General Competitiveness of Vietnamese Enterprises

The loyal, dynamic and market-savvy staff have brought the Sacombank brand into the lives of Cambodian people and the Branch's business activities have also achieved encouraging results.

From the initial main operating area of Phnom Penh city, up to now, Sacombank - Phnom Penh Branch's customers have reached 650 customers in many provinces and cities across Cambodia such as Takeo, Kampong Cham, Koh Kong... The Branch's products and services are increasingly welcomed by customers, including: deposits, loans, payments, guarantees... Particularly for payment activities between Vietnam and Cambodia, with the advantage of fast money transfer time between the two countries within just 01 hour and with the advantage of Sacombank's leading network in Vietnam, the money transfer turnover through Phnom Penh Branch up to now has reached 126 million US dollars (USD).

With the motto of becoming one of the leading retail banks in Cambodia and bringing the best banking products and services to every Cambodian, in the coming time, Sacombank will promote the expansion of transaction points in the Phnom Penh area and other provinces. Phnom Penh branch has just completed increasing its charter capital from 15 million USD to 38 million USD according to the regulations of the National Bank of Cambodia, in order to strengthen its financial capacity, contributing to meeting the increasing demand for loans of customers in the Cambodian market.

With a long-term commitment to the Cambodian market, Sacombank plans to continue expanding its network of operations in the capital Phnom Penh and other provinces; in which, the important task in the period from 2010 to 2012 is to complete the conversion of the Phnom Penh Branch into a 100% Sacombank-owned bank. At the same time, Sacombank will focus on improving its financial capacity, investing in modern technical equipment, diversifying products, improving service quality and building a team of enthusiastic and highly skilled employees to serve customers better and better. In addition to traditional business activities, Sacombank will, together with member companies in the Sacombank Group, research and participate in providing the Cambodian market with services related to securities activities, commodity trading, gold, silver, precious stones, real estate, etc. when qualified.

- Regarding credit funding: has gradually provided financial support to individuals and organizations doing business in Cambodia to develop family and business economies, contributing to the economic development of Cambodia.

- Regarding money transfer services: with the time to transfer money from Cambodia to Vietnam and vice versa taking only 1 hour in the past, it has contributed to making trade activities between Vietnamese and Cambodian enterprises quick and convenient and is a factor helping the import and export turnover between the two countries to be increasingly improved.

In addition, in order to meet the needs of customers for using convenient products and services with the goal of performing well the financial intermediary function, contributing to the effective implementation of the Friendship and Cooperation Agreements between Vietnam and countries in the region - especially Laos and Cambodia, Sacombank has recently launched the product "Payment factoring for customers exporting to foreign markets where Sacombank branches operate".

The purpose of this product is to meet the working capital needs in the purchase and sale of goods and provision of services of customers (exporters) with importers in countries where Sacombank branches operate - initially Laos and Cambodia. Accordingly, after delivering goods to the importer, customers will receive an advance payment from Sacombank instead of having to wait until the payment date. The special feature of this product is that customers do not need to have collateral when receiving an advance payment for sales. Sacombank will support the assessment of the reputation of the importer and help customers save costs in monitoring and recovering debts from the importer.

In order to facilitate business operations and meet customers' payment needs anytime, anywhere, Sacombank has expanded the payment scope for customers of the Phnom Penh Branch in Vietnam through the payment method of Cheques. With customers' deposit accounts at the Phnom Penh Branch, customers can use Cheques to withdraw money at all Sacombank branches in Vietnam without having to do any additional money transfer procedures.

* Sacombank Laos

Sacombank - Laos Branch opened on December 12, 2008. By the end of 2009, Laos Branch had total mobilized capital of 10 million USD and total outstanding loans of nearly 5 million USD.

Currently, Sacombank - Laos Branch is providing a number of products and services such as: Mobilizing deposits, LAK, USD, THB from organizations and individuals; Providing short, medium and long-term loans to meet production and business needs; Providing international payment services in the forms of L/C, D/A, D/P, TTr...; Transferring remittances from Laos to Vietnam and receiving remittances from the US to Laos. ...

d. Presence of natural persons

Currently, Sacombank mainly attracts foreign experts to provide consulting support in management and business technology transfer. Sacombank's expert activities for other countries have not been established.

2.3. Analysis of the current competitive capacity in service export of Vietnamese commercial banks

2.3.1. General competitiveness of Vietnamese enterprises

Although achieving and maintaining a high GDP growth rate for a long time, from the perspective of growth quality (ability to improve investment efficiency and competitiveness), Vietnam's economic situation in the past few years has been significantly less positive. In the World Economic Forum (WEF) global competitiveness rankings, Vietnam's ranking has continuously and rapidly dropped, from 60th place in 2003 to 81st place in 2005. Although it rose back to 68th place in 2007, it dropped 2 places in 2008 to 70th place and in 2009 it continued to drop 5 places to 75th place out of 133 countries.

Table 2.16: Vietnam's growth competitiveness ranking

Country name

Ranking 2009

Rating Points

2009

Ranking 2008

Rating Points

2008

Ranking 2007

Rating Points

2007

Ranking 2005

Rating Points

2005

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Vietnam

75	4.0	70	4.1	68	4.04	81	3.37
China	29	4.7	30	4.7	34	4.57	49	4.07
Thailand	36	4.6	34	4.6	28	4.70	36	4.50
India	49	4.3	50	4.3	48	4.33	50	4.04
Malaysia	24	4.9	21	5.0	21	5.10	24	4.90

Source: Global Competitiveness Report, World Economic Forum. http://www.gcr.weforum.org

However, Vietnam's business competitiveness ranking has increased significantly compared to 2005, from 81st place in 2005 to 75th place in 2009, the strategy and operation ranking index has also improved correspondingly, increasing from 81st place to 79th place; in particular, Vietnam's business quality and environment index has decreased compared to 2005 from 77th place to 78th place in the ranking.

The overall picture shows that the Vietnamese economy is operating in a paradox: rapid growth but competitiveness is slowly improving, even declining. Particularly noteworthy is the sharp decline in Vietnam's competitiveness compared to its main competitors, China and Thailand. The implication is clear: Vietnam is growing rapidly but still faces the risk of falling further behind the world.

Not only has Vietnam fallen further behind in terms of competitiveness, it has also fallen further behind in terms of absolute income: comparing Vietnam's GDP per capita with selected countries after 10 years, the gap between Vietnam and other countries has widened even though Vietnam has had a higher growth rate for a long time.

Following that trend, with the current growth rate correlation (Vietnam continues to grow faster), the actual level of development lag of Vietnam has not improved. In fact, the gap has even widened.

It should be noted that in order to break through and escape from the backward state, Vietnam must dramatically increase its savings and investment levels. But when the gap between personal incomes is increasing and if Vietnam's savings and investment levels compared to other countries remain low,

If this remains unchanged, Vietnam's per capita savings and investment will become increasingly smaller.

An example to show the seriousness of the problem: China's GDP/capita is twice that of Vietnam. Therefore, in the case that China's savings and investment level is equal to Vietnam's, China's savings and investment per capita is also twice that of Vietnam. But in reality, China's savings and investment per capita are 20-30% higher than Vietnam's. Therefore, China's savings and investment per capita is actually not twice that of Vietnam but 2.5-3.0 times that of Vietnam. If we multiply this difference by China's huge population, we will see how much greater China's savings and investment potential is than Vietnam's.

The implication of the above analysis is that: Vietnam will find it harder to grow than more developed countries because Vietnam's financial resources are weaker. That leads to the suggestion: Increasing FDI and improving capital efficiency are factors that play a decisive long-term role in enhancing Vietnam's position and competitiveness in the immediate integration period.

The Global Competitiveness Report 2007-2008 ranked Vietnam 68th in terms of growth competitiveness and 76th in terms of business competitiveness. This shows that Vietnam's competitiveness is lower than that of some Asian countries, except the Philippines. One of the factors of service sector competitiveness is the strength of the domestic legal environment. Thus, it is clear that Vietnam is still behind its main competitors in terms of legal and regulatory framework and consistency in implementation. According to the rankings, Vietnam's legal competitiveness index is ranked 70th, behind all countries in the region except the Philippines. Vietnam's infrastructure competitiveness index is even lower, according to the 2007-2008 assessment report, Vietnam ranked 89th. Another competitiveness index that has a great impact on service import-export businesses is the index of accounting and auditing standards, according to the assessment report, Vietnam ranked 93rd in the ranking.

2.3.2. Current status of competitiveness in service export of Vietnamese commercial banks

For Vietnamese commercial banks, competitiveness in service export is shown in 5 aspects: (1) Potential competitors, new to the market; (2) Alternative competitors; (3) Depositors; (4) Customers borrowing and using banking services; (5) Competition level (Direct competitors), specifically as follows:

2.3.2.1. Potential competitors, new to the market

The rapid increase in the number of banks, concentrated in the two groups of joint stock commercial banks and foreign bank branches, shows the attractiveness of the Vietnamese banking sector to domestic investors as well as international financial institutions.

Joint Stock Commercial Banks: Most joint stock commercial banks have a development strategy focusing on the retail banking market. Some leading joint stock commercial banks such as ACB and STB have the orientation to expand into multi-functional financial groups in which commercial banks are the core. The main customers of this group are small and medium enterprises and individual customers. Some joint stock commercial banks have sold shares to strategic partners, which are large banks in the world, in order to improve their financial and management capacity.

SBV&LD Block: Foreign banks currently present in Vietnam are all names in the Top 100 largest banks in the world such as Citibank, HSBC, ANZ,... These banks have a strategy of focusing on specific customer groups such as 100% foreign-owned enterprises, joint venture companies, large state-owned enterprises and foreign individual customers.

2.3.2.2. Alternative competitors

Potential competition from other financial institutions. The operations of banks are currently subject to slight competition from non-bank financial institutions such as financial companies, especially financial companies belonging to corporations and general companies (for loan arrangement, credit, capital mobilization); large-scale securities companies (for investment banking activities such as underwriting, merger consulting, investment, etc.). However, in the future, if

If these models are successful, they will be direct competitors with banks in each area of operation, especially competition from large-scale independent securities companies in investment banking activities.

Many new licensing conditions have been applied. Since April 1, 2007, according to its commitment to join the WTO, Vietnam has officially allowed the establishment of 100% foreign-owned banks. The banking industry is a special industry and is considered to be highly competitive, so the establishment of new banks must meet strict regulations. Newly established banks must have a minimum charter capital of VND 1,000 billion and must reach VND 3,000 billion by 2010. Room for foreign investors is still limited to 30%. Foreign strategic shareholders can only hold a maximum of 20% of charter capital and these organizations must have total assets of at least USD 20 billion.

2.3.2.3. Depositors

In addition to the growth in quantity, the scale of operations of the banking system has also grown strongly. In 2006, the total assets of the entire system increased to more than 1,700 trillion VND, equivalent to more than 130% of GDP in 2008. The growth of the system focused on two traditional activities: lending and mobilization. The growth rate of deposit mobilization was very high, reaching an average of over 35%/year during the period 2002 - 2008. There has not been a strong shift of deposits between the state-owned commercial banks and joint-stock commercial banks to the State Bank of Vietnam (SBV) sector because this sector is subject to restrictions on capital mobilization in VND from individual customers. However, the shift between state-owned commercial banks and joint-stock commercial banks is very strong. In the coming years, the strong development of retail banking services is a premise for the State Bank of Vietnam (SBV) sector to increase its deposit market share.

2.3.2.4. Customers borrowing and using banking services

Traditional Banking activities are forecast to grow more slowly: Despite many difficulties in 2008 and 2009, Vietnam's economy is still assessed by many organizations to have a good growth rate in the coming years. According to BMI's forecast, Vietnam's GDP growth rate will still reach an average of 8% in the period 2010 - 2012. This is an important factor for the development of the Banking system.

Retail banking products and services have the potential to grow strongly along with economic growth: According to the IMF, the number of bank accounts in Vietnam in 2006 was estimated at just over 8 million accounts, accounting for about 9.4% of the population and focusing mainly on high-income earners in urban areas and businesses. Cash payment is still a fairly popular payment method. Although the ratio of Cash/Total means of payment (M2) tends to decrease, this ratio in Vietnam is still the highest in the region. This opens up the potential of the banking industry when payment products and services are relatively complete and the Government has a policy to promote payment through banks.

State-owned commercial banks: currently still hold the dominant market share in the main business segments. However, the market share of this group is tending to narrow due to strong competition from the Joint Stock Commercial Banks and the State Bank of Vietnam. In 2008 - 2009, the market share of this group decreased sharply because the State-owned commercial banks did not focus much on business growth but focused on strengthening financial capacity as well as credit quality management to prepare for the equitization process.

Joint Stock Commercial Bank Block: market share has increased rapidly, especially in the last 3 years, showing the rapid development and increasingly strong competitiveness of this block in the market.

SBV & LD sector: this sector has a rapid and fairly steady growth in the number of banks. The operating market share of SBV & LD sector is quite stable due to the limited ability to expand market share.

2.3.2.5. Level of competition (Direct competitors)

* Size and financial capacity of competitors:

The size of assets and equity of Vietnamese banks in recent years has grown strongly, but is still much lower than the average in the region. The state-owned commercial bank sector has a superior size, but the growth rate is slower than that of the joint-stock commercial bank sector.

The rapid growth in capital scale helps banks significantly improve their financial capacity. The average capital adequacy ratio (CAR) of state-owned commercial banks increased from

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