by Thien Ly
The State Bank of Viet Nam plans tough measures against the foreign currency black market, considering it one of the factors behind the shortage of dollar in the banking system.
In co-ordination with local police, the bank has launched a campaign to inspect illegal trading in foreign currencies, particularly at gold shops that are not licensed to do so. Although it has just begun, the police say they have already discovered hundreds of violations and confiscated a large volume of foreign currencies.
However, these efforts do not seem to have had much effect because most gold shops, after being inspected, are still engaged in the business. They say they are operating on the market s "supply and demand" principle.
On January 23, District 1 police in HCM City discovered that Dao Van Hung was carrying SGD3,800, and Hung said he bought the currency from the Kim Ha Gold Shop in District 3 s Nguyen Dinh Chieu Street.
Later the same day, the police caught the shop s employees illegally selling US$1,000 for a customer. On this sudden visit, they also confiscated foreign currencies worth VND8 billion ($421,000) including the US dollar, Japanese yen, Singaporean dollar, euro, and British pound. However, two days later, the shop was still engaged in the same business.
Senior Lieutenant-Colonel Huynh Tri Thanh of Go Vap District Police admitted that even after inspections, the situation of illegal trading in foreign currencies in the city had not reduced much, but it had become more discreet.
The police are only allowed to seize foreign currencies that are being traded or kept in the shops. Most gold shop owners keep their foreign currencies in other places, so what the police confiscate is not much.
"The trading of foreign currencies is a highly profitable business so dealers would never give it up unless the Government has more effective measures," Thanh said.
It is also true that the black market in foreign currency has flourished in Viet Nam since local banks are unable to meet people s needs.
Under current regulations, banks are allowed to sell foreign currencies to people for overseas studies, medical treatment and tourism. Those who want to buy foreign currencies for other purposes including paying for some products and services in the local market have to approach the black market directly.
The fact, however, is that local banks cannot meet even legal needs, so individuals and organisations have no choice but to buy the money in the black market. And those who need to buy foreign currencies for other purposes have to directly get it from the black market.
Ho Huu Hanh, director of the central bank s branch in HCM City, admitted that local commercial banks did not have enough foreign currency to sell to enterprises for their import needs, so individual demand was even more difficult to meet.
The leader of a joint stock commercial bank in Ha Noi agreed with Hanh, adding that in fact some foreign exchange regulations also indirectly encourage the existence of the black market.
In particular, people can deposit any amount of US dollar that they have with the banks without declaring their source. Another regulation says that people who receive the greenback from their relatives abroad do not have to sell it to the banks.
"The current difference in the exchange rate between banks and the black market is another reason for the latter to exist and develop," he said.
In 2009, the money sent by Vietnamese migrants to Viet Nam was about $6.2 billion. However, local banks were able to buy just 10 per cent of this sum.
A gold shop owner in District 10 said that since dollar prices on the free market were still higher by VND800 per dollar than the rate quoted by commercial banks, people still preferred making transactions outside.
However, Cao Sy Kiem, member of the National Advisory for Monetary Policies and former Central Bank governor, said the time was right for the State Bank to clean up the market. "If it does not do this now, it never will," he said, adding that illegal foreign currency exchange had caused "chaos" in the market.
Rising credit costs
The lack of capital for production and trading activities has forced many enterprises to accept bank loans at interest rates higher than the ceiling imposed by the central bank.
A senior official of a joint stock company involved in animal feed production in Binh Chanh District said that his company was suffering interest rates of between 16 and 17 per cent while the rate mentioned in the loan agreement was just 12 per cent.
Tran Tuan Khanh, director of a leather shoe company in the Binh Duong Province, also said that for the last three months, his company had to pay interest rates 3 or 4 per cent higher than the regulated level to access bank loans.
How does this happen? Enterprises, in fact, have only to pay the 12 per cent interest rate as regulated by the central bank, but they are required by the commercial banks to pay other fees. These include consulting fees, appraisal fees, property guarantee fees and management fees. All these additional fees push the total costs that enterprises have to pay to get bank loans to very high levels.
Cao Sy Kiem, chairman of the Small and Medium Enterprises Association, also said that he had recently received many complaints from member companies about the high lending rates.
He agreed that many local commercial banks were collecting many kinds of fees at irrational levels as though they wanted to raise difficulties for them.
"Small and medium enterprises always meet difficulties to get access to bank loans particularly when the Government is applying monetary tightening policies. Therefore, they have no ways to choose except they must accept bank loans at high interest rates," he added.
Many enterprises also admitted that when compared with the capital they raised from the black market, bank loans with such high interest rates were still cheaper. However, at such high costs, it would be very difficult to ensure they could make profits of about 20 per cent per year to maintain their production and trading activities, they said.
For their part, the banks say they now have to pay deposit interest rates of 10.5 per cent per year and incur management fees and promotion costs of about 3 per cent. This means that the banks would make no profit from lending unless they get returns of at least 14 to 15 per cent.
Some enterprises have said that because they need capital to maintain production activities, they are ready to accept bank loans at high rates. However, they are still receiving refusals from the banks because the latter do not have enough money for lending.
Mobile carriers want another digit
Leading mobile carriers have asked the Ministry of Information and Communications (MoIC) for permission to add another digit to existing phone numbers, citing a shortage of numbers believed to have resulted from unrestrained promotions.
Viettel has asked the ministry for one more digit to mobile numbers with prefix 09 for developing its 2G, 3G and Mobile Internet services. MobileFone and Vinaphone also asked the ministry to provide another digit to increase subscriber numbers.
Minister Le Doan Hop said that these requests were "an irrational issue" when Viet Nam has a total population of just over 86 million. He said the ministry would reconsider the real number usage capacity and decide to supply or not.
Viet Nam now has seven mobile carriers with 21 different prefixes. There are over 100 million cell phone numbers subscribed, but half of them are virtually non-existent since discounts offered by mobile carriers for new prepaid subscribers led to an upsurge in demand for new simcards.
The country has 130 million telephone subscribers, 85 per cent of them for mobile services. It also has more than 22 million internet users with 2.89 million broadband subscribers.
The total turnover of the ICT sector was estimated at $6.26 billion in 2009 VNS