BUSINESS IN BRIEF 20/10
Viet Nam was estimated to export around 1.87 million tonnes of steel and steel ingot this year, a 44.5 per cent increase from 2010 figures, Viet Nam Steel Association chairman Nguyen Chi Cuong said.
"This year, export of cold-rolled steel, stainless steel, steel bars and zinc-coated steel sheets all increased significantly in comparison with last year," Cuong said.
On special thing, Cuong informed the country imported more than 285,000 tonnes of pig iron this year.
"This is strange as Viet Nam has never before exported steel ingot - in previous years. The country has needed to import pig iron to serve domestic production," said Cuong.
Giving reasons for the increase in steel exports, Cuong said trade promotion schemes had shown a positive effect.
"These programmes have helped companies find partners in foreign countries," Cuong said.
Cuong said many foreign-backed steel companies and steel-ingot manufactures based in Viet Nam had begun operation and exporting their products to their own countries and throughout the world.
"One important factor is that the steel supply in the domestic market is now exceeding demand so companies need to export," he said.
According to Cuong, exports had helped lower the trade deficit related to steel production, as local steel consumption had dropped due to stalled investment projects.
Cuong said that the association planned to work closely with businesses to expand markets and maintain a positive export turnover.
He said good quality, competitively-priced steel tubes, cold-rolled steel and zinc-coated steel sheets had consistently sold well in the US as well as Indonesia, Thailand and Malaysia.
In the first nine months of the year, the association's members produced 3.7 million tonnes of steel, a year-on-year increase of more than 5 per cent.
Garments face troubled times
Viet Nam's garment and textile industry will face a downturn in contracts next year due to the poor economic conditions in the US and Europe, despite monthly export revenue of more than US$1 billion, the Ministry of Industry and Trade said (MoIT).
Ministry statistics showed the sector would reach its export turnover target of $13-13.5 billion this year due to the growth in the first nine months of the year which saw the industry hit an export record of $10.5 billion, the highest level in the past four years.
The ministry said the industry had been affected by less spending in the US and European markets which would drive down the number of contracts.
The sector has experienced a capital shortage with imported materials totalling $9.2 billion of input costs.
The minimum wage hike for workers took effect at the beginning of this month which also created pressure on garment and textile exporters as salaries are 65 per cent of total costs.
Deputy general director of the Viet Nam National Textile and Garment Group Le Tien Truong said the lack of contracts would be especially hard for small- and medium-sized enterprises (SMEs).
Vice chairman of the Viet Nam Textile and Garment Association Pham Xuan Hong said export turnover in the last quarter of the year would be 10 to 15 per cent down due to a reduction in contracts from the US and Europe.
MoIT said the industry would facilitate capital access to businesses while promoting co-operation between larger firms and SMEs in sharing market information.
The ministry added that garment and textile producers should be active in developing cotton plantations and maximising production capacity.
The Government aims to develop the industry into one of its key export sectors according to current planning.
The sector's yearly growth rate was 12 to 14 per cent while exports was 15 per cent.
The ministry hopes to bring total cotton production to 500,000 tonnes per year, creating 2.75 million jobs.
The industry's key products will be fibre, cotton, knitwear and garments, as it aims to increase the portion of original design manufacturing to 20 per cent by 2020.
Viet Nam now has more than 3,700 garment and textile businesses, most of which are located in large cities such as Ha Noi and HCM City.
Foreign investors sell off Vietnamese shares
Foreign investors have been unloading shares on both national stock exchanges since August, negatively affecting the psychology of domestic investors, according to analysts.
The net sell value by foreign investors on both bourses increased from VND200 billion (US$9.5 million) in August to nearly VND1 trillion ($47.6 million) in September, the fastest pace in the past two years. They sold off another VND161 billion ($7.7 million) worth of shares in the first week of October.
Shares sold were concentrated largely in heavyweight blue chips such as insurer Bao Viet Holdings (BVH), real estate developers Vincom (VIC) and Hoang Anh Gia Lai Co (HAG), steelmaker Hoa Phat Group (HPG), software giant FPT and Vietinbank (CTG).
The trend reflected a general tendency by foreign investors to withdraw capital from emerging markets whenever global markets became instable, analysts with Viet Capital Securities Co told the newspaper Dau tu Chung khoan (Securities Investment).
Viet Nam was a small market by capitalisation compared to emerging markets in Singapore, South Korea or Thailand, so it wasn't reasonable to look at current net sales by foreign investors here as part of a common trend of private capital divestment from emerging markets, countered the head of HCM City Economic University's financial investment department, Le Dat Chi.
However, if foreign investors continued to unload high-value shares at their current pace, it could impact foreign exchange reserves and put pressures on the exchange rate towards the end of this year, Chi warned.
Recent deals between domestic companies and foreign strategic investors have helped stem the foreign capital outflows. Japan's Mizuho Corporate Bank bought a 15-per-cent stake in Vietcombank (VCB) worth $570 million, while South Korea's CJ-CGV multiplex cinema chain bought a 92-per-cent stake in Envoy Media Partners for $73.6 million.
Ha Noi sets up land development fund
The establishment of a land development fund for the capital city was announced at a conference held by the Ha Noi People's Committee yesterday.
Vu Hong Khanh, deputy chairman of the People's Committee and chairman of the fund's management board, said that Ha Noi needed about VND8-9 trillion (US$390-437 million) each year to develop land and construct buildings.
"The development fund is being launched at a good time," said Nguyen The Thao, chairman of the People's Committee, citing facilitation of land management and land clearance policies and strategies as advantages of the fund's operation.
Thao said the Ministry of Finance would allot VND1 trillion ($48.5 million) collected from public land use fees as the fund's initial capital.
However, city leaders asked the fund's management board to be proactive in mobilising its own resources.
The Ha Noi Land Development Fund, a non-profit State financial organisation under the People's Committee, is responsible for receiving money collected for the use and rental of public land, land use rights auctions and other sources. The funds collected will be used to either pay resettlement compensation for those whose land were reclaimed by the State, or to help construct public buildings.
Vietnamese abroad push local produce
More than 200 overseas Vietnamese businesspeople gathered in the capital yesterday to discuss methods to promote Made-in-Viet Nam goods on the occasion of Viet Nam Entrepreneur Day.
In the conference themed "Opportunities for co-operation, investment, trade and export of Vietnamese goods", Nguyen Thanh Son, deputy minister of Foreign Affairs, who is also head of the State Committee for Overseas Vietnamese Affairs (COVA), said: "Overseas Vietnamese communities now live in 103 countries and territories and most of them are concentrated in big markets like the US, the EU and Eastern Europe.
"However, the paradox is that most of the goods our communities are trading and distributing are made in China, Thailand and Turkey."
He attributed the discrepancy to the fact that Vietnamese goods have difficulty penetrating certain markets and to the loose co-operation between domestic Vietnamese companies and those abroad.
Deputy chairman of the Viet Nam Association of Small and Medium Enterprises (VINASME) To Hoai Nam said domestic enterprises often hesitated to export goods to foreign markets due to fears of legal risks.
"When I asked them why, they [domestic enterprises] said if they failed to win a law suit, they would probably lose capital that had taken them 20 years to accumulate.
"I also find that local companies often do not have a deep understanding of foreign consumer tastes and they miss opportunities due to being over-cautious," he said.
"On the other hand, administrative procedures are described as one of the biggest obstacles facing Vietnamese enterprises in foreign countries when it comes to importing and distributing Made-in-Viet Nam products."
Although the Government had many favourable policies, the obstacles lied in policy implementation, he said.
The hesitation of overseas Vietnamese businesspeople also stemmed from worries about risks such as poor domestic infrastructure and food safety, Nam added.
Nguyen Thanh My, permanent deputy chairman of the Business Association of Overseas Vietnamese, said overseas Vietnamese often chose products from China, India and Turkey to sell because they were affordable and nicely designed. Meanwhile, some Vietnamese products, despite having locally recognised brand names, were still not enticing to foreign markets, especially the EU and the US.
Domestic companies had not put a lot of investment into product design, marketing and promotion activities, or in extras such as after-sales services, he said.
Therefore, the two mains problems that needed to be addressed were product design and distribution strategies, he stressed.
My suggested that the State should co-operate with business communities abroad to set up wholesale or trade centres in foreign countries in order to facilitate the penetration of Vietnamese goods and build on the strength of overseas Vietnamese businesses.
Chairman of the Vietnamese businesses association in Hungary Pham Ngoc Chu said: "We find that European consumers prefer Vietnamese goods such as noodle soups, canned fruits and green tea over Chinese options."
However, Vietnamese companies should pay more attention to product design and colour so that buyers could easily differentiate Vietnamese goods from Chinese ones, he said.
"Chinese goods are often recognised by their red packaging, but considering the current situation of climate change and temperature increase, we should use harmonious packaging with the soft colour of nature."
Chu also suggested Vietnamese firms should link hot news with production. He used the fortune teller octopus in Spain, which was admired by football fans throughout the world during the World Cup season last year, as an example.
He said Vietnamese companies could have sold thousands of T-shirts or other souvenirs if they had been decorated with the octopus symbol.
During the conference, Deputy Minister of Industry and Trade Nguyen Thanh Bien called for Vietnamese companies abroad to take full advantage of new policies, such as nationality, house and land ownership, and investment preference, to enrich themselves in Viet Nam and contribute to the country's socio-economic development.
They were asked to use their knowledge of foreign cultures, business and management to act as a bridge between Vietnamese goods and foreign markets and help domestic enterprises meet criteria to avoid lawsuits from foreign consumers.
The Ministry would continue streamlining administrative procedures and create favourable conditions for Vietnamese enterprises in the country and abroad to develop their businesses and open export markets, Bien affirmed. The conference was jointly held by the Ministry of Foreign Affairs and VINASME.
Country in need of new models to sustain agriculture growth rate
Viet Nam, as well as other Asian countries in which agriculture has played a critical role in growth, is currently facing new challenges that require new models for sustainable development, a conference heard yesterday.
At the opening of the 7th international conference of the Asian Society of Agricultural Economists held in Ha Noi, international and domestic delegations agreed that Asia had been emerging as a new economic force in the world and that the agricultural sector was a primary engine of the economy.
Rising demand for food in the region and throughout the globe required an increase in production, they said. However, increasingly limited land and water resources, natural calamities, climate change and other social changes had affected agricultural production and posed risks to food security in these countries.
Dang Kim Son, general director of Viet Nam's Institute of Policy and Strategy for Agricultural and Rural Development said that high economic growth would improve living standards, but would also widen the income gap between rural and urban areas, ensure rural poverty and create social conflicts.
"This required consideration of a better model for agricultural and rural development for the future," Son said.
"Viet Nam, with nearly 70 per cent of its population living in rural areas and an agricultural sector which ensured the livelihood of a large portion of the population, also needed strong policies to maintain stable growth of the sector," he said.
Choe Yangboo, President of the Asian Society of Agricultural Economists said the assurance of food security was hot topic in regional countries, especially with urbanisation and the decreasing availability of cultivation area.
He said maintaining agricultural land, for rice production in particular, was one way to ensure stable development.
Delegations agreed that the conference, which is held every three years, would be an opportunity for researchers, scholars and policy makers in Asia to discuss and co-operate with each other to solve complicated issues as they emerged during the development process.
More than 300 delegations from 30 countries will join seven sessions to discuss agricultural-related issues in Asia today. Participants expect to find useful ideas and strategies that can be put into practice.
The event is co-organised by the Ministry of Agriculture and Rural Development and the Asian Society of Agricultural Economists.
Vinalines in tie with foreign firms to build ports
Vietnam National Shipping Lines Corp (Vinalines) has announced to clinch deals with two foreign partners to build two international terminals in central and northern regions of Vietnam.
The Netherlands-based Rotterdam Port Co will be responsible for the researching, building and operating of the Van Phong International Sea Port in central Khanh Hoa province, while Japan-based Molnykit Corp will be the main builder of the northern Hai Phong International Port.
Representatives of Rotterdam Port Co are expected to visit Vietnam for setting up the joint venture with Vinalines for constructing the $200 million sea port of which the construction works were started in October 2009, said Nguyen Canh Viet, general director of Vinalines.
But the investor had to cease the process for the project because of financial difficulty.
Vinalines and Molnykit Corp have planned to start construction the first two harbors of Hai Phong International Port with total investment capital of 30 billion yen in Q4/2012.
After completion, it will be one of the largest container ports in Vietnam.
At the signing ceremony, the construction works would be conducted in two parts.
Part A would be carried out under Public Private Partnership (PPP) method, using ODA fund and counterpart capital worth about $900 million, while Part B will be implemented by Vinalines and Japanese investors with total investment capital of $321 million.
Vinalines and Vietnam Shipbuilding Industry Group (Vinashin)'s subsidiaries, including Nam Trieu Shipbuilding Industry Corp, Bach Dang Shipbuilding Industry Corp, Pha Rung Shipbuilding Industry Corp, Ha Long Shipbuilding Co and Cam Ranh Shipyard Co Ltd, have recently reached a shipbuilding agreement.
Accordingly, 19 ships with the tonnage of 6,500-56,200 DWT and one 700 TEU container ship will be built and completed by five member companies of Vinashin for Vinalines.
In the first six months in 2011, Vinalines posted a loss of VND660 billion, of which Vinalines branch in Ho Chi Ming City accounted for VND140 billion, according to Thoi Bao Kinh Te Saigon newspaper.
In the first six months this year, with freight rates and the amount of transported goods decreasing, many small vessels had to the domestic market only to accept late payments and bear fiercer competitions.
As of June 30, the domestic fleet with Vietnamese flag only gained 6 percent of market share in inland transport, while the rest belonged to 44 foreign-flagged vessels of 6,000-27,000 DWT with that had domestic transportation licenses, according to the figures of Vietnam National Maritime Bureau.
More than 80 percent of imports and exports of Vietnam are transported by foreign shipping companies.
The Vietnamese fleet now has 1,689 ships with total tonnage of 7.5 million DWT, according to the maritime bureau.
Central bank pumps funds via open market
In a move to improve liquidity for banks, the State Bank of Vietnam in the first three days of this week pumped VND9 trillion to banks via open market operations (OMO).
As a result, overnight interest rates on the market rose by one percentage point compared to before: between 16.5 percent -17 percent per year for one-week term, 17 percent – 18 percent for two weeks and 17.5 percent - 18.5 percent for one month.
The central bank injected VND2 trillion, VND2 trillion and VND5 trillion on Monday, Tuesday and Wednesday respectively on the market. On Tuesday, there were 31 banks joining the OMO with the total demand of VND31.5 trillion, 10.5 times bigger than the central bank’s supply.
The moves aim to help improve liquidity in the banking system, especially small lenders, and ease the interest rate uptrend after refinancing rates and interest rates in inter-bank e-payment have also risen.
The interest rates are expected to fall back slightly as net injection on OMO has increased.
Last week, the central bank posted a net withdrawal of VND13 trillion via OMO by taking back VND27 trillion while lending VND14 trillion at 14 percent per year for 14-day term.
The central bank reported continuous net injection on OMO previously.
Although the central bank suddenly revised key interest rates a week ago to keep tightening money supply on the banking system and prevent pressure on inflation, the recent moves show that it continues to provide flexible and cautious management from now to the end of this year.
Commercial banks’ borrowing costs from the central bank have turned more expensive after the key interest rates have increased, preventing lenders from using cheap capital sources on the refinancing channel to re-lend on the inter-bank market or other markets.
According to a commercial bank, the central bank put a net injection of around VND28 trillion on OMO in September while it withdrew VND66 trillion this year. Experts said banks would be cautious and tighten credit procedures in the near future.
Sri Lanka inks deal to buy Vietnamese oil
Sri Lanka on Friday signed agreements with Vietnam to buy oil and share oil and gas expertise, just after it announced the discovery of natural gas offshore in the Mannar Basin.
Those two agreements were among eight signed after a two-day visit by Vietnamese President Truong Tan Sang, along with a business delegation, to explore the expansion of commercial and diplomatic ties.
"We have signed two agreements, and one is to purchase oil from Vietnam's state oil firm by the Ceylon Petroleum Corporation," External Affairs Secretary Karunatilaka Amunugama told Reuters.
The other related to technical cooperation on oil and gas exploration, he said. He gave no details on the terms.
Six other memorandums of agreement, including one relating to defence cooperation, were also signed, he said.
Sri Lanka produces no oil and is dependent on imports, which cost it $3 billion in 2010, but this month had a promising natural gas find that may reinvigorate exploration interest in the country.
On Oct. 2, driller Cairn India Ltd. said it had found a natural gas deposit in the offshore Mannar Basin, but said more drilling was needed to see if it was commercially recoverable.
Sri Lanka also wants Vietnam's expertise to boost foreign direct investment, after the end of a quarter-century war that had long hampered the growth of the Indian Ocean island nation's $50 billion economy.
"We are ready to share any experience in the national development of Sri Lanka," Sang told an audience of Sri Lankan business owners in the capital, Colombo.
Sang said there was potential for increased cooperation in the textile, oil and gas, telecommunications, banking, infrastructure, security and education.
Outstanding brands honoured with Gold Star awards
The top 200 Vietnamese trademarks representing 25 commodity groups and 10 businesses with good performance of social responsibilities were honoured at the 2011 Vietnam Gold Star Awards ceremony held in Hanoi on October 15.
After nine years, the Gold Star Award has become one of Vietnam’s most prestigious and large-scale trademark promotion programmes.
Addressing the event, Deputy Prime Minister Vu Van Ninh said Vietnamese brands have made contributions to promoting the image of Vietnam and increasing its position in the international arena.
The Deputy PM asked ministries, agencies and localities to facilitate businesses in general and those wining the Gold Star Awards in particular for further development.
This year’s programme attracted close to 350 brands from 54 cities and provinces. In particular, this is the first time businesses which well performed social responsibilities have been commended at the event.
Tien Giang seeks more investment from Korea
A workshop on investment promotion was held in the Mekong Delta province of Tien Giang on October 15 to introduce the province’s potential and investment opportunities to businesses from the Republic of Korea .
The event was organised as part of the Vietnam-RoK Culture Days in Tien Giang province.
At the event, Doan Van Phuong, Director of the provincial Department for Trade and Investment Promotion, highlighted the locality’s strengths and advantages for foreign investors and pledged to create favorable conditions for RoK’s businesses to set up shop in Tien Giang
Le Van Huong, Vice Chairman of the Tien Giang provincial People’s Committee, said that RoK’s businesses are involved in 14 out of 62 foreign direct investment (FDI) projects in the province with a total investment of 144.5 million USD, operating mainly in the fields of garment, footwear, seafood processing, and animal feed.
RoK’s investors have made remarkable contributions to the local economic development in recents years, Huong stressed.
Vietnam foreign reserves to grow by $5 bln: PM
Vietnam’s economy will grow by 5.9 percent this year and foreign reserves will increase by US$5 billion, Prime Minister Nguyen Tan Dung has said during a meeting on the country’s macro-economy in 2011.
Addressing the business community at the meeting, the Prime Minister admitted that the country’s economy is in difficulty but it has managed to gain considerable results.
He said economic growth in the first three quarters of this year was in an upward trend, and the full-year growth was expected to be 5.9 percent compared with the 6-percent target, which he said was “acceptable” amid economic difficulties.
As for the battle against inflation this year, Dung said the Consumer Price Index was under the government’s control and tended to gradually fall down.
Another good sign of the economic development, he said, was that the export turnover in the year to September rose by 34 percent over the same period last year, reducing the trade gap to below 10 percent from the 20 percent posted last year.
He affirmed that the exchange rate was under the flexible management of the State Bank of Vietnam.
“Another good point is that the balance of payment will post a surplus this year after two consecutive deficits,” the Prime Minister said.
“This will enable Vietnam to increase foreign reserves by $4-5 billion.”
According to the International Monetary Fund, Vietnam’s foreign reserves in the first half were recorded at around $13.5 billion.
Prime Minister Dung said Vietnam’s overspending this year was estimated at 4.9 percent, down by 0.4 percent compared with estimates.
He said overspending had dropped thanks to the increased budget collection.
As for the complaints that the budget collection of 25 percent of GDP was too high, causing difficulty to businesses, he affirmed that the rate was reasonable.
“The budget collection includes incomes from the land use right auction and crude oil exports.
“If these incomes are excluded, the tax collection only accounts for 15 percent of GDP, which is equal to the rate in the neighboring countries and does not hinder businesses,” he explained.
The Prime Minister also admitted that challenges and risks were still lurking ahead for the country’s economy.
He said despite the government and businesses’ efforts, only 1.55 million new jobs were created this year, failing to meet the target of 1.6 million.
“This is a weakness that we should improve as soon as possible,” he said.
Interest rate cap leaves banks in the lurch
As the central bank has slapped a ceiling of 14 percent per year on deposit interest rates, investors are turning their back on bank savings, putting banks under liquidity pressure.
In September, most banks cut their deposit interest rates to 14 percent as ordered by the central bank who threatened strict punishment against violators.
With a lower interest rate, bank savings are becoming less attractive to investors, Saigon Tiep Thi newspaper reported.
Many investors also withdrew their savings to buy gold in mid-September, when the domestic gold price fell.
Banks’ mobilized capital has also been affected as investors have been drawing their savings to buy dollars.
Truong Van Phuoc, CEO of Eximbank, said capital mobilization at his bank this month fell by 2 percent month on month while lending also saw a similar drop.
Phuoc said deposits between July and September fell by as many as VND4 trillion (US$195 million).
Other banks also admitted to having similar saving outflows, though they declined to give exact figures.
The decreased mobilized capital has put liquidity pressure on banks and other credit institutions and heated the interbank interest rate market.
In the first week of this month, the overnight average interbank rate rose to 15 percent while the interest rate for one-week term increased to 15.5 percent and 17.5 percent for one-month term, much higher than the 14 percent rate applied for deposits mobilized from the public.
Exchange rate pressure has also emerged recently as the central bank has increased the interbank dollar exchange rate for six times this month.
The current rate has been set at VND20,688 a dollar, up by VND60 a dollar compared with early this month.
Banks have all adjusted their selling price of the greenback to the ceiling rate of VND20,895 a dollar.
Interbank transaction in dollars also saw a strong increase in turnover.
In the last week of September, interbank dollar trading turnover rose to US$3.01 billion, or $602 million a day, from the $2.64 billion a week earlier.
Experts said such development of the exchange rate was predictable since dollar demand always rose in the last quarter.
But they said the pressure had come earlier than expected since a large amount of foreign currencies had been spent on gold imports.
Besides five tons of imported gold in August, banks also had to use dollars to buy gold from the gold account trading floor on the international market to make up for an estimated 10 tons of gold they have sold to stabilize the market since October 6.
Under such pressure, the dual forex rate phenomenon has reportedly returned to some banks.
The director of a machinery importer said a bank had offered to sell dollars to him at VND21,450 a dollar, while the listed selling price was only VND20,885 a dollar.
Overseas Vietnamese invest over $1 bln
Overseas Vietnamese invested in 213 projects worth a total $1.047 billion in Vietnam in the first 9 months of this year, said an official from the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.
New investments included 170 wholly-owned projects, 39 joint ventures, and 4 joint stock company projects and business cooperation contracts, said Nguyen Thi Bich Van, deputy head of FIA.
Incomplete statistics showed till the end of 2010, about 3,500 enterprises had been established or invested by overseas Vietnamese with a total registered capital of $11 billion.
The total amount of remittances sent to Vietnam in recent years has reached $7-8 billion per year, FIA said.
Overseas Vietnamese investors from the US invested most with 67 projects worth $285 million, followed by investors from Poland with 4 projects valued at $121 million.
Manufacturing and processing were most attractiveness to overseas Vietnamese investors, followed by accommodation and catering services, information and telecommunications, real estate, agriculture and forestry, seafood and construction.
Vietnam stock market, banks hit by $240 mln fraud: report
Vietnam's stock market and banks have been hit by a 5 trillion dong (US$240 million) fraud, a state-run newspaper said on Thursday.
Police have detained a former executive of VietinBank's Nha Be branch in Ho Chi Minh City on charges of fraud, the Tuoi Tre newspaper run by the Ho Chi Minh City Communist Youth League said.
The former executive and another staff of the bank, who is also in police detention, have falsified contracts between the bank branch and securities firms to misappropriate funds, Tuoi Tre quoted police sources as saying.
The two have also used fake deposit contracts as collateral to get loans from banks and raised deposits from traders and investors on the over-the-counter stock market, it said.
The credit scam has raised concerns over lenders' asset appraisal and management, said Nguyen Tuan, director of APEC Securities Co.
"Investor's confidence in the stock market has been severely hurt and led to sell-offs," he said.
The benchmark VN Index has fallen around 14 percent this year.
The report of fraud emerged at a time when Vietnam's central bank is drafting a restructuring plan, paving the way for mergers and acquisitions among banks, in a move to step up the restructuring of the sector hit by rising bad debt.
The State Bank of Vietnam is drafting the plan that included considering mergers and acquisitions to deal with small, struggling banks, an online report by the newspaper Sai Gon Tiep Thi newspaper said on Thursday.
After years of high credit growth, bad debt in Vietnam's banking system reached 3.04 percent of all loans at the end of July from 2.16 percent at the end of 2010, according to government statistics.
The central bank has said bad debt could rise to 5 percent of total loans by the end of 2011, but many economists and bankers say the true level of non-performing loans in the system is likely to be higher than the official figures.
The newspaper report did not give any bank names for possible mergers and acquisitions or any timeline for the central bank's plan.
At several banks, non-performing loans exceed the value of their equity, Sai Gon Tiep Thi quoted Le Xuan Nghia, deputy chairman of the National Financial Supervisory Council, as saying.
Officials at the central bank were not reachable for comments.
Vietnam has more than 40 partly private banks, led by VietinBank and Vietcombank, as well as four fully state-owned banks, two of which are policy lenders.
State-owned Agribank, the country's largest bank by assets, had bad debt that accounted for 6.67 percent of its outstanding loans at the end of August, said the ruling Communist Party's bureau that watches state-run businesses. ($1=20,880 dong)
OTHERS
Indonesia nickel move may cut global supply 35%
Lithium Market Forecast: Top Trends for Lithium in 2025
Thailand expects 25 percent loss of rubber production in December due to storms
India increases rubber production by 8.6 percent in 2024
Economic-trade cooperation remains bright spot in Việt Nam-China relations