If the VND is depreciated in 2009, this would benefit a lot of businesses, analysts say.


2008: exchange rate adjustment caused losses


According to Euro Capital, a securities company, in
2008, the exchange rate trading band was adjusted five times, the
highest number of adjustments ever made in a single year. The
continuous exchange rate adjustments created a lot of difficulties for
businesses.


Those which imported materials were twice as miserable in mid 2008 due to material price increases and VND price fluctuations.


The Binh Minh Plastics Company in May and June 2008
incurred the loss of VND5-6bil due to exchange rate fluctuations. The
Vietnam Textile and Garment Group also reported the loss of VND50bil in
the period due to the gap between the low prices at which it sold
dollars to commercial banks and the high prices at which it purchased
dollars to pay for materials.


As for petrol and oil importers, Petrolimex said that
the production cost of every litre of petrol and oil increased by
VND300-400, also because of the exchange rate fluctuations.


PPC has been cited as a typical example of the businesses which suffered from the exchange rate fluctuations.


With a loan worth Yen37bil, PPC
incurred double losses from the exchange rate fluctuations as the VND
dropped in value against the dollar, while the dollar dropped in value
against the Japanese Yen. In September-November 2008, the Japanese Yen
increased by 20-25% in value against the greenback, and 30-40% against
the euro.


Possible impacts on businesses in 2009


According to Ngo Van Minh, Deputy Head of the Analysis
and Investment Division under ECC, the VND depreciation in 2009 will
benefit exporters, but hurt importers.


As for the pharmacy industry, as it needs to import
90% of total materials, the weaker VND will make expenses for input
materials higher.


Dairy producers, which are now making dairy products
with over 80% imported materials, will also suffer from the VND
depreciation.


Companies which have good domestic material supply
sources will be able to minimise impacts of the dollar price increases,
especially as the inflation rate is expected to be one-digit in 2009.


In principle, the depreciation of the VND will help
Vietnamese steel producers clear big stocks as the expensive import
steel will make imports less competitive.


However, in the long term, the more expensive dollar
will affect domestic steel producers, as Vietnamese enterprises still
are relying on ingot steel imports. Meanwhile, expensive imports of
ingot steel will make production costs higher.


Seafood, footwear and garment producers will benefit
from the cheaper VND. The garment export turnover at the end of 2008
decreased sharply partially because of the VND’s appreciation against
the currencies of some other export companies like China, Thailand and
Indonesia. Seafood producers have asked for a loosening of the exchange
rate trading band in order to help boost exports.


However, the business branch which can enjoy the biggest benefit from the VND depreciation will be oil and gas.


With the current interbank exchange rate, oil and gas
enterprises will get VND2,500bil more this year. If the VND depreciates
by 5%, oil and gas enterprises will get VND4,500bil more.