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Measures to stimulate export found impotent
Experts say Vietnam needs to keep monetary market stable for a long time and control the foreign currency market strictly in order to stimulate export and help curb trade deficit.
In an effort to boost exports and curb trade deficits, since the beginning of the year, the State Bank of Vietnam (SBV) has twice adjusted the dong/dollar interbank exchange rate. However, the “remedy” has not worked: exports are still increasing slowly, while the trade deficit remains very high.
In the first nine months, the total export revenue reached $51 billion, an increase of 22 percent over the same period of 2009. However, if comparing with the same period of 2008, the figure just represents a modest five percent increase.
Export revenue decreased considerably in September as dong depreciation pushed the consumer price index (CPI) up, causing big difficulties for businesses and people.
Dong depreciation has also led to an increase in Vietnam’s foreign debt. Statistics show that foreign debts by the end of 2009 reached $28 billion. At that moment, since the dollar price was low at 18,480 dong, the debt was equal to 517,440 billion dong. Since the dollar has become more expensive, the value of the debt has reached 546,000 billion dong, or 28,560 billion dong ($1.47 billion). The additional sum Vietnam must pay due to the dollar price increase is equal to the value of three million tons of exported rice.
Vietnam has a high trade deficit level, $8.6 billion in the first nine months of the year. The higher dollar price has pushed up prices of all kinds of goods, thus making production costs higher and making export items less competitive.
Since the export products are mostly raw materials or those with low-added values, low export revenue increases cannot offset the higher sums spent on imports.
In general, governments usually devalue local currencies when they want to boost exports. Economists have pointed out this does not work in many cases.
In the last 10 years, the Thai baht has increased by 33 percent in value, from 45 per dollar to 30 per dollar. The political situation in Thailand has been uncertain, but the export revenue has increased steadily. It is expected that Thailand’s export revenue will reach $183 billion this year, an increase of 20 percent from 2009.
Meanwhile, the South Korean won has increased by 26 percent since March 2009, but they are still expecting export revenue of $445 billion this year, an increase of 22 percent over 2009.
China, though having seen the yuan increasing by 20 percent in value, remains one of the countries with the highest export revenue in the world.
Some experts believe that, in these countries, appreciation of local currencies make people feel secure when putting money into production and business. Since they do not worry about depreciation, they do not try to hoard foreign currencies. Therefore, the governments can easily buy foreign currencies for their reserves. China’s foreign currency reserves have reached $2500 billion, while South Korea $285 billion.
This shows that the export capability of a nation depends on production capability and scale of enterprises, not on policies to combat weak local currencies.
Financial experts believe that what the Government needs to do now is to stabilize the monetary market and strictly control the foreign currency market (In Vietnamese territory, Vietnam dong must be the only currency used in payment). If people find out that they will not make a profit on foreign currencies, they will sell them. This will also prompt businesses to focus on production and export.
vietnamnet, NLD
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