The Export and Import Bank of Vietnam (Eximbank) increased overnight deposit interest rates to 13 percent per annum. The 48 hour “call” deposit interest rate was raised to 13.5 percent per annum.

On June 16, the Ho Chi Minh City Housing Development Bank (HD Bank) raised its VND deposit interest rate to the maximum of 18.5 percent per annum and USD deposit interest rate to 8 percent per annum for 12 month terms.

From June 16, the Saigon Joint Stock Commercial Bank (SCB) increased its VND deposit interest rate for short term and non-term to 9 percent per annum; with three, four, five and six day terms to 14-14.6 percent per annum; one, two and three week terms to 17.1-17.6 percent per annum; and one to nine month terms to 17.8-18.4 percent per annum.

Although the macro economy is temporily facing difficulties, foreign investors are still flockeing to Vietnam. The country expectes to attract 23 billion USD of foreign direct investment (FDI) in the first six months this year.

2007 was seen as a successful year for FDI attraction with 20.3 billion USD, but that number has been left far behind and Vietnam is now striving to disburse FDI capital inflow of 1 billion USD per month.

“Nankang of Vietnam”

The Thu Thiem Software Park project capitalized with 1.25 billion USD by Saigon Tel, a member of Saigon Investment Group (SGI) and TA Associates International, Pte Ltd Co from Singapore, a member of Teco Group in Taiwan will be licensed by Ho Chi Minh’s People Committee. On a site of nearly 16 hectares along the east – west avenue of the Thu Thiem new urban area, the project will be built into a software processing city for export to design chips and train human resources in the hi-tech field, with an expected turnover of more than 6 billion USD per annum.

Apart from the initial 1.25 billion USD, the project is expected to attract an additional 2.95 billion USD from foreign and domestic investors.

“Our partner, Teco Group is managing the Nankang software center with total capital of 3.5 billion USD, earning annual turnover of 10 billion USD. Nankang is considered one of the three largest software projects in the world. Nankang’s successful experience and Teco’s reputation will help attract investment into the Thu Thiem Software Park,” said Mr. Dang Thanh Tam, President of SGI Group.

More “cautious” investors

Six months will draw more than 23 billion USD of FDI

Mr. Thang forecast FDI in the first six months will exceed 23 billion USD, the highest rate ever. He also said that about five large projects, including the Nghi Son Oil Refinery Plant worth 6 billion USD, will be licensed from now to the end of this month. Furthermore, FDI capital in technology is soaring.

This week, 14 US companies in many fields led by an assistant to the US trade minister will visit Vietnam to seek business and investment opportunities. This is the third big business group from the US coming to Vietnam since early this year.

“Small and medium-sized companies following big companies showed that US investors hail Vietnam’s business environment. Small companies are usually cautious and afraid of risk, thus the trip to Vietnam proved their confidence in the market,” said an expert from US Commercial Affairs.

Coming back from the Europe, Mr. Dang Thanh Tam said, “Many economic groups in Europe are keen on investing in Vietnam. A 30 – billion USD investment fund in Norway is famous for its conservative mindset but has paid much attention to Vietnam.”

According to Mr. Phan Huu Thang, Head of the Foreign Investment Department under the Ministry of Planning and Investment (MPI), FDI from North Africa, Europe and Japan all show positive signs in the near future.

Efforts to satisfy investors

Although FDI continued to pump into Vietnam, a recent survey by the Japan External Trade Organization (Jetro) revealed Japanese enterprises have become less satisfied with the investment environment in Vietnam. With the approval rate dropping from 75.4 percent in 2006 to 41.7 percent last year, the country has fallen from first to fifth place among six ASEAN countries having Japanese investors. The reason was said to be Vietnam’s under-developed infrastructure and difficulties in purchasing locally-made materials and spare parts.

Moreover, after being improved significantly, administrative formalities in the South showed problems. Investors complained that the waiting time for investment license approval by the Ho Chi Minh Planning and Investment Department is longer than that in Hanoi.

Mr. Thang noted, “We listened to the concerns of investors and are coordinating with local authorities to resolve the issue. We will try to deal with the problem after surveys on project progress in cities and provinces nationwide are revealed. This year, speeding up the disbursement of FDI projects is our top priority.”

Mr. Nguyen Duc Thuan, President of the Vietnam Leather and Footwear Association (Lefaso) said the association submitted a proposal to the Government, ministries and branches to continue negotiating with the EU for Vietnam’s footwear to enjoy the general system of preferences (GSP).

The proposal was released after the EU approved the GSP document in the 2009-2011 period, including removing GSP status for Vietnam’s footwear export.

According to Lefaso, removing GSP will affect to the development of the Vietnam footwear sector, domestic business community and national economy in general. The biggest damage is that domestic businesses will have less competitive advantage because foreign partners will move their orders to Indonesia and Bangladesh to avoid facing an additional 3.5-5 percent import tax on each pair of shoes when exporting to the EU, worth more than 100 million USD.

According to Lefaso, in 2007, the EU remained the biggest consumption market for Vietnamese shoes, bringing in the turnover of 2.6 billion USD, an increase of 33.9% over 2006.

Proposing the government continue to negotiate with the EU is very necessary because the document will be submitted to the European Commission for approval before an official decision is issued in the beginning of July 2008, said Mr. Thuan.

Finance Minister Vu Van Ninh said Vietnam is determined to take synchronised measures to curb inflation, ensure macro-economic stability and social security, while promoting economic renewal and implementing its commitments to international integration.

Speaking at the World Economic Forum (WEF) on East Asia held in Kuala Lumpur from June 15-16, the Vietnamese finance minister said the Vietnamese government is ready to meet with domestic and foreign businesses and listen to their opinions, to create favourable conditions for foreign investors to carry out long-term projects in Vietnam.

Minister Ninh said Vietnam had obtained great achievements in the renewal process over the past 20 years, paving the way and creating new opportunities for the country to further develop.

At a time when the global economy is experiencing many changes, Vietnam is also facing a number of difficulties and challenges, the minister said.

Participants praised the prospect of Vietnam’s economic development, saying Vietnam remains an attractive investment destination with advantages in human resources, wide market and its implementation of WTO commitments. They said they hoped to invest in long-term projects in Vietnam.

During the meeting, Minister Ninh met with WEF Executive Chairman Klaus Schwab. He praised WEF for arranging a delegation of CEOs of WEF members to visit Vietnam on June 13, ahead of the WEF meeting.

The VEF Executive Chairman said the visit was successful and the delegation’s dialogue with Deputy Prime Minister Nguyen Thien Nhan made a good impression on WEF members. He pledged to actively consider Vietnam’s proposal to hosting the WEF on East Asia in 2010.

Minister Ninh also visited and worked with a number of major Malaysian groups, including Tan Chong, Malaysia’s National Electricity Board and the Malaysia Exchange.