Hanoi to Become Monetary and Financial Hub

Hanoi to Become Monetary and Financial Hub

Hanoi, the capital city of Vietnam, could soon become the monetary and financial hub of the North if comprehensive measures are undertaken quickly, governmental officials declared last week.

A two-stage plan on formulating a monetary and financial hub in Hanoi has been created to submit to the government for an approval.

Tran Cao Nguyen, a senior expert from the Ministry of Finance said that in the first stage between 2004 and 2007, a modern “over-the-counter” securities market should be put into operation.

“Further, a number of commercial banks will be equitised with the aim of enhancing their competitiveness,” he said, adding that infrastructure and industrial zone projects should be fulfilled in this stage.

He said that the second stage between 2008 and 2010, foreign invested financial firms in insurance, auditing, securities services and financial consultancy would be stimulated to operate in Hanoi.

“A comprehensive bond market should be developed in this stage with the trade of bonds issued for mobilisation in infrastructure projects and urban property projects,” he said.

He added: “Hanoi will organize on a trial basis the issuance of housing construction bonds which have the duration of 15 to 20 years to be listed on the future Hanoi bourse.”

Nguyen Dai Lai, a representative of the State Bank of Vietnam said that the diverse network of commercial banks and financial organisations would be a big advantage in the plan to develop Hanoi as a monetary and financial hub into reality.

The statistics provided by the State Bank indicate that Hanoi is the headquarters of the State Bank of Vietnam, five giant state owned commercial banks with total chartered capital of VND19,000 billion (US$1.23 billion) and 28 joint stock commercial banks with the total chartered capital of VND2,700 billion (US$173 million).

Furthermore, it is also a hub for five joint venture banks and around 20 foreign bank branches. The capital is home to a number of financial institutions.

In 2003, total capital mobilisation in local currency and foreign currencies reached VND90 trillion (US$5.9 billion) and VND53,800 billion (US$3.5 billion), respectively.

By comparison, Ho Chi Minh City only reached mobilisation of VND74,300 billion (US$4.8 billion) in local currency and VND38,200 billion (US$2.5 billion) in foreign currencies.

“As at August 31, 2004, total mobilisation capital via commercial banks in Hanoi reached approximately VND128,000 billion (US$8.4 billion), equivalent to 25 per cent of GDP and 3.5 times higher than the total GDP of Hanoi,” he said.

Nguyen Hong Ky, director of the Hanoi branch of the State Bank agreed, saying that Hanoi was also the national payment centre of the banking industry as total payments via money transfer reached VND237,902 billion (US$15 billion) as at September 2004.

He applauded the equitisation of a number of commercial banks as through it banks are able to increase their chartered capital to increase competitiveness.

“Further,” he said, “there should be effective policies on risk prevention for the banking system without interference from concerned agencies.”

Pham Cao Nguyen, director of the Hanoi Department for Natural Resources, Environment and Housing said that the plan for the Hanoi Property Market by 2005 could become a reality if the legal framework on land auctioning and collateral mortgages were issued transparently and clearly. 

Nguyen, from MoF, said that the immediate requirement is to set up a Hanoi securities trading centre, controlling the parameters for Hanoi’s operation as a financial hub and as a market for banks’ securities, corporate bonds and shares.

Vuong Trong Nghia, an analyst with the National Economic University said that the Hanoi monetary and financial hub “will operate effectively and efficiently if a diverse system of intermediary financial organizations is set up.”

“As such, formulating a legislative framework for the operation of intermediary organizations would be the premise now,” he said.

Table1: Investment structure of insurance companies

Source: The State Bank of Vietnam

Table 2: Current situation of financial companies

      (Source: The State Bank of Vietnam)

• Nguyen Phuong Thao