FINANCE. finance & business news. Reference exchange rate rises again

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1 finance & business news 3 August Reference exchange rate rises again 2 Bank rates surpass most predictions 2 SBV's forex policy aimed for macroeconomic stability 3 Cryptocurrency management regulations yet to be issued 3 Financial leasing significant to mobilise capital 4 When will debt trading market be formed? 5 Getting ahead of consumers' spending openness 6 Banks benefit after paving way for insurance to access customers 7 How are the parent banks in the last 6 months? 8 Tra Vinh supports SMEs with loans 9 HDBank, Vietjet Air launch promotion campaign 10 PTI aims to achieve sales of $171.8 million by the end of Vietnam feels heat of US-China trade war 11 New momentum for economic growth needed: PM 11 Vietnam jumps 25 levels in WB's logistics performance index 12 Vietnam inflation forecast to exceed central bank's 4pct target: HSBC 13 Hanoi takes lead in FDI attraction 14 Vietnam PM asks for criteria to assess economic reform 14 Vietnam exports timber products to 120 countries, territories 15 Vietnam shrimp exports sluggish, but to recover along with prices 15 Shrimp, abalone to be under US import monitor from December Vietnamese steel exporters warned of possible 25pct tax 16 Vietnam's tea exports fall 6.9pct in revenue 17 Vietnamese tea finds flavour of growth in new world tastes 17 VN businesses need to learn how to deal with anti-dumping lawsuits: experts 18 Vietnam, Thailand discuss ways to achieve 20 billion USD in trade 19 CPTPP, EVFTA help Vietnam's garment-textile lure investment 20 HCM City to equitise many public service firms in Economic policies will remain stable: PM 21 Tax investigation removed from draft tax management law 22 MoF draft law gives taxpayer interests a nod 23 Vietnam, Croatia sign double taxation avoidance agreement 23 Procedures get cut to boost trade 24 Smart city building helps improve economic efficiency: Architect 25 Tay Ninh encourages safe and high-quality farming 26 Hanoi advised to replan urban zoning to ease traffic pressure 26 Vietnam's online tourism to thrive 27 The cost for advertising in Vietnam is two low compared to other countries 29 Many sugar mills face uncertain future 30 Private capital to flow into aviation infrastructure projects 30 Real estate inventories fall sharply 31 Gas-to-power projects attract global energy giants 32 Investors run away from condotel projects 32 Vietnam attractive destination of Chinese enterprises 33 VN, Japan firms seek connection in agro-fishery, food trade 34 BIZ NEWS Business Briefs 03 August Indexes on both markets recover slightly 35 VN stocks rebound on bottom-fishing 36 Stock market briefs 36 HNX sells trillion VND worth of bonds in July 37 SOEs urged to list on stock market 37 EVN Finance to debut 250 million shares on UPCoM, valued at $133 million 38 Foreign investors bail on Vinalines sale 38 Cyber attacks target accounts of enterprise leaders 39 HCM City wants joint scheme with ministry to build Ring Road 3 40 Public transport centre seeks to resume minibus service in HCM City 40 HCM City urges speedier work on bridges to Thu Thiem 41 Vina Chuoi receives funding of more than VND2 billion 41 Indonesian ride-hailing Go-Jek extends testing services in Vietnam42 Airbus backs Vietnam's space industry development 43 Origin scandal undoes consumer trust in Con Cung 43 VND4.1bn tax arrears bill for man profiting from online business 44 Imported Ford Ranger recalled for fixing faulty 45 CapitaLand Vietnam organises picnic for underprivileged children 45 Vietbuild expo opens in Can Tho City 46 Reference exchange rate rises again 03/AUG/2018 INTELLASIA VNA The State Bank adjusted the daily reference exchange rate for August 3 up 10 VND from the previous day to 22,676 VND/USD. With the current trading band of +/- 3 percent, the ceiling rate applied to commercial Intellasia No. 21, lane 173/63/17, Ngoc Ha Ward, Ba Dinh Dist, Hanoi All Rights Reserved Tel: Fax: Office@intellasia.com Websites:

2 banks during the day is 23,355 VND/USD and the floor rate 21,997 VND/USD. The opening hour rates at commercial banks saw mixed changes from August 2. Vietcombank raised both rates by 5 VND, listing the buying rate at 23,250 VND/USD and the selling rate at 23,330 VND/USD. Meanwhile, both the rates at BIDV were adjusted down 10 VND to 23,240 VND/USD (buying) and 23,320 VND/USD (selling). The rates listed at Techcombank also went down by 15 VND to 23,210 VND/USD (buying) and 23,320 VND/USD (selling). The reference exchange rate was on a rising trend on the first two days of the week from July 30 to August 3. It stood unchanged on Wednesday and went down on the next day before rising again on the last day of the week. Overall, the reference exchange rate has gained 17 VND during the week. The rates listed at commercial banks saw mixed changes but overall, the rates on Friday showed increases ranging from 20 to 50 VND compared to the beginning of the week. Bank rates surpass most predictions 03/AUG/2018 INTELLASIA TRI THUC TRE On 1st August, the central rate of the State Bank of Vietnam (SBV) was quoted at 22,669 dong (the ceiling exchange rate was 23,349 dong) and the SBV's exchange rate was 22,700-23,299 (buy-sell). At commercial banks, the highest selling price of US dollar on 2nd August was 23,345 dong, only four dong to the ceiling price, the purchase price was around 23,250 dong. On the free market, the US dollar's price was traded around 23,450 dong. Compared to the beginning of the year, the central rate has risen by approximately 1.1 percent while the price of US dollar's quoted by commercial banks has risen by 2.6%, the same as on the free market. The increase of exchange rates was explained by many factors, but mainly due to the impact of the US dollar's appreciation around the world, the devaluation of the Chinese yuan and partly due to psychological elements. SBV said that the appreciation of US dollar is appropriate for domestic and international markets. Earlier when the exchange rate increased sharply from late June to early July, many popular experts and financial institutions forecasted that exchange rate would rise but slightly, such as MB Securities Joint Stock Company (MBS) and Hochiminh Securities Corporation (HSC) forecasted an increase by one to two percents. Nguyen Tri Hieu predicted an increase of one to three percents (he had forecasted one to two percents in the beginning of the year but then adjusted to three percents in June). At the beginning of this year, there were many forecasts. For example, the National Financial Supervisory Commission (NFSC) predicted an increase of 1.5 to two percents, The Hongkong and Shanghai Banking Corporation (HSBC) forecasted exchange rate to rise to 23,000 dong, etc. The forecasts were based on the fact that the SBV would intervene to stabilise the exchange rate when foreign exchange reserves are abundant, constantly rising, and currently at a current record high. In addition, the exchange rate policy will also aim to maintain the macro-economy and support export activities. In fact, the exchange rate has increased by more than two percent from June till now, 2.6 percent in total since the beginning of the year, and far exceeded all forecasts. Although the exchange rate has risen sharply, there are two opposing views on this adjustment. An expert group opines that exchange rate should be allowed to fluctuate with the market since SBV cannot intervene by selling foreign exchange reserves to support exchange rates, instead should try to be familiar with strong US dollar. Another suggestion says that the devaluation of the dong must be very careful, otherwise the economy will be affected. Intellasia 3 August / 46

3 SBV's forex policy aimed for macroeconomic stability 03/AUG/2018 INTELLASIA VNS The State Bank of Vietnam (SBV)'s exchange rate policy was aimed at ensuring macroeconomic stability, not just export growth, said Nguyen Thi Hong, the bank's deputy governor. Hong made the statement following suggestions that the dong should be further weakened against the US dollar to support the country's exports, especially given the recent devaluation of the Chinese yuan. According to Hong, the SBV had been monitoring several currencies as well as the yuan to set its daily reference exchange rates. Besides managing the forex market based on the daily reference rate, Hong said that SBV was also looking at other factors such as interest rates and liquidity, as well as fiscal policies to ensure the country meets its macroeconomic targets. The SBV reported that by August 1, the central bank's daily reference exchange rate of the dollar against the dong had risen by 1.1 per cent compared to the end of last year, while with the current trading band of +/- 3 per cent, the inter-bank rate was up 2.5 per cent. The rise was under control and in line with other currencies in the region and the world, Hong said. On August 2, the SBV announced a daily reference exchange rate of VND22,666 per dollar, down VND3 against the previous day. The ceiling rate applied for commercial banks during the day was from VND23,345-21,987. Opening hour rates at commercial banks saw slight fluctuations. The rates listed at Vietcombank remained unchanged compared to Wednesday at VND23,245 for buying and VND23,325 for selling. BIDV added VND10 to both rates, buying the greenback at VND23,250 per dollar and selling at VND23,330. Meanwhile, Techcombank listed the buying rate at VND23,225, down VND5, and selling rate at VND23,335, up VND5. Cryptocurrency management regulations yet to be issued 03/AUG/2018 INTELLASIA THE SAIGON TIMES Vietnam has yet to issue specific regulations on managing digital assets and cryptocurrencies despite busy online trading, news website Vietnamplus cited Nguyen Thi Hong, deputy governor of State Bank of Vietnam (SBV), as saying. At a press conference following the monthly cabinet meeting, Hong said that the prime minister had approved a plan on August 21 last year to formulate a legal framework to manage cryptocurrencies and digital assets and assigned the Ministry of Justice to execute the plan. Digital currencies, such as e-wallets and prepaid bank cards, are being managed in line with the Law on Electronic Transactions and the government's Decree 110 on non-cash payments, she noted. Deputy minister of Industry and Trade Do Thang Hai said the ministry has prepared solutions to manage the import of cryptocurrency mining machines. According to the government's Decree 69, detailing the implementation of some articles of the Law on Foreign Trade Management, computers designed for mining cryptocurrencies are not subject to import bans. Under the current Vietnamese law, cryptocurrencies are considered illegal in the country. Therefore, the Ministry of Industry and Trade, under the prime minister's direction, has coordinated with the Ministries of Finance and Justice and the central bank to propose banning the import of these machines. At the press conference, representatives of other ministries and agencies also answered questions about problems that have raised public concern. Hai warned of the possible influx of Chinese goods into Vietnam which might then be Intellasia 3 August / 46

4 shipped to the United States to enjoy lower tariffs. The government has issued Decree 31/2018 to tighten the management of the origins of commodities, he added. The ministry has also issued Circular 05 guiding the implementation of Decree 31, which took effect on March 8. As for the listing of enterprises on the stock market, deputy minister of Finance Vu Thi Mai noted that the ministry in August last year had publicised the list of equitised State-owned enterprises (SOEs) that were reluctant to be listed on the local bourse. Only 150 out of 750 equitised firms have listed their shares on the local stock markets. At a recent meeting of the Steering Committee for Enterprise Reform and Development on the equitisation of SOEs in the first half of the year, deputy prime minister Vuong Dinh Hue, head of the committee, asked the ministries and agencies to accelerate the listing of SOEs under their management. Talking about the foreign exchange rate, SBV deputy governor Hong said the interbank exchange rate on August 1 increased by 2.5 percent over the rate last year, which remained under control. Financial leasing significant to mobilise capital 03/AUG/2018 INTELLASIA VNA Financial leasing is an effective solution to solving medium- and long-term capital shortages for local businesses, head a conference held by the BIDV-SuMi TRUST Leasing (BSL) in HCM City on August 1. Financial leasing is an alternative way of financing whereby a licensed leasing firm purchases an asset on behalf of its customer in return for an agreed series of payments, which usually include interest. This kind of credit has become popular globally, with total revenue of up to 1 trillion USD per year. In Japan, the annual figure is some 50 billion USD. However, revenue from financial leasing in Vietnam was just 8.6 trillion VND (369.8 million USD) by the end of the second quarter in According to Can Van Luc, Chief Economist of the Joint Stock Bank for Investment and Development of Vietnam (BIDV), there will be huge demand for machines, equipment and vehicles in the next two years as stable growth has been forecast for the Vietnamese economy, with GDP growth expected to exceed 6.5 percent during the period. With banks limiting short-term capital for medium- and long-term loans, and small and medium enterprises short of mortgageable assets, financial leasing is an important solution helping local firms overcome capital barriers, Luc said. BSL general director Nguyen Thieu Son said financial leasing mobilises resources for sustainable development. It also settles problems of money balance, capital restructuring and effective use of capital. Vietnam's financial and banking sector has been developing rapidly, with 91 commercial banks, 27 financial and financial leasing firms and 1,100 credit institutions. Financial leasing has grown in stature as a channel to inject capital for local companies. Fujita Takeshi, BSL deputy general director, gave a bright outlook for the Vietnamese financial leasing market, due to expected overall economic growth. The BLS has designed financial leasing models to serve demands of companies, contributing to the development of businesses and the financial market, he added. It is a joint venture between the BIDV and Sumitomoto Mitsui Trust Bank, the first financial leasing joint venture between a Vietnamese bank and a foreign financial institution in Vietnam. With a chartered capital of 900 billion VND (38.7 million USD), the venture is expected to attract more than 3,200 Japanese firms operating in Vietnam that have been using financial leasing services and other locally-based firms vnp Intellasia 3 August / 46

5 When will debt trading market be formed? 03/AUG/2018 INTELLASIA THOI BAO NGAN HANG The Vietnam Asset Management Company (VAMC) has recently celebrated 5th anniversary of its founding and operation. As announced by VAMC, the bad debt ratios processed through VAMC by June 30th 2018 reached trillion dong of debt principal on balance sheets, estimated at over 40 percent of the total settled bad debts. VAMC has coordinated with credit institutions (CIs) to recover nearly 100 trillion dong. However, the number of successful direct auctions of the bad debts purchased by VAMC is very modest. The achievements of VAMC throughout the past five years are undeniable, but the most concerning issue of the company in the near future is to trade bad debts at market prices the solution which is considered to solve the root of the bad debt problem. According to Decision 618/QD-NHNN issued by the State Bank of Vietnam (SBV) on April 12th 2016, VAMC is allowed to trade bad debts at market prices. Implementing this decision, VAMC has acquired bad debts at a total value of debt principal of about 2,938.6 billion dong. The purchase value of those debts was 3, billion dong. By June 30th 2018, the market value of the debt purchase was trillion dong. In terms of sales, the first bad debt purchased and auctioned successfully by VAMC was a bad debt of Viet Thuan Thanh Company Limited. VAMC earned 301 billion dong, 1.6 billion dong higher than the starting price. The profit of this deal is not significant, because under the agreement, VAMC must share with Commercial Joint Stock Bank for Agriculture and Rural Development (Agribank) the bank that initially sold this debt to VAMC. However, it is a very meaningful deal, because it can be considered a trial for both VAMC and CIs as well as investors when participating in trading bad debts at market prices, with the expectation that the debt trading market will gradually be formed and become more exciting in the near future. "Debt trading market" phrase has appeared for quite a long time with concerns of many people in financial and banking world. However, it is now still a plan and an expectation. Thus, when VAMC's Chair of the Member Board Nguyen Tien Dong disclosed to reporter of Thoi bao Ngan hang that VAMC is deploying a debt trading software on the basis of supplementing information and building database on bad debts, new hopes have been given as this is the foundation to form a bad debt trading market in the future. So what factors are needed to establish and run the debt trading market? According to Dong, they are goods (debts in general, not necessary bad debts), buyers, sellers, managers, and most importantly a mechanism for managing and operating the market. Among those factors, what do we have? We have goods (bad debts, and later may be extended to debts in general), buyers, and sellers (VAMC, CIS, investors, and later may be expanded, even including foreign investors). Thus, we are in short of a legal framework for the market and the regulators. The problem is whether it is necessary to have a new market in order to set up a management board and a legal framework or a legal framework should be built first in order to operate the market. According to Dong, to avoid this concern, they decided to form the market first and then the legal framework. To establish the market, according to VAMC's way, information must be transparent first. Whoever has the goods may "show" on a website. Interested people can grasp the basic information of the debt, current price of the debt (principal, interests, etc.), price as assessed by the price appraiser, offer price of seller, etc. Dong affirmed that the trade of bad debts at market prices helps the settlement of bad debts be more substantial and effective on the principle of preserving capital and ensuring efficiency, etc. VAMC aims to take control of the bad debt trading market of the banking sector, then expand it to the entire economy. To achieve the goal. VAMC needs resources in terms of capital, technology, assets, and especially legal resources. A centre for trading bad debts of the banking sector may soon be established in the future. However, in order to have the participation of foreign investors, there is a lot to do. Therefore, if only VAMC and the banking sector make efforts without the joint ef- Intellasia 3 August / 46

6 Getting ahead of consumers' spending openness forts of relevant industries and ministries, it is unknown when this playground can be put into operation. 03/AUG/2018 INTELLASIA THOI BAO NGAN HANG In the recent years, the spending of people has been following an upward trend. According to a survey of Nielsen, the consumer confidence index in the first quarter (Q1) 2018 in Southeast Asia was very optimistic, rising by two points from 119 points in Q to 121 points. In which, Vietnam is among the top three countries recording the highest points and among the top five countries having leading confidence indexes in the world. Along with that, the consumption trend of Vietnamese has been gradually changing. Instead of saving enough money to buy a product in need, many people are looking to purchase the product and pay for it by the money accumulated later on. At the same time, the development of modern retail system, in chain model in replacement of separate traditional stores also makes it easy for consumer financial service providers to reach large number of borrowers. As said by Mai Ngoc Minh from HCM City, with the boom of consumer instalment loans young people like her no longer have to be worried when buying items of which the value is two to three times higher than monthly income as before, but willing to borrow instalment loans to own the item immediately. Basically, it can be seen that consumers' confidence is based on economic growth. Accordingly, in terms of spending, Vietnamese consumers are willing to spend more on high value items with the aim to improve the quality of life such as shopping, travelling, buying new technology products, entertainment, housing renovation, etc. Thanks to the open spending trend of people, CIs have the opportunities to promote their strength in financial retail. All of the above factors blended together to create a strong wave in retail among CIs in the recent time which has significantly boosted the consumer credit growth. Accordingly, at many commercial banks, the proportion of lending to individual customers in total outstanding loans has constantly been rising. Typically, at Military Commercial Joint Stock Bank (MB), personal loans by the end of Q grew by 17.3 percent compared to the beginning of the year, reaching trillion dong, contributing 34.4 percent into the bank's total outstanding loans (it was 30.3 percent in Q2 2017). In the first six months of 2018, the outstanding personal loans of Vietnam International Commercial Joint Stock Bank (VIB) were among the highest numbers in the system. VIB ranked the first in new disbursement of auto loans with over 30 percent market share; as well as in personal home loans with growth rate reaching 78%, mainly focusing on home loans with land use right certificates ("red" books) and house ownership certificates ("pink" books), and home repair loans, etc. In terms of data, the growth rate of personal lending segment is not significant. However, currently, among about 95 million people, over 30 million of them have average income of less than 10 million dong per month and have demand for financial credit. Nevertheless, over the past 10 years, the retail finance industry has served only about 10 million customers. And in such fertile land, many banks have announced to strive to become the leading retail bank in the system and have tried to boosted consumer loans. This orientation is becoming the main target of banks in this period. The dong lending rates in this segment are maintained at six to nine percent per annum on short terms and nine percent to 11 percent per annum on medium and long terms. In general, the consumer borrowing opportunities of people will be expanded in the near future. All consumer credit needs will be met in various forms. This is a positive sign of the economy because the increase of consumption will stimulate all corners of the economy to develop. However, even if banks loosen the doors, according to many financial experts, consumers should not tend to be overly optimistic in borrowing consumer loans and should consider their future income instead of being willing to borrow more for spending at the present time. If this is done well, borrowers of personal loans will not have to worry about the repayment ability and will score good points with banks on other transactions. Intellasia 3 August / 46

7 Banks benefit after paving way for insurance to access customers 03/AUG/2018 INTELLASIA INFONET In addition to the normal distribution contracts, many insurance companies and banks have signed exclusive distribution contracts with quite long tenors. Insurance companies compete for market shares and opportunities for banks Cooperation between banking and insurance (bancassurance) is where insurance companies distribute their products to customers of banks. Due to the increasing demand for integrated financial products, bancassurance has become an inevitable trend to enhance customers' experiences. According to the Vietnam Insurance Association (IAV), the growth potential of the insurance market in Vietnam is still very large as the current market penetration rate is only two percent of GDP, while the average GDP growth in the next five years will still be maintained high at percent per annum (pa). The size of the market is small with total premium income in 2017 of trillion dong, equivalent to $4.64 million, but the number of companies in this business was up to 30 non-life insurance companies and 18 life insurance companies, along with 14 insurance brokers and two reinsurers. Therefore, the competition in the insurance industry in Vietnam is very severe. It is this fierce competition for market shares that has stipulated insurance companies to expand their bancassurance channel in the past three years. In addition to the normal distribution contracts, many insurance companies and banks have signed exclusive distribution contracts with quite long terms. Typical cases include contracts of the joint ventures between Prudential and Vietnam International Joint Stock Commercial Bank (VIB) (15 years), Chubb Life Vietnam and Vietnam Asia Joint Stock Commercial Bank (VietABank) (10 years), Dai-ichi Life and Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) (20 years), Manulife and Vietnam Technological and Commercial Joint Stock Bank (Techcombank) (15 years), AIA and Vietnam Prosperity Joint Stock Commercial (VPBank) (15 years). Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) is also via Credit Suisse searching for insurance distributors across its network. The contract is expected to have a tenor of at least 10 years with value of $1 billion. For banks, bancassurance broadens the portfolio of products and services available to customers but does not require additional capital. The level of overall risk is also unchanged compared to when a new credit product is deployed. Insurance products that are sold concurrently with loans also help banks mitigate the risk of losing capital as insurance companies pay in the event of death or permanent disability. In addition, the development of the bancassurance channel also helps banks to increase their income from services, reduce their reliance on credit, and stabilise banks' earnings during periods of hard times for credit. The fact that bancassurance revenue from agent commission fees (recognised in Trust and Agency Income) paid by insurance companies is contributing significantly to the banks' revenue. According to statistics of Viet Dragon Securities Company (VDSC), in 2017 many banks will announce profitable results of "income from trust services and agents", for examples: "Income from trust services and agents" of Techcombank reached trillion dong, an increase of 2,493 percent compared to 2016; VPBank reached trillion dong, up 46%; SHB reached trillion dong, up 1.258%; Hochiminh Development (HDBank) reached 153 trillion dong, up 537 percent year over year (y-o-y). What do insurance companies get and lose? According to VDSC's analysis, in addition to utilising the bank's distribution network, insurance companies also have access to the bank's vast customer database that bancassurance offers. This source of customer data will support insurance companies in research and development of new products, more suitable to customers' demand and for risk management. Intellasia 3 August / 46

8 However, the bancassurance model also makes insurance companies accept the trade off. Despite of no official statistics, VDSC did a survey through insurance companies. The results showed that the coverage rates of bancassurance insurance products are often very low, often below one percent. Though, due to fierce competition in the insurance market, there are cases where insurance companies breach the rule to make premium payment to banks more than the limit of 20 percent of their premiums through various different fees. As a consequence, although bancassurance sales have increased sharply (up 30 percent in 2017) and its portion of premium income increases from five percent in 2012 to approximately 10 percent in 2017, profitability was very low even loss due to very high combined rate of 99 percent or more. Due to upfront charges (exclusive bank fees paid in the first year) are prepaid expenses, they should be excluded from the total asset when calculating the solvency margin. This will put pressure of large capital raising on insurance companies. Another point to note, according to the agreements between the insurance companies and the banks, all insured objects related to banking services are classified into bancassurance customers. Consequently, when the deal is signed, the agent channel's customers who are using the bank's credit products become customers of bancassurance channel. Accordingly, all the effort, time and money spent by insurance agents to and maintain the relationship with the existing customer become useless. This has caused many insurance agents to become discouraged and want to quit because of declining income. How are the parent banks in the last 6 months? 03/AUG/2018 INTELLASIA TRI THUC TRE Normally, the parent banks are the largest contributors to banks' profit, accounting for over 90 percent of the consolidated results. In the first six months of 2018, 12 banks recorded combined pre-tax profit of trillion dong, of which, parent banks made a profit of trillion dong, contributing 91 percent to the total consolidated profit. This contribution was only slightly lower in the first half of 2017, at 89%. In the first two quarters of 2018, the parent bank of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) parent bank earned a profit of trillion dong, accounting for 96 percent of the consolidated pre-tax profit of the bank, i.e. more than a dozen other subsidiaries and joint ventures contributed only 296 billion dong. The contribution rate of parent banks was almost 100 percent at VIB and Eximbank (99%). It is noticed that the growth of parent banks is relatively steady, while results in subsidiaries are very unstable. For example, in Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), it is estimated that in the first six months of 2018, its subsidiaries had a profit of 160 billion dong, only a quarter of the figure achieved in the same period last year. Meanwhile, profit of the parent bank still grew at 23 percent reached trillion dong. In a special case at Vietnam Prosperity Joint Stock Commercial (VPBank), the single financial statement recorded in the first six months of 2018, the parent bank had a pretax profit of trillion dong, higher than the profit of the consolidated bank (4,436 trillion dong). The difference was due to the fact that in the period, the parent bank received interest income from FE Credit and VPBank AMC up to nearly 2,855 trillion dong from the previous year which was recognised in the item of contributed capital contribution. Excluding this transfer, parent company's pre-tax profit for the first half was estimated at trillion dong, accounting for 64 percent of the consolidated pre-tax profit of the consolidated result. This also coincides with information given by VPBank that FE Credit contributed 36 percent of profit (about trillion dong) in the last two quarters. Previously, the contribution of VPBank's parent bank was only 50 percent and the other half was contributed by Fe Credit. The shares of parent bank soared to 64 percent in the first half came from a 44 percent increase in parent bank's profit while Fe Credit's Intellasia 3 August / 46

9 profit increased by only 26%. Kalidas Ghose, Fe Credit's chief executive, said the slowdown of FE Credit was due to the company's adjustments to a number of targeted borrowers. Apart from VPBank, Bank for Investment and Development of Vietnam (BIDV), Saigon Hanoi Commercial Joint Stock Bank (SHB), Hochiminh Development Joint Stock Commercial Bank (HDBank) and Military Commercial Joint Stock Bank (MB) recorded relatively high proportion of contribution from subsidiaries (over 10%) in the first half of this year. At BIDV, the parent bank spent more than 9.8 trillion dong for provisions, leaving only trillion dong in pre-tax profit. However, thanks to the subsidiaries' contribution of up to 601 billion dong, the bank still earned more than five trillion dong of consolidated pre-tax profit. BIDV has about 11 subsidiaries, and is one of the banks owns the largest number of members and subsidiaries in Vietnam. The member companies of MB are increasingly contributing more profits. In the first six months of 2018, the parent bank earned a profit of trillion dong, up 47 percent year over year. However, the growth rate of subsidiaries was even stronger, rising 2.2 times to 313 billion dong, of which MBS contributed 138 billion dong, increased 10 times compared to the same period last year. In many instances, the bank's leader said that a lot of expectation is put on subsidiaries such as MCredit, MB Ageas Life. Tra Vinh supports SMEs with loans 03/AUG/2018 INTELLASIA VNS Authorities in the Cuu Long (Mekong) Delta province of Tra Vinh have pledged to provide enterprises, mostly small- and medium-sized, better access to preferential loans. Under the guidance of the provincial People's Committee, leaders of State agencies in the province on August 2 held a dialogue with local businesses in order to resolve their difficulties. As many as 2,071 enterprises are operating in the province with a total investment of nearly VND25.6 trillion (US$1.1 billion), creating jobs for more than 87,000 people, according to a report of Tra Vinh Province's Business Association. The businesses have difficulties in accessing preferential loans, applying science and technology in production, as well as marketing and expanding markets in the province and abroad. Most businesses want the province to help them access preferential loans to invest in modern equipment. Le Van Hai, deputy director of the State Bank of Vietnam's Tra Vinh Province branch, said that SMEs would be given priority to loans for production from credit institutions. Accordingly, SMEs are entitled to preferential interest rates under Decision No 1425/ QD-NHNN of the Governor of the State Bank of Vietnam. Businesses can contact branches or transaction offices of credit institutions in the area for guidance about procedures for loan access, he said. In addition, credit institutions may provide loans to businesses through a credit guarantee from the Tra Vinh Development Investment Fund. According to the policy of the central bank, credit institutions will give priority to SMEs in the fields of agriculture and rural areas, production and trade of exports, and to support industries as well as for businesses that apply high-tech in their production. Credit institutions have simplified loan procedures, and publicised information and procedures related to loans and interest rates to ensure transparency, according to Hai. In addition, representatives of Hong Viet Garment Co Ltd in Chau Thanh District, recommended that the province support the company in labour recruitment and training to ensure high quality human resource of the enterprise. Duong Quang Ngoc, deputy director of the province's Department of Labour, Invalids and Social Affairs, said the company could contact the department's Employment Service Centre for help in recruitment of highly skilled labour. The meeting was attended by leaders of departments of Planning and Investment, Industry and Trade, Natural Resources and Environment, and the Taxation Department. Intellasia 3 August / 46

10 HDBank, Vietjet Air launch promotion campaign The aim was to answer questions related to procedures and conditions of preferential policies in the province. 03/AUG/2018 INTELLASIA VNS HDBank is working with Vietjet Air for a promotion campaign targeting people buying flight tickets. Customers booking Vietjet Air tickets using the "Pay later" service on HDBank's ebanking system, and if the fare is at least VND1 million (US$42.75), are entitled to a 20 per cent refund (up to VND500,000). Total refunds worth VND180 million ($7,694.2) are available. Every week two customers with the highest total spending will get vouchers for international return trips worth around VND9.4 million ($401.2). HDBank is also running a campaign until September 30 in which customers using HD- Bank Vietjet Air co-branded credit cards to pay for tickets on the Vietjet Air website for the first time are also entitled to 20 per cent refunds and up to VND500,000 ($21.37). They also get 3 per cent cash back, up to VND1 million ($42.75), on their total monthly spending. PTI aims to achieve sales of $171.8 million by the end of /AUG/2018 INTELLASIA VN ECONOMIC TIMES At its 20th anniversary, PTI said that by mid-july, its revenue was VND2.1 trillion ($90.2 million). * Insurance premiums exceed $2bn in 1H * Insurance company revenues soar * Minimum wage to increase, insurance payments may decrease The Post and Telecommunication Joint Stock Insurance Corporation (PTI) aims to achieve sales of VND4 trillion ($171.8 million) by the end of 2018 in order to reach VND10 trillion ($429.5 million) by 2025, which would account for 10.5 percent of the non-life insurance market in Vietnam. At its 20th anniversary, PTI said that by mid-july, its revenue was VND2.1 trillion ($90.2 million), up 25 per cent year-on-year. PTI's revenue has been continuously increasing over the years. In 2011, PTI reached VND1 trillion ($42.9 million) in revenue for the first time and then doubled to VND2 trillion ($85.9 million) in In 2017, PTI achieved revenue of VND3 trillion ($128.9 million) which accounts for 8 per cent of the market share and ranks them third in the non-life insurance market in Vietnam. PTI is currently the number two market for motor vehicle insurance and the leader in online insurance. At the event, PTI was awarded the Labour Medal by the State for their performance and contributions in the insurance finance sector. PTI has 47 member units, more than 100 transaction offices, 400 assessors, payment guarantee on 600 linked garages, 10,800 post offices, and nearly 13,000 distribution agents nationwide. PTI was founded on August 1, 1998, and has three major shareholders, namely South Korea-based Dongbu Insurance Co., Ltd (37.32 per cent), Vietnam Post Corporation (22 per cent), and VNDIRECT Securities Corporation (22 per cent). PTI offers customers a wide range of practical and superior products and services. They provide both individual and institutional customers with over 100 insurance products grouped in four main product categories namely Motor Vehicle Insurance, Personal Insurance, Property & Engineering Insurance, and Marine Insurance million-by-the-end-of-2018 Intellasia 3 August / 46

11 Vietnam feels heat of US-China trade war 03/AUG/2018 INTELLASIA HANOI TIMES Vietnam may find itself in the middle of a trade war between the US and China. Vietnam is feeling the heat of a trade war, as more Chinese products are faking Vietnamese origins in a bid to enjoy preferential rates when exporting to the US, according to Do Thang Hai, vice minister of Industry and Trade. "Under this circumstance, we should look at the worst scenario that may happen to Vietnam," Hai stated at a press meeting following a monthly cabinet gathering on August 1. Hai also pointed to a possibility of American goods, especially beef and other high quality foods, going through a similar way to be exported to China. According to Hai, the government has been aware of the situation and issued Decree No.31 on March, which sets forth origin of exported and imported goods. The decree is applied to traders and other entities relevant to origin of goods. In May, the US slapped steep import duties on steel products from Vietnam that originated in China after finding they evaded US anti-dumping and anti-subsidy orders. Specifically, US customs authorities will collect anti-dumping duties of percent and countervailing duties of percent on imports of cold-rolled steel produced in Vietnam using Chinese-origin substrate, the Commerce Department said in a statement. Corrosion-resistant steel from Vietnam faces anti-dumping duties of percent and anti-subsidy duties of 39.05%, it said. Trade war places Vietnam's economy at risk In a conference in July, economist Pham Chi Lan expressed concern over US-bound product made in China going through Vietnam to evade import tariffs. "Capital inflows to Vietnam in the near future may become unpredictable, as Chinese investors will aim at Vietnam as an indirect route to the US." Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR), said a trade war between the US and China will lead to the Chinese yuan (CNY)'s depreciation and cause a negative impact on Vietnam's economy. A high trade-to-gdp ratio of 190 percent makes the Vietnamese economy more vulnerable to a potential global recession caused by an ongoing trade war between the US and China, Thanh said. Thanh warned Vietnam could face a wave of Chinese goods flooding its domestic market, so plans are needed to prevent negative impacts on domestic enterprises. Taking into account Fed's decision to hike interest rates and Chinese yuan (CNY)'s depreciation, Thanh suggested the Vietnamese central bank devaluate the dong, but at a more moderate pace than the CNY against the USD. As the country mainly imports material inputs from China for processing and export, such devaluation would place Vietnamese importers at an advantage over the Chinese market and exporters. In this scenario, Vietnam can take advantage of both China and the US to improve production and trade balance, he said. Echoing Thanh's view, finance-banking expert Hieu warned CNY's depreciation would cause Vietnam's trade deficit with China to widen, which is already at the highest level among Vietnam's trading partners, second only to South Korea. "If the trade war continues to escalate and China retaliates the US by depreciating the CNY further, Vietnam will be in real trouble," Hieu added. New momentum for economic growth needed: PM 03/AUG/2018 INTELLASIA VNA Prime minister Nguyen Xuan Phuc has tasked the national steering committee on economic restructuring and growth model reform with seeking ways to create new momentum for the national economy. The PM made the request at the first meeting of the committee in Hanoi on August 2 that aims to review the implementation of the government's action programme on re- Intellasia 3 August / 46

12 alising resolutions on growth model reform adopted by the Party Central Committee and the National Assembly over the past one and a half years. PM Phuc, who heads the committee, highlighted the important role played by institutions, policies and laws; the economic sector; international economic integration, especially free trade agreements; and science-technology, particularly the fourth industrial revolution, in economic restructuring. Ministries, agencies and localities should change their viewpoints and actions, thus creating breakthroughs to improve productivity, quality, efficiency and competitiveness, he said, describing this as a decisive factor to make the national economy develop sustainably and avoid lagging behind. The PM also emphasized the need to focus on revamping State management comprehensively and continue efforts in building the government that works effectively. Growth quality has been improved over the past time, with contributions of the total factor productivity (TFP) increasing from 33 percent during to percent in 2016 and percent last year, he said. However, the leader pointed out that shortcomings in mechanisms, policies and laws have hindered the implementation of economic restructuring and growth model reform solutions. Stressing the significant role of the State and market in economic restructuring, PM Phuc said it is necessary to complete the socialist-oriented market economy mechanism. Speaking at the working session, members of the committee suggested facilitating ongoing key projects in order to soon put them into operation, creating impulses for economic growth. Nguyen Dinh Cung, head of the Central Institute for Economic Management, proposed seeking new driving forces right in the domestic economy, explaining that if Hanoi, HCM City and the central city of Da Nang grow 1 percent each, the national economy would expand by 0.5 percent vnp Vietnam jumps 25 levels in WB's logistics performance index 03/AUG/2018 INTELLASIA VNA Vietnam's position in the Logistics Performance Index (LPI) in 2018 rose 25 levels compared to two years ago, jumping to the 39th among 160 surveyed countries, according to the latest report from the World Bank (WB). This is the best result of Vietnam since 2007 when the WB announced the ranking for the first time. Representatives from the Ministry of Transport attributed the result to the improvement of the two indicators of "Logistics Competence" (up 29 levels) and "Tracking and Tracing" (up 41 levels). The report states that among the lower-middle income countries, large economies such as India and Indonesia, as well as emerging economies such as Vietnam and Cote d'ivoire, stand out as top performers by showing a significant jump to a higher rank. The top five logistics performers this year are Germany, Sweden, Belgium, Austria and Japan. Among Vietnam's neighbouring countries, Thailand is still ahead, ranking 32nd. The LPI is the world's logistics performance index released by the WB every two years. It is a unique benchmarking tool, providing the same measure for more than 160 countries. It measures performance on trade logistics within a country based on six indicators, namely the efficiency of customs and border management clearance; the quality of trade and transport-related infrastructure; the ease of arranging international shipments with competitive price; the competence and quality of logistics services; the ability to track and trace consignments; and the frequency with which shipments reach consignees within the scheduled or expected delivery time. The LPI is a crucial part of global efforts to better understand logistics performance in Intellasia 3 August / 46

13 Vietnam inflation forecast to exceed central bank's 4pct target: HSBC the context of increasingly complex supply chains. Thanks to the ranking, enterprises can get insight into logistics systems of each country, thus calculating the efficiency for their investment and business In 2016, Vietnam ranked 64th out of the 160 countries in the World Bank's Logistics Performance Index and fourth in Asean after Singapore, Thailand and Malaysia. Vietnamese firms mainly provide domestic logistics services such as transport service, airport, seaport and warehouse services and cargo handlng services. Few firms provide international logistics services through acting as agents for foreign enterprises. 03/AUG/2018 INTELLASIA HANOI TIMES HSBC expected the SBV to react proactively, hiking its policy rate moderately by 25 basic points in the third quarter this year to curb inflationary pressures and inflation expectations. Vietnam's headline inflation rose 4.5 percent year-on-year in July, remaining wellabove the State Bank of Vietnam (SBV)'s 4 percent target, which is expected to remain above the target for the remainder of the year and well into next year, stated HSBC. This is unless the government imposes additional measures to curb prices that may, eventually, hurt its budget, said HSBC in its latest research sent to Hanoitimes. The downside risks to inflation in Vietnam are if the government continues to roll back its reforms to liberalise healthcare costs and/or imposes additional subsidies to certain goods and services, both of which may lead to a wider government budget deficit and, ultimately, higher public debt. However, HSBC believed this would be counter-productive, given recent positive developments on the fiscal front and potentially bad repercussions if the government were to breach its public debt- to-gdp limit of 65%. HSBC expected the SBV to react proactively, hiking its policy rate moderately by 25 basic points sometime in the third quarter to curb inflationary pressures and inflation expectations. The research pointed to just one hike is an acknowledgement that the government is concurrently implementing administrative controls to curb inflation, while the SBV also wants to ensure that credit growth does not fall significantly below its current 17 percent year-on-year growth target. HSBC believed these factors will ultimately prevent the need for the SBV to tighten monetary policy aggressively. Nevertheless, administrative measures alone are enough to curb inflation and inflation expectations in the near term. For one, upside risks to inflation persist, given the rapid VND depreciation in recent weeks, which the research expected to translate to higher domestic prices. In fact, it is estimated that Vietnam's foreign exchange (FX) passthrough is the highest in Asean, with 100bp of currency depreciation associated with approximately a 0.25 percentage points increase in Vietnam's headline consumer price index (CPI). This is due to the fact that Vietnam is one of the most trade open economies in the region, with imports at around 90 percent of GDP, which is only second to Singapore, where headline import data reflect the country's role as a trans-shipment hub. Recent history also shows that periods of rapid VND depreciation have been associated with high domestic inflation, which may result in higher inflation expectations. This is a situation that the country must aim to avoid, according to HSBC, given multiple bouts of 'runaway' inflation in its recent history. A policy rate hike from the SBV, therefore, would not only be a necessary supplement to administrative measures but also help anchor inflation expectations in the near to medium term. Intellasia 3 August / 46