The procedure of payment by letter of credit in importing contracts of Vietnam National General Export-Import Joint Stock Company No. I

FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS ---***---MID-TERM INTERNSHIP REPORT Major: International Business Economics VIETNAM NATIONAL GENERAL EXPORT-IMPOR

FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS

-*** -MID-TERM INTERNSHIP REPORT

Major: International Business Economics

VIETNAM NATIONAL GENERAL EXPORT-IMPORT

JOINT STOCK COMPANY NO I

TABLE OF CONTENTS

PREFACE 1

PART 1: INTRODUCTION OF VIETNAM NATIONAL GENERAL EXPORT-IMPORT JOINT STOCK COMPANY NO I (GENERALEXIM I) 2

1.1 The establishment and development of GENERALEXIM I 2

1.2 Functions of GENERALEXIM I 3

1.3 Missions of GENERALEXIM I 3

1.4 Main business sectors of GENERALEXIM I 4

1.4.1 Commercial Business 4

1.4.2 Manufacturing 4

1.4.3 Services 4

1.4.4 Financial and Joint Venture – Association Activities 4

1.5 Organizational Structure of GENERALEXIM I 4

1.6 Business results of GENERALEXIM I in recent years 5

PART 2: MID-TERM INTERNSHIP DIARY 7

PART 3: THE PROCEDURE OF PAYMENT BY LETTER OF CREDIT IN IMPORTING CONTRACTS OF VIETNAM NATIONAL GENERAL EXPORT-IMPORT JOINT STOCK COMPANY NO I 12

3.1 The current situation of payment method by Letter of Credit (L/C) of Vietnam National General Joint Stock Company No I 12

3.2 Assessment on the use of payment by L/C in importing contracts of GENERALEXIM I 13

3.2.1 The advantages and achievement of payment by L/C in importing contracts of GENERALEXIM I 13

3.2.2 Unresolved drawbacks in the procedure of payment by L/C in importing contracts of GENERALEXIM I 14

3.3 Some proposals to resolve the weaknesses of payment by L/C in importing contracts of GENERALEXIM I 15

CONCLUSION 16 REFERENCES

Export-import has always been playing an important role in the development

of the national economy For a developing country that is currently moving towardsintegration into world market, exporting and importing activities even become thefirst priority Being a student majoring in International Business Economics, I wasfortunate enough to experience a five-week internship at export-import companies, inparticular, a one-week period at Vietnam National Textile and Garment Group(VINATEX) and a four-week period at Vietnam National General Export-ImportJoint Stock Company No I (GENERALEXIM I)

The following report describes what I have learned and observed from theinternship period Due to the limit of time and personal restrictions, there might bemistakes throughout the report Hence, all the comments and remarks will be highlyappreciated, which could help me do better in my future assignments

The structure of this report consists of three parts as follows:

Part 1: Introduction of Vietnam National General Export-Import Joint Stock Company No I (GENERALEXIM I)

Part 2: Mid-term Internship Diary.

Part 3: The procedure of payment by letter of credit in importing contracts of Vietnam National General Export-Import Joint Stock Company No I.

Last but not least, I would like to give special thanks to – my instructor

in this Mid-term Internship module, and – my mentor at GENERALEXIM Ifor the help and support during my internship Without whom, I would not havecompleted my report with much more knowledge and experience relating to mymajor

Hanoi, August 2014

PART 1: INTRODUCTION OF VIETNAM NATIONAL GENERAL IMPORT JOINT STOCK COMPANY NO I (GENERALEXIM I)

EXPORT-1.1 The establishment and development of GENERALEXIM I:

Vietnam National General Export-Import Joint Stock Company No I (alsoknown as GENERALEXIM I) was founded in December 1981 under the Ministry ofForeign Trade (nowadays called the Ministry of Industry and Trade) and transformedinto a joint stock company in 2006 During its early days, GENERALEXIM I mainlyfocused on export-import before diversifying its portfolio, in which the initial focusaccounted for nearly 85% of the company's annual revenues and profits In bothdomestic and international markets, the company has always been highly appreciatedfor its prestige in trade and sound financial capacity The headquarter is located at No

46, Ngo Quyen Street, Hoan Kiem District, Hanoi and its three branches are in HaiPhong, Da Nang and Ho Chi Minh City respectively

Throughout over 30 years, the company's establishment and development isdivided into three main stages:

 Stage 1 (1981-1992): The company was newly established, while the nationaleconomy started to apply a combination of the market mechanism, the economicmanagement mechanism, the old and new export-import methods This was thetime for the company to decide on its orientation and lay grounds for its businessactivities

 Stage 2 (1993-2004): The economic management mechanism in accordance withmarket mechanism was formed clearly; the company's development was at thesame speed with the international economic integration process of the nationaleconomy

 Stage 3 (2005-present): The company's business activities have become stable and

it has been successful in transforming into a joint stock company Being consistentwith the existing business strategies, until now, the company has continued toconsolidate them and started making adjustments in accordance with its new

structure as well as the country's new management mechanism

GENERALEXIM I was honoured to receive a Third-class Independence

"Sao Vang Dat Viet" award for outstanding Vietnamese brands in the integrationprocess In 2008, GENERALEXIM I was ranked 261st place in the Top 500 biggestbusinesses in Vietnam and 41st place in the Top 500 biggest private enterprises inVietnam.

Headquarter: No 46, Ngo Quyen street, Hoan Kiem district, Hanoi

Besides, the company also supplies/imports/exports materials and other goods

to locals, industries and enterprises which pay in cash or in exchange of other goods

as agreed upon economic contracts

Moreover, the company manufactures and processes products for exporting,

as well as provides services relating to importing

1.3 Missions of GENERALEXIM I:

 Effectively performing manufacturing and services activities

 Self creating capital; managing and exploiting it in an effective way;performing its obligation towards the government

 Complying with policies, economic management system, export-importmanagement system and external trade management system

 Performing every obligation in relevant economic contracts

 Improving the quality and quantity of exported goods; expanding internationalmarkets; attracting more foreign currencies and promoting exporting activities

 Traning to make more well-qualified staff

 Importing: industrial equipments; machines; transportation means; materials formanufacturing and constructing (iron, steel, aluminum, copper, cattle foods,materials for vetenirary medicines, etc.); chemicals; consumer products

1.4.4 Financial and Joint venture – Association activities:

 Strategic partnership with Vietnam Export-Import Commercial Joint-Stock Bank(EXIMBANK)

 General Real Estates Corporation I (G-Land)

 Strategic partnership with BeeLogistic to establish BEEGEN Distribution SolutionCorporation

 Shareholder of Quang Ngai Minerals ML Corporation

1.5 Organizational Structure of GENERALEXIM I:

The company consists of several departments with different functions andspecializations, yet they perform in uniformity under the direction of the Board ofDirectors The organizational structure is demonstrated in the diagram below:

1.6 Business results of GENERALEXIM I in recent years:

Today, GENERALEXIM I is a company which has diversified business areas,however, export-import still remains its primary focus, which accounts for nearly

SHAREHOLDERS ASSEMBLY

SHAREHOLDERS ASSEMBLY

BOARD OF MANAGEMENT BOARD OF MANAGEMENT BOARD OF DIRECTORS

Business Departments

- Import-Export Department 1

- Import-Export Department 2

- Import-Export Department 3

- Import-Export Department 4

- Import-Export Department 5

- Import-Export Department 6

- Property Business Department

- Import-Export Department 1

- Import-Export Department 2

- Import-Export Department 3

- Import-Export Department 4

- Import-Export Department 5

- Import-Export Department 6

- Property Business Department

Subsidiaries and Affiliated Enterprises

Subsidiaries and Affiliated Enterprises

- In Ho Chi Minh City

- In Da Nang

- In Hai Phong

- Hai Phong Export Garment Enterprise

- Dong Nai Representative Office

- Forestry Products Processing and Exporting Enterprises and General Depots

- In Ho Chi Minh City

- In Da Nang

- In Hai Phong

- Hai Phong Export Garment Enterprise

- Dong Nai Representative Office

- Forestry Products Processing and Exporting Enterprises and General Depots

Agriculture-Joint Ventures and Associated Units

Joint Ventures and Associated Units

- De Nhat Development Company

- EXIMBANK

- Quang Ngai Minerals ML Corporation

- General Real Estates

Corporation I

- Hop Luc Fund Management Company

- De Nhat Development Company

- EXIMBANK

- Quang Ngai Minerals ML Corporation

- General Real Estates

Corporation I

- Hop Luc Fund Management Company SUPERVISORY BOARD

85% of the company’s annual revenues and profits In both domestic and internationalmarkets, the company has always been highly appreciated for its prestige in trade andsound financial capacity Over the past few years, although both the national andinternational economies have faced with significant fluctuations, thanks to theguidance of the Board of Directors and utmost efforts of the whole company staff, thecompany’s performances have been expanded both in depth and width, especially inexport-import.

In 2009, profit after taxes reached 40.4 billion VND, and return on sales (ROS)was 3.72%

In 2010, net revenue rose to nearly 80 billion VND, which was 1.95 timeshigher than the previous year Besides, ROS also increased to 7.52% meaning asuccessful year with high profits

However, profits decreased in the next 3 consecutive years In 2013, ROS sunk

to only 0.53%, while net profit was 11.07 billion VND – about half of that in 2012.This figure proved that the company was still in hardship and no signs of recoveryhad been found (Please refer to Table 1.1 in Appendix for more details)

PART 2: MID-TERM INTERNSHIP DIARY

Week 1: Tuesday, July 1 st 2014

Today was my first day at VINATEX When I arrived, I was asked to come tothe Conference room to have a quick meeting with the Director of Market Departmentand his two assistants, along with another intern We shared our plans andexpectations during the internship, then the two assistants were assigned by theDirector to be our mentors, helping us fulfill our wishes to learn and experience Ourfirst week of internship, decided by the Director, would focus on the overview of theGroup’s activities and the Department’s functionalities

Thereafter, I had a conversation with my assigned mentor, Mr Dung – who is

4 years older than me and also graduated from Foreign Trade University, HighQuality Program of External Economics, so our getting aquainted went very well.Also, he really well understood the requirements of the Mid-course Internship moduleand ensured to assist me throughout the 1-month-period

After that talk, he led me to my booth at the middle of the office, betweenanother internship and a female Business Development Assistant There were noavailable computers left, so he told me to bring my laptop next time I came to theoffice The documents for this week research would be sent to my e-mail and could beread at home, so I was allowed to leave early

Before leaving, I was asked to meet the Director of Human ResourcesManagement and show her the Referral from my Univesity Being friendly andsupportive as she was, she gave me several suggestions for my Internship Report

Week 1: Thursday, July 3 rd 2014

I continued reading the sent documents, which were: VINATEX Analysis inthe process of Equitization by BSC, and The Functions and Missions of MarketDepartment They provided me deep insight about the Group’s strengths/weaknessesand its opportunities/challenges on the way to become a corporation from a state-owned one member limited company

In the document, it was stated that the Group would open to many types ofinvestors, in which there would be several chosen strategic ones I wondered who

Vinatex would choose as its strategic investors and tried to reasearch online first, but

no official list had been announced yet, even any predictions When I asked otherseniors at the office, they also said the same thing

I chatted for a while with an employee sitting next to me Though she was busyarranging files, she was willing to get to know me and answer my questions

Finishing my reading, I listed out several topics I would like to be providedfurther information on, which were: Current international partners of VINATEX andPredictions about future international commercial relationships after VINATEX fullybecame a corporation I turned to my mentor to ask for those documents, but he told

me that he could not provide them as they were not available for references

Week 1: Friday, July 4 th 2014

Today the Head of the Department and Mr Dung were going to another city

to attend a meeting, so I did not meet them at the office I had already finished thereading, so I did not know what else to do there The intern next to me was busytranslating some documents, and another employee on my right was making phonecalls all morning I just sat at my booth doing some research on the Internet aboutgarment markets until noon Then I decided to leave as I thought the afternoon would

be the same as morning

Week 2: Monday, July 7 th 2014

This week I was introduced to a new place for internship – Vietnam NationalGeneral Export-Import Joint Stock Company No I (GENERALEXIM) It would bemore consistent with my major than VINATEX, and more importantly, more open inproviding research materials

Firstly, an adminstrative staff showed me around the building, we stopped byevery room and said hi to everyone in it The last one was Export-Import Department

3, to which I was assigned The room was not very large, and there were 7 employeesworking in this Department I talked to the Vice Manager of the Department and toldhim about the purpose of my Mid-term Internship module He set up a space for me to

sit in and said that I would be allowed to observe some of their tasks as I was notqualified enough to do them by myself, still I felt happy with that.

I came in the afternoon so there was not much work to do at that time, Ithought I could use some time left to get acquainted to the staffs Two of themgraduated from Foreign Trade University, and they also said that about half of thestaff in the whole company were FTU students However, the number of FTUgraduates applying for GENERALEXIM I tended to decrease over the last few years

Week 2: Thursday, July 10 th 2014

I was provided with documents with general information about the companyand the Department From them I learned that Export-Import Department 3 is one ofthe 6 Export-Import Departments of the company, which is in charge of importing andtrading transport equipments, metals, as well as processing and producing apparels.They have to deal with a lot of import contracts and manufacturing contracts on aregular basis, which requires very sound knowledge about international commercialtransaction

Today I was asked to make some copies of a document of request for opening

an L/C It was urgent so I did not have time to thoroughly look at it, but it seemed notdifferent from the ones that I had seen in textbooks Besides the copying, I was alsoasked to send several documents to another Departments Mr Cuong said that theywere some “warm-up” tasks for me to get used to the workplace Perharps next weekwhen all things were finished, I would ask to have a look at an import contract and

other relevant documents

Week 3: Tuesday, July 15 th 2014

It was quite a relaxing day at the office today as other seniors did not havemuch work They were preparing for the company’s summer vacation trip thisweekend, so they talked a lot about the plan I also tried to join their conversationeventhough I would not take part in that trip Most of the employees in thisDepartment were young and friendly, so I found it easy to get along and get to knowthem better My mentor – the Vice Manager of the Department – told that I would not