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Aug 11 2013

Vietnam report slow credit growth in first-half 2013

vietnam report slow credit growth in first half 2013

 
Stacks of money at a bank in Hanoi

Credit growth at Vietnam’s four major state-owned banks has slowed over the last six months.

The statement was released in a recent report by Vietcombank Securities firm (VCBS) which also attributed the year-to-date first-half loan growth of 5.02 percent to smaller commercial banks’ push on consumption loans.

The four major state-owned banks are Agribank, BIDV, Vietcombank, and Vietinbank.

The State Bank of Vietnam set the year’s target at 12 percent, 7 percentage points higher than last year when the economy hit a 13-year low at 5.03 percent.

Vietcombank, the country’s largest partly private lender, saw its outstanding loans fall 0.2 percent by July, an improvement from a fall of 1.6 percent a month earlier.

Loans at Vietinbank rose to 1.6 percent by June after a reversal of 3 percent in the first quarter.

Loans at Agribank expanded 4.2 percent in the first half, slow progress compared to its targeted growth of 11-13 percent for this year. But Agribank chairman Nguyen Ngoc Bao said his bank found it “not too difficult” to increase lending while the country has not shown many signs of recovery.

BIDV has yet to report its credit growth for the first half, but the rate was 1.2 percent in the first quarter.

Eximbank Deputy Director Pham Huy Thong said banks are facing difficulties boosting loans amid the stagnant economy, not to mention tighter requirements for lending since the banking system is making efforts to tackle high bad debt levels, the highest in Asia.

Vietnam recorded 4.9 percent economic growth in the first half, compared to 4.93 percent last year, putting it on track for its slowest annual expansion in 14 years. As banks are struggling to lend, at least 120,000 businesses have closed since 2011, according to official data.

The VCBS report said the slow credit growth can “partly explain” the reductions of the country’s Purchasing Managers’ Index (PMI) as money has not flown to manufacturing but consumption.

The index was 48.5 in July, still at the sub-50 level, signaling a third successive monthly contraction in the sector, according to HSBC.

The lending slump has lead commercial banks to shift to consumption loans, according to the VCBS report.

The Saigon Times news website quoted Nguyen Hoang Minh, deputy director of the State Bank of Vietnam’s HCMC branch, as saying it was not good for the economy’s recovery to have only small and medium-sized banks with strong loan growth.

He expected the growth rate to improve in the second half due to further interest rates cuts, but said banks still would not see a robust increase in credit growth because bad debt cleanup has yet to improve. 

The State Bank of Vietnam said non-performing loans accounted for 6 percent the total outstanding loans of $130 million.

It launched a $23.6-million asset company to buy bad debts late last year. But local and international experts are concerned that the “miniscule” company is in ineffective. They also said the bad debt level could be higher as official estimates lack transparency.

Low profits

The majority of banks have not publicly reported their financial statements for the first six months, but economists said worse performance than last year was predictable.

Sacombank, ABBank, and OCB have only posted estimates on pre-tax profits, which indicate that they are among the few lenders to have done well in the first half.

As of August 5, Navibank was the only of Vietnam’s eight listed banks to post its balance sheet. The bank’s profit after tax was VND10.5 billion, down 24 percent year-on-year.

The central bank recently said HCMC-based credit institution profits decreased by 16.5 percent year-on-year to VND4.76 trillion ($225.3 million). Of this, 88.3 percent came from lending, down 1.9 percentage points from last year.

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Aug 11 2013

Vietnam mulls opening ailing real estate market to foreign buyers

vietnam mulls opening ailing real estate market to foreign buyers

 
Vietnam’s Ministry of Construction has proposed that foreigners residing in the country are given more chances to buy homes in Vietnam as part of efforts to reduce inventories in real estate sector.

In a report sent to Prime Minister Nguyen Tan Dung late last month, the ministry proposed that organizations like foreign investment funds, banks, Vietnamese branches and representative offices of overseas companies as well as all foreigners who have a visa to the country that is valid for at least three months, are allowed to buy homes – apartments and independent houses – in Vietnam.

Diplomatic institutions, NGOs and their employees will not be allowed to purchase homes in the country, the ministry said.

It also proposed that those foreign organizations and individuals eligible for home purchase in Vietnam are allowed to buy different types of properties, including townhouses and villas with less than 500 square meters of land to apartments. These properties can be leased if their foreign owners are not living in them.

The houses can only be sold or given to 12 months after the ownership certification is granted to the foreigners.

The ministry put forth two options for individual purchasers. Under one, foreigners can buy any number of housing properties, and under the other, the number will be limited to one or two. The number of houses an organization can buy will depend on the number of foreign employees it has.

The proposal also contains two options for the duration of ownership of housing properties by foreigners. The first option will allow ownership for 50 years with the possibility of a 50-year extension, or 70 years with no extension.  

It, however, mentioned no proposed change in ownership duration for foreign organizations. Under current regulations, organizations’ ownership of their properties will last until their investment registration expires.

Under a law that took effect on January 1, 2009, foreigners are allowed to buy apartments, but not houses, and each individual or organization can own one apartment that cannot be leased or used for other purposes except living. The law was to be implemented on a trial basis for five years. 

The law also stipulates that only five categories of foreign individuals and organizations are allowed to own apartments: individuals who invest directly in Vietnam or who are employed to management positions by domestic or foreign-invested companies in the country;  foreigners who receive certificates of merit or medals from the president or government for their contributions to the country; those who work in socioeconomic fields, hold at least a bachelor’s degree or higher, and possess special knowledge and skills that Vietnam needs; foreigners who are married to Vietnamese nationals; and foreign-invested companies operating in Vietnam, except for those in real estate industry, that need to buy homes for their employees.

The foreigners should be legal residents of Vietnam and have lived here for at least one year at the time of purchasing the apartment. Companies wanting to buy residential properties in Vietnam should have their investment registrations valid in at least one more year in the country from the time of purchase.

Individuals have to sell or give their apartments to others after 50 years – the general time limit to own an apartment in Vietnam. As mentioned earlier, companies’ ownership will last until their investment registrations expire.

The current law leaves out a large number of foreigners in Vietnam who do not belong to the five categories.

According to the construction ministry, only 126 expats and foreign organizations have purchased apartments in Vietnam as of the end of June 2013, most of them were in southern and south-central localities like Ho Chi Minh City, Ba Ria-Vung Tau, Binh Duong and Khanh Hoa Province.

Only 20 percent of the buyers are organizations, the ministry says, adding that housing prices have been too high compared to renting costs, and companies are not allowed to have their local employees live in the houses that they purchase. They are also not allowed to rent their properties, which have to lie vacant when foreign employees leave the country.  

Around 80 percent of foreign individuals who have bought houses are married to locals, while another 15 percent have invested directly or are employed in management positions in the country.

Statistics from the General Department of Land Administration show that more than 80,000 foreigners live and work in the country.

Many experts and industry insiders have supported the recent proposal by the construction ministry, saying that relaxing regulations for purchase of residential properties by foreigners, if approved, will give some hope for Vietnam’s stagnant property market.

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Aug 10 2013

No further dong devaluation, Vietnam central bank assures

no further dong devaluation vietnam central bank assures

The central bank on Wednesday increased the dollar’s buying price to VND21,100 from the VND20,826 it had maintained since late June, asserting there it would not repeat last June’s dong devaluation.

The greenback’s selling price has been kept at the ceiling level of VND21,246 per dollar.

The latest adjustment comes after the monetary authority weakened its dong reference rate by 1 percent to 21,036 per dollar on June 28 to support exports and help revive an economy that grew last year at its slowest pace since at least 2006.

The currency is allowed to diverge by 1 percent from the benchmark rate, which had, prior to the latest devaluation in June, been set at 20,828 since December 2011.

Responding to the latest increase in the dollar’s buying price, economist Nguyen Tri Hieu said it was a common transaction of the central bank. It can increase the dollar’s buying price to be able to purchase big volumes and bolster foreign exchange reserves, recently used for the purpose of importing gold, he said.

The central bank, the nation’s sole gold importer, has held gold auctions since March, selling 1.17 million taels, or about 44 tons, according to bank data. Bidders are mostly banks and jewelers.

The dollar price increase was also aimed at halting the trend of a decrease in the exchange rate, which had negatively affected Vietnam’s export earnings, Hieu said.

At commercial banks, the exchange rate stood at VND21,040-21,060 per dollar, compared to VND21,080-21,090 per dollar early this week.

The higher exchange rate will help increase export values if they are calculated in the local currency, as exporters can convert the dollars they earn from their shipments to Vietnamese dong in the domestic market, he explained.

The central bank has said it has no plans for a repeat of last month’s dong devaluation, the first since 2011, and has pledged to support the currency.

“The State Bank of Vietnam affirms that it isn’t going to adjust the dong-dollar exchange rate and will take determined measures to stabilize the rate,” Deputy Governor Le Minh Hung said in a note posted on the State Bank of Vietnam’s website. “That includes strong intervention,” he said, adding that foreign-exchange reserves “are at high levels.”

The CEO of Eximbank, Truong Van Phuoc, said the central bank is likely to keep the exchange rate unchanged until the end of this year because of a big balance of payment surplus. The central bank has forecast the country will enjoy a $5 billion balance of payments surplus in 2013, easing pressure on the dong.

However, economist Hieu said that if the exchange rate in the black market increases, the central bank will need big foreign currency reserves to intervene. Meanwhile, it also needs to use the reserves to import more gold for its auctions. “With the current national foreign currency reserves, it will not be easy for Vietnam to carry out both tasks at the same time,” he said.

Based on economists’ estimates and government data, Vietnam’s foreign reserves were estimated at around $26 billion at the end of 2012. The exact amount of foreign exchange reserves is not publicly released in Vietnam.

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Aug 10 2013

SOEs have to accept disinvestment losses: experts

soes have to accept disinvestment losses experts

The government should accept losses if it wants state-owned enterprises (SOEs) to successfully withdraw their investments from non-core sectors amid the economic slowdown, economists say.

It will be very difficult for SOEs to complete their non-core divestment if the government insists on asking them to do it but without making losses on the sale, economist Nguyen Tri Hieu said.

“We should see this as the cost of restructuring of SOEs. The issue is how much loss is acceptable,” he said. “The government should regulate specific loss levels that can be accepted in each sector.”

Last month, the government issued a decree requiring SOEs to accelerate their divestment from non-core areas and refrain from investing in banking, insurance, property and stock markets. However, the decree did not remove the older stipulation that the divestment should not be made at a loss. 

At the end of 2011, state-owned firms’ investment in non-core areas stood at VND23.74 trillion (US$1.12 billion), half of it in banking.

The Hanoi Stock Exchange (HNX) said it has canceled the auction to sell shares of the state-owned machine manufacturer Lilama in the Song Vang Hydroelectricity Plant. The auction had been scheduled for August 1, but no investor had registered to participate in it by the registration deadline on July 25.

The Vietnam Chemical Group (Vinachem) in June failed to withdraw its investment in the securities, trade and industry company VIG, as it could not sell any of 2.1 million shares because of high prices. VIG shares are selling for VND2,500 ($0.1) on the unregulated over-the-counter market, while Vinachem set a minimum price of VND10,600.

Economist Bui Kien Thanh said the withdrawal of SOEs’ non-core investments cannot happen as fast as expected partly because they are not allowed to sell stakes to investors at lower than their original prices.

For companies that the government wants to divest completely from, it is necessary to accept losses and sell shares below their original value, he said.

“Only 15 out of 49 joint stock banks are earning any profits, so far from selling shares at high prices, it is already very good for SOEs to pull back their capital from them,” Thanh said.

SOEs have been asked to divest from non-core sectors and concentrate on their core business ever since the economy began experiencing a slowdown three years ago. In 2009, the government issued a decree which asked SOEs to ensure at least 70 percent of their total investment would their core business.

The issue of SOEs’ divestment from non-core sectors reemerged recently with the government seeking ways to improve their effectiveness. Many of them have faced big losses after investing in non-core sectors.

“The selling of stakes by state companies has dragged on for so long because of large investment costs incurred years ago,” said Dang Quyet Tien, deputy general director of the ministry’s corporate finance department. They don’t want to sell now because of the decline in share prices and property values since then will result in losses, he said.

The finance ministry is drafting “strong” measures to force state companies to sell stakes in non-core businesses, which will include the removal of chief executives should they fail to meet timelines for share sales, Tien said.

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Aug 10 2013

Change without change

change without change

Opened for around one month now, the new Quan Bui restaurant in Ngo Van Nam Street continues to serve authentic Vietnamese cuisine just like the original Quan Bui in Nguyen Van Nguyen Street.

Inside is a peaceful space of traditional Vietnamese ambience where everything is done in an authentic manner, the food above all.

I was struck by the design and decor when I ventured there for lunch a few days ago. Inside, I was greeted by three bamboo yokes containing flowers and fruits topped by three nón lá, the traditional hats of Vietnam.

The tables and chairs on the ground floor are wooden and look quite old, giving a warm feeling.

Pictures of old Vietnam hang on the walls, and in one corner of the main dining room is a stand of earthenware pottery where traditional cups and bowls in different designs are displayed, not only for decoration but for sale too.

I chose a table by the deck looking out onto a small parterre and the street beyond.

Pretty pictures of old Vietnam are printed in the menu, which covers all kinds of Vietnamese cuisine from the country’s north, center and south, and includes a special list of northern food, spring rolls, different kinds of salad and rice, noodles and hotpots. Prices range from VND40,000 to around VND300,000.

For lunch, I chose to have a common meal of familiar food like sour soup with chopped fish, braised fish in a clay pot, okra fried with garlic and of course rice.

All of the dishes, which were served in earthenware bowls and dishes, were individual and scrumptious. Among them, I liked the braised fish the most as it was fragrant, greasy in the best style, and definitely moreish.

After wolfing down the food, I took time out to discover more of Quan Bui’s interior design.

Each of the four stories is different in style and ambience. One of the few things they have in common is a blackboard on every floor listing the day’s specials and their prices.

The air-conditioned second floor is quite modern in appearance while the third floor, which looks across to a French terrace over the road, has an old-world atmosphere.

And on the top is a leafy roof garden and bar that is perfect for enjoying snacks and drinks.

Quan Bui is certainly worth a try for anyone who wants to experience Vietnamese cuisine at its finest.

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Aug 10 2013

A chance to be one with nature

a chance to be one with nature


  Located in the northern province of Ninh Binh, Van Long Nature Reserve is the largest wetland in Vietnam’s northern region / PHOTO COURTESY OF NINHBINH.GOV.VN

It is said that one man’s poison is another’s nectar.

It sounds unfair and unacceptable that one person’s sadness can be another person’s happiness, but we were not feeling guilty as we visited the Van Long nature reserve in Ninh Binh.

While local authorities may rue the fact that the place has not attained the popularity of other sites in the province like Trang An and Tam Coc – Bich Dong, which are home to numerous caves and historical relics, we were distinctly happy about it.

It was a hugely welcome relief, not being bothered by people offering various handicrafts or other items, not to mention this service or that.

The Van Long nature reserve is not quite different from the more popular places mentioned above. The 3,000-hectare area is home to 457 plant and 39 animal species, including rare ones, as well as 32 caves and many mountains.

However, due to limited investments, the largest wetland in Vietnam’s northern region has not been a big draw since it was first introduced as a tourism site in 1999.

My friends and I reveled in this relative lack of popularity.

Our boat seemed to move through still waters because they were not crowded with other boats. We could see why the wetland had been called “the bay without waves.” 

It was not a pretty boat. It was made of concrete and covered with bamboo wattles, but our ferryman was a simple-hearted man who kept telling us different stories, mostly about local life.

Van Long, however, is not just about calmness, silence and peace.

In action 

We’d set out at 5 a.m. with a boat we’d booked the day before, hoping to encounter Delacour’s Langurs (Trachypithecus delacouri), which are listed as “critically endangered” by the International Union for Conservation of Nature.

According to Tilo Nadler, director of the Endangered Primate Rescue Center in Ninh Binh, Van Long is now home to more than 40 of the rare langurs. It is the biggest population of the leaf-eating monkeys in Vietnam. But, the animals are rarely spotted by visitors, as the boat rides typically do not happen when the primates are up and about. 

Perhaps it was our lucky day. Just as our boat took a turn at the first mountain, we saw a very big primate sitting near the water’s edge. It looked at us for a moment, before slowly leaving its place and climbing on to a tree with leafy branches.

Then, all of a sudden, a group of some ten langurs showed up and ran all over the mountain cliff, making a lot of noise. 

A woman in another boat nearby said they were chasing a fox. We did not believe her, but were too busy taking photographs to take the issue further. It is a pity that our photographs were not very good as they were taken from hundreds of meters away in the dim early morning light.

The chaotic scene lasted for more than 20 minutes before the monkeys left, as suddenly as they’d appeared. Our boatman told us that he’d never seen what had just happened before. He’d only seen one or two monkeys from afar, earlier. 

As we continued our ride and went deep into the wetlands, we saw groups of birds that made a lot of noise at our presence.

Wild ducks were quietly swimming in the waters, but quickly flew away on hearing the sounds of approaching boats. Storks which were standing still higher up also took off hurriedly, but soon returned to their places. It seemed that we were not too close to them enough to be any concern.

Most of the birds here were a kind of stork that has beaks similar to that of pelicans but smaller. It was unfortunate that no one at that time could tell us its name. 

According to our boatman, local people love the stork because it eats channeled apple snails that threaten local crops. A stork can eat up to one kilogram of snails a day, he said.

Meanwhile, local photographers are attracted to it because its flying pose is as beautiful as that of the famous Sarus cranes in the Mekong Delta province of Ca Mau. They often gather in the wetlands as the sun goes down, hoping to catch tens of thousands of storks flying with their cameras.

We did not have the luxury of being able to wait for a long time, so the small groups of storks were good enough for our cameras.

Despite the chaos caused by the birds, Van Long was still at peace.

The calm and pure water surface, still mountains, high wild grass and flowers like lotuses, lxora and water lily – together, they created a harmony that we felt blessed to be part of, if only for a while.

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Aug 09 2013

A lesson in leisure from Tay Ninh

a lesson in leisure from tay ninh

As Vietnam reduces every attractive destination to sheer kitsch, locals who are being themselves save the day

Cao Dai adherents sweep up around the all-seeing eye at the religion’s Holy See in Tay Ninh Province following noon mass. If you avoid the trashy tours, watching a ceremony there can be a pretty transcendent. Photo by Calvin Godfrey

A trip to Tay Ninh sounded like the most perfunctory vacation that one could muster in Saigon.

Busses left from the backpacker district every day, heralding hungover Australian 20-somethings into the Cao Dai’s Holy See to snap a few pictures and snigger. 

I imagined these trips being led by a wise-cracking RMIT alum eager to make fun of everything about his own country before the foreigners had a chance.

So I never went.

 

Last Friday, a friend from Stockholm convinced me to get up early and drive down the blue line on his iPhone toward the stunning grounds of the Technicolor temple.

The Cao Dai’s Holy See sits on a campus of bright administrative buildings and old colonial rubber plantations. We arrived just before the noon mass and left my bike next to a tin shack on the edge of the grounds in the care of two old volunteers watching TV in hammocks strung under a tin shack. 

Graham Greene famously described the place as a something of a cartoon spectacle.

A tall rearing tiger rears up on hits hind legs atop a copula painted like a half a globe. Jesus and Buddha and Confucius hang together on the ceiling. The Masonic eye peers out at you from high places.

My companion and I doffed our shoes and fell in line behind a French family as they plodded up the stairs to the viewing gallery.

What struck Greene as silly felt powerful, even hopeful, now. A chorus of young women chanted over one-string zithers sending sounds radiating down the shrinking, 100-yard hall to be answered by a disembodied voice at the other end. Only believers on the ground could see where it came from.

From above, the sight of the believers conspired to evoke the “oceanic” feeling that Freud attributed to the end of breastfeeding. But all of this felt much bigger than boobs. It rivaled black gospel Sundays, Thai meditation sessions and my grandmother’s funeral for atmospheric weight.

It left me with a feeling that made my ears tingle and my soul a wee bit ascendant.

And then an usher began shuttling all of the foreigners out into the sunlight.

The good feeling quickly evaporated when a slick young guide began torturing a pair of baby monkeys to get a rise out of their mother for the sake of a group of fat, nonplussed tourists.

We walked away from the crows to take tea with the ushers, who were watching a hurricane slowly move toward China and Northern Vietnam from their hammocks. They asked us our ages and about our love lives. They offered us cigarettes and asked about our families.

With the rest of the afternoon to go and a kind of spiritual craving still tugging at our hearts, we headed toward the imposing mountain jutting up into the clouds on the horizon.

Cao Dai graves are always oriented in the direction of this inexplicable bump in the pancake-flat expanse of the Mekong Delta.

The headline legend of Nui Ba Den (young maiden jumps to death to remain faithful to lover fighting foreign invaders) appealed to our moods and we headed toward its dark silhouette through brief but powerful downpours.

Control of the mountain has always been key to Vietnam’s survival. During the liberation war against the French, revolutionary soldiers hid in the caves that dot its base.

During the Vietnam War, the US Special Forces erected massive radio antennae on the peak to intercept transmissions between liberation forces.

After endless bombardments and raids, the forces streaming down the Ho Chi Minh Trail retook the mountain, stashing several American POWs in the caves they’d once hidden in.

Now, the mountain has been swallowed by an amusement park with virtually nothing in it.

We arrived at four and bought ten tickets for a blue tractor-turned-train tram emblazoned with a red star. Then, at the base of the new cable car, we argued with vendors about why we had to buy ten tickets to go up and come down the mountain.

In the end, it was a matter of company policy.

But the sun was setting and the leering concrete animal statues that filled the space gave the place a cheap, haunted Scooby Doo atmosphere.

By the time we returned to the parking lot, dogs had been set loose. The heavy-lidded attendant let them bark and snap at our ankles as we sped onto the road back to town.

On the ride through the gloaming we paused at a Cao Dai monastery to peer into the garden. Instead, strict nuns arranged us in front of an altar and taught us to genuflect before a small altar containing a painting of the all-seeing eye.

When all this was done, we had tea with the abbot—a smiling, shorn man who invited us to a vegetarian meal just as the sun set into purple rainclouds.

On the drive back, I couldn’t help but think that every effort to capitalize on the things that makes Vietnam beautiful inevitably reduces those things to a poorly maintained roadside attraction.

It is the people, every time, who save it again and again.

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Aug 09 2013

Vietnamese steel losing to cheap Chinese imports

vietnamese steel losing to cheap chinese imports

As the property market slumps, the local steel industry’s main buyers aren’t buying, and local producers are seeing stronger competition coming from cheap Chinese steel.

Reports by the Ministry of Industry and Trade at a meeting in Hanoi Monday said that businesses had to compete with each other by selling cheap and offering various promotions, according to Thoi Bao Kinh Te Saigon.

Prices in July dropped VND100,000-250,000 (US$4.75-11.87) a ton from the previous month, it said.

The Vietnam Steel Association recently asked the central government to investigate Chinese steel imports, which the association said had evaded millions of dollars in taxes using a technical loophole.

Vietnam exempts alloy steel from import tariffs while other steels are taxed between 5 and 18 percent.

The association said Chinese companies have mixed 0.0008 percent, “a very little amount,” of metalloid element boron to their steel to make it “alloy,” according to a Saigon Tiep Thi report.

It said Vietnam imported 679,000 tons of hot-rolled steel and 275,000 tons of hot steel sheets containing boron from China last year, as well as 270,000 tons of rolled-steel in the first five months this year.

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Aug 09 2013

Vietnam bank fix starts with $476 mln debt

vietnam bank fix starts with 476 mln debt

New asset management firm to buy bad debts worth VND10 trillion in the next two months

 
The headquarters of the Vietnam Central Bank in Hanoi: Photo: DAAÉ

Vietnam’s state asset management company, tasked with cleaning up bad loans, said it will acquire as much as VND10 trillion (US$476 million) of spoiled debt over the next two months as it considers possible foreign funding.

Vietnam Asset Management Co. will issue special bonds to about 10 banks in exchange for as much as VND10 trillion of non-performing loans in the next two months, Chief Executive Officer Nguyen Huu Thuy said in an interview in Hanoi on August 6. The lenders will be able to use the bonds to secure funding from the central bank, he said.

“We can start buying the first batch of bad debt in the next two weeks,” Thuy said. “This will send a positive signal to the market and investors so they can see how quickly we can move forward and how determined we are in resolving bad debt.”

Prime Minister Nguyen Tan Dung is seeking to overhaul almost $5 billion in bad debt at banks that has crimped lending, and revive an economy that last year grew at the slowest pace since at least 2005. Vietnam is emulating a model tested by neighbors from Malaysia to China in forming an entity to acquire loans from banks, as it seeks to revive investor confidence.

“This is a brand new development and it’s long overdue,” Alan Pham, chief economist at VinaCapital Group in Ho Chi Minh City, said in a telephone interview August 6. “Any concrete action or step by the VAMC will be welcomed by the market. The purchase of debt is a new step on this long road to resolving bad debt.”

Lenders lag

Shares in the country’s top lenders have underperformed the benchmark stock index this year. Of the five banks traded on the Ho Chi Minh Stock Exchange, three have dropped in 2013. Joint-Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, the country’s biggest listed bank by market capitalization, rose 0.7 percent compared with a 20 percent increase in the benchmark VN-Index.

The VN-Index rose 0.7 percent at the close on August 7. The dong strengthened 0.1 percent to 21,095 per dollar.

The asset company will “prioritize” buying debt from banks that have the highest non-performing loan levels and will require these to be backed by property and other assets, Thuy said. Asked whether these are real-estate loans, state-owned company debt or other borrowings, he said there is a variety. The majority of Vietnam’s bad debt is in local currency, he said.

The central bank estimates bad debt at 7.8 percent of outstanding loans at the end of last year. About 35 percent of property loans were non-performing as of the end of 2012, according to the National Financial Supervisory Commission. The country’s outstanding property loans stood at VND230 trillion as of March 31, according to the central bank.

Vinashin debt

State-owned enterprises account for about 53 percent of the banking system’s bad debt, according to the Finance Ministry. Vietnam Shipbuilding Industry Group, the state-run company known as Vinashin, almost collapsed in 2010 because it over-diversified and failed to manage cash flow and debt, according to the country’s transport ministry. Vinashin was on the brink of bankruptcy with about $4 billion of debt, the government said that year.

Lenders with bad-debt ratios of 3 percent and above will be required to sell their non-performing loans to the asset management company, according to a May government statement.

The VAMC will purchase banks’ debt at book value and will sell it at market value, and plans to propose the central bank allows it to buy bad debt at market value after 2013, Thuy said. The company has spoken to international banks with clients who have expressed interest in buying Vietnam’s bad debt, and wants to encourage foreign investors to participate in buying the assets, he said.

Sharing loss

“We will auction the debt at a discount and someone will have to take a loss,” he said. “The banks and their borrowers will have to share the loss.”

The company may also tap overseas funding for its operating capital, the CEO said. “International organizations have expressed a lot of interest in giving loans, or providing funding to VAMC,” he said.

The asset company, which is overseen by the State Bank of Vietnam, began operations on July 26, and will have an initial registered capital of VND500 billion. It will resolve as much as VND70 trillion of non-performing loans this year, central bank Governor Nguyen Van Binh has said.

The “very small” level of capital assigned to the asset company, its lack of independence and its plan to acquire debt at book value, are “not good practices,” Deepak Mishra, the World Bank’s lead economist in Vietnam, said last month.

The central bank in July lowered the repurchase rate to 5.5 percent from 6 percent, and asked banks to accelerate lending to help achieve its target of 12 percent loan growth by the end of the year. Credit grew 5.02 percent as of July 25 from end-2012, according to official data.

The central bank said last week it will direct lenders it qualifies as healthy to buy stakes in weaker banks.

“I do believe that the VAMC will meet expectations in terms of helping to resolve bad debt,” Thuy said. “It’s not easy at all to resolve bad debt. With the determination of the government and the central bank as well as the VAMC’s utmost efforts, we will make positive progress and attract foreign investors to participate.”

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Aug 09 2013

High GDP growth easy, but not sustainability: economist

high gdp growth easy but not sustainability economist

 
A worker checks quality of jeans in a garment factory in Ho Chi Minh City

With gross domestic product estimated at US$322 billion in terms of purchasing power parity (PPP), the Vietnamese economy ranks 42nd in the world and sixth in Southeast Asia behind Indonesia, Thailand, Malaysia, the Philippines, and Singapore.

It is not difficult for the country to go back to 7-8 percent growth, but sustainable growth is another thing altogether, economist Nguyen Minh Phong tells Vietweek.

Vietweek: How do you assess Vietnam’s ranking?


 

Nguyen Minh Phong: This shows Vietnam’s economic scale and economic development potential in comparison with the rest of the world. Vietnam used to be in the latter half of the world rankings in many areas. In economic scale, we are now in the top half of the rankings. This is very positive. Vietnam could do more to improve its ranking.

The average income is still low and the economy is still weak. Isn’t it because of our large population that the GDP is high?

It is not quite right to say that we have high GDP because of our large population. It is mainly due to inflation and exchange rates. For example, according to World Bank calculations, to buy a product which is sold for $1 in Vietnam, a consumer has to spend $3-4 in the US. Thus, Vietnam’s GDP based on purchasing power parity will increase three or four times. Vietnam estimates its GDP at some $120 billion, while the bank estimates it at $322 billion under the PPP method.

Nevertheless, per capita GDP is still low due to the large population. To improve it, we need to accelerate economic restructuring, encourage firms’ deep international economic integration, increase products’ value addition, and develop market information. The private sector will spearhead Vietnam’s GDP ranking.

While the world economy seems to be recovering, Vietnam is stuck in low growth mode compared to a few years ago. Why?

It is because it is our intention to keep economic growth low. Vietnam has not focused on increasing the GDP in the past two years. We have prioritized macroeconomic stability and inflation control. So we have reduced public investment. Obviously, low economic growth is also due to lower demand and the debilitation of firms caused by high interest rates, outdated technologies, and many other factors. But we should not think that low GDP growth is bad.

When and how can Vietnam return to 7-8 percent growth rates?

It is not difficult to achieve GDP 7-8 percent growth each year. We can achieve it if we increase public investment. However, this will hurt economic sustainability in terms of the environment, resources and public debts. We cannot forecast when we can achieve the growth because it depends on the implementation of policies, for example when the restructuring is done, how it is implemented, and how corruption is tackled. Economic growth also depends on the private sector’s development.

In 2013 the government has unveiled some important policies such as the measures to resolve firms’ difficulties and bad debts. If the policies are strictly implemented, they will have a good impact to the economy.

Has the private sector’s development been facilitated?

Some big private companies have received government support. At the same time, reform of state-owned enterprises should be speeded up so that the monopolies in some areas can be reduced and the state can shift its support to private firms from state-owned enterprises. However, the policies are being implemented too slowly. The private sector has not yet got full support from the government.

The restructure of banking and public investment is also slow. So what are feasible now?

The restructure is happening slowly because we have not yet been given a clear direction for it. The government should amend the Law on Investment, which would facilitate the development of the private sector. The sector now operates in a passive manner since it depends on new policies issued by the government every year.

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