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Vietnam's Economic Troubles Deepen
http://www.voanews.com/english/news/...112373754.html

Vietnam's economic troubles have deepened as its sovereign credit rating has been lowered by a global rating agency for the second time this month.

Standard and Poor's Ratings Services announced Thursday that it was lowering Vietnam's long-term rating by one notch to BB minus, putting it on the same level with Bangladesh and Mongolia.

Moody's Investors Service took similar action eight days ago, citing the risk of a balance-of-payments crisis and problems at the state-owned ship-building company Vinashin.

The lower rating makes it more difficult and more expensive for Vietnam to borrow money abroad.

Standard and Poor's said it was acting because Vietnam's banking system has become more susceptible "to a financial or economic shock." It said the country's long-term outlook is negative, meaning its rating could be lowered further in the future.

Moody's said last week that Vietnam's problems result from "shortcomings in economic policies" that are "resulting in ongoing macroeconomic instability."

It said the government has been too slow to tighten its monetary policy after having successfully stimulated its economy during the global economic crisis.

Moody's said Vietnam's debt problems reduce its ability to support state-owned enterprises like Vinashin, which came to the brink of bankruptcy earlier this year with $4.4 billion in debt. The company was unable to make a $600 million payment due on Monday and is asking its creditors to reschedule the debt.
Vinashin was once promoted as a prime example of Vietnam's economic liberalization, enjoying rapid growth and expanding into areas ranging from animal feed production to tourist resorts.

Its chairman was suspended in July and later arrested on charges of having ignored state regulations on economic management. Six other former top executives of the company also face charges.

Vietnam shipbuilder Vinashin defaults on loan: report
http://www.google.com/hostednews/afp...06a9aef599.3f1
By Ian Timberlake (AFP) – 2 days ago
HANOI — Nearly-bankrupt Vietnamese shipbuilder Vinashin has defaulted on a loan to international lenders and told them it will pay only interest, the Wall Street Journal reported Friday.
Citing a person familiar with the matter, the paper said Vinashin (Vietnam Shipbuilding Industry Group) did not meet a deadline earlier this week to pay the first 60 million dollar instalment on a 600 million dollar loan arranged by Credit Suisse in 2007.
However, the paper's source called it "positive" that the state-owned company was willing to pay interest.
Vinashin has agreed to meet creditors in mid-January to discuss repayment of the loan principal, the source said.
A Vinashin spokesperson declined comment to AFP on the report.
Company chairman Nguyen Ngoc Su was quoted in official media on Monday as saying the firm had no way to immediately make the payment and was "still waiting for the final answer" on a request to defer it for 12 months.
The government has said Vinashin must settle its own debts -- which total at least 86 trillion dong (4.4 billion dollars).
Despite those comments, speculation has grown that the government would step in to help Vinashin.
On Wednesday a Vietnamese newspaper reported that Hanoi had granted tax concessions to Vinashin, after speculation authorities would find a way to help the firm meet its debt deadline.
Among the concessions, the state-owned firm will get a grace period until December 31, 2011 for paying its taxes, Tuoi Tre reported, citing the Ministry of Finance.
State-linked Tuoi Tre did not give the amount of tax involved or the period it was due for.
The one-year delay coincided with the deferral Vinashin had reportedly sought for repayment of its international debts.
One foreign analyst said Wednesday that he thought the tax concessions were the government's way of indirectly bailing out the firm amid concerns of wider economic impact from the Vinashin case.
Global ratings agency Standard & Poor's on Thursday lowered Vietnam's sovereign credit rating, the country's second downgrade by an international agency in recent days.
S&P raised concerns about Vietnam's banks as it lowered the long-term foreign currency sovereign credit rating to BB- from BB, while the local currency rating dropped to BB from BB+, with a negative outlook.
Bonds in all of these categories are considered speculative, or junk bonds.
"The ratings downgrade reflects Standard & Poor's assessment of a greater susceptibility of Vietnam's banking system to a financial or economic shock," the firm's credit analyst, Kim Eng Tan, said in a statement.
In separate comments to AFP, Tan said troubles at Vinashin "contribute to the uncertainties affecting the banking sector" but were not by themselves a key factor in the downgrade.
On December 15 Moody's Investors Service downgraded Vietnam's government bond rating to B1 from Ba3, maintaining a negative outlook.
It cited the risk of a balance of payments crisis, rising inflation and the debts of Vinashin.
Moody's said a default on Vinashin's foreign obligations would likely damage the ability of the country to raise affordable foreign market financing for its still largely unmet infrastructure needs.

Vietnam, Ukraine enhance economic and trade links
http://english.vovnews.vn/Home/Vietn...012/122610.vov
The Vietnam-Ukraine Inter-Governmental Committee for Economic, Commercial, Scientific and Technological Cooperation held its 11th session in Hanoi on December 23 with a view to boosting bilateral trade ties.
The two sides compared notes on economic, commercial, scientific and technological cooperation and development, with a focus on investment, industry, transport, energy, construction, and supporting small and medium-sized enterprises.

They briefed each other of the socio-economic status in their respective countries in the context of the global economic downturn, praised the outcomes of agreements reached from the previous sessions, and discussed specific ways of ironing snags to further enhance cooperation between the two countries.

In recent times, most Ukrainian familiar products have not been seen in the Vietnamese market because of tough competition against those from other countries. Consequently, Vietnam has asked Ukrainian businesses to renew their product designs and management to sharpen the competitiveness.

Vietnam mainly exports agro-forestry-aquatic products, garments and textiles, footwear, coffee, pepper, rice to Ukraine while importing wheat, fertiliser, iron & steel and machinery and equipment.

Over the past 10 months, total two-way trade turnover reached more than US$205 million in which, Vietnam exported US$96.2 million worth of goods to Ukraine and its import turnover hit US$109 million.

Deputy Minister of Industry and Trade, Le Danh Vinh said Vietnam wants both sides to promote trade ties and give reciprocal support to products of their concern and expressed the hope that with great efforts made by the Vietnam-Ukraine Inter-Governmental Committee, relations between the two countries will be elevated to a higher level in the future.

RoK - an important partner of Vietnam
http://english.vovnews.vn/Home/RoK--...012/122637.vov
Vietnam and the Republic of Korea (RoK) economic and trade ties have developed since the establishment of diplomatic relations 18 years ago.
RoK businesses want to increase investment in Vietnam

RoK investment in Vietnam has increased remarkably over the past years. RoK’s Deputy Minister of Knowledge Economy Park Young Jun said that Vietnam’s good investment opportunity will attract more and more RoK businesses.

RoK ambassador to Vietnam Park Suk Hwan said that RoK now ranks second among nations and territories investing in Vietnam with 2,621 valid projects capitalised at US$22.8 billion. The ambassador highlighted strategic partnership between RoK and Vietnam, as well as the RoK and ASEAN.

He said that Vietnam is now an ideal destination for RoK investors and expressed his belief in cooperation among business communities of both countries.

At present, RoK investors are involved in almost all fields in Vietnam such as infrastructure, telecommunication, real estate, hotel, restaurants and many important industries such as energy, oil and gas, mechanics, electricity, electronics, chemicals, garment and textiles, and footwear through famous brands such as Huyndai, Samsung, LG, Deawoo, and Taekwang.

According to Seogki Sun, Director of the Korea Trade and Investment Promotion Agency (KOTRA) in Hanoi, RoK has become one of the leading investors in Vietnam over the past ten months and made an important contribution to Vietnam’s economic development.

Apart from direct investment projects, RoK has carried out many activities to support the development of Vietnam’s industry through providing loans and devising plans to develop human resources. By 2011, RoK will provide US$411.8 million in Official Development Assistance (ODA) to Vietnam, up by 39 percent compared to this year.

Do Nhat Hoang, Head of the Foreign Investment Agency under the Ministry of Planning and Investment said that Vietnam and RoK had signed an agreement on investment encouragement and protection, an agreement on double taxation avoidance, Free Trade Agreement (FTA) and the ASEAN Korea Free Trade Agreement (AKFTA). The agreement on investment encouragement and protection took effects since September 1, 2009, which have brought benefits to businesses of both countries.

At a meeting with Deputy Prime Minister Hoang Trung Hai on December 20, Mr Park Young Jun expressed his wish that the government of Vietnam will create favourable conditions for RoK businesses to invest in the fields of energy, mineral exploration, transportation, and aviation.

Mr Park Young Jun said that Vietnam has abundant human resources, and many RoK’s major groups will focus on developing the field.

Earlier, at the seventh meeting of Vietnam-RoK cooperation sub-committee on December 20, both sides signed four memoranda of understanding on energy, oil and gas, coal and mineral ores in Vietnam.

Notably, both sides have completed four plans until 2025 with the vision for 2050 in the fields of oil and gas and energy in Vietnam including the development of oil reserves system, oil refinery chemistry industry, gas industry and as well as building national energy policies. Mr Park Young Jun expressed his belief that the cooperation between the two countries will further develop in future along with the business communities of both countries.

Vietnam-RoK two-way trade turnover to reach US$20 billion by 2015

As of September 2010, Vietnam-RoK two-way turnover had surpassed US$9 billion and is expected to exceed US$12 billion this year, up 20 times compared to US$500 million in 1992.

Both nations also aim to bring two-way trade turnover to US$20 billion and improve trade balance by 2015. To fulfill the goal, an average annual trade growth is expected to reach 15 percent in the 2010-2014 period.

Over the past years, the RoK has always been an important partner of Vietnam. The countries have established an inter-government committee on Vietnam-RoK Economic Cooperation and held periodical meetings to promote bilateral economic cooperation.

Although Vietnam has been affected by global economic crisis, the country’s exports to RoK have increased with key export items including seafood, garment and textile, and crude oil.

Garment and textile sector have also seen a remarkable growth after enjoying preferential policies from the Free Trade Agreement. The group of commodities have greatly benefited from commitments within AKFTA with the average tax rate for textiles down from 8 percent to zero percent and the average tax rate for garment down from 13 percent to zero percent. Along with ASEAN nations, Vietnam has completed negotiations on FTA with a proposal for the RoK to grant Vietnam a preferential treatment in the field of garment and textile.

Deputy Chairman and Secretary Seneral of the Vietnam Textile and Garment Association, Le Van Dao, said that garments and textiles in the RoK market have increased sharply after preferential policies from AKFTA. For example, the exports have increased 64 percent over the past 8 months of the year.

Seafood products have great potential to be exploited to the RoK and the demand for these products will increase in future. However, Head of the Asia-Pacific Department under the Ministry of Industry and Trade, Bui Huy Son said that the development of export turnover have not matched trade potentials of both countries due to the current tariff quota.

Vietnam has advantages in exporting tea, coffee, and fruit products. However, due to problems with meeting food and safety hygiene requirements, the distribution of these farm products is still limited in the RoK market.

In addition, the diversification of import sources and tapping into Vietnam’s comparative advantages has given a fresh impetus for RoK importers to explore the Vietnamese market.

In the bilateral trade ties with the RoK, Vietnam has always been in a position of an importing country. For example, Vietnam’s key import items are petroleum, machines, automobiles, garment and textile materials, plastics, synthetics chemicals, iron and steel for construction and shipbuilding industry.

In the long-term, Vietnam’s consumer goods, processed food, clothes and footwear have great potential to be exported to the RoK. However, it largely depends on the country’s economic restructuring and business’ adaptability.

National gold exchange to be set up
http://www.saigon-gpdaily.com.vn/Bus...2010/12/88310/

Vietnam's National Financial Supervisory Commission said it has asked the government to open an official gold exchange in 2011 to decrease the dependence of Vietnam’s economy on US dollars and restore order to the market of this precious metal. Government officials will discuss a concrete plan for the setting up of the national exchange next week, said Le Xuan Nghia, vice chairperson of the commission.

He said in other countries, gold is kept in reserve centers, under the management of the central Bank. In Vietnam, the ratio of gold controlled by the ordinary people is very high. He added that the state bank should help to mobilize the capital in gold in the population, by acting as the largest controller of gold and the final buyer and seller in the gold market. “The establishment of the Gold Exchange will help investors trade in gold methodically under the risk control of the State. The exchange is also a place where managing agencies can supervise, regulate and intervene in the market,” said NFMC Vice Chairman Le Xuan Nghia.

Under the project, the State Bank of Vietnam will establish a joint stock company to monitor and manage the operation of the exchange and build a technical infrastructure system to manage gold trading activities. Investors will buy and sell gold under the form of certificates. The exchange will operate like a stock exchange in both Ho Chi Minh City and Hanoi. Gold will be traded in the form of certificates.

The launch of the exchange will allow investors to invest in gold officially, and at the same time, help authorities manage the market, Nghia said. He also informed that the government should apply the mechanism of issuing bonds in gold, allowing commercial banks to carry out services of refunding and rediscounting gold. Besides, commercial banks can be permitted to reserve gold as a foreign currency.

Vietnam closed all 20 gold exchanges in the country from March. The central bank said the closure was necessary to eliminate risks posed to the national financial system. After the shutdown, however, some illegal trading floors for gold ‘popped up’. This was because many investors still wanted to trade gold using accounts despite the huge risks involved.

Many experts proposed that this project would help stabilize, manage and develop the gold market better, as well as promote the role of the capital source in economic development.
Before, the Bank for Investment and Development of Vietnam (BIDV) proposes this project to the Prime Minister, a national gold exchange Department should be set up. The Gold Exchange, which will be a state funded organization, will ensure the equity in the market and avoid any unnecessary price increases that may damage our economy, said Nguyen Manh, Head of BIDV’s Capital and Capital Business Department.

Vietnam's Economic Problems Driven by Unchecked Growth
http://www.voanews.com/english/news/...112594804.html

The stability of Vietnam's economy is under scrutiny as the country confronts soaring inflation, a growing deficit, a weakening currency and falling foreign exchange reserves. Financial and political analysts say the problems are symptomatic of Vietnam's rapid growth.

Vietnam's economy is often cited as one of the most promising emerging economies in Asia. The economy expanded by about 6.5 percent in 2010, continuing a decade of strong growth.

But the country finds itself grappling with serious problems, including a trade deficit this year that topped $12 billion.

The trade deficit and inflation fueled by the economic growth have put pressure on the country's currency, the dong. The government, which tightly control's the dong's movement, has devalued it three times in the past 13 months.

Yet inflation continues, with consumer prices jumping 11 percent this year.

Partly to prop up the currency, Vietnam has spent its foreign exchange reserves, dropping them from a peak of $24 billion in 2008 to $14 billion in September.

Tom Byrne is senior vice president of ratings agency Moodys Investors Service in Singapore. He says there is increasing downward pressure on the dong and if reserves drop further, the risk of a debt repayment crisis will increase.

"If the exchange rate does weaken further, of course it leads to short-term ramifications on inflation, maybe even more capital flight," Byrne said. "But, over the long term it would help Vietnam's exports gain some competitiveness. But, the key thing is that whatever the authorities do, what we think would support the rating would be greater macroeconomic stability. Strong growth, yes, but probably not so strong that it leads to high inflation."

Byrne says government policies favor fast growth, which is good for employment and short-term economic development but not sustainability.

Many people fear the dong could weaken further, and they are investing in gold and U.S. dollars - which also adds to the pressure on the dong.

Moodys and other rating agencies downgraded Vietnam's credit rating this month because of the unbalanced economic data and an announcement that a state-owned ship building company defaulted on a foreign loan.

Vinashin, one of Vietnam's largest employers, failed to make a payment on a $600 million loan. The Communist Party Politburo has told the company to restructure.

The default raises concerns the government may now be less able to offer financial support to other state-owned enterprises with heavy debts.

But Carl Thayer, a professor of politics at the Australian Defense Force Academy, says the decision was likely a political rather than economic one. He says senior leaders probably decided to restructure Vinashin as a show of displeasure with Prime Minister Nguyen Tan Dung's fast growth economic policies.

"Vinashin was a showcase of the prime minister. So, it's hard for me not to see this as being political. I don't really think the Vietnamese leadership has made a moral-hazard stance and said 'state-owned enterprises you've got to fend for yourselves'. I mean, there is that sentiment but it isn't dominant because that's shooting yourself in the foot because that's what the government depends on," Thayer said. "They want state enterprises to be effective and they've coddled them. But, Vinishin is just too big to be allowed to go."

Last month the prime minister accepted responsibility for Vinashin's problems - its debts are estimated at $4.5 billion.

Thayer says the Communist Party Congress in January is unlikely to make any major pronouncements on the economy.

And, he says, despite criticism over the economy, the prime minister is likely to retain his position as he has few eligible rivals.

"Even when they faced the donor's meeting this year, the prime minister, despite their criticism, and I'm mirroring some of that, was basically saying we can do growth, have macroeconomic stability, and maintain political stability all at the same time. So, he's juggling three balls and the odds are that it looks like one might be dropped. And, that could be the macroeconomic stability," Thayer stated.

Financial and regional analysts say that Vietnam's recent problems, including the Vinashin default, may scare off some foreign investors. But Byrne at Moody's says Vietnam's long-term economic outlook is still positive.
"Vietnam has made measures, has taken steps to welcome foreign direct investment, and therefore, I think, boost the long-term growth potential. What really gave Vietnam a shot in the arm was the bilateral trade agreement with the U.S. that was signed some years ago, giving Vietnam access to the U.S. market," he said.

Byrne says aside from balancing payments, Vietnam needs to improve transparency on economic data and policies.

For instance, he says updates on foreign exchange reserves are released much later than other countries at similar stages of development.

More information on debt distress and support for state-owned companies, he says, would also improve the investment environment.

Making Vietnam a strong marine-based economy
In order to improve the effectiveness of “Vietnam’s Sea Strategy up to 2020,” Vietnam needs to enhance its planning for the development of sea ports.
The “Vietnam’s Sea Strategy up to 2020” aims to turn Vietnam into a strong marine-based economy, with the marine economy accounting for 53-55 percent of the Gross Domestic Product (GDP).

Located on the Gulf of Tonkin Economic Belt, the Northeastern region of Vietnam, with Hai Phong and Quang Ninh at its centre, has taken advantage of its natural potential to develop the marine economy. It is now a strategic region for international and domestic business activities and a gateway to the seas of the Northern Vietnam key economic region.

Taking full advantage of the sea potential

For more than 100 years, Hai Phong port has played a crucial role in the import-export activities of Vietnam’s Northern provinces and is now one of the most important ports in Southeast Asia. Cargo transported via the city increased from 6 million tonnes in 1996 to 38 million tonnes in 2010.

Dan Duc Hiep, Vice Chairman of the Hai Phong Municipal People’s Committee, said Hai Phong, with fully-equipped infrastructure, attracts goods from all over the world to Vietnam and to some southern provinces of China.

70 percent of the world’s goods is transported by sea, so Hai Phong’s development strategy is focused on developing sea ports, not only for Hai Phong but for the whole northern region as well as some of China’s southern provinces, he said.

Its potential to develop marine economy has helped Hai Phong maintain a high annual growth rate of 11 percent over the past five years, with industry and service sectors making up 90 percent of the province’s GDP. Hai Phong is also becoming an attractive destination for foreign investors. 28 countries have invested in 280 projects in the city with a total investment of US$4.3 billion.
Even without geological and historical advantages of Hai Phong, Quang Ninh province developed a system of ports with Cai Lan port, which can receive 40,000-tonne-container vessels, Cam Pha port for coal transportation, and the B12 oil terminal port which can receive 5,000-tonne vessels. The volume of cargo transported through Quang Ninh has continued ton increase over the years, reaching 23 million tonnes in 2010.

In addition to strengthening its marine industry, sea port activities, and exploitation of aquatic products, aquatic breeding and exploitation, Quang Ninh has focused on developing sea and island tourism. As a result, the number of visitors to the province has increased to about 4 million in 2010. Quang Ninh also enjoys a high economic growth rate in comparison to other Northern key economic provinces.

Nguyen Cong Thai, Vice Head of the Ha Long Bay Management Board, said as a World Heritage Site, Ha Long Bay has great potential for tourism development with cultural, historical, and humane values.

In addition, Hai Phong and Quang Ninh are seeing the development of other industries and services such as storage, land and marine transportation, and petrol, oil, gas, steel, and cement distribution services. Their shipbuilding industry is experiencing significant development with Song Cam, Nam Trieu, Tam Bac, Bach Dang, Pha Rung, and Ha Long shipbuilding factories which together account for 50 percent of the whole country’s shipbuilders’ output.

Close cooperation needed

According to the Vietnam sea port plan to 2020 with orientation to 2030, Hai Phong is to become an international gateway port and Vietnam’s biggest port complex with four key harbours, namely Lach Huyen, Dinh Vu, Song Cam, and Song Chanh. The city is now investing US$179 million to build the Cai Lan container port, which will be able to receive 40,000-tonne container vessel, and VND17,000 billion into Lach Huyen international port. Once put into operation in 2014 or 2015, Lach Huyen port is expected to receive 100,000-tonne vessels.

Associate Professor Bui Tat Thang, Deputy Director of the Institute for Strategy and Development under the Ministry of Planning and Investment, said effective planning is needed for the development of sea ports in the Northern region to take full advantage of sea transportation.

Sea ports from Quang Ninh to Hai Phong should be connected in a development chain, Thang said.

In order to turn Vietnam into a strong marine-based economy, the country needs not only deep-water ports but also large vessels and a close cooperation between businesses and local authorities. The Vietnam National Shipping Lines (Vinalines), which has taken over some projects from the Vietnam Shipbuilding Industry Corporation, is increasing its investment capital in an effort to build a leading fleet of vessels in the Southeast Asian region.

In addition, authorities are making great effort to remedy shortcomings in investment policies, administrative procedures, shortage of labourers, and the poor infrastructure. As the Northern economic region sees a significant development, Hai Phong and Quang Ninh will be gateways to connect Vietnam Northeastern region with China’s Southwestern provinces, especially when the Lao Cai-Hanoi and Hanoi-Hai Phong highways are completed.

http://english.vovnews.vn/Home/Makin...012/122762.vov
Link for the above article

Vinashin yet to agree on 1st payment of $600M debt
http://www.businessweek.com/ap/finan.../D9KC46480.htm


State media say the Vietnam Shipbuilding Industry Group doesn't yet have an agreement on the first repayment toward $600 million it owes foreign creditors.

The company better known as Vinashin defaulted last Monday on the $60 million payment due as part of syndicated loans arranged by Credit Suisse in 2007.

Vinashin chairman Nguyen Ngoc Su was quoted in Monday's online version of Vietnam Economic Times as saying the company has offered to pay the interest. He said he considered that a sign of Vinashin's "goodwill" to pay the debt.

Vinashin is one of Vietnam's largest state-owned conglomerates. But it owed $4.5 billion (86 trillion dong) in debts as of June and the government has said it won't bail out the company.

Vietnam’s exports to Hong Kong rise sharply
http://english.vovnews.vn/Home/Vietn...012/122793.vov

As of November, 2010, Vietnam’s export value to Hong Kong (China) reached US$1.759 billion, an increase of 59.8 percent over the same period last year, announced the Commerce and Economic Development Bureau of the Hong Kong Special Administrative Region.
In November, exports of such products as office machine components, computer, rice, and telecom equipment to Hong Kong saw a sharp increase.

Pham Van Cong, Vietnamese Deputy Consul General to Hong Kong and Ma Cao said Vietnamese businesses not only firmly develop in the country but also expand their markets in Hong Kong, despite the world’s economic crisis.

He expressed his hope that in 2011, Vietnam’s export turnover to Hong Kong will exceed US$2 billion.

Vietnam Commercial Affair in Hong Kong will continue providing Vietnamese businesses with information of market and price to help them seek business partners, Cong said.