Vietnam - News and Regulations

INSURANCE - Optimistic about 2010 insurance market

Insurance is considered as one of the sectors that will see robust growth in 2010.

Pham Quang Tung, director of Bidv Insurance Co (BIC) said that "In 2009, BIC excellently fulfilled its plan with total revenue exceeding the milestone of 548 billion dong while the economy had various changes. Particularly, the company's pre-tax profit in 2009 reached 81.25 billion dong. This is the highest profit within four years of operations, exceeding the company's plan. Following the successes of 2009, this year is considered as an important year during BIC's development path. The year 2010 is seen as the important transitional year for the following development path when BIC becomes a public company.

In 2010, BIC targets at revenue growth of 35 percent, profit increase of 23 percent and keeps one of the top ten positions regarding the insurance market share and the top five regarding return on equity in the non-life insurance market in Vietnam. In order to promote its competitiveness capacity, BIC will continue developing new products, enforcing distribution channels, strongly investing into human resources and improving service quality.

Regarding the organisational structure, the operation model of BIC will also have important changes in line with the model of a public company according to the company's equitisation and share listing plan in 2010.

Speed up to fulfil the target in 2010: Takashi Fujii, chair cum CEO of Dai-chi Life Vietnam

Takashi Fujii said that "Looking back 2009, the general difficulties of the economy, particularly instabilities of the financial market caused significant impact on performances of Vietnam's insurance businesses. However, as for life insurance products with protection features, the changes and instabilities of the market seemed not to impose significant impacts on many businesses. Normally, when the life is more risky, people pay more attention to protection of life insurance. This was demonstrated by the continued increase of insurance premiums in 2009, the growth of the number of offices and agents.

"I can say that I am satisfied with what Dai-ichi Life Vietnam achieved in 2009. We expanded the network of offices together with improving service quality, building strong human resource, investing into a modern information technology system and others. Especially, 2009 is the second consecutive year that the company gained profit with total insurance premium revenue of 744 billion dong, rising by 27 percent against 2008".

"In 2010, we will focus on expanding the network of offices, improving service quality and introducing new product with more utilities, in order to provide clients more options when participating into Dai-icho Life Vietnam's insurance policies. Our market share is now nearly 7 percent and our target is 10 percent by 2012; thus, in 2010 we will speed up to fulfil the target. The insurance market in 2010 is predicted to continue suffering from unforeseeable changes of the economy. However, I still believe that the year 2010 will still be a relatively stable year for Vietnam's insurance market."DTCHK

POWER - EVN plans new power plant projects

Hanoi — National power utility Electricity of Viet Nam (EVN) has said it would generate an additional 2,000 MW from 15 new hydropower and thermal projects nationwide this year.

These projects include Ban Ve, Srepok 3, Dong Nai, An Khe – Kanak, the first turbine group of the Son La hydropower plant, and the second turbine groups of the Quang Ninh and Hai Phong thermal power plants.

EVN will also complete the transmission grid for Ha Noi, a 500-KV transformer station for Pleiku and speed up other transmission projects in the Central Highlands and southern regions to ensure stable power supplies after 2012.

Furthermore, the group will also provide power to remote ethnic minority hamlets in five Central Highlands provinces, for the Khmer people in southern provinces of Soc Trang and Tra Vinh, and for poor households in the two northernmost provinces of Dien Bien and Lai Chau.

The Phu Quoc Island in the southern province of Kien Giang will soon be linked to the national grid through the 110-KV undersea cable system.

The northern province of Son La and southern province of Bac Lieu will get 85-per-cent financial support from State budget to build electricity grids to reach out to remote and ethnic minority areas.

The Sai Gon Giai Phong (Liberated Sai Gon daily) has quoted the corporation as saying it will also submit to the government a report on investment in nuclear power and other plans for the national power grid in the 2008-15 period.

This year, EVN will start constructing six more thermal and hydropower plants with a total capacity of 5,356 MW and prepare for four other projects capable of generating 2,760 MW that will begin construction next year. — VNS

INFRASTRUCTURE - Japanese to help build, maintain infrastructure

HCM CITY — The Japanese government is teaming up with companies from that country to build, operate and maintain infrastructure facilities in emerging markets, including Viet Nam, according to a Japanese daily newspaper.

Their first undertaking in Viet Nam will be three infrastructure projects worth 75 billion yen (US$820 million), the Nikkei said.

The projects, expected to be awarded by the Vietnamese Government as early as next month, include setting up a water supply system in Ha Noi by NGK Insulators Ltd and Metawater Co, installing intelligent transportation systems on a highway linking Ha Noi and HCM City by the Central Nippon Expressway Co, and construction of a bio-mass power plant on the outskirts of HCM City by Electric Power Development Co.

The Japanese government will offer trade insurance and other support in case Viet Nam and other countries delay or suspend payments. It could also offer insurance cover for the projects as a whole, including operations and upkeep.

Japanese firms' involvement in infrastructure projects in Asia and elsewhere has so far been limited to construction and supply of materials.

The projects will focus on nuclear and efficient thermal power plants, water systems, railways, recycling operations, telecommunications and the like.

The Government will draw up strategies to help Japanese firms win infrastructure orders in the next decade or so and consider providing financial support to Japanese consortiums.

Around 2 per cent, or some $1 trillion, of the world's gross domestic product is spent every year on constructing and maintaining infrastructure, according to the Japanese Ministry of Economy, Trade and Industry.

With infrastructure demand to balloon in emerging markets, spending will total an estimated $41 trillion between 2005 and 2030. —VNS

FINANCE - CPI hard to be reined at 7pct

Considering the effects of an increase in prices of essential goods such as petroleum, electricity (from March 1), managers and economists are worried that inflation may exceed the ceiling 7 percent mark.

Right from January, consumer price index (CPI) unexpectedly increased by 1.36 percent, so, many economists simultaneously warned of possible return of high inflation. In February, the market prices saw the highest change in the year. The finance ministry said that purchasing power and demand of people on the lunar New Year holidays unexpectedly increased, namely up 20-30 percent in the urban area, 10 - 15 percent up in the rural area. Particularly, prices of some kinds of vegetables and meat increased by from 100 percent to over 400 percent, prices of overseas tours surged by 30-50 percent. Additionally, vehicle parking and restaurant services also rose by 50 percent to 400 percent. The transport freight reported the highest growth because many businesses collected additional service charges of 40-60 percent of ticket prices for inter-province routes.

An expert from the finance ministry's price management department said that in recent years, the pricing rule has been broken due to the impact of various internal and external factors. Normally, the whole first quarter accounts for up to 50 percent of CPI of the full year. This year is also not exceptional when in the first two months alone, CPI climbed up to 3.35 percent against December 2009. Meanwhile, early March, the electricity price will be increased, hence, CPI would hardly surge lowly or keep the same as other years. Therefore, the risk of high inflation increase exists.

Director of the price management department Nguyen Tien Thoa said that when building the inflation criteria of 7 percent, experts have already considered such factors as the increased prices of petroleum, electricity, salary as well as the world's price trend as predicted by big economic organisations. In order to control inflation, it is necessary to simultaneously carry out such measures as regulating the monetary, price, fiscal, export-import, market policies.

Nguyen Duc Thang, vice director of the general Statistical Office's trade-service-price department, said that "as usual, the CPI increase of 3.35 percent in the first two months should not be worrying because this is also equivalent to the increase of the period of 2003-2007 when inflation and recession had not existed. The risk of high inflation will likely appear in the middle of the year when the delay of the monetary loosening policy starts together with the general price growth due to the economic recovery. This may be the unusual movement of CPI compared to the rule of other years." Thus, reining inflation at 7 percent is not easy.

According to GSO, CPI in February increases by 1.96 percent against January, and the highest growth since July 2008.NGLD

STOCK MARKET - SBV holds line on prime rate

State Bank of Vietnam (SBV) has announced to keep the prime rate of dong at 8 percent pa in March 2010. Whether this is an optimistic signal for the development prospect of Vietnamese stock market is a million dollar question?

The finance market factually is reacting positively to the information on basic rate adjustment.

Usually, central banks monitor the monetary policies by financial tools such as discount rate, compulsory reserve ratio, open market operations (OMO), and regulations on lending rate for commercial banks based on chartered capital/ownership capital or deposits. In Vietnam, along with the above tools, SBV controls the monetary market by basic rates plus administrative measures.

Previously, the basic rate was used as a rule to deal with usurious lending. Accordingly, Clause 476 Civil Law 2005 regulated that the market's lending rate was not allowed to surpass 150 percent of basic rates fixed by Central Bank.

Basic rate became a useful tool by the start of 2008 when the lending rates continuously climbed to new highs and banks raced to hike deposit rates. At present, the basic rate is used to regulate the ceiling lending rate for the credit market according to Decision No 16/2008/QD-NHNN. Also, the basic rate is for SBV to fix the ceiling deposit rate of commercial banks.

In later half of 2009 when the government's economic stimulus package ended and the post-crisis capital demand was on an upward trend, basic rate tool could not be promoted effectively like previously. With the basic rate of 8 percent pa, the ceiling lending rate is curbed at 12 percent pa and the negotiated deposit rate is 10.5 percent pa at highest. However, the real interest rates on the market surpassed both above ceiling levels. Lending rate factually stands at 17-18 percent pa while the deposit rate is common at 13-14 percent pa.

According to the latest announcement of SBV, March will be the consecutive fourth month the basic rate is kept at 8 percent pa, showing that SBV seems to popularise the message that inflation is still under control. The authority committed to maintain the basic rates at a suitable level to stimulate the economic growth.

Reportedly, February Consumer Price Index (CPI) surged 1.96 percent month on month. During the first two months of 2010, CPI has increased by 3.35 percent against the full year's 7 percent target. Compared with the previous years, February CPI of 2010 was higher than February CPI 2009, but much lower than February CPI of 2002 to 2008. Average CPI of the seven years rose by 2.54 percent and all February CPI rise was over 2 percent. Therefore, the CPI of February 2010 is not worrisome. A surge in February CPI of 2010 came from the prolonged Tet holidays and the impacts of forex rate adjustment.

To help credit institutions avoid the affects of ceiling lending rate regulation, last January 23, 2009 SBV issued Circular No 01/2009/TT-NHNN allowing credit institutions to carry out the negotiated interest rate for consumer loans. Accordingly, credit institutions could be allowed to lend medium and long term loans at negotiated rates. Meanwhile, they could collect extra fees on short term loans. If these become true, banks could raise capital more easily and the transparency in corporate business expense will be improved.

Specialist forecasts that it will take some time to ease the market's real interest rate. However, 2010 CPI is not too alarming. Real interest rates are moving close to the peak.SN

FOOTWEAR - Footwear exports to top $6.2b

Leather and footwear exports could top $6.2 billion this year, according to the Leather and Footwear Research Institute. They were worth $5.3 billion last year.

The leather and footwear sector has posted impressive growth in recent years to become the third biggest export earner behind garment and textile and crude 011, the Ministry of Industry and Trade-run institute said.

There are more than 700 firms operating in the sector, employing 700,000-750,000 workers, of whom 80 percent are women.

But with 70 percent of these firms merely doing subcontracting work for foreign companies, their techniques, technologies, and designs depend completely on their foreign principals.

Besides, with the industry importing most raw materials, Vietnamese footwear products see little value-addition, experts said, noting that their competitive advantage in terms of prices over rivals like

China, India, Indonesia, and Thailand is also gradually shrinking.

To develop sustain ably and become more competitive, the sector needs to restructure and increase the local content rate, they said.

It should upgrade technologies, expand the product range, and improve quality to meet the increasing demands of consumers, they said.

They urged the industry to hire designers and create its own designs rather than just wait for orders and make products based on designs provided by the buyers.

To capture the domestic market, footwear firms should research the market and expand distribution networks, they said. The industry now exports up to 90 percent of its output.

Vietnam ranks fourth globally in footwear exports, selling its products to 50 countries and territories, with the EU, US, and Japan being the main buyers.

The main export items are sports, canvas, and leather shoes and sandals.VNS

FOREIGN DIRECT INVESTMENT - Jan-February FDI attraction rises by 5 times

In Jan-Feb, Vietnam has attracted 88 new foreign-invested projects worth registered $1.8 billion of FDI, reported Foreign Investment Department.

Similarly, HCM City's FDI attraction hit over $300 million with 29 projects. The city governance is considering licensing some real estate projects with total estimated cost of over $3 billion.

With $920 million for two FDI projects registered in the first two months of 2010, Ba Ria Vung Tau becomes the top province in FDI attraction.TT

REGIONAL TRADE - Vietnam-India trade turnover targets $5b in coming years

Chair of the National Assembly, Nguyen Phu Trong recently paid a five-day official visit to India (February 23 to 28) and Indonesia (February 28 to March 3) confirming the hope of promoting the close tie between Vietnam with these two countries.

In India, Trong had important talks with India's high-ranking leaders and participated in Vietnam-India Business Forum and inaugurated ceremony of "Vietnamese days in India" programme.

At the meeting with chair of Indian lower house of Parliament, Meira Kumar, Trong highly praised India's helps on equipments, technology and training and suggested the two partners should continue to promote cooperation in coming years too. Especially, after the Asean-India Trade in Goods (AITIG) was signed, Vietnam-India two-way trade turnover could reach $5 billion in coming years.

Meira Kumar also said that India National Assembly will create favourable conditions for Vietnam's enterprises to seek investment opportunities in India.DT