[Vnbiz] June trade deficit down

[Duc Phamcao]

Dear CACC,
 
It is good to have a positive expectation but we should be practical and see the current Vietnam's status in various perspectives, including the down side risk for the remains of the year. Theoretically, I believe that Vietnam government is on the right track; in discussion with my colleague I am insistent that the inflation and trade deficit are going down.
 
But downside risk for the economy and the banking system is put on the table afterward. Also the inflation pressure is still hanging around.
 
Why the inflation is going down? Because the speculation stop temporally. 
- Cement that is bountiful in the North is transported into the South easing the temporary shortage.
- Billet and steel imports that has been 100% yoy increase in the 1H08 is slowing down because the international market price is hiking while the price is capped in domestic. 
- Foodstuff accounting for about 40% VN CPI is believed to be affected by the international market and infectious diseases. The government seems to be able to control the foodstuff increase thanks to good harvest and export control but it can be harder if some kind of disease keep happening. 
- Also the tighter measure of government made the shortage of credit for companies, cooling down the economic growth that heavily depended on credit growth but not efficiency.
 
But all this measures expose the economy to a number of other risks:
 
- Inflation can go back higher when the price of some sorts of input as steel and oil can no longer be controlled.
- Some kind of natural resources are running out such as oil and coal, that is much blamed to TKS corporation (Coal and resources Corporation) because they are smuggling tons of coal to Chinese for the wealth of some peoples. This will make the Vietnam much more depending on international commodity market. It will run along with the international inflation.
- The current measures of government are weighing on banking system. With this level of rate the NPL will increase. The liquidity is also big problem if the SBV is not informed well.
- SBV is control the foreign exchange market both official and black by administrative tool and bumping USD into the banking system. The former seems to be effective with black market, curbing active speculation and dolarization. But the announced forex is not able to be applied for banks and companies as far as I know. Importers hardly find the exchange rate for their purchase and banks is also unable either. Moreover, the $$ reserve is reducing, which may bring about to VND significant devaluation.
 
All in all, the economy is still on the verge of crisis. It can be stable and recovery gradually but also may worsen. But I think for long term, the economy can only grow stably if the roots of problems are resolved.
- The management of SOE Corporate, Groups must be much more improved. Each Corporations have to focus on their core business and its own advantage. There must be not the situation of all investing in real estate, banking, ... 
- Infrastructure must be much more developed. How can economy can grow efficiently if traffic is as terrible as in Hanoi and HCMC. How can industries as cement, steel can be competitive with foreign without the deep and special ports? Office shortage in HCMC as well as in Hanoi is apparent but if there are more offices in the cities then how worse the traffic and pollution? Given the waist of time and energy for traffic it cannot be a advantageous investment environment. Just my 2 cents,
 
Have a great day,
 

Duc.

--- On Sat, 6/28/08, Tran Dinh Hoanh <tdhoanh at gmail.com> wrote:

From: Tran Dinh Hoanh <tdhoanh at gmail.com>
Subject: [Vnbiz] June trade deficit down
To: vnbiz at vietlinks.net
Date: Saturday, June 28, 2008, 11:44 PM

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