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BUSINESS IN BRIEF 16/10   2010-10-16 - VNS

VN banks heed call to lower interest rates

Several commercial banks yesterday began lowering their deposit interest rates by 0.2 percentage points to 11 per cent per year in compliance with an agreement made between the Viet Nam Banking Association (VNBA) and the State Bank of Viet Nam.

The agreement, which took effect yesterday, requires banks to cut interest their rates to no more than 11 per cent, instead of 11.2 per cent. The move is designed to get banks to cut capital input costs as well as help enterprises access credit.

Asia Commercial Bank was the first bank to apply the new interest rate on 36-month deposits. Interest rates for one-week to 24-month deposits now range from 9.9 to 10.88 per cent per year, but the bank is also offering depositors a cash bonus equal to 0.15 per cent of their primary deposit.

Late yesterday afternoon, Sacombank, Habubank, Eximbank, SeABank, and HDBank got in line, cutting deposit interest rates by 0.2-0.3 percentage points to 11-11.1 per cent per year.

HDBank acting general director Nguyen Huu Dang said that if depositors expected high returns, lowering the interest rates offered on deposits would not enable banks to absorb excess capital.

Expressing a similar concern that capital would be directed away from banks and towards higher-yield investments, the deputy director of a HCM City-based bank said, on condition of anonymity, "We must comply with the agreement. However, banks may become involved in a promotional war to attract depositors if new interest rates do not meet customer expectations."

VNBA general secretary Duong Thu Huong said that further interest rate cuts would be executed with prudence with respect for market behaviour and the depositor expectations as inflationary pressures continued to grow during the final months of the year.

Taiwan shares experiences in IT

Taiwanese experts shared experiences in IT development with their Vietnamese counterparts at a seminar held in the city on Thursday.

Participants said the quality of information technology products in the country should be improved through close co-operation between the factory and the research and development (R&D) departments. This also needed supporting policies from the Government, they said.

The seminar, themed "Integration quality for IT products", was organised by the HCM City’s IT Press Club and the Taiwan External Trade Development Council (TAITRA).

"We’d like to share our practical experiences in developing the IT industry with local enterprises," said Tso Wei Dar, chief representative office of TAITRA to Viet Nam.

The IT industry had developed steadily over the last 20 years, but it had to overcome initial failures in localisation, the seminar heard.

"The result is that most of local companies import accessories, install and put Vietnamese brandnames on them. Right now, we don’t have a real IT industry, except for a small group of enterprises who are trying to make Vietnamese computers," said Pham Thien Nghe, general secretary of the HCM City Computers Association.

Other reasons restricting development of the industry were the small investment in relevant R&D and the lack of co-operation between enterprises and institutions.

"All these have made the industry stagnate at an initial stage," said Ngo Van Vi, general director of Viettronics Tan Binh (VTB)

Tso Wei Dar shared at the seminar his thoughts on how Taiwan was able to solve such problems.

"Our research institutions have a duty to meet development requirements from enterprises. They will provide what enterprises need with financial support from authorities. It is a close co-operation," he said.

Tso also emphasised the vital role of R&D for each company.

"To create each company’s product, enterprises should pay attention to their own R&D initiatives," he added.

Last year, Viet Nam exported IT goods and services worth US$2.8 billion, mostly through FDI enterprises, and imported $4.5 billion for computers, electronic accessories and products.

Insurance proves lucrative for investors

Investment-linked insurance operations are proving lucrative as firms gain greater premiums, while the number of contracts is on the rise.

According to the Department of Insurance Management and Supervision, firms had grown significantly over the last few years by exploiting investment-linked insurance.

Last year, life-insurance firms signed 135,223 investment-linked contracts, an increase of 116 per cent compared with 2008. Total revenue from this type of insurance was worth VND1.136 trillion (US$582.5 million), accounting for 9.6 per cent of the total revenue and an increase of 5.1 per cent in comparison with 2008.

The average premium of each contract was VND6.33 million ($325) – VND2.16 million ($110) higher than traditional product premiums of VND4.17 million ($214).

Phung Dac Loc, general secretary of the Viet Nam Insurance Association, said although it was considered a newly born product, investment-linked insurance had earned profits for investors through offering traditional benefits while catching up with current development trends in the securities and real estate markets.

He also said investment-linked insurance was aimed at investors interested in securities that offered less risk, while generating more profit than leaving money idle in commercial banks.

Investment-linked insurance is in essence a product that combines demand and savings protection.

Landlords fight for new tenants

Landlords in HCM City will vie with each other during the third quarter in offering better leasing deals including rent and amenities, according to the latest market review published by real estate firm CBRE.

The firm received 28 per cent more enquiries in the third quarter than the second, but more than 43 per cent of these were for spaces 150 sq.m and smaller, the review says.

The company estimates that around 1.2 million square meters of office space will be put in use over the next three years in the city.

Project owners will face a challenge from long-term tenants of large areas who plan to re-rent a part of their space at prices between 15-35 per cent lower than the standard ones, CBRS associate director of research and consulting Rudolf Hever, said at a press conference on Monday.

He also said (2,000-5,000sq.m) grade C buildings in prime locations would continue to be popular because their value and long-term lease would help tenants have greater control over their investment.

There were no new grade A office buildings on offer during the third quarter, but rents for the segement reduced lightly to a monthly average of US$36.7 per sq.m, which Hever said was due to higher demand for grade B and C spaces.

One grade B building and eight new grade C buildings came on line in the third quarter, providing a total of 63,180sq.m.

Vinaincon to auction nearly 9m shares

Viet Nam Industrial Construction Corp (Vinaincon) will auction 8.87 million shares to the public on November 9 on the Ha Noi Stock Exchange, the bourse has announced.

The company, which has a charter capital of VND550 billion (US$28.20 million), operates in the fields of design and consultancy, equipment supply, civil and industrial construction, power substation construction and transmission line installation.

The shares represent 16 per cent of its capital and each will have a starting price of VND10,900. More than 4.9 million shares will be offered to the company’s employees while the state will retain a 75-per-cent stake.

"The capital raised through the auction will be used to increase the firm’s charter capital and expand its business activities, particularly to invest in its cement factory in the northern province of Thai Nguyen," said Ngo Duc Cuong, a member of Vinaincon’s finance and accounts department.

"However, the listing timetable on the domestic stock exchange has not yet been determined," Cuong said.

Last year, Vinaincon posted a revenue of VND3.32 trillion ($170.66 million). This year, it is projected to earn a revenue of VND3.67 trillion ($188.20 million).

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