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Posts Tagged ‘challenges’

Banks to start year with challenges and oppotunities

In Uncategorized on January 12, 2011 at 7:14 am

Commercial banks are set to cope with challenges and opportunities in 2011 as monetary policies will be more flexible, Dr. Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee, said in an interview with Dau Tu Tai Chinh Newspaper.

(Photo:Minh Tri)

With the global economy will surely recover in 2011, foreign investments will return strongly to emerging markets in Asia, including Vietnam, said Dr. Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee.


“Statistics show foreign investments keep flowing constantly into Vietnam in the last four months. Despite the inflation rising relatively high, investors are not too worried about the possibly of an unstable macro economy as the basic rate caused by monetary policies remains low,” Nghia said.


The inflation will decrease to 7-8 percent in this year if the gasoline price is around US$85-90 per barrel, helping commercial banks to cut interest rates, he said.


“Commercial lenders had to cope with the difference between the long-term and short-term interest rates last year, which hit the banking system hard. Therefore they should strengthen their operation as soon as possible this year,” he said.


The deposit interest rate fluctuation at the end of 2010 showed the interest rate was not driven by both the monetary market and the governmental regulations, threatening the safety of banks’ operation, Nghia noticed.


“Lenders this year will also have to cope with issues from the foreign exchange rate. They should offer foreign currency loans with the interest rates, which are adequate to each type of clients,” he said.


The vice chairman of the National Financial Supervisory Committee also warned the competition of foreign-owned and local banks this year will become harsher as the formers will be allowed to take the dong deposits from Vietnamese clients.


“But I do not think local lenders will be so worried about that. Foreign banks remain behind local lenders as their weaker financial strength and a fewer number of branches nationwide. Moreover, the strict risk managements prevent them from taking risks in such a small market in Vietnam,” he said.


“Besides, human resource is also a tough challenge for foreign lenders. Therefore, the biggest competitor of local banks in the next couple year is still themselves.”


Local lenders will also have to change their entire accounting software to match up with new regulations in the Law of Credit Institutions, which took effective on Jan. 1st 2011, he said.


“The new Law of Credit Institutions has some more regulations including forbidding banks to deposit to each others and restraining the credit growth of banks,” Dr. Nghia said.

Source: SGGP

Obama challenges China on G20 stage

In Uncategorized on June 28, 2010 at 12:52 pm

TORONTO, June 27 (AFP) – US President Barack Obama has launched a stern challenge to China, using the big stage of the G20 summit of world powers to demand Beijing’s help in rebalancing the world economy.


The G20 leaders, representing both the world’s established economic giants and its dynamic emerging powers, agreed a package of measures to cut deficits, stimulate growth and return stability to financial markets.

A protestor holds a sign during a demonstration in Toronto’s the financial district on June 27, 2010. AFP

But Obama went further than the carefully worded joint statement, using his post-summit press conference to remind China that the United States expects it to allow its currency to rise and to reduce its huge trade surplus.


“My expectation is that they’re going to be serious about the policy that they themselves have announced,” Obama said, welcoming China’s announcement last week that it will allow more flexibility in the yuan exchange rate.


As the world limps out of the worst recession since the 1930s, American policymakers fear the recovery will revive the one-sided trade across the Pacific in Chinese goods kept cheap by the low level of the yuan.


“After years of taking on too much debt, Americans cannot — and will not — borrow and buy the world’s way to lasting prosperity,” Obama declared, in an implicit swipe at export-led economies such as China’s and Germany’s.


“No nation should assume its path to prosperity is paved with exports to America. Indeed, I’ve made it clear that the United States will compete aggressively for the jobs and industries and markets of the future.”


“A strong and durable recovery also requires countries not having an undue advantage,” Obama said, demanding “currencies that are market-driven.”


Despite allowing the yuan to rise to its highest level in five years on the eve of the summit — in what was seen as a gesture to Washington — China has insisted that it will not be bullied into relaxing currency controls.


Prime Minister Stephen Harper of Canada, the host of the Toronto G20, said China had even insisted that a draft phrase welcoming China’s concession be stripped out of the summit final statement before its release.


“It is important to address trade frictions appropriately through dialogue and consultation and under the principle of mutual benefit and common development,” Chinese President Hu Jintao said at the summit.


For Beijing, the greatest threat to the world economic recovery is not trade imbalances, but the developed world’s attempts to shield its own producers from competition from the emerging economies.


“We must take concrete actions to reject all forms of protectionism and unequivocally advocate and support free trade,” Hu said.


The G20 statement, agreed by all the leaders and thick with exemptions and caveats, rejects protectionism and promises that unnamed “surplus economies will undertake reforms to reduce their reliance on external demand.”


European leaders — Germany’s Chancellor Angela Merkel, French President Nicolas Sarkozy and Britain’s Prime Minister David Cameron — came to the talks calling for fiscal restraint and for a new levy on bank profits.


They made some headway on deficits, but will have to go it alone on the banking tax, as countries like Australia, Canada and India that were spared by the 2008 financial meltdown rejected the proposal out of hand.


The leaders’ joint statement, released at the end of two days of talks in Toronto, warned that “failure to implement consolidation where necessary would undermine confidence and hamper growth.”


“Reflecting this balance, advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016,” it promised.


Nevertheless, the group exempted Japan and its huge deficit from the pledge and noted that measures should be “tailored to national circumstances.”


This was enough for EU president Herman van Rompuy, who declared the summit a European victory. “The EU came to Toronto with a clear agenda. The result of the summit reflects a broad convergence around the European approach,” he said.


Not to be outdone, the major developing economies also claimed success for their very different vision, having expressed skepticism over European budget cuts they fear will harm the recovery.


“The emerging countries have been totally taken into account in the statement, all of our positions are in there,” boasted Brazilian economy minister Guido Montega.


For the G20 leaders, the differing agendas reflected in the catch-all final statement was not a weakness, but a recognition of the need for countries with different problems to nurture growth in their own ways.


“The cohesion of the G20 was striking,” Harper said at his closing press conference. “We’re following different policies but with a single objective; to ensure growth and recovery in a durable and balanced way.

d
Source: SGGP

Numerous challenges still ahead, says Party chief

In Uncategorized on June 27, 2010 at 4:52 pm




Numerous challenges still ahead, says Party chief


QĐND – Sunday, June 27, 2010, 21:11 (GMT+7)

In spite of overcoming the toughest times of the global economic crisis, the country still faces numerous challenges that require the whole nation’s efforts. 


Party General Secretary Nong Duc Manh made the remark at a meeting with voters in the northern province of Thai Nguyen on June 26 after the National Assembly (NA) wrapped up its 7th session. 


Political stability is the most important condition to boost the country’s comprehensive renovation process in an effective and sustainable way, the Party chief told the local voters. 


Development and socio-political stability are related matters, he said, affirming that if the country wants to develop, the country needs the socio- political stability. And, vice-versa, development creates foundations for stability. 


For their parts, the voters showed their agreement with the NA’s major decisions at the recent session, including its suspended decision on the North-South express railway project as well as its request for further study into the Hanoi master plan. 


The voters said that they are pleased with the high sense of responsibility and democracy shown by the NA delegates and feel confident about the NA performance. 


In a frank and open atmosphere, they expressed their concerns over the implementation of the criminal code and the law education in schools. 


In addition, they asked the state to continue developing transport infrastructure, irrigation network, schools and clinics for ethnic minority groups in mountainous areas.


Source: VOV


Source: QDND

Thailand faces ‘huge challenges’ after deadly conflict: PM

In Uncategorized on May 21, 2010 at 9:13 am

BANGKOK, May 21, 2010 (AFP) – Thailand’s premier said Friday that order has been restored after a deadly crackdown on anti-government protests triggered mayhem in the capital, but that the divided kingdom faces “huge challenges”.


Prime Minister Abhisit Vejjajive declared victory in a campaign to secure Bangkok, clamping down on militants in the “Red Shirt” movement who went on a rampage of arson and looting after their leaders surrendered Wednesday.

A Thai soldier aims his rifle as they arrive and secure Din Daeng, in Bangkok, on May 21, 2010 after the area was held by the anti-government protesters for several days. AFP photo

“This is one of the worst episodes Thailand has ever faced,” Abhisit said in a televised address to the nation.


“We will continue to swiftly restore normalcy and we recognise that as we move ahead there are huge challenges ahead of us, particularly the challenge of overcoming the divisions that have occurred in this country.”


Abhisit said he regretted the loss of life in the army offensive to shut down six weeks of anti-government protests, which left 15 dead including an Italian photographer, but defended the way it was carried out.


“The operation was within the law and complied with international practice,” he said, adding however that there would be an independent probe. Concern remains over a shootout at a temple “safe zone” where six bodies were found.


The premier, who has resisted calls for fresh elections from Red Shirts who condemn his government as illegitimate, said the focus should now move to healing the splits that fomented the unrest.


“We are living in the same house,” he said. “I invite all of you to join the reconciliation process.”


“Let me reassure you that the government will meet these challenges through the five point reconciliation plan I have announced,” he said, referring to a roadmap which failed to produce a peaceful resolution to the Reds rallies.


Thailand is largely split between the Reds, mostly urban and rural poor who are demanding the ouster of a government they condemn as undemocratic, and rival pro-establishment “Yellow Shirts” who represent the nation’s elites.


The Reds are mostly supporters of ex-premier Thaksin Shinawatra, who was ousted in a 2006 coup. The billionaire tycoon was accused of gross rights abuses and corruption, but won grassroots support with his populist policies.


Thaksin’s elected allies were later ejected in a controversial court ruling, paving the way for Abhisit’s administration to be appointed in a 2008 army-backed parliamentary vote.


Across central Bangkok a huge clean-up was under way after the scenes of anarchy that saw 36 major buildings go up in flames including the stock exchange and the nation’s biggest mall which now lies in ruins.


City workers used everything from brooms to bulldozers to clear debris left behind after two months of rolling demonstrations, including the remnants of towering barricades the Reds had used to occupy a top shopping district.


In the hotspots where protesters have battled with security forces over the past week, roads were being cleared of burned tyres, and concrete blocks and stones that had been used as missiles.


“Time to Rebuild,” the Nation newspaper said in a front-page banner, as reports said the damage bill from the torched buildings alone could reach 40 billion baht (1.2 billion dollars).


Thailand has suffered regular bouts of civil unrest in its turbulent history, but commentators warned the emotional wounds from unrest that has left 85 dead and 1,900 injured since mid-March could be hard to heal.


“No one knows how long it will take to close the deep divisions that have been opened within Thai families and society,” the Bangkok Post said in a front page editorial.


Bangkok and 23 other provinces in the rural north and northeast — the Reds’ heartland — have been put under a curfew until Sunday to try to contain the conflict and prevent it from spreading across the nation.


With dire travel warnings issued by foreign governments, the outlook for the tourism sector is bleak. The finance minister said the chaotic scenes flashed on television bulletins would have a “disastrous” impact on the sector.

d
Source: SGGP

New educational program helps learners solve life challenges

In Uncategorized on May 10, 2010 at 12:46 pm

To help all classes of the society improve their educational level, a new multi-leveled education program is in the works.


The Ministry of Education and Training is creating new education programs that aim to provide all segments of society with knowledge of law, environmental protection, physical fitness and business matters.  Officials hope the program will be helpful for people to solve life’s challenges.


Flexibly designed, the program includes over 1,500 classes, addressing many important issues in society. Under the plan, individual provinces would be able to choose which programs address the needs of their particular communities.


The ministry will consider input from all segments of society while designing the new educational programs.

Source: SGGP

Achievements, challenges for Vietnam after 3 years in WTO

In Uncategorized on April 5, 2010 at 11:22 am

Three years after becoming a member of the World Trade Organization (WTO), Vietnam has gained both direct and indirect achievements in socioeconomic development and administrative reform, but it has also encountered several difficulties in adopting new policies.

Workers package rice for export at Foocosa Company. After joining the WTO in 2007, many Vietnamese industries have benefited greatly (Photo: SGGP)

Successes
 
Since joining the WTO in 2007, Vietnam has attracted more than 4,000 foreign direct investment (FDI) projects worth over US$114 billion, 4.5 times higher than the target set for the 2006-2010 period.
 
The country’s export turnover has also soared sharply. Export and import turnover in 2008 and 2009 reached US$150 billion each year, equal to over 160 percent of the country’s GDP.
 
Vietnamese commodities have been exported widely to 150 countries and territories, with many sectors benefiting from WTO membership including labor-intensive industries like clothing, footwear and electronics.
 
Vietnamese goods are no longer discriminated against and domestic customers now have opportunities to buy a variety of imported goods at cheaper prices.
 
Joining the WTO has also raised people’s awareness of international integration, which has changed Vietnam’s global position and led to an extensive reworking of a number of the Government’s policies.
 
The legal system has been streamlined and undergone many administrative reforms as well.
 
Former Deputy Prime Minister Vu Khoan said that 30 percent of administrative procedures have been reduced under international pressure to simplify processes.
 
Opening the market, removing tax barriers and subsidies, applying principles of non-discrimination, and implementing transparent policies have facilitated the development of local enterprises, and thus business standards have gradually improved.
 
Challenges
 
Since the country’s WTO accession, however, not all enterprises have been informed about the Vietnamese Government’s bilateral and multilateral commitments.
According to the Ministry of Industry and Trade, only 20 percent of businesses have taken full advantage of the country’s WTO membership as related to tariffs and goods origin.
 
Therefore, many Vietnamese commodities have lost their competitive advantage.
 
Tariff cuts on meat imports applied in 2007 and 2008 were earlier set at higher rates than the country’s WTO commitment.
 
The sudden cuts, without technical barriers, led to a mass import of meat into the country in 2009, ruining many local farmers while customers were inundated with poor-quality frozen meat.
 
In the financial sector, forecasting and macro management have seen embarrassments.
 
About 20 percent of small- and medium-sized enterprises have gone bankrupt because of an inability to access funds. A further 60 percent of companies have also faced a host of difficulties, especially in finding a balance between supply and demand due to a hike in input costs and a shortage of capital.
 
The former Deputy PM has said Vietnam is currently facing a dilemma of whether to focus on growth or quality, and that the two contradict each other.
 
Quality includes capacity, sustainability, and stability at the macro level in addition to social welfare. But if monetary policies are tightened to stabilize macro development, it will be hard to develop the economy.
 
Conversely, if monetary policies are loosened, growth targets can be hit, but macro development will be unstable, said Former Deputy PM Khoan.
 
The second dilemma is balancing local and foreign markets. At present, the foreign market makes up 60 percent of the country’s GDP. However, if the local market isn’t capitalized on, it will create favorable conditions for foreign enterprises to control the market.
 
Another dilemma is to what extent the Government should intervene in regulating the market. If the Government doesn’t intervene, it will be unable to monitor and adjust market conditions. But on the contrary, if it is tightened, enterprises will find it hard to develop their businesses.
 
In order to take full advantage of the WTO membership and limit difficulties, economists have said more reforms need to be accelerated, and the country’s quality of growth and enterprises’ competitive capacity must be improved. 

Source: SGGP

Achievements, challenges for Vietnam after 3 years in WTO

In Uncategorized on April 5, 2010 at 11:20 am

Three years after becoming a member of the World Trade Organization (WTO), Vietnam has gained both direct and indirect achievements in socioeconomic development and administrative reform, but it has also encountered several difficulties in adopting new policies.

Workers package rice for export at Foocosa Company. After joining the WTO in 2007, many Vietnamese industries have benefited greatly (Photo: SGGP)

Successes
 
Since joining the WTO in 2007, Vietnam has attracted more than 4,000 foreign direct investment (FDI) projects worth over US$114 billion, 4.5 times higher than the target set for the 2006-2010 period.
 
The country’s export turnover has also soared sharply. Export and import turnover in 2008 and 2009 reached US$150 billion each year, equal to over 160 percent of the country’s GDP.
 
Vietnamese commodities have been exported widely to 150 countries and territories, with many sectors benefiting from WTO membership including labor-intensive industries like clothing, footwear and electronics.
 
Vietnamese goods are no longer discriminated against and domestic customers now have opportunities to buy a variety of imported goods at cheaper prices.
 
Joining the WTO has also raised people’s awareness of international integration, which has changed Vietnam’s global position and led to an extensive reworking of a number of the Government’s policies.
 
The legal system has been streamlined and undergone many administrative reforms as well.
 
Former Deputy Prime Minister Vu Khoan said that 30 percent of administrative procedures have been reduced under international pressure to simplify processes.
 
Opening the market, removing tax barriers and subsidies, applying principles of non-discrimination, and implementing transparent policies have facilitated the development of local enterprises, and thus business standards have gradually improved.
 
Challenges
 
Since the country’s WTO accession, however, not all enterprises have been informed about the Vietnamese Government’s bilateral and multilateral commitments.
According to the Ministry of Industry and Trade, only 20 percent of businesses have taken full advantage of the country’s WTO membership as related to tariffs and goods origin.
 
Therefore, many Vietnamese commodities have lost their competitive advantage.
 
Tariff cuts on meat imports applied in 2007 and 2008 were earlier set at higher rates than the country’s WTO commitment.
 
The sudden cuts, without technical barriers, led to a mass import of meat into the country in 2009, ruining many local farmers while customers were inundated with poor-quality frozen meat.
 
In the financial sector, forecasting and macro management have seen embarrassments.
 
About 20 percent of small- and medium-sized enterprises have gone bankrupt because of an inability to access funds. A further 60 percent of companies have also faced a host of difficulties, especially in finding a balance between supply and demand due to a hike in input costs and a shortage of capital.
 
The former Deputy PM has said Vietnam is currently facing a dilemma of whether to focus on growth or quality, and that the two contradict each other.
 
Quality includes capacity, sustainability, and stability at the macro level in addition to social welfare. But if monetary policies are tightened to stabilize macro development, it will be hard to develop the economy.
 
Conversely, if monetary policies are loosened, growth targets can be hit, but macro development will be unstable, said Former Deputy PM Khoan.
 
The second dilemma is balancing local and foreign markets. At present, the foreign market makes up 60 percent of the country’s GDP. However, if the local market isn’t capitalized on, it will create favorable conditions for foreign enterprises to control the market.
 
Another dilemma is to what extent the Government should intervene in regulating the market. If the Government doesn’t intervene, it will be unable to monitor and adjust market conditions. But on the contrary, if it is tightened, enterprises will find it hard to develop their businesses.
 
In order to take full advantage of the WTO membership and limit difficulties, economists have said more reforms need to be accelerated, and the country’s quality of growth and enterprises’ competitive capacity must be improved. 

Source: SGGP

Challenges increase for Mekong farmers

In Uncategorized on March 28, 2010 at 2:28 pm




Challenges increase for Mekong farmers


QĐND – Sunday, March 28, 2010, 21:7 (GMT+7)


Farmers in the Cuu Long (Mekong) Delta have for long adapted to rising sea levels and are used to a life of hardship, but current challenges have rendered them most vulnerable in years, experts say.


National and international experts including scientists and academics said at a climate change conference opened yesterday that climate change adaptation challenges were exacerbated by several other problems facing Delta farmers today.

The two-day conference in Can Tho City has drawn the participation of more than 30 experts from several universities and agencies including the American Western Washington University, German United Nations University, Asian Disaster Preparedness Centre, and the delta-based universities of Can Tho and An Giang.


Participants held open discussions on the daily life challenges of delta farmers, scenarios for rice production in the coming time and the ways to assist farmers with information and better sales of agricultural products.


Delivering the keynote address to open the conference, Prof. Vo Tong Xuan of An Giang University said increase in sea levels was not a strange phenomenon to the delta farmers and they have been adapting to it for a long time.


“Before 1972, delta farmers cultivated a 7-month floating rice crop with a yield of one tonne of rice per ha; now they cultivate two crops a year with each lasting just three months, yielding 10 to 14 tonnes of rice per ha a year,” Xuan said.


He told the conference that environmental changes and impacts from development have brought several trans-border issues to the fore, including drifting gases on river flows, the spread of brown plant hoppers, and the shortage of fresh water.


Dr. Mart Stewart of the Western Washington University said, “Farming in general – and rice farming in the densely populated Mekong [Cuu Long] Delta in particular – has rarely been easy, seldom been secure, and never been risk-free.”


However, he was now alarmed by the “the growing vulnerability of many agriculturalists to powerful middlemen.”


Xuan told Viet Nam News that the only way to assist farmers was strong measures by the Government to improve the system of rice purchase in the delta.


Lack of control over prices, poor market information and lack of access to common property resources are being lost to increasing privatization were making it more difficult for farmers, especially with small landholdings, to make their livelihoods sustainable, the conference heard.


Prof. Mauro Agnoletti of the Italian University of Florence spoke of the importance of traditional knowledge and adaptation techniques in climate change learning from the Mediterranean region.


Today’s sessions will cover aquaculture and sustainability; comparison – culture – and history; perception, resilience and adaptation.


Source: VietNamNet/VNS


 


Source: QDND

Ebooks gaining popularity but still face challenges in VN

In Uncategorized on March 24, 2010 at 5:22 am

In the wake of the global economic downturn and green movement, ebooks have emerged as the latest method of publishing a literary piece without the drawbacks of traditional publishing methods.








An online website to sell educational documents

Last year saw a dramatic spike in the popularity of ebooks, both locally and around the world. Amazon.com, an online shopping website offering a large selection of books and magazines, has reported the turnover of ebooks is now much higher than hardcopies and paperbacks.


Ebooks have the advantage of being cheap while offering readers quicker access to the latest titles. They are also environmentally friendly, saving huge amounts of trees and paper.


The largest Vietnamese online book distributor, Vinabook.com, plans to offer ebooks in the future, but says that currently, hard-copies are still more popular in the country.


Some local book aficionados, however, have established their own websites like thuvien-ebooks.com or thuquan.net, where members can read books for free.


Other domestic enterprises provide digital libraries, while the Lac Viet Company has implemented its own software to make it convenient for readers and online shoppers to access books.


Experts say Ebooks have yet to become as popular in Vietnam as they are globally for two main reasons: difficulty in utilizing ebook technology and copyright issues.


Most Vietnamese readers can’t afford a professional wireless reading device like Kindle, which costs more than US$200, and thus resort to reading ebooks via their mobile phones.


Moreover, once initially purchased online, ebooks are relatively easy to copy. This has deterred local online book distributors from offering them as they don’t stand to make large profits.





Source: SGGP Bookmark & Share

Economy rebounds, but major challenges loom

In Uncategorized on March 24, 2010 at 4:47 am

Despite the global crisis, last year can be seen as a successful year for Vietnam, with its GDP growing by 5.32 percent, the highest rate in Southeast Asia. However, there remain many big challenges the country faces in 2010.


Besides the impressive GDP growth, last year saw the country’s overall CPI kept at 6.8 percent, the lowest rate since 2004, and unemployment rate stand at 3 percent, the lowest in the world.


Owning to strengthened control over budget spending, the deficit was restrained at 6.9 percent of GDP, slightly lower than the 7-percent target and far lower than the projections by international financial analysts.








Customers at an Eastern Asia Commercial Bank branch in Ho Chi Minh City. The negotiable interest rate mechanism should be applied again to replace the ceiling interest rates on loans and deposits, to help stabilize the foreign exchange market, says Le Xuan Nghia, Deputy chairman of the National Financial Supervisory Committee. (Photo: Viet Bao)

As a result of the Government’s effective social welfare policies, the number of poor households fell to 12 percent from 14 percent in 2008.


The banking system was relatively stable, with an ROE of 13-14 percent. Average bad debt rate at banks was less than 2 percent.


Last year also saw many financial companies and financial leasing companies improve themselves in term of profitability and bad debt ratios. The insurance market and stock exchange have rebounded in terms of capital, liquidity and profit.


The above performances, resulting from the Government’s opportune policies on economic stimulus and macroeconomic stabilization, and great efforts by businesses, investors and consumers, have created favorable conditions for better economic achievements in 2010.


The revival in consumer demand the world over is also a good sign for Vietnam’s exporters.


This year, free trade agreements (FTA) between Vietnam and China, Japan, and possibly Russia, will be implemented, benefiting Vietnamese importers, exporters and producers, contributing to boost growth and generating jobs.


Trade deficit, exchange rate


It is a big challenge for the country to achieve a GDP growth of 6 percent this year. In 2009, the country’s GDP grew by 5.32 percent, of which 1.2 percent contributed by a 30 percent reduction of trade deficit (from US$17 billion in 2008 to $12.2 billion in 2009).  But in 2010, the situation has been reversed: trade deficit is forecast to rise by 20 percent and will make the growth rate reduce by 1 percent.


In other words, if the country wants to reach a GDP growth of 6.5 percent this year, it must see total consumer spending and domestic investment increase by 7.5 percent. To overcome this big challenge, it is necessary to apply flexible policies to boost public investment, credit and consumer spending.


Another problem is how to improve the foreign exchange market’s liquidity and to stabilize exchange rates.
 
Last year, the weak liquidity of the foreign exchange market mainly arose from the fact that the Government’s interest subsidy was offered only to loans in dong, which narrowed the gap between the interest rates on dong and foreign currencies, leading to difficulties in mobilizing and lending foreign currencies.


When the Government increased the official VND-USD exchange rate by 5.5 percent, boosted the prime rate by 1 percent and stopped offering interest subsidy for short-term loans, the liquidity of the foreign exchange was improved.


However, the difference between the State’s official exchange rates and those on the open market remained relatively high.


Therefore, if the exchange rates are not regulated flexibly based on market developments and if the negotiable interest rate mechanism is not applied again to replace the ceiling interest rates on loans and deposits, the instability of the foreign exchange market is likely to remain a big problem in 2010.        


Particularly, the US Federal Reverse is likely to increase its base interest rate in April. If this is the case, the value of US dollar will strengthen against other foreign currencies and liquidity in Vietnam will be weakened, affecting not only the financial market but also the efficiency of the national economy as a whole.


By Dr. Le Xuan Nghia, deputy chairman of the National Financial Supervision Committee





Source: SGGP Bookmark & Share

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