MENTION Vietnam and most people think of war, but when the administration of US President Bill Clinton announced it would not oppose international lending to Hanoi, images of another kind start to come to bankers' mind. The news will generate funds for the infrastructure projects, and gives hope for the economy's future. Foreign banks were quick to grasp opportunities once the door was slightly open in 1989, with seven foreign banks having established branches in the country - five in Ho Chi Minh City and two in Hanoi. Of the seven banks, four are French, two Thai and one Australian. ''In 1989, when the economy first opened up, all bankers in the country were experts in handling bad debts, because Vietnamese banks had bad reputations for repayment,'' said Banque Nationale de Paris deputy general manager Hubert Marchat, who headed the bank's operation in Vietnam from 1989 until August last year. BNP was one of the first five banks allowed to open a branch in Ho Chi Minh City. ''Other banks found it too risky in 1989 to put out US$15 million capital for a branch which was the government's requirement at that time. So they missed the chance,'' he said. Hongkong Bank is presently running two representative offices in Vietnam, one in Ho Chi Minh City and another in Hanoi. The bank filed an application to upgrade the office in Ho Chi Minh City last year. However, according to Hongkong Bank senior manager Alastair Cooke, the Vietnamese Government strongly encourages foreign banks to open branches in Hanoi. With all the commercial and manufacturing activity radiating out from Ho Chi Minh City, foreign banks wanted to follow the commercial drift to go south, Mr Cooke said. But Mr Marchat said: ''We were also advised to open a branch in Hanoi, but we insisted and now we are in Ho Chi Minh.'' Vietnam's Prime Minister Vo Van Kiet has said his government was not prepared to receive further application from foreign banks after June 30 until a review on foreign bank operations had been completed. Unlike China, which forbids foreign banks from doing local-currency business, foreign banks in Vietnam are free to deal in the dong, Vietnam's currency. However, other restrictions are still in place to protect the Vietnamese banks. ''We cannot receive deposit from private individuals. Neither can we accept deposit from Vietnamese companies unless we extend credit to them,'' Mr Marchat said. ''Trade finance and project finance are the two main areas of bank business in Vietnam. Since the total foreign trade volume for Vietnam is much lower than Shenzhen, the potential for growth and business is huge,'' he said. One of the keys for success in Vietnam, according to Mr Marchat, is understanding the market. ''There is a premium for the banks which came first. The Vietnamese have a very different way of doing business, different from the Chinese,'' he said. However, he cautioned that banks should also be prepared to take on the risks of the market. ''Vietnam does not have a comprehensive banking law, no bankruptcy law and no real mortgage law,'' he said.