US bank 'to fail within months'

A "whopper" bank is going to "go under", Mr Rogoff said

The global financial crisis is set to get worse, with a large US bank likely to collapse in the next few months, a former IMF chief economist has warned.

Kenneth Rogoff's comments came as shares in Fannie Mae and Freddie Mac sank on a report that the home lenders would, in effect, be nationalised.

Despite hopes that the US economy had turned the corner, Mr Rogoff claimed it was "not out of the woods".

"I would even go further to say 'the worst is to come'," he said.

"We're not just going to see mid-sized banks go under in the next few months," said Mr Rogoff, who held the IMF role between 2001 and 2004.

"We're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks."

We have to see more consolidation in the financial sector before this is over Kenneth Rogoff

Speaking at a conference in Singapore, Mr Rogoff, now an economics professor at Harvard, forecast that Fannie Mae and Freddie Mac would "probably" not exist in their present form in a few years.

"We have to see more consolidation in the financial sector before this is over."

On Monday, shares of Fannie Mae fell more than 22%, or $1.76, to close at $6.15. Shares of Freddie Mac fell almost 25%, or $1.46, to $4.39.

'Wrong move'

Shares in Freddie and Fannie first fell sharply last month on fears that they would run out of money to fund their business, forcing the US government to take radical steps to ease the panic.

The two firms are the backbone of the US mortgage market as almost all US lenders rely on them to buy their mortgages in order to access the funds to lend to consumers.

As mortgage guarantors, they must pay out when homeowners default on their loans.

With the housing market across the US crumbling, their finances have come under severe stress.

Problems in the US housing sector prompted the Federal Reserve to slash interest rates to 2% earlier this year.

But Mr Rogoff said the Fed was wrong to cut interest rates as "dramatically" as it did.

"Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States," he added.

US house prices 'see record fall'

The US housing market shows little sign of improvement

US house prices were down a record 15.4% in the April to June quarter compared with a year ago, according to a closely-watched report.

The decline was recorded by the latest S&P/Case-Shiller survey of US national home prices.

The report said the fact that the falls were nationwide was the latest sign the US housing downturn is continuing.

Separate government data said sales of new homes hit 515,000 in July, up from June, but still near a 16-year low.

Both sets of figures come a day after a study by the main US estate agency body, the National Association of Realtors, said the volume of home sales in July were down 13.2 on the year.

'Mortal enemy'

Housing analyst Gary Shilling said a key problem for the housing market was the oversupply of unsold new homes built during the recent boom years, which he estimated still stood at 1.8 million properties.

It is reasonably encouraging in that it suggests that some parts of the problem are more localised now Economist David Sloan of 4Cast

"The key point is we are a long way from bottoming out," he said.

"The bulls keep hoping otherwise, but the basic problem is excess inventories. They are the mortal enemy of prices."

However, other analysts were less downbeat, pointing to the fact that the month-on-month rate of house price declines appeared to be slowing.

The fall in May was 0.85%, compared with 1.28% in April and 2.15% in March.

"Prices are still falling but at a progressively lesser pace, this is the slowest decline since last July," said economist David Sloan of 4Cast.

"It seems that some areas are now finding a base. It is reasonably encouraging in that it suggests that some parts of the problem are more localised now."

The S&P/Case-Shiller survey bases its findings on 20 of the largest US cities.

Those that saw the biggest drop in prices from the second quarter of 2007 to that of this year were the sunbelt cities of Las Vegas (-28.6%), Miami (-28.3%), and Phoenix (-27.9%). Falls were also particularly sharp in Southern California, which had previously seen a huge boom.

The least affected city was Charlotte, North Carolina, where prices fell only 1%.

The continuing falls in the housing market are likely to prove a further headache for the banking sector, which has suffered huge losses as the value of its bonds linked to house prices has fallen.

Credit Suisse to advise on MobiFone’s 2009 share sale

Credit Suisse Group, Switzerland’s second-largest bank, will advise Vietnam’s government on the initial public offering of Vietnam Mobile Telecommunication Service Co., known as MobiFone.

MobiFone will sell its first shares early 2009, Tran Duc Lai, Deputy Minister of Information and Communications, said over the phone from Hanoi Monday. Vietnam’s government is selling shares in state-owned companies as part of a two-decade-old process of shifting to a market-based economy. France Telecom SA, Europe’s third-largest telephone company, is considering buying a minority stake in MobiFone, Chief Executive Officer Didier Lombard said in an interview last month. About seven companies in Asia and Europe, including Vodafone Group Plc. and operators in Russia and Asia,have expressed interest in buying shares of MobiFone, the Southeast Asian nation’s second-biggest mobile-phone company by number of subscribers. The sale was delayed from this year because of a slump in the nation’s stock market. The benchmark VN-Index has rebounded more than 24 percent from a 28-month low on June 20, leaving the measure down almost 51 percent this year. Lai said the government would decide how big a stake to sell in MobiFone following consultations with Zurich-based Credit Suisse. Hanoi-based MobiFone plans to sell 30 percent of its shares at the initial public offering, Vietnam News Agency reported, citing the Ministry of Information and Communications. A spokesperson for MobiFone declined to comment. Source: Bloomberg

Central bank expects forex surplus in 2008

Tellers count money at an ACB Bank branch in Ho Chi Minh City. Vietnam's central bank expects a surplus in foreign currency supply and a stable dollar/dong exchange rate this year, thanks to higher inflows of foreign exchanges towards the year end.

State Bank of Vietnam Governor Nguyen Van Giau said he expected remittances, inflow of foreign direct investment and export revenues to increase late this year. The foreign exchange funds would be sufficient to cover a US$20 billion trade deficit expected in 2008, Giau said on the government’s website. “The State Bank will continue to manage the exchange rate with flexibility based on market situations and maintain relative rate stability to promote exports and limit imports,” Giau said. The central bank was also revising its regulations on licensing joint-stock banks to make sure these entities “are financially strong and highly competitive” as the country continues to integrate in the global market, Giau said. The Foreign Investment Agency had forecast disbursement for foreign direct investment projects this year to jump nearly 38 percent from 2007 to a record $11 billion. New pledges would more than double to $50 billion compared with last year. Remittances from Vietnamese working overseas have also been forecast to reach a record $8 billion this year. The Southeast Asian country's trade account has been under massive pressure this year as raw material prices soared but the trade gap has been narrowing after the government capped imports, especially consumer products such as cars and mobile handsets. Still, January-to-July's accumulated deficit was double the same period last year at $15 billion, government data showed. Weak demand for dollar On the unofficial markets, the dong strengthened to a two-month high yesterday at about VND16,450 per dollar, in line with the interbank market rates and up from VND19,000 in June as demand to hoard the currency has weakened, dealers said. "Many investors are putting their money back into the stock markets, real estate to take advantage of low prices so the dollar is not a favorite investment now," a Hanoi dealer said. Meanwhile, bankers said yesterday their banks had cut annual interest rates on dollar deposits to around 6 percent this week from 8.5 percent in June. The central bank said in a market review yesterday it received little interest from commercial banks to buy dollars last week. "Because of the government's policy to limit imports, foreign currency demand between now and the yearend will not be as strong compared to the same period last year," DongA Bank Chief Executive Tran Phuong Binh was quoted as saying. Source: TN, Reuters

Dragon fruit ready for flight to US

A man and his son harvest blue dragons in Binh Thuan Province. On a 1,500 tree orchard in Binh Thuan Province, Tran Van Thai has been busy noting the temperature, the weight of the fruit and the amount of watering in preparation for exporting dragon fruit to the US next month.

Thai adheres to EurepGAP, an internationally recognized set of farm standards to ensure safe and healthy products. Many central region farmers, members of Ham Ninh Dragon Fruit Cooperative in Ham Thuan Nam District, have been applying the standards since 2006. “Growing high-quality fruit is not easy but if you are determined, you can do anything difficult,” Thai said. He is now happy as his efforts are going to pay off. The Southern Plant Protection Department recently announced that Ham Minh Cooperative’s produce was the only dragon fruit from the province to be exported to the US The first delivery is scheduled for next month. Nguyen Van Hue, another cooperative’s farmer, has applied EurepGAP farming standards for more than a year. Hue said his fruits were now ready to sell to the US, the world’s hardest to please market. “I have grown dragon fruit for a dozen years and have just been waiting for this chance.” Now the owner of two hectares of dragon fruit plants that meet EurepGAP standards, Hue already invested more than VND400 million (US$24,000) in different storage sheds for tools, fertilizers, plant protection chemicals and in plot division. Under EurepGAP standards, the wells for watering must be covered to keep out insects and rubbish such as plastic bags, fertilizer packages and bottles, which are completely prohibited in the orchards, Hue said. “It is hard work but that’s the price for getting rich.” In 2006, the US Ministry of Agriculture and Animal and Plant Health Inspection Service came several times to monitor Ham Ninh’s growing and packing procedures, said Nguyen Thuan, head of the cooperative. In October that year, Ham Minh became the first Vietnamese dragon fruit cooperative to receive EurepGAP certification, after demonstrating good agricultural practices. The certification is the key to accessing worldwide markets. Ham Ninh is working with a company in Ho Chi Minh City to apply biological nitrogen fixation on the fruits as requested by the US Animal and Plant Health Inspection Service before export, Thuan said. Nguyen Van Thu, deputy chairman of the provincial People’s Committee, said the dragon fruit sold in the US would be labeled “made in Binh Thuan.” Province officials went to the US earlier this month to register the brand name. The registration will remain valid until the end of this year or until early 2009, Thu said. Binh Thuan administration has also asked its Department of Agriculture and Rural Development and Department of Industry and Trade to transfer VietGAP farming technology to every local dragon fruit farmer, Thu said. VietGAP, based on international standard systems like EurepGAP or GlobalGAP, provides procedures and principles to raise the fruit quality and protect farmers’ and consumers’ health and the environment. Together with the Mekong Delta’s Tien Giang and Long An provinces, Binh Thuan is one of the main localities nationwide that grow dragon fruit, producing more than 70 percent of the country’s total output. The two other units beside Ham Minh Cooperative to receive EurepGAP certification are Hoang Hau Dragon Fruit Company and Duy Lan Farm. Approval for exports of Vietnamese dragon fruit to the US was given by the US Animal and Plant Health Inspection Service. The main export markets for the country’s dragon fruit so far are China, Thailand, Singapore and Malaysia. Source: Tuoi Tre

Highway builder to sell $31 million worth of bonds

State-run Vietnam Expressway Corporation will sell VND500 billion (US$31 million) worth of 15-year bonds next week, the Hanoi stock market said.

The unlisted corporation would auction the bonds on August 20 in its first corporate debt sales guaranteed by the government and issue them on August 22, with maturity on August 22, 2023, the over-the-counter exchange said in a statement seen on Saturday. It did not name any specific projects which would use proceeds from the bond sales, but said the corporation would use revenues from toll collected on the Noi Bai-Lao Cai highway to repay the debt. In the latest auction of the 15-year bonds on July 31, state-run Vietnam Development Bank sold VND129 billion (US$7.7 million) worth of the debt at a yield of 15 percent via an auction at the Hanoi exchange. Vietnam Expressway Corporation was established in 2004 to diversify funding sources, including the Asian Development Bank and Japan Bank for International Cooperation, to invest in building and maintaining highways across Vietnam. In February, it teamed up with partly private Global Petroleum Bank, nearly 10 percent of which is owned by state oil monopoly PetroVietnam, to establish a joint stock firm to build, operate and transfer highways. Source: Reuters

Northeastern authority licenses int’l container port

The People’s Committee of Quang Ninh Province Friday licensed a 50-year project for the Cai Lan International Container Port Co. Ltd.

According to the license, the company will invest US$103 million to build and operate the three wharves at Cai Lan Port. The wharves which are expected to be completed in 2014, will be able to receive container ships of up to 40,000 DWT. The Cai Lan International Container Company is a joint venture between the Cai Lan Joint Stock Company and SSA Holdings International-Vietnam Inc. an affiliate of the US-based SSA Marine group. Reported by Pham Hai Sam

City Developments seeks distressed assets in Vietnam

An apartment project in Ho Chi Minh City’s District 7. City Developments, Singapore’s second-largest real estate developer, is looking for distress sales in Vietnam. City Developments Ltd., Singapore’s second-largest real estate developer, may buy distressed assets in Vietnam as early as next year, Chairman Kwek Leng Beng said.

The company has explored Vietnam but isn’t making any immediate investments because the market is “very toppish,” Kwek said. Residential property prices in Ho Chi Minh City declined as much as 40 percent between December 2007 and May this year, according to Morgan Stanley. “It’s best to buy completed projects when they are distressed,” Kwek said in an interview Thursday. City Developments, which owns Millennium & Copthorne Hotels Plc, may buy hotels and residential and commercial projects in Vietnam, Kwek said. Distressed-asset investors will benefit from a wave of opportunities in Asia in the second half, when about US$80 billion of debt will be refinanced, Cube Capital Group, an alternative investment fund that manages $1.2 billion of assets, said in June. City Developments will target assets that have gone through foreclosure or that are being sold at below market value. More of those assets may become available this year in Vietnam where the benchmark stock index tumbled by almost half and the central bank raised interest rates three times to combat the fastest inflation since at least 1992. Limiting bad debt The central bank has asked lenders to limit bad debts to about 3 percent of their loans, Nguyen Dai Lai, deputy director of the central bank’s department for development strategies, said by phone from Hanoi Friday. CapitaLand Ltd., Singapore’s biggest developer, said in June it is seeking distressed assets in Japan and China. Banyan Tree Holdings Ltd., a Singapore-based operator of luxury resorts, said earlier this month it also expects to buy troubled assets in Asia. City Developments is also turning to Vietnam as growth slows in Singapore, which last week lowered its 2008 economic forecast for a second time. Vietnam’s government expects the economy to expand 7 percent in 2008. City Developments should venture into emerging markets like Vietnam in the medium to long term, said Brandon Lee, analyst at DMG & Partners Securities Pte in Singapore. The government expects as many as 22 million people to live in Ho Chi Minh City by 2020, and about 30 million by 2050, Vietnam Economic Times reported in May. The country’s population of 86 million is increasingly shifting to urban areas. ‘Urbanization’ “Vietnam is riding on the fundamental story of urbanization,” Lee said. “The office sector rents are also looking good and yields are getting more attractive.” City Developments relies on its residential developments and office buildings and malls in Singapore for the bulk of its profit. Most of its overseas earnings come from its hotels through its Millennium & Copthorne chain, owner of properties such as the Biltmore in Los Angeles. Hotels made up 30 percent of its second-quarter pretax profit of S$248.9 million ($175 million). The developer is already raising funds for its overseas investments. Kwek told reporters Friday the company is raising as much as S$1 billion ($705 million) through Islamic financing to “bottomfish at the right time.” Source: Bloomberg

Steel, cement prices fall on low demand

A modified motorbike delivers steel materials to a construction site in Ho Chi Minh City. Steel and cement demands have been weak, causing their prices to plummet. Steel and cement prices have plummeted in the last two weeks but, with demand becoming sluggish, manufacturers are struggling to sell their products.

Nguyen Quoc Dai, director of a private construction business in Ho Chi Minh City’s District 7, said steel prices have fallen by VND2 million- 2.5 million per ton since the beginning of July to VND18.2 million-18.5 million (US$1,096-1,114). “You can buy as many tons as you want and the producers will make free delivery,” Dai said. The Vietnam Steel Corporation, whose prices are already VND500,000 a ton lower than private and joint venture manufacturers, is offering a further cut of VND300,000- 340,000 for big buyers. In the early part of this year prices had doubled, and home-builders and building contractors faced a hard time. A sales executive at a HCMC steel joint stock company, who wished to be unnamed, said the situation has changed now with consumption of building materials falling sharply in the rainy season. “Constant rains hinder construction and also delay new projects.” Steel demand is even weaker in the north and the average price there now stands at VND17.5 million a ton, Nguyen Tien Nghi, vice president of the Vietnam Steel Association (VSA) said. VSA figures show that its members sold 250,000 tons in July, 16.5 percent down from June. Steel feedstock prices have also fallen. Billet imported from China is now $230-240 per ton cheaper than at the end of July. Cement down too The cement market has also started to cool down, with August consumption in HCMC falling by 60 percent month-on-month. Mai Anh Tai, deputy director of Ha Tien 1 Cement Joint Stock Company, said producers and distributors have failed to achieve their sales targets. Huynh Anh, a building-materials retailer in District 7, said sales have plunged despite falling prices. Retailers make a mere VND500 profit from a 50-kilogram bag of cement they sell for VND65,000- 69,000, Anh said. Steel and cement producers are also offering special discounts to regular customers. A sales executive at a cement joint venture, who wished to remain unnamed, said several large wholesalers are getting discounts of VND5,000-10,000 a ton. Their steel counterparts get discounts of VND30,000-100,000. But this is not enough to increase offtake. A steel wholesaler, speaking on the condition of anonymity, said the discount is attractive but he does not plan to buy much because he already has a large inventory bought when prices were up to VND20.5 million ($1,200) a ton. The wholesaler is, in fact, hoping to liquidate the stocks quickly to repay bank loans. Prices are likely to fall further if demand remains low. Analysts said retailers could also hope to enjoy discounts, with consumers getting steel at not much higher than wholesale prices. Cement producers said, on the other hand, they can hardly cut prices further because they still have to import clinker at high prices. Retailers would have to offer competitive prices, lowering their margins, to achieve high sales, analysts said.

Quang Nam to arrest market management officials

Central Quang Nam Province People’s Procuracy Thursday approved a decision to arrest two market management officials on charges of “power abuse while on duty.”

According to reports, Bui Van Kheo, the former chief of a market management unit and Nguyen Van Son, a unit member, stopped a car on June 30 for illegally carrying 11,200 packets of cigarettes. The two officials allegedly recorded finding just 2,000 packets, however, and fined the driver, Phan Van Tuan, VND3 million (US$180). The pair is accused of keeping 4,000 packets to re-sell and leaving 5,200 packs with the driver. Police are still investigating the case. Reported by Le Huy

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Women traffickers get over 16 years in jail

The Khanh Hoa Province People’s Court Thursday sentenced three people engaged in trading women to a total of 16 and a half years.

Ha Thi Thom, 20, got seven and a half years while two other men got five and a half and three and a half years. The three were arrested after Nguyen Thi M. T., a 19-year-old resident of Nha Trang came forward claiming that she had been sold into prostitution in China last year. Earlier, the group deceived T. and then sold her to a Vietnamese woman in China for 4,500 Yuan (US$562). She was then forced to work as a prostitute until she escaped and returned to Vietnam in May 2007. Reported by Huu Tri

PM lambastes grain firms for sluggish paddy purchase

A farm in the southern province of Tra Vinh. The government has urged state-owned rice companies to expedite buying to benefit farmers. Prime Minister Nguyen Tan Dung has said the two state-owned grain companies must quickly buy up the entire summer-autumn harvest from farmers and also ensure the farmers made at least a 40 percent profit.

At a meeting Thursday with ministries and the State Bank of Vietnam, PM Dung slammed the Vietnam Northern Food Corporation (VINAFOOD I), the Vietnam Southern Food Corporation (VINAFOOD II) and rice businesses for their slow purchase of paddy despite the bumper harvest across the country. This is impacting the farmers’ livelihoods, he pointed out. The government had capped rice exports for the January-September period at 3.5 million tons. But domestic firms have already signed deals for exporting around 3.6 million tons. However, by the end of July, exports were only 2.8million tons, with a major amount remaining in stock. Dung also instructed VINAFOOD I and VINAFOOD II to buy 400,000 to 500,000 tons this month and ensure rice export contracts are honored. He asked ministries and the Vietnam Food Association to monitor the two agencies’ rice purchases. He instructed the central bank to consider soft loans for rice businesses so that they can buy the paddy from farmers. Loans should also be provided to farmers who need them, he said. Earlier this month the state-run Agribank, Vietnam’s largest lender by assets, said it would lend more to rice businesses. The unlisted, Hanoi-based bank said in a statement 70 percent of its loans had gone to agricultural production, rural development and farmers. Dung said the government would also continue to waive export tax incases where the free-on-board price of rice is below US$800 per ton. Dung said at the meeting that official agencies and the media should be in close touch to accurately report about rice exports to avoid misleading the public. Rice shipments are expected to hit 4.5-4.6 million tons by year-end, the government said. Farmer woes In the past two months droughts in the central region have parched rice paddies with malfunctioning irrigation systems worsening things. Elsewhere, in the Mekong Delta, insects have ravaged paddy crops with authorities warning about the serious consequences caused by the brown plant hoppers. The government has instructed local authorities to help farmers in the central region cope with the drought and those in the south to tackle the insect devastation. Source: TN, Agencies

Vietnam to sell VND1 trillion gov't bonds on Aug 8

Vietnam's State Treasury plans to raise VND1 trillion ($60.63 million) at a government bond auction late next week, the over-the-counter exchange said.

The auction will sell Hanoi two-year bonds worth VND500 billion and five-year bonds worth VND500 billion next Friday, and the debt will be issued on Aug. 12, the exchange said in a statement seen on Saturday. The proceeds will go to funding major infrastructure projects such as roads, bridges and ports. At its latest auction on July 11, the State Treasury failed to sell any of its two-year and three-year bonds worth a combined VND500 billion because no participants joined the auction. On June 27, the State Treasury sold VND2 billion worth of two-year bonds with a yield of 11 percent, its first success in raising funds from selling government debt after seven auctions since late February at which it found no buyers. Banks, which often buy government bonds, have been struggling to raise dong funds after the central bank tightened monetary supply by raising interest rates and ordered banks to buy debt to rein in inflation that hit an annual rate of 27 percent in July. The central bank aims to cap Vietnam's credit growth this year at 30 percent after a surge of 54 percent in 2007. On Thursday, the Vietnam Development Bank raised only VND129 billion by selling 15-year government bonds, about one-fifth of its targeted amount. The debt carries an annual yield of 15 percent. Source: Reuters

VietinBank gets ISO quality certificate

The Vietnam Bank for Industry and Trade (VietinBank) has received the ISO 9001:2000 quality management certification.

Nguyen Toan Thang, deputy governor of the State Bank of Vietnam, and Tran Van Vinh, deputy chief of the country’s Directorate for Standards and Quality, attended the award ceremony in Hanoi Thursday. Speaking at the ceremony, VietinBank chairman Pham Huy Hung said the certification reflects the bank’s commitment to providing quality products and services. Established in 1988, VietinBank is now one of the country’s largest banks with branches in 56 provinces and cities. Reported by Vinh Bao

Focus on medium-priced housing, says property consultancy

A block of mid-level condominiums is under construction at Phu My Hung in Saigon South. Property company CB Richard Ellis Vietnam Thursday urged developers to shift the focus to smaller and more affordable apartments, saying end users are expected to make up the largest ratio of buyers this year.

“For now, speculators have left the market,” Nguyen Thai Nguyen, a deputy director at the Ho Chi Minh City-based unit of CB Richard Ellis Group Inc, said. “[They are] backing off from investing until market conditions improve.” Until recently speculators accounted for 80 to 90 percent of deals, he said, calling it “abnormal.” It should only be about 20 percent, he said. He attributed the change partly to tightening of credit, high interest rates of up to 21 percent, and increased risk. People can only borrow 60 percent of a property’s value. For people buying to lease out, the rental yield has become less attractive than ever. Vo Dinh Quoc, general manager of An Binh Land Real Estate Company, said some apartment blocks have not seen a single transaction in the past three or four weeks. According to CB Richard Ellis, the mid-level price segment, with apartments ranging from VND600 million to VND1 billion, would recover first. There has been a decrease in the number of luxury apartments in prime locations with end users – mostly first-time home buyers or newlyweds – preferring to buy cheaper properties. As a result, since the first quarter the Lancaster saw a 13 percent fall in prices, Avalon 5 percent, The Manor 18 percent and Saigon Pearl 16 percent. Only 12 apartment projects with 7,800 units were launched this year; just 2,400 have been sold so far. Though Thai said prices in many locations in the city have fallen by as much as 40 percent, he was confident that condo prices would recover quickly. Bui Thi Minh Hang, deputy director of Nam Long Investment Joint Stock Company, said her company recently built 120 smaller-sized apartments, mostly below 75 square meters, and has sold them. “But it is more difficult to sell the larger ones,” she said. Though the government has allowed foreigners meeting certain criteria to buy apartments since May, Thai said developers should not pin their hopes on this market. In a recent interview with Bloomberg, Tim Murphy, founder and managing director of IP Global Limited, said he expects Vietnamese property prices to rise in six months. He rated HCMC among the “fantastic” markets along with Kuala Lumpur in Malaysia, Abu Dhabi in the UAE and Sao Paolo in Brazil. CB Richard Ellis Vietnam’s managing director Marc Townsend said there is still a market out there amid the gloom for developers. The problem, he said, has to do with how developers cater to that market. Reported by Huong Le – Vinh Bao

Tax on bikes, cars, booze could rise

An auto exhibition in HCMC. More items will come under the purview of special consumption tax (SCT) if the house passes proposed amendments to it.

Motorbikes of 175 cubic centimeters and upward, aircraft and yachts used for non-business purposes, slot machines used for gambling, and betting services are sought to be added to the list of taxable items under a draft proposal. Others include products made from tobacco besides cigarettes and cigars and automobiles running on biofuel, solar energy and electricity. The draft is scheduled to be submitted to the National Assembly for approval next November. A conference to discuss the draft was held Friday by the Ministry of Finance, the Vietnam Chamber of Commerce and Industry (VCCI) and the house’s Committee for Finance and Budget. It was attended by representatives from the Ministry of Finance, VCCI and businesses. Director of the Tax Policy Department, Vu Van Truong, told them that motorbikes, aircraft and yachts would attract a tax rate of 20 percent and slot machines 30 percent. The rate on tobacco products would be 65 percent. Cars running on electricity or solar energy would attract 10-30 percent of the rates imposed on vehicles using traditional fuels, hybrids 70 percent, and those running on bio-energy 50 percent, he said. But some delegates said vehicles running on electricity and solar energy should not be taxed and hybrids should be taxed less. Others called for taxing beauty services, including cosmetic surgery, since these should be limited in the current difficult economic situation. Le Thi Thu Thuy from the Hanoi National University’s law faculty, said the tobacco products should be taxed higher, maybe at 70 percent, to reduce their consumption. The draft also envisages amending the tax rates on some other products. Wine and other beverages with alcohol content of 20 percent upward will be taxed 55 percent instead of the current 30-65 percent. The tax on beer will be 50 percent instead of the current 40-75 percent. Cars with 10 seats or less will be taxed 50-70 percent depending on engine capacity. Under the existing regime, vehicles with five seats and less attract 50 percent, and those with 6-15 seats 30 percent. Industry not happy Predictably, business executives attending the conference protested some of the amendments. The higher SCT would be detrimental to automobile producers and assemblers, a Honda Vietnam official said. An executive from the Hanoi Alcohol Company said the government should not raise the SCT on alcohol because higher prices could force people to brew their own drinks or buy substandard or even fake products that can damage their health or even kill them. Dang Tran Kien of Viet Ha Company said the higher tax on bia hoi – the popular draught beer – would push many bia hoi makers into bankruptcy. The share of SCT in overall tax revenue rose to 9.49 percent in 2007 from 7.89 percent in 2003, according to the Finance Ministry. Most of the SCT comes from automobiles, tobacco, alcohol and beer. Eight kinds of goods and five types of services are subject to SCT, too few compared with most countries, Thuy said. The number of items subject to the tax is 17 in Indonesia, 22 in Hungary, and 19 in Sweden, she noted. Reported by Bao Van

Poor villagers enjoy rapid rise to top of the business world

Le Van Vay, who has been paralyzed since birth, was hired as a company director. Many villagers in a northern city have become company directors without knowing anything about the companies.

Le Van Vay in the northern city of Hai Phong has been paralyzed since he was born and has spent almost all his 54 years in bed. Only able to write his own name, the disabled man is now a director of a company, whose name he doesn’t remember. Some people came from the city one day to buy the birds raised by his brother. When they saw his difficulty, they expressed their wish to support him, Vay recalled. Because Vay had an ID card and permanent resident registration, they asked him to sign some papers. “And so I became a director,” Vay said. In An Hoa Commune in Hai Phong City’s An Duong District, many poor locals have also been made company directors. All they know about their jobs is that they get paid VND2 million (US$120) every month. They know next to nothing about the companies they are supposed to “direct.” As a result, some panic when officials, investigating possible incidents of invoice fraud, come to question them about the affairs of their companies. Thanh from Tinh Thuy Village said she was questioned by officials when she had only been a company director for one month. The 40-year-old, whose husband died 10 years ago, dropped out of school in the fourth grade. Thanh had been raising her two children single-handedly in a poorly-furnished house. Last August, a commune local named Loi told Thanh that she only needed an ID card and a resident registration to be a company director. “Almost everyone in the village takes the job and they make big money,” she said. Thanh accepted and she was taken to a company office in a commune in An Lao District, she said. After that one visit, Thanh just went to Loi’s house to sign company papers, she said. Thanh said she was really scared when the commune officers interrogated her. “I told them everything I know and asked them not to put me in jail.” After her brush with the law, Thanh was asked to resign the post, she said, showing documents Loi gave her in February stating she was no longer the director of An Hung Company at Quoc Tuan Commune. Truong Van Dung, head of An Hoa Commune police, said the local authorities didn’t know how many directors there were in the commune because it was not informed every time a new company was established. According to the laws, every citizen who has an ID card and a permanent resident registration can become a company director, Dung said. So far, local police officers have arrested three residents – Ngo Van Trinh, Ngo Van Khoai and Pham Van Nghi – from An Hoa Commune for issuing fake invoices to make money illegally. Trinh, who has previous drug convictions, took over Thanh Binh trade company when he was released from prison. From November 2005 to January 2006, Trinh allegedly faked the director’s signature on counterfeit invoices so that he could get refunds of value added tax (VAT). The head of Quang Ninh Province’s border police said the provincial authorities had discovered dozens of companies run by An Hoa Commune locals that had issued fake invoices to assist illegal coal exporters. As a result, there’s now raised eyebrows every time a local child boasts “my father is a company director.” Source: Lao Dong

Sweet singers

A barley sugar singer performs at a sidewalk pub in District 2. Many young people use an unusual marketing technique to sell sweets on the streets of Ho Chi Minh City – singing love songs at full volume.

One night at seven o’clock, two people stood by a motorbike to introduce the song they were about to sing at a sidewalk pub on District 2’s Tran Nao Street. On their motorbike was a box of barley sugar and a stereo system. After the prelude, the young man began to sing Xin loi tinh yeu (Apology for Love). Many people, including this correspondent, watched curiously. “Every day, these guys go to pubs to sing and sell barley sugar,” my friend told me. These singers are just one of many groups that peddle barley sugar on the streets of Ho Chi Minh City every night, especially at pubs in suburban districts. Hard-earned money Talking with the two singers, I discovered they are a brother and his younger sister, from central Khanh Hoa Province, who now live in a rented house in Go Vap District. Both have been working as barley sugar singers for more than a year. Huy, the brother, said, “We worked hard for nearly a year to save the VND6 million (US$363.60) to buy this stereo.” “To be able to do this job, you must learn dozens of hot songs and you must know which ones customers like to hear,” Huy told us. “If we don’t sing well, no one buys the candy.” “When we started the job, we sang at night and practiced in the daytime to improve our singing,” Huy said. At midnight, Dung from Ca Mau Province and Linh from Soc Trang Province, who rent a room near Cat Lai Ferry Quay in District 2, drove their motorbike around Quoc Huong Street in the district to look for a place to “perform.” Most pubs were empty, so they left for Tran Nao Street. Their old motorbike chugged along slowly, straining under the weight of two people and an audio system. Near the end of Nguyen Thi Dinh Street, they stopped to perform at a crowded pub. After their introduction, Linh began to sing her signature songs, without forgetting to sell barley sugar to customers. “We earn VND30,000-35,000 ($1.80-2.10) every night but to do so we have to visit many places,” Dung said. The two singers travel many kilometers every night. They leave their room to go to District 2, then Binh Thanh and Go Vap districts and then return to Thu Duc District. They stop to perform for 10 – 15 minutes at each pub. Sometimes they don’t get home until 1 a.m. Moods Barley sugar singers say they sometimes feel sorry for themselves. They are criticized and sometimes even threatened for interrupting the conversations of drinkers, who make up most of their audience. “Once, while I was singing and selling barley sugar to customers, a man stood up and shouted at me,” singer Ngoc recalled. “I was so afraid. I almost cried.” “It’s hardest when we go on rainy nights,” Thang and Hai, from northern Hai Duong Province, said. “The instruments, machinery and barley sugar get wet. That means we earn no money that night and go back to our room with an empty stomach.” As they move a great deal, their audio system frequently gets damaged, which costs a lot to repair. They also often have motorbike problems. Linh and Dung said one night at nearly midnight their motorbike suddenly ran out of gasoline. All the filling stations had closed, so they had to push it home, which took more than an hour. Although the singers sometimes earn only enough to pay for food and rent, they are attached to their job because of their love of singing. When night falls, they begin a new trip with the hope that they will be able to sell a lot of candy to earn money for their families. For nearly two years Hai has been sending several hundred thousand dong a month to his family in Hai Duong. For Linh, earning VND300,000 ($18) a month to send home is her biggest joy. “I was unlucky I didn’t get a good education, so I must try to make money to support my younger brother and sister. I don’t want them to follow in my footsteps.” Source: SGGP

Vietnam to allow genetically modified crops to reduce imports

Workers walk through a paddy field of genetically modified Golden Rice at the International Rice Research Institute, the largest international agricultural research center in Asia, in south Manila. Vietnam is aiming for “massive production” of genetically modified (GM) crops to reduce imports of soybeans, corn and cotton.

Development of GM crops may reduce the nation’s dependence on imports, helping to narrow the trade deficit and calm concerns about economic stability. Increases in food prices have spurred inflation of 27 percent, the fastest since at least 1992. “Vietnam plans to allow massive production of GM crops after 2010,” Pham Van Toan, Hanoi-based head of the general office at the agriculture ministry’s Science and Technology Department, said. The country approved in 2005 the program to cut agricultural imports, he said. The agricultural attaché’s office at the US embassy in Hanoi said in a report the authorities have completed a draft of a law that will allow such crops. A National Assembly session in October is expected to approve the law, Vietnam News Agency reported. Bui Thi Huong, an agricultural specialist at the embassy, said in the report: “Vietnam remains keen to produce genetically modified crops, particularly soybeans, corn and cotton, to reduce the dependence on import of these key commodities.” Vietnam was Asia’s biggest importer of soybean meal, which is used primarily for animal feed, along with Indonesia last year. It shipped in 2.4 million tons, according to data from the Foreign Agricultural Service. Vietnam also imported 750,000 tons of corn, the FAS said. Dependence on imports The country is dependent on imports of soybeans, corn and cotton for its “large feed and textile industries,” Huong said. Cotton imports rose 26 percent to 170,000 tons in the seven months through July, according to the General Statistics Office. Cotton is used by the garment industry to manufacture clothes, the country’s second-biggest export after crude oil. The trade shortfall widened in the seven months through July to US$15 billion, or more than in all of 2007. The deficit in the same period last year was $6.3 billion. Imports rose 57 percent, slowing from 62 percent growth in the first half. Toan said the Science and Technology Department has not issued any guidelines to ensure GM crops are safe for mass production. Delays in approving regulations mean the 2010 target is unlikely to be met, according to the US report. Vietnam aims for GM crops to account for about 70 percent of production by 2020, the report said. “Under this plan, Vietnam expects to create new plant varieties, animal breeds and biotech products through application of biotechnology, so as to enhance the competitiveness of its agricultural and fishery products,” Huong wrote. Source: Bloomberg