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USD flowing to banks in Vietnam
Currently, the USD interest rate in the US is around 3%/year while the rate in Vietnam stands at 6%/year. This has led a lot of overseas Vietnamese to transfer money to banks in Vietnam for more profit.
Visiting Vietnam in early 2008 opened an effective and low risk business window for Mr Tan, a Vietnamese-American. He decided to transfer all of his savings (around 250,000 USD) from a local bank in California to Vietnam via a relative.
Tan is not the only one. The very attractive interest rates offered by Vietnamese banks become are strong motivation for many overseas Vietnamese in the US to use accounts here. They borrow USD in the US and then create accounts in Vietnamese banks.
An anonymous overseas Vietnamese said that the interest rate for lending in the US is 5%/year on average (varying with lonaupon kinds of borrowing), meanwhile the VND savings interest rate in Vietnam is around 11-12%/year. Investors accept the risk for this profit margin.
According to a financial expert in Ho Chi Minh City, the difference is attractive not only for overseas Vietnamese but also the others. “This is very dangerous if the Government does not interfere immediately,” he said.
A practical response would be to limit short-term loans from the outside the country that lead to covered-borrowing loans. For example, a foreign company joints with a domestic company but the real story is transferring capital (USD or Euro) into the country.
“The difference in interest rate has created favorable conditions to move more and more money into the hand of foreigners. So that, if the interest rate changes to an unfavorable position, they would quickly withdraw their capital and the banking system will become unbalanced”, the expert explained.
VNN
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