New dollar rates ‘won't affect remittances'

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"No country in the world sets high dollar-deposit interest rates with the aim of attracting remittances from their citizens abroad," the Vietnam Economic Times quoted Nguyen Hoang Hai, VAFI general secretary, as saying.

The assurances come after analysts warned that the 3 per cent cap on dollar interest rates could cause remittances by overseas Vietnamese to dry up and possibly increase flows in the reverse direction.

Sai Gon Tiep Thi (Saigon Marketing) newspaper claimed in a story that large amounts of remittances have been flowing into the country because interest rates are higher than elsewhere in the world.

The remittances rose 17.9 per cent on average between 2000 and 2007, before jumping by 30.9 per cent in 2008, and 27.3 per cent in 2010.

In that period, the interest for three-month dollar deposits rose from 4 per cent in 2007 to 6.5 per cent in mid-2008. Again it shot up from 1.5 per cent in mid-2009 to 4 per cent in mid-2010.

The 3 – 4 per cent gap between dollar interest rates in Vietnam and the US between 2008 and 2010 were large enough to attract dollar to Vietnam.

Last year alone $600 million were remitted to Vietnam to take advantage of this gap, Sai Gon Marketing said.

VAFI, however, attributes the sharp rise in remittances mainly to the jump in the number of Vietnamese working abroad.

In the past few years 70,000 to 80,000 Vietnamese have gone abroad every year, and most remitted their savings home since they did not qualify to resettle abroad.

Asked about a possible repatriation of dollar abroad, Hai said without the State Bank of Vietnam's permission, remitting foreign currencies abroad is "illegal" and not "an easy task."

According to SBV figures, inward remittances went up from $1.2 billion in 1999 to more than $8 billion last year.

But the media has said this only takes into account the remittances received through formal channels and does not consider the money brought home by returnees and sent through other channels.