Financial Services Opportunities

An Expert's View about Taxes and Accounting in Vietnam

Last updated: 28 Feb 2011

In the recent years, Vietnam has been one of the fastest growing economies in the world. The average GDP growth rate of the country in the period 2006 – 2010 was 6.9%. Vietnam’s GDP reached 6.78% in 2010, beating the Government’s target of 6.5%. The country’s growth was highest in ASEAN.

Sector briefing Financial Services Opportunities in Vietnam Why Vietnam? In the recent years, Vietnam has been one of the fastest growing economies in the world. The average GDP growth rate of the country in the period 2006 ? 2010 was 6.9%. Vietnam?s GDP reached 6.78% in 2010, beating the Government?s target of 6.5%. The country?s growth was highest in ASEAN. Vietnamese financial market has rapidly expanded during the past few years and has gained great strategic importance at the global level. With the rapid liberalisation, privatisation and globalisation of the market, Vietnam has become a preferred des tination for an increasing number of international financial investors. The key financial sectors ?banking? and ?insurance? are attracting huge foreign investments as both of ?With the rapid liberalisation, these sectors represent highly untapped privatisation and potential. globalisation of the market, F ind general information on Vietnamese market Vietnam has become a conditions on UKTI?s website. Doing Business preferred destination for an Gu ide in Vietnam gives an overview of Vie increasing number of tnam?s economy, business culture, potential opportun international financial ities and an introduction to other relevant issues. investors? UK Trade & Investment Sector briefing: Financial Services Opportunities in Vietnam Opportunities expansion has been primarily a consequence of growing presence of foreign players, which The UK is the third largest EU investor in intensified the market competition. Vietnam and is the No. 1 foreign investor in the financial services sector. UK business is well Non-Life Insurance represented by leading UK financial services There are currently 27 non-life insurers multinationals such as Prudential, Standard operating in Vietnam, of which 2 state-owned, Chartered and HSBC (HSBC?s USD 350 million 15 joint stock, 3 joint venture and 7 foreign stake in Bao Viet is the UK?s largest single companies. In 2000,the insurance sector was investment in Vietnam). valued USD 177.12 million only. Going forward, it is expected that the market will grow at an Banking average rate of 16.25% and reach USD 2,039 Vietnam?s banking sector presents some of million by the end of 2011. Asia?s biggest opportunities and challenges. Vietnam is largely undeveloped territory for The market continues to grow and open to banking services. Out of a total population of competition from domestic and foreign 89 million, less than 20% of Vietnamese have providers - Vietnam removed restrictions on a bank account, around 17 million ATM cards foreign providers selling insurance to domestic are in use, and only 2% have ever taken out a customers in January 2008. There is evidence bank loan. that large domestic players are losing market share. The country?s banking sector consists of 5 state-owned credit institutions, 38 joint stock Furthermore, a focus by domestic players on commercial banks, 33 foreign banks? branches, traditional products (to tap into the existing 5 foreign banks (100% foreign owned), 5 joint customer base) means there are areas of the venture banks, and several other types of market that remain under-developed, for financial institutions. example, agriculture, business loss and employer liability. The Vietnamese government encourages the participation of foreign and private capital in Life Insurance small and medium sized commercial banks. It Between 2000 and 2007, the life insurance is expected that foreign investors will bring in sector increased from USD 51.12 million to not only capital, but also technical expertise USD 586.24 million, a growth of 35.65% and management know-how. during this period. It is forecasted that the life insurance market in Vietnam would grow at an UK banks can consider the option of equity annual rate of 13.21% between 2007 and investment in the local small and medium size 2011. commercial joint stock banks. This will allow UK industry players to gain access to the 11 life insurers are currently competing in already established network of local branches, Vietnam. Market leader is the UK based their customer base as well as settlement Prudential with 41.3% market share, followed system of local funded banks and thereby by local company Bao Viet with 33.13%. The expanding the market share. other 9 companies are sharing the remaining 27.57% share of market. Most Vietnamese banks now have an online centralised accounting system and other With 60% of the population under age 30, the associated online services. However, Vietnamese people can well afford to buy a full investment in their ICT infrastructure has been range of insurance products and services. The limited to date, focusing on core banking. statistics show that about 7 million people in Should these banks want to offer more Vietnam are insured, which equals to just 7% services, they will need to upgrade and of the population and means a great potential improve their technology. This could be for the industry. another option for UK banks to look at. Funds Management Insurance Foreign fund managers are attracted by At the insurance front, the sector has investment opportunities in Vietnam and life expanded rapidly during the last few years and insurance provides a useful tool for has witnessed increase in the presence of participation. foreign players. The insurance sector UK Trade & Investment Sector briefing: Financial Services Opportunities in Vietnam Similar to the banking and insurance sectors, which can be listed on HNX, to finance special immediate opportunities are available for projects. providers of software, systems and professional development to support domestic Securities Companies (Stock Brokers) fund managers that seek to improve the All Vietnam?s largest local banks and state- sophistication of their services and meet owned insurance companies have established international standards in areas such as wholly owned securities subsidiaries. In corporate governance. addition there has been an explosion in the number of new securities companies (around Stock market 100 currently), partly because of the low The stock market in Vietnam is regulated and capital required for entry. supervised by the State Securities Commission (SSC), which was established in 1997 with its Although investors? confidence has been headquarter in Hanoi and a representative shaken, the government is confident that the office in Ho Chi Minh City. Securities Trading local stock market will not see a crisis for the Centres were opened in Ho Chi Minh City in following reasons: July 2000 and in Hanoi in March 2005. The Ho Chi Minh City Securities Trading Centre became ? Vietnam?s economy, though being a fully-fledged Stock Exchange in August 2007 influenced by many factors, is still on the and Hanoi one in 2009. right track of development; ? Vietnam has learned lessons in dealing with Equity market financial crises. It experienced and Since Ho Chi Minh Stock Exchange Centre, the overcame the Asian financial crisis 10 years country?s first official securities market, opened ago; in July 2009, Vietnam?s stock markets have ? Foreign investors are unlikely to withdraw grown in importance as sources of financing. their capital from the stock market of The country?s two stock exchanges, HOSE in Vietnam unless they lose all confidence. Ho Chi Minh City and HNX in Hanoi, have suffered a violent boom-and-bust cycle that Accountancy has undermined investors? confidence in recent The early development of the accountancy years. The VN-Index slipped from a peak of profession in Vietnam was based on the 1,173 points at the beginning of 2007 to a low accounting practices of the countries that of 235 points in February 2009, then hit over Vietnam had strong military, social or trade 600 a couple months ago and declined back links, including China, then Soviet Union and, around 500 this past November (2010). more recently France and the United States. However, the current price level in Vietnam is slightly higher compared to the regional A move towards alignment with International markets. Accounting Standards (IAS) began in the early 1990s. The complete set of Vietnamese Individual investors dominate the current Accounting Standards (VAS) was issued at the markets, creating a high level of short-term end of 2003. These were based on IASs, and speculative trading. Additionally, there are knowledge of regional countries? standards, about 10,000 foreign investor accounts on the and Vietnam's own legal provisions and markets, over 1,000 of which belong to requirements. As Vietnamese companies are institutional investors, account for 20% of the looking to list in international exchanges, a market size. move towards International Financial Reporting Standards is becoming more urgent than ever Bond market and the Ministry of Finance is working hard to The fixed income market is also still ensure consistence between IAS and VAS. developing. Most of the listed bonds are government bonds, with an average of 3.5 The UK Association of Chartered Certified years to maturity. Long-term government Accountants (ACCA) has been working with the bonds are auctioned on HNX, while the State Ministry of Finance to develop a Vietnamese Bank of Vietnam (SBV) auctions short-term variant of ACCA's accountancy qualification. government bonds. SBV typically announces From December 2006 candidates were able to new issues of government bonds a few days sit the ACCA recognised Vietnamese variant before the auction. In addition, ministries and examinations in Corporate Law and Business local government can issue project bonds, Taxation. This represented completion of the first step in the roadmap to fulfil the UK Trade & Investment Sector briefing: Financial Services Opportunities in Vietnam commitment signed between ACCA and legal procedure in Vietnam to carry out the Ministry of Finance in 2003, concerning the deal with Deutsche Bank, while the bank and localisation of the international examination in its Indian partner investment bank Elara a bid to improve the relevance of the ACCA Capital, are seeking interested investors and qualification in Vietnam. There is a potential finalising necessary formalities for the London training requirement for other papers within listing. The group is planning to raise up to the ACCA qualification where UK financial USD 70 million through the secondary listing in experts can add value. London, which would make it the first big Vietnamese company to sell shares overseas. Auditing In response to both the move towards a M&A and trend market-based economy in Vietnam and It is forecasted that in the very near future, international economic integration, external M&A will take place in Vietnam due to the fact auditing activities began to substantially that the current number of banks and develop in the late 1990s. With a view to securities companies is already very high establishing a legal framework for the compared to regional countries when establishment, development and management considering the economic situation and the of external auditing activities, the Government growth of the market. promulgated the Regulation on Independent Auditing in the National Economy, the Currently, regulations on M&A in Vietnam are Regulation on the Examination and Issuance of provided in several legal documents, including Audit Certificate as well as the Regulation on Civil Code, Enterprise Laws, Investment Laws Registration and Practising Audit Profession. and Laws on Competition, etc. A decree on M&A with foreign-related factors is being The big-six global audit firms dominate drafted by the Ministry of Planning and accountancy in Vietnam. With the huge work Investment will provide favourable conditions from ODA projects, foreign accountants for foreign investors to buy domestic continue to deliver strong business results in companies. Vietnam. Their workload has increased significantly with the implementation of the Many listed companies in Vietnam are expected Enterprise Law. to increase M&A deals in the coming years rather than setting up new business as a way During the period from 1991 to 2005, the to expand operations. Ministry of Finance (MOF) only licensed 75 auditing companies. With the booming of the Following the new regulations from the State stock market in 2006/2007 and the sharp Bank of Vietnam that all commercial bank increase in the number of companies listed in would have to increase their charter capital the both stock exchanges, and in order to from VND 1 trillion to VND3 trillion by 31 Dec ensure that all listed companies have their 2011, M&As within banking sector are booming accounts audited, SSC and MOF had to lower in the country. the requirements and licensed a large number of auditing companies (71) during 2006/2007 A lack of experience and knowledge, as well as period. Even then, the demand still exceeds professional brokers, lawyers and consultants the supply. in the field remains as obstacles for Vietnam but could be seen as opportunities for British Listing in the UK companies. British financial service companies can assist local companies to list in the UK, opening them You can be alerted to Vietnam opportunities on up to international venture capital. a regular basis by registering on the UKTI website. Find out more on UKTI?s business Opportunities exist for listing on the London?s opportunities service on the UKTI website. stock exchanges (either Main Board or AIM) given that listing would help them access international markets and potential investors, improve their operation as well as exploit international consultancy services. Hoang Anh Gia Lai, one of Vietnam?s largest private sector conglomerates, has completed UK Trade & Investment Sector briefing: Financial Services Opportunities in Vietnam Major events and activities UKTI contacts Lord Mayor and Business Delegation Visit Nguyen Phuong Nam Contact: UKTI team Deputy Head of UKTI (Hanoi) British Embassy in Hanoi and Consulate British Embassy Hanoi General in HCMC Tel: (0084 4) 3936 0500 Email: Nguyen.Nam@fco.gov.uk Email: Nguyen.Nam@fco.gov.uk Le.Le@fco.gov.uk www.ukti.gov.uk Time: Mar 2011 Le Hanh Le Banking Vietnam ? Conference and Trade & Investment Officer Exhibition British Consulate General Contact: UKTI team Tel: (0084 8) 3825 1971 British Embassy in Hanoi and Consulate Email: Le.Le@fco.gov.uk General in HCMC www.ukti.gov.uk Email: Nguyen.Nam@fco.gov.uk Le.Le@fco.gov.uk Time: May 2011 Vietnam Business Forum Contact: UKTI team British Embassy in Hanoi and Consulate General in HCMC Email: Nguyen.Nam@fco.gov.uk Le.Le@fco.gov.uk Time: June 2011 Find full details of all Vietnam financial services events on the UKTI website. New export events are added daily to the site and you can register to be alerted to them on a daily, weekly or monthly basis. UKTI?s Tradeshow Access Programme (TAP) provides grant support for eligible Small & Medium Sized Enterprises (SME's) to attend trade shows overseas. Find out more about UKTI support for attendance at overseas events. UK Trade & Investment Sector briefing: Financial Services Opportunities in Vietnam Next steps - How UKTI can help ? Arranging appointments British companies wishing to develop their ? Organise seminars or other events for business in the Vietnamese market are advised you to meet contacts and promote your to undertake as much market research and company in the Vietnamese market planning as possible in the UK. UKTI?s team in Vietnam, with its wide local knowledge and This work is available via our Overseas Market experience, can provide a range of services to Introduction Service (OMIS) a chargeable British-based companies wishing to grow their service which assists British-based companies business in the Vietnamese market. wishing to enter or expand their business in overseas markets. This can include: ? Provision of market information To find out more about commissioning this ? Validated lists of agents/distributors work, or accessing other UKTI services and ? Key market players or potential specialist advice, please visit the UKTI website customers in the Vietnamese market to find contact details for your local UKTI ? Establishment of interest of such office. contacts in working with you Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation & Skills, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published 2011 by UK Trade & Investment. Crown Copyright © UK Trade & Investment Sector briefing: Financial Services Opportunities in Vietnam
Posted: 24 February 2011, last updated 28 February 2011

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