Trucks set to roll on East-West highway

The first 1,500 vehicles of Vietnam, Laos and Thailand have been licensed to run on the East-West Economic Corridor (EWEC), which is expected to boost trade, investment and tourism activities in the relevant countries.

Representatives of the three countries met in the Central Highland resort city of Da Lat on February 25-26 to grant permits to 500 trucks from each country. The permits allow the vehicles to travel on the EWEC, particularly the section linking Vietnam and Laos.

The event will mark Vietnam’s first success in implementing the cross-border land transport facilitation agreement among the six countries of the Greater Mekong Sub-region (GMS), said Nguyen Van Thach, deputy director of the International Cooperation Department under the Ministry of Transport.

The GMS is comprised of Vietnam, China, Thailand, Laos, Cambodia and Myanmar.

The EWEC is an especially important corridor as it will create a channel for commodities coming from Thailand and Laos and going to Vietnam’s ports of Da Nang and Vung Ang, said Mr Thach. From there, the goods will be exported overseas. In addition, Vietnamese commodities will move to Thailand and Laos on the same channel. The EWEC is the shortest way for Thai goods to enter Vietnam and vice versa.

The 1,450km long road links the following points: Mawlamyine-Myawaddy in Myanmar, Mae Sot-Phisanulok-Khon Kaen-Kalasin-Mukdahan in Thailand, Savanakhet-Dansavanh in Laos and Lao Bao-Hue-Dong Ha-Da Nang in Vietnam.

It also intersects several north-south arterial routes: Yangon-Dawei, Chiang Mai-Bangkok, Nong Khai-Bangkok, Road 13 in Laos and Highway 1A in Vietnam.

The corridor aims to strengthen economic cooperation and facilitate trade, investment and development between Laos, Myanmar, Thailand and Vietnam; reduce transport costs and make the movement of goods and passengers more efficient; reduce poverty and support development of rural and border areas; and promote tourism.

Banks open doors wide, but few securities investors entering

Commercial banks have resumed loaning to fund securities investments, but they have not attracted many clients. Securities investors seem to be indifferent.

Banks have been pushing up loans

HDBank has announced a package of VND400bil ($23.5mil)it plans to loan to fund securities investments with securities themselves being the mortgaged assets. The VND400bil is part of a plan on disbursement for consumer credit worth VND900bil ($52.91mil). The lending interest rate is about 1.2% per month on average.

Eximbank is lending to securities investors at the interest rate of 0.833% per month only, equal to the interest rate applied to consumer loans, though funding securities investments is considered risky. Clients can borrow sums not higher than 30% of the securities’ market values.

Besides loaning to fund house and car purchases in installments, Tien Phong Bank also provides loans to fund securities investments at the interest rate of 10.5% per annum. Its clients can also borrow sums equal to 30% of securities’ market values for 12 months. However, borrowers must not have had bad debt at the bank in the previous 12 months.

Unlike previously, when banks hesitated to give loans to securities investors, they are now opening their doors wide to investors. It is because they now have profuse capital and they need to push up loaning.

However, despite the efforts by banks, loans to fund securities investments just account for a small proportion of their total outstanding loans. As the stock market has been falling, investors are hesitant to make investments with loans.

While banks have been pushing up loans, securities companies have also been trying to push up services, like repo service, to attract more investors. However, according to Nguyen Viet Hai, General Director of ACB Securities, though the capital reserved for repo service is profuse, and the repo service fee has been decreasing, it is still difficult to attract clients.

Representatives of Thang Long Securities Company (TSC) also say that the number of clients using repo service has dropped significantly since the beginning of 2009.

Analysts have said that in the current conditions, though the banks’ doors are open wide, clients will remain uninterested in loans as they will be under pressure to pay debts to banks on time while there is no sign that the market is on its way to recovery and stock prices are increasing.

Black market price for the dollar climbs

A single dollar cost as much as VND18,000 on the street on Friday.

The price represented a VND200-300 depreciation against the dollar within a day and a VND350-450 fall since Thursday morning.

Gold shops on Ha Trung and Tran Nhan Tong streets, Ha Noi, bought a single dollar at VND17,750-17,800 and sold at VND17,950-18,000.

The rate at small shops ranged from VND17,600-17,750.

In the non-deliverable-forward, or NDF, market – where investors anticipate the value of currencies – the monthly cost of the dollar was expected to rise to VND18,300 within three months – up VND700 against late last year – and VND19,200 within six months.

The dollar is expected to cost VND19,900 by December.

But the State Bank of Viet Nam reduced the daily inter-bank exchange rate by VND3 to VND16,974 on the mandated market.

Vietcombank’s buying and selling price was the same at VND17,483 and the exchange rates at commercial banks remained at the upper limit of the adjustable peg.

The Vietcombank’s rate at the end of 2008 was VND17,494 compared with VND16,025 the previous year.

Several bankers described the demand for the dollar as normal.

"Purchasing power in the domestic market is not growing and demand from enterprises to pay for imports remains limited," said Asia Commercial Bank deputy general director Nguyen Thanh Toai.

The currency, at its most volatile, had ranged between VND15,825 and VND17,495 throughout last year.

Why the high price?

So why the high price on the street?

Senior economist Le Dang Doanh believes that both business and individuals are seeking safety in the dollar.

Others believe the Government decision, announced last Friday, to issue bonds denominated in the dollar to fund key national projects and help offset the budget deficit has added to the currency’s popularity.

People believe policy makers will allow the depreciation of the domestic currency to make the bonds more attractive.

As PXP Viet Nam Asset Management’s Kevin Snowball explained: "Investors will buy bonds if the foreign currency is stronger because they’ll make money.

"They won’t buy bonds if the foreign currency is weaker because they’ll lose money."

Also gold traders, who sold to take advantage of the high international price for the precious metal, are turning their dong into the dollar because the interest banks now offer for deposits is not as attractive as several months ago.

The likelihood that the interest paid for dong deposits will fall as low inflation in Asia, including Viet Nam, allows the central bank to further reduce the interest rate also promotes the dollar.

In addition, the Harvard Kennedy School of Government and some international banks have advised a further, orderly depreciation of the dong this year to boost exports and narrow the trade deficit.

Then, as Asian stocks slide and insolvent banks face the prospect of public ownership, investors are choosing the safety of the dollar, US Treasury bonds and gold.

And many bankers agree, the Government is unlikely to intervene in the market.

Hot gold

Gold jumped slightly to VND19.67 million (US$1,130) a tael yesterday, up VND20,000 per tael against late Thursday.

The price followed the world price for the precious metal, which had reached $978.20 an ounce – up $4.80 and its highest for more than six months.

A tael equals 1.2 troy ounces.

On the Sai Gon Gold Trading Exchange in Ha Noi, gold cost VND20.47 million ($1,133) per tael.

In Ha Noi, the Phu Nhuan Jewellery Co, PNJ-DAB, the buy-sell price for gold leaf was VND19.58/19.66 million ($1,125-1,129) per tael.

At Bao Tin Minh Chau Jewellery Co (BTMC), gold traded at about VND19.54/19.62 million ($1,122-1,127) per tael while at the Sai Gon Jewellery Holding Co, it was about VND19.60/19.67 million ($1,126-1,130) per tael.

Sellers, who offered not only gold leaf but also gold jewellery, heavily outnumbered buyers in the morning and early afternoon.

Viet Nam Gold Trading Association member Tran Quoc Quynh forecast that domestic gold prices would increase during the next few days because of the international trend upward.

It could plateau at $1,050 per ounce because of the heavy demand in the US, Russia, China, Switzerland and France, he said.

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Government units to tackle labour disputes

The Vietnamese government is stepping up efforts to address labour disputes by establishing specialised industrial relations units nationwide.

Last week, the government permitted the establishment of the Industrial Relations Centre, the first of its kind, under the Ministry of Labour, War Invalid and Social Affairs’ (Molisa) managerial umbrella. It will be run with state financial support.

Following the establishment of the Centre, city and province-based sub-centres are to follow, ensuring the Centre’s responsibilities are met and all enterprises nationwide reached.

Nguyen Manh Cuong, a Molisa senior official, who is the founder of the Industrial Relations Centre, said that industrial relations units would act as a third party, playing the role of mediator and helping to settle labour disputes arising between employers and employees.

“The units will also provide technical assistance and training in association with industrial relations if needed. They will forecast and analyse industrial relations, giving the results to government agencies and organisations, as well interested employers,” Cuong said.

The establishment of such units is among the Vietnamese government’s moves toward better resolving labour disputes, a problem that foreign investors have said hindered their business, thereby affecting the nation’s attractiveness for foreign direct investment.

Last year, Prime Minister Nguyen Tan Dung urgently asked governmental agencies and local governments of 63 cities and provinces across the nation to open regular dialogues, enhance labour policies and establish grassroots trade unions in face of rising labour strikes at foreign invested enterprises (FIEs).

Reported figures indicated that labour strikes had risen year on year, from 139 in 2003, to 147 in 2005, to 541 in 2007 and to 649 in eight months of 2008. In total, there were 2,555 strikes in Vietnam between 1995 and August of 2008, of which 72.4 per cent occurred in FIEs. Most strikes were reported in the nation’s industrial hubs of Ho Chi Minh City, Binh Duong and Dong Nai.

Reasons for strikes, many of which were unprompted, include low wages, excessive overtime hours, unpaid social insurance and lack of communication between employers and workers.

Ou Cheng Ming, vice president of the Taiwanese Electrical and Electronic Manufacturers’ Association (TEEMA), a group of 3,800 company members with giants like Foxconn and Compal, said that labour strikes in Vietnam would make Taiwanese investors reluctant to enter the country.

Meanwhile, although Vietnam has been ranked as the third most promising investment destination for Japanese investors in the next three years by the Japan Bank for International Cooperation surveys, labour-related issues like rising labour costs are raising concern about Vietnam’s investment climate.

“I have seen the Vietnamese government actively moving to address our labour problems since the middle of the year, and this is a positive signal for us to look favourably upon Vietnam,” said Ming, who received an investment certificate to build a $35 million electronic part manufacturing plant in the north of Vietnam two weeks ago.

Following the prime ministerial directive on industrial relations last year, Molisa would have to improve labour policies including those governing the payrolls of FIEs to more clearly regulate the wage levels of unskilled and skilled workers.

The Ministry of Planning and Investment would head the organisation of regular talks with foreign investors, especially employers, using Vietnamese workers in industrial and export processing zones to more quickly address the issues.

Concurrently, local governments of cities and provinces across the country must also set up labour - related taskforces.

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