Mr Brett Krause, Managing Director and Citi’s Country Officer for
Looking back on Vietnam’s economy in 2010, what were the good and the bad in your view?
Let me start with the upside. In 2010 we saw strong growth momentum driven by domestic demand and resilient industrial production. The economy grew a robust 7.1 per cent in the third quarter, prompting us to nudge our GDP growth forecast this year up to 6.6 per cent. Pickup in the private and foreign invested sectors and resilient exports are also upsides. In terms of FDI, the manufacturing sector still has a fairly attractive level of competitiveness.
Another piece of good news is that Vietnam continued to rank well in global investment and business surveys as one of the Top 20 most attractive FDI destinations for 2010-2012. Actually, Vietnam moved up to 8th place from 11th place in this list. We also see Vietnam score highly in labour markets, access to market size, innovation potential, and infrastructure improvements.
In terms of exports, Vietnam did quite well in 2010 compared with 2009. However, while Vietnam’s exports have outperformed the region, its high import content has led to very little impact being made on the trade deficit. Import growth has also remained resilient, though the composition of drivers of import growth has shifted more towards intermediate goods for exports. Upward bias in global commodity prices and, more importantly, gold, also creates distortions in the trade account.
In terms of challenges, Vietnam has continued to struggle with its foreign exchange regime. It is important to put in place policies that bolster confidence in the VND and stabilise the currency if Vietnam is going to be successful in continue to attract FDI and FII against an increasingly competitive set of alternative emerging market destinations.
Higher inflation is likely to pose a risk alongside economic expansion. Although the CPI is still well below its previous peak during the 2008-2009 cycle, rising inflation momentum since the third quarter, led by volatile food and other one-off factors (like education costs), may affect macro-economic stability. More pressure will likely be created from next year’s minimum wage adjustments, higher global commodity prices, and rising imported inflation as the VND depreciates.
What are Citi’s strengths in Vietnam?
We have a number of clearly identifiable strengths in Vietnam.
We maintain a strong focus on innovation and service. Whether in transaction services, global markets or corporate banking, Citi has pioneered innovation in Vietnam and you can now see Citi bringing a new level of innovative solutions to consumer banking. Our smart banking branch in Hanoi and superior internet banking are just two recent examples. We will continue to look for ways to innovate to offer our clients more convenience, flexibility and value when it comes to their banking and wealth management needs.
We have the biggest global distribution network. Citi is playing a major role in helping the government and Vietnamese companies pursue their strategic goals and raise capital to support these needs. This year alone we were joint bookrunner on Vietnam’s $1 billion sovereign bond issue and were mandated by the Vietnam Development Bank to arrange EAF long-term financing to support the Hanoi - Hai Phong expressway project.
Another strength we have is our people. Citi places a strong focus on talent development. We have more than 300 people on the ground in Vietnam and have a rigorous training and development program. This translates into superior service and advice for our clients.
Last but not least, we have a well-established brand. We have been in Vietnam for 15 years and our brand enjoys strong recognition. We intend to build on that platform as we expand in the country.
Export credit financing is one of Citi’s specialities. How many deals have you done so far in Vietnam?
In Vietnam Citi has dominated capital markets and investment banking transactions, including international and domestic bonds, syndicated loans, and export agency financing. Over the last 12 months Citi has executed landmark long-tenor financing transactions with a total value of around $1.64 billion and we have a strong pipeline going forward. By leveraging Citi’s global platform and long-term relationship with multinational organisations, as well as investors and export credit agencies, Citi is best positioned to deliver optimal financing arrangements for large-scale projects with long tenor in Vietnam.
For example, in July 2010 we closed the $470 million Hermes & NEXI-insured term loan facility for the PetroVietnam Nhon Trach 2 power plant project. This is a landmark transaction in the Export and Agency financing space in Vietnam, being at once the largest such financing as well as combining traditional ECA-financing with unique untied Agency supported financing. It is a reflection also of the willingness of Agencies to support large projects of critical national importance to Vietnam, as the country’s economy develops rapidly.
Other major export financing deals where Citi has been mandated include the NEXI-term loan facilities for the National Power Transmission Corporation (NPT), Mineral Industries Holding Corporation Limited (Vinacomin), and Vietnam Development Bank.
In terms of treasury and trade services, how has Citi dealt with FIEs as well as Vietnamese corporates?
In the corporate and transaction banking areas, Citi has been recognised as the strategic service provider for over 90 per cent of the Global Fortune 500 companies that have a presence in Vietnam. Citi is seen as a one-stop bank for comprehensive solutions in cash management, trade, finance and sales & structuring, with qualified services and products that meet international standards.
We are working on a series of treasury and trade initiatives for both Vietnamese and foreign companies, which are based on cutting-edge technology. One of the key products is called Treasury Vision, which helps centralise Treasury and in-house banking and improve working capital management through control over cash flows, investments and risks.
Another innovation worth mentioning is an active portfolio management tool providing corporate and financial institution clients with short-term trade advances and account receivables financing. We are also offering outsourcing trade solutions to optimise yields for clients by leveraging Citi’s regional relationships with financial institutions in the Asia-Pacific region.
What are the prospects for export credit/financing within the banking sector in Vietnam and in regional markets?
We have seen strong willingness of agencies to support large projects of critical national importance to countries in the region as well as Vietnam, as the regional economy develops rapidly. The agencies fill a critical gap in the financing of such projects by enabling banks to make more lending capacity available and for longer tenors.
Infrastructure development will remain a key development priority in Vietnam, and most other Asian markets, for the foreseeable future, and we believe that ECAs and other agencies will continue to play a very important role in this space. Further, moving beyond traditional export credit financing for projects, we are seeing agencies stepping up to encourage sustainability, renewable energy and green initiatives in emerging markets, which has an overall positive developmental impact.
Having strong relationships with export agencies both in the region and internationally, Citi is always ready to provide Vietnamese companies with our best experience and solutions to help finance their projects.
Over the past 12 months Citi has expanded to retail banking services in Vietnam. Given that Citi is well known for its corporate banking services, what lies behind this expansion?
Citi has gained a strong reputation for corporate and investment banking in the last 15 years in Vietnam but our retail banking business is equally well known in Asia. We serve nearly 31 million retail banking customer accounts across 14 markets in the region and are the top credit card issuer in Asia Pacific, with close to 15 million accounts in circulation. It was only natural to bring our retail banking expertise to Vietnam and offer customers here a different proposition.
In October 2009 Citi opened its first retail outlet in Ho Chi Minh City, to provide individual consumers in Vietnam with savings and deposit products, including multi-currency deposits, flexible interest bearing accounts, and online banking. We have followed that up with a retail branch in Hanoi in October 2010. This branch in Hanoi leverages innovative technology to redefine the banking experience. We also have plans to launch an expanded suite of consumer banking products, such as credit cards, personal loans, mortgages and insurance, starting in December.
Citi is said to have applied for a licence to launch a 100 per cent foreign-invested entity in Vietnam. How will you materialise this plan in 2011?
Our intention is clear - we want to be the leading, most customer-focused international bank in Vietnam. We will pursue growth in the country along many different business lines. Our consumer banking business will continue to play a leading role in introducing new and innovative banking services to Vietnam. We want to be the bank of choice when it comes to the provision of wealth management services and helping Vietnamese individuals achieve financial success.
Our focus is primarily on organic growth and you have seen Citi over the past year become the first US bank to launch retail banking in Vietnam. We have also launched debit cards in China and mobile phone banking in several markets across Asia, and secured stock broking licences in Indonesia and Malaysia. We look forward to working closely with the State Bank of Vietnam in 2011 as we expand and increase our already strong investment in Vietnam.
Source:
VnEconomy
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