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Business continue to worry about exchange rate fluctuations

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The currencies of many countries have depreciated sharply against the dollar, thus affecting the competitiveness of Vietnam’s goods.

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According to the Vietnam Association of Seafood Exporters and Producers (VASEP), its member companies now are worried about the dong/dollar exchange rate fluctuations and the trend of devaluation of local currencies in other regional countries.

“Other currencies have depreciated by 5-7 percent against the dollar so far this year, while Vietnam dong by 2-3 percent only,” the representative of VASEP said. 

“Our seafood export products are higher than the rivals in the region. Therefore, we may lose clients, especially in the key markets of China and Thailand,” he said.

Meanwhile, the importers from Thailand and China are exploiting the opportunity to force Vietnamese exporters to lower the export prices.

The devaluation of regional currencies has also put textile and garment companies on tenterhooks, though the impact is not severe.

Dang Trieu Hoa from Soi The Ky JSC said as the yuan has depreciated against the dollar, Chinese textiles and garments have high competitiveness compared with Vietnam’s goods in large markets, including the EU.

The exchange rate fluctuation is not the only big concern of enterprises. In the context of the escalating US-China trade war, the origin of products proves to be a ‘delicate issue’.

“If Vietnam’s businesses continue importing fabric and input materials from China in large quantities, they may face the risk of bearing high tax rates when exporting products to the US,” Hoa warned.

Nguyen Duc Thanh from the Vietnam Institute for Economic and Policy Research (VEPR) predicted that the exchange rate will still be under pressure because of the trade war escalation.

Thanh believes that Vietnam should pursue a forex policy under which the devaluation of the dong is lower than the devaluation of the yuan against the dollar, which will improve domestic production.

The 2-3 percent dong devaluation, according to Thanh, is ‘acceptable’.

“Vietnam imports input materials from China to process products for export. So, this forex policy would allow Vietnam’s input material importers to benefit both from the Chinese market and from exports to the US,” he said, adding that if Vietnam can exploit both Chinese and US markets, it would be able to improve the production situation and the trade balance.

Luu Bich Ho, former head of the Development Strategy Institute, warned that the war between the two large economies would bring a chain of effects, not only in trade, but other fields as well, including investment, securities and technologies.

Vietnam has forex reserves of $64 billion, while $1 billion has been used recently to intervene in the market.

 

 

Source: VietNamNet

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