Vietnamese Dong News VNC – the currency that could.

VietNamNet Bridge – The dollar price has been increasing these days  because of the slight demand increase. However, the dong/dollar exchange rate is  believed to get stabilized by early July 2013.

The dollar prices, which have been unchanged over the last two years,  suddenly increased slightly in June 2012. Especially, commercial banks quoted  the same price levels for both selling and buying prices, the thing that has not  been seen over the last many years.

The dollar prices have been increasingly more sharply in the last two weeks.  The dollar selling price quoted by commercial banks is now at VND21,036 per  dollar, hitting the ceiling level.

The “ceiling level” is understood as the highest possible price level at  which banks can apply in the transactions between them and clients. The ceiling  level is calculated by the interbank exchange rate announced daily by the State  Bank of Vietnam plus the trading band of 1 percent.

The black market has also heated up with the dollar trading at VND21,200 per  dollar.

Observers have noted two special things in the current green back price  increases. First, the dollar price increase can be seen not only at the official  and the black markets, but the State Bank Exchange itself has also raised the  dollar selling price as well.

By June 16, the exchange rate quoted at the exchange had been raised from  VND20,950 to VND21,036 per dollar.

Second, the gap between the selling and the buying prices has been very  narrow of between VND6 and VND10. This shows that the dollar demand has really  increased sharply. Prior to that, the dollar price increase was thought to be  just a temporary move by the banks to improve their foreign currency  positions.

This is for the third time the dollar price increases so far this year,  though people were told that they should not expect any price fluctuations this  year. However, the two previous price fluctuation fits did not cause any big  problems, because the dollar price quickly reduced later. What about the third  price increase?

Since late 2011, the State Bank of Vietnam has been keeping the dong/dollar  interbank exchange rate stable at VND20,828 per dollar. The exchange rate  stabilization has been hailed as a success of the State Bank to stabilize the  exchange rate to facilitate the export and import.

However, analysts lately have given the warning that the stable exchange rate  for too long may do more harm than good, because this does not help encourage  export.

In its official statements, the State Bank, while reaffirming its policy not  to devaluate the dong, has stated that it does not intend to keep the exchange  rate unchanged at any costs, but it would make flexible adjustments in  accordance with the supply and demand basis.

Dr. Nguyen Tri Hieu, a well-known finance expert said the finance expert has  been put under the pressure, which relates to the fact that commercial banks  have to finalize the gold trade on account prior to June 30.

The dollar price increase has also been attributed to the narrower gap  between the dong and the dollar deposit interest rates, which has prompted  people to buy dollars to deposit at commercial banks.

If these are the true reasons behind the recent dollar price increases, the  problems would be settled soon, which means the exchange rate would cold down by  early July 2013.

TBKTVN

VietNamNet Bridge – Chinese network operators really want to expand their  business to Vietnam and other South East Asian markets, but they are fearful of  the cutthroat competition in the Vietnamese market.

While Chinese telecom equipment companies have been cementing their firm  positions in South East Asian markets, their fellow countrymen in the  telecommunication field dare not enter the markets because of the stiff rival in  the markets, especially in Vietnam, according to China Daily.

Chinese big mobile network operators including China Mobile, China Unicom and  China Telecom all want to penetrate the other markets in the globe, but many of  the markets have become saturated, which makes it very difficult for a new comer  to do business there, the newspaper has quoted Andrew Kitson, a senior analyst  of Business Monitor International (BMI) as saying.

The analyst said the Lao, Cambodian and Vietnamese all have great potentials,  but too many network operators have been operating there already, which have  developed the infrastructure system very well.

The competition in the market has become so stiff that mobile network  operators, while having to spend more money on advertisement campaigns and sale  promotion programs, have to slash the service fees, thus leasing the sharp  profit decreases. The stiff competition has pushed some of the players against  the wall and they had to leave Vietnam.

The three big foreign groups had to quit the games after a long period of  struggling to survive in the market. They are Swedish Comvik, which was the  first foreign telecom investor in Vietnam and the first which left Vietnam,  South Korean SK Telecom and Russian VimpelCom.

Therefore, BMI believes that Chinese network operators should only seek their  opportunities in Myanmar, a newly emerging market. Meanwhile, there is no more  opportunity in the markets of Laos, Cambodia and Vietnam, and it would be very  risky to invest in there.

Meanwhile, Huawei, a Chinese hardware product supplier, has been very  successful in the Vietnamese market. It has become a big partner of nearly all  the biggest mobile network operators in Vietnam, supplying telecom equipment to  the Vietnamese big guys.

Following its great success in Vietnam, Huawei has revealed its plan to  launch 400,000 smart phones into the market. If it can sell 400,000 products in  2013 as planned, it would account for 5 percent of the domestic smart phone  market share.

Chinese telecom groups also nearly don’t have opportunities in the markets of  Indonesia, Malaysia, Thailand and the Philippines – the developed markets with  very stiff competition, which is being controlled by domestic and regional  companies.

In related news, President of Russian Alltech Group paid a courtesy visit to  the Vietnamese Minister of Information and Communication Nguyen Bac Son when he  visited Russia and Belarus in mid-May 2013. The group’s president expressed his  willingness to make investment in Vietnam to develop the infrastructure for the  new generation 4G network, according to Buu Dien newspaper.

Meanwhile, the Australian Telstra telecom group opened a new office in  Singapore in late April 2013. Zdnet website commented that the office opening  was a part of the group’s big plan to expand its business to Asia, with Vietnam  being a targeted destination.

The website quoted David Thodey, Telstra’s CEO, as saying that the group does  not intend to join the bid for an operation license in Myanmar, the market that  it does not understand well. Instead, it is eyeing Korean markets, including  Vietnam.

Compiled by C. V

VietNamNet Bridge – The detergent market, which has been “peaceful” over  the last three years, has suddenly become boisterous.

With the total estimated revenue of $600-650 million a year and the average  growth rate of 10 percent, the Vietnamese detergent market is believed to have  great potentials

Unilever has been dominating the domestic market over the last few years with  its products, bearing the trademarks of Omo, Viso, and Surf, accounting for 50  percent of the market share. The remaining part of the market belongs to P&G  with Tide, and other products for popular consumers such as Lix, Vi Dan or  Net.

Market seething

The peaceful market has suddenly become seething because of the appearance of  a new trademark, Aba of Dai Viet Huong Company. The joining of Aba into the  market is believed to lead to the re-division of the market share.

Unlike the other domestic manufacturers who make low cost products to target  popular consumers and avoid the direct confrontation with the two big guys  Unilever and P&G, Dai Viet Huong has unexpectedly set up the high price  levels for its products, which are only lower than Omo, which is considered the  best product now in the market which has the highest selling price.

Dai Viet Huong may well understand that it would have to face when competing  with the big guy Unilever, a foreign brand with powerful financial capability.  Therefore, it decided to follow a special marketing strategy.

The company has launched its products in the Mekong Delta provinces,  considering this the general headquarters of the marketing campaign. The  launching proves to be very impressive, which has gradually conquered the hearts  of the local consumers.

In some localities, Aba products have been competing on the same rank with  the big guys of Omo, Viso and Surf, while it has far exceeded other domestic  brands just after one year of joining the market.

P&G, whose Tide products have been less favored than Unilever’s Omo, has  also made a big leap in the market by launching Ariel powder detergent after  succeeding with Ariel liquid products, which is the direct rival to Omo.

P&G may have learned the lesson from the failure with Tide, which has  been put on the par with lower-class products of Unilever. When launching Ariel  this time, P&G might have prepared very carefully to introduce Ariel as the  high class product.

As such, a tripodal position has taken shape in the Vietnamese detergent  market which comprises of Unilever with Omo, Viso, Surf; P&G with Ariel and  Tide, and Dai Viet Huong with Aba.

The marketing war

Aba and Ariel are believed to make very wise moves to scramble for the market  shares from Unilever.

In the eyes of the experts from LSA, a consultancy firm, Dai Viet Huong has  been “venturesome” but “wise.” The pricing policy of Dai Viet Huong allows  bringing a big margin profit to Aba products.

Meanwhile, Dai Viet Huong has been running very big trade marketing campaigns  to create an impression on consumers. In an effort to successfully occupy the  space at retail points, Dai Viet Huong once accepted the high discount rates of  10 percent or even 20 percent for retailers, the thing which never happened in  the market before.

As for Ariel, P&G has been following a methodical marketing campaign,  which is believed to be the biggest one of the group so far since the day the  group set its foot in Vietnam.

SGTT

VietNamNet Bridge - Commercial banks all have raised the dollar selling  price to the ceiling level of VND21,036 per dollar. The State Bank’s Exchange  late last week quoted the selling price at VND21,360 per dollar. These are the  signals for a new dong/dollar exchange rate adjustment?

The dollar prices quoted by commercial banks on June 12 showed the slight  increases in comparison with the previous days. At Vietcombank, the dollar price  was quoted at VND21,020-21,036 per dollar (buy & sale), an increase of VND35  per dollar in sale price over June 11.

At BIDV, the dollar price was quoted at VND21,015-21,036 per dollar on the  same day, a VND5 per dollar decrease over the buy sale on June 11. Vietinbank’s  rates were VND21,030-21,036. On the black market, the dollar was traded at  VND21,250-21,270 per dollar.

The Deputy General Director of a joint stock bank in Hanoi said the demand  has increased sharply over the last two weeks, while the supply remains  unchanged.

The banker has also cited the narrowing of the gap between the dong and the  dollar interest rates as a reason to explain the dollar price increases. The  dong interest rates have been lowered by commercial banks recently in an effort  to boost lending.

It happened in the past that once the dong and the dollar interest rates came  closer to each other, people would try to hoard dollars instead of dong, which  would raise the dollar price.

A rumor has been spread out recently that the dong would be devaluated by 2  percent, which might have prompt people to collect dollars.

People believe that the dollar price increases in the market could be the  signals for a new decision of the State Bank to adjust the dong/dollar exchange  rate.

However, the State Bank has said it is not going to adjust the exchange rate  at this moment, affirming that banks have raised the dollar selling price just  to balance their foreign currency trade.

The latest report of the State Bank of Vietnam said that the dollar price  increases occurred only for a short time, which has helped improve the banks’ foreign currency positions. The dollar prices have decreased to VND20,980-21,030  per dollar.

Meanwhile, experts all believe that the exchange rate adjustment would be an  unreasonable move at this moment.

Dr. Nguyen Tri Hieu, a banking expert, thinks that the higher demand from  businesses for importing goods to prepare for a new production period has led to  the slight increases of the dollar prices. Meanwhile, some other enterprises  want to borrow dollars to pay debts.

However, Hieu believes that it’s not the right time now to devaluate the dong  to restrict the imports and facilitate the export. It would be better if the  State Bank considers raising the trade band from one percent currently to two or  three percent to help them take initiative in their foreign currency trade  activities.

Analysts also think that the dollar price increases over the last two weeks  are just “temporary,” and that there’s no need to adjust the exchange rate now.  In principle, the State Bank would have to make an intervention when necessary,  but it should take cautious steps by making small adjustments in order to avoid  shocks to the market.

Tien Phong

VietNamNet Bridge – Deputy Prime Minister Nguyen Xuan Phuc has declared  that economic restructuring, especially of State groups and the banking system,  has led to positive results for Viet Nam.

Deputy Prime Minister Nguyen Xuan Phuc (left) and Procurator General  Nguyen Hoa Binh at the 13th National Assembly's Q&A sessions on Friday.

Speaking at the 13th National Assembly's (NA) Q&A session on Friday, Phuc  also pledged that critical measures would continue to be implemented to enhance  the country's global standing.

However, his view was not shared by all, with Nguyen Ba Thuyen of Lam Dong  Province and Tran Du Lich of HCM City among several NA deputies to suggest that  restructuring is taking place more slowly than expected.

Phuc though defended the progress that had been made, citing the issuance of  a government decree preventing ineffective public investment; the critical  reform of nine commercial banks with better liquidation capability; and the  equitisation of 16 top enterprises as examples of recent reform  achievements.

He stated that speedy reform was not realistic, as many factors beyond the  Government's control were slowing the pace, such as the need of participation by  all industries and sectors and volatility in the world markets.

He reassured the lawmakers that major reform was still underway, with the  Government's mid-term planning until 2015 and the on-going equitisation of State  enterprises. Inspections of these companies would be intensified to prevent  potential losses, he added.

Deputy Le Nhu Tien from Quang Tri Province questioned the need for the State  to rescue and restructure failing companies rather than allowing them to go  bankrupt. He gave the examples of Vinashin and Vinalines, which between them  lost tens of trillions of dong.

Phuc acknowledged that ineffective management at these companies had caused  huge losses for the State. However, he argued that restructuring them would  certainly bring more long-term benefits than letting them shut down. He pointed  out that bankruptcy would leave the State responsible for paying all their debts  and would cause a setback in the country's long-lasting shipbuilding  industry.

He confirmed that nine leaders of Vinashin, including general director Pham  Thanh Binh, are under investigation. The company had been extensively  restructured, with 216 of its sections closing down and 36 others being  reorganised.

About 170 vessels have been built and sold in the past three years. Among  them, 66 vessels worth US$1.215 billion have been exported.

Meanwhile, Vinalines has finished the equitisation of its four enterprises  and has decided on its final restructuring plan.

The Deputy PM ended his answer by arguing that although these two groups are  still loss-making, it is necessary to believe in their progress, especially when  the world market recovers.

Regarding the country's economic growth, Pham Tat Thang of Vinh Long Province  questioned why the Government was not looking for quick solutions to the current  stunt in growth.

Phuc replied that it would be meaningless to chase high economic growth  without first ensuring that the inflation rate remained low and would not have a  negative effect on the lives of the people.

He said that Viet Nam's economic growth should be stable, healthy and  sustainable and so the Government always followed a policy of working towards  higher economic growth and a lower inflation rate.

He called on industries and sectors to continue implementing their tasks of  socio-economic development by removing barriers for production, boosting trading  activities and giving necessary support for farmers and suppliers.

State bonds would be issued in the near future to collect funds for urgent  projects such as National Highways 1A and 14B, he said.

Deputy Nguyen Nhu Lam of Long An Province said agriculture played an  important role in economic growth. However, farmers were facing difficulties in  producing and selling their products when the prices of inputs were on the  increase, poultry smuggling via borders was still widespread and product prices  were controlled by traders.

Phuc answered by saying the relevant agencies had been entrusted to actively  ensure sources for cattle feed and other necessary materials for farmers;  tighten measures to prevent smuggling activities, control farm markets to avoid  the manipulation of private traders and help farmers apply modern  technology.

Justice sector

Procurator General Nguyen Hoa Binh of the Viet Nam Supreme People's Procuracy  was also one of the cabinet members to participate in the question and answer  sessions yesterday.

Thai Binh representative Nguyen Manh Cuong was among the legislators to ask  about the plan of the Supreme People's Procuracy to improve the skills and  qualifications of their staff, as this is essential to ensure that no criminals  can escape from justice and no innocent victims suffer from unfair  judgments.

NA Chairman Nguyen Sinh Hung remarked that the sector should settle the lack  of well-qualified prosecutors by the year 2015 to ensure the accomplishment of  their tasks.

Binh said the work load of the procuracy sector has been on the increase.  According to him the number of criminal and civil cases rises by 10-15 per cent  year after year.

This means it is imperative for the sector to develop their human resources  in terms of quality and quantity.

He declared that the recruitment process is underway already and will employ  more well-qualified staff for district-level procuracy agencies, stating that,  "all these processes have been made public and transparent."

Leaders of procuracy agencies in upland and rural districts will become more  connected with educational institutions in Ha Noi, HCM City and Can Tho to  recruit excellent students who are prepared to work outside of the country's  cities.

The sector is also working with education institutions in Russia and New  Zealand in training lawyers at bachelor and masters level, he said.

He admitted that in corruption cases the percentage of suspended sentences of  30.8 was relatively high in comparison with other cases (21 per cent). The  Supreme People's Court had reviewed the cases to ensure laws were applied  strictly, he said.

Voter feedback

Also yesterday, many voters expressed their satisfaction with the live  broadcast Q&A session held by Deputy PM Phuc.

Nguyen Duy Phuong, a lecturer at the Ha Noi-based University of Labour and  Society, said the Deputy PM's answers had covered all the questions posed by  deputies and voters regarding the prospects of the economy given the current  global economic situation, while clear solutions for hot issues were also  discussed.

Phuong said he totally agreed with the Deputy PM regarding the tough measure  on getting rid of unprofessional and unethical civil servants.

Nguyen Thi Huong, Director of ATP Investment and Trade Ltd Co in Ha Noi's Cau  Giay District, said that she was satisfied with the Deputy PM's answers  regarding the road-map on economic restructuring as well as social welfare.

"At the moment, solving difficulties faced by businesses, creating favourable  conditions for them to develop, boosting exports and continuing administrative  reforms are the best measures," she said.

Source: VNS

VietNamNet Bridge – From 2015, Vietnamese products of pork, chicken and  poultry eggs would no longer enjoy the local production protection policies. It  is expected that by that time, Thai, Indonesian and Malaysian products would  flood the domestic market.

Thai chicken need 6 hours only to arrive in HCM City

Pham Duc Binh, General Director of Thanh Binh Company, who is also Deputy  Chair of the Vietnam Animal Feed Association, said with the current conditions  of the livestock industry, which is far inferior to regional countries in terms  of the scale, productivity, production costs and quality, Vietnamese enterprises  and farmers would suffer big difficulties once the protection is removed.

Also depending on the breeders’ quality, Thailand, Indonesia and Malaysia,  which are believed to have the most developed livestock industry in the region,  have greater advantages than Vietnam in the field, especially in the farming  scale and the productivity.

A worker in Thailand is believed to take care of a flock of 20,000 fowls,  while a Vietnamese worker handles 5,000.

Thailand has been pursuing a methodical investment strategy on the animal  husbandry industry, which allows to control the feed material sources. Unlike  Vietnam, Thai farmers can make animal feed instead of relying on imports.

Especially, Thai farmers can access bank loans at the low costs, enjoy tax  incentives and the government’s support. All of these help make their production  costs lower by 15-20 percent than Vietnam.

Binh said 10 years ago, he once came to Thailand to learn about the  competitiveness of the country once the tax is removed. In early 2013, he  decided to quit the fowl farming because he realized that he would not be able  to compete with Thais.

“Thais can provide fowls at very low prices. And I am sure that Thai chicken  need only six hours to arrive to Vietnam. The products can be available at the  Vietnamese markets at 4 am before housewives go to markets to buy food for the  days,” Binh said.

Other Asian countries can sell chicken at low prices to Vietnam partially  because they are the big exporters, which sell products to many countries in the  world. Since European countries favor chicken breast, the exporters would export  chicken breast to Europe, and export chicken legs to Vietnam at low prices to  make their products more competitive than domestic ones.

Domestic farmers bear hard pressure

Since taking a loss, foreign invested enterprises have been trying to apply  different measures to cut losses. They have prolonged the farming time and cut  down the output.

According to Nguyen Dang Vang, Chair of the Vietnam Livestock Association,  the flcok of fowls has been narrowed considerably. In 2011, three big foreign  invested enterprises -- namely C.P, Emivest, Japfa, bred 120 million fowls. The  figure dropped to 70 million in 2012 and it is expected to decrease further in  2013.

“Up to 50 percent of the farms in the north have stopped farming,” Vang  said.

Vang went on to say that the tariff cuts within the framework of AFTA would  have serious impacts on domestic farmers. He thinks that foreign big groups in  the fields have realized that there are no more great opportunities for them.  Therefore, they have been taking steps to gradually scale down the farming in  Vietnam.

SGTT

VietNamNet Bridge – The bailouts, if they are launched, should target  consumers in order to stimulate the demand, experts say, warning that the  deflation, if it occurs, would be more dangerous than the inflation.

Dr. Tran Dinh Thien, Director of the Vietnam Economics Institute, has noted  that the inflation has decreased more rapidly than expected, but there have been  signs of the economic decline.

Despite the interest rate reductions, businesses still cannot access bank  loans because of the strict requirements set by the banks on borrowers.  Commercial banks keep reserved when providing loans, because they still cannot  clear the big bad debts.

Economists believe that in such conditions, a new bailout is really necessary  for now. Dr. Tran Hoang Ngan, a Member of the National Advisory Council for  Monetary Policy, thinks that the bailout should target consumers, saying that  stimulating the demand is a way to indirectly support businesses.

The biggest problem for enterprises at this moment is the high inventories.  Therefore, once the government stimulates the demand, this would help businesses  clear their stocks to get money back to cover the expenses.

How should the bailout be?

Since 2008, the government has applied a series of measures in an effort to  stop the economic decline. The total sum of money spent so far, according to the  Ministry of Planning and Investment, has reached VND143 trillion.

However, the huge bailout could not reach the right addresses. A National  Assembly’s report showed that the bailouts have had impacts on profitable  businesses, while unprofitable businesses could not get the support in need.

The 2009 bailout, in the eyes of economists, aimed to stimulate the supply,  not the demand.

Meanwhile, Phung Quoc Hien, Chair of the National Assembly’s Finance and  Budget Committee, has warned that the bailouts, if they cannot be managed  effectively, would make the financial burdens heavier on the national  economy.

As such, economists say, if Vietnam is going to launch a new bailout, it  should be a credit package to target consumers to stimulate the people’s demand,  encourage them to spend money on goods and services.

“We need to warm up the total demand of the national economy,” said Vu Viet  Ngoan from the National Financial Supervision Council.

In order to reach that end, the government needs to increase its spending, or  the public investments. This would help encourage the production and create more  jobs, thus helping rescue the national economy from recession. Besides, the  government has also been urged to cut tax to support enterprises and people.

In late 2008, the Chinese government announced it would launch a bailout  worth $586 billion. The bailout comprised a mater program on restructuring the  country’s infrastructure system. This included the projects on upgrading the  rural infrastructure systems, railways, highways and airports, the projects on  developing power transmission networks, protecting the environment and  developing healthcare, education and culture.

China decided to focus on the infrastructure development as the basis for the  demand stimulation, because the country decided to rely on the domestic demand  to overcome the economic recession.

The bailout did not aim to rescue commercial banks or big conglomerates in  difficulties, but aimed to stimulate the domestic production.

NCDT

VietNamNet Bridge – The Vietnamese monetary policy always aims at many  different targets, which, in some cases, are contradictory. As a result, the  policy cannot bring the desired effects.

Simplifying the monetary policy’s targets

The experts from the International Monetary Fund (IMF), who have been keeping  a close watch over the Vietnamese monetary policy over the last many years, have  commented that Vietnam always pursues too many goals with its monetary policy,  from the economic growth, exchange rate stabilization and inflation congestion.  Meanwhile, these are the contradictory things which should be approached through  different ways.

The loosened monetary policy, for example, which expands credit rapidly,  would help stimulate the national economy, but it would also cause a side effect – the high inflation.

Therefore, the IMF’s experts believe that it would be better to simplify the  monetary policy’s targets. The State Bank, for example, has recently targeted a  reasonable goal of controlling the inflation. The low inflation rates would help  stabilize the national economy, thus bringing benefits to businesses.

A reasonable monetary policy would help create a good business environment in  which the market performance is predictable for businesses. This would create  favorable conditions for businesses to draw up their business plan, including  the investment capital arrangement and labor recruitment.

Meanwhile, the low inflation would also benefit the poor and the old people  who live on the stable and limited incomes.

IMF has also suggested that the dong/dollar exchange rate needs to be  regulated in a reasonable way, to serve the economy which has been more deeply  integrating into the world and has been heavily relying on foreign  investment.

The State Bank of Vietnam has been advised to gradually remove the non-market  measures to control the market, including the ceiling interest rate and targeted  growth.

The side effects of the monetary policy loosening warned

The government and the State Bank of Vietnam have been advised to maintain  and to pursue the policy on stabilizing the macro economy, making the banking  system healthy and perfecting the legal framework for the monetary policy  implementation.

The State Bank has done many things over the last two years when dealing with  the problems in the national economy and the banking system. The inflation has  been decreasing, while the banking system and the foreign currency market have  been stabilized, and the foreign currency reserves have increased  significantly.

However, problems still exist which require the government to strengthen the  consolidation of the banking system, and to restructure the state owned  enterprises.

The two goals prove to have close relations, since state owned enterprises  play a very important role in the Vietnam’s national economy. They are also the  big clients of banks and need to take partial responsibility for the bad  debts.

Vietnam, after a long period of applying an easy credit policy which has led  to the high inflation and the credit bubble busting, has taken important steps  since 2011 to congest the inflation and stabilize the finance market in an  effort to avoid the banking system crisis boom.

The widened gap between the VND and dollar interest rate has helped restore  the confidence in the local currency, thus helping stabilize the exchange rate  and increase the foreign currency reserves.

Ngoc Son

VietNamNet Bridge – The Government's new VND30 trillion bank loan package  was providing positive signals to Viet Nam's gloomy real-estate market, said the  director of the State Bank's credit department, Nguyen Viet Manh.

Low-income apartment buildings in the Dang Xa Urban Area in Ha Noi's Gia  Lam District. The Government's new VND30 trillion bank loan package is a drastic  measure to help prop up the low-cost housing segment.

Speaking at an online meeting on Monday, Manh said the package was a drastic  measure that helped prop up the low-cost housing segment.

He said there was high demand for housing among low-income earners,  especially those in urban areas, but low supplies.

Manh said the revived low-cost housing segment was expected to lead a  spillover to other property segments.

Under the programme, the State Bank of Viet Nam will provide VND30 trillion  ($1.428 billion) to five banks, including BIDV and Agribank, so that they can  offer preferential loans to low-income earners and developers.

The fund will be disbursed over three years. From this month, eligible  borrowers can access preferential home loans of 6 per cent.

On May 28, the Housing and Urban Development Corporation and Viet Nam BIC  started a social housing project in Ha Noi's Linh Dam New Urban Area - the first  to be developed with credit from the stimulation package.

Director general of the corporation Nguyen Duc Hung said on Monday that the  project would provide more than 1,000 low-cost apartments by early next  year.

"Thanks to the preferential loans, we can offer home buyers a price of about  VND12 million per square metre," he said, adding that another of its housing  projects in suburban Me Linh District could offer prices of less than VND9  million per square metre.

The corporation plans to develop about 5,000 low-cost apartments by 2015, and  20,000 apartments by 2020.

Hung said that the social housing segment would be a priority in its business  strategy following Government incentives for housing, including preferential  loans and tax policies.

Deputy minister of Contruction Nguyen Tran Nam said that social housing  projects in Ha Noi would sell for less than VND12 million per sq.m.

In other provinces including Hung Yen, Thai Binh, Phu Tho, Bac Ninh, the  price would be less than VND7 million per sq.m, he said.

"The prices offered express great efforts made by Government and developers,  despite costs for building materials and land," he said.

In late 2009, the first social housing project was developed in major cities.  So far, nearly 10,000 households have moved to their new homes.

In Ha Noi alone, there is a need for at least 100,000 low-cost  apartments.

"We don't expect the package can meet demand, but it will help warm up real  estate and prop other segments," he said, adding that at present, 70-80 per cent  of housing for students and workers at industrial zones had been built by  individuals, not by Government or housing corporations.

Tran Xuan Hoang, deputy general director of the Bank for Investment and  Development of Viet Nam, said in the next few days, the bank would also  implement projects with investors in southern Binh Duong Province.

Deputy Minister Nam added that early this week, Agribank signed lending  contracts with 10 investors in 13 housing projects eligible for preferential  loans under the stimulation package.

Source: VNS