Intel, for example, is considering relocating its mainboard and microprocessor production bases from Kulim, Malaysia to Vietnam because of the lower labor costs in Vietnam.
Some months ago, the group said it would relocate a production line from Costa Rica to Vietnam.
The shows that the giant is taking action to speed up its investment activities in Vietnam, turning the country into an important global production base.
The US Ambassador to Vietnam Ted Osius said at an important event that the TPP (Trans Pacific Partnership agreement) would allow the US to become Vietnam’s No 1 investor and partner.
In late March, P&G started construction of its Gillette razor factory in the southern province of Binh Duong, capitalized at $100 million. The factory, expected to become operational in 12 months, will create 300 jobs.
P&G Vietnam’s CEO Emre Olcer said the group had considered other countries before deciding to set up a factory in Vietnam.
P&G brands in Vietnam have had steady two-digit growth rates, including Ariel, Pampers, Downy, Pantene to Tide and Head & Shoulders.
More and more US businesses have come to Vietnam to seek investment opportunities in recent years. They are attracted by the low labor costs, the large domestic market and news that the TPP agreement would be inked soon.
Twenty-two US businesses in 2013 came to Vietnam to learn about the business environment. Three groups of large conglomerates, including big players such as Boeing, Apple, AIG and Exxon Mobil, came in the first six months of 2014.
More recently, more than 30 US businesses, all members of the US-ASEAN Business Council, came to Vietnam to seek opportunities in the civil engineering sector.
Analysts said they see a new wave of US businesses leaving China for Vietnam, whcih could be a new world factory in the near future.
Microsoft has relocated its 39 production lines from its factories in Komarom, Hungary, Beijing and Guangdong in China and Reynosa in Mexico to Bac Ninh province of Vietnam, turning Vietnam into an important link in the group’s global supply chain.
Vu Minh Tri, Microsoft Vietnam’s CEO, said the group considers Vietnam a strategic market.
Intel, the largest chip manufacturer in the world, is fulfilling its commitment of investing $1 billion in Vietnam.
According to Intel Products Vietnam’s CEO Sherry Boger, SOC (system on a chip), used for tablets and smartphones has been made at the factory in Vietnam since January 2014.
VietNamNet Bridge - Brothers Tran Kim Thanh and Tran Le Nguyen have been at the two top posts in Kinh Do Corporation since the company’s establishment.
Kinh Do Corporation is a business group of Vietnam with an emphasis on food production, including baked goods, confections, snacks and soft drinks. The corporate group also includes companies in the fields of financial services, real estate and a retail bakery chain. Kinh Do Corporation manages a wide variety of brand names, distributes imported brand name snack and candy goods, and manufactures food for export from Vietnam. Main offices of the company are located in Ho Chi Minh City.
Brothers Tran Kim Thanh and Tran Le Nguyen.
For over 20 years, brothers Tran Kim Thanh and Tran Le Nguyen’s positions at Kinh Do Corporation have not changed.
Thanh is still the corporation’s Chairman while his younger brother is the Vice Chair and Chief Executive Officer. Another brother of Thanh, Tran Quoc Nguyen, is a member of the management board.
Thanh and Nguyen’s wives – Mrs. Vuong Buu Linh and Mrs. Vuong Ngoc Xiem – are also members of the management board.
The dominance of the Tran family is more clearly as many other family members hold the positions of Vice CEO and chief accountant.
According to Kinh Do’s report in 2013, Chairman Tran Kim Thanh and his wife owned only 130,000 shares, accounting for 0.08%, and 80,000 shares or 0.05% of chartered capital but his brother Tran Le Nguyen had up to 14 million shares, corresponding to 8.35%. Nguyen’s wife also had 5.8 million shares or 3.45% of the chartered capital of Kinh Do. This woman is the corporation’s Vice CEO and a management board member.
Recently, Kinh Do’s business strategy changed.
The company has sold its shares to strategic investors or signed contracts worth hundreds of million of USD with new partners as PhinDeli, Vocarimex, and Saigon Vewong to enter into new business fields.
With the new policy, the Kinh Do "pie" will certainly be further divided. However, it is certain that the influence of the Tran family will not change.
The "big boat" is changing direction
With more than 200,000 retail outlets and accounting for 30% of the market share, Kinh Do is the largest domestic confectionery producer in the country.
In 2013, it earned VND4,560 billion of turnover, 1.6 times over the total revenue of the three local confectionery producers ranking behind Kinh Do in the market - BIBICA, Huu Nghi and Hai Ha.
However, the ambition of brothers Tran Le Nguyen and Tran Kim Thanh is bigger as they are enter the food industry.
The plan to engage in coffee, instant noodles and cooking oil will need a lot of money. Therefore, cooperation with other giants may be a good choice for the Tran family.
In early 2014, Kinh Do issued 40 million shares to increase its chartered capital to VND2,000 billion, earning VND1,700 billion in cash, in order to serve the expansion strategy.
At the extraordinary shareholders' meeting in late 2014, Kinh Do approved the sale of 80% of its capital in confectionary segment and the remaining 20% may be sold within the next 12 months for foreign investors.
Specifically, Kinh Do sold 80% stake in confectionery segment to American partner Mondelez International Group, equivalent to $370 million.
Mondelēz International, Inc. is an American multinational confectionery, food and beverage conglomerate, employing around 107,000 people around the world. It comprises the global snack and food brands of the former Kraft Foods.
With this decision, Kinh Do withdrew from the confectionary market after 20 years.
Kinh Do immediately announced plans to use the money gained from the deal: spending nearly $25mil. to buy a 27-percent stake in the Vietnam Vegetable Oil Industry Corporation (Vocarimex).
The successful transaction brought Kinh Do's stake in Vocarimex from 24 percent to 51 per cent. Currently, Kinh Do has three representatives in Vocarimex's managerial board: Tran Kim Thanh, Tran Le Nguyen and Nguyen Thi Xuan Lieu. Thanh is the chairman of both companies.
In its initial public offering last July, Vocarimex sold 37.9 million shares at VND13.428 ($0.6) per share to five organisations and 42 individuals. At present, the State holds 36 per cent of the organization’s charter capital, while the corporation's staff holds 0.88 per cent. Meanwhile, two strategic shareholders, Kinh Do and VPBank Securities, hold 24 and 8 per cent respectively. The remaining 31.12 per cent stake belongs to other investors who bought shares in the corporation's initial public offering.
Data from Ban Viet Securities Company revealed that Vocarimex possesses 51 per cent of Tuong An Vegetable Oil JSC, 49 per cent of Nha Be Golden Hope Cooking Oil Company, 32 per cent of Cai Lan Vegetable Oil Company and 27 per cent of Tan Binh Vegetable Oil SJC.
Most recently, Kinh Do inked a cooperation deal with Saigon Vewong, a Taiwanese company specializing in the production of food.
Under the agreement signed in early May, the two sides will build a US$30 million plant at the Vietnam Singapore Industrial Park in the northern province of Bac Ninh to develop new noodle varieties and also produce Kinh Do's products.
Ve Wong now produces Kinh Do’s products at its HCM City plant, but its current capacity, which KDC refused to disclose, is not enough to meet demand.
Kinh Do executives said their first instant noodle products hit the market five months ago and had become very popular with consumers. The company will hold a 49 percent stake in the new plant and Saigon Ve Wong, 51 percent.
It will have a capacity of 6 million packets of noodles a year initially, when it will produce only instant noodle and spices, before doubling it in the second phase when it will also make instant porridge and other kinds of instant noodles like pho. It will make other instant foods in the third phase and sauces in the last.
Kinh Do said more plants would come up in other locations as part of its efforts to become one of the top three instant noodle producers in the country.
Saigon Ve Wong is known in Vietnam for many instant products it sells under the Aone brand name.
$1 = VND21,500
Tran Kim Thanh’s family started out in the 90s and built Kinh Do into the leading brand in the confectionary market of Vietnam. In 2013 this corporation earned turnover of more than VND4,500 billion and VND619 billion of profit. Kinh Do accounted for a large market share in almost all confectionery product lines, such as biscuits, cakes, bread and ice cream.
After listing the company on the stock market in 2005, Kinh Do joined hands with many partners, such as investing in Tribeco (2005) and Nutifood (2007) and acquiring Vinabico (2008). In 2012, Ezaki Glico (Japan) spent VND660 billion to buy a 10% stake in Kinh Do. However, not all deals were successful. Kinh Do accepted losses in Tribeco and Nitifood while the Japanese partner withdrew from Kinh Do. The most successful deal was the acquisition of Wall's ice cream factory of Unilever in 2003.
In the field of real estate, Kinh Do invested VND1,015 billion to own 50% of the project Lavenue Crown in HCM City. But after years, this 5-star complex has yet to kick off.
According to the management report in the first six months of 2014, Thanh’s family held approximately 26% stake in the company.
Apart from Kinh Do, Thanh and Nguyen are also members of the management board of Thien Long Company, as representatives of Kinh Do. Thien Long is a stationery company with the market value of more than VND1,400 billion.
6/10/2015 9:42:29 AM
HSBC will shed almost 50,000 jobs and take an ax to its investment bank, cutting the assets of Europe's biggest lender by a quarter in a bid to simplify and improve its sluggish performance.
The bank said on June 9 about half the staff cuts will come from the sale of businesses in Brazil and Turkey. The other half will come from cutting about 10% of the remaining 233,000 staff by consolidating IT and back office operations and closing branches. About 7,000-8,000 cuts are expected to be in Britain, or one in six UK staff.
UPDATED : 06/10/2015 20:01 GMT + 7
Vietnam has seen improvements in its eco-social development in the first five months of 2015 compared to the same period last year, but the government is “not satisfied,” Prime Minister Nguyen Tan Dung said Tuesday.
Although the country’s eco-social development has improved, there is still macroeconomic instability and weaknesses in the way the economy is managed and driven, the premier said at the 2015 Midterm Vietnam Business Forum (VBF) in Hanoi.
“The government is not satisfied and will continue focusing on its major tasks in the future,” he said.
The plans include stabilizing the macro-economy, controlling inflation, keeping public debts under safe limits, boosting enterprise restructuring and increasing the effectiveness of state investment, he elaborated.
Vietnam will try to keep inflation below five percent not only in 2015 but also the ensuing years, according to the prime minister.
“In 2016 there will be no weak banks left in the banking system, and the nonperforming loan rate will be reduced to three percent,” he said.
The VBF, held by the Vietnam Chamber of Commerce and Industry, was themed “enhancing enterprise competitiveness for global integration.”
In their speeches delivered at the forum, representatives from the World Bank, AmCham Vietnam, EuroCham Vietnam, and the Japan Business Association in Vietnam pinpointed many challenges, such as tax procedures, business transparency and enterprise restructuring which the Southeast Asian country is facing in its global integration.
In his closing speech, Prime Minister Dung ordered relevant ministries to seriously take these suggestions and recommendations into consideration.
The Vietnamese ministries should “create all favorable conditions to have a better business environment and improve the competitiveness of the enterprises and the economy,” the premier requested.
With many international investors showing concern about a possible power shortage in the future, Prime Minister Dung asserted that “Vietnam will not run out of electricity from now to 2030.”
The sluggish construction of some power plants may cause a power shortage in the southern region in 2018, but “the government already has plans to deal with this,” Dung reassured.
“The roadmap for adjusting electricity prices in Vietnam will soon be made public and transparent to dissipate any worries of those investors who want to participate in this sector,” he added.
The premier also revealed that Vietnam is only “a few technical issues away” from signing a free trade agreement with the EU, and the Trans-Pacific Partnership with 11 other countries, including the U.S.
“Vietnam will then have 14 free trade agreements and relations with 55 partners, 15 of which are G20 members,” he said.
“This is an important ground to create a favorable business environment.”
The VBF was established as a project of the Vietnam Consultative Group at a meeting between the Vietnamese government and its donor partners in Tokyo in 1997, according to the forum’s website.
The forum is known as one of the first public-private dialogue projects implemented by the World Bank and its International Finance Corporation.
The VBF hosts two annual meetings in Hanoi, establishing regular channels of communications between foreign and domestic companies and the Vietnamese government.
The forum is widely recognized for contributing to reforms that have improved the business environment in Vietnam.
The mid-term Viet Nam Business Forum 2015 opens yesterday in Ha Noi. — VNA/VNS Photo Duc Tam
HA NOI (VNS) — The country's investment climate has witnessed significant improvements following three challenging years of macroeconomic instability, according to Minister of Planning and Investment (MPI) Bui Quang Vinh.
In his opening remarks at the mid-term Viet Nam Business Forum 2015 held yesterday in Ha Noi, the minister said the forum would help boost the international integration of Viet Nam, especially at the time of signing and participation in new free trade agreements (FTA).
With the theme "Enhancing Enterprise Competitiveness for Global Integration," the forum focused on the solutions and measures to develop the private economic sector and make it more competitive for global supply chain.The minister forecast an annual growth of 6.2 per cent for 2015, adding that local business difficulties were easing.
Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said the local business community had recognised the Government's efforts to provide a better regulatory environment.
However, the VCCI chairman pointed out the lack of transparency in access to regulatory documents of Government agencies, unpredictable changes in rulings by regulatory agencies, and law enforcement not conducive to business still troubling local enterprises and firms.
Meanwhile, Sherry Boger, Chairperson of the American Chamber of Commerce (Amcham) emphasised that Viet Nam had been extremely successful with international economic integration in general and with the US in particular.
She remarked that last year, the total trade between the two countries reached US$36.3 billion, up by 20 per cent. She added that it could reach nearly $72 billion by 2020 if the present trends continue, and even more with TransPacific Partnership (TPP).
The Amcham chairperson added that in 2014, Viet Nam became the leading supplier to the US among ASEAN countries, ahead of Malaysia and Thailand. Viet Nam's share of total US imports from ASEAN was 22 per cent and could exceed 30 per cent by 2020.
Addressing the forum, Prime Minister Nguyen Tan Dung said more work needed to be done determinedly to secure the rapid and sustainable socio-economic development of Viet Nam.
He added that the Government would do more to stabilise macroeconomic elements by controlling exchange rates, inflation, budget overspending, and trade deficit.
A worker operates equipment at a production chain for car tyres at the Kumho Tire Viet Nam factory in Binh Duong Province. — VNA/VNS Photo Vu Sinh
He told the forum that the Vietnamese Government would commit to improve the business and investment climate, as well as raise entrepreneurs' competitiveness.
"Aiming to sign 14 FTAs in the coming time, Viet Nam will establish trade relations with 55 partner countries, including 15 member countries from G-20. That will be the fundamental foundation for Viet Nam to integrate with the world," said Dung.
Nguyen Thi Hong, Deputy Governor of the State Bank of Viet Nam, said the SBV had used its monetary policy tools in restructuring local financial institutions and enhancing monetary and banking regulations. As a result, it would improve investors' confidence in Viet Nam. Hong noted that the SBV would reduce the bad debt rate to 3 per cent by the end of 2015.
Country Director of the World Bank Victoria Kwakwa said Viet Nam had made significant progress in a number of areas and important legislations, adding that the WB would see how the country continues to move in the right direction and towards a more private sector-driven economy.
She said key FTAs would allow Viet Nam to transform itself and move towards a modern industrialised economy.
Highlighting that significant progress had been made in important issues for the businesses community, the co-chairman of Vietnam Business Forum Consortium, Virginia B Foote, said since the last forum, new laws on investment, enterprise, and land had been passed, while some amendments to the Tax Law were made to attract investment, support industries, and develop the local economy.
The forum was co-organised by the VBF Consortium, MPI, International Finance Corporation, and the World Bank in Ha Noi.
Many banks have raised deposit rates over the past few weeks to improve liquidity amid the pressure of a stronger US dollar. — Photo tuoitre.vn
HA NOI (VNS) — Many banks have raised deposit rates over the past few weeks to improve liquidity amid the pressure of a stronger US dollar.
Viet Nam Bank for Agriculture and Rural Development (Agribank) was the latest among them to take the measure, raising its long-term Vietnamese dong deposit rates by 0.3-0.5 per cent per year as of June 2.
Accordingly, Agribank raised deposit rates for individuals from 6.2 per cent to 6.5 per cent per year for an 18-month term and from 6.3 per cent to 6.8 per cent per year for a 24-month term. For organisational customers, the bank also lifted its 24-month deposit rate from 6.3 per cent to 6.8 per cent per year.
Previously, Asia Commercial Bank (ACB) also lifted its deposit rates for 6-36 months by 0.2 per cent from May 25. The deposit rate for the 36-month term is the highest, 6.7 per cent per year. Meanwhile, the 12-month and 24-month rates are at 6.2 per cent and 6.5 per cent per year, respectively.
Similarly, on May 21, Eximbank raised its deposit rates for some terms and the highest rate of 6.9 per cent has been for a 36-month term. Meanwhile, the 18-month and 24-month rates are at 6.6 per cent and 6.7 per cent, respectively.
Several other banks have also lifted deposit rates slightly.
ACB's Chief Executive Officer (CEO) Do Minh Toan told online newspaper Vnexpress that the move was just to balance capital source and will not affect lending rates considerably.
According to Tuoi tre (Youth) newspaper, Truong Van Phuoc, vice chairman of the National Financial Supervision Commission (NFSC), attributed that banks had raised deposit interest rates to improve liquidity and this was a normal action and not a basis for them to hike lending rates accordingly.
Financial expert Nguyen Tri Hieu observed that although inflation remained stable, with CPI in May rising 0.16 per cent over the previous month and up 0.95 per cent year-on-year, somehow a stronger US dollar recently affected capital mobilisation as some people withdrew their dong savings to buy the dollar; hence, banks had to raise dong deposit rates to attract capital.
Last week, the National Financial Supervisory Commission (NFSC) said that deposit rates were under pressure and set to rise as the growth rate of deposits had been lower than that of credit.
According to the NFSC, total deposits rose 0.98 per cent in the first quarter, in which deposits in the dong rose 1.9 per cent and deposits in foreign currencies fell 4.9 per cent. Total outstanding loans, meanwhile, increased 1.7 per cent, in which outstanding loans in dong climbed 2.4 per cent and outstanding loans in foreign currencies dropped 0.9 per cent.
As a result, the loan to deposit ratio (LDR) rose to 84 per cent from 83 per cent in December 2014, of which LDR in foreign currencies climbed to 87 per cent from 83.4 per cent at the end of 2014, the NFSC reported. — VNS
VietNamNet Bridge – The Trans Pacific Partnership (TPP) trade agreement is expected to add 30 per cent to Viet Nam's GDP over the next 10 years, the US Assistant Secretary of State for Economic and Business Affairs said at a press briefing held in HCM City last week.
Twenty years ago, Viet Nam-US bilateral trade was US$450 million but now stands at $40 billion. — File Photo
Charles H. Rivkin said Viet Nam had the smallest economy among 12 countries that are negotiating the terms of the TPP agreement, and that if approved, the TPP would allow Viet Nam to grow further by integrating into global supply chains.
Rivkin said US President Barack Obama and US Secretary of State John Kerry wanted to complete the TPP agreement within their office terms.
"I cannot give specific times on signing this agreement but negotiations have made positive and significant progress, and we hope it will be finished by the end of the year," he said.
The US could wrap up negotiations over the TPP agreement soon if the Congress approves Trade Promotion Authority (TPA), he said.
The US Senate recently approved the TPA with an overwhelming vote but it still must be considered by the US House of Representatives.
One of the reasons the US wants to sign the TPP was the size of the Asian market, Rivkin said.
It has 550 million consumers and sales worth US$2.7 billion, six times higher than the US market.
Twenty years ago, Viet Nam-US bilateral trade was US$450 million but now stands at $40 billion.
"Let's imagine what would happen after the TPP is concluded," he said.
According to Rivkin, business opportunities in the Vietnamese market abound, but US investors want three key factors to be satisfied: transparency, predictability and legal compliance.
These factors, which are mentioned specifically in TPP, must be met with the highest standards.
If Viet Nam signs the trade pact, it would create an attractive environment for not only US investors but also other nations, Rivkin said.
"There will be a wave of investment hitting Viet Nam, and increased market access for foreign investors in Vietnam," he said.
During his first visit to Viet Nam, Rivkin met with officials of the American Chamber of Commerce in Ha Noi and HCM City.
"US businesses have invested in Viet Nam and now want to expand to take advantage of opportunities from the TPP agreement. Viet Nam also has the advantages of a young, hard-working labour force," he said.
TPP is expected to lead to significant changes in industrial sectors.
The US is Viet Nam's biggest export market, and after joining the TPP, trade barriers will fall.
The removal of trade barriers, however, will affect small- and medium-sized enterprises (SMEs) in the US as well as Viet Nam, where SMEs are a critical part of the economy.
But the TPP will also create good conditions for SMEs to promote exports.
The US has over 28,000 SMEs, accounting for 98 per cent of total enterprises. However, SMEs bring export value of $19,000 billion, only 1 per cent of total turnover.
Rivkin, in his trip to Asia, visited Ha Noi, HCM City and Taipei from May 26 – June 3, where he focused on strengthening economic ties in the region.
In Viet Nam, Rivkin met with government officials, business leaders and representatives from the private sector to discuss the achievements of the last 20 years since the normalisation of US-Viet Nam relations and the way forward for the growing economic partnership between the two countries.
VietNamNet Bridge – Along with a remarkable rebound, the country’s real estate sector continues to enjoy foreign direct investment (FDI) flows.
Illustrative image -- File photo
According to report from the Foreign Investment Agency under the Ministry of Planning and Investment, the sector has attracted 461.5 million USD in the first five months of 2015.
Data from Ho Chi Minh City’s Department of Statistics reported that as of May 15, the city’s capital construction investment reached nearly 40 trillion VND (1.9 billion USD); of 11,000 newly established firms, 2,600 work in construction and real estate.
The southern hub’s People’s Committee revealed that from 2011 to 2015, the city had 5,331 FDI projects with total investment capital of 36.65 billion USD, of which the real estate sector accounted for 12.3 billion USD (36.7 percent).
Su Ngoc Khuong, Director for investment of Savills Vietnam, said the FDI flow has created a driving force for growth in other markets such as retail, hospitality and tourism while the country’s real estate sector is receiving the attention of potential foreign investors from the Republic of Korea, Japan, Singapore and Indonesia.
With the revised Land of Housing, which will officially go into effect on July 1, 2015, not only overseas Vietnamese but foreigners also will have chance to own permanent property in the country, he added.
Meanwhile, General Director of Cushmand & Wakefield Vietnam Timothy Horton said the strong FDI inflows into real estate may pose the risk that foreign investors will dominate the market. He added that domestic enterprises in the sector should quickly reform themselves and join hands in order to compete against foreign rivals.
Deputy Director of Him Lam Real Estate Joint Stock Company Ngo Quang Phuc said FDI flows into the sector will increase supply, offering consumers more choices when purchasing property.
The participation of foreign investors will increase project competitiveness and transparency, which will minimize the “bubble” pricing phenomenon in the real estate market in recent years.
The foreign exchange market has stabilised after fluctuations caused by the State Bank's recent decision to devalue the Vietnamese dong by 1%, according to independent market analysts.
After the central bank's devaluation, banks have adjusted their forex rates, creating a new pricing level for the US dollar.
A representative of a foreign bank in Vietnam, who declined to be named, said the forex rate was VND21,800 per US dollar.
Techcombank, for instance, has raised its selling price for the US dollar to VND21, 870, while Eximbank is selling the greenback at VND21,860.
At Vietcombank, the exchange rate is between VND21,795 and VND21,855 per dollar.
On the Hanoi free market, common forex rates are around VND21,850 and VND21,855 per US dollar. In Ho Chi Minh City, the greenback is selling at VND21,850 and VND21,870.
Meanwhile, the central bank continues to apply the buying and selling exchange rates of VND21,600 and VND21,620 per dollar, respectively.
The average forex rate on the inter-bank market was fixed at VND21,673 on its website.
Analysts, however, said the new rate would remain stable because supplies of foreign currencies are abundant.
The foreign exchange market's liquidity is rather plentiful.
According to reports from credit institutions, foreign bank branches' total value of interbank transactions in the second week of May was VND46,934 billion (converted from US dollar), up by VND3,386 billion compared with the figure in the previous week.
Additionally, overseas remittance from overseas Vietnamese to Ho Chi Minh City alone reached US$1.4 billion in the first four months, up by 19.6%. The figure for Viet Nam is estimated to be between US$13 billion and US$14 billion for the entire year.
A report from the Foreign Investment Department also said that foreign investors registered US$2.29 billion in the first five months of the year. In the period, the Foreign Direct Investment (FDI) enterprises disbursed VND5 billion, a year-on-year increase of 7.6%.
The National Assembly's regular session in April also reported that about US$550 million of Official Development Assistance (ODA) has so far this year been disbursed, up by 11.4%.
"When capital of FDI and ODA projects is disbursed, this means that an additional volume of foreign currency is pumped into the foreign exchange market, thus helping balance supply and demand," Dr. Nguyen Tri Hieu, a senior economic expert, told Dau Tu Chung Khoan magazine.
Nguyen Thi Hong, deputy governor of the State Bank of Vietnam, said that fluctuations of forex rates were still within the permissible level. Credit institutions' and people's legitimate demand for foreign currencies had been satisfied by the banks.
"In the coming time, the central bank will apply several measures and tools to stabilise the forex rate and the foreign exchange market, based on the newly established rate, and put a close watch on fluctuations of the market as well as economic and monetary predictions to ensure proper and effective management," she said.
The State Bank of Vietnam (SBV) will keep the fluctuation of the VND/USD exchange rate at a maximum of 2 percent in 2015, as set in its policy for the year, despite the fact that the rate has already been adjusted by 1 percent twice this year.
The central bank raised the inter-bank average exchange rate between the VND and USD by 1 percent on May 7, from 21,458 VND to 21,673 VND per 1 USD. Banks may set their rate within a range of +/- 1 percent of the SBV-set inter-bank average rate.
On January 7, the SBV also adjusted the inter-bank rate with an increase of 1 percent.
SBV Deputy Governor Nguyen Thi Hong said the 2 percent fluctuation range was set on the basis of socio-economic development targets set by the National Assembly and forecasts on macro-economy and the domestic and international monetary situation.
The recent adjustments were based on economic and psychological factors along with market expectations, she noted.
The SBV will continue to closely following changes in domestic and global markets and predictions to employ appropriate monetary policy tools, ultimately keeping the exchange rate stable and within the set range, she said.
Hong said that although rapid appreciation of the VND may benefit exporters, it will be disadvantageous to manufacturers of export products made from imported materials, since they will have to pay more in VND to buy raw materials.
Data in 2013 showed that the textile and garment sector imported 82.5 percent of the necessary materials, the wood product sector 70 percent, and the footwear industry 50-60 percent, all of which produce key exports of Vietnam.
If the exchange rate adjustment exceeds 2 percent, payments on the Government’s foreign debt obligations will be increased, negatively affecting efforts to control public debt within 65 percent of GDP. Businesses’ foreign debt payments will also be raised accordingly.
The Deputy Governor also noted that the domestic currency is not overvalued, citing a recent study of IMF experts which said the VND/USD rate is in an alignment stage.
The set fluctuation range will also help curb possible inflation, even though inflation is currently under control, she added.