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Deposit interest rates rising despite pandemic

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After many months of staying at low levels, deposit interest rates at banks have increased since late May.

Deposit interest rates rising despite pandemic

The Sai Gon – Ha Noi Bank (SHB) announced new deposit interest rates on May 27, with interest rates up by 0.1-0.3 percent.

The 1-5-month deposit interest rates rose from 3.35-3.65 percent to 3.4-3.8 percent. The new 6-11-month interest rates are 5.2-5.5 percent, an increase of 0.2 percent.

For 12-month deposits, the 5.7 percent interest rate (+ 0.1 percent) is applied to deposits at the counter, while online deposits have an interest rate of 6.15 percent per annum (+ 0.35 percent). A 0.3 percent interest rate increase is applied to long-term deposits (24-36 month).

Sacombank applied new interest rates on May 10, up 0.1-0.2 percent per annum compared to previous rates.

The interest rates are 3.5 percent for 2-month deposit at the counter, 3.6 percent for 3-5 month and 5 percent for 6-month deposits. The rates are 5.7 percent, 5.7 percent and 6.4 percent for 12-month, 24-month and 36-month deposits, respectively. Meanwhile, the 36-month online deposit has seen an interest rate rise from 6.5 percent to 6.7 percent.

TP Bank launched the Dac Loc package, offering an interest rate of 6.5 percent per annum, the highest rate of the bank, for 12-month deposits, or 0.5 percent higher than normal deposits. This is the first time the bank has changed its interest rates since February.

A report from BVSC showed that the average interest rate at banks increased slightly for 6-month and 12-month deposits. However, the increases were mostly at small and medium sized banks, while large banks kept their interest rates unchanged.

The ‘big four’, including Agribank, BIDV, VietinBank and Vietcombank, have applied interest rates that were announced in February.

Experts said that interest rate increases are occurring only at a few banks, and that interest rates will stay low because the pandemic has led to a drop in credit demand.

Meanwhile, some large private banks have slashed interest rates on short-term deposits.

VPBank, for example, eased the interest rate by 0.1-0.3 percent for most types of deposits. Techcombank also reduced its interest rates by 0.1 percent for 1-5 month terms.

Experts said that interest rate increases are occurring only at a few banks, and that interest rates will stay low because the pandemic has led to a drop in credit demand.

However, when credit demand bounces back and inflation pressure returns, deposit interest rates will move up in the second half of the year.

When comparing the interest rates of 30 Vietnamese commercial banks on May 28, they found big differences among bank groups.

They noted that online deposits offered interest rates 0.1-0.2 percent higher than deposits at the counter.

GPBank at that time was offering the highest interest rate for this type of deposit.

As for 3-month deposits, the interest rate of 3-4 percent was quoted for counter deposits and 3.15-4.05 percent for online deposits. SHB was offering the highest online interest rate for this type of deposit.

Regarding 6-month deposits, counter deposits had interest rate of 3.6-6.25 percent on average, while CBBank was paying the highest rate.

Meanwhile, online deposits were offering an interest rate of 4-6.45 percent, while SCB was paying the highest rate in this segment.

In 9-month deposit segment, the average interest rate was 3.8-6.35 percent, while CBBank and SCB were offering the highest rates for counter and online deposits, respectively.

The figure was 4.6-6.8 percent per annum for 12-month deposits. The highest interest rate was offered by SCB.

The highest interest rates offered in the market belong to small and medium sized banks, while larger banks are applying low interest rates.

While deposit interest rates have moved up slightly, experts don’t think this will lead to a lending interest rate hike at this time. Meanwhile, the Saigon Securities Incorporated (SSI) thinks the lending interest rate will rise in the early third quarter when the Covid outbreak is controlled. 

Tuan Dung

Source: https://vietnamnet.vn/en/feature/deposit-interest-rates-rising-despite-pandemic-742579.html

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Phuc Long tea chain to open first US store

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Phuc Long tea chain to open first US store

An artist’s impression of the first Phuc Long store in California, U.S. Photo courtesy of Phuc Long.


Phuc Long beverage chain will open its first store in the U.S. next month, following in the footsteps of other Vietnamese coffee brands that have branched out to other markets.

The store will be located in Garden Grove, California, the company said in a Facebook post.

Phuc Long has over 80 stores in Vietnam. It had recently signed a deal with conglomerate Masan Group to establish Phuc Long kiosks in over 2,200 VinMart+ conveniences stores.

Last month, TNI King Coffee chain opened its first store inside a mall in California.

Other Vietnamese coffee chains that have branched out to foreign markets include Cong Ca Phe with six stores in South Korea and two in Malaysia, and Trung Nguyen E-Coffee with a store in Laos.

Source: https://e.vnexpress.net/news/business/companies/phuc-long-tea-chain-to-open-first-us-store-4298686.html

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Private enterprises lack internal strength and driving force to develop

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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.

Private enterprises lack internal strength and driving force to develop

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

Source: https://vietnamnet.vn/en/feature/private-enterprises-lack-internal-strength-and-driving-force-to-develop-former-head-of-ciem-748432.html

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Excited but anxious: Hanoi business owners reopen

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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.

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.

Source: https://e.vnexpress.net/news/business/industries/excited-but-anxious-hanoi-business-owners-reopen-4298384.html

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