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VN Business News (Mar 27, 1997)
Graft, banking scandals signal worries for Vietnam
Nike Suspends Vietnam Manager; Criticized In Labor Report
Asian Cash Rice Flat; Iran Seen Buying Vietnamese, Thai
Vietnam Legislator Says 'Much Concerned' With Bank Problems
Vietnam Execs' New Class Struggle Is With Capitalism
Vietnam delays banking legislation
Vietnam aims to trim trade deficit to 10 percent of GDP
Thursday, Mar 27, 1997 [39]... Back to headlines
_[INLINE] Graft, banking scandals signal worries for Vietnam _
HANOI (Reuter) - Facing trouble in its banking system, corruption
scandals and a mood of economic gloom, Vietnam appeared to retreat on
Thursday from publicly airing its problems, which analysts said were
inextricably linked.
As Ho Chi Minh City police continued their investigation of top
business executives linked to serious banking debt problems, a stream
of piecemeal revelations of the troubles surrounding the case that had
appeared in state media dried up.
A day earlier, Hanoi announced restrictions on press coverage of
banking issues, citing the need to protect the reputation of the
sector and the national economy.
Details emerging from a major appeals trial into corruption at
Communist Party-affiliated firm Tamexco were also conspicuously mute,
in marked contrast to court hearings earlier this year that were
accompanied by a media circus.
Foreign economists, struggling with sparse information and few
details, were left questioning whether Vietnam's view of its own
troubles had been exaggerated.
``Where's the crisis?'' said a senior economist in Hanoi. ``There are
problems, and there have been very visible problems, but that does not
mean that the whole banking system or economy is systemically at
fault.''
But other analysts said problems afflicting the property market,
exchange rates, trade and banking were inextricably linked to the
government's ability to handle a market economy, and to corruption.
``They feel threatened by what's happening,'' said a Vietnam watcher,
referring to policy makers in Hanoi. ``But what they've got to do is
focus on the future. They have to deepen the process of reforms.''
Part of Vietnam's current difficulties is the problem of endemic graft
that is seen as having worsened in the wake of reform and open-door
policies launched in the late 1980s.
In recent months, Hanoi has sought to get tough on the issue. In
addition to the Tamexco case, in which four people are appealing death
sentences this week, the death penalty has been handed down in a
number of other cases.
Graft is also said to be at the root of the current banking industry
difficulties.
Industry executives told Reuters last week that powerful business
firms had used connections and influence to secure multiple loans from
private and state banks, mostly via letters of credit, for property
speculation during the market's boom in the early 1990s.
A subsequent real estate downturn left Vietnam's banks owing millions
and having to delay repayments on letters of credit because collateral
was in the form of property that is declining in value and bound in
the red tape of Vietnam's archaic land-ownership laws.
State investigators are probing major southern garment exporter Minh
Phung and trading firm EPCO for their involvement in the property boom
and bad debt problems.
An official at the State Bank of Vietnam, the central bank, said
recently that ``loose supervision'' had led to serious problems for
the economy and banking system.
Analysts say the ultimate danger is that Vietnam, despite its booming
economy, could get cold feet about continuing the economic
liberalisation that hardline ideologues see as the root of the
problem.
In a sign of the new mood, senior politburo member Lieutenant General
Le Kha Phieu, earlier this week stressed the need to add unique
Vietnamese socialist characteristics to its market economy.
``The core issue is a multi-sector economy with diversified ownership,
including capitalist ownership,'' he said. ``But we will never follow
the capitalist road, we will never become a capitalist regime.''
___________________________________
Thursday, Mar 27, 1997 [40]... Back to headlines
_[INLINE] Nike Suspends Vietnam Manager; Criticized In Labor Report _
Hanoi (AP,DJ) -- Shoe giant Nike has suspended a manager in its Ho Chi
Minh City factory in response to a labor group's charge of worker
abuse in Vietnamese manufacturing plants, USA Today reported Thursday.
Nike representatives in Asia were unavailable for comment, but
U.S.-based company spokesman McLain Ramsey told the newspaper that a
manager had been suspended for abusing workers.
The newspaper reported that labor activist Thuyen Nguyen of U.S.-based
Vietnam Labor Watch inspected Nike facilities in Vietnam last month in
escorted and surprise visits.
Nguyen said he found violations of minimum wage and overtime laws as
well as physical mistreatment of workers.
His 12-page report on working conditions in Vietnam is the latest in a
series of troubles Nike has faced with its subcontractors in Vietnam.
Last year, a South Korean factory floor manager working for Nike
subcontractor Sam Yang Co. was convicted of beating Vietnamese
employees with a shoe.
At least 250 Vietnamese employees walked off the job at the Sam Yang
factory last week to protest poor working conditions and low wages,
state-run media reported.
A second Nike subcontractor, Taiwanese firm Pou Chen Vietnam
Enterprise, has been cited for physically abusing workers at its
plant.
Nike has repeatedly come under criticism for not clamping down on poor
labor conditions in factories it hires to produce its line of footwear
and apparel.
Company spokesman Ramsey said Nike has a full investigation going and
has encouraged local police to do the same, according to the paper.
Nguyen's report was to be released Thursday in New York.
About 3% of Nike's output is produced in Vietnam, a Nike spokesman
said in an earlier interview.
___________________________________
Thursday, Mar 27, 1997 [41]... Back to headlines
_[INLINE] Asian Cash Rice Flat; Iran Seen Buying Vietnamese, Thai _
SINGAPORE (Dow Jones)--Physical rice offers are holding firm late
Thursday in Asia, with some talk centered on the possibility of
Iranian parties concluding a large deal for Vietnamese rice by early
next week, trade sources said.
These Iranian parties, currently in Vietnam, may decide to buy up to
200,000 tons of 5% broken rice, said a trade source in Ho Chi Minh
city, adding the parties are also likely to contract the same amount
of Thai rice at a later date.
Still, Vietnamese 5% broken rice prices aren't expected to rise on the
large Iranian purchase. Increasing supply of the rice, as the
winter-spring crop flows into the market, should keep prices stable or
at least prevent them from falling sharply, the Ho Chi Minh city trade
source said.
He also said the Vietnamese government has set the floor price for
paddy from the winter-spring crop at 1,600 Vietnamese dong, some 400
dong higher that set for the previous summer-autumn crop. ($1=11,6550
dong)
Offers for Vietnamese 25% broken rice are at $225-$230/ton, while Thai
offers for the same grade are steady at $268-$270/ton.
Thai 100%B rice is quoted around $315-$320/ton, compared with offers
for the 100% Vietnamese rice heard around $300/ton.
Elsewhere, 25% broken rice is offered at $245/ton in India and
$210/ton in Pakistan.
Meanwhile, as reported Wednesday, the first rice shipment of 13,000
tons of Thai rice has arrived in Iraq. (See Dow Jones page 60843 for
related story.) Trade sources said all the rice contracted by Iraq is
from the private sector.
Also, as reported Wednesday, the state-owned Food Corp. of India has
purchased about 9.9 million tons of rice from Oct. 1, 1996 to March
25, 1997, up from 8 million tons purchased in the same period a year
earlier. Total procurement by the FCI this year is expected at 11
million tons.
-By Joyce Teo 65-421-4825
___________________________________
Thursday, Mar 27, 1997 [42]... Back to headlines
_[INLINE] Vietnam Legislator Says 'Much Concerned' With Bank Problems _
Hanoi (DJ) -- The problems of Vietnam's banks are a cause of national
concern, a spokesman for the national legislature said Thursday, in
one of the first public acknowledgements from a government official
the banking system is experiencing troubles.
Asked whether members of the National Assembly are worried about the
health of Vietnam's banks, legislative spokesman Vu Mao replied: 'Not
only the deputies, but the entire nation. ... We are very much
concerned.'
Worries about the level of bad debts and corruption in the banking
system have swelled in recent months, on official comments about the
value of deferred letters of credit coming do this year and anecdotal
evidence of signifcant bad-loan problems at several private banks.
Vietnam's National Assembly legislative spokeman Mao himself would
only speak in general terms about difficulties in the banking system,
referring to the collapse of several credit funds and the flight from
punishment of some debtors.
'This is a big problem, but we shouldn't exaggerate it,' Mao said,
adding the government has grappled successfully with other major
difficulties in the past.
And he suggested the government would have a clear motivation for
addressing the situation. Referring to the political unrest that has
erupted in Albania from the collapse of pyramid savings schemes, Mao
said, 'We don't want to face those problems.'
Mao's comments, although vague on the specific nature of bank
problems, represent one of the first times a government official has
said the situation is significant.
The National Assembly will convene for a month-long session on April
2.
At the last session, in October, members sharply criticized corruption
in bank lending practices, assumed to be a major cause of bad loans.
The upcoming session had been expected to approve new laws on the
central bank and on the banking system, but debate on them has pushed
back to the Assembly's subsequent sitting, in about six months.
Mao said the government's current banking ordinances 'have some
shortcomings' because they are about seven years old and therefore
somewhat out of date.
___________________________________
Thursday, Mar 27, 1997 [43]... Back to headlines
_[INLINE] Vietnam Execs' New Class Struggle Is With Capitalism _
HANOI (AP) -- Hold on to your hammer and sickle, class is in at
communist Vietnam's new school for capitalism.
Taught by some of Dartmouth University's top business faculty,
Vietnam's leading executives were back in the classroom this month for
a crash two-week course on free market economics.
One lesson covered a basic precept of capitalism: marketing.
Inside a makeshift lecture hall at the Communist Party's International
Club of Hanoi, about two dozen of Vietnam's corporate elite huddled
around a television and video player. On the screen, poultry icon
Frank Perdue is served up as an example of marketing ingenuity.
The video shows how Perdue's neatly packed rows of pre-plucked,
pre-butchered fowl have become synonymous in the United States with
chicken. It's a stretch for most Vietnamese, who still select their
squawking birds live at the local open-air market.
``Perdue is the quintessential American example of marketing
success,'' said Dartmouth business school professor Rohit Dishpande.
``It may not be directly applicable in Vietnam, but it illustrates the
concept of brand equity.''
Dishpande is keely aware that these students work in a realm different
from those at the Ivy League school in Hanover, N.H.
``We're looking at marketing strategies in a place where the natural
laws of marketing don't apply,'' he said.
Until recent years, Vietnam's ruling Communist Party ran an austere,
pragmatic country where consumer choice was as rare as free market
competition.
Economic reforms and liberalization have turned Vietnam into a
promising new market and have triggered a demand for knowledge.
Dartmouth is teaming up with the Vietnam National University to help
corporate executives make the leap from socialist economics to
capitalism.
``We're just entering a market economy and our information on how
things are done is still very limited,'' said Dang Thi Cat, the deputy
director of Asia-Pacific Bank Vietnam.
Going from the regimented socialist ideals of non-competitive central
planning to survival-of-the-fittest capitalism isn't always an easy
jump for many of Vietnam's senior executives.
The student roster at the Dartmouth program reads like an alumni
gathering from the former Soviet bloc's most prestigious socialist
academies.
Duong Manh Cuong, the man charged with turning heavily subsidized,
state-run Vietnam Airlines into a viable business entity, graduated
from Moscow's Economic University class of 1980.
``The one thing we've learned above all else is flexibility. You can't
be stiff, or rigid, and succeed in a competitive market,'' Cuong said.
With foreign investment pouring into Vietnam, competition is bound to
force many central planners into new ways of thinking.
``They see big foreign companies coming in and they say to us, `How do
we compete?''' said Paul Argenti, a marketing professor from
Dartmouth. ``We're trying to show that you can turn small into a good
thing.''
Much of the 9 percent annual economic growth in recent years has been
driven by the success of foreign companies entering Vietnam's
burgeoning new consumer markets. In many instances, the state-run
competition has struggled to keep up.
Advertising, for example, is still a nascent industry in Vietnam,
where Vietnam Advertising Co. Director Binh Ba Thanh estimates the
market is worth about $141 million.
``The bigger companies are beginning to realize the importance of
marketing and advertising,'' Thanh said. ``Especially as foreign
companies with large marketing budgets enter Vietnam.''
Thanh and his classmates will have an opportunity to see advertising
and other business concepts in practice when they travel to the Unites
States as part of the program. Once there, the group will visit Wall
Street, Microsoft and Boeing, among other leading business
institutions.
The Dartmouth program is one of a growing number of academic
partnerships forged between the United States and its former enemy
Vietnam.
In Ho Chi Minh City, formerly Saigon, Harvard University and the
Fulbright Center are helping executives from state-owned and private
Vietnamese companies make the transition to market economics.
Partnered with the Ho Chi Minh University of Economics, Harvard
faculty teach introductory and advanced training in macro and micro
economic development.
Other U.S. schools, including the University of Hawaii, have
established exchange programs with Vietnamese schools such as the
University of Hanoi.
Back at the Dartmouth program, professor Argenti sizes up the progress
made by his students and, by extension, the future for Vietnam.
``My hope is to own stock in Vietnam,'' he says. ``These people are
going to make it.''
___________________________________
Thursday, Mar 27, 1997 [44]... Back to headlines
_[INLINE] Vietnam delays banking legislation_
HANOI (AFP) - Vietnam has delayed passage of banking legislation to
allow time for improvements to avoid the type of crisis that has
engulfed strife-torn Albania, an official said Thursday.
Vu Mao, chairman of the legislative National Assembly office, told a
news briefing that the assembly wanted to be careful in drawing up new
banking legislation.
"The National Assembly is very aware of these banking problems. We
don't want to have a situation like in Albania where a lot of people's
credits collapsed," he said.
Street protests in Albania, sparked by the collapse of fraudulent
investment schemes, escalated into a full-blown armed rebellion on
February 28 after rioters ransacked army barracks.
Mao did not provide details of what problems were faced by Vietnam's
banking industry. The country's national assembly starts its next
session on April 2.
Banking analysts have warned of a looming banking crisis in Vietnam
where there is an estimated one billion dollars in overdue letters of
credit, representing about 25 percent of the country's import bill.
Mao said the government would not rule out letting certain troubled
banks collapse.
"We have a law on bankruptcy pertaining to all enterprises and banks
are enterprises," he said.
The sector is currently regulated by two banking ordinances passed
after the sector was restructured in 1988 to separate central bank and
commercial banking functions.
"These two ordinances have shortcomings and there are a lot of
problems in the banking sector that need to be dealt with," he said.
"But we came to the conclusion that the draft of two new banking laws
(for the central bank and commercial banks) don't meet our
requirements," he said.
The assembly is expected to pass laws introducing a value added tax to
replace the existing turnover tax, a law on corporate income tax and a
trade law.
___________________________________
Thursday, Mar 27, 1997 [45]... Back to headlines
_[INLINE] Vietnam aims to trim trade deficit to 10 percent of GDP _
HANOI (AFP) - The Vietnamese government hopes to trim its trade
deficit to 10 percent of gross domestic product (GDP) in 1997,
according to documents provided by the National Assembly on Thursday.
In a report to be submitted to the National Assembly which begins its
next session on April 2, the office of the National Assembly provided
an economic blueprint for this year that calls for a sharp cut in the
deficit.
The plan should be committed to boosting exports so as to "ensure a
reasonable (import) surplus ... below 10 percent of the national GDP."
It is the first public indication by the government that it has set a
target for the trade deficit which is one of the biggest macroeconomic
challenges facing Vietnam.
Last year, Vietnam's trade deficit climbed to about four billion
dollars, representing about 17 percent of GDP, a figure economists
have said is not sustainable.
However, the government has estimated a trade deficit for the first
three months of 1997 of 945 million dollars, a 6.5 percent decline
from the year earlier period.
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