Vietnam has violated its World Trade Organization commitments with a new price control law targeting overseas firms, a US business leader said Thursday, adding to foreign opposition to the decree.
The law on prices took effect on October 1 and allows state institutions to impose "stabilisation" measures if, for example, prices rise faster than production costs.
Vietnam, which began opening its economy 24 years ago, has denied that the measures would violate rules of the WTO, which it joined in 2007.
"We believe that price controls do not work and are counterproductive to future growth," Hank Tomlinson, chairman of the American Chamber of Commerce (AmCham), told the Vietnam Business Forum.
"We are also concerned that implementation of the new law has focused primarily on imports from foreign companies -- a clear violation of the letter and spirit of Vietnam's World Trade Organization (WTO) commitments."
In a written brief, AmCham called the decree on price controls "a step back towards central planning that will add substantial costs and uncertainty to the private sector doing business here".
The forum for local and foreign business leaders is held twice a year by the World Bank and Vietnam's Ministry of Planning and Investment.
The European Chamber of Commerce in Vietnam told the gathering that under the price-control decree, producers of coal, formula milk, oil, gasoline, steel and other goods have to declare their suggested retail and other prices, apparently adding to firms' administrative burden.
The Australian Chamber of Commerce also expressed "serious reservations" about measures including price controls.
The government is trying to control inflation, which reached 11.09 percent year-on-year in October, well above a targeted maximum of eight percent this year.
On Tuesday a government decree said price "stabilisation" was among the administration's top priorities for the rest of the year.
AmCham voiced concern that Vietnam lacks an effective inflation policy, and said the investment community had "credibility and confidence issues" with government economic and monetary policy.
"Vietnam's currency system has undermined confidence -- both among local and foreign investors -- and there is no anchoring of expectations on the value of the Vietnam dong," Tomlinson said in his address.
From January 1 the government will impose a 10 percent tax on gold exports -- up from the current rate of zero -- a Ministry of Finance official said.
With the gold market closely linked to foreign exchange trade, the government is likely to temporarily achieve its goal of returning stability to financial and stock markets, Nguyen Hai Ha, chief analyst at Ho Chi Minh City-based MBCapital fund management, told Dow Jones Newswires on Thursday.
In Vietnam many people see dollars and gold as a safe haven against economic uncertainty.
On Wednesday the dong slumped to a record low in the free market, a day after Prime Minister Nguyen Tan Dung urged "strong measures" to stabilise foreign exchange rates and gold prices.AFP
MONEY MARKET - Firms scramble for loans despite higher rates
Banks’ current lending rates are much higher than in October but companies are still struggling to borrow as they have entered the peak manufacturing and trading season.
A bank staff counts Vietnamese banknotes. Banks have hiked lending rates strongly but this has not deterred companies from borrowing - Photo: Le Toan HCMC – Banks’ current lending rates are much higher than in October but companies are still struggling to borrow as they have entered the peak manufacturing and trading season.
Steady rate hikes
After many banks raised interest rates in early November, Asia Commercial Bank, a leading joint-stock bank in the country, followed suit on Monday by hiking deposit rates for all terms to a single rate of 12% per year.
In addition, the bank will pay a bonus equivalent to 0.15% upon maturity for the 378-day savings deposit.
Many joint-stock banks offer rates higher than 13% to attract depositors. Western Commercial Bank has the highest rate, 14.5%, and has issued short-term promissory notes at an interest rate of 13.5% plus a gift equivalent to 1%, bringing the total to 14.5%.
But the deposit rate hikes are not attractive enough to lure customers, a leader of Western Bank said, adding his bank had failed to raise as much money as expected.
Given the rising borrowing cost, banks have increased their lending rates. At this time, the normal rate for Vietnam dong loans for corporate clients ranges from 17% to 19%, while that for individuals is 19% or above.
Some financially strong banks extend lower rates to customers who use many of their banking services such as savings, international payment and money transfer. For example, Military Commercial Bank charges 15.5% interest on loans for its close corporate clients.
High demand for capital
A leader of Western Bank says now is the peak business season, so many enterprises want to take out loans from banks despite higher rates.
For small and medium enterprises, especially family-run businesses, banks’ interest rates are still lower than those on the underground credit market. The owner of a family-owned business says the lending rate outside the banking system is up to 3% per month, or 36% per year, or even 4% per month, or 48% per year.
Many banks have reported slower credit growth in November but they expect capital demand to stay high in the final month of the year.
Given the rising lending rates, a branch director of Tien Phong Bank says, his branch has seen credit growth slowing. “Enterprises may put on hold some of their projects but they are willing to pay more for much-needed cash to keep their manufacturing and trading activity running.”
Nguyen Hoang Minh, deputy general director of the central bank’s HCMC branch, says November credit growth at the city’s banks was slower than in previous months due to liquidity problems and high lending rates.
However, when liquidity improves in December, outstanding loans will pick up again given more manufacturing and trading activity at the end of year, he says.
Meanwhile, according to a number of banks, the slow November credit growth is partly ascribable to the fact that banks already saw their credit growth beating the plan submitted to the central bank early this year.
Military Bank’s outstanding loans grew 5% in November and by late November, its credit had grown over 50% from late last year. A representative of the bank says the slow credit growth has resulted from credit restrictions in the last months of the year.
According to estimates by the central bank’s HCMC branch, outstanding loans at the city’s banks in 2010 would amount to VND699.81 trillion, up 25% year-on-year, and total deposits would reach VND766.25 trillion, up 27%.SGTD
DOLLAR HIKE - How to ease the “dollar fever”?
State management agencies blame speculation for the dollar price fever. People rush to purchase dollars, while businesses refuse to sell dollars to banks. why do people and businesses try to hoard dollars?
Uncertainties encourage speculation
Thanh Minh, 38, who lives in Hanoi, has to check the dollar price every day, because he wants to purchase dollars to pay his debts. Minh bought a car earlier this year on the installment plan. Since the car’s price was in dollars, it has become more expensive because of the steady dollar increase. Minh has decided to pay debts right now, or else he will not be able to pay debts if the increase continues.
on the morning of December 1, Minh bought dollars on the black market at 21,570 dong per dollar. The dollar price has increased by 2000 dong per dollar just over the past two months. The price has exceeded the record threshold of 21,500 dong per dollar and it is coming closer to 21,600 dong.
“Several months ago, when the dollar price began increasing, I decided not to buy dollars at this moment, because I hoped the dollar price would go down again. The central bank promised to stabilize the dollar price,” Minh said.
Minh is not alone. Many other people have the same problem. The debts they incur have increased by tens to hundreds of millions dong over the past few months just because of the dollar increase. Fearing further increases, people rush to buy dollars on the black market,.
Thanh Phuong, whom VIetNamNet’s reporter met on Ha Trung street foreign currency market on December 1, related that she has bought $200,000. Phuong believes that she made a right decision. She got the money from selling an apartment in Thanh Xuan District and she initially intended to reinvest it in the real estate market. However, she later realized that the real estate market is too quiet, while the gold and dollar prices keep increasing. “Keeping dollars proves to be the best way to keep your assets at this moment,” Phuong said.
Meanwhile, Huy Nam in Dinh Cong new urban area, who has a saving of one billion dong which he intends to use to build a new house, has also decided to purchase dollars. “I feel anxious about the dollar increases, therefore, I have to keep my money in dollars,” Nam explained.
The strange thing is that the more the dollar price increases, the more people rush to purchase dollars. The owners of the exchange shops on Ha Trung street also said the demand for dollars will increase further, because people believe the dollar will continue to rise.
Tran Du Lich, Head of the HCM City Economics Institute, commented that people feel anxious when the inflation rate is increasing. The Ministry of Industry and Trade has admitted that keeping the inflation rate at one-digit level would be an impossible mission. People would not rush to buy dollars if the dong/dollar exchange rate is stable, but they will rush to collect dollars if they see uncertainties. It is clear that uncertainties encourage speculation.
The real demands
It is estimated that in 2010, the total foreign currency purchase turnover would be $58.5 billion, a decrease of 12 percent over 2009, while the total sale turnover would reach $59.92 billion, down by 4.3 percent. The dong mobilized capital is estimated to reach 579,430 billion dong (+ 30.8 percent), and foreign currency mobilized capital 195,820 billion dong (+ 17 percent). The dong outstanding loans would reach 501,650 billion dong by the end of the year, while the outstanding loans in foreign currencies 198,160 billion dong.
The figures show that the dollar outstanding loans would be relatively high. Meanwhile, the demand for dollars is increasing because people always try to pay debts at the end of the year. In fact, the high demand for dollars towards the end of the year has been anticipated.
In November 2010, the import turnover reached $1.3 billion, the highest level in the last nine months, which has raised the trade deficit to $10.7 billion. It is estimated that the total trade deficit may reach $12 billion for the whole year 2010.
The Prime Minister has instructed the State Bank to follow a flexible monetary policy which to control the volume of cash in circulation. He also requested the State Bank to apply necessary measures to control the foreign currency exchange rates more tightly and ease the speculation. VNNEWS
MINING - Strategic Mining Corp. (SMNG) Acquires Nat Son Gold Mine in Northern Vietnam
Strategic Mining Corporation (PINK SHEETS:SMNG) today announced it has acquired 51 percent of the Nat Son gold property in northern Vietnam from its joint venture partner Ba Dinh Minerals JSC, a Vietnamese mining company.
Under the terms of the agreement, Strategic Mining has the option to increase its ownership to as much as 90 percent, the maximum foreign ownership level allowed under Vietnamese law. The company intends to move ahead immediately with exploration and development.
"We're thrilled to have completed the acquisition of Nat Son, which we believe represents a great opportunity for our shareholders," said Strategic Mining President Todd Sterck. "This property was extensively explored by French miners, who initiated small-scale gold mining before being expelled from the country in the mid-1950s. It has lain dormant ever since, and now we have the opportunity to resume mining operations with the advantages of modern mechanization and advanced ore-processing methods."
Nat Son is located in Hoa Binh province, about 50 kilometers south west of Hanoi in the center of the gold-rich Kim Boi deposit.
Prior to completing the acquisition, Strategic Mining commissioned a detailed geological report of the Nat Son property by consulting geologist Bob Marvin. Four zones of gold mineralization were identified, and 140 rock-chip samples were collected and tested over a strike length of four kilometres. Based on the positive results of the field study, the geologist recommended a drill program for 13 core holes to help determine the gold potential of the property.
Additionally, the company has received assay reports from three independent labs, a geochemical survey and a NI 43-101 report that indicated Nat Son was a "Property of Merit."
About Strategic Mining Corporation
Strategic Mining Corporation (PINK SHEETS:SMNG) is engaged in the exploration and development of gold properties in Viet Nam, the U.S. and Africa. The company holds the only gold mining license in northern Vietnam. Strategic Mining intends to expand by acquiring mineral rights to key properties and initiating strategic joint ventures. As previously stated in a company press release, Strategic Mining has filed to move to the OTCBB.
Safe Harbor
No assurance can be given that past or similar results of precious metal mining will be indicative of future results. This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (The "Act"). In particular, when used in the preceding of discussion, the words "pleased," "plan," "confident that," "believe," "expect," or "intent to" and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act and are subject to the safe harbor created by the Act. Such statements are subject to certain risks and uncertainties and actual results could differ materially from those expressed in any of the forward-looking statements. Such risks and uncertainties include, but are not limited to, market conditions, general acceptance of the company's products and technologies, competitive factors, the ability to successfully complete additional financings and other risks in the
company's SEC reports and filings.INTELLASIA
TRADE BALANCE - Overseas remittance to Vietnam may reach $7.3b in 2010
Inward remittance to Vietnam may touch $7.3 billion this year, up 14.1 percent compared to $6.4 billion in 2009, according to the State Bank of Vietnam (SBV)'s governor, Nguyen Van Giau, at the press conference in Hanoi on November 2.
Giau said the foreign currency situation has been improved during past two weeks.
This year's trade deficit may be up to $12 billion, according to Giau.
This year's payment balance deficit would fall to $4 billion from $8.8 billion in 2009.
The central bank also worked with Ministry of Industry and Trade to control the production and reserve of oil and gas for domestic market.SGTD
E-commerce in HCM City: 92pct of enterprises have Internet facility
At a forum on E-commerce in Vietnam 2010 held by Department of Information, Technology and Electronic Commerce under the Ministry of Industry and Trade (MoIT) on December 1 in HCM City, representative from MoIT said that indicators on E-commerce application into enterprises have been improved considerably.
Accordingly, 92 percent of companies have made Internet connection, 71 percent of firms making E-commercial transactions and 32 percent of enterprise having their own websites.
However, enterprises have not believed in electronic contracts yet. Moreover, they find it hard to make electronic payments, especially payments for huge value.
HCM City Department of Industry and Trade also said that E-commerce transactions between businesses to customers (B2C) still face obstacles because of business practices, and weak awareness of electronic commerce.SGP
| TRANSPORTATION/INFRASTRUCTURE - Japan to help Vietnam build urban railway |
The Osaka Chamber of Commerce and Industry (OCCI) and local businesses were making research to help Vietnam in building the urban railway routes in order to reduce the traffic jam in large cities.
Dr Vu Tien Loc, chair of Vietnam Chamber of Commerce and Industry (VCCI) revealed that at present, preventing traffic jam in large cities, such as Hanoi and HCM City, has become one of the burning issues in Vietnam. The government would like to construct short urban railway routes to connect the economic centres.
Representative of Japanese enterprises, Ahigetaka Sato, chair of Keihan Railway Group cum chair of Osaka Chamber of Commerce and Industry said that the Japanese government and some enterprises were considering the most suitable railway routes for Vietnam, before applying for ODA fund to realise the projects.
Apart from cooperating with Vietnam in constructing the urban railway routes in Hanoi and HCM City, Ahigetaka Sato also would like to strengthen the Vietnam-Japan economic cooperation relationship.
| ADB helps Vietnam, Laos upgrade road system |
The Asian Development Bank (ADB) will provide $95 million to help Lao and Vietnam upgrade their road systems in the northeastern transport corridor which will benefit trade and reduce poverty in the two countries and the Mekong region.
The ADB Board of directors has approved the provision of loans for the second project to upgrade the northern transport network of the Greater Mekong Subregion (GMS).
Under the project, 340 km of road belonging to a section of the northeastern transport corridor which starts in Vietnam's Thanh Hoa province and runs through to Bangkok, Thailand will be upgraded.
Apart from improving material facilities, the project will help deal with issues including overloaded vehicles, road transport safety and bomb and landmine clearance, and raise public awareness of human trafficking and the prevention and control of HIV/Aids.
The ADB will provide Vietnam with $75 million sourced from the Asian Development Fund's preferential loans, and it will grant Laos $20 million in non-refundable aid.
The loan has a period of 32 years with a grace period of 8 years and an interest rate of 1 percent/year during the grace period and 1.5 percent after that.
Meanwhile, the Vietnamese and Laos governments will provide a total capital investment of $32.7 million. The OPEC Fund for International Development (OFID) will consider lending Laos $12 million in March next year. If it is approved, the ADB will manage OFID's capital inflow and the project will cost a total of $139.7 million.
The project is scheduled for completion in June 2016.
The ADB operates its mission of poverty reduction in the Asia-Pacific region through comprehensive sustainable growth, and regional integration.
Established in 1966, the ADB now has 67 members including 48 regional members. In 2009, it approved a total of $16.1 billion to provide loans and non-refundable aid and conduct programmes on guaranty, financial and trade promotion, capital investment and technical assistance. It also mobilised $3.2 billion in co-sponsorship funding.
Oliver Massmann
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