Last update 5/28/2012 7:00:00 AM (GMT+7)

Vietnam Economic Report 2012 announced

Vietnam’s economic growth rate in 2012 is likely stay at 5.1 percent, the lowest ever since 2000 while the inflation rate will reach 6.2 percent.    

The current growth model is highly dependent on ineffective State-run enterprises, which weakens economic effectiveness, according to the Vietnam Annual Economic Report 2012, released in Hanoi on May 24.

Director of Vietnam Centre for Economic and Policy Research (VCEPR) Dr. Nguyen Duc Thanh said the basic question of the macro-economy is to deal with bad debts in the commercial bank system and create conditions for the market to restructure the enterprises, with the support of bankruptcy and merger and acquisition procedures.

The report, compiled by the (VEPR), said that Vietnam should have a clear view of the new development model and suitable support mechanisms to successfully reform the economy and overcome challenges posed by restructuring.

It provides analysis and comment on three economic restructuring programmes.

It also focuses on public investment, state-owned enterprises and commercial banks, as well as difficulties and shortcomings during the implementation.

Hundreds of thousands of businesses have started to benefit from the Government's tax relief package after a circular guiding the implementation of the policy officially took effect on Wednesday.

The circular was issued to help struggling firms and households overcome financial difficulties. It detailed a series of tax deferrals, reductions and exemptions mainly for small- and medium-sized enterprises (SMEs) and businesses that use a high number of labourers.

According to the new regulations, a six-month extension for value added tax (VAT) payments for this year's second quarter has been granted to SMEs. This excludes lottery and stocks, as well as financial, banking and insurance businesses under major corporations. Businesses that use a high number of workers for production and processing of agriculture, aquaculture, textiles, footwear, infrastructure and electrical equipment are also excluded from the extension.

Regarding the VAT deferral, director of the Institute of Financial Strategies and Policies Vu Thang estimated that roughly 400,000 enterprises would enjoy the tax breaks.

The Ministry of Finance has also calculated that some VND4.1 trillion (US$195.2 million) of VAT will be delayed every month so companies will have more working capital for their business performance.

The new circular also mentioned a reduction of land rental payments in 2012 by 50 per cent for service businesses. A 12-month extension for land lease fee payment will be also included in the circular.

In addition, the circular has guided a nine-month extension for corporate income taxes (CIT) backdated to 2011 for SMEs and those with a high number of workers in the production and processing of agriculture, aquaculture, textiles, footwear, infrastructure and electrical equipment.

If CIT payments are not made on time from April 1 to December 31 of this year, the firms will not be fined as the deadline will now be January 2 of next year.

Fishing households will also be exempted from paying taxes on business licences this year; those already having paid the tax will be refunded.

Slowing declines offer faint hope of renewed rally

On the HCM City Stock Exchange on Friday, the VN-Index closed at 437.38 points, losing 2.4 per cent from the previous week and representing a slower pace of declines than the market has posted in recent weeks.

The VN30, tracking the exchange's 30 leading shares by market capitalisation and liquidity, meanwhile managed to rise by 1.9 per cent over the previous Friday to 514.27 points.

The average daily value of trades on the HCM City bourse last week totalled about VND1.2 trillion (US$57 million), a decline of 17.2 per cent from the prior week.

On the Ha Noi Stock Exchange, the price volatility of the HNX-Index also appeared to be declining. The Index ended the week at 76.06 points, down just 1 per cent from the previous Friday. Trades were sluggish, however, average just VND546.4 billion ($26 million) per session.

Analysts for the website estimated that the below-average volume of trades indicated little success or interest in bottom feeding. "This means that, if the market continues to rally next week, the pressure of profit-taking is not too high," they wrote in a note.

Investor psychology became more optimistic late last week, they added, as economic news turned more positive. Inflation returned to a single-digit pace during May and was is expected to further decelerate in the coming months.

"An additional 1-2 per cent reduction in interest rates is also entirely possible to promote the process of easing credit," they added.

If volumes this week in HCM City can keep above 50 million shares a session, investors could hope for another short-term rally, they said.

Central bank dispels coin recall rumor

The State Bank of Vietnam (SBV) has yet to issue any directive on recalling the Vietnam dong coins, Le Thi Thanh Hang, deputy director of the SBV’s branch in Ho Chi Minh City has confirmed.

The announcement was made after many small traders in Binh Tien market in District 6, and Cho Lon (Lon Market) in District 5 refused to receive payment in coins, following a rumor that the government will withdraw all coins in the market and stop their circulation as of May 27.

“A coal seller refused to take my coin, and other traders just do the same,” said Tuan, a market-goer.

Hang added that in case the coins are slightly damaged or rejected from payment, consumers can use them for purchase at post offices or supermarkets, or exchange for newer ones at banks or the state treasury.

The Vietnamese coins were reinstated in late 2003, under the government’s bid to increase automatic payment for vending machines. The new coins are in denominations of VND200, 500, 1,000, 2,000, and 5,000.

Exciting to see the coins reappear after many years at first, local residents however soon considered them inconvenient as the coins easily drop out of the pockets or become tarnished.

The SBV has stopped issuing new coins since 2010 due to the rising steel prices, which made it costlier to produce coins than polymer banknotes.

Besides, coins in denominations of VND200 and 500 are of little use amid this time of skyrocketing prices.

Mekong region needs to tap potential

Administrative reform, improved infrastructure and training for quality human resources would help the Mekong (Cuu Long) Delta area attract more investment, experts said at a conference held in HCM City yesterday.

The Cuu Long (Mekong) Delta is known as the country's key rice-growing and aquatic production and export area. The region annually contributes about 20 per cent to the national gross domestic product (GDP).

However, despite its potential and numerous incentives offered by localities, investment in the region remains very low compared to other region due to infrastructure limitations, a shortage of skilled workers and poor development plans, according to Nguyen Huu Lam, director of the HCM City University of Economics' Center for Excellence in Management Development.

Lam said provinces and cities in the area often call for many similar investment projects, some of which are not suitable for their areas. He said every locality should identify its strengths and advantages and seek practical projects to avoid scattered investment.

According to Pham Thanh Khon, vice-director of Department of Planning and Investment of Vinh Long Province, lack of a support industry and business-development services have also driven away investors.

Ha Xuan Anh, chairman of Son Viet Garment Joint Stock Company, said poor infrastructure had caused difficulties for enterprises in distributing their products.

Another significant problem is the lack of qualified staff.

Vo Thanh Thong, deputy chairman of the Can Tho City People's Committee, said training had not met the needs of businesses because there had been few linkages between training schools and companies.

Starting from this year, the city plans to improve this situation, according to Thong.

Vocational training schools as well as universities should improve their training quality to improve human-resource quality, Lam said, adding that cities and provinces should also adjust their policies to attract talented people.

"We need to improve institutional structures so they will be more attractive and create a healthy business environment," Khon said.

Local authorities should also regularly organise dialogues with enterprises to learn about their problems, he said.

Lam called for tighter linkages among provinces to exploit the region's advantages, particularly in infrastructure and agriculture.

Many conference participants suggested that the region should focus on investment in projects using high-technology and bio-technology in order to raise the quality and export value of local farm produce.

During the conference, Can Tho City representatives called for domestic and foreign investment in industry-construction, agriculture, trade-services and tourism sectors.

From 1988 to 2011, the Cuu Long (Mekong) Delta attracted 565 foreign-invested projects with total investment of US$9.5 billion, or less than 5 per cent of the total FDI in the country.

The conference was organised by the Viet Nam Chamber of Commerce and Industry in Can Tho, Can Tho Trade, Investment and Tourism Promotion Center and 2030 Businessmen Club.

FDI disbursement hits $4.5b

Foreign Direct Investment (FDI) disbursement during the first five months of this year is slightly lower than the same period last year, according to the Ministry of Planning and Investment's Foreign Investment Agency (FIA).

Disbursement reached US$4.51 billion during the period, or 99.8 per cent of last year's corresponding period figure. New FDI registered across the country dropped by 25.3 per cent year-on-year, falling to $4.12 billion, the FIA said.

Added capital in existing projects also slumped. In five months, 82 projects registered to increase their capital by a total of $1.2 billion, a decrease of 47.5 per cent against last year's corresponding period.

The country attracted a total FDI of $5.32 billion during the period, a 32 per cent reduction from last year.

Among the largest projects are the Japan-invested Tokyu Binh Duong urban area worth $1.2 billion, a tyre manufacturing plant worth $575 million and a $300-million yarn production plant in northern Quang Ninh province.

The processing and manufacturing industry took the lead in terms of investment capital, gobbling up $3.3 billion or 62.3 per cent of total national FDI.

Real estate came second, attracting $1.57 billion or accounting for 29.6 per cent of the total FDI while the transport and storage sectors attracted the third largest portion of FDI at $182 million.

The southern province of Binh Duong continued to be a favourite location for foreign investors, drawing $1.6 billion or 30 per cent of total FDI registered in the country over the period.

It was followed by the northern port city of Hai Phong with $928.8 million, and southern Dong Nai Province with $698 million.

During the January-May period, Japan remained the country's leading source of foreign investment, pumping $3.68 billion into the country, followed by the British Virgin Islands, which invested $441 million and Hong Kong with $400 million in investments.

Earlier, FIA director Do Nhat Hoang urged sectors to call for environmentally-friendly projects that utilise modern technology and aim to raise the competitiveness of domestic products while helping the country expand its presence in the global production network and value chain.

He highlighted fields such as technology, mechanics, communications, pharmaceuticals, biology and clean energy.

Hoang suggested that changes be made to regulations and policies governing investment and business, land management and environmental protection in addition to FDI promotion.

Enterprises seek further State support

Financial and banking policies and production problems were debated at a meeting held by Ha Noi's Industry and Trade Department early this week.

General director of the Ha Noi Plastics Company Bui Thanh Nam said his company would have to cut jobs and weekend work from this month due to reduced orders.

The company supports the automobile and motorbike industries, supplying products to domestic and foreign firms such as Honda, SYM and Toyota.

In the first quarter, it worked to capacity and needed about 100-120 more workers. This quarter, however, its major customers began reducing orders, with Honda cutting back 20 per cent and others giving notice they would buy less from June.

Nam said the company had curbed production costs and reviewed its investment policy but it was not enough to offset the reductions.

Executive council chairman of Animal Production Processing and Import Export Joint Stock Company Doan Trong Ly said banks needed to further lower their interest rates while suppliers of electricity, water and petrol and oil should cut prices for production to help struggling industries.

Ly said the State needed to focus investment in the enterprises which had taken advantage of new technology or had developed new products.

Representatives of enterprises also discussed the city's "solution package" which included tax, fees, bank interest, land rental and taxes and incentives for eco-friendly producers.

It was reported that many enterprises lacked working capital because their inventory backlogs had increased 50-60 per cent over the same period last year, especially in the areas of construction materials and electric goods.

On the sidelines of the meeting, Industry and Trade Department director Le Hoang Thang said enterprises faced difficulties in both input and output. Production costs such as electricity, petrol and oil, transportation and salaries had increased while consumers had cut spending so enterprises failed to sell their products.

Thang said the banks needed to lower interest rate as soon as possible but that would not meet the demand of every enterprise. Preference should be given to enterprises which had the capacity to develop or those who made goods for export.

Thang said the business community had welcomed Government Resolution 13/NQ-CP on tax, land rental and land use fees which was designed to counter difficulties in production. It was expected to help many enterprises regain their growth rate in the third and fourth quarters and reach their targets for the year, he said.

It was reported that more than 5,300 enterprises had stopped operating or were dissolved so far this year due to the economic recession.

Nation targets electronic payments

The Economist Intelligence Unit (EIU) on Thursday released the results of the 2011 Government e-Payments Adoption Ranking (GEAR) study, showing that Vietnamese Government's strong commitment in creating policy environment helps support e-payment adoption.

The study said Viet Nam and the region were expanding their use of electronic payments as they saw its benefits.

"We have seen the Vietnamese Government's effort in creating a policy environment that helps to support e-payments adoption. Proof lies in the positive trend of policy context, including the Government's commitment to e-payment security and to integrating the informal economy. With our international experience and expertise in the payment industry, Visa also looks forward to join hand with the Viet Nam Government to deploy a sustainable payment platform and utilise the best out of e-payment benefits," said Lorijon Bacchi, country manager of Visa in Viet Nam, Laos and Cambodia.

The GEAR study measures the extent to which governments in 62 countries provide e-payment services and the underlying factors that affect government e-payments adoption. It tracks and highlights the diversity of government e-payment systems already in place, as well as the abundant opportunities available to governments for improving e-payment services.

The EIU defines e-payments in the study as the exchange or transfer of funds over an electronic platform with various means such as payment card, direct deposit, direct debit, electronic funds transfer, and wire transfer.

There are still gains to be made, particularly in obtaining/paying for an ID card, requesting unemployment, workers' compensation and welfare benefits, and disbursement of loans to businesses.

More than half the countries in the 2011 GEAR study have developed 3G and other mobile phone technologies, including 4G. The number of mobile phone subscriptions has soared and the diffusion of broadband has grown swiftly.

For years, trust has been a key barrier to citizen adoption of government e-payments. This challenge is slowly being overcome by the rollout of new and improved e-payment security systems and government enforcement mechanisms. More than one-third of the 62 countries in the 2011 GEAR study received the highest possible score for their efforts to promote e-payment security.

The GEAR study also looks to the future, noting that as governments work toward adopting and improving e-payment services, their strategies will almost undoubtedly reflect each country's unique infrastructure and social, economic and policy context. No single approach to government e-payments adoption is universal.

Lucy Hurst, associate director of the Custom Research, Economist Intelligence Unit, said: "Two key trends the study showed us are that momentum has continued in the development of e-payments despite all the potentially derailing factors that could have constrained it, like the economic downturn and fiscal austerity measures. Secondly, the overall trend for the last five years is for governments to continue to make commitments to the development of e-payment platforms. There is increased ease and efficiency in the way citizens and businesses conduct transactions with their governments."

Ministry seeks $4.3b to expand highway

The Ministry of Transport has asked the Government to approve a project to expand National Highway 1 at a total cost of VND89 trillion (US$4.3 billion) under the BOT (build-operate-transfer) model.

The project will include 11 construction works to expand and upgrade National Road 1, according to the ministry.

The Government has asked the ministry to finish the project and put the entire road (from Ha Noi to Can Tho City) into operation by the end of 2016.

Wood processors call for lower export duty

The Viet Nam Wooden and Forestry Products Association has asked State offices to reduce the export tax rate on woodchip products from 5 per cent to zero.

Meanwhile, a month ago, An Hoa Paper Joint Stock proposed increasing the export tax rate from 5 per cent to 20 per cent to ensure there was enough woodchip for pulp production in Viet Nam.

Eighty processors exported 5 million tonnes of woodchip last year.

Export taxes on coal may be reduced

The export tax rate for coal may be cut from 20 per cent to 10-15 per cent due to the depressed economy, falling prices and low export volumes, according to State offices.

In April, the Viet Nam National Coal and Mineral Industries Group (Vinacomin) asked the Government to cut the coal export tax rate to zero because of low consumption and falling export volumes.-

PetroVietnam affiliate builds offloading vessel

PetrolVietnam Technical Service Joint Stock Company (PTSC) is to build a floating, production, storage and offloading vessel (FPSO) for Lam Son Oil Management, Exploration and Exploitation Joint Stock Company (Lam Son JOC).

The contract, which is worth US$600 million, was signed by the PTSC and Lam Son JOC on Thursday in Ha Noi.

The vessel will have a designed capacity of storing at least 350,000 barrels of crude oil and processing 18,000 barrels per day. It is scheduled to be completed by the end of 2013.-

Industrial output rises 4.2% in first 5 months
The national index of industrial production in the first five months of this year increased 4.2 per cent against the same period last year, the Ministry of Planning and Investment reported at a meeting in Ha Noi yesterday.
The event was organised by the ministry with an aim to review the economy during the period.

This was the lowest growth in comparison with the same time over the past years. However, since the early months of this year, index growth had reflected positive performance, the ministry said.

Particularly, the indices of industrial production and processing have risen by 3.9 and 2.4 per cent respectively in the first two months, up 6.5 and 8.6 per cent in March as well as 7.5 and 9.3 per cent in April.

However, goods inventories were still high and went up 29.4 per cent over the corresponding period. Especially, storage levels of some commodities increased sharply, cement rising over 52 per cent, motor vehicles by 56.5 per cent and beer by 29 per cent.

In May, the number of newly established enterprises was 4,450 with a total registered capital at VND55 trillion (US$2.62 billion).

As a result, in the first five months, the figure of new companies came to 30,100 with a combined registered capital up to VND190 trillion ($9.05 billion), down 12.2 per cent in the number of enterprises and 3.6 per cent in capital in comparison with the corresponding time last year.

The ministry reported that Viet Nam had signed $2.1 billion of official development assistance (ODA) investment with foreign partners and had already disbursed $530 million.

Viet Nam also attracted $5.33 billion of foreign direct investment (FDI), equal to 68.2 per cent of the same period in 2011, while disbursement reaching $4.5 billion, approximately the same as last year.

Total State budget revenues during the period reached over VND291 trillion ($13.8 billion), making up 39.3 per cent of the total annual plan, an increase of 3 per cent over the same term last year.

To conclude, Deputy Minister of Planning and Investment Cao Viet Sinh said that though the economic situation was improving, it was still unstable.

Sinh said the ministry would pay special attention to domestic market progress while stimulating domestic consumption and reducing inventories.

He also said the Government would monitor interest rate policies flexibly so that enterprises would have easier access to commercial loans.
Provinces urged to act on blue-ear disease
The Ministry of Agriculture and Rural Development wants 14 vulnerable provinces and cities to take stronger action against the spread of the blue-ear disease among pigs.

They are Ha Noi and Hai Phong and Bac Ninh, Bac Giang, Thai Nguyen, Phu Tho, Vinh Phuc, Hoa Binh, Hai Duong, Hung Yen, Thai Binh, Ha Nam, Nam Dinh, and Ninh Binh Provinces.

The epidemic has become widespread and threatens to spread rapidly, but prevention efforts are slack in some provinces, it added.

Bac Ninh and Hoa Binh could prove particularly vulnerable because of the huge number of pig farms and large-scale transportation, trading, and slaughter of the animals.

Besides, they are contiguous to several cities and provinces in the Song Hong (Red River) Delta, which could spark of an epidemic in the area.

To control the epidemic and revive pig farming, the ministry urged the administrations of the 14 cities and provinces to promote awareness among local authorities as well as common people.

It wants them to form task forces to supervise and speed up prevention efforts at affected areas as well as other vulnerable places.

Recently the disease broke out at a large pig breeding centre in Hoa Binh, which was a main source of supply of piglets for the entire province.

In response, Hoa Binh authorities asked the ministry to supply 20,000 vaccines as well as antiseptics and equipment.

They also asked for the province to be listed as an epidemic zone.

Time ripe to expand in fruit-growing province

Tien Giang, the province with the largest area under fruit, plans to further expand its fruit cultivation area and improve the quality of fruits to increase exports.

The Cuu Long (Mekong) Delta province is seeking to increase the fruit-growing area from the current 70,00ha to 80,000ha by 2020, expanding output by a fifth to 1.2 million tonnes.

Tran The Ngoc, secretary of the provincial Party Committee, said to achieve this, priority would be given to zoning areas suitable for various kinds of fruit.

The province would also improve the quality of fruit strains and use advanced cultivation and post-harvest technologies, he said.

Genetics and bio-technology would also be gradually used, he said.

Last year the province's fruit output was worth VND3.2 trillion (US$152 million), accounting for 52 per cent of its total agriculture production.

Several fruits bring farmers profits of more than VND100 million per ha per year – like Lo Ren star apple and Hoa Loc mango.

In 2009 Hoa Loc mango received protection under the geographical indication regime.

The province has received the Global Good Agriculture Practices (Global GAP) certification for seven ha of its Lo Ren star apple in Vinh Kim District.

It has also received the Vietnamese Good Agriculture Practices (Viet GAP) certification for 30ha of Tan Lap pineapple, 16ha of Tan Phong rambutan, and 15ha of Nhi Qui longan.

But despite all the famous fruit brand names, fruit farming in the province faces several problems such as small scale and lack of planning, leading to uneven quality and small output, Ngoc said.

Management of fruit strains and post-harvest technologies remain backward, he said.

The lack of close co-operation among fruit farmers has precluded the setting up of co-operatives, which help them take the initiative in production and sales, he said.

To improve farmers' incomes, the province has identified seven speciality fruits like Hoa Loc mango, Lo Ren star apple, Ngu Hiep durian, Go Cong Barbados cherry, Tan Lap pineapple, Cho Gao dragon fruit, and Long Co Co grapefruit, and would focus on developing them, he said.

Tien Giang has been investing more than VND3.7 billion in a programme to support farmers replace aged fruit trees with high-quality strains to improve quality to boost exports.

Under the programme, 1.5 million Queen pineapple seedlings have been given to 50 households in the Dong Thap Muoi area in Tan Phuoc District.

The seedlings, worth a total of VND1.5 billion, have been planted in an area of 60ha.

The province is also helping farmers replace more than 1.5 million other old fruit trees by giving them for free high-quality, high-yield seedlings.

Water-starved central region faces fallow lands this growing season

Areas growing rice and other crops in the central region could leave lands uncultivated this season because of drought.

More than 3,000ha of rice paddies along the lower stream of the Vu Gia River in Da Nang are facing a water shortage for the summer-autumn crop, according to the city's Department of Agriculture and Rural Development.

The Dong Nghe and Hoa Trung dams irrigate this area but their water levels have fallen to levels where they cannot supply water for irrigation.

Hundreds of ha could be left unplanted as a result, Huynh Van Thang, deputy director of the department, said.

If dams in the upper stream of the Vu Gia do not release large quantities of water and the drought and heat continue, areas in neighbouring Quang Nam Province would also suffer, he said.

To cope with the drought, the Da Nang Irrigation Exploitation and Management Company has begun maintenance of its groundwater pumping stations to ensure they can operate at full capacity.

This year's rainfall was lower than that of last year, meaning the drought would persist for a long time, Le Van Sam, deputy director of the company, said.

Quang Nam has the same summer-autumn rice planting schedule as Da Nang – May 15 to June 6 – but many of its fields have not been cultivated because of the lack of water.

Nguyen Dinh Nien, director of the Quang Nam Irrigation Project Exploitation Company, said not only are rivers flowing low but are also very saline.

The salt content at the Tu Cau and Cam Sa pumping stations in Dien Ban has reached 0.14 per cent and 0.16 per cent, so they cannot irrigate 400ha of rice fields that depend on them, he said.

The company has set up a temporary pumping station at the Phu Loc Lake in Duy Xuyen District.

It has also petitioned the province People's Committee to allow digging of a canal from the Thu Bon River to Dien Ban District's Vinh Dien town to supply water for the summer-autumn crop.

To circumvent the impacts of the drought, many central provinces have advised farmers to grow medium – and short-term rice varieties that are highly resistant to pests and drought.

The Quang Ngai Department of Agriculture and Rural Development has instructed farmers to plant rice varieties that have a gestation period of less than 120 days for the winter-spring crop, and less than 100 days for the summer-autumn crop.

Tran Van Manh, director of the Central and Central Highlands Regions Fertiliser, Plant Products and Strain Experimental Centre, said his centre experimented with 50 short-term rice varieties during the last winter-spring crop.

He recommended their planting now saying they are highly resistant to drought and diseases.

Vietnam to cut rates in two weeks: HSBC

The Hongkong and Shanghai Banking Corporation (HSBC) has predicted that the State Bank of Vietnam (SBV) will cut interest rates further in the next two weeks.    

According to its report released on May 24, HSBC said faster-than-expected decline in inflation will prompt the SBV to reduce interest rate.

The consumer price index (CPI) was estimated to see a year-on-year decrease of 8.34 percent in May, marking the first single-digit rise since October 2010.

Successful implementation of tight measures in 2011 has slowed down inflation significantly from its peak of 23 percent in last August while dampening demand has driven prices down and slowed economic growth, the report says.

Bank lending cannot grow as expected as commercial banks have tightened their lending conditions to avoid bad debts.

In addition, high lending rates have discouraged local businesses.

The SBV has lowered interest rates twice since the beginning of this year.

New platform for Thang Long/Dong Do oil field

A contract worth US$600 million to supply a floating production and storage platform for the Thang Long/Dong Do oil field was signed in Hanoi on May 24.    

The contract between the PetroVietnam Technical Services Corporation (PTSC) and the Lam Son Joint Operating Company will be carried out over seven years.

Under the contract, PTSC will be the main contractor, providing the consulting and designing. It will also supply the equipment, and take part in the building, installation, and commission of the vessel.

The platform is designed with the latest technology and has the capacity store of 350,000 barrels of oil, processing 18,000 barrels a day. It should last for over 10 years.

The platform is scheduled to receive its first oil by the end of 2013.

Vinh Long Province resolves issues for sweet potato growers

The People’s Committee of Vinh Long Province is encouraging and creating favourable conditions for local firms to develop sweet potato processing units, after farmers were let down by Chinese traders who abruptly refused to buy back their Japanese sweet potato crop.

According to Nguyen Hoang Hoc, head of People’s Committee of Vinh Long Province, latest statistics show that Vinh Long has 9,225 hectares under sweet potato cultivation, of which the Japanese sweet potato cultivation covers 70 per cent of the area.

Up to now, farmers in Binh Tan and Binh Minh Districts have harvested 3,400 hectares and the rest will be harvested in the near future.

While other local sweet potato varieties were bought at VND220,000-360,000 per quintal, ensuring profits for growers, the price of Japanese sweet potatoes dropped to around VND160,000-170,000 per quintal in the Mekong Delta provinces on May 23, the lowest ever in the past few years.

Thus, several Japanese sweet potato growers were whining after suffering losses. Earlier, Chinese traders had offered high prices for Japanese sweet potato crops, luring several farmers to switch from rice, despite warnings from local authorities.

Local authorities are now seeking solutions to ease farmers’ woes such as looking for consumer markets in and outside the country for sweet potatoes. They are also discouraging farmers from expanding sweet potato growing area, especially for the purple variety, so as to reduce dependency on Chinese traders and because Vietnamese people favour sweet potato of the white or beige flesh variety more than the Japanese purple variety.

Bad debt plagues financial sector

While the State Bank of Vietnam (SBV) has claimed the country’s ratio of bad debts increased to 3.6% by the middle of April, other studies claim the figure could be three to four times higher.

A group of economists recently released the Vietnam Annual Economic report which said that the rate of bad debts among the country’s banks fluctuates from 8.25% to 14.01%.

The report was jointly conduced by Vietnam Centre for Economic and Policy Research (VEPR) under Vietnam National University – Hanoi’s University of Economics and Business; National Economics University; Vietnam Academy of Social Sciences and some other research institutes.

The report also included different estimates on the issue from several organisations.

According to StoxPlus, a Vietnamese financial portal, banking bad debts averaged at 2.3%. Meanwhile, Fitch Ratings claim Vietnam’s banking system is saddled with a bad debt rate of 13%.

The research group cited analyst Ho Ba Tinh who claimed that the bad debt rate could be from 7%-8%, and even over 10%, equivalent to around VND300 trillion (USD14.36 million).

The Vietnamese banking sector’s contingency funds currently don’t follow international norms, while bad debts among state-owned enterprises account for 70% of banks’ total bad debts.

During 2011 and the first quarter of 2012, businesses faced numerous difficulties, forcing thousands of enterprises to close. The situation was worsened by the decline in the real estate and securities market, adding to banking bad debts.

Dr. Quach Manh Hao said the research group had reached their conclusion about banking bad debt rate mainly based on securities and real estate-based lending. Outstanding loans for these industries accounted for 10%-12% of the banking system’s total lending.

“If the SBV’s figure is accurate that the banking bad debt rate increased from 3.2% in early 2012 to 3.6% by the middle of April, all securities and real estate-based loans could be classified as bad debts,” Hao noted.

The research group conducted the report by studying the bad debts held by 41 banks in Vietnam. Their calculation did not include Vinashin’s debts.

Even though there has been no final conclusion on the rate of bad debts, the SBV’s figure means a considerable increase in bad debts among banks. This is a result of the currently gloomy economic outlook.

Many big banks have been troubled by several major clients failing to repay their debts.

Financial reports have showed that bad debts are on the rise among listed banks. Vietcombank reported an increase in its bad debts from 2.03% to 2.87% by the end of March. Its unrecoverable debts rose to 32%, worth VND3.1 trillion (USD148.53 million).

Vietinbank’s bad debts also increased from 0.75% in early 2012 to 1.85% by the end of the first quarter.

Eximbank’s  bad debts increased from 1.6% to nearly 2% while ACB’s figure was up from 0.85% in late 2011 to over 1% by the end of March.

After the merger with Sacombank or SHB, Habubank’s leaders announced a bad debt rate at 16.06% by the end of February. The figure changed to 9.7% by the end of March, according to its financial report for the first quarter of this year.

Several experts said that bad debts were an inevitable in current circumstances. However, they emphasised the necessity to find a solution.

On March 1, the Prime Minister issued Decision No. 254 on restructuring financial institutions for the 2011-2015 period, which is considered the main method of dealing with incompetent banks.

The decision allows the SBV to buy stakes in weak banks and grant foreign institutions the right to increase their stake in domestic banks. It also encourages big banks to buy assets and debts from incompetent banks while allowing banks to sell their debts to a Debt and Asset Trading Company (DATC).

On May 15, the SBV issued a regulation that allowed the 14 biggest commercial banks to trade in debts.

This is expected to help minimise the costs of banking restructuring.