Eximbank has decided to lower its one-month deposit interest rate to 6.5 per cent, and on two and three months to 6.6 and 6.8 per cent respectively.— File Photo

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Eximbank has decided to lower its one-month deposit interest rate to 6.5 per cent, and on two and three months to 6.6 and 6.8 per cent respectively.

Many other banks had already cut their rates. Sacombank, Techcombank, and ACB cut them by 0.1 –0.4 per cent for terms of up to six months, and to 6.5 and 6.55 per cent for one month.

Some banks have slashed the rates twice since Tet (the Lunar New Year) at the end of January.

Some also cut the interest rates on deposits of six to 12 months by 0.1 per cent.

So far this year, the banking sector's credit growth has fallen sharply, meaning banks have had to reduce deposits, especially short-term ones, by trimming interest rates.

But this is not automatically gloomy news for depositors since the inflation rates in January and February remained low. It is not good news for borrowers either. But more of that later.

According to figures the General Statistics Office (GSO) released on February 24, the consumer price index (CPI) only rose by 0.55 per cent last month from January and 4.65 per cent from the same period last year. It is the lowest level in several years.

Besides, interest on long-term deposits remain basically untouched.

Executives at some banks revealed that since the Lunar New Year the number of deposit transactions, most of them for new, long-term deposits, has increased by 2.35 per cent.

Many people expect that lowering the deposit interest rate would enable banks to reduce their lending rate, but the fact is that borrowers are not getting much benefit from this move.

This is because the banks have only lowered the interest rate on short-term deposits while most loans that enterprises want to get from banks are medium or long-term.

Analysts say the lending rate can be reduced only when banks trim their operating costs.

Meanwhile, the biggest obstacle for enterprises now is not the interest rate but access to bank loans.

For instance, although agriculture is one of five priority sectors that qualify for preferential interest rates, many enterprises have been unable to borrow the capital they need from banks.

The Department of Agro- Forestry Products Processing and Salt Industry recently asked the banks to allow processing and export enterprises to restructure existing debt and enable them to get new loans.

Cao Si Kiem, chairman of the Small and Medium-sized Enterprises Association, also said that only a small number of SMEs had been able to get bank loans, and this was despite the fact that official pronouncements repeatedly talk about facilitating greater access to credit for this sector as the nation's largest employer.

To sum up, the latest cuts announced in deposit interest rates are no cause for optimism among enterprises looking for cheaper credit.

Cement glut squandering

Cement producers are now vying with each other in offering lower export prices in order to clear inventories created by oversupply in the domestic market.

This is a drastic change in the situation from just four years ago, when the country was importing between 3.5 and 4.5 million tonnes to meet domestic demand.

But today, the cement industry's production capacity has reached 70 million tonnes per year, much higher than the domestic market's demand, estimated at 48 million tonnes.

The oversupply has become a more serious problem because the real estate market, hit hard by the global and local economic downturn, is undergoing a prolonged period of stagnation.

In the rush to boost exports, earn working capital and clear inventories, many cement manufacturers have been ready to slash their prices. Industry observers say Viet Nam's cement export prices are, on average,10 per cent lower than those offered by others in the region.

According to the Ministry of Construction, Viet Nam exported 10 million tonnes of clinker and 4 million tonnes of cement in 2013.

Nguyen Quang Cung, Chairman of the Viet Nam Cement Association, told the Sai Gon Economics Times that in 2013 clinker export prices ranged between US$37 and 40 per tonne and cement export prices were around $50 per tonne. Meanwhile, domestic clinker and cement rates were US$50 and $70 per tonne, respectively.

Analysts say that the difference between domestic and export prices is caused both by the oversupply and the lack of co-operation between manufacturers, as also the reluctance to sign long-term export contracts.

These factors have allowed importers to force prices down further. When some cement manufacturers slash their export prices, others have to follow suit, and all the firms suffer.

Analysts say exporting cement products at low prices for a long time will end up squandering the nation's natural resources since cement manufacturing uses up a lot of water, limestone and electricity. This is not to mention the severe negative impacts the industry has on the environment.

Experts are also concerned that despite the current oversupply, Viet Nam could experience a shortage of cement products in the future.

The country's cement demand has been estimated at 75-76 million tonnes by 2015, 93-95 million tonnes in 2020 and 113-115 million in 2030, much higher than the current figure of 60 million tonnes.

Meanwhile, many cement projects approved several years ago have not been developed because they lack capital and, in some cases, Government guarantees.

Troubled times

Manufacturers and dealers have been offering promotions and discounts repeatedly, but the local motorbike market has continued to dip further. And there is no easy way out, analysts say.

Motorbike sales last year reached 2.79 million units, down about 10 per cent over the preceding year. In 2012, the figure was 3.11 million, a year-on-year fall of 6.6 per cent.

The continuous decline in sales has forced many firms to offer direct price cuts even at the cost of making no profit. In fact, certain motorbike models have even been sold at below cost prices to achieve sales, so dealers' earnings are now mainly from repair and replacement services.

Many stores selling imported motorcycles in HCMC have had to close down or switch to other business.

A report by the General Department of Customs says just 18,866 motorcycles worth about $42.3 million were imported in 2013, down 49.5 per cent and 40.3 per cent respectively over the previous year.

With macroeconomic indicators for 2014 showing no bright signs yet, it is certain that the motorcycle market will remain in trouble, marked by low sales and fierce competition.

Honda Vietnam now has three factories capable of manufacturing 2.5 million units per year. Yamaha Vietnam has two plants with a capacity of 500,000 units a year while Suzuki and Piaggio each has factories which can make a total of 300,000 units a year. These five manufacturers by themselves can supply more than five million units a year, not to mention others like Kymco and some domestic firms.

Based on market consumption in the past two years, it can be said that manufacturing capacity exceeds demand by up to 50 per cent.

Given the situation of low sales and overcapacity, it seems that exports are the way out for motorcycle manufacturers.

Analysts say that with the dong more stable at present, Vietnamese firms, including those in the motorcycle industry, can exploit the advantage this creates for export.

However, exporting motorcycles will not be easy, they warn, noting that countries like India, China and Indonesia, major manufacturers, are also looking to expand their export markets. — VNS