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Weak banks strive to attract foreign investors

Update: March, 26/2012 - 09:44

by Thuy Anh

Prime Minister Nguyen Tan Dung has approved a plan to restructure credit institutions by 2015 which includes permission for foreign banks to acquire higher stakes in weak lenders.

The current limit is 20 per cent for a strategic foreign partner and 30 per cent for foreign investors.

Sumit Dutta, CEO of HSBC Viet Nam, is sure many more foreign investors will be interested in buying into small banks if they are allowed a dominant, or even 100 per cent, stake. They will want a say in running the business and other aspects like human resources and policymaking, he explains.

He believes that with their experience and advanced technologies, foreign investors will be able to improve the banks' efficiency.

But the first thing to do to attract foreign investment in domestic banks, he says, is to improve their transparency so that prospective investors will thoroughly understand the health of each bank and feel more secure about putting in money.

Deputy chairman of the National Commission for Financial Supervision, Le Xuan Nghia, however thinks it is not easy for weak banks to sell stakes to foreign investors because of their bad-debts problem.

There are some banks whose bad debts surpass their capital, so there is no way foreign banks will purchase them, he says. In such cases elsewhere in the world, the government buys a dominant share in the bank, turns them around, and then sells them to investors.

Nguyen Xuan Minh, CEO and general director of the Viet Nam Asset Management, has a different view, telling the Sai Gon Economic Times foreign banks might pay attention to factors like networks and clientele, and not just the figures in their books.

Infrastructure deals stall

BOT (build-operate-transfer), BTO, and BT have been popular models for infrastructure projects in the country's largest economic hub, HCM City, but investors are now finding them increasingly less attractive.

According to the city Department of Transport, among their downsides is the fact it is impossible to set up many toll booths in the city while the current toll structure brings little profit to investors.

Nguyen Mai Bao Tram, investment and business director at the HCM City Infrastructure Investment Joint Stock Company says toll from BOT transport projects brings in stable but not high revenue. The period of toll collection could be prolonged but bank loan repayment terms are fixed.

This is not even to mention the high loan interest rates.

For BT projects, the city used to pay infrastructure developers in the form of land use rights – like it did in the case of approach roads for the Phu My Bridge – but the city does not have a land bank for this purpose. The little land it has is in remote areas and will not interest too many investors. But it does not have enough money to pay for many of the projects either.

In light of all this, the Department of Transport wants the central Government to issue guarantees, according to Nguoi Lao Dong newspaper. Thus, if an investor fails to achieve 85 per cent of the revenue target from toll collection, the Government has to reimburse the rest.

It also wants the Government to consider other possible methods such as granting land for rubber plantation and mining and management of trade and sports centres, among others.

It also wants the Government to provide guarantees for investors raising capital inside and outside the country in 2012-15 since bank lending interest rates remain high.

Furthermore, the city should consider paying a part in the form of cash in instalments and the rest by land use rights. For urgent projects, special preferential policies should be offered.

Myanmar tourism tie-in

Travel firm Fiditour recently entered into a strategic deal with 10 major Myanmar travel firms, including MTS Myanmar Tourism Services, Able Winners Tour, and Universal Sky Top Travel&Tours to promote travel between the two countries.

The tie-up came during a visit to explore trade and investment opportunities organised by the HCM City Investment and Trade Promotion Center.

Meanwhile, last week, during a visit to Viet Nam by Myanmar President Thein Sein, An Giang Pesticide Joint Stock Company and asset management firm VinaCapital signed an agreement with Myanmar's Eden Group to develop a US$100 million agro-processing factory in Myanmar.

Such developments are expected to accelerate as the prime ministers of the two countries had earlier made a joint statement on co-operation in 12 sectors, including agriculture, banking and finance, aviation, telecom, oil and gas, mining, and construction.

Seeing the potential for co-operation, an association of Vietnamese investors in Myanmar was established in 2010 to facilitate investment in that country under an initiative by the Bank for Investment and Development of Viet Nam. Since then several investment and trade promotion conferences and Vietnamese goods exhibitions have been held in Myanmar, attracting hundreds of companies looking for partners in that country.

According to BIDV chairman and president of the Association of Vietnamese Investors in Myanmar (AVIM) Tran Bac Ha, the association also helps by providing businesses with information on developments in that market and making recommendations to both governments to facilitate investment by members.

By the end of last year Vietnamese businesses had 15 projects worth around US$550 million in the pipeline. Several have been licensed – such as a quarry by Simco Song Da and one for oil and gas exploration and drilling by PetroVietnam and Petrovietnam Exploration Production Corp.

AVIM wants the governments and ministries to review bilateral agreements already concluded – like the one on avoiding double taxation – and provide specific guidance for implementation. — VNS

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