Remittances take their toll on economy
by Le Hung Vong
(VNS) Remittances from abroad reached a record high of nearly US$11 billion, or 8 per cent of Viet Nam's gross domestic product, in 2012, but economists were less than happy about it, saying it meant hidden economic and social costs for the country.
Large remittances are a weakness for a country's economy, they said, claiming that for getting $10 billion, Viet Nam suffers a "loss" of $83 billion or $218 billion depending on whether it is based on the average international per capita income or regional number.
Their labour contributes to the GDP of the host countries while their spending also benefits that country, they said.
If Viet Nam could provide jobs for all its workers, it would benefit proportionately, they said.
Then there are many Vietnamese women who marry foreign men for economic reasons and move abroad. They are also lost to the country's workforce, the economists pointed out.
High remittances also indicate the backwardness of a nation's economy. The Philippines, for example, has the highest remittances while its per capita GDP is much lower than other countries in the region like Indonesia, Thailand, Malaysia, and Singapore.
The World Bank said developing countries received a total of $406 billion in overseas remittance last year. India topped the list with $70 billion, and was followed by China ($66 billion), the Philippines and Mexico ($24 billion), and Nigeria ($21 billion).
Some 400,000 Vietnamese work abroad, while 4 million other ethnic Vietnamese live in around 100 countries.
Despite the global economic turmoil that has caused travellers across the world to tighten their purse strings, Viet Nam received a record number of 6.85 million international visitors last year, a year-on-year increase of 9.5 per cent.
Of them, 4.17 million were tourists, a 7.3 per cent rise and also a new record, according to figures from the General Statistics Office.
Nearly 1.17 million foreign visitors came for business purposes, indicating optimism and confidence in the country's business and investment climate.
Almost the same number came to visit their relatives.
The number of visitors coming for other purposes like medical care and education was nearly 360,000, a year-on-year increase of 2.1 per cent.
Chinese were the largest group of foreigners visiting the country at 1.43 million. The neighbouring country is the third largest exporter to Viet Nam and 14th largest investor.
At around 576,000, South Koreans were the second largest group of visitors, an increase of 30.7 per cent over 2011.
South Korea is the second largest investor and fifth largest exporter.
The third largest group of visitors was the Japanese, also with over 576,000 arrivals, a year-on-year increase of 19.7 per cent.
Japan is the largest investor and donor and the second largest exporter.
Around 444,000 visitors came from the US to Viet Nam, up just 0.9 per cent over last year.
The year also saw more than 409,000 Taiwanese visiting Viet Nam, a year-on-year increase of 13.4 per cent, making them the fifth largest group.
Taiwan is the third largest investor in Viet Nam.
The other large groups of visitors were from countries that do a lot of business with Viet Nam — like Australia, Cambodia, France, Laos, Malaysia, Russia, Singapore, and the UK.
Competition has become bruising in the Da Nang hotel industry following a sharp increase in the supply of rooms after a hotel and resort construction boom in the region, a meeting held by the city's Department of Tourism and Tourism Association heard on December 27.
"The oversupply [has led] to room rate discounts and undercutting, and has a serious impact on the tourism industry." Huynh Tan Vinh, deputy general director of Bac My An Tourism JSC and chairman of the Tourism Association, was quoted by Thoi Bao Kinh Te Sai Gon (Sai Gon Economic Times) as saying.
A series of two- and three-star beach hotels have dragged room rates down to VND300,000-400,000 per night.
Such low prices also pose a great threat to hotels located in the city's downtown, Vinh said.
Le Vinh Quang, chairman of Phu Hoang Transport Service Co., said the city authorities should make careful plans for the development of new hotels since in the current situation, it is hard to bring both hotel room rental and service quality under management.
Once the development goes out of control, the situation would become messy and Da Nang's reputation would be lost, especially at a time it is striving to become a tourist city, he warned.
The reputation as a tourist city is linked with festivals, but Da Nang has yet to achieve the expected results due to many reasons, especially the timing of its festivals.
"For instance, the fireworks competition held on April 30 and May 1 attracts a large number of tourists.
"But Da Nang gets crowds of tourists on these days in any case, so there is no need to attract more tourists at this time of the year by organising the fireworks event.
"If the competition is organised in summer when the weather is nice, Da Nang could avoid the crush number of tourists."
The "abnormal" hotel room shortages during these events are to blame for persuading investors to build more hotels, leading to the current oversupply, he pointed out.
But the problem is not just in Da Nang. Luxury hotels across the country have encountered brutal competition and foreign investors have sold several five-star hotels both in the north and south.
According to a report by Grant Thonton, the five-star hotel market is showing signs of grinding to a halt, as revealed by the lower average room rate and, lower demand.
"Besides, there has been a change in the profiles of tourists. They are now mostly regional tourists and book 3-4 star hotel rooms," it said. —VNS