Businesses take hit from dong depreciation

The State Bank of Viet Nam's decision to devalue the dong by 2.1 per cent will have an impact on the operations of local businesses, especially importers and exporters.

Dien Quang Hiep, director of Minh Phat Co, says whenever there is a currency devaluation, suppliers of raw materials increase prices, normally by a higher rate than the devaluation.

"But we cannot increase the prices of our products because we signed contracts months earlier."

Companies selling their products in the domestic market will suffer more than those that export them since now they get more dong for every dollar of sales abroad.

But the devaluation will put pressure on those who have borrowed in US dollars, Le Thanh Duong, general director of Truong Son Co, says.

If his company had borrowed US$1 million for six months at an interest rate of 6.5 per cent, it will have to pay $32,500 or VND637 million in interest.

But to repay the principal, it will have to shell out an additional VND500 million since a dollar is now worth VND19,600 rather than VND19,100.

If the loan had been in dong, it would have to repay VND1.337 billion in six months, still almost VND200 million more.

Duong explains that the two amounts will draw level if the dollar rises to VND19,800 to the dong. At VND19,900, dong loans will become cheaper.

Tran Tuan Duong, director of steel production at Hoa Phat Group, says exchange rate fluctuations are unavoidable and a constant risk companies have to face.

Since his company requires large quantities of US dollars, of $10-20 million a month, it cannot hoard the greenback every time there is a sign of fluctuation.

Besides, exchange rate fluctuations are similar to other risks like petrol or electricity price increases. "Businesses need to anticipate risks to make suitable business plans," he says.

Students balk at high fees

The new academic year is almost under way but private universities find there are no takers since students are wary of their poor quality and high fees.

Many students who fail to get into State universities but can get admission to private universities say they prefer to wait for next year's entrance exams rather than join the latter.

Nguyen Van Bang, a 18-year-old from Thua Thien-Hue who is eligible to join the HCM City University of Technology (Hutech) as a second-choice student, says he plans to wait for next year's entrance exam at the Da Nang Polytechnics University's Architecture Department.

High tuition and problems with training quality, facilities and teaching staff are the main reasons for students to say no to non-State universities.

"Due to poor teaching quality, it will be very difficult for me to get a job after graduating from this non-State university. My parents are not rich enough to send me to another university then. That's why I've not joined," Bang explains.

Nguyen Thi Mai Binh, head of Hung Vuong University's Training Division, says fees at her university have increased by VND1,000 per hour this year. For some streams, they have now gone above VND10 million a year.

At Hong Bang University, the tuition for business administration studies is VND19.2 million a year, and more than VND12 million for other streams.

At the HCM City University for Foreign Languages and Information Technology (Huflit), tuition is VND11.3 million –VND 11.5 million a year, up from VND8.1 million-VND9.9 million in the past.

As a result, non-State universities are afraid that they don't have enough students.

Binh says since the entrance exam was very difficult this year, public universities will lower the qualifying marks. This makes it even more difficult for the private schools to attract students since they are an option only when a student fails to get into a public school.

Nguoi Lao Dong (The Labourer) newspaper says Huflit plans to admit 1,600 students this year but only 1,000 have applied and even fewer have obtained the qualifying marks for enrolment.

To get more students now, the university must accept students who opt for it as their second or third choice.

Hung Vuong has sought to enrol 1,660 students and received 2000 applications. But Binh expects only 500 to qualify and 200 to enrol.

Luu Thanh Tam, deputy president of Hutech, says the university received 3,600 applications and expects only 10-12 per cent of them to get through the entrance exam.

Non-State universities have no other choice but to upgrade their quality, he admits.

"Only when they have confidence in the quality will students choose to join a non-State institution," Nguoi Lao Dong quoted him as saying.

Chinese to build textile plant

Texhong, one of the China's biggest textile and garment groups, has announced plans to build a US$100 million textile plant in Hai Yen Industrial Park in Quang Ninh Province.

The president of the group, Hong Tianzhu, has visited Quang Ninh several times this year.

It will be the second textile plant for the Texhong Group in the country after a $200 million plant it built in Nhon Trach Industrial Park, Dong Nai Province, in 2006.

The Chinese firm plans to build a much bigger plant in the central region. In May, Hong and representatives of Texhong Viet Nam Co toured Quang Nam Province to identify a site in Chu Lai Open Economic Zone for a $300 million plant that could employ 8,000 workers.

Le Quoc An, chairman of the Viet Nam Textile and Garment Association (VITAS), says though Viet Nam's human resources have become less abundant than a few decades ago and labour costs have risen significantly, the country's investment environment remains attractive to Asian investors, especially Chinese. — VNS