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Euro Currency : Off to a lukewarm start

Entering quietly into Vietnam last week, the euro has, so far, had little impact on the local financial market though Vietnam's banking system was ready for the introduction

HO CHI MINH CITY - "Instead of importing euro through Vietcombank as planned, we directly purchased EUR1 million on December 26," said Van. EAB has been conducting transactions in euro since January 2. Meanwhile, Eximbank bought almost EUR1.5 million, according to Hanh. Hanh said given the ample supply, all demands for settlements in euros, even sizable ones, from enterprises would be met. "To help commercial banks in need of euro bank notes for their customers, SBV will grant import permission as soon as possible, half a day after receiving the proposal at most," he said. Vietcombank General Director Vu Viet Ngoan said his bank had previously imported EUR10 million. In late November last year, Vietcombank imported this amount as its reserves following the closure of transaction accounts in EU currencies a month earlier. All deposits in the currencies of the EU nations (except Britain, Denmark and Sweden) would be converted into euros in accordance with the rates set by the European Central Bank. Vietcombank will continue to purchase bank notes of the 12 EU nations until February 28. After the date, the bank will levy charges.

Vietnam Investment Review quoted Nguyen Hoa Binh, deputy general director of Vietcombank, as saying that because euro cash has already been circulating in the banking sector for some time, the introduction of the new currency has not created any substantial changes in the market. Binh predicted that the U.S. dollar will continue to dominate in Vietnam's payment system as the latter's attraction is higher than the euro. A HCM City-based commercial bank said it might delay the import of euro notes until next month due to low demand in the market. "Vietcombank's transactions and forex agents are hesitant about the new currency although the bank has organized training for them," said a banker from Vietcombank. Last week, both EAB and Eximbank conducted only a small number of transactions in euro. On the unofficial market, French franc and Deutsche marks are still exchanged at a rate VND5-10/FF(DM) higher than the official rate. However, until last week traders still refused to receive euro notes, as they said they were unable to distinguish real bank notes from counterfeit bills.

Danang

To date, the demand for euro payments in Danang and Central Vietnam remains calm. Danang-based banks said besides those customers who have had settlements in euro before, no new clients have withdrawn deposits in euro bank notes. The bulk of euro notes available in banks are still in their coffers. "A few customers did take out some euro notes," said Do Xuan Dong, head of the department of sales and external relations of the Bank for Industry and Commerce of Vietnam (Incombank) Danang. "But they just want to know what the notes are like. Nobody has ever used them." Nguyen Thi Thanh Ha, director of Vietcombank Danang, said transactions in euro at her bank had began since last September but the number of customers wanting to convert U.S. dollars and other EU currencies into euro rose only after January 1.

Incombank Danang said it has between 150-200 customers, mostly overseas Vietnamese, who are likely to make payments in euro. As the Lunar New Year is coming, overseas Vietnamese's remittances are on the rise. "Instead of French franc or Deutsche mark, overseas Vietnamese are now sending euro to Vietnam," said Thanh Ha. "Over the past few days, we have had transactions worth over EUR13,000." However, she said the receivers are not yet accustomed to the euro. "Some don't even know what it is," she added. Explaining this phenomenon, Do Xuan Dong said, "Given the feeble demand for foreign exchange in the region coupled with the uncertainty on the exchange rate of the euro, customers still prefer the U.S. dollar."

He predicted it will take more time for the euro to become popular. "When the margin of the forex rates between euro in and outside banks becomes remarkable, the demand for euros will be stronger," he said. Dong emphasized however that banks are ready for any demand. Incombank Danang has more than EUR100,000 in reserves. "The rising exchange rate of the euro over the past few days will be a boost to this new currency," remarked Thanh Ha. According to Nguyen Dinh Luong, director of Huu Nghi Danang Company, his enterprise has made payments and transfers in euro. "We even feel more assured with the euro than the currencies of the 12 EU nations because the latter's exchange rates to the U.S. dollar are not always stable," he said. "The use of euro is more convenient for us."

Can Tho

"The circulation of the euro among our customers is normal," said Tran Thi Thu, director of Vietcombank Can Tho with customers in Can Tho, Soc Trang, Dong Thap, Vinh Long and Tra Vinh, who are capable of making transactions in euro. Some EUR100,000 were transferred to Vietcombank Can Tho. The balance is now EUR99,700. Between January 2-7, some 30 customers made remittances in euro worth EUR31,700 via Vietcombank Can Tho. Statistics show that L/C (letter of credit) transactions of EUR1 million were made via the bank before January 1. Ever since, no new L/C deal in euro has been conducted. "I think deals in euro at Vietcombank Can Tho will grow stronger in the future," said Thu. Reported by the Saigon Times staff writers in HCM City, Hanoi, Danang and Can Tho

EU commission says new-born Euro to take time to circulate

Caldarone, economic counselor of European Union commission in Vietnam, said the euro will take time to be more popular in Vietnam. "It is only days since the currency launch, one should not expect to see much of euro on the trafficking," he said. "But given six months or a year, one would see the change." The counselor said he did not know whether local banks start to transact in euro but tourism should be the first sector to get used to it. "Tourism services providers like hotels should change their menu currency into euro because there are many European tourists," he told the Weekly. Caldarone said the euro should be reserved as a balance to the U.S. dollar, given the lesson from the current crisis of Argentina. "The euro may be instrumental to the independence from the U.S. dollar," he said. The EU commission will organize a seminar on the euro for Vietnamese entrepreneurs later this month.

The Saigon Times Weekly - January 12, 2002.