Vietnam considers loosening foreign currency management policy

VietNamNet Bridge – Under the draft of the new Ordinance on Foreign Exchange, individual residents can borrow money from foreign sources, pay debts and must be responsible for the borrowing in accordance with the regulations to be drawn up by the government.

If the draft ordinance is approved, Vietnamese individuals would be able to take initiative in borrowing foreign currencies from foreign sources for their personal spending or investments and paying debts.

The State Bank of Vietnam thinks that it’s now the right time to loosen the policy on foreign currency management applied to individuals.

However, economists do not think this way. The draft ordinance, therefore, has not been applauded.

Dr. Tran Hoang Ngan, a member of the National Advisory Council for Monetary Policies, believes that Vietnamese individuals should not be allowed to borrow foreign currencies from foreign sources. It’d be better if only legal entities have the right to do this.

According to Ngan, it’s highly possible that individuals, who borrow money to run their business or buy houses, would not be able to pay debts. “In this case, they would spoil the national prestige and national brand,” Ngan said.

“I wholeheartedly remain against the new regulation,” he said.

Ngan agrees that it’s necessary to promulgate the new Ordinance on Foreign Exchange in order to help stabilize the foreign currency market, especially when the black market has resumed its operation. However, he still believes that the ordinance should be revised, even though the draft ordinance is expected to be ratified in 10 days.

Dr. Tran Du Lich, a well-known economist, has agreed that it’s now not the right time to loosen the foreign exchange management policy.

Every year, tens of millions of Vietnamese farmer householders have to work hard to be able to export $30 million worth of products. Meanwhile, every year, the rich people remit 3.5 billion dollars abroad for healthcare and study services.

Citing the figures, Lich said that foreign currencies have been flowing out of Vietnam, which may badly affect the national balance. Therefore, he has suggested keeping the current strict control over the foreign currency inflow and outflow as an issue relating to the national balance.

Agreeing that a big amount of foreign currencies has been going out of Vietnam every year, a senior executive from Bao Viet Bank said that it’ll be of no use to prohibit people to remit foreign currencies abroad. It’s simply because the demand for having healthcare and study services overseas has been existing. If the government still prohibits the remittance, people would still try to bring money abroad, but through illegal channels.

The banker said that instead of a ban, Vietnam should set up reasonable policies to restrict the remittance (collecting high fees, imposing tax…). This would not only help restrict the foreign currency remittance abroad, but also help increase the tax sums to be collected to the state budget.

In related news, the draft of the new Ordinance on Foreign Exchange does not include the provisions relating to the gold market management, which has raised controversy.

Dr. Lich stressed that foreign currencies means gold as well, while the gold management remains a very burning issue for now.

According to Nguyen Van Giau, Chair of the National Assembly’s Economics Committee, the new ordinance is expected to get the ratification by March 18 or 19. The new ordinance is scheduled to take effects on July 1, 2013.