Massive Vietnamese Capital Flows to Laos

In 2012, a number of Vietnamese banks have sought to expand their market shares in Laos on many aspects, like providing banking products and lending to enterprises.

Vietnamese firms have to compete fiercely with Chinese and Thai rivals in the neighbouring country.

 

Following its commercial presence in Frankfurt (Germany), many people think that Vietnam Bank for Industry and Trade (Vietinbank) will come to the United States and Europe where financial markets are very busy and overseas remittances into Vietnam are relatively big.

 

But, after the Lunar New Year (Tet), which fell on early February, VietinBank chose Laos for open its second international branch at No. 29, KhounBoulom - Vatchan, Chanthabouly district, Vientiane.

 

The opening ceremony held on February 9, 2012 caught the attention of the public and attention of Party and State leaders of Vietnam and Laos.

 

Explaining why Vietinbank chose Laos as its next international destination, Mr Pham Huy Hung, Vietinbank President, said: “Laos is part of the Vietinbank’s market development strategy development strategy targeting countries and territories that have economic, trade and investment links with Vietnam.”

 

This is a wholly Vietinbank-invested branch, Hung said. It provides basic operations like money transfer, forex service, account service, deposit, lending, commercial funding, and card service. It will serve as a bridge for Vietnamese companies to do business in Laos.

 

At the inauguration ceremony, Vietinbank also signed deals with seven Vietnamese businesses. They are Vietnam National Coal, Mineral Industries Holding Corporation Limited (Vinacomin), Song Da Holdings, Star Telecom Joint Venture Company, Tien Phong - SMP Plastic Joint Stock Company, PV Oil, and Don-Chan Palace Hotel.

On February 10, 2012, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) handed 400 21-inch flat TVs to people in four provinces of Sanavan, Sekong, Attapu and Champasak through the Vietnam Heart Fund and the Vietnam Television. The event followed the inauguration ceremony of the first phase of the television tower. The 140-metre facility in Paksong, Champasak province, funded by Vietnam, has a radius of service coverage of 100 km. It will cover the entire lower Laos and central Vietnamese provinces.

 

Mr Nguyen Duc Huong, Vice President of LienVietPostBank, said his bank is conducting a market research in a bid to open more branches in Laos later this year. He added that the Laotian monetary market has rich development potential because this gathers big companies in the world. And, Laos’ investment policies will create breakthroughs in the next five years.

 

According to Mr Tran Bac Ha, President of the Vietnam Bank for Investment and Development (BIDV), a meaningful activity to investment operations of Vietnamese enterprises in Laos was the seminar on investment promotion into central and southern Laos provinces, held by the BIDV and the Association of Vietnamese Investors in Laos (AVIL) on February 10.

 

He added that Laos is the most favoured destination of Vietnamese enterprises. As of December 2011, Vietnam had 209 investment projects with a total registered capital of over US$3.4 billion, ranking second among foreign investors in Laos.

 

Particularly, in 2011, Vietnam licensed 15 projects worth US$485 million in Laos, a rise of 2.5 times from 2010. Particularly, Sekong 3 hydropower plant, invested by Song Da Holdings, cost US$275 million and Nam Cong 2 and 3 power plants, invested by Hoang Anh Gia Lai Group, required US$135 million.

 

Vietnamese investment capital in Laos may reach US$4.5 billion by the end of 2012.

 

BIDV was compared to a pathfinder for Vietnamese financial, banking and insurance companies in Laos. In 1999, it set up Laos Vietnam Bank and Laos - Vietnam Insurance Company (holding the second largest market share in Laos), paving the way for many Vietnamese banks to do business in Laos.

 

Previously, a number of banks have opened branches and expanded commercial presence in Laos, including Sacombank, Vietnam Laos Joint Venture Bank and Military Bank (MB).

 

Ha said, banks, including BIDV, are very important for Vietnamese enterprises to invest in Laos. Banks are financial intermediaries providing investment credit package, payment services, export financing, bancassurance and value-added services. They first serve Vietnamese companies and then the Laos monetary market. Although it is quite underdeveloped now, it is forecast to thrive in the next five years.

 

Besides, according to a report by AVIL, to keep economic growth of at least 8 percent a year from 2011 to 2015, Laos needs at least US$1.6 billion of foreign investment capital a year. At present, it is planning to raise US$2.9 billion of investment capital, of which the government investment accounts for 10 percent, private investment contributes 54 percent, 12 percent comes from banks and 24 percent is foreign finance.

 

With such a huge capital demand, Vietnamese banks will have a lot of opportunities.

 

However, to create the space for Vietnamese banks to operate effectively, according to AVIL, governments, central banks and commercial banks of Vietnam and Laos need to have mechanisms in support of investors.

 

VNE