Introduction, Day 2
Mark Norbom
Good morning. I trust you all enjoyed the evening last night and were able to feel some of the excitement that is part of doing business in Asia. I think that that's something you can't really show in presentations, you have to (be) a part of that.
There are a few new faces here this morning, so let me start by welcoming you to our second day of presentations on Prudential Corporation Asia. On Tuesday we shared our vision and strategy and our financial as well as our approach to distribution, and our brand and customer strategies.
Today you will be hearing about our operating excellence, and I think one of the highlights – the grow opportunities that we have around the region. However, before we move into these topics, we are very honoured to start this morning's session with some comments from Mr. Vo Van Kiet, former prime minister of Vietnam. Mr. Vo Van Kiet has played an important role in shaping the modern development of Vietnam. He was Prime Minister of Vietnam from 1991 until 1997 and under his guidance, Vietnam made great strides, in terms of economic reforms and development. He has held a number of senior positions within the Vietnamese government, including Deputy Chairman to the Council of Ministers and Advisor to the Central Party committee. So if you could now join me in welcoming our very distinguished guest, Mr. Vo Van Kiet, former Prime Minister of Vietnam.
(Applause)
Mark Norbom
Would you care to make some comments?
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Distinguished guests, Ladies and Gentlemen, first I would like to extend my warmest welcome to all of you, the top equity and investment analysts from the UK, as well of the world to Vietnam in your East Asia visit. This visit is extremely meaningful against the context of a very successful Asean meeting, the 5th Asean meeting in Hanoi. This is a kind of co-operation mechanism between Asia and Europe. For those of you who have been to Vietnam for the first time, I do that the achievements that Vietnam has made, will give you a very good impression. However, having said that, for those people who have been here before, I do hope that the fond memories that you have been keeping of Vietnam will be repeated this time, and you have the opportunities to witness the positive changes and progress that Vietnam is making.
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Ladies and gentlemans, in parallel to the other reform taking place in Vietnam, the reform of the banking and finances sector in Vietnam so far has gone through the past 15 years and has made valuable and important to the growth rate of Vietnamese GDP as well as the economic stability of Vietnam in the past decade. The financial and banking sectors of Vietnam have been reformed in compliance with the operations of a market economy mechanism. In addition to the State Bank that are operating nowadays in Vietnam, we also have other forms of banking co-operation, such as joint stock commercial banks, with the equities from the private sectors, the joint venture banks from the equities of the State Bank of Vietnam and the foreign banks, as well as the branches of foreign banks operate as 100% foreign owned entities.
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Ladies and gentlemans, a (incomprehensible) competitions and a good environment for the banks in Vietnam have been established and this kind of creation has provided the motivation as well as the encouragement for the further development and progress of the local banks. They have been able to develop (incomprehensible) and provided better services by the expanded network of services nation wide. The joint-venture banks, and the branches of foreign banks in Vietnam are also being considered for better working relations, as well as better customer service. The banking sector in Vietnam is moving towards a point of time where there is no discrimination for the operation of local banks or foreign banks. We must admit that the foreign banks operating in Vietnam (are) growing rapidly and is been very effective in their operations. I can give you one of the very shiny examples of those foreign banks operating well in Vietnam, such as (HSBC), Citibank and some of the other banks. Some of them have even been assessed by the banking expert at some of the best foreign banks operating in Vietnam with the highest growth rate per year.
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Ladies and Gentlemans, the stock exchange of Vietnam has been established and is (hoping?) for its very appropriate development, a pathway, (the government of Vietnam?) is doing their utmost to provide for a better legal framework, as well as a very sound financial and banking operating environment just to facilitate the more effective and sound performance of the entities in Vietnam, so that at the end of the day, there will be more transparent en more open in their operation performance, helping the public understand better about the financial health of their own companies, as well as their financial capacity, so that we can enhance the trust that the customer can place in those financial institutions. The government of Vietnam is very determined in their programme of equitation the state-owned enterprises and I believe that in a very near future you can see with your own eyes and take part in the operation of a very sound stock exchange market in Hong Kong.
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Distinguished guests, Ladies and Gentlemans, the insurance sector in Vietnam has just been opened to different investors in the past few years, especially in the area of Life Insurance. And Prudential, a company from the UK, has become a leading Life Insurance company in Vietnam. Without any further proof, I guess that all of you know that Prudential Vietnam is a great success here and on this occasion, I would like to extend my sincere thanks to the management of Prudential Vietnam and (Prudential PRC?), especially to Mr. Jonathan Broomer, the Chief Executive of (the Prudential PRC?) and Mr. Peter Williams, the very person who took the initiative to organise this very informal gathering.
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Ladies and Gentlemans, Vietnam is doing its utmost to successfully integrate into the regional and global economies. Vietnam is trying to fulfil its commitment in the framework in the FTA, the free trade area among the Asean countries. Vietnam is also trying improve (bilateral?) and multi-lateral negotiations with different partners in the world, so that finally it can (access/exist) into the World Trade Organisation (WTO). In this endeavour of Vietnam, I highly appreciate and I do thank the partners around the world, especially the EU countries for their valuable and effective assistance given to Vietnam in the past few years.
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Having said that, however, I must admit that in the course reforming or implementing the (Doy Mui?) innovation policies opening its door to the world and speeding up the process of integration with the regional and global economies, Vietnam does face a number of difficulties and challenges. The banking sector of Vietnam has yet to make expected progress as others look at her. Vietnam has yet to utilise the valuable opportunities in the past few years to speed up the reform process, especially in public finance management. I believe that Vietnam still needs to learn from other countries and other partners, especially in the industrialised world, in the areas of banking and financial management, (just to?) remedy the shortcomings and to build a solid foundation for a better, more effective and sound operation of the banks, living up to the expectation as a reliable and trustworthy partner of international financial and banking community.
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
Ladies and Gentlemans, the stock exchange in Vietnam has just been established and works as a pilot model and we need to work more from our international friends and work harder so as to make the stock exchange in Vietnam a great success. The investment climate in Vietnam, although it has been much improved in the past few years, and frankly speaking, in relation to the successful (investment?) in Vietnam, we do have some investors who are not quite satisfied with their operations here and they often complain to us about the red tape, bureaucracy and procedures that bother them. And I am sure that's while you are here or while you are in the UK, you have seen or heard of these complaints of red tape and bureaucracy, and please rest assured that the leaders and the population of Vietnam also see (no?) problems and their own problems. During your short stay in Vietnam I am convinced that you have spend a little or some time to follow the lively debate at the National Assembly in Vietnam, because the National Assembly in Vietnam, which is the Vietnamese Parliament, is now in congress. And the National Assembly Vietnam is facing the truth of the reality of what is happening in Vietnam. The deputies to the National Assembly have also pointed out, in a very frank manner, the shortcomings as well as the weaknesses that Vietnam has encountered, especially in the areas of governance, in public investment, extravagance (?) and corruption in the government apparatus, and as a result they have been trying to point out those problems and working out measures so as to remedy those shortcomings. While we appreciate the compliments from our international friends and the community about our achievements, we are also very attentive and take serious note of the criticisms and constructive comments about the slow progress of reform of the Vietnamese economy, as well as the fact that we are lagging behind other countries in the region. The Vietnamese people and government are not complacent with what we have been achieving in the past few years. What we really want at the end of the day is that Vietnam can develop commensurate with its potential. Many friends have asked me: Vietnam has so many potential and many comparative advantages. Why haven't Vietnam been able in achieving a double digit growth rate in the past few years. I consider this is not a question from our friends in the world, but also one of the top concerns and priority for the leadership and the population of Vietnam.
Vo Van Kiet
(Speech in Vietnamese)
Inter
preter
Ladies and Gentlemans, it is my sincere hope that after this visit many of you will come back here and become a very close member of the financial and banking community of Vietnam, not only as an investor, a consultant, but also as a friend who are willing to contribute your knowledge and experience so as to help Vietnam develop a very sound financial market, that is on par with those of the regions and of the world. And at the same time I also hope that you will become the goodwill ambassadors that after leaving Vietnam you will bring back to your respective countries the image of a Vietnam that is peace loving, that wants to make friends with people of good intent. I also hope that you will use your influence and your capacity to help the international community understand Vietnam better so that they can support and work with us on an equal footing basis. Together we will build a more peaceful world that is more prosperous and with more (empathy/equity/energy?)
Vo Van Kiet
(Speech in Vietnamese)
Interpreter
I wish all of you a very productive trip to Vietnam and a very pleasant stay in Vietnam. Thank you for your attention.
(Applause)
Mark Norbom
Well, thank you!
Thank you, Mr. (Kit?). Clearly, you can see the importance that Vietnam puts on developing the financial sector and it is a great pleasure for Prudential to be a part of this great growth story. We are also very privileged to be able to welcome another leader development in Vietnam, another distinguished guest, Mr. Doan Hung, who is the Vice Chairman of the States Securities Commission. And if I could, I would like to invite Mr. Hung to say a few words.
Doan Hung
Firstly, I would like to welcome all of you to visit Vietnam and Hanoi and Ho Chi Min City on the occasion of the fifth birthday of the (incomprehensible) of Vietnam.
Knowing that you have a very busy schedule, so we have given a short time to presenting you some of the developments of the stock market in Vietnam of the last 4 years. I know that all of you, who are the finest (there is) investment bankers, fund managers and especially representing the London Stock Exchange, visit her today. I hope that in 15 minutes time will give you a clear picture of how the capital market in Vietnam has been developing since the year
2000.
As you know, not like the other countries, in Vietnam the regulator, the State Securities Commission, has established before the market of risks. That means that in 1996 the government of Vietnam has signed the decree no. 75 to establish the SSC in Vietnam, that is the government body that regulates the markets, though, that time there was no market. And then in the year 2000, July 2000, the Ho Chi Min City we call the Trading Centre has been established. That is the July 11th, the first session of trading has been done in the Centre. And now, this day we call the Security Market Day in Vietnam. Can you move to the next?
After 4 years of establishment, now you can see that we have 25 listen companies with a total market face value of -quite small- 11,256 billion Dong. That's rather small compared with the other regional capital stock markets. We have about over 150 times bonds with a total value of 17,300 billion Vietnamese Dong. Beside the government bond, we also have the corporate bond, that is the BIDV Bank bonds, with a total value of 157 billion Dong.
Market capitalisation is about 3.7% of GDP; that's quite small compared with the Thai stock exchange or the the Chinese stock exchange and other regional stock exchanges. The share value accounts for only .65% and we have 900 trading sessions so far, with the value changed by hand 13 billions transactions.
Talking about the market intermediaries: we have 13 security companies with totally equity capital of just over 600 billion Dong. And we have one venture fund management company, one investment fund, this has been a joint venture management company between the EC and (Sakung Bank?) is a (Dong?) capital management company. We have 5 custodian banks, 3 foreign banks and 2 Vietnamese banks. One certain bank is VIDV and we have 8 auditors admitted for the securities industry. Total investment accounts is 19,000 accounts, in which 145 accounts of domestic institutional investors, 21 accounts for foreign institutional investors and 806 of individual investors.
Trading mechanism we have 2 forms. The first one is auction; the second one is negotiation. Auction will be taking place from 9.00 am to 10.30 am. And after that there will be negotiation trading. Orders we have 2: limit orders and ATO orders. Trading units: (round lots, ten shares, note shares, note trades), 10,000 shares. And we have trading bank, is not like the other markets. It's now plus and minus 5% of the reference price. Settlement: (T + 3?). Other matching principle, like the other markets: price, time.
Talking about the qualification of public offering stocks. The choice stock companies (or equities?) are two forms of companies. The conditions are minimum legal equity capital of 5 billion Vietnamese Dong. They have retained profits for the year before the listing. And they also need to have the feasible business plan for the fund to be used. So, offering through the intermediaries to at least 50 investors outside the issuer. And the size and profitability exemption for offering of stocks by issuers in infrastructure, development and high technology sectors. So, the lowest are the priority given by the government.
For bond offerings, SOE's, joint stock and limited liabilities companies, so legal capital of 10 billion Vietnamese Dong, positive earnings for 2 consecutive years before the offering. They also have to have a feasible business plan for funds to be raised. And the bonds should be offered to at least 50 investors outside the issuers. They need to have an underwriter and commitment to fulfil debt obligations to investors. Bond custodian (holders?) represent bond holders. So, those are the requirements.
For stock listing requirement SSC – so public offering, license by the SSC, minimum legal equity of 5 billion Vietnamese Dong. They also have to have (sound financial?) conditions and positive earnings for consecutive 2 years. (Incomprehensible) to be immediately listen.
At least 20% of stocks must be held at least 50 investors outside the issuers. Directors, management, employees, sellers commit to hold 50% of their shares for at least 3 years after the listing.
For corporate bond listing requirement at the SSC the same: equity capital at least 10 billion Dong, sound financial conditions and positive earnings for 2 years before listing; 50 bond holders outside the issuers.
For common bond listing conducted at the request by the institution nominated by the governments for offerings; now the issuers the formation disclosure. Principal formation disclosers, they have to report quarterly and annually, annual reports. And besides that we have the irregular information disclosure requirements within 24 hours, like the other markets. Events that may effect stock prices, information disclosures on request. So, at the request of the SSC or the SDC. Means for information disclosure: we have the bulletin, issued by the SDC, and public media.
So, this bond is very beneficent to you for the foreign ownership limits. At present we still have some limits on the foreign investors. The maximum share holding: 30%. Bond holding: no limits.
And maximum share holding at the securities business joint ventures: 49%. So that means if you want to set up a securities company in the form of a joint venture with a Vietnamese partner, the maximum contribution by the foreigner can be 49%.
For invested trading: trading (court?) have been given to the foreign investors. Principal free in flow. Repatriation of principle, after 1 year. And this condition will be removed soon, I have to say that. It has been started... under consideration by the State Bank of Vietnam. They have in principle agreed that this condition will be removed soon.
Tax regime: no repatriation tax. No personal income tax.
So, that is some information on the SDC of Ho Chi Min City. And for the future our target has been set by the strategic, approved by the Prime Minister. The size of the market capitalisation will be 2-3% of GDP by next year, 2005, so next year GDP can be USD62 billion.
And then we have the target towards the year 2010 so that market capitalisation of the market will be 10-15% and become a reliable, safe, transparent and efficient markets for medium and long-term funding for economy, competitive and ready for market liberalisation.
As you know, we are one of the Asean countries. And now we also have the plan of Asean bond markets; we also have some plan to do with the other Asean countries for (volume?) tradings and cross listing. Especially now we have an agreement with the Singaporean Stock Exchange that's study will be done for the cross border trading and cross listing. Beside that we also have the Asean plus 3 market, we call the Asean bond markets, lead by the Japanese government. This plan has been prepared to leap to the total liberalisation of the (capital?) accounts within the Asean countries and Asean plus 3, in the year 2020.
So different solutions... we have to improve the legal framework for capital markets. At present, you know that we are drafting the first new law on securities and exchange. And plan that this law will be presented to the Parliament for the approval in the year 2006. We hope that with the new law the development of the market will be much improved after that.
We also want to... the SSC Vietnam in corporation with the Ministry of Planning and Investment, (incomprehensible) and other government agencies, try to have more and more companies privatised and listed in the market. Next please.
We need to develop the capability of the government and (incomprehensible) bond offerings. At present you know that 98% of the total volume transacted in the market is in the form of government bonds and we want in the future more and more companies, more banks will issue bonds, to be traded at the floor.
(Incomprehensible) Vietnam to conduct listing linked equitisation of state-owned banks, listing of choice (to?) buying shares. As you know, we plan that the first state-owned commercial bank is the Vietcong Bank will be privatised and some shares of this bank will be listed op the trading floor maybe early next year. And 2 other commercial (joint-stock?) banks like the (Sagon?) bank and ACB they also have plans now to present to the State Bank of Vietnam for the approval. And if it is approved by the State Bank in Vietnam, the shares of those 2 banks will be listed soon. We hope that next year, in the first quarter or second quarter of next year.
We shall also co-ordinate with the MOF to improve the tax and fee incentives. At present you know that for listed companies they have some priorities have been given to the listed companies that for the first 2 years after listing they have the... 50% of the tax can be deducted. So they are exempted.
(Incomprehensible) institutional investors and mutual funds like (Incomprehensible) invest in the markets, so in April this year our first mutual fund has been established, it's called (FV1?) managed by the VFM, as I mentioned to you before. And then for the insurance fund, you may all know that yesterday the MOF has in principle given the license to the (Prudential?) Vietnam to set up the fund managers company.
We have to modernise the trading system, establish the depository centre, this is our medium term plan. We are going to set up our second trading centre in Hanoi soon. The Hanoi market will become our first OTC market, where we hope that small and medium size companies can be... shares can be traded there, and later on the government bonds and corporate bonds will be traded there.
The trading system of Ho Chi Min City, the Trading Centre will be improved soon. Our plan is the Ho Chi Min Trading system will become... or will be run by (choice-stock?). That means that the (securities?) will hold the shares of the Ho Chi Min Trading choice stock company in the year 2007. And we also have the plan to establish the independent depository centre in the year 2007. This depository centre will be the only one, registered, in settlements and clearing centre in the country.
We also try to help the securities companies to expand their network and quality of services in future. Speed up is (our vision?) of fund management. We hope that more and more mutual funds will be established soon in Vietnam.
And improving information disclosure, stringent supervision survey of the market and (Incomprehensible) suitable enforcement actions.
In the short time I had to give you such information, so that as the financial analyses, I hope that you can understand of the Vietnamese stock markets. And we do hope that... I wish you all great success in doing business in Vietnam. And hope to see you very quite often in the future. Thank you very much.
Mark Norbom
Mr. Hung, thank you very much. That was very good. Thank you.
This is our license in principle, licensed by the SSC.
(Applause)
I would like to ask the insurance commissioner, the join us on stage, and Takashi San who will head up our fund management business here. And Jonathan and Peter and Phong, if you could also come up. We take this opportunity for another photo, if we can.
(Applause)
Mr. Kit, Mr. Hung, Mr. Bin, your commitment to developing the market in Vietnam is clear and I will take this one last opportunity to say thank you.
(Applause)
So, a very exciting moment for Prudential in Vietnam. The license that we were just handed is the first 100% owned foreign company to be awarded a fund management license in Vietnam.
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