IMF sees Vietnam reserves rising despite pressure

HANOI - The International Monetary Fund sees Vietnam's foreign reserves growing steadily this year and next after a sharp drop so long as authorities can maintain economic stability.

Vietnam's international reserves, including gold, would grow to $15.4 billion by the end of 2010 and $19.2 billion next year, from $14.1 billion at the end of 2009, the IMF projected in a report issued in Washington on Wednesday.

The IMF's senior resident representative in Vietnam, Benedict Bingham, said on Thursday the projection was made under "a scenario in which the government continues to preserve the stable macroeconomic conditions prevailing in the second quarter, a scenario in which they also manage to preserve and hopefully build on the confidence that was coming into the dong at that time."

Policymakers have sought to balance growth and stability, checking inflation and a trade deficit, and bringing back some confidence in the dong, which has been devalued three times since November 2009.

The latest devaluation in August showed the fragility of Vietnam's economic stability after it was buffeted by the global crisis.

The IMF report issued in Washington was prepared before the August devaluation.

Bingham said the devaluation "underscored the continued need to consolidate macroeconomic stability and confidence in the dong. That's one of the main messages of the report."

The IMF's reserves projections were based on a definition of foreign exchange reserves used by Vietnam, which is narrower than the one used by the IMF's International Financial Statistics office.

The broader figures estimated gross reserves plus gold at $16.8 billion at the end of 2009.

The IFS this week said March's gross reserves plus gold at $14.2 billion.

By either measure, Vietnam's foreign exchange reserves dropped sharply from 2008 through the middle of this year as foreign currency inflows flagged during the global slowdown and Vietnamese switched to dollars and gold fearing the worst for their own currency.

The closely controlled dong traded for much of the second quarter of 2010 within its 3 percent band and the IMF said reserves grew to $12.9 billion by the end of May. But by July, pressure began to build anew on the currency, which economists and traders said was the result of a surge in dollar demand from loans taken when dong lending rates were high coming due.

Since the August devaluation, the dong has traded near or slightly beyond the weak end of the band.

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Vinashin told to report on debt solutions

The Government on Sept. 8 directed the State owned shipbuilding giant
Vinashin to report its existing bank credit debt and propose debt
solutions.

Vinashin must deliver the report by Sept. 13.

Deputy Prime Minister Hoang Trung Hai instructed relevant ministries
and agencies to stabilise production and operations, pay its employees
and restructure personnel.

The group's managers and
member companies conduct online meetings every week to review tasks and
to solve emerging problems. The group was instructed to provide social
insurance to its employees.

More than 5,000 Vinashin
workers, or almost 10 percent of its workforce, lost their jobs when
the company failed to pay 234 billion VND (12 million USD) in salaries
and social insurance in June.

Newly-appointed
Vinashin General Director Nguyen Quoc Anh said that Vietnam 's
shipbuilding industry had potential. He said the group was working to
overcome the hard times.

The Government Office reported that Vinashin's total debt was 86 trillion VND (4.41 billion USD) at the end of last month./.

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More Vietnamese goods head for regional markets

For the first time ASEAN has surpassed the EU in importing Vietnamese goods, reported the Ministry of Industry and Trade.

In July, Vietnam exported 6.21 billion USD worth of goods to ASEAN
while the export value to the EU was 5.98 billion USD.

Nguyen Thanh Bien, deputy minister of Industry and Trade, attributed
the EU's smaller import consumption to the debt crisis.

Export turnover to ASEAN is expected to hit 8.88 billion USD by the
end of the year while the estimated figure for the EU market will be
10.9 billion USD, according to export plans from the ministry.

Vietnam will have a difficult time boosting its exports to the
Southeast Asian block because Vietnam and ASEAN countries produce
similar, competitive commodities.

" Vietnam can
capitalise on opportunities to enhance exports to other markets via the
free trade agreements with ASEAN nations rather than approaching a
strong export growth in the block," said the ministry's multi-lateral
trade policy department director Tran Quoc Khanh.

About 13 sectors' export values were higher than 1 billion USD each
during the first eight months of the year, reported the ministry. Staple
exports include textiles and garments, footwear, wooden furniture,
seafood and coffee.

Traditional markets, including
the EU, the US , Japan , mainland China and the Republic of
Korea , continue to be the largest consumers of Vietnamese exports.

Demand fluctuations in these markets would directly impact Vietnam 's exports, said experts.

Nguyen Son, deputy general secretary of the Vietnam Textile and
Apparel Association (Vitas), said the US economy's poor performance
in July resulted in lower demand.

Nguyen Ton Quyen,
deputy chairman of the Vietnam Timber and Forest Product Association,
said Vietnam aims to earn 1.3 billion USD from wooden furniture
exports to major markets this year.

Russia ,
Eastern Europe, the Middle East, Africa and North America markets have
been difficult to penetrate, especially during the global economic
crisis.

The textile and garment industry has had
difficulty tapping into the Russian market because of the country's high
import taxes. Africa has a large amount of demand for clothing, but
enterprises have had difficulties negotiating payment methods.

Experts warned local firms about technical barriers in large markets.

New legislation in the US and the EU are likely to have an adverse impact on Vietnamese exports, said experts./.

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Vietnam 2011 trade gap seen up at $14.5 bln

HANOI - Growth in Vietnam's exports and imports is projected to slow to around 10 percent next year, and the country's trade deficit would edge up to $14.55 billion, a state-run newspaper reported on Thursday.

Exports in 2011 would rise 10 percent to $74.25 billion and imports would increase 9 percent to $88.8 billion, the online version of the Vietnam Economic Times newspaper said, citing a report by the Planning and Investment Ministry.

The trade deficit this year would be nearly $14 billion, with exports rising 18.2 percent and imports up 16.5 percent, the report said, after a gap of $12.25 billion in 2009.

The International Monetary Fund has forecast Vietnam's exports would grow 16.9 percent next year after rising 14.5 percent in 2010, while imports would increase 14.3 percent in 2011, slowing from an expansion of 16.2 percent projected for this year.

The MPI report to a cabinet meeting projected economic growth of 7-7.5 percent for 2011, average inflation of under 8 percent and a slightly weaker exchange rate of VND20,000 per dollar, the newspaper reported.

It did not specify the exact timing for the exchange rate and stopped short of saying if the rate was for the unofficial markets or in interbank transactions, which stood at VND19,480/19,500 on Thursday.

The government has projected inflation next year at 7 percent and economic growth would accelerate to 7.5 percent, from an expansion of 6.7 percent expected for this year.

On Aug 18 the central bank cut the dong exchange rate by around 2 percent against the dollar, saying the move was to help control the trade gap.

The devaluation of the dong reference rate was the third since last November by the State Bank of Vietnam.

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More counterfeit products flood Vietnamese market

Photo: AFP

The production and trade of fake products was becoming increasingly common, said Deputy Minister of Industry and Trade Nguyen Cam Tu.

Many officials agreed with the deputy minister that fake products were pervasive during a meeting which has been held to review the Prime Minister's direction No 28/2008/CT-TTg to fight the production of counterfeit goods.

Fake products are available across the country in urban centres and in rural markets.

Counterfeit goods are produced with sophisticated methods and modern technology, which makes it hard for consumers to distinguish between fake and genuine products, reported the Vietnam Fake Production Prevention and Trademark Protection Association.

Fake wine accounts for 20 to 50 percent of the market share.

Popular methods of marketing fake products include producing counterfeit registered trademarks. Production can include the use of low-quality materials mixed with genuine products.

Modern technology gives producers of fake goods the opportunity to sell well-forged products, including official-looking wrapping and labeling.

However, the lack of a legal framework and technology to evaluate products, and ineffective co-operation between relevant ministries and agencies makes it difficult for authorized agencies to stamp out the production and trade of counterfeit products, according to the association.

"The lack of comprehensive cooperation by relevant agencies and essential tools to conduct their work hinders the fight against counterfeit products," said Chairman of the Vietnam Anti-Fake Production and Trademark Protection Association Le The Bao.

Meanwhile, businesses themselves paid little attention to protecting their products with registered trademarks, he said.

The association proposed the Ministry of Justice to give Market Watch groups the power to punish violators to help improve the situation rather than keeping that capacity solely with chairmen of local People's Committees which is currently the case, he said.

"Businesses should actively work with authorized agencies to protect their trademarks," Bao added.

Deputy Minister Tu proposed the establishment of a decree on punishing producers and traders of fake products.

It was also essential to review and finalize all legal regulations against counterfeit and low-quality products and supplement the regulations on prosecuting violators, he said.

"Increasing information dissemination to raise public and business awareness about protecting their legal rights is also important," he added.

During the first six months of the year, market watch forces nationwide handled nearly 41,000 violation cases, according to the Ministry of Industry and Trade.

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Economists cut U.S. growth forecast again

Projected US economic growth for the rest of this year and next was revised down for a third month in a row by a panel of about 50 economists.

The latest Blue Chip Economic Indicators report Thursday said the weaker outlook for second-half 2010 growth stemmed from lower expectations for consumer spending, business investment and private construction.

"Growth in the current quarter now is expected to be little better than the disappointingly soft advance registered last quarter," the survey said. Gross domestic product grew at a meager 1.6 percent annual rate in the second quarter, less than half the first quarter's 3.7 percent rate.

But the economists' group said that, after the mid-year soft patch, it saw a gradual improving trend setting in with growth slightly surpassing trend rate in the second half of 2011.

Blue Chip defines GDP trend growth at about 2-3/4 percent a year.

"For all of 2010, real GDP now is forecast to increase 2.7 percent on a year-to-year basis, 0.2 of a percentage point less than a month ago and 0.6 of a point less than predicted in June," the survey said.

Its consensus forecast for real GDP growth in 2011 was cut by 0.3 of a percentage point from a month ago to 2.5 percent.

"Given the depth of the recession, a forecast of roughly trend growth this year and next amounts to a very disappointing pace of recovery, with little progress expected to be made in lowering the unemployment rate," the forecast said.

Its consensus forecast is that the U.S. unemployment rate will end this year at 9.6 percent and fall only to 9 percent by the end of 2011.

It forecast that after averaging 554,000 new housing units in 2009, starts this year will rise to 600,000 and to 760,000 units in 2011. "Although residential investment appears destined to subtract from GDP in the second half of this year, double digit growth is expected by early 2011, with rates of growth over 30 percent by the second half," Blue Chip said.

The economists said they expect short-term interest rates to remain very low before starting to rise next summer. They said the Federal Reserve -- the U.S. central bank -- likely will keep the federal funds rate at its current range of zero to 0.25 percent through mid-2011, finally raising it to 0.75 percent by the end of 2011.

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South Korean businesses focus on Vietnam

Photo: Reuters

Businesses from the South Korea see Vietnam as a promising market for their investments and intend to maintain their position as Vietnam’s number one foreign investor.

The Director of the ASEAN- Korea Center (AKC) for Planning and Development, Jae Hyun Cho stated this at a workshop on trade and investment between Vietnam-South Korea in Hanoi Wednesday.

Jae Hyun Cho is leading a delegation of 23 RoK leading enterprises that operate in agricultural machinery, forestry, seafood and foodstuffs, on a fact-finding tour of Vietnam from September 7-10 to seek out business and investment opportunities.

Investment and trade ties have developed steadily between Vietnam-RoK since Vietnam introduced the Law on Foreign Investment in 1988. The RoK has invested in nearly 2,600 projects, with a total registered capital of over US$23 billion in Vietnam.

The Deputy Trade and Industry Minister Le Duong Quang, said that businesses from the RoK, who are often amongst the top three foreign investors in Vietnam, have made their presence felt in property and infrastructure, ship building, electricity and electronics.

Despite the negative impacts of last year’s global economic crisis, bilateral trade between Vietnam and the RoK reached $9 billion in 2009 and is expected to climb to $20 billion in 2015.

At the workshop, the Director of the Foreign Investment Agency under the Planning and Investment Ministry, Do Nhat Hoang, pledged to continue supporting RoK investors to do business in Vietnam, to boost trade and investment between the two countries.

Hoang also called on RoK businesses to continue investing in Vietnam, especially in agriculture, agricultural machinery and forestry, in order to retain its position as one of Vietnam ’s leading investors.

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