Vietnam - News and Regulations

BIGGEST FREE TRADE ZONE ON EARTH - Big opportunities for Vietnam's export activities after ACFTA takes effect

The year 2010 marks the year when Asean-China Free Trade Agreement (ACFTA) officially comes into effect. This is the foundation for Vietnam's export growth, Dao Tran Nhan head of Ministry of Industry and Trade's Asia Pacific Market Department yesterday spoke at the ministry's conference in Hanoi.

Since 2004, China has continuously been the biggest trade partner of Vietnam. In 2006, the bilateral trade of two countries reached $10.4 billion, which was doubled to $20.2 billion in 2008. Although suffering the impacts of global economic crisis last year, Vietnam's export turnover to China still surged 8.23 percent against 2008, bringing China to be the third largest export market for Vietnam, after US and Japan.

However, according to Nhan, while Vietnam's export to China accounted for 8.59 percent of its total export turnover but Vietnam only occupied nearly 0.48 percent of China's total import spending. So, the export opportunity for Vietnam in China market remains very high, he remarked.

As for Asean market, Vietnam's export import turnover gained $22.5 billion last year, including the export turnover of Vietnam at $8.7 billion and import spending of $13.8 billion. Factually, the country's capacity of producing some export goods is limited as compared with regional nations.

ACFTA with strong commitments taking effects from 2010 will continue opening more opportunities for Vietnam to promote exports through its traditional relation with Asean and China.

As said by Nguyen Hong Thanh-expert from Ministry of Industry and Trade's Multilateral Trade and Economic Policy Department, as from January 1, 2010, ACFTA officially was actualised with the commitment of strong tariff cuts from China and Asean. Accordingly, a series of commodities imported from Vietnam to China and Asean-6 will enjoy an import tariff of 0-5 percent. Particularly Vietnam signed to carry out the tariff cuts five years later, starting from 2015.

"Therefore, in next five years, Vietnamese businesses need to take these advantages in tariffs to enhance the cooperation in trade, investment and production to expand export market", Thanh advised.

In details, China will remove tariffs on some sensitive products for Asean countries by 2012. In return, Asean countries nodded to sign an agreement on establishing a free trade region and build up Asean economic community in 2015. The agreement is to liberalise trade (cutting and abolishing tariffs, removing non-tariff measures according to a roadmap, simplifying customs procedures to create conditions for trade), open service market and enhance internal investment.

At the conference, all delegates agreed, one of leading measures to boost exports of Vietnam made goods to China and Asean is given priority for trade promotion activities. Le Xuan Duong, director of Export Support Centre of Trade Promotion Department said in a statement that Vietnamese state will strengthen preferential policies and supports in capital, infrastructure, warehouses, insurance and banking services in order to encourage goods exchange with regional countries.

In 2010, the government approved the national trade promotion programme Phase 1 with 27 plans capitalised at over 74 billion dong.VNS

FOREIGN DIRECT INVESTMENT/PROFITABILITY - Vietnam's profitability ratio at top, Grant Thornton statistic

Grant Thornton International in its latest report has said that Vietnam's Return on Invested Capital (ROIC) (or profitability ratio) reached the world's highest level with 91 points. According to the report 92 percent of foreign invested companies investing in Vietnam expect earning fairly high profits in 2010.

The survey showed that Vietnam is one of the attractive destinations for international investors this year. Although having to undergo a global economic recession, Vietnam still could maintain the GDP at over 5 percent in 2009, representing the highest level in Asean.

Last year US were recognised to be the biggest investor of Vietnam, followed by Cayman Islands, Samoa and Korea with investments in the fields of hotel and restaurant services and property business. Thus, foreign investors always consider Vietnam to be the potential destination and the long term investment address. By the end of March 2010, a lot of Italian enterprises visited, worked and sought investment opportunities in Vietnam, which promised a new avenues for foreign investments here, In details, the Italian business delegation met Vietnamese firms in HCM City, starting the visit of seven Italian enterprises to three big cities of HCM City, Da Nang and Hanoi with an aim to develop the bilateral business cooperation in hotels and food processing technology.

According to investment specialists, Vietnam needs to continue upgrading its capacity of attracting foreign investment through the competitiveness of labour market, improvement of legislative foundation, and administrative reforms.

Vietnam should focus on advantageous sectors like agriculture and food processing industry. The country thereby can push up the export of high quality agriculture products to earn a higher turnover.

Marco Saladini, head of the Italian Trade Commission (ITC) said that the partnership with Vietnamese businesses is strategic for Italian food processors. "Representatives of many Italian firms assessed that Vietnam is a potential market for Italy's machine exporters and food processing companies. This is good opportunity for Italian investors to pour capital into Vietnam", he added.

Specialists expect that Vietnam's FDI attraction will be higher in 2010 thanks to the 2009 achievements.DTA

IFC helps improve credit access for private sector

IFC, a member of the World Bank Group, says it is helping Vietnam improve access to credit for micro, small and medium size enterprises and consumers by supporting the State Bank of Vietnam (SBV) to develop a legal framework for credit information activities.

IFC and SBV's Credit Information centre organised a workshop in HCM City on Tuesday and another in Hanoi yesterday to present key elements of the newly enacted decree on credit information activities.

The decree makes borrowers' credit history available at private credit bureaus, helping accelerate the lender's loan decision and significantly reducing the lending risk.

This will benefit not only the lenders but also small and medium enterprises through more readily available credit and lower interest rates, says IFC.

"In a country with a fast developing economy such as Vietnam, the consumer credit market has great potential to grow;' Pham Cong Uan, director of SBV's Credit Information Centre, said in a statement.

"With support from IFC, the enactment of the Decree on Credit Information Activities on February 12 marked a milestone in the development of the legal framework for credit information activities in Vietnam and the credit information management of the State Bank of Vietnam,"

Effective from today, the decree governs credit information-sharing activities among banks, financial institutions, borrowers and credit information companies.

"The decree, drafted with IFC's advice, is expected to enable access to credit, and hence support the recovery of the Vietnamese economy;' said Simon Andrews, IFC regional manager for Vietnam, Cambodia, Laos and Thailand.

"We are likely to see significant improvement in access to credit in the Vietnamese lending marketplace".

In Vietnam, IFC's advisory services are carried out in partnership with Finland, Ireland, the Netherlands, Switzerland and New Zealand.

IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets.SGTD

Banking - SBV commits to support banks in lowering loan rates

On April 14, State Bank of Vietnam official issued a circular guiding the dong lending with negotiated interest rates of credit instructions. At the same time, banks organised internal meetings to orient and adjust the interest rates for coming time. Although there has been no particular adjustment yet, generally banks are all waiting and seeing each other to fix their own new interest rate benchmark.

The market will see a lower and more suitable interest rate band, which is the good signal for enterprises to access bank loans.

Under the guidance circular, from Wednesday April 14, banks providing the dong loans must publicise the lending rates at suitable level based on the supply and demand of capital on the market, capital borrowing demand and credit rating of borrowers, save operation cost, create conditions for customers to access loans for business production (especially agricultural and rural sector, export companies, SMEs).

Many financers said that a certain time is needed for commercial banks to reach a general agreement in lowering the market's interest rates. Cutting down lending rates is expected from the pioneer moves of big banks like Vietcombank, Vietinbank and Bidv.

According to some bank representatives, in the forthcoming time, the lending rate of dong could range between 15 and 17 percent pa.

Although not yet officially made announcement, Vietnam Commercial JS Bank for Private Enterprises (VP Bank) tried to keep the medium and long term loan rates at 14-15 percent pa, according to the general director Nguyen Hung.

The adjustment in loan rates at this time is very necessary because the current lending rate band remains fairly high. The band had been released previously to counter with the previous crisis situation, he explained.

Hung remarked that his bank will have to seek ways to cut down deposit rates because the old deposits were raised at high rates. We are saving operation cost and select the support measures for production and export import projects. In short time, the short term deposit rates will reduce because banks' money volume is in surplus. Lowering lending rates is totally reasonable.

The capital mobilisation growth of the whole banking system has been improved well. Till April 9, the growth was posted at 4.18 percent compared with this year early. During first nine days of April 2010, total deposits rose by 0.68 percent slightly against March, of which the savings of residents up 10.2 percent from the start of this year and 1.2 percent month on month, higher than the growth of outstanding loans soaring by 3.84 percent (in comparison with 2010 early). This is also the basic for banks to continue cutting down loan rates.

Meanwhile, Cao Thuy Nga, deputy general director of Military Bank said in a statement that the deposit rates remained high so banks' targets of reducing loan rates become more difficult. Loan rate of each bank will be different because banks must balance between lending rate and capital mobilisation cost based on classifying risks.

"Negotiated interest rate mechanism helps customers and enterprises have more chances to take bank loans. In return, banks could not force borrowers to accept a too high loan rate. Factually, banks are propelled to consider carefully their business efficiency, maintain an attractive lending rate to keep customers, she stated.

Meanwhile, a lot of enterprises are afraid that banks' lending fees could surge again. director of Mai Vang private firm (located at No 413 Dong Thanh Hamlet, Tan Dong Commune, Tan Chau Dist of Tay Ninh province), Le Quang Thuc gave his point of view that the enterprises' ability in accessing banks' capital source has not been improved immediately because banks still keep offering high fees. As asking a maximum loan of 10 billion dong at Vietinbank Tay Ninh branch, his firm was required to show the mortgage asset worth of up to 70-80 billion dong along with complex procedures excluding a number of derivative trading fees. To take a loan of a couple of hundreds of dong, an enterprise still has to suffer a fee of 9-10 million dong. The acceptable loan rate for many enterprises is 14-15 percent pa.

Businesses now are waiting for a deeper reduction in loan rates. Factually, many of them shifted to borrow US dollar instead of the dong because of more benefits.

Quoting Duong Thu Huong, general secretary of Vietnam Banks Association (VNBA), Central Bank will continue supporting commercial banks to reduce loan rates deeper.vns

POWER - Most hydropower projects designed in central provinces

The appearance of 393 hydropower projects totalling the designed capacity of 7,381MW in nine key central provinces showed the breakout of hydropower investment in the region and raised the wonder on the administration capacity of local governances.

A recent examination by Ministry of Industry and Trade reported that in 36 provinces/cities nationwide, there are now 1,021 approved hydropower projects with total installation capacity of 24,246MW. If excluding 138 projects of total 18,366MW in the country's hydropower step plan over main rivers, investors pumped much capital in 883 small to medium hydropower works with total turbine installation capacity of over 5,800MW or 6.6MW per project. In which, 78 projects (totalling 1,844MW) are designed in Gia Lai highland province, 71 projects (1,147MW) in Lam Dong, 68 (356MW) in Kon Tum, 61 projects (1,731MW) in Quang Nam province.

Because of the high density of small and medium sized hydropower projects in central region, investors have not yet done their all responsibility while the supervision of relating authorities (local governances) who grant investment licenses to hydropower projects have not been improved.

Typically, in Dak Lak province, Ministry of Industry and Trade decided to abolish 38 small and medium sized hydropower projects (that were approved already or designed in potential locations but there was no investor), require local governments to adjust the size of 35 others (that can harm environment and society or be more suitable to other plans).

In many provinces, a series of hydropower projects in Cao Bang, Ha Giang, Lang Son, Dien Bien, Nghe An, Quang Nam, Dak Nong and Lam Dong have to be delayed.

In the investment and examination process, the qualified obligation of investors and administrators in terms of environmental protection, construction progress and quality is needed. Not all local governances report regularly and seriously about the investment construction of hydropower projects according to current laws.DT

INSURANCE - Life insurer reports an increase of 80pct in 2009 new insurance premium

AIA Vietnam Life Insurance Co Ltd has released the 2009 financial reports, in which its profit after tax was estimated at over 72 billion dong and new insurance premium increased by 80 percent year-on-year.

Last year, the company reported earning total insurance premium of 778 billion dong, up 24 percent against 2008. AIA Vietnam was ranked the forth position in the markets with over 6 percent of market share. The company's insurance standby fund reached over 2.183 trillion dong in 2009, or 10 percent higher than the previous year.

In its development plan up to 2014, AIA Vietnam aimed to become the most favourite insurance provider in the markets via its customer care services and a variety of insurance products.DTCHK

ACE Life increases chartered capital

ACE Life Vietnam Co announced that the company was completing the legal procedures to increase its chartered capital by 1.5 times higher than the current one, as per the approval that ministry of finance has already officially issued.

At present, ACE Life Vietnam remained at the first position in Vietnam's life insurance markets in terms of product's par value, with average insurance value of over 300 million dong per contract.

In 2009, the company's market share of new insurance contracts counted for nearly 10 percent of the total.

The insurer reported to gain positive growth rate after the first three months of this year.

Liberty non-life insurer to hike chartered capital to $40m

Liberty Non-life Insurance Co has recently decided to scale up its chartered capital to $40 million.

After two years of operations, the non-life insurer has not only met the satisfaction of customers but also built its position in the market, especially in HCM City and Hanoi.

The non-life insurer has recently also inaugurated its transaction sites in Bien Hoa city (Dong Nai province) and Da Nang city.

Along with expanding market, Liberty is also enhancing service cooperation with garages nationwide of world's leading car trade names such as Mercedes, Ford, Toyota, and Honda.