Vietnam Currency Discussion Board

[RICK C]

Viet Nam takes UNSC chair

(01-07-2008)

HA NOI — Viet Nam will officially begin its month-long chair of the United Nations Security Council (UNSC) from today, affirming the country’s increasing political role in settling issues of conflict that are important to international security, said the Ministry of Foreign Affairs.

Ambassador Le Luong Minh, Viet nam’s permanent representative to the UN Security Council, said the country would contribute to the council’s decisions and reflect concern on the legitimate interests of member countries and relevant agencies.

"Viet Nam is committed to contributing to the settlement of conflicts through dialogue and peaceful negotiation and respects the independence, sovereignty and territorial integrity of all countries," he said.

The ambassador said Viet Nam was prepared for its role as UNSC’s Chair. Representatives from member countries affirmed that Viet Nam would be able to make great strides in this role particularly in promoting peace and conflict resolutions.

So far this year, Libya, Panama, Russia, South Africa, the UK and the US have chaired the UNSC. Viet Nam became a UN Security Council non-permanent member on January 1 this year for the 2008-09 term.

Deputy Director of the ministry’s Press and Information Department Nguyen Phuong Nga reported that Deputy Prime Minister and Minister of Foreign Affairs Pham Gia Khiem would lead a Vietnamese delegation to take part in important activities of the UNSC and chair a high-ranking open discussion in accordance to the monthly agenda. Viet Nam would build on UNSC working programmes and agendas. It would judiciously study the different proposals put forward by various countries’ and decide which ones to entertain during the sessions.

However, the country’s role will mainly centre on procedures needed to help countries reach a joint agreement.

Viet Nam will host and manage around 40 closed and public conferences this month. To prepare for these conferences, it will carry out un-official meetings with UNSC member countries and countries related to the issue at hand as well as with organisations and individuals negotiating on matters related to UNSC drafts, declarations and resolutions.

In its capacity as the Chair the country will work with media outlets and report the outcome of UNSC’s conferences to UN member countries.

As the main representative of the UNSC, Viet Nam will also hold regular meetings with the UN Secretary General and other senior leaders of the UN’s Secretariat, the President of the UN’s General Assembly, the President of the UN’s Economic and Social Council, and those countries whose pressing issues need attention.

As Viet Nam takes the role in July, the country will gear up to prepare the UNSC’s yearly report (from July 31, 2007 to July 31, 2008) to send o the UN’s National Assembly and review the council’s activities. — VNS

[RICK C]

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.
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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

[RICK C]

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

[RICK C]

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.

[RICK C]

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)

[RICK C]

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 [e-mail]; Jason Folkmanis in Ho Chi Minh City at [e-mail]

Last Updated: June 19, 2008 08:34 EDT

[RICK C]

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 [e-mail] Permatasari in Kuala Lumpur at [e-mail] Tien Hin in Kuala Lumpur at [e-mail]

[RICK C]

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

[RICK C]

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

[RICK C]

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.''

[RICK C]

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.

[RICK C]

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

[RICK C]

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.

[RICK C]

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 [e-mail]

Last Updated: June 9, 2008 07:54 EDT

[RICK C]

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)

[RICK C]

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