What is your outlook on Viet Nam’s economy next year?

As an economist, I see good prospects for Viet Nam’s market next year. Viet Nam’s growth rate in 2007 will be around 8 per cent with the Vietnamese dong appreciating against the [US] dollar slightly after 5 years of stability.

Do you think Vietnamese banks will face tougher competition against giant foreign banks like JPMorgan?

We are a bankers’ bank so we are not going to compete with local firms like other foreign banks. We will, instead, support partnerships with local banks.

So far, JPMorgan has a few partnerships with some big local banks like BIDV [Bank for Investment and Development of Vietnam] and Vietcombank [Bank for Foreign Trade of Vietnam]. We have developed along side Vietnamese banks and will grow with them.

How do you evaluate the financial and banking sectors’ potential?

The market perspective of Viet Nam in the mid-term is very bright. Efforts to raise capital in the banking sector is continuing, and there will be more and more listed equities as well as debt instruments.

I think these elements will help Viet Nam attract more foreign investment in the future.

What is your assessment of Viet Nam’s monetary policy?

As I said, the Vietnamese dong has the potential to appreciate next year, but the decision to make it happen depends on the Government.

In terms of SBV [State Bank of Vietnam] reforms, I expect in the coming years it will operate in a more open market with the ability to alter interest rates and determine foreign exchange policies more independently as a modern central bank.

As far as I know, the SBV has been drafting a Central Bank Law which is expected to be ratified by 2008. I think it is a positive and critical plan. For the last few years, countries in the region, such as South Korea and Indonesia, have set up regulations on modern and independent operations for their central banks.

I can not give an exact time for when the SBV will act more independently, but it is an indispensable trend occurring in the region.

How about Viet Nam’s bond market?

At present, the development of the stock market has led to increasing demand for bonds. However, the bond market has not yet developed, especially the liquidity in the secondary market. The reason is due to long-standing habits; Vietnamese people buy bonds and hold them without ever trading them.

Besides, the number of listed bonds is very modest.

I think in 2007 the Vietnamese Government should make greater effort to further develop the bond market and increase the volume of corporate bonds to better liquidity. This is very important.

Viet Nam’s bond market has strong potential, thanks to the appreciation of its currency and the possibility of declining interest rates.

At present, a new trend is emerging which is people are buy bonds in their own currencies, not in US dollars as was the case earlier.

Recently, the dollar has weakened against most other major currencies, which means bond yields in US dollar terms have fallen, so people are now buying bonds in local currencies.

Viet Nam has all the conditions to attract foreign investors, and investors have been looking at Viet Nam’s story for many years. So the most important thing now is more bond supplies.

Why do you see the dong appreciating next year?

There are a couple of factors. Despite the trade deficit, the current account is a surplus due to increasing revenue, remittance and foreign direct investment.

In fact, a slight appreciation of the Vietnamese dong will send a powerful sign to the market.

Regarding concerns over a dong appreciation cutting the competitiveness of Vietnamese exports, I don’t think it’s true because Vietnamese exporters will not compete in price only but in many other aspects.

Moreover, the dong has increased by 0.5 per cent [against the dollar this year], which is small compared to other regional currencies, such as the Chinese yuan that has appreciated by 10 per cent.

Source: VietnamNews