Inventories not a cause for worry, official says

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Vietnam's Ministry of Industry and Trade has tried to allay concerns about overwhelming inventories by saying that sales are expected to rise for the rest of the year.

The ministry is not too optimistic, but the buildup of goods is not very serious, Deputy Minister Tran Tuan Anh told legislators at a meeting Tuesday, adding that most inventory levels are within an acceptable range.

He said that even steel stockpiles, though large, are not too high and can be drained when construction activities pick up at the end of the year.

The ministry is creating more barriers to restrict steel imports in an attempt to support local producers, but they have to improve their understanding of the market and upgrade technology to save themselves, Anh said.

Inventories in the manufacturing sector had jumped 20.4 percent from a year earlier as of September 1, the General Statistics Office said in a report early this month.

Stockpiles in cement, steel and plastic products rose the most, by at least 40 percent. Dairy and pharmaceuticals saw smaller increases of 5.8 and 10.5 percent respectively.

The National Assembly's Economic Committee on Tuesday said the two main challenges for the government in the final three months of the year would be stockpiles and bad debts.

"The higher the inventories, the higher the bad debts," said Nguyen Van Giau, chairman of the committee. "It's urgent to reduce inventories to support production and, at the same time, it is a solution to reduce bad debts effectively."

Vietnam's government on October 5 ordered the central bank to strengthen discipline in the banking sector and completely "deal with" all weak lenders next year.

The State Bank of Vietnam needs to take timely measures, including those to reduce bad debts, in order to stabilize the banking system and regain the confidence of the public and investors, the government said.

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Vietnam's bad debts had risen to 8.6 percent of total loans in the banking system by the end of March. Many businesses have complained that they are having difficulties clearing their stockpiles and repaying bank loans.

The real estate sector in particular is sitting on huge stock. Experts estimated there are 70,000 unsold units in Hanoi and Ho Chi Minh City. The central bank said property loans account for 5 percent of outstanding loans in Vietnam and it will take measures to reduce real estate-related bad debts.

General Secretary Nguyen Phu Trong of the Communist Party said Monday that settling bad debt in the banking system and easing difficulties for businesses are among the priorities for Vietnam next year.

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