Banking restructure aims to generate capital for key sectors

HA NOI — The Government will continue to restructure the banking system to encourage citizens to invest their savings and thereby satisfy the economy’s capital demands, according to the Ministry of Finance.

The Financial Minister Nguyen Sinh Hung said that increased revenue gained in this way will be invested in key sectors relating to fertiliser, gas and oil, and electricity.

The State Bank of Viet Nam said that credit growth this year is estimated at 22 per cent and 24 per cent, down from last year’s 25 per cent and 26 per cent.

Efforts to encourage investment from citizens and thereby boost credit growth has yielded around VND60 trillion (US$3.8 billion), but bankers believe the potential amount to be reaped from this activity is much greater, with year by year increases expected.

Under the restructuring plans, non-State and State-owned enterprises and equitised firms in hydroelectricity, cement production and telecommunications will be able to set up projects to issue bond and stock securities to encourage investment. Banking experts say it will be difficult to boost investment if enterprises cannot create credit for people.

These experts also argue that enterprises should show transparency in their financial activities, particularly the pre-equitisation valuation of enterprises. This measure is essential to increase public confidence and thereby attract capital investment.

The State fund for enterprises is currently estimated at VND200 trillion, but the market-based valuation of these can reach between VND300 trillion and 400 trillion.

The experts also said it is necessary to grant favourable conditions to attract foreign investment and open up more undeveloped economic sectors, such as insurance, banking and telecommunications.

If the situation improves they estimate that domestic capital could reach 40 per cent of the nation’s GDP.

Viet Nam News, May 14, 2005