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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Investors place orders at Viet Dragon Securities Corp. in Ho Chi Minh City. Foreign investment in Vietnamese stocks stands at US$5 billion, including shares in commercial banks, insurance firms and major companies, an industry report said Friday, up from $4.6 billion at the end of last year.

Earlier industry reports had shown a steep drop in portfolio investment from $7.6 billion in December 2007. The current investments included $1 billion by foreign strategic investors in financials and $4 billion from funds and institutions not based in the country, the Vietnam Association of Financial Investors’ report said. Vietnam caps foreign ownership in listed domestic banks at 30 percent, with a 15 percent limit for strategic investors that can be increased to 20 percent with government approval. Foreign investors now have shares in a number of Vietnamese banks, such as Saigon Thuong Tin Bank, Asia Commercial Bank and Vietcombank, the country’s largest partly private lender. The VN Index on the main Ho Chi Minh Stock Exchange has risen 70 percent this year. It added 1.8 percent on Friday. 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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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’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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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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Interest rates ‘have hit a floor,’ may rise, ratings agency says

The benchmark interest rate has probably reached “a floor” after a series of cuts, and borrowing costs may need to be increased as government subsidies spark accelerating loan growth, Fitch Ratings said.

The State Bank of Vietnam has lowered its key rate to 7 percent from 14 percent in October. Standard Chartered Plc predicted a month ago that policy makers would further reduce the rate to 5 percent by the end of June, in an attempt to bolster economic growth. “Given the government’s needs and that we’re starting to see dong liquidity tightening in the market, rates at the moment appear to have hit a floor,” said Peter Tebbutt, a Hong Kong-based senior director at Fitch, in an interview Thursday in Ho Chi Minh City. “If anything, they may go up a bit.” A government subsidy on loans, intended to help boost economic growth from the 3.1 percent first-quarter pace, has sparked a “new credit boom” in Vietnam, Citigroup Inc. said last month. Lending jumped about 11 percent from January to April, marking a sharp acceleration from a first-quarter increase of 3 percent, according to Fitch estimates. The subsidy program “appears from April’s numbers to be too successful,” said Tebbutt. “It seems to be driving loan growth too much.” The State Bank of Vietnam has apparently resisted government pressure for now to lower interest rates further, according to Sabine Bauer, a Hong-Kong based Fitch director. Defending their ground “The central bank in this regard has proved to be a strong voice,” Bauer said Thursday in HCMC. “In this debate, on the base rate, they have so far defended their ground.” In addition to delaying potential non-performing loans, the Vietnamese government subsidy program may also have resulted in some borrowing being used to invest in property or stocks; in the creation of some fake projects to take advantage of the scheme; or in banks using “circular loans” to profit from it, according to Citigroup. “The banks’ responsibility is to ensure that these are loans made to projects which are viable,” Bauer said. “But having said that, it’s very difficult for them to monitor where the money actually goes.” In a report released last week on Vietnam’s banking industry, Fitch said “moral suasion” has encouraged banks to keep lending rates low, with authorities attempting to ensure a “reasonable level” of loan growth. Still, with the spread between lending and deposit rates narrowing, the dong depreciating, and international demand for Vietnamese goods weakening, credit costs are set to rise, Fitch said in the report. “You have the interest-rate subsidy, you have quite strong loans growth,” Tebbutt said. “Then you could possibly start getting inflation coming back. And you’ve got a government that needs to borrow a lot of money this year, particularly for its fiscal stimulus program. So with everyone borrowing, rates will go up.” Source: Bloomberg

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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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Vietnam’s economic growth has probably begun accelerating, with the first quarter likely to be the low point in the country’s downturn, HSBC Holdings Plc said.

The economy expanded 3.1 percent in the first quarter from a year earlier, the slowest pace of expansion on record. A round of rate cuts by Vietnam’s central bank, a government stimulus program, a weaker currency and resilient personal consumption expenditure are buoying the growth outlook, Prakriti Sofat, a Singapore-based economist at HSBC, wrote in a note. The economy may grow 4.5 percent for the year, compared with 6.2 percent in 2008, she said. “The worst is behind us,” wrote Sofat. Vietnam is facing a “slowdown, not a recession,” she said. The State Bank of Vietnam has cut its benchmark interest rate to 7 percent from 14 percent in October. The central bank’s moves to date represent a “massive monetary policy easing,” Sofat wrote. The easing is now “working its way through the system,” she said in the note. A government subsidy on loans – part of a stimulus package that Prime Minister Nguyen Tan Dung last month valued at US$8 billion – functions as a de facto further easing of monetary policy, according to HSBC. The loan subsidy program is creating a new “credit boom” in Vietnam, Citigroup Inc. said last month. Exports holding up Exports may be receiving some boost from a 10 percent “nominal depreciation” of the Vietnamese dong against the US dollar over the last year, Sofat wrote. Garment shipments have held up “reasonably well,” in part due to a focus on lower-end products that benefit during a period when shoppers’ incomes are being squeezed, she said in the note. “We’re into summer orders already, and things are holding up,” said Jonathan Pincus, an economist with the Vietnam Program at the Harvard Kennedy School in Ho Chi Minh City, when asked about garment export performance this year. Retail sales of goods and services in the country grew 21.5 percent in the first four months, according to the General Statistics Office in Hanoi. The “astounding” recent growth in retail sales in Vietnam “shows that consumption remains very strong,” HCMC-based fund manager Dragon Capital said in a note dated April 29. “Strong growth and asset price gains (including commodity prices) over the last few years, even after taking into account the recent declines, mean that the average Vietnamese person is much better off,” Sofat wrote. Vietnamese Prime Minister Dung said last month that gross domestic product may increase as much as 5.5 percent for the full year, while the International Monetary Fund foresees 3.3 percent growth. Any positive figure is “an achievement when seen in the regional context,” Sofat wrote. Source: Bloomberg

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A streets-side barbershop on Hang Ruoi Street in Hanoi’s Old Quarter. Laws prevent badly needed upgrades to cramped and decrepit housing in the capital’s most popular neighborhood.

Squeezing through a crowded clothing shop, Nguyen Thi Hoa must continue through a courtyard strewn with old dressers, water tanks, and coal-fired stoves to enter her apartment in Hanoi’s Old Quarter neighborhood. Behind the clothing store on Hang Dao Street, Hoa’s apartment is situated alongside five other cramped and dilapidated units in a long dark corridor. Altogether, nearly 30 people are living in the confined space. Hoa’s family is among several in the Old Quarter suffering miserably in the apartments. They are not allowed to upgrade their units or build new ones, in part because of state regulations on preserving the original elements of the Old Quarter. And a staggering 95 percent of the residential units in the neighborhood are in need of upgrades. Located in the capital’s Hoan Kiem District, the Old Quarter is famous for its ancient architecture and is considered the heart of Hanoi’s cultural beauty. Old streets with unique architecture, elaborately tiled buildings, and intricate alleyways form the foundation of the popular area. For local residents, however, the charm of the badly eroded infrastructure leaves something to be desired. The municipal People’s Committee lists 274 houses in the district which are to be preserved for cultural heritage reasons, but the phrasing of the directive indicates that no restorative work can be carried out either. The residents are thus left in the lurch. “I know it is not safe. But, we have no other choice but to stay here,” Hoa said. Her family has lived in a deteriorated apartment with leaking pipes for more than 40 years now. Within the 25-square-meter one-bedroom unit, Hoa’s six-member family has been forced to turn their corridor into a space for cooking and clothes drying. At night, the family sleeps together in what little space is left in the one main room. “Daily life is very inconvenient,” said Hoa. “There are three generations sharing this cramped space.” According to government statistics, housing space per capita in the Old Quarter stands at a mere one square meter, much lower than the 10 square meters per capita in Vietnam’s urban areas. Up to 20 percent of residents in the Old Quarter have no private kitchens, and more than half of all households in the area have five to six people sharing just one room. Yet, the neighborhood has one major draw which dissuades many residents from moving – it is the city’s busiest downtown trading area. “All of my family lives above our shop, so we can’t leave here although the house is very cramped,” said Nguyen Van Ba from Hang Bac Street. His 10-member family lives in a dark 40-square-meter house and is forced to share a toilet with three other households nearby. Nguyen Thi Toan, however, chooses to stay in the Old Quarter for different reasons. She doesn’t own a shop but her small home on Hang Ga Street has great sentimental value, she said. Four generations of Toan’s family have lived here and so despite the discomfort of the cramped space, she and her relatives stay. “We are acquainted with the way of life here, and don’t want to move,” she said. “Moreover, it is downtown, near good schools, good hospitals and big markets. The services are very convenient.” Better preservation laws needed While the government has recognized the value of preserving the architecture of Hanoi’s Old Quarter, complex and ambiguously worded laws fail to address many important issues. For instance, regulations stipulate that for some structures, the “status quo” must be strictly preserved. The phrasing therefore prohibits even necessary restorative work from being carried out. Hanoi’s municipal authorities have asked agencies to simplify procedures so that people can upgrade their homes while retaining the features of the homes’ cultural heritage. Officials have also requested that organizations accelerate work on construction, drainage and pavement systems in the area. A member of the Hanoi Management Board of Relics and Landscape said, “It is necessary to assess the status of relics, build scientific documents for each old street, assess the deformation of houses and streets, and consider residential and infrastructural factors before building a detailed preservation program.” Unable to wait for improvements to his Old Quarter residence, Nguyen Van Trung decided to move out of the area altogether in 2006. He purchased a small house in a suburban district outside the city. “I live in the new house but I keep the old one on Hang Luoc Street for my cosmetic products business,” he said However, in a country where per capita income hovers around US$1,000 a year, not everyone can afford a new house like Trung. One of his old neighbors on Hang Luoc Street was recently forced to expand his cramped apartment onto the building’s fourth floor by adding steel bars to make a small room for his two daughters. “It’s [not ideal], but it helps him battle the shrinking living space and gives the family more freedom,” said Trung. Reported by Bao Van

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Vietnam has managed to avoid the sharp falls in exports experienced by other Asian nations, taking advantage of its focus on lower-end products such as garments. Vietnam posted a trade surplus for the first four months of the year, swinging from a deficit in the same period a year earlier, as import demand tumbled while garment exports increased.

The country recorded a surplus of US$801 million through April, compared with a shortfall of more than $11 billion in the same period a year earlier, the General Statistics Office said in Hanoi Friday. Exports declined 0.1 percent to $18.64 billion, while imports plunged 41 percent to $17.84 billion. Sluggish first-quarter economic growth, the slowest on record, cut into demand for raw materials from overseas. Vietnam has also managed to avoid the sharp falls in exports experienced by other Asian nations, taking advantage of its focus on lower-end products such as garments and on commodities such as rice. “People still need to have staples at the table, and they still need to have clothes for their kids,” Myron Brilliant, a vice president at the US Chamber of Commerce in Washington, told reporters Thursday in Ho Chi Minh City. “Vietnam is in areas where consumers are still buying products.” Garment shipments rose 2 percent to $2.59 billion, according to Friday’s report. Vietnam is among the world’s top 10 garment exporters, Deputy Prime Minister Nguyen Thien Nhan told an investment conference in HCMC Friday. FIRST MONTHLY DEFICIT IN 2009 With a sharp drop in exports of precious metals and gems in April, Vietnam would record the first trade deficit this year, the General Statistics Office estimated. Overall exports would come to around US$4.5 billion in April and imports would be $5.2 billion, the office said. The precious metal and gem stones category, consisting mainly of gold re-exports, earned only a paltry $15 million in April, the statistics department said. In March it earned $1.1 billion and in February $1.3 billion. Over the past two weeks, gold prices in Vietnam have been as much as $20 a tael more expensive than on the international market, gold traders said. A tael equals 37.5 grams. The domestic price of gold had been lower since the start of the year, prompting the record surge in gold re-exports. The central bank banned gold imports in May last year and had restricted exports, although it relaxed the rule to let a selected number of banks export the metal in February and March to take profits, bankers and gold traders said. Source: Reuters Self-sufficient “For a lot of the big retailers in the US, Vietnam is their second-largest platform, after China,” said Virginia Foote, president of financial advisory company Vietnam Partners LLC, in an interview Friday in HCMC. “Vietnam is hanging on to second, and that’s not a bad place to be.” Rice exports jumped 44 percent by value to $1.16 billion. Vietnam’s target is to maintain a “strong, self-sufficient export-oriented agriculture industry,” Nhan said Thursday. “Vietnam remains the world’s second-largest rice exporter,” the US Foreign Agricultural Service said in a report this month. “Large-volume contracts are often signed within the first two quarters of the year.” Oil exports slumped 45 percent by value to $1.98 billion, even while increasing 20 percent by volume. The average global price of crude oil tumbled 56 percent during the period. Footwear shipments slipped 11 percent to $1.24 billion, while seafood exports fell 7 percent to $1.06 billion. ‘Less vulnerable’ “Vietnam has been successful in having a fairly diverse export portfolio,” said Foote. “They’re less vulnerable. In this environment, that’s been very helpful.” Exports of precious stones and metals surged to a record $2.54 billion in the first four months from negligible levels a year ago. The sale of gold abroad has been driven by Vietnamese taking advantage of higher international prices for bullion, HSBC Holdings Plc said in a note. Almost all Vietnamese gold exports result from bullion obtained through past imports rather than from local output. “The gold export figures have been coming down quickly,” said Jonathan Pincus, an economist with the Vietnam Program at the Harvard Kennedy School in HCMC, in an interview Friday. “One would think that that’s it, that’s been played out.” Imports of machinery and mechanical products slumped 27 percent to $3.37 billion, while steel purchases from abroad tumbled 68 percent to $1.16 billion, according to Friday’s report. Foreign exchange “One of the reasons that imports are falling so rapidly is that people can’t get access to foreign exchange, as banks and exporters are holding it because of concerns about the exchange rate and fears that if they sell foreign exchange now they won’t be able to get it back later,” said Pincus. “And a lot of it is just a slowdown in investment,” he said. “It’s a signal that a lot of investment projects are being postponed or scaled down.” Vietnam is likely to post a trade deficit for the full year of as much as $6 billion, wrote Prakriti Sofat, a Singapore-based economist at HSBC, in a research note Friday. Imports will “show more life as base effects become less favorable and the policy stimulus feeds through the economy,” Sofat wrote. “It is important to bear in mind that Vietnam remains in the early stages of development, meaning that the country needs to import large quantities of capital goods, keeping it in a structural deficit.” Source: Bloomberg

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Timothy Geither: 'These are encouraging signs' Financial chiefs from the G7 have said there are signs the contraction in the global economy may have eased, but warned this did not signal a recovery। The world economy shows "some signs of stabilisation", finance ministers and central bank governors from the G7 said after meeting in Washington. Although the G7 expects economic activity to begin to recover later this year, it said risks still persist. The IMF has predicted the global economy will shrink by 1.3% in 2009. The G7 also said it would continue to act to restore lending, and to ensure the soundness of financial institutions. "Recent data suggest that the pace of decline in our economies has slowed and some signs of stabilisation are emerging," it said in its communiqué. However, speaking after the meeting, US Treasury Secretary Timothy Geithner warned "we are not close to emerging from the darkness". The G7 comprises the US, the UK, Japan, Germany, France, Italy and Canada. Weekend meetings Later, financial chiefs from the G20 will also meet, a day before the spring summits of the World Bank and the International Monetary Fund. World leaders signed a deal to tackle the crisis with measures worth $1 trillion (£681bn) on 2 April. At the London meeting three weeks ago, the G20 agreed to triple the resources available to the IMF to $750bn. That included a $500bn emergency lending facility, with the European Union (EU), Japan and the US each pledging $100bn towards it. G20 COUNTRIES The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the US and the EU.



At Friday's meetings the US is expected to be pressed to sign off on its contribution. Ministers will also discuss plans on how quickly any restructuring of the IMF can take place, as well as plans to reform the financial system, although they are expected to focus more on national reforms rather than international. Timothy Geithner said the meetings would offer "a good chance to follow up" on the decisions made at the London summit. However, the World Bank has accused the US, the EU and other G20 members of going against one of the pledges made at the summit. It has named several countries it says have carried out protectionist measures, despite the G20 agreeing cuts to trade barriers.

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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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Germany's exports have been hit hard by the global slowdown

Germany's economy will shrink by 6% this year and continue to contract in 2010 according to a forecast from the country's leading economic think tanks.

The estimates, compiled by eight institutes for the German Economy Ministry, also predicts that the rate of unemployment will hit 10% next year.

The gloomy forecast chimes with that of the IMF, which shows the German economy contracting by 5.6% this year.

This is faster than any other major economy apart from Japan, says the IMF.

"The joint forecast of the institutes paints a very dark picture of German economic prospects in the foreseeable future," said Timo Klein at IHS Global Insight.

Severe contraction

The latest twice-yearly forecast shows just how rapidly the outlook for the German economy has deteriorated.

Through 2009 we anticipate a loss of more than 1 million jobs Joint report from German economic think tanks

The think tank's previous forecast predicted economic growth of 0.2% for this year.

The deepening global downturn now means the group sees a severe economic contraction this year and a further shrinkage of 0.5% next year.

"For 2010 the institutes expect no drastic rebound," the report said.

The IMF is forecasting a contraction in the German economy of 1% in 2010.

Comments by some of Germany's largest companies confirmed the bleak outlook for the country's economy.

"It will probably take five years before demand is back to its pre-crisis level in 2007," said Karl-Thomas Neumann, boss of car parts firm Continental.

The chief of rival Robert Bosch, Franz Fehrenbach, said: "We expect to see a deep recession until well into 2009."

Job losses

The report for the Economy Ministry also forecasts a fall in exports of 22.6%, compared with its prediction of a rise of 0.1% made just six months ago.

Germany is world's largest exporter.

Unemployment, the report says, will hit 10.8% in 2010.

"Through 2009 we anticipate a loss of more than 1 million jobs... and in the [autumn] unemployment will be well over the 4 million mark," the think tanks said.

The IMF forecast sees the Japanese economy contracting by 6.2% this year before growing by 0.2% next year.

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