FINANCE. finance & business news. Reference exchange rate stays unchanged on May 25

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1 finance & business news 25 May Reference exchange rate stays unchanged on May 25 1 Fitch Revises 3 State-Owned Vietnam Banks' Outlooks to Positive 2 Treasury mobilises more capital from government bonds 3 Flawed regulations on handling collateral hinders bad debt settlement 3 Banks to up capital by $1.6b 4 Banks keep racing to increase capital 4 Credit growth faces dilemma 6 Risk tolerance of Vietnamese banks very low: Dr Le Xuan Nghia 7 ABBank, TPBank join ADB trade finance programme 8 Sacombank postpones AGM to June 30 9 Asset Magazine lauds Citi and Citi Vietnam as the banks to go 9 Bonds sell well 11 NA aims to better recover bad debts 11 Vietnam values financial grants from OFID 12 Capital aims for 4.5pct export growth in Vietnam & Thailand set trade target 13 VN, Denmark exchange lessons in food control 13 Deputy PM chairs Vietnam-Spain business forum 14 Annual exports to South America expand by 30-40pct 15 Bangladesh in the market for 300,000 tonnes of Vietnamese rice 15 Vietnam plans to open 'outstanding' special economic zones 16 High time for high-tech farming in Vietnam 17 Vietnam set to approve coal-fired power plants worth $7.5 billion 18 Upbeat signs for Vietnamese rice exports 19 Coffee output to near 2016 yield 19 Vietnam's 2017/2018 coffee output to rise 10 pct on good weather, prices 20 Opportunities for Vietnam's fruits, vegetables export 21 Right approach necessary for private sector to drive Vietnamese economy 21 Not all SMEs to enjoy lower tax 23 Vietnam's shrimp export to Japan sees sharp increase 23 Australian delegation visiting in search of energy cooperation 24 HCM City's retail space strongly differentiates 25 Reference exchange rate stays unchanged on May 25 Intellasia No. 21, lane 173/63/17, Ngoc Ha Ward, Ba Dinh Dist, Hanoi All Rights Reserved Assembled-in-Vietnam cars are twice as expensive as Thailand's 25 Hometel property segment promises big profits, big challenges 26 Vietnam luxury hotel market becomes 'hotspot' in SE Asia 27 Worries loom as international arrivals seen surging 27 BIZ NEWS Business Briefs May 25, All main indexes close higher 29 Shares rebound on financial stock recovery 29 Petrolimex enjoys huge benefits through treasury stock sale 30 More than 1,000 investors register for Viglacera auction 30 Kido completes Vocarimex stake acquisition 31 Vietnam's 10 years in WTO through expert's glance 31 Prime minister welcomes Siemens CEO 32 MoIT proritises letting Dung Quat Shipyard go bust 32 Can Tho wants more firms, jobs 33 Dong Nai attracts $483 million in FDI 34 Thai Binh 1 thermal power plant joins national grid 34 Enterprises want a level playing field 34 Suppliers meeting distributors effective for commodity trading 36 Competitiveness key for goods distribution flow 36 City to monitor produce supply chain 37 Northern provinces enjoy bumper Winter-Spring rice harvest 38 Cattlemen look to imports to meet growing demand for beef 38 Korean firm plans to acquire Gemadept 39 Kantar Worldpanel releases fifth annual Brand Footprint report 40 Clayton-based Enterprise Holdings inks Vietnam franchise deal 40 LG Display Vietnam proposes to increase investment 40 Vietnam's tax authorities to take closer look at foreign retailers41 CJ's road to dominance in Vietnamese food sector 41 Former Vinaconex boss faces prosecution for regulation violation 43 Phu Quoc possesses great potential for second home market 44 Vietnam sees six-fold rise in foreign workers since OFID lends $21.8mn for Vinh Phuc bridge 45 Clean Air Asia urges Can Tho to control air pollution 46 Expensive car imports decrease 46 Milk and dairy fair set for Hanoi 46 25/MAY/2017 INTELLASIA VNA The daily reference VND/USD exchange rate on May 25 stayed unchanged from the day before at 22,384 VND. With the current trading band of +/-3 percent, the ceiling rate applied to commercial banks during the day is 23,055 VND and the floor rate 21,713 VND per USD. The opening hour rates at commercial banks also stayed stable. Vietcombank listed the rates at 22,650 VND (buying) and 22,720 VND (selling) per USD, the same as on May 24. The rates at BIDV were kept at 22,650 VND (buying) and 22,720 VND (selling). At Vietinbank, the greenback was bought at 22,650 VND per USD, up 10 VND from May 24, and sold at 22,720 VND, the same as the May 24 rate vnp Tel: Fax: Office@intellasia.com Websites:

2 Vietnam finance & business 25 May 2017 Fitch Revises 3 State- Owned Vietnam Banks' Outlooks to Positive 25/MAY/2017 INTELLASIA REUTERS Fitch Ratings has revised the Outlooks on the Long-Term Issuer Default Ratings (IDRs) of three state-owned Vietnamese banks - Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and Vietnam Bank for Agriculture and Rural Development (Agribank) - to Positive from Stable. At the same time, the agency has affirmed the Long-Term IDRs on the banks at 'B+'. A full list of rating actions is provided at the end of the rating action commentary. The Outlooks have been revised following a revision in the Vietnam sovereign's Outlook to Positive from Stable on 18 May 2017, which takes into account Vietnam's strong macroeconomic performance and improvement in the country's external stability indicators. The improvements are reflected in persistent current-account surpluses, manageable debt-service costs and sustained foreign direct investment inflows. For more details on the Outlook revision on the sovereign, see the rating action commentary <a href=" ">Fitch Revises Outlook for Vietnam to Positive; Affirms at BB-, dated 18 May KEY RATING DRIVERS VIABILITY RATINGS, IDRS, SUPPORT RATINGS AND SUPPORT RATING FLOORS The Outlook revision on the three banks' IDRs reflects Fitch's view of improving sovereign ability to provide extraordinary support, if needed. The Long-Term IDRs of Agribank, Vietinbank and Vietcombank are driven by Fitch's expectation that government support will be forthcoming, if needed, in light of their high systemic importance and the government's controlling stakes. They are among the top four Vietnamese banks by assets and have strong domestic franchises. The banks' IDRs and Support Rating Floors are one notch lower than Vietnam's sovereign rating (BB-/Positive) as Fitch believes the large size of the banking industry relative to GDP and the government's limited resources may hamper the timeliness of support. The 'b-' Viability Ratings of Vietcombank and Vietinbank reflect their limited balance sheet buffers relative to the size of their problematic assets, their weak financial performance and high loan concentration risk in state-owned enterprises (SOEs). The Viability Ratings also consider their solid domestic franchises and their stable funding profiles. Fitch does not assign a Viability Rating to wholly government-owned Agribank. The bank's role in providing support to the domestic economy has a high influence on its standalone profile and makes it likely that Agribank will continue to benefit from regulatory forbearance. RATING SENSITIVITIES IDRS, SUPPORT RATINGS AND SUPPORT RATING FLOORS OF AGRIBANK, VIETINBANK, VIETCOMBANK The Long-Term IDRs, Support Ratings and Support Rating Floors of Agribank, Vietinbank and Vietcombank are sensitive to movements in the sovereign's ratings, which are currently on a Positive Outlook. An upgrade of the sovereign ratings would likely lift the banks' support-driven ratings. The banks' ratings may also be affected by any perceived change in the government's propensity to support the banks. VIABILITY RATINGS OF VIETINBANK, VIETCOMBANK Fitch may take positive rating action on the banks' Viability Ratings if structural issues, such as corporate governance, bad-debt resolution and thin capitalisation, are more adequately addressed, leading to greater transparency and, together with sustained strong economic performance, to continued improvements in the banks' overall credit profiles. Viability Ratings may be pressured if excessive growth or an increased loan concentration leads to significant impairment risks and weakened balance sheets. Downward pressure for Vietinbank may be higher given its low capital ratio and higher SOE loan concentration risk. The rating actions are as follows: Agribank Long-Term IDR affirmed at 'B+'; Outlook revised to Positive from Stable Short-Term IDR affirmed at 'B' Support Rating Floor affirmed at 'B+' Support Rating affirmed at '4' Vietinbank Long-Term IDR affirmed at 'B+'; Outlook revised to Positive from Stable Short-Term IDR affirmed at 'B' Viability Rating affirmed at 'b-' Support Rating Floor affirmed at 'B+' Support Rating affirmed at '4' Vietcombank Long-Term IDR affirmed at 'B+'; Outlook revised to Positive from Stable Short-Term IDR affirmed at 'B' Viability Rating affirmed at 'b-' Support Rating Floor affirmed at 'B+' Support Rating affirmed at '4'. Intellasia 25 May / 47

3 Treasury mobilises more capital from government bonds 25/MAY/2017 INTELLASIA VNA Over 5.86 trillion VND ( million USD) worth of government bonds issued by the State Treasury were sold at an auction at the Hanoi Stock Exchange (HNX) on May 24. The sale included 1.5 trillion VND (66.13 million USD) worth of five-year bonds with an interest rate of 5.03 percent per annum, 0.13 percent lower than bonds of the same term sold in the previous auction on May 17. Similarly, 1.95 trillion VND (85.97 million USD) worth of seven-year bonds sold at the auction bear an interest rate of 5.35 percent, 0.09 percent per lower than those sold in the May 17 session. Meanwhile, the sold 20-year bonds, worth a total 1.3 trillion VND (57.3 million USD) bear an interest rate of seven percent per annum, 0.09 percent lower than the successful bid at the previous session on May 10. The successful bids for 30-year bonds worth billion VND (49.16 million USD) put the interest rate at 7.55 percent per annum, 0.09 percent lower than those sold at the May 10 session. Since early this year, the State Treasury has mobilised more than 97.5 billion VND (4.3 billion USD) from the auction of G-bonds on the HNX vnp Flawed regulations on handling collateral hinders bad debt settlement Banks to up capital by $1.6b 25/MAY/2017 INTELLASIA VNA Flawed legal regulations on collateral for debt collection have hampered bad debt settlement, participants said at a workshop in Hanoi on May 23. The State Bank of Vietnam (SBV) reported that the credit institution system handled VND616.7 trillion (US$27.18 billion) of non-performing loans (NPLs) as of January The sum of handled bad debts has increased each year, from VND74.68 trillion (US$3.29 billion) in 2012 to VND trillion (US$5.22 billion) in Bad debts settled in January 2017 alone were valued at VND5.14 trillion (US$ million). NPLs settled by credit institutions themselves were VND349.7 trillion (US$15.41 billion), accounting for 56.7 percent of total bad debts. The remaining 43.3 percent were sold to other organisations and individuals. About VND53.24 trillion (US$2.35 billion) of debts collected through the Vietnam Asset Management Company (VAMC) from 2013 to March 31, 2017 were solved. However, only VND17.1 trillion (US$753.6 million) or 2.8 percent of the handled NPLs was collected through selling collateral, the SBV said. Legal regulations did not protect the rights of credit institutions and VAMC and hindered the development of a bad debt market which includes sales and purchases of bad debts guaranteed by land use rights and land assets. Legal regulations on collateral settlement haven't ensured creditors' rights to collateral seizure. Meanwhile, it takes up to two years to solve bad debts and collateral via courts, making expenses account for 29 percent of collected debt value. At the workshop, participants said that if credit institutions can't seize collateral will it substantially influence their debt collection capacity. Nghiem Xuan Thanh, Chair of Vietcombank's board of directors, asked courts to streamline procedures for resolving disputes over collateral. He also called for police assistance in dealing with debtors who intentionally dodge debt repayment obligations. Nguyen Duc Kien, vice Chair of the NA's Committee for Economic Affairs, said the NA Standing Committee and the economic committee agreed on the need to issue a resolution on bad debt settlement, which is expected to be approved at the NA's ongoing third session. 25/MAY/2017 INTELLASIA VNS The banking system is expected to further develop this year, as 16 banks have announced plans to increase capital by a total of nearly VND37 trillion (US$1.62 billion). Intellasia 25 May / 47

4 Vietcombank plans to increase charter capital from VND trillion to nearly VND39.6 trillion this year through the issue of an additional 360 million shares, equivalent to 10 per cent of its capital. The shares will be sold either to the public or offered to no more than 10 investors (including existing shareholders) in a private placement due late this year. BIDV also approved a plan to increase charter capital by VND4.445 trillion to VND38.63 trillion. The plan will be conducted via the issuance of 2016 dividend-paying stocks worth nearly VND2.39 trillion, shares for investors worth over VND1 trillion and others for employees, known as Employee Stock Ownership Plan (ESOP) valued at over VND1 trillion. The same trend was also seen at Military Bank, VP Bank, Techcombank and Nam A Bank with capital hike plans ranged between VND1 trillion and VND5 trillion. According to the banks, the capital hike is aimed to enhance their competitive edge and meet requirements of Basel II, which is due to take effect in Vietnam in September 2017 in a pilot programme for ten banks. With the capital hike plans, some are concerned about a wave of increasing illegal bank capital as in the period. In 2006, in order to improve bank financial status and stability, the government issued Decree No. 141/2006/ ND-CP issuing the list of legal capital levels of credit institutions. Under the decree, minimum legal capital for commercial banks must be VND1 trillion in 2008 and VND3 trillion by December 31, However, the capital increase caused difficulties, due to the stagnant stock market and some banks failure to follow through. Therefore, to meet the regulations, they increased financial capital illegally through cross-ownership to avoid being acquired or merged. However, experts said that such an increase of financial capital at this time is unfeasible. Banking expert Can Van Luc told online newspaper bizlive.vn that the increase of illegal capital is now almost impossible as the State Bank of Vietnam (SBV) monitors and controls the issue very strictly. In particular, the SBV is also very active in introducing measures to combat the increase of financial capital, helping transparency of information and prevent cross-ownership in the banking system. In addition, Luc said, through the occurrences in the period, banks themselves recognise the risk of raising financial capital illegally and do not dare to do so. However, he recommended the government and the central bank to help commercial banks increase capital to meet the Basel II requirements. The government can allow banks to keep roughly per cent of dividends for capital increase as some other countries do, Luc suggested. Besides, he said, it is also necessary to speed up the restructuring of ailing banks and recover bad debts to remove the bottleneck in the lending capital flow. If the recovery of bad debts is sped up, banks can reduce their provision for risky loans and have more funds to add to their charter capital, Luc said. 16b.html#yrezSpxtlD41vXY1.97 Banks keep racing to increase capital 25/MAY/2017 INTELLASIA NDH 2017 Banking Annual general Meeting (AGM) season has basically ended except for several banks. The most noteworthy point is that many banks plan to increase capital from small-scale banks to the "big four". Methods of capital increase are quite diversified, from issuing to existing shareholders, seeking strategic partners to using undistributed profits, equity surplus and other bonus funds. *A hundred ways to raise capital Techcombank plans to raise capital the most in 2017 and is also one of a few banks planning to increase chartered capital from existing shareholders. The Bank plans to issue 500 million shares with a minimum issue price of 10,000 dong per share. Intellasia 25 May / 47

5 If the offering is successful, Techcombank's chartered capital will increase from trillion dong to trillion dong, equivalent to 56.5%. This will be the largest capital increase of this bank from For four years from 2008 to 2012, Techcombank's chartered capital has steadily increased from trillion dong to trillion dong and has not raised much capital over the last four years. According to the plan approved by shareholders at the AGM, Vietnam International Bank (VIB) will raise more than 7.9 trillion dong of chartered capital this year, equivalent to 44.6 percent compared to the current level by paying dividend in shares (3.5%), bonus shares (36.1%) and issuing ESOP (0.4%). *Capital increase to prepare for Basel II There are two main reasons for this trend. The first is the need to expand banking scale in the context of fierce the competition to enlarge market share. The second comes from the requirement of maintaining capital adequacy ratio - CAR when the State Bank of Vietnam (SBV) is actively introducing Basel II standards. Banks who increase capital with the aim of expanding scale are mainly banks with low chartered capital but high growth rate in the past two years, such as Vietnam Prosperity Commercial Joint Stock Bank (VPBank) or VIB. For example, VPBank had more than 10 trillion dong chartered capital, attained more than 15 trillion dong in net interest income and nearly four trillion dong in profit after tax in equivalent to two thirds of BIDV's profit whose chartered capital is 3.5 times as much as VPBank's. Similarly, VIB, with a chartered capital of more than five trillion dong, also earned more than 700 billion dong in profit with the credit growth of 25 percent in Both of these names have had a very high growth rate in two recent years thanks to the expansion of the retail market. The general formula for the capital increase of these banks is to use the capital surplus or profit accumulated for many years to issue bonus shares to shareholders in lieu of paying dividend in cash only. Although the capital increase is expected to be between 30 percent and 40 percent compared to the end of 2016, this does not affect the size of Tier 1 capital. Instead, this only changes its composition while still helping to increase chartered capital significantly. In order to increase the capital adequacy ratio (CAR), these banks choose to expand the Tier 2 capital scale through the issuance of secondary bonds. VIB, besides the plan to raise chartered capital by 40 percent in 2017 through paying dividends in shares and bonus shares, also proposes to mobilise seven trillion dong of Tier 2 capital to increase the CAR and other adequacy ratios for business needs. In addition to the aforementioned reason, most of the remaining banks are rushing to improve the CAR when the adoption of Basel II is coming. Of the 10 banks piloting Basel II under SBV's decision in early 2016, with the exception of Maritime Bank and Sacombank who have no specific plan, seven out of eight remaining banks proposed to raise capital this year. Compared with other countries in the region and in the world, the application of Basel standards in Vietnam is quite slow. While many countries have completed Basel II, moving towards Basel 2.5 and Basel 3, most Vietnamese banks have basically met Basel I standards and are in the process of piloting the higher level. Under Basel II, the risk is also calculated by the three main factors that banks have to face instead of one such as Basel I, including credit risk, operational risk and market risk. Although the regulation on CAR does not change (minimum eight percent), the requirement for capital adequacy is significantly improved when the denominator is raised by adding weightings when assessing risk level. With this new calculation, many banks will fall into risky situation when they do not meet the minimum when recalculating. As per Military Bank Securities Company (MBS)'s analysis report issued at the time the SBV promulgated to pilot applying this standard at the beginning of 2016, the CAR of banks following the new formula would reduce by 1-3 percent compared to the current level. Therefore, there will appear banks whose CAR will be lower than the minimum eight percent after recalculating. Pressure to "push up" CAR is an obvious thing Intellasia 25 May / 47

6 Credit growth faces dilemma to do if you do not want the adequacy indices to hit the danger level. In order to increase this ratio, there are actually only two ways which are to raise capital or reduce the total risky assets. Of course, in the context that banks race for credit growth, it is not easy to reduce risky assets and the fastest way to raise capital. Only cases such as BIDV, which is very difficult to increase capital, choose to reduce risky assets. 25/MAY/2017 INTELLASIA VNF At the recent prime ministerial meeting with businesses in 2017, State Bank Governor Le Minh Hung said that credit growth in the first four months of 2017 reached 5.76%, highest level in the last eight years. Compared with the credit growth target in 2017 of approximately 18%, the credit growth in the first four months has completed 32 percent of the year plan. Credit growth has gone one-third of the way after one-third of the time of Basically, in order to complete the credit growth target for the whole year, the State Bank of Vietnam (SBV) needs to maintain the credit growth as in the first four months of the year. This is not difficult because normally, the credit growth in the first few months are often low due to low production capacity as well as low pressure on payment and repayment. In the past four years, credit growth in the first four months of the year has never met more than 25 percent of the full year target. In 2013, credit growth in the first four months (2.22%) was equal to 18 percent of the whole year credit growth (12.52%). In 2014, credit growth was even lower with only 10%. In 2015 and 2016, this figure was 23 percent and 22 percent respectively. The projected figure of 32 percent for 2017 is "breaking" the annual rule. In fact, whether this breaks the rule or not depends on whether the SBV will increase credit growth target for 2017 or not. If SBV does not aim to increase, for the remaining months, credit growth will be shaky in the context of high credit pressure as production capacity, pressure of payment and repayment is increasingly higher in the coming months. Can the rule breaking affect the efficiency of economic resource allocation? Does credit shameless lead to the situation that businesses which need capital and meet the conditions for lending cannot access credit? Loosening credit growth target at this time can be seen as a solution in the context of much lower GDP growth than forecast, and low inflation. Breaking the rule of annual credit growth will therefore be unlikely. However, the efficiency in allocation of economic resources is once again mentioned. "The quality-growthists (including me in this group) think that loosening monetary policy to grow at this moment is unreasonable. We think that the economy and business like forests and trees, credit is like fertiliser. Only moderate application should be made for the root itself to find other sources of nutrients. Thus, the root will develop deeply underground, then the tree will stand firm under the storm and the forest will not be destroyed," said Nguyen Duy Hung, Chair of Saigon Securities Incorporation (SSI). The risk of "bubble" is also a concern when loosening credit growth target. As per the National Assembly Economic Committee, in the context that credit growth in the first four months hit 5.76%, some have proposed to strengthen the risk control for real estate loans to reduce the risk. The "bubble", especially when more than 3,100 real estate businesses are set up in 2016, nearly doubles Bad debt is also a major barrier to credit expansion. According to a recent government statement, as of December 31, 2016, the non-performing loan (NPL) ratio in the balance sheet and bad debt sold to Vietnam Asset Management Company (VAMC) and potentially irrecoverable bad debt was percent of the total outstanding loan. If the net debt ratio of 2.46 percent is subtracted, as of December 31, 2016, the NPL ratio sold to VAMC which has not been settled and the potentially irrecoverable bad debt will be 7.62%. With such a high unsolved bad debt ratio, if the full provision is made, Intellasia 25 May / 47

7 Risk tolerance of Vietnamese banks very low: Dr Le Xuan Nghia the banks' profits will be greatly eroded, even many banks will be hard to avoid big losses. Accordingly, the equity will grow slowly for years or even shrink. Equity is like the most important capital adequacy "buffer". With thin capital safeguards, banks will be forced to be cautious in boosting credit, as the higher the credit, the greater the risk of arising new bad debt in the context that unsolved bad debt remains large. 25/MAY/2017 INTELLASIA TRI THUC TRE Dr Le Xuan Nghia, a financial shock from the outside or from the property market (real estate market, stock market) will have a very bad impact on the whole financial system and economy. It can take many years to recover. As per Dr Le Xuan Nghia, a finance and banking expert, dealing with bad debts and restructuring banks is the most urgent issue today. According to reports by commercial banks and the Vietnam Asset Management Company (VAMC), the total unsolved bad debt is now between 450 trillion dong and 500 trillion dong, equivalent to about $20 billion to $25 billion. "The worry is that the bad debt concentrates in some ailing banks that are in the process of restructuring, with limited additional funds. Despite the government's plan to restructure the system of credit institutions since 2011, the results are still relatively modest, mainly due to the limited financial resources, lack of financial resources to quickly deal with bad debts. On the other hand, we have not built a strong legal corridor to handle bad debt quickly and efficiently," said Nghia. The treatment of bad debt has so far been based mainly on financial resources of the banking system, mainly debt recovery, sale of collateral or use of risk provisions deriving from the business results of the commercial banks themselves. So far, commercial banks have handled about 250 trillion dong of bad debts on their own. These are great efforts of the banking system, but this also makes their financial fundamentals be drastically reduced. The commercial banks' profitability is only half that of 10 years ago and the lowest in South East Asia, with some commercial banks experiencing negative equity. "This shows that the risk tolerance of Vietnamese commercial banks is very low and only a financial shock from outside or from the asset market (real estate market, stock market) could have a very bad impact on the entire financial system and economy that will take many years to recover. In the current international context, the instability of financial markets can take place at any time and with ever increasing scale," the expert said. *There should have separate legal corridors to handle bad debt Dr Le Xuan Nghia said that the handling of large scale non-performing loans, in all cases, needs a separate legal corridor. For example, Korea and Thailand in 1997, despite the huge financial support from IMF with about $50 to $70 billion needed a special legal corridor, for example, the regulations on nationalisation of private banks to restructure and the privatisation or the regulations on the power of debt trading, the right to recover collaterals for selling of commercial banks. In Vietnam, if there is no centralised financial resources but based on the self-restructuring of commercial banks, a stronger legal framework is required. Because the commercial banks themselves are not competent enough to take back debt, recover collaterals or buy and sell debts on the market principles without conflicting with other relevant laws. Up to now, the handling of bad debts at commercial banks and at VAMC needs to overcome legal barriers, such as the recovery of security assets, the sale of assets, the legal enforcement, the search for new investors to replenish their own capital, off-balance sheet accounting, debt write-offs by risk provision, etc. These legal hurdles are making the process of dealing with bad debts so sluggish, ineffective, even wasting resources and greatly affecting the financial foundation, credit expansion and risk tolerance of commercial banks. At the same time, it also affected the reduction of interest rates, financial investment costs and access to credit by businesses, especially small Intellasia 25 May / 47

8 ABBank, TPBank join ADB trade finance programme and medium enterprises. Nghia pointed out in the next few years, many bad debts from VAMC will be returned to commercial banks while these banks are struggling to deal with bad debts that have not been sold to VAMC. At that time, the difficulty of dealing with bad debt and restructuring of these banks will be multiplied. That can seriously affects the financial security of the whole banking system. Thus, more than ever, state-run agencies need to have strong political will to break through the old law-making mindset, quickly building a separate legal corridor as the basis for commercial banks to successfully carry out the NPL process as set out in the restructuring plan of the government's credit institutions. This is also the only solution to ensure the stable stability of the entire financial sector and make decisive contribution to stabilising macroeconomic and sustainable growth of Vietnam in the coming years," the expert said. 25/MAY/2017 INTELLASIA VNA An Binh Joint-Stock Bank (ABBANK) on May 24 officially signed an agreement with the Asian Development Bank's (ADB) on joining the Trade Finance Programme (TFP) one of prominent programmes enabling Vietnamese enterprises to increase competitiveness and get more opportunities to promote economy. Under the agreement, ABBANK will promote the implementation of regulations on safe management and operation, towards constantly improving the quality of services and helping enterprises easily access international market. Becoming a member of the TFP, ABBANK will serve as an effective bridge, bringing opportunities to Vietnamese firms to expand links with other 200 member banks of the TFP worldwide. "Our Trade Finance Programme aims to help Vietnam and Vietnamese businesses expand trade opportunities, increase competitiveness, and promote trade-led inclusive growth," said Steven Beck, ADB's Head of Trade Finance. According to Cu Anh Tuan, Chief Executive Officer of ABBANK, the signing with the TFP marks the start of a positive development and close relationship between ADB and ABBANK in developing banking services of the Vietnamese bank. Cooperating with the TFP will not only bring higher business efficiency, but also create an opportunity for our bank to affirm its brand in the banking and financial market, he stressed, hoping that ADB's continued trust and support will further promote trade development between Vietnam and other countries. The same day, Tien Phong Commercial Joint-Stock Bank (TPBank) signed a similar agreement with ADB. According to Nguyen Hung, Chief Executive Officer of TPBank, ADB's extensive network of banks and other financial institutions will provide great opportunities for TP- Bank to expand its global partnerships. He said that the guarantee limit from ADB shall be used to support Vietnamese small and medium-sized enterprises to optimise their businesses so they can contribute to Vietnam's economic growth. ABBANK is one of the leading commercial joint-stock banks and is among the top ten largest commercial banks in terms of charter capital in Vietnam. Its current charter capital exceeds 5,319 billion VND (about 234 million USD) and it has an extensive network of 164 transaction offices located in 34 provinces nationwide. Meanwhile, TPBank is one of the most dynamic commercial banks in Vietnam with total assets of around 106,000 billion VND (4.6 billion USD), about 4,000 employees, and an extensive network of 55 branches and transaction offices across Vietnam. Currently, with more than 1.5 million individual customers and businesses, TPBank has been asserting its position as a strong, sustainable and healthy bank in the country. To date, TFP has supported 8.2 billion USD in trade through 5,814 transactions covering both guarantees and direct funding in Vietnam. Out of TFP's total transactions in Vietnam, 67 percent are related to small and medium-sized enterprises. TFP is currently working with 11 commercial banks in Vietnam and, with the signing of agreements Intellasia 25 May / 47

9 Sacombank postpones AGM to June 30 with ABBANK and TPBank, this will increase to 13 commercial banks vnp 25/MAY/2017 INTELLASIA VN ECONOMIC TIMES Bank's restructuring plan secured central bank approval on May 22. In an announcement published on its website on May 24, Sacombank said it cannot hold its 2015 and 2016 annual general meeting (AGM) in May as expected, with a new date set for the end of June. "Due to the incomplete preparations of AGM documents and personnel for the new Board of directors and Supervisory Board during the tenure, Sacombank will postpone the AGM, which was set for May 26, and expects to hold it on June 30," the statement read. This is the second time Sacombank has postponed its AGM, which was initially set for April 28. The announcement also noted that the bank's restructuring plan post-merger was approved by the State Bank of Vietnam on May 22, and its audited financial statements are currently being completed. Sacombank is yet to publish its 2015 and 2016 audited financial statements. It will send an invitation letter to shareholders and publish documents for the AGM within the prescribed time limit. In addition to the bank's current senior officials, including Chair Kieu Huu Dung, the list of candidates for the new Sacombank Board for the tenure includes Nguyen Van Huong, the recently-resigned deputy Chair of LienVietPostBank. Huong is currently the deputy Chair of the year-old Vietnam Macadamia Association, a social and professional organisation co-founded by LienVietPostBank and real estate giant the Him Lam JSC, which holds more than 30 per cent of LienVietPostBank. Sacombank became the fifth-largest lender in the local banking sector in 2015 after its voluntary merger with Southern Bank. Previously among three private lenders with the highest annual net profits, the joint entity was supposed to bring greater benefits to Sacombank's shareholders and customers. But the bank was hit almost instantly post-merger, with a pre-tax loss of VND671 billion ($29.5 million) in 2015's fourth quarter, making its pre-tax profit for 2015 as a whole only VND1.29 trillion ($56.6 million), a fall of 55 per cent against In its October 2016 report, Moody's confirmed Sacombank's "B3" long-term ratings and "caa1" BCA, and changed the outlook to negative. The confirmation of the caa1 BCA reflects the high solvency and liquidity risks faced by Sacombank post-merger. The B3 long-term ratings of Sacombank were confirmed because Moody's continues to incorporate one notch of uplift, based on the rating agency's expectation of moderate support from the Vietnamese government. The negative outlook on Sacombank's ratings reflects the uncertainty around the strategic direction of the bank, its unclear ownership structure, and the true scope of asset quality challenges. The bank posted an after-tax profit of VND210.5 billion ($9.28 million) in the first quarter of this year, a 30 per cent increase year-on-year, according to the bank's latest financial report. Its bad debt ratio fell from 5.35 per cent at the end of 2016 to 4.88 per cent as at March 31, but remains the highest among its peers. Asset Magazine lauds Citi and Citi Vietnam as the banks to go 25/MAY/2017 INTELLASIA VIR Leading industry publication Asset Magazine announced the 2016 winners of its annual poll. Accordingly, Citi Vietnam was the Best Corporate and Institutional Bank in 2016, and Citi was the Best Bank in the Asia-Pacific, as well as the Best Corporate and Institutional Bank and the Best Digital Bank in Asia. The decisions were made by the editorial team of the magazine and were based on the 12-month performance of the banks. Intellasia 25 May / 47

10 In the editorial write-up announcing the awards, the editors explained their pick of the best bank and the best corporate and institutional bank as follows: "Citi reported positive revenue growth last year. It opened a new office in Hong Kong One Bay East, launched voice biometrics across Asia, and added new credit card offerings across the continent. In terms of corporate and institutional banking, Citi is consistent in arranging marquee transactions across equity, equity-linked, debt capital markets, and M&A. Citi was also a trusted financial adviser and represented clients in deals such as Chinese outbound acquisitions and divestments from multinationals." Regarding the digital award, Asset Magazine said, "During the review period, Citi excelled in refining its mobile offering and struck a number of partnerships with new age companies. From India to Korea, Citi in the Asia-Pacific has undergone a digital transformation over the past 12 months. The bank has pushed forward with a number of digital services aimed at making customers' lives easier. Citi has also taken a mobilefirst approach to retail banking, enhancing its mobile capabilities across its regional footprint. The bank has pushed forward in its engagement with customers over social media platforms, including Line and WeChat. Moreover, the bank has continued to support the growing fintech community in Asia through its Citi Mobile Challenge." "In a highly competitive market, this independent recognition is greatly appreciated by all of us at Citi. I would also like to thank our clients who place their trust in us to meet their financial needs. Asia and Vietnam is at the heart of Citi's growth strategy and we are well placed to capture more of the growth opportunities in this region, including further digitisation and from our clients using our Asian and global network," said Natasha Ansell, Citi Vietnam CCO. The last 12 months were pivotal in Citi's 115-year history in Asia, with a deliberate shift in strategy in response to the market environment to generate growth. In institutional banking, Citi helped raise over $150 billion for clients and advised on over $85 billion of M&A for clients in the region during 2016, according to Dealogic data. During 2016, Citi's consumer banking business in the Asia-Pacific, which spans over 12 of the 19 global consumer markets globally, was further transformed to a model that is simpler, dramatically faster, more scalable, and far more digital. On average, Citi announced a new digital innovation or partnership on a fortnightly basis in the last 12 months. Today, more than half of the bank's consumer banking clients uses digital channels, with mobile being the fastest growing channel (35 per cent growth year-on-year). One of every four new credit card accounts acquired comes from digital sources and over 50 per cent of our clients are actively using digital banking channels, up from the 30 per cent three years ago. During 2016, Citi announced strategic partnerships in leading digital ecosystems across the region. Some of these included Alipay and WeChat in China and Line in Thailand and Taiwan. The bank also formed digital credit card partnerships with the likes of Amazon, Airbnb, Grab, Uber, and Lazada in various countries across Asia. Over the last year, Citi launched the newly-refreshed Citi Mobile App, featuring easyto-use functionality and interfaces, such as Snapshot and Touch ID, which has seen over two million downloads to-date. The bank was also the first to launch Voice Biometrics across the region, which has since received more than one million sign-ups from customers. Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Bonds sell well 25/MAY/2017 INTELLASIA TRI THUC TRE Last week, the State Treasury held a successful auction session. For the first time after seven months, 100 percent of bonds consisting of four trillion dong bonds called for Intellasia 25 May / 47

11 bid and 1.2 trillion dong bonds called for additional bids were sold out, according to the weekly money market report of Saigon Securities Incorporation (SSI). Following the success of the auction in the previous week, the State Treasury only focused on four short terms ranging from five years to 15 years as the 20-year and 30- year tenor bonds have exceeded the full-year issuance plan. Demand for bonds continued to move positively with the registration rate soaring 356%, the highest level since October 2016, helping the State Treasury to easily issue bonds at the interest rate reducing six percentage points for each term, reversing the continuously increasing trend of interest rates since February. In addition, in the context of improved liquidity, the Bank for Social Policies also successfully issued one trillion dong worth of bonds in 5-year, 10-year and 15-year terms, gaining 720 billion dong with interest rate decreasing six percentage points for 10-year term and 20 percentage points for 15-year term. In the common trend with the primary market, the secondary bond market was also very active. The increased demand for bonds helped the liquidity to rise significantly. The total transaction value reached 42.5 trillion dong, equivalent to an average of 8.5 trillion dong per session. Particularly, demand from foreign investors increased with the buying value to improve from 800 billion dong to 1.3 trillion dong, leading to the net buying back of 477 billion dong of foreign investors. Bond yields continued to decline, with a common decrease of 2-11 percentage points. In particular, the three-year term slumped 11.6 points compared to 11 points to 4.16 percent for one-year term and 6.4 points to 4.77 percent for two-year term. NA aims to better recover bad debts 25/MAY/2017 INTELLASIA VNS The National Assembly's Economic Committee on Monday agreed to streamline existing legal regulations to better recover bad debts and restructure credit institutions. During the meeting, the Governor of the State Bank of Vietnam Le Minh Hung, on behalf of the prime minister, presented a report on the draft resolution on fixing bad debts by credit institution. He also presented amendments to the Law on Credit Institutions for consideration and approval. The draft resolution comprises 18 articles regarding the rights of legal lenders, the development of debt markets, the settlement of guaranteed assets and other topics. Chair of the NA's Economic Committee Vu Hong Thanh said that the committee basically agreed with the government's report on the need to settle bad debts and further restructure the system of credit institutions during the period. The committee stressed the need to streamline laws to build a system of financially healthy credit institutions that operate under international rules. It asked compiling agencies to continue reviewing draft law regulations to ensure that they are synchronous with the Constitution and relevant laws. Once the resolution is approved by the Legislature, the government affirmed that it would focus on improving legal documents, mechanisms and policies for restructuring credit institutions and settling bad debts. The government would also improve plans to fix weak banks in line with market rules in an expeditious, sweeping and cautious manner to safeguard the banking system and depositor interests. According to Governor Hung, after four years implementing a project on settling bad debts of credit institutions, the entire system of credit institutions recovered VND trillion (US$26.82 billion) of non-performing loans (NPLs). Of that total, over 56 per cent were settled by the institutions themselves, and the remaining were sold to the Vietnam Asset Management Company (VAMC) and other individuals and institutions. "The results of settling bad debts have helped credit institutions expand loans to the economy, especially to priority and strategic sectors. It has contributed to removing difficulties in production and business, thereby promoting economic growth," Hung said. However, the restructuring of ailing CIs and settlement of bad debts still faced diffi- Intellasia 25 May / 47

12 Vietnam values financial grants from OFID culties, Hung said, adding that total NPLs of the entire credit institutions system until March 31, 2017 were VND160 trillion, equal to 2.56 per cent of the institutions' total outstanding loans. According to Hung, because of inadequate legal regulations, there remain obstacles to speeding up the restructuring of ailing banks and settlement of bad debts. For example, the law on the handling of mortgaged assets to recover debts still has many inadequacies related to the confiscation of mortgaged assets, especially land, which limits the progress and effectiveness of debt settlement. 25/MAY/2017 INTELLASIA VNS Vietnam welcomes technical support from the OPEC Fund for International Development (OFID) via official development assistance and preferential loans. Prime minister Nguyen Xuan Phuc made the remarks when talking about Vietnam's high demand for infrastructure development at a meeting with OFID director-general Suleiman Jasir Al-Herbish in Ha Ni yesterday. The PM lauded the signing of a $21.8 million loan agreement between the finance ministry and OFID on Monday for the construction of Dam Vc Bridge in the northern province of Vnh Phuc. He noted that the two sides had implemented many effective joint projects in Vietnam's remote areas. He asked the OFID to continue financing projects in Vietnam, adding that the government is willing to work with the fund in designing programmes in line with OFID funding criteria and the country's growth strategy. Stressing that Vietnam wants to develop the private sector, the PM called on the OFID to create favourable conditions for the sector to access the fund's capital. He suggested holding discussions on the matter and assigned the finance ministry to work on the cooperation. For his part, Suleiman Jasir Al-Herbish said his current visit reflected the OFID's willingness to expand cooperation with Vietnam in any field at any time within its capacity. Noting that 2018 would mark 40 years of collaboration between the OFID and Vietnam, he said the joint work had produced sound outcomes and revealed that the organisation was studying a number of projects in the country. The OFID hoped the prime minister would direct relevant agencies to prepare all needed procedures for joint projects so that they could be signed right after being approved by the OFID executive board, he said. The OFID director-general said his organisation had a private sector department that could work with the Vietnamese finance ministry on cooperation between OFID and Vietnam's private sector. Capital aims for 4.5pct export growth in /MAY/2017 INTELLASIA VNS The capital aims to generate $11.1 billion from exports this year, 4.5 per cent higher than 2016, the municipal Department of Industry and Trade has said. To achieve this goal, Ha Ni will continue work on accelerating administrative reforms with special focus on customs, tax and business licencing procedures, as well as draw up effective policies. Priority will also be given to improving the competitiveness of local enterprises and their export products, and attracting investment for infrastructure that is needed to promote export activities. The city will also strengthen promotional activities, and provide businesses with more information on international markets and export products. Training sessions will be held for businesses to make them aware about export policies and regulations in Vietnam and other countries so that they can meet international commitments and overcome trade barriers. In 2016, the city's exports rose by a modest 1.5 per cent to around $10.6 billion. The Intellasia 25 May / 47