Wide deposit-loan interest gap persists: analysts

The interest rate gap between loans and deposits has reached 4 per cent, benefiting banks but causing difficulties for enterprises, independent analysts have said.

In recent months, banks have cut deposit interest rates, with the rate on short-term deposits at some banks standing at 4.5 to 5 per cent per year and for long-term deposits, 7 per cent per year.

Although lending interest rates have been cut, they remain high, averaging between 8 and 12 per cent per year.

Do Minh Toan, general director of the Asia Commercial Bank, said that his bank's current average lending interest rate was 9.7 per cent per year.

Interest rates of between 7 and 8 per cent were offered only to financially healthy enterprises with highly feasible projects.

At Eximbank, its average lending interest rate has been about 9.5 per cent, and its lowest loan interest rate, 7-7.7 per cent per year.

Tran Phuc Vu, general director of Nam A Bank, said that his bank's preferential lending interest rate was between 8 and 9 per cent per year for short-term loans and 11 per cent per year for long-term loans.

The chairman of an enterprise in HCM City's Hoc Mon District said his company was paying an interest rate of between 11 per cent and 11.5 per cent for bank loans.

Agribank's lending interest rate of 11 per cent per year for a loan to the Special Aquatic Products Joint Stock Company (Seapimex) caused problems for the company, the deputy director of Seaspimex Do Trong Vinh said.

The current interest rate gap between deposits and loans should be reduced to about 2.5 per cent to keep the lending interest rate between 6 and 7 per cent in order to support enterprises, he said.

Many banks have recently launched several preferential credit packages with very low interest rates but it has not been easy to access such soft loans.

Pham Ngoc Hung, vice chairman of the HCM City Enterprises Association, said that many banks had offered a lending interest rate of only 7 and 8 per cent per year, but only a few enterprises could qualify for them.

Most enterprises had to pay the lowest lending interest rate of 10 per cent per year for short-term bank loans and higher interest rates for medium- and long-term loans, Hung said.

Cao Si Kiem, former governor of the State Bank of Viet Nam, told Dau Tu (Vietnam Investment Review) newspaper that it was necessary to cut the interest rates because inflation was dropping and the country's lending interest rate was two times higher than those of countries in the region.

Also, domestic enterprises do not have many opportunities to make profits as the economy is still sluggish, he added.

"In addition, lowering the interest rates at a level that enterprises can bear would encourage credit activities," Kiem added.

Analysts, however, said that banks did not want to lower lending interest rates since they wanted to make more profits to settle their bad debts.

A member of the National Monetary and Financial Advisory Council, who declined to be named, told Dau Tu that most banks were trying to survive and were not financially strong enough to rescue enterprises as well.

Many banks not only face huge bad debts but have a low level of chartered capital.

Thus, narrowing the gap between deposit and loan interest rates is not feasible at this time, the council member said.

Major shares drag markets down

Investors' caution prevailed last week because of heavy profit-taking in the Vingroup real estate company and PetroVietnam Gas (GAS), as well as bad news for Ocean financial group (OGC).

Investors rushed to sell OGC at bottom price last Thursday following speculation of administration intervention. Later that day, the State Bank of Viet Nam announced that Ha Van Tham, chairman of Ocean Bank, one of OGC's financial arms, "seriously violated legal regulations".

Police investigators specified that he had breached the ruling on lending activities.

OGC said its operations remained normal, and the company would gain more profits than expected. But Tran Duc Anh, Bao Viet Securities Company analyst, predicted the news to continue to weigh on the stock price.

At the HCM City Stock Exchange, the VN-Index added one per cent over the previous Friday's close, reaching 591.51 points because of impressive gains on Tuesday.

Transaction value averaged VND1.9 trillion (US$89.6 million), a 24-per cent week-on-week decrease, on a daily volume of 103.2 million shares.

GAS boosted trading on the bourse in the first two days but was also one of the reasons for the slump in the following sessions.

Meanwhile, the HNX-Index at the Ha Noi Stock Exchange lost by 0.68 per cent to reach 87.05 points. The average value and volume of trade fell around 20 per cent to reach VND790.4 billion ($37.2 million) and 58.8 million shares.

Last Friday, demand for low priced shares nearly matched selling activities. However, caution remained as seen in declining liquidity and buyers' hesitation.

Foreign investors sold a net of merely VND33.4 billion ($1.5 million). Their activities had no effect on the market last week.

According to Maritime Bank Securities analyst Trinh Thi Hong, the VN-Index will test its support of 575 to 580 points this week.

"With the recent movements, I think shares will continue to decline in the coming week," Hong said, adding, however, that investors may consider buying stocks in Duc Long Gia Lai furniture company, Phu My Fertiliser and Thong Nhat Production and Investment, as well as Ba Ria Thermalpower and Tri Viet Investment.

Supportive economic factors such as the slower consumer price index (CPI) increase were not enough to push the stock market. The nation's CPI in October increased by only 0.11 per cent month-on-month. In the first 10 months of 2014, the CPI increased by 2.36 per cent, the lowest in the last 11 years.

Petrol price was reduced for the eighth time in three months, with total reduction at VND3,300 per litre.

According to the European Chamber of Commerce in Viet Nam, European Union companies gave a more favourable review of the country's business climate.

FPT Securities Company said these factors had already influenced share prices in previous rallies, but such support was currently absent from the market.

VN CPI hits six-month low in October

Viet Nam's consumer price index (CPI) posted a six-month low in October, rising by only 0.11 per cent month-on-month as a result of stability in the price of essential goods.

Figures released yesterday from the General Statistics Office (GSO) also showed that the CPI in the first 10 months of the year increased by only 2.36 per cent compared with the entire 2013, representing the lowest level of CPI increase in the past decade. The increase is also much lower than the Government's seven-per cent target for this year.

Do Thi Ngoc, the GSO Consumer Price Index Department deputy director, attributed the slight increase to abundant supply sources and stability in the price of essential goods.

Ngoc said the price of food and foodstuff, which accounts for 40 per cent of the 11-commodity basket used to calculate the CPI, increased by only 0.05 per cent month-on-month because of abundant supply sources.

She added that a 2.19-per cent decline in petrol prices, which was cut three times since late September, also helped bring down the price of transport service by 0.45 per cent and housing and construction materials, including fuel, by 0.08 per cent

The price of telecommunication services also inched down by 0.03 per cent while the price of other goods in the CPI basket increased slightly, including beverages and cigarettes by 0.06 per cent; culture, tourism and entertainment by 0.02 per cent; and garments, hats and footwear by 0.19 per cent.

The price of educational commodities and services reported the highest increase at 1.46 per cent, in the wake of the Government decision to increase school fees in several cities and provinces.

The domestic prices of gold, which is not in the CPI basket, dropped sharply by 2.82 per cent month-on-month, following the global downward trend, while the US dollar exchange rate increased by 0.18 per cent.

The CPI in the country's two largest cities of Ha Noi and HCM City ended mixed, with a 0.04 per cent increase in Ha Noi and a 0.03 per cent decrease in HCM City. GSO experts predict that the country's CPI increase this year will fluctuate at about five per cent.

FDI disbursement up 5.9% in 10 months

Disbursement of foreign direct investments (FDI) posted an encouraging 5.9-per cent increase to US$10.15 billion in the first 10 months of 2014.

The latest report from the Ministry of Planning and Investment's Foreign Investment Agency also revealed that in the first 10 months of the year, Viet Nam attracted FDI worth $13.7 billion, or 71.2 per cent of total FDI in the same period last year.

Of this total, exactly $9.95 billion came from more than 1,300 newly-licensed projects and the remainder, from 469 ongoing projects which increased their capital.

Manufacturing and processing remained the hottest sector to foreign investors, attracting the lion's share of FDI at $9.7 billion, or 70.8 per cent of the nation's total registered capital. Estate trading ranked second with $1.22 billion, and construction industries ranked third with $1.03 billion.

Of the 56 countries and territories investing in Viet Nam, South Korea was the leading source, with $3.6 billion or 26.3 per cent of the country's total FDI, followed by Singapore with $2.64 billion or 19.3 per cent, Hong Kong with $1.67 billion or 12.2 per cent, and Japan with $1.66 billion or 12.1 per cent.

From January to October, foreign investors pumped capital into 50 provinces and cities nationwide, with HCM City taking the lead with $2.85 billion. Northern Bac Ninh province came in next with $1.38 billion while the southern provinces of Dong Nai and Binh Duong ranked third and fourth, with $1.37 billion and $1.36 billion, respectively.

According to the agency, the foreign-invested sector posed a trade surplus of $13.8 billion in 10 months as its exports reached $82.48 billion, a 13.6-per cent year-on-year increase, and its imports reached $68.66 billion, a 10.7-per cent year-on-year increase.

Domestic drug companies wrestle with competition

Domestic drug producers are facing significant obstacles in selling their products in both the domestic and foreign markets, the Tin tuc (News) Newspaper has reported.

"The majority of the domestic companies have to deal with the market issue," said Pham Khanh Phong Lan, deputy director of the HCM City Department of Health, adding that most local factories currently operate at only half their capacity due to this hindrance.

"Locally manufactured drugs see many trade barriers when they are exported," said Huynh Thi Lan, director of the Mekophar Chemical Pharmaceutical Joint Stock Company in HCM City.

To sell drugs abroad, domestic firms have to invite foreign partners to Viet Nam to check the quality of the production facilities and materials, and pay the inspection costs.

"The registration charges for medicines that are distributed are also much more expensive in foreign countries than in Viet Nam," she said.

Meanwhile, foreign medicines can be imported quite easily, according to Phong Lan.

India is the leading exporter of drugs to Viet Nam, having 12,160 registration numbers in the total of 28,000 registration numbers of medicines imported here. But Viet Nam has been able to inspect only one factory in India so far.

Extremely low local registration costs have let all kinds of drugs, of any quality, penetrate the domestic market. "If this situation continues to persist, domestic firms will not be able to compete," Phong Lan said.

Even Sanofi, a French joint venture producing drugs in Viet Nam, reportedly considers expansion of markets a major concern.

"Seventy-five per cent of our equity is held by foreign partners, and we are investing in up-to-date production chains. Still we are worried about how to sell our products better," a representative of Sanofi told Tin tuc on condition of anonymity.

Industry insiders said that the biggest disadvantage causing domestic companies to be uncompetitive is that they have to import production materials at high prices. Many local firms manage to survive by seeking contracts to sell drugs in hospitals.

This has resulted in stiff competition among domestic enterprises in the home market.

HCM City has 25 medicine factories and most of them produce general drugs such as antibiotics and analgesics, while few focus on making specific remedies for cancer or heart diseases.

Nguyen Tan Binh, director of the HCM City Department of Health, suggested that domestic firms should link up to produce more high-value products, rather than working separately on similar products.

Binh noted that the city has given a priority to local firms that sell drugs in local hospitals in recent years.

Of VND3.8 trillion (US$180.95 million) worth of generic drugs (pharmaceutical products that are usually intended to be interchangeable with brand products and manufactured without a licence from the brand company) distributed in the hospitals here every year, the value of domestic drugs amounted to VND2.6 trillion ($123.80 million).

"But enterprises need to have long-term measures to help themselves for sustained development," he said.

Rosatom nuclear company chairman visits Viet Nam

Golubev Aleksey Viktorovich, chairman of Russia's Rosatom State Nuclear Energy Corporation, is on a working visit in Viet Nam to seek co-operation opportunities.

Viktorovich unveiled this purpose during his meeting with Nguyen Hong Son, the Ha Noi People's Committee vice chairman, last Friday.

Son said Ha Noi always welcomed and was always prepared for co-operation opportunities with foreign partners.

Rosatom is a global leader in the nuclear technology field, comprising more than 350 nuclear companies and research institutions that operate in the civilian and defence sectors worldwide.

Viet Nam's top brands for 2014 announced

The Institute of Economic Research and the Global Trade Alliance-Global GTA (UK) announced Viet Nam's Top Brands 2014 at a ceremony held here last Saturday.

The brands came from big players such as Vinamilk, Sasco, Viettel and AIA, as well as SaigonBus, Haco and Merino.

Award recipients must ensure the application of international standard-quality management systems, the recognisability and popularity of their brands, and the credibility, trust and respect for the brand from society, as well as overall management capacity in the co-operation process and trade alliances.

Vietnam banking tycoon detained on suspicion of fraud

Former chairman and founder of Dai Duong (Ocean) Bank, Ha Van Tham, has been announced today by police to be held for four months for investigating his financial irregularities.

He was charged by police of violating regulations on granting loans as ruled at the Article 179 of the Criminal Law.

Hours before the arrest, the State Bank of Vietnam announced to suspend his post as the chairman of the executive board of the bank.

Nguyen Minh Thu, member of the board of directors of Ocean Bank, was elected to replace the chairmanship.

The firm has a chartered capital of VND3 trillion (US$141.6 million) and has interests in real estate, banking, securities, retail, media and hotels, according to Reuters.

Ocean Group shares have fallen as much as 15 percent since Wednesday on Vietnam's main stock market, which traders said was in response to market rumors of Tham's arrest.

Volume of trading in the stock hit a record high of 22.4 million shares on Thursday, or 15 percent of total volume. Ocean Group closed Friday down 2.68 percent, at 10,900 dong a share, but off an earlier low of 10,500.

Exporters make inroads into Australia

The Vietnam Trade Office in Australia and the Ministry of Industry and Trade are organising a series of activities to help Vietnamese exporters sell more goods to this market.

Under the free trade agreement between ASEAN, to which Vietnam is a member, and Australia and New Zealand, Australia eliminated import tariff on around 96% of lines of imports from ASEAN in 2010 and the remaining by 2020.

In early August, the Vietnam Trade Office arranged for a delegation of Australian fishery companies to visit and inspect aquaculture farms in Vietnam. Later, it helped businesses from the southernmost province of Ca Mau participate in an international food expo in Australia.

In the first nine months of this year, Vietnam’s exports to Australia were valued at US$3 billion, a year-on-year surge of 24.5%. Crude oil took the lead with a value of US$1.4 billion in January-August, up 53.7%, followed by mobile phones and parts with US$243.1 million and seafood with US$144.3 million.

Popular products such as iron and steel, electric wire, pepper, and garment-textile all registered high growth.

Deputy Minister of Industry and Trade Tran Tuan Anh said the Australian market has a great demand for apparel, footwear, wooden furniture and fishery products that are strengths of Vietnam. However, he noted that this is a choosy market which requires strict regulations on the quality and the delivery time of products.

A dozen of Vietnamese garment-textile firms are expected to participate in an international trade fair in Australia by the year’s end.

Construction begins on second made-in-Vietnam offshore oil rig

A ceremony to launch the construction of Tam Dao 05 offshore oilrig, the second locally-manufactured jack-up rig, was held in the southern province of Ba Ria-Vung Tau on October 25.

Invested by the Vietnam-Russia Oil and Gas Joint Venture (Vietsovpetro), Tam Dao 05 oilrig featuring the JU-2000E model of the American Friede and Goldman is expected to be completed within 32 months at a total cost of US$230 million.

The 120-metre jack-up rig weighs almost 18,000 tonnes when it is fully completed and can drill to a depth of 9 kilometres.

According to Vietsovpetro Director General Tu Thanh Nghia, the company is currently renting four foreign oilrigs at a total cost of US$220 million per year. This oilrig could help reduce the cost for the company, he added.

Tam Dao 05 platform manufacturer, PetroVietnam Marine Shipyard JSC (PV Shipyard), built the first made-in-Vietnam jack-up rig, Tam Dao 03, weighing nearly 12,000 tonnes. Tam Dao 03 platform, including a helicopter deck, can drill as deep as 6 kilometers.  

In addition, PV Shipyard also successfully upgraded Tam Dao 02 oilrig for Vietsovpetro in October, 2014.

Investment and business seminar held in Canada

The Embassy of Vietnam in Canada has sponsored a recent seminar in Halifax, Canada to promote investment and business opportunities in Vietnam.

Those attending the seminar included Premier of Nova Scotia Stephen McNeil, Mayor of Halifax, Mike Savage and over 100 leading representatives of the Canadian business community.

In his opening speech, Vietnam Ambassador to Canada To Anh Dung elaborated on the stable political and business climate of the nation and the fine development of bilateral relations between the two countries.

The Vietnamese diplomat affirmed the Vietnam Government’s steadfast determination to continue improving the business environment and urged those in attendance to invest in the Southeast Asian country.

Vietnam Trade Councillor in Canada Hoang Anh Dung in turn gave a presentation and spoke with local business representatives, who expressed a high level of interest in doing business in the country.

For their part, Nova Scotia Premier Stephen McNeil and Halifax Mayor Mike Savage and other scholars were appreciative of the accomplishments of Vietnam in recent years and expressed satisfaction about the development of good relations between the two countries.

As Canada’s Atlantic gateway, they agreed Vietnam has many advantages including international deep water port, mineral resources and agro-fisheries products and said they hoped to further elevate trade ties.

During the working session with with Halifax Mayor Mike Savage and Halifax Port Authority on the same day,Dung announced plans to lead a delegation of businesses from Halifax to Vietnam to explore investment opportunities.