VN Bus. News (Apr. 21, 1997)

[Vu Thanh Ca <vuca@envi.env.civil.saitama-u.ac.jp>]

April 21: Vietnam Collects 21.6% Of FY Revenue To Mid-April:Report 
April 21: Ad firms find it hard to account for Indochina 
April 21: S. Korea: Posco's Vietnam Plants Expected To Swing To Pfts 
April 21: Vietnam Unlikely To Widen Dong Trading Band Again - Report
April 21: Critics Fear Vietnam's Poor Are Borrowing Too Cheaply 
April 21: Vietnam's Credit Rating May Pave Way for Bond Issue


Vietnam Collects 21.6% Of FY Revenue To Mid-April:Report

HANOI (DJ) -- The Vietnamese government has collected 21.6% of its
projected full-year budget revenue as of April 15, according to an
official media report.

The figure, reported in the Communist Party newspaper Nhan Dan (The
People) Saturday, represents an essentially stable performance
compared with the year-ago period. In the first quarter of 1996, the
government collected 20.1% of its full-year revenue target.

The Vietnamese government historically has had difficulty gathering
revenue, and in the last few years it has had to engage in major
late-year campaigns to approach its targets.

The Nhan Dan article indicated revenue collection in some sectors has
improved slightly from last year.

Through April 15, revenue collection from state-owned enterprises
stood at 19.6% of the 1997 target, up from 16.2% in the first quarter
of 1996

Through mid-April, collection from the private sector stood at 21.1%
of the full-year target, and at 27.6% from foreign-invested companies.

In 1996, the government is reported to have collected 97%-to-99% of
its projected revenue.

In 1997, government revenue is forecast at 67 trillion dong.

The budget deficit is forecast at 3.5% of gross domestic product,
even, in percentage terms, from 1996.

There are 11,655 dong to $1.
                 ___________________________________


Ad firms find it hard to account for Indochina 

The Straits Times
By TOH HAN SHIH

UNCERTAINTY over changing laws in Vietnam and fears over possible
international sanctions in Myanmar are among the range of problems
faced by foreign advertising firms in the region, says Bates' chief
executive for Indochina, Mr Mike Langton.

Bates Indochina, headquartered in Singapore, is the leading
advertising firm in Vietnam, Cambodia, Laos and Myanmar.

"In Vietnam, the business environment has been tough for everybody. It
is very hard to do business there," said Mr Langton.

He listed two main problems in Vietnam:

Foreign advertising agencies are affected by uncertainty over whether
the Vietnamese government will unilaterally change the many
regulations in the country.

The many distributors of products covering small areas in Vietnam is
inefficient.

Mr David Bell, chairman of Bates Vietnam, the Vietnamese subsidiary of
Bates Indochina, said another difficulty facing the 18 or so foreign
advertising agencies in Vietnam is that they are not allowed to form
joint ventures but can only operate as representative offices.

"The size of the market is such that we all have to be here," he said.
"The multinationals in Vietnam want an international standard of ad
service that can only be provided by the foreign ad agencies."

Vietnam is well ahead of Myanmar, Cambodia and Laos in advertising
billings, having US$100 million (S$144 million) in billings last year,
a five-fold jump from four years ago, said Mr Langton. By comparison,
Cambodia and Myanmar's advertising billings will be about US$20
million each this year, he estimated. Laos lags behind at US$2.5
million last year.

Of that, Bates Indochina had annual billings last year in Vietnam,
Myanmar, Cambodia and Laos of US$12 million, US$5.5 million, over US$5
million and US$500,000 respectively, said Mr Langton.

Bates Indochina is a subsidiary of US-based Bates Advertising, the
second-largest advertising agency network in the Asia-Pacific region
in terms of billings and coverage.

Indochina's advertising billings are small compared with that of the
more prosperous South-east Asian nations. Last year, Thailand's
advertising billings were US$1.7 billion and Malaysia's were US$1.5
billion, according to Mr Bell.

Mr Sian Owen, an executive with market research firm SRG Vietnam,
said: "Advertising prices (in Vietnam) are extremely low due to the
industry being almost entirely state-sponsored right now. Only if and
when media, especially TV, becomes competitive in Vietnam will prices
start to rise and the value of advertising start to match other
countries in the region."

Ms Owen projected Vietnam's advertising billings for this year will
increase 20 per cent to US$120 million.

A foreign advertising executive based in Vietnam said: "In the past,
we (advertising) have been seen as a social evil in the press, (on a
par with) prostitution. That has changed.

"In any communist society, the media is a sensitive area and any
perception of losing control of the media by the government is a
no-no. Thus, it is hard to get new media in, particularly TV and
radio."

He said that in the past few years, some foreign TV companies tried to
get into Vietnam but did not succeed.

According to SRG Vietnam, last year roughly 55 per cent of Vietnam's
advertising billings came from TV, a quarter from print, 20 per cent
from outdoor billboards and 2 per cent from radio. Mr Langton said TV
penetration in Vietnam is high.

However, Mr Bell said advertising is highly restrictive on Vietnamese
TV, which has an official rate of three minutes of advertising per
hour of air time.

As a result, there is an excess of demand for TV advertising time,
which can only be alleviated by more TV channels.

Mr Langton said: "Companies are now researching consumer attitudes and
making advertisements especially for the Vietnamese market, not just
dubbing foreign advertisements. It's a good development."

Market research in Vietnam revealed some interesting insights. For
example, many young people patronise the cinemas but "normally, people
don't watch the movie and they go there to make out" because there is
little privacy in crowded homes, said Mr Langton.

Many Vietnamese still prefer to hoard their wealth at home rather than
deposit it in banks because they have seen banks collapse in the past.
However, such attitudes are changing, said Mr Langton.

On Myanmar, he said that multinationals were nervous over the
possibility of international sanctions against the country.

Meanwhile, Cambodia saw a dramatic 137 per cent rise in TV and print
ad spending to US$14 million last year, according to IMIC Research, of
which TV accounted for US$11 million.
                 ___________________________________


S. Korea: Posco's Vietnam Plants Expected To Swing To Pfts 

SEOUL (AP, DJ) -- South Korea's largest steel maker Pohang Iron &
Steel Co. (Q.PKX) said Monday two of its Vietnam joint venture plants
- steel pipe maker Vietnam Pipe Corp. and wire rod maker Vietnam Posco
Steel Co. - are expected to swing to profits of about $540,000 and
$1.3 million respectively this year, for the first time since they
were established in early 1990.

The expected shift to profitability indicates all three joint venture
plants Posco has in Vietnam - including Posco Vietnam Corp. - will be
profitable, said a spokesman at Posco.

Vietnam Pipe, which produces 30,000 tons of steel pipes a year, is
expected to record a profit, helped by increasing demand in tandem
with the Vietnam government's infrastructure investment around Hanoi.
Posco has a 15% equity in Vietnam Pipe, while South Korea's SeAh Steel
Co. and a Vietnam partner own 35% equity and the remaining 50% equity
respectively.

Vietnam Posco Steel is a joint venture plant, where Posco holds 35%
equity. The plant produces 200,000 tons of steel wire and rods a year.

The Posco spokesman added galvanized its third joint venture concern
in Vietnam, steel plate maker Posco Vietnam Corp. - where Posco has a
50% equity - is expected to maintain lucrative profitability this
year, as it has since it was established in 1992. The galvanized steel
plate maker, which produces 50,000 tons a year, is expected to post
1.2 million of net profits this year.

Shares of Posco closed at 55,000 won Monday, down 800 won, with 55,800
shares traded.
                 ___________________________________


Vietnam Unlikely To Widen Dong Trading Band Again - Report

Hanoi (DJ) -- Vietnam's isn't likely to widen the trading band of the
dong again, a top central bank foreign exchange official said,
according to an official media report Sunday.

'The State Bank plans to restrict the band to plus/minus 5.0% because
our target is exchange-rate stability,' Nguyen Doan Hung, the director
of the central bank's foreign exchange department, said in an
interview with the Vietnam Investment Review.

Asked whether the daily trading band of the dong would be widened
further, Hung replied: 'I don't think this will happen.'

Monday, the dong is trading at 11,655 to $1, essentially flat from
Saturday.
                 ___________________________________


Critics Fear Vietnam's Poor Are Borrowing Too Cheaply 

CAT BANG (WSJ) -- Two pink snouts poke through gloom of a ramshackle
pigsty, where the nature of Pham Van Ba's new business wafts through
the air.

"Pig manure," the Mao-suited farmer explains with a toothless grin,
standing ankle-deep in one of his tiny farm's most important
by-products. "I'm going to sell fertilizer for the rice paddies."

Mr. Ba has reason to be pleased. Although he owns no land for
collateral and earns less than $100 a year making conical palm hats,
he was able to buy two pigs with a $180 loan from the state-controlled
Vietnam Bank for the Poor at interest rates a fraction of what he
could obtain elsewhere. In the long run, he hopes a pig-breeding
business will help lift him from the poverty that, according to some
surveys, burdens half of Vietnam's population.

That's the idea. Vietnam Bank for the Poor was formed in 1995 to pull
together several of Hanoi's scattershot efforts to help its rural
population. But international experts in microfinance say that --
despite its best intentions, and success stories such as Mr. Ba's --
the bank is hamstrung by a severe lack of financial acumen. Indeed,
they fear the bank itself may be headed for the poorhouse.

Unless the bank is run differently, "it doesn't have a future," says
Joyita Mukherjee, a program analyst for the Washington-based
Consultative Group to Assist the Poorest, a nongovernmental
organization that works with the World Bank and the United Nations
Development Program on international rural-credit projects.

Bank for the Poor plays a vital role in Vietnam's push to alleviate
poverty and enable the population to build up the domestic savings
that the country's economy badly needs. Its demise would deprive
farmers of affordable credit and could drive them deeper into debt as
they turn to money lenders. The gap between rich and poor might widen
further, threatening the country's social stability.

Ms. Mukherjee recently spent a week in Hanoi, at the World Bank's
request, to provide technical assistance to Bank for the Poor. The
World Bank has offered a $15 million "carrot" to Bank for the Poor on
the condition that it changes the way it operates. But Bradley Babson,
the World Bank representative in Hanoi, doubts the bank will make
changes in time to receive any of that financing this year.

The problems that Ms. Mukherjee cites are fundamental. For starters,
she has advised Bank for the Poor to start charging interest rates
high enough to cover operating and financing costs and leave "a modest
retained-earnings margin" -- in other words, a profit.

Ms. Mukherjee also says Bank for the Poor "doesn't follow standard
international accounting procedures." Missing elements include
loan-loss provisioning, she says, adding that the bank doesn't even
track delinquent accounts.

Bank for the Poor charges its customers 1% a month, which may sound
steep by the standards of more developed markets. However, it beats
the loan sharks, the only other source in Vietnam for the smallest
loans; their monthly rates can range from 6% to 12%. Vietnam's
commercial-bank interest rates hover around 1.25% a month, but larger
banks typically won't make tiny loans to people with no collateral or
scant income.

The most important comparison, experts argue, is with other successful
microfinance programs, such as those in Bangladesh and Indonesia,
which charge 2% to 3% a month. The higher rates are essential to
finance loan officers' muddy treks to isolated villages, and the
extensive paperwork, hand-holding, education and follow-up visits that
clients require.

Take Mr. Ba's bank manager, Ha Si Vinh, who spends almost half his
time in the small communes scattered across a crowded province in the
Red River delta. Mr. Vinh typically spends hours traveling by car and
foot to check in on only two or three customers with a loan portfolio
of less than $400.

Cat Bang is just a 15-minute walk from his office, but it's a step
back in time. Standing in a slippery dirt track near Mr. Ba's farm,
Mr. Vinh steps aside to let an ox cart pass, careful not to slip into
the sewage-choked ditch that flanks the roadside. "My shoes are always
dirty," the banker grumbles. Although his work is gratifying, today
he'd prefer a desk job, he says.

Villagers chat familiarly with Mr. Vinh as he picks his way through
the traffic of stray chickens and dogs. The sleepy commune's
ramshackle homes once housed a thriving cottage fireworks industry.
But the government snuffed out that business in 1994, when it banned
fireworks. Residents have been struggling to find new sources of
income ever since.

The banker's first stop is a dilapidated farm on the edge of the
commune. He wants to know when the bank can expect the next payment on
its loan, but the only people at home are a barefoot girl playing in
the dirt courtyard and an elderly woman dozing in her hammock. From
what the old woman later tells Mr. Vinh, it isn't clear whether the
family has enough money left over from the sale of a pig bought with
the loan to pay the money back on time.

Down the road the banker stops at Mr. Ba's small but tidy two-room
cottage. Mr. Ba, who calls himself a former "anti-U.S." resistance
fighter, is held up by the bank as one of its more exemplary
customers. The 62-year-old couldn't earn his living in the rice fields
like other villagers. "No leg," he explains, cheerfully lifting his
right trouser leg to show off a slippered prosthetic. Mr. Ba stepped
on a land mine during the war.

But the veteran will be able to manage his new livestock enterprise
despite his disability. "I can stay at home with my wife and we can
feed the animals," he says. He plans to rent out a bull he bought with
the same loan to help rice farmers plow their fields. The extra income
will enable Mr. Ba to put his four teenage children through school.
With profits from his budding enterprises, he already has bought new
bicycles for two of his children.

While Mr. Ba has invested in what promises to be a profitable
enterprise, not everyone does. Many borrow money to pay off old debts.
Mr. Ba's neighbors, the Nguyens, recently sold all the pigs they
bought with their loan and used the money to buy decorations and
treats for the annual Tet festival, which celebrates the new lunar
year.

Mr. Vinh has tried to persuade clients that an extra hectare of rice
paddy might be a wiser investment than, say, a new roof or clothes and
school books for the children. But faced with such immediate needs, it
isn't always easy to coax villagers to put money into a long-term
investment.

And with hundreds of communes under his care, Mr. Vinh hardly has time
to teach people the long-term gains to be had by plowing profits back
into a business. Meantime, Bank for the Poor's low rates are keeping
other international microfinance programs on the sidelines, where they
fret that the Vietnam bank's cheap loan terms and meager education
program may be doing more harm than good. "If [people] can get cheap
loans so easily, there's no incentive to save," complains one
international expert in rural finance who is trying to establish a
credit union network in Vietnam that also would provide affordable
small loans. Instead, microfinance banks should teach borrowers to
deposit their savings, and use that capital base to get further loans,
he says.

Prof. Dao Van Hung, a lecturer at the faculty of banking and finance
of the Hanoi National Economics University, agrees that Vietnam's
farmers probably aren't learning how to invest money properly. "When
they get a loan now, most don't invest in their farm, they put it in
the mattress," he says.

Bank for the Poor's general manager, Ha Thi Hanh, recognizes many of
the structural difficulties her bank faces. While she acknowledges the
need to charge market interest rates eventually -- "to become
self-sustaining" -- she points out that the bank's mandate is to
subsidize loan costs and absorb risks as part of the government's
program to reduce poverty. Profit can wait. For now "our goal is to
help the poor approach the market mechanism," she says.

During a "transitional phase" until 2000, she says, the bank will
continue to charge low rates. The bank's rates are dictated in
legislation passed by the governing politburo, she notes.

Mrs. Hanh is well-acquainted with the plight of Vietnam's rural poor.
She is from the remote northwestern town of Dien Bien Phu, in the
heart of one of the most impoverished regions of Vietnam, where she
headed a branch of the state-controlled Vietnam Bank for Agriculture.
The people from her home province barely eke a subsistence living from
the hilly terrain.

Until Bank for the Poor consolidated Hanoi's antipoverty efforts into
one institution, "efficiency was low," and even fewer were helped,
Mrs. Hanh says.

Although the current institution may be an improvement, big hurdles
remain. Every year the bank seeks financing from the World Bank, and
every year it is turned down. As Ms. Mukherjee puts it, unless the
bank starts to operate "the way a good bank should," the World Bank
and other international donors are likely to continue to deny aid.

Requests for international funding are becoming more important as
Vietnam's beleaguered domestic banks, which have provided the vast
majority of Bank for the Poor's capital, struggle with their own
problems of cash flow and bad debt.

The bank was capitalized with 500 billion dong ($42.9 million) in 1995
from Vietnam's central bank and the Bank for Agriculture. A year later
it received additional financing totaling 1.953 trillion dong from a
combination of state-budget allocations, treasury-bond issues and
long-term bank loans. Its only international funding to date has been
233 billion dong, which came mostly from a South Korean government
grant. Clients' savings deposits equal only 0.05% of the bank's total
capital.

Looming difficulties don't seem to be slowing the bank's haste to keep
lending. "The most important thing is to get the loans to those who
need them, as quickly as possible," Mrs. Hanh declares.

That adds up to a lot of people. Under its poverty-reduction program,
the government plans to give 90% to 95% of poor households access to
credit by 2000. The 1.4 million people who already have received loans
from the bank are just a fraction of the 40 million or so poor who
need capital.

Bank for the Poor has budgeted two trillion dong to disburse over the
rest of this year, Mrs. Hanh says. But, she adds, "we need at least
three times that amount to meet demand."

The eagerness to disburse cash highlights another weakness observers
cite: bookkeeping. Mr. Dao, the banking and finance professor, asserts
that the staff lacks even basic bookkeeping skills and tools for such
a broad task.

In a dimly lit room in one of the bank's branches in the Red River
delta province of Hatay, two women write accounts in thick ledger
books, while a young man puts piles of crumpled dong notes through a
counting machine. Next door, a branch director takes his afternoon nap
in a cot behind his desk. Asked later how many loans were disbursed by
the bank's branches in Hatay, a provincial director replies "enough to
buy 219 tons of fertilizer, 8,700 cows and 57,000 pigs." The official
is less forthcoming on the bank's loan-repayment rate, however.

Mrs. Hanh estimates the bank's repayment rate is 90%. However,
supporting information for this estimate is difficult to track, Ms.
Mukherjee and others say, given Bank for the Poor's nonstandard
accounting procedures and its dizzying array of loans. Terms often
vary dramatically from borrower to borrower, to take into account the
time it takes to grow rice crops, rear livestock, or hatch a small
enterprise.

As a rule, peer pressure among a commune's residents keeps loan
customers honest. Mr. Ba paid back his loan on time. The Nguyens have
a few more payments to go. However, Mr. Vinh says loan deferments are
common; on average, a loan's repayment is delayed three times, he
says.

Mrs. Hanh concedes there are some "slight" discrepancies between
official numbers on the books and what is happening in reality.
Indeed, a branch director in the Mekong River delta puts the repayment
rate at 70%, while some commune officials reckon only 50% of loans
have been repaid on time. With Bank for the Poor's long-term loans
from banks coming due in the next few years, such discrepancies may
lead to insolvency, analysts warn.

Bank officials voice confidence, even if they're a bit hazy on the
details. One branch manager asserts that commercial banks will soon
match the bank's own low rates, although he can't explain how they
might do so and still make a profit. When they cut their rates, he
figures, "Farmers will have more places to go for cheap loans, and our
problems will be solved."
                 ___________________________________


Vietnam's Credit Rating May Pave Way for Bond Issue

HONG KONG (WSJ) -- Bankers hailed Vietnam's first sovereign credit
rating -- by Moody's Investors Service Inc. -- as a positive step that
may help open doors to international capital markets.

The rating put Vietnam's credit-worthiness at Ba3, above Argentina,
Brazil and Pakistan, and on a par with Turkey.

"I think a Ba3 rating is not bad for them. After all, how can you say
they're better than Argentina or Brazil?," said Barry Field, director
at ANZ Investment Bank, which he described as one of the heaviest
traders of defaulted Vietnam loans.

Economic Record Praised

Moody's cited Vietnam's record of structural reform and macroeconomic
stabilization as factors in the rating. The agency also lauded the
country's "robust investment- and export-led growth and success in
restructuring its external debt burden."

The country is in the process of issuing Brady bonds, bonds backed by
zero-coupon U.S. Treasurys, as a means of settling approximately $900
of commercial-bank principal and arrears. The bonds are expected to be
issued in June. A term sheet to settle the commercial-bank principal
and arrears was finalized in January. Vietnam achieved about 50% debt
reduction in the deal.

Constraints on Moody's rating include the country's low domestic
savings rate, weak legal system, fragile financial sector and heavy
infrastructure needs, the rating agency said.

An official at Standard & Poor's Ratings Group in Melbourne would not
comment on whether the firm is in the process of rating Vietnam as
well.

Bankers said that getting the credit rating suggests that the country
may be moving ahead with longstanding plans for an inaugural
sovereign-Eurobond or global-bond issue. The issue has been on hold,
although Merrill Lynch and Nomura International were awarded a mandate
some time ago to jointly lead-manage it. An official involved with the
issue said, however, that there is no change in the situation and that
no schedule has been set for its launch.

Nonetheless, Moody's said it "expects to assign a Ba3 rating to the
forthcoming Eurobond issue of the Socialist Republic of Vietnam,"
fanning speculation that the bond might indeed be on its way.

Brady-Bond Issue First

Mr. Field predicted a Eurobond offering of $150 million to $300
million, but said he doubts the issue will be launched before 1998
since the Brady bonds must be launched first. In addition, the World
Bank and the International Monetary Fund have criticized the planned
issue, factors that may continue to slow the process, he noted.
Officials at Merrill and Nomura were silent about details.

The rating, however, is definitely a positive for the bond's
prospects, said Cleo Kawawaki, debt syndicate manager at Nomura
International (Hong Kong) Ltd. "For the bond, I think it would remove
the uncertainty and be very good for it. It's a very good rating for
an emerging-market country," she said. "It's easier to assess the
credit now -- and a lot more people will be interested in the
country."

The rating could also ease the pricing of the bond offering because
its lead managers and traders can look to the pricing of bonds from
similarly-rated countries for comparison.

Kazakstan, for example -- also rated Ba3 -- launched a $200 million
three-year Eurobond in December 1996 at a spread of about 350 basis
points, or hundredths of a percentage point, over U.S. Treasurys. The
issue narrowed to about 220 to 230 basis points over Treasurys,
according to a fixed-income trader.