Banks bank on property

The majority of commercial banks still rely on real estate as collateral assets for providing loans to small- and medium-sized enterprises.

The IFC, the World Bank’s private sector arm and the Vietnam Bankers’ Association, recently completed a survey of lending practices showing that 93 per cent of banks prefer property as collateral for commercial loans.
Most businesses assets, especially for small- and medium-sized enterprises (SMEs), are usually movable.
Sin Foong Wong, IFC’s country manager for Vietnam, said: “Better access to credit is crucial to achieve more widespread business growth in Vietnam, particularly for SMEs that now generate 60 per cent of GDP.
“Most of these firms cannot finance their operations through formal means because they cannot meet the collateral requirements of Vietnam’s financial institutions. Currently, Vietnamese banks rarely lend without property as collateral,” he said.
According to the survey, SMEs’ moveable assets which are worth billions of dollars, could be put to productive use and contribute to economic growth if businesses could use their assets to secure the financing they need to upgrade and expand.
To address this challenge the Ministry of Justice, with the IFC, Mekong Private Sector Development Facility (IFC-MPDF), together with the World Bank’s Foreign Investment Advisory Service (FIAS) has worked for the past year to improve the legal framework for asset based lending.
According to experts, as experience with other reforms shows, effective implementation was needed to maximise impact.
This includes computerising National Registration Agency operations for secured transactions and educating financial institutions about the reforms and how to profit from asset based lending.
Nguyen Thuy Hien, National Registration Agency director general for secured transactions (NRAST), said: “Vietnam needs to complement the legal reforms with an effective collateral registry. This will give financial institutions the quick and accurate information they need to make good lending decision.”
“Having this information available on an easy-to-access secure website will greatly enhance information flows, and make it easier for all parties involved,” she said.
NRAST is an institution under the Ministry of Justice, set up in 2001, with the objectives of undertaking administrative functions related to secured transactions (developing policy and a legal framework) and directly managing the operations of the registration agency for secured transactions, including leasing, sales with retention of ownership, and sales of the right to collect debts.
After nearly four years of operating, the NRAST has registered almost 15,000 secured transactions. Nearly 900 bank head offices and branches have registered as “regular clients” with the registry.
By VIRVietnam travel

Tourism: Tortoise’s In Town

Located in the heart of HCM City, the Tortoise Fountain is among the city’s well-known historical sites



Tortoise Fountain is the name of a square in central HCM City. It is located at the intersection of Pham Ngoc Thach, Vo Van Tan and Tran Cao Van streets, approximately 200 meters from the Notre Dame Cathedral.

The structure was originally built in 1879 and had gone through many alternations ever since. Initiated by the French, the 20-meter-high water tower was built in the center of the traffic circle. The water tank of steel with a capacity of 100 cubic meters was supported by eight pillars, placed in octagonal shape. The top of the tower was layered with tiles. The overall structure reflected the Pearl of the Far East design, which was the name of Saigon at the time, and can be seen on postcards dated in the late 19th century.

In 1921, the tower was destroyed. The reasons are unclear since all official and architectural documentations were lost. Records were not well kept at the time. They originally were in the possession of the Admiralty, then transferred to the General Governor’s Palace, to the Ministry of Public Works, and finally to the City Hall. It is likely that they were destroyed in transport or eaten away by moth in storage. The speculations for the abolition of the tower are either the structures were broken but repairs were unable to be made since the plans were lost or that the structures was too small to meet the demands of the citizens.

Once the tower was gone, the Council of Saigon City repaired the traffic circle and named it Marechal Joffre Square. In 1927, a Memorial to the 1914-1918 World War Dead was erected at the center of the square.

In 1972, the Vietnamese government rebuilt the intersection to commemorate allied countries that provided aid for the then South Vietnam. In the center of the fountain, stand five 20-meter-high upright pillars, reminiscence of five arms with five palms holding a globe. Beside the five pillars is a copper turtle. On its back was a stone stele which was engraved with the names of aiding countries. There was also a set of unique 30-step staircase, in which there is a resting platform after every 10 steps, on the south side of the fountain’s pool, leading up to an offering table for Heavens and Earth, which was five meters above ground level. Unlike the offering altar of Nam Giao in Hue, the table of the Tortoise Fountain in HCM City was neither round nor square but elliptical, with two axes being 12 and about seven meters long. The table was sustained by one main pillar and eight supporting pillars. On it, there was a one-meter-high altar, which faced the north.

When completed, it was not well received. Saigonese felt the five pillar hands turned upward as though to beg for aid. This was not believed to be a work of pride. Thus, the government transformed the five arms with five hands into a 25-petal flower. This became the structure seen today.

In early April of 1976, or 11 months after Saigon was liberated, an explosion took place at the traffic circle at 8 p.m., killing one young man and injured four others. The copper tortoise was damaged. According to HCM City Police, this incident was a political sabotage and the dead young man, himself, placed the dynamite on the tortoise.
Vietnam travel
Today, the tortoise no longer exists but the name Tortoise Fountain still remains. This site is particularly lively at night. It is surrounded by local coffee shops and street vendors. It has a reputation for great ice cream, especially coconut flavor. Around the lake, there are many age-old golden oak trees. They have fruits with two wings. When falling, these fruits twist and slowly land onto the ground. In the blooming seasons, these trees emit gentlefragrances throughout the area,creating poetical atmosphere for passers-by.
by TTM

Tourism news: Famtrip to India

Saigontourist Holding Co. is collaborating with its partners for the press trip from India to Vietnam. In the program, Indian reporters will visit different destinations in Vietnam, including HCM City.

India is now viewed as a potential market for the tourism industry, specifically from Saigontourist standpoint, which has launched many programs to promote the industry to India. The tourism conference named Vietnam an attractive destination for Indian tourists in New Delhi is the result of their efforts. It is well received and is much appreciated by Indian media and tourists.

Not only India, Saigontourist is also collaborating with many travel agencies to set up international programs to countries worldwide.

Martini Loungeinaugurated
Lion Restaurant has just opened its Martini Lounge inside the restaurant. The lounge is capable of accommodating up to 100 people. It has a balcony with airy atmosphere, a bar with buzzing jazz, and more.
Vietnam travel
Martini Lounge introduces to guests over 20 types of cocktails with special flavors. It also offers selections of snacks. The lounge opens from 5 p.m.-11 p.m. daily.
By SGT

Big Push For Stronger Banks

Banking regulators want stronger local banks to be able to stand the fiercer competition now that Vietnam has to open its economy as a WTO member

Vietnam travel
Vietnam is in the process of opening its finance-banking sector in line with its commitments to the World Trade Organization. At present, there are five State-owned commercial banks, one policy bank, one development bank and 37 commercial joint stock banks holding nearly 90% of the banking market share. However, except for a few strong banks, most of the commercial joint stock banks are not large by international standards, with their charter capital averaging VND500-1,000 billion (US$31.2-62.5 million).

HSBC, Standard Chartered, ANZ and Citigroup already have a presence but with the opening of the local banking market, more and more foreign banks, most of them established institutions with strong financial capacity and extensive experience, are keen to gain a good share of the local market.

Shrinking number

In an effort to help the local banking sector strengthen competitiveness, the State Bank of Vietnam, the central bank, is mulling regulations in step with the Government’s policy to restrict the establishment of new banks and encourage the merger of joint stock banks. “In the long term, the aim is to bring the number of domestic banks and financial groups down to 15 to 20 before 2010,” said a source from the central bank.

Kieu Huu Dung, director of the central bank’s bank department, expresses the idea this way: “When competition reaches a certain level, it will create pressure for mergers. At present, there is room for local commercial banks to grow in Vietnam, but merging may take place after five years more.”

To reach this target, the State Bank will implement policies regulated by the Basel Commission, which include high requirements for financial security, financial capacity, and experience in new banks’ big shareholders. The bank has just issued a decision on setting up new banks, which is seen as a new step to translate its plan into reality.

Under Decision 24/2007/QD-NHNN issued on June 7, the minimum charter capital required for a new bank will be periodically regulated by the Government. All commercial joint stock banks established between now and December 31, 2008, must have charter capital of at least VND1 trillion (US$62.5 million). Those coming into existence between December 31, 2008, and 2010 must have capital of at least VND3 trillion (US$187.5 million). A new commercial joint stock bank must have at least 100 shareholders, including at least three institutional founding shareholders.

The requirements for a founding shareholder do not make the role easy. If this shareholder is a non-bank enterprise, it must have equity capital of at least VND500 billion (US$31.2 million) and profitable operations in three consecutive years. If it is a bank, it must have total assets of at least VND10 trillion (nearly US$625 million), a bad debt ratio of less than 2% of total outstanding loans and profitable operations in three consecutive years.

The shareholders also face some restrictions in share ownership. An individual investor can hold at most 10% of the charter capital and an institutional investor at most 20%. In the first five years after the bank is established, founding shareholders can transfer their shares only among themselves. Meanwhile, non-founding shareholders cannot transfer their shares in the first three years. The shareholders must contribute capital with their own money, not with loans in any form.

The central bank’s intention to restrict the establishment of new banks is also a move to terminate the operation of ailing commercial banks. The collapse of any one of these may have a negative effect on the whole banking system. In the period of consolidating the operations of commercial joint stock banks from 1998-2001, the State Bank had to close 10 ailing banks, leaving 30 that have regained their vitality only over the past three years.

Stronger players

Despite the strict requirements of the new decision, more new commercial joint stock banks will likely come into existence this year. Dung says this is a strong trend at the moment. “Banks are doing well. So, the move to set up a bank is unavoidable,” he said. About 25 applications for setting up commercial joint stock banks have been received by the central bank.

Meanwhile, several strong corporations have plans to set up their own banks. Among their number are FPT, Bao Viet (Vietnam Insurance) Group, Postal Savings Company and PetroVietnam Finance. The central bank is cautious about this move. Central bank governor Le Duc Thuy early this year reminded the local media of the bitter outcome of events in the 1990s when many big businesses rushed to establish banks to raise funds for their operations and faced heavy losses.

At present, big State corporations are keen to establish banks or to hold a dominant role in a certain bank. According to Dung, this move is understandable, but it may lead to the corporations “manipulating” the banks when the corporations face some challenges. Therefore, the central bank has ruled that a corporation that is a member of the board of directors or a big shareholder of a bank cannot take out loans from that bank.

For these reasons, the Government is encouraging the merger of banks to establish bigger domestic institutions. To encourage bank mergers, the central bank will cooperate with the Finance Ministry to issue preferential tax policies for parties to a bank merger. The policies will appear next year. Along with this, the authorities will issue regulations to restrict the network expansion by banks which have capital below VND1 trillion this year. They will also adjust regulations on financial safety to meet international rules and create chances for the successful merger of banks.

According to a source from the central bank, strong backing will go to financial groups that combine insurance, banking and securities services. In 2006-2008, the Government will build one or two pilot financial groups by supporting a merger between a State-owned bank and Vietnam’s insurance giant Bao Viet. A law on financial groups will be adopted to replace the current law on credit institutions. The central bank will encourage financial groups to set up finance leasing companies to give a boost to the diversification of products and services on this market.

To help local banks boost their strength, Vietnam will give priority to foreign investors wishing to become strategic investors of local commercial joint stock banks. In a decree issued in April, the Government allows a strategic foreign investor to own a maximum stake equivalent to 15% of the charter capital of the local bank. Decree 69/2007 states that in particular cases, the Prime Minister may permit the strategic foreign investor to hold a stake equivalent to 20% of the capital. However, strategic foreign investors can transfer their shares only five years after their purchase.

On their part, a local bank that sell shares to foreign investors must also be a strong institution with charter capital of at least VND1 trillion (US$62.5 million), in addition to meeting other requirements on financial status, management and operations. Meanwhile, the foreign credit institutions buying shares of local commercial banks must have total assets of at least US$20 billion.

Aware of the need to become stronger players, many existing commercial joint stock banks are rushing to raise their charter capital to the level required, either by issuing shares or inviting the participation of local investors with strong financial capacity or foreign financial institutions. Some banks, like Vietnam Eximbank, have sold shares to strategic local partners such as Kinh Do Corp., Saigon Jewelry Co., PetroVietnam, Asia Commercial Bank and others. Others are selling part of their stakes to strong foreign banks. Among such deals are those between Orient Commercial Bank and BNP Paribas, Techcombank and HSBC, Habubank and Deutsche Bank, Southern Bank and United Overseas Bank, VP Bank and Overseas Chinese Banking Corp., Sacombank and ANZ Bank, and Asia Commercial Bank and three foreign partners–Standard Chartered, International Finance Corp. and Dragon Capital.

Vietnam will give priority to foreign financial institutions that become strategic investors of local banks. Therefore, foreign investors’ ownership in local banks may be allowed to increase from the present 30% to 49%. After 2010, the country will open up the financial sector in accordance with World Trade Organization commitments.
By SGT

More Choices Available

Many Vietnamese travel companies continue to introduce new products and services to serve the ever increasing and diversifying demand of tourists, both local and international

MICE (meetings, incentives, conferences and meetings) has been the strength of Saigontourist Travel Service. In the first five months of this year, Saigontourist organized MICE tours for over 4,000 tourists in China, Japan, Korea, Malaysia, Portugal and Singapore. This June, it designed a total of eight MICE programs for 2,300 tourists. At present, Saigontourist has its own MICE department to serve MICE demands.
Vietnam travel
In addition to traditional MICE, Saigontourist also launches special MICE tours. On June 21, Saigontourist held special MICE tours to Malaysia and Singapore for 78 tourists on the five-star Super Star Gemini cruise. The spacious ship with special design was filled with specific activities to boost morality, team spirit, and understanding. New experiences were created and visitors were buzzing with excitement.
Vietnam travel
Aside from the group activities, there were plenty of time for individual attention. Tourists were given private rooms, fully furnished with all the amenities. Included on the ship were several recreational spaces like bars, music shows, game club, gym and swimming pool. Western and Asian foods were always ready for tourists to enjoy.

On the journey to Singapore, the cruise dropped by Tioman Island of Malaysia. Then it headed to Singapore and stopped by the the lion city’s beautiful landscapes, such as Faber Mount, Sentosa Island, Sealion Park, and more. On June 25, the tourists returned to its final destination, HCM City. This was the first time Saigontourist held such a tour.

From June 13-23, Saigontourist also began the trans-Viet tour for veterans. The tour’s main destinations were Truong Son trails and Dien Bien Phu. It offered traveling on automobiles and planes.

The first journey was from HCM City to Kontum, where tourists visited famous Dong Xoai, Bom Bo Village, etc. Then visitors were headed to Dong Ha and stopped by Phuc Son, Vietnam’s biggest gold mine, as well as Ngang Pass, Quang Tri Old Citadel, Pha Din Pass, Dien Bien Museum, and the likes.

In addition, this tour also offered veterans chances to visit the country’s renowned landscapes such as Fairy Cave, Cung Dinh Cave, Single-Pole Pagoda, and the likes in Phong Nha-Ke Bang.

Fiditour offers promotion

Saigontourist is not the only one hopping on the MICE tour train. Fiditour has won a contract to offer MICE tours to over 300 agencies of Dong Tam Tile Co. Mid-June, 60 agencies of the company went to China, where Shenzhen, Shanghai, Hangzhou, Suzhou, Wuxi and Beijing were the main destinations. The trip lasted eight days and seven nights.

Prior to the China trip, Fiditour organized tours for some 240 agencies from HCM City and Hanoi to Bangkok-Pattaya for five days and four nights. It also awarded agencies with outstanding business performances with a high-end voucher of US$1,000/person to Korea and Europe. Currently, Fiditour is working on its tour for a group of 450 tourists to Phan Thiet City next July.

A special package of Fiditour is the Sea and Green Islands. It features beautiful beaches and islands like Phu Quoc, Con Dao, Phan Thiet, Nha Trang, Qui Nhon and Danang. Visitors will spend their holidays at the luxurious Furama Resort on the three-day and two-night trip from Danang to Hoi An or at the five-star VinPearl Resort on the three-day and two-night stay in Nha Trang. At both resorts, tourists can enjoy rejuvenating sports like Yoga and Taichi or fitness centers and free physical consultations on body building, steam bath and sauna. In Nhatrang, tourists can also enjoy hydrotherapy in hot springs. Babysitting service for free is also provided, with safe and fun game activities.
In case tourists like to enjoy the warm and cool atmosphere of the highlands, as well as relax in the sunshine and the sea, they can book for such tours as Nha Trang-Dalat, Ninh Chu-Dalat, Phan Thiet-Dalat, Qui Nhon-Nha Trang, Truong Son Road-Danang-Ba Na-Hoi An-Hue-Phong Nha, Hanoi-Sapa-Yen Tu-Halong-Tuan Chau, and trans-Viet. These are open tours, thus they are very flexible. Tourists can opt or add any destination, depending on their interests.

With the aim of providing the best for tourists this holiday season, as well as constantly creating new experiences, Fiditour proudly offers a lucky draw program of big prizes called Fiditour Holiday Season-Valuable Holiday Season. It is running now and will end on September 2 this year. Clients who spend over VND1 million on booking, airplane tickets, study abroad consultancy or any of Fiditour’s services like food and accommodation in its hotel and restaurant chain, are qualified for the program. The special prize is valued at over VND50 million, comprising an LCD monitor, an Acer laptop, and a Nokia N series cellphone. One first prize is priced at VND20 million, consisting of a Sony video camera and a Canon IXUS 7.0 camera. Two second prizes worth VND10 million, including a Sony hi-fi player and an Apple Ipod. Three third prizes are worth VND5 million each, comprising a tour coupon of VND5 million. And 30 consolidation prizes include a buffet coupon each for two persons at a five-star hotel in Vietnam.
By SGN

New bank establishment not easy

A new commercial joint stock bank must have at least 100 founders, according to a new regulation issued on June 7 by the State Bank of Vietnam (SBV), Vietnam’s central bank.

Decision 24/2007/QD-NHNN, which details regulations for the establishment of a new commercial joint stock bank, states that the new bank must also have at least three member institutions, each with capital valued at a minimum of VND500 billion. New banks must meet the legal requirement of capital, at least VND1 trillion initially, but no less than VND3 trillion by early 2009.

The decision also states that the capital of a new bank must be owned by shareholders, and not be loaned in any form. Each member institution can own a maximum stake of 20% of the bank’s charter capital, and an individual shareholder can hold a maximum 10%.
Vietnam travel

To ensure the stability and development of new banks in this transition stage, the central bank will allow new bank founders to make transfers to each other five years after the launch of their banks; and other shareholders to transfer their stakes in a bank three years after its founding.

Foreigners cannot serve as a party to the founding of a bank. However, they can purchase the bank’s stake after it begins operations. Apart from the capital requirements, the new decision establishes detailed criteria for human resources, information technology, and business strategy.

Kieu Huu Dung, head of the banking department within the central bank, said that authorities would receive petitions for the establishment of a new bank and consider relevant stakeholders after the new decision came into force. About 24 proposals to create new banks have been sent to the central bank, among them are proposals by big corporations like PetroVietnam, Bao Viet and FPT. The bank will apply the standards of the recent decision, and take six months to examine each file.

Reuters makes Vietnam’s stock prices known worldwide

Reuters, one of the world’s leading news agencies, has launched a new service allowing its customers worldwide to follow prices of HCM City bourse-listed stocks online.

The British news agency earlier brought prices of shares traded on the Hanoi Securities Trading Center online as well, making it easier for overseas investors to instantly track stock price movements in Vietnam.

Edward Haddad, managing director of Reuters for ASEAN, said the new service was added to the Vietnam market information section provided through the Reuters 3000 Xtra product. Customers of Reuters can now watch price movements instantly, and place orders with securities companies in Vietnam through a secure, high-speed order-making system.

Reuters and Thailand’s firm Bisnews AFE have also launched an information service called Bisnews Equities Terminal focusing on Vietnam’s stock market. This product provides updates about local stock indexes, indexes of stock exchanges in the world, forward markets, foreign exchange rates, reports on stock and foreign exchange markets, and Vietnam’s stock market. The service will help securities firms receive orders from foreign countries through Reuters’ secure order-making system.

Big deals expected during U.S. visit

Many big business deals are expected to be signed during President Nguyen Minh Triet’s visit to the U.S. this week, the first by a Vietnamese head of state.

According to Vietnam Chamber of Commerce and Industry (VCCI), Triet is accompanied by a powerful business mission comprising more than 100 top Vietnamese businesses. The big deals may involve Vietnam Airlines and Boeing; Electricity of Vietnam, Chevron and Citibank; Saigon Securities Incorporation and Credit Suisse; and some ministries, IT companies and Microsoft. The biggest deal worth more than US$1.5 billion involves Agribank and Wachovia Bank, Standard Chartered Bank and RZB Bank.

Triet is scheduled to meet the CEOs of more than 100 top U.S. companies in New York, visit the New York Stock Exchange and attend a forum on financial investment in Vietnam organized by AIG and VCCI. He will also witness the signing of contracts between Vietnamese and American businesses and the Trade and Investment Framework Agreement.

Investors look past corporate tax cuts

The government is planning to lower the corporate income tax rate in a bid to favour investors, but some observers have countered that greater investment incentives should also be taken into consideration।






Scores of foreign invested firms have put their hand up in support of lowering corporate tax rates



Truong Chi Trung, Vice Minister of Finance, said the plan to reduce corporate income tax (CIT) by 3 per cent down to 25 per cent, which would bring Vietnam in line with other countries in the region, was being carefully considered.
Trung said that a number of companies had complained in recent years about the tax being too high, and expressed their belief that maintaining tax level at 28 per cent could adversely impact the business environment.
“The CIT reduction plan, which is expected to become effective in 2008, could cause the state coffers to witness a dramatic drop in revenues,” said Nguyen Van Ninh, head of the General Department of Taxation under the Ministry of Finance.
He estimated CIT collection would provide around VND30 trillion ($1.9 billion) to the state budget this year, around 3 per cent of the country’s GDP.
“If the CIT reduction goes into effect, the state budget could lose around VND3 trillion ($190 million), equivalent to 10 per cent of total CIT revenues,” he said.
“On the other side,” he added, “the business environment will become more and more attractive, resulting in increased investment”.
Ninh said the CIT adjustment was planned within a comprehensive and long-term strategy on tax reshuffles until 2010, and set up in an effort to make the country’s tax system more attractive to investors.
Martin Rama, a lead economist at the World Bank, said the CIT reduction was obviously a positive step forward to attract investors.
“However,” he said, “more importantly, the government should pay special attention to other investment incentives in line with its WTO commitments.”
Rama noted that there remained different standards for foreign and domestic investors, an obstacle that needed to be tackled quickly.
He said Vietnam’s drive to create a favourable business environment was on the right track, resulting in numerous new firms entering the nation’s market.
Ngo Thanh Tung, managing partner of the Vietnam International Law Firm, said the CIT rate was just one factor that foreign investors take into consideration before setting up in Vietnam.
“Other important factors are comfort and ease of infrastructure and administrative procedures,” he highlighted, adding that the assurance of a highly-qualified labour force was a necessity.
Tung commented that the adjusted CIT rate of 25 per cent was lower than that currently applied in China and other regional countries.
“Now is the perfect time for Vietnam to attract foreign investors, but the government must pay due attention to a comprehensive package of reforms regarding not only taxes but also other factors so as to keep foreign investors. The immediate and urgent problem to be settled is the assurance of enough electricity for investors.
“The macro-economic policies are favourable, but implementation at the grassroots levels remains cumbersome,” Tung said.
He said apart from improvements to the investment environment, Vietnam needed to improve living conditions for investors, particularly the diversification of services like entertainment, shopping, healthcare as well as the minimisation of environmental pollution.
By VIR