Vietnamese use dollar at their peril

Famous guests at Hanoi’s leading five-star hotel, the Sofitel-managed Metropole, have included actor Charlie Chaplin, novelist Graham Greene and, in the last few weeks, Mark Zuckerberg, founder of Facebook.

But the French colonial-era hotel has also had some rather unwelcome visitors recently in the shape of the enforcement department from the central bank, which is trying to crack down on the widespread use of dollars in Vietnam’s shaky economy.

The central bank said on its website last week it had fined the hotel’s owners 500m Vietnam dong ($24,000) for listing prices on menus in greenbacks, in violation of various laws.

Persistently high inflation and regular devaluations of Vietnam’s dollar-pegged currency, the dong, have driven many Vietnamese to save in gold and dollars.

This flight from their own currency feeds back into further downward pressure on the dong.

By singling out Hanoi’s leading hotel, which is jointly owned by the Hanoi city government and Vinacapital, a foreign fund manager with various listed funds, the central bank is trying to send a message that this crackdown is for real.

Previous attempts to reduce the use of dollars and gold through similar administrative measures have proved short-lived. Traders, investors and ordinary Vietnamese have become adept at circumventing government restrictions when they challenge their financial interests.

Some other large hotels and luxury goods stores have switched their prices from dollars to dong, although customers can probably still get away with exchanging dollars for dong at the front desk.

Many travel agencies in Hanoi were still quoting dollar prices on Tuesday, while the gold shops that double as black market foreign exchange bureaux across the city were carrying on with business as usual.

But caveat emptor. Last year the central bank introduced a new fine of 50m-100m Vietnam dong for those making payments in foreign currencies.

So future guests at the Metropole should take note. You can check out any time you like but if you want to leave without getting your collar felt you should probably pay the bill in dong.

Related reading:
Vietnam: a question of balance, FT
Vietnam: the curse of gold, beyondbrics
Vietnam’s black market alchemists, beyondbrics