Viet­namese seek safety in gold

The Pak Banker - - International -

HANOI: Do Hai Ninh has been stash­ing away her mea­ger earn­ings un­til fi­nally sav­ing enough to make a de­posit. But the high school teacher isn't about to put her money into a Viet­namese bank with the value of the lo­cal cur­rency steadily drop­ping. She's in­vest­ing in a safer bet: gold.

Jew­elry shops and black­mar­ket money chang­ers have over­flowed with cus­tomers in re­cent weeks, des­per­ate to un­load their Viet­namese dong for green­backs or gold nuggets as the fast-grow­ing South­east Asian nation is buf­feted by dou­ble-digit in­fla­tion and the near col­lapse of one of its largest state-owned com­pa­nies.

The prob­lems have un­der­lined the down­sides of the Com­mu­nist govern­ment's push for rapid eco­nomic growth, which has lifted mil- lions out of poverty but cre­ated new chal­lenges that the coun­try's tech­nocrats are of­ten ill-equipped to deal with.

At­tempts to cre­ate na­tional cor­po­rate cham­pi­ons have wasted cap­i­tal with un­wise in­vest­ments and left sta­te­owned busi­nesses loaded with too much debt. Rapid growth in lend­ing, mean­while, has not been matched by in­creases in de­posits, a phe­nom­e­non partly ex­plained by sus­pi­cion of banks af­ter pre­vi­ous bouts of hyper in­fla­tion de­stroyed sav­ings. It all adds up to a fi­nan­cial sys­tem creak­ing un­der im­mense pres­sures that are re­flected in the lack of faith Viet­namese have in their coun­try's cur­rency.

"Peo­ple's trust in the lo­cal cur­rency, the dong, has been eroded se­ri­ously," said econ­o­mist Nguyen Quang A, for­mer pres­i­dent of the In­sti­tute of Devel­op­ment Stud­ies, the coun­try's first in­de­pen­dent think tank, which dis­banded in protest last year fol­low­ing a govern­ment de­cree re­strict­ing the right to con­duct and pub­lish re­search.

"One of the most im­por­tant tasks of the govern­ment, specif­i­cally, the State Bank is to pro­tect the power of the lo­cal cur­rency," he said. "The pol­icy aim­ing for high growth with in­ef­fi­cient in­vest­ment in the econ­omy, par­tic­u­larly in­vest­ment in state-owned en­ter­prises and in the govern­ment, has led to this sit­u­a­tion."

Last week, Moody's In­vestor Ser­vices slashed Viet­nam's govern­ment for­eign cur­rency bond rat­ing to B1 from Ba3 and kept the out­look as neg­a­tive, mean­ing it could cut the credit rat­ing again.

It said the coun­try was fac­ing an in­creased risk of a bal­ance of pay­ments cri­sis be­cause Viet­nam is im­port­ing more than it ex­ports, for­eign ex­change re­serves are be­ing de­pleted to prop up an over­val­ued cur­rency and for­eign cap­i­tal is flee­ing.

High in­fla­tion, ex­ces­sive bank lend­ing and prob­lems at Viet­nam's be­lea­guered staterun ship­build­ing con­glom­er­ate Vi­nashin were fur­ther rea­sons for the down­grade, Moody's said.

The head of Vi­nashin re­peated Mon­day that the ship­builder did not have enough cash to make the first re­pay­ment of prin­ci­pal due that same day on a $600 mil­lion loan from a group of cred­i­tors led by Credit Suisse. He told the of­fi­cial Viet­nam News Agency that the com­pany was still await­ing word from the len­ders on whether they will agree to de­lay the pay­ment. -Reuters

MANCH­ESTER: Manch­ester City's Car­los Tevez, cen­ter, re­acts af­ter los­ing to Ever­ton dur­ing their English Premier League soc­cer match at Manch­ester Sta­dium. -Ap

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.