Local businesses are trying to slash costs in the face of the weakening dollar and rising interest rates
The weakening dollar and rising interest rates are a major headache for exporters but it seems some businesses are coping rather well.
Export company VietEuro’s president and chairman, Nguyen Thanh Lam, said the depreciating greenback had not taken his company by surprise.
It had accurately forecast the dollar to fall and decided to hedge its losses by doing business in different currencies, he said.
“Thus, the loss that would have followed a cheaper dollar did not materialize,” Lam added.
With the dollar losing its value against other currencies in the midst of an American recession, other exporters are trying various ways to minimize their losses.
Song Hau Farm, for instance, is signing only short-term contracts as a precaution against the volatile exchange rate while Minh Quang Company insists on adjusting for exchange rate changes when signing contracts.
The Vietnam Association of Seafood Exports and Producers has asked the government to instruct banks to buy exporters’ foreign currencies at reasonable prices.
An Giang Seafood Export Import Company’s president and chairman, Ngo Phuoc Hau, said his company had found other ways to raise revenues - by finding new import partners and increasing domestic sales to capitalize on the strengthening dong.
And all the while, businesses are slashing costs in the face of rising prices.
“We have to calculate much more carefully before we spend now,” Au Lac Stock Company’s president, Nguyen Hong Mai, said.
To offset rising costs, members of the Ho Chi Minh City Association of Garment and Textile Embroidery and Knitting have raised export prices by 5 to 15 percent.
But perhaps the biggest test of businesses’ ability to adjust is the high interest rates banks are charging on dong loans.
Cashew exporter Thanh Son Company has asked customers to pay faster to ensure it can repay loans quickly.
Thanh Son’s president, Vu Thai Son, said his company was now insisting on letters of credit from foreign partners.
“With L/C’s, we get paid [immediately],” he said.
“On the other hand, the D/P (document against payment) method requires the bank to inform importers before making payment which means a lag of 20 - 25 days before we are paid.”
Son said in this time of high interest rates, “the sooner exporters collect their money, the better.” Like Thanh Son, other businesses have also hit upon innovative ideas to deal with the high loan interest rates.
Vinh Hoan Joint Stock Company’s president, Truong Thi Le Khanh, said her company had started to borrow in dollars since the interest rates on the greenback were considerably lower.
It is around 5 percent per annum on dollar loans compared to 18 to 20 percent for dong loans.
Some companies have turned away from banks altogether.
Real estate company Sacomreal, for instance, has mobilized VND750 billion (US$47,000) by selling bonds, a relatively new method in Vietnam.
Foreign companies are also finding ways to benefit in these testing times.
Indochina Capital’s president, Thomas Ngo, said his company was starting to invest more in private enterprises rather than state-owned ones as the former was facing a more severe fund shortage.
Government aids exporters
Deputy Minister of Industry and Commerce Nguyen Thanh Bien said the government was trying to help exporters.
In addition to its recent instruction to banks to buy export-generated foreign currencies, the State Bank of Vietnam has also asked commercial banks to loosen credit and lower interest rates on loans to agricultural and aquatic produce importers and exporters.
Bien said his ministry had also requested the Ministry of Finance to expand credit for a wider range of export products.
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