Local banks in Vietnam are competitively weak and likely to lose their market share to foreign rivals during the international economic integration process, Vietnam Economic Times reported Thursday.

Vietnamese commercial banks are much less competitive in terms of capital, manpower, technology, management, service and market. Most of the banks have limited capital and business scopes, while their bad debt ratio is high. Five state-owned commercial banks, which hold a credit market share of 80 percent, have total paid-up capital of just over 1 billion US dollars.

Now, products and services of local commercial banks are poor, while procedures for using them are relatively cumbersome. Many advanced services such as electronic banking, business brokering and consultancy in Vietnam are still in infancy stage.

Besides, technologies used in the banks are out-of-date, which makes them unable to establish highly effective risk management systems, internal payment systems, and inspecting and auditing systems.

Encountering the weak points, many local banks will find it hard to survive when Vietnam opens up its banking services to the outside world, the report said. Under the Vietnam-US bilateral trade agreement, which took effect in December 2001, US banks can do business in the country in the next few years.

With regard to banking services, US banks may establish joint ventures with Vietnamese partners, with US equity of 30-49 percent for the first nine years after the agreement goes into effect. After the period, 100-percent subsidiaries are permitted.

As of mid-2004, Vietnam had housed five state-owned commercial banks, one policy bank, 34 commercial joint stock banks and 26 branches of foreign banks.

Source: Xinhua