Vietnam - News and Regulations

FINANCE - PROFIT HORIZON - Banks report robust fiscal year

In comparison with first three quarters of 2009, the increasing impetus of banks' profit in Q4 tumbled sharply because the gap between lending and deposit rates was nearly flat. But, the full year's profit performance of banks was very impressive, surpassing far 2009 targets.

Especially between Q2 and Q3, the banking profit mainly came from the earnings of credit activities thanks to the government's lending rate subsidisation programme. Also at that time, banking profits nearly fulfilled the full year's plan.

For example, Sacombank's 2009 pre-tax profit was announced at 1.901 trillion dong (excluding the combined profit from member companies) after deducting money for the risk prevention fund. In December alone, the bank reported earning 243 billion dong in profit. In the profit structure, the bank's earnings from credit activities accounted for 25.5 percent and the remainder was from other service and profits.

Ly Xuan Hai, general director of HCM City based Asia Commercial JS Bank (ACB) said in a statement that that lending leapt 81 percent in 2009, more than double the credit growth in the banking sector as a whole of 38 percent. It had forecast 2.7 trillion dong in profit. ACB's total assets reached 171.95 trillion dong, a surge of 63.2 percent from 2008, it said. ACB shares were trading down 600 dong at 37,000 dong at 0311 GMT on Friday. Notably, its combined profit reached 2.818 trillion dong, of which 20 percent from credit operations, 26 percent from service provision, 4 percent from interbank capital business, 24 percent from bond business and 25 percent from other profits. Capital Adequacy Ratio (CAR) of ACB was posted at approximately 40 percent.

Similarly, at Maritime Bank, the turnover from credit activities in 2009 made up 25 percent of its total profit. Till December 31, the profit from business was closed at 1.084 trillion dong, growing by 132 percent year-on-year and exceeding nearly 500 billion dong against the last year's plan.

Talking with Dau Tu Chung Khoan, Tran Anh Tuan-general director of Maritime Bank said, high profit from lending operations was thanks to the surge in revenue of non-credit services (derivative service, bond, debt securities and other services).

On the interbank market, Maritime Bank is considered to be the potential and prestigious partner. Total assets of Maritime Bank till late 2009 hit 60 trillion dong. According to annual report, the 7-day payment capacity of Maritime Bank is always at over 1.75 percent. This is also the firm development basis of Maritime Bank.

As for Bank for Investment and Development of Vietnam (Bidv), total assets reached 300 trillion dong on December 31 while its deposits totalled at 194 trillion dong, total pre-tax profit was estimated at 3.450 trillion dong and the bad debt ratio at 3 percent (lower than 2008's 4 percent).

According to Nguyen Duc Vinh-general director of Techcombank, 2009 pre-tax profit obtained 2.138 trillion dong, bringing the united profit to 2.250 trillion dong after deducting 550 billion dong to the risk standby fund.

Meanwhile, Vietinbank posted total profit of 3.018 trillion dong, total deposits of 221.700 trillion dong, total outstanding loans and investment of 218 trillion dong. Lending and investment operations occupied 91 percent of the bank's total assets. Till late 2009, total outstanding loans for the economy Vietinbank provided reached 162.3 trillion dong. DongA (Eastern Asia) Commercial JS Bank estimated total pre-tax profit at 782 billion dong, average deposit balance at 33.392 trillion dong in 2009.

Although have not revealed 2009 business results, Eximbank said it would early finished the year's profit target of 1.5 trillion dong.

Ending 2009, HCM City Housing Development Commercial JS Bank (HDBank) publicised 2009 business performance with 19.140 trillion dong in total assets, 17.119 trillion dong in deposits, 8.231 trillion dong in total outstanding loans, bad debt ratio of 1.1 percent, and pre-tax profit of 255 billion dong. The figures of ABBank were 26.576 trillion dong, 15 trillion dong, 12.883 trillion dong, and 415.57 billion dong profit. Additionally, ABBAnk's charter capital in 2009 was raised to 3.482 trillion dong.

With the optimistic signals from the economy, ABBAnk strikes to maintain the growth at 30-40 percent in 2010 and earn 550 billion dong in pre-tax profit, total assets of 35 trillion dong and a charter capital of 3.8 trillion dong.

Up to the end of last December, Sacombank posted the bad debt ratio at 0.69 percent. Its total capital surplus and funds attained 2.095 trillion while ACB's ratio was 0.42 percent. Sacombank's 2010 profit is targeted at 2.6 trillion dong.

Thanks to the low bad debt ratio, banks' money deduction for risk standby fund in 2010 is expected to be less than 2009 along with higher profits.DTCHK

SOVERIGN BOND MARKET - Vietnam to sell $1b of 10-yr debt next week

Vietnam will start marketing $1 billion of dollar-denominated 10-year bonds next week amid the busiest start of a year for sovereign emerging-market debt in at least a decade.

The government hired Barclays Capital, Citigroup Inc. and Deutsche Bank AG to manage the sale, said a person familiar with the matter, who declined to be identified before a public announcement. deputy Finance minister Tran Xuan Ha will meet investors in Hong Kong on January 18, London on January 19, Boston on January 20 and New York the following day, the person said.

The sale of Vietnam's second dollar bond will test investor confidence in the nation, shaken by accelerating inflation and a decline in the dong to a record-low. Indonesia this week sold $2 billion of 10-year bonds at a higher yield than last week's sale by the similar-rated Philippines, after scaling back the offering and cancelling plans to sell 30-year debt.

"There are still pockets of money looking to invest but the market is coming off a bit and getting more selective," said Felix Dornaus, an emerging-market bond investor in Vienna at Erste Sparinvest KAG, which owns Vietnam sovereign bonds among 27 billion euros ($39 billion) of assets. "There's some scarcity value to Vietnam bonds and it could do well in that sense."

Demand for developing nations' dollar debt is ebbing after governments sold $10 billion of bonds overseas this year, twice as much as the $4.5 billion in the year-earlier period, according to Bloomberg data. Turkey, Mexico and Poland also sold foreign-currency bonds this year.

Widening Spreads

The spread between yields on emerging-market debt and US Treasuries has widened nine basis points to 2.79 percentage points in the past week, after declining 4.16 percentage points in 2009, according to the JPMorgan Emerging Market Bond Index Plus. A basis point is 0.01 percentage point.

"As the global credit markets are starting to normalise there is demand at this point in time," said Joseph Lau, a Hong Kong-based economist at Credit Suisse Group AG. "It still represents at least an opportunity for them to raise capital offshore."

Vietnam is rated Ba3 by Moody's Investors Service, three levels below investment grade. The government in October 2005 raised $750 million by selling 10-year bonds, then lent the proceeds to Vietnam Shipbuilding Industry Corp., known as Vinashin.

The 6.875 percent securities maturing January 2016 traded at 3.5 percentage points more than similar-maturity Treasuries yesterday, compared with 2.8 percentage points three months ago, according to data compiled by Bloomberg. The bonds were issued in 2005 at 2.56 percentage points more than US government debt.

Financing Needs

Vietnam's government, as part of a two-decade-old reform process known as 'doi moi,' or renovation, needs funds to build roads and power plants as the population expands. deputy prime minister Nguyen Sinh Hung said in November that it will use the money raised from the dollar bond issue for energy projects.

Proceeds may also help ease a shortage of dollars in the country. The dong declined 5.4 percent against the dollar last year. It traded at 18,474 as of 3 p.m. in Hanoi.

"They have virtually unlimited needs for financing," said Jonathan Pincus, an economist with the Vietnam Programme at the Harvard Kennedy School in HCM City. "They have to finance their budget deficit and they have plenty of infrastructure needs. Power is a major issue, there are roads and railroads to build."

Vietnam has about $16 billion in foreign-exchange reserves, central bank deputy Governor Nguyen Van Binh said in Hanoi on December 3. The World Bank estimates the nation's reserves totalled $23 billion at the end of 2008.

Supply

Vietnam said on January 13 that it plans to almost double the amount of its local-currency bond sales this year to meet spending requirements as about half of its existing debt matures.

The Ministry of Finance intends to sell 100 trillion dong ($5.4 billion) of debt, up from 56 trillion dong originally planned. About 70 trillion dong of government debt will mature this year.

An increase in supply may drive up dong-denominated bond yields, which are rising on concern that inflation will quicken, according to a report from Bank for Investment & Development of Vietnam, the country's second-biggest lender. The Vietnamese government sold less than a third of the 100 trillion dong of bonds it planned in 2009 because investors demand higher yields.

"They're not willing to pay the premium that people demand for dong bonds so they have to go overseas and sell dollar bonds," Pincus said. "If they can get a reasonable price, it's the right thing to do."DTCHK

Bond market promises robust growth this year

With more attentions of big investment organisations, the bond market promises stronger development in 2010.

Currently, in the world, some countries use only nine government bond codes, while others have nearly 20 government bond codes. Meanwhile, Vietnam has over 500 government bond codes with different terms.

According to a representative from the finance ministry, the ministry is considering setting standards terms, volumes for each issue time and accordingly the ministry will repurchase retailed government bond codes in the market.

Some experts said that with the recovery of Vietnam and the world's economies, demand for different kinds of government bonds and corporate bonds in Vietnam have continued recovering quickly. Namely, in recent months foreign investors have paid much attention to different kinds of Vietnam's corporate bonds.

In addition to government bonds, corporate bonds are also a kind of potential commodities that attract much attention of big financial organisations. With strong increased demand for capital by businesses, the upcoming time promises more commodities for the corporate bond market.

Many experts said that the land for the corporate bond market in Vietnam remains widely open because it has been nearly untapped.

Hoang Huy Ha, chair of Vietnam Bond Association, said that Vietnam's bond market's scopes is only 17 percent of total GDP while this figure in China is 53 percent, in Thailand 58 percent, in Singapore 74 percent and in Malaysia 82 percent.

Currently, in the structure, corporate bonds account for only 10 percent of total bonds, Vietnam Development Bank's bonds 33 percent and the remaining volume is government bonds and provincial bonds.

In fact, the number of businesses paying attention to raising capital via bond issue is increasing very fast. In 2008, only two or three businesses issued bonds but in 2009, this figure was 15 with total value of 20 trillion dong.

With such a trend, experts said that in 2010 and following years, the number of businesses issuing bonds will continue increase quickly. Additionally, in 2010, there would be some favourable factors for businesses' raising capital via bonds when the credit channel from banks becomes tougher.DT

INSURANCE - Life insurance firms plan to launch competitive plans in 2010

During the year 2009, although the economy in general and banking and finance market in particular witnessed ups and downs, as for life insurance firms, 2009 still was considered a good year.

These life insurers are starting 2010 with many competitive plans to occupy market share. Along an aim of bringing life insurance products closer to inhabitants, the more important point as for life insurance is trade-mark and prestige to customers.

With a satisfactory business result in 2009 of 39 percent growth against 2008, Dai-ichi Life Vietnam said that the year 2009 was the second consecutive year it posted high profit with total insurance premium of 744 billion dong. Hence, Dai-ichi Life Vietnam affirmed that this year will be the company's speed-up year.

"2010 is regarded as an important year as for Dai-ichi Life Vietnam because the company has finalised preparing infrastructure as well as human factor and strategic finance to launch to the market" said Takashi Fujii, Dai-ichi Life Vietnam's general director.

Takashi Fujii added in 2010, his firm plans to open at least 10 business offices and upgrade quality for insurance agent system towards more professionally. The company will also study to launch more new products to market.

Dai-ichi Life Vietnam targets to reach 8 percent market share of life insurance in 2010 and it is expected to be 10 percent by 2012.

At present, there are about 5 percent of Vietnamese people buying life insurance products while there are over 120 million Japanese people buying life insurance products (averaging one Japanese person owns two life insurance products). Thus, Vietnam's life insurance market potential is very big and Vietnam's life insurers need to strive to build a healthy and professional market, according to leader of a life insurer.

Also with satisfactory business results in 2009 of over 200 percent last year's plan, in the marketing plan in 2010, Korea Life will spend some three billion dong on social activities and supporting community.

AIA Vietnam also ended 2009 with good performance such as 75 percent growth of first year insurance premium and 25 percent growth of total premium against 2008. AIA Vietnam said that is prepared to increase chartered capital from 970 billion dong to 1.026 trillion dong and develop stronger in Hanoi market via opening more branches and offices.

"AIA Vietnam will also open more offices and branches in provinces and cities to provide its life insurance products to inhabitants more easily. In addition, AIA Vietnam is mapping out plan to upgrade customer care centres. As planned, till the end of 2010, the company will complete upgrading and putting into operation 10 modern customer care centres including centres in provinces and cities such as Nha Trang and Da Nang" according to representative from AIA Vietnam.

Representative from ACE Life stressed that building a standard operation system along with a strong corporate culture will be core issues of ACE Life in 2010 in order to perfect its image to customers.

In fact, although each life insurer builds its own strategies to develop its image in the market, the common point of life insurance companies is offering the best products to customers. Therefore, in 2010, life insurers will make focuses on perfecting customer service system with the best products. Additionally, this year, life insurers will launch more new products with more value added services.VNS

Foreign Direct Investment - Provincial Competitiveness Index

Da Nang still most competitive in 2009

Da Nang City continued to be the most preferred business destination for entrepreneurs, according to the 2009 Provincial Competitiveness Index (PCI) to be officially released today in Hanoi.

The central coast city is given a score of 75.96 points, slightly ahead of the southern province of Binh Duong with 74.01 points, while Lao Cai, Dong Thap and Vinh Long also emerged as three of the best performers, according to the PCI 2009, which measure governance in the country's 63 cities and provinces.

Rankings of other major cities remain stable, with HCM City taking the 16th position with 63.22 points, Hanoi on the 33rd place with 58.18 points, while Dong Nai ranked the 18th with 63.16 points and Ba Ria¬-Vung Tau on the 8th place with 65.96 points. Cao Bang, Dale Nong, and Bac Kan-at the bottom of the rankings-still require the most improvement in provincial governance.

The PCI 2009 is the result of a major, ongoing collaborative effort between the Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency for International Development (USAID)-funded Vietnam Competitiveness Initiative (VNCI). The Saigon Times Group serves as the official media organisation for the annual survey since its first launch in 2005.

The organisers have conducted polls among 9,890 Vietnamese enterprises. Respondents are random1y selected from a list of registered private firms that is supplied by the National Tax Authority, stratified by business age, sector, and legal form. The process ensures a highly representative sample.

The PCI research team notes that many localities have exerted tremendous efforts to improve their rankings. They included Ca Mau, Dien Bien, Long An and Thua Thien-Hue.

In particular, Dien Bien slashed informal charges substantially, enhanced the proactively of its leadership and boosted the quality of labour and training. Meanwhile, Ca Mau moved up the ranking table thanks to its lower market entry costs and informal charges. Long An and Thua Thien-Hue fared better in 2009 as both managed to improve transparency, making it easier for locals to gain access to their official documents.

In 2009, the weight assigned to each sub-index was recalculated to reflect the operations of the economy and changes in Vietnam's institutions. Sub-indices that left the greatest influence on growth, investment and returns in the private sector were given the highest weight (20 percent) - namely, transparency as well as labour and training.

2009 was also the fifth consecutive year in which transparency was given the greatest weight although the methods used to calculate PCI were already adjusted to better reflect reality.

Land access and legal institutions, which were given the lowest weight (5 percent), were actually important. However, since the scores of Vietnamese localities in both aspects were mostly dismal and similar, the impacts of both factors on the development of the private sector were not significant. To improve their scores on both sub-indices, local authorities would need not only initiatives of their own but also broader policy reforms on a national level.

Positive trends

According to the latest PCI ranking, the median score continued to rise, showing that local economic governance was remarkably better in 2009. Five of the nine sub-indices posted significant improvement.

Regarding market entry costs, the research showed that the time taken to register business fell from 12.25 days to 10 days. The time cost of regulatory compliance also improved after years of stagnation. The total time taken for business leaders to carry out administrative procedure also dropped from 22 percent to 15 percent while the average tax inspection time decreased from eight hours to five hours. In other words, administrative reforms brought about considerable improvements.

The scores on land access, labour and training, and legal institutions also rose drastically.

Remaining challenges

Transparency, which had the highest weight, already made great strides for several years, but a reverse trend arose last year.

Access to provincial documents and plans was diminished in general. The proportion of enterprises which deemed it necessary to foster rapport with authorities to gain access to provincial documents related to their business returned to the level of2006 (about 61.26 percent). Similarly, the percentage of enterprises which found the implementation of central laws on provincial levels predictable or which had to negotiate with tax officers resembled that in 2007.

Notably, enterprises found it easier to access legal documents such as decrees and documents guiding the implementation of central laws than to obtain provincial documents such as budgets, zoning and land use plans, as well as incentives.

The research team cited a report by experts to observe that the government started to use official letters instead of legal documents. The government issued 9,470 official letters relating to legal issues in 2005-2008, three times as much as it did in 1987-2004. Before 2004, a locality had 19 official letters and 81 legal documents on average. The figures have changed to 55 and 45 respectively. Consequently, legal documents have proliferated, making ties with the authorities especially important.

Business plans

Business plans fleshed out by enterprises for the following two years are an important part of PCI surveys. PCI 2009 is announced when business sentiments are on the wane despite more upbeat macroeconomic forecasts.

According to the surveys, only 65 percent of the private enterprises plan to expand production and business in the next two years, lower than the figures for 2008 and 2007 (78 percent and 77 percent). Small enterprises were more adversely affected by the global economic turmoil, so only 47 percent of them wanted to scale up their operations.

Enterprises hoping for bigger operations mostly choose Hanoi, HCM City and Da Nang as the best locations to increase investment thanks to their attractive markets. However, if this factor was not taken into account, Binh Duong and Vinh Phuc would become the preferable choices by virtue of their high quality of economic governance.sgtd

FOREIGN INVESTMENT - Vietnam an attractive destination for foreign investors

Germany's EMFIS news provider last weekend assessed that Vietnamese economy in 2009 had grown strongly but its inflation remained at dangerous level.

Vietnamese stock market increased sharply when entering the first trading sessions of 2010. Particularly, the VN Index on January 14 surged to 534 pts and has soared by nearly 8 percent so the year early, marking the highest growth in Asia.

The positive development of Vietnamese stock market led to a number of notable things, in which Letindex of Vietnam in recent months was very low. In the forth quarter of 2009, Letindex was below 1.9 percent, the lowest level in Asia.

The recovery of the Vietnamese stock market in the last days had many reasons. First off, Vietnamese government released some interventions to loosen share transactions. In addition, the disordered gold trading will be suspended till late March 2010. Also, initial statistics on the 2009 economic growth of Vietnam (that had been announced already) were at high prospect. In details, total Gross Domestic Product (GDP) of Vietnam last year still grew by 5.32 percent against 2008's 6.18 percent despite the financial crisis. GDP surged again in the last half of 2009 especially that of Q4 2009 rose by 6.9 percent. The economic recovery was been shown clearly by the money supply.

In 2009, the money supply for lending of banks increased by 38 percent year-on-year, mainly in construction field which helped supporting the domestic economy.

EMFIS said that Vietnam, along with China and India still is one of few nations overcoming the financial crisis without any "tattoo".

According to EMFIS, in medium term, Vietnam will continue being one of countries attracting the global attention with the wave of privatisation, modernisation and urbanisation are continued and the prospectus of many social classes keeps growing.

International investors forecasted that in next years, there will be billions of US dollar being pumped into Vietnam's economy.VNS

WORLDBANK ON VIETNAM’S TRADE LOGISTIC - Vietnam stands at 53rd grade in trade logistic index, WB report

World Bank last Friday announced the ranking list of Logistics Performance Indicators - LPI of 155 economies, which was led by Germany, Singapore standing at second position and China at 27th.

The report was based on the overall survey on the international commodity transportation sector. In which, Vietnam ranks 53rd position in terms of WB's trade logistic index report. Vietnam with China, India, Uganda, Thailand, Philippines and South Africa are the developing countries showing special signals on the logistic industry.

Chair of WB, Robert Zoellick said that the economic competition unintentionally made the countries more flexible in improving the trade logistic operations, upgrading the business efficiency, reducing costs and boosting the economic growth.

More suitable connection between producers and international market will result in the bigger development and investment opportunities, that are also the major concerns in the development strategy of developing countries, Robert Zoellick added.

According to Otaviano Canuto-vice chair of WB, the developing countries should invest better in logistic sector to escape from the crisis.DTCHK

CONSTRUCTION - Construction investment for 2010 estimated at 42tr dong

Ministry of Construction estimated total investment for its member companies in 2010 at nearly 42 trillion dong, up 22 percent year-on-year.

In 2009, the entities under Construction Ministry carried out 437 among 563 projects with total value of 30.950 trillion dong, reaching only 92 percent of the year plan.

In the urban technical infrastructure, social infrastructure and housing field, there were 313 projects with the actualised capital of 13.870 trillion dong, accounting for approximately 44.8 percent of the total figure of 2009.

Many enterprises were active in accessing and borrowing soft loans at 4 percent pa from the government's demand stimulus package for developing production and investing in new projects.

According to the Ministry of Construction, the real estate is the investment field with high profitability compared with other sectors but it contains a lot of risks if being short on experience and financial strength. Together with property giants namely HUD, Song Da Corp, Viwaseen and Viglacera started joining the new playing ground. Many entities began research and construction on housing projects for students, and low income earners.

Business - PetroVietnam surpasses 2009 business plan targets

Vietnam National Oil and Gas Group (PetroVietnam – PVN) announced surpassing the 2009 targeted business plan, in which the total drilling output of crude oil exceeded 2.8 percent, gas exploration of 0.1 percent and production output of nitrogenous fertiliser of 2 percent.

The group reported achieving significant financial results of total revenue of 265.02 trillion dong, equal to 125 percent of year plan, contributing to state budget of 91.05 trillion dong, or 148 percent of year plan, export turnover of $7.82 billion, or 134 percent of the year plan.

The year 2009 was the first time in the past four years that PetroVietnam has fulfilled the year plan of oil exploitation with total production output of 16.3 million tonnes, or 440,000 tonnes higher than the year plan. The group's total oil-based exploitation volume was estimated at 24.31 million tonnes, equal to 102 percent of the year plan, up 8 percent against the previous year. The crude oil export was posted at 16.29 million tonnes, or 105 percent of the year plan, up 11.5 percent year-on-year.

PetroVietnam targeted to increase the national reserve of 35-40 million tonnes of oil. The group planned to reach total oil production volume equal to 92 percent compared with that of 2009, gas production of 99.9 percent, nitrogenous fertiliser of 99 percent, power production volume of 117.7 percent, output of petroleum products of 350 percent and crude oil supplies for Dung Quat Oil Refinery of 229.7 percent.cafef

TELECOM - Viettel attains 10tr dong profit in 2009

Military Telecommunications Corp (Viettel) has recently released business results in 2009 with 60 trillion dong of revenue, increasing 80 percent against 2008's figure, 10 trillion dong of profit and over seven trillion dong of tax payment, according to Nguyen Manh Hung, Viettel's deputy general director.

As planned, the company will invest in 10-15 countries by 2015 and the company's revenue from foreign markets will be higher than that from domestic market.

Hung said that during past five years, Viettel's revenue increased 52 times.

Viettel has also invested some $250 million in Laos and Cambodia and is the telecom firm with biggest infrastructure in these markets.

During 2009, Viettel's revenue from foreign markets gained over $70 million and it is expected to be $300 million in 2010.

In February 2009, Hung said that his firm would invest about $60 million in the Republic of Haiti. Viettel is also promoting to invest in Burma, Bangladesh, North Korea, Angola and Cuba.

In 2010, Viettel set a target of 60 percent growth. Also from 2010, Viettel will officially carry out new strategy: studying, designing and providing telecommunications equipments. The telecom provider expected to gain $100 million of revenue in 2010 from this field.CAFEF

VinaPhone signs $70m contract with Motorola for expanding GSM network

Motorola Group announced on January 14 that its member company of Motorola mobile information network has recently signed a contract valued $70 million with VinaPhone.

Accordingly, in the next two years, Motorola will support VinaPhone to set up additional 3,000 BTS stations, expanding 2G coverage area in provinces in northern and southern regions, especially in large, crowded cities of Hanoi and HCM City.

The signed contract between two parties resulted from achievements during the period when Motorola supported VinaPhone in launching 2G and 3G mobile network services.

The GMS network with large coverage area will help VinaPhone in upgrading capacity to meet the increasing demands of telecommunication services in urban areas and high quality services with wide coverage areas in rural and urban services.TBKT