Nhon Ai Commercial JS Bank in 2005 spent hundreds of thousands of dollars on three adjoining houses on Pasteur Road, District 1, HCM City, called the banking street.

That was when Nhon Ai had just upgraded from a rural to an urban bank and needed an office in HCM City. Settled in its new home, Nhon Ai changed its name to Saigon – Hanoi Bank, increased its capital and began seeking partners, which was much more difficult than buying the offices.

Finally, Nhon An signed a cooperation and investment contract with the Vietnam Rubber Corporation and the Vietnam Coal and Minerals Corporation. Nhon Ai was not alone in seeking strategic partners.

Joining hands

Saigon Thuong Tin Bank (Sacombank) and Asia Commercial Bank (ACB) were the strategic partnership pioneers when they sold shares worth tens of millions of dollars to foreign banks, ANZ and Standard Chartered, respectively, in early 2004.

After that, Saigon Commercial Joint Stock Bank (SCB) signed strategic partnership contract with the Bank for Foreign Trade of Vietnam (Vietcombank) and the Investment and Development Bank of Vietnam (BIDV). Thanks to its cooperation with its strategic investors, the largest domestic banks, SCB has recovered from a past slump and was listed as one of the top ten joint stock banks of Vietnam in 2007.

The strategic partnership movement boomed in 2007. Every firm wanted one.

Some companies signed strategic partnership agreements with several partners. Every week, journalists received several invitations to attend strategic partnership signing ceremonies. At first, people paid attention but it has become commonplace and unexciting.

There is dense meaning and a confluence of responsibilities behind the words “strategic partnership” if cooperation is carefully and systematically developed and has a long-term vision. Let’s take a look at how foreign banks did before they signed strategic partnership agreements with local banks.

Citigroup, HSBC, etc. inspected Asia Commercial JS Bank (ACB) from the inside out, every detail, during the negotiation process. They asked to check all capital borrowing records.

A leader of the Technological and Commercial Bank of Vietnam (Techcombank), who negotiated with HSBC, said he drank vodka with an HSBC senior official and discovered that his partner drinks very well. “His paternal grandfather was a Russian,” the official revealed.

With such an intimate period of inspections and research, such negotiations often last several years; but businesses that sign strategic cooperation contracts in such a determinately professional manner are few. For example Sacombank – ANZ, ACB – Standard Chartered Bank, Techcombank – HSBC, Oriental Bank – BNP Paribas, and Eximbank – SMBC, Qantas – Pacific Airlines.

Smoke and mirrors

In many cases, strategic partnerships are merely a mask for stock trading affairs, where buyers can get stock cheap and the sellers can better advertise their name with their affiliates.

Companies take advantage of strategic cooperation as a marketing solution or to push stock prices up. Strategic partnership is the thing that listed or about-to-list firms want to do.

A nameless estate company located in a suburban District of HCM City increased its capital and sold its shares to three foreign investment funds. Rumors hit the market that this firm had foreign strategic partners and many construction projects, etc. That firm’s stock price soared. When investors knew it had sold stock to foreign investment funds for VND50,000/share, equivalent to one third of the market price, they immediately sold out, but it was too late.

Strategic partnership contracts are no longer good useful, as many companies used them to increase their stock prices – a different meaning behind strategic partnership.

Strategic partnerships are expected to be few this year while the number of listed firms is on the rise and the over-the-counter (OTC) trading floor becomes operational in March 2008.  

Source: TBKTSG