[Vnbiz] EIU Vietnam finance PM approves privatisation of three banks

[Craig Stevenson]

Vietnam finance: PM approves privatisation of three banks
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 September 29th 2006

   FROM DIALOG NEWSEDGE

[Agence France-Presse English Wire]

Vietnam has cleared a major hurdle and approved privatization for three
commercial banks to help the communist country compete against growing
international competition, officials said Thursday.

"The privatisation is part of the banking sector's preparations for
Vietnamentering the World Trade Organisation (WTO)," said Nguyen Hoa,
an official
at the State Bank of Vietnam (SBV), the country's central bank.

The Bank for Investment and Development of Vietnam (BIDV), Bank of Industry
and Commerce (Incombank) and the Bank for Agriculture and Rural Development
of Vietnam received Prime Minister Nguyen Tan Dung's green light on
Wednesday.

The final approval was announced in a written decision signed on his behalf
by Deputy Prime Minister Nguyen Sinh Hung.

Pham Huyen Anh, an official at Incombank, said he hoped the process could
start as early as next year.

"We will submit in October a detailed project to the SBV and the government
after discussions with Vietnamese and foreign experts," he told AFP.

Vietnam's financial sector has long been dominated by state banks, many
saddled with bad loans. But the sector is set to face stiff foreign
competition when Vietnam joins the WTO, a move expected later this year or
early next.

WTO membership rules will allow more multinational banks to set up branches
in Vietnam, offer financial services and vie for the wealthiest customers
and those who represent the lowest credit risks.

A year ago, Vietnam announced the privatisation of the Bank for Foreign
Trade of Vietnam, or Vietcombank, unanimously considered the country's best
managed financial institution.

Wednesday's decision "is a welcome confirmation of what we've all been
hoping," said Dominic Scriven, director of the Vietnam-based investment fund
Dragon Capital.

But analysts and bankers said additional reforms were needed for the process
to succeed particularly in regards to transparency, reporting and corporate
governance.

"Undoubtedly, the greatest possible transparency will be required prior to
the privatisation," a foreign banker said. "When you look at bad debt
figures provided by the Vietnamese authorities, they are ridiculously low.

"Nobody believes them."

"The problem is that the SBV does not have teams of competent experts that
can properly inspect the structure of the banks' balance sheets," he said.

WTO regulations will increase pressure on the authorities to get rid of
old-fashioned methods inherited from a centralized state-planned economy.

"To attract more capital is essential," a BIDV analyst said asking not to be
named. "But the most important thing will be to improve management systems
and make it stricter, more efficient and transparent."

Scriven said official figures put non-performing loans at 4.7 percent of the
whole sector. The real figure could be twice that or even more, he said. And
bad debts are, by definition, more numerous at state banks than at others.

In recent months, British-based emerging markets specialist Standard
Chartered, Australia's ANZ and global giant HSBC have all acquired up to 10
percent stakes in some of Vietnam's better performing banks.

However, overall investment levels remain low and Scriven added while
foreign investors should be interested in the Vietnamese banking sector they
should also remain cautious.

"It would be nice if there were sets of controls that were put in place over
time. That's got to be a huge objective, but it's not the reality right
now."

Currently, a single foreign investor can not hold more than 10 percent in
any single commercial bank, while the total foreign holding of a single bank
is limited to 30 percent.

Last July, the Saigon Thuong Tin Commercial Bank became the first bank to
list on Vietnam's stock exchange.

Copyright (c) 2006 Agence France-Presse

Copyright (c) 2006 The Dialog Corporatio
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