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

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In capitalist Vietnam, death to bankers

HO CHI MINH CITY - A Vietnamese trader could face the death penalty if she is found guilty of losing money on a foreign-currency transaction involving foreign banks she oversaw while working for a state-owned bank. Nguyen Thi Quynh Van is former deputy head of trade finance at the Industrial and Commercial Bank of Vietnam, known widely as Incombank, one of the country's largest state-owned financial institutions. Police recently charged her with "losing state resources through economic mismanagement", a crime that carries the death penalty in Vietnam.

Authorities maintain that she lost US$5.4 million in speculative currency trades made with three foreign banks that do business in Vietnam, although only one bank, ABN Amro, has been accused publicly. Two Vietnamese employees of ABN Amro's Vietnam affiliate were also jailed, and another two bankers from the Dutch bank were placed under house arrest. Vietnamese-American Del Pham, general director of ABN Amro's Hanoi branch, has been asked to clarify issues related to the bank's recent activities and transactions within Vietnam. He has been banned from leaving the country while under investigation. In response to the arrests, Incombank on August 3 filed a lawsuit against ABN Amro seeking the return of the money, plus interest and court fees.

"The persons involved at our branch weren't registered, and persons at the other bank [ABN Amro] knew about this and still undertook transactions with them, so it's clear that they were wrong as well," said Incombank spokesman Tran Duy Bich. The state and Incombank say that Van was not authorized to undertake foreign-exchange transactions and that her conduct represented mismanagement of funds. ABN Amro, for its part, denies any wrongdoing, saying it was simply conducting a routine business transaction. "ABN Amro believes the trades were valid," the bank said in a statement.

One employee of ABN Amro who spoke on condition of anonymity strongly denied that the case involved illicit foreign-exchange deals. "How could we know that a deputy director of finance at Incombank wasn't allowed to conduct forex transactions?" the employee asked. Van's arrest is the latest case in a series of government-led crackdowns on suspected corruption, graft and embezzlement - all crimes that can lead to the death sentence in Vietnam. Since 2003, Vietnamese courts have sentenced 11 high-ranking officials and business people to death for economic crimes.

The latest execution was carried out in March on Phung Long That, head of the Customs Department's anti-smuggling office, who was found guilty of accepting bribes and smuggling, according to UK-based rights group Amnesty International. The recent case represents the first big case to involve foreign investors. Many foreign investors here say they lack faith in Vietnam's legal system, which they contend, based on recent court decisions, lacks independence from the government and ruling Communist Party.

The Incombank suit against ABN Amro will become a closely watched legal litmus test for many foreign investors, they say. The use of the death penalty for economic crimes has given many foreign businesses pause, and many have requested the state to abolish the death sentence for white-collar crimes.

Moreover, many foreign banks with operations in Vietnam and the American Chamber of Commerce have expressed their concerns about the criminalization of what they view as normal business transactions. They note that the police, possibly prone to political pressure, decided to file charges against Van and ABN Amro but notably not the central bank. The central bank, the official regulator of Vietnam's financial sector, has neither filed charges against any company nor publicly commented on the high-profile and controversial case.

"The [criminalization of business transactions] could freeze business in Vietnam, and the [lack of central-bank involvement] could negatively impact Vietnam's financial markets in general and foreign-exchange markets in particular," American Chamber of Commerce chairman Tom O'Dore said in a statement related to the case. "People keep on thinking that police have wrongly arrested representatives of a foreign bank to help a local bank recoup its forex transaction losses," said Edward E G Samuel, a veteran businessman based in Ho Chi Minh City. "The outcome of the legal dispute between Incombank and ABN Amro could become an interesting test at a time when Vietnam is doing its best to polish its image as a trustworthy candidate for admission to the World Trade Organization."

Another businessman, who requested anonymity, agreed that the Incombank-ABN Amro case could have a chilling effect on future foreign investments. He noted that Vietnamese banks and businesses frequently lose money in foreign-exchange deals and ventured that the government should not try to shield state companies from the ups and downs of the free market. Government officials, for their part, have been quick to play down the Van case, particularly in connection with its possible adverse consequences on foreign investment. "Vietnam has ratified the United Nations Convention against Corruption and is committed to carrying it out," said Nguyen Van Thanh, head of research at the Vietnam's Government Inspectorate.

"Ratifying the UN convention goes along with a host of other measures that will make Vietnam a more transparent place to do business," he said, adding: "From our point of view, it is very important for the investors to see the developing of our transparency, and if we do that we can get more investors internationally into Vietnam." Foreign Affairs spokesman Le Dung reaffirmed that stance when he told the media, "Vietnam's relevant agencies are dealing with the case transparently and clearly, in conformity with Vietnamese law and our country's commitments to international agreements." So far, however, foreign investors in Vietnam don't seem fully convinced.

By Tran Dinh Thanh Lam - Inter Press Service - August 24, 2006.