The volatility of the exchange rate always directly influences import and export enterprises, particularly in the context of Vietnam's growing economy and increasingly active trading activities. The right solutions to cope with exchange rate changes will help businesses limit negative impacts.
Enterprises have different responses to recent fluctuations of the exchange rate. Export companies are worried about the USD payment while others are excited about benefits they will gain from this payment. But not only is the dollar exchange rate; other currencies such as Euro and Yen are fluctuated. The volatility of such currencies also led to concerns to many companies, including export companies. A representative of Nam Viet Phong Company that specializes in importing commodities such as environmental cars and health facilities from Korea said that the exchange rate is what we are getting headache. The value of the contracts we signed with the partners from the fourth quarter of 2014 remains the same. Meanwhile, recently, the USD exchange rate has increased, causing many difficulties. Meanwhile, the costs of inputs such as electricity and gasoline continue to rise.
Nguyen Thi Quynh Mai, a representative of Nippo Mechatronics Vietnam, a 100 percent FDI company that mainly engages in production and assembly of plastic products, said that its import of plastic is directly impacted by the exchange rate fluctuations. However, the only solution that the company chose to respond to the fluctuations of the exchange rates that cause adverse impacts on the businesses is negotiation with partners by asking them to adjust the purchasing price. However, the negotiation is not simple. In many cases, partners will not adjust prices and the company must accept losses.
One of many solutions the businesses are raising to cope with exchange rate fluctuations is exchange-rate insurance. Currently, banks are offering some hedging instruments to insure the exchange rate, such as forward, trading option and futures contracts. For example, in regard to the "option contract", businesses can buy and sell foreign currency with rates determined in a certain period of time to protect its capital and accounts receivable. Businesses also buy foreign currency option at a determined exchange rate to avoid risks from exchange rate fluctuations on their liabilities in the future. Theoretically, when a company is insured, it can use this "self-defence" instead of purchasing the foreign currencies when the exchange rates rise.
In regard to the form of the insurance rates, an economist said that businesses have used this tool, but the effectiveness is not significant.
The representatives of some companies also said that they know about insurance services at the banks but they cannot afford them. So they continue to offer temporary solutions to respond to exchange rate fluctuations. In the context of strong integration, those that ignore risks of exchange rate fluctuations expose their weaknesses in business administration. It is important that companies seriously consider and evaluate the specific situation of enterprises to choose appropriate solutions. For example, when the enterprise could fix the price in advance and clarify this on the contract to avoid the risks of the exchange rate fluctuations at the time of delivery.
Le Hien
Vietnamese
