Thread: Latest news on the Dong!

Originally Posted by Spoiledred

Interesting. Thanks for that titbit. Really wonder what they are really up to?

Ain't no tellin'. (Oil!)

Its looking up......

( IF YOU DON'T DEPLOY YOURSELF OTHERS WILL EMPLOY YOU)

Wealth Pools, Int'l.

Dong slightly falls against dollar

VNECONOMY updated: 08/06/2007

The Vietnamese dong showed one of its biggest monthly depreciations against the U.S. dollar last month. The market is trading the local currency at around VND16,090-16,100 per dollar, compared to VND16,040-16,050 a month earlier, representing a 0.3% decline.
Last month's fall of the dong also netted off with all of its appreciation against the dollar in the first quarter of the year to help the local currency being held at the same exchange rate as the end of last year.
Similarly, the exchange rates of the local currency against other major currencies have also been stable over the past weeks. The dong trades at around VND21,650 per euro and about VND132 per yen.
The dollar/dong forward rates are also quoted at low levels in comparison to the same period of the last couple of years due to low interest rate differentials between the local currency and the green-back for short tenors up to one month.
Banks even do not add any swap point to the dollar/dong spot rates for such tenors since they are really in cash surplus at the moment. However, two-month and three-month swap points are still positive when quoted at around VND20 and VND50 above spot respectively due to the market's lack of longer tenors' fund availability.
Vietnam ups reserve requirements
Last week dong interest rates continued to stay stable. Banks kept their overnight rates at 3.4-3.5% per annum, unchanged from the previous week.
Steady rates suggested that funds in the banking system remained at a healthy level. Last week, the central bank withdrew VND15.5tril from the system via its open market operations and VND200bil from its weekly auction.
Effective from June 1, the levels of compulsory reserves that banks must keep with the State Bank of Vietnam in dong and foreign currency will be raised.
Reserve requirements for dong deposits will be doubled, from 5 to 10% for deposits with terms of up to 12 months and from 2 to 4% deposits with terms of 12-24 months.
Reserve requirements for foreign currency will increase from 8 to 10% for deposits with terms of up to 12 months and from 2 to 4% for deposits with terms of 12-34 months.
The move aimed at capping inflation. Vietnam's annual consumer price index accelerated to 7.31% year-on-year from 7.16% in April, both above the target of keeping annual inflation this year below 7%.
This move will reduce banks' liquidity but the interest rates will not change immediately as banks till have surplus funds.

Source: SGT Daily

Whats happening with our Dong????? This looks like it's going to be a rollercoaster ride.........

Originally Posted by Ralphrod67

Whats happening with our Dong????? This looks like it's going to be a rollercoaster ride.........

A lot of people are taking out loans and using them to buy stocks. The SBV is trying to curb this.

The article itself also states that they're trying to curb inflation.

Dragon economy faces forex challenges

NOLAN CRAWFORD
Leading economists are urging Vietnamese policymakers to liberalise their foreign-exchange regime sooner than later, while the country is still building ample reserves and huge amounts of investment capital continues to flow into the market from abroad.
The International Monetary Fund, which always advocates free-floating currencies, last week issued a statement calling for greater flexibility in the foreign-exchange markets in Vietnam. A US$100 banknote is pictured in front of 100,000-dong notes in Hanoi. The IMF, which always advocates free-floating currencies, last week issued a statement calling for greater flexibility in the foreign-exchange markets in Vietnam. Although the statement is not new, the timing was important, say analysts and economists. — BLOOMBERG NEWS
Although the statement by IMF deputy managing director Takatoshi Kato is not new, the timing was important, say analysts and economists.
This year, economists both in the public and private sectors expect Vietnam's current account to swing into deficit, while inflationary pressures remain strong and foreign debt accumulation by both the public and private sectors mounts.
Barclays Capital, in a recent report, predicted that the current account deficit could hit $1.1 billion this year and $2.1 billion in 2008, due to the rising costs of freight, insurance, interest payments and the repatriation of profits.
"Implementing monetary and exchange-rate policies in the presence of growing capital flows, managing fiscal policy when aggregate demand pressures are building up while prices are increasingly liberalised, and ensuring debt sustainability when investment needs are large are some of the immediate challenges [to the Vietnamese economy]," said Mr Kato from IMF.
Vietnam maintains a managed float regime for the dong. The State Bank of Vietnam (SBV) uses the average exchange rate in the interbank market during the previous business day as the official rate. Commercial banks are then allowed to trade within 0.5% on either side of the SBV quoted rate.
Over the past few weeks, the US dollar has fluctuated between 16,050 and 16,140 dong.
A pegged rate usually requires higher reserve coverage both to stabilise the exchange rate and ensure credibility of the forex regime itself.
In addition, when the exchange rate has been fixed, or "managed" in Vietnam's case, over a long period, it can result in a false perception of stability, according to IMF and Asian Development Bank (ADB) economists.
As well, there are a lack of incentives for the private sector to hedge against risk, leading to a buildup of unhedged foreign currency liabilities. Something similar to this happened in Thailand during the financial crisis of 1997.
The latter point - unhedged liabilities - is a concern given the huge amounts of foreign-denominated bonds the government and state enterprises intend to issue over the next few years.
A more immediate worry in the forex market is the flood of foreign capital into the booming stock market, says Phi Dang Minh, head of the central bank's Foreign-exchange Department.
According to World Bank estimates, foreign investors as of the end of March had pumped more than $4 billion into the stock market, controlling about 28% of its capitalisation.
"Exchange-rate management has become more challenging with the massive growth of local bourses, because a minor change in the rate could have a wide range of effects," Minh said recently.
Just as challenging as the inflow is the fear of an outflow of foreign capital.
"Any sustained period of market volatility would lead to a reversal in the balance of payments dynamic and cause a sharp decline in forex reserves," wrote Barclays Capital economists.
There are already signs of a weakening bourse. Last week, the State Securities Commission decided to cap total commercial bank loans for stock investments at three percent of total outstanding loans.
Regardless of the fact the new policy has yet been enacted, the announcement caused net selling among foreign funds and forced the VN-Index to as low as 1,040 points, down 4% over the previous week.
In the end, though, officials seem eager to keep the forex market relatively stable, especially against key currencies such as the dollar, yen and euro. Policymakers want to ensure that Vietnamese goods remain price-competitive, especially as it tries to integrate into the regional supply chain.
"Concern about export competitiveness and forex reserve sufficiency to cope with a possible reversal in capital flows appears to have a significant bearing on policy," said a Citigroup economist.
With the growing short term risks and likelihood the current account this year turns into a deficit, Vietnam still has a relatively stronger foreign reserve position than it had in the past, a trend that Barclays, Citigroup and HSBC all expect to see continue.
At the end of 2006, reserves stood at $13.4 billion, or about 3.8 months of import coverage.
Barclays Capital predicts reserves could reach $18.4 billion by the end of this year, as foreign direct investment (FDI) and official development aid continue to flow into the country.
The foreign-reserve cushion has not stopped economists from urging officials in Hanoi to liberalise the country's forex market. This would not only involve floating the dong but also the imposition of the correct measures to control capital flows. The IMF's Mr Kato said the challenges facing the market would "require determined and, at times, complex policy responses" - hence a need for further reform in monitoring foreign exchange.

Last Updated: Monday, June 11, 2007 11:12:34 Vietnam (GMT+07)

Vietnam apparel shipments to US up 20 pct

Vietnam’s apparel exports to the US rose by 20 percent to US$927 million in the first quarter this year, the US Department of Commerce’s data shows.

Of the eight Vietnamese apparel items placed under dumping watch by the department, shirts posted the highest rise of 30.61 percent, the data further showed.

Diep Thanh Kiet, deputy chairman of the Ho Chi Minh City Knitting, Embroidery and Textile Association, said the growth had not been high.
The US Textile Association’s argument that Vietnamese garments hurt local industry was nonsensical.
Vietnam accounted for a mere 3 percent of the US’s total apparel imports, and therefore could not be a threat to the latter’s textile and garment industry.
The average export unit price of Vietnamese products last year had been $2.96, much higher than the US’s average import price of $1.79.
The average price of apparels from Mexico was $1.84, China $1.55, and Canada $1.02.
The DOC began monitoring import of textile and apparel products from Vietnam soon after lifting quotas following Vietnam's accession to the World Trade Organization in January.
American importers have put off buying Vietnam-made apparel until August when the DOC will announce the surveillance results since they fear the outcome may be unfavorable.
The import supervisory mechanism will remain in place until the present US administration’s tenure ends in January 2009.
Six US congressmen, both Republican and Democratic have recently expressed concern over the DOC’s monitoring mechanism against apparel imports from Vietnam.
In a letter to Secretary of Commerce Carlos Gutierrez they said it could place the US in violation of agreements under the WTO.
The senators also argued that the program, a unilateral anti-dumping measure taken by the US does not benefit US businesses and consumers.
US retail firms have also criticized the monitoring mechanism, saying it would affect both Vietnamese and Americans.
At a public hearing in Washington late April, Ronald Shulman, chairman of giant retailer JC Penney Company, said the surveillance would hit the Vietnam textile industry and also retailers and consumers in the US.
Stephanie Lester, deputy chairwoman of the US Retail Industry Leaders Association (RILA), said most of the products the RILA members purchased from Vietnam could not be supplied by domestic production.
The DOC’s surveillance program was inappropriate and a misuse of government resources to monitor imports of products to possibly self-initiate anti-dumping proceedings though there were no domestic producers of the items.
Representatives of the International Textile Group, the National Retail Federation, the Association of US Importers of Textile and Apparel, and Hampshire Group all objected to the surveillance mechanism and told the DOC to reconsider the decision.
Vietnam’s apparel exports are set to grow by 27 percent this year to US$7.3 billion.
The industry said that in the first five months they rose 24.3 percent, adding that at this rate the exports could reach $6.5 billion this year.
The US is the largest importer, accounting for 55 percent of Vietnam’s textile shipments.
Vietnam’s apparel exports last year were worth US$5.8 billion. With $3.1 billion, it ranked sixth among apparel exporters to the US.
Source: Tuoi Tre, Thanh Nien – Compiled by Dong Ha

Vietnam-EU workshop on WTO legislation held

A workshop aimed at discussing measures to enhance the effectiveness of Vietnam’s legislation in relation to the country’s WTO commitments was held in Hanoi on June 8 in the framework of the EU-sponsored Mutrap project.
Junior professional Associate Radu Tatucu, who is working for the World Bank, addressed the workshop, which was entitled “Improving the quality of trade-related legislation in Vietnam”, and held with the participation of Vietnamese legislators and European Union (EU) consultative experts.
He said improvements are needed in internal co-ordination between different ministries involved in the preparation, drafting, discussion and ultimately adoption of the legislation, so that laws approved by the National Assembly, as well as regulations issued by local People’s Councils are in line with WTO principles and Vietnam’s commitments before the WTO.
“There are certain methodological issues that need to be improved by Vietnamese legislators,” he stressed.
He remarked that organising the workshop is a positive step and shows the Vietnamese government’s efforts in improving the legal system in the country.
Countries becoming WTO members need time to adjust to legislative and economic reforms, he said, adding that legislative reform should be seen as a positive because Vietnam is embracing the rules of the international economy and by doing so is building a well rounded legislative system which is attractive to foreign investment.
Ngo Duc Manh, Director of the Scientific Research, Library, and Information Centre of the National Assembly’s Office, said that after the country joined the WTO in January, the Vietnamese government has looked into laws and regulations relating to the implementation of WTO commitments. The 2007 agenda of the NA has touched upon the building of 21 bills and 14 ordinances and resolutions.
The EU-sponsored Mutrap project began in September 1998. The second phase of the project, which will be allocated EUR 5.35 million of which the Vietnamese government will shoulder EUR 250,000, was launched in January 2005 and is expected to be completed by June 2008.
The project is aimed at supporting Vietnam to further accelerate economic development and integrate into global and regional trade systems. (VNA)

HCM City Stock Exchange will be a $62.5mil company08:30' 01/06/2007 (GMT+7) VietNamNet Bridge – Tran Dac Sinh, Director of the HCM City Securities Trading Centre (HSTC), said that HSTC would become the HCM City Stock Exchange, a company with the total chartered capital of VND1tril ($62.5mil).

How different will the HCM City Stock Exchange be from the current HSTC?

The stock exchange will be a legal entity, State owned, structured as a one-member limited company. It will operate under the Securities Law and Enterprise Law, and have the total chartered capital of VND1tril.
The difference between the stock exchange and the trading centre lies in the fact that the stock exchange regulates the market directly, but operates like an enterprise. This enterprise can set up regulations at its level which helps it regulate and supervise market operations. The stock exchange can set up rules for the market, for listing companies and its members. If you want to join the market, you have to follow our rules.

The second difference is that the stock exchange will have autonomy in its operations. Until now, HSTC has always needed to get approval from higher levels for everything, even when it just needs to hire one new staff.

Could you please tell more about that: how has HSTC been fed, from the State budget or membership fees?

Until now HSTC has been fed by the State budget. However, the situation will be different: the stock exchange will feed itself by collecting fees. In fact, now HSTC collects fees from its members, but it has to pay them back to the State, and when it needs money to do something, it has to ask for money from the State.

HSTC now collects listing fees and member fees (VND20mil or $1,250 a year), everyday transaction fees (securities companies have to pay HSTC 20% of the total brokerage fees they get every day), and other kinds of fees.

In other countries, stock exchanges auction the seats on trading floors. Will the HCM City Stock Exchange think of selling the seats or will it still provide free seats?

Mr Tran Dac SinhI know this. In Thailand, the stock exchange collects $80mil a year from seats. The figure is bigger in Singapore, $1bil a year. HSTC plans to collect some VND150bil ($9.37mil) this year, double that of 2006. The stock exchange will not increase the fee level, but will reduce the fee as the market becomes bigger and there are more and more listing companies. It is estimated that the fee volume to be collected will steadily increase. By May 18, 2007, there had been 86 brokerage tables of member companies put at HSTC.

Some experts said that HSTC decided to delay the application of the real-time order matching scheme for fear of losing control. With there be any changes with the mode of transaction once HSTC shifts to operate as a stock exchange?

The preparatory work for the new transaction scheme has been completed. We are ready now, and we just need the nod from the State Securities Commission (SSC) to put the scheme into operation, maybe in early June 2007.

HSTC, and the HCM City Stock Exchange in the future, has been given the right to licence listing companies. Will the stock exchange, running after profits, try to licence on a massive scale, ignoring the requirements for listing companies?

We will only licence the companies that can meet the set requirements. Under the current regulations, a company must have the minimum capital of VND80bil ($5mil) to be eligible to list on the bourse, but the required capital may be higher in the future. The stock exchange will be known as a place where big and profitable companies gather – the most outstanding companies of national economies.

In the future, there will be indexes of different sectors: indexes of blue-chip groups, for example, the index of the 30 companies which have the biggest market capitalisation volume. It is likely that the stock exchange will have another trading floor for smaller-scale enterprises.

Enterprises should understand that only selected companies will be able to list at the HCM City stock exchange, not every company can list there.

Will the HCM City Stock Exchange cooperate or set up a joint venture with foreign partners?

We have signed cooperation agreements with stock exchanges of many countries in the world, mostly on training, technical assistance and information exchange. The cooperation will help Vietnamese companies list on foreign bourses, while creating favourable conditions for foreign companies to list on Vietnam’s bourse.

Will there be any changes in the stock exchange’s capital structure in the future? If yes, will the stock exchange sell shares to its members and investors? Will the diversification of capital sources affect the objectiveness of the stock exchange in regulating the market?

It is expected that the stock exchange will be equitised in 2010. The stock exchange’s stock will be sold to members and the public. The equitisation of the stock exchange will be guided by the Prime Minister.

(Source: TBKTSG)

WTO Commitment Implementation: Need for Consensus between Vietnam and Donors
Posted: Monday, June 11, 2007


Vietnam Business Forum, an annual event prior to the Consultative Group (CG) meeting, was held in Hanoi on May 30, 2007. This forum was the first after Vietnam officially joined the WTO. Therefore, the issue of reform to carry out the WTO commitments was the hottest topic for investors and international donors.

Constructive ideas from investors
The issue of legal reform was the hottest point of discussion at the forum. Many foreign investors said they were eager to enter Vietnam to seek business opportunities, but the promulgation of instructive documents was slower than expected.

Mr Gunwhan, representative of the Korea Chamber of Commerce and Industry (Kocham) in Vietnam, said Vietnam should quicken the process of issuing and validating laws and regulations to match its WTO accession commitments. Many regulations have been issued to implement Vietnam’s WTO commitments, but they seemed incomplete, unclear at some points, and sometimes contradictory.

Mr Alain Cany, Chairman of European Chamber of Commerce (Eurocham), said one concern is when foreign companies will be permitted to carry out exporting and distributing. This seems to be moving more slowly than expected. This lateness is attributed to lack of coordination in issuing instructive decrees, regulations and circulars enclosed with the laws.

AusCham emphasised Vietnam’s implementation of commitments in the service sector has so far made little progress. Laws executing commitments have still not been issued in many fields. The Vietnamese Government needs to speed up the issuance of clear instructive documents for foreign investors to follow.
On behalf of investors, Auscham recommended that a “package” system of legal documents, including laws, decrees, circulars and instructions, should be issued at the same time, creating a synchronous and convenient system for investors as well as governments of different tiers.

Mr Fred Burke, leader of Manufacturing and Distribution Workgroup, said, according to Decree 23 on amendments to trading, import, export and distribution activities of foreign investors, foreign investors will have to settle so many sub-licences and this is actually a hurdle.

Another area of concern is the instruction for the establishment of wholly foreign-owned banks in Vietnam, effective from April 1, 2007. Government decree 22 also mentioned this issue. However, this commitment has not been realized, because no instructive document for implementation has been introduced.

The decree instructing the execution of WTO commitments is now under compilation and it is crucial to the implementation of WTO commitments. Thus, investor anxiety is understandable.

Vietnamese authorities’ voices
At the sidelines of the forum, Minister of Planning and Investment Vo Hong Phuc said Vietnam would implement WTO commitments in accordance to the “mental development” philosophy. In the coming time, the Ministry of Trade and the Ministry of Planning and Investment will send instructive documents on executing WTO commitments in the fields of market opening, service, commodity distribution, branch opening, and retail supermarkets, to local governments. The Ministry of Planning and Investment is compiling and will submit to the Government by July or August for approval the decree instructing the execution of WTO commitments.

The slowness in issuing circulars on decree implementation is a normal phenomenon in Vietnam, because of the sluggish document compilation. However, this problem will be solved in the coming time, said Mr Tran Quoc Khanh, Director of Multilateral Trade Department under the Ministry of Trade.

Mr Khanh affirmed the investors’ opinion that the variety of sub-licences from Decree 23 (on amendments to trading, import, export and distribution activities of foreign companies) is inaccurate because this decree does not require the issuance of new sub-licences. The circular to instruct the implementation of this decree has been sent to the ministries and will soon be posted on the Ministry of Trade’s website to collect more ideas. In addition, the roadmap related to the trading of goods and related activities, released by the Ministry of Trade May 21, is also an important document to decentralize the implementation of the Decree to provincial levels.

Vietnam confirms no discrimination between domestic and foreign enterprises. However, the Vietnamese Government will allow certain preferential tax for domestic small and medium enterprises. Vietnam consistently holds the viewpoint that any preferential treatment for foreign investors that exceeds WTO commitments will not be retroactive, Khanh added.

Mr Pham Manh Dung, Director of the Legislation Department under the Ministry of Planning and Investment said, “We look at the WTO commitments in the process of development. We all know that Vietnam has opened several fields for many years to an extent wider than the commitments. Therefore, to meet the development demand, the decree also treated both early and late opening fields to fit Vietnamese economic conditions.”

Regarding WTO commitments to service, the Ministry of Planning and Investment will fully abide by the commitments to 108 service sectors. However, this does not mean that foreign investors cannot invest in sectors unlisted in the WTO accession commitments. In other words, the opening of uncommitted service sectors is dependent on economic development needs.

A Ministry of Planning and Investment representative said his ministry advocates the viewpoint that if Vietnamese laws provide higher preferential treatment than WTO commitments, they should be maintained not lowered to the rates in the commitments. This showed that Vietnam respects, protects and facilitates investors who have contributed to Vietnamese economic development.

The philosophy of Vietnam is to execute WTO commitments without rigid observance, but based on Vietnamese law and the practical situation in Vietnam. This shows the goodwill of the Vietnamese Government in protecting the interests of investors who have set up long term business with Vietnam.

Vietnam Business Forum

ASEAN-Korea FTA to Narrow Vietnam Trade Deficit with S. Korea
Posted: Tuesday, June 12, 2007

The ASEAN-Korea Free Trade Agreement (AKFTA) is expected to create more trade opportunities for Vietnam as well as other ASEAN member countries, helping narrow Vietnam’s consistent large trade deficit with South Korea, heard an ongoing meeting in Hanoi.
The AKFTA, effective from June 1, 2007, has already scrapped taxes on 70 per cent of on goods imported from ASEAN, paving the way for Vietnam’s further exports of seafood and processed products, said Tran Trung Thuc, an official of the Vietnamese Ministry of Trade (MoT), at the 18th meeting of the ASEAN-S. Korea Trade Negotiation Committee, held from June 5-8.
Meanwhile, Kim Han-soo, Deputy Minister of South Korean Foreign Affairs and Trade, said the agreement would contribute to reducing the US$3 billion yearly trade deficit between Vietnam and S. Korea and create more jobs for Vietnam’s workers.
He also added that investment flows from S. Korea to ASEAN countries, including Vietnam, are likely to increase.
In January-May period this year, South Korea invested US$733.8 million into 105 projects in Vietnam, raising its total investment into the country to over US$8.72 billion for 1,392 projects, only second to Singapore.
Currently, S. Korea is Vietnam's sixth largest trading partner, with bilateral trade accounting for 6.6 per cent of Vietnam’s total import-export turnover from 2002 to early 2006.
However, Vietnam has consistently recorded a trade deficit with S. Korea, in large part due to the foreign country’s increased investment in Vietnam and the ASEAN nation’s imports of machinery, spare parts and equipment, cars and materials for garment and textiles manufacturing.
S. Korea mainly imports seafood, crude oil, coal, electrical equipment, footwear, woodwork products, rubber, household utensils and coffee from Vietnam.


Vietnam Business Forum