FINANCE. finance & business news. Reference exchange rate drops 1 VND

finance & business news 5 May 2017............................... 1 Reference exchange rate drops 1 VND 2 Interbank interest rates continue to anchor at high level 2 Moody's affirms ratings of eight Vietnamese banks 2 Over 32tr dong capital expected to be poured into banking sector 3 Banks report high profits in first quarter 4 Shifting nature of bank bad debts 4 Right mix for consumer loans to flourish: experts 6 Central bank reaps dividends of $270mn from three banks 7 M & A of financial companies flourishing 7 Vietnam's life insurance market faces challenges 8 Senior official keen on SMBC support in Eximbank restructuring 11 Asean+3 region, including Vietnam, remains resilient amid global economic volatility: report 12 PM asks for detailed plans to achieve set targets 13 Government to borrow 15.05 billion USD in 2017 14 Decree designed to encourage investment in agriculture 14 Vietnamese businesses managing in their own way 15 FDI firms' losses and the transfer pricing issue 16 IIP rose 5.1pct in last four months 17 Provincial Competitiveness Index - Setting the standard 18 Textile sector growth surges 21 Vietnam's Jan-April rice exports fall to 9-year low - govt 21 Coal export posts surge 22 4M CBU vehicle imports total 35,000 22 Sugar import quota for 2017 to be auctioned 23 Social insurance contribution rate cut for employers 23 Instead of counting on pensions, Vietnamese pour more money into real estate 24 Firms compelled to issue e-invoices from 2018 24 Franchise of Vietnamese brands just in initial stage: insiders 25 Vietnam remains destination for investors 26 Changes needed in energy strategy: expert 26 Phu Quoc on track to be 'smart city' by 2020 27 Kien Giang: WB-funded project helps change old farming practices 28 Ha Nam aims to attract 150 projects in four years 29 New manufacturing orders rise sharply in April 29 Reference exchange rate drops 1 VND Minister eases concern over farm produce consumption 30 Garment-textile businesses seek to penetrate Russia 31 Vietnam fruit exports have to meet high standards in foreign markets 31 Big investors pour money into agriculture, organic food 32 VN shrimp brand: difficult, but not too late 33 Golf returns drive developer interest 34 Vietnam takes heed to Macadamia nut 37 BIZ NEWS............................. 37 Business Briefs May 05, 2017 37 VN Index rises to near 720 points 38 Shares extend gains on growth of bank stocks 39 Sabeco reports 18pct rise in profit 39 Inspections set for massive aluminum stockpile in Vung Tau 40 Criteria for Vietnamese casino gamblers released 41 VN: First silica, nano silica plant gets nod 41 Epson unveils slew of new products for Vietnamese market 42 Ca Mau to build rice trademark 42 Cargill inaugurates 10th aquafeed plant in VN 43 Vietnam refinery allowed to discharge wastewater into sea 43 Vingroup opens hotels, golf course and malls 44 Genco 3 to build $422mn solar plants in Ninh Thuan 44 Presotea seeking local franchisees 45 Starbucks opens first Starbucks Reserve Coffee Bar 46 Phu My Hung introducing second phase of Japanese complex 46 Aeon looks to open 500 grocery stores nationwide 47 Golf could drive Danang tourism beyond fairway 48 Five E-Class cars delivered to InterContinental Saigon Hotel 49 Vietnam Motorcycle Show 2017 opens in HCM City 50 Vietnam among top countries for internationalised domain name distribution 50 Workshop on domestic trade development strategy to 2025 51 Japanese products appeal to Vietnamese people's taste 52 The 'meat fight' among instant noodle manufacturers 52 Breeding cows donated to poor households in delta 53 Enterprises back pig consumption 53 Don't get addicted to latte if you value your dong in Vietnam 54 05/MAY/2017 INTELLASIA VNA The State Bank of Vietnam adjusted the reference VND/USD exchange rate down by 2 VND from the day before to 22,349 VND/USD on May 5. With the current/- 3 percent VND/USD trading band, the ceiling exchange rate is 23,022 VND per USD and the floor rate is 21,683 VND per USD. The opening hour rates at commercial banks' rates saw slight fluctuations. Vietcombank listed the buying rate at 22,700 VND/USD and the selling rate at 22,770 VND/USD, down 10 VND. Techcombank kept its buying rate unchanged at 22.700 VND per USD and cut its selling rate by 5 VND to 22,795 VND per USD Intellasia No. 21, lane 173/63/17, Ngoc Ha Ward, Ba Dinh Dist, Hanoi All Rights Reserved Tel: +844 2213 2244 Fax: +844 3759 2034 Email: Office@intellasia.com Websites: www.intellasia.net www.tritueachau.com

BIDV listed its buying and selling rates at 22,700 VND and 22,770 VND, per USD, down 10 VND. http://en.vietnamplus.vn/reference-exchange-rate-drops-1-vnd/111215.vnp Interbank interest rates continue to anchor at high level 05/MAY/2017 INTELLASIA TRI THUC TRE/SSI In the last week of April, the overnight interest rate on the interbank market fell only seven basis points, to 4.53%/annum while 1-week and 1-month interest rates rose slightly by one point and six points respectively, closing at 4.71%/annum and 4.8%/annum, according to the monetary market report released recently by Saigon Securities Incorporation (SSI). On the Open Market Operation (OMO), the State Bank of Vietnam (SBV) used 14-day term for the first time since the Traditional Lunar New Year to stabilise liquidity. For the whole week, SBV poured 31 trillion dong, including 18 trillion dong of 14-day term and 13 trillion dong of 7-day term. The amount of matured OMO was 38 trillion dong, equal to SBV's net withdrawal of seven trillion dong from the system. The amount of OMO in circulation at the end of April 2017 was 31 trillion dong, 19.4 trillion dong higher than the same period of 2016. Also according to SSI's report, in the week, the State Treasury auctioned 5-year, 7-year, 15-year and 20-year tenor bonds with the total value of 7.7 trillion dong. The 20-year, 30-year terms were still successfully issued with bid winning interest rate to decrease 10 points for 20-year term and five points for 30-year term. It is worth mentioning that the registration rate for these terms has relatively decreased compared to the previous week. For 5-year term, the lowest bid rate increased sharply by 10 points to 5.15%, the highest level since January 18, 2017. The State Treasury must push the bid winning interest rate to 5.22%, seven basis points higher than the lowest bid and 10 points higher than the previous session but only one trillion dong/1.5 trillion dong bonds were issued. The State Treasury often accepts the winning interest rate to be 2-17 basis points higher than the lowest bid. After four months, the State Treasury issued a total of 81.3 trillion dong bonds, completing 44.3 percent of the 2017 plan. More than 50 percent of more-than-seven-year terms were issued, while 5-year term alone has only completed 20.3 percent of the whole year target. Moody's affirms ratings of eight Vietnamese banks 05/MAY/2017 INTELLASIA VIR Moody's Investors Service on May 3 affirmed the long-term and short-term deposit and, where applicable, issuer and senior debt ratings of eight banks in Vietnam (B1 positive), as well as revised the outlooks for the local currency deposit and local and foreign currency issuer ratings of these institutions to positive from stable. The baseline credit assessments (BCAs), adjusted BCAs and counterparty risk assessments assigned to the eight banks are unaffected by today's rating actions. The credit ratings, assessments and outlooks assigned to the other seven Moody's-rated banks in Vietnam are unaffected by the outlook change on the Vietnam sovereign rating. These seven unaffected banks are: (1) HCM City Development JSC Bank (B2 stable), (2) Saigon Hanoi Commercial Joint Stock Bank (B2 stable), (3) Saigon Thuong Tin Commercial Joint-Stock Bank (Sacombank, B3 negative), (4) Tien Phong Commercial Joint Stock Bank (B2 stable), (5) Vietnam Maritime Commercial Joint Stock Bank (B3 positive), (6) Vietnam Prosperity JSC Bank (B3 stable) and (7) Orient Commercial Joint Stock Bank (B2 stable). Today's rating actions on the eight Vietnamese banks are driven by Moody's affirmation on April 28 of Vietnam's B1 sovereign rating, and the change in the country's rating outlook to positive from stable on the same date. Vietnam's sovereign credit strength is a key input in Moody's deposit and issuer ratings for Vietnamese banks, because the country's credit strength affects Moody's assessment of the government's capacity to provide support to the banks in times of stress. Moody's revision of the outlook on Vietnam's B1 sovereign rating to positive from stable signals the government's potentially higher capacity to provide such support to the banks. The positive outlook on the Vietnamese government rating is based on Moody's expec- Intellasia 5 May 2017 2 / 54

tations that strong foreign direct investment inflows, fostered by ongoing economic reform, will continue to diversify the economy and enhance economic performance when compared to rating peers; macroeconomic and external stability will be maintained; and the resulting strong growth and stable macroeconomic environment will help stabilise government debt around current levels. The B2 foreign currency deposit ratings of the eight Vietnamese banks were affirmed with stable outlooks, because these ratings are constrained by the B2 foreign currency deposit ceiling for Vietnam. If the B1 rating on the Vietnamese government is upgraded, Moody's will likely upgrade the long-term ratings of the eight Vietnamese banks stated above, by incorporating additional notches of public support uplift. The long-term ratings of the eight Vietnamese banks could be downgraded if there is a severe deterioration in their credit fundamentals, and Moody's assesses that government support for the banks has weakened. http://www.vir.com.vn/moodys-affirms-ratings-of-eight-vietnamese-banks.html Over 32tr dong capital expected to be poured into banking sector 05/MAY/2017 INTELLASIA TRI THUC TRE The 2017 Annual general Meeting (AGM) season of banks has ended with the exception of Sacombank that will hold the AGM at the end of May due to the inability to finalise personnel following the original plan and PVcomBank that has not had any move. One common point of this year's AGM season is the strong capital raising plan of banks from small to large, from private to public. Our statistics show that the 14 banks including BIDV, Vietcombank, MB, OCB, NCB, VPBank, Techcombank, ACB, SCB, HDBank, LienVietPostBank, SHB, VIB and Nam A Bank plan to increase chartered capital by total of more than 32 trillion dong. Of which, Techcombank and VPBank are the most ambitious as both want to increase capital by about five trillion dong, followed by the two state-owned commercial banks i.e. BIDV and Vietcombank with the capital increase target of 4.445 trillion dong and 3.598 trillion dong respectively. ACB, MB also plan to increase capital by one trillion dong this year. SCB wants to increase its capital by more than 1.7 trillion dong to scale it up to 16 trillion dong. HD- Bank also plans to increase capital by 567 billion dong while VIB was approved by shareholders to increase capital by more than 2.5 trillion dong. In the small bank group, NCB plans to raise another three trillion dong charter capital, to six trillion dong. Nam A Bank wishes to increase its capital by nearly two trillion dong to five trillion dong and OCB wants to have an additional of one trillion dong in its chartered capital. All banks have clear reasons for the capital increase. They are to supplement their financial capacity to build offices, expand branches and invest in information technology system, etc. and especially to ensure the Capital Adequacy Ratio (CAR) following Basel II standard. The source of money that banks look to increase capital is through the share issuance to make dividend payment, separate issuance or sale of shares to strategic partners at home and abroad. If the above mentioned capital increase plan of banks was successful, the banking picture at the end of 2017 will have important changes in the ranking of banks in Vietnam. Vietinbank had no plans on capital in this year and if it cannot merge PGBank, the No.1 position will fall in the hands of Vietcombank with more than 39 trillion dong. In the private joint stock group, Sacombank has not left open any possibility but on the books, the No.1 position of this bank with more than 18.850 trillion dong cannot be surpassed though other joint stock banks increase capital. The farther future is uncertain when MB will have 18.155 trillion dong capital at the end of the year. SCB with the plan to increase capital to 16 trillion dong is expected to continue holding the third position. As Eximbank, SHB and ACB have rather modest capital increase plan while VPBank and Techcombank plan to inject as much as five trillion dong, they are going to occupy Intellasia 5 May 2017 3 / 54

Banks report high profits in first quarter the positions of top five banks having the largest chartered capital in the private banking group along with Sacombank, MB and SCB. In the group of small banks, the booming of NamA Bank and OCB, if successful, will also drive them out of the "tiny" group to the same group having more than five trillion dong charter capital. However, all the above mentioned figures are just expectations and no one knows for sure what will happen. In the previous years, many banks used to make "splendid" capital increase plan but finally failed. Therefore, whether the banking picture can change or not still has to wait for eight more months. 05/MAY/2017 INTELLASIA VNS Many commercial banks posted positive business performances in the first quarter of the year, earning high profits. Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) recorded post-tax profit of more than VND2.2 trillion (US$97 million), up 20.1 per cent against the same period last year. The figure made the bank top the list in terms of profits in the first quarter. Vietnam Bank for Industry and Trade (Vietinbank) made pre-tax profit of VND2.54 trillion ($111.9 million), up 5.8 per cent year-on-year, and post-tax profit of VND2.04 trillion ($89.7 million). This is the strongest growth the bank has recorded since 2011, according to Vietinbank's chair of the management board Nguyen Van Thang. Bank for Investment and Development of Vietnam (BIDV) earned nearly VND2.3 trillion ($100.1 million) and VND1.85 trillion ($81.3 million) in pre and post-tax profits, respectively, up over 9 per cent year-on-year. Similarly, Vietnam Technological and Commercial Joint Stock Bank's (Techcombank) total pre- and post-tax profits were VND1.32 trillion ($58.2 million), double the figure of the same period last year, and VND1.06 trillion ($46.6 million), respectively. Meanwhile, Military Bank (MB) recorded a year-on-year increase of 22 per cent to VND1.06 trillion ($46.4 million) in pre-tax profit, or 25 per cent of the yearly plan. The bank hopes to post over VND4.5 trillion ($199.4 million) in pre-tax profit this year. Also during the reviewed period, Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) showed impressive performance with pre and post-profits hitting VND309 billion ($13.6 million), and VND210 ($9.24 million), up 50 per cent and 30 per cent, respectively. Export-Import Bank (Eximbank) recorded a five-time increase to VND170 billion ($7.48 million) in pre-tax profit and VND136 billion ($5.98 million) in post-tax profit. According to the Department of Statistics and Forecasting under the State Bank of Vietnam, the banking system's average growth is expected to rise by 13.4 per cent, higher than the percentage in 2016. http://bizhub.vn/banking/banks-report-high-profits-in-first-quarter_285910.html Shifting nature of bank bad debts 05/MAY/2017 INTELLASIA VN ECONOMIC TIMES Figures from ten Vietnamese banks reveal the cumulative bad debt ratio has increased from 1.87 per cent at the end of 2016 to 1.9 per cent as at March 31. Total bad debts increased 6 per cent to VND50.7 trillion ($2.23 billion), mainly in the form of Group 1, standard debt, which was up 13 per cent during the first quarter to VND15.75 trillion ($692.7 million), and Group 2, debt needing special attention, which was up 18 per cent to VND7.94 trillion ($349.2 million). Notably, Group 5 debt, potentially irrecoverable debt, fell 0.1 per cent during the period but still represents the majority of the total, standing at VND27 trillion ($1.2 billion) as at March 31. Four out of six banks saw a lower bad debt ratio at the end of the first quarter: Sacombank, Vietnam International Bank (VIB), Vietcombank, and Kienlongbank. Sacombank's 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 of the ten banks. Its total bad debts reached a record high of VND10.1 trillion ($444.2 million) as at the Intellasia 5 May 2017 4 / 54

end of the first quarter. This excludes the VND37.76 trillion ($1.66 billion) in debts sold to the Vietnam Asset Management Company (VAMC), Vietnam's debt bank. Together, the amount of bad debts at Sacombank reached as much as VND47.84 trillion ($2.1 billion). On the positive side, the bank's potentially irrecoverable debts were down 7 per cent during the first quarter, standing at VND6.6 trillion ($290.3 million) as at March 31. Eximbank, meanwhile, saw its bad debt ratio approach the 3 per cent threshold during the quarter, totalling VND2.59 trillion ($114 million) as at the end of March. Potentially irrecoverable debts amounted to VND1.26 trillion ($55.4 million), up 11 per cent. BIDV, the leading bank in terms of total assets, followed, with bad debts surging from 1.99 per cent as at the end of 2016 to 2.14 per cent as at March 31. Its total bad debts during the first quarter rose 13 per cent to VND16.25 trillion ($714.7 million). Fourth on the list was VIB, with a bad debt ratio of 1.96 per cent as at March 31, significantly down from the 2.58 per cent on December 31. Its total bad debts have fallen by the largest amount within the ten banks, standing at VND1.25 trillion ($55 million) as at the end of the first quarter. Potentially irrecoverable debt fell 13 per cent to VND1.17 trillion ($51.5 million). Techcombank's bad debt ratio rose from 1.58 per cent to 1.89 per cent during the first quarter, reaching VND2.6 trillion ($114.35 million) as at March 31, up 16 per cent quarter-on-quarter. Its potentially irrecoverable debt amounted to VND1.5 trillion ($66 million), up 10 per cent compared to the end of 2016. Military Bank (MBB) recorded a bad debt ratio as at the end of the first quarter of 1.35 per cent, with potentially irrecoverable debt rising nearly 40 per cent during the period to VND854 billion ($37.6 million), while debt needing special attention rose by 50 per cent to VND730 billion ($32.1 million) as standard debt fell by half, to VND435 billion ($19.1 million) as at March 31. Vietinbank, the leading bank in terms of stockholder equity, saw its bad debt ratio rise by 17 per cent to VND7.92 trillion ($348.3 million) as at March 31. This was mainly due to an increase in standard debt of 70 per cent to VND3.6 trillion ($158.3 million). Potentially irrecoverable debt, meanwhile, fell 9 per cent during the period to VND3.5 trillion ($154 million). Its first quarter consolidated financial statement did not reveal how much bad debt has been parked at VAMC, but the bank, however, has a plan to buy back its debt from the debt bank this year. As at the end of March, Vietinbank's bad debt had surged from 1.02 per cent as at December 31 to 1.13 per cent. At Vietcombank, its bad debt ratio as at the end of the first quarter was lower than at BIDV and Vietinbank, at 1.48 per cent against 1.51 per cent as at December 31. Total bad debts stood at VND7.4 trillion ($325.4 million), up 6 per cent quarter-onquarter, in which irrecoverable debt was up 3 per cent to VND4.4 trillion ($193.5 million) and debt needing special attention had increased 40 per cent to VND1.9 trillion ($83.5 million). Kienlongbank and Bac A Bank are the two banks that kept their bad debt ratios below 1 per cent, standing at 0.96 per cent and 0.82 per cent, respectively, as at March 31. http://english.vietnamnet.vn/fms/business/177736/shifting-nature-of-bank-baddebts.html Right mix for consumer loans to flourish: experts 05/MAY/2017 INTELLASIA VNS Consumer lending has the potential for explosive growth in Vietnam, but this can only happen with significant improvements in consumer satisfaction with credit institutions and loan conditions, experts say. They say that tapping this growth potential will boost national spending and economic growth. Intellasia 5 May 2017 5 / 54

"Within the decade, market demand for unsecured loans has grown to adapt to the current financial scene in Vietnam, with an increasing amount of retail lenders and personal borrowers," Hoang Van Hai, director of the School of Business Administration (SBA), Vietnam National University of Economics and Business, said at a conference last week. He said the growth can be attributed to favourable legal and socio-economic conditions that have fostered changes in income and spending habits. At present, consumer loans in Vietnam range in value from VND1 million to VND60 million ($44.6 to $2680). The application process and repayment schedule are fairly simple, and the rate of interest is reasonable at between1.49 per cent to 1.6 per cent per month, with the occasional zero per cent for smaller loans. In 2016, consumer credit was mostly used for purchasing household goods and travel expenses, with a focus on mobile devices, vehicles and personal computers under $2000. Sometimes, depending on the borrower's credit history, capital is given directly (instead of paying purchase invoices). Vietnamese consumers are reaching a spending over earnings ratio of 67 per cent, and this is set to rise further as the economy picks up. Hai said that Vietnam will soon reach a purchasing market worth about $15 billion per year, with 30 million people in the 20 to 59 age bracket. This means more and more people in the middle income group are demanding capital to fund their immediate spending, without the hassle going through bank loans for smaller purchases. Underdeveloped sector However, the central bank sees current retail lending as underdeveloped, given the modest number of credit institutions giving out consumer loans as also the overall demand for such loans. The central bank estimates that consumer loans account for just five to ten per cent of total lending in the country, as opposed to the average 40 to 50 per cent in developed nations. Can Van Luc, a senior advisor to the Chair of the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), said at an online conference in March that Vietnamese credit institutions granting consumer loans have a mere $1.78 billion in capital, about 0.7 per cent of the credit sector's total. This is due to the fact that these institutions are not allowed to take deposits like commercial banks, having to rely instead on bonds. The lack of capital, coupled with the reluctance among a majority of consumers to borrow, has lead to interest rates higher than the commercial banks' average of 0.9 to 1.2 per cent per month, said Luc. However, consumer lending carries rich potential, especially among the population segment that does not qualify for bank loans. This segment can access this capital instead of being beholden to black market loans controlled by loan sharks. While the central bank is positive about growth in this credit segment, there are still regulatory issues that need to be resolved. In 2016, the SBV and the Ministry of Industry and Trade, received a large number of complaints from borrowers. The Vietnam Competition Authority (VCA) released a report last year in which they detailed several major problems faced by consumers buying common household and electronic items. A chief complaint from borrowers was that cumulative calculation of interest rates made the loan repayment untenable in just three to six months. They also said that the credit institutions did not show "decent conduct" while trying to recover loans. The VCA advised consumers to have a clear understanding of the loan contracts before signing and reevaluate their own disposable income before taking out a loan, no matter how small. Meanwhile, the SBV has simplified procedures and increased transparency for consumer loans through Circulars 39 and 43 issued in 2016 and 2017 respectively. Intellasia 5 May 2017 6 / 54

Central bank reaps dividends of $270mn from three banks At present, the SBV considers a loan to be a consumer loan if it is made in Vietnamese Dong, the borrower is an individual, not an institution, the purpose of the loan is to meet personal spending needs, and the total amount borrowed does not exceed VND100 million ($4468). http://bizhub.vn/news/right-mix-for-consumer-loans-to-flourish-experts_285891.html 05/MAY/2017 INTELLASIA VN ECONOMIC TIMES The State Bank of Vietnam (SBV) has received significant dividend payments for 2016 from BIDV, Vietcombank, and VietinBank, totalling VND6.17 trillion ($271.375 million). The SBV is the dominant shareholder in the three banks and also Agribank, and as such is responsible for their operations. With solid credit growth last year, the three banks provided large dividends to the State coffers. Vietcombank recorded profit growth of 25 per cent and VietinBank 17 per cent. BIDV's profit, meanwhile, fell more than 2.5 per cent. Agribank is yet to release its financial statement for 2016. The three banks held their annual general meetings at the end of April, where dividend plans were approved. Under the direction of the Ministry of Finance, the three banks will pay a cash dividend of 7 or 8 per cent. With a shareholding of 95.28 per cent in BIDV, the bank provided the SBV with the highest dividend, of VND2.28 trillion ($100.228 million), despite its dividend being 7 per cent and it recording falling profits last year. Vietcombank followed, with a dividend of 8 per cent totalling VND2.219 trillion ($97.596 million). VietinBank's dividend rate was 7 per cent, with the SBV to receive some VND1.680 trillion ($73.889 million). The VND6.179 trillion ($271.764 million) the SBV will receive is down by VND324 billion (14.249 million), or 5 per cent, compared to the dividend payment for 2015. BIDV's falling profits is the main reason for the decline, and its dividend also fell from 8.5 per cent to 7 per cent. Its merger with the Mekong Delta Housing Development Bank (MHB) and its ongoing restructuring greatly affected its performance last year. The State is planning to divest from businesses and credit institutions. It is expected to cut its stake in BIDV from 95.28 per cent to 65 per cent and to equitise and reduce its ownership in Agribank by 65 per cent during 2016-2020. These banks are free to seek and select strategic partners, especially foreign partners. http://english.vietnamnet.vn/fms/business/177738/central-bank-reaps-dividends-of-- 270mn-from-three-banks.html M & A of financial companies flourishing 05/MAY/2017 INTELLASIA DTCK Consumer loan, which is considered as a fertile land, is continuing to attract many banks to explore, through the establishment or acquisition of finance companies. The Orient Joint Stock Commercial Bank (OCB) said this year, the bank plans to set up a new finance company. This company will operate as a wholly owned subsidiary with the initial charter capital of 500 billion dong (equal to the legal capital of a finance company), conduct consumer credit operations, finance lease and factoring. In case not, OCB will seek an M&A opportunity with a finance company with the target of owning at least 70 percent of this company's chartered capital. That is also one of the reasons for OCB to raise its chartered capital to five trillion dong this year. Currently, OCB is gradually stepping up retail operations. ACB also said it is promoting the acquisition or establishment of a finance company, transforming the operation model of ACB Leasing Company into a consumer finance company. At the end of 2016, there was a rumour that ACB "eyed" PTFinance Co. Ltd ACB's 2016 management report said the bank's management board had a meeting about the plan to acquire this finance company on August 4, 2016. PTFinance is one of Vietnam's first finance companies which was established in October 1998. The company's charter capital was 500 billion dong, fully owned by Vietnam Post and Telecommunication Group (VNPT). Intellasia 5 May 2017 7 / 54

In several recent years, M&A deals between banks and finance companies have continuously been carried out. Most recently, SHB completed the M&A with Vinaconex- Viettel (VFF) after two years pursuing this deal. After being approved by the State Bank to merge VVF into SHB, the bank announced to establish SHB Consumer Finance Company with the charter capital of one trillion dong. At the same time, SHB disclosed the cooperation with some foreign partners in the near future including the capital contribution. With the development potential of the consumer finance market, the race to acquire finance companies of banks seems to have not stopped. Apart from HDBank, VPBank and Techcombank such banks as SHB, MaritimeBank have completed their plans to acquire finance companies. Earlier, many other banks made acquisitions of finance companies and their business performance increased significantly afterwards. With the acquisition of finance companies, banks may participate in unsecured lending. Despite high risks, the return is much higher than normal lending. Vietnam consumer finance market has experienced strong growth in three recent years, especially when there is the participation of consumer finance companies and commercial banks' acquisition of finance companies which have gradually stepped up individual capital for consumer loans, home repair, and land and home purchase. The booming of this kind of credit in the near future is very huge with three main factors showing the market potential including: first, Vietnam ranks 14th among the world's most populous countries with the population scale of about 90 million people; the proportion of young population is rather high so the population entering the working age increases very fast each year; Vietnam is a developing country with a dynamic economy and the people's income grows every year, which is reflected in the world's fastest growing GDP. Consumer lending still has much room to develop because currently, it only accounts for about 6.5 percent of the total outstanding loan of the economy (compared to about 15-25 percent in other countries). The development of consumer finance segment has contributed significant revenue and profits to commercial banks. VPBank's 2016 business results show that, FE Credit Finance Company made a great contribution to this bank's consolidated profit at nearly two trillion dong. Or HD Saigon contributed about 300 billion dong to HDBank's total consolidated profit in 2016. The attractiveness of consumer finance market is drawing foreign investors. Japan investors acquired 49 percent stake of HD Saigon. Meanwhile, VPBank's FE Credit is in negotiating with foreign partner to sell 49 percent stake of finance company directly under this company. Vietnam's life insurance market faces challenges 05/MAY/2017 INTELLASIA VN ECONOMIC TIMES Twenty-four-year-old Trinh Van Anh, the manager of an international school in Hanoi, does not have a life insurance policy and hasn't thought about getting one, even though her monthly salary of $1,000 is higher than most of her peers. "No one recommends I take out a policy," she said. "No one knows what life insurance covers, what it gives the policyholder, or what the benefits are." Like Anh, many other Vietnamese people remain confused about what life insurance can actually bring. Even though premiums in Vietnam are on track for yet another record year, the gains are coming from a very low base and foreign insurers have yet to truly crack the market despite dominating. It should take only a few more years, though, for them to make more substantial headway. Foreign insurers' playground 2016 continued to see robust growth in Vietnam's insurance market, with the life insurance segment reaching a ten-year high. Insurance premiums totalled around VND86.6 trillion ($3.8 billion), representing an Intellasia 5 May 2017 8 / 54

increase of 22.74 per cent against 2015. Total revenue in life insurance was over VND49.2 trillion ($2.2 billion), an increase of 30.5 per cent, while revenue in non-life insurance was VND36.4 trillion ($1.6 billion), up nearly 12.5 per cent, according to data from the Insurance Supervisory Authority (ISA) under the Ministry of Finance (MoF). Eighteen life insurers are competing fiercely in the market. Eight of the 18 increased their charter capital in 2016 to improve financial capacity during expansion and business development. Manulife Vietnam, for example, raised its charter capital to VND1.82 trillion ($80 million), while Chubb Life Vietnam increased its by VND150 billion ($6.5 million) to more than VND1.55 trillion ($69.5 million). According to an assessment from Vietnam Report, among the five largest life insurers, which hold 86 per cent of the market share, are four foreign companies and only one domestic company, Bao Viet Life, which has a foreign strategic shareholder, Sumitomo Life from Japan. Prudential Vietnam leads the life insurance market with a share of 29.9 per cent, followed by Bao Viet Life with 25.7 per cent, Manulife 12.1 per cent, AIA Vietnam 9.2 per cent, Dai-ichi Vietnam 9.1 per cent, Chubb Life Vietnam 4.4 per cent, and PVI Sun Life 2.3 per cent. The remainder share 7 per cent. The five largest life insurers are believed to have posted premium revenue of VND5.8 trillion ($254.7 million) in the opening two months of this year, an increase of 30 per cent year-on-year and accounting for 80 per cent of all revenue, according to the ISA. Due to market regulations, it is impossible to compete in Vietnam's life insurance market solely by premiums. All products are subject to close scrutiny from the MoF before being launched and premium levels are set. There is no way to cut premiums to attract buyers, and players must instead compete in service quality or the provision of value-added packages. All life insurers have headquarters in Hanoi in the north and HCM City in the south, with most also having branches and representative offices in major cities and provinces. Dai-ichi has 53 branches and representative offices, Manulife Vietnam 22, Prudential Vietnam 21, and AIA 14. Bao Viet Life remains the only player to cover all 63 cities and provinces in the country. Most companies over the last ten to 15 years started with agencies and this represents about 90 to 95 per cent of the industry in Vietnam today, with ISA's figures showing there are currently some 1,000 representative offices and general insurance agencies of life insurers nationwide. Besides traditional sales methods, life insurers have also started partnering with commercial banks to increase sales and promote products. The sluggishness in the bancassurance market in Vietnam over the last few years can be attributed to a lack of service and low awareness among customers about the benefits of bancassurance products, with it only contributing 2 per cent to total turnover. Still, analysts believe that the channel holds great potential, with some 35 commercial banks and financial institutions now cooperating with insurers. Impediments remain "The penetration rate of life insurance, usually measured as the number of individuals who actually own life insurance, is still low in Vietnam relative to other Southeast Asian countries," Steve Clark, Country Head of Prudential Vietnam, told VET. Average insurance premiums stand at only $30 in Vietnam, much lower than the global average of $595 and $74 in Southeast Asia. Only 7 per cent of Vietnam's 90+ million people have life insurance and the sector contributes a modest 2 per cent to GDP, compared with more than 2.6 per cent in Indonesia and 11-14 per cent in South Korea and Singapore. The obstacles are many. According to Phung Quoc Khanh, director of the ISA, aware- Intellasia 5 May 2017 9 / 54

ness among Vietnamese people about life insurance may have increased but most still don't think it's worth it. Almost all Vietnamese people are wary or believe it unnecessary to buy insurance because they don't have a thorough understanding of its importance. Life insurance products usually involve a long contract term, so many customers are concerned about their ongoing financial capacity. At the same time, doubts about foreign life insurers' commitment to permanent operations in Vietnam add to the low penetration rate. Many potential Vietnamese consumers still see insurance as an investment rather than a device to share financial losses caused by poor fortune. They prefer bank savings or investing in gold or real estate, where they earn a higher rate of return, than buying insurance. The low penetration rate also comes from the fact that life insurers have only focused their operations in big cities while overlooking the 70 per cent of the population that still live in rural areas. They are also still separating themselves from the general activities of the sector, missing out on promotional opportunities and not playing a role in trying to increase awareness. "Life insurers have only focused on building their brand and image and not on activities to promote basic insurance knowledge," Khanh said. While life insurers focus on implementing their own strategies to gain more market share and sign up more customers, their ambitious plans may fail due to problems relating to human resources. The rising number of insurance companies in recent years along with a lack of quality insurance training has created a serious shortage of skilled human resources for the sector. This has led to unfair competition in attracting experienced employees and insurance agents, one insider said. While acknowledging the increasing number of life insurance products, Khanh believes that these are mainly for high-income earners. Lower premiums to mid and low-income earners are yet to be introduced, even though they are the majority of the population and are vulnerable to financial incidents. Potential enormous The penetration rate may well change soon, however. An emerging middle class with more money to spend and a desire to spend that money to improve their lifestyles are driving a lot of activity in Vietnam. The young middle class and rising wages all round are creating demand for consumer products, credit, and investment. Soon enough, they will turn to life insurance products, with health now being one of the leading concerns among Vietnamese people, according to a February report released by global market researchers Nielsen. According to the ISA, life insurers have mainly focused on three of the seven life insurance products in Vietnam: term life insurance, endowment insurance, and universal life insurance. This again presents opportunities for others in unit linked and pension insurance products, which can meet the differing requirements of customers. With Vietnam's stock market now being increasingly stable, the possibility exists for the creation of hybrid products, using an asset-based approach to funding long-term care. With Vietnam now participating in a host of free trade agreements (FTAs) and bilateral agreements, demand for life insurance is set to be boosted by the growing number of expats in the country. The arrival of foreign firms seeking to take advantage of preferential policies is also expected to boost demand for goods and services related to property, social security, and health coverage, among others, generating knock-on opportunities for insurers. Intellasia 5 May 2017 10 / 54

A strengthened economy and new innovations from continued FDI should also impact positively on household confidence and future demand for insurance products, according to Phung Dac Loc, former Secretary general of Vietnam Insurance Association (AVI). In a move to facilitate the growth of the insurance sector in general and life insurance in particular, Decree No.73 came into force on July 1, 2016, prescribing new regulations on the licensing, organisation, and operations of financial institutions, with specific regulations on investment portfolios and ratio and reserves. This requires that life insurers consider investment strategies to ensure customer benefits together with risk management and liquidation, which hint at greater competitiveness. Key regional players already eye Vietnam as a potential avenue for growth. The Hong Kong-based FWD Group, for example, which has operations in Macau, Thailand, Indonesia and the Philippines, broke into Vietnam in November last year. South Korea's Samsung has also expressed an interest in expanding its footprint in the life segment. Last September, general director of Samsung Vietnam Han Myoung Sup told the Ministry of Information and Communications that two local units, Samsung Life Insurance and Samsung Fire and Marine Insurance, were currently exploring investment plans. Wilfred Blackburn, CEO of Prudential Vietnam, believes that Vietnam's life insurance market is far from saturated. In fact, he believes there is still time for new companies to enter the country. "The life insurance market wants new players that are able to grow and bring a fresh approach to the industry," he said. "This also requires that current players be more dynamic and innovative to expand the scope of the market." http://english.vietnamnet.vn/fms/business/177658/vietnam-s-life-insurance-marketfaces-challenges.html Senior official keen on SMBC support in Eximbank restructuring 05/MAY/2017 INTELLASIA VN ECONOMIC TIMES Deputy PM Vuong Dinh Hue hopes Sumitomo Mitsui Banking Corporation will play a major role in bank's restructuring and possibly infrastructure investments in the country. Deputy prime minister Vuong Dinh Hue has expressed a hope that Japanese lender the Sumitomo Mitsui Banking Corporation (SMBC) will participate in Eximbank's restructuring process and the equitisation and restructuring of State-owned enterprises. During a May 3 meeting with Ryuji Nishisaki, SMBC's Head of Emerging Markets Business Division, the deputy PM urged the Japanese lender to help with the restructuring and development of Eximbank in the future. Nishisaki said that SMBC, which currently holds 15 per cent of Eximbank, pays great attention to the restructuring process of Vietnam's credit institutions and will focus on the restructuring of the HCM City-headquartered bank. He also expressed his appreciation of government efforts in developing a derivatives market and using the bond market as an effective capital mobilisation channel, which helps to diversify the economy. SMBC stands ready to bring its subsidiaries in the securities field to Vietnam's derivatives market, he added. Deputy PM Hue also suggested that SMBC participate in the development of infrastructure in Vietnam. From now to 2020, Vietnam is seeking capital to build the 700- km North-South Expressway, which is expected to cost more than $10 billion. SMBC and other foreign and domestic investors could invest in the project via a public-private partnership (PPP), the deputy PM believes. For his part, Nishisaki hopes to expand SBMC's operations in Vietnam by helping small and medium-sized enterprises develop and to also participate in infrastructure development in the country. SMBC now provides financial support for Vietnamese and Japanese enterprises. At Eximbank's annual general meeting on April 20, SMBC nominated Yutaka Mori- Intellasia 5 May 2017 11 / 54

waki, who became deputy CEO of Eximbank last October, as its board member for the 2015-2020 term. On April 21, the move secured approval from the State Bank of Vietnam. At a press conference held ahead of the AGM, Moriwaki touched on unresolved issues faced by the bank, such as the absence of a sound business strategy and the low staff morale caused by frequent leadership changes. He and deputy CEO Nguyen Quoc Huong are in charge of the "New Eximbank" plan, which is believed to bring significant changes to its business operations. Moriwaki said that Eximbank will focus on its core operations, such as lending to exporters, importers, retailers, and automobile buyers, and is confident that SMBC can help it connect with Japanese businesses in Vietnam and provide financial support and trade finance. Eximbank's profit has been sliding since 2012. In 2011, after-tax profit was about VND3 trillion ($132 million) then plunged to VND2 trillion ($88 million) in 2012 and a mere VND308 billion ($13.5 million) last year. http://vneconomictimes.com/article/vietnam-today/senior-official-keen-on-smbc-support-in-eximbank-restructuring Asean+3 region, including Vietnam, remains resilient amid global economic volatility: report 05/MAY/2017 INTELLASIA TUOITRE NEWS The Asean+3 region is expected to post moderate economic growth in 2017, with Vietnam among the regional economies able to remain resilient despite persistent volatility in global financial markets, a report shows. The Asean+3 cooperation comprises the ten members of the Association of Southeast Asian Nations Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam plus China (including Hong Kong), Japan, and South Korea. The Asean +3 Macroeconomic Research Office (AMRO) on Thursday released its inaugural Asean+3 Regional Economic Outlook (AREO) 2017, an annual report on regional surveillance that assesses the macroeconomic outlook and financial stability in the region. The report, the first of its kind to be released by AMRO, provides policymakers, the private sector and the broader public with in-depth analysis of regional developments and trends that can inform their decision-making, according to AMRO director Junhong Chang. The report asserts that the Asean+3 region is expected to grow at 5.2 percent in 2017 with inflation under control, despite the global uncertainty. It also says growth of the two largest economies in the region, China and Japan, remains stable and robust, expected to anchor the continuing growth in the region. "It is encouraging to see the Asean+3 region has been resilient going into 2017," says Dr Hoe Ee Khor, AMRO chief economist. "Under the current global environment, the region should prioritise financial stability while supporting growth with an appropriate policy mix, including targeted macroprudential policy measures and sustained structural reform." Outlook for Vietnam According to the report, Vietnam, along with other regional emerging markets including South Korea and Malaysia, Indonesia, the Philippines, Singapore, and Thailand, known as the Asean-5, will "remain resilient even as volatility in global financial markets persists." In the meantime, such developing Asean economies as Cambodia, Laos and Myanmar will continue to grow and reap benefits from regional integration. Vietnam's economy expanded at 6.2 percent in 2016, compared to 6.7 percent in 2015, as agricultural production was adversely affected by a prolonged drought and increased saltwater intrusion, and mining and quarrying output contracted, according to the report. Even though Vietnam's GDP expansion slowed down to 5.1 percent in the first quarter of 2017, AMRO projects full-year growth to pick up slightly to around 6.4 percent, as Intellasia 5 May 2017 12 / 54

agricultural production recovers and mining and quarrying output normalises alongside sustained development in manufacturing and services. The report also reviews Vietnam's performances in the fields of monetary, credit growth and foreign exchange. With the State Bank of Vietnam adopting a wider trading band for the dong since August 2015 and a daily fixing since early 2016, the Vietnamese currency has appreciated slightly against the US dollar recently, whereas credit growth picked up to 18.2 percent in the final month of 2016. The report also says Vietnam's budget deficit remains sizeable, and likely stayed above 5 percent of GDP in 2016. "In this regard, it is welcome that a lower fiscal deficit of 3.5 percent of GDP has been set in the [Vietnamese government's] budget plan for this year," the report comments. Meanwhile, Vietnam's public debt is estimated to have increased to 63.7 percent of GDP in 2016, compared with the threshold of 65 percent of GDP. The lawmaking National Assembly has recently approved the five-year fiscal plan and the medium-term public investment proposal for 2016-2020, which the report says is an encouraging signal as those plans "should help strengthen fiscal discipline going forward and reduce the pressure from rising public debt." http://tuoitrenews.vn/business/40825/asean3-region-including-vietnam-remains-resilient-amid-global-economic-volatility-report PM asks for detailed plans to achieve set targets 05/MAY/2017 INTELLASIA VNA Prime minister Nguyen Xuan Phuc has directed that each ministry and locality must devise a detailed plan to fulfill set targets, in which responsibilities of individuals and units must be specified. The PM made the request during the monthly government meeting in Hanoi on May 4 which discussed the socio-economic performance in April and the first four months of this year as well as specific measures to ensure that economic growth targets for the remaining quarters and the whole year are met. The government is resolved to achieve the economic growth of 6.7 percent this year and sees that it is achievable, he said. He hailed the progress in tourism, foreign direct investment attraction, public investment disbursement, manufacturing and exports in April and the past four months. The Ministry of Industry and Trade was asked to review key commodities, especially oil and gas production which should be increased by 1-1.5 million tonnes while coal mining amounts to 2 million tonnes and the manufacturing and processing industry grows at least 13 percent. Sufficient energy supply must be ensured and 12 loss-making projects be dealt with soon. He noted that the ministry needs to closely track hygiene of farm produce and actively partner with the Ministry of Public Security to strictly punish multi-level marketing violations. The leader required the construction sector to develop a healthy real estate market with a focus on accommodation for workers and social housing, and the tourism sector to grow 30 percent from last year and serve 15 million foreigners this year. The PM said the agricultural sector should ensure its growth of over 3 percent and strive to earn at least 33 billion USD from exports this year. Ministries, agencies and localities must accelerate the equitisation of State-owned enterprises, curb the consumption price index below 4 percent, and allocate capital to prioritised fields, including agriculture, small- and medium-sized enterprises, exports, especially disbursing the 100 trillion-vnd package designed for high-tech agricultural firms. Speeding up the economic restructuring in combination with renewing growth model in a practical and effective manner is important to implementing the resolutions set by the National Party Congress and the National Assembly, he said. On social safety and order, he called for attention to dealing with hotspots, especially in the land issue to ensure legitimate interests of the people, and illegal sand exploita- Intellasia 5 May 2017 13 / 54