BUSINESS IN BRIEF 15/1 The sixth negotiating session of EU-Vietnam Free Trade Agreement (EVFTA) opened in The subject matter of the negotiations include trade of goods and services, investment, customs cooperation, the rule of origin, SPS, TBT, competition, sustainable development, institution and legislation. Addressing the opening session, heads of the Vietnamese and EU delegations emphasized the goal to finalize the negotiations soon and expressed their determination to fulfill the objective. They asked experts to speed up the progress of the negotiations and to conclude technical negotiations of some contents in which both sides do not have differing views. For other contents, groups of experts should continue negotiations to narrow the gap between the parties. In the coming days, delegation heads will also debate viewpoints and orientations for important areas to accelerate the negotiation and devise a roadmap for completing the EVFTA negotiation. The negotiating session will last until January 17. Doosan Vina makes first international shipment in 2014 Doosan Vina’s HRSG Business Unit on January 13 made its first international shipment of the new year to a company in The shipment, to Intergent thermal power plant in The shipment was made pursuant to a cooperation agreement with Intergent thermal power plant and set sail from Doosan Vina’s port in Dung Quat Economic Zone to Under the agreement, the HRSG Business Unit completed and exported nearly 6,000 Fin Tubes, 200 Headers, 80 Harps, 10 sets of Module and 70 tonnes of Links. Since the HRSG Business Unit was placed into operation in 2009, it has exported 10 HRSG boilers to the world market and affirmed its “Made in Vinamilk to construct US$23 million facility in This was announced on January 13 at the fourth Vietnam-Cambodia Investment Cooperation Conference in Vinamilk will cooperate with Vinamilk will provide equity funding for 51% of the project whilst the remaining 49% will come from the Cambodian partner. The plant is designed to process an annual capacity of more than 19 million litres of fresh milk, 64 million cups of yogurt, and 80 million tins of condensed milk with estimated revenue of US$35 million in 2015. Signatories to the protocol were The additional protocol also updates the Organization for Economic Cooperation and Development (OECD) 2004 version sections pertaining to exchange of information. The article asked the signed parties to conduct an exchange of information in situations that are not limited to solely tax issues. After the signing, both sides should approve the protocol and keep each other informed so that it can be given effect. Vietnamese exports eye opportunities in Bangladesh The Ministry of Industry and Trade’s (MoIT) Africa, West Asia, and South Asia Market Department considers Bangladesh a market rich in potential, awaiting further investigations to fully tap the opportunities presented by its 62 million consumers. An estimated 89.5% of Bangladeshi citizens identify as Muslim. Increasing exports will require Vietnamese businesses to familiarise themselves with the unique demands of Islamic consumers. Agriculture employs more than 45% of the Bangladeshi workforce. The country’s main exports include garments and textiles, farm produce, seafood, leather, and jute products.some The Joint Committee for Economic, Cultural, Scientific, and Technological Cooperation conducted its first Both nations have signed 16 agreements and protocols governing diplomatic, economic, trade, and investment cooperation. The economic and trade relationships linking Bilateral import-export increased six-fold from US$65 million in 2008 to US$390 million in 2012. Statistics from the General Department of Vietnam Customs cited earlier speak to the impressive growth of Its best performing export commodities were fibre (US$33.6 million), garments and textiles (US$16.9 million), and machinery, equipment, and spare parts (US$8.7 million). Some of Despite their similar export production structures, the Africa, West Asia, and South Asian Market Department believes Vietnamese businesses have faced tough competition from their Bangladeshi counterparts thanks largely to preferential European Union policies. But Vietnamese businesses can take advantage of these mechanisms, seizing investment and production opportunities in Vietnamese enterprises should also investigate potentially lucrative openings in Bangladeshi agriculture, mechanical engineering, and industry. Mekong Delta localities will strive to record a GDP growth rate of 9-10 percent in 2014. According to Nguyen Phong Quang, Deputy Head of the Steering Committee for the Southwestern Region, the localities target at least US$11 billion in exports and more than VND38 trillion (US$1.786 billion) in tax revenues this year. The region is expected to raise per capita income to VND37 million (US$1,739) per year, reduce its poverty rate to six percent and create more than 371,000 jobs, said Quang. To reach the goal, the committee will foster coordination with ministries, sectors and localities to realise the Politburo’s Conclusion No. 28 on directions, tasks and solutions for socio-economic development and ensuring national security and defence to 2020, he said. The committee will focus on removing difficulties and obstacles faced by enterprises, enabling them to strengthen exports, fuelling economic growth and increasing budget contributions, Quang said. He added that comprehensive measures and policies will also be applied to create jobs and develop the labour market. The committee will enhance the State’s role in supervising and regulating market supply and demand, gradually restructuring human resources to meet the reform needs of businesses, sectors, the region and localities, especially in agriculture. More efforts will be made to strengthen management of State investment and outline solutions to settle debts in capital construction, making appropriate capital allocation. Quang said poverty reduction, the building of new-style rural areas and environmental protection will be prioritised. Providing universal access to healthcare, education and training, culture and sports will be stepped up, while national security and defence will be strengthened. In addition, the region will speed up major projects to submit to the Party Politburo and Government, including those on building an administrative unit and special economic zone in Kien Giang province’s island district of Phu Quoc and fostering regional connectivity in agricultural production and trade, the official said. The region will also continue hosting the annual Mekong Delta Economic Cooperation Forum, scheduled for this year in Soc Trang. Last year, despite negative impacts from the common economic situation, the Mekong Delta region still saw 9.06 percent in economic growth. The average annual per capita income increased by VND2.3 million year on year to reach VND34.6 million, while total investment hit VND215 trillion, up 11 percent over the previous year. The proportion of poor households was reduced by 2 percent over 2012 to 7.24 percent. Meanwhile, national security and defence, social welfare as well as ethnic and religious policies have been ensured. The Mekong Delta region comprises of 12 provinces and one centrally-run city with a total area of 40,000 square kilometres and a population of 18 million. It is the largest granary and the major aquaculture development region of the country. The fourth Vietnam-Cambodia Investment Cooperation Conference aims to discuss solutions to further promote future trade and investment cooperation. Prime Minister Nguyen Tan Dung and his Cambodian counterpart Hun Sen co-hosted the event in Tran Bac Ha, President of the Association of Vietnamese Investors in The country ranked fifth among foreign investors in Vietnamese projects were focused on key areas such as agriculture-forestry-fishery, energy, finance, banking, insurance, telecommunication and aviation which gave leverage to Two-way trade between Meanwhile, the number of Vietnamese visitors to Vietnamese businesses in In total US$35 million has been spent on social welfare programmes over recent years. However, businesses still find it difficult to promote trade and investment in In his speech, PM Nguyen Tan Dung praised the efforts made by both nations in implementing cooperative agreements and making new proposals on cooperation programmes, particularly the signing of a protocol revising the investment encouragement and protection to facilitate investment. PM Dung delivered a speech at the event. Dung said he hopes that the Cambodian Government will focus greater attention to Vietnamese businesses’ investment by alleviating difficulties and hindrances to accelerate the progress of licensed projects. He also affirmed The Vietnamese Government will do its utmost to work with its Cambodian counterpart to further strengthen relations and comprehensive cooperation between Vietnam and Cambodia, positively contributing to peace, stability, cooperation and development in the region and wider world, Dung stressed. Cambodian PM Hun Sen briefed his host on Hun Sen suggested Vietnamese businesses intensify investment in food and farm produce processing in his country and offer mutual support and hopes that the Vietnamese Government will continue to support his government by boosting investment cooperation. The two PMs witnessed the granting of an investment license to Vietnam Dairy Products Joint-Stock Company (Vinamilk) on a dairy processing plant construction capitalized at US$23 million in Cambodia and the signing of an agreement between the Bank for Investment and Development of Vietnam (BIDV) and the Cambodian Ministry of Education, Youth and Sports on 50 BIDV scholarships for Cambodian students in Vietnam. She added that in 2014, Hong said that the city should strengthen the role of state agencies in devising strategies to promote the campaign, such as demand stimulation programs and trade promotion activities to promote trade and direct communication and meetings and to improve the competitive edge of Vietnamese goods in both local and international markets. Ho Thi Kim Thoa, Deputy Minister of Industry and Trade said that over the years, the campaign’s successful contributions have helped increase the number of Vietnamese goods consumers from 38% to 71%. In particular more than 40% of consumers have encouraged their relatives to use Vietnamese goods. Thoa added that the campaign has also urged businesses to improve product design, quality and their competitive capacity. At a campaign reviewing conference in Senior officials from The signatories to the MoU were The MoU was introduced in the wake of an agreement signed between the leaders of both nations in September 2013. In a press release, the RoK’s Ministry of Agriculture and Forestry reported that both ministries agreed to promote agricultural cooperation including setting up a joint committee to increase the exchange of information and human resources development along with efforts to improve the food safety of each nation. The Ministry said that the agreement has opened up a strategic partnership between the two nations and promotes additional agricultural investment. Lee Dong-phil said that his nation will share its experience and provide The ministers’ also discussed other relevant issues including the export of the Korean pork to US$50 million steel factory inaugurated Hang Nguyen Minerals Joint Venture officially opened the first phase of the US$50 million Tuyen Quang Iron and Steel Factory in the The factory includes an advanced production line with modern, synchronized and automated equipment. Construction work started on the factory in December 2009 on an area of 20 hectares in the Long Binh An industrial park, with a design capacity of 200, 000 tonnes of iron per year in the first phase. When fully operational, the factory is expected to contribute over VND1,500 billion to the province’s industrial production value and over VND100 billion to the State budget, as well as generate nearly 700 local jobs. To help the project operate effectively, the province provided the factory with two locations of mines named Cay Nhan and Cay Vau in districts of Yen Son and Ham Yen with an ore reserve of over 1.5 million tonnes. Pham Minh Huan, Vice Chairman of the province’s People’s Committee said that since the project has been implemented, Tuyen Quang has always created the most favourable conditions for investors in site clearance, material area planning and devised proper policies to ensure the factory’s long-term effective operation. New IPO listings to increase market supply this year The Viet Nam National Textile and Garment Group (Vinatex) is finally expected to launch an IPO in the first quarter of this year, after failing to do so several times in the past, according to the Dau Tu Chung Khoan (Securities Investment) newspaper. Viet Nam Motors Industry Corporation (Vinamotor) has also been urged to privatise in 2014, and, therefore, it is also likely to launch an IPO. National carrier Vietnam Airlines and the Bank for Investment and Development of Viet Nam (BIDV) are also preparing their respective IPOs. A representative from the Corporate Finance Department said the restructuring of State-owned enterprises, including the privatisation efforts, would lead to an increase in the supply of high-quality shares in the market. According to economic expert Vu Dinh Anh, the supply of shares in the market will be plentiful this year, in part due to Decree 108/2013/ND-CP which came into effect on November 11, 2013. The decree stipulates that joint stock companies must be listed on the stock exchange within one year after they start selling shares to the public. Vice director of HCM City Stock Exchange (HOSE) Tran Thi Anh Dao told Dau Tu Chung Khoan that the exchange estimates the total volume of listed shares to rise significantly in 2014 from the previous year. According to the Ha Noi Exchange, the equity market is expected to thrive this year, which should attract more companies to list on the stock exchange. The exchange said up to 15 companies could list their shares this year if the equity market showed positive developments. Trade sector told to facilitate business, production The trade sector needs to strengthen State management and create a more conducive climate for business and production, PM Nguyen Tan Dung has said. At a review meeting in He particularly acknowledged the sector’s solutions for increasing trade promotions at home and abroad, equitising its businesses for higher operational efficiency, and balancing trade. In 2013 Outlining tasks for 2014, he asked the sector to formulate policies on trademark and support industry development, enhance craft associations’ role in assisting businesses in difficulty, and increase the ratio of high technology and local contents in products. The PM reminded the Ministry of Industry and Trade (MoIT) to realise domestic market development and overseas market expansion solutions, ensure a sufficient supply of essential commodities, and tighten market control to prevent trade frauds and cross-border smuggling. He encouraged the MoIT to go ahead with its market mechanism for electricity, coal and petrol, taking into account support policies for vulnerable groups in society such as social policy beneficiaries and the poor. The trade sector needs to better perform its role in free trade agreements (FTAs) negotiations, especially the Trans-Pacific Partnership (TPP) agreement and the Vietnam-EU FTA, the government leader said. Despite economic difficulties in 2013, industrial production bottomed out, rising 5.9% or 0.1% higher than 2012’s figure. The inventory index fell on a monthly basis, from 21.5% in January to 10.2% in December. Total export earnings rose 15.4% to US$132.17 billion, exceeding the target set by the National Assembly. In 2014 the sector will continue creating a favourable business environment in line with the country’s socialist-oriented market economy and international norm. Cement consumption to hit 63 million tonnes The Construction Ministry predicts that Of the figure, domestic consumption is likely to hit 48.5-49 million tonnes, while the remaining 13.5-14 million tonnes will be exported. The Construction Ministry has announced its goals to conduct improved surveys and provide quality forecasts to enhance It also aims to closely monitor the implementation of cement projects in the 2012- 2015 period and work with the Vietnam Cement Association to increase its operational efficiency. In 2013, local cement plants produced 70 million tonnes, and about 61 million tonnes were consumed, exceeding the yearly set target and rising 13.9% year on year. Approximately 47 million tonnes was sold in the domestic market, and around 14 million tonnes were exported. Cassava exports slide back in 2013 Export of cassava and cassava products plunged by 18.2 per cent to US$1.1 billion last year, according to the General Department of Customs. Volumes were down almost 30 per cent to 3.1 million tonnes. In recent years cassava has become one of the products with high export value, according to the Ministry of Agriculture and Rural Development. The export of cassava and cassava products was worth $952 million in 2011, a whopping 70 per cent rise from 2010, and it went up by another 41 per cent in 2012. So much so cassava and cassava products were the seventh largest export staple in 2013. Around half of it is consumed domestically. In the 2001-11 period, the area under cassava increased by an average of 6 per cent a year. Insurance industry to maintain growth After failing to grow by double-digits in 2013, the insurance market is expected to grow modestly this year, on the back of an economic recovery and stock market gains. The introduction of new products and the increased diversification of distribution channels are likely to boost growth as well. According to Hoang Viet Ha, chief operating officer of the Bao Viet Insurance group, with economic growth forecast at between 5.4 per cent and 5.6 per cent this year, the insurance market is likely to maintain the growth rate of the previous year. The non-life insurance segment is predicted to expand by about 8 per cent, while the life insurance segment is expected to increase by around 15 per cent. Ha said the implementation of the voluntary pension insurance scheme and new products would stimulate the life insurance segment this year. In the non-life insurance segment, insurance providers would further diversify their distribution channels to promote growth. The insurance sector is aiming for a more stable and sustainable growth rate and is determined to undertake restructuring measures, including reducing capital from non-core businesses, he was quoted as saying by Dau tu (Vietnam Investment Review). According to Luong Quang Ban, deputy director of PetroVietnam Insurance, the insurance market in However, general director of the BIDV Insurance Corporation Ton Lam Tung told Thoi bao Tai chinh Viet Nam (Viet Nam Financial Times) that 2014 would remain a difficult year for the insurance market and the non-life insurance segment, in particular, adding that double-digit growth would be a challenge. According to the statistics from the Insurance Supervision Authority, Viet Nam has 59 insurance companies, which generated total revenues of more than VND45 trillion (US$2.15 billion), representing an increase of 10 per cent over 2012. MoT requires new funding to upgrade national highways The transport sector needs some VND3 trillion (US$142 million) for road maintenance this year, according to the Ministry of Transport's Viet Nam Road Administration acting general director Nguyen Duc Thang. Currently, the department oversees 19,100 kilometres of roads, consisting of 119 highway routes. Of these, 10,000 kilometres were overdue for maintenance, while more than 2,500 kilometres are scheduled for repair. Also, some 400 bridges are in need of being rebuilt or upgraded. According to Thang, last year the department had taken a series of measures to protect road surfaces and their safety corridors, such as digging and building drainage on highways, using new technology for building bridges and regulating overloaded trucks. This helped save trillions of dong, said Thang. However, the increase in traffic, damage caused by overloaded trucks and the erosions of roads caused by storms have resulted in problems for maintenance crews. In fact, the road maintenance fund of VND4.1 billion ($192,700) only covers 40 per cent of the country's demand for repairing and upgrading transport infrastructures, he said. Thang added that the demands for road repair and construction along highway routes remain very large, while the capital fund for road maintenance is limited. Thus, it was necessary to create plans that prioritised regulating areas with recurring traffic accidents and deteriorating roads. The department will strengthen the quality of management of local road management departments by tendering the maintenance management of about 20 per cent of highways. Also, the department is to replace or add road signs at dangerous locations and divert overloaded trucks to minimise road damage. Further, the department required the transport units to calculate regular maintenance costs of highways, bridges and tunnels to report to the department. Major highways with heavy traffic flows would receive priority for regular maintenance, he said. In terms of weakened bridges, the department has received the ministry's approval to re-examine major bridges nationwide and repair weakened bridges using new technologies that adapt plastic cables to reinforce bridges and strengthen their load carrying capacities. Last year, as many as 80 weakened bridges along national highways were repaired and upgraded with the new technologies, saving about VND1 trillion ($47 million). Incentives sharpen social housing focus Several real estate projects have been changed to social housing developments to provide housing for poor people and contribute to loosening difficulties in the market. The country currently has 124 social housing projects containing more than 78,700 apartments, according to statistics from the Ministry of Construction. Of these, 85 projects has been under construction for low income earners with 51,900 apartments, while 39 other projects with 27,000 apartments would be made available to workers in industrial zones. The total projects' investment was over VND35.6 trillion (US$1.69 billion). In addition, 57 projects have been proposed to convert from commercial housing to social projects, which could provide an additional 34,837 apartments with a total investment of VND20.5 trillion. Of these projects, Ha Noi has reviewed proposals from 15 projects to increase the number of apartments from 5,478 to 10,587. Another 10 projects in Regulations supporting social housing take effects The Government has issued Decree 188/2013/ND-CP on the development and management of social housing with stronger support and clearer procedures, which aims to increase the social housing supply, as well as regulate the property market. The decree, which took effect yesterday, stipulates that social housing projects would be exempt from land use taxes. Investors in such projects would also enjoy benefits, such as tax reductions and exemptions for value-added and corporate taxes. Enterprises in the projects could ask for loans from credit institutions. Under the decree, commercial banks and credit institutions would be responsible for providing at least 3 per cent of their total debt balance for social housing projects, offering assistance to low income earners with lower interest rates than those available in the market. Also, investors would be given support from the State budget for land clearance and infrastructure improvements. Investors would also be allowed to issue bonds guaranteed by the Government to arrange capitals for their projects. Further, the purchase of social housing will be transferred after 5 years of use, from the time of signing the contract with the investor. Of note, in the last two weeks of 2013, disbursements from a VND30 trillion package to offer soft loans to home buyers and property developers, in an attempt to stimulate the property market and resolve bad debt, saw a surge of VND170 billion. By the end of last year, the State Bank of Of these, commercial banks distributed VND304 billion to 7 enterprises and 1,750 customers, with total loans of VND428.5 billion. Also, the Bank for Investment and Development of Viet Nam took the lead in providing loans under the package, with total disbursements of VND150 billion. This was followed by Vietcombank, Vietinbank, Agribank and MHB. Meanwhile, the ministry's Housing and Real Estate Management Department said banks have received applications and reviewed them. Interbank rate sees year-end increase High capital demand from commercial banks raised the borrowing interest rates in the interbank market in the last week of 2013, the central bank's statistics showed. The value of the total transactions in Vietnamese dong reached VND128.5 trillion (US$6.1 billion) and those in US dollars was $2.8 billion. Overnight and one-week terms accounted for up to 77 per cent of all transactions in dong and the greenback. Interest rates charged for dong loans for one month were up by 0.79-2.23 percentage points, while those for US dollar loans, ranging from one-month to three-month loans, rose by 0.19-0.35 percentage points. The increase was blamed on the growing capital demand before the end of the year when all payments were due and on enterprises importing materials for domestic production, as well as trade companies importing products for the Tet sale season. Moreover, banks were also accelerating plans to expand outstanding loans to hit the targeted credit growth. The State Bank of Labourers in industrial zones often line up in front of the ATMs, hoping they will not run out of cash or incur technical problems. The demand for cash always skyrockets with the approach of the longest and most important annual festival in Many ATMs in However, he added, due to the holiday traffic, these refills may be delayed at times. Real estate to perk up by year-end The policy of maintaining stability and reasonable economic growth this year is important and appropriate to foster the business (including property) environment, said Vu Viet Ngoan, chairman of the National Financial Supervisory Commission. Ngoan told members of the HCM City Real Estate Association (HOREA) at a meeting this week that the Government has come out with measures to revive the market, which would have a domino effect. They included the simplification of administrative procedures and the VND30 trillion (US$1.42 billion) credit package for developers and buyers. Le Hoang Chau, HOREA chairman, said the difficulties the market faced last year persist and are likely to ease gradually as the economy and foreign exchange rate stabilise, inflation eases, and, especially, disbursement of the VND30 trillion credit is speeded up. "It (the credit programme) restores developers' confidence in the recovery of the market and offers urban low-income earners a chance to buy dwellings at reasonable prices and reasonable interest rates," he said. But disbursement has been too slow, at less than 2 per cent, he complained. He also proposed having a more open policy that allows overseas Vietnamese and foreigners to buy high-end apartments. According to a report on HCM City's real-estate market in the fourth quarter of 2013 released on Tuesday by property services provider Savills Viet Nam, there were approximately 15,300 units in the primary market, a surge of 2 per cent from the previous quarter and 5 per cent year-on-year. Seven new projects and new phases of three existing projects brought 2,100 units to the market in the quarter. Savills Viet Housing demand at the end of the year typically increases. The total number of units sold this quarter was 46 per cent higher than in the third quarter of 2013. Meanwhile, approximately 2,400 units entered the market this quarter. The total primary stock was approximately 11,500 units, increasing by 15 per cent quarter-on-quarter (QoQ). The absorption rate was 11 per cent, up 2 percentage points QoQ due to lower prices, fast construction progress, offers of shell packages and a wide range of promotions, said a Savills Viet Nam spokesperson. The apartment market in Ha Noi has also shown improvement in the last quarter of 2013, according to the fourth quarter report on Ha Noi's property market by the CB Richard Ellis Viet Nam Company (CBRE). Re-launch activities were very active since developers were more concerned about clearing out outstanding stock than in releasing new products. Following a record third quarter, the fourth quarter also saw the completion of 7,500 units. An interesting development during the fourth quarter is the shift in the developers' focus from low-priced products ($1,000 per square metre and below) to mid-priced products ($1,000-$1,500 per square metre). Unlike previous quarters in which transactions occurred mostly in the low-price range, the last quarter of 2013 saw more transactions at the mid-price level. This is most likely driven by buyers' increasing confidence, which also led to a 50 per cent quarter-on-quarter increase in total transaction volume. The year 2014 should see many more completed projects and further intensification of competition, with newly launched units. Buyers are now mostly interested in completed or nearly completed units to avoid issues with handover quality and late handovers. High-quality projects will likely see increasing transactions, even though their prices may not necessarily improve. Truong An Duong, head of research for Savills in Overseas remittances in 2013 are likely to have been $10.6 billion, up 6 per cent. Over 59,500 units in 94 projects are expected to be completed from 2014 to 2017, with 81 per cent being completed from 2016 onward. In the next two quarters over 1,200 units are expected to be hit the market. VICEM targets $1.4b in revenues in new year The Viet Nam Cement Industry Corporation (VICEM) hopes to earn more than VND30 trillion (US$1.41 billion) in revenues by selling nearly 21,000 tonnes of cement and its associated by-products in 2014. To meet the target, the corporation will take efforts to minimise production, management and selling expenditure, while diversifying production and stepping up corporate restructuring efforts. It will also improve business management and renew production methods in an attempt to lead Defying the economic downturn, in 2013, VICEM witnessed significant growth, with clinker and cement output increasing 8.8 per cent from the previous year to over 16 million tonnes. It generated VND30.5 trillion ($1.43 billion) in revenues and a pre-tax income of VND528 billion ($24.8 million), while contributing over VND1 trillion ($47 million) to the State budget. 2014: Brighter prospects for Vietnamese economy The Vietnamese business community continues to believe in brighter economic prospects for 2014, due to the Government’s drastic measures on easing difficulties and expectations emerging from a Trans-Pacific Partnership (TPP), said domestic experts. As many as 42 percent of surveyed enterprises said they could enlarge their production while 50.7 percent of them planned to maintain their existing business scale, with only 6.7 percent thinking of narrowing manufacturing. Despite many difficulties, domestic production and business activities saw signs of recovery at the end of 2013, attributed to escalating consumption demand before the Tet (Lunar New Year) holiday, according to Chairman of the Vietnam Association of Small- and Medium-sized Enterprises Cao Sy Khiem. In-depth integration into the international arena still remains an impetus to the economy. Noticeably, the TPP, an expansion of the 2005 Trans-Pacific Strategic Economic Partnership Agreement, will have a great effect on the economy as it will bring tariffs to zero percent on trade among its members, including Many business associations and large corporations also have high expectations of the benefits the TPP will bring about. The Vietnam Textile and Apparel Association (Vitas) hopes that the agreement will help raise export turnover of the sector to 30 billion USD in 2020 and 55 billion USD by 2030. Besides big opportunities in boosting exports and FDI attraction, the TPP will also bring challenges to many domestic sectors. The domestic breeding industry, for example could face difficulties competing with partners from developed countries. In the same way, economic collaboration between ASEAN countries as well as their newly-signed cooperation agreements will facilitate Vietnamese enterprises’ investment activities and help expand their market share and exports, while exposing them to increasing competition from rivals in the region. Low-price commodities will flow in, while domestic skilled labourers will move to other ASEAN countries, Doanh said.- Borrowing costs face upward pressure Interest rates increased sharply in the interbank market in the last few weeks of December 2013, revealing a huge demand for liquidity at banks. According to the State Bank of But the interest rates on both VND and USD borrowings have risen sharply. It was 0.79 percentage points up from the previous week for dong loans at 2.23 percent per year. However, they did not come as any surprise since a rising trend had begun several weeks earlier. Demand for cash often increases at the end of the year as people need more money to do shopping. Besides this, the central bank has also been pumping money through open market operations (OMO). By December 27, it had injected 14.73 trillion VND (701.43 million USD) during the month. In previous months the flow had been negative to the extent of 102 billion VND (4.86 million USD). Clearly, the central bank is ready to intervene in the market to prop up the banking system's liquidity and keep the interbank market stable. Not surprisingly, banks have also begun a new race to increase deposit interest rates. Sacombank offers the ceiling interest rate of 7 percent – applicable for deposits of up to six months – for one to five months, and 7.3 percent for six to 11 months. Asia Commercial Bank offers 6.9 percent for deposits of one to two months. Eximbank offers 8 percent for a one-year term. Some small banks in With the deposit rates rising again, lending rates are likely to be under pressure too this year. A senior economist said besides the rising deposit interest rates there are also other reasons that would keep loan interest rates from falling in 2014. They include a predicted inflation rate of around 7 percent, meaning the coupon rates on Government bonds have been fixed at a level that banks find attractive. The US dollar is likely to strengthen, affecting the interest rates and exchange rates, he added.- Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR |
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