AEC Effect: ASEAN banks follow retail & realty investors, into Vietnam

The ASEAN Flag

Several ASEAN based commercial banks are planning to elevate their presence in Vietnam. The development follows a spate of investment by Thailand-based companies as well as regional companies, in the country’s retail and the real estate markets.

The Thailand based bank Kasikorn has recently opened two representative offices in Hanoi and Ho Chi Minh City. Prior to Kasikorn, the Development Bank of Singapore (DBS) and Maybank (Malaysia) have made inroads into the Vietnamese market.

Also read: AEC Effect: Thailand cos foray into Vietnam 

Kasikorn said it will expand its operation in Vietnam by launching more offices and branches, when the State Bank of Vietnam allows it. The bank plans to cater to the Vietnamese small/medium-sized companies. Before its formal launch last week, Kasikorn had collaborated with two local banks, Vietinbank and Agribank.

The trend hints at the rising investment needs of ASEAN companies, particularly in Vietnam and the banks are here to tap these growing opportunities

The United Overseas Bank (UOB), in 2013, had shown interest in takeover of the Vietnam based GPBank. This would help to establish a 100 per cent foreign-owned bank in Vietnam, while helping the government restructure the loss-making lender. However, the deal was not finalised .

By the end of this year, the AEC, will be formed and one of it’s targets is to completely open the banking door within the community. Therefore, there will be virtually no obstacles, in the future, for such deals.

The biggest barrier to foreign banks operating in Vietnam currently is the cap on foreign holding, which cannot exceed 30 per cent. The removal of this limitation will take some time, as Vietnam is in the process of forming a future roadmap for banking integration. .

Also read: Myanmar opening banking doors

Meanwhile, the penetration of more foreign banks means a more fierce competition for domestic Vietnamese banking groups. Besides catering to the banking needs of foreign companies, which have investment activities in Vietnam, the foreign banks are likely to attract business from local firms.

Therefore, the Vietnamese government is mulling a process of restructuring that will make the domestic banking system consolidate activities and help in emergence of large banks of “regional level”.

Vietnam’s leading banks have presence in Laos and Cambodia, which are smaller markets. In Myanmar, a highly potential market, only the Bank for Investment and Development of Vietnam has set up its representative office, and in Singapore, the most developed in the region, only Vietcombank opened an office.

Although Vietnamese banks are seeking expansion beyond the country’s territory, the foray of rivals from the ASEAN five tigers (Singapore, Malaysia, Indonesia, Philippines and Thailand), who will bring their strengths of capital, network and product diversity, will put pressure on the domestic banks.

Vietnamese banks, as a result, should cooperate with ASEAN banks such as DBS, OCBC or Maybank, to jointly develop, according to Dam Nhan Duc, Techcombank’s head of strategic management and research centre.

Also read: Vietnamese banks expand in Indochina

Independent economist Phan Minh Ngoc alleged that the establishment of the mutual economic community should be valued regardless of the competition and all the drawbacks that Vietnam would face. “Bank assets owned by lenders in the ASEAN are still small if we compare to the share held by international banks,” he explained.

Therefore, the integration will create stronger banks to take back customers.

In addition, ASEAN is an important trade partner of Vietnam. According to the government portal, commercial trade with ASEAN accounted for more than 14 per cent of the country’s total trade value in 2014. Vietnam’s export to ASEAN countries reached $19 billion, 12.7 per cent of the total export turnover.

As of December last year, eight ASEAN countries had direct investment in Vietnam, including Singapore, Malaysia, Thailand, Brunei, Indonesia, Phillippines, Laos and Cambodia. Their combined investment capital stood at $53 billion, occupying 20 per cent of Vietnam’s total foreign direct investment.

Related story: Vietnam’s Vietinbank confirms merger with PGBank

Image: freedigitalphotos.net

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.