Equitization and Reform:
Credit Suisse in Vietnam
December 11, 2007
Vietnam’s economy is a dynamic environment capped by the recent accession
into the WTO. The accession is the last stage in a long process of reforms initiated over
twenty years ago. While still significantly influenced by The Communist Party, Vietnam
is moving toward a liberal market economy. The regulatory environment has improved
tremendously, creating an incentive for foreign investment. Aside from certain
government owned entities, such as railroads and air-traffic, by 2010 foreign investment
will be able to account for one-hundred percent of invested capital in a Vietnamese
Vietnam is an emerging market and a perfect opportunity for Credit Suisse to
continue its recent dominance of emerging-market global banking. Credit Suisse is a
world renowned financial institution, having satisfied investors, government, and
individuals, while aiding in economic growth through sound consulting in financial
liberalization. Brady Dougan, CEO of Credit Suisse, has repeatedly emphasized the
importance of developing emerging markets.
The Vietnamese government has identified their need of help in liberalizing their
economy. The rise of the Ho Chi Minh Stock exchange and the commitment by the
Vietnamese government to equitize its state owner enterprises has created an intriguing
business environment ready for Credit Suisse’s services. The emerging and unpredictable
marketplace has the high risk and high return investors demand. The government has the
demand, Credit Suisse has the capacity, and Vietnam provides the opportunity, the only
thing left to do is develop a strategy.
The current state of Vietnam is a result of a long process of conquest, revolution,
and reform. Vietnam is traditionally a Confucian society, dominated by several large
empires over the course of its history. The recent conquest of Vietnam occurred under
colonialism in 1858 by the French, and was a part of French Indochina by 1887
(Karrnow, 1997). Vietnam was taken over the Japanese during World War Two, than
transferred back to France after Japan’s defeat. Vietnam declared its independence and
won it in 1954 by defeating the French.
The country was thereafter divided into the communist north and the non-
communist south. The infamous Vietnam War brought the country back together, but at a
price. The war caused massive damage to the economy and general public. In 1986 the
Doi Moi renovation policy committed the government to increase economic liberalization
through export promotion strategies (Karrnow, 1997). Vietnam has enjoyed constant
economic growth since the Doi Moi reforms, resulting in increasing living standards
Vietnam is located in Southeast Asia bordering the gulf of Thailand, Gulf of
Tonkin and the South China Sea. On land it borders China, Laos and Cambodia (CIA,
2007). The terrain of Vietnam is low and flat in the north and the south. There are Central
highlands and mountains in the north and northwest. The climate is tropical in the south
and monsoonal in the north with a hot rainy season from May to September and warm
and dry season from October to March. There are also occasional typhoons between May
and January that can cause extensive (CIA, 2007). Vietnam has extensive natural
resources in the form of timber, natural gas, oil, and minerals (CIA, 2007). Its geography
is well suited for economic growth considering the natural resources and close proximity
to the emerging markets of Thailand and China.
Population Statistics (CIA World Factbook)
As of July 2007, the estimated population of Vietnam is 85,262,356 (CIA, 2007).
The age structure is: 0-14 is 26,3%. 15-65 years is about 67,9% and 65 years and up is
about 5,8%. The Languages in Vietnam ordered in descending importance are
Vietnamese, English, Chinese, local dialects, and French. The literacy rate is 90% for the
total population, 94% for males and 89% for females. Human development statistics are
much better than in neighboring Cambodia and Laos, with 6.19 deaths per 1000
population in 2007. The sex ratio is .982 males per female. The life expectancy is 71,07
There are several ethnic groups in Vietnam. The main ethnic group is the Kinh
(Viet) at 86,4%. The remaining 13.6% is made up of more than 55 ethnic groups creating
a plethora of diversity. The majority of Vietnamese do not have a denominational
religion, although nearly all are spiritual in some way. The biggest religious groups are:
Buddhism at 9, 3%, Catholic 6,7% and Muslim at .1%. In between there are also several
other local religions, such as Cao Dai and Hoa Hoa.
GDP (purchasing power parity) $262.5 billion
GDP (official exchange rate): $48.43 billion
GDP - real growth rate 8.20%
GDP - per capita (PPP) $3,100
GDP - composition by sector agriculture: 20%
Labor force: 44.58 million
Unemployment rate 2%
Population below poverty line 19.50%
Household income or consumption by percentage
share Lowest 10%: 2.9%
highest 10%: 28.9%
Inflation rate (consumer prices): 7.50%
Investment (gross fixed): 32.3% of GDP
*Source (CIA, 2007)
GDP per capita GDP, billions of GDP, billions of Change in
Year (PPP) constant New Dong New Dong GDP Inflation
$USD (nominal) (adj.) (adjusted)
2000 2,037 441,646.000 273,666.000 6.8% -1.7%
2001 2,200 481,295.000 292,535.000 6.9% -.4%
2002 2,365 535,762.000 313,247.000 7.1% 4.0%
2003 2,553 613,442.488 336,242.808 7.3% 3.2%
2004 2,784 713,071.948 362,092.796 7.7% 7.7%
2005 3,025 806,854.877 389,243.583 7.5% 8.0%
2006 3,255 889,461.775 417,905.534 7.4% 7.0%
2007 3,503 982,013.527 448,646.166 7.4% 6.0%
*Source (worldbank, 2007)
The culture in Vietnam has very deep roots. Vietnamese culture is rooted in the
Southeast Asian water-rice cultures similar to Cambodia, Laos, Thailand, and India
(Vietnam Embassy, 2007). Vietnam has been under the influence of Buddhism,
Confucianism and Taoism, which were conciliated and Vietnamized, contributing to the
development of the Vietnamese society and culture over several thousand years (Vietnam
Embassy, 2007). The recent culture in Vietnam is a hybrid of the old and new. The
influences of France, the U.S., and now world trade have created a culture grounded in
tradition, but open to foreign influence.
The Vietnamese have absorbed much of their drive for economic growth from
China, from this they have gotten their culture of financial duty. Vietnamese culture
places a high emphasis on education along with self betterment. Some cultural trends
have emerged out of the communist influence of the USSR. Dissent or criticism is
uncommon in Vietnam, especially towards the state. The penalties for dissent can be
extremely high. The dynamic situation in Vietnam necessitates a cultural shift towards
even greater openness if economic growth is to be achieved.
Vietnam is a one-party state with the power exclusively to the communist party of
Vietnam (CPV). The CVP have the responsibility for all changes and regulations made.
The National Party Congress is the CVPs highest organ but the decisions are made by a
14-member politburo which is currently led by CPV General Secretary Nong Duc Manh,
the State President Nguyen Minh Triet, and Prime Minister Nguyen Tan Dung. The
government answers to the national assembly, which is elected every five years
Even though the Vietnamese government has shown willingness to make
economic progress the progress made in the fields of civil and political rights are still
limited. And access is denied to outside independent human right monitors. The death
penalty is still used for many crimes such as economic crimes. Even though the
government denies the existence of any prisoners of conscience, many people are
imprisoned under vaguely defined “national security” provisions (Vietnam, 2007)
Economic Reform and Liberalization
In 1986, The Sixth National Congress of the CVP, Faced by shortage of food,
three digit inflation, chronic trade imbalance and deteriorating living standards, initiated
an overall economic renovation policy commonly known as the “Doi Moi” (VinaTrade,
This reform initially aimed at changing the economic priority from heavy industry to
three other major economic projects. These were; production of food, production of
consumer goods and production of exports. Another goal of the government was to
reduce state intervention in business. The reform’s focus on overhauling the business
sector was to open trade with the outside world to encourage foreign and domestic
investment (VinaTrade, 2007).
The initial reform was expanded by the national congress of the party held in
1991, 1996, 2001 and 2006. It was important to the Vietnamese government that the
economy worked under both the market mechanism and state management. The
expansions created necessary changes to amend the original Doi Moi to the current
political and economic environment. Another important change that came out of the
reform was trade liberalization. Prices and domestic trade were liberalized, the double
price system was abolished and the prices were determined by the market. Even though
trade has been improved, there are several resources that are price controlled by the
government such as electricity, water, gasoline and seaports (Vtrade, 2007).
Import and export restrictions have been vastly reduced. Vietnam has moved
from state monopoly to freer trade and export oriented policies. Important to Credit
Suisse, the banking system received an overhaul. The banking system was changed into a
two-tier system that separated the central state bank from commercial banks and opened
the way for private banking. This resulted in the interest rate and foreign exchange
controls have been greatly reduced. In order to fight inflation, the government started to
issue bonds and treasury bills, and in late 2000 the Ho Chi Minh Stock Exchange was
established to mobilize private savings for investment (Vinatrade, 2007).
The next step in Vietnam’s reform will take place in 2007 as Vietnam will be
accepted into the WTO. The easing of trade restriction will make Vietnam a more
appealing investment, potentially capitalizing on investors’ fear of investing in China
(Chandler, 2006). The total FDI rose from 28 projects worth $140 million in 1988 to
6,900 projects in 2006 worth $64.4 billion. In 2005 FDI enterprises contributed 16% to
GDP and half of the export value (VinaTrade, 2007)
Although the new WTO regulations are easing the difficulty of doing business in
Vietnam, the country still ranks high in barriers (Doing Business, 2007). Currently
licenses are not given to small foreign businesses. After getting the license the office has
to be “opened” within 90 days, and must be registered with the local people’s committee.
Reports must be made every 6 months. Joint Ventures are preferred by the state and are
subject to favorable treatment if a State Owned Enterprise is the partner. It is important to
note that lengthy contracts will not be read, and if they are will not be understood. If the
contract is signed it may not be enforced in a court (Foreign Affairs, 2007).
Regulatory Standards in Vietnam
To become a foreign investor within Vietnam, investors must apply for a license
through the Ministry of Planning and Investment (MPI) in Hanoi (WTO, 2006). Once an
international license has been approved, the MPI monitors and regulates the performance
of licensed projects. To evaluate license proposals, foreign invested projects are
classified into two separate categories: Group A or Group B. Group A requires the
approval of the Prime Minister, and includes a multitude of investment projects with
investment capital exceeding US$40 million.
Group B includes projects approved by MPI, and with certain investment capital
depending on the location of the investment activity. Project applications for both groups
must include application forms, the charter of the foreign invested enterprise, feasibility
study and environmental impact assessment, corporate documents related to the legal and
financial status of the parties in the project, and any additional documents related to
technology, trademarks, or land use (WTO, 2006, 41) Throughout this process, the
foreign company is still only applying for a license for a Joint venture into an investment
with a domestic partner.
Credit Suisse would also be required to apply for a separate license through the
Ministry of Finance of the Socialist Republic of Vietnam. Credit Suisse must be careful
to adopt a legal ownership structure. “With respect to foreign commercial banks, foreign
credit institutions are only permitted to establish presence in Vietnam with a commercial
joint venture bank with foreign capital contribution not exceeding fifty percent of
chartered capital” (WTO, 2006).
The strict and intricate laws to obtain licenses to invest in Vietnam coupled with
monetary investment limitations for a foreign entity, creates a rigid business atmosphere.
The result of the rigidity of the environment can be seen in the amount of JV with
domestic identities. Vietnam and the communist influenced government have recently
understood the negative implications of the harsh investment laws on their growing
In response, on January 11, 2007, Vietnam joined the World Trade Organization,
to create a more fair trade and investment environment for domestic and international
investors. By agreeing to conform to WTO standards, Vietnam agreed to a broad range
of trade standards. These standards include: trade without discrimination, and treating
foreign and nationals equally; creating a freer trade environment with lowered trade
barriers, a more predictable trade environment, the promotion of fair competition, all to
encourage development and economic reform (WTO, 2006).
While Vietnam did sign the WTO agreement in the beginning of 2007, it does
take a few years for a government to implement new trade standards throughout their
current system. In compliance to their agreement, Vietnam will have fully implemented
the majority of WTO standards by 2010. This includes new regulations that will allow
one hundred percent capital contribution investment by a foreign entity in Vietnam
(WTO, 2007, 36).
Role of the Vietnamese Government
Communism and SOEs
Even while technically defined as a socialist form of government, the Communist
Party still remains the dominant political force. The party selects future leaders and
senior government officials and gives them extensive political and ideological training.
This strong Communist influence makes the situation more difficult for foreign investors
to enter the Vietnamese market. Since communism fundamentally lies in the
unchallenged strength of the government, any international investors with a large stake in
any one investment could be seen as a threat to power. This has led to the majority of
businesses within Vietnam being State Owned Enterprises (SOEs).
In Vietnam, the process of equitization includes changing an SOE into a
stockholding company where shares are held in private ownership. The 3,000 SOEs
currently equitized represent about 12% of previous state-owned capital (SCIC, 2007).
Even while the communist government has made this important step to conform to WTO
and Doi Moi standards, they have still retained ownership of forty-six percent of the
shares of the newly equitized firms. Another thirty percent are held by the managers and
employees of the firms, leaving only twenty four percent available for outside investors.
Of the 3,000 newly equitized firms, only twenty attracted foreign investment. The
Vietnamese government has pledged to continually equitize SOEs, leaving only a few
business sectors completely in the government’s control. These include railways,
airports, the media, tobacco, and defense equipment. Even with this pledge, the
Vietnamese government sends mixed messages to private investors, by allowing them
freer trade regulations, but still imposing a forty-two percent corporate income tax, the
highest corporate income tax in the area (Doing Business, 2007).
While the benefits of equitization may seem apparent, many Vietnamese oppose
the privatization of SOEs. SOEs have some advantages over private firms, in that they
have easier contract application, land and credit access, in addition to subsidized loans.
However, once all of the intended SOEs are equitized, laws regulating SOEs will no
longer be in effect, except for those business sectors kept in government control.
The vision of Credit Suisse is to become the world’s premier bank, renowned for
its expertise in investment banking, private banking and asset management, and most
valued for its advice, innovation and execution (Credit Suisse, 2007).
In order to achieve our vision, Credit Suisse will set new standards: new standards
in partnering with our clients and new standards in providing them with innovative and
integrated solutions (Credit Suisse, 2007)
Reasons for Worldwide Success
Since its start in 1856, Credit Suisse has combined traditional values along with a
lasting drive for innovation to continually enhance the Credit Suisse brand.
Headquartered in Zurich, Switzerland, Credit Suisse is a leading financial services
company providing clients with investment banking, private banking and asset
Credit Suisse’s asset management services offer many different investment
products, many are alternative investments. They also manage portfolios, mutual funds
and other investment methods for institutions, governments, corporations and private
individuals. Credit Suisse has offices in eighteen countries that focus specifically on asset
management, but is operated globally on an integrated network.
Credit Suisse’s private banking services provide “comprehensive advice and a
broad range of investment products and services tailored to the complex needs of high-
net-worth individuals globally” (Credit Suisse, 2007). In addition, Credit Suisse provides
asset and liability management to these clients including alternative investment products.
This includes wealth management and booking platforms in addition to their banking
services to business and retail clients.
Credit Suisse also offers investment banking services that include securities
products and financial advisory to corporations, government and institutional investors.
Operating in 57 locations across 27 countries, Credit Suisse specializes in “innovative
solutions, drawing on expertise from across the full spectrum of products: debt and equity
underwriting, sales and trading, mergers and acquisitions, investment research,
correspondent and prime brokerage services” (Credit Suisse, 2007).
Credit Suisse is currently active in over 50 countries, and is one of the few truly
integrated banks, providing institutional and private clients with rapid and effective
service. “Credit Suisse’s business model is the response to constantly changing client
needs in an industry that is driven by globalization and rapid technological
developments” (Credit Suisse, 2007).
Reasons for Success in Vietnam
With the recent privatization policies for Vietnam’s State Owned Enterprises, the
market will be more monetarily fluid. Investment regulations have also recently changed
due to implemented WTO standards. The business environment in Vietnam is full of
opportunities. Credit Suisse’s expertise and seasoned business model for emerging
markets was a key factor in identifying the Credit Suisse as a good match for Vietnam.
Credit Suisse’s strengths are: a commitment to emerging markets, previous
involvement in Vietnam, and a strong brand name bolstered by international recognition.
The importance of emerging markets to Credit Suisse is obvious. Emerging markets have
much more potential for explosive growth than industrialized nations. One of the golden
rules of economics and certainly banking, is that capital tends to congregate in areas that
offer the highest return. Investors want their investments to generate high returns, but
they need professional help due to high risks inherent to emerging market economies.
Credit Suisse is therefore providing a service in high demand to investors around the
The emerging market segment has increased in importance since the last large
global debt crisis in 1998. In a speech to investors, Credit Suisse CEO Brady Dougan,
listed the rapid growth and increasing importance of emerging markets as one of the main
themes in the 2006-2007 agenda (Dougan, 2005). Dougan also highlighted Credit
Suisse’s commitment to emerging markets by revealing the market leading position of the
company in key emerging markets: Brazil, Mexico, Russia, and China.
Credit Suisse is a key player in emerging markets, but it is their commitment to
Asia that adds credibility to their potential success in Vietnam. Similarly to Dougan’s
speech in 2005, Credit Suisse Asia Pacific CEO Paul Calello told investors in a
presentation on April 2, 2007, “The development of emerging markets is a key banking
trend in Asia” (Credit Suisse, 2007). The next three slides of the presentation detail some
of the investment trends in Asia. The fourth slide of the presentation features two key
emerging markets in Asia, the first is Pakistan, the other Vietnam. Credit Suisse has
initiated a fund specifically for purchasing or partnering with foreign companies in
emerging markets; the fund is currently worth $6.7 billion (Credit Suisse, 2007).
Credit Suisse has acknowledged the importance of the Vietnamese market for
over a decade. While most of its competitors began operations in Vietnam in the early
90’s, Credit Suisse waited until the government initiated much need reforms. Credit
Suisse has acted as a consultant to the process of Vietnam credit rating, conducted by
Moody’s, S7P, and Fitch since 2001 (VietNamNet, 2007). In 2005, Credit Suisse stepped
up its commitment in Vietnam by acting as the guarantor in Vietnam’s successful
issuance of $750 million worth of international bonds (Credit Suisse, 2007).
Currently, Credit Suisse is working on a $1 billion loan to Vinashin, a state owned
shipbuilding company and is also advising some of Vietnam’s largest SOEs on
equitization strategies (VietNamNet, 2007). Credit Suisse obtained an SSC license from
the government allowing it to buy and trade domestic securities in the Ho Chi Minh and
Hanoi stock exchanges. The growing footprint of Credit Suisse in Vietnam necessitates
the need to establish a Vietnam branch.
After Credit Suisse secured the loan to Vinashin, the PM of Vietnam, Nguyen Tan
Dung told Credit Suisse CEO Oswald J. Gruebel, “I hope leading CEOs and
consultancies will be much involved in the Vietnamese market, and I wish you every
success in Vietnam’s economy’’(VietNamNet, 2007). The government of Vietnam is not
alone in recognizing the importance of Credit Suisse in the development of emerging
markets. The Credit Suisse brand name is one of the most credible in the industry. Credit
Suisse has received many awards in 2007 in the global banking community, here are just
-Global Investment Bank of the Year
-Best Leveraged Finance House
-Best High Yield Bond House
-Best Leveraged Finance House
-Best Emerging Markets Debt House
-Best Investment Bank in Vietnam
- -Best Investment Bank in Indonesia
-Best Equity Underwriter
-Best Debt Underwriter
-Best Long-Term Partner
-Best Overall Investment Bank
The variety of awards illustrates the credentials of Credit Suisse, a brand name that gives
the company a competitive advantage in the highly saturated market of global banking.
The Credit Suisse Group has witnessed a decline in its net interest margin over the
past few years. The group's net interest income has declined from $6,166.9 million in
fiscal year 2004, to $5,387.4 million in 2006 (datamonitor, 2007). The net interest margin
of the group has declined from about 0.91% in fiscal year 2004 to 0.59% in 2006. This
was mainly due to an increase in interest expense in the group's institutional securities as
a result of higher short-term borrowing costs and higher financing liabilities. The decline
of interest margins deceases the company’s bottom line.
The other weakness identified by Credit Suisse on their website was the relative
weak performance of asset management over fiscal year 2006. The income from
continuing operations before taxes from asset management division declined by 49.5% to
touch $416.8 million in fiscal 2006, down from $825.4 million in fiscal 2005. This is
primarily due to the rising operating expenses of this division. The operating expenses of
this division increased by 31% to touch approximately $1,929.8 in fiscal 2006 from
$1,472.8 million in fiscal 2005. The cost to income ratio stood at 82.2% in 2006
compared to 64.1% in 2005. Declining margin from this division indicates the existence
of cost inefficiencies and gives the company a competitive disadvantage.
The opportunities open to Credit Suisse are a result of strong growth in Vietnam
GDP Growth 8.4
7.1 7 7
40 39 5
GDP % Growth
2000 2001 2002 2003 2004 2005 17
GDP GDP % Growth
and reflect the needs of the market and consumers. The current business environment in
Vietnam is alluring to global banks. The financial sector in Vietnam has grown
considerably, due to reforms and high GDP growth rates since 1998. The growth in the
financial sector necessitated the creation of stock exchanges in Vietnam.
The Ho Chi Minh Stock Exchange (HOSE) has grown dramatically, albeit
erratically since its innaguration in 2000. Due to the government regulations and the
listing of companies on HOSE in Vietnamese Dong, Vietnamese stocks had remained
largely inaccessible to foreign investors (Economist, 2007). WTO accession in 2006
liberalized HOSE by allowing foreign banks to gain access to SSC licenses for the
purpose of buying and trading stocks listed on HOSE (Hochiminhcity, 2007). Since the
reform, foreign investors are now piling in to what remains a fairly small market. Its total
worth has risen from $400m in early 2006 to around $22 billion (Economist, 2007).
The HOSE stock exchange represents a significant opportunity to Credit Suisse.
Vietnamese companies have the potential to grow very rapidly, a demand identified by
the financial banking sector as very important to investors worldwide. A 2007 survey of
300 senior executives conducted by Ernest & Young shows that 83% of participants are
looking to emerging markets for strategic investments (Credit Suisse, 2007).
In spite of recent achievements, Vietnam’s process of transition to a market
economy is still ongoing. State Owned Enterprises (SOEs) still represent a substantial
part of the economy. The process of SOE reform, whose centrepiece is “equitisation”, the
partial divestment and transformation of SOEs into joint stock companies, represents a
prime opportunity to serve as the equitizaition consultant to the Vietnamese government
(European Commission, 2007, 6).
SOEs today account for 39% of both GDP and industrial output and 35% of non-oil
exports (European Commission, 2007, 6-7). While the SOE sector is becoming more
profit-oriented and its economic performance has improved overall, it is consistently
outperformed by the non-state sector, not least as a result of ineffective corporate
governance (European Commission, 2007, 6-7). The EC also noted that SOEs account for
the lion’s share of Vietnam’s non-performing loans, resulting in contingent liabilities for
the government estimated at 8% of GDP, and thus weaken the position of the banking
sector. The inefficiency of SOEs was a driving force behind the revamped commitment in
2001 by the Vietnamese government to speed up the equitization of SOEs (Credit Suisse,
2006). Being the emerging market leader in: merger & acquisition advisory, debt &
equity underwriting, and especially Initial Public Offering (IPO) services, Credit Suisse
would be an excellent consultant.
The main threats to Credit Suisse are its competitors. Credit Suisse is not the only
company aware of the promise in Vietnam. Unfortunately, there are many other banks
operating in Vietnam, including most of Credit Suisse global competitors. Although there
are many competitors in Vietnam, the threat to Credit Suisse is not as significant as it
could be. The strategy of Credit Suisse’s competitors seems to be, offer a broad range of
services in the hopes of creating demand for at least a few of them. Credit Suisse will not
attempt to compete in this matter. Credit Suisse will focus on a strategy of specialization
focusing on the demands of the market, such as equitization.
Credit Suisse’s three main competitors are Deutsche Bank, HSBC, and Morgan
Stanley (Datamonitor, 2007). HSBC and Deutsche Bank entered the market early in
1993, while Morgan Stanley entered last year. All three offer a broad variety of services
like: import/export finance, trade finance, insurance, securities, account services, and
personal banking. So far, Credit Suisse’s competitors have been content to compete with
the same services, stressing brand loyalty as the difference. The specialization strategy of
Credit Suisse could shake up the market by inducing its competitors to follow suit.
The political risk in Vietnam has been significantly reduced by economic and
political reforms, but is still a threat to the company. The potential for risk exists because
of the central control of the government. Power is concentrated into the hands of very
few. The CVP is still under the overwhelming influence of the ruling elite and the
military (business monitor international, 2007). The CVP enacted a new law this year
denying a large sector of the Vietnamese economy the right to strike (business monitor
The CVP is also engaged in an ongoing dispute with ethnic minorities in the central
highlands, most notably the Montagnards. Like many ethnic minorities in LDCs, the
Montagnards measure lower in every economic statistic than the majority Kinh Viet
people. The Montagnards have suffered tremendously. After fighting on the U.S. side in
the Vietnam War, 200,000 Montagnards were killed, many in public executions
(Washington Times, 2006). The Montagnards have since been moved from their ancestral
land, living in extreme poverty in reservations with little access to public services. The
Vietnamese government has routinely denied the existence of any conflict and has
blockaded the central highlands from foreign press (Washington Times, 2006).
The Montagnards have adopted more violent forms of protest in the last five years
including direct attacks on Vietnamese military and police. It is difficult to grasp the
extent of the violence in the highlands. Vietnam is listed as one of the worst counties in
freedom of the Press. The current situation is an appalling civil rights abuse, but not a
direct threat yet to the business sector in Ho Chi Minh City. However, recent conflicts
have proven to be extremely disruptive to Asian LDC economies, most notably in
Myanmar and Sri Lanka.
There are environmental risks affecting the global banking environment and the
environment in Vietnam. The global banking environment has been hit by poor forecasts
for the short-medium term. The performance of the global banking industry is forecasted
to decelerate, with a compound annual growth rate anticipated at 3.5% for the five-year-
period 2006-2011 (Datamonitor, 2007). The decline in growth takes into account many
unfavorable factors such as, new global banking regulations, mortgage uncertainty and
interest rate volatility. Environmental risks inherent to Vietnam are climate related risks:
monsoons, typhoons, flash-floods, and tropical diseases pose relative threats to Credit
Suisse (CIA World Factbook, 2007). The sum of the environmental risk adds another
dimension of needed hedging to ensure a successful business venture.
As stated in their description of services, Credit Suisse targets their investment
banking services to corporations, government, and institutional investors. As a successful
international bank, it was decided to have the target market be the same entities for
foreign investment into Vietnam. These would include corporate investors defined as
companies that invest, or acquire control of other companies; and, institutional investors
that are banks, insurance companies or retirement funds and financially sophisticated
hedge funds (Credit Suisse, 2007).
Credit Suisse identifies the importance of marketing to an established customer
base. These clients are already aware of the reputation of the company and have an
established business relationship with Credit Suisse. These clients typically understand
the emerging markets and therefore are informed consumers, likely to respond to a
successful marketing strategy.
In addition, it was also decided to target the countries and governments that are
currently the main contributors into Vietnam. Taiwan, South Korea, Japan and Hong
Kong are the top four governments that are currently investing into Vietnam (Economist,
2007). By targeting these governments, Credit Suisse will be able to explain the benefits
of investing in the emerging market since they are already familiar with current trade
trends and regulations. The abundance of funds flowing through the Vietnamese market
as a result of the equitization of SOEs will be a target of Credit Suisse. Domestic
investors will have a new incentive to invest in the economy as more securities become
available on the Ho Chi Minh Stock Exchange.
Having established the needs of our target market, Credit Suisse will develop
products that are synergistic in nature, while taking into account the current business
environment. The market at this time is too saturated to make private banking worth the
extra cost. Therefore, Credit Suisse will focus on asset management and investment
In Investment Banking, Credit Suisse currently offers securities products and
financial advisory services to corporations, governments and institutional investors
(Credit Suisse, 2007). Operating in 57 locations across 26 countries, Credit Suisse’s
investment banking business specializes in innovative solutions, drawing on expertise
from across the full spectrum of products: debt and equity underwriting, sales and
trading, mergers and acquisitions, investment research, correspondent and prime
brokerage services. Investment banking in Vietnam will be very similar to this model, but
will focus specifically on the services relevant to equitization. Necessarily, Credit Suisse
will emphasize its competitive advantage in merger and acquisitions, debt and equity
underwriting, and investment research.
In its asset management business, Credit Suisse offers products across the full
spectrum of investment classes, ranging from equities, fixed income and multiple-asset
class products, to alternative investments such as real estate, hedge funds, private equity
and volatility management (Credit Suisse, 2007). Credit Suisse’s asset management
business manages portfolios, mutual funds, and other investment vehicles for a broad
spectrum of clients ranging from governments, institutions and corporations to private
Asset management in Vietnam will be a prime focus for the company as its asset
management performance is one of the company’s biggest weaknesses. The market for
asset management is huge in Vietnam, both domestically and internationally. The
domestic market is comprised of the government, public and private businesses, and even
individuals interested in a manager for their respective portfolios. The volatility of the
market necessitates a professional manager with a successful track record in high
risk/high yield market worldwide. Credit Suisse is that manager.
In addition to management services, Credit Suisse will offer two introductory
products. The demand for emerging market funds is large for investors that can afford the
risk involved. Credit Suisse will begin by offering two mutual funds to meet the demand.
The funds will both be comprised of small amounts of equity from Vietnam’s most
successful listed companies. One of the funds will target the needs of the domestic
market. This fund will be comprised of riskier securities, as the investment regulations
are less stringent domestically. The international fund, also available to domestic
investors, will be a fund hedged to decrease the risk. The foreign fund will be more
expensive due to the higher cost of conforming to international banking regulations, like
the new Basel Accords enacted to inform potential investors of the risks to their privacy
and portfolios (Credit Suisse, 2007). Credit Suisse will monitor the success of these funds
closely with the goal of offering more products in the near future.
Ho Chi Minh city is located on the southern tip of Vietnam. The city is the
financial capital of the country, and boasts the first Stock Exchange of Vietnam which
opened in 2001, and is now one of Asia’s most dynamic stock markets. With over
300,000 businesses populating the city, it is also seen as the economic center of Vietnam
(Economist, 2007). The modern business sector is composed of many large enterprises in
different industries including: technology, electronics, information processing, light
industrials, and agro-products (Economist, 2007). The city has fifteen industrial ports,
and the Quang Trung Software Park, and the Saigon Hi-Tech Park. The computer
company Intel invested one billion dollars into their plant located in the heart of Ho Chi
The city accounts for twenty percent of the national Gross Domestic Product and
thirty percent of industrial product value (Economist, 2007). Ho Hi Minh City also
contributes about twenty-one percent to the national revenue per year. In addition to the
thriving economy, higher education is more developed in Ho Chi Minh City than
anywhere else in Vietnam. Fifty universities are located within the city, with over
300,000 enrolled in the universities. The universities include the University of
Polytechnic, University of Information Technology, Faculty of Economics, the
University of medicine and the University of Banking (Economist, 2007).
Ho Chi Minh City is the best place to launch Credit Suisse. Credit Suisse wants
to be in the financial hub of any city they enter. Ho Chi Minh City is the overwhelming
financial center. It is also the intellectual center. As evidenced by the higher enrollment
rate, Ho Chi Minh City has most of the countries young minds.
To promote the entrance of Credit Suisse into the Vietnamese market, it has been
decided that two promotional activities will be undertaken. Each activity will address a
different sector of the defined target market through a multitude of events.
Soccer is a social institution within Vietnam. It is the most popular sport, and
children are taught to play from their youth. Vietnam has two major soccer teams, the
Vietnam National Football Team, and the V-League (vietnamnet, 2007. The National
Football Team is a large team that is very popular within the nationals. However, the V-
League sponsors youth through adult leagues, and is a more successful team in different
tournaments. In Vietnam last year, the V-League sponsored the Tiger Cup, and also
played in the King’s Cup. The adult V-League team made it to the quarter-finals in both
of these tournaments.
It has been decided that Credit Suisse will help sponsor the V-League, and its
programs for youths and adults alike. By showing the local community that Credit Suisse
is interested in their community through supporting local youth soccer teams, Credit
Suisse will gain a positive reputation among locals. Also, by supporting the adult V-
League teams, Credit Suisse will be able to get their name out to the domestic and foreign
viewers of the tournaments.
This has proved successful in the past with Credit Suisse, as the host a seven day
rugby tournament in Hong Kong, and is very popular internationally and domestically
(Credit Suisse, 2007).
Asian Investment Conference
The Asian Investment Conference (AIC) is an international event sponsored by
Credit Suisse (Credit Suisse, 2007). Held in Hong Kong every year, the conference is
seen as the leading event for foreign investors to discover tomorrow’s opportunities and
issues facing Asia. Leading international corporate, governmental, and private investors
travel to Hong Kong to participate in seminars and meet with other investors to talk over
trade and investing contract in a mediated forum.
In addition to the highly regarded investment conference, Credit Suisse sponsors a
seven day rugby tournament, called The Sevens. The Sevens is a very popular event
domestically and internationally, and attracts viewers all over the globe. Credit Suisse
sponsors the entire event and their logo can be seen throughout the entire event. Credit
Suisse successfully combined the professional goals of their conference with the
important cultural ties to their investors, to provide an influential conference highly
regarded by many powerful investors.
It is at the AIC that credit Suisse will announce their entrance to the most recent
emerging market in Asia: Vietnam. To gain interest into this market, it was decided that
the opening speaker of the conference will be the Prime Minister of Vietnam. The
opening speech at the AIC has in the past been filled by presidents, prime ministers and
Nobel Prize winning economists (Credit Suisse, 2007). In addition, since the conference
is based around the opportunities within Asia, multiple seminars and lectures regarding
the upcoming Vietnamese economy will also be included. This will inspire investors to
either invest in Vietnam and their newly privatized SOEs, or inquire for more information
regarding the economic status of Vietnam. Either way, Credit Suisse sees both of these
options as a benefit, as investors will have more information regarding the Vietnamese
Economy, and will see Credit Suisse as a leader in this emerging market.
To determine the price of investments within the Vietnamese economy, many
factors needed to be accounted for. Bidding, personal consultation, operating leverage,
market volatility, additional fees, and the basic market price of the product are all
determinants of the price for international investments. It is impossible to analyze past
pricing due to privacy laws. Credit Suisse’s pricing will remain a complex package
based on current interest rates, future discounts, management services, products offered,
and a number of other factors unknown at this point in time.
Market Entry Strategy
The success of the venture is highly dependent on the ability of Credit Suisse to
secure a joint venture partnership. The WTO laws concerning banking and other financial
sectors allow for 100% foreign owned branches staring April 1, 2007 (WTO, 2007,
36-40). WTO laws concerning the securities sector are more stringent, not allowing 100%
foreign ownership until 2012 (WTO, 2007, 36-40). Credit Suisse will operate as a hybrid
bank, offering common financial services and securities, thereby denying Credit Suisse
sole ownership of its branch in the first year of operation.
A partnership would also be advantageous to Credit Suisse if the partner could
provide access to government securities or help to lessen start-up costs. The best potential
partner for Credit Suisse is a government holding company named State Capital
Investment Corporation or SCIC. SCIC was created in 2005 to help with the equitization
of SOEs. SCIC’s primary objectives are to facilitate SOE reforms and improve efficiency
of the government’s capital resource utilization (SCIC, 2007). SCIC also manages a
massive portfolio covering different sectors, such as financial services, energy,
manufacturing, telecommunications, transportation, consumer products, health care, and
It is obvious from the company description on the SCIC website that there is goal
compatibility between SCIC and Credit Suisse. Credit Suisse would benefit by partnering
with one of its largest customers, the Vietnamese government. SCIC would also provide
unquantifiable access to market data and would greatly reduce regulatory hurdles. SCIC
could benefit by partnering with one of the market leaders in equitization. SCIC has
proved to be much less efficient than Credit Suisse in managing its equity. The ROE for
SCIC is near 11%, whereas Credit Suisse is consistently over the 20% mark (Credit
Suisse et al, 2007 & SCIC et al, 2007). A business partnership between Credit Suisse and
SCIC would be an asset to both companies.
Credit Suisse will attempt a 20% stake in SCIC. WTO regulations mandate that
no foreign firm can take more than a 30% stake in a Vietnamese state owned banking
entity (WTO, 2007, 42). Credit Suisse negotiators must be aware that the Vietnamese are
known for stalling negotiations to put pressure on the other side. This is one of the
reasons it took ten years of negotiation for Vietnam to accept WTO regulations. Credit
Suisse must remain honest and focus on the synergies inherent in the deal. SCIC will be
keenly aware that Credit Suisse must have a partner to enter the market. This necessitates
the need of a back-up plan highlighting different potential partners so that Credit Suisse
has some bargaining power. Credit Suisse must also consider compromising down to a
10% stake, but any less would jeopardize the financial goals of the company.
Contributed Capital $54,000,000
Cost of Revenue 15% of revenues
The cost forecast above is our best estimate at the costs of implementing this venture. It is
also the culmination and climax of our presentation.
*Sources: (Doing Business in, 2007)
*Sources for Energy: (Electricity of Vietnam, 2007), Needs based on 100,000 square
foot, type “A” office building.
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