The State Bank of Viet Nam has shown its determination to stabilise the exchange rate, ensuring a maximum change of 1 per cent for the rest of the year.

The bank justified its decision, saying that the balance of payment (BOP) surplus could reach between US$2.5 billion and $4.5 billion while foreign currency reserves have also increased significantly. In addition, the central bank has also applied many measures to curb credit growth in US dollars.

On September 1, the bank rate for compulsory reserves on foreign-currency deposits with terms longer than 12 months was raised to 8 per cent from 7 per cent. This means that if banks mobilise $100 and paid interest rates, they would be allowed to lend $92.

Because of this, banks' business costs are expected to increase so they have to raise the lending interest rate to get more money to compensate for the loss.

The central bank has also decided to increase the risk ratio of foreign currency assets from the current 20 per cent to 50 per cent. This decision is expected to restrict the lending of foreign currency and facilitate the collection of debts to stabilise a capital-adequacy ratio at 9 per cent.

However, independent market analysts said that all the above measures are not enough to cool dollar credit growth, which has reached around 24 per cent, or stabilise the forex rate.

Unforeseen developments in the forex market are predicted if dollar demand far exceeds supply.

The price of US dollar on the free market has recently increased, jumping to new highs of VND21,000 in the middle of last week. This sparked concerns among enterprises over the return of the dual-dollar pricing at banks and the back market when the market's dollar demand increased at the year-end.

The chairman of a large steel company said that his company had to buy the US dollar from banks at a price higher than the formally quoted bank rate.

Fees and other expenses included, the company had to buy dollars at over VND21,000 while the highest quoted price at banks allowed by the central bank was just VND20,834 at the time.

The US dollar price changes from day to day depending on supply. The difference between the actual selling price at banks and the quoted price may rise to VND100 if the supply is not ample.

Thus, the potential resurfacing of a dual-dollar pricing scheme is threatening enterprises as it was in previous years, making it difficult for both importers and exporters to keep their accounting books due to unofficial fees.

Trust Bank Chairman Hoang Van Toan said risk was still there, despite the central bank's commitment to timely intervene in the forex market.

Therefore, enterprises should prepare themselves now for the situation rather than assuming that the exchange rate would remain stable.

Toan said there were few enterprises resorting to risk-hedging tools provided by banks about forex risks because they do not want to suffer from additional costs.

Do Thi Minh Hanh, head of the Treasury Department of the Military Bank, said only a modest number of enterprises used these tools because they lacked information and understanding about their benefits. She noted that some vehicles such as forwarding transactions and currency swaps had no fees.

Her bank now provides a forward currency product which helps enterprises avoid forex risks. The tool is increasingly accepted by enterprises, but not by many of them.

Calls to fixed lines get pricier

The Ministry of Information and Telecommunications (MoIT) has decided to increase charges for calls between cell phones and fixed phones, from VND270 per minute to VND415. But the number of people using fixed phones has dropped sharply.

This has affected Viet Nam Post and Telecommunications (VNPT) the most, since the company has 73 per cent of the fixed phone market.

VNPT estimates that it already lost about 1 million fixed-phone subscribers a year, according to Vu Tien Duong, a representative of the company.

Because of a sharp decline in the number of subscribers, VNPT's turnover has dropped rapidly, around 20 per cent per year, he said.

VNPT turnover from a fixed phone is only VND40,000 per month. The subscription charge is VND20,000.

In addition, electricity companies have already increased rental fees for their electric poles to VND20,000 per month, which is more than five times higher than existing rates. This has created more difficulties for VNPT's business.

To have money to maintain the fixed-phone networks, the company had to use other revenue to make up for losses, which has climbed to hundreds of billion dong.

In Ha Noi alone, about 60,000 fixed-phone subscribers of VNPT have shifted to using cell phones.

To save the fixed-phone network, MoIT has a plan to develop the broadband fixed wiriness network, which is expected to help develop the fixed-phone network but also other value-added services such as cable TV IPTV, MyTV programme and Internet ADSL.

The ministry has drafted a programme that is designed to provide telecom services, including internet, to people in every part of the country. The scheme will give priorities to developing new fixed phones, particularly at enterprises, in order to ensure the sector's sustainable development.

VNS