VietNamNet Bridge – No economy in the
world can get to the root of non-banking foreign currency market. Vietnam
should not expect to absolutely eliminate the free market, said Huynh Buu Son,
a well known economist in Vietnam.

Huynh Buu Son, a well known economist in Vietnam

Son talks
with VietNamNet’s Vietnam Economic Forum about the current foreign currency
market and about why the black market has become paralyzed in the last few
days.

What would you say about the fact
that the free market has halted transactions for the last several days?

This should
be seen as a precarious reaction of some foreign exchange shops to the
information that the State Bank of Vietnam and relevant agencies
will  inspect the shops. Some authorized
foreign exchange shops fear that they may be discovered as making transactions
at the exchange rates which are higher than the exchange rates allowed by the
State Bank. If they have to collect foreign currencies at the stipulated
prices, they will not make a profit.

The halting
of transactions on the free market is not a problem at all because this does
not mean that there is a shortage of foreign currency. People should not panic
about the news.

Were transactions ever interrupted
in the past? You know, even the licensed foreign exchange agents have also
halted transactions?

Such a
thing has not happened in recent memory, but it once happened in the past.
However, the transactions were interrupted for a short only.

Currently, many enterprises and
individuals, who have demand, cannot buy foreign currencies on the official
market and they have to seek foreign currencies on non-official market. Some
sources said that in an effort to tighten the foreign exchange market, the
central bank will narrow the network of foreign exchange shops. What would you
say about that?

People, who
have demand for foreign currencies, can go directly to commercial banks. After
the latest dong/dollar exchange rate adjustment, the gap in the foreign
currency prices in the official market and the free market has narrowed.
Therefore, banks are opening their doors more widely to satisfy the demand from
enterprises and people.

The State
has called on export companies, big economic groups to sell foreign currencies
to banks, so that banks can have foreign currencies to meet legitimate
aspirations by businesses and individuals. To date, no congestion in the dollar
supply has been reported.

Some experts say that the black
market has been interfering with foreign currency and it is necessary to settle
the problem immediately. Meanwhile, businesses do not want this. They say if
the black market is eliminated, they will have no other source to seek foreign
currencies. What would you say about that?

No economy
in the world can get to the roots of the non-banking foreign currency market,
including the US or China. Vietnam should
not expect to absolutely eliminate the free market.

In fact,
dollarization will always exist, and we can just try to ease dollarization
level. The level of dollarization depends on many factors, including the gap in
the prices between the official and free markets. If the gap is narrowed,
people will choose to purchase and sell foreign currencies on the official
market. When the market operates well and when we have reasonable exchange
policies, we will be able to narrow the black market. Meanwhile, it will be
very difficult to eliminate such a market.

Pham Huyen