Table 1: Policy roadmap

Year Policy Roadmap

1991 Reduce state budget deficit to less than 5%, required reserves to less than 10%

1997 Apply a flexible exchange rate mechanism

2002 Establish Social and Policy Bank

2002 Apply a negotiable interest rate mechanism

2004 Allow the establishment of 100% foreign-owned financial companies

2007 Remove limitations on 100% foreign-owned insurance companies

2011 Remove limitations on 100% foreign-owned banks

Source: State Bank of Viet Nam, 2005

The nature of international integration in financial services can be observed in different ways. It is a
process by which countries and regions become open to the involvement of external elements in
financial areas, including capital (direct and indirect investment), technology, credit, and highly skilled
labor. International financial integration is also a process by which domestic factors enter other
countries2.

International financial integration may be pursued by nations in response to external factors.

International economic organizations or alliances (such as APEC, WTO, or ASEAN) can put pressure
on their member countries, or members may be obliged to follow organizational decisions governing
the opening of markets. As international financial integration is a process of adjusting business
operations, laws, financial policies, and regulations, processes must aim to harmonize and unify both
external and internal elements.

International integration of financial services is also a process of alignment of institutions, regulations,

policies, standards, principles, and laws that govern finance. The essence of the alignment process
lies with different countries commonly agreeing on financial treatments (tax, insurance and banking)
for the benefit of each other’s economic activities. The process is also the result of adjustments made
by the nation and its enterprises. The greater integration is the more practices and common
regulations aimed at uniformity and harmonization of financial policies are required.

International integration of finance is a continuous process, as the driving force behind it is the
development of the scientific, technological and economic powers of a given nation. As these factors
grow, financial integration is sooner realized and reflected in a wider range of aspects, such as the
extent of capital and labor exchanged. International practices increase and develop between the
financial relationships of organizations and institutions.

Finally, international financial integration is a cooperative process. Cooperation between nations

develops in accordance with the need to rely upon one another. However, some uncertainty remains

2
According to GATS, the corresponding “mode of supply” in which services are delivered: i) Mode 1 – “Cross Border” supply
occurs when a service supplier located in one country provide services to a customer in another country; ii) Mode 2 –
“Consumption abroad” occurs when a national of one country travels to another country, where it is then supplied with the
service; iii) Mode 3 – A service supplier is said to have a “Commercial Presence” when it sets up a branch or subsidiary in
another country in order to provide a service there; and iv) Mode 4 – “Presence of a natural person” refers to situations in
which a person travels from one country to another and there provides a service to a customer.