Tuesday, 8 March 2011

Vietnam - News and Regulations

FOREIGN DIRECT INVESTMENT - Vietnam to change FDI tactics in 2011

Vietnam attracted $1.558 billion from foreign direct investment (FDI) projects in the
first two months this year, representing 68 percent of the figure in the same period last
year, said a report by Vietnamese general Statistic Office.
According to the Vietnamese Ministry of Planning and Investment (MoPI), the FDI situation
will see some changes in 2011 as the country will concentrate on raising the
quality rather than the quantity of FDI projects.
MoPI said Vietnam will prioritise attracting FDI to develop the infrastructure, hi‐technology,
supporting industries and highly competitive products for export this year.
Dang Huy Dong, deputy minister of MoPI, said it is a positive move when a number
of FDI projects have cut their capital and changed the direction of their investments.
He said that the MoPI plans to carry out investment promotions in special areas,
branches, sectors and regions to take advantage of the countryʹs potential and
The MoPI is scheduled to work with the Ministry of Agriculture and Rural Development
to draw up policies to attract FDI for seafood processing and exports including
preferential tariffs.
A similar policy for the supporting industry will be carried out with the assistance of
the Ministry of Industry and Trade.
According to MoPI, the FDI sector accounted for 25.8 percent of the countryʹs total investment
fund last year.
According to the report, the investment includes $1.47 billion in 93 newly licensed
projects and $86 million of additional capital for 14 existing projects.
Vietnam has set a target of attracting about $20 billion FDI in 2011, with $11billion‐
$12.5 billion expected to be disbursed.VNBUSASIA

ECONOMIC GROWTH - HSBC forecasts Vietnam’s GDP growth at 7pct in 2011

HSBC said in its latest report that Vietnam is implementing steps to restore the balance
to the economy and has adjusted its GDP growth forecast for Vietnam from 7.5 percent
down to 7 percent.
The adjustment of the forecast on GDP growth came from the current priorities of the
government in controlling inflation, said HSBC.
HSBC pointed out some challenges for Vietnamʹs economy as high inflation, widening
trade deficits and currency devaluation pressure, while the foreign investors, who
play an important role in the development of the economy, stand out in the context of
weakening confidence.
Since January, a series of drastic measures have been introduced, and the economy is
expected to step into a more stable period in 2011. HSBC also said that the restrictions
in public spending and credit growth will help offset the impact of raising energy prices.
HSBC forecasts the CPI growth rate will return to a one‐digit level from the current
13.2 percent by the end of this year, and reach the average level of about 9.9 percent in
2011. In addition, these efforts are also expected to help restore confidence of investors,
reflecting the actual FDI figures.
However, the governmentʹs measures to tighten fiscal and monetary policies now will
affect growth. Therefore, HSBC has downgrade its GDP growth forecast for Vietnam
in 2011 from 7.5 percent to 7 percent. The decline in domestic demand is expected to
partly offset by an increase in investment activity (especially FDI) when the confidence
of investors is restored.
HSBC also has offered the optimism for the medium‐term prospects of the economy to
improve the balance of the economy. With the current efforts of the government of Vietnam,
HSBC said that instead of using interest rates causing psychological impact
rather than the practical effect as the base rate, the government of Vietnam will focus
on tools with major influence such as interest rates of the open‐market operations.
HSBC forecasted that the State Bank of Vietnam will raise OMO interest rates to 14 percent
by the second quarter of this year. INTELLASIA

POWER – City urges firms to help reduce power cuts

HCM CITY — Authorities in HCM City have told city businesses and residents to minimise their power usage in an effort to meet the goals of the Government's plan to reduce the number of power shortages.
This move follows the Prime Minister's decree late last month on implementation of the power-saving plan.
The chairmen of people's committees in districts have also been told to encourage residents in their areas to reduce power usage.
In addition, the districts will have to closely oversee public-light usage between 6:30pm and 5:30am.
State-run companies and businesses will be expected to use energy-efficient equipment, maximise their use of natural light, and turn off air conditioners when they are not needed.
The city has asked district officials to regularly evaluate individuals' and organisations' efforts to cut power usage.
Households have been asked to limit use of power-hungry equipment during peak hours between 5pm and 9pm, and are encouraged to use energy-efficient lights.
Under the plan, half of all public lights and advertising billboards will also be turned off during the evening's peak hours of electricity use.
Large commercial billboards will be turned off if an emergency power-savings plan becomes necessary.
Last summer, HCM City was forced to implement an emergency power-savings plan to save at least 10 per cent of power consumption.
Excessive power consumption in HCM City caused an overload during peak hours last summer.
Companies and businesses have been asked to work with the city's power companies to take measures to use power efficiently.
Electricity of Viet Nam (EVN) in HCM City on Friday said poor households would receive financial assistance to pay their electric bills.
The monthly subsidy of VND30,000 (US$2), sourced from the Ministry of Labour, Invalids and Social Affairs, will be given to each poor household which consumes less than 50kWh a month for at least three consecutive months.If low-income households registered for the subsidy consume more than 150kWh for three months, they will be charged the retail price for other households.The EVN has warned that increasing demand from the industrial production and construction sectors will lead to power-supply shortages and power cuts during the dry season. — VNS

CREDIT MARKET - Credit growth at 18pct in 2011 will be good
enough: SBV

To achieve the credit growth at below 20 percent in 2011, the State Bank of Vietnam
will penalise banks who violate its rule on ceiling interest rate and forex trading, SBV
Governor Nguyen Van Giau affirmed at a workshop on implementation of Resolution
11/NQ‐CP of the prime minister in Hanoi on March 3.
18 percent credit growth is ʺbeautifulʺ
Although credit growth target set in 2011 is just under 20 percent, the SBV Governor
said that the credit growth figure of 18 percent is ʺbeautiful.ʺ This figure corresponds
to approximately 460 trillion dong credit that will be pumped into the economy this
ʺTo achieve this goal, the general directors of all commercial banks must deliver concrete
plans to each branch or local transaction office. And on that basis, the State Bank
will be down on those who violate its rules, ʺthe Governor said.
Concurred with this view, Secretary general of Vietnam Banking Association (VNBA),
Duong Thu Huong also said that direct views of the State Bank in the spirit of Resolution
11 is very true.
ʺPerhaps, itʹs the first time the government of Vietnam has issued a comprehensive resolution
to carry out the macroeconomic policy. This suggests that the government has
demonstrated a resolute attitude, in which it chose a clear goal against inflation, rather
than a ʹdoubleʹ objective again, ʺsaid Huong.
However, the credit growth target at below 20 percent, according to Huong, is very
ʺThis is an ever lowest indicator. This may affect the financial plans of commercial
banks. The problem posed is that how much each credit institution will increase, so
that the whole industry can achieve this target? ʺHuong questioned.
However, Huong also said that banks should sacrifice their own interests in the short
term to achieve long‐term benefits, when inflation is maintained at low levels, the business
activities of banks will be better.
How to keep interest rates below 14 percent?
Also on March 3, the State Bank issued Circular No. 02 governing the maximum deposit
rate of dong for credit institutions at not exceeding 14 percent per year (including
Although this circular received a high consensus from commercial banks and credit institutions
attending the conference, many of them were concerned about the situation
of the economy.
ʺThe information that many banks which raised interest rates to 15‐16 percent, even 17
percent is widespread. So whatʹs the problem? Is the lack of liquidity of banks due to
the State Bankʹs withdrawal of a large amount of money over the past two months,
which forced those organisations to return to the market? ʺHuong questioned.
If so, according to Huong, to stabilise interest rates at 14 percent per year, the State
Bank needs to inject a certain amount of money into circulation together with necessary
measures so that ʺinterest rate should be sufficient to control inflation.ʺ
In this regard, Tran Minh Tuan, SBVʹs deputy governor said he had checked and
known the banks that violated the rate of 14 percent per year. ʺWe ask that tomorrow
March 4, banks will penalise branch managers who let their branches violate the rule
of ceiling interest rates. If banks do not deal seriously, we will penalise board chair,
general manager of those banks, ʺsaid Tuan.VNPLUS

INFRASTRUCTURE FINANCING - Japan marks $6.1b for major projects

Japan would provide an ODA loan of 500 billion yen (US$6.1 billion) to Vietnamʹs two
infrastructure development projects, the Lach Huyen Port Complex and the Long
Thanh International Airport, as a public‐private partnership.
Daily newspaper Nikkei yesterday quoted relevant information resources as saying
that the Japanese government would finance the projects through its businesses.
Details of the projects will be discussed in meetings between Vietnamese Politburo
members of the Party Central Committee, minister and head of the government Office
Nguyen Xuan Phuc and Japanese authorities next week.
The 140 billion yen ($1.7 billion) Lach Huyen Port Complex in northern Hai Phong
Port City will receive 120 billion yen ($1.4 billion) from the Japanese government,
while the remaining capital would be provided by Itochu Corp, Nippon Yusen KK and
Mitsui O.S.K Lines Ltd
The three groups will cooperate with Vietnam National Shipping Lines (Vinalines) to
build the port complex, which is expected to become operational in 2015.
They will manage the port for a certain amount of time until they get back their invested
capital. Japanʹs International Cooperation Agency (Jica) is scheduled to build a detailed
construction plan by the end of this month.
The Long Thanh International Airport would cost an estimated 300 billion yen ($3.6
billion) to build its major components, including the runway and air traffic control centre.
Mitsubishi Corp, Taisei Corp, Japan Airport Consultants Inc and Narita International
Airport Corp will use capital from Jica to conduct research on the project and report to
the two governments this year.
The airport is expected to become one of the largest in the region with a designed capacity
of handling 100 million passengers and 5 million tonnes of cargo every year. The
airport will receive 90 percent of international flights and 20 percent of local flights to
and from HCM City.VNNEWS

Oliver Massmann
Duane Morris Vietnam LLC
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83B Ly Thuong Kiet Street, Hoan Kiem District
Cell: 84.90 4506167
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Oliver Massmann

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