Feb 15, 2013

Vietnam - Economists say stabilized exchange rate nooses exporters

Follow Me on Pinterest
VietNamNet Bridge – The stabilizing of the dong/dollar exchange rate over the last two years has made the local currency depreciate by 20 percent, which has hindered exports.

Stabilized exchange rate blocks exporters’ way

An official of the Vietnam Association of Seafood Exporters and Producers (VASEP) complained that catfish exporters have been facing difficulties from all four sides. Especially, he said, the stable dong/dollar exchange rate has made it unable to boost exports in the context of the weak global demand.

Dr. Nguyen Duc Thanh, Director of the Economics and Policy Research Center, an arm of the Hanoi National University, said while the nominal exchange rate has been kept unchanged over the last two years, the inflation rate has been staying firmly high, which means that the dong has quietly appreciated against the dollar.

Thanh said the local currency has been overvalued, which has hindered the export of many key products of Vietnam, including catfish.

“Some experts say the exchange rate has in no way affected the export. However, I believe that the stabilized exchange rate can be compared with a noose, which has been gradually tightening businesses’ neck,” Thanh said.

“The exchange rate stabilization has weakened exporters, while they should have been supported to boost exports,” he added. “The fact that catfish processing enterprises are now on the verge of bankruptcy shows that problems are existing in macroeconomic policies.”

Dr. Le Xuan Nghia, a well-known economist, also thinks that the dong has been appreciated by 20-21 percent higher against the dollar and 3-4 percent against the other 19 currencies from the countries with which Vietnam has trade relations.

“This has put Vietnam’s exports at a disadvantage,” Nghia said.

Dong/dollar exchange rate should be adjusted in 2013

Experts all think that it is quite within the reach of the State Bank of Vietnam to stabilize the exchange rate in 2013. However, they have warned that if the exchange rate stays unchanged for too long, it would cause big difficulties to the national economy which has been relying on exports.

Trinh Quang Anh from Maritime Bank said on Dau tu that the exchange rate stabilization in the whole year 2012 would put a heavy burden on businesses in 2013. He said Vietnam’s export in the last six months of the year was severely hurt; therefore, the State Bank needs to consider the exchange rate adjustment.

Dien dan Doanh nghiep has quoted an expert as saying that the dong should be devalued by two or three percent in order to ensure the competitiveness for Vietnam’s exports.

However, some other economists disagree, saying that the depreciation of the dong would bring more harm than good.

Nguyen Bich Lam, Deputy Head of the General Statistics Office, said though Vietnam’s economic growth heavily depends on export, Vietnam also imports products in big quantities. As such, when depreciating the dong, Vietnam would suffer because the sums of money it has to pay for imports would be much higher.

“It would be okay if one dong worth of imports would bring one dong worth of exports. But if the figure is smaller, this means that the more we export, the bigger loss we incur,” Lam explained.

In 2000-2008, the ratio was always 1. However, since 2009, the ratio has always been lower than 1. “This means that devaluation of the dong would not benefit the national economy,” he said.

Compiled by C. V

Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.

No comments:

Post a Comment