[Vnbiz] Spotlight: Nguyen Van Giau, Vietnam's central bank governor

[Tai Phan]

Spotlight: Nguyen Van Giau, Vietnam's central bank governor
*By Karina Robinson <http://www.iht.com/cgi-bin/search.cgi?query=By Karina
Robinson&sort=publicationdate&submit=Search>*
Published: December 11, 2007

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*HANOI <http://www.iht.com/articles/2007/12/04/yourmoney/wbspot08.php#>:*Crossing
the street in this city is best done with closed eyes and a prayer
that the tidal wave of motorcycles will swerve to avoid you.

The Vietnamese are a kind people, so your chances are good. But Nguyen Van
Giau, the country's central bank governor, needs to be less than kind to
deal with another overwhelming phenomenon: applications for banking
licenses.

Giau, 50, is facing a record 46 submissions, of which 22 are domestic
applications and 24 are from foreign entities. His affable nature is being
tested by requests from organizations as diverse as Vietnam Seafood Corp., a
state-owned enterprise, and the province of Binh Duong, which has a
population of fewer than 1 million.

What is attractive are the perceived easy pickings in Vietnamese banking:
The economy is booming, credit is growing more than 40 percent a year, and
there are insufficient goods in the shops to satisfy demand.

But not everyone can have a license. So how will Giau resist all these
demands? A close relationship with Prime Minister Nguyen Tan Dung, himself a
former governor of the State Bank of Vietnam, should help. He can also draw
on 20 years of experience in commercial banking - he was chief executive of
the Bank for Agriculture and Rural Development - and five years as a local
Communist Party official. Political knowledge and influence is imperative in
a country that, according to the Communist Party of Vietnam, is run as a
"market economy with a socialist orientation."
   <http://www.iht.com/articles/2007/12/11/business/fed.php>
<http://ad.fr.doubleclick.net/jump/business.iht.com/article;cat=article;sz=190x90;ord=123456789?>

Under the World Trade Organization obligations that Vietnam assumed along
with membership in 2006, the country is loosening restrictions on foreign
banks so that by 2010 no regulatory distinction will be drawn between them
and their local competitors. The restrictions have kept the 39 foreign banks
in Vietnam confined to niche markets, but in April the central bank gave
five foreign banks permission to apply to incorporate locally.

One of the lucky five, the Australian bank ANZ, is hoping to add another 10
branches to its current two in 2008. But ANZ's Vietnam country head, Thuy
Dam, said he feared that state-owned enterprises would use their political
muscle to keep the new banks from cutting into their 60 percent market
share.

Over sweet strawberry tea in the formal visitors' reception room of the
central bank building - the 1920s-era former headquarters of the Banque de
l'Indochine - Giau was adamant: "I will firmly say no to pressure on the
central bank to limit the branches of foreign banks to create advantages for
state-owned banks."

Giau, a father of one who took office in August, is also facing a brimming
in-box of proposals for modernizing the financial system. Ben Bingham,
senior resident representative in Vietnam for the International Monetary
Fund, outlined the issues facing the central bank, including "the role of
exchange rate policy in the face of large capital inflows, the role of
monetary policy and how best to conduct it," and "how to safeguard financial
sector stability." The central bank is drafting legislation to present to
the government next year.

There is another burning issue: inflation, which was 8.1 percent in the
first ten months of this year. Any increase in interest rates is anathema to
the Vietnamese government, which is aware that the country's economic growth
of more than 8 percent a year in the past two years still does not match
that of its neighbor China. The central bank's inflation target for 2007 is
8.5 percent or lower, although Giau acknowledged that the rate could be
higher if oil continued to climb.

Booming credit growth and a build-up of nonperforming loans is another major
issue confronting Giau.

He has told the board of the state-owned Bank for Investment and Development
of Vietnam to monitor credit quality closely - an admonition he has been
repeating to all banks. He has also told them to improve their technology to
introduce cashless payments as part of the modernization initiative.

As of next year, helmets will be obligatory on motorbikes. Giau may be well
advised, for his own protection, to purchase one immediately.

Karina Robinson is senior editor of The Banker. This article is adapted from
her monthly column.
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