Viet Nam: A Top 10 Recipient of Remittances

2016 top 10 remittancesAccording to the World Bank, Viet Nam ranked a close 9th to Bangladesh in 2016 in total remittances with an infusion of $13.4 billion. 

With a 2016 GDP of $202.6 billion this means that 6.6% of Viet Nam’s GDP was attributed to remittances.  (See GDP definition below.)

Where Does the Money Go?

According to the State Bank of Vietnam HCMC Branch, a report released in early 2016 indicated that 70% of remittances went to production and business projects, while 21.6% went to the real estate market and 7% was spent on families’, i.e., relatives’, daily lives, healthcare and education services. 

One result of the decrease in the dollar interest rate to 0% a couple of years ago has been more money flowing into real estate.  (HCMC has one of the hottest real estate markets in the world.)  The rationale behind the official decision to lower the USD interest rate to nothing was to prevent people from hoarding dollars.

remittances vn
Here is an overview of Viet Nam-bound remittances from 2006 to 2015.  (Source:  WB)

Another way to make money with money is simply to have foreign currency converted to VND and park it in a CD account.  Current savings interest rates are in the 7-8% range, considerably higher than in the sending countries.  This reflects the growth of the domestic credit market and explains why so many banks are doing so well.

vn gdp
Here’s a graphic look at Viet Nam’s dramatic GDP growth from 1985 through 2016.  (Source:  WB)

Brain Circulation:  A Mixed Bag

Remittances are one of the benefits of having a large diaspora and one reason why the term “brain drain” is not a useful description of what happens when people emigrate for whatever reason.  There are about 4.5 million overseas Vietnamese nearly half of whom are in the US.  Vietnamese-Americans send 60% of the total.  This also includes money sent by Vietnamese working overseas on a work visa.  The majority is sent by overseas Vietnamese. 

Future Prospects

It was predicted earlier this year that the decrease in remittances would continue, especially from the US, because of tighter restrictions on immigration to the US that would primarily affect illegal immigrants and those with a work visa.  (These individuals comprise up to 38% of all workers in the US from the Philippines, Viet Nam, and India.) 

In fact, it is estimated that Ho Chi Minh City will most likely receive a total of $5.2 billion in 2017, an increase of 6% from 2016.  Let me go out a limb here and say “As HCMC goes, so goes the country.”  ​(Viet Nam’s economy grew at the fastest rate in a decade this year and slightly higher than the government target of 6.7% exceeding the 6.21% for 2016.)

The November estimate was $5.7 billion, which was revised downward because of plans by the US Federal Reserve System to increase interest rates several times next year.  Another unknown variable is the VND/USD exchange rate, for which an “upward trend” is predicted “in the next four or five months”.  The VND has been stable for a number of years, thanks to government policy.  This means that there is virtually no difference on a given between the bank and “black market” rates.

Definition of GDP from The World Bank:  It’s useful from time to time to actually define terms, even if they are seemingly well-known.  Here’s the definition that the World Bank uses:  GDP at purchaser’s prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in current U.S. dollars. Dollar figures for GDP are converted from domestic currencies using single year official exchange rates. For a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions, an alternative conversion factor is used.

MAA

Advertisements

Vietnam Remittances Top $12 Billion in 2015; OV Investment Nearly $9 Billion

dollar_NTEG
File photo courtesy of TNN.

Last year, Vietnam received $12.3 billion in remittances, according to the World Bank, 57% of which came from the US.  This money is used for a variety of purposes, including investment in new businesses.  Another use is simply to convert dollars to VND and park the money in a savings account in order to earn 7% interest, a substantially higher ROI than in the US, where the interest rate is hovering around 1%.

In addition to remittances, there is significant overseas Vietnamese investment here, contrary to the letter and spirit of this recent Bloomberg article entitled Vietnam’s Divide: Slow Healing, Fewer Prospects for Children of U.S. Allies. According to the Ministry of Industry and Trade, overseas Vietnamese have invested in 52 out of 62 provinces and cities in Vietnam, where they currently run about 3,600 businesses with some 2,000 projects valued at a combined total of $8.6 billion.  The projects are in trading, tourism, construction and real estate, in addition to the production of export goods, aquaculture and seafood processing. They bring generate about $20 billion in annual revenue.

The Ministry mentioned that overseas Vietnamese companies and entrepreneurs have stakes in domestic banks such as Techcombank and VPBank, and major property and tourism businesses such as VinGroup and Sungroup.  There’s also overseas Vietnamese investment in large manufacturing companies like Eurowindow and Masan, as well as the waste processing firm Da Phuoc.

MAA