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VN Bus. News (May 17, 1997)
May 16: Vietnam Trims Airline Growth; Moody's Sees better Investment Climate
May 16: World Pepper Report: Vietnam Defaults Keep Prices Buoyed
May 16: Asian Cash Rice Flat; Vietnam Awaits Buyers of High Grades
Vietnam Trims Airline Growth; Moody's Sees better Investment
Climate
Asian Aviation News
(c) 1997 Phillips Business Information, Inc.
Vietnam's aviation industry appears to be turning toward a more
realistic growth plan. Given the country's rapid growth, `realistic'
still means massive requirements for aircraft and other aviation
support. Tailoring ambitions to match the country's economic capacity
provides a much better chance for meeting those requirements and
rewarding investors.
Vietnam Airlines carried 2.5 million passengers in 1996, a healthy
18-percent increase from the prior year. But the airline had projected
25-percent growth. For 1997, a calmer 15-percent growth pace has been
forecast.
So far, only cargo is meeting the revised plan. In the three months
through March 31, the airline boosted its passenger count only 4
percent from the same period of 1995. Cargo, the mainstay of air
transport in developing economies, jumped 14 percent.
"There has been some flattening out of traffic, a plateau," one
observer says. The slower pace is due to demand, not aircraft
constraints, he says.
Like China in the 1980s
Traffic is driven by Vietnam's economic growth. Figures on the
country's growth are imperfect, acknowledged Hanan Amin-Salem, a
senior analyst at Moody's Investors Service. Nevertheless, Moody's
preliminary estimates of Vietnam's growth in the early 1990s parallels
the rise in China's economy in the 1980s.
Moody's expects Vietnam's economy to grow at nearly 10 percent in
1997.
"The rate of growth is quite phenomenal," according to Amin- Salem. "
Vietnam has avoided the decline that other countries transiting from
command to market economies have experienced."
Economic growth at near 10 percent could support traffic growth of up
to 20 percent, if all the gears meshed smoothly. That is hardly the
case in Vietnam now.
Vietnam Airlines has 14 large commercial jets, down from 16 late last
year, all effectively `wet-leased,' with crews and maintenance
included in the deal. Four Boeing 767-300ERs have been leased with at
least partial crews from GECAS and Ansett Worldwide. Ten Airbus A320s
have been wet-leased, or dry-leased and then "wetted up" with crews
provided by Singapore's Region Air.
One reason for leasing is Vietnam's primitive legal protection of
property. "They try to keep the jets on a foreign registry for
clarity," says an Ansett leasing spokesman.
The other reason is the need for training Vietnamese pilots, who are
experienced with Russian jets. Ansett provides an Australian captain
with its 767, but Vietnamese fill other crew positions. "We have
trained up Vietnamese pilots as first officers, and we have checked
out two as captains on 767s," said Ted Walters, Ansett's director of
operations. "We have ongoing training at the airline."
As recently as last year, Vietnam Airlines had very ambitious plans: a
fleet of 70-80 jets by early in the next century. And the government
announced it wanted to spend $5 billion to upgrade 16 airports,
including $1.8 billion to expand Ho Chi Minh City Airport.
Stretching to Meet the Market
These plans may have to be trimmed, stretched out, and integrated with
the rest of Vietnam's capital needs. Moody's has given Vietnam a
"sovereign risk" rating of Ba3. This is three notches below Moody's
lowest investment grade, Amin-Salem noted, but the same rating given
Jordan, Romania, and Kazakhstan. Moody's judges that foreign investors
bear more risks in Vietnam than in China, which has an
investment-grade A3 rating, but less risk than in Argentina and
Brazil, much richer but sometimes less disciplined economies.
Moody's is impressed by Vietnam's decontrol of most prices, cutting of
subsidies to state enterprises, and reduced budget deficits. Inflation
was dramatically reduced to about 4.5 percent 1996, Amin-Salem
estimated.
Vietnam's export growth of about 15-20 percent per year is robust and
not too burdened by past commitments. The country's `current account'
deficit--the deficit on trade and other current payments--was 12
percent of GDP in 1996, not very high by developing- nation standards.
Excluding debts to the former Soviet Union, which are being
renegotiated, foreign debt is 88 percent of GDP. That ratio is high
but can be managed if it is kept stable, according to Amin- Salem.
A Chinese Pace
Vietnam's GDP Growth
(Preliminary)
%/Yr
1991 5.9
1992 8.6
1993 8.1
1994 8.8
1995 9.5
1996 9.5
1997 (e) 9.5
Source: Moody's from Vietnam statistical sources
___________________________________
World Pepper Report: Vietnam Defaults Keep Prices Buoyed
Defaults in Vietnamese FAQ black pepper since last month have
supported prices of such pepper, traders said.
Price increases in Vietnamese pepper had led exporters to default on
their contracts, leading affected buyers to cover their positions in
the secondary market, traders said.
'There are more defaults from Vietnam and this makes the market more
difficult,' said a Rotterdam-based trader.
Only some 2,000-5,000 tons of black pepper are left in Vietnam,
keeping prices bolstered, traders said.
Offers of Vietnam FAQ black pepper are quoted Friday at $3,150/ton,
FOB Ho Chi Minh City, up about $100/ton from last week.
Offers of such pepper are also heard Thursday around $3,300/ton, CIF
Rotterdam or Hamburg.
Most end-users are well-covered with pepper till June or July, and are
barely covered for the rest of the year, said the Rotterdam-based
trader. As such, more demand is expected from them for shipments in
the second-half of the year, he added.
Indonesia's Muntok white pepper prices are weaker from last week, amid
thin selling interest, traders said.
Offers of such pepper are quoted Friday around $4,600/ton, for nearby
shipment, FOB Pangkal Pinang, down from $4,650-$4,675/ton last week.
Prices slid to around $4,500/ton early this week, but rebounded from
Wednesday, traders said.
Bids of Muntok white pepper are tagged at $4,400-$4,500/ton, for
nearby shipment, FOB.
Although buyers are showing slack demand for nearby shipment of white
pepper, they are scouting for shipment from July onward, said the
Jakarta-based trader. Indonesian exporters, however, are reluctant to
sell forward, traders said.
For forward shipments, Muntok white pepper prices are quoted at a
$100/ton-discount to the nearby months.
On the fundamentals front, the influx of Indonesia's white pepper crop
into the market has been picking up since early this month, said the
Jakarta trader.
Muntok white pepper prices, however, aren't likely to be weighed down
by the crop's arrival, as some Indonesian exporters still have to
cover their short positions for May-June shipments, he added.
-By Netty Ismail 65-421-4821
___________________________________
Asian Cash Rice Flat; Vietnam Awaits Buyers of High Grades
SINGAPORE (Dow Jones)--Cash rice offers are largely steady late Friday
in Asia, with the Thai market focusing more on parboiled rice, market
sources said.
Offers for Thai parboiled rice are firm at $340/ton as some exporters
are still on the short side.
A trade source in Bangkok estimates that exporters have yet to cover
some two to three cargoes of parboiled rice contracted by Nigerian
buyers, said to be at an average price of $320/ton, FOB.
He said most exporters have covered a large portion of their orders
from Iranian buyers, rumored to be for about 20 vessels or up to
300,000 tons.
Thai 100%B rice is offered steady at $340/ton while the 25% broken
rice is quoted around $265/ton, with the highest offers heard at
$280/ton.
Another Bangkok trade source said lower supply has pushed up prices of
25% brokens. 'It's difficult to find the rice. The 25% brokens come
from the same paddy used for (processing) parboiled rice. And millers
are currently concentrating on the parboiled rice,' he said.
In Vietnam, offers for 25% broken rice are still at $195-$198/ton
while the 5% brokens are offered around $225/ton.
Vietnamese prices are kept low because of ample supply. Also, 'it's
just West Africa buying large quantities of the low-grade rice. Iran
isn't buying Vietnamese, they're in the Thai market,' said a trader in
Ho Chi Minh City. 'So there isn't much buying of the higher-grade
rice, but the current crop is by and large for the higher-grade rice.'
The Indian 25% brokens are indicated at $260/ton amid an absence of
buying interest while Pakistani 25% brokens are offered flat around
$230/ton.
-By Joyce Teo 65-421-4825