Dollar dearth dampens Vietnamese dong

Due to concerns about a possible year-end dollar drought, and rumors about expanding the exchange rate between the Vietnamese dong the dollar, the unofficial exchange rate rose sharply this week.

Meanwhile, firms find it hard to buy dollars at prices fixed by the State Bank of Vietnam.

The dollar rose as high as VND20,020 at gold shops in Hanoi on Wednesday, compared to 19,900-19,980 on Monday. Meanwhile, commercial banks were selling dollars at 19,400- 19,500.

Economist Ngo Tri Long, former deputy head of the Market and Price Research Institute, gold prices have affected the exchange rate. “With the high price of gold, some people have accumulated dollars to smuggle gold, and then resell it on the domestic market at a profit,” Long said.

The domestic price of gold rose to VND33.09 million per tael on Thursday morning, compared to VND32.97 million on Wednesday, according to SJC, the country’s top gold trader.

The dollar price also increased as businesses scrambled to accumulate dollars to repay greenback loans taken out early in the year. Importers need dollars to serve production and business, which often jumps at the end of the year.

Meanwhile, exporters who are paid in dollars by foreign partners have only agreed to sell them to banks at high prices, or keep them in deposit.

Nguyen Manh, director of the business department at Bank for Investment and Development of Vietnam, said people are accumulating dollars due to worries about another devaluation of the dong.

The State Bank of Vietnam’s reference rate at 18,932 has not changed since the dong was devalued by 2 percent in August. The currency may fluctuate up to 3 percent on either side of the rate, which means it can be traded as low as 19,500 per dollar.

Many firms said it is difficult for them to buy dollars at commercial banks, and some reported having to pay additional fees. As a result, the actual market price is often higher than the official reference rate.

Dao Duy Kha, vice general director of the Vietnam Plastics Corporation, said: “Firms have to queue up for dollars at commercial banks to cover imports. Banks were offering dollars at the official rates but requesting additional fees from buyers, bringing the actual rate to as approximately high as unofficial market prices.”

His firm’s exports are small, so its greenback earnings are not enough to cover import materials, Kha said.

The central bank governor Nguyen Van Giau said the central bank has no plans to adjust the dong exchange rate against the US dollar, even though the dong’s value has been dropping on the unofficial market.

Jayant Menon, an economist from the Asian Development Bank, said Vietnam is running a trade deficit so implementing some sort of controlled depreciation of the currency to improve competitiveness is not a bad idea. However, Menon said that erratic drops in the value of the dong, caused by lack of confidence, pose a cause for concern.

“In the current context of consumer price hikes, widening exchange rates (between the dong and dollar) could push up inflation,” said economist Long. “The country should be very careful in considering devaluation at this point,” he said.

Fractious G20 set to confront trade imbalances

The United States looked set to win G20 backing Saturday to tackle groaning trade imbalances as the world's biggest industrial nations vowed to avoid tit-for-tat currency devaluations.

US Federal Reserve Chairman Ben Bernanke attends the G20 Finance Ministers and Central Bank Governors meeting in Gyeongju on October 22, 2010.

But after all-night talks among senior officials in South Korea, amid fears of a global "currency war", a draft G20 text reported by Dow Jones Newswires did not set specific targets on trade for the United States, China and others.

In the draft statement, Group of 20 finance ministers would agree to refrain from "competitive" currency devaluations, and aim for "market-determined exchange rates", an official told Dow Jones.

The G20 would commit to "pursue a full range of policies conducive to reducing excessive imbalances" and "maintaining current-account imbalances at sustainable levels", according to the reported statement.

The International Monetary Fund would win greater power to oversee G20 commitments, through reports that investigate how a country's economic policies can damage major trading partners.

The draft had won widespread backing from advanced economies, while Chinese officials "left the room comfortable enough" with the language, the official told Dow Jones as the ministers prepared to end their meeting Saturday evening.

Two years after the start of the world's worst financial crisis since the 1930s, fears are mounting that major debtors such as the United States and big exporters such as China could relapse into crippling trade protectionism.

South Korean Finance Minister Yoon Jeung-Hyun had urged his G20 guests to exploit their collective heft on currency disputes, IMF reform and ensuring mega-banks can no longer imperil the world economy.

History demanded that the group build "a new post-crisis international economic order", he told the meeting Friday, looking ahead to a November 11-12 summit in Seoul of G20 leaders including the US and Chinese presidents.

At the weekend talks, US Treasury Secretary Timothy Geithner urged nations running big current-account surpluses to change their exchange-rate policies. He did not name the nations but China seemed the clear target.

He suggested that countries should aim to reduce surpluses or deficits to a targeted share of gross domestic product in the coming years. Officials said Geithner's target would be four percent of GDP by 2015.

China's current account surplus stood at 4.9 percent of GDP in the first half, and targeting the surplus would be an indirect way for Washington to cajole Beijing into letting its currency appreciate.

But other major exporters such as Germany would also be affected by the Geithner plan, and are already unhappy at being asked to remedy failings in the global financial system that were exposed by a US-generated crisis.

The draft text reportedly made no mention of numerical targets for the current account, which Japanese Finance Minister Yoshihiko Noda had said were "not realistic".

The US suggestion for binding targets ran into broad opposition at the G20, delegates said, with Australian Treasurer Wayne Swan expressing wariness about a "one-size-fits-all" approach.

Germany insisted that its own current account surplus would be treated as part of the European Union's overall balance, and not separately, a source said.

But the G20, which rose to summit-level prominence during the 2008-09 crisis, was under pressure from the financial markets not to leave South Korea empty-handed ahead of the leaders' meeting in three weeks.

With a super-loose US monetary policy weakening the dollar, G20 economies including Japan, South Korea, Brazil and Indonesia have intervened in recent weeks to curb an alarming rise in their currencies.

But for the United States, which is in the throes of election season, China's firm grip on the yuan's value is the root of the problem. Critics say that policy gives China's export machine an unfair edge.

"I think there's a recognition that this currency issue has to be addressed," Canadian Finance Minister Jim Flaherty said Friday.

"If it's not, then we know from history the path that we end up going down, which is not good for any of us," he said.

Cement firms advised to downgrade coal

Cement plants should change their technology to use coals which are more available in Vietnam, advised an official from Vinacomin.

Vietnam’s coal output remains low to meet domestic demand

General Deputy Director of Vinacomin (Vietnam National Coal - Mineral industries Group) Nguyen Manh Hung said that currently, cement producers in Vietnam use high-quality coal dust which accounts for just 15% and 16% of the total coal output of Vinacomin.

He feels that cement plants should replace the current grade-3 coal dust with the lower-grade of 4b or 5.

“If Vinacomin’s coal output is less than 43 million this year, it may fail to provide 6.2 tonnes of coal for the Vietnam Cement Industry Corporation (Vicem),” affirmed Vinacomin another Deputy General Director Le Minh Chuan.

Earlier, Vicem said that it is facing a serious shortage of coal. Each day, it needs up to 5,000 tonnes of grade 3 and 4 coal dust, but Vinacomin only meets half of the demand.

The shortfall affects operations of its affiliates, including Hoang Thach, But Son, Tam Diep, Hoang Mai, Hai Phong and Ha Tien, Vicem complained.

Responding to Vicem’s complaint, Vinacomin Deputy General Director Nguyen Manh Hung said, in the first nine months of this year, Vinacomin supplied 4 million tonnes of coal for Vicem, or 64.8% of the set full-year target.

The modest figure is attributed to Vinacomin’s low output of grade 3 and 4 coal dust, Hung said, noting that his group had to halt the coal supply for many cement firms which did not make payments on time in September.

Due to the limited supply, cement companies should negotiate and sign contracts with the group before carrying out their new projects. Cement producers are also advised to ink long term contracts with Vinacomin when Vietnam may have to import coal in 2015.

Vietnam to open up booming express delivery market

As part of its accession plans in the World Trade Organisation, Vietnam has committed to liberalising the express delivery market to level the playing field for both local and foreign express delivery companies.

Vietnam plans to open its market in 2012 to allow joint-ventures to be made with 51 percent foreign investment capital or to establish wholly-foreign companies in the next five years, according to Paul Needham, chief editor of CEP-Research, the first internet portal specialised on the courier, express and postal market.

The country's revenue in express delivery has grown steadily from 50 million USD in 2007 to around 200 million USD in 2010. In urban areas where the abundance of enterprises means express delivery is in high demand, expenditure is estimated to reach between 10-100 million VND per unit (512-5,120 USD).

According to Ho Chi Minh City 's Department of Planning and Investment, the increasing number of businesses joining in express delivery service are not yet accounted for.

Big domestic and foreign companies including VNPost Express, Saigon Post, Viettel, and multi-nationals like TNT, DHL, FedEx and UPS are operating in a joint-venture model.

These companies are more powerful in technology and finance than the remaining small-scale companies in the country.

Meanwhile, companies with domestic prestige like Tin Thanh, Netco, Nasco, Hop Nhat, 247 Express and 365 Express account for 20 percent of the market share.

The domestic companies are experienced with long-term development from three to 10 years; however, they are unable to compete with foreign express delivery companies who have powerful international networks.

The country's exports are expected to reach 8.8 percent in 2010 and the swift movement of goods both domestically and internationally is key to facilitating and enhancing economic growth that will generate more opportunities for express delivery services.

The four leading express delivery companies, DHL, TNT, FedEx and UPS, have expanded their network in Southeast Asia in order to get a firm foothold in this market.

They have invested in their network, equipment and services as well as expanded their aviation network in Singapore , Indonesia , Malaysia , Thailand and recently Vietnam – a newly emerging market.

International express delivery companies have entered the logistics services market, which has been growing quickly in Vietnam .

Onno Boots, regional managing director of TNT Southeast Asia and India , said " Vietnam has tremendous growth potential and occupies a strategic position in Asian trade being so close to China ."

In Southeast Asia and Vietnam , TNT has been expanding its network and service in a unique way. It has focused its efforts on developing a cost efficient road network service that links seven countries and 127 cities across Southeast Asia and China , including Vietnam – a total distance of more than 7,650km.

Its unique road network is linked to its air network, thereby enabling customers to choose from a wider variety of transports that suit their needs – by air, road or a combination of both.

Today, TNT has launched an expanded and newly-designed integrated air and road hub located at ICD My Dinh, Hanoi , to handle soaring freight volumes.