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

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Thai banks left out of Vietnam boom

HANOI - Financial services companies from around the region are eyeing Vietnam for growth opportunities as the country appears ready to join the World Trade Organization later this year. Entry into the globe trade body will lift restrictions on the financial services sector and bring a sudden rush of competition into the market, analysts said.

'With only four million people out of a total population of 83 million currently holding a bank account, the potential upside is fairly impressive,'' Kevin Snowball of PXP Asset Management in Ho Chi Minh City told the Bangkok Post. But although many companies around the globe are clamouring for a piece of the action, Thai banks are unlikely to be among them. Industry executives say that Thai financial services companies will likely wait and see if other Thai companies set up shop in Vietnam before investing.

The Thai Board of Investment estimates that just over 100 Thai companies have operations in Vietnam, with more opening every month. It remains to be seen if the combination of extra investment, WTO entry and a developing domestic market will provide incentives for Thai banks to invest in its Asean neighbour. Vietnam is the world's second-fastest growing economy. Its labour costs are estimated to be about a third of those in Thailand, and the workers are relatively well-educated.

''Everyone sees Vietnam's economy exploding,'' said Wittaya Supatanakul, general manager of Bangkok Bank in Ho Chi Minh City. ''The opportunities are there and investors are coming.'' So far, Thai banks have a small presence. Only two have operations in the country: Bangkok Bank and VinaSiam Bank, a joint venture between CP Group, Siam Commercial Bank and the Vietnam Bank for Agriculture and Rural Development. In addition, the majority of the banks' clients are not Thai, but Taiwanese. Because tough regulations imposed by the State Bank of Vietnam (SBV) allow only five Taiwanese banks to have branches in the country, Thai banks have cashed in on the spillover demand from Taiwanese investors.

Bangkok Bank also has a strong relationship with Taiwanese businesses as the bank has three branches on the island. Mr Wittaya and several other bank executives speak Mandarin. Besides Bangkok Bank and VinaSiam, the only other Thai bank to take a shot at the Vietnamese market was Thai Military Bank. In 1990, it opened a representative office and then a branch, but soon pulled out because it was unable to generate enough revenue.

Thirty-one foreign banks have set up shop in Vietnam, compared to just 18 in Thailand, Mr Wittaya said. Some of those banks in Vietnam are already making money, but others are waiting until the government lifts restrictions and allows expansion. Anecdotal reports suggest that even more banks want to enter Vietnam, but bureaucratic obstacles are holding them up. Companies particularly appear to have difficulty getting the necessary paperwork translated and notarised in a country with a limited supply of good translators.

But the hassle will likely be worth it. Recently, Sacombank, Vietnam's largest privately owned bank by assets, became the first bank to list on the Ho Chi Minh City stock exchange. Shortly afterwards, it announced a large boost in first-half profits. Executives see the listing as proof that banks can make plenty of money in Vietnam, but they expect competition to be fierce. ''The next few months are going to be very interesting for all of us,'' said Adil Ahmad, a director of Sacombank.

By Bill Hayton - The Bangkok Post - October 14, 2006.