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US dollar in Vietnam: The currency with three “sides”
The US dollar in Vietnam has a green side when it is transacted among banks, a red side when it is in hands of management agencies, and a black side when it is traded on the black market.
The decision by the State Bank of Vietnam to devaluate the local currency Vietnam dong by more than 9% has stirred up the public. Hundreds of VietnamNet’s readers have emailed to the editorial board, expressing their surprise about the decision. They wrote that they could not imagine that the Vietnam dong would depreciate so sharply.
It’s necessary to shut down the black market
laohac...@yahoo.com wrote: “The US dollar in Vietnam has a green side when it is transacted among banks, a red side when it is in hands of management agencies, and it has a black side when it is traded on the black market. The reader believed that what is necessary to do now is to shut down the black market.
“Under the current law, the dollar can only be transacted among banks, between banks and businesses to serve the import-export activities, also to individuals who have demand for foreign currencies when traveling abroad. However, in reality, dollars are being traded on the black market as well. As a result, the foreign currency market has become a chaotic market”, he wrote.
Agreeing with laohac...@yahoo.com, Phi Hung thinks that Vietnam is “running after the dollar price”, while it is not “stabilizing the dollar price”.
“In order to stabilize the dollar price, we need drastic administrative measures to shut down the black market, not a move to devaluate the currency,” he said. “If we don’t take drastic measures with the black market, the black market’s dollar price will continue increasing, and the state bank will have to further devaluate the local currency.”
Having concerns about the possible high inflation rate after the dong devaluation, Nguyen Anh Minh, a VietNamNet reader wrote that the latest move by the State Bank will certainly create new price level of goods and services, which will be much higher than the price level seen in late 2010. The national economy will, once again, confront a new “price storm”.
Nevertheless, other readers keep a more optimistic view over the issue. Divivu thinks that even if the dollar price hadn’t had increased, the prices of essential goods and services will still increase. He also thinks that the price increases will be reasonable, and not as sharp as warned by some “experts”. Therefore the readers believe that the State Bank has made the right move when adjusting the exchange rate.
It’s necessary to increase production capacity, not to increase exchange rate
Some readers believe that the nature of the exchange rate adjustment is productivity and the value of products.
“If our production capacity is high, and our products have high quality and strong brand names in the world market, our products will be sold well. High exports will generate trade surpluses and Vietnam will not have to devaluate the local currency. If so, Vietnamese will feel secure to keep Vietnam dong in their pockets, and dollarization will not occur”, a reader named Alex wrote.
Also according to him, in theory, the devaluation of the local currency aims to reduce the trade gap. However, the reader believes that in reality this move will not bring the desired effects.
“Therefore, the most important solution for now is to upgrade the competitiveness of Vietnamese goods. The state should apply all necessary measures to have Vietnamese enterprises build their brand names, promote trade such as providing preferential loans with low interest rates, maybe at 1% per annum as applied in other countries in the world. This will help improve sales. Especially, the state should think of offering tax exemption or reduction to leading enterprises so that the enterprises can reinvest, like PetroVietnam which is allowed to use 3.500 billion dong of the state budget for foreign investments”, he wrote.
Besides, the reader has also suggested upgrading the investment efficiency (It is necessary to stop dispersing capital to too many projects). It is also necessary to improve the competitiveness of enterprises (Giving consultancy, providing capital, training the labor force. Especially, it is necessary to dissolve unprofitable businesses).
He stressed that it is necessary to improve the ICOR index which is relatively to high at 10.
Chung Linh
vietnamnet
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