Updated  
July, 18 2011 11:18:19

Banks continue to offer high deposit interest

Thuy Anh

 

Despite expectations of lower deposit interest rates, commercial banks continued offering the regulated cap of 14 per cent per annum for term deposits between two weeks and 12 months.

However, under-the-table, depositors could still negotiate the rate to around 18 per cent for a one-month term if they had VND1 billion (US$49,000) or more. In some cases, the term was extended to three months.

Several banks, including Eximbank and Sai Gon Commercial Bank, have started promotional programmes, which benefit minor depositors as well.

Meanwhile, several banks have already exceeded the two-per cent fence for deposits in the US dollar. Large sums could help double the official rate.

An industry insider said that without the above-the-cap rate, banks could hardly maintain existing deposits, not to mention attracting additional cash, as the risk of high inflation still exists.

Meanwhile, the large gap between interest rates for the dong and the dollar have prompted corporate borrowers to choose foreign currency.

The lending rate for dong, which has experienced some slack, remained high, at around 21 per cent, while that for the dollar was no more than 8 per cent.

The exchange rate has been stable in recent days and is expected to remain in that direction at least until the year-end.

Figures from the State Bank of Viet Nam showed that by June 20, mobilisation of the US dollar had fallen by 3.62 per cent month-on-month while dong mobilisation rose by 2.32 per cent.

Credit growth in dong as of June 20 had declined by 0.43 per cent. The US dollar climbed by 2.43 per cent month-on-month.

A further comparison to the end of 2010 showed that outstanding loans in the dollar had increased by 23.5 per cent and in domestic currency by only 2.76 per cent.

Vietcombank chairman Nguyen Hoa Binh said both lenders and borrowers longed for reduced rates but that it would take some time for that to occur.

The situation has influenced credit growth. Vietcombank and DongA Bank announced 8 per cent credit growth in the first six months, but the figure fell to under 3 per cent for Sacombank.

The average was more than 7 per cent for the year's first half, compared to the annual target of 20 per cent set by the State Bank.

Room for credit growth is large, but filling it is difficult. Tran Phuong Binh, general director for DongA Bank, said he did not expect strong growth in the remaining months.

Meanwhile, Nguyen Chien Thaêng, president of the HCM City Handicraft And Wood Industry Association, said his bank members lost foreign customers as they dared not to sign large and long-term contracts because of capital insufficiency for production.

Trade paradox

With a coast of more than
3,200km and a climate that favours salt production, Viet Nam has been importing salt products.

This year the country set a minimum quota of 182,000 tonnes of salt imports.

The Ministry of Industry and Trade (MoIT) recently withdrew a proposal to buy an additional 50,000 tonnes, after facing strong opposition from the Ministry of Agriculture and Rural Development and the public. More than 235,000 tonnes of salt are now in stock.

On the other hand, chemical manufacturers are opposed to the decision, saying that without the sales, their operations could come to a halt.

According to Le Van Hung, director of the Southern Basic Chemicals Company, his firm needs 80,000 tonnes of industrial salt each year to produce salt for daily use and for other chemicals. This year, he could not buy any industrial salt from local sources.

Though there is a large volume of salt in stock, industrial salt is short in supply, according to MoIT. A MoIT official revealed that a foreign company was exploring the industrial salt market to invest in building a factory.

The cheap domestic salt price of VND300,000 per tonne (US$14.5) exists for various reasons, including low quality, which results from small-scale production by farmers with no hi-tech equipment. Because of this, farmers do not think that producing salt is a safe trade.

In addition, there is no viable master plan to ensure stable growth for salt production.

A meeting was held by the MoIT last week for chemicals and salt companies, but this was not successful as it did not attract participation from salt companies.

Similarly, coffee beans have seen high prices on the world market, but local exporters and farmers of Viet Nam, which is the world's second-largest coffee-producing country, are not benefiting from the situation. However, foreign traders are taking advantage of the high global prices.

Many local traders with export contracts find it hard to collect the amount for delivery on schedule.

The volume in farmers' storage is estimated at 100,000 tonnes, between 7-10 per cent of the 2010-11 crop's total output. Some farmers with coffee in stock are waiting for higher prices before selling.

Foreign traders, however, have more coffee beans in stock, with about 200,000 tonnes in their own storehouses or bonded warehouses. With such high volume, they have been offering sales to local traders at high prices. These sales can bring more profits than sales on the London International Financial Futures and Options Exchange (LIFFE).

Around 150 domestic companies export no less than 1 million tonnes each year. In the first six months of the year, they sold 80,000 tonnes for $190 million.

Coal trading is another example. Viet Nam, which previously only exported coal, has begun importing coal, with the first batch of almost 9,600 tonnes arriving last month from Indonesia. More is expected to come.

State-owned Viet Nam Coal and Mining Group (Vinacomin) 's acting deputy general director Vu Manh Hung said the company should sell high-quality coal, mainly to chemical and metallurgy industries, and import cheaper coal for thermal power generation.

In May, Viet Nam sold 2 million tonnes for $192 million. The import price from Indonesia was $100.6 per tonne.

Domestic coal transported to the south from the north totalled $122 per tonne, according to Vinacomin General Director Le Minh Chuan.

A nudge to equitisation

The sluggish equitisation of State-owned enterprises (SoEs) is expected to speed up with a new decree on the subject expected to be issued this week, according to Dang Quyet Tien, head of the Coporate Finance Department under the Ministry of Finance,

For equitisation, an enterprise must re-assess its value. If the revaluation shows that its real value is lower than the total debt amount, the enterprise will be required to work with the lenders and the Ministry of Finance to map out a corporate restructuring plan.

Another highlight of the decree is the criteria for strategic partners. These partners are required to have strong financial capacity and a long-term commitment to the company.

Basing on the charter capital scale, the business operations and the need for expansion, the National Steering Board for Equitisation of SoEs will ask the authorised body for a decision on its equitisation plan, as well as the criteria for selecting a strategic partner.

SoEs with chartered capital of more than VND50 billion ($24 million) and operations in areas including insurance, banking, post and telecommunications and aviation, as well as parent companies under State-owned corporations and groups, will have to ask for the Prime Minister's approval on strategic partner criteria, as well as the amount and mode of equity selling to the strategic partners.

Each enterprise will have no more than three strategic partners, who will not be allowed to transfer their stake over a minimum period of five years.

The State Audit agency of Viet Nam will audit results of the corporate valuation of enterprises with charter capital of more than VND500 billion and operations outlined in the decree.

The first half of the year saw the equitisation of four major SoEs, Viet Nam Steel Corporation, Petrolimex, Mien Trung Coporation and the Mekong Housing Bank. — VNS

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