Stephen Hawking: God didn't create universe

LONDON, England (CNN) -- God did not create the universe, world-famous physicist Stephen Hawking argues in a new book that aims to banish a divine creator from physics.
Hawking says in his book "The Grand Design" that, given the existence of gravity, "the universe can and will create itself from nothing," according to an excerpt published Thursday in The Times of London.
"Spontaneous creation is the reason why there is something rather than nothing, why the universe exists, why we exist," he writes in the excerpt.
"It is not necessary to invoke God to light the blue touch paper [fuse] and set the universe going," he writes.
His book -- as the title suggests -- is an attempt to answer "the Ultimate Question of Life, the Universe, and Everything," he writes, quoting Douglas Adams' cult science fiction romp, "The Hitch-hiker's Guide to the Galaxy."
His answer is "M-theory," which, he says, posits 11 space-time dimensions, "vibrating strings, ... point particles, two-dimensional membranes, three-dimensional blobs and other objects that are more difficult to picture and occupy even more dimensions of space." He doesn't explain much of that in the excerpt, which is the introduction to the book.
But he says he understands the feeling of the great English scientist Isaac Newton that God did "create" and "conserve" order in the universe.
It was the discovery of other solar systems outside our own, in 1992, that undercut a key idea of Newton's -- that our world was so uniquely designed to be comfortable for human life that some divine creator must have been responsible.
But, Hawking argues, if there are untold numbers of planets in the galaxy, it's less remarkable that there's one with conditions for human life.
And, indeed, he argues, any form of intelligent life that evolves anywhere will automatically find that it lives somewhere suitable for it.
From there he introduces the idea of multiple universes, saying that if there are many universes, one will have laws of physics like ours -- and in such a universe, something not only can, but must, arise from nothing.
Therefore, he concludes, there's no need for God to explain it.
But some of Hawking's Cambridge colleagues said the physicist has missed the point.
"The 'god' that Stephen Hawking is trying to debunk is not the creator God of the Abrahamic faiths who really is the ultimate explanation for why there is something rather than nothing," said Denis Alexander.
"Hawking's god is a god-of-the-gaps used to plug present gaps in our scientific knowledge.
"Science provides us with a wonderful narrative as to how [existence] may happen, but theology addresses the meaning of the narrative," said Alexander, director of The Faraday Institute for Science and Religion.
And Fraser Watts, an Anglican priest and Cambridge expert in the history of science, said that it's not the existence of the universe that proves the existence of God.
But, he said, "a creator God provides a reasonable and credible explanation of why there is a universe, and ... it is somewhat more likely that there is a God than that there is not. That view is not undermined by what Hawking has said."

Hawking's book will be published on September 7 in the United States and September 9 in the United Kingdom.

Toyota Feels Exchange-Rate Pinch as Rivals Gain

TOKYO — For all the turmoil over Toyota’s wave of recalls, the company, the world’s largest automaker, may face a bigger problem: the surging yen.
With the yen at 15-year highs against the dollar, a 9-year peak versus the euro and still near recent heights against the won, Toyota is finding that its cars have become too expensive to compete in the increasingly cutthroat global auto market. That has created inroads around the world for its non-Japanese rivals, like Volkswagen of Germany, Hyundai of South Korea and the Detroit automakers, all of which are benefiting from relatively weaker currencies.
Hyundai is rapidly increasing its share in major markets, including the United States and China, using record profit to offer aggressive sales incentives that Toyota is struggling to match.
Volkswagen continues to dominate in Europe and across much of the Asia-Pacific region. Its chief executive, Martin Winterkorn, has said the automaker aims to be the world’s largest in sales by 2018, up from its current third place.
Analysts say the yen, which started soaring as a refuge currency in late 2008 in response to the global financial crisis, has highlighted a flaw in Toyota’s global production setup. The problem, they say, is that the company depends too heavily on factories and suppliers in its high-cost homeland. Although Toyota is taking steps to improve the ratio, about half of its cars are still assembled in Japan, many of them then shipped overseas.
“Before the yen’s surge, Toyota got by with exporting lots of cars, even though it was aware that posed a big currency risk,” said Takashi Akiyama, vice president at SC-Abeam Automotive Consulting, based in Tokyo.
“They held out for as long as they could, but now they’re seeing the consequences of stalling,” Mr. Akiyama said.
Other big Japanese exporters, like Honda, Nissan, Sony and Canon, feel the yen’s burden, too. The country’s export growth slowed for the fifth consecutive month in July, weighed down by the strong yen. But because they have moved more of their production overseas in recent years, those companies suffer much less from currency imbalances.
The difference is laid bare in a startling statistic: For every yen that the Japanese currency gains in value against its assumed dollar rate of ¥90, Toyota says, it loses ¥30 billion, or $357 million, in operating profit. If the exchange rate stays at the current ¥84 to a dollar, Toyota’s operating profit for its financial year ending next March, which the company forecasts will reach ¥330 billion, could fall by half.
By that same measure, Nissan says it loses only half as much for each yen’s gain against the dollar — about ¥15 billion yen. Sony loses but ¥2 billion.
The unfavorable foreign exchange has probably damaged Toyota more than its series of safety recalls has, by bringing margins to razor-thin levels, and a further rise in the yen raises the specter of operating losses, said Christopher Richter, a senior analyst for the automotive industry at the brokerage firm CLSA.
“Fixing the problem takes a lot of time,” Mr. Richter said. “But given how fast the yen has strengthened, time is not Toyota’s friend.”
Over the years, of course, Toyota has set up manufacturing operations outside Japan, including the United States, where it makes cars at four assembly plants, helping to buffer the effects of swings in the dollar-yen exchange rate.
Still, many of the cars Toyota sells in the U.S. market are made in Japan, especially after the automaker shuttered a plant in Fremont, California, earlier this year that had made its popular Corolla compact sedan. A total of 35 percent of the cars Toyota sells in North America are imported, compared with 10 percent for Honda.
Toyota is well aware of the need to move production closer to the consumer. Next year, Toyota plans to open a plant in Blue Springs, Mississippi, to build Corollas.
“Our goal is to produce cars where they’re sold,” said Paul Nolasco, a spokesman for Toyota in Tokyo. “Who knows when, and 100 percent might not be possible, but the idea is to try to make as many cars locally to increase local content,” he said. “That just makes business sense.”
Perhaps nowhere does Toyota need to localize production and cut costs more than in emerging markets, where its vehicles are easily undersold by competitors. Take China, now the world’s biggest auto market, where sales of the Yaris compact have fallen far short of expectations since its introduction in 2008. Although Toyota assembles the Yaris in China to take advantage of that country’s much cheaper labor, many of the parts still come from Toyota suppliers like Denso and Aisin.
That helps push the Yaris’s price tag to more than 100,000 renminbi, or almost $15,000, making it hard to compete with the likes of the new Verna subcompact sedan from Hyundai, priced as low as 73,900 renminbi, or the popular Buick Excelle from General Motors, which carries a slightly higher price tag than a Yaris but has a larger, sleeker body — delivering more bang for a buck, analysts say.
Toyota had only 5.2 percent of China’s auto market last year, trailing Hyundai, General Motors and the Chinese market leader, Volkswagen, whose Jetta family car starts at about 75,000 renminbi and is pervasive in the big cities.
In another big emerging market, India, Toyota plans to introduce the Etios compact car later this year, which analysts expect will be priced about 500,000 rupees, or $11,000 — significantly higher than the most popular models in India like the Alto from Maruti Suzuki, which starts at 323,000 rupees, or the Hyundai i10, which sells for 350,000 rupees.
Much of that pricing is deliberate: analysts say Toyota wants to build an upmarket image in India. Still, Toyota has much to learn from the market leader Maruti, a subsidiary of the Japanese automaker Suzuki that builds cars in India and procures almost all of its parts locally. Though Toyota also builds cars in India, many of its parts are from outside the country, adding to production costs. Toyota currently commands only 2.5 percent of the Indian car market, far behind Maruti Suzuki’s 40 percent.
Toyota’s slim market shares in India and China are worrisome to the company because emerging markets are expected to make up for most of the growth in the global auto industry. According to the Englewood, Colo.-based research firm, IHS Automotive, car sales in emerging economies like China and India will surge 81 percent - from about 25.8 million units in 2009 to almost 47 million units in 2016. During that time, sales in industrialized economies will grow at half that rate, from 31.7 million to 45.3 million, or an increase of 43 percent, according to IHS Automotive.
To capture a bigger part of those burgeoning markets, Toyota says it is seeking to increase local production and its use of locally supplied parts in both India and China. But it takes time and sizable investment to set up local production networks, analysts say.
“Toyota already knows that it must shift more production overseas, and it must make a push into emerging markets,” said Masatoshi Nishimoto, senior manager at IHS Automotive. “But it isn’t an easy task to build supplier networks overseas,” he said. “Then there’s the question of what to do with the excess capacity in Japan.”
The challenge demonstrates how Toyota is paying for not moving more production to lower-cost countries during a manufacturing boom in the mid-2000s, when Toyota enjoyed record profits. The yen stayed weak during that time, helping to make Toyota competitive and fueling the company’s global expansion.
Toyota held back from shifting production away from Japan and procuring components from overseas parts makers, analysts say, partly because of its traditionally strong relationship with many Japanese suppliers.
Toyota’s smaller compatriot, Nissan, has been more aggressive in shifting production overseas. This year, it transplanted the entire production line for its popular March minicar to Thailand, for example, and now imports cars even for the Japanese market from its Thai factory — an unprecedented move for a Japanese automaker. But the shift makes sense: Personnel costs at its main factory in Oppama, Japan were 10 times those in Thailand.
It is non-Japanese global automakers like General Motors, Volkswagen and a new rising star, Hyundai, that are poised to benefit most from Toyota’s troubles.
Volkswagen, of Germany, was an early entrant into the Chinese market and enjoys an almost 20 percent market share there — the highest among foreign automakers. And Volkswagen continues to dominate in Europe, where Japanese automakers have recently been shut out by a prohibitively high exchange rate.
Meanwhile, Hyundai, of South Korea, is reaping the rewards of a weak won, which has bolstered its competitiveness alongside its Japanese rivals. In China, it leads Japanese automakers with a 6.2 percent share in 2009, and has also garnered 14 percent of Indian market, where it plans to bring out a car that costs as little as $5,000 by 2012.
In the United States, the weak won has allowed Hyundai to offer much more aggressive sales incentives than Toyota, allowing it to chip away at Toyota’s market share, which fell to 15.2 percent in August from 16.6 percent at the start of the year.
Ford, Nissan and Volkswagen, by contrast, have added market share in the United States.
Still, Toyota is in a tough spot. Moving production overseas would inevitably mean cutting capacity — and jobs — in Japan, something the automaker has hitherto avoided. Exporters are under immense pressure to keep jobs in Japan; however, government hesitation against taking steps to weaken the yen through intervention or monetary policy is adding to exporters’ frustrations.
In a Japanese government survey of 102 exporters, released last week, 39 percent of companies said that they would transfer their factories overseas if the yen stayed at current levels.
Some analysts say that it is a good chance for Japan to get over its obsession with manufacturing, move production overseas, and make a long-awaited move into services.
“It would be a tough transition,” said Kazuki Ohara, a senior management consultant at the Tokyo-based Nomura Research Institute. “But instead of trying to curb the strong yen or ride it out,” he said, “it would be better for Japan to build an economy that thrives on a strong currency.”

Strong Yen Helps to Fuel Germany’s Export Boom

FRANKFURT — There was a touch of schadenfreude in the most recent earnings report issued by Kuka, a company based in the Bavarian city of Augsburg whose orange industrial robots are a common site on auto assembly lines around the world.
Kuka said last month that its sales had bounced back to precrisis levels — and then some. By contrast, sales at its Japanese rivals were still one-third below where they had stood in early 2008, before the global downturn slammed the machinery industry.
A surge in orders from European carmakers has helped Kuka’s rebound. But it also does not hurt that the euro has plunged in value compared with the yen, which has given Kuka a price advantage against Japanese competitors that it did not have a year ago.
“Price is not the sole criteria, but it’s an important criteria,” Kuka’s chief executive, Till Reuter, said in an interview. “The weaker euro is to our advantage.”
European companies tend to focus on the dollar exchange rate, because the U.S. currency is the most important for world trade. But the yen’s recent strengthening is playing a role in Germany’s export boom as well.
The euro has fallen 19 percent against the yen in the past year, nearly double the decline against the dollar. And the euro is down more than 36 percent against the yen since August 2008.
A stronger yen is good news for German machinery and auto companies whose main competitors often are based in Japan. And it is, of course, bad news in Japan, where the strong currency has become a political issue.
The rivalry between the two countries is particularly intense in China, the fastest-growing market for many German companies, but where Japan’s proximity gives its exporters a geographical edge.
China was the destination for 5 percent of German auto exports last year, up from 0.6 percent in 2000. And 9.1 percent of German machinery exports went to China, up from 2.7 percent a decade ago, according to the Ifo Institute, a research organization in Munich.
“Japanese manufacturers are all over the place, and they are usually the toughest competitors,” said Oliver Wack, a China specialist at the German Engineering Federation, an industry group.
In fact, German companies gained ground in China last year, increasing their share of imports to 22.9 percent from 20.6 percent, while Japan’s share of Chinese imports slipped to 24.1 percent from 27 percent, according to the engineering federation.
Because the Chinese currency moves in lockstep with the dollar, the yen is rising against the renminbi, even as the euro has gotten cheaper. But economists and company executives caution that there are many other reasons for Germany’s gains. For example, Germany benefited from China’s heavy investment in infrastructure like power plants, which favored companies like Siemens.
And sticker price is often a secondary consideration in markets for specialized factory machines or heavy equipment, where both Japanese and German companies are strong. Customers scrutinize factors like energy efficiency, which may be a more important cost factor over the long term.
But few German companies are complaining about the strong yen.
“If Japan has a stronger currency, there is no question that helps the German companies,” said Steffen Elstner, who specializes in exports at the Ifo Institute, an economic research and policy consulting organization in Munich.
How much is hard to quantify. It is small but significant, said Rolf Schneider, head of macroeconomic research at the German insurer Allianz. He calculates that the dollar’s rise against the euro has added three or four percentage points to German exports, while the yen’s rise has added no more than one percentage point.
“One percent is still relatively high,” Mr. Schneider said. “For companies that compete directly with Japanese companies, it plays a decisive role.”
The weak yen of a few years ago was a product of Japan’s extremely low interest rates, which made Japanese bonds and other assets less attractive for international investors. But when the financial crisis hit, the European Central Bank also cut its benchmark interest rate, to a record low of 1 percent.
“Now that interest rates are low worldwide, this advantage is gone,” said Ralph Wiechers, chief economist of the German Engineering Federation.
Company representatives tend to play down the importance of exchange rates, preferring to emphasize other reasons why their strategies and products are superior to those of competitors.
A spokesman for the carmaker Volkswagen, who said he was not authorized to be quoted by name because of company policy, said that the company had been taking market share from Toyota because of the quality of its cars, not because of a shift in the yen.
ABB, a company based in Zurich whose products include industrial robots made in Germany and other locations, said it was not noticing any yen effect.
“At this point we don’t see an overall change in the competitive landscape because of the strong yen,” Michel Demaré, the chief financial officer at ABB, said in an e-mail.
Most multinational companies now produce their products all over the world, in part to protect themselves from currency swings. Kuka produces machinery in Shanghai as well as in Germany and Hungary, and it buys parts from Japan.
Liebherr, a German company that makes construction equipment, competes directly with Tadano of Japan in the mobile crane business. But, since Tadano manufactures mobile cranes at a subsidiary in Germany, the strong yen does not give Liebherr any advantage.
Still, in Japan the yen has become a sensitive issue as the currency fluctuates around a 15-year high.
In a government survey of 102 exporters, released last week, more than 60 percent of companies said that they would see profits fall because of the strong yen.
Ichiro Ozawa, who is challenging Prime Minister Naoto Kan to be head of the Democratic Party of Japan, said Thursday that action was needed to weaken the yen, Reuters reported.
While acknowledging there may be little that the authorities can do, Mr. Ozawa said that “the yen’s rise has come to a level where we will need to act.”

How the man from Japan Inc. became a school principal

Tokyo, Japan – Akihisa Shirota has piles of manga in his office. He likes to take math drills with the students. And he dismisses the “ivory tower” types as living too “in the box.”
Not your average junior high school principal in any country, but especially in Japan, a country renowned for its rigorous and rudimentary educational system.
Look at Shirota’s resume and you notice what’s not there: the words "teacher" or "educator." It’s instead dotted with high tech and publishing companies he’s headed as the president or manager.
Shirota’s lack of experience in education is exactly what made him attractive to Wada Junior High School.
Watch how Japan is seeking to revamp its education system
“Principals are people who became teachers right after graduating from college,” said Shirota. As a former Japan Inc. man, Shirota treats his students more like his employees. He knows the name and test score of every single student in the school, all 400 of them.
The day at Wada Junior High begins with a math drill known here as “brain training.” Stealing from the theory that puzzles may prevent dementia among the elderly, Shirota believes drilling with puzzles and problems everyday under time pressure will sharpen young minds.
Later in the day, the students head to a seminar headed by a company. The class teaches business manners, like how to politely greet clients and behave at a board meeting.
Then at 7pm, night school begins. Cram schools, as these evening classes are called, are common in private schools, but not in public ones. Shirota says the purpose is the same: to boost test scores for school entrance exams.
Critics have varied from calling Wada Jr. High too rigorous or too lax.
Koya Nakamura, 15, says he enjoys the school, even if his school day ends at 9pm. Other students call their principal “different” but “cool.”
Call him what you like, says Shirota, both good and bad. But his philosophy has paid off in higher test scores, he says. At the core of this principal’s beliefs is this: Japan’s companies must adapt to the times to compete in an ever-changing global environment. Schools should be no exception.
Posted by: Kyung Lah, CNN International Correspondent
Filed under: Asia •Japan

Cement surplus

Vietnam is up to its ears in cement.
Amid a startling surplus of the product, government agencies are working quickly to figure out ways to offload cement at home and abroad.
Prospects are not looking good.
Vietnam’s 20-year industry development plan called for 53 cement factories to come into operation between 2005 and 2010.
Vietnam met its official goals, and then some. Some plants were built or developed outside the scope of the plan.
According to the Ministry of Construction, Vietnam now houses 105 cement plants with a combined capacity of 61 million tons.
This year, the plants are scheduled to produce 55 million tons; output is expected to exceed demand by some five million tons, Chairman of the Vietnam Cement Association Nguyen Van Thien said.
One hard flood
In 2009, Vietnam was featured in the list of the top ten cement producers in the world. The list includes China with an annual output of 1.37 billion tons, India 160 million tons, the US 113 million tons, and Japan 68 million tons.
The cement surplus may represent more than 10 percent of the total output in the next several years, said Le Van Toi, head of the Construction Material Department under the Ministry of Construction.
Thien said that some local governments continue to license new cement projects even though this surplus was forewarned three to four years ago.
The chairman attributes the recent rush on cement plant development to an abundance of small-time investors who purchased low-quality start-up equipment. Thien said these investors were after short-term profits.
He also cited poor local management as a contributing factor to the predicament. “While some cement plant projects were delayed, localities worry about a coming shortage, so they licensed others. When all the projects came into operation at the same time, we were left with a surplus.”
Exporters dilemma
The Construction Ministry has recently asked three cement producers – Nghi Son in Thanh Hoa Province, Chinfon in Hai Phong City, and Phuc Son in Hai Duong Province — to export 100,000-150,000 tons in the second half of this year.
The firms will have to unload 50 percent of their output in 2011, and 100 percent in 2012.
Construction Deputy Minister Nguyen Tran Nam said the three joint ventures have committed to export 30-40 percent of their annual output. However, their primary market remains at home.
“Exportation is a solution,” Thien said. “But, it is difficult to implement, and it is also not a decisive solution.”
Exporting cement can be a losing deal and one not easily made.
Vietnam planned to export some one million tons in 2010. However, the Vietnam Cement Corporation has only managed to ship around 500,000 tons of the products to Laos, and less than 12,000 tons to Cambodia since the beginning of this year.
Thien said Vietnam lacks the necessary maritime infrastructure (e.g. deep seaports and big ships) to move the cement.
Meanwhile, Vietnamese firms are having a tough time trying to break into Asian cement markets because they are surrounded by big exporters such as China and Thailand. Thus, Vietnam can only hope to tap distant markets, like Africa and Brazil. However, cement’s going rate, $40-45 per ton, doesn’t begin to cover shipping costs, let alone furnish a profit.
Thien added that carving into Vietnam’s limestone mountains to furnish materials for cement production will degrade the country’s natural landscape.
A way out of the woods
The Construction Ministry has begun a review of the cement industry’s development plan.
The ministry has also asked the government to spur domestic cement consumption. “If the usage of cement in road construction is increased, the situation will quickly change,” Thien said.
He also suggested that investment in deeper seaports to facilitate shipping the materials from the north to the south should be considered.

Cambodian province seeks direct link with Phu Quoc

Cambodia's Kep Province is looking for an investor for a port that links it directly with Vietnam’s Phu Quoc Island, the provincial government has said.

Has Sareth, chairman of Kep Province, said the tourist port is expected to cost around US$20 million.

Kep Tourism Department director Tep Houm said the port will help take tourists to ideal resorts in Phu Quoc, which lies off the Mekong Delta’s Kien Giang Province, in around one hour and a half on ferry boats.

Phu Quoc is expected to receive 2-3 million visitors in 2020, with 35-40 percent of them foreigners, according to Vietnam Ministry of Transport.

Kep Province has also been a tourism hotspot in Cambodia. In the first half this year, the province received more than 409,600 visitors including nearly 50,200 foreigners, compared to around 277,000 visitors and nearly 5,000 foreigners during the same period last year.

Sareth said the province disagreed with Japanese investor Rotong Development Group about the location of the port.

The group wanted to build the port in downtown Kep where it is crowded and the water is deep but Kep officials want to put the port five kilometers away, as it would be convenient for the province’s further development.

Sokhom Pheakvanmony, a Cambodian senior transport official, visited the province last week, but has not made a decision on the port's location.

Large gold trader warns of counterfeit product

Vietnam’s largest gold trader, SJC, on Thursday alerted the public that counterfeit products bearing the company logo are circulating on the market.
The company has offered to verify the quality of all gold bars bearing its brand name, free of charge.
Real SJC gold bars are 99.99 percent pure, while counterfeit products have less gold content, between 95 percent and 98 percent, the company announced at a press briefing.
With gold values hovering at around VND29 million per tael, buyers of these counterfeit gold bars can expect to lose some VND1 million on every one-tael bar they purchase, the Ho Chi Minh City-based company said. A tael is equal to 1.2 ounces of gold. 
SJC also warned that some sellers are shaving a small amount of gold off the four corners of SJC bars, robbing buyers of between 0.7-1.2 grams. The trick allows these sellers to skim VND1.1 million off every one tael.
While it is easy to spot a gold bar that has had its corners sheared, buyers may find it difficult to tell the difference between a real SJC gold bar and a counterfeit one, the company said.
Nguyen Thanh Long, general director of SJC, said his company has been trading gold in Vietnam for 20 years and has produced a total of  600 tons. SJC dominates the trade, Long said, with approximately 80 percent of the market. 
There has never been any quality issues with SJC products over the years, Long said.
“We decided to alert local consumers because this is a new problem,” he said, noting that company sales could be affected.
Long said that SJC will improve its product design next month to foil counterfeits.
The company advised gold buyers to request a receipt for every purchase. The receipts should feature a product serial number printed on it to protect buyers.
Vietnam is one of the world’s largest gold consumers. Home and land used to be evaluated and traded mainly in gold.
Since its value has skyrocketed, the precious metal gradually lost its popularity in daily trading activities. Many Vietnamese continue to purchase and keep gold as a means of savings.

Weaker dong enhances inflation threat: experts

Relatively low incremental increases in prices over the last few months have lulled consumers and others into a sense of false security, experts say, warning that inflation continues to be a serious threat in the coming months.

The recent devaluation of the dong against the dollar only enhances the threat, they add.

Production enterprises dependent on imported materials have to bear higher input costs and are likely to increase prices.

The State Bank of Vietnam on August 18 set the daily reference rate of the dong two percent lower at 18,932 to a dollar, the third devaluation since last November, in a move aimed at reducing the trade deficit.

The dong was little changed at 19,485 per dollar as of 9:10 a.m. Thursday in Hanoi, compared with 19,490 a week ago, according to data compiled by Bloomberg.

Dao Duy Kha, deputy general director of the Vietnam Plastics Corporation, said up to 90 percent of materials for the country’s plastic production was imported, thus the lower value of the dong was a big blow.

The gasoline price hike early this month had already pushed up their production costs and the higher dollar prices now make an increase in selling prices “unavoidable,” he said.

Some association members have already increased their prices, while others will do so soon, with an average increase at 1-2 percent, he added.

Kha said firms have not increased their prices sharply because current purchasing power in the market was still low. “However, the prices will continue to rise in coming months when the demand for products goes up.”

Tran Trung Hieu, general director of Hanoi Investment and Footwear Export-Import Company, which imports materials for footwear production and sells them to local producers, said he will increase prices to match the dollar hike.

However, he cannot raise prices under contracts signed months ago that are due to be delivered now. “We are suffering losses from the contracts,” he said. His company imports materials worth US$100,000-200,000 each month.

Meanwhile, the price hike has also affected a number of customers. “Some customers have cancelled their orders, while others have cut their buying volumes,” Hieu said. His company has had to lower its profits significantly to keep their traditional customers, he added.

The increase in costs of imported materials has also prompted many supermarkets to announce plans to increase their retail prices.

Nguyen Thanh Huyen, public relations manager for the Big C supermarket chain, said some distributors have proposed to raise their products’ prices by 5 to 10 percent.

Another supermarket chain, Maximark, has received proposals from over 100 distributors on increasing, by 3 to 10 percent, prices of 500 kinds of products, mainly food, cosmetics and home appliances.

The price increases have sparked inflation fears.

Vietnam’s consumer price index rose 8.18 percent in August from a year earlier, and 0.23 percent from a month earlier, the General Statistics Office said. In July, the index rose 8.19 percent from a year earlier.

“A very important implication is that the outlook for inflation is likely to be affected by the devaluation. The devaluation, of course, is going to raise the risk of imported inflation in the months ahead,” Bloomberg quoted Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore, as saying.

The dong will trade near 19,500 per dollar for “at least the next several weeks,” he said.

If inflation accelerates or the trade deficit deteriorates, “you may see more selling pressure on the dong. But, of course, that’s very much down to the upcoming data that we expect to see at the end of the month,” he said.

Vu Dinh Anh, deputy head of the Institute of Market and Price Research, said: “Inflation control should be the most important target for the end of this year. There is now a subjective complacence as consumer prices have only seen small hikes in recent months.”

The government aims to cap inflation at 8 percent this year, though many local analysts say that will be difficult to achieve.

Firms should carefully watch for changes in the exchange rate. They should prepare sources of the greenback to repay dollar loans on schedule, and use other foreign currencies, which have lower exchange rates, Anh said.