VietNamNet Bridge – A lot of businesses have incurred
big losses due to the dong/dollar exchange rate fluctuations. They have called
on the Government to intervene in the foreign currency market and take
necessary measures to stabilize the exchange rate in 2011.
Exchange
rate fluctuations turn profit into loss
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In mid-December 2010, Bao Gia Khanh Company signed a
contract on providing interior decoration to a client whose factory is located
in Nhon Trach Industrial Zone in Dong Nai. In order to fulfill the contract,
Bao Gia Khanh needs 500 plywood panels. The price of a panel imported from Malaysia at the
time when the contract was signed was 360,000 dong.
However, just several days later, due to the exchange
rate increase, the price of every panel has risen by 20,000 dong. “The price
increases have upset our calculations,” said Ngo Chi Hieu, Director of the
company. “If the Government does not take actions to stop the exchange rate fluctuations,
small and medium enterprises will certainly incur heavy losses”.
“Businesses are distressed with the current lending
interest rate of 17 percent per annum, and the exchange rate fluctuations,” he
added. “Even the enterprises which can manage their business well earn only
enough money to pay the interest rates and the tax to the state”.
The Saigon Paper Joint Stock Company anticipates that
it will still have to face the difficulties caused by the exchange rate
fluctuations in the first half of 2011. The company plans to put into operation
a new project with the total investment capital of two trillion dong. More than
80 percent of the equipments have been imported from foreign countries, and 70
percent of the capital used to buy equipments comes from the foreign currency
loans from banks. Therefore, since the exchange rate fluctuated, the company
has incurred the loss of 20 billion dong on the investment project.
Businesses now incur
“double” loss, because banks do not accept payments in dollars which
businesses purchased on the black market. In order to “legalise” the dollars,
businesses have to pay additional expenses, thus making the businesses’ losses
higher. In general, businesses have to pay an additional sum of 1.2 billion
dong for every one million dollar they pay.
Director of a baverage company said that the possible
maximum net profit of enterprises in the industry is no more than 20 percent
per annum. Meanwhile, enterprises incur the loss of 15 percent due to the
exchange rate fluctuations, and they have to pay the loan interest rate of 17
percent per annum. He said that if enterprises sat idle with their money
deposited at banks , they would get the bigger profit than from production.
Saving
themselves before God saves them
Businesses, while calling for the Government to take
necessary measures to stabilize the exchange rate, have been trying a lot of
measures to “save themselves before the Government does”.
Nguyen Thi Hoang Anh, Managing Director of Au A Trade
Company, specializing in importing consumer goods from Europe and the US, said that
in order to deal with the exchange rate fluctuations, the company asked the
import partner for a more flexible payment mechanism. At the time when Au A
imports products, if there is a significant gap between the dong and the dollar
value, the company will have the right to make payment in another currency in
order to avoid losses.
“The partner has agreed to our proposal. One time, we
imported a consignment of goods from Australia. If we had paid in US
dollar, we would have incurred a big loss. However, the partner accepted the
payment in Australian dollar,” she said.
Anh said that her company has been keeping a close
watch over the prices of currencies, so that it can choose the most suitable currency
for making payment. According to her, thanks to the flexible payment method,
the company can save 50-100 million dong.
Le Tan Phuoc, General Director of Sarefico, said that
his company negotiated with suppliers to fix exchange rates for three months.
Besides, the company has been trying to seek domestic suppliers. When
purchasing equipments, the company can
use Vietnam
dong in making payment and share risks with the partners. “In order to do that,
Sarefico has to pay more money in advance to suppliers. Meanwhile, the company
also asks investors to share risks by paying 20-50 percent of the contract
values in advance,” he said.
Source: Thoi bao Kinh te Saigon