Phát triển thị trường tiền tệ ở việt nam sau khi gia nhập tổ chức thương mại thế giới tt1

1 INTRODUCTION án tố tn gh iệ p kỹ th uậ t Rationale In recent years, Vietnam has been promoting the process of international economic integration Along with the process, monetary financial transactions increase both in size as well as in diversity and complexity Towards the integration roadmap, it will form a more equal and competitive market applying international practice rules Structure and scale of "financial intermediary” types will change with the emerging participation of foreign-capital financial institutions in the market Banking activities will also become more dynamic and complex; so far, it will pose more hard-to-identify potential risks in the business Money market (MM) plays a particularly important role in mobilizing savings, allocating capital efficiently in order to ensure the competitiveness of an economy and promote socio-economic development In the process of Innovation, a financial market has been gradually established and developed Theoretically, developing the MM is crucial to establish the structure and motivation for any market economy’s operations Therefore, MM is always a top priority of economic strategy in all countries around the world The development of MM in Vietnam is still initial and at a low level Meanwhile, the integration into the region and the world requires the country to have a strong enough MM along with a high-level technology, the abundant and diversified products, and last but not least, the qualified and professional staff This situation poses new issues and challenges to be solved Therefore, research activities to find recommendations and solutions for the development of the current MM in Vietnam are very essential Based on those essential needs, I have chosen the title “The development of the money market in Vietnam after joining the World Trade Organization" for my doctoral dissertation in economics Đ Literature review In the process of international economic integration and financial liberalization, many research studies have summarized solutions needed to enhance the MM development in terms of completing the components of MM, flexibly operating the monetary policies, and strengthening the supervision and synchronization between Monetary Policies and Fiscal Policies In general, the foreign study on MM in Vietnam is still relatively limited in number However, there are also some research studies on MM conducted in the regional countries as well as in the economies which has been transiting from subsidized to market (transition economy) In other words, the characteristics of the economy in general, and the development of the MM in particular in the countries are similar to those in Vietnam Thus, these studies help provide valuable theoretical issues and lessons learned to the MM development in Vietnam There are some other studies on the development of MM in the context that Vietnam has been involved in the international integration process in trade, services and financial t banking However, most of those studies only referred to the integration requirements of the banking system following the roadmap of signed agreements There is still a gap to be filled on the study side on the impacts of the Vietnam’s accession to WTO for the development of the MM in Vietnam Through scientific research, some theoretical and practical issues regarding analyzing and synthesizing various aspects of MM and each component market has been collected from research studies based on their purposes, subjects and scope However, studies exploring the development of the MM in Vietnam after joining the WTO have not been published the current situation and solutions under the scientific perspective of political economy, in a comprehensive theoretical and practical basis This dissertation studies the current MM in Vietnam to propose recommendations and solutions for the next phase - the period after Vietnam joined the WTO This is the first scientific research on this issue, so there is no duplication with the previous published ones tn gh iệ p kỹ th uậ Study purposes - Contribute to interpreting the theoretical and practical basis of the development of the MM in Vietnam after joining WTO - Analyze the status of the MM in Vietnam over the recent activities of the State financial banking system, and point out achievements, limitations and causes of the limitations in the process of formation and development of the MM - Propose consolidated viewpoints and solutions for MM development in Vietnam after joining WTO Đ án tố Study subjects and scope Study subject of this dissertation is the development of the MM in Vietnam, in the context that the economy is operating in the regional and global integration process, focusing on the period after Vietnam joined the WTO The development of the MM is a generalized theme that involving many fields This dissertation is limited to the contents within the activities of the MM for the credit institutions in Vietnam The analytical framework of the dissertation is described as follows: 1) About the contents on MM, the dissertation focuses on the development of component markets such as interbank MM and open market, subjects and mechanism of MM 2) Essential conditions for MM development include the development level of the economy, legislation and policy environment, ability of banking system, development of the related markets, and supervisory role of the State to the financial system The analytical framework of the dissertation: Conditions for Contents of MM development development Development level of Developing Research criteria Criteria about economy components markets and their commodities contents of MM development Legislation and policy environment Developing subjects involving MM Capacity of banking system Criteria about conditions for MM development Development of related markets Establishing mechanism of MM uậ t Supervisory role of the State to financial system tố tn gh iệ p kỹ th Study methods Dialectical Materialism and Historical Materialism are the rationale and methodology for conducting this study This dissertation focuses and applies Dialectical Materialism to consider the necessity of the development of MM in Vietnam after joining WTO The study also uses the analysis and synthesis, comparative, and statistical methods to explore the subjects, combined with economic analysis of survey data at the Vietnam commercial banks in recent years Đ án Scientific contributions of the study On the theoretical side: Systematic overview about the MM, analyze the basic characteristics, structure and role of the MM in the economy Analyze the contents and the factors affecting the MM development in Vietnam after WTO accession On the practical side: Assess the situation of MM in Vietnam in recent years; analyze the operational mechanism, relationship between the component markets, the impact of macro-economic management process; then propose solutions to develop the MM in Vietnam after being a WTO member Study structure In addition to Introduction, Table of contents and References, this dissertation consists of three chapters which are as follows: Chapter 1: Rationale for the development of the MM after WTO accession Chapter 2: Status of the MM in Vietnam after WTO accession Chapter 3: Orientation and solutions for the development of the MM in Vietnam 4 CHAPTER RATIONALE FOR THE MOMEY MARKET DEVELOPMENT AFTER WTO ACCESSION Đ án tố tn gh iệ p kỹ th uậ t 1.1 Overview of monetary and money market 1.1.1 General theoretic of monetary 1.1.1.1 Concept and functions of money Monetary is a special commodity, which stands out from all other goods and considered as a general price level object for all goods It represents social labor and reflects the social relations of production, the relationship between goods producers Money has 05 functions which are measure of value, medium of transactions, medium of account, medium of store and an international monetary 1.1.1.2 Supply and demand for money The Central Bank is the state agency responsible for providing money for the economy, balancing the money supply and demand for stable MM, prices, production, circulation, etc The Central Bank does operational measures to withdraw money from circulation when the inflation signs occur, or to provide more money into circulation when it shows degradation By increasing or decreasing the money supply, the Central Bank regulates economic activities 1.1.2 Money market and the role of money market 1.1.2.1 MM definition There are many viewpoints on the MM can be referred from the aforementioned definition of monetary This dissertation approaches MM as a wholesale market with short-term debt instruments with low risk and high liquidity Under Article 9, Amendment of the Law on the State Bank (2003): "MM is a short-term capital market where buying and selling short-term commercial papers, including exchequer bills, bank bills, certificates of deposit and other commercial papers" According to Article 6, State Bank Law (2010): "MM is a marketplace for short-term capital transactions" 1.1.2.2 MM characteristics Although the characteristics of MM vary among countries, there are six common features Firstly, MM goods are mainly short-term securities, referring to short-term commercial papers, having very high liquidity Secondly, the exchange in the market is to meet capital needs or to the profitability Thirdly, the "commodity prices" is the MM interest rate for traders to buy, sell or borrow, lend mutually agreed by the parties under the law on supply and demand on short-term capital and short-term securities Fourthly, this market has the participation of many members not excluding the Central Bank Fifthly, the current MM does not take place in a specific address but a common concept about the interaction of supply and demand for the price of each type of debt securities Sixthly, it is statistically significant that the MM is a wholesale market with huge volume of transactions 1.1.2.3 The role of MM in the socio-economy MM is highly developed in countries with market economies, in terms of economic theoretics An active MM with perfect organization brings many benefits to not only commercial banks, but also financial institutions, businesses and the whole economy In the market economy, the MM development is a factor to promote the development of commodity production and circulation in a national scale, and somewhat expand to international scale a-MM contributes to promoting the development of the economy b-MM is the foundation to develop financial market c-MM is the macro-adjustment tool of the State Đ án tố tn gh iệ p kỹ th uậ t 1.2 Money market development: nature, contents and conditions 1.2.1 Nature of MM development 1.2.1.1 Definition of MM development MM development is a general term with variable concepts On the theoretical side, the market economy is established and developed under the effects of the social work assignments with different ownerships of means of production A high-level developed market economy pushes its MM development to the same level Component markets are formed naturally under that theory 1.2.1.2 The facts of MM development 1) Mobilizes temporarily idle capitals and creates short-term supplies for the economy 2) Promotes capital demand and creates liquidity in the market 3) Stabilizes and regulates monetary circulation, regulates short-term capitals among financial, non-financial and governmental intermediaries 4) Continuously refreshes the system and operation mechanism of the MM to be in line with international practices - Develop interbank market for domestic currency - Create operation mechanism for the MM 1.2.2 Contents of MM development 1.2.2.1 Development of MM component markets and commodities in the component markets MM is the system constituted by the component markets, including the interbank MM and open MM The MM in the financial system is described as follows: FINANCIAL MARKET MONEY MARKET INTERBANK MONEY MARKET CAPITAL MARKET OPEN MONEY MARKET STOCK MARKET COMMERCIAL PAPER MARKET CREDIT MARKET kỹ th INTERBANK FOREIGN EXCHANGE MARKET gh iệ p INTERBANK MARKET FOR DOMESTIC CURRENCY uậ t BOND MARKET tn Chart 1.2: Money market in the structure of financial market system Đ án tố Firstly, the development of interbank MM (1) Definition of interbank MM Interbank MM is a wholesale with short-term capital between commercial banks, non-banking financial institutions and the Central Bank in order to serve the abilities of payment and capital use of institutions involved In the interbank market, commercial banks deal with temporarily excessive or temporarily short capitals between banks using their accounts in the Central Bank; in order to deal with shortage of mandatory reserve funds, payment for customers and shortage in balance between banks (2) Characteristics of interbank MM - Interbank market has high reliability - Interbank market is a wholesale with short-term capitals - There are many kinds of subjects to be involved in interbank market - Types of transactions in interbank market: + Loan between banks + Deposit between banks - Currencies in interbank market include domestic currency and foreign currency + Interbank market for domestic currency (so called domestic MM) + Interbank foreign currency market (so called interbank foreign exchange market) iệ p kỹ th uậ t Secondly, the development of open MM Open MM is the market where traders are banks, businesses, securities brokers and individuals In other words, open MM is a short-term capital market for many subjects such as the State, banks, businesses and individuals Based on service and commodity types, open MM is divided into two types which are Short-term commercial paper market and Credit market (1) Short-term commercial paper market Short-term commercial paper market is a market where short-term commercial papers such as exchequer bill, commercial time bill, bank time bill, certificate of deposit, bonds of financial companies, transaction contract, etc (2) Credit market Credit market is a market where capitals transact under credit principles to get and loans capitals for profits Based on subjects, credit market is divided into: - Bank credit: Subjects involved are banks (interbank market) or banks and their customers - Commercial credit: Subjects involved are businesses having regular relationship - State credit: Subjects involved are the State and individuals - Free credit between individuals án tố tn gh Thirdly, relationships between component markets in MM - Relationship within MM – the domestic currency market and foreign exchange market - Relationship between MM and stock market - Relationship between MM and credit market Đ Fourthly, development of tools and commodities in MM (1) Develop discount commodities/instruments are short-term debt certificate without interests, sold for discount price and paid at payment due with full nominal value (2) Develop commodities/instruments with interests 1.2.2.2 Development of subjects involved in MM - The State Treasury issues exchequer bills and government bonds - Commercial banks issue bank time bills, certificates of deposit (CDs) and banker’s acceptance (BAs) - Central Bank - Investors - Brokers and businesses 1.2.2.3 Development of operating mechanism of MM Firstly, course of dealing and interest rate in MM p kỹ th uậ t  Course of dealing  Interest rate in MM 1.2.3 Commitments, conditions and necessity of MM development after WTO accession 1.2.3.1 Commitments on monetary after WTO accession 1.2.3.2 Requirement conditions for MM development after WTO accession Firstly, level of socio-economic development Secondly, economic legislation and policy system Thirdly, capacity of banks Fourth, level of development of relevant markets - Goods and services market - Real estate market - Financial market 1.2.3.3 The necessity of development of MM after WTO accession Firstly, requirements to proactively seize opportunities and cope with challenges after WTO accession Secondly, development of MM is to meet capital needs for economic growth and development Đ án tố tn gh iệ 1.3 Experiences on developing MM in some countries after WTO accession and lessons for Vietnam The MM in some European countries has been developed at high level It operates completely under the market mechanism, so it is flexible that can adjust inequalities in supply-demand towards market flows However, MM in Vietnam has some similarities with some countries in the region such as China, Japan, Singapore and Thailand, etc 1.3.1 Experience on developing MM in China after WTO accession 1.3.2 Experience on developing MM in Japan after WTO accession 1.3.3 Experience on developing MM in Singapore after WTO accession 1.3.4 Some features of MM in developing countries 1.3.5 Lessons learned to apply for Vietnam Exploring and studying MM development in China, Japan and Singapore after WTO accession has showed us a handful of lessons learned Firstly, interest liberalization is an essential condition for active and competitive MM in these countries Secondly, increase liquidity reserves to deal with risks Thirdly, lack of diversity of new financial instruments, banks can hold or sell in secondary market to control disposable funds Fourthly, establish a highly developed and professional interbank market Fifthly, in general, banks involved in MM are relatively fair, so they can transact with each other without concerns about excessive potential risks Sixthly, foreign banks are not limited in borrowing and lending with domestic institutions and individuals, so that they are equal in competition with domestic banks Seventhly, loans and borrows can be done through brokers and should be in 1-15 day time-limited Fast borrows in interbank market not need mortgage assets, so it can minimize mortgage assets in the market Eighthly, establish focused electronic trading centers for MM, foreign exchange, bonds and derivative instruments Ninthly, create a code of conduct and promote compliance and adherence of market members kỹ th uậ t Vietnam has gradually been transmitting money control from direct instruments to indirect instruments The development process of MM in East-Asian countries, especially China has produced us many lessons to apply for Vietnam p SUMMARY OF CHAPTER tố tn gh iệ This chapter reviews theoretical issues on monetary and MM, hence creates a logical framework on MM development The logical framework clearly indicates that MM development is the development of the component markets, subjects involved in the market and operating mechanism of the market án There are also posing requirements, conditions and necessity of MM development after WTO accession in Vietnam mentioned in the chapter Đ This chapter analyses experiences in MM development in China, Japan and Singapore after WTO accession, and provides some lessons learned for MM developing in Vietnam 10 CHAPTER STATUS OF THE MONEY MARKET IN VIETNAM AFTER YEARS OF WTO ACCESSION iệ p kỹ VIETNAM MONEY MARKET th uậ t 2.1 Overview of MM development in Vietnam 2.1.1 History of MM establishment and development in Vietnam MM has been set up in the financial structure in Vietnam since 1993 Although the whole market is not yet developed, the constituent parts of the MM have been formed at a certain extent This section will consider the state of the MM consists of 05 parts based on activities of the subjects in the market, which are: The first is the interbank market for domestic currency; The second is the interbank foreign exchange market; The third is the short-term commercial paper market; The fourth is the credit market; and The fifth is the regulatory activities of the State Bank gh Interbank market for domestic currency Short-term commercial paper market Short-term credit market tố tn Interbank foreign exchange market Đ án Chart 2.1: MM model in Vietnam (MM development project of the State Bank) 2.2 Status of MM development in Vietnam 2.2.1 Status of MM component markets and their commodities in Vietnam in the recent years 2.2.1.1 Status of interbank market and its commodities Table 2.2 –Transaction volume in interbank market Unit: million Vietnamese dong; thousand US dollar Loan volume Deposit volume Year VND USD VND USD 2005 3.114.982 1.097.279 52.016.579 5.412.309 2006 2.113.922 50.202 101.414.707 5.802.178 2007 23.458.546 24.560.671 9.381.802.652 244.773.306 11 2008 46.817.092 40.934.452 15.636.337.754 611.933.265 2009 117.042.730 68.224.087 31.272.675.508 1.223.866.529 2010 234.085.461 121.828.726 52.121.125.847 1.748.380.756 2011 334.407.802 152.285.907 86.868.536.412 2.185.475.945 2012 2.008.327.919 1.239.345.283 4.006.333.654 2.391.596.275 1.487.727.884 761.821.549 837.572.480 883.227.897 7/2013 Source: Interbank market transaction report of the State Bank - Firstly, domestic currency interbank market and its commodities Table 2.4 Loan and deposit volumes in the period from 2007 to 7/2013 uậ t Unit: thousand billion Vietnamese dong 2007 2008 2009 2010 2011 2012 7/2013 118 245 483 805 1.149 1.331 483 th State commercial kỹ banks 4.181 8.362 13.93 19.91 83.85 21.03 44.06 73.43 104.9 12 Branches of foreign 9.96 16.60 35.21 58.69 banks, join-venture 12.5 án Total tố banks tn commercial banks gh iệ p 2.50 Joint stock 932 1.929 873 6.01 2.316 Đ 92 2.617 Source: Report on loan and deposit relationships of credit institutions of the State Bank - The second, interbank foreign exchange market and its commodities 2.2.1.2 Status of open market and its commodities The first, short-term commercial paper market - Commercial paper trading market between the State Bank and credit institutions through open market operations - Exchequer bill market 12 Table 2.10- Government bonds and exchequer bills exchange in Stock Exchange and SBV Operations Centre Unit: billion Vietnamese dong Government bond Exchequer bill 2009 Bids 2.385 Outright 21.104 Repos 1.265 Bids 10.714 OMO 165.960 2010 27.959 123.458 4.203 8.350 92.393 2011 37.878 112.197 461 2.150 57.722 Total 66.212 256.759 5.929 21.214 316.075 Đ án tố tn gh iệ p kỹ th uậ t Source: Hanoi stock exchange and SBV Operations Centre websites + Exchequer bills are short-term government bonds (under year) issued by Vietnam State Treasury through bidding activities in the State Bank + Government bonds which term last more than year are issued by the Government to raising funds for the national budget to invest on some specific areas - Public bonds issued by the Development Bank: the Development Bank issues the bonds to invest in long-term infrastructure - State Bank bonds are also short-term debt instruments issued by the State Bank to serve monetary policy objectives - Short-term commercial papers issued by credit institutions are mainly time bond, accounting for 95% of funds raised from short-term commercial papers - Bonds issued by sub-national authorities - Business bonds: - Public bond or tradable certificate of deposit can be traded in the market, depending on transaction volumes - Open market operations, run by the State Bank since July 12, 2000, is considered a step forward of the Bank in operating monetary policies by indirect money instruments Table 2.11 – Open market operations transaction volume from 2007 to 7/2013 Unit: billion Vietnamese dong Year/Month 2007 2008 2009 2010 2011 2012 1/2013 Expected volume 2.006.100 1.359.823 1.113.000 2.898.000 2.992.000 1.392.000 135.000 Valid registration volume 718.578 4.030.675 3.613.330 4.031.749 5.973.652 1.382.540 80.164 Bid winning volume Buying Selling 60.495 356.844 947.206 88.860 966.811 100 2.101420 7.295 2.440.045 449.923 173.944 11.057 53.734 13 2/2013 3/2013 4/2013 5/2013 6/2013 7/2013 Total 181.000 40.000 41.000 43.000 20.000 142.000 602.000 123.152 66.821 9.976 78.200 2.225 117.502 478.040 53.586 6.331 8.996 10.047 2.225 40.002 132.244 49.259 14.874 20.000 33.752 171.619 Source: Open market operations implementation report of the State Bank -Time-limited buying and selling market of commercial paper between credit institutions iệ p kỹ th uậ t Currently, the buying and selling activities between the State Bank and credit institutions dominates in the time-limited buying and selling market The buying and selling activities between financial institutions (transactions in the MM excluding the participation of the State Bank) in Vietnam are still limited Most of the transactions are between credit institutions and stock companies (mostly), or between credit institutions Most businesses have not been interested in the activities because Government bonds interest rate is still low án tố tn gh The second, short-term credit market and its commodities When studying on open MM, it will be a shortage if credit market is not considered Credit market is traditional but is still playing the most important role in Vietnamese banking activities, reflecting through borrowing and loaning between banks and their customers Credit market is now providing a high proportion of the total revenue of current banks in Vietnam Đ Credit market system of state commercial banks (including equitized state commercial banks) (1)- Fund raising Fund (capital) raising plays a crucial role in the operations of state commercial banks and in the credit institutions system in Vietnam Table 2.12- Fund raised by the state commercial banks 1- VIETCOMBANK - Debt asset ratio 2- BIDV - Debt asset ratio 2005 2006 2007 125, 127, 163, 8 74,5 71,3 76,4 117, 138, 180, 63,3 62,6 68,7 Unit: thousand billion Vietnamese dong 2008 2009 2010 2011 2012 194, 233,7 209,1 231,7 345,30 75,4 67,78 62,63 90,30 73,9 203, 280,3 281,1 286,7 447,45 70,4 76,31 69,58 97,26 67,8 14 3- VIETINBANK - Debt asset ratio 74,7 72,7 4- AGRIBANK - Debt asset ratio 142, 200, 61,3 58,9 460, 560, 68,3 66,8 Total fund raised - Debt asset ratio 93,4 75,5 106, 73,1 273, 57,2 723, 67,7 108, 220,6 242,8 316,6 460,08 75,6 65,39 66,69 96,37 71,7 338, 411,5 405 423 557,03 61,2 77,46 75,53 97,63 57,5 845, 1.146, 1.137, 1.258 3.920.0 69,25 75 66,6 67,7 68,5 95,19 Source: Annual report 2005 – 2012 (2)- Loaning uậ t Loaning, to the state commercial banks, has become the most importantly profitable producing tool that is the biggest source of income The fact can be applied for most of the commercial banks currently operating in Vietnam Đ tố 140 148 176 208 241 40,7 40,9 41,2 56,3 58,2 164 173 247 291 340 72,9 72,4 72,6 70,6 70,1 162 169 233 292 333 63,8 68,2 63,7 61,5 66,2 214 342 415 444 481 83,4 84,7 85,5 79,2 78,2 679 832 1.071 1.235 1.396 66,8 68,0 68,7 67,9 69,2 Source: Loan report of the State Bank iệ p 129 35,9 157 77,6 155 66,9 176 78,6 618 65,1 gh 117 21,5 144 72,0 142 61,6 156 84,0 559 58,1 tn 116 24,3 136 73,5 135 61,3 139 76,3 526 56,6 án VIETCOMBANK - Percentage vs assets (%) BIDV - Percentage vs assets (%) VIETINBANK - Percentage vs assets (%) AGRIBANK - Percentage vs assets (%) Total - Percentage vs assets (%) kỹ th Table 2.14- Loaning of state commercial banks Unit: thousand billion Vietnamese dong 2005 2006 2007 2008 2009 2010 2011 2012 2.2.1.3 General assessment on the component markets and their commodities in MM - Firstly, component markets of MM has been established - Secondly, the MM has come closer to international practices - Thirdly, the trading volume has been increasing - Fourthly, the State Bank plays crucial role in operating MM - Fifthly, the operation of market has contributed to regulate short-term capital in a flexible manner - Sixthly, issuing bonds and exchequer bills through bidding over the State bank has opened a new issuing channel 2.2.2 Status of supply-demand subjects in the MM 15 gh iệ p kỹ th uậ t - Firstly, in the Vietnamese MM, Government is the issuer of government bonds - Secondly, the State Bank innovates organizational structure and operating methods - Thirdly, the credit institutions are in the process of reorganizing, consolidating and restructuring - Fourthly, non-banking credit institutions, insurance companies, investment funds: - Fifthly, enterprises and individuals participate in MM as investors in debt instruments 2.2.3 Status of operation mechanism of the MM - Firstly, the State Bank takes the role of management and regulation of the market - Secondly, legal document system creates a necessary legal framework for the operation MM activities towards development and integration into the regional and international financial markets - Thirdly, the interbank offered rate is becoming closer to the market rate and gradually reflects market demand and supply for capital - Fourthly, the operation of market help regulate short-term capital in a flexible manner within the banking system, thereby promoting the efficient use of capital, creating conditions for commercial banks to become familiar with the disposable fund management in the market economy - Fifthly, exchange rate between USD and VND in the interbank market for foreign currency meets supply and demand for foreign currency under regulations of the State Bank Đ án tố tn 2.3 Fundamental limitations and causes of the limitations of MM development in Vietnam for WTO integration 2.3.1 Fundamental limitations in MM development in Vietnam for WTO integration 2.3.1.1 Limitations in terms of component markets and their commodities development in MM - Firstly, the scope of the market is still narrow and is much dependent on state commercial banks - Secondly, the component markets have not been completed - Thirdly, goods and products in the markets have not met the requirements 2.3.1.2 Limitations in term of the subjects involved the market - Firstly, there has not been a developed MM in Vietnam - Secondly, the State Bank is the central bank which has functions: issuing money, bank of banks, and bank of the Government - Thirdly, absences of currency brokers (professional money intermediaries) in the market, and absences of market makers – ones who set buying and selling price of all current goods and instruments in the market - Fourthly, the open market is not yet active 2.3.1.3 Limitations in term of operations mechanism of MM 16 Đ án tố tn gh iệ p kỹ th uậ t - Firstly, the State Bank does not have full rights to take initiative in regulating the State Bank operations, so that the operations rely heavily on the Government and the Governmental agencies - Secondly, information about the market, transaction means and technique is not adequate - Thirdly, the transactions between the members are only trust-based but mostly not guaranteed without secured by the State Bank or secured by deposit balance in the lending bank - Fourthly, the offered rate for interbank loans and deposits (VNIBOR) announced by Thomson Reuters does not reflect market rate - Fifthly, transactions business is still simple, and only applied for direct loans through deposit contract It is rarely applied for modern types of transaction - Sixthly, codes of conduct in MM has not been issued - Seventhly, a standard profit curve of government bonds is not developed, as the issued government bonds are not diverse in term of duration - Eighthly, Vietnam does not have a prestige credit ratings company Thus, it has not favored the development and use of negotiable instruments in transactions on the interbank market - Ninthly, there is no focused trading system/focused information system among component markets of the MM, so that it is difficult for the members to find partners and market information - Tenthly, transactions between commercial banks are trust-based; although there has been some important improvements but not yet met the international standards - And the eleventh, capital regulation in the market between banks is not efficient 2.3.2 Causes of limitations in MM development in Vietnam 2.3.2.1 Obstructive economic environment creates barriers to MM development in Vietnam - Firstly, the state businesses - Secondly, the capital income in Vietnam is still low, savings and consumption are also far different - Thirdly, the operation leaders lack knowledge and experiences in business accounting operations towards market mechanism 2.3.2.2 The banking legal system is not consolidated and not in line with international practices - Firstly, banking legal and policy system currently has a number of limitations It creates the discrimination among different types of credit institutions, among groups of banks and between domestic banks and foreign banks, causing unhealthy competitions - Secondly, the legal system for banking operations is not consolidated - Thirdly, there are many limitations in loans regulations 17 kỹ th uậ t - Fourthly, the dollarization has not stopped but is increasing which cannot be immediately remedied It leads to withholding of foreign currency that makes interbank foreign exchange market less exciting - Fifthly, offered rate policies are not flexible enough towards market signals to attract customers 2.3.2.3 Competency of banks is still limited - Firstly, the owned capitals of the state commercial banks are too small compared with those of the regional banks as well as with the operation scale of the state banks This is one of the weakest points of the state commercial banks - Secondly, banks ineffectively attract the big amount of cash in circulation - Thirdly, human resources have not been trained in expertise, operations and business management - Fourthly, information technology system remains inadequate 2.3.2.4 Development of relevant markets is at a low level, not synchronized and is dealing with challenges 2.3.2.5 Finance supervision has some limitations iệ p SUMMARY OF CHAPTER tố tn gh Based on the logical framework of Chapter 1, this Chapter focuses on both the achievements and limitations of the process of establishment and development of component markets of MM and their commodities, the subjects involved and the operation mechanism of the MM in Vietnam at the moment Đ án The Chapter also indicates the limitations in MM development in Vietnam Those are insufficient economic environment in Vietnam that creates barriers to the MM development; banking legal system that is not yet consolidated and consistent with international practices; limited capacity of banks; and the development of the relevant market that is remaining at a low level while facing with many challenges 18 CHAPTER ORIENTATION AND SOLUTIONS FOR THE DEVELOPMENT OF THE MONEY MARKET IN VIETNAM AFTER WTO ACCESSION 3.1 Perspective and orientation to develop the MM in Vietnam after WTO accession 3.1.1 International and national economic contexts related to MM development in the period 2011-2015 3.1.1.1 International economic context related to MM development in the period 20112015 iệ p kỹ th uậ t CPI 2004-2012 (Source: Internet) tn gh Figure 3.1 – CPI 2004 -2012 tố Firstly, the Party and the State of Vietnam will take the attention on the MM development in our country in following years Đ án Secondly, however, the MM development has been facing with the challenges and limitations coming from the economy 19 th uậ t Economic growth 2004-2012 kỹ Figure 3.1- Economic growth (GDP) in 2004-2012 Đ án tố tn gh iệ p (Source: Internet) 3.1.2 Perspective of MM development in Vietnam after WTO accession Firstly, adequate and consistent awareness with the development of MM in Vietnam Secondly, MM development is a long-term process that cannot skip a stage Thirdly, to ensure compliance with the “market” principle in MM operation Fourthly, develop the MM towards regional and international economic integration with prudent and effective conduct of financial liberalization Fifthly, MM development must take into account the synchronization in the development of the market system in Vietnam Sixthly, developing the MM is also simultaneously implementing the project to restructure credit institution system according to the Decision No 254/QD-TTg issued by the Prime Minister dated 01/3/2012 3.2 Orientation of MM development in Vietnam after WTO accession 3.2.1 Consolidated developing of markets, of which prioritize component markets and diversified goods in MM 3.2.1.1 Develop interbank markets for domestic currency and foreign exchange 3.2.1.2 Develop credit market and commercial paper market (repo) 3.2.1.3 Diversify instruments in MM 3.2.2 Improve capacity of subjects involved in MM In the period of 2011 - 2015, prioritize on improving financial transparency and capacity of credit institutions, promoting safety and efficiency in their operations; ensuring market order, discipline and principles in banking activities Striving to have at 20 least or commercial banks with equivalent scale and level to regional ones by the end of 2015 3.2.2.1 Improve monitoring and supervision capacity of the State Bank 3.2.2.2 For commercial banks There will be no developed MM in a market economy without a transparent banking system, of which commercial banks hold crucial positions in business activities in MM Firstly, consolidate and restructure the commercial banking system (1)-For state commercial banks (2)-For joint stock commercial banks Secondly, improve financial and capital management capacity of commercial banks in Vietnam uậ t (1)-For assets th (2)-For liabilities p kỹ 3.2.2.3 Improve credit quality, ensuring stable operation of MM 3.2.2.4 Set up Association of investors in MM; strengthening roles of associations, especially Association of Banks to promote MM development iệ 3.2.2.5 Establishing commercial paper discount companies Đ án tố tn gh In order to create favorable conditions to that commercial paper market operates on its own rights, as well as MM instruments reflects as true commodities, companies for commercial paper discount must be established These companies are responsible for discounting commercial papers demanded by any subject Therefore, it is flexible to exchange commercial papers into cash when the subjects need It will improve liquidity of commercial papers, promoting MM activities for its development 3.2.2.6 Establish monetary brokers Research on the possibility of establishing monetary brokerage system in Vietnam; support to establish a system of currency brokers in Vietnam The establishment of the currency brokers will pose great significance for all MM participants These companies will provide information about national and international interest rates, exchange rates, duration, volume, etc of all borrowing and loaning partners in the market The brokers will provide information in timely, efficiently and reliably manners and highly responsive to customer requirements 3.2.3 Complete operation mechanism of MM 3.2.3.1 Improve the operating capacity, independence and MM control role of the State Bank Firstly, strengthen regulatory activities of the State Bank 21 Secondly, enhance capacity of analyzing and forecasting monetary and inflation 3.2.3.2 Complete interest mechanism Firstly, shift the operating target from regulating volume to regulating interest rates Secondly, gradually make 7-day yield interest rate on open market business as a market-oriented interest rate 3.3 Promoting necessary conditions for MM development in Vietnam after WTO accession 3.3.1 Complete legislation environment towards Socialist-oriented market mechanism in line with international practice t 3.3.2 Complete macro-economic policies of the State uậ 3.3.3 Create a stable and sustainable socio-economic environment án tố tn gh iệ p kỹ th 3.3.4 Establish a transparent banking and financial system Secondly, strengthen the financial capacity and risk management for credit institutionsthe major participants in the MM Thirdly, establish and develop high competent state commercial banks in every area, to the extent to be the core of commercial banking system towards market mechanism Fourthly, make People’s credit funds actually become cooperative credit institutions that operates independently, based on the principles of voluntariness, autonomy and responsibility for its performance Fifthly, expand banking service market towards international integration roadmap, ensuring the business authorization of foreign banks and banking financial institutions to comply with international commitments Đ 3.3.5 Strengthen the facility and human resources for MM modernization after WTO accession 3.3.6 Enhance the financial supervision system at the national level 3.4 Recommendations for the development of MM in Vietnam after WTO accession From the discussion above, the study proposes some recommendations for developing MM integrated with international market: 3.4.1 For the Government 3.4.2 For the Ministry of Finance 3.4.3 For the market participants, including associations 3.4.4 For relevant sectors in terms of market management and supervision system SUMMARY OF CHAPTER 22 Following the logical framework in Chapter and the results of the situational analysis in Chapter focusing on the limitations and the causes of limitations in the MM development to meet the requirements after WTO accession, Chapter clarifies the following issues: 1-The opportunities and challenges for MM development towards international integration as well as in Vietnam context as a developing country after WTO accession; 2-Perspective and orientation to complete MM in following years in the period after WTO accession; Đ án tố tn gh iệ p kỹ th uậ t 3-Recommendations divided into six categories for MM development in Vietnam to the Government of Vietnam, the Ministry of Finance, the MM participants, with the relevant sectors in terms of market management and supervision 23 CONCLUSION Đ án tố tn gh iệ p kỹ th uậ t In the innovation period, towards market-economy development orientation, the Vietnamese financial market in general and the MM in particular has really been established, contributing to promoting the development and raising the level of social productive workforces However, because of many objective and subjective reasons, the MM in Vietnam has not grown in a consolidated way, thus restricting the flow of capital financial investments for the general economy in general, and in the particular MM In order to create a momentum for stronger growth of Vietnamese economy in the coming period, the mobilization of investment capital for development is extremely important A consolidated developed, larger in scale and more efficient MM will help mobilize and better allocate capital, so investors and businesses can better reduce risks The country is currently in the process of industrialization and modernization, with high economic growth to integrate into the regional and international economies, so it lead to the higher demands for raising capital and capital investment to meet the process of economic growth Therefore, the MM development is currently an essential and urgent requirement Over study and research works, the dissertation has been completed and can be summarized as follows: First of all, the dissertation synthesized the rationale, the structure and the components of MM, and also explained and discussed the development of the MM in the process of forming a comprehensive market system in Vietnam, especially in the period after Vietnam joined the WTO The dissertation has analyzed the status of the MM in Vietnam after the WTO accession It thereby has indicated the achievements, limitations, and the causes of the limitations of each MM component in particular and the MM in general It has also provided the perspective, the orientation, and the conditions that should be created to develop the MM in the process of establishing a comprehensive market system in Vietnam, and especially in the regional and international economic integration process Last but not least, the dissertation has proposed direct and indirect solutions for all components of the MM, in order to operate the MM as a whole in each stage as well as in its development In conclusion, it can be said that the MM development in Vietnam is a complex issue, a continuous process, which requires the solutions to be regularly adjusted to fit the actual and specific conditions in the market During this process, there are very important roles of the State Bank, the Government, and the coordination between the authorities in all the MM operation and management activities in the context of increasingly integrated economy with the regional and international economies 24 LIST OF PUBLISHED ARTICLES OF THE AUTHOR RELATED TO THE DISSERTATION - Nguyen Thi Thanh (2004), The actual situation and some solutions to current money market development in Vietnam The Economics and Forecast Magazine, No 4, 2004, the organ of the Ministry of Planning and Investment - Nguyen Thi Thanh (2006), Further discussions on state commercial banks equitization in the context of international economic integration The Economics and Development Magazine, October 2006 in the 50th anniversary of National Economics University and the Faculties of Marxism-Leninism sciences uậ t - Nguyen Thi Thanh (2009), Consolidate and develop Vietnam money market in the current economic downturn Theoretics and Operations Magazine of the State Bank of Vietnam, No 4, February 2009 p kỹ th - Nguyen Thi Thanh (2009), Stablizing exchange and interest rates, the prioritized task in 2009 Theoretics and Operations Magazine of the State Bank of Vietnam, No 12, June 2009 on the occasion of celebrating the Vietnam Revolutionary Journalism Day (June 21) tn gh iệ - Nguyen Thi Thanh (2009), Which solutions to develop the current interbank money in Vietnam The Economics and Development Magazine, October 2009, in the 25th anniversary of Faculty of Political Sciences (1984-2009) Đ án tố - Nguyen Thi Thanh (2013), Vietnam Joint Stock Commercial Bank for Industry and Trade with the agriculture and rural economic development Theoretics and Operations Magazine of the State Bank of Vietnam, No 7, April 2013