The surge in demand for agricultural produce in the region following the economic crises earlier this year has provided Vietnam with a potentially very profitable market, particularly for rice. The devaluation makes Vietnam's rice more affordable and now the country's exporters are set to reap their reward. The same holds true for manufacturers and exporters of industrial goods and materials, although much of Vietnam's industry, which depends heavily on imported raw materials, will suffer as imports become more expensive. The devaluation should also encourage foreign investment by cutting some of the costs inside the country, although wages and rents are all still denominated in US dollars. Economists and bankers point to the action of traders following the State Bank's announcement as proof the dong still has some way to go to reach its true value.
Observers say the government needs to be careful, as devaluation is a double-edged sword.
It may improve life for exporters, they say, but it increases the debt burden for companies which borrow in US dollars as well as the country's external debt service. On balance, however, most exporters and bankers believe further devaluation will improve the business environment and most say they are waiting for the dong to fall a little further.