Vietnam needs to put right policies in place as soaring inflation, a devalued currency and several fundamental economic imbalances are all coming to a head

South-east Asia’s favourite poster child, Vietnam, is treading a precarious path. The devaluation of the dong by 8.5 per cent in the second week of February – when the country was already grappling with a huge trade deficit, low currency reserves and rocketing inflation – highlighted the imbalances in this fast-growing economy. The following week, the State Bank of Vietnam, the central bank, increased interbank lending rates by 2 per cent, with the refinancing rate up to 11 per cent from 9 per cent, in an attempt to check rising prices following the significant devaluation of the dong.

Vietnam’s communist government has been focusing aggressively on high growth rates, mostly at the cost of ignoring macro-economic stability. In 2008, inflation reached 28 per cent; and since then, the dong has fallen more than 25 per cent. Annual inflation was at 12.2 per cent in January, and the devaluation in the dong along with the worldwide increase in commodity prices were expected to push inflation up even further. The target consumer price index (CPI) for 2011 is 7 per cent. Average economic growth in the last five years has been around 7 per cent (6.8 per cent in 2010), and the goal for the next five years is to keep this growth rate at 7-7.5 per cent.

by NAVNITA SARMA

Download complete issue

Vietnam currently leads the world in the production and export of black pepper, and is second only to Brazil in the production and export of coffee

In recent years, Vietnam has emerged as a notable exporter of agricultural commodities such as rubber and coffee – coming up to par with or even overtaking top producers around the region and globally. Vietnam currently leads the world in the production and export of black pepper; is second only to Brazil in the production and export of coffee; and has drawn level with Malaysia and Indonesia in rubber. Although these commodities make up less than 10 per cent of its total exports altogether, they account for a significant portion of global production.

BLACK PEPPER

Last year, Vietnam exported 116,859 tonnes of pepper worth US$431 million. Against its total export value of US$72 billion, this seems like a drop in the bucket until one realises that Vietnam has been the world’s largest producer and exporter of black pepper since 2001. It exports almost all the pepper that it produces, and accounted for over 50 per cent of global black pepper exports in 2010.

by MINT KANG

Download complete issue

Vietnam jump-starts commodity futures trading with VNX

The Vietnamese call it choi chung khoan or “playing stocks”. Those who play often do so daily, trading on market rumours or the slightest bit of news.

They gather at brokerage houses watching stock prices scroll by on a screen running the full length of the room. After a volatile 2009 – stocks soared in the first half of 2010 before falling in the second – the Ho Chi Minh Stock Index was in bear territory towards the end of 2010, down more than 17 per cent from its mid-year highs

Ten years after Vietnam’s stock exchange opened in 2000, it has become a symbol of what the country is trying to achieve: a market-based economy. In this communist nation, the stock market is seen as the ultimate symbol of capitalism because people have the freedom to choose their own financial fates, for good or bad, through their investments.

by VISHWESH IYER

Download complete issue

Vietnam has banned gold trading since March last year

Since last March, it has not been possible to trade gold on public floors in Vietnam, and deposits and lending in gold at financial institutions have been heavily curbed. The ban on trading, which was announced at the end of 2009, affected around 20 trading floors run by commercial banks, institutions and companies, and also put a stop to direct transactions with foreign partners.

Vietnam has moved to clamp down on gold trading several times in the past decade. This time, the most recent series of restrictions is closely intertwined with the government’s attempts to stabilise the foreign exchange market. The State Bank of Vietnam explained at the time that gold trading, which was heavily leveraged on the public floors, was based on “a fragile foundation that lacks legal, economic and technical frameworks and knowledge”, and creating massive risk not only for individual investors, but also to the country’s entire financial system.

by MINT KANG

Download complete issue

Techcombank’s initiatives give customers access to international exchanges

As an emerging market, Vietnam boasts considerable growth potential. However, its financial market has not yet developed to the same degree as other countries in Asia.

To some banks, this is an opportunity to promote product innovation to cater to the existing needs of customers, and anticipate their future needs. The trading business experiences risk primarily in foreign exchange and interest rates, including both short-term rates in money markets and medium- to long-term rates in bonds. A bank’s risk-taking activities are primarily focused on supporting customer business, as being active in the market allows them to give more competitive pricing to various clients.

The Vietnam Technological and Commercial Joint Stock Bank (Techcombank) was founded in Hanoi on Sept 27, 1993 with an initial registered capital of 20 billion dong. By the end of 2010, Techcombank reported maintaining a high growth rate among the group of commercial joint stock banks.

by VISHWESH IYER

Download complete issue

Vietnam is taking baby steps in regulating its financial markets

The development of the financial markets in Vietnam is very closely linked with the national cause of revolution and construction. The foundation of the Vietnam National Bank was the result of the struggle to develop an independent and autonomous monetary and credit system. It marked a new developmental step – changing the quality of the national monetary and credit sector.

The State Bank of Vietnam, as it is known today, was the result of the renaming of the Vietnam National Bank in 1960 in accordance with the 1946 Constitution of the Democratic Republic of Vietnam.

by VISHWESH IYER

Download complete issue

Ong First Tradition does not have a physical presence in Vietnam but has links with the banks in the country that are authorised to facilitate their clients to trade in global exchanges through international clearers

Singapore-based futures broker Ong First Tradition Pte Ltd started venturing into Vietnam in the second quarter of last year to tap opportunities in the fast-growing emerging economy that is a leading producer of agricultural commodities.

Vietnam is among the world’s top 10 agro-product exporters, shipping out commodities such as coffee, rice, black pepper, rubber and cashews which have generated billions of dollars of export revenue each year. The country is the second largest producer of coffee in the world after Brazil, and is the largest grower of robusta beans. It is also the world’s second largest rice exporter.

Download complete issue