~ Le Viêt Nam, aujourd'hui. ~
The Vietnam News

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Vietnam approves bank listing seen as reform test

HANOI - Communist Vietnam has approved the sale of shares in Vietcombank next year, the bank said on Friday, the first listing of a state-run bank seen as a key test of the government's commitment to financial sector reforms. Up to 30 percent of shares in the Bank for Foreign Trade of Vietnam (Vietcombank) would be offered to foreigners in a phased sale to begin in 2006, the bank said in a statement on its Web site www.vietcombank.com.vn.

Deputy Prime Minister Nguyen Tan Dung signed a directive on Wednesday approving the planned share sale, which will keep 51 percent of the bank in state hands. A foreign investor would be allowed to hold a maximum 10 percent of the bank's registered capital, but the total foreign ownership in Vietcombank could reach 30 percent, the bank said. The partial "equitisation" was aimed at improving the bank's management and ensuring it could compete with foreign rivals as Vietnam integrated into the world economy, the bank said. However, Vietcombank said the state would continue to have "a governing role in its operations".

Reform of Vietnam's tightly-controlled banking sector is a key issue as Hanoi seeks to enter the World Trade Organization, which most economists expect to be delayed until next year due to difficult talks with the United States. Vietnam's economic and legal reforms have not yet reached levels expected by Washington, its biggest trading partner at $6.4 billion between the two in 2004, just three years after a U.S.-Vietnam trade deal came into effect. "The Vietnamese government needs to establish a vibrant capital market featuring profit-motivated banks and dynamic stock and bond markets that can attract and fuel both foreign and domestic investment," U.S. ambassador to Vietnam Michael Marine told a business dinner on Wednesday. Hanoi has approved the partial privatisation of all state-owned commercial banks by 2010, the year that Vietnam has agreed to open its banking system fully under a bilateral trade agreement with the United States.

New management please

Vietcombank, with a registered capital of 3.3 trillion dong ($208 million), is among five state-run banks which control about 80 percent of market lending. The sector has battled concerns about the high level of bad loans and poor quality of credit analysis. Foreign investors are watching to see if Vietcombank serves as a role model for reform of the banking industry.

"We are happy to see this moving ahead," said Il Houng Lee, the resident representative of the International Monetary Fund. "We hope as a next step to see a change in management and a reorientation toward a commercial-based operation with their own independent credit decision-making process," he told Reuters. Vu Viet Ngoan, the head of the bank, told Reuters last month Vietcombank planned to issue convertible bonds to raise 1.2 trillion dong before it embarked on the partial privatisation. He said the bond would be sold only to domestic investors. Ngoan could not be reached for comment on Friday.

Earlier this month, state media quoted him as saying the bond sale would start in December if the government granted the final go-ahead in September. Ngoan has said Vietcombank would hire a foreign consultant to evaluate the bank, a process bank executives and central bank governor Le Duc Thuy said would take six months. Vietcombank made a gross profit of 1.3 trillion dong in the first half of this year, up 41 percent from a year earlier. State-run Bank for Investment and Development (BIDV), Vietnam's second-largest bank after Agribank in term of capital, said it would submit a partial privatisation plan late this year so work could begin in late 2007.

Reuters - September 23, 2005.