ENHANCING THE COMPETITIVENESS OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE VIETINBANK IN INTERNATIONAL TRADE FINANCE IN VIETNAM

In general, there has been very little indepth research on the topic of enhancing international trade finance activities in commercial banks in Vietnam. Although the issue of developing international trade finance is increasingly concerning in the context of the outbreak of the Covid19 epidemic and complicated developments causing many difficulties for the world economy, most of the research theses only present the most common problems and difficulties along with shortterm solutions. Moreover, most of the studies were done more than 5 years ago, so the data are not close to the real situation and are too old to use, analyze and compare. Therefore, it is necessary to do brand new research about trade finance activities in Vietnam with the information in the 20182020 period. This thesis will focus on the current situation of Vietnam’s commercial banks especially the Joint Stock Commercial Bank for Industry and Trade VietinBank.

BANKING ACADEMY INTERNATIONAL BUSINESS FACULTY  GRADUATION THESIS ENHANCING THE COMPETITIVENESS OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE VIETINBANK IN INTERNATIONAL TRADE FINANCE IN VIETNAM Student : LUONG TAN MINH Class : K20KDQTG School year : 2017 – 2021 Student ID : 20A4050228 Lecturer : M.A Ngo Duong Minh Ha Noi, May 2021 BANKING ACADEMY INTERNATIONAL BUSINESS FACULTY  GRADUATION THESIS ENHANCING THE COMPETITIVE CAPACITY OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE VIETINBANK IN INTERNATIONAL TRADE FINANCE IN VIETNAM Student : LUONG TAN MINH Class : K20KDQTG School year : 2017 – 2021 Student ID : 20A4050228 Lecturer : M.A Ngo Duong Minh Ha Noi, May 2021 ii ACKNOWLEDGEMENT In order to complete this research, first of all, I would like to express my endless thanks and gratefulness to Mr Ngo Duong Minh, M.A., who wholeheartedly helped, guided, and instructed me during the course of the thesis Besides that, I would like to thank the teachers in the International Business Faculty and all the lecturers of the Academy, who have imparted useful and valuable knowledge to me during my study and research at school Despite many efforts, due to limited time, my qualifications and experience are still limited Therefore, shortcomings cannot be avoided Hence, I hope to receive comments from teachers and friends to make this thesis more complete Thank you sincerely! iii DECLARATION I commit the graduation thesis "Enhancing the competitive capacity of Vietnam Joint Stock Commercial Bank for Industry Trade Vietinbank in International Trade Finance Activity in Vietnam" is my own and independent research, under the guidance of Mr Ngo Duong Minh, M.A The figures in the thesis are truthful and have clear, specific origins The results of the thesis are truthful and have never been published in any other research that I know of iv TABLE OF CONTENTS INTRODUCTION 1 The urgent of the study Object and scope of the study Research question Research Methods Research Overview 5.1 Foreign study 5.2 Vietnamese study 5.3 Research gap 6 Thesis Structure CHAPTER 1: 1.1 Definitions of Trade finance and Competition 1.1.1 Definition of trade finance 1.1.2 Definition of competition 1.2 Competitive capability in international trade finance at commercial banks 12 1.2.1 Evaluation criteria for enhancing competitive capability in trade finance 12 1.2.2 Necessity of enhancing competitive capability in international trade finance at commercial banks 14 1.2.3 Factors affecting the competitive capability in trade finance 15 1.2.3.1 External factors 15 1.2.3.2 Internal factors 16 CHAPTER 23 v 2.1 Vietnamese economy and its impact on competitive capability in international trade finance 23 2.1.1 The volatility of the world market in the context of covid-19 pandemic 23 2.1.2 2.2 Size of import and export market of Vietnam 26 Current situations of enhancing competitive capability in international trade finance at VietinBank 27 2.2.1 Strength 27 2.2.2 Weakness 30 2.2.3 Opportunity 32 2.2.4 Threat 33 2.3 Reason 34 CHAPTER 3: 38 3.1 Orientation goals to enhance Vietinbank's competitive capacity according to the Law on Credit Institutions 2010 38 3.2 Solutions to enhance Vietinbank's in competitive capacity 41 3.2.1 Improve strengths to take advantage of opportunities: 41 3.2.2 Overcoming weaknesses to get over challenges: 42 3.3 Recommendations for Vietnamese Government 44 3.4 Recommendations for import-export businesses 46 CONCLUSION 48 1.1 Conclusion 48 3.2 Limitations 49 3.3 Future research 49 LIST OF REFERENCES 50 vi LIST OF ABBREVIATION Abbreviation Meaning ASEAN Association of Southeast Asian Nations BIDV Joint Stock Commercial Bank for Investment and Development of Vietnam EVFTA Vietnam - European Union Free Trade Agreement FDI Foreign direct investment IAB Investing Across Borders RCEP The Regional Comprehensive Economic Partnership Agreement SBV State Bank of Vietnam SMEs Small and medium enterprises SOCBs State-Owned Commercial Banks UKVFTA UK-Vietnam Free Trade Agreement VAMC Vietnam Asset Management Company VietcomBank Joint Stock Commercial Bank for Foreign Trade of Vietnam VietinBank Vietnam Joint Stock Commercial Bank for Industry and Trade VpBank Vietnam Prosperity Joint Stock Commercial Bank WTO World Trade Organization vii LIST OF FIGURES Figure 2.1 Profit after tax of VietinBank 27 Figure 2.2 Evaluate the effectiveness of personnel after training 31 Figure 2.3 Scale of Vietinbank and Vietcombank's non-performing loan 32 viii LIST OF TABLES Table 2.1 List of Top 10 prestigious Vietnamese commercial banks .29 ix INTRODUCTION The urgent of the study In a period of rapid and widespread international economic integration trend around the world, Vietnam used to be a low-middle-income country until achieved economic achievements, reform society 1986 and a series of participation in international organizations such as ASEAN, WTO Over the years, investors can be impressed with a new Vietnam in the business environment This place is an attractive investment destination for foreigners to start a business in Vietnam At the same time, the role of the Bank - the key economic sector of the country, where managing capital flows in and out of enterprises takes on more and more core meaning than ever, is the connection point between domestic and foreign enterprises through international payment activities, promote the import and export of goods and services, foreign investment and international credit finance With that trend, the influx of capital pouring into Vietnam has increased the competition in the market to become extremely fierce, posing problems for domestic banks: What to to compete and develop against these competitors? VietinBank is a Vietnamese State-owned commercial bank, established on March 26, 1988, on the basis of separation from the State Bank of Vietnam under Decree No 53/HDBT of the Council of Ministers With available potentials and excellent market conditions, VietinBank has all the ingredients to become a leader in trade finance in Vietnam However, there is still strong competition from other banks, such as VietcomBank, BIDV, in terms of international banking, so the full potential has not been brought into play completely In general, there has been very little in-depth research on the topic enhancing international trade finance activities in commercial banks in Vietnam Although the issue of developing international trade finance is increasingly concerned in the context of the outbreak of the Covid-19 epidemic and complicated developments causing many CHAPTER 3: RECOMMENDATIONS TO ENHANCE COMPETITIVE CAPACITY IN INTERNATIONAL TRADE FINANCE OF VIETINBANK 3.1 Orientation goals to enhance Vietinbank's competitive capacity according to the Law on Credit Institutions 2010 - Increase financial strength First, increase tier capital: Increase charter capital from applying for additional funding from the state budget; recovery of outstanding debts; debts that have been planned off-balance sheet and have been handled by the State Increase in funds included in Tier capital such as reserve fund for supplementing charter capital, financial reserve fund, investment and professional development fund Second, increase tier capital: Continue to issue bonds with competitive interest rates to increase Tier capital; organize to reevaluate of fixed assets This is a solution that can be implemented proactively, quickly but effectively in increasing Tier capital because most of Vietinbank's fixed assets are real estate Therefore, if Vietinbank's fixed assets are revalued, Vietinbank's Tier capital will increase significantly - Improve the management of assets and liabilities Completing and promoting statistical reporting, ensuring the accuracy of reported data; Building and applying the asset and liability management model in business activities 38 Bringing the management of assets and liabilities to a new position, it is necessary to establish the importance of this management Smooth and synchronous coordination between credit risk management _ liquidity risk management in assets and liabilities management - Diversify traditional products and develop new products Firstly, establishing a market research and product development department next to the Marketing department to study the needs, tastes and trends of consumers on the basis of Vietinbank's inherent advantages to offer new product lines so as to meet consumer needs; Second, diversifying new product lines on the basis of traditional products to adapt to many different customers; market segmentation to provide products that are suitable for customers' needs and Vietinbank's advantages Third, develop new products (for Vietinbank) based on the existing advantages of Vietinbank or on the existing basis of other credit institutions that are applying, such as mobilizing and lending in gold to diversify forms of mobilization and generate income for affiliated companies Fourth, improve the quality of the marketing department, build a marketing strategy suitable for each product to help customers understand and approach the new product line effectively Especially to improve the marketing ability in the heart of every banker, not just the marketing department - Completing and synchronously developing information technology for the whole system Continue to perfect and enhance the role of network administrator, system administrator because once high-tech products such as home_banking, credit cards, Visa cards are born, cybercriminals will appear more and more, they can harm any banking system, customers These damages will significantly affect the reputation, quality as well as business activities of the bank 39 - Completing the distribution channel system Firstly, the rapid development of first-level branches and transaction offices when there was a change in the management mechanism in the past year in the city area has inadvertently turned second-level branches into first-tier ones, this leads to too many tier-1 branches in the same area (district), thus leading to competition within Vietinbank itself, this will affect Vietinbank's reputation and customer's bad psychology with the bank Second, the number of transaction offices in the communes of the provinces is becoming redundant, which makes it difficult for the synchronous deployment of information technology; causing waste in transactions, fixed costs and personnel In order to make good use of our existing advantages in Vietinbank's network and distribution channels, we need to: To enhance the role of fixed asset management at Vietinbank's head office, the licensing of establishment of new branches and transaction offices must be done on the basis of synchronization and harmony between existing branches of Vietinbank Build kiosks, automatic transaction points, install more POS machines in commercial centers and big cities Focusing on foreign distribution channels (establishing representative offices in the US, Singapore ) to support payment activities in business activities - Continue to strengthen and promote the strength of human resources Firstly, Vietinbank's human resources is not uniform in terms of "quality", there are still many staff with the mindset of the previous period, so they are not active and cannot keep up with the changing demands of the banking sector Secondly, Vietinbank's recruitment mechanism in recent years has not been made public, although it is public, the standards set forth for recruitment are not really consistent with reality 40 Third, the current salary and allowance regime of Vietinbank is not high, while the meritocratic regime is still low compared to other credit institutions Solutions that need to be implemented to overcome and improve the quality of human resources at Vietinbank include: More transparent about recruitment issues, giving appropriate criteria and closer to recruitment needs Mechanism of salary, bonus and employee treatment regime must be raised to commensurate with what that cadre has contributed Limiting the "scratch" salary system, there must be separate bonus policies for each staff to encourage them to complete their tasks well and stick with the bank for a long time Although there is a training center, in recent years the center has not promoted its role in training and improving the professionalism of its staff So the arrangement and reorganization of the training center is really necessary - Solutions for internal audit work 3.2 Solutions to enhance Vietinbank's in competitive capacity 3.2.1 Improve strengths to take advantage of opportunities: Today, when the competitive pressure in the banking business is increasing, commercial banks are always looking for ways to improve their competitive strength, in which, Taking advantage of the advantages that we have available to promote the strength is the shortest and most effective step The advantages that VietinBank can promote are: First of all, take advantage of the wide network to develop products and services, aiming VietinBank to become a leading retail bank Diversifying deposit and capital mobilization product lines, card products, high-tech products in big cities and developing cities (Dong Nai, Binh Duong, Vung Tau, Đa Nang ) Second, Promote cooperation, open Representative Office, branch in China to develop the field of multi-border payment, money transfer based on the brand name for 41 more than 20 years Continue to consolidate and develop the retail market in urban areas, towns on the brand known for many generations of citizens Third, enlist the support of the Government and international organizations to access and use "cheap" capital to develop technology, improve human resource quality, consolidate and promote market share Integration not only opens up new opportunities for the Vietnamese economy, but also creates countless opportunities for the banking industry in general and VietinBank in particular But how to take advantage of those opportunities? It is important to turn them into strength and use them as a tool to increase strength in competition To turn those opportunities into the key to VietinBank's success, VietinBank needs to: Firstly, quickly develop high-tech product lines (e-banking, mobile_banking, internet_banking product lines); promote and develop the business trend of the bank in the direction of modern retail banking based on available advantages (wide network) Another point is to take advantage of the cooperation of the State Banks to approach professional management methods and new technologies In addition, it is necessary to take advantage of the attention and financial and technological support of international financial groups such as the World Bank, ODA, etc to strengthen and upgrade the information technology system, the quality of human resources…in order to improve competitive strength Finally, continue to promote the establishment of representative offices and branches outside the territory to enhance the strength in payment and create brand 3.2.2 Overcoming weaknesses to get over challenges: Not only VietinBank but any credit institution always has certain weaknesses Therefore, overcoming its weaknesses and turning them into advantages and opportunities to enhance competitive strength for development is what any organization wants To that, VietinBank needs to: 42 Firstly, improve the quality of human resources on the basis of building and training a team of staff with a new mindset, understanding and recognizing the importance of customers for the survival and development of the bank Training a team of employees with the spirit of working hard and dedicating to the cause of VietinBank Second, diversify products and services, improve service quality on the advantages of network, brand and the support of the Government.… Third, in order to overcome the credit risk that VietinBank has suffered in recent years, it is the investment object of VietinBank, VietinBank must make the best use of the advantages of the Government to overcome these weaknesses, by transferring the risk to another object, which is the insurance company Fourth, improve the infrastructure, ensure the synchronicity in the field of technology Finely reduce branches and transaction offices to facilitate investment in technology development as well as create a face for the bank Avoid having too many transaction offices and branches with low infrastructure and equipment because this will reduce VietinBank's position with customers Fifth, improve the quality of reporting to serve as a basis for VietinBank's forecast and development orientation on the basis of industry development and in line with the trends and guidelines of the Party and State Perhaps what commercial banks in general and VietinBank in particular do, and how, with its strengths, on the understanding of its existing weaknesses with taking advantage of the opportunities of the market to overcome all challenges that are and will be faced ahead To turn the advantages that we have, the opportunities that the market has created on our weaknesses to overcome the challenges of the market to create a competitive advantage VietinBank needs to: Firstly, strengthen financial strength to invest in developing new technologies, improve infrastructure, and upgrade equipment to improve the "speed" of data 43 transmission between branches and headquarters, , between branches and transaction offices to ensure accuracy, safety and speed in all transactions Avoiding congestion in transactions, causing damage to customers and affecting the reputation of the Bank In addition, it is necessary to pay attention to network administration, because once hightech products are used then the problem of "stealing" information, customers' assets will be more reliable and the consequences will be more serious Moreover, perfecting and enhancing the role of governance in banking business activities such as: asset management, risk management, human resource management, etc Because once the competition trend increases among banks, the risks in banking business will increase In addition, not only the banking industry is facing the competitive trend, but all other sectors in the economy are also under the same pressure, so the volatility of the market will also increase This inevitably makes the banking industry inevitably implicated, so perfecting and enhancing the role of risk management is a must Besides that, continue to improve the salary, remuneration and recruitment regime to attract human resources with "gray brains" to ensure the creation of a team of energetic and capable employees enough capacity to manage and operate in the current period and inherit in the future Finally, make a difference in their own business activities based on products, people and service quality, having enough capacity to manage and operate in the current period and inherit in the future 3.3 Recommendations for Vietnamese Government Firstly, macroeconomic stability The socio-economic environment has a significant impact on the scale of international trade financing Therefore, macroeconomic stability will have a positive impact, creating a favorable business environment for businesses The task of "macroeconomic stability" has become a top priority instead of the goal of achieving high 44 economic growth as in the economic development policy in previous years Continue to strengthen macroeconomic stability, through controlling inflation, and stabilizing exchange rates in the face of complicated developments of the Covid-19 epidemic Inflation weakens purchasing power for goods and services as well as pushes up borrowing costs beyond the reach of many businesses Besides destabilizing the market, inflation also affects Vietnam's ability to supply a cheap labor force to labor-intensive industries Exchange rate is a particularly important factor for import-export businesses since the currency used for international payments is mainly a foreign currency, fluctuations in exchange rates will change the estimated revenue (costs) of the business Therefore, the government needs to take practical measures to control inflation and maintain a stable exchange rate Secondly, develop an appropriate foreign trade policy Under the influence of the trend of globalization and international economic integration, international trade policy is becoming one of the important parts of each country's economy International trade policy with tools and measures applied appropriately and optimally will create conditions for businesses to expand overseas markets, have the ability to rise up in competitive conditions and international cooperation, bringing benefits to the country The government needs to have policies to support, encourage and promote the export of key commodities, which are Vietnam's strengths, such as textiles, seafood, handicrafts, etc.In order to increase foreign currency revenue for the country and at the same time have appropriate policies and measures to stimulate domestic consumption demand, reduce the current account burden, and facilitate the operation of a flexible exchange rate mechanism In addition, administrative procedures need to be further reviewed and adjusted in the direction of shortening in order to create conditions for enterprises to business effectively, save time, minimize the operational opportunities of corrupt and wasteful acts Continue to improve the domestic investment environment, attract foreign capital 45 Thirdly, the operation of appropriate exchange rate policy Stable exchange rate policy to ensure safety for banks when conducting international trade activities and international trade finance In the context of world economic instability, the SBV needs to build a flexible, not rigid exchange rate In addition, the SBV needs to pay attention to the national foreign exchange reserves in order to operate the exchange rate policy effectively If the amount of foreign currency in the country is not enough to meet the demand, it will inevitably lead to exchange rate fluctuations Therefore, raising foreign currency reserves corresponding to the growth rate of import and export turnover is a necessary job Finally, completing and developing the interbank foreign currency market The completion and development of the interbank foreign currency market is one of the important solutions to meet the foreign currency needs of banks, support for international trade activities and international trade finance is done quickly and smoothly Banks can attract foreign currency from residents, businesses or exchange between credit institutions on the interbank market 3.4 Recommendations for import-export businesses In international trade activities, besides the help of banks, businesses themselves also need to advocate to overcome their weaknesses and solve their problems First, businesses need to equip themselves with basic knowledge about international trade and trade finance Currently, the professional level of foreign trade and legal knowledge of enterprises are still weak In fact, there are many businesses, especially small and medium enterprises, who lack knowledge about international trade, lack of understanding of international practices and laws as well as the practices of partners in the market Experience in international trade is not much, lack of capital, lack of modern technology to be able to stand firmly in the competitive market Businesses need to organize training courses, fostering professional knowledge and foreign languages for employees and can learn from the enthusiastic advice of bankers Due to their experience 46 in making payments for customers, bank staff are the most important source of information that import-export businesses can exploit To improve the ability to be funded, businesses need to have effective and feasible business plans Enterprises need to conduct meticulous market research, develop a reasonable consumption plan, and at the same time improve their skills in business project planning and financial reporting Enterprises themselves need to send staff to participate in training courses on corporate governance, on project financing, to participate in conferences and seminars to improve their capacity CHAPTER SUMMARY The trend of integration, the fluctuations of the economy the above recommendations to improve VietinBank's competitiveness in term of trade finance activities from the realities of VietinBank, strengths, weaknesses, opportunities and threats in addition to the changes of the economy in the integration trend and complicated developments of the Covid-19 epidemic Chapter closes with solutions to improve Vietinbank's competitiveness in trade finance The solutions mentioned above are only generalized, not really going into each specific solution However, those are the basic foundations for development orientations and separate solutions for the development of Vietinbank in the future 47 CONCLUSION 1.1 Conclusion In 2020, never before, within a year, Vietnam has joined major trade agreements, opening up an unprecedentedly large market including the Vietnam European Union Free Trade Agreement (EVFTA), The Regional Comprehensive Economic Partnership Agreement (RCEP) and the UK-Vietnam Free Trade Agreement (UKVFTA), bringing the total number of free trade agreements that Vietnam participates in to 15 marked a strong step forward in Vietnam's deep and wide international economic integration into the world economy, marked a strong step forward in Vietnam's deep and wide international economic integration into the world economy When participating in foreign trade activities and want to improve their position in trade, in addition to factors such as product quality, price, brand being promoted, Vietnamese enterprises need great support in terms of financial resources and prestige from the system of commercial banks to assure with customers Commercial banks, with their advantages in terms of prestige and economy, have launched many trade finance products to meet the increasingly diverse and rich needs of customers Recognizing this problem, the thesis has focused on systematizing the theory of trade finance activities Based on that knowledge, focus on researching and evaluating the current state of trade finance at Joint Stock Commercial Bank for Industry and Trade VietinBank However, due to limitations in data and research time, my thesis inevitably contains shortcomings and subjective assessments I look forward to receiving comments and suggestions from teachers and friends to make the thesis more completing 48 3.2 Limitations - The thesis just uses qualitative analysis, not using quantitative models to accurately assess the improvement of competitiveness in international trade finance at VietinBank - The thesis has not compared VietinBank with banks of the same scale at home and abroad to have an objective assessment of competitiveness in the industry in international trade finance at VietinBank 3.3 Future research - Future studies can apply quantitative models to assess the improvement of competitiveness in international trade finance more precisely - In addition, studies can also evaluate the improvement of VietinBank's competitiveness in relation to banks of the same size at home and abroad to make better suggestions, enhance VietinBank's position not only domestically but also internationally 49 LIST OF REFERENCES Prof Dr Nguyen Van Tien – Nguyen Thi Hong Hai M.A, International payment and foreign trade finance curriculum, Thống Kê publishing company 2013 Nguyen Thi Hong Hai M.A, Nguyen Thi Cam Thuy M.A, Tran Nguyen Hop Chau M.A, Tc Đoan Ngoc Thang, International trade finance study document, Banking Academy 2012 Performance report of Joint Stock Commercial Bank for Industry and Trade, Vietinbank 2018-2020 Annual Report, Financial Statement of Joint Stock Commercial Bank for Industry and Trade, Vietinbank 2018-2020 Graduation thesis: “ Solution to improve quality of trade finance activities by Documentary Credit at Joint Stock Commercial Bank for Investment and Development of Vietnam BIDV – Cau Giay Branch” - Tran Thi Hong Nhung 2016 Study “development of international trade finance at vietinbank vietnam industry and trade joint stock company” - Nguyen Thi Thanh Huyen 2014 A number of website - www.vietinbank.vn - www.sbv.gov.vn - www.hanoi.gv.vn - www.tapchinganhang.com.vn 50 Bản giải trình sửa khóa luận tốt nghiệp NGÂN HÀNG NHÀ NƯỚC VIỆT NAM HỌC VIỆN NGÂN HÀNG CỘNG HOÀ XÃ HỘI CHỦ NGHĨA VIỆT NAM Độc lập - Tự - Hạnh phúc BẢN GIẢI TRÌNH CHỈNH SỬA KHĨA LUẬN TỐT NGHIỆP Họ tên sinh viên:……Lương Tấn Minh……… .……………………… Mã sinh viên:……………20A4050228……………………………………… Lớp: ………K20KDQTG…………… Ngành:…Kinh Doanh Quốc Tế Tên đề tài: Enhancing the competitiveness of VietinBank in international trade finance in Vietnam Các nội dung hoàn thiện theo kết luận Hội đồng: Nội dung yêu cầu chỉnh sửa Hội đồng Nội dung chỉnh sửa sinh viên Sửa lại phông chữ từ trang 45 đến 49 Xem lại thuật ngữ Competing capability Sửa lại tiêu đề Sửa lại phông chữ từ trang 45 đến 49 thành phông Times New Roman cỡ chữ 13 Sửa lại toàn cụm “Competing capability” > “Competitive capability” Sửa lại cụm “Competitive capacity” -> “Competitiveness” tiêu đề Ghi (ghi rõ vị trí chỉnh sửa: dịng, mục, trang) Trang 45 - 49 Tiêu đề Kiến nghị khác (nếu có): Giảng viên hướng dẫn (Ký ghi rõ họ tên) Hà Nội, ngày tháng năm 2021 Sinh viên (Ký ghi rõ họ tên) Minh Lương Tấn Minh 51 52