Standard Chartered Bank Vietnam just opened its new head office at Keangnam Hanoi Landmark Tower in Hanoi. On the occasion, the bank’s CEO Louis Taylor shared his thoughts with Vietnam Investment Review about the Vietnam economy’s current standing, future perspective and the bank’s commitment in doing business long-term in Vietnam.
What is your forecast on Vietnam economy in 2012?
Our forecast with GDP this year is around 5 per cent. We also reduce our forecast on inflation. The inflation on average of the year will be around 8 per cent. We saw September inflation numbers. A large part of it seems to be healthcare and education. The inflation is about 2.2 per cent up in the market, and 1.5 per cent-1.6 per cent for health and education, but both of those are controlled by the government. Meantime, the trade balance looks in a good shape and currency remains stable this year.
The Vietnamese government has made strenuous efforts in restructuring the economy through three pillars banking, public investment and state enterprises in the year to date. What has worked well and what has not yet?
The government has certainly managed the public and some strategic policies related to the three purposes. I think we should see more on the implementation plan and the application of responsibility and the timelines around all of those. There are a lot of items need to be done and it’s still very general and really details on how things will get done.
So we encourage the government to be bold on taking the reform that they say they want to see. And we are very happy to help them as much as we can.
What are objective and subjective reasons that make these efforts not work?
There are some difficult issues. Turning to the banking restructuring side, there are some confusion on the level of non-performing loans (NPLs). The government said to the National Assembly it was over 10 per cent, and even 16 per cent at some banks while the others have no capital left. So there is certainly a NPLs issue in the banking system. I think the first step on any restructuring is recognising and extending that and the solution can follow.
Do you think the State Bank of Vietnam (SBV) will cut one more per cent in interest rate?
I think that SBV has been very good at settling interest rates commensurate with the environment at the time. They lowered interest rate with 500bps. It is fair to say that during the time they don’t let the inflation falling by more than 5 per cent. So arguably, the real interest rate is higher than they were. Does it create room to lower interest rates further? I think that it is the judgment SBV has to take. But what we saw in September inflation numbers may give a pause of thought.
And also what you have seen with the food prices, with prospective of food prices to the end of the year, they may want to hold off from lowering the interest rates again because with bad half year from US and elsewhere, it looks like the food prices may rise to the end of the year.
One of the main causes for foreign investors to not expand business in Vietnam is the instability. What will you recommend to investors?
I think with any developing market, you will see some up and down as well. But the important thing is the trend up or down. The trend of Vietnam economy is up. This is the progress of the economy. There is a necessary to underline the structuring reform which the government effort has recognised. GDP growth may be lower than everybody would like for this year, next year and maybe the year after but it doesn’t mean that there are few good business opportunities.
A lot of the depression is on GDP. It’s potentially the result of bad lending in the past that you are seeing on NPLs. That’s why dealing with NPLs is so important and represent the capability to provide growth capital to businesses. So for foreign investors who are looking at Vietnam, there are some issues but they should take comfort in the long term potential of the country and the ability of the Vietnamese government and SBV to control inflation and to maintain the currency stability.
Do you think 2013 will be better than 2012?
It’s difficult to see ahead of those things. That’s a part of problem. We have to do day after day. We have a strategy which is for a long term but we have to recognise to getting to the strategic point in the future.
Can you tell us about the result of your bank until Q3?
It was a very good year of Standard Chartered Bank Vietnam and Standard Chartered globally with 10 consecutive success years of record result. And here in Vietnam, we also have a record result. However, the second half of the year is a challenge time but we have a very good year 2012.
How about Standard Chartered’s strategy in Vietnam?
Our strategy is unchanged. We set our strategy to be good for all weathers. We still want to broaden our local base including local corporate SME, retail customers, as well as foreign invested and state-financial enterprises selectively. Our range of products continues to expand.
We continue to have a good product range for corporations and retail, customers as well. There is a plenty of growth with small banks in the market. We have a strong balance sheet, lots of capital, no NPLs. We see opportunities.
Vietnam Investment Review