Foreign donors guaranteed Vietnam official development assistance of more than US$8 billion at a meeting Friday, a sharp increase from the figure pledged a year ago.

The annual pledge was announced at the Consultative Group meeting on Vietnam, which included Vietnam’s top donors such as the World Bank, the Asian Development Bank, Japan and EU, concluded a two day meeting in Hanoi. The Official Development Assistance (ODA) funds will help Vietnam stabilize its macro-economy, regain growth and further reduce poverty, the Consultative Group said in a statement. Foreign donors began offering development assistance to Vietnam in 1993. Their pledges have totaled $42.5 billion since then, more than half which has been disbursed, according to the government. Last December the group announced $5 billion in aid. The figure was later revised to $5.85 billion by the government after Japan resumed aid this year. This year’s disbursement is expected to reach $3 billion. During the meeting, foreign donors and government officials discussed various issues including economic stability and poverty reduction. ADB Country Director for Vietnam, Ayumi Konishi, lauded the government’s efforts to manage the adverse impact of the global economic crisis. “Risks are growing and we appreciate the government’s recognition that stabilization is the essential prerequisite for rapid and sustainable growth,” he said. World Bank representative in Vietnam Victoria Kwakwa said a key theme was improving business competitiveness and reinvigorating state-owned enterprise reform. “I think the message from donors to government is to really move forward on this and to move forward in a bold way,” she said. The increased ODA comes with Vietnam’s economy on track to grow around 5 percent this year, according to government figures. Middle income status Vietnam is also likely to cross the middle income threshold of having average annual per capita income of at least $1,000 next year, which will have an affect on the composition of future aid and is likely to impact the total volume. The World Bank and other development partners were already beginning to discuss how the annual Consultative Group meeting should change as middle income status alters Vietnam’s eligibility for certain types of assistance, Kwakwa said. “We don’t expect that there will be a major cut-off, just like that. I think that it will be more gradual and in a way that responds to the needs that the country still has,” Kwakwa said. Mark Kent, the British ambassador, said this Consultative Group had already begun looking at those challenges. “While obviously keeping the focus on poverty reduction is going to be important still, increasingly we are going to be looking at other challenges if Vietnam wants to keep on moving up the value chain – things like dealing with corruption, dealing with infrastructure,” he said. Climate change figured prominently this year, and a United Nations official said earlier in the week that future soft loans and other development aid to Vietnam could be dominated by climate change-related projects. Vietnam is recognized by international organizations as one of the most vulnerable countries to the effects of climate change, including rising sea levels. Source: Thanh Nien, Reuters

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A new business can be established with a maximum of nine days in Hanoi from Tuesday (November 17, 2009), instead of the 30 days it takes at present.

The announcement was made Monday by the deputy director of the capital city’s Department of Planning and Investment, Nguyen Van Tu. Under a decision recently issued by the Hanoi People’s Committee, selected staff from the planning and investment department, tax agency and the police will gather at the department’s business registration office to deal with applications for establishing a new business. With this arrangement, businesses don’t have to spend time running around to complete all necessary procedures, Tu told Thanh Nien. The department has also proposed adequate compensation for the staff so that they do not solicit bribes or engage in other actions that cause difficulties to businesses, he added. The government is making several efforts to streamline administrative procedures that have been criticized as time-consuming and too complicated. However, many failings found in the 2001-2010 administrative reform program has prompted the National Assembly to directly oversee it next year. Reported by An Nguyen

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North Kinh Do Food Joint-Stock Co., a Vietnamese snack-food producer, raised its full-year pretax profit forecast by 67 percent to VND100 billion dong (US$5.6 million), according to an e-mailed statement Wednesday.

The company, based in the northern province of Hung Yen and partly owned by Citigroup Inc., plans to issue 2.5 million shares and give them to shareholders as dividends, and list 2.8 million shares on the Ho Chi Minh Stock Exchange after it obtains official approval, according to the statement. Source: Bloomberg

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People in Vietnam can now submit their income tax declaration and conduct customs procedures on the Internet, the Finance Ministry said in a Friday agreement with the state telecommunication company.

The agreement between the ministry and Vietnam Posts and Telecommunication Group (VNPT) aims to digitize the ministry’s public administrative procedures. During the pilot period until December, the ministry will use the digital signature system of VNPT for tax and customs services and then apply the service to all of its public administration procedures when VNPT is licensed to provide the service. Reported by Truong Son

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Banks in Vietnam cut their dollar lending rates on the interbank market in the past week due to a growing surplus after firms switched to borrowing in Vietnamese dong under a government stimulus package, bankers said.

The State Bank of Vietnam said on Monday banks cut their dollar lending rates for nearly all terms in the week ending August 27. Rates on 12-month loans dropped to 1.7 percent from 2.8 percent the previous week. Many companies that needed dollars earlier this year have switched to borrowing in dong because of a government rate subsidy package, leaving banks with a surplus of the foreign currency, the official Securities Investment newspaper said. It said central bank measures to limit the use of the dollar in domestic markets had also helped reduce demand. On August 20 the central bank and the Industry and Trade Ministry agreed to tighten control over foreign exchange as dollar rates rose on the unofficial market and the country's exports were forecast to fall 6.4 percent this year to US$58.6 billion. On the unofficial market, the dollar rose to 18,390/18,430 dong on Monday from 18,370/18,390 last Friday. Commercial banks lent businesses about VND398 trillion ($22.3 billion), equivalent to 81 percent of the government’s loan-subsidy program, as of August 27, according to a statement on the government’s website. Last week the value of subsidized loans rose 0.43 percent from a week before, accelerating from 0.25 percent the previous week, central bank data shows. Governor Giau told a seminar last week the central bank would maintain its looser monetary stance, with the annual credit growth target lifted to 30 percent from the 25-27 percent set earlier by the government. Money supply would be targeted to expand 30 percent in 2009, accelerating from 20 percent growth last year, Giau said in a statement seen on Monday. “Inflation is on a rising trend in the last months of the year due to the impact of the easier fiscal and monetary policy,” he said, forecasting inflation this year at 6 percent to 8 percent. Consumer prices surged 22.9 percent in 2008. The central bank said state-run banks raised their dong deposit rates slightly, offering to pay 8.2-8.4 percent on six-month deposits against 8.0-8.4 percent a week ago, but that was below the 8.5-8.9 percent offered by partly private banks. Last week bankers said commercial banks extended their campaign to raise dong funds by increasing interest rates and in one case offering gold prizes. Source: Thanh Nien, Reuters

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A worker packages cooking oil bottles at a factory in Ho Chi Minh City Further fiscal stimulus is needed as the US$8 billion package this year has worked its way through the economy, showing good results, experts say.

If the economy is not completely out of the woods by the end of the current stimulus package, its continuation should be considered though the amount can be smaller, economist Vu Dinh Anh said Friday in a report on Vietnam Television’s website Cao Sy Kiem, a member of the National Advisory Council for Monetary Policy, said more stimulus measures would be necessary even after the economy has recovered. “Local businesses need to descend the ladder step by step and there should not be any abrupt end in stimulus spending,” Kiem said in an interview with Tien Phong newspaper Wednesday. Although the government’s program to subsidize 4 percent of the interest rate on loans taken by local businesses has shown real effects, it can only meet about one third of the credit demand, he said, noting the program is also set to close in the next four months. Vietnam’s economy accelerated in the second quarter as the stimulus helped drive credit growth and buoyed construction activity. The nation’s commercial banks have lent more than VND397.7 trillion ($22.3 billion) to businesses as part of the government’s loan-subsidy program as of August 27, a 0.43 percent increase from a week earlier, according to a central bank report Friday. “The government’s interest-rate subsidy program has helped the banking system and companies avoid bad debt and bankruptcies,” Tran Du Lich, a member of Vietnam’s National Assembly Committee for Economic Affairs, said at a conference in Ho Chi Minh City on August 19. Lich said the National Assembly will early next year discuss the size of another lending program for medium and long-term loans to help companies restructure businesses through the end of next year. The International Monetary Fund has said the global economy is recovering from a severe downturn, but it is too soon for governments to begin winding down stimulus efforts, according to AFP. “The outlook is improving but we do feel that it is very important to stress that it is no time for complacency,” AFP quoted IMF spokeswoman Caroline Atkinson as saying at a news conference Thursday. Kiem said interest rates on loans subsidized by the government are around 6 percent now but they would return to around 10 percent without the subsidies, which would cause many difficulties for local businesses. “What the government should do is to provide more credit,” he said, noting a credit growth target of around 30 percent is viable. The central bank plans to ease limits on credit growth this year as it aims to help the nation reach its economic expansion target of about 5 percent. The State Bank of Vietnam aims to cap expansion in lending at 30 percent, and will try to slow loan growth in the coming years, Governor Nguyen Van Giau said in a statement on the central bank’s website Friday. Credit from banks has grown 25 percent in the eight months through August from the end of last year, Giau said at a meeting in Da Lat on Friday. Vietnam’s economy may grow 5.2 percent this year, he said. Source: Thanh Nien, Bloomberg

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Multi-billion dollar foreign steel projects in Vietnam are likely to face delays because of the global economic slump, even though demand in the country is forecast to grow 20% this year and 10-15% next year.

Foreign investors, including Taiwan’s Formosa, India’s Tata Steel, South Korea’s Posco and Malaysia’s Lion Industries, have pledged to invest nearly US$30 billion in steel projects with total capacity of about 25-30 million tons by 2025. But Pham Chi Cuong, chairman of the Vietnam Steel Association, which groups the country’s major producers, said the global economic slump would hobble on those plans. “Most of the big foreign-invested steel mill projects are likely to be delayed because of their internal difficulties, such as finances,” he said in an interview on August 27. Cuong said the two partners in the country’s biggest steel project to date, a $10 billion joint venture between state-owned ship builder Vinashin and Malaysia’s Lion Group, had problems coming up with the money for the required investment. The only foreign company that had made any progress recently was Taiwan’s Formosa, with its $7.8 billion mill project in Vung Ang, in central Vietnam, Cuong said. India’s Tata Steel was still sorting out a “land allocation” issue for the plant’s site with authorities in Ha Tinh province for its $5 billion project, he said. No great leap forward Half of Vietnam’s annual consumption this year of about 11 million tons will be imported but domestic producers had already voiced concerns about oversupply once all proposed steel mills are up and running within the next five years. “There are many question marks around how realistic these foreign invested projects are, given all the problems they are facing, both internally and externally,” Cuong said. “There will not be a Great Leap Forward here for the steel industry,” he said. The industry had a painful start to the year, with a slump in prices and demand. Some companies slashed work shifts by as much as two-thirds and cleared inventories by selling at a loss to service bank debt, Cuong said. A chunk of money from the government’s stimulus package, which the Prime Minister’s office has valued at $8 billion, has gone into housing for the poor and infrastructure, buoying steel demand, which he said would rise more than 20 percent to 11 million tons in 2009. “The worst is behind us but we still cannot be too optimistic because of the uncertainty in the recovery and the fast rises in world commodity prices,” he said. Demand would increase 10-15 percent next year, he added. Prices have jumped nearly 40 percent so far this year and are set to rise around 5 percent between now and the end of the year thanks to robust demand, said Cuong, a former deputy director of top state-owned steel group Vietnam Steel Corp. Hence demand for scrap steel, the main source of feedstock for Vietnam’s mills, are expected to jump around 35 percent this year compared to 2008 to 2 million tons, Cuong said. At present the country does not import any iron ore as a few of its mills are designed to use iron ore but if the foreign-invested projects are completed they would have to import iron ores from mines in Laos, Australia and Brazil from 2012, Cuong said. Source: Reuters

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A branch office of ABBank in Ho Chi Minh City. Vietnam’s credit growth may spur inflationary pressures as the government encourages lending to boost the economy amid a slump in overseas demand, Morgan Stanley said.

Property prices in some projects have increased as much as 30 percent in Vietnam and new loan creation this year is equivalent to about 17 percent of gross domestic product, economists Deyi Tan, Chetan Ahya and Shweta Singh wrote in a note published Wednesday. Vietnam’s economy accelerated in the second quarter as stimulus spending that the government values at more than US$8 billion helped drive loan growth and buoy construction activity. The nation’s banks have lent more than VND389 trillion ($21.8 billion) to businesses as part of the government’s loan-subsidy program as of July 30, according to the central bank. “Credit disbursement has provided a cushion at a time when external demand indicators remained weak,” the economists wrote. “The current mode of policy-driven recovery could face limitations. With Vietnam having a functional banking system to push out liquidity via credit growth, strong credit acceleration could pose inflationary concerns.” Inflation slowed for an 11th straight month in July, with consumer prices rising 3.3 percent from a year earlier, compared with a 3.9 percent gain in June, according to General Statistics Office figures. Monetary policy Vietnam’s inflation will soon begin accelerating again, driven by commodity prices, a weakening currency and increased bank lending, HSBC Holdings Plc economist Prakriti Sofat said last month. Inflation will probably begin accelerating in September after dropping to about 2 percent in August, she said. The State Bank of Vietnam on July 20 said it will manage monetary policy in the second half to ensure credit grows as much as 27 percent for the year. Loans growth so far this year is about 20 percent, Morgan Stanley said. “If the lending target is to be adhered to, credit disbursement for the second half will have to slow to less than half the pace of the first half,” the economists said. “The delicate task of policy adjustment will likely have to take place to reduce the possibility of demand-pull inflationary pressures.” The central bank has kept the key interest rate at 7 percent since January, after reducing it six times from 14 percent in October, to slow inflation. Shipments from Vietnam dropped 13 percent to $32.35 billion in Januaryto-July from the same period a year earlier, according to data from the General Statistics Office. Exports from Vietnam, the world’s second-biggest shipper of coffee and rice, are poised to recover as commodity prices and production increase, fund manager Dragon Capital told investors this month. “Limitations to a policy-driven recovery due to potential inflation and trade deficit pressures suggest that the growth baton will have to be passed from policy-makers to make way for a market-based export-driven recovery,” the Morgan Stanley economists said. “We believe a market-based export-driven recovery is in the cards.” Source: Bloomberg

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PetroVietnam Drilling and Well Services Joint-Stock Co., which provides drilling services to joint ventures led by Soco International Plc in Vietnam, plans to sell another 25.7 million shares.

Soco International Plc is a UK oil explorer operating in Asia and Africa. The sale may raise about VND2.2 trillion (US$123 million), based on the Ho Chi Minh City-based company’s share price of VND85,000 Friday. The State Securities Commission gave permission to PetroVietnam Drilling to sell the shares to merge with its investment unit, PetroVietnam Drilling Investment Joint-Stock Co., according to a statement on the regulator’s website. PetroVietnam Drilling fell 4 percent on the Ho Chi Minh Stock Exchange Friday. On June 9, it had reached a eight-month high of VND92,000. The provider of oilfield services is the eighth-biggest company on the exchange. The statement didn’t say when the company will sell the new shares. Officials at PetroVietnam Drilling were not available for comment. Source: Bloomberg

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The Central Highlands province of Dak Lak was chosen by the World Bank to host the WB-chaired informal mid-year Consultative Group meeting, which will review the efficiency of ODA use in Vietnam, on June 8 and 9.

The Central Highlands province, known as Vietnam’s “coffee capital,” will seize the opportunity to introduce its economic potential and boost investment promotion to local and foreign investors, according to the provincial People’s Committee.

The local government has asked Dak Lak Department of Planning and Investment to pick several locations for donors and business representatives to visit on the sidelines of the meeting in an effort to attract investment in the province.

According to the Department of Planning and Investment’s Foreign Trade Office, meeting delegates will join a field trip to inspect seven ODA-funded projects.

They include a coffee and cocoa beans processing project in Tan An-Buon Ma Thuot Industrial Complex developed by Vietnam-Netherlands Coffee Company, a drainage and environmental sanitation project developed by Dak Lak Urban and Environment Management Limited Company, and a health and education center developed by Dak Lak Health Department.

The remaining projects are Dak Man Export Coffee Processing Joint Venture, a water management and bio-diversity preservation project for Cu Yang Sin National Park, a vocational training project and a transport project for rural areas.

The local government said they hoped the Consultative Group meeting will help attract more investors to the Central Highlands province.

Photo courtesy of Swiss-Belhotel Dakruco Hotel

The province currently has 25 ODA-funded projects, of which 13 are managed by the provincial People’s Committee, totaling VND1.4 trillion.

The ODA-funded education projects mainly come from the Asian Development Bank (ADB). Currently, the bank is financing three projects in Dak Lak province.

The Japan International Cooperation Agency (JICA) also granted non-refundable aids to the Central Highlands.

According to the Dak Lak Clean Water and Environmental Hygiene Center, JICA granted VND170 billion for a water supply project.

The World Bank-chaired Consultative Group is made up of representatives of the Vietnamese government and the foreign governments and international bodies that provide ODA to the country. The group usually holds its official meeting each December.

The informal two-day meeting will be held at the Swiss-Belhotel Darkruco Hotel in Buon Ma Thuot City in the Central Highlands province of Dak Lak on June 8 and 9, the ministry said.

Representatives from the Vietnamese government and some 50 international donors will discuss Vietnam’s economic policies, including poverty reduction strategies and the efficiency of ODA use in Vietnam.

Vietnamese and foreign non-governmental organizations and representatives from the Vietnam Business Forum will attend the meeting as observers.

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Vietnam’s largest banks will lower their interest rates on dollar deposits to 1.5 percent in June from around 2 percent now in a move to help avoid dollar hoarding in domestic markets, the central bank said.

All state-run banks plus Vietcombank, Vietnam’s largest partly private lender, have also agreed to set the ceiling for dollar lending rates at 3 percent, the State Bank of Vietnam said in a statement seen on Saturday. “The governor of the SBV is asking Vietnam Banks Association to seek consensus with other commercial banks to lower interest rates and (help) stabilize the forex market,” it said. The new rates come into effect tomorrow. The interbank 12-month dollar lending rates rose to 2.29 percent on Friday from 2.20 percent a week ago. This is still below the rate of 2.45 percent on April 29, according to Reuters data. The central bank said its inspectors will also step up large-scale checks from next month to deal with corporate dollar hoarding, which has pushed the exchange rate beyond regulated levels and led to a dollar shortage for the past several months. The Dow Jones newswire quoted Hanoi-based bankers as saying the SVB is implementing measures to make dollar holders sell greenbacks to banks, and encourage enterprises to borrow dollars instead of buying them. Earlier this month the government asked authorities, including the police, to help regulate foreign exchange transactions as part of efforts to reduce dollarization in the economy and control dollar rates on the black market. The central bank will accept the country’s recently issued dollar-denominated bonds as collateral in its dollar lending operations to help ease the tightness in dollar supply, bankers said on Friday. The central bank said it would accept foreign currency denominated “valuable papers” as collateral for the first time, without elaborating. Bankers said these papers would primarily include Vietnam’s US$230 million dollar bonds issued in March and they would be accepted in the central bank’s dollar lending operations. “This will accommodate the supply of short-term funds to banks which suffer from liquidity shortfall,” the bank said in a statement seen on Friday. Importers have been complaining they were unable to buy dollars at the official exchange rate due to dollar shortage at the banks. “The new rule would create a new mechanism for the central bank to intervene to solve the dollar shortage issue but given the amount of domestic dollar bonds, it will not be much,” a banker in Ho Chi Minh City said. The central bank said earlier this month that banks had plenty of dollars that they can lend but a shortage of dollars to sell as exporters preferred to keep their export earnings in the greenback on fear of a faster depreciation of the dong. Vietnam devalued its dong currency twice last year and the currency remains under pressure because of general economic uncertainty, an expected turnaround in the trade balance to a deficit and the fact that the dong has weakened less than many of its peers recently. The government estimated earlier this week that the trade deficit in May would widen to $1.5 billion from $1.18 billion in April. But State Bank Governor Nguyen Van Giau said last week he saw no need to adjust the dong’s exchange rate against the dollar on the grounds that the dollar was depreciating against other major currencies. The central bank allows interbank dollar/dong transactions to trade up to 5 percent on either side of the official reference rate. It set the rate at VND16,938 per dollar on Saturday. Source: Reuters, Thanh Nien

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Tra fish are processed at a facility in the Mekong Delta. The industry has been hard hit at all levels – production, processing and exports. The tra fish industry is bogged down in a stalemate that shows no sign of breaking as farmers choose to abstain from breeding and exporters are hit by falling demand.

According to the Aquaculture Department under the Ministry of Agriculture and Rural Development, the total area for tra fish (pangasius) farming has shrunk 30 percent from a year ago, after farmers hit by huge losses stopped breeding them. In the Mekong Delta province of An Giang, for instance, the current tra fish area is about 1,000 hectares, 400 hectares less than last year. The output in April dropped 20 percent from March to around 25,000 tons. Meanwhile more than 360 hectares of tra fish ponds in Dong Thap Province have been left idle for a year. The tra fish output of the province is expected to drop by 40 percent by the end of September. Shrinking fish farms will lead to raw material shortages for processing enterprises at the end of the year, the Aquaculture Department warns. Tra fish can be farmed throughout the year in the Mekong Delta and farmers start harvesting their crop after six months. Farmers in the region say that after consecutive price drops last year, tra fish prices have recovered to around VND16,000 (US$0.90) recently, which means they no longer suffer huge losses although the profit margin is still very small. But many tra fish farmers say they have lost confidence, and are concerned that if they all start breeding the fish again, prices will fall again as supply increases. Some of them now work for seafood companies and get paid to breed the fish for those companies. As breeders downsize, other businesses in the seafood industry have struggled with falling demand for fish feed and fingerlings. A salesman for a fish feed company, who wished to be unnamed, said sales at his company so far this year have dropped by half compared to the same period last year. “Farmers calculate expenses very carefully as selling prices [of the fish] are not high,” he said. Hoan Thanh, a group of tra fingerling providers in An Giang Province, said it has had to cut back on production. The group said it has sold some 80 million fingerlings this year, a decline of as much as 70 percent over a year ago. Downstream plight The situation is not much better downstream for the tra fish industry with processors and exporters facing their own difficulties. Seafood exports in the first four months fell 6 percent from a year earlier to $1.05 billion as the global recession hurt demand. Tra fish exports alone fell 0.42 percent in volume terms to 161,826 tons, the industry’s first ever contraction. The Ministry of Agriculture and Rural Development said falling demand, together with several allegations in important markets like Russia, Egypt and Italy that Vietnamese tra fish was unsafe, caused many difficulties for local exporters. Russia in April lifted a ban on imports of seafood products from Vietnam that it had imposed last December. Although the market has been reopened, exporters say prices are still low, at around $2 per kilogram of tra fish. Ngo Phuoc Hau, general director of An Giang Fisheries Import and Export Joint Stock Co., said prices for US exports were higher at $3.16 a kilogram. Agifish, as the company is known, said it will increase tra fish shipments to the US this year. However, the company said it could be a difficult task as tra fish would be subject to more stringent inspections by the US Department of Agriculture if the US 2008 Farm Bill is passed. “It’s hard to forecast market prospects,” said Nguyen Dinh Huan, Agifish deputy general director. The company’s exports have dropped about 30 percent compared to a year ago. Source: TBKTSG

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High school students in Hanoi fill out registration forms for the college entrance exams. A National Assembly (NA) committee Saturday said a proposal to increase tuition fees had to be scaled down to minimize hardships for students, particularly those from disadvantaged backgrounds.

According to the proposal presented at the NA’s ongoing session Saturday by Deputy Prime Minister and Education Minister Nguyen Thien Nhan, monthly tuition fees would rise to VND255,000 (US$14.35) from the current VND180,000 ($10) for university students, and to VND170,000 ($9.40) from VND120,000 ($6.70) for those attending vocational schools. But the chairman of the NA’s Committee for Culture, Education, Youth and Children, Dao Trong Thi, said the monthly tuition for universities should be raised to a maximum of VND230,000 ($12.80), and that for vocational schools to VND155,000 ($8.60). Under the government’s proposal, university tuition fees will range from VND550,000-800,000 ($27.80-44.40) per month by 2014, depending on the discipline. Deputy Prime Minister Nhan said the education sector has not had enough capital to increase salary for teachers and to buy equipment to improve the quality of education given. Between 1999 and 2008, minimum salaries under the state regulation increased 1.86 times, state budget for education went up 5.8 times, and the consumer price index doubled. But tuition fees over the same period have remained unchanged, and this has affected the quality of education provided and caused irrationalities in the sector, Nhan said. Chairman Thi said the percentage of state budget spending on education, which has been 20 percent since 2007, should be increased annually, instead of remaining at the same rate, as per the government proposal. Tuition-income ratio The government has also proposed new tuition fees for public kindergartens, secondary and high schools under which the fees, together with other studying expenses, must not exceed 6 percent of the average family’s total income. As the new tuition fees are charged in accordance with families’ capacity to pay, it will not be a financial burden, Nhan said, adding that poor families would pay less than those with higher incomes. Under the new regime, the average urban school tuition fees would be VND35,000 ($1.94) per month, equaling the current average schooling fee in urban areas. Average tuition would be VND17,000 ($0.94) monthly in rural areas, lower than the current average of VND25,000 ($1.39), according to the proposal. Nhan said the government would subsidize part of the tuition fees and expenses for poor families. In Vietnam, the poverty line has been set at monthly income of VND200,000 ($11.10) per person in rural areas, and VND260,000 ($14.40) in urban areas. But Thi said the proposed 6-percent level is too high, and unsuitable with the actual income of households in a developing country like Vietnam, as most students come from poor rural households. The ratio stands at 1.9-7.95 percent in newly developed countries, and at 2-10 percent in developed countries. Therefore, the committee suggested that the tuition fee should not exceed 5 percent of the average income of a household, Thi said. Thi suggested the fee be increased gradually each year and the proposed fee to not be fully applied until 2014. Eliminate free tuition policy for would-be teachers Under the proposal, students trained to become teachers will be required to pay VND280,000 ($15.50) every month beginning in 2010, whereas they do not have to pay anything now. The rate will be raised each year until it reaches VND500,000 ($27.80) in 2014. Deputy Prime Minister Nhan said the current policy of exemption of school fees for students of pedagogy, but does not require them to work in the education sector after graduation, is irrational. Under the proposal, students will be facilitated in getting study loans from banks, and the state will pay off the interest and loans for them if they choose to work in the public education sector for a period at least double the time they study at universities or colleges. Thi said the proposal was a suitable solution, because the fee exemption policy has not been effective as there are many students who do not work in the public education sector after graduation, but they are not required to refund the training expenses, which is a drain on scarce budget resources. Reported by Ngan Anh

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Vietnam’s leading retailer Saigon Co.op Thursday signed a deal with Tin Nghia Real Estate Company to take over its existing market in Bien Hoa Town and upgrade it into a supermarket.

The 3,000-square meter Co.opMart Tan Bien would be the retailer’s second outlet in Tan Bien Ward, an affluent business center in the city. Saigon Co.op said it is set to invest more than VND20 billion (US$1.1 million) to renovate Tan Bien market. Work would start next month, the retailer said, adding the supermarket would begin full operation in the third quarter. In July 2007, Saigon Co.op opened its first outlet in Dong Nai Province. Saigon Co.op’s revenues last year topped VND6.35 trillion ($372 million), a 48.9 percent year-on-year increase and it expects this to rise to VND9 trillion this year. It plans to have around 100 outlets by 2020. Reported by Vinh Bao

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An airplane replica seen at a ticket office of Vietnam Airlines in Ho Chi Minh City. Falling demand for travel amid the global economic downturn has forced many airlines flying to Vietnam to cut back on services and delay expansion plans.

From next month, Hong Kong Airlines will reduce the frequency of its Hanoi-Hong Kong service to five flights a week from the current seven. Sales manager Nguyen Tuan Hai said demand has fallen away sharply. Zlatko Zlatic, general manager of Lufthansa in Vietnam, said the German carrier would continue to fly three times a week this summer from Vietnam to Frankfurt, with a stopover in Bangkok. Demand is still adequate and the schedule would be restructured if passenger numbers decline, he said. Zlatic said the number of people flying from Europe and the US to Vietnam has dropped 10 percent since a year ago. The number of foreign travelers to the country fell 18.8 percent year-onyear in the first five months this year to 1.6 million, figures from the General Statistics Office show. Vo Huy Cuong, head of the Aviation Transport Department at the Civil Aviation Administration of Vietnam, said last month the number of flights registered to fly to and from Vietnam in the March-October period fell 4 percent from last year’s period. Many carriers, including Singapore Airlines, Thai Airways and Vietnam Airlines, have decided to reduce their flights, Cuong said. Vietnam Airlines has decided to cut down services on many sectors. The number of flights on the HCMC-Busan route, for instance, has been halved to two a week. The airline carried 2.3 million passengers in the first quarter, a 5 percent fall year on year, as the global recession hit leisure and business trips. “Our sales may decline and our costs are rising this year,” Pham Ngoc Minh, its chief executive officer, told Bloomberg last month. “We will try everything possible to make sure we don’t make a loss this year.” Indochina Airlines, which started operating late last year, now uses only one 282-seat airplane for its four flights between Hanoi and HCMC daily. Ha Dung, general director of Indochina Airlines, said cutting services and using just one plane are measures to deal with the economic slowdown. Even the no-frills model has not managed to weather the economic downturn very well. Budget carrier Jetstar Pacific has had to delay its plan to launch new services to Bangkok and Seam Reap. VietJet Air, a local carrier licensed in late 2007, has had to delay its first flight until the end of this year because of the downturn. Worldwide, air passenger traffic fell 3.1 percent in April, slowing from double-digit falls in the two preceding months, AFP reported Wednesday, citing the International Air Transport Association. Asia Pacific carriers saw the biggest fall in demand, with an 8.6 percent drop in passenger traffic in April. Giovanni Bisignani, director general of the airline association, said in a statement that as the decline in passenger demand still outstripped the capacity cuts made by airlines, yields have not improved. “The worst may be over. However, we have not yet seen any signs that recovery is imminent,” he said. Lufthansa’s Zlatic said the effects of the economic downturn would end soon in Vietnam and air travel demand would grow again. Hai of Hong Kong Airlines said though sales in the first few months were not so good, Vietnam, with its stable economic growth, remains a promising market. “During these hard times, we try to launch new services and manage our flight schedules well to overcome the difficulties. In the longer term, we are still scouting for new markets like HCMC and Da Nang.” Source: TN, Agencies

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Vietnam will probably produce an average of about 400,000 barrels of oil a day until at least 2030, the US government said, suggesting Vietnam will halt a four-year decline in output.

The projections accompanied the 2009 International Energy Outlook that the US Energy Information Administration released in Washington Wednesday. A report on Vietnam last month by the International Monetary Fund cited an anticipated drop in oil production “in the longer run,” while the World Bank last year identified “production capacity constraints” as hampering the country’s industry. Vietnam is opening new areas to exploration as it attempts to reverse the production decline. “There are some doubts about Vietnam’s ability to maintain its peak production level,” said Victor Shum, a Singapore-based senior principal at oil industry consultants Purvin & Gertz Inc., in a telephone interview Thursday. “The EIA projection is an optimistic outlook.” Vietnamese oil production has declined each year since peaking in 2004 at about 427,000 barrels a day, according to BP Plc. Through the first five months of this year, Vietnam produced about 6.95 million tons, or about 345,000 barrels a day, according to preliminary estimates from the General Statistics Office in Hanoi. Other scenarios Vietnam could maintain production of 400,000 barrels a day through 2030 in a low oil price scenario, according to the Energy Information Administration. In a high oil price scenario, Vietnamese production would be expected to slip to about 300,000 barrels a day by 2025, said the organization. Vietnam’s major oil field, operated by a Russian -Vietnamese venture, has been declining in output after more than two decades of production. But last year, ConocoPhillips, Nippon Oil Corp., Soco International Plc and Talisman Energy Inc. all began production from new Vietnam oil fields in which they hold shares. Premier Oil Plc, Soco and Talisman are among companies planning new output. “There’s a fair amount of exploration going on in Vietnam and no one has really started with the deepwater areas yet,” said Tony Foster, Hanoi-based Vietnam managing partner for the law firm Freshfields Bruckhaus Deringer, whose clients include oil companies. “A lot depends on the outcome of China’s power play in the area.” BP said in March that it would withdraw from a Vietnamese exploration area. The government in Hanoi said in 2007 that projects involving BP off its coast are in Vietnamese territory, after China cited concern over “actions” by its neighbor in the area. BP declined to comment in March on whether the territorial dispute influenced its decision. Source: Bloomberg

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Retail sales rose 352 percent in the ten years since 1997, while gross domestic product (GDP) increased by only 264.77 percent, according to the General Statistics Office.

The difference in the growth rates shows that the domestic market significantly contributed to the economic growth. Even during the Southeast Asian financial crisis of 1997, retail sales remained on an upward trend. It rose 5.7 percent in 1998 and 4.1 percent in 1999 against a GDP rise of 5.8 percent and 4.8 percent. Retail sales between 2001 and 2005 rose by an average of 10.3 percent a year, far in excess of GDP growth which averaged a mere 7.5 percent in the period. In 2006 and 2007, retail sales surged by an average of 14.5 percent annually, double the GDP growth of 8.4 percent in the period. In money terms, it rose from US$10.8 billion in 1997 to $45.7 billion in 2007. Sales of consumer products increased from 81.4 percent of total retail sales in 1997 to 83.4 percent in 2000. But by 2007 they had slumped to 77 percent, but remained at a hefty $35.2 billion as the size of the overall retail market had skyrocketed. The Red River Delta, Mekong Delta and southeastern region accounted for 75.9 percent of the retail market. By Nguyen Van Son* *Nguyen Van Son is an economist Source: SGTT

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From May 15, 2009, Viettel Telecom officially launches the pre-paid mobile package for foreign tourists when traveling in Vietnam. The package, named Tourist Sim, is offered with flexible usage time, attractive price and many other effective search services. Using Viettel’s Tourist Sim, customers are provided accurate, quick and free information on hotels, taxi numbers, exchange rate, weather forecast and sightseeing places by 5055 automatic server. Tourist Sim is also attractive for its price and usage duration. Regarding the price, the Tourist Sim is offered at US$5 or $10. Regarding call rate, International Direct Dial rate is at VND3,240/minute and Internation SMS is at VND2,160/message. Depending on the customer’s duration of stay and need for communication, he/she can re-charge his/her Sim at unchanged rate. Moreover, customers are provided GPRS for free. A free service center, 18008168, is also set up in both English and Chinese. This Sim will be widely distributed at airports, tourism places, hotels, resorts... Tourist Sim is a mobile pre-paid package specially designed for foreign tourists to Vietnam. It is a greeting from Viettel and Vietnam to international tourists. Viettel hopes to be the tourist’s friend as a communication bridge between tourist and their family, friends.

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Nobel laureate Paul Krugman said Vietnam needed to bide its time while 'the bigger economies get their act together' Paul Krugman’s advice for Vietnam: don’t lose sight of financial regulation as private business takes off and the “invisible hand” of the market grows stronger.

The Nobel Prize-winning economist said strict regulation of the financial sector and government safety nets would be key to greasing the wheels of Vietnam’s transition to a market-based economy. Speaking at a seminar in Ho Chi Minh City Thursday, The New York Times columnist and Professor at Princeton University said the global economic crisis was “stabilizing” but that there were no clear signs o a full recovery. “Things are getting worse, but they’re getting worse more slowly,” he said, citing less rapid US job losses and a slowdown in the fall of industrial production and exports in key economies. “I don’t think we’ve hit bottom, but the bottom is not too much further below us,” he said. “My big concern is that we don’t hit the bottom and bounce, we hit the bottom and stay there. It’s not obvious where recovery comes from.” He said there was not much Vietnam could do to help itself recover other than to stay smart, hope and wait. Shadow banking Krugman spoke at length of how the deregulation of the US financial sector allowed the shadow banking system to set off the financial crises that transformed into a global economic recession. Institutions that provide the services of banks without banking regulation, including but not limited to hedge funds, money funds and investment banks, have become notorious for their role in the meltdown. This system of institutions, known as the shadow banking sector, held trillions of dollars in the US by 2007. With so much money, the vulnerable and unregulated system in which investments are risky and unprotected, became an integral part of US and global finance. Krugman blamed deregulation that began in the Reagan-Thatcher era for the development. “We had a whole set of precautionary measures coming out of the great depression that were designed to prevent a recurrence of the banking crisis.” Then the world watched in dismay as the banking crisis of 2008 spawned global panic. “We were persuaded after about 1980 that we should have the same kind of free market principles for finance that we had for wheat or airline services,” said Krugman. “It turned out that our grandfathers were right and we were wrong.” The Nobel laureate stood by one of his trademark lines about talking to economists: “Don’t trust anyone under 50,” he said, explaining that anyone brought up in the new school of economics had not been taught the lessons our grandfathers learned. He went on to repeat another one of his mantras: “anything that does what a bank does, anything that has to be rescued in crises the way banks are, should be regulated like a bank.” He said the government officials who oversaw this deregulation, not just bankers, have a lot to answer for. “They liberalized, they deregulated, even as the banking sector was going crazy… in the US, this is bipartisan. The Clinton administration gave the bankers a lot of what they wanted, the Bush administration even more.” Krugman told the mostly-Vietnamese audience to not let the same thing happen here. “If you let a deregulated financial system run wild, it will do very bad things to your economy.” Slap in the face In discussing Vietnam’s situation, Krugman also warned against some of the market’s more exotic trappings. Asked about whether Vietnam should embrace derivatives, he was clear: “Don’t touch them.” He was skeptical of financial innovation in general. Most innovations – other than ATMs and overdraft protection – were geared toward helping institutions evade regulation, he said. Turning back to his rules for the financial sector, he suggested that banks be restricted from operating out of their main line of business. He said any deregulation “needs to be done with great care because you’ll find that when banking system goes wrong it does a lot of damage.” Now that damage has been done, he said the fate of highly trade-dependent, small economies like Vietnam were tightly bound to the world crisis, with their recovery linked directly to a real global recovery. So, what can Vietnam do toward that recovery? “Not a lot under the circumstances,” said Krugman. “Pray that the bigger economies get their act together.” He said things would have to change in New York and London before they changed in Vietnam. Though Vietnam was not responsible for the crisis, Krugman said the country was being “slapped in the face by the invisible hand.” Wryly, he said: “I miss that US$3 trillion that we spent on tax cuts and the war,” positing that if the US hadn’t wasted the funds, the crisis would be less severe. Reported by Jon Dillingham NO QUICK FIXES Thanh Nien Daily spoke with leading economists, entrepreneurs and journalists on the sidelines of a seminar presented by Nobel Prize-winning economist Paul Krugman in Ho Chi Minh City Thursday. Economist Pham Chi Lan Many reliable international economic magazines are saying the crisis has not hit bottom and nobody knows how large it is… for developing countries like Vietnam, the crisis arrived later but will stay longer. I personally think official predictions that Vietnam’s economy will recover by the end of this year are unrealistic. The Ministry of Labor, Invalids and Social Affairs said 300,000-400,000 people have lost their jobs, while trade associations have reported nearly 5,000,000. As the unemployment rate is a critical criterion in assessing the crisis, transparent information is more essential than ever. Krugman’s careful judgments can help governments and policy makers be more objective. They should keep their eyes on the rough road ahead. Vietnam’s US$8 billion stimulus package accounts for about 10 percent of its GDP. However, several representatives at the current National Assembly session are questioning where this money came from and how it will be used. Here, we [need] a clear target and transparent supervision system for stimulus packages. Gian Tu Trung, president of the PACE Institute of Directors This crisis has changed our view of the future… This is a right time for us all to reposition ourselves… I hope Paul Krugman’s presentation will bring a new perspective on all this. Understanding the aim of your journey will definitely help you choose the best path to take to get to the destination. John Yeomans, director of Deloitte Consulting/ICS Pte Ltd. In terms of the different economic systems around the world, you have some that are more under control than others and some that are more free. What we can learn from the seminar and recent history is that there is no perfect system and so my view is we need to look at different systems around the world and pick the best from each. So the policy makers should adapt in making their policies to best suit their situation. Vu Thanh Tu Anh, director of research at the Fulbright Economics Teaching Program I have drawn two important things from the seminar: Firstly, the government’s role of ensuring sound regulations for the financial system, especially for an economy like Vietnam’s, is crucial. Secondly, every country under any political system should have an effective social security system, especially during the economic crisis, as the poor are the most vulnerable to unemployment and other consequences. David Pilling, Asia editor of the Financial Times The government’s role in regulating the economy is crucial and undeniable. However, let’s take the example of China. If people’s creativity is allowed to flourish, it would usually create better results. In this case, the government should ease regulations for the private sector to fairly compete with the state-owned enterprises in the economy. Vietnam has allowed room for the private sector to develop and this should be maintained in the future. However, this is not a case for some to take undue advantage and commit corruption. Reported by Vinh Bao

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The market has been benefiting from increased liquidity in the last couple of weeks as a result of returning interest in Vietnamese shares.

The drop we saw in 2008 and the early part of the year has made Vietnamese shares cheaper, which has helped fuel the return of interest in the market. Some Vietnamese companies have also been more proactive in disclosing information and increasing transparency, allowing investors to increase their understanding and conviction in some of the companies that they have invested in. It is no secret that the market has moved higher in terms of u the recent runup. Our view is that the sustainability of the market’s rally should be determined by the fundamentals of the stocks themselves. Should we see more companies upgrading or becoming more bullish on their respective earnings outlook going forward, then that should indicate that the market’s renewed strength should be sustainable. Mark Canizares, head of equities at Ho Chi Minh City-based Manulife Vietnam Fund Management Source: Bloomberg

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