The dollar appreciated and became a “salvation” for Vietnamese exporters who were burdened with production costs due to inflation.
Receiving news that the USD is stronger, Mr. Nguyen Hoai Bao, Deputy General Director of Scansia Pacific, is not very excited even though the more expensive USD partly helps the Company reduce a part of the cost burden.
Manufacturer of furniture for many famous brands in the world, including IKEA was able to lose capital due to the contract agreement signed previously. In addition to rising worker wages and rising transportation costs, inflation has led to a significant increase in input costs.
According to Mr. Bao, considering the export price in USD, the Company benefits, but imported raw materials are also calculated in USD, so this benefit is insignificant. “From the outside, it looks like a rising dollar is very profitable. In my opinion, this number is not significant, but it is better than nothing.”
With a worker’s salary of 10 million VND/month, labor costs account for 20% of the finished product’s value. When the exchange rate is still 22,000 VND/USD, the selling price of 1 table is 100 USD, the enterprise must deduct 440,000 VND to pay wages to workers per product. Currently, if the exchange rate rises to 24,000 VND/USD, businesses will gain 40,000 VND from the exchange rate difference, Mr. Bao calculated.
But from July 1, the Government increased workers’ wages by 7%, the cost of paying workers from 440,000 VND to 470,000 VND/product. Export orders of enterprises are usually offered in advance and signed in advance 1 year (or 6 months), the product price is calculated on the cost at that time. Thus, an increase in the price of USD helps businesses not to lose the cost of this increased difference in wages. Not stopping there, the exchange rate increased causing the price of packaging to skyrocket from 88,000 VND to 100,000 VND/product. Enterprises still have to compensate for this cost.
Enterprises benefit more or less depending on the industry and whether the products produced are highly dependent on imported materials. According to Mr. Nguyen Dinh Tung, General Director of Vina T&T Joint Stock Company, inflation in the US is high, so consumers turn to choose domestic products or lower prices, fruits imported to the US market belong to products. The price is high, but fortunately, the Company’s fruit is an essential commodity that is not affected too much such as textiles, wood, etc. Mr. Tung added that the increase in exchange rate still helps the Company to have a price advantage. If before, the product had to sell for 10 USD, now it only needs to sell for 9.7 USD to make a profit.
In order to bring fresh fruits such as milkweed, mango or dragon fruit to the US market by air, the logistics cost has reached 7 USD/kg, equivalent to 80% of the value of the goods. Even for items that can be frozen for a longer time, sea freight accounts for 60% of the value of agricultural products, Tung added.
“If the USD appreciates, making export revenue in USD beneficial, the cost of imports, transportation, logistics, warehousing, and debt denominations in USD will also increase. The assessment of gain and loss will depend on the specific situation of each business,” said Master Phan Minh Hoa, Lecturer in Economics at RMIT University.
According to Ms. Hoa, the appreciation of the US dollar also makes Vietnam’s exports more competitive in the US market, resulting in more sales. However, not only VND but also other currencies weakened against USD.
| The appreciation of the US dollar also makes Vietnam’s exports more competitive in the US market, resulting in more sales. Photo: Quy Hoa. |
According to calculations by Thomson Reuters, from the beginning of 2022 until now, the USD has only appreciated by 2.3% against the VND but increased by 10.3% against the euro, compared to 6.3% of the yuan. Thai baht is 10.4%, so Vietnam’s exports to the US do not benefit too much when competing with these countries.
With the outlook for the world economy still not positive and the US Federal Reserve (FED) continuing to raise interest rates (most recently, on July 27, the FED continued to increase by 75 percentage points to 2 -2.5%, USD’s rally will continue. Therefore, Ms. Hoa said that import-export businesses need to continuously monitor exchange rate fluctuations and stay updated on inflation, interest rates, the COVID-19 epidemic, the Russia-Ukraine war. From there, businesses can choose export and import markets and diversify, choose a profitable payment currency, and gradually reduce the use of only USD.
According to Ms. Hoa, for import companies, maximizing domestic resources, finding alternative partners, especially from the country, gradually reducing dependence on imports will help reduce costs. This is a difficult problem that has been posed to businesses since the pandemic.
According to NCDT.vn
