FINANCE. finance & business news. Reference exchange rate up by 4 VND

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1 finance & business news Reference exchange rate up by 4 VND 2 Domestic gold prices fall sharply 2 PM urges lower interest rates, taxes stable 2 Interest rates, if applicable, will fall by 0.5pct per annum only: expert 3 HSBC: Vietnam is likely to reach credit growth target of 21pct 4 HSBC: Credit misallocation dampens GDP growth 5 Foreign capital welcomed to join weak bank's restructuring 6 Banking sector to maintain positive trend in Q2/2017: VCBS 7 Why is Dang Thanh Binh being charged with 'lack of responsibility'? 8 Outlook on Techcombank revised to stable 9 Vietinbank becomes Diners Club card issuer 10 Joint Statement on promoting startups in Apec issued 10 Apec forum looks towards dynamic, networked start-ups community 11 More efforts needed to enforce EU-Vietnam FTA 12 State budget collection up 13 per cent 12 Restructure the State Budget to make it more efficient 12 VN to complete statistical indicators set for sustainable development 14 Vietnam's government steps in to suspend sweeping new tax hikes 14 Minister: Law on special economic zones will offer strong boon for investors 15 Special Economic Zones may have single leader 15 Tuna exports to emerging markets on the rise 16 Exports to Algeria up 26pct 16 Australia extends VN's wind towers investigation 17 Australia-Vietnam launch new Agriculture Strategy 17 Coconut farming languishing 18 Winter crops to span 410,000 ha in northern region 19 Automobile sales dips 6pct in eight months 20 Airport service fees to increase from October 20 Quang Ninh's efforts pay off in improving competitiveness 21 Foreigners hail business opportunities in Vietnam 22 French firms learn about investment chances in Da Nang's hi-tech park 22 Vietnamese retailers stay outside competition of single-price chains 23 Reference exchange rate up by 4 VND Vietnamese businesses bet on huge investment projects 24 Digital economy vital for MSME growth 24 Foreign capital strongly flows in pharmaceutical industry 25 Solar panel industry sees growth 27 Italy offers grant to help study Vietnam's railway infrastructure upgrade 28 Ben Tre to up industrial investment 28 Tra Vinh will support private economic development 29 BIZ NEWS Business Briefs 13September, Bank stocks lift the market back up 30 VN Index breaks 7-day winning streak 31 Mekong Enterprise II lowers stake in MWG 32 Vietnam at high risk of APT attack 32 North-South toll fees too high 32 AgriTech accelerator for Mekong Sub-region launched 33 ACV to invest nearly $2 billion to upgrade key airports 34 Coal-fired power projects should accompany renewable energy production 34 Waste treatment problem hinders coal power plant development 35 SOEs name new staff to top management posts 36 Tokyo introduces tourism products in HCM City 37 HCM City suspends much-touted bus rapid transit project 37 Bac Ninh to invest VND570 billion in smart city project 38 Hanoi to have more waste-to-energy plant 38 Work begins on second quay of Long An Port 39 Mondelez Kinh Do accelerates its presence rapidly after M&A deal 39 BMW Group Asia chooses Thaco as new dealer of BMW, MINI in Vietnam 40 Doosan Vina Ships Three Giant RMQC Cargo Container Cranes to India 41 Japanese company gets customs priority status 41 Samsung continues to look for Vietnam suppliers 42 Vietnamobile rolls out 3G nationwide 42 Synnex buys 47pct stake in FPT Trading 43 FPT opens office in Denver, its 5th in the US 43 Seminar to bring together sellers, buyers of ICT services 44 Vietnamese products introduced at World Food Moscow Vietnam-AV Show 2017 to be launched on Friday 45 13/SEP/2017 INTELLASIA VNA The State Bank of Vietnam set its reference VND/USD exchange rate at 22,438 VND/USD on September 14, up by 4 VND from September 13. With the current +/- 3 percent VND/USD trading band, the ceiling exchange rate is 23,110 VND per USD and the floor rate is 21,766 VND per USD. Major commercial banks continued keeping their rates stable. Vietcombank offered 22,690 VND (buying) and 22,760 VND (selling), per USD, unchanged from the end of last week. Intellasia No. 21, lane 173/63/17, Ngoc Ha Ward, Ba Dinh Dist, Hanoi All Rights Reserved Tel: Fax: Office@intellasia.com Websites:

2 BIDV also kept its rates unchanged, offering 22,690 VND (buying) and 22,760 VND (selling), per USD. Techcombank retained its buying rate at 22,680 VND and its selling rate at 22,770 VND, per USD, unchanged for days. Domestic gold prices fall sharply 13/SEP/2017 INTELLASIA VNS Gold prices slumped in the Vietnamese market on Tuesday morning. On the Hanoi market, selling price of one tael, or ounces, of State-owned SJC's gold declined by VND190,000 (US$8.3) to VND36.75 million. On the buying side, the price of each tael also fell VND160,000, trading at VND36.53 million. In the southern cities of HCM and Can Tho and central Da Nang City, one tael of SJC's gold declined VND250,000 during selling, trading at VND36.73 million. Meanwhile, one tael was being bought at VND36.53 million. Bao Tin Minh Chau Gold Jewellery Company and Doji Gold and Jewellery Corporation (DOJI) listed their selling prices at VND36.68 million and VND36.70 million, respectively. Buying rates of their gold were listed at VND36.62 million and VND36.60 million, respectively. On the Asian market, gold is trading at some $1,325 per ounce, equivalent to VND36.36 million per tael. On global gold trading website Kitco.com, the price of gold slipped 1.2 per cent per ounce to end at $1, per ounce, the largest drop since July 3. Last Friday, global gold price hit a yearly peak of $1, per ounce. Thus, the price of one tael of gold in Vietnam is some VND410,000 higher than that on the world market. Global gold prices declined due to an upward trend in the dollar rate following an uptick in risk appetite fuelled by relief that North Korea did not test-fire missiles or conduct nuclear tests over the weekend as some had feared, Reuters reported. Assets traded primarily in dollars, such as gold, are very sensitive to currency fluctuations. An increase in the dollar rate will lead to gold becoming more expensive compared with other currencies and the demand for gold also decreases, the website said. Meanwhile, the worst-case scenario due to Hurricane Irma's impact, the most powerful hurricane ever recorded in the Atlantic, looked to have been avoided, easing concerns of investors about the negative impact of the storm on the US economy. PM urges lower interest rates, taxes stable 13/SEP/2017 INTELLASIA VNS The government has instructed corresponding administrative authorities to aim for a 0.5 per cent decrease in lending interest rates from now until the end of 2017, while keeping taxes, fees and other charges unchanged, in order to propel the current disbursement rate in public spending and boost businesses' productivity. Under Resolution 84/NQ-CP issued last week, prime minister Nguyen Xuan Phuc signed the request for the State Bank of Vietnam (SBV) to take the initiative in monitoring the money supply and general monetary policy to suit the actuality of the country's macroeconomic flows based on inflation rates and the money market. At present, the PM has asked the SBV to strive for both a 0.5 per cent interest rate reduction and a 21 to 22 per cent annual credit growth rate for Simultaneously, the Ministry of Planning and Investment (MPI), Ministry of Finance (MoF), and other central and local departments or agencies will shift their focus to accelerating the disbursement rates for public investment, as stated in Resolution 70/NQ- CP. If these changes can be implemented, the country should be looking at a much better fourth quarter result for 2017, including the annual goal of 6.7 per cent GDP growth. Additionally, all taxes, fees and charges should remain unchanged in 2017 to encourage exports and production, in the hope of achieving economic growth consistent with the domestic market. In the last four months of 2017, increases in the disbursement of public spending on projects, including from official development assistance and the State budget, should play a significant role in helping economic sectors reach their year-on-year growth goals of 3.05 per cent for the agriculture sector, 7.91 for industrial production, and 7.19 per cent for tourism and services. Intellasia / 45

3 In the first eight months of 2017, the MoF has reported a total of VND137 trillion (US$6.1 billion) in State budget disbursement for public projects, amounting to 38.4 per cent of the yearly plan for public investment as approved by the National Assembly, in comparison with 2016's 39 per cent over the same period. On the other hand, the money and credit market has been stable, with credit rates marking a year-on-year increase of per cent as of the end of August. As the SBV is in charge of keeping lending rates low to encourage borrowing from businesses and other economic sectors, the MoF must take the lead in implementing support policies to monitor the State budget, guarding against misspending, promoting saving across all sectors and strictly following the government's regulations on financial and budget management. The MoF has in turn asked local authorities to help reduce business related costs, and analyse the impact of an increase in value added tax on the general economy. The government also requested the MPI and the MoF to work with the Ministry of Transport on mobilising investment towards strategic public traffic infrastructure projects, helping speed up disbursement on the North to South Vietnam highway project, as well as the national railway construction project and the Long Thanh airport project in HCM City. Phuc also required the SBV to increase monitoring, inspection and dealing with any breaches in the credit sector, especially when it comes to the financial branch's system security. Interest rates, if applicable, will fall by 0.5pct per annum only: expert 13/SEP/2017 INTELLASIA DTCK The policy to raise outstanding loans in 2017 to percent by the prime minister is a good condition for banks to boost lending in the last months of the year. But to achieve this target, interest rates will have to be more competitive, which experts say that it is difficult to be implemented at the present time, especially when the government also requires the banking sector to further reduce lending rates by 0.5%. The reality shows that the credit growth target in 2017 at percent following the request of the prime minister, instead of the 18 percent as planned before is a "hot" issue now. While bankers are thrilled, especially banks that have run out of credit room since the middle of this year as they have more room to boost lending in the coming peak business season, experts say there should not push up the outstanding credit because it will negatively affect inflation, rather than economic growth. "High credit does not necessarily put pressure on interest rate reduction. On the other hand, if we are not careful, it will lead to revenue unbalance. Bank liquidity needs to be paid attention to, especially in the remaining months of this year", one expert acknowledged. HSBC Vietnam CEO Pham Hong Hai said once the credit room is loosened, banks will have additional room to lend, so lending rates will have to be more competitive. In other words, short-term interest rates need to be adjusted down. Only then can banks win the credit market share. However, also as per Hai, it is likely that lending rates from now till the end of the year will be stable and are difficult to decrease compared with the current moment, especially for short-term loans because deposit rates of banks are still on the upward trend. Hai said medium and long-term interest rates can decrease in the near future when the ratio of short-term capital for medium and long-term loan is reduced from 50 percent to 40 percent at the beginning of 2019, instead of early "Even so, medium and long-term interest rates are unlikely to fall sharply, only about 0.5 percent per annum" Hai said. Huynh Buu Son, a finance and banking expert, also said that in the current context, when the input interest rates of banks have to compete with other investment channels (real estate, securities, etc.), lending rates are difficult to fall deeply. "As the input cost of banks is difficult to decrease, maintaining the current lending Intellasia / 45

4 rates has already been a great effort of banks as well as management agencies", said Son. To raise the credit room of the banking sector by 2-4 percent in this year, as per Son, is not necessarily worrisome but there needs to take into account the economy's capital absorption and the tolerance of businesses about interest rates. "At present, although lending rates have decreased over the last period, they still remain the barrier for businesses having demand for loans. Besides businesses that are successful in expanding their operations, many businesses have had to narrow their production and business scope because of high interest expenses. Moreover, not all businesses can access to bank capital, especially small and medium businesses", Son said. On the business side, Nguyen Thi Mai Thanh, Chair cum CEO of the Refrigeration Electrical Engineering JSC (REE) said that lending rates should further decrease compared to the current level so that businesses can boldly borrow to invest and expand production because as per Thanh, to be able to get a loan with reasonable interest rates, profits will improve, businesses will grow more efficiently and then banks will no longer worry about rising bad debts. "Therefore, credit target increases but interest rates are difficult to reduce, then the ability of capital absorption of businesses is also difficult to grow strongly", said Thanh. As per the assessment made by Ngo Dang Khoa, Country manager of Foreign Exchange Services and Capital Market at HSBC Vietnam, when credit grows 22%, about 600 trillion dong will be injected into the economy. However, the problem is which sector will this capital source flow into to ensure the limitation of bad debt risk. "The average lending rate of Vietnamese businesses in the past three years is about six percent per year, much higher than the average rate of regional countries, such as China at just 3.1 percent per annum. High input costs are one of the main reasons to reduce the competitiveness of domestic goods", Khoa said. HSBC: Vietnam is likely to reach credit growth target of 21pct 13/SEP/2017 INTELLASIA NDH At the regular press conference of the government in August 2017, the minister-head of the government Office Mai Tien Dung said that, as of August, the credit grew by more than 10%. The prime minister urged to carry out solutions to obtain credit growth of 21 percent in In the report on Vietnam's economic outlook in September 2017, HSBC assessed that Vietnam can easily complete the credit growth target set by the prime minister. "The sudden cut in interest rates of the State Bank of Vietnam (SBV) in July clearly showed that the government of Vietnam plans to achieve GDP growth target of 6.7 percent in 2017 through credit channel. The spending of the government has been carefully monitored as public debts are rising and almost reaching the limit set by the government (65 percent of GDP). In addition, SBV's survey right after the interest rate cut showed that the credit growth in 2017 was estimated to reach only 16.3%, lower than SBV's initial plan of 18%", stated HSBC's report. According to HSBC, this does not mean that the credit growth has slowed down. In fact, the credit growth of Vietnam has constantly risen in the last few years. In the first half of 2017, credit recorded the highest growth in the past six years. HSBC forecasted that the growth of credit will continue to rise in the fourth quarter of 2017 and easily surpass the 18.3 percent recorded in Assuming that the credit growth in the remaining time of the year is still similar to the growth in 2016, by the year end, the credit growth will reach 19.3%. Meanwhile, the interest rate cut of SBV in July 2017 will also help promote the credit growth and help the government easily achieve the new credit growth goal of 21%. However, HSBC noted that the fast credit growth may create new risks to the banking sector, especially if the new loans are located to the inefficient industries. In addition, recent reports of the International Monetary Fund (IMF) and the World Bank (WB) all stated that state-owned enterprises are currently absorbing unequal credit in the econ- Intellasia / 45

5 HSBC: Credit misallocation dampens GDP growth omy of Vietnam compared to small and medium enterprises. However, HSBC said that the credit growth in Vietnam is showing positive signs. From the beginning of the year, trade, transport and telecommunications sectors have been major contributors to credit growth, being a factor boosting the competitiveness of higher productivity industries. Moreover, the government in the recent time has issued new measures to help VAMC make easier purchases of secured assets in case enterprises fall into insolvency, increasing VAMC's power to seize the assets lost from bad debts. 13/SEP/2017 INTELLASIA THE SAIGON TIMES While the government is seeking to boost credit growth, HSBC Bank has voiced concerns over likely adverse impacts on economic growth due to the misallocation of credit among economic sectors. Both the International Monetary Fund (IMF) and the World Bank (WB) have noted in recent studies that State-owned enterprises (SOEs) are absorbing a disproportionate amount of credit in the economy at the expense of small and medium enterprises. In Hanoi, for instance, a majority of loans still go to the State corporate sector. An empirical study from the IMF also shows that SOEs borrow at lower interest rates than private firms, enabling weak SOEs to access bank funding to avoid shrinking their balance sheets. Meanwhile, a WB survey of Vietnamese businesses showed that only 29 percent of small enterprises, which have one to 20 employees each, have an active credit line, with SOEs and large domestic companies taking the lion's share of credit in the market. The data thus suggests that high credit growth alone is not enough to lift Vietnam's economic growth. The misallocation of credit and crowding out of private investments may weigh on gross domestic product (GDP) growth and increase the risk of future non-performing loans (NPLs), if left unchecked, HSBC said in a macro economic report released on September 11. In addition, the decline of the NPL ratio in recent years somewhat belies the true level of problematic loans in the economy. Part of the reduction in NPLs is due to transfers to the Vietnam Asset Management Company (VAMC), where the underlying credit risks of such loans have not been fully eliminated. Ongoing SOE equalisation and reforms also remain crucial to leveling the playing field for credit access, as it could help divert credit away from supporting weak SOEs and to helping boost private sector investments. This is an area where there has been growing momentum as non-state investments have recently caught up to State investments in percentage of total investments in the economy, HSBC said in the report. HSBC predicted this year's credit growth rate at 19.3%, assuming credit growth for the remainder of the year remains exactly in line with last year's pace. Top government officials are calling for an increase in the credit growth target from 18 percent to 21 percent in hopes of reaching the government's 6.7 percent GDP target for all of The economy grew just 5.7 percent in the first half, and in light of already high public debt, Vietnamese officials are signaling that they aim to achieve higher growth via the credit expansion. For now, there has been no official announcement that the credit growth target has been increased. It is worth noting, however, that rapid credit growth may create new risks for the banking sector, especially if new credit is placed in less productive industries. For instance, real estate related sectors still appear to be contributing the most to total credit growth, despite their declining contribution in recent months, HSBC said. The country's real estate sector, which sank after a bubble period in , was one of the primary reasons for a rise in NPLs and the banking sector crisis in Intellasia / 45

6 Foreign capital welcomed to join weak bank's restructuring 13/SEP/2017 INTELLASIA NDH In early 2017, the State Bank of Vietnam (SBV) identified that the settlement of weak credit institutions (CIs) including the three zero-dong banks, Dong A Commercial Joint Stock Bank (DongA Bank), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) would be focused in So far, the plan to restructure four out of these five banks has not yet been approved (except for Sacombank). However, an official of SBV said that an Asian bank is conducting Due diligence into OceanBank; while GPBank and Construction Bank (CB) are also being eyed by some foreign investors. Meanwhile, the new policies are showing special encouragements of the government for foreign capital to participate in the restructuring of weak banks. Although there are various difficulties, weak banks have recorded certain recovery after being acquired by SBV or put under special control. OceanBank continued to be profitable in 2015, 2016 and the first half of DongA Bank recorded mobilisation growth of over 700 billion dong in the first six months of 2017, in which the outstanding loans to individual customers rose by nearly 400 billion dong and the recovered bad debts were trillion dong. The attractiveness of weak banks, firstly, is due to the potential of Vietnam's banking sector with a good growing economy, large population and the low level of banking service usage. The barriers to enter the sector remain fairly huge and the establishment of a bank in Vietnam currently still faces numerous difficulties, even 100 percent foreign-owned capital. Meanwhile, the foreign ownership rate of the banking sector is still kept at 30%. However, the prime minister may decide to loosen the ownership room of foreign investors to 100 percent for weak banks. The trade-off between the costs to settle weak banks and the license to operate in the banking sector is a worthy point for foreign investors to consider. In addition, weak banks also have other interesting values. In terms of network, the acquisition of a bank will help investor to reduce the time and resources in building and expanding the network of branches and transaction offices. In fact, the expansion of banking network is currently very difficult due to Circular 21/ 2013/TT-NHNN. This can be proved through a small comparison. If a foreign investor acquires DongA Bank, they will immediately have a wide-spread network across 55 provinces and central cities with 223 branches and transaction offices. However, if that investor establishes a wholly-owned foreign bank in Vietnam, it takes at least 12 years to obtain the above number of branches (assuming that the bank is immediately and continuously profitable and its charter capital meets the prescribed requirement). In terms of existing customers, by acquiring a bank, foreign investor will immediately have a certain number of existing customers instead of starting from zero. For example, by the end of December 2016, DongA Bank had over seven million individual customers, equivalent to nearly one tenth of Vietnam's population. With this number of customers, if the cross-selling of products is performed well, the profits will be very huge and the costs will be much lower compared to developing new group of customers. Weak banks' asset quality is said to be greater than audited because the value of equity of weak banks announced by independent auditors is surely based on prudent principles. Under the Vietnamese accounting standards, many fixed assets (mostly office buildings) are not priced according to market prices. The debts are also currently provisioned at the highest level, while in fact, the provision costs will be much lower if the projects or completion of secured asset documents are injected with a small amount of capital. In addition, the brand value, human resources and operational processes are also the valuable assets that must be accumulated in a long time. The solution to allow foreign capital to join the restructuring of weak banks has been encouraged for a long time but it has not been implemented, due to two major barriers in bad debt settlement and negotiation of price. Since the reasons that caused banks to fall into weak situation are all related to asset quality, the core of weak bank's settlement is just about dealing with bad debts. For the negotiation of the price to sell and Intellasia / 45

7 buy weak banks, it is difficult to reach an agreement with the buyers as bankers always expect high selling price. The failure of the deal between GPBank and UOB is an example. However, these above barriers have been removed. After acquiring weak banks, the right to set the price now belongs to SBV. When selecting a partner to acquire a weak bank, SBV would probably place greater attention on the ability to successfully restructure these banks rather than concern about the selling price. Moreover, the selection performed by SBV will help avoid the case when the acquired bank continues to be used for backyards operations such as the case of CB. The bad debt settlement is expected to be speeded up after the issuance of Resolution 42/2017/QH14. This resolution approves legal support for the handling of a huge volume of assets secured for the bad debts; removes difficulties and obstacles in debt trading of the Vietnam Asset Management Company (VAMC); and at the same time allows banks to flexibly allocated accrued interests and the difference when trading bad debts, helping ensure that bank's annual business results are not negative. In addition, the draft law amending and supplementing some articles of the Law on Credit Institutions 2010 also provides many supportive measures in the case when weak banks transfer all shares and contributed capital. Accordingly, SBV allows these banks to provision for risks based on the difference in revenues and expenses in the annual business results; to sell bad debts that have no secured assets or secured assets are being seized and bad debts that have no valid documents to VAMC and the Debt and Asset Trading Company (DATC). In addition, these banks are allowed to allocate the losses due to the sale of bad debts, receivables and investments within in 10 years; and are exempt from taxes and charges on property transfer in the process of merger, consolidation and transfer of all shares and contributed capital. With these attractive preferences of the government, the opportunities for foreign investors to wholly own a Vietnamese bank by joining the restructuring of weak banks has never been as wide as it is today. For such a deal, if it is successful, it will surely bring tremendous benefits to the banking sector, to the economy and to foreign investors. Banking sector to maintain positive trend in Q2/2017: VCBS 13/SEP/2017 INTELLASIA NDH Good credit growth, strongly recovering banks' business results and support policies for bad debt settlement and restructuring will be the driving force to maintain the positive trend of the banking industry. *Credit growth target of percent can be feasible As of August 21, 2017, credit growth reached 10.06%, 9.01 percent higher than the same period of Meanwhile, credit growth in 2016 was percent and credit at the end of the year was usually better than the beginning of the year, so the target of percent in this year can be feasible. At the end of Q2/2017, some banks used 70 percent of the State Bank's target limit and may apply for an increase in limit. In case the State Bank approves the proposed limit of these banks, the credit growth of the entire year is highly likely to be further strengthened, especially in the context of favourable macro economy and the government's preferential interest rate policy for businesses. Contrarily, these banks have additional motivation to structure loans, select good customers and improve asset quality. *The pressure on deposit rate increase may come back but the State Bank has plenty of room to regulate The pressure to raise deposit rates has slightly decreased in Q2/2017. However, if the State Bank does not have the expected supportive move, along with the fact that credit growth has been further accelerated in the second half of the year, the pressure to raise deposit rates will quickly return. This poses potential risk for banks as lending rates are difficult to rise, especially after SBV's operating rate cut, which negatively affects banks' NIM or liquidity in the interbank market may reverse, adversely affecting long-term bond investments that took Intellasia / 45

8 place vibrantly in the first half of the year. VCBS assessed that the State Bank still has room to support low interest rates, which may consider such options as loosening Circular 06's regulations as having been mentioned in the draft, or boosting foreign currency purchase, etc. State-owned commercial banks may boost their capital mobilisation to improve CAR in the second half of the year. With the low CAR that is close to the State Bank's minimum requirement, state-owned commercial banks are increasingly limiting the credit growth room. Accordingly, VCBS expects these banks to be more aggressive in raising capital in the second half of 2017 and early Accordingly, banks may limit cash dividends, Tier 2 capital mobilisation by issuing bonds or promoting separate issuance. The government has issued Decision No.1058/QD-Ttg on approval of "The restructuring of credit institutions associated with the settlement of non-performing loans (NPLs) for period", requiring the State Bank, the Ministry of Finance and the Ministry of Planning and Investment to allocate resources to increase the chartered capital for state-owned banks holding more than 50 percent of chartered capital by 2020 to meet capital adequacy standards under Basel II. This will provide more support to banks, allowing them to retain dividends to increase capital, support them in their decision to approve separate issuance deals. However, in the short-term, banks are more likely to use bond issuance method to meet urgent capital demand. And so, the pressure on capital cost for state-owned commercial banks still continue in the near future. In spite of not suffering from high capital increase pressure like the group of sateowned commercial banks, the group of joint stock commercial banks still has preparation moves, as reflected in the capital increase plans submitted to the general meeting of shareholders. *The bad debt settlement process is expected to improve after new policies are issued VCBS expects the bad debt settlement process to be strengthened in the second half of 2017 when support policies are approved by the National Assembly. New policies may have positive impact by improving the debt recovery by collateral, boosting VAMC's involvement, supporting new cash flow and liquidity of the debt trading market thanks to the involvement of new investors. Accordingly, if the aforementioned policies are effectively implemented, the bad debt trading market is expected to be put into operation soon, accelerating the bad debt settlement and stimulating the capital flow to the economy. Of course, this should go hand in hand with the active coordination and support from both policy and related management authorities. Why is Dang Thanh Binh being charged with 'lack of responsibility'? 13/SEP/2017 INTELLASIA VIETNAMNET Before becoming the first chair of VAMC, Dang Thanh Binh was deputy Governor of the State Bank, responsible for taking care of bad debt and credit institution restructuring. Binh spent 25 years working in the finance & banking sector. In 1994, he was the director of the Finance Institutions Department. In 1997, he took office as director of the Legal Department. In 2002, he was appointed to the post of director of the Department of Personnel and Organisation, and three years later, he took office as deputy governor of the State Bank. He assumed the position of head of the preparatory committee for the establishment of the Vietnam Asset Management Company (VAMC). The company was officially set up in 2013 after the central bank's decision, and Binh became the first chair of the company in July Nguyen Quoc Hung, deputy CEO of Agribank, was appointed to the post of deputy chair of VAMC. The post of general director of VAMC was assigned to Nguyen Huu Thuy, deputy director of the Foreign Credit Agency Inspection Department, an arm of the Inspection Agency under SBV. Intellasia / 45

9 However, the post of VAMC's chair was transferred to Hung after one year after Binh retired. At that time, the leadership at the State Bank included Governor Nguyen Van Binh and six deputy Governors Nguyen Dong Tien, Nguyen Toan Thang, Le Minh Hung, Dao Minh Tu, Nguyen Phuoc Thanh and Nguyen Thi Hong. A report shows that by the end of June 2014, the company had purchased VND51 trillion worth of debt from credit institutions. The figure had increased twofold by the end of the year to VND123 trillion in principal, of which VND4 trillion had been settled. By the end of March 2017, after three years of operation, VAMC had purchased 25,631 bad debt items from 42 credit institutions in Vietnam with the total original outstanding loans of VND trillion at the price of VND trillion and with payments in special bonds. As the two banks have finished settling bad debts sold to VAMC, the number of credit institutions holding special bonds is 40. Most of the debts VAMC bought from banks are ones mortgaged by properties or assets created from loans. Of these, real estate assets are worth VND trillion, accounting for 62 percent, while assets in land are valued at VND trillion, or 7.2 percent; valuable papers VND trillion, 3 percent; and machinery & equipment VND trillion, or 5.1 percent. Binh has been prosecuted on the charge of lacking responsibility, causing serious consequences in a case related to Pham Cong Danh, former chair of the Construction Bank. Outlook on Techcombank revised to stable 13/SEP/2017 INTELLASIA VNS Standard & Poor's (S&P) has revised its rating outlook on Vietnam Technological and Commercial Joint Stock Bank (Techcombank) to stable from negative. It also affirmed the bank's 'BB-' long-term and 'B' short-term issuer credit ratings. "We revised the rating outlook on Techcombank to stable because we believe the bank can sustain its above-average profitability over the next 12 months despite competition," S&P said. According to S&P, Techcombank has adopted a balanced approach toward profit enhancement and risk-taking. The bank is pursuing a retail-focused strategy, particularly among the mass affluent, while downsizing its chunky corporate exposures to enhance yields. It is also considering downsizing its real estate and construction exposure to derisk its loan book. Techcombank's asset quality has been improving since 2013, reflecting the bank's efforts to clean up its legacy weak loans through increased provisions and rehabilitation and recovery of bad loans. Techcombank's gross non-performing loan ratio declined to 1.6 per cent in 2016, from a peak of 3.7 per cent in Its restructured loans also fell to 0.5 per cent from 9.7 per cent over the same period. "We expect Techcombank to maintain its capitalisation and liquidity over the next 12 months," S&P said, adding that the bank has a history of retaining profits with zero dividend payout to preserve capital to support growth. Techcombank's stable deposit base is backed by a sizable contribution from the retail segment, which underpins its funding profile. The stable outlook on Techcombank reflects S&P's view that the bank will maintain its status as a leading privately owned bank in Vietnam over the next 12 months with an entrenched retail franchise and above-average profitability. However, S&P noted, it may lower the rating if Techcombank's business position suffers due to strategic missteps or if its pre-diversification risk-adjusted capital ratio falls below 3 per cent. Intellasia / 45

10 Vietinbank becomes Diners Club card issuer 13/SEP/2017 INTELLASIA VNS Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) on Monday signed a partnership agreement to become the only issuer of Diners Club (DC) cards in Vietnam. The agreement helps to expand Vietinbank's existing acquisition relationship with Diners Club International Ltd, a business unit and wholly-owned subsidiary of Discover Financial Services and a part of the Discover Global Network. "Our partnership with Diners Club International will help us accelerate our product mix in the market and provide more choice to our customers in Vietnam. Diners Club will allow us to boost our credit card line-up and enhance our services to our clients by providing global access and solutions that make business and international travel more efficient," said Phung Duy Khuong, director of retail banking at Vietinbank. The DC cards have the same issuance process and method of use as international credit and debit cards. In addition to the functions of international credit cards, such as internet payments, point of sale payments, withdrawals and accessing transaction history, cardholders also enjoy many discounts across more than 30 countries at restaurants, hotels and shopping centres. Diners Club also offers VietinBank and its cardholders, particularly international and business travellers from Vietnam, a comprehensive new suite of products and features such as access to more than 800 airport lounges and worldwide acceptance. "Vietnam is a fast-growing market that is critically important for Diners Club International to further expand our presence in Asia," said Joe Hurley, senior vice president and head of global business development for Discover. "We are excited to open up the vast Discover Global Network to Vietnamese travellers when they are using their VietinBank Diners Club card while abroad," Joe added. Currently, Diners Club International has over 26 million merchant acceptance locations and 1.9 million ATM and cash access locations across 185 countries and territories. Established in 1988, Vietinbank now provides a nationwide network of 155 branches scattered across 63 provinces and cities in Vietnam, as well as two branches in the Federal Republic of Germany and one subsidiary bank in the Lao People's Democratic Republic. Joint Statement on promoting startups in Apec issued 13/SEP/2017 INTELLASIA VNA Member economies from the Asia-Pacific Economic Cooperation (Apec) issued a Joint Statement on promoting start-ups and micro, small and medium-sized enterprises at the Apec 2017 Start-ups Forum held in HCM City on September 12. President of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said the forum focused on discussing, sharing and proposing measures to develop economy in the region. This was also the first forum to talk about the startup ecosystem which is an important prerequisite to promote entrepreneurship and effectiveness of startup businesses, he said. The fact shows that small-and medium-sized enterprises (SMEs) plays a "backbone" role in all global economic sectors, he said, adding that the establishment and engagement in the global value chains of millions of micro, small and medium-sized enterprises (MSMEs) have been a driving force for the world's economic development. The Joint Statement issued at the forum provides recommendations for the most important elements of the startup ecosystem, including government support policies, innovations, and entrepreneurship education. It also mentions the development of startup support services, especially financial and consultative matters, as well as the building of a green supply chain and the performance of corporate social responsibility. The VCCI President noted that from 2017, the Apec Start-ups Forum will become an annual event to create opportunities for member economies to share experience and Intellasia / 45

11 announce startup indicators in the region, in addition to proposing solutions and recommendations to promote startup activities and build an Apec startup network. The content of the Joint Statement will be brought for discussions at the upcoming Apec Small and Medium Enterprises ministerial Meeting (SMEMM) in HCM City on September 15, he added. MSMEs account for over 97 percent of all enterprises and employ over half of the workforce across Apec economies. MSMEs contribute significantly to economic growth, accounting for between 20 percent and 50 percent of GDP in most Apec economies. However, they account for only 35 percent or less of direct exports. Established in 1989, Apec comprises 21 economies, including Australia, Brunei, Canada, Chile, China, Hong Kong (China), Indonesia, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taipei, Thailand, the US, and Vietnam vnp Apec forum looks towards dynamic, networked start-ups community More efforts needed to enforce EU-Vietnam FTA 13/SEP/2017 INTELLASIA VNA The Apec 2017 Start-ups Forum was held in HCM City on September 12 to support micro, small and medium-sized enterprises (MSMEs) to innovate, integrate and access to the global value chain right at their nascent business stage. Vo Tan Thanh, vice President of the Vietnam Chamber of Commerce and Industry (VCCI), said Vietnam is evaluated as one of the most entrepreneurial countries in the world. The Vietnamese government aims to have at least one million effective bussinesses by 2020, he noted. The selection of HCM City as the venue of the Apec 2017 Start-ups Forum is reasonable since the southern economic hub is striving to build itself into a start-up urban centre with the establishment of 500,000 enterprises through Deputy minister of Science and Technology Tran Van Tung said the increasing number of new bussinesses which hit a record of more than 110,000 in 2016 is expected to create more job opportunities and social services. Besides quantity, equal attention should be paid to the quality and health of bussinesses so that more innovative start-up firms will be set up in the future, he said. He called on major groups such as Viettel, FPT and Truong Hai Auto Corporation to provide pragmatic support for start-ups in Vietnam. During the forum, participants discussed a wide range of topics such as innovative start-ups in the digital era, education and training on entrepreneurship, business services for start-ups, and acceleration of sustainable socio-economic growth. Through sharing experiences, ideas and tools to support start-ups, Apec member economies look to form a dynamic and networked Apec Start-ups Community. Initiatives raised at the event will be discussed to propose a Joint Statement on promoting start-ups and MSMEs to the upcoming Apec Small and Medium Enterprises ministerial Meeting (SMEMM) in the city on September 15. MSMEs account for over 97 percent of all enterprises and employ over half of the workforce across Apec economies. MSMEs contribute significantly to economic growth, accounting for between 20 percent and 50 percent of GDP in most Apec economies. However, they account for only 35 percent or less of direct exports. Established in 1989, Apec comprises 21 economies, including Australia, Brunei, Canada, Chile, China, Hong Kong (China), Indonesia, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Chinese Taiwan, Thailand, the US, and Vietnam. 13/SEP/2017 INTELLASIA VNA The European Union wants to ratify the EU-Vietnam Free Trade Agreement in 2018 and put it into force as soon as possible. This is the main theme of a seminar held in Intellasia / 45

12 State budget collection up 13 per cent Brussels, Belgium recently. Vietnamese Ambassador to Belgium Vuong Thua Phong said amid changes in the world, all parties need to make greater efforts to realise the EU-Vietnam Free Trade Agreement and to soon enforce the deal. According to EU chief negotiator Mauro Petriccione the ratification of trade agreements between the EU and partners is very crucial. Enterprises affirmed the importance of the agreement to win-win economic and trade cooperation. They agreed that the trade pact will aid not only Vietnamese firms but also companies and people of Europe. Along with technological transfer, Vietnam is expected to make a greater progress and participate in high value-added areas in order to ensure substantial growth. 13/SEP/2017 INTELLASIA VNS Total State budget collection in the first eight months of this year was estimated at VND762.8 trillion (US$33.4 billion), an increase of 12.8 per cent over the same period last year. The amount is equivalent to 63 per cent of the whole year's estimates, according to the Ministry of Finance. In the reviewed period, domestic collection reached VND603.6 trillion, up 10.7 per cent year-on-year, accounting for 61 per cent of the year's estimates. The ministry said budget revenues from crude oil exports, estimated at roughly VND29.97 trillion, met 78.3 per cent of estimates, up 11.3 per cent over the same period in Import-export activities contributed VND190.8 trillion to the State budget, an increase of 9.5 year-on-year and equaling 66.9 per cent of projected revenues. According to the ministry, total budget spending was VND793.5 trillion, up 7.8 per cent year-on-year, completing 57.1 per cent of the yearly target. Of the estimate, budget investment for development was VND137 trillion. Regular expenditures in eight months were estimated at VND585 trillion, equaling 65 per cent of the year's estimate, up 7.4 per cent over the same period last year. Debt payment and interest expenses during the period totalled VND68 trillion, meeting 68.9 per cent of annual target and increasing by 14.6 per cent year-on-year. Restructure the State Budget to make it more efficient 13/SEP/2017 INTELLASIA VNS Truong Ba Tuan, deputy director general of the Institute for Strategic and Financial Policies under the Ministry of Finance (MoF), speaks to Vietnam News Agency on the MoF's proposal to restructure the national budget. What should be the focus of the Ministry of Finance in restructuring the State budget? Like many other countries, Vietnam has been facing fiscal risks, particularly mid-term and long-term risks due to overspending of State funds and skyrocketing public debt. From the experiences of many countries, a delay in consolidating the fiscal year and restructuring the State budget may cause much harm on the national economy. To restructure their state budgets, many foreign countries adopted comprehensive and synchronous measures to improve efficiency in using state funds while restructuring tax policies. They paid special attention to enhancing the role of potential taxes, including current tax liabilities and assets. Many foreign countries also adopted proactive measures to tighten their control on public debts and to monitor fiscal risk management. Can you elaborate on proposed tax changes in the budget restructuring? Vietnam aims to have a comprehensive plan in restructuring the State budget towards safe and sustainable public finances. The Politburo and National Assembly have adopted a number of solutions to restructuring the State budget, including State budget collection and public debt management. The GDP growth rate is falling short of the target, coupled with a cut in tariff barriers as Vietnam has signed many free trade deals. As a result, State budget collection in the Intellasia / 45

13 future will be smaller than what has been projected during the development of the country's five year financial plan ( ) and the mid-term investment plan ( ). That's why it has become urgent for us to adjust our State budget collection policies right now. Meanwhile, the pressure on financial resources for national development investment and the implementation of national targets on social security, wage reform and responses to climate change and natural calamities has become a heavy pressure on State funds. However, in my opinion, the proposed revision of the five tax laws proposed by the MoF will have big impacts on restructuring State budge collection. Amendments to the five tax laws will make the structure of the State budget more solid while making the business investment environment more lucrative. More importantly, these changes conform to current international tax reforms. It has been reported that there have been many problems in implementing the Law on Value Added Tax. How should the law be changed? As I mentioned above, to restructure our State budget, we need a national strategic plan, including measures to restructure State budget collection. Adding to that is our country's deep international integration and many international and regional countries have been slashing taxes, particularly personal income tax and enterprises' tax in order to attract investment capital, technology and labour. In tandem with these policies, many governments have adjusted their tax policies or been considering increasing their value added tax (VAT). In Europe, the Organisation for Economic Cooperation and Development and in Asia, VAT was already adjusted in 2008 following the global economic crisis. Such a change was an effective tool to reduce the pressure on public debt. However, in our case, enterprise's income tax is low compared with those in the region. Meanwhile, personal income tax in Vietnam, in the last decade, has been adjusted downwards. So in my opinion, I support the government's proposal to increase VAT. This is a good way to make State budget collection more sustainable and it will help us harmonise all relevant objectives. Many people have complained that the proposal to increase VAT will harm consumption. How do you respond to that? All kinds of taxes, in one way or another, will have impacts on the economy. However, the impact levels will be different depending on the characteristics and the designs of each policy. Compared with income tax, VAT will be more effective and have less negative impacts on society's consumption. To reduce the burden for tax payers, particularly those who have low income, our current Law has exempted VAT on 25 groups of commodities and services and levied 5 per cent VAT on some essential commodities, including drugs/medicine and services for agriculture production. VN to complete statistical indicators set for sustainable development 13/SEP/2017 INTELLASIA VNS The General Statistical Office (GSO) is in the process of finalising a set of statistical indicators for Vietnam's sustainable development goals (SDGs), the office said. The set of SDGs indicators is expected to be issued within this month. According to the GSO, the set of SDGs indicator will include indicators for the monitoring and evaluation of the National Action Plan for implementation of the 2030 Agenda on SDGs, indicators of the global monitoring framework, issued by the United Nations' Department of Economic and Social Affairs, which Vietnam will compile for the purpose of evaluating the implementation of the SDGs. In order to assess the feasibility of the indicators of the global monitoring framework, the GSO and international experts have worked with relevant ministries and agencies Intellasia / 45