VN Bus. News (Apr. 25-26, 1997)

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

April 26: Karat Enters Joint Venture in Vietnam 
April 25: Total receives licence for Vietnam liquified gas joint venture
April 25: Vietnam's Bank For Poor Hits Major Problem ...
April 25: Asian Cash Rice Flat-Up Amid Strong Demand For Vietnamese 
April 25: Vietnam April RPI -0.6% Vs March, +1.6% Vs Yr-Ago Month 
April 25: Vietnam to Ease Restrictions On Promotions of Cigarettes 
April 25: Vietnam says annual inflation at 1.6 percent in April 


Karat Enters Joint Venture in Vietnam

Business Day (Thailand)

KARAT Sanitaryware, a subsidiary of Siam Cement, has entered into a
joint venture agreement with Hai Hung Construction and Hai Hung
Investment and Development of Vietnam to set up a sanitaryware
manufacturing plant there.

In a report submitted to the Stock Exchange of Thailand yesterday, the
company said that the two chosen Vietnamese companies would hold a 20
percent and 10 percent stake respectively in the joint venture
company, Karat Hai Hung ( Vietnam).

Karat Sanitaryware will hold the remaining 70 percent stake in the new
company, which would have a registered "capital of $5 million.

The plant, to be located in Hai Hung province, is expected to produce
100,000 units of various sanitaryware in the first year and 500,000
units a year when it reaches full capacity after the third year of
operation.

Karat Sanitaryware earlier entered into a joint venture with a
Vietnamese firm to set up a joint venture floor and wall tiles
manufacturing plant with a 6,400 tonnes a year capacity.

The plant is scheduled for completion in 1998.

Karat Sanitaryware recently set its 1997 sales target in Thailand at 1
billion baht, the same as in the previous year.

Its 1997 first quarter sales have already exceeded the target by 15-20
percent.
                 ___________________________________


Total receives licence for Vietnam liquified gas joint
venture

HANOI (AFP) - French oil company Total has received a licence to build
a 10.6 million dollar liquified petroleum gas (LPG) plant in the
northern port of Haiphong, a company executive said Friday.

Total will take a 70 percent stake in Total Gas Haiphong, with
state-owned company Tradimexco taking a 30 percent share in the
bottling plant which will supply butane and propane to the domestic
market, Jean-Pierre Labbe, Total chief representative to Vietnam said.

The group will construct an LPG receiving terminal and storage depot
with a capacity of 1,000 tons and a bottle-filling unit will be built
to serve the growing domestic demand for gas.

The project is Total's second foray into down-stream products. In
October last year the group opened a 7 million dollar LPG plant in the
southern province of Dong Nai, in which it holds a 32 percent stake.

The group has also signed a contract to take a 60 percent stake in a
third a third LPG facility to be built in the city of Can Tho in the
Mekong Delta. The project is not yet licenced.

Total is also conducting a feasibility study to build a bitumen plant
in the southern port of Ba Ria-Vung Tau, Labbe said.

Although Total is optimistic about the robust demand for down stream
products including lubricants which it imports, prospects for larger
scale projects in Vietnam have failed to pan out.

In 1995 Total pulled out of a proposed Dung Quat oil refinery costing
more than one billion dollars because the project was deemed
uneconomical. Vietnam has said it will build the 1.2 billion dollar
refinery, with or without foreign help.

In 1996 Total sold its 10.5 percent stake in the offshore Dai Hung oil
field because realised production of 12,000 barrels a day was just a
fraction of original estimates.
                 ___________________________________


Vietnam's Bank For Poor Hits Major Problem
---Last Resort for the Nation's Most Needy Runs Short Of Necessary
Expertise

By Samantha Marshall
The Wall Street Journal

CAT BANG, Vietnam -- Two pink snouts poke through the 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 followup 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.

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, says general manager Ha Thi Hanh. But, she adds,
"we need at least three times that amount to meet demand."

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."
                 ___________________________________


Asian Cash Rice Flat-Up Amid Strong Demand For Vietnamese 

SINGAPORE (Dow Jones)--Physical rice offers are steady to higher late
Friday in Asia as the Vietnamese market continues to see strong
demand, trade sources said.

Vietnamese 25% broken rice offers are now largely pegged at $205/ton,
compared with $200-$205/ton heard Thursday, while the 5% broken rice
remains offered at $235-$240/ton.

'There is enough supply but not enough capacity to meet the demand,'
said one Ho Chi Minh city trader. 'If many vessels come at the same
time, the supplier can't deliver the cargoes on time.'

Current buyers include those from Indonesia, West Africa and Peru, he
said, adding Vietnam should easily record exports of 300,000 tons or
more this month. Last month, Vietnam shipped out 297,640 tons.

Although there is talk of the current wheat crisis in Pakistan
spurring domestic demand for rice, Pakistani rice offers are stable,
at around $220/ton for the 25% broken rice, said a trade source in
Lahore.

'There's a wheat shortage here but it's not going to push up rice
prices much,' he said.

In Thailand, prices are climbing amid strong demand, a trade source
there said, though he also said the market is rather chaotic, with
exporters quoting different prices.

Offers heard from a large Thai exporter are as high as $344/ton for
the 100%B rice, up from $325/ton, and at $275-$279/ton for the 25%
broken rice, up from $260/ton heard from traders Thursday.

-By Joyce Teo 65-421-4825
                 ___________________________________


Vietnam April RPI -0.6% Vs March, +1.6% Vs Yr-Ago Month 

Hanoi (AP,DJ) -- The government's retail price index (RPI), Vitenam's
principal barometer of inflation, fell 0.6% in April from March. It
rose 1.6% from the year-earlier month, according to preliminary data
from the the Government Statistics Office (GSO) Friday.

The April month-on-month decline compares with an 0.5% decrease in
March. The year-on-year rise in March was 2.3%.

The April 1997 results compare with a 0.1% month-on-month increase in
April 1996 and an 8.4% year-on-year increase.

According to an economist at an international organization, the April
year-on-year index increase of 1.6% is the smallest in the ten years
since Vietnam launched its program of economic reforms.

Among the major components of the index, on a monthly basis: cereals
and foodstuffs fell 1.6%; non-foodstuffs were unchanged from March;
and services increased 0.5%.

On a year-on-year basis: cereals and foodstuffs declined 2.6%;
non-foodstuffs rose 3.4%; and services advanced 9.7%.

Economists said a sharp drop in domestic rice prices, the consequence
of a bumper winter-spring rice crop, is the main factor behind
Vietnam's currently very mild inflationary climate.

'That's pretty much the whole story,' said one Hanoi-based economist.
'Supply is too high. People can eat just so much rice domestically.'

Cereals and foodstuffs account for about 30%-35% of the overall price
index.

The deceleration of inflation in recent months, therefore, doesn't
necessarily raise concerns about the overall level of growth in the
economy, the economist said. Some government officials and foreign
analysts have suggested the low level of inflation might point to a
slowing economy.

'This is a sectoral issue, not an economy-wide one,' the economist
said.

Cereal prices dropped 2.8% in April from March and were down 9.5% from
April 1996, the Statistics Office report indicated.

The decline in rice prices suggests the government's latest efforts to
support rice farmers haven't succeeded so far and points to the
consequences of the export quota that limits external shipments of the
grain.

In March, Prime Minister Vo Van Kiet issued a decree intended to
decentralize the rice export process and open up the possibility of
private-sector companies participating for the first time.

According to industry players, however, no private-sector companies
have been authorized yet to export, despite the fact state-owned
companies aren't able to buy up all the rice available on the market.

Although the rice situation does explain most of the subdued nature of
inflation, some questions about the pace of the Vietnamese economy are
legitimate, said the economist at the international organization.

'It's almost certain you can't have 9.0% real growth and less than
2.0% inflation for a sustained period,' the economist said.

He noted there have been recent official media reports of slowing
industrial production in Ho Chi Minh City and of growing stockpiles of
items like steel. Additionally, both government monetary and fiscal
policy remain tight.

For now, though, there still isn't any concrete evidence of a
slowdown, he added.

'Altogether, inflation continues to be a non-event, and surely
constitutes an event in itself,' the economist said.

'The government has had a very successful anti-inflationary strategy.'
                 ___________________________________


Vietnam to Ease Restrictions On Promotions of Cigarettes 

Hanoi (WSJ) -- Score one for Big Tobacco.

It hasn't had much to cheer lately. In the U.S., cigarette companies
are in talks to settle potentially ruinous lawsuits. Around the world,
tightening rules are curbing tobacco advertising.

But this is Vietnam. By the end of next week -- assuming an amendment
to the Commercial Law is passed by the National Assembly as scheduled
-- the country will be rolling back what had been some of the world's
strictest restrictions on promotion of tobacco.

At the moment, say officials, the law bans any kind of promotion that
even suggests a brand of cigarette. Philip Morris Cos.' Vietnam branch
learned that late last year, when it tried to hand out lighters with
the Marlboro logo at the market in Ho Chi Minh City. City officials
seized the giveaways. A couple of weeks later, Marlboro salesmen
festooned pushcarts with cowboy posters and red-and-white carton
sleeves at a motorbike race; police confiscated those as well. (Philip
Morris says it complained to the authorities about the seizures and
notes that the company wasn't fined.)

But under the amendment being proposed, any kind of product promotion
will be allowed, as long as it's "not applied to people under the age
of 16," according to a draft copy of the new legislation. A ban on
advertising in the mass media will remain, however.

Rules? What Rules?

How much practical impact any changes to the law will have is unclear;
many vendors and advertisers already flout the rules. Triet Viet Vuong
Street in Hanoi, known to locals as "Cafe Street," is lined with tiny
bars decked out in competing cigarette company colors. Cafe Lan, for
example, sports the blue-and-gold stripes of the 555 brand of
cigarettes. Next door, Cafe Tho's decorative theme is red and white,
Marlboro's signature colors. One cafe owner says she's aware that this
kind of advertising is illegal, but "we've never had a problem here
with the police enforcing the ban."

Nonetheless, under the proposed new rules, she would be on the right
side of the law.

Sudden policy reversals aren't uncommon in Vietnam. But this one
points to the internal jockeying that usually takes place behind
tightly closed ministerial doors. Under the proposed amendment,
jurisdiction over alcohol and tobacco promotion will be taken away
from the Ministry of Culture -- one of the main bastions of
conservative opposition to foreign ideas and products -- and put into
the hands of the Ministry of Trade. The Trade Ministry isn't renowned
for its liberal leanings, either, but as a key economic ministry, it's
heavily involved with foreign investors and investment.

"There is certainly an ebb and flow of opposing government forces,
though they don't always follow a linear pattern that's readily
apparent to your average foreign investor," explains Harold Fiske, a
lawyer at the Hanoi branch of legal firm Russin and Vecchi.

Regulatory Cooperation

Ever since the Ministry of Culture took a hard line on tobacco and
alcohol advertising early this year, it has come under heat from
various state and commercial interests, including the Ministry of
Industry, the Ministry of Trade, state-owned Vietnam Tobacco Corp., as
well as foreign tobacco and alcohol firms.

They argued that ban would hurt Vietnam's own tobacco industry, which
manufactures foreign brands under various joint-venture agreements.
Foreign liquor and tobacco sales also contribute a sizable chunk of
tax revenue to government coffers. Over an overflowing ashtray in a
meeting room of the Ministry of Trade, Nguyen Minh Chi, director of
the legal department, hints that most recent directives against
advertising promotions went too far. But he's quick to stress that the
two ministries will cooperate closely in administering the revised
rules. After all, mass-media advertising will still fall under the
control of the Ministry of Culture.

Officially, the Ministry of Culture takes the line that the
advertising and promotions ban is in the interest of public health and
social stability. "Tobacco and alcohol are harmful to health, the
environment, and cause extravagance inappropriate for Vietnam's
socio-economic situation," says Le Anh Tuyen, an official in the legal
department of the Ministry of Culture. Mr. Tuyen doesn't smoke
himself, a rarity among Vietnamese men.

Still, Mr. Tuyen admits that the promotions ban "hasn't been
comprehensively enforced." Outside his office, a four-wheel drive car
emblazoned with the Marlboro colors and name cruises by.

In the Mekong Club, a popular after-hours discotheque in southern
Hanoi, affluent young Vietnamese bop under a giant cowboy poster. The
club's dance nights are sponsored by Philip Morris.

Nearby in the New Feeling Bar, another of the capital's hot night
spots, customers show their gold packets of 555 cigarettes to the
bartender in exchange for free bottles of beer. "Few Vietnamese know
the law," says Nguyen Phan Vinh, the bar's owner, as he touches the
side of his nose and winks. Such promotions may not be as effective as
cigarette companies would hope. Despite pushing 555s, Mr. Vinh, after
all, is a Marlboro man.
                 ___________________________________


Vietnam says annual inflation at 1.6 percent in April 

HANOI (AFP) - Vietnam recorded year-on-year inflation of just 1.6
percent in the month to April 25, its lowest rate in more than a
decade, according to official figures released Friday.

During the month to April 25 prices nationwide fell 0.6 percent,
thanks to softer food prices, especially the price of rice which has
fallen dramatically thanks to a bumper winter crop, the statistics
office said.

Rice prices fell 2.8 percent from March and 9.5 percent from a year
earlier, according to the General Department of Statistics.

The inflation figure was the lowest in Vietnam since the country
launched its economic reforms in the mid-1980s.

Construction materials prices are 1.1 percent down from year-earlier
levels and the country has stockpiles of both cement and steel and a
flood of cheap imports.

In contrast, fuels have been the only major commodity to see double
digit inflation over the past 12 months, up 22.4 percent due to large
fuel price and tax increases last November.

Ho Chi Minh City, which has seen its economy grow at around 15 percent
annually in the past two years, had the country's highest 12 month
inflation rate of 3.8 percent, though prices dropped 0.3 percent from
March.

Prices in Hanoi also fell slightly over the previous month, dropping
1.1 percent from March, and rising just 1.2 percent over a year ago.

Inflation in Vietnam has fallen from 67 percent in 1991 to 17.5
percent in 1992, 5.2 percent in 1993, 14.4 percent in 1994, 12.7
percent in 1995 and just 4.5 percent last year.

The dong has slipped 4.4 percent against the dollar in the past twelve
months according to the official exchange rate, and one percent since
March.

However the dong has lost more value against the dollar on black
market rates in recent weeks.

Vietnam releases its inflation figures around the 25th of the month
rather than waiting until the month is over.