More Channels for Capital Attraction

 

GDP growth rate in the first nine months averaged at 4.56 percent (3.14 percent in the first quarter, 4.46 percent in the second quarter, and 5.76 percent in the third quarter). The GDP growth rate in agro-forestry-fishery sector rose 1.57 percent, in industry sector rose 6.5 percent, and in services rose 5.91 percent. The growth rates in the three sectors in the third quarter were higher than those in the first and the second quarters. The economic situation, however, was still pregnant with worrying signals for investors.

The situation in which goods exports sharply fall while import growth rate rises incessantly are forecast to cause difficulties for the balance of payments. The goods import turnover in September, 2009 is estimated at US$6.2 billion, up 6 percent from a month earlier and 10.7 percent from a year earlier. The trade gap was US$1.5 billion in the month and US$6.5 billion in the first nine months. In the remaining months, imported goods will rise more sharply due to the rising local demand. In this year’s economic context, imported goods mechanism has brought disadvantage changes to the country when fuel and materials imports fell to 63.3 percent from earlier 65.2 percent while consumer goods import rose to 8.3 percent from 6.7 percent. This will result in the increase in the trade gap in the remaining months. 

 

Exports in September dropped 11.3 percent from a year earlier. Some goods were maintained in terms of volume but their values fell sharply, leading to the reduction in the turnover. The goods export turnover in the first nine months estimated at US$41.7 billion, down 14.3 percent for a year earlier. Main products such as crude oil tumbled by 45.6 percent from last year in export turnover. Export turnover of coffee was US$1.3 billion, up 14.4 percent in volume but down 19.7 percent in turnover; of coal was US$913 million, up 2.4 percent in volume but down 21.2 percent in turnover; of rubber was US$734 million, up 7 percent in volume but down 41 percent in turnover.

 

Besides that, FDI capital dropped 11 percent. A monetary expert said that the capital withdrawal in the Vietnam stock exchange of some foreign investors and investment funds is likely to rise from their worry about the rate change. According to an announcement by the Asia Development Bank (ADB) on September 15, Vietnam’s foreign exchange reserve tumbled to US$17.6 billion in June from the level of US$23 billion in last December.

 

Rate change will influence on profit of investors who transfers capital to other countries. Therefore, the best time for investors to pull out of the market is at the end of the third quarter when the VN-Index reaches to nearly 600 points.

Of total development investment in the first nine months of VND 483,200 billion, up 14.4 percent from a year earlier, VND 174,200 billion sourced from state budget, accounting for 36 percent and up 45.5 percent from last year. Spending from state budget rose while collecting from state budget fell due to incentive tax policies and loss making of many enterprises. Total collecting for state budget since the beginning of the year through mid-September estimated at VND274,400 billion, VND 60,000 billion lower than the spending. 

 

According to the General Statistics Office (GSO), while investment from state budget rose 45.5 percent, investment from non-state areas only rose 12.6 percent and FDI fell 11.2 percent. That was the reason why the government had to increase the spending while not mobilising investment from other resources in the society.

 

In order to ensure the balance between spending and collecting, the Vietnamese government may issue bonds with a more attractive interest rate than its bond issuance in the beginning of the year to mobilise investment from institutions, enterprises and individuals, an analyst of Wall Street Securities said. There will be a large amount of money to pour into g-bonds instead of current fields. Many investors in stock exchanges are taking advantage to make profit and will transfer their capital in g-bonds while stock retailers are continuing buying stocks. 

 

The stagnancy in disbursing the government’s first demand stimulus package (according to an inspection report of National Assembly Finance and Budget Committee) and the sluggishness in carrying out the second stimulus package are also contributing to the point decrease in stock exchanges despite of clearer and clearer satisfactory signals in the economic recovery.