Prime Minister Nguyen Tan Dung has asked the Republic of Korea (RoK) to expand its official development assistance (ODA) to Vietnam.
Talking with the host President, Lee Myung-bak in Seoul on May 30, PM Dung also suggested the RoK facilitate Vietnam ’s exports in order to gradually change the bilateral trade unbalance.
PM Dung affirmed that Vietnam sees the RoK as one of the top important partners, saying he hopes the two countries would together exert efforts to make their cooperation in politics, economy, diplomacy, national security and defence as well as culture, education and environmental protection deeper, more stable and effective towards a strategic partnership.
President Lee Myung-bak said the RoK has attached importance to developing the cooperation with Vietnam . He praised the results of the May 29 talks between PM Dung and his RoK counterpart Han Seung-soo, particularly their agreement on principle to bring the Vietnam-RoK relationship to the “Strategic Partnership” for peace, stability and development in the region and the world.
Regarding the situation on the Korean Peninsula , PM Dung said Vietnam always wishes for peace and stability on the peninsula and the country’s consistent policy is to support the denuclearisation of the Korean Peninisula, protest nuclear tests and nuclear weapon proliferation. He said Vietnam supports a process to deal with the nuclear issues through peaceful dialogues and negotiations.
PM Dung conveyed President Nguyen Minh Triet’s invitation for a Vietnam official visit to President Lee Myung-bak.(Banking - Finance)
Showing posts with label Banking - Finance. Show all posts
Showing posts with label Banking - Finance. Show all posts
Sunday, May 31, 2009
Major banks to cut dollar deposit rates to inhibit hoarding
Vietnam’s largest banks will lower their interest rates on dollar deposits to 1.5 percent in June from around 2 percent now in a move to help avoid dollar hoarding in domestic markets, the central bank said.
All state-run banks plus Vietcombank, Vietnam’s largest partly private lender, have also agreed to set the ceiling for dollar lending rates at 3%, the State Bank of Vietnam said in a statement seen on Saturday.
“The governor of the SBV is asking Vietnam Banks Association to seek consensus with other commercial banks to lower interest rates and (help) stabilize the forex market,” it said.
The new rates come into effect tomorrow.
The interbank 12-month dollar lending rates rose to 2.29 percent on Friday from 2.20 percent a week ago. This is still below the rate of 2.45 percent on April 29, according to Reuters data.
The central bank said its inspectors will also step up large-scale checks from next month to deal with corporate dollar hoarding, which has pushed the exchange rate beyond regulated levels and led to a dollar shortage for the past several months.
The Dow Jones newswire quoted Hanoi-based bankers as saying the SVB is implementing measures to make dollar holders sell greenbacks to banks, and encourage enterprises to borrow dollars instead of buying them.
Earlier this month the government asked authorities, including the police, to help regulate foreign exchange transactions as part of efforts to reduce dollarization in the economy and control dollar rates on the black market.
The central bank will accept the country’s recently issued dollar-denominated bonds as collateral in its dollar lending operations to help ease the tightness in dollar supply, bankers said on Friday.
The central bank said it would accept foreign currency denominated “valuable papers” as collateral for the first time, without elaborating.
Bankers said these papers would primarily include Vietnam’s US$230 million dollar bonds issued in March and they would be accepted in the central bank’s dollar lending operations.
“This will accommodate the supply of short-term funds to banks which suffer from liquidity shortfall,” the bank said in a statement seen on Friday.
Importers have been complaining they were unable to buy dollars at the official exchange rate due to dollar shortage at the banks.
“The new rule would create a new mechanism for the central bank to intervene to solve the dollar shortage issue but given the amount of domestic dollar bonds, it will not be much,” a banker in Ho Chi Minh City said.
The central bank said earlier this month that banks had plenty of dollars that they can lend but a shortage of dollars to sell as exporters preferred to keep their export earnings in the greenback on fear of a faster depreciation of the dong.
Vietnam devalued its dong currency twice last year and the currency remains under pressure because of general economic uncertainty, an expected turnaround in the trade balance to a deficit and the fact that the dong has weakened less than many of its peers recently.
The government estimated earlier this week that the trade deficit in May would widen to $1.5 billion from $1.18 billion in April.
But State Bank Governor Nguyen Van Giau said last week he saw no need to adjust the dong’s exchange rate against the dollar on the grounds that the dollar was depreciating against other major currencies.
The central bank allows interbank dollar/dong transactions to trade up to 5 percent on either side of the official reference rate. It set the rate at VND16,938 per dollar on Saturday. (TN)
All state-run banks plus Vietcombank, Vietnam’s largest partly private lender, have also agreed to set the ceiling for dollar lending rates at 3%, the State Bank of Vietnam said in a statement seen on Saturday.
“The governor of the SBV is asking Vietnam Banks Association to seek consensus with other commercial banks to lower interest rates and (help) stabilize the forex market,” it said.
The new rates come into effect tomorrow.
The interbank 12-month dollar lending rates rose to 2.29 percent on Friday from 2.20 percent a week ago. This is still below the rate of 2.45 percent on April 29, according to Reuters data.
The central bank said its inspectors will also step up large-scale checks from next month to deal with corporate dollar hoarding, which has pushed the exchange rate beyond regulated levels and led to a dollar shortage for the past several months.
The Dow Jones newswire quoted Hanoi-based bankers as saying the SVB is implementing measures to make dollar holders sell greenbacks to banks, and encourage enterprises to borrow dollars instead of buying them.
Earlier this month the government asked authorities, including the police, to help regulate foreign exchange transactions as part of efforts to reduce dollarization in the economy and control dollar rates on the black market.
The central bank will accept the country’s recently issued dollar-denominated bonds as collateral in its dollar lending operations to help ease the tightness in dollar supply, bankers said on Friday.
The central bank said it would accept foreign currency denominated “valuable papers” as collateral for the first time, without elaborating.
Bankers said these papers would primarily include Vietnam’s US$230 million dollar bonds issued in March and they would be accepted in the central bank’s dollar lending operations.
“This will accommodate the supply of short-term funds to banks which suffer from liquidity shortfall,” the bank said in a statement seen on Friday.
Importers have been complaining they were unable to buy dollars at the official exchange rate due to dollar shortage at the banks.
“The new rule would create a new mechanism for the central bank to intervene to solve the dollar shortage issue but given the amount of domestic dollar bonds, it will not be much,” a banker in Ho Chi Minh City said.
The central bank said earlier this month that banks had plenty of dollars that they can lend but a shortage of dollars to sell as exporters preferred to keep their export earnings in the greenback on fear of a faster depreciation of the dong.
Vietnam devalued its dong currency twice last year and the currency remains under pressure because of general economic uncertainty, an expected turnaround in the trade balance to a deficit and the fact that the dong has weakened less than many of its peers recently.
The government estimated earlier this week that the trade deficit in May would widen to $1.5 billion from $1.18 billion in April.
But State Bank Governor Nguyen Van Giau said last week he saw no need to adjust the dong’s exchange rate against the dollar on the grounds that the dollar was depreciating against other major currencies.
The central bank allows interbank dollar/dong transactions to trade up to 5 percent on either side of the official reference rate. It set the rate at VND16,938 per dollar on Saturday. (TN)
Sunday, February 22, 2009
Dollarization domination
Dollarization in Vietnam is estimated by the State Bank of Vietnam at 21%, relatively high when noting that the figure is 9% in China and 1% in Thailand. Nguyen Dong Tien, Deputy Governor of the State Bank of Vietnam, discussed how serious dollarization is in Vietnam and how to fix the problem.
He said that the Government has asked the State Bank of Vietnam (SBV) to draw up a master plan on reducing dollarization. The plan needs to improve the convertibility of the VND and the value of the VND in international transactions.
Could you please tell us more about the plan?
Previously, experts once suggested that all sums of money transferred from abroad into Vietnam should be converted into VND. However, the Government and central bank decided against this after thorough consideration. Right after this suggestion was made public, the foreign currency inflow into Vietnam decreased sharply.
Therefore, measures to reverse dollarization must be flexible and not extreme, and it is clear that direct intervention or administrative orders are not the right measures. This is the most important requirement for the plan.
Second, measures must ensure that depositors and enterprises have higher confidence in the commercial bank system
Third, it is necessary to make the cost of VND transactions lower compared to US$ transactions, which will help improve the convertibility of the local currency.
Fourth, it is necessary to stabilize the economy, which will result in people having more confidence in the local currency, and get them to keep VND in their wallets.
However, I have to acknowledge that to some extent, we cannot absolutely eliminate the dollarization of the national economy.
IN 2007, the foreign portfolio investment capital into Vietnam reached $6.2bil. Can you see any link between this and dollarization?
As we open the national economy, more and more foreign capital will enter, and if the foreign capital is overly high compared to the absorbability of the national economy, the supply of foreign currencies will be profuse, and dollarization will increase.
We have many choices of ways to deal with the problem. The Government is pursuing the principle that the central bank will continue buying foreign currencies to stabilize the value of the VND. Also, we need to take measures to control the VND supply in order stunt inflation. These steps were taken, to some extent, in 2007, and we will continue them in 2008.
Some experts have suggested that Vietnam should allow foreign investors to open foreign currency accounts to make securities transactions. If so, Vietnam can reduce dollarization, successfully control inflation, while foreign currencies in accounts at commercial banks can still produce profits for money owners. What do you think about this?
I have heard this suggestion. However, it may be contrary to the regulations stipulated in the Ordinance on Forex Management. The ordinance says that all foreign money must be transferred into Vietnam through a special account, and after that, the money must go into investments. (VNeconomy)
He said that the Government has asked the State Bank of Vietnam (SBV) to draw up a master plan on reducing dollarization. The plan needs to improve the convertibility of the VND and the value of the VND in international transactions.
Could you please tell us more about the plan?
Previously, experts once suggested that all sums of money transferred from abroad into Vietnam should be converted into VND. However, the Government and central bank decided against this after thorough consideration. Right after this suggestion was made public, the foreign currency inflow into Vietnam decreased sharply.
Therefore, measures to reverse dollarization must be flexible and not extreme, and it is clear that direct intervention or administrative orders are not the right measures. This is the most important requirement for the plan.
Second, measures must ensure that depositors and enterprises have higher confidence in the commercial bank system
Third, it is necessary to make the cost of VND transactions lower compared to US$ transactions, which will help improve the convertibility of the local currency.
Fourth, it is necessary to stabilize the economy, which will result in people having more confidence in the local currency, and get them to keep VND in their wallets.
However, I have to acknowledge that to some extent, we cannot absolutely eliminate the dollarization of the national economy.
IN 2007, the foreign portfolio investment capital into Vietnam reached $6.2bil. Can you see any link between this and dollarization?
As we open the national economy, more and more foreign capital will enter, and if the foreign capital is overly high compared to the absorbability of the national economy, the supply of foreign currencies will be profuse, and dollarization will increase.
We have many choices of ways to deal with the problem. The Government is pursuing the principle that the central bank will continue buying foreign currencies to stabilize the value of the VND. Also, we need to take measures to control the VND supply in order stunt inflation. These steps were taken, to some extent, in 2007, and we will continue them in 2008.
Some experts have suggested that Vietnam should allow foreign investors to open foreign currency accounts to make securities transactions. If so, Vietnam can reduce dollarization, successfully control inflation, while foreign currencies in accounts at commercial banks can still produce profits for money owners. What do you think about this?
I have heard this suggestion. However, it may be contrary to the regulations stipulated in the Ordinance on Forex Management. The ordinance says that all foreign money must be transferred into Vietnam through a special account, and after that, the money must go into investments. (VNeconomy)
Gold prices go up again to be over VND17 million/tael
After dropping to below VND17 million/tael, the lowest level during the previous two weeks, the price of gold once again has fluctuated wildly and is currently trading at over the VND17 million/tael mark.
The domestic price of gold suddenly increased because of a dramatic rise in the world price of gold on Tuesday night, with the Federal Reserve System (FED) surprisingly cutting US$ interest rate by 0.75 percent, from 4.25 percent to 3.5 percent, with the aim of steadying the world’s biggest economy which is currently in critical condition.
The US dollar continued devaluing against the Euro. The price of gold at spot delivery in New York instantly shot up to reach over US$890/oz.
On the domestic market, SJC gold at the Sai Gon Gold, Silver and Gem Stone Company is trading at VND17.13-17.23 million per tael at present, up VND470.000/tael compared with Tuesday’s transactions. The price is applied commonly in Hanoi, Ho Chi Minh City, Da Nang, Nha Trang and Can Tho.
At 2pm on Wednesday, the price of gold at the Phu Quy Gold, Silver and Gem Stone Company in Hanoi stood at VND17.12-17.24 million per tael, up VND240,000/tael compared to the previous day.
At Bao Tin Minh Chau in Hanoi, the price of gold slightly increased but the number of people, particularly those coming to sell rather than buy gold, undertake transactions at the company remained almost the same.
The domestic price of gold suddenly increased because of a dramatic rise in the world price of gold on Tuesday night, with the Federal Reserve System (FED) surprisingly cutting US$ interest rate by 0.75 percent, from 4.25 percent to 3.5 percent, with the aim of steadying the world’s biggest economy which is currently in critical condition.
The US dollar continued devaluing against the Euro. The price of gold at spot delivery in New York instantly shot up to reach over US$890/oz.
On the domestic market, SJC gold at the Sai Gon Gold, Silver and Gem Stone Company is trading at VND17.13-17.23 million per tael at present, up VND470.000/tael compared with Tuesday’s transactions. The price is applied commonly in Hanoi, Ho Chi Minh City, Da Nang, Nha Trang and Can Tho.
At 2pm on Wednesday, the price of gold at the Phu Quy Gold, Silver and Gem Stone Company in Hanoi stood at VND17.12-17.24 million per tael, up VND240,000/tael compared to the previous day.
At Bao Tin Minh Chau in Hanoi, the price of gold slightly increased but the number of people, particularly those coming to sell rather than buy gold, undertake transactions at the company remained almost the same.
Domestic Banks Safe Amid Foreign Influx For The Time Being
Considering that six foreign banks are applying for establishment as 100%-foreign-owned banks in Viet Nam in addition to three foreign branches licensed this month and 40 others in operation, will foreign banks one day pose a threat to Vietnamese ones?
Foreign banks are pioneers in applying state-of-the-art banking technology and new services in Viet Nam and are doing their utmost to expand their networks.
Many foreign banks are eager to establish subsidiaries in Viet Nam. For instance, though the Singapore-based Overseas Chinese Banking Corporation (OCBC) is holding 10 percent of stakes in VPBank, it has recently applied to establish a subsidiary bank in the country to target small to medium enterprises and individuals.
In addition, the Hong Kong and Shanghai Banking Cooperation (HSBC) has decided to set up a subsidiary bank in Viet Nam to provide clients with more banking services and products, said CEO Thomas Tobin.
Just this month, the Republic of Korea’s Industrial Bank, Australia’s Commonwealth Bank and Taiwan’s Taipei Fubon were licensed to open branches in Ho Chi Minh City and Ha Noi for a duration of 99 years.
Still no fear in sight
Despite such influx, there are only a handful of banks applying to open fully-foreign-owned banks, therefore fierce competition is yet to occur between foreign and local banks, analysts said.
In addition, the local financial market is growing well so domestic banks have many opportunities to develop new financial services to outdo their overseas rivals.
Meanwhile, foreign banks will have to face certain challenges when operating in Viet Nam, warned Doctor Le Xuan Nghia, head of the State Bank of Viet Nam’s Banking Development Strategy Department.
Because Vietnamese enterprises are somewhat alien to foreign professional banking management, they will have difficulty seeking loans or just shy away from such foreign banks, he explained.
Then, despite being a potential wholesale market, most high incomers are living in cities and urban areas where domestic banks have already taken roots, hence little room for foreign newcomers.
Added to such obstacles are the country’s shortage of human resources, and local banks’ readiness to pay high salaries to attract qualified employees.
However, Nghia admitted foreign banks will have many opportunities to develop their services in wholesale markets, investment and commercial funds this year.
He said those services are in great demand in the country but local banking institutions are yet to provide them due to technological constraints, lack of human resources, and risk management skills. (Saigon GP)
Foreign banks are pioneers in applying state-of-the-art banking technology and new services in Viet Nam and are doing their utmost to expand their networks.
Many foreign banks are eager to establish subsidiaries in Viet Nam. For instance, though the Singapore-based Overseas Chinese Banking Corporation (OCBC) is holding 10 percent of stakes in VPBank, it has recently applied to establish a subsidiary bank in the country to target small to medium enterprises and individuals.
In addition, the Hong Kong and Shanghai Banking Cooperation (HSBC) has decided to set up a subsidiary bank in Viet Nam to provide clients with more banking services and products, said CEO Thomas Tobin.
Just this month, the Republic of Korea’s Industrial Bank, Australia’s Commonwealth Bank and Taiwan’s Taipei Fubon were licensed to open branches in Ho Chi Minh City and Ha Noi for a duration of 99 years.
Still no fear in sight
Despite such influx, there are only a handful of banks applying to open fully-foreign-owned banks, therefore fierce competition is yet to occur between foreign and local banks, analysts said.
In addition, the local financial market is growing well so domestic banks have many opportunities to develop new financial services to outdo their overseas rivals.
Meanwhile, foreign banks will have to face certain challenges when operating in Viet Nam, warned Doctor Le Xuan Nghia, head of the State Bank of Viet Nam’s Banking Development Strategy Department.
Because Vietnamese enterprises are somewhat alien to foreign professional banking management, they will have difficulty seeking loans or just shy away from such foreign banks, he explained.
Then, despite being a potential wholesale market, most high incomers are living in cities and urban areas where domestic banks have already taken roots, hence little room for foreign newcomers.
Added to such obstacles are the country’s shortage of human resources, and local banks’ readiness to pay high salaries to attract qualified employees.
However, Nghia admitted foreign banks will have many opportunities to develop their services in wholesale markets, investment and commercial funds this year.
He said those services are in great demand in the country but local banking institutions are yet to provide them due to technological constraints, lack of human resources, and risk management skills. (Saigon GP)
Banks’ compulsory ratio raised to curb inflation
The State Bank of Vietnam (SBV) has made its first move in its plan to control inflation, expected to be very high this year, by requiring a higher compulsory reserve ratio for deposits.
Inflation reached 12.63% by the end of 2007; this was partly attributed to the poor monetary policy of the central bank. Now though, it seems the central bank has learned from its mistake: immediately in 2008, it decided to tighten credit by increasing the compulsory reserve ratio.
The compulsory reserve ratios, according to decision No 187 dated January 16, will increase by 1% and be applied to all kinds of deposits.
The VND demand deposit and less-than-12-month term deposits will have a compulsory reserve ratio of 11% instead of 10%, while the ratio for more-than-12-month term deposits will be 5% instead of 4%. The same compulsory reserve ratios will also be applied for foreign currency deposits.
The decision does not become effective immediately, but will become valid in February 2008, so that commercial banks can have more time to prepare. Meanwhile, the ratio increases will not be applied to credit institutions operating in rural areas (agriculture bank, rural joint stock banks, the central people’s credit fund and cooperation banks) so as to support economic development of rural areas.
An SBV official said the compulsory reserve ratio increases are actually quite gentle when compared to the increases in June 2007, when the central bank unexpectedly increase ratios into double digits (for example, the ratio for VND deposits of less than 12 months rose from 5% to 10%).
It seems that the central bank has decided to change tactics; it is trying to tighten credit step by step instead of suddenly turning off the ‘capital tap’, in order to avoid abrupt market shocks.
The official also said that the central bank cannot raise the compulsory reserve ratio too sharply right before Tet, which is always considered the most ‘sensitive’ moment of the year. In general, commercial banks need more capital in the months before Tet to fund their clients’ business deals, and the sharp increases in the compulsory reserve ratio will force banks to pay higher capital mobilization costs.
Deputy Director of a joint stock bank said the demand for capital is increasing, which is why banks have to offer higher interest rates for deposits.
“The 1% compulsory reserve ratio increase means that our capital mobilization cost is 1% higher,” he said.
However, he acknowledged that with the slight increase of 1%, commercial banks ‘will still be able to manage’. Besides, he said, this is a necessary move to curb inflation.
Leader of a state owned bank estimates that the decision will help the central bank withdraw some VND3tril ($187.5mil) from circulation.
The official believes that this is just the first move by the central bank in its strategy to control inflation, which may be followed by future, higher compulsory reserve ratios.
“The central bank is striving to gradually withdraw money from circulation, stabilize their monetary policy and curb inflation,” he said.
The 1% increase of the compulsory reserve ratio is just the first step the central bank needs to take in order to slow down inflation. It remains unclear how many times the compulsory reserve ratio will increase and when the central bank will stop. The State Bank will make those decisions after considering the performance of the monetary market.
Of course, commercial banks do not want these increases, because they make their capital mobilization cost higher. However, “if the compulsory reserve ratios are raised step by step, we will be okay,” a bank’s Director said. (Securities Investment Newspaper)
Inflation reached 12.63% by the end of 2007; this was partly attributed to the poor monetary policy of the central bank. Now though, it seems the central bank has learned from its mistake: immediately in 2008, it decided to tighten credit by increasing the compulsory reserve ratio.
The compulsory reserve ratios, according to decision No 187 dated January 16, will increase by 1% and be applied to all kinds of deposits.
The VND demand deposit and less-than-12-month term deposits will have a compulsory reserve ratio of 11% instead of 10%, while the ratio for more-than-12-month term deposits will be 5% instead of 4%. The same compulsory reserve ratios will also be applied for foreign currency deposits.
The decision does not become effective immediately, but will become valid in February 2008, so that commercial banks can have more time to prepare. Meanwhile, the ratio increases will not be applied to credit institutions operating in rural areas (agriculture bank, rural joint stock banks, the central people’s credit fund and cooperation banks) so as to support economic development of rural areas.
An SBV official said the compulsory reserve ratio increases are actually quite gentle when compared to the increases in June 2007, when the central bank unexpectedly increase ratios into double digits (for example, the ratio for VND deposits of less than 12 months rose from 5% to 10%).
It seems that the central bank has decided to change tactics; it is trying to tighten credit step by step instead of suddenly turning off the ‘capital tap’, in order to avoid abrupt market shocks.
The official also said that the central bank cannot raise the compulsory reserve ratio too sharply right before Tet, which is always considered the most ‘sensitive’ moment of the year. In general, commercial banks need more capital in the months before Tet to fund their clients’ business deals, and the sharp increases in the compulsory reserve ratio will force banks to pay higher capital mobilization costs.
Deputy Director of a joint stock bank said the demand for capital is increasing, which is why banks have to offer higher interest rates for deposits.
“The 1% compulsory reserve ratio increase means that our capital mobilization cost is 1% higher,” he said.
However, he acknowledged that with the slight increase of 1%, commercial banks ‘will still be able to manage’. Besides, he said, this is a necessary move to curb inflation.
Leader of a state owned bank estimates that the decision will help the central bank withdraw some VND3tril ($187.5mil) from circulation.
The official believes that this is just the first move by the central bank in its strategy to control inflation, which may be followed by future, higher compulsory reserve ratios.
“The central bank is striving to gradually withdraw money from circulation, stabilize their monetary policy and curb inflation,” he said.
The 1% increase of the compulsory reserve ratio is just the first step the central bank needs to take in order to slow down inflation. It remains unclear how many times the compulsory reserve ratio will increase and when the central bank will stop. The State Bank will make those decisions after considering the performance of the monetary market.
Of course, commercial banks do not want these increases, because they make their capital mobilization cost higher. However, “if the compulsory reserve ratios are raised step by step, we will be okay,” a bank’s Director said. (Securities Investment Newspaper)
Small money is hard to come by
Small change has become scarcer and scarcer in circulation. Meanwhile, the State Bank of Vietnam said it has been providing small change steadily. Where has all the small change gone?
When making payment at retailers, sellers always prefer smaller value banknotes. They grimace unhappily if you give them a VND500,000 bill. In Vietnam, old tattered notes and blackened coins may be more favored than sterling larger-value ones.
The shortage of small change has become more serious these days, as people rush to buy goods for Tet. Supermarts, vendors, shops and trade centers all complain that they do not have enough small change (VND500, VND1,000, VND2,000 and VND5,000) to pay to clients.
The owner of a pharmacy on Road No 13 in Thu Duc district, HCM City, said that she needs several millions of VND in small change to pay clients. In order to get small-value banknotes and coins she promises children who sell lottery tickets that she will buy a lot of tickets if they agree to change money for her.
An employee at Nguyen Van Cu book store said they need some one million VND a day in small change, and it has signed contracts with the nearby Phuong Nam Bank branch to provide small change.
If you go to Big C supermart, you will see a board that says the supermart needs small change and will offer 1% of the value for all small monies exchanges for big (i.e. if you provide VND1mil in small change, you can get VND1.1mil in big-value bank notes). Regardless, the supermart is still having trouble meeting the demand for small change.
At traditional markets, vegetable sellers always ask consumers to accept chili or mints as change. At supermarkets, cashiers automatically give chewing gum or envelopes instead. In fact, a lot of consumers are unhappy with this system because they are forced to buy products they do not want.
In 2003, the State Bank of Vietnam issued coins with face value of VND500, VND1,000, VND2,000 and VND5,000. At that time, the coins were not welcomed by sellers and buyers. However, the situation has become quite different: buyers and sellers have to use coins because they have no other choice in getting small change.
The disappearing coins
Hoa, a housewife in Binh Thanh district in HCM City said that she does not want to keep coins in her wallet because she often drops and loses them. Instead, she puts all her coins into a clay piggy bank. Recently, she counted up her piggy bank savings, which amounted to VND2mil.
For families with small children, parents and grandparents always give children coins as gifts, which are always put into piggy banks. At the end of the year, just before Tet, the money is used to buy clothes and toys for children.
Suppose that every family spends VND50,000 on everyday expenses, including VND20,000 in small change, then 1mil families will need VND20bil a day. Supposed that every family has VND50,000 in small change in their piggy banks, then 1mil families will keep VND50bil, meaning a lot of small money resources are not in circulation.
Money issuer’s responsibility
Analysts say the shortage of small change would not be so serious if the State Bank issued banknotes instead of coins.
It seems the central bank has ‘forgotten’ the customs of their own people. Meanwhile, the system of vending machines where people can utilize coins has not yet developed.
In fact, the lack of small change once occurred in the years between 1986 and 1990. At that time, the money issuer thought that small change and big-value bank notes were both money and did not pay attention to issuing small-value bank notes. As a result, people had to accept changing money at a 10/9 ratio (giving VND10 to get VND9 back).
It is clear that the money issuer has not carefully considered societal habits and characteristics when issuing coins.
When making payment at retailers, sellers always prefer smaller value banknotes. They grimace unhappily if you give them a VND500,000 bill. In Vietnam, old tattered notes and blackened coins may be more favored than sterling larger-value ones.
The shortage of small change has become more serious these days, as people rush to buy goods for Tet. Supermarts, vendors, shops and trade centers all complain that they do not have enough small change (VND500, VND1,000, VND2,000 and VND5,000) to pay to clients.
The owner of a pharmacy on Road No 13 in Thu Duc district, HCM City, said that she needs several millions of VND in small change to pay clients. In order to get small-value banknotes and coins she promises children who sell lottery tickets that she will buy a lot of tickets if they agree to change money for her.
An employee at Nguyen Van Cu book store said they need some one million VND a day in small change, and it has signed contracts with the nearby Phuong Nam Bank branch to provide small change.
If you go to Big C supermart, you will see a board that says the supermart needs small change and will offer 1% of the value for all small monies exchanges for big (i.e. if you provide VND1mil in small change, you can get VND1.1mil in big-value bank notes). Regardless, the supermart is still having trouble meeting the demand for small change.
At traditional markets, vegetable sellers always ask consumers to accept chili or mints as change. At supermarkets, cashiers automatically give chewing gum or envelopes instead. In fact, a lot of consumers are unhappy with this system because they are forced to buy products they do not want.
In 2003, the State Bank of Vietnam issued coins with face value of VND500, VND1,000, VND2,000 and VND5,000. At that time, the coins were not welcomed by sellers and buyers. However, the situation has become quite different: buyers and sellers have to use coins because they have no other choice in getting small change.
The disappearing coins
Hoa, a housewife in Binh Thanh district in HCM City said that she does not want to keep coins in her wallet because she often drops and loses them. Instead, she puts all her coins into a clay piggy bank. Recently, she counted up her piggy bank savings, which amounted to VND2mil.
For families with small children, parents and grandparents always give children coins as gifts, which are always put into piggy banks. At the end of the year, just before Tet, the money is used to buy clothes and toys for children.
Suppose that every family spends VND50,000 on everyday expenses, including VND20,000 in small change, then 1mil families will need VND20bil a day. Supposed that every family has VND50,000 in small change in their piggy banks, then 1mil families will keep VND50bil, meaning a lot of small money resources are not in circulation.
Money issuer’s responsibility
Analysts say the shortage of small change would not be so serious if the State Bank issued banknotes instead of coins.
It seems the central bank has ‘forgotten’ the customs of their own people. Meanwhile, the system of vending machines where people can utilize coins has not yet developed.
In fact, the lack of small change once occurred in the years between 1986 and 1990. At that time, the money issuer thought that small change and big-value bank notes were both money and did not pay attention to issuing small-value bank notes. As a result, people had to accept changing money at a 10/9 ratio (giving VND10 to get VND9 back).
It is clear that the money issuer has not carefully considered societal habits and characteristics when issuing coins.
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