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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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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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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The global economic recession has hindered expansion of the export market for local producers. Vietnam’s exports declined 0.1 percent to US$18.64 billion in the first four months of the year, according to the General Statistics Office. Many producers have since decided to shift their focus to the domestic market and expand their market share at home, but are finding it a hard task. “The game seemed to be easy at home but it even takes more effort to win local hearts,” said Lai Kim, chief executive officer of Nhat Tan Garment Company. Kim admits that the company, which started exporting garments in 1992, did not have a strong distribution system here, nor did it run any promotional campaign to build up its local image before its foray into the domestic market. The garment producer is now struggling to build strategies for production, distribution and promotion for local markets. “For exports, we were not much worried about selling the products; we could concentrate on manufacturing as requested,” the CEO said. Ly Ngoc Minh, general director of Minh Long I, said the most difficult problem that the ceramic maker has had to face was to convince local customers to choose its products, as their prices are very high. Minh said the company has invested a lot in design and production to supply international customers with high quality ceramic products, including tea cups and bowls. Foreign customers could easily accept the high prices but locals may not, Minh said. Joey Ngo, deputy general director of Trung Thanh Furniture Corporation, said the domestic market had potential for wood processors as Vietnam’s current furniture spending per capita was very low at $10, compared to $250 in Europe, the firm’s main export market. The corporation has focused on stabilizing and balancing its sales in foreign and domestic markets, Ngo said, but added that its furniture products were still expensive for most consumers in Vietnam. According to Ngo, only 20 percent people in big cities are able to afford its furniture products. Many other businesses say being patient, creative and understanding are important qualities for exporters trying to switch their focus to home. But economist Le Dang Doanh said the domestic market should not be considered the only focus for export-oriented businesses as they still need to boost exports to keep the national economy growing. However, he conceded that due to falling prices and demand on the global market, Vietnamese exporters will find it more difficult to achieve what they did last year. The government predicts export growth will slow to 13 percent this year from the scorching 29.5 percent in 2008 because of the economic downturn in important markets like the US, Europe and Japan. Exports earned Vietnam $62.9 billion last year. Vietnamese exporters should reduce production costs to make their products more competitive while maintaining high quality so that they can retain their overseas markets, Doanh said. High prices and a lack of marketing are making things more difficult for export-oriented firms Reported by Minh Quang

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PetroVietnam Finance Co., a unit of Vietnam Oil & Gas Group, will lend coffee company Vinacafe Buon Ma Thuot Co. up to VND750 billion (US$42.2 million) to fund development of a plantation.

Vinacafe would use the money to buy urea and other products from PetroVietnam Fertilizer & Chemical Joint-Stock Co., the country’s biggest-fertilizer producer, the lender said in an e-mailed statement Friday. “We offer Vinacafe an interest rate of 6 percent for this one-year loan as it is part of the government loan subsidy program,” PetroVietnam CEO Tong Quoc Truong said in a phone interview. “This is a very good rate compared with the lowest rate of 10 percent we have offered to others.” Vietnamese lenders gave VND255 trillion ($14.3 billion) in loans to businesses between February 1 and April 23, after the government started a subsidy program to bolster the slowing economy. Source: Bloomberg

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The State Bank of Vietnam said Friday it has allowed the Ho Chi Minh City Deutsche Bank AG to increase its registered capital from US$15 million to $24 million.

The German bank opened its Vietnam branch with a capital of $15 million in June 1995, the central bank said in a statement on its website. Currently, there are 38 foreign banks operating in Vietnam. Source: Thanh Nien

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These apartments in Hanoi are meant for residents displaced due to projects to construct industrial parks and urban areas. Displaced farmers, food security and the loss of an average of 74,000 hectares of farmland yearly to urban and industrial zones were a few issues heard at a seminar in Hanoi Friday.

The Land Science Association held the event to discuss regulations on land relating to agriculture, farmers and rural areas. Experts blamed industrial parks for devastating surrounding farmland with pollution, while people in rural areas have lost jobs from the farmland shrinkage. Around 500,000 hectares of farmland have been taken for other purposes between 2000 and 2007, said Ton Gia Huyen from the association. This area is equal to 5 percent of the country’s farmland, he added. Many serious problems have cropped up from the revocation of farmland for non-agricultural purposes, he said. A survey at 16 cities and provinces found 89 percent of land being revoked to build residences, industrial parks and infrastructure were farmland, mostly rich rice paddies. “Many industrial parks in several localities have been constructed on farmland although they could have zoned them on mountainous areas or those with poorer soil, because of their advantageous infrastructure,” said Hoang Thi Van Anh from the Land Bureau under the Ministry of Natural Resources and Environment. She named several such industrial parks, including Ba Thien, Quang Minh II and Binh Xuyen in Vinh Phuc Province; VSIP, Que Vo and Nam Son – Hap Linh in Bac Ninh Province; Long Giang in Tien Giang Province and Van Trung in Bac Giang Province. Of these provinces, Vinh Phuc set up three industrial parks in 2007 which cover a total of 865 hectares of good farmland, while three industrial parks at Bac Ninh eliminated 1,940 hectares of farmland in 2007 and 2008. Vu Thi Binh from the Hanoi Agricultural University said Hai Duong Province, which saw its paddy fields decrease 4.8 percent in 2008 from 2005, has suffered a fall of 3.3 percent in its rice output. If land for paddy cultivation continues to plummet, Hai Duong could have a rice shortage, she said. Tran Ngoc Hung, chairman of Vietnam General Construction Association warned the shrinkage of farmland could threaten food security. “Vietnam is one of the countries worst affected from the sea level rising,” he said, adding that the salty water is threatening to spill over and damage millions of hectares of farmland nationwide in the future. “I wonder what our descendents would think about our decision to eliminate millions of hectares of farmland which had been created by our ancestors,” Hung said. Vietnam’s population is estimated at about 86 million and is expected to increase by 1-1.2 percent in the next few decades. Researchers estimated rice demand would jump to 53.2 million tons in 2020 from 47 million tons in 2010. The farmland revocation from 2003 to 2008 has affected 950,000 farmers in more than 627,000 families, the Ministry of Agriculture and Rural Development reported. Between 25-30 percent of these farmers became unemployed or found unstable jobs, leading to a 53 percent decrease in income for these families, the ministry said. Resettlement problem Housing for displaced farmers has been a monumental headache for the families, advocates said. Hung of the construction association said he was “allergic” to the term “resettlement” because the poor quality apartments and houses are not suitable for the displaced residents. He said between 60 and 70 percent of displaced residents in major cities have sold their new accommodations because it was worse than their previous houses or not suitable for living. Hung suggested providing sufficient compensation, equal to market prices, for residents to find their own accommodations instead of compensating less and offering cheap resettlement residences. Anh from the Land Bureau also criticized the farmland compensation rate. “Compensation for farmland is often not enough to buy the same area of farmland in other places, or to help the farmers find other employment,” she said. Phan Van Tho from the Land Bureau said some localities, due to their limited budget, have offered compensation equaling only 30-50 percent of market prices. In many localities, project investors negotiate directly with farmers about the amount of compensation for land revocation. But they have failed to do so in a structured and unified manner, creating compensation differences in a locality, which has also caused complaints, he said. In addition, the resettlement process has not been planned well enough so that those affected could be assured of being provided with equal or better housing than before, said Huyen from the Land Science Association. Tho also said the shortage of funds for housing, land and capital in resettlement is now all too common and serious. Hanoi’s housing and land fund meets only 40 percent of its demand for resettlement, and Ho Chi Minh City’s is 70 percent, he said. Reported by Bao Van – Quang Duan

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Workers at a construction site in Ho Chi Minh City. Construction firms said they are optimistic about the industry’s prospects this year. The construction industry had a very tough time last year but insiders say the decline in building activity may be over.

Nguyen Luong Thinh of the Ho Chi Minh City-based Binh Minh Construction Company said 2008 was the most challenging year in the last two decades for the industry. The economic problems last year had a huge impact on the industry as well as the construction material and real estate sectors, he said. “The sudden downturn came as a shock to all construction firms, which just one year ago had so much work to do and enjoyed an average annual growth rate of 30 percent.” The rise in borrowing costs, salaries and construction material prices in the first half was a burden that many firms found too heavy, he said. As prices rocketed, materials alone accounted for as much as 70 percent of the total construction cost. Many building contractors said they had to accept losses because investors refused to pay more after signing contracts. Le Thanh Cong, deputy chairman of the HCMC Construction Association, said 40 percent of more than 2,000 construction firms in the city are small-sized and most of them had to stop working last year or do contract work for small projects. But construction firms said they are optimistic about the industry’s prospects this year. Huynh Phu Kiet, chairman of Toan Thinh Phat Architecture Investment Construction Company, said the economy is expected to recover next year, with the construction industry likely to see a recovery earlier. The scenario for the industry would become bright again in the third quarter this year, Kiet said, noting that his company signed construction contracts worth VND300 billion (US$16.85 million) in the first quarter. Construction firms also said the industry would benefit greatly from the government’s stimulus package, especially a VND8 trillion ($450 million) program to build low-income housing around the country. Construction value expanded 6.9 percent in the first quarter, a “surprise on the upside,” according to a note last month from Vietnam Property Fund Ltd. With construction activity gaining momentum, the construction material market also started to pick up. Ha Tien 1 Cement Joint Stock Company, which has a 30 percent market share in HCMC and the southeastern provinces, said sales in April recovered to more than 7,000 tons a day after months of slowdown. The sales recovery has allowed the cement manufacturer to run its plants at full capacity again. Pham Chi Cuong, chairman of the Vietnam Steel Association, said steel consumption last month returned to the normal level of more than 360,000 tons. Last year, the monthly consumption dropped to as low as 110,000 tons. Despite good prospects for the construction industry this year, Le Viet Hai, chairman of the Hoa Binh Construction and Real Estate Corporation, warned that construction firms should not be too optimistic when making plans for the year. The industry still depends on how well the economy fares and it would be affected if high inflation returns or if investors cannot find enough funds for their projects later this year, Hai said. Cong said even if the industry recovers as expected, the opportunities would not be available for all businesses, with small contractors affected the most by the harsh competition. Source: TBKTSG

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A practice session of the Co Bo drumming team in Bac Ninh Province’s Thi Cau Ward Co Bo drumming, once used to serve the kings of the Nguyen Dynasty, is being preserved in a northern village.

Music researchers believed the traditional art of Co Bo drumming, used to serve the last monarchy in Vietnam, died out in the central ancient capital of Hue. But this echo from the past has resurfaced and is being preserved by people in a northern village, 750 km from Hue. The sound is enthralling, as a group of men passionately play drums. A man who stands in the middle plays a pair of cymbals, while the other four men play on drums that hang in front of their stomachs. These drums, 40 cm high and 25 cm wide, carry images of dragons and clouds. Co Bo music, which once graced the courts of the kings of the Nguyen Dynasty (1802-1945), can now be found in Thi Cau Ward, in the northern province of Bac Ninh. In ancient scripts, Co means drum, and Bo means Ministry. Co Bo means “drums of Ministry of Rites” (one of the six main ministries of the feudal dynasties). Researchers thought the ancient art form of drumming was truly lost to time. “In 1996, while I was studying Hue’s royal music, I searched for information on the Co Bo drum but I found no answers,” said Bui Trong Hien, an ancient music researcher. The town that’s preserving Co Bo has a musical history. Thi Cau Ward used to be the village famous for quan ho (traditional northern folk songs) of Bac Ninh Province. Local elders said the drumming skills came into the town through an instrumentalist whose family name was Hoang. He served as a member of a music band in Hue’s Royal Citadel. When Hoang returned to his home village, he passed on his drum playing skills to local villagers. He taught them 12 compositions of drum performance, but today people only remember six. Tran Anh Tu, local cultural official, said people taught the drumming skills orally and through listening to each other. “The band often performs their drum playing during annual ceremonies to worship village gods and other local festivals,” he said. “In addition, most local families have their own drum bands, who perform in their own family ceremonies and funerals.” Tu said the local authorities have encouraged people to preserve the art and to find a better way to teach the skills. “Oral transference is not safe enough, so we need scientists and music researchers to do official studies and make recordings on this art of drumming,” he said. “We are asking the Ministry of Culture, Sports and Tourism to have a specific plan to help us maintain this ancient art.” Researcher Bui Trong Hien said these drumming pieces were used regularly to serve the kings and their royal family. “The drums were used to welcome the kings, when the kings met envoys from other countries, and when the kings prayed during the Nam Giao ceremony,” Hien said. “The drums were also used while servers brought the kings tea, wine and offerings.” But in Thi Cau, local musicians perform them in ceremonies to worship the village gods. It’s a skill that others from nearby villages have tried to learn, but haven’t completely mastered. Most people do not have access to this tradition early on, said Nguyen Van Cau, 76, a well-known drummer from Thi Cau. “We’ve heard these drum sounds since we were very little children,” he said. “We have practiced drum beating since childhood and we have been attached to the art for many years.” Cau said the drum sound can sometimes be heard nearly every day around this area. The lengths of the drum pieces are short, he said. “All six drum pieces can be performed in 30 minutes,” he said. “Each is then repeated again and again.” The lone cymbalist in the group of drummers controls the rhythm of the group, he said. The cymbalist must be aware of each stage of the worship ceremonies to lead the drummers into a new composition. Currently, Cau is the only person who has mastered all the drumming compositions and performance skills, along with knowing the stages of the worshipping ceremonies. He now teaches other men in the area. With Cau’s help, people in the nearby Thanh Phuong Village, in Vu Ninh Commune, have also established their own drum teams: one team with older men and another of younger players. They can perform the six drumming compositions fluently. Reported by Hoang Trung Hieu

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By Steve Schifferes Economics reporter, BBC News

Bank losses are even bigger than expected one year ago, the IMF says

The International Monetary Fund (IMF) has warned credit crunch losses could reach $4 trillion (£2.75tn), damaging the financial system for years to come.

It says that even if urgent action is taken to clean up the banking system, the process will be "slow and painful", delaying economic recovery.

Banks may need $1.7 trillion in additional capital, the IMF forecasts.

And it warns that the cost of the bail-out will severely hit UK government finances with its added debt burden.

The power to force banks to raise additional capital rests with national regulators, such as the FSA, not the IMF Robert Peston BBC Business Editor Read Robert's blog

But the IMF corrected its estimate of the cost to the UK of the bail-out from 13.4% of GDP, or £200bn, to 9.4% of GDP, or £130bn.

The Treasury confirmed that the chancellor will be making a "prudent" estimate of the cost of the bail-out in the Budget, but many commentators believe this will be around £60bn, or half the IMF estimate.

The US and Ireland will face even higher government bills for the bail-out, according to IMF estimates.

Rising bill

One year ago, the IMF estimated that total losses from the credit crunch would be $1tn, which has been exceeded, showing how rapidly the financial meltdown has escalated.

The IMF now says that banks are likely to lose $2.7tn, but other financial institutions such as insurance companies and pension funds are also coming under strain.

And it says that emerging market economies, which will need $1.8tn in refinancing next year, will be hard-hit by the collapse of cross-border lending. It predicts that there will be no net private lending at all to developing countries this year.

WHY $4TN LOSS MATTERS The banks' huge losses have made them reluctant to lend The lack of lending has pushed the world economy into a deep recession Government budgets are strained by the cost of the bail-outs, hitting taxpayers

The report comes as the IMF and World Bank are beginning their spring meeting in Washington, after receiving a promise of $750bn in fresh funds agreed at the G20 summit.

Policy response

The IMF's latest Global Stability Report says that the banking system has not yet been stabilised, despite the billions of dollars spent by governments.

But it warns that political support for further bank bail-outs is waning.

It says that there may be "a real risk that governments will be reluctant to allocate enough resources to solve the problem" because the public has become "disillusioned by what it perceives as abuse of taxpayer funds".

The situation is especially difficult in the US, where Congress appears reluctant to allocate additional bail-out funds above the $700bn approved last autumn despite the inclusion of another $750bn in President Obama's latest budget proposal.

Systemic risks remain high and the adverse feedback loop between the financial system and the real economy has yet to be arrested IMF

The US Treasury has instead proposed a private-public partnership to buy up troubled assets underwritten by loans from the Federal Reserve.

But the IMF comments that "uncertainty about political reactions may undermine the likelihood that the the private sector will constructively engage in finding orderly solution to financial stress".

Deeper recession

The IMF says that restoring the banking system so that it functions normally is likely to take several years, and this will make the recession longer and deeper than usual.

But it warns that if policies are unclear or not implemented forcefully and promptly, "the recovery process is even more delayed and the costs, in terms of taxpayer money and economic activity, are even greater".

It adds that the worldwide recession has deepened the financial crisis.

COST OF REBUILDING BANKS US banks: $275bn Eurozone banks: $725bn UK banks: $250bn Other European banks: $225bn Source: IMF, based on 6% capital/assets ratio

"Systemic risks remain high and the adverse feedback loop between the financial system and the real economy has yet to be arrested, despite the wide range of policy actions and some limited improvement in market functioning.

"Further effective government action - particularly geared toward cleansing balance sheets and strengthening institutions - will be required to stabilise the global financial system and to provide the foundation for a sustainable economic recovery."

On Wednesday, the IMF will present its world economic forecast.

It is expected to be the gloomiest for 60 years, with the world falling into a global recession, and an even sharper decline in output in the rich countries.

An earlier version of this story referred to an IMF estimate that the total cost of bailing out the UK banking system would add 13.4%, or about £200bn, to government debt. The IMF has since corrected this figure, and has returned to their earlier estimate that it would cost 9.4% of GDP, or about £130bn.

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South Korea-based Samsung Electronics, the world’s No. 2 mobile phone maker, will put a handset factory in northern Vietnam into operation this month, a company executive said.

Most of the factory’s products will be exported and Southeast Asian countries would be the first markets, the executive told TBKTSG Online. Earlier, the Vietnam News Agency had said the plant, located in Yen Phong Industrial Park in Bac Ninh Province, would initially produce 30 million handsets a year and step-by-step increase its annual production capacity to 100 million units. The agency also said the factory’s total investment capital was US$670 million. The investment is in line with Samsung’s efforts to cut costs to improve global price competitiveness and meet fast-growing demand in Southeast Asia. In addition to the company’s domestic handset plant in Gumi City, about 250 kilometers from Seoul, Samsung also runs handset facilities in China, India and Brazil. Source: Thanh Nien

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A project to construct 600 apartments for low-income earners underway in Ho Chi Minh City’s District 7. Prime Minister Nguyen Tan Dung said Tuesday that supporting agricultural production is vital for tackling the economic downturn, as it would affect industrial production and exports.

At a government session in Hanoi Tuesday, the Ministry of Planning and Investment reported a growth of 3.1 percent in the first quarter, much lower than last year’s 7.49 percent. Dung also instructed concerned agencies to prevent plant and animal diseases, and better manage agriculture production to avoid situations where farmers suffer losses from bumper crops. Farmers should make a 30 percent profit on their investment, he said. The Prime Minister also wanted low-interest or no-interest loans given to farmers for purchasing farming equipment, televisions and motorbikes, and to build houses. To boost industrial production, Dung said administrative procedures have to be simplified and the policy to apply peak-hour prices for electricity consumed by the sector reconsidered. The disbursement of official development assistance (ODA) and foreign direct investment (FDI) should be expedited and the government would issue more bonds to raise funds to meet the capital needs of the production and commerce sectors, he said. Dung hailed the management of the financial sector but recommended that the State Bank carefully consider its policy to maintain inflation at around 6 percent. Small- and medium-sized enterprises will also be offered a 4 percent interest subsidy on two-year loans taken for new investment projects. Social housing At the session Tuesday, the government discussed projects to construct more houses for workers and low-income earners, and dormitories for university students. Earlier, the government had approved a plan to build dormitories to accommodate 60 percent of total students nationwide by next year. The Construction Ministry reported that only around 20 percent of between 2.2 million and 2.5 million workers in industrial parks nationwide had stable accommodation. Meanwhile, only one third of nearly two million civil servants own a house. The ministry proposed an VND8 trillion (US$469.42 million) plan to build housing for university students, workers in industrial parks and low- income earners in urban areas by 2015. Under the proposal houses would be built and leased to low-income earners at favorable rents, or sold with the help of low-interest bank loans. The government has allowed the municipal administrations of Hanoi and Ho Chi Minh City to start building this year projects to provide accommodation for 200,000 students by 2010 and the second quarter of 2011, construction Deputy Minister Nguyen Tran Nam said. More stimulus packages The Ministry of Planning and Investment is considering another stimulus package of VND20 trillion ($1.14 billion) to spur investment and consumption, Deputy Minister Cao Viet Sinh said at the press briefing. He said government bonds worth VND36 trillion ($2.1 billion) had been sold in 2008. Recently, Le Duc Thuy, chairman of the National Finance Supervision Committee, had called for further stimulus packages to prevent the economy from slowing down and help it recover soon. It is now using VND17 trillion ($970 million) from a stimulus package to provide a 4 percent interest subsidy on loans to companies that export, import or produce essential goods. An official from the Ministry of Industry and Trade said his ministry will propose a plan for not reducing state budget spending so that social welfare projects and other government activities have adequate funds. Reported by Bao Van – Xuan Toan

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A crane loads sand illegally dredged from Dau Tieng Lake in Dong Nai Province on to a truck Virtually overnight, some paddy fields on the Dong Nai River have collapsed recently.

It is not some cataclysmic event like an earthquake that has caused it, but the illegal activity of sand dredging in Dong Nai Province that continues unabated five years after a government ban. The Dong Nai River originates in the Central Highlands and flows for more than 437 kilometers through the provinces of Lam Dong, Dak Nong, Binh Phuoc, Dong Nai, Binh Duong, Ho Chi Minh City, Long An and Tien Giang. But it is the sand exploitation in Dong Nai Province, one of the fastest areas in the country to industrialize, that has seriously eroded many areas on its banks, including public, farming and residential land. Provincial police have busted four cases since early this year and seized 27 dredging vessels, but the illegal exploitation is apparently beyond the control of local authorities. A portion of the Dong Nai River bank in Binh Loi Commune has eroded due to the illegal activity of sand dredging that has continued unabated for five years in Dong Nai Province Thanh Nien reporters last week found many sections of the river bank eroded to dangerous levels. “A bamboo hedge collapsed into the river some days ago,” said Dao Thi Bong of Binh Loi Commune in Vinh Cuu District. “I don’t know when the erosion will stop. “There used to be a path on the river bank some 15 meters from my land. But it has disappeared to erosion and locals now have to walk through my garden.” Her neighbor, Nguyen Ngoc Dinh, said he has lost some hundred square meters of land so far to erosion. “The situation has become slightly better recently after the district police began patrolling more regularly,” he said. “Last week, I reported illegal dredging to the police, but they could only manage to fire some warning shots in the air to scare them away.” Nguyen Van Son, chief of police in Binh Loi Commune, admitted that illegal sand dredging was happening, but done more secretly. “Waterway traffic police last week detected two illegal dredgers but they sank their boats and fled to avoid being caught,” he said. Nguyen Van Tot from the province’s Nhon Trach District said dozens of dredgers often worked at night to evade detection and capture. The illegal dredging is also common on the Dau Tieng Lake, which is fed by the Dong Nai River, threatening local irrigation works. A dredger said his team could dredge 20 cubic meters of sand from the lake everyday for a remuneration of VND10,000 (US$0.56) per cubic meter. The owner of a nearby café said the pirate dredgers run construction material sales depots near the site to cover up their exploitation because it is legal to store sand in such places. A local resident said up to 100 trucks carrying sand from the site leave between 4 a.m. and 9 p.m. everyday. Nguyen Trong Thanh, director of the Dau Tieng Irrigation Work Management, said the Ministry of Agriculture and Rural Development had banned sand exploitation from the lake in 2005, but the activity still continued. Vo Van Chanh, deputy director of Dong Nai Department of Natural Resources and Environment, also said the illegal sand dredging has been “complicated” and difficult to control. All concerned authorities have been mobilized to deal with the issue but they have not been able to stop illegal dredging yet, he said. He said the district’s people committees have been asked to intensify patrols on the river as a preventive measure. Clay exploitation The loss of farmland to illegal dredging is not confined to Dong Nai, unfortunately. The Central Highlands province of Dak Lak has seen its farmland shrink after people began digging up their fields to exploit it for clay to make bricks. Erosion caused by illegal sand dredging is also threatening irrigation works in the province. The Dak Lak Department of Natural Resources and Environment has announced that 84.5 percent of entities and individuals that are exploiting minerals don’t have permits. Sand and clay are major resources being illegally exploited, besides stone, peat, lead, zinc and granite. The department says only two companies have been licensed to dredge sand, but at least eight other entities and 58 individuals are illegally exploiting around 500,000 cubic meters a year. Only three companies are licensed to exploit clay, but nine others and 178 individuals engage in the activity, averaging 320,000 cubic meters a year. Duong Dinh Hoanh, head of the department’s mineral management office, said illegal sand dredging was common in the Krong Ana and Krong No rivers. He said this had caused erosion of river banks and changed the river’s currents, while clay exploitation on paddy fields has reduced farmland in the province. Tran Dinh Chien, chairman of Ea Bong Commune’s People’s Committee in Krong Ana District, said there were 40 brick producers in the commune and 80 percent of rice paddies had clay. Residents have exploited clay to sell to brick producers, saying they were renovating their farms, he said. Hoanh said this activity has damaged the fields because they would become deeper and unfit for rice cultivation. In January, the Dak Lak People’s Committee instructed district authorities to strictly manage mineral exploitation and take stiff measures against violations. However, district authorities have failed to report to the committee on action taken thus far. The deadline for submitting the report was February 28. Reported by Thanh Nien staff

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A broker (2nd, L) at real estate company Dat Xanh points out locations to potential buyers Interest rate cuts and cheaper construction material costs have pushed down housing prices in Ho Chi Minh City, said a senior executive at a property company.

Some developers have reduced apartment prices by 40-50 percent from last year as construction material prices have fallen to a three-year low, said Luong Tri Thin, general director of property firm Dat Xanh. He also said builders could now borrow easier from banks, enabling them to complete projects at lower initial costs. Efforts to stimulate the economy have seen the central bank slash the key rate from 8.5 percent to 7 percent, allowing commercial banks to charge interest on dong loans up to 50 percent above the benchmark rate, which is now only 10.5 percent a year. Dat Xanh plans to offer 224 apartments in the SunView Apartment building in HCMC’s Thu Duc District at the price of US$764 per square meter, a drop of more than $500 a square meter from last year. According to the HCMC-based firm, 60 percent of its customers wanted to pay no more than VND1 billion ($57,200) for a full apartment while only 10 percent were in the market for apartments at $1,500 per square meter or more. Property firm Vinh Tuong has begun selling apartments in Block 3 of the Tan Tao Building in Binh Tan District at some VND9 million ($515) per square meter. Each 70-120 square meter apartment has two bedrooms. Apartments in Nam Long Company’s Ehome Building in District 9, which is under construction and scheduled to open by September, are on sale for VND11.5-14.5 million ($671-847) per square meter. Apartments larger than 50 square meters at the 17-storey Sunshine Building under construction in Thu Duc District are expected to be sold for only VND500-VND600 million ($29,197-35,036). HAGL Land cut prices for its new Hoang Anh River View apartments in District 2 by 40 percent to US$1,350 per square meter last week. It has also lowered prices at another project in Nha Be District to $1,250 from $1,800 per square meter. Le Hung, director of HAGL Land, said the price cuts would “revolutionize” the HCMC property market in line with government efforts to stimulate the economy. In Hanoi, medium and low-income apartments are selling for a whopping VND25 million per square meter, said Le Xuan Truong at property firm B.D.S Co. Thin told Thanh Nien that property firms didn’t expect profits this year to look anything like they did in 2007, when prices and sales went through the roof. But 2009 is set to beat dreary 2008. “Their earning growth target is 20- 30 percent this year,” said Thin. In another boon to the local property market, several banks have recently begun offering loans for house and apartment purchases. Western Bank is lending a maximum of VND1 billion to potential homebuyers at interest rates of between 10.5-13.2 percent a year for the first three months. Tien Phong Bank is offering 15-year mortgages worth 70 percent of the house value at 10 percent interest. Vietnam Export-Import Commercial Joint Stock Bank, or Eximbank, Asia Commercial Bank and Sacombank are also offering housing loans. Reported by Thanh Nien staff

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The Ministry of Construction has issued policies on the use of public and private space in apartment buildings as well as on fees charged to condominium owners.

The ministry circular requires the apartment sales contract to distinguish between the buyer’s private space and the building’s public space, such as the hallways, stairs, lifts and parking lots. Both the Housing Law and ministry regulations state that apartment building residents do not have to pay to use public spaces. Condominium contracts must designate what facilities might be owned by the buildings’ developers such as swimming pools, tennis courts or supermarkets. Deputy Minister Nguyen Tran Nam said the instructions should have come sooner to prevent the many conflicts that have flared up between apartment occupants and investors. Some apartment building developers in Ho Chi Minh City asked residents to pay enormous fees of up to US$25,000 for a car parking space or to use meeting areas, child care facilities and even libraries. Also in line with the new circular, all contracts must specify the apartment’s exact measurements in detail. Two percent of each apartment price will be used for maintenance fees. If the amount is not enough, the developers can ask residents to contribute extra fees based on the size of their apartments, according to the ministry. The sale contract must mention these fees and estimate the amount each household must pay to cover the other costs of operating the buildings, Nam said. City and provincial People’s Committees will decide the maximum operation fee for apartment buildings in their jurisdiction, according to the ministry. The developers and buyers will rely on those ceiling fees to work out specific payments in their sales contracts. Nam said committees are allowed to change the ceiling fees every year depending on market prices.

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Ho Chi Minh City will encourage more investment in advanced mechanical engineering and the electrical, electronic, and chemical industries in its industrial parks, an official said.

By 2020 about 7,000 hectares of land would be earmarked for setting up factories in three export processing zones and 12 industrial parks in the city, up from the current 4,000 ha, Vu Van Hoa, chairman of the HCMC Export Processing and Industry Zone Authority (Hepza), said. By last year the parks and zones housed nearly 1,200 projects with an investment of US$4.36 billion, of which 463, worth $2.63 billion, are foreign-owned, according to Hepza. They contributed $17 billion to the country’s total export of $62 billion last year, it said. Reported by Minh Quan

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Government defers income tax collection to spur spending

Vietnam would lose around VND1 trillion (US$57.3 million) every month if it waives income tax for five months, Deputy Minister of Finance Do Hoang Anh Tuan said The government will delay the collection of personal income tax until the end of May to help stimulate spending amid the global economic crisis.

Personal income including salaries, profit from real estate and stock transactions and other investment returns would not be taxed until May, the government said in a statement posted on its website Monday. The National Assembly will decide then if the payments will be waived completely or just delayed. The economy expanded 6.2 percent in 2008, the slowest pace in nine years, as the global recession cut demand for Vietnamese exports in the US and Japan. The government is targeting 6.5 percent growth for this year. The government said last month it would provide a 30 percent rebate on tax bills from the fourth quarter of last year onwards for small- and medium-sized firms, defined as those having less than VND10 billion (US$572,000) in capital or employing fewer than 300 workers. It will also cut value-added tax by half in February for products like coal, construction materials, engineering equipment used to make other products and automobile parts. The country would lose around VND1 trillion ($57.3 million) every month if it waives income tax for five months, Tuoi Tre newspaper reported on January 13, citing Deputy Minister of Finance Do Hoang Anh Tuan. Non-resident individuals would not have to pay tax on income from financial investments, transactions, copyright and franchising until May, Monday’s statement said. Source: Bloomberg

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