Vietnam is set to receive a record US$10-11 billion in overseas remittances this year, up from $9 billion last year
Overseas Vietnamese have continued to send money to their home country despite the global economic downturn, allowing Vietnam to beef up its reserves and keep the exchange rate stable, experts say.
With more than four million Vietnamese living and working overseas, the country receives a large amount of remittances every year. Although previous forecasts indicated the inflows could be hit by gloomy economic conditions in Europe and the US, new data suggests otherwise.
Phan Huy Khang, general director of Sacombank, said remittances sent through the Ho Chi Minh City-based bank reached nearly US$1.3 billion, up 17 percent from the same period last year.
"We are trying to attract $1.6-1.7 billion in remittances this year," he said.
A similar trend has been seen at other money transfer service providers.
DongA Money Transfer, a subsidiary of DongA Bank, reported overseas remittances of more than $1 billion in the first nine months.
Nguyen Hoang Minh, deputy head of the central bank's Ho Chi Minh City branch, said banks in the city handled remittances worth $2.9 billion in the first nine months.
"We hope remittances in the city will rise 20 percent from last year to $3.4 billion," he said.
Remittances to Vietnam from January to June reached $6.3 billion, equal to 70 percent of the amount for the whole of 2011, according to the National Overseas Vietnamese Committee.
Vietnam is set to receive a record $10-11 billion in overseas remittances this year, an increase of up to 20 percent from $9 billion last year, it said.
Since 1993, the country has received a total of $70 billion in remittances. This is equivalent to 72 percent of the foreign direct investment and twice the foreign aid from development partners that the country has received over the same period, according to a report on the government's website October 4.
"The large and increasing remittances have helped improve Vietnam's balance of payments, increase foreign exchange reserves and reduce the pressure on the exchange rate," the report said. "In 2011 and in 2012 so far, the balance registered a higher than expected surplus after two years of deficits."
It said there are favorable policies for remittances, including no limit on the amount of money, a low transfer service fee of 0.05 percent and a zero tax rate on the money received in Vietnam.
Interest rates on dong deposits are capped at 9 percent and most banks are offering 2 percent on dollar deposits. In comparison, dollar deposits in the US earn just 0.1-0.5 percent.
"The large gap between dong and dollar rates is still very attractive, even after fluctuations in the exchange rate are taken into account," the report said, adding that many people have sold US dollars to banks to switch to dong deposits.
The central bank has kept its reference rate for the dong at 20,828 against the dollar, unchanged since December.
Minh of the central bank said overseas remittances have in fact played a positive role in the economy, especially when foreign investment into the country has declined.
"The most important thing is the remittances have become a major source of foreign currencies that the economy can make use of. This is a real income source that contributes to stabilizing the foreign exchange rate and expanding national reserves," he said.
Prime Minister Nguyen Tan Dung said Monday that Vietnam's forex reserves have increased to 11 weeks of imports while the balance of payments saw a surplus of more than $8 billion.
The government will strengthen measures to attract more foreign inflows, including overseas remittances, he said at a meeting with legislators in Hanoi.
Nguyen Thi Nhu Ly, regional director of Western Union, Indochina, said Vietnam ranks ninth in the world in terms of remittances.
She said inflows came from only 16 countries in 1994, but now more overseas Vietnamese around the world send money to their home country, with many using the official services of banks and financial companies.
The World Bank last year placed Vietnam at number eight in the top 10 list of developing countries with the largest remittances. The four top recipients were India, China, Mexico and the Philippines.
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