Inflation in Vietnam-Causes Vietnam-Causes and solutions
What are causes of inflation in Vietnam?
1. A fact that state investment in total investment from 2002 to 2007 is always more than 50%. Put it differently government spend to much bring about a big increase in aggregate demand, then inflation. 2. Boom in FDI. When there is a huge influx of foreign exchange into the economy, money supply increases then inflation does. Further more, influx of foreign exchange cause a rise in demand. For the former, a rise in demand can not be met by import then push price up. Result in inflation. 3. State bank has to undertake too many targets. On one hand they have to curb inflation, on the other hand they have to stimulate economic growth. Theoretically, It is impossible to fulfill both targets at the same time. 4. Some of the causes of Vietnam's high inflation are externally induced such as dramatic increases in the international prices of food, fuel and construction materials have a large impact on domestic prices, but others others are home-made such such as the unsterilised liquidity liquidity inflows, unusually unusually high domestic credit growth, expansionary fiscal policy, and aggressive public investment were the principal home-made home-made causes of Vietnam's high inflation.
The solutions to curb inflation in Vietnam
First, the Government Government would further tighten monetary policy: The constant increase of the money supply in circulation and outstanding loans dating from 2004 were major reasons for high inflation. The Government must closely to control payment and loans, Tightened monetary policy, however, should ensure the economy’s liquidity and the operation of banks and credit institutions. It should also create conditions for domestic production and export activity. Second, the Government would cut down on expenses and public investments relying on the State enterprises so as to reduce the Budget , and it would strictly control investment items of State-owned enterprises deficit and contribute to the economy’s development. Third, development of agriculture and industry would take priority so as to overcome consequences resulting from inclement weather and epidemics and to increase food productivity. Production development was key to increasing the supply available for in-country use and export, curbing inflation and decreasing the trade deficit without side effects. Fourth, supply and demand of goods must be ensured to promote exports and reduce the trade deficit . Balancing the supply and demand of goods, especially essential goods for production and living, was necessary to prevent sudden price changes and speculation. The Government applied a flexible exchange rate with an appropriate trading band which should help curb inflation without impacting exports. Additionally, the Government asked that exports increase and imports decrease to balance trade. Fifth, thrift in production and consumption consumption was encouraged. Businesses must re-check expenses to reduce prices. Sixth, market management should be further supervised to avoid goods speculation, especially in Cross-border rder regar regards ds to essent essential ial items items such such as petrol petrol,, cement cement,, steel, steel, medic medicine iness and foods foods. Cross-bo smuggling should be immediately stopped. Finally, to help people, especially the poor, the Government Government would implement social welfare policies and increase salary and allowances allowances.
Seven-point plan to ease inflation (31-03-2008) The Prime Minister issues a call to arms in the battle against the high cost of living.
HA NOI — Curbing inflation was a complex task that exacted a price, said Prime Minister Nguyen Tan Dung. In an article published on the Vietnamese Government website, the Prime Minister analysed the reasons for current inflation and elaboratedPipelines supply gas to the Ca 1 power plant. The plant is on the Government’s measures to curb inflation and maintain economic Mau part of the Ca Mau Gas, Electricity and Fertiliser Complex located in growth. To control inflation would require concerted efforts by Government Government management management agencies and authorities at all levels, he said.
the southernmost province of Ca Mau. — VNA/VNS
In a recent meeting, the Government defined key tasks in curbing inflation, inf lation, maintaining macroeconomic macroeconomic development, and ensuring social welfare and sustainable growth. To achieve the targets, the Government proposed 7 measures: First, the Government would further tighten monetary policy. The constant increase of the money supply in circulation and outstanding loans dating from 2004 were major reasons for high inflation. The Government began to closely control payment and loans earlier this year, Tightened monetary policy, however, however, should should ensure the economy’s economy’s liquidity liquidity and the operation operation of banks banks and credit credit institutions. It should also create conditions for domestic production and export activity. Second, the Government would cut down on expenses and public investments relying on the State Budget, and it would strictly control investment items of State-owned enterprises enterprises so as to reduce the deficit and contribute to the economy’s development. development. Ministries and chairmen of provincial People’s Committees were asked to strictly monitor investment items of State-owned enterprises and terminate ineffective construction works. Third, development development of agriculture and industry would take priority so as to overcome consequences resulting from inclement weather and epidemics epidemics and to increase food productivity. productivity. Production development development was key to increasing the supply available for in-country use and export, curbing inflation and decreasing the trade deficit without side effects. Fourth, supply and demand of goods must be ensured to promote exports and reduce the trade deficit. Balancing the supply and demand of goods, especially essential goods for production and living, was necessary to prevent sudden price changes and speculation. speculation. To stabilise domestic production, the Government Government would not increase fuel and petrol prices before June this year and would reduce some fees for farmers. To ensure food security, the Government Government decided that the total rice export volume would be 4 million tonnes this year.
The Government applied a flexible exchange rate with an appropriate trading band which should help curb inflation without impacting exports. Additionally, Additionally, the Government Government asked that exports increase and imports decrease to balance trade. Fifth, thrift in production and consumption was encouraged. Government and State offices were called to cut 10 per cent of administration expenses. Businesses must re-check expenses to reduce prices and people were were encouraged encouraged to save fuel fuel and energy in in their day-to-day day-to-day living. Sixth, market management management should be further supervised to avoid goods speculation, especially in regards to essential items such as petrol, cement, steel, medicines and foods. Cross-border smuggling should be immediately stopped. Finally, to help people, especially the poor, survive a price hike, the Government would implement social welfare policies and increase salary and allowances. — VNS
Inflation target hard to reach: minister (29-03-2008) HA NOI — Finance Minister Vu Van Ninh warned the National Assembly Standing Committee yesterday that it would be very difficult to have economic growth higher than inflation as required by parliament parliament earlier earlier this year. Vu Van Ninh was answering questions as the first finance minister to be quizzed by the Standing Committee. Workers load goods for export at Quy Nhon Port. — VNA/VNS Photo Dinh Hue
State Bank of Viet Nam Governor Nguyen Van Giau; Agriculture and Rural Development Minister Cao Duc Phat and Chief Judge of Supreme People’s Court, Truong Hoa Binh, were also questioned. The finance minister told the committee that the most important targets were: Halting inflation; Stopping Stopping consumer price increases from going higher than last year; Stabilising the national n ational economy and socio-political socio-political situation; and maintaining economic economic growth by adapting to the changes. But the State would not re-adjust prices for the goods it controls such as petrol, electricity electricity and coal between between now and June, June, he said. The finance minister blamed international prices and domestic factors for the inflation. The domestic reasons were: The poor standard of development; the poor quality and effectiveness of the national economy; poor competitiveness; competitiveness; natural disasters and epidemics. Deputy Nguyen Huu Cuong, central Nghe An Province, asked the minister when inflation would be controlled. If the eight measures introduced by the Government were effectively and simultaneously applied, applied, the situation would improve by the end of the year, the finance minister replied.
No price rises HA NOI — Prime Deputy Nguyen Van Phuc, central Binh Thuan Province asked the finance Minister Nguyen Tan Dung on Thursday said minister why the State Treasury had deposited VND52 trillion (US$3.2 the price of ten billion) with with commercial commercial banks, helping helping to raise raise inflation. essential goods items would not increase by The minister denied that the deposit had raised inflation and said the June.The Prime money was to ensure State spending. Minister made the promise after listening to the opinions of Deputy Le Thi Nga, northern Thai Nguyen Province, asked how the Government Government intended to stop the continuing rise in the price of essential leaders from various ministries, goods. departments and industries. Ministries had been instructed to assess the situation, the finance The goods items myinister replied. include petrol, electricity, coal, water, The finance ministry had co-ordinated with other offices and localities to bus tickets, rail tickets, air tickets, cement, inspect 440 import enterprises last year. steel, school fees and hospital fees. Fines had been imposed for unreasonable price rises and enterprises asked The Prime Minister also to guarantee not to raise prices. urges both organisations and individuals to Governor explains implement saving measures when using Many deputies asked State Bank of Viet Nam Governor Nguyen Van the goods. Giau if mistakes in monetary policy had sparked the high inflation. State-administration offices in particular will The governor conceded that consumer prices would not have risen so try to save 10 per cent high, if the banking industry had better managed monetary policy. of their total petrol consumption. However, Giau told reporters yesterday that newly-introduced monetary He also said, market policies had had benefited the the market and and the State State Bank was was determined determined to watchdogs and commodity limit year-on-year credit growth to less than 30 per cent. associations associations should closely monitor prices The governor, who spoke to reporters during a break in the NA Standing so as to catch and Committee’s morning session, argued that monetary policy had been punish all violators. Viet Nam will export neither inconsistent nor sudden. the maximum volume For example, the central bank had given the commercial banks 45 days to of rice, some 3.5 million tonnes, to increase their compulsory reserves. stabilise food prices on the domestic market, In 2007, the commercial banks had been allowed only 33 days to double he added. their reserves. To reduce the trade deficit, the Prime Minister suggests that The order for the compulsory purchase of treasury bills had been exports should be necessary and had helped bring the monetary system into balance. boosted, and commercial banks "Every country has to pay some cost to implement monetary policies," the provide loans in governor said. foreign currency for producers of some "In Viet Nam, the central bank can’t arbitrarily increase compulsory export goods, including textiles, reserves at commercial banks as the higher reserves could hurt garments, footwear borrowers." borrowers." and seafood. "Import tax rates The yearly 12 per cent ceiling for dong deposit was to control general should increase for interest rates during a time of change. certain goods, including motorbikes, automobiles, electronics and
The governor said that the tightening of lending for real estate was to ensure the property market did not become a ‘bubble’. The governor said the central bank together with government ministries was determined to use flexible measures to manage the money market control inflation and boost economic growth during the next month. The spike in inflation had not been caused by any single ministry or individual and the curbing of it required effective co-operation. co-operation. World Bank Viet Nam director Ajay Chhibber has described the Government’s measures to curb inflation as "very good" because they focused on protecting the poor and reducing public spending. "We will see lower growth and higher inflation by the end of the year but Viet Nam will be no different to other countries," the economist forecast. "The important important thing is to minimise the damage to growth growth and in order to do so try to ensure that credit goes to export and productivity," productivity," he said.
The package The Government measures to curb inflation include: A more flexible exchange-rate policy; Increasing revenue and cutting public spending; Controlling prices; Boosting export and reducing the trade deficit; and implementing implementing policies to support the poor. — VNS
Gov’t puts inflation, economic growth first (06-08-2008) Despite national achievements, challenges will continue to arise.
HA NOI — Prim Primee Minis iniste terr Nguye guyen n Tan Dung ung has has aske asked d the the Gove Governm rnment ent to resol resolve ve probl problem emss hinder hindering ing produ producti ction, on, busine business ss operations and investment. Worke Wo rkers rs lab labour our at the Sa Sao o Ma Maii
He made the statement yesterday at the Government’s two-day regular Cem Cement ent Fact Factory ory in the southern prov pr ovinc ince e of Ki Kien en Gi Giang ang.. Pr Prim ime e meeting for July. Minister Minis ter Ng Nguye uyen n Ta Tan n Dun Dung g ha has s called cal led to prio prioriti ritise se cap capital ital funds nation’s on’s key cons construct truction ion thefor the nati project pro jects. s. — VNA/ VNA/VNS VNS Phot Photo o Van on Khanh
The Gove The Governm rnment ent discu discusse ssed d the sociosocio-ec econo onomic mic situat situation ion over over course of July and the previous seven months. They also spoke macro-economic policies, inflation control and goals for the remainder of the year.
According to reports by the Ministry of Planning and Investment, the Ministry of Finance and the General Statistics Department, though the country is struggling with rising prices and lack of capital, it is still showing some positive economic results.
Industrial production value in July totalled VND56 trillion (US$3.3 billion), bringing production value for the first seven months of the year to VND382 trillion (over $22.8 billion), up 16.4 per cent over the same period last year. Agricultural Agricultural production had stabilised. In the last seven months, export turnover totalled $36.8 billion, up 37.7 per cent, while total foreign investment reached $45.2 billion, up 373 per cent. By mid-July the State budget had collected VND215 billion ($12.8 million) or 66.7 per cent of the year’s estimated figure. The Government acknowledged that despite the achievements, the national economy still faced many challenges: The trade deficit is still at a high level. Markets are unstable. Much of the population population is struggling with living conditions. And epidemics epidemics continue to wipe out crops and livestock. In respo response nse,, the PM empha emphasis sised ed five five measu measure ress for minis ministri tries, es, secto sectors, rs, locali localitie ties, s, office officess and enterprises enterprises to implement implement from now to the end of the year: – Prioritise inflation control, control, resolve difficulties in accessing accessing capital, particularly particularly for production production and export, and work towards achieving an economic growth rate of 7 per cent. – Prioritise capital funds for key construction projects set for immediate immediate operation, and delay unnecessary projects. – Monitor organisations organisations and individuals to control prices, and root out and manage speculation activities. – Control the the trade deficit through activities activities like raising import taxes taxes on luxury items. items. – State-owned State-owned enterprises enterprises should focus on development development and raising productivity and business performance, performance, while working toward toward equitisation. equitisation. To assure assure social social welfa welfare re,, the PM asked asked minis ministr tries ies,, secto sectors rs and locali localitie tiess to conti continue nue to offer offer subsidies and to prepare to issue new social policies, especially related to ethnic minority families, war invalids, families of fallen soldiers and families of people who have contributed services to the revolution. The Gover The Governme nment nt also also discu discusse ssed d a decre decreee to fine fine specul speculato ators, rs, smugg smuggler lerss and trade trade frauds frauds;; a regulation on computer games for foreigners; a decree on revising construction prices; a draft Compensation Law; and a draft Land Law. At a press conference on the meeting, held yesterday, Tran Quoc Toan, deputy head of the Government Government Office affirmed that the Government Government has managed to initially control inflation. The trade deficit in July was at only $800 million and the total trade deficit for the last seven months was $15 billion, 40.7 per cent of total export turnover. — VNS
HCM City takes aim at inflation (08-07-2008)
HCM CITY — The city authority will focus on a number of measures to curb inflation and ensure social welfare while maintaining economic growth, a senior official has said. Speaking at a recent meeting of HCM City People’s Council, the chairman of HCM City People’s Committee, Le Hoang Quan, said the city authority would examine revenues and expenditures in the city’s budgets in an aim to economise on public investments, better manage currency policies, and supervise commercial banks. In the second half of the year, the city authority would continue to examine the feasibility of publicly funded funded projects projects and projects projects of State-owned State-owned enterprises. enterprises. Investment priorities would be given only to important projects and programmes. The city authority said it would help control prices on essential food and foodstuffs, and consumer goods and materials. Market management management would be enhanced against counterfeit goods and contraband. Quan said the city would ask the Central Bank to provide sufficient loans to businesses, especially to importers and exporters and manufacturers of essential goods. To ensure adequate living standards for lower-income workers, Quan said the ban on self-modified two – and four-wheel four-wheeled ed vehicles vehicles would be delayed delayed while the construct construction ion of student student and worker dormitories would be sped up. He said the Labour Law would be enforced at enterprises to minimise labour disputes and strikes. At the meeting, council members ratified a resolution on the city’s socio-economic development development for the second half of 2008 that gives top priority to inflation control. The council asked the city People’s Committee Committee to increase business production and investment from domestic and overseas sources. The council also passed a plan mapped out by the city People’s Committee to adjust capital for infrastructure projects. Under the plan, 390 publicly funded projects would be delayed or extended, with total capital of VND519 billion (US$30 million) to be withdrawn. According to the deputy chairman of HCM City People’s Committee, Nguyen Thanh Tai, in the second half of the year, the city will supply monthly relief of VND50,000 for each member of 6,700 poor families families in the city. city. Poor families are those who earn less than VND5 million (US$300) per person annually. — VNS
Governmen Govern mentt str strate ategie giess to tac tackle kle soa soarin ring g inf inflati lation on on rig right ht track: economic experts (03-07-2008) HA NOI — The country’s socio-economic situation and measures to curb inflation, stabilise the macro-economy macro-economy and boost social welfare and growth were high on the agenda at the Government’s Government’s regular meeting in the capital yesterday.
Speaking at the meeting, former governor of the State Bank of Viet Nam and Deputy Chairman of the the Nati Nation onal al Advis dvisor ory y Coun Counci cill for for Fina Financ ncee and and Mo Mone neta tary ry Poli Polici cies es Le Duc Thuy huy said said the the Government Government must be resolute in its drive to curb inflation, without jolting the markets. Thuy said the Prime Minister’s efforts to cope with the country’s difficult economic situation in the face of a jittery world economy had been timely, comprehensive and in the right direction. Council member Truong Dinh Tuyen suggested the Government needed to tighten monetary policy, run a flexible exchange rate and cut public spending to curb inflation. Among the factors driving inflation up is the rising price of oil. By June this year, Viet Nam had imported 6,813 tonnes of oil and gas, an increase of nearly 300 tonnes compared with the same period last last year. The Government has spent VND11,000 billion subsidising the price for local oil and gas importers in order to ensure the country’s production and consumption needs are shielded from fluctuations in the world crude oil price. State Bank Governor Nguyen Van Giau recommended the Government provide guidance on dealing with rising oil prices. Giau added that the State Bank of Viet Nam would closely monitor the liquidity of commercial banks and credit credit organisations. organisations. In conclusion,, Prime Minister Nguyen Tan Dung emphasised emphasised a number of key tasks that needed to be carried out this year, including efforts to curb inflation, stabilise the macro-economy, macro-economy, ensure social welfare and a steady growth rate. However, he said the Government’s priority would be to tackle inflation. He agreed that it was essential to have a tight but flexible monetary policy. The State Bank of Viet Nam must continue to keep exchange rates flexible according to market demands, the Prime Minister said. Dung added that cities and provinces needed to continue to reduce public spending. Answering press queries after the meeting, a representative from the Ministry of Planning and Investment said that as many as 1,736 public projects had been postponed in line with Government Government demands to cut back on spending. By doing so, VND5,625 billion had been saved, the spokesman said. This figure did not include the sum saved from reductions in administrative costs, which amounted to VND2,558 billion, the official said. He added that more public projects could be postponed to save money. Meanwhile, Dung asked the Ministry of Industry and Trade and relevant ministries, industries and office officess to ensure ensure suppl supply y and demand demand were were balanc balanced, ed, while while punis punishin hing g those those who who use marke markett fluctuations to raise prices, especially of essential commodities. In regard to social welfare, the Prime Minister Minister said it was necessary to issue policies that supported the poor in the 58 districts where the number n umber of impoverished impoverished households stood at 50 per cent. Dung also reminded cities and provinces of the need to implement flood-prevention projects and post-disaster post-disaster relief strategies. strategies.
He also asked the press to provide an accurate picture of the socio-economic situation in the country. The meeting also discussed reforms to education and training finance up to 2 2012. 012. — VNS
Inflation tops Gov’t agenda (02-07-2008) Sustainable growth and social welfare are also receiving thorough attention. HA NOI — The Government decided that controlling inflation remained the most important task in socio-economic development Co Cons nstr truc ucti tion on oc occu curs rs on th the e Tu Tuye yen n hydro- el electric facil it ity. at its regular meeting for June, presided over by Prime Minister Quang Dev evel elop opm men entt of hyd ydrroo-el elec ecttri ric c Nguyen Tan Tan Dung. cons co nstr truc ucti tion on is a ke key y pa part rt of th the e Governme nt nt’s socio- ec economic develo dev elopm pment ent st strat rategy egy.. — VN VNA/V A/VNS NS solutions Photo Huy Hung
At the meeting, the Government focused on discussing for curbing curbing inflation, inflation, stabilisi stabilising ng macro-e macro-econom conomy, y, and ensuring ensuring social welfare and sustainable growth for the last months of this year.
According to the Ministry of Planning and Investment, although the national economy faced many difficulties and was impacted by unfavourable fluctuations in the global economy, in the first six months, the country’s GDP growth was 6.5 per cent and industrial production value grew by 16.5 per cent .In the first six months, the country harvested a bumper winter-spring winter-spring rice crop with more than 18 million tonnes of rice, an increase of 1 million tonnes over the previous crop. Export turnover gained a high level, including eight export items which brought in more than $1 billion each. The rate of inflation declined, with the consumer price index for June growing by 2.14 per cent, the lowest rate of the last six months. Culture and information continued to develop, and education and training made progress. Politics, national defence, security and social safety and order were maintained. However, the Government acknowledged that the trade deficit was still high, at $14.8 billion, accounting for 49.8 per cent of export turnover. On the first day of the session, the Government listened to reports about administrative reform in June and the first six months, and reports about anti-corruption and responding to the people’s complaints complaints and denunciations. Related statistics At a press conference held by the General Statistics Department to review the socio-economic situation in the first six months this year, Deputy Minister of Planning and Investment Nguyen Duc Hoa said agricult agriculture, ure, forestry and fisheries fisheries grew by 3.04 per cent; industry industry and construc construction tion increased by 7 per cent; and services grew by 7.5 per cent. He said although GDP growth in the first six months was lower than that of the same period for some pervious years, a global economic downturn complicated the situations and the economic growth of many other countries was similarly reduced, so that Viet Nam’s economy posting the growth rate that it did should be considered a tremendous achievement. achievement.
Hoa said that in order to reach the year’s 7 per cent GDP growth target set by the National Assembly, Assembly, in the year’s last six months the country should post GDP growth of 7.4 per cent. According to the Ministry of Trade and Industry, the country’s demand for necessary n ecessary items this year will increase by 14 per cent compared to last year, but domestic products and imports would be sufficient to meet the demand. Revenues from commodities and services for the whole country in the last six months gained VND447 trillion, an increase of 30 per cent compared to the same period last year and the highest level compared to many previous years. In the last six months, the country imported 6.8 million tonnes of petrol to meet the demands of domestic production and consumption. consumption. In the last six months, market watch teams found 27,135 cases of speculation, recovering VND75 billion for the the State budget. budget. — VNS VNS
Gov’t strives to cut public spending to reduce inflation (19-06-2008) HCM CITY — The Ministry of Planning and Investment (MPI) will begin inspecting public agency construction projects in an The Cua Dat Hydro-power plant, which effort to cut expenses and reduce inflation. is unde underr cons construc truction tion in Thuon Thuong g Xuan According to the Government’s website, 11 teams will work from Monday to June 30 on the implementation of plans on capitalinvestment investment restructuring and budgetary spending and collection.
District in the province of Thanh Hoa. The power station is expected to open next year. — VNA/VNS Photo Huy Hung
The teams will work with the Viet Nam Development Bank, the Social Policy Bank and commercial banks to examine bad loans, loans to state groups and companies, companies, and the use and mobilisation of capital. The teams will focus on the Agriculture and Rural Development Ministry and the Transport Ministry as well as cities and provinces under the management of the Government. Construction projects that that rely on the the State budget budget and treasury treasury bills will come come under close scrutiny. In each each locali locality ty and minis ministry try,, inspe inspecto ctors rs will will examin examinee plans plans for using using publi publicc inves investm tment ent for construction projects, including lists of delayed projects and projects that have been temporarily halted because of problems in land clearance and raising capital. According to the MPI, at the end of May, 43 out of 64 provinces and cities and 28 ministries and sectors had submitted reports on their plans to cut investment or delay projects. A total total of 995 construc construction tion projects, projects, represe representing nting total capital capital of VND4,0 VND4,000 00 billion billion (US$250 (US$250 million), had been reported to the ministry by May 28. Based on the results of the inspectors’ reports, the ministries and localities will have to reorganise 2008 investment plans without increasing investment funds. MPI teams will also inspect public agency investment activities in main businesses, such as bank loans and use of capital, as well as in sideline business fields.
In the southe southern rn provin province ce of Binh Binh Phuoc Phuoc,, the provi provinci ncial al Peopl People’s e’s Comm Committ ittee ee has reasse reassesse ssed d investment projects financed by the province’s budget and decided to postpone six projects and extend implementation periods of four projects. Total capital saved is VND50.2 billion (US$3.1 million) which will be diverted to other projects. The province has also cut 10 per cent of expenses, or VND24.3 billion ($1.5 million) on head office repairs, buying public vehicles, hosting guests and sending officials abroad for study. The amount of money will now be spent on social-security projects. The committee’s deputy chairman, Nguyen Van Loi, has asked districts, communes and sectors in the province to only approve items of expenditure worth less than VND100 million ($6,200). The southe The southern rn provin province ce of Lo Long ng An’s An’s Peopl People’s e’s Comm Committ ittee ee has also also decid decided ed to elimi eliminat natee two two unfeasible projects in the Can Giuoc districts, a 120ha airport and aviation park in Dong Thanh Commune and the paper and package producing factory in Tan Kim Commune. The committee also withdrew three long suspended projects in the Tan Kim Commune: expanded Tan Kim Industrial Zone, Truong Binh Industrial Zone, and the Tan Kim cemetery zone, and will assign contractors with enough financial capacity to implement them. The provincial committee also decided to reduce the total area of Phuoc Ly Industrial Zone and Long Hau residence zone invested in by the Nam Sai Gon Development Joint stock Company. The northern province of Hoa Binh has eliminated five projects, including the Green World tourism farmhouse in Ky Son District. Currently, the province has 18 projects with low feasibility due to difficulties in land clearance and financial sourcing. Minister of Planning and Investment Vo Hong Phuc said the nation must make a concerted effort to reduce the inflation rate, currently at 22 per cent — VNS
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(22-05-2008) HA NOI NOI — Any Any indivi individu dual al or organi organisat sation ion specul speculati ating ng and causing essential goods’ prices to rise will face serious fines based on Prime Minister Nguyen Tan Dung’s new directive, released on Coall is processed Coa processed Tuesday. the no north rtheas easter tern n
at Cam Pha port in provi pr ovince nce of Qua Quang ng Ninh. — VNA/VNS Photo Nguyen Dan
Unde Underr the the dire direct ctiv ive, e, Dung Dung mand mandat ated ed that that conc concer erne ned d agen agenci cies es cont contro roll pric prices es of esse essent ntia iall commodities commodities through strong measures, measures, even including prosecution and information campaigns. He targeted three products of immediate concern: cement, steel and fertiliser. Dung ung requ reques este ted d that that the the mini minist stri ries es of Cons Constr truc ucti tion on and and Indu Indust stry ry and and Trad Tradee and and Peop People le’s ’s Committees of cities and provinces help enterprises guarantee supply and tighten pricing of these key goods.
The directive is a response to the sudden price hike of essential goods in the southern provinces, notably HCM City. On Mo Mond nday ay the the ceme cement nt reta retail il pric pricee clim climbe bed d to VND1 VND118 18,0 ,000 00 (US$ (US$7. 7.4) 4) per per pack packag agee from from VND85,000 ($5.3 ) several days ago, far outpacing the prices sold at factories, which range between VND53,000-55,000 ($3.3). The hike occurred despite a Ministry of Construction decision last week to transport between 30,000-50,000 tonnes of cement from the north to the south to help meet demand. Stabilisation
To avoid speculation, State-owned corporations and groups have been selling goods directly to users. "This is one significant step that steel manufacturers have taken to help decrease speculation, since the price of steel products has already surged 70 per cent since last year," said chairman of the Viet Nam Steel Steel Association Association Pham Chi Cuong. Cuong. Cuong said that the association urged steel makers to publicise steel prices, issue timely reports to local... control agencies and ensure products were sold at appropriate appropriate levels. In addition, steel producers planned to boost pig iron production, thus relying on fewer imports and meeting 60 per cent of market demand. The measure was taken in response to China’s recent hike of pig iron export tariffs and other countries’ prohibitions prohibitions of pig iron exports in the first quarter of this year. "In the short term, steel makers have agreed not to increase steel prices if pig iron on the global market stays around $900 per tonne. But if prices rise above the $900 mark, producers will discuss a raise in retail prices while taking care to avoid a shock to the market," Cuong said. Fertiliser
Simi Simila larr effo effort rtss are are unde underw rway ay for for fert fertil ilis iser er cont contro rol. l. Lead Leadin ing g Nati Nation onal al Oil and and Gas Gas Grou Group p (PetroVietnam) deputy director Hoang Xuan Hung said, "PetroVietnam has established 31 major fertiliser distributors with 1,237 distribution points nationwide to ... guarantee that fertiliser is sold directly into the hands of farmers." PetroVietnam PetroVietnam affirmed that the company’s company’s chemical fertiliser subsidiaries would strive to satisfy 70 per cent of of national demand demand and had set prices 10-15 10-15 per cent lower lower than market market averages. In the first four months this year, Phu My Fertilisers, a subsidiary of PetroVietnam, churned out 210,233 tonnes of fertiliser and imported another 150,000 tonnes to meet domestic demand. Phu My fertiliser prices ranged between VND7,300 and VND8,000 per kilogram, while import prices hovered hovered around VND12,0 VND12,000. 00. Determining strategy
Truong Dinh Tuyen, former Minister of Trade stressed that, "State-owned corporations and groups must short-list projects and only pump capital into effective projects right now. This will help them develop sustainably and healthily in the long term." Tightening capital investment channels would also greatly contribute to the fight against inflation, Tuyen added. In addition, State-owned corporations should focus on core businesses with competitive advantages in terms of labour, technology and experience, he said. "For groups setting up banks, it is very easy to access capital for ineffective projects. It is a lesson offered by many countries that Viet Nam should avoid," Tuyen said. Phan Thi Hoa, management board member of PetroVietnam echoed these statements, saying, "PetroVietnam will still inject capital into key projects for ports, warehouses, and shipping fleets, but it will will cease putting putting capital into into real estate estate construction and and other less effective effective projects." projects." Investment capital resources outside of core business lines would be retained at only 7 per cent of total investment capital, said Dinh La Thang, chairman of the PetroVietnam management board. Most corporations and groups have pledged to boost production, cut costs and stabilise prices of their core products while ensuring solid revenue and sustainable payment to the State budget. — VNS
ADB forecasts end to slow growth, inflation infla tion (03-04-2008) HA NOI NOI — Viet Viet Nam Nam will will cont contin inue ue to make make rapi rapid d prog progre ress ss in economic economic development development in the medium medium-- to long-term long-term,, supporte supported d by strong strong econo economic mic fundam fundament entals als and large large inflow inflowss of forei foreign gn direct direct investme investment, nt, says Asian Asian Develop Developmen mentt Bank Bank country country director director Ayumi Ayumi Konishi Workers unloa Workers unload d Viet Vietname namese se rice in the Philippines port of Tabaco. In issuing the bank’s Asian Development Development Outlook 2008 in Ha Noi Record high prices for rice on the market can help Viet Nam yeste yesterda rday, y, assess assessing ing curre current nt econo economic mic devel developm opment entss in the AsiaAsia-global to fur furthe therr ac accel celera erate te eco econo nomic mic Pacific and making economic projections for the region, Konishi said growth. — AFP Photo Jay Directo
real gross domestic growth for Viet Nam would be 7 per cent in 2008 while year-on-year inflation would rise to 15.6 per cent. For 2009, the bank forecasted a more favourable 8.1 per cent growth rate and inflation of 7.6 per cent. The current high inflation rate would ease gradually from now to the end of this year and would see a sharp decrease in 2009. "Although the situation is under control and monthly inflation is likely to decline considerably throughout 2008, average inflation for this year will be significantly higher than in the last several years, reflecting relatively high inflation in the early months of the year," Konishi said. The ADB The ADB forec forecast astss were were based based on severa severall dom domes estic tic econo economic mic assum assumpt ption ionss includ including ing the maintenance of the Government’s anti-inflationary policy stance and co-ordination and coherence of economic policies. ADB also assumed that monetary tightening would be supported by fiscal belt-tightening and greater exchange rate flexibility. Other assumptions assumptions were that monetary tightening would not cause serious problems in the financial sector and there would be no major supply-side shocks.
Konishi expressed optimism over the Vietnamese Government’s efforts to curb the high inflation rate but noted that, in the current current global context, context, "speed in reponse reponsess to changes in the global and domestic economy really does matter." "It will take some time for the current efforts of the Government to control inflation to yield results," he added. Konishi emphasised that implementing tight monetary policies alone would not be enough in dealing with high inflation, but concerted responses in monetary and fiscal policy were crucial. While the Government has been persistent in implementing implementing tighter monetary policy, the direction in which fiscal policy would go was not yet clear. In the short term, the Vietnamese economy would have to overcome two challenges or "storms": relatively high inflation and adverse developments in the global economy, Konishi said "We expect the ongoing turmoil in international financial markets markets and the resulting global economic slowdown to have mostly adverse, albeit transitory, effects on Viet Nam." ADB country economist for Viet Nam Bahodir Ganiev emphasised emphasised in yesterday’s press conference that greater exchange rate flexibility was important for Viet Nam in dealing with unfavourable adverse effects from the global slowdown. However, how much the exchange rate should be allowed to fluctuate depends on a mixture of Government Government policies and other factors, he said. "We also think some slowdown in growth may even be desirable to control inflation and to address the possible vulnerabilities resulting from overheating of the economy. After the Government effectively deals with these two ‘storms’, we believe Viet Nam can speed up economic growth," said Konishi. For more information on the Asian Development Bank report, see story on page 7.— VNS
