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Source: Nguoi Lao Dong, dtinews.vn

Strong US dollar worries domestic businesses

Many companies are now distressed about high import prices on materials and a recent increase in the exchange rate.

>> State Bank raises exchange rate

Many companies in Vietnam are now distressed about high import prices on materials and a recent increase in the exchange rate.

Steel firms have to spend more on steel ingot imports due to the rise in exchange rate

Over the past several days, the USD price on the free market has swung between gains and losses ten times against the local dong, pushing local firms into difficulties.

Vo Van Duc Bay, Deputy Director of Cho Lon Plastic, said many plastic companies are facing difficulties as plastic materials on the world market have grown by 20% and the exchange rate is increasing. However, they do not dare to raise their prices because of a decrease in purchasing power and increased competition pressures from illegally-imported goods.

Tran Duy Hy, General Director of Duy Tan Plastics Corporation, said his firm has to import all of their materials, while not given priorities to buy USD from banks. “In this situation, we plan to buy part of our plastic materials from Dung Quat Polypropylene Plant [in central Vietnam] to reduce costs,” he shared.

Many household appliance producers and food processors also said that purchasing power has sharply dropped because of price hikes on essential goods, forcing customers to reduce spending.

Pham Ngoc Chau, Deputy General Director of Hanco Food Company said, “In the world market, prices of materials for powder milk production have grown by 15% to USD4,800 per tonne while prices of other items such as sugar, cooking oil and packing have also increased 15%, hurting local firms. Despite the raises, companies are not bold enough to raise their products for fear of slow sales.”

Petroleum and steel firms crying for help

Vuong Thai Dung, Deputy General Director of the Vietnam National Petroleum Corporation (Petrolimex), said the exchange rate increase in late August has caused a loss of VND400 billion (USD200 million) for Petrolimex. Currently, petroleum prices on the global market continue rising and the stronger USD has resulted in a loss of VND1,600 (USD0.8) per litre of gasoline for the corporation.

Since October 22, although petroleum traders have been offset VND550 (USD0.028)/litre by the petroleum price stabilisation fund, their losses have amounted to over VND1,000 (USD0.05) per litre.

Dung also added that it is very difficult for petroleum firms to buy USD. At present, they are not offered priority to buy USD under the official exchange rate but still have to get loans from banks. Therefore, they have to pay a considerable interest every month, which is now a pressing issue for petroleum business.

Tran Minh Ha, Head of Saigon Petro\'s Business Department, said his company incurs a loss of between VND30 billion (USD1.5 million) and VND40 billion (USD2 million) per month due to these factors.

Many petroleum companies complained that they would be unable to maintain their operations under the current circumstances unless concerned agencies take action. They called upon the government to lower petroleum import taxes and also allow them to receive more financial support from the price stabilisation fund.

Steel companies are also in the same situation. Do Duy Thai, General Director of Vietnam Steel Corporation, said “The steel sector needs huge investments. Currently, bigger spending for steel ingot imports and the escalating exchange rate have caused remarkable losses for us. The loss is about VND900,000 (USD45) a tonne.” As a result, many steel companies have raised their prices by VND200,000 (USD10)/tonne.

Priority should be given to urgent and effective projects– Associate Professor-Dr. Tran Hoang Ngan, Vice Principal of the Ho Chi Minh City Economics

In this context, it is necessary for enterprises to prioritise the use of domestic material sources, balance foreign currency, set up provisional funds to deal with exchange rate changes and focus on urgent and effective projects first.

The state should quickly stabilise the financial and monetary situation to consolidate confidence of firms, investors and people.

It is right time to deal with issues such as raising prices and deposit interest rates without permission.

"Good preparations are needed"- Dr. Le Dang Doanh, senior economist

Falling price of the US dollar is a good sign for the national economy, but this may not be maintained for a long time. Currently, many companies are encountering problems because they inked import contracts in USD, thus, they have to spend more for payments.

Meanwhile, contracts they signed with local firms can’t be changed. To avoid exchange rate-related losses, companies must quickly finish their business deals. It is better for them to sign contracts in short periods, and should complete them before the Lunar New Year of 2011. They should make careful business preparations.

 

 

Content link: https://dtinews.dantri.com.vn/vietnam-today/strong-us-dollar-worries-domestic-businesses-20101112171221000.htm