Strong dong deals blow to exporters Vietnamese export companies have seen a sharp fall in export orders recently.  Do Trong Vinh, deputy general director of Seaspimex, a seafood export company, confirmed that the orders have decreased sharply from the EU and Japanese markets. As the euro and Japanese yen have depreciated against the dollar, importers all have asked Seaspimex to lower the selling prices or they will reduce orders. In fact, garment, footwear and seafood companies all have suffered from dollar appreciation against many hard currencies. Some governments have devalued their local currencies sharply in order to protect their exports. Meanwhile, Vietnam has adjusted the dong/dollar exchange rate twice by 2 percent so far this year. The insignificant depreciation of the dong has made Vietnamese export products become more expensive and less competitive. Vinh said Seaspimex has been trying to cut input production costs to maintain profits, but this has been nearly impossible. Seaspimex cannot buy catfish from farmers at below VND21,000-25,000 per kilo, the farming production cost, because if it did, farmers would stop  production and the company would not have input materials to fulfill export orders. Do Thien Anh Tuan, lecturer of FETP, pointed out that the currencies of the countries which compete directly with Vietnam in the world market all have depreciated significantly. Japan, Australia, India, Myanmar, Singapore and Thailand have devalued their currencies by 3.9-11.2 percent. “The currency depreciation has made foreign products cheaper than Vietnam’s,” Tuan said. “Vietnam’s export items, from textiles & garments to seafood and farm produce, are all essential goods, but they can be easily replaced if they get expensive,” Tuan said. “As a result, Vietnamese businesses now have fewer orders or take losses because of the strong dong." Do Ha Nam, deputy chair of the Vietnam Coffee and Cocoa Association, confirmed that the export price has increased because of the exchange rate policy. He said Indonesia and Brazil, the countries which compete directly with Vietnam in coffee export, all have devalued their currencies by 30 percent to help boost their exports amid the dollar price increase. Dr. Nguyen Duc Thanh, head of the Vietnam Economics and Policy Research Institute (VEPR), said he advocates further devaluation of the dong, emphasizing that the overvaluation of the dong has had a negative impact on exports. According to Thanh, the local currency is now overvalued by 14.5 percent. Meanwhile, a VEPR survey showed that light labor-intensive industries suffer most from the forex policy. If the Vietnam dong is overvalued by 10 percent, this would lead to a 7.65 percent decrease in output and 11.64 percent decrease in exports. However, the State Bank affirmed the dong would not lose more than two percent of its value by the end of the year. NLD