Vietnam - News and Regulations

FOREIGN DIRECT INVESTMENT - FDI disbursement speeded up

Many predictions have showed that Foreign Direct Investment (FDI) inflow into Vietnam will be more satisfactory in 2010. However, the problem is how to effectively disburse this important capital source.

According to the Overseas Investment Department under the Ministry of Planning and Investment (MoPI), disbursed FDI capital in January reached about $400 million meanwhile new registered and raised FDI capital was $318 million.

In February, FDI disbursement reached $700 million, bringing the total figure during Jan-February to $1.1 billion, up 10 percent against the same period last year.

This is significant in the context that new FDI attraction and raised FDI capital decreased. In Jan-Feb, total FDI attraction and raised FDI capital reached only $1.78 billion, or 27.3 percent compared to the same period last year.

FDI disbursement is a big problem. In 2008, the country drew over $64 billion of registered FDI capital and it was over $21 billion of pledged FDI in 2009. But, FDI disbursement in 2008 and 2009 reached only $21.5 billion, equalling to 25 percent of total registered FDI capital.

Phan Huu Thang, former head of Overseas Investment Department, recommended that country should focus on disbursement and carrying out effectively signed FDI projects instead of focusing on seeking new FDI projects.

"Transferring from pledged capital into actualised capital is a big challenge. Especially in the limited current conditions on scale of economy, development of infrastructure as well as management capacity, it is hard to expect about an attractive disbursed FDI capital" said Thang.

The main concern of foreign investors is infrastructure. The amount of capital spent on building a modern and large port area will lose effect if infrastructure such as road system or electricity supply does not meet the operation capacity.

Ground clearances also worry many investors, especially in real estate sector.

Minister of planning and investment, Vo Hong Phuc, said this year the government will focus on solutions on law and policies, schemes, infrastructure improvement, manpower preparation, state management and investment promotion.

Information from localities showed that many big FDI projects will be started in forthcoming time such as Guang Lian Dung Quat steel mill project ($3 billion), Safari zoo project ($200 million) in the southern province of Ba Ria-Vung Tau, Vietnam-Singapore service and industrial urban zone project ($100 million) in the northern city of Hai Phong.vietstock

BANKING - Solutions to deal with banks' liquidity shortage

Both enterprises and banks need not only a fully negotiation based lending rate mechanism (meaning that negotiated interest rates should be applied on all short, medium and long term) but also a fairly low interest rate band of 12-13 percent pa to develop production and ensure the economic growth of 6.5 percent this year. Both demands are controlled by State Bank of Vietnam (SBV).

Central Bank reported that before Lunar New Year and banks were in surplus of 13 trillion dong of spare capital that now has increased to 30 trillion dong.

However, vice head of National Assembly's Economic Committee, Vu Viet Ngoan told Lao Dong newspaper on March 5 that the sum of money of 30 trillion dong is usually used to meet liquidity of commercial banks.

In fact, credit institutions could not be in excess of spare capital because the capital mobilisation in the first two months of 2010 fell by 0.17 percent year-on-year. If the ceiling deposit rate and lending rate are still maintained at 10.50 percent (based on SBV's basic rate of 8 percent pa), bank capital still cannot come to enterprises and consumers because of high lending rates despite the negotiated rate is imposed on short term loans.

The lack of smooth capital flow is affecting to credit growth and Q1 GDP of 2010. Lately SBV reported that the credit growth of last December rose by 0.72 percent month on month, +0.26 percent in January and +1.14 percent in February. Meanwhile, general payment means in Jan-February increased by 1.39 percent.

But previously, on www.sbv.gov.vn, Central Bank announced the December credit growth (2009) at 0.87 percent and January 2010 at 1 percent. In January alone, general payment means was estimated to surge 1.5 percent and total deposits increased by 0.3 percent, meaning that general payment mean of February is a negative number along with the sharp reduction of capital mobilisation in Feb, hence the capital mobilisation in the first two months of 2010 fell by 0.17 percent.

The difference between two report periods was high. Whether is the February credit growth of +1.14 percent exact when both capital mobilisation and general payment means were posted at negative figures?

State Budget also is facing difficulties because of interest rate problem. Despite an increase in the tax collection, there was not enough money to offset the budgetary deficit. To compensate the budgetary overspending, the state relies on issuing government bonds. Last year the bond issue was gloomy and seemed to be worse in 2010. In the first G-bond issue tranche on January 15, the Ministry of Finance (MoF) sold 75 billion dong of two-year bonds at coupon rate of 11 percent/year among 1.5 trillion dong of bond offering under the guarantee of CitiBank Hanoi.

During the second tranche on January 26, only two billion dong of 1.5 trillion dong of G-bonds were sold to Vietcombank Securities Co. Announcement on the third bond issue tranche was released on March 2, 2010 but to date no one has registered to buy because MoF's coupon rate of 11 percent pa was lower than the bidding rate of 13-14 percent pa. However, the finance ministry cannot raise the coupon rate higher then the SBV's ceiling lending rate because the coupon rate of G-bonds is one of standard interest rates of the market.

Late 2009, the state budget had to advance tens of billion of dong of deposits (of State Treasury, of insurance firms mainly Bao Viet Group and some other state groups) for spending. For this move, state groups withdrew deposits from banks, leading to the liquidity shortage of banks. Finally, banks were forced to enhance capital mobilisation from residents through pushing the deposit rates.

This year the demand for issuing G-bonds is expected to be higher, hundreds of trillion of dong, to offset the budgetary overspending and pay the money advance of 2009, Le Duc Thuy-chair of National Finance Supervision Committee told Saigon Economic Times (Thoi Bao Kinh Te Sai Gon). One of the most feasible measures is that SBV should offer short term advances to the state budget in order to surmount the temporary liquidity shortage. State Budget will pay the advances within that fiscal year, which was allowed by Law on State Budget.

National Finance Supervision Committee proposed MoF to issue short term bonds (3-6 months) with the coupon rate of 8 percent pa to the SBV. Central Bank will buy those bonds by deposits and compulsory reserve capital of credit institutions. By this way, State Budget will have money to pay advances to the State Treasury and state groups. After that State Treasury and groups will re-send the sum of money to banks. As reported, the capital mobilisation of the whole banking system during the first two months of this year decreased mainly because deposits of economic institutions slumped 5.94 percent. Once State Budget refunded the advanced money items, the gap of 5.94 percent will be fulfilled.

Earlier, enterprises enjoyed the lending rate subsidisation of 4 percent pa while borrowing bank loans at 6.5 percent in 2009, but now they have to manage capital hard with the lending rate of 18 percent pa. So now the liquidity of commercial banks should be raised soon and become urgent problem.VNS

INSURANCE - Life insurers report surprising performance in Jan-Feb

Following the success of 2009, life insurance companies in Jan-February continued reporting good business results.

Korea Life surpassed the Jan-February business plan by 127 percent, in which its southern branch reached 172 percent of business growth and central branch up 104 percent and northern branch up 101 percent. A representative of Korea Life assessed, this was the special and surprising business result because 2010 Lunar New year lasted longer than normal. Korea Life is marking firm steps in the roadmap to become the seventh life insurer in terms of insurance premium till the end of 2010. While the premium of new contracts of other insurers in January all decreased against last December, Korea Life's still grew by 27 percent.

ACE Life also announced that its 2009 insurance premium reached 490 billion dong, surging 159 percent from 2008. This was the remarkable performance of a life insurance firm only after four years from officially launching products in Vietnam. Presently, ACE Life keeps leading the life insurance market in terms of product par value with the average insurance value of over 300 million dong per contract. In 2009, the market share of new contracts of ACE Life accounted for nearly 10 percent of the whole life insurance sector, reported the general director Lam Hai Tuan.

Reportedly, the new insurance premium of life insurers all reached a high growth rate, led by Prudential, Bao Viet, Manulife Vietnam, AIA Vietnam, ACE Life, Dai-ichi Life Vietnam, Korea Life, Prevoir Vietnam, Cathay Life and Great Eastern Life.

Talking to Dau Tu Chung Khoan newspaper recently, Philip Hampden-Smith, currently head of Manulife's six operations in the Asean cum a member of Manulife Financial's Global Management Committee, said that Vietnam's insurance contributes only 2 percent to its GDP while Asean countries' are around 14-15 percent. "Therefore, we rank Vietnam in the list of young markets with rapid growth of 25-30 percent. In next five years, along with expanding network, we [Manulife] will focus on developing other distribution channels such as selling insurance via banks, general agent, micro-insurance to low-income earners and via cell-centre", he said..

"Medium-class customers are targets of Manulife so we will boost launching health care and retirement insurance products," he shared.

Last year Bao Viet Life Insurance reached total premium of 3.705 trillion dong, a year-on-year growth of 8.12 percent. The firm plans to raise the new insurance premium by 40 percent and total revenue by 9 percent in 2010.

Ministry of Finance lately estimated that the non-life insurance market could surge 20-25 percent this year and the life insurance market will grow by 10-15 percent compared with 2009. Also, total premium is targeted at 29.147 trillion dong including 16.297 trillion dong of non-life insurance, up 23 percent against 2009 and 12.850 trillion dong of life insurance premium, soaring by 12.41 percent. Furthermore, the investment revenue of insurers could gain 6.474 trillion dong in 2010.DTCHK

PVI ranked finance rating B+

The world's leading finance rating organisation A.M. Best yesterday announced that PetroVietnam Insurance Joint Stock Corp (HNX listed PVI) was assigned a finance rating B+ with a firm financial safety and capacity.

To date, PVI is the only insurance and finance enterprise of Vietnam reaching the high grade.

Roger Sellek, Managing director - Global Financial Services of A.M. Best spoke at the announcement ceremony held yesterday in Hanoi that the ranking was based on three criteria including total assets, business contacts and efficiency through collecting all information of PVI relating to financial capacity, vision of management board, business strategy and overseas business expansion plan.

He added that if wanting to list on the international market, a Vietnamese firm must meet two important standards namely professional and rating level. A.M. Best's ranking will help PVI be organised on the world's finance market.

According to the chair of PVI Nguyen Anh Tuan, his firm is speeding up the process of raising charter capital from 1.035,5 trillion dong to 1.6 trillion dong for seeking foreign strategic partners. In future, PVI will set up life insurance arm and fund management company.

PVI now has second highest market share in Vietnam in sectors of retail and wholesale, 21 percent. In field of industry insurance, PVI is the biggest insurer with the nearly absolute market share in energy.TBKT

INFRASTRUCTURE - Vietnam's development investment to rise 12.3 pct

Vietnam's total development investment is set to increase 12.3 percent from 2009 to VND791 trillion (US$41.4 billion) this year, a government official said Thursday.

The total investment will be equal to 41 percent of the country's gross domestic product, minister of Planning and Investment Vo Hong Phuc said during a video conference on construction investment.

Investment from the state budget, government loans and bond proceeds will account for 30 percent of the total number while the rest will come from foreign investors, local businesses and other sources, he said.

Most of this year's government bond proceeds will be allocated to infrastructure, healthcare and education projects, Phuc said.

Prime minister Nguyen Tan Dung told the conference that infrastructure construction is a priority for the country this year.

It's important that capital is raised and used effectively so that the country can achieve its social and economic development targets, he said.

Dung also asked the Ministry of Natural Resources and Environment to work with cities and provinces to speed up land clearance and support relocated residents.tnnews

AUTOMOTIVE - January auto component import hits $175m

The country's automobile component import in January reached over $175 million, jumping 254.07 percent year-on-year but slumping 24 percent from last December. In which, the import of auto accessories for below 9-seat cars hit $103.17 million, surging 336.52 percent against 2009.

Big auto component suppliers of Vietnam include Japan ($53.94 million or accounting for 30.82 percent of Vietnam's auto component import turnover), Thailand ($33.49 million, 19.13 percent), Korea ($28.9 million, 16.51 million), and China ($14.95 million, 8.54 percent).

Vietnam spent $5.02 million importing auto components from Philippines in January, growing by 944.36 percent year-on-year, $7.5 million from Germany, $6.05 million from Netherlands, $216,314 from Sweden, and $486,200 from Spain. Vietnam's auto component import from Russia in the first month of 2010 jumped 268.63 percent year-on-year, Malaysia +159.91 percent, India +145.24 percent, Indonesia +125.88 percent, US +125.23 percent and Taiwan +102.31 percent.VNNET

RESOURCES - Cooperative inks gas pipeline deal

A business cooperation contract on a gas pipeline project for Block B -O Mon was signed yesterday in Hanoi by the PetroVietnam Gas Corp (PVGas), Chevron, MOECO (Japan) and PTTEP (Thailand).

The pipeline is an important project invested in by the PetroVietnam Group, with a total investment capital of $l billion. PVGas contributed 51 percent of the capital, while the remainder came from foreign partners.

The 398km pipeline, which has 246km underwater and 152km on land, runs through Can Tho City and Hau Giang, Kien Giang, Bac Lieu and Ca Mau provinces. The gas transporting capacity is 18.3 million cubic metres per day and night (6.4 billion cubic metres per year).

This is the biggest gas pipeline project in Vietnam. It a key project for the Vietnam oil and gas industry. The project's objective is to transport natural gas from Block B&48/95 and Block 52/97 in the southwest seas of Vietnam to supply gas for electricity plants at the O Mon Electricity Centre, in Tra Nee of Can Tho (with a total capacity of 3,000MW), partly for the Gas-Electricity-Fertiliser Industrial Park in Ca Mau and for other consumer households in the southwestern region.

In addition, the pipeline is connected with the system for Southeast Asia, and the system for the southeastern region, in order to balance the gas demands of Vietnam in the future.

Speaking at the signing ceremony, Chevron Vietnam general director Hank Tomlinson said that the signing ceremony marked the start of long-term cooperation to build the gas pipeline. He said he hoped that Chevron would closely work with foreign contractors to develop gas pipeline projects in Vietnam in 2010 and in the following years.VNS

FOOD PROCESSING/SAFETY - Vinacontrol forms Europe Food Safety Inspection Co

The Vietnam Superintendence and Inspection Co-Vinacontrol (coded VNC) has cooperated with two foreign partners namely SHP Steriltechnik AG and FCS Qualitotssicherungsysteme GmbH to set up Europe Food Safety Inspection Co capitalised at two million euro.

The firm located in Tan Thuan Export Processing Zone will focus on building offices in charge of inspecting food, apparel, leather shoes and tobacco according to European standards.

The first analysis and test centre of Europe Food Safety Inspection Co in Tan Thuan EZ will be operational from this August.

Seafood processor invests 80b dong in Minh Phu Hau Giang Port

STC listed firm Minh Phu Seafood Joint Stock Co (MPC) reported investing 40 percent of its chartered capital or 80 billion dong into the setting up of Minh Phu Hau Giang Port Joint Stock Co. Also MPC officially transformed the 90 billion dong Minh Phu-Hau Giang Seafood Processing Co Ltd into a two-member limited company.

Minh Phu Hau Giang Port Joint Stock Co has a charter capital of 200 billion dong, located in Dong Phu Commune, Chau Thanh Dist, Hau Giang province.VNC

POWER - $4.9b power centre to be built in central

Representatives from the UK-based International Power PLC Group (IP-PLC), Japan's Sojitz and Vietnam's Pacific Joint Stock Co on March 10 worked with leaders of People's Committee of the central province of Binh Thuan to invest in Son My power plant.

In late February 2010, deputy prime minister, Hoang Trung Hai, approved three groups to invest in Son My power centre and Son My I power plant in Son My industrial zone, Ham Tan, Binh Thuan province.

As planned, the Son My power centre will include three power plants with total capacity of 3,600 MW with total investment capital of $4.9 billion and an expected output of 23.4 billion KWh per year.

Nuclear energy in Vietnam's power generation in future

Nuclear energy is expected to account for a remarkable proportion in Vietnam's power generation in the future, Vietnam news agency reported, citing to Minister of Science and Technology Hoang Van Phong, as saying.

In an interview granted to a Vietnam News Agency correspondent on the sidelines of the International Conference on Access to Civil Nuclear Energy held here, Phong said that the application and development of atomic energy for peaceful purposes is one of the country's socio-economic development objectives in the next decades.

The conference was held from this March 8 to March 9.

"Nuclear power plants will contribute considerably to the country's annual electricity output, helping meet demands for production and daily activities as well as ensure the sustainable development of the national economy during the process of industrialisation and modernisation," he said.

Developing nuclear energy will create a favourable environment for the development of many other industries, including those requiring high scientific and technical standards, he added.

According to Minister Phong, in January 2006, the Prime Minister approved the Strategy on Atomic Energy Application for Peaceful Purposes by 2020.

The National Assembly also passed the Atomic Energy Law in June 2007 and approved a policy to build nuclear power plants in the country in November 2009.

The Vietnamese government is focusing on building a full and consistent system of legal documents that meets international standards for the nuclear energy sector, including specific plans for each agency and each area as well as human resource training schemes, he said.

The government is also speeding up education work to raise the awareness of people and the whole society of the importance of nuclear power plants as well as possible risks.

Vietnam's first nuclear power plant is expected to be put into operation in 2020.VNS

Telecom - ST Telemedia purchases 10pct stake into VNPT Global

Vietnam Post and Telecommunication Group (VNPT)'s International Investment Joint Stock Co (VNPT Global) on March 11 in Hanoi officially announced cooperation with Singapore Technologies Telemedia (ST Telemedia).

Accordingly, ST Telemedia will buy 10 percent stake into VNPT Global.

Earlier, ST Telemedia and VNPT Global signed an agreement after nearly one year of negotiation between the two partners.

VNPT Global was established in January 2008 with three founding shareholders namely VNPT, Vietnam Mobile Telecom Services Co (VMS) and Vietnam Post Corp.cafef