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HCMC - Standard & Poor’s on Wednesday revised Vietnam’s outlook to stable from negative, citing the government’s successful drive to bring down sky-high inflation. At the same time, the ratings agency also upgraded the outlook for two major banks, namely Vietinbank and BIDV, to stable from negative.

In a statement issued on Wednesday, the ratings agency said that it affirmed Vietnam’s long-term sovereign credit rating at BB- with a stable outlook and the short-term rating at B.

“The outlook revision reflects our assessment of a reduction in the risks to macroeconomic and financial stability in Vietnam,” the agency said in a statement obtained by the Daily.

In 2011, Vietnam shifted its focus from economic growth to macro-economic stability to curb price rises and other uncertainties, including dwindling foreign reserves, a ballooning trade deficit and downward pressure on the dong currency.

Such efforts paid off, as the Government has been able to bring inflation from a high of 23% last August to 8.34% year on year this May by repeatedly hiking rates throughout 2011.

S&P said that the risks of macroeconomic and financial instability “have subsided somewhat since early 2011.”

“We expect Vietnam to maintain these improvements as the Government has expressed its intention to keep price stability high on its policy priorities,” said S&P credit analyst Kim Eng Tan in the statement.

Also on Wednesday, the ratings agency revised up its outlook for the two banks mentioned above.

“Standard & Poor’s Ratings Services on Thursday revised the outlooks on Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) and Bank for Investment and Development of Vietnam (BIDV) to stable from negative,” it said.

At the same time, “Standard & Poor’s affirmed its ‘B+/B’ issuer credit ratings on both banks. We also revised the ASEAN scale ratings on BIDV to ‘axBB/axB’ from ‘axBB-/axB’,” S&P said.

The ratings on Vietinbank and BIDV are one notch above the banks’ respective stand-alone credit profiles, reflecting the banks’ “high systemic importance” in Vietnam’s banking system, S&P said.

By Hoang Son - The Saigon Times Daily

HANOI – Foreign and domestic enterprises attending the Vietnam Business Forum (VBF) 2012 in Hanoi this week have showed their concerns over the Government’s cap of advertising and promotion (A&P) costs. Alain Cany, co-chairman of Vietnam Business Forum (VBF) Consortium, told the Daily that A&P costs are part of the normal costs of running a business as advertising and promotional activities positively impact the interests of consumers, businesses and the country. Therefore, the taxation regime should not discourage enterprises from incurring expenditures on advertising and promotion, Cany said. He called for the Government to move towards completely lifting the cap. Pham Thi Thu Hang, general secretary of the Vietnam Chamber of Commerce and Industry (VCCI), echoed the opinion, saying A&P activities are very important for enterprises to compete with others in the market economy. “Lifting this cap will mean… higher positions of Vietnamese brands and trademarks,” she said, adding many Vietnamese companies cannot promote their products as long as they are still tied by this cap - now at 10% of legitimate expenses – even their products have competitive quality. As a result, the A&P cap will put local enterprises at a disadvantage in the competition and even make them lose on their home market, she said. Hang argued that if this cap is said to protect domestic enterprises, it should be adjusted to fit with the market’s requirements in each period, instead of having been maintained for 13 years since it came into force in 1999. The advertising restriction by imposing the A&P cost cap has left a negative impact on Vietnam, consumers and businesses over the past 13 years, said Preben Hjortlund, chairman of European Chamber of Commerce in Vietnam (EuroCham). The restriction has put up a barrier against European investment inflows into the country, Hjortlund said. Multinationals can consider investing in other markets which provide them more favorable conditions while Vietnamese small- and medium-sized enterprises (SMEs) are hardest hit, he added. Even Quach Duc Phap, former director of the Tax Policy Department under the Ministry of Finance, agreed that the current cap is no longer suitable. “The 13-year period for a temporary solution is too long. We should consider removing this cap because it goes against the international economic integration and reduce the competitiveness of a country,” he told the Daily.

The Saigon Times

Vietnam's export turnover in April is estimated to reach US$8.6 billion, an increase of 14.3 per cent over the same period last year, according to the Ministry of Industry and Trade at an online meeting in Hanoi and Ho Chi Minh City on Wednesday. In the first four months of this year, export turnover reached US$33.4 billion, an increase of 22.1 per cent over the same period last year. In April, the trade deficit was estimated at only US$200 million. However, production and trading activities of businesses still faced many difficulties due to capital shortage and a shrunk export market. This year, the ministry will continue to broaden and persify the export market, targeting an export growth of 13 per cent, to reach $108 billion within 2012. The ministry will continue to implement the programme 'Be Vietnamese Buy Vietnamese', to boost and encourage domestic consumption and production and limit a trade deficit.

Translated by Hai Mien