Cambodia - Industrial and Commercial Bank of China offers RMB transfers

A new banking settlements system called CHANCES, dealing exclusively in the Chinese currency renminbi (RMB), aims to make trade between China and the ASEAN countries easier and less expensive.

Owned and operated by the Industrial and Commercial Bank of China (ICBC), the CHANCES system stands for China ASEAN Clearing Electronic System and was introduced yesterday at Hotel InterContinental.

It intends to make trade in RMB easier between China and all the ASEAN countries.

At a press conference yesterday at Hotel InterContinental, ICBC joined Cambodia’s Union Commercial Bank in a Chinese language event to describe the system, which was developed in-house by ICBC.

On hand were ICBC’s Head of International Trade Processing Center Yuan Qin Long along with Deputy Head of Guangxi Regional Headquarters Xu Guibei as well as Yum Sui Sang of the Union Commercial Bank and other officials and key players in Phnom Penh’s Chinese community.

While ICBC has its own branch office in Phnom Penh on Norodom Boulevard, the Union Commercial Bank has a correspondent relationship with ICBC, enabling its customers to also use the CHANCES system, many of whom are garment factories and trading houses with needs to both send and receive RMB to and from China.

The global SWIFT system of wire transfers, which stands for the Society for Worldwide Interbank Financial Telecommunication, uses standard Business Identifier Codes approved by the International Organization for Standardization (ISO).

ICBC’s CHANCES system intends to enable RMB transfers between China and all the ASEAN countries for lower rates than conventional US dollar wire settlements. Many Cambodia-based banks charge .020 per cent of the amount of an international transfer using the SWIFT code system, often with a minimum charge of $20 to $30.

It remained unclear how much lower priced or how much speedier ICBC’s Chance RMB system would be at yesterday’s event.

UCB’s CEO Yum Sui Sang said that while most Cambodians didn’t use RMB now, he believed the use of the Chinese currency will grow in the future.

“When we look forward, the use of RMB will be more and more. I put my focus on 2015. More and more companies in the ASEAN area will be doing business with China by 2015. Now Cambodia is using the US dollar, but in future the RMB will increase,” Yum said.

“I already have some customers that are making payments to China for machinery and equipment and they make remittance in RMB. The RMB eventually will be a strong currency.”

ICBC’s Deputy Head of Guangxi Regional Headquarters, Xu Guibei, said the purpose of yesterday’s event was to discuss how to facilitate RMB cross border settlement trading since the establishment of ICBC’s ASEAN clearing centre.

“The main advantages of our CHANCES system is high efficiency, security and price performance,” she said. “We can provide a better financial service for the Cambodian banks and the Cambodian import and export enterprises with the CHANCES system.”

Xu said ASEAN currencies quotations would also be provided, with only the Vietnamese dong now available and other currencies coming soon.

“If we do the settlement or the clearing business by RMB, it can reduce the exchange cost of the currency conversion. This is the advantage we have.”

Head of ICBC’s International Trade Processing Center Yuan Qin Long said Cambodia was very important to ICBC.

“Our main target in business is the traders who have the connections with China and also the enterprises of Chinese people in Cambodia.”

Yuan said ICBC was taking Cambodia more seriously than other ASEAN countries because of the open market and profit potential.

“Compared to other ASEAN countries, we are more serious about Cambodia because we think we can earn much profit from this market and because we have a very good friendship between China and the Cambodian people.”

Xu said it was her first visit to Cambodia and she expressed her condolences about the loss of King Father Norodom Sihanouk.

“Yesterday when we arrived here we saw there were a lot of pictures of King Father.

“He was the best of friend and the old friend of Chinese people, and he knew there was a great friendship between China and Cambodia,” she said.

“We want to pay our respect to the King Father and give our deepest condolences.”

Xu said Cambodia needed to be recognised for the good work during the past decades of maintaining the stability of the currency.

“The best thing they have done is to maintain the stability of the currency since the war, and that led to the Cambodian people’s living standards not being negatively affected by currency.”

Stuart Alan Becker

http://www.phnompenhpost.com/

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Vietnam - 32 ranked commercial banks throw stones at rating firm

VietNamNet Bridge – The report on the competiveness rating given to 32 commercial banks has been facing strong opposition from the banks, especially from the ones put into C or D groups. The State Bank of Vietnam has denied the facts.

Bankers say the rating unreasonable

The report on the credit rating of 32 commercial banks released by CRV Company on September 8 showed that nine of the 32 banks were ranked in “A” group, the most competitive ones in the market.

“B” group included nine banks, the ones with good competitiveness. “C” group, which gathers average competitiveness, comprises of 10 banks. Meanwhile, “D” group with worst banks comprises of three banks.

The banks in C and D groups all have expressed their disagreement with the CRV’s report, saying that CRV’s research team had never met or contacted or interviewed them before, affirming that the way of working followed by CRV is quite different from that pursued by international credit rating firms, including Moody’s.

An executive of Maritime Bank, which is in “B” group, also said CRV has never contacted the bank to get information or learn more about the bank.

He went on to say that the grades given by CRV are quite different from that in the credit rating report released by the Credit Information Center (CIC) under the State Bank of Vietnam earlier this year.

In the CIC’s report, Maritime Bank was listed among the 12 best banks - G12, which controls 85 percent of the market share. Meanwhile, in the CRV’s report, Maritime Bank is in “B” group.

An executive of OCB also said that the report does not show clearly the criteria for ranking, therefore, the rating proves to be unreasonable and unconvincing.

“I do not know which criteria they considered when giving the rating. I cannot understand why some banks were put by the State Bank into the first and second groups (the best banks), but now appear in the CRV’s report in the C group.

Meanwhile, a manager of a D group’s bank, said the credit rating does not worry him, and that he does not care about the report.

“We are not a big bank. However, since the day of operation, we have never had to make compulsory borrowing from the State bank and we have never been put into the list of the banks subject to the restructuring. Therefore, no need to worry about the credit rating,” he said.

Meanwhile, an official of the State Bank of Vietnam said on September 10 that CRV did not get information from the watchdog agency before making public the crediting rating for 2012.

Under the current laws, the State Bank of Vietnam is the highest authority in ranking and assessing the capability of commercial banks. However, the laws do not prohibit private institutions to make surveys and release the results of their research works.

In 2010, a company released the report on the credit rating of Vietnamese commercial banks, which then raised controversy. Experts then said that the report faced the opposition from banks because it hurt banks when talking about a “sensitive issue” – the credit rating. Nowadays, CRV seems to mention a less sensitive issue – the competitive edges of banks.

On September 10, a representative of CRV admitted that the authors of the report did not contact and meet the banks when they collected information for the research work. The figures and information were then analyzed from the finance reports made public by the banks themselves.

VNE

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Vietnam - ICA tells Vietnam to play by rules

The International Cotton Association has urged Vietnam’s government and contract parties to obey international cotton trading rules.

The UK-based association’s (ICA) president Antonio Vidal Esteve, managing director Kai Hughes and Richard Pollard, chairman of the ICA Rules Committee, last week met with leaders of key ministries and cotton industry players in Vietnam to discuss solutions to the large numbers of arbitration cases that have arisen recently, due to Vietnamese cotton importers’ failure to abide by the ICA’s globally recognised bylaws and rules.

The ICA mission also held talks with leaders of the Delegation of the European Union to Vietnam and the British embassy to explore means to raise awareness and encourage compliance with the ICA bylaws and rule Vietnam.

Pollard, chairman of the ICA Rules Committee, told VIR that about 44 arbitrations had been initiated over the past 18 months against Vietnamese cotton importers and the number of arbitrations might continue to rise in the coming months.

“Between August 2010 and March 2011, there was a violent spike in global cotton prices rising to a high of $2.20 per pound from an average price of 70 cents before falling sharply again to the usual rates. This placed Vietnamese cotton spinners, who had contracted to buy cotton at high prices, into grave difficulties in the falling market. Instead of talking with the suppliers to find a solution many Vietnamese firms simply broke their contracts with foreign cotton exporters,” Pollard said.

Pollard declined to name the Vietnamese spinning mills concerned citing confidentiality between the parties, but stressed that: “Those Vietnamese spinning mills which defaulted on contracts and refused to comply with ICA arbitration awards will be listed on the ICA list of defaulters together with associated companies. ICA members are not permitted to trade with companies on the default list putting Vietnamese cotton spinners at a significant disadvantage in the market.”

The Vietnam Cotton and Spinning Association reported that Vietnam annually imported around 400,000 tonnes of assorted cotton, accounting for 5 per cent of the world’s total cotton output. Locally-sourced cotton could currently meet only 1 per cent of local production demand. The country was also a big garment and textile exporter which last year earned nearly $16 billion from exporting garment and textile products and has enjoyed 20 per cent annual growth for the past five years.

Vietnam’s textile and garment industry employed more than 2.5 million people and made up some 15 per cent of the country’s export revenue. Textile and garment revenues for 2012’s first half stood at $7.5 billion.

“We are increasingly concerned about the high proportion of Vietnamese partners who are defaulting on their contracts. The recent fluctuations in cotton price was a global problem but in other countries buyers negotiated with sellers to reach a compromise solution. Thus we have to come to Vietnam to discuss the solutions and understand the country’s rules in settling international trade disputes and enforcing the awards of foreign arbitral institutions,” Pollard said.

One of the ICA’s primary functions is its arbitration service. If cotton is traded under ICA bylaws and rules, parties have the right to apply for ICA arbitration in the event of a contract dispute. The service is impartial and internationally recognised.

Thanh Dat | vir.com.vn

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Vietnam - Banks deposit large capital at other credit institutions

Commercial banks that are supposed to be lending to the economy have, in fact, deposited a large amount of capital at other peers, which has partly hindered credit from production.

The primary market (residents and businesses) is closely monitored whereas the secondary market (interbank market) is totally beyond supervision. Despite regulations on debt classification as in the primary market, barely has any bank put them into practice. The interbank market has seen substantial bad debts mounting rapidly. The 202 trillion dong bad debts released by the central bank indicates bad debts of businesses rather than credit institutions.

In principle, money injection would drive down interest rates, thus boosting up production. In fact, interest rates have yet much softened making bank credit inaccessible. As a result, inventories keep surging and manufacturing remains sluggish.

The total amount of deposits and loans among credit institutions reportedly gained 105.746 trillion dong at Vietcombank; 56.568 trillion dong at ACB; 36.627 trillion dong at MB and 21.308 trillion dong at VietinBank.

Such amounts would be to be made inter-payment and long-term deposits as well. Credit institutions would rather deposit at high interest rates at other peers so as to seek profits than bring credit to the economy. Consequently, the first six months experienced negative credit growth in spite of enormous capital injection.

Also, since capital flows among commercial banks rather than reach businesses, lenders’ plentiful profits despite modest credit growth would make sense then.

Normally, commercial banks burdened with liquidity problems will be directly funded by the central bank with specific obligations included. However, the operation will be conducted via intermediate credit institutions in Vietnam, hindering those of weak liquidity from such funding and pushing them into the interbank market to resort to credit at high interest rates.

As a result, liquidity keeps worsening and many have then defaulted on their loans. Ironically, collateral is required for lending in the interbank market whereas mere trust should be adequate. As such, interest rates have good grounds for the surging, which have then distorted the interbank market.

It is the lack of transparency in the central bank’s refinancing that discourages commercial banks from channelling credit to the economy as well as stir up the interbank market. Capital is unlikely to reach businesses and interest rates could hardly ease as expected unless any solutions would be executed.

VietBiz24

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Vietnam - Schools turning into markets, goods and services penetrate schools

VietNamNet Bridge – A lot of services and goods have appeared at general schools. The areas reserved for schooling now serve the trade.

Bui Xuan My, a parent who has a son going to a secondary school in Hanoi, suggested at a parents’ meeting that the parents should ask the school’s management board to remove the shops set up in front of the school.

My’s idea was applauded by many other parents, who said that the existence of the shops, especially food shops, has badly affected the schooling environment.

However, a parent said no one would be able to remove the shops, because the shops’ owners all have pay money to school to have the right to do business here.

Ngoc, whose son has finished the third grade of a primary school in Hanoi, related that some months ago, her son repeatedly urged his mother to pay in money to buy textbooks for the fourth grade, even though he had not attended the year-end semester yet.

“Why did the school urge students to buy textbooks for the next grades, even though the academic year still had not finished?” Ngoc said.

In fact, Ngoc knows well what the answer is. The school can get commission from the sales of textbooks to students.

A mini survey conducted by VietNamNet has found out that the majority of parents do not advocate the “cooperation between manufacturers and schools”. Bringing products to schools to sell directly to students and parents is the way many food producers are following to boost sales.

This marketing method has been favored most by dairy producers. A parent said that her daughter asked her to buy milk every day, just because the seller offered toy gifts. The girl only wanted to drink the milk sold at school, while she refused the products bought by the mother.

Besides dairy products, books, newspapers and journals have also been put on sale at school, leaving parents in awkward situation.

“Parents and students are told that they can decide themselves whether to buy textbooks, while the purchase is not compulsory. However, parents cannot refuse to buy the books once the teachers “advise” them to buy,” a parent said.

Newspapers or journals are considered “luxury items” for poor parents. If they agree to buy newspapers and journals, this would be a finance burden on them. Meanwhile, if they refuse to buy, the teachers may become unpleased.

Parents and students have also been advised to book tours and use other services.

Teachers advise their students to attend live skill training courses, buy stationary products, go to foreign language classes and attend overseas summer camps.

Bui Thi Mai, a parent, related that four months ago, her daughter asked for the permission to attend a summer camp in Malaysia at the total fee of over 3000 dollars.

3000 dollars was a big sum of money for every Vietnamese family. However, Mai refused to allow the daughter to make the trip not because she did not have money, but because the trip was organized just 20 days before the second semester exams began.

The daughter then said she would feel ashamed if she was the only student who did not attend the trip.

Mai finally found out that the school organized the trip at that time because it was the low travel season and the school would get higher commissions if bringing students abroad at that time.

Hoang Thu

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Vietnam - Commercial banks still hesitant to reduce interest rates for old debts

No one can say for sure that commercial banks would accept the loan interest rate of 15 percent per annum to be applied for the old debts, even though this is the instruction given by the State Bank of Vietnam (SBV).

The central bank has instructed commercial banks to apply the interest rates of no more than 15 percent per annum to the loans, which were signed before between banks and clients at high interest rates. The interest rate reduction must be completed prior to July 15.

Waiting in doubt

The decision has been made by the central bank in an effort to rescue Vietnamese businesses, which have got exhausted because of overly high interest rates and big inventories. However, businesses still have doubts about the feasibility of the decision.

A businessperson said commercial banks would not accept to lower interest rates unconditionally. Meanwhile, not all businesses can satisfy the requirements set by the banks in order to be able to enjoy the low interest rates.

There is an immutable principle that banks have to follow that they would not accept to ease the interest rates of the loans provided before to the enterprises which have overdue debts, or have “problematic” mortgaged assets.

In order to reduce the old loans’ interest rates to below 15 percent per annum, banks would have to cut down their expenses (operation costs, capital costs) and increase the income from non-credit activities.

Besides, there is another important reason which may make the interest rate reduction impossible. However, no bank would dare to complain about this. Commercial banks lent at high interest rates in the past, because they had to mobilise capital at high costs. However, they have been forced to slash the interest rates for the previous loans, which means that they would incur loss because they bought high and now sell cheap. Who would compensate their losses?

Nguyen Viet Hai, director of a Construction Company in Hanoi said that he has contacted some commercial banks to ask about the interest rate reductions right after the central bank’s decision was released, but he has been told to wait.

In fact, Hai does not believe that his old debts can enjoy the low interest rates of less than 15 percent, simply because he has to pay 18.5 percent for the new loans.

Nevertheless, the central bank’s decision has been applauded by a modest number of businesses.

Trinh Ngoc Son, President and general director of Nghe An Trade Joint Stock Company, said the lower interest rates would certainly help businesses reduce their production costs and make more competitive products.

Son has his reasons to keep optimistic about the effects of the decision. His company usually borrows short term loans and it usually pays debts on schedule. Therefore, he believes that he would be able to enjoy the low interest rates.

Regarding the complaints by some businesses that the new interest rate would still be inaccessible for them, Son said the businesses would get indirect benefits. Once a business can enjoy low interest rates, it would be able to make products at lower production costs, thus benefiting the satellite companies and their partners as well.

Interest rate reductions will not help much

Both bankers and the business circle think that interest rate is no more the biggest problem for enterprises. A lot of banks are ready to provide loans at low interest rates, but businesses dare not borrow money, unless they can be sure that they can sell products.

Meanwhile, Bui Kien Thanh, a well-known economist, has commented though this is a good idea to slash interest rates for the old debts, everything would still depend on commercial banks.

VietNamNet

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Vietnam - Vietnam banks asked to report on credit availability

The State Bank of Vietnam (SBV) on Monday asked commercial banks to submit reports detailing credit access for businesses.

SBV also requested information on the difficulties and outdated regulations businesses encounter when they apply for credit. It said commercial banks should include suggestions on how to improve credit access and business efficiency.

Credit quotas

The SBV has announced credit-growth rates allocated to commercial banks.

Under Directive No 1, four credit institutes and bank groups have been allocated credit-growth rates from zero to 17 per cent this year, based on the health of the organisation and their performance last year.

Those with well-performing lenders will be classed in groups A and B, and weaker lenders in groups C and D. Group A will receive the highest credit growth of 17 per cent.

They include Vietnam Maritime Joint Stock Commercial Bank (Maritime Bank), Vietnam Prosperity Joint Stock Commercial Bank (VP Bank), Vietnam International JS Commercial Bank (VIBank); and Southeast Asia Joint Stock Commercial Bank (SeABank).

Commercial banks listed in Group B will receive a credit-growth quota of 15 per cent. They include Nam A Joint Stock Commercial Bank (Navibank); and Dai A Joint Stock Bank (DaiAbank).

After receiving the allocated credit-growth quotas, several banks developed specific lending plans for 2012. Maritime Bank, for example, developed a lending plan to control credit activities to ensure the growth rate not exceed 17 per cent at any time this year.

VPBank said although it had been classified by SBV in group A with a credit-growth quota of 17 per cent, its lending rate for non-production sectors had climbed to 16 per cent. Thus, the bank does not plan to offer many personal loans.

Navibank will focus its loans on small and medium-sized enterprises, with a lending rate of no more than 10 billion dong.

An expert at the HCM City Banking University said the number of banks in weak groups C and D was considerable.

Vietnam News

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Vietnam - Commercial banks feel uneasy waiting for central bank to take the roll call

VietNamNet Bridge – The names of the commercial banks belonging to the four groups categorized by the central banks have not been released. Meanwhile, commercial banks say they need to know what group they belong to, so as to draw up their business plans.


The central bank released the Instruction No 1 on the monetary and credit policies in 2012.

In the instruction, the central bank has allocated credit growth targets to four groups of commercial banks. The first group of banks, which includes healthy banks, can obtain the maximum credit growth rate of 17 percent. The second group, including the ones operating at average level, can have the credit growth rate of 15 percent. The “quota” is 8 percent for the third group, including below-average banks. Meanwhile, the banks belonging to the fourth group, the weak banks, will not be allowed to have credit growth.

In a press conference, Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said that there are “several weak banks,” but declined to give the names of the banks. 

The statement by Tien has made banks feel worried and made people make wild guess about who the bad banks are. Meanwhile, bank officers all try to reassure clients that the bad banks are not them. Analysts have commented that once the names of the bad banks are exposed, depositors would rush to withdraw money from the banks, which may lead to the collapse of the banks and of the whole banking system.

Nevertheless, economists have warned that the information would be exposed, sooner or later, because the boards of directors of the banks would have to release the information at the shareholders’ meetings. As such, the State Bank will have to prepare solutions to the problems that may arise.

Le Duc Tho, Deputy General Director of Vietinbank, said that the State Bank should give official information about the four groups of banks, so that banks can take initiative in their business and restructuring plans.

Opinions still vary about the credit growth rate limits set up by the State Bank. An economist said that the big advantage of the new instruction is that it will force commercial banks to focus on restructuring and improving their liquidity rather than on credit growth rate. However, the banks which are allowed to obtain the growth rate of eight percent, or not allowed to have credit growth in 2012 would meet big difficulties.

“This would be a big danger, if a bank cannot grow its credit,” he commented.

General Director of a bank said that the five or eight percent credit growth rates would be acceptable for the banks in other countries, but the rates are really low in Vietnam, a young economy that needs capital to develop.

“If a bank cannot have credit growth rate, this would be a dead bank,” he said.

In the latest news, some banks have sighed with relief when receiving information about the bank classification from the central bank. General Director of Nam A Bank Tran Anh Tuan said that Nam A has been put into the second group, which means that the bank would have the maximum credit growth rate of 15 percent in 2012.

After receiving the information, the board of directors of the bank has gathered a meeting and decided to focus on lending to small and medium enterprises.

Nguyen Thanh Toai, Deputy General Director of ACB, said though he still has not got official information about the classification, but he believes that his bank would be a first-group bank. Meanwhile, another banker said he has been put on the tenterhooks and he can feel the hard pressure from shareholders. The board of directors has successfully persuaded shareholders to pump more capital to raise the chartered capital to 3 trillion dong. 

“We have just finished the capital increase process. If we cannot increase credit, this would be a big problem,” he complained.

Source: VnExpress


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Vietnam - Commercial banks rush to “change their dress”

VietNamNet Bridge – After the announcement by the State Bank of Vietnam to carry out a bank restructuring process, commercial banks have been hurriedly restructuring themselves by changing the brand identification system, improving the service quality and seeking new way of development. 


Eximbank has carried out a noisy media campaign on the occasion of introducing a new logo with the appearance of Fabio Cannavaro, the former Captain of the Italian national soccer team which won the champion title in the World Cup 2006.

This could be seen as a special gift for football fans as Eximbank has become the main sponsor to the Vietnam Premier League from 2011 to 2013.

Explaining the move of “changing dress” at the time when people and businesses complain about big difficulties, Truong Van Phuoc, General Director of Eximbank, said that the goal of listing itself in the list of top Vietnamese banks by 2020 in terms of import-export and retail banking would be unfeasible, if Eximbank cannot find a suitable way to follow.

In order to obtain that goal, Eximbank has been trying to diversify products, developing corporate banking together with retail banking, developing the network and upgrading the governance skills.

Bac A, a small bank, which once faced liquidity problem and has just got a credit of 3 trillion dong from the Bank of Investment and Development of Vietnam BIDV, has also just “changed the dress”.

Thai Huong, President and Chief Executive Officer of Bac A Bank, said that the bank is making a breakthrough in its development strategy in order to turn the small bank into a medium class bank.

Bac A has found the big opportunities from the rural market, where there are 70 percent of the population. It is also considering targeting the clients - businesses in agriculture, clean medicine, healthcare and education.

Over the last three years, Vietnam has witnessed a series of domestic banks spending multi-million dollars to change logos and the brand identity system, including VietinBank, Maritime Bank, VP Bank, VIB Bank, HDBank and OceanBank.

It is clear that the changes in the appearance of the banks imply the changes in the quality and strategy. Instead of only targeting the clients-businesses which bring the majority of income, banks now have been targeting individual clients as well. Especially, some big banks have made the first steps in their plans to reach out to the world by registering their brands in many countries.

However, experts say they still can see problems in the renovation of banks. Most of the banks have decided to provide personal banking as well instead of focusing on wholesale; they still cannot offer attractive products. The services of banks are nearly the same, and banks only compete with each other in the interest rates. Meanwhile, no one can make the clients’ thought change overnight.

Pham Viet Anh, Chair of Left Brain Connectors, a brand consultancy firm, said that not all the changes can bring the desired effects immediately. Commercial banks need to conduct market surveys and analyze data about their clients to outline the main points in their media campaigns.

In related news, commercial banks reaped big profits in 2011, despite the big difficulties of the national economy.

Three out of five commercial banks which list their shares on the stock market and have submitted finance reports, have reported the net profit of over one trillion dong for the fourth quarter of 2011. They are Vietcombank VCB which made a profit of 1219 billion dong, the Asia Commercial Bank ACB 1092 billion dong and EIB 1023 billion dong.

Other banks have also reported profits, though their profits are not too big. To date, Habuban remains the only bank that has reported the loss of 41 billion dong in the fourth quarter of 2011.

Source: TBKTVN


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USA - Study Finds No Savings from Using Commercial Disease-Management Programs for Medicare Patients

WASHINGTON—At a time when everyone is looking for ways to reduce health care costs in America, using commercial disease management programs to reduce the fee-for-service Medicare costs associated with chronic conditions among senior citizens seems like a practical approach.

Rather than managing chronic conditions with traditional care that includes physicians and clinical visits, commercial disease-management models rely on teams of health coaches, usually in remote call centers, to enhance beneficiaries' knowledge and ability to care for themselves as well as coordinate services across providers.

Unfortunately, commercial disease management models did not reduce hospital admissions or emergency room visits or result in cost savings in a study of nearly 250,000 Medicare patients conducted by researchers at RTI International for the Centers for Medicare and Medicaid Services.

The study is published in the Nov. 3 issue of the New England Journal of Medicine.

"While this would appear to be an innovative way to reduce Medicare expenditures, managing the care of older patients through telephone contact or an occasional visit does not achieve the cost savings Congress had hoped for when it mandated the Medicare Health Support Pilot Program," said Nancy McCall, ScD, a senior health economist at RTI International and the study's lead author. "Our results suggest that for such programs to be effective, they would need to be supplemented by intensive, costly, personal clinical attention."

The study, which included almost 250,000 patients randomly assigned to a commercial program for disease management or usual care, found that commercial disease-management companies had no success in reducing hospital admissions or emergency room visits among fee-for-service Medicare beneficiaries and had only limited success in improving the processes of care.

The results also showed that commercial disease-management programs achieved only modest improvements in quality-of-care measures and had no demonstrable reduction in the use of acute care or the costs of care.

The researchers suggest that the commercially based disease-management model may not work for Medicare, in part because the care of older, chronically ill patients is difficult to manage. They are more likely than younger people to have new acute conditions such as stroke, pneumonia or a hip fracture.

The authors also found that the health coaches in the disease-management program were not integrated into the patient's primary health care team, which hindered their ability to interact directly with the patient's primary care providers and facilitate changes in medical care plans made by the primary care provider.

As part of the Medicare Modernization Act of 2003, Congress required the Centers for Medicare and Medicaid Services to test the commercial disease management model in the fee-for-service program.

Nancy McCall

RTI International

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Vietnam - Economists call on to sell commercial SOEs

VietNamNet Bridge – Vietnam is facing an increasing public debt which may rise to 70 percent of GDP. It is necessary to stop half-done ineffective projects. It is necessary to sell the state owned enterprises (SOEs) that operate for purely commercial purposes, experts say.


SOEs that operate for profit need to be sold as soon as possible

Both the government and economists have agreed that it is necessary to begin restructuring the national economy, but a question has been raised that where the process should be started. The public investment, SOEs and the banking sector all have been defined as the key points for the economic restructuring.

Tran Xuan Gia, a well known economist, former Ministry of Planning and Investment, said that the biggest worry for now is the rapid increase of the public debts, warning that if the sovereign debt increases to 70 percent of GPD, Vietnam may fall into the insolvency.

Sharing the same view with Gia, Dr Nguyen Xuan Thang, Chair of the Vietnam Institute for Social Sciences, said that local authorities try to draw up as many projects as possible and try to get the projects approved, even though they are not sure about the feasibility of the projects and about the sources of capital.

“It is clear that we are facing a problem that the public debt is very high. Therefore, it is necessary to keep strict supervision over every project and say “no” to the ineffective ones,” Thang said.

Gia believes that there are two things that need to be done. It should sell definitely or sell at a loss all the half-done projects where the State does not have to control. It should also sell the SOEs which operate purely for profit, to get money and use the money for more important purposes.

“We should not let more SOEs to be born and then restructure SOEs later. It would be foolish if we drop litter and then we have to clean up,” Gia said.

Meanwhile, the World Bank’s Vietnam Country Director Victoria Kwakwa, said that it is necessary to have thorough consideration over the projects to choose the ones for sale, because the projects which have much significance to the socio-economic development should not be put on sale. 

Dominic Scriven from Dragon Capital, an investment fund management company, also said that it is necessary to keep cautious when selling SOEs, because the companies operating for public interests should be held by the State. Therefore, it is necessary to clarify SOEs and sell the enterprises which operate for purely commercial purposes, so that they would not hinder the national economy.

Restructuring national economy – where to start?

Dr Le Xuan Ba, Head of the Central Institute for Economic Management (CIEM), stressed that the national economy restructuring needs to start from changing the existing viewpoint.

“It is necessary to point out what role the State should hold in a market economy. The only thing the State needs to do is to set up a legal framework in order to create favorable conditions for businesses to operate, while it should not get involved in business and intervene businesses’ operation,” Ba said.

Ba emphasized that in other countries, the state economic sector’s contribution to GDP is 4-5 percent only.

Deepak Mishra, Chief Economists of the World Bank in Vietnam, said that Vietnam’s predicted GDP growth rate of six percent is really an optimistic scenario. The average GDP growth rate of 6 percent has been predicted for developing economies, while in worse scenario, the growth rate is 4 percent.

Pham Huyen


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Vietnam - Commercial Law inconsistent with other laws

The National Assembly's passage of the Commercial Law in 2005 was a significant event in promoting commerce and a healthy business climate. 

However, after nearly seven years in effect, the law has revealed some shortcomings, making it imperative that the law be amended in order to create the most favourable conditions for commercial development in Viet Nam. 

For instance, the definitions of terms used in the law, e.g., "business entities", "commercial activities", and "commodities exchanges", are inadequate and unclear, and provisions on penalties, promotions and complaints are incoherent. Overall, the law contains many provisions inconsistent with other laws and regulations.

The concept of "business entities" as defined in Article 6.1 of the Commercial Law is confused and appears to conflict with Article 7. Article 6.1 provides that "business entities shall be comprised of economic organisations which have been lawfully established ... and have business registration." However, an enterprise is already considered lawfully established only if it has been established in accordance with the procedures prescribed by law and have obtained business registration. Yet Article 6.1 also says that "business entities shall consist of economic organisations which conduct commercial activities independently and frequently." This condition is both unclear and unnecessary, as the law is otherwise silent as how an economic organisation may be judged to have satisfied such a requirement.

Regulations on commodities exchanges are also incomplete. In particular, the Commercial Law only defines some concepts related to commodities exchanges and the primary rights and obligations of parties engaged in the trading of goods via a commodities exchange. It does not provide for the organisation, management or operation of commodities exchanges and lacks regulations on the transactions and allocation of risks among parties trading on a commodities exchange. The law is not sufficiently comprehensive to support the development and operation of these markets for goods in Viet Nam.

The Commercial Law also provides for remedies for breach of contract. Article 300 defines the remedy as one in which "the aggrieved party requires the defaulting party to pay a penalty for breach of contract if so agreed and recorded in the contract." In other words, the remedy is only available if it has been expressly agreed upon by the parties and recorded in the contract. In the case of a breach, neither party has the right to seek such a remedy from the other unless it is so stipulated in the contract. 

Article 301 also limits the damages available, stating, "The penalty rate in respect of any one breach of a contractual obligation or the total penalty rate in respect of more than one breach shall be as agreed by the parties in the contract, but shall not exceed 8 per cent of the value of the contractual obligation which is the subject of the breach."

This contradicts Article 422.2 of the Civil Code, which stipulates that "the penalty rate shall be as agreed by the parties" without limiting the maximum penalty. Lawmakers should revise the limit on damages of 8 per cent of the value of the contractual obligation to be consistent with the Civil Code. It is the nature of a contract that is an agreement between the parties and the parties therefore bear responsibility for setting an applicable penalty rate.

With respect to the right to claim interest in the case of late payment, under Article 306 of the Commercial Law, "the aggrieved party shall have the right to demand the defaulting party to pay interest on late payment amount at the average interest rate applicable to overdue debts in the market at the time of such payment for the delayed period." However, the Commercial Law offers no detailed guidance on how to determine the average interest rate applicable to overdue debts on the market, or which banks' rates would be used in that calculation.

The Commercial Law should be revised to address these inconsistencies to encourage and promote the healthier and more stable development of the economy and of commercial relationships in Viet Nam.

VNS


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