ministry of Planning and Investment), as of February 2015, the US had 729 investment projects in Vietnam with total capital of approximately $11.035 billion.

US firms have invested in 17 of 18 fields and in 42 of 63 provinces. In the past five years, bilateral trade between Vietnam and the US has doubled, from $14.2 billion in 2010 to $36.3 billion in early 2015.

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20May/150

In Vietnam, US dollar appreciation makes some quite happy, leaves others in trouble

UPDATED : 05/20/2015

 

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The rise in value of the U.S. dollar against the Vietnamese dong, which took effect earlier this month, has made some Vietnamese people quite happy, but disappointed many others.

 

The State Bank of Vietnam, the central bank of the Southeast Asian country, on May 7 allowed the local currency to lose another one percent against the greenback, after devaluing it by one percent in January.

The bank has promised that it will not depreciate the local currency by over two percent against the dollar this year in order to stabilize the macro-economy.

 

While local exporters, who are said to be the main beneficiaries of the latest devaluation, told Tuoi Tre (Youth) newspaper the benefits they have received are negligible, those firms that have to import materials for production said they face many hurdles with the appreciated greenback.

 

Some agricultural exporters said they would make more money because of the dollar price increase, but many importers are concerned about additional costs, as they have to spend more Vietnamese dong to buy dollars to import goods and pay their dollar-denominated debts.

 

Exports of agro- and aquaculture products are among Vietnam’s leading cash earners, with US$25.7 billion last year, making up over 17 percent of the country’s total export revenue.

 

The flip side

 

The export of aquaculture products, which suffered the most when the dollar appreciated against many other currencies in the first quarter of this year, seems to have begun making back what they lost during the period.

In the first quarter of 2015, seafood exports reached $1.65 billion, down 17.4 percent from the same period of 2014.

 

Shrimp shipments in particular were the biggest loser, at $574 million, down 28 percent from the same period last year, according to the Vietnam Association of Seafood Exporters and Processors.

 

Exports to the three largest markets, including the U.S., Japan, and the EU, dropped by 56 percent, 28 percent and three percent, respectively, mainly due to the fact that the dollar has risen strongly against the euro and Japanese yen, which caused seafood prices for export to those markets to increase.

 

Le Van Quang, general director of Minh Phu Seafood Corp, said that in just over one year the greenback appreciated by 20 percent against the Japanese yen, Australian dollar and euro, thus making Vietnamese shrimp exported to the U.S. more expensive.

 

Meanwhile, many other rivals, such as China, India, Thailand, Indonesia, and Ecuador have devalued their currencies, making the prices of their shrimp more competitive when exporting to the U.S.

 

The exchange rate adjustment of one percent is negligible and the competitiveness of Vietnamese goods has not improved much, he complained.

 

However, many exporters said they were badly affected by the rate adjustment.

 

Tran Viet Anh, general director of Nam Thai Son company, said that the firm does not benefit from the exchange rate adjustment, as it received euros when exporting goods, while they have to pay in U.S. dollars for the importation of raw materials.

 

With demand from $1.2 to $1.5 million a month for payments to the bank, the new rate will cost the company an additional VND258-322 million ($11,900-14,860) per month to produce goods for which all the materials are imported.

 

Nguyen Chi Trung, director of Gia Dinh Shoes company, said the firm has targeted to earn $48 million from shipping four million pairs of shoes in 2015.

 

“Although our goods are for export, we have to buy materials from foreign partners and pay in U.S. dollars, so the benefit of the rate adjustment is tiny,” he said.

 

Which currency to hold?

 

Van, a woman from Binh Thanh District, Ho Chi Minh City, said she has a VND200 million ($9,230) three-month term deposit with an interest rate of 4.6 percent per year.

 

"But the exchange rate has increased by two percent, plus 0.75 percent of the current interest rate of deposits in U.S. dollars, the real interest for greenback holders now is 2.75 percent, while for Vietnamese dong holders like me, the current rate, minus inflation, will be very small by the end of this year,” she said.

 

Economist Huynh Buu Son said that people should consider various factors to decide whether to keep the local currency or the greenback.

 

Many people worry that the dollar will rise in value against the dong again before the end of the year.

“But in my opinion, in the last months many favorable factors can appear for exchange rates to remain stable, such as increased export revenue and the rising inflow of overseas remittances,” Son said.

 

On the other hand, exchange rate stability is the most important goal set by the central bank, so it will try to achieve the goal by the end of the year, he added.

 

“Therefore, the possibility that the exchange rate will be hiked again is small, and if any changes are made they will not be significant,” Son said.

 

The economist added that given low inflation, which was at 0.8 percent in the first four months of this year, keeping dong would be more profitable.

 

The general director of a joint stock bank also shared similar thoughts, as exchange rate rises will put pressure on interest rates, thus increasing the operational cost for local firms, which the state does not want to do.

 

If there are moderate savings, the best choice for people is to deposit to earn high interest, he said, noting that if their savings are big, customers can choose many investment channels to diversify profits and risks.

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20May/150

Statistics Office’s inaccurate prediction about trade deficit behind dollar price hike?

20/05/2015

 

VietNamNet Bridge - The predicted high trade deficit in the first four months of the year reportedly put pressure on the exchange rate and led to the State Bank’s decision to devalue the VND by one percent on May 7.

 

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After three days of the dollar price soaring, the market unexpectedly cooled down on the afternoon of May 15. This was attributed to the State Bank’s statement that it was ready to sell dollars to intervene in the market if necessary.

The statement was made at the same time when the General Department of Customs (GDC) released a report on the lower-than-expected trade deficit in the first four months of the year.

The department reported that in April 2015 Vietnam exported more than it imported, with a trade surplus of $900 million. This helped narrow the trade deficit of the country in the first four months of the year to $2.07 billion.

The General Statistics Office (GSO) estimated that the trade deficit would be as high as $3 billion in the first four months of the year, according to Tien Phong.

The GDC report is good news for the State Bank and businesses, because this helps ease businesses’ anxiety about the lower dollar supply.

However, this is not good news for policy makers, and the high predicted trade deficit has put unnecessary pressure on exchange rate policy.

Tuoi Tre newspaper quoted Le Thi Minh Thuy, a senior official of GSO, as saying that statistical errors are unavoidable.

Thuy explained that the government and relevant ministries demand statistics in mid-April for the government’s meeting at that time.

However, GSO could only collect information on events by mid-April, and therefore, it had to make calculations based on the figures it projected for the other half of the month.

Also according to Thuy, there are thousands of import and exports, which make it impossible for GSO to check the import and export turnover of all the products.

GSO can only make calculations based on 40 categories of products which make up 80 percent of the total import/export turnover.

Tuoi Tre also quoted Nguyen Hoang Hai, deputy chair of the Vietnam Association of Financial Investors (VAFI), as saying that the information about the high trade deficit had influenced the public.

Meanwhile, the central bank repeatedly said the dollar price increased because of the people’s unreasonable anxiety.

An analyst noted that banks’ and businesses’ expectations on exchange rate have had a high impact on market prices. The dollar supply is still abundant, but banks have sold dollars in dribs and drabs because they expected the dollar price to increase in the future because of the predicted high trade deficit.

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20May/150

Billions in bad loans resolved

May, 20 2015 08:50:00

 

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Customers make banking transactions at VP Bank in Ha Noi. The banking system resolved a total of $14 billion of bad debts in the last three years. — VNA/VNS Photo Tran Viet

 

HA NOI (VNS) — The banking system has resolved roughly VND311.1 trillion (US$14.33 billion) of non-performing loans (NPLs) in 2012-14, accounting for 67 per cent of total NPLs reported in September 2012.

These results were recently reported by the State Bank of Viet Nam's governor, Nguyen Van Binh, to deputies of the National Assembly.

The ratio of NPLs had been reflected more accurately and transparently since late 2014, Binh said, adding that the NPL ratio had declined from 3.61 per cent in late 2013 to 3.25 per cent in late 2014.

Though the NPL ratio inched up in the first two months of this year to 3.59 per cent, it was still within the range of what was forecast, and had remained under control of the central bank, Binh said, explaining that NPLs often increased in the first months of the year, before declining sharply at the year end.

Binh said that the central bank would continuously instruct commercial banks and credit institutions to handle NPLs strictly through debt classifications and risk provisions in accordance with legal regulations.

The central bank has targeted to resolve at least 60 per cent of the total number of NPLs that they are supposed to handle in 2015 by June 30. Further, they have to transfer at least 75 per cent of the total debts that they assign for sale to the national debt dealer, Viet Nam Asset Management Company (VAMC), this year.

Additionally, the central bank is to take bold measures, including restrictions on profit sharing, to punish credit institutions and commercial banks whose NPLs are large and inactive.

VAMC chairman Nguyen Quoc Hung said that VAMC estimated that it had bought roughly VND40 trillion ($1.84 billion) of NPLs at their book value during the first five months of this year, out of VND80 trillion ($3.68 billion) planned for the entire year. More than 90 per cent of the debts bought by VAMC were mortgaged by real estate assets.

The VAMC's NPL purchase, to date, has been relatively smooth, Hung said, adding that all credit institutions, including State-owned commercial banks, had so far suggested they would sell their NPLs to VAMC.

The Bank for Investment and Development of Viet Nam (BIDV), to date this year, sold roughly VND3 trillion ($138.24 million) of its NPLs to VAMC, out of VND8 trillion ($368.66 million) planned for the entire year.

Vietinbank has also plans to sell roughly VND4 trillion ($184.33 million) of NPLs to VAMC this year, while Vietcombank expected VND1 trillion ($46.08 million) in NPLs to be sold to VAMC in the second quarter of this year. — VNS

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18May/150

Banks need more funds for non-performing loans

May, 18 2015 08:19:00

 

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Banks will need more provisional funds to support the risk of bad debts. — File photo

 

HA NOI (VNS) — Banks will need more provisional funds to support the risk of non-performing loans (NPLs) in accordance with national requirements for controlling bad debts, reported Dau tu (Viet Nam Investment Review) online.

Asia Commercial Bank General Director Do Minh Toan said his bank targeted credit growth of 13-15 per cent and a bad debt ratio of below 3 per cent this year and had arranged a provisional fund of some VND2 trillion (US$95.24 million) for 2015.

This year, the bank planned to sell VND1 trillion ($47.62 million) of NPLs to the Viet Nam Asset Management Company (VAMC) and handle VND1.6 trillion ($76.19 million) in bad debts by itself, he added.

Sai Gon Joint Stock Commercial Bank reported that it had sold VND11.4 trillion ($542.86 million) in NPLs to the VAMC over the last three years, reducing its bad loan ratio to 0.5 per cent by the end of last year.

The bank said it would have to continue to deal with NPLs to improve its financial situation, and provisional funds were likely to be increased.

Viet Nam International Bank also said it would establish a provisional fund of more than VND2 trillion ($95.24 million), though it had held its bad debt ratio at 2.51 per cent last year.

The bank expected its deposits to grow by 8 per cent to VND53 trillion ($2.52 billion) and outstanding loans to increase by 11 per cent to VND42.38 trillion ($2.02 billion) this year.

It planned to resolve some VND3.84 trillion ($182.86 million) in NPLs, predicting provisional funds would rise sharply, with bad debts likely to climb by VND300 billion ($14.28 million) in 2015.

Prerequisite

Eximbank leaders said establishing provisional funds was a prerequisite for guaranteeing operational security; hence, it was willing to sacrifice profits to provisions. Last year, a provisional fund amounting to VND3 trillion ($142.86 million) resulted in a pre-tax profit as low as VND68 billion ($3.24 million) for the bank.

The bank planned to sell some VND1 trillion worth of bad debts to the VAMC this year, they added.

The State Bank of Viet Nam (SBV) has urged credit institutions to step up bad debt resolution since January in a bid to reduce the overall NPL ratio in the domestic banking system to less than 3 per cent in 2015, following Government orders.

The lenders have to resolve by June 30 at least 60 per cent of the total number of bad loans they are supposed to handle in 2015. They have to transfer at least 75 per cent of the total debts they will register for sale to VAMC this year, within the same deadline. The deadline for selling all their NPLs is September 30.

The SBV has allowed the VAMC to issue special bonds, worth up to VND80 trillion ($3.76 billion), to acquire bad loans from credit institutions this year. The central bank also required lenders to establish yearly provisional funds amounting to 20 per cent of the value of the bonds they had bought from the company.

Tran Du Lich, a member of the National Financial and Monetary Policy Advisory Council, said selling NPLs to the VAMC was a good way for banks to clean up their accounting balances, but the requirement for provisions would create significant pressure for them. — VNS

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