Vietnam must address concern dong may slide: IMF

Vietnam must work to address expectations its currency will depreciate further, according to the International Monetary Fund’s representative in the country.

The Southeast Asian nation faces an “embedded expectation of a declining trend in the dong,” Benedict Bingham, the IMF’s senior resident representative in Hanoi, said in prepared comments for a presentation. It was delivered at a seminar in Ho Chi Minh City on Sept. 21 organized by a National Assembly committee, and posted on the IMF’s website this week.

Vietnam’s central bank devalued the dong last month for the third time in the past year, citing the need to curb the trade deficit. Further pressure on the currency “would be negative” for financial stability, Fitch Ratings said in July when it lowered the nation’s debt rating.

The state of the country’s foreign-exchange market has “undermined confidence in the dong” in part because it has “increased transaction costs and uncertainty for Vietnamese businesses,” Bingham said. The currency market has also “impaired Vietnam’s standing among international investors,” he said.

The State Bank of Vietnam weakened the dong’s reference exchange rate by 2 percent on Aug. 18 to 18,932 per dollar. The currency can fluctuate 3 percent on either side of the figure.

Concerns about an overheating economy, the balance of payments and a high inflation rate will probably “keep the currency under stress,” Capital Economics Ltd. analysts said in a research note sent yesterday, predicting an exchange rate of 20,400 per dollar by the end of 2011.

The Vietnamese have shifted from dong to US dollar assets or into gold because of expectations of dong devaluations, the IMF said in a report this month.

Vietnam’s financial system has faced excessive volatility, Bingham said. A lack of transparency has hurt confidence in the country’s macroeconomic management, partly due to a reluctance to adjust the central bank’s benchmark interest rate, he said. The benchmark was left unchanged at 8 percent for the ninth consecutive month in September.

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Vietnamese inflation quickened in September to 8.92 pct

Vietnamese inflation accelerated for the first time in six months as food and education costs rose, signaling the government may have less scope to push for lower lending rates to bolster the economy.

Consumer prices climbed 8.92 percent in September from a year earlier, compared with an 8.18 percent advance in August, according to figures released Friday by the General Statistics Office in Hanoi. The reading is the highest since May. Prices rose 1.31 percent in September from the previous month.

Prime Minister Nguyen Tan Dung’s government is targeting a 25 percent expansion in credit this year and 6.5 percent economic growth, even as inflation has held above its 8 percent goal for eight consecutive months. Today’s data may fan concerns that the drive to increase loans and a recent devaluation of the dong conflict with price stability.

The latest inflation figure is “surprisingly high, even though we had expected greater price pressures this month as the effect of the dong’s devaluation kicked in and world commodity prices rose,” Hai Pham, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd., said in a note. “We are concerned about high inflation becoming more entrenched in the coming months.”

The State Bank of Vietnam weakened the dong’s reference exchange rate by 2 percent last month, citing the need to narrow the trade deficit.

‘Weak currency’

The dong traded at 19,490 per dollar at 1 p.m. in Hanoi from 19,099 before the devaluation was announced. The Ho Chi Minh City Stock Exchange’s VN Index fell 0.2 percent today to 449.71, and is down 9.1 percent this year.

“Vietnam’s expansionary fiscal and monetary policy are resulting in a weak currency and high inflation,” said Jonathan Pincus, a Ho Chi Minh City-based economist with the Vietnam Program at the Harvard Kennedy School. “Unless we see evidence of tighter policy, we would expect prices to continue to rise.”

The government has been urging commercial lenders to cut loan rates. The central bank said this month short-term lending rates in dong ranged from 12 percent to 15 percent, and that credit growth reached 16.3 percent in the first eight months of 2010 from the end of last year.

While the government is concerned that high lending rates could affect industrial activity, “premature” monetary loosening may cause a “deterioration” in the trade deficit and boost inflation, the International Monetary Fund said in a report this month.

Overall food prices gained 10.81 percent in September from a year earlier, while costs in a category including rice advanced 14.01 percent, today’s report showed. Education prices jumped 15.56 percent from a year ago, and surged 12.02 percent from August.

“The lofty rise in education” largely reflects an increase in tuition costs as well as back-to-school spending, Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co., said in a note.

Economic growth may reach 6.7 percent this year, exceeding the government’s target, Deputy Minister of Planning and Investment Cao Viet Sinh said on Sept. 17.

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Telecom firms top list of corporate tax payers

Telecom giants MobiFone and Viettel have headed the top ten list of Vietnamese companies with the highest corporate income tax payments from 2007 to 2009, news website VnExpress reported Friday.

MobiFone, run by state-owned Vietnam Posts and Telecommunications Group, paid a total corporate income tax of nearly VND6 trillion over the period, followed by military-run Viettel, the report said.

VnExpress said it was a surprise that the two telecom firms topped the list, instead of large banks or the state oil and gas group PetroVietnam.

“The results show that telecom was the most lucrative sector over the past three years,” the report said, noting that both MobiFone and Viettel posted an average growth rate of 70-80 percent a year despite the economic downturn.

Together the companies in the top ten list paid a combined VND25.8 trillion in taxes. PetroVietnam Gas, Vietcombank and PetroVietnam were other companies making up the top five.

The figures were compiled by Tax Magazine, run by the General Tax Bureau, and VnExpress said they were confirmed by an official of the bureau.

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Telecom firms top list of corporate tax payers

Telecom giants MobiFone and Viettel have headed the top ten list of Vietnamese companies with the highest corporate income tax payments from 2007 to 2009, news website VnExpress reported Friday.

MobiFone, run by state-owned Vietnam Posts and Telecommunications Group, paid a total corporate income tax of nearly VND6 trillion over the period, followed by military-run Viettel, the report said.

VnExpress said it was a surprise that the two telecom firms topped the list, instead of large banks or the state oil and gas group PetroVietnam.

“The results show that telecom was the most lucrative sector over the past three years,” the report said, noting that both MobiFone and Viettel posted an average growth rate of 70-80 percent a year despite the economic downturn.

Together the companies in the top ten list paid a combined VND25.8 trillion in taxes. PetroVietnam Gas, Vietcombank and PetroVietnam were other companies making up the top five.

The figures were compiled by Tax Magazine, run by the General Tax Bureau, and VnExpress said they were confirmed by an official of the bureau.

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AIG flags $2 bln pre-tax profit for AIA in 2010

Photo: Reuters

HONG KONG - AIA Group Ltd, the Asian life insurance business of American International Group Inc, will likely have a pre-tax operating profit of at least US$2 billion for the fiscal year ending on Nov. 30, 2010, AIG said on Saturday.

"We believe that, in the absence of unforeseen circumstances, and, on the bases and assumptions set forth below, our consolidated operating profit for the fiscal year ending 30 November 2010 is unlikely to be less than $2 billion," the statement said.

The bailed-out U.S. insurer plans to list AIA in Hong Kong and the initial public offering could raise about $15 billion, which would make it the biggest-ever insurance IPO and a record offering in Hong Kong.

The profit forecast comes ahead of pre-marketing of the IPO which kicks off on Monday to gauge demand for the offer. The roadshows will begin on Oct. 6, while the listing is scheduled for Oct. 29.

AIA's planned IPO comes after AIG tried unsuccessfully to sell its Asian business earlier this year to Britain's Prudential Plc for $35.5 billion. The British insurer had asked AIG to cut the price to $30.4 billion, but it was turned down, leading to the termination of the agreement.

Hong Kong-based AIA had about $1.84 billion in pretax operating profit in 2009, Prudential said in a March filing.

AIG, which is nearly 80 percent owned by the US government, is disposing of assets to repay taxpayers who committed $182.3 billion to prop up the insurer during the financial crisis.

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AIG flags $2 bln pre-tax profit for AIA in 2010

Photo: Reuters

HONG KONG - AIA Group Ltd, the Asian life insurance business of American International Group Inc, will likely have a pre-tax operating profit of at least US$2 billion for the fiscal year ending on Nov. 30, 2010, AIG said on Saturday.

"We believe that, in the absence of unforeseen circumstances, and, on the bases and assumptions set forth below, our consolidated operating profit for the fiscal year ending 30 November 2010 is unlikely to be less than $2 billion," the statement said.

The bailed-out U.S. insurer plans to list AIA in Hong Kong and the initial public offering could raise about $15 billion, which would make it the biggest-ever insurance IPO and a record offering in Hong Kong.

The profit forecast comes ahead of pre-marketing of the IPO which kicks off on Monday to gauge demand for the offer. The roadshows will begin on Oct. 6, while the listing is scheduled for Oct. 29.

AIA's planned IPO comes after AIG tried unsuccessfully to sell its Asian business earlier this year to Britain's Prudential Plc for $35.5 billion. The British insurer had asked AIG to cut the price to $30.4 billion, but it was turned down, leading to the termination of the agreement.

Hong Kong-based AIA had about $1.84 billion in pretax operating profit in 2009, Prudential said in a March filing.

AIG, which is nearly 80 percent owned by the US government, is disposing of assets to repay taxpayers who committed $182.3 billion to prop up the insurer during the financial crisis.

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North in deficit as south runs surplus

Hanoi's trade deficit reaches nearly US$10 billion, while Ho Chi Minh City reaps a trade surplus of about $300 million in the first nine months of this year, statistics offices in the two cities stated.

In Hanoi, the trade deficit almost doubles the export value, the statistics office reports, adding that in the first nine months of this year, the city is expected to earn an export revenue of $5.5 billion, a year-on-year increase of 19.5 percent.

Meanwhile, the import value rises by 18.2 percent to $15.5 billion.

In September alone, Hanoi's trade gap is predicted to hit $1.08 billion, up $70 million over August. Export revenue is expected to drop 0.3 percent against the previous month to $680 million, while import turnover is expected to rise 1.3 percent to $1.76 billion.

“It is easy to understand why Hanoi has a big trade gap. It is a large developing city with a high demand for machinery, equipment, accessories and materials for construction projects," said an official from the statistics office's trade section.

She, however, added that in the first nine months of the year, huge sums are spent on imported luxury goods such as cars, wine, cigarettes and interior furnishings.

The Hanoi Statistics Office earlier forecast that the capital would suffer a trade deficit of $13.8 billion in 2010, with exports earning just $7.6 billion and imports $21.4 billion.

From January to September 2010, HCMC's import turnover is estimated to reach nearly $15.5 billion, a year-on-year increase of 12.6 percent. Its export value is predicted to reach $15.8 billion, representing a year-on-year increase of just 1 percent.

In the coming months, export turnover should rise as market demand would typically rise in the last months of the year, the city's Statistics Office stated. Although HCMC experiences a trade surplus, the office reports that exporters are encountering persistent difficulties.

Officials said the price of raw materials is increasing, which would affect exporters' competitiveness. They also said the city is suffering a shortage of skilled workers and that some industries are facing material shortages, both of which are hitting exports.

In September alone, the city's export revenue month-on-month drops 9.7 percent to $1.7 billion.

Meanwhile, the decrease in gold and crude export volumes also contributed to the fall in the city's total export value, officials said.

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