BIDV Review 52 - August

A Newsletter of Bank for Investment and Development of Vietnam JSC • Issue No.52 | August 2019

Banks and fintech collaboration key to financial inclusion BIDV and EXIM Thailand sign MOU

BIDV headquarters seen from Hoan Kiem Lake

ABOUT BIDV Founded in 1957, BIDV is the largest commercial bank in Vietnam by assets. The bank boasts subsidiaries in finance, banking, securities and insurance. It has a wide network of more than 1000 branches and transaction offices as well as commercial presences in six countries and territories.

BIDV stock (BID) is listed on Ho Chi Minh City Stock Exchange (HOSE). For more information, please visit www.bidv.com.vn.

EXECUTIVE PRODUCER QUACH HUNG HIEP, Ph.D Bank for Investment and Development of Vietnam JSC

Senior Executive Vice President EDITORIAL BOARD Communication and Branding Department HEAD OFFICE: BIDV Tower, 35 Hang Voi str., Hoan Kiem dist., Hanoi, Vietnam Tel: (+84) 24 22205544 Fax: (+84) 24 22225316 Contact center: 19009247 Email: bidvreview@bidv.com.vn License No.17/GP-XBBT dated 15 March 2019 by the Ministry of Information and Communications Printed at Vietnam Book Printing Joint Stock Company

Editor’s Letter

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Dear readers, n this publication, we offer some insight into the country's bancassurance, M&A, fintech and coffee industry.

Bancassurance is confirming its increasing role as a preeminent sales channel in Vietnam, bringing practical benefits to customers, banks and insurance companies. Bancassurance is the main insurance distribution channel in countries owning developing insurance markets. The cooperation between BIDV and BIC is one of the first of its kind in Vietnam.

The Vietnamese coffee industry has a great competitive advantage and holds high potential for industry development and investment. Vietnam is currently a leading country among the main producing countries, reaching about 2.55 tons per hectare. The country’s coffee industry is forecast to see further development and reach new heights, contributing to promoting the country's image in the international market.

After a decade of strong growth, Vietnam’s mergers and acquisitions (M&A) market grew dramatically and is predicted to enter a new era with various opportunities. M&A has become an important source of funds for local companies and diversifying capital inflows into the economy. M&A is also pushing the restructuring process of Vietnam’s growing economy. Total M&A value in Vietnam in the first seven months of this year reached nearly USD5.43 billion.

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The cooperation between fintech and banks operating in Vietnam will lay solid foundations for improving access to financial and banking services for users.

The banks and fintech companies are expected to perfectly complement each other, helping create value for users and society, and promoting the dynamic development of the market in the future.

This trend is seen in many banks both throughout the region and globally.

In this issue's legal column, we provide readers with brief information about a list of transactions that must be made by noncash methods including several payments and transactions in M&A activities, securities, and tax. Another circular concerning foreign direct investments in Vietnam is also noteworthy. Pursuant to this Circular, foreign investors and domestic investors in foreign-invested enterprises in Vietnam may make either foreign-currency or Vietnamese-dong investments according to the capital contribution rate mentioned in a number of documents.

On the last pages there will be some interesting information about the structures featured on Vietnam's VND50,000 banknote as well as a mural village in Quang Nam province which features an array of vibrant artworks depicting scenes of local daily life.

contents

10. BIC sees profits surge

BIDV HIGHLIGHTS

04. BIDV and EXIM Thailand sign business cooperation agreement

11. LaoVietBank awarded by ABF for achievements in IT 12. BSC named Best Brokerage House

05. BIDV Retail Banking: 10 years and counting 06. Smile Run full of impressive moments

MARKET MOVEMENTS

13. Data centre growth brings extra storage demand

08. Development trends in bancassurance

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contents

LIFESTYLE

INSIGHTS

22. Historical structures on Vietnam's banknote

14. New opportunities for Vietnam's coffee industry

16. M&A market: 10 year review 18. Banks and fintech collaboration significant for financial

24. Local daily life on murals

inclusion

CSR

26. Blood donation saves lives

POLICY UPDATE

20. New regulations on compulsory non-cash transactions and FDI

27. Safe passage for students in the rainy season 28. Bridges bring convenience to rural communities

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BIDV Highlights

Phan Anh

BIDV and EXIM Thailand sign business cooperation agreement banks. He hoped that the agreement will effectively realise cooperation transactions between the two parties in the near future.

Mr. Le Ngoc Lam, senior executive vice president in charge of BIDV's Board of Management (L) and Mr. Pisit Serewiwattana, president of EXIM Thailand represent the two banks to sign the MOU in Hanoi

On 16 August, BIDV and Export-Import Bank of Thailand (EXIM Thailand) signed a memorandum on mutual business cooperation.

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r. Tanee Sangrat, Thai Ambassador Extraordinary and Plenipotentiary to Vietnam, Mr. Le Ngoc Lam, senior executive vice president in charge of the Board of Management, Pisit Serewiwattana, CEO of EXIM Thailand and senior executives of the two banks were in attendance.

Under the agreement, BIDV and EXIM Thailand will strengthen cooperation in potential areas such as project finance, customer referral and provision of banking products and services, international payment and trade finance. In particular, in trade finance, the two banks will prioritise each other’s involvement in financing projects, co-financing transactions and providing products and services to projects and customers.

Addressing the ceremony, Mr. Tanee Sangrat expressed his congratulation on the cooperation of the two

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BIDV is the first Vietnamese bank EXIM Thailand has entered into a memorandum of understanding with.

As of 30 June 2019, the Vietnamese primarily state-run lender’s total assets reached more than USD60.2 billion, up 6.6 percent compared to the end of 2018. The bank covers a network of more than 1000 branches and transaction offices as well as commercial presences in six countries and territories. BIDV has been in the list of the top 2,000 world’s largest public companies and top 500 world’s most valuable bank brands.

EXIM Thailand is a state-owned bank.

The bank currently has a network of nine branches with total assets and owner’s equity of USD3.5 billion and USD698 million, respectively (as of 31 December 2018). The bank provides financial services to promote import and export activities as well as investment activities for national development. EXIM Thailand receives great support from the Thai government to serve small and medium enterprises, Thai investors abroad and large-scale shipping businesses.

BIDV Highlights

Ha Thu

BIDV Retail Banking: 10 years and counting During the past 10 years of retail banking development, especially in the last 3 years, BIDV has made great strides on track to become the best retail bank in Vietnam.

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IDV Retail banking was awarded "Best Retail Bank in Vietnam” for 5 consecutive years by The Asian Banker and “Outstanding Retail Bank” for 3 years in a row by Vietnam Banks Association (VNBA) and International Data Group (IDG). However, besides the awards and accolades, the retail banking has contributed significantly to the bank business results, making up 38 percent of the total income of the bank’s system.

In early August 2019, BIDV organized a conference on Retail banking business plan implementation. At the conference, BIDV board chairman Phan Duc Tu shared the retail banking orientation for the period 2019-2021.

In particular, Mr. Tu highlighted the technology application in all banking activities, and the combination of retail banking and wholesale banking.

According to Mr. Tu, the system should improve management capacity, branding and network, adding that the

smooth coordination between Head Office and branches is the driving force to promote the development of retail banking.

BIDV is set to be the best retail bank in Vietnam in the next 3 years. The lender’s confidence is built on the high quality human resources, and effective support of the digital banking project.

In recent years, BIDV has always been the leader in deposits, retail credits, individual customer base and the increasing service income.

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However, scale growth is not the target of BIDV retail banking, but the efficient and sustainable development.

Larger scale means increased pressure on operation and there will be more potential risks, which will directly affect service quality and customer satisfaction. That requires BIDV to innovate, further improve corporate governance and launch more digital banking products to create qualitative change in the bank’s retail banking activities.

BIDV Highlights

Nguye n Linh

BIDV Smile Run

full of memorable moments On 25 August BIDV held the run “BIDV Smile” in Binh Duong province as part of a series of activities to convey the service message of 2019: “BIDV Smile - Thoughtfulness, Professionalism and Quality".

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he race saw the participation of 1458 athletes from the bank’s 54 local trade unions in Ho Chi Minh city and the Southeastern region, who competed over a distance of 4, 400 metres – a target of service income set

by BIDV for 2019.

The Smile Run aims to raise awareness of the significance of the service development plan for BIDV employees, motivating them to improve the bank's service quality, professionalism, friendliness and responsibility, striving to fulfil the 2019 net service income target and laying solid foundations for the plan implementation in the coming years.

Speaking at the race opening ceremony, Mr. Tran Xuan Hoang, senior executive vice president at BIDV, chairman of BIDV Trade Union and head of the race steering committee, said he hoped the event would trigger a series of

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BIDV Highlights

activities of the service development plan. He also said that the message “Thoughtfulness, Professionalism and Quality” is one that customer relationship officers as well as branches and departments should keep in mind while serving customers.

Sideline activities of the race also attracted the attention of the bank’s employees such as creating slogans, communication documents, a photo contest “Most favourite team” on the BIDV Fanpage, and a Flash mob dance.

Many collectives and individuals were honoured at the prize giving ceremony following the exciting competition.

However, the victory is not only for the race winners, but for all the bank’s employees who are inspired to render more effort and contribute to the bank’s service development in order to better serve customers.

Final race results: Collective prizes First prize: BIDV Gia Dinh Second prize: BIDV Truong Son, So Giao Dich 2, and District 9 Sai Gon Third prize: BIDV Binh Duong, Dong Nai, Binh Phuoc, Tay Sai Gon, and Tay Ninh.

Men’s individual prizes First prize: Bui Quang Phat (BIDV Gia Dinh) Second prize: Huynh Tuan Minh (BIDV District 9 Sai Gon) Third prize: Bui Dinh Vu (BIDV Truong Son), Lai Minh Khoi (BIDV Chau Thanh Sai Gon).

Women’s individual prizes First prize: Dang Thuy Duong (BIDV Binh Thanh) Second prize: Nguyen Thi Hong Van (BIDV Binh Duong) Third prize: Duong Thi Thuy (BIDV Cho Lon), Dinh Thi Ngoc Ngan (BIDV District 9 Sai Gon)

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BIDV Highlights

Nhu Linh

Dr. Sanjeev Jha, managing director and CEO of Fairfirst Insurance Limited, speaks at a conference on BIC and BIDV’s bancassurance cooperation

Development trends in bancassurance In Vietnam, bancassurance is confirming its increasing role as a preeminent sales channel, bringing practical benefits to customers, banks and insurance companies.

Impressive growth Bancassurance is the main insurance distribution channel in countries owning developing insurance markets.

In Europe, premium revenue from bancassurance captures 60 percent of total market insurance premium revenue. In some Asian countries such as Japan and Hong Kong, bancassurance is also more dominant

than traditional insurance channels.

Speaking at the conference on BIC and BIDV’s bancassurance cooperation early this month, Dr. Sanjeev Jha, Managing Director and CEO of Fairfirst Insurance Limited, a subsidiary of Fairfax Asia from Srilanka, between 2017 and 2018 there were 50 cooperation deals in bancassurance, with outstanding ones in countries including Nepal, India, Pakistan and Vietnam.

The success of bancassurance in developing countries is due to banks’ awareness of this channel’s important role in exploiting the great potential of the existing customer base and future customers. Bancassurance completes

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risk prevention solutions, ensures credit safety for banks, and brings a large source of revenue from insurance commissions.

In Vietnam, although bancassurance appeared later than other insurance channels, it has quickly attracted the attention of banks and insurance enterprises, especially in the last five to seven years when Vietnam's banking system was strengthened, becoming more active, modern and competitive.

However, the share of this distribution channel is quite modest - at less than 10 percent of the total market insurance premium revenue.

According to the Insurance Supervision Authority under the Ministry of

BIDV Highlights

Finance, Vietnam’s insurance market has 31 non-life insurance companies, two to three of which are cooperating with local banks to implement bancassurance. It is estimated that bancassurance has seen an average growth rate of 30 percent per year in the last five years and is expected to report impressive growth in the coming years.

In Vietnam, the cooperation between BIDV and BIC is one of the first of its kind in Vietnam. The cooperation is growing, bringing many benefits to both sides. After 11 years, the bancassurance revenue of BIC has increased 50-fold with average growth of 50 percent per year and the number of bancassurance customers reaching 300,000. BIC’s insurance products are effective risk management tools, ensuring financial safety for banks when customers lose their debt payment ability.

Inevitable trend According to the world's leading reinsurance company Swiss Re, bancassurance will continue to have more favourable conditions to develop in the future.

The development trend of bancassurance is inevitable given the harmonious benefits it brings to customers, banks and insurance companies. In particular, customers will be provided with "full package, one-stop" financial services at competitive prices. The insurance application process will be simplified and more attached to banking products. Banks will receive increasing

financial protection from insurance companies' products and services, more customer engagement, reduced bad debt, and increased service revenue without any risk. Cooperating with banks will help insurance companies to take advantage of the bank brand's strength and customer base to develop business operations and increase efficiency.

However, there are still some factors that can inhibit the development of bancassurance. According to Dr. Sanjeev Jha, many banks in emerging markets are lacking of vision and strategy and only interested in high commission rates, as a consequence, other benefits of bancassurance are undervalued.

Therefore, banks need to raise awareness in cooperating with insurance partners.

Banks needs to select insurance products that are compatible with their credit policy and target customers, in order to provide the most complete financial service package to them.

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BIDV's Board of Directors determines that insurance is an important pillar of the BIDV system. Insurance is an additional tool by which BIDV can provide a full financial package to customers, manage risks, increase service revenue and restructure revenue sources.

Based on the active support from BIDV and the close cooperation between the two sides, the company has identified its targets for the next five years. Specifically, BIC aims to remain amongst the top three profitable nonlife insurance companies and reach the top five insurance companies in terms of market share in 2025; and increase its insurance premium revenue by at least 20 percent in the next five years.

Bancasurance growth is expected to hit 35 percent per year in the period 20192025, accounting for 40 percent of total direct written premium in 2025.

BIDV Highlights

M anh Hai

BIC sees profits surge and enhancing the application of information technology to improve productivity and reduce costs. BIC's retail activities in the first six months of 2019 also achieved impressive results. In particular, bancassurance surged 69 percent, fulfilling more than 45 percent of the year plan.

BIC logo on Vincom Tower in Hanoi

BIC’s business result was reported to be positive in many activities, with the highlight being a profit surge of 18 percent. This information was released in BIC’s recent preliminary review conference covering the first six months of 2019, held in Nha Trang, Khanh Hoa.

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ccording to Mr. Tran Hoai An, BIC's CEO, the company's business activities in the first six months of 2019 reported very positive results. Total insurance premium revenue of the parent company completed 47 percent of the year plan, of which, direct written premium grew by 12 percent compared to the same period last year. Consolidated profit before tax increased by 18 percent compared to the same period in 2018, fulfilling 67 percent of the year plan.

In the first half of 2019, BIC recorded profit from its insurance business activities. This result comes from BIC's efforts over the past years in restructuring products, controlling operation and compensation costs

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In addition, in the first six months of 2019, BIC also completed credit re-ranking with A.M.Best, the world's leading financial credit rating organisation. Currently, BIC is one of three non-life insurance companies owning the highest credit rating in the market (B++). BIC has also recently been granted many awards and accolades including being named among the Top 10 reputable non-life insurance companies in Vietnam and Vietnam's Top 100 excellent brands.

BIC said it would continue to implement solutions to complete the annual plan targets of 2019.

Specifically, total insurance premium revenue of the parent company is expected to reach VND2,220 billion (USD95 million) and consolidated profit is planned to hit VND223 billion (USD9.5 million) Mr. Tran Xuan Hoang, a senior executive vice president at BIDV and BIC Chairman said that business activities till the year-end will still face challenges. He asked BIC to implement more creative ideas, apply solutions to increase operational efficiency besides increasing premium revenue in order to maintain a reasonable cost ratio.

BIDV Highlights

Tu an Manh

LaoVietBank awarded by ABF for achievements in IT LaoVietBank recently received double awards from Asian Banking and Finance magazine at a ceremony held in Singapore.

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he awards included Laos Domestic Technology & Operations Bank of the Year in the Wholesale Banking category and Digital Banking Initiative of the Year – Laos in the Retail Banking category.

LaoVietBank has been honoured with the “Laos Domestic Technology & Operations Bank of the Year” award for a number of consecutive years and is the first bank in Laos to be nominated for the category “Digital Banking Initiative of the Year – Laos”.

The awards are recognition of the bank’s sustainable development and pioneering action in applying IT to its banking operations.

The event drew over 270 banking and insurance executives. Almost 100 outstanding banks from 37 countries were recognised at the awards ceremony.

Commenting on the achievement, Mr. Bui Thanh Hoai, deputy general director at LaoVietBank, emphasised the significance of IT development to banking operations, particularly services and products. The senior executive expressed his gratitude to

Representatives of LaoVietBank receive the award from ABF magazine

the bank’s customers and employees for their trust, effort and creativity that helped the bank win the awards.

Asian Banking and Finance magazine is one of the Asia’s most prestigious magazines for banking and finance.

Since 2006, the magazine has run polls to honour the best financial institutions in Asia, with 15 categories for retail banking and five for wholesale banking.

This year’s nominations were judged by representatives from the Big Four accounting firms: Deloitte; Ernst and Young; KPMG; and PricewaterhouseCoopers.

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Lao-Viet Joint Venture Bank (LaoVietBank), the first Vietnamese bank to be established in Laos in 1999, is a jointventure between BIDV and Banque Pour Le Commerce Exterieur Lao (BCEL).

In 2018, LVB continued to be one of the leading commercial banks by scale and efficiency in Laos. Total assets reached nearly USD1.13 (earning the bank third rank in the market). Customer deposits reached over USD1 billion.

Total outstanding loans reached USD809 million and profit before tax reached USD9.5 million.

BIDV Highlights

Nha n Thanh

BSC named Best Brokerage House BIDV Securities Company (BSC) was recently honoured to receive the “Best Brokerage House, Vietnam 2019” award from Global Banking and Finance Review.

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he annual award is recognition of BSC's efforts in providing the best services and products to customers and partners. Receiving the award marks a milestone in the company’s 20year journey of establishment.

For many consecutive years, BSC has been among the Top 10 securities companies with the largest brokerage market share in Vietnam, and Top 6 securities companies with largest market share in futures brokerage on Hanoi Stock Exchange (HNX).

In particular, the company has maintained its leading position in the government bond brokerage market share on HNX since 2013.

Since its inception in 2011, the Global Banking and Finance Review awards has reflected the innovation, achievement, strategy, progressive and inspirational changes taking place within the global financial community. The awards were created to recognise companies of all sizes that are prominent in particular areas of expertise and excellence within the global financial community. They reflect the innovation, achievement, strategy, progressive and inspirational changes taking place within the financial sector.

BSC, a subsidiary of the Joint Stock

Mr. Do Huy Hoai, CEO of BSC, (R) receives the Best brokerage house award from Global Banking and Finance Review

Commercial Bank for Investment and Development of Vietnam (BIDV), is one of the country’s first full-service brokers.

The company has made good use of the market trend to achieve outstanding growth in profitability. Profit before tax in 2018 reached USD10 million, surpassing 19 percent of the 2018 plan and increasing by 16 percent from 2017.

BSC enjoys wide recognition for its local market expertise and privileged access to both data and opportunities.

The company has played a leading role in the shaping of the two major stock exchanges in Vietnam. BSC has a unique overview of both national and local corporate trends and developments that allow the brokerage to identify exceptional opportunities for their clients’ benefit.

Earlier in 2018 BSC was also named Best Securities Broker in Vietnam 2018 by Capital Finance International (CFI.co).

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The two national stock exchanges (Hanoi Stock Exchange and Ho Chi Minh Stock Exchange) are set to merge into one single stock exchange under the new name Vietnam Stock Exchange. The new headquarters will be in Hanoi.

This information was released during the 36th session of the National Assembly Standing Committee held from 12 to 16 August 2019, contradictory to previous predictions that the two current bourses will operate independently under the control and ownership of a new stateowned company.

The post-merger stock exchange will be managed by the Ministry of Finance, acting as a focal point for issuing regulations on stock listings and trading, monitoring the stock market, managing risk and directly organising securities transactions.

market movements

Son Quang

Data centre growth brings extra storage demand

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ccording to a recent report released by property consultancy Cushman & Wakefield, the Southeast Asia region will be the fastest-growing region for co-location data centres over the next five years.

The market size is expected to expand by a compounded annual growth rate (CAGR) of 13 percent between 2019 and 2024.

The second fastest growing region is the Asia Pacific. This region is expected to grow steadily at around 12 percent CAGR over the same period.

North America is currently the largest co-location data centre by market size at USD17.2 billion but the Asia Pacific region is expected to take over the top position by as early as 2021. The total market size for the Asia Pacific co-location data centres is forecast to be around USD28 billion by 2024, 20 percent higher than the USD23.4 billion market size of North America.

Singapore has emerged as the third most robust data centre market worldwide

to other countries. Singapore is one of the early adopters of 5G, and is on track to roll out 5G mobile networks by 2020.

need across Southeast Asia is of great potential for data centers development, according to Cushman & Wakefield.

Singapore has emerged as the third most robust data centre market worldwide in a global ranking of 38 countries, and the only mature data centre market in Southeast Asia.

Taking second and third place in the Asia Pacific ranking are Hong Kong and South Korea, respectively.

Vietnam ranks ninth, followed by India and Indonesia. Although the rest of the SEA countries such as Malaysia, Indonesia, Thailand and Vietnam rank relatively lower in the risk index, the potential commercial benefits for data centre players are significant.

Singapore’s rise in the global index comes on the back of its improved highspeed connectivity, political stability and low risk of natural disasters relative

The young and dynamic workforce of Indonesia and Vietnam will promote information technology, e-commerce and digital banking. The data storage

However, the infrastructure in these markets is not fully developed, posing some challenges for data centre providers. Cushman & Wakefield noted that well-located data centres that are built with redundancies will therefore be in short supply and high demand. Data centre service providers should weigh commercial opportunities against risks and put in place appropriate measures to mitigate and manage risks accordingly.

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Insights

Anh Tuan

New opportunities for Vietnam's coffee industry Bestowed with favourable climate conditions for growing coffee plants and low-cost labour and production, Vietnam's coffee industry, particularly in the Central Highlands, has a great competitive advantage amongst global competitors. Vietnam is currently a leading country among the main producing countries, reaching about 2.55 tons per hectare.

The industry’s impressive results are attributed to many factors including the favourable natural conditions, the industry benefits from the experience of growers and producers and technical improvements in plant varieties, cultivation and the care process by coffee growers.

Vietnam's coffee industry, particularly in the Central Highlands, has a great competitive advantage amongst global competitors

The Vietnamese coffee industry has a great competitive advantage and holds high potential for industry development and investment. BIDV Training and Research Institute evaluates investment opportunities in this high-potential industry.

Leading position In the past 20 years, both the cultivated land area and the production of coffee grown in Vietnam have developed strongly, especially in the period 2000 - 2010 when the world price of coffee was in a cycle of price increases. During this period, world coffee prices increased about six times from USD0.45/pound in 2001 to USD3/pound in 2010. The coffee

growing area in Vietnam during this period also increased from 470,000 hectares in 2000 to nearly 550,000 hectares in 2010. Since 2010 when the world coffee price decreased, the coffee growing area in Vietnam, although there was a period of slowdown, saw continued expansion overall. By the end of 2018, Vietnam’s coffee cultivation area was at 688 hectares, of which the harvest area was 650 thousand hectares.

On the world coffee map, Vietnam currently ranks sixth by cultivation area and second by coffee production (behind Brazil) and ranks first

by Robusta coffee production. In the 2017/2018 season, Vietnam's coffee accounted for 18.6 percent of production output and 19.8 percent of global export volume. It can be said that Vietnam has become a leading country in growing and producing coffee beans.

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Challenges Though successful in affirming the leading position in production and export, the country’s coffee industry is still facing many difficulties and challenges.

Currently, the proportion of coffee trees aged 15-20 years in the Central Highlands region is quite high. The productivity of these aging trees will gradually reduce and they will need to be replanted. To address this issue, in 2014 the Ministry of Agriculture and Rural Development issued a scheme to replant coffee trees in the Central Highlands, setting a goal toward 2020 to replant about 120,000 hectares. The replanting area is relatively high and is expected to achieve the set target.

However, in many regions replanting results are not as expected due to ineffective processes being in place that have resulted in pests and diseases in the new trees. In addition,

Insights

the intensive cultivation of coffee on a large and centralised scale has led to a decline in soil quality and nutrient imbalance, causing crop diseases such as root rot, yellow leaves, dry branches, and fruit drop. This is likely to affect coffee productivity in the coming time.

Meanwhile, growing coffee trees is not of high economic efficiency due to the impact of prolonged price reduction cycle in the world coffee market. In some places, farmers are not interested in maintaining coffee gardens, instead replacing the trees with others with higher economic efficiency.

Another factor that affects the overall efficiency of the coffee industry is the limited ability to process highvalue products. Currently, Vietnamese coffee is mainly processed and then exported in the form of coffee beans. The rate of deeply processed products of commercial value is limited and although there have been improvements in recent years, the rate of deeply processed coffee products is still low, accounting for only about 0.1 percent of total export turnover.

Opportunities for Vietnamese coffee Although facing many challenges, the development potential of the coffee industry is very open. However, as a country leading in coffee production, Vietnam is still lacking and weak in the processing stage in terms of creating branded products.

According to the Vietnam Coffee Cocoa Association (VICOFA), there are more than 150 coffee export enterprises and about 3,000 coffee agencies, of which about one-third of the enterprises have export coffee processing plants.

However, there are only 19 instant coffee processing plants with a total design capacity of nearly 180,000 tons per year. Although the number of enterprises in Vietnam’s coffee business sector is very large, there are only a few big names and brands such as Trung Nguyen Group, Nestle Vietnam Co., Ltd., and Vietnam Ngon Coffee Co., Ltd. Therefore, there is great opportunity for new businesses to invest in Vietnam's coffee industry.

Trading coffee in the domestic market also draws attraction from many businesses both at home and abroad. According to data from the International Coffee Organisation (ICO), the market for coffee consumption in Vietnam has experienced a rapid growth rate (tripling in the last 10 years). This is the highest growth among coffee exporting countries. Domestic coffee consumption is expected to continue to increase as Vietnam is a developing

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country, with per capita income and population increasing rapidly. New trends and diversifying customer tastes, especially among young people, present the possibility of developing new coffee products.

In recent years, the market has witnessed the strong development of traditional coffee store chains, existing Vietnamese coffee brands such as Trung Nguyen and Highlands Coffee, along with the market entry of international coffee brands such as Coffee Bean and Starbucks. The boom of these coffee chains reflects the potential of the domestic market.

With the industry’s current position and potential, Vietnam's coffee industry is forecast to have further development and reach new heights, contributing to promoting the country's image in the international market.

Insights

Khanh Linh

M&A market: 10 year review After a decade of strong growth, Vietnam’s mergers and acquisitions (M&A) market grew dramatically and is predicted to enter a new era with various opportunities.

However, currently many challenges remain.

Significant growth In the last ten years, M&A activities across the country have grown greatly both in quantity and deal value, becoming an important source of funds for local companies and diversifying capital inflows into the economy. M&A is also pushing the restructuring process of Vietnam’s growing economy, which includes the equitisation of state-owned enterprises

and boosting standards of corporate governance and the competitiveness of Vietnamese companies.

According to Mr. Vu Dai Thang, Deputy Minister of Planning and Investment of Vietnam, in 2009, total M&A value reached USD1.1 billion. However, in 2018, it soared to USD10.2 billion, pulling the total value in the last ten years to USD55 billion.

The number of deals also increased rapidly across all businesses, from private to foreign and state-owned enterprises. The deals attracted the participation of not only domestic and foreign professional financial investors but also production and technology enterprises.

The most bustling sectors in the period 2018-2019 include consumer goods manufacturing, real estate,

logistics, e-commerce and retail, all of which are taking advantage of the country's huge market of more than 96 million people.

The deal between BIDV and KEB Hana Bank would be the largest ever one in Vietnam's banking sector

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Vietnam’s M&A market has seen a great deal of socio-political developments, including the revised laws on investment and enterprises, as well as

Insights

BIDV-KEB Hana Bank deal is the highlight of the M&A market in general and financial market in particular.

Specifically, BIDV will issue over 603 million stocks as private placement to South Korean partner KEB Hana Bank.

The total value of the deal is more than VND20 trillion. With the stock purchase, KEB Hana Bank will hold a 15-percent stake in BIDV. Besides finance and banking, consumer goods and retail are expected to be targets for financiers thanks to the growth potential and rising local demand. In particular, the food and beverage sector will remain attractive for M&A deals. According to Dang Xuan Minh, general director of AVM Vietnam, with much room for potential transactions, famous brands such as Habeco, Vinamilk, and others will be on the radar of international groups from the United States, European Union, and neighbours such as Thailand.

However, challenges remain. The process of equitisation and divestment of state-owned enterprises in 2018 and in the first seven months of 2019 showed certain efforts and positive results although signs of slowing down. In addition, valuation, brand management, and post-M&A management are notable issues of M&A activities in 2018 and early 2019. the Securities Law and other legal documents such as a strategy to attract new-generation foreign investment inflows, as well as new free trade agreements such as the CPTPP, EVFTA, and EVIPA. It is hoped that these developments will usher in new opportunities to help Vietnam attract more foreign investment capital, including through the M&A channel.

Trends Total M&A value in Vietnam in the first seven months of this year reached nearly USD5.43 billion. Experts posit that the value could reach USD7.6 billion by the year-end, while leaving open the possibility of a higher value if big deals like KEB Hana Bank appear.

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The challenges also come from both outside and inside Vietnam. For example, major economies are changing their policies on international trade, and from within Vietnam, some regulatory roadblocks have yet to be resolved, while the quality of many domestic businesses remains low. Moreover, there are pending issues related to the equitisation and divestment of state-owned enterprises.

Insights

Phuong Linh

Banks and fintech collaboration significant for financial inclusion The development of Fintech and the cooperation between fintech and banks operating in Vietnam will lay solid foundations for improving access to financial and banking services for users.

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ccording to the Payment Department under the State Bank of Vietnam (SBV), the number of Fintech companies in Vietnam increased from 40 in 2016 to nearly 100 currently, of which 30 companies are licensed by the State Bank to provide payment intermediary services.

Improving access to financial and banking services Changes in fintech have greatly contributed to expanding financial inclusion, reducing transaction costs, improving transparency, cost efficiency and income.

Digital finance is improving access to financial services, especially unbanked groups. So far, although the number of mobile phones is larger than the current world population, only 6 out of 10 adults have bank accounts. Therefore, financial services are expected to provide customers with high speed, responsibility and efficiency.

In addition to new services that the Fintech wave brings in, the cooperation will turn Fintech into an extended arm

Banks and fintech companies are expected to perfectly compl

of banks reaching to those without bank accounts, bringing about good, flexible, and convenient experience to customers, effectively supporting the financial inclusion, and making a significant contribution to socioeconomic development.

In addition, if technology companies connect with banks, many new products will be launched to help diversify financial services for

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customers, pool risk and reduce financial shocks.

This cooperation also helps banks and fintech take advantage of each other's strengths to provide better financial and banking services as well as solutions for users. The banks’ strength is their compliance with the provisions of the law. In addition, these banks have established their reputation and trust with customers

Insights

offer a better experience for users. The weakness of Fintech companies is that there is no support for legal compliance, monetary safety regulations or antimoney laundering. This prevents fintech from building trust and a reputable brand in financial services.

Thus, the banks and fintech companies are expected to perfectly complement each other, helping create value for users and society, and promoting the dynamic development of the market in the future.

This trend is seen in many banks both throughout the region and globally.

However, in addition to the obvious benefits, Fintech's resurgence also poses many challenges which directly affect current banks and new Fintech entrants to the financial sector, including network security control, technical infrastructure investment costs, technology and human resources training.

Finalising ecosystems for Fintech development ement each other, helping create value for users and society

and the community, and have good knowledge of banking services.

However, banks also have some weaknesses in that they are often slower than other technology companies in IT innovation and creativity. Meanwhile, Fintech companies bearing the nature of startups tend to be creative and dynamic. They view banking services through the perspective of a customer and are ready to provide services that

The activities of payment intermediary service providers in Vietnam, a form of Fintech in the field of payment, have been subjected to the State Bank Law 2010, Government’s Decree 101/2012 on non-cash payment and the State Bank’s Circular 39/2014 on payment intermediary.

In recent years, the SBV has been active in approaching the issue and working with Fintech businesses to remove obstacles and facilitate them to enter the market. To date, after establishing a relatively clear legal framework,

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the SBV has granted an official operating license to nearly 30 payment intermediary service providers.

Major payment intermediary services include: first, electronic payment infrastructure supply which consists of financial switching; electronic clearing and electronic payment portal; second, payment service support services, including supporting collection and payment and supporting electronic money transfer; and third, electronic wallet service.

In March 2017 the SBV established the Financial Technology Steering Committee in order to provide solutions to improve the ecosystem, thereby facilitating the development of Fintech businesses in Vietnam.

The committee set out key contents of focus for Fintech, including E-payments, e-KYC; P2P Lending, Open APIs and Blockchain application solutions.

According to the Payment Department, in the coming time, the SBV will focus on formulating and finalising the legal framework for the operations of Fintech companies in the banking sector, while supplementing and amending the banking regulations to be compatible with, and better suited to the digital context and development trend of Fintech. The central bank would continue improving its payment-related policies, especially electronic payment, and create a test management mechanism for fintech firms after its regulatory sandbox policy is passed.

Policy update

Tu an Minh

New regulations on compulsory non-cash transactions and FDI BIDV Review introduces new regulations on the list of compulsory non-cash transactions and foreign direct investment in Vietnam budget revenue and expenditure transactions must be carried out through banks.

The list of compulsory transactions via banks in accordance with the law is made public on e- portals of the Government Office, the Ministry of Finance, the SBV and other related ministries and branches.

Lists of compulsory non-cash transactions announced Authorities have announced a list of transactions that must be made via banks in some areas in a move to boost non-cash payments.

According to a newly-issued regulation of the State Bank of Vietnam (SBV), several payments and transactions in merger and acquisition (M&A) activities, securities, tax and State budget must now be made via banks.

Accordingly, in the financial sector, enterprises that contribute capital to purchase and sell stakes in other enterprises, or transfer their contributed capital to other enterprises must use non-cash payment forms.

Non-credit institutions are also required to use non-cash payments for transactions related to loans and loan repayments.

According to the SBV’s Payment Department, the use of cash is falling as non-cash payments become more common. In the first five months of 2019, the total transaction value through the interbank e-payment system surged by 23.23 percent against the same period last year, while the number of transactions increased by 17.63 percent.

Some transactions in the securities sector must be paid via banks. These include payments of securities transactions on the Hanoi and Ho Chi Minh stock exchanges as well as those deposited at the Vietnam Securities Depository Centre; bond transaction payments; and trading securities for customers of securities companies.

E-payments also jumped 65.81 percent in the number of transactions and 13.46 percent in value.

In the tax sector, firms are required to use non-cash payments for their purchase or export of goods and services worth more than VND20 million (USD860) so as to enjoy tax refunds and corporate income tax reduction.

Under a government plan on cashless payments in the 201620 period approved by the Prime Minister, the ratio of transactions that use cash will be reduced from 90 percent in 2016 to below 10 percent by the end of 2020.

The regulation also states State

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Notably, mobile payments witnessed a year-on-year surge of 97.75 percent in volume and 232 percent in value.

Policy update

Regulations on foreign direct investment in Vietnam

capital contribution rate mentioned in: • Investment registration certificate;

On 26 June 2019, the State Bank of Vietnam promulgated Circular 06/2019/TT-NHNN providing instructions about foreign exchange management concerning foreign direct investments in Vietnam.

Pursuant to this Circular, foreign investors and domestic investors in foreign-invested enterprises in Vietnam may make either foreigncurrency or Vietnamese-dong investments according to the

• Establishment and operation permit prescribed in specialised laws (with respect to foreign-invested enterprises that are established and operate as per specialised laws); • Notice of foreign investor’s conformance to regulatory requirements for capital contribution, share purchase or buyback; • PPP contract with a competent state

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authority which has already been in effect and other documents evidencing foreign investor’s capital contribution in compliance with laws.

(Currently, both foreign investors and domestic investors in foreigninvested enterprises may contribute capital in either foreign-currency or Vietnamese-dong according to the investment rate inscribed in the investment certificate).

The Circular 06 will enter into force on 6 September 2019.

lifestyle

Vo Thanh

Historical structures on Vietnam's banknote Vietnam's VND50,000 banknote features two pavilions of the Nguyen Dynasty, Vietnam's last royal family who built their grand residence in the central town of Hue.

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ack from the Flag Tower that overlooks Huong (Perfume) river are two buildings that are the face of the Citadel of Hue. The first is the Pavilion of Edicts, or Phu Van Lau. In front of Phu Van Lau close to the Perfume river is a house called Nghenh Luong Dinh (Nghenh Luong Pavilion).

The Pavilion of Edicts was built in 1819 during the reign of King Gia Long and Nghenh Luong Pavillion in 1852 during King Tu Duc's reign. Both were kings of the Nguyen Dynasty (1802-1945).

The Pavilion of Edicts is located on

Hue Imperial Citadel

Vietnam's VND50,000 banknote

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the main axis of the Hue Imperial Citadel. It is a 11,67m yellow tile roofed pavilion with 16 dark-red pillars and a banister surrounding the entire construction. The ground floor is empty while silk painting frames can be found on the second floor.

There are also round windows on two sides, a wooden banister and a front

lifestyle

The Pavilion of Edicts Vietnam's VND50,000 banknote features two pavilions of the Nguyen Dynasty

window decorated with a horizontal lacquered board. The Pavilion of Edicts is a beautiful construction from the Nguyen dynasty and a typical heritage of the Hue monument complex.

While the Pavilion of Edicts was used as a place for listing the king's and court's edicts or the results of civil

service examinations, Nghenh Luong Pavilion was a place where the royals went to relax and enjoy the views of the landscapes.

The architecture style of Nghenh Luong Pavillion is that of one main central structure with four wings. Crab shell houses are built in the front and back

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side of Nghenh Luong Pavillion. The upper wooden frame is elaborately carved. The main house features a yellow glazed tile roof while the roof of the two crab shell houses comprises another type of yellow glazed heatinsulated tiles. Thirteen steps lead to a corridor constructed near the water.

lifestyle

Ngu y en Quynh

Local daily life on murals Tam Thanh village in Quang Nam province is Vietnam's first mural village, featuring an array of vibrant artworks depicting scenes of local daily life.

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he village attracts many visitors who come to admire the fascinating murals and take advantage of the endless photo opportunities.

In the summer of 2016, Tam Thanh village was selected as the 'blank canvas' location for the project by

“Art for a Better Community�, a collaboration between Korean and Vietnamese artists. The project was inspired by the success of mural villages in Korea. The artists from both countries have brought the old walls of the village to life, adorning more than 100 houses with vivid and unique 3D paintings.

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lifestyle

can join a tour to learn about the fish sauce making process as well as sample the aromatic and delicious sauce.

Nearby Tam Thanh village and also worth a visit is Tam Thanh beach.

This beach has been little affected by tourism and remains white, clean and clear. Early in the morning and late afternoon each day, people from Tam Ky city and the surrounding areas flock here to swim in the cool water.

The paintings in Tam Thanh mural village mainly describe the daily life of the fishermen and villagers, as well as the simple stories of the local youth through fresh, eye-catching colours.

The striking pictures stand in harmony with the peaceful village scene and the cool air of the coast, appealing to visitors who take time to relax in the village.

Visitors are free to take photos and the local people in the fishing village are gentle and friendly, even welcoming visitors into their gardens to take pictures.

Thanks to the project, the fishing village community who in the past have struggled to make ends meet have new opportunities to earn income. Young people flock to the village to view the colourful paintings and Tam Thanh village has become a familiar name as a tourism destination in Quang Nam province.

In addition to fishing, local people in Tam Thanh also make fish sauce.

Currently about 20 households are producing fish sauce. The fish sauce here is produced by traditional methods without the use of preservatives or additives. Visitors

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Visitors to Tam Thanh remark upon the breathtaking view of the simple yet beautiful village, the warm hospitality of the locals, the stretch of peaceful beach with its gentle waves and above all the uniqueness of this tranquil place.

CSR

Q u y nh D o

Blood donation saves lives to continue working at the bank.

Travelling from Cao Bang to the institute in Hanoi is no easy task.

Hang and her husband have to leave work early the afternoon before Ty's appointment to travel to Hanoi.

The following morning, they line up very early for Ty's examination and medicine, and then bring him back home right away so they can get back to work on time. Suffering from anemia and a deficiency of micronutrients, Ty’s health is not as good as other children of the same age.

However, Ty and his mother continue fighting hard in order for Ty to live a normal life.

“Every mother wishes her child to be healthy. Saying I’m a happy mother is not completely correct, but I’m still happy because I love my son and having him by my side teaches me how to sympathise and share the pain of other patients,” she said.

Thu Hang and her husband and two kids

Chu Thi Thu Hang, one of the most dedicated volunteers of the BIDV's blood donation campaign, shared her story of donating blood and raising a son with Thalassemia.

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ang, a staff member of BIDV Cao Bang, and her husband are both from the Tay ethnic minority group. They have a son and a daughter. In 2014, Hang gave birth to her son Nguyen Minh Quan, known to family members as Ty. The little boy brought great happiness to the young couple. When Ty was 18 months old, he experienced a high fever and his red

blood cell count suddenly decreased abnormally. He was sent to the National Institute of Hematology and Blood Transfusion and diagnosed with Thalassemia.

It was the first time Hang and her family had heard of the blood disorder and she had no idea that such a serious illness ran in her family.

Every month since, Ty’s parents have taken him to the National Institute of Hematology and Blood Transfusion for examinations, medicine and if his red blood cell count dropped too low, blood transfusions. Ty's journey back to health has been difficult but Hang always stays optimistic and manages

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Hang has donated at four blood donation campaigns. Every time the Red Journey blood donation campaign is held in her locality, Hang is always the first person to donate. For BIDV staff in general, the bank's cooperation with the Red Journey campaign is an opportunity to share love and sympathy. For Hang, being a part of the campaign is a way of expressing her family's gratitude to the people who have willingly given blood to save the lives of others.

Cao Bang is the 25th stop of the Red Journey blood donation campaign 2019. The campaign in the mountainous region of Cao Bang and the story of Hang and Ty has deepened the meaning of blood donation.

CSR

Thu Quynh

like this bag, it is both beautiful and effective as a buoy.�

Quan Hoa is a poor border district in Vietnam. Currently, the rate of impoverished households is over 15 percent and the number of households living close to the poverty line is over 13 percent. People living in the area are mainly Thai ethnicity, accounting for 95 percent of the total population.

To reach school, local children have to cross many streams which become extremely dangerous in the flood season.

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accidents on the way to school, BIDV has provided thousands of lifesaver backpacks to pupils, especially in the Central region.

On August 23, BIDV Thanh Hoa presented 500 lifesaver backpacks to students in Quan Hoa district, Thanh Hoa province.

According to Ms. Luong Thi Minh, Vice chairman of Thanh Hoa Province's Labour Union, the lifesaver backpacks donated to the pupils on the first day of the new school year are very important, encouraging pupils to enter the new school year despite the challenges that come in the rainy season.

Lifesaver backpacks are essential for students in mountainous areas, where children often face floods. In order to help students avoid drowning

Happily carrying his new lifesaver backpack, Vi Thi Lan, a 5th grade pupil from Chieng Cam village, Hien Kiet commune said excitedly "I really

ietnam is entering the rainy season and floods have occurred in many areas across the country.

In order to ensure that pupils in flooded areas can go to school safely, several BIDV branches have donated lifesaver backpacks to pupils in mountainous and remote areas which are at risk of flooding.

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In the past years, Quan Hoa district has suffered a lot of damage due to floods and storms. In 2018, many houses were swept away. In 2019, although no lives were lost, the flood caused heavy economic losses. Six schools were seriously damaged after the flood.

On 22 August, in Tuy Phuoc province, BIDV Binh Dinh gave 200 lifesaver backpacks to children of local workers.

Tuy Phuoc is the last district that the Kon river flows through and becomes flooded every rainy season.

According to local authorities, natural disasters have claimed the lives of 22 pupils who are mostly of primary and secondary grade. Lifesaver backpacks are essential and meaningful gifts for local pupils. After Tuy Phuoc, 300 lifesaver backpacks will be sent to flooded areas including Phu Cat District and An Nhon town in Binh Dinh province.

CSR

Tr a ng Hanh

Bridges bring convenience to rural communities

BIDV My Tho eases difficulties for the community

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o motivate students living in difficult circumstances in Tien Giang, on 16 August BIDV My Tho branch and Tien Giang Labor Union presented 100 students with 100 lifesaver backpacks and 1000 notebooks.

The children are all students of My Trung Primary School (My Trung commune, Cai Be district, Tien Giang province).

Mr. Le Trung Thanh, senior executive vice president at BIDV (L) presents VND100 million to the Study Encouragement Fund of Tan Hong district, Dong Thap province

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n 15 August, in Tan Hong – the border district of Dong Thap province - five out of six rural bridges were inaugurated and put into use, making life easier for local communities.

In 2019, BIDV committed to fund VND10 billion to construct six rural bridges in three communes in Tan Hong district, Dong Thap province.

Total investment for the bridges was VND20.3 billion. The bridges range from 28 to 78 metres in length and 4 - 4.5 metres in width. The bridges’ abutments, piers and surfaces are

made entirely of concrete. Each has a maximum load of five tons.

The remaining bridge is on target to be completed soon.

The construction of the bridges is a meaningful gift, with contributions from 25,000 BIDV employees who want to offer practical support to the local people of these rural communes.

At the inauguration ceremony BIDV also presented VND100 million to the Study Encouragement Fund of Tan Hong district.

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The presents are one of a number of activities in parallel with BIDV’s tradition of supporting local people in impoverished and difficult areas.

On 10 August, together with My Tho Charity Association, BIDV My Tho participated in the programmes "Charity Kitchen" and “Love sharing" at Tien Giang General Hospital and the Traditional Medicine Hospital.

Through the program, they provided free meals to support families and patients being treated at the hospitals.

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