Bangkok Bank hopes rising FDI, higher incomes will help Vietnam operations

Tharabodee Serng-Adichaiwit, senior vice president and general manager of Bangkok Bank’s Vietnamese operations, expects its lending there to see double-digit growth from rising FDI, stabilisation of the local currency and higher incomes.

The bank has two branches in Vietnam, one in Hanoi and the other in Ho Chi Minh City.

Vietnam has spent the past year getting its economy moving, battling inflation and stabilising its currency. Gross domestic product is expected to expand by 5-6 per cent this year thanks to export growth of 20-30 per cent, he said.

Vietnamese exports are valued at US$13 billion (Bt420 billion) a month, compared with Thailand’s $18 billion to $19 billion, and Vietnam could overtake Thailand in four or five years, he said.

Low wages and a large number of working-age people have attracted foreign investors to set up operational bases in Vietnam for export.

"We still see the [political] problems with China as a key risk to Vietnam’s economic growth. However, Vietnam will be stronger, as its GDP next year is projected to grow by 6-7 per cent, up from the 5-6 per cent expected this year," he said.

In the first eight months of this year, new loans by Bangkok Bank in Vietnam expanded by 10 per cent, which almost of the growth have to book at BBL’s offshore branches because Vietnam’s central bank instructed banks to limit foreign currency loans as part of its efforts to control inflation.

The limited foreign currency caused the lending in banking system in Vietnam grew only 4 per cent far from the government target at of 12-13 per cent.

Tharabodee said the TPP, if agreed, would help strengthen the Vietnamese economy in the long run, especially exports of garments and textile products, as Vietnam benefits from trade with the other 11 countries participating in the TPP negotiations.

Vietnam thinks it could benefit more from the TPP than from the Asean Economic Community, as under the former, it will enjoy zero export tariffs. Supporters of the controversial negotiations hope for an agreement by the end of this year.

Currently Japan is the biggest investor in the country, followed by Singapore, Taiwan and mainland China. Japan and Singapore are also part of the secret TPP talks.

Tharabodee said Bangkok Bank had seen an influx of FDI in Vietnam and it had participated in offering credit to foreign investors, which account for 90 per cent of its new loans there.

"We will serve the flow of investment by using the bank’s network, especially in China, as Chinese investors are coming here [Vietnam] to set up production bases. Furthermore, we will increase the focus on local small and medium-sized enterprises that are supply chains of larger corporates in Vietnam," he said.

Lending to SMEs is seen as low-risk as the bank can see the route of cash flow of those companies from corporate customers.

SMEs account for 20 per cent of Bangkok Bank’s loan portfolio in Vietnam, while Thai companies and multinationals account for 40 per cent each.

Thai SMEs might face difficulties doing business in Vietnam because they will face key rivals from Singapore, Taiwan and Hong Kong, which have strong capital backing. Thai SMEs must define which markets they can successfully penetrate, he suggested.

Most SMEs from Thailand in Vietnam are trading businesses.

Largely, Bangkok Bank has chosen to support the real sector as manufacturing plants are well established and therefore low risks for the bank.

Vietnam’s 90-million population not only provides a strong workforce to attract investment, but it is expected to include more middle-income people, as many as 20 million or 30 million by 2020, compared with 7 million currently. Many Thai conglomerates know this, and have acquired businesses in Vietnam to tap the high purchasing power in the near future, he said.

He noted that Thailand’s Berli Jucker had acquired Metro Cash & Carry Vietnam and Phu Thai Group Joint Stock Company, the former operator of FamilyMarts in Vietnam, to establish B’s Mart convenience stores.

Thailand’s Central Group has expanded its presence in Vietnam by opening Robins Department Store, he said.