VN news (June 2)

[Dam Son <son@fermi.phys.washington.edu>]

Asian-Pacific & Emerging Markets:
Heineken's Vietnam venture not allowed to buy dollars for loan
Vietnam's GDP up 9 Percent in First Half of Year 
Vietnamese Farmers Sell Land to Survive: Report 
BHP Gets Green Light To Seel Stake In Vietnam Oil JV 
US$63.5 Mln Bridge Construction Set To Begin In Vietnam 
Vietnam Clears Fibre Wood Forest, Fireboard Plant Plans 
Vietnam ponders solutions to economic slowdown 

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Asian-Pacific & Emerging Markets:
Vietnam's Cut In Rates to Hurt Foreign Banks 

The Wall Street Journal Europe
07/02/97

HANOI  -- The interest-rate cuts announced by Vietnam's central bank
could make a tough job tougher for foreign banks operating in the country,
banking executives said.

There already are relatively few creditworthy local clients to lend to
and even less information to guide a lending decision. The competition
is fierce; returns are small. And they grew even smaller as a result
of the decision to lower interest rates, bankers say.

As part of a series of interest-rate reductions intended to boost economic
growth, the State Bank of Vietnam lowered the ceiling interest rate on
dollar loans by a full percentage point to 8.5%.

"It's a difficult place to operate, and now we're being penalized on
profit without risk being evaluated," one foreign banker said.

To be sure, many banks weren't lending to foreign companies based in
Vietnam at the previous ceiling rate.

For those loans, which are funded offshore, the banks generally charged
a lower rate of 1.25 to two percentage points above the Singapore interbank
offered rate, which is around 3.87% for one-year loans. Many of the foreign
banks' clients are international corporations.

Instead, the squeeze comes in lending to Vietnamese companies, which
generally don't benefit from the same rates. Dong-denominated rates were
cut by 0.25 percentage point on Monday.

"It's an interest-rate cut, but we can live with it," another foreign
banker says. "But if it goes down any further, we'll have a problem,"
he adds.

Most foreign banks in the country don't take deposits, but fund lending
by borrowing offshore. ( Vietnamese law doesn't allow them to take dollar
deposits from locals and dong deposits are limited to 25% of capital
from non-dong borrowers.)

The level of deposits at state-owned and private Vietnamese banks also
is relatively low because of a lack of confidence in the system and confidentiality
concerns.

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Heineken's Vietnam venture not allowed to buy dollars for loan
redemption 

AMSTERDAM, July 02 (AFX) - Vietnamese Brewery of Ho Chi Minh City has
been denied permission from Vietnamese monetary authorities to buy dollars
needed to redeem a loan, Volkskrant reported, citing a Heineken NV spokesman.

Vietnamese Brewery is owned by Asia Pacific Breweries, a joint venture
of Heineken and Singapore's Fraser & Neave.

The paper said the construction of the brewery was financed by a loan
to APB which is redeemable in dollars.

"The brewery is negotiating with the authorities and they are convinced
they will find a solution," the paper quoted Heinken's spokesman as saying.

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Vietnam's GDP up 9 Percent in First Half of Year 

HANOI (July 2) XINHUA - Vietnam's gross domestic product (GDP) increased
nine percent in the first half of this year compared to the same period
last year, according to official statistics.

The agricultural production posted a high growth rate, with farmers nationwide
harvesting 14.6 million tons of paddy, an increase of more than one million
over the same period last year.

More than 1.8 million tons of rice had been exported, increasing 46 percent
over the corresponding period this year.

The industrial output is reported to grow 13.6 percent in the first six
months with higher increases recorded in electricity and production of
fertilizer, construction materials and chemicals.

The consumption of cement, paper, cloth, food and foodstuff also showed
a rise.

Vietnam gained 4.1 billion U.S. dollars from exports, 30.2 percent higher
than those in the first half of 1996.

The imports were reported at 5.533 billion dollars, an increase of 0.3
percent.

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Vietnamese Farmers Sell Land to Survive: Report 

HANOI, July 2 (AFP) - Vietnamese farmers are being forced to sell or
mortgage their land to survive, an official report said on Wednesday.

As many as 10 percent of farmers in some provinces in Vietnam's southern
rice bowl in the Mekong Delta have given up their land and become labourers
in order to make ends meet, the Vietnam News daily said.

At a meeting chaired by Communist Party General Secretary Do Muoi in
southern Soc Trang Province, delegates learned that some landholders
had bought up as much as 10 hectares (about 25 acres) of land.

This trend could provoke an official reaction within the Communist Party
which regards is as "a new form of feudalism" said one Western diplomat.

Vietnam virtually abandoned collectivized agriculture in the late 1970s,
but the notion that each family should have a plot of land still pervades
official socialist thinking.

However according to the report, between six and 10 percent of farmers
in An Giang and Tra Vinh provinces had to work as hired labourers, in
some cases working for those who bought their land.

Farmers have been forced to sell or mortgage their land because of low
rice prices and high lending rates, often paid to private rice traders
who charge as much as 3 percent per month.

Although Vietnam has experienced two years of bumper rice crops, bureacratic
bungling and inefficient distribution has prevented farmers from reaping
the benefits of good harvests, while private traders have profited.

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BHP Gets Green Light To Seel Stake In Vietnam Oil JV 

Hanoi, July 1 (VNA) - Australia's BHP Petroleum can sell its share of
a joint venture with Petro Vietnam at the Dai Hung (Great Bear) offshore
oilfield in southern Vietnam, the Ministry of Planning and Investment
(MPI) said.

BHP's US$60 million share of this oil production-sharing contract signed
on April 15, 1993 will be sold to Petronas Carigali of Malaysia and Japan's
Dai Hung Oil Development Ltd. The decision became effective June 14.

Petronas Carigali is taking the lions share, and becomes a partner in
the joint venture holding nearly 72.86 percent of the stock. Dai Hung
Oil will have over 12.14 percent, and Petro Vietnam, 15 percent.

(VNA)

01-07 1556

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US$63.5 Mln Bridge Construction Set To Begin In Vietnam 

Hanoi, July 1 (VNA) - Construction of the My Thuan bridge over the Mekong
river in southern Vietnam is scheduled to start on July 6 and continue
for 36 months.

The Australian government is providing nearly A$60 million in non refundable
aid towards the A$90 million (roughly US$63.5 million) project to build
an 800 metre bridge spanning the Mekong river.

The bridge will be the first crossing the Mekong river in Vietnam and
will make a significant contribution to economic development in the entire
Mekong delta.

Baulderstone Hornibrook Engineering of Australia was selected as the
project's builder while Maunsell Consulting Company Pty Ltd of Australia
and the Communication and Transport Consulting and Design Company of
Vietnam will take responsibility for supervising the project execution.

My Thuan will be a cable suspended bridge built with the most advanced
construction technology. It will be constructed by about 1,200 local
workers with technical assistance from 300 Australian experts.

The Vietnamese government has granted a special preferential regulation
for the project, including exemption of land-use taxes and construction
site rent during its construction period.

Tax and fee exemption will be applied to machinery, equipment, material
supplies, and contractors and foreign labourers involved in the construction
of the project. The regulation also stipulates that local sub-contractors
will also enjoy free income tax.

(VNA)

01-07 1605

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Vietnam Clears Fibre Wood Forest, Fireboard Plant Plans 

Hanoi, July 1 (VNA) - Deputy Prime Minister Tran Duc Luong has approved
a prefeasibility project to establish fibre wood forests and to build
fibreboard factories in Hoa Binh and Gia Lai provinces.

The project aims to produce materials to replace logs cut from natural
forests, thus gradually forming a stable material resource to feed factories
and meet demand for domestic consumption and export.

It will also help alleviate the problems of unemployment and increase
income for people living in mountainous and remote areas.

The decision appoints the Ministry of Agriculture and Rural Development
to zone certain areas.

Factories to make fibreboard planks, each with a capacity of 54,000 cubic
metres per year, will be built in Luong Son (the northern province of
Hoa Binh) and in An Khe (the Central Highlands province of Gia Lai).

The decision also defines the responsibilities of the Ministries of Planning
and Investment; Finance; Science, Technology and Environment; the State
Bank and relevant agencies to ensure execution of the project.

It is part of a programme to develop man-made materials to replace wood
via the Forestry Corporation, following the government's policy to close
natural forests, now being applied across Vietnam.

(VNA)

01-07 1614

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Vietnam ponders solutions to economic slowdown 

By John Chalmers

Hanoi, July 1 (Reuter) - Vietnam released data on Tuesday that pointed
to slowing economic growth and proposed new measures to boost industry,
including a revamp of struggling state-owned firms.

The General Statistics Office said that although the economy grew at
a vigorous annual rate of 9.1 percent in the first half of 1997, production
was stagnating in some areas and deflation had started to cause problems.

The report came a day after the central bank's announcement that it had
lowered the ceiling on interest rates to bolster industrial production
and breathe new life into bank lending and consumer demand.

Western economists say a slowdown of Vietnam's economy, which has grown
at more than eight percent a year since 1992 thanks to far-reaching reforms
along market lines, would be no bad thing.

"The past five years' pace just can't be sustained," said one senior
economist in Hanoi. "If it slows to about seven percent, that might
be more manageable."

However, he said the loss of economic momentum also reflected a pause
in the reform process, which has come about because of pending leadership
changes and ideological resistance to the next, crucial stage of reform
-- streamlining the state sector.

"They really can't sustain this success story until they get reforms
going again," he said.

The statistics office said the growth of output under Industry Ministry
control fell to a year-on-year 8.2 percent from 14.8 percent in the first
half of 1996, while Ministry of Agriculture-run production growth slumped
to 10.1 percent from 30.2 percent.

First-half industrial production growth in Hanoi tumbled to 1.7 percent
from 10.3 percent in the same period of last year, and in Ho Chi Minh
City -- the country's economic powerhouse -- it dropped to 9.9 percent
from 10.3 percent.

The report said this year's target of 14.0-14.5 percent for industrial
production growth would probably be missed.

It said consumer prices, which fell three months in a row before rising
by a meagre 0.1 percent in June, had created a more favourable environment
for investment.

However, deflationary pressures were having a negative impact on some
sectors of the economy, especially agriculture, where a bumper winter-spring
rice harvest had led to stockpiling.

The statistics office report said the stagnation in output could be pinned
to a lack of capital for investment, backward technology, bad management
and high production costs .

It recommended a restructuring of the country's sprawling and, for the
most part, unprofitable state sector and a quickening of exports from
sectors with foreign investment.

Truong Tan Sang, Ho Chi Minh City's Communist Party chief, told the Tuoi
Tre newspaper that sudden policy shifts were discouraging both domestic
and foreign investment, and called for the business climate to be improved.

However, he denied that Ho Chi Minh City's economy had cooled because
cosy relationships between banks and business had been ruptured by a
recent rash of fraud and corruption scandals.

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