[Vnbiz] Vietnam's position on economic issues
Linh Phuong Pham
linh10 at gmail.com
Sun Jun 8 08:02:08 PDT 2008
Hi A Hoanh,
I think I used to have emails coming in daily digest. How could I change
the subscription please?
Many thanks,
eLinh
Tran Dinh Hoanh wrote:
> [ Vietnam Business Forum ]
>
>
>
> ------------------------------------------------------------------------
>
> Dear Brothers Binh & Nam & CACC,
>
> Brother Binh, I guess most of us Vietnamese are very cynical about the
> government. During my lifetime this far, I have never known of any
> government that is trusted by our people (probably with the exception
> of the pre-1975 Northern government during the War time. When in war
> against a foreign power, we tend to unite strongly behind our
> anti-foreign-invastion leaders). I think this cynicism has several
> deep-rooted causes: First, historically, dominating governments, from
> the Chinese to the French, were supposed to be bad guys. Second, the
> old authoritarian culture made even our own governments very
> authoritarian. That generally generated a communication gap between
> the government and the people. Third, the government did in fact enjoy
> its authoritarian role too much, so it generally expected the people
> to listen and obey, didn't allow the people to question, and didn't
> care much about spending time to explain things to the people and got
> their consent. And of course, today with so corruption, the
> people even have more reasons to doubt government officials' words.
>
> But let me tell you, Binh. Cynicism is a disease that we have to
> conquer. Distrusting people can never congeal into a strong entity.
> Both the government and each of us individually have to work to build
> trust among us, if we want our country to become a great nation
> eventually.
>
> Now, brother Nam's questions:
>
> 1. It is possible that commercial banks do not have enough USD. It
> may also be that commercial banks require a lot of paperwork, to sell
> you USD for an import deal. I don't think anyone can just knock on
> the door of a commercial bank and ask for USED. It may also be that
> commercial banks are not too excited about selling USD at the official
> price that is 10% lower than the free market price.
>
> The SBV has to have a good grip on the USD circulation because the USD
> has such an incredible influence on Vietnam's economy. But I do
> question the wisdom of intentionally keep the VND over-evaluated
> against the USD. It may be good to do that when you have some serious
> economic shock. But after that, the exchange rate should be allowed
> to gradually back up to market rate.
>
> The further we are from the market mechanism, the more burdens the
> government has to carry on its back. Imagine a guy carrying on his
> back 50kg of food subsidy, 50kg of food price control, 50kg of oil
> subsidy, 50kg of gasoline price control, 50kg of exchange rate
> control. How is he going to function under all that weight? I am not
> saying that the government should just throw all that away, but it
> should try to shed as much weight as it can at a gradual speed that
> doesn't produce much shock to the system. Some of the weight, such
> as some specific form of subsidy, especially subsidy to farmers or
> poor consumers, may still be there for a long time. But most of the
> dead weight should be shed away as soon as we can.
>
> 2. According to the PM, foreign indirect invesment can be repatriated
> freely. I think money brought in the country to buy stocks may be
> considered indirect investment. I am not sure about the mechanism, but
> I imagine you can repatriate that kind of money through the commercial
> banks.
>
> Direct investment, like capital contribution from foreign invested
> companies, can only be repatriated upon the termination of the
> join-venture contract or the dissolution of the foreign invested company.
>
> Profits from foreign invested companies, however, can be repatriated
> quarterly or annually.
>
> Those are legal repatriation. There are ways to bring USD out of the
> country illegally. One of the common ways a company may do is to
> inflate its import invoices. Say, importer A in Hanoi asks its friend
> exporter B in New York to send him a 1000 cell phones. The cell phone
> actually costs $20 a piece, but the invoice will say $100 a piece.
> That $80 is capital leaving the country illegally. And importer A
> will be able to claim an additional expense of 80,000 USD as a tax
> deductible expense in Vietnam.
>
> For individuals with money (i.e., people with underground money), I
> see a different method. These folks usually have children schooling
> overseas. They visit their children often. Every time the son or
> daughter comes back to Vietnam for a visit or the parent leaves
> Vietnam to visit the child overseas, they will bring out a bunch of
> cash, either within the legal limit (20K USD?) or higher than the
> legal limit.
>
> Of course, another really illegal way is to hire pilots and air
> stewardesses to bring huge amount of cash out, as we see often in the
> criminal news.
> 3. How long can SBV put their decision on foreign exchange into
> effect? I am not sure I understand the question. All SBV decisions
> on foreign exchange rates are already in effect, at least in theory.
> And if the SBV changes a decision, it can choose whatever effective
> date it wants. The question about enforcement is another thing.
>
> I understand very well how the USD dollar is being traded around the
> country (I grew up with that kind of system before 1975). The free
> market will always have its free price. It is impossible for the SBV
> to stop it. But if the SBV is very dilligent, it can enforce it with
> major importers/exporters (which is big enough to distort the economy).
>
> Hope this helps.
>
> Have a great day!
>
> Hoanh
>
>
> 2008/6/7 Mercedes Benz <myhometheatre at gmail.com
> <mailto:myhometheatre at gmail.com>>:
>
> [ Vietnam Business Forum ]
>
>
> Dear CACC,
>
> I have some questions in mind when reading your comments:
> 1. It is not easy for an importer to go to either one of
> commercial banks to buy USD. It is because even commercial banks
> do not have much USD.
> 2. How can "foreign big guys" take out the USD from the market?
> 3. How long can SBV put their decision on foreign exchange into
> effect?
>
> Could you please CACC help me these concerns?
> Thank you much!
> Nam
>
> 2008/6/6 Tran Dinh Hoanh <tdhoanh at gmail.com
> <mailto:tdhoanh at gmail.com>>:
>
> [ Vietnam Business Forum ]
>
>
> Dear CACC,
>
> The following article is about the Vietrnamese government's
> position on a numer of issues that we have discussed lately:
> Eventual devaluation of the VND upto 40%? No. Vietnam needs
> IMP support (for the dong)? No. Balance of payment: Still
> has 1 billion USD in surplus. Indirectr-investment capital
> flight: Vietnam is not worried about it and will not try to
> stop it. High USD exchange rate on the free market: SBV
> doesn't like it and will enforce its offical rate thoughout.
> (I don't like this SBV position. Obviously SBV is trying to
> keep the USD low (and the VND high) to hold down inflation.
> This is a lot of work and generates other pressures from
> distorting the economy too much.. The situation like a couple
> of days ago is much better: Allowing the USD to go up to its
> true value (in the free market) would help export, and keeping
> USD low in the commercial banks would help import, and
> withdrawing VND back through the sell of USD to commercial
> banks to reduce inflation. This arragement won't work well in
> the long term, but for a short while, it may work out very well).
>
> Have a good day!
>
> Hoanh
> __
> --
> Tran Dinh Hoanh, Esq., LLB, JD
> Washington DC
>
> ------------------------------------------------------------------------
>
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