The first ‘shock’ was the central bank’s increase of the exchange rate between the Vietnam dong and the US dollar by 9.3 percent as of February 11, 2011. After that, price of petrol also rose from 17 to 24 percent and that of electricity from 15.2 percent as of March 1.
The high increase of prices of fuels after a long time of retaining made adverse impacts. Prolonged high inflation, with over 1 percent monthly in the first, second and third quarters, forced the government to adjust the targeted consumer price index (CPI) from 7.5 percent to 15 and then 18 percent in 2011, instead of clear improvement in credit and state budget deficit.
The year 2011 also recorded new “shocks”, which caused controversies at the National Assembly’s meetings and on the media, confused banks and raised doubts for the people about the central bank’s effort to control the forex and gold market under the government’s Resolution 11/NG-CP dated February 23, 2011.
The gap between gold price in Vietnam and the world market was sometimes up to VND3-5 million ($150-250) per tael, compared to VND2 million ($100) per tael in 2010. This gap was maintained for months, regardless of the statement of the central bank’s governor that the maximal gap is only VND400,000 ($20).
The end of this, which made people more shocked, is the SJC gold brand of Saigon Jewelry and Gemstone Company, a state-owned company under the management of the HCM City People’s Committee, has become the national gold brand in an unexpected statement of the central bank’s governor at the National Assembly question and answer session in late November. The decision was made without any formality or any procedure.
The third shock is bad debts of banks and black credit bankruptcy. Though it was anticipated in the early 2011, the public could not avoid ‘shock’ when bad debts of commercial banks was reported to VND76 trillion (over 3.5 percent of outstanding debt) by the end of October.
Notably, state-owned enterprises account for 60 percent of the total outstanding debts and 70 percent of bad debts of commercial banks.
The bankruptcy of big debtors in the black credit market in many provinces and cities in late 2011 has hit hundreds of thousands of families. These bankrupt cases also enhanced worries over the healthiness of the local credit market.
The fourth shock is the fall of the real estate and stock markets.
2011 is the first year that the prices of estate products are slashed by 30-40 percent, even 50 percent but many villas and houses are still left fallow.
In the stock market, the prices for many kinds of shares dropped sharply. Some types of shares are sold for VND900/unit, even cheaper than a glass of ice tea at tea shops on pavements, while the prices for all other goods rocketed.
The fifth shock is the abnormal increase of loss-incurring companies, the controversy over the business outcome of the petrol industry and the “heart-breaking” salary of the power sector.
The public was shocked when in 2011, each 10 new companies were established, nine old firms were dissolved, merged or closed for losses.
Up to 450 out of 495 listed firms reported losses. Around 50 percent of small and medium enterprises and over half of handicraft villages said to be very difficult to borrow capital.
The question whether the petrol sector gets profit or incurs loss is not answered yet.
Especially, the public was heavily shocked to know that the Electricity of Vietnam Group (EVN) operated at loss but the average salary paid for its employees is much higher than the peak level in the state’s wage table for any top teacher or scientist in Vietnam.
Identifying problems and dealing with their consequences is now an urgent need to prevent and better control the repetition of these ‘shocks’ in the future.
TVN
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