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Vietnam’s top 10 economic events of 2013

Vietnam’s top 10 economic events of 2013

Monday, January 06, 2014, 17:00 GMT+7

Though Vietnam's economy was riddled with difficulties in 2013, there were some noteworthy positive signs of a more sustainable recovery in 2014-2015. Let's take a look at the 10 most prominent economic events of 2013 chosen by Tuoi Tre.

1. Macroeconomic stability maintained, inflation under control

The most notable economic occurrence of 2013 was the lowest inflation rate recorded in 10 years, reaching 6.04%, far less than the 8% target set by the National Assembly earlier in 2013.

Total gross domestic product (GDP) growth was estimated at 5.42%, bringing the country's total GDP to over VND2,500 trillion in value, marginally lower than the 5.5% target set by the NA, but still higher than 2012’s rate of 5.25%.

Credit growth in 2013 was estimated to be at 8.83%, less than the 12% target set by the State Bank of Vietnam (SBV) and 0.08% lower than 2012’s rate. As of the end of 2013, total outstanding loans of the economy was estimated to reach over VND3,000 trillion.

2. Interest rates matching those of 2005-2006

In 2013, SBV lowered many main policy rates, lending rates for short-term loans to prioritized sectors, and maximum depositing rates by 2%, 3%, and 1% per annum respectively. Since June 2013, SBV also allowed local credit institutions to fix the long-term depositing interest rates from 6-month periods and up.

With the SBV’s rate adjustment, lending interest rates for local businesses were reduced by 2-5 % per annum compared to those of 2012, ranging at the common rates of the 2005-2006 period. By the end of the year, interest rates on existing loans were less than 13% per annum, while the lending rates for new short-term loans hovered at only 8-9% per annum.

3. Gold prices fall by VND11.6 million, gold bullion tender sessions held during the year

By the end of the last day of 2013, the bid and ask prices of SJC gold bullion were quoted at VND34.62 million and VND34.92 million per tael (1 tael = 1.2 ounces), down VND11.62 million ($545) per tael compared to early 2013 – a record price drop for any one-year period ever recorded.

The dramatic decrease of gold prices made the role of gold investment – usually a safe haven – fade away in 2013.

After the sales of 26,000 taels of gold bullion, or around 0.98 ton in the first auction session held on March 28, 2013, SBV sold a total of 1.82 million taels, or almost 70 tons of gold bullion, during 76 sessions in which the central bank offered 1.932 million taels throughout the year.

The difference between domestic and world gold prices decreased from VND6.6 million per tael from the beginning of the year to about VND4 million per tael recently.

Meanwhile, the foreign exchange rate adjustment in 2013 was only at 1.3 %, lower than the target of 2-3% set by SBV. SBV devalued the dong by the rate on June 28 after maintaining the old rate of VND20,828 since the end of 2011.

At the end of year, the exchange rates at the commercial banks were listed at around VND21,085 per dollar and VND21,125 per dollar for bid and ask, respectively.

With the stabilized exchange rate, SBV was reported to buy many billions worth of foreign currency to feed the national forex reserves estimated at around $30-32 billion, which, in turn, helped increase the value of the Vietnamese dong.

4. Stock market makes strong recovery

The stock market saw a year of recovery with strong growth and a healthy state of liquidity. Both local stock indices increased compared with the end of 2012, while the benchmark VN-Index of Ho Chi Minh Stock Exchange and HNX-Index of Hanoi Stock Exchange gained 21.97% and 18.83%.

The stable gain resulted in a new number of foreign investors who flocked to the local stock market with 437 individual foreign investors, slightly up from 432 in 2012.

The local stock market also became one of the best-performing markets in the world and the fastest-growing market in the Southeast Asian region.

5. VND30 trillion ($1.4 billion) credit package for potential house buyers deployed

Pursuant to Government Resolution No. 02, SBV issued Circular No.11, offering a VND30 trillion credit package to support social housing buyers. The package is expected to be one of the fundamental solutions to relieve the burden of mounting unsold local real estate stock.

However, as of mid- December, the disbursement rate was reported to hit VND555 billion, or less than 2% of the total value of the package, according to the Ministry of Construction.

6. Hearing of corruption cases in economic sectors

The end of 2013 saw a series of serious corruption trials held in the economic field, including 8 relating to wrongdoings in the banking sector. A corruption case involving Agribank Leasing Co 2 - a finance leasing arm of Vietnam’s biggest lender, Agribank – which caused a loss of nearly VND532 billion for the state budget, was tried in October 2013 and resulted in two death penalties.

Another case involves Huynh Thi Huyen Nhu, 35, the former deputy head of the Risk Management Department of the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank). She is charged with “abusing trust to appropriate assets” and “counterfeiting seals and materials of agencies and organizations” for swindling many individuals and banks of nearly VND4 trillion (US$188.7 million).  The case is being tried.

One of the most noteworthy cases in 2013 involved banking tycoon Nguyen Duc Kien, whose arrest sent shockwaves across the country in August 2012. He was accused oftwo charges, “intentionally violating State regulations on economic management, causing serious consequences” and “cheating to misappropriate other people's assets”, causing a loss of VND1.7 trillion. The case will also be heard in January 2014.

7. Ongoing negotiations for Trans-Pacific Partnership trade agreement

Officials involved in the negotiations on the Trans-Pacific Partnership (TPP) trade agreement say there are still a lot of negotiations to be made with other countries.

TPP sets the standard for free trade and investment in the future, so if they are successful in negotiations, it will be easier for Vietnam when negotiating other free trade agreements (FTA) like the FTA with the European Union ( EU ) and the Customs Union of Belarus, Kazakhstan, and Russia.

A new milestone was marked at the 17th round of talks in Peru when Japan officially joined as the 12th member. Although it was expected to be completed before the end of 2013, the TPP remains unfinished because many issues have yet to reach a consensus among the member countries.

If concluded and successfully signed, the TPP will enable 90% of tariff lines of goods traded among the 12 member countries to be exempted- Australia, Brunei, Chile, Canada, the U.S., Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

8. FDI on a rise, investigation on transfer pricing at FDI firms launched

Newly registered foreign direct investment (FDI) capital in 2013 increased by $7.6 billion, an increase of 54.5% over the same period of 2012, to $ 21.6 billion as of Demceber 15, bringing the total registered FDI capital in Vietnam to $78.5 billion, according to the Foreign Investment Agency under the Ministry of Planning and Investmen. FDI disbursement in 2013 was estimated at U.S. $11.5 billion, up 9.9 % from 2012. These are impressive numbers given the difficult period the world economy was still facing.

Along with the attraction of new FDI, the fight against transfer pricing in foreign businesses began heating up in 2013, as the typical transfer pricing mechanism became increasingly sophisticated. Dozens of large foreign enterprises were also put under watch, but so far no case was determined without proper evidence.

9. M&A in banking becoming more active

Active mergers and acquisition (M&A) deals in the banking sector became more apparent in 2013.

In September, Western Bank merged with the PVFC to become PvcomBank. A new group of investors bought 85% stake in TrustBank, and renamed it the Vietnam Construction Bank.

A notable merger in 2013 was the M&A deal between DaiABank and HD Bank. After the merger, the name DaiABank became obsolete. In addition, HD Bank also bought French financial company SGVF to turn it into a 100% locally owned firm.

10. Chinese traders increasingly purchase local agricultural products, making more risks for local farmers

There was a series of cases in which Chinese traders bought Vietnamese agricultural products from local farmers so that they could manipulate the local market. Besides investing in a large yam growing area in the Mekong Delta’s province of Vinh Long, Chinese traders competed with local traders by buying a surplus of crabs and shrimps, causing dire consequences for both local farmers and traders when they suddenly stopped doing so.

The most frequent move of Chinese traders is to dramatically increase and then lower buying prices, combined with the initiative of buying goods in very large volumes in order to manipulate the market in their favor.



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