Trade deficit despite higher export value

According to the General Statistics Office, Viet Nam’s export turnover in the year’s first nine months reached US$51.5 billion, up 20.5 per cent over the same period in 2009. If gold exports are included, the increase would be higher, at 27 per cent.

Of the total turnover, businesses with foreign direct investment represented $23.7 billion (exclusive of crude oil exports), up over 40 per cent against the same period in 2009.

Exported items with high growth include steel (193 per cent), rubber (97 per cent), chemicals and chemical products (84 per cent), and electrical wires and cables (68 per cent).

For the first time, steel and products made of steel, coal and rubber were among those over $1 billion in export turnovers.

Others were textiles and garments, crude oil, footwear, seafood, rice, wood and wooden products.

The garment and textiles sector earned $7.5 billion from exporting to major markets such as the US, Japan and the EU, up over 17 per cent compared to the year before.

The sector is expected to surpass its target for this year of $10.5 billion. Many businesses have already signed orders with foreign partners for the next year.

According to the Ministry of Industry and Trade, higher prices of several export items like those of rubber (83 per cent), cassava (76 per cent), coal (52 per cent) and pepper (38 per cent) helped increase total export value by $2.5 billion.

The Asian market accounted for 48 per cent of Viet Nam’s export turnover (y-o-y 28 per cent up) and the Latin American market represented 23 per cent, showing a rise of 24 per cent. The figure from the European market fell 4.4 per cent, to 22 per cent of the total turnover.

Meanwhile, imports consumed over $60 billion, up almost 23 per cent, and again foreign-invested companies represented higher growth, of over 42 per cent, reaching $25.7 billion. The import value showed a trade deficit of $8.6 bilion.

Cotton showed a high growth in import value of 80 per cent, and the rate for ordinary metals was almost 73 per cent. A fall of 35 per cent was registered for fertiliser imports and 13 per cent for cars.

Similar to exports, the price rose for a number of imports, such as up 40 per cent for ordinary metals and 35 per cent for liquified gas. Price increases accounted for $4.2 billion in import value.

Lower interest rates

The Viet Nam Banking Association last week sent a document asking its members to lower interest rates for the Vietnamese dong and US dollar.

Specifically, it wants the rate for deposits in dong to go down to 11 per cent per annum, from the current 11.2 per cent.

For deposits in dollar, it said banks should cut the rate lower than the existing 5 to 5.5 per cent, depending on terms. It also advised banks to reduce lending rates to debtors in the areas of agriculture, export and small- and medium-sized enterprises to 12 per cent.

The Dai A Joint Stock Bank cut rates beginning from last Friday. For its Ordinary Deposit service in dong, the rate for one-month term went down to 10.95 per cent and three, six, 12 and 13 months terms, to 11.05 per cent. It came down to 10.86 per cent for terms of 18, 24 and 36 months. But the bank maintains the 11.2 per cent for other deposit products.

In case of the US dollar, the bank now offers 3.75 per cent for one- and two-month term, and 4.15 per cent for three-month term. The highest rate of 4.75 per cent for 12-, 24- and 36-month terms.

However, according to Dr Tran Du Lich, member of the National Monetary and Financial Policy Advisory Council, the interest rates will not reduce significantly thanks to Circular 19, which provides adjustments to Circular 13. Circular 13 aims to ensure financial market stability and well-managed capital circulation.

Accordingly, banks will be allowed to lend up to 25 per cent of their non-term deposits by economic institutions.

They will also be able to count deposits by the State Treasury as parts of their reserves for lending. The treasury deposits are around VND57 trillion ($3 billion)in commercial banks, with the big four accounting for the lion’s share of over VND52 trillion ($2.73 billion) – Agribank with VND33 trillion ($1.73 billion), BIDV with VND 9.4 trillion ($495 million), Vietcombank with VND8.3 trillion ($442 million) and Vietinbank with VND1.4 trillion ($74 million).

However, these two sources are not stable and State Bank Governor Nguyen Van Giau said in the future a road would be set for taking the State Treasury’s deposits out of the banks’ lending sources.

According to Vietcombank general director Nguyen Phuoc Thanh, banks will now cut their promotional programmes rather than significantly cut down their interest rates, for both deposits and lending.

Following the world’s gold price hitting a record of around $1,322 per ounce before declining to $1,318.6 last Friday, the price in Viet Nam also reached its historic peak at VND31.50 million ($1,657) per tael last Saturday (VND2 million higher than early September). (One tael equals 1.2 troy ounces). Industry insiders said local prices last week were higher than the global price.

According to Huynh Trung Khanh, consultant of the World Gold Council in Viet Nam, last week’s trade was not busy, which is different from the past when individuals rushed to buy gold, fearing that the price was going to rise.

The hike was imposed mainly because a number of individual and institutional traders had borrowed large gold volumes under the form of 10-per-cent mortgage and 3-per-cent interest rate per annum.

They sold when the price fluctuated around VND30 million per tael, thinking the price would fall and they could buy back to pay their debts. Their expectations failed. Still, they had to buy to cut losses.

Meanwhile, according to Khanh, gold companies did not have large volumes in stock due to unexpected fluctuations that made demand-and-supply imbalance, thus creating higher prices.

In addition, enterprises who also thought the gold price would slide borrowed gold from banks, then transferred the gold into dong to serve their demands for business operations (because the interest rate in gold is much lower than that of dong). The enterprises joined others, including mostly traders not individuals, in buying gold to cut their losses, for fear the price would continue to rise.

Khanh also said there might be unofficial gold imports, which was reflected in the higher exchange rate between the Vietnamese dong and US dollar (VND19,710 on Thursday; however, down to VND19,650 on Saturday).

Central banks of many countries increased their gold purchases, and weaker US dollar has made gold an important channel of the global financial investment circle. Thus, the world’s gold price is expected to fluctuate upward and have an impact on Viet Nam’s, according to the WGC consultant. — VNS

Tags: Vietnam trade, Vietnam trade deficit 2010