Entry to WTO - A Lot of Progress Made, More Needs to Be Made

As joins the WTO, there’s a need of consolidation and of the most importance to ’s banking sector is to develop the human resources capable of servicing customers. This is the opinion of Mr. Charly Madan - Country Officer of Citibank regarding joining the WTO and the challenges facing the banking industry in .

Do you think that can join the WTO by the end of this year?

Well, I think the desire, the strong commitment is there and from the latest visit that I had with the Prime Minister, and from the discussions that we had with officials from both sides, we are optimistic. However, still has a few things needing to be done. The point is more; ‘joining the WTO in one month or in another’, and I think a matter of few months difference is not going to make a huge difference in what is a very important process for . And if all the processes can be completed, accession to the WTO can be achieved within this year, that’s wonderful. If it’s not in this year but in the first quarter of next year, it’s only a few months away.

With the accession into the WTO of , what’s the benefit for your bank?

The way I think is, it will benefit the people of first. It will benefit the country. That is the way I look at it.

Still there are a lot of reforms and work to be done. I mean once you join the WTO, companies will have to face increasing competition, but they will also face increasing opportunities. How do they best capitalize on these opportunities, and how do they tackle them, the competition. And to that effect, we’re working with our customers, we have discussions with them in order to talk with them about their industry or global impact & trends in their industry, and that’s what the benefit of working with a global company like Citigroup is, as we have a presence in over a hundred countries, we have a strong market leadership position across many products and this allows us to bring in our expertise from various walks of life and various industries for the benefit of the company here.  For example, we have discussions and dialogue with various stock departments about the regulations, whether to develop the capital market, whether it is the development of the money market, the foreign exchange market, the regulatory environment for each of these markets, whether is the development of international trade, whether it is the application rules that support trade finance, and whether it is about just corporate governance. That’s is a very key area for . And while I think a lot of progress has been made, a lot more needs to be made. I believe does have the ability to achieve its goals and the capabilities to do so.

Can you give your comment on the banking sector when accesses the WTO?

 

Before we change to get in the WTO, let’s look at where the banking market is today. We have a banking system that has 5 major banks dominating 73 per cent –75 per cent  of the entire system. Some other 20-30 banks are joint stock banks, another between 13 per cent-17 per cent of the system, and the rest is foreign banks which is a very small percentage with a very large number of banks: over 30 bank branches and 45 rep offices of various financial institutions. There are going to be certain challenges once you have that mix because you’ve got companies with the joint stock banks that are very small and companies that are reasonably big. And as joins the WTO, what we expect to see is a bit of consolidation.

As accesses the WTO, let’s look at the industry again, the State Bank and Gov are making very good efforts towards strengthening the banks and their tasks. The regulations we have seen in the past and up to now are very progressive regulations. Our regulations will enable the banks to be on a firmer and better foothold in the marketplace over here, they will have a better capital level and this will allow them financial strength.

The other area that we have to look at is the development of the human resource of the system. Banking is all about people. It’s about being able to service customers, that’s the number one. Number two: understanding the risks and working our customers through the risks, and developing a solution for their risks. And all of these will require a lot of training. I believe that will progress a lot in the financial industry because there’s a lot of training we have provided at the moment and a lot of reforms have taken place within the sector itself and within the banks themselves. They are all aware of the challenges waiting ahead. Once joins the WTO, I think the entire banking industry should benefit because it will increase international trade, increase domestic trade and banks are facilitators of trade. And when trade comes, other aspects of trade come like cash management, foreign exchange risks management, and with increase in investment across the country, companies that would be looking at bringing money in and also requiring money onshore and requiring working capital be provided to their companies as they set up plans for their companies here.

Considering the BTA roadmap, I heard that your bank has plans to become a local bank in by the end of this decade. Could you give some details on this plan?

I think what you mean by becoming a local bank, is by having a dominating position. What we are looking for are investment opportunities in the banking system over here. And as a branch we’ll continue to focus on activities here to serve our customers. By the end of this decade, we would like to be substantially larger if the right opportunities come and if the right types of risk rewards present themselves. Or rather than presenting themselves, we’ll go out to look for them and we can find the right type of risk reward opportunities.

About the stock market, What should Government do to push it up?

 

 Firstly, today we have some 29 stocks and the intact capital market already has a turnover of over 1 billion. dollars and that’s a reasonable basis to start. We know that the stock market in the south and the OTC here both have different sets of clients and performances. What has actually happened here? To a large number of people in other countries, we’ll see the ability of companies to go and raise capital in the stock market. Today the companies will just transfer the stocks to be listed in the market then raise new capital in the market place. So the primary issue to raise capital is what will be required here and to encourage them to raise capital in the stock market. The infrastructure of the stock market, the clearing system, the settlement system then consolidated system, or depository system and a strong regulatory framework, that’s also very important to develop the capital market over here. In addition to that, for developing the cap market, a very strong area that we require is the rating agencies need to be developed. We’ve been working with various departments within the Ministry of Finance.

Could you reveal the agreements reached during Prime Minister Mr. Phan Van Khai’s visit to CitiGroup H.Q. in June 2005?

Firstly I’d like to say that the visit by the PM was a very successful visit, well-organized. I think the trip achieved the objectives that had been set before leaving. There is a lot of support from the side for to join the WTO. Obviously, will have to fulfil some of the obligations and I think that is expected of many countries joining the WTO. We were involved in supporting the PM’s visit and some meetings. As you recall, we arranged as well the visit to by the president of the United States Bill Clinton, and arranged a reception at that time and also arranged the PM’s meeting with Clinton . And I think under our world leadership series, Mr. George Bush, the president of the United States had visited Vietnam at that time and we also arranged for various dialogues to take place. This time we were honoured by the Prime Minister’s dialogue with our seniors in New York . We had some excellent dialogues. The Prime Minister and his entourage had some excellent visions for and that was shared and discussed and he confirmed his support for our commitment to continue to work in and with the Government to achieve objectives and also work to expand free trade within .  The memorandum that was signed in New York between ourselves and Vietcombank calls for further cooperation in various areas between VCB and CitiGroup, and various areas of technical expertise and assistance that Citigroup would provide to VCB.

You said that Citibank has a dominant market share in the banking service in Vietnam

Yes, in the market segment in which we choose to compete, we are sure that we have a dominant position, especially in the cash management area both from a product offering perspective, customer usage perspective and external award of recognition. That’s also electronic banking. That allows us to continue developing products & providing instant solutions to our customers. It’s our ability to customize.

I foresee that a few years down the road some of the large SOEs will have a lot of overseas investment and subsidiaries, such as Vietnam Airlines, will provide cash management services, so that the head office, at any point in time can look at, control, transfer, make payments or receive money from any of their accounts overseas that are in Citibank. So our Citidirect is the engine for this and you will also have world link which is a very important product, and that’s for customers to clear their overseas payment. It will increase efficiency and productivity substantially, hence competing for the WTO will become easy.

Could you give briefs about Citibank’s achievment in ?

Citigroup first established a rep office here in 1993, that was then converted into a full branch status in Hanoi and after a short period we received the license to open a branch in HCM. Today we have 150 people and we have pioneered a number of product introductions in this market.

We were the first to introduce electronic banking and today we have a dominant position in that area. The other important area is the area of structured trade banks. We did the first ever US Exim deal which was the financing of the Boeing 777s for Vietnam Airlines and we financed three of the four planes for Vietnam Airlines. We also did the first transaction for the foreign exchange swaps for , for interest swaps and foreign exchange cross currency swaps.

We do a lot of community programs and finance, such as projects that provide financing to the Women’s Union , especially in Thanh Hoa province. We do a lot of work with Operation Smile where we provide funding and labor as well. We work with the Vietnam Youth Union and we take a lot of street children off the street and provide them with vocational training whether it is in hospitality, motorcycle repair or welding and equip them with tools. Those are some of the few programs that we do in addition to those we provide scholarships to students here.

Reported by Thi Van