Firms feel heat from FX changes

Auto importers claim their sales have hit judder bars

Ha Thi Giang, a sales representative from Vietnam Star Automobiles Ltd. Company - which distributes Mercedes-Benz cars, said the new exchange rate revision had hurt her company.

“The move may affect our car sales. At present, customers have to pay another VND20 million (over $1,000) if they buy a $60,000 car,” Giang said.

Echoing Giang’s view, Hanoi Automobiles Joint Stock Company salesman Nguyen Ngoc Tien  said that if customers bought a Kia Forte car at $32,000, they would have to pay at least VND12 million ($631.5) more if they pay in dong.

In another case, if they bought a Mercedes S550 at a price of $300,000, they would have to pay another VND120 million ($6,315), Tien said.

“Now is the difficult time for sales of automobiles and the exchange rate revision has hurt automobiles sellers,” Tien said.

For the second time this year, the State Bank  on August 18, 2010 weakened the dong via the mid-point exchange rate by 2.1 per cent, to VND18,932 per dollar, from VND18,544. The move aimed to help curb the country’s trade deficit.

Thus, the new trading range for the dong now stands at VND18,364-VND19,500 per dollar, instead of the previous band ceiling of VND19,100 per dollar.

On February 10, 2010, the State Bank shifted the US dollar/dong mid-point reference rate upward by 3.4 per cent from VND17,941 to VND18,544 per dollar, which allowed the spot rate to trade as high as VND19,100. 

Nguyen Tao Chuyen, director of NTC Joint Stock Company, said he was anxious about the second exchange rate revision.

“While we are finding it hard to seek enough dollars to import animal feed for production, the revision has forced us to pay another VND20 million (over $1,000) for buying dollars over the past week. The revision is suffocating importers like us,” Chuyen said.

“The dong is all the more depreciated. Consumers are the most affected,” he said.

Many travel companies with outbound tours said that they had begun to feel looming losses caused by the revised exchange rate.

“While we don’t dare to increase the tour prices to remain competitive, we anticipate incurring a 15-20 per cent hike in operation costs due to the new exchange rate. Most of clients pay us in Vietnamese dong. But, we have had to buy dollars to pay our foreign partners,” said Nguyen Ngoc Thuyen, director of Nhat Anh Travel Joint Stock Company in Hanoi.

Meanwhile, according to the Vietnam Food Association, the move could help local rice exporters earn about $200 million more from rice exports. Specifically, the association said, Vietnam could export $6.5 million tonnes of rice this year, of which four million tonnes had already been exported with a turnover of $1.7 billion. The remaining 2.5 million tonnes, which would be exported from now to the year’s end, would earn the country $1 billion, not $800 million as expected before, based on an average export price of $400 per tonne.

However,  Tu Liem Production and Service Company general director Nguyen Van Hai said the additional cash earned from dollar payments through exports was not significant, because input costs for all materials, employees, petrol, water and electricity had soared.