Experts say the government will find it difficult to rein in inflation this year as surging food and materials prices hurt citizens and businesses.
Loan and her husband in HCMC’s District 5 spent around VND120,000- 200,000 ($5.22-8.70) per day last month on feeding their family of three, almost double that of the same time last year. They say the prices of vegetables and meat have been increasing since the beginning of the year.
Hoa, another HCMC resident, has seen her spending on family meals increase by 65 percent to VND5 million per month. She says the prices of cooking gas and many ingredients she needs have been rising.
“The prices of some products have doubled since the beginning of the year. I’m spending out of my savings.”
Ngoc Chau, head accountant for a construction company in Tan Binh District, has seen prices of a bowl of noodle soup rising nearly 20 percent to VND65,000 the past few months.
“I have been reluctant to eat out these days.”
In the first four months of this year, the prices of materials and ingredients have risen by 4.64 percent year-on-year, with the surge strongest in the agriculture, forestry and fisheries sector, up 6.77 percent, according to the General Statistics Office.
The GSO has cautioned that although inflation was 0.29 percent in the first quarter, the lowest in 20 years, keeping it under the targeted 4 percent this year won’t be easy as many economies including the U.S. have introduced economic stimuli to boost recovery.
The Ministry of Agriculture and Rural Development said that animal feed prices have surged 30 percent since the beginning of the year and is set to rise further in the second quarter.
Fuel prices, meanwhile, have increased by 19 percent since the beginning of the year.
Do Van Khuoi, director of supplies at Saigon Food, said that prices have been rising due to limited supply of goods domestically and shortage of materials globally.
There are signs that some suppliers are increasing their reserves to indulge in speculative pricing, he added.
“Disrupted supply chains due to difficulties in transporting goods amid the pandemic have also pushed up prices.”
Khuoi said that in recent months, the prices of spices have risen by 5-10 precent, rice and seafood by 5-20 percent and material for plastic production by 15-70 percent.
A spokesperson for food processor Vissan also said that many food companies were facing “headaches” because of rising material prices. Some suppliers have requested a 15 percent increase starting this month.
Most businesses say they are trying to look for alternative sources of materials and ingredients to lower prices.
Authorities have also been working to stabilize prices.
Pham The Anh, head economist of the Vietnam Institute for Economic and Policy Research (VEPR), said that Vietnam and many other economies face high risks of rising inflation this year as prices of some products like steel and fuel have been surging at around 20-30 percent.
Economist Nguyen Duc Thanh said that authorities are facing difficulties in controlling inflation, as keeping prices low will hurt businesses which are already hit by the Covid-19 pandemic, while allowing prices to rise will hurt low-income people.
The domestic department market under the Ministry of Industry and Trade said it has been working with businesses to ensure adequate supply to keep prices from surging suddenly.
It has also been working with customs and agriculture authorities to ensure the stable delivery of goods, especially between localities with a high number of Covid-19 cases.
Deputy Prime Minister Le Minh Khai has also ordered relevant government bodies to take keep fuel prices stable.
Private enterprises lack internal strength and driving force to develop
How will Vietnam overcome challenges to realize its development plans? Nguyen Dinh Cung, former head of Central Institute for Economic Management (CIEM), shares his perspective with VietNamNet.
One of the great successes of economic reform in Vietnam since doi moi (renovation) is the establishment of a community of businesses from different economic sectors with many ownership modes. Vietnamese enterprises are operating under similar legal forms as in other market economies.
High in quantity, small in scale
In terms of quantity, enterprises in the private sector account for the overwhelming proportion, 97 percent, while SOEs (state owned enterprises) account for 0.38 percent and FIEs the remaining.
The enterprises employ 16 million workers. The workers in SOEs account for 7 percent, private enterprises nearly 60 percent and 33 percent in FIEs (foreign invested enterprises).
In terms of total assets, SOEs account for 28 percent, private enterprises 53 percent and FIEs 29 percent.
In terms of stockholder equity, SOEs account for 20 percent, non-state owned enterprises 56 percent and FIEs 24 percent.
In terms of net revenue, SOEs account for 14.5 percent, non-state owned 57 percent and FIEs 28.5 percent.
In terms of pre-tax profit, SOEs account for 21 percent. The figures are 36 percent for non-state owned enterprises and 43 percent for FIEs.
If considering financial efficiency, the ROE (return on equity) is 9 percent for SOEs, 4.5 percent for non-state owned enterprises and 15 percent for FIEs. Meanwhile, the profit to sale ratio is 5.6 percent for SOEs and FIEs, while it is just 2.4 percent for non-state enterprises.
The figures show that while private enterprises account for the overwhelming proportion, they mostly have small and micro scale, with very few enterprises having medium scale. They have low technology and low competitiveness.
Lacking inner strength and driving force to develop
This is attributed to several reasons:
First, the ratio of profit to revenue and to assets is too low. Stockholder equity is not high enough for re-investment and development. Therefore, most private enterprises have to rely on working capital from relatives and friends. Only a small part of the enterprises can access bank loans.
Most private enterprises lack capability to innovate and receive technology transfer, and lack the driving force to research, develop and renovate technology. In other words, private enterprises lack inner strength and motivation for development.
Second, one part of private enterprises doesn’t want to expand investment to become large enterprises.
This is attributed to unclear and overlapping laws which can be understood and implemented in different ways by different state management agencies. The bigger that enterprises become and the more business fields they cover, the higher legal risks they face, which may cause big losses or loss of all of their assets that had been created over decades.
|While private enterprises account for the overwhelming proportion, they mostly have small and micro scale, with very few enterprises having medium scale. They have low technology and low competitiveness.|
In this situation, there is no reliable and effective tool and institution, especially independent courts, capable of protecting their rights and benefits.
Third, another part of private enterprises wants to grow but cannot, because they cannot access resources for investment and development. Surveys have found that capital costs are too high. The inability to get enough capital and access land are the big barriers for private enterprises in this group.
Fourth, some of the hundreds of thousands of private enterprises are crony enterprises. The number of these enterprises is not high if compared with the total number of operating enterprises, but they appropriate significant resources and deprive business opportunities from authentic investors and businesses.
The enterprises of this kind contribute to creating an unfair business environment which lacks transparency; distort the allocation of national resources; and distort the value and constrict the business motivation of genuine businesses.
It is the enterprises of this kind that make it difficult for other enterprises to access resources and business opportunities. This is a major obstacle for the development of private enterprises.
Large private groups vulnerable
Vietnam now has some large-scale private enterprises, called economic groups. There are some similarities and differences between the economic groups and groups in some Asian economies prior to 1979 as follows:
The similarities include investment in multi business fields; reliance on bank loans; lack of transparency in administration and business; and relatively friendly relations with the government. They are big if compared with the size of the economies, and so they are not allowed to collapse.
Regarding differences, some foreign economic groups specialized in manufacturing, developed strong R&D (research and development), and expanded their business across the region and the world. They have had specific products and strong brands. Meanwhile, Vietnamese private economic groups mostly target the domestic market, focusing on real estate and consumer services. They still cannot develop and master technologies in their fields and don’t have global competitiveness.
It is obvious that Vietnam’s private economic groups are not as powerful as Asian private economic groups before 1979, and they are vulnerable. If the businesses collapse, it will take a longer time to recover them and the collapse may cause bigger losses to the national economy.
Therefore, developing the private sector, including economic groups, in a balanced, effective and sustainable manner must be a top priority task in the coming time.
It is necessary to amend unreasonable policies to help private enterprises increase their strength and overcome obstacles so they can feel secure to expand investment for development.
The 13th Party Congress Resolution has set specific goals for Vietnam’s socio-economic development.
By 2025, Vietnam would become a developing country with industry going towards modernization and income surpassing the lower average level.
By 2030, Vietnam would become a developing country with a modern industry and higher than average income.
By 2045, it would become a developed country with high income.
Nguyen Dinh Cung
Excited but anxious: Hanoi business owners reopen
Though they eagerly reopen after being closed for 27 days due to the Covid-19 outbreak, many Hanoi businesses are also worried about changing consumer behaviors.
Closed restaurants inside a shopping mall in Ha Dong District, Hanoi, June 20. Photo by VnExpress/Duc Minh.
After Hanoi authorities announced that indoor dining and hairdressing can resume on Tuesday, Bui Quang Hung, co-founder of barber shop chain 30Shine, showed his excitement with a post on social media saying, “see you Hanoians on Tuesday morning.”
He said the shops would open from 7.30 a.m. until late night to clear a backlog of almost a month.
“Men have to visit the barber once every three weeks on average because they feel irritated if their hair is one to two centimeters too long.”
There would be two or three times the usual number of customers for two weeks, he said based on his experience from previous waves.
But some other businesses are less hopeful.
Trieu Nguyen Quan, owner of the Goofoo Gelato chain of ice cream shops, does not expect many customers for 10 days after reopening since people are afraid of the pandemic.
Hoang Tung, CEO of fast-food restaurant chain Pizza Home, said the outbreak could cause him to lose a number of customers since people have adopted a new habit of eating at home.
To survive the stop-start nature of their business amid the pandemic, many have sought to improve their business model. Tung said Pizza Home has closed some stores that were not doing well but has expanded into home delivery and apps.
“The restaurants have to operate both online and offline, and must be prepared for the worst, which is closure, amid the pandemic.”
Goofoo Gelato too has managed to pull on thanks to online sales.
Quan said he plans to increase the number of outlets but only after vaccination. He said vaccination is the only way to make him feel secure and the ultimate solution for businesses to open and the economy to revive.
Around 2 percent of the population has received the first shot, and 0.1 percent has received both.
Vietnam has received delivery of around three million vaccine doses so far, and is expected to get over 120 million this year.
It seeks around 150 million in all to cover 70 percent of its population.
Market falls on strong selling forces
HÀ NỘI — Shares inched down on Wednesday, weighed by strong selling pressure across most sectors despite gains in some large-cap stocks.
The market benchmark VN-Index on the Hồ Chí Minh Stock Exchange (HoSE) declined by 0.22 per cent to 1,376.87 points. The market’s breath stayed negative with 298 stocks falling, while 94 stocks rose and 51 ended flat.
The liquidity was high as more than 710.77 million shares were traded on the market, worth over VNĐ21.1 trillion (US$528.6 million).
The market was weighed by selling forces despite rallies in large-cap stocks, especially bank stocks.
The VN30-Index, which tracks 30 biggest stocks in market capitalisation on HoSE, climbed slightly 0.02 per cent to 1,489.53 points. Twenty stocks of the VN30 basket plummeted, while only nine jumped and one stayed unchanged.
Stocks in many sectors posted negative performance yesterday with material stocks leading the market’s trend. Vietnam Rubber Group (GVR) witnessed the biggest losses, down 2.47 per cent, followed by No Va Land Investment Group Corporation (Novaland, NVL), Vingroup JSC (VIC) and Mansan Group (MSN), down 0.5 – 1.57 per cent.
However, the losses were limited by gains in bank stocks. Of which, Vietcombank (VCB) was the biggest gainer in the market, up 1.95 per cent. Other stocks witnessing big increases were Vietinbank (CTG), VPBank (VPB) and Saigon Beer – Alcohol – Beverage Corporation (SAB), up more than 1.5 per cent.
The market has fluctuated since the beginning of the week with alternative up and down sessions.
Analysts from Saigon – Hanoi Securities JSC (SHS) said that based on Elliot Theory, there is still room for an upward trend with a resistance level of around 1,400 points.
Investors who took profits last week should refrain from opening long positions at the current price and wait until the market corrects deeper to come back, SHS added.
On the Hà Nội Stock Exchange (HNX), the HNX-Index plunged 0.41 per cent to 315.8 points.
During the trading session, more than 126.2 million shares were traded on the northern bourse, worth nearly VNĐ3 trillion.
Meanwhile, foreign investors returned to the market as they net bought a value of VNĐ159.5 billion on both exchanges. Of which, they net bought a value of VNĐ144.44 billion on HoSE, and a value of VNĐ15.06 billion on HNX. —
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