[Vnbiz] Vietnam's position on economic issues

[Tran Dinh Hoanh]

Dear Craig & CACC,

I am glad you say "it seems," Craig.  Of course, everything must "seem" to
look official.  I imagine you will never see a sign with the free market
rate anywhere in Vietnam (except probably in some small ares of the
country where no one knows who the SBV is and no one cares about what the
SBV says).  All the signs at all the exchange places have the official rate
(That is how the rate is OFFICIAL!).

(The daily rate shown on VNExpress is always the official rate,  which of
course gives me very little news value. The only way I know the free market
rate is that once in awhile, VNExpress has an article on the exchange rate.
Other than that,  most of the time, I am blinded on this matter).

If you want to sell your USD at the gold shop at the offical rate, the shop
is happy.  Buying at the official rate is a diffdrent thing though. Chances
are the answer is "Sorry, we're out of USD already.  Want some gold instead,
sir?"

When government really enforces the official rates, only regulars in the
"market network" are able to do business with each other at the free market
rate.  If at the gold shop, then it is in the back of the shop, not the
front. However, where government may harass, most of the free market
exchanges are not at the shops, but at more private locations.

As a matter of terminilogy, there is a recent noticebale change.  Since the
beginning  of time, it has always been "black market rate" (gia cho den).
But very recently, probably within several weeks or several months, the new
term pops up on the media--"gia tu do" (free price) or "gia do la tren thi
truong tu do" (the USD price on the free market).  This could be a subtle
sign of a very significant change in policy.  Probably the "black market"
was slowly allowed to become (legally tolerated) free market.

I think the SBV now is trying to reverse its own (quiet) policy, which, I
repeat, is not very wise move.  I think the SBV shoul just let the market
work and utilize the exchange rate to push export.  If it wants it can use
the offical rate to help import and to withdraw some VND circulation to
reduce inflation pressure, until it runs out of USD to do that, then it can
simply let the market take over.  Holding the VND too high against the USD
not only distorts the economy so much (which makes more difficult the
planning for all other things like export, import, price controls, inflation
control, etc.) but also greatly increases the chance for speculative
currency attacks from international players.  Don't give them the reason to
form a wolf pack.

Have a great day!

Hoanh

On Sun, Jun 8, 2008 at 2:52 AM, Craig Stevenson <cstevenson2000 at gmail.com>
wrote:

> [ Vietnam Business Forum ]
>
>
> FYI, at least yesterday, it seems that the Gold Shops, at least in Hanoi,
> were trading at official SBV rate, VND to USD.
>
> And Gold is way to high....
>
> Craig
>
> --
> Tran Dinh Hoanh, Esq., LLB, JD
> Washington DC
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