The arrest of one of Vietnam’s most prominent tycoons has sent shockwaves through the Communist-ruled country and further undermined confidence in what was once one of the world’s hottest emerging markets.
Nguyen Duc Kien, founder of Asia Commercial Bank – one of Vietnam’s biggest lenders and part owned by Standard Chartered – and a leading figure in the country’s football industry, was arrested on Monday night on suspicion of conducting “illegal business” by failing to obtain the proper licenses, the government said on Tuesday.
The well-connected 48-year-old football fanatic could face up to two years in prison if found guilty of the charges, which relate to his chairmanship of three small investment firms rather than ACB, in which he no longer holds any management position.
As news of the surprise arrest broke on Tuesday, Vietnam’s main stock market index fell 5 per cent and the central bank pumped VND5tn ($240m) into the inter-bank market to stave off fears of a bank run by anxious ACB depositors.
Mr. Kien is the second of Vietnam’s new generation of tycoons to fall foul of the Communist authorities in recent months, following the ousting of businesswoman Dang Thi Hoang Yen from Vietnam’s Communist party-controlled parliament in May.
Like Ms Yen and their peers, he used his political connections to amass great wealth as Vietnam’s Communist party opened up the economy over the past two decades, following a path laid out by neighboring China.
But rapid growth has come at the cost of economic instability, with inflation crises, currency devaluations and major corruption scandals at state-owned companies damaging Vietnam’s status as a key emerging market. And now those once lauded as economic pioneers are finding themselves under pressure.
Annual GDP growth, which averaged more than 7 percent in the decade before the inflation crisis of 2008, slowed to just 4.7 percent in the second quarter of this year as the government choked off credit in an effort to fight inflation and renew confidence in the currency.
Mr. Kien is chairman of the Hanoi Football Club and drove the foundation of a new football league that controversially broke away from direct state control last year. Although he no longer holds office at ACB and has reduced his shareholding to less than 5 percent, according to the bank, he and a former founding partner Tran Mong Hung are still believed to exercise significant influence over ACB. Mr. Kien also holds stakes in several other Vietnamese lenders.
Carl Thayer, an expert on Vietnamese politics at the Australian Defense Force Academy in Canberra, said that the arrest of such a prominent businessman would require political backing from the highest levels of the government and the Communist party.
With Vietnam’s economic growth model floundering, he said there were tentative signs of a backlash against the “super rich” who seem to have benefited from the boom at the expense of national economic stability.
But Mr. Thayer said that while “other businessmen may be concerned that they may be next, there’s a limit to how far this can go”.
A Vietnam-based expatriate businessman noted that the relatively light charge against Mr. Kien could be designed to “send a message to someone much higher up” – or, could just be a “slap on the wrist.”
Nguyen Van Binh, the central bank governor, tried to reassure depositors that ACB was not affected by the scandal. However, he underlined broader concerns about the state of the banking sector by revealing to Vietnam’s parliament that non-performing loans at some lenders have risen as high as 60 percent despite reported bad debts of less than 2.5 percent. “Some banks have no capital at all now,” he said.
Standard Chartered Bank owns 15 percent of ACB while Jardine Matheson, the Hong Kong-based conglomerate, owns 7 percent and Dragon Capital, a Vietnam-based fund manager, owns 6.7 percent. ACB is the largest non-state bank in Vietnam, with assets estimated at around VND256tn and a market capitalization of VND22.6tn.