Foreigners can, Viet Kieu cannot?

16:46' 09/04/2008 (GMT+7)
VietNamNet Bridge – Many Viet Kieu in the US have found a new type of business: they borrow money in the US and remit the money to Vietnam to their relatives, who deposit the money in Vietnamese banks to enjoy profit from the interest rate gaps. However, this kind of business is still not protected under Vietnamese laws.
Across-border business
Huong, a Viet Kieu in the US, discovered during a visit to the homeland that the interest rates in Vietnam are higher than in the US.
Huong mortgaged her house in the US to borrow money and then remitted the money to a relative in Vietnam, asking the relative to deposit that sum of money in a Vietnamese bank. Thanks to her good credit history, she could borrow $100,000 for 25 years with the interest rate of 7% per annum.
In Vietnam, her relative deposited the sum of money (converted into VND) in several banks with the interest rates of between 9-12% per annum. As such, she can get $1,000 in interest from the deposits in Vietnam, while she only has to pay $710 in interest to the US bank.
However, the biggest problem for Huong is that she finds it hard to transfer the profit back to the US as there is no regulation covering this activity.
Illicit business?
According to Huong, a lot of Viet Kieu want to transfer money to Vietnam to make bank deposits or lend to relatives for doing business.
Currently, they are transferring money to their relatives under the mode of overseas remittance. Previously, ‘overseas remittance’ referred to the small sums of money sent by Viet Kieu to their relatives in Vietnam to help improve their relatives’ lives. However, the situation is quite different now: many remitted sums of money are worth hundreds of thousands of dollars.


However, as said above, money can be remitted to Vietnam, but cannot be transferred back abroad under legal channels. As a result, Viet Kieu have to rely on unofficial channels of transferring money, and if a dispute arises, Viet Kieu are always the losers.



Business allowed on paper?



A Viet Kieu said that he once sought lawyers’ consultancy about that and he was told that Vietnamese laws allow Vietnamese individuals to borrow money from foreign sources. The Ordinance on Foreign Currency Management 2005 stipulates that individuals can borrow money from abroad provided they register the loans with the State Bank of Vietnam. The individuals have the right to buy foreign currencies from banks to pay debts and transfer profit abroad.



However, when asked about the procedures, a banker said that there has been no legal guideline about the issue. This means that while the laws allow individuals to borrow money from foreign sources, the State Bank of Vietnam has ‘forgotten’ to promulgate the documents guiding the implementation of the laws.



Foreigners can, Viet Kieu cannot?



The way Viet Kieu are borrowing money in foreign countries and then making deposits in Vietnamese banks is also what foreign investors are doing. The foreign investors are bringing billions US dollars to Vietnam to purchase government bonds. They are protected by the laws, and they have the right to buy foreign currencies to send money abroad.



Meanwhile, Viet Kieu cannot do that because of no legal guideline from the State Bank



The lawyers say that the State Bank should concretise the issues already stipulated in the laws. This will pave the way for billions of dollars more to flow into Vietnam. If so, Vietnam will have more capital for doing business, investing in securities and real estate.