For The Existence And Development Of Vietnam Development Bank

 Issuance of bonds, promissory notes, certificates of deposits, commercial paper in VND currency of Vietnam Development Bank;

 Loans from Vietnam Social Insurance, loans from domestic and foreign financial institutions;

 Loans from the State Bank of Vietnam;

 Receipts of deposits entrusted by domestic and foreign organisations;

 Other sources of capital by the virtue of law.

Credit granting activities

 Compliance with development investment credit policy and State-owned export credit according to the Government's regulations;

 Entrustment to manage ODA capital and other sources;

 Entrustment of financial and credit institutions to carry out VDB’s credit operations.

Provision of payment services to customers

2.1.6. Operating results of VDB during 2011- 2015

2.1.6.1. For the social economy

Contributed to create a large supported fund for the economy; Asserted the role of financial leverage to attract other sources of capital in the economy; Introduced the new capital mobilization channel for economic growth, contributing to the development of Vietnam's financial market; The investment credit and export credit of the State have accounted for the rapid economic growth and export growth as well as the development of rural agriculture, social security, regional development and environmental protection.

2.1.6.2. For the existence and development of Vietnam Development Bank

VDB’s scope is increasing

VDB’s total asset at the end of 2015 reached 363,799,901 billion VND. Over the past five years, VDB 's asset has experienced the considerable growth.

Table 2.1: Structure Assets of VDB from 2011 to 2015

Unit: million VND

TARGETS

31/12/ 2011	31/12/2012	31/12/2013	31/12/2014	31/12/2015
Total Assets	274.708.123	291.700.892	298.986.367	324.526.866	359.799.901
Growth%	32,39%	6.19%	2.50%	8,54%	10,87%
1.Asset	226.932.798	242.990.839	257.489.601	274.326.337	310.275.735

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operations


Proportion	82.61%	83.30%	86.12%	84,53%	86.24%
Growth rate	32,64 %	7.08%	5.97%	6.54%	13.10%
2.Other Assets	47.775.325	48.710.053	41.496.766	50.200.529	49.504.166
Proportion	17.39%	16.70%	13.88%	15,47%	13,76%
Growth rate	32,05 %	1.96%	(14.81%)	20,97%	(1,39%)

Source: Data research topics

More reasonable capital structure

Liabilities: Liabilities include capital to issue commercial papers; investment trusted capital; loans from state budget, loans from financial institutions; other sources of capital. These sources are utilised by VDB in its operations. Liabilities is at 94% of total capital. Equity (Capital & Fund) accounts for a small proportion (about 6%), the equity is a stable and major source of capital of investment in modern infrastructure and technology to serve VDB's operations in the new phase of the economy.

Table 2.4 Structure Capital power of the VDB from 2011 -2015

Unit: million VND, %

TARGETS

31/12/ 2011

31/12/2012

31/12/2013

31/12/2014

31/12/2015

Total resources

Growth rate

274.708.123

32,39%

291.700.892

6,19%

298.986.367

2,49 %

324.526.866

8,54 %

359.799.901

10,87%

1. Liabilities

Proportion

260.530.975

94,84 %

276.779.437

94,88 %

283.145.853

94,22 %

307.949.061

94,89 %

339.011.701

93,17%

2Capital & funds

Proportion

14.117.505

5,16 %

14.921.455

5,12 %

16.112.043

5,38%

16.577.805

5,11 %

20.788.200

6,83%

Source: Data research topics

For Vietnam Bank Development’s performance

The VBD’s income and expenses have increased in line with the operating scale from time to time. The recent performance for 5 years showed that Vietnam Bank Development’s operations were moderate efficiency with unstable trends.

2.2. THE CURRENT STATE OF EXPORT CREDIT THE STATE DEVELOPMENT AT VIETNAM DEVELOPMENT BANK

2.2.1. Overview of activities at VDB

Investment Credit (IC) Investment credit is medium and long-term credits that are

funded by VDB for designated investment projects of the government.

ODA re-lending: ODA loans are re-allocated to investment projects in the list of investment products financed by lateral or multilateral ODA agreements between the Government of Vietnam and foreign countries.

Export credit: State-owned export credit are short-term credits granted by VDB towards product lines and commodities in the list for export promotion.

Guarantee, re-guarantee: In addition to lending under the three types of credit (mentioned above), VDB also provides guarantee and re-guarantee services for domestic enterprises, especially small and medium enterprises so that they may access to financial support from domestic and foreign financial institutions.

2.2.2. Current state of State-owned export credit development at VDB

2.2.2.1. Development of State-owned export credit in both scale and quantity

► Development of State-owned export credit in both scale and quantity according to planned targets

To assess of the current state of operation and development of export credit of the State at Vietnam Bank Development during 2011-2015, the thesis has compared the actual data with planned indicators.

Table 2:10 Situation Development activities credit export of the Statein VDB in accordance with norms of Planning from Unit: million,

YEAR

LOAN SALES			AVERAGE OUTSTANDING LOAN
Plan	Perform	Completio n Rate	Plan	Perform	Completion Rate
2011	18.000.000	18.574.200	103,19	17.000.000	15.667.796	92,16
2012	17.000.000	15.926.344	93, 68	15.000.000	10.221.224	68,14
2013	17.000.000	15.004.570	88, 26	13.000.000	10.871.492	83,63
2014	16.000.000	13.693.162	87, 27	12.000.000	9.823.454	81,86
2015	16.000.000	15.246.466	95, 28	12.000.000	9.998.391	83,32

Source: Data research topics

Planned loan targets: Except for 2011 (the loan targets reached 103,19%), the remaining years’ results are below the plan.

Real growth in the loan target of the export credit: Form 2011 to 2015, the loan targets

decreased from 20,637,792 to 18,246,466 (a decrease of 18%).

Average loan balance: The actual number of outstanding loans from 2011 to 2015 compared with the planned targets of average outstanding loans was not met.

Real growth in average loan balance of export credit In terms of scale and quantity, the development of export credit of the State at VDB during 2011 to 2015 is not contented enterprises’ expectation.

► Export credit development in both scale and quantity according to actual data

State-owned export credit development in context of borrower categories

Borrowers of export credit at VDB are divided into two groups, including state-owned enterprises and non-state-owned enterprises.

The size and structure of export credit debt balance over the years have focused on state- owned enterprises. Although the proportion of export credit to non-state-owned enterprise is still low, however it shows an increase trend.

Table 2:11 Export credit debt in VDB and outstanding growth rate of customers from 2011 to 2015 Unit: million VND, %

TARGETS

31/12/ 2011	31/12/2012	31/12/2013	31/12/2014	31/12/201 5
Export credit Debt	16.226.757	10.247.736	10.295.247	8.838.977	10.233.121
% Growth	0,92 %	(36,85%)	0,46%	(14,15%)	15,17%
1. State Enterprises	14.026.825	8.752.591	8.560.498	7.161.339	8.160.914
Proportion	86,23 %	85, 41 %	83,15%	81,02 %	79,75%
Growth rate	0,21%	37,61%)	(2,2%)	(16,35%)	13,96%
2Non State Enterpries	2.239.932	1.495.145	1.734.749	1.677.638	2.072.207
Proportion	13,77 %	14,59 %	16,85 %	18,98 %	20,25%
Growth rate	7,65%	(33,26%)	16,03%	(3,30%)	23,52%

Source: Data research topics

State-owned export credit development based on exports group

Table 2.12: Export credit debt in VDB in VDB and growth rate

by commodity group from 2011 -2015 Unit: million VND, %

TARGETS

31/12/ 2011

31/12/2012

31/12/2013

31/12/2014

31/12/2015

EC Debt

Growth rate

16.226.757

0,92 %

10.247.736

(36,85%)

10.295.247

4,06%

8.838.977

(14,15%)

10.233.121

15,17%

1.AFF

13.797.611	8.566.083	8.580.059	7.383.197	8.561.029
Proportion	85,03 %	83,59%	83,34%	83,53 %	83,66%
Growth rate	( 0,65%)	(37,02%)	0,16%	(13,95%)	15,95%
2. Crafts	1.260.819	880.281	911.129	788.437	898.460
Proportion	7,77 %	8,59 %	8, 85 %	8,92 %	8,78%
Growth rate	12,98%	(30,12%)	3,50%	(13,47%)	13,95%
3.P I	954.133	979.738	643.453	549.784	638.547
Proportion	5, 88 %	6,03 %	6,25 %	6,22 %	6,24%
Growth rate	6,72%	2,68%	(34,37%)	(14,56%)	16,15%
4.CCA Proportion Growth rate	214.193	232.343	160.606	117.558	135.077
	1,32 %	1,43 %	1,56 %	1,33 %	1,32%
	8,30%	8,47%	(30,88%)	(26,01%)	14,90%

Source: Data research topics

State-owned export credit development based on export market regions

US market (about 15%); EU market (54%); Japanese market (over 11%); South-East Asian markets (around 45); Russian market (about 4%;); Chinese market (nearly 5%), South Korea (about 2.7%); Other markets such as Brazil, Mexico, Myanmar and other countries (about 26%).

2.2.2.2. State-owned export credit development in both quality and efficiency

The quality of export credit of the State at Vietnam Development Bank from 2011 to 2015 was improved gradually: The debt ratio during 2011, 2012, 2013 was around 80%, the debt ratio significantly reduced by 59.60% in 2014 making the overdue and bad debts high. However, the situation had been improved in 2015. In sum up, export credit of the State quality had improved in a positive direction. Bad debts had been controlled and reduced by 7,02% as planned.

Table 2.15 Export credit Debt classification from 2011 -2015 at VDB. Unit: million VND

TARGETS

31/12/ 2011

31/12/2012

31/12/2013

31/12/2014

31/12/2015

EC Debt

Growth rate

16.226.757

0,92 %

10.247.736

(36,85 %)

10.295.247

0,46%

8.838.977

(14,15%)

10.233.121

15,17%

1. Term debt

Proportion

13.151.787

81,05 %

7.535.685

73,54 %

8.464.752

82,22 %

5.267.714

59,60%

8.584.934

83,91%

2. Overdue Debt

3.074.242	2.712.051	1.830.495	3.571.263	1.610.072
Proportion	18,95%	26,46%	17,79 %	40,40%	16,04%
Inside: Bad debt	1.567.504	978.659	932.749	758.384	718.365
Proportion	9,66 %	9,55 %	9,06%	8,58 %	7, 02%

Source: Data research topics

Provision for export credit of the State risks

The provision for credit risks at VDB is strictly implemented. The Prime Minister determines cases of debt cancellation and debt sale as submitted by the Ministry of Finance at the proposal of VDB’s Chairman. Thus, the use of risk provision to deal with risks arising from debt group 5th (potentially defaulted) is carried out once a year under the unified direction of the Board of Directors and the Executive Board at the request of the Committee of Specialists.

2.2.2.3. Development of export credit guarantee

►Types of export guarantee at Vietnam Development Bank

Export credit guarantee

Export credit guarantee is a written commitment of VDB to credit organisations for export borrowers to repay on behalf of customers (the guaranteed) if those customers have failed to pay the debt or indebted to credit institutions under the contract.

Bid security and export contract fulfilment

Bid security is a written commitment of Vietnam Bank Development to the bidder who is a foreign organisation to perform his/her obligations on behalf of the contractor who is a Vietnamese economic organisation in case the contractor failed to perform the binding contract.

The bid security of the export contracts is a written commitment of Vietnam Bank Development to the importer who is a foreign economic organization to perform his/her obligations on behalf of the exporter who is an economic organization of Vietnam if the Vietnamese exporter has failed to perform or insufficiently performed the provisions of the contract signed with the foreign importer.

►Development of export guarantee at Vietnam Development Bank

VDB is a financial institution of the Government with strong financial capacity and guaranteed by the Government for payment. Therefore, VDB’s guarantees are trusted by financial institutions and economic organisations. However, the actual data shows that

VDB's guaranteed activities are too modest, inadequately with the position and potential of VDB within Vietnam's financial system.

2.3. SURVEY AND ASSESSMENT OF EXPORT CREDIT OF THE STATE DEVELOPMENT AT VIETNAM DEVELOPMENT BANK

2.3.1. Survey of export credit of the State at Vietnam Development Bank

Survey results are statistically collected for the research purposes

2.3.2. Assessment of export credit of the State development at VDB

2.3.2.1 Results

Firstly: to complete export credit of the State policy at the basic level. Secondly: to improve the quality and efficiency of credit management.

2.3.2.2. Limitations and reasons

►Limitations

 Debt balance and lending turnover of the export credit of VDB are still minor in comparison with the bank’s scale and position.

 Export credit of the State model at VDB is monotonous.

 Although regulations and rules on lending, debt management, debt collection in the export credit have changed, however, flexibility needed to be improved further.

 Credit limit-based lending method is an advanced method of lending, but the lending approval process is still rigid and unattractive to borrowers.

 Though credit rating is innovative, still subjectivity is remained due to the assessing criteria are not based on reliable data.

 Supervision, management and collection of debts have not been planned based on the borrower’s cash flow.

 The number of State-owned export credit borrower at VDB is not high.

 There are also limitations in management lowering the credit quality, particularly bad debt rates remain high.

►Causes of limitations

 Causes of mechanisms and policies: binding responsibilities is too rigid.

 Subjective causes: Operations and management capability are still limited.

 Causes from borrowers: lack of consideration towards the export item’s quality, lack of adequate financial management and deliberate violation of regulations.

 Impacts of the global economic environment.

2.4. ASSUMPTION OF EXPORT CREDIT OF THE STATE POLICY IN VIETNAM

2.4.1. Maintain and expand of export credit of the State policy

Firstly, development of export credit of the State policy at VDB for more than 10 years has showed that this policy has promoted the certain socio-economic benefits.

Secondly, the author finds that most countries, including industrialized and developing countries, do not hesitate to develop and implement export credit of the State policy with the aim of export enhancement. Countries, with strong banking systems, have a very strong support policy to implement export credit of the State policy to boost the advantages to their businesses. In such a fierce competition environment, Vietnam cannot stand to suffer from its loss in exporting its goods to the rest of the world.

Thirdly, although export credit of the State policy in Vietnam has increased the budget burden because of subsidising interest rate differences, this is acceptable.

2.4.2. Renovation of export credit of the State policy model

 Model renovation will take advantages of commercial bank’s experience and strength; in turn, the export credit-based turnover and debt balances will increase significantly.

 Commercial banks participating in the development of export credit of the State policy are those with extensive networks. They have the agent relation to hundreds of banks in the world, as well as banks performing international banking services with highly professional quality. Thus, these commercial banks can monitor their cash flows to control the debt collection and take appropriate credit risk management measures.

2.4.3. Termination of export credit of the State policy

Assumption of termination of export credit of the State policy would less likely to be accepted, because:

Firstly, export credit of the State activities at VDB have been implemented for more than 10 years and have had accumulated substantial experiences, also, these activities have been steadily operated.

Secondly, the world is facing with tough economic and commercial competition in many different forms; particularly export credit of the State policy is one of the most effective instruments. Therefore, no country, including US, has abandoned this important