Vietnam needs to heed black market, official rate gap, ADB says

Vietnam should pay attention to the “widening” gap between black market and official exchange rates, which can be considered a barometer of investor confidence, according to the Asian Development Bank.

“We certainly need to keep watching,” Ayumi Konishi, the ADB’s country director for Vietnam, said at a press conference in Hanoi. The “trend certainly reflects people’s expectations.”

Vietnam’s dong is about 1.8 percent cheaper to buy in the black market than the official rate paid by banks and devaluations are likely in 2011 to bring the exchange rate into line, Credit Agricole CIB said in an Oct. 11 research note.

While other Asian countries like China or Thailand are worried about appreciation, the concern in Vietnam is “sharp devaluation rather than any gradual adjustment in the value of the dong,” said Jayant Menon, an economist in the Office of Regional Economic Integration at the Manila-based ADB.

The dong traded between 19,830 and 19,870 per dollar at money changers in Ho Chi Minh City on Friday afternoon, according to a telephone information service run by state-owned Vietnam Posts & Telecommunications. The rate in the interbank market was 19,499, the weakest level since at least 1993, according to data compiled by Bloomberg.

The State Bank of Vietnam fixed the reference rate at 18,932 on Friday, a level unchanged since Aug. 18. The currency is allowed to fluctuate up to 3 percent on either side of the rate, which means it can be traded at low as 19,500.

“Vietnam is running a trade deficit so some sort of controlled depreciation of the currency to improve competitiveness is not a bad idea,” Menon told reporters after the conference. “The concern is sudden sharp, erratic falls in the value of the dong, caused by lack of confidence.”

Vietnam’s cumulative trade deficit in the first nine months reached $8.58 billion, according to the General Statistics Office. For September alone, the gap rose to $1.05 billion from $395 million in August.

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Tra export forecasts lowered

The Ministry of Industry and Trade has reduced its October forecast for
tra fish exports from 1.38 billion USD to 1.35 billion USD following
plans by the US to impose an anti-dumping tax of 130 percent on the
fish.

The Vietnam Association of Seafood Exporters
and Producers (VASEP) said the country's total seafood export value this
year would be 4.81 billion USD, lower than earlier estimates.

The new tax rate, far in excess of any previous dumping tariffs
imposed on Vietnamese seafood exports in the last eight years, was
agreed at the sixth administrative review by the US Department of
Commerce (DOC).

In pervious DOC reviews, most Vietnamese exporters enjoyed a tax rate of just 0.52 percent – the lowest possible.

VASEP said the US department's ruling is unjustified and that it
was based on the price of raw materials imported from the Philippines ,
not from Bangladesh as was previously the case.

The 130-percent anti-dumping tax rate will be imposed on Vietnamese tra
exporters, such as Vinh Hoan, Vinh Quang, Agifish, ESS LLC and South
Vina from March 2011.

Nguyen Ngo Vi Tam, deputy
general director of Vinh Hoan, said her firm will reduce exports of tra
fish to the US and increase exports to other markets as a result.

VASEP said DOC has given Vietnamese tra exporters
until October 26 to submit documents relating to their exports if they
want the draft tax rate reviewed./.

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Banks say cutting rates still a challenge

HCMC – Several bankers say it still proves difficult to cut interest rates in the rest of the year, borrowing and lending alike, as instructed by the Government although their current capital has got a spur following amendments to Circular 13.

The general director of a bank in HCMC’s District 1 said that his bank would not lower the lending rate any more between now and the end of the year as its profit up to date was so low compared to the year’s target. In addition, given current deposit rates, mobilization in Vietnam dong at the bank cannot increase much so the possibility of trimming the rate would be low, he added.

Another banker in HCMC said the rate cut would be minimal if any.

After Circular 13 was amended, which effectively means quantitative easing, the amount of current capital has increased as banks can use part of corporate deposits under call terms for lending, a practice banned under the circular.

However, “although there is the possibility of lower lending rates, the reduction will not be substantial,” explained the banker, who serves as deputy director of the HCMC branch of a big bank.

In September, Vietnam Banks Association had meetings with banks in Hanoi and HCMC to encourage them to reduce interest rates under the Government’s requirement. The association encouraged banks to cut mobilization rates to 11% from October 15 from the current 11.2% per year.

Early this month, the association has sent a document asking banks to comply with the requirement, but Duong Thu Huong, the association’s general secretary, told the Daily that banks would look at each other before making any rate cut decision due to fear of losing depositors.

“Banks are very much hesitant over the rate cut as demanded by the association,” Huong said.

In fact, commercial banks have launched a lot of promotion programs to lure depositors. Besides, according to the leader of a joint-stock bank, several lenders even negotiate deposit rates with clients at this time.

However, Huong also said that besides amending the Circular 13, the interest rates are also determined by the country’s inflation rate this year, which usually gains a faster pace towards the year’s end, as seen in the September CPI at 1.31%.

In addition, deposit rates for the U.S. dollar and gold are increasing, making it harder to cut the rate in Vietnam dong. Therefore, Vietnam Bank Association has asked banks to lower their dollar and gold rates also.

Many banks said that their deposits in gold have strongly increased after the interest rates have increased to 1%-2% per year.

According to the third quarter report of the State Bank of Vietnam, lending rates in Vietnam dong for agricultural sector, exporters, small and medium enterprises are around 12%-12.5% at State-owned banks and 12.5%-13.5% at joint-stock banks while rates for other loans are from 13% to 15% per year. However, only banks’ close corporate clients can enjoy those rates while others are charged at least one percentage point higher.

The report also said that mobilization and lending rates could not decrease to the levels asked by the Government (deposit rate at 10% and lending rate at 12%) due to high pressure on inflation and banks’ difficulties in mobilizing fund.

The new report of the National Financial Supervisory Commission said that after changes to Circular 13, the capital flow has got bigger but basically it is still restricted by the loans-to-deposit ratio at 80% for banks.

In 2009, banks’ outstanding loans accounted for 96.93% of total mobilization, and the ratio was 92.96% in the first half this year. Reducing the ratio further to 80% from October 1 has also proved a hard nut to crack for many banks.

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Banks say cutting rates still a challenge

HCMC – Several bankers say it still proves difficult to cut interest rates in the rest of the year, borrowing and lending alike, as instructed by the Government although their current capital has got a spur following amendments to Circular 13.

The general director of a bank in HCMC’s District 1 said that his bank would not lower the lending rate any more between now and the end of the year as its profit up to date was so low compared to the year’s target. In addition, given current deposit rates, mobilization in Vietnam dong at the bank cannot increase much so the possibility of trimming the rate would be low, he added.

Another banker in HCMC said the rate cut would be minimal if any.

After Circular 13 was amended, which effectively means quantitative easing, the amount of current capital has increased as banks can use part of corporate deposits under call terms for lending, a practice banned under the circular.

However, “although there is the possibility of lower lending rates, the reduction will not be substantial,” explained the banker, who serves as deputy director of the HCMC branch of a big bank.

In September, Vietnam Banks Association had meetings with banks in Hanoi and HCMC to encourage them to reduce interest rates under the Government’s requirement. The association encouraged banks to cut mobilization rates to 11% from October 15 from the current 11.2% per year.

Early this month, the association has sent a document asking banks to comply with the requirement, but Duong Thu Huong, the association’s general secretary, told the Daily that banks would look at each other before making any rate cut decision due to fear of losing depositors.

“Banks are very much hesitant over the rate cut as demanded by the association,” Huong said.

In fact, commercial banks have launched a lot of promotion programs to lure depositors. Besides, according to the leader of a joint-stock bank, several lenders even negotiate deposit rates with clients at this time.

However, Huong also said that besides amending the Circular 13, the interest rates are also determined by the country’s inflation rate this year, which usually gains a faster pace towards the year’s end, as seen in the September CPI at 1.31%.

In addition, deposit rates for the U.S. dollar and gold are increasing, making it harder to cut the rate in Vietnam dong. Therefore, Vietnam Bank Association has asked banks to lower their dollar and gold rates also.

Many banks said that their deposits in gold have strongly increased after the interest rates have increased to 1%-2% per year.

According to the third quarter report of the State Bank of Vietnam, lending rates in Vietnam dong for agricultural sector, exporters, small and medium enterprises are around 12%-12.5% at State-owned banks and 12.5%-13.5% at joint-stock banks while rates for other loans are from 13% to 15% per year. However, only banks’ close corporate clients can enjoy those rates while others are charged at least one percentage point higher.

The report also said that mobilization and lending rates could not decrease to the levels asked by the Government (deposit rate at 10% and lending rate at 12%) due to high pressure on inflation and banks’ difficulties in mobilizing fund.

The new report of the National Financial Supervisory Commission said that after changes to Circular 13, the capital flow has got bigger but basically it is still restricted by the loans-to-deposit ratio at 80% for banks.

In 2009, banks’ outstanding loans accounted for 96.93% of total mobilization, and the ratio was 92.96% in the first half this year. Reducing the ratio further to 80% from October 1 has also proved a hard nut to crack for many banks.

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Markets sort mixed economic signals

HCM CITY — Mixed macroeconomic signals and continued lateral movement of stock markets continued in September, but one of the most positive signs was estimated GDP growth of 7.16 per cent for the third quarter, according to a monthly review released by the company Viet Nam Asset Management yesterday.

The GDP rate during September contributed to the combined growth of the first nine months to 6.52 per cent.

The full-year GDP growth target was revised up to 6.7-6.8 per cent, given that the last quarter is usually the most robust period of economic activity.

For the first nine months, industrial production was up 13.8 per cent while retail sales revenue soared 25.4 per cent compared to the same period last year.

While economic growth is edging up, inflation and exchange rates are likely to become issues in the last three months of the year.

The September consumer price index (CPI) came in at 1.31 per cent month-on-month and 8.92 per cent year-on-year.

This was the first month-on-month increase of over 1 per cent since this February.

The sharp acceleration was driven by higher prices of foods, construction materials, gas and education fees, with the latter caused by a seasonal effect.

The exchange rate is another concern, as the unofficial rate, after months of converging with the official rate, suddenly heated up in September, trading at 1 per cent above the upper limit of the official trading band.

The recent fluctuation of the exchange rate in the unofficial market was primarily attributed to strong increases in gold prices in the last two months, accelerating inflation and widening the trade deficit.

The mix of a record-high gold price, an unexpected rise in September's CPI, and the divergence of official and unofficial exchange rates has once again sparked fears of inflation and further devaluation toward the year-end.

The securities market continued its prolonged lateral movement when the VN-Index closed the month at 454.52, almost flat against September.

The report suggests that despite the potential catalyst from corporate earnings in the third quarter, investors will likely remain cautious in October because of a stocks oversupply and mixed macroeconomic signals.

"We are still upholding our long-term interest in the consumer, IT, telecom and pharmaceutical sectors. For short-term seasonal play, we are closely watching natural rubber and some high-dividend defensive stocks. Overall, we strongly advise investors to look closely at individual firm's performances rather than choosing a specific industry," the report said. — VNS

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GDP accelerates to 6.52% in three quarters

CPI increases 1.31 % in September

HCMC – Vietnam’s gross domestic product growth rate has accelerated to 6.52% year-on-year in the January-September period, and the economy is headed for 6.7% for the whole year, the Ministry of Planning and Investment said on Monday.

In its report released on Monday for a regular meeting, the ministry noted that the economy has gained growth momentum, with the GDP growth rate moving faster one quarter after another, according to local media covering the meeting.

In fact, the economy posted an annualized GDP growth rate of 5.83% in the first quarter, 6.4% in the second quarter, and now 6.52% for the three quarters combined. This rate is higher than the targeted 6.5% growth rate endorsed by the National Assembly early this year.

Construction and manufacturing as a whole posted the strongest growth, at 7.29% year-on-year in the January-September period, followed by the service sector with 7.24%, while agriculture inched up 2.89%. The growth rates of all the three sectors are higher than those in the same period of last year, according to the ministry’s report.

While maintaining an upbeat tone about the economy this year, the ministry also highlights challenges to be addressed in the rest of the year. These include the uptrend of prices at home and abroad -- which may stoke up inflation -- the high interest rate charged by commercial banks that makes life harder for enterprises, and high trade deficit.

* September’s consumer price index surged 1.31 % against the previous month, attributed mainly to a dramatic increase of education services prices and depreciation of Vietnam Dong against the U.S. dollar, the General Statistics Office reported on Friday.

CPI in August increased by 0.23 % over the previous month, so increases in September were earlier forecast at between 0.8 and 1 %.

CPI in this month rose 6.46% compared to December, 2009. Vietnam targets to curb inflation this year at 7% to 8%, but this target is difficult to reach due to an uptrend in commodities prices in the rest of the year and higher import demands.

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Central bank holds steady on prime rate

The prime rate would be kept unchanged at 8 percent for the 11th
consecutive month as part of the ongoing effort to help commercial banks
lower lending interest rates, the State Bank of Vietnam said on
Sept. 27.

The refinancing and overnight rates for
electronic payments on the interbank market would also remain at 8
percent and the discount rate at 6 percent, the bank said.

Since the central bank gave the go-ahead for a negotiable interest
rate mechanism in March, the prime rate had not had direct impact on the
market lending interest rate that it used to, analysts said.

However, the benchmark interest rate was seen as a way of signalling
the monetary policy direction of the central bank at any given period.

The Government has ordered commercial banks to cut
lending rates to 12 percent and deposit rates to 10 percent in order to
help enterprises access credit.

Prevailing loan rates now range between 12-15 percent.

Many banks expected Circular No13's review to result in important
changes that would loosen credit requirements and help banks have more
capital on hand to make money and reduce interest rates./.

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Banks further hike gold deposit rates

HCMC – Several banks have continued to raise interest rates for gold deposits to between 1% and 2% per annum from just 0.1% a month ago.

The highest gold rate is offered by Nam Viet Commercial Bank, at 2% per year for the 11-month term, 1.5% for the three-month term, and 1.55% for the six-month term.

The race to hike gold rates was triggered two weeks ago when Asia Commercial Bank (ACB) and Vietnam Export Import Commercial Bank (Eximbank) boosted deposit rates for gold to around 1%. ACB offered 1.1% per year for a three-month term while Eximbank quoted it at 1% for a one-month term.

ACB on Monday heated up the race by raising the annual interest rate by between 73 and 85 basis points to 1.35% for the 12-month term and 1.3% for terms of three, six, and nine months.

Late last week, Southern Commercial Bank also revised up its gold deposit rate with the highest level being 1.5% per year for terms longer than five months. Sacombank now mobilizes the yellow metal at 1% per year for a three-month period.

A banker in HCMC’s District 1 said the higher deposit rate was offered to attract more gold to meet the rising demand.

“Many people think the gold price has hit the ceiling so they want to borrow gold now to enjoy a lower lending rate (compared to Vietnam dong or the U.S. dollar),” he said.

Mobilizing more gold and dollars at this time will also help banks improve their current capital pools to meet a new rule on keeping the loan-to-deposit ratio at no more than 80% under the central bank’s Circular 13, he explained.

According to the central bank’s HCMC Branch, as of end-August, the loan-to-deposit ratio of banks in the city had been about 96.3%, as mobilized funds totaled VND683.5 trillion compared to outstanding loans of VND623.1 trillion.

Ho Huu Hanh, director of the branch, said gold deposits made up 10% of the total mobilization by credit institutions in the city.

Hanh commented on the ‘gold rush’ that many banks who had sold mobilized gold earlier to take Vietnam dong for lending now had to draw more gold to offset the loans made.

As the dollar and gold interest rate are increasing now, banks find it hard to lower the lending rate in near term as told by the central bank, said a banker in HCMC.

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Lending rate almost beyond enterprises’ reach: report

The organizers of the survey Vietnam Business Insight Survey announce the results at a conference in HCMC - Photo: Thu Nguyet

HCMC – Many local enterprises are taking out short-term loans with interest rate of more than 12% a year, which they say they can’t afford for a long time, according to a survey report released on Thursday.  

The Vietnam Business Insight Survey, conducted among nearly 400 enterprises in the country, shows the current interest rate of short-term loans is nearly touching the unaffordable level for many local companies. It means many of them are hardly able to burden the high rate any longer.

The survey is made every quarter by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the General Statistics Office and Asia Competitiveness Institute, under the financial support of the Asia Foundation.  

In details, two-thirds of nearly 400 corporate respondents are borrowing short-term loans at an annual interest rate of more than 12%. About 60% of these enterprises say the lending rate is unreasonable, and 36% of them can’t afford the high capital cost loans in the long term.

Therefore, instead of borrowing from banks, they resort to other capital sources to support their operations and production, which negatively affects their investment strategy. According to the survey, about 94% of business respondents say under-12% lending rate is reasonable for them.  

Besides the expensive loans, the survey found many local companies are facing challenges from lack of electric power and skilled labor, and traffic congestion.  

In addition, local companies are coping with obstacles from the current business environment, said Vu Kim Hanh, vice chairwoman of Leading Business Club, at a conference to release the survey in HCMC.  

Hanh explained that they suffered fierce competition from fake, cheap and smuggled goods. Hence, some of them stopped their production and were having their products outsourced to China then labeled “Made in Vietnam” to reduce costs of the products.    

“Even some companies recognized as producers of high-quality Vietnamese products are outsourcing to China and label the goods as domestically made,” she said.  

Hanh added that local enterprises also told her that they were burdened by un-official fees but didn’t give any details. Costs for after-sales services, promotion and environment protection are challenging local producers.

The survey also shows local enterprises’ trade and production improved in the second quarter of this year compared with the first quarter.

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Lending rate almost beyond enterprises’ reach: report

The organizers of the survey Vietnam Business Insight Survey announce the results at a conference in HCMC - Photo: Thu Nguyet

HCMC – Many local enterprises are taking out short-term loans with interest rate of more than 12% a year, which they say they can’t afford for a long time, according to a survey report released on Thursday.  

The Vietnam Business Insight Survey, conducted among nearly 400 enterprises in the country, shows the current interest rate of short-term loans is nearly touching the unaffordable level for many local companies. It means many of them are hardly able to burden the high rate any longer.

The survey is made every quarter by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the General Statistics Office and Asia Competitiveness Institute, under the financial support of the Asia Foundation.  

In details, two-thirds of nearly 400 corporate respondents are borrowing short-term loans at an annual interest rate of more than 12%. About 60% of these enterprises say the lending rate is unreasonable, and 36% of them can’t afford the high capital cost loans in the long term.

Therefore, instead of borrowing from banks, they resort to other capital sources to support their operations and production, which negatively affects their investment strategy. According to the survey, about 94% of business respondents say under-12% lending rate is reasonable for them.  

Besides the expensive loans, the survey found many local companies are facing challenges from lack of electric power and skilled labor, and traffic congestion.  

In addition, local companies are coping with obstacles from the current business environment, said Vu Kim Hanh, vice chairwoman of Leading Business Club, at a conference to release the survey in HCMC.  

Hanh explained that they suffered fierce competition from fake, cheap and smuggled goods. Hence, some of them stopped their production and were having their products outsourced to China then labeled “Made in Vietnam” to reduce costs of the products.    

“Even some companies recognized as producers of high-quality Vietnamese products are outsourcing to China and label the goods as domestically made,” she said.  

Hanh added that local enterprises also told her that they were burdened by un-official fees but didn’t give any details. Costs for after-sales services, promotion and environment protection are challenging local producers.

The survey also shows local enterprises’ trade and production improved in the second quarter of this year compared with the first quarter.

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IMF warns Vietnam against rapid rate cuts

The International Monetary Fund warned Vietnam on Wednesday that it risks hard-won market stability by trying to cut lending rates too fast, and said it should maintain the level of the dong currency to safeguard financial calm.

"The repeated announcements by the government about the need to lower the commercial lending rates may be counter-productive," the IMF said in a regular review of Vietnam's economic health.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said in a statement.

"The government, therefore, needs to convince market participants that its priority rests with macroeconomic stability. For this purpose, staff believes that maintaining the current stable exchange rate ... should be the immediate goal for the government," the IMF said.

State Bank of Vietnam governor Nguyen Van Giau said last week that lending rates were expected to drop. But Giau said they were not falling quickly at present because banks were cutting deposit rates slowly.

The IMF said Vietnam's exchange rate regime policy should be reformed over the medium term.

"A move from the current system that is based on a basket of currencies including those of regional trading partners may be appropriate," the report said.

The IMF review also said there was room for further reduction in Vietnam's budget deficit. Total investment spending was expected to fall this year by three percentage points of GDP from the 2009 level to about 11 percent of GDP, the report said.

The IMF projected GDP growth of 6.5 percent this year and 6.8 percent in 2011.

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Hai Phong needs to become modern industrial city

The northern port city of Hai Phong should make full use of its advantages, including its marine economy, agriculture, industry and human resources, to become a modern industrial and port service city by 2015.

Prime Minister Nguyen Tan Dung made the request at the Political Bureau’s working session with Hai Phong City’s Party Committee (HPC) in Hanoi on Wednesday to examine the city’s preparations for its Party congress.

The city should focus on developing seaport systems together with infrastructure, mechanics and supporting industries, port services and tourism, he said.

PM Dung asked the municipal leaders to drastically implement administrative reforms, creating favorable conditions for businesses to invest in these areas, in order to fulfill the city’s targets of reaching a GDP growth rate of 13-13.5 percent, per-capita income of over US$3,000 per year and reducing the poverty rate to 1 percent by 2015.

Hai Phong City should pay attention to environmental protection, especially solid waste treatment, speed up the shifting of labor structure by reducing the proportion of laborers in agriculture and raise the rate of households gaining access to clean water.

Regarding the building of the Party and political system, the Government leader suggested the HPC continue strongly implementing political and ideological work in the Party and among people as well as stepping up the implementation of the “Studying and following President Ho Chi Minh’s moral example” campaign.

The city needs to strengthen its apparatus in the political system and better anti-corruption work and personnel training, especially for female and young cadres, he noted.

On behalf of the Politburo, Prime Minister Nguyen Tan Dung praised the HPC’s efforts to build documents and orientations for personnel work in line with the Politburo’s Decree 37 and the Party Central Committee’s guidance.

He also spoke highly of the municipal Party Committee’s attempts during the 2006-2010 term to overcome difficulties and attain achievements in all aspects, especially a GDP growth rate of 11.15 percent and a reduction in the poverty rate to 3.8 percent.

However, he pointed out the city’s shortcomings that should be addressed in the next tenure, including unsustainable economic development, weak competitiveness and urban management and development.

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Vietnam predicts GDP growth rate of 6.7 pct

An apparent recovery trend that the national economy has shown in the past eight months provides experts with the grounds to predict that Vietnam will achieve a GDP growth rate of 6.7 percent and rein in inflation to below 8 percent this year.

According to the General Statistics Office, the country raked in US$44.5 billion in export earnings in the past eight months, representing a year-on-year increase of 19.7 percent and a three-fold rise over the yearly plan.

In the review period, the country attained an industrial production value of over $504 trillion, showing a year on year rise of 13.7 percent which surpassed the yearly plan.

Seeing those positive signs and the recovery of the global economy, many cabinet members at their August meeting predicted that the country’s GDP would reach 7.18 percent in the third quarter.

They forecast that it would grow at 6.7 percent for the whole year, surpassing the 6.5 percent goal targeted by the National Assembly.

There is a favourable development in the CPI, as it rose just 0.23 percent in August over July, constituting a low growth rate in the fifth consecutive month. It rose just 5.08 percent compared with December, 2009.

If CPI growth is maintained at this speed and grows 0.7 percent a month from now to the end of this year, it is forecasted not to exceed 8 percent as set early this year.

Experts say in this difficult circumstance, reining in inflation is significant as it will enable policymakers to take bolder steps in managing the macro economy and make the life of people, especially low-income earners, more stable.

To fulfill the yearly growth targets and deal with elements that can drive prices up in the remaining months of the year, including natural disasters, diseases, and fluctuations in the world market, Prime Minister Nguyen Tan Dung has in the cabinet’s August meeting asked relevant ministries, sectors and localities to continue providing businesses with the best conditions they can to boost their production and exports and lure more local and foreign investment.

He also asked relevant agencies to intensify the management of prices, bank loan interest rates and the foreign exchange rate and make adjustments suitable for actual needs.

 

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Cost of borrowing declines

HA NOI — The interest rate on loans at commercial banks from August 20-26 was lowered by 1 per cent to about 13 per cent per year.

This move aims to boost the economy after the State Bank of Viet Nam injected capital into the market to improve liquidity.

State owned banks are charging exporters, farmers and rural developers between 12-13.5 per cent per year for both short and long term loans. Private banks charge between 12-14.5 per cent.

The total trading volume on the inter-bank market was VND101.22 trillion ($5.19 billion) in Vietnamese dong and US$1.96 billion in US dollars, up 3.9 per cent and 1.8 per cent, respectively.

Most tradings in dong were made overnight and during the week. Overnight interest rates for the dong rose 0.08 per cent.

Average short term interest rates ranged from 6.78 per cent to 8.56 per cent per year.

The highest lending interest rate was 12 per cent and the lowest interest rate was 6 per cent.

The exchange rate hovers around VND19,480-19,500 per US dollar after the dong depreciated by 2 per cent last week. — VNS

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Vietnam predicts GDP growth rate of 6.7 pct

An apparent recovery trend that the national economy has shown in the
past eight months provides experts with the grounds to predict that
Vietnam will achieve a GDP growth rate of 6.7 percent and rein in
inflation to below 8 percent this year.

According to the General Statistics Office, the country raked in 44.5
billion USD in export earnings in the past eight months, representing a
year-on-year increase of 19.7 percent and a three-fold rise over the
yearly plan.

In the review period, the country attained an
industrial production value of over 504 trillion VND, showing a year on
year rise of 13.7 percent which surpassed the yearly plan.

Seeing
those positive signs and the recovery of the global economy, many
cabinet members at their August meeting predicted that the country’s GDP
would reach 7.18 percent in the third quarter.

They forecast
that it would grow at 6.7 percent for the whole year, surpassing the 6.5
percent goal targeted by the National Assembly.

There is a
favourable development in the CPI, as it rose just 0.23 percent in
August over July, constituting a low growth rate in the fifth
consecutive month. It rose just 5.08 percent compared with December,
2009.

If CPI growth is maintained at this speed and grows 0.7
percent a month from now to the end of this year, it is forecasted not
to exceed 8 percent as set early this year.

Experts say in this
difficult circumstance, reining in inflation is significant as it will
enable policymakers to take bolder steps in managing the macro economy
and make the life of people, especially low-income earners, more stable.

To
fulfill the yearly growth targets and deal with elements that can drive
prices up in the remaining months of the year, including natural
disasters, diseases, and fluctuations in the world market, Prime
Minister Nguyen Tan Dung has in the cabinet’s August meeting asked
relevant ministries, sectors and localities to continue providing
businesses with the best conditions they can to boost their production
and exports and lure more local and foreign investment.

He also
asked relevant agencies to intensify the management of prices, bank loan
interest rates and the foreign exchange rate and make adjustments
suitable for actual needs./.

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Vietnamese central bank to keep interest rate at 8 pct

Vietnam’s central bank said it will keep its benchmark interest rate unchanged for a ninth consecutive month in September as it strives to boost lending.

The so-called base rate will stay at 8 percent from Sept. 1, the State Bank of Vietnam said in a statement on its website Wednesday. The benchmark was raised from 7 percent on Dec. 1. The refinancing and discount rates will also be held at 8 percent and 6 percent respectively.

The government has been urging banks to cut credit costs to bolster the economy as it targets 25 percent lending growth and 6.5 percent economic expansion this year, even as inflation has held above 8 percent for most of 2010. The central bank allowed lenders to set their own rates for medium- to long-term loans in February, scrapping a cap linked to the benchmark.

“The base rate will stay at 8 percent until the end of the year,” Alan Pham, Ho Chi Minh City-based chief economist at VinaSecurities Joint-Stock Co., said before the announcement. Following the elimination of the cap, the base rate “is irrelevant and nobody cares what it is,” Pham said.

Commercial lending rates ranged from 12 percent to 15 percent in July, the central bank said in August. It previously said it will seek to further cut the costs over the rest of 2010 through measures including increased money supply. Credit growth reached 12.97 percent by July 31 from the end of last year.

Dong devaluation

The State Bank of Vietnam lowered the dong’s reference exchange rate by 2 percent last week, citing the need to narrow the trade deficit. The shortfall was $900 million this month from a revised $978 million in July, a report showed Tuesday. For the eight months through August, the gap was $8.16 billion.

The dong traded at 19,490 per dollar at 4:18 p.m., down from 19,099 before the devaluation was announced. The Ho Chi Minh City Stock Exchange’s VN Index slid 2.4 percent to 423.89, after entering a so-called bear market Tuesday following a drop of 21 percent since May 6.

“With the recent devaluation of 2 percent, inflation would likely pick up,” Pham said. “So banks have to keep up their lending rates or even raise them, to keep their real rates positive.”

Inflation cooled for a fifth month in August, climbing 8.18 percent from a year earlier compared with 8.19 percent in July, according to data released this week.

Vietnam’s gross domestic product expanded 6.4 percent in the second quarter, after advancing 5.8 percent in the first three months of the year. Prime Minister Nguyen Tan Dung said in June the economy may grow as much as 7 percent in 2010.

The Southeast Asian nation is preparing a “rapid and sustainable” development strategy for 2011 to 2020 that will lead to average GDP growth of 7 percent to 8 percent a year for the period, the prime minister said last week.

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Vietnamese central bank to keep interest rate at 8 pct

Vietnam’s central bank said it will keep its benchmark interest rate unchanged for a ninth consecutive month in September as it strives to boost lending.

The so-called base rate will stay at 8 percent from Sept. 1, the State Bank of Vietnam said in a statement on its website Wednesday. The benchmark was raised from 7 percent on Dec. 1. The refinancing and discount rates will also be held at 8 percent and 6 percent respectively.

The government has been urging banks to cut credit costs to bolster the economy as it targets 25 percent lending growth and 6.5 percent economic expansion this year, even as inflation has held above 8 percent for most of 2010. The central bank allowed lenders to set their own rates for medium- to long-term loans in February, scrapping a cap linked to the benchmark.

“The base rate will stay at 8 percent until the end of the year,” Alan Pham, Ho Chi Minh City-based chief economist at VinaSecurities Joint-Stock Co., said before the announcement. Following the elimination of the cap, the base rate “is irrelevant and nobody cares what it is,” Pham said.

Commercial lending rates ranged from 12 percent to 15 percent in July, the central bank said in August. It previously said it will seek to further cut the costs over the rest of 2010 through measures including increased money supply. Credit growth reached 12.97 percent by July 31 from the end of last year.

Dong devaluation

The State Bank of Vietnam lowered the dong’s reference exchange rate by 2 percent last week, citing the need to narrow the trade deficit. The shortfall was $900 million this month from a revised $978 million in July, a report showed Tuesday. For the eight months through August, the gap was $8.16 billion.

The dong traded at 19,490 per dollar at 4:18 p.m., down from 19,099 before the devaluation was announced. The Ho Chi Minh City Stock Exchange’s VN Index slid 2.4 percent to 423.89, after entering a so-called bear market Tuesday following a drop of 21 percent since May 6.

“With the recent devaluation of 2 percent, inflation would likely pick up,” Pham said. “So banks have to keep up their lending rates or even raise them, to keep their real rates positive.”

Inflation cooled for a fifth month in August, climbing 8.18 percent from a year earlier compared with 8.19 percent in July, according to data released this week.

Vietnam’s gross domestic product expanded 6.4 percent in the second quarter, after advancing 5.8 percent in the first three months of the year. Prime Minister Nguyen Tan Dung said in June the economy may grow as much as 7 percent in 2010.

The Southeast Asian nation is preparing a “rapid and sustainable” development strategy for 2011 to 2020 that will lead to average GDP growth of 7 percent to 8 percent a year for the period, the prime minister said last week.

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State Bank holds line on prime rate

The State Bank of Vietnam on Aug. 25 announced it would retain the
prime rate at 8 percent in September for the tenth straight month,
quelling market hopes that it might be lowered and borrowers enjoy a
more affordable stream of income from this source.

The unchanged rate is seen as a sign of stability.

The refinancing and interbank electronic payment interest rates will
also remain at 8 percent and the discount rate, at 6 percent.

The benchmark lending rate has been held steady since last November,
having been lowered by a percentage point back in early 2009 to spur
lending during the economic crisis.

Since the
central bank gave the go-ahead for a negotiable interest rate mechanism
in March, the prime rate has not had the direct impact on the market
lending interest rate that it used to. However, the benchmark interest
rate is seen as a way of signalling the monetary policy direction of the
central bank at any given period.

Lending rates at
commercial banks are now ranging from 12.5-15 percent per year for
Vietnamese dong loans but the SBV is trying to lower the rate to as
little as 12 per cent in order to help enterprises access more credit./.

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Shipping taxes to be waived

HA NOI — All export-import express packages will be tax exempt from, October 1.

The exemption is embodied in Government Decree 87/2010/ND-CP which regulates the prices at which tax applies; the exchange rate to caculate tax; tax payment schedules and tax exemptions and refunds.

The decree also exempts imported raw materials or devices dedicated for privileged investment sectors or which are not made in Viet Nam for five years from the day of their production.

But some goods - automobile assembly parts and such household appliances as air-cond-itioners, electric heaters, refrigerators, washing machines, electric fans, hair driers and smoothing irons - will not be tax exempt.

Tax for materials imported to make exports or for export to tariff-free zones will be refunded calculated on the final export product.

Products proved as entirely built with imported materials will not be taxed.

The State Bank of Viet Nam's interbank exchange rate will be used to calculate tax. Bridging rates will be used if the currency to calculate tax is not included in the rate. — VNS

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Vietnam allows weaker dong, sets new reference rate

Vietnam set a lower reference rate for the dong for the third time since November, which may allow the currency to weaken and help reduce the trade deficit.

The State Bank of Vietnam set the daily reference rate 2 percent lower at 18,932 to a dollar, starting Wednesday, according to a statement posted on its web site on Tuesday. The currency is still allowed to trade 3 percent either side of the reference rate, according to the statement. The dong dropped 0.1 percent to 19,099 at 6:24 p.m. in Hanoi, according to data compiled by Bloomberg.

“The central bank is trying to be proactive,” said Alan Pham, chief economist at VinaSecurities, a unit of VinaCapital Investment Management Ltd., in a telephone interview from Ho Chi Minh City. “They want to get ahead of the situation, instead of waiting for crisis to make a move.”

The change to the reference rate is to “make a contribution in controlling trade deficit,” the central bank said in the statement.

In the so-called black market, the dong weakened to 19,335 at gold shops in Ho Chi Minh City in the afternoon, compared with 19,265 Monday, according to a telephone-information service known as 1080 run by state-owned Vietnam Post & Telecommunications.

“There are signs of an increase in the black market rates recently and this decision would send a signal to the market that the central bank is taking the measure seriously in stabilizing the dong,” Pham said.

Vietnam’s trade deficit widened in July from the previous month on falling exports. The shortfall reached $1.15 billion from a revised $742 million in June. For the seven months through July, the deficit was $7.4 billion, almost twice the figure for the same period last year.

Governor Nguyen Van Giau on Feb.11 depreciated the dong by lowering the reference rate 3.4 percent to 18,544.

The central bank hasn’t changed the daily reference rate for the dong since Feb. 11.

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