Vietnam’s New Currency Law Not A Big Threat To Foreigners, Bankers Say
HANOI, Vietnam (AP) _ Foreign investors have little to fear from new restrictions on the use of the U.S. dollar and other foreign currencies in Vietnam, bankers said Friday.
The new law, effective Oct. 1, requires Vietnamese firms to deposit all foreign currency earnings into special accounts and then regulates access to the funds.
It also requires that Vietnamese dong be used for almost all domestic transactions.
The rules aim to boost demand for the dong while squeezing the parallel dollar economy that has existed for years in Vietnam.
″The immediate impact is theoretically nil for foreign investors because the new law doesn’t apply to them,″ said Bernard Frachon, general secretary in Vietnam for France’s Banque Nationale de Paris. He cautioned that unforeseen future laws could affect foreigners.
Firms with foreign backing can continue to pay for imports and employee salaries in dollars and other currencies under the new guidelines, issued earlier this month by the State Bank of Vietnam, the country’s central bank.
One possible impact would be felt by companies that pay in dollars for imported goods they must then sell for dong on the domestic market, said Noel Pinpac, head of international banking at Indovina Bank Ltd., Vietnam’s oldest joint-venture bank. Their risk would increase as they wait for dong revenues to be converted back into dollars.
Foreign bankers agree that the State Bank is acting sensibly to promote the use of a single currency, but they say the bank will need time to implement the new law.
″It’s not going to be a big bang,″ said one Western banker, who spoke on condition of anonymity.
″The major change is that they want to take dollars out of the economy and replace them with dong,″ he said. ″They do not want to scare away foreign investors and travelers.″
Foreign firms have pledged more than $9.3 billion in investment since Vietnam opened up to overseas investors in 1987.
John Brinsden, chief executive in Vietnam for Britain’s Standard Chartered Bank, said many of his international corporate clients were phoning him in near panic about the law two weeks ago. Their fears lessened as the scope of the currency restrictions became more clear.
″Fundamentally, the State Bank does not want to upset the apple cart as far as business is concerned,″ Brinsden said.
Vietnamese have used dollars and gold as hedges against inflation, and many still fear depositing money in banks that, under socialism, served state-owned enterprises only.
Bankers estimate that as much as $1 billion in dollars might still lie outside Vietnam’s banking system.
The government wants to attract the money into banks as part of an effort to mobilize up to $20 billion in domestic investment capital needed to help double national income by the end of the decade.