Vietnam inflation challenge handed to binh in succession plan
Vietnam’s struggle to sustain growth while containing Asia’s fastest inflation will be handed to Nguyen Van Binh under succession plans for the central bank’s leadership, according to three people with knowledge of policy makers’ discussions on the matter.
The National Assembly is scheduled to confirm Prime Minister Nguyen Tan Dung for a second term in coming days. It then holds votes on Dung’s personnel picks, with the State Bank of Vietnam chief likely in early August, two of the people said on condition of anonymity as the talks weren’t public. Leaders of the Communist Party, which has dominated Vietnam since the 1970s, met to select candidates for top government positions July 4-10.
Binh would succeed Nguyen Van Giau, inheriting the challenge of building credibility for a central bank that cut a key interest rate on July 4 even after inflation reached a 31- month high. A former development bank executive, the Russian- educated Binh, 50, is one of five deputy governors and has worked at the central bank for more than two decades.
“I definitely hope he’s more willing to take a more aggressive stance against inflation,” Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG, said by telephone. “They really need to clarify their stance over what’s going to happen next. It looks like they’re taking a U- turn too early.”
The benchmark VN Index of stocks is down 18 percent in the past year, the world’s third-worst slide, on concern price gains will stanch spending, undermine the currency and hurt growth. Moody’s Investors Service, Standard & Poor’s and Fitch Ratings cut the nation’s sovereign-debt rating in 2010 deeper into so- called junk status, in part citing policymaking challenges.
Demand for Vietnamese sovereign bonds slumped this month, after a revival in the second quarter, according to data compiled by Bloomberg, signaling investors were losing confidence in the nation’s ability to contain prices. Vietnam struggled earlier in the year to sell debt, with no securities being sold in 10 of 26 auctions in January to March.
Binh, whose father was also a deputy governor at the central bank according to government websites, has served as vice-chairman of International Investment Bank, a Moscow-based lender that counts communist and former communist nations among its members. He received a doctorate studying in Russia, according to his resume. Binh has said he’s attended training courses at the International Monetary Fund, World Bank and Asian Development Bank.
Binh often leads the Vietnamese delegation at council meetings of the International Investment Bank, said Vladimir Liventsev, the bank’s head of administration in Moscow.
“He’s more of a businessman than a bureaucrat,” said Konstantin Ryzhkov, a managing director at the International Investment Bank. “While some countries seek more of a political stance, he’s always the one voicing solutions to develop the banks’ businesses that would benefit all members rather than sticking to certain political views.”
Vietnamese consumer prices climbed 20.82 percent in June from a year earlier, the fastest pace since November 2008 and the highest among 17 economies in the Asia Pacific region tracked by Bloomberg.
Even so, the State Bank of Vietnam lowered its repurchase rate for the seven-day term this month to 14 percent from 15 percent. The bank had boosted it from 7 percent at the start of November 2010 to fight price gains. The rate appears to have become the benchmark for monetary policy, according to JPMorgan Chase & Co. Vietnam’s central bank doesn’t release regular policy statements that explain its monetary decisions.
The party’s Central Committee met July 4-10 and “approved candidates for key positions in state agencies to submit to the National Assembly for election or approval,” according to the party’s online newspaper. Under a 2008 decree signed by Dung, the central bank is a ministerial-level body of the government.
In an April note posted on the central bank’s website after the bank boosted two key policy rates, Binh reiterated the importance of staying committed to tackling inflation through 2015.
“At various points in recent times, we put forward the issues of stabilizing the economy and containing inflation but were not consistent and often times, they were sacrificed for other economic goals,” he wrote. “That hurt confidence among the investor and donor community.”
Containing inflation and “stabilizing the macroeconomy” are tasks not only in 2011 but also throughout the upcoming development period, Binh said in the note.
By K. Oanh Ha - Bloomberg - July 20