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READ PARAGRAPH LOCATED BETWEEN THE LINES.--------RICK
(27-06-2008)
Is Viet Nam in dire financial straits?
by Dr Phan Van Thanh
Having emerged from the last 15 years as a success story in terms of development, Viet Nam now finds itself in economic troubled waters caused by a deterioration in macro-economic fundamentals: inflation of 25 per cent year-on-year in May, a widening trade deficit, a liquidity crunch in the banking sector, falling bond prices, a jittery stock market and a looming real estate crisis?
Do all these factors point towards an economic recession on a par with that experienced by Thailand 10 years ago?
To answer this question we need to look at a number of factors such as the country’s development status, the regulatory and supervisory framework, as well as other local and global factors.
The Thai crises started with the bursting of the real estate bubble. That was followed by a 50 per cent depreciation in the baht and the fleeing of foreign direct and portfolio investors who were playing a significant role in the local stock exchange. The whole process was accelerated by the ease with which it was possible to carry out current account and capital account transactions and the baht’s convertibility.
Compared to Viet Nam, the Thai stock exchange was at an advanced stage of development.
Viet Nam’s current negative development is a home-made phenomenon that has been amplified by the international commodity price shocks – which themselves have been mitigated by the fact that Viet Nam is a net oil and rice exporter.
Despite full WTO-membership, the country is not fully integrated into the world economy. The money flowing into Viet Nam so far has been in the form of FDI (foreign direct investment), ODA (official development assistance) and other long-term investments, against a limited short-tern fund entry. At the end of 2007, the country’s external debt was worth 29 per cent of its GDP – at the end of 1996 Thailand external debt stood at 59 per cent of its GDP.
The Viet Nam dong is not yet convertible and the foreign exchange market is controlled. The stock exchanges are still small and in an early stage of development. From the end of 2007 to now, total market capitalisation has dropped by 60 per cent. A large part of the stock portfolio involves property and securities held by non-residents, which have lost a large part of their value. However, that figure is far less that the cumulative inflow of US$9 billion since 2006.
The widening trade deficit, around $14.4 billion in the first months of this year, is threatening the country’s balance of payments and putting significant pressure on the dong. However, national reserves, excluding gold, are worth $20.7 billion – worth more than three months of imports – plus net FDI and FII, which have helped to buffer the risks.
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On the policy and regulatory fronts, the Government has declared that it will keep the exchange rates running flexibly, curb speculation on the grey market and not devalue the dong.
===============================================================
Current account transactions were liberalised some time ago but capital account transactions are still subject to controls, which will keep outflows at a manageable level and ease pressure on the exchange rate.
Facing the toughest challenge yet, the Government has worked out a package of measures designed to restore macro-economic stability, which has come at the cost of some growth (down 9 per cent to 7 per cent in 2008). As well as monetary and fiscal policies, the package includes strict administrative and punitive measures to curb market speculation.
The fight against inflation began with the central bank hiking prime rates, raising reserve requirements, issuing compulsory bonds and ceiling credit growth of 30 per cent in 2008, together with flexible foreign exchange rates that are supported by the price controls on some strategic goods. This has demonstrated to some extent the central bank’s policy-making and regulatory ability.
In supporting (rather than burdening) monetary policy, the fiscal measures are designed to cut government spending, which includes spending on inefficient State-owned enterprises.
The Government’s recent moves to consult international organisations on how to deal with its economic problems have been welcomed by the media, the business world and investors, who still demonstrate confidence in Viet Nam’s medium – and long-term outlook – as evidenced by record high registered FDI of $ 31.6 billion in the first half of 2008, compared to $21.3 billion in 2007.
Positive signs that the Government’s actions were working were shown in market movements in June. Credits in the first half 2008 slowed to 20 per cent compared to 54 per cent in 2007; domestic consumption is slowing; imports show signs of dropping; the consumer price index in major cities is slowing down and property prices have fallen by 20 per cent to 60 per cent.
While helping to deflate the looming real estate bubble, monetary tightening has resulted in a liquidity crunch that is also hitting sound enterprises and projects – including much needed infrastructure ones that are essential for sustainable economic growth. This in turn creates funding problems and fuels borrowing costs, leading to a slowing down in the economy.
Overall, I do not see an imminent crisis but I do see Viet Nam facing major challenges ahead.
The Government’s fiscal policy must be decisive and consistent in order to support the effectiveness and efficiency of its monetary measures. —VNS
UPDATE 3-Vietnam suspends gold imports as trade gap widens
Mon Jun 23, 2008 1:37pm IST
By Lewa Pardomuan
SINGAPORE, June 23 (Reuters) - Vietnam has temporarily suspended gold imports as Hanoi struggles with a trade deficit that has tripled this year, but the move is unlikely to lift local prices because of plentiful supplies and weak demand.
The move, in place for the past two weeks, is an effort by Asia's second-largest gold investor to ease the economic burden as Hanoi steps up efforts to rein in inflation by tightening credit, said Hyunh Trung Khanh, a consultant for the Vietnam chapter of the World Gold Council.
"The government is very concerned. They have to reduce the trade balance deficit. Gold is one of the main imports," he said.
But traders added only a prolonged suspension could cut domestic supplies and trigger a scramble for safe-haven assets. Fears that the dong could fall in value are making dollar holders reluctant to let go of their foreign exchange.
"Of course this depends on how long the suspension lasts," said Adrian Koh, an analyst at Philip Futures in Singapore.
Traditionally, Vietnamese use gold for savings, jewellery and real estate transactions but when inflation is high many choose gold or the U.S. dollar to hedge against inflation.
Khanh said Vietnam had imported 60 tonnes of gold valued at $1.8 billion in the January-May period, up 100 percent from the same year-ago period.
The central bank have given quotas to 40 banks and trading houses to import 73 tonnes of gold in 2008, up slightly from about 70 tonnes in 2007.
"They have required companies and banks which have not imported yet to remit back their remaining quotas to the central bank. Eleven tonnes have not been imported yet," said Khanh.
Vietnam imported 77.7 tonnes of gold -- both for jewellery and for investment in 2007 -- well below purchases by main consumer India, which imported more than 700 tonnes last year.
For a graphic on Vietnam's gold investment demand, click on: here
OVERHEATING
Following a year of overheating and high credit growth, 2008 has been strained for Vietnam, where macroeconomic stability was taken for granted as it boasted one of the world's highest growth rates, averaging 7.5 percent a year since 2000.
Speculation that the dong would fall has weighed on the currency.
Gold powered to a record of $1,030.80 an ounce on March 17on record-high crude oil, which raised fears of inflation and expectations of more rate cuts in the United States, making the metal more attractive as an alternative investment.
Gold <XAU=> has since corrected and stood around $905.85 on Monday, and barely reacted to the news on Vietnam.
"We have imported quite a lot. So there's still quite a lot of gold inside the country, and the demand in June is slowing down. The difference between the local and international gold price is not very high," he said without elaborating.
The price of gold was quoted by local dealers at around $873 an ounce, lower than international prices.
"Re-export of gold is not restricted but we have not seen any selling on the international market so far because they can still make a good, handsome profit in the local market," said an official at the Vietnam Gold Traders Association. (Additional reporting by Nguyen Nhat Lam in HANOI; Editing by Sambit Mohanty)
© Thomson Reuters 2008 All rights reserved
AP Texas News
June 23, 2008, 6:49AM
Vietnam's PM visits US
By MARGIE MASON Associated Press Writer
© 2008 The Associated Press
HANOI, Vietnam — Vietnam's prime minister began a visit to the United States on Monday, hoping to gain some economic tips that might help ease soaring inflation at home.
Prime Minister Nguyen Tan Dung is the communist country's third high-ranking leader to visit Washington since the former foes normalized relations in 1995, two decades after the Vietnam War ended. The countries have since built strong economic ties, with the U.S. becoming a leading trade and investment partner.
Vietnam's inflation, which hit 25 percent in May over the same period last year, is among the region's highest. The country began opening up to a market economy in the mid-1980s, and Dung said it still has a lot to learn.
"The Vietnamese government attaches importance to the experiences of other countries, including the U.S., and is willing to exchange views with other countries, experts on experiences in economic development, management of macro economy and in curbing inflation," Dung told The Associated Press in a written response to submitted questions.
Dung was expected to meet President Bush, Treasury Secretary Henry Paulson and former Federal Reserve Chairman Alan Greenspan during his trip. He also planned to open a new Vietnamese consulate in Houston, home to thousands of Vietnamese-Americans.
Dung was not expected to make stops on the West Coast, where the largest population of overseas Vietnamese, known as Viet kieu, live. Many remain fiercely anti-communist after fleeing to the U.S. as refugees when the U.S.-backed South Vietnamese government fell to northern communist forces in 1975.
Former Prime Minister Phan Van Khai was met with protests during a 2005 stop in Seattle — the first time a Vietnamese leader paid an official visit to the U.S. since the war.
President Nguyen Minh Triet traveled to Washington last year, and a number of high-level U.S. leaders have also stopped in Hanoi, including Bush's visit in 2006 when he attended the Asia-Pacific Economic Cooperation forum.
U.S. Ambassador Michael Michalak said last week that Dung and U.S. officials would discuss topics ranging from trade and investment to climate change, nuclear energy and education. Human rights also will be on the agenda, following a number of arrests involving U.S. citizens who were peacefully promoting democracy.
Dung maintains that "there are no political prisoners in Vietnam." He has also defended the recent arrest of two Vietnamese journalists who had aggressively reported on a high-profile corruption scandal. They were accused of abusing power for allegedly publishing inaccurate information about the case, which involved several government officials. Several newspapers have called for the journalists' release — a bold move in a country where all media are state-controlled.
"The two journalists were not probed and detained because they fought against corruption," Dung said. "Vietnam is a law-governing state, all citizens are equal before the law and protected by laws and will be severely punished if they violate the laws regardless of who they are."
Michalak said he expected many business deals to be signed during the visit. Executives from about 60 Vietnamese companies were traveling with the prime minister.
Two-way trade between the countries topped US$12 billion in 2007, an increase of 34 percent from 2006, according to government figures.
Vietnam H1 trade deficit triples to $16.9 bln-paper
Mon Jun 23, 2008 7:37am IST Email | Print | Share| Single Page[-] Text [+] HANOI, June 23 (Reuters) - Vietnam estimated its trade deficit would more than triple to $16.9 billion in the first half of this year as imports soared 64 percent, a state newspaper reported on Monday.
The government is expected later this week to release full data on trade and inflation, which reached 25.2 percent in May, as the imbalance and rising prices strain the developing economy and hurt domestic investor confidence.
The official Lao Dong (Labour) newspaper cited Planning and Investment Ministry statistics as recording January to June imports would surge to $45.5 billion while exports would rise 27 percent from the first six months of 2007 to $28.6 billion.
The trade deficit was $5.2 billion during the first half of last year while the full-year trade deficit was $12.4 billion, according to government data.
"This is causing imbalance to the payment account and is the factor triggering fluctuations in the foreign exchange rates recently," the Vietnam Labour Confederation-run newspaper said.
The daily exchange rate set by the State Bank of Vietnam, the central bank, values the Vietnamese dong <VND=> 9 percent higher against the dollar than the black market rate. On Monday, the central bank set the rate at 16,450 dong to the dollar, while the unofficial rate was about 18,000 dong to the dollar.
Vietnam has total foreign exchange reserves of $20.7 billion, State Bank of Vietnam Governor Nguyen Van Giau told international investors last week.
The Planning and Investment Ministry has forecast exports to rise 37 percent this year to $83 billion, above the government's initial projection of 20-25 percent, but that the trade gap would widen to $30 billion. (Reporting by Ho Binh Minh; Editing by Grant McCool)
Vietnam's Controls Will Avert Crisis, S&P's Chew Says (Update3)
By Patricia Lui and Jason Folkmanis
June 19 (Bloomberg) -- Vietnam's ``extensive'' capital controls and the management of its currency will prevent overseas investors from fleeing the nation even as inflation accelerates and economic growth slows, said Standard & Poor's.
Foreign funds are mostly limited to buying property and stocks, said Ping Chew, the Singapore-based head of Asian sovereign and corporate ratings at S&P, the first of three ratings firms to lower the Southeast Asian nation's credit outlook to negative. Stocks have slumped almost 60 percent this year, the world's worst performance, and the dong is set for its biggest drop since 2001, falling 3.6 percent.
``Vietnam is not in a currency crisis,'' Chew said in a June 17 interview. ``There's definitely a bit of hot money that went in. But is it going to leave en masse like that which decimated Asia in 1997? I don't think so.''
S&P cut the country's BB long-term foreign currency rating outlook to negative May 2, saying the country's overheating economy was a risk to stability. That is two levels below investment grade. Vietnam's inflation rate rose to 25 percent in May as food and energy prices climbed and the trade deficit tripled in the first five months of the year.
Foreign investors have cut their stock purchases in half this year to $334.2 million, according to data compiled by Bloomberg. Morgan Stanley last month said the dong was heading for a ``currency crisis,'' citing a widening current-account deficit. Calyon, Credit Agricole SA's investment banking unit, said this month there was a threat of a balance of payments crisis and Citigroup Inc. said a banking crisis is the primary problem facing Vietnam.
`Very Bad Story'
The dong closed at 16,616.50 per dollar in Hanoi from 16,619.00 yesterday. It is allowed to trade 1 percent either side of a reference set by the central bank each day. The State Bank of Vietnam weakened the dong by 2 percent on June 11 seeking to prevent currency speculation and raised rates to 14 percent from 12 percent to curb inflation.
Forward contracts are pricing in a 33 percent drop in the next year, after taking into account interest-rate differentials, according to offshore 12-month non-deliverable forwards at 24,800 per dollar. Forwards are agreements in which assets are bought and sold at current prices for future delivery.
``Vietnam is turning into a very bad story,'' said Thomas Harr, a senior currency strategist from Standard Chartered Plc in Singapore. ``The 2 percent devaluation a few weeks ago was not a good move. They should instead have been more aggressive on hiking rates to signal that they are committed to dealing with inflation.''
The dong won't stop falling until investors are convinced of the central bank's commitment to fight inflation, he said.
Cracking Down
The impact of flagging confidence will be limited as investors will ``have difficulty'' taking profits out of Vietnam, said Joseph Lau, an economist at Credit Suisse Group in Hong Kong.
``Generally banks aren't allowed to trade the currency for speculation, you need to have a reason for it,'' said Lau. ``It is difficult for a householder to purchase dollars legally, which is why when they do want to do it, they have to go through the black market.''
Vietnamese banks selling U.S. dollars at a higher rate than the official trading level will be fined and may have their trading licenses withdrawn, Vietnam News reported, citing an official at the central bank.
While a ``herd mentality'' has led to a loss of confidence in the dong among some Vietnamese, the country's banking system is stable, said Dam Bich Thuy, Australia & New Zealand Banking Group Ltd.'s chief executive for Vietnam. ANZ has a 10 percent stake in Saigon Thuong Tin Commercial Joint-Stock Bank and a 12 percent stake in Saigon Securities Inc.
Banking Confidence
``We see some people trying to get dollars, but then they still put their dollars back into the banks,'' Hanoi-based Thuy said. ``They don't take money out and put it under the mattress.''
Vietnam's economy ``is in reasonably good shape,'' buoyed by strong currency reserves, Alex Thursby, Asian-Pacific managing director for ANZ told reporters in Ho Chi Minh City. ``I don't think there's a crisis.''
Vietnam's foreign currency reserves are about $20 billion to $22 billion, Credit Suisse's Lau said. By comparison, the market capitalization of companies on Vietnam's benchmark stock market, the VN Index, is $9.08 billion, the second smallest in Asia after Sri Lanka, according to data compiled by Bloomberg.
``This is still a managed currency with extensive capital controls,'' said Chew at S&P, which issued a report today saying that Vietnam faces pressures but no crisis. ``For the negative outlook to turn around, we need to see more tightening measures, we need to see them addressing lending problems in banks.''
Balance Sheets
Bank's non-performing loans may increase as the economy slows and the central bank raises lending costs, said Chew. The economy expanded 7.4 percent in the first quarter from a year earlier. Last year, gross domestic product grew 8.5 percent, the fastest pace since 1996.
The balance sheets of banks in Vietnam may not reflect the state of the bad loans as the country has yet to adopt internationally accepted accounting standards, he said. Non- performing loans are debts which fall behind on interest payments or are unable to service principal repayments.
To contact the reporters on this story: Patricia Lui in Singapore at plui4@bloomberg.net; Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net
Last Updated: June 19, 2008 08:34 EDT
Vietnam Doesn't Plan to Allow Currency to Depreciate (Update1)
By Soraya Permatasari and Shamim Adam
June 15 (Bloomberg) -- Vietnam doesn't plan to let the dong depreciate because it would affect the economy, Finance Minister Vu Van Ninh said, identifying a fight against inflation as the government's biggest priority.
Vietnam's inflation rate, running at the fastest since 1992, may ease to below 10 percent next year as the government takes steps to cool surging prices, Ninh told participants at the World Economic Forum on East Asia in Kuala Lumpur today. ``We do not intend to depreciate the dong because it will have a great impact on our economy,'' he said.
Vietnam's central bank has increased borrowing costs three times this year to 14 percent, the highest in Asia, as the Southeast Asian nation seeks to tame accelerating inflation by tightening credit and cutting the supply of money. It lowered the dong's reference rate by 2 percent to prevent currency speculation on June 11.
``Our economy has been impacted especially with high inflation,'' Ninh said today. The government's biggest priority is to contain consumer price gains and ``restore economic stability.''
Consumer prices surged 25 percent in May, and analysts have warned the economy is at risk of a hard landing. The central bank increased interest rates on June 11 to 14 percent from 12 percent. It sets a daily reference rate that allows the currency to fluctuate by 1 percent on either side.
Tighter monetary policy this year has affected the stock market, Ninh said.
Political Stability
The country is experiencing ``short-term'' difficulty due to ``shortcomings'' in the economy, Ninh said. The government will need time to control inflation, which won't be an easy task; Vietnam's inflation is both ``domestically rooted'' and imported, he added.
The government, which has maintained its fuel subsidies to provide a safety net and ensure ``political stability,'' won't raise fuel costs this month and will take into account global crude prices when deciding on any increase in July, Ninh said in comments translated from Vietnamese.
``We maintain petrol prices low, so step by step we'll adjust the price,'' he said.
Vietnam may have to adjust oil and gasoline prices should global crude costs keep rising, Deputy Minister of Industry and Trade Nguyen Cam Tu said earlier this month. The government caps gasoline prices to keep fuel affordable for the country's 85 million people.
Trade Deficit
The nation's trade deficit tripled in the first five months of the year to $14.42 billion from $4.25 billion in the same period a year earlier.
Standard & Poor's, Moody's Investors Service and Fitch Ratings have all lowered their outlook on Vietnam's credit rating to negative since the beginning of May.
Vietnam's bank lending surged 50 percent last year as banks extended credit to retail investors and brokers to buy securities, and demand for mortgages increased as the real estate market boomed.
The government sees ``much potential for growth'' and will continue to implement reforms including selling state-owned enterprises, Ninh said today.
To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.netSoraya Permatasari in Kuala Lumpur at soraya@bloomberg.netChan Tien Hin in Kuala Lumpur at thchan@bloomberg.net
Business Banter
(13-06-2008)
How rate hikes are stabilising the economy
By Ha Phuong
The State Bank of Viet Nam’s whopping two per centage point interest-rate hike and the weakening of the local currency by almost another two per cent are welcome steps to reduce inflation and to narrow the burgeoning trade deficit.
However, more requires to be done to reach national targets.
Given that some organisations predicted Viet Nam might need an IMF-style assistance prog-ramme, the Prime Minister has confirmed Viet Nam does not need help at this stage.
On Tuesday, the central bank lifted the prime rate from 12 to 14 per cent, the refinance rate from 13 to 15 per cent, and the discount rate from 11 to 13 per cent – the second time it has raised the benchmark in within four weeks.
At the same time, to control the overheated economy, it adjusted down the Vietnamese dong against the US dollar by 1.96 per cent to VND16,461 from the previous VND16,139.
The two decisions came two weeks after the release of a 25.2 per cent annualised inflation rate in May – the highest since 1992 – and a trade deficit of US$14.4 billion caused by surging imports.
Foreign investors at a business forum in Ha Noi earlier this month warned local commercial banks they were facing a severe liquidity situation and might have to merge to survive. A Goldman Sachs report on Tuesday stated that by adjusting the price of money, interest-rate hikes would be more efficient than administrative measures, such as credit controls and raising compulsory reserve requirements.
It added that this would create less distortion and have more long-lasting impact on slowing the economy.
The International Monetary Fund (IMF) last week also suggested Viet Nam tighten monetary and fiscal policy to fix its overheating economy.
IMF’s chief representative in Viet Nam, Benedict Bingham, said the central bank should raise interest rates to provide adequate returns to those savings – and to bring credit growth and inflation under control.
On the other hand, some economists now believe the central bank should increase interest rates even more.
Vo Tri Thanh, senior economist with the Central Institute for Economic Management said that a further one to two per cent rise in the prime rate would be acceptable "if the inflation shows no sign of braking."
Normal adjustment
The resetting of the inter-bank exchange rate at VND16,461 was a dramatic rise from VND16,139 the previous day – and some were concerned that this meant a real devaluation of the dong by the central bank.
However, late last week, Prime Minister Nguyen Tan Dung said Viet Nam would not devalue the dong.
Responding to the concerns, the SBV’s governor, Nguyen Van Giau, explained that the change was a normal adjustment to make the exchange rate closer to market forces.
"It’s not a currency devaluation at all. Any adjusting is aimed at gradually stabilising the market. When the market becomes more stable, we will stop our adjustments. I have thoroughly discussed the situation with the Prime Minister," said Giau.
In other words, when people look at the nominal and real exchange rates, they will realise the latest moves will benefit exporters.
So far this year, the exchange rate has remained stable at about VND16,000 to the US dollar. If it had not been for marker interventions by the central bank, the dong would have appreciated early this year when capital inflows were still considerable, said an economic update titled "Taking Stock" by the World Bank.
However, the report added that the Vietnamese currency depreciated slightly when portfolio inflows slowed down and the surging growth of imports used up a large amount of US.
The apparent stability of the nominal exchange rate hides a sizeable real appreciation of the dong in recent months.
"This was the result of the two opposite forces. By implicitly pegging the dong to the dollar, the monetary authorities allowed a depreciation of the dong because the dollar depreciated against the other major currencies Viet Nam uses to import or export goods," the World Bank report said.
It added that if Viet Nam had pegged the local currency to a basket of currencies, including the euro and the Japanese yen, with the weights reflecting the pattern of Viet Nam’s foreign trade, the price of the dollar to the dong would have fallen by roughly 5 per cent.
However, during this period, inflation in Viet Nam was much higher than that of its main trading partners. This gap amounted to a loss of competitiveness for the domestic economy.
The World Bank said that if the central bank tried to maintain competitiveness with Viet Nam’s main trading partners, the price of a dollar to the dong should have increased by about 12 per cent.
The report claimed that the appreciation of the dong was not a welcome development when the economy was facing a large trade deficit.
So, according to the Goldman Sachs report, it was "laudable that the Vietnamese monetary authority has reacted pre-emptively against the Vietnamese dong overvaluation in real terms and undertook a policy change before the currency crisis risks escalated to a less-manageable level."
Many now understand that the weakening of the dong is modest based on the calculations of the World Bank. In fact, the dong could have easily fallen to 18,075 to the dollar.
However, there are those who believe the depreciation is still not big enough to cut losses for Vietnamese exporters – and therefore encourages the importation of goods.
The IMF believes greater exchange-rate flexibility would simplify monetary management and help the central bank manage shifts in capital flows more effectively. — VNS
WE SHALL NEVER FORGET OUR LOST BROTHERS AND SISTERS. -RICK C
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http://www.bangkokpost.com/
Search begins at Vietnam site for remains of Army captain
Associated Press
June 11, 2008
HARTFORD, Conn. - The search is beginning for the remains of an Army captain from Waterford who was shot down over Vietnam in 1972.
A U.S. military team is excavating a ridge west of Vietnam's Hue City to find the remains of Arnold "Dusty" Holm. U.S. Rep. Joe Courtney, D-Conn., confirmed the start of the work.
Holm, who was a 28-year-old Army captain at the time, and two passengers are believed to have died in a downed helicopter on June 11, 1972.
The search team, coordinated by the Joint POW/MIA Accounting Command, is set to continue through July 25. It will use techniques similar to an archaeological dig.
Work two years ago found the site where Holm's scout helicopter was believed to have crashed.
---
Information from: The Hartford Courant, http://www.courant.com
Thursday June 12, 2008
• EXCH RATES
Baht/$ 33.08/12
Bid/Ask
GOLD
13,650
- 250
Vietnam a concern for Thai bankers
BBL, SCB and Exim monitoring exposure
SOMRUEDI BANCHONGDUANG & WICHIT CHANTANUSORNSIRI
Local bankers are watching nervously events to the east, where Vietnam appears to be on the verge of a full-blown currency crisis.
Wittaya Supatanakul, an adviser for the international banking group at Bangkok Bank, said the country's largest bank did not expect a significant impact if the Vietnamese dong were sharply devalued.
''[Bangkok Bank] will continue its current investment plan in Vietnam, although we along with other banks have been affected by the lack of liquidity in the market,'' he said.
The Vietnamese economy is teetering on the verge of a currency crisis as authorities wrestle with inflation as high as 25%, a sharp decline in the equities market and deteriorating economic conditions in the global market.
Based on forward contracts in the currency markets, the dong is up to 40% overvalued compared with the US dollar, as the country's trade and current deficits have soared due to the soaring cost of oil imports.
The State Bank of Vietnam on Tuesday announced a minor depreciation of 2% in the dong's official reference rate and a rise in policy interest rates to 14% from 12%. The rate hike also pushed the ceiling for deposit and lending rates to 21% from 18%, as the central bank tries to tighten monetary policy to slow economic growth and inflationary pressure.
The central bank has also moved to curb bank lending growth at less than 30% this year compared with 33% last year.
Limits have also been imposed on lending to the property sector and for margin lending for share trading to curb asset speculation.
The controls have hit asset prices hard, with property prices in Vietnam down 30% to 35% over the past six months. The Vietnamese stock exchange has also lost 65% in value over the past 14 months.
Mr Wittaya said Bangkok Bank had been ''slightly affected'' by the poor macroeconomic situation in the country, adding that its outstanding loans were primarily to Thai and other foreign investors in the Vietnamese manufacturing sector.
Bangkok Bank operates two branches in Vietnam. Its Ho Chi Minh City branch has outstanding loans of US$340 million and its Hanoi branch $110 million.
''The bank does have to be more prudent in doing business in the country, given the uncertainties about the dong and the economy. We will focus on monitoring and helping our existing customers rather than expanding lending,'' Mr Wittaya said.
Paspun Suvanchinda, an executive vice-president at Siam Commercial Bank, said the bank was taking a similarly cautious line.
SCB operates a joint venture with the Vietnam Bank for Agriculture and Rural Development, the country's largest state-owned bank, as well as with the CP Group.
The three partners hold equal shares in VinaSiam Bank, which operates six branches in Vietnam and a loan portfolio of around US$90 million.
At the Export-Import Bank of Thailand, officials said the quality of loans exposed to the Vietnamese market had not been affected to date.
Kittiporn Limpisvasti, an Exim Bank senior executive vice-president, said most of the bank's outbound projects to Vietnam were relatively small.
''But we are reviewing how the economic situation in Vietnam might affect credit quality and the viability of various business ventures,'' he added.
Mr Kittiporn said existing loans for Thai projects in Vietnam were all current. The Exim Bank also had another 10 to 20 million baht worth of exposure in the form of export guarantees, which to date have not yet been exercised.
''If the crisis deteriorates, we will likely stop our transactions. But the situation is not yet at that point,'' he added.
One problem facing outside analysts was in gaining accurate economic data about the state of the Vietnamese economy, Mr Kittiporn said.
Foreign reserve figures vary from as low as $15 billion to as much as $26 billion, depending on how the numbers are calculated. Trade deficit, at $14.4 billion for the first five months of the year, would seem to be highly alarming for the country's external finances, although authorities say the gap can be covered by foreign investment flows and aid from foreign countries.
''Certainly we hope that Vietnam can find a way to handle the crisis, and possibly learn from Thailand's own experience during the 1997 crisis,'' Mr Kittiporn said.
''Actually, one major difference between Thailand then and Vietnam now is the fact that in 1997, Thailand had huge foreign debt levels, much more than Vietnam has today.''
Vietnam hikes rates; adjusts currency downward
By Lisa Twaronite, MarketWatch
Last update: 3:23 p.m. EDT June 10, 2008Comments: 3SAN FRANCISCO (MarketWatch) -- Vietnam's central bank tightened policy in the face of inflation Tuesday, and also adjusted its official exchange rate downward in an effort to thwart currency speculation.
The State Bank of Vietnam increased its refinancing rate on Tuesday to 15% from 13% and the discount rate to 13% from 11%. The central bank also said it would set Wednesday's official exchange rate at 16,461 dong per U.S. dollar, compared with 16,139 dong on Tuesday.
The dong is allowed to trade 1% above or below the official exchange rate. But last week, a dollar bought as much as 18,500 dong in the black market, as investors bought dollars to hedge against soaring prices.
"I think the implication of the move is that the effective spot dong rate might now appreciate a couple of percent, as it is still 4% to 5% above the new official rate," said James Malcolm, global emerging markets currency strategist at Deutsche Bank in London.
Last week, Moody's Investors Services cut its outlook on Vietnam's key ratings from positive to negative, becoming the third of the three major ratings agencies to cut their outlook on the country. See full story.
Moody's cited "policy shortcomings in addressing inflationary and balance-of-payments pressures."
Vietnam's inflation rate surged to 25.2% in May.
The interest rate and currency moves likely signal that the policymakers recognize the need for both a tightening and a foreign exchange adjustment, and are carrying it out in a gradual and controlled manner, said Win Thin, currency strategist at Brown Brothers Harriman.
"We think Vietnam can manage the adjustment process well, and really don't see any destabilizing hot money flows," Thin said, such as those that flooded into Thailand and other South East Asian countries during the 1997 Asian currency crisis.
"We believe policy-makers will continue to engineer a gradual depreciation of the dong as the year progresses, but not by a huge amount, as a big 30% devaluation would boost inflation even higher," said Thin.
Vietnam's stocks have tumbled more than 50% this year, making them the worst performer in their asset class, as the country struggled with inflation and a hefty trade deficit. Read more on Vietnamese stocks.
Against that backdrop, the dong has been dropping against the U.S. dollar since it hit a multi-year high of 1.5820 in late March.
Lisa Twaronite reports for MarketWatch from San Francisco.
PRESS DIGEST - Vietnam newspapers - June 10
Mon Jun 9, 2008 10:37pm EDT
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More Business & Investing News... HANOI, June 10 (Reuters) - These are some of the leading stories in the official Vietnamese press on Tuesday. Reuters has not verified these stories and does not vouch for their accuracy.
- - - -
FINANCIAL NEWS:
THANH NIEN
-- Several banks continued to raise interest rates on dong deposits above 16 percent per year to attract dong depositors.
- - - -
-- Viet A Bank has raised interest rates on dong deposits to up to 16.5 percent per year, the highest yield on dong deposits offered by commercial banks.
- - - -
THOI BAO KINH TE VIETNAM
-- Depositors who put money in foreign currencies at banks can withdraw the whole principal and interest in foreign currencies, the Department of Foreign Exchange Management said in a document to refute a rumour that commercial banks would not allow depositors to withdraw their savings in foreign currencies.
-- Local authorities of Thua Thien - Hue province licensed a subsidiary of Singapore's Banyan Tree Group (BANY.SI: Quote, Profile, Research) to invest $875 million in a resort complex called Laguna Hue.
-- Gemadept Joint Stock Company GMD.HM will carry out the issue of 24.5 million additional shares that was scheduled in late 2007 or in the first quarter of 2008 but temporarily suspended due to the stock market's decline.
- - - -
ECONOMIC AND GENERAL NEWS:
SAIGON GIAI PHONG
-- Contractors have completed more than 90 percent of the construction of Dung Quat refinery and aimed to put the plant into operation on time by February. The refinery will meet about 30 percent of national oil product demand, officials said.
- - - -
TUOI TRE
-- Vietnam has had no bird flu outbreaks in the past 14 days, Deputy Agriculture Minister Vu Van Tam said.
- - - -
VIETNAM NEWS
-- Deputy Prime Minister cum Foreign Minister Pham Gia Khiem emphasised his wish to strengthen dialogue between Vietnam and the Vatican as a Vatican delegation visited the country.
-- Prime Minister Nguyen Tan Dung declared a new campaign against drug trafficking from June through August that includes more efforts to change prevention of illegal drug use.
- - - -
© Thomson Reuters 2008 All rights reserved
So based on what we see & Read latily -WHAT do investors in the DONG THINK will happen-----REVAL or DEVAL
REVALUATION=LESS Number of Dong to BUY US Currency OR
DEVALUEATION=US DOLLAR gets MORE DONG for the Buck.
DONG UPDATES-------------6-9-08
Vietnamese Skeptical of Currency Assurances
By James Hookway
Vietnam's Prime Minister Nguyen Tan Dung said last week he is confident the country won't have to devalue its currency.
Ordinary Vietnamese aren't so sure, pushing black-market rates for the dollar to new highs as concerns spread about Vietnam's inflation-wracked economy, especially with oil prices surging.
The country has been hit by a wave of strikes as it grapples with the impact of seven months of double-digit inflation, which hit an annualized rate of 25.2% in May. The stock market has collapsed as investors switch to gold.
On Friday, it cost 18,500 Vietnamese dong to buy $1 on Vietnam's informal ----------
-----------------------------------------------------------------
Vietnam May Intervene to Maintain the Value of Dong (Update3)
By Nguyen Dieu Tu Uyen
June 9 (Bloomberg) -- Vietnam has enough foreign-exchange reserves for the government to step in to maintain the value of the dong, said Prime Minister Nguyen Tan Dung, acting to damp concern the currency will collapse.
``With the foreign-currency surplus, the government will be able to intervene to maintain the dong's value and ensure imports,'' Dung said a statement posted on the government's Web site.
The Southeast Asian nation is battling inflation of more than 25 percent, the fastest since at least 1992, spurring concern that the dong may lose value as the benchmark stock index extends a record losing streak. Rating agencies have lowered their outlook for the nation's debt in the past month, citing a slow government response to inflation.
``The government is now clearly making public what it thinks the problems are, and what it is doing to solve them,'' said Dominic Scriven, a director at Dragon Capital, a Ho Chi Minh City-based investment firm with more than $1.5 billion under management. ``The government is doing the right thing to help the dong regain its value.''
The government last week cut the economic growth target for this year to 7 percent from 9 percent as it tries to slow the pace of consumer price gains. Vietnam is aiming for 2009 growth of as much as 7.5 percent, according to a statement posted on the government's Web site June 7.
Vietnam's balance of payments showed a surplus of $1 billion in the first five months of the year, according to the government statement. The excess will increase to as much as $3 billion for the whole year, Dung said.
Record Losses
The Ho Chi Minh Stock Exchange's benchmark VN Index fell 1.3 percent today, capping a record 23-day losing streak, on concern a widening trade deficit and inflation at a 16-year high will prompt overseas funds to sell local holdings, adding pressure on the dong to decline. The benchmark has lost 59 percent this year.
Morgan Stanley said on May 28 that Vietnam is headed for a ``currency crisis'' because the current-account deficit may swell this year to an ``unsustainably large'' level. Deutsche Bank AG also predicts a dong devaluation because of quickening inflation.
Vietnam's trade gap widened to $14.42 billion in the first five months this year from $4.25 billion at the same time a year earlier, the General Statistics Office said on May 26.
The Prime Minister's statement was released following a meeting with David Fernandez, head of emerging-market research at JPMorgan Chase & Co.
Devaluation `Unlikely'
``Our own view is that Vietnam is close to the peak of the recent bad macro news on inflation and the trade deficit,'' Singapore-based Fernandez said in a research note meeting after the meeting. ``A currency devaluation is unlikely to occur due to foreign-capital flight.''
The dong advanced to as high as 16,246.50 per dollar before closing 0.1 percent lower at 16,290.50 as of 6 p.m. in Hanoi, according to data compiled by Bloomberg. The dong has declined against the dollar for three straight months, the longest losing streak since August.
The State Bank of Vietnam today set a reference rate of 16,132 a dollar, compared with 16,124 on June 6, according to its Web site. The currency is allowed to trade up to 1 percent on either side of the rate.
Minister of Planning and Investment Vo Hong Phuc said last week that the nation doesn't yet need aid from groups such as the International Monetary Fund after Deutsche Bank predicted the country may be forced to seek an ``IMF-style program'' in coming months because of insufficient foreign-exchange reserves.
The country's foreign currency reserves have increased to about $22 billion from $19 billion as of the end of 2007, according to Nguyen Thanh Do, director of external financing at Vietnam's Ministry of Finance. ``The reserves will be much higher at the end of the year,'' Do said.
To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at Uyen1@bloomberg.net
Last Updated: June 9, 2008 07:54 EDT
UPDATE 1-Vietnam says no plans for currency devaluation
Fri Jun 6, 2008 3:26pm IST
HANOI, June 6 (Reuters) - Vietnam's government has no plans to devalue the dong in spite of the forwards markets pricing in a sharp depreciation in the value of the currency one year from now, the country's second-largest bank BIDV said on Friday.
The government also has sufficient foreign currency reserves to meet investors' demands to convert their funds into dollars, Prime Minister Nguyen Tan Dung was quoted as saying in the bank's statement.
Vietnam will strive to reduce its inflation to single digits by 2010, Dung told BIDV Chairman Tran Bac Ha and JPMorgan's Head of Economic and Sovereign Research, David Fernandez, at a meeting on Thursday, BIDV said.
Vietnam's economy and the dong are under pressure from inflation running at more than 25 percent and rising imports.
The country's overall balance of payments for the first five months of the year was a surplus $1 billion, Dung said.
"Given the current forex surplus, the prime minister believed that the dollar/dong trading band should be adjusted in a flexible manner in both directions," the statement quoted Dung as saying of the current daily band of +/-1 percent.
In the short term, the band could be changed to come close to the +/- 2 percent as projected by the government, he said.
Analysts said the remarks would help calm market jitters over recent volatility.
"I think the market has seen some dramatic moves (in Vietnam) recently, and the comments are aimed at trying to calm down the market's nerves over how policy makers are dealing with the inflation problem," said David Mann, currency strategist at Standard Chartered Bank in Hong Kong.
"We are expecting more of a smooth weakening of the dong than the NDF market suggests -- some market expectations do appear to be overdone."
VOLATILITY
Earlier on Friday, BIDV called on the central bank to take more action to stabilise the dong as it fell to fresh lows under pressure from rising import prices [ID:nHAN269583].
In offshore non-deliverable forwards PNDG, the dong firmed to 22,800/23,800 per dollar on one-year term by 0848 GMT, implying the currency will be worth around 30 percent less in a year's time.
The dong's <VND=> spot rate was at 16,283/16,285 per dollar.
Dung said offshore markets which priced in a fall of between 20 and 40 percent in forwards deals had no grounds doing so.
He said the State Bank of Vietnam would step up its measures to intervene in the markets.
"The government will soon publish its foreign exchange reserves in dollars," the BIDV statement said, adding that Dung has asked the State Bank of Vietnam to publish the reserves on a regular basis to win the public's trust.
Dung assured the two bankers at the meeting that Vietnam would not conduct any policy to control foreign portfolio investments, which would contravene the country's commitments toward integration and the market economy it pursues.
Mann of Standard Chartered said rising oil prices have had a major impact on the economy and inflation was likely to climb.
"We are still expecting inflation, which is quite high right now, to go even higher in the third quarter," Mann said. "But we think it will start coming off by the fourth quarter and the first quarter of next year."
(Reporting by Ho Binh Minh and Kevin Yao, editing by Jacqueline Wong)
ietnam dong hits fresh lows as bank calls for actionReuters,
Friday June 6 2008 By Ho Binh Minh
HANOI, June 6 (Reuters) - Vietnam's second-biggest lender called on the central bank on Friday to take more action to stabilise the dong as it fell to fresh lows under pressure from rising import prices.
Ratings agencies have turned negative on the outlook for Vietnam, arguing policy makers are not doing enough to combat the Communist country's 25-percent inflation and swelling trade and current account deficits.
The State Bank of Vietnam, or central bank, set its official daily rate for the dong at 16,124 per dollar on Friday, its lowest level in more than six months. The currency is down just 0.06 percent so far this year.
But the gap between the official rate and the rate the currency is traded at on the black market and offshore is widening, prompting state-run BIDV, Vietnam's second-largest lender, to call for action from the central bank.
"The State Bank should deploy stronger measures to intervene in the market," BIDV Chairman Tran Bac Ha said in a statement sent to Reuters.
On the black market in Hanoi, the dong was changing hands on Thursday at a record low of 18,500 dong per dollar, nearly 13 percent below the official rate.
Offshore non-deliverable forwards were betting the dong would drop in a year's time to 23,500/24,500 per dollar, suggesting a depreciation of around 32.2 percent, deeper than 30 percent indicated on Tuesday.
"The exchange rate fluctuation on the free market in recent days is mainly due to psychological and speculative factors," the central bank said in a statement.
Onshore foreign exchange markets can trade the dong within a band of plus or minus 1 percent from the daily official rate.
FLEXIBLE POLICY
The central bank has said it pursues a flexible exchange rate while the government has said that during 2008 it would allow only a 2 percent annual appreciation or depreciation of the dong.
Given the soaring price of imports, such as raw materials, Vietnam's trade deficit more than trebled to $14.4 billion in the first five months of 2008, higher than the $12.4 billion deficit for the whole of 2007.
BIDV said the dollar rose due to strong demand from importers, especially to pay for oil products, steel and medicine.
It also said importers of luxurious goods and cars have to buy dollars from the free markets, contributing to the rise in the U.S. currency. Regulations don't encourage banks to issue foreign exchange to importers of luxury goods, including cars.
In the past few weeks Fitch Ratings has downgraded its outlook on Vietnam's credit rating to negative from stable and Moody's Investors Service has cut the outlook to negative from positive.
Both agencies highlighted growing economic imbalances.
"The policy response has been both too slow and too small as real policy interest rates remain deeply negative even following their recent increase," Fitch said.
Vietnam has carried out a number of policy measures to try to combat the growing threat of inflation, including raising official interest rates and tightening bank reserves requirements to tighten cash in the banking system.
However, a state-imposed limits on commercial banks mean that deposit and lending interest rates are well below the level of inflation. (Editing by Neil Fullick
Forex policy as fickle as weather
00:04' 15/05/2008 (GMT+7)
VietNamNet Bridge – While the State Bank of Vietnam (SBV) affirms that the foreign currency market has been stabilized, commercial banks still complain that they cannot buy dollars and the central bank has to put billions of dollars into circulation.
In March 2008, SBV’s forex policy saw a change: it let the VND revaluate against the dollar. As the result, the dollar depreciated sharply at that time, once dropping to VND15,882/US$1.
However, the policy could not last for long time. The dollar value unexpectedly increased sharply, forcing the central bank to pump dollars into circulation to restrain the price increases.
The dollar shortage is now not so serious and obvious on the market, but it has been threatening the commercial banks that are keen on import-export payment services. Those banks complain that they cannot buy enough dollars to sell to clients due to the fixed exchange rates. Importers and commercial banks can pay more to get dollars from dollar holders, but they dare not do that.
The only dollar supply source importers and banks are relying on is the central bank. However, the supplies from the source just come in dribs and drabs.
Businesses and individual dollar holders, who can be the big dollar suppliers to banks, now tend to keep dollars in hands as the tool of saving assets.
Analysts said that people now tend to keep dollars for fear about the trade deficit. According to the Ministry of Planning and Investment, Vietnam’s trade deficit reached $11bil in the first four months of the year ($18.26bil worth of export turnover and $29.36bil worth of import turnover), or 60.8% of export turnover. The prediction that the US may stop slashing US$ interest rates has also prompted people to keep dollars as the dollar value may increase again.
The trade deficit showed the signs of slight decreases in April 2008, and will decrease further if the Government takes drastic measures to control imports. However, the drastic measures may cause other side effects.
The demand for dollars is increasing also because of the more expensive imports (petrol, steel and fertilizer). It is expected that the trade deficit may hit $20bil or higher, therefore, the dollar shortage always ‘lies in wait’.
Commercial banks have been trying to buy more dollars and attract dollar capital. Many banks have raised the US$ deposit interest rate to over 6% (higher than the ceiling interest rate agreed among banks). However, the dollar capital flowing to banks remains modest.
What will VND/US$ exchange rate be like?
Analysts said that the most important factor that decides the VND/US$ exchange rate is the trade deficit level. The Government is attempting to raise taxes and use technical barriers to limit imports.
A foreign banker in Vietnam gave an optimistic forecast about Vietnam’s trade deficit this year. It said that Vietnamese enterprises imported big quantities of steel and equipment in the first months of the year (up by 56% over the last year’s same period), and they won’t do that in the remaining months, which also means that the trade gap will be improved in the coming months.
In principle, the deficit of dollars due to the trade gap can be offset by other supplies of dollars (foreign investment, official development assistance capital and overseas remittance). The Ministry of Planning and Investment is trying to speed up the disbursement of foreign direct investment.
The VND/US$ exchange rate is also decided by another factor, the health of the dollar. The currency, which once depreciated in the world market, is now showing the signs of recovery.
Which forex policy is best?
Experts said that the State Bank of Vietnam was not good at regulating the foreign exchange policy. That explained why the market once saw the dollar excess at one time and then the dollar shortage at other time.
In March 2008, the State Bank said that the VND revaluation will make imports cheaper, which can help curb inflation. Realizing that the central banks would not keep the weak VND any more to encourage export, businesses and people rushed to sell dollars. As a result, the dollars were in excess with hundreds of millions of dollars unable to find buyers. Meanwhile, the State Bank ignored the demand to sell dollars from businesses and the public, and exporters had to claim directly to the Prime Minister.
Just a couple of weeks later, the dollar witnessed an upturn. The State Bank had to sell dollars to stabilize the market (the sold volume was $1.2bil in April). However, it is clear that the central bank is applying the new forex policy under which the VND is weakening against the dollar.
(Source: Tuoi tre
Economic difficulties just temporary: Deputy PM
16:53' 06/06/2008 (GMT+7)
VietNamNet Bridge – “The current economic difficulties are just temporary. Only speculators are leaving Vietnam at this moment, while investors are staying here to continue their business,” said Deputy Prime Minister Hoang Trung Hai at 'Doing Business in Vietnam' held in Hanoi on June 5.
Deputy Prime Minister Hoang Trung Hai
Speaking before several hundred foreign and domestic businesses at the forum, an event under the framework of the Global Summit of Women 2008, the Deputy Prime Minister emphasised that the government of Vietnam is strictly respecting the commitments it made to the international community.
It is speeding up the completion of administrative procedural reforms in order to create more favourable conditions for investors.
Hai said that Vietnam attaches great importance to quality standards in implementing its plan on socio-economic development, striving for a sustainable development and the improvement of competitiveness for businesses and the national economy.
“Vietnam is trying to create favourable conditions for the development of all kinds of businesses under all kinds of economic sectors,” Hai said.
The Deputy PM said that Vietnam is applying fair policies for both foreign and domestic businesses. Every year, Vietnam has 50,000 more businesses with the total capital of $30bil. This shows the dynamism of the business environment in Vietnam with a lot of opportunities.
“Vietnam considers foreign enterprises a part of the national economy. Co-workers and I are here to listen and discuss with you about all the issues you are interested in,” Hai said.
Participants at the business forum
Regarding the performance of the national economy currently, Deputy Prime Minister Hoang Trung Hai said that high inflation, high trade deficit and the low liquidity of the banking system are the biggest challenges for the national economy.
At the business forum, Charly Madan, General Director of Citibank Vietnam, expressed his concern about Vietnam’s economy.
Vietnam has obtained high economic growth rates in the last few years, but it is now facing a macroeconomic imbalance which has been worrying investors. “What will the government do to help investors?” he asked.
Hai said that the government has drawn up eight basic measures to stabilise the macroeconomy. One of the measures is to cut public investments. The government has asked relevant ministries to delay or cancel projects which are not really necessary or urgent. Meanwhile, Vietnam is taking necessary measures to limit imports of luxury products.
Le Thi Thanh Thuy, a domestic businesswoman, said that Vietnam now has to compete with a lot of foreign enterprises. “What will the government do to help domestic businesses improve their competitiveness?” she asked.
Hai affirmed that the government has been taking necessary measures to support businesses. Most recently, the Ministry of Construction proposed abolishing seven of the 13 current construction procedures. The government will release the documents further decentralising investment management, in order to simplify administrative procedures.
However, Hai believes that the improvement of competitiveness will depend a lot on businesses themselves. He related that he knew Vietnamese entrepreneurs were flying to Africa to seek new markets.
Speaking at the Business Forum, the chairman of the Vietnam Chamber of Commerce and Industry (VCCI) also said that the government of Vietnam has been taking a lot of measures to stabilise the national economy and curb inflation. The measures have been supported by the business community and they are showing effects.
Foreign investment in Vietnam steadily increased in the first five months of the year, especially in projects initiated by strategic investors. This shows that domestic and foreign investors are still confident that the current difficulties are just temporary, while the potentials are very big here, in Vietnam, in the long term.
(Source: VNE
US$ price soars to VND18,500/US$1
16:49' 05/06/2008 (GMT+7)
VietNamNet Bridge – The dollar price has officially surpassed the VND18,000/US$1 threshold, selling at VND18,500/US$1,prompting further gold price increases after the falls following the world’s price decreases.
The foreign currency market this morning saw another peak of the price increase wave with the selling price hitting $18,500/US$1.
Quoc Trinh Gold and Foreign Exchange Shop on Ha Trung street in Hanoi this morning quoted the prices of VND17,900 (purchasing) and VND18,200/US$1. Meanwhile, Phu Quy Gold Shop on Tran Nhan Tong street in Hanoi offered the prices of VND18,000 and VND18,500/US$1, respectively. The highest peak was VND400/US$1 higher than the previous day’s level.
Meanwhile, the exchange rate on the interbank market announced by the State Bank of Vietnam this morning also saw another increase of VND10/US$1 over yesterday morning, at VND16,117/US41.
Dr Cao Sy Kiem, former Governor of the State Bank of Vietnam, has attributed the dollar’s dramatic price increases recently to speculation. Meanwhile, people themselves have been making the situation worse as they have been rushing to buy dollars to hoard up for fear that the prices will go up further. Kiem has advised people not to panic about the price increases, as the black market does not represent Vietnam’s foreign currency market.
At the government’s annual press conference on June 2, Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien affirmed that the government’s policy is to stabilise the VND’s value, and that the VND will not go up or down by more than 2% compared to 2007.
Tien said that people should be cautious with deals on the black market, and rely on the official information provided by state agencies.
The sharp dollar price increases have led gold prices to increase by nearly VND50,000/tael over yesterday, despite the continued falls of the world’s gold prices in the last two consecutive trading sessions.
SJC Gold in Hanoi is now being offered at VND18.28-VND18.38mil/tael, while Bao Tin Minh Chau is offering gold for VND18.2-18.4mil/tael.
On the ACB gold trading floor, gold is being traded at VND18.34mil/tael with 192,000 taels of gold successfully transacted this morning, worth VND3,515bil.
Banks are continuing to raise US$ deposit interest rates. An Binh Bank, for example, is now offering the interest rate of 7.6% at the highest, becoming the bank that offers the highest rate now in the market.
The dollar price has been increasing sharply, hitting the highest peak in the last three weeks. At 11 am this morning, in Asia’s market, the US$ was traded at US$1.5835/EUR1.
(Source: Dan tri, VietNamNet)
State Bank holds line on interest rates
(03-06-2008)
HA NOI — The State Bank of Viet Nam announced yesterday it would retain benchmark rates in place, with the 12-per-cent prime rate, 13-per-cent refinancing rate and 11-per-cent discount rate all left unchanged.
Since the last rate increase on May 19, bank officials said, market lending rates have been becoming more stable, ranging from 15.6-18 per cent per year for short-term loans through State-owned banks, and from 17-18 per cent yearly for mid and long-terms loans.
Borrowing costs for short-term loans through private commercial banks stretch from 14.8-18 per cent annually, and from 16.8-18 per cent for mid and long-terms loans.
Lending rates cannot pass a maximum of 18 per year by law. However, there are still concerns about additional fees and costs charged by banks, pushing the real lending rate to over 20 per cent.
Meanwhile, interbank rates over the past two weeks have fluctuated at 12-18 per cent.
Dong deposits
Deposit interest rates have also shown signs of levelling out.
State-owned banks were offering about 3.6 per cent per year for non-term deposits, 12.71 per cent for three-month term deposits, 12.97 per cent for six months and 13.39 per cent for one year.
Private commercial banks were offering consumers slightly better deals, with 4.38 per cent on standard deposits and up to 14.23 per cent on six-month term deposits. None so far have popped their heads over the 15-per-cent barrier, despite a legal limit of 18 per cent. — VNS
--------------------------------------------------------------------------------
EMERGING MARKETS REPORT
Vietnam stocks tank again; Moody's cuts outlook
Ratings agency cites need to get inflation, balance-of-payments under control
By Barbara Kollmeyer, MarketWatch
Last update: 3:36 p.m. EDT June 4, 2008Comments: 4LOS ANGELES (MarketWatch)
-- Stocks in Vietnam hit fresh two-year lows on Wednesday, as investors fretted about runaway inflation and Moody's Investors Services cut its outlook on the country's key ratings from positive to negative.
The ratings agency, which now is the third of the three major ratings agencies to cut their outlook on Vietnam, cited "policy shortcomings in addressing inflationary and balance-of-payments pressures." The outlook cuts affect the Ba3 long-term government foreign and local-currency ratings and the B1 foreign-currency bank deposit ceiling.
"The economic imbalances now emerging are greater than anticipated, thereby derailing the improving trend previously evident in the country's credit fundamentals," said Tom Byrne, Moody's senior vice president. "Rising inflation is proving very difficult to control, and pressures have rapidly built up on the balance of payments."
'For the authorities, the dilemma now is how to dampen growth without throwing the economy into recession or damaging the environment for FDI (foreign direct investment).'
— Tom Byrne, Moody's
Inflation hit 25% in May, which Moody's blamed on overheated growth driven by "excessive credit expansion" and large "off-budget" spending on development.
Shares in Hanoi fell below 400 points on Wednesday, closing down nearly 1.4% at 395.66, the lowest level since August 2006. Shares were also pressured after the stock exchange said many listed firms hadn't yet established provisional funds to cover losses, according to a report in the London Guardian newspaper.
Vietnam, considered a frontier emerging market, is now the worst performer in its asset class, with stocks nearly halved in value so far this year. See also Where has the mania for Vietnamese stocks gone?
"For the authorities, the dilemma now is how to dampen growth without throwing the economy into recession or damaging the environment for FDI (foreign direct investment)," said Byrne.
Cameron Brandt, global markets analyst at EPFR Global, said the move on ratings is a timely one by Moody's "For the most part it reads to me as a warning to Vietnam rather than this has already happened, and the one real red flag I saw in that was their assertion that actual direct foreign investment flows are beginning to seriously lag."
Moody's noted that direct investment tallied up to more than 9% of gross domestic product in 2007, financing the country's current account deficit for that year. This year so far, inflows have doubled to more than $15 billion, but have lagged a spike in trade and current account deficits for the first quarter.
Moody's said the measured policy response officials in Vietnam have taken this year was further bolstered in May, notably towards reining in credit growth and stabilizing the deposit base of the banking system. It said authorities have expressed intent to tighten further if needed.
"The months ahead will test their resolve in dealing more effectively with inflation and the gaping current account deficit, but for now, macroeconomic and balance-of-payments trends are unsustainable," said Byrne.
He added that Vietnam's high level of foreign exchange reserves is helping buffer fallout from "the abrupt shift now seen in foreign portfolio investor sentiment," but trade and current account deficits could "overwhelm the availability of more stable, long-term financing for the balance of payments, and may put substantial pressure on reserves and the exchange rate."
The ratings agency said Vietnam's credit fundamentals are still favorable with its peers, and long-term prospects will survive if they can put a stronger policy framework into place. Persistently high inflation and large current account deficits could overwhelm the country's capacity to absorb such a shock and further pressure the government's rating, warned Byrne.
"For the rating outlook to improve, we would need to see an end to high inflation, demonstrated stability in the banking system, and a decline in the current account deficit towards a level which can be financed by stable long-term capital inflows," said Byrne.
In or out of the money?
While Vietnam may scream buyer beware for the average retail investor, Brandt said dedicated funds both in the U.S. and Europe are viewing the downward spiral of the Vietnamese equity market as a buying opportunity.
"Vietnam country funds that we track have so far this year attracted more fresh money than has been pulled out of them," he said.
However, the assets of these funds are suffering, given the rough year for stocks, he said, Funds started the year out with $1.4 billion under management, which is now around $814 million.
"Just looking at the numbers that are being driven by investors outside Vietnam, they seem to indicate certainly quite a few people with money who believe the bottom has been hit. They're buying aggressively on dips that you would expect to be scaring people out of this. There are still people who believe Vietnam has value and there hasn't been a wholesale retreat from Vietnam given the market performance," he said.
"If you invest carefully instead of taking a broad brush approach, there are likely to be companies that do well regardless of the domestic background, ones that are geared to a U.S. or Chinese export cycle, serving those particular markets local companies," he said.
Transparency remains an issue for Vietnam, he said, notably official data that is shrouded in secrecy and the fact the government is now going after private business journalists. "Lots of numbers you'd normally base a rational decision on are shaky or just not there," he said.
Indeed, Moody's Byrne noted that it's extremely difficult gauge Vietnam's external payments situation given the secrecy surrounding the international liquidity position of the State Bank of Vietnam, which undermines confidence in analyzing the country's current credit conditions.
Barbara Kollmeyer is an editor for MarketWatch in Los Angeles.
NEVER GOING TO HAPPEN. NOT IN A MILLION YEARS,.
Much different at least in my thinking. I mean if this one world Government is going to happen for real ... I know it is, this is just a step towards it.
the overall picture is we are getting hammered in every way. Since they have done these things below ... what's to say they have not secretly setup the SEC rules on pinks and otc's to allow the CEO and partners, to literally collapse the backs of the people so to gain control and make us a slave. After all the ENRON, California Power Grid, and many other major investigations were in that third building (#7) when it went down six hours after the Twin Towers went down
Vietnam May Accelerate Dong's Decline, Goldman Says (Update2)
By Patricia Lui
June 3 (Bloomberg) -- Vietnam may speed up the pace of the dong's decline to prevent the currency from becoming ``excessively overvalued'' because of soaring inflation, according to Goldman Sachs Group Inc.
Deutsche Bank AG said the currency will weaken as much as 30 percent in the coming months, extending this year's 1.5 percent loss. Consumer prices have risen at the fastest pace in 16 years while the trade deficit has tripled in the four months through April on surging import costs. Forwards show traders are betting the currency will slump 26 percent in 12 months.
``They will be in more trouble'' if they don't consider speeding up the pace of the dong's decline, said Helen Qiao, a Hong Kong-based economist at Goldman in an interview today. ``We are thinking that this is the direction policy makers are moving toward.''
The dong was at 16,255 per dollar as of 4 p.m. in Hanoi, according to data compiled by Bloomberg. Twelve-month offshore non-deliverable forward contracts show traders are betting the U.S. dollar will buy 21,850 dong in a year. Such contracts, settled in dollars, are used by traders to bet on currencies they can't freely convert.
``The probability of the central bank being forced into taking an abrupt and sharp nominal devaluation in the near term is still low,'' wrote Qiao in a report published today. The dong will avoid the scale of devaluation like the Thai baht in 1997, Qiao said, because portfolio inflows and remittances will limit the increase in the trade deficit.
IMF Program
Deutsche's Singapore-based analyst Hak-Bin Chua disagreed with Goldman and echoed Morgan Stanley's forecast of an impending ``currency crisis.''
``An IMF-style program will be needed in coming months,'' Chua wrote in a report dated yesterday. ``This will involve further monetary tightening, sizeable dong devaluation, nationalizing insolvent banks and establishing an asset management entity to carve out bad loans.''
Goldman's Qiao declined to cite a forecast for the currency's accelerated pace of declines, and said Goldman is keeping to its forecasts set in May for the dong to trade at 16,220, 16,260 and 16,400 for three, six and 12 months.
``If inflation deteriorates further for a sustained period, local capital might flee into gold and the dollar, putting the domestic monetary system under stress,'' she wrote in the note. The State Bank of Vietnam may rein in inflation by extending price controls, fiscal measures and tighter controls on credit, Goldman said.
To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net
Last Updated: June 3, 2008 06:54 EDT
well after talking to some friends about the DONG Investment, The General feeling is NOT TOO.I don't see this going any where for a very long time. JMO.
Yeah that would make those who sold today....chasers~
it may take serious outcomes like them to address their finacial turmoil
News Digest
(27-05-2008)
Deputy PM salutes Moody Credit Ratings executive during visit
HA NOI – Permanent Deputy Prime Minister Nguyen Sinh Hung yesterday received Moody’s Credit Ratings Council President Thomas Byrne who is on a working visit to Viet Nam.
Deputy PM Hung informed his guest of the country’s macro-economy and comprehensive solutions taken by the Government to control inflation, ensure social welfare and maintain economic growth.
"Viet Nam places top priority on the fight against inflation and has adjusted the economic growth target," Hung said.
The Deputy PM said Viet Nam was determined to overcome challenges to maintain economic growth and deal with social and environmental issues, like hunger eradication and poverty reduction for the goal of sustainable development.
As a globally leading provider of independent credit ratings, research and financial information to capital markets, Moody’s has conducted credit ratings for Viet Nam since 1995.
Last year, the US-based company released a positive report on Viet Nam’s prospects.
Deputy Prime Minister greets US General Electric official
HA NOI – Deputy Prime Minister Pham Gia Khiem has applauded US General Electric’s (GE) efforts and long-term plans in Viet Nam.
The Deputy PM, who doubles as Foreign Minister, had separate meetings with GE’s senior vice president Brackett Denniston and the vice president and Senior counsel of International Law and Policy, Karan K Bhatia, in Ha Noi yesterday.
The senior leader and GE officials discussed cooperation between Viet Nam and GE and other areas of common concern.
Deputy PM Khiem praised vice president Bhatia’s contributions to Viet Nam-US bilateral relations, particularly the vice president’s work as US deputy trade representative in 2005.
Bhatia chaired Viet Nam-US negotiations and signed a bilateral agreement for Viet Nam to join the World Trade Organisation. He also led a campaign for Permanent Normal Trade Relations status for Viet Nam and signed a framework agreement on trade and investment between the two countries. — VNS
Go to Google News
A market stall owner (right) sells food at a local market in Hanoi, Vietnam where inflation hit 25 percent in May
inflation hits 25 percent in May
1 day ago
HANOI (AFP) — Vietnamese consumer prices surged by over 25 percent in May compared to the same month last year, a trend driven mainly by sharply higher food prices, the communist government said on Tuesday.
Prices shot up an estimated 3.91 percent between April and May alone, a period that saw panic-shopping for rice as prices surged, the highest month-to-month rise since 1995, said the General Statistics Office (GSO).
Food and beverage costs rose by over 42 percent year-on-year, with rice up almost 68 percent in May compared to a year earlier, said the GSO.
Housing and construction materials rose 23 percent, clothing and footwear prices were up 9.5 percent, pharmaceuticals and health care increased by 8.2 percent, and the cost of household goods and appliances rose by 7.5 percent.
For the first five months of the year, prices rose by 15.96 percent.
Inflation -- driven by record high global oil and food prices -- has hit much of Asia this year and stoked public anger and fears of food shortages in Vietnam, a country of 86 million people.
In late April, many supermarkets ran out of rice in Ho Chi Minh City and other cities as consumers, worried by rumours of looming shortages, queued to stock up on rice, further driving up retail prices.
Prime Minister Nguyen Tan Dung in an urgent message said that Vietnam, the world's number-two rice exporter, has enough stocks to meet domestic and export demand and warned speculators of "severe punishment."
Rising prices have outpaced wage increases and fuelled industrial unrest in Vietnam. Factories were hit by 295 labour strikes in the first three months of 2008, the official labour union reported according to the Lao Dong newspaper.
NEWS for today-
------------------------------------------------
Many Viet Nam products may enter US duty-free
(24-05-2008)
Crude oil, exploited at Bach Ho Field, is one of Viet Nam’s major export products to the US which could benefit from the Generalised System of Preferences (GSP). — VNA/VNS Photo Tran Am
HA NOI — Many Products from Viet Nam may be able to start entering the US market free of import duties sometime this year, says the Ministry of Industry and Trade (MoIT).
Under the US’s Generalised System of Preferences (GSP), potentially duty-free products from developing and underdeveloped countries are given preferential duty-free entry in order to enhance the benefited countries’ trade and economic growth.
Viet Nam was exporting thousands of potentially duty-free products, the ministry said.
Nguyen Hong Duong, deputy director of the MoIT’s American Market Department, said the ministry had recently officially proposed the US include several of Viet Nam’s exports under the GSP. He estimated that it would take three or four months before they would be included under the system, if the proposal was approved.
A ministry expert who declined to be named said he believed that Viet Nam would qualify for the GSP in light of its WTO membership and normalised trade relations with the US. Trade ties with the US had strongly developed in recent years, he said, as evidenced by the signing of the Viet Nam-US Bilateral Trade Agreement (BTA) and the Viet Nam-US Trade and Investment Framework Agreement (TIFA).
He said Viet Nam’s progress in instituting a market economy would also help its case.
During the first ministerial-level meeting under the TIFA Council late last year, Vietnamese officials for the first time brought up the GSP, calling for the US to apply the regulation to Viet Nam’s agricultural and processed goods in light of the enormous trade potential between the two nations.
Currently, about 4,650 products exported to the US from 144 countries and territories, including Thailand, Indonesia, the Philippines and Russia, qualified for the GSP, according to the US Trade Representative.
To qualify, the benefited commodities must be directly imported from the benefited country to the US and at least 35 per cent of content must be produced in the exporting country.
Vietnamese commercial counsellor to the US Ngo Van Thoan said that without the GSP, Vietnamese exports to the US were disadvantaged in competition with goods from other developing countries that benefit.
GSP-benefited commodities include crude oil, industrial materials and light industrial products and agricultural produce. The US president selects commodities and countries to benefit from the GSP annually, pursuant to proposals from the US Trade Representative and the US International Trade Commission.
Duong said Viet Nam’s exports to the US last year were worth $10 billion and the figure was expected to rise to $11 billion this year. In the first quarter of this year, the country earned $2.3 billion from exports to the US market. — VNS
--------------------------------------------------------------------------------
So just WHAT do you think they plan on DOING?? And When?
viet central bank loosing control! so now reval!to gain it back!
The central bank would be "maintaining the fixed exchange rate with a moderate downward crawl against the U.S. dollar in 2008-2009," economist Helen Qiao at Goldman Sachs in Hong Kong said in a report issued on Monday.
Annual inflation has jumped in Vietnam to more than 20 percent and the central bank has carried out a number of measures to tighten liquidity to try to stem the rise in prices.
Vietnam has said it wants to keep its credit growth this year at 30 percent with an economic expansion of 7 percent, after loans rose 54 percent last year, helping to fuel economic growth of 8.5 percent. (Reporting by Ho Binh Minh; editing by Neil Fullick)
i will fly to viet nam and put my 500m dong in a 12% account
1.00 USD = 16,175.00 VND
United States Dollars Vietnam Dong
1 USD = 16,175.00 VND 1 VND = 0.0000618238 USD
Currency Converter Results
Wednesday, May 21, 2008
1 US Dollar(s) = 16181 Vietnamese Dong(s)
1 VND = 6.18009e-05 USD
1 USD = 16181 VND
Good Morning, Vietnam
Thirty-three years after the fall of Saigon, a lot has changed--but not enough.
by Duncan Currie
05/15/2008 12:00:00 AM
April 30 marked the 33rd anniversary of Saigon's fall to the North Vietnamese Communists. The former capital of South Vietnam is now called Ho Chi Minh City, a name that better reflects Vietnam's past than its present and future. As John O'Sullivan has observed, "A Martian landing in Saigon or Hanoi today with no knowledge of history since 1970 would assume that the South must have won the war. These cities have all the boutiques and designer labels of London or Venice--and more homegrown entrepreneurial vitality than both."
Though it is much smaller than China, and thus gets far less global attention, Vietnam has become one of the developing world's great economic success stories. Over the past two decades, it has transformed itself from an impoverished basket-case into a robust Asian tiger.
Just look at the numbers. Vietnam's economy has grown by more than 8 percent for three straight years. Since the government launched its doi moi economic reforms in 1986, tens of millions of Vietnamese have emerged from abject poverty. By the end of 2007, the World Bank reports, Vietnam's stock market capitalization had "reached 43 percent of GDP," compared to only "1.5 percent two years earlier." Meanwhile, "foreign direct investment commitments almost doubled" in 2007, "non-oil exports grew by 27 percent," and "international reserves increased by over $10 billion to $21.6 billion, equivalent to 30.2 percent of GDP or 3.3 months worth of imports." The country's leaders seem eager to expand foreign trade (Vietnam officially joined the World Trade Organization last year), boost investment opportunities, and support private entrepreneurship.
"Vietnam is racing to be more like the United States every day," says Daniel Griswold, a trade policy analyst at the Cato Institute. In recent years, its fast-growing information technology sector has played a key role in luring foreign capital and spurring further liberalization. Truong Gia Binh, the CEO of Vietnamese software giant FPT, may well be the country's richest person. "The opening up of Vietnam because of technology is remarkable," says Carl Thayer, a Vietnam expert at the University of New South Wales at the Australian Defense Force Academy. Moving forward, Thayer reckons that "Vietnam is going to keep opening and opening and opening."
To be sure, it remains a developing country with big swathes of rural poverty. Still, Vietnam's long-term progress is extraordinary. "As recently as 1993, 58 percent of the population lived in poverty, compared to 37 percent in 1998 and 29 percent in 2002," the World Bank has noted. "This amounts to halving the share of poverty in less than a decade. Or, put differently, almost a third of the total population was lifted out of poverty in less than ten years." Indeed, "by 2002, its poverty rate was substantially lower than that of other countries at the same development level. Thus, the 'speed' at which poverty was reduced in Vietnam was much faster than the average speed across developing countries."
The Vietnamese miracle traces its roots back to the mid-1980s, when the country was paralyzed by an economic crisis. "It was basically an emergency situation," says Edmund Malesky, a Vietnam expert at the University of California, San Diego. In 1986, the Communist party decided to embark on a bold path of market-oriented reform. Hanoi moved gradually to de-collectivize agriculture, loosen restrictions on free enterprise, enlarge the private sector, liberalize prices, and promote foreign trade and investment.
"It really helps when you can see the other system fail abjectly," says Malcolm Gillis, board chairman of the Vietnam Education Foundation. The post-1986 Vietnamese reforms were similar to those embraced by China after 1978. As Malesky points out, Vietnam already had a significant non-state sector prior to 1986. For years, individual entrepreneurs had been plugging the gaps in a central planning regime. The country had also permitted experiments with local markets selling agricultural products.
Today, Vietnam boasts a vibrant urban economy. "The middle classes of the Socialist Republic of Vietnam have taken quite well to capitalism," Reuters reported in November 2006. "Whether it is families dining at fancy restaurants, businessmen buying luxury cars, or people shopping for vanity items, conspicuous consumption is popular, especially in Ho Chi Minh City and Hanoi."
Foreign direct investment (FDI) in Vietnam surged in the early 1990s, declined during and after the 1997-98 Asian financial crisis, and has simply exploded over the past few years. It reached a record level in 2007. In its latest FDI Confidence Index, the consulting firm A.T. Kearney ranked Vietnam as the world's 12th most attractive destination for FDI, which was Vietnam's "highest ranking ever" in the Index.
"I just find the place alive," says Gillis. "Alive with innovation." The importance of demography can't be overlooked. It is estimated that more than two-thirds of Vietnam's 85 million people are below the age of 35. Such youthfulness "makes for a very dynamic country," says Raymond Burghardt, who served as U.S. ambassador to Vietnam from 2001 to 2004.
The youth factor also helps explain why Vietnam has become so pro-American. Most Vietnamese have no real memory of the war. But they do recognize how U.S. investment has helped their country, and, as Malesky puts it, their "aspirational ethos" encourages a positive view of U.S. influence. Young Vietnamese also seem enamored of American popular culture.
"The admiration for the U.S. is on the soft-power side," says Thayer. "America has enormous appeal." When Microsoft founder Bill Gates visited the country in April 2006, he got a hero's welcome. In certain Hanoi bookstores, says Burghardt, "there's a whole section devoted to Bill Gates." Burghardt reckons that Vietnam is now among the most pro-American countries in Southeast Asia. "There are people who are bitter towards us," he admits, "but it is a remarkably small percentage."
After the Soviet Union collapsed, Hanoi made the pragmatic decision to bolster its diplomatic connections in Southeast Asia and normalize relations with the United States. The U.S. and Vietnam signed a bilateral trade agreement in 2000, and two-way trade has since ballooned. There has also been significant progress on bilateral security cooperation. The Vietnamese are worried about China's growing regional influence, says Burghardt. At the same time, they don't want to be seen as joining the U.S. in an "anti-China" alliance.
"They're definitely triangulating now," says Malesky, in hopes of maintaining close links with both Washington and Beijing. The issue of those Vietnamese who were harmed by the wartime defoliant Agent Orange (which Burghardt calls "the last ghost left over from the war") remains a sore point for Hanoi. Still, Burghardt says he is "basically optimistic" that U.S.-Vietnamese relations "will continue to improve."
Of course, as long as the Vietnamese government remains a one-party dictatorship that persecutes democracy advocates, independent journalists, religious worshippers, and ethnic minorities, the process of upgrading bilateral relations will be hampered. Hanoi recognizes this, and in recent years it has taken steps to assuage U.S. concerns. In November 2006, the State Department removed Vietnam from its list of the worst abusers of religious freedom. But many activists felt that was a mistake. Earlier this month, the U.S. Commission on International Religious Freedom released a report arguing that, while Vietnam has made "noticeable progress," the Bush administration acted prematurely in changing the country's designation.
In its latest survey of freedom around the world, Freedom House gave Vietnam its lowest rating (a 7 out of 7) for "political rights" and its third-lowest rating (a 5 out of 7) for "civil liberties." The latter score put Vietnam ahead of China but behind Malaysia, Singapore, and Thailand. Overall, Freedom House classified Vietnam as "not free."
"This is still a Leninist political system," says Burghardt. Though the country's dissident movement is courageous, its ranks are small. Vietnam has nothing approaching the "volatile intellectual atmosphere" that China had in the late 1980s (prior to the Tiananmen Square massacre). "People are quite proud of what the country's done," Burghardt explains, and they give the ruling party credit for overhauling the economy and improving living standards.
Interestingly, Malesky says that Vietnam has been more ambitious than China in experimenting with "intra-party democracy." He also says that the government bureaucracy is more independent of the Communist party in Vietnam than it is in China. However, China has done more to promote legal reform.
"There's a considerable group in Vietnam that still fears peaceful evolution," says Thayer. "There's still an ideological residue that hasn't gone away." He emphasizes that "the Communist party is not unified," with some members more sympathetic to liberalization than others. As the economy changes, more and more Vietnamese will enter the middle class and the ranks of private entrepreneurs will continue to swell. "These people are going to demand a say in political decision-making," Thayer argues. "The system cannot deny their voice."
Maybe--but how long will it take? In a recent report on Vietnam, Economist correspondent Peter Collins wrote that "even as the government tolerates a wide range of outside influences, it still tries to keep control over all things political and cultural." As Burghardt says regretfully, "real political reform is going to be very slow in Vietnam."
Duncan Currie is managing editor of The American.
© Copyright 2008, News Corporation, Weekly Standard, All Rights Reserved.
HANOI, May 21 (Reuters) - The Vietnamese government has urged the central bank to allow a flexible exchange rate by allowing the dong <VND=> to move 2 percent up or down against the dollar, it said in a statement.
The central bank "must control the appreciation or the depreciation of the Vietnamese dong within +/- 2 percent," the statement issued late on Tuesday said, re-stating a policy first announced in early March.
"The government's instruction applies for the whole year while the central bank has not made any change to the current band," an official in the central bank's Foreign Exchange Management Department said.
On a daily basis, the central bank allows the dollar/dong exchange rate to move up or down 1 percent either side of an official rate announced daily.
It widened the band on March 10 to up or down 1 percent from up or down 0.75 percent.
The central bank would be "maintaining the fixed exchange rate with a moderate downward crawl against the U.S. dollar in 2008-2009," economist Helen Qiao at Goldman Sachs in Hong Kong said in a report issued on Monday.
Annual inflation has jumped in Vietnam to more than 20 percent and the central bank has carried out a number of measures to tighten liquidity to try to stem the rise in prices.
Vietnam has said it wants to keep its credit growth this year at 30 percent with an economic expansion of 7 percent, after loans rose 54 percent last year, helping to fuel economic growth of 8.5 percent. (Reporting by Ho Binh Minh; editing by Neil Fullick)
News -May 21,08
I do like this part=" It should also focus on improving the foreign exchange,"-----------------------------------------------
Investment should be targeted to hi-tech, support industries
(21-05-2008)
Viet Nam Chamber of Commerce and Industry president Vu Tien Loc spoke to Thoi bao Kinh te Viet Nam (Vietnam Economic Times) about the country’s investment environment.
How does the business community view the current investment environment in the context of recent economic fluctuations?
Obviously economic changes in the past few months have been a valuable experience for many investors and enterprises in planning their strategy and trading purposes.
Recent events have forced businesses to re-examine their operations and focus more on quality, efficiency and competitiveness.
In the past few months, short-term investment with high profit in the stock, estate and gold markets has not created much added value for the country.
When capital is not spent on developing technology and auxiliary industries, it does not have a stable effect on society.
Do you think that the economic fluctuations will produce more difficulties together with existing obstacles such as low capital availability and slow investment procedures?
In its annual report, the Government has admitted that inflation, rising consumer prices and the excess of imports over exports, together with sudden changes in the monetary market, stock market and real estate market have had negative impacts on the production, trading and investment environment.
That’s why the Government should focus on smoothing big obstacles like administrative procedures, capital lending, cash distribution and tax and customs procedures. It should also focus on improving the foreign exchange, reducing non-official expenses for enterprises, help enterprises improve technology and develop essential industries and additional industries as well as exports.
In particular, businesses should spotlight human resources, an area which is revealing more weaknesses as the economy takes in more investment capital.
What do you think is the most important piece of advice the Government can give businesses now?
As well as the above-mentioned easy trading environment, the most important thing to do is make markets transparent, easy to predict and reduce expenses. It’s also important to have well-controlled markets to get rid of speculation and market bubbles.
Trading strategy and enterprises’ capital should also aim to boost competitiveness, improve technology and increase product value.
Will the Government’s plan to have 500,000 more businesses in Viet Nam by 2010 be affected by the current economic climate?
I still believe the plan is feasible. The important thing is to adapt our way of doing things to the new situation.
Our economy is going through a difficult stage right now but we still have more than 3 million household businesses. And when the State applies various measures to stabilise the macro economy, limit inflation, especially when the bubbles in the stock market and estate market burst, I believe that investors will find more realistic investment opportunities.
What do you think about the proposed changes in tax policies for businesses currently being discussed at the National Assembly?
All of the proposed changes are good news for the country’s trading environment. With the new Value Added Tax Law, enterprises will have simple, clear, transparent and more equal tax policies.
In the new law on income tax, the State will cut duties for businesses, enabling them to invest in equipment and production development.
What do you think about Viet Nam’s potential economic development in the next few years?
I think Viet Nam’s long-term future is bright and in the next three years, the economy will return to its normal growth rate.
There are still many potential factors for economic development and the present difficulties are short-term. My opinion is also shared by many international economic organisations. — VNS
NEWS TODAY--May 18,08
British market offers untapped potential for Viet Nam exports
(17-05-2008)
An engineer operates the Nam Con Son gas pipe, which was jointly built by the Viet Nam National Oil and Gas Group and foreign companies, including the UK’s BP Group. Viet Nam’s bilateral trade with the UK reached $1.7 billion last year. — VNA/VNS Ha Thai
HA NOI — There’s plenty of room for more Vietnamese products and services in the UK market, commercial expert Laurie Burns told a conference held yesterday in Ha Noi to provide Vietnamese exporters with updated information about the British market.
In order to better tap into this potential market, she said, Vietnamese enterprises should pay more attention to researching tastes of UK consumers and their consumption trends, in order to better design products for UK consumers.
She also urged domestic firms to negotiate suitable payment methods and focus on packing and shipping methods aimed at minimising costs as well as concentrate on improving product quality improvement and diversifying designs to make products more competitive.
Exporters needed to be more active in finding customers by participating trade promotion activities and international trade fairs and exhibitions, she said, citing the Spring Fair Birmingham 2009, the biggest gift and home trade event in the UK, as a good example.
The five-day fair, beginning next February 1, was expected to bring together some of the worlds leading brands with more than 80,000 product buyers in the UK. It would be a valuable venue in which Vietnamese businesses could advertise products and seek new business contracts, Burns said.
Yesterday’s conference in Ha Noi was organised by the Ha Noi Trade Promotion Centre.
The UK is one of Viet Nam’s seven top trade partners with bilateral trade reaching US$1.7 billion in 2007. Viet Nam exports footwear, garments, wood furniture, seafood and coffee, and imports hi-tech products, telecommunications equipment, aviation components, and medicines from the UK. — VNS
LAX-Heck DEAD is more like it, sounds like they can't get er done.
That's cool. I'll give it another year most likely. But I agree with you. Way to lax.
I have lost faith in this 1. I don't believe there will be a revalue, this country is to lax in complience to WTO regs.
I plan on disposing of all dong.
Imports drive US dollar over dong
(09-05-2008)
HA NOI — The US dollar has continued to stren-gthen against the dong.
An increase in demand for imports is blamed for the rise.
Vietcombank’s listed USD/VND exchange rate was 16,130/16,147, the highest for the year on Wednesday with the interbank rate at VND15,987.
It meant a selling price in the upper range of the +/-1 per cent trading band.
Bank rates listed yesterday were up about 0.76 per cent against early this year and about 0.11 per cent against Friday, May 2.
The dollar supply is always limited from April to August every year when demand is strong due to imports," a treasury officer at a big Ha Noi commercial bank told Viet Nam News yesterday.
"But it’s just the beginning of the year and we really lack dollars. The shortfall is becoming critical," he said.
Other banks reported a similar shortage and said the number of their borrowers was falling except for importers; customers who have to make due international payments and investors in the international market.
A reliable source told Viet Nam News that interest of 15 per cent for very short-term loans was being charged to limit dollar lending.
Not as good as gold
The State Bank of Viet Nam’s decision to allow gold dealers and banks to import an extra 3.5 tonnes of the precious metal this year has also been blamed for the strong dollar demand.
The shortage of greenbacks is even obvious in the open market where the currency traded at VND16,400 yesterday.
"People rushed to buy the US dollar today," said Ha Noi-based Bao Tin Minh Chau Jewellery Co senior dealer Nguyen Huu Dang.
"Very few came here to sell.
"It’s ‘hottest’ trading day since the beginning of this year and I think the trend will continue because the US dollar has gained against the euro in the international market."
The State Bank of Viet Nam confirmed last month that it would keep selling the greenback to commercial banks to support for their liquidity and to stabilise the money market.
Now the central bank does not seem to have anticipated the extent of the rise in the dollar against the dong. — VNS
---------------------------------------------------------------
Viet Nam hopes for stronger ties with WB
(08-05-2008)
HA NOI — Viet Nam always hopes for more effective and practical cooperation with the World Bank (WB), especially in infrastructure construction and human resource training, Prime Minister Nguyen Tan Dung said .
Dung spoke of the aspirations at a reception for WB Country Director Ajay Chhiber in Ha Noi yesterday to mark the end of his term of office in Viet Nam .
The PM praised the WB official’s contributions, which helped strengthen ties between Viet Nam and the bank, particularly in infrastructure investment, energy, poverty reduction and policy consultancy.
Dung said he hoped WB would continue giving preferential loans to Viet Nam for development, as well as consultancy on macroeconomic policy.
He proposed the two sides co-ordinate to organise a donors’ meeting in June and carry out assistance programmes for the 2009-10 fiscal year and infrastructure investment projects.
Ajay Chhiber said he would continue to help Viet Nam and make preparations for the donors’ meeting and spoke of his experience coordinating with relevant Vietnamese agencies to build four large universities, the Da Nang-Quang Ngai highway and two energy projects.
Ajay Chhiber said the adjustment of the growth rate by the Vietnamese government was necessary in the context of the world economy and added that he would support Viet Nam in infrastructure investment and policy consultancy. — VNS
Live rates at 2008.05.06 18:10:05 UTC
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Banks lift interest lid 1 per cent
(29-04-2008)
HA NOI — The Viet Nam Banks Association (VNBA) yesterday announced a new 12 per cent lid on deposit interest rates in document No 171/HHNH-NV sent to commercial banks.
The new cap is effective from today. Twelve per cent interest, instead of 11 per cent previously, would be paid at the end of the term for dong deposits of six months and over. The new rate would apply to all mobilisation tools including certificates of deposit, bonds and savings.
Dong deposits of less than six months stand to earn 11.5 per cent interest a year, instead of 10.5 per cent previously, also payable at the end of the term. Meanwhile, deposits in the greenback will receive 6 per cent interest.
Initially, the new rates were approved by only 10 out of Viet Nam’s 38 banks. However, after much deliberation 37 out of the 38 banks approved the new caps, saying they were reasonable. VNBA explained that the new rates are a natural consequence of commercial banks’ lacklustre efforts to mobilise capital in the first quarter, up a modest 4.14 per cent from the end of 2007.
Since the implementation of the 11 per cent ceiling at the start of this month, the absence of liquidity has been a key concern.
The number of deposits has fallen while trillions of dong have been withdrawn from banks. Skyrocketing lending rates, tightened monetary policy and VNBA’s ceiling interest rates have left banks desperate for more deposits.
Many banks, therefore, are unlikely to maintain a rate of 11 per cent interest.
VNBA said the 12 per cent cap was necessary as inflation rises to 21.42 per cent year-on-year in April. The association hopes the new measures will aid a move towards a real positive interest rate.
In other news, the VNBA held a meeting yesterday to dicsuss the regulations governing bank’s promotional campaigns. Results of the meeting are pending. — VNS
Nation could make more use of WTO benefits: NA report
(06-05-2008)
HA NOI — Full use has not been made of the benefits from Viet Nam’s World Trade Organisation commitments, a new National Assembly External Affairs Committee survey shows.
The failure was despite the visible positive impact of the commitments.
The results of the two-month-long survey of 20 cities and provinces as well as industries and ministries were published in Ha Noi yesterday.
They show that the WTO commitments have contributed significantly to the attraction of domestic and foreign investment; trade revenue and a shift in economic structure in localities where they have been properly implemented.
The survey also found that WTO commitments have boosted administrative reform with the introduction of simpler and more transparent procedures,
But numerous improvements from the building of action plans to the publicising of activities; document checking and mechanisms for reform are still required.
Personnel training has proved confused, inactive and unreliable.
External Affairs Committee chairman and survey overseer Ngo Duc Manh attributed the failure to benefit from the commitments to a lack of comprehensive and close co-operation between the State and enterprises; between central and local authorities; localities in the economic regions and among local agencies.
Authorities at all-levels were confused about identifying and choosing the best measures to exploit and promote the benefits of the WTO commitments, he said.
They had not been able to put socio-economic development programmes and projects into the context of WTO integration so as to properly identify the opportunities and challenges.
Economists agree
Senior economists Pham Chi Lan and Tran Dinh Thien agreed that Viet Nam lacked a broad vision for regional co-operation and a specific action programme in which the State’s co-ordination and strong co-operation among ministries, industries and localities would be crucial.
It was time to encourage a broader economic space so as not to pursue scattered and small-scale businesses, they argued.
They reiterated that the bottlenecks in economic development were poor infrastructure and the lack of skilled personnel.
The bottlenecks posed not a few challenges to the implementation of the WTO commitments.
The duo advised that publicity to raise awareness about Viet Nam’s WTO commitments should suit each industry and locality with local officials the key to the process.
The External Affairs Committee has now proposed that the National Assembly and its committees quicken improvement in the quality of their legislative work and perfect the laws to better meet WTO requirements and regulations.
The committee also wants more research into the impact WTO entry will have on the most vulnerable such as residents of rural Viet Nam, including farmers, so that appropriate remedial policies can be introduced.
The Viet Nam Support for Trade Acceleration, or STAR, project provided technical support for the survey. — VNS
S&P lowers credit rating for Viet Nam
(06-05-2008)
HA NOI — Standard & Poor’s has lowered Viet Nam’s credit rating from stable to negative, reflecting doubts in the global community about the country’s capacity to cool down its overheated economy.
However, other ratings’ agencies have not changed their positions on Viet Nam. Moody’s maintains a positive outlook, placing a Ba3 rating on the country’s long-term debt in both foreign and local currencies. And Fitch rates Viet Nam’s outlook as stable.
S&P affirmed Viet Nam’s credit rating at BB/B for foreign currency and BB+/B for local currency, noting "good prospects for sustained economic growth" driven in part by a wave of foreign investment.
The credit rating agency cautioned, however, that Viet Nam’s ratings could be lowered if a banking system crisis arose.
It said excessive credit growth had resulted from a loosely regulated banking system, especially smaller commercial banks that had lent aggressively to build market share while ignoring the risks, and lending for stock investments, real-estate developments and projects of State-owned enterprises with little prospects for profit.
Viet Nam, one of Asia’s fastest-growing economies, has been struggling with skyrocketing inflation, which hit a 17-year high of 21 per cent year-on-year in April, and a mounting trade deficit of US$7.4 billion brought on by booming fuel, steel and capital equipment imports.
Tackling the dual problems of high inflation and a huge trade deficit has left the nation’s top regulators scratching their heads and have forced the Government to cut the growth target this year from 8.5 per cent to 7.5 per cent.
To battle inflation, the State Bank of Viet Nam has tightened monetary policy, imposing higher compulsory reserve ratios on banks, raising interest rates, and limiting loans on securities and real-estate investment.
S&P also said the ratings outlook could improve "on indications that the economy was rising to a sustainable growth path".
Analysts are worried that any further downgrading of Viet Nam’s credit rating could have a negative impact on foreign capital inflows. — VNS
No Idea, I have my DONG MILLIONS tucked away in the Bank .
We'll have to wait it out and Pray it's a Nice Revaluation.
WOW. I wonder what it will increase to. Any idea?
MORE DONG NEWS----
Gradual VND revaluation better than shocking jump
VietNamNet Bridge – VietNamNet briefs an article by Nguyen Dinh Bich, Senior Economist at the Trade Research Institute, about the VND/US$ exchange rate policy, published in Thoi bao Kinh te Vietnam. Bich thinks that a gradual VND revaluation is better than a shocking jump.
The government and state management agencies have not announced the official treatment for the VND/US$ exchange rate. However, it seems that those advocating the scenario of the dramatic VND revaluation have gained the upper hand.
The Vietnam Association of Financial Investors (VAFI) and other experts have proposed widening the forex trading band from 1% currently to 3-4% or even 5%, which means that the central bank needs to revaluate the VND in order to clear away the tie-up in the monetary market. Currently, banks are refusing to buy dollars from exporters, because they have to buy at high prices following the current forex policy applied by the State Bank of Vietnam.
However, the too wide trading bands may be the overdose to the national economy. The conclusion was released after considering the factors as follows.
First, this would put on the emergency brake on the export train. Figures released by the Ministry of Industry and Trade several days ago show that enterprises have been struggling to fulfill their export plans.
In order to export nearly $60bil worth of turnover this year, Vietnam has to gain the export turnover of $5bil every month. Meanwhile, exports fetched $13bil only in the first quarter.
This means that the ‘export train’ is slowing down; if the State Bank widens the forex trading band as suggested, i.e. the dollar’s value declines more sharply, exporters will go bankrupt.
Vice versa, the ‘import train’ is speeding up, pushing the trade deficit to a new record high.
Also according to the Ministry of Industry and Trade, in January, import turnover was $5bil only, while the figure jumped to $8.2bil in February and then $7.3bil in March, raising total import turnover to $20.5bil in the first three months of the year. This represents the increase of 68.7% over the same period of last year, and three times more than the export growth rate.
The overly wide trading band will be the main factor in preventing Vietnam from reaching its economic targets. As such, though the VND revaluation is unavoidable, the revaluation process needs to be carried out step by step so that the national economy has enough time to adapt to it.
If policy makers impatiently apply drastic policies by sharply devaluating the dollar, this will cause immeasurable socio-economic consequences.
Chairman of HSBC David Eldon also said on the sideline of the Asia Banker conference that no country can have a healthy market overnight with just quick actions.
(Source: TBKTVN)
[In trang]
Bài báo trên VietNamNet Bridge:
http://english.vietnamnet.vn/biz/2008/03/775209/
Xuất bản lúc: 07:33 26/03/2008
@ VietNamNet
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