VN news (July 25)

[Dam Son <son@fermi.phys.washington.edu>]

Senior Vietnam banker says overdue debt increasing
Thousands mourn death of top Vietnam Buddhist
Vietnam's troubled VP Bank plays down bad press

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Senior Vietnam banker says overdue debt increasing

HANOI, July 25 (Reuter) - A senior central bank official warned in an
interview published on Friday of growing monetary problems linked to a
slowdown in Vietnam's economy, and said levels of overdue debt were
increasing. 

Deputy State Bank Governor Le Thi Ngot told the Saigon Giai Phong
newspaper that the capital mobilisation rate, or the rate at which money
enters the banking system, had fallen sharply in the first half of this
year to nine percent from nearly 16 percent a year ago. 

She said growth in lending had also slowed to seven percent against
projections of 20 percent for the whole of 1997, and added that while some
improvement had been seen in the quality of credit, there was also an
increasing trend of debt becoming overdue. 

"These results show that the economy is facing real difficulties, and this
has a strong impact on the banking field," she was quoted as saying. 

Ngot added that slowing rates of business activity and production, coupled
with falling inflation levels and slow capital circulation, had
contributed to problems for domestic industry in making use of credit. 

"In other words, enterprises do not have the ability to borrow or repay,
resulting in growth of outstanding debt," she said. "(The situation) acts
as a brake on the development speed of the economy and will have a bad
impact on the banking field itself." 

Ngot's frank assessment follows signs of growing problems in Vietnam's
banking system, which has been rocked in recent months by a series of debt
scandals involving several major firms. 

Central bankers were forced to defend the reputation of the industry
recently following news that some banks were delaying repayment on
deferred letters of credit issued on behalf of two companies whose top
executives were arrested in March on fraud charges. 

Ngot referred obliquely to the problem by saying that some of Vietnam's
regulations on credit "were not suitable for reality". 

She also called for reform of the banking sector, including the
establishment of reserve funds to protect deposits and closer supervision
of inflation and exchange rates with a view to keeping both stable. 

Vietnam's booming economy has continued to register impressive
fundamentals, but a series of problems over the past year with budgetary
management, trade and in the banking sector has caused concern about its
underlying health. 

Government data released on Thursday showed inflation at a year-on-year
rate of 3.1 percent, a reduced trade deficit of $1.77 billion in the first
seven month resulting from a slowdown in imports, and industrial
production at 14.1 percent. 

But a further breakdown of the industrial production figures showed growth
in the non-state and state sectors at less than half the rate of that in
the foreign-invested sector. 

Economists say the rate of inflation is also below the healthy norm for an
emerging economy where growth targets for this year and next have been set
at around nine percent. 

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Thousands mourn death of top Vietnam Buddhist

HO CHI MINH CITY, Vietnam, July 25 (Reuter) - Thousands of Buddhist
faithful paraded through the heart of this southern city on Friday in a
huge memorial ceremony to mark the death of a leading figure in the
country's state-sponsored church. 

Thich Thien Hao, a member of the resistance movement against the
U.S.-backed South Vietnamese regime during the Vietnam War, died last
Sunday after a long illness. He was 86. 

As dawn broke on Friday some 6,000 monks, nuns and other members of the
Vietnam Buddhist Church gathered at one of the city's holiest shrines, the
Xa Loi pagoda, for prayers and a ceremony. 

They then began a slow march, accompanied by music from conch horns,
through the city centre as women wearing traditional grey-silk dress and
others threw jasmine flowers over the coffin. 

Residents of the city, still associated with images of religious tension
and protest during the Vietnam war, looked on with quiet interest. 

"This monk was very important," said one middle-aged woman. 

"He was more important than a general." Thich Thien Hao was one of the
most prominent monks in the state-sponsored church. He occupied positions
in the National Assembly and Fatherland Front -- a powerful
socio-political organisation linked to the ruling Communist Party. 

Buddhism is the religion of most of Vietnam's 77 million population, but
Ho Chi Minh City is also a centre for one of the largest Catholic
communities in Asia. 

In recent years there have been increasingly frequent disputes between
Hanoi and dissident monks who support the banned Unified Buddhist Church
of Vietnam, the main Buddhist organisation in the south prior to the end
of the Vietnam War in 1975. 

Thich Thien Hao's body was due to be taken to the southern coastal town of
Vung Tau on Friday to be entombed in a shrine. 

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Vietnam's troubled VP Bank plays down bad press

By John Chalmers

HANOI, July 25 (Reuter) - Vietnam's VP Bank, whose failure to honour a
debt guarantee on time in February opened a Pandora's box of nationwide
banking woes, has dismissed persistent media reports of slack lending
practices and a mountain of debt. 

In an interview with Reuters, the private bank's director general shrugged
off state investigations into "problems of the past" and said newspapers
were overstating the volume of deferred letters of credit on the bank's
books. 

"The newspapers want to have something for their readers. 

But they are exaggerating the situation," Huynh Buu Son said. 

The tightly controlled press has reported with unusual gusto on this
year's banking upsets, fraud scams and even the grisly murder of a banker
caught up in a finance scandal. 

Vietnam Joint-Stock Bank for Private Enterprises (VP Bank), which was set
up to lend to the communist country's emerging private sector, would seem
to be the latest whipping boy. 

The Tuoi Tre journal said last week that by mid-1996 VP Bank had opened
letters of credit -- bank guarantees that sellers will be paid for goods
-- worth in excess of $76 million, far more than allowed under
debt-to-capital ratio regulations. 

It said that some $18.49 million, or 31.7 percent, of the bank's debt was
overdue, with late payments on letters of credit standing at $12.95
million. 

However, Son said VP Bank had now paid up on one-third of its letters of
credit, 90 percent of which were opened for deals with South Korean firms.
More than half of the remainder will be paid "as normal" and negotiations
were under way to reschedule the rest. 

He said the bank had a serious problem with only one letter of credit, a
$2.9-million guarantee for a shipment of steel from South Korea's
Ssangyong Corp -- and $500,000 of that had been paid off since it came
under the media spotlight in February. 

In a separate newspaper interview published on Friday he further detailed
the amounts saying that some $50 million was currently owed to the bank,
but only 17 percent was overdue. 

Concern about Vietnamese banks' failure to repay debts racked up during a
short-term trade financing spree in 1995 and 1996 has dented confidence in
the country's creditworthiness. 

The central bank moved last month to reassure the international financial
community, denying a report that the Finance Ministry had instructed banks
to default and insisting that global banking norms would be respected. 

However, it admitted that of the $1.3 billion in letters of credit
outstanding, payments were late on five percent. 

The furore over the nascent banking system's woes has coincided with
revelations about malpractice and fraud at state firms, private
conglomerates and many of their banks. 

VP Bank -- the first non-state commercial bank to take foreign
shareholders and long considered one of the best-run of 52 "joint-stock"
banks -- has also come under scrutiny for the alleged "economic mistakes"
of its former managers. 

The Business and Law newspaper said state inspectors had found 14
instances of people receiving shares in the bank for nothing, and
subsequently pocketing some $985,000 in profit dividends. 

Another report said some former bank officials were under investigation
for racking up bad debts by using false documents to borrow and lend, and
using deferred letters of credit for their own personal gain. 

It said two shareholders had been arrested, one of them for appropriating
around $9.42 million. 

Son, who was parachuted into the bank in April to solve the problems,
noted that VP Bank had made a $1 million profit in the first half of this
year and said he was confident that 80 percent of its overdue debt would
be repaid by the end of this year. 

He said the central bank had also given the go-ahead for a capital
increase to 250 billion dong ($21.42 million) from 175 billion, so the
sale of new shares was now on. 

VP Bank's current shareholders include the Dublin-listed Vietnam Fund and
Dragon Capital, which is part of the Dublin-listed Vietnam Enterprise
Investments Ltd. 

Two state-owned banks, Industrial and Commercial Bank of Vietnam
(Incombank) and Vietnam Bank for Investment and Development, have been put
forward as possible subscribers to the capital increase, taking up to 10
percent of VP Bank's equity each. 

But Incombank is currently up to its neck in debts from exposure to the
scandal-hit Minh Phung company. And in any case, Son is not too keen to
take the "P" for "Private" out of VP Bank. 

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