Last update 6/27/2012 7:00:00 AM (GMT+7)

A boost to Vietnam-Latin America relations

The upcoming Ministerial Forum on Vietnam-Latin America Trade and Investment, scheduled for July 5-6 in Hanoi, will create a breakthrough to accelerate and deepen bilateral relations for mutual benefits.

In response to reporters’ questions about the upcoming event, Deputy Foreign Minister Nguyen Phuong Nga reaffirmed Vietnam’s policy of developing comprehensive cooperation with Latin-American nations.

She said Vietnam and Latin-America have great potential for fostering cooperation in various fields, especially trade and investment.

Bilateral ties have constantly grown over the past decade with two-way trade increasing 15 fold (from US$300 million in 2000 to US$4.5 billion in 2011), she cited, adding that in the context of international integration and economic links between East Asia and Latin America, both sides have enormous strengths that can supplement each other.

Nga said the Latin America’s huge demand for goods will give a boost to Vietnam’s exports in exchange for a supply of materials, fuel, capital, and technology from that region.

In their strategic approach to the Asia – Pacific region, Nga said, Latin American countries attach great importance to developing relations with Vietnam, which holds an important position in Southeast Asia thanks to its socio-political stability and dynamic economic growth.

Another factor that attracts foreign investors to Vietnam, Nga said, is its large population of 90 million and its active international integration.

There is high hope that the forum will create favourable conditions for participants to exchange information and seek measures to boost cooperation between Vietnam and Latin-American countries, Deputy FM Nga said, adding that the decision to organize the forum has received a positive response from many Latin-American countries.

The forum will focus on three main themes including “Vietnam - Latin America business investment and ideas for trade - investment promotion,” “Vietnam - Latin America traffic connectivity, logistics, telecommunications and services” and “Vietnam - Latin America partnership in agriculture and energy,” Nga revealed.

In preparation for the event, the first of its kind, the Foreign Ministry has set up an organizing board with the participation of representatives from related ministries and agencies, the Vietnam Chamber of Commerce and Trade, and the Quang Ninh provincial People’s Committee to ensure the forum will be a great success, Nga said.

Gearing up for urban development project in northern provinces

Deputy PM Hoang Trung Hai on June 25 presided over a meeting in Hanoi of representatives from ministries, departments, localities and the World Bank (WB) to discuss the launch of an urban development project worth US$250 million.

The project will be carried out in the four northern mountain provinces of Dien Bien, Bac Kan, Cao Bang and Thai Nguyen during the 2012-2014 period.

At the meeting, the WB Country Director for Vietnam Victoria Kwakwa shared his views on the mode of deploying the project in an effective way.

Deputy PM Hai highly appreciated the WB’s assistance to the development process in the country, especially in the urban infrastructure construction and upgrading of the Mekong Delta region.

He said the urban development project will help the four northern mountain provinces keep pace with other localities in the country.

Hai asked the WB to further support Vietnam in carrying out the project more quickly and effectively as it suggested.

Car imports in June decrease

Vietnam has imported 2,000 complete built unit (CBU) automobiles worth US$50 million this month, showing a slight decrease over May, according to the General Statistics Office (GSO).

The import level is predicted to remain the same in the next three months.

In the first six months of the year, the country imported 14,000 CBU automobiles, worth US$285 million, down 41 percent in volume and 45.3 percent in value compared to the same period last year.

In May, Vietnam produced and assembled 5,710 CBU automobiles.

French businesses eye Vietnamese power market

Eight French businesses will visit Vietnam from June 25 to 29 to learn more the power market in the country, according to the French Trade Commission (Ubifrance).
They will study Vietnam’s policies, key projects and challenges for foreign investors in power projects.

Their visit also offers a good chance for businesses from both countries to develop a sustainable partnership in trade, industry and technology.

The French businesses are scheduled to work with and introduce their products and services to the Electricity of Vietnam Group (EVN), PetroVietnam Power Corporation, and Vietnam National Coal and Mineral Industries Group (Vinacomin).

They will also work on the possibility of cooperation with the General Department of Energy, the Ministry of Industry and Trade and Institute of Energy.

Recent studies show that Vietnam has achieved average annual GDP growth of 7 percent over the past 20 years, and 97 percent of its population (more than 90 million people) currently has access to electricity.

US$398 million for urban upgrade project in Mekong Delta

The Ministry of Construction and the World Bank (WB) on June 25 began work on a US$398 million project to upgrade urban areas in the Mekong Delta region.

The WB is providing US$292 million for the project and the remaining US$106 million will come from the Vietnamese Government.

The project is part of the National Urban Upgrading Program (NUUP) until 2020, which aims to improve living conditions for local residents and boost sustainable development in the Mekong Delta.

Infrastructure will be upgraded in six Mekong Delta cities including My Tho, Ca Mau, Tra Vinh, Cao Lanh, Rach Gia, and Can Tho.

Once completed, it will directly benefit 276,000 poor people in the region and indirectly benefit more than 1.6 million others from transport, housing and environmental sanitation services.

HCM City to host Chinamac Fair 2012

The 12th Chinese Machinery Fair in Vietnam (Chinamac 2012) will be held at the Sai Gon Exhibition and Convention Centre in Ho Chi Minh City from July 25-28.

The expo showcases industrial products such as civil engineering, construction, and hydraulic equipment, power generators, pumping machines, agricultural machinery, and machinery for rubber processing, papermaking, printing, and packaging industries.

More than 250 domestic and foreign enterprises will be displaying their products and services at 400 stalls in the exhibition hall.

Seminars on trade and investment policies will also take place during the trade fair to help participating businesses increase cooperate and trade promotion.

HCM City economic recovery on track

The country’s largest economic hub has achieved the GDP growth of 8.1 percent in the first half of 2012, showing signs of steady recovery, says mayor Le Hoang Quan.

Quan says the city’s gross domestic product (GDP) increased by 8.8 percent in the second quarter, which is higher than the 7.4 percent recorded in the first quarter.

In the second half of this year, the city will focus on promoting production, containing inflation and stabilizing the macroeconomy to lay a firm foundation for sustainable growth in the future. It will also speed up economic restructuring to improve quality, efficiency and competitiveness.

To fulfill the set targets, HCM City is accelerating the restructuring of State-owned enterprises, promoting trade, investment, tourism and services, and meeting with businesses to effectively and quickly deal with their difficulties.

It also aims to increase exports, reduce imports and encourage local people to use Vietnamese products.

Quan says that the city will apply tight monetary policies flexibly and efficiently, and propose adjusting interest rates to support businesses, especially small-and medium-sized export, processing and support industry enterprises in taking out bank loans.

It will also ask relevant agencies to manage budget collections more effectively and mobilize capital for key projects.

US$1.9 bln overseas remittance to HCM City

The overseas remittance to Ho Chi Minh City was estimated to reach US$1.9 billion in the first half of this year, US$500 million lower than the level recorded in the same period last year.

This was attributed to the crunch time that most of the money was channeled through credit organizations or economic organizations in the US, Europe, Australia, Canada and some of Vietnam’s labour export markets such as Taiwan, the Republic of Korea and Japan.

Vinatexmart stores to double this year

Vietnam Garment and Textile Fashion Trading Ltd. Co., the owner of the supermarket chain Vinatexmart, is planning to double the number of its supermarkets this year compared to the original target for the year.

Speaking to the Daily, Duong Thi Ngoc Dung, general director of Vinatexmart, said the target set by Vietnam National Garment and Textile Group (Vinatex) as the mother company was to open some 20 supermarkets this year, raising the total to around 80. Luckily, with a deep price fall in the property market, Vinatexmart can now speed up its expansion by doubling the target, she added.

Dung said the leasing price has dropped by around 50%, and this is the chance for the firm to expand its Vinatexmart network. The firm has now leased some places with the shortest leasing term of 15 years and an area of 700 to 1,000 square meters.

Therefore, the total investment costs needed for the expansion this year will amount to VND720 billion.

In addition to opening supermarkets in HCMC, Vinatexmart is shifting its investments to other big provinces such as An Giang, Binh Duong, Dong Nai and Binh Dinh.

This plan is aimed at expanding the business network to many provinces and cities nationwide with a target of having 200 Vinatexmart supermarkets, stores and commercial centers by 2015, up from the current 71.

However, Vinatexmart has an advantage in garment, with apparel products accounting for nearly 50% of products at supermarkets and supplied by over 300 member companies of Vinatex, Dung said.

Besides developing the supermarket system, Vinatexmart this September will construct a goods storehouse worth VND106 billion covering an area of six hectares in Le Minh Xuan Industrial Park, HCMC’s Binh Chanh District.

Vinatexmart has recently increased its chartered capital from VND215 billion to VND420 billion. Bank for Investment and Development of Vietnam (BIDV) has also provided a huge loan for Vinatexmart to carry out its retail expansion and storehouse construction, according to Dung.

Despite the economic difficulties hitting the retail industry, Vinatexmart still obtained a revenue rise of 11% in the year’s first half from the same period last year.

Four-star hotels post best growth

Three- to five-star hotels have continued growing in room rates and occupancy given the rising numbers of both inbound and domestic tourists, with four-star hotels gaining the highest growth.

Kenneth Atkinson, managing partner of Grant Thornton Vietnam, cited a hotel market research project as saying on Wednesday that 2011 was a successful year for Vietnam’s hotel sector.

Higher room prices and occupancy rates have led to a year-on-year increase of 10.4% in revenue per available room (RevPAR), a gauge of room use efficiency and hotel revenue.

Atkinson said the country’s tourism market continued to grow last year with over six million international tourists arriving, up 19% over the preceding year, and that the average room rate rose 9% against 2010 to nearly VND1.8 million, or US$91, per night.

The average RevPAR picked up from VND1 million, US$49.7, to VND1.1 million, or nearly US$54.9, thanks to higher room prices and occupancy rates.

The four-star hotel segment recorded the strongest RevPAR growth, hitting some VND1.1 million, or US$54.7, while five-star hotels saw a significant RevPAR decline due to a 6.5% drop in average room tariffs, from VND2.7 million to VND2.5 million, or from US$131 to US$123.

Hotels gained quite stable revenues last year. Revenue from room services accounted for 63%, dinning services made up 28%, and others took the remainder.

Four-star hotels achieved the highest net profit margin of 37.8%, followed by five-star hotels with 28.4% and three-star hotels 19%.

Atkinson said the market witnessed a fall in room prices and occupancy at the five-star hotel segment in the early months of this year due to an oversupply and customers’ switch to three- and four-star hotels on financial worries.

According to a survey of Grant Thornton Vietnam, the average room rate of three-star hotels is VND932,000 (US$45.5) per night, while that of four-star hotels is VND1.9 million (US$93), versus VND2.5 million (US$123) of five-star hotels.

Market observers said the average hotel room rate in Vietnam is still higher than most regional countries, only after Hong Kong and Singapore.

Data of the Vietnam National Administration of Tourism show there are currently some 12,000 lodging facilities nationwide with 265,000 guest rooms. Particularly, there are 48 five-star hotels with 12,120 rooms, 126 four-star hotels with 15,517 rooms and 273 three-star hotels with 18,990 rooms.

ACO to energise landmark solar project

US-based ACO Investment Group plans to plug into the local renewable power sector with Vietnam’s first ever solar power project.

The firm has expressed an interest in building a 50 megawatt solar power farm in central Binh Thuan province, according to Binh Thuan People’s Committee.

An ACO Investment Group in Vietnam representative last week confirmed this information and said the firm was working with the Ministry of Industry and Trade (MoIT) to add this project to the national electricity master plan.

“We are serious about this project and we are trying to complete all procedures to push it ahead as soon as possible. A feasibility study is being undertaken,” the source said, declining to be named. ACO Investment Group focuses on transportation and logistics, information technology, telecom, e-commerce media, energy, financial services and consumer goods.

In Vietnam, it is also looking at aviation investment opportunities through Airis International Holdings, in which it is a shareholder. Airis International Holdings is making a feasibility study to build an airport in Khanh Hoa province, one of the most attractive tourism destinations in Vietnam.

“Vietnam has untapped potential for renewable energy, especially solar power. So, we [ACO Investment Group] want to be the first investor to develop a solar power project here,” said the source.

Institute of Energy statistics show that the country has potential for renewable energy sources like solar and wind power. For instance, Vietnam has solar resources with solar radiation from 3–4.5 kilowatt hours, per square metre, per day (kwh/m2/day) in winter to around 4.5–6.5 kWh/m2/day in summer. The number of hours of sunshine ranges between 1,800 and 2,700 per year.

Binh Thuan and its neighbouring Ninh Thuan province are said to have the biggest potential for solar energy. A Binh Thuan Department of Planning and Investment senior officer said many domestic and foreign investors had expressed interest in investing into solar power in this province.

Banks embark on interest rate race

The jury is out to whether ceiling mobilising rate scheme should be removed.

After the central bank (SBV) decided on letting banks to fix their more than 12-month deposit interest rates from June 11, 2012, banks have stepped into a new interest rate hike race to lure depositors.

On July 14, Western Bank lifted its ceiling mobilising rate to 14 per cent per year for 13-month deposits. However, four days later the bank pulled down the rate to just 12.5 per cent per year.

SBV deputy governor Le Minh Hung assumed the move was a correct step to gradually remove the ceiling interest rate scheme.

“”Since lending rates are on downward trend, banks accepting high borrowing costs will surely be hurt,” said Orient Commercial Bank (OCB) chairman Trinh Van Tuan.

Tuan said banks’ input rates might slide further.

A Hanoi branch director of a joint stock bank said ceiling mobilising rate would be no longer needed since the bank was financially healthy and there were few borrowers.

“If the ceiling mobilising rate was removed, possibly some banks could drive up the rates like the recent case with Western Bank. But this race could soon end as banks are struggling to lend,” said the director, added that if so the bank would peg its ceiling mobilising rate at about 11-12 per cent, per year.

“Plummeting inflation and contracted credit growth are auspicious factors to kill ceiling interest rates. The rate hike race is unlikely to come true since banks cannot boost lending,” said National Financial and Monetary Policy Council member Cao Si Kiem.

Economic expert Le Tham Duong said underperformed banks created chaos in the market and if these banks were radically treated in June as once declared by the SBV governor, there would be no reason to retain mobilisation ceiling.

Echoing the idea, financial expert Nguyen Tri Hieu assumed ceiling interest rates might be abolished in the third quarter or not later than the fourth quarter, but feeble bank issue must be entirely tackled to make the banking sector healthy.

Industry experts said the market could wobble after mobilising rates were removed. “However, after that, the interest rate will stay stable at a rational level truly reflecting the supply-demand rule,” said National Financial Supervisory Commission deputy chairman Ha Huy Tuan.

PCA to usher in new era of EU relations

Deputy Minister of Foreign Affairs Bui Thanh Son says the Vietnam-EU Partnership and Cooperation Agreement (PCA), expected to be clinched this week, will usher in a new era for Vietnam’s economic, trade and investment relations with the EU.

On November, 2007, during his official visit to Vietnam, European Commission (EC) President José Manuel Barroso and Vietnam’s Prime Minister Nguyen Tan Dung agreed on starting the PCA negotiations. After two years and nine negotiation rounds, the PCA content was agreed on. The PCA was initialed in October, 2010.

The PCA is a frame agreement monitoring the Vietnam-EU relationship and it replaces the 1995 Vietnam-EC Frame Cooperation Agreement. The PCA creates a new long-term and comprehensive framework for the Vietnam-EU relationship. It is compatible with the two sides’ socio-economic development priorities and external policies.

The agreements within the PCA are an important foundation for the two sides to establish specific cooperation mechanisms, contributing to further strengthening the bilateral cooperation and partnership.

Politically, the PCA would help further sharpen the two sides’ fine political relationship. Agreements reached within the PCA in politics, peace and security are the basis for the two sides to boost dialogue and cooperation in settling issues of mutual concern, both bilaterally and on such multilateral forums as the United Nations, ASEM and particularly ASEAN-EU when Vietnam will become a coordinator of the ASEAN-EU relationship in July, 2012.

With its external policy of being “an active and responsible member in international issues”, Vietnam will further join hands with foreign partners in solving global issues, including its cooperation with the EU in tackling regional and international issues like climate change, transnational crimes and terrorism, ensuring nuclear security, managing natural resources, environment and maritime security.

In terms of trade and investment, the PCA facilitates the two sides to better tap their comparative advantages and supplement their economic structures. The EU has advanced technologies, especially in mechanics, manufacturing, chemicals, transport, aviation, pharmacy and services with big added value. These are also products increasingly needed by Vietnam whose production capacity remains limited. Meanwhile, the EU has big demand for a wide range of products, such as raw rubber, handicrafts, footwear, garments, fishery, coffee, tea and pepper which Vietnam has competitive advantages in.

The potential for Vietnam to expand its exports to the EU is big, because the two sides’ trade turnover occupies only 0.6 per cent of the EU’s total trade turnover with its foreign partners. The PCA, including a separate chapter on trade and investment, shows the two sides’ wish for the development potential of these sectors.

The PCA allows Vietnam to access the EU more conveniently. Specifically, the EU pledges to boost consultancy in improving the effectiveness in using benefits that the Generalised System of Preferences can bring to Vietnam. The EU vows to give Vietnam special treatment packages in its economic and trade relations with Vietnam. It also heads for soon recognising Vietnam as a market-based economy.

Besides, the PCA has laid an important basis for the two sides to ignite negotiations of the Vietnam-EU Free Trade Agreement (FTA). FTA negotiations and signing would usher in many opportunities, removing tariff and non-tariff barriers, and boosting export and economic growth.

At present, only 42 per cent of Vietnam’s exports to the EU enjoy a zero per cent tax rate, while the rate for Malaysia and the Philippines is 80-85 per cent. If the FTA comes true, the rate of Vietnam’s exports enjoying a zero per cent tax rate in the EU will be 90 per cent and this will add another 35 per cent to Vietnam’s exports volume to this market. Besides, together with the FTA negotiation process, the EU will accelerate its recognition of a market-based economy status for Vietnam and this will enable Vietnam to better fight trade protection forms like an anti-dumping tax.

As for development cooperation, the EU commits within the PCA to continue giving development assistance to Vietnam in a new period after 2013, suitable to the country’s socio-economic development programmes and strategies. The EU also pledges to strengthen its support to Vietnam in achieving development targets recognised by the international community, including the United Nations’ Millennium Development Goals.

This is also a foundation for Vietnam to continue taking advantage of necessary support from the EU and its member countries in the future, in order to serve its national development targets.

The PCA will swell specialised cooperation fields that the EU can offer and Vietnam needs. In these fields, the EU also has concrete commitments in technical assistance and capacity improvements. This will enable Vietnam to benefit from the EU’s scientific and technological achievements to more effectively implement its economic restructuring and international integration.

In a nutshell, on the back of Vietnam’s strong relationship with the EU and its member countries over the past more than 20 years, the official signing of the PCA and the start of FTA negotiations will open up a fine prospect in the Vietnam-EU relationship.

The two sides are embarking on a new stage, with a larger scale and scope. This will further contribute to accelerating Vietnam’s doi moi and national industrialisation and modernisation, and international integration in the coming time.

Chu Lai’s transformation is a lesson to other zones

Central Quang Nam province’s Chu Lai Economic Zone’s drive into  an automotive industry hub is setting an example to economic zones nationwide.

Domestic Truong Hai Auto Corporation last week broke ground of its $250 million auto engine manufacturing project in the zone, which will manufacture 20,000 engines each year under a technology transfer agreement signed with South Korean’s Hyundai Motor Company.

This project, close to Truong Hai’s auto assembling factory, is a milestone in turning Chu Lai from a multi-sector zone to an automotive manufacturing hub.

“This is a new way for the development of Chu Lai. This will contribute to development of the country’s automotive industry,” said Do Xuan Dien, deputy director of Chu Lai Economic Zone Management Authority.

Late last year, Japan’s Mazda Motor Corporation launched an auto assembling factory in this zone, to manufacture 20,000 units per year.

“Our target is luring automotive manufacturers and domestic and foreign suppliers in the industry to the zone. By doing that, we don’t have to compete with other economic zones,” said Dien.

Vietnam has 15 coastal economic zones and 28 bordergate economic zones and by the end of last year coastal economic zones attracted $31 billion in foreign direct investment, while bordegate economic zones commitments reached $700 million.

As a result, the gloves are off between zones as they compete for investment. For example, economic zones like Nghi Son in central Thanh Hoa province, Dung Quat in central Quang Ngai, Nam Phu Yen in central Phu Yen and Nhon Hoi in central Binh Dinh all want to become an oil refinery hub.

“Each economic zone should be an industrial cluster for a specific industry. This will help boost the development of the industry it focuses on. Chu Lai is a good case for study,” said Nguyen Mai, chairman of Vietnam Association for Foreign Invested Enterprises.

In fact, Chu Lai neighbour Dung Quat Economic Zone is also changing its policy in investment attraction with the focus on oil refinery, steel and mechanical manufacturing.

Le Van Dung, deputy director of Dung Quat Economic Zone Management Authority, said the focus would make Dung Quat be a centre of heavy manufacturing as well as enable the local authorities to select right and effective investment projects.
Power equipment supply to go local

The government is throwing its weight behind local industry by selecting three thermal power plants to use locally-manufactured power equipment.

The projects are Song Hau 1 in southern Hau Giang province, Quang Trach 1 in central Quang Binh province, which are invested by PetroVietnam and Vinacomin-invested Quynh Lap 1 in central Nghe An province.

The pilot aims to boost the capacity of domestic power equipment manufacturers and reject low-quality power equipment imports, mostly from China. According to Vietnam Energy Association, Chinese contractors have taken part in 20 thermal power projects in Vietnam, including Haiphong 1, 2, Son Dong, Mao Khe and Vinh Tan 2.

“Our surveys show that the weakness of [Chinese] EPC contractors has caused problems not only in the execution of these projects, but also their operations later on. Since the technology used and criteria applied are not advanced, there are often technical errors in the projects’ operation,” Vietnam Energy Association chairman Tran Viet Ngai said.

To implement the piloting plan, the government web portal said the Ministry of Industry and Trade (MoIT) would map out a mechanism for piloting production.

According to the Seventh Vietnam Power Development Plan for 2011-2020 with vision to 2030, 58 thermal power projects would be built with the total capital investment about $97 billion, in which the cost for equipment accounted 60-70 per cent or $67 billion.

Dao Phan Long, deputy president of Vietnam Association of Mechanical Industry, said the pilot plan could encourage domestic and foreign manufacturers having set up facilities in Vietnam to increase their investment in the country.

South Korea’s Doosan Vina, which has a large-scale manufacturing factory in central Quang Ngai province’s Dung Quat Economic Zone, will be the first one benefit from this plan. Last year, the manufacturer won a contract to provide equipment for Mong Duong 2 thermal power plant in northern Quang Ninh province, which is invested by US’s AES Corporation, South Korea’s Posco Power and China Investment Corporation.

In a proposal sent the government early this year, Vietnam Energy Association recommended Doosan Vina be used as an alternative to solve problems related to power plant development in Vietnam. At this moment, Doosan Vina is working with Lilama, National Research Institute of Mechanical Engineering and other Vietnamese companies to manufacture power plant equipment in Vietnam.

“This is an opportunity for both us and Vietnam. For Vietnam it means the critical skills and expertise that is required in the production of high tech power plant boilers will be transferred to Vietnamese technicians and for the company it is of course an opportunity to expand our business and production,” said Hang Ha Ryu, general director of Doosan Vina.

Southern hub looks to get firms moving

Loans provided by Ho Chi Minh City banks and credit institutions received a slight bump between January and June.

They amounted to VND779 trillion ($37.45 billion), a 1.96 per cent rise against the end of last year, said Nguyen Hoang Minh, deputy director of the city's State Bank.

By the end of May, about 85 per cent of the total lending were classified as business loans for companies and enterprises, he said. Among them, small- and medium-sized enterprises (SMEs) received VND16.2 trillion ($778.8 million).

On June 5, leaders of the southern economic hub and State Bank agreed upon a credit package totalling VND30 trillion ($1.44 billion) with preferential interest rates and with immediate disbursement, for the prioritised four groups of companies.

The four groups are SMEs; agricultural and rural companies, export-oriented businesses and supporting industry companies.

However, nearly 80 companies registered to borrow more than VND2,200 billion ($106 million), according to the city's Department of Industry and Trade.

A department representative said the biggest problem faced by city businesses was large inventories.

Meanwhile, the central bank's Ho Chi Minh City Branch suggested the city's administration ask the Vietnamese government to allow banks to freeze debts at these four groups of companies so they could access new loans.

The branch's deputy director Minh told a People's Council meeting last week that many businesses needed new loans to clear off bad debts.

He said the ratio of bad debts at banks and credit organisations in the city increased constantly from this February, from 3.6 per cent that month to 3.9 per cent in March, 4.2 per cent in April, 5.3 per cent last month and 6 per cent this month.

However, the city's banking system liquidity has improved since the end of last year. Deposits of 14 Ho Chi Minh City-headquartered commercial banks have increased by almost 18 per cent to VND19.9 trillion ($960 million).

Total deposits at the 14 lenders rose by 8.87 per cent over the end of last year. The current ratio between total outstanding loans and total deposits is 68.3 per cent, much lower than 92.7 per cent late last year.

PVEP expands operations in South America

The PetroVietnam Exploration and Production Corporation (PVEP) has expanded its presence in South America by acquiring over 50 per cent of a project to explore for oil in Peru, from the London based oil and gas company Perenco SA.

PVEP and Perenco SA signed the deal for 52.6 per cent of Block 67 in London on June 21. This brings the number of exploration projects which PVEP has in overseas markets to 19 so far.

When speaking at the signing, Jean Michel Jacoulot, Perenco’s CEO, said that he hopes the joint operation will be the first of many between the two companies.

As he congratulated his new partners PVEP, he added that he is impressed with PVEP’s previous operations and he has a high regard for the company’s specialists, technicians and workers. “We found a good partnership can be established,” he said.

Jacoulot also said he hopes that the first oil will flow from Block 67 by the middle of next year.

The chairman and CEO of PVEP, Do Van Khanh, said that the expansion of PVEP’s operations in the South American country played an important role in its strategy to reach out further into overseas markets.
The output of oil from this project will help to ensure national energy security, he said.

Currently, PVEP, one of PetroVietnam’s key companies, has 44 domestic projects in operation and 19 overseas in 15 countries around the world.

Additional money for Sa Huynh–Dung Quat road

The central province of Quang Ngai has ratified an increase in the investment capital for the Sa Huynh to Dung Quat coastal road project, from VND2.5 trillion to over VND5.6 trillion.

The extra money is to be used to help cover additional construction costs and land clearance expenses.

The Sa Huynh - Dung Quat coastal road will run through five of districts Binh Son, Son Tinh, Tu Nghia , Mo Duc, and Duc Pho and Quang Ngai city.

It links crucial economic zones in the central region such as Dien Ngoc Industrial Zone, Chu Lai Open Economic Zone, and Dung Quat Economic Zone.

When complete, the route is expected to help boost socio-economic development in the coastal region.

The road is scheduled to be built in two phases, with the first phase, the My Khe to Tra Khuc stretch having 6 lanes, 36 metres wide in total now underway.

Mong Cai to have border economic zone

The Prime Minister’s decision to establish a border economic zone in Mong Cai in the northern province of Quang Ninh was announced on June 21.

The Prime Minister on April 10 signed a decision to establish Mong Cai border economic zone in the northern province of Quang Ninh. The decision took effect on June 1.

The 121,197 hectare complex will cover 17 wards of Mong Cai city, Hai Ha industrial zone and seaport, Quang Ha town and a number of communes in Hai Ha district.

Once operational, it will accommodate a non-tariff area, industrial zones, a financial centre, an administrative centre, a residential area and other functional areas.

Over the years, Mong Cai has seen a significant growth in its commercial ties with China, with an average yearly increase of 26.25 percent.

The total import-export turnover through the border gate at Mong Cai from 2006 to 2011 reached $18 billion.

This revenue accounted for 95.7 per cent of the province’s total trade with neighbouring China and made up 40 per cent of the total import-export turnover through northern border gates during the same period.

Economic hub’s loan wish list

The southern hub wants ADB loans for 11 key infrastructure projects.

It has just proposed the Ministry of Planning and Investment (MPI) put 11 key projects onto a list of projects funded with Asian Development Bank (ADB) loans between 2013-2015.

Large-scale traffic and water supply projects highlight the list, with the first being urban rail route 3A linking Ben Thanh Hub with Tan Kien in Binh Chanh district.

Subway route No.2, an elevated road along the Nhieu Loc-Thi Nghe Canal, upgrading and expanding the street axis An Duong Vuong-Phan Anh-Binh Long-Village Road No. 3, phase two of the city's North-South railroad project from Ong Lanh Bridge to Nguyen Van Linh Blvd are the other traffic projects.

The people's committee proposal made early this week also mentioned a project to build a facility to treat sludge from water plants, repairing the D2000 water pipe system, completing a data transmission network, two projects to minimise water loss on a large scale and installing a major water pipe system along Au Co Street in Tan Binh district.

The city administration said the 11 key projects needed huge investment.

In addition, the people's committee proposed the MPI to ask for the prime minister's approval to build a new Ho Chi Minh City Children's Hospital and a new cancer hospital with Kuwaiti official development assistance. It is estimated that the two hospitals would cost $192 million to build.

Housing adverts plaster capital    

Land and houses ads can be found plastered beside concrete cutting and drilling and drainage dredging ads.

Many real estate companies have to close or reduce their operations. Real estate is no longer attracting investors either, with sellers outstripping buyers.

Beside classified ads on forums, websites, and online adverts, many companies choose to offer their services via advertising on pavements and public sites to reduce costs and access potential customers.

While these adverts can be found littering public places, there is little evidence about the effectiveness of this form of advertising.

Trang, a woman living in Hoang Cau Street, Hanoi, angrily complained that  her house’s surrounding walls were plastered with all kinds of ads, including houses for sale, renting house, and signs seeking roommates, She had torn down all the paper leaflets, but a few days later her walls would be covered again. Some companies even spray painted their ads.

Cuong, living in Hanoi’s Thanh Xuan Bac Ward had just repainted his house’s surrounding walls to prepare for his son’s wedding, but the following day, he was shocked to see it covered in advertising.

Quang, director of a real estate agency, admitted that housing adverts on streets has diminished house trading. But with only VND5 million (USD238.7), he could print huge amounts of leaflets and hire people go around Hanoi to stick them on walls.

Advertising in newspapers would cost him VND20 million (USD955.1) per page per periodical. Advertising with an online newspapers would cost VND3-5 million (USD143.2-238.7) per time. Advertising on TV costs billions of VND. Due to the downturn in the economy and slumps in the sector, real estate agencies have to find the most economical ad methods.

In Quang’s opinion, mini apartments and cheap private houses worth around VND1 billion (USD47,755) is ideal for this method. But luxury villas, lands in up-market projects, and expensive apartments would devalue their products employing this form of marketing.

However, head of PR department of a housing project in My Dinh urban area said they still have to use banners and street posters as their most effective way to approach potential common customers.

Some housing investors have found out more polite ways to drum up interest, such as advertising in supermarkets and hotels.

However, this kind of advertisement hasn’t yet to be licensed by authorities. When reporters asked for their advertising license, the PR department said they had a communication company to do the paperwork for them.

Buyers of apartments swindled by investor
Many customers of Lilama Joint Stock Company in Hanoi complained that they were forced to buy apartments with larger areas than those stated in contracts they signed.

The apartments belong to a project including offices, trade centres and apartments at No. 52 Linh Nam, Hanoi. The project is six months behind schedule, and Lilama admitted that they cannot hand over the apartments to the buyers on December 31, as planned.

Mrs. Pham Thi Quang, who signed a contract to buy an apartment in March of 2011, was shocked after receiving the company’s notice, in which stated that her apartment had increased size from 81 to 115 square metres. The company did not inform her of the changes, and the contract did not have any stipulations regarding this except for the pace of construction.

Nguyen Duy Hai, Director of real estate projects of Lilama Hanoi, said, the minimum increase of area was five square metres and the maximum was 24. He explained that, “The project turned out to be unprofitable so we expect sympathy from customers.”

He also said that the legal foundation for the increase in area had approval from the authorities. According to Lilama, the area increase has received customers’ agreement too. But in an interview with DTiNews, Hai admitted that 10% of the customers did not agree, and had not signed to the commitments.

The authorities have given a license for the company to increase the apartment area, so they are unable to withdraw in order to meet the demands of the remaining 10%, he said.

While trying to persuade the buyers to agree, Lilama has shocked a number of them with higher prices than they signed for.

Mr. Tung, who was forced to add buy five extra square metres to his apartment, complained that, “Lilama increased the area without our approval. We signed contracts, but they are requiring us to pay more money for their mistake."

The money for the increased area is also considered 'initial area', requiring buyers to pay fees that are subject to interest plus a 10% fine for late payment.

At the same time the project is lagging behind schedule, and the invesor cannot say for sure when they will be able to hand over the apartments.

Bui Quang Hung, of BQH Law Offices, said that capital appropriation is something that is often seen in the case where investors have limited financial capacity. He added that, under current regulations, customers only have to hand over 70% of the contract's entire value to begin the transaction, with the rest to be paid upon receival of the property. In this case, buyers paid 95%, and have the right to sue the company, he said.

An expert from the Federation of the Civil Engineering Association said, “The initial contract signed with customers has the highest legal value. Any additional terms must be based on the initial contract, with agreement from the buyers. In this case Lilama Hanoi increased the apartment area unilaterally. Designs of apartments were also changed without prior approval from the buyers. At the same time the buyers were held to the terms of a contract which they die not sign."

Banks start cutting long-term deposit rates
After taking part in a race to offer exorbitant deposit rates a fortnight ago, many banks are now lowering their deposit rates for savings of above 12 months to below 12 percent a year.

Western Bank, which became a phenomenon in mid-June for mobilizing deposits at as high a rate as 14 percent a year against the average figure of the system of 11 – 13 percent, last week cut the rate to only 12.5 percent a year for savings of a 13-month term.

On June 8 the State Bank of Vietnam, through its circular no. 19, stipulated that credit institutions are allowed to set interest rates on long-term savings of above 12 months through their own initiatives.

Banks have since set a new height for deposit rates of that category to between 12 – 14 percent, while rates savings of a term between one and 12 months are restricted under a ceiling of 9 percent a year.

However, Western Bank’s rate cut has now set another trend for other banks, which have respectively lowered their deposit interest rates, after rushing to hike them following the cap removal.

SeaBank now offers savings for a term between 12 and 24 months at an interest rate of 11 percent a year, instead of the erstwhile 12 percent rate.

It also cut the 12.6 – 12.8 percent rate applicable to deposits worth more than VND1 billion (US$48,000) to 11.6 – 11.8 percent a year.

At Techcombank, the 12 percent a year rate is now only applied to 12-month savings, while the rate for 13-month term has dropped to only 11.07 percent a year.

The highest rate offered by Vietcombank is 11 percent a year, applicable for 12-month terms, while savings with terms between 24 and 36 months are now subject to a low rate of 9.5 percent.

The interbank interest rate yesterday unexpectedly soared by 2 – 3 percentage points from last week, according to Phap Luat Thanh Pho newspaper.

Specifically, the interbank overnight rate rose from 5 percent to 7 percent a year, while rates for a one-week term increased to 7.6 – 8 percent a year, up from 5 percent.

However, experts said there should be concern over the hikes.

Nguyen Hoang Minh, deputy director of the State Bank of Vietnam’s branch in Ho Chi Minh City, said the soaring overnight interbank interest rate does not provide enough ground to say that banks have weak liquidity.

“A bank may face a money shortage one day, but things will be solved the following day,” he said.

“Moreover, the interbank rate is currently lower than the deposit rate, so there is nothing to worry about.

“There have been times when rates were as high as over 20 percent,” he concluded.

Meanwhile, Doctor Le Dang Doanh, former head of the Central Institute for Economic Management, said rising interbank interest rates means that some banks are facing liquidity problems, especially during the first days of the week.

“This is when there are high demands for payments but banks cannot afford them, and thus have to borrow from the interbank market,” he explained.