Internet banking could drive Vietnam-China cross border trade to a new high.
Smooth money transfers allow for the seamless movement in goods
In June 2007, Vietnam’s Industrial and Commercial Bank (Incombank) teamed up with the Industrial and Commercial Bank of China (ICBC) to launch a cross-border online settling service to facilitate the two countries’ trade in the northern border provinces of Lang Son and Quang Ninh. Cao Xuan Binh, director of Danang-based Food and Foodstuff Industries Joint Stock Company (Foodinco), said new online settling methods helped shorten payment times from four hours to just half an hour. The company has been exporting agricultural products with an annual volume of around VND110 billion ($6.87 million) to Chinese partners over the last few years via Mong Cai border gate in Quang Ninh. “Thanks to new settling methods, we could double the growth of current annual trading volumes,” said Binh.
By launching the new services, Incombank Vietnam is the first domestic bank to settle cross border trade transactions via the internet. Previously, for a cross border payment, a customer from Vietnam or China needs to complete a paper-based settling document, then the documents are sent to the relevant bank in the other country which is a time consuming process due to custom clearance procedures at the border gate.
Chen Zhou Qun, MaoMing Guban Energy Co. Ltd Energy Department head, said internet banking applied in settling cross border trade transactions was a technology breakthrough. He said that in the past, MaoMing and Vietnamese partners had disputes over the late payments caused by traditional settling system. Nguyen Ngoc Thach, deputy director of the State Bank’s Quang Ninh branch, said new settling methods would help establish better cash flow, tax and counterfeit money controls in the border area. Previously, without local bank services, export/import transactions via Vietnam-China border gates are settled through unauthorised agents acting as an exchange bureau which run the risk of fake money being circulated and tax evasion. Since 1996, local banks have started offering traditional cross border settling services.
Nguyen Van Thanh, Incombank’s deputy general director, said the launch of a new internet banking service could eliminate unofficial exchange markets at border gates. Thach estimated that up to 70 per cent of cross border transactions via Quang Ninh’s Mong Cai border gate are settled via the banking system. “With the new online settling service, we expect the rate could soon increase to 85-90 per cent,” said Thach. At present, estimates place the Vietnam-China annual bilateral trade volume via Mong Cai alone at over $2 billion. In 2006, total Vietnam-China bilateral trade reached approximately $10 billion.
According to the Mong Cai branch of the state run Agricultural and Rural Development Bank of Vietnam (Agribank), Vietnam’s largest bank by assets, the bank is now in discussion with ICBC to launch online cross border settling services from September, 2007 in Lang Son and Quang Ninh. Over the first half of 2007, Agribank Mong Cai has carried out cross border transactions with total value of $320 million.