Vietnam - News and Regulations

ECONOMIC GROWTH - Citigroup praises outstanding Vietnamese growth figures

HA NOI — In the shadow of the global economic meltdown, Viet Nam’s GDP growth in 2009 outpaced regional economies with the exception of China, Citigroup said this week.

Viet Nam achieved 6.9 per cent growth in the fourth quarter, bringing the overall growth rate to 5.32 per cent for 2009, a stark contrast to Citi’s earlier forecast of 4.7 per cent.

The higher-than-expected 2009 growth rate has been attributed to statistical revision in previous quarters: the third quarter growth was upgraded to 6.04 per cent from a previously reported 5.2 per cent.

The biggest annual rebound was in construction sector, which expanded by 11.4 per cent in 2009 from almost zero growth in 2008. The rebound has been linked to strong monetary and fiscal stimulus, also evident from the acceleration of credit growth to 37.7 per cent in 2009, up from 25.4 per cent last year.

Year-end inflation touched 6.52 per cent (year on year) in December, with a full year average of 6.88 per cent, a touch below the 7 per cent forecast by Citi.

A mismatch between supply and demand is predicted to remain in the foreign exchange market even though the gap between market and official rates narrowed after some corrective measures were announced in November: a depreciation of the dong by 5.4 per cent and a narrowing of the daily trading band to 3 per cent from 5. One US dollar now buys VND18,600. Over the past two weeks, trading has remained above the official ceiling rate of VND18,479 to one US dollar.

The market is now waiting for rise in the dollar supply after the Prime Minister ordered major corporations to sell dollars back to the banks to shore up the dong.

With growth remaining strong, the dong will likely remain under pressure in the shadow of the 2009 trade deficit which burst out to US$12.2billion, Citi economist Johanna Chua wrote in the report.

Over the last decade, Viet Nam with a population of 86 million has recorded an average economic growth of 7.3 per cent, bringing the per capita income to $1,000.

Viet Nam is widely expected to have a high growth rate this year at 7 per cent, and continue to be one of the fastest growing economies in the region.

The country had recovered remarkably fast from the global economic crisis although Bloomberg said Viet Nam’s excessively overheated growth and a return to inflation next year were causes for concern. — VNS

Average GDP growth in 2006-2010 expected at 6.9pct

Ministry of Planning and Investment stated that the average GDP growth rate in the past five years from 2006 to 2010 was expected to achieve about 6.9 percent per year, compared to the proposed target of 7.5-8 percent.

The GDP growth rate calculated on criteria of price in 2010 was expected to increase twice as much as that of 2000, in comparison with the targeted growth rate of 2.1 times higher. The GDP par capita in US dollar to be calculated on the basic of 2008 exchange rate reached over $1 billion, equal to the expected target in 2010.

In the three major sectors, only the industrial and construction sector failed to reach the targeted average economic growth rate, the two remaining sectors of agriculture, forestry, aquaculture and services fulfilled the targeted annual growth rate. The ministry of Planning and Investment predicted that the export turnover in 2009 and 2010 would be lower than the expected annual growth rate in 2006-2010. The ratio of social investment capital over GDP in five years of 2006-2010 was expected to surpass the predicted one by 40 percent. TBKT

BANKING PROFITS - Caution with 2010 profit plan

Banks have started revealing profit targets for 2010 which are quite impressive but in a way cautious too due to predictions about difficulties in 2010.

Although facing with many hardships from the global financial crisis, banks have harvested many successes in 2009. Most banks reported profit exceeding their plans. However, banks are now quite cautious when setting profit targets for 2010.

Tran Phuong Binh, Eastern Asia Commercial Joint Stock Bank (EAB)'s general director said that his bank's pre tax profit target is set at 1.1 trillion dong for 2010, higher 350 billion dong than 2009's plan.

Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank)'s chair, Dang Van Thanh, said that his bank targets to reach 2.6 trillion dong of profit this year, higher one trillion dong against last year's plan and 700 billion dong of last year's actualised figure (in 2009, Sacombank earned 1.9 trillion dong of pre tax profit, higher 300 billion dong than the bank's approved plan).

With higher profit target for 2010, Thanh said there will be pressures, especially the market still remains difficulties, the difference between deposit rate and lending rate is being narrowed and the capital mobilisation sources are more difficult.

Therefore, in order to gain profit target in 2010, Thanh said that Sacombank will restructure capital sources and develop services to increase capital sources.

According to Nguyen Hoa Binh, Vietnam Joint Stock Bank for Foreign Trade (Vietcombank)'s chair of director board, the aim of controlling credit growth at 25 percent in 2010, lower than 2009's figure, does not mean that credit operation would not have opportunity to develop. Binh added, the current difficulty is seeking saving sources when other investment channels are being recovered.

Vietcombank's profit in 2009 was 4.4 trillion dong, higher than last year's target at 3.4 trillion dong. But, Binh said, his bank's profit target this year is not much higher than last year's actualised figure.

Representative from Asia Commercial Joint Stock Bank (ACB) said that the bank's profit in 2009 was not much higher than the approved plan of 2.7 trillion dong. At the same time, ACB set a modest profit target for 2010 because according to ACB, profit must go with stable development. Additionally, both lending and deposit activities this year will face more difficulties.

Banks set modest profit targets in 2010 mainly due to earning from credit activity is predicted not to be high like previous year's figure because the government's short term lending rate subsidisation policy ended.

In fact, earning from credit activities accounts for large part in total earnings of banks' profit (about 65-70 percent in big banks and 80-85 percent in small-scaled banks).

Meanwhile, competition on saving rate is becoming tenser and banks are tending to offer allowable maximum saving rate whereas the lending rate is still being controlled. In addition, earning from other services is predicted to be narrowed this year. DT

MONEY MARKET POLICY - SBV pumps $789m into market to ease inter-bank rate

The State Bank of Vietnam has pumped 15 trillion dong (US$789.47 million) through open market operations to cool down an over-heated interest rate on the inter-bank markets where some banks are struggling to accumulate capital.

Commenting on the move, head of Monetary Policy Department of the central bank Nguyen Ngoc Bao said: "Injecting capital through open market operation is a very normal activity for a central bank to balance supply and demand."

I Some banks report that after the initiative, the inter-bank rate was lowered to below 12 percent for short capital, 11 percent for week capital, and 8.5 percent for overnight loans.

The central bank aims to bring the inter-bank interest rate down to around 9%.

I have been said to illegally rise to 16-17 percent per year for two-week to three-month terms. Normally, inter-bank rates were equal to or slightly higher than the refinance interest rate, which currently stands at 8 percent.

"The pumping of the central bank helps ease off a lack of liquidity in many banks," said Nguyen Thanh Toai, deputy general director of Asia Commercial Bank.

Last month, rumours had it that the central bank had injected about 30 trillion dong ($1.5 billion) to support banking liquidity but the central bank denied the bank bailout.

Associate Professor Tran Hoang Ngan at the HCM City Economics University assumed that the lack of liquidity was because banks used up their financial capacity in 2009, especially on the economic stimulus package, and because the speed capital circulating back to banks remained slow.

The Vietnam Bank Association (VNBA) general secretary Duong Thu Huong noted that capital always became scarcer in the latter part of the year, when many firms borrow to payoff loans and settle contracts. "We call1his capital tension a seasonal capital shortage"

In an attempt to attract capital to balance liquidity, some banks are said to have negotiated deposit interest rates with customers bC10nd the 10.49 percent cap set by the central bank and the VNBA.

"We have measures to rationalise financial sheets for these cases," said a bank official who asked to be unnamed, adding: "However, the lack of liquidity at this time is just temporary. After Lunar New Year, everything will be ok."

While banks and customers under the table push deposit rates beyond recommended levels, lending rates now are officially frozen at 12%. That means banks are being squeezed for profits at the very least, with some even posting losses if they entirely comply with the cap.

Commenting on the issue, Le Xuan Nghia, deputy head of the national financial supervisory commission, said: "The market always acts based on its rules. If the market operates normally, interest rates will reflect true capital costs. If there is something unusual, the market itself will adjust. VNS

POWER - Thermo power JSC estimates gaining pre-tax profit of 830b dong

Southern bourse-listed Pha Lai Thermo Power Joint Stock Co (coded PPC) announced earning 2009 revenue of 4.797 trillion dong, exceeding 14 percent of the year plan, in which the total costs were estimated at 3.976 trillion dong and pre-tax profit of 830 billion dong.

The above-mentioned costs also included the foreign debt in yen to be calculated up to the 31 December forex rate.

The company revealed that the two turbines No 2 and 5 continued being put into operation and delayed their general maintenance services in 2010, resulting in the total electricity output in 2009 of 7.357 billion KWh in 2009 and total electricity output sold to Electricity of Vietnam Group (EVN) of 6.62 billion KWh. VNS

ENERGY EFFICIENT BUILDING - Viglacera Land builds 55 ecological villas in North

Viglacera Land Co today January 8 is to start construction on project of building Hoan Son ecological villa area in Tien Du Dist in the northern province of Bac Ninh, about 20 kilometres from Hanoi on Northeast.

The project covering a site of 20.3 hectares with a total investment of 170 billion dong will include 55 garden house villas with 32 villas Grade A, eight villas Grade B and 15 villas Grade C.

Along with ecological garden houses in Bac Ninh province, Viglacera Land also invested in building many industrial zones and office and housing zones, trade centres in Hanoi.

The company's high-ranking project of apartment, office and trade centre in Tay Mo, Tu Liem, Hanoi has recently been started work. DTK

HIGHWAY/TRANSPORTATION PROJECTS - Ministry of transport prepares for investing in Mai Dich-Noi Bai highway project

Ngo Thinh Duc, deputy minister of transport has lately released final decision about preparing to invest in Mai Dich-Noi Bai highway project.

The project of upgrading Mai Dich-Noi Bai route into the highway one will be conducted by Vietnam Expressway Development Co (VEC) and China Bridge and Road Corp.

The investors plan to build a new bridge in accordance with the research proposed by China Bridge and Road Corp with construction scale of four lanes and two lanes for urgent stopping of vehicles.

As for the project's implementation process, after Chinese party finishes its research works, ministry of transport will take responsibility for making report to ministry of planning and investment and ministry of finance before submitting to the prime minister for final approval.CAFEF