Report of Department of Service Economy – Ministry of Planning and Investment in June 24th 2012.
I. OVERVIEW
1. World situation.
Despite adverse information and worse economic data of several economies posted recently, the world economy still had some highlights as follows:
- U.S Economy has maintained its momentum of recovery and is currently building up the confidence of local and foreign consumers.
- The economies of Japan, India and Russia have attracted international attention and are now among countries showing potentials for stable economic recovery.
- China Economy was in the stage of stable development, growth deceleration. China’s trade turnover in April 2012 recorded the lowest growth rate since the financial crisis 4 years ago.
In the Eurozone, election progress in French, Greece and its impact on the guideline for addressing the sovereign debt crisis in Europe is also a big issue, exerting dramatic effects on the global financial market. However, the tendency of new factors shows that although being more difficult and complicated, these factors will be more active and help Europe overcome the hardships.
Stock markets in Europe and North America witnessed dull trading sessions because no agreement was made between Greek political parties on the formation of a coalition government and Greece will, therefore, be bound to carry out a general election in the next month. This exaggerated the concern about the possible withdrawal of Greece from the Eurozone and its “surrender”.
In Asia, released data regarding China economy showed that this economy exhibited clear signs of deceleration with scaled down industrial production, retail sales, imports and exports, etc. This is essential for such a country which has shifted its focus towards stimulating domestic demand rather than exports; nevertheless, this economy is still dependent on external demand, and it will take time for domestic demand to grow. Expressing great determination to provide economic assistance by continuously cutting down compulsory reserve ratios of banks in order to partially increase the liquidity, China economy is expected to bring back the momentum for growth early, that is, economic growth will be not as hot as in previous years but will become more sustainable.
2. Local situation.
There were several highlights as follows:
- The confidence in the national financial resources, solutions to economic recovery, especially in solving financial obstacles for business and production has been improved gradually.
- Some opinions argued that: it would be necessary to restore the lending mechanism which provided low interest rate assistance for objects like “unsecured loans” as before; but guarantors have to be specialized economic management agencies and qualification procedures must be scientific, economic and feasible; especially special attention should be given to the capacity of business and production establishments and their ability to make timely payment of principal and interest.
- Foreign exchange reserves of commercial banks have been remarkably enhanced and increased by around 30% as compared to that at the end of 2011.
- There were numerous factors to predict that: It was possible that the State Bank would reduce VND loan interests more quickly in coming time as the issue regarding eligible objects was dealt with on a firm and reasonable basis.
Vietnam economy continued maintaining the prospect for stable recovery and considerable development. Data showed that our economy was getting more and more positive and stable; especially monetary and financial markets. In addition, economic stability was represented by its maintenance of Fitch Ratings’ B+ and stable outlook rating. In particular, the promulgation of the Resolution No. 13/NQ-CP by the Government on solutions for easing difficulties faced by enterprises and the market is highly appreciated by international organizations.
However, solutions set forth in the Resolution (mainly providing tax debt exemption, reduction and extension for enterprises) predominantly focus on production activities while consumption promotion and inventory reduction are disregarded. It is worth noting that whatever assistance packages or solutions are executed, it is important that primary and overriding objectives of management tasks are consistent and directed towards objects in need of assistance. Enterprises with large stock, unable to find customers and with no revenue – the objects to which the State should give assistance – will benefit little from these assistance packages.
For imports and exports, given opportunities arising from the world growing consumer demand, Vietnam economy still need to attach special importance to exports.
II. ASSESSMENT OF PERFORMANCE RESULTS IN THE FIRST SIX MONTHS OF 2012
1. Performance of the service sector
1.1. General situation.
As estimated, the service sector in the first six months of 2012 recorded a year-on-year growth rate of 5.26%, of which some fields of the service sector witnessed a remarkable growth rate, including wholesale and retail services, financial and banking services, and tourism. The structure of the service sector in the first half of the year was estimated to fullfil 38% of the yearly plan.
Rising prices of some input materials and increasing consumer demand resulted in a considerable surge in prices of a number of services such as transportation, tourism, hospitality, especially on long holidays such as the Liberation of South Vietnam and National Reunification Day (April 30) and International Labor Day (May 01).
Service exporting in this period was estimated at US$4.5 billion, rising by 12% as compared to the same period last year, of which some services produced a large export value, namely tourism, telecommunications, transportation and banking, etc.
(Estimated figures of the Department for Service Economy)
1.2. Performance of certain services.
a. Tourism
The estimated number of international arrivals to Vietnam in the first six months of this year was about 3.6 million, up 23% over the same period a year earlier. Almost all international tourist markets to Vietnam exhibited a year-on-year growth of which the number of tourists from Russia had the highest rise (up 51%), followed by Korea with 49%, Taiwan with 30%, Malaysia with 29%, Japan with 25%, China with 24%, etc. While the number of tourists from Australia and Cambodia experienced a reduction of 4% from the same period of 2011; visitors coming for tourist purposes accounted for 53%; for business purposes 17%, for visiting relatives 17.7% and for other purposes 5.7%.
Maintaining the momentum for growth in 2011, the local tourist market in this period continued to see drastic changes. The number of domestic visits was estimated to hit 17.2 million, climbing by 8% as against the same period last year.
The revenue of the service sector in the first half of this year was at an estimate of VND78,000, showing a year-on-year increase of around 20%.
General assessment: In the first months of this year, units operating in the service sector and localities actively held events with a view to attracting tourists of which key events were activities included in the program on organization of the National Tourism Year of the North Central Coastal region – Hue 2012 with a wide range of events mainly held in January, February and April such as Spring Festival and Hue Festival 2012; Danang International Fireworks Competition 2012; the ceremony to announce Ha Long Bay as New 7 Wonders of Nature in the world, etc. These factors were considered to contribute to the growth rate of the service sector in the first months of 2012.
b. Cargo and passenger carriage
In the first six months of 2012, the volume of goods transported was estimated to reach 320 million tons and 72 million tons-kilometers, up 107% and 101% year on year, respectively. Passenger carriage was at an estimate of 1,210.5 million visits and 49,176.2 million passengers-kilometers, representing a year-on-year increase of 112% and 117.7%, respectively.
c. Post and Telecommunications
The number of new telephone subscribers in the first half of the year was estimated at 5.2 million. The estimated number of telephone subscribers nationwide by the end of June 2012 totaled 136.1 million.
The volume of broadband internet subscribers across the country by June 30, 2012 was at an estimate of 4.6 million, rising by 20.4% as against the same period a year ealier. The number of internet users by late June 2012 was estimated at 32.5 million.
d. Financial services
Banking services
Upon the implementation of the Resolution No. 01/NQ-CP dated January 03, 2012 by the Government with respect to the first package of solutions ”focusing on inflation control, microeconomic stabilization”, particularly executing tight, prudent and flexible monetary policies; continuing to implement fiscal policies in a strict and effective manner; enhancing market and price control, well organizing the domestic market; encouraging exports, curbing imports, limiting trade deficit, the State Bank of Vietnam (SBV) in the first half of this year conducted a variety of measures in order to lower bank interest rates, ceiling deposit interest rates to 12%/year from 14%/year. Therefore, credit interest rates recorded a fall of 1-1.5% as compared to the beginning of this year. In addition, SBV carried out credit policies designed to provide assistance for the agriculture sector, urban area, SMEs, production for export, processing industry, enterprises employing a large number of workers.
Results achieved:
Deposit interest rates: VND deposit interest rates: Deposit interest rates were kept stable as over the end of 2011, of which prevailing interest rates on demand deposits were 2.4-3%/year, while deposits with the term of less than one month at 3.5-4%/year and those with the term of one months or above at 11.5-12%/year.
Prevailing USD interest rates on deposits from individuals stayed at 2%/year while those on deposits from economic organizations at 0.5-1%/year.
Lending interest rates: VND lending interest rates: After the promulgation of the Circular No. 14/2012/TT-NHNN by the SBV, credit institutions have reduced VND short-term loan interest rates to 15%/year for borrowers from the agriculture sector, urban area, export processing and supporting industries and SMEs. Moreover, several commercial banks continued to cut interest rates on VND short-term loans, for example, HSBC made an additional reduction of 1-2%/year for interests rates on consumer loans; The Bank for Investment and Development of Vietnam (BIDV) lowered interest rates on short-term loans made to borrowers from production and business fields to 15%/year, the lowest loan interest rate was 13.5%/year. At present, prevailing interest rates on loans made to borrowers from the agriculture sector, rural area, export processing and supporting industries are 13.5-15%/year, an interest rate at 12%/year is applicable only to loans in service of Winter-Spring rice procurement for temporary storage are 12%/year, loans made to borrowers involved in other fields of production and business are charged an interest rate of 14-18%/year while non-production fields at 16.5-20%/year.
USD lending interest rates: Prevailing lending interest rates on short-term loans and mid-and-long term loans were 5.5-7.5%/year and 7.5-9%/year, respectively.
Interbank average exchange rates were kept stable, transaction rates of commercial banks showed a downward tendency and were always lower than the permitted ceiling one. The Interbank average exchange rate of VND versus USD was VND20,828/USD, indicating no change from late 2011; Prevailing transaction rates of commercial banks were around VND20,800/20,860/USD.
Total means of payment: in general, total means of payment in the first six months of 2012 were estimated to rise by around 1% only over the same period a year earlier. Total deposit balances of customers at credit institutions were estimated to surge by 1.4%.
Credit for the economy was estimated to decline by 1.8% as against the same period last year, estimated outstanding loans for fields subject to lending restrictions dropped from 11.2% in late 2011 to 10.5% by the end of June 2012. Credit institutions paid greater attention to production fields while credit for fields subject to lending restrictions saw a rapid decline from 11% at the end of 2011 to 10%.
Bad debts soared slightly from 3.2% at the beginning of this year to 3.6%, but for a particular organization, bad debts even recorded a higher increase. Overall, Vietnamese enterprises in this period faced various difficulties such as global economic crisis, low demand for Vietnamese exports from big clients, huge stockpiles.
Insurance services
Performance of the insurance sector in the first half of the year: The Government kept adopting macroeconimic policies such as concentrating on restructuring the economy, reducing public spending, maintaining a tight financial policy which has more or less been exerting impacts on the insurance market.
Currently, there are 29 non-life insurance companies and 14 life ones in Vietnam insurance market. Gross written premiums in the first six months of 2012 was estimated to total VND21,300 billion (climbing by 22% year on year); total investment amount in the period was at an estimate of VND92 trillion; total amount of indemnity and claim payment was estimated at VND7,070 billion; total premiums written through brokers was estimated to hit VND7,8 trillion, up 60% year on year, etc.
Assessment:
Vietnam economy in the first half of 2012 still faced numerous difficulties, especially enterprises operating in finance, banking and real estate industries, preventing insurance companies from expanding their client bases. Besides, as stated by experts in this sector, from 2012 onwards, in accordance with WTO commitments, branches of foreign non-life insurance enterprises may be established and operate in Vietnam. Thus, the competition will become stronger, posing an enormous challenge for domestic insurers.
However, right from early this year, insurance enterprises have been aware of these obstacles and have taken measures uniformly with a view to upholding available advantages for improvement of customer service and care quality, developing a wide range of new products to satisfy customer demands, of which great attention is given to promoting products designed for individuals. Hence, the industry has achieved a number of remarkable results.
Securities services
2011 was the year of net selling in the stock market due to a pile of adverse information. Liquidity squeeze resulted from investors’ pessimistic sentiment. On several days, the trading value on both bourses was less than VND650 billion. In early this year, most experts forecast that the market would move up in the second half of the year. Nevertheless, the stock market in the first six months of 2012 reported a rapid growth. The liquidity of both bourses amounted to VND3trillion/session, 5 times higher than the average level of 2011. As estimated, as many as 8.2 million shares worth VND122 trillion were traded in the first six months of this year.
The total value of listed securities across the market hit VND271,892 billion, representing an increase of 2.7% as compared to the beginning of this year, of which shares took the lead with VND200,462 billion, making up 73.7%, followed by bonds with VND68,669 billion and fund certificates with VND2,761 billion, occupying 25.3% and 1%, respectively. The market value of listed securities amounted to VND608,555 billion, rising by 33.7% as against the beginning of this year. VN-index at the end of May 2012 attained 447.93 points, indicating an increase of 37% (96.38 points).
Net buying of foreign investors in this period was estimated at VND600 billion.
e. Distribution services
Distribution services in the first months of 2012 faced numerous difficulties as a result of tightened consumer spending and decreasing buying power. Among 17,735 enterprises which wound up and terminated their business in the first four months of the year, as many as 5,297 units were from the retail and wholesale sector, representing the largest number.
Distribution, wholesale and retail services are forecast to show an upward tendency but have a growth rate which is lower than those in previous years. In this situation, enterprises have opportunities to expand the market share, gain greater access to retail space thanks to decreased real estate prices. Many retail enterprises focus their strategies on improving management efficiency, minimizing costs, enhancing the association and combination with others to take up the market share.
1.3. Assessment of the implementation of the Resolution No. 01/NQ-CP
- With respect to service development indicators, the service sector in the first half of 2012 recorded a growth rate of 5%, much lower than the yearly plan (7%). Thus, this sector should make a breakthrough in its growth rate in the third and forth quarters of this year.
- Regarding banking interest rate management tasks, recently, banking interest rates have witnessed a slight decrease, but still not fulfilled enterprises’ expectations. In fact, enterprises still faced difficulties in getting access to capital sources from banks.
- With respect to the implementation of the Directive No. 1792/CT-TTg, Ministries, branches and localities strictly implemented the Directive of the Government’s Prime Minister, especially in new project appraisal, indicator assignment and disbursements in the 2012 plan.
- Regarding the management of service import and export, trade deficit in services remained so high. This is a real situation which the service sector has coped with over the last years, thus, in the great efforts should be made to lower trade deficit in service trade balance.
2. Import and export of goods
2.1. Import and export in May and first five months of 2012:
a. Export
Total export revenue in May 2012 was estimated to reach US$9.1 billion, up 1.5% month on month, of which the export turnover of foreign-invested enterprises (excluding crude oil) was estimated at US$4.78 billion.
Total export revenue in the first five months of this year was at an estimate of US$42.86 billion, increasing by 24.1% as compared to the same period a year ealier, of which foreign-invested enterprises posted an export revenue (excluding crude oil) of US$23.15 billion, escalating by 43.7% as against the same period last year and making up 54% of total export revenue.
With respect to import of several main items: import value of crude oil in the first five months of 2012 was estimated to reach 3.05 million tons, representing a year-on-year drop of 9.8% by volume and 0.5% by value; coal with 5.8 million tons, down 14.4% by volume and 20.4% by value; rubber with 332 thousand tons, up 41.9% by volume and down 1.6% by value; rice with 2.95 million tons, down 12.4% by volume and 17.1% by value; coffee with 850 thousand tons, up 6.5% by volume and 1.8% by value; import value of garment and textile hit US$5.3 billion, up 7.7%; footwears with US$2.7 billion, up 14.3%; wood and furniture with US$1.8 billion, up 22.6%; telephones of all kinds and accessories with US$3.7 billion, up 111%; electronic components with over US$2.7 billion, up 99.3%; sea products with US$2.3 billion, up 11.8%, respectively, etc.
Prices of almost all agricultural products experienced a year-on-year reduction, of which rubber price recorded a sharpest decrease of 30.6%, followed by products made from cassava with 16.7%, cashew nuts with 7.8%, rice with 5.4% and coffee with 4.4%, respectively.
Regarding export markets, estimated export turnover to Japan in the first five months of this year recorded the highest increase with 41.6%, occupying 12.3% of the country’s total export revenue, followed by China with 33.3%, capturing 11.7%; EU with 21.6%, accounting for 17.1%; US market with 19.8%, making up 17.3%, ASEAN countries with 19.5%, occupying 14.4%, respectively.
b. Import
Import value in May 2012 was at an estimate of US$9.8 billion, climbing by 9.4% month on month, of which the import value of foreign-invested enterprises was estimated at US$4.9 billion.
Import value in the first five months of 2012 was estimated to total US$43.48 billion, soaring by 6.6% year on year, of which foreign-invested enterprises reported an import value of US$22.2 billion, surging by 25.3%.
Regarding the volume and import value of some main items: the import of oil and petrol in the first five months of this year reached 3,944 thousand tons, down 23.2% by volume and 13.3% by value; iron and steel of different kinds with 3,159 thousand tons, up 6.4% by volume and 2.1% by value; fertilizers with 1,108 thousand tons, down 27.1% by volume and 13.8% by value; papers and paper products with 475 thousand tons, up 9.7% by volume and 4.1% by value; plastic materials with 1,033 thousand tons, up 1.9% by volume and down 2.7% by value; machinery and equipment with US$6.2 billion, up 6.3%; computers and computer accessories with US$4.5 billion, up 103.4%; fibrics with US$2.75 billion, down 1.8%; garment and textile accessories with US$1.26 billion, up 3.6%, etc.
The import value from Asia markets in the first five months of 2012 accounted for 80.3% of the country’s total import value. Main import markets included China (up 12.9% in import value, making up 23.7%), ASEAN markets (up 0.9%, capturing 19.9%), Korea (up 14.3%, occupying 13.1%), Japan (up 14.3%, accounting for 10.1%) and EU (up 11.6%, making up 7.2%).
Total trade deficit in the first five months of this year hit US$622 million, equaling 1.45% of the total export turnover. Vietnam’s main import partners included China (nearly US$5.3 billion), ASEAN (approximately US$2.5 billion), Korea (roughly US$3.7 billion) and Taiwan (US$2.7 billion.
c. Comments on import and export situation in the first five months of 2012:
- The country’s export activities in this period maintained a high growth rate (24.1% year on year) which was much higher than import activities (6.6%):
+ Industrial products kept a good growth rate in export turnover, in particular, the export turnover of telephones and accessories increased by 111%, computers and computer accessories by 99.3%, making a considerable contribution to the growth of export turnover (the export turnover of these two items in the first five years of the year saw an increase of US$3.3 billion).
+ Prices of exported agricultural products in 2011 touched the peak while in the first five months of 2012 seeing a fall or remaining the same against the same period in 2011 and the average price of 2011. Overall, the export turnover of agriculture, forestry and fishery only recorded a surge of US$500 million as compared to the same period last year.
- The FDI sector has maintained a high growth rate over the three consecutive years and made significant contribution to the growth of export value. Total export turnover in the first five months of 2012 posted an increase of US$8.3 billion, of which the FDI sector had a rise of US$7 billion (excluding crude oil) in its export revenue. Therefore, the export value of domestic economic sectors recorded an increase of US$1.3 billion year on year only.
- The growth rate of import value of the FDI sector in the first five months of 2012 was far higher than that of the country’s total import value because major items of this sector were processed and assembled products, the production of which is dependent on imported materials. The import value of this sector showed an increase of nearly US$4.5 billion as over the same period a year earlier while the country’s total import value ran an increase of US$2.7 billion.
- The country’s total trade deficit in the first five months of the year was estimated to attain US$622 million, equal to 1.45% of total export turnover, of which the FDI sector (excluding crude oil) reported a trade surplus of US$960 million.
- The reduction in trade deficit was a fairly positive signal but showed that demand for imports supporting domestic production has decreased. The economy in general and enterprises in particular experienced numerous difficulties in business and production development.
2.2. Estimate of export and import in the first half of 2012 and in 2012:
Export turnover in the first half of this year was estimated at US$52 billion, jumping by 20.8% over the same period last year; import value was at an estimate of US$53.5 billion, widening by 8.1%. Trade deficit in this period was estimated to reach US$1.5 billion, equivalent to 2.89% of total export turnover.
Export turnover in 2012 was estimated to hit US$109 billion, growing by 12.5% over 2011; import value in 2012 was estimated at US$115 billion, up 7.7%. Trade deficit was at an estimate of US$6 billion, equaling 5.5% of total export value[1]. If compared to the indicator set forth by the National Assembly, it is possible to fulfill the indicator of trade deficit under 10%, but greater importance should be paid to the possibility for recording the annual growth rate of 13% in 2012.
In 2011, the country’s export turnover grew by 34.2% (equivalent to US$24.7 billion) primarily as a result of a sharp increase in average export prices, especially prices of agricultural products as compared to 2010. Increasing export prices entailed export turnover to grow by 19.6% while quality contributed to the 12.2% increase of export turnover. In 2012, prices in general and prices of agricultural products in particular will have effect on export revenue of this category of goods. Industrial products, especially electronic accessories and telephones produced by the FDI sector will make the largest contribution to export growth of this year.
3. Domestic market development
3.1. Total retail sale of consumer goods and services
As estimated, total retail sale of consumer goods and services in May 2012 attained VND191,800 billion, expanding by 0.6% against April 2012. Among economic sectors participating in the market, the individual sector still made up the largest share with 47.3%, followed by the private sector with 34.9% and 14.1%, respectively. The FDI sector only contributed 2.6% to total retail sale of consumer goods and services of the market while the collective sector accounted for 1.1%.
Total retail sales in June 2012 was estimated to hit VND198,247 billion, rising by 3.3% over May 2012. In general, total retail sales of the country in the first six months of this year was at an estimate of VND963,862 billion, growing by 21.6% against the same period in 2011.
(Forecast of the Department for Service Economy)
3.2. Consumer Price Index
The CPI in May 2012 was estimated to soar by 0.18% month on month. The CPI in June 2012 was estimated to grow by 0.22% over May 2012. Hence, as estimated, the CPI in the first half of 2012 saw a 3% surge as compared to December 2011 – lower than the plan (The CPI is planned to increase by 10%).
(Forecast of the Department for Service Economy)
3.3. Supply – demand, prices of necessities
a) Oil and petrol
From early May to date, finished oil product prices worldwide has continuously witnessed a downward bias. In trading sessions last week, prices of A92 petrol dropped to US$114.45/barrel, representing a 6.4% decline as over the first half of May. On May 09th, 2012, when global oil price fell sharply to around US$98/barrel (down 9%), domestic retail price of petrol was lowered by VND500/litre and import taxes on some petroleum products were increased from 0% to 2% - 3%.
At present, light, sweet crude oil for June deliveryon the New York Mercantile Exchange continues to show downward tendency and is traded at around US$92.6 per barrel. Local retail price of oil and petrol and import tax levels are projected with another adjustment so as to match world oil prices.
According to provisional data released by the General Statistics Office, the volume of oil and petrol imported in the first five months of this year was estimated to attain 3,944 thousand tons, equivalent to US$3,982 million, equal to 76.8% as against the same period a year earlier. Crude oil exported in this period was at an estimate of 3,049 thousand tons, equivalent to US$2,916 million and equaling 90.2% of the same period last year.
b) Iron and steel
Steel production and consumption in the first five months of 2011 fell to low levels again due to the persistent slump in the real estate market, delay in investment capital disbursements, etc. As estimated, steel consumption in May 2012 reached 490 thousand tons, representing a jump of 30 thousand tons over April 2012 with a slight surge of steel price owing to increasing prices of input materials such as steel billets, imported steel scraps, jumping oil price, etc. At present, construction steel is sold at VND15,400 – VND15,700/kg, VAT excluded. Steel price is forecast to have a slight surge because of increases in production costs and input materials prices, but the change level is forecast with a small range.
According to Vietnam Steel Association, as many as five additional building steel projects will be put into operation with the total capacity of 1.5 million tons/year (Thai Trung Steel Project in Thai Nguyen province with a capacity of 500 thousand tons/year, three others in Danang including Dana-Italian Steel Project with 250 thousand tons/year, Asia-Pacific Project with 250 thousand tons/year, Central Steel Project with 250 thousand tons/year and An Hung Tuong Steel Project with 250 thousand tons/year). A tough competition is forecast due to redundant outputs. Currently, domestic demand for building steel swings around 6.3 million tons/year whereas the additional output of these factories will push the total building steel capacity of the country to 9 million tons/year, leading to a three-ton redundancy.
Steel export is currently paid great attention but the export volume is still modest. Vietnam’s steel exporters are Cambodia, Indonesia, Philippines, Thailand, Malaysia, etc. of which Cambodia is the largest partner of Vietnam.
Provisional statistics of General Department of Vietnam Customs showed that the realized volume of imported steel in May 2012 was estimated to hit 700 thousand tons or US$583 million, up 5.6% month on month.
c) Fertilizer
The world fertilizer market showed an upward tendency in May as a result of limited supply sources and a sharp decline in inventories in various countries (Thailand, U.S., etc.). Urea was offered at 495-505 USD/ton in the first week of May.
Domestic fertilizer price tended to re-bounce because Mekong Delta provinces were prepared for summer-autumn crop. Phu My urea fertilizers are now offered at VND10,800 – VND12,000/kg depending on the area with a supply source basically satisfying consumption demand.
In accordance with preliminary data from the General Department of Vietnam Customs, the estimated volume of urea fertilizer imported in the first five months of 2012 was 130 thousand tons, equivalent to US$56 million, equaling 39.4% of the same period last year.
d) Cement
Public investment slashing and delay in implementation of 2012 investment plan by ministries, branches, localities caused a constant stagnancy in the cement market, like other building materials.
Cement production in May was estimated to reach 4.9 million tons, indicating a slight month-on-month jump. Overall, cement output in the first five months of 2012 was at an estimate of 22.7 million tons. Cement consumption in May showed a positive sign, was estimated to attain about 5 million tons, pulling inventories down over the previous month.
Regarding selling price, cement price in this period was relatively stable. In May, a large number of cement enterprises offered big promotions with a view to decreasing inventories, namely Ha Tien Cement applied 10 – 12 free packages for every 100 packages; Ha Long and Thang Long Cement provided a 15% discount, etc.). Cement is currently sold at VND1.3-1.5 million/ton in the North and VND1.6-1.8 million/ton in the South.
II. RECOMMENDATIONS ON SOLUTIONS TO IMPROVE MANAGEMENT EFFICIENCY IN THIRD AND FORTH QUARTERS OF 2012
1. Development of service sector
1.1. Context for the implementation of the 2012 plan
In 2012, the world situation has been changing rapidly and unexpectedly. The complexity of the world economic situation, political turmoil in the Middle East pose many potential factors that threaten the stability and growth of the world economy. This situation will negatively affect the local economy.
In the local market, increasing prices of several input materials such as oil, petrol and gas have drove prices of other essential commodities up. Complicated diseases have occured in many localities throughout the country and bad information exerted adverse impacts on consumer confidence such as super-lean pork, toxicants in butterfishes, etc. These have posed various difficulties and challenges to the development of the local service sector.
On the other hand, in 2012, the service sector should continue to strictly implement guidelines in the spirit of the Conclusion No. 02 of the Poliburo, the Conclusion of the third plenum of the 11th CPV Central Committee, the Resolution No. 11 of the Government in accordance with the current domestic and world situation, the Resolution No. 01/NQ-CP dated January 03, 2012 by the Government on key measures to direct the implementation of the socio-economic development plan and state budgeting for 2012 with a view to contributing to macroeconomic stabilization and laying a foundation for future economic development while taking advantage of favorable conditions of the world economy and upholding internal forces.
With overall objectives of 2012, namely giving priority to controlling inflation, stabilizing macroeconomy, maintaining a reasonable growth rate in association with innovating the growth model and restructuring the economy towards improving the quality, efficiency and competitiveness;ensuring social welfare and security and improving people’s living standards; maintaining political stability, enhancing national defense and security, ensuring social order and safety ; improving the efficiency of foreign affairs and international integration, it is possible to say that 2012 is an importantpivotal year for Vietnam to accomplish objectives of the service sector for coming years.
1.2. Forecast on the implementation results of the 2012 plan.
1.2.1. General situation
The service sector in 2012 is forecast to record a growth rate of 5.5-6%, the structure of the service sector is estimated to cross US$9.5 billion, service export is estimated to grow over 7% against 2011, trade deficit is estimated to approximate US$2.5 billion[2].
1.2.2. Specific services.
a. Tourism
The total turnover of the tourism sector in 2012 is planned to hit VND155 trillion, an increase of 18% as compared to 2011 and outperforming the set target (VND150 trillion). International visits to Vietnam is projected to increase 15% year on year and reach 6.8-7 million. The number of domestic tourists is expected at 32 million.
b. Transportation
The volume of goods transported is planned to total 600 million tons and 130 million tons-kilometers, equal to 109% and 106% of that recorded in 2011, respectively; passenger carriage is expected to hit 2,100 million passengers and 75,864 million passengers-kilometers, equaling 113% and 112%, respectively.
c. Posts and Telecommunications
The post and telecommunication industry in 2012 is expected to fulfill the set targets: the total revenue is estimated at VND189,901 billion, rising by 12% over last year. The number of telephones per 100 people is at an estimate of 194. The estimated number of broadband internet subcribers is 4,64 million and that of internet users is 36.04 million.
d. Financial services
Banking services:
In the last months of 2012, the SBV aims to actively and flexibly manage monetary policies and instruments, particularly its policies on interest rate, refinancing loans and open market operations, control the annual credit growth rate of 15% - 17%, ensure the growth of total payments of 14% - 16%, ensure the liquidity of credit institutions and lower interest rates in accordance with the macro economy.
Insurance services:
To maintain the goal to stabilize and develop the market in a sustainable manner; to maintain growth; to improve financial and business capacity of insurance enterprises; to meet international competition and integration requirements, contributing to the implementation of the Resolution 01/NQ-CP dated January 3, 2012 of the Government on key measures to curb inflation, stabilize the macro economy and ensure social security. In particular, focus will be placed on the development of the insurance market with a total premium income of VND46.4 trillion, up 24% as compared to 2011 and VND43 trillion higher than the target. Of the sum, non-life premium income is expected at about VND24-25 trillion, representing a growth of about 23-25% while life premium income is estimated to hit VND17-17.5 trillion, posting a year on year growth of 14-15%.
Securities services
Target: The market development goals set for this year are to maintain the stability and sustainability of the stock market and pull the market out of difficulties and gradually restore the efficient capital mobilization channel of the economy, contributing to economic stability and development.
1.3 Solutions to the development of the service sector
1.3.1. General solutions
a) To complete and implement the Action Plan to realize overall strategy on the development of Vietnam's service sector towards 2020, under which focus will be placed on guiding relevant units to implement of the Action Plan to realize overall strategy on the development of Vietnam's service sector towards 2020;
b) To raise awareness of the service sector: To develop and submit to the Prime Minister for approval and implement the program to raise awareness of the service sector (including media campaigns, social mobilization, activities to raise awareness among relevant agencies, localities and professional associations);
c) To standardize the legal framework and policy with respect to the development of the service sector:
- To review the system of legal documents relating to services in order to avoid overlapping and ensure consistency with international agreements on services;
- To develop and adopt or revise the strategy or plan on the development of important services;
- To build and apply a system of classification criteria and service standards.
d) To promote the role of the state in managing and developing the service sector and at the same time organizing the state service management apparatus to meet practical needs in the future.
e) To develop human resources to meet the requirements of the dynamic and modern service sector
- To establish and organize the labor market effectively; to well solve employment problems, including thinking, modes, interests, etc.
- To develop a wide education and training network with the participation of the private sector in providing these services;
- To work out measures and policies to promote the training of basic skills in the creation,management and operation of service activities, communication skills, foreign languages;...
- To promote, encourage regular training activities due to the changing and dynamic nature of the service sector;
- To introduce FDI attraction policies in the field of training; to improve the level and skill of local manpower.
f) To improve productivity, promote competition and keep opening the door for foreign investors in the service sector
- To continue the equitization and restructuring of state-owned enterprises not engaged in naturally proprietary markets or fields related to national defense and security or public services;
- To put state-owned businesses and other entities under the regulation of the provisions on public procurement applicable to services;
- To set forth policies on the procurement of supporting services and other services through competitive bidding rather than giving priority to state run enterprises. This will create more opportunities for private service companies to expand their business;
- To develop a roadmap to gradually eliminate legal barriers to the service area in consistence with the modern market economy and the increasing regionalization and globalization.
g) To promote the export of services and enhance international integration with respect to services by:
- Providing services for foreign tourists to Vietnam;
- Providing services for foreign vehicles transiting through Vietnam;
- Promoting the provision of trading supporting services for both exports and imports through the development of aircrafts and watercrafts; improving insurance and financial capacity for trading activities;
- Promoting the provision of services for foreign investors in Vietnam;
- Promoting the provision of Vietnam’s electronic services for foreign customers; Promoting the provision of Vietnam’s temporary labor services for foreign customers;
- Encouraging greater outward investment in the service sector; Promoting the provision of services for customers abroad through overseas Vietnamese companies (in order to support the export of services of companies operating in sectors such as construction, transport, architecture, entertainment, hospitality, etc.).
h) Solutions with respect to resources:
- The state will provide investment support from its budget for the development of the service sector, in which the focus will be given to priority service areas identified as key as above through a National Target Program and (or) support of targeted investments.
- To prioritize ODA funds to the development of the service sector’s infrastructure;
- To develop policies to mobilize resources of the private sector; to attract more indirect investments through capital markets to serve the development of the service sector;
- To continue to standardize regulations on foreign direct investment (FDI) in the service sector in order to attract, promote efficiency of this funding source and at the same time to study and build new models along with detailed instructions to attract more foreign direct investment in key service areas and encouraged areas to ensure efficiency and interests of investors, the state and service users;
- To implement the public private partnership (PPP) model in the provision of services, especially public services.
i) To carry out solutions to stimulate the demand for services by ordering private intermediary service providers and apply service procurement and leasing to public procurement activities. To build linkages between hospitality service, transportation, entertainment and recreation services to lower service charges and stimulate the tourism industry.
1.3.2. Specific services.
a. Tourism
- To proactively develop, disseminate and implement the Development strategy for Viet Nam tourism to 2020, vision 2030 and implement the master plan for tourism development in Vietnam until 2020, Vision 2030 and at the same time build a series of sustainable development plans, especially the seven key tourist areas as the basis for attracting investment and promoting tourism in the country in general and regions and localities in particular;
- To continue to focus on implementing successful programs and activities of the National Tourism Year - Northern Central Coastal Area - Hue 2012 with the theme "Heritage Tourism";
- To continue making breakthroughs in enhancing destination management by controlling service quality and managing tourist environments. This is one of the weaknesses and limitations, which have been seen for many years, but have not been thoroughly addressed;
- To promote advertising and promotion activities in the country and abroad, customized professional activities and tasks set by the industry;
- The tourism industry should have campaigns to change the society’s thinking and awareness of community tourism. These include the development of tourism benefits in the community, the development of local economy and responsible or sustainable tourism, which have been successfully implemented in India and Kenya. Local people are not engaged but participate in tourism business while local travel companies are those that make economic contributions by paying 10% of their revenue and profit to localities.
- To implement effectively the environmentally and socially responsible tourism (ESRT) capacity development program for the 2011 – 2015 period funded by the EU, which is financially favorable to deploy key tourism development programs.
b. Transportation services
- To keep standardizing policies and legal documents on investment and construction; To introduce uniform investment policies to promote investment efficiency;
- To focus on investing in and upgrading the system of seaports and airports in a centralized manner and form international transshipment ports; To improve the quality of vehicles and service quality;
- To accelerate the equitization of state-owned enterprises in the transport sector.
c. Post and telecommunication services.
To be updated
d. Financial services
Banking services
- To control VND credit growth: (1) Credit institutions should continue to control credit growth within the limit allocated by the SBV at the beginning of the year. (2) Depending on the market situation, particularly the supply and demand of foreign currencies, the SBV should continue its flexible management through channels to ensure the harmony between the growth rate and the money supply in each month and ensure the objective of monetary policies. (3) To consider requirements to control inflation and gradually remove the requirements applicable to real estate loans, especially in the housing area in order to meet the housing need of people from all walks of life to enable them to access housing properties in different segments;
- To ask credit institutions to develop plans and control credit growth in the last quarters of 2012, in consistence with the maximum credit growth target as set by the SBV;
- To continue to implement measures to strictly control foreign currency lending to ensure foreign currency credit growth in consistence with the ability to raise capital and the policy to minimize dollarization in the economy;
- To manage foreign exchange rates and the forex market in a flexible way according to market signals and in line with the supply and demand for foreign currencies in the market, changes in the international balance of payments and macroeconomic balances; to continue standardizing the legal framework for foreign exchange management, encouraging exports and reducing trade deficit, attracting investments, remittances from foreign countries to increase the country's foreign exchange reserves;
- To strengthen the supervision and inspection over the money market and banking operations, strictly control the quality of activities of credit institutions, ensure the safety of the system to avoid and reduce the risk of bad debts and stabilize the money market, including the inter-bank market, and the gold market;
- To implement in a uniform manner solutions to restructure bank operation under the plan approved by the Government with the principle of preventing uncontrollable collapses, gradually improving the safety, healthiness and efficiency of the banking system; To be determined to handle weak banks, creating favorable conditions for safe operations of credit institutions and their development efficiency;
- To improve the quality of statistical data and forecasts used in the planning and management of monetary policy instruments;
- To well carry out communication activities and provide complete and timely information on solutions to manage monetary policy instruments and banking activities.
Insurance services:
- The Government should speed up the restructuring of the insurance sector in the direction of dividing the sector into four main groups in order to promote sustainable future development of the industry and the stability of the entire financial market.
- Insurance companies need to adapt to the competitive insurance market and put their focus on attracting high-quality human resources, developing new products, expanding distribution channels in order to better exploit the market.
- Insurance enterprises should strengthen cooperation and accelerate their search for foreign strategic partners to improve their administrative and technological capacity to gradually meet international standards.
Securities services:
- The SBV should continue its tight, prudent and flexible monetary policies, apply credit policies to the stock market in a flexible manner on the basis of not leveling or discriminating against banks using their financial or administrative status; To propose to the Government and the National Assembly to extend the tax exemption for the securities field and securities market as provided in the Resolution No. 08/2011/QH13.
- Measures to directly support the development and standardization of the stock market include: Improving the legal framework and policies for the market; strengthening management, improving product quality and developing market products; strengthening management over operations of intermediary organizations, implementing the project to restructure securities companies; restructuring the investor base, including step-by-step development of institutional investors; restructuring and developing the stock exchanges, the depository and clearing system; strengthening market management and supervision activities; and promoting training, research, propaganda activities.
- The SSC should study and submit to the Government the restructuring plan of the two stock exchanges.
2. Some solutions to manage export-import in 2012
Promoting exports
To maintain the export growth rate achieved in 2011 and strive to record an export revenue ofUS$109.5 billion, it is necessary to focus on the following measures:
- To focus on improving quality in order to increase the value of traditional items (especially agricultural, forestry, fishery products), which may not increase much in volume; To expand production scale, renovate equipment and technology, to boost production and export of commodities having large turnovers and growth capacity and largely contributing to the implementation of the export plan, employment, and social stability;
- To improve the quality of trade promotion, expand markets, boost production and export of products having unlimited production capacity and using local materials; To increase funding for national trade promotion programs;
- To exploit the depth and width of traditional markets and the bordering markets; To promote information and forecasting activities with respect to foreign markets and early detect and have measures to overcome technical barriers;
- To provide loans and ensure sufficient capital for farmers and businesses purchasing raw materials for the production of export goods; To encourage enterprises to diversify the use of currencies in their transactions; To introduce regulations to require commercial banks to ensure loans for production and export enterprises in accordance with regulations without any additional costs;
- The poor quality of export supporting services such as transport, insurance and logistics in Vietnam is currently limiting the promotion of exports. This issue should be given focus and improved in the short term.
Controlling imports
- To continue to implement a series of measures to stabilize the market, ensure the supply and demand balance of essential commodities on the basis of improving the quality of market forecast and warning; To coordinate with Associations, ministries and sectors to assess the demand for imported goods and the ability to meet demand of domestic production to have specific restrictions for each item;
- The Ministry of Industry and Trade should develop policies to encourage investment in producing goods to replace imports, developing supporting industries, increasing the use of locally manufactured machinery, materials and equipment under the direction of the Government.
- To identify the priority level of access to foreign currency loans for the group of non-essential goods, discouraged imports and introduce provisions and principles on import loans;
- Tax solutions: In the short term, for the group of discouraged imports, it is important to add the number of items subject to increased tax rates; To consider the option to increase the number of items to be subject to tariff quotas for tighter control of imports.
- For the cross-border economy: To develop specific mechanisms and policies to promote export activities of Vietnam on the one hand and strictly control goods imported from neighboring countries, of which focus will be put on technical standards and hygiene and safety standards for consumers.
- To strengthen post-inspection with respect to the quality, safety and hygiene and circulation of imported products in accordance with the existing standards and regulations; To implement technical measures to protect consumers and create technical barriers to limit imports and control the import of raw materials for export processing...
- To review signed Bilateral and Multilateral Trade Agreements and be cautious in promoting the negotiation and conclusion of new agreements. International trade agreements on the one hand create opportunities to promote local exports and on the other hand may lead to trade deficit if are signed with no close negotiation.
- To continue to emphasize information and communication measures, especially the campaign "Vietnamese give priority to use Vietnamese goods", as this is an indirect channel to increase the rate of use of Vietnamese goods, thereby reducing of imports.
3. Development of the domestic market
3.1. Overall solutions
- To continue to implement strictly and drastically the instructions given by the Government as set out in the Resolution No. 01/NQ-CP dated January 3, 2012on key measures to direct the implementation of the 2012 socio-economic development plan and state budgeting for 2012.
-To tighten management and inspection over the market and detect and handle, in a timely manner, especially in hot spots and bordering areas, cases of smuggling, speculation and hoarding of goods to cause price fevers, especially in case of essential goods such as food, gasoline, cement, steel and iron, and pharmaceuticals;
- To well carry out market regulation activities, ensuring fair distribution of goods among regions and preventing commodity shortages in some places, especially essential goods such as food, petroleum...
- To quickly have solutions to accelerate the disbursement of the State budget, Government bond capital and ODA to increase the consumption of inventories of producers and quickly complete works and put them into use and operation to improve the efficiency of capital use;
- To provide funds in a rapid and timely manner for businesses, especially small and medium enterprises;
- To encourage and support enterprises to actively bring goods to rural and remote areas in order to expand and establish a firm market for locally produced products; To study measures to encourage consumption and stimulate consumers to increase consumption and reduce inventories to support manufacturing businesses.
3.2. Solutions for necessities
a) Petroleum
- The inter-ministries of Finance - Industry and Trade should closely changes in market prices of petroleum in the world and proactively require enterprises to adjust domestic retail prices in line with oil prices on the world market in accordance with current regulations.
- To enhance the inspection and monitoring of the quality of oil in the market to ensure the safety of vehicles.
b) Iron and steel
To direct state steel and iron production companies and to encourage non-state companies to arrange appropriate production schedules for reduced electricity costs, to develop an effective distriction system, to reduce the number of distribution intermediaries so as to lower product prices.
c) Fertilizers
Domestic fertilizer producers should work out plans to have available sources to meet the demand of farmers and avoid maintenance at seasonal peak times, which may cause supply tension.
d) Cement
Businesses should focus on investing in modern technology in order to improve productivity and save production materials./.
[2] Forecast of the Department for Service Economy
[1] Indicators set forth by the National Assembly: total export revenue increases by 13%. Trade deficit accounted for 11% - 12% of total export revenue. In favorable conditions, efforts should be made to lower trade deficit to less than 10% of export revenue.
Ministry of Planning and Investment