1.

POLITICAL FACTORS

The Government of Vietnam always maintains stability now and in the future. The country
has the full name of the Socialist Republic of Vietnam, the internal political system is stable
and conflict-free because Vietnam is a one-party state having democratic orientation. The
Association of Asia-Pacific Nations assesses Vietnam as the country with the most stable
political situation in all fields and a suitable place for political activities. This political
environment facilitates the smooth and efficient operation of BIDV, and the bank can
constantly expand the market, diversify products and services, and compete equally in the
domestic market. In particular, in 2019, Vietnam successfully organized the US-Trieu
summit, a special international political event in Hanoi City. This event not only
demonstrates the sustainability and stability of the political system in Vietnam but also
gives the resources to this country to enhance its reputation in the international market and
attract foreign investment into domestic industrial companies, especially the bank industry.
Besides, Vietnam is a socialist-oriented state and can strongly enter the market economy, so
state-owned enterprises like BIDV play a decisive role in the economy, which allows the
bank to receive support from the Government and the State Bank.

The political regime of Vietnam is favorable for foreign investment. According to the Pestel
analysis of Vietnam (2020), Vietnam aims to be a friend with many countries in the world in
spite of the difference in political regimes. Besides, the country has participated in some
organizations, namely the United Nations, Association of Southeast Asian Nations, Non-
Aligned Movement, and so on. Especially, in 2007, Vietnam officially became a member of
the World Trade Organization (WTO), which exerts a profound influence on Vietnam by
attracting foreign investment (Pestel Vietnam, 2011). Moreover, with this success, the
banking industry in Vietnam stands a chance of the management capacity, the quality of
allocating capital, technology level, the quality of human resources, and improving
competing ability. As a result, BIDV has opportunities to access the international financial
market, easily mobilize capital and improve services and products. On the other hand,
Vietnam's policy of integrating the global market creates difficulties for BIDV to fiercely
compete with foreign banks in mostly banking fields, and risks will also increase when
companies and enterprises that are its customers lose.

Vietnam has offered many available tax incentives to encourage foreign investors to invest
in industries in the country. According to Grant Thornton (2020), tax incentives in Vietnam
include corporate income tax incentives, the exemption of land rental fees, and the import
duty exemption for fixed assets. With these special tax regimes, Vietnam creates favorable
conditions for industries in general and the banking sector in particular to receive foreign
investment. Therefore, banks, especially BIDV, can constantly develop banking products and
services, and at the same time expand business markets.

2. ECONOMIC FACTORS:

2.1.GDP

https://www.gso.gov.vn/en/data-and-statistics/2021/01/viet-nam-economy-in-2020-the-
growth-of-a-year-with-full-of-bravery/

Nhan Dan magazine (2020) stated that the growth of Vietnam's economy is steady and
significantly improved, and there has been an expansion in the economy scale. According to
the Government (2020), the GDP growth rate of Vietnam in 2019 is 7.02%, exceeding the
goal set by the National Assembly, while this rate in 2020 sharply decreased and is
estimated 2.91%, the lowest rate during 2011-2020 period. However, because of the
adverse impacts of Covid-19 pandemic, this GBP growth is remarkable, which makes
Vietnam one of the countries with the highest growth rate worldwide (Government, 2020).
Accordingly, in terms of economy scale, Vietnam ranks 4th in South East Asia. Therefore,
the economy of Vietnam has been maintaining outstandingly. This is a favorable condition
for the banking system in Vietnam to continue to develop and expand its market. Thanks to
the GDP maintenance and growth, the quality of Vietnamese's lives is guaranteed, and their
needs for banking services are steadily maintained. Besides, business organizations,
especially small and medium-sized enterprises still operate effectively, which ensures that
BIDV still possess a strong supplier and customer base. Moreover, with great GDP growth in
the context of Covid-19 pandemic, Vietnam created a positive impression to foreign
countries, which is an opportunity for banks to attract more foreign investors.

https://vietrf.com/vi/tang-truong-gdp-nam-2020-cua-viet-nam-chi-dat-48-nhung-van-cao-
nhat-chau-a/
Average CPI growth rate in 2020 (%)

https://translate.google.com/translate?hl=en&sl=vi&tl=en&u=https%3A%2F
%2Fwww.gso.gov.vn%2Fdu-lieu-va-so-lieu-thong-ke%2F2021%2F01%2Fkiem-soat-thanh-
cong-lam-phat-nam-2020-dat-muc-tieu-quoc-hoi-de-ra-duoi-4%2F&prev=search

Inflation rate in Vietnam

https://khoahocdoisong.vn/ty-le-lam-phat-o-viet-nam-xuong-muc-thap-nhat-trong-4-thang-
qua-150842.html

The inflation rate in Vietnam has significant fluctuations in the period 2019-2020. This figure
in 2019 is estimated at 2.24%, the lowest in the period. In the first 3 months of 2020, this
rate increases alarmingly with the highest level reaching 6.43%. However, by the end of the
year, inflation was successfully controlled at 2.98%. According to the General statistics office
(2020), the CPI, the average customer price index, in 2020 increased by 3.23% compared to
2019, reaching the target of the National Assembly of less than 4%. Thus, in general,
inflation in Vietnam is successfully controlled, ensuring the quality of life for people,
contributing to promoting the growth of businesses. Especially, with low inflation rate in the
country, BIDV stand a chance of fair competition with competitors in the domestic market
as well as the enhancement of commercial market share.

3. SOCIAL FACTORS

According to the United Nations (2019), the total population of Vietnam is 97 billion,
ranking 14th in the world. Besides, Vietnam has a golden population structure with an
average age of 31 and 69.3% of the population aged 15-64. This can be considered as one of
the most favorable conditions for BIDV to attract and build a potential individual customer
base, thus thriving the retail market. Moreover, according to statistics, by the end of 2019,
the national poverty rate was 3.75%, the average in 4 years decreased by 1.53% / year, and
the per capita income was constantly increasing (Phu Tho, 2020), which proves that the
poverty rate has decreased sharply, and the rich and middle class make up the majority of
the population. This is an advantage for the banking industry in general and BIDV in
particular because when the quality is improved, the need for card services, payment,
accumulation, insurance, production and business loans and so on are constantly increasing.
However, although the poverty rate is low and the income of the population improves, the
average income of Vietnamese workers is only about 242 USD / month, less than 1/7 of the
region and 1/8 of the world (ZingNews, 2019). In addition, the low social class living in rural
areas, especially in remote, economically disadvantaged areas that do not have the
conditions to access and use banking products and services.

Vietnamese always value effective financial management, and they want to use services
that are useful to their financial resources. Moreover, in the period when Vietnam is
experiencing a remarkable rise in economic development and improved human life, the
optimal solutions related to financial checks are of most concern to most people. This
lifestyle allows BIDV to have extensive contact with customers, enhance advertising and
application of financial products and services into the operation process. As a result, the
bank can increase revenue and attract more customers. According to the BIDV Annual
report (2019), the number of individual customers of BIDV in 2019 is about 10.4 million,
which shows the growth potential of BIDV's customer base. Another Vietnamese lifestyle
that facilitates the development of BIDV is that they are always very excited and sensitive to
digital banking services. This is a strong motivation for BIDV to constantly create and offer
services such as SMS Banking, Mobile Banking as well as many other distribution channels
(BIDV, 2019). On the contrary, because Vietnamese have a habit of using cash and do not
have a deep understanding of the banking system, the demand for banking services is still
limited and the banking environment, therefore, has many risks. According to the Financial
and Monetary market Review (2019), although the usage of payment services is
continuously increasing, the rate of cash reduction in payment is still very slow. Moreover,
customers' demand for product quality is becoming stricter, which causes BIDV to increase
investment in high-quality products, apply technology, marketing activities and capture the
world's banking development to meet the needs of its customers.

4. TECHNOLOGICAL FACTORS

The technology in Vietnam is growing dramatically (Pestle of Vietnam, n.d). According to

Xuan Anh (2020), the fourth industrial renovation in Vietnam is conducted on both the
production and operation processes of business organizations. The Pestel analysis of
Vietnam (2020) recorded that tech parks located at Da Nang and Saigon have provided a
large number of companies with factories and offices. Especially, the country ranks 8th in
the world for information technology services. According to Samuel (2019), Vietnam is
focusing on major segments, namely fintech, E-commerce, education technology, artificial
intelligence, and software outsourcing. These technological advances are a strong
motivation for BIDV to enhance its business effectively. Based on Vietnam's technology
development foundation, BIDV has successfully applied the technology system to the
business process and has achieved many remarkable achievements. According to BIDV's
Annual report (2019), BIDV provided customers with a wide range of advanced distribution
channels, namely Mobile Banking, Internet Banking, Facebook, Web Chat, Youtube, and so
on. Moreover, many modern products were offered by BIDV and its partners, such as
Samsung Pay, QR Pay, modern technology in robots, and artificial intelligence in the
business process. Thanks to these technological advances, BIDV conducted the process of
operating and managing the business smoothly and comprehensively. Especially, the bank
constantly brings customers great experiences, which satisfies the trust of loyal customers
and attracts more new customers. However, because of the strong and widespread
development of information technology, BIDV faces fierce competition with domestic and
international banks. This requires more investment in this field to keep up with the market
trend. Besides, BIDV has difficulty in finding skilled employees working in the technology
sector.

In general, technology transfer is feasible. Fulbright University Vietnam's Nguyen Xuan

Thanh claimed, "The use of technologies and support for tech companies allow an economy
to leapfrog and achieve higher growth in a shorter period". In particular, BIDV deployed a
lot of activities in digital transformation and technology development. For example, BIDV
has signed a contract with KEB Hana Bank on the application of the most modern
technologies from its partners, and BIDV has also built business relationships with Fintech /
Big Tech companies to enhance its customer base (BIDV, 2019). Besides, BIDV and Ernst &
Young Company officially signed a contract to build a BIDV digitalization strategy for the
period of 2019-2025, with a vision to 2030 (BIDV, 2019).

5. TECHNOLOGICAL FACTORS:

In terms of environment, according to Vietnam (2015), climate change and natural disasters
exert extremely adverse effects on Vietnam. Accordingly, two most constant and dangerous
disaster risks Vietnam has suffered from are floods and storms. Recently, these risks have
occurred on a more regular basis, which leads to serious issues to economic development
and people's lives (Vietnam, 2015). In 2020, Vietnamese dealt with a number of frequent
and complex natural disasters, such as 14 storms, 120 floods, droughts and landslides,
causing death, injuries, the damage of houses and agriculture with 39.1 trillion VND of
property damage (Government, 2020). These environmental issues significantly affect the
operation and business efficiency of BIDV. Because of severe consequences of disasters,
BIDV has to follow the Government's policies to customers and citizens (Agribank, 2021). In
particular, BIDV, with other credit organizations, is supposed to stick to circumstances,
evaluate outstanding debt balance, thereby having proper plans for restructuring the
repayment term, exempting or decreasing loan interests, etc. for several customers and
enterprises (Agribank, 2021). As a result, these supports cause BIDV to remarkably reduce
its profits, especially the profit from credit activities (Banking Review, 2020). Moreover, due
to the reduction of financial resources of most customers during disasters, the demand for
banking services decreases, and the bank has to pay more for capital mobilization. 
When Covid-19 epidemic occurred massively in Vietnam, the banking system in general and
BIDV in particular also had difficulties in many aspects, such as daily operational activities,
credit growth, the profit of the bank and bad debt. However, this pandemic also brings
some benefits to BIDV. First, this is an opportunity for the bank to evaluate the efficiency of
business operation and human resources, thereby proposing necessary solutions. Second,
BIDV is motivated to quickly implement the technology transformation and promote digital
services and products. This comes down to the fact that the epidemic prevents customers
and the bank from direct transaction, and the development of mobile banking and internet
banking is proper in this case. Thirdly, the reduction of credit growth enables BIDV to
reduce credit rates in the business, increase service activities and limit potential risks. 

6. LEGAL FACTORS:

Any business organization, financial institution, and business conducting business activities
need the Government's control through legal documents on many aspects, such as
personnel, customers, health and safety, and so on. BIDV, one of the banks in the banking
system in Vietnam, must comply with the following laws:

Decree 88/2019 / ND-CP of the Government on administrative sanctions in the monetary

and banking sector

Decision 1627/2001 / QD-NHNN of the State Bank of Vietnam on regulations on lending by

credit institutions to customers

Decree 117/2018 / ND-CP of the Government on keeping confidential information of credit

institutions' customers

Resolution 02/2001 / NQ-CP of the Government on improving the business environment,

enhancing national competitiveness

These legal documents have a significant impact on the operation and existence of BIDV in
the domestic market. They ensure that BIDV competes in a healthy and fair business
environment, minimizes risks and deficits in the process of operation, ensures the rights of
customers, and fulfills all responsibilities to the Government and State Bank of Vietnam. For
example, according to the Vietnamese inspection agency (2018), based on Decision 1627,
BIDV has been flexible in issuing loan regulations and documents related to credit products.
Accordingly, BIDV has been successful in the bank's risk management capacity for credit
services as well as attracting customers' attention to banking services. Moreover, in
compliance with the provisions of the law on customer information security, BIDV has
implemented its security principles, such as not disclosing customer information if the law
does not allow or without the permission of customers, accessing customer information in
accordance with the law (BIDV, 2018). In addition, thanks to the sanctioning regulations,
BIDV has promptly detected and prevented illegal lending by some individuals within the
bank (Central Internal Affairs Committee, 2020).