Vietnam decree: all cos must convert part of forex to dong
HANOI - The Vietnamese government has issued a decree stating that all businesses that operate in Vietnam, both
foreign and domestic, must convert a percentage of their hard-currency earnings at a state-sanctioned commercial bank.
Decree 05/2001/NDCP was signed Wednesday by Prime Minister Phan Van Khai and takes effect Feb. 1. It expands upon a
1999 regulation that forced many (but not all) companies with business interests here to sell 50% of their foreign exchange
holdings to the government.
That regulation was put in place to help Hanoi shore up faltering hard-currency reserves. But although reserve levels have risen
substantially since then, Hanoi remains concerned about the possibility that too much foreign currency may leak out through
Vietnam's porous borders. The government maintains various rules to keep dollars and other currencies in the country.
According to this week's decree, all businesses must from next month sell some of their foreign exchange earnings to a
government-owned or government-sanctioned bank in order to provide those banks with enough hard currency to meet their
customers' borrowing needs, a central bank official told Dow Jones Newswires.
"Now that all businesses, including foreign-invested enterprises, are allowed to buy foreign currencies from banks, they must also
sell some foreign exchange to the banks," he said.
However, he noted that "exactly how much foreign exchange they will have to sell is not clear right now, and is subject to another
prime ministerial decision, which will be issued soon."
Further details weren't available.
Business and foreign banking executives have long lobbied Hanoi to cancel its 50% foreign exchange surrender requirement. They
say it damages business interests and is no longer necessary to maintain national currency reserves.
Dow Jones - January 19, 2001.
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