Overseas bounty
Growing remittances from overseas Vietnamese are
making a huge impact on the domestic economy
HANOI - With wads of cash nestled in suitcases and
money-belts, thousands of overseas Vietnamese are
streaming back to their homeland to celebrate the Lunar
New Year in early February. Tradition calls for sharing
wealth at this propitious time. Yet the generosity is
growing all year round, as the 2.7 million-strong
overseas Vietnamese community plays an increasingly
vital role in the local economy.
Remittances from relatives abroad reached $2.06
billion for 2002, up 17% over the previous year. And
that's only counting the funds that flowed through official
channels such as banks and licensed agents. Estimates
of undeclared funds vary widely, raising the total to
anywhere from $2.5 billion to $4 billion, or the
equivalent of 11% of GDP. This influx of foreign
currency has been crucial in helping Vietnam cope with
its trade deficit, which swelled to $2.77 billion in 2002
due to the 19.4% surge in imports. The remittances also
reduce pressure on the dong and stimulate private
investment, analysts say.
To grasp the significance of this overseas bounty, take a
ballpark figure of $3 billion in remittances. That figure
tops the $2.34 billion of foreign direct investment
disbursed in 2002. It rivals the $3.2 billion raked in last
year by Vietnam's leading export, crude oil. It dwarfs
the $1.45 billion repatriated last year by the 370,000
Vietnamese workers sent to work abroad. Most
remarkably, it exceeds the $2.5 billion in overseas
development assistance, or ODA, pledged by major
foreign donors for 2003.
"Our offspring will still have to pay for ODA, but here,
they don't pay anything for remittances," notes Nguyen
Van Pham, director of economic relations at the
state-run Committee for Overseas Vietnamese. Pham
reports that more than half the money is sent from the
United States, home to 1.5 million ethnic Vietnamese.
In descending importance are Canada, Australia,
France, Germany and Japan. Given that most of the
post-1975 migrants hail from southern Vietnam, it
follows that some 70% of remittances flow down south.
What might seem surprising is that remittances are
growing despite the downturn in the U.S. and Europe.
One explanation is that the damage inflicted on
stockmarkets and the hi-tech and financial industries did
not devastate the overseas Vietnamese, many of whom
hold modest jobs in the service sector. But another clue
lies in the vibrancy of Vietnam's economy, which the
International Monetary Fund predicts will grow 6.5%
this year.
Anecdotes suggests that many families are helping their
relatives start new companies, expand existing
household ventures or purchase real estate in this
promising climate. Overseas Vietnamese are also
credited with aiding the astounding local success of
foreign life-insurance companies, which collected 4.4
trillion dong ($285.7 million) in premiums last year. "I'm
sure [the remittances] are making a very positive
contribution to the premium level of the insurance
industry," says Huynh Thanh Phong, Prudential's CEO
in Vietnam, although he can't pin down an exact figure.
For locals, collecting the tax-free remittances in dollars
or dong has never been easier. With hundreds of local
companies now vying for 3% commissions or less, the
competition has spurred U.S.-based Western Union to
triple its number of sub-agents in Vietnam in just one
year, thereby covering 52 provinces and cities. It
certainly pays to grab the Year of the Goat by the
horns.
By Margot Cohen - The Far Eastern Economic Review - January 09, 2003.
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