Record remittances - "Golden resource" to boost growth

Despite the general impact of the global economy, remittances to Vietnam still maintain their position in the top 10 countries with the largest remittances in the world. According to estimates, the amount of remittances to Vietnam has reached nearly 16 billion USD. This is considered a high amount of remittances in the current difficult context.

Top 10 countries receiving the largest remittances

The Migration and Development Report by the World Bank (WB) and the International Organization for Migration Cooperation (KNOMAD) said that remittances to Vietnam have regularly reached over 10 billion USD/year since 2010. In particular, in 2023, Vietnam attracted about 14-15 billion USD and was in the top 3 countries receiving the most remittances in the Asia-Pacific region, and the top 10 countries in the world in terms of remittances.

As a major economic center of the country, Ho Chi Minh City has always been the place that attracts the largest amount of remittances. Ho Chi Minh City leaders said that remittances are estimated to reach nearly 9.5 billion USD in 2023, an increase of 43.3% compared to the previous year. This is the opportunity and key resource to help the city recover quickly and develop steadily in the post-Covid-19 period.

According to Mr. Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam, Ho Chi Minh City branch, remittances to the city, in addition to the fundamental factors directly related to overseas Vietnamese and workers abroad, the world economic growth has an important impact on the income of overseas Vietnamese and workers... the seasonal nature also plays an important role and is most clearly demonstrated at the end of the year and the traditional Lunar New Year.

Accordingly, at the end of each year and during the Lunar New Year, the amount of remittances sent back is higher than the average of the months of the year. This factor comes from the sentiments of the majority of overseas Vietnamese towards their homeland, relatives and family every time Tet comes, sending money back to give to relatives at the end of the year, as a tradition of remembering the source of water, showing gratitude and thanks to parents and relatives in the homeland for a prosperous Tet.

The peak season for Tet remittances usually lasts about a month before and after Tet. According to recorded data, the amount of remittances sent domestically during this Tet peak season has increased significantly in both the number of remittances and the amount of money sent per item.

According to the Department of Overseas Labor Management (Ministry of Labor, War Invalids and Social Affairs), the total number of Vietnamese workers going to work abroad in 2023 is 159,986, reaching 133.3% of the plan. Of these, 55,804 are women, accounting for nearly 35%.

Previously, the target set for 2023 was to send 110,000-120,000 workers to work abroad.

Japan is still the leading market receiving Vietnamese workers, with more than 80,000 people. Next are some major markets attracting many Vietnamese workers to work such as: Taiwan (China) 58,620 workers; South Korea 11,626 workers; China 1,806 workers...

Currently, Vietnam has about 650,000 workers working in 40 countries and territories around the world, concentrated in several large markets.

Vietnamese workers go to work abroad in many different types of occupations, mainly in the manufacturing sector accounting for 80% including (mechanics, textiles, footwear, electronics assembly...); the rest are in the construction, agriculture, aquaculture, and service sectors including (caring for the elderly, sick people, domestic help). On average, each year, the number of Vietnamese workers going abroad accounts for approximately 10% of the employment target that needs to be solved.

On average, after 3 years of working abroad, workers can save from 500 to 700 million VND. In general, workers working abroad earn an average income 5 to 8 times higher than their domestic income.

With the money they have saved, many families have escaped poverty and built decent houses. After returning home, workers have the ability to invest in production and business, develop production, and more importantly, their skills and qualifications have also become valuable resources.

Ms. Nguyen Thi Thoa (Ly Nhan district, Ha Nam) said that her family has 2 sons and 1 daughter-in-law who are working in Japan and send back billions of dong each year. Thanks to that, her family has built a garden house worth more than 2 billion dong. In addition, each child has also bought a nice piece of land outside the town so that when they return home, they can use it as a place to do business.

“Without the regular income sent home by our children, life would be very difficult because we farmers would not know how to make money, just enough to eat every day,” Ms. Thoa shared.

Besides, many villages in localities across the country have also "changed their skin and flesh" thanks to remittances such as Bac Giang, Bac Ninh, Vinh Phuc, Thai Binh, Thanh Hoa, Nghe An, Ha Tinh...

Important resources for socio-economic development

According to economist, Associate Professor, Dr. Dinh Trong Thinh (Academy of Finance), the amount of remittances to Vietnam is increasing. In 2023, the global economy is facing difficulties, so it is normal for the cash flow of Vietnamese people to Vietnam to decrease compared to last year, but at 14-15 billion USD, it is very high. This is a large source of capital to supplement investment in the domestic private economic sector. The cash flow of Vietnamese people abroad is mainly sent back to relatives and family for spending, construction, buying houses, etc. This has greatly contributed to ensuring the lives of many families and supporting social security in the country.

Agreeing with the above viewpoint, economist Nguyen Tri Hieu commented that remittances have significantly added to Vietnam's foreign exchange reserves. This increase in flow is partly due to Vietnamese people working abroad believing in the stability of the economy and seeing better investment opportunities in the domestic market. The biggest advantage of remittances today is that they do not carry the same risks as foreign direct investment (FDI).

In addition, this expert also said that the stable and flexible exchange rate policy has had a positive impact on the flow of remittances to Vietnam in recent years. “Any investor wants the exchange rate in the country where they invest not to fluctuate too much. Because if the exchange rate increases sharply while the main source of income in the Vietnamese market is the dong, then when wanting to transfer money to the country where the investor is living (abroad), they will be at a disadvantage,” said Mr. Hieu.

From the perspective of commercial banks, the increasing amount of remittances to Vietnam also helps banks increase their revenue from service activities. When more remittances are transferred through banking channels, banks will have the opportunity to increase the attraction of deposits from converting foreign currencies to VND, adding more investment capital to the economy. Therefore, as scheduled, in the last two quarters of the year, banks always actively launch many attractive policies to attract this valuable resource.

According to statistics, because banks hold foreign currency without interest, more than 70% of people receiving remittances convert to VND. That helps banks have abundant foreign currency sources to serve production and business development, especially increasing national foreign exchange reserves, reducing dependence on foreign capital.

It cannot be denied that remittances are a “golden” resource for socio-economic development, but this resource can easily flow into some risky and speculative areas. Therefore, to promote the role of remittances, experts believe that the Government needs to have policies to continue to maintain macroeconomic stability, control inflation, and change the investment environment in a positive direction.

In particular, according to experts, there should be many policies to "direct" remittances to production and business sectors and good investment channels through creating a good and favorable investment environment as well as developing markets such as corporate bonds and professional and more effective securities to attract investment.