Thus, by 1938, the capital that the Indochina Bank provided to the CPAs accounted for over 90% and this is also the basis for us to affirm that the CPAs were essentially just special branches of the Indochina Bank, the " octopus tentacles " of French capital reaching deep into the Vietnamese countryside in general and the North and Central regions in particular to suck the blood of the colonial people.
But since 1939, the operating capital structure of CPAs has changed significantly. Please refer to the following statistical table:
Table 3.7. Working capital situation of CPAs in the period 1939-1944
Unit: 1,000 $
Year
Total capital | Association capital by associations contributor | Capital from reserve fund | Capital of the NHDD | Capital from deposits | ||||
Amount | Percentage of total capital | Amount | Percentage of total capital | Amount | Percentage of total capital | |||
1939 | 5782 | 307 | 5.3 | 753 | 13.0 | 1177 | 20.3 | 3545 |
1940 | 7278 | 326 | 4.4 | 753 | 19.4 | 1893 | 26.0 | 4305 |
1941 | 8669 | 348 | 4.0 | 791 | 9.1 | 2550 | 29.4 | 4980 |
1942 | 11063 | 427 | 3.9 | 1171 | 10.6 | 3136 | 28.3 | 6302 |
1943 | 19608 | 222 | 1.5 | 3866 | 19.7 | 6970 | 36.5 | 550 |
1944 | 25261 | 245 | 0.1 | 2908 | 11.5 | 8769 | 34.7 | 13312 |
Maybe you are interested!
-
Investment Situation in Non-Credit Services at Saigon Commercial Joint Stock Bank in the Period of 2015-2019 -
Loan Sales Situation of Military Commercial Joint Stock Bank - Hue Branch in the Period 2017 - 2019 -
General Assessment of the Current Situation of Public Investment Capital Management at the Ministry of Health in the Period 2016 - 2020 -
Completing the appraisal of loans for additional working capital for corporate customers at Vietnam Joint Stock Commercial Bank for Industry and Trade - Dong Anh Branch - 5 -
Assessment of the Current Status of Access to Bank Credit Capital of Small and Medium Enterprises in Thai Nguyen Area in the Period of 2013 - 2018
Source: File No. (N6-170), South Vietnam Government Representative Office, National Archives II, HCMC .
Thus, from 1939 onwards, the capital of the Indochina Bank tended to decrease significantly. This further confirms that the Indochina Bank only invested capital in activities that brought high profits but low risks. Because, from 1939, World War II broke out, the business activities of capitalists in the colonies also encountered difficulties and high risks. Therefore, the Indochina Bank reduced the capital lent to CPAs to avoid risks in business.
Meanwhile, the prepayment of promissory notes secured the borrowing and sale of various goods in the international market and especially the high discount and commission rates went hand in hand with the instability of currencies in Indochina as well as the development of many other bank branches in the markets.
Asia. All of these factors have urged the Bank of Indochina to step up its activities and expand into many fields in pursuit of huge and certain profits. Some of the increasingly strong operating results of the Bank of Indochina are clearly shown in the following statistical table:
Table 3.8. Nature of banking activities carried out in the period 1914 - 1921
Unit: franc
Year
Discount (prepayment) | Advance on goods chemical | Loan on income plan | |
1914 1919 1920 1921 | 176,080 475,808 794,608 721,379 | 82,057 204,807 252,112 125,376 | 445 255 135 181 |
Source: J. Aumiphin (1994), French financial and economic presence in Indochina (Dinh Xuan Lam translated), Vietnam Historical Science Association, Hanoi , p.26 .
3.1.2. Exchange
3.1.2.1. Some policies on exchange rate
By a Convention signed on the day the issuance privilege expired (January 20, 1920), the French Government granted the Bank of Indochina a greater and more certain privilege: in addition to the issuance and treasury functions, the bank was also allowed to assume the function of a foreign trade bank for the Government of Indochina from March 27, 1920 [22; p.27]. Therefore, all foreign currency capital and precious metals (gold, silver, etc.) of the Government of Indochina were deposited at the Bank of Indochina. This convention met the requirements of foreign trade activities, thanks to which these activities grew stronger after the war. With this decree, it contributed to strengthening the power of financial capitalists. In fact, many officials holding top positions in the state apparatus had shares in the bank. And also in this year, the French Government established the Exchange Commission in Indochina to control exchange activities [90]. The period from 1930-1939 was the period when the economic crisis began to have a strong impact on Vietnam and this greatly affected the investment pace. To stabilize the Dong
The most feasible measure that the French government applied was to tie the Indochinese piastre to the franc. Therefore, agreements were signed with the Bank of Indochina to ensure the balance of the exchange rate. At the same time, the bank also committed to exchanging banknotes issued by the bank for gold but above a prescribed minimum level [45]. Then on September 9, 1939, the French President issued a decree on the control of exchange and gold trading in Indochina (Contrôle des Changes et Commerce de l'Or) [70]. The export of gold, currency, banknotes and foreign currencies out of Indochina was prohibited. This decree was issued to strengthen the measures to concentrate material resources for the war. According to this document, private individuals were not allowed to send or bring capital (including money, banknotes, shares of public bonds with value in lieu of money) from Indochina abroad; in special cases, permission from the Exchange Office (Office des Changes) was required. Each Indochinese person when going abroad is only allowed to bring a maximum of 25,000 francs (ie 2,500 USD), which can be deposited monthly according to the regulations of the Exchange Department. Foreigners coming to Indochina must declare and register their capital at the customs office and can only bring into use in Indochina no more than 10,000 francs.
3.1.2.2. Foreign exchange activities
The Indochinese piastre was on the silver standard and the French franc was on the gold standard, which were the currencies with value in international transactions. Therefore, the exchange rate always changed according to the price of gold and silver, as shown in the following table:
Table 3.9. Conversion rate between Indochinese piastre and French franc
Year
1 piastre ($) to the franc (f) | Year | 1 piastre ($) to the franc (f) | |
1886 | 4.2 | 1904 | 2.4 |
1890 | 3.9 | 1905 | 2.6 |
1897 | 2.7 | 1914 | 2.4 |
1901 | 1.9 | 1916 | 2.8 |
1902 | 1.9 | 1919 | 4.5 |
1903 | 2.3 |
Source: Nguyen Dinh Dau (1998), “Saigon Currency 1859-1954”, Past and Present Magazine No. 55B/1998, Ho Chi Minh City General Science Library , p.5.
The table above shows that the exchange rate between the Indochinese piastre and the French franc was always changing. In particular, in 1901 the value of the Indochinese piastre fell to its lowest, 1 Indochinese piastre could only be exchanged for 1.925 francs. This caused domestic commodity prices to skyrocket. Inflation rose to 21% between 1901 and 1903 [20; p.440]. In that situation, to stabilize the Indochinese piastre from 1903 to 1905, the Government issued a law banning the circulation of the Mexican piastre and banning the export of the Indochinese piastre abroad. Thanks to that, by the end of 1905, Indochina had entered the era of command currency. By December 1, 1905, 1 Indochinese piastre could be exchanged for 2.65 francs (without hindering rice exports). To stabilize the Indochinese currency, the Decree dated January 9, 1930 maintained the exchange rate of 1 Indochinese piastre for 10 francs [20; p.442]. The change in exchange rate between the colonial currency and the national currency caused many disturbances and disadvantages not only for the people but also for businesses. Only the Indochina Bank benefited the most in this extremely complicated exchange rate fluctuation context. In international payment services (including buying, selling or transferring foreign currencies), the bank always guaranteed to earn interest.
The above table also shows the financial savvy of the bank and this helped the bank overcome many difficulties. Indeed, since 1916, the sharp increase in silver prices had no effect on the Indochinese exchange rate, while China, a silver buyer, saw a large part of its reserves being absorbed by other countries. So China decided to target the Indochinese reserves to buy more for itself. Despite all the prohibitions that were issued, the Indochinese currency was still attracted by the huge arbitrage profits (silver depreciated by 18 to 20% against the Hong Kong dollar, when it had previously been equivalent) and made its way across the border to China [82].
To save the situation, the Governor's Palace signed a convention with the bank on January 20, 1920, to support the Bank of Indochina to stop the exchange of Chinese currency and turn the bank into the banknote issuer of the Governor's Palace. Thanks to that, the bank increased its foreign currency reserves to strengthen its financial strength, creating an absolute advantage, making the Bank of Indochina an organization that regulates the exchange rate, always beneficial to the Indochina budget. At the same time, the Bank of Indochina gained huge profits from the exchange rate difference over a long period of time. The following table shows that the bank's exchange activities from 1914 to 1921 grew dramatically.
Table 3.10. Bank exchange operations from 1914-1921
Unit: franc
Year
Exchange operations | |
1914 1919 1920 1921 | 1,045,979 3,273,289 4,480,180 4,682,562 |
Source: J. Aumiphin (1994), French financial and economic presence in Indochina (Dinh Xuan Lam translated), Vietnam Historical Science Association, Hanoi , p.26 .
During its operation, the Bank of Indochina had to compete with many other banks also present in Vietnam, such as: Chartered Bank established its headquarters in Saigon in 1904 and in Hai Phong in 1914. Yokohama Specie Bank established an agency in Saigon in 1920, and also South China Bank, a branch of the Bank of Taiwan. Many small banking enterprises, partly with Chinese or Vietnamese capital, were established... however, the Bank of Indochina still maintained its positions. At the end of 1920, the Saigon branch performed from 51 to 54% of on-site foreign exchange services [20; pp. 466-467].
On the other hand, through financing international trade, foreign exchange business has become a necessary activity and has an important stature.
Bank of Indochina. Just talking about rice export activities alone, the foreign currency that the Bank of Indochina collected from financing transactions was 65% in 1913 and 61% in 1928 [20; p.465]. According to regulations, the currencies of different countries when paying for the Bank of Indochina all had different exchange rates and changed erratically. Starting from the time of purchase, the transportation time on ships running with "sails " until arriving at the buyer's port, the time was too long, the foreign exchange rate had changed, this stage ended the transaction often with a loss of capital. Therefore, on July 1, 1940, the Governor-General of Indochina added a Decree requiring exporters to declare the amount of money earned from selling goods abroad and transfer that foreign currency to the Exchange Office for Indochina banknotes. Conversely, the purchase of foreign goods imported into Indochina in foreign currency must also be approved and supervised by the Exchange Office. Thus, with this decree, the Government has assisted in creating conditions for the Bank of Indochina to collect more foreign currency and create a lucrative profit from this foreign exchange business.
Table 3.11. Conversion rates between the Indochinese piastre and some common currencies
Year
1 piastre ($) compared with francs | 1 US dollar vs. piastre ($) | 1 pound to the dollar piastre ($) | |
1923 | 9.54 | 1.99 | 8.67 |
1924 | 10.11 | 1.84 | 8.53 |
1925 | 15.37 | 1.73 | 8.38 |
1926 | 12.30 | 2.06 | 9.99 |
1927 | 12.87 | 1.97 | 9.64 |
1928 | 12.52 | 2.05 | 9.91 |
1929 | 10.23 | 2.49 | 12.12 |
1930 | 10.00 | 2.56 | 12.17 |
Source: Cited from Pham Quang Trung (1997), History of Vietnamese agricultural credit (1875 - 1945) , Social Sciences Publishing House, Hanoi, p.41.
3.1.3. Management of gold trading, precious metals and mortgages
The next service which banks were authorized to perform was the trading in “ precious metals ” and the receipt and storage in cash of gold, silver and copper, whether or not they were profitable. In 1910 the Government established the Control Department.
gold and silver objects in Indochina, the trade in gold and silver throughout Indochina from now on must have a license. The State will manage all private jewelry stores, and when necessary, it has the right to requisition [71].
Following the Decree dated November 20, 1916 [92; p.1863] of the Governor-General of Indochina, pawnshops (monts de piété) were elevated to a business sector. The Decree specified the content and form of operation of pawnshops opened in Indochina specifically: pawnshops could be established in any locality deemed useful and permitted by decree of the Chief Official of the local Government. The pawnshop manager had the exclusive right to lend with mortgages within the scope of authority, specified in the licensing decree (these can be considered usury organizations with real estate mortgages). Anyone who opened a pawnshop within this scope without a license would be punished according to Article 411 of the Criminal Code. The Bank of Indochina alone was allowed to lend with seasonal mortgages and advances for gold and precious metals. At the same time, the decree also stipulates the direct management of pawnshops, loan conditions and interest rates are set at 2% per month, and the loan term is three months. The decree also stipulates the auction of mortgaged items after the loan term expires without repayment of debt and interest.
The operation of pawnshops was also a source of profit for the French capitalists, of which the Bank of Indochina was one of the biggest beneficiaries. Therefore, it continuously developed this field. If in 1884, Cochinchina had only 5 pawnshops, by 1938 the number of pawnshops had increased to 28, of which 16 belonged to a French capitalist company (Société d'Exploitation des Monts de Piété de Conchinchine), with a capital of tens of millions of francs. The Decree dated April 3, 1901 prohibited pawnshops from lending gold, but by the Decree dated September 27, 1939 [69], the Governor-General of Indochina allowed and encouraged pawnshops to promote the campaign of lending on mortgage (Opération de Prêts) of gold artifacts, but the amount of gold or precious metals that customers could not redeem their debts had to be transferred to the Bank of Indochina. This policy was part of the colonial government's measures to strengthen its capacity.
ability to concentrate gold and rare metals, give privileges to the Bank of Indochina and meet the needs of war service.
However, the bank's activities never limit themselves, as long as they maximize profits. In addition to issuing money (a unique and special function that the French Government granted to the Bank of Indochina), credit is the tool that the bank actively invests in and expands. In addition, it also actively participates in the establishment and development of agricultural and land credit associations, the establishment of large construction companies, public works such as dredging, water supply, electricity supply, railways, etc., creating a powerful financial force that dominates all areas of activity and especially the economy of the Indochina countries.
3.2. Financial investment activities
As an effective tool of the colonial government, the Bank of Indochina, in addition to its monopoly on currency issuance, was also the largest financial institution of the French government and financiers. The bank used the wealth it gained from its privileges to engage in direct business activities in the colonies. “ There were few French enterprises of any importance in which it did not hold a portion of the capital or in which it did not establish close ties ” [76; p.46]. In 1920, direct business in Indochina accounted for 90% of the Bank of Indochina’s activities [2; p.27]. The bank mobilized domestic capital for development and financed the development of key economic sectors.
In January 1920, according to the decision of the French Government, the Bank of Indochina issued 48,000 new shares, each worth 475 francs. This issuance was very successful, with 21,181 shares purchased by colonial capitalists. Most of the shareholders were large companies that had connections or were companies with shares in the bank, such as: the River Transport Company in Cochinchina, the Portland Cement Company, the Indochina Artificial Company, the French Coal Mining Company in Tonkin, the Indochina Distillery Company, and a large number of anonymous individuals living in cities where the bank was present, such as Saigon, Hai Phong, Hanoi,