“We Are on the Threshold of the Year 2012, Leaving the Hardest Time Behind”

As we well know, this global recession originated in the USA with the subprime debt crisis. Then, we have observed many giant European economies under the burden of public debt and budget deficit. Under this context, the Vietnamese economy has been also influenced by external impacts and internal constraints.

 

Global financial crisis is still the first reason for this situation. Vietnam has a wide open economy with the import – export/GDP ratio of up to 170 percent and our development investment is sponsored significantly by external funding, such as FDI and ODA. Now, inflation is rising in Asia Pacific countries, which are Vietnam’s main export markets. With the slowdown in foreign investment as investors are now busy with their own nation’s crises, negative impacts are unavoidable for Vietnam.   

Internally, Vietnam’s financial position has experienced the first instabilities since 2007 as FDI and FII climbed dramatically after Vietnam joined WTO. When we were first aware of the problem and started applying monetary tightening policies to cope with the situation, the financial crisis originated from the USA swept through, and various demand stimulus packages have been applied worldwide. The Vietnamese Government was very successful with its US$ 8 billion demand stimulus package, having stopped 2009 GDP growth reduction. However, in mid 2011, we had to face more financial turmoil from Europe, coming along with the previous demand stimulus package’s adverse impact, namely inflation. Monetary tightening policy has placed obstacles in front of the economy, like growing Incremental Capital Output Ratio (ICOR) due to the inefficient public investments, and poor SOE performance. The Vietnamese banking system has also been directly affected by the monetary tightening policy and especially by the poor performance of businesses, causing high inventory and bad debt.

 

However, the overall picture for the Vietnamese economy has encouraging areas: 2011 GDP growth is expected o reach 6 percent, inflation tended to cool down, overall trade balance and balance of payments have improved remarkably, and the budget deficit has decreased.

 

I believe that our achievements in 2011 are really encouraging and we are on the threshold, in 2012, of leaving the hardest time behind.

 

Monetary tightening policy, restricting the money supply, has directly affected the banking system. Vietnamese businesses have coped with limited supply and high capital cost (interest rates), so obviously they have had many difficulties. It was even harder for sectors such as construction, real estate and construction materials, due to public investment and real estate lending restrictions. Those are critical and short term difficulties which always come along with the economic restructuring process. 

 

However, the monetary and fiscal tightening policy is necessary in this period, and in the long-term, is considered as a special treatment for serious and chronic problems of Vietnamese businesses. Businesses getting through this period will be more healthy, effective and ready for a new growth cycle. With reasonable monetary and fiscal policy, the Vietnamese economy will certainly be improved; inflation, trade deficit, and budget deficit will decrease; investment efficiency will increase; creating a firm foundation for Vietnamese enterprises' sustainable growth.

 

Firstly, the total outstanding capital in the market is still growing, and is expected to increase by over 10 percent in 2011. Exports are forecast to grow by over 30 percent, and GDP growth will be approximately 6 percent. In addition, official figures show no sudden unemployment rate increase in Vietnam. Secondly, regarding consumption, total retail volume still jumps even with the impacts of inflation.

 

Accordingly, it can be affirmed that the picture is not entirely gloomy. It is true that some companies are in hard times; some industries are facing difficulties as I mentioned above. In this period, the Government also directs the banks to focus on loans to production, export, agricultural and rural development. Enterprises also benefit from preferential policies such as tax cuts and CIT payment deadline expansion. These support Vietnamese companies to deal with short-term constraints and I don’t think there is much room left for these priority policies.

 

What we need now is long term policies to help both enterprises and the Vietnamese economy to deeply restructure, improve business efficiency, cut costs, enhance productivity, and reduce environmental pollution.

 

 SeABank wishes to become a prominent retail bank of Vietnam whose core customers are individuals, households and SMEs. In the current conditions, we offer a main part of our credit to SMEs, business households, and export financing.

 

Currently, we are implementing an Exporter subsidiary program with special interest rate, favourable credit requirements and special service fee priority. We are very glad to receive the strong support of ministries, agencies, sectors and businesses nationwide and it is clear that the program targets shall be achieved.

 

In 2012, SeABank shall enforce its policies to accompany our customers in sustainable development, focusing on the business and production fields prioritized by the Government.

 

 In these challenging days, businesses should be prudent. They also need to use capital efficiently, limit new investment and think about focal investment with short payback period. Their relation with existing partners must be further strengthened and expanded.