The low CPI rise, the first trade surplus in 20 years, and the suspected price transfers/ tax evasion are among the economic highlights of 2012.
1. Lower CPI rise than expected
Looking back in 2012, the consumer price index (CPI) increased by only 6.81 percent compared with 2011, lower than the 11.75 percent year on year rise in 2010 and an 18.13 percent surge in 2011.
The price index in 2012 witnessed many fluctuations.
CPI increase was not too high in the first two months of the year, normally the high time for CPI rise, but the highest increase was in September with a 2.2 percent increase, primarily due to the impact of the drugs/medical services and educational groups.
Another surprise is the CPI does not decrease after the Lunar New Year in 2012 but fell in the two months in the middle of the year.
2. Unexpected trade surplus for the first time after 20 years
Not only is the CPI unexpectedly low, the $248 million trade surplus in 2012 is not what experts predict this year.
Foreign-invested firms in Việt Nam exported $12 billion more than they imported while local firms imported $11.7 billion more than they exported.
Shrinking domestic demand for imported machinery and equipment due to the stagnation in the operation of local businesses is the main cause.
The direct impact of the surplus is that the average interbank foreign exchange rate between the US dollars and Việt Nam đồng still hold in the VND20,828 a US dollar mark set by the beginning of the year.
2012 is also the first year the national foreign exchange reserve reached the standard of the International Monetary Fund (IMF) of about 12 weeks of imports of the economy, or over $20 billion, with the help of the surplus.
3. Numerous businesses in trouble
In 2012, there were about 55,000 firms having been dissolved, leaving millions of workers unemployed.
The number of newly established enterprises reached up to 65,000, down 10 percent and 8.4 percent in number and registered capital respectively compared to the same period in 2011.
However, experts said that some 10,000 enterprises of them were just simply new forms of the dissolved companies.
They now took on new names to access bank loans.
Combined with the number in 2011, this number was at nearly 110,000, accounting for half of dissolutions since the economic reform took place at the end of 1980s.
The Chamber of Commerce and Industry (VCCI) said this was one of the darkest periods for Vietnamese enterprises.
In May, the Government issued Resolution 13 with solution package worth VND29 trillion including VAT tax arrears, land rent reduction, and debt restructuring.
Last December, the Government continued to announce a rescue package new worth tens of trillions with focus on reducing taxes and lowering interest rates.
4. Bad time for banking, securities and real estate
Those operating in securities, banking and real estate have passed their heyday.
Mounting bad debts in the real estate sector has a profound has a profound influence on the local banking system.
Bad debts accounted for 8.82 percent of total outstanding loans, equivalent to nearly VND240 trillion, the highest ever.
As of 3rd quarter of 2012, 56 out of 100 securities companies reported losses.
There were three securities companies which voluntarily left the playground, withdrawing from membership of two stock trading floors – Hà Nội Stock Exchange (HNX) and Hồ Chí Minh Stock Exchange (HoSE).
The handling of weak banks, besides the long-term restructuring of the system, is hurriedly taking place with 5 of 9 weak banks having almost completed the restructuring process.
According to the State Bank of Việt Nam (SBV), the banking system’s credit growth was 4.85 percent in the first 11 months of the year.
This is the first time since 1992 that credit growth was in single digits, compared with an average 28 percent in the last 10 years.
5. Scandals of big foreign firms
In the last month of the year, the public was angered by reports of suspected price transfers/ tax evasion cases worth from tens to hundreds of billions of dong committed by big foreign names like Coca-Cola, Adidas, and PepsiCo.
According to the preliminary conclusions of tax authorities, such cases actually lasted for years.
The public are now raising doubts about the real contributions of the foreign companies operating in Việt Nam.
6. Slowdown in foreign capital inflows
Foreign direct investment (FDI) and official development assistance (ODA) continued their downward trend after a 26 percent drop in FDI and a slight decrease in ODA in 2010.
Realized FDI in 2012 reached $10.46 billion, down 4.9 percent from 2011, with the registered capital of $12.72 billion dollars, down 22.39 percent.
ODA commitments for 2013 are at only $6.5 billion, down 12.2 percent compared to 2012.
7. State enterprise struggling for restructuring
By the end of 2011, liabilities of state-owned enterprises were up to 1.29 trillion ($62 million), including VND287 trillion of PVN, VND275 trillion of EVN and VND71 trillion of Vinacomin.
The 2011 losses of EVN, Petrolimex, and Vinalines were at VND2.59 trillion, VND2.39 trillion and VND791 billion, respectively.
Those state-owned enterprises have been required to restructure themselves, and exit non-core businesses.
8. Governemtn determined to revive economy
The price for fiscal and monetary tightening to control inflation in 2011-2012 is the dragging of economic growth at only 5.03 percent in 2012, lower than the target of 6 to 6.5 percent by the National Assembly.
At the National Assembly meeting Session XIII, the Prime Minister frankly acknowledged the existing problems and apologized for weaknesses in macro-economic management.
The issue of interest groups was recognized.
The proposals to increase base salary, to reduce VAT for businesses, cut land rent by 50%, to delay deadline to pay corporate income tax by 9 months, and to increase the taxable personal income threshold to VND9 million a month are among the measures the government took to revive the economy.
The National Assembly passed the government’s proposals on the adjustment of the minimum wage from VND1.05 million a month to VND1.15 million a month.
From January 1, 2013, the minimum wage will be from VND1.65 million to VND2.35 million per month.
The personal income tax proposal has also been approved and is applicable in 2013.
9. High-profile business leaders arrested
Former board chairman of the state-owned Việt Nam National Shipping Lines (Vinalines), Dương Chí Dũng, was indicted in the middle of May for deliberately acting against state regulations.
After escaping from Việt Nam, Dũng was captured in foreign country and was brought back to Việt Nam in early October.
He was extradited to Hà Nội on October 5.
In August, the banking industry was in a tremendous shock as former leaders of Asian Joint Stock Bank (ACB), Nguyễn Đức Kiên, a famous tycoon, and Lý Xuân Hải, were arrested due to their own faults, which is also in related to mega fraud caused by Huỳnh Thị Huyền Như in 2011.
The total capitalization of the stock market is three sessions after Kiên’s arrest plummetted by VND80 trillion ($3.85 billion).
10. Sơn La hydroelectric power plant in operation
On December 23, the Sơn La hydroelectric plant officially joined the national grid after 37 years of survey and development mired in controversy over dam safety and environmental impact.
With more than VND60 trillion invested, the Sơn La plant holds the record as having the biggest water reservoir.
It came into operation 3 years earlier than scheduled, making it the project with the earliest completion time ahead of target.
It is expected to generate $500 million revenue annually, saving more than 5 million tons of coal in equivalence.
With a capacity of 2,400 MW a year, the largest hydropower project in Southeast Asia is also expected to help avoid power shortages to meet electricity demand in 2013.