Vietnam has no devaluation plans: newspaper

The State Bank of Vietnam 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, a local newspaper reported on Tuesday.

"At present the State Bank does not have any plans for exchange rate adjustment," Governor Nguyen Van Giau was quoted by the Saigon Giai Phong daily as saying, rejecting market rumors of a dong devaluation.

The central bank has devalued the dong three times since November and speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

Dollar demand has also been rising as businesses need the currency for loan repayments and importers need dollars for settlements.

However, the dong edged up to 19,870/19,920 per dollar on the unofficial market on Tuesday morning from 19,920/19,970 on Monday, while it was steady at VND19,490/19,500 on the interbank market, with the selling rate at the permitted ceiling.

Victoria Kwakwa, the World Bank's representative in Vietnam, told reporters on Tuesday that "we think that broadly the government has been moving in the right direction" on monetary and fiscal policy.

However, she said more could be done by the authorities to communicate their policy stance and give more information on indicators, so as to build up confidence in overall macroeconomic management.

This would help "address some of the left-over expectations of inflation and continued instability that are underpinning some of the challenges".

The Bank's lead economist for Vietnam, Deepak Mishra, said he expected pressure on the dong to ease over time, but how the market reacted would depend on the government putting forward a "credible road map" for dealing with the problem.

The International Monetary Fund warned in September that Vietnam needed to concentrate on maintaining the level of the dong, and said that repeated comments from the government about the need to lower lending rates was counter-productive.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said.

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World Bank finds cause for worry amidst rapid recovery

Vietnam’s recovery from the economic crisis has been fast but uneven, and improved governance of state-owned enterprises is needed to ensure strong and sustainable growth, the World Bank says.

The nation’s key economic indicators are expected to recover to “near their pre-crisis trend growth rates” but there are still concerns about a “soft landing” for the country, the bank said in its latest East Asia and Pacific Economic Update released Tuesday.

The current account deficit remains high and there is “persistent pressure” on the local currency as households and firms appear to continue to stockpile foreign currency and gold, it said.

Bankers said this week that speculation of another devaluation is putting pressure on the dong, making businesses more reluctant to sell dollars to banks.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, told Reuters the pressure on the dong was increasing as businesses needed to accumulate dollars to settle greenback loans they had taken in earlier months of the year. “But I don't think there should be a devaluation at this point of time, as the pressures are not large enough,” he said.

The World Bank also said Vietnam’s current account deficit remains high and there are concerns about the balance sheet of some of the banks.

“The stock market, after staging a smart recovery in 2009, has slumped again and continues to underperform the broader economy,” the bank said in the report. Vietnam’s benchmark VN-Index has fallen by more than 11 percent so far this year.

The government is trying to “phase out the stimulus package without disrupting the economy”, the bank noted, adding that the economy is on track to achieve the 2010 target of 6.5 percent

State sector

According to the World Bank, state-owned enterprises have played an important role in Vietnam’s progress, but have also become “a source of long term vulnerabilities.”

“While some of the Economic Groups have served the cause of their existence (e.g., Vietnam Posts and Telecommunications Group, Electricity of Vietnam, PetroVietnam, etc.), many have also contributed to magnify the economic instability,” it said.

The bank said in its report that in late 2007 and early 2008, the groups invested heavily in the financial sector and real estate, exacerbating the asset price bubbles.  It cited the case of shipbuilder Vinashin, which was on the verge of default, as an example of a state-owned enterprise that failed.

Vinashin piled up to $4.5 billion in debt, leading to a restructuring and a financial investigation in to the firm. Several top managers of the shipbuilder have been arrested for mismanagement.

The World Bank said improved governance of the Economic Groups, along with a new law on public investment and a new framework for public private partnership, will “boost structural reforms in Vietnam and set the foundation for a strong and sustainable growth.”

At the regional level, the bank said the economic recovery in East Asia and the Pacific is robust, but attention must now turn to managing emerging risks.

“Should inflows remain strong, especially against a background of weak global growth, the authorities will be faced with the challenge of balancing the need for large capital inflows – especially foreign direct investment – with ensuring competitiveness, financial sector stability, and low inflation,” said Vikram Nehru, World Bank Chief Economist for the region.

The bank also said in its report that the ongoing relocation by manufacturing firms from higher wage countries in East Asia is beginning to benefit Vietnam, “which with its relatively low wages and easy access to coast is well positioned to absorb such investments.”

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World Bank finds cause for worry amidst rapid recovery

Vietnam’s recovery from the economic crisis has been fast but uneven, and improved governance of state-owned enterprises is needed to ensure strong and sustainable growth, the World Bank says.

The nation’s key economic indicators are expected to recover to “near their pre-crisis trend growth rates” but there are still concerns about a “soft landing” for the country, the bank said in its latest East Asia and Pacific Economic Update released Tuesday.

The current account deficit remains high and there is “persistent pressure” on the local currency as households and firms appear to continue to stockpile foreign currency and gold, it said.

Bankers said this week that speculation of another devaluation is putting pressure on the dong, making businesses more reluctant to sell dollars to banks.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, told Reuters the pressure on the dong was increasing as businesses needed to accumulate dollars to settle greenback loans they had taken in earlier months of the year. “But I don't think there should be a devaluation at this point of time, as the pressures are not large enough,” he said.

The World Bank also said Vietnam’s current account deficit remains high and there are concerns about the balance sheet of some of the banks.

“The stock market, after staging a smart recovery in 2009, has slumped again and continues to underperform the broader economy,” the bank said in the report. Vietnam’s benchmark VN-Index has fallen by more than 11 percent so far this year.

The government is trying to “phase out the stimulus package without disrupting the economy”, the bank noted, adding that the economy is on track to achieve the 2010 target of 6.5 percent

State sector

According to the World Bank, state-owned enterprises have played an important role in Vietnam’s progress, but have also become “a source of long term vulnerabilities.”

“While some of the Economic Groups have served the cause of their existence (e.g., Vietnam Posts and Telecommunications Group, Electricity of Vietnam, PetroVietnam, etc.), many have also contributed to magnify the economic instability,” it said.

The bank said in its report that in late 2007 and early 2008, the groups invested heavily in the financial sector and real estate, exacerbating the asset price bubbles.  It cited the case of shipbuilder Vinashin, which was on the verge of default, as an example of a state-owned enterprise that failed.

Vinashin piled up to $4.5 billion in debt, leading to a restructuring and a financial investigation in to the firm. Several top managers of the shipbuilder have been arrested for mismanagement.

The World Bank said improved governance of the Economic Groups, along with a new law on public investment and a new framework for public private partnership, will “boost structural reforms in Vietnam and set the foundation for a strong and sustainable growth.”

At the regional level, the bank said the economic recovery in East Asia and the Pacific is robust, but attention must now turn to managing emerging risks.

“Should inflows remain strong, especially against a background of weak global growth, the authorities will be faced with the challenge of balancing the need for large capital inflows – especially foreign direct investment – with ensuring competitiveness, financial sector stability, and low inflation,” said Vikram Nehru, World Bank Chief Economist for the region.

The bank also said in its report that the ongoing relocation by manufacturing firms from higher wage countries in East Asia is beginning to benefit Vietnam, “which with its relatively low wages and easy access to coast is well positioned to absorb such investments.”

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Dai-ichi Life Vietnam sees premiums up 51%

HCMC - Dai-ichi Life Insurance Company of Vietnam reported on Tuesday strong year-on-year growth of 51% in new business premiums to nearly VND230 billion (US$11.8 million) in the January-September period, almost the same as the total of last year.

The Japanese life insurer said its third-quarter premiums hit a high of nearly VND110 billion, giving it confidence in achieving the business target of 2010 and strengthening its position in the life insurance market in Vietnam.

“Our target for 2010 is to grow by at least 50% for new business sales premiums, and to earn higher profits than in 2009,” Takashi Fujii, chairman and general director of Dai-ichi Life Vietnam, said in a statement.

Fujii said the higher-than-expected business performance supported the company’s plans to continue sales office network expansion across the country and enhance the relationships with strategic partners.

Fujii credited the business success in the three quarters to the company’s big investment in infrastructure, new products to meet the diverse needs of customers, and the quality of customer service to match the demand.

Dai-ichi Life Vietnam is pressing ahead with a plan to expand its office network with emphasis on general agency offices. With 14,500 staff and agencies at 56 offices nationwide, the company is now serving more than 510,000 customers and ready for a bigger share of the market.

Dai-ichi Life Vietnam said it would focus on strengthening cooperation with partners in the banking industry and new investments as one of the ways the company was pursuing to improve its business efficiency.

Vietnam is the first foreign market for the Japan-based Dai-ichi Life Insurance Co. Ltd. to expand life insurance business by establishing a wholly-owned subsidiary. In January 2008, Vietnam’s Ministry of Finance allowed Dai-ichi Life Vietnam to increase its charter capital from US$25 million to US$72 million, after one year of its official operations in this market.

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Toyota Vietnam introduces new Corolla Altis

Toyota Vietnam president Akito Tachibana (2nd, R) and others pose for a photo at the launch of the new Corolla Altis version in HCMC on Tuesday - Photo: Quoc Hung

HCMC - Toyota Motor Vietnam on Tuesday introduced the new Corolla Altis 2010 equipped with technology comparable to high-end Toyota models.

Michihiro Sato, chief engineer of Corolla Altis, said the car had been improved by using the new ZR engine with Dual VVT-i and ACIS (Acoustic Control Induction System) and the new Super CVT-i (Continuously Variable Transmission) to provide smooth driving and fuel efficiency.

Altis 1.8CVT consumes 6.8 liters per 100km and Altis 2.0CVT consumes 7.2 liters per 100 km thanks to the engine technology.

“We do believe that with the advanced and dynamic character with power train and the cool and premium design, our customers will enjoy driving the new Altis,” he said.

In particular, the Super CVT-i also adopts 7-speed sports sequential shift which allows drivers to proactively control the speed ratio like a manual transmission.

The new Corolla Altis comes with three types – Altis 2.0V (CVT), Altis 1.8G (CVT) and Altis 1.8G (M/T) and four colors – medium silver metallic, silver metallic, beige metallic and black mica. It sells for VND675 to VND786 million per unit, including VAT.

Toyota Vietnam president Akito Tachibana said at the introduction of the automobile in HCMC on Tuesday that his company was looking to initially sell 550 units per month.

The new car will be available at the company’s dealer network nationwide from Wednesday.

The first Corolla Altis was launched in Vietnam in 1996 and to date total sales have amounted to more than 26,400 units, accounting for 54% of the market share.

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Typhoon Megi forces cancellation of Hong Kong-Vietnam yacht race

Flooding, typhoon hit tour operators

HCMC – The organizer of an international yacht race from Hong Kong to Vietnam has shelved the competition scheduled to take place on Wednesday.

The Royal Hong Kong Yacht Club said the VinaCapital Hong Kong to Vietnam Race had been canceled due to the approaching super typhoon Megi, which has battered the Philippines on its course to the East Sea.

The organizer said it regarded safety as the first priority for all its events, particularly for its international Category 1 Offshore events. It would be unthinkable to send the boats to stormy high seas, it said in a statement.

However, the organizer said that competitors and the club are fully supportive of running the race in the middle of next October. The date is expected to be set soon to allow international competitors to plan their racing calendars.

Vu Duy Vu, deputy director of the race’s local partner Saigontourist Travel Service Co., has confirmed the cancellation.

“We completed all preparatory activities for the race but we had to cancel it for safety reasons,” he told the Daily on Tuesday.

Earlier, the central Government had allowed Saigontourist Holding Company, the parent company of Saigontourist Travel Service Co., to combine with the foreign partner to organize the 656km race from Wednesday to next Wednesday.

The event has been taking place every two years since 2004.

* In related news, local travel firms said they have stopped selling tours to Quang Binh Province known for the World Heritage-listed Phong Nha-Ke Bang National Park which is home to the longest underground rivers and the largest caverns, as the severe flooding in the central region is still unpredictable.

“We have stopped selling tours to Quang Binh since last week. Tours to other destinations in the central region like Danang and Hue are still selling as normal but fewer tourists are purchasing such tours,” Tran Quoc Bao, head of the domestic department of Saigontourist Travel Company, told the Daily on Tuesday.

Tour operators said that the hardest hit provinces, including Quang Binh, Ha Tinh and Nghe An, are not favorite tourist destinations like others nearby such as Danang, Hue, and Hoi An, so flooding has left little impact.

However, tour operators are concerned about the bad impact of the new super typhoon Megi, which might prompt tourists to cancel all tours to the region.

Fiditourist already feels the impact, as the company on Tuesday received a request from a big group of tourists for cancellation of a tour of the coastal city of Nha Trang.

“The tourists’ final decision has yet to come but we will lose more if the tour is cancelled because Vietnam Airlines is asking for full charges of the cancellation,” said Nguyen Ngoc An, head of the domestic department of Fiditourist.

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Dollar rises to record vs dong on unofficial market

HCMC – The U.S. dollar surged to a new record high of VND20,000 per dollar on the unofficial market on Tuesday and as a result businesses are seeking to hold on to the greenback for fear of foreign exchange risk.

The dollar on the underground market on Tuesday afternoon traded at VND19,980 for buying and VND20,020 for selling, up VND50 from the previous day and VND170 from late last week.

Reportedly rumors that the central bank would continue devaluing the Vietnam dong were behind the dollar rally on the unofficial market on Monday. However, the central bank governor, Nguyen Van Giau, on Tuesday affirmed in Saigon Giai Phong newspaper that there would be no more dong devaluation but his message did not appease the market.

The central bank has yet to take a single move to ease the dollar fervor. Commercial banks on Tuesday quoted the dollar selling price at VND19,500 per dollar although no companies could buy the dollar at that price.

Corporate clients must now pay extra fees to buy dollars at banks, virtually appreciating the dollar versus the dong. 

There are no official reasons for the dollar jump but market watchers said shaky confidence in the local currency had led to volatility on the foreign exchange market, so any rumors could drive the dong down.

When the dong fell to VND20,000 per dollar, the dollar price in futures contracts on Asian markets on Tuesday afternoon was VND19,950 for one month and VND21,520 for one year.

There are signs that enterprises are holding on to dollar funds on their bank accounts. A source from the State-owned bank BIDV told the Daily BIDV’s dollar purchases had dipped strongly recently, because corporate customers declined to sell.

Individuals are also speculating on the dollar, the source said.

According to a report by the central bank’s HCMC Branch by late August, dollar purchases from enterprises accounted for 40% of the city-based banks’ total.

If enterprises had sold the dollar to banks last week, it would have lost VND500 for each dollar. Therefore, no one wants to sell dollars to banks given the continued price increase of the dollar on the unofficial market, the source said.

Meanwhile, companies having dollar debt are rushing to buy dollars for premature payment.

Outstanding dollar loans rose sharply in the first nine months of this year, and in HCMC alone, dollar credit expanded by a whopping 36.4%.

Dollar supply is in decline while dollar demand is sharply up, leading to a sudden imbalance on the foreign exchange market, the source said. However, the source affirmed BIDV could meet all legitimate corporate needs for dollars.

Meanwhile, the general director of a joint-stock bank told the Daily that dollar funds were ample but prohibitively high prices really mattered.

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