BIDV and the unprecedented affair

The fact that the Bank for Investment and Development of Vietnam (BIDV) bought back the capital contribution made by the foreign partner in the insurance joint venture company between BIDV and Australian QBE in early 2006 may have fallen into oblivion. The deal valued just at $2.5mil, and this sum proved to be too small compared to the financial capability of BIDV or any other insurers in the market. However, at that time, it was quite strange that a Vietnamese company could buy the foreign capital contribution, as people only saw foreigners buying capital contributions from Vietnamese partners.

The story began from the fact that QBE, now one of the 25 biggest insurance companies in the world and the 50-50 foreign partner in the joint venture wanted to buy the BIDV’s capital contribution to get more self-control right. However, BIDV did not agree. The Australian partner then asked to retain 10% of capital in the joint venture, but BIDV once again said ‘no’. Finally, BIDV got what it wanted: it successfully bought back the QBE contributed capital to set up the BIDV’s Insurance Company (BIC), a life insurer.

Tran Bac Ha, Director General of BIDV said that the bank wanted to retain the insurance company because it aims to diversify the operation of the bank. This is also a part of the strategy BIDV is following, under which BIDV will become a financial group, which provides a wide range of financial services. Mr Ha also reminded that BIDV had to spend a lot of exertion to get the permission to set up the insurance company.

In October 2006, BIDV injected another VND100bil in BIC to raise its chartered capital to VND200bil. Now BIC is the fifth biggest life insurance company in the market, and it is planning to raise the chartered capital again from VND200bil ($12.5mil) to VND1tril ($62.5mil) in the first quarter of 2007. It has a lot of insurance policies, including the ones under the network of BIDV.

Two commercial affairs of VinaCapital

The fact that VinaCapital successfully bought 70% of shares ($43mil) of Hilton Opera Hanoi in July 2006 showed VinaCapital’s determination to make investment in the real estate market.

Hilton Opera Hanoi is one of the two five star hotels in Hanoi which always have the room operation capacity of more than 80%, and the place where famous personalities stay when visiting Vietnam.

It was the good time for the deal, in 2006. French telecom group Vivendi Universal, which is not keen on hotels, wanted to sell shares to make investment in other fields. At that time, VinaCapital saw good opportunities to make investment in the real estate market and in tourism in Vietnam. And the deal was made, Don Lam, Director General of VinaCapital Don Lam, related how the parties of the deal could meet each other.

In another affair, VinaCapital decided to act as the strategic partner in Pho 24 chain after it injected $3mil in the trademark development.

In mid 2006, it seemed to be adventurous for VinaCapital to inject money in pho (a kind of Vietnamese favourite meal). However, it is now considered a successful deal as 40 pho shops have been opened locally and abroad. It is expected that 100 shops in Vietnam and 100 shops in foreign countries will be opened in the near future. If you want to develop a food shop chain in other countries, fast food would be the first choice, but if you want to do this in Vietnam, making investment in pho would be a wise choice, as pho is very favourite by Vietnamese people.

As fro Don Lam, the sum of money VinaCapital has injected in Pho 24 is the investment in the future, when pho would bridge Vietnam and the world.