VietNamNet Bridge – Administrative orders on the market are giving rise to corruption and spoiling business ethics, said economists, pointing an accusing finger at recent moves of the central bank.
Interest rate cap
Among the administrative measures taken by State agencies in recent years, the central bank’s interference in the market emerges as the greatest concern.
The State Bank of Vietnam (SBV), since 2008, has adopted a series of measures, such as setting the ceiling deposit rate and specifying the margin between the deposit rate and the lending rate for the preferred sectors.
Under the mechanism in which SBV imposes the ceiling deposit rate and banks can freely negotiate lending rates, both depositors and borrowers suffer.
Such policies have been corrupting business ethics over the past years, said experts.
“It’s best that there is no interest rate cap because any administrative measure can distort resources and ethics,” said Dr. Vo Tri Thanh, vice president of the Central Institute for Economic Management.
“As long as administrative measures still exist, the market will remain distorted. Double-price and ask-give mechanisms always lead to severe moral hazard,” he told the Daily.
Administrative measures badly affect resource allocation and Vietnam’s transformation into a market economy, he added.
Tran Dinh Thien, director of the Vietnam Institute for Economics, said SBV maintained a gap between the deposit rate and the lending rate to create a favorable mechanism for banks.
Although enterprises now need to be rescued from high lending rates, banks do not want to share the benefit from such a policy with their corporate clients.
“The way interest rates are regulated in favor of banks in the difficult situation seems to reflect the interest group domination,” he said.
Thanh hoped SBV would remove a couple of administrative measures such as the ceiling deposit rate on dong, the U.S. dollar and gold later this year.
Interference in gold market
Several experts expressed their displeasure at SBV choosing SJC as the only gold brand via the issuance of Decree 24. This has considerably widened the gap between the local and global gold prices.
Economist Ngo Tri Long said: “Vietnam is the only country interfering in the gold market with administrative orders.” The recent gold auctions show signs of manipulation, speculation and interest groups, he told a workshop recently held in Hanoi.
Expert Nguyen Thi Hien said the SBV governor had failed to fulfill his promise to keep the local-global price gold gap at VND400,000 per tael. Recently, the local price has sometimes stood at VND7 million per tael higher than the world level.
“It is extremely weird that the central bank focuses its power on gold trading in the context that Vietnam is integrating into the global economy,” she remarked.
In his latest talk with the media, Governor Nguyen Van Binh said gold is not an essential item and not subject to price stabilization under the Price Law.
Therefore, prices in the gold market will be purposely controlled by SBV in a bid to increase the national gold supply and convert all gold into cash serving production and business activities. “The State has gold, the economy has cash,” he said.