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Abundant supply

In recent years, thanks to the stable exchange rate management, the State Bank of Vietnam (SBV) bought foreign exchange reserves of up to more than US$60 billion. Currently, the supply of foreign exchange comes from four sources: disbursement of foreign direct investment (FDI), trade surplus, M&A and foreign currencies transferred by overseas Vietnamese (called remittances). According to information from the World Bank (WB), in 2018, remittance sources to Vietnam reached nearly $16 billion. The agency forecasts that in 2019, remittances will continue flowing strongly to Vietnam.

The above statement is completely grounded, because the leaders of the State Bank of Ho Chi Minh City branch said that in the first eight months, the city had $3.65 billion of remittance transferred to credit institutions. It is estimated that in 2019, the total amount of remittances transferred to Ho Chi Minh City will reach $5.6 billion - an increase of about 10 percent compared to the same period last year. This shows that, in recent years, the flow of remittances into Vietnam has constantly increased in both absolute and relative numbers to GDP. Although compared with the proportion of exports, the foreign currency revenue from remittances is not large, but compared to the value of trade surplus, this is a much larger number. Because in the first eight months of the year, Vietnam's merchandise trade balance had a surplus of $2.93 billion. Even compared to the figure of $11.96 billion of FDI disbursement in the first eight months of 2019 and 16 billion US$ of remittances of 2018, the difference is significant.

According to experts, this is an important resource for the country's socio-economic development, contributing to hunger eradication and poverty alleviation, raising the standard of living of some of the people. Moreover, unlike foreign currency loans from abroad, remittances are a source of non-refundable foreign currency, with no interest, no conditions and no burden on foreign debts to the economy. Economic expert Dinh Tuan Minh said that, as with other foreign currency revenue sources, the more remittances it sends, the stronger the domestic currency of Vietnam, the current account balance as well as create positive impacts on the macro economy.

Because of recognising the importance of remittances, the policy of attracting overseas remittance of Vietnam is more and more open, creating conditions for overseas Vietnamese to remit money, supplement capital for production and business, increase consumption and promote increased investment. Recently, some banks have cooperated with organisations providing smart remittance solutions for remittance payment services to attract overseas remittance from abroad to Vietnam.

Absorb remittance effectively

Because dollar deposit interest rates have been reduced to 0 percent for several years, the amount of remittances to Vietnam has no longer been targeted to save for interest, but mainly to invest in real estate, securities, buying shares or starting a business. In particular, the Government's policies to improve the business environment, promote integration, tax incentives in business, investment incentives have helped the economy absorb remittances effectively and stimulating overseas remittances to move money stronger.

Therefore, in investment, real estate is a place that attracts a lot of foreign remittances, especially in the context that the State Bank limits real estate loan risks. The reason is that if the SBV tightens real estate credit, investors will be forced to find alternative investment sources, including remittances. Besides, the real estate market is getting better, so experts are not afraid of the amount of remittances going to "surf" real estate, if not strictly controlled, it can form “bubble”, which has a negative impact on the market. In addition, if State agencies have loose management, Dinh Tuan Minh also raised concerns about the phenomenon of "money laundering" with remittances.

Late remittance of collected tax, bank will be fined VCN- The General department of Vietnam Customs has requested a commercial bank to urgently check information and ...

These issues show that to "remodel" the flow of remittances into the fields of production, business or other activities that benefit the country's economy, the management agencies must have more policies to create trust for overseas Vietnamese and beneficiaries of this cash flow. Specifically, the macro-economy must continue to be stable, curb inflation, and change the business environment more openly and consistently, loosen business conditions, administrative procedures. This problem, not only attracts more remittances, but also helps remittances into areas that create surplus value for the economy, contributing to a positive increase for the whole economy.