State Bank of Viet Nam’s Governor Nguyen Van Giau confirmed in a recent meeting with commercial banks that there would be no changes in the annual 7 percent base interest rate until the early months of 2010. The Government wants to control the inflation rate at 7 per cent this year.

He also said there would be no major supplies of Vietnamese dong put into circulation by the year’s end.

The unchanged rate means the lending interest cap for corporate customers will remain at 10.5 per cent per annum.

According to the State Bank, commercial banks have achieved around a 29 per cent credit increase which is subject to a limit of 30 per cent growth this year from the end of 2008. Thus, there is only 1 percent left for the remaining months of the year.

The State Bank official reminded banks to maintain a balance between capital mobilisation and lending.

In the coming months, mobilisation is forecast to slow down as corporate depositors will withdraw cash to pay the year’s bonus to employees as well as purchase materials for future operations.

Giau also said inspection would be carried out on all operations of commercial banks that offered yearly deposit interest rates of over 10 per cent.

This has resulted in the lowering of interest rates higher than 10 per cent by a number of banks, with the highest one now standing at 9.9 per cent.

Meanwhile banks also increased other rates. The Maritime Bank has pushed up the rates from 0.1 to 0.2 per cent per annum for deposits in dong and the Saigon Hanoi Bank, 0.2 to 0.25 per cent, depending on different deposit terms, to levels still lower than 10 per cent.

The governor confirmed there would be no devaluation of the Viet Nam dong against the US dollar and the State Bank would maintain flexible forex rates to ensure the market’s stability.

Japanese insurer hits town

Japanese life insurance Dai-ichi Life Vietnam yesterday opened a general agent office in the northern province of Hoa Binh, following the opening of another office in Phu Tho, increasing its network of more than 50 across the country, serving 500,000 clients.

General director Takashi Fujii said expanding business to rural areas, a potential sector of the market, is part of the company’s strategy. These moves were aimed at achieving 10 per cent of the market share in terms of premiums, in 2012, from the current seven percent. It is now among the smaller insurers compared to the larger companies, including Bao Viet Life, Prudential and Manulife.

Korea Life Vietnam also opened its second office in the capital city last Wednesday. Though it has a modest clientele of more than 5,000, as it officially began operations only early this year, it is striving for a 10 per cent share of the market within five years. It now has just 1 per cent.

General Director Jung Seop Hyun expects to gain no less than VND40 billion in premium turnover for 2009, surpassing the year’s target of VND17 billion.

This South Korean insurer plans to open an office in the Central Highlands province of Dac Lac in December and one additional office in Ha Noi will follow next year, then others in Da Nang, Khanh Hoa, Gia Lai and Binh Duong.

Taiwan’s Cathay Life, which has 16 months of operation experience, has made its presence known in the major cities of Ha Noi, HCM City and Da Nang, with Can Tho as the latest, and others in the pipeline.

Statistics from the Association of Vietnamese Insurers showed that Bao Viet Life, the single local life insurance company to date, Prudential and Manulife had, respectively, a premium share of almost 40 per cent, 33 per cent and over 10 per cent for the year’s first half. Together, they held a dominant stake of 83 per cent, leaving 17 per cent to the remaining eight life insurance companies.

Domestic brands surge

During its clients’ annual seminar to review Viet Nam’s consumer market last week, the market research firm TNS showed that Vietnamese brands are becoming more popular.

Based on urban consumption TNS found that in the first half of the year, up to eight local brands were listed among the 10 fastest-growing brands. The figure was only two in 2007, and grew to four last year.

These brands are soya milk Vfresh, fish sauce Nam Ngu (Chinsu), fruit juice Vfresh, ice cream Trang Tien, magarine Tuong An, soya milk Fami, powdered milk Dielac Anpha 1 and fresh milk Vinamilk. The remaining two were the foreign brands of Kotex pantyliner and Sting soft drink.

Ralf Matthaes, managing director for TNS Vietnam, said the Government’s call for Vietnamese to use Vietnamese products and price policies had a positive effect.

He also noted that Vietnamese had become more savvy about brands. He, however, also raised the question whether Vietnamese brands "have the quality and aspirational brand equity to thrive when the economy rebounds."

Around 81 per cent of TNS survey respondents said they were equally concerned about price and quality, while 73 per cent preferred brands with a health/environmental focus. Seventy-one per cent of the respondents said they would be willing to pay more for higher quality brands.Well-known brands were the favourites of 56 per cent of respondents, while 50 per cent said Vietnamese brands were as good as international ones. Around 39 per cent confirmed that they preferred Vietnamese brands.

The survey also revealed that 52 per cent of respondents said they would reduce their spending in 2009. Entertainment and dining out, home appliances, household utilities and personal equipment suffered the hardest hit, while education and health care were the least affected.

Speaking at the seminar, Katryna Mojica, managing director of Ogilvy&Mather Vietnam, said that companies that cut their marketing spending took longer to return to their pre-recession market shares. She cited that 60 per cent of brands which dropped TV advertising for six months showed a decline in brand usage or brand image.

"If cutting the marketing budget is necessary for the company’s survival, do it for the smaller brands, then exploit seasonality to make cuts in off-peak periods and prune product lines," she said. — VNS

Source: Viet Nam News