December 2, 2010

Vietnamese banks invest in Mekong Delta aquaculture

The strong aquaculture sector in Vietnam's Mekong Delta region has been attracting commercial banks from the north of Vietnam as well as many foreign credit institutions seeking to expand their businesses.

KienlongBank, MHB, LienVietBank, the Ocean Joint Stock Commercial Bank (Oceanbank), and the Orient Joint Stock Commercial Bank (OCB) are among the banks who have gotten permission from the central bank governor to open branches in Can Tho City and Soc Trang Province, according to the Vietnamese media.

The Mekong Delta is Vietnam's main fisheries producer, making up 52% of the country's total fisheries.

Earlier this month, the central bank increased all key rates, and since then, commercial banks have started to hike both deposit and lending rates on dong accounts again. At the same time, they have introduced promotions such as cash and rate bonuses and gifts to maintain and attract deposits.

Some independent banking experts attributed the interest rate hikes to banks trying to prevent other banks from luring their capital-bases and the hardships that often come with raising capital towards the end of the year. Thus, interest rates on deposit loans could increase further.

Food producers coping with the limits that come with participating in the government's price stabilisation programme have to cut costs and profit margins due to rocketing input costs. The interest-free credit which participating firms obtain from freezing their output prices has not counteracted the extra input costs.

As companies stock up on food for the Lunar New Year festival season in February, rising input costs and dismal weather conditions are posing difficulties for them to keep selling prices lower than the market price.

Deputy Director of the Sai Gon Fish Company, Le Thi Thanh Lam, explained that prices of tra and other products had jumped by 20% in contrast to the beginning of the second quarter and this excludes other costs like transport and labour, which have also escalated by 10-15% on average and output prices cannot increase by more than 10%.

Her firm is negotiating with supermarket chains for an 8% price rise to mitigate losses but many have not accepted.

Furthermore, the growing exchange rate between the US dollar and the Vietnamese dong has hampered the efforts of companies partaking in the programme.