Electronics industry suffers in wake of market woes

By Thien Ly

Many electronics importers and retailers are going to see a much smaller turnover this year than the 25 per cent increasc that was predicted earlier this year.

Since May, the electronics market�s valve decreased between 30 and 50 per cent, depending on the type of good, compared with the same period last year. Electrical engineering products, IT items and mobile phones saw the biggest drops.

Market fluctuations, often out of distributors and retailers� hands, are mainly to blame for the slowdown.

In mid-June, the exchange rate on black market between the US dollar and dong climbed to a record high of VND20,000 per dollar. This led to rising prices for most imported electronics since they were sold in dong.

Likewise, consumer trends of "tightening purse strings" suppressed electronics goods consumption. Meanwhile, companies could not cancel the import contracts signed with their foreign partners.

As a result, most companies, including distributors and retailers, have high volumes of stockpiled goods worth trillions of dong. Worse yet, these goods are in low demand as their prices are higher than more recent imports.

From late June and to the end of July, importers were forced to buy dollars off the black market at exorbitant rates to pay for their imports because banks imposed a limit on sales of foreign currencies to companies.

Earlier this month, the prices of many essential goods like oil and gas as well as gold fell overseas, resulting in lower prices of several other goods, including electronics, in Viet Nam.

Making the best out of a no-win situation, distributors and retailers are now trying to generate some revenue by offering big sales and high-end freebies along with their stockpiled goods.

To merge or not to merge

With many new banks set to arrive on the scene after more open policies were passed, experts are recommending the Government to encourage small banks to merge with each other to improve their financial potential and service quality.

By the end of May, Viet Nam had 85 banks, including five State owned commercial banks, six joint venture banks, 36 joint stock banks and 44 branches of foreign banks, the State Bank of Viet Nam reported.

While the total number of banks does not appear to be too small to accommodate the country�s 80 million citizens, the domestic banking system still does not meet the market�s needs as most banks are too small.

The prescribed capital at each of several commercial joint-stock banks is less than VND1,000 billion (US$59 million).

The limited financial capacity of small-scale banks means they are less competitive with others and carry higher business risks. These banks also have a more difficult time in updating banking technology and recruiting staff.

Many extol the benefits of mergers of smaller banks. Their consolidation would not only enrich their financial potential but also raise revenue and cut unnecessary operating costs.

In the case of a bigger bank absorbing a smaller one, shareholders of the smaller bank would reap the standard benefits of such mergers as well as have stakes in a bigger playing field.

The country�s increasing integration into the global economy is set to diversify its financial market as never before. Small-scale credit organisations might not have the resources to overcome the growing pains.

Viet Nam�s existing banks often lack service quality, a service culture, modern banking services and talented managerial staff. New banks will be hard pressed to find experienced workers up to the task of improving the country�s banking system.

Moreover, there is now a certain chaos in the entire banking system as the recent granting of licenses for new banks was quickly followed by a brain drain from existing banks as skilled employees, including high-level staff, were lured away from their old jobs.

In fact, both individuals and economic organisations are more concerned about the quality of banking services than the number of banks.

Inflation control

Viet Nam�s con sumer price index (CPI) in August is expected to be not much higher than last month, which saw a yearly record-low increase of 1.13 per cent.

Figures from the General Statistics Office indicate that the CPI in August may rise less than 2 per cent over July.

This month, Ha Noi and HCM City�s CPI increased 1.92 per cent and 2.09 per cent, respectively, over July. (Ha Noi�s CPI in July was up 1.65 per cent, with HCM City at 0.54 per cent and the whole country at 1.13 per cent.)

The national CPI was not hit too hard by recent price fluctuations in gasoline since the VND4.500 increase per litre on July 21 and the VND1,000 drop per litre on August 14. This is because the changes took place in such a short time that companies were unable to establish new pricing frames.

Recent natural disasters in Viet Nam also do not seem to have affected the CPI, as the provinces most devastated by them play a minor role in the national economy.

Experts attributed the CPI�s stability this month to Government efforts to rein in inflation and stabilise the economy.

Inflation this month was more controlled as people�s confidence in policies to curb inflation increased and fear and uncertainly subsided.

On the whole, experts predict inflation will not increase much throughout the rest of the year as food, fuel and gold prices, the principal causes of inflation, show signs of dropping.

Motorbike market

High fuel prices and financial hardship facing customers are leading to fewer new motorbikes on the streets.

Sales at motorbike shops in HCM City and Ha Noi have been sluggish since early July, especially after the Government decision to hike fuel prices by 30 per cent. Automatic transmission motorbikes sold especially poorly as they guzzle more gas than manual ones.

Despite big discounts last month, the market is still quiet. Sales at some shops are 30 to 40 per cent down from previous months.

However, dealers expect the Ministry of Finance�s decision to reduce fuel prices in mid- August to revitalise business. � VNS

Source: Viet Nam News