31 Aug 2012 Intellasia Finance Vietnam - Hong Kong Business ...

FINANCE
Vietnam finance & business 31 August 2012
FDI firms enjoy a
trade surplus of $7b in
Jan-Aug
The study had pointed out a number of problems in Vietnam's current social security
system. Accordingly, only 20 per cent of the workforce contributes to the social insurance
fund whereas the rate of contributors/recipients is falling dramatically.
This is shown from the fact that in 1996 there was one retirement pension recipient per
217 contributors to the fund, it slid to around 10 contributors per one recipient in 2011.
Meanwhile, the current average retirement age remains low (53.43 years generally for
men and women), resulted in shorter time for payment against extended period of getting
insurance benefits as the average life span of retirement pension recipients has extended
to 73.
In addition, pension hikes have significantly driven up fund costs.
"After three six upward revisions from 2007 until present the pension hiked 134 per
cent whereas social insurance fund rose an average less than 10 per cent per year," said
ILO Vietnam's associate expert Carlos Galian.
Hence, the fund's actual expenditure made up 94.65 per cent of total collected amount
in 2011 against only 64.4 per cent in 2007.
To boost incomes sources, under current regulations the fund's balance can be used to
lend state commercial banks with usually low interest rates, to buy public bonds and
government bonds. It could not be used for direct investment to ensure safety. This has
resulted in low profit rates of 9-11 per cent only.
From that practice, Ministry of Finance's Administrative Finance Department's deputy
head Do Thi Thuy Hang suggested to hike idle capital efficiency through combining
short-term and long-term loan provision or reforming lending rate setting methods.
Hang proposed forming a specialised investment body to ensure the fund sustainable
growth.
ILO's Insurance and Finance Section expert Hiroshi Yamabana suggested gradually
scaling up the retirement age.
Accordingly, ILO suggested increase retirement age for men to 61 and to women to 56
from 2016, one year more than current levels. Then every two years the retirement age
for men and women will increase one more year until reaching 65 years.
However, this move alone is not enough, according to the ILO. Yamabana also suggested
introducing regulations to restrict early retirements such as slashing 5-6 per
cent retirement pension to each year of early retirement.
"As the Law on Social Insurance slated to be put on National Assembly agenda in later
this year session and might be approved in early 2013, we expect a raft of measures to
help balance fund collections and expenditure soon be in place," said Yamabana.
http://www.vir.com.vn/news/business/social-insurance-conundrum.html
31/AUG/2012 INTELLASIA | BAO DAU TU
While the export turnover of FDI firms posted gigantic growth, local companies saw a
fall of nearly 2 percent year-on-year in term of export turnover, according to the local
newspaper Bao Dau Tu (Vietnam Investment Review).
Vietnam's export import situation in the first months of 2012 saw strong changes. After
eight months, the country's trade deficit was just about $62 million, much lower than
the figure of $5.8 billion in the same period last year.
Notably, in the country's export turnover in the first months of this year, FDI (foreign
direct investment) companies made a significant contribution. According to the report
from the Overseas Investment Department (Ministry of Planning and Investment-
MoPI), FDI firms enjoyed a trade surplus of $7 billion in Jan-August (including crude
oil). If excluding crude oil, FDI firms also posted a trade surplus of $1.53 billion in Jan-
August
It is expected that this positive change will last till the end of this year with some staple
export items, which are the strength of FDI companies, such as electronic products,
components and telephones.
The import structure also had positive changes. As forecasted by MoPI, in Jan-Aug,
while the import spending of essential products was estimated at $70 billion, rising 6.7
percent on year, the import value of controlled items was estimated at $3.2 billion,
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