Inflation in 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 are home-made such as the unsterilised liquidity inflows, unusually high domestic credit growth, expansionary fiscal policy, and aggressive public investment were the principal home-made causes of Vietnam's high inflation. The solutions to curb inflation in Vietnam 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 must closely to control payment and loans, Tightened monetary policy, however, should ensure the economys 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 Budget, and it would strictly control investment items of State-owned enterprises so as to reduce the deficit and contribute to the economys 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 was encouraged. Businesses must re-check expenses to reduce prices. Sixth, market 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, the Government would implement social welfare policies and increase salary and 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 elaborated Pipelines supply gas to the Ca 1 The on the Governments measures to curb inflation and maintain economic Mau of power plant. Gas, plant is part the Ca Mau Electricity and Fertiliser Complex located in growth. To control inflation would require concerted efforts by Government 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, maintaining 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, should ensure the economys 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 Budget, and it would strictly control investment items of State-owned enterprises so as to reduce the deficit and contribute to the economys development. Ministries and chairmen of provincial Peoples Committees were asked to strictly monitor investment items of State-owned enterprises and terminate ineffective construction works. 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. To stabilise domestic production, the 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 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, the 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 encouraged to save fuel and energy in their day-to-day living. Sixth, market 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 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 Peoples Court, Truong Hoa Binh, were also questioned. The finance minister told the committee that the most important targets were: Halting inflation; Stopping consumer price increases from going higher than last year; Stabilising the national economy and socio-political situation; and maintaining economic growth by adapting to the changes. But the State would not re-adjust prices for the goods it controls such as petrol, electricity and coal between now and 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; 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, the situation would improve by the end of the year, the finance minister replied.

No price rises
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 commercial banks, helping to raise inflation. The minister denied that the deposit had raised inflation and said the money was to ensure State spending. Deputy Le Thi Nga, northern Thai Nguyen Province, asked how the Government intended to stop the continuing rise in the price of essential goods. Ministries had been instructed to assess the situation, the finance myinister replied. The finance ministry had co-ordinated with other offices and localities to inspect 440 import enterprises last year. Fines had been imposed for unreasonable price rises and enterprises asked to guarantee not to raise prices.
HA NOI Prime

Governor explains
Many deputies asked State Bank of Viet Nam Governor Nguyen Van Giau if mistakes in monetary policy had sparked the high inflation. The governor conceded that consumer prices would not have risen so high, if the banking industry had better managed monetary policy. However, Giau told reporters yesterday that newly-introduced monetary policies had benefited the market and the State Bank was determined to limit year-on-year credit growth to less than 30 per cent. The governor, who spoke to reporters during a break in the NA Standing Committees morning session, argued that monetary policy had been neither inconsistent nor sudden. For example, the central bank had given the commercial banks 45 days to increase their compulsory reserves. In 2007, the commercial banks had been allowed only 33 days to double their reserves. The order for the compulsory purchase of treasury bills had been necessary and had helped bring the monetary system into balance. "Every country has to pay some cost to implement monetary policies," the governor said. "In Viet Nam, the central bank cant arbitrarily increase compulsory reserves at commercial banks as the higher reserves could hurt borrowers." The yearly 12 per cent ceiling for dong deposit was to control general interest rates during a time of change.

essential goods items would not increase by June.The Prime Minister made the promise after listening to the opinions of leaders from various ministries, departments and industries. The goods items include petrol, electricity, coal, water, bus tickets, rail tickets, air tickets, cement, steel, school fees and hospital fees. The Prime Minister also urges both organisations and individuals to implement saving measures when using the goods. State-administration offices in particular will try to save 10 per cent of their total petrol consumption. He also said, market watchdogs and commodity associations should closely monitor prices so as to catch and punish all violators. Viet Nam will export the maximum volume of rice, some 3.5 million tonnes, to stabilise food prices on the domestic market, he added. To reduce the trade deficit, the Prime Minister suggests that exports should be boosted, and commercial banks provide loans in foreign currency for producers of some export goods, including textiles, garments, footwear and seafood. "Import tax rates should increase for 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. World Bank Viet Nam director Ajay Chhibber has described the Governments 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 thing is to minimise the damage to growth and in order to do so try to ensure that credit goes to export and 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 policies to support the poor. VNS

Govt puts inflation, economic growth first

(06-08-2008) Despite national achievements, challenges will continue to arise. HA NOI Prime Minister Nguyen Tan Dung has asked the Government to resolve problems hindering production, business operations and investment.
labour Sao Mai He made the statement yesterday at the Governments two-day regular Workers Factory at the southern Cement in the province of Kien Giang. Prime meeting for July.

The Government discussed the socio-economic situation over the course of July and the previous seven months. They also spoke on macro-economic policies, inflation control and goals for the remainder of the year.

Minister Nguyen Tan Dung has called to prioritise capital funds for the nations key construction projects. VNA/VNS Photo Van Khanh

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 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 years 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 is struggling with living conditions. And epidemics continue to wipe out crops and livestock. In response, the PM emphasised five measures for ministries, sectors, localities, offices and enterprises to implement from now to the end of the year: Prioritise inflation control, resolve difficulties in accessing capital, particularly for 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 operation, and delay unnecessary projects. Monitor organisations and individuals to control prices, and root out and manage speculation activities. Control the trade deficit through activities like raising import taxes on luxury items. State-owned enterprises should focus on development and raising productivity and business performance, while working toward equitisation. To assure social welfare, the PM asked ministries, sectors and localities to continue to 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 Government also discussed a decree to fine speculators, smugglers and trade 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 Office affirmed that the 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 Peoples Council, the chairman of HCM City Peoples Committee, Le Hoang Quan, said the city authority would examine revenues and expenditures in the citys 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 projects and projects of State-owned 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 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-wheeled vehicles would be delayed while the construction of 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 citys socio-economic development for the second half of 2008 that gives top priority to inflation control. The council asked the city Peoples Committee to increase business production and investment from domestic and overseas sources. The council also passed a plan mapped out by the city Peoples 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 Peoples 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 in the city. Poor families are those who earn less than VND5 million (US$300) per person annually. VNS

Government strategies to tackle soaring inflation on right track: economic experts

(03-07-2008) HA NOI The countrys socio-economic situation and measures to curb inflation, stabilise the macro-economy and boost social welfare and growth were high on the agenda at the Governments regular meeting in the capital yesterday.

Speaking at the meeting, former governor of the State Bank of Viet Nam and Deputy Chairman of the National Advisory Council for Finance and Monetary Policies Le Duc Thuy said the Government must be resolute in its drive to curb inflation, without jolting the markets. Thuy said the Prime Ministers efforts to cope with the countrys 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 year. The Government has spent VND11,000 billion subsidising the price for local oil and gas importers in order to ensure the countrys 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 organisations. In conclusion,, Prime Minister Nguyen Tan Dung emphasised a number of key tasks that needed to be carried out this year, including efforts to curb inflation, stabilise the macro-economy, ensure social welfare and a steady growth rate. However, he said the Governments 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 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 offices to ensure supply and demand were balanced, while punishing those who use market fluctuations to raise prices, especially of essential commodities. In regard to social welfare, the Prime Minister said it was necessary to issue policies that supported the poor in the 58 districts where the number of impoverished households stood at 50 per cent. Dung also reminded cities and provinces of the need to implement flood-prevention projects and post-disaster relief 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 2012. VNS

Inflation tops Govt 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 Construction occurs on the Tuyen hydro-electric facility. at its regular meeting for June, presided over by Prime Minister Quang Development of hydro-electric Nguyen Tan Dung. construction is a key part of the At the meeting, the Government focused on discussing solutions for curbing inflation, stabilising macro-economy, and ensuring social welfare and sustainable growth for the last months of this year.
Governments socio-economic development strategy. VNA/VNS Photo Huy Hung

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 countrys 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 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 peoples 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 agriculture, forestry and fisheries grew by 3.04 per cent; industry and construction 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 Nams economy posting the growth rate that it did should be considered a tremendous achievement.

Hoa said that in order to reach the years 7 per cent GDP growth target set by the National Assembly, in the years last six months the country should post GDP growth of 7.4 per cent. According to the Ministry of Trade and Industry, the countrys demand for necessary 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. In the last six months, market watch teams found 27,135 cases of speculation, recovering VND75 billion for the State budget. VNS

Govt 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 under construction in Thuong Xuan According to the Governments website, 11 teams will work from Monday to June 30 on the implementation of plans on capitalinvestment 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, 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 rely on the State budget and treasury bills will come under close scrutiny. In each locality and ministry, inspectors will examine plans for using public investment 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 of 995 construction projects, representing total capital of VND4,000 billion (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 southern province of Binh Phuoc, the provincial Peoples Committee has reassessed investment projects financed by the provinces 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 committees 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 southern province of Long Ans Peoples Committee has also decided to eliminate 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

Government directive acts to curb inflation

(22-05-2008) HA NOI Any individual or organisation speculating and causing essential goods prices to rise will face serious fines based on Prime Minister Nguyen Tan Dungs new directive, released on Coal is processed Tuesday. the northeastern

at Cam Pha port in province of Quang Ninh. VNA/VNS Photo Nguyen Dan

Under the directive, Dung mandated that concerned agencies control prices of essential commodities through strong measures, even including prosecution and information campaigns. He targeted three products of immediate concern: cement, steel and fertiliser. Dung requested that the ministries of Construction and Industry and Trade and Peoples 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 Monday the cement retail price climbed to VND118,000 (US$7.4) per package 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 Association Pham Chi 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 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 Chinas recent hike of pig iron export tariffs and other countries 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 Similar efforts are underway for fertiliser control. Leading National Oil and Gas Group (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 affirmed that the companys chemical fertiliser subsidiaries would strive to satisfy 70 per cent of national demand and had set prices 10-15 per cent lower than 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 around VND12,000. 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 cease putting capital into real estate construction and other less effective 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

(03-04-2008) HA NOI Viet Nam will continue to make rapid progress in economic development in the medium- to long-term, supported by strong economic fundamentals and large inflows of foreign direct investment, says Asian Development Bank country director Ayumi Konishi

In issuing the banks Asian Development Outlook 2008 in Ha Noi yesterday, assessing current economic developments in the AsiaPacific and making economic projections for the region, Konishi said 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 forecasts were based on several domestic economic assumptions including the maintenance of the Governments 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 were that monetary tightening would not cause serious problems in the financial sector and there would be no major supply-side shocks.

Workers unload Vietnamese rice in the Philippines port of Tabaco. Record high prices for rice on the global market can help Viet Nam to further accelerate economic growth. AFP Photo Jay Directo

Konishi expressed optimism over the Vietnamese Governments efforts to curb the high inflation rate but noted that, in the current global context, "speed in reponses 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 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 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 in yesterdays 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 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