VietNamNet Bridge – The volume of kieu hoi (overseas remittance) to Vietnam has been increasing in recent years and it is expected to further increase in the upcoming years.

Kieu hoi not only the money

Kieu hoi, or overseas remittance, is the money sent to relatives in Vietnam by either overseas Vietnamese, called Viet Kieu, i.e. the Vietnamese who have been settling in foreign countries, or the Vietnamese people, who are working in 40 countries the territories in the world.

Some noteworthy things about kieu hoi

First, kieu hoi began catching the attention of the public in 1993, but only since 1999, has the kieu hoi volume been increasing stably and continuously. In 2011, even though the world’s economy was still in the crisis, the volume of kieu hoi to Vietnam still reached 9 billion dollars, the highest level so far. As such, Vietnam now ranks the 8th among the countries and territories which receive biggest volumes of kieu hoi.

Second, since 1993, the annual volume of kieu hoi accounts for 6.9 percent of the GDP on average. Especially, the proportion was very high in 2007, at 9.4 percent.

The ratio of kieu hoi on the foreign direct investment FDI since 1993 is 72 percent on average. Especially, in some years, the volumes of kieu hoi were even higher than the implemented FDI. In 2003, for example, the volume of kieu hoi was 2.657 billion dollars, higher than the FDI of 2.650 billion dollars (100.3 percent). The ratio was 112.2 percent in 2004, 114.8 percent in 2005 and 126.8 percent in 2006.

Also during that time, the volume of kieu hoi to Vietnam was double of the ODA (official development assistance) capital. Especially, the ratio once reached the highest peak of 3.6 in 2008.

Third, the increasingly high volumes of kieu hoi have helped improve Vietnam’s general payment balance, increase the foreign currency reserves and ease the pressure on the dong/dollar exchange rate.

Fourth, kieu hoi is really a powerful resource for Vietnam to mobilize to develop its national economy.

Kieu hoi continues increasing

It is expected that kieu hoi would continue rising in the coming years, for some reasons.

Vietnam has more than 3 million overseas Vietnamese, mostly in developed countries, where the average income per capita is high. Vietnam also has more than 400,000 workers working in 40 countries and territories. Preliminary estimates show that the workers can remit 1.8 billion dollars every year, which means that a worker remits 4500 dollars.

The stable increases of kieu hoi to Vietnam in recent years have been explained by the open policies applied by the government of Vietnam. The State now allows to receive foreign currencies in cash or open foreign currency accounts at commercial banks. The money remittance is really low, just equal to 0.05 percent of the remitted money sums.

Especially, receivers do not bear any limitations on the sums of foreign currencies they can receive, and they do not have to pay personal income tax for the kieu hoi.

Experts say that kieu hoi has been flocking to Vietnam recently, partially because of the attractive dollar interest rates in Vietnam which are usually much higher than the international interest rates. This prompts overseas Vietnamese to remit money to their relatives in Vietnam, who deposit dollars at banks for higher profits.

Besides, the big difference between real exchange rates and purchasing power parity exchange rate, which has gone down from previous years, remains large, estimated at about 3 times, i.e. one dollar in Vietnam has the purchasing power three times higher than in the US.

Source: TBKTVN