Keep Us Strong WikiLeaks logo

Currently released so far... 143912 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
AORC AS AF AM AJ ASEC AU AMGT APER ACOA ASEAN AG AFFAIRS AR AFIN ABUD AO AEMR ADANA AMED AADP AINF ARF ADB ACS AE AID AL AC AGR ABLD AMCHAMS AECL AINT AND ASIG AUC APECO AFGHANISTAN AY ARABL ACAO ANET AFSN AZ AFLU ALOW ASSK AFSI ACABQ AMB APEC AIDS AA ATRN AMTC AVIATION AESC ASSEMBLY ADPM ASECKFRDCVISKIRFPHUMSMIGEG AGOA ASUP AFPREL ARNOLD ADCO AN ACOTA AODE AROC AMCHAM AT ACKM ASCH AORCUNGA AVIANFLU AVIAN AIT ASECPHUM ATRA AGENDA AIN AFINM APCS AGENGA ABDALLAH ALOWAR AFL AMBASSADOR ARSO AGMT ASPA AOREC AGAO ARR AOMS ASC ALIREZA AORD AORG ASECVE ABER ARABBL ADM AMER ALVAREZ AORCO ARM APERTH AINR AGRI ALZUGUREN ANGEL ACDA AEMED ARC AMGMT AEMRASECCASCKFLOMARRPRELPINRAMGTJMXL ASECAFINGMGRIZOREPTU ABMC AIAG ALJAZEERA ASR ASECARP ALAMI APRM ASECM AMPR AEGR AUSTRALIAGROUP ASE AMGTHA ARNOLDFREDERICK AIDAC AOPC ANTITERRORISM ASEG AMIA ASEX AEMRBC AFOR ABT AMERICA AGENCIES AGS ADRC ASJA AEAID ANARCHISTS AME AEC ALNEA AMGE AMEDCASCKFLO AK ANTONIO ASO AFINIZ ASEDC AOWC ACCOUNT ACTION AMG AFPK AOCR AMEDI AGIT ASOC ACOAAMGT AMLB AZE AORCYM AORL AGRICULTURE ACEC AGUILAR ASCC AFSA ASES ADIP ASED ASCE ASFC ASECTH AFGHAN ANTXON APRC AFAF AFARI ASECEFINKCRMKPAOPTERKHLSAEMRNS AX ALAB ASECAF ASA ASECAFIN ASIC AFZAL AMGTATK ALBE AMT AORCEUNPREFPRELSMIGBN AGUIRRE AAA ABLG ARCH AGRIC AIHRC ADEL AMEX ALI AQ ATFN AORCD ARAS AINFCY AFDB ACBAQ AFDIN AOPR AREP ALEXANDER ALANAZI ABDULRAHMEN ABDULHADI ATRD AEIR AOIC ABLDG AFR ASEK AER ALOUNI AMCT AVERY ASECCASC ARG APR AMAT AEMRS AFU ATPDEA ALL ASECE ANDREW
EAIR ECON ETRD EAGR EAID EFIN ETTC ENRG EMIN ECPS EG EPET EINV ELAB EU ECONOMICS EC EZ EUN EN ECIN EWWT EXTERNAL ENIV ES ESA ELN EFIS EIND EPA ELTN EXIM ET EINT EI ER EAIDAF ETRO ETRDECONWTOCS ECTRD EUR ECOWAS ECUN EBRD ECONOMIC ENGR ECONOMY EFND ELECTIONS EPECO EUMEM ETMIN EXBS EAIRECONRP ERTD EAP ERGR EUREM EFI EIB ENGY ELNTECON EAIDXMXAXBXFFR ECOSOC EEB EINF ETRN ENGRD ESTH ENRC EXPORT EK ENRGMO ECO EGAD EXIMOPIC ETRDPGOV EURM ETRA ENERG ECLAC EINO ENVIRONMENT EFIC ECIP ETRDAORC ENRD EMED EIAR ECPN ELAP ETCC EAC ENEG ESCAP EWWC ELTD ELA EIVN ELF ETR EFTA EMAIL EL EMS EID ELNT ECPSN ERIN ETT EETC ELAN ECHEVARRIA EPWR EVIN ENVR ENRGJM ELBR EUC EARG EAPC EICN EEC EREL EAIS ELBA EPETUN EWWY ETRDGK EV EDU EFN EVN EAIDETRD ENRGTRGYETRDBEXPBTIOSZ ETEX ESCI EAIDHO EENV ETRC ESOC EINDQTRD EINVA EFLU EGEN ECE EAGRBN EON EFINECONCS EIAD ECPC ENV ETDR EAGER ETRDKIPR EWT EDEV ECCP ECCT EARI EINVECON ED ETRDEC EMINETRD EADM ENRGPARMOTRASENVKGHGPGOVECONTSPLEAID ETAD ECOM ECONETRDEAGRJA EMINECINECONSENVTBIONS ESSO ETRG ELAM ECA EENG EITC ENG ERA EPSC ECONEINVETRDEFINELABETRDKTDBPGOVOPIC EIPR ELABPGOVBN EURFOR ETRAD EUE EISNLN ECONETRDBESPAR ELAINE EGOVSY EAUD EAGRECONEINVPGOVBN EINVETRD EPIN ECONENRG EDRC ESENV EB ENER ELTNSNAR EURN ECONPGOVBN ETTF ENVT EPIT ESOCI EFINOECD ERD EDUC EUM ETEL EUEAID ENRGY ETD EAGRE EAR EAIDMG EE EET ETER ERICKSON EIAID EX EAG EBEXP ESTN EAIDAORC EING EGOV EEOC EAGRRP EVENTS ENRGKNNPMNUCPARMPRELNPTIAEAJMXL ETRDEMIN EPETEIND EAIDRW ENVI ETRDEINVECINPGOVCS EPEC EDUARDO EGAR EPCS EPRT EAIDPHUMPRELUG EPTED ETRB EPETPGOV ECONQH EAIDS EFINECONEAIDUNGAGM EAIDAR EAGRBTIOBEXPETRDBN ESF EINR ELABPHUMSMIGKCRMBN EIDN ETRK ESTRADA EXEC EAIO EGHG ECN EDA ECOS EPREL EINVKSCA ENNP ELABV ETA EWWTPRELPGOVMASSMARRBN EUCOM EAIDASEC ENR END EP ERNG ESPS EITI EINTECPS EAVI ECONEFINETRDPGOVEAGRPTERKTFNKCRMEAID ELTRN EADI ELDIN ELND ECRM EINVEFIN EAOD EFINTS EINDIR ENRGKNNP ETRDEIQ ETC EAIRASECCASCID EINN ETRP EAIDNI EFQ ECOQKPKO EGPHUM EBUD EAIT ECONEINVEFINPGOVIZ EWWI ENERGY ELB EINDETRD EMI ECONEAIR ECONEFIN EHUM EFNI EOXC EISNAR ETRDEINVTINTCS EIN EFIM EMW ETIO ETRDGR EMN EXO EATO EWTR ELIN EAGREAIDPGOVPRELBN EINVETC ETTD EIQ ECONCS EPPD ESS EUEAGR ENRGIZ EISL EUNJ EIDE ENRGSD ELAD ESPINOSA ELEC EAIG ESLCO ENTG ETRDECD EINVECONSENVCSJA EEPET EUNCH ECINECONCS
KPKO KIPR KWBG KPAL KDEM KTFN KNNP KGIC KTIA KCRM KDRG KWMN KJUS KIDE KSUM KTIP KFRD KMCA KMDR KCIP KTDB KPAO KPWR KOMC KU KIRF KCOR KHLS KISL KSCA KGHG KS KSTH KSEP KE KPAI KWAC KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG KPRP KVPR KAWC KUNR KZ KPLS KN KSTC KMFO KID KNAR KCFE KRIM KFLO KCSA KG KFSC KSCI KFLU KMIG KRVC KV KVRP KMPI KNEI KAPO KOLY KGIT KSAF KIRC KNSD KBIO KHIV KHDP KBTR KHUM KSAC KACT KRAD KPRV KTEX KPIR KDMR KMPF KPFO KICA KWMM KICC KR KCOM KAID KINR KBCT KOCI KCRS KTER KSPR KDP KFIN KCMR KMOC KUWAIT KIPRZ KSEO KLIG KWIR KISM KLEG KTBD KCUM KMSG KMWN KREL KPREL KAWK KIMT KCSY KESS KWPA KNPT KTBT KCROM KPOW KFTN KPKP KICR KGHA KOMS KJUST KREC KOC KFPC KGLB KMRS KTFIN KCRCM KWNM KHGH KRFD KY KGCC KFEM KVIR KRCM KEMR KIIP KPOA KREF KJRE KRKO KOGL KSCS KGOV KCRIM KEM KCUL KRIF KCEM KITA KCRN KCIS KSEAO KWMEN KEANE KNNC KNAP KEDEM KNEP KHPD KPSC KIRP KUNC KALM KCCP KDEN KSEC KAYLA KIMMITT KO KNUC KSIA KLFU KLAB KTDD KIRCOEXC KECF KIPRETRDKCRM KNDP KIRCHOFF KJAN KFRDSOCIRO KWMNSMIG KEAI KKPO KPOL KRD KWMNPREL KATRINA KBWG KW KPPD KTIAEUN KDHS KRV KBTS KWCI KICT KPALAOIS KPMI KWN KTDM KWM KLHS KLBO KDEMK KT KIDS KWWW KLIP KPRM KSKN KTTB KTRD KNPP KOR KGKG KNN KTIAIC KSRE KDRL KVCORR KDEMGT KOMO KSTCC KMAC KSOC KMCC KCHG KSEPCVIS KGIV KPO KSEI KSTCPL KSI KRMS KFLOA KIND KPPAO KCM KRFR KICCPUR KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG KNNB KFAM KWWMN KENV KGH KPOP KFCE KNAO KTIAPARM KWMNKDEM KDRM KNNNP KEVIN KEMPI KWIM KGCN KUM KMGT KKOR KSMT KISLSCUL KNRV KPRO KOMCSG KLPM KDTB KFGM KCRP KAUST KNNPPARM KUNH KWAWC KSPA KTSC KUS KSOCI KCMA KTFR KPAOPREL KNNPCH KWGB KSTT KNUP KPGOV KUK KMNP KPAS KHMN KPAD KSTS KCORR KI KLSO KWNN KNP KPTD KESO KMPP KEMS KPAONZ KPOV KTLA KPAOKMDRKE KNMP KWMNCI KWUN KRDP KWKN KPAOY KEIM KGICKS KIPT KREISLER KTAO KJU KLTN KWMNPHUMPRELKPAOZW KEN KQ KWPR KSCT KGHGHIV KEDU KRCIM KFIU KWIC KNNO KILS KTIALG KNNA KMCAJO KINP KRM KLFLO KPA KOMCCO KKIV KHSA KDM KRCS KWBGSY KISLAO KNPPIS KNNPMNUC KCRI KX KWWT KPAM KVRC KERG KK KSUMPHUM KACP KSLG KIF KIVP KHOURY KNPR KUNRAORC KCOG KCFC KWMJN KFTFN KTFM KPDD KMPIO KCERS KDUM KDEMAF KMEPI KHSL KEPREL KAWX KIRL KNNR KOMH KMPT KISLPINR KADM KPER KTPN KSCAECON KA KJUSTH KPIN KDEV KCSI KNRG KAKA KFRP KTSD KINL KJUSKUNR KQM KQRDQ KWBC KMRD KVBL KOM KMPL KEDM KFLD KPRD KRGY KNNF KPROG KIFR KPOKO KM KWMNCS KAWS KLAP KPAK KHIB KOEM KDDG KCGC
PGOV PREL PK PTER PINR PO PHUM PARM PREF PINF PRL PM PINS PROP PALESTINIAN PE PBTS PNAT PHSA PL PA PSEPC POSTS POLITICS POLICY POL PU PAHO PHUMPGOV PGOG PARALYMPIC PGOC PNR PREFA PMIL POLITICAL PROV PRUM PBIO PAK POV POLG PAR POLM PHUMPREL PKO PUNE PROG PEL PROPERTY PKAO PRE PSOE PHAS PNUM PGOVE PY PIRF PRES POWELL PP PREM PCON PGOVPTER PGOVPREL PODC PTBS PTEL PGOVTI PHSAPREL PD PG PRC PVOV PLO PRELL PEPFAR PREK PEREZ PINT POLI PPOL PARTIES PT PRELUN PH PENA PIN PGPV PKST PROTESTS PHSAK PRM PROLIFERATION PGOVBL PAS PUM PMIG PGIC PTERPGOV PSHA PHM PHARM PRELHA PELOSI PGOVKCMABN PQM PETER PJUS PKK POUS PTE PGOVPRELPHUMPREFSMIGELABEAIDKCRMKWMN PERM PRELGOV PAO PNIR PARMP PRELPGOVEAIDECONEINVBEXPSCULOIIPBTIO PHYTRP PHUML PFOV PDEM PUOS PN PRESIDENT PERURENA PRIVATIZATION PHUH PIF POG PERL PKPA PREI PTERKU PSEC PRELKSUMXABN PETROL PRIL POLUN PPD PRELUNSC PREZ PCUL PREO PGOVZI POLMIL PERSONS PREFL PASS PV PETERS PING PQL PETR PARMS PNUC PS PARLIAMENT PINSCE PROTECTION PLAB PGV PBS PGOVENRGCVISMASSEAIDOPRCEWWTBN PKNP PSOCI PSI PTERM PLUM PF PVIP PARP PHUMQHA PRELNP PHIM PRELBR PUBLIC PHUMKPAL PHAM PUAS PBOV PRELTBIOBA PGOVU PHUMPINS PICES PGOVENRG PRELKPKO PHU PHUMKCRS POGV PATTY PSOC PRELSP PREC PSO PAIGH PKPO PARK PRELPLS PRELPK PHUS PPREL PTERPREL PROL PDA PRELPGOV PRELAF PAGE PGOVGM PGOVECON PHUMIZNL PMAR PGOVAF PMDL PKBL PARN PARMIR PGOVEAIDUKNOSWGMHUCANLLHFRSPITNZ PDD PRELKPAO PKMN PRELEZ PHUMPRELPGOV PARTM PGOVEAGRKMCAKNARBN PPEL PGOVPRELPINRBN PGOVSOCI PWBG PGOVEAID PGOVPM PBST PKEAID PRAM PRELEVU PHUMA PGOR PPA PINSO PROVE PRELKPAOIZ PPAO PHUMPRELBN PGVO PHUMPTER PAGR PMIN PBTSEWWT PHUMR PDOV PINO PARAGRAPH PACE PINL PKPAL PTERE PGOVAU PGOF PBTSRU PRGOV PRHUM PCI PGO PRELEUN PAC PRESL PORG PKFK PEPR PRELP PMR PRTER PNG PGOVPHUMKPAO PRELECON PRELNL PINOCHET PAARM PKPAO PFOR PGOVLO PHUMBA POPDC PRELC PHUME PER PHJM POLINT PGOVPZ PGOVKCRM PAUL PHALANAGE PARTY PPEF PECON PEACE PROCESS PPGOV PLN PRELSW PHUMS PRF PEDRO PHUMKDEM PUNR PVPR PATRICK PGOVKMCAPHUMBN PRELA PGGV PSA PGOVSMIGKCRMKWMNPHUMCVISKFRDCA PGIV PRFE POGOV PBT PAMQ

Browse by classification

Community resources

courage is contagious

Viewing cable 08HOCHIMINHCITY359, MONETARY POLICY PITS INFLATION HAWKS AGAINST EXPORTERS

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

Understanding cables
Every cable message consists of three parts:
  • The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
  • The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
  • The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08HOCHIMINHCITY359.
Reference ID Created Released Classification Origin
08HOCHIMINHCITY359 2008-04-09 08:54 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Consulate Ho Chi Minh City
VZCZCXRO7188
OO RUEHDT RUEHPB
DE RUEHHM #0359/01 1000854
ZNR UUUUU ZZH
O P 090854Z APR 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3966
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHHI/AMEMBASSY HANOI PRIORITY 2604
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 4188
UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 000359 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND EEB/IFD/OMA 
USAID/ANE/EAA FOR FRANK DONOVAN 
COMMERCE FOR A/S SPOONER AND SSU 
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO 
SINGAPORE FOR TREASURY 
STATE PASS USTR FOR BISBEE 
TREASURY FOR SCHUN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV VM
SUBJECT: MONETARY POLICY PITS INFLATION HAWKS AGAINST EXPORTERS 
 
REF: A) HANOI 394, B) HANOI 377, C) 07 HANOI 1729 
 
HO CHI MIN 00000359  001.2 OF 003 
 
 
1. (SBU) Vietnam's leadership remains intent on fighting 
inflation despite the increasingly apparent toll on economic 
growth; the Government of Vietnam (GVN) recently proposed 
revised growth estimates for 2008 down from 8.5 percent to 
6.5-7.5 percent.  Nevertheless, exporters now complain loudly 
and publicly that global commodities inflation, rising local 
costs and tight credit "threaten the very existence" of small 
and medium-sized (SME) exporting companies.  Since the apparel 
industry alone employs two million largely unskilled workers, 
the GVN will be seriously tempted to consider industry proposals 
that could undermine the fight against inflation.  End summary. 
 
GVN Seized with Inflation 
------------------------- 
2. (SBU) Vietnam's year-on-year consumer price index approached 
20 percent in March.  With newspapers carrying reports of 
dramatic increases in the cost of basic food items like rice (36 
percent over last March) or beef noodle soup (up 50 percent in 
some venues), the GVN must be concerned about possible impacts 
on social stability.  Industry is being hit hard by rising cost 
as well, especially for imported raw materials and local inputs 
like labor costs and fuel.  Nguyen Thai Hoc, Vice Chair of the 
Vietnam Cashew Association, said at a meeting between the 
Ministry of Industry and Trade and domestic exporters in HCMC on 
March 14, "Against the same period of last year, input costs for 
processing one ton of agricultural products has risen 40 
percent, fuel costs 30 percent, labor costs 30 percent and bank 
interest rates 50 percent." 
 
3. (SBU) In an effort to restrain inflation and control prices, 
the GVN announced a series of monetary policy moves earlier this 
year.  The State Bank of Vietnam (SBV) issued the compulsory 
364-day treasury bills worth VND 20,300 billion (U.S. $1.3 
billion) on March 17 and required 41 commercial banks and credit 
institutions to purchase the bills at an annual interest rate of 
7.8 percent.  To meet the State Bank of Vietnam's (SBV) mandate, 
commercial banks struggled to raise the required cash by March 
17.  The GVN also increased the reserve ratio at commercial 
banks from 10 to 11 percent.  Together, these moves pushed up 
monthly interest rates for commercial operation loans in VND 
from 1.1 to 1.6 percent per month (13 to 19 percent annually). 
(Comment:  Despite exporter complaints, these are negative real 
interest rates based upon current inflation rates.  End 
comment.) 
 
Higher Interest Rates Hit Business in the Pocket Book 
--------------------------------------------- -------- 
4. (SBU) Market analysts like HSBC expect a six to nine month 
lag before the effect these moves is felt on inflation, but the 
tightening monetary policy has immediate consequences for 
Vietnamese companies.  Industrial associations like the Vietnam 
Textile and Apparel Association (VITAS) and the Vietnam 
Association of Seafood Exporters and Producers (VASEP) complain 
that small and medium-sized enterprises (SME) in particular need 
to borrow in VND to cover operating costs and USD to cover 
trading costs.  The cost of borrowing has risen rapidly, cutting 
so deeply into returns that VITAS predicts many SMEs may go 
under if current conditions persist. 
 
5. (SBU) According to the Director of Vinamit fruit processing 
company, the sharp jump in interest rates has forced the company 
to scale back investment plans.  Chairman of the Young 
Entrepreneurs' Association of HCMC said the "current monetary 
policy is driving exporting companies to cede the playing field 
to foreign investors because the current exorbitant interest 
rates of bank loans mean expansion projects are no longer 
feasible." 
 
Waiting for the Other Shoe to Drop -- FOREX 
------------------------------------------- 
6. (SBU) By pushing up VND interest rates, the SBV is also 
creating pressure on the VND to appreciate, making Vietnam's 
exports (especially contracts in USD) less attractive.  From the 
end of 2007 to mid-March, the VND experienced nominal 
appreciation of nearly five percent against the USD.  (Note: 
Because Vietnam's surging inflation has eroded the purchasing 
value of the VND, the real rate of appreciation of the VND had 
been much greater. End Note.)  Pham Xuan Hong, General Director 
of Saigon Garment No. 3 Company, estimated that each month his 
company exports about 800,000 units valued at US$1 million. Due 
 
HO CHI MIN 00000359  002.2 OF 003 
 
 
to the USD depreciation, the company lost U.S. $12,500 each 
month.  Buu Huy, Director of An Giang Seafood Import Export 
Company, blamed the sharp fall in the U.S. dollar for exporters' 
financial loses.  In January, his company signed a U.S. $1 
million export contract at an exchange rate of VND 16,000 to the 
dollar.  After the contract was paid, the foreign exchange rate 
dropped to VND15,550/USD, costing the company VND450 million 
(U.S. $28,000) each delivery because of the 60-day interval 
between contract signing and payment. 
 
Adding Insult to Injury 
----------------------- 
6.  In the meantime, exporters find it extremely hard to sell 
dollars to commercial banks for dongs.  While export revenue 
falls and the VND appreciated against the USD, banks added to 
exporter woes through their reluctance to exchange VND for 
dollars.  With a surplus of U.S. dollars, banks were afraid to 
accumulate dollars that they expected would fall further in 
value.  "We set a limit of the USD we buy each day because we 
must balance our capacity to buy and sell," said Vietcombank 
Treasury Director Nguyen Thanh Ha.  Eximbank Deputy General 
Director Dao Hong Chau told us, "The USD value on free market is 
much lower than the officially listed price so banks must 
consider both its volume and price each day."  (Comment: 
Another factor limiting VND/USD trade is that the SBV threatens 
legal/criminal action against banks caught trading outside the 
official band.  End comment.)  To make the situation even worse, 
banks typically charge a fee of two percent on currency 
exchange. 
 
Who Goes Where From Here? 
------------------------- 
7. (SBU) Exporter organizations like VITAS, HAWA and VASEP are 
pressing the GVN to stabilize the foreign currency exchange 
rate, stabilize interest rates for loans in VND and ensure 
industry access to bank loans.  Some have argued directly to the 
Prime Minister that State-owned commercial banks should provide 
lower interest rates specifically for export-oriented companies. 
 They also suggest easing lending restrictions to in order to 
make trade financing available on "more reasonable" terms. 
(Comment:  In the past week they may have seen some success as 
the VND fell sharply against the dollar.  Part of this was due 
to less overall pressure on the dollar, but some of it may have 
been due to market participants concern about Vietnam's widening 
current account deficit. End comment.) 
 
A Silver Lining, at Least for U.S. Exports 
------------------------------------------ 
8. (SBU) The weak dollar presents a good chance for U.S. exports 
to make inroads into Vietnam's market, especially hardwood. 
According to HAWA Vice Chairman Manh relatively cheap U.S. 
hardwood has the added benefits of stable supply and guaranteed 
quality.  Malaysia and Indonesia, key wood suppliers to Vietnam, 
limit their wood exports thereby driving up the price of their 
wood exports to Vietnam.  Moreover, Vietnam furniture 
manufacturers are increasingly familiar with U.S. hardwood and 
trust its quality.  He suggested to ConGen that U.S. wood 
exporters should set up a distribution system in Vietnam now to 
capitalize on the current market opportunity. 
 
Comments: 
--------- 
9. (SBU) There is a legitimate choice between whether to fight 
inflation with interest rates alone, or whether to also fight it 
with currency appreciation.  Considering that the VND has gone 
down with the dollar, Vietnam has actually gained 
competitiveness vis-a-vis most of the rest of Asia.  Vietnam 
could strike a different balance if they chose to let the 
currency appreciate to take some of the pressure off rather than 
just rely on interest rates and administrative controls. 
However, fighting it with neither, as the export associations 
want is not a viable alternative, since inflation will continue 
to eat away at their costs, eventually making them 
uncompetitive, but with a very high cost on the poor. 
 
10. (SBU) Despite all their complaints, exporting industries as 
a whole are faced with the prospect of slimming profit margins 
and slowing growth, not decline.  The exchange rate losses 
exporters are suffering are as much a reflection of the lack of 
sophistication of the overall financial system (where there is a 
paucity of products available to help exporters mitigate 
 
HO CHI MIN 00000359  003.2 OF 003 
 
 
exchange rate exposure) as they are of long-term structural 
weaknesses in the major exporting industries.  Current 
conditions favor well-run companies with financial resources and 
business acumen but will be unkind to companies that are barely 
scraping by.  More importantly, woes at labor-intensive export 
companies are a litmus test for the GVN's commitment to tackling 
inflation.  Placating exporters may help those companies in the 
short term but will further fuel inflation.  End comment. 
 
11.  (U) This cable was coordinated with Embassy Hanoi and the 
Regional Financial Attache in Singapore. 
FAIRFAX