The central bank has unveiled a draft decree which seeks to prohibit non-Vietnamese from opening bank savings accounts in foreign currencies.
The proposal, if approved, will supersede decree No.160 which guides the 2005 Foreign Exchange Ordinance.
The State Bank of Vietnam said it wants to curb some foreigners’ practice of having foreign currency sent from abroad and depositing it at local banks to take advantage of Vietnam's high interest rates.
The practice exerts pressures on the foreign exchange market, especially at a time when it is strained, online newspaper VnEconomy quoted the bank as saying.
The interest rate on dollar deposits is 1.25 percent for individuals, while the London Interbank Offered Rate (Libor) was 0.6 percent at the end of October.
The central bank said it it wants regulations to be in line with the 2005 ordinance, which only allows Vietnamese nationals to have savings deposits in foreign currencies.
When decree No.160 was issued in 2006, Vietnam was entering the World Trade Organization, so some of the ordinance's provisions were relaxed, the bank explained.
But this has led to inconsistencies in the legal framework, it said.
No gifting of foreign currency
The draft decree also seeks to ban Vietnamese from gifting foreign money.
One of its authors said the ordinance does not expressly permit this, meaning it is not allowed.
But the existing decree legalized it.
He also said the ban would help plug a loophole since many people caught illegally trading foreign exchange claim they were gifting the money.
Some experts, however, question the legality and feasibility of the regulation.
Speaking to Thanh Nien, Le Tham Duong, dean of the HCMC Banking University's business administration department, while agreeing the loophole exists, said many Vietnamese have a habit of gifting foreign money during Tet (the Lunar New Year).
For example, it is a common belief that $2 bills bring good luck.
The ban would thus encroach on people’s rights if approved, he said.
Economist Huynh Buu Son said foreign currencies are not illegal in Vietnam and people are allowed to possess them, so “why are people not allowed to give or gift them?”
Nguyen Minh Thuan, director of the Saigon International Law Company, said without elaborating that the ban also violates the Constitution.
The government cannot ban everyone from gifting foreign money just because some people carry on illegal transactions, he said.
Tran Xoa, director of Minh Dang Quang Law Company in Ho Chi Minh City, wondered if the ban would also target remittances by overseas Vietnamese to their families, estimated at around US$10 billion a year.
If there is indeed a ban, receivers have to convert the remittances into dong, he said.
An old problem would then resurface, he warned, recalling a period in the past when a similar ban saw illegal remittances proliferate.
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