US embassy cable - 05HANOI1374

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