[Vnbiz] June trade deficit down

Sat Jun 28 13:27:43 PDT 2008

Dear Brother Duc & CACC,

Thanks for the good note.  You make a lot of sense, but in order not to
confuse some folks, allow me to clarify things a little.

In a treatment of any crisis, we always have two plans:   The immediate plan
to solve the hot problem at hand, and the long-term treatment to solve the
root cause.  It is easy to see how this two-prong approach works if you
visit a hospital.  Say, if you go to the emergency room or intensive care
unit, the doctors' focus is solely on the emergency symptoms at hand:
Temperature too high?  Reduce it?  Can't breathe?  Put a respirator on.
Heart stop beating?  Giving an electric shock.  Doctors in emergency or
intensive care unit, most of the time. don't even think about what is
the root cause of the problem and how to fix the root cause.  They don't
have that luxury.  They have to focus on the emergency situation at hand.

When the patient is transferred out of intensive care into the regular care
unit, then the new doctor teams will start to work on a completely different
system of treatment for the root cause.

It is important to keep this in mind when we solve economic crisis too.
Right now, we are focusing on the immediate solutions to control
inflation: raising interest rate, tightening credit, reducing fiscal
deficit, reducing trade deficit.

And now the situation gets a little better, we even plan to move into
intermediate issues of subsidy and price control.  I call  these
intermediate issues because we don't have to solve them when we are in the
mid of a very hot crisis (we may even need them when we are in a very hot
crisis), but as the crisis subsides, these issues may be solved to
strengthen the crisis solutions further (and to solve a very long term
problem of the economy--subsidy and price control).

Then a bit later, when we are very much out of the crisis concern, we can
look at some truly long-term issues such as the organization of the SOEs,
infrastructure, the integrity of the banking system, etc.

Dumping things together will confuse a lot of folks. Say, if in the middle
of stock market analysis, we start to talk about infrastructure, lots of
folks will ask:  What?  Why infrastructure?  Does it have anything to do
with the stock price for next week?  The answer is no, although it may
affect the stock price in the long term in a way that we cannot measure.

Dumping many things together into a talk not only will confuse the readers
but may also confuse ourselves in our analysis.  For example, we are talking
about inflation, and inflation is on the way down, but SOEs are still very
bad, should we conclude that inflation may start back up because the SOEs
are bad?  No, normally there is no reason to have such close connection.

Other than making sure that we are not confused about different issues of
the economy, everything you said make sense, brother Duc.  There is still a
lot of work to do to strengthen the economy so that it can absorb surprise
shocks wherever they come from.

Have a great day!

Hoanh

On Sat, Jun 28, 2008 at 2:13 PM, Duc Phamcao <ducpc83 at yahoo.com> wrote:

> [ Vietnam Business Forum ]
>
>
>   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
>
> [ Vietnam Business Forum ]
>
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-- 
Tran Dinh Hoanh, Esq., LLB, JD
Washington DC
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