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Exchange rate now serving as the barrier for export: Expert
Dr. Vo Dai Luoc, the former Head of the Economics and Politics Research Institute, believes that the exchange rate is now the big barrier for Vietnam to boost export.
2009 will be a difficult year for exports
At the end of 2008, when discussing the possible impacts of the world’s financial crisis on Vietnam’s export, experts said that the majority of Vietnam’s export items are essential goods, so Vietnam will only bear slight impacts from the crisis. However, the situation seems to be quite different from the prediction as Vietnam exported only US $3.8 billion worth of products in January.
Some people say that rice, vegetables, and fish, the main export items of Vietnam, are the essential goods, which the whole world needs to consume. So, they think that no need to be too worried about the narrowing of the export markets.
In fact, the US, EU, and Japan consume the biggest proportions of export turnover in the world. Therefore, if they cut consumption, all the countries which have trade relations with them will certainly suffer. A lot of export countries have to fight in such narrowed markets; therefore, the competition proves to be very stiff.
I think that Vietnam’s export in 2009 will face bigger difficulties in 2008.
There is one thing that has surprised me that the serious drop of industrial production value in July (down by 8.6% over the previous month, and 4.4% over the same period of the last year). The industrial production should have increased in January, the Tet month. This has not happened in the last twenty years.
Could you please tell me about the export prospectus in 2009?
As for crude oil export, even if the oil price increases by tens dollars per barrel, the prices will still be much lower than that in 2008. Moreover, as the Dung Quat oil refinery has become operational, the oil export will certainly decrease.
As for rice, forecasts say the prices are going up. However, everything will still be spent on the crops in 2009. In 2009, the prices dropped sharply just after a bumper crop.
I think the prices of seafood will not be able to increase in the current conditions, while the prices footwear and apparel will see decreases.
Woodwork will certainly see the prices drop as nobody wants to purchase these things in the crisis.
In general, I can see that most of our export items may see the prices decrease.
Domestic market? Just a temporary solution
Do you think that pushing up sales in domestic market deserves to be a good solution for now?
Eyeing the domestic market proves to be a wise move. But I don’t think that the demand in the domestic market is big enough.
I think that the domestic sales just can help consume between US $5 billion and US $7 billion, which is not big enough to offset the decreases in export.
Boosting sales on domestic market should be seen as the temporary solution only. Let’s look at Japan, South Korea, and China, and you will see that no country in the world can move forward with just the sales on domestic markets.
Exchange rate is now barrier for export
Which are do you think the biggest barriers that have been hindering export?
One of the big barriers, I think, is the exchange rate. If the currency is highly valued, the export of the country will be at a disadvantage.
I think that in the crisis, exporters compete with each other mostly in terms of prices, while brand name, quality, design, and distribution networks have become less important at this moment.
A weak local currency should also be seen as the most effective barrier that prevents the flock of foreign made products and helps improve the competitiveness of domestic products on the home market.
How have other countries been doing with their exchange rate policies?
In order to boost export, other regional countries, including South Korea and China, and ASEAN countries all have been following the policy on weak local currency. South Korea, for example, drastically devalued its currency in 2008.
VietNamNet, TBKTVN
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