Vietnamese cash in on cross-border exchange

via CAAI

By Ben Bland in Hanoi and Tim Johnston in Bangkok

Published: January 28 2011

Vietnamese consumers frustrated by years of high inflation and a depreciating currency have devised a new cross-border arbitrage scheme to earn some extra cash ahead of next week’s lunar new year holiday.

The latest ruse came to light after Cambodian banks such as ANZ Royal, a joint venture of Australia’s ANZ, noticed a sharp increase in dollar withdrawals, particularly from cash machines near the Vietnamese border.

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Bankers worked out that Vietnamese customers were travelling to neighbouring Cambodia, withdrawing dollars from a cash machine at the official dong-dollar exchange rate and then converting the greenbacks back to dong at the superior black market rate.

In spite of impressive economic growth rates, persistent instability has undermined faith in Vietnam’s currency, the dong, which trades against the US dollar at a discount of up to 10 per cent on the black market.

Customers of Vietnamese lender Techcombank – which charges much lower foreign currency withdrawal fees than its rivals – have been at the forefront of the scheme, making instant, risk-free profits of about 5 per cent, but bleeding many Cambodian cash machines dry of dollars.

Stephen Higgins, ANZ Royal’s chief executive, said Techcombank customers had taken $13m out of his bank’s machines, and at least $30m from across Cambodia.

ANZ Royal and Acleda, another large Cambodian bank, have blocked all dollar transactions on Techcombank cards.

A spokeswoman for Techcombank said that while these withdrawals were legally valid, it was raising its fees for overseas transactions “to prevent large cash withdrawals which could lead to black market currency trading”.