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Vietnam’s top economic events in 2011

Wenesday - 04/01/2012 13:13
Vietnam's sky-high inflation, and high depositing and lending rate, followed by a series of individual insolvencies and bankruptcies as the consequence, are the most noticeable among Vietnam’s top economic events in 2011. 2. Ficombank, TinNghiaBank and Saigon Commercial Bank (SCB) were the first three banks to be merged

1. Vietnam’s inflation rate, as measured by the consumer price index (CPI), soared to 18.58 percent in 2011 compared with 9.19 percent in 2010, according to the General Statistics Office.

The consumer price index in December grew 18.13 percent against the same month last year, easing from an annual rise of 19.83 percent in November, said GSO.

The CPI growth rate exceeded the target of 18 percent set by the government in early November.

The December’s CPI rise of 0.53 percent seems to follow a rising trend of 0.36 percent and 0.39 percent in October and November, respectively.

Vietnam’s inflation in 2011 is said to be the highest in Asia-Pacific, and the world’s 2nd highest after South America’s Venezuela.

2. Ficombank, TinNghiaBank and Saigon Commercial Bank (SCB) were the first three banks to be merged, as the State Bank of Vietnam began to implement its plan on restructuring the banking system.

“The central bank has approved the policy on merging the three banks, and assigned the Bank for Investment and Development of Vietnam, or BIDV, to take a comprehensive role in the merged bank,” central bank Governor Nguyen Van Binh announced at a press briefing on December 6.

Accordingly, all the major management posts at the new bank, including the board of directors and other important departments, were filled by BIDV staff members.

The governor said Ficombank, TinNghiaBank and SCB had recently been confronted with liquidity problems, since they had used capital borrowed from short-term deposits to offer medium and long-term loans.

“The central bank has provided liquidity aid to the three banks, partially stabilizing the situation,” he said.

“The three banks have voluntarily proposed to be merged to build a stronger bank with higher ability to access the market and establish a broader system.”

3. With sky-high inflation, depositing rate was anchored at 14 percent, while lending rate some time exceeded 18-20 percent, causing capital inflows to the real estate and stocks markets to slow to a trickle.

As a result, many real estate projects, both already finished and still under construction, saw their prices drop some 20-30 percent, and the prices are predicted to fall further in 2012. 

The “frozen” realty market in 2011 consequently affected related industries such as cement, steel and construction material makers, forcing many to declare bankruptcy or teeter on the brink of dissolving.

On Ho Chi Minh Stock Exchange (HoSE), Vietnam’s benchmark stock exchange, over 50 percent of the listed stocks, or 163 out of 307, devalued further from their face value. Some were even traded at under VND1,000 (around $0.05) per share.

The situation seemed worse on Hanoi Stock Exchange with 70 percent of the listed stocks, or 276 out of 393, lost their face values.

The VN-Index of Ho Chi Minh Stock Exchange (HoSE) and HNX-Index of Hanoi Stock Exchange (HNX) dropped 27.46 percent and 48.6 percent from the beginning of this year, from 484.66 points to 351.66 points and from 114.24 points to 58.74 points respectively.

The values of southern and northern bourses in 2011 were estimated to decline around VND129.33 trillion and VND41.8 trillion, respectively.

4. As the world’s gold price became so volatile in 2011, local gold price peaked to VND49 million a tael (1 tael is equal to 37.5 grams) when its world counterpart hit $1,900 in early September.

The price then retreated, hovering around VND45-46 million a tael and finally dropping to VND42.5-43 a tael recently.

Fearful that rising gold prices could devalue the local currency, local people flocked to gold shops, mostly located on Tran Nhan Tong Street in Hanoi and shops under Saigon Jewelry Co (SJC), Vietnam’s biggest gold trader with 90 percent market share for gold bullion, to buy gold, a scene that has never been seen in the last decade or so.

Nguyen Van Binh, governor of the State Bank of Vietnam, in a move to calm local buyers, said the purchase should only be carried out when the local gold price was VND400,000 a tael higher than the world’s price.

But the price gap widened to some VND3-4 million a tael before scaling down to VND1-2 million a tael, which SCJ and other sellers said was due to surging demand.

Binh then declared in a meeting with the National Assembly in November that SJC would be the national gold bullion brand and at some point in the future would be transformed into SBV brand, allowing SJC to be Vietnam’s sole gold bullion maker.

5. The volatility on the real estate, stocks and gold market led to a series of individual insolvencies and bankruptcies, with unpaid debt ranging from some tens of billions of dong to trillions of dong throughout the country.

6. 2011 saw the most successful year for Vietnam’s foreign trade since its accession into the World Trade Organization in 2007, reaping $96.3 billion in export revenue, up 33.3 percent year on year, thus bringing trade deficit down to $9.5 billion, or around 9.89 percent of export revenue, down from the 16 percent target set by the National Assembly.

Vietnam’s trade gap has been on a decline from $17 billion in 2008 to $12.8 billion in 2009 and $12.4 billion in 2010.

But its trade gap with China still remained high, standing at $12.36 billion as of November 2011. Last year’s figure was at $12.6 billion.

The import of luxury goods also followed an upward trend, with $14 billion in 2011 compared to $10 billion in 2010. The import of cars and cell phones, for instance, saw an increase of 8 percent and 74 percent respectively.

Vu Huy Hoang, Minister of Industry and Trade, warned that the trade gap may be widened to $13 billion in 2012.

7. Vietnam welcomed the six millionth foreign visitor in 2011 in the northern province of Quang Ninh on December 26.

The French visitor, Curvalle Bernard Francois, travelled aboard the MV Super Star Aquarius cruise ship, which departed from Hainan, China, for a journey to Vietnam.

In the past 11 months, most foreign tourists to Vietnam came from East Asia, Southeast Asia, Europe and America.

Although figures are still not available, the tourism sector is expected to earn a revenue of VND130 trillion ($6.2 billion) in 2011. The figure was 96 trillion dong ($4.6 billion) in 2010. 
According to experts in the tourism sector, Vietnam looks set to welcome 10 million foreign arrivals by 2020.

8. The long-awaited Thu Thiem Tunnel underneath the Saigon River, linking District 1 with Thu Thiem New Urban Area in District 2, was open to the traffic on November 20.

It is the first under-water tunnel in Vietnam and Southeast Asia, and the most important section of the East-West Highway.

The tunnel is 1,490m long and 33m wide with 6 lanes and has two emergency exits. 
It is a key work in the urban traffic infrastructure system of Ho Chi Minh City.

22km long, 42-100m wide and having 8-14 lanes, the East-West highway was built with a total capital of VND16 trillion ($762 million), of which 65% came from the Japanese Government’s ODA and 35% from the city’s budget.

After the opening, thousands of vehicles converged on Thu Thiem tunnel under the Saigon River every weekend.

9. Vietnam and the US celebrated the 10th anniversary of their bilateral trade agreement (BTA) which brought two-way trade value to over $20 billion, a 1,200 percent rise, since the BTA entered into force on December 10, 2001.

On July 13, 2000, just five years after President Clinton announced the normalization of diplomatic relations with Vietnam, the US and Vietnamese negotiators signed a bilateral trade agreement (BTA) that now defines the strong economic ties between the two countries.

In addition to the trade and investment benefits, the BTA served as a “stepping stone” for Vietnam’s accession to the World Trade Organization in 2007.

Progress in the bilateral trade and investment relationship has coincided with a tremendous economic transformation in Vietnam that has helped to improve the lives of ordinary Vietnamese citizens.

Real income in Vietnam has grown an average of 7.2 percent per year, and GDP per capita has risen from $413 in 2001 to $1,300 in 2011. Meanwhile, Vietnam’s poverty rate has fallen from 58 percent in 1993 to 10.6 percent in 2010.

10. The audits at two giant monopolies, the Electricity of Vietnam Group (EVN) and Petrolimex, commanding 90 percent of local electricity market share and 60 percent of petroleum market share, respectively, have disclosed many things.

The debt of the Electricity of Vietnam Group (EVN) has exceeded VND240 trillion ($11.4 billion) as of 2010, according to a recent report from the State Audit of Vietnam.

Recent auditing results showed that the Vietnamese state-run electricity monopoly has invested over VND2.1 trillion in sensitive and non-core sectors such as property, insurance and banking, accounting for 3.27 percent of the group’s equity.

An inspection team is looking into salary issues at the EVN after the company announced a huge accrued loss of VND40 trillion (US$1.9 billion), while the State Audit reported that the group paid its staff salaries as high as VND7.9 -10.3 million ($376-490) per month. 

Meanwhile, although fuel wholesalers have repeatedly sung a “refrain” of losses, they have actually been operating with enormous profits, Deputy Minister of Finance Vu Thi Mai said in a press briefing on December 20, citing audit results.

At the press conference held to publicize the audit results conducted on four major fuel wholesalers, Le Hoang Hai, deputy head of the Business Finance Agency under the Ministry of Finance, said that on August 26, when the gasoline retail price was cut by VND500 a liter, the finance ministry claimed that fuel wholesalers were operating with a gain.

In fact, audit results show that in the period between July 1 and August 26, Petrolimex enjoyed a profit of VND130 billion (US$6.24 million), Hai said.

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