UBS Global Asset Management has signed an agreement with Vietcombank in Hanoi to share technology and knowledge with the goal of offering overseas investment products to VietcombankÆs customers. UBS will become VietcombankÆs preferred supplier of investment products while Vietcombank will become UBSÆ preferred domestic distribution partner.

UBS officials believe they may be able to approach the Bank of Vietnam and the State Securities Commission with offshore products for authorisation before the end of the year.

The National Assembly has passed an ordinance on foreign-exchange controls that includes a number of liberalising measures. One article says accredited banks will be able to offer offshore products.

Executives at other foreign fund-management companies and commercial banks in Ho Chi Minh City report they are scrambling to figure out what is or isnÆt possible.

ôWeÆve known this would come for a while but weÆre short on detail about the regulations,ö says one. ôPeople with cash have been pressing the regulator to access offshore markets. I donÆt know if the government will let the cash move but it might allow some synthetic structure like a participation note, which already exists for overseas investors coming into Vietnam.ö

A banker adds: ôWeÆve not seen anything defined in the current regulation but weÆre trying to find out.ö

But the regulation is unlikely to spell out anything concrete. Instead, UBS wants to help Vietcombank prepare its systems and knowledge, so that it can be ready to provide offshore funds or vehicles.

ôThe intention of this agreement is very broad,ö says Michael Winter, executive director and head of institutional business at UBS in Singapore. ôItÆs about the transfer of expertise about distribution, itÆs not about products.ö

He says, however, that UBS is keen to have Vietcombank offer the firmÆs investment products once it is ready. These would likely begin as low-risk offerings, with local deposit rates as the benchmark.

But a lot of work has to be done first. ôWeÆre talking about whether [Vietcombank] has the IT platform to transact these products, or helping it so its staff will be able to educate customers about investments,ö says Winter.

UBS has an existing relationship with Vietcombank, which is considered a leading financial institution in Vietnam. It was founded in 1963 as a state-owned commercial bank It has the largest market share in domestic loans and foreign exchange, and customer deposits in excess of $5 billion.

ôVietnamÆs economy is growing at 8% per year, a pace that is second only to China,ö says Christof Kutscher, head of UBS Global Asset Management in Asia Pacific. ôThe country is rich in natural resources and has an expanding manufacturing base. As its capital markets evolve and wealth in the country increases, investors will be looking for ever-more sophisticated investment products.ö