>> Interest rates remain high

>> Exchange rate on US dollar damages Vietnam’s profits

The strong USD and high interest rates have caused difficulties for Vietnamese companies.

Garment and textile firms face difficulties (Illustration photo)

Since late 2010, local garment and textile companies have encountered challenges in importing textile and other materials due to world price hikes.

The price of imported cotton has reached record high of USD5.2 per kilogramme, up from USD3.18 per kilogramme. Additionally, the VND/USD exchange rate changes have led to big losses for importers, as the export contracts signed before have been kept the same.

On the other hand, garment and textile factories which are located in rural and suburban areas often deal with an unstable power supply.

Currently, Vietnam has around 18,000 apparel labourers, mostly in the central region.

Not only apparel companies but also paper companies are struggling with pressure from the exchange and high interest rates. A paper factory in Long An Province, scheduled to started operations in September, is in dire need of capital for its production lines, said an official from the Vietnam Paper Corporation.

The corporation has proposed that the government appoint a bank to provide loans for its production lines as well as its forestation projects to ensure a reliable material source.

The Vneconomy cited Nguyen Van Lung, Deputy General Director of Tuong An Vegetable Oil Joint Stock Company, as saying, “This year’s pretax profit target is VND50 billion (USD2.39 million), less than half of last year’s figure.”

He added that his company has to import up to 95% of its materials, while the global prices fluctuate. This, added to the unfavourable exchange rate, creates a big burden.

The Ministry of Industry and Trade has recommended the Government to stabilise VND/USD exchange rate to support businesses’ operations.