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Vesuve
Joined: 18 Dec 2004
Posts: 28
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 Posted: Fri Jan 28, 2011 4:59 am Post subject: The Stupidity of Dual Currency Rates - and Greed |
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Yes, we all want to get a good deal, but this is just plain, greed. I can relate to poor and even middle class doing this, but the people doing this are very wealthy.
The policy of dual currency rates - an official rate and black market exchange rate gap - is just plain stupidity.
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Money for nothing
Thursday, 27 January 2011
James O�Toole and May Kunmakara
A money changer holds up US dollars and Vietnamese dong at Central Market in Phnom Penh yesterday.
Several weeks ago, staff at ANZ Royal Bank noticed a peculiar customer at one of their ATMs in Phnom Penh.
With a male companion looking on behind her, the woman inserted a card issued by Vietnam�s Techcombank and withdrew the maximum allowable amount of cash, US$2,000.
Then, taking out a new Techcombank card for each transaction, she repeated the task 11 times in succession.
The woman is one of a growing number of Vietnamese nationals who bankers say have been cleaning out the Kingdom�s ATMs, taking advantage of the unusually large gap between Vietnam�s official and unofficial exchange rates to earn thousands of dollars in profits.
ANZ CEO Stephen Higgins said yesterday that Techcombank cardholders had withdrawn roughly $12 million in cash from his bank�s ATMs since mid-December, with the bulk coming in the past two weeks.
They took roughly $5 million from ACLEDA Bank machines from the beginning of the month until yesterday, ACLEDA Executive Vice President So Phonnary said.
All told, Techcombank users have withdrawn �at least $20 million� in cash from Cambodian ATMs in the past few weeks in a scheme that has also stretched to Singapore and China, Higgins said.
�It�s very smart what they�re doing,� he said.
�It�s one of those things where one person figures out this is an easy way to make money, tells a few people who tell a few more people, and suddenly you get busloads of people coming across the border to try and do it.�
The Vietnamese government has pegged the country�s official exchange rate at roughly 19,500 dong to the dollar, though the black market rate � also used legally by money changers in Cambodia � is closer to 21,000 dong to the dollar, a difference of about 8 percent.
The Vietnamese who have been travelling to the Kingdom have taken advantage of this.
At Cambodian ATMs, they receive US dollars that have been converted from the dong in their home accounts at the official exchange rate.
They can then trade these dollars for dong from Cambodian money changers or money changers in Vietnam who use the black market rate, earning the difference with the official rate.
ATM transaction fees eat into these profits, but even accounting for such costs, Higgins said the Techcombank users were likely earning about $20,000 for every $1 million in cash withdrawn.
Techcombank, he added, is uniquely exposed to the scheme.
While most Vietnamese banks charge international transaction fees to make up for the difference between the dong�s official and unofficial rates, Techombank�s fees are unusually low. |
Link: http://www.phnompenhpost.com/index.php/2011012746406/National-news/money-for-nothing.html |
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s10czar
Joined: 20 Feb 2010
Posts: 60
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| Posted: Fri Jan 28, 2011 5:32 am Post subject: |
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That's not greed.
Arbitrage is just good, clean, heads-up business. What do you think Goldman Sachs is doing day-in, day-out?
If the big boys can do it, then so should the little guys. More power to 'em. |
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Vesuve
Joined: 18 Dec 2004
Posts: 28
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| Posted: Fri Jan 28, 2011 6:01 am Post subject: |
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| s10czar wrote: |
| That's not greed. |
Depends on the definition. The locals have been "dollar crazy" and that's fine, but I have been squeezed for the black market rate by my landlord (he tried and failed), and in other instances. Constant.
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Arbitrage is just good, clean, heads-up business. What do you think Goldman Sachs is doing day-in, day-out? |
Goldman Sachs and the rest of the banksters on Wall St. are the worst, but that's another topic. I do see your point.
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If the big boys can do it, then so should the little guys. More power to 'em. |
The folks doing this are not "little." |
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DNK
Joined: 22 Jan 2007
Posts: 236
Location: the South
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| Posted: Fri Jan 28, 2011 8:57 am Post subject: |
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I am still puzzled by the idea that paying the black market rate is getting "squeezed". If you negotiate in dollars, the owner expects payment in dollars, the owner expects to be able to trade in said dollar payments for X dong. Why should you feel "squeezed" when he decides to ask for that same X dong when you change payment into another currency unilaterally? Unless it clearly states in the (illegal) contract that you can change currencies to dong/etc at a given rate (ie, official rate), that is.
The official exchange rate is a joke, obviously, so 'sticking to your guns' on it is just "asking to pay 8-10% less" for an already agreed upon contract (I assume you would neg any new contracts in the currency you are paying in). Sounds like reneging to me.
Anyway, this sort of arbitrage is generally for the well off, that's just how it goes. I fail to see how that makes this greed in a bad way. Just because wealthy people can do something poor people can't doesn't make them bad people for doing it. Poor locals can't get paid 5-10x the average wage to teach other people to speak their native tongue, so what does that make us exactly, evil? |
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Vesuve
Joined: 18 Dec 2004
Posts: 28
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| Posted: Fri Jan 28, 2011 10:10 am Post subject: |
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| DNK wrote: |
| I am still puzzled by the idea that paying the black market rate is getting "squeezed". |
Because landlords only demand the black market rate when the spread between the bank rate and black market rate has a gap.
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| If you negotiate in dollars, the owner expects payment in dollars |
,
I do NOT and did NOT negotiate in US Dollars.
Paying rent with a dollar lease is against the law.
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the owner expects to be able to trade in said dollar payments for X dong. Why should you feel "squeezed" |
The owners are NOT trading in dollars for Dong - they are hoarding dollars.
This is the root of the problem.
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| when he decides to ask for that same X dong when you change payment into another currency unilaterally? Unless it clearly states in the (illegal) contract that you can change currencies to dong/etc at a given rate (ie, official rate), that is. |
They know we are pad at bank rates, and paid only in Dong
Using the black market to 1. hoard dollars and 2. ask for that amount in Dong is just a way to increase the rent by 8-10%.
Greed.
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The official exchange rate is a joke, obviously, so 'sticking to your guns' on it is just "asking to pay 8-10% less" for an already agreed upon contract (I assume you would neg any new contracts in the currency you are paying in). Sounds like reneging to me. |
Please read above, again. |
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toiyeuthitmeo
Joined: 21 May 2010
Posts: 213
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| Posted: Fri Jan 28, 2011 11:35 am Post subject: |
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| Don't give in to the black-market rates. Nguyen Phu Trong doesn't want you to, Nguyen Tan Dung doesn't want you to, and the community of expats who try to avoid being fleeced don't want you to perpetuate this trend. |
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DNK
Joined: 22 Jan 2007
Posts: 236
Location: the South
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| Posted: Fri Jan 28, 2011 12:49 pm Post subject: |
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| Because landlords only demand the black market rate when the spread between the bank rate and black market rate has a gap. |
Yes, I understand that and feel it is understandable if not to be expected. Given the nature of inflation here, some of the terms of leases, and the fairly fixed nature of the official exchange rate, I would do the same in their shoes. Why should the landlord, the one owning the property and providing the services, lose 3%+ over a 6mo term because the foreigner insists on paying at an ever-increasing lesser rate than the actual market rate? The costs of his services and local properties are rising at 5-6% every six months while the official rate jumps maybe half of that (or less) over the same period, or maybe, as it has for the past 6 months, remains flat.
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They know we are pad at bank rates, and paid only in Dong
Using the black market to 1. hoard dollars and 2. ask for that amount in Dong is just a way to increase the rent by 8-10%.
Greed. |
I'm sure many are just greedy. I also agree that from one viewpoint, it's another way to negotiate a higher rent. Nothing, however, is stopping the rentee from negotiating the total down 8-10% to compensate before signing. I am not sure why landlords asking for higher rent is a problem. To me, that seems to be expected as well, and completely ordinary. I don't complain back home when a landlord says, "oh, and you have to pay for heating" because it adds another 10% on to my total housing expenses. If I don't like the price, I try to negotiate down or find another place or just deal with it and sign. Where is the sin?
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| Please read above, again. |
Is this referring to the fact that you did not negotiate in dollars? I am not up on the particulars of your current rental contract, so I can't comment specifically. If the landlord used the USD as a peg for your VND-based contract, then I assume you would have agreed to a proper exchange rate during negotiation. If he is reneging on that by shifting from some official rate to the market rate, then it is certainly right of you to stand up against that. |
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Vesuve
Joined: 18 Dec 2004
Posts: 28
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| Posted: Fri Jan 28, 2011 3:55 pm Post subject: |
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| DNK wrote: |
| Quote: |
| Because landlords only demand the black market rate when the spread between the bank rate and black market rate has a gap. |
Yes, I understand that and feel it is understandable if not to be expected. Given the nature of inflation here, some of the terms of leases, and the fairly fixed nature of the official exchange rate, I would do the same in their shoes. Why should the landlord, the one owning the property and providing the services, lose 3%+ over a 6mo term because the foreigner insists on paying at an ever-increasing lesser rate than the actual market rate? |
You're missing the point.
I do not think you are a foreigner in VN, but a local.
The point is this: the rent should be in DONG. By law, rents are to be paind in Dong.
Landlords that 1. write up these ILLegal USD contracts and 2. demand black market rates are thieves and liars.
It's ILLEGAL.
Understand?
You are in my opinion, a Vietnamese.
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| The costs of his services and local properties are rising at 5-6% every six months while the official rate jumps maybe half of that (or less) over the same period, or maybe, as it has for the past 6 months, remains flat. |
Lie.
I know my landlord very well. Cost of his services? WHAT SERVICES?
(Laughing.)
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They know we are pad at bank rates, and paid only in Dong
Using the black market to 1. hoard dollars and 2. ask for that amount in Dong is just a way to increase the rent by 8-10%. |
That is IRRELAVENT!
How are the Vietnamese paid?
I pay taxes AND dual prices on EVERYTHING. |
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DNK
Joined: 22 Jan 2007
Posts: 236
Location: the South
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| Posted: Sat Jan 29, 2011 12:48 pm Post subject: |
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So, is calling me a local and Vietnamese supposed to be an insult?
I honestly am lost on why you are upset over people making contracts in USD. It's technically illegal, yes. It is still an agreement between consenting adults. Given the sorts of shiftiness and complete bs I've seen in the States with legal contracts as a quasi-norm for renting in places where the disparities between landlord and tenants' income is far less and quite reversed, I'm not really moved by someone making up an illegal but otherwise fair contract and then sticking by it with what I would consider to be in good faith in a country with significantly poorer legal institutions.
Services in his personal life, his food, his lifestyle, whatever; his maid, cable/internet contracts, water, whatever he provides for you. Perhaps I don't know your personal landlord, but I am talking in general for those renting out serviced places.
Are you getting offended by the idea that someone should make more than they need to (ie enough to live lavishly, or at least comfortably with the ability to travel once or twice a year) as someone who is paid 5-10x the local average wage just to teach his native tongue? I mean, he's living comfortably off of your hard-earned money, the jerk... 
To the last bit, I'm not sure what's going on, but I'm also paid in VND. I agree that what the landlord does with his income (saving it in another form of asset) is completely irrelevant, though, as is the fact that he uses a fair XYZ tactic (market rate) to increase the rent during negotiations.
If I negotiate a contract pegged to the dollar and agree to which rate beforehand (or afterward through hardball), then okay; if I negotiate one strictly in VND, okay. I am supposed to be horridly outraged over one of these two, but I'm not seeing it yet... |
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Vesuve
Joined: 18 Dec 2004
Posts: 28
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| Posted: Sun Jan 30, 2011 3:16 am Post subject: |
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| DNK wrote: |
| So, is calling me a local and Vietnamese supposed to be an insult? |
No. Neither positive or negative. Just an observations.
A warning to all: do not agree to anything in USD. Only make agreements in Dong. Your options will diminish when looking for housing and apartments, but this can be done. |
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CThomas
Joined: 21 Oct 2009
Posts: 380
Location: HCMC, Vietnam
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| Posted: Mon Jan 31, 2011 7:51 am Post subject: |
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21.3 today  |
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just noel
Joined: 17 Jul 2006
Posts: 168
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| Posted: Mon Jan 31, 2011 12:46 pm Post subject: |
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| CThomas wrote: |
| 21.3 today |
How can this be good? There is nothing good about it.
The VND is losing value. This makes -certain- prducts more expensive, and it causes inflation in general.
If you're a businessperson earning USD you get about an 8-10% raise, while only this black market to bank rate spread is happening.
If you are earning USD (but paid in Dong) you gain nothing. But you do....lose like everyone else in the Dong economy. The nasty thing called "inflation."
CThomas, you stated you were teaching EFL here. If you are teaching, this is not helping you at all.
The signs now are only pointing to a further devaluation, as the black market exchange rate (according to many) reflects the true, actual value of the Dong. |
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CThomas
Joined: 21 Oct 2009
Posts: 380
Location: HCMC, Vietnam
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| Posted: Mon Jan 31, 2011 11:01 pm Post subject: |
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| just noel wrote: |
| CThomas wrote: |
| 21.3 today |
CThomas, you stated you were teaching EFL here. If you are teaching, this is not helping you at all.
The signs now are only pointing to a further devaluation, as the black market exchange rate (according to many) reflects the true, actual value of the Dong. |
I was happy because I happened to have some USD yesterday and found that price. Fun for the moment. Point taken that it's not good in general for TEFLrs.
Just curious: has anyone been able to take advantage of all this through FOREX? |
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Andy123
Joined: 24 Sep 2009
Posts: 206
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| Posted: Tue Feb 01, 2011 1:00 am Post subject: |
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| Never pay in USD!!!!! If you do you are stupid. |
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baygioimdi
Joined: 28 Jan 2011
Posts: 44
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| Posted: Tue Feb 01, 2011 4:43 am Post subject: |
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I think it is necessary to give more details in case some people dont understand the issues.
Renting a house/room/apt etc
The majority of rental contracts in Vietnam are in USD and agreed at a certain exchange rate. The exchange rate is generally if not always the official rate of the State Bank of Vietnam. Right now the official rate is 19,500. Landlords would not use another rate such as 20,000 because there is a possibility that they may lose money if the Vietnamese Dong is devalued to more than 20,000 etc.
Landlords do not have problem with using the State Banks rate if they can buy USD on the black market at a rate similar to the Banks rate. So for most of the year there are no complaints from landlords because they only have to pay 50-200 Dong more than the Bank rate. However, when there is a large difference between the two rates, as is the case now, some of them want to be paid in USD or increase the exchange rate to the black market rate. This is against the law and a scam, of course, do not agree to this.
As another poster stated it is against the law to have rental contracts in USD and I have never seen one or heard of anybody signing contracts in USD.
Obtaining USD in Banks.
Right now you can't get USD at any of the banks unless you are a foreigner and it is stated in your employment contract that you will be paid in USD not Dong. Vietnamese citizens are not allowed to have contracts in USD. Most, if not all EFL teachers do not have contracts in USD. Why do you need USD. You can buy other currencies(euros, GBP,etc etc at any bank at the official exchange rate and if you must have USD, one can change the other currency in another country and will lose very little-.001% or less. This is what I do when I can't get USD.
Using Credit cards abroad
One can get USD from your ATM card abroad but I would not recommend it. All of the banks will charge you fees etc and it will cost you more than the black market rate. I know because I have done it using ATM cards from Vietcom Bank, HSBC and SCB and it was the same with all of them.
Also do not forget that HSBC, A and Z, SCB in Vietnam are independent banks and not affiliated with their banks in other countries. |
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