Vietnam would be exposed to such risks as discrimination in tax imposition and goods evaluation in the US market after the US added Vietnam in the list. (Photo: VNA) Hanoi (VNA) –Vietnam is working hard tobuild a stable and transparent investment and business environment, thus becominga destination for international human and capital resources, so it would beunreasonable for the country to devaluate its currency, experts have said.
They made the affirmation following the US TreasuryDepartment’s labelling of Vietnam as a currency manipulator.
According to Associate Prof. Dinh Trong Thinh, asenior lecturer at the Academy of Finance, Vietnam would be exposed to suchrisks as discrimination in tax imposition and goods evaluation in the US marketafter the US added Vietnam in the list.
Maintainingclose cooperation with US
One month ago, the US held a forum for its expertsand businesses, and those from Vietnam and certain countries, where most of thedelegates shared the view that Vietnam has not manipulated its currency.
The American Chamber of Commerce (Amcham) in Hanoisaid in a statement that the US and Vietnam have developed a healthy commercialrelationship that has created jobs, tax revenues, and opportunities for bothcountries over the past year.
“Currency manipulation has not been an issue for ourmembership, and any potential action in the final days of the Trumpadministration to harm Vietnam’s economy with punitive tariffs will damage theclose partnership the two countries have developed over many years,” said AdamSitkoff, Executive Director of AmCham in Hanoi.
He added tariffs or other retaliatory measures couldhave broad commercial implications for companies and investors in Vietnam.
Sitkoff said the recent growth of Vietnam’s exportto the US was driven primarily by the relocation of the supply chain from Chinato Vietnam.
“We believe in a cooperative approach and preferthat the US government prioritises its efforts on more pressing issues facingour business community. Examples include policies on digital trade andbroadcast, pharmaceutical imports, intellectual property rights, customs andtax procedures, and more.”
By opening up its market to more American goods andservices, Vietnam can reduce its growing trade surplus with the United Statesin a manner that benefits both countries, he said.
Regarding the US Department of Treasury’sannouncement of a report on Macroeconomic and Foreign Exchange Policies ofMajor Trading Partners, in which Vietnam and Switzerland were listed ascurrency manipulators, at a meeting of the Government’s standing members on December18, Prime Minister Nguyen Xuan Phuc said that under the instruction of him and otherVietnamese government leaders, Vietnamese ministries and agencies have activelycoordinated with US partners, and reaped fruitful outcomes, especially in tradeand investment.
The two sides have worked together to deal withdifficulties and obstacles to maintain a stable trade relationship, towards harmonious,sustainable and win-win trade, the PM said.
The spokesperson of the Foreign Ministry and theState Bank of Vietnam have answered reporters’ questions related to the issue,clarifying Vietnam’s viewpoint on monetary regulating policy, which aims tostabilise the macro-economy but not to devaluate the currency to create tradeadvantages.
The Prime Minister has assigned ministries andagencies to continue coordinating closely with the US side to maintain themomentum of the bilateral partnership and make it stronger in the future, bringingpractical benefits to peoples and businesses of both countries.
USTreasury Department’s evaluation criteria need to be reviewed
Truong VanPhuoc, a member of the advisory panel to the Prime Minister and former actingChairman of the National Financial Supervisory Commission, said there areseveral points in the Treasury’s report that need to be clarified.
Regarding the large trade surplus with the US, Phuoc, who is also a former headof the Foreign Exchange Management Department at the State Bank of Vietnam(SBV), said the country’s trade activities in the past three decades reflectits transition process to a market-oriented economy, with the distinguishingfeatures of cheap labour costs, labour-intensive growth, inflows of foreigninvestment, and exploitation of natural resources resulting in cheap exports.Therefore, it is unreasonable to say that Vietnam uses foreign exchange to makeits products even more of a bargain.
With a material current account surplus, Vietnam has enjoyed a trade surplus inrecent years, but the actual amount is not significant, at around 5-10 billionUSD each year and over 20 billion USD in 2020 in particular. As most of thecountry’s current account comes from remittances, foreign exchange is not theelement that makes the current account surplus exceed 2 percent of GDP.
Touching on interventions in the foreign exchange market, Vietnam does notallow foreign currencies to be used as a means of payment, which means foreigninvestors and exporters must exchange their money into Vietnam dong to conductbusiness activities.
For this reason, it is compulsory for the SBV to purchase foreign currencies,since it facilitates business activities of people in Vietnam, Phuoc stressed.
Another issue is that the US perceives thatVietnam has bought foreign currencies to set the value of the Vietnam dongbelow its real value.
Phuoc said Vietnam should explain to the US moreclearly about its currency’s parity with the US dollar.
This parity largely depends on the inflation difference between Vietnam and itsmajor trading partners, especially the US, he elaborated, adding that annualinflation in Vietnam has averaged 4 percent in recent years, with 5 percent thehighest, while exchange rate growth has been maintained at 1-1.5 percent, or 2percent in certain years. Compared to inflation, the exchange rate has increasedat a much slower pace.
There is no such thing as currency devaluation, but the Vietnam dong’s currentvalue is even higher than its real value.
“These are factors indicating that Vietnam hasnot manipulated its currency,” Phuoc stated.
Vietnam’s exchange rate managementwithin monetary policy
Vietnam’s monetary policies have been carried out to concretise a consistent target of controlling inflation rate and ensure macroeconomic stability, the bank said, adding it does not seek unfair trade advantages. (Photo: VNA) Vietnam does not manipulate its currency, the StateBank of Vietnam (SBV) affirmed on December 17, one day after the US TreasuryDepartment announced the Macroeconomic and Foreign Exchange Policies of Major TradingPartners of the US report, which designated Vietnam and Switzerland as moneymanipulators.
The country’s monetary policies have been carried out to concretise aconsistent target of controlling inflation rate and ensure macroeconomicstability, the bank said, adding it does not seek unfair trade advantages.
Trade surplus with the US, and materialcurrent account surplus are the results of many factors, including thoserelated to distinguished features of the Vietnamese economy.
The bank’s purchase of foreign currencies aims toensure the smooth operation of foreign currency markets in the context ofabundant supply, contributing to stabilising the macro-economy and building upState foreign currency reserves, which remain low compared to regional countries,so as to enhance national financial-monetary security.
Phuoc believed the US will listen to the Vietnamese side, and trade and foreignexchange experts so as to see that Vietnam has no intention to devalue itsdong.
Through dialogues and debates, Vietnam has received support from renowned USeconomists, who have a deeper view in the story.
The SBV will join hands with competent ministries and sectors to work on issuesof the US’s concern based on the spirit of cooperation and mutual benefits towardsbuilding harmonised and sustainable trade relations.
It will continue current monetary policy to curb inflation rate, stabilise themacroeconomy, support economic growth in a rational manner, while taking aflexible foreign exchange policy based on macro-economic balances and marketdevelopments.
Chief Executive Officer of HSBC Vietnam Tim Evans said SBV provided two-waysupport when it lowered the USD selling rate in March to meet demands as whenforeign exchange market appeared to be under pressure during the socialdistancing period, and lower the USD buying rate in November when dollar supplyin the market turned ample again.
Unlike previous years when the dong usuallydepreciated against the greenback, in 2020, the dong has even appreciated slightlyby about 0.2 percent compared to the dollar, while there has been almost noyear-end pressure for the foreign exchange market, he said.
“We have grounds to expect the exchange rates in2021 to continue to be managed flexibly,” Evans said. “Notably, with theforeign exchange reserves surging to record high, the SBV has enough tools andresources to stabilise the exchange rates to meet market supply and demand.However, there are still challenges that need to be observed and monitored suchas the vaccination roadmap for COVID-19, the recovery of the global supplychain, not to mention 2021 being a transition year for the US presidency.”
“Against the context of unpredictable fluctuationsof exchange rates, businesses, especially in export-import area and businesseswith foreign loans in foreign currencies need to actively use hedging tools,especially through derivatives such as term contracts, interest rate swapcontracts, etc. to ensure their proactiveness in cash flow planning and profitbalancing,” he noted./.
VNA
