VietNamNet Bridge – Prime Minister Nguyen Tan Dung has approved the project on heightening the convertibility of the local currency, VND, and combating with the dollarisation in the national economy.
The project is expected to be completed in 2010, by that time, the convertibility of the local currency will be improved, while the dollarisation, which means the popular use of the dollar in transactions in Vietnamese territory, will be minimized. The aims of the project are to foster the external economy, attract foreign investment, and heighten Vietnam’s position on the international market. The reduction in the dollarisiation will help improve the efficiency of the monetary and exchange rate policies.
By 2010, the convertibility of the VND will be fully implemented in Vietnam, which will pave the way for heightening the international convertibility of the VND in the future. The current transaction liberalization and the involvement of local currency, VND, in export activities will be achieved. From now to 2010, Vietnam will gradually reduce or remove the price quotations in dollars, not allow payments in dollars, and illegal foreign currency trading. The banking system will find out suitable ways to attract floating dollars on the black market into the banks.
In order to undertake the project, the Government has asked the central bank to build up the policy on basic interest rates, which will be based on the market supply and demand. The central bank will ensure the harmonization between the exchange rate and interest rate policies to ensure the benefit of holding VND and foreign currencies.
The State Bank of Vietnam will follow a flexible forex policy which allows the boosting of exports and attracts foreign investment. The forex policies will be renovated, according to which there will be more freedom in capital transactions and current transactions. In addition, a lot of tasks have been assigned, including 1. liberalizing currency transactions 2. removing the licensing to remit foreign currencies abroad for individuals and credit institutions 3. gradually raising the allowed proportion of mobilizing capital in VND by foreign banks 4. raising reserves in foreign currencies.
A lot of measures will be implemented to carry out the project, of which the central bank will do step by step, remove many kinds of licenses in foreign currency management and trading, as well as the limitations in using foreign currencies.
Other ministries, including the Ministries of Finance and Trade, will join forces with the State Bank of Vietnam to undertake the project. The Ministry of Finance has been assigned to develop the capital market in VND, while the Ministry of Trade will find out the solution to have the VND involved in export activities. The Ministry of Planning and Investment will consider enacting regulations allowing foreign investors to make investment capital in projects in Vietnam in VND. Besides, Vietnam may consider removing the regulations on balancing foreign currencies of different kinds in foreign invested enterprises.
Assessing the current situation of the dollarisation and the convertibility of the VND, the central banks said that the VND is still not favoured in transactions and payment, and that the VND has no convertibility in the world.
Meanwhile, the dollarisation is thought to be “relatively serious”. This explains why a big volume of foreign currencies is circulating on the black market and held by the public which is out of the control of the state bank. This has resulted in illegal dollar trading and illegal payment in foreign currencies.
Viet Nam Net
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