Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

VIETNAM

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of January 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: November 8, 2005.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)Restrictions are imposed on financial transactions and to freeze accounts belonging to individuals and entities associated with terrorism in accordance with (1) UN Security Council resolutions and (2) the list of current terrorist organizations maintained by the U.S. Secretary of State.
Other security restrictionsYes.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Vietnam is the Vietnamese dong.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementEffective December 31, 2006, the State Bank of Vietnam (SBV) quotes the daily average exchange rate against the dollar in the interbank market during the previous business day as the current interbank market rate. Effective January 1, 2007, the SBV widened the dollar-dong trading band, allowing banks to quote rates that vary up to ±0.5% (previously, ±0.25%) from the rate quoted by the SBV. With respect to other currencies, banks and financial institutions may set their exchange rates at their discretion. The exchange rate has remained very stable with respect to the dollar since August 2004 when the SBV announced that the annual depreciation rate for dong would be limited to 1%. During 2006, the dong depreciated 1.4%.



The SBV has continued implementing an exchange rate flexibility road map, including (1) allowing banks to set the dong-dollar forward rate on the basis of the difference between the dong basic interest rate announced by the SBV and the U.S target interest rate announced by the U.S. Federal Reserve; (2) liberalizing foreign exchange conversion; (3) piloting dong option transactions with negotiated fees (liberalized the indirect exchange rate to be decided by market forces); and (4) piloting foreign exchange trading in cash with negotiated prices.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketThe SBV permits authorized credit institutions to enter into forward and swap transactions between the dong and foreign currency with maturities of 3 to 365 days. The maturities of forward, swap, and options transactions of foreign currencies are negotiated between authorized credit institutions and customers. The dong-dollar forward rate is set on the basis of (1) the spot rate of the day of signing the forward and swap contract, (2) the difference between the dong base interest rate (a year) announced by the SBV and the U.S. target interest rate (announced by the Federal Reserve), and (3) the maturity of the contract. Authorized credit institutions are not permitted to conduct option transactions with economic entities and other organizations and individuals; however, recently, options transactions with negotiated fees were introduced as a pilot.
References to legal instruments and hyperlinksDecision No. 2554/QÐ-NHNN of 31/12/2006.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currency
For capital transactions
Transactions in capital and money market instrumentsYes.
Transactions in derivatives and other instrumentsYes.
Credit operationsYes.
Use of foreign exchange among residentsResidents may make payments in foreign currency for certain transactions only.
Payments arrangements
Bilateral payments arrangements
OperativeVietnam maintains bilateral payments arrangements with Belarus, Cambodia, China, the Lao People’s Democratic Republic, and the Russian Federation.
Barter agreements and open accountsYes.
Administration of controlExchange control is administered by the SBV.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On external tradeThe SBV issues licenses for (1) the import and export of gold in the form of bars and pieces and (2) gold trading through overseas accounts of gold trading companies and authorized credit institutions.
Controls on exports and imports of banknotes
On exports
Domestic currencyIndividuals are required to declare amounts in excess of D 15 million of the amount brought into Vietnam.
Foreign currencyExports of foreign currency exceeding $7,000 or its equivalent must be declared to customs or accompanied by the necessary documents, as stipulated by the SBV.
On imports
Domestic currencyFor individuals, amounts in excess of D 15 million must be declared on entering Vietnam.
Foreign currencyFor individuals, amounts in excess of $7,000 or its equivalent must be declared to customs. For financial institutions, SBV permission is required.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResident organizations are entitled to open and maintain foreign currency accounts at authorized banks for (1) receiving foreign currency transfers from abroad; (2) receiving foreign currency from other domestic legal sources of foreign currency; (3) receiving foreign currency in cash from abroad in accordance with SBV rules; and (4) making payments for (a) sale of foreign currency to authorized credit institutions; (b) remittances; (c) transfers in foreign currency or account transfers for salaries and bonuses of nonresidents and foreign residents; (d) transfers for making payments for current and capital transactions; and (e) domestic transactions allowed in foreign currency as specified by the SBV.



Resident individuals may open and maintain foreign currency accounts at licensed banks. These accounts may be used for (1) receiving foreign currency transfers from abroad; (2) receiving foreign currency from other domestic legal sources of foreign currencies; (3) receiving foreign currency in cash from abroad in accordance with SBV rules; and (4) making payments for (a) sale of foreign currency to authorized credit institutions; (b) remittances; (c) payments for effecting transfers in foreign currency or account transfers for donations, inheritances, and allowances in accordance with the law; (d) withdrawn foreign currency in cash or transfer to foreign currency saving accounts opened at licensed credit institutions; (e) transfers for making payments for current and capital transactions; and (f) domestic transactions allowed in foreign currency as specified by the SBV.



Resident individuals having foreign currency in cash may open a savings account at licensed credit institutions and are entitled to earn interest in foreign currencies and to withdraw principal and interest in foreign currencies.



Resident enterprises with foreign owned capital must open a direct investment foreign currency account at an AD to receive foreign currency contributions to their capital, medium- and long-term loans, and transfers from foreign currency savings accounts of the enterprise. Remittances of capital, profit interest, and fees and other disbursements related to direct investment may be effected through these accounts.
Held abroadResident organizations operating in specified sectors may open and use foreign currency accounts overseas; for example, (1) licensed credit institutions for operations in foreign exchange abroad; (2) economic organizations having branches and representative offices abroad or needing to have an account to receive foreign borrowing or fulfill commitments and contracts with a foreign partner; and (3) diplomats, armed forces, and political and social charitable organizations working abroad.



Resident individuals living abroad may open and use accounts abroad following the rules of the host country.
Approval requiredYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedNoresident organizations may open and maintain foreign currency accounts at authorized banks for (1) receiving foreign currency transfers from abroad; (2) receiving foreign currency from other domestic legal sources; (3) receiving foreign currency in cash from abroad in accordance with SBV rules; and (4) making payments for (a) sale of foreign currency to authorized credit institutions; (b) remittances; (c) transfers in foreign currency or account transfers for salaries and bonuses for nonresidents and foreign residents; (d) transfer abroad or account transfer to other nonresident organizations or making payments for exports of goods and services to residents; and (e) transfers for making payments for current and capital transactions and domestic transactions allowed in foreign currency as specified by the SBV.



Nonresident private individuals are entitled to open and maintain foreign currency accounts at licensed banks. These accounts may be used for (1) receiving foreign currency transfers from abroad; (2) receiving foreign currency from other domestic legal sources; (3) receiving foreign currency in cash from abroad in accordance with SBV rules; and (4) making payments for (a) sale of foreign currency to authorized credit institutions; (b) remittances; (c) transfers in foreign currency or account transfers for donations, inheritances, and allowances in accordance with the law; (d) withdrawal of foreign currency in cash; (e) transfers for making payments for current and capital transactions and domestic transactions allowed in foreign currency; and (f) transfers abroad or to foreign currency accounts of other nonresident individuals.
Domestic currency accountsNonresident organizations and individuals may open and use dong accounts at licensed credit institutions for (1) receiving proceeds from selling foreign currency to licensed credit institutions; (2) receiving income from other legal sources in Vietnam; and (3) making payments for (a) expenditures in Vietnam in cash or via accounts; (b) current and capital account transactions; and (c) donations and inheritances in compliance with the relevant laws, buying foreign currency from licensed credit institutions for remittance abroad, and for other purposes allowed by law. Nonresident investors must open an indirect investment dong account with an AD to carry out indirect investments in Vietnam.
Convertible into foreign currencyYes.
Blocked accountsAccounts may be blocked only under the order of authorized Vietnamese agencies.
References to legal instruments and hyperlinksEffective December 28, 2006, Decree 160/2006 ND-CP.
Imports and Import Payments
Foreign exchange budgetThe budget is indicative only and not binding.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsImporters are required to submit to commercial banks relevant documents (such as contracts and licenses) for import payments.
Import licenses and other nontariff measuresDomestic firms are allowed to import any goods that are permissible under commercial law. Trading by foreign-owned firms may be carried out only in accordance with the registered business activity of the enterprise. Imports of certain products are controlled by other ministries for health, safety, and moral purposes.
Negative listProhibited imports are weapons, ammunition, explosives, and other military equipment; nonmedical drugs and toxic chemicals; reactionary and/or pornographic materials; fireworks and children’s toys that detrimentally influence personality, education, social order, or safety; cigarettes (excluding limited quantities imported during personal travel); most used consumer goods; most used vehicles, including bicycles and motorcycles, and used vehicle parts; and some types of passenger vehicles.
Licenses with quotasThe Ministry of Planning and Investment (MPI), in coordination with the Ministry of Trade (MOT), may impose ad hoc temporary quantity controls. In addition, imports of motorcycles with a capacity of 175 cubic centimeters require an import license from the MOT and imports of sport guns and bullets require an import license from the Sport Ministry.
Other nontariff measuresSome additional nontariff measures exists.
Import taxes and/or tariffsThere are 20 tariff rates, ranging up to 150%. Most imports of machinery, equipment, and medicine are exempt from tariffs. Certain imports of foreign enterprises that are incorporated under the Law on Foreign Investment are also exempt from tariffs. A rate of 150% is applied to imports of some types of used cars and motorbikes.



Tariffs are imposed on the imports of sugar, eggs, salt, and tobacco.
State import monopolyNo.
References to legal instruments and hyperlinksDecree 12/2006 ND-CP.
Exports and Export Proceeds
Repatriation requirementsAll receipts originating from current transactions by resident entities must be repatriated immediately.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesThe following exports are prohibited: weapons, ammunition, explosives, and other military equipment; antiques; nonmedical drugs and toxic chemicals; timber and timber products from natural forests; wild and/or rare native animals; rare aquatic breeds; certain plants; and cipher machinery and cipher software.
Without quotasYes.
Export taxes
Other export taxesYes.
References to legal instruments and hyperlinksEffective December 23, 2006, Decree 12/2006 ND-CP came into effect.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersPayments for invisibles related to authorized imports are not restricted. Foreign enterprises are allowed to buy foreign currency from commercial banks to pay for their current and other permitted transactions.
Investment-related payments
Indicative limits/bona fide testInformation is not available on indicative limits for interest payments.
Credit card use abroadn.r.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsAll proceeds originating from current transactions by resident entities must be repatriated immediately.
Restrictions on use of fundsRestrictions are the same as those applied to other foreign exchange holdings.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Controls on capital and money market instrumentsControls apply on all transactions in capital and money market instruments and in collective investment securities. All sale or issue abroad by residents of securities must be approved by the SBV and carried out through an account with an AD.
On capital market securitiesTo sell or purchase listed securities on the stock exchange, foreign organizations and individuals are required to open a securities trading account denominated in dong. All payments for and receipts from securities transactions must be effected through these accounts.
Shares or other securities of a participating nature
Purchase locally by nonresidentsForeign individuals and organizations are allowed to hold, in aggregate, up to 49% of an issuer’s listed current shares with some exceptions in the banking sector, which has a maximum of 30%.
Sale or issue locally by nonresidentsShares denominated in dong may be issued only in Vietnam.
Purchase abroad by residentsThese transactions are not allowed.
Sale or issue abroad by residentsYes.
Bonds or other debt securities
Sale or issue locally by nonresidentsThese transactions are not allowed.
Purchase abroad by residentsThese transactions are not allowed.
Sale or issue abroad by residentsYes.
On money market instrumentsControls apply to all these transactions.
On collective investment securities
Purchase locally by nonresidentsForeign individuals and organizations are allowed to hold, in aggregate, up to 49% of an issuer’s listed current shares with some exceptions in the banking sector, which has a maximum of 30%.
Sale or issue locally by nonresidentsThese transactions are subject to approval by the SBV and/or relevant agencies.
Purchase abroad by residentsThese transactions are subject to approval by the SBV and/or relevant agencies.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instruments
Sale or issue locally by nonresidentsSBV approval is required.
Purchase abroad by residentsSBV approval is required.
Sale or issue abroad by residentsn.a.
Controls on credit operationsEnterprises are subject to annual overall external borrowing ceilings and the fulfillment of certain other conditions. Resident individuals may borrow from abroad after being approved by the SBV.
Commercial credits
By residents to nonresidentsResident credit institutions may extend commercial credits in accordance with SBV regulations. Lending by residents is subject to the permission of the prime minister. Once allowed to lend in foreign exchange, enterprises must open a foreign currency account for loan disbursement and collection at an AD. All transactions of capital disbursement, interest payment, as well as related fees must be conducted through this account.
To residents from nonresidentsFor short-term credit, borrowing enterprises must observe the required conditions of the SBV. For medium- and long-term loans, enterprises, including state-owned enterprises (SOEs), must register the borrowing and repayment schedules with the SBV before disbursement, within 30 days of signing the loan contract. Borrowing contracts of SOEs must be approved by the SBV and SOEs must report the borrowing and repayment schedules to the SBV. SOEs may borrow from abroad without prior SBV approval.
Financial credits
By residents to nonresidentsFinancial loans to nonresidents are subject to approval by the SBV or other relevant agencies. Approval from the prime minister must be obtained prior to signing the contract. The loan agreement must conform to SBV regulations.
To residents from nonresidentsThe regulations governing commercial credits apply.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsn.a.
To residents from nonresidentsThe MOF provides government guarantees for borrowing abroad by enterprises and by credit institutions.
Controls on direct investment
Outward direct investmentOutward direct investment requires an MPI permit. Enterprises engaged in these investments must open an account with a bank with foreign exchange authorization and must register such accounts with the SBV. All related transactions must go through these accounts.
Inward direct investmentThe authority to grant foreign investment licenses in Vietnam depends on the scope and areas of investment (as stipulated in Decree No. 108/2006, September 22, 2006, guiding the implementation of Foreign Investment Law). Foreign investment projects must be approved by the government, the MPI, or the Provincial People’s Committee. The forms of foreign investment are regulated by the investment law. Foreign enterprises and foreign partners are required to open specific foreign currency accounts at authorized banks for all capital transactions.
Controls on liquidation of direct investmentn.a.
Controls on real estate transactions
Purchase abroad by residentsn.a.
Purchase locally by nonresidentsForeign investors may not own land and must lease it from the state.
Sale locally by nonresidentsn.a.
Controls on personal capital transactions
Loans
By residents to nonresidentsThese transactions are not allowed.
To residents from nonresidentsSBV approval is required prior to signing the loan contract.
References to legal instruments and hyperlinksDecree 134/2005/ND-CP; Decree 108/2006; Decree 160/2006 ND-CP of December 28, 2006.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadRegistration with the SBV is required for medium- and long-term borrowing.
Maintenance of accounts abroadSBV approval is required.
Lending to nonresidents (financial or commercial credits)Registration with the SBV is required.
Lending locally in foreign exchangeAuthorized credit organizations may extend loans to residents for the following purposes only: (1) borrowing to pay for imports of goods and services, (2) investment projects approved by the prime minister, (3) export projects involving manufacturing or trade, (4) borrowing under the terms of export documents, (5) borrowing to repay in advance external loans that have been guaranteed by domestic credit institutions and that meet certain criteria, (6) borrowing by temporary guest workers from foreign countries as regulated by the SBV, and (7) short-term borrowing for manufacturing or other businesses that do not earn foreign exchange proceeds.
Purchase of locally issued securities denominated in foreign exchangen.a.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsFor most banks, reserve requirements of 8% and 5% apply to deposits in foreign and domestic currency, respectively, with maturity of less than 12 months. For deposits with maturity of 12 to 24 months, the reserve requirements for deposits in foreign and domestic currency are unified at 2%.
Liquid asset requirementsn.a.
Interest rate controlsCredit institutions’ lending rates to customers are not directly controlled by the SBV. Credit institutions and their customers are free to negotiate their lending interest rates. Periodically, the SBV announces the base rate as reference for the credit institutions.
Credit controlsn.a.
Differential treatment of deposit accounts held by nonresidentsn.a.
Investment regulationsn.a.
Open foreign exchange position limitsThe aggregate open position limit is 30%, but the SBV may exempt banks from this limit in special circumstances. Forward and spot positions are included in the calculation of open position limits. These regulations apply to all authorized banks.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsInstitutional investors are not allowed to purchase or hold these instruments.
Limits (max.) on investment portfolio held abroadThese transactions are not allowed.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Pension fundsn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Nonresident accountsDecember 28. Decree 160/2006 ND-CP was introduced.
Exports and export proceedsJanuary 23. Decree 12/2006 ND-CP was introduced.
Capital transactions
Controls on direct investmentSeptember 22. Decree 108/2006 ND-CP was introduced.
Changes during 2007
Exchange arrangementJanuary 1. The SBV widened the dollar-dong trading band, allowing banks to quote rates that vary up to ±0.5% from the rate quoted by the SBV.

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