Vietnam - Dollar in short supply threatens domestic production

by lexie Tue Nov 15, 2011 12:19 pm

Last update 15/11/2011 10:49:00 AM (GMT+7)

Dollar in short supply threatens domestic production

VietNamNet Bridge – Businesses complain that they cannot buy dollars to import materials for domestic production. This not only make them suffer, but also causes big difficulties to the national economy, because the lack of import materials will make the domestic production stagnant.

Saigon Petro cannot buy foreign currencies from banks for the last several years. According to General Director of Saigon Petro Dang Vinh Sang, the actual price at which banks sell dollars to businesses is 500-600 dong per dollar higher than the quoted price. This means that the prime cost of petrol imports would be higher by 500-600 dong per liter, while the company cannot raise the sale price without the permission of the state management agency.

At present, a liter of petrol is selling at approximately of one dollar.

“If the actual price is just 100 dong per dollar higher than the quoted price, we would clench our teeth and endure the price. However, in fact, the gap between the actual price and the quoted price is as high as 500-600 dong,” Sang complained.

He went on to say that every month, the company needs 50 million dollars to import petroleum products. As such, the company would have to pay the additional sum of 25-30 billion dong for the price gap. Meanwhile, the company cannot enter the actual sum of money in accounts, because it does not have the voucher for the transaction. Therefore, the sum of money cannot be considered as the legal expenses to be considered as the legal expenses

As a last resort, the company has to borrow dollars instead of Vietnam dong, though they do not want to, because they fear the dollar price would increase, thus increasing their debts. With the loan worth 100 million dollars and the possible exchange rate adjustment of several percent, Saigon Petro would incur the loss of tens of billions of dong, because they products had been sold out.

Not only Saigon Petro, most of the importers nowadays move heaven and earth to seek to purchase dollar. A Hanoi-based company which specializes in importing the materials which cannot be made domestically, also said it is suffering from the dollar supply shortage.

Three months ago, the enterprise borrowed 500,000 dollars from a bank in Hanoi. At the same time, the enterprise disbursed a collative sum of dong to buy dollars from the same bank (at the price which were hundreds of dong per dollar higher than the quoted price). As such, if counting on all kinds of expenses, the actual interest rate the enterprise had to pay to bank is 23-24 percent per annum.

Even when the business had to “take a roundabout” suggested by the bank in order to access the dollar source, bank still has been disbursing in dribs and drabs.

As a result, though the business had to make payment to the foreign partner on November 10, it still could arrange enough dollars for the payment. The company’s director had to pay with his own money and the borrowings from relatives and friends.

The short dollar supply has also made the expenses of the business increase by four times. The expenses it has to pay for every container of material imports has climbed to 18 million dong, including the transport fee, storage fee and customs fees.

In the past, the company usually imported two containers each time, the volume big enough to provide to the domestic partners within two months. However, nowadays, due to the lack of dollars, the company has to import in dribs and drabs with the import volumes big enough for the sale within two weeks.

In general, the expenses for every consignment of imports are about 28-30 million dong, which means that in order to have enough goods to sell within two months, the total expenses would be 120 million dong.

The director complains that he is sure about the loss. However, it cannot stop importing materials. If it does, it will cause big difficulties to hundreds of other enterprises, which are using the materials provided by company.

Source: SGTT

http://english.vietnamnet.vn/en/business/15290/dollar-in-short-supply-threatens-domestic-production.html