Businesses miss opportunities because of foreign currency trouble
Managers of the Hanoi Machinery Import-Export Company have been like cats on hot bricks for the last three weeks because they cannot purchase foreign currencies to make payments for transactions.
“The market opportunities are leaving us. We are afraid that many business deals may turn out to be unprofitable,” said Le Phuc Giang, Chairman of the company.
Giang’s company is just one of the companies which have seen business opportunities missed because of problems in payment.
Opportunities missed
Many commodities like machinery, fertiliser, animal feed, garment and textile materials are considered as having good prices as the global economic recession has forced prices down. Businesses want to import materials in big quantities at this moment to store up in anticipation of price increases in the future. Analysts also say that storing up materials now proves to be a wise move, since businesses need to prepare for the economy’s recovery.
However, difficulties in getting foreign currencies have forced them to rethink. Businesses fear that they will not be able to collect enough foreign currencies to make payments for the import deals.
“The opportunities are leaving us. I’m afraid that the opportunities will have disappeared when we have enough dollars to make payment and settle the current problems with the foreign currency market,” said the director of a company who needs dollars to import zinc.
With the dollar shortage, import-export companies have become really miserable.
“Our income has been absolutely relying on the trade of import products, like construction machinery, health care equipment and cars, therefore, we have suffered heavily,” said Giang from the Hanoi Machinery Import-Export Company.
Even the companies which are lucky enough to import commodities on schedule, also do not feel happy as their expenses have become higher than expected. “Commercial banks always charge additional fees, they do not sell dollars at the prices they quote,” said Nguyen Dang Duc, General Director of the Hanoi Materials and Technique Service Company.
Duc said that 50% of his company’s turnover was accounted for by machinery, equipment, steel, wood and metal imports. It needs some $1-2 million a month in foreign currencies to pay for imports.
He complained that in early April, the State Bank of Vietnam announced it would keep the forex trading band stable, but later at the end of the month, the bank raised the trading band by 2%.
“We have suffered as we have to pay additional expenses, which has made the import deals lose the advantage of having low prices. The deals which we thought would be profitable may turn out to bring losses,” he said.
Losing money, however, is not the biggest concern of businesses. What worries them most is that they may lose clients: Domestic clients may seek other partners because they cannot wait longer. The general director of a state-owned enterprise, who asked to remain unnamed, complained: “If we lose the market, this means we will lose everything.”
“Businesses entreating us for dollars”
As the banks’ doors are closed to enterprises, they have been trying to contact export companies, which have earnings in foreign currencies, to entreat them to sell dollars.
Do Ha Nam, General Director of Intimex, related that a lot of people have called him, begging him to sell dollars, but he won’t sell. “It is simply because we have not been able to export much since the beginning of the year; therefore, we do not have excess dollars,” he said.
According to Nam, the key problem is the economic downturn and decreased earnings in foreign currencies. Overseas remittance has also been decreasing, as overseas Vietnamese workers have had to come home because of no jobs in foreign countries. The disbursement for foreign direct investment, and export turnover both have decreased.
Regarding export turnover, Nam said that the net profit of garment, footwear and woodwork exports is not high, because input materials make up 70-80% of the total export products’ values. Meanwhile, crude oil has decreased in price from last year.
However, Nam’s opinion is not shared by other businesses.
Giang said that Vietnam does not lack foreign currencies. “I personally think that the key problem lies in the inflexible forex policy being followed by the State Bank of Vietnam,” he said.
Deputy Governor of the State Bank of Vietnam Nguyen Van Binh admitted that a lot of businesses are trying not to sell dollars, adding that it is the big economic organisations which get state support that are the organisations speculating dollars for profit.
