AFP: After boom years, inflation bites in Vietnam

A market in Hanoi

A market in Hanoi

HANOI (AFP) — Hit with Asia’s highest inflation rate and a surprise 30 percent hike in petrol prices last week, some Vietnamese are rediscovering bicycles and the frugal lifestyle of bygone years.

Galloping consumer prices — fuelled by record global oil, food and commodity costs — have rocked many countries, but few have been hit harder than Vietnam, where inflation topped 27 percent year-on-year in July.

For many people here the surging cost of living is the first real economic setback since the communist country emerged from the lean post-war years of hyper inflation and food queues to enjoy 15 years of solid economic growth.

“Now I feel like my money is being stolen every day,” said Tran Ngoc Duong, 30, a Hanoi state employee and mother of one. “I spend about one third more than I did last year when I go shopping for my family.”

More than 90 percent of Vietnamese now worry about high food prices, according to a recent survey by market research firm Nielsen, which listed people’s other top concerns as high petrol prices and their children’s well-being.

The survey, released Friday, also found that, while people remained optimistic about the future, 60 percent said they were shopping less, and many had abandoned supermarkets to bargain for groceries on local markets.

While most middle-class Vietnamese are still coping — albeit grudgingly — with the rising gap between income and outlay, for others, especially the urban poor, runaway inflation is far more serious.

A carpenter waits to be hired in Hanoi

A carpenter waits to be hired in Hanoi

Development experts say inflation threatens to reverse Vietnam’s impressive poverty reduction from 58 percent in 1993 to around 15 percent last year.

“A lot of people now aren’t counted as poor, because they’re above the poverty line — but they’re not above it by much,” said Scott Cheshier, a former UN Development Programme economist. “So if rice goes up, meat goes up, petrol goes up, they start to get into difficulties.”

In some coastal villages, media reports say, family-run fishing boats have stayed onshore because the cost of filling their fuel tanks is greater than the profit they could hope to make on a voyage into the South China Sea.

Industrial unrest has been on the rise, with more than 300 strikes reported in the first quarter alone, reportedly prompting Taiwan’s chamber of commerce last week to urge Vietnam to ensure workplace stability.

The last time inflation hit this level was in the early 1990s, when Vietnam was launching its “doi moi” (renewal) market reforms in earnest, setting off a period of annual economic growth of seven percent or more.

Experts say Vietnam’s economy has overheated, with too much new capital chasing too few investment projects and driving up inflation, which first hit double digits last November.

Monthly inflation growth had started to slow somewhat — but last Tuesday state-run oil companies hiked petrol prices by 31 percent to 19,000 dong (1.15 dollars) per litre and also raised diesel and kerosene prices.

People worry that the sharply higher fuel costs will drive up the cost of everything from motorcycle-taxi fares to a bowl of noodle soup, and for many, belt-tightening has become a new way of life.

A service station in Hanoi

A service station in Hanoi

Some people are giving up their Honda Dream, Wave and Future scooters — the ubiquitous symbols of Vietnam’s economic success — and are flocking to buy bicycles, which ruled the streets here until 20 years ago.

Many couples planning to marry in the autumn wedding season are cutting back their guest list, as the costs of venue hire, banquets, and hairstyling have all doubled since last year, The Nation newspaper reported.

A popular rhyme circulating by email on office computers looks with wry humour at life in the times of double-digit inflation.

“I take you to school on my bicycle,” it reads, describing a world where “helmets are suddenly useless,” “dogs will run through the streets with the old men” and “my mother races her electric bicycle.”

“Life in the fuel-saving period is so simple and romantic.”

AFP: After boom years, inflation bites in Vietnam

Vietnamese miracle begins to run out of fuel for Vietnam Airlines

July 28, 2008

The surge in jet fuel prices, a stock market plunged into crisis and outright panic among foreign investors are set to derail plans to privatise Vietnam’s largest airline.

The sale to foreign investors of between 10 per cent and 20 per cent of Vietnam Airlines has been on the cards this year, but industry sources have told The Times that it is now unlikely to happen before 2009. If the Vietnamese economy continues to writhe in its current agony, it could be postponed even further.

Despite strong passenger numbers and bullish ambitions in line with Vietnam’s recent economic miracle, the airline’s bottom line has been battered by fuel costs, which soared nearly 40 per cent beyond the company’s forecasts. Plans for the airline to run direct flights to the United States are thought to be in jeopardy and this month the group reported a first-half loss of $5 million (£2.5 million).

The Vietnam Air privatisation was to have involved a slice of the Government’s stake being sold to three or four strategic investors from overseas. Foreign investors have already walked away from previous Vietnamese privatisations because of rules that forced them to agree to buy stakes before a price was known.

The expected delay to the privatisation of Vietnam Airlines comes as the lustre on the country’s recent economic boom has begun to fade. Fund managers with significant portfolio exposures to Vietnam say that the past few months have been dreadful. One described the collapse in the stock market as a timely reminder of the meaning of risk in emerging markets.

Rumours abound among brokers in Singapore that at least three substantial foreign hedge funds have been stung by a liquidity trap that has left them unable to exit stock and currency positions that have turned heavily against them.

The difficulties experienced by Vietnam Airlines, observers say, highlight some of the vulnerability of the country’s stratospheric economic story. The carrier’s revenues in the first half of 2008 were nearly 30 per cent higher than at the same period in 2007 as business travel and cargo use soared. The business model has unraveled because of Vietnam’s lack of big energy resources.

The same is true at a national level. Vietnam’s exports remain exceptionally strong, despite fortunes fading elsewhere in Asia, but the January-July trade deficit doubled to $15.01 billion because of the cost of imported oil. Vietnamese inflation is running at 27 per cent and many economists believe that it could touch 30 per cent by the end of the summer. Interest rates have been raised three times this year and a further tweak is expected. Robert Prior-Wandesforde, an HSBC economist, has said that monetary policy authorities will have to act soon if the country is to regain the credibility that it has lost over recent months.

The Government is also likely to face a prolonged, financially draining struggle to support its currency. Traded on a vigorous black market, the dong has come under intense downward pressure from speculators. Government resolve to avoid the sort of currency implosion that triggered the 1997 Asian crisis could lead to its foreign reserves being reduced to nothing by repeated intervention.

A more striking sign of that drop in credibility has been the main stock market index’s plunge of more than 55 per cent of its value since its peak last Autumn. A lot of recent bank lending in Vietnam has been collateralised with shares and property prices are sinking fast.

Some of Vietnam’s other vulnerabilities have also emerged of late. Where once it was a much-favoured destination for Japanese foreign direct investment – particularly factory-building – suddenly circumstances have changed. Rising construction costs and materials prices, for example, persuaded Nippon Light Metal to pull out of plans for a huge aluminium hydroxide plant, which was to have opened in 2011. On Friday, Sony, the electronics giant, said that it was closing a factory producing televisions principally for the Vietnamese market.

The closure, which will result in the loss of 200 jobs, appears to stem from the country’s recent induction into the World Trade Organisation (WTO). Pre-WTO entry, crippling tariffs on imported electronics meant that it made sense for companies such as Sony to build a factory in Vietnam to meet rising demand from the market there. Now that those tariffs have disappeared, Sony can deliver to Vietnam televisions made outside the country and produced at an even lower cost than the ones leaving the factory in Ho Chi Minh City.

Vietnamese miracle begins to run out of fuel for Vietnam Airlines – Times Online

AFP: Thousands on strike at SKorean footwear plant in Vietnam

HANOI (AFP) — Nearly 14,000 workers at a South Korean footwear company in Vietnam have gone on strike to demand higher salaries, blaming the action on rising consumer prices, state media said Sunday.

The workers of Hwa Seung Vina in southern Dong Nai province stopped work Saturday, asking company leaders to raise their incomes by at least 300,000 dong (18 dollars), said Tuoi Tre daily newspaper.

The management of the company which produces shoes for export, offered to raise workers’ salary by 200,000 dong (12 dollars) but the compromise did not work, the paper said.

Company and provincial labour officials could not be reached for comment Sunday.

Communist Vietnam is now fighting spiralling inflation, with consumer price rises topping 27 percent year-on-year in July. The country last week surprisingly raised petroleum prices by 30 percent.

AFP: Thousands on strike at SKorean footwear plant in Vietnam

Vietnam inflation hits 27 percent, trade gap widens

HANOI (AFP) — Vietnam’s annual inflation rate hit 27 percent in July, the government said Thursday, as rocketing food and fuel costs saddle its economy with one of Asia’s toughest battles against rising prices.

The figure was only a little higher than June’s 26.8 percent, but the government’s decision earlier this week to hike retail petrol prices more than 30 percent is thought likely to push inflation still higher.

Other official data Thursday estimated Vietnam’s trade deficit for the January-July period at 15 billion dollars as imports surged more than 50 percent.

The figures come after the Asian Development Bank on Tuesday warned Vietnam to take decisive measures to avoid the kind of economic meltdown suffered by Thailand in 1997, which triggered the Asian financial crisis.

Vietnam was once widely hailed as Asia’s next economic tiger, but has been battered by double-digit inflation, a ballooning trade gap, tumbling share prices and worries about the banking sector and its currency, the dong.

In July alone, food and beverage costs rose by 44.7 percent year-on-year, while the price of the staple food rice and other grains was up 72.7 percent, the state-run General Statistics Office said in a preliminary report.

Prices for housing and construction materials were up by 24.9 percent, clothing and footwear was up 10.9 percent and pharmaceuticals and health care costs rose by 9.5 percent for the month.

For the first seven months of the year, the consumer prices index has risen by 21.28 percent, the figures showed.

The statistics office’s trade figures showed imports in the first seven months totalled 51.9 billion dollars, up 56.8 percent year-on-year. Exports rose 37.7 percent to 36.9 billion dollars.

The communist nation spent 8.2 billion dollars on importing equipment and machinery, a rise of 40.3 percent.

With large oil reserves but no operating refinery, the country used 7.8 billion dollars to buy petroleum products, a rise of 90.7 percent amid record high global energy prices.

Vietnam earned 6.8 billion dollars from selling crude oil, a rise of 52.2 percent against the same period last year.

Footwear sales earned Vietnam 2.8 billion dollars, up by 18.4 percent.

The country’s export turnover from this sector might change as the European Union on Wednesday decided to end preferential tariffs for Vietnamese-made footwear and some other goods.

The trade deficit for July alone stood at 700 million dollars.

The government has said it has given top priority to fighting inflation and lowered its 2008 economic growth target to seven percent.

According to the government website, the public sector, including 15 major state enterprises, have cut more than two billion dollars in costs from almost 3,000 projects scheduled for this year in a bid to help reduce inflation.

The Asian Development Bank forecast Vietnam’s economic growth would slow to 6.5 percent this year and then hit 6.8 percent in 2009, from 8.5 percent last year.

Vietnam: Eight Vietnamese Writers Receive Prestigious Human Rights Prize (Human Rights Watch, 22-7-2008)

Writers Banned, Censored, Harassed, and Jailed

(New York, July 22, 2008 ) – Eight Vietnamese writers are among a diverse group of 34 writers from 19 countries to receive Hellman/Hammett awards this year in recognition of the courage they showed when facing political persecution, Human Rights Watch said today.

The Hellman/Hammett awards, administered by Human Rights Watch, are given annually to writers around the world who have been targets of political persecution or human rights abuses. The grant program began in 1989 when the American playwright Lillian Hellman willed that her estate be used to assist writers in financial need as a result of expressing their views.

This year’s prize winners from Vietnam include Father Nguyen Van Ly, one of the leaders of the democracy movement in Vietnam. He has been repeatedly imprisoned during the last 30 years for his written appeals calling for human rights, religious freedom, and freedom of expression. At his most recent trial in March 2007, in which he was sentenced to another eight years in prison, police placed their hands over Father Ly’s mouth to prevent him from speaking.

“The Vietnamese phrase for censorship, ‘bich mien,’ means to cover the mouth,” said Brad Adams, Asia director at Human Rights Watch. “There is no stronger image of the dismal state of freedom of expression in Vietnam today than the photograph of police physically muzzling Father Ly during his trial.”

The Vietnamese authorities have used both official and unofficial sanctions to silence this year’s Hellman/Hammett award winners from Vietnam. Dissident writers have been harassed, assaulted, indicted, jailed on trumped-up charges, dismissed from their jobs, socially isolated, detained and interrogated by police, publicly humiliated in officially orchestrated “Peoples’ Tribunals,” and injured by officially sanctioned mobs or targeted traffic “accidents.”

“Many people around the world do not know that Vietnamese writers are being locked up for simply expressing their views,” said Adams. “That makes it more important than ever to recognize the brave writers who have suffered persecution or sacrificed their freedom in order to push for a free press, human rights, and a multi-party system in Vietnam.”

Human Rights Watch has administered the Hellman/Hammett awards since 1989, awarding nearly 700 writers over the 19 years of the program. The Hellman/Hammett program also makes small emergency grants to writers who have an urgent need to leave their country or who need immediate medical treatment after serving prison terms or enduring torture.

Short biographies of seven of the eight Vietnamese writers who can be safely publicized follow below:

Le Quoc Quan, 36, is a lawyer who has written extensively on civil rights, political pluralism and religious freedom. He was detained by police four days after returning home after a year spent in the United States on a National Endowment for Democracy fellowship. For several days after his arrest, his whereabouts were unknown and no charges against him were publicized. Quan was later charged under Article 79 of the Criminal Code for “activities aimed at overthrow of the government.” He was released on June 16, 2007, but charges against him are still pending. On November 27, 2007, while trying to attend an appeals court hearing on two fellow attorneys, Quan was beaten and taken to a local police station to prevent him from attending the hearing.

Le Thi Cong Nhan, 29, is a lawyer widely recognized as a leader in a new generation of young activists who are building organizations inside Vietnam with links to groups outside. She was a founding member of the Committee for Human Rights in Vietnam and spokesperson for the Vietnam Progressive Party, one of several opposition parties that surfaced during a brief period in 2006 when the Vietnamese government temporarily eased restrictions on freedom of expression. As a frequent writer of appeals for democratic change in online newspapers and blogs, she has been harassed, intimidated and placed under house arrest. She was arrested in March 2007, and sentenced to four years in prison, which was later reduced to three years, on charges of disseminating propaganda against the government under article 88 of the criminal code.

Nguyen Phuong Anh, 36, is one of the most prolific and widely read dissident writers in Vietnam today. A former businessman, he owned a 1,000-seat restaurant and a thriving import-export company. After he became involved in the struggle for human rights and democracy, he began writing satiric critiques of the government on Vietnamese websites. He is a staff member of the To Quoc (Fatherland) underground bulletin, which is distributed quietly in Vietnam and through the internet. As soon as he became an activist, he was summoned to police headquarters and told to mind his own business. When he ignored the warnings, full fledged harassment began. Police came to his restaurant in uniform, state newspapers reported lies, and the restaurant went bankrupt. Goods imported by his company were confiscated, all his bookkeepers suddenly quit, and his company was fined for not paying taxes and went broke. Along with all this, he has been repeatedly detained and beaten by the police.

Father Thadeus Nguyen Van Ly, 60, one of the founders of the underground Tu Do Ngon Luan (Freedom of Expression) review, is receiving a Hellman/Hammett grant for the second time. Father Ly has been writing appeals for religious freedom, freedom of expression and a multi-party system in Vietnam for more than 30 years, an endeavor that has resulted in him spending 15 years in prison since 1977. During one prison stint in 2001, it is believed that he was drugged and beaten before a visit by a US congressional delegation so that his words were slurred and he uncharacteristically admitted to having committed criminal acts. He was released in 2005 and promptly returned to advocacy and dissident writing. Father Ly was one of the founders of the democracy movement in Vietnam known as Block 8406, named after the date of its inception on April 8, 2006. His latest arrest in February 2007 led to a prison sentence of another eight years on charges of disseminating propaganda against the government.

Nguan Xuan Nghia, 58, is a journalist who also writes novels, short stories, poems and essays. He comes from a family with strong revolutionary credentials; his father joined the Vietnamese Communist Party (VCP) in 1936 and his oldest brother was killed in the first Indochina war. Nghia continues to be a member of the Association of Vietnamese Writers, despite his outspoken position against the VCP. As a journalist, he wrote for all the main government papers until 2003, when the government banned him because of his pro-democracy activities. Since then, he has been arrested, detained and interrogated multiple times; his house has been searched twice; he has been denounced at public meetings and socially isolated. He is a member of the editorial board of To Quoc (Fatherland) Review, an underground pro-democracy publication. He is also a standing committee member of Block 8406 and the Alliance for Democracy for Human Rights. On November 27, 2007, he was badly beaten by policemen at the Hanoi court house when he showed up to demonstrate in support of two fellow dissidents who were on trial.

Nguyen Xuan Tu, aka Ha Sy Phu, 68, is a biology researcher and one of Vietnam’s most respected dissident writers. Writing under his pen name of Ha Sy Phu, he first became known in 1987 for his essay, “Let’s go Forward Hand in Hand Under the Guide of Reason.” He continued writing philosophical essays, satirical pieces and poetry that are published abroad and clandestinely in Vietnam. Over the past 20 years, he has suffered repression, social isolation, police interrogation, detention, imprisonment and house arrest. Because of his widespread influence on other dissident writers and the democracy movement, for the past 11 years he has been prohibited from owning a telephone or using the internet. Despite bad health, he continues to write and participate in the debate about democracy.

Pham Hong Son, 40, is a physician who writes articles and open letters that are circulated by hand in Vietnam and posted on websites of the Vietnamese diaspora. He was arrested and imprisoned in March 2002 on charges of espionage under article 80 of the criminal code for writing about human rights and democracy and posting them on the internet. Released in August 2006, he immediately resumed writing, even though he is under administrative probation, a form of house arrest. One of Vietnam’s most prominent dissidents, he has been unable to find a job since his release from prison, despite his training as a medical doctor and in business administration.

Vietnam: Eight Vietnamese Writers Receive Prestigious Human Rights Prize (Human Rights Watch, 22-7-2008 )

Carly Zalenski decided to build a school for children in Vietnam. It took her two years. She was 12.

Carly Zalenski’s eyes filled with tears as the dusty bus rattled down a dirt road in southern Vietnam. The 14-year-old and her family had traveled by plane from Canton, Ohio, to Ho Chi Minh City and then by bus deep into the Mekong Delta. Now, as they approached the village, hundreds of cheering schoolchildren lined the entrance to the Hoa Lac School, a two-story concrete building that Carly had raised money for.

Carly started helping others when she was eight, handing out Thanksgiving baskets at church to families in need. It was a snowy day, and she saw that one girl was wearing flip-flops and others didn’t have warm coats. The next November, she went door-to-door asking for used coats, hats, gloves, and scarves, then handed them out with the baskets.

But Carly wanted to do more-she wanted to “change lives,” she says. She remembered that her grandmother’s Rotary club had, years earlier, raised money to build a school in Vietnam. That was it, she decided. She’d build a school too.

She put together a PowerPoint presentation on the people and culture of Vietnam. At 12, barely able to see over the podium, she gave her first fund-raising pitch. Though her new braces made it hard to enunciate, she spoke with enthusiasm. “The kids in rural Vietnam don’t have decent schools,” she told a room of 200 Rotarians. “That’s not fair. I want to give them a place to make their lives better.”

That summer, Carly set off with her family across Ohio, visiting three or four Rotary clubs a week. “We traveled like crazy people to all these meetings,” recalls her mother, Kris.

The first few sessions yielded no donations. But one night, Carly and her dad, Fred, pulled up to a rundown building in Minerva, Ohio. Carrying a laptop, a projector, and a portable screen, they traipsed through a bar to a darkened back room where 15 Rotarians were sitting around a long table. There was dead silence and blank stares after Carly had finished. Fred thought, This is never going to work. Then someone made a motion: “Let’s give this girl a check right now.” Minutes later, an elated Carly walked out with her first donation: $500.

Not everyone was wild about the idea of giving back to a Communist country. “Why should we help Vietnam?” asked one veteran. Carly replied simply, “They’re kids. And I’m just a kid who wants to help out.”

As word spread, individual donors sent checks for as little as $5. A restaurant chain contributed $1,000. Carly’s karate teacher organized a tournament that netted $4,000. A Bible camp chipped in to help buy 500 backpacks for the children.

In two years, Carly had raised $50,000, a sum that was matched by the Vietnam Children’s Fund.

At the dedication ceremony in Hoa Lac, the school principal was impressed with the ninth grader. “How wonderful,” he said through a translator, “that a girl her age wanted to do something for kids so far away.”

Vietnam lifts fuel prices, raises inflation risk

HANOI, July 21 (Reuters) – Vietnam raised domestic fuel prices by as much as 36 percent on Monday, the first hike in five months, raising the spectre of even higher inflation, more interest rate rises and slower economic growth.

The steep increase in the price of petrol and diesel came as a shock to consumers, many of whom were seen thronging gas stations before the new prices came into effect at 0300 GMT.

Less than two weeks ago, the government had ruled out rises in fuel prices for the rest of this year, suggesting it preferred to bear the cost of subsiding gasoline rather than pushing consumer prices any higher.

But retail gasoline prices were raised by 31 percent on Monday. A litre of the popular 92-octane gasoline grade now retails at 19,000 dong ($1.15) per litre, up from 14,500 dong per litre previously, an official from top importer and retailer Petrolimex said.

Petrolimex also raised retail prices of diesel by 14.3 percent to 15,950 dong ($0.97) per litre and the price for fuel oil by 36.8 percent to 13,000 dong ($0.79).

“When international oil prices are this high, the principle of community responsibility must be implemented to share the hardship between the government, organisations and consumers,” the Finance Ministry said in a statement.

It estimated the government would have to cover a loss of $3.2 billion this year even after Monday’s fuel price rises if world crude prices stayed above $145 per barrel.

Vietnam’s retail gasoline prices are still below those in other parts of Asia, such as Singapore and Sri Lanka. Still, people on the street were dismayed.

“We are not getting any support for the petrol price hike from the company,” a taxi driver said as he tried to move his car hopelessly in the noisy crowd in front of a petrol station in Hanoi that had brought traffic to a standstill.

The driver failed to reach the petrol pump before Petrolimex staff changed their selling prices at 0300 GMT.


Vietnam, which has been severely strained by double-digit inflation for eight consecutive months and a widening trade deficit, had subsidised fuel consumption by keeping prices unchanged since February as it sought to rein in inflation.

“It makes sense for fuel prices to go up in line with world oil prices but as a result inflation will remain on the rise,” Tai Hui, an economist at Standard Chartered in Singapore said.

Vietnam’s inflation raced to multi-year highs this year, hitting an annual rate of 26.8 percent in June as food prices soared, forcing the government to cut its 2008 growth target to 7 percent from 8.5-9 percent.

Irvin Seah, an economist with DBS Bank, said it was likely inflation will rise beyond 30 percent in August, and there would be another 2 percentage point rise in Vietnam’s base lending rate for banks, now at 14 percent. Seah also forecast GDP growth in 2008 would fall to 6.4 percent.

Vietnam, which relies almost entirely on oil product imports as it lacks major refineries, paid nearly $5.9 billion for imported fuel in the first half of this year, or 69 percent more than the same period last year, as crude oil raced to a record high over $147 a barrel on July 11.

For a FACTBOX on state-regulated fuel prices in Asia, click on [ID:nSP37494].

For a FACTBOX on subsidies offered by different countries on oil, click on [ID:nSP186344] ($1=16,500 dong) (Reporting by Ho Binh Minh and Nguyen Nhat Lam, editing by Vidya Ranganathan and Ben Tan)