VIETNAM'S MURKY REMITTANCE PICTURE

UNCLAS HANOI 001374

SIPDIS

SENSITIVE

STATE PLEASE PASS TO USTR EBRYAN
STATE ALSO FOR E, EB AND EAP/BCLTV
STATE ALSO PASS USAID FOR CHAPLIN/ANE
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: EFIN ECON VM LABOR CTERR FINREF
SUBJECT: VIETNAM'S MURKY REMITTANCE PICTURE

REF: A) Hanoi 885 B) HCMC 428

Sensitive but Unclassified -- Please protect accordingly. Do
not post on the internet.


1. Summary: Remittances through the banking system to
Vietnam in 2004 amounted to USD 3.0 billion according to the
State Bank. The IMF representative estimates that this was
really USD 3.2 billion and that another USD 3 to 4 billion
is flowing in through unofficial channels. These informal
inflows include funds sent back by Vietnamese working and
living abroad. The IMF representative believes that money
laundering may also account for part of these remittances.
End Summary.


2. (SBU) According to the Deputy Director the International
Cooperation Office of the State Bank of Vietnam, remittances
totaled USD 3 billion in 2004. This figure measures all
remittances received through the banking system. He was not
willing to provide an estimate for remittances through
informal channels. Remittance refers to any flow of cash
(i.e., unrequited transfer) into Vietnam, regardless of
whether it was from a Vietnamese worker abroad or another
source such as family, he noted. Another State Bank
official from the foreign exchange office noted that the
Government encourages people overseas to send money back to
Vietnam. No taxes or restrictions are placed on those funds
so theoretically all funds should be official. In practice,
some investments might be "unofficial," he added.


3. (SBU) According to IMF representative Susan Adams, the
official channel handled USD 3.2 billion in remittances in

2004. Adams told ECON/C that she estimates unofficial
remittances were an additional USD 3 and 4 billion for 2004.
Adams cautioned that this figure was a rough estimate based
on an analysis of the errors and omissions line of Vietnam's
balance of payments. She also noted that data provided by
SBV were not complete. She estimates the total remittances
through all channels for 2004 were USD 6 to 7 billion.


4. (SBU) Since it is impossible to measure these
remittances or to track them accurately, opinions differ as
to their sources. Vietnamese working or living abroad
contribute to but appear not to account for all of these
remittances. The Ministry of Labor, Invalids and Social
Affairs estimates that 400,000 unskilled or semi-skilled
Vietnamese are working temporarily abroad, primarily in
Korea, Japan, Malaysia and Taiwan. Their monthly wage rates
range from USD 150 to 200 in Malaysia to a high of USD 700
to 800 in Korea and in Japan. While the workers likely send
home as much as they can, their share of remittances is
likely no more than several hundred million dollars. No
doubt Vietnamese living permanently abroad in the United
States, Europe, Canada and Australia are a key source of
remittances, but their share of the total is not clear.
Some portion of remittances seems likely to be laundering of
criminal proceeds from abroad and some may be illicit funds
from Vietnam, recycled and laundered as remittances.


5. (SBU) Given the lack of controls or monitoring of
currency inflows into Vietnam, the IMF representative
believes that there is the potential for significant money
laundering in Vietnam. She believes that a major Ukrainian
investment in Nha Trang, the Sofitel Vin Pearl Resort, and
the Vin Com shopping center in Hanoi owned by Vietnamese in
the former Soviet Union may have been funded with unofficial
remittances. While MPI lists the hotel as a Vietnamese
investment, another hotel manager in Nha Trang told ECON/C
that a party of Ukrainians whom he described as the
"investors" stayed at his hotel at the time of the Vin Pearl
opening.


6. (SBU) A number of experts believe that speculation is
fueling the hot real estate market in Hanoi and Ho Chi Minh
City. (reftels) While it is hard to identify the sources of
investment in real estate, it is easy to see the potential
for money laundering in this largely cash-based economy.


7. (SBU) Comment: Remittances are clearly an important
source of capital for Vietnam's economy that will continue
to help drive economic growth. However, with unofficial
inflows at such high levels, it is imperative for the
government of Vietnam to establish an effective legal
framework to deal with anti-money laundering and counter
terrorist finance. End Comment.

MARINE