Vietnam should revise forex rules to raise more dollars from abroad

If Vietnam wants to raise money from overseas Vietnamese, it needs to revise the prevailing foreign exchange control regulations to facilitate overseas capital flows into Vietnam.

Recently, Vietnam has to face a conflict. While the government issued international bonds at an interest rate of 7 percent per annum, domestic banks are mobilising people’s dollars at the rate of 6 percent per year (new lowered ceiling rate of 3 percent last week), the lending interest rate of some countries like the US and Canada ranges from 3 percent to 4 percent per year. The interest rates of savings deposits in those developed nations are lower, at only 1 percent. So why the Vietnamese in foreign countries not sending money to receive high interest rates?

The current foreign exchange control regulations strictly require the proof of the purpose of cash transferred abroad and the amount of cash restricted at about $ 10,000 once, even though for many people, their money has clear origins. Even, thee funds transferred from abroad into Vietnam aim to enjoy high interest rates, but when necessary, the money cannot be easily withdrawn from Vietnam to foreign countries to serve life or investment. This has limited the attractiveness and made stuck in cash flows between Vietnam and internationally.

According to experts, if wanting to raise money from overseas Vietnamese, Vietnam needs to revise the existing foreign exchange control regulations to facilitate capital flows from abroad into Vietnam, avoid interest rate differentials of US dollars between Vietnam and foreign countries as presently. Those who transfer from foreign banks into Vietnam to receive high interest rates on savings will be free to transfer out of Vietnam.

The money transfer must also be convenient with the same procedures as authorised or transfer money online so that Vietnamese people in foreign countries or foreigners can open accounts and transfer money conveniently and easily from Vietnam to foreign countries.

Currently, Vietnam has set limits for loans in US dollars, with the controlled ceiling dollar deposit rate at no more than 3 percent/year aimed at avoiding speculation and people’s hoarding dollars, changing the borrowing relationship to directly trading relationship. But this solution needs to pay attention to a possibility that many people want to keep hoarding US dollars not only for high deposit interest rates, but a safe shelter when VND/USD has kept up rising, and the continuous depreciation of dong.

Therefore, to solve the root of the problem to hold US dollars, there is a need to address the shortage of US dollars due to an imbalance in supply and demand of US dollars (trade deficit and repayment of foreign loans, foreign investment flows decline, falling remittances and others).

One of the things that have not been unified in the foreign exchange management is while the transfer of payments in goods and services through international credit cards now is rather simple and convenient, the transfer of money from the bank channel is too complex.

Therefore, in the foreign exchange management regulations, there is a need to change to the transfer of payments for goods and services amongst the people through banks and international credit card more conveniently alike. - VEF

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial