Dollar anxiety paralyzes business
Not just importers, but enterprises of all sorts are feeling a dollar pinch. On the curb market, a dollar now fetches nearly 20,000 dong. Tuoi Tre and VnExpress report.
Nguyen Tam, the Vietnamese representative of an international freight forwarding and shipping firm said: “Our service fees are quoted in dollars, but we receive dong from our clients at the dong/dollar exchange rate quoted by commercial banks. Though we have plenty of dong, we can’t buy dollars from banks, therefore, we do not have dollars to pay to shipping firmsâ€Â.
“We are going to apply a ‘dual pricing’ scheme. If clients pay in dollars, we’ll charge them our original fee levels. If they pay in dong, however, we will have to collect a ten percent surcharge.  We will use the extra 10 percent to purchase black market dollars to pay our partners,†he said, adding that the expedient of purchasing black market dollars does not satisfy either the service provider or the client.
According to a company that export construction stone, the transport cost for every consignment will increase by tens or hundreds of dollars if it pays in dong. The company does not always have dollars it can use to make payment.
Director Phan Dinh Son at Bao An Computer Company complained that his company sold imported computers priced according to an exchange rate of 18,000 dong per dollar.  Now the company now has to pay nearly 20,000 dong to purchase dollars to pay its bills to foreign partners.
“It’s costing us another one million dong for every $1,000 worth of goods we’ve imported,†Son said
A computer equipment company in HCM City halted import deals two weeks ago because it faced big losses due to the dollar price increase. “If we buy dollars to import goods now, we’ll lose 10 percent of the value of every order,†Minh, one of its executives, said.
Minh explained that the company has two months’ worth of goods in inventory. However, he said, he has had to raise prices to offset losses. That’s led to lower sales – in the last twenty days they’ve been running one-third behind the October daily average even though November is traditionally a season of high sales.
A director at a car trading company says that the unstable dong/dollar rate has got him puzzled as he tries to price his autos. “Overly high prices will not be accepted by customers,†he said, “while low prices hurt our profits.â€Â
The auto trader added that in the last few days, sales have been very slow because the exchange rate is unpredictable.  Buyers tend to haggle hard and long, and some delay making payment to the company.
Commercial banks, while promising to support importers by providing the dollars they need to pay foreign partners, say they themselves can’t persuade exporters to sell them dollars.
Minh, the computer company exec, said that his company has close relations with some exporters. “Thanks to that, the exporters are willing to sell us dollars, but at a price that’s five to seven percent higher than the official rates quoted by commercial banks,†he said.
On the black market, the dollar price on November 24 afternoon climbed 19,750-19,850 dong per dollar. The interbank exchange rate, for the first time passed 17,000 dong per dollar, while banks quoted 17,882 dong to anyone wishing to sell dollars.
Tuoi Tre newspaper on November 25 included an interview with a member of the National Advisory Council for Finance and Monetary Policies who proposes to buy back five to six billion dollars held by state-owned corporations and groups.
If businesses must continue to purchase dollars at 19,800 dong to the dollar, explained Dr. Tran Hoang Ngan, this will have a knock-on impact on the prices of other goods.  High inflation will return and damage our macroeconomic stability, which we have made such a big effort to attain. Stabilising the exchange rate has become an urgent matter; if we fail to do so, later on Vietnam will have to pay a much heavier price to stabilize the economy. The escalation of the price of gold has caused people to doubt the value of the dong. If there’s no [State Bank] intervention, the gold price will continue to move erratically. Tuoi Tre: Do you think we are really short of dollars? Dr. Ngan: No. In principle we can absolutely balance supply and demand, even though our trade deficit is forecast to reach $12 billion, because we have $5 to $6 billion in overseas remittances, $10 billion dollars from FDI disbursements and $2.5 to $3 billion in official development assistance. The problem here is speculation. TT: What should we do to fight hoarding and speculation, then? Ngan: Three measures are needed. First, the State Bank should adjust the interbank exchange rate to a more appropriate level. Second, it should narrow the trading band from +/-5 percent to +/-2 percent. Third, it should force state-owned corporations and groups to sell 50 to 80 percent of the foreign currencies they are holding. The State Bank can use these foreign currencies, estimated at $5 to 6 billion, to intervene in the market, by selling dollars.  When the supply increases and the price decreases, no one will speculate in dollars any more. TT: Won’t state owned companies protest the use of ‘administrative orders’ to force them to sell dollars? Ngan: The state-owned companies have benefitted greatly from administrative measures, including the interest rate subsidy. Therefore, it would be only fair if they have to sell dollars to the central bank |
VietNamNet/VNE, TT
Tags: Vietnam business news, Vietnam finance news