MINISTRY OF EDUCATION AND TRAINING VINH UNIVERSITY _ ĐO THI MY HIEN INDOCHINA BANK OPERATIONS IN VIETNAM BETWEEN 1875 AND 1945 Major: Vietnam History Code: 62.22.03.13 BRIEF OF THE HISTORY THESIS NGHE AN - 2017 This thesis was completed at Vinh University Supervisors: PROF NGUYỄN TRỌNG VĂN PROF NGUYỄN QUANG HỒNG Reviewer 1: PROF PHẠM HỒNG TUNG University of Social Sciences and Humanities – Vietnam National University Ha Noi Reviewer 2: PROF NGUYỄN NGỌC HÀ Communist Party History Reviewer 3: PROF TRƯƠNG CÔNG HUỲNH KỲ Hue University of Education The Dissertation will be defensed prior the Review Board of University level at Vinh University … [time, date]… … The Dissertation can be found at:  National Library of Vietnam  Vinh University Library ABSTRACT Scientific and Practical sense 1.1 One of key tools enabling capitalist country to well harness its colony is holding monetary system in hand As having this tool, colonial government is able to make financial, investment, credit and settlement management The French deeply understands this To prepare for the completion of colonial conquest in Indochina on the basis of colonial government own intention, in 1875, France instablished Indochia Bank and issued Indochia money Soon afterwards, the Indochina money held a key position in Vietnam’s monetary circulation system and became the tool for the French to lay ruling foundation for long time in our country in particular and Indochia countries in general by applying Treaty of Patenotre (1884) The establishment of Indochina Bank, its geographic and economic operation expansion, and then the formation of French Indochia Union by the Treaty of Patenotre (1884) indicate that French colonial exploitation was organized and operated in the right order: starting from the establishment of Indochina Bank, France let Indochina Money circulate and made the bank investment apparatus Hidden under the cover of Indochina economic development, this apparatus became French colonial ruling tool and exploitation 1.2 Historical research of Indochina Bank establishment and development, a particular financial institution, is of a typical feature of French Empire in Vietnam, in relation with imperially colonial exploitation stategy is a scientifically meaningful issue, attracting many scientists concern; However, there has been still certain gaps in clarifying historical position of Indochina Bank in performing French colonial exploitation strategy Nowadays, there have done several studies on Indochina Bank by domestic and international authors Such studies have brought about extremely abundant materials, scientific perception, and important suggestion that would be inheritted and promoted Nevertheless, there lacks an in-depth and systematic research of the establishment and development of Indochina Bank in Vietnam in correlation with colonial ruling policies of French Empire hidden under the cover of Indochina economic development 1.3 Vietnam is on the way of transforming, developing and integration with regional and global economy However, what happenned in the past formed factors of foundation, which is described as specifically In Finance and banking sector, beside negative factors, which are of exploiting nature of colonism, the model of Indochina Bank seems precious experience, initial steps for the development of current banking system The study of Indochina is not only of historical sense but alo brings about some features and experiences to be leant from, as well as managerial lessons suggested for development policies applied for our country finance and banking development nowadays With such reasons, the topic of “Indochina Bank opeartion in Vietnam between 1875 and 1945” is chosen for History doctoral thesis, Major of Vietnam History Study objectives and missions 2.1 Study objectives On the basis of reliable material sources, the thesis focuses on studying the formation of Indochina Bank and its branches in Vietnam between 1875 and 1945, as well as clearifying functions of issuing money, commercial bank and bank’s financial investment Hence, the thesis evaluates the nature, concludes impacts that Indochina Bank put on Vietnam socio-economics at that time 2.2 Study missions In order to achieve the objectives above, the thesis focuses on solving some missions as follows: Firstly, clearify Indochina Bank’s context of formation, money issuing operation, and monetary policy between 1875 and 1945 Secondly, clearify Indochina Bank’s operation as a commercial bank Thirdly, in-depth research on Indochina Bank’s financial investment activities in Vietnam Forthly, figure out Indochina Bank’s impacts on Vietnam socio-economic system Study subjects and scope 3.1 Study Subject The subject of this thesis is the apprearance and operation of Indochina Bank in Vietnam between 1875 and 1945 3.2 Study scope 3.2.1 Time, based on existing materials, the author limits this thesis’s study scope of Indochina Bank’s operation in Vietnam between 1875 and 1945 The reason why 1875 is chosen as study starting point of time is that Indochina Bank was established in Paris in 1875, at the same time, its first branch was openned in Saigon (19/04/1875) 1945 is chosen as the ending point of time because August Revolution succeeded, Democratic Republic of Vietnam was born and Vietnam Dong was issued in replacement of Indochina money 3.2.2 Geographically, the thesis determines its study scope of Indochina Bank’s operation in Vietnam in Cochinchine, and Annam 3.2.3 Content, the thesis focuses on studying operation of Indochina Bank with functions of: - Issuing Bank, the thesis goes to details of issuing operation and monetary operation The thesis content aimings at figuring out money issued at the two branches of Indochina Bank in Vietnam which are Saigon branch and Hai Phong branch, thereby, assessing impacts of money issuing on Vietnam socio-economics during French time - Commercial bank, the thesis carries out deep understanding bank’s lending activities, foreign exchange operation, gold and silver trading and their influences on Vietnam socio-economics - Financial Investmnet, in this part, the thesis only focuses on the sectors that banks directly disbursed by contributing capital, buying shares, or sponsoring French enterprises and those activities effects on Vietnam socio-economics For issues beyond the limit of time, geograpic, and content scope mentioned above are not of the thesis subject and scope Material sources and study methodology 4.1 Material sources To complete the thesis, the authors rely on major material sources as follows: - Archives: in order to carry out the thesis, the authors accessed, made use of archives in French and Vietnamese now available in Vietnam, stored at I National archives (Hanoi), II National archives (TP.HCM), and in France like Archives Nationales d’Outre-Mer - ANOM, Aix - En - Provence, France, Bibliothèque Nationale de France - BnF, National Library of Vietnam Most of those documents are of original version directly related to the thesis topic - Reference: during the time of thesis conduction, the authors accessed monograph work by national and international scholars whose contents mention directly to the formation and operations of Indochina Bank Besides, the authors approach some researh work, writings published on economic magazine under colonial French time such as Buletin économique de l’Indochine, Bulletin officiel de la Cochinchine française, Eveil économique de l’Indochine, Journal officiel de l’Indochine française, etc and specialized research journals such as Historical Studies, Xua and Nay magazine, etc., thesises, disertations, periodically official newspapers and some national and international reliable websites with contents closely related to Indochina Bank 4.2 Study methodology Regarding the methodology, in order to solve issues set by the thesis, the authors base mainly on dialectical materialism and historical materialism as well as the theory of Marxism-Leninism in economics - politics (concepts of money, economics, and politics) Here, Marxist historiography is used to objectively evaluate Indochina Bank operation in Vietnam between 1875 and 1945 Marxist historiography is also guideline to process materials scientifically with historical nature maintainance By resolving the thesis requirements, the specialized methodology used includes historical methods, logical methods and others such as comparative, statistical, analytical, synthesis, fieldwork methods (during progress of thesis preparation, the authors visited Hanoi, Hai Phong, and Indosuez bank in Singapore, and so on so as to consider honestly, objectively Indochina Bank operation in Vietnam between 1875 and 1945 The thesis contribution - The thesis is the first work in Vietnam restoring the panorama, details and system of formation and development of Indochina Bank in Vietnam between 1875 and 1945 - The thesis points out the dialectical connection between Indochina Bank and French colonial ruling policy by the major activities of lending (credit), foreign exchange and investment - By studying operations of Indochina Bank in Vietnam between 1875 and 1945, the thesis evaluates, sums up impacts of Indochina Bank on Vietnam socioeconomics, simultaneously, points out contribution of Indochina Bank towards Vietnam current banking system - The thesis contributes to material collection, scienctific argumentation toward history research and teaching, especially history of Vietnam modern finance banking major - The thesis results become a source of document for policy planners, learders of finance and banking sectors to take as reference, completment to establish solutions to better and more efficiently manage finance and banking sector Thesis Structure Beside the Introduction, Conclusion, Appendixes, Reference, thesis main content includes chapters: Chapter 1: Overview of study issues Chapter 2: Indochina Bank’s formation, money issuing operation Chapter 3: Indochina Bank’s operation with functions of Commercial bank and financial investment Chapter 4: Indochina Bank’s impacts on Vietnam socio-economics Chapter OVERVIEW OF STUDY ISSUES The authors carry out survey on two main groups comprising of national authors’ and internaltional (French) authors’ research work which are related to the thesis issues On that basis, there are some comments as follows: Firstly, regading French materials, there has been a great deal of work and research on Indochina Bank in Vietnam between 1875 and 1945 However, it is an outstanding feature noted that French materials are mainly concerned about some specific sectors of operation that the bank was permitted to operate in Vietnam There lack in full study on Indochina Bank’s opeartion in Vietnam Although some papers on specialized magazines are informative reference sources, they are just decrees or documents of law Nonetheless, based on French materials, methodology of historical and economic study, information, records are inherited These are theoretical basis for scientific foundation enabling the authors to approach more intensely, specifically issues related to Indochina Bank operation in Vietnam Secondly, regarding Vietnamese materials, Vietnamese authors have declared a great deal of historical work a little associated with Indochina Bank operation in Vietnam There is a clear thing that announced documents mainly mentioned Vietnam economics, politics, social under French time and Indochina Bank was mentioned a little in their work Some history doctoral thesises have recently been oriented toward the new study scope but just a certain operation of the bank The panoramic picture of Indochina Bank operation and a complete, appropriate assessment of the existence of Indochina Bank in Vietnam between 1875 and 1945 are still left open However, materials from such work are seen as extremely important to be inherited, complemented and developped Thirdly, with History, studying Indochina Bank, regardless of any specific operations of the bank, has recently become a trend of much concern The authors’ way of study about Indochina Bank between 1875 and 1945 is still of the desire to follow the route that previous scientists drew through their works From analyses above, it cannot be denied that choosing the topic of Indochina Bank operation in Vietnam between 1875 and 1945 to study is a new issue, not overlapping with any nationally or internationally declared works Chapter INDOCHINA BANK’S FORMATION, MONEY ISSUING OPERATION 2.1 The formation of Indochina Bank and its branches in Vietnam This part discusses contents as follows: 2.1.1 Indochina Bank and Cochinchine Branch After French conquest of Cochinchine, both France government in Cochinchine and in Paris realized that in order to pacificate and exploit in Cochinchine as well as expand invading war, there was a need of particular bank in this area The far-reaching cause was that France wanted to take monopoly role in money issuing in Indochina as an exchange mean, and directly control money supply; then French government could adjust the economy The idea of forming a colonial bank was suggested in 1865 by Albert Henry de Vallandé; it was not until 1871, the project of Indochina Bank formation - a real standing credit institution to support investment and exploitation activities was actually proceeded On February 2nd 1872, Mr Victor Kresser put forward “Project of formating an Issuing Bank in Saigon” with the guideline of establishing a special bank which was not the same as any existing colonial bank in Vietnam; which was called “Cochinchine Bank” However, the negotiation process between Comptoir National d’Escompte de Paris, Department of the Navy, and French colony lasted more than years with the participation of Commercial and Industrial Credit Bank CIC) at the end of negotiation phase The plan was formed as the name of “Indochina Bank” and submitted to French President on November 3rd 1874 On Jannuary 21st 1875, a Decree signed by Mac Mahon - French President allowed establishing a common bank of French colony overseas named Indochina Bank or “Banque de l’Indochine”, located in Paris Indochina Bank’s charter capital was fixed at milions francs On April 19th 1875, according to French President’s Decree, Indochina Bank branch in Saigon was formed The Saigon branch’s function was the same as parent bank which comprised of issuing, lending and discounting and its location was located at the position where is today State Bank building, Ben Chuong Duong 2.1.2 Tonkin Branch Along with setting up French concrete ruling apparatus in Tonkin, in order to effectively support colonial exploitation in Tonkin, negotiations between Indochina Bank and French government for forming a branch in Tonkin were early promoted Indochina Bank branch in Hai Phong was openned on May 21st 1885 On Jannuary 17th 1887, there appeared another branch in Hanoi which was located at the position where State bank of Vietnam head quarter is now located 2.1.3 Annam Branch With the Agreement of Harmand 1883, Annam officially become French protectorate Within years (between 1885 and 1891), French colonists transformed the old feudal system into a mainstray and a tool to dominate There was a need to set up a bank branch in Da Nang On August 24th 1891, Indochina Bank’s branch in Tourane (Da Nang) was open Not only in Vietnam, Indochina Bank was also set up in Noumea (17/09/1888), Phnompenh (22/02/1892), Hong Kong (01/7/1894), Bangkok (22/02/1897), Singapore (01/3/1905) The bank system was widespread Particularly, there were more 06 branches in Vietnam during the period of time between 1926 and 1943 including Can Tho, Nam Dinh (1926), Vinh (1927), Quy Nhon (1928), Hue(1929) and Da lat (1943) 2.2 Indochina Bank with function of money issuing Among branches of Indochina Bank in Vietnam, initially, there was only Saigon branch, and later Hai Phong, was allowed to issue money as its parent bank In Saigon, according to the Decree issued on January 21 st 1875, Indochina Bank’s Saigon branch had the priviledge of casting and issuing banknotes for 20 years; after that, with the Sanction on February 20th 1888, this priviledge lasted ten more years At the beginning of the twentieth century, the Sanction on May 16 th 1900 signed by French President in which Indochina Bank was equipped with treasury function in Indochia to be able to issue and retrieve banknotes, simultanoeusly extend the issuing priviledge until January 20th 1920 Since January 21st 1920, the monopoly term just lasted 06 months When 06 months ended, the term could be extended if there had been a new sanction After that, House of commons met on February nd 1931 and House of Lords met on March 6th 1931 As a result, Indochina Bank was allowed to make monopoly of issuing banknotes for 25 years Indochina Bank’s banknote issuing monopoly - from consecutive sanctions - lengthened until the ending day of its existence 2.2.1 Indochina Money 2.2.1.1 The appearance of Indochina Money The appearance of Indochina Money derives from the two basic reasons as follows: The first reason is that French government must have made monopoly of money by discarding other types of money out of Indochina market The second reason is that it is favourable for purchasing opium that Indochina monopoly companies needed Besides money issuing, Indochina Bank was also an exchange organization, accepting deposit, as well as lending and trading economic sectors in Indochina in general and Vietnam in particular 2.2.1.2 Indochina money types The issuing history of Indochina Bank can be divided into three main phases as follows: - The phase between 1875 and 1920 Indochina curency (in French: Piastre; in Vietnamese: Đồng Đông Dương; symbol: $) was money unit that French issued and circulated in Indochina area under French Indochina currency was divided into piastre, cent/centime and sapèque Indochina currency comprised of metallic currency and papers At first, coins circulated as French coins (centime), then, coin with card design or summer rice design In 1905, the bank issued lead coin only for Tonkin whose value was equivalent to 1/6 of centime, named Lục Bách Phân Chi Nhất Thông Bửu (in Chinese characters) After the world war I, Indochina Bank issued dime, dime with material of silver mixture but they were not popular In terms of paper money, paper money of Indochina was issued and circulated firstly in Cochinchine according to the Decree on January 21st 1875 and Decree on February 20th 1888 In 1990, Indochina paper money issued again with “mother country’s design” Once circulated, paper money was quickly accepted and widely used by Vietnamese One reason was that paper money was guaranteed by the bank If people kept paper money, they could come to the bank and exchanged with spread flower coin However, due to its high par value and strong purchasing power, paper money only served social rich class - The phase between 1921 and 1928 In 1921, after piastre stability, the bank issued new series of paper money Until 1923, the bank issued types of $1, $5, $20, and $100 and our people often called $5 paper “5 paper money” of peacock or “100 paper money” of censer; at that time, money was of stable and high value In 1924, Indochina Bank produced and ciruclated coin of niken and copper and tin alloy in Indochina niken coin was called kền coin (kền mean zinc) and used together with dimes - The phase between 1929 and 1945 This is a time period that global economy was in crsis Money value, therefore, devaluated respectively According to the French Government Decree, Indochina Bank issued new paper money of “gold paper” as “one gold paper” of Chapter INDOCHINA BANK’S OPERATION WITH FUNCTIONS OF COMMERCIAL BANK AND FINANCIAL INVESTMENT 3.1 Commercial Bank operation 3.1.1 Credit 3.1.1.1 Some Indochina Bank’s procedures and lending practices Credit: Credit derives from Latin which is Creditium meaning trust, reliance It is Credit in English Credit is interpretted in Vietnamese folklore as borrowings In agriculture, since being formed, Indochina Bank was ambitious for granting agricultural credit and the first lending practice was “seasonal lending” However, during applying, colonial government had to adjust and declared executing series of legal seasonal lending documents so as to be suitable for the economic situation With archives, Indochina Bank’s “seasonal lending” at its branches in Vietnam had to follow procedures: - Fully fill in the loan application with the prescribed copies, signed by village mayor, village officials and certified by being stamped - Classify and transfer the application to confirm and register at provincial level (province level approved loan application up to $150, country level approved loan application above $150) - Provincial/country level approve loan application - Tranfer to Indochina Bank’s local branch for entering the national register and making money transferring note to provincial or country level - Provincial or country level enter national register, forward to Treasury to disburse money In order to make more profit on lending farmers, on February 1st 1913, Cochinchine governor approved forming “native mutual agricultural credit association” (Société Indigène de Crédit Agricole Mutuel - SICAM), supervised by Chef-province and monitored by provincial committee Regarding operating fund, by principle, SICAMs had to use funds contributed by their members to maintain their operation Nevertheless, as a matter of fact, members’ contribution was insufficient Therefore, colonial government patronized so that Indochina Bank became monopoly bank funding SICAMs Actually, SICAMs were the very special agents of Indochina Bank In Tonkin and Annam, “Popular agricultural credit bank” (Banque de crédit populaire agricole or Caisse provincial de crédit agricolepopulaire - CPA) was born according to the Decree issued on September 4th 1926 Indochina Bank would be in charge of funding CPA Agricultural General Inspector was the person in charge of 11 direct managing, managed organizing, lending and withdraw toward this credit operation with the guarantee of Indochina General Governor Aiming at encouraging and enhancing mother country’s investment into Indochina, especially on agriculture and rubber On April th 1932, French Government issued credit law applied for Indochina This law was issued under the Decree on June 14th 1932 by Indochina General Governor in which the maximum amount of lending was 250 million francs (until December 31 st 1932) Besides, there were also guarantees for short-term or long-term loans from farmers and Landed proprietors and guarantees for a local firm borrowing up to 170 million francs, which were used for short-term or long-term loans to farmers This amount would be spent 90 million for farmers borrowing and 80 million to offset the price of rubber In addition, regarding industrial and commercial activity, Indochina Bank lent French government to spend on “economic equipment”, particularly, building up railways through Indochina Credit conditions applied for exporters enabled the bank to make huge profit 3.1.1.2 Lending operation - Lending activities in Cochinchine Regarding credit scale, since seasonal lending started, profit that bank as well as colonial budget made from Indochina Bank’s seasonal lending always increased strikingly over the years However, Indochina Bank’s seasonal lending was unsound In order to make more profit from granting credit, since 1913, colonial government along with Indochina Bank formed native mutual agricultural credit association in Cochinchine (SICAM) Most of SICAM fund was provided by Indochina Bank Hence, SICAM helped Indochina Bank and State Budget make a huge amount of profit That was why colonial government always protected the bank operation and made the most profit during the time the bank operated in Vietnam However, during 1931 - 1935, the world’s economic crisis affected Vietnam, then, SICAM operation coped with difficulty resulting in increasing dead-weight debt So as for SICAM to function, Government and Indochina Bank established State Fund according to the Decree on August 5th 1932 All SICAM debts gathered in only account of State Fund; the debt would be repaid by deducting $500.000,00 from Indochina Bank’s borrowings - Lending activities in Annam and Tonkin In Annam, similar to Cochinchine at the first time, lending activities in Annam after the Decree issued in 1897 - 1898 faced great deal of difficulty: only small numbers of small Landed proprietors in the area were entitled to loans 12 Tonkin seasonal lending only existed between 1897 and 1920 The amount of lending was generally not significant and lend activities were active for the first years So, it is realized that Tonkin seasonal lending was not as smooth as Indochina Bank and colonial government’s expectation As in Cochinchine, when seasonal lending was difficult, colonial government change their dodge by establishing CPAs in Annam and Tonkin Until 1938, total amount of fund that Indochina Bank granted for CPA was accounted for 90% and this indicates that CPAs were actually special branches of Indochina Bank, as “octopus tentacle” of French Capitalist reaching out to the countryside in Vietnam in general and Tonkin, Annam in particular for high profit for the colonial government, which is represented by the tycoon of Indochina Bank 3.1.2 Foreign Exchange 3.1.2.1 Some foreign exchange policies Indochina Bank was responsible for Indochina Government’s foreign trade since March 27th 1920 On September 9th 1939, French President declared the Decree of foreign exchange control and gold trading in Indochina (Contrôle des Changes et Commerce de l’Or): private individuals were not allowed to send or bring capital (including money, banknotes, shares of valuable bonds) from Indochina to abroad; on special occasion, they must have been allowed by Head of Foreign exchange (Office des changes) 3.1.2.2 Foreign exchange activities General Governor signed a convention with Indochina Bank on January 20th 1920 aiming at supportting that Indochina Bank stopped Chinese exchange Affer that, Indochina Bank increased its foreign currency reserves in order to enhance its financial health, make absolute advantage, which enabled Indochina Bank to become a foreign exchange regulating organization that would be always beneficial for French Government’s Indochina budget At the same time, Indochina Bank enjoyed gigantic foreign exchange difference for a long time On the other hand, by sponsoring international commerce, currency exchange trading became Indochina Bank’s neccessary and magnitude activitiy 3.1.3 Managing gold, precious metals trading and mortgages Another service that the bank was allowed to execute is trading of precious metals, accepting and storing of gold, silver and bronze, with or without interest Particularly, Indochina Bank was permitted to make seasonal loans along with mortgage and accept advances of metals and precious stones Simultaneously, the Decree fixed management of pawnshops, lending conditions and defined interest rate 13 of 2% per month with month term of loan The Decree also defined the auction of mortgates when the loan term expired Operation of pawnshops brought about huge amount of profit for French Capitalists which includes Indochina Bank Therefore, they constantly developed 3.2 Financial investment operation 3.2.1 Investing in Agriculture In Agriculture, Indochina Bank’s branch in Saigon specialized in exporting rice products by accepting advances up to 70% of rice order value Besides, the bank also allowed Landed proprietors to get advances on mortgage of harvested rice Regarding rubber trading, since 1921, Indochina Bank directly managed rubber companies: Indochina Hévéa Rubber company, Conponton Rubber company and tropical agricultural products Indochina compaby 68% of 100.000 hectares of rubber planting in Vietnam belonged to 27 companies of big capitalists (Indochina Bank was one of them) 3.2.2 Investing in Industry In industry sector, French capitalists only focused on mining and processing industry to make immediate profit without noticing investing in heavy industry, machinery manufacturing industry because such industries were so popular in France In general, French capitalists wanted that Vietnam had to rely on France as much as possible Thus, mining industry (Hon Gai coal company), and wine processing (Phông-ten brand) were industries that Indochina Bank invested and owned a large number of shares Hai Phong branch was entrusted with exporting ore mines 3.2.3 Investing in transportation Transportation was invested between 1898 and 1945 for colonial plundering and exploitation policy Roads, waterways, seaports and especially railroads were invested with great deal of money Indochina Bank’s branch of Hanoi was responsible for sponsoring public works It could be said that the establishment of Indochina Bank played a crucial role in French ruling policy in Vietnam With Indochina Bank, colonial government stretched its hand to control village and commune authority Besides, sponsored by colonial government, Indochina Bank made huge profit and guaranteed with no loss in doing business That was the reason why the government and bank were closely connected Indochina Bank held all “blood vessels” of Indochina economy which showed that French was so wise in soon forming colonial local banks Indochina Bank was not just a bank but developed and become a multicompany involving in every industries, every economic sectors The reason why it 14 succeeded was that it was supported, protected, enclosed with colonial government power in Indochina The government was actually founders of the bank with nominal meaning of controlling the bank which was in fact to ensure that Indochina Bank operated powerfully and influenced Indochina economic issues Thus, Indochina Bank had full power of “power of resources”, “power of government” and also “spiritual power” Thanks to that, Indochina could organize and execute fleecing plans towards our people at highest level In terms of socio-economics, Indochina Bank’s operations of credit, mortgage, international settlement at that time were not beneficial for Vietnamese and Indochina countries However, the model of credit institutions and bank’s international settlement left lessons of experience in establishing and managing Vietnam Banks, especially Commercial banks after our country’s independence and also up to now 15 Chapter INDOCHINA BANK’S IMPACTS ON VIETNAM SOCIO-ECONOMICS 4.1 Indochina Bank’s impacts on Vietnam socio-economics 4.1.1 Positive impacts 4.1.1.1 Money issuing policy The priviledge of money issuing became a big source of benefit for Indochina Bank In Saigon during the time from 1880 to 1885, 72% of bank profit came from issuing Its monopoly in money issuance was still highly profitable in following years Therefore, Indochina paper money was increasingly issued and circulated According to Karl Marx, printing paper money must follow the rule of paper money circulation The rule is that “paper money issuance must be limited in the amount of gold (or silver) represented by that paper money which should have actually circulated” Contrast to bank’s benefit, Vietnamese social life and people endured miserable situation due to the devaluation of money, especially in economic crisis time Until 1932, money devaluated to 10% in comparison with the value at the beginning of 20th century, inflation rose, people life got difficult due to sharply increasing price Consequently, the despair of the poor in colonial society became heavier and heavier 4.1.1.2 Foreign exchange operation French empire wisely used monetary tool to manipulate and exploit our people by sophisticated tactics with imposing silver coins in expenditure and Indochina Bank made thorough use of this tool to get great profit thanks to exchange rate fluctuation and traded this currency at the exchange rate in favor of the bank Fixing Indochina currency with franc was colonial monetary method in order to enhance exploiting Vientamese people and only bring about profit to Indochina Bank as well as French financial capitalists In the mean time, most of people including civil servants in Indochina, were struggling and suffered exaction 4.1.1.3 Financial investmet * Agriculture Rice and rubber were mainly invested because they were two important export goods Colonial government always applied different tactics so that French Landed proprietors robbed our farmer's land to set up plantations, land and subdivided them for tenants to rent and collect taxes This practice in which farmers must have rent land for plantation and paid taxes was formed resulting in severe consequences for farmers Vietnamese farmers were not only miserable for losing their land but also became tenants renting lands from French Landed proprietors and paid taxes after 16 each harvest In addition, they endured burden of colonial government exaction When agricultural products were negatively impacted because of the world economic crsis, French capitalists were extremely beneficial thanks to colonial government practice which derived from people taxes * Industry French empire quickly executed the right policy of making Vietnam industrial materials supply to its great industry One of the industries that France noticed at most was mining industry and Hon Gai coal company was the biggest one with the most profitable in this field However, as exploiting, mine owners mainly made use of cheep labor of Vietnamese mining workers They shared together profit without caring about investing in machines which enabled Vietnamese workers better lives It is the very exploitation that the Vietnamese working class early owned struggling spirit Especially, since 1930, with the appearance of Vietnam Communist Party, Vietnam working class officially won the flag leading the revolution of national liberation * Transportation The focus of transportation investment was to develop railways at large scale in order to disperse local residences and express power of French empire On the other hand, it supported quick and cheap goods transferring In addition, it enabled to conveniently exploit resources and fleece Vietnamese Besides, railways were also considered as suitable mean to send French troops to beat our insurgents Economic reason for setting up railways was that French heavy technologies took advantages of selling railways equipments, engines, rail vehicles, etc at high price French railway capitalists were not only financially sponsored to execute by Indochina Bank but also loaned by French imperial Government to pay railway contractors 4.1.2 Positive impacts Indochina Bank appeared and was allowed to issue money, especially paper money accepted and settled widely, forming paper money using habit among people which indicated the success of Indochina Bank and French government, signaling the beginning of circulating paper money not only under French time but also up to now When French invaded Vietnam to monopolize Vietnam economy, French had to control the money circulation To so, French had to make a commanding currency Therefore, French government let Indochina Bank issue money This is the “unique” function of Indochina Bank Beside coins, paper money was issued and circulated If paper money had not been accepted under Ho time, paper money issued by Indochina Bank was accepted and became the only one type of currency existing in Vietnam (Mexico Pesos might have to disappear) 17 The money unification put a big impact on Vietnam economy Then, all exchange, international settlement based on Indochina currency The convenience of this type of settlement tool contributed to promote manufacturing, exchange, purchase and sale, which helped Vietnamese goods was step by step present at global market In terms of foreign exchange, this was a new field appearin gin Vietnam under French However, by this field, Indochina Bank contributed to help Indochina Bank regulate Vietnamese economy in particular and Indochina in general Indochina Bank well performed controlling foreign exchange which have been managed with difficulty by State Bank of Vietnam nowadays Exchange rate control played an important role in economic development, attracting foreign currencies invested by domestic and international companies Indochina Bank was so successful in this field and enabled Government to keep the curreny stable, which contributed to boost Vietnam economy to develop in some measure By foreign exchange activities, modern business model started in Vietnam Nowadays, domestic and international businesses could transfer and receive money quickly via banks With the presence of modern business form, clients could believe each other thanks to bank guarantee Indochina Bank’s financial investment policy at that time affected signficantly Vietnam economics Nevertheless, with the bank’s investing activities, Vietnam foreign trade has developed Vietnam goods traded on the global market, marking starting international trading of Vietnam businesses Regarding business model of plantation (rice, rubber, tea, etc.), French capitalists’ hiring workers contributed to import the relation of capitalist production (eventhough French still maintained outdated feudal production relations at that time) The appearance of railways contributed to develop Indochina economy in general and Vietnam in particular Thanks to this transportation, Vietnam goods have increasingly been traded on global market It was easier and faster to trade with other countries This attracted more and more French capitalists’ funds to Vietnam, hence, French capitalists’ profit increased Although railways were set up to support colonial exploitation, they some how helped people travelling more conveniently, which contributed to inhabitants allocation, attracted the influx of migrants to urban areas to earn their living (farmers moved to urban areas and worked in factories and became workers) From that, new urban areas were formed It could be said that train system achieved a big success Indochina Bank used fund sources granted by the Government or mobilized to directly invest and opened enterprises in most of economic industries and sectors (as long as they got high profits), occupied and engrossed the market, leaving many 18 lessons for current managers and policymakers Therefore, State Bank of Vietnam has now learnt from that and prohibited Commercial Banks to use capital mobilized and directly business as well as invest in different sectors In conclusion: Indochina Bank operation contributed to form colonial economy With active operation of Indochina Bank, a new and modern economic structure appeared at the first time: agriculture, industry, commerce, transportation and especially finance - banking (new industry) And at some measure, Indochina Bank supported to promote and develop Vietnam economy at that time 4.2 Impacts of Indochina Bank to Vietnam society 4.2.1 Negative impacts 4.2.1.1 Credit activities, gold and precious metals trading and mortgages management * Credit activities Since the establishment, Indochina Bank found how to lend Vietnamese in order to acquire commercial activities, simultaneously stiffled capitalists of overseas Indian, Chinese and Vietnamese Landed proprietors In addition to economic purpose, seasonal lending also solved social matters However, impacts of Indochina Bank’s lending activities on Vietnam socio-economics were not so positive Interest payment time that the bank set totally based on rice crop This term did not take into account the market feature of agricultural products That was the reason why there were still unsound Administrative procedures made seasonal credit loans virtually impossible for Cochinchinese farmers Moreover, they became opportunities for village officials appropriated part of loan amount Colonial government got only insignificant interest regardless of its large scale theoretically The reason was the deadweight debts guaranteed by the government became larger and larger When native mutual agricultural credit association (SICAM) appeared in Cochinchine, Cochinchine’s Landed proprietors took advantage of funds that SICAMs lent for their benefit by borrowing from SICAMs and lending to enjoy the interest difference CPA operations encountered the same situation From the practice of Indochina Bank’s credit activities, most of loans belonged to Landed proprietors (including Vietnamese Landed proprietors) This made landed proprietor class become “main supporters of current society” (in comparison with Cochinchine, Tonkin and Annam were smaller) Such policy somehow expressed that French policy on Vietnam conquest was “used Vietnamese to rule Vietnamese” it was this that Vietnamese farmer and craftsmans’ struggling fire outbroke more and more severely They became key forces (along with workers) in the fight against French and feudalism 19 * Gold, precious metals trading and mortgages Indochina Bank traded gold and precious metals mainly for Government which were used to balance gold standard to issue money The most emerging of trading gold and precious metals combined with usury was pawnshops Pawnshops were present in Vietnam since the early time of French conquest Their prosperity was closely associated with French widely casino opening policy To pawners, they thought that they would redeem their belongings when the troubles ended or they beame richer But, redeeming what they pledged seemed a big problem Then, it was unavoidable that Vietnamese people would fall in distress situation 4.2.1.2 Rice export and wine brewing monopoly policy * Rice export policy French rice export policy put signifcant impact on Vietnam society at that time Indochina Bank’s branch in Saigon specialized in exporting this product (because rice was mainly exported from Cochinchine) The bank would fund exporters and perform currency exchange transactions Eventhough Vietnam socioeconomic situation fluctuated, regardless of increasing or decreasing exchange rate of Indochina currency, the bank revenue from this operation never lost On poor crops, local people fell in famine, however, rice was exported with large quantity and local people had to buy rice expensively As a result, famine happened It enforced our people to fight against French oppression (Japan joined since 1940) The success of August Revolution was inevitable * Brewing monopoly policy The monopoly policy of wine brewing gave favourable conditions to French wine producing monopoly companies especially Indochina wine producing (Phongten brand) This brought about giant profit to Indochina Bank and some ruling officers because they were major shareholders They used all tactics to make the highest profit regardless of Vietnamese abjectly poor lives Additionally, wine monopoly policy enabled French wine companies to develop favourably in Vietnam, which not only broke Vietnamese traditionally cultural way of life but also resulted a group of Vietnamese young people in being sunk in drinking, losing struggling spirit, no longer thinking of chasing invaders out of the country This was clearly portrayed by “Chi Pheo” character by Nam Cao However, this was just a small group in society, the majority of Vietnamese evidently recognized French colonial wicked nature 4.2.1.3 Policies poisoning Vietnamese For exploiting purpose, French empire did not skip any fields to extract colonial countries’ wealth to enrich mother country Efficiently supported by colonial 20 government, Indochina Bank executed monetary policy, credit, investing in all fields of industry, agriculture, commerce and transportation, getting back giant profit In indirect way, by Indochina Bank, French imperial government proceeded its wicked plot in leading our people to be sunk in gamle, drug, alcoholism in order that they easily make profit from such addicting products Therefore, it could be said that the appearance and operation of Indochina Bank put significant impacts on Vietnamese society and livings under French time 4.2.2 Positive impact With function of Commercial Bank, credit activities brought about huge profit for banks and indirectly dispossessed Vietnamese people land But, on the other hand, it was reasonable to realize that credit activities made certain contribution to transform our country small-scale peasant economy into an economy with capitalism characteristics Enlarging credit activities and money circulation fostered the relation between goods and money to be increasingly popular in Vietnam (where preserved “self-sufficiency” economy for long time), contributing to make premise for goods economy development Favoured by the Government, Indochina Bank showed its leadership capability and hence, it managed and well run pawn shops This contributed to increase the bank’s fund and enable the bank to get back a weighty amount of profit This is a matter that Vietnam bank managers should learn so as to make management solutions Our country has floated this field, private individuals and black credit have freely manipulated Granted with priviledge, Indochina Bank not only issued money and operated in banking sectors, the bank also used its fund mobilized to directly or indirectly invest in different sectors Thus, Indochina was a tool for French to use when dominating Vietnam It was outstanding that by French ruling policy, there were many changes in Vietnam society The relation of capitalist production was imported to Vietnam and resulted in the apprearance of new classes in society including worker, middle-class and petty bourgeoisie, which made contribution to finalize modern class structure, defining Vietnam society future of development Another important thing was that French ruling policy by Indochina Bank generated and grow Vietnam urban system, a leading factor to access western culture 21 CONCLUSION Modern banking system is connected with market economy and capitalist manufacturing - circulating approach The history of establishment and development of Indochina Bank through its existence (from 1875 to 1945) was also associated with French colonial economy model It could be said that the presence of French finance in Indochina was marked at first by organizing a strong and closely controlled bank Indochina Bank, soon after its establishing, became one of the best organization among colonial countries Indochina Bank was not only a bank but also developed to a corporation involving in all industries with all economic sectors It could so because of Indochina government’s support, protection and coverage Indochina Government was the bank founding shareholders with the nominal role of controlling the bank but actually ensured that Indochina Bank had influences to operate and rule Indochina economic issues So, Indochina Bank had full power of “power of resources”, “power of government” and also “spiritual power” Thanks to that, Indochina could organize and execute fleecing plans towards our people at highest level In terms of organization, Indochina Bank was a super powerful organization It was a monopoly bank in money issuance, functioning as a Central Bank Besides, it was an enterprise doing business of currency trading like exchange, deposits, loans money transfer, settlement, etc which was of a Commercial Bank All of activities above together brought about giant profit They became richer and richer regardless of how much sweat and tears of Indochina people in general and Vietnam in particular Indochina Bank played a role of Central Bank However, its feature of Central Bank was associated with France colonial exploiting purpose and economic benefit regulating in Indochina It diversified financial acquisition, on the other hand, concealed fleecing practice under fine meaning of “contributing to foster Vietnam outdated agricultural economy”, it was considered as “kill two birds with one stone” In addition to issue money, the presence of France in Indochina, from the beginning, a foundation was started to execute the task of collaborating between individuals and public power Indochina Bank was completely defined on that “heart and brain of Indochina economy” Indochina Bank was formed in the context when French troops occupied Cochinchine and Saigon Branch of Comptoir National d’Escompte de Paris was not capable of money managing This revealed the importance of monetary policy in colonial conquest and exploitation The model of Indochina Bank and its Saigon Branch were established within months which was a strong proof of monetary 22 system’s role and importance of money control in French empire’s colonial exploiting strategy; moreover, its importance and meanings were still the same in later economic managing approach French empire turn Indochina Bank into an apparatus that completely served their colonial exploiting policy by assigning depositing most of yearly Indochina fund at Indochina Bank under the portfolio of “expenditures on public agents serving economic development” Although this financial source derived from Vietnamese contribution, it did not bring about any benefit to Vietnamese but proliferated in the bank At the end, “economic development fund” was only used for French capitalists to exploit our people more and more sophiscicatedly and cunningly Indochina Bank’s directly or indirectly involving actively in exploiting on all sectors of agriculture, industry, commerce and transportation in Vietnam showed that French empire transformed Vietnam outdated feudal agricultural economy into outdated colonial agricultural economy Summing up, Vietnam economy after near one century of “civilized” by French was still an outdated agriculture even there was a certain difference in level of being outdated Indochina Bank caused uncountable miserable situations for local people in direct or indirect way due to usury, gamble, drug, drinking, etc In addition, French dominating policy and priviledge in every economic sectors resulted in disastrous circumstances in which most of Vietnamese people impoverish to the utmost And this time was the darkest of Indochina in general and Vietnam in particular under French imperial ruling with efficiently supported by Indochina Bank “hidden” behind Indochina Bank was established and quickly held all “blood vessels” of Indochina economy, thereby executing its intrigue “binding” Indochina economy with France including Vietnam Therefore, if there is opportunity to look back today, it is easy to realize that most of countries who used to be French colony are poor and obsolete That proved how much wicked French colonial exploitating policy was However, in today’s integration trend, apprearance and operation of Indochina Bank should be seen objectively and evaluated fairly Beside consequences that the bank caused among Vietnamese in direct or indirect way, there has been some important contribution including: Firstly, the appearance of Indochina Bank and its branches in Vietnam changed Vietnamese thinking Since then, Vietnamese traded and exchanged on the basis of “money”, contributing to transform our country small-scale peasant economy into an economy with capitalism characteristics Secondly, the appearance of Indochina Bank’s Saigon branch on April 19 th 1875 marked starting point of banking operation in Vietnam Lessons from Indochina Bank’s experiences of how to manage banking system were useful for management approach, running practice of Vietnam current banking system 23 Thirdly, Indochina Bank has been considered as the foundation of organizing business activities of Vietnam banks later Specifically, foreign exchange, currency exchange, money transfer, credit, mortgage, etc have left so many lessons of how to organize, targeted customers, mortgage procedures, managing and running, and so forth as well as operational techniques have all been subjects for us to study and learn, especially for those who work in banking sector Forthly, Indochina Bank used Government capital or funds mobilized to directly invest, open business, acquire and engross the market, which would be lessons for current managers and policymakers Therefore, State Bank of Vietnam has now learnt from that and prohibited Commercial Banks to use capital mobilized to set up enterprises and directly business as well as invest in different sectors Some works of Indochina Bank’s contribution up to now are some railways built by colonial government (funded by Indochina Bank), they have become a crucial mean of transportation among Vietnamese people Or, some architecture such as head office of today State Bank of Vietnam is the very the office of Indochina Bank’s Hanoi branch; Hochiminh Stock exchange is now located in the position of Indochina Bank’s Saigon branch before People are living in a modern society, when the war passed far away, the past should be closed with orientation toward the future The relationship between Vietnam and France should be enhanced Until 1954, despite the fact that French troops went out of Vietnam, then, Indochina Bank did not exist in Vietnam, its name did not fall into oblivion in the market Until 1975, Indochina Bank (Banque de L'Indochina) was merged to Banque de Suez et de L'Union Mines des and became Banque de Suez The merge inherited business techniques, fame, and brand name of Indochina Bank This was accompanied with Banque de Suez et de L'Union Mines des which existed in Europe leading to a stronger system On the other hand, taking advantage of Indochina Bank capabilities with a wide network in Asia and Middle East, Banque de Suez et de L'Union Mines des was globally popular Thus, after near a century of operation, nowadays the name of Indochina Bank has not been no longer present However, its reputation and well-known success marks banking sector In Vietnam, corporate and investment bank of Crédit Agricole Viet Nam is considered as Indochina Bank’s offspring, which has efficiently operated, positively contributed to Vietnam economic development nowadays 24 LIST OF THE AUTHOR’S DECLARED WORKS RELATED TO THE DISSERTATION Indochina Bank – Money Issuance and the Appearance of Vietnam Monetary System under French Time, Journal of Science of Hochiminh City Open University, No.4, 2011 Some Features of Indochina Bank’s Operation, yearbook of scientific workshop “Research and Teaching History, Culture, Society”, Social Science Publishing House, Hanoi, 2014 Operation of Indochina Bank in Vietnam between 1875 and 1945, Journal of Science of Vinh University, Volumne 43, No.1B, 2014 The Appearance and Monopoly in Money Issuance of Indochina Bank in Vietnam, Journal of History Studies, No 2/2016 Credit Activities of Indochina Bank’s Saigon Branch between 1875 and 1945, Journal of Science and Society of Hochiminh City, No 4/2016 25 ... Vietnam between 1875 and 1945 3.2 Study scope 3.2.1 Time, based on existing materials, the author limits this thesis’s study scope of Indochina Bank’s operation in Vietnam between 1875 and 1945 The... reason why 1875 is chosen as study starting point of time is that Indochina Bank was established in Paris in 1875, at the same time, its first branch was openned in Saigon (19/04 /1875) 1945 is chosen... between 1875 and 1945 The thesis contribution - The thesis is the first work in Vietnam restoring the panorama, details and system of formation and development of Indochina Bank in Vietnam between 1875