Remittance policy of some countries in asia and lessons for vietnam

- Financial instruments used in mobilizing foreign type Dilip Ratha andSanket Mohapatra Sonia Plaza 2008 - Analysis of the remittance system Raul Hernandez-Coss, 2005 - Limit the prohibi

1 The necessity of thesis

There is always the huge demand for the capital of the economicgrowth and the sustainable development such as poverty reduction indeveloping countries, especially in countries with low domestic saving rate.For these countries, domestic resources play a fundamental role, butexternal resources is also extremely important for the growth in order tocatch up with other developed economies In order to meet the capital need,many countries turn to domestic or international financial markets to issuegovernment bonds and international bonds or absorb foreign directinvestment (FDI) or receive official development assistance (ODA) but alsoless interested in the amount of money that individuals transferred fromabroad to their relatives in the country, that is the remittance Remittancetends to be more important for the countries with low and middle incomes.However, in some countries, remittance flows are limited by the internalfactors of the remittance-receiving countries such as the management policy

of the state, money transfer fees, domestic banking systems This factrequires improved policies to optimize the role as well as the potentialbenefits of remittance flows to the economy

In the developing countries such as typical Asian countries: India,China, Philippines remittance inflows on domestic increase dramatically.Across the world, the largest remittance-receiving countries in 2013 areIndia, China, Mexico, the Philippines and France In Asian countries, thethree leading countries in attracting remittance were India, China, thePhilippines and Vietnam ranked the fourth For Vietnam, remittancesbecome increasingly important In recent years, remittance flows to

Vietnam increased both in absolute and relative terms to GDP The figuresshow that, from 1993 to 2009, remittances have increased by 45 times, from

$ 141 million in 1993 to 6.28 billion in 2009 and Vietnam in 2013 hasreached more than $ 12 billion in remittances to attract from abroad

Implementing policies to open up the economy, Vietnam has appliedthe easing of remittance flows since 1989 Changes in foreign exchangemanagement policy also create more favorable conditions for the inflow ingeneral and in particular, remittances However, policies relating toremittances still have many shortcomings, which lead to the fact thatVietnam cannot attract maximum remittances to promote the positiveeffects and to minimize the negative impact of remittances

Learning from the experiences in attracting and using remittanceseffectively to promote the economic and social development not only bringspractical significance but also valuable theory In this situation, the study ofremittances policies of the three countries India, China, Philippines to getlessons for Vietnam is urgently needed Therefore, I choose the topic

"Remittance policy of some countries in Asia and lessons for Vietnam"

to be the subject of the thesis

2 Overview of current reasearch

Domestic reasearch:

In recent years, the issues related to financial flows have lured attentionfrom the research community due to the strong growth of remittances inVietnam A number of case studies on issues are such as works of Le MinhTam and Nguyen Duc Vinh (1999), Nguyen Anh Dung & associates(2005), Dang Nguyen Anh (2005), Pfau & Jiang Qing Long (2006),Nguyen Thi Thuy Linh (2006), Nguyen Duc Thanh (2007), Do Thi DucMinh (2007), Nguyen Minh Thao (2009)

The research by Le Minh Tam and Nguyen Duc Vinh (1999) issuggestive on remittances This research detected from the fact thatVietnamese migrants always send money to support their families andrelatives to afford the living, education costs and investment business; Pfau and Long's study (2006) shows a shift in the distribution ofremittances in recent years: gradually from urban to rural, from the RedRiver Delta and the Southeas to the North China and the Mekong delta Inaddition, the authors also focus on understanding the purpose of theremittances

Nguyen Thi Thuy Linh (2006) studied the impact of remittances toeconomic development, especially in the household economy The studyresults show that households receiving remittances tend using a larger share

of increased income for the construction and home repair

Nguyen Duc Thanh (2007) with modeling techniques of generalequilibrium (CGE) analyzes the impact of remittances on the economy ofVietnam The results of this study reinforce that the impact of remittances

on the economies of developing countries are complex and they are mixedamong many different trends

Do Thi Duc Minh and associates (2007) have also successfully built ageneral equilibrium model (CGE) to perform the first quantitative analysis

of the impact of remittances on the Vietnamese economy

Other studies mostly considers the perspective of remittances as an item

in the balance of international payments Thus, they affect the state of thebalance of payments, foreign exchange reserves and the status dollarization,inflation in these specific conditions Remittance can be also as a factor inthe process of financial liberalization

Oversea reasearch:

- Concept, nature of remittance / money transfer, remittances classification,measures to enhance the effectiveness of remittance (Tasneem Siddiqui,2008)

- Relationship between remittances, poverty and investment (Dilip Rathaand Samuel Munzele Mainmbo, 2005)

- Role and importance of remittances, money transfer from abroad todeveloped and developing countries (Admos O Chimhowu, Jenifer Piesse,and Caroline Pinder, 2005)

- Research on the promotion, strengthening, improving infrastructure of thefinancial sector to improve receiving of remittances (David C Grace,2005)

- Remittances (Nikos Passas and Samuel Munzele Mainbo, and Gina ElKoury Abdusanlam Omer, Omer and Gina El Koury Abdusanlam, 2005)

- Migration, development and remittances issues (Rechard H Adams Jr.and John Page, Devesh Kapur, Devesh Kapur, 2005)

- The state of migration and remittances in Pacific-Asia (John Connell andRichard PC Brown, 2005)

- Financial instruments used in mobilizing foreign type (Dilip Ratha andSanket Mohapatra Sonia Plaza (2008)

- Analysis of the remittance system (Raul Hernandez-Coss, 2005)

- Limit the prohibition policy of the host country for remittances (Mark P.Sullivan, 2009)

- The impact of international migration and remittances on poverty (Richard

H Adams Jr and John Page, 2005)

3 The purposes and the mission of the reasearch

- Analyze and clarify the theoretical basis of remittances and remittancepolicies

- Assess and analysis of remittance policies of India, China and the Philippines,

to learn theses lessons in attracting, managing and using remittances as aneffective way to promote positive sides, limiting the negative impacts ofremittance flows to the economy and society

- Assess and analysis the attraction of remittances in Vietnam in recent years,the thesis draws lessons from three countries India, China and Philippines inattracting, managing and using remittances in the effective way to makepolicies on remittances of Vietnam during the period of economic and socialdevelopment

4 The subjects and the scopes of the reasearch

- Clarifying the rationale of remittances and remittance policy: The concept

of remittances and remittance policies; The nature of remittances(remittance flows); The socio-economic factors which determine theforeign source for a country;

- On the basis of theoretical overview of remittances, the thesis analyzeremittances of some Asian countries, of which I focus on three typicalcountries India, China and the Philippines

- From policy analyses of three national remittances, comparison of policiesare made to attract remittances from third countries in order to get lessonsfor Vietnam in attracting and effectively using remittances for socio-economic development of Vietnam

- To demonstrate the point of the thesis, the scope of the dissertationresearch sample typical three countries India, China and the Philippines inthe period from 1995

5 Methodologys

- Using methods in the social sciences, including the method of dialecticalmaterialism, historical materialism, statistical method, comparative method,synthetic method of analysis

- On the basis of the practice of remittance policies of India, China and thePhilippines in order to analyze its impact on the socio-economicdevelopment

- In addition, the thesis will use statistical tools, charts, popular model toanalyze and prove some claims and scholarly perspectives

6 The contributions of the thesis

- The synthesis of the common problems of remittances and remittance policy

as a theoretical basis for the study assessed the impact of remittances for economic development of every country in the process of economic integrationinternational

socio Comparison and evaluation of remittance policy in three countries India,China and the Philippines in order to draw lessons for Vietnam to attract,manage and use remittances efficiently

- The thesis also makes recommendations on policies of Vietnam remittancesduring the socio-economic development period in 2020 on the basis ofassessment of the attraction and use of remittances in Vietnam period from

1995 to the present

7 The structure of the thesis

Besides the introduction, conclusion and reference, texture of the thesis

is divided into three chapters:

Chapter I: Rationale and practice of remittances and remittance policy Chapter II: Remittances and remittance policies of some Asian countries Chapter III: Lessons for the planning and implementation of policies remittances in Vietnam.

CHAPTER I: RATIONALE AND PRACTICE OF REMITTANCES AND REMITTANCE POLICY

1.1 Overview of remittance

1.1.1 The concept of remittance

International Monetary Fund (IMF) defines remittances "are goods and financial instruments for which workers live and work abroad for at least one year transfer into the country." According

to World Bank (WB): "Remittances include cash transfers from foreign, which sourced from income of workers, migrants abroad, are shown in the balance of international payments is funds

transfers (net) " Although the transfer of money (Remittances) can

be international or domestic (between different regions of the samecountry) but the thesis refers only to the international transfer(international Remittances) According to Puri & Ritzema (1999),

remittances (international Remittances) can be defined as "the income

of workers abroad sent home."

According to the Decision 170/1999 / QD-TTg of the PrimeMinister dated on 08.19.1999, the definition of remittances has beenexplained: "Remittances are the freely convertible foreign currencywhich is converted into Vietnam under the form follows: transfer offoreign currency through authorized credit institutions; transfer offoreign currency through businesses providing financial servicesinternational postage; individuals who bring foreign currency intoVietnam Individuals overseas when entering Vietnam with foreigncurrency for Vietnam households abroad must declare to the customsgate about this amount of foreign currency to beneficiaries in thecountry

Thus, the view of the definition of Vietnam remittances isconsistent with the definition of the World Bank and based on thisconsensus view, this definition is the rationale for analysis

1.1.2 The Overview of the global remittance flow

Across the world, the largest remittance-receiving countries in 2010are India, China, Mexico, the Philippines and France According to thelatest report of the World Bank (WB), remittances worldwide in 2013 wasestimated at DOLLARS 534 billion and will increase to 685 billion dollars

in 2015 Developing countries received 406 billion total remittances in

2012, up 6.5% compared with 2011 India is the leading in this list with 70billion dollars, followed by China (66 billion dollars), the Philippines andMexico (with 24 billion dollars), Nigeria (21 billion dollars), Greece (18billion dollars), Pakistan and Bangladesh (with 14 billion dollars).

1.1.3 The factors impacts to the remittance flow among countries

Studies have shown that there are three basic groups of factors thatmay impact remittance flows: 1) group of elements influenced by emotional(altruistic); 2) group of microeconomic (micro-Economic) factors and 3) agroup of macroeconomic factors (macro-Economic)

From these basic factors affecting remittance flows, the cause formation

of remittance flows between countries can be analyzed as follows:

The first reason is the wages gap between rich and poor countries The second reason is that people residing abroad wish to return home

investment business with the desire to make a profit and contribute in theconstruction and development of homeland

The third reason is for migrants to send money home for his family.

With this motivation, people abroad reduce anxiety for his family at home

The fourth reason is related to demographic analysis As the aging

population, the developing countries will have to find other sources oflabor to boost the economy The reason is that, without new labor force, thegovernment cannot afford to pay pensions for increasing amount of elderlypeople

The fifth one caused by the receiving-remittance countries tend to

increase incentives to attract remittances flow which are considered asforeign currency inflows from abroad

The sixth cause is for the payment of debts Regularly, families have to

borrow money to cover the travel costs for exported labors or to studyabroad They hope that they will be able to pay a portion or all of the debtafter a period of study or getting a job This is essentially the same as aninvestment.

The last motivation can be considered is the insurance policy.Migrants may invest on financial assets in the country they work in, butthey cannot avoid the risk of financial market imperfections Therefore, aneffective solution to minimize this risk is to transfer money to theirfamilies

1.1.4 The impacts of remittances to the social and economic development of developing country

1.1.4.1 Positive impacts of remittances to the social and economic development of developing countries

The positive contribution of remittances to social and economicdevelopment can be seen in the following points: remittances provide theeffective channel for strong foreign currency, increase foreign exchangereserves and finance the current account balance deficit; and contribute topromote investment and consumption They are the engine of economicgrowth with stability and minimize credit risk and debt burden; contribute

to improve the fledgling financial system or transfer both knowledge andtechnology They also contribute to poverty reduction in developingcountries as well as having positive impact on human resources.Remittances can help families receiving remittances invest more in humanresources as the increase of spending in education and health

1.1.4.2 Negative impacts of remittances to the social and economic development of developing countries

The basic limitations of remittance flows are expressed such as:remittances increase dollarization and sensitivity to foreign currency inthe economy; causes obstacles in determining the money supply whichincreases risk of inflation The use of foreign currency from remittancesunsettled; which impact on the labor market Members of the family canreceive remittances and depend on remittances or ignore labor efforts

1.2 Overview of the remittance policies

1.2.1ThecConcept and content of remittance policies

Remittance policy is a set of measures, macro and micro policies to attract,manage and use the resources of remittance effectively for the purpose ofdeveloping the country’s socio-economy

The content of remittance policy includes:

*) Foreign Exchange Management Policy

*) Policy to encourage foreign settlers and foreign workers to invest in thecountry

*) Labor export policy

*) The liberalization of the banking and financial services

*) Remittance services competition

1.2.2 The policies to attract remittance flow to finance for the economic development of developing countries

socio-The first policy is to develop and finalize the basis of international lawthrough treaties, official bilateral and multilateral agreements andmultilateral with countries and international organizations around the world.The second reason is to improve the legal framework so as to protect andcreate conditions for businesses, intellectuals, and oversea people to workand invest in their countries The formation of professional associations isalso encouraged and the cooperation in the community and with foreigncountries is expanded

Thirdly, actively support the stability and development of residents abroad,preserve ethnic identity through the expansion of exchanges on manyaspects such as culture, education, sports, donation between domestic andforeign communities

Fourthly, the specific situation of community of each country, each areashould be evaluated in order to encourage and motivate timely positivefactors, promote the community's strengths and limit the negative sides It isalso important to take advantage of remittances for the development ofcountry

Fifthly, help overseas people to have access to the policies of economic development of the country quickly, accurately and properly

socio-1.2.3 Policies on managing and improving the effectiveness of the utilization of remittance

Firstly the State implements policies to guide or motivate remittances toinvest in the manufacturing sector and human such as education and publichealth to create long-term developmental effects for the country

Secondly, for the exchange rate policy: consider a flexible exchange rateregime through the relaxation of trading rate band and when necessary can

be gradually adjusted the official exchange rate band, and reduction ofinterventions on the foreign exchange market

Thirdly, on fiscal policy: According the experience of many countries,while there is an increase of capital inflows, the government need to bequick and decisive in limiting spending, reduce the impact on total demandand inflationary pressures

Fourthly, the completion and development of related policies to attractoverseas investment to strengthen business operations in the country

Chapter II: REMITTANCE AND THE REMITTANCE POLICIES

OF SEVERAL AISAN COUNTRIES

2.1 Remittance and the role of the remittance in Asian countries.

According to World Bank’s report about remittance and globalmigration, the average amount of remittance transferred across nationalborders has bounced back and increased from 416 billion dollars in 2009 to

440 billion dollars in 2010 The report indicated that 7 of 10 countrieswhich received the largest amount of oversea remittance respectively areIndia, China, Philippines, Pakistan, Bangladesh, Vietnam and Srilanka.Remittance contributed such an important part to the economy’s recoveryafter the crisis period The amount of money transferred through theremittance is considered as the second important foreign money sources afterthe direct foreign investment of developing countries Indian, China,Philippines are the most typical countries for receiving the remittance, hence

what are the impacts of these money flows to the development ofsocioeconomic of each country? What lessons that Vietnam could draw fromthe experience of the attracting and utilizing remittance policy of thesecountries?

2.2 The Remittance policy of India, China and Philippines

2.2.1 In India

2.2.1.1 The remittance policy of India

According to the report of World Bank about the reality of oversearemittance in India, in 2013, the remittance transferred back to India was 71billion dollars For the purpose of transferring the remittance as the valuableforeign currency used for the development of socioeconomic, India hadimplemented many policies for attracting and using the oversea remittanceeffectively:

*) The policy for people settling abroad

Based on the fact that the remittance is the money transferred by theIndian living abroad back to their countries, the Indian government hadimplemented many more opening and clearing polices for attracting theirnational residents living abroad In 1998, India issued constructing bondonly for Indian people living oversea After that, Indian governmentenforced "quasi-citizenship" regulations stating that Indian nationalresidents are received their rights as the domestic people includingtravelling in and out the India without visa, owing house and land in Indiaand receiving the investment incentive only for Indian national residentsliving oversea Additionally, New Delhi government has established theDepartment of Indian national residents’ matters for solving their questionfrequently, or found Non-Resident Indian - NRI City with modern