17:38 | 11/05/2015 Finance - Banking
(VEN) - In the first quarter of 2015, overseas remittances pouring into Ho Chi Minh City came to US$1.2 billion, about US$200 million more than the same period in 2014. Increased overseas remittances contributed to an abundant supply of foreign currency to the foreign exchange market, and funded investment in various production and trading activities, including real estate businesses and other operations.
ncreased overseas remittances help the foreign currency market achieve a significant surplusAbundant supply of foreign currency
According to Western Union, Vietnam is one of the top 10 countries in the world in terms of attracting overseas remittances. Remittances coming from the US make up the lion’s share of this, with 57 percent. This is followed by Australia, Canada, Germany, Cambodia, and France. Over the last two years, overseas remittances from the Republic of Korea and China grew significantly compared to previous years.
Surveys by the Central Institute for Economic Management (CIEM) showed that in the past four years, overseas remittances to Vietnam increased from US$9 billion in 2011 to US$10 billion in 2012, US$11 billion in 2013, and US$12 billion in 2014. Cumulatively, Vietnam has attracted more than US$92 billion in overseas remittances between 1991 and 2014, equivalent to almost eight percent of the country’s gross domestic product (GDP) during this period.
Increased overseas remittances also helped the foreign currency market achieve a healthy surplus in the balance of payments as well as in the overall trade balance.
Attracting overseas remittances with stable policies
The State Bank of Vietnam’s policy to maintain a stable Vietnamese dong/US dollar exchange rate contributed to increases in overseas remittances. Changes in the exchange rate between the Vietnamese dong and US dollar were far smaller than those between the US dollar and other regional currencies. Many overseas remittance beneficiaries deposited the remittances directly or had them converted to the Vietnamese dong before depositing them at the bank. The interest rate for Vietnamese dong deposits was 4-5 percent higher than that for foreign currency deposits. Therefore, banks and remittance companies launched many promotions to attract overseas remittance deposits.
Nguyen Hoang Minh, deputy director of the State Bank of Vietnam’s branch in Ho Chi Minh City said increases in overseas remittances to Vietnam in recent years were attributed to the effective policy of expanding the money transfer and remittance payment networks.
Overseas remittances are the second biggest source of foreign currency in Vietnam, after foreign direct investment (FDI) and ahead of official development assistance (ODA).
Another helpful factor in the increase of overseas remittances is that regulations have been simplified. In addition, some tax obligations have been lifted; the amount of overseas remittances to Vietnam is no longer controlled; overseas remittance beneficiaries no longer need to pay income tax and do not have to sell their foreign currency to the bank. Also, crucially, overseas Vietnamese can benefit from conditions allowing them to buy houses and invest in Vietnam. Commercial banks have procured modern money transfer technology to better satisfy customer demands.
By Thanh Thanh