* State shipbuilder pulls $1 billion investment
* Trade gap triples in first six months
* Gold imports suspended due to trade balance worries
By Nguyen Nhat Lam and Lewa Pardomuan
HANOI/SINGAPORE, June 23 (Reuters) - Vietnam pulled the
plug on a $1 billion investment by a state firm and has halted
gold imports in its struggle to prevent soaring prices and a
ballooning trade gap from crippling the once-booming economy.
Vietnam's state-run shipbuilder Vinashin said on Monday it
had dropped a plan to invest in a $5 billion steel venture with
South Korea's POSCO (005490.KS) heeding the government's appeal
to state companies for spending cuts to bring down inflation
from multi-year highs above 25 percent.
Vinashin said it would also delay or suspend 40 other
projects worth a total of $395 million.
The Communist Party-run government has ordered state-run
businesses to cut borrowing and spending, cited by economists
and authorities as among the drivers of inflation.
Vietnam also temporarily suspended imports of gold earlier
this month, worried that purchases of the precious metal were
pushing the country's swelling trade shortfall to unacceptable
levels, a World Gold Council official said on Monday.
Official June trade and inflation data are due later this
week, but a state-run newspaper reported on Monday Vietnam's
trade deficit tripled in the first half of this year to almost
$17 billion.
Imports are estimated to have soared 64 percent in the
first six months to $45.5 billion, while exports rose 27
percent to $28.6 billion, the official Lao Dong newspaper
reported, citing planning and investment ministry data.
"The government is very concerned. They have to reduce
trade balance deficit. Gold is one of the main imports," said
Hyunh Trung Khanh, a consultant for the Vietnam chapter of the
World Gold Council.
SHATTERED CONFIDENCE
Vietnam is Asia's second-largest gold investor and
traditionally Vietnamese use gold for savings, jewellery and
real estate transactions. But the surge in inflation and a slew
of worrying trade figures in the past weeks and months have
shattered local investors' confidence in the dong currency and
triggered strong demand for gold and U.S. dollars.
According to the council's figures, Vietnam's gold imports
doubled to about 60 tonnes, worth $1.8 billion, in the first
five months of this year, compared with the same period of
2007.
The Southeast Asian nation of 86 million people for the
better part of the past decade has boasted one of the fastest
economic growth rates, averaging 7.5 percent since 2000.
But after a bumper 2007, the economy began sputtering with
inflation roaring to more than decade highs, the import bill
soaring and local stock markets and the currency hit by quickly
deteriorating investor confidence.
The dong was quoted around 16,610 per dollar in the
official onshore market VND=, 0.96 percent weaker than the
mid-point set by the central bank.
The central bank allows the dong to move only within a 1
percent band around that mid-point, but effectively devalued
the currency earlier this month by 2 percent.
Still, black market rates are markedly lower than official
rates. Traders said the dollar was changing hands at about
17,800 dong on Monday, down from a record 19,600 dong last
Friday.
In another sign of pessimism about the local currency,
speculators in the offshore non-deliverable forwards
VNDNDFOR=, priced the dong at 22,650 in the one-year tenor,
27 percent weaker than the spot rate.
The decision to suspend gold imports had little impact on
the international gold markets or in the local market, given
that high imports earlier in the year will keep the market well
supplied for the time being.
"We have imported quite a lot. So there's still quite a lot
of gold inside the country, and the demand in June is slowing
down. The difference between the local and international gold
price is not very high," said Khanh.
The price of gold was quoted by local dealers at around
$873 an ounce, below the international price XAU= above
$900.
OTHER STORIES
> Vietnam suspends gold imports....[ID:nSP54864]
> Vietnam effectively devalues dong 2
pct........[ID:nSP221939]
> Vietnam net foreign reserves $20.7
bln........[ID:nL19802759]
> Vietnam H1 loans up 20 pct, June credit
slows.[ID:nHAN320478]
> FACTBOX-Inflationary stresses confront
Asia....[ID:nSP291331]
(Additional reporting by Grant McCool, Miyoung kim and Ho Binh
Minh, Writing by Tomasz Janowski; editing by Neil Fullick)
