Exporters no longer expect profits from dong/dollar exchange rate fluctuations

Exporters no longer expect profits from dong/dollar exchange rate fluctuations

While the State Bank of Vietnam considers the dong/dollar exchange rate stabilization in recent months a great success, exporters complain that with the dollar price stabilization, they do not hope to make profits from the exchange rate fluctuation any more.

Vu Thanh Son, General Director of the Hanoi Trade Corporation (Hapro), said that Vietnamese exporters’ business has been meeting too many difficulties in recent years, because the export markets have been narrowed, while the input material costs have been increasing sharply. Therefore, exporters mostly expect profits from the exchange rate fluctuations.

However, the policy pursued by the State Bank of Vietnam to stabilize the exchange rate to ensure the macroeconomic stability has cut the source of income.

“While the exchange rate stabilization policy can bring benefits to the national economy in general, this has brought big difficulties to export companies,” he said.

Do Ha Nam, General Director of Intimex and Chair of the Vietnam Pepper Association, said on Dau tu the stable exchange rate would be good to all subjects in the national economy. However, he still wishes to see the dong to be devaluated slightly to ensure profits for exporters.

“If the State Bank continues fixing the dollar price at the current rate, exporters cannot make profits, and they would have to force the domestic prices down, which would harm farmers,” he said.

Vietnamese exporters think that the Vietnam dong has been a little bit overvalued against the dollars, thus bringing disadvantages to exporters, who have to struggle to boost exports in the context of the export market narrowing. Therefore, all of them wish to see the dong depreciating slightly, which would be a factor to help encourage exports.

One more thing that worries businesses is that after December 31, 2012, commercial banks would tighten the lending in foreign currencies as stipulated in the Circular No. 03 of the State Bank. Once the legal document takes effects, foreign currency loans would only be provided to some groups of borrowers. Instead of the current easy regulations, enterprises, which have the demand for foreign currencies, would have to buy foreign currencies instead of borrowing from banks as currently.

Devaluating the local currency and keeping the door opened for all subjects to borrow foreign currencies are always the things exporters want, because these would bring benefits to them.

Truong Van Phuoc, General Director of Eximbank, said that the dollar lending interest rate is now at 4.5 percent per annum on average, which is much lower than the dong interest rate at 15 percent per annum.

Meanwhile, the State Bank has committed to curb the dong/dollar exchange rate fluctuation at no more than three percent in 2012. This means that there would be no considerable risks in borrowing dollars. This explains why businesses prefer dollar loans to Vietnam dong loans.

There is one more reason which prompts export companies choose to borrow in dollars instead of dong. The companies can borrow dollars, then sell the dollars to the banks for dong which they would use as working capital or would deposit at banks. When the exporters get payment from the foreign partners in dollars, they exporters would use the dollar from the sources to pay bank debts.

Commercial banks themselves also want to push up the lending in dollars, because they can seek low cost dollar capital, since the State Bank has decided that the dollar deposit interest rates must not be higher than two percent.

Meanwhile, Governor of the State Bank of Vietnam has calmed down the public, saying that the policy on tightening the lending in foreign currencies would be applied after 2012 if the national economy shows the signs for a brighter prospect.

vietnamnet