Vietnamese seek safety in gold
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
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