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Vietnamese courting trouble over currency concerns

7/2/2008 10:32:28 AM

The Vietnamese dong has fallen so far against the under-strength dollar that it appears to be influencing the business decisions of transportation providers long bullish on the Southeast Asian nation's economy.

 

News outlets in China reported Monday that China Southern Airlines has curtailed its plans to offer cargo flights from Vietnam to Europe and the United States in spite of business growing 10 percent for the year. The problem is that the dong has fallen nearly 3 percent against the dollar, and more severely against the Chinese yuan.

 

The currency problems also make oil procurement more expensive, the airline said.

 

In early June, analysts predicted the dong would drop 10 percent this year, putting a major crimp in company's plans to use Vietnam as a sourcing counterweight to China. The fall of the dong against the dollar is a particularly noteworthy clue as to its weakness, given the fall of the dollar against nearly every major world currency this year. Vietnam's stock market has lost 60 percent of its value in just more than a year, and dollars are in short supply.

 

The crisis may be short-lived, since most economists theorize that Vietnam's underlying growth has a solid foundation. The problem is that infrastructure failed to be built at the same pace as the economy expanded, while some international banks started cautioning earlier this year that Vietnam's economy was ripe for overheating and interference from global investors.

 

American Shipper

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