Prices keep pace with minimum wage rise

The prices of many consumer goods began to rise even before the 12 per cent hike in minimum wage announced by the Government took effect on May 1.

The prices of many consumer goods began to rise even before the 12 per cent hike in minimum wage.

An expert from a market research company in HCM City, who wished to remain unnamed, said prices have risen by at least 5 per cent in anticipation of the wage increase.

Under a decree issued on March 25, the minimum wage for employees in State agencies, the armed forces, political organisations, socio-political organisations, State-owned companies, and other government bodies has gone up by VND80,000 to VND730,000 a month.

Allowances and other benefits will also increase proportionately.

But a few days earlier, in late April, the prices of vegetables shot up at most HCM City markets.

The owner of a vegetable shop in Thanh Da Market in Binh Thanh District said salad vegetables have doubled to VND25,000 a kilogramme while tomatoes have gone up by half to VND12,000.

Nguyen Tan Tai, a worker at the Tan Thuan Export Processing Zone in District 7, said his house rent was set to go up to VND850,000 month from VND600,000.

Electricity and water charges followed suit, he said.

Nguyen Thi Sang, a retired worker living in Tan Binh District, said her pension increased by 12.3 per cent, or VND200,000 a month, to more than VND2.2 million.

“With the additional amount, I cannot afford to pay the increase in the prices of electricity, water, food, and services,” Sang said.

Independent analysts said the VND80,000 hike failed to keep pace with the rising prices.

Since the beginning of the year the prices of many items have shot up by 20 per cent.

According to the HCM City Statistics Office, prices rose by 0.23 per cent in April and 4.02 per cent so far this year.

VietNamNet/Viet Nam News

• Rate talk continues to simmer
• Banks ponder a new burden: gold
• With capital more abundant, banks ease interest ra...

Steel sector told to play straight

Vietnam Steel Association chairman Pham Chi Cuong said local steel manufacturing enterprises were jockeying for market positions, with demand growing until July when the rainy season arrived.

LookAtVietnam - An iron hand will come down on construction steel speculators. Vietnam Steel Association (VSA) chairman Pham Chi Cuong said local steel manufacturing enterprises were jockeying for market positions, with demand growing until July when the rainy season arrived.

Steel giant Pomina makes IPO in HCM City

Gas, steel prices escalating

Five steel producers fined for rapid price hikes

Construction steel prices have increased since early March under pressure from the surge in prices for scrap and billets, fuel, power and the US dollar.

Local steel-makers reportedly raised their prices by 14-15 per cent in April against early March to around VND15.2-15.5 million ($800-815) per tonne. Retail prices stood at around VND16 million ($842) per tonne.

The Ministry of Industry and Trade (MoIT) early last week requested stable production and strict controls of construction steel prices to avoid further increases, which would seriously affect the business sector and consumers.

In an instruction document sent to local level authorities, state-run Vietnam Steel Corporation and VSA, MoIT deputy minister Nguyen Thanh Bien stressed the importance of preventing speculation and fraud.

“Speculation happens when trading firms take advantage of short supplies to raise their retail prices to make money. However, production is on the rise and we will try our best to ensure supplies for local consumption,” Cuong said.

VSA members sold nearly 570,000 tonnes of construction steel in March, up 88 per cent from the previous month. It was also the biggest growth they had ever recorded. During last March, construction steel sales from member enterprises grew 59.7 per cent.

They also reportedly had more than 200,000 tonnes of construction steel in stockpile now. VSA’s data also showed that billet reserves were at 530,000 tonnes in April, which is sufficient enough for construction steel manufacturing during the month.

“Steel sales hit record highs in March because trading firms promoted their buying for stockpiles with the expectation that prices would continue to grow later,” Cuong said.

The Market Monitoring Bureau, which involves representatives from the MoIT and ministries of Finance, Planning and Investment, predicted that steel purchasing would not be as high as in March, since trading firms already had big stockpiles.

“In fact, some trading companies had started selling their stockpiles since the middle of April, with the price a bit lower than earlier in the month,” Cuong said. VSA member companies sold a total of 1.21 million tonnes ofconstruction steel in the first quarter of this year, up 54.4 per cent from last year’s corresponding time.

Source: VIR

Rate talk continues to simmer

A floating interest rate mechanism can only be a matter of time, but calls for raising policy rates continue.

A floating interest rate mechanism can only be a matter of time, but calls for raising policy rates continue.

Govt leaders discuss inflation

Bankers and businesses want interest rate ceiling gone

Businesses miss opportunities due to high interest rates

An HSBC Asia economist Wellian Wiranto said Vietnam’s robust economic growth had been accompanied by price pressures and “we expect double-digit inflation in the coming months”.
“While the rate has been hiked once, by 1 per cent in November 2009, further tightening is still needed to counter inflation,” said Wiranto.

At the moment, a floating interest rate mechanism is under discussion and the rate is still capped within 1.5 times of the base rate currently set at 8 per cent. However, the State Bank allowed for medium and long-term lending rates to be freely set from March, 2010.

“At the moment, the State Bank is cooperating with other relevant authorities such as Ministry of Justice to work out a floatinginterest rate mechanism. It might come in a few weeks,” said Nguyen Thi Kim Thanh, head of the State Bank’s Banking Development Institute.

Wiranto said that in 2009, under the pressure from the global financial crisis, local authorities set out to insulate Vietnam from the chaos. As a result, its policy rate was halved and a massive fiscal stimulus programme was implemented, with a 4 per cent, per year interest rate subsidy on short-term loans.

“These emergency measures helped to secure 5.1 per cent growth in 2009, with a further spillover into this year – we expect 7.2 per cent growth in 2010,” said Wiranto. Thanh said the base rate’s role could change radically as soon as banks were allowed to float their mobilisation and lending rates.

Wiranto added that buoyant consumption increased imports as exports languished, adding further cyclical pressure on the structural trade deficit and exacerbating depreciation pressures.
In fact, some local financial experts are worried that increasing the market lending rate would place additional inflationary pressures on the economy if local enterprises have to pass on rising borrowing costs to selling prices.

However, while admitting that the cost of servicing debt would indeed naturally increase alongside increased interest rates, Wiranto argued that increased borrowing cost factor alone would push up production cost such that inflation would go up in tandem might be too narrow a view.

“First of all, unless there is zero competition in a specific industry, businesses will be quite hesitant to pass on this cost fully to the consumers, for fear of losing market share to their competitors.
“Second, it is extremely unlikely the interest servicing costs is the biggest cost item for most businesses, unless they are disproportionately loaded up with debt.

Other costs such as wages and input materials are likely to be the more important expenditure items for the businesses,” said Wiranto.

Source: VIR

Banks ponder a new burden: gold

VietNamNet Bridge – Before speculative trading in gold was banned, lending gold was a big profit maker for banks.

VietNamNet Bridge – Before speculative trading in gold was banned, lending gold was a big profit maker for banks. Now it has become a burden on the banks and a hindrance to efforts to maintain a stable national currency.

On April 12, 2010, reports VietNam Express, Agribank Jewelry Company (AJC) stopped raising capital in gold for Agribank, its state-owned parent company. Customers who came in to roll over time deposits were angry that they had to wrap up their gold bars and take them home.

AJC General Director Nguyen Thanh Truc said that the company was following Agribank’s instruction after the State Bank (SBV) let it be known that it is considering a ban on deposits of gold and gold-based lending throughout the whole banking system. Truc regrets this, explaining that the demand for gold loans is increasing. As the interest rate on gold loans is only about a quarter of the interest rate on dong loans, businesses like to borrow gold and then sell it as they need dong in their business operations.

Other joint stock banks are still accepting gold deposits, but they feel worried after hearing that AJC has stopped doing so. The banks now find it difficult to find customers who will borrow in gold. Onlybusinesses which accept currency risks will borrow in gold and then convert it as necessary into dong.

The State Bank’s rumored move against the common practice of holding monetary assets as gold follows by a few months its decision to shut down speculative ‘gold trading floors’ and ban settlement of foreign transactions in gold, in-kind gold transactions on the domestic market have decreased, while the volume of gold kept as bank deposits remains relatively large.

Viet A Bank reports that gold accounts for 30 percent of its total assets, while at ACB and Eximbank, gold deposits are over 10 percent of assets. These high figures give headaches to banks because they could create liquidity problems.

A representative of Viet A Bank told the press that the amount of capital represented by gold deposits has decreased from the beginning of the year. However, as banks find difficult to find the borrowers of gold, the bank is considering further slashing deposit interest rates for gold, though they are low already.

According to Eximbank, the interest rate on gold loans has fallen by half since mid-2009, to around three percent. However, it is still difficult to find gold borrowers. Meanwhile, the gold deposits rising though the interest paid on them has fallen nearly to zero.

Though the State bank of Vietnam has not made a final decision on whether to ban banks from borrowing and lending in gold, experts believe this is highly possible. Lending in gold puts pressure on the exchange rate, and stabilizing the dong against world currencies is a major concern at present.

According to Huynh Trung Khanh, Deputy Chairman of the Vietnam Gold Business Association, most of the gold deposits that commercial banks now hold are in individuals’ accounts. It is estimated that Vietnamese private individuals are holding altogether 400 to 500 tons of gold, of which 10 to 20 percent has been deposited at banks.

Source: VnExpress

With capital more abundant, banks ease interest rates

Just days after raising the dong deposit interest rates to a record high of 11.99 percent, banks are now rushing to scale them back.

LookAtVietnam - Just days after raising the dong deposit interest rates to a record high of 11.99 percent, banks are now rushing to scale them back.

The Saigon-Hanoi Bank’s interest rates have been ‘updated’ with the highest interest rate now at 11.5 percent per annum instead of 11.99 percent, the all time high that existed for five days.

The new interest rate of 11.5 percent per annum is applied to different kinds of deposits with the terms ranging from 3 to 36 months. The bank is paying 11.4 percent and 11.45 percent per annum for one month and two month term deposits, respectively.

Explaining the decision to slash deposit interest rates, the bank said that the adjustment has been made in response to a request to ease interest rates by the Vietnam Banking Association. VNBA believes that a deposit interest rate of 11.5 percent is reasonable and itt has called on commercial banks to apply the rates around 11.5 percent. VNBA also asked that banks not offer gifts or bonusinterest rates, which may distort the monetary market.

Saigon-Hanoi Bank is the first bank which has lowered interest rates to respond to the call by VNAT. Some 10 other commercial banks are still paying more than 11.5 percent per annum for deposits, of which two or three banks offer theinterest rates of up to 11.99 percent. Some banks are still offering gifts or bonus interest rates, despite repeated requests by the banking association.

VnExpress quoted a director of a bank which is offering the high interest rate of 11.99 percent as saying that the bank will soon lower the rates. The director said that the bank has to offer high interest rates to lure depositors. “However, as the market is stabilizing step by step, the deposit interest rates will gradually be decreasing,” he said.

“We are considering adjusting the interest rates when our capital has become more profuse,” he added.

Banks’ liquidity has improved, according to the State bank of Vietnam. In the week of April 9-15, the Vietnam dong average interest rate in the interbank market decreased for all kinds of loans by 0.22-0.75 percent. The three month term loans saw the sharpest decrease from11.56 percent to 10.81 percent. Theinterest rate of one month term loan also reduced from 10.18 percent to 9.48 percent.

Depositors now tend to make longer term deposits in order to enjoy higher interest rates, especially when they guess that the interest rates tend to decrease.

However, experts have advised that commercial banks need to consider the inflation rate when defining interest rates.

Alan Pham, Chief Economist of VinaSecurities told the press that it seems to be impossible for Vietnam to reduce the inflation rate below seven percent as requested by the National Assembly. Vietnam would only be able to curb the inflation rate at below 10 percent even in a best-case scenario. And if the inflation rate is at 8-9 percent, he said, the basicinterest rate should be raised from the current level of 8 percent which could be reach 10 percent by the end of the year.

At the working session with the State bank of Vietnam on April 20, Prime Minister Nguyen Tan Dung asked the bank to be consistent with the positive monetary policies in order to stabilize macroeconomics and prevent high inflation. Dung said that the GDP growth rate of 6.5 percent in 2010 is the goal.

The Prime Minister has requested the central bank to take necessary measures to gradually lower the deposit interest rates to 10 percent and lending interest rates to 12-13 percent per year.

Source: VnExpress

• Auto manufacturers offer sales promotions to offse...
• Weighing in on the investment climate
• Office rent decline continues in Q1
• BUSINESS NEWS IN BRIEF 15/4

PPP promoted as aviation sector development solution

The public-private partnership investment model will become a suitable method to attract private investors to join in the development of Viet Nam’s aviation infrastructure . . .

LookAtVietnam - The public-private partnership investment model will become a suitable method to attract private investors to join in the development of Viet Nam’s aviation infrastructure, according to a conference held in Ha Noi yesterday, April 22.

Public private partnerships (PPP) were discussed at a conference on aviation infrastructure development in Viet Nam conducted by the Viet Nam Ministry of Planning and Investment (MPI), Airis Holdings LLC, Zurich Airport and HSHNordBank.

Foreign tourists arrive at Phu Quoc Island’s An Thoi airport which has been seeing an increasing demand of travellers and tourists between Phu Quoc and Rach Gia, and HCM City. (Photo: VNS)

Speaking at the conference, Deputy Minister of MPI Dang Huy Dong said infrastructure projects always faced difficulty finding financing, even in other countries. If the PPP model were to be applied here it would bring handsome benefits forinfrastructure development, he said.

The Government has committed to enhancing the PPP model soon in the prioritised sectors of aviation and road transportation. The Government would also strengthen the application of the PPP model in other sectors such as education, science and technology, Dong added.

A representative from the US Embassy in Ha Noi told participants the Vietnamese Government needed to quickly complete legal documents related to the PPP model to assist in the development of the country. Effective use of the PPP model would help Viet Nam to access heretofore unheard of levels of financing, and would create a more transparent and effective process by which public procurement decisions. The result would be the development of a new PPP law in Viet Nam, the representative said.

The US government stood ready to continue supporting the MPI and the Vietnamese Government to carry out policies and laws based on its experience using the PPP model, the representative said.

Thomas E Kern, CEO of the Zurich Airport, said the PPP model could be carried out successfully in the development of Viet Nam’s aviation infrastructure with participation from partners in Ha Noi. He expressed is hope that the model would result in high quality aviation infrastructure projects and that Viet Nam’s economy would develop strongly towards the greater use of the PPP model.

To successfully implement this model Viet Nam would face many difficulties, including creation of a legal framework, a comprehensive policy on PPP, and administrative procedures barriers would need to be lifted in order to ensure a competitive edge for both domestic and foreign investors, said deputy general director of the Bank for Investment and Development of Viet Nam Tran Thanh Van.

Transparency in the choice of investors would be a prerequisite for successful implementation of the PPP model, he said.

Viet Nam’s aviation industry currently included 22 airports, five international and 17 serving only the domestic market. The majority of these aviation terminals were built prior 1975, with short runways allowing the take-off and landing of only small aircraft to serve relatively short domestic routes, Van said.

None of the country’s existing airports could feasibly be transformed into gateways to other Asian countries to exploit Viet Nam’s geographical advantages, he said.

VietNamNet/Viet Nam News

Auto manufacturers offer sales promotions to offset price hikes

Despite the low purchasing power, automobile manufacturers have raised sale prices.

LookAtVietnam - Despite the low purchasing power, automobile manufacturers have raised sale prices. Now they have to offer sales promotions to attract buyers.

Many automobile manufacturers have raised the sale prices two times since the beginning of the year. On January 1, 2010, the manufacturers, for the first time, raised the price when the VAT increased from five percent to 10 percent.

And now, they have raised sale prices again, reasoning that the dong/dollar price has increased from 18,479 dong to 19,100 dong per dollar.

Effective in March, Toyota Vietnam increased the price per car by 20-30 million dong. Camry 2.4G, for example, is now selling at 998.9 million dong per car, which is an increase of 31.3 million dong, while Corolla Altis 2.0 has seen a price increase of 23.7 million dong to 754.5 million dong.

Honda followed the move when it announced the price increase of 19-32 million dong per car as of April 1, 2010. Civic 1.8MT is now selling at 613 million dong per car, an increase of 19.8 million dong, while Civic 1.8AT is priced at 682 million dong, up by 22.3 million dong.

Ford Vietnam has also raised the sale prices of its models. Transit, for example, has seen the price increase by $1,700 to $37,300 per car, while Mondeo’s price has increased by $2000 to $49,990 per car. The new prices took effect on April 1st.

The price increase proves to be highly debated move by automobile manufacturers especially due to the current low purchasing power of the average person. To explain this, an expert said that automobile manufacturers are just trying to show to Government agencies that the car prices are influenced by tax policies and dong/dollar exchange rates.

While automobile manufacturers raise sale prices, they are forced to offer sales promotions and campaigns in order to attract more customers, especially when recent sales have been going very slowly.

Analysts say they have never seen such big sales promotion packages like these. One manufacturer offers a coupon for purchasing petrol worth 12 million dong. Another manufacturer offersthe price discount of up to 1200 dollar to the buyers of a certain model.

A salesman of Toyota said that sales agents in Hanoi are competing with each other to lure customers by lowering the actual prices of cars. Some sales agents even promise to give 3-5 million dong to customers if they purchase cars from their agents.

However, it seems that all the efforts still cannot help get the car market heated up. Vu Dinh Bach from Ford Thang Long said that car dealers all have to expect low sales this year after a prosperous year 2009.

It is now the most difficult period for car dealers, when the average purchasing power is very weak. Statistics showed that in March, Ford sold 603 cars, a decrease of 30 percent, Honda sold 179, a decrease of 44 percent, GM Daewoo 749 cars, a decrease of 34 percent, Mercedes Benz 129 cars, a decrease of 70 percent compared to the same period of the last year.

Pham Huyen

Weighing in on the investment climate

Viet Nam has become an attractive and safe destination for foreign investors to do business in recent years, Viet Nam News reporter sat down with foreign investors to share this view.

* Takashi Fujii – chairman and general director, Dai-ichi Life Viet Nam (Japan)

I think Viet Nam is an attractive and safe destination for foreign investors. In comparison to other countries in the region, Viet Nam has potential advantages for long-term investments because of its economy, society and political situation. Investors find it appealing because of an aggressive opening up of its market under commitments when it became a member of the World Trade Organisation (WTO), especially in the service industry.

A higher percentage of young people in the population and continually increasing per capita income have led to a higher workload as well as development of the consumer market. In terms of macro-management, the Government is striving to improve administrative procedures, offer more opportunities and help the investment environment by calling for foreign investors.

For Japanese investors in particular, Viet Nam is always an effective and safe environment for investment. A prominent symbol for this faith is the establishment of Dai-ichi Life Viet Nam, the first foreign company with a 100 per cent investment from Dai-ichi Life Japan. We generated profits just after one year of operating here.

Japanese investors used to focus on manufacturing but now they are beginning to diversify into other industries such as services, finance and banking, distribution and others.

Regarding life insurance, the business that our company is operating in, the Government is quite pro-active in their policies to encourage foreign investors as well as active in improving the legal framework for market development. Worldwide, life insurance has had a long history and become increasingly important in people’s lives.

But in Viet Nam, it has only operated for the last 10 years. In many business fields, 10 years possibly represents a set-up stage, development stage and stability stage for the industry. However, for the life insurance industry, it is just a fundamental stage. Because this field is still in its infancy, consistency in regulation is sometimes limited. We hope that these problems will soon be improved.

Frankly speaking, Dai-ichi Life Viet Nam and other life insurers have faced many difficulties in the early years of their operation in Viet Nam. These problems are due to the fact that the industry is so new, and life insurance products somehow are a new concept for the people.

Nowadays, we are very pleased that people are more familiar with life insurance products and begin to realise it as one of the most important things for their family.

* Khoo Teck Chong, general director, SetiaBecamex JSC (Malaysia-Viet Nam JV)

The economy is recovering amid the troubled global arena. We agree with analysts that the general current investment climate in Viet Nam, in light of the post-global credit crisis of 2008 and 2009, is one of recovery, which is similar to that being experienced by many other economies. We are pleased to note that despite the current challenges, Viet Nam is expected to register a respectable single digit growth for 2010.

However, the economy is not out of the woods yet. By all accounts, there is neither robust nor quality growth in the developed economies as all recent gains are the result of government stimulus policies (many of which are in the process of being withdrawn). This kind of growth does not drive consumer demand, which in turn will affect an exporting nation like Viet Nam. To compound matters, we now have to confront the sovereign credit crisis in Greece and possibly Spain, Portugal and the UK in the global arena.

These unfavourable external realities, coupled with inflationary anxieties, the twice-depreciated dong and the interest-rate scenario, have prompted us to be cautious like other foreign investors here.

However, caution is not synonymous with a lack of confidence. SetiaBecamex takes a long-term view of our presence here. This is as much a reflection of our confidence in the growth of the nation as it is on the nature of real estate investment. At our EcoLakes project in Binh Duong Province, we will be delivering the first houses to our purchasers in the next few months.

On the role of Government in the real estate arena, it should be mindful of the fact that the property sector has strong multiplier effects on the economy. A review of the various stimulus packages implemented globally in response to the global credit crisis revealed that they all contain policies to spur the property sector. These measures range from subsidies for first-time home buyers to waivers of property-related taxes.

Of course, it goes without saying that we have every confidence in the Government’s ability to steer the economy to greater heights. We are sure that the Government is aware of the many options it has when it comes to leveraging the property sector to manage to economy.

* Kan Trakulhoon, president and CEO of SCG (Thailand)

Viet Nam’s investment environment is still very attractive in the eyes of foreign investors. Despite the global economic crisis, Viet Nam is one of the fastest reformers in the area.

The Government has implemented many important regulatory changes over the past years, which has improved overall business sentiment and facilitated foreign investors, like us, in our operations.

There are more investments now than ever from many developed countries and international enterprises. Thailand, Japan, the US and several European countries are among those that contributed to Viet Nam’s growth, particularly through investment projects that created opportunities and strengthened the economy.

We appreciate Viet Nam’s governing authority for their efforts of speeding up international economic integration and creating investment stimulus packages, especially the launch of the Enterprise Law which helped reinforce investor protection. Their improved legal framework and the enhanced favourable investment climate significantly benefitforeign investors.

I believe that with the strong support from the Government of Viet Nam, coupled with an abundant labour force and rich natural resources, the country remains highly competitive and attractive toforeign investors.

VietNamNet/Viet Nam News

Office rent decline continues in Q1

Average office rent at all grades in HCMC and Hanoi continued falling in the first quarter of this year and is expected to continue the downtrend in the coming time . . .

Average office rent at all grades in HCMC and Hanoi continued falling in the first quarter of this year and is expected to continue the downtrend in the coming time because of abundant supply in the market, according to market research companies.

Oversupply of offices for lease warned

Office rental rates decrease further

Chaos looms as small businesses are forced to vacate residential towers

Savills Vietnam released a quarterly report on Tuesday, saying HCMC’s average office rent at all grades and in all districts in the first quarter of this year fell 3% from the previous quarter and 11% year-on-year.

A bird’s eye view of some office buildings located along Le Duan Boulevard in HCMC’s District.

The office market recorded an average rent of US$61 per square meter for Grade A, US$29 per square meter for Grade B and US$22 per square meter for Grade C buildings in HCMC, according to the market research company.

The decline in office rent could be attributed to an increase in supply.

Savills said the first quarter of this year witnessed total supply in HCMC’s office market increasing by 5%. The company said 42,000 square meters of office space was added in the first quarter, taking the total to around 838,000 square meters in 138 office buildings of all grades in the city, with 54% in District 1 alone.

HCMC’s office take-up in the quarter was recorded at about 39,400 square meters, and the majority of office transactions occurred for small space generally below 100 square meters.

Grade B still holds a strong preference for both new entrants and existing tenants in HCMC, according to Savills.

The average occupancy for all grades achieved 89% in the first quarter and remained stable as compared to the previous quarter. However, vacancy will increase as more products come ontothe market this year.

Savills projected an additional supply of 315,000 square meters would join the market by the end of this year, half of which comes from three notable projects including Vincom Tower, Bitexco Financial Tower and A&B Tower.

Talking about the rising vacancy in the future, Brett Ashton, managing director of Savills Vietnam, told the Daily on Tuesday that clearly the rate of vacancy would continue to rise as more products are launched ontothe market.

Ashton projected that the lack of new Grade A space coming onto the market over the next two years would lead to rising occupancy for this grade. Meanwhile office rents of the middle and low grade segments would continue to fall in the coming time.

“Grade B and particularly Grade C rents will suffer continued falls in rent through next year, but we expect to see Grade A rents stabilizing and climbing again in early 2011 given that there is no new Grade A supply currently under construction,” Ashton says.

In another market review, CB Richard Ellis Vietnam (CBRE) said the office rent in the capital city of Hanoi decreased in the first quarter of this year due to abundant supply.

Richard Leech, managing director of CBRE, said the market saw a slight decrease of 3.55% quarter-on-quarter to US$42.16 per square meter for Grade A office rent.

Meanwhile, Grade B office remained stable with rents averaging out at US$26.77 per square meter.

In the first quarter, there was a Grade B project named Capital Tower with some 21,000 square meters joining the market there.

According to CBRE, vacancy in Hanoi market totals around 80,000 square meters, the biggest number since 2004.

However, more projects due to join the market this year will cause supply to far outpace demand, and vacancy in the market will increase up to 150,000 square meters by the end of this year, according to the market researcher.

Leech of CBRE remarked that landlords at all grades of office have revised down rents to meet the market demand, but more supply will continue to put more pressure on office rent in the coming time.

VietNamNet/SGT

BUSINESS NEWS IN BRIEF 15/4

First shrimp farmer holds exclusive brand name; US$ prices listed by banks and in free market equal; Vietnam, India eye stronger business ties in several fields

World Bank hails Vietnam’s development results

The World Bank has announced a report by its Independent Evaluation Group (IEG), which highlighted recent development results in Vietnam as impressive.

As one of the fastest growing economies in the world - with average annual GDP growth of 7.2 percent during the decade prior to the fiscal year 08-09 economic slowdown - Vietnam has lifted some 35 million people out of poverty, it said on April 14.

The country’s poverty rate fell from 58 percent in 1993 to 14 percent in 2008, it added.

Water supply and sanitation facilities have expanded. Electricity reaches 95 percent of the population and 90 percent of the population is connected by all-weather roads. Health services and living conditions of people in remote mountainous areas have been improved, according to the WB.

The results from the bank’s Vietnam development support programme have been outstanding, based on the IEG evaluations of 34 completed projects. Vietnam has maintained its record of 100 percent of projects having been rated satisfactory, it emphasised.

The WB programme was to improve the business environment and governance, and strengthen social inclusion and natural resource and environmental management in Vietnam .

At the same time the WB stressed the sustainability of Vietnam’s growth will also be challenging, given increasing pressures on the country’s natural resource base, the exposure of large segments of the population to natural disaster risks, and the expected (adverse) impacts of climate change.

Institutional reforms are necessary to ensure the country’s large development agenda meets its objectives of inclusive and sustainable growth, the WB said.

The next few years will be critical for Vietnam in completing the transition to a market economy and creating the foundations of a middle income country, it forecast.

Firm wins 35 mln USD oil transport deal

The PetroVietnam Technical Services Co (PTSC) won two international tenders to provide an oil and gas vessel and services to Talisman Malaysia Co Ltd – Canada’s largest investor in Malaysia.

The two sides signed contracts totalling about 35 million USD on April 13 in Kuala Lumpur.

Under the deals, PTSC will supply a multi-functional DP2 Platform Supply Vessel to Talisman Malaysia and a “braided line” service.

Deputy president of Talisman Malaysia Wee Yiaw Hin said PTSC played a significant role in the building and maintaining of project PM3-CAA and supported the enterprise’s operations well.

PM3-CAA is being implemented in the area between Vietnam and Malaysia under an oil production sharing contract and the vessel will be used for this project.

This is the second time that PTSC has worked with Talisman Malaysia. Last December, PTSC won an international tender to supply a vessel to the partner for a total contract value of nearly 35 million USD.

Previously, the Vietnamese firm also won another international bid to supply a floating storage and offloading vessel, two service vessels and a multifunctional service vessel among others.

PTSC has exported a number of technical-service packages for the oil and gas industry in Malaysia with a total market value of hundreds of millions of US dollars, contributing significantly to its revenue, it stated.

Petroleum Technical Services Corporation (PTSC) is a member of the Vietnam National Oil and Gas Group (PetroVietnam) providing diversified technical services for the oil and gasindustry inside and outside Vietnam with total assets of nearly 200 million USD and more than 4,000 employees.

Vietnam, India eye stronger business ties in several fields

A delegation of eight leading Indian companies visited HCM City this week to seek cooperation in a number of fields, including energy, industrial machinery, steel, finance, real estate and tourism.

Speaking at the meeting on April 14, the president of the Indian Chamber of Commerce in Calcutta, V Sharan, said the visit would help promote trade and investment cooperation between the two countries.

The delegation members include the RPG Group, SMIFS Capital Markets Limited and Shree Baidyanath Ayurved Bhawan Pvt. Ltd.

Indian companies that have located in Vietnam include the Te Godrej steel furniture factory, the pharmaceutical company Ranbaxy, and the pepper processing plant Vallabhdas Kanji Limited, all of which are located in southern Binh Duong province.

Another Indian furniture manufacturer, Sudima International, has also established a base in Vietnam, along with Nagarjuna International and the KCP sugar plants in southern Long An and Phu Yen provinces.

Vo Tan Thanh, general director of the Vietnam Chamber of Commerce and Industry’s HCM City branch, said two-way trade turnover reached 2.5 billion USD in 2008, a sharp increase from 75 million USD in 1995.

Last year, despite the global economic downturn, two-way trade turnover between the two countries resulted in 2.05 billion USD. Vietnam’s exports to India reached 420 million USD million and imports 1.6 billion USD.

Thanh said last year India had invested more than 201 million USD in 38 projects, ranking 29 out of 79 foreign investors in Vietnam .

“Vietnam is an emerging country, but it has had a stable growth rate of 7-8 percent and has offered open policies to investors, including India . India is expected to rank in the top 10 among investors in Vietnam,” he said.

Handicraft producers seek road to Japan market

Handicraft producers and exporters are showcasing products at an exhibition which opened in Hanoi on April 14 with the aim of boosting exports to Japan.

As many as 26 handicraft importers from Japan visited and made transactions at the exhibition which was held under an initiative by Vietnam-Japan Special Friendship Ambassador Ryotaro Sugi.

The organisers had previously invited two design and marketing experts from Japan to help 46 domestic handicraft companies get a handle on the demands of Japanese consumers and ways to penetrate this market.

As part of the Vietnam Expo 2010, the show was co-organised by the Japan External Trade Organiation (JETRO), the Vietnam Trade Promotion Agency (Vietrade) and the Vietnam Chamber ofCommerce and Industry (VCCI).

US$ prices listed by banks and in free market equal

US$1 in the free market was sold at VND 19,060 yesterday, a reduction of VND 50, as much as the selling US$ price listed by commercial banks for the first time.

The same day, US$ prices quoted by the Vietcombank were VND 18,990 for buying and VND 19,060 for selling, a slight decline of around 20 VND/US$ as against the previous day. Meanwhile, the inter-bank exchange rate listed by the State Bank of Vietnam still stood at VND 18,544 to a US$.

The above-said phenomenon has led to the sharp increase in US$ trading in the free market because many people think that it is difficult for the US$ price to further reduce in depth in the coming time so they decide to buy the currency.

First shrimp farmer holds exclusive brand name

Vo Hong Ngoan has become the first shrimp farmer ever granted an exclusive brand name certificate ‘Clean Prawn Farming Sau Ngoan Vietnam’ by the National Office of Intellectual Property.

He resides in Bien Dong A hamlet, Vinh Trach Dong commune, Bac Lieu town, Bac Lieu province.

Currently, his industrial prawn farming covers an area of over 30 hectares, applied according to a clean and sustainable prawn raising process without using antibiotics and chemicals.

Many EU and Japanese companies have come to his farming to sign contracts to buy prawns at the price which is 15-30% higher than themarket price.

VietNamNet/VNA, Nhan dan

Small banks race to expand capital

Big banks can easily persuade shareholders to buy more shares in order to increase their chartered capital, but smaller banks cannot.

LookAtVietnam - Big banks can easily persuade shareholders to buy more shares in order to increase their chartered capital, but smaller banks find it difficult to do the same.

Many large banks with more than three trillion dong in chartered capital as required by the State Bank, plan to expand by increasing their chartered capital further.

Sacombank has chartered capital of 6700 billion dong, but its board of directors thinks that the stockholder equity is modest compared with other banks. Now the bank has decided to increase its chartered capital from 6700 billion dong to 9179 billion dong in 2010.

To raise this much capital, Sacombank plans to pay dividends to existing shareholders in stakes instead of cash, issue more shares to existing shareholders (at 12,000 dong per share) and provide two percent of stakes to bank staff.

ACB’s board of directors will submit plans to shareholders about raising chartered capital by 1563 billion dong. Other big banks such as Techcombank and Dong A Bank both want to increase their chartered capital by 1,000-2,500 billion dong in 2010.

Financial analysts remarked that it is easy to persuade shareholders to inject more money, because these banks are all big and prestigious. Bank shares have high liquidity because shareholders can sell them on the bourse.

In contrast, smaller banks are struggling. To increase chartered capital, the board of directors at small banks must persuade big shareholders to pour in more money and also persuade smaller shareholders to accept plans to issue more shares.

Small shareholders at these banks think long and hard about what they should do with their money. They can inject more money in the stakes of a small bank or purchase shares of big banks at reasonable prices. The second option is an attractive choice.

According to Hoang Van Toan, Chair of Dai Tin, bank shareholders must be persuaded that the bank is in an important development period requiring heavy investment. They must also see great potential in the bank if they are to contribute additioncapital.

Dai Tin has successfully increased its capital from 1252 billion dong to 2000 billion dong as of March 19 and plans to expand further to have three trillion dong by the end of the year as required by SBV.

Meanwhile, another joint-stock bank, whose chartered capital has just been raised to 1800 billion dong, is not as optimistic. The general director revealed that they are negotiating with foreign partners about selling stakes to them.

“We need foreign shareholders, because it will be impossible to increase capital if we continue seeking domestic partners, especially when bank shares are not attractive to them anymore,” he observed.

24/39 operational joint-stock banks have chartered capital of less than three trillion dong. Of this amount, 15 banks have chartered capital of less than 2 trillion dong, and 8 banks have 1 trillion dong in capital No less than 10 banks have officially announced plans to list on the bourse in 2010, half of which have chartered capital of less than 3 trillion dong

Source: Thoi bao kinh te Saigon

Deposit interest rates shatter 10.5 percent barrier

The deposit interest rate ceiling of 10.5 percent has been shattered when ACB raised its rates even higher.

LookAtVietnam - The deposit interest rate ceiling of 10.5 percent, which has existed for one year, has been shattered when ACB raised its rates even higher.

Banks hope for deposit interest rate autonomy

Bankers and businesses want interest rate ceiling gone

Banks want interest rate ceiling removed, central bank says ‘no’

ACB announced new deposit interest rates on April 13, with the highest at 11.6 percent per annum. This special rate applies to clients who deposit 10 billion dong or more for at least 36 months.

The interest rate will also be adjusted every 12 months in accordance with the market interest rate so that depositors will enjoy higher rates in the future, and vice versa.

The highest available rate of 11.6 percent will also be applied to other deposits when clients deposit more than 10 billion dong for 13 months.

Interest rates for one-month and longer term deposits are all higher than 10.5 percent per annum.

The ACB decision has been described as “shocking,” because the State Bank of Vietnam (SBV) has not directed the removal of the ceiling on deposit interest rates. Other commercial banks offer only care to offer the highest interest rate allowed by SBV, 10.49 percent per annum.

Meanwhile, Ly Xuan Hai, General Director of ACB, claimed that ACB is not violating the law. He stressed that the Government now seeks to liberalize interest rates based onmarket demand.

In reality, ACB’s new interest rates are old news. Banks pay high interest rates to depositors, but they quote interest rate at 10.49 percent.

Just one day after the ACB announcement, Viet A pushed its deposit interest rate beyond 10.5 percent. They are now the highest levels, offering 11 percent and higher for nearly all kinds of deposits. The highest interest rate of 11.8 percent is applied to 12-13 month term deposits. If clients deposit more than 100 million dong, they will enjoy additional interest rates of 0.03-0.1 percent.

According to Tien Phong, many other banks are also considering an interest rate hike, although they warn that the rates will not be as high as in 2008. Deposit interest rate must be lower than 12 percent per annum, because the lending interest rate has been cut to 14-15 percent. If banks mobilize capital at over 12 percent, they will not profit and must face high risks.

VnExpress quoted Cao Thuy Nga, Deputy General Director of Military Bank, as saying that the bank would raise the deposit interest rate if the ceiling rate of 10.5 percent is removed. Nga also stressed that the increase will not be decided immediately and increases will not be big, because the bank’s liquidity is not in good condition.

One year ago, SBV made an effort to stabilize the market interest rate by decided that commercial banks should not mobilize capital at higher than 10.5 percent. SBV also threatened to inspect banks offering higher rates.

Source: Tien phong, VnExpress

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