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A dear price to pay

The news about Nguyen Duc Kien’s arrest on Monday, Aug 20 came out as a deafening explosion, not only because of his status as one of the richest investors on the local stock exchange, not because of his deep involvement in the country’s banking sector, and not because of his overwhelming power in national soccer. Rather, it is the high price he has to pay for what is described as illegal business conducted via three companies at his helm in Hanoi. And, given the massive cash withdrawals in the past three days at Asia Commercial Bank where he used to serve as a senior leader, and the panic on the local stock market, it is also the colossal price the public has to pay. The saga continues.

Tuoi Tre sheds light on Kien’s illegal business practices, saying he has set up “fraudulent business schemes” to take out bank loans.

“Although the three companies are not licensed to make financial investments, Nguyen Duc Kien still used the companies’ legal persons to engage in financial investment business,” says the paper.

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Vietnam Increases Gold Market Controls

April 12, 2012. The State Bank of Vietnam is instituting a de facto nationalization of Vietnam’s gold market, in an effort to restore confidence in the country’s currency – the dong. Vietnam is suffering from a growing current account deficit and record-high inflation. The government’s new measures will have unpleasant side effects, as more than 2,000 Vietnamese gold traders might have to close their businesses. However, private citizens will retain the right to buy gold.

From May 25 the State Bank of Vietnam will in effect be the sole controller of gold trading in the country. Rules passed last year pushed many small gold traders out of business, and these new gold rules mean that after the May 25 deadline, only companies with minimum capital of 10 billion Vietnamese dong, yearly tax payments of 500 million Vietnamese dong and with branches in a minimum of three provinces will be allowed to trade gold and import gold bars.

Currently, the only company able to comply with these requirements is the public company SJC of Hoh Chi Minh City. SJC controls 90 % of the national gold trade. According to the new regulations, major Vietnamese banks will also be allowed to trade gold. The State Bank of Vietnam has called on major banks to present their own plans for joining the gold trade, and regarding possible development of a national distribution grid. Experts believe that the State Bank of Vietnam is trying to use commercial banks to create its own distribution grid and thus increase its control of the gold sector.

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Travel firms, hotels want to quote prices in foreign currencies

VietNamNet Bridge – Enterprises operating in the tourism sector have proposed government agencies to allow them to quote the prices of products and services in popular foreign currencies such as Euro or US dollars, instead of Vietnam dong, in order to make it easier to understand for foreign travelers.

Under the current regulations, Vietnam dong is the only currency which can be used in the transactions in the Vietnamese territory, while the prices of services and products also must be quoted in Vietnam dong.

The government has issued Decree No 95 stipulating the fines on the violations of the regulations in the monetary and banking sector, which took effect on October 20, 2011. The decree says that the fine on the price posting in foreign currencies would be 300-500 million dong, which is much higher than the previously applied levels.

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Vietnam’s economy in 2011: the impressive figures (VietNamNet)

VietNamNet Bridge – The Vietnam Economic Forum VEF of VietNamNet reviews the 10 most impressive figures associated with the most important events that had big impacts on the national economy in 2011.

1. The record high inflation rate of 18 percent (compared with 7% target)

The government has determined to force the inflation rate to 9 percent in 2012.

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Analysis: Vietnam taps reserves but dong still likely to slide

HANOI | Tue Sep 6, 2011 (Reuters) The Vietnamese dong looks stuck for now with the unappealing title of Asia’s worst performing currency, despite moves by the central bank to dip into foreign reserves to bolster it.

The dong’s chronic weakness has repelled foreign investors and hampered attempts by Vietnam’s policymakers to reverse the faltering fortunes of an economy that only five years ago was one of Asia’s most promising.

Until Vietnam rebuilds trust by decisively taming the region’s worst inflation and narrowing sizable trade and budget deficits, the risks of holding dong are likely to continue to outweigh the benefits no matter what tinkering the central bank does, analysts and investors say.

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IMF Advises Vietnam Against Cutting Interest Rates “Prematurely”

Sep 8, 2011. Vietnam should avoid reducing interest rates too soon as that may weaken its currency and raise questions about the government’s commitment to fighting inflation, the International Monetary Fund said.

“It is important that monetary policy not be eased prematurely, because the recent improved sentiment towards the dong remains relatively fragile,” Benedict Bingham, the IMF’s senior resident representative in Vietnam, said in an e-mail today. His comments are a summary of remarks he made at a Sept. 6 meeting in Hanoi attended by officials including Prime Minister Nguyen Tan Dung.

The State Bank of Vietnam will leave interest rates unchanged for now and consider cutting them if inflation slows, the government said last month as faltering U.S. and European recoveries darken the outlook for Asian expansion. Vietnam’s consumer-price growth accelerated to 23.02 percent in August, a 33-month high and the fastest pace in Asia.

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Macroeconomic instability causes FDI to shrink by one-half

HANOI, Jul 15, 2011. International development partners are urging the Government to settle down the macroeconomic chaos in order to put the country back to the radar screen of foreign investors as uncertainties have caused foreign investment to fall.

Japan is the pioneer to do so. For the first time ever, the joint committee of the Vietnam-Japan joint initiative phase 4 has defined macroeconomic stability as the major condition for the country to improve the business environment.

“Vietnam dong has been continuously weakening for the past three years… Only Vietnam dong has devalued while the neighboring nations’ currencies have all strengthened against the U.S. dollar,” the joint committee said in a document issued on July 1.

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Vietnam inflation almost 21 pct in June

Jun 24, 2011. Vietnam’s inflation rate, already one of the world’s highest, rose again in June to almost 21 percent, according to official estimates released Friday.

The consumer price index is expected to rise 20.82 percent this month compared with June last year, the General Statistics Office said.

Prices have risen every month since August 2010, although inflation is still below a recent peak of 28.3 percent recorded in August 2008, and far from the triple-digit figures seen in the 1980s.

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VND to continue to weaken, Credit Suisse Says: VN GDP Forecast Cut

Jun 16, 2011 The dong’s recent stability will likely be temporary and it will resume weakening by year-end, Credit Suisse Group AG said today as it cut its growth forecast for Vietnam.

The Southeast Asian country’s economy will expand 5.8 percent this year, compared with an earlier forecast of 6.2 percent, a Credit Suisse research note released today said. The dong will weaken 1.4 percent to 20,900 per dollar by year-end and reach 21,400 by the end of 2012, according to the prediction, which said the currency’s recent steadiness was driven more by administrative measures than monetary tightening.

“There are many reasons to believe that this is only a temporary phenomenon before another episode of instability,” wrote Santitarn
Sathirathai, a Singapore-based economist at Credit Suisse. “A combination of higher inflation, slower growth, and signs of financial distress are likely to spark concerns among investors in the coming months.”

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Vietnam stocks tumble to lowest since 2009 on inflation reports

May 23, 2011. Vietnam’s stocks tumbled, sending the benchmark index to its lowest level since July 2009, after news reports said the nation’s inflation may accelerate faster than previous estimates.

The VN Index on the Ho Chi Minh City Stock Exchange slumped 3.5 percent to 417.82 at the 11 a.m. local time close. Bao Viet Holdings, the biggest insurer, sank 4.5 percent to 74,000 dong, the lowest close since April 14. Masan Group Corp. (MSN), the third- most valuable company on the bourse, plunged 4.6 percent to 92,500 dong.

The country’s consumer prices index will rise no less than 2 percent this month from April after climbing 2.38 percent in Ho Chi Minh City and 1.76 percent in Hanoi in May, the state-run Saigon Tiep Thi online newswire reported, citing unidentified economists. The Ministry of Finance’s domestic market department forecast prices will rise by between 1.8 percent and 2 percent in May from April, state-run Phap Luat Thanh Pho Ho Chi Minh newspaper reported on April 27.

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