You are on page 1of 30

FOREIGN TRADE UNIVERSITY

FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS

INTERNSHIP REPORT
Topic: Recommendations for strengthening
Vietnam Korea financial cooperation relation.

Student:

Dinh Hue Phuong

Class: High quality course A


Major: International Economics
Student number: 05
Lecturer: Lu Thi Thu Trang
Hanoi, July 2010

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

PREFACE

International Cooperation has played an important role in the progress of founding


and protecting our country. In the war time, the support in term of material and spiritual
and of friends from all over the world was the motive power for us to struggle for the
independence and freedom. Nowadays, international cooperation has become an more and
more requisite aspect for in economic development of Vietnam. Since Vietnam issued
Doi Moi policy, Vietnams government exerted all the effort to expand external
relations of Vietnam to all countries in the world, and we can proud of our achievements.
Vietnam joined Association of South East Asia Nations (ASEAN) in 1995, The AsiaEurope Meeting (ASEM) in 1996, Asia-Pacific Economic Cooperation (APEC) in 1998,
and the World Trade Organization (WTO) in 2007. Vietnam has been affiliating and
developing with the global economy with a extraordinary pace. In the development of
international relation, Vietnam priors the closed relationship with the neighbor countries
like ASEAN countries and the partner of ASEAN in Asia like Japan, China, Korea, India,
etc. in which Korea has been a strategic partner of Vietnam since the official visit of
Korea's CEO President Lee Myung-bak in October 2009. Vietnam has been received a lot
of support packages from Korea in many areas: economic, investment, education and
culture, etc. In internship period in International Cooperation Department of Ministry of
Finance, I had a very good opportunity to participate in an activity under Vietnam
Korea financial cooperative program, receiving many instructions from experts in this
department and research on this field. I think that Vietnam Korea relationship will be
better and better and both Vietnam and Korea will get a lot of benefit from each other if
we have a suitable policies and actions to consolidating and improving this relation.
Therefore, I would like to choose the topic for my research be Recommendations for
strengthening Vietnam Korea financial cooperation relation
In this research, I would like to express the financial cooperation relation between
Vietnam and Korea in the Governments level as well as the Ministries level, especially

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

under the ASEAN +3 and ASEAN Korea Comprehensive Economics Partnership


frameworks. As I mentioned above, this research gives some suggestions for Ministry of
Finance of Vietnam the organization which is main responsible for managing the
financial relation with all country in the world- with its power, to consolidate and
strengthen the financial relation in the future. The structure of this research consists of
three chapter as follow
Chapter 1: An overview about the organization structure, tasks and powers of
Ministry of Finance of Vietnam and the International Cooperation Department.
Chapter 2: The background of financial relation between Vietnam and Korea, both
intergovernmental relation and relationship of Ministry of Finance of Vietnam and
Ministry of Strategy and Finance of Korea.
Chapter 3: Some suggestions for the financial relation in each criteria listed in
chapter 2.
Last but not least, I would like to give special thanks to all experts in International
Cooperation Department and Banking Finance and Financial Institutions Department for
providing me materials, information and advice during the time I interned in Ministry and
prepared for the research. I also want to give a deep thank to my lecturer, Ms Lu Thi Thu
Trang for her support for me in finding the topic, checking the outline and fulfill the
research. Finally, it is my pleasure to receive comments and assessment from my lecturers
for this research. They will be a very useful advice for me to be better in doing the final
thesis as well as other researches in the future. Thank you very much.
Student

Dinh Hue Phuong

ABBREVIATIONS
ASIA Bond Market Initiative

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

ABMI
AFDM

ASEAN Vice Minister of Finance and Deputy Governor of State Bank


Meeting

AFMM

ASEAN Finance Ministers Meeting

AKFTA

ASEAN Korea Free Trade Area

APEC

Asia-Pacific Economic Cooperation

ASA

ASEAN Swap Agreement

ASEAN

Association of South East Asia Nations

ASEM

The Asia-Europe Meeting

BSA

bilateral swap arrangements

CEO

Chief Executive Officer

CMI

Chiang Mai Initiative

FDI

Foreign Direct Investment

HS

Harmonized System

ICD

International Cooperation Department

KDB

Korea Development Bank

KDI

Korea Development Institute

Kexim

Korea Export Import Bank

KIEC

Korea Export Insurance Corporation

MoF

Ministry of Finance

MOFE

Ministry of Finance and Economic

MoFV

Ministry of Finance of Vietnam

MoU

Memorandum of Understanding

SMEs

Small and Medium Enterprises

SOEs

State Owned Enterprises

VDB

Vietnam Development Bank

WTO

World Trade Organization

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

LIST OF FIGURES

1. Figure 1: Structure of International Cooperation Department MoF of ...12


Vietnam.
2. Figure 2: List of Projects sponsored by Korea since 2009..13
3. Figure 3: List of projects prepared to be sponsored by Korea in the near future14

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

TABLE CONTENTS
PREFACES ..................................................................................................................... 1
ABBREVIATIONS ......................................................................................................... 3
LIST OF FIGURES ........................................................................................................ 5
Chapter 1: Overview about the Ministry of Finance of Vietnam and the Department
of International Cooperation.......................................................................................... 8
1.1.

The Ministry of Finance of Vietnam .................................................................... 8

1.1.1.

Tasks and powers .......................................................................................... 8

1.1.2.

Organization structure of the Ministry of Finance of Vietnam ..................... 10

1.2.

International Cooperation Department ............................................................... 11

1.2.1.

Tasks of International Cooperation Department ......................................... 11

1.2.2.

Structure of the International Cooperation Department .............................. 13

Chapter 2: Financial Cooperation between Vietnam and Korea ............................... 14


Vietnam Korea Government financial cooperation program ........................... 14

2.1.

2.1.1.

Overview of Vietnam Korea relation ........................................................ 14

2.1.2.

Financial cooperation under ASEAN + 3 frameworks ................................. 17

2.1.3.

Financial cooperation under the framework of ASEAN Korea

Comprehensive Economics Partnership (AKFTA). ................................................... 19


2.1.4.
2.2.

Cooperation in Taxation and Customs sectors ............................................ 19

Bilateral Cooperation between Ministry of Finance of Vietnam and Ministry of

Finance and Strategy of Korea ..................................................................................... 20

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

2.2.1.

Memorandum of Understanding in September 2006 .................................... 20

2.2.2.

Memorandum of Understanding on cooperation in October 2009 ............... 22

Chapter 3: Recommendations for strengthening Vietnam Korea financial


cooperation relation. ..................................................................................................... 25
Suggestions for strengthening Vietnam Korea financial cooperation relation .. 25

3.1.

3.1.1.

Under ASEAN Korea Comprehensive Economics Partnership framework


25

3.1.2.

Under ASEAN + 3 framework ..................................................................... 25

3.1.3.

In taxation and custom sectors .................................................................... 26

3.2.

Recommendations for strengthening financial relation between Ministry of

Finance of Vietnam and Ministry of Finance and Strategy of Korea ............................ 27


3.2.1.

Recommendations for implementing MOU 2006 ......................................... 27

3.2.2.

Recommendations for implementing MOU 2009 ......................................... 27

3.3.

Other recommendations ..................................................................................... 28

CONCLUSIONS ........................................................................................................... 29
REFERENCES ............................................................................................................. 30

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Chapter 1: Overview about the Ministry of Finance of Vietnam and the Department
of International Cooperation
1.1. The Ministry of Finance of Vietnam
1.1.1. Tasks and powers
The Ministry of Finance is a Government agency which has the function of
implementing the State management in finance (including: State budget, tax, fees and
other revenues of the State budget, national reserve, State financial funds, financial
investment, corporate finance and financial services); customs; accounting; independent
auditing; insurance; prices; securities; conducting the ownership rights to the States
investment capital in enterprises according to regulations of the Law. The main tasks and
duties of the Ministry of Finance are pursuant to the Decree No 118/2008/N-CP issued
by the Government as follows:
-

Submit to the Government and Prime Minister for approval law and ordinance
projects. Draft legal documents, strategy and development planning, long-term, fiveyear and annual plans on the fields within the Ministrys authority.

Issue legal documents within the Ministrys authority.

Instruct, guide, supervise and to be in charge of implementing the legal documents,


strategy, planning, plan; to set up the propaganda, disseminate, educate legal
documents on the fields within the Ministrys authority.

Manage the State budget, the collection of tax, fees and other revenues under the
State budget, the budget fund, the State reserve fund and other State financial funds
and the national reserves.

Manage the State assets.

Manage corporate finances and the State capital at the enterprises.

Manage the Government borrowings and debt servicing from domestic and abroad;
and international grants.

Implement the State management in accounting and auditing

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Manage banks and non-banking financial institutions regarding issues; financial


services.

Manage customs operations.

Implement the State management in prices.

Issue Government bonds and participate in stock market management under the
regulations of law, Manage, supervise stock and stock market.

Organize and guide the implementation of statistics in the fields within the
Ministrys authority.

Undertake international cooperation and economic integration in the fields within


the Ministrys authority.

Organize and guide the implementation of scientific research, scientific and


technology application in the field within the Ministrys authority.

Decide specific orientations and measures and guide the operating mechanism of
public services providing organizations in the fields within the Ministrys authority
in accordance with provisions of Laws; to manage and guide the implementation of
activities of non-productive units within the Ministrys authority.

Implement

the

State

management

to

associations

and

non-Govermental

organizations in the fields within the Ministrys authority.


-

Inspect, control, settle complaints and denouncements, resist corruption, and be


processed by authorized level or be submitted to the competent levels for setlement
in accordance to the regulations of law applied for finance-budget management
regime breaks and violations.

Conduct administrative reform under the Government program.

Manage organizational structure, permanent staff; guide the implementation of the


provisions on salary, bonuses, disciplines for the State officers within the Ministrys
authority; train and retrain staff in the whole sector.

Manage the assigned capital and assets and the distributed budget plan under the
provisions of the Law.

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

1.1.2. Organization structure of the Ministry of Finance of Vietnam


The Ministry of Finance comprises one Minister, six Vice Ministers who support
directly to the Minister and 29 departments each specializes in a specific area related to
financial issues. Furthermore, there are an organizational system of financial institutes
and financial organizations of MoF in each city and province throughout the nation.
29 departments in MoF include:
-

State Budget Department

Investment Department

Department No.I

Administrative Finance Department

Tax Policy Department

Banking Finance and Financial Institutions Department

Accounting and Auditing Policy department

International Cooperation Department

Legal Department

Finance and Planning Department

Personnel and Organization Department

Commendation and Emulation Department

Financial Inspection

Ministrys Office

Public Asset Management Department

Corporate Finance Department

Debt Management and External Financial Department

Insurance Management and Control Department

Price Control Department

Informatics and Financial Statistics Department

General Department of Taxation

General Department of Customs

10

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

General Department of State Resevre

State Treasury

State Security Commission

Institute of Strategy and Financial Policy

Financial Times of Vietnam

Financial Review

Institute of Financial Training


The Minister of MoF is Mr. VuVan Ninh. He is in charge of providing general and

comprehensive directions, instructions on implementation of all tasks of the whole


Ministry and Finance Sector; making decisions and solutions on the Ministry and sectors
strategies, policies, mechanism and major tasks.
Six Vice Ministers are - Vice Minister Nguyen Cong Nghiep
-

Vice Minister Tran Xuan Ha

Vice Minister Do Hoang Anh Tuan

Vice Minister Pham Sy Danh

Vice Minister Tran Van Hieu

Vice Minister Nguyen Huu Chi

International Cooperation Department

1.2. International Cooperation Department


1.2.1. Tasks of International Cooperation Department
Pursuance to the Decision No 2146 /Q-BTC issued by the Ministry of Finance,
The main tasks and duties of International Cooperation Department are to counsel and
support to the Minister of the MoF to deal with economic integration and international
financial cooperation under the MoFs controls fields; to manage the programs and
projects which are sponsored by foreign nations and organizations to the MoF; to perform
external affair issues of the MoF.

11

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

In particular, the main tasks of International Cooperation Department includes:


Preparing and presenting to the Ministry the projects and tentative of legal
documents, strategies, action plans, long-term, medium-term and annual plans
about international cooperation, legal documents regulate the duties and relations
between departments in the MoF in implementing international cooperation tasks;
Instructing and inspecting the implementations of such legal documents of
departments and organizations in the MoF.
Being main responsible for preparing contents of agreements and commitments in
international financial cooperation of the MoF with the support of other related
organizations in and out of the MoF, and participating in all cooperation programs
based on such preparations; implementing supervision mechanism macroeconomic,

preparing

plans

for

managing,

supervising,

reporting

the

implementations of these regional and international financial cooperation


agreements and commitments.
Setting up and presenting to the Ministry the tentative for the general and annual
plans about the demand for government financial supports; being responsible for
asking for sponsorships or supporting to other departments and organizations in
requesting for sponsorships for actions and programs in specific cooperation fields;
instructing concerning departments to prepare and consider necessary documents
for these programs;, negotiating with foreign partners; supervising, assessing and
solving struggles in performing, managing and prepare the general report for
approval of the Leader of th Ministry.
Prepare for the procedure to instructing, supervising and assessing the Ministrys
departments and the administration of the Ministrys projects; Managing action
plans for in- coming and out-going delegations of the Ministry, being responsible
for translation and reception duties in greeting foreign delegations to the MoF,
holding and being a main responsible person in international conferences of MoF

12

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

and being on behalf of MoF in signing cooperation agreements and commitment


with approval of the Leader of the Ministry.
Managing and announcing financial cooperation program of MoF, encouraging
MoFs personnel to research individually or in group on economic and financial
issues.
1.2.2. Structure of the International Cooperation Department
To perform these above tasks effectively, the International Cooperation
Department has been divided into 4 divisions, each is responsible for a specific tasks as
follows:
-

External Affair Division

Project management Division

Economic Integration Division

International Financial Cooperation Division

Figure 1: Structure of International Cooperation Department MoF of Vietnam.


The leader of the International Cooperation Department is Ms. Nguyen Thi Bich,
Director General, moreover, there are three other Deputy Director Generals who are
responsible for supporting Director General in the particular tasks of the Department.
Presently, Deputy Director Generals are Mr. Nguyen Ba Toan, Ms. Nguyen Van Chi and
Mr. Ha Duy Tung.

13

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Chapter 2: Financial Cooperation between Vietnam and Korea


2.1. Vietnam Korea Government financial cooperation program
2.1.1. Overview of Vietnam Korea relation
In economic, Korea is one of the most important economic partners of Vietnam. FDI
from Korea to Vietnam up to now is about USD 17 billion sponsored to 2064 projects and
created more than 500 thousand employees. Recently, Korea investment structure has
transformed to service industry, heavy industry (steel production, construction,
information technology); there are some large-scale projects (the processing and
laminating steel complex project of Posco Corporation, West West Lake New Urban Area
project of group of 5 Korean construction companies, Bac An Khanh Urban Area project
of Posco Vinaconex cooperation, etc.)
About facilitative loan, since 2009, the MoF and Korea Export Import Bank signed the
following Agreements:
No.

Unit: USD
Projects

Commited value

Providing equipments for Pleiku Hospital

3 000 000

Providing equipments for H Trung Hospital,Thanh Hoa

3 000 000

Constructing motorway Hanoi- Hai Phong package No10

100 000 000

Hoa Khanh Tay Water Supply Project

29 998 000

Thanh Hoa city social-economic development project

32 730 000

Water supply and waste water process project in Moc Chau

12 980 000

Providing equipments for Thanh Hoa College of Industry

3 000 000

Smart motorway system Ho Chi Minh City Trung Luong

30 000 000

Contructing Vinh Thinh Bridge

100.000.000
Total 314.708.000

14

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Figure 2: List of Projects sponsored by Korea since 2009


Source: Project Management Division ICD - MoF
Moreover, some Agreements are prepared for signing in next time including:
Unit: USD
No.

Projects

Committed value

Providing training equipments for Ayun Pa Vocational 2.963.000


College

Providing equipments for Ca Mau Hospital

2.963.000

Constructing Yen Bai Complex Hospital

45.000.000

Total:

50.926.000

Figure 3: List of projects prepared to be sponsored by Korea in the near future


Source: Project Management Division ICD - MoF
Assessing the implementation of Koreas lending Agreement: in general, the
Koreas loans are released tightly followed the schedules, meet the needs of the projects.
However, there are some projects that needed to be renewal contract preparing and capital
withdrawing time such as solid waste processing project in Ninh Binh, Project of
constructing 5 Vietnam Korea vocational colleges, Water supply Project in Hoa Binh.
To reduce this problem, we need to focus on preparing the project before asking for
approval and signing contract to maintain that the project runs fluently as expected.
In international trade, Korean import export scale to Vietnam reached USD 8.85 billion
in 2008, increased 34.4% in comparison with the year 2007, stood at the forth position.
Vietnam exported USD 1.78 billion (increases 42,44% in comparison with the year 2007,
focused on agriculture and aquaculture products, mineral, handicraft and light industry
products), imported USD 7 billion (increased 32.38% % in comparison with the year
2007, focused on industrial products and process industry products). Korea is one of six

15

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

greatest trade deficit markets to Vietnam (in 2008. it got USD 5.28 billion, equal to 29.3%
total trade deficit of Vietnam). The Intergovernmental Panel about economic and
technology cooperation was set between two countries.
About labor issue, Korea is the third largest labor exporting market of Vietnam at
present. There are around 54,000 Vietnamese labors working in Korea. On May 25 th,
2004, we signed an agreement on moving labors from Vietnam to Korea pursuant to the
Employment Permit System of Korea.
In tourism factor, recent years, Korean tourists have become one of the main sources to
Vietnam: in 2007 there are 475,000 tourists, in 2008, as the affects of economic recession,
this figure reduced to 450,000 people.
In education and culture sector, mutual agreement between two nations in August 1994,
Memorandum of Understanding about culture, arts, sport and tourism in October 2008
and many other agreements about youth exchange and education. Two nations usually
hold cultural exchange programs, exhibitions, motion-picture industry. In 2006, Korea
established Korean Culture Center in Hanoi. Ministry of Education and Training chose
Korea to be the strategic informatics partner in education and training.
Government, universities and organizations of Korea sponsored to many project to
improve education system of Vietnam such as constructing elementary schools project,
Middle-Vietnam vocational schools. Scholarship funds like Korea Foundation, Samsung,
Kumho, etc. provided many scholarships for poor students in Vietnam, improve language
and profession skills in Korea. At present, there are about 5000 Vietnamese students
studying in Korea.
In the end of October 2009,on occasion of the President Lee Myung-bak had official visit
to Vietnam, the Leaders improved relation between two nations to be strategic
partnership

16

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

2.1.2. Financial cooperation under ASEAN + 3 frameworks


Under ASEAN +3 frameworks (comprise of 10 ASEAN member countries, and
three partners: China, Japan and Korea), the financial cooperation relationship between
Vietnam and Korea has not been quite plain, mostly focus on dialogues and exchanges
information about the macroeconomic situations, participating in regional cooperative
initiatives including Chiang Mai initiative, Asia bond market initiative and ASEAN
research group.
Compared to Japan, the role of Korea in ASEAN +3 finance is quite modest.
However, recently, Korea has encouraged to research on improving cooperative
relationship within ASEAN +3 such as analyzing the procedure of credit support for small
and medium enterprises in South East Asia area.
These are some initiatives of financial cooperation in ASEAN area with the
participation of Korea.
Chiang Mai Initiative (CMI):
Under ASEAN +3 frameworks, CMI was approved in May 2000 in order to
improve cooperative relationship and facilitation in the region on foreign exchange to
provide urgent aid to the countries facing temporary difficulties in terms of balance of
payment. This important monetary cooperation consists of the following contents:
-

Expanding the capital scale of ASEAN swap (ASEAN Swap Agreement


ASA)

Establishing the system of bilateral swap arrangements (BSA) among member


8 members of ASEAN +3

Improving the provision mechanism and policy dialogues in ASEAN +3 in the


level of: (i) Minister of Finance (AFMM +3); and (ii) Vice Minister of Finance
and Deputy Governor of State Bank (AFDM +3)

The aim of CMI is to expand the ASEAN Swap Arrangement (ASA) to all
ASEAN members and to set up a network of bilateral swap arrangements among ASEAN

17

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

members and 3 partners China, Japan and Korea to provide liquidity support for member
countries that experience short-run balance of payment deficits. Up to now, there are 16
bilateral swap arrangements signed, in which Korea signed 5 arrangement with ASEAN5.
However, Korea has no action to speed up negotiation bilateral swap arrangements with
other ASEAN countries including Vietnam.
ASIA Bond Market Initiative (ABMI):
ASEAN +3 have prepared to implementing ABMI aims to develop efficient and
liquid bond markets in Asia, which would enable better utilization of Asian savings for
Asian investments.
ASEAN bond market development is an important content of financial cooperation
of AFMM +3, in which Korea and Japan are the leaders of this initiative. Vietnam bond
market in general and capital market in particular are quite young and weak in the
development process towards effectively integrate to regional bond market. Under this
initiative, Vietnam has been received many supports from Japan, however, the support of
Korea concentrated mostly on setting up and developing website Asianbondonline of
ASEAN +3 to encourage member countries to update the development of bond markets in
these countries to provide useful information to foreign investors. Up to now, this website
has been run and Vietnam is one of the most active members in providing data for this
website.
Stimulating training and research activities:
Korea has provided some training courses for high-grade personnel of Ministry of
Finance and State Bank of ASEAN countries about the regional financial system and
international financial integration under ASEAN +3 financial cooperation. These course
were valued quite useful and effective.

18

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

2.1.3. Financial cooperation under the framework of ASEAN Korea


Comprehensive Economics Partnership (AKFTA).
ASEAN Korea Free Trade Area agreement had been signed officially on May
16th 2006 in Manila, Philippines, in which the tax reduction regulation will be
implemented since 2006 and finished in 2011 for the founder members of ASEAN and
Korea, 2016 for Vietnam and 2018 for Laos, Cambodia and Myanmar.
However , tax reduction has not been performed because some ASEAN countries
have not fulfilled their procedure to ratify the agreement. Korea has just ratified the
agreement and is has been valid since June 1st 2007 but they have no more legal document
about tax cut and tax reduction.
Vietnam finished the procedures to announce new legal document about tax
reduction, these document will be valid when Korea officially announce their regulations.
2.1.4. Cooperation in Taxation and Customs sectors
In tax management, there are some agreement between the governments of the
Socialist Republic of Vietnam and the Republic of Korea about double tax avoidance and
the prevention of fiscal evasion with respect to taxes on income and capital gains. Since
2002, the General Department of Taxation of Vietnam and the National Tax Service of
Korea had some meetings and agreements of cooperative activities of these departments.
According to these agreements, two parties will have some exchange programs to learn
experiences in tax management of experts in Vietnam to Korea every year.
In customs cooperative activities, two countries established the relationship in
customs field since 1995 and recently, the Governments of two countries has signed a
bilateral agreement on cooperation in customs operations between Vietnam and Korea in
Korea in 2006 and MoU about information technology in customs operations on May 16th
2006 in Korea. As these agreements, there were a lot of exchange programs of experts of
Customs Departments of each country come to other country to study about customs
procedures in partners countries. Korea provide Vietnam many support packages to help
Vietnam to modernization Custom system by facilitating equipments and technology

19

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

using in customs processes, risk management, export import activities and public
relations. In the year 2008, 2009 and 2010, Vietnam has held enterprises and Customs
Department dialogues platform to give explanation to Korean companies about customs
procedures of Vietnam.
2.2.

Bilateral Cooperation between Ministry of Finance of Vietnam and

Ministry of Finance and Strategy of Korea


2.2.1.

Memorandum of Understanding in September 2006

Contents
Signed on September 25th 2006, the MoU is an agreement between Ministry of Finance of
Vietnam and Ministry of Finance and Economic of Korea about banking and finance
sectors. According to this 3 year MoU, MOFE of Korea will support to MoF of Vietnam
in following activities:
(i) Developing the policy system about finance and credit management and
strengthening the management and provision ability of the Government in this
sector
(ii) Enhancing the activities of implementing and supervising credit investment and
credit export policies
(iii)

Developing policy system and strengthening the control of the Government in


managing the actions of credit guarantee fund system for Vietnamese small and
medium enterprises.

Activities according to the MoU 2006


After the MoU was approved, a general action plan was designed for the period
2007 2009 to specify the contents of the MoU. It was also a basic for preparing
activities in a synchronous and comprehensive in each step of cooperation program.

20

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Many specific cooperative activities about the state export credit, export credit
insurance, investment credit, and credit guarantee fund were held effectively and
diversely by departments, institutions and organizations of two Ministries:
-

MoF of Vietnam designated to 7 delegations with 65 experts from

departments in MoF, Ministry of Industry and Trade, Vietnam Development Bank (VDB),
Credit guarantee fund, and Investment and development fund of some provinces to visit
Korea to study their experiences in organizing and managing the banking and finance
system. Moreover, we held many conferences and dialogues with the presence of most
important government organizations many enterprises of Vietnam and Korea to discuss
about credit issues.
-

8 experts from VDB were sent to work in government financial

organizations of Korea (Kexim, KDB and KIEC)


-

Two cooperative research groups was set in order to investigate, evaluate

the situation of export credit services of Vietnam and to define the demand for these
services in Vietnam; and to assess the credit guarantee funds in Vietnam and to give some
recommendations to the concentrative credit guarantee fund model in Vietnam.
Assessment of the success of these activities
Firstly, these activities were a basic for the establishment of Vietnam Development Bank
and Vietnam Export Import Bank, support for set up policies for investment credit and
state export credit, supervisions and reforming of the implementations of investment
credit and export credit after joining WTO
Secondly, the conferences and training courses provided a useful source of information of
VDBs personnel and Vietnamese enterprises to more deeply understand about
experiences of foreign countries and the importance of risk management in banking
system, especially in export import activities, and the process of credit guarantee
services for credit guarantee funds of SMEs.

21

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Thirdly, in 2009, VDB was designated to perform the policies for credit guarantee for
SME following concentrative model as well as current model. The support of Korea
played an important role in the success of these policies. It also created a chance for new
cooperative programs in the future.
However, in the time of implementing the MoU, the activities only concentrated on
sharing knowledge and information, the requirements for practical skills for personnel of
two countries were not met. They did not have chance to analysis deeply the banking and
finance as well as credit guarantee issues.
2.2.2. Memorandum of Understanding on cooperation in October 2009
Contents
On October 22nd 2009, Ministry of Finance of Vietnam and Ministry of Strategy and
Finance of Korea signed a Memorandum of understanding on cooperation in three years,
focusing on the public finance management such as state budget management, treasury
activities, state owed company control, and human resource improvement:
(a) Macro-economic forecast and analysis;
(b) Budget revenue management (including taxation and custom);
(c) Budget expenditure management (focusing on social securities expenditure);
(d) Fiscal policy and treasury policy;
(e) Privatization of SOEs & public institutions management;
(f) International financial cooperation;
(g) Human resources management and organization structure of both MOSF and
MOFV;
(h) Other areas as mutually agreed by the Sides.
Activities according to the MoU 2006
On March 5th 2010, the representative of MoFV and MoSF worked together to get a
action plan for the year 2010 with 3 activities:

22

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

On May 2010: a delegation of MoF was sent to Korea in a study tour about

the experiences in human resources management and organization structure of MoSF


including organization structure, staff recruitment (standards, qualifications...) staff
evaluation, staff rotation, staff retraining program, staff nomination progress, the staff
training including training program, designing the training program, training content/areas,
training methods. Moreover, the MoF delegation worked with the Customs Agency of
Busan to discuss the organization structure of custom agency at centre and region/local
level, and Taxation Agency in Busan to discuss the organization structure of tax agency
at centre and region/local level
-

On July 2010, in Hanoi, MoFV and MoSF held a policy dialogue program

on the topic Post financial crisis policies and foreign investment encouraging policies.
In the conferece, MoFV updated Vietnams Economic of the first six month 2010 and
forecasted that of the last 6 month 2010 as well as post financial crisis policies of Vietnam.
Experts from MoSF and KDI shared their experiences respond to financial crisis and
foreign direct investment inducement of Korea.
-

On October 2010: a training course for 15 experts of MoFV will be held in

Korea about state budget revenue management and privatization of SOEs and public
institutions management.
For the activities in next year, after finishing all activities in the year 2010, two ministries
will have a meeting on mutual agreement of actions in 2011 and 2012 based on the MoU.
Assessment of the success of these activities
Firstly, MoF can learn from the experience of Korea in managing human resources,
defining the personnel classification scale for organizations and departments of MoF,
divide tasks and powers to each individual, supervising and inspecting regularly
individuals work and general tasks of the organizations and departments transparently.
Personnel rotation should be consider carefully to have suitable polices, take advantages
of personal living condition and working condition.

23

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Secondly, the process of staff recruitment, staff retraining, and nomination progress have
to be organized logically, flexibly with the social policies of gender equality, beneficiary
of social welfare, ethnic minority, and talent inducement policy.
Thirdly, the valuable experiences in inducing FDI by focusing on building special
economic zones, exporting processing zone and free trade area, stimulating the economy
recovery after financial crisis.
However, the working program was in very short time with a lot of tasks, therefore, the
contents about human resources management were not analyzed carefully and deeply
enough, the experiences is more theoretically than practically, and it should be reformed
before applying in Vietnam.

24

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

Chapter 3: Recommendations for strengthening Vietnam Korea financial


cooperation relation.
3.1.
Suggestions for strengthening Vietnam Korea financial cooperation
relation
3.1.1. Under

ASEAN

Korea

Comprehensive

Economics

Partnership

framework
Two countries need to cooperate more effectively in supervising, inspecting the
implementation of the commitment. After announcing the legal documents about tax
reduction and tax cut as agreed in AKFTA, Korea have to inform Vietnam soon for the
announcement of these documents in Vietnam, against unilaterally tax cutting and
reducing actions.
3.1.2. Under ASEAN + 3 framework
Chiang Mai initiative (CMI):
In the progress of performing CMI, Vietnam has been negotiating the first USD 1 billion
bilateral agreement with Japan. As this agreement, if Vietnam had financial problem,
Japanese Government can lend not exceed USD 1 billion. Therefore, if we can negotiate a
similar agreement with Korea, it will a lot of benefit to Vietnam.
Vietnam desires to stimulate negotiation the bilateral swap arrangement with Korea
under the Chiang Mai Initiative of ASEAN +3 financial cooperative activities to enhance
the financial cooperation between Vietnam and Korea Government in particular and to
develop the swap arrangement system in ASEAN +3 in general with the participation of
all ASEAN members.
ASIA Bond Market Initiative (ABMI):
ASEAN bond market development is an important content of financial cooperation of
AFMM +3, in which Korea and Japan are the leaders of this initiative. Vietnam bond
market in general and capital market in particular are quite young and weak in the

25

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

development process towards effectively integrate to regional bond market. Vietnam want
to improve cooperative relationship with Korea in developing capital market, especially
the support in technology and exchange experiences in managing bond market.
3.1.3. In taxation and custom sectors
Vietnams Government and Ministry of Finance are implementing the project of
modernization tax and customs system, and we need both support from many countries
not only in ASEAN but also all over the world, in which Korea is the most important
strategic partner for experiences and technology facilitation. Under Vietnam Korea
financial cooperation, we can give some suggestions for their supports as follows:
-

Continuing the MoU on cooperation and support of Customs Department of


two countries in applying information technology in customs operations.

The customs Department of two countries combine against violation in


intellectual property right and unfair trade , including against stolen car traffic,
and tightly cooperate in exchange information about investigating cheating in
trade, applying consistent HS code.

The customs Department of two countries share experiences and profession


skills in drilling special dogs

to improve the effectiveness of in narcotic

inspection activities
-

Providing support for staff in customs department of Vietnam in term of


training course about profession skills in customs operations such as
information processing and risk management.

Holding the conference between representative of tax and custom departments


of two countries to response to the questions of corporate and enterprises in two
countries about the procedure of tax and customs operations as well as ask for
recommendation in setting up tax and customs system.

26

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

3.2.

Recommendations for strengthening financial relation between Ministry of


Finance of Vietnam and Ministry of Finance and Strategy of Korea
3.2.1. Recommendations for implementing MOU 2006
With the success of cooperation in 3 year valid time of MoU, the MoFV and the

MOSF had agreed to expand the MoU with the same contents in two years 2010 and 2011,
focusing on fulfilling the organizational structure and preparing action plan for VDB in
the period 2010 2015; assessing the implementation of investment credit policies,
export credit and state export credit insurance.
To archive these targets in the year 2010 and 2011, we have some suggestions to
strengthen their cooperation as follows:
-

About export credit, two Ministries should have some meetings to exchange

experiences in setting up, organizing and managing policies and credit assessment
procedures of Kexim to apply to VDB
-

About export credit insurance, MoFVs experts will be designated to Korea

in study tour to analysis about capital raising and managing progress, furthermore,
MOSF will send their experts to Vietnam to research on the potential market for
export credit insurance of Vietnam.
-

About investment credit, MoFV and MoSF cooperate in training for

Vietnamese experts about risk management capacity, credit assessment operations


and experiences in raising fund international financial market of KDB and Kexim
-

About credit guarantee fund management, Koreas experts help Vietnam

fulfill the credit guarantee policy system with the roof is VDB
-

Koreas

Government and MoSF support for Vietnam more about the

techniques and information technologies from the experiences of make KDB


become the leader of the economy.
3.2.2. Recommendations for implementing MOU 2009

27

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

The year 2009 is the first year of implementing MoU, although there are some
valuable successes, in the next 2 years, we need to focus on the agreed contents
effectively, in which:
-

Two Ministries have mutual agree on the action plan for each year, diversify

the activities in all agreed areas to strengthening Vietnam Korea cooperative


relation such as issuing government bonds, managing public projects, managing
financial institutions and financial market more effectively.
-

Utilizing the Korea Sharing Program to get experiences in risk management,

capital account liberalization,

research and development activities, capital

mobilization
-

Organizing training courses for practical profession skills for Vietnamese

experts in public finance management and providing technique and information


technology in financial management especially in finance system reform, financial
supervision, macroeconomic, capital market development, opening financial
services, etc.
3.3.

Other recommendations
The mutual benefit in international cooperation is very important. We

require a lot of supports from other countries then we should show them what their
benefits of coming to Vietnam are. The role of the Government is undeniable in
this situation to strengthen the combination of all organizations, especially
Ministry of Finance, Ministry of Industrial and Trade, Ministry of Planning and
Investment in preparing a comfortable for Korean Investment to invest in
Vietnamese market by open and transparent policies in business and investment,
capital and profit movement facilities and strict administrative measures for
ineffective investment. The transportation and telecommunication system also
need to be improved to adopt with new requirement for development. Furthermore,
the advantage of a stable political environment and a diversify culture with large
population would be a factor to attract investors to Vietnam in the next decades.

28

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

CONCLUSIONS

In the progress of international affiliation, establishing, consolidating and


strengthening cooperative relation is the most important issue for all countries, especially
for developing countries like Vietnam.

Recently, in general, although the financial

relation between Vietnam and Korea had some significant improvements with many
agreements and a MoU on development cooperation in 2009, Vietnams Government as
well as other related Governmental organizations should consider to issue suitable
policies and strategy to maintain our relation. In finance and economic issue in particular,
Korea is a good model for Vietnam in developing and managing the economy and
financial organizations, Vietnam can learn a lot from Korean experiences in
macroeconomic forecast, banking finance, corporate finance, export credit, investment
credit, etc. Moreover, Vietnam and Korea need to cooperate tightly to control Tax and
Customs operations. Training courses and exchange programs will be very useful support
of Korea for Vietnam to improve the profession skills in organizing, managing and
processing financial issue in term of global financial market has been fluctuating over
time. Vietnam also needs Korea to share the information technology and techniques to
establish and perfect the banking system, tax and customs regulation system, and financial
statistics system.
To maintain the cooperative relation as well as inducing Korean investors,
Vietnams Government need to have open strategy for investors and businessmen to enter
domestic market, show them the advantages of Vietnam with a rapid growth, potential
market of more than 80 millions customers and s stable political environment. With a lot
of similarities in graphical positions, culture and history, Vietnam will become one of the
most important partners of Korea in Asia and in the global market. Recognizing the
mutual benefit of each party in this relation will be a base to develop the relationship to be
closer and closer in the future.

29

Dinh Hue Phuong HQ A International Economics K46

Recommendations for strengthening Vietnam Korea financial cooperation relation 2010

REFERENCES
1. PGS.TS. Vo Thanh Thu, B 2008, Quan h kinh t quc t, Nh xut bn thng k
2. Ministry of Finance - Finance and Financial Institutions Department, 2010, Bo
co nh gi kt qu hp tc theo Bin bn fhi nh k gia B Ti chnh Vit
Nam v B Ti chnh v Chin lc Hn Quc
3. Ministry of Finance - Personnel and Organization Department, 2010, Bo co
Kho st cng tc t chc cn b ti Hn Quc
4. Ministry of Finance - Ministry of Finance - Finance and Financial Institutions
Department , 2010, Chng trnh thc hin nm 2010
5. Ministry of Finance International Cooperation Department, 2010, Ti liu chun
b cho bui lm vic ca B trng V Vn Ninh v i s Hn Quc
6. Salvatore, Dominick (2004), International Economics

8th

Edition, Donneley &

Sons Publishing House.


7. Ministry of Finance - Banking Finance and Financial Institutions Department ,
2006, Memorandum of Understanding on Cooperation between Ministry of
Finance of Vietnam and Ministry of Finance and Economic of Korea.
8. Ministry of Finance - Banking Finance and Financial Institutions Department,
2009, Memorandum of Understanding on Cooperation between Ministry of
Finance of Vietnam and Ministry of Strategy and Finance of Korea
9. Ministry of Finance - Banking Finance and Financial Institutions Department,
2010, Cooperation action plan for 2010 (Implementation of the MoU between
MOSF Korea and MoF Vietnam)
10. Korea Embassy website, [hanquocngaynay.com], 7/20/2010
11. Ministry of Finance website,[ http://www.mof.gov.vn], 7/24/2010
12. Ministry of Planning and Investment, 2010, Record of Discussions at the 12th
Session of the Joint Economic Committee Between the Socialist Republic of
Vietnam and the Republic of Korea

30

Dinh Hue Phuong HQ A International Economics K46