WB VN Chief Economist: Vietnam’s economy like fast motorbike
11.30.07 (7:42 pm) [edit]
Martin Rama, Chief Economist of the World Bank Vietnam, when presenting WB’s report about Vietnam’s economy, described Vietnam’s economy as a motorbike running very fast at 200 km/h.
Vietnam’s FDI implementation ratio higher than China’s
Mr Rama said that as driving at high speed, Vietnam’s national economy is facing a lot of risks, which require steady handling and a helmet.
WB Vietnam Country Director Ajay Chhibber and Mr Rama affirmed that Vietnam’s economy was strongly developing. The most encouraging factor is that the national economy is growing rapidly but stably, and every Vietnamese citizen can benefit from the high growth rate.
Mr Rama emphasised that the economic growth rate coincided with the improvement of competitiveness. Exports have been growing more rapidly than the GDP, not counting crude oil exports.
The high engaged foreign direct investment capital (FDI) of $16bil this year is seen by the chief economist as an encouraging result. This figure includes the $5bil of implemented projects. According to Mr Rama, Vietnam’s ratio of implemented FDI capital per GDP is higher than China’s.
According to WB, the trade deficit in 2007 will be higher than in 2006 as imports are growing more rapidly than exports. However, Mr Rama said that the trade deficit was not really a worrying problem, as Vietnam mainly imported equipment and machineries to serve development.
Regarding foreign debts, Mr Rama said that most of the debts were preferential loans which Vietnam did not need to pay immediately, amounting to 25% of GDP – within control.
Inflation and monetary policies
By the end of November, the inflation rate had exceeded the 10% threshold, of which food and foodstuff accounted for 43% of the CPI increase.
Mr Rama applauded the decision by the government of Vietnam not to subsidise oil and petrol any more, saying that this would show active impacts on inflation in the long term.
Regarding inflation, Mr Rama said that it was partially because of monetary policies. He said that the 40% credit growth rate proved to be overly high for a national economy with the growth rate of over 8%. He also said that the government’s policies did not suit the forex policies when it purchased too many dollars in order to maintain the exchange rate of VND16,000/US$1.
The exchange rate benefits exports, but it has led to higher inflation since Vietnam has to import many products with the world’s prices continuing to rise.
Worries about too many new financial companies
While applauding the rapid equitisation process, the WB economist expressed his concern about the fact that a lot of leading Vietnamese leading groups were rushing to diversify their business fields.
When a group makes investment in an unfamiliar field, it faces a lot of risks, and the success index is lower.
Mr Rama also warned about the risks groups face when setting up finance companies. The government should keep an eye on the finance companies. Chile experienced a crisis, originating from the fact that big groups used capital raised from the public for investments.
(Source: Tien phong)
Vietnam’s FDI implementation ratio higher than China’s
Mr Rama said that as driving at high speed, Vietnam’s national economy is facing a lot of risks, which require steady handling and a helmet.
WB Vietnam Country Director Ajay Chhibber and Mr Rama affirmed that Vietnam’s economy was strongly developing. The most encouraging factor is that the national economy is growing rapidly but stably, and every Vietnamese citizen can benefit from the high growth rate.
Mr Rama emphasised that the economic growth rate coincided with the improvement of competitiveness. Exports have been growing more rapidly than the GDP, not counting crude oil exports.
The high engaged foreign direct investment capital (FDI) of $16bil this year is seen by the chief economist as an encouraging result. This figure includes the $5bil of implemented projects. According to Mr Rama, Vietnam’s ratio of implemented FDI capital per GDP is higher than China’s.
According to WB, the trade deficit in 2007 will be higher than in 2006 as imports are growing more rapidly than exports. However, Mr Rama said that the trade deficit was not really a worrying problem, as Vietnam mainly imported equipment and machineries to serve development.
Regarding foreign debts, Mr Rama said that most of the debts were preferential loans which Vietnam did not need to pay immediately, amounting to 25% of GDP – within control.
Inflation and monetary policies
By the end of November, the inflation rate had exceeded the 10% threshold, of which food and foodstuff accounted for 43% of the CPI increase.
Mr Rama applauded the decision by the government of Vietnam not to subsidise oil and petrol any more, saying that this would show active impacts on inflation in the long term.
Regarding inflation, Mr Rama said that it was partially because of monetary policies. He said that the 40% credit growth rate proved to be overly high for a national economy with the growth rate of over 8%. He also said that the government’s policies did not suit the forex policies when it purchased too many dollars in order to maintain the exchange rate of VND16,000/US$1.
The exchange rate benefits exports, but it has led to higher inflation since Vietnam has to import many products with the world’s prices continuing to rise.
Worries about too many new financial companies
While applauding the rapid equitisation process, the WB economist expressed his concern about the fact that a lot of leading Vietnamese leading groups were rushing to diversify their business fields.
When a group makes investment in an unfamiliar field, it faces a lot of risks, and the success index is lower.
Mr Rama also warned about the risks groups face when setting up finance companies. The government should keep an eye on the finance companies. Chile experienced a crisis, originating from the fact that big groups used capital raised from the public for investments.
(Source: Tien phong)
WB VN Chief Economist: Vietnam’s economy like fast motorbike
11.30.07 (7:42 pm) [edit]
Martin Rama, Chief Economist of the World Bank Vietnam, when presenting WB’s report about Vietnam’s economy, described Vietnam’s economy as a motorbike running very fast at 200 km/h.
Vietnam’s FDI implementation ratio higher than China’s
Mr Rama said that as driving at high speed, Vietnam’s national economy is facing a lot of risks, which require steady handling and a helmet.
WB Vietnam Country Director Ajay Chhibber and Mr Rama affirmed that Vietnam’s economy was strongly developing. The most encouraging factor is that the national economy is growing rapidly but stably, and every Vietnamese citizen can benefit from the high growth rate.
Mr Rama emphasised that the economic growth rate coincided with the improvement of competitiveness. Exports have been growing more rapidly than the GDP, not counting crude oil exports.
The high engaged foreign direct investment capital (FDI) of $16bil this year is seen by the chief economist as an encouraging result. This figure includes the $5bil of implemented projects. According to Mr Rama, Vietnam’s ratio of implemented FDI capital per GDP is higher than China’s.
According to WB, the trade deficit in 2007 will be higher than in 2006 as imports are growing more rapidly than exports. However, Mr Rama said that the trade deficit was not really a worrying problem, as Vietnam mainly imported equipment and machineries to serve development.
Regarding foreign debts, Mr Rama said that most of the debts were preferential loans which Vietnam did not need to pay immediately, amounting to 25% of GDP – within control.
Inflation and monetary policies
By the end of November, the inflation rate had exceeded the 10% threshold, of which food and foodstuff accounted for 43% of the CPI increase.
Mr Rama applauded the decision by the government of Vietnam not to subsidise oil and petrol any more, saying that this would show active impacts on inflation in the long term.
Regarding inflation, Mr Rama said that it was partially because of monetary policies. He said that the 40% credit growth rate proved to be overly high for a national economy with the growth rate of over 8%. He also said that the government’s policies did not suit the forex policies when it purchased too many dollars in order to maintain the exchange rate of VND16,000/US$1.
The exchange rate benefits exports, but it has led to higher inflation since Vietnam has to import many products with the world’s prices continuing to rise.
Worries about too many new financial companies
While applauding the rapid equitisation process, the WB economist expressed his concern about the fact that a lot of leading Vietnamese leading groups were rushing to diversify their business fields.
When a group makes investment in an unfamiliar field, it faces a lot of risks, and the success index is lower.
Mr Rama also warned about the risks groups face when setting up finance companies. The government should keep an eye on the finance companies. Chile experienced a crisis, originating from the fact that big groups used capital raised from the public for investments.
(Source: Tien phong)
Vietnam’s FDI implementation ratio higher than China’s
Mr Rama said that as driving at high speed, Vietnam’s national economy is facing a lot of risks, which require steady handling and a helmet.
WB Vietnam Country Director Ajay Chhibber and Mr Rama affirmed that Vietnam’s economy was strongly developing. The most encouraging factor is that the national economy is growing rapidly but stably, and every Vietnamese citizen can benefit from the high growth rate.
Mr Rama emphasised that the economic growth rate coincided with the improvement of competitiveness. Exports have been growing more rapidly than the GDP, not counting crude oil exports.
The high engaged foreign direct investment capital (FDI) of $16bil this year is seen by the chief economist as an encouraging result. This figure includes the $5bil of implemented projects. According to Mr Rama, Vietnam’s ratio of implemented FDI capital per GDP is higher than China’s.
According to WB, the trade deficit in 2007 will be higher than in 2006 as imports are growing more rapidly than exports. However, Mr Rama said that the trade deficit was not really a worrying problem, as Vietnam mainly imported equipment and machineries to serve development.
Regarding foreign debts, Mr Rama said that most of the debts were preferential loans which Vietnam did not need to pay immediately, amounting to 25% of GDP – within control.
Inflation and monetary policies
By the end of November, the inflation rate had exceeded the 10% threshold, of which food and foodstuff accounted for 43% of the CPI increase.
Mr Rama applauded the decision by the government of Vietnam not to subsidise oil and petrol any more, saying that this would show active impacts on inflation in the long term.
Regarding inflation, Mr Rama said that it was partially because of monetary policies. He said that the 40% credit growth rate proved to be overly high for a national economy with the growth rate of over 8%. He also said that the government’s policies did not suit the forex policies when it purchased too many dollars in order to maintain the exchange rate of VND16,000/US$1.
The exchange rate benefits exports, but it has led to higher inflation since Vietnam has to import many products with the world’s prices continuing to rise.
Worries about too many new financial companies
While applauding the rapid equitisation process, the WB economist expressed his concern about the fact that a lot of leading Vietnamese leading groups were rushing to diversify their business fields.
When a group makes investment in an unfamiliar field, it faces a lot of risks, and the success index is lower.
Mr Rama also warned about the risks groups face when setting up finance companies. The government should keep an eye on the finance companies. Chile experienced a crisis, originating from the fact that big groups used capital raised from the public for investments.
(Source: Tien phong)
Vietnam has first private owned airline
11.30.07 (7:39 pm) [edit]
The government has released a document, agreeing to the establishment of Vietjet, the first private owned, and the fourth airline in Vietnam.
The Prime Minister has assigned the Ministry of Transport to implement the licencing of Vietjet in accordance with the Law on Civil Aviation.
With the licence to be granted, Vietjet will become the fourth air carrier in Vietnam to exploit the domestic market, after Vietnam Airlines, Vietnam Aviation Services Company (VASCO) and Pacific Airlines.
Vietjet has been lucky enough to become the first private owned airline in Vietnam, while other applications have been rejected. Previously, T&C Investment Joint Stock Company sent an open letter to the Civil Aviation Administration of Vietnam (CAAV), mentioning the establishment of a private owned airline in Vietnam. However, the application by T&C was not accepted as the investor did not present a detailed plan. Saigon Airlines has also been seeking permission to set up a private owned airline, but CAAV has not given the nod due to lack of capital.
According to Vietnam’s Law on Civil Aviation, airlines will only be licenced if they can meet the requirements as follows:
1/ have legal capital enough to develop air fleet. Airlines that have from one to ten aircrafts must have the legal capital of VND200bil. In order to provide international flights, airlines must have at least VND500bil. Foreign investors can make capital contributions to Vietnamese air carriers, holding 49% of total capital at maximum.
2/ have apparatus and personnel that ensures professional air transportation business.
3/ have detailed plans on aircraft use.
(Source: VNE)
The Prime Minister has assigned the Ministry of Transport to implement the licencing of Vietjet in accordance with the Law on Civil Aviation.
With the licence to be granted, Vietjet will become the fourth air carrier in Vietnam to exploit the domestic market, after Vietnam Airlines, Vietnam Aviation Services Company (VASCO) and Pacific Airlines.
Vietjet has been lucky enough to become the first private owned airline in Vietnam, while other applications have been rejected. Previously, T&C Investment Joint Stock Company sent an open letter to the Civil Aviation Administration of Vietnam (CAAV), mentioning the establishment of a private owned airline in Vietnam. However, the application by T&C was not accepted as the investor did not present a detailed plan. Saigon Airlines has also been seeking permission to set up a private owned airline, but CAAV has not given the nod due to lack of capital.
According to Vietnam’s Law on Civil Aviation, airlines will only be licenced if they can meet the requirements as follows:
1/ have legal capital enough to develop air fleet. Airlines that have from one to ten aircrafts must have the legal capital of VND200bil. In order to provide international flights, airlines must have at least VND500bil. Foreign investors can make capital contributions to Vietnamese air carriers, holding 49% of total capital at maximum.
2/ have apparatus and personnel that ensures professional air transportation business.
3/ have detailed plans on aircraft use.
(Source: VNE)
Exports up but trade deficit remains high
11.30.07 (7:38 pm) [edit]
Exports over the past 11 months increased 20 percent year on year to 43.6 billion USD, however, the imports growth index stood at over 33 percent as the revenue passed beyond 54 billion USD, reported the General Statistics Department.
Nine major cash earners met the yearly plans with apparels continuing to lead in the non-crude exports list to earn over 7 billion USD, or 32 percent over the same period last year.
Other industrial projects with strong growth included footwear with over 3.5 billion USD in export revenues, representing an increase of 9.5 percent, and wooden furniture, with 2.15 billion USD or 24 percent increase.
Electronic appliances and computer parts also grew, almost 2 billion USD or up 24.6 percent, and rubber stretched to over 1.2 billion USD or up 5.3 percent.
Agricultural products and seafood in the “1 billion USD club” managed to maintain high growth rates such as seafood which earned almost 3.45 billion USD, and rice with almost 1.45 billion USD. Coffee came in at almost 1.7 billion USD.
Major import items were machinery, equipment and materials that are not yet produced in Viet Nam .
Minister of Industry and Trade Vu Huy Hoang told Viet Nam News Agency on the sidelines of the recent National Assembly meeting that high demand for national economic development and an increased world price hike were major causes to high import growth and huge trade deficits.
“The prices of steel, fertilizers, plastics, petroleum and assorted yarns, Viet Nam ’s major imports, have continuously skyrocketed on the world market,” the industrial chief said.
He called for boosting exports of major hard currency earners and high-valued products as a key measure to reduce trade deficits in December and the coming years.
In addition, steps to develop supportive industries should be taken to reduce imports, he added.
“The scheme to put into operation oil refinery factories and steel plants as well as a target to turn out 1 billion metres of clothing by 2015 will considerably contribute to reducing the nation’s dependence on imports,” the minister concluded.
(Source: VNA)
Nine major cash earners met the yearly plans with apparels continuing to lead in the non-crude exports list to earn over 7 billion USD, or 32 percent over the same period last year.
Other industrial projects with strong growth included footwear with over 3.5 billion USD in export revenues, representing an increase of 9.5 percent, and wooden furniture, with 2.15 billion USD or 24 percent increase.
Electronic appliances and computer parts also grew, almost 2 billion USD or up 24.6 percent, and rubber stretched to over 1.2 billion USD or up 5.3 percent.
Agricultural products and seafood in the “1 billion USD club” managed to maintain high growth rates such as seafood which earned almost 3.45 billion USD, and rice with almost 1.45 billion USD. Coffee came in at almost 1.7 billion USD.
Major import items were machinery, equipment and materials that are not yet produced in Viet Nam .
Minister of Industry and Trade Vu Huy Hoang told Viet Nam News Agency on the sidelines of the recent National Assembly meeting that high demand for national economic development and an increased world price hike were major causes to high import growth and huge trade deficits.
“The prices of steel, fertilizers, plastics, petroleum and assorted yarns, Viet Nam ’s major imports, have continuously skyrocketed on the world market,” the industrial chief said.
He called for boosting exports of major hard currency earners and high-valued products as a key measure to reduce trade deficits in December and the coming years.
In addition, steps to develop supportive industries should be taken to reduce imports, he added.
“The scheme to put into operation oil refinery factories and steel plants as well as a target to turn out 1 billion metres of clothing by 2015 will considerably contribute to reducing the nation’s dependence on imports,” the minister concluded.
(Source: VNA)
50% of banks cannot reduce securities loans to below 3%
11.30.07 (7:36 pm) [edit]
Half of joint stock banks now are like cats on hot bricks because they still cannot reduce the securities loans to below 3% of total outstanding loans as requested by the State Bank of Vietnam, while the deadline of December 31 nears.
Truong Dinh Song, Deputy Head of the Legal Department under the Vietnam Banking Association (VNBA), said that 50% of joint stock banks would surely be unable to reduce the securities loans to below 3% of total outstanding loans, though the banks have been trying their best.
According to VNBA, the ratio of securities loans of VIB is 10% now, while the figures are 10% for South East Asia Bank, and even higher for others. Le Xuan Nghia, Head of the Banking Development Strategy Department under the State Bank of Vietnam, said several days ago that the majority of the inspected 19 banks were found as having the securities loan ratios at 10-24%.
Mr Song said that VNBA has sent the Dispatch No 384 to the State bank, requesting the consideration of punishment measures to be applied on the banks that cannot reduce the securities loans to below 3%.
VNBA said that there are many lawful credit contracts signed prior to the time the Instruction No 03 on limiting securities loans was promulgated on June 30, 2007, and will be due after December 31, 2007. Commercial banks cannot unilaterally stop the lawful contracts with clients in order to collect debts.
Commercial banks are now worried about whether the central bank will apply the non-retroactive principle.
Lawyer Tran Huu Huynh, Head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), said that the non-retroactive principle needs to be followed.
Mr Huynh stressed that commercial banks need to respect the contracts signed between them and clients, if the contracts are lawful. If the signed credit contracts did not come contrary to the Civil Code and Credit Low, the Instruction No 03 must not interfere with the transactions in the contracts.
On November 28, 2007, an official from the State Bank of Vietnam said in an interview to press agencies that the central bank would obey laws and would consider all cases that have the securities loans ratio higher than 3%. The bank would impose heavy punishment on the banks that cannot prove that the credit contracts were signed before June 30, 2007.
The official said that most of the securities loans were short term, and he believes that banks would have enough time to reduce the securities loans ratio.
The official said that the central bank would check every contract to find out if commercial banks deliberately do not follow the central bank’s instructions.
Meanwhile, Mr Song said that it would be very difficult to check every contract, as many contracts on funding securities investment might be declared as the contracts on funding house purchases.
Regarding the punishment, violating banks may face the punishments of VND20-60mil, or may have their licenses revoked.
(Source: TBKTVN)
Truong Dinh Song, Deputy Head of the Legal Department under the Vietnam Banking Association (VNBA), said that 50% of joint stock banks would surely be unable to reduce the securities loans to below 3% of total outstanding loans, though the banks have been trying their best.
According to VNBA, the ratio of securities loans of VIB is 10% now, while the figures are 10% for South East Asia Bank, and even higher for others. Le Xuan Nghia, Head of the Banking Development Strategy Department under the State Bank of Vietnam, said several days ago that the majority of the inspected 19 banks were found as having the securities loan ratios at 10-24%.
Mr Song said that VNBA has sent the Dispatch No 384 to the State bank, requesting the consideration of punishment measures to be applied on the banks that cannot reduce the securities loans to below 3%.
VNBA said that there are many lawful credit contracts signed prior to the time the Instruction No 03 on limiting securities loans was promulgated on June 30, 2007, and will be due after December 31, 2007. Commercial banks cannot unilaterally stop the lawful contracts with clients in order to collect debts.
Commercial banks are now worried about whether the central bank will apply the non-retroactive principle.
Lawyer Tran Huu Huynh, Head of the Legal Department under the Vietnam Chamber of Commerce and Industry (VCCI), said that the non-retroactive principle needs to be followed.
Mr Huynh stressed that commercial banks need to respect the contracts signed between them and clients, if the contracts are lawful. If the signed credit contracts did not come contrary to the Civil Code and Credit Low, the Instruction No 03 must not interfere with the transactions in the contracts.
On November 28, 2007, an official from the State Bank of Vietnam said in an interview to press agencies that the central bank would obey laws and would consider all cases that have the securities loans ratio higher than 3%. The bank would impose heavy punishment on the banks that cannot prove that the credit contracts were signed before June 30, 2007.
The official said that most of the securities loans were short term, and he believes that banks would have enough time to reduce the securities loans ratio.
The official said that the central bank would check every contract to find out if commercial banks deliberately do not follow the central bank’s instructions.
Meanwhile, Mr Song said that it would be very difficult to check every contract, as many contracts on funding securities investment might be declared as the contracts on funding house purchases.
Regarding the punishment, violating banks may face the punishments of VND20-60mil, or may have their licenses revoked.
(Source: TBKTVN)
Vietnam to have new banks
11.30.07 (7:33 pm) [edit]
The domestic banking market would see new ‘players’ by the end of the year. Sources said that four or five banks will receive approval from the State Bank of Vietnam this year.
These banks are the luckiest among 20 investors which have made application to the State Bank for setting up new banks since the new decree on licensing joint stock banks came into effect on July 20.
Governor of the State Bank of Vietnam Nguyen Van Giau told VN Express on November 28 that the central bank’s departments are considering the applications. The bank would announce the list of the first group of banks which can meet the requirements stipulated in the new decree. The list will also be available on the central bank’s website.
Governor Giau declined to reveal how many banks would get the approval in principle by the end of this year. However, sources said that four or five banks would get the approval, maybe early next week. Among these banks, the smallest will have the chartered capital of VND1tril ($62.5mil), while the biggest will have VND5tril ($312.5mil).
After getting the approval in principle, the investors would have to fulfill procedures to get official licenses. Under the current regulations, the State Bank of Vietnam would have the final decision on whether to license banks 25-30 days after the files are submitted to the central bank.
If licensed, these 4-5 banks would be the first ones to operate in Vietnam after a decade that saw no new banks. Analysts have warned that the competition in the banking market would become stiffer when the market welcomes new players which have powerful financial capability.
Prior to that, a lot of big names announced their plans to jump into the banking sector, including FPT (the Corporation for Financing and Promoting Technologies), Bao Viet insurer, PVFC (PetroVietnam Finance), Vinatext textile and garment producer, and VNPT (Vietnam Post and Telecommunication Group).
(Source: VNE)
These banks are the luckiest among 20 investors which have made application to the State Bank for setting up new banks since the new decree on licensing joint stock banks came into effect on July 20.
Governor of the State Bank of Vietnam Nguyen Van Giau told VN Express on November 28 that the central bank’s departments are considering the applications. The bank would announce the list of the first group of banks which can meet the requirements stipulated in the new decree. The list will also be available on the central bank’s website.
Governor Giau declined to reveal how many banks would get the approval in principle by the end of this year. However, sources said that four or five banks would get the approval, maybe early next week. Among these banks, the smallest will have the chartered capital of VND1tril ($62.5mil), while the biggest will have VND5tril ($312.5mil).
After getting the approval in principle, the investors would have to fulfill procedures to get official licenses. Under the current regulations, the State Bank of Vietnam would have the final decision on whether to license banks 25-30 days after the files are submitted to the central bank.
If licensed, these 4-5 banks would be the first ones to operate in Vietnam after a decade that saw no new banks. Analysts have warned that the competition in the banking market would become stiffer when the market welcomes new players which have powerful financial capability.
Prior to that, a lot of big names announced their plans to jump into the banking sector, including FPT (the Corporation for Financing and Promoting Technologies), Bao Viet insurer, PVFC (PetroVietnam Finance), Vinatext textile and garment producer, and VNPT (Vietnam Post and Telecommunication Group).
(Source: VNE)
Banks scourged by falling dollar
11.29.07 (11:14 pm) [edit]
The supply of dollars is now so profuse that it is always higher than the banks’ purchasing capacity. Banks now buy dollars in dribs and drabs, as they do not have enough VND.
The volume of dollars flowing into Eximbank these days is 30% higher than the same period last year. In the first 10 months of the year, some $2bil went in. In the last few days, the bank has purchased $5-7mil every day.
Currently, Vietcombank, the biggest foreign currency trader in Vietnam, always quotes the dollar purchase price equal to the sale price, at VND16,048/US$1 (as of November 27), reflecting the bank’s desire to bring as few dollars as possible.
An official from Vietincombank said that the supply of dollars is very profuse but the bank is not able to purchase dollars in large quantities, as the bank does not enough VND.
The official said that banks are now incurring losses due to the devaluation of the dollar. However, banks still have to buy dollars at prices higher than the levels they want since they must adhere to the floor level set by the State Bank of Vietnam.
In principle, when there is an excess of foreign currency supply, the central bank would buy, in order to prevent devaluation which harms exports. However, the central bank has yet to interfere in the market. There are no signs that the central bank will buy up dollars from commercial banks.
People are now exchanging the dollar for VND at a tremendous rate to prepare for Tet shopping. Meanwhile, making dollar deposits in foreign banks is not profitable for Vietnamese banks, as the world’s interest rates are reducing due to the FED’s rate cuts.
The supply and demand imbalance of the dollar has become more serious as commercial banks cannot find borrowers. Import-export companies, the biggest clients, rarely borrow dollars at the end of the year; they need VND to pay local companies.
The Vietincombank official said that the demand for VND loans is increasing, but the bank is trying to limit outstanding VND loans. Meanwhile, the bank is ready to satisfy any and all dollar loan demands.
Ho Huu Hanh, Director of the HCM City Branch of the State Bank of Vietnam, acknowledged that dollars are now in excess. Nguyen Van Hung, Deputy Director of the Hanoi Branch of the State Bank, also said that banks are facing dollar abundance. However, he said that Hanoi’s banks would not bear insurmountable pressure as Hanoi is the banking centre.
Mr Hung said that there would be no significant changes to the VND/US$ exchange rate towards year end. Banks top priority now is to help curb inflation, he said.
(Source: VNE)
The volume of dollars flowing into Eximbank these days is 30% higher than the same period last year. In the first 10 months of the year, some $2bil went in. In the last few days, the bank has purchased $5-7mil every day.
Currently, Vietcombank, the biggest foreign currency trader in Vietnam, always quotes the dollar purchase price equal to the sale price, at VND16,048/US$1 (as of November 27), reflecting the bank’s desire to bring as few dollars as possible.
An official from Vietincombank said that the supply of dollars is very profuse but the bank is not able to purchase dollars in large quantities, as the bank does not enough VND.
The official said that banks are now incurring losses due to the devaluation of the dollar. However, banks still have to buy dollars at prices higher than the levels they want since they must adhere to the floor level set by the State Bank of Vietnam.
In principle, when there is an excess of foreign currency supply, the central bank would buy, in order to prevent devaluation which harms exports. However, the central bank has yet to interfere in the market. There are no signs that the central bank will buy up dollars from commercial banks.
People are now exchanging the dollar for VND at a tremendous rate to prepare for Tet shopping. Meanwhile, making dollar deposits in foreign banks is not profitable for Vietnamese banks, as the world’s interest rates are reducing due to the FED’s rate cuts.
The supply and demand imbalance of the dollar has become more serious as commercial banks cannot find borrowers. Import-export companies, the biggest clients, rarely borrow dollars at the end of the year; they need VND to pay local companies.
The Vietincombank official said that the demand for VND loans is increasing, but the bank is trying to limit outstanding VND loans. Meanwhile, the bank is ready to satisfy any and all dollar loan demands.
Ho Huu Hanh, Director of the HCM City Branch of the State Bank of Vietnam, acknowledged that dollars are now in excess. Nguyen Van Hung, Deputy Director of the Hanoi Branch of the State Bank, also said that banks are facing dollar abundance. However, he said that Hanoi’s banks would not bear insurmountable pressure as Hanoi is the banking centre.
Mr Hung said that there would be no significant changes to the VND/US$ exchange rate towards year end. Banks top priority now is to help curb inflation, he said.
(Source: VNE)