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Vietnam Table of Contents


Foreign Currency Management

In the 1980s, the Foreign Trade Bank, under the authorization of the State Bank of Vietnam (formerly the National Bank of Vietnam), made payments for imports. Headquartered in Hanoi, with a branch in Ho Chi Minh City, the Foreign Trade Bank managed Vietnam's foreign currency holdings and related matters, such as the resolution of debts owed foreign countries. The Foreign Trade Bank also conducted Vietnam's relationship with the World Bank (see Glossary), following Hanoi's assumption of the memberships held in the Asian Development Bank and the International Monetary Fund (IMF) by the government of the Republic of Vietnam (South Vietnam) until 1975 (see Banking , this ch.).

Vietnam was, in addition, a member of the Comecon-affiliated International Investment Bank and the International Bank for Economic Cooperation in Moscow. Under the terms of Vietnam's Comecon membership, the International Bank for Economic Cooperation extended limited credit in transferable rubles (for value of ruble, see Glossary) for transactions not cleared through bilateral Soviet-Vietnamese trade agreements; the bank also maintained a convertible foreign exchange account for Vietnam.

In order to increase exports, the government used incentives. Bonuses for export production were introduced in 1980, and extended in 1985, to reward cooperatives and other collective entities that met their export production quotas. Incentives to increase exports also were applied through the government's manipulation of foreign exchange disbursement. In general, foreign exchange for import companies either was carefully allocated in the state plan or was determined by the relevant ministries on an ad hoc basis when the companies requested convertible currencies for their operations. The amount of foreign exchange allocated to a company for import operations, however, was determined by the amount of foreign exchange earned by the company exports. Tying foreign exchange allocations to export earnings was intended to act as an incentive to boost export production. The government also required that most export companies turn in between 10 and 30 percent of their foreign exchange earnings. Beyond this general guideline, however, many enterprises were permitted to retain all or a portion of their hard currency earnings in the form of special credits against State Bank accounts. Companies operating in a developing region such as the highlands, for example, were granted a five-year holiday during which they could retain all foreign exchange earnings. Those exporting major commodities such as coal, rubber, and marine products were allowed to retain between 80 and 100 percent of their hard-currency earnings for use in necessary import purchases. Centrally controlled enterprises in the field of tourism were completely exempted from turn-in requirements, and companies that borrowed hard currencies from abroad received preferential status.

Under a system of procurement subsidies, export companies applied for funds to cover gaps between procurement costs and their export revenues. The Ministry of Finance, through its Export Support Fund, disbursed these subsidy payments to the centrally administered trading corporations. Local corporations could receive a subsidy mix based on profits from imports and payments made by local governments. All such subsidies were limited, and companies exceeding the limit could lose their export permits.

Data as of December 1987