SBV yet to mull deposit rate ceiling cut
The State Bank of Vietnam (SBV) has no plans to lower the ceiling interest rate for short-term deposits in the local banking system, a source told the Daily on August 26 afternoon.
Currently, the central bank imposes a cap of 6% per annum on deposit tenors from one to six months.
In recent days, some commercial banks have reduced deposit rates, sparking rumors that the SBV would cut interest rates soon.
Vietcombank reduced its deposit rates by around 0.2 percentage point for all tenors on Monday. Earlier, BIDV and VietinBank announced slight deposit rate cuts while Agribank has applied low deposit rates for a long time.
At present, State-run banks account for around 60% of the local deposit market.
Large commercial joint stock banks have offered deposit rates slightly higher than those of State-run banks while launching promotional programs to woo depositors.
On the other hand, they have introduced preferential credit programs to customers. Maritime Bank is offering a new credit package that allows individual clients to benefit from an interest rate of 0% per annum if their loans are disbursed in certain periods each month.
Other banks have also launched loan packages for their target clients such as small traders, small and medium-sized enterprises (SMEs) and exporters.
Therefore, industry insiders have forecast further rate cuts by banks in the coming time.
Most banks, especially State-run banks, have seen a capital surplus. So, lowering mobilization rates can help reduce input capital costs while they are still struggling to spur sluggish credit growth, according to the experts.
Ending June 30, Vietcombank reported a deposit growth rate of 14.52% while its credit grew only 6.65% against late 2013.
Meanwhile, the nation’s consumer price index (CPI) in August rose just 0.22% month-on-month and 1.84% compared to December 2013. This is a foundation for banks to keep interest rates low.
According to lenders, whether the central bank lowers the deposit rate ceiling in the current circumstances or not does not matter since most banks have long maintained their deposit rates far below the current ceiling to keep themselves afloat.
In a notice released on August 15, the SBV said that the interest rates for demand deposits and those of one month or less in dong have hovered around 0.8-1% per annum. Tenors from one month to below six months have had interest rates of 5-6% per annum, six to under 12 months 7.5% and one year or longer 7.5-8.1%.
Enterprises in the fields of agriculture, export, supporting industry and high technology and SMEs have been able to borrow loans with annual interest rates of 7-8% compared to normal rates of 9-10% for short-term loans and 10.5-12% for medium to long-term credits.
Chinese goods imports into HCMC shrink
Imports from China into HCMC in the year to date have shrunk by 7.4% versus a year ago, but have still accounted for 21% of the total import bill of the city, the municipal government said in a report released on August 26.
HCMC’s total import spending has reached US$15.6 billion, falling 9.1% versus the same period last year, heard a review meeting on socio-economic performance in the January-August period held by the city government.
Meanwhile, imports from other markets like Singapore, Taiwan, Japan, South Korea, and the U.S. have sharply increased.
Particularly, imports from Singapore, the U.S. and South Korea have surged by 58%, 27.2% and 16% respectively compared to the same period last year. Despite the strong increase, the market shares for imports from Singapore, Taiwan, and Japan remain modest, at 13.4%, 7.2%, and 7.1% respectively.
While the total import value of the city has decreased, its exports in this period have moved up 2.3% year-on-year at US$15.8 billion. Items contributing to the city’s export growth are seafood, apparel, rice, coffee, and footwear.
Given the above statistics, HCMC authorities noted that the city’s import and export markets have been getting more diverse, reducing its dependence on a single market or one supplier.
Fibre industry on the rise
The local fibre industry has been booming on the back of rocketing investment and the resultant reduced dependence on imports.
Vietnam’s export value of fibre amounted to an estimated $1.6 billion in the year to August, a 20 per cent rise on-year with major suppliers like Phong Phu, Tra Ly, Phu Bai, and Hoa Tho signing export contracts with foreign partners for the whole of this year.
After many years of reliance on material imports, the local garment industry has become much more independent, with the spinning sector making the gains needed to get there.
Among the leaders in the spinning business is Phong Phu Joint Stock Corporation, which operates three companies producing and trading in fibre and eight spinning factories providing a variety of quality fibres and threads.
“Phong Phu’s fibre products feature strong visibility in the domestic market, particularly in the high-end segments such as OE cotton or cotton ring fancy. Besides, our company is the main distributor of quality thread to UK-based Coats Group,” said the company’s general director Pham Xuan Trinh.
Phu Nam Fibre JSC, based in the Phu Bai Industrial Park in the central province of Thua Thien-Hue, has the capacity to supply nearly 30,000 spindles, half of which are sold in the domestic market.
The company envisages scaling up production to surpass 30,000 spindles to meet growing demands both at home and abroad.
With approximately VND500 billion ($23.8 million) in the total revenue last year, of which exports accounted for 40 per cent, Tra Ly Fibre JSC has made a significant contribution to fulfilling the demand of fabric producers.
Its new spinning factory, with 15,000 spindles and costing VND160 billion ($7.6 million) in the total investment capital, was commissioned in the second quarter this year.
Hanoi Textile Garment Joint Stock Corporation (Hanosimex) is a typical example when it comes to making investment into boosting fibre production capacity.
“Our VND410 billion ($19.5 million) project to invest in 36,000 spindles with the annual capacity of 6,400 tonnes of quality fibre was approved by parent company Vinatex and is slated to kick-off construction early next year,” said the company’s general director Nguyen Song Hai.
The Vietnam Cotton and Spinning Association (VCOSA) has forecasted that export surplus in the fibre industry could be in the range of $1-1.1 billion this year, compared to $600 million in the first eight months of this year.
VCOSA statistics show that by the end of 2013, Vietnam was home to more than 100 spinning businesses with 6.1 million spindles and total output of 720,000 tonnes. This represented around 2.1 per cent of global production capacity (250 million spindles).
Of the 720,000 tonnes, 250,000 tonnes is distributed domestically and 470,000 tonnes is earmarked for export.
Vietnam’s leading fibre export market is China, making up 44 per cent of total value, followed by South Korea, Indonesia, Thailand and India.
State Bank exec discusses credit rating system development
Deputy General director of the State Bank of Vietnam’s Credit Information Centre Nguyen Huu Duong reaffirms the need to implement an effective internal credit rating system to help banks boost lending.
The State Bank has recently urged banks to push up their unsecured lending by developing an internal credit rating system. Could you comment on their progress so far?
Sure. In early 2013, the State Bank enacted Circular 02/2013/TT-NHNN on the classification of assets, level and method of risk provisioning to help banks deal with operational risks.
Specifically, item 3, clause 5 in that circular stipulated that credit institutions and foreign bank branches need to develop an internal credit rating system for rating customers that, when necessary, could serve to filter out bad borrowers, help banks make better decisions, improve credit quality, and devise policies to mitigate risk commensurate with a particular bank’s operational scale and real situation.
This acts as the legal base for banks to provide unsecured loans, as businesses right now are finding it hard to access bank capital and have little collateral to put up.
However, whether banks choose to use the credit rating system or not when disbursing loans is their choice, and at their own risk.
Those with a trustworthy credit rating system that uses information from the Credit Information Centre (CIC) and that control risk effectively can ideally boost lending though unsecured loans.
What’s the ratio of ‘healthy firms’ based on the CIC’s appraisal?
Each year the CIC gives a credit rating to around 25,000 businesses that represent around 20 per cent of the total number of firms with established banking relationships. There are certain differences in respect to the rate of ‘good firms’ in specific areas, as well as operational scope.
Our centre’s credit rating results last year showed that healthy companies accounted for 58 per cent of the total.
In fact, it has been reported that more than a few banks are doubtful of a credit rating system due to a lack of transparency regarding the input information used to develop firms’ ratings. Is this case?
The most challenging task in assessing an appropriate credit rating is that firms lack transparency in their financial reporting due to the low rate of audited financial statements.
To address that dilemma and ensure accuracy of the results, it is important that we cross-check the information provided by other sources. This could involve comparing the financial statements presented by banks with those from the General Statistics Office and General Department of Customs, tracing firms’ credit relations with credit organisations, or looking at financial changes over the course of a firm’s operations.
Financial reports that have been ‘massaged’ can easily be identified if firms have been operating for more than three years, as there will be a lack of uniformity across their reporting periods.
Most banks have not yet started work on an internal credit rating system. Can this effort be pushed forward?
Using a credit rating system is becoming more popular these days in Vietnam. Some banks have developed a system already, particularly after the State Bank enacted Circular 02.
I believe this practice will further expand in the coming time. From their side, firms will be more active and transparent in delivering information to banks, as this will open the door for them to access capital.
OTT market sees fierce competition
The competition between over-the-top services providers has been increasingly fierce, with fresh players joining the market.
In the recent past Zalo announced it had reached 15 million users, with 185 million messages delivered daily through its system and up five million users compared to March 2014.
Viber also claimed its users amounted to 12 million as of March.
Zalo and Viber are the two leading OTT service providers in the domestic market.
Back in mid-February 2014, Garena (registered in Singapore but with headquarters in Bangkok) made its foray into Vietnam with the launch of its BeeTalk app.
In mid-April, Bkav – Vietnam’s leading Internet security firm – rolled out its newest product Btalk. It has only managed to attract just over 100,000 users in its three months since launching.
Leading telecoms Viettel, MobiFone and VinaPhone have also reportedly claimed they are ready to offer OTT services, but “now is not the right time for such a launch”.
“OTT services are not having a drastic effect on the revenues of mobile service providers, which is why we have yet to jump into this field,” said a source from one of these leading telecoms.
While the top market players have yet to enter the race, the competition between existing OTT service providers is becoming much more severe.
Industry experts have said that unique services and solutions are key to providers getting the upper hand.
To strengthen its position, Viber has launched the Viber Out package, that allows uses to even call fixed telephone numbers very cheaply, for just VND400 per minute.
For its part, Zalo has rolled out its Zalo 2.0 version which includes marked changes to its interface and functionality, commensurate with its continuous product innovations.
Newcomer BeeTalk has reportedly made quite a splash through its marketing and promotions that have included outdoor billboards and brand ambassadors.
Nguyen The Tan, deputy general director of VC Corp, owner of the Zalo app, said “Competition between OTT service providers is not only concentrated on new innovative functions, but also transmission stability. Businesses that are consistent in providing basic functionality will ultimately succeed.”
According to Nguyen Tu Hoang, vice chairman of Bkav (owner of Btalk), OTT software products are very similar in terms of their functions, so to gain market share amid high competition, newcomers need to have a breakthrough development strategy.
“Stable quality and new experiences are crucial in helping gain users over the long-term,” Hoang added.
He also said that Btalk aims to grow into a market leader in OTT services provision over the next few years, before launching value-added services to further monetise its product.
According to Vuong Quang Khai, a leader at Zalo, advertising that target specific customer segments, value-added services (games, tone music, live pictures, etc.), and e-commerce are great ways for service providers to generate more revenue.
Khai forecasted that e-commerce would enjoy a development boom with OTT, but admitted that it would take time to realise this goal.
Exporters in Mekong Delta waver over rice purchase
Local exporters in the Mekong Delta have been hesitant in purchasing rice after many weeks hastily buying large volumes from farmers.
Lam Anh Tuan, director of Thinh Phat Company, a member of the Vietnam Food Association (VFA), told the Daily that local exporters will only buy rice after they secure contracts with importers. Tuan attributed the problem to the higher domestic price of rice than the export price and the currently restricted exports in small volumes to China, thus making life difficult for exporters.
Nguyen Thanh Phong, director of Van Loi 2 Company, gave another reason concerning the doubt of Vietnam winning a government-to-government contract to supply 500,000 tons of rice to the Philippines. The auction result is expected to come out this Thursday.
If Vietnam can grab the deal, the domestic price of rice will be higher than last month; otherwise, the local rice market will witness a price plunge. As such, local exporters are hesitant to buy rice, Tuan added.
Despite a slowdown in trade, the rice price remains the same as last week.
Price of IR 50404 paddy currently ranges from VND5,000 to VND5,100 a kilo while IR 50404 material rice price is between VND7,500 and VND7,550 a kilo.
Explaining the stable price, Duong Van Men, a rice trader in Dong Thap Province, said the volume of rice harvested from the summer-autumn crop has been largely consumed and a number of exporters that have yet to finish their business contracts have to continue buying rice.
In terms of the export price, 5% broken rice, 25% broken rice and jasmine rice are offered at US$450-460, US$400-410 and US$590-600 a ton respectively.
According to VFA, the association’s members shipped abroad nearly 3.8 million tons of rice with the free-on-board (FBO) value of around US$1.7 billion from the year to this month’s first half.
HCM City City employment seen rising in September
The HCMC Center of Forecasting Manpower Needs and Labor Market Information has forecasted that companies in the city will need around 20,000 workers next month, some 6,000 higher than last month.
In particular, they will need 7,000 unskilled workers and 2,600 laborers of secondary schooling for the sectors of apparel, footwear, services, housework, and sales.
Meanwhile, 4,400 laborers at intermediate level and 6,000 people having college degrees and higher degrees are needed for the fields of mechanical engineering, construction, information technology, sales, consulting, customer care services and tourism.
The increase in employment demand for next month is explainable as enterprises need more workers to fulfill their orders in the final months of the year.
The high demand is a chance for jobless people in the city but they will have to compete hard to land a job as most companies now care more about the quality and productivity of laborers.
Danang boosts cooperation with Germany
Danang municipal People’s Committee Chairman Van Huu Chien paid a courtesy visit to Second Mayor Dr Dorothee Stapelfeldt of Hamburg on August 28 to discuss strengthening cultural exchange and cooperation between the two cities.
Chien briefed his host on the current state of affairs of Danang-Hamburg relations and wished the two sides could work more closely together to consolidate the cultural ties and elevate cooperation, especially in the fields of tourism, industry, and service.
The Hamburg Second Mayor welcomed the visit by Chien and his entourage, which she said will help open up a bright prospect for more effective cooperation between the two cities in the coming time.
Stapelfelt revealed that she is planning to lead a group of representatives from the Hamburg business community on a visit to Danang in 2015 to explore cooperation and investment opportunities.
The same day, both Chien and Stapelfelt attended an investment seminar organizedby the Vietnam Embassy in Germany in collaboration with the Hamburg Chamber of Commerce and Industry and local businesses.
At the event the attractiveness of Danang as a place to do business and the opportunities in the city and region for cooperation and investment were the focus of attention, particularly those in the tourism, seaport, industry and service sectors.
Many Hamburg businesses showed keen interest in Danang, saying they regard the city as a promising future investment destination.
During his visit, Chien worked with many representatives from the Vietnam Embassy in Berlin and met with representatives of Overseas Vietnamese (OVs) in Germany.
Seminar discusses ways to penetrate Russian market
Boosting trade promotion and investment in the Russian market was the main theme of a seminar held in HCM City on August 29.
Regarding prospects for future trade development between Vietnam and Russia, some experts emphasised that the list of import-export goods of both nations are not in competition but complement each other.
Russia is an important and traditional market of Vietnam with a population of 140 million and a market that favours consumer products from Asian nations thanks to their low-cost and diversity, experts said.
Tran Chi Tam, former Vietnamese minister-counsellor in Russia said Vietnam and the Customs Union of Russia, Belarus and Kazakhstan are speeding up the signing of Free Trade Agreement (FTA) and hope to sign it later this year, creating favourable conditions for Vietnamese businesses to promote their advantages and exploit the huge market through import-export activities.
Deputy Minister of Industry and Trade Do Thang Hai said with the signing of the FTA between the Customs Union of Russia, Belarus and Kazakhstan and Vietnam, two-way trade turnover is likely to increase to US$12 billion by 2018.
The Ministry of Industry and Trade’s European Market Department Deputy Director Tran Ngoc Quan said Russian businesses are very keen on investing in Vietnam’s economic sectors such as petroleum and mineral exploration, transport, communications, satellite, and automobile assembly.
Some Vietnamese businesses announced they are formulating plans to cooperate with Russian partners and invest in the Eurasian nation’s market. As of June 2014, Vietnamese businesses have invested over US$2.47 billion in 17 Russian projects.
Labour challenges posited by TPP, EVFTA discussed
Employment and labourers’ income issues, especially the implementation of international labour standards, will pose significant challenges to Vietnam when the Trans-Pacific Partnership Agreement (TPP) and the Vietnam-EU Free Trade Agreement (EVFTA) come into effect.
The statement was made by Vu Quang Tho, Director of the Vietnam General Federation of Labour (VGCL)’s Institute of Worker and Trade Union on August 29 at a seminar in HCM city discussing the ramifications of the TPP and EVFTA on labour relations and trade union activities. During the seminar, delegates said that these agreements will have a comprehensive impact on all economic activities, especially businesses and employment issues.
Accordingly, participating nations should implement basic principles and rights at workplace according to the International Labour Organisation Declaration adopted in 1998.
Tho said that these agreements have required the involved nations to make huge adjustments on law and policies on labour union.
Delegates said that the free participation of labourers in setting up labour organizations will lead to difficulties in management, even unhealthy competition among associations, and adversely affect the interests of collectives.
Le Thanh Thuy from the Vietnam Chamber of Commerce and Industry in HCM city said these agreements should greatly benefit Vietnam by generating more jobs, improving the quality of human resources and urged businesses to participate in environmental protection.
Delegates also recommended that employment centres should enhance their capacity and serve as a bridge to provide useful information to employees and employers.
At the same time, they emphasised the need to establish a forecast centre for human resources and labour market information, making it possible for businesses to devise their own strategies for better operations.
Int’l community supports agricultural restructuring
Minister of Agriculture and Rural Development Cao Duc Phat on August 29 called for the support of international donors in creating a new momentum for rural development and restructuring the agricultural economy.
Lan Huong, a representative from the UN Food and Agriculture Organisation (FAO) in Vietnam, said the FAO considers improving the income of farmers as the key factor in development.
“The FAO fully supports the Vietnam government because its overriding goal aims to improve the livelihood of farmers,” Huong said.
The The FAO plans to provide assistance in the four areas of –institutional reform, climate change adaptation, improvement of sustainability of regulations on goods and services, and effective and comprehensive improvement of agricultural and food systems.
Nguyen The Dung, a representative from the World Bank (WB) in Vietnam, in turn said the WB is supporting a “Sustainable agriculture transformation in Vietnam” (VnSAT) project.
In the future, the WB proposes VnSAT focus on rice production in the Mekong Delta region and coffee in the central highlands. In addition, VnSAT proposes enhancing agricultural restructuring and initiatives on sustainable rice and coffee.
For his part, Canadian Ambassador to Vietnam David Devine said Vietnam is shifting the growth model to one based on raising competitiveness, productivity, added value and sustainable development.
“Thus, institutional changes to improve transparency and the Government’s responsibility to assist local people create a market niche are critically important,” he said.
Investment incentives in agriculture should attract more Canadian investors to Vietnam, especially in hi-tech and environment services. Minister Phat said many international organisations have provided significant assistance for Vietnam agricultural restructuring projects through specific programmes.
Specifically, the FAO has helped the Ministry of Agriculture and Rural Development develop action plans for three sectors: plantation, husbandry and fishery.
The Canadian Government has funded CAD500,000 for Vietnam to implement a technical and policy support project to restructure the agricultural sector in the 2013-2020 period.
Additionally, The WB has funded sustainable agricultural production transformation projects, which assist Vietnam in devising important market chains for agricultural products.
RoK businesses updated on tax, customs policies
Representatives from over 130 Republic of Korea (RoK) companies attended a dialogue with the Dong Nai Province Customs Department on August 28 to stay abreast of Vietnam’s tax and customs policies.
Customs officers explained changes including restrictions on the import of used machinery, quick settlement of administrative procedures concerning tariffs, changes in the VAT and new tax policies.
Some Korean representatives in attendance raised questions about key issues relating to the clearance of goods, investment incentives, hiring of foreign workers, and health care.
Head of the Dong Nai provincial Customs Department Le Van Danh said the local customs agency is committed to streamlining the goods clearance process and reducing the time involved as well as creating more favourable conditions for businesses to operate effectively.
So far, Korean companies have pledged total investment capital of US$4.3 billion in 280 projects, ranking second among foreign investors in Dong Nai, and accounting for 10% of the total of RoK investment in Vietnam.
Economists support PM’s speech on closing weak banks
Many banking experts have expressed agreement with Prime Minister Nguyen Tan Dung’s assertion that weak banks should be dissolved.
At the regular government meeting, held from August 27 to 28, Prime Minister Nguyen Tan Dung asked agencies to deal with bad debt during this time of bank restructuring. He said, “Weak banks must be strictly monitored and shut down if necessary.”
In June, the National Assembly gave its consent to the new banking bankruptcy policy. From January 2015, credit institutions will be able to file for bankruptcy. If an insolvent facility does not file for bankruptcy on its own, the State Bank of Vietnam will file for bankruptcy on behalf of that facility. Those which have taken out special loans from the state bank will have to pay their debts before distributing assets and paying salaries and insurance to employees.
One banking expert said that this is a strong message to bank shareholders, meant to urge them to quicken the restructuring process. Many banks have tried to improve their operations by making new development plans and offering more credit services. However, some banks have been slow to reform, some still operate with negative charter capital due to the heavy load of bad debt. He said, “The state bank has been supporting the banking system, but the state cannot subsidise a weak system forever.”
The leader of a commercial bank in Hanoi said, “Bankruptcy of institutions in the financial sector is not necessarily a bad thing. It could serve as a warning to other banks. I think Vietnam has too many small banks and most of them are performing poorly.” He went on to say that the true value of a bank does not lie in virtual profits or adventurous loans, but in the benefits for its shareholders and customers.
Keith Pogson, the head of Asia-Pacific Financial Services, Ernst Young, agreed that Vietnam should dissolve its ‘zombie banks’.
ASEAN markets more important for US companies: survey
Over the past two years, ASEAN markets have become more important for 58 percent of respondents of a poll of 588 senior executives representing US companies in all 10 ASEAN countries.
The ASEAN Business Outlook Survey, the 13th of its kind, was conducted by the US Chamber of Commerce and the American Chamber of Commerce in Singapore (AmCham Singapore ) from May 5 to June 5.
According to the survey results, released in Singapore on August 28, 74 percent reported that their companies’ level of trade and investment in ASEAN has increased over the past two years, and 89 percent of respondents expect it to rise over the next five years.
Region-wide, respondents reported that Indonesia , Vietnam and Myanmar are the priority markets for future business expansion, accounting for 41 percent, 37 percent and 35 percent, respectively.
The profit outlook is solid with 63 percent of the executives expecting profit increases this year, and 81 per cent next year. As many as 53 percent of the respondents expect their companies’ workforce to expand this year, while only 5 percent hope for decreases.
The vast majority (81 per cent) of surveyed business executives in all the 10 ASEAN countries believe that ASEAN integration is important in helping their companies do business in the region.
The survey also revealed that US companies take advantage of regional economic integration efforts, including ASEAN’s free trade agreements (FTAs) with Australia and New Zealand , China , India , Japan, and the Republic of Korea.
Nearly half (49 percent) reported that they use the FTAs to export goods from ASEAN to China . American companies’ use of the other FTAs ranges between 43-47 percent.
As many as 98 percent of respondents in the region said that the Regional Comprehensive Economic Partnership (RCEP) will either help or have a neutral effect on their companies’ trade and investment in the region.
Meanwhile, 51 percent thought that the Trans-Pacific Partnership (TPP) agreement will help their companies’ trade and investment with Indonesia , Malaysia , Singapore , and Vietnam – the four ASEAN members participating in TPP negotiations.
“This survey substantiates what ASEAN-based executives of US companies witness every day – ASEAN is a dynamic and forward-looking region with enormous growth potential, energetic populations, and exciting prospects for regional integration,” said AmCham Singapore Chairman James Andrade.
However, it also found substantial concerns to companies’ growth in the region, including corruption, burdensome laws and regulations, lack of transparency, poor quality of infrastructure, and the difficulty in moving products through customs in some countries.
Construction begins to build route to Nghi Son economic zone
A VND4,598 billion (US$216 million) Build-Transfer (BT) project to build a route from Tho Xuan airport to Nghi Son Economic Zone (EZ) in the central province of Thanh Hoa was kicked off at a ceremony on August 29.
The ceremony saw the presence of Deputy Prime Minister Hoang Trung Hai, former General Secretary Le Kha Phieu, National Assembly Deputy Chairwoman Nguyen Thi Kim Ngan and local leaders.
The route, when completed in 2017, will be 65.7km long and 12-19m wide to serve vehicles travelling at a designed speed of 80km/h.
Deputy PM Hai stressed the project’s importance in boosting trade and promoting effectiveness of other projects in the Nghi Son EZ, contributing to facilitating socio-economic development and ensuring security and national defence in Thanh Hoa province and the surrounding region.
He asked the project’s investors and contractors to ensure capital and human resource to implement the project on schedule and meet quality and technical requirements.
Deputy PM Hai also asked local authorities to focus on carrying out site clearance, facilitating the construction and taking measures to ensure that transportation, the environment and daily activities of local residents are not adversely affected.
SCIC told to invest in Thai Nguyen steel project
The Government has asked the State Capital Investment Corporation (SCIC) to pour capital in Thai Nguyen steel expansion project’s second phase, and urged banks to restructure debts to ease difficulties for the project owner.
According to the Prime Minister’s instructions, the project invested by Thai Nguyen Iron and Steel Corporation (TISCO) and still remaining uncompleted after seven years will continue to be implemented as proposed by the Ministry of Industry and Trade.
SCIC will have to draw up a capital contribution plan to pour at least VND1 trillion on behalf of the State. Capital contributed will be sourced from the Enterprise Reform Support Fund.
Over the past few years, apart from existing State stakes at some steel enterprises that were previously State-owned enterprises, the State has no longer poured capital in the industry. Vietnam Steel Corporation, the parent company of TISCO, has lagged behind due to the harsh competition in the steel industry from private and foreign-invested enterprises.
The aforementioned project has not been put into operation seven years after its commencement. The project’s investments were initially approved at VND3.84 trillion but have been revised up to VND8.1 trillion.
Some VND4.330 trillion has been disbursed, according to TISCO’s first-half report, but the project has ground to a halt since late last year as banks have stopped lending. This is also the second time in the past seven years the project has deadlocked due to a capital shortage.
As of June 30, 2014, TISCO owed VND7.541 trillion while its equity is only VND1.717 trillion. Due to a lack of capital, the second phase had to be suspended while pending instructions from the Ministry of Industry and Trade and the Government.
While deciding to inject capital so that the investor can finish its project, the Government still requires the industry ministry and the steel corporation to be responsible for the cost-effectiveness of the project and appraise the feasibility of the borrowing plan.
The Thai Nguyen steel expansion plan’s second phase was approved in 2005 to have a capacity of 500,000 tons of steel billet and 500,000 tons of rolled steel, and is one of the projects of Group A to receive preferential loans of the Government.
However, at this moment when the project has fallen far behind schedule, the production capacity of the industry has doubled the demand and many steel plants have to run at less than 50% capacity to avoid inventories.
Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR