Businesses have been criticized for relying on the American dollar for making payments, instead of using a range of hard currencies.  They have suffered when the dollar supply is short. However, businesses say, it is not so easy to diversify the currencies used for making payments.

    Expert advisors are fond of telling businesses, especially companies engaged in foreign trade, to use more than one currency in settling their foreign accounts.  Diversifying to include the Japanese yen or the Euro would in theory allow them to minimize risks brought by the exchange rate fluctuations and the dollar short supply.

    The State Bank of Vietnam has sounded the same note. Nguyen Quang Huy, Director of its Foreign Currency Management Department, told participants at a Vietnam Chamber of Commerce and Industry workshop in June that diversification of foreign exchange used for settlements can help ease the short supply of dollars on the market.

    “Over reliance by businesses on the dollar entails high risks,” the central banker said. 

    Because the foreign currency loans of businesses are almost exclusively in dollars, Huy said, balancing supply and demand continues to be a hard job for banks. The central bank is encouraging importers and exporters, especially import companies, to diversify the hard currencies they use.

    A banking expert, touching on the short supply of dollars, also said that in principle, if businesses diversify the foreign currencies they use to make payments, this will partially settle the tense dollar situation.

    “But how should we diversify?” the expert asked. The choice of currency for making payments depends on many factors, including the requirements set by the foreign partners when contracts are signed. Although our imports come from all over, the foreign suppliers still prefer to use the dollar for settlement.

    Not so easy for businesses

    A representative of an import company said that his company mainly imports products from EU countries, China and ASEAN. However, in making payment, the dollar is always stipulated as the payment currency. Very few companies accept the Euro, Japanese yen or Chinese yuan.

    Nguyen Van Hung, Chairman of Tan Phu Plastics Company, said he has been importing materials mainly from Thailand and Singapore, and that the dollar is the only currency his foreign partners accept as the payment currency.

    Hung said that he once tried to persuade them to accept the Euro or Japanese yen. However, his proposal was refused.  Tan Phu’s partners said they preferred to stick with the dollar, the most popular currency in the world and the traditional payment currency for years.

    When asked if businesses would source goods from different markets if the dollar remains scarce and businesses find it hard to access dollar supply sources, Hung said that his company will be put at a disadvantage if it tries to source from unfamiliar markets.

    “We may not find the right materials we need from new suppliers. We could meet difficulties in goods shipment or the import prices could be higher,” Hung said.  He added that currently his company has to purchase dollars in Hanoi at ‘topsy-turvy’ free market prices.

Source: Source: Vietnamnet