Thread: Latest news on the Dong!

Vietnam: many targets, few tactics
http://blogs.ft.com/beyond-brics/201...s-few-tactics/

Cheap labour lies behind Vietnam’s impressive growth, which has averaged 7 per cent a year over the last decade. Shoe and garment producers have settled in the country, and more manufacturers are arriving, attracted by wages that are a third of those in China.
The government, however, is not satisfied. It says the country must shift from a reliance on low-cost exports, and improve productivity and competitiveness. But, without practical policies, such talk is as cheap as Vietnamese labour itself.
Vietnamese officials are schooled in Soviet-style planning and targets. So prime minister Nguyen Tan Dung issued a directive last week calling on officials to institute ten simple measures to boost the competitiveness of the economy:

(1) stabilising macro-economy; (2) perfecting quality of human resources; (3) developing infrastructure; (4) shifting economic structure towards advantageous industries; (5) expanding economic zones and industrial parks; (6) attracting more foreign investment; (7) boosting business network; (8) utilising natural resources and minimising environmental impacts; (9) enlarging input materials such as labor, capital and land; (10) and pursuing administrative reforms.

The list might be an attempt by Dung to show his initiative, ahead of the Communist Party’s next congress, where the top leadership posts and policies for the following five years will be decided. Dung may face a battle to keep his own job.
Yet wishlists are of only limited use. Vietnam’s motto for its chairmanship of the Association of Southeast Asian Nations this year is “from vision to action”. That should apply not just to diplomacy, but to domestic economic policy too.

Push for growth hurts Vietnam dong
http://www.ft.com/cms/s/0/578cd696-e...44feabdc0.html

Fears of a global ­currency war are likely to feature high on the agenda at the Asian leaders’ summit that opens in Hanoi today, but the host nation faces a different economic problem.
Political pressure to maintain growth in Vietnam is trumping worries about the money supply. The result is that inflation is nearly back to double digits, the Vietnamese currency is under severe pressure and people are snapping up dollars and gold.
But the Communist government, which started easing monetary policy in 2009 in an attempt to maintain economic growth in the wake of the global financial crisis, is reluctant to tighten credit ahead of a Communist party congress in January for fear that the growth rate slips or cumbersome state-owned enterprises start to collapse.
Consequently, inflation, which peaked at 28 per cent in August 2008 as Vietnam’s economy overheated, is approaching double figures once more and the dong is trading at a low against the dollar in the black market.
“We are worried because prices are increasing suddenly,” said Le Thi Luon, who runs a food stall in Hanoi’s old quarter. She said the price of some fruit and vegetables had gone up by as much as 5 per cent in the past month and the floods in central Vietnam, which have devastated some crops, could make the situation worse.
Other south-east Asian currencies such as the Thai baht and the Singapore dollar have been appreciating against the US dollar this year as hot money has flowed into their economies.
By contrast, Vietnam’s central bank has devalued the dong three times against the dollar since last November but has failed to stem concerns about the country’s macroeconomic stability.
“You have to devalue the currency or put up interest rates but heading into the party congress, the government is fixated on growth numbers, not prices,” said Jonathan Pincus, a former UN economist and head of the Fulbright economics teaching programme in Ho Chi Minh City. “If they want to push for growth, they run the risk of a sudden change of sentiment and a run on the dong.”
Consumer prices rose 1.05 per cent between September and October, with inflation accelerating to 9.66 per cent year-on-year in October, according to Vietnam’s general statistics office. Although the government has raised the spectre of price controls on essential goods, economists believe it will be difficult for the country to meet its annual inflation target of 8 per cent.
On Wednesday, the dong touched a record low against the dollar in the gold shops on Ha Trung street, central Hanoi, which double as black market foreign exchange bureaux.
One dealer who did not want to be identified said dollars were in relatively short supply as some people were hoarding hard currency. She was selling dollars at 20,300 dong each, compared with the official exchange rate of 19,495 and the interbank rate of 19,500.
Soaring prices of global commodities, such as cotton and wheat, have not helped. Duong Bich Hang, who runs a bedding store in Hanoi, said the cost of cotton sheets has risen more than 10 per cent during the past two months. “When the price goes up like this, there are fewer buyers,” she said.
Large companies are also being squeezed. Phan Van Thien, deputy chief executive of Bibica, one of Vietnam’s biggest confectionery makers, said the cost of sugar and some other ingredients had risen by up to 80 per cent over the past year, driven by heady global prices and the declining dong. That has forced the Ho Chi Minh City-based company to cut its annual turnover and profit targets by 10 per cent.
Economists expect the pressures on both prices and the dong to increase in the run-up to the Tet lunar new year festival in February because demand among shoppers typically rises and companies need dollars to build their inventories of imported goods.
Last week, Nguyen Van Giau, Vietnam’s central bank governor, said there were no plans to devalue the dong again. But he made similar comments around the same time last year, just before the latest devaluations began.

Vietnam Central Bank Raises Benchmark Rate for First Time in Almost a Year
http://www.bloomberg.com/news/2010-1...st-a-year.html

Vietnam raised interest rates for the first time in almost a year after inflation accelerated to a 19-month high last month, joining regional counterparts from Malaysia to Thailand that have raised borrowing costs this year.

The so-called base rate increases to 9 percent today, the State Bank of Vietnam said in a statement on its website, announcing its first boost to the benchmark since December. The refinancing rate will rise to 9 percent from 8 percent, while the discount rate rises the same amount, to 7 percent.

Vietnam is unlikely to meet its inflation target and the dong will probably be devalued again in the first quarter of 2011, London-based Kevin Grice, an economist at Capital Economics, said in a note this week.

Vietnam: Almost a Tiger
http://www.whartonjournal.com/inside...iger-1.1750185

Economic opportunities are returning to the country that has been touted as Asia's youngest tiger. This year, the Prime Minister's office expects Vietnam's GDP to grow by 6.7%. However, growth is not without its costs. Inflation is back at its highest level since 2008. Meanwhile, rumors circulate about the State Bank of Vietnam (SBV) devaluing its currency yet again.

Intel makes a $1 billion bet on Vietnam with new factory
http://www.statesman.com/business/te...m-1028894.html

HO CHI MINH CITY, VIETNAM — Intel Corp.'s new billion-dollar factory, which has a clean room the size of more than five football fields, rises up from former rice paddies like a Walmart on steroids.

"On behalf of Intel's 85,000 employees, I would like to say, 'Hello, Vietnam,' " company CEO Paul Otellini told an auditorium packed with enthusiastic government officials, employees and other dignitaries. The chip giant's arrival in the Southeast Asian country put it "on the map for high-tech investment and helped the country attract significant investments from several leading global technology firms, including Foxconn and Compal," he added.

We will what happens later during the year..
Exchange rate paradox occurring only in Vietnam
http://english.vietnamnet.vn/en/busi...n-vietnam.html

Dong devaluation will not occur

In current circumstances, the move that people expect from the central bank is the further devaluation of the dong. However, the government has decided that Vietnam will not devalue the dong.

The Asia Development Bank has recently advised Vietnam not to adjust the exchange rate. Government officials have all agreed that adjusting the exchange rate at this moment is not a wise move and could even have very bad consequences.

The Vietnam dong has not become so weak that it is necessary to adjust the dong/dollar exchange rate. The dong devaluation also will not be a powerful tool to help boost exports. Especially, Vietnam is expecting to see exports increase significantly this year.

If Vietnam adjusts the exchange rate at this moment then it will send the inflation rate soaring. If so, the National Finance Supervision Council has estimated that the increase in the price of goods would be double-digits or more. Meanwhile, the top priority task for now is to obtain macroeconomic stability, especially, to control inflation. If the government fails to do that, people will lose their confidence.

However, the State Bank of Vietnam will take necessary measures to cool down the forex market. It will “pump” foreign currencies into circulation to ease the situation.

The announcement has raised the concern that this could make Vietnam’s foreign currency reserves become “thinner”. However, Thuy has reassured the public that the foreign currency reserves are sufficient enough. In the long term, Vietnam needs to increase its foreign currency reserves and will so when there are more favorable conditions.

Vietnam Pledges to Fight Inflation
http://online.wsj.com/article/SB1000...googlenews_wsj

HANOI—The Vietnam government said Wednesday it continues to be confronted with rising price pressures and faces an uphill battle trying to keep inflation in single digits by year's end, but it remains determined to stabilize the economy.

The government will ask local authorities to increase their monitoring activities in local markets in an effort to tame rising prices, Nguyen Xuan Phuc, head of the Government Office, said in a statement posted on the government's web site.

谢谢您 (Thank you) Seaview and Nidya

Bill Clinton Sees Enduring Vietnam Ties on Hanoi Trip
http://www.bloomberg.com/news/2010-1...nton-says.html

U.S. interests in its relationship with Vietnam include shared concern over the rising strength of China, the Congressional Research Service said in a report last year. Clinton cited “security cooperation” when listing areas in which the U.S. and Vietnam have worked together.

There is now an “enduring partnership between the United States and Vietnam,” Clinton said in his speech to the students today. “We have put those years to very good use.”

Vietnam’s exports to the U.S. grew to $12.4 billion in 2009 from $1 billion in 2001, according to the U.S. International Trade Commission. In the first nine months of this year, Vietnamese shipments to the world’s largest economy climbed 18 percent to $10.75 billion, while U.S. exports to Vietnam rose 19 percent to $2.51 billion.

“In Vietnam, we are cultivating a level of cooperation that would have been unimaginable just 10 years ago,” said U.S. Secretary of State Hillary Clinton, speaking last month in Hawaii en route to a visit to Asia that included a stop in Hanoi.

“Our diplomatic and economic ties are more productive than ever, and we’ve recently expanded our discussion on maritime security and other defense-related issues,” said Hillary Clinton, who is Bill Clinton’s wife.

I am so glad to see some action on this thread. Your posts are greatly appreciated.