Business Beat
As part of the US-Viet Nam Bilateral Trade Agreement, starting from Tuesday, American banks operating in Viet Nam can accept dong deposits up to 100% of their registered capital, doubling the amount they could mobilise in their first year. Other foreign banks are complaining of unfair competition because they have to limit their mobilisation to 25% of their capital. Among local banks, there is now also a race to attract local depositors. Apart from raising interest rates on dong deposits, some banks are offering prizes for their clients. Incombank, in an effort to mobilise VND2,000 billion, has invited people depositing more than VND20 million for more than six months to take part in a lucky draw. The first prize is a VND400 million car. Other banks are competing with more flexible terms and gifts. Bankers say money is still coming in to banks with deposits growing a healthy 1.6% a month, but as demand for loans is picking up, they need more money to satisfy borrowers. Anyway, the lucky draw trick proves that bankers know local people love to gamble, even with their savings.***
As 2003 draws near, local business people are starting to talk about the inclusion list and temporary exclusion list for the implementation of Viet Nam’s AFTA commitments. These include 755 new items in the list of goods which will have their tariffs cut dramatically. Local manufacturers are concerned because many of these are consumer goods like rice cookers, irons, vacuum cleaners, and air conditioners. Their current import tax of 40-50 per cent will be cut to 20 per cent starting early next year. This worries local producers as they might have to lower their selling price considerably to remain competitive. However, it seems Vietnamese businesses haven’t been able to cash in on the opportunities to gain market share in other ASEAN countries. Viet Nam’s exports to ASEAN in the first six months of this year dropped 13.5 per cent compared with the same period in 2001, and the percentage of ASEAN exports in total export revenue also dropped. It was 15.9 per cent in the first six months, 16.9 per cent in 2001 and 18 per cent in 2000. It may be because Viet Nam’s main exports are agricultural products that are still on the exclusion list for ASEAN countries. Local business people are also worried that AFTA might become irrelevant when members seal separate trade agreements with the US, Japan, or Australia. These deals might serve as a "back door" for goods from these countries to penetrate the ASEAN market without any return favours.
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The private sector has contributed dramatically to this year’s economic performance. Industrial output by the sector is expected to increase 20 per cent compared to the national average of 14.4 per cent. The private sector contributes more than 42 per cent of GDP, compared to 39 per cent generated by the state sector. But there is a common misunderstanding here. Talking about the private sector, people tend to think of formally registered and well-known companies like Biti’s, ACB or REE. In fact, despite a spectacular growth after the new Enterprise Law was enacted, the formal private sector is very small. As of 2002, it accounts for less than 4 per cent of total GDP, 6 per cent of output in manufacturing and about 3 per cent of total employment. The bulk of the private sector is the 10 million or so household businesses that are flexible, dynamic and capable of generating jobs for millions of people. At the same time, they are small, employ outdated technology, possess almost no management expertise and have no access to formal loans or support. If national economic policies are geared to this informal private sector, the potential for growth would be much higher and success would be more spectacular.
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Two intellectual property disputes ended last week. The first involved a well-known song about teaching that Thai Tuan Textiles used without permission in one of its advertisements. Songwriters said the design of the ad, in which the lyric of the song was printed on Thai Tuan cloths, showed disrespect for the song and the composers. Thai Tuan Textiles apologised and offered VND20 million as compensation. The composers accepted the apology and donated the money to the HCM City Fund for Poor People and 10 Vietnamese heroic mothers. In the other case, well-known software and Internet service provider FPT apologised to HT-MedSoft, a start-up company specialising in writing hospital management software. FPT accused HT-MedSoft of pirating its software. It sent letters to hospitals, detailing the accusations, which caused HT-MedSoft to lose sales. Now FPT has admitted it was in the wrong and there had been no theft. Both software companies have struck a deal of co-operation – HT-MedSoft will provide the e-hospital package while FPT will focus on its marketing.
VNS
