Business Beat in Vietnam today

7/12/2009
by Thien Ly

Banks come up with supply of dollars

On the morning of December 2, the exchange rate between the Vietnamese dong and US dollar on the interbank market stood between VND19,000 and 19,100 per dollar. But it declined to VND18,500 by the afternoon. Many importers of essential goods bought the greenback at the listed price of VND18,487.

As a result, the VND/USD rate on the black market also fell, from VND19,480 to VND19,200 on December 3.

The US dollar fell after local banks committed to sell the currency in large volumes in a response to an appeal made by the central bank on December 2 to stabilise the foreign exchange market.
Several days before the central bank made a decision to intervene in the market, the VND/USD rate on the inter-bank market was more than VND19,500 per dollar and reached VND20,000 on the black market.

The Viet Nam Export-Import Commercial Bank (Eximbank) announced that it would ensure enough US dollar supplies at the official exchange rate for businesses and individuals who need the greenback for payments for imports, overseas studies and medical care, among other items. The demand at the bank is between US$6 and $10 million a day.

Vietcombank will also ensure supplies of the greenback for their customers. Its general director, Nguyen Phuoc Thanh, said the bank had recently bought a large volume of US from the central bank.

Since December 2, the Technological and Commercial Joint-Stock Bank (Techcombank) has ensured adequate supplies of the US dollar for their customers at the rates fixed by the central bank.

The fact that the central bank has committed to help commercial banks make up for the lack of US banknotes to supply their customers has also encouraged them to sell the hard currency.
Banking insiders believe that as the central bank and major commercial banks actively sell US banknotes, the current speculation in hard currency by enterprises will soon end. This will result in better stability in the official market, and the black market prices for the US dollar will also fall.

They also predict that sources of hard currency on the domestic market will be more plentiful in 2010, and at that time the central bank will have more opportunities to buy the money back.

Apparel exports to Japan

Although the Viet Nam-Japan Economics Partnership Agreement (VJEPA) has been in effect for two months, the country’s apparel export value to Japan will not continue to increase dramatically.

For the first 10 months of the year, Viet Nam’s apparel exports to Japan increased by 14 per cent, compared to the same period last year. The Viet Nam Textile and Garment Association forecasts that Vietnamese enterprises will be able to export apparel products worth between $900 million and $1 billion to Japan by the year-end, registering a year-on-year increase of between 18 and 20 per cent.

The apparel industry’s export turnover is also estimated to reach between $1.1 billion and $1.2 billion next year.

The VJEPA, under which major Vi?t Nam-made exports to Japan enjoy import duty rates of zero per cent from October 1, include garments and textiles, furniture, shrimp and shrimp products, electric cables, computers, durian, flowers and other items.

Aquatic products, textiles and garments and leather shoes are Viet Nam’s three main exports to Japan.

According to many apparel industry insiders, the VJEPA will create big opportunities for Vietnamese enterprises to further penetrate into the Japanese market.

Nguyen Xuan Dung, general director of the Hýng Yen Garment Joint-Stock company, said the number of contracts with his company from Japanese partners had increased sharply in recent months.

The agreement also helps local companies because Japanese partners now pay higher manufacturing charges to their Vietnamese partners.

The Sai Gon 3 Garment Company has also won contracts to export to Japan, which accounts for 60 per cent of its total orders.

Many apparel enterprises have given top priority to Japan by focusing investment on expanding workshops and upgrading technology to meet the hard-to-please market’s requirements.
Many experts, however, said there would not be a sudden increase in Vietnamese apparel exports to the Japanese market, due to current VJEPA requirements.

To take advantage of the VJEPA-based zero tariff, Vietnamese apparel enterprises must meet two requirements: their products must be produced in Viet Nam and with materials and accessories from Viet Nam, Japan or ASEAN countries, but not Indonesia, the Philippines, Cambodia or Thailand.

The exporters are also required to supply high-quality products, which means that they will have to invest both capital and time into production. In addition, Vietnamese enterprises will not be able to enter the market for cheap goods because they cannot compete with Chinese rivals.

Consumer goods

Huynh Thi Lan Anh, a housewife in HCM City’s District 10, had to spend an additional VND1 million for her family in November. Anh spent, on average, VND4 and 4.1 million in September and November, but her family’s expenses were more than VND5 million in November.

Anh said she had to pay an additional VND40,000 a gas canister, VND60,000 for rice, VND600,000 for fresh foodstuff and VND200,000 for spices.

In recent days, price hikes have been seen at markets as well as supermarkets in HCM City. Prices for imported foodstuffs have risen between 5 and 15 per cent, while the price of electrical goods rose by 10 per cent.

The price of many kinds of construction materials has also soared. Prices of steel product of the Southern Steel Company rose between VND200,000 and VND300,000 per tonne.

A similar situation was seen in the Ha Noi market, with many goods rising between 10 and 20 per cent in price. For instance, the prices of imported cake tins from Malaysia, France and Germany soared by VND10,000 and VND30,000 each.

Many independent market watchdogs, however, warn that a wave of price hikes has just begun. Prices will continue to increase, especially as Tet holiday approaches.

Price hikes have occurred for several reasons, including the State Bank of Viet Nam’s recent decision to adjust the VND/USD exchange rate in ways that devalue the domestic currency. The other major reason is the rise in prices on the world market.

This has affected the price of imported consumer goods and materials.

The price of imported steel ingots, for example, was $20 and $30 higher this month than the rate recorded in early November. Prices for imported materials used for processing animal food have also jumped by 20 per cent.

Recent increases in petrol prices and the market’s increased purchasing power in the months before Tet were also important factors that contributed to price hikes.

To protect customers from the continued wave of prices hikes, many retailers have signed large contracts with producers and distributors and have paid part of the contracts in advance to ensure that prices are not much higher during Tet.

In a related matter, governing agencies of industries and localities are trying to prevent excessive price increases by urging control over the market to prevent fishing in troubled waters. —VNS