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BUSINESS IN BRIEF 18/10   2010-10-18 - VNS

Soft drinks imported despite local products

Softdrink maker Coca-Cola has three factories in the country, but around US$900,000 has been spent since the beginning of this year to import the drink, according to the HCM City Customs Department.

No Coca-Cola products were imported into Viet Nam last year.

Martin Gil, general director of Indochina Coca-Cola and chief representative of the brandname in Viet Nam, said consumption of their products in the local market was growing faster than expected, so several firms chose to import some to meet demand.

The three Coca-Cola plants in the country produce a total of 608 million litres and the company is installing two more production chains in its factories in Ha Noi, and upgrading facilities in HCM City and Da Nang.

"The imports will be fully stopped at the end of next year when we complete improvement of our production capacity," Gil told the Tuoi Tre (Youth) newspaper.

In fact, imported soft drink is much cheaper than local products. Each imported box of Coca-Cola costs around VND80,000 ($4) (after taxes), half the retail price in the domestic market.

Apart from Coca-Cola, the Red Bull energy drink is also imported from Thailand, despite the fact that it is also produced in Viet Nam.

Call to boost faith in dong

Viet Nam should expend more effort in raising people’s confidence in the dong, while co-operating with neighbouring countries on resolving overuse of foreign currencies, the Asian Development Bank said in its latest study.

"Dealing with dollarisation and multiple currencies is ultimately an issue of national economic policy, and in this regard, Viet Nam has made good progress in de-dollarisation," Ayumi Konishi, ADB Viet Nam country director said at the book’s launch in Ha Noi last Friday.

"Yet, authorities, especially the State Bank of Viet Nam, are fully aware that administrative measures alone will not be effective."

In order to de-dollarise the Vietnamese economy, it is essential to enhance people’s confidence in the Vietnamese dong through sustainable and high economic growth, stabilisation of the foreign exchange rate, reforms in monetary policies, and by strengthening the capacity of financial institutions, the ADB representative said.

The study shows other countries’ currencies, particularly the US dollar, are in wide use in the three Indochinese countries – Laos, Cambodia and Viet Nam.

In Viet Nam, about 20 per cent of all currencies in circulation are foreign; in Laos the figure is 50 per cent; while in Cambodia it is 90 per cent.

The study highlighted the costs and benefits of dollarisation. On the plus side, dollarisation can impose discipline on governments since they cannot easily finance budget shortfalls by printing money. In addition, if dollarisation leads to a near fixed exchange rate, prices can be less volatile.

However, the use of multiple currencies reduces the control of economic authorities over monetary and exchange rate policies. It also restricts the power of central banks to act as "the lender of last resort" in the event of a banking crisis, the study said.

"Dollarisation blunts the tools for macroeconomic stabilisation, especially monetary and exchange rate policy, that a country like Viet Nam needs in order to tackle a variety of economic and developmental challenges, such as rising inflation," the book’s co-editor Jayant Menon, principal economist at ADB’s Office of Regional Economic Integration, said.

Demand for essential goods to increase

Demand for 12 essential goods items is forecast to increase next year, including for steel, cement, oil products and coal.

Based on Viet Nam’s economic growth expectations from 2011-15, the Ministry of Industry and Trade estimated demand for steel products to increase 8-10 per cent to 12.5-12.8 million tonnes in 2011.

The demand for cement next year was predicted to go up by 10 per cent to 55-56 million tonnes while total output to reach 60 million, thus meeting demand and keep price stable.

Demand for petrol and oil productswas forecast to be 17 million tonnes next year, to be met by 6 million tonnes of domestic production and 11.6 million tonnes of imports.

The nation would balance the demand for 44 million tonnes of coal by producing 47.3 million tonnes, the ministry said.

Paper demand would increase to 2.35 million tonnes next year, to be met by 1.77 million produced locally and 700,000 tonnes from imported.

The nation’s consumption of 28 million tonnes of rice in next year would be supplied by the expected harvest of 31.6 million tonnes.

The demand on medicine, food and fertiliser was also expected to increase next year.

Meanwhile, Prime Minister Nguyen Tan Dung has called on ministries, agencies and municipal and provincial authorities to implement strategies to stabilise the market and boost production.

Directive No1875/CT-TTg, released last week was designed to ensure the country’s growth rate reaches 6.5 per cent, while the consumer price index did not rise above 8 per cent.

Dung said the economy, which typically suffers during the final months of the year, would also have to weather capital shortages, rises in the price of essential goods, power shortages and potential animal epidemics.

Foreign buys salvage market

Strong performances by a few blue chips saved the markets from a substantial decline last week, but trading remained sluggish on the nation’s stock exchanges.

Strong buys by foreign investors helped lift shares like insurer Bao Viet Holdings (BVH), which gain 7.5 per cent on the week. Software giant FPT, real estate developer trader Hoang Anh Gia Lai (HAG), Phu My Fertilisers (DPM), and PetroVietnam Construction (PVX) all had solid volumes boosted by foreign investor interest.

FPT Securities Co analyst Le Quang Vinh said that blue chips were serving as a mainstay for the stock markets, able to lure a few long-term investors and with the potential to ignite a rally if there were a substantial easing in monetary policies or a major positive shift in economic data to reassure domestic investors unsettled by volative exhange rates, gold prices and inflation data.

The Ministry of Industry and Trade has forecast the monthly October inflation rate (CPI) to reach a manageable 0.5 per cent. But, at the middle of last week, the Government asked the State Bank of Viet Nam (SBV) to detail a plan for commercial banks to tighten monetary supplies in an effort to further stem inflation in the final quarter.

Several commercial banks, including Asia Commercial Bank, HDBank, Sacombank, Habubank and Eximbank, last Friday began lowering deposit interest rates to 11 per cent per year in compliance with an agreement between the Viet Nam Banking Association and the SBV aiming to cut capital input costs and help enterprises access credit.

Despite all these official efforts to reassure investors, the VN-Index closed out last week down by just 0.19 per cent from the previous Friday to 459.39 points, while the value of trades remained anaemic on the HCM City Stock Exchange, falling by 32.8 per cent from the previous week to a daily average of just VND635 billion (US$32.6 million), with an average volume of only 24.4 million.

Meanwhile, on the Ha Noi Stock Exchange, the HNX-Index finished off a more substantial 1.64 per cent to close at 119.69 points. Average values fell 30 per cent to VND421.7 billion ($21.6 million), on an average daily volume of only 18.9 million shares.

Foreign investors remained net buyers on both exchanges, by picking up VND375 billion ($19.2 million) worth of shares.

Pham Binh, head of analysis at PetroVietnam Securities Co, said weak market sentiment reflect the diminished expectations of domestic investors and forecast that the VN-Index would continue to range this week between 440 to 469 points, while the HNX-Index could fall as low as 117.

Vinh suggested investors keep an eye on this week’s Government instruction on price stabilisation and its impact on market sentiment.

Vietcombank cuts interest rates

The Joint Stock Commercial Bank for Foreign Trade of Viet Nam (Vietcombank) reduced lending interest rates by up to 1 per cent and deposits by 0.2-0.3 per cent from last Saturday.

The new lending interest rate stood at the lowest of 11.5 per cent while the new deposit rates were between 10.5 per cent and 11 per cent for the three-, six-, nine- and 12-month terms.

City expo displays Taiwanese ICT

Seventeen Taiwanese information and communication technology (ICT) brands presented their latest products last Saturday at the Tan Binh Exhibition&Convention Centre.

The Taiwan ICT Day offered gifts and discounts on several popular ICT products from the territory, including Asus, A-Data, Genuis, BenQ and MSI.

The event was part of the Taiwan Excellence campaign which runs until December to promote innovative and high-quality ICT products made in the territory.

Six licences for industrial projects

Quang Ngai Industrial Park Management Board granted licences for six projects with a registered capital of VND400 billion (US$20.5 million) for the first nine months of this year.

This brings the total projects in the province to 81, with a total registered capital of VND4.2 trillion.

The board also granted 30 certificates of origin for companies in the industrial zone.

More international flights planned

Vietnam Airlines will open five more international flight routes from Da Nang City to Hong Kong, Taipei, Seoul, Guang Zhou and Singapore.

There will be one flight per week to and from Taipei, two flights per week for travel to and from Hong Kong, Guang Zhou and Seoul, and four flights per week to and from Singapore.

This increase is expected to welcome 1,000 passengers each week.

Interbank transaction turnover down

Turnover transactions in the interbank market tumbled last week, said the State Bank of Viet Nam.

The average interest rate on interbank transactions dropped slightly in a one-month-term and for non-term deposits. The rate increased slightly for all terms in total from 1 to 3 per cent.

Citibank widens retail banking

Citibank Viet Nam has expanded its retail banking operations by opening a new branch and launching Citigold, the wealth management offering in Ha Noi.

The new outlet, equipped with innovative Smart Banking technology, enables Citibank to serve individuals in Ha Noi.

The launch complements Citibank’s first retail branch in HCM City that opened last year.

Other news

Powder milk prices sky high because of unhealthy competition   2010-10-18

Doubts raised over plan to hire state capital representatives   2010-10-18

Viet Kieu begin to invest in VN property market   2010-10-18

Banking sector thriving, production sector facing big difficulties   2010-10-18

Ford: it’s not the right time to make big investment in Vietnam   2010-10-18

Doubts raised over plan to hire state capital representatives   2010-10-18

Powder milk prices sky high because of unhealthy competition   2010-10-18

Interest rates sky high, businesses feel anxious as Tet nears   2010-10-18

BUSINESS IN BRIEF 17/10   2010-10-17

ADB urges multi-national effort against “Dollarisation”   2010-10-17

Antidumping tariffs drag this year’s tra fish export target   2010-10-16

Low-tech cement factories cause burden to energy supply   2010-10-16

Recent price increases raise inflation jitters   2010-10-16

BUSINESS IN BRIEF 16/10   2010-10-16