Export Finance Structure In Vietnamese Dong And Foreign Currency (Usd) At

Loan turnover (short-term and medium-long-term) is respectively: 34.26%, 33.5% (

2004 was: 31.19%, 32.16%). The reasons are:

+ After a period of participating in international business activities, Vietnamese import-export enterprises have become more experienced and proficient in international transactions, creating prestige and trust for NHNT. Therefore, they are increasingly able to sign large, long-term contracts, have highly feasible and effective production projects, and NHNT also has more long-term funding for them.

+ The State Bank is trying to finance medium- and long-term foreign trade contracts, or highly effective export production and business projects to gain more profits and increase the effectiveness of financing.

Like lending turnover, the debt collection turnover of NHNT also increases over the years, in which the import-export debt collection turnover accounts for a large proportion, and according to the financing term: short-term debt collection turnover is always higher than medium- and long-term debt collection turnover. That is because medium- and long-term financing has a longer maturity period than short-term. In fact, medium- and long-term financing loans of NHNT are usually from 3 years or more.

2.2.3.2. Export financing structure in Vietnamese Dong and foreign currency (USD) at

NHNT.

NHNT finances exports in Vietnamese Dong or foreign currency depending on customer needs, domestic and foreign currency resources of the bank, etc.

Table 2.5. Export finance outstanding debt structure in VND and foreign currency at the State Bank of Vietnam.

Unit: million VND;%.

Target

2003		2004		2005		2006
Outstanding	Density	Outstanding	Density	Outstanding	Density	Outstanding	Density
 outstanding debt	2,347,981	100	2,800,193	100	2,931,346	100	3,087,294	100
VND	1,389,067	59.16	1,667,795	59.56	1,710,147	58.34	1,763,771	57.13
USD	958,914	40.84	1,132,298	40.44	1,211,199	41.66	1,323,523	42.87
Bank Loan	1,241,847	52.89	1,486,062	53.07	1,592,600	54.33	1,698,012	55
VND	863,353	36.77	1,084,795	38.74	1,113,032	37.97	1,128,097	36.54
USD	378,494	16.12	401,267	14.33	479,568	16.36	569,915	18.46
T-DH Loan	1,106,134	47.11	1,314,131	46.93	1,338,746	45.67	1,389,282	45
VND	527,714	22.39	583,000	20.82	597,115	20.37	635,674	20.59
USD	580,420	18.45	731,131	26.11	741,631	25.3	753,608	24.41

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Source: Debt Management Department.

Looking at table 2.5 above, we can see that foreign currency and VND export financing loans have increased over the years, however, loans in domestic currency still account for a higher proportion: in 2003, the total outstanding export financing debt was 2,347,981, of which VND outstanding debt accounted for 59.16%, foreign currency outstanding debt accounted for 40.84%; by 2006, although the proportion of foreign currency outstanding debt had increased (but not significantly), it still only accounted for 42.87%, while VND was 57.13%. The increase in the proportion of outstanding debt in foreign currency in 2005 and 2006 was due to the increase in the proportion of short-term debt in foreign currency (in 2005 it increased by 2.03% compared to 2004, in 2006 it increased by 2.1% compared to 2005), while medium and long-term financing tended to decrease (in 2005 it decreased by 0.81% compared to 2004, in 2006 it decreased by 0.89% compared to 2005). Another reason is that, in the current export reality, the demand for capital in domestic currency is very large: however, the situation of mobilizing domestic currency capital of commercial banks in general and non-commercial banks in particular is very difficult (due to the strong competition in capital mobilization as analyzed above, and due to the current trend of the population preferring to deposit savings in foreign currency rather than domestic currency to enjoy high interest rates). These are the reasons why local currency capital in banks is scarce, often not enough.

to meet the needs of businesses, especially in short-term foreign trade contracts: export businesses often need domestic capital to purchase goods for export or produce for export.

The proportion of domestic currency (or foreign currency) according to the financing term is also different. For short-term exports, enterprises mainly request working capital financing to purchase, process, and produce export goods, so the demand for domestic capital financing is larger than that of foreign currency (in 2006, the proportion of short-term financing in domestic currency was 36.54%, foreign currency was 18.46%; in 2005, it was 37.9% and 16.36%), while for medium- and long-term export financing, enterprises mainly request financing to contribute additional capital, form joint ventures with foreign enterprises, or pay for transportation costs, pay for temporarily re-exported goods, or pay for foreign countries, so the demand for foreign currency in the long term is larger than the short term (in 2006, the proportion of medium- and long-term financing was 36.54%, and 18.46%, respectively).

– long-term in foreign currency accounts for 24.41%, domestic currency is 20.59%; in 2005 it was 25.3% and

20.37%).

This table also shows that in the structure of export financing, short-term export financing has a larger proportion than medium- and long-term, and the following year is higher than the previous year, specifically: in 2006, the proportion of short-term financing accounted for 55% compared to 45% of medium- and long-term (in 2005: 54.33%, 45.67%; in 2004: 53.07%, 46.93%). The main reason is that banks want to reduce the risk of financing, ensure faster capital turnover and be able to pay customers who deposit money when due without fear that customers who borrow or request financing cannot repay. The second reason is that banks want to limit the credit limit of state-owned enterprises and private enterprises, so banks mainly focus on short-term financing. This also reflects reality: because the proportion of short-term financing is always higher than the proportion of medium- and long-term financing.

2.2.3.3. Export financing structure by item at the State Bank of Vietnam.

Implementing the State's export promotion policy, the State Bank has provided loans to export enterprises to supplement temporary capital needs during the process of collecting goods or processing goods to prepare for export. Especially for large, reputable export organizations with contracts.

Continuous export contracts often have immediate capital needs to continue normal production and business. From there, export activities are increased. Currently, our country is still an agricultural country. Therefore, our country has strengths in agricultural products, seafood and traditional industries - these are also the products that receive the main funding from the Bank for Foreign Trade of Vietnam.

Table 2.6. Export financing structure by product at the State Bank of Vietnam.

Unit: million VND.

Target

2003		2004		2005		2006
Sales loan	Outstanding debt	Sales loan	Outstanding debt	Sales loan	Outstanding debt	Sales loan	Outstanding debt
Crude oil	1,902,434	735,002	2,146,547	948,674	2,648,239	934,123	2,675,485	950,269
Aquaculture	1,264,523	565,313	1,631,743	723,065	1,235,431	7654,003	1,339,770	843,449
Rice	1,085,264	722,400	1,638,965	718,269	1,847,231	700,385	1,875,814	720,574
Textile	455,103	120,110	470,234	134,021	423,176	132,479	509,005	152,821
Goods #	402,907	205,156	536,163	306.64	419,113	399,356	299,615	420,181
	5,830,231	2,347,981	6,423,657	2,800,193	6,573,190	2,931,346	6,759,869	3,087,294

Source: NHNT Business Results Report 2003 – 2006.

Table 2.7. Proportion of export finance items at the State Bank of Vietnam.

Unit: %

Target

2003		2004		2005		2006
Sales loan	Outstanding debt	Sales loan	Outstanding debt	Sales loan	Outstanding debt	Sales loan	Outstanding debt
Crude oil	32.63	31.30	33.42	32.81	40.29	31.87	39.58	30.78
Aquaculture	21.69	24.08	25.40	25.82	18.79	26.09	19.82	27.32
Rice	30.96	30.77	25.51	25.65	28.10	23.89	27.75	23.34
Textile	7.81	5.12	7.32	4.79	6.44	4.52	7.53	4.95
Goods#	6.91	8.74	8.35	10.93	6.38	13.62	5.32	13.92

Source: NHNT Business Results Report 2003 – 2006.

Looking at the two tables 2.6 and 2.7, we can see that Vietnam's main export items such as crude oil, seafood, rice, and textiles are also the items that are financed the most by the State Bank. Of which, crude oil is always the item that is financed the most (loan turnover and outstanding debt). In 2006, the loan turnover and outstanding debt for this item were respectively: 2,675,485 million

VND and VND 950,269 million increased by 1.03% and 1.73% compared to 2005 (in 2005, loan turnover increased by 23.37% compared to 2004). Therefore, crude oil also accounted for the largest proportion of financed goods that NHNT financed, specifically: from 2003 - 2006, it accounted for over 30% of total loan turnover and total outstanding loans financed for goods. In 2005, the proportion of loan turnover was 40.29% - an increase compared to 2004, 2003 by 6.87%, 7.66% respectively, in 2006 this proportion was 39.58%. The reason why financing for crude oil accounts for such a high proportion is because: crude oil is a national mineral, so the exploitation of crude oil is subject to the State's regulations and plans. On the other hand, the exploitation of crude oil requires a very large amount of capital, and the State often has a target for funding this industry. Therefore, the State will intervene in the capital of the State Bank to finance the exploitation of crude oil for export. Moreover, the Vietnam Oil and Gas Corporation is a traditional customer, a large customer with a long-term relationship with the State Bank, so the State Bank often has a more preferential funding policy for this customer. The third reason is: with the rapid development of the world economy, the demand and price of world oil have increased sharply beyond expectations, causing the exploitation and export of crude oil to increase sharply and the demand for funding capital is also greater. However, in 2006, the volume of loans and outstanding debt for crude oil financing still increased, but its proportion decreased slightly compared to 2005: the volume of loans and outstanding debt decreased by 0.71% and 1.12%, respectively. This decrease is also part of the State's strategy to reduce crude oil exports to ensure domestic raw materials and fuels, so the increase in capital financing for crude oil exploitation and export will also decrease.

For aquatic products in 2006, there were signs of recovery, after the decline in 2005. This is shown in both absolute and relative numbers, specifically: in 2006, the loan turnover and outstanding debt for aquatic products reached 1,339,770 million VND and 843,449 million VND compared to 2005, which only reached 1,235,431 million VND and 765,003 million VND; The proportion of financing for this item in 2006 also accounted for 19.82% of total lending turnover and 27.32% of outstanding loans, an increase of 1.03% and 1.23% compared to 2005. Textile and garment items are similar to seafood: in 2005, lending turnover and outstanding loans for textile and garment only reached 423,176 million VND and 132,479 million VND (the proportion in total lending turnover and outstanding loans)

debt decreased by 0.88% and 0.27% compared to 2004), but by 2006, loan turnover and outstanding loans reached 509,005 million VND and 152,821 million VND (increased by 20.28% and 15.35% compared to 2005). There was a decrease in 2005, and the recovery in financing both of these items was due to: in 2005, NHNT, fearing that these two industries would face fierce competition from similar rivals and the impact of anti-dumping lawsuits, reduced financing for seafood and textiles. But in 2006, because export enterprises overcame difficulties in technical trade barriers in the US, EU, and Japanese markets, they changed the structure of goods as well as the structure of export markets. Moreover, at the end of 2006, Vietnam became a member of the WTO, so textile products will avoid concerns about export quotas and there will be rules to protect products from dumping lawsuits. This has reduced the fear and apprehension of commercial banks when financing exports for these products. This has led to a resurgence in loan sales and outstanding loans for seafood and textile products at commercial banks in 2006.

Thus, in terms of goods, capital financing for the four items of crude oil, seafood, textiles and rice has accounted for the majority of the loan turnover and outstanding export financing of the State Bank. This proves that the export financing structure of the bank has not yet expanded. While in reality and according to the State's export orientation, many items have a fairly high growth rate such as light industrial products, handicrafts, high-tech products (electronics, computer components, etc.), wood products, etc. Specifically: wood products reached 1.9 billion USD, an increase of 25% compared to 2005; electronics, computers, and electronic components reached 1.65 billion USD, an increase of 16%; and according to the forecast for 2007, the group of light industrial and handicraft products is estimated to reach 20 billion USD, an increase of 29% and the group of high-tech products continues to achieve high growth rates in exports thanks to the production capacity of the electronics industry which has been significantly enhanced by foreign investment with big names such as Fujitsu, Canon, Intel, ... as well as foreign investors. With such production capacity and growth rate, these products have not received adequate funding from the State Bank. This is shown through loan sales and surplus.

Export financing debt for other groups of goods (including: handicrafts, wooden products, high-tech products, etc.) has increased insignificantly over the years. In 2006, the lending turnover of this group of goods was 299,615 million VND, accounting for 5.32% of the total lending turnover - this figure reflects the situation of the State Bank's financing for this group of goods not increasing but decreasing compared to 2005 (the lending turnover was 419,113 million VND, accounting for 6.38% of the total lending turnover). In general, this is a very modest ratio, not really meeting the capital needs of enterprises producing these export goods. The problem here is how the State Bank needs to diversify and expand the structure of its export goods, creating conditions for enterprises to increase exports, and serving the country's economic development strategy.

2.2.3.4. Export financing structure by economic sector.

According to the policy of the State Bank of Vietnam, it is to finance all enterprises producing and trading export goods, and for all economic sectors, but in reality, in recent years, the State Bank of Vietnam has focused on lending to enterprises belonging to the State economic sector, especially lending to large State-owned enterprises (SOEs). This is shown in the following table:

Table 2.8. Export financing structure by economic sector.

Unit: billion VND; %.

Target

2003		2004		2005		2006
Outstanding debt	Ratio weight	Outstanding debt	Ratio weight	Outstanding debt	Ratio weight	Outstanding debt	Ratio weight
Bank Loan	1,241.84 7	100	1,486,06 2	100	1,592,60 0	100	1,698,01 2	100
State-owned enterprises	1,133.18 5	91.2 5	1,328,39 1	89.3 9	1,381,42 1	86.7 4	1,432,44 3	84.3 6
Private Enterprise	0	0	0	0	12,741	0.8	21,055	1.24
JSC&TNH H	77,988	6.28	121,560	8.18	151,456	9.51	201,894	11.8 9
Foreign investment company	30,674	2.47	36,111	2.5	46,982	2.95	42,620	2.51
T-DH Loan	1,106,13 4	100	1,341.13 1	100	1,338.74 6	100	1,389.28 2	100
State-owned enterprises	1,005.14 4	90.8 7	1,180.19 5	88	1,145.96 6	85.6	1,153.10 4	83
Private Enterprise	0	0	0	0	9,371	0.7	16,671	1.2

JSC&TNH

58,625	5.3	102,194	7.62	110,313	8.24	135,871	9.78
Foreign investment company	42,365	3.83	58,742	4.38	73,096	5.46	83,636	6.02

Source: Debt management department of NHNTVN.

Looking at the data table 2.8, it can be seen that in 4 years (2003 - 2006), lending to state-owned enterprises always accounted for a high proportion (in the short term: 2003: 91.25%; 2004: 89.39%; 2005: 86.74%; 2006: 84.36%) while other components accounted for a very small proportion. For state-owned enterprises, the focus was on large corporations such as the Petroleum Corporation (Petrolimex), the Northern Food Corporation (Vinafood), the Tea Corporation (Vinatea),... In 2006 alone, outstanding loans to the above-mentioned state-owned enterprises accounted for 70%, of which: Vinafood: 32.6%; Vinatea: 15%... Focusing too much on state-owned enterprises will push commercial banks into a passive, dependent position, not proactive in business and lacking a solid guarantee. Because in reality, state-owned enterprises are not the most efficient and dynamic businesses, but rather joint-stock enterprises and limited liability companies (LLCs). They often have many business relationships and sign many large foreign trade contracts, but have difficulty accessing funding sources from banks, because the quota that NHNT gives to these businesses is still very small. However, it can be seen that the focus of funding on state-owned enterprises is gradually decreasing, instead it is joint-stock enterprises and limited liability companies (LLCs), specifically: in 2006, the outstanding short-term and medium-long-term loans for joint-stock companies and limited liability companies reached the following levels: VND 201,894 billion, accounting for 11.89% of the total outstanding short-term loans, an increase of 33% compared to 2005; and VND 135,871 billion, accounting for 9.78% of the total outstanding medium-long-term loans, an increase of 23.17%. This reflects the efforts of the State Bank in shifting the lending structure to non-state economic sectors, expanding and developing credit financing towards diversifying customer segments. However, this shift can be partly attributed to the fact that since 2004, many state-owned enterprises have been equitized. Therefore, in essence, there has not been a major change in expanding lending financing to non-state economic sectors.

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