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VN takes advantage of two years of global integration
Vietnam’s insurance and banking industry had taken advantage of its integration with the global economy after two years with the World Trade Organisation (WTO).
However, the privilege has exposed many shortcomings in managing the economy, Deputy Minister of Industry and Trade Le Danh Vinh said at a seminar here yesterday.
The seminar, held to evaluate WTO impacts on finance banking and insurance, was organised in Hanoi by Ministry of Industry and Trade and the Ho Chi Minh National Political Academy.
Speaking at the conference, general secretary of the Viet Nam Insurance Association, Phung Dac Loc said a period of two years was not long enough to evaluate and overview WTO’s influences on the local insurance.
"However, the Vietnamese insurance market has shown vigorous growth during the past two years, despite domestic inflation and the fluctuation of grid prices, securities and global finance. For example, a credit crisis in the United States late last year led to the escalation of petrol, iron, steel and rice prices," Loc said.
According to Viet Nam Insurance Association statistics, local non-life insurance earned revenues of VND5.5 trillion (US$333.3 million) during the first six months of this year, a rise of 43 per cent against the same period last year. The life-insurance’s figure was more than VND5.02 trillion ($305 million), an increase of nearly 13.5 per cent.
Vinh said Vietnam’s commitments to global integration and improving its market-economy mechanisms were the most important factors for increasing economic reform and luring foreign investment.
He said the Vietnamese insurance industry needed to promote and improve service quality to take advantage of chances offered by entry to the WTO.
Do Anh Truong, an official of the Insurance Department, under the Ministry of Finance, said WTO entry would help the insurance sector grow strongly and promote foreign investment.
He said it had laid a foundation for developing the local insurance industry, which would expand with demands for new insurance products.
Basically, WTO accession has directly and indirectly brought about desirable results. The difference between forecast numbers and results are partly due to complex internal and external elements of the economy.
There are now 720 non-life-insurance products and 130 life-insurance products for life, asset and responsibility available on the market.
Insurance enterprises are also leading investors in the economy. Total re-investment capital is estimated at nearly VND40 trillion ($2.5 billion), of which nearly 90 per cent is placed in government bonds or in banks.
The strength and prestige of Vietnam’s insurance companies has been confirmed by some of the world’s leading insurance groups, including HSBC, AXA and Swiss Re, all of which have formed strategic partnerships with domestic insurers.
Vietnamese insurance companies are expected to face challenges as foreign competition is allowed to provide compulsory-insurance products under WTO commitments.
Loc said domestic-insurance companies were also endeavouring to improve training of insurance employees, develop information technology, improve business practices and support legal foundations.
Loc said he believed domestic insurers were ready to compete in the new context and urged them to update their knowledge on economic accession to gain a thorough grasp of opportunities.
Banking industry
The banking industry has made significant development in the last two years. It has generated an open market and developed both in quantity and scale, said Cao Si Kiem. Chairman of Viet Nam Small and Medium-sized Enterprises (VINASME).
He said domestic banks had made best use of the competitive edge and played a key role in supplying traditional services and mobilising capital and lending, adding that domestic banks had mobilised at least 90 per cent of local capital sources.
However, Kiem said the banks would face risks as WTO membership had "opened its door" to competition.
"Vietnam has begun to attract large investment from foreign banks by allowing them to open representative branches and establish wholly-foreign invested banks.
"Great advantages in services an finance enable foreign banks to create great pressure on domestic banks. Vietnamese banks will gradually lose advantages they have with clients and distribution channels."
This is why Kiem, an ex-governor of the State Bank, is worried about the low development of the domestic banking industry. "An inadequate banking service network and technology and poor managerial skills are the great challenge for domestic banks," he said.
"Although, the country has penetrated into the market economy, bank payments and services are insufficient and unprofessional," he said, mentioning the brain drain from the State Bank to other companies.
Deputy head of the Department for Monetary Policy, Nguyen Thi Kim Thanh, said monetary policy was a tool to manage the macro economy. "It has made an active contribution to stabilising the finance market, controlling inflation and supporting economic growth," he said.
Thanh said monetary policy faced big problems, including control of the total monetary volume in the economy, interest rates and exchange rates.
VNN
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