August 27, 2009
Foreign-owned Standard Chartered Bank (Viet Nam) Limited this month began operations as a locally incorporated entity, enjoying the same rights, growth options and obligations as local banks.Viet Nam News reporter Phuong Hoa talked to Ashok Sud, chief executive officer of Standard Charter Bank Viet Nam, Laos and Cambodia, about challenges and opportunities for the local banking sector.
Why has Standard Chartered Bank decided to locally incorporate in Viet Nam and significantly increase its investment here?
As a leading international financial institution, Standard Chartered Bank has always had a major footprint in Asia which accounts for about 70 per cent of its business.
This implies that we are conversant with Asian culture and values.
We have had a presence in Viet Nam for more than 100 years, know the country well and believe in its future as a leading player in the region. Through locally incorporating our bank in Viet Nam, we would be able to partner Viet Nam more effectively in its march towards prosperity and growth.
Local incorporation means increasing our investment in Viet Nam six times, which underpins our long-term focus and commitment to growing in Viet Nam.
What is the role of an international bank in an emerging economy?
First, international banks usher into developing countries products, skills and banking standards based on global best practices. This has the effect of raising the bar for the entire banking industry, thereby creating a more robust and efficient banking sector to support economic growth. In Viet Nam, international banks like Standard Chartered are doing just that.
The second key role is for international banks to lead Vietnamese companies into international capital markets for raising long-term financing for their projects.
The Government estimates that during the next decade, much more than US$100 billion of long-term financing would be required to sustain Viet Nam’s economic progress.
This would mean large companies and State-owned enterprises in Viet Nam would have to tap capital markets across Europe, Asia and the Middle East to raise the funds. International banks have a key role in such fundraising through international syndication and bond issues. Standard Chartered Bank is a leading player for syndication in Asia and in Viet Nam too.
Last but not the least, international banks act as a magnet to attract foreign direct investment into a country as large investors always seek their opinions before investing in countries. In fact, our local incorporation and substantial increase in investment into Viet Nam is an excellent example that we often quote to potential investors into Viet Nam as we are walking the talk.
What challenges and opportunities do you foresee for the banking sector in Viet Nam?
The banking sector is always a reflection of how the real economy in a country grows. Viet Nam’s economy has had a proven track record of growth and we believe this trend will continue in the long run. The banking sector will both drive and benefit from this growth.
In terms of product sophistication and depth of the banking market, there is a lot of ground that must be covered. For example, the size of the capital market in Viet Nam as a proportion of its GDP is much lower than some more developed Asian countries – so catching up is both a challenge and an opportunity.
Lastly, given the young demographics of the Vietnamese population, consumerism, and therefore consumer financing, is still at a nascent stage and we believe these will become more sophisticated and grow rapidly over the next decade.
Recently the London-headquartered group announced its interim results and record profits yet again. Why has the bank been relatively less affected by the financial crisis?
Although we are headquartered in London, our business footprint since our inception almost 160 years ago has always been Asia, Africa and the Middle East with Asia playing a predominant role.
Our excellent results in 2008 and for the first half of 2009 have been driven by our limited exposure to Europe and the US on the one hand and the relative resilience displayed by the Asian economies in the global economic slowdown on the other.
Our long and wide presence in Asia would hopefully translate into riding the growth curve in this region. So, we happen to be in the right place at the right time.
How do you see competition in the banking sector in Viet Nam?
All the international banks in Viet Nam account for about 10 per cent of the market, with local banks and State-owned banks having the lion’s share. I believe this percentage will continue over the next 10-15 years in spite of the fact that three or four international banks have locally incorporated in Viet Nam.
What will change is the sophistication of banking products and a growth in the overall banking wallet. This is the trend that we have seen in many Asian countries with growth and demographics similar to Viet Nam’s.
While there would be increased competition – which is always good for the customers and the development of the banking sector – local banks will continue to dominate this market. — VNS