Tr−êng §¹i häc Hμ Néi KHOA QUẢN TRỊ KINH DOANH – DU LỊCH

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Th¸ng 5 – 2010

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh - Du lÞch

Th¸ng 5 - 2010

MỤC LỤC
1. AN EXPLORATORY RESEARCH INTO WALKING TOUR DEVELOPMENT IN HANOI .................................................................................................................. 3
Written by: Nghiem Truong Son (3K-08), Tran Thu Phuong (4K-07) Luu Thi Hoang Oanh, Bui Phan Phuong Thao, Nguyen Thi Thu (2D-07) Supervisor: Nguyen Duc Hoa Cuong

2. ROLE OF AUDIT IN VIETNAM ........................................................................... 18
Written by: Pham Quynh Anh, Nguyen Thi Thu Phuong (1KT-08) Nguyen Thi Lien, Le Thi Huyen Trang (2KT-08) Vu Thi Ngoc (3KT-08), Dang Anh Thu (1KT-08) Supervisor: Chu Huy Anh

3. MANAGEMENT ACCOUNTING: FRAMEWORK AND PRACTICES IN VIETNAM CASE STUDY:NATEXCO .................................................................. 30
Written by: Tran Hong Nhung, Nguyen Thi Hoai Thu (1KT -07) Tran Duy Nam, Vu Phuong Thao, Bui Thi Hai Yen (2KT -07) Supervisor: Do Van Anh

4. ACCOUNTING FOR FIXED ASSETS................................................................... 42
Written by: Nguyen Thi Ha, Hoang Thu Hang Bui Thi Minh Hoat, Le Thi Kim, Dinh Thi Thoi Supervisor: Dinh Le Mai

5. SCIENTIFIC RESEARCH PAPER REPOS CONTRACTS: LAW AND APPLICATIONS IN VIETNAM ............................................................................. 70
Written by: Nguyen Hong Hanh Tran Viet Kien, Nguyen Thi Quyen Supervisor: Nguyen Quynh Anh

6. DANCE WITH VIETNAM INFLATION 2005-2010............................................. 84
Written by: Nghiem Truong Son, Pham Thanh Cong (BA-08) Le Bich Thuy (AC-07), Bui Thu Van (BA-07) Supervisor: Pham Thi Hoa Nhai

7. COUNTRY RISK ANALYSIS IN VIETNAM ....................................................... 98
Written by: Nguyen Thi Dieu Tuyet (3TC07), Nguyen Van Trang (2TC07) Nguyen Thi Bich Phuong (3TC07), Luong Thu Huong (3TC07) Supervisor: Nguyen Thu Huong

8. THE IMPORTANCE OF PHYSICAL EVIDENCE IN SEVICES ORGANIZATION.................................................................................................. 120
Written by: Le Tuyet Lan, Thieu Thi Thuy Linh (BA08) Luu Dieu Linh, Nguyen Thanh Huyen (BA08) Supervisor: Tran Tuan Anh

9. MARKETING AFTER CRISIS ............................................................................. 135
Supervisor: Ngo Phuong Dung Written by: Nguyen Thi Thu, Nguyen Thi Hoa (TR-06) Vu Thi Thin, Hoang Thi Thanh Huyen, Do Thi Phuong (TR-06)

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh - Du lÞch

Th¸ng 5 - 2010

10. COUNTRY RISK ANALYSIS IN VIETNAM ..................................................... 169
Written by: Dang Thu Trang, Nguyen Thi My Hanh (3K-07) Tran Thi Quynh Trang (3K-07), Phung Thi Anh (2K-07) Supervisor: Nguyen Thu Huong

11. GAP BETWEEN ORDINANCE AND SMALL-SCALE RETAILERS’ MANAGEMENT ON FOOD HYGIENE AND SAFETY .................................... 196
Written by: Nguyen Thi Thanh Huong (3K-08) Hoang Thu Ha (CN2-08), Nguyen Thi Thuy (2KT-07) Supervisor: Nguyen Thi Cuc

12. The development of Standby Credit and its application in Vietnam...................... 209
Written by: Le Thi Thu Huong, Nguyen Thi Thanh Nga Nguyen Thi Ha Nhung, Nguyen Phuong Van Supervisor: Phan Thi Kim Ngan

13. BILL OF LADING AND ENDORSEMENT PROCESS ...................................... 225
Written by: Nguyen Van Anh (FB-07) Kieu Thi Thu Hang, Nguyen Le Quyen (FB-07) Supervisor: Phan Thi Kim Ngan

14. EFFECTIVENESS OF INNOVATIVE TRAINING ............................................. 240
Written by: Do Duc Thu (4K -07) Duong Hong Hanh, Nguyen Hai Yen (1D-07) Supervisor: Nguyen Le Phuong Tram

15. ANALYSIS OF THE DEPENDENCE OF TOURISM REVENUE ON THE NUMBER OF VISITORS, INVESTMENT, CPI .................................................. 256
Written by: Hoang Thi Hue, Ngo Van Lung (TR-08) Supervisor: PhD DAO Thanh Binh

16. THE FACTORS AFFECTING STATISTICS FINAL RESULTS OF FMT STUDENTS............................................................................................................ 268
Written by: Pham Viet Dung, Luu Dieu Linh (BA-08) Nguyen Thi Dung (BA-08) Supervisor: PhD. Dao Thanh Binh

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh - Du lÞch

Th¸ng 5 - 2010

AN EXPLORATORY RESEARCH INTO WALKING TOUR DEVELOPMENT IN HANOI
Written by: Nghiem Truong Son (3K-08), Tran Thu Phuong (4K-07), Luu Thi Hoang Oanh, Bui Phan Phuong Thao, Nguyen Thi Thu (2D-07) Supervisor: Nguyen Duc Hoa Cuong ABSTRACT This paper aims to analyze the potentiality of walking tour in Hanoi and find out problems which is needed to improve for further development of walking tour in Hanoi. Basing on both primary and secondary method, the information collected through real experiences of tourists in Hanoi and tourist information center (HaproTic) which are conducted through interview and observe. We also gathered some information about traffic, transportations and attractions in the internet through reliable sources. From those, we can conclude that I. INTRODUCTION Being well-known as a City of Peace and ranked the sixth in top ten most attractive cities in Asia according to Travel and Leisure magazine of the US in 2007, is one the of top ten best shopping cities in Asia, of top ten best city for leisure in Asia by online tourism magazine Smart Travel Asia (2009), Hanoi, a thousand year city, is likely to be an ideal destination for tourists from all over the world. Looking at many neighbor countries such as Thailand, Singapore, Malaysia which have utilized Tourism as an engine to boost their economies, Vietnam generally and Hanoi particularly must take action to make tourism become a key industry soon. Besides many popular types of traveling such as cycling tour, in-seat coaching tour, walking tour could be a trend to develop in Hanoi because Hanoi has many potentials to nurture it. Thus, this paper focus on analyzing some aspects of Hanoi ranging from attractions, transportation, information system… to find out problems which is needed to improve to develop walking tour and also give some recommendations and potential walking tours for further development. II. LITERATURE REVIEW 1. The walking tour concept Nowadays, tourism is defined by most of the countries as the chief industry to develop economy because tourism has become a popular global leisure activity. However to meet the demand of all the customers, tour operators have to create a wide range types of tours in term of tour styles (luxury tours, budget tour) or tour activity types (adventure tours, eco-tours…) and another type of tour which depends on transportation options such as motor coach tours, train tours, bicycling tours… Among them walking tours has become a popular trend for many tourists. Walking tour may refer to either a multi-day trip or a full day or partial day trip of one or more destinations

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Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh - Du lÞch

Th¸ng 5 - 2010

where the primary method of transportation is walking. Walking tour can be led by a tour guide or be self-guided. Your tour will probably involves a morning walk with sightseeing stops, lunch, a longer afternoon walk and dinner (http://en.wikipedia.org/wiki/Walking_tour). Commonly, walking tours take place when distance between destinations is not too long and accessibility for walking tourists is somewhat convenient. By participating in walking tour, tourist can take advantage of seeing destinations in great detail and also saving a large expenditure for transportation. 2. Typical walks in major cities The Classic Walk in Paris (http://classicwalksparis.com/paris/tours/classic-walk) Duration: 3.5 hours Distance: 4 miles or 6.4 km The Classic Walk offers a whole overview of Paris. Virtually most of major sites in the city center are covered: - The Eiffel Tower: the symbol of Paris - Notre Dame: the most famous cathedral in the world - Napoléon’s Tomb: the resting place of the most famous Frenchman in history - Louvre Museum: one of the grandest museum in the world, include the most famous works: Mona Lisa, Venus de Milo…. - Musee D’ Orsay: the museum hosts a world-class collection of Impressionists paintings. - Tuileries Garden: Former Royal Garden in the middle of the city - Champs- Elysees: the most famous avenues in the world. Its sidewalk are lined with café, cinemas, 5-star hotels and shops. The French Revolution Walk (http://classicwalksparis.com/paris/tours/frenchrevolution-walk) Duration: 2 hours Distance: 2.3 miles or 3.7 km The French Revolution Walk will enlighten you to the significance of one of the most important events in modern history. Revive the troubled period leading up to some famous events in France. Fashion walking tour (http://www.paris-walks.com/crbst_6.html) Duration: 2 hours The tour is conducted by the fashion specialists; it is an enjoyable mixture of history, anecdotes, and trivia associated with fashion. The tour guide will show you both famous names and introduce you some lesser treasures. You also can go inside the shops and purchase what you want. Vatican walking tour (http://www.enjoyrome.com/walking/vatican.html) Duration: 3 hours

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historic and natural ones. Peter’s Basilica Ancient and Old Rome walking tour (http://www. Hanoi have many attractions both cultural.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Sistine Chapel .St.2010 The Vatican is one of the most famous interesting and breathtaking beautiful sites in the world. and Chu Van An.Colosseum (interior visit) . The tour will take you to some major attractions as well as some lesser known spots.Du lÞch Th¸ng 5 . Ba Dinh Quarter.html) Duration: 3 hours The tour covers all the well known sites of ancient and old Rome including: .com/walking/ancient. and provide you a broad base for understanding the history.Capitoline Hill . or Vietnam’s first university.Roman Forum (interior visit) . The Temple of Literature was built in 1070 in honour of Confucius. and politics of the Vatican.Vatican Museums . architecture. Ho Chi Minh Mausoleum… Van Mieu – Quoc Tu Giam is a famous historical and cultural relic consisting of the Temple of Literature and Vietnam’s first University. and it was later opened to talented students.Trevi Fountain . Hanoi with walking tour Hanoi – A legendary city with significant collections of major cultural and historical attractions Hanoi – the beautiful capital of Vietnam strategically lies at the center of the triangular basin of the Red River.Pantheon (interior visit) .1010. And it is very potential for walking tour because most of these attractions were located closed to others. and ancient construction such as Khue Van Pavillion. and Worshipping Hall. The site preserves historical vestiges of a 1000 years old civilization such as status of Confucius and his disciples. It original named Thang Long (City of the Ascending Dragon) and was first the capital of Vietnam in A. -5- . we can not forget many rich historic attractions such as Hanoi Old Quarter. Quoc Tu Giam.Piazza Navona 3. It means that tourists can visit these attractions by their feet instead of other kinds of transport Mentioned about Hanoi.D. a moral figure in Vietnamese education. his followers. The highlights of the tour include: . With the 1000 years history and culture and the topography of many lakes and rivers. It was the first educational school for royal family members. Flag Tower. was built in 1076.enjoyrome. Temple of Literature.

The Huc Bridge. One-Pillar pagoda… Quan Su Temple was built in the 15th century under the Le dynasty.2010 Another attraction which is also very familiar and attractive with tourists who come to Hanoi is Hanoi Old Quarter. One-Pillar Pagoda is a historic Buddhist temple in Hanoi. its inner transportation is inappropriate and problematic for designing walking tours It will be difficult for a visitor to enjoy a walking tour in Hanoi without an appropriate transportation system. It is not only diversified but also simple and sophisticated. there are cultural. it was rebuilt afterwards. Today only the temple remains. Truc Bach Lake. as one of Vietnam’s two most iconic temples. Cuisine of Hanoi is also very attractive. It is regarded alongside the Perfume Pagoda. historic and religious buildings and traditional restaurants. Beside those cultural and historic attractions. Pen Tower in the surrounding is a part of the Red river. Now. the Emperor ordered to construct a building called Quan Su (Embassy) to receive foreign ambassadors to Thang Long. According to Hoang Le Nhat Thong Chi. It is a unique antique quarter which represents eternal soul of the city. Tran Quoc pagoda. Hang Dao Street (original was communal house built in XVII.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Hanoi is also very well-known with its religious attractions like Quan Su temple. In 1934. Bun. In Hanoi Old Quarter. the General Buddhist Society of Tonkin was founded and choosed as its headquarters. The temple is designed to resemble a lotus blossom. the Old Quarter still maintains Vietnamese and Asian architecture and creates a complexity of unique architecture. it was named Hoan Kiem Lake (Sword Lake) after the legend of Emperor Le Thai To. which is Buddhist symbol of purity. a mirror-like green lake with Ngoc Son Temple. Two examples of cultural and historic buildings which still remained are 87. However. since a lotus blossoms in a muddy pond. Being a long-standing urban area. in Hanoi Old Quarter. Because those ambassadors were all Buddhist. now has combination of traditional and modern architecture). Red River… Sword Lake – the beautiful basket of flowers inside Hanoi. there are walking streets and night markets which were established to promote walking tour.Du lÞch Th¸ng 5 . The French Union forces destroyed the pagoda before withdrawing from Vietnam after the First Indochina War. during Emperor Le The Tong’s seign. Hanoi is also proud of its natural attractions which mostly are beautiful lakes and rivers such as West Lake. Pho. Sword Lake used to be called Luc Thuy Lake (or Green Water Lake) since the water was green all the year round. It cannot argue that because this is a walking tour -6- . beside traditional buildings. Nowadays. they decided to build a temple on the premises for worship. In 15th century. Com (green rice). Sword Lake. Ma May Street (built in XIX century with old traditional architecture) and 38. In 1954. for example Thanh Tri Cuon Cake.… And it is considered as a attraction to attract tourists come to Hanoi.

It is not a convenience transport for traveler. The bus systems in Hanoi have improved in the past few years but are light years behind Hong Kong and Bangkok and. the research group decided to hang on a banner with slogan “if you love Hanoi. many visitors claimed that pavements in Old quarters are very narrow. in order to walk along a street. One or two researchers interviewed one tourist and took note what he or she said. Besides some main roads for instance Trang Thi.2010 then feet will be the only one means to travel. those are Old Quarters. two surveys and one observation were conducted in two different days and all data colleted are quantitative.000d per kilometer. Too many transports circulation around the street make visitors feel terrible and scared. their likes and dislikes in Hanoi. convenience for changing the route if necessary.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . because they have to negotiate the price beforehand. buses are not a practical way to get around town. However. transportation. both Vietnamese and foreigners. In order to travel to the walking streets. The first survey was carried out on 1 May 2010 from 8. in general. their evaluation about Hanoi attractions. the most important factor that. sometimes they have to walk in the road instead of the pavement. III. and especially about Walking tour. Beside those transports above. please tell me” to attract tourist’s attention first. were randomly chosen to answer various open-end questions ranging from their motivation to travel. Some will be suggested as taxies. a transportation system is developed to add more conveniences for traveler. then -7- . many streets have a large and nice pavement not only in using mean but also in the aesthetic mean. Even this kind of system is much cheaper but obviously it has more disadvantages than taxies. RESEARCH METHODOLOGY In order to fulfill this research. The road system in Hanoi is the second significant factor. 17 tourists. travelers need some transports to take them from their hotels or from airport to Hanoi’s center. Getting around by motor taxies is easy as long as you don't have a lot of luggage. Le Dai Hanh. In the survey we have been conducted. etc which are very huge.Du lÞch Th¸ng 5 . streets in the blocks are small and crowded. First of all. In this survey. traveler can find cyclo. cheap by international standards and a safe way to travel around at night. is pavement. Taxies will be the most useful transport. able to pick up a number of people. In Hanoi nowadays. Besides. It can be easy to order. Basing on experiences from many surveys before. and motor taxies. Average tariffs are about 10. in the streets that almost every visitor to Hanoi will walk in maintain a situation of bad pavement. or hide a motorbike or bicycle to enjoy their moment in Hanoi.30am around Sword Lake in the form of personal interviews.45am to 11. buses.

history and especially Vietnamese people who are very friendly and hospitable that attract them to come back Hanoi. Some stated that they wanted to be here just for relaxation. Hanoi Old Quarter. At the same time. FINDINGS 1. only one-third of them have traveled to Hanoi before. another American journalist who has ever traveled to Hanoi seven times tenderly looked at the research group and said “I come back here because of you”. However. the research group divided into two sub-groups to conduct both a survey and an observation simultaneously from 4pm to 6 pm. some other said they would like to discover Vietnamese culture and history through their travel. nationality. Noticeably. the majority of interviewees were people who approached us first due to their curiosity and then expressed their willingness and happiness to take part in the survey. it is Vietnamese culture. everyone who participated in the survey received small gift that is a couple of Vietnamese in traditional dress. Furthermore. At the end of each interview. Meanwhile. we got very good responses from tourists in this survey. he loved Hanoi Old Quarter atmosphere that was hard to describe by word.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Motivation for traveling to Hanoi Although most of tourists interviewed are repeated travelers. we also played a role a person who need information about some destinations in Hanoi to have short interview with the staff so as to evaluate the quality of information they provided to tourists. IV. In addition to observing. respondents were asked to provide their personal information comprising name. besides questions relating to general information system in Hanoi. another sub-group conducted observation inside Happro Tic center to evaluate attitude and working style of the staff. the research group focused on asking them about their assessment on the quality of information given by this center. Ho Chi Minh Mausoleum. facilities and design of the center. Thus. Right after each survey and observation. no matter what their motivations are. The first sub-group carried out the survey around Sword Lake and in front of Hapro TIC. we also collected many cards and brochures there to appraise effectiveness of these materials. On 11 May 2010. all information collected was entered in database in order to make deep analysis.Du lÞch Th¸ng 5 . Especially for the tourists who were out of Hapro TIC. Temple of Literature. As one Japanese tourist who has been to Vietnam six times and in Hanoi three times revealed. and email address to make valid references for the research. Moreover. West Lake. a free information center in Dinh Tien Hoang street in the purpose of figuring out how tourists evaluate the quality of information system in Hanoi that is one of key factor influencing walking tours. a semi-structure interview with open-end questions was used to collect quantitative data. it is hard for first time tourists to Hanoi to answer the question why they want to travel to Vietnam generally and to Hanoi particularly. Sword Lake. For those who have visited Vietnam several times before. and some -8- . As a result. Once again.2010 asked them to join the survey instead of blocking them on the way and ask for their cooperation.

some respondents who are male journalists and engineer. Attentively. going shopping and enjoying Vietnamese traditional food are favorite ones of many interviewees. Besides. one Japanese tourist could name some well-known Vietnamese food such as pho. those prefer spending time walking around Hanoi Opera house and its environs to satisfy their like to going shopping in Hanoi Old Quarter or in open markets. Further. However. Despite the fact that these products are very nice and Vietnamese. even some gave great praises for authentic Vietnamese food. In addition to some quite popular activities that tourists want to take part in during their stay in Hanoi. some of them asked showed their good experiences on enjoying food from street vendors like Vietnamese people often do. the great majority of tourists asked expressed their preference on traditional Vietnamese dishes. and friendliness of the local people in Hanoi of tourists. in addition to several compliments on attractiveness of many beauty spots. spring roll. it is not surprising that every tourist asked stated that they would like and always come to small family-own shops to enjoy their meals instead of going to luxury restaurants where Vietnamese taste seems to be weaker than the former. It is quite interesting that one Greek journalist revealed bread with pâté in the street was his favorite breakfast everyday in Hanoi. In terms of food and beverage.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Likes and dislikes of tourists in Hanoi Among some common activities that tourists often participate in Hanoi. They love hanging out Hanoi Old Quarter to watch and purchase small handicraft souvenirs such as wooden objects. Thus. toys. vermicelli and grilled chopped meat in Vietnamese. particularly French buildings in Hanoi. brocades for themselves. these tourists expressed their willingness to expose to very Vietnamese lifestyle. there are some comments on keeping public sanitation in Hanoi because they saw many litters scatter on the ground. Interestingly. Therefore. one respondent showed his wish for watching the hand-made items making process when going shopping in order to learn more about Vietnamese culture in more creative and exciting way. This interest possibly pertains to their jobs and genders. of Vietnamese culture and history. In contrast to many foreigners who feel afraid of eating food sold in the street because of hygiene matter. -9- . Hanoi would be more beautiful if both everyone is more aware of keeping environment clean and the local authorities implement stricter regulations to rule their behaviors. This can be a good recommendation for tourism makers to add more value for tourist during their trips. and/or for their families and friends at home. 2. it is strongly recommended by one tourist that different shops had better sell different products in order to make shopping experience of tourists more diverse and exciting. silk clothes. have special interests in learning more about architecture.Du lÞch Th¸ng 5 .2010 Museums where Vietnamese culture and history are deeply reflected are places that they have visited or want to visit the best.

Du lÞch Th¸ng 5 . one tourist even exclaimed “terrible” when he was asked about the signpost on the roads because he did not see any signposts during his stay in Hanoi. one tourist suggested that Hanoi should block some streets suitable for walking in certain holidays in order to give tourists a chance to enjoy their own walking tours without any disturb of heavy traffics. they would like to take part in a walking tour that lasts from 0. some other were willing to participate in a tour that takes 8 hours in maximum or even the whole day starting from the morning until the night. It is Vietnamese people who feel confused when looking at the signposts in Vietnamese because they are simply the names of streets or roads without any arrows that show directions. a small number of them expressed their willingness to combine public transportation means with walking in the trip as provided that they have a good guide. Besides. there is the extreme shortage of signposts on the road not only in multilingual but also in Vietnamese that makes tourists find more difficult in their trips. most of time. After being explained shortly and clearly what a walking tour was. tourists often rely on their guidebooks and personal maps. For this reason. In the respect of ideal time and the length of walking tours. As several tourists complained. A minority of them was willing to travel in afternoon summer when the sun burns less hot. Worthy saying that the poor instruction in bus stops as well as from the board hung on the bus makes Vietnamese travelers misunderstand and lost many times. In fact. the traffic in Hanoi is too heavy. the great majority of tourists asked want to join a walking tour in autumn and spring. all of the foreign tourists asked stated that they completely rely on their guidebook and personal map to find the way.2010 3. However. Even some Vietnamese tourists asked also expressed their dislike in traveling by these modes. especially in the morning when the weather is cool and fine. This reveals that walking tour appears to be a quite new term for tourists even though they have ever experienced it many times or were joining it at the time the survey was being carried out. one Japanese civil engineer gave a comment on improving infrastructure to make traveling on road more smoothly. Opinions on walking tour in Hanoi When being asked about whether they had ever heard or joined in a Walking tour before. -10- . Firstly. foreign tourists travel on foot and sometimes take a taxi rather than using other public transportation means like bus. currently. dangerous and different from their home countries for them to travel. some tourists who used taxi to travel complained that they felt dissatisfied because of being differently by taxi drivers. According to the majority of respondents. Additionally. cyclos or motorbikes to travel in Hanoi because of many reasons. roughly a half of them replied “No” because they seemed to be unclear about what a walking tour was. Actually. For this reason. Thus.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . However. Moreover. Vietnamese tour guides are now quite bad at both foreign language and tourism knowledge.5 to 3 hours per day only. Most of them appropriately thought about traveling on foot without using any kind of transportation during the tour. the instruction of each bus routine at bus stops is in Vietnamese only so that foreign tourists feel very hard to travel by bus.

some Vietnamese traditional folk games such as man chess. For them. in order to encourage tourists to take longer walking tour. Vietnamese two-chord fiddle can be performed around Sword Lake in certain days under the control of the local authority to make Hanoi have more distinctive melody. In addition. they also utilized their guidebook as a direction tool to find the way to the destinations. some tourism websites of Vietnam in general and Hanoi in particular upload too general information about destinations. hotel rooms. Furthermore. firstly. Therefore the information appears too bias to him and he can’t absolutely trust in the information for the tour. Equally important. Tourist information is the main drawback for promoting walking tours in Hanoi Guidebook and website are the main tourist information channels before the trip Among the above problems.Du lÞch Th¸ng 5 .2010 Only one out of 17 tourists desires to join a walking tour at night. During their journey. According to Steven Bugg. it is a good idea if there are different walking tours designed with different themes and itineraries according to seasonal changes and time in a day in Hanoi. Only few tourists have ever visited Vietnam websites to find out information. and Xam singing. using body language is the best solution. a night walking tour with food and beverage theme will offer tourists very great nights in Hanoi. they also base on other sources of information. some of interviewees wish to have their travel partners are the local people so as to learn more about Vietnamese people and have better guidance in some cases. Thus. however they did not highly appreciate quality and value of these websites. for instance their relatives. a tourist from Australia who traveled to Hanoi to visit his relatives. other expressed their want to travel with strangers who may come from different countries with different languages. Next. Especially. Moreover the information is mainly for the purpose of commercial such as selling tours. we tried visiting some tourism websites of -11- . walking on stills may be organized in parks to arouse the image of very traditional Vietnam in the heart of busy Hanoi. To prove for his statement. more entertainment activities bearing strong Vietnamese characteristics like bamboo singing (ca tru performance). This is possibly attributable to the shortage of night activities in Hanoi. Different from some tourists who like traveling with strangers because they are confident in speaking some foreign languages. except for one-third of tourists surveyed is reluctant to travel with kids under 10 or the old people due to their believed that different tastes and health conditions between this group and them may affect their travel negatively. Most of the tourists stated that before traveling to Vietnam. 4. There are some reasons for this. it is highly recommended that besides famous and popular water puppetry performance in Hanoi. and searching on Google. the majority of tourists expressed their readiness to travel with such partners. friends. they only obtained needed information about Vietnam from guidebooks. swinging. the most outstanding issue is about information system for tourists.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Furthermore. most of respondents show their willingness to and interest in learning new things from new friends coming from different cultures. In addition to 30% some of tourists asked love traveling with family and friends. traditional music instruments like monochord.

ticvietnam.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . furthermore all of them are in Vietnamese without translation into English and other languages. www. Hence. the other areas such as Ho Chi Minh mausoleum and West Lake also very popular for tourists haven’t any centers which can support for tourists to find the information.com) which is established in 2006. in the center of Hanoi there is only one center which is located near Hoan Kiem Lake. most of them ignored the center. However. However. In term of signposts system. should keep it better”.vn. most of these sources have not been developed to serve for walking tourists effectively. hotels. when we interviewed to 3 tourists around Hoan Kiem Lake.Du lÞch Th¸ng 5 . these websites only contain some basic information about tourist agency. They lack a very important part about transportation systems which helps tourists to find the way from the destination to other destinations on your own.vn. Hapro TIC -12- .hanoitourism. http://www. This information is particularly important for developing walking tour for self-guided tourists. or local people. While. In our subject opinion. lecturer of Hanoi University said that when he traveled to Paris. Therefore they had to find the way by their own map and guidebook and sometimes they might loose their ways. www. hotels. location of this center is not proper due to the reason that when tourists get off their flights. they are designed and positioned appropriately for all tourists being able to find their way without difficulty. and also read Vietnam guide book online of Lonely Planet to compare the information from two sources. it has contributed a big role in providing tourists with free information and knowledge of Hanoi in particular and Vietnam in general. in Hanoi. they have searched enough information to get to their hotel. As well.vietnamtourism-info.vn.2010 Vietnam such as www. the other tourists complained that they rarely saw the signposts on the road. there are two centers like this: one located in Noi Bai airport and the other located in Dinh Tien Hoang Street named Happro Tic. Provision of tourist information in Hanoi could be improved During their trips.vietnamtourism. Whereas.vn. signposts systems are considered as an important element for the success of these destinations. in some famous destinations for walking tour in the world such as Paris or Romeo. he could find the way to all destinations by himself just by basing on the direction of the signposts.org. information centers. In Hanoi.gov. Actually. signposts system actually is an imperative issue. tourists can base on a variety of sources to search information for their trips such as signposts. restaurants. Mr Steven Bugg claimed that “It is very terrible. Mr Cuong. to Hanoi.dulichvn. all of them said that they have never visited as well heard about the center at the airport.vietnam-tourism. www. therefore they want to come to the hotel immediately for check-in process before doing the other things. the guidebook is possible of providing more detailed information about how and by what means of transportation which can help them to travel from this destination to other destination.com. About Hapro Tourism Information Center or Hapro TIC (www. Another tool which tourists can take advantage of asking free information is the information center. and typical attractions. tour guides. However.gov.com.

The other source of information which tourists can get is from their hotels. free maps. Australia – Mr. Hapro TIC also incurs some problems in its operation process. we also had to spend some minutes to find this center. while its decoration is not outstanding enough to catch up tourists. moreover it is hidden by the trees in front of it which has hampered the service access. Hanoi-based Hapro TIC is mainly composed of an information service section with 2 agents (4 in total with 2 work shifts). its good facilities support travelers to search for information like Internet free access. knowledge and communication skills. and currency exchange service by Lien Viet Bank. All interviewed customers were quite satisfied with the provided effective information or service and want to use it again.2010 has two other centers in Da Nang and Ho Chi Minh cities. Besides. Despite all its strengths. This is also a weakness which needs to be improved more for a better tourism information system in Hanoi to develop walking tour as well as other forms of tours. Hapro TIC in Hanoi also rent its center to other extra services including Hanoi Moment’s souvenir boutique. targeted customers are limited to only Vietnamese. Hence. this center also faces with problem of outside decoration and location. four agents in free information section is a modest number compared to an increasing number of walking travelers to Hanoi. Additionally. Gloria Jean’s Coffees. and stocks of various kinds of pamphlets and brochures. The reason he stood there only because he wants to use free internet of the center to contact with his relatives. Besides. And even us. because the company’s name board is hang up too high compare with the view of the viewers. when we interviewed three tourists around Hoan Kiem Lake. English and Vietnamese are the main languages used to assist travelers. tourists can mistake it with other shops and ignore them. The center place is difficult to be recognized among thousands of shops and stalls on Dinh Tien Hoang Road. free Internet access section. in reality it is only for the purpose of booking tour but not providing free information for tourists. Greg Woods who stood in front of the tourism information center. when we came there to collect information. therefore.Du lÞch Th¸ng 5 . Owing to these reasons. none of them know about this center. Besides Happro Tic. Even when we asked a tourist come from Melbourne. and Vietnam culture and tourism books for sale. however. English native speakers and ESL speakers. tour booking services. it also has a group of English-proficient agents with good behavior. In addition. Hapro TIC provides free information service assists travelers to find information and direction faster.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the tourist who has asked his hotel to get information said that the hotel just provided him with general information and they still had to base on the other sources. he did not know about this center. Asiana Travel Mate’s travel services. around Hoan Kiem Lake there are also some others small stores named information center. attitude. -13- . Furthermore. However. which helps develop Hanoi tourism industry.

there are some recommendations to improve the ineffectiveness of providing information for traveling in Hanoi generally and for developing walking tour in Hanoi particularly. First. information pertaining to taxi price as well as that of other means of public transportation should be placed both in websites and map boards on the roads. Additionally. Next. Moreover. it is students who are major in tourism or culture. then regularly examine their odometers as well as strictly punish lawbreakers to assure the rights and reinforce belief of travelers. Second. French. the Hanoi authority is strongly recommended to require all taxi drivers to post the tariff up clearly. it is necessary to set up multilingual instruction boars and maps at every bus stop to encourage tourists to use public transportation more and more.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Korean.Lack of free information center for walking tourists . information system includes these main following problems: .2010 Conclusions Drawing from the findings. especially information related to events. the large number of signposts with detailed instructions in some popular foreign languages besides Vietnamese such as English. Spanish. parks. RECOMMENDATIONS Drawing from all findings above. In addition to signposts. Furthermore. history from Universities and colleges in Hanoi could contribute to the success of these centers by work there in form of internship. Temple of Literature. in addition to professional staff. museums. it is a good idea to put some big map boards in some places which have large spaces like Tokyo does.Ineffective signposts system both in quality and quantity . German. Hanoi should have more rigid regulations for tour guide qualification. Japanese. there are some problems to develop WT in HN and the problem of ineffectiveness information is the most outstanding one. Spanish. both state-owner and private organizations should join hand to establish more tourism information centers that follow Hapro TIC model around Hanoi. Chinese need to be installed in higher density in order to help travelers locate themselves as well as find the way easily. markets… Further. In order to be a tour guide of Hanoi.Unqualified tour guide both in foreign languages and tourism knowledge V. Chinese besides English only because those from these nations constitutes a large proportion in the total number of tourists to Hanoi now. a person has to receive a certificate -14- . German. Japanese. it is highly appreciated if all of official tourism websites provide more detailed information about traveling in Hanoi to tourists. Equally important. More to the point. especially in places where are highly concentrated by tourists such as around West Lake. activities that celebrate up coming 1000-year-old Thang Long anniversary.Du lÞch Th¸ng 5 . it is better if the staff in these centers can speak some popular foreign languages such as French.Shortage of websites about Vietnam and Hanoi tourism with detailed tips and advice for walking travelers . Korean. In brief.

dirty dust and vendors which a walking tour in day will suffer. Hanoi may also establish a forum for tour guides to update information of Hanoi and to learn more from one another as well. 2. and then visit Ta Hien Street. and To Tich and Ly Quoc Su Streets. A walk through three religions of Vietnam Our first suggested itinerary is “Three integrated religions in Vietnam” tour which introduces history and influences of three main religions in Vietnam. -15- . Hang Bong Street. The reasons why we want to suggest this tour because walking tour in night will avoid many problems like too heavy traffic. etc. Then we move by bus or bike to West Lake area where we visit Quan Thanh Temple (Taoism) and Tran Quoc pagoda (Buddhism). tourists can enjoy Hanoi’s night nosh on Tam Thuong gate. and Buddhism. Hang Gai Street. It is noted that night market in Old Quarter only open on Saturday and Sunday. in summer. 3. Afterward. fried fermented pork roll.2010 that demonstrates both his foreign language skills and tourism knowledge. Hang Gai Street.m. A walking tour for architecture lovers This walking tour program is intended for people in love with Hanoi architecture which is a blend of French and Vietnamese. then to Ta Hien Street. which is famous for beer bars for foreigners. In addition. Temple of Literature (Confucianism) Quan Thanh temple (Taoism) Religions in Hanoi have not been totally discovered and studied. A night walk in Hanoi’s Old Quarter The purpose of this walking tour is to enjoy the peaceful. First. which are cuisine streets of Hanoi. Pho. snack. Tong Duy Tan Street and Cam Chi Street. noodle. VI. Its time schedule is from 8 a. The walking tour will be carried out in the morning or afternoon. Tong Duy Tan Street and finally Cam Chi Street. Specially travelers can take rest time for shopping.Du lÞch Th¸ng 5 . Here you can enjoy baked cuttle-fish. walking tourists can go shopping in night market of Old Quarter. Taoism. Taking part in this itinerary. and entertainment at West Lake area. FOUR SUGGESTED TOUR PROGRAMMES IN HANOI 1. tourists gather in front of Temple of Literature (Confucianism) to discover the first Vietnamese university. It means that this tour will operate on Saturday and Sunday. quiet and glistening atmosphere of Old Quarter’s nightlife and enjoy night dishes in Hanoi. to 8 p. They are Confucianism.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Our tour will have the following itinerary in order: first night market of Old Quarter (from Dong Xuan market and Hang Ngang Street to Hang Dao Street). This walking tour can give travelers unique amazing experiences of Hanoi religions’ philosophies and history. which have potential for main tourism products of Hanoi. the weather of night is better than that of day.m. pickled fruit juice.

com/.html. one of the Vietnam’s most successful chains of silk boutiques which specialize in clothes and other silk products. small ceramics. which is one of the capital's most successful galleries gathering the top-ranking artists from different generations.m. Accessories and Home wares as well as Tan My Design’s own brand. believe that this report can be helpful -16- . The tour program may include some services such as English speaking tour guide. tourists can refer to these websites as follows: http://www. Ho Chi Minh Mausoleum. From the first step. Next. come to Hoang Dieu road where Thang Long Imperal City is located. handicrafts. then to Ngo Quyen Street where The North palace (Bac Bo Phu) are situated. tourists turn to Tran Phu street and travel to Tong Duy Tan Street and Cam Chi Alley by bus or on foot to enjoy dinner. which combines feelings of old Hanoi with modern contemporary architecture and design.m. Next.Du lÞch Th¸ng 5 . and from Phan Dinh Phung road to Hung Vuong road to visit Presidential palace. For more information for this walking tour program. Problems for walking travelers have been deeply analyzed and synthesized to offer you the most insightful view on Hanoi tourism service situation. Unfortunately. The tour will end at Cam Chi Alley.culturalprofiles.2010 Tourists will start walking from Sword lake in Dinh Tien Hoang Street. tourists travel to Vietnamese House on 92 Hang Bac Street for a collection of gems. CONCLUSION In this research report.html. Then tourists can have a chance to visit Khai Silk in 96 Hang Gai Street. 4. due to the lack of human capacity and time resource. To some extent. From Hung Vuong road. Hanoi’s finest espresso. shopping. we would like to portray the general picture of walking tour in Hanoi. and light meals at Tan My Design café. we provided you with our research methodology and the process of finding. especially its information system and effectiveness. street signposts. and One Pillar Pagoda is next door. Walking travelers will begin the trip at Apricot gallery on 40B Hang Bong Street.net/viet_nam/units/683. to 10 a.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .hotels-in-vietnam. http://www. and the final destination is Furniture gallery on 8B Ta Hien Street for furniture products. Meticulous recommendations are also given with the best consideration many factors of information on websites. the report may contain some unavoidable errors or mistakes. VII. Tan My Design features some of Vietnam’s finest designers – Fashion. Vietnam. tourists travel along Tran Hung Dao Street where many French-style buildings exist to Phan Boi Chau Street where they can enjoy delicious lunch in Quan Ngon restaurant. A fashion and art themed walking tour in Hanoi The walking tour is likely to last 3 hours from 8 a. Afterward. http://www. Tan My Design in 66 Hang Gai Street is a new shopping experience in Hanoi. however. etc. we. turn to Ly Thai To Street to visit Hanoi Opera House.tanmydesign. and models of free information center multiply.com/hotels/Travel_Vietnam/shopping-in-hanoi. After having lunch. tour guide qualification. tourists can travel to Dien Bien Phu Street to visit Hanoi Flag Tower Contemplation.

[online]. [online].d. Available at URL: http://www. [online].wikipedia. 2010) No author.tanmydesign. [online]. [online].com/ (Accessed 12 May.html (Accessed 12 May. [online]. “Ancient and old walking tour”. “Fashion walks”. Available at URL: http://classicwalksparis. [online].com/en/ (Accessed 12 May. “Shopping in Hanoi”.com/walking/vatican. [online]. Available at URL: http://www.com/paris/tours/classic-walk (Accessed 10 May. Available at URL: http://travel. 2010) No author. 2010) No author. [online].nytimes.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 2010) No author.gov.com/crbst_6. “Vietnam cultural profile”.html (Accessed 10 May. “The window to Vietnam”. “Vatican walking tour”. [online].com/hotels/Travel_Vietnam/shopping-in-hanoi. “Tourist Attractions”.ticvietnam. n.net/viet_nam/units/683.Du lÞch Th¸ng 5 . Available at URL: http://www. “The French revolution walk”.vn/home (Accessed 10 May. Available at URL: ` http://www. Available at URL: http://www. 2010) No author. Available at URL: http://en.hanoitourism. Available at URL: http://www.2010 REFERENCES No author. 2010) Tic Tourism information center. Available at URL: http://www.paris-walks.com/walking/ancient.org/wiki/Walking_tour (Accessed 10 May. Available at URL: http://classicwalksparis. 2010) -17- . 2010) No author. [online].html (Accessed 12 May.hotels-in-vietnam. Available at URL: http://www.html (Accessed 10 May. 2010) No author. “Walking tour”.html (Accessed 10 May.com/paris/tours/french-revolution-walk (Accessed 10 May.com/frommers/travel/guides/asia/vietnam/hanoi/frm_hanoi_019701000 1. 2010) Frommer “Introduction to Hanoi”. 2010) No author. “Welcome to Tan My Design”.culturalprofiles.html (Accessed 10 May. [online]. 2010) No author. “The Classic Walk”.enjoyrome.enjoyrome.

the purpose of our research is to give a panorama of auditing in Vietnam with scale. the demand of audit in general and independent audit in particular are increasingly higher and higher. some recommendations are suggested to improve the independent audit practices in Vietnam. Particularly. the study focuses on the roles of independent audit in Vietnamese economy. Based on the secondary data. ensure the compliance of the laws. it only concentrate on Vietnam’s external audit. Vietnam’s economy has been rapidly developing with the integration into the world economy. and recommendations to the development of Vietnamese auditing system in the future. Part A: Introduction In recent years. development. Despite being a new profession in Vietnam. Overview of independent audit of Vietnam 1. Therefore. competitive advantages and disadvantages of Vietnamese auditing firms. Independent audit is periodic or specific purpose (ad hoc) -18- . this research gives an overview of the development and scale of Vietnamese independent audit industry. From these points.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Part B: Findings I. Le Thi Huyen Trang (2KT-08) Vu Thi Ngoc (3KT-08). independent audit has made many undeniable contributions to the development of a healthy economy in Vietnam. which is getting more and more interest of public today 1.2010 ROLE OF AUDIT IN VIETNAM Written by: Pham Quynh Anh. then analyze the main roles of auditors to the economy and to other interested parties. Although the profession is still young and still needs a lot of improvement.Du lÞch Th¸ng 5 . Nguyen Thi Thu Phuong (1KT-08) Nguyen Thi Lien.1 Development Independent audit is one of 3 types of audit classified by subject. Dang Anh Thu (1KT-08) Supervisor: Chu Huy Anh ABSTRACT Independent or external audit is playing an increasingly important role in Vietnamese economy. the number independent auditing firms has been rising over the years. Their efforts are to bring about transparent financial statements. which includes State audit and internal audit. and help investors make accurate decisions. therefore. the achievements it has gained and the drawbacks it has overcome. As a result. Not only does it strengthen investors ‘confidence in enterprises’ businesses but independent audit also enhances the managerial effectiveness by providing the managers with advisory. the development and roles of independent auditing in Vietnam. Especially. Overview of the audit in Vietnam Audit is a large topic that the research cannot focus on all sides of the field. our research is divided into three main contents: the overview of Vietnamese independent auditing.

089 333.200 39.616 266. Therefore.384 89.T AASC A&C Deloitte PwC E&Y KPMG 31. 1. now Vietnam audit and accounting company (ASSC).Du lÞch Th¸ng 5 .669 Revenue (million VND) Source: VACPA -19- .2 Scale Top ten audit firms in Vietnam 2009 BDO Vietnam Mazars AISC G.805 37. among other things. Being aware of the important role of independent audit in the development of the economy.113 62.324 273. Its objective is to determine. on May 13 1991 the government decided to establish two independent audit firms. Growth in revenue of Vietnames e independent audit indus try Num ber of c e r ti fi e d a u d i to r s Scale of Vietnamese Independent audit 1500 171 N u m b e r o f a u d it fi r m s 2000 1500 1000 500 0 13 2 1991 2001 2005 2009 Year 531 34 1234 200 150 100 50 0 2500 2000 1500 1000 500 0 1991 B illio n s V N D 2200 108 Certified auditor Firm 622 2005 year Revenue(billions VND) 2009 Source: VACPA Figure 1: Growth in revenue of Vietnamese independent audit industry Figure 2: Scale of Vietnamese Independent audit Two graphs above illustrate the expansion in scale of Vietnamese independent audit in terms of revenue and quantity of firms as well as the increase in certified auditors.41 323. whether (1) the accounting records are accurate and complete. and the results of its financial operations.134 77. which initiated the independent audit practice in Vietnam. (2) prepared in accordance with the provisions of GAAP. namely Vietnam audit company (VACO) and Vietnam audit service company(ASC) according to decision 164-5-TC/QD/TCCB. 19 years has seen the dramatic growth of Vietnamese independent audit in both quantity of firms and auditors force and range of service. and (3) the statements prepared from the accounts present fairly the organization's financial position.130.2010 audit conducted by external (independent) qualified accountant(s). it is necessary for businesses in a market economy that is typical of competition.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

According to these decrees. 2. Violating this condition in 6 consecutive month. the independent auditing law has built and it is going to be passed by National Assembly in May 2010. 2. 23 member firm of international network. in top ten audit firms earning the biggest revenue. legal framework established for ground rules in Vietnamese independent auditing has consisted of decrees and circulars and regulations of the government and Ministry of Finance (MOF). 2) Within 30 days since obtaining operating license. Director or General Director must have 3-year experience of auditing after gaining the auditing license and must not hold administrative or managerial position in other firms. the MOF issued the circular 60/2006 to give the detailed guideline of standards. 5 of them are foreign companies and 5 ones are member firms of international network. the cases that are required to be audited and other things relating to independent audit. audit firms.Du lÞch Th¸ng 5 . In response to the development and growing role of independent auditing. circulars and regulations relating independent audit The Vietnamese government issued decree 105-2004 and decree 30-2009 to regulate auditors. the rest firms are small and medium enterprises. the audit firm must inform MOF of the establishment of the auditing firm and the list of auditors employed by the auditing firm.2010 Currently.1 Decrees. 6 foreign companies. listed companies and securities trading companies. In terms of revenue. While foreign companies account for 55% market share. Vietnamese standards of auditing as well as accounting law. To date. -20- . If the firm is a joint-venture firm or a limited liability company. Legal framework for Vietnamese audit practices. the firm must stop provide auditing service. the MOF has issued 37 standards in 7 batches to offer auditors guidelines and directions to apply. independent audit firms are classified into 3 types: 136 limited companies. conditions to establish and operating of auditing firms. regulations are imposed to control the quality of accounting and auditing service and to select the auditing firms to undertake the audit of the stock issuers. Besides the above decree. and vary in scale. 3) While operating the firm must have at least 3 full-time auditors.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . including Director or General director. Director or General director must own at least 10% of chartered capital. in order for an audit firm to be established and to operate in Vietnam.2 Vietnamese standards of auditing Standards of auditing are basic principles of auditing profession and relations derived from the auditing process. In addition to decrees and circulars. it must meet the following requirements: 1) The firm must employ at least 3 auditors holding the auditing license. Up till now. the validity of audit results. 2. and 6 partnership companies.

the others think that owing to auditing procedure deduction. In terms of positive attitude. 3. 10 times to even 20 times as much as local firms do. However. “these foreign firms. only residual 45 percent of market share is for domestic firms. many foreign companies also keep price below cost.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . “Vietnamese accounting firms mainly serve Vietnamese companies. to kill off local firms. -21- . foreign firms in Vietnam often charge a very high fee. There are many inverse explanations about this situation. while smaller firms serve smaller companies which do not intend to attract foreign investment” (2010. They truly understand characteristics of culture. economic and politics.2010 3. Ernst & Young Vietnam. However. audit giants raise eye-brows with loss report). serve many large multinational companies and together with Deloitte Vietnam.Du lÞch Th¸ng 5 . Pros and cons of Vietnamese auditing 3. it is undeniable that lower price is a competitive advantage of Vietnamese auditing firms. which requires them to make differentiation and build their own brand. Vietnamese auditing system has developed as well as massively increasing quantity of auditing firms. they also have weaknesses that need to be improved. In the opinions of Bui Van Mai.1 Competitive advantages of Vietnamese auditing As the globalization and the integration of Vietnam into the world market. and small and medium scale enterprises. domestic firms are possibly competitive to multinational firms. Low fees cause auditing firms’ losses). This leads to a fierce competition among auditing firms. local firms can reduce their cost to charge lower because of the government’s favor and guarantee. Secretary General of the Vietnam Association of Certified Public Accountants (VACPA). Therefore. saigontiepthi. which have large operation and finance scale. beside tax obstacle. so they can give auditing services such as financial statements or advisory plans under the Vietnamese law and the government policy. After 15 years of growth. hold a 55 percent market share” (2010. Meanwhile. following mistakes in the results. The first superior point is the low fees of auditing services. local firms also understand domestic market more widely than foreign ones. Secondly. Therefore. to the same client. local firms choose this kind of client because they are an expertise in this segment. Vietnamese auditing market can be divided into three segments with three main kinds of client: multinational groups. especially between Vietnamese ones and foreign ones in way of involving customers. big invested Vietnamese companies. KPMG Vietnam and PricewaterhouseCoopers.2 Competitive disadvantages of Vietnamese auditing Although Vietnamese auditing firms are now confident to compete with foreign firms. It is obvious to see that from the option of target customer of the local ones. In one current statistic. Beside the reason of insufficient technique and human resource. foreign firms in Vietnam impose a very high price as taking advantage of reputation from parent companies. Big auditing firms serve big Vietnamese corporations. Actually. Both international accounting firms and foreign auditing firms choose conglomerates. this leads to a loss of VND 96 billion (US 5 billion) of three biggest auditing firms.

technique. Conversely. must have accurate. the managers of the enterprise need honest and transparent information on financial reports to decide right actions in all phases of management. II. international firms have reached worldwide.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . international firms are prospective. local firms are even newly born and developed. monitoring and managing all the business activities. and presentations of financial statement. shareholders…) want honesty and transparency. Furthermore. It means that our firms are in short of quality and professionalism. workshops of professional skills. audit giants raise eye-brows with loss report). “According to the Vietnam Association of Certified Public Accountants. in the programs out of border. one problem is about reputation and prestige. It is also the main way of development in Vietnamese auditing firms for the time going. the business. and reliable financial information. especially financial activities are the combination of the various specific transactions. 1. cash-flow statement. The independent audit companies have highly professional staff to providing reliable information for both internal and external users.owners who are in charge of issuing financial statements want to conceal the loss or weak points of financial results. Only an audit can provide such information: the receipts of capital. income statement. and human resource. Many firms become members of big international auditing firms to have support from parent companies. which operate in all sectors. Meanwhile. On average each auditor has to audit 46 companies and organizations a year” (2010. which makes us less competitive. To improve these main weak points. As a result. All activities. Secondly. Those factors lead to formation of independent audit companies.Du lÞch Th¸ng 5 . Because of many different causes. Role of external audit The market economy requires all enterprises. local firms need to upgrade quality of services. Whereas. It is obvious that business owners cannot control all the thousands and thousands of financial transactions happen in the enterprises. also raising difficulty for Vietnamese auditing firms to gain the market share from foreign firms. The -22- . the regulations and policies from the government always change in the different period of time. All annual results of operation of all enterprises are reflected on financial statements including: balance sheet. For internal users: Audit plays an important role in operating business of any enterprises of various types and sizes. Other firms cooperate to help each other with holding seminars. independent auditors contribute professional guidance and improve accounting activities in the companies. Obviously. Firstly. and the target market is only domestic clients. timely. However.100 certified auditors in the country and just 111 of them have international qualifications. local auditing firms are understaffed as there are only around 1.2010 the gap between local firms and international firms has been narrower. so they are very famous and believable. those who are interested in financial results and financial situations of enterprises (investors.

multilateral investment both not only in domestic but also oversee so the government is very interested in attracting investments from abroad (direct and indirect).2010 auditors’ comments will help business owners to detect errors and violation of law. Those factors lead to lack of reliability and certainty in accounting information. finding the potential business partners.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In the process of preparing and declaring financial information. At the present. allowing the application of various accounting methods and many professional assessment of the subjective view of the managers. understate expenses and liabilities.Du lÞch Th¸ng 5 . profits or maintain market shares. Vietnam is implementing open door policy. there are a lot of problems arising such as benefit contradictions and differences in information using objectives. It is said that the transparency is the most valuable asset to the enterprise itself. Transparency of the financial statements is essential for financial decision making of investors. or make improper use of reserves. accounting standard variation or timing obscurity and so on. 2. thereby also hiding potential bankruptcy of the company. investors really need professionalism and credibility from the third party-independent audit. because investors normally do not have adequate level of profession to understand financial information. For investors Transparency in financial reporting is extremely important especially to investors. obtaining bank loan. The more transparent information investors get the less risk they can encounter. In fact. It not only helps businesses limit the risk but also find out potential financial strengths in the internal business. It can be argued that one of the most reliable resources for investors is independent audit. -23- . To create profitable figures. The reason for this practice is that the company is under pressure to achieve the objectives and plans of revenues. Some common practices the companies often abuse are transactions hiding. etc. These foreign investors always require audited financial statements to evaluate exactly the financial situation of the companies. It should provide a “true and fair view” of financial statements in accordance with an accounting standard. it is difficult to examine whether accounting information is right or wrong. The “create” practice is quite difficult to be detected by investors. Therefore. it will create better conditions for raising capital. The main purpose of an audit is to enhance the transparency of financial situation and management system by providing written reasonable assurance from an independent source. in many cases. Investors would make noise if they rely on dubious financial statements. When a company can be trusted with by investors. Investors make investing decisions based on financial reporting of the companies. they would find many ways to overstate revenues and assets. Last but not least. Even. audit ensures the transparency of financial information of the companies. a lot of companies intentionally make financial statement beautiful by “cooking books” to attract investment or capital. which they intend to invest. Obscure statements also hide the level of debt. business partners. This is not too difficult to implement because the accounting standards are flexible.

3 The transformation of management model and ownership of auditing enterprise The decree 105/2005/NP-CP on independent auditing has exposed some inadequacies. Some typical example can be mentioned are financial fraud of Bong Bach Tuyet Company. and the latest case come from Vinaconex with 263. objective. For many companies. as well as to integrate with other associations in the region and all over the world.2010 In recent years. It helps to ensure the transparency of financial information. professional ethics and service quality control. as of 20. III. the Prime Minister issues the decree 113/2005/ND-CP that -24- . The foundation of the association meets the development requirements of accountancy profession in Vietnam. According to Ms. Trinh Hong Nguyet.vn statistics. General Secretor of Vietnam Association of Certificated Public Accountants (VACPA). auditing and financial advisory services in Vietnam through training technical update courses. The objectives of VACPA are to maintain and develop accountancy profession. Achievements and scandals of Vietnam’s audit 1. due to rapid economic growth. In this situation.Du lÞch Th¸ng 5 .292 billion VND difference between before and after auditing financial statement. 1. improve quality of accounting. they have had negative impact on Vietnam economy and created bad publicity on Vietnamese companies especially the ones listed on the stock market.1 Establishment of the Vietnam Association of Certified Public Accountants (VACPA) The Vietnam Association of Certified Public Accountants (VACPA) is an organization of practicing auditors in Vietnam. Bien Hoa Join-stock company. In summation. which is crucial for investment decision.2 Promulgation of ethical standards in Accounting and Auditing practice Standard of morality is a sensitive concept of any industry existing in society. Achievements 1.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the role of audit becomes more and more important.4. which consists of a variety of rules and guidelines applying the standards of morality for the accountants as well as auditors in order to make the profession of the auditing in Vietnam. the Standard of morality is built to bring the independence. in the field of accounting and auditing this standard is extremely important and required high level. As a result. It also contributes to the consistency of economic growth.Bibica.2009. independent audit plays an important role in public and investing community. Before VACPA’s establishment on 15 April 2005. 1. difference between business operating results was quite large (over 10%). Although these fraudulent were not as serious as the cases of other countries. at least 194 companies have a difference of business results before and after auditing. there are more and more commercial and financial frauds in Vietnam. prudence. information exchange for its members. the principles are the first official correspondence. the Ministry of Finance directly manages and operates all auditing activities. and confidentiality. of 357 listed companies. According to Stox. Declared in December 1. 2005.

4 The formation of website vaa. 1. which are to be applied from this 15 December 2009 and considered to be applied in the country. VACPA has implemented a project “Sample Audit Program” funded by the World Bank. there are varieties of guideline for preparations and mock exams for the practicing certifications available on the website for anyone interested in accounting and auditing. The transformation from stated-owned model to one of the four types above is not only compulsory but also imperative for businesses to improve the management capacity and ability to compete. especially for small companies. timing.Du lÞch Th¸ng 5 .5 Lays of foundation of auditing & accounting in Vietnam according to international standards According to VACPA’s statistics. 1. auditing firms with foreign owners will always be founded and operated as limited-liability model under the Foreign Investment Laws. CEO of Deloitte Vietnam Company limited.vn In March 2007.vn. and extent of essential audit procedures. the website of Vietnam Association of Accountants and Auditors (VAA) was officially online at www. Not only be an official information channel about accounting and auditing in general. Accordingly. objectivity.vn is considered as a useful information resource about auditing and accounting. vaa. executing to finalization. There will be no joint stock company and no state-owned enterprise. it is a relatively complex task. and enterprise under the Law on Foreign Investment in Vietnam. Consequently.100 practicing auditors. there are more than 150 auditing enterprises and 1. Director of Hanoi office of DTL Auditing Company. private enterprise.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . VAA in particular. the Sample Audit Program provides auditing enterprises with a coherent process from start to finish. It specified that auditing enterprises might be established and operated in one of four types of entities. In Vietnam. The Sample Audit Program (“SAP”) is designed to guide the nature. it is a new tool for VAA to manage the practicing of accounting. Hopefully. The scale and quality are quite different among the programs. International audit firms also implement their own audit program. to auditing the financial statements of manufacturing or trading companies. In fact. ranging from planning. According to Ms. based on the revised International Standards on Auditing. but the website also increases the interaction between domestic and foreign companies. In addition. Nguyen Thanh Lam. transparency. partnership. which include limited liability company. Moreover.2010 amends and adds a number of articles in the previous one. As said by Mr.vaa. transformation of ownership types is judged as a crucial step forward for each firm as well as for the general development of audit in Vietnam. It provides a huge amount of updated news relating to the technical areas of accounting an auditing and the entire business community. It satisfies the innovation requirements of the Law on Auditing and the requirement of global economic integration. Ha Thi Thu Thanh. Only a number of businesses develop their own internal audit program. The renovation enhances the independence. the quality of auditing will be improved in the coming audit season 2010 – 2011 with the new regulations. -25- .

In 2007. the earnings after tax of Cobovina was negative 8448 billion VND. in 2007. Scandals Besides all good points are mentioned about. As a result. therefore. Confronting such problems. In exchange for this service.2010 2. use of reserve salary to pay insurance and payment for advertising a new product not included in financial statement.Du lÞch Th¸ng 5 . The punishment SSC gave to the two auditing companies was considered to be unfair and made many investors disappointed. However. Grobest is immune from corporate income tax for four years since its business is profitable and it is subject to 50 percent of tax reduction for the next four years. In 2006 and 2007. according to some experts. which released that the business made profit of 982 million VND.121 billion VND. the corporate must ensure the export of aquatic products and seafood accounted for more than 50 percent in the first year and go up to 60 percent.2 AACC’s illegal consultancy According to the investment license that the management board of industrial parks in Dong Nai province issues. In fact.000 USD and 10 percent of the amount of tax saved if its business had profits from 2006 to 2011. SSC was responsible for disclosing the information without re-checking to affect benefits of the investors. objectively. Bach Tuyet Cotton Coporation (Cobovina Bach Tuyet) shocked all investor by being revealed that the firm had said to be profitable while it made loss.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In 2004. the deep reason of this case was that BBT had provided unfaithful information leading to the mistakes in the financial statement. the financial statements after auditing showed that BBC lost 2. the firm’s export only made up approximately 5 percent. the auditing in Vietnam can not avoid some troubles for recent years. BBC started to adjust some transactions to match the earning from the previous years. BBC required to re-check some items in financial statement for year ended 2006. in 2005. and nearly 42 percent of its total revenue in 2006.1 Bach Tuyet Cotton Corporation’s scandal In 2008. In addition. 2. The edited data was showed on the beginning of the financial statement for year ended 2007. another company took part in auditing the activities of BBCAISC. In 2007. This scandal was revealed in 2008 and the State Securities Commission of Vietnam (SSC) fined BBT 90 million VND and reprimanded A&C and AISC. in order to receive such treatment. However. However. 2. Because the corporate did not meet the commitment. in 2004. 30 percent in 2005. After that. the firm had a loss of 4537 billion VND and stopped operating. a company named A&C was invited to audit the financial statement of BBC. it should not been entitled to treatment. Grobest invited AACC to give them tax consultancy services about petition for Ministry of Finance’s or General Department of Taxation’s ratification that allowed Grobest to be tax-exempt for four years of its profits and be cut 50 percent corporate income tax for the following seven years. Although the auditor from A&C had opinions excluding some terms like the lack of reserve for inventory. and then reach three – quarter of the total revenue. BBT had a loss of 6809 billion VND and in the first 6 month of 2008. when Tax Department of Dong Nai province carried -26- . Grobest had to pay a fee of $155.

Du lÞch Th¸ng 5 .vn”. 2.043.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Sacombank. 2008. there were 357 listed businesses on both Hanoi Stock Exchange and Hochiminh Stock Exchange. A subsidiary of Kinh Do Group also had a large gap between operating income before and after being audited – that is North Kinh Do Joint Stock Company (NKD). there were 47 businesses with the difference rate of more than 50%.376 billion VND to a loss of 60. Sai Minh Company was required to carefully check the auditing process in order to avoid crucial mistakes and insure the quality of its service. 2008 – the director were suspended for 1 year. Tung Kuang Industrial joint stock company and Southern Steel Sheet Company. 2. after auditing Vietnam Construction and Import-Export Joint Stock Corporation (Vinaconex). Nguyen Phu Hien (Auditor card: 0534/KTV) who signed in the capital auditing report of Toan Cau insurance joint-stock company in March 31. According to the decree numbered 17329/BTC-CĐKT in December 10.423 billion VND. AACC also gave tax consultancy services for many other businesses with foreign investment in Dong Nai and some other surrounding provinces such as Taya (Vietnam) electric wire and cable Joint Stock Company.3 Mistake of auditing chartered-capital in 2009 The auditing and consulting Sai Minh was reprimanded because of the mistake it made about the chartered capital of 28. the rate of the difference reached to 8. The Ministry of Finance had shutdown this auditing firm. Another one was Minh Phu Seafood Corporation (MPC). Tran Phuoc (Auditor card: 1049/KTV) who signed in the auditing report and Mr.529 billion VND to a loss of 44. Asia Nutrition Technologies Vietnam. Apart from Grobest. At least 194 of them revealed disparities in business results before and after being audited.2010 out an investigation about tax-exemption and reduction.8 billion VND of the Toan Cau insurance jointstock company in February 28.Kinh Do Corporation (KDC).4 Inconsistency in accounting treatment of some listed companies and vague information disclosure Along with the overall decline of the stock market in the end of 2008.500 percent. with operating income dropping from 39 billion VND to nearly 1 billion VND. Mr. the -27- . which had difference rate of 1. With the difference in after-tax operating income of about 202. pressure of the losses due to reserve of declined stock on the listed firms leads to the inconsistency in accounting treatments among them and among auditing enterprises.602 billion VND). According to the statistics on the website “stox. from a profit of 0. The most noticeable case was the differences in business results of one business of Kinh Do Group . one of the most prestigious firms in Vietnam also had a gap in pre-tax profit of 133 billion VND before and after the audit as well. Up to 20 April 2009.94%. In the case of Nam Vang Corporation (NVC).987 billion VND (operating income declined from a profit of 142. 2009. the truth of the scandal was revealed. Meanwhile. Grobest must pay a tax arrears of more than 36 billion VND and a lot of tax staffs were prosecuted. Most recently. KDC were ranked as the most noteworthy case. As a result.

often the insiders. 2. have had a great -28- . investors. As a relatively underdeveloped auditing system. The role of auditing is gradually gaining appreciation by the public. Due to the lack of professionalism in financial analysis by Vietnamese investors. That is the optimistic signal. auditing has become one of the most reliable resources for public and investing community. the State Securities Commission of Vietnam should introduce sanctions in order to punish the enterprises announcing inconsistent information to manipulate the market. not only auditing but also accounting quality are being managed efficiently and systematically. It only created opportunities for those who grasped the information. outside investors suffered a loss. scandals relating to information disclosure or illegal consultancy are unavoidable.Du lÞch Th¸ng 5 . we need to continue to improve the system of auditing law and enhancing the role and activities of the professional associations to support state agencies to control independent audit practice. One more cause could be the revaluation of the exchange difference among foreign loans. In addition. Mr. to gain high profits. In order to partly solve these problems. In 15-years development. promising a significant development of Vietnamese independent audit. technique. Some weaknesses of independent audit in Vietnam include low reputation and lack of quality and professionalism. almost all industries in Vietnam in general. For that reason. Dinh The Hien stated that the businesses had inconsistent financial information and large differences without any reasonable explanation could not be accepted. and the field of auditing in particular. Conclusion This research is carried out in the purpose of providing an overview of the auditing profession and its important roles in recent years in Vietnam. and enterprises. Recommendation After being a member of the World Trade Organization (WTO). There were a number of reasons that the businesses could rely on to explain for the investors about the differences. promulgation of ethical standards and transformation of management model and ownership of auditing enterprise are also considered encouraging results. A financial expert. Furthermore. it has obtained many significant achievements. One of the outstanding successes of audit is the establishment of VACPA-the Vietnam Association of Certified Public Accountants. Thanks to the foundation of this association.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Part C: Conclusion and recommendation 1. Vietnamese auditing companies own some competitive advantages relative to foreign ones such as low fee and expertise of domestic market. such as the way revenues and costs are recorded in real estate businesses or the way financial investments are set aside in financial businesses. although auditing in Vietnam has faced with many challenges.2010 Corporation’s after-tax profit of the year 2009 fell 97.84% compared with that before the audit. These disadvantages are being improved by upgrading services. and special human resource training.

(Accessed May 16. Firstly.kiemtoan. 2010) “10 Sự kiện kế toán nổi bật năm 2005”. the Government has formed a relatively adequate and comprehensive system of law bringing into play its effects in directing and operating audit activities for nearly 20 years. An auditor must be a member of an auditing association that provides training.vn/2010041805295147CA36/cac-cong-ty-kiem-toan-doc-lap-song-ngam-de-doachat-luong.kiemtoan.2010 number of opportunities as well as challenges. Secondly. Nevertheless. Available at URL: http://kketoan.chn (Accessed May 16. The associations not only accommodate their members with professional knowledge but also manage their quality and professional ethics.com. 2010) “10 Sự kiện kiểm toán. In the field of external audit.vn/uploads/Files/63399277549353903610%20s%E1%BB%B 1%20ki%E1%BB%87n%20n%E1%BB%95i%20b%E1%BA%ADt%20trong%20l%C4% A9nh%20v%E1%BB%B1c%20k%E1%BA%BF%20to%C3%A1nc%C3%B4%20T%E1%BA%A5m. Available at URL: http://www.php?name=News&op=viewst&sid=23 (Accessed May 16. 2010) “10 sự kiện nổi bật trong lĩnh vực kế toán.php?name=News&op=viewst&sid=900 (Accessed May 16.vn/modules.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the system of law should be improved. Available at URL: http://cafef.aspx?SkinSrc=[G]Skins/_default/No+Skin&ContainerSrc=[G]Containers/_default/ No+Container (Accessed May 16.com.doc. Chances to learn and to enhance Vietnam’s audit in the global market are always accompanied by fierce competition of foreign auditing firms. kế toán và thuế nổi bật năm 2008”. the system is starting to be unsuitable up to now.com. Available at URL: http://www. Available at URL: http://kiemtoan. and regulating on administrative violations in the independent auditing field. 2010) “Các công ty kiểm toán độc lập: "Sóng ngầm" đe dọa chất lượng”.Du lÞch Th¸ng 5 . It should be amended by promulgating the Law on external audit and the guidelines.congnghemoi. kiểm toán và thuế năm 2009”. updated information frequently and continuously for them.vn/modules. Vietnam’s administrative structure is still inefficient compared to the organizing and operating structures of the associations in the market economy. Available at URL: http://www. Despite many recent reformations.edu.vn/modules.net/TaichinhKetoan/ChitietKetoan/tabid/1621/mid/4418/ArticleID/10 6262/tid/1588/dnnprintmode/true/language/viVN/Default. enhancing the associations’ operating roles is an efficient solution that may help Vietnam’s audit stronger in the present and in the future. enhancing the role of professional associations can support government agencies to intensify control over the practice of external audit. Hence. updating and promulgating Auditing standards in accordance with international ones. The report gives some recommendations that may help the auditing field of Vietnam will be stronger and synchronized with international standards.php?name=News&op=viewst&sid=1910 (Accessed May 16. 2010) “10 sự kiện kế toán kiểm toán nổi bật năm 2007”.duytan. Part D: References “Chuyển đổi mô hình quản lý và chuyển đổi sở hữu công ty kiểm toán nhằm nâng cao năng lực hoạt động và cơ hội phát triển”. 2010) -29- .

up to now. banks and suppliers. some limitations in Vietnam’s managerial accounting system compared to the standards -30- . Meanwhile. study on framework of Vietnam management accounting under the laws and regulation. there has not had any expertise and experienced consultant organization to give advice and guidelines enterprises to build managerial accounting system. second. From this fact. guiding the application of management accounting in business. in specific. Vu Phuong Thao. it is easy for us to know the main reasons for the hesitance in apply managerial accounting system in the company. a great number of enterprises have not understood clearly and thoroughly about the content as well as the way to set up a management accounting system. 2006. Bui Thi Hai Yen (2KT -07) Supervisor: Do Van Anh ABSTRACT Management accounting (Managerial accounting) has appeared and developed in Vietnam for about 15 years. Recommendations for the company and some suggestions for further research are given at the end of report. our group chose a specific company – Nam Dinh Textile to explore their management accounting system and base on their information the chief accountant provided to define whether this system worked effectively and helped managers in making decision or not. government agencies. most enterprises do not know how to operate a complete and efficient management accounting system. in general. To achieve this goal. and the application in Nam Dinh Textile Company. From that. The recent Decree No 53/2006/TT-BTC of Ministry of Finance was issued on June 12th. 1. or if it has. Moreover. Introduction Accounting can be divided into two fields – financial accounting and management accounting. Our research includes three main parts: first. These two accounting fields contribute considerably to the success of the enterprises. management accounting focuses on information for internal decision makers of a business. Nguyen Thi Hoai Thu (1KT -07) Tran Duy Nam. Financial accounting is used much more popularly than managerial one because it focuses on reporting to external parties such as investors.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Du lÞch Th¸ng 5 . Nam Dinh Textile Company – a manufacturing company was chosen for case study so that we can base on provided information from the company’s accounting department to explore how management accounting system was carried out and whether it brought a lot of benefits for the managers’ decision. the comparison between managerial accounting system in Vietnam and in United States and last but not least. we mentioned about some regulations guiding to apply this system. However. and for the whole company. From this fact. finding the reason why managerial accounting has still not developed in Vietnam is our group’s main concern.2010 MANAGEMENT ACCOUNTING: FRAMEWORK AND PRACTICES IN VIETNAM CASE STUDY:NATEXCO Written by: Tran Hong Nhung. management accounting in Vietnam has not been gained proper attention from the enterprise side. In fact. In this report.

reliable and timely accounting information will aid management in taking managerial and economic decision for the efficient management of the organisation and the attainment of the overall organisational goals and objectives. profit to determine appropriate production index. Management accounting must be done by each corporation under control and instructions of goverments. • break-even point analysis: finding out the point which maximize the profit given the resources. • budgetting: building up budget plans for production and sales. issued by the ministry of Finance. 3. unlike financial accounting which produces annual reports mainly for external stakeholders such as creditors. investors. relevant. we also use the book and internet -31- . 2. raw material and in-process inventory. management accounting generates monthly or weekly reports for the firm's internal audiences such as department managers and the chief executive officer. and may also include trend charts. In Vietnam. Methodology Our research aims at two aspects: analyzing the framework of management accounting in Vietnam and considering its practices in reality. fixed asset and salary methods. The provision of accurate. in the corporation.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Literature review “Management accounting is the process of preparing management reports that provide accurate and timely key financial and statistical information required by managers to make day-to-day and short-term decisions. These reports typically show the amount of available cash. Besides. and other statistics” (http://www. aims as well as framework of managment accounting is regulated in the circular number 53/2006. the applied subjects..businessdictionary. variance analysis. • pricing analysis: determining sales price for products. management accounting also includes other fields such as research on inventory. outstanding debts. First. and lenders. we mostly base on secondary data. both fixed and variable).com/) As can be seen from this definition. as well as cost of goods sold • cost-volume-profit analysis: analyzing the relationship between cost. Management accounting plays a very imprtant role in managerial system.Du lÞch Th¸ng 5 . volume. in order understand the framework of management accouting in Vietnam. state of accounts payable and accounts receivable. amount of orders in hand. etc.2010 in this field of developed countries and the important part about the application in Nam Dinh Textile Company. The process of management accounting refers to different stages such as: • cost analysis: understanding about the material and labor costs(both direct and indirect. The information comes from the circular 53/2206 of the Ministry of Finance and Law on Accounting. Besides. the definition. sales revenue generated.

Summary of Vietnamese accounting law documents: Unlike financial accounting. we asked about her assessment on management accounting and her giving solutions to these problems. liability. organizations and individuals for supplying relevant. These could be Vietnamese enterprises or representatives of foreign organizations on Vietnam. etc… -32- . The practices of accounting include collecting and processing accounting.1.Du lÞch Th¸ng 5 . 53/2006/TT-BTC which guides implementation of management accounting in enterprises. Moreover. These data helps us have a truly look in NATEXCO management accounting so as to evaluate the level of application of it in NATEXCO. chief accountant of NATEXCO on May 12th 2010. Second. tax. Management accounting frame work practices in Vietnam 4. information must ensure the continuity of accounting periods as well as be arranged in a comparable and systematic manner. timely and transparent information in management and administration activities. enterprises. Vietnamese accounting law: Accounting Law was issued in June 17. administrative or non-administrative activities of both state and non state funded enterprises are the main objects of accounting. the subjects of application include enterprises funded and not funded with the state budget. information provided by management accounting is used inside the companies and affects decision making. salary. understandable and accurate data.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . we asked questions about the company history and its products. capital.1. from all economic sectors. 2003 to uniform accounting practices in Vietnam. We designed an interview questionaire and arranged an appoinment with Ms. Its aim is to meet the requirements of State agencies. inventory. and supplying information for internal and external uses to meet the requirements of explicit. 4. However.2010 resources to have more understanding of management accounting in general and its practices in Vietnam particularly. individuals and cooperation. We also requested Ms.1. fixed assets. accounting department and especially different elements of management accounting such as: costs. revenues and expenditure. Items of business activities are assets. keeping track of financial revenues and expenditures. which is proved by the existence of only two legal documents: Vietnamese accounting law in general and Circular No. etc. 4. Hoai. stating Nam Dinh textile company (NATEXCO) as the case study so that our group could examine the application of management accounting to this business. we chose a public company. It is only used outspread in recent years and official documents of government about this field are also limited. pricing. the concept of management accounting is quite new in Vietnam. Hoai to provide us with some accounting materials of NATEXCO in the past through our email (attached in the Appendix). As indicated in the law. In this interview. Collection or spending. Besides.

consolidation. accounting inspections. and ceased the effectiveness of the 1998 Accounting and Statistics Ordinance. Cost- -33- . Circular No. 4. the cost of any unit.2. Based on the implementation of past decision. This is quite important to review the implementation of revenue.Du lÞch Th¸ng 5 . preservation and archival of accounting records. 53/2006/TT-BTC: After Law on Accounting as well as other instructive documents has come into existence.2010 The fields of accounting comprise of financial accounting. capital. cost and profit plans to manage assets. Appropriate contents in the Circular can be used by financial and banking enterprises like insurance company. each organization must organize their accounting staff to meet the requirements of law provisions. dissolution or bankruptcy of accounting units are also taken into the consideration. management accounting is to provide information internally for managers about production and operating activities. Regulations are set about the practice of Accounting vouchers. rights and duties of accountants and chief accountants. work and product is seriously taken into consideration. the Ministry of Finance has promulgated the Circular No. asset inventory. book-keeping accountants and accounting books. the process of management accounting includes the collecting. analyzing and supplying economic and financial information in response to effective management requirements to give the right financial decision within accounting units. The law also indicates how monetary units are used in calculations for both local and foreign enterprises. The content of accounting practices is the most important part of the Law. separation.1. The normal accounting period might be an annual. merge. management accounting. on June 12th 2006. The main contents of the management accounting include: Products’ cost and unit price management accounting. stock and investment companies. The case of division.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . processing. According to the circular. The subjects of applications are enterprises in production. Sales and sales results management accounting. quarter or monthly accounting period. materials. ownership transformation. To be different from financial accounting. For any aspect of management accounting. The law ruled out criteria.53/2006/TT-BTC in order to assist the application of management accounting for manufacturing and trading enterprises. trading and service sectors. general accounting and detailed accounting. corrective actions should be taken to make budget estimation production and other activities. financial statements. Regarding the operation of accounting systems. debts as well as to select information for long term and short term decision. The Ministry of Finance is responsible for guiding the application of accounting practices suitable to each field. The law of accounting came into effect from the first of January 2004. credit fund as well as other financial organizations.

subjects. in the Circular No. these two materials and the book “Cost Accounting: A managerial emphasis” (Horgen C T.Du lÞch Th¸ng 5 . This will lead to differences in contents of management accounting between two. etc as mentioned in the summary of Circular No. mostly definitions.2010 volume-profit analysis. However. the most important part in management accounting.2.which is considered as a source of documents about US management accounting. are mentioned and many methods are listed out. Foster G & Datar S. general.2. controlled and uncontrolled costs. stops at basic points and does not give out needed detail to help companies implement effectively. there is no information about how to apply methods in real condition of companies. Labor and salary management accounting and Debts management accounting. It seems to be vague when mentioning that direct method is used in case costs related to one cost object and the other is to more than one cost object without citing what is cost object to make it clearer and more easily to apply although it is a key word. indirect. Firstly. how to deal with problems met when using and so on. there are two cost accumulation methods namely: direct method and allocation method. these documents still open directions for internal accounting system because they provide basic background information.2. rules. there are the same criteria to classify costs into categories like variable. the terms are used without further explanations and examples to make them more understandable. Differences: However. Similarities: As mentioned above. however. it is almost theoretic because of no example beside complicated guide by words. for instance: in section (1. responsibilities. it is the unequal weight because job costing method is described more detailed than the others which are referred to the names without further explanations about what they are and how to use them. Moreover. 53. main contents of management accounting.2. job costing and process costing methods in these sources are presented similarly. 13th ed. Therefore. 4. Among these other methods. 2008). Production and sales budget. For example: in cost accounting. Comparisons between Vietnam and US management accounting: 4. fixed and mixed costs or direct. are quite similar in term of definition. In addition. 53.2) about cost management. Management accounting of some other items namely: Fixed asset management accounting.1. a lot of theories. advantages and disadvantages of these to help companies choose the ones that are suitable for them. 4. Vietnam’s management accounting is at the early stage of development comparing with US ones. Moreover.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2. Prentice Hall. Appropriate information Selection for decision making. Inventories management accounting. However. units. only two legal documents about management accounting is not enough and will create difficulties for companies to apply because they do not know which method is suitable. so information in official documents is still more theoretic. target -34- .

so formula. inventory. if company’s condition does not belong to these above like: products or services differ greatly in volume and manufacturing activities and/or overhead costs constitute a significant portion of total costs. return on sales and so on. 5. activitiesbased costing. economic value added. labor and salary. break-even point. nothing about advantages and disadvantages of all methods as well as steps and proper conditions to apply exists in this circular. cost-volume-profit analysis which requires calculating contribution margin. or batch of products cost separately while process costing is done when production involved continuous process of similar items and cost assigned according to set periods of time. is considered one of the oldest companies in Vietnam. Furthermore. job costing is used for unique products and for custom orders when each job. After all. Ngo Quyen. However. “Nam Dinh textile” -35- . debts due to lack of detailed explanations and guides. format and application should be added to make a standard. are not. Taking job costing and process costing as examples. this state must be reconsidered due to the fact that performance measurements will point out the effectiveness of the business in financial and non-financial results in order to have prompt adjustments. They are balanced scorecard and accounting-based ratios namely: return on investments. founded in 1920. product. cost structure. If it is not used. From Vietnam’s liberation in 1945 up to now.2010 costing. information selection for decision making. it has been the member of The Vietnam National Textile and Garment Group. In addition. coefficient costing and cost exclusion basing on secondary products costing methods that are unpopular are mentioned while a much more accurate method. operating leverage and so on is a crucial in management accounting. Nam Dinh city. However. not according to specific jobs. with the role of the flagship of textile and garment industry in Vietnam. In the past. The head office is located at 43 To Hieu. residual income. Case study: Application of management accounting in Nam Dinh Textile one member of state responsibility limited company (NATEXCO) 5. The company came into being by French when they invaded Vietnam in order to exploit the country’s resources.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Du lÞch Th¸ng 5 .1 Company background: HISTORY Nam Dinh Textile company (NATEXCO). It is known that to have an effective management accounting in this newly integrated period of Vietnam it will take a long time to help Vietnam government together with companies approach gradually and develop to improve entire system. It is also the same cursory situations for sales and sales result management. companies will not know how well or bad they did and something not good might happen. one area that is very necessary but received little concern or even ignored in management accounting in Vietnam is performance measurement because its importance may be assessed inappropriately or offset by its costs. budget setting and costing for fixed assets. activities-based costing method should be considered because it provides an accurate but high cost measurement.

The director is Mr. Exported to Japan Include: Kaki.. Cotton. European standard.000 products Characteristics Pe/ cotton or cotton (Average indice: Ne 32) Company’s traditional products Made from Australia and New Zealand lambs’ fleece. real estate and construction. garment products and other services.000. etc.2007).). the government made suitable adjustments to operation and management of the company. 5.). in 2005. At the end of 2007.000 meters 2. 2005). Aiming at saving the company out of its recession. when Vietnam economy stepped into the new stage of innovation and intergration. Petex Others Output (per year) 100 tons 300. Include: trousers. since the company’s reformation in 2005. due to outdated machines and management system. Photo 1: Nam Dinh Textile Company in the early 1920s (yahoo. The table below lists NATEXCO main garment products in term of output and characteristics: Products Fibre Visco Rayon Tuytsilen Pe/Co. store services. NATEXCO has been specializing in producing fibre. etc. It made NATEXCO face up with huge bad debts that the company could not pay back to the debtors. with 133 billion VND of charter capital according to QĐ 185 signed by the prime minister Nguyen Tan Dung (Linh S.. the Hanoi Securities Trading Center undertook auction sale of 2. Accompanied with this change. (source: vnnet. such as: hospitality (restaurants.2010 used to be a famous brand within the country.2 Mangement accounting in NATEXCO -36- .com) Since the establishment. Caro.Du lÞch Th¸ng 5 .000. Garbadin. hospitals. 2005). transporatation (accomodation cars. Dao Quang Hiep. NATEXCO has been investing in some other industries. Nam Dinh textile company was changed into Nam Dinh Textile one member of state responsibility limited company. etc. At the same time. Vietnamese government had an effort on writing off a bad debt of NATEXCO. jackets.000 meters 2. etc. The company contributed a lot to development and income of the whole country in the very early time after independence.000 meters 800. chemises..930.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the company expanded its operation to new fields beside textile industry.000 shares (par value at 10000 VND/ share) (Kiều M. the company was unable to catch up with other foreign competitors. equalling 222 billion VND (Duc T.vn) What is more. However. In July 2005. cloth.

sales. Therefore. They gather and allocate direct material costs. they adjust the difference between actual overhead costs and estimated ones. Budget is a formal written statement of management’s plans for a specified time period. expressed in financial terms. RELATIONSHIP AMONG COST. Moreover. Under allocated method. Besides. The reason. Under direct method. these following studies are still not available. the cost incurred involved in many cost subjects. human resouces of these practices are very limited in term of skills and time to do such practices. cloth and garment products. the cost incurred only involved in cost subjects such as fibre. BUDGETING Firstly. the factory estimates overhead costs of each task and each product at the beginning of the period. volume and profit relates to three very important factors: sale price. accounting department in NATEXCO assigns the price of each product not basing on break-even point analysis but basing on determining the price that can make up for the costs and get the expected profit. VOLUME AND PROFIT Studying on the relationship among cost. Accounting departmant has not done research on break-even point as well as having a deep understand about these three factors yet. It is said that budgets are an integral part of management control systems because of some benefits it brings to the firm. and planning again.). The cost object of the factory is a finished product. is mainly because of lack of the cost for these activities. investigating variations from plans. understanding the relationship among these involve in analyzing the break-even point (in term of quantity. stated by the chief accountant. it is also one of the -37- .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . each particular product or a group of products. considering feedback and changed it. providing a set of specific expectations. quantity and cost (both fixed and variable). then at the end of the period. it is important to understand what budget is and how it operates as well as its importance to managers’ decisions. in Nam Dinh Textile company. Besides.Du lÞch Th¸ng 5 . the factory allocates costs into machine hours directly. time. Besides.2010 COSTS MANAGEMENT The factory applies both direct method and allocated method in term of cost accounting. Doing this way can help NATEXCO minimize the differences between actual overhead costs and estimated values. Its cycle includes four steps: planning the performance of the organization. Nam Dinh textile caculates the costs of goods sold in monthly period. Monthly is an appropriate time because the company’s production takes place in a small scale. So. The method of calculating cost of production which company is applying is according to types of products and tasks. With this allocated method. direct labor costs and overhead costs for each seperate task. However. which is very important for manager to make right decisions about future production and sale process. It helps to build up association and promote communication among subunits within the company. Moreover. they can record expense quite exactly correspondent with production level..

In fact. It is obvious that the main objective of management accounting is to provide meaningful information so that the managers can base on this information to make decisions and fulfill an organization’s goals. As mentioned above. FIFO the highest and weighted average an amount in between. This will help managers to define methods to explore these fixed assets in an effective way and consider investing in new fixed assets. they will work harder to achieve it. Nowadays. As provided. salary and debts. The chief accountant of this company explained that budgeting is a time – consuming process that involves all levels of management. It can be explained when the executives set achievable goals for their subordinates. One more advantage is motivating managers and other employees. especially manufacturing company like Nam Dinh Textile Company. -38- . the company needs to determine the accounting method to calculating inventory. Actually. there are still some challenges existing in administering budgets. MANAGEMENT ACCOUNTING FOR OTHER ITEMS Management accounting also concerns some important items such as: fixed assets. each unit works separately and association among departments is limited. everything is changing so fast and unexpected situations can happen anytime. machines and means of transportation like truck. which makes many medium and small – size companies in Vietnam hesitate to use it. inventory is an important item for the company. These are the reasons the top management of Nam Dinh Textile Company decided not to use it until now. as can be easily understand that the company needs to adjust plans in accordance with conditions changes. It is the reason why management accountant does not have enough and quality information related to using fixed assets to provide proper advice for manager. cost of goods sold as well as purchase and sales units. the main fixed assets of Nam Dinh Textile are plant. Moreover.Du lÞch Th¸ng 5 . Nam Dinh Textile Company is among them. management accountant needs to show the effectiveness of using and managing fixed assets of each unit and the whole company as well as the demand for using these fixed assets. association is one of the benefits when applying management accounting. to organize management accounting in term of the quantity and value of beginning and ending inventory. in this company. FIXED ASSETS In term of fixed assets. the provided information about inventory has helped managers a lot in making decision about which inventory items the company should purchase more and which buy less as well as the effect of price changes on sales revenue and cost of goods sold. INVENTORY Secondly.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2010 effective tools to evaluate employees’ performance by comparing the actual quantity with the planned one. this company applies weighted average method. However. It is learned that LIFO results in the lowest income. However. As chief accountant’s answer. inventory. workers who directly operate machines and truck understand more clearly about the effectiveness of these fixed assets than management accountant does. To do that. One of the objectives of managing inventory is to establish list of materials and more importantly.

Actually. budgetting – a very important stage in management accounting – is not yet undertaken.2. Hoai considered that the company has paid higher amount than the level the government regulated. Textile industry is not an exception.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . The lack of these very important steps in management accounting is partially able to explain the inefficiency of NATEXCO’s management accouting as the chief accountant’s comment. about liabilities. the amount. According to the chief accountant of NATEXCO. social assistance. enterprises establishes standard costs of raw materials. Circular 53 of Ministry of Finance to guide about management accounting. However. -39- . payment date and the quality of debts. the company does not analyze the relationship among cost. as Ms Hoai said that the company does not follow this regulation about payroll scale. however the company does not budget for any items including inventory. SALARY Salary is also one important concern of enterprise. which can be seen from liability ledger. 2009. However. LIABILITIES Lastly. articles 6. Meanwhile. so it is hard to ask about the specific amount salary this company is paying for their employees. accountant looks at timekeeping table. Therefore. Payroll scale of this industry includes six levels and is divided into three groups depending on the hardness level and the complexity of the job.Du lÞch Th¸ng 5 . She said the company used these scales to calculate insurance. accountant has a liability ledger to record the detail information such as debt holders’ name. This information provided by accountant helps managers to consider carefully about liability policy: tighten of flexible for each kind of customers depends on their reputation. Ms. In fact. it is necessary for the company to assess the performance of management accounting carefully and up to date new regulations to complete an effective decision making system. they calculated salary based on each product and job the workers had completed. quantity and profit as well as not figuring out break-even point. the managers in NATEXCO can not base on information which is brought to by management accouting to make right decisions to the company. As can be seen in NATEXCO. Salary is sensitive issue. payroll scale of each industry has stated in Decree 76/2009 applied from November 1st. Moreover. this company calculated bad debts according to debt time of each debtor (typical a year). materials for each product and set up the reserve level for each list of inventory.2010 As stated in point c. PERFORMANCE EVALUATION Management accounting in Nam Dinh Textile has not been paid much attention and has still been disregarded. To evaluate the performance and contribution level of each employee to pay salary.

Secondly.Du lÞch Th¸ng 5 . For example. Then they can find out their strengths. volume and profit from production and sale activities in operation progress of the factory (monthly.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . reduce manufacture cost. the company should evaluate the performance of management accounting after a Photo 2: NATEXCO now (namdinh. Conclusion and limitations Our research has a look at the management accounting in term of framework and practices in Vietnam. First of all. when comparing between Vietnam and United States management accounting. Thirdly. 6. the director and the other managers should pay attention to norm plan so as to link all the departments. resulting in very bad quality of information. -40- . Finally. the company should search the content and method to set up the budget for all categories. there are many books that write about this topic because the practices of management accounting are very various. adjust appropriately with their conditions and economic condition in each period. the information submitted to manager will be adequate and precise. our reference of United States framework mostly base on the book “Cost Accounting: A managerial emphasis” (Horgen C T.volume – profit or beak-even point models. the company should establish one department to research on the relationship between cost. In reality. As a result. Due to lack of time resource and human resource. Firstly. there are many issues which still exist. Second. Foster G & Datar S. they should flexibly apply budgetting. performance measurement is not good enough or companies do not pay much attention on research on cost. Moreover. the company should carry out deep analysis of breakeven point to schedule manufacture and business plan appropriately. the result from NATEXCO case study only does not fully reflect management accounting practices in Vietnam. or diversify products.3 Recommendations: After analyzing the framework of the management accounting in Vietnam theoretically and the application of management in one of state company named NATEXCO. 2008). The issues often arise when Vietnamese companies apply the goverment regulations into practices in reality. their weaknesses of their performance and overcome these drawbacks. they can find out methods to maximize profit. Thus. we would like to give some recommendations to improve the efficiency and effectiveness of practices of NATEXCO management accounting. 13th ed.vn) fixed period of time (quarterly or yearly). we can not undertake a survey on different companies in different fields. quarterly and yearly). Prentice Hall.2010 5. our research has some drawbacks.gov. From that. Besides. After the study.

available at URL: http://www.. M.vnexpress.2010). Nam Định xưa và nay [online].2010). REFERENCES “Managerial accounting” [online]. Khấu hao và các phương pháp tính khấu hao tài sản cố định [online]. available at URL: http://www. 13th ed. S.saga.saga (accessed: May 18.gov. Linh. and Datar S.saga (accessed: May 16 2010).html (accessed: May 18. X.referenceforbusiness. 2005. Trường.htm (accessed: May 16. N. T.aspx?portalid=1&tabid=336&itemid=5634 (accessed: May 18.com/ (accessed: May 16. 2010).html (accessed: May 16. We suggest further research on analyzing deeply drawbacks of Vietnam management accounting and figuring out worthy solutions to complete the famework and upgrade the effectiveness in management accounting operation in companies in Vietnam. there might be something that may conflict among the book.businessdictionary. available at URL: http://www. Nga. available at URL: http://vneconomy. 2010). 2007.-bang-luong--Quydinh-va-huong-dan-xay-dung. Khai.vn/Default. “Đề nghị xoá 222 tỉ đồng nợ cho dệt Nam Định” [online]. Business dictionary [online]. 2008.net/GL/Kinh-doanh/Chung-khoan/2005/07/3B9E0649/ (accessed: May 16.saga.Du lÞch Th¸ng 5 . Circular 53/2006/ TT – BTC [online]. “Doanh nghiệp khó tuân thủ bảng lương” [online].com/ke-toan/tai-san-ngan-han/phuong-phap-tinh-gia-xuat-hang-tonkho-ph. Horgen C. available at URL: http://vnet. The Vietnam national textile and garment group [online].htm (accessed: May 16.vn/c76/s76-87209/de-nghi-xoa-222-ty-dong-no-cho-det-nam-dinh.tapchiketoan. Vietnam accounting law [online].2010 Therefore.com/upload/ducha/Luat_Ketoan_170603. 2010).net/default. available at URL: http://ketoanducha. available at URL: http://w13. “Cost Accounting: A managerial emphasis”. 2006. available at URL: http://namdinh.2010). Đ. “Lịch sử tiến hoá của kế toán quản trị” [online]. K. 2010). Kiều.mof.vn/65406P7C642/det-nam-dinh-dau-gia-gan-3-trieu-co-phieu. available at URL: http://www. 2005.vn/index. Chi. available at URL: http://www.vietnamforumcsr.pdf (accessed: May 15.kiemtoanvietnam. Q.vinatex. available at URL: http://www. available at URL: http://dantri. 2010).php?option=com_content&view=article&id=321:thongt-532006tt-btc-hng-dn-ap-dng-k-toan-qun-tr-trong-doanh-nghip-&catid=81:k-toan-kimtoan&Itemid=122 (accessed: May 15 2010). The ministry of Finance [online].vn/Taichinh/Ketoan-Kiemtoan/Ketoantaichinh/4652.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . leading to some not exact analysis on management accounting which are in practices in United States.com/ (accessed: May 16 2010).vn/Business/?b=395 (accessed: May 16. Foster G. available at URL: http://www.2010).vn/Taichinh/Ketoan-Kiemtoan/Ketoanquantri/12664. “Dệt Nam Định đấu giá gần 3 triệu cổ phiếu” [online]. 2008. T.html (accessed: May 16 2010). “Hệ thống thang. “Dệt Nam Định thành công ty TNHH” [online].com/ encyclopedia/Man-Mix/Managerial-Accounting.cpoclub. Phương pháp tính hàng tồn kho [online]. 2009. 2010). Công ty cổ phần dệt lụa Nam Định [online]. available at URL: http://www.gov.vn/ (accessed: May 15 2010).com. 2010).. -41- . L. 2007.net/news_detail/181/He-thong-thang. available at URL: http://www. Duc.aspx?TabID=735 (accessed: May 16. available at URL: http://www. bảng lương: Quy định và hướng dẫn xây dựng” [online]. Prentice Hall.

share a lot of similarities to IFRS. The accounting for fixed assets. In continuing its way to harmonize with international financial reporting standards. On talking about the differences between Vietnamese accounting standard and international accounting standard or IFRS the question arising is “how to help students who study in international university or foreign accounting practice in Vietnam aware about Vietnamese practice?” The answer to the question is also the purpose of this paper. some comparison with the international practice as well as examples will also be made. Introduction Accounting for fixed assets seems to be an important practice for every company all over the world because fixed assets often take up the largest percentage in a firm’s asset. As firms expand their business with a larger scale. Dinh Thi Thoi Supervisor: Dinh Le Mai Abstract Accounting for fixed assets seems to be of growing concern for almost every company in the world. examples will also be given to help a deeper understanding of the reader.2010 ACCOUNTING FOR FIXED ASSETS Written by: Nguyen Thi Ha. therefore. the practice to accounts for fixed assets under Vietnamese accounting standards will be gradually analyzed in this research. and equipment. The so-called Vietnamese accounting standards. There are still some variations due to the certain conditions and development of each country. the variations still exist. plant. although. VAS has had some changes reflected in many other decrees or circulars over years to reach to the common standards. under VAS fixed assets can be divided into two forms: tangible fixed assets and intangible fixed assets. The accounting for these two main types of fixed assets will be gradually presented as below. In addition. there exist some variations between the accounting for fixed assets under Vietnam Accounting Standard and International Financial Reporting Standards. the variations are possible but the whole still share a lot of similarities to the common standard. especially students who are studying international school in Vietnam be aware of the accounting practice in both international scale and country scale. However. In this paper. the procedure to account for fixed assets under Vietnam Accounting Standards will be analyzed. most of the countries’ financial reporting practices are based on a common standard referred as “International Financial Reporting standards” (IFRS). fixed assets tend to grow correspondently. -42- . More specifically.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the practice is not alike for every country. I.Du lÞch Th¸ng 5 . However. To make the situation clearer. cannot be ignored because it helps firms to manage their assets effectively and efficiently. Generally. While under IFRS fixed assets are often referred to property. Le Thi Kim. Due to certain condition and policy of each country. It is hoped that this paper will help foreign investors. Hoang Thu Hang Bui Thi Minh Hoat.

plants. 203/2009 TT BTC dated 20 Oct 2009 by the Ministry of Finance) Definition: Fixed asset is assets in the physical forms (tangible fixed assets) or value form (intangible fixed assets) to perform one or some particular functions in the operation and business activities of the company. (More details given in part “Intangible fixed assets”) 2. Criteria to recognize tangible fixed assets: . they shall be accounted as separate tangible fixed asset. b. + Other tangible fixed assets .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Major accessories and maintenance equipment can be determined as tangible fixed assets when their useful lives last for over 1 year. 206/2003/QD BTC dated 12 Dec 2003 and circular no. the enterprise should apply the above criteria on a case by case basis.Historical cost is measurable .Tangible fixed assets: +Houses.Useful life is estimated at more than 1 year . Fixed assets used for operation process of enterprises. may be consolidated and apply the criteria of tangible fixed assets to such aggregate value. in conformity with the criteria of tangible fixed assets a. Intangible fixed assets: all fixed assets satisfy the above 4 criteria but not in the group of tangible fixed assets.Future economic benefit is probably obtained . brand name. patent. Accessories and auxiliary equipment are often considered as movable and thus accounted as expenses. Fixed assets in enterprises 1. Classification of fixed assets: a.Du lÞch Th¸ng 5 .2010 II. fixed asset has big value and usable in a long period of time. architectural objects + Machine. In each specific case. When determining the components of tangible fixed assets.Its value is equal or greater than10 million VND Note: IAS or IFAS does not have the forth criteria in determining tangible fixed assets. total cost of tangible fixed asset may be allocated to their components and separately accounted for each one. -43- . If they are only used in association with tangible fixed asset irregularly. capitalized and depreciated over the period shorter than the life of related tangible fixed assets. . animals yield products and labor for humans. Definition and criteria to determine (According to Vietnamese Accounting standard. supplemented by Decision no. trade mark. Separate parts. such as tools and swages.Intangible fixed assets: land. equipment + Means of transportation and conveyance system + Managerial tools + Perennial tree garden. This is applied in case when each component of an asset has different useful life or they contribute to create different economic benefits to the firm.

000 VND. their historical cost must be accounted at the purchasing price promptly paid at time of purchase. registration fee. -44- . then the cost of assets must be determined separately with the cost of land. 3. Determination of acquisition cost of tangible fixed asset In conformity with the regulations. Fixed assets the company stores for other divisions or for the Government are classified in conformity with the common regulation. increase or decrease of tangible fixed asset should be reflected in historical cost. property tax: 200. transportation cost: 100.for –use condition or position.1 Historical cost of tangible fixed assets a. Example: Company A exchange a machine A (15 million VND) for a dissimilar one B (18 million VND – reasonable value). Example: Hoa Phat company buys a machine at the price of 50 million Vnd. installation cost is 2million. Tangible fixed assets purchased from exchange form Historical cost of a tangible fixed asset purchased in the form of exchange for a dissimilar one or other assets can be determined = the reasonable value of the received one + taxes+ attributable expense to put the assets into ready use.2010 b. transportation. In case. in all cases. procured tangible fixed assets are paid by deferred payment method. Fixed assets the company uses for social welfare. except in case that difference is accounted into the historical cost of the tangible fixed asset according to the regulation of “capitalizing borrowing expense” (costs attributable to the construction investment or production of uncompleted assets shall be capitalized or added to the value of that assets/capitalized interest cost for self-constructed assets) Costs incurred. military… in the company can be classified as fixed assets for business operation c. security. installation... The difference between price promptly paid and payable amount will be considered as the expense in the payment period. b. ground preparation and trial run cost.Du lÞch Th¸ng 5 . procured tangible fixed assets Historical cost of procured tangible fixed asset= purchasing price+ taxes(excluding refundable tax amount)+ expenses attributable to put the assets into ready-use state such as registration fee. Historical cost is all the costs incurred to get the asset and putting it into the ready. It is quite similar to criteria in IFAS which states that Procured fixed assets= purchasing price+ attributable costs + site restoration costs. architectural objects. loading and unloading. will not be included in the historical cost of the asset.with land use right.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . ground preparation cost is 2 million Vnd Cost of machine = 50+ 2+ 2= 54 million Vnd When procured tangible fixed assets are houses. if just indirectly related to the procured tangible fixed assets. 3. etc. 000 VND.

then the historical cost of the received one can be determined = net book value of the exchanged one.Historical cost of self-constructed assets= total costs at the time of putting to use.000=18.Historical cost of self-produced assets = selling price + other attributable costs. interest rate= 10%/year. Self constructed or self produced tangible fixed assets Historical cost = actual cost of asset + attributable cost to put the assets into readyuse state. present or excess due to recording error: historical cost = costs evaluated by the Committee of evaluation. it is obligation to exclude all internal profits and unreasonable expenses like wasted labor. materials. Example: department A receive a fixed assets from other division B in the company. In excess of normal levels in the process of self constructed or produced. assignment. contribution from other owners…) . Historical cost of the building= 1 billion+ total interest expenses d. Example: Company B self-construct a building by 1 billion VND borrowed from AB bank. Tangible fixed asset is from internal transfer or assignment: Historical cost = reasonable value evaluated by the Committee of evaluation + other expenses or the book value of the transferring division.. Tangible fixed assets augmented from other sources (donation. .Tangible fixed assets from the contribution of other owners: Historical cost is reasonable value most shareholders accept or based on the reevaluation of the Committee of evaluation. c.2010 Historical cost of received one= 18million+ 200.. 203/2009 TT BTC of the Ministry of Finance: . installation cost is 1m Total historical cost = 16m -45- .Sources are from donation.300. The revaluated value is 15m.Du lÞch Th¸ng 5 . supplies.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . According to circulation No. trial run cost) Total historical cost = 100+ 2= 102 million VND e.000 VND Historical cost of a tangible fixed asset purchased in the form of exchange for a similar one/from its sale and exchange for the right to own similar one. Historical cost of financial leasing tangible fixed asset in book of lessee is fair value of the asset at the time of leasing. Financial lease tangible fixed assets When tangible fixed assets are leased in the form of financial lease. (According to circulation 203/2009 TT BTC of the Ministry of Finance) Example: A corp. Its value is 100 million VND. their historical costs can be determined according to the regulations of the accounting standard section 06 “lease”. present. receives a machine presented by shareholder C. In these cases.000+ 100. . related costs= 2 million (transportation.(more details are given in the part of financial lease fixed assets) f.

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Du lÞch Th¸ng 5 . historical cost determination of tangible fixed assets under VAS and IFRS are similar.1.2 Historical cost of tangible fixed assets of individuals. B pays X in cash Dr 211 tangible fixed assets: 2billion VND Cr cash: 2billion VND 3.4 Tangible fixed assets can be accounted according to the net book value Net book value= historical cost . 3.2. owner of private company. limited company.Dr account 211 tangible fixed asset: purchasing price excluding tax -46- .Account 211” tangible fixed assets” 211: houses.Maintenance cost or repair cost for the purpose of sustaining or restoring the current capacity to bring about the current profit is just considered as expense.Cost incurred is recognized to included in historical cost of the tangible assets if these costs help improve the current conditions of assets and contribute to create higher productivity of the assets in future . animals give products 2118: other tangible fixed assets 4.accumulated depreciation 3. Tangible fixed asset is from investment & construction by the method of bid. Record for the increase or decrease in value of tangible fixed asset 4. architectural objects 2112: Machinery. Historical cost = closing adjustment price+ other related costs Example: X Construction Company delivers a building to company B with the closing adjustment price: 2 billion VND. Accounts used . Remove or replace one or some components of the asset 3.3 Historical cost of tangible fixed assets can be changed in the following cases: a.5 Capital cost or expenditure . is the reasonable value the company evaluates by its own. or corporation without the bill or record. When tangible fixed assets increase due to purchase: . 4. equipment 2113: means of transportation 2114: managerial tool 2115: long lived trees. and the company will be responsible for the accuracy of that value.2010 g. Reevaluate the value of tangible fixed asset in conformity with the regulations b. Record for the increase in tangible fixed assets a. Note: commonly. Improve the assets c.

Costs related to put assets into ready-use state: Dr account 211 tangible fixed asset Dr account: 133 VAT deducted Cr account 111.Du lÞch Th¸ng 5 .1 .1 Cr account 411 working capital: 315 Cr account 111 cash: 2. we can base on the historical cost to transfer these cost into business capital Dr account: 414 fund for development and investment Dr account 441: Capital for investment and construction Cr account 411 working capital b. These related cost are paid by cash.1 million VND including VAT(5 %).1 Cr cash: 317. pay by working capital. equipment) Cr cash Company purchases an equipment at the price of 315 million VND including VAT(5 %).IFAS: Dr assets: 302 Dr tax expense: 15.Import tax when purchasing tangible fixed asset from foreign country is included in historical cost of assets: Dr account 211/ 213 tangible/intangible fixed assets Cr account 3333: Import or export duties .VAT amount of tangible fixed asset is deducted: Dr account 133 VAT deducted Cr account 33312 VAT for imported goods Note: with firms not in group of paying VAT in discount method. transportation and loading/ unloading costs are 2.1 . Example: VAS: (unit: million VND) Dr account 211 tangible fixed asset: 302 Dr account 133 VAT deducted: 15. cash/cash at bank Under IFRS: Dr assets (houses. Company pays tax by discount method. 112.If tangible fixed asset is bought from used funds.112.2010 Dr account 133: VAT deducted Cr account 111. 331: Cash/cash at bank/ payable to the seller . Buying tangible fixed assets in installment method: accountant records: Dr account 211 tangible fixed asset Dr account 133 VAT deducted Dr account 242 long term prepaid expense -47- . land.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .. their VAT amount will be included in historical cost of the asset .

installment amount is 7.2010 Cr account 331 payable to seller Under IFRS: Dr assets Cr account payable . record: .331 – cash/cash at bank/ payable to seller -48- .3m c.4million VND/years in 4 years. 112 cash/cash at bank Under IFRS: Dr account payable Cr cash (installment amount) .3m Cr cash: 7.Du lÞch Th¸ng 5 .VAS: Dr account 211 tangible fixed assets Cr account 711: other revenue Cost directly related to tangible fixed assets presented.3m Cr 111 cash: 7. Interest expense: 20%/year. sponsored is accounted in historical cost: Dr account 211 tangible fixed assets Cr account 111. VAT (5%) in discount method. buys equipment at the cost of 20million VND.3m IFAS: Dr assets: 39m Cr account payable: 39m Periodic payment: Dr account payable: 7. when company is presented or sponsored the tangible fixed asset. 112. VAS: Unit: million (m) VND Dr 211 tangible fixed assets: 20m Dr 133 VAT deducted: 1m Dr 242 long term prepaid expense: 18m Cr 331 payable to seller: 39m Periodic payment: Dr 331 payable to seller: 7.As well as periodic payment to supplier: Dr account 331: payable to supplier Cr account 111.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Interest amount due to late payment is accounted into expense: Dr account 635 financial activity expenses Cr account 242 long term prepaid expense Cr account 142 prepaid expense Example: A corp.

installation. the net book value is allocated in 2 years starting from this year.Du lÞch Th¸ng 5 .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . accumulated depreciation is 9 million. 113. when using self produced products: converts it into tangible fixed assets: Dr Cost of good sold: account 632 Cr account 155 finished good Cr account 154 work in process cost . trial operation cost related: Dr account 211 tangible fixed assets Cr account 111.as well as record increasing in tangible fixed assets: Dr account 211 tangible fixed assets Cr account 512 internal sales revenue . machine) Cr donation/ contribution revenue Convey a fixed assets in managerial division into tools with historical cost of 19m. VAS: .2010 . land. Installation and trail run costs are 1million VND by cash.Record costs related: Dr 211 tangible fixed assets: 1m Cr 111 cash: 1m IFAS: Dr equipment: 25m Cr cash: 1m Cr other income: 24 m D.IFAS: Dr assets Cr contribution income/ other income Example: C present a computer to company B with the market value of 24 million VND. VAS: Dr 211 tangible fixed assets: 10 m Cr 512 internal gross sales: 10m IFAS: Dr assets: 10m Cr revenue: 10m -49- .cash/cash at bank/ cash in transit Under IFRS: Dr Assets(houses.Dr 211 tangible fixed assets: 24m Cr 711 other revenue: 24 m . 112.

VAS: .old one Dr loss on disposal of assets Cr old assets Cr Cash .When delivering the asset. record the increase in revenue: Dr account 131 account receivable: 21m Cr account 711 other revenue: 20m Cr account 3331 VAT: 1m -50- .Du lÞch Th¸ng 5 .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Vat 5%. record the increase in revenue: Dr account 131 account receivable Cr account 711 other revenue Cr account 3331 VAT When receiving the asset: Dr account 211 tangible fixed assets Dr account 133 VAT deducted Cr account 131 Under IFRS: . The new one value is 25m. depreciation value is 5m. tangible fixed assets in exchange for the similar one: Dr account 211 tangible fixed assets received one Cr account 214 depreciation Cr account 211 tangible fixed assets exchanged one e.When delivering the asset. record the decrease in asset Dr account 811: other expense Dr account 214 depreciation expense Cr account 211 tangible fixed assets At the same time. Tangible fixed asset in exchange for the dissimilar one .2010 d. accumulated depreciation 10 m.Exchange of assets in the gain case: Dr new assets Dr accumulated depreciation.Exchange of assets in the loss case: Dr new assets Dr accumulated depreciation.At the same time. historical cost is 20m. record the decrease in asset Dr account 811 other expenses: 10m Dr account 214: 10m Cr account 211 tangible fixed assets: 20m .old one Cr cash Cr gain on disposal of old one Cr old assets Example: A exchange an asset to X.

When company is assigned the assets. 641. Company sells tangible fixed assets: .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . depreciation and residual value to record: Dr 211 tangible fixed assets: historical cost Cr 214: depreciation expense Cr 411 working capital residual value Note: when company finds out that there is an increase in value of tangible fixed asset due to the error in recording: Dr account 211 tangible fixed assets Cr related accounts And the depreciation expense is included in production and business cost: Dr account 142 prepaid expense Dr account 627. When the construction finishes.Exchange of assets in the gain case: Dr new assets: 20m Dr accumulated depreciation.If assets are not satisfied with the criteria of tangible fixed assets. Record the decrease in tangible fixed assets: a.Du lÞch Th¸ng 5 .When receiving the asset: Dr account 211 tangible fixed assets: 20m Dr account 133 VAT deducted: 1m Cr account 131 account receivable: 21m IFAS: .raw materials/tools and supplies Cr account 241 construction in progress . 112.2010 .old one: 10m Cr gain on disposal of old one: 10m Cr old assets: 20m f.Revenue from sale: Dr 111. 153. record: Dr account 152. based on the historical cost. 642 general operating expense/selling expenses/administrative expenses Cr account 214 depreciation of fixed asset 5. 131 cash/cash at bank/ account receivable Cr account 711 other revenue Cr account 3331 VAT -51- . and asset is used: Dr account 211 tangible fixed assets Cr account 241 construction in progress .Record decrease in value of assets: Dr account 214 depreciation of fixed assets Dr account 811 other expenses residual value Cr account 211 tangible fixed assets historical cost .

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 112. 131 Cr account 711 other revenue About the tax: Dr account 711 other revenue Cr account 3331 VAT . 112 payable to employees/other payable/ cash/ cash at bank . sales price is 220 million including VAT 20 million VND.Du lÞch Th¸ng 5 .Record cost incurred related: Dr account 811 other expenses Cr account 334. cash/cash at bank Cr account 711 price without tax Cr account 3331 VAT . 111.2010 .Pay tax by direct method: Dr account 111.Record decrease in tangible fixed assets: the same in sale of assets . It received cash through transfer of credit account a. 112. Under VAS Dr account 811 other expenses: 180 million Dr account 214: 120 million Cr account 211 tangible fixed assets: 300 million Dr account 112: 220 million Cr account 711: 200 million Cr account 333: 20 million Under IFRS Dr cash: 220 million Dr accumulated depreciation: 120 m Cr assets: 300 million Cr gain from sale: 40 million b. b. 112 cash/cash at bank Cr account 711 other revenue Under IFRS: Dr depreciation expense Cr accumulated depreciation Dr cash Dr accumulated depreciation of machine (Dr Loss on disposal of assets) Cr machine (Cr Gain on disposal of machine) -52- . Company liquidates the assets: .Revenue from the liquidation: Dr account 111.Firm pays tax by direct method: Dr account 111. 112 cash/ cash at bank Example: Company sold one tangible fixed assets.338.Costs related to selling process: Dr account 811 other expenses other revenue Cr account 111. historical cost is 300 million VND with depreciation: 120 million.

Under VAS Dr 214: 120 million Cr 211 tangible fixed assets: 120 million c. and net book value to record the assets .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . liquidation cost + liquidation price = 0. If the net book value is small. A find out that its fixed assets’ value is 20 million VND lower than its book value without the reasons. net book value is zero. allocate it on the cost of objects used in the accounting period: Dr account 627.Du lÞch Th¸ng 5 . just write off the assets out of the book.Assets used for operation and business activities: Dr 214 Depreciation expense of fixed assets Dr 138 Other account receivable Dr 411 working capital operation capital Dr 811 other expenses Cr 211 tangible fixed assets tangible fixed assets Under IFRS: Dr depreciation expense Cr accumulated depreciation Example: After auditing. depreciation. swages. VAS: Dr account 214 depreciation expense: 20million VND Cr account 211 tangible fixed assets: 20 million VND IFAS: Dr depreciation expense: 20millionVND Cr accumulated depreciation: 20 million VND 7. accumulated depreciation 10m: Dr 1361 investment in subsidiaries: 7m Dr 214 depreciation of fixed asset: 10 Cr 211 tangible fixed assets: 17m 6. When auditing. -53- . 642 “residual values” (general operating expense/selling expenses/administrative expenses) Under IFRS No record. record: a. it can use the historical cost. When transferring tangible fixed assets into tools. When transferring tangible fixed assets to other divisions: Dr account 1361investment in subsidiaries: net book value Dr account 214: depreciation of fixed asset Cr account 211 tangible fixed assets/ 213: historical cost Example: Department A transfers its assets to other division in the company with historical cost of 17m.2010 Example: Liquidation of fixed assets with the historical value is 120 million VND. 641. company finds out the deficiency of fixed assets but not yet sees the reasons.

If the residual value is big. 641. purchasing price without tax is 400 million VND.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Du lÞch Th¸ng 5 . pays tax by discount method. exchange. involuntary conversion.2. please refer to the following example: Hoa An company. Company sold one tangible fixed assets. 8.a Under VAS Dr account 211 tangible fixed assets: 400million Dr account 133 VAT deducted: 40 million Cr account 112: 440 million Cr account 009 fundamental discount capital: 400 million Under IFRS Dr machine: 400 million Dr tax expense: 40 million Cr cash: 440 million 1. 2010 was related to some increase and decrease in tangible fixed assets.2010 Dr account 214 depreciation expense Cr account 211 tangible fixed assets historical cost b. 642 general operating expense/ selling expenses/administrative expenses Cr account 142 prepaid expense: allocation amount. sales price is 220 milliion including VAT 20 million VND. or abandonment of the plant asset -54- . To illustrate. Its operation on April. retirement. historical cost is 300 million VND with depreciation: 120 million. VAT is 40 million VND. producing Green bean cake. It received cash through transfer of credit account a. It purchased machine and paid through transferring the credit account.1.b 8. 9. Record the journal entry: 8. Dispositions of plant assets A disposition of a plant asset is the sale. Under VAS Dr account 811: 180 milliion Dr account 214: 120 million Cr account 211 tangible fixed assets: 300 million Dr account 112: 220 million Cr account 711: 200 million Cr account 333: 20 million Under IFRS Dr cash: 220 million Dr accumulated depeciation: 120 m Cr assets: 300 million Cr gain from sale: 40 million b. 1. transfer it into prepaid expense to allocate gradually to cost of other objects: Dr account 142 prepaid expense net book value Dr account 214 depreciation of fixed assets Cr account 211 tangible fixed assets historical cost -Then allocating gradually to others: Dr account 627.

Depreciation expense Dr Ac 811 other expenses.without tax Cr Ac 3331. or condemnation To illustrate.Accumulated Depreciation Cr Ac 211. This made the following entry: Dr Ac 112 cash at bank 500.extra amount 300.000 Dr Ac 214-Accumulated Depreciation 200.1. 131 cash/cash at bank/VAT deducted Cr Ac 711 other income. 112 cash/ cash at bank 9. 9. Involuntary conversion Involuntary conversion: fire. and equipment.Original cost of asset Money receives when sale asset Dr Ac 111. Co.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .000 Dr Ac 111.Du lÞch Th¸ng 5 . Exchange: The proper accounting for exchange of nonmonetary. then the insurance company compensate with price $500.000 which substantially exceeded the $200.000 9.book value of asset Cr Ac 211 tangible fixed assets. 112. a corporation has equipment but it’s fired. is controversial.3. plant. the transaction has commercial substance. That is.VAT Expenses when sale asset Dr Ac 811 other expenses Cr Ac 111.000 Cr Ac 211 tangible fixed asset 400. A gives fixed asset for Co.Original cost of the new 9.2 Exchange without the same price When Co.3.2. such as property.Original cost of old fixed asset Dr Ac 214.3.000 book value of the plant and land (cost of $400.000 less accumulate depreciation of $200. flood. 112. A records transaction as follow: -55- .1 Exchange with the same price Dr Ac 211. An exchange has commercial substance if the future cash flows change as a result of transaction. theft. Sale of plant assets Companies record depreciation for the period of time between the date of last depreciation entry and the date of sale Decrease of fixed asset Dr Ac 214. B.2010 Account 211 tangible fixed assets Account 2112: building Account 2113: machine Account 2114: transportation Account 2115: equipment 9.000). if the two parties’ economic position change.

financial leased assets.Accumulated Depreciation Cr Ac 211 tangible fixed asset.extra amount Cr Ac 131 account receivable In case. b/ Incomes or losses from the change in the reasonable value of the residual value of the leased asset are associated with the lessee.book value of old asset Dr Ac 214. the lessee will recognize the financial leased asset as an asset and liability in its balance sheet with the same value equal to the -56- . The cases leading to financial lease may include: a/ The lessor transfers the asset’s ownership to the lessee at the end of the lease term. c/ The lease term accounts for most of the economic life of the asset even if the ownership is not transferred. the account used is 212.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . A receives new tangible fixed asset Dr Ac 211 tangible fixed assets. A financial lease is a lease whereby the lessor transfers most of the risks and rewards associated with the ownership over an asset to the lessee. 112 cash/ cash at bank. A pays extra money when price of old asset is less than the new Dr Ac 131 account receivable Cr Ac 111. Co.depreciation of GTGT tax (if any) Cr Ac 131 account receivable.2010 Dr Ac 811 other expenses. Co. e/ The leased asset is of a special-use type which can be used only by the lessee without major modification or overhaul. Recognition: With financial lease. d/ At the inception of the lease. The ownership over the asset may be transferred at the end of the lease term.fair value of the old In case. c/ The lessee is able to continue leasing the asset after the lease contract expires at a rent lower than market rents. A receives extra money when price of old asset is higher than the new: Dr Ac 111. Lease contracts will be also considered financial lease contracts if they fall into at least one of the following three cases: a/ If the lessee cancels the contract and pays compensation for damage associated with the contract cancellation to the lessor.original of old asset When Co. The recognition is as follow: At the inception of a financial lease.Du lÞch Th¸ng 5 . 112 cash/ cash at bank 10. b/ At the inception of the lease. the lessee has the right to purchase the leased asset at a price expected to be lower than the reasonable price at the end of the lease term.original of new asset Dr Ac 133 VAT deducted. Fixed assets under financial lease According to Vietnamese Accounting Standards. The historical cost recorded at the inception of the lease terms is based on section 06: lease in VAS. the present value of the minimum lease payment accounts for most of the reasonable value of the leased asset.

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Under VAS. the journalizing process is as follow: Before the acquisition of the leased assets: company recognizes for the attibutable to the acquisition of the leased assets: negotiation cost. However. the present value of the minimum lease payments shall be recorded. Initial direct costs incurred in connection with financial leasing activities. the lessee’s incremental borrowing interest rate will be used for calculating the present value of the minimum lease payments.fixed asset under financial lease Cr account 142 prepaid expense/111cash /112 cash at bank (the amount equal to the amount recorded above) At the end of the fiscal year. If the reasonable value of the leased asset exceeds the present value of the minimum lease payments for the lease. basing on the lease contract.Du lÞch Th¸ng 5 . If the interest rate implicit in the lease contract is undeterminable. transaction cost. in practice the situation seems to be more complicated because of the differences in the account as well as tax system.2010 reasonable value of the leased asset. such as costs for lease contract negotiation and signing will be recognized into the historical costs of the leased assets. The discount rate used for calculating the present value of the minimum lease payments for the lease will be the interest rate implicit in the asset lease contracts or the interest rate inscribed therein. determine the lease liability for the next period Dr account 342 long term liability Cr account 315 Long term loans due to date Periodically get the bill to pay lease liability To record the lease liability and interest expense Dr account 635 financial activities expenses (current interest expense) Dr account 315 Long term loans due to date (including value added tax) Cr account 111/112 cash/ cash at bank -57- . Theoretically. Dr account 142 prepaid expense Cr account 111/112/…: cash/ cash at bank The prepaid for the assurance of the lease contract: Dr account 342 long term liability Dr account 244 long term collateral and deposit Cr account 111/112: cash/cash at bank Acquisition of the leased assets: Dr account 212: fixed assets under financial lease (excluding VAT) Cr account 342: long term liability (present value of the minimum lease payment or reasonable value of the leased assets) The initial direct cost is included in the historical cost of the leased asset: Dr account 212. accounting for leased assets under VAS is quite similar to IFRS’s. ect.

000VND 4.000.000.000 VND. there is an example as follow: X is a construction company which pay VAT on deductible base. Dr account 212 fixed asset under financial lease Cr account 111 cash Cr account 315 long term loan due to date Cr account 342 long term liability 100. X also returned another financial lease asset to the lessor at the end of the lease term.000VND.000. interest expense: 25.000.000.000.000VND.tangible fixed asset 30. Requirement: journalize the entries Solution: 1. 3.000VND.000 VND 10. X paid in cash the amount of 30.financial lease fixed asset 400. Dr account 211.000 VND.000.000VND 2.000.000 VND 360.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .000 VND 25.000.000 VND (VAT not included). Dr account 211. 2.000.000.2010 Periodically depreciate the leased assets to operating expense or capitalize to construction in progress Dr account 623/627/641/642/241…/executing machine using expense/general operating expense/ Dr account 009 fundamental discount capital Cr account 214.Depreciation of fixed asset To illustrate.000VND.cash 30.000 VND 410. the historical cost was 200.000 VND 40.000 VND b.000. Use transfer payment to pay for the lease expense with the amount of 135.000VND.tangible fixed asset 400.000.accumulated depreciation under financial lease 380.000 VND 10.000. a.Du lÞch Th¸ng 5 . Dr account 2142 accumulated depreciation under financial lease 200.000 VND 3. The historical cost of the financial leased assets was 400. Acquire another financial lease asset from company Y.depreciation expense (tangible fixed asset) 380.000 VND Cr account 111.000.000.000.000VND Cr account 2141. VAT expense: 10.000VND in which the initial expense: 100.000 VND c. Buy a financial lease asset at the end of the lease term.000 VND Cr account 212.000. Other attributable expenses which had been paid already were 10.000 VND Cr account 212 fixed asset under financial lease 200.000.000.000 VND and it has been fully depreciated.000.000. the total expense was 400.000 VND -58- . Dr account 315 long term loan due to date Dr account 133 VAT deducted Dr account 635 financial activities expenses Cr account 112 cash at bank 4.000 VND 135.000. Company X had the following activities related to financial lease fixed assets: 1.000. Dr account 2142 . In January 2004. the current expense was 40.000. the depreciated amount was 380.000.000.

2010 11. a company estimates the useful life of an asset based on its past experience of the same or similar assets. and Units-of-output depreciation method. the following factors must be such as: the extent of use capacity or output of such asset: the extent of wear-and-tear. It is not a matter of valuation but a mean of cost allocation to expense in a systematic and rational way to those periods expected to benefit from use of the tangible assets. Enterprises need to estimate service lives of assets because it differs from its physical life.1. Steps of calculating as follow: Determine the useful life of the asset in years Determine the salvage value of the asset after its useful life Deduct the salvage value from the purchase price of the asset Divide the number of useful years into the total in step number 3 -59- . For easy computation. it is the simplest and most common method of computing depreciation.com/depreciation. firms can choose an appropriate method suitable for their own kind of fixed assets. Straight-Line Depreciation Method of computing depreciation in which the depreciable cost (historical or purchase price) of a tangible capital asset is reduced by an equal amount in each accounting period (usually a year) over the asset's estimated useful life. Economic benefits yielded by tangible fixed assets shall be gradually exploited by the enterprises through the use of these assets. According to Finance Minister’s Decision No 206/2003/ QD-BTC. depending on the use process. other factors.. wear-and-tear of these fixed assets due to their non-use. In most cases. Then. from the replacement or renovation of the technological chain or changes in the market demand for the products or service turned out by the asset. the estimated useful life of fixed assets may be shorter than their actual useful life. The useful life of tangible fixed assets shall be determined by the enterprises mainly on the expected use extent of the assets. Suitable where the usage of an asset remains generally uniform despite the asset's age.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Therefore. when determining the useful life of tangible fixed assets. The chosen and registered one will be implemented consistently during usage of these fixed assets. Nevertheless. Straight line depreciation is computed as a fixed expense by dividing the asset's depreciable cost by the number of years the asset is estimated to remain in service. In fact. Methods of depreciation Depreciation http://www. Basing on real conditions applied for each method. legal constraints in the asset use. the depreciation rate may be converted to a percentage of the depreciable cost. like technical backwardness. often cause reductions in the economic benefits which the enterprises expect these assets would bring about. According to VAS. the enterprise’s repair and maintenance of the asset.htm is the reduction in the value of an asset from wear-and-tear or obsolescence. they must register their depreciation method to tax agency before depreciating. Declining-balance depreciation method.Du lÞch Th¸ng 5 . 11.investorglossary. there are 3 main methods of depreciation: Straight-line depreciation method..

2010 As an example.Year 3 (at 31 Dec 04): Accumulated depreciation: (4. The depreciation charge reduces the book value of the asset each period.000 Year 31 Dec 02 31 Dec 03 31 Dec 04 31 Dec 05 31 Dec 06 Beginning value 11.000 .600 – 1. Net book value: 7.600 – 1.000 Salvage (residual) value $ 1.Year 2 (at 31 Dec 03): Accumulated depreciation: (7. To calculate declining balance depreciation the depreciable basis of the fixed asset is multiplied by a factor. Refer to example above.000 .000 9000 7000 5000 3000 Depreciation 2000 2000 2000 2000 2000 Accumulated depreciation 2000 4000 6000 8000 10000 Net book value 9000 7000 5000 3000 10000 11.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .000) x 40% = 4. 2.000) x 40% = 2.000 . Solution: Depreciation per year: (11. Net book value: 2. ABC Ltd.000 = 1. Net book value: 4.600 .Year 5 (at 31 Dec 06): Accumulated depreciation: 2.440.000) x 40% = 1.000 = residual value -60- .cost less accumulated depreciation.000 .2.296 = 1.296 – 1.4. This process continues until the book value of the asset equals its estimated value.000 – 1. applying constant-declining balance rate to lower book value result in lower depreciation charges each year. bought a new machine on 1 st Jan 2002. Net book value: 3.296.296 .160 – 1.400. show the depreciation expenses and net book value using Reducing method at 40% per year.000.000 = 7.Year 1 (at 31 Dec 02): Accumulated depreciation: (11.1.Du lÞch Th¸ng 5 .000 Usage (useful life) 5 years Required: Show the depreciation expenses and net book value using Straight-line method.400 = 4.296 – 1. Declining-balance depreciation method The declining balance depreciation method is an accelerated method since a large part of the cost of the fixed asset is expensed at the beginning of the life of that asset.Year 4 (at 31 Dec 05): Accumulated depreciation: (3.000 – 1. The following information is provided: Cost $11. The factor is the percentage of the asset that would be depreciated each year under straight line depreciation times an accelerator The declining balance rate is multiple by the book value of the assets at the beginning of each period. Net book value: 11.160 . Solution: .864 = 2.000)/5 = $2.000) x 40% = 864.160 .440 = 3. The depreciable basis is the book value of the fixed asset .

Charge for one hour of use is determined as follows: Charge/hour = (22.250. Metallurgical equipment for manufacture of building materials.600)(1. Tractors 4. Electrical generators 3. Electrical transformers and power source equipment 4.2010 11. Tools 2.000) = $1. Specialized equipment for manufacture of optical and electronic component.60 DURATION FRAMEWORK FOR THE USE OF FIXED ASSETS Issued with circular 203-2009-TT-BTC by the Ministry of Finance dated 20 October 2009 Categories of fixed assets A. Working machinery and equipment 1.2.Du lÞch Th¸ng 5 . and for precision mechanical engireering -61- Minimum useful lives (years) 8 7 7 6 7 5 6 6 6 7 6 6 5 Maximum useful lives (years) 10 10 10 10 10 8 8 8 8 10 10 8 12 . Machines used for agriculture and forestry 5. Determine the depreciation charge for a year when this machine was used for 2. petrol and water pumps 6.600 hours.Dynamic machinery and equipment 1. Specialized machinery and equipment for manufacture of building materials. It is expected that the machine can last for 16. depreciation during a given year will be very high when many units are produced. the depreciation charge is Depreciation charge = (2. Dynamic generators 2.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . porcelain and glassware 7. porcelain and glassware 9. Specialized equipment for manufacture of chemicals 8. activity. and it will be very low when only a few units are produced. Units-of-output depreciation method The units of production method of depreciation are based on an asset’s usage.266) = $3. or parts produced instead of the passage of time. terracotta. Oil.3.291. Under the units of production method. Mining and construction machinery 3.250)/(16. other machinery and equipments B.500.266/hour As the machine is used for 2. For example.000 hours.500 . terracotta. Solution: The salvage value can be estimated as 10% of first cost or $2. A new milling machine is purchased for $22.600 hours.

Machinery and equipment for production and processing of grains and foodstuffs 15. Analytic measurement equipment used in physical chemistry 5. Machinery and equipment used for manufacture of leather. Equipment used in specialized sectors 7. sonic and thermodynamic volumes 2. Machinery used in the film industry and in health services 16.Managerial tools 1. Optical and optical spectru equipment 3. Moulds used in the casting industry D. machinery and software for the purpose of management 3. Equipment for measurement of and experiment on mechanical.Transport equipment and means of transport 1. Machinery and equipment for production of pharmaceutical drugs 18. electrical and electronic equipment 4. Other experimental and measurement equipment 8. for printing stationery and cultural products 11. Telecom.Machinery and equipment used in the textile industry 12.2010 10.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . electronics. Machinery and equipment used in the paper industry 14. information. Other facilities and means of transport E. Means of transport by railway 3.Du lÞch Th¸ng 5 . Equipment for conveyance via pipelines 6. Means of transport by airway 5. informatics and television and machinery and equipment 17. Means of transport by road 2. Other managerial instruments and facilities F. Machinery and equipment used in the clothing industry 13.Buildings and Architectural works 1. Radioactivity measurement instruments and equipment 6. Equipment for goods discharge and lifting 7. Subtantial buildings 7 10 5 5 7 6 3 6 5 10 15 7 15 12 12 15 10 12 5 6 5 6 6 5 6 2 6 7 7 8 10 6 6 5 3 5 25 10 10 8 10 10 8 10 5 10 15 15 20 30 10 10 8 8 10 50 -62- . Means of transport by waterway 4. Other working machinery and equipment CMeasurement equipment and laboratory instruments 1. Electronic equipment. Calculating and measuring instruments 2.

Criteria for recognizing intangible fixed assets: First of all. Quays. sewers.2010 2. harbours and docks slipways and so forth 5. Intangible assets 1. Other architecral works G. Definition: 6 5 6 5 4 6 2 4 25 20 30 10 15 40 8 25 Intangible fixed assets mean assets which have no physical form but the value of which can be determined and which are held and used by the enterprises in their production. drying yards. The useful life is estimated to last for over one year is the fourth criteria and all value criteria prescribed by current regulations are met will be the last criteria for deciding which assets can be intangible fixed asset. 2. livestock of all kinds 2. + Computer software. + Intangible fixed assets being developed. Accounting of intangible fixed assets which are classified by groups of fixed assets of the same nature and use purposes in the enterprises’ operations. air runways. Industrial and perennial plantation. the certainty to acquire future economic benefits brought about by the asset. Building of other kinds 3.Du lÞch Th¸ng 5 . dams. + Copyright. bridges.Livestock and perennial platations 1. business. including: + The right to use land for a definite term.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Determination of historical cost of intangible fixed assets: Historical cost means all costs incurred by the enterprises to acquire intangible fixed assets as of the time of putting these assets into use as expected. parking lots. -63- . designs and prototypes. + Distribution rights. ect 4. + Trademarks. tanks. 3. + Preparation formulas and methods. service provision or leased to other subjects in conformity with the recognition criteria of intangible fixed assets. + Licenses and right concession permits. and orchards 3. canals. patents. The second criterion is that the asset’s historical cost must be measurable. H. models.other types not in the above categories III. Lawn and green areas. roads. Storehouses.

issuing right. jigs and swages related to new technologies. Methods for posting the accounts (all journal entries are based on Vietnamese accounting standard) a) Posting the account for purchasing intangible fixed assets: . processes. designing. tools. compensation…. constructing and experimenting prototypes or models before they are put into production or use.2010 a) Historical cost of separate-intangible fixed asset consists of the purchasing price (minus (-) trade discounts or price reductions).Intangible fixed assets Debit account 133 VAT deducted . b) Historical cost of a procured intangible asset is the purchasing price plus taxes (not including reimbursable taxes. evaluating and selecting final options.In case the corporations rent the land that cost is allocated to business expenses. designing tools. processes. d) Historical cost of intangible fixed asset created from within the enterprise is the costs directly related to designing. designs. developing and manufacturing on a trial basis substitute materials. Formulas. donated or presented. constructing and operating economically infeasible trial workshops for commercial production operations. c) Historical cost of intangible fixed asset under exchange form is the reasonable value of vouchers issued in relation to capital ownership. molds. products. is determined according to the initial reasonable value plus (+) the expenses directly related to the putting of the assets into use as planned.Du lÞch Th¸ng 5 .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In Vietnam: Debit account 213 . products. related costs counted to the time of putting the assets into use as expected. 4. services.Payable to seller -64- . or other knowledge. designing. not intangible fixed asset. tools. exploring. consumer list shall not be recognized as intangible fixed assets but as production and business expenses in the period. tools. evaluation and final selection of alternative methods for materials. products. All costs incurred in the research stage (including activities of researching into and developing new knowledge. systems. new or improved. taxes (excluding reimbursed tax amounts) and expenses directly related to the putting of the asset into use as planned. services. including VAT that is calculated according to discount method. f) Historical cost of intangible asset being the right to use land is the cost of having legal land using right plus other cost for leveling the surface. The application of research results. e) Historical cost of intangible fixed asset which is allocated by the State. services. systems and services.Where intangible fixed assets are bought for manufacturing goods. The exploration of alternative methods for materials. new or further improved) and costs for having trade name.VAT deduction of fixed asset Credit account 111 -Cash or Credit account 112-Cash in bank or Credit account 331 . processes.

Prepaid expenses Making payment to seller: Debit account 331.Intangible fixed assets Credit account 242. 311…Credit.Intangible fixed assets VND 500.Where intangible assets are purchased for manufacturing goods and services.000 or Credit account 141 – Advances VND 525.Cash in bank Payable to seller With the above example. levied by VAT that is calculated by discount method. 311…Credit. pay by cash.Cash in bank VND 500.000.Interests return from purchasing intangible assets with deferred payment mode every term Debit account 635-Financial activities expenses Credit account 242.000 b) Purchasing intangible fixed assets that are paid by deferred payment mode.In case intangible fixed assets are purchased for manufacturing goods. the transaction will be: Debit account 213 .000 or Credit account 331 .000.Payable to seller Credit account 111.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .000.If intangible fixed assets use for producing goods. services. but the company does not be eligible to pay VAT.112 Cash/ cash in bank c.Long-term prepaid expenses Credit account 331.Du lÞch Th¸ng 5 .000 Credit account 111-Cash VND 525. Intangible fixed assets purchased in form of exchange: * Intangible fixed assets purchased in form of exchange for a similar intangible fixed one: When receiving intangible fixed assets purchased in form of exchange for a similar intangible fixed one and use immediately for manufacturing activities: -65- . Credit account 231.Payable to seller VND 525.000.Intangible fixed assets Credit account 112.Intangible fixed assets VND 500.000 . mortgage: .000.Payable to seller .Payable to seller . not levied by VAT Debit account 213 .Intangible fixed assets Debit account 242.000.000 Debit account 133 VAT deducted VND 25.000 Credit account 112.2010 For example a company buys patents from one person with 5% VAT.Long-term prepaid expenses or Credit account 142 .000. the transaction will be recorded as follow: Debit account 213 . services not levied by VAT or levied VAT directly: Debit account 231 .Long-term prepaid expenses Credit account 133 VAT deducted Credit account 331.

Long-term prepaid expenses Debit account 642 . Cash in bank.Simultaneously reflecting income from exchange of fixed assets Debit account 131. recording as follow: .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .153… Cash.Accounts receivable d) Value of intangible fixed assets that are created from within enterprise in the development stage: * When having costs in the development stage.VAT deducted -66- . payable to seller… . accountant must record real costs become historical costs: Debit account 213–Intangible fixes assets Credit account 241 . Debit account 242 .Intangible fixed assets Debit account 133 .Real costs that arise within the stage in order to become historical costs will be recorded as: Debit account 241 .331…– Cash.VAT deducted Credit accounts 111. 112. cash in bank… * When the result of development stage meet definition and standard of recognizing fixed assets.153. that costs will be recorded as manufacturing costs or long-term prepaid expenses.2010 Debit account 213 –Intangible fixed assets (receiving) Debit account 214.112.Du lÞch Th¸ng 5 . if result is not satisfied the definition and standard for recognizing fixed assets.Fixed assets depreciation Debit account 811. accountant should record separately the right to use land as intangible fixed assets.Intangible fixed assets depreciation Credit account 213.Accounts receivable Credit account 711.Recognizing the decrease in intangible fixed assets for exchange: Debit account 214.Value added tax Recognizing the increase in intangible fixed assets receiving from exchange: Debit account 213 .152.Intangible fixed assets Debit account 133 . house as tangible fixed assets: Debit account 211–Tangible fixed assets Debit account 213 .Intangible fixed assets .Intangible fixed assets (exchange) * Intangible fixed assets purchased in form of exchange for a dissimilar intangible fixed one: .Construction in progress e) When purchasing intangible fixed assets is the right to use land accompanying with houses.VAT deducted Credit account 131.At the end of the stage.administrative expenses Credit accounts 111.construction in progress Debit account 133 .152.Other income Credit account 3331.Other expenses Credit account 213.

740 Cr account 2143 Intangible fixed assets depreciation VND 135.331… –Cash.740 . the depreciation expenses are VND 135.Costs related to donated and presented intangible fixed assets: Debit account 214 .When company increases adjustment for depreciation with the amount of VND 367685825 Dr 009: VND 367685825(off.112…. historical cost of intangible assets will be the legal value of those documents.increase/decrease amount in revaluation of fixed asset .112. the adjustment should be made as: + With increase in depreciation expense: -67- . Account used: 412.For depreciation of intangible fixed assets. the practice seems to be more flexible.807.Du lÞch Th¸ng 5 .807.878.Intangible fixed assets Credit accounts 111.When receiving the donated and presented intangible fixed assets: Debit account 213 .Other income .085 Cr account 627 General operating expenses VND 231. For example. the different will be recorded as: Dr account 412 difference upon assets revaluation Cr account 211 tangible fixed assets/213 intangible fixed asset .If the revaluation result shows an increase in the value of fixed assets. The transaction recoding will be: Dr account 627 General operating expenses VND 135. it is recorded as follow. however.Cash. there still exists the impairment of both tangible and intangible fixed assets. recorded as follow: Debit account .085 (367685825-135807740=231878085) IV. the revaluation will be recorded.Intangible fixed assets Credit account 411 .If there is a change in the depreciation expense due to the revaluation of the fixed assets. cash in bank… .878.If the revaluation result shows a decrease I the value of fixed assets. cash in bank.740.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . payable to seller… f) Purchasing intangible fixed assets from exchange payment by documents that related to the right to own capital of joint stock companies. Revaluation (Impairment) of fixed assets Under IFRS impairment refer to the write off of long lived assets (PPE and intangible assets) whose carrying amount is not recoverable.2010 Credit accounts 111. the difference will be recorded as: Dr account 211 tangible fixed assets/213 intangible fixed asset Cr account 412 difference upon assets revaluation . When there is an increase in the value of fixed asset like land.Working capital g) When the enterprises have donated or presented intangible fixed assets that used for manufacturing activities: .balance sheet account) (009: depreciation capital) Recording decreased adjustment (depreciation): Dr account 2143 Intangible fixed assets depreciation VND 231.Intangible fixed assets Debit account 711.807. Under VAS.

in reality the practice seems to exist some differences because of the appearance of Vietnamese code system. -68- .Du lÞch Th¸ng 5 . Then the procedure continues with the record for the increase and decrease in fixed assets along with their depreciation/amortization and revaluation. Particularly. In addition. They reduce new and unnecessary equipment purchases. companies reduce expenses through loss prevention and improved equipment maintenance. (www. and theft deterrence Fixed assets are essential for company to generate goods and services. however. maintenance and depreciation status of their fixed assets. the step to account for fixed assets is a continuous procedure which starts with the determination of historical cost. . but without accurate method of keeping track of these assets it would be very easy for the company to lose control of them.en.finding the way to harmonize with IFRS. outsourcing or off shoring happens more regularly.org) An example of fixed asset management can be as follow: VI.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In comparison with IFRS’s the procedure is quite similar. Yet the purpose of the adjustments is still to reach a common goal. Conclusion In conclusion. preventive maintenance. in the context of Vietnam’s integration in WTO. As a result. Therefore. the owner of the assets can take inventory with a mobile barcode reader and then produce a report. etc) to be aware of both Vietnamese and international practice to equip themselves with deep knowledge and help them have better investment decision or management measurement.Many organizations face a significant challenge to track the location.wikipedia. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags. managers. Management of fixed assets Fixed assets management refers an accounting process that seeks to track fixed assets for the purposes of financial accounting. It seems to always necessary for current accountants as well as potential accountants and other related parties (investors.2010 Dr account 412 Difference upon assets revaluation Cr account 214 accumulated depreciation + with decrease in depreciation expense: Dr account 214 accumulated depreciation Cr account 412 difference upon assets revaluation V. the replacement of the circulars or decision made by Ministry of Finance to fit with the new situation of Vietnam has leaded to the adjustment in practice as well. quantity. often with bar codes for easy and accurate reading. and they can more accurately calculate taxes based on depreciation schedules. Periodically. condition. fixed assets management seems to be always necessary.

http://en.org/wiki/Fixed_assets_management.Du lÞch Th¸ng 5 . Accessed at 28th April 2010. 4. national economic university publish house. Loan Dang Thi. “Quyết định 15/2006/QĐ-BTC”. Vietnam government. -69- . lý thuyết và sơ đồ”. 2009. 2006. Available at Error! Hyperlink reference not valid. Ministry of finance. 2. Accessed at 4th May 2010. 5. Labor and Social Affair publish house.vn/forum/attachment.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . “kế toán tài chính trong các doanh nghiệp”. “Kế toán tài chính. Nhi Vo Van. “Vietnam accounting standard”.2010 REFERENCES 1. Accessed at 22 May 2010 3.php?attachmentid=7337&d=1256885510 Accessed at 4th May 2010.webketoan.wikipedia. Available at http://www.

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . data and materials which were then incorporated in our paper as convincing evidences. Vietnam is an emerging market with a lot of chances for growth and plenty of risks as well. higher return” has made the derivative market become an important part of the whole market. Introduction 1. the participants in each market. the question of “why recently repo captures a lot of attention” is step by step solved. its constituent players and their roles. and -70- . Hopefully. It not only provides market participants with hedging tools but also speculative tools for making profits. though the derivative instruments still have not much developed. a derivative market tool in Vietnam. The introduction of Repo has a profound effect on many players. our paper looks into the repo tool in both stock and bond market. Introduction The Vietnamese financial market has undergone massive changes in recent years. from cash-rich individual investors who find it as a source of easy money to banks and other financial institutions who recognize in it the potential of diversifying their securities holdings and remedying maturity mismatch. in the process. Methodology This research was conducted with our greatest effort and care despite time limit. Emphasises are placed on law aspects and the market participants’ behaviors within the laws. key findings and recommendations are presented in the conclusion part. we will use the term “repo” consistently in our research) is one such instrument that has captured much attention among the market participants in Vietnam of late. Our research aims at conducting analysis on sale and repurchase agreement (also known as repo). PART I. their benefits and behaviors within the law platform in Vietnam.Du lÞch Th¸ng 5 . commonly known as Repo transaction (for simplicity. throughout the research report. some of them have widely been used. Finally. Even local government has stepped in the Repo transactions in an effort to stabilize the financial markets in certain instances. Nguyen Thi Quyen Supervisor: Nguyen Quynh Anh ABSTRACT The rule “higher risk. What is repo then that could stir up frenzy in an already turbulent and highly sensitive market of Vietnam? We will in turn look at the different aspects of a repo transaction. new light could be shed on the century-old market instrument yet still holding wonders to many. 2. many of which are far from similar to Vietnamese investors. The Sale and Repurchase Agreement. the Southern East Asian has developed from the stage of an “emerging economy” to a more advanced market with a myriad of financial products and services. In particular. Especially. Since the initiation of the stock market in mid-1998. In the country. A secondary research approach was employed to gather information.2010 SCIENTIFIC RESEARCH PAPER REPOS CONTRACTS: LAW AND APPLICATIONS IN VIETNAM Written by: Nguyen Hong Hanh Tran Viet Kien.

It is time to turn to a repo transaction. Repo transactions in Vietnam: 1.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . its counterparties and their respective roles as well as the practice of the market in which it takes place will exert a certain level of ambiguity. The procedure of executing a repo contract (or so one may label this second-length process) is fairly simple. Our text book “Bank asset and liability management” by Moorad Choudhry proved to be a useful reference source of knowledge. In a classic repo one party will enter into a contract to sell securities. However in Vietnamese market a repo transaction is. the nature of the transaction. simultaneously agreeing to purchase them back. Analysis 1. Primary research approach was also used. conducted on the “classic” and sell/buy back basis. sources such as official websites of government authorities.Du lÞch Th¸ng 5 . and as part of the same transaction. and websites of big corporations are given priorities to the others. -71- . for most parts. In addition to those types. he has already fixed up most of his portfolio and is short of cash to cover a “surfing” or a speculative investment. After the terms and conditions of the contract are agreed upon (the brokerage firm normally present to its customer formal and standard contracts with uniform provisions). Nguyen Quynh Anh and Ms.com. A notice is then sent to customers.2010 references. For example. Unfortunately.Tran Phuong Thao from Trang An securities firms about confusing related issues. Our group took advantage of the Internet as a cheap and easy access to human rich knowledge and information source in order to search for needed materials. The procedure for a sell/buy back repo is essentially the same except for some technicalities. just a few moments are spared to transfer back the funds plus the repo rate. our quick-thinking investor just has to sign in the form and the wired amount is immediately transferred into his account for further investment. facts and figures.1 Overview A repo agreement is loosely defined as a transaction in which one party sells securities to another. yahoo. Popular searching engines such as google. commits to repurchase identical securities on a specified date at a specified price. and at the same time. stating their repo contracts with the firm have expired accordingly. Emails asking for consultation are sent to expertise people in the field that are our instructor Ms. there exists tri-party repo in which a third-party is contracted to act as an agent of both the seller and buyer. No more smart money goes to waste! Also at the termination date. In order to increase the reliable and quality of the information. Imagine an individual customer has noticed some good buy after long and arduous hours of screening the dashboard.i Though the definition seems straightforward enough. famous online newspapers. PART 2. is a repo agreement essentially a dual transaction in which the agreements to sell and buy back are made simultaneously or two separate transactions of reverse positions actually constitute a repo agreement? The question turns out to be the key feature that separates a classic repo and a sell buy back repo.com assisted us much in the process of collecting documents. while a sell/buy back repo means an outright sale of a bond on the value date and an outright repurchase of that bond for value on a forward date.

Rights and obligations of the counterparties . revaluation method .000.50 7.00 Lãi suất trúng thầu (%) 17. a repo transaction was. undesired outcomes may arise in the process of market formation.Du lÞch Th¸ng 5 .Repo transactions with bonds 2.00 8.00 11.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Other terms and conditions 1.00 6. bonds other securities and for some instances other assets such as real estate.000 3.100.00 7. in effect. executed by SBV as early as in 2000 by means of Openmarket-operation.The legal status of counterparties to the transaction . While it is a fairly new market instrument to most individual investors. Now let us look briefly at the main participants in a bond-repo transaction.2 Laws and applications regarding repo market The rapid expansion in the repo market may necessitate a comprehensive and detailed body of regulations to ensure the instrument is employed with ease and free of misinterpretation.00 . In the absence of laws governing repo. Is the legal system of Vietnam capable of keeping pace with the dynamic nature of the business? This issue will be looked at with some detail later in our report. .00 872.00 30.1.00 5.000.2010 The main terms and conditions of a repo contract include the following: . margins and deductions applied. The most prominent participant into a repo market is undoubtedly the State Bank of Vietnam (SBV).00 8. The years 2006 and 2007 have seen an impressive development of repo market in terms of trading volume. 2.54 1.000.Collateral: could be stock.000.10 8.000 1.00 8.30 25.1 The government and Open market operation The strategic move of Vietnam’s Ministry of Finance in establishing a stand-alone market for trading bond early in March 2008 has a direct impact on repo transactions.00 6. the number and value of deals have been increasing through the years.800.000 3. The trading value of several open market transactions is presented in figure 1.Repo interest rate. Ngày đấu giá 02/05/08 02/14/08 02/15/08 1/21/2009 1/22/2009 1/22/2009 1/23/2009 1/30/2009 3/18/2009 3/19/2009 9/29/2009 9/30/2009 Hình thức giao dịch Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Reverse Repo Kỳ hạn (ngày) 14 7 7 14 14 14 14 14 14 14 7 7 -72- Giá trị trúng thầu (tỷ VND) 3.00 7.00 3. repo term.50 7. number of deals and institutions with a repo desk. Since then.

Thus our government has strong interest in repo as a versatile instrument in stabilizing the macro environment. On the other hand. Nonetheless. An open market operation requires the purchase/sale of a block of government bond by means of open bidding to commercial banks and a subsequent reverse transaction. The anecdotal investor in the previous section may well illustrate this point. The key difference is that repo activities with individual investors are profit-driven. the effective cost of repo for individual investors.2010 It is apparent from the table that an upward trend in the volume of reverse repo transaction. Due to the short term nature of the objectives desired. the repo rate is based on the prevailing rate on short-term loans.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the instrument is useful for diversifying banks’ income and strengthening their balance sheet. In recent years. For this reason.2 Repo market between credit institutions and individual investors In 2006. By convention of the Vietnamese market. a more subtle and market-oriented approach is in place so that Open-marketoperation comes closer to its true meaning in Vietnam.Du lÞch Th¸ng 5 . BIDV (Bank of investment and development of Vietnam) issued new bonds with value of more than 2. The purpose of the operation is to adjust some key economic variables. plus a monthly interest of 0. individual investors also benefit from a repo contract as a readily available source of funds to cover short positions in their portfolios. 2. Although it is not explicitly stated as a repo transaction. The issue had provided the bond market with high quality bonds suitable for the purpose of repo trading. For example. at earlier stages. The other counterparty to this transaction is large commercial banks and state-owned banks and other credit institutions. banks and credit institutions also use repo as a short term financing method. non-market power has to be utilized to achieve SBV’s goals. the essence of one such operation resembles that of a repo contract. Short term interest rate can change substantially over the course of several days but the repo rate is “locked in” for each contract.200 billion VND for 10 and 15 year maturity. In some circumstances. Agriseco (Agriculture and rural development bank) introduced the repo contract with 15-day term. In addition with their involvement with SBV. By advancing cash to investor and accepting bonds as collateral. Agriseco was committed to buy back the bonds at the same price when the period expired. including inflation and interest rate and to improve shortterm liquidity in the banking system without changing the money supply. Investors entering this contract purchase government bond for a 15 day period. also being the fee income for banks may prove volatile. commercial banks and financial institutions also carry out repo contracts with individual investors although their financial resources mean they have a different standing and incentives in association with the transactions. Although the operation is labeled as “open market”. banks earn short term profit on those transactions in the form of repo rate. in the same way as individual investors do.475% for customers with an -73- . or the open market operation looked from the perspective of commercial banks. however. commercial banks are forced to take part in the transactions while their strategic directions may dictate otherwise. Repo is an ideal medium with the term as low as 6 days. in late 2008. That is.

bonds (or otherwise valuable papers) are allowed for the purpose of open market operation. bidding rules. At the same time. only short term notes. for the most parts.Du lÞch Th¸ng 5 . the stock repos market experience rapid growth or slowdown accordingly. certain regulations of the open maket operation as stipulated in the State Bank of Vietnam Code can be applied for this market segment. Meanwhile. In developed economies.4625% for those who do not have one. These terms are quite attractive compared to the normal savings deposits rate. When the securities market booms or bursts. may be a plausible reason for its popularity among credit institutions. The implication of repo may come further than simply mobilizing funds. In fact. especially for the purpose of making up the shortfall in the required reserves. on the other hand.3 Repo transaction in interbank market Up to this point. 2. the latter used as a financial leverage tool make the funds in the securities market increase then contributes to the boom of the former. The repo contract itself. according to Vietnam -74- . However.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Thus the integration of repo mechanism has changed the bond trading practice fundamentally. In 2006. it also means that bank can make corrections to their asset and liablity by contracting repo if asset-liablity mismatch (the differing maturities of asset and liability) exists. 3.2010 account at Agriseco and 0. The interaction of banks and credit institutions on a repo basis.85/2000/QD-NHNN14 of March 9. mostly come in form of bond trading on the exchange. However. 2. 70% of all the volume of bond transactions are implemented through the repo mechanism. when the securities market loses its value and liquidity. It came as no surprise that Agriseco was able to mobilize more than 10.Mutual impacts of stock repos and Vietnam securities market Vietnam securities market and stock repos market have mutual influences on each other. This restriction somewhat limits the power of repo intrument in the open market operation scenerio. More specifically the Decision NO.4 Laws and applications on the bond repo market Although there is currently no set of laws explicitly governing the practice of repo transaction with bonds. which allows for terms of 6 days up to 9 months and differing trading values. in Vietnam there are little empirical evidence to show that a similar interbank repo market exists. 2000 by State Bank of Vietnam provided for the term. interests rate and other provisions that can regulate the use of bond repo. Repo transactions with stocks 3. we have deferred the discussion of repo instrument in one of most the most dynamic environment – the interbank market. The booming period of Vietnam securities market began from year 2006 to 2007 mainly due to the favourable economic development. one pitfall that need to be kept in check is that according to the Decision. repo transactions are a commonly used as a short term financing instrument in interbank market. repos transactions may worsen the situation.000 billion VND from repo activities alone in 2004.1. is a short term market instrument. The versatility of a repo contract.

(Anh Vu.000VND/share).000VND/share).17% . many investors engaged in repos transactions. A record of 15million stocks and investment fund certificates traded at 1259 billion VND was made on 26/9/2007 (Nhat Linh. SAM (250. investors were willing to pay a P/E ratio of 40 (Le Dat Chi – Truong Minh Huy. To increase profitability. 2007).000 VND/share). 2010).000VND/share). KDC (246. They put up their OTC stocks as collateral in securities firms or commercial banks to obtain funds while at the same time promised to buy them back. Moreover.89% (compared with 12/2007) and 23% (compared to year 2007). since the securities market did not bring much profit anymore. Stock price also rose as a result of higher demand. However. securities firms and commercial banks had to sell the stocks held as collateral in those repos contracts to cut loss. DHG (394. Many stocks reached their top prices such as SJS (728. This made the trading volume and value increase substantially. In 2008. ACB (292. at that time the market already lost its liquidity and stock price was low. At some point. The lowest trading volume recorded was on HASTC with 272300 stocks with a value of 10. many enterprises announced loss or a decrease in the profit such as DPM. To fight inflation.35 billion VND (Tuan Truong. investors engaging in repos could not purchase back their stocks or deposit more money when the price of the stocks used as collateral fell below initial margin.. On 1/1/2007. the government imposed a restriction on the monetary policy causing obstacles for the economic growth.02 million stocks and investment funds certificate with a total value of 482 billion VND.000VND/share)… This in return motivated investors to borrow more and more via repos. PVF. 2009) Seeing this bleak economic picture. 2008). -75- .Du lÞch Th¸ng 5 . The funds were then used to buy other attractive securities in the market.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the securities market in Vietnam thrived during the years. much less than those in the previous years. investors revised their expectations to a more realistic level.a high rate in the region and the world. GDP in 2008 was just 6. Consequently.18%. HPG. the inflation rate in Vietnam in year 2008 was markedly high at 19. the economy of the country grew at 8. FPT (665.000VND/share). a substantial supply of stocks drove the stock price and the securities market value to a lower level. In the year 2007.000 VND/share). As stock prices were volatile and VN-index lost its score. the economy continued prospering. VN-index hit its peak at the score of 1170 at the beginning of 2007. after Vietnam successfully held the APEC summit and joined the WTO.85 score.000VND/share). the economy of Vietnam was negatively influenced by the world financial market. SSI (255. VNM (212.2010 general statistic office website. The average trading volume stood at 8. As a result. many investors ceased participating in the securities market making the liquidity of the market decrease.000VND/share).. Moreover. 2007). In addition. REE (285. the Securities Law was put into practice providing legal frames for the development of the securities market (TTXVN. there were high expectations in the ongoing development of the economy. As a result. By the end of 2008 VN index hit its bottom at 286.

many enterprises announced making profit such as Nhiệt điện Phả Lại (PPC) with profit before tax in the first 5 months at 500.Ngọc Châu. Though the country’s GDP was at 5. The collaterals in such contracts are mostly bonds. especially its stimulus package of 160 thousand billion VND. contracts are signed between security firms and individual investors. the liquidity and value of the stock market would improve. repo is more convenient for short term borrowing because of fewer procedures involved. Moreover. As mentioned in the development of Repo activities. individual investors use their current stocks as collaterals for entering a repo. repo brings the party which needs to borrow money some flexibility. (168% planned profit).2. 3. in Vietnam.2 billion VND. repo was prosperous in 2006 and 2007.2010 In the year 2009.Du lÞch Th¸ng 5 . Contrary to the bleak picture in 2008. Since the securities market started recovering. 3.For these investors. First of all. However. as many investors believe that the securities market in Vietnam will grow and volatile in an upward trend (Quang Sang. It is a substitute for pledged stock. Participants Repo is done widely by the Security firms in the developed financial markets. whereas in a repo. In the current year 2010. during the downturn of the stock market from 2008. the economy of Vietnam started to recover as a result of the government’s effort. the rest are the blue chip stocks. Secondly.2.with the long term investors. repo bring them some benefits.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . However. Vietinbank successfully made their IPOs on the stock market. Firstly. which appeared in VN earlier. The repo process take place as mentioned in our overview of repo previously. According to Ms. many firms started offering repos transactions after ceasing this activities for a while due to the slump in the securities market in 2008 (VnEconomy. Both stocks pledging and repo are considered to be ways for investors to buy securities before actually paying. repos contract as a financial leverage may regain its popularity just as several years earlier. it was among the top economic growth rate in the world. which is restricted according to Vietnam’s securities law. investor can change the stocks in the repo contract if agreement is reached between 2 parties in repo.23%. 2009). this repo market attracts a lot of attentions because the active participants are the individual investors who make up the most of the security market. -76- . Their counter party is a security firm.1 Parties that enter a repo In a repo contract. Therefore. the demand for repos transaction has been increasing. with nearly 150 billion VND… Moreover. 3 big corporations Bao Viet. repo is an choice to get credit for their long term investment. In reality. Stock pledging is the contract between a financial institution and an investor. stock repo is also a popular activity. REE achieved 60% planned profit before tax in the first 5 months. 2010). 2009). In compare with pledged stock. Basically they are two types of secured loans and investors often use money from these loans to invest in the stock market. Vietcombank. These factors helped boost the security market (Bạch Hường .Cao Thị Hồng – Deputy CEO securities firm VIS. Most of stocks in repos are stocks in OTC market.

3. the value of a loan does not exceed 40% market value of the collateral and not exceed 2 time of par value of the securities as collateral. have cooperated with a financial institution to get fund for this service. Security firm will use its own fund. When the stock market in VN got into some problems due to financial crisis. the rate is till high because investors either unwilling to sell a large number of their OTC stocks or unable to sell them due to the low liquidity of market. For example. they are attacked by margin variation called by the securities firm and the banks that provide funds for these repos. the rate can be up to 1. the average rate is 1.It is noticeable that in 2008 and 2009.net) During 2006 and 2007. although the stock market is down and repo activities is somewhat reduced. Security firm’s first motive to enter a reverse repo is that Repo is profitable field. The list of securities accepted as collateral at SHS is stock of Eximbank. investors got fund and made a short term investment in stock to grasp the substantial growth of Vietnam’s stock market. can access to this borrowed fund to invest more in stock market. Sabeco.vn) Secondly.85%/month. has booted the stock market up to 100-200 %.vinacorp. Bao Viet Corporation. they can not repurchase the stocks acting as collaterals. besides their equity. however.000 than down to 286.(http://vnexpress.15%/month. Repo.15%/month (http://www.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .In 2008 and 2009. Habeco. many investors got stuck in repo contract.2010 liquidity of the market reduces.Du lÞch Th¸ng 5 . Parties that enter a reverse repo Security firms enter a reverse repo to provide credit for individual investors against collateral. Because there has been no official law or guidelines regulating this field so each bank has its own policy regarding the repo activities. also. Each security firm has its own choice of the stocks to be accepted in its repo. risk that investor faced increased. Investors. the VN index reduced from a peak of about 1.2. Repo acts as a financial leverage to boost net return. through repos. is carried out in large block (at least 20. Repo at Petrol Vietnam Security (PVS). The interest rate is high when repo is in high demand. In this business. Many of them. The role of financial institutions will be presented later in our report. repo fee. this rate is between 1-1.vn). investor with long term goal can make use of Repo to get fund instead of trying to outright selling their current stocks (http://vneconomy. it can bring the investor superior profits or substantial losses. Other factors such as assessed value of the collateral. at Sai gon –Hanoi Security firm (SHS).85 in 2008 and just 235 in 2009.2.In 2007. In 2006. As a rule in using financial leverage. etc. The maturity is up to 6 months. However. Due to the loss in stock investment in general. -77- . together with other other financial leverage such as stock pledged and margin trading.000 stocks) with repo value equals par value. however. Therefore. According to the published data. due to the excessive use of this instrument and other financial leverage instruments. are calculated and presented in repo contract made by each security firm.

if with a large repo contract.2. Commercial banks are. BCVS and SBS. Banks when performing its role as intermediaries in a repo contract. AVSC had contracts with Agribank. lowest amount for lending in a repo was 50 million VNV/investor and no ceiling is applied for the lending amounts. 2009.In case of Eximbank in 2008. these commercial banks can somewhat maintain their benefits in the stock investment lending but still meet the regulator’s requirements. ACBS. The value of loan was up to 50% market value of the collaterals. it is the SSC that directly manages the matters regarding securities and the -78- . 3. a newly established security firm with plenty of equity fund could engage in Repo to use this fund in a profitable way while waiting for the stock market back to its normal upward trend. These security firms have a wide network with branches and dealing rooms. According to this instruction. By cooperating with Security firms in a Repo as presented above. the proportion of loan for stock investment can not exceed 3% of the total loan made by a bank. These financial institutions act as parties which smooth the repo process. Joining the repo process. due to the fierce competition in the market. the number of security firm in Vietnam is 105. stock pledged. put under pressure to limit its fund resources in its traditional and profit field. In Repo market.3 Other finacial institutions Financial institutions mentioned here mainly are finance companies and banks. up to the 30th of April. Law and applications Repo is a derivative instrument that should be governed by the Security law. (http://duthaoonline. Security firms often has contract with banks to get funds for a reverse repo. In addition.2010 Morever. security firms provide Repo as a service to attract more investors to come to trade and keep the loyal customers.com).i. interest rate was 16. therefore.com) This high interest rate partially due to the fact that the repo interest rate is not regulated by a ceiling as a normal loan. Moreover.gov. 3.e.For example.03/2007/CTNHNN on control of scale and quality of credit and loans for investment.vn). Nam A bank provided 100 billion VND for the investor of BIS with the maturity up tp 3months. The loan market for stock investment is then quickly exploited by Security firm through their Repo service. commercial banks play a dominate role. stock business to control inflation and to impulse economic growth (http://www.sbv.5 times increase compared with figure of 2005. In Vietnam. Currently.This number is the result of of 7.quochoi.Du lÞch Th¸ng 5 . try to increase the services including Repo service. However. 80% of the market share belongs to 20 out of 105 biggest security firm such as SSI.5%/year (atpvietnam.The rest has to compete hardy for the 20% of market share left. The firms. in the period when the stock market was down and full of uncertainty. For example. earn a high interest rate. banks often provide fund for securities firm under a agreed credit line. on 28th May 2007 the SBV release the Instruction No. the investor has to file for the repo with Eximbank on his/her own.3. in 2008. According to the published figure. therefore. Nam An and Au Lac with Eximbank (http://atpvietnam.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .. VCBS.vn).

these investors suffer and not able to fulfill their obligation under repo contract. This draft has proved a substantial effort to standardize a repo contract and guiding security firms to make a safer repo However. four strict conditions are required for a stock to be accepted in a repo. Therefore. when the stock market had substantial growth. Therefore. when the market is down.Vu Thi Kim Lien. there are some conditions for the security firm to be allowed to provide repo service and conditions for the parties who enter a repo. the condition of 5 year operation can reduce substantially -79- . the market at the middle of 2008 experienced unpredictable downturn due to the risks from repo. many investors make use of repo service and other financial leverage such as stock pledged and margin trading to invest more in stock market. decided to restart this field. the repo value.First. in May of 2008 the State Security Commission (SSC) has release a official dispatch. were unable to meet the contract’s requirements.on a large scale. Secondly.gov. For security firms. the vice chairman of SSC. which will restrict the repo development. Due to this fact. Especially.Du lÞch Th¸ng 5 . As a result. For individual investors. after a short period of ceasing the repo service. the operating period of the company is at least 5 years. In fact. ROE of the 2 previous years is to be greater than 10% and that company must be a public company registered with SSC. In 2006 and 2007. they have to mange the risk on their own without a standard among the market.Security firms was considered to have taken too much risks when their customers. stock repo in Vietnam has attracted a lot of attention of major stock market participants due to their own benefits in a repo. the terms in its repo contract. As detailed in the previous sections. Some other terms to standardize a repo contract are also stated. many security firms. However. as illustrated on the security investment (8/10/09). In 2008 and the beginning of 2009. consider the requirements are too strict.vn) In attempt to building a trading platform of Repo activities as promised.ssc. which asked for the temporary termination of signing new repo contract until the rules are to be made to govern a repo transaction. stock repo has not yet had a trading platform. which create a magnified demand and make investing in stock market of Vietnam is expensive because the stock is overvalued. many investors overuse this financial leverage. a draft of circular for repo transaction was made by SSC and opinion of major market participants was collected regarding the content of the draft.2010 stock market. the public’s opinion. This official dispatch only request for the cease but does not prohibit security firm from carrying out Repo. For example. In this draft. each security firm has to decided on its own the kinds of stocks accepted for repo. at a large proportion. the 990/UBCK-QLKD. According to Ms. this has created some obstacles for the two counterparties in a repo process. because there is no guidelines and rules that control their behaviors. in June of 2009.Finally. the SSC had to release the second official dispatch to once again ask the security firm stop their repo service (http://www. the charter capital can not be less than 50 billion VND and that company does not have a cumulative loss.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

is the activity in which Security firms provide credit for its customers. The second point in article 8 of the draft prohibits institutions other than banks from activities of providing credit. arose a lot of market’s attention. 2009) Besides. VIS chooses stocks that have high liquidity to put in its list (Vneconomy. is in contrary with the security law which allows security firm to lend customer within a limit amount. there is also disapproval about the limit for the total value of repo contracts for individual investors. Nguyen Ngoc Chung. -80- . at the mid of August. Securities firms employ other methods such as limiting repo contract term to maximum 6 months as at SHS or funding only 30-40% market value of the collateral stocks (Ngoc Thuy. While all of these laws have not yet come to effect. This draft was presented at the 6th section of the 12 National Assembly at the end of 2009 and will be voted against at the 7th section of the 12 National Assembly which opened on May 20. repo is considerd to be a channel for investor to get fund for long term investment (www. security firm is not likely to be allowed to continue carrying out such activity like repo. Therefore. While this draft of SSC was not successful. repo is subject to this draft law. which repo is to be subject to. actually.vn). margin trading. Repo. It is therefore a question mark whether which law Repo is to be regulated by. Customers who own accounts at ACBS are also given priorities. security firms decided on their own to restart their repo service.Du lÞch Th¸ng 5 . 2009). However. After the first official dispatch of SSC about the temporary termination of repo activity in May 2009. the deputy director of VNS. 2010. from the first of January 2011 when this law comes to effect. According to Mr. 2009) Repo contract at this time was also considered to be safe because the stock’s price was on the way back to intrinsic value. during the 2008 and 2009. Security firms have realized the need to reduce their exposure of risk through such actions as evaluating their customers and analyzing more carefully the behavior of collateral on stock market. VNS made some changes in carrying a repo such as shorten the repo contract maturity. Nguyen Van Trung. in 2009. If there is no amendment. The draft law however. which is not to be greater than 1% of equity fund of security firm and not exceed 5million VND. reduce repo rate and stricter selection of the stocks to be accepted for a repo. ACBS is also planning to collaborate with CIC to improve its accuracy in judging the financial capacity and legal status of investors (Ngoc Thuy. Vice CEO of ACBS reveals that ACBS only signs repo contract with investors of good creditworthiness and willingness. these companies have made some changes to make repo safer with stricter criteria. Also. Beside.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . some security firms with the support of their banks restarted the Repo business. the draft of law on credit institutions.2010 the number of stock to be accepted for a repo because a large number of Vietnam’s companies are newly established.thesaigontimes. However. due to the illiquidity of market.

Should the securities lose its price by a certain amount. 2009) Acording to Dau tu chung khoan dien tu. However. commercial banks will be the only institutions to take charge in this kind of service. As a result. investors and financial institutions have called for a legal frame for securities investment in Vietnam. However. Vice Professor. Thus. investors should not only rely on repo as a financial leverage tool but others such as margin to reduce risk to themselves as well as the whole market. one article in the Draft concerning the activities of securities firms has been found to be in contrast with the Law of Securities. investors may deposit 70% of the amount needed to buy securities and borrow commercial banks the rest. three main types of which are price risk.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Securities firms Many securities firms ceased repo operations in 2008. the Law of Securities was put into force on Jan 1st 2007 and then draft of Law of Credit Institution is being scrutinized for approval by the National Assembly on May 2010. It is necessary that two sets of law be consistent with each other for the convenience of applying. Recommendations 1. the investors have to make more deposit. -81- .Investors Individual investors are considered most vulnerable when they use financial leverage tools such as repo with a view to boosting profitability. 3.Du lÞch Th¸ng 5 . clear and thorough guidelines to increase safety in repo transactions should be also provided by the government. once the Law of Credit institution prohibits securities firms from offering repo service. It is also safer for investors as it prevents them from taking excessive risk. In order to reduce risk when “surfing”. After the market signaled recovery. Doctor. Government authorities For long. 2. engaging in margin. Banks do not sell stock collaterals as cash is deposited so there is little impact of a default on the market as a whole. much stricter policies and procedures have been widely applied in order to control risks associated.2010 PART 3. this operation was revived. Besides. For example. individual investors should put the leverage amount under control and conduct thorough analysis on the movement of the market as well as the stock they invest (TCTC online. liquidity risk and counterparty risk. Vice Rector of National Economic University advised investors to turn to financial leverage tools only when clearly identifying a long term and sustainable increase in the market score. Pham Quang Trung.

asia/news/1098/tim-co-hoi-trong-chung-khoan. Available at URL: http://vnexpress. 2010) Ngọc Thủy. 2009. Ngọc Châu. 2010) Anonymous. Available at URL: http://tuoitre.vn/Details/phong-thuy/ttck-va-nhung-cai-nhat-trong-nam2008/32/37688. 2010. Chứng khoán Việt Nam lập kỷ lục mới về giao dịch. [online]. Available at URL: http://en. [online].nhipcaudautu.tuanvietnam.vn/kinhte/2007/09/744935/ (Accessed May 20. Repo chứng khoán trước nỗi lo an toàn hệ thống.vn/news/repo-chung-khoan-truoc-noi-lo-an-toan-he-thong/ct300890 (Accessed May 19. Available at URL: http://www. [online]. TTCK Việt Nam qua mô hình bùng – vỡ. [online]. 2010) Anonymous. 2010) Mỹ Hạnh.vn/Qu%E1%BA%A3ntr%E1%BB%8Bn%E1%BB%99idung/ViewArtic leDetail/tabid/56/Key/ViewArticleContent/ArticleId/1148/Default. Available at URL: http://vietnamnet.net/GL/Kinh-doanh/Chung-khoan/2009/12/3BA17318/ (Accessed May 12.html (Accessed May 10. 2010) Anonymous. Bank asset and liability management Quang Sáng.nguoilanhdao. 2010) Nhất Linh.Du lÞch Th¸ng 5 . Repo cổ phiếu: mỗi nơi một kiểu.vn/news/van-con-cho-de-cam-co-va-repo-co-phieu/ct-286815 (Accessed May 15. 2007.html (Accessed May 18. 2007. 10 sự kiện chứng khoán nổi bật 2007. 7 điểm nhấn chứng khoán 2009. Trương Minh Huy. TTCK và những cái “Nhất” trong năm 2008. Available at URL: http://www. 2009. 2010) Bạch Hường. [online]. 2010) Anonymous. [online]. [online]. 2010) Anonymous. Available at URL: http://vtv. Nghiệp vụ repo cổ phiếu đang trở lại. Đòn bẩy tài chính trên TTCK: Cân nhắc “liều lượng”! [online]. 2009.vn/Kinh-te/Tai-chinh-Chung-khoan/236506/10-su-kien-chung-khoan-noi-bat-nam2007. Repo cổ phiếu thế nào cho an toàn. [online].thesaigontimes.com/repo-co-phieu-the-nao-cho-an-toan/ (Accessed May 14. Available at URL: http://www. Available at URL: http://www.vinacorp.net/2010-05-04-ttck-viet-nam-qua-mo-hinh-bungvo (Accessed May 20.html (Accessed May 20.vinacorp. Repo an toàn.vn-seo. Sàn HOSE và những cái “Nhất” trong năm 2009. [online]. 2009.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Available At URL: http://www.atpvietnam. Available at URL: http://www.2010 REFERENCE Moorad Chauldry.tapchitaichinh. Available at URL: http://doanhnhan. Available at URL: http://www. 2010) Nguyễn Tuân.aspx (Accessed May 16. Available at URL: http://www. 2010. 2010) Anonymous.infotv.aspx (Accessed May 10.com/vn/thuctechoick/30712/index. 2010) Anh Vũ. Available at URL: http://www.aspx?id=2581 (Accessed May 15.star (Accessed May 13. Tìm cơ hội trong chứng khoán. 2010) -82- . 2009.vn/chung-khoan/tin-tuc/40638-san-hose-va-nhung-cai-nhat-trong-nam2009 (Accessed May 18. 2009. 2007. [online]. 2010) Lê Đạt Chí.vn/Article/Get/Nhan_dinh_thi_truong_chung_khoan_2010_fcd263064d. [online].vn/article. 2008. [online]. 2010) Tuấn Trường. [online]. Nhận định thị trường chứng khoán 2010.vn/Home/taichinh/chungkhoan/9455/ (Accessed May 20. [online]. 2009. Vẫn còn chỗ để cầm cố và repo cổ phiếu. 2009. 2008.

Khởi động thị trường trái phiếu chuyên biệt.com/vn/thuctechoick/39927/index. 2010) State Agency of Securities.vn/vn/home/tinthoibao. Available at URL: http://ww.2010 Anonymous. 2008. repo. -83- . Available at URL: http://duthaoonline. Thị trường giảm: Nhà đầu tư không còn mặn mà với dịch vụ cầm cố. 2009.205234.quochoi.com/vn/san_hose/23073/index. 2010) Anonymous.atpvietnam.Du lÞch Th¸ng 5 . Dự thảo Luật sửa đổi. Available at URL: http://tintuc. 2010) Ngọc Quyết. Chỉ thị số 03/2007/CT – NHNN: Hạn chế cho vay kinh doanh chứng khoán. [online]. Doanh nghiệp kém hiệu quả. 2009. 2010) Anonymous.infotv. Available at URL: http://www. Luật Các tổ chức tín dụng “bỏ rơi” hoạt động repo và ký quỹ.aspx (Accessed May 18.html (Accessed May 13.ssc.gov. [online].aspx (Accessed May 20.vn/xem-tailieu/giao-dich-repo. 2010) Anonymous.timnhanh. [online]. [online]. 2008. Available at URL: http://www.sbv. Hướng dẫn giao dịch repo: Đừng chặt quá hóa… vô hiệu.vn/du-thao-luat/du-thao-luat-sua-111oibo-sung-mot-so-111ieu-luat-chung-khoan (Accessed May 19.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . [online].vn/portal/page/portal/ubck/1096905?p_page_id=1096905&pers_id=109534 1&folder_id=&item_id=22467300&p_details=1 (Accessed May 18. Giao dịch repo. cổ phiếu không được repo. [online]. bổ sung một số điều luật Chứng khoán. Available at URL: http://www.vn/20091103034514158P0C6/luat-cac-to-chuc-tin-dungbo-roi-hoat-dong-repo-va-ky-quy. 2010) Minh Đức. 2009.htm. 2010. Available at URL: http://atpvietnam. Available at URL: http://tailieu. [online].gov. Công văn Ủy ban chứng khoán nhà nước về chấn chỉnh một số hoạt động của công ty chứng khoán. [online]. 2010) Anonymous. [online]. 2009. 2010.com/kinh_te/chung_khoan/20080304/35A7206B/ (Accessed May 18.jsp?tin=1075 (Accessed May 19. Available at URL: http://vneconomy. 2010) Law of Securities.vn/chung-khoan/tin-tuc/38002-doanh-nghiep-kem-hieu-quaco-phieu-khong-duoc-repo (Accessed May 17. 2007.

Vietnam treasury bonds are highly appreciated by foreign investors. however. Vietnam treasury bonds are first issued in the international capital market. a rising tiger. In 2010. in the Southeast Asia has been a destination for many investment projects. Vietnam first has to employ flexible monetary policies to curb its inflation. Vietnam issued treasury bonds for the second time in the international market and gained success by selling 1 billion USD 10-year bonds with an interest rate of 6. Recently on April 24th 2010. and discount rate manipulation to control Vietnam inflation. Vietnam assures a promising business hub in ASEAN community.3%. Inflation has been. -84- . the required reserve rate goes up to 4 %. reserve requirement. Vietnam has successfully utilized three main measures to rein in the inflation rate in order to maintain the stable economy: the open market. In the domestic market. a factor that hampers Vietnam’s sustainable development. With the current growth rate.exchange rate and credit and macro intervention when necessary. Pham Thanh Cong (BA-08) Le Bich Thuy (AC-07). and postrecession are deeply analyzed and critically dissected to offer an insight view on open market operation. Vietnam needs to be transparent in the capital and policies.3% in 2005 and rocketed to 23. Recently on January 25th 2010.95%. Vietnam issued 1500 billion VND bonds for 3 types: 2-year. To become globally competitive. For example in 2009. For the reserve requirement. further close coordination between the interest rate . and discount rate. Three periods of pre-recession.000VND/bond. recession. The 2-year bonds were bought altogether with an interest rate of 11. and 5-year. All 750 million USD bonds with an interest rate of 7. In order to achieve the aimed inflation in 2010. For the open market.125% were bought in 30 seconds after issuing. Vietnam has changed the reserve requirement rate many times during 2005-2010.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Du lÞch Th¸ng 5 . treasury bonds have been issued in international and domestic market. 1. reserve requirement. which was a promising omen for a developing country. 3-year. Introduction to Vietnam inflation rate in 2005-2010 During the time of 2005-2010. Vietnamese monetary policies in the period of 2005-2010 are synthesized and analyzed to have better comprehension of Vietnam inflation rate. Treasury bonds were auctioned for the interest rate.2010 DANCE WITH VIETNAM INFLATION 2005-2010 Written by: Nghiem Truong Son. In this report. Bui Thu Van (BA-07) Supervisor: Pham Thi Hoa Nhai Executive Summary Vietnam. required reserve rate went from 5% to 3% for loans below 12 months. A par value is 100. In October 2005.1% in 2008. which went from 8.

Urban jointstock commercial banks 4% including Foreign Banks’ Branches in Vietnam.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .3% 2008 23. local credit funds.4% 2007 8. 2010 For discount rate.1% 2009 6. 2010 Deposit in VND Types of Credit Institutions Demand & below 12 months Up to 12 months Deposit in foreign currency Demand & below 12 months Up to 12 months State-owned commercial banks (excluding the Vietnam Bank for Agriculture & Rural Development). Through its monetary policies.5% 2010 (est. Joint – Venture Banks.3% 2006 7. Vietnam central bank also manipulates for flexible monetary policies. Vietnam inflation rate 2005-2010 has been tightly controlled. taking effect from February 1st.Du lÞch Th¸ng 5 .2010 Under Decision No. Vietnamese discount rate ranged from 5% on April 10th. Vietnam Bank for Social Policies (Source: State Bank of Vietnam) 2% 7% 3% 1% 6% 2% 1% 6% 2% 0% 0% 0% Table 1: Reserve required taking effect from February 1st. 74/QD-NHNN. 2010 to 6% at the moment.) 7% Table 2: Inflation rates in 2005-2010 -85- . Year Inflation rate 2005 8. cooperative banks. 3% Central People’s Credit Fund Credit Institutions with deposit balance subject to reserve requirement below VND 500 0% million. Financial Leasing Companies Vietnam Bank for Agriculture & 3% Rural Development Rural joint-stock commercial banks. Finance Companies.

websites of research organizations and online newspapers. In addition. In order to comprehend the whole image of Vietnam economic development from 2005-2010.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 2008-2009 (recession).google. Economic period analyses 3.Du lÞch Th¸ng 5 .1. and World Bank for reliable data. WTO membership from 2006 has given Vietnam many opportunities but at the same time more difficulty for Vietnam to adjust to the global playground.google. Then it is our responsibility to sort out data from research report and well known journals. Methodology Data and materials are an essential part of a methodical and thorough report.com to find necessary information. Vietnam has encountered many challenges to sustain the economy’s growth.1 The economic condition: In 2004. During the time of 2005-2010.9 Million of -86- .1.2010 Inflation rate 25 20 15 Inflation rate 10 5 0 2005 2006 2007 2008 2009 2010 (est) Figure 1: Inflation rates in 2005-2010. we also referred to annual reports by Asian Development Bank. FDI (more than 4 Billion USD). Tourism (2. Our group utilized Internet search tools like http://www. Period of 2005-2007 3. our group has chosen secondary information for references due to the time limit and lack of human capacity. In the process of conducting this research. Vietnamese monetary policies and their influences on GDP and unemployment rate in each period are thoroughly analyzed for better comprehension. Moreover. 2.com and http://scholar. Three periods of 2005-2008 (pre-recession). the financial recession has also struck a hard blow on Vietnam economy. 3. and 2009-2010 (post-recession) are carefully examined. Vietnam economy developed impressionally with the new records of export (26 Billion USD). the State Bank of Vietnam.

America’s economics are being affected by financial crisis and the crisis began to affect to other countries. there is a special point in the picture of inflation of Vietnam this time. in 2005 and 2006.1 Open market In order to manage the liquidity for credit institutions. That event has brought opportunities as well as threats for the young-industry of Vietnam. the growth of GDP in these years is always at the high rate.Du lÞch Th¸ng 5 . the inflation rate increase suddenly and reach 12.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Particularly. 11/1/2007.6%. overseas national currency exchange (3. other components of Vietnam economy also increase strongly and reach many huge 2007 is also the year marked a historical turning-point in Vietnam economy. there is still a special point in the picture of inflation in the period of 2005 to 2007.23% in 2006 and 8. and the engagement of external aid in year 2005 (3. This is the second high rate in Asia and is only lower than the growth rate of China. State Bank of Vietnam held three open market operations session per week.43% in 2005. during the last days of years and before the Lunar New Year. However. above 8% (8. Moreover the stable trend represented the stable development of Vietnam’s economy in this period. Besides. Although at this time. To proceed the success in 2004. There is no change in the trend of inflation through each year and the inflation rate is almost lower than 10 percent.4 Billion USD). Vietnam has to face up to the disadvantaged condition.2010 international tourists). Figure 2: Inflation rates in 2005-2007 In that period. the highest rate within three years and the reason is at that moment. inflation rate in Vietnam economics developed steadily. Vietnam became a full-fledged member in World Traded Organization.2.46% in 2007).1.2 Monetary policies 2005-2007 3.1. Besides. 8. phase of 2005 -2007 is the stable developing phase of Vietnam economy. Open market operations were run -87- . 3. The rate always starts at the lowest point at the beginning of year and reaches the peak in last month of each year. In December 2007.8 Billion USD).

increased the amount of bills to be sold. reserve requirements continued to be managed on the monthly average basis to help the credit institutions using their sources flexibly.2010 daily to assist the credit institutions ensuring liability and stabilizing the money market. joint-venture banks.Du lÞch Th¸ng 5 . The scale of open market operations had been expanded.1. 3.5 -2 times in order to withdraw money and control total liquidity growth Deposit in VND Credit Institutions Demand & below 12 months 2005 2006 State-owners commercial banks (excluding the Vietnam Bank for Agriculture & Rural Development). SBV still kept the constant reserve ratio. from the middle of 2007. because of the sharp increasing of inflation. Joint – Venture Banks. and to promote the economic growth. The SBV still continued to pay interest rate for VND reserve requirement but not for excess reserves to prevent the liquidity surplus of SBV. there were 20 participants in open market operations. Urban joint-stock commercial banks including Foreign Banks’ Branches in Vietnam.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2. State Bank of Vietnam increased the number of transaction sessions from 3 times per week to daily Open market Operations transactions. In 2007.2 Reserve requirement In 2005 and 2006. included state-owned commercial banks. and determined the appropriate interest rate to withdraw money from circulation through this channel. Financial Leasing Companies Deposit in foreign currency Demand & below 12 months 2005 2006 2007 Up to 12 months 2005 2006 2007 Up to 12 months 2005 2006 2007 2007 5% 10% 2% 4% 8% 10% 2% 4% -88- . to maintain the monetary stability. and number of new players participating in the open market operations increased year by year. In 2007. to restrict the speed of the raise in price of market. in order to reduce the pressure of increasing the mobilized interest in the market. Finance Companies. and foreign bank branches. However. diversified term of SBV bill from 14 to 365 days. In 2 first years. SBV had to increase the reserve ratios by 1.

local credit funds. Increasing discount rate also raised the loan interest rate of commercial banks. there is not too much change in the monetary policy of SBV. -89- .1. therefore reduce the total export of Vietnam in 2007 and create the big negative net export in this year. and the result was decreasing in the benefit of corporations. SBV had three times raising discount rate of 3 – 3. cooperative banks. And until the end of 2007.6% . We also can see this effect through the big trade deficit of Vietnam.3 Effect In two year 2005 and 2006.5 percent per year. 3. Central People’s Credit Fund Credit Institutions with deposit balance subject to reserve requirement below VND 500 million. the inflation rate of Vietnam economics increase too fast. The US crisis decreased the amount of export to US market. in the last quarter in 2007.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .3 Discount Rate In 2005. SBV still unchanged the discount rate of 4. The reason for this stability is stable development in Vietnam’s economics as well as global economics. One reason for this unusual trend was the effects of US crisis to Vietnamese economics. However. Vietnam Bank for Social Policies 4% 8% 2% 4% 8% 10% 2% 4% 2% 4% 2% 4% 8% 10% 2% 4% 0% 0% 0% 0% 0% 0% 0% 0% Table 3: Reserve Requirement from 2005 to 2007 3.2. and in last month of this year. narrowed fields of activities.2010 Vietnam Bank for Agriculture & Rural Development Rural joint-stock commercial banks. That policy made the borrowing money of commercial banks from SBV becomes more expensive and from that affected to almost persons as well as corporations.Du lÞch Th¸ng 5 .5 percent. the inflation rate reached a peak at the rate of 12.1.the highest rate within three years.5 – 4 – 4.

2.8 billion threatening the stability of balance of payment and putting heavy pressure on USD/VND exchange rate (VND depreciated largely in comparison with USD.2010 Figure 3: Import and Export 2005-2007 Although being affected by US crisis in 2007. -90- . trade deficit in the first six month of 2008 reached USD14. especially in 2007 GDP reached 8. 3.19%. That situation put Vietnam in a great challenge with rocketing inflation rate along with escalating trade deficit and dwindling property market.Du lÞch Th¸ng 5 . Period of 2008-2009 3.5 percent. GBP. due to the volatility of the world price. in the first quarter of 2008 Vietnam suffered the highest quarterly inflation rate from 1995 up to now. Therefore. 9.1 Economic condition As global financial crisis. The GDP developed too fast. While property market was frozen in high price. respectively). 2. Vietnam economy from 2005 to 2007 in general developed strongly. around the world stock markets fell. Vietnam economics still developed stably with timely and reasonable monetary policies. and governments in even the wealthiest countries had to come up with rescue packages to bail out their financial systems.2. Moreover.3 percent and 2 percent. while USD depreciated considerably over other frequently-traded currencies such as EUR. The government was also very success when controlled the unemployment rate (the unemployment rate from 2005 to 2007 is 2. CAD and AUD).46 percent – the highest rate within nearby 10 years. many large financial institutions collapsed.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

Unemployment rate also increased sharply from 2% (2007) to 4.expanding policies of social issues. and enhancing information and propagating to appeal to the cooperation of all citizens. which included making use of tight monetary policies.8%. lessening trade deficit by boosting export and restricting import.tuoitre. concentrating on the development of industry. GDP growth rate of the first three months 2008 was only 3. The next part will discuss how government used monetary policy to control inflation.2 May 3.2010 Source: www. In November 2008.18 Oct -0. this rate came up to 19. Vietnamese government had decided to set the targeted duty of the country at this time was reducing inflation.38% in January 2008 compared with December 2007 to 20. close control and improving the efficiency of government budget.vn Figure 4: Inflation rate of the first 10 months 2008 Inflation rate in Vietnam rose so fast from only 2. with the rate of each month is stated as the table below: Jan π 2. the government turned to the new package of five solutions for dealing with recession.5%).76 Dec -0.91 June 2.44% in comparison with 31th December 2007 and at the end of the year.14 July 1. the government applied the package of eight solutions for improving Vietnam economic condition. the inflation rate got to 18.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . stabilize macroeconomic condition and ensure sustainable development.5% in September. At the end of June. In January 2008.19 Nov -0.com. when price level had the downward trend. -91- .38 Feb 3.13 Aug 1. It is obvious that the negative influences of it on the economy as well as the living standard of Vietnamese people were not small. strengthening market management.Du lÞch Th¸ng 5 .99 April 2.68 Table 4: Monthly inflation rate 2008 In order to stabilize the economy.56 Mar 2.1% which was much lower than the expected rate of government (6-6.56 Sep 0. practicing economization in both manufacturing and consuming. agriculture and service sector to ensure the equilibrium of goods and services.7% (2008).

By this way.5% to7. cement manufacture…. President of Vietnam Institute of Economics. leading to the fall in price level. Reserve requirement for commercial bank with over one year deposits declined from 5% to 3%. However. Two months later. the government introduced the use of prime rate that does not allow commercial banks setting interest rate 150% above this rate. Moreover.75%.2. the prime rate was 12%. 19th May 2008. Prime rate was considered an effective tool for government to manage the market rate based on the sign of anti-inflation from goods and services market as well as money market.300 billion of government bonds.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the idea of using demand stimulation policy had been raised to deal with the problem of recession. Going along with expanding export and investment in construction.2 Monetary Policy and its Influences On 30th January 2008. For VND and foreign currency deposits up to one year (including demand deposits). Furthermore. The criticism continued with the high pressure that the policy -92- . electricity. discount rate from 4. the compulsory reserve requirement was raised from 10% to 11%. would receive the support of 4% interest rate by government. According to the report of government. and the reserve of the deposits of more than one year was raised from 4% to 5%. by using this policy. Government also sold VND20. for motivating investment as well as consumption. the demand stimulation policy has not gone in expected direction.and medium-sized enterprise. reserve requirement was also moved up. the money supply could be reduced along with the decline in consumption and investment. At this time.2010 3. State Bank of Vietnam announced that it would raise three significant policy rates. VND 20. the threat of economic recession in 2009 was not a big problem any more with 5. expansionary monetary policies was also taken advantage of. this rate was raised to 14% following the tight monetary policy. analyzed by Mr. at the same day. unemployment rate climbed while GDP plunged. Tran Dinh Thien. Value-Added Tax (VAT) also diminished from 10% to only 5% together with reduction in prime rate to 7%.000billion of government bonds was bought back as the intention to increase money supply. enterprises who borrowed medium. The base lending rate was raised from 8. However.or long-term debt.5%. the government decided to used USD1 billion. effective from 1st February 2008.25% to 8. due to this drop of demand.Du lÞch Th¸ng 5 . In December.5% to 6% and refinancing rate from 6. Instead of going to manufacturing sectors. at the end of 2008. However.2% of GDP growth rate in 2008. pushing up the aggregate demand to avoid the economic collapse by compensating 4% interest rate for small. from 4th April 2009. the capital came to stock market as well as property market that raised VN-Index 71% and hot growth in property market with the sign of “bubble” in April 2009. this policy applied. followed by the package of USD6 billion. In April-May 2008. After the race of raising interest rate of commercial banks.

47% incremental amount of coal price. the black market became eventful even when the exchange rate in black market was much higher than the official exchange rate. economic growth rate in 2008 was not low but the quality of market got worse that would put severe pressure on many year later. Therefore. If the government implemented this policy sooner in the last quarter of 2008.5% rise in gasoline price and 28% .S. First of all.3 Period from the fourth quarter 2009-early 2010 3.. raising the inflation rate of the first quarter 2009 to 14. the inflation rate tend to increase up to now.2. however. There was a huge difference between supply and demand of foreign currencies.96% compared to the last month and also the highest level within last 17 months. Mr.2010 put on balance of payment as well as government debt by Mr. some recommendation was raised to ease the monetary policy and more idea about the necessity of demand stimulation policy and solution for deflation. boosted almost all prices of other goods and services. Japan International Cooperation Agency’s monetary policy professional. also declared that Vietnam’s monetary policy was going on the right direction with the flexible change in interest rate and reserve requirement as well as market liquidity rise.3. said that thanks to the government’s efforts to forecast the situation accurately and adopt the right policies timely to prevent escalation in the cost of goods and services. Tran Xuan Gia. Ex-Minister of Planning and Investment Portal. which. Furthermore. Vietnam economy has been recovering step by step. However.Du lÞch Th¸ng 5 . especially USD. 3. Bui Kien Thanh. Nguyen Tien Thoa. In addition. It is seen that the CPI in February 2010 increased by 1. the better result would be expected. Mr.3 Evaluation At a seminar on 31st December 2009.5% compared with the same period last year. accordingly. Not only affecting the production costs of other goods and services. The inflation was caused by four main reasons. 6. the easy monetary policy created a good condition for inflation. especially the burden of environment pollution. in the fourth quarter of 2009.1 Economic condition After nearly two years affected adversely by the recession from the U. was brought up. In the end of June. an economic expert. on the word of Mr. he pointed out that the weakness of Vietnam monetary policy laid in foreign exchange market. Hisatsugu Furukawa.8% increase in electric price from 1st March 2010. the Director of Price Management Department. The State Bank of Vietnam has tried to get out of consequence of inflation. For detail. The monetary policy ran behind the economic condition so the result was not high. there was 6.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 3. The government should reconsider monetary system management with the purpose of maintaining the consistence for daily transaction. the climb in electric price created -93- . Vietnam had successful kept inflation rate under control. a rise in electricity and gasoline cost and some basic utilities price had a strong influence on the cost of goods and services in the whole economy and rate of GDP growth.

Credit development in 2009 went up to 37. This also raised the production cost of other goods and service and brought an increase in the overall prices in the market. therefore. M2 up to 28.etc.7% and the inflation level in 2010 could be born on because the timing lag is average 5-7 months afterwards. When consumers demanded huge amount of goods or services for Tet holidays and suppliers could not be able to provide all at that time.100 dong for 1 dollar on February 2010. Moreover. the growth in utilities price after the adjustment of exchange rate is transparent. the base salaries increased 5%-10% depending on areas. It is shown that the price of steel. due to demand pulling. the prices of goods and service raised. The consequence will remain in Vietnam economy in 2010. -94- . Until January 18th. 2009 However. up by 5%-10%. 2009. using stimulus packages and increasing government purchases urged demand of some goods.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2 Monetary policies With respect to reserve requirement. this ratio has been changed from 18 March.2010 negative impact on consumers’ perception that the inflation rate would be higher in the future. 3. so they begin to buy more goods and services. 2010. Besides. The State Bank of Vietnam changed the exchange rate up to 19. Thirdly. milk. the adjustment of exchange rate is one component for the inflation rate to increase. it pushed the prices of food and other utilities increase significantly. many consumers now believe more in the future economic growth. from April 2010.Du lÞch Th¸ng 5 . changed their prices. Vietnam is a developing country. needing many modern machine and other high-tech products from abroad. Secondly. Fourthly. the actual inflation rate was much worse. 2010 for VND deposit: VND deposit Continously and under 12 months 4% 3% Over 12 months 2% 1% All Commercial banks except BIDV bank BIDV bank Table 6: Reserve required from 18 March.74%. hence.3. the simple reason for inflation growth is the State Bank of Vietnam’s money injection into the open-market. Another problem is that in 2009. the reserve ratio The State Bank of Vietnam applied is shown as follow: VND deposit Continuously and Over 12 under 12 months months 3% 1% 1% 0% Foreign currency deposit Continuously and Over 12 under 12 months months 7% 3% 6% 2% All Commercial banks except BIDV bank BIDV Bank Table 5: Reserve required until January 18th.

the State bank succeeded in stimulating Vietnam economic growth rate of 5. To deal with inflation in next time. 3. Ha Huy Tuan. It is recommended that due to FED’s easy monetary policies over the nest time. perhaps the SBV must accept a higher level of inflation of 7%. creating conditions for faster growth than last year. the government needed to implement them flexibly. The State Bank of Vietnam reduced the amount of money injected into the open-market. In 2010.5% growth for 2010.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . To achieve 6. from March 4th 2010. The administrative measure to increase base lending interest rate has been regarded as one of the causes of decreasing the abilities to mobilize capital from banks and thereby decrease liquidity in the financial markets. SBV should regulate interest rates through open market operations or the sale and purchase on the valuable documents and thus draw on a pump or the amount necessary to adjust the money supply. the SBV is capable of meeting both objectives.Du lÞch Th¸ng 5 . The State Bank of Vietnam has applied next is raising the discount rate. exports. while inflation stayed at 6.3. another decree. To implement contractionary monetary policies.3 The evaluation By contracting money supply. the government could ensure that CPI would not go up fast and still GDP can raise steadily. and then achieve the expected interest rate. made the discount rate up to 6% into effect. Therefore. In February 2010.5%. which contracts the supply of money. but its growth targets can be dominant because the world’s economic situation will turn the switch more easily. which will increase the price of goods and services overall. etc. Nevertheless. this also affects Vietnam economy by many channels such as imports. By that way. the amount of money infection decreased significantly with one-shift-per-day operation. increasing interest rate and limiting money injection into open-market. Vice president of National financing Committee. dodging to minimum of effect from USA economy 4. from just two months later. the discount rate that the commercial banks bear is 5% a year. In 2010 as the economy becomes increasingly more -95- . Furthermore. However. An inflation of 7-9% can be acceptable. According to the decree 2232/QD-NHNN coming to effect from October 1st 2009. said that although contractionary monetary policies focused on inflation problem. Instead of using the measure. The State Bank of Vietnam has been using tight monetary policy through increasing the reserve ratio by at least 1%. he also suggested that The State Bank of Vietnam should combine monetary and fiscal policies closely and consistently. then raises the interest rate. QĐ 2664/QĐ-NHNN. the government is trying to restrain inflation. Recommendations In 2009.2010 Clearly. the Vietnamese government shoud prepare and launch appropriate policies timely for Vietnam economy. especially not contract too tightly to firms. The State Bank of Vietnam injected from VND 12 thousand billion to VND 15 thousand billion and also reinforced the open-market oreation 2 shifts per day. According to Mr.3%.

L 2009. we would like to portray the general picture of Vietnam inflation rate through Vietnamese monetary policies in the period of 2005 . However. exchange rates. viewed 17 May 2010.com/Desktop. close coordination between the interest rate . A.com/2008/08/28/1584/ -96- . they have now been publicized. 11 June. H 2008. it should be transparent in the capital and policies.doanhnhan360. such as open market operations.. ‘Chong suy giam kinh te: Ban qua lau se mat co hoi’. however.vn/vn/home/tintapchi. ‘5 giai phap trong tam ngan chan su suy thoai kinh te’.jsp?tin=560 Tran. believe that to some extent this report would be useful in synthesizing Vietnamese monetary policies in 2005-early 2010.exchange rate and credit and macro intervention when necessary.com.sbv. the inflation rate has gone up and down following the “dance” directed by the State Bank of Vietnam. some mistake or constraint is unavoidable.T 2008.gov. Vietnam has gone through the period of stable growth in 2005-early 2008. viewed 17 May 2010. In the future. and finally sustainable recovery from 2009 until now. viewed 17 May 2010. http://thongtinphapluatdansu.Du lÞch Th¸ng 5 . http://www.giaothongvantai. http://www. the central bank needs to use more monetary policy tools instead of administrative measures. ‘Lam phat – Nguyen nhan va giai phap’. http://vietnamnet.jsp Le. viewd 17 May 2010. the financial indicators were considered State secrets. Owing to the lack of resources and limited time. N & Vo. viewed 17 May 2010. viewed 21 May 2010. as well as the inflation rate. the inflation will be curbed. n. 10 December.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Thong tin ve lai suat.sbv. N 2008. we would like to conduct further research on this engaging topic as well as inflation’s impacts on other macroeconomic variables and more analysis and comparisons between Vietnam inflation rate and its monetary policies and those in other countries. http://www. ‘Lam phat hien nay o Vietnam’. Banking Magazine. We. 5. http://www. foreign exchange reserves.vn/vn/CdeCSTT-TD/laisuat.2010 stable. 30 December.wordpress. Thus. For harmony between growth and inflation.vn/chinhtri/2008/12/821189/ T. The State Bank of Vietnam should make a move to a model of a central bank of a mature economy. no. 28 August. 1. reserve required to regulate the money supply. The publicity of these criteria does not only create peace of mind for the market about the SBV’s monetary policies but also help to predict more accurately SBV’s measures of inflation control.d. financial markets expect from Vietnam central bank more transparency through the publication of financial indicators such as indicators of money supply. Conclusion In this report. suffered from the financial recession during 2008-2009. If those relationships are settled.early 2010. ‘Chien thang lam phat nam 2008 va hoat dong ngan hang Vietnam 2009 gop phan chong suy giam va kich thich cau kinh te’. discount rate. interest rates. rediscount rate.aspx/News/kinh-te-xahoi/5_giai_phap_trong_tam_ngan_chan_su_suy_giam_kinh_te/ Tran.gov. REFERENCES State Bank of Vietnam (SBV) 2010. Years ago.vn/Desktop.aspx/Thi-truong-360/Tai-chinh360/Lam_phat_hien_nay_o_Viet_Nam/ Nguyen.

gov. ‘Chinh sach tien te 2010: Muc tieu tang truong se chiem uu the’. Tinh hinh kinh te – xa hoi nam 2006. Annual report 2007.. H 2008. http://danluan.tuanvietnam. viewed 5 May 2010.gov.sbv.vietinbankschool.sbv. Annual report 2005 (part 2).aspx?Id=308 T.laodong T.Du lÞch Th¸ng 5 . viewed 9 May 2010.. Tinh hinh kinh te – xa hoi thang 12 va ca nam 2005.vn/vn/Baocaothuongnien/pdf/2008.gov.. Annual report 2005 (part 1).tin247.mpi. L 2008.pdf State Bank of Vietnam (SBV) n.aspx?tabid=413&thangtk=12/2007 Hoang. viewed 5 May 2010. viewed 5 May 2010.edu.d. T 2008...pdf State Bank of Vietnam (SBV) n..d. 19 October. 17 December. viewed 15 May 2010. viewed 5 May 2010. 21 April.htm Le.d.2010 Cong An Nghe An 2009.vn/default.com. http://www. viewed 13 May 2010. http://vneconomy.vn/Web/Content.vn/vn/Baocaothuongnien/pdf/Report2004. G 2010.sbv. ‘Tac dong cua chinh sach kich cau doi voi nen kinh te Vietnam’. ‘Theo duoi kich cau va rui ro chinh sach’.gov.d... 2010.M.d. http://www. Annual report 2008.vn/Home/Chinh-sach-tien-te-2010-Muc-tieutang-truong-se-chiem-uu-the/20103/175686.htm P. viewed 5 May 2010. viewed 18 May 2010.gso. http://www. viewed 5 May 2010.aspx?NewsID=192 K. viewed 28 April 2010. http://congannghean.pdf State Bank of Vietnam (SBV) n. C n. http://www.gov. http://vneconomy.com/noi_ro_ve_hieu_qua_cua_chinh_sach_kich_cau-3-21499308. 1 March. 3 June.org/node/1461 M. Eight-month economic review.vn/20081217093946872P0C6/chinh-sach-tien-te-cua-viet-namdang-di-dung-huong. L 2008.vn/vn/Baocaothuongnien/pdf/baocao2005_1. ‘Vi sao chinh sach tien te nam 2007 khong hieu qua’.T. 24 November.sbv.org.gov.gov.gso.pdf -97- . 1.gov. http://www.sbv. ‘Chinh sach tien te cua Vietnam dang di dung huong’.vn/default. Economics and Forecast Magazine.aspx?tabid=621&ItemID=3966 General Statistics Office (GSO) n.aspx?tabid=413&thangtk=12/2006 General Statistics Office (GSO) n. http://www. 8 September. http://www.net/2010-04-20-chinh-sach-tien-te-da-muc-tieu Vietnam Economic Portal (VEP) n.html Bui.d. http://www. viewed 5 May 2010.vnep.htm T. viewed 5 May 2010. viewed 13 May 2010.gov. Annual report 2004. http://www..vn/NewsDetails.sbv. http://www..Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .vn/portal/page/portal/tckt/903605?m_action=2&m_itemid=14813&m_mag aid=1252&m_category=266 State Bank of Vietnam (SBV) n. L.gso. http://www.aspx?distid=4429&lang=vi-VN General Statistics Office (GSO) n.d. ‘Chinh sach tien te da muc tieu’.d. ‘Lam phat nam 2008 khoang 22%’. viewed 5 May 2010.vn/default.vn/vn/Baocaothuongnien/pdf/Report2006. http://www.vn/2008122204312108P0C6/chinh-sach-tien-te-lathanh-cong-lon-nhat-cua-nam-2008. viewed 16 May 2010. 23 December.d. http://www. no. http://vneconomy. Chinh sach tien te o Vietnam giai doan tu nam 2000 den nay. viewed 5 May 2010. http://www.gov. viewed 10 May 2010. Annual report 2006. ‘Noi ro ve hieu qua cua chinh sach kich cau’.d. viewed 28 April 2010. Tinh hinh kinh te – xa hoi nam 2007.pdf State Bank of Vietnam (SBV) n.pdf State Bank of Vietnam (SBV) n.vn/vn/Baocaothuongnien/pdf/Report2007.vn/vn/Baocaothuongnien/pdf/baocao2005_2. http://www. C 2009. T 2009.laodong. ‘Chinh sach tien te la thanh cong lon nhat cua nam 2008’. H.vn/Home/Article. viewed 5 May 2010..d.vn/20081124093140103P0C6/lam-phat-nam-2008-khoang-22.

Our research also draws conclusion about country risk in Vietnam and suggest some recommendations to both Vietnamese government and foreign investors. with the objective to reducing the country risk level of Vietnam. this research paper. Thailand and China.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . financial risk factors and giving overall picture about Vietnam’s country risk. Investing in the countries with excessive risk may harm the corporation’s profits or create other potential adverse impacts to MNC’s value. Luong Thu Huong (3TC07) Supervisor: Nguyen Thu Huong ABSTRACT In the view of the rapid growth of international lending and foreign direct investments. and improve the enforcement of anti. Targeted macroeconomic indicators of Vietnam and selected Asian countries in same region were collected throughout the period from 2007 to 2009 in order to conduct macro-assessment of risk factors as mentioned above. PART 1: INTRODUCTION 1. and overall risk rating based on some recent studies of reputable risk rating agencies. Nguyen Thi Bich Phuong (3TC07). this study suggests that Vietnamese government should reform administrative procedures.2010 COUNTRY RISK ANALYSIS IN VIETNAM Written by: Nguyen Thi Dieu Tuyet (3TC07). there are not many studies available on country risk analysis in Vietnam. there are many specialized country risk rating institutions based on different criteria and weighting methods to evaluate. financial risks. Moreover.M. Understanding about this limitation. Additionally. Analysis of secondary data showed that compared to other Asian countries such as Singapore. This was illustrated by Vietnam’s risk rankings.Du lÞch Th¸ng 5 . which was collected from the evaluation of famous rating institutions such as Euromoney.corruption program as well as maintain flexible monetary and fiscal policies. The paper outlines and illustrates a framework of country risk analysis in Vietnam that focuses on assessing political risks.Best. the country risk analysis has become extremely important for the international creditors and investors. based on secondary data and macro-assessment will try to focus on analyzing country risk in Vietnam in three aspects: political risk factors analysis. In all over the world. That’s why it is important for an MNC to assess country risk before making investment decisions. country risk analysis is not only beneficial to the case of doing business in a new country but also advantageous to monitoring countries where MNC is currently conducting business. Vietnam has higher risk level of political risk as well as financial risk. Unfortunately. Coface and A. -98- . INTRODUCTION The decision whether to conduct business in a particular country is fundamental to many MNCs. Nguyen Van Trang (2TC07).

The concept evolved in 1960s and 1970s in response to the banking sector’s efforts to define and measure its loss exposure in cross-border lending. all of the others are market-based and measurable. The political risk approach is really relevant. understanding the country risk rating components. besides a normal business plan (market.Du lÞch Th¸ng 5 . a. due to most of the government decisions affects directly the economic agents. investing and trade over the world is very popular. building the portfolio. Certainly. http://www. financial. and primarily form internet sources. its expectations. therefore. PART 2: LITERATURE REVIEW 1. Direct investment If a company looks for a place to invest. Except the political risk. the strategists define a recommended portfolio by adjusting the weight of each country (market weight. including political and financial risk in Vietnam. MERRILL LYNCH1 in its portfolio strategy for emerging markets (equities. 1 Portfolio Strategy. Merrill Lynch does not have an econometric model to estimate the intrinsic risk of the countries despite following the behavior of many macroeconomic variables and other information to define the weight of the countries in its portfolio. analyzing each components and combining the results will have a lot in success of investors or trader. under or overweight) and the respective duration (short. bonds and commodities) uses to divide the portfolio according to its index weighting for each country). considering the ongoing behaviors of the global economy and the countries. After.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . specially.gwu. currency and political risks. Moreover. behavior and the landscape where transactions are made. the way to assess these risks is the major concern of this paper. Thus.2010 2. journals. DEFINITION OF COUNTRY RISK ANALYSIS Country risk refers to the volatility of returns on international business transactions considering several facts associated with a particular country. OBJECTIVES OF COUNTRY RISK ANALYSIS Nowadays. 2. line diagrams have been used. by the outcome of their interaction. b.edu/~ibi/minerva/spring2001/renato. METHODOLOGY The purpose of our research is to analyze the overall country risk. magazines.pdf -99- . all of the components have to be thought not only by itself but. Statistical Tools Used Simple tools like bar graphs. It can be broken down into major components as economic. neutral or long). similar approach is adopted for each asset. Method of data collection This research paper is based on the secondary sources: books. tabulation.ribeiro. Within the countries.

eighth edition. etc) they must concern about the legal environment as national regulations about profit transfers.Du lÞch Th¸ng 5 . journals. like its cash flow in terms of current account balance and reserves. we have an overview of Vietnam situation. 3. political forces and its viewpoints about international capital. special reduced tax for foreign investments and minimum term of them. assess all industries. Country risk analysis rests on the fundamental premise that growing imbalances in economic. beyond some specific financial assessments (historical prices of company’s shares. An imbalance in a given factor produces different risks for different investments. forecasts about the behavior of the market and the own company).Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Jeff Madura. Why? Because the risk of the country can affect on the currency using in the commercial contracts or the kinds of international payment (L/C: if exporter worry about blockage of fund transfers in importer’s country …). host -100- .Actions of host government: Various actions of government can affect the cash flow of an MNC (impose pollution control standards. THEORIES OF COUNTRY RISK ANALYSIS This research paper is based on the secondary sources: books. The following are some of the more common forms of political risk: . other macroeconomic aspects and so on. location.Blockage of fund transfer: Subsidiaries of MNCs often send fund back to the headquarters for purchase of supplies.2010 suppliers. and give macro assessment. Trade In international trade. or political factors increase the risk of a shortfall in the expected return on an investment. the analysis has to emphasize the financial equilibrium of the country. social. standard deviations. If consumers are very loyal to local products. a joint venture with a local company may be more feasible than an exporting strategy. Financial investment In case of investment in the capital market.… In some case. . An extreme form of political risk is the possibility that the host country will take over a subsidiary. additional corporate tax…) . exporters and importers need to look for all risks of the country in which they have partners. labor forces. energy. Political risks are the risks that come from the actions of host country’s government and consumers in that country. especially in the short run. besides the exchange rate and the perspectives of changes on the legal environment as well. magazines. In this research. exchange rate regime. and primarily from internet sources and focus on two main factors: Political factors and financial factors. its return’s. According to the text book of International Finance subject: International Financial Management . remitted earning. Florida Atlantic University.Attitude of consumer in the host country: is a tendency of residents to purchase only locally produced products. two theory of political risks and financial risks are shown clearly again.

a subsidiary of an MNC can pay off the host country government to win the projects in that country. . + Exchange rate: can influence the demand for the country’s exports. their business operations an cash flows generated from such countries more uncertain.Du lÞch Th¸ng 5 . + Inflation rate: can affect consumers’ purchasing power and from that the demand for MNCs’ products is also affected. A wide range of host government’s actions can affect the cash flow of an MNC such as imposing special requirements or taxes. PART 3: VIETNAM COUNTRY RISK ANALYSIS 1. Lower interest rates often stimulate the economy and increase demand for MNCs’ products. a high level of inflation can lead to a decline in economic growth. including Current & Potential state of the economy and Indicators economic growth. for example. financial risk factors should be considered when assessing country risk. Thus. it may still make poor decision because of improper forecast of the country’s financial risk factors. Assessing inflation rate is very important because it indirectly affect a country financial condition by influencing the country’ interest rate and currency value. This can affect the safety of subsidiaries’ employees. which could force subsidiaries to undertake projects that are not optimal.War: Some countries tend to engage in constant conflicts with neighboring countries or experience internal turmoil. which take time of MNCs to get and complicate their businesses. even if an MNC considers them in country risk analysis. . a recession severely reduces demand or financial distress cause the government to restrict MNC’s operation. Various form of corruption can occur. an MNC’s parent may need to exchange it for goods to extract benefits from project in that country. . POLITICAL RISKS ANALYSIS 1.2010 government may block fund transfers. Thus. .Current and potential state of the economy: for example. which in turn affects the country’ production and income level.Corruption: can adversely affect an MNC’ business because it can increase the cost of conducting business or it can reduce revenue. . Most financial factors are difficult to forecast.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . restrict fund transfers. . subsidize local -101- .1 Actions of host government Actions of host government should be considered when assessing the political risks.Currency inconvertibility: Some governments do not allow subsidiaries to exchange their income from host countries’ currencies into other currencies.Bureaucracy: it mentions about complicated procedures in the host country. Therefore.Indicators of economic growth: + Interest rates: higher interest rates tend to slow the growth of an economy and reduce demand for MNCs’ products. Along with political risk.

2 Blockage of fund transfers Another factor that foreign investors often pay attention when they assess the risk of a country that is the blockage of fund transfer. http://www. 85%2 (top 10 out of 107 countries survey. the blockage of fund transfer can eliminate their capacity to withdraw cash back to the home country. which has negative impact on MNCs ’revenues.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Normally.com/graph/cri_sof_pir_rat-crime-software-piracy-rate -102- . Therefore. this paper will focus on discussing the risk of MNCs due to deficiency of Vietnamese government’s enforcement of copyright laws.5 billion in the Asian Pacific due to piracy levels. software producers lose an estimated $3 billion in sales annually in Asian for that this reason. get profit and transfer it back to the home country. investors want to invest in another country. It is interesting to note that not only strict regulations of government but also lack of restrictions in a host country has negative influence on the performance of foreign firms. Vietnam experienced the highest software piracy rate in Asian countries. According to BSA report. With the Vietnamese case. the blockage of fund is not remained any more. They may lose their price competitiveness over domestic firms due to their high expenses for research and development of new products. books. It can be seen that the policy of host country related to the blockage of fund transfer will affect the decision of investors a lot in investing in this country or another. It is a way that the government can attract external sources of capital especially through FDI channel. This was illustrated by this graph below Figure 1: Software piracy rate in some Asian countries (Source: nation master.9%). and dollar losses at over 16. When you invest abroad. it is very risky for foreign firms conducting business especially in intellectual industry such as software. 1. the average of 107 countries is 59. CDs.com) Due to the failure of Vietnamese authorities to enforce Intellectual Property Law against local firms that illegally copy the MNC’s product. Therefore. you cannot expect that the investment will last continuously or even for a very long period of time.2010 firms. According to recent studies.nationmaster.Du lÞch Th¸ng 5 . 2 Piracy rate Crime in Vietnam.

The destruction of war is so terrible that almost countries that war is happening will get trouble with financing and also the ability of attract funds is limited. the foreign investors that the home country currency is not a very strong currency.vietbao.vn/kh%E1%BA%A3_n%C4%83ng_chuy%E1%BB%83n_%C4%91%E1%BB%95i/2/ 4 Global peaceful index of some countries. war cannot be omitted.php -103- . But the profit we earn is often in the domestic currency so when we want to transfer it to our home country.272 1. the percentage of dollarization of Vietnam is 24% is at highest level group of Asia while other countries like China or Thailand this rate is only 1% to 9%3. http://www.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . It is proof for the inconvertibility of Vietnam Dong and bring disadvantage to Vietnam when foreign investors make investment decision. Simply. http://tim. when we invest in a country.3 Currency inconvertibility Currency convertibility is a very important factor that we need to take in to account when consider the risk of a country. According to vision of Humanity. According to Mr Phi Dang Minh. we want to earn profit. and it can bring a lot of risk to business not only in the country war happen but in other country related. War can bring loss to almost all party. the convertibility of the host country currency is so important.org/gpi/results/rankings. When investors invest in Vietnam. The below table show the rank and score of peace of some countries4: Country Japan Singapore Malaysia Rank 7 23 26 Score 1.561 3 Currency Inconvertibility. As Vietnam does not have any civil war or war with outside parties and the political situation is quite stable compared to some countries in same region especially Thailand.2010 1. they can convert Vietnam Dong to some very strong currency like USD. Other currencies are very difficult to exchange to VND either in Vietnam or in their country. It is quite a high rank in comparison with other countries in Asean area and other Asian countries.visionofhumanity. Hence. When we consider this factor when we assess the risk of Vietnam. deputy director of foreign exchange management. That is the reason why. Euro or Japanese Yen. It can loss the attraction of Vietnam in the foreign investors’ eye. Luckily. they will get a lot of trouble in converting the profit to home currency.Du lÞch Th¸ng 5 .533 1.4 War To assess country risk. it can be seen that Vietnam has a quite weak currency that bring the investors a lot of difficulties in converting Vietnam Dong to other currency. Vietnam is ranked the 35th in 144 countries about the global peaceful index. 1. Vietnam is considered as one of the most peaceful destinations in the world. we need to convert this currency to our home country.

It leads to low rank of Vietnam in term of the ease of business (only 116 out of 183 countries).2010 South Korea Vietnam Indonesia China Cambodia Philippines Thailand Myanmar 33 39 67 74 105 114 118 126 1. an investor merely needs to register his or her business with the registration and tax agencies before starting operations.8).doingbusiness.179 2. Much administration involves more than one ministry.664 1. Therefore. Much legislation takes the form of regulations and circulars that are passed down to local level for implementation.0.627 1. are considered to be serious in Vietnam due to inefficient government governance and cumbersome administrative procedures especially those involving customs and tax. which can complicate an MNC’s business. registering for a tax code and purchasing pre-printed invoices (15 days).853 1. war is not a risk that we need to consider when we judge the risk of Vietnam.327 2. cost (% of income per capital: 25. 1.29% annual income per capital to start a business. 11 procedures and 13. Interpretations often differ form area to area. 5 Doing Business Report 2010.1. such as procedural and documentation requirements. and 0.pdf -104- . one day.org/documents/fullreport/2010/DB10-full-report. time (days) 41.501 Table 1: Global peaceful index of some countries It can be seen from the table that Vietnam is evaluated as a peace country in comparison with others in area and all over the world. obtaining a company seal (14 days). it takes 50 days.Du lÞch Th¸ng 5 . there is little co-ordination between different ministries and departments leading to long delays and frustration. The three main procedures in this process are: applying for a business registration certificate (15 days). Doing Business in 20105 reports that it takes only one procedure. By contrast.921 2.353 2. which is much higher than the average of East Asia & Pacific region (Procedures (number): 8. As communication is almost entirely vertical.5 Bureaucracy Another country risk factor is government bureaucracy. and much paperwork is generated in attempts to standardize.4 percent of annual income per capital to register a private limited-liability company in New Zealand. in Vietnam. http://www.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In these top-ranked countries. “Red tape”.

or resources by government officials or employees for personal gain. the abuse of public power. Risk arises from the matter of wasting the money and time not only before but also after the business in Vietnam. by extortion. corruption in Vietnam is much more than other countries in same region. Vietnam has experienced exceptional economic growth in recent years-with a growth rate of around 8% it was Asia’s second fastest growing economy in 2007s.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .1 (% income per capital) 1. 2009 (score range 1 10.transparency. soliciting or offering bribes.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table 6 -105- .Du lÞch Th¸ng 5 . Vietnam’s economic rise is accompanied by rampant and rising corruptions. are widely believed to be one of major sources of political risk in developing countries.6 Corruption High levels of corruption. office.Compared to good practice and selected economies Therefore. e. foreign investors as well as MNCS will bear more risks due to the complicated administrative procedures. ranked 120 out of 180 countries surveyed.1 (% of property value) Time to complete Cost 1. However. which is illustrated by table below.g.2010 Figure 2: Ranking of Vietnam in Starting a Business. It can be clearly seen from the graph below.7. the score of Vietnam is 2. The Corruption Perceptions Index (CPI). Procedure After registering in Vietnam 1 2 3 Dealing with construction permits Registering property Paying Taxes 194 days 57 days 1050 hours per year 32 number of payments per year 248. According to annual report Corruption Perceptions Index (CPI)6 of Transparency International Organization. clean score means 10) http://www.

pdf 9 http://www.33 0. http://report.. These firms are more likely to pay for a license. www.. 2009.38 0. “Elections”. 298 43 213 155 23 266 998 Bribe Amount (Per cent of total revenues) 0.edu/publications/working-papers/2010/en_GB/wp2010-16/_files/83069119040782563/default/2010-16.74 1.org/Vietnam/2009 Working Paper on Firm-Level Corruption In Vietnam.pdf -106- .3 0.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In Vietnam.. 67% of the companies surveyed reported having to make informal payments in order to “get things done”.Du lÞch Th¸ng 5 .. with across-the-board poor performances in the “Anti-Corruption and Rule of Law”. According to the Investment Climate Assessment (ICA) survey for Vietnam (ICA 2005)8. Vietnam receives an overall score of “very weak” on the Integrity Scorecard complied by Global Integrity (44 out of 100). “Administration and Civil Service” and “Oversight and Regulation” sectors. to avoid antagonizing the local administration. “Government Accountability”.globalintegrity. foreign firms are particularly vulnerable to administrative corruption due to their lack of knowledge of local customs a procedures. it seems that corruption creates a perception that they cannot run business effectively without patronage7.wider.55 Per cent of bribes paid by medium/large firms 10 15 61 0 13 61 0 Table 2: Average size of informal payments in Vietnam 7 8 Vietnam Global Integrity. World Institute for Development Economics Research in 20099 as the most corrupt public institutions (as can been seen from this table below) Types of Infomal Payment To get connected to public services To get licenses and permits To deal with tax and tax collections To gain government contracts To deal with customs Other reasons Total Obs./wp201016/_.wider. even though it might be illegitimate and unnecessary according to the law../working-papers/2010/en.09 0.unu.56 0. Therefore.unu.2010 Figure 3: Corruption Perception Index Table Moreover.edu/. the agencies that most frequently interact with foreign businesses. such as the tax and custom department./2010-16. “Civil Society and Public Information and Media”. Moreover. land administration agencies and the construction permit and import/export license authorities were cited by the United Nation University survey..

http://www.vnnewstime.com/business news 2/domestic goods still out of favour with vietnamese consume rs/ 11 Kimberly Amaded. According to Dr Dinh Thi My Loan.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . can easily further depress GDP and consumers have less money to spend on purchases. then businesses will hold off investing in new purchases and hiring new employees. FINANCIAL RISK ANALYSIS 2. Furthermore. it is likely to achieve an economic growth rate of 8 percent in 2010”. Overview about Vietnam’s GDP growth rate In the period from 2000 to 2007. This. 2. China 10 http://www. jobs and personal income.(source: CIA World factbook)12. If GDP is slowing down. says an executive from the International Monetary Fund. In conclusion. However. What is the Difference Between GDP and Growth Rate? http://useconomy. corruption remains serious and complex across many aspects of public life. (2009). the foreign firms can take advantage of Vietnamese consumers’ perception of high quality. they do not have much more risky from national identity such as South Korea or Japanese customers.htm) 12 Vietnam GDP-real growth rate”. waiting to see if the economy will improve.com “if Vietnam adopts more effective policies. If the GDP growth rate actually turns negative. Therefore.2010 Although anti-corruption law in Vietnam had taken effect from Jun 1st 2006 with “3 No” campaign (no monopoly. while the average figure is just 40 percent in Asia10. If GDP is growing. the GDP growth rate in Vietnam was up-ward sloping. which may discourage foreign investors to invest in Vietnam. It refers to the percentage increase or decrease of GDP from the previous year adjusted for the inflation rate. the global recession has hurt Vietnam's export-oriented economy in 2008 and 2009 with GDP growing less than the 7% per annum average achieved during the last decade.about.html -107- . Deputy Chairman of the Vietnam Retailers’ Association cited the latest statistics released by a market survey firm that 77 percent of Vietnamese consumers favor foreign products. no accountability). in turn. so will business.1 Real GDP growth rate The GDP growth rate is the most important indicator of economic health.Du lÞch Th¸ng 5 . no discretion. In addition. Comparison real GDP growth rate between Vietnam and China Like other countries world-wide in general and Vietnam in particular. 1. corruption can adversely affect an MNC’s international business or it can reduce revenue.com/od/grossdomesticproduct/f/GDP_Growth_Rate. based on the article “IMF forecasts 8 percent GDP for Vietnam” from vovnews. Vietnamese consumers tend to be loyalty to foreign goods rather than the domestic goods due to low quality of Vietnamese goods.indexmundi. howerver.com/vietnam/gdp_real_growth_rate.7 Attitude of consumers in the host country A mild form of political risk for MNCs is a tendency of residents to purchase only locally produced goods. then the economy is heading towards a recession11.

Vietnam real GDP growth rate has been at high level.com/Economics/GDP-Growth.5 percent in comparison with the same period of the previous year.86% in compared with the year of 2007 (source: IMF). however. much more higher in comparison with other countries in Asia such as China (125). according to statistics of CIA World fact book. A high level of inflation may also lead to a decline in economic growth. It also indirectly affects a country’s financial condition by influencing the country’s interest rates and currency value.2 Annual inflation rate Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. after that it started to increase rapidly again and reached impressive level of 11.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . It is also expected that this level will continue go up in the rest of this year13 With all the statistics collected. 2010. Inflation in Vietnam Vietnam is one of the countries where have high and unstable inflation rate. in 2008 Vietnam’s average inflation stood at 23. 2009 since last 10 years. Especially. Moreover. After 12 year of curbing inflation (1995-2007) Vietnam has seen inflation come back with the two. Vietnam’s inflation rate in 2008 ranked at number 11 over 219 countries in this survey. http://tradingeconomics. Inflation can affect consumers’ purchasing power and therefore their demand for an MNC’s goods. etc Furthermore.46. petrol price and tentative electric city price. it appears less favorable compared with China 2.Du lÞch Th¸ng 5 . In addition.8 one year later. Comparison inflation rate between Vietnam and China Similarly to the case of Vietnam.aspx?Symbol=CNY) -108- .1 China ranked at number 3 in Asia and number 8 in over the world for GDP growth rate level while these number for Vietnam namely were 6 and 55. For example.115 % which has been considered the highest inflation rate since last 10 years. it is no doubt to state that China’s GDP growth rate has been virtually much more higher than this Vietnam index.9% in March. However. as this information was already indicated in part 1. In conclusion.2010 economy also has been affected by 2008 global financial crisis and GDP growth rate fell to the lowest level of 6.2% in March. increased dramatically by 176. in 2008 the ratio between China’s GDP growth rate and Vietnam one was nearly 1.Vietnamnet). These are the highest level since mid 2008 (source: Vietnamnet). the consumer price index (CPI) in February 2010 increased by nearly 8. this ratio was up to 1. China’s annual inflation rate is also forecasted 13 China real GDP growth rate”. Singapore(112).(“Experts say expect high inflation in 2010”.digit CPI (Customer Price Index) since December 2007. the inflation rate in Vietnam is expected to continue to increase in the year of 2010 due to the main reason of increasing in the dong/dollar exchange rate. In fact.

For example.com) To compare the differences between the inflation rate in Vietnam and China. every hour.8%. by analyzing them. The next three months (Aug. it went up significantly to 2. unstable and expected to increase.3 Exchange rate Exchange rate is an important factor. with growth rate 3. affecting the consumption of domestic production. even it reached to the negative value in many years. price of USD increases in many countries. Four months following (April. In short.Oct). The last two months of the year. the difference between free market and official market is very high. which impacts the demand of customers.Du lÞch Th¸ng 5 . 2008 is the year that exchange rate happened unusually.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .500 VND / USD. in the recent year of 2008 the inflation rate of this country was 5. and therefore reduce the country’s production and national income. Otherwise. USD price is in decreasing trend.2010 to be higher in the year of 2010. Exchange rates change every day. in the three-month period from January to March. the USD continued to increase. sometimes up to above 2.4 % in March. Vietnam‘s inflation rate has been at high level. the demand for foreign currency for import goods last year is usually higher than other months. we can find out clearly whether or not the risks accompany with the foreign investment projects in Vietnam. China’s inflation rate has been lower than Vietnam’s one for most periods of time. imports rise. so our country has to adjust accordingly.74%. Thirdly. 2010 (source: tradingeconomics. with an increasing rate 9%. 2. however. A very weak currency can cause outflows motive and reduce the amount of funds available to finance growth by business. causing economic failure. two aspects are examined. The first one is the level of inflation rate.26%. It is clear to realize the percentage change in inflation rate in Vietnam was extremely larger than China’s in 2002. Firstly. The second measure used is the annual inflation rate volatility The chart above illustrates the annual percent change in inflation rate compared with the previous year's inflation rate. It is a result of three factors.July).92% just approximately to one-fourth in comparison with the level of Vietnam. increase the volume of imported goods. The rise of the USD during this period encouraged exports. limit imports and keeping trade deficit. According to APTVietnam. profits of Multinational companies located in Vietnam. Secondly.055 in 2009. from 2003 to 2009 China’s index seemed to be more volatile than Vietnam one. This problem puts the Vietnamese government under a lot of pressures and threatens the foreign investors. the financial crisis and global recession impact on our country makes exports fall. with the reduction of 3. While this index level stayed at -0. with the reduction of 1. A strong home currency may reduce demand for the country’s exports. As can be seen from the chart above. the USD fell. -109- . the USD increased again.

the average bid rate of commercial banks at 17. fertilizers.net mentioned November 2009. up 0. the highest from 1999 till this time. steel. rice.11% over the beginning of the month and increase 2. this may affect the overall balance of payments and putting pressure on the exchange rates. At the same time it also increases the competitiveness of Vietnam's goods compared to imported goods. TuanVietnam.11% over the month and increase 2. the case of Pha Lai Thermal Power Corporation. On the other hand.16% from early 2009.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . and it created a lot of risk for enterprises in doing business with converting currencies if they did not use derivative instrument.47% from early 2009. the policy changes immediately create trouble or risks for enterprises which have foreign currency loans in operating businesses without enough time to implement derivative operations for these loans. Exchange rate in 2009 had increasing trend. while increasing exchange rates from 17.. the USD growth rate is 6. increases demand for MNCs’ products produced in Vietnam.861 VND / USD.862 VND / USD. Figure 9: Movements of Exchange rate In addition. up 0.44% rate increase. the end of October 2009. November 2009 of State securities commission of Vietnam. -110- . In the securities magazine N0 11..PPC with loans in Yen for investment activities to expand their factories is a typical example. The changed rate is evaluated as an important step to change the imbalance between official foreign currency market and black market.2009 was 17. with narrow margin from + -5% to + . While the average ask rate of commercial banks at end of Oct.3%. often associated with changes in inflation.Du lÞch Th¸ng 5 . combined with the changing of base rate from 7% to 8% per year. State Bank applied a new exchange rate.034 VND/USD (25/11/2009) to 17. the change in exchange price is very fluctuant.2010 Over the year.31%. In this year. changing in USD price was analyzed carefully. the reason for that was commodity prices in the world affect changes in prices of crude oil.961 VND/USD (26/11/2009) made 5. Because prices of goods that have direct impact on import and export value of Vietnam. precious metals.

ODA commitments in 2010 with U.. due to capital flows differ in time.985 17. 10: very good) Exchange Rate Stability Month 6/ 09 7/ 09 8/ 09 9/ 09 10/ 09 11/ 09 Exchange rate 16.2010 In 2010 plan.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh ..10608829 0. Thus. $ 8 billion.Du lÞch Th¸ng 5 . overall supply and demand of foreign currencies in 2010 is not too difficult when the deficit target this year is about $ 12 billion while the supply is approximately $ 20 billion..967 16. this will make the exchange rate has some fluctuations.07080481 0. the FDI disbursement is expected to reach 10 billion USD. It is forecasted to make the risk in investing in Vietnam decrease.960 16.04127358 0. However.10008831 Point 10 10 10 10 10 -111- . plus $ 1 in issuance of government bonds and other sources of income: portfolio investment.948 16.05903885 0.002 % Change 0. tourism. Figure 10: Exchange rate USD/VND Figure 11: Consumer Price Index The official rate announced by SBV each month:(0: very bad.S.938 16.

544 18. interest rates for mediumlong term business under the new rates fluctuate around 12-14% per year. joint stock -112- .942 17. therefore with the preference of using products made in Vietnam. with assessing exchange rate perspectives.Du lÞch Th¸ng 5 . this interest rate is appropriate in the current conditions to ensure that commercial banks face by pulling down lending interest rates. the demand for domestic goods will increase. while ensuring harmonious interests of depositors and banks. According to the Banking Association.00557351 1.58296639 1.225 18. some foreign firms will find investing in Vietnam so risky.2010 12/ 09 1/ 2010 2/ 2010 3/ 2010 4/ 2010 5/ 2010 17. Accordingly. and export their products to other countries for higher prices.49012871 0. especially joint stock banks. Vietnam Banks Association has a written agreement calling for members to apply deposit interest rates were around 11. Figure 12: Interest Rates Lending interest rates in the early 2010 have some special change. with lower domestic currency means lower revenues in USD.544 0. earning higher profits. the operating costs in investing in Vietnam will go down.4 Interest rate 2009 and 2010 are two years that have some special changes in interest rates. the risk in investing in Vietnam.75034294 0 10 10 10 10 10 10 Source: State Bank of Vietnam In conclusion. the change in exchange rate is becoming more consistent. Besides.99400071 4. will decrease. because all revenues are calculated in the domestic currency. Recently. foreign firms can invest in Vietnam with lower costs. notified by the central bank.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .171 17. 2. both deposit rates and lending rates. With lending in VND. and in the trend of increase in price of USD.941 18. Thus.5% and terminate other forms of promotion as reward money. However. lending interest rate was increased by the commercial banks.

In the article “Lãi suất cho vay:Xu thế giảm dần” . approximately 15% per year. In addition. bringing more service revenue for banks. general director of ACB. borrowing firms suffered higher cost of business than at present. In addition.third branch. the business can also create risk for both enterprises and banks as interest rate differences can not offset the exchange rate price fluctuations. the interest rates are decreasing. the state allows to reduce the compulsory reserve ratio of foreign currency from 7% to 4% for maturity of less than 12 months. Thus. 18 / NQ-CP.5% per year for large businesses. For loans of real estate business.5% per year for small businesses. Many experts expect interest rates to mobilize dollars is hard to rise. a financial expert stated that: The foreign currency interest rate of the economic organizations only 1% per year has helped reduce the interest rate of banks lending dollars.12/03/2010. and from 5 to 5. loans 10-11% per year.5% per year. Mr. small banks from 4% to 4.Du lÞch Th¸ng 5 . Explaining this.fishing businesses. Trading Room VCB leaders said interest rate is at 14. said the lending rate floor agreement here applies to all kind of enterprises is 14.5% per year. only from 4% to 4. Particularly. the state commercial banks are beginning to compete to reduce lending rates. many banks have massively reduced lending USD interest rates down. But recently.5% and can extend the loan from 7 years to 10 years. However.5 to 7% per year.long term at 15 to 16. the State agreed to reduce commercial bank lending rate to 0.5% to 3. especially state banks have business customers which have a large amount of foreign currency deposits. banks can decease the dollar deposit rate about 0. The maximum lending rate is 13% per annual for agriculture-forestry.Ly Xuan Hai. will have to pay higher interest rates. state commercial banks lending interest rate applicable under the agreement in accordance with supply and demand of funds and ability to pay debt of customers. Mr. the USD deposit rates of major commercial banks ranges from 2. made the supply of USD lending amount increased.000 billion VND to support business loans. interest rates were nearly equal medium or small joint stock commercial banks. With the advantages of raising cheap deposits.2010 ranges 15-17% and the highest is 18% per year. with little collateral. overall demand for business loans is up but still not great as foreign currency earned from export is major but demand for foreign currency loans for imported raw materials does not grow strongly. (Decree 18/NQ-CP) In case of lending in foreign currency.1%.09% years for large companies have long relationship. From 1st May. interest rates for medium. not too large of changes compared with the past. exporting enterprises and producing costs of medium or small enterprises. the current interest rates relatively reasonable compared with rates in the general mobilization.5% and lending rates from 6. However. Nguyen Truong Giang. said that VND amount of this bank is in excess of over 30.S. Interest rates for VND loans are higher than interest rates in U.5% 1% per year for the borrowers under the direction of the Government in No.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . from 3% to 2% for 12 month term loan. deputy director of VietinBank. small enterprises. securities business and consumers. -113- . Several months ago. 3-4 months ago when the market lacks liquidity.

Now the United States and the rest of the world are retrenching. lower country risk. the answer is no. it will improve the investment in over the country. are struggling. But this would have made Chinese goods more expensive in dollars --114- . In fact. it can force them to lend. Chairman Ben Bernanke and his cohort may print a lot of money (and they did). The list of negative consequences is very long. In the case of China‘s monetary policies: The article “The China Bubble's Coming -.But Not the One You Think” published on the Foreign policy magazine by VITALIY KATSENELSON.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . China sold goods to the United States and received dollars in exchange. China's communist government owns a large part of the money-creation and money-spending apparatus. In overall. deposit interest rates are quite low. they will spend money for consumption. Foreign investors who worry about host country takeovers can borrow capital in Vietnam banks with low costs and use these funds to invest. it will create more demand in consumption as deposit money in banks now can not attract people. The United State borrowed Chinese money to buy Chinese goods. lower interest rate often stimulate the economy and increase demand for the MNC’s products.S. no matter what the global economy is doing? Of course. The dollar would have declined and renminbi would have risen. Another casualty of what's taking place in China is the U. The only question is when and how much. But don't confuse fast growth with sustainable growth. Some people wonder: Is the Chinese economy operating in a different economic reality? Will it continue to grow. which it has also done. China bought a massive amount of US Treasury bonds in order to undervalue of RMB. interest rate. corporations are slashing their spending. the monetary policy of China and all of its effects were showed clearly. furthermore. It is evident to see that the Chinese economy has shown incredible resilience recently although its biggest customers. it would have converted those dollars to renminbi (that is. and consumers are closing their pocket books.Du lÞch Th¸ng 5 . but there's almost nothing they can do to speed the velocity of money. which means that Chinese growth was dependent on that borrowing. the United States and Europe. But the Chinese central bank has a significant advantage over the U. Much of China's growth over the past decade has come from lending to the United States. This means that the consumption of Chinese goods is on the decline. If China were to follow the natural order of things.5 percent in June 2009. They simply cannot force banks to lend without nationalizing them (and only the government-sponsored enterprises have been nationalized).S. The most recent estimate put annual growth at nearly 8 percent. sell dollars and buy renminbi).2010 To sum up. They also cannot force corporations and consumers to spend. Money supply therefore shot up 28. lending interest rates are decreasing. and spend quickly. Federal Reserve. make the economy going up. Since it controls the banks. The country suffers from real overcapacity. This growth will result in a huge pile of bad debt. In the monetary policy of it own. China can force government-owned corporate entities to borrow and spend.

As can been remarkably seen that.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 3. and its economy would have grown at a much slower rate. investment grade. Coface’ratings. several bad things would happen. according to the rating of Coface. and therefore not good for China. http://www. It artificially propped up the dollar. China needs to stimulate its economy.html?Type=Article&ArticleID=1898962 -115- . China is sitting on 2. 2009.M. 2008. Or.S. which indicates the unsteady economic and political environment. U. it is evident to see that China‘s monetary policies are strictly controlled by the government to protect exporting industry. semi-annual country risk ratings of 185 countries scores between 100 (excellent) and 0 (considerable risk). interest rates would go up dramatically. not good for its biggest customer. Instead of exchanging dollars back into renminbi and thus driving the dollar down and the renminbi up.2010 making Chinese products less price-competitive.com/Article/1898962/Country risk 2008 overall results index table. it needs the domestic currency to finance its continued growth. But China chose a different route. First of all.Du lÞch Th¸ng 5 . if it were to sell dollar-denominated treasuries. Its currency would skyrocket -. Vietnam are classified as B. Although in these policies still have some problems. Figure 5: Country Risk Overall Results Index.2 trillion of them. 2008 Secondly. and A. Now. VIETNAM OVERALL RATING IN THE VIEWS SPECIALIZED COUNTRY RISK RATING INSTITUTIONS OF SOME One of the common approaches to evaluate overall level of country risk is based on the risk assessment of some reputable country risk rating agencies such as Euromoney. so in comparing monetary policies. investing in China is considered more attractive than Vietnam.euromoney. China would have exported less.meaning the loss of its competitive low-cost-producer edge. Thus. not only the overall risk but also political risk in Vietnam were evaluated higher compared to others countries below except Indonesia. in term of Euromoney assessment14. Therefore. Therefore.Best’s assessment. 14 Country Risk Overall Results Index Table.the natural order of things . but a lot of things in these that Vietnamese government need to observe. However. Philippines and Cambodia. this paper will summarize some recent survey of these agencies with the aim to position the risk level of Vietnam.China parked its money in the dollar by buying Treasuries.

2010 Countries Australia New Zealand Hong Kong Japan Malaysia Singapore South Korea Taiwan China Thailand Indonesia Philippines Vietnam Cambodia Lao Myanmar Overall rating A1 A1 A2 A2 A2 A2 A2 A2 A3 A3 B B B D D D Implications Steady economic and political situation Steady economic and political situation Weak default probability Weak default probability Weak default probability Weak default probability Weak default probability Weak default probability adverse circumstances may lead to worsening payment method adverse circumstances may lead to worsening payment method Unsteady economic and political environment Unsteady economic and political environment Unsteady economic and political environment High risk profile and very bad payment method High risk profile and very bad payment method High risk profile and very bad payment method Table 1: Coface’s Ratings Table Other well-know approach is The Country Risk Tier (CRT). Political and Financial risk. the sole CRT-5. Best considers the majority of countries in Southeast Asian to be categorized as CRT-3 or CRT-4.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Vietnam has high levels of risk across all three categories of risk assessed. Country Risk Tiers CRT-1 Definition Predictable and transparent legal environment.M. which reflects A. mature insurance industry framework -116- .Best’s assessment of three categories of risk: Economic. and Singapore the sole CRT-1. legal system and business infrastructure. sophisticated financial system regulation with deep capital markets.M. The exceptions are Vietnam. A.Du lÞch Th¸ng 5 .

bureaucracy as well as high inflation rate would be considered as high country risk factors in Vietnam.ordination between different ministries and departments are required to avoid long delays and frustration. and Singapore. Vietnamese authorities had better to continue reform administrative procedures and improve the governance efficiency. CONCLUSIONS To sum up.Du lÞch Th¸ng 5 . Because the time and resources are limited.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . legal and business environment with limited or nonexistent capital markets. the public information and media should be allowed to coordinate with the competent authorities to investigate corruption case (the score of public information and media only ranked as 22 out of 100 points). the enforcement of this program received low score 52 out of 100 points. Secondly. co. in order to attract more FDI. legal and business environment with underdeveloped capital markets. this paper has just accessed the Vietnam’s country risk in terms of macroassessment. corruption. China. enforcement of anti-corruption program should be enhanced. Vietnamese government should try to minimize the political risk MNCs have to bear due to bureaucracy. developing insurance regulatory structure Relatively unpredictable and nontransparent political. 2. partially to fully inadequate regulatory structure Unpredictable and opaque political. therefore. According to recent survey. mature insurance industry framework Developing legal environment. Moreover. With the objective to improve the effectiveness of this program.org/Vietnam/2009 -117- . corruption problems. we hope that our research will be developed in the near future and analyzed more in terms of micro-assessment. with the aim to the bureaucracy issues. Firstly.2010 CRT-2 Predictable and transparent legal environment. the level of uncertainty in Vietnam is evaluated more significantly than others in same region such as Thailand. According to Global Integrity15. Based on findings from all previous parts. despite strong score anti-corruption law (100 points). the salary or living conditions of civil servant should be improved more.globalintegrity. RECOMMENDATIONS As mentioned above. sufficient financial system regulation with deep capital markets. Vietnamese civil servants are extremely 15 http://report. legal system and business infrastructure. our research has been deliberately made up to gain a better understanding about Vietnam’s country risk situation. low human development and social instability CRT-3 CRT-4 CRT-5 To sum up. Furthermore. legal system and business environment with developing capital markets. PART 4: CONCLUSIONS AND RECOMMENDATIONS 1.

To make the Vietnam Dong stronger and can be come a kind of currency using in international trade.2010 poorly paid. the Vietnamese currency is very weak now. Economic Risk and Financial Risk” Country Risk Analysis. Madura (2003). January. Harvey. Country Risk Analysis. It will increase the risk to investors due to the increasing fluctuation of interest rate. reducing the administrative procedures is one of key solutions.worldbank.Du lÞch Th¸ng 5 . “Political Risk. http://www. 8th. The state bank should maintain a relative low interest rate so that we can attract more investors. they should collect all information about Vietnam market. In terms of foreign investors.doingbusiness.org/psdblog/corruption/ -118- .R. Besides. N. Moreover. C. International Financial Management. 41-43.pdf. (1996). J. a 40 year old gets 60 USD. Therefore. REFERENCES Burton.globalintegrity. if they cannot live on the official salary. analyze carefully the country risks and have suitable adjustment of discount rate and estimated cash flows. the corruption would never disappear. Roy (1991). Firstly.org/documents/fullreport/2010/DB10-fullreport.” The Banker. “The Determinants of Country Risk Ratings. the government should not use direct intervention in controlling the foreign exchange rate. Therefore. Cosset. The reason is that the World Bank’s investment climate department (CIC) found that there exists positive correlation between corruption and restrictive regulations16.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .org/Vietnam/2009/scorecard Retrieved on date May 6th 2010 “Domestic 16 goods still out of favor with Vietnamese consumers” http://psdblog. it is important to figure out flexible monetary and fiscal policies in order to curb the inflation rate as well as ensure high economic growth. “Country Risk Evaluation Methods: A Survey of Systems in Use.” Journal of International Business Studies. Retrieved on date May 8th 2010 “Vietnam: Integrity Indicators Scorecard” http://report. A new hire (university graduate) typically gets 15 to 20 USD monthly. 1983. Hence. Vietnamese government is intended to remove the base interest rate that makes the interest rate fluctuate so much. Additionally. that is a need that Vietnamese government has to strengthen the Vietnam Dong. In addition. interest rate of Vietnam is quite high in comparison with other countries in the world. p247-306 “Doing business 2010”. 22(1). the new policy that removes the base interest rate will raise the country risk in term of financial risk of Vietnam. 135-142. and J. whether they work for the central government or local. and Hisashi Inoue. in terms of Vietnamese government. F. any changing in monetary policy needs to be announced before implementation with enough time for enterprises to prepare actions (in case of PPC). Vietnam Dong should be freely traded with other kinds of currency. Secondly.

aspx Retrieved on date May 5th 2010 Thanh Binh (2010).Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . “IMF forecasts 8 percent GDP for Vietnam”.htm (accessed 10.But Not the One You Think” http://www. May 2010) About.com/ICRG_Methodology.com.[online]. http://www. [online].com/Article/1898962/Country-risk-2008-overall-resultsindex-table.com/S43N4063/Lai-suat-chovay-Xu-the-giam-dan.vn/monreNet/default.2010 http://www. “The China Bubble's Coming .prsgroup.html Retrieved on date May 4th 2010 VITALIY KATSENELSON (2009). http://useconomy.com/od/grossdomesticproduct/f/ Available at: GDP_Growth_Rate.gov.net/2010-02-09-kich-ban-kinh-te-viet-nam-2010-co-the-du-bao Retrieved on date May 8th 2010 “Lãi suất cho vay: Xu thế giảm dần” http://doanhnhantimes.vnnnews. May 2010) Vietnamnet.com/vn/thongtinnganh/24339/index. Retrieved on date May 6th 2010 Ministry of natural resources and environment. “The differences between GDP and GDP growth rate”.vn. Available at: http://www. “Kịch bản kinh tế Việt Nam 2010 có thể dự báo?” http://www.euromoney.vnnewstime.Du lÞch Th¸ng 5 . 2010.html?Type=Article&ArticleID=1898962 Retrieved on date May 8th 2010 “ICRG Methodology”.aspx? tabid=253&idmid=&ItemID=81717 (access ed 10.”Many factors have been cited by experts as the main reasons why they believe we can expect high inflation in 2010”.tuanvietnam.com/articles/2009/07/23/the_china_bubbles_coming_ but_not_the_one_you_think Retrieved on date May 6th 2010 “Euromoney”. Retrieved on date May 8th 2010 “Diễn biến giá USD năm 2008 và dự báo cho năm 2009” http://www.aspx#PolRiskRating. www.foreignpolicy.about. [online].com/business-news-2/domestic-goods-still-out-of-favour-withvietnamese-consumers.atpvietnam. Available at: http://www. May 2010) -119- . 2010.monre. 2009.net/experts-say-expect-high-inflation-in-2010 (accessed 10.

Then the research continues with the drawbacks of physical evidence’s inefficiency and deficiency.Hanoi University (HANU) which is located in Nguyen Trai Road. Accordingly. A sample size of 65 students was randomly select to be included in the survey.Du lÞch Th¸ng 5 . This study begins with the profound analysis toward the strategic influences of servicescape in scores of service dimensions. Physical facilities convey the intended images. customer and employee dissatisfaction are the two most severe consequences due to bad physical environment. at the same time. statistical data were exploited to draw conclusions and suggestions. whiteboards. That turns out to be untrue in the modern background. On the basis of theoretical fundamentals. human beings are witnessing the non-stopped prosperity of the service sector. In addition. Hanoi. Distance in terms of relationships. computers… and peripheral physical evidence like the library. The questionnaire was designed with four evaluation questions and the last one was used to collect respondents’ recommendations about HANU’s physical evidence. behaviors between two parties customers and employees can also be reduced with the presence of a good servicescape system as a socializer. Finally. through some necessary calculations. create core values and values added as a facilitator.2010 THE IMPORTANCE OF PHYSICAL EVIDENCE IN SEVICES ORGANIZATION Written by: Le Tuyet Lan. statuses. dormitory and student’s cafeteria actually need to be upgraded the sooner the better. Nguyen Thanh Huyen (BA08) Supervisor: Tran Tuan Anh EXECUTIVE SUMMARY In such an increasingly aggressive and growing industry. A majority of students are content with the quality and quantity of existing HANU’s facilities. physical evidence carries the powerful potentials which help the service company differentiate itself from any competitor. Thieu Thi Thuy Linh (BA08) Luu Dieu Linh. However.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . The big question is “How do firms persuade customers to purchase their product/services before they actually experience the product/service and trust its quality?” The answer will be all about the impression the business made on the -120- . some essential facilities such as chairs. a real case application was conducted with the study object . Business organizations nowadays are making more efforts than ever to improve its marketing strategies of attracting the customer to their products/services. Physical Evidence or Servicescape framework is known as one of the leading marketing strategies promising the success for service businesses. tables. Thanh Xuan District. INTRODUCTION Many people tend to think that the product or service’ intrinsic quality is all that really matters to the success or failure of a business.

travel agencies. student accommodation. but they also often expect a good standards or presentation. shops. It proves to be a very important element in the extended marketing mix for its powerful influence on the buying decisions of the customer. Pricing. Marketers should be quite familiar with the ‘4Ps’ concept for Product. Place. Physical Evidence is a newly-born concept established by Booms and Bitner in 1981. Later parts of this report will discuss about theoretical view on this topic and the practical case of our university. Creating effective physical evidence is truly a new challenge in the modern business patterns today. The large majority of the most successful business organizations all over the world possess an excellent system of servicescape. Physical evidence and Processes (Bernard H. in the modern global multifaceted marketing environment today.e.Du lÞch Th¸ng 5 . Booms and Mary J.) However. bars and other facilities. Bitner. we are talking about Physical Evidence or Servicescape in marketing. Kotler. record stores. Yes. today consumers typically come into direct interaction with products/services in retail units or agents of the organization . called the ‘7Ps’ including 7 elements of the marketing mix: Products.g. 1992. Price. GENERAL UNDERSTANDING OF PHYSICAL EVIDENCE IN MARKETING Marketing mix is the combination of controllable elements that organizations will be using to successfully influence the customers to purchase their products/services.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In the early days when Industry of manufacturing dominated the global economy the physical evidence of production units such as factories and production line equipment was not very important to the end consumer because they never went inside the factory. GL. the ‘4Ps’ seem to be too simple or limited in terms of effective reflection of the entire marketing mix of an services organization. Moorthy. The Extended Marketing Mix was born then.. Not only do they need to easily find their way around the store.and they expect a high level of presentation in those modern representatives of the organization . People. which can be illustrated by several typical examples: Students going to college or university have far higher expectations about the quality of their accommodation and learning environment than in the past. • -121- . Promotion.2010 customers. P. clothes shops. Promotion and Place (Lilien. banks etc. 1981) Physical Evidence is one of the 7Ps that could persuade the customers about the value/quality of the services through the physical facilities that they are actually experiencing. The importance of quality physical layout is important in a range of service providers. There’ are a number of other key factors that also significantly influence the marketing strategies as well as the customers’ behaviors toward a service. As a result colleges and universities pay far more attention to creating attractive learning environments. the presentations and proof of the product/service’s quality or of the company’s credibility that the customers themselves see and feel before they use the product/ service. However. There are a lot more to discover about this topic.

L.2010 Air passengers expect attractive and stimulating environments. but also to the layout and structure of virtual stores. • Hair dressing salons are expected to provide pleasant waiting areas. • Physical evidence is not only relevant to stores. This 6th P. access to coffee for customers. Instant examples for essential physical evidence are a bank’s computer systems. Facilitating the flow of the service delivery process iii. and websites. hospitals… physical evidence or servicescape has very powerful impacts on customers’ evaluation and perception of quality. the design of the service environment performs scores of crucial roles.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . increasing credibility of the service provider. banks. Because of the abstract and intangible nature of services. 2008). Hence. The intangible nature of a service means that Potential customers are unable to judge a service before it is consumed. Socializing customers and employees alike in terms of their respective roles.Du lÞch Th¸ng 5 . a school’s buildings and yards. for organizations delivering high contact services or leisure services. thus. one of the very unique capabilities of physical evidence is that it acts as a very powerful tool for differentiation from competitors. a customer relies mostly on peripheral cues that represent and visualize the service to appreciate its invisible aspects. Peripheral evidence is represented by tangibles provided by service providers as value-added facilities/commodities or gifts for customer’s greater convenience and satisfaction. Four of the most significant ones are: i. Through the physical facilities that customers can actually see or experience when they use a service.Physical Evidence of marketing planning. with activities for young children etc. Differentiating the company from its competitors -122- . retail stores. IMPORTANCES OF PHYSICAL EVIDENCE IN SERVICES ORGANIZATIONS In services organizations such as hotels. It enables the organization to increase employee productivity and provides effective management of service quality. Packaging the services ii. A. professional offices. they will have cues to position the services in their own mind. is to reduce that perceived risk in the customers’ mind (Palmer. There are plenty of important benefits that physical evidence can offer an organization. with attractive reading materials. etc. Moreover. behaviors and relationships iv. Physical evidence can be generally classified into 2 types: peripheral and essential (Shostack. Physical evidence creates good impression as well as repositioning in customers’ mind. and other interactive channels between the services organization and its customers. clinic’s professional equipments. (1982)). Essential physical evidence is by tangibles. restaurants. That fact increases the riskiness inherent in their purchase decision. which is essential and vital to the basic operation of the service. etc. such as interesting departure lounges. which the customers visit. G.

Sundstrom and Altman1989. forms initial impressions as well as influence their perceptions (eg. A large number of researches suggest that the physical facilities with the role of a facilitator may influence the customer's ultimate satisfaction and employees’ satisfaction.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the presence of these supporters can enhance remarkably the students’ understanding. Sundstromv and Sundstrom 1986. hairdryers. -123- . Taking a patient who wants to visit a dentist as an example. his patients will be likely to feel more reliable on the quality of the dental clinic on witnessing the professional certificates and high qualification degrees displayed on the wall. A hairdresser will not be able to serve her customers without scissors. and motivation (e.Du lÞch Th¸ng 5 . etc. Any risk including financial. air-conditions can not completely disrupt the education process. performance. computers. the physical elements of servicescape are the most valuable visible aspect of service offering that the marketers should take advantage to create the desired impression on their customers. However. loyalty. Servicescapes can be so designed that they facilitate service providers and consequentially also increase productivity. boardmarkers.Steele 1986. physical & psychosocial risk is always inherent with the purchase of services due to their unique characteristics. a professor can not teach his students with the absence of boards.. On one hand. The situation implies that the patient is facing with some certain perceived risk.2010 Service packaging The first strategic role of servicescape is to convey the corporation’s image (quality. Definitely.g. Physical surroundings is considered as “quality cues” that set up customer satisfactions. As a result. physical evidence often dictates the flow of the service delivery process by incorporating design elements like signs and cueing formats that communicate to customers how the service process work (Solomon. features and values) to its target customers. a professional dental clinic with professionalism would know how to improve the customer credence and trust by providing the most modern equipments in his office. Services tend to be intangible and nonstandardized offerings. productivity. Wineman 1986). reduce perceived risks). satisfaction and excitement during the lecture. servicescape comprises core equipment that is vital to any service provider. air conditioner. shampoos… On the other hands. For instance. newspapers. the patient can not evaluate the service offering prior to the accomplishment stage. Davis 1984. 1985). In teaching. Facilitating the flow of the service delivery process As a facilitator. therefore. the deficiency of projectors. as well as other supporting facilities that may improve customers’ satisfaction like comfortable seats in waiting room. however. a facilitator acts as a determinant of the service operation. obviously. the physical layout in the dentist’s workplace conveys positive messages to his customers.that is the image of a high-class and professional dental clinic. perceived risks are more highly associated with sales in services organizations than in production firms. Moreover. chairs & desks. Becker 1981. hair dyers. In this case.

They can see how the bank tellers proceeds customer’s order. how should they interact appropriately in the communication environment. Socializing employees and customers Physical evidence socializes employees and customers toward their respective roles behaviors and relationships. the style of uniform and the facility designs are the two concrete tools used for building up the exceptional features of the corporation. customers and employees interact with each other within the organization's physical facilities. a large part of the floor is marked as restricted. how the cashiers work with their tasks. makes customers feel more welcome. leaving little space in the form of a narrow aisle along the outer walls of the hall for customers. Having some certain understanding in advance should help two sides (the organization and the customer) socialize much better with each other. private banks approach customers with conviviality. is conducted and by entering that area. Perceived risk that customers face when using private banks’ services is much lower than state-owned banks. Everything seems clear and open to the customer. The message is clear –customer must not enter the restricted area. reaching a win-win negotiation and build a good relationship between the two sides.2010 Goood servicescape helps to reduce turnover rate of both employees and customers.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . internal operations. the organization's environment should support the needs and preferences of both service employees and customers to meet their satisfaction and boost up the services sales. could make its employees to feel a sense of belonging and connected with others people who work for the organization. The physical layout design of the office suggests that customer is indeed central to all activities. The air conditioned lounge with comfortable seats and a cold water dispenser as you pass through a spotlessly clean glass door. It gives the employees and customers clues and implicit directions about their roles. A practical example is the comparison between the servicescape of state-owned banks with that of private banks in Vietnam. and typically require direct human contact. In state-owned banks. customers will be interfering with their task. Customers are allowed with more space to move and occupy a seat across from executives’ desks. which is where the most important job of the bank. calm and cooperative in the way they communicate with the organization’s staff if they realize that they are sitting in a background of a high-class office well equipped with excellent servicescape. Thus. A typical customer would react in a better way. etc. The reason is services generally are purchased and consumed simultaneously. Other internal physical evidence like uniforms and proper systematic design of a organization’s office layout.Du lÞch Th¸ng 5 . trying to be polite. -124- . However. etc. Also. There’s no wonder why private banks are getting more and more successful over state-owned banks in Vietnam Acting as a tool for differentiation Physical surroundings are regarded as a means for differentiation that distinguishes a service organization from its competitors. A restaurant with candles in tables and smooth classical music differentiates a restaurant from one with blasting music and stylist pictures on the walls.

Firms may find out many ways to achieve differentiation. will all matters to almost all of the customers. airline engine problems). Never before has differentiation become so crucial as nowadays. However.g. etc. there is supposed to have 3 main types of servicescape failures including: Mechanical problems (e.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . a facilitator aiding in the service delivery. cleanliness issues (e. the most effective and conspicuous one is using servicescape. the role of Physical Evidence/ Servicescape in service marketing is very crucial and tactic in every service organizations. the services organization can control the positioning of both its perceived service quality and its business culture in customers’ mind through physical evidence. However. the effects of a deteriorating servicescape will be highlighted in reference to the impacts on the two main participants in service transaction: customers and employees. employees’ appearance. Thus.g. credence and search attributes. In general. poor décor style). and lastly a differentiator making the differences among the businesses.g. It defines the style of the organization. As stated in the empirical research of K. the website. or providing \the same type of services. this part will focus on the other side of the problem by giving out the consequences of having poor Physical Evidence. physical evidence is a package visualizing the intangible property. Douglas Hoffman et al named “A CIT investigation of servicescape failures and associated recovery strategies”. dirty hotel rooms) and design issues (e. EFFECTS OF POOR PHYSICAL EVIDENCE As mentioned in the prior parts. even its credibility… Obviously. the professionalism it holds. relationships between customers and employees. In this research. equipment. there is a high degree of uncertainty for consumers when purchasing services because of their experience. employees. As suggested from other researches: whether customers. The design of the office layout. the color tone for the whole system of branches and agents. importance of customers to it. These failures in controlling the environmental settings really lead the managers to expose to the risk of demarketing which will certainly experience an unexpectedly tremendous decrease in the demand and involvement of the customers. or both are present within the servicescape also determines the types of objectives a firm -125- . If a new established service firm wants to expand and create its value perceived by customers. a socializing tool striking to balance the roles.Du lÞch Th¸ng 5 . So what are the effects of a bad Physical Evidence? With the purpose of demonstrating more the importance of Physical Evidence in service marketing. as the marketing environment is changing to be more multifaceted and aggressive. unique and different from the rest. there are few choices but to strongly attempt to grasp customer’s attention by improving its physical environment. there have been a large number of failures in the process of managing physical facilities. since competition between services organizations is getting harsher and harsher in this modern economy. Any of them would wish to be positioned in customers’ mind as a outstanding.2010 There are a large number of firms operating in the same field of business.

The bad working environment can lead to frustration and actual discomfort among workers. Berry and Parasuraman (1988). the repurchase and re-patronage intentions are also strongly affected by the level of physical setting.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . The vague initial impression aroused from the physical evidence of the service company may keep customer from approach behaviors which were suggested by M. it definitely cannot be denied that the customer’s satisfaction is significantly constrained by the bad performance of physical evidence. the same physical setting that communicates with and influences customer may affect employees of the firm. As a result. Here the inappropriate selection of music stimuli acts as ambient condition of physical evidence that in fact damages the image of the shop. Therefore if the marketers cannot control the deteriorating in the physical evidence. ordered working place and the other firm without the good working assistance. Moreover. Beside the negative image affection.2010 might expect to accomplish through its physical environment. telephone offices and other similar professional agencies. According to Baker. Targeting physical surroundings to get the customer’s positive quality perception and customer’s satisfaction is the first magnitude of the self-serviced firms such as goal land and movie theatre … The very first and easily to be detected result from a poor servicescape is the deteriorating company’s image conveyed to the customers. interest and loyalty in the company (especially while other competitors of the company -126- . especially to the new build-up firm targeting to create a specific image. The influences of poor physical evidence on the customer can be viewed from the impacts on the customer’s perception and customer’s satisfaction to the service offerings. this research goes on examining the bad effects on the individual behaviors of customer and employee along with the effects on the interaction between them. The servicescape facilitating the performance of employee is in the concern of almost service organization but it’s indeed the dominant role for the remote service organizations like insurance firms.Bitner (1992) to consist of attraction. Let consider a simple case of 2 law firms where one can facilitate employees with good air condition. the failures in sevicescape also constrain customer in terms of leading them to the confusion about what really the firm provide. The unavoidable outcome is the bad working environment firm can have high rate of turnover because their employees hardly find motivation. The price paid to that kind of mistake is truly unpredicted: the company will have to face with a very high risk of temporary close or even bankruptcy as its revenue will be very low and cannot cover the cost to run the operation. spend money. That means some firms commit a huge mistake if it only focus on developing its core service provided to the customers but neglecting the importance of building up its physical facilities that put the very important first impressions on the customer’s mind. the whole firm is exposed to mislead customer’s perception as well as the loyalty regardless of how better they perform in the building of tangible cues (even the price and the quality of the service itself). It can be easily to imagine the case of a small fashion shop as the shop owner offer the ‘golden’ tempo background that almost drives away the youth market segment. return and carry out plan.J.Du lÞch Th¸ng 5 . stay/ explore.

That fact also means the company has to bear the risk of lowering customer’s retention rate. we have done some research into the condition of Hanoi University’s servicescape. The questionnaire consists of five questions which are designed mostly as ranking ones since we want to know the different evaluation of students about various kinds of physical evidence in Hanoi University. a survey was carried out within a small sample of only 65 random HANU students. an employee in a store is interested in helping customer in order to build a long maintain relationship when in return a customer in relaxed mood also wants to communicate with a salesperson to help them fulfill their purchasing intention. Prior researches show that the service design can aid in socialization. There is also a question asking for their recommendations to improve Hanoi University’s image in their eyes.Du lÞch Th¸ng 5 . HANU is a special -127- . Most of the survey samples are delivered during breaks between lectures and tutorials and collected at the end of each study sessions. the majority of them are from K07 and K08 students. they may defer the interaction between these two main participants in the service encounters. Following are the findings and analysis we have drawn from them. it can minimize the customer’s interest in buying. in this research we only conducted a survey on evaluation of the quality of HANU’s physical facilities from the students’ view. There are many ways as well as many aspects to examine the physical evidence.2010 are offering much more). However. Limitations In this research. in that both participants can understand their expected roles and relationships. Likewise. Finally. For instance. The limited size of the sample in comparison to a large population of HANU’s student body may cause some bias in the result. The research includes 65 students from Hanoi University. It can be concluded that the improved physical surroundings can help the worker make more efforts and assist them in achieving success in their performance when the bad physical facilities turn out to severely affect the quality of service firms through deteriorating the employees who transfer service to the customers. the failures in building an good servicescape can result in the misleading customer’s perception of the service offering and customer’s satisfaction at the same time as the lower performance of the firm’s employees. In conclusion.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . PRACTICAL CASE: PHYSICAL EVIDENCE IN HANU Methodology Putting theory into practice. the interaction of customer and employee in service occurrence can be deferred by the problems during managing a servicescape. The result is the interaction between them is corrupted and lead to the failures of sales revenue. however. the most influential dominant of any services organization. It took us 4 days to completely gather 65 answered questionnaires from all the survey takers. Moreover. the bad physical surroundings really distract employees from focusing on their task and they can ignore the customer or serve them in a bad appearance or attitiude. Moreover.

resulting in limited applicability of the findings as well. this research is carried out by a group of only 4 students in a short time of several weeks. whose teaching staff are teachers at young age that they can easily understand what students feel and even sympathize and encourage them in their studying. Thus. A large proportion of them comes from rural areas while many comes from modern cities. much younger than teachers in other faculties in HANU. the satisfaction and evaluation on HANU’s servicescape is immensely affected by that fact. forums. educational core facilities and teachers/staff’s professional appearance are the parts that take most of the first impression of HANU on its students. First year students in HANU mostly study entrance subjects. A small internal research in this department itself has revealed that the mean age of the teachers is 24.2010 services organization since it is a state-owned one in the field of education. Moreover. Study rooms are quite similar with those of high schools but lecture halls with projectors. Another limitation is that the background of HANU’s students varies. students come in contact with not only new friends. their appearances as well as dressing style are much matched with the students’ “taste of fashion”. accounting for over 60% as a whole. Their expectation of the university’s physical facilities therefore may vary as well.Du lÞch Th¸ng 5 . teachers but also new teaching and studying style. Hence. microphones… certainly make freshmen -128- .etc Others (2 or more options mixed) As expected. For deeper understanding of the situation and analysis as well as to make any further step based on research results. Its typical servicescape system is supposed to be much different from organizations of other fields. The shortness of time and human resources as well as the lack of experience and further professional knowledge can be huge barriers in the process of conduction of the research. some of the findings from our analysis may not be widely applicable to other profit-oriented services firms. Analysis Figure 1: First impression on HANU E ducational facilities S upporting facilities Teachers/ S taff's professional appearance Websites. Last but not least.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . more efforts and careful researches are highly recommended. Entering the university.

we spent more effort researching the opinions of undergraduates towards each and every dimensions of the school’s physical evidence.Giang 2010). for example Faculty of Management and tourism http://web. Though most students did not pay too much attention to the websites at first. students mention the large “green” campus and the great stadium as an outstanding feature of HANU’s physical evidence that not many other school have. the security staff works quite diligently to protect the stadium and take care of the trees. As a result. it cannot be denied that the two factors. Peripheral physical evidence or supporting facilities.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . HANU is a multi-major university and each faculty has an internal website address.vn/fsd/.hanu. these include dormitories. After visiting many universities in Vietnam. etc which help boosting up students and teachers’ efficiency. Chief of the Department of Education University (MOET) raised a question ‘’With the facilities and teaching staff like that. declaration as well as legal documents and study results will be broadcasted through this channel. In the latter question. In HANU specifically. parking areas. Furthermore. Back to the early time. Besides. Actually.vn/fmt/ or Foundation Studies Department http://web. cafeteria.hanu.2010 impressed. which enhances the HANU’s servicescape image in students’ eyes. Physical subject particularly surprises students with the intense of exercises and the hugeness of the stadium. the views of HANU students about these will be clarified more clearly. The first and foremost finding is about current educational facilities condition. gradually.Du lÞch Th¸ng 5 . physical condition and teaching capacity. However. Ms Tran Thi Ha. Every afternoon. worried and eager at the same time. there have been reports about the bad condition of the educational foundation facilities. the university’s management staff had decided to invest a great amount of money in building up the stadium. -129- . colleges nowadays are increasing the usage of information technology to effectively reach the students’ issues and opinions. just serve as an aid to the performance. as its name mentioned. HANU has successfully built a good impression in this term of physical evidence. This is definitely a good method to control the management process of the whole school. Whenever describing HANU. they have found out the necessity of having access to them because all the notices. After all. what could schools rely on to develop stable and sustainable background for students?’’(M. the problems regarding the quality of higher education have for long been the concern of the society. are of utmost importance when building up any academic institution’s image. hoping that students would have the chance to practice curricular subjects as well as extra sports activities. HANU’s “playground” is full with students enjoying different track-and-field events. this element influence much on the student’s lifestyle and educational environment of the university After looking through the first impression of students on HANU as a whole.

Du lÞch Th¸ng 5 .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . All broken facilities need to be reported to the corresponding staff and be repaired as soon as possible. Afterwards. then they still need to improve the current equipment. some lecture halls still in lack of desks. teachers’ appearance and some interactive channel of HANU are being taken into consideration. However. which made students feel uncomfortable while taking part in educational activities. if the university wihshes to maintain the appeal. However. The survey result of this question suggests a good sign that HANU is creating a good image in the customers’ eyes. chairs and air conditioner. Study rooms are of reasonable brightness quality and equipment.2010 Figure 2: Satisfaction level with HANU's current educational facilities Exceed expectation Good Neutral Under expectations Bad The overall comment is that students quite satisfy with the current physical condition of HANU which is the core of HANU’s service. The results are as follows 35 30 25 20 15 10 5 0 1 2 3 4 S upporting facilities Teachers' appearance Interactive channels 5 Figure 3: Evaluation of the tangibles’ quality -130- . or they have ceased operating already. other types of servicescape such as supporting amenity.

Figure 4: Factors need improving the most E ducational core facilities S upporting facilities S professionalism taff Interactive channels Others -131- . HANU is a university with a long history of development. upgraded in 11 years. when the dry season comes. however. What is more. which means that these are acceptable. The condition in most dorm rooms at present is good. electricity and water cut-off happen quite often. Many students say that if the library staff were friendlier. of more than 400 college and colleges across the country. they could not concentrate on studying completely. HANU’s library is in acceptable condition with many sources of referencing materials and good air conditioner operation. The expansion of this field has caused rumors among people about the quality of higher education (Tien Dung 2010). the quality of HANU’s restaurants has not come up with the students’ expectations. Therefore. foods and drinks services are considered quite important. as a result. during the last rainy season. The next part of this research will discuss which parts in the physical evidence should be considered for improvements. more than 300 schools have been established. the university should consider getting this problem solved.Du lÞch Th¸ng 5 . albeit not very good. Nevertheless. cafeteria. Regarded as a top supporting servicescape of a school. therefore. notwithstanding the old versions of some computers and the hostile attitude of the staff. Nevertheless. the whole dormitories were flooded.2010 The most common range of mark is from 2 to 4. eventually. S-club attracts pupils because of delicious foods and drinks. the dorm staff had to use many methods to get the condition back to normal. Cafeteria’s foods receive the most complaints from students. but the price doesn’t seem to fit the student’s allowances enough. they would come here more frequently because the study atmosphere is very encouraging. Some infective diseases took the chance to spread throughout the dorm areas. Library is also an important physical evidence of a school. Students mention quite much about the quality of some supporting services like dormitories. it has had chances to improve both physical and teaching staff’s quality. In the school-run cafeteria. let alone the high price. which made students escape from their shelters and go home.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the foods and smells are not very pleasant. the number of low-quality colleges is rising quickly.

Moreover. whiteboards need to be improved to get a better studying condition for the students. In addition. The small -132- . as the purposes in theory part have suggested. As a matter of fact. the websites have also been taken care of and update everyday. Though these are understandable desires.Du lÞch Th¸ng 5 . HANU staff often makes frequent check-up at the rooms to fix any problems regarding the chairs. Moreover. all of the problems mentioned above regarding the dorm areas and the quality of foods in the cafeteria also should be considered improving. it will take such a long time to fulfill all. it seems that there are some necessary changes that Hanu should follow to reach its goals: The studying stationaries such as chairs. thus leading to miscommunication and unmotivated lecturers. Recommendations As noted in the discussion part about the role of servicescape in service firms. Specifically. they want to have better quality dormitories and cafeteria as well as free parking spaces. There are some other factors that students have mentioned like clubs or events. HANU may have been in the process of augment these issues already. Any students will look up to their teachers and certainly teaching staff also have a considerable effect on them. • Recommendations on the essential physical evidence With no dout that the core facilities are in the very heart of the quality of any education organisation in the world. However. Interactive channels and educational facilities represent 32% as a whole. the teaching method is still a problem as some teachers do not know how to communicate with students effectively. they should reinforce the student’s attitude to protect the university’s facilities as the useful life-time of any public facilities mainly depends on the usage of people. teachers’ knowledge and several students’ services at ‘’students’ price’’ should be expanded to meet their needs and wants. The advancement of lecturers definitely brings about customers’ satisfaction (students’ eagerness) to study more effectively. Therefore. Hanu is on its way to step-by-step improve its educational facilities to best assist the student’s performance. in other words. tables. Supporting facilities come second in this list with 20% of the students favor the change in them. Most of HANU’s teachers are qualified with at least Bachelor and even Master and Doctor Degrees. As a result. desks or other utilities. Hanu can consider ordering some new chairs and tables and making effort on fixing some bad stationaries. HANU should have effective plans to enhance its image perceived by students and other stakeholders of the university. the customer’s perception about the service offerings is mostly determined by the service surroundings.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . However. about 21 out of 65 students interviewed agree that developments in these fields are priority.2010 It is no wonder that teaching staff has been voted as the factor worth improving the most. These plans are suggested to concentrate on dealing with the disadvantages of the core facilities and supporting facilities that have clarified in the previous part which includes the information getting from the survey.

This research. Hanu is supportes to quickly address some problems in relation to the library. with the purpose of demonstrating the tactic role of Physical evidence in service marketing. Hanu should call for the sponsership of other organization especially the technical firms to give it a hand to upgrade such core facilities of the university • Recommendations on the peripheral physical evidence In terms of supporting facilities. it can definitely blur the difference between good and service to the customer’s perception and create the positive customer behaviours toward it supplied service. the problem arouses that the head projectors. potential students and other sponsors. In other words. Physical Evidence is increasingly attributed to be on top priority in building an effective service system. this study also has taken into account one specific reference to Hanoi University with the aim to analyse the presence of physical evidence that the university supply to facilitate the study of its students and other stakeholders. The dormitory should be furnished with moderner facilities when the cafeteria is supposed to get better in the nutrition of the meals and the cleanliness inside the cooking area. In order to fulfil these tasks. It can be stated that the servicescape acts as a strategic bone of a service organisation when it can make the service with the originally intangible characteristic turn to be more tangible. However. The questioned arisen here is whether Hanu’s managers have a regular check on the performance of such staff to quickly identify the inappropriate working attitude? Therefore. in order to enhance the image and attraction conveyed to students.Du lÞch Th¸ng 5 . The dormitory and cafeteria for students are in urgent need of improving as most of students consider them as below standard conditions. Hanu should seriously take care of the problems and constantly evaluate the service quality offerings and student’s level of satisfaction.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . to confront with that Hanu should seriously make a plan to build an investigation team to catch up with the emergence of negative issues. the unexpected bad performance of servicescape dimensions really can ruin the whole thing that remind marketers of carefully selecting the right strategy to establish the most appropriate servicescape process. It is clearly justified in the research that Hanoi -133- . has provided the broad view of the purpose. importance of a physical environment as well as the discouraging influence of a bad servicescape. the library is evaluated to be less attractive as the consequence of the poor attitude of the library staff. CONCLUSION Being one of the seven Ps in marketing mix.2010 notice piece of paper on the wall of any classroom could have an unexpected effect that the university shuold take care about Besides. Moreover. In general. computer system and labrooms are reported to have poor perfomance that really constrain the quality of many lectures should be highly considered by the management board. the most important solutions’s basis is the regular input seeking from both student and its staff as to what improvement can be made in the service process to get the best satisfaction from its students. dormitory and student’s cafeteria As mentioned above.

M. "Packaging the service provider". American Marketing Association. Vol..57-71. Siddiqui. J.89-93.Du lÞch Th¸ng 5 . Thus this research opens up a gamut avenue to the future accomplishments which will generate more multifaceted and thorough understanding about the servicescape in relation to build up better physical environment settings to achieve the service goals of the organization. Donnelly and W. 12-16 Lilien. European Journal of Marketing. Agricultural and Mechanical College. pp47-51.J.L.D." Journal of Retail Banking.vn/Giao-duc/361167/Nhieu-truong-dai-hoc-thieu-co-so-phat-trien.Creativity in Services Marketing. 56 No.July. (1986). This research contributes an imperative material to the future in-depth researches and analysis to link the role of Physical Evidence to the impacts on customer’s perception and satisfaction of the service offerings.html Tien Dung 2010. pp.uk/theory/theory--the-extended-marketing-mix-%287ps%29-319. G. 1992. 11-23 Bitner. http://www. Shostack. vol 4. M. pp. -134- . Bitner. Booms and Mary J. http://www. Vol. S.wikipedia. A. Prentice-Hall International. 1982.. Maidenhead. http://tuoitre. 28th January 2010. C.. pp49-63. McGraw Hill. Berry. Service Industries Journal. GL.R. M. "Servicescapes: the impact of physical surroundings on customers and employees". Solomon.J. 10-13 John.co. "The Marketing Impact of Branch Facility Design.org/courseware/Services%20Marketing/SM-DS16. 16(1). M. KS. Some recommedations are also brought up to provide cues to assist the Hanu’s board of management on their way to reach their goals of best improving Hanu’s quality and image. Schmalensee. P. The Extended Marketing Mix (7Ps) p.H (2007) “The impact of servicescape on quality perception and repatronage intentions of customers-with specific reference to shopping malls”.2. 17th April 2010. satisfaction and repurchase intentions”. 5 No. Marshall..thetimes100. Service Marketing. and A. Englewood Cliffs NJ. George. (2008) Principles of Services Marketing.64-71. Chicago: American Marketing Association. IL. Bernard H. Moorthy.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . in J. REFERENCES Bitner. M. 33-42. Journal of Marketing. 10 (2).April. http://vnexpress. Journal of Marketing. http://en. Kotler.H. viewed on May 12th 2010. 1981. Leonard L. icmrindia. pp. "Marketing Models". Bitner. Parasuraman (1988). 2003 “The effects of the employee service quality provision and customer personality traits on the customer participation. D.N..2010 University has quite good physical surroundings but still be far away from performing the expected servicescapes like the other universities in the developed economy countries. ‘’Nhieu truong dai hoc thieu co so phat trien’’. (1992).Giang 2010. viewed 19th May 2010. (Eds). ‘’Phai dong cua cac truong dai hoc kem chat luong’’. Tripathi. M. 56: 57-71 Baker.J. How to design a service.R. "Consumer responses to the physical environment in service settings".icmrindia. in Venkatesna.org/wiki/Marketing_mix M.org. viewed 18th May 2010. Chicago.Chapter 16: Physical Evidence viewed on May 12th 2010.phpMarketing mixWikipedia viewed on May 12th 2010. Marketing Strategies and Organization Structures for Service Firms. M.htm The Times 100. 5th Edition. (1985). Marketing of Services.1992 “Servicescapes: The impact of physical surroundings in customers and employees”.net/GL/Xa-hoi/Giao-duc/2010/04/3BA1AE99/ Palmer.

However.843 in 1997) to 2. thank to the high-speed development. With the aim of having a comprehensive outlook about the impact and destination marketing campaign after crisis. 1996). and particularly the genocidal regime of the Khmer Rouge in 1960s that destroyed the tourism industry.000 to 70. The level of influence of such adverse attack on the tourism industry depends on many factors in which how the destination get ready to encounter and how the tourism authorities response actively response to the crisis. but also for the political legitimacy and the national and cultural identity of Cambodia (Chheang. Introduction There is no doubt that tourism nowadays becomes one of the most key industries in the economic development strategy of each country. or one in every 6. Cambodia was one of the most popular tourist destinations in Southeast Asia. in spite of decades of civil war. ranging from the socio-economic crisis to political crisis. Bali.etc. 2008). and the killing fields. Hoang Thi Thanh Huyen.Du lÞch Th¸ng 5 .1 The impact of crisis a) Pre-financial crisis The second generated economic sector. our research concentrates on 4 types of crisis: economic. 2008) -135- . Nguyen Thi Hoa (TR-06) Vu Thi Thin.000 jobs (2008) 15. II. The findings of the research will be the valuable reference for Vietnam tourism in the term of better preparing toward any kinds of crisis. After that it changed themselves gradually due to insurgencies.102. from disease impacts to natural disaster. with between 50.. it made a enormous contribution easing a huge number of jobless by creating 1. civil war. political.. Indeed. Since then.4% of total employment. In particular.015. destination’s image is firstly suffered from negative impacts of this crisis. tourism also is an easily vulnerable industry due to a wide range of crisis. Hong Kong and China.2010 MARKETING AFTER CRISIS Supervisor: Ngo Phuong Dung Written by: Nguyen Thi Thu. disease and natural crisis in the case of Cambodia. In addition. tourism.5 jobs (Chheang. it was recovered by increasing nearly ten times from the 1990s with more than 200000 visitors arrivals (218.128 in 2007 that concretized by revenues increasing from 103 million USD in 1997 to 1400 million USD. Findings 1. tourism has become not only the country’s engine for economic growth.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . has obviously demonstrated its position from flying higher and higher with the huge amount of tourist income especially after suffered from insecure politic. In the 1960s. Do Thi Phuong (TR-06) I. Economic crisis – Cambodia case 1.000 annual visitors (Lam. Cambodia seemed to recover its position after conflict ended in the early 1990s.

told TTR Weeklya global economic crisis forced a slump in demand. we could get about 30 US dollars per table.Du lÞch Th¸ng 5 . but now it is completely different. Figure 1: Growth of tourism sector ( %) 2004-2009 25 20 15 10 5 0 2004 2005 2006 2007 2008 2009 year Source: NIS and EIC data as cited in Cambodia Economic Watch (2009). the extraordinarily changeable statistic belongs to Siem Reap in which site of the world famous tourism attraction – Angkor Wat Temples. Vandy Ho. Chanthorn witnessed 16 percent decrease tourist arrivals in the first quarter of 2009 (Cambodia Daily. Japan dropped 14%.3 million visitors to only 8. “Last year. 2009)." said Ms.2010 b) After-financial crisis The collected-data has illustrated dissatisfactory result due to enormous decline in tourist arrivals from 2004 to 2009 with the statistic of roughly plunge from 22. with tourist arrivals falling and some luxury hotels temporarily shut down. especially from markets in Asia. expanding tourist coming quantity is defined progressively before crisis but plummet after that 32% from 50.6 million ones (Figure 1) within 5 years that lead to a certainly considerable shrink in the number of international tourist.53% in 2007 and 5.53% in 2004 to 18.48% and 1. % growth East -136- . local media reported. Arrivals from China dropped 10% in the first seven months. Generally. More detailed.ph/2009). (Source: Ministry of Cambodia tourism) Cambodia Association of Travel Agent president. while Thailand dropped 20 to 21% this year (Sawapat Pimchaichon. Now some people spend only one dollar for a Coke and then leave the restaurant. Korea dropped 30%.7% in 2008 and 2009 respectively (Source: Ministry of Cambodia tourism). Mr.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . http://balita.

with the same statistic reaching-10% in September 2008.Du lÞch Th¸ng 5 . and by 10% in Phnom Penh for the period January-September 2008 over the same period in the preceding year. Incidence of domestic flights actually shrank by 22% in Siem Reap for the period January-May 2008 over the same period in 2007. flight movements at both airports were considerably lower in 2008. from 21% in May to a mere 3% in September 2 0 0 8 . and expectedly also in 2009 compared with previous years.flight movement statistic which illustrated in term of percentage change in two main airports in Cambodia. especially in 2009. B e s i d e s .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Figure 3: Flight movement (% change) -137- . Consistent with this. Most airlines have already made plans to cut capacity on existing routes. the situation at Siem Reap International Airport has been even worse.2010 Figure 2: International visitor arrivals to Cambodia 2004-2009 • The ebbing of measured-number also lies in faded. The chart recorded the significant drop in growth of passenger traffic at Phnom Penh International Airport.

Tuk-Tuk. but have seen their earnings drop to just $2.ilo. etc. restaurants.ilo.63%. Tuk-Tuk drivers earned around $15 per day during this season in the past. As the result. Japan 6. those in Phnom Penh use to get $15-20 per day. Kampong Cham) and 8. 1. In a nutshell. the immediate strategy seems to have been to focus on reviving the number of tourists coming in through regionalization and vamped-up marketing. airlines.77 % etc (Source: Ministry of Cambodia tourism 2009). In Siem Reap. are seeing a major slowdown in tourists. A great deal of contributed revenue principally comes from the international tourist particularly main sources like Vietnam 14. Korea 9. but now. USA 6.87." Said Thy Sok Mony.2 Marketing strategy Segmentation strategy After the financial crisis. employment opportunities were created for more than 100. Takeo and Kampong Cham).2010 • “I am worried about that if the hotel business is good. the target segmentation of the main sources of Cambodia tourism listed the emergency source needed recovering. However this expected percent was plummeted under 0%.000 people and increase 20% annually. (www.Du lÞch Th¸ng 5 . (www. we are good.000 locals face living difficulties. the impact still has not stopped till making slightly down in tourist receipt from $ 1595 USD to $1561 USD in 2008 and 2009 respectively (Source: Ministry of Cambodia tourism) • The multiple-services characteristic has created a numerous labour force such as hotels.org) “Only 56 rooms out of 222 are currently occupied. Phnom Penh and Sihanouk Ville. Oddar Meanchey. guesthouses.000 in Siem Reap (50% are migrants from nearby provinces such as Kampong Thom. souvenir shops. we are down. more diversified and more visible set of responses. 6.000 Tuk-Tuk drivers.000 drivers in Phnom Penh (almost all are migrants from provinces such as Prey Veng. And. the longer-term strategy refocuses on pushing the quantity of tourist specially -138- . tour operators. then about 30. front office manager at the Prince D'Angkor Hotel. Similarly. the vast change at least in labors structure can be noticeable.50 per day in recent months.15%. There is approximately 14. food vendors. the 4% contributed GDP accommodation industry actually stagnated due to tourist arrival decreasing and their short average length of stay. account for -3% in 2009 that means a huge lose of 63000 tourists $ 50USD in revenue and 10000 direct job and if a tourism job can help 3 locals. massage parlors. down from last year's low-season average of 100” said Thy Sok Mony again. If it's down.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Even though their income is declining. key tourist attractions. Certainly. Tuk-Tuk drivers said they have no plans to change their jobs or return home because the chances of earning money in the city is higher than in their villages. considered the special character in Siem Reap.balita.ph/2009/) especially the real number shows the over-shock decline of 30-80% in 2009 compared with 2008 (www. travel agencies. An observable example about Tuk-Tuk a kind of motor Dup street vendors. The policy mix administered to rekindle tourism in this country has constituted a relatively bigger.org). Definitely. they earn only $5 per day. Consequently. Cambodia has been working on the recovery plan of its tourism sector.

hotel and restaurants associations. with 30% to 40% of travel agencies operating in the country having slashed prices of package tours (MoT. Kingdom of wonder” tends to ease the horrible image of a spoiled country by civil war. including accommodation.Du lÞch Th¸ng 5 . from countries that have land borders. The reduction price strategy also has been proven through lowering of fees at tourist sites: “three million VND touching the wonder” (Huu Vinh.000 tourists per year and 59 million U. is enlarging and adding the necessary infrastructure to airports made smooth the process of air-traveling especially among Asian country. have implemented a series of strategy related to recover tourism product. Additionally. some of the promotional strategy was started activating Pricing strategy • To stave off the further ebbing of the tourism sector. the Tourism Working Group of the Government–Private Sector Forum (GPSF). targeting better spenders) and products and gearing up to tap other tourist sites and markets.g." said Pascal Deyrolle. in connection with this. Indeed. for further serving and facilitate tourists’ touring process. the RGC (Royal Government of Cambodia) has initiated maintenance -139- . we could potentially bring in an extra 39. Meanwhile. 2009). while some persons operating hotels believed that more flights from more carriers would help growth. Cambodia. political infighting and massive corruption resounds loudly in the international community so that it can actually hit the degree of tourism affect. the Cambodian government’s proposed chief strategy is to boost the total number of tourists from last year by 5-7% by enhancing the number of national tourists and tourists from the ASEAN region. 2009). vice president of the Cambodian Hotel Association and general manager of a hotel in Siem Reap (Xinhua. In the effort of bringing Cambodia image and also raising international tourists’ awareness. Product strategy • Tighten the cooperation between the stakeholders and the tourism private sector. especially from European countries (the country’s airports are said to be capable of accommodating eight times the current traffic). reducing package-tour prices would foster growth in international travel. has reportedly been undertaken by the private sector.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2010 international one and enhancing the quality of the tourists (e. Concurrently. for one week etc. Besides. facilitation of transportation services was implemented in term of freely allowing 150 vehicles. a 10% to 20% reduction in the price of tourism services. the Cambodia Association of Travel Agents. dollars. the Société Concessionaire des Aéroports (SCA). both passenger and cargo carriers. As the result. 2009) has shown the surprised entrance fee in Angkor Wat with only $15USD included $ 165 USD package tour to the famous tangible cultural heritage in Siem Reap. new slogan “Visit Cambodia. since 50-70% of tourism spending is on accommodation also draw the lower package tour.S. the Middle East and Russia. boosting of budget and direct flights. opposition groups and independent analysts. Going with this flow requesting hoteliers to cut their rates. food and transportation. “If we could add two more flights daily from Bangkok to Siem Reap.

" Luu Meng said.org).cambodia-tourism. it will take time and a great deal of persuasion by tourism reformers realize this objective.000 (http://www. 2009). Given the underdevelopment of other areas and the traditional fixation on Angkor Wat. attributed this year's tourism decline to the global economic downturn. “the purpose of the law is namely about developing the tourism industry. although such diversification seems to have been the hardest to concretize. and print media.2010 and repair works that have a direct bearing on travel facilitation.Du lÞch Th¸ng 5 . minister of tourism. For instance.org) • In parallel with reducing the package-tour price facilitating the touring process will be the added factor creates the highest level of tourist’s convenience and satisfaction. a tourism stimulus package has been spoken of but the government has sought to downplay expectations about its breadth in advance. featuring Angkor Wat alongside images of eco-tourism sites. insuring that establishments working in the industry have formal licenses that are renewed on a yearly basis and helping them meet the required standard as well. said (Xinhua. He said television advertising and this week's launch of national carrier Cambodia Angkor Air would both represent a welcome help. Indeed. co-chairman of the government private working group on tourism. international television. "And we hope the number of tourists visiting Cambodia will pick up from the end of September. "There will be nothing to worry about provided they don't actually close down their hotels. both of which discourage investors from undertaking risks and venturing into other areas. Apsara dancers. remains the key pillar of tourism.cambodia-tourism. Caution has -140- . which in return will help reduce poverty” Thong Khon. kingdom of wonder” takes the main role forming the first impression opening new page of tourism development by broadening Cambodia’ reputation becoming a cradle of ancient temples and pagodas Accordingly. Promotion strategy • As stated the slogan “ Visit Cambodia. 2009). he said. The ministry's campaign was welcomed by Luu Meng. as it ultimately depends on up to how much the government coffers can accommodate. had already forced several hotels to close and several others to reduce their employees' hours and also crack down on unlicensed agents and hotel and restaurant operators that do not meet relevant standards (Xinhua. Angkor Wat specifically. national roads leading to key border checkpoints have reportedly been restored. For approaching the law Ho Vandy. a marketing campaign conducted to be adverted on international channels such as CNN with the huge amount invested of US$340." he said. beaches and shadow puppets. but the Siem Reap–Sihanoukville–Phnom Penh triangle generally.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . because that is the start of the tourism season. • Simultaneously. Tapping other tourist sites and non-traditional tourist markets has also been high on the agenda. Tourism law was launched in 2009 tighten the tourism controlling of all private and public sector. the president of the Cambodian Hotel Association. He added that moves by hotel operators to cut staff numbers and working hours would work as a short-term solution to combat the problem of lower visitor numbers. (http://www. which.

1. which looks at the branding of Cambodia as an international tourist destination with distinct features compared to neighboring countries. so the sector is on the way to recovery. said. alternative tourist-destinations. director of the Statistics and Tourism Information Department. And now it is over.56 percent in January year on year.” We have already received the impact from the crisis. • Additionally. sector growth remains and will remain positive. Driven by responsible Cambodian company owners. an attractive promotional campaign was designed and launched from the first appearance throughout 2007 up to now.73 percent Data also showed a dramatic rise in tourists from Cambodia’s two main sources – South Korea and Vietnam. Nhim Kimny. The “Stay another Day” initiative supports from the idea of sustainable and socially responsible tourism aligned to other promotional tourism initiatives such as ‘Kingdom of Wonder’. probably increase the average number of days.” said Mohan Gunti. Consequently “The government seems to be more optimistic and emphatic about the fact that. good customer service and a diversity of offers. while less compared with previous years. • In addition. we are confident of increasing tourism arrivals to Cambodia because the country has an advantageous relationship between quality and price. It has been demonstrated perceptibly the recover in the actual data. which included a nearly 5 percent increase in all-important air arrivals. the campaign initially (2007 and 2008) was jointly published and financially supported by the International Finance Corporation (IFC) and GTZ-PSP but after that get going on by itself. an adviser to the Cambodian Association of -141- . however. With the aim at raising tourists’ awareness about so far unknown. saw full loads on its flights four times per week in January to Cambodia’s main tourism hub.Du lÞch Th¸ng 5 . “stay another day” has proven its distinctive power in attracting more and more tourist to Cambodia. as total visitors rose an annualised 6. and that a firm recovery would likely take hold throughout the remainder of 2010. 2009).75 % rise in flight arrival year on year in January released by the Ministry of Tourism Thursday suggested Cambodian tourism is starting to recover after a difficult 2009. Figure of 4. It has set recovery by 2011 or earlier” (Chun. analysts said the figures were positive. while Siem Reap arrivals climbed just 2.36 percent in January.2010 also been expressed with regard to the easing of visa requirements especially the visa exemptions for fellow GMS (The Greater Mekong Subregion) countries Vietnam and Lao PDR and ASEAN countries Singapore. which declared 39% rise in traveller suspended flights to Siem Reap from Incheon for nearly three months ahead of the tourism high season at the end of last year. “This year.” said Kong Sophearak. the figures showed. The statistic of tourist arrival at airport also recorded speedy recover: Phnom Penh International Airport saw arrivals rise 7. South Korean Airlines Asian. the airlines sales and marketing supervisor.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .3 The result • As the result of all the implemented strategy Cambodia is still an attractive destination due to be cradle of ancient value and beauty. Malaysia and the Philippines. activities and as a result.

498 arrivals (Terrorism and Poverty: Causes and Impacts) (figure 5) -142- . In November it dropped to 31. 2002. Indeed. Saturday October 12.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Despite medical and emergency response efforts. the new page of Cambodia tourism has changed themselves to become “kingdom of wonder” instead of the destroyed country in civil war and steer forward to be the target destination in 2011 in Asia. Figure 4: Deaths by country of origin 2. staff and revelers.1 Impact of the crisis Tourism demand slumped dramatically following the Bali bombing. 202 people died as a result of these blasts and hundreds more were injured . the idyllic island paradise of Bali was rocked by a series of devastating explosions. Political crisis – Bali case At approximately 11:20 pm. 2. Both entertainment venues were packed with unsuspecting tourists. In September 2002 direct international visitor arrivals to Bali stood at 150.747.2010 Travel Agents. many others were in the vicinity.Du lÞch Th¸ng 5 .with varying degrees of severity (ABC Online 2003). Paddies Bar and the Sari Club on the main street of Kuta bore the brunt of the impact.

the image of Bali has been stuck with the memory of October 2002. Thus. If retail trade. Especially. -143- . Product strategy To recreate the image of a safe and peace destination. Moreover. tourism enterprise in Bali found own way to survive. And the result is the traditional long-haul North American and European market segment has been well surpassed by domestic. As a result. Furthermore. a number of coping strategies at the village level were run including reducing expenditures. and return migration to the home villages as a social safety net (32%). by the end of October 2002 they had plummeted to 10% as the exodus ensued (After the Bali). when the main source of income suffered from a big tragedy. a number of countries. but contributed 21% to Bali’s provincial economy. and increasing the highly visible police and security presence across Bali. the United States.000 people (3.2010 Figure 5: Tourist arrival 2001. move beyond the images and memories of Bali bombing.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . scaling down remittances to villages. particularly at seaports and airports. Bali authority improved the national and regional security. including Australia. Japan. manufacturing. introducing new anti-terrorism laws.2 Marketing after crisis Segmentation The fact that the tourists from Australia and other Western countries hesitated to come to Bali and Australian government encouraged their citizens not to travel to Bali. Britain and other European countries have imposed travel warnings against their citizens who plan to travel to Bali and other places in Indonesia. And 100. scaled back working hours and reduced salaries in attempt to remain operational. selling assets (16%). With the slumping in number of tourists after the bombing. The number of Japanese tourists visiting Bali ranked the second after the Australians. Taiwanese and Korean.Du lÞch Th¸ng 5 . 2.3% of the labor force). Many businesses encouraged staff to take unpaid leave. Asian and budget Australian travelers with shorter visits and reduced daily expenditures. Implementing active strategies like identifying and prosecuting the Bali Bombing suspects. That creates the suspicion of tourists about the safety and prevents them to travel to Bali. Bali tourism focused more on young and retired Japanese ones (Bali plans to lure Japanese tourists). That revealed the relative instability of the tourism industry and the vulnerability of those dependants on the revenue it generates. and construction are included. strengthening international intelligence sharing arrangements. they aimed to regain the customer confidence.2002 Hotels and restaurants alone employed 58. New Zealand. the USA and Europe to Asian market like Japanese. tourism can be argued to generate over half of Bali’s income. The main target market was removed from Australia.000 had already lost their jobs— most from the informal sector. since October 2002. The week before the bombing occupancy rates at starred hotels ranged from 65 to 100%.

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2010 For example. hotels and tour operators is an effective action to lure the tourists back to Bali. In addition. after the Bali blasts. on Feb. Moreover. Moreover. we contacted all embassies and travel institutions around the world to convince them that Bali still safe. to ensure the safety of the first visitors . Additionally. the local police guarded the harbor. cooperation between businesses. warm smile and willing conversation of local residents reduce the sadness and confusion of tourists (After the Bali). emergency -144- . The cruise liner arrived on 9 a. the humanitarian organizations. Initial campaigns and slogans such as: “Bali for the world” and “Unified in Diversity: Unified we stand” were designed to demonstrate the strength of both industry and community. In fact. It was important to respect and remain the sensitive to the victims of Bali tragedy. these changes were reflected in a decline in the numbers of FITs (Free Independent Travelers) and a relative increase in package tourists (Terrorism and Poverty: Causes and Impacts). Other significant investment has been committed to the development of dedicated websites. Other campaigns and slogans like Bali for the World and Kuta Karnival of Life active strategies to emphasize and assure safety and security. We also asked related governments to revoke their travel advisories. especially after the terrorist bombings of 2002 and 2005. while broadening the Bali brand to encompass Bali culture and heritage (Bali overcoming crisis). and attract media attention from around the world to display the level of grief and anxiety of Bali bombing. available resources. Congress Tourism from the frequent international conferences held on the island. Every issue like security. People To get over the tragedy. regional stability. all levels of government and the local community contributed a greater socio-economic resilience through the development of a comprehensive crisis management plan and associated recovery marketing strategies. 10 (Senior Japanese tourists enjoy the beauty of Bali). Then. there is a special need of cooperation between all relevant stakeholders of Bali. there were several ceremonies inviting all religious denominations and nationalities to purify and cleanse it of all residual chaotic influences. They created familiarization trips for foreign journalists to promote balanced media reporting. ostensibly to resurrect Bali's damaged tourism industry as well as its tarnished image (The Bali Updated). contingency planning.Du lÞch Th¸ng 5 . They continued advertising and resilience like using media and public attention drawn to other issues in various parts of the world. sales promotion like large concession from airlines. brochures and promotional materials. some types of products changed to catch up with the situation.m.the first large Japanese group to visit the island after the bombing tragedy. International marketing and public relations firms were also employed by various organizations to assist in the promotion and restoration of a positive destination image for the area. Promotion strategy Right after the crisis.

however in the aftermath of this tragedy lies the chance to realize a safer. rehabilitation and mitigation. hotel occupancy declined severely in the second quarter of the -145- . holistic and sustainable. experience and knowledge it is possible to anticipate a diversity of problems. However.9 % negative growth in the last half of 16 days. more alert and more resilient community—the ultimate emergency management priority (Gurtner Y. spending and behavior patterns have yet to return to precrisis levels. There is a rapid downturn in tourist arrivals followed the first outbreak of SARS in this country from mid-March onwards. Through the open. Disease – Hong Kong case The Asian Development Bank (ADB) has indicated that the Asian economics severely affected by the SARS (Severe acute respiratory syndrome) crisis include People’s Republic of China (PRC) Singapore. and promotional initiatives. multilateral sharing of information. Promotional efforts. In an effort to support Bali tourism. The tourism operations in hotel. The restoration of destination should be full awareness and support of the local community. and determine organizational responsibilities (After the Bali).Du lÞch Th¸ng 5 . the Bali community has yet completely empowered. Also according to the ADB.1% positive growth in the first half of the month to 9.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Appeared at the end of February 2003) SARS widely spread to Hong Kong and causes serious affects on tourism activities in this country. However. communication. It is a sad reflection of today’s world that the island of Bali can never truly recover its pre-crisis “innocence”. And to remain effective each element was regularly reviewed and updated ensure that relevant destination image. Improve a community’s capacity to efficiently respond to a hazard—whether threat or reality.3 The results Bali becomes more affordable place. 2. 2004) 3. tourist attractions and airline transportation are suddenly froze. (New record tourists to Bali in 2009: 2. Revitalization and continuing growth in visitor numbers appears promising. Many of the social and victim support groups formed directly after the terrorist attacks in 2002 have now disbanded or moved on to sponsor other causes. Many residents still remain ignorant the political decisions official actions. Direct foreign arrivals have reached unprecedented highs while occupancy rates are generally above 80% (BPS Statistics Indonesia 2004). Many airlines have rerouted or scheduled new flights to the island while hotels and businesses are experiencing renewed patronage. formulate appropriate response techniques. rather than simply reactive. Vietnam and Hong Kong. Comparison with the same period of 2002. Constructive crisis management should be integrated. PATA quickly deployed representatives to assist with the management issues and conduct an objective of initial response strategies. security improvements and heavy discounting have helped to attract tourism back to Bali yet such tactics have created their own social and economic issues. restaurant. Employment remains limited and wages low.2010 procedures. arrival dropped from 19.2 million). need to be clearly addressed. The lodging industry also suffers heavily from the SARS storm.. marketing.

the crisis has speed up Hong Kong tourism diversify and develop new potential target market such as India. Along with the decrease of airline transportation is the drop in tourist expenditure in exchange. at the special “Recovery Committee’s” meeting in Berlin (2002). In the short time of applying. especially the America and European market drop dramatically. with the aim of concentrating in one of the target segmentation market. One of the priority tasks is redefine the target segmentation market. for instance. Russia and the UK (Hong Kong Association and travel Agents). Hong Kong is believed that development in this area could stimulate more local spending. In the addition.2010 year.300 per day. The retail sales dropped 50% in March 2003 (Hong Kong Retail Management Association. when both inbound and outbound travel was dropped a half. the tourism industry sustain the most serious influence is airline industry. 2003. The Association of Asia Pacific Airlines (AAPA) indicated that the average passenger in April 2003 just over 11. In the next month this airline just carried approximately 7. lowing prices is the one of the five best methods that determines the demand change in the market after crises.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . A number of possible areas for further explorations also turned up. Based on that the overseas markets such as the United States and Australia may feel safe visiting Hong Kong again in the big event of this country. It were 7 years after the disease crisis. Therefore. As the results. There is a fact that the international visitors quantity come to Hong Kong. Therefore. the Individual Visit Scheme that allowed travelers from Mainland China to visit Hong Kong on the individual basis has been applied on July. In the addition. the number of visitors under the scheme increase constantly. However.Du lÞch Th¸ng 5 . 2003). From this above statistics. The reality shows that Hong Kong tourism has applied -146- . it created a 'positive by-product' to attract overseas travelers to visit Hong Kong when scheme is attracting a large number of Mainlanders to Hong Kong. we can jump to the conclusion that Hong Kong tourism is the greatest industry suffer from the SARS). as well as provide more appeal to tourists than just shopping so they would extend their stay in Hong Kong. local tours organized by tour companies was a hit as few people had been aware of the local attractions and countryside. Pricing strategy According to WTO. Segmentation strategy Due to the large impacts of SARS. downturn 65. the government should provide the infrastructure and create more tourist destinations to satisfy the unfulfilled demand." (Miss Kinnie Wong. it is necessary for the Hong Kong tourism authorities conducting the various destination marketing campaigns in order to recover the tourism industry after the crisis.6 % from the same period last year. This research aims to evaluating the tourism marketing recovery campaigns of this country and the effectiveness of its actions. 2003). the flight schedules have been cut about 45%. During the outbreak. it is the right time to look back how successfully the tourism authorities done to overcome the crisis.000 passengers a day. Even many large corporations in American forbid their employee travel to Hong Kong as an incentive travel.

international awardees in its own right. During SARS outbreak. Chair person of the Hong Kong tourism Board.price holiday package tour and value-added services to the all visitors. marketing content and materials. Hong Kong tourism Board spread out widely the message “ Seeing is believing” by inviting nearly 500 international trade representatives and media. said Selina Chow. There fore. promotional techniques and distribution channels. Korea and India. included the communication message. The airline has recently been accorded as the Airline of the Year 2009. That requires Hong Kong tourism authority conduct a comprehensive marketing campaign in all aspects.disease destination. Germany. Southeast Asia. Malaysia. make it more reliable and more sustainable in development as well. Airline supplier Cathay Pacific and Dragonair spent 3000 airlines ticket with low price. They also made sure that all these events are widely publicized in the participants’ home market so that the reassurance message is well spread to consumer in those countries.Du lÞch Th¸ng 5 . Food and beverage industry also reattracts the tourist expenditure by reducing the receipt price or dishes price such as Yung Kee or Maxim”s Caterers restaurant.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . There is a fact that. The travel agents offer the reduced. The government of Hong Kong spent $129 million on a global recovery campaign aimed at revitalizing the city's battered tourism. It can be said that Hong Kong not only target on the domestic market but also the international market. consequently stimulating demand and generating the incentives to travel. commerce and exhibition businesses in the wake of the SARS epidemic. Japan. Promotion – marketing strategy "What we need now is a stunning and effective publicity strategy that draws the attention of global consumers and the media and rebuilds their confidence”. promotion and communication plays an important role as changing and raising awareness of products to prospective customers. The -147- .2010 price reducing activities in the wide scope of tourism activities. a dangerous and deadly country instead. These feature interview with visitors and expatriate business people. With the aims of changing visitor ‘s perception towards Hong Kong. This strategy really brings the positive results in response. is indeed formidable. HKTB constantly produces three videos newsreels which have been distributed to major TV stations and networks in more than 60 countries worldwide. stating their confidence in Hong Kong as well as showing the community out enjoying themselves again at events like Dragon Boat Festival celebrations. Public media is also an important promotion channel in the marketing after crisis strategy of Hong Kong tourism. It is totally necessary to create a strong relationship and cooperation between the destination and its prospective market. including groups from Europe. It partly reveals the effort of Hong Kong in recover the tourism industry after SARS. Hong Kong now no longer is the safety and non. Its tandem with Hong Kong International Airport. the campaign "We Love Hong Kong" showed Cathay Pacific hand in hand with the Hong Kong community can overcome adversities. SARS crisis deeply changed the destination’s image on the customer’s perception.

media interviews and articles to spread the message that life in Hong Kong is back to normal. With a new event being added each month. They also make full of use of popular and well-established.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . . Hong Kong after SARS storm made the best effort in recovery tourism with the aim of bringing visitors back as quickly as possible. The promotional program will be carefully timed and tailored to each different market. WTO 2001). The priority of Hong Kong tourism board is reviving the tourism business in key source market and build on Hong Kong core strengths and values to reinforce its positioning as a significant market in the international area. These events will ride on Hong Kong’s unique harbor and lighting. -148- .2010 Hong Kong and overseas offices have also been using press releases. Chow. working closely with the Hong Kong Economic &Trade Offices and the Hong Kong Trade Development council in relevant markets to deliver a strong and consistent message. based on the assessments of consumer sentiment gathered from HKTB research. That is the reason why Hong Kong tourism focus on making the sustained and memorable program not long right after crisis. these recovery programs are looking at the long term (Mrs. news-making event. and creating new excite and experiences for visitors worldwide. travel agent will have a sustained supply of “must see” attractions that they can use to arouse customer’s desire to visit Hong Kong.A series of mega events and promotion running from mid August until the end of March 2004. Their plan is combining short tern initiatives that will attract visitors back with specials offers and spectacular event that can reinforce Hong Kong’s long term destination image and reputation. .“Welcome month” launched on 13 July of 2003 to coincide with the Boan / WTO tourism forum and running until mid September/During period. Under the banner “Hong Kong welcome you” the Hong Kong tourism board conducting a serial of recovering program that include: . which will also be opened to local residents to help stimulate domestic spending. various short-term product (WTO 1991 in Glaesser 2003) and niche products (Mintel 2002. Product Strategy It is suggest that the tourism product in the recovery period of a destination suffering crisis fall on the eliminate the negative influence on the tourism products and offers (Glaesser 2003). the leading trade and representatives from all over the world will be invited to Hong Kong to enjoy a spectacular series of special. 2004). It is clearly to recognize. a list of special dining and shopping privileges when they arrive and a Lucky Draw offering more than HK $10 million worth of prizes. early customer will be lured back with some irresistible air and hotel offers. Christmas and Chinese New Year.A major welcome day in Mid August at the mid point of the two welcome months. However.Du lÞch Th¸ng 5 . showcasing the city’s energy and vibrancy. colorful festival such as Mid Autumn Festival.

trends in sanitary services are also encouraging. the priority tourism product focuses on the product extension and diversification. Hong Kong is an ideal Mice destination for the various business travels with the advanced technology and facilities.2010 The effort of Hong Kong and the city administration of Hong Kong in applying product developing strategies reflected the above approach. as both the public and private sectors now understand the importance of hygiene. is the indirect communication between customer and service providers or “secondary distribution”. such as Disneyland in order to refresh and extent its product base (World Travel and Tourism Council.gov. although a number of conventions and exhibitions in the second quarter of 2003 were postponed due to the SARS outbreak. So far. direct sale is an effective channel to answer the enquiries from the customer and open the opportunities for the services suppliers make customer satisfy throughout the professional and differentiated product and services. warm hospitality personalized services coupled with immense natural beauty and rich cultural heritage. According to the Hong Kong tourism Board (2004). direct sale take place directly between the service providers and consumers (Glawsser. love it” widely -149- . more than 120 international conferences and exhibitions have been scheduled between 2004 and 2010. It brings to the Hong Kong tourism an opportunity to focus on enriching and boosting the Mice product in the post-SARS period.hk etc) or the marketing strategy of famous star Jackie Chan with slogan “live it. The increased demand for cleaning services alongside the heightened awareness of hygiene should be another bright spot. Cost consideration is one of the most important contributors of direct distribution channel that used as an indicator in choosing the tourism product of the consumer. many were simply rescheduled to later in 2003 or 2004. In order to recover the customer’s belief after SARS crisis.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . www. Therefore. Although Hong Kong authorities has updated a lot of related information and guideline for the best trip in the crisis period in the tourism websites (www. Except the affect of SARS outbreak.hk. 2003) One of the most importance findings of a research that after the crisis period. there are two kind of distribution channel: direct and indirect. The 2% rise in business since the SARS outbreak means there is still long way to go.gohongkong. in contrast. By spending more resources on cleaning up the city.news. 2004). has applied many lowest possible prices with the best guarantee and reliability to customer.gov. In the addition. Hong Kong. Indirect sale. Internet and television is the popular indirect channel. not only quality of life in the city is can be improved.com.info. Distribution strategy Basically.about. the consumer had highly demand of finding the information and statistic about this destination as well as the expectation for the recovery and insurance in term of safety and security for their traveling. In the field of domestic tourism distribution. www. due to this principle.Du lÞch Th¸ng 5 . but also the tourism industry can be changed in term of destination’s image and brand name (Hong Kong tourism development committee).

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .html of CDNN (CYBER DIVER News Network)1 that showed viewers clear information and evidence about the huge negative impacts of that disaster on a country having been well known in tourism for such a long time. This indicates a fact that tourism will have to suffer huge damage if a natural disaster happens in some region. Even the Prime Minister of Thailand. especially reputation in terms of tourism. In this paper.146). Based on the above analysis and findings. when an earthquake destroyed the eastern city of Tangshan. we con draw a conclusion that Hong Kong tourism board was successful in way of recovery the country’s image and tourism industry. 4. Natural crisis – Sichuan Earthquake.2010 spread in the public media (2004). it will take some time to draw back tourists to the affected areas". applying the various the destination marketing campaign.Du lÞch Th¸ng 5 . The instruments and fundamental decisions still remain the same.28 pm (Beijing time) that struck China’s Southwestern. at 2. p. the internet still a long way from becoming a major distribution channel in term of volume (WTO. Phuket. Thailand in tsunami (30 December 2004) is a typical example. Thaksin Shinawatra while touring the disaster area said "Even though we can quickly rebuild hotels. Conclusion After gradual recovery from the SARS crisis. Any destination which has ever had to suffer from natural disasters once was also left with extensive damage and heavy losses.” (Glaesser 2003. typhoon.1 General impacts This was not the first time that a natural disaster occurred in China. China often had to experience some types of natural disaster like famine. China (12 May 2008) The word “Natural Disaster” has now become too familiar with the history of the Earth during the past years. May 12. 2002b). To conclude. “The marketing instrument employed in crisis management requires no change or innovation in themselves. The earthquake on Monday. The inbound and outbound tourist market continues developing in the amount of visitors. It is recommended that the Hong Kong tourism authorities should conduct both two distribution channels in order to change the customer’s perception as well as boosting their traveling to Hong Kong.info/industry/i041230/i041230. the Hong Kong tourism destination marketing campaign has proved the effectiveness in the way of recovery the tourism industry by each step of each particular strategy: retargeting the market segmentation. our group would like to emphasize on the case of Wenchuan (Sichuan) Earthquake in China (12 May 2008) in addition to the case of tsunami in Thailand as it has recently occurred and received most attention from many parts of the world. 4. “Tsunami drowns Thailand's tourism industry” is the title of an article on website http://www. Sichuan province is said to be China’s most severe natural disaster since 1976. diversifying the product catalogue and broadening the distribution channel. lowering the tourism service package price.cdnn. flood. In the past. killing -150- . Only the different framework caused by the negative event has to be taken into account.

The total disaster area covered 500. and Shaanxi Provinces were RMB771. Gansu.26% Productive Cross Figure 6: A. and 2. and caused some damage in another seven provinces. Gansu.227 lives with 17. Geological hazards induced by the earthquake. and the ecology and environment encountered severe destruction. and RMB22. Yunnan. The total amount of direct economic losses caused by the Wenchuan earthquake is estimated at RMB 852.535 million.05% 22.08% S ocial Infrastructure 55.32% 5. making up 99.2010 upwards of 240. the official death toll stood at 69. As of 25th September. Besides. agriculture and industry suffered from heavy losses.770 million. making up 91. Shaanxi and Gansu Provinces are estimated at RMB 845.830 million.32%. this 8.70% S ichuan S aanxi Gansu 91.643 people injured (see Table 7). among of which losses in Sichuan. and Shanxi Provinces covered 130.70% of the total losses in the three severely affected provinces.136 million. 5.98% 2. Gansu. RMB50. 417 counties (cities. Percentages of Direct Economic Losses in Different Sectors In general. rock falls. districts) in Sichuan. Hubei. Jiexiu and Lianyou 2008)2.25 million people were affected by the earthquake. mainly in Sichuan. 4. a great number of rural and urban houses collapsed. According to a comprehensive study (LingLing. districts). 5.0 magnitude earthquake caused extensive damages and heavy losses. rattling -151- .810 villages. were experienced at an uncommonly high level. Gansu and Shaanxi Provinces. Shanxi and Hunan).309 million.000 people. Particularly.Du lÞch Th¸ng 5 . and losses in Sichuan. debris flow and barrier lakes.61% 17. Totally 46. Guizhou.16% of the total. 000 square kilometers. Percentages of Direct Economic Losses in Three Severely Affected Provinces B.923 people missing.98%. infrastructure facilities were damaged on a large scale. such as landslides. in which the worst affected 51 counties (cities. Henan. respectively. the Wenchuan earthquake affected 10 provinces/cities (Sichuan.667 towns and 48. and 374. Shaanxi.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 000 square kilometers. huge tremors from the first wave were felt throughout the country. Chongqing.

9% of the economic growth in Sichuan.7 million domestic travelers and 1. services play an irreplaceable role in developing the economy and promoting social stability in the affected areas. Figures from the National Bureau of Statistics show tourism revenue of Sichuan Province hit 121. many travel agencies have also had to suspend their activities because of the non-availability of tourist destinations. The development of the service sector is particularly important. 30% and 4% respectively. Tourism and travel accounted for more than 8 percent of the province's gross domestic product. The situation became more serious when three strong aftershocks measuring 4.7%. -152- . Therefore. but it is clear that the effects will be severe and long-lasting. and smaller shocks were felt as far as Thailand and Vietnam. were wrecked by the earthquake. Overall losses to the service sector are estimated to be RMB 41. with no exception of the local tourism. It is hard to quantify the long term effect of the disaster on the development of tourism in Sichuan.000 people have lost their jobs and the average occupancy rate in hotels has been less than 25%. a) Pre-disaster situation Tourism in Sichuan belongs to the service sector which contributed 34.3 b) After-disaster situation Due to the earthquake. Also according to a comprehensive study (LingLing.13 billion. as it provides jobs not only for new additions to the labor force.8 respectively continued to occur in the quake areas and hit the Sichuan-Gansu border region. transportation was hardly moving.8. So far the percentage of losses in tourism has been highest (53%) compared with commerce.71 million foreign travelers in 2007 (Xinhua News Agency 15 May 2008).3 percent year on year. Consequently. Sichuan received 185. some of the unaffected tourist destinations have had no tourists because the transportation infrastructure for bringing tourists to those areas was not able to function and the government introduced a tourism prohibition to those regions. but also for transferred farm laborers. Jiexiu and Lianyou 2008). Located in the country's southwest mountainous areas.Du lÞch Th¸ng 5 . Additionally. up 24. 5. Impacts on Sichuan tourism: The earthquake has tremendously affected all industries in the quake-hit areas. Most of the tourist destinations. Emei Mountain and Wolong Giant Panda Protection and Research Center. many researches about the impacts of the earthquake on the affected regions have been carried out to find for the overall planning of the rehabilitation process.7 billion yuan in 2007. including Jiuzhaigou.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . including cultural heritage sites in Sichuan Province. and service establishments were closed for several weeks in the aftermath of the disaster.5 and 5. As a request. real estate and finance in service sector which were 13%. Over 300. Sichuan is well-known by its diversified scenic spots. the gross income from tourism in May in Sichuan decreased by 64.2010 buildings in both Beijing and Shanghai. The combined effects of the earthquake means the situation regarding tourism-related employment is grave.

natural ecosystem or biology diversity. 2008.Wu Jiaoli. 2008)4. but it will not persist long”. the province raised nearly 200 billion (nearly US$29 billion) from both the governments and investors for the reconstruction of the sector (Sichuan reopens to tourists. Real Estate. -153- . a renowned national online traveling service company. an expert with Ctrip. cultural heritage. experts said that the earthquake will have little long-term impact on the province's tourism industry but the short-term impact is severe because after the quake hit on Monday the China National Tourism Administration (CNTA) ordered all local travel agencies to halt its planned journeys destined to or passing through quake-hit areas and the public is asked not to visit the areas in the near future. Guang'an. com. Meishan and Ziyang and the Liangshan Yi autonomous prefecture and some visitors' attractions were reopened to visitors before June 15. said a staff member surnamed Huang in a travel agency that deals in arranging domestic travel for overseas tourists. Dai Bin. Leshan. According to the plan. Sichuan reopened 12 cities and one prefecture to tourists in a move to revive its once-booming tourism industry.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . . Neijiang. the vice president of China tourism institution with the CNTA. responding to Xinhua News Agency. Yibin. However. Luzhou.“The earthquake might cut the inflow of foreign tourists even more”. full recovery by 2010. Besides.2 Plan of Recovery Marketing After the earthquake. The company had canceled several planned tours out of concern for safety. On a website of China. Suining. Nanchong. Sichuan has been working on the reconstruction plan of its tourism sector. in the article “Tourism in quake-hit Sichuan encounters severe but short-term problems”3. 4. Dazhou. which include Zigong.2010 13% 4% Tourism Real Estate 53%Finance 30% Commerce Figure 7: The percentages of losses in Tourism. Finance and Commerce The earthquake affected all resources necessary for developing tourism like natural reserves. Panzhihua. said that the quake had given a severe and abrupt shock to the tourism and traveling industry in the areas. There were also some other comments about the impact of the quake: . told that “the prospects for the tourism industry this year may not be as bright as in the previous years.Du lÞch Th¸ng 5 .

many attractions in Sichuan were open free of charge. the epicentre of the 8. The typical example for this is the Lidui Park (48 km northwest of Chengdu) which was open free of charge for three months. As a result there is a new sector. • Moreover. Xinhua. which was in response to the Sichuan Provincial Tourism Administration's decision to partially reopen the provincial tourism market on June 15 (Cui Wei.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . deputy director of the Sichuan provincial tourism department said to the Xinhua News Agency that “There is a huge tourism market in the ruins. It also means that the international market was just considered as a second priority while the domestic market was focused as the main one. It means that the province could incorporate a number of new sights along the fault line that runs through Wenchuan. and 20 million "panda cards" have been issued. All of these measures have obtained favorable social effect and economic benefits. soon after the quake. Product strategy: “Earthquake Tourism” • In August 2008. China officially endorsed ‘disaster tourism’ as a form of economic subsidy to devastated areas as Wu Min.2010 Segmentation strategy According to Zhang Gu.0-magnitude earthquake. Hanwang and -154- . Pricing strategy • To promote tourism hard hit by the May 12 earthquake.” Zhang Gu. as reported on the article “Earthquake Memorial or Tourist Attraction?”. Beichuan. 2008). local officials in the south-western Chinese province of Sichuan announced plans to help restore tourism by turning the area devastated into a tourist attraction6. such as a giant panda habitat and villages of the ethnic Qiang people. For example.6 • Besides. These would include a memorial in Yingxiu. some scenic spots have provided tickets at half price or for free.cn. Sichuan would promote visits to its attractions by locals in the province and ask provinces and cities which were helping Sichuan in its after-quake reconstruction to organize tourists to Sichuan and the fact really proved the effectiveness of this. Sichuan province also launched preferential policies on tourism named as "price lowland". chief of the Sichuan provincial tourism administration on chinadaily.”8 • In addition to earthquake-related sights. In May 2009. Under the initiative. the “Earthquake Tourism” where travelers come to Sichuan to visit the ruins from the quake7. a museum of quake ruins in Beichuan and a “quake lake” at Tangjiashan. “The tourist route for the Wenchuan quake ruins will demonstrate the protection of such ruins and the quake survivors’ spirit of perseverance.com. which had a price tag of 2 billion yuan. museums were built in Wenchuan. the planned tourist zone extended to cover southern Gansu province and the Hanzhong region of Shaanxi province and incorporated some of Sichuan’s more conventional attractions. chief of the Sichuan Provincial Bureau of Tourism quoted as telling the local news agency. We can not block the tourists out and we also hope the tourists watch their behavior and not hurt the quake survivors’ feelings. the central government spoke about building earthquake museums to remind people of the disaster.Du lÞch Th¸ng 5 .

the province will stress the promotion of the Chengdu-Mount Emei-Leshan Giant Buddha route in the second half the year 2008 to show Sichuan is safe first. dwelling.8 • In order to explore overseas market. Mianzu. Maoxian. shopping and entertainment"5.com. Sichuan province has invited travel agents and media delegations with total 510 persons in 15 batches from various countries and areas. and has dispatched delegations totaling 11 batches to -155- . medics. no matter whether funding would come from the central government or from local residents.one of the most ravaged cities in the earthquake zone . encouraging residents to travel to the earthquake area as tourists and help its recovery by sightseeing and spending. the issuance of the cards was not limited to all those who have helped its relief work. In addition. so as to develop the advantage of Sichuan tourism products as a whole. 4." Some localities have even issued vouchers. and France. Sichuan province has integrated the tourism resource and. on the basis of reinforcing the strength of invitation of investment and driving the construction of important projects. the Dujiangyan municipal government presented 100 "gold cards" to soldiers. has subsidised Macau tourists to Sichuan with vouchers of 1. which is birthplace of Taoism. trip.000 self-help and selfdrive travel routes with measured strokes and integrated scenic spots. They had their eyes on the same goal which is to attract tourists as well as to boost the local economy.5 million times on the internet. A report prepared by the communist party school in Dujiangyan . Sichuan Tourism Bureau has designedly launched about 1.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . policemen. The government of Macao Special Administrative Region for instance. Pengzhou.4 • The boom in disaster tourism has received official endorsement not only from local officials but from party leaders too. tourism.cn. the U. made up an overall plan on travel routes. since June 2008 to now.Du lÞch Th¸ng 5 . in a ceremony marking the Lidui Park’s reopening. 2009. journalists and representatives from international organizations to appreciate their contribution to relief work in the city. Before June 1.000 routes have been published on the internet successively with the coverage of 21 cities. volunteers. which are featured with such tourism factors as "meal.S. towns and roads into route portfolios. the only religious indigenous to China. Japan. donors. Dujiangyan. free of charge during their lifetime.2010 Hongkou counties. to encourage domestic travels to the ruin sites.3 Promotion strategy • As stated on www.chinadaily. holders who have contributed to relief work can visit the Dujiangyan Irrigation Project and Mount Qingcheng. total 1.9 • Taking the post-disaster recovery and reconstruction as an opportunity. such as South Korea.has called on officials to "actively promote the earthquake tourism brand" in order to transform destruction into a "valuable tourism resource. to investigate in Sichuan. autonomous prefectures and main scenic spots. The total hit rate has been more than 4. In order to meet demands of self-help and self-drive tourists for the trip.500 RMB (220 US dollars) each. showed interest in building their own memorial museums or markers. Particularly. With the cards.

squashing schools.9 million people arriving in Chengdu and heading out on specially designed one-day package tours of the earthquake zone. Director of Sichuan Tourism Bureau.Du lÞch Th¸ng 5 . Vice-governor of Sichuan province. Huang Yanrong.net. Vietnam under the global economic crisis 2007-2010 5.4 The results Currently.200 foreign tourists. “which has stimulated the sale of owners. the county’s tourism director.5 4.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . factories and homes. except for very few severest disaster areas. According to the Sichuan Tourism Office.8 • The plans of building earthquake museums." . during the Chinese New Year holiday more than 7 million people flocked to the mountainous region where the earthquake wiped out whole towns. markers or parks also have had some success.5 • On the website ipsnews. and brought about the opening of 50 hotels in the area. Sichuan province had achieved the tourism revenue of RMB125. attended a tourism exhibition held in Berlin.1. the state agency reported that ruins from the quake had become a draw for visitors .400 villagers survived a landslide triggered by the earthquake is now amongst the hottest tourist destinations in the Sichuan province for the “Earthquake tourists” as more than 260.000 visitors have been to the park to pay respect to the earthquake victims. Xue Yaping.” Shen Xingna. Donghekou village where only 300 of more than 1. 5. 2. It was the first time for Sichuan province to exhibit its tourism in the world after the earthquake. the bailout of banks by national governments and downturns in -156- . In Qingchuan.85 million by welcoming 586. told the reporter that from January to October of 2009. expressed. the foreign exchange achieved US$180. In March 2009. the tourism market in Sichuan province has welcomed tourists comprehensively. and sightseeing platforms to observe panoramic views of the destruction.4 percent than the same period of 2008. "It can be said that the tourism market of Sichuan province has recovered to and surpassed the level before the earthquake. Such tours include visits to quake relics parks.7 • The numbers of tourists that have swarmed to the earthquake zone are astonishing.01 billion yuan. the practice which evoked strong echo.attracting hundreds of thousands of tourists. leading Sichuan tourism promoting delegation. Among the revenue.2010 propagandize in some other countries and areas. The global economic crisis’ effect on Vietnam’s economy in general and tourism sector in particular Financial crisis of the period 2007-2010 has resulted in the collapse of large financial institutions. told reporters. May Day weekend saw another spike of tourists .with 2. public cemeteries where the ashes of many dead are buried. Germany. up 43.000 tourists had visited the Donghekou Relics Park in 2009 since it opened in November 2008. food and souvenirs.Zhang Gu.9 The local government already recovered its initial investment of 3 million yuan. Deputy Director of Sichuan Tourism Bureau.

international tourists have been accounting for a significant sector to Vietnam tourism industry. since everything is connected. December 2008). attached the importance of this problem. Mr Vu The Binh. Vietnam. He said many people in the west did not have access to loan facilities following the global economic crisis and as a result they did not have money to travel abroad. Under those circumstances. The impact was apparent in the first quarter of 2009. In September 2009. the general director of Vietnam Airlines.1 percent from a year earlier. According to the Washington-based World Bank (WB).6 percent in the third quarter. many people in the West were laid off by their employers and as a result they did not have money to travel as tourists. From 1. "The number of international arrivals has been down for months. There were also a lot of hotels which held the reservation rate of only 30% for the first quarter of 2009 (Du lịch lâm vào khủng hoảng: Cấp bách giảm giá.2010 stock markets around the world. (http://en. 2009).3 percent increase in the total arrivals in the second quarter. when GDP increased only by 3. travel operators and airlines. or 4 percentage points below the average firstquarter growth for the last few years. the global financial crisis and economic recession slowed economic growth in Vietnam. one of fastest growing economy (Bản tin Tài chính Chứng khoán ngày 6/5. was not out of this global impasse. According to Mr Minh. 2009). In an effort to get its head above water. the industry managed to stem the fall to 10. Whereas. December 2008). However. Representatives of many travel agencies showed the worries when the number of tourists canceling tours were increasing. The impact of the global economic crisis (GEC) on Vietnam economy was obvious. the seminar “Capacity building for Vietnam’s tourism businesses against the backdrop of the global financial crisis” was held in Ho Chi Minh city to discuss lessons and recommendations for local tourism businesses to improve their capacity (Financial crisis. the collapse continued. in the next month. the presentation reviewed a negative fluctuation in tourists’ arrival since its second quarter in 2008. tourism industry quickly saw a slump at negative 9. 2009). excluding hospitality. with the bottom recorded a drop of 28. (Vietnam navigated global financial crisis relatively well. all the sectors under the tourism industry were affected. Discussing Vietnam in particular. But. it brought about the impact on tourism industry (Borislav Hadzhiev. 2009). Whereas.wikipedia. following the global economic crisis. the industries interrelated directly and indirectly. a senior official at VNAT (Vietnam tourist numbers plummet as crisis bites. However. with a 17. swine flu blamed for tourist fall. the number of passengers on international flights was negative compare to the same period of 2007 and the situation could be the same for domestic flights after the lunar New Year holiday. positive signs of recovery have been emerging as a result of the government efforts to support economic activity.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .1 percent in June. According to Alieu Secka (Global Economic Crisis Affects Tourism. 2008). It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.org). but the situation has seriously worsened since October. the head of travel department.6 percent. The fluctuation continued during the first seven months of 2009. -157- .8 percent at loss.Du lÞch Th¸ng 5 . Pham Ngoc Minh told that from September 2008." said Vu The Binh.

These are also groups of tourists who are more price-sensitive than Australian. 2009). English. 3/ organize professional training. 2008). French. the discount program was at that time considered to be the foremost solution. in order to maintain and develop tourism market during the crisis period. and launch marketing campaigns. At the same time. in such situation. 2009). hotel rooms.gov. some tourism sector heavyweights have concluded that it was the right time to restructure themselves. Hong Kong. etc. According to the survey of PATA. visa fees. 5. Hence. giá rẻ.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Vietnam tourism industry decided to target at local markets such as Singapore. China. Pham Ngoc Minh. service quality among countries. Besides. Promotion strategy Nevertheless. improve service quality. 2009). one third of tourists thought that the economic crisis did not affect much on their traveling plans in which the choice for cheap and short packages were dominated (Giải pháp du lịch thời khủng hoảng: Ngắn ngày. Japan. According to the VNAT General Director Nguyen Van Tuan. Vietnam tourism industry’s practices in overcoming the crisis In front of this issue.vn. At the very beginning. In this program. the hotels reduced the price up to 30-50% (Ảnh hưởng của khủng hoảng kinh tế thế giới đến ngành du lich Việt Nam. the most mentioned solutions were the discounts in tour packages. restaurants. The practices of Vietnam tourism sectors are put in more detail in the following respective sections. 4/ continue upgrading facilities and 5/ improving the quality of the tourism experience (Travel agencies and hotels preparing for post-crisis period. the agency would focus in five areas to get ready for the recovery of tourism: 1/ continue the ‘Impressive Vietnam’ discounted services campaign. transportation. Price strategy The VNAT called for the enterprises to participate in the discount program to attract tourists. Taiwan. Though the global economic crisis has cratered Vietnam’s tourist market. travel agencies.promotours. takes the full advantage of stable -158- . etc. giá rẻ. December 2008). Mr.Du lÞch Th¸ng 5 . Indian tourists whose travel plans are less affected by economic crisis (Giải pháp du lịch thời khủng hoảng: Ngắn ngày. shopping centers. whereas. American. general director of Vietnam Airlines said that instability in some Asian countries (such as Thailand and India) resulted in less safety and less competition in some traditional destinations. He added that Vietnam could grasp the opportunity. at http://www.2. etc. VNAT also launch a website which provided information about the discounted services of all enterprises in sectors of hospitality. only discounting was not enough. Some specialists in tourism industry attached the importance of launching new programs about advertising and promotional activities.2010 2009 would be the year of tense competition in terms of destinations. 2/ advertise Vietnam at home and abroad as a tourist destination. the National Administration for Tourism (VNAT) drawn out solutions and criteria for all the tourism sectors to follow. the program attracted 61 hotels and 34 travel agencies. (Du lịch lâm vào khủng hoảng: Cấp bách giảm giá.

particularly internet marketing. including 8 weeks in Asia-Pacific.5 million hotel rooms all over the world. Tai added that while waiting for the opportunities to come. the firm is emphasizing training and pushing up marketing.2010 politics. Australia and New Zealand. Together with releasing images of Vietnam’s heritage on Heritage. roadshows in Bei Jing and Shang Hai. Comprehensively. Besides. (Quảng bá hình ảnh Việt Nam còn thiếu và yếu. Eastern Europe. said that his firm had been expanding Saigontourist’s system in Hanoi and was opening a branch in Can Tho to access the Mekong Delta market (Travel agencies and hotels preparing for postcrisis period.000 publications to biggest international tourism trade fairs and exhibitions. (Quảng bá hình ảnh Việt Nam ra nước ngoài. safe security and diversified tourism products… by promoting marketing activities (Du lịch lâm vào khủng hoảng: Cấp bách giảm giá. 2009) -159- . According to the statistic. France. Korea and Middle East. each time 30 seconds. the goal of the campaign was to promote Vietnam’s image abroad. He concluded that companies in the travel business need to detect changing tourist preferences so as to draw up reasonable marketing and advertisement policies. North America. One of the traditional markets of Vietnam is China with the population of over 1 billion people. This campaign was divided into 3 programs. One of the efforts of VNAT in promoting the image of Vietnam to tourists was opening the campaign “Impressive Vietnam” since the beginning of 2009. The campaign “Impressive Vietnam” was intended to be promoted till early 2010 with the organization of events. VNAT also promoted Vietnam’s image and tourism via public media overseas. BBC is the channel broadcasted worldwide in 200 countries in different regions. Accordingly. 6 weeks in Europe and 6 weeks in America. Western Europe. Saigontourist Director.Du lÞch Th¸ng 5 . Vietnam also extended to new markets like Russian. Vietnam tourism was advertised on JETSTAR magazine which was followed by more than 1 million readers worldwide. tourism’s potential to Chinese people. those images and detailed information about Vietnam tourism can be found in “Tourism handbook 2010” published by PATA (Pacific Asia Tourism Association) and the World Tourism market daily magazine with over 60. 2008). Vo Anh Tai. so that Saigontourist could be primed to greet tourists as soon as the crisis ends. The head department of Vietnam tourism cooperated with agencies of the Foreign Affair to hold “Vietnam week in USA” at the end of 2009. Beside the main markets such as China. 2009. Japan. culture. the clip was broadcasted 320 times. the magazine of UNESCO. December 2008). one clip about Vietnam tourism was shown on BBC World starting in early April. Specially. A lot of promotional activities were held in order to introduce the image of our country.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . What is more. travel agencies and tour operators were putting more effort in launching marketing campaigns. the channel is watched daily by 276 million households and it appears in 1. 2009). Specifically. while focusing on some main international markets which were put on top by VNAT. exhibitions. This was generally considered to be the way that the sector prepared and overcome the crisis. people.

the general director of MOSCT.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . UNWTO would continue to help Vietnam check and adjust tourism planning policies. hoteliers were putting more effort in renewing their products and services. This is the driving force for Vietnam tourism to increase drastically in 2010.6% compare with the same period of 2009. Vietnam was chosen to be the venue for international events such as the East Asia-Pacific committee meeting. In the first quarter of 2010. give technical assistance in promotional activities. etc. Nguyen Van Tuan. during and after the crisis. fulfilling the strategies and goals of tourism development before. cultural heritage especially the World Heritage sites. Miss Universe. Meaningfully. Travel agencies and hotels preparing for post-crisis period. improve the human resource quality for Vietnam tourism via short training cources.3 million international tourists. UNWTO signed the tourism corporation between the Ministry of Sport. There was the fact that guests were scarce at most of Hanoi’s five star hotels (Phan Huy Tien. the new strategy would be to focus on potentials like natural landscapes. Accordingly. However. Vietnam tourism industry received over 1.2010 Product Strategy Regarding on tourism product development. 2008). (Consultants sought for long-term tourism development plan.3 The result of the policies in recovery effort of Vietnam tourism The work of promoting the image of Vietnam tourism to the big and key market has been more and more effective. 2010). a Vietnamnet reporter found managers in the elite hotel sector are looking to the future rather than moaning about the present. Asian Indoor Games. increased more than 30. (Động lực cho Du lịch Việt Nam tăng trưởng trong năm 2010. Accordingly. the five stars Movenpick Saigon was spending $25 million on an 18 month upgrade to its rooms and services. In January 2010. hoteliers believe that today’s reduced travel budgets. 2008). 5. As an example. canceled meetings and ‘staycations’ (stay-at-home vacations) are tomorrow’s pent-up demand. Starwood planed to open the Sheraton Nha Trang in November that year. Place Strategy The effort in recovery is not only the job of the head department of tourism but also the concern to every tourism enterprise and local authority. Vietnam’s luxury hotels have been particularly hard hit by sharply lower tourist arrivals. VNAT has done its best in trying to involve all sectors from provinces to individual business into the effort of tourism recovery. said Vietnam tourism -160- . Culture and Tourism (MOSCT) and UNWTO. (Travel agencies and hotels preparing for post-crisis period. One quite new product put more on development was sea tourism which was considered as an important product for both local and international tourists. On the other hand. said Patricia Neo of Starwood Hotels & Resorts.Du lÞch Th¸ng 5 . Specially. In the hospitality industry.and unique cultural communities. The group had put into operation a telephone number (free of charge) which clients could use to book hotel rooms at 950 hotels run by Starwood worldwide. 2010).

However.Du lÞch Th¸ng 5 . This is the opportunity for the development of Vietnam tourism. Baron Ah Moo of the Vietnam Business Forum’s tourism consultative group. This result can be gained thanks to the effort of the whole industry. 2009). (Hotels spoil plan on low-cost tourism. 2010). in Vietnam. besides reducing the price. Other countries such as Indonesia. the tourism enterprises continued discussing and it was untill January 2009 that cheap tourism packages were launched.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . additional to its ‘regular budget’ of $80 million designed for 2009. (Ảnh hưởng của khủng hoảng kinh tế thế giới đến ngành du lich Việt Nam. etc. decreased the room price up to 70% in Phuket. Tourism administrations in many countries had very quick response to their crisis. 2008). they invested hundred of million USD in promotion for the last months of 2008. 50 year anniversary of tourism industry. says he was been told that the initial budget for promoting Vietnam’s tourism in 2009 was $2 million. tourists were surprised of their campaign to encourage tourists to come back. etc. Even though the figure of 2010 looks good compare with 2009. 50% in Bangkok.2 million international travelers in the first seven months of this year (Consultants sought for long-term tourism development plan. which is a positive sign of Vietnam in the year 2010. 2008). Additionally. Considering some shortcomings in the implementation of the proposed plans. there was one meeting to discuss about the urgent solutions to attract tourists to be held. Hue Festival 2010. Under 10 days that Thailand ended its political crisis. this may not be realized because the country just received nearly 2. Malaysia reportedly has reserved $180 million for ‘Truly Asia’ campaign (Travel agencies and hotels preparing for post-crisis period. (Động lực cho Du lịch Việt Nam tăng trưởng trong năm 2010. the provinces in the whole country to achieve the target and the plans of the year with big events such as Hanoi 1000 year anniversary. Saigontourist Director Vo Anh Tai commented that other countries seemed to have had a more rapid economic recovery and have better dealt with the crisis than Vietnam (Travel agencies and hotels preparing for post-crisis period. the tourism administration. However. The above statistic showed that Vietnam tourism went on the right direction in the recent period of crisis recovery.2010 developed spectacularly despite of objective factors including the economic crisis. a Mexico Tourism Board official noted at a workshop that Vietnam tended to be very slow to draw up new tourism policies when conditions changed (Travel agencies and hotels preparing for post-crisis period. (Du lịch lâm vào khủng hoảng: Cấp bách giảm giá. until December 10. December 2008). this is not only the -161- . 2009). Hence. Meanwhile. 2008. Thailand launched the campaign “Thailand apologizes” to attract tourists. according to The HCM City Tourism Association. The tourism administration once expected that Vietnam would receive around six million foreign visitors in 2010. Malaysia. 2008). Thailand announced it would provide $140 million to revive tourism after the Bangkok airport was shut down for several weeks by political upheavals. Expressing the same viewpoint. Whereas. 2010). it is still far from what was expected. the discounts of 10 to 30 per cent did not make a "strong impression" on tourists when many countries in the region were offering up to 80 per cent rate cuts.

2009). electricity and water prices. For example. the strategies for tourism recovery seemed not to be widespread to and accepted by all the private enterprises and local region of Vietnam. (Hotels spoil plan on low-cost tourism. in correcting the image of the destination that had to suffer from heavy losses and damage. said Furama had not participated in the campaign because its room prices were already reasonable. these new tourism products also raised a strong campaign like “Stay another Day” in Cambodia. In addition. one of which is the promptitude and sensibility of local officials in renewing their products and services to fit each of their situations. As a result. Sichuan in China proved that it was really successful in this point when the local authority turned the area devastated into a tourist attraction called “disaster tourism” or “Earthquake tourism”. they would be unable to raise them in the future. Some said they did not honor their commitment because they were still waiting for the Government’s incentives for those involved in the campaign which mainly related to taxes. it is easy to see some common good practices between them. all of the destinations focused on the domestic market as the main priority. In general.Du lÞch Th¸ng 5 . As a result. more important.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . while others were afraid that if they cut tariffs now. which took part in improving the economy situation as well. Some hotels did not want to reduce their prices because it could affect their prestige. Good practices Considering all recovery plans for marketing the destination in some countries after crisis or disaster. By this way. this can help to create a valuable tourism resource from the disaster as well as catch the interest of a numerous people/tourists who are attracted to sites of catastrophes. they become a form of economic subsidy to devastated areas in terms of contribution to the country economy in general and to the tourism industry in particular. In order to response to unexpected crisis. For the second issue. Besides. In addition. that practice increased the number of shorter visits with lower expenditure. in Bali. even reopening attractions for free of charge. In fact. Nguyen Duc Quynh. money is still the first concern. deputy executive director of the Furama Resort Da Nang. III. many hotels did not participate in the program of reducing room rates.2010 problem of being slow in drawing out the strategies but also in putting sufficient amount of investment in recovery tourism. the large concession from airlines. most of destinations experiencing crisis used strategy of reducing price. the destination can encourage a wider market to visit the ruins or the regions -162- . making it become a more affordable place. they are more willing to spend their trips and attention in subsidizing their national tourism industry itself. This is not a new point but seems to be effective in most situations as for tourists with not very high income. The reason for this is simply because domestic tourists have a more convenient access to the sites in terms of distance than international ones. Assessment of findings 1. hotels and tour operators lured the tourists back to Bali.

When the lack of communication and regularly updated information among the participations. While unanimous decisions are rarely a political reality. the Bali Recovery -163- . A seemingly valid proposal to establish a jointly funded co-ordination centre to operate as a centralized data collection and dissemination point was dismissed by the majority without further discussion or clarification. The promotion campaign was conducted widely in both national and international scope to ensure the safety and security as well as the remaining attractiveness of devastated sites. In Vietnam. tourism exhibitions. The case of Bali shows that within the cooperation there still exists problem. after planning the strategy.2010 and have an opportunity to show them that it is still safe for people. In a conference of VNAT (“Discussion about the way to increase the number of international tourists to Vietnam”) in Dec 2008. While subsequent programs and activities have attempted to address issues of social and economic development. This not only achieved the opportunity to explore overseas market but also recovered the belief and preference of customers.2 The cooperation of relevant stakeholders There is a need of the unity between the relevant bodies (Du lịch thời khủng hoảng: Phải tìm được tiếng nói chung). especially media. experience has revealed some of the disparities between theoretical ideals and practical realities (After the Bali). crisis management and promotion. resegmentation and low price strategy cannot exclude the good collaboration between the stakeholders to recreate the image of the destinations. Thanks to the prompt response from the local authorities.Du lÞch Th¸ng 5 . 2. this lead to the corruption and misuse of public funds.1 Low and reactive response The first thing to rise is low and reactive responses when the crisis happened. 2002 Bali had no operational crisis management plan or integrated recovery strategies. Despite admirable response efforts and altruistic intentions it is apparent that prior to the tragic events of October 12. The reactive action also reflects in tourism product: In Hong Kong. 2. every effort was made to advertise the local tourism in tourism conferences. which leads to a positive image about the destination in their mind. the tourism product is short term with the aim of attracting customer come back. right after the crisis. the promotional campaign did not involve all relevant bodies. there is a slow in drawing out strategies long after crisis. Tourists can be confused and suspicious about the destination with the instability in price and quality of service. The success of renewing products. Thus. Hong Kong need to create the sustainable long term product that not be affected by crisis or develop the unique product.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Moreover. the links between tourism suppliers in promotional campaign. all members agreed about the problem of Vietnam Tourism is the collaboration. Furthermore. Bad practices 2. the strategies are implemented less promptly compared with other countries like Thailand.

In a country renowned for its corruption and misuse of public funds many organizations remained reluctant to offer full accountability and transparency (Karyadi 2003). efficient collaboration. Apart from promoting campaigns of general image “Impressive Vietnam” or “Vietnam. the result did not show a full satisfaction from managing people. Actually. Cashing In on Earthquake tourism). Firstly. Vietnam should have proactive plans and policies for any crisis to occur. accommodation. 2.3 Others The business ethic is big issue tourism enterprise must take careful consideration. Especially. Following that.Du lÞch Th¸ng 5 . Low pricing of tourism products and packages was one of effective strategies that the head department of tourism has directed all tourism sectors to follow. That is the reason why there was a slow in finalizing the strategies from the head government. Waiting until the crisis to come that policies are discussed is not a wised strategy. Vietnam still lacks experiences in tourism recovery after crisis. attractions. regarding any type of crisis. it is the job of all individual enterprises to create their own special and creative packages to show a different image of Vietnam tourism other than using the old ones. Regarding product strategy. IV. resulting in slow implementation of policies. etc. In the earthquake crisis. Thailand for instance offered packages of flights. human resource is not exploited thoroughly in the crisis period. with the discount of up to 80%. Vietnam has to do more and learn more from practices of other countries. Even though mentioning about creating more new and diversified tourism products. In the following period. this also created a question whether it is moral to capitalize on other people’s suffering and received oppose from some people who worried that China lacked the courage to reflect on and preserve the painful memories of calamities (Antoaneta Bezlova. it is hard to touch international tourists since they face up with numerous choices of cheaper packages from other countries. Lessons from Thailand showed the success and advantages of quick actions that the country of crisis has applied. Many of them were unemployed or had to take unpaid job.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the lack of human resource will be a big problem. Recommendations for Vietnam in tourism recovery after crisis In order to effectively recover tourism. there was almost no outstanding or different packages in the period of recovery compare with the previous period. To deal with this shortcoming. they did not affect strongly to buyers’ mind that had to suffer from decreased salary and increased inflation rate. Yet. While the discount packages ranged from 30-50%. the sensitivity is concentrated to the memorization place of crisis. This is due to the lack of assertive discount decision-making from the head department in general and individual tourism enterprises in particular. which strongly affected tourists’ choice of destination. They saw the craze of ‘earthquake tourism’ as a perturbing sign. Vietnam seemed not to make the most of its tourism resources in creating tourism products. the hidden charm”. -164- .2010 Group seemed to lack the consensus for effective.

In term of promotional strategy. Besides. 15 December 3. Available at URL: http://en.htm. Hence. (Accessed 23 April 2010) -165- .info/industry/i041230/i041230. Xinhua News Agency 2008.chinadaily.cn/china/200806/15/content_6761484. “Tsunami drowns Thailand’s tourism industry”. provincial and local authorities in implementing the policies. this tourism market needs being paid more attention and even made to be the typical product of Vietnam. “Sichuan reopens to tourists. Available at URL: http://www. 2008.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . “Providing Emergency Response to Wenchuan Earthquake”. W. CYBER DIVER News Network [online]. One way to encourage tourism sectors in gaining the general objectives is to offer them incentives. Vietnam can take the advantage of the country of safety and peace in the eyes of tourists and effectively recover its tourism industry.shtml.2010 Recently. L. etc. these practices and recommendations are critical in order to gain the most successful result. Nevertheless. journalists of prestigious magazines or gifts to the delegates which shows the image of Vietnam tourism. 2008. full recovery by 2010”.. 29 January [online]. Yu. There was a fact that the lack of coordination among stakeholders affected partly to the success of recovery plans. the high quality of tourism products needs special attention to show the effort of Vietnam in tourism recovery and its care for its customers. “Tourism in quake-hit Sichuan encounters severe but shortterm problems”.org. However.htm. “Sichuan tourism recovery gathers strength”.cn/Insight/201001/29/t20100129_20888370. That may be some benefits such as having the right to advertise in some specific media. Zhiling. tourism fairs can be held a long with other activities such as invitation of celebrities. sufficient care and added values for this product are out of notice from tourism people in order to make Vietnam an outstanding destination for MICE to international tourists. Lianyou. Available at URL: http://www. What is more. C. So. Japan. Ensuring the appropriate implementation of these strategies. 15 June [online]. 15 May [online].cn/travel/news/2008-05/15/content_15241574. To any kind of crisis.html (Accessed 20 April 2010) 2.. Domestic tourists are quite picky in buying decision.Du lÞch Th¸ng 5 . it is a must for the head department to attach the importance of coordination among stakeholders in implementing the proposed trategies. it is a should to firstly pay attention to the domestic market as this accounts for a big market of Vietnam tourism. Available at URL: http://www. yet they are easier to persuade if the benefits are shown.china. Lingling. the promotional activities during these events have shown to be ineffective. REFERENCES 1. Vietnam has been successful in a lot of international event biddings. Specifically. (Accessed 22 April 2010) 5. What to recommend for Vietnam is to establish more activities to promote Vietnam tourism in events which are held in Vietnam and events which are held in other countries. However.com. Jiexiu. L. Vietnam has identified its new product of MICE tourism. the head department should put more effort in encouraging all tourism enterprises. J. (Accessed 22 April 2010) 4. H & Xianyu. it was good practice of Vietnam to target at specific international markets such as China.ce.cdnn. all national. 2010. Apart from those above suggestions.

[Accessed 22nd May. (Accessed on 29 April 2010) 16. Vannarith “State and tourism planning: A case study of Cambodia.au/www/emaweb/rwpattach.co. 19 No.235-241. “Earthquake tourism plan for China”. 2010] 21. 5 December 10. 17. “Cambodia adopts new law to promote tourism amid economic downturn” [online]. Ministry of Tourism (2009) ‘Report on the Situation of the Tourism Sector 2008/2009’. Available http://ipsnews.html.2010 6.thejakartapost.html (Accessed on 5 May 2010) at: at: at URL: 15.org. Bali overcoming crisis [online] Available at: http://books.net/news. (1996).tourismreview. In Khmer. “Cambodia's tourism drops due to global financial crisis” [online]. “Growing Cambodia tourism to be boosted by Khmer rouge attractions” [online]. Vol.asp?idnews=46992 (Accessed 23 April 2010) 9. Available http://maximos62.go. 2003.vn/books?id=5LOG4Of9meYC&pg=PA85&lpg=PA85&dq=Bali+ overcoming+crisis&source=bl&ots=EvLs-N8ky&sig=Nmd4aXiMrODHEub8czw9CtcUYpg&hl=vi&ei=VUH3S_rtNIOPccOx6eYL&sa =X&oi=book_result&ct=result&resnum=4&ved=0CCsQ6AEwAw#v=onepage&q=Bali%2 0overcoming%20crisis&f=false. (Accessed on 5 May 2010) 14. Hongyi. 17th October 13. 2009] 20.ttrweekly. 2010) 22.pdf. Tourism and poverty: causes and impacts [Online]. 22 August [online]. Vannarith chheang (2008) “ Tourism development in Cambodia: Oppurtunity for Japanese companies” [online]. PATA. 4 (Online). Indonesia/Balinese Tourism Recovery Post October 12th 2002. Available at URL: http://www. Bali plans to lure Japanese tourists [online]. Available at URL: www.” (Spring 2009). After the Bali bombing –the long road to recovery. Sawapat Pimchaichon. Adrian.com/site/2009/09/slender-travel-margin-forcambodia/ [Accessed 11st September.pdf/$file/AftertheBali. Lam. http://www.pdf (Assessed May 22. 2009 “Slender travel margin for Cambodia” ttrweekly [online].. Available at URL: http://www.gov. B.uk/travel/travelnews/2601658/Earthquake-tourism-plan-forChina. Available at URL: http://balita.Du lÞch Th¸ng 5 . Available at: 11. China [online]. “Tourism in Cambodia: An overview of Cambodian international tourism and development potential.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . “CHINA CAPITALIZES ON EARTHQUAKE” 2009 [online]. (Accessed on 2 May 2010) 12. 19. Nov 2004.telegraph. 2008. 18.tourism-review. The Australian Journal of Emergency Management.com/cambodia-tourism-industry-to-develop-khmerrouge-attractions-news2092 [Accessed at 15th March. Available at URL: http://www. 8.kh/Development/ Docs/CG%202004/tourism. Z.” Pacific Tourism Review 1(3). Phnom Penh: Cambodia.htm#top (Assessed May 21.com/news/2010/01/27/bali-plans-lure-japanese-tourists. “Tourism” [online]. Available at URL: http://www. pp.ema.ngoforum. 2008. Available at URL: http://balita.com.google. 2010) 23.ph/2009/05/22/cambodias-tourism-drops-due-to-global-financial-crisis/.jp/English/Publish/ Download/Brc/pdf/02_ch1. (Accessed 25 April 2010) 7.ide. “Earthquake Memorial or Tourist Attraction”.com/article/1682-china-capitalizes-on-earthquake (Accessed 25 April 2010). Chheang.ph/2009/06/23/cambodia-adopts-new-law-to-promotetourism-amid-economic-downturn/ ([Accessed at 23rd June. 2009] -166- . “Cashing In on ‘Earthquake Tourism?”. 2009] 24. Gurtner Y. Available at URL: http://www.nsf/VAP/(3273BD3F76A7A5DEDAE369 42A54D7D90)~AftertheBali.wordpress.com/terrorism-poverty/. T. Available http://www. mimeo.

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25. “Private Sector Promotion in Rural Areas (PSP)” [online]. Available at URL: http://www.pspcambodia.org/ [Accessed May, 2010] 26. “Cambodia experiences first half decline in tourism” [online]. Available at URL: http://www.cambodia-tourism.org/news/209-cambodia-experiences-first-half-decline-intourism [Accessed 1st December, 2010] 27. “Cambodia continues to extend visa exemptions to aid economy: official” [online]. Available at URL: http://balita.ph/2009/08/10/cambodia-continues-to-extend-visaexemptions-to-aid-economy-official/ [Accessed 10th August, 2010] 28. Vutha (2009) “Cambodia made new tourism marketing” vuthasurf [online]. Available at URL: http://www.vuthasurf.com/2009/01/16/cambodia-made-new-tourism-marketing/. [Accessed 16th January, 2010] 29. “Nom láng giềng Campuchia làm du lịch” [online]. Available at URL: http://www.tienphong.vn/Phong-Su/166941/Nom-lang-gieng-Campuchia-lam-du-lich.html [Accessed 23rd July, 2010] 30. Sawapat Pimchaichon (2009)” Slender travel margin for Cambodia”, ttrweekly [online]. Available at URL: http://www.ttrweekly.com/site/2009/09/slender-travel-margin-forcambodia/ [Accessed 11 September, 2010] 31. May Kunmakara (2010) “Tourism recovery begins”Thephnompenhpost [online]. Available at URL: http://www.phnompenhpost.com/index.php/2010031233563/Business/tourismrecovery-begins.html [Accessed 12th March, 2010] 32. http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932010 33. Bản tin Tài chính Chứng khoán ngày 6/5, 2008 [Online]. Available at URL: http://tintuc.xalo.vn/001006332869/ban_tin_tai_chinh_chung_khoan_ngay_6_5_ban_tieng_ anh.html (Accessed May 10, 2010) 34. Vietnam navigated global financial crisis relatively well, 2009 [Online]. Available at URL: http://www.vcbf.com/vi/tin-tuc/8-finance-and-banking/490-wb-vietnam-navigated-globalfinancial-crisis-relatively-well-.html (Accessed May 10, 2010) 35. Borislav Hadzhiev, Impacts of global economic crisis on tourism destinations – A true story, 2009 [Online]. Available at URL: http://www.tourism-master.nl/2009/06/19/impactsof-global-economic-crisis-on-tourism-destinations-%E2%80%93-a-true-story-entry-essaycompetition/ (Accessed May 5, 2010) 36. Alieu Secka, Global Economic Crisis Affects Tourism, 2009 [Online]. Available at URL: http://allafrica.com/stories/200903200896.html (accessed May 5, 2010). 37. Financial crisis, swine flu blamed for tourist fall, 2009 [Online]. Available at URL: http://www.vietnamcustomizedtours.com/vietnam-travel-news-1268.html (Accessed May 2, 2010) 38. Vu The Binh, Vietnam tourist numbers plummet as crisis bites, December 2008 [Online]. Available at URL: http://www.smh.com.au/travel/vietnam-tourist-numbers-plummet-ascrisis-bites-20081215-6yl9.html (Accessed May 9, 2010) 39. Travel agencies and hotels preparing for post-crisis period, 2008 [Online]. Available at URL: http://www.vietnamopentour.com.vn/vietnam-information/news/travel-agencies-andhotels-preparing-for-post-crisis-period.html (Accessed May 3, 2010) 40. Du lịch lâm vào khủng hoảng: Cấp bách giảm giá, December 2008 [Online]. Available at URL: http://www.vn-seo.com/du-lich-lam-vao-khung-hoang-cap-bach-giam-gia/ (Accessed May 12, 2010) 41. Giải pháp du lịch thời khủng hoảng: Ngắn ngày, giá rẻ, 2009 [Online]. Available at URL: http://www.tienphong.vn/Kinh-Te/153202/Giai-phap-du-lich-thoi-khung-hoang--Nganngay-gia-re.html (Accessed May 12, 2010)

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42. Ảnh hưởng của khủng hoảng kinh tế thế giới đến ngành du lich Việt Nam, 2009 [Online]. Available at URL: http://kdulich.duytan.edu.vn/Info/Detail.aspx?id=48&lang=VN (Accessed May 1, 2010) 43. Động lực cho Du lịch Việt Nam tăng trưởng trong năm 2010, 2010 [Online]. Available at URL: http://www.baodulich.net.vn/Story/vn/50namthanhlapnganhdulich/50namthanhlapnganhdulich/ 2010/4/5458.html (Accessed May 14, 2010) 44. Quảng bá hình ảnh Việt Nam ra nước ngoài, 2009 [Online]. Available at URL: http://www.fiditour.com/ban-tin-fiditour/160/quang-ba-hinh-anh-viet-nam-ra-nuocngoai.html (Accessed May 3, 2010) 45. Quảng bá hình ảnh Việt Nam còn thiếu và yếu, 2009 [Online]. Available at URL: http://vovnews.vn/Home/Quang-ba-hinh-anh-Viet-Nam-con-thieu-vayeu/20094/108776.vov (Accessed May 6, 2010) 46. Consultants sought for long-term tourism development plan,2010 [Online]. Available at URL: http://www.vietnamawesometravel.com/detail_product.aspx?product_id=1473 (Accessed May 11, 2010) 47. Hong Kong American Baptist mission [Online] Available http://www.abmhk.org.hk/hongkongnews-sar.html (Accessed May 18th, 2010) at URL

48. Crisis management for the tourism business [Online] Available at URL http://jersey.com/business/Documents/Guidance/cirisis_management_for_tourism_business. pdf (Accessed May 15th, 2010) 49. Hong Kong forges ahead five years after Sars [Online] Available at URL http://business.timesonline.co.uk/tol/business/economics/article3677490.ece (Accessed May 18th, 2010) 50. Hong Kong tourism Board [Online] Avaliable at URL http://www.yearbook.gov.hk/2003/ english/chapter15/15_03.html (Accessed May, 18h, 2010) 51. Tourism industry report [Online] Available at URL http://www.acrc.org.hk/sars/ industry.asp?doc=tourism (Accessed May, 18h, 2010) 52. Cathay Pacific Branding problems [Online] Available at http://us.asiancorrespondent.com/hong-kong-blog/2009/05/cathay-pacific-brandingproblems.html (Accessed May, 19th, 2010) URL

53. China & Hong Kong [Online] Available at URL www.tourismforum.scb.se/papers/.../TSA/.../ China_Hong_Kong.pdf (Accessed May, 19th, 2010) 54. Alan Fung, 2003, Sars threatening to cripple Hong Kong [Online] Available at URL http://www.atimes.com/atimes/China/ED05Ad04.html (Accessed May, 19th, 2010) 55. Economic impacts of Sars on Hong Kong Available at URL www.hiebs.hku.hk/ working_paper_updates/pdf/wp1084.pdf (Accessed on May, 19th, 2010) 56. Film legend Jackie Chan helps fight to revive Hong Kong tourism after SARS Available at URL http://www.encyclopedia.com/doc/1P1-76653965.html (Accessed on May, 19th,2010) 57. Sars after Sars [Online] Available at URL bea/bea030701.htm (Accessed May, 22nd, 2010) http://info.hktdc.com/econforum/

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COUNTRY RISK ANALYSIS IN VIETNAM
Written by: Dang Thu Trang, Nguyen Thi My Hanh (3K-07) Tran Thi Quynh Trang (3K-07), Phung Thi Anh (2K-07) Supervisor: Nguyen Thu Huong ABSTRACT We conducted this research in order to help the foreign investors have an overall view about the level of risk they may face when investing in Vietnam. There are two main risks which would be taken into consideration, the current political and financial issues. In terms of political risk, the attitude of Vietnamese consumers toward foreign goods and services, the tax condition and other actions of host government to local firm or the copyright law, the bureaucracy and corruption recently were those aspects we wanted to analyze. About the financial risk, we considered the fluctuation of some main economic indicators like the GDP growth rate, GDP per capital, inflation rate, the exchange rate and real interest rate. After evaluating each criteria of risk, we give some recommendations for the investors with the hope that they can overcome all the difficulties to successfully get into Vietnam. PART 1: INTRODUCTION 1. INTRODUCTION As a result of war, Vietnam's economic development suffered compared with other neighboring countries. However it is catching up fast. Despite the 1997 Asian economic crisis, Vietnam's economy has expanded rapidly since the Communist Party of Vietnam turned away from the communist economic policies in the 1980s. A sustained growth rate of around 8% for over 19 years shows great progression and is one of many reasons for the increasing number of foreign investors. Vietnam received over US$20 billion of foreign direct investment in 2007, a record amount with an increase of 70% on 2006 figures, and saw almost 1,500 new projects licensed in the same year. Although the economy is developing at a rapid rate, entry costs for investors are still low. Furthermore, with 50% of population of 84 million under 30, Vietnam has a strong human resource and consuming force. The very cheap labor costs coupled with a young, literate workforce make business investment a very attractive and lucrative prospect. The Vietnamese government has shown their commitment to economic liberalization and international integration. Structural reforms needed to modernize the economy have been implemented, helping to produce more competitive, export-driven industries. Vietnam joined the WTO in January 2007. This should give a major boost to Vietnam's export led economy and should spur on the country's economic liberalizing reforms. However, problems remain. Reform of state enterprises is proceeding slowly, while another big issue is the under-development and poverty level in remote ethnic-minority areas. Although recent statistics show Vietnam in a favorable investment light, it is crucial to also take note of the country's current economic and political situation. In this

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research, on the perspective of foreign investors, we will focus on analyzing factors of political and economic risks that they may encounter when investing in Vietnam. And then we also give out recommendations for foreign investors to overcome and reduce the risks so that they still can make investments and earn huge profits in Vietnam. 2. METHODOLOGY Our research methodology requires gathering relevant data from the specified documents and compiling databases in order to analyze the materials and arrive at more complete understandings about the level of overall risks in Vietnam in recent years. Our research specialize in the type of secondary research which involves examining all the various types of research that are available to the public, collecting data, and forming some type of opinions about it. When analyzing aspects of both political and financial risk in Vietnam, we start with raising the real situation of each with the facts and figures to prove our judgments, then explain why this issue happens in Vietnam, how the matter creates risks to foreign investors, compared with another regional countries in Asia. After all, we can assess the overall level of risk in Vietnam PART 2: LITERATURE REVIEW There is a long tradition of research on country risk in the international business area. In the world, there have had a lot of projects which have been carried out to analyze the overall situations worldwide in general and in Vietnam in particular. The challenges posed by the intersection of politics and markets continue to be a topic of interest to both academic scholars and practicing managers. In forums, official websites and newspapers, the authors have tried to determine the causes, the facts and figures, results of economic and political opportunities and threats so that the readers could have deeper understading of his own country as well as of surroundingsSeveral scholars (Fatehi - Sedeh and Safizadeh, 1989; Formica, 1996; Kobrin, 1979; Robock, 1971; Sethi and Luther, 1986) did describe the difficulties involved in developing a precise definition of political risk and suggest ways to improve the clarity of the domain of the construct. In general, it is most commonly conceived in terms of (usually host) government interference with business operation (Carbon, 1979). Schmidt (1986) defines political risk as "the application of host government policies that constrain the business operations of a given foreign investment". Jeff Madura(2006) believed country risk represents the the potentially adverse impact of a country’s environment on the MNC’s cash flows. Country risk can be used to monitor the countries where the multinational company is presently doing business. It can be considered to improve the analysis used in making long-term investment or financing decisions. The Euromoney indices of country risk note that country risk on the other hand includes not just political risk but also other factors such as economic performance (current and future), credit ratings, and a host of other indicators. Cosset and Roy (1991) suggested that country risk ratings provided by publicly available economic statistics represent reasonably valid and reliable measurements of country
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risk. Jeff Madura(2006) in his “International Financial Management” book rated political risk based on attitudes of consumers in the host country, actions of host Government, Blockage of Fund transfers, Currency inconvertibility, War, Bureaucracy and corruption. According to him, economic Risk factors include Interest Rates, Exchange Rate and Inflation(Madura,2006). Actually, there are 4 types of country risk assessment: Macro-political risk, Macrofinancial risk, Micro- political risk, Micro-financial risk. And the opinions of different risk assessors often due to subjectivities. There are some techniques of assessing country risk like checklist approach, delphi technique, quantittative analysis and inspection visits. In this research, because of limitations, we focus on analyzing the risk of macro environment, not the micro ones by using the descriptive method. Many projects have proved that the economy and the stability of a country are the extremely crucial factors that investors take into consideration before choosing to invest into any country. Chakrabarti (2001) finds that higher levels of political risk are generally associated with lower levels of FDI inflow. Click (2005) finds that when firms invest in higher risk countries, the country risk is compensated by higher returns, suggesting that foreign investors seek higher returns to compensate for the higher risk of their investments. In this research, instead of covering all the issues of overall risk of every country, we focus on analyzing specific points of political and financial risks of Vietnam only in comparison with those of regional countries. Our completion of this research is the result of colleting information from various sources, especially the book“International Financial Management” of Jeff Madura(Florida Atlantic University), the research of PERC and a report of Yoshiharu Tsuboi (Waseda University). This topic creates an endless inspiration for economists to exploit, therefore, we do this research with the hope that it can be helpful not only for foreign investors but aslo for further surveys or researches in the future. PART 3: COUNTRY RISK ANALYSIS IN VIETNAM As stated above, we are going to identify gradually all the risks that foreign investors may have to face when investing in Vietnam. There are two sources of risks forcing earnings generated in Vietnam to reduce out of foreign investors’ expectation. I. POLITICAL RISK Regarding political risk first, all the factors determined political risk of Vietnam to be low or high in comparison with other countries will be pointed out one by one. 1. ATTITUDE OF VIETNAMESE CONSUMERS Attitude of consumers are considered as one factor in political risk because the preference of Vietnamese customers toward foreign goods will affect the demand and then sales volume of foreign made goods. Luckily, according to study result of “Eye on Asia” program conducted by Grey Group, statistics shows that 77% of Vietnamese prefer foreign brands. However, average number of foreign brand preference across
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vtv. The answer is Vietnamese consumers have not trusted domestic producers for a long time. It is believed that in the near future. Prime Minister Mr. Foreign firm have sold globally branded products at a price that Vietnamese people can afford. many newspapers and other means of media had a lot of activities in order to raising awareness of Vietnamese people toward domestic products. (See appendix 1). This campaign has been carried out in many ways. Nguyen Tan Dung did sign the documents which required export to be promoted and import of unnecessary products to be limited for the purpose of balancing Vietnam trade deficit.2010 Asian countries is just about 40% (http://www. Vietnam has changed to market economy. In centrally planned economy. Import tax rate on cosmetics product increased by 6% from 30%. there was an online round discussion amongst various economists and experts considering the issue of Vietnamese people‘s preference toward foreign brands (http://www. From 20/6/2008. foreign goods are trusted and preferred by Vietnamese people for years and the trend is still maintaining. to have more frequent advertisement over multi-media so that Vietnamese people can have more information about products and put their trust in domestic producers. Vietnamese will gradually have the habit of and get acquainted to using home made products. products made abroad have been advertised popularly and professionally.daisuhangviet.thesaigontimes. 2009. at 9 a.Du lÞch Th¸ng 5 . In addition. good post purchase service. for example. Apart from indoctrinating this campaign to Vietnamese people. From the action of preventing foreign products from flowing into Vietnam. tax levied on importing mobile phone or wireless used items went up from 5% to 8%.tienphong. new import tax applied for some unfavorable foreign products has been implemented.vn). In the face of this issue. high technological machines. Moreover.vn and http://hangviet. For example. concerning the political risk factor of Vietnamese consumer attitude toward -172- . www. there are some separate websites only used for the purpose of running this campaign. From then. along with government supporting actions for domestic firms. thus. http://www. Those who imported high engine’s item had to bear the tax up to 29%. Apart from high quality. Therefore.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the campaign “let’s buy domestic product” was promised to be successful in the near future.vn. Moreover. finished products which were low and unstable quality were used to meet minimum requirements of Vietnamese people. Vietnamese firms themselves need to improve their good quality. Until Vietnamese government had “DOI MOI” campaign. Vietnamese government has some actions to reduce this percentage by raising a campaign “let’s buy domestic products”. Vietnamese products will be replaced with foreign made ones which were once preferred by Vietnamese consumers. Therefore. One of them is having government restrictions on foreign made products by increasing import tax rate.m 19th of June. Vietnam lacked of materials. outdated industrial knowledge. in December 2009.vn/. This policy would support “let’s buy domestic” campaign. Vietnamese producers have had more opportunities to develop but they also have to face the fierce competitions from foreign producers.dunghangviet.vn). The question raised is that why Vietnamese people prefer foreign brand.

More than 70% of respondents say they would stick to their current brands.com) According to CLSA research. Vietnamese government has the policy to guarantees foreign investment. foreign investors will be less risky when investing in Vietnam rather than investing in China. Regarding the proof of the fact that Chinese people prefer domestic brands.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . However. foreign investor will enjoy a quite comfortable business environment. trend-setting consumers from 15 leading Chinese cities. 2. plus a list of the Top-100 most preferred consumer brands and a comprehensive assessment of brand value. who named 1230 brands in nine core sectors ranging from food to financial services to produce the Index. the risk is predicted to increase for foreign investors to sell foreign made products in Vietnam when Vietnamese government does try best to promote Vietnamese products as well as protect domestic producers under the threat of fierce competitions with foreign firms. However. They want to consume more domestic goods rather than foreign goods.Du lÞch Th¸ng 5 . the risk that foreign investor may face in Vietnam is increasing over time. And if Vietnam changes policies which may damage foreign investors ‘properties. CLSA (Credit Lyonnais Securities Asia) (see appendix 2) conducted a comprehensive survey of more than 1500 urban. Thus. Investing in Vietnam is also challenging only if the campaign of “let‘s buy domestic” come into effect and it will let Vietnamese people prefer Vietnamese brands to foreign brands. foreign investors will face more risks when they intend to invest in China. (See appendix 3) As a result.clsa. Chinese people are famous for their strong culture and strong national identity preservation. apart from many encouraging fields for foreign investment. In comparison with China.(https://www. in comparison with Vietnam. they will be compensated in appropriate ways. It will also be illustrated further and more clearly in foreign investment Law of Vietnam (Appendix 4). with seven of the top ten being Chinese. this group reveals domestic Chinese brands make up more than 50% of the Top-100 brands preferred by its respondents. On 17th September 2009. Vietnamese government has had many supporting policies and conditions to encourage foreign investment in Vietnam. with 77% of Vietnamese population likes foreign products. But it takes time to achieve this vision. For example.2010 foreign products. accordingly. ATTITUDE OF VIETNAMESE GOVERNMENT 2. Now all the evidences supporting this idea will be listed out one by one. Following the foreign investment law of Vietnam. in 2009.1 Discouraging policies toward foreign investment During the time of globalization and free market economies. Vietnamese government also had some important fields in which foreign firms are restricted or banned to make investment in because of some sensitive -173- . it is forecasted that Vietnamese people are gradually aware of good domestic brands and buy more domestic products. Chinese people are also very loyal to currently used brand. Therefore. Foreign properties will never be nationalized in any conditions and situations.

Besides. high tech foreign firms will be exempted from income tax payment for 8 years. At Hai Nam province. 2. that’s why two countries have attracted a lot of FDI over years. In addition. And many other favorable tax conditions are applied for foreign investors investing in Can Tho (see Appendix 6). which is applied in different areas. Foreign investors do not have the right to invest in all investment fields that they like. China also has different favorable policies in tax on using land. invest in project of building up transport traffic infrastructures.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Production firms will be charged no income tax in 4 years and tax will be paid 50% less in 4 following years. Vietnam has not restricted currency convertibility. If initial cash outlay is less than 5 million USD. Despite the fact that Vietnamese government does not have policy to limit maximum amount of fund transferring. But Vietnam government has attracted foreign investors to reinvest in Vietnam by offering many favorable conditions.43).gov.Du lÞch Th¸ng 5 . foreign high tech firms have the right to use land without paying any tax for the first 5 years.38) out of total earnings in comparison with China with tax rate of 33%. therefore.2 Tax (Corporate Income Tax and Withholding tax) Foreign investors who want to make investment in Vietnam put tax rate as the first consideration and concern because tax will affect very seriously earnings generated in Vietnam. low profit foreign firms are exempted from land using tax payment and at Ha Mon foreign investors have to pay this tax 50% less. For example.42). less than 10 million USD and greater than 5 million USD. With the project of reinvesting for more than 3 years.2010 reasons like sovereignty protection (see Appendix 5).Comparing with China. Foreign investors all have to pay corporate income tax of 15% to 25% (See appendix 4. Along with this. At Chu Hai. foreign investors also receive different favorable condition for their investment. Foreign firms have to bear this kind of risk when making investment in Vietnam. foreign production firms have to pay 10% as corporate income tax and tax will also be favorably reduced in at least 8 following profitable years. foreign investors will receive all tax payment paid earlier to the government. From then. at Tham Quyen province. Firms out of industrial zones have to pay 3% applied to firms which have initial investment of more than 10 million USD. Especially in Dong Nai.(See appendix 4. If foreigner invests in Dong Nai province. foreign firm has to pay 7% as tax on fund transfer (see Appendix 7). Service firms are charged only 15% income tax and tax will be exempted in 2 following profitable years and be discounted in 4 following years. corruption will destroy foreign investors’ return.tayninh. administrative procedures in Vietnam are so complicated and may hinder business activities. firms in industrial zones have to pay only 3% for fund transferring to home country. Clause No. It means that all money earned in Vietnam can be converted into any other foreign currency. Clause No. Clause No. Moreover. tax will be reduced if foreign investors rent upland or fallow. in Can Tho city. project’s length is required to be at least 2 years longer and they just receive back 40% of tax paid if reinvested in China (http://socongthuong. It can be -174- . For example. Vietnam and China both have favorable tax policies to encourage foreign investment. it will be one of some difficulties for foreigners investing in Vietnam. for different areas in Vietnam. foreign investors have to pay 5 to 10% as cost of transferring fund (See appendix 4.vn).

2.117/2009/ND-CP on having an increasing fine in environment-damaged issues with the highest punishment up to 500 million Dong. government will support SMEs by ordering their products for government purchase. in this case any foreign investors have to consider this new policy if they have intention to damage the environment in Vietnam in order to gain unethical profit. In 2010. The timeline used for loan subsidy was from the beginning of February to December 2009 with the purpose to provide incentives for Vietnamese firms to invest in new fields. following resolution 131/QĐ-TTg. product advertising activities. Mining industry.vn) Concerning small and medium sized enterprises (SMEs). Therefore. all firms which borrowed money for investment in some industries namely agro-forestry industry. Construction industry. Vietnamese government now concerns more about environmental issues because Vietnam is so polluted with industrial waste and smoke especially in big cities. Moreover. this policy is still remained for new investment encouragement. Processing industry. Government creates opportunities for SMEs to approach information about market. (http://www. water industry. Vietnamese government encourages SMEs to stimulate exporting activities by creating -175- .chinhphu. in near future.Du lÞch Th¸ng 5 .com. Producing and distributing electricity. interest rate subsidy is reduced to 2% for medium and long term loan denominated in Vietnam Dong. SMEs also have been given land for appropriate operating activities (Decree 90/2001/ND-CP) and government aims to build up enough industrial zones for all SMEs to do business. Interest rate loan subsidy will help firms to reduce large amount of capital financing cost and then push down product prices. Government encourages many different areas and provinces to set up credit grantees institutions.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . maritime products industry.2010 said that foreign investors face less risk in terms of obligations to pay income tax or land using tax. SMEs also have favored tax in land renting and land using. Thus. (http://www.baodongnai. which may threat foreign investors’ future earnings generated in Vietnam. Investment encouraging policy said that government will help through financial support. To avoid polluting the environment more. government is going to impose pollution control standards in order for foreign investors doing business in Vietnam to protect the environment and then reduce global warming effects. It will be much higher than current punishment on the same issue. In terms of loan subsidy. prices. SMEs will have chances to cooperate with stated own companies for exchanging high technology and learning expertise as well as experiences so that SMEs will improve their competitive competencies. This decree has officially been implemented from March 1st 2010.3 Pollution control standards: In 2009 the government did introduce a decree No.4 Subsidy to local firm Vietnamese government did have many policies for subsidizing local firm.vn) 2. Vietnamese government also has supporting policies which create favorable conditions for them to grow. supports them to expand consumer market as well as product displaying. Information Technology industry would receive 4% interest subsidy with medium and long term loan. product launching.

In 2003 and 2004. As a result.hotrodoanhnghiep.software business alliances). Vietnam in 2009 was categorized in group of countries which had highest piracy rates over the world.2010 opportunities for them to cooperate with foreign companies. Until November 2005 Vietnamese government enacted copyright law.4 Failure to enforce copyright law As seen in the following picture.Du lÞch Th¸ng 5 . Now the latest news about Vietnam privacy rate in software industry was 85% (2009) (http://vietbao. this copyright law has just been seriously implemented. The risk now is proved to be little but in the future it will be very likely to increase.vn). domestic firms are now growing steadily and gradually can compete with foreign companies in the future. Despite the fact that SMEs have a lot of supporting policies enacted by government. foreign investors may face equal risk in failure of enacting copyright law of both countries.gov. Source: BSA (Business software alliances) Figure 1: Top 30 highest and lowest piracy rates in 2009 -176- . 2. As soon as Vietnam integrated into World Trade Organization. Comparing with China copyright law was set up in 1990 but it is believed that this Chinese law is very loosely implemented. The percentage equaled to 96 million USD lost to Vietnam software industry due to copyright privacy. despite the fact that China enacted copyright law long before Vietnam.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the privacy rate was still 80% (2009). they are still weak and feel hard to compete with foreign companies. foreign investors now face more risk when they consider investing in Vietnam. the data about privacy rates collected in 2006 was 88%. Concerning this issue. when investing either China or Vietnam. (http://www.vn) With government’s support. statistics showed that privacy rate in software industry was 92% (followed SBA. to expand products and services exporting market. This statistics explained that copyright law in Vietnam did not come to effect. therefore.

According to a research of World Bank. on average. the number of signatures for export/import was 12/15. A new survey about young business association in Vietnam in 2009 found out that 39% of firms rated the tax procedure “complicated”. in 2008.thuvienphapluat.vn) Figure 3: Ease of starting a business -177- . 38. administrative regulations are still rated unnecessarily prolix as the assessment of Rand and Tarp organization.050 working hours per year. the average time which firms had to spend to solve administrative papers was 29. BUREAUCRACY Rank Ease of Doing Business 93 Starting a Business Dealing with Construction Permits Employing Workers Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business Doing Business 2010 93 116 69 103 40 30 172 147 74 32 127 Figure 2: Some measuring factors of doing business in Vietnam in 2010 3.7 % in Hanoi and Ho Chi Minh City. Vietnam stood 140/182 of the most complicated tax administrative procedures.1 %. and the average day for export/import was 35/36.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . http://www. to complete all formalities about tax. it was found that a firm had to hand in 32 times. to spend 1. In 2009.2010 3.1 Facts and figures Although Vietnam has some improvement in reducing administrative procedures. Vietnam was included in the group which spent most time to meet tax requirements due to complicated papers and procedures. 16% rated “easy” and 40% assessed it not transparent and stable enough. Also in this research. especially.Du lÞch Th¸ng 5 . The number of document for export/import was 6/9. In 2007.

Vietnam is ranked 127 overall. Figure 4: Ease of closing a business Countries Ireland Indonesia Lao PDR Malaysia Philippines Thailand Number of years 0.4 years in East Asia and Pacific.5 year in OECD States. In some the process is straightforward and affordable.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In others the procedures are so -178- .Du lÞch Th¸ng 5 . foreign investors will learn that it takes too much effort to expand their business in Vietnam.5 no practice 2.4 5.7 Figure 5: Length of time it takes to close a business When entrepreneurs draw up a business plan. the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate.3 5. a firm has to consider a lot of procedures and they have to wait for a really long time for their papers to be solved.2010 Vietnam is ranked 116 overall for Starting a Business. even ranks after Lao PDR. To start a Business in Vietnam. Due to the complexity in solving problems related to procedures and papers. it is not easy at all for foreign investors to quickly open a business in Vietnam. The table which demonstrates the procedure time to complete and the Cost to complete when a business is opened in Vietnam (see appendix 9) Also. As it can be seen. Economies differ greatly in how they regulate the entry of new businesses. Vietnam takes 5 years to close a business. compared to an average of 3.7 2. and 1. this country ranked poorly in the length of time it takes to close a business.

they constrain private investment. In this survey.2010 burdensome that entrepreneurs may have to bribe officials to speed up the process or may decide to run their business informally. The Government of Singapore. in South East Asia area. some of which appearing and existing attached to the appearance and existence of the State while the rest come up due to objective situations and conditions. From this table. Figure 6: Ease of doing business It can be inferred that Vietnam is at the middle rank among South East Asia countries. Singapore is the top ranked economy. in a rate of Ease of Doing Business 2010. Vietnam is famous for complicated procedures with high corruption level.2 Causes of bureaucracy The bureaucracy appeared and then arises from many different causes. The table illustrates the number of days and procedures a firm has to deal with when starting business in Vietnam and other countries can be found in Appendix 10. Although this country has many significant policies to encourage foreign investment. Analysis shows that burdensome entry regulations do not increase the quality of products.Du lÞch Th¸ng 5 . Thailand and Malaysia as well have positive policies to motivate the foreign investors. these three countries are the most attractive places for investors. Firstly. Therefore. Instead. increase consumer prices and fuel corruption. Their policies are not just in words on papers but also seriously practiced in daily life. New organizations under control of the State are -179- . make work safer or reduce pollution.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . political and social activities have been more diverse and complicated. the appearance of bureaucracy and the existence of State are often associated. push more people into the informal economy. the State tends to extend its organizational structure and personnel. As the society has evolved. 3. many economic. Vietnam ranked 93 out of 183 countries. we can have some useful comparison to know which country should be invested in the most.

Furthermore. However. 4. Secondly. activities. forecasting ability is not updated. For the international institutions and foreign governments. The principles. what matters is not whether there was an exchange of money outside of the rules with regards to administrative work. taking advantage of laws and “loop hole” occur which can be considered the source of bureaucracy disease. the foreign governments including international institutions and the Vietnamese government have different understanding of the definition of “corruption”. And this convenience in information transmission also shapes the psychology to be afraid of “travelling incognito” to investigate the real life of residents.Du lÞch Th¸ng 5 . individuals can avoid their responsibility and there is no one to be blamed for. This creates an advantage for bureaucracy to develop. or an individual keeps all the “commission” to himself instead of distributing it fairly among the members of his team or department. Legal system is not synchronized. in proportion to their respective positions. cannot understand the hopes and the wishes of residents. on the fixed charge for whatever they do in their job. or “commission”. A great many of officers use fake figures or make up stories to please his supervisors so that they can be promoted or can lower their colleagues. CORRUPTION Despite the fact that progress on corruption will remain a key determinant of investment attractiveness and the authorities had announced aggressive plans to fight corruption by encouraging the media to act as a watchdog. the society in which we live is a society of information. but these efforts have not made a significant progress because corruption has become endemic in Vietnam at all levels of Government. so officers cannot grasp the essence of the issues.2010 established to manage the activities of the whole society. plus the limitations of management ability leads to the failure in managing and controlling the whole organization. It will be just taken into serious consideration when the “commission” is an outrageously huge quantity. mechanisms and policies in management are not close and clear enough. In Vietnamese understanding. because no civil servants can make a living solely depending on their salaries. it is conventionally understood that they take a certain margin. the political institutions are still limited and our institution also contains many problems. so a great many of areas. from Vietnamese government’s point of view.1 The difference about corruption concept understanding Actually. corruption is any acts of demanding money outside of fixed charge or taking commissions for favors on the part of the civil servants.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 4. Thus. social relations have not been adjusted on time. but how much commission that they received was and whether they fairly delivered it among themselves. therefore. There are high level of people just catch the information through reports without caring about the accuracy of given information. A cumbersome system with a lot of personel. -180- . when the negative activities are found out.

The public feel it is not easy at all to forget PMU 18 crime.. They did -181- . However. an export company whose headquarter is in Philadelphia. this money will flow into that policeman’s pocket. It is not difficult for the corruption to be seen in almost anywhere which has the appearances of civil authorities.2 Level of corruption Corruption covers all aspects of social life..Du lÞch Th¸ng 5 . According to a Japanese public prosecutor. you will be fined a large amount of money and your car will be taken away for a short period of time according to the traffic regulations. giving the authorities an agreed sum to make your procedures done more quickly has become a habit. these people bribed a high level official of Vietnam to be taken part in a development project originated from Japanese Government. These brothers admitted having given a total number of $250. or he will have to wait for many days without having any idea of when his problem will be solved. (http://www. Kim Nguyen and An Nguyen pled guilty of corrupting Vietnamese officials to exchange for huge contracts which broke the Foreign Corrupt Practices Act of America. For example. instead of into the treasury organization. It happens from slightest activities to highest level ones.bbc. This can be evidenced by the corruption of Nexus Technologies Inc. Therefore.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In this case. if you go straight when the traffic light is red. This type of corruption is the most popular in our society. a Japanese company which used this technique when doing business in Vietnam.. it is a fortune that political corruption has not taken place. It is not so difficult to see corruption in almost everywhere nowadays.2010 4. Individual corruption is corruption that takes place primarily in relations between individual citizens and public officials and authorities. In Vietnam. Haruo Sakashita and Tsuneo Sakano. you could continue going and your car will not be taken away. or other typical crimes related to land conflicts. Failure in giving a certain quantity of money beforehand means that you have to wait in a long queue and for a long time to make your problem to be solved even when you have enough necessary legal conditions and procedures. And certainly.000 USD to Government Officials in the period of 1999 to 2008. It was Pacific Consultants International (PCI). Masayoshi Taga and other 3 officials Kunio Takasu. the former President of this company.uk). not only domestic companies but also international companies bribe the officials to make a quick procedure and to ensure that their company could take over the projects. a resident must either have a extremely close relationship with high-level people or give an appropriate rewards to the person who will take in charge. and even a “custom” in our society. if you give the traffic policeman an agreed sum of money.co. business and political. in this report. Therefore. Mr. at all levels of every sector. Nam Nguyen. in order to append committee’s seal to a birth certificate or other kinds of paper certification. we just mention the first two levels. were accused of corrupting behavior. However. The corruption happens at 3 levels: individual. In another situation. The next level is business corruption which takes place primarily in relations between enterprises/companies and public officials and authorities. According to Kyodo Media.

leader in particular and of the world in general is not doing enough to combat corruption worldwide. The corruption perception Index last year said that the U.Du lÞch Th¸ng 5 . Viet Nam ranked 3rd in the list of the highest corrupt countries in Asia-Pacific in a new economic report. It is critically a significant point to have interest in when the investors are confused whether to choose China or Vietnam. A political corruption in both Iraq and Thailand has made these two countries in to a political crisis. 4. Vietnam ranked 41 steps less." Vietnamese government always claim anti-corruption as one of priority.3 Fact and Figures Figure 7: Corruption perception index From this table. it can be inferred that the corruption in Vietnam is really higher. this has not happened as Iraq or Thailand. Denmark and New Zealand. According to the Political and Economic Risk Consultancy (PERC). according to the table.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the report asserts that "corruption is the environmental risk to economic recovery and a major challenge for countries which are in conflict. Made after one year was much the economy crisis. which violated the laws of anti illegal competition.2010 give a sum of $ 820. one of -182- . (http://www.uk) Political Corruption is the corruption that takes place in the higher echelons of public administration and on a political level. based in Hong Kong. but also recognizes this war is difficult. In the highest position for corrupt countries is Indonesia.co. and this problem is much more serious than other countries like Singapore. In Vietnam. in comparison with China.bbc. Although the index of Vietnam is higher than Indochina countries.000 USD (90 million yen) to an official in Hochiminh City.S. which increases the worry of foreign investors.

which is 19% as high as previous years.69. Japan. according to Mr. China and Malaysia also marked with high levels of corruption.co. 379 derogations were detected with the damage of 50 trillion VND and in this inspection.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . However. with the calculation from economists. About a third of those sentenced are found guilty of ‘harming the social order’ and one of six is engaging in ‘economically corrupt’ behavior. while the score of last year was 7.200 trillion VND and 880 ha of land. government procurement.174 high end and middle class investors operating in Asia Pacific area. Indonesia was scored 9.07 points over 10. PERC have reviewed the 16 nations of Asia Pacific areas from the foreign investors’ points of view. in the period of 2001 and 2005. Hong Kong.464 officials were addressed.870 trillion VND. and sale of land licenses and closely regulated state industries. ahead of Vietnam. For example. In provinces.000 investigations. On average.000. This organization has consulted 2.2010 the economies which are highly developing in the continent. In Vietnam. inspectors found the derogation with 2. Corruption is stealing from the State. According to the anticorruption organization in China. One estimate puts the cost of corruption in China at more than $100 billion a year or around 5 per cent of gross domestic product. corruption cost 3-4% of total GDP per year. there were 106.415 cases related to economy.uk) Nevertheless. The second. this percent of corruption can be higher with 6-7% GDP.mt. approximately 4 trillion USD flowed into greedy mandarins. therefore. in the period of 6 months in 2009. after 3. U. In the 1990s it was rare for a corruption scandal to involve a million Yuan. is Cambodia and after Vietnam is the Philippines.gov.vn) -183- .com). Corruption in China and Vietnam has some similarities. In this survey.000 mandarins arrested for embezzlement in 2009. These include infrastructural projects. which were 114 cases more than 2008. Inspectors suggested taking back 1. It came up with a figure of 1. financial services. The amounts of money now being stolen in China are astronomical. the corruption is concentrated on those sectors in which the government is most involved. 442 officials were judged.Du lÞch Th¸ng 5 . Australia and Singapore were considered the least corrupt nations.(http://www. Meanwhile. These can be demonstrated by the figures. the estimated cost of corruption worldwide is more than 5% of global GDP (US$ 2. This was about 8 per cent of budget spending for these years. In 2009.S. In 2007. Countries such as Thailand. http://www. 1. In Vietnam.6 trillion) each year. the authorities deal with huge numbers of cases every year. India.5 trillion VND and 187 public servants were addressed.29 trillion Yuan ($170 billion). over 150.bbc. 1.24 million USD and 880 ha of land. since the 1980s. China’s National Audit chamber tried to calculate the cost of corruption between 1996 and 2005.000 cases come before the courts. (http://thanhtra. the inspectors worked out 202 derogations with the total loss of 16. through a thorough investigation of 7. In China.tin247. the policemen in the South discovered 1. Tran Dinh Thien. according to C37.

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The lack of a competitive political system and a free press renders these sectors especially vulnerable to corruption. In China, a 2006 survey of over 3,000 corruption cases revealed that over half were involved in infrastructural projects and land deals. Transport and urban planning are other areas where officials succumb to bribery and other crimes. Astonishingly, over half of provincial officials responsible for transport have been found guilty of corruption over the years. Some have even been executed. In Indonesia, corruption has cost this country billions of dollars for the last 5 years. The latest report of Human Rights Watch estimated that corruption in forestry has taken two billion dollars each year away of Government budget. Although Indonesia ranks the third about high tropical forest areas, millions of trees are cut down illegally each year. Land is very valuable and, consequently, is the source of much crime. Local officials use violent means to acquire land at low prices and then sell it on to developers at high prices. In one survey in sixteen cities in 2005 found that half the development land had been acquired by extra-legal means. The authorities uncovered over a million cases of illegal land acquisition in the six years up to 2005. 4.4 The reasons of corruption in Vietnam 4.4.1 The leadership of one party system The absolute and comprehensive leadership of the Vietnam Communist Party is the root of all the tragic situation of the country today, including corruption problem. Viet Nam Communist Party would want to gain people’s trust through efficient administration and civil servants clean of corruption, however, administrative reform in Vietnam involves a vast structural problem. Unless there are certain forms of benefits during the reform to the party members working for existing administrative institutions, it would be difficult to push the process forward. Therefore, they have to tolerate a certain degree of embezzlement or misappropriation as a necessary evil. 4.4.2 Poorly-paid salary in State-owned organization Vietnamese civil servants are extremely poorly paid, whether they work for the central government or local. Although there is a fact that the salary level has been improved over the certain periods, these levels of increase have not ensured the employees to be able to live on their “hard salary”. Therefore, sharing commissions from work becomes the easiest way to “earn cash.” Thus, as long as it is reasonably acceptable sum and shared equally among everybody involved, they do not think they are doing something wrong, not to mention “corruption”, and do not understand why such deeds should be condemned. 4.4.3 The inconvenience and unclearness in administrative procedures. The legal system is not synchronized and still overlapping. Therefore, many public servants take use of this inconvenience, plus with their high position to receive illegal amount of money. Not only domestic companies but also the international companies has made use of this to guarantee that their companies could have a quicker procedures and could have the projects they want from the help of public servants(as said above).

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To sum up, high level of corruption in Vietnam is actually an obstacle for foreign investors. Maybe in the future, with the serious interest in addressing corruption of Government, corruption will be reduced over time and thereby, investors could have a fair competition in which they can position themselves without doing unethical actions. II. FINANCIAL RISK 1. Exchange Rate From 2008 until now, exchange risk has tended to grow. Dong was subject to downward pressures. Government authorities thus increased the dong fluctuation band several times (plus or minus 5% as of March 2009) and lower the official value of the dong, which is pegged to the US dollar, four times: in June 2008 (by 2.4%), in December 2008 (by 3%), in November 2009 (by 5%) and in February 2010 (by 3.4%). Moreover, the authorities decided in November 2009 to reduce the dong fluctuation band to 3% in order to anchor exchange-rate anticipations. On the black-market, however, the dong is still traded far below official parity. Government authorities could thus devalue the dong again in 2010. (http://www.coface.jp) Bui Kien Thanh, a former government adviser, said: “The State Bank foreign exchange reserves will shrink further and the State Bank will be forced to take further action to defend dong parity". (http://uk.reuters.com) If the SBV allow the dong to depreciate further against the US currency, it would increase the dong value of firms’ US dollar-denominated debt, which raises the risk of default for the many firms that rely on trade financing in US dollars.

Figure 8: Exchange rate of USD/VND from 2008 to 2010 In the process of finding out the reasons for that issue, we can enumerate some factors below. Firstly, inflation is on the rise once again. After trending lower during most of 2009 to a low of 2 percent in August, it rebounded to 7.6 percent by January to stand above a 2010 government target of 7 percent. HSBC currency strategist Daniel Hui says inflation will reach double digits in the second quarter of the year
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(http://uk.reuters.com). Obviously, the rise in inflation rate makes a decrease in the export and an increase in the import of Vietnam, which affects the balance of trade in this country. Actually, after increasing sharply in 2009 as a result of the economic slowdown and the stimulus plan, the trade deficit will likely remain substantial in 2010. In fact, the trade deficit has ballooned in recent years from $5 billion (3 billion pounds) in 2006 to $18 billion in 2008. The global downturn saw it narrow to $12 billion in 2009 but the deficit in January 2010 was already well over $1 billion. (http://uk.reuters.com) In order to improve the trade deficit, SBV make a decision to devaluate the VND. The public debt will likely grow and half of it is denominated in foreign currency, which makes it vulnerable to exchange rate risk. The current account deficit is moreover expected to remain high in 2010 with only 50% covered by FDI. Vietnam will thus remain very dependent on financial markets. (http://www.coface.jp) 2007 Current account balance (%GDP) Foreign debt (%GDP) Foreign exchange reserves (in months of imports) (f): forecast Figure 9: Some macro-economic indicators Secondly, despite the SBV’s effort to stabilize the foreign exchange market, its status remains uncertain because of the high dollarization rate of Vietnam. Concerned about fluctuations in the exchange rate, many businesses were unwilling to sell US dollars earned from their export activities. In order to preserve their accumulations of US dollars, companies access loans in US dollars to fund their immediate needs, leading to a US dollar deficit in bank transactions. The gold fever appeared during the end of 2009, with prices escalating as people rushed to buy gold. In addition, the ongoing foreign currency tension combined with the increase in exchange rates caused people to worry over the decline in their savings. Additional inflation pressures created by the recent stimulus package have led many people to move their assets into gold and dollars. With the high demand for US dollar in Vietnam, it is obvious that US dollar appreciate against the VND. The issue that recently VND has weakened against the US dollars makes more risk for the foreign investors in case they invest in Vietnam. Exchange rate volatility can work against an international company if a payment in a foreign currency has to be made at a future date. There is no way to guarantee that the price in the currency market will be the same in the future-it is possible that the price will move against the company, making the payment cost more. On the other hand, the market can also move in a business' favor, making the payment cost less in terms of their home currency. In the near future, “Vietnam may weaken its currency to rein in the nation’s trade deficit”, said Nguyen Duy Hung, chairman of Saigon Securities Joint-Stock Co., referring to a
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2008 -11.9 29.7 3.2

2009 -9.7 31.9 3.5

2010(f) -9.4 32.0 3.1

-9.8 33.3 3.6

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March research note. The company’s Sector Watch report predicted 3 percent to 4 percent depreciation for the rest of 2010. (http://www.businessweek.com) Therefore, the trend of exchange rate in Vietnam in next few months seems predictable and the risk level seems less serious. Consider the exchange rate in Singapore from 2008 to 2010, as seen in the figure below, this rate has fluctuated more than the one in Vietnam. Moreover, according to the forecast of Financial forecast centre, the Singapore dollar are going to depreciate against US dollar in next few months, so it is more risky. Consequently, in the aspect of currency risk, from the perspective of international investor, Vietnam is regarded as more attractive for investing than Singapore.

Figure 10: Exchange rate of USD/SGD 2. Interest Rate Real interest rate of Vietnam during the period from 2008 up to now has fluctuated continuously as it can be seen in the table below
Time Nominal interest rate (per year) Inflation Real interest rate (per year)

01/01/2008 01/02/2008 19/05/2008 11/06/2008 21/10/2008 05/11/2008 21/11/2008 05/12/2008 22/12/2008 01/02/2009 11/2009 04/2010

8.25% 8.75% 12% 14% 13% 12% 11% 10% 8.5% 7% 8% 8%

14% 16% 25% 25% 27% 22% 22% 24% 24% 17% 4% 9%

-5.5% -7.25% -13% -11% -14% -10% -11% -14% -15.5% -10% 4% -1%

Figure 11: Real Interest rate in Vietnam

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Why have we had the incessant fluctuations of real interest rate? It’s because of the change in base interest rate and also the variability of inflation rate from 2008 up to now. Apparently, it has related to the monetary policy of Vietnamese government. • In the first half of 2008, Vietnam was combating a potential macroeconomic instability such as high inflation, a fragile financial system and surging twin deficits. Therefore, on April 17, 2008, the Government released Resolution No.10/2008/NQ-CP detailing measures to restrain inflation, stabilize macro economy and ensure social security and sustainable growth. In one side of the Resolution, the government took decisive and consistent measures on monetary tightening. The State Bank of Vietnam (SBV) increased benchmark interest rate on VND three times in the first half of 2008, boosting benchmark rate from 8.25% to 14% per annum on June 11, 2008. (http://www.eai.nus.edu.sg/BB447.pdf). The government’s policies to stabilize the macro economy have generated visible results. In particular, the monetary policy has reduced inflation and trade deficit. However, the level of overall macroeconomic instability is still quite severe. • In the second half of 2008, before the country could fully address its first set of problems, the economy was dealt another blow by the global financial crisis, including surging trade deficit since September 2008, rising unemployment, weakening domestic demand and slow economic growth. Consequently, in December 11, 2008, the Vietnamese government released Resolution 30/2008/NQ-CP on urgent measures to deal with the economic recession. In detail, on monetary policy, since July 2008, Vietnam has gradually eased its monetary policy. From October 21, 2008 to January 23, 2009, SBV cut its benchmark interest rate six times from 14% to 7% per annum. (http://www.eai.nus.edu.sg/BB447.pdf). • In 2009, the government has continued to apply the loosened monetary policy. SBV try to adjust and maintain the interest rate at rational level since February 2009 in order to reduce the lending interest rate level and to strengthen the mobilization sources to meet the credit expansion of the economy, thereby, the prime interest rate in VND was still remain at 7% per annum. Since November 2009, all the aforementioned interest rates have readjusted 1% additional to response the new conditions of the economy. Moreover, on January 23, 2009, the Vietnamese Government decided to use US$1 billion (VND 17 trillion) to subsidize loans’ interest rates to boost the economy. Decision No. 131/QD-TTg, (dated January 23, 2009) was issued by the Prime Minister to provide interest-rate subsidies. Under the Decision, short-term loan contracts with maximum duration of 8 months and signed and disbursed from February 1, 2009 to December 31, 2009 will get interest rate assistance of 4% per annum. Since April 2009, this package has been expanded to medium and long-term contracts and simultaneously supported for loans to purchase machineries, equipments, materials for agricultural productions and for constructing houses in rural areas. To sum up, 2008 is the year that the degree of interest rate varied constantly while in 2009 and the first quarter of 2010, that rate seem to stabilize. Refer to the degree of

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GDP Per Capital GDP per capital($) Vietnam China Cambodia 2009 1074 3677 740 2008 1024 3160 818 2007 825 2459 723 Figure 13: GDP per capital It can be seen that Vietnam has low GDP per capital.9 2008 6. Vietnam has moderate risk. the risk of interest rate is not very high. Cambodia is the most risky country and China is the least one. if the foreign companies offer product with unreasonable price or there is uncertainty they will face the potential of losing sale and so reduction in their revenue. in comparison with China and Cambodia. it is risky for investors to invest in low income countries. the more threatening the foreign investors have to confront under the control of government. Therefore. China is at 114(according to the GDP per capital country rank by the CIA World 2009). but lower than China.Du lÞch Th¸ng 5 . 3. developing countries. Vietnam’s GDP per capital is still very low. it is higher than Cambodia.23 9 6. only about $1000 in two recent years. this is a good signal for economic development. Furthermore. the more fluctuant the interest rate is. But comparing with developing countries like Cambodia. From the above table. In general. It is known that low income country has low consumption power. it still grow in spite of the world financial crisis. downward is the same trend for the world economy due to the world financial crisis. However.2010 country risk.2 Figure 12: Real GDP growth rate In 2008 the financial crisis affected many developed economies and some other developing economies. recently. China is one of the biggest and fastest-growing economies. This is a risk for investors when they invested in because low growth rate means low return rate. GDP per capital of China has high growth rate and is more than 3 times as much as Vietnam’s one. The low GDP per capital show the poor and less developed economy. Vietnam’s GDP per capital is at average level.7 -2.3 8. Real GDP Growth Rate Real GDP Growth rate (%) Vietnam China Cambodia 2009 4. Vietnamese economy is less risky.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . However. it has increased continuously. so it has lower risk than Vietnam and Cambodia.5 13 10. all the growth rates of three countries had downward trend. In comparison with other countries in region. it stands at 137 in the world. So. -189- . they are usually sensitive to the price.5 2007 8.

China. It is simple that high inflation leads to the increase in price.5 1. with stable growth.0 6.8 2008* 3.8 1.4 6.0 2.0 -0.5 2.2 2.4 6. Country Cambodia China Hong Kong India Indonesia Korea Laos Malaysia Philippines Singapore Thailand Vietnam 2002 3. it can be seen that despite the financial crisis.5 1.8 1.6 10. so the risk of investment in Vietnam is not very high as the others like Cambodia.518 0. nearly double.6 5.8 1.5 13.2 1.9 -0. and Cambodia from 2007 to 2009 Vietnam still has very high inflation rate.6 0.0 6.2 2. but the relative inflation of Vietnam with others is still high.4 6.7 1.3 2006 4. Commonly.1 2004 3.8 19.8 -3. which increased rapidly from 2007 to 2008. Inflation Rate Inflation (%) Vietnam China Cambodia 2009 6.4 6.6 1.5 6.0 4.8 3.5 2. Vietnam is in the recovery stage.0 1.0 5.0 7.1 3.8 3.8 1.2 1.8 3.5 6.325 2008 23 4.5 8.8 2003 1.6 5.4 15.6 7.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 4.1 3.8 7.7 4.7 1.0 3.8 3. This put high pressure on government to control inflation and high risk for investors who invest in Vietnam.2010 Analyzing both GDP per capital and GDP real growth rate. when the price increases.6 2.Du lÞch Th¸ng 5 .6 6.5 0. the table below of the inflation condition of inflation of Asian country from 2002 to 2008 also showed that Vietnam was one of the highest inflation countries.7 2. it is very risk to invest in high inflation country due to the increase in cost of production and reduction of sale.4 11.8 10.2 1. in three countries. This reduction is due to the economic slowdown.2 3.3 5.2 6.5 4.2 2.6 5.7 5.4 0.87 2007 12.9 Figure 14: Inflation rate in Vietnam.2 -2.3 -0.8 2005 5.5 2007* 4.4 10. However. In addition.5 2.3 *Forecasted for 2007-2008 Resource: Asian Outlook 2007-Comparison Table: by Runckel & Associates Figure 15: Forecasted inflation in some Asian countries -190- . high price will reduce demand for the product and reduce sale as well as the revenue of the firm. At the present. Furthermore.0 4.7 5. in a positive note inflation has reduced dramatically from more than 20 percent in 2008 to less than 10 percent in 2009.5 1.9 3.8 7. the cost of production will rise because of the rise of material’s price. Vietnam has the highest level.6 3.1 2.1 2. Vietnamese economy still grows with slow and rather stable rate.4 5.0 1.5 5.0 2.9 2.

and GDP per capital remains low by regional standards and high inflation.Du lÞch Th¸ng 5 .eiu. open market policies encourage Vietnamese economy to develop a lot. Stable political condition. C.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . political risk and financial risk. Conclusion From all above. Vietnam still remains low GDP per capital only around USD 1. especially failure to copyright law. the highest risk -191- . Country risk service by the Economic Intelligence Unit (EIU) for 2008. the higher risk is. the financial risk of Vietnam is high. and belongs to one of highest inflation countries in Asia. Consequently.asp? info_name=eiu_CRS&rf=0 The higher score is. These factors make Vietnam highly risky to foreign investors. too. Overall. as EIU’s evaluation Vietnam has moderate political risk and high economic risk and overall country is moderate risk. A. They rates countries according to scores from 0 to 100 and range in to 10 categories as the table below. investing in Vietnam face two main risks. downward pressure on VND. local firm’s subsidy. Furthermore. the economic is slow in 2008 and 2009. economic improvement. Score New model band 0-12 9-22 19-32 29-42 39-52 49-62 59-72 69-82 79-82 89-100 AAA AA A BBB BB B CCC CC C D Source: Rating band characteristics detail at: http://www.2010 Overall. Vietnam has moderate or a little bit high political risk by considering all the factors listed above.23 percent in 2008 and 4. B for political risk and overall country. failure to enforce copyright law. PART 4: CONCLUSION AND RECOMMENDATION 1. Vietnam’s economy expanded rapidly with GDP growth at 8. including strict pollution control standards. massive and complicated procedures. there are a lot of burdens when investing in Vietnam. Besides that. and corruption which are serious problems in Vietnam. In addition. bureaucracy. However. However. And then the whole country risk is high.5 percent in 2007.com/site_info. D where AA is the lowest and D the highest risk. BB. emerging economy helps Vietnam be less affected by the world financial crisis. Vietnam is considered to be highly risky for investment. unstable interest rate also creates risk for investors. As a result.3 percent in 2009. It continued to grow at 6. good attitude of Vietnamese consumers toward foreign goods and services and favorable tax condition make Vietnam less risky for investors to make investment in. so AAA is the least risky and D is the most risky. Some evaluation or rate of country risk for Vietnam by some international organizations can be used as references to understand more about Vietnam Country risk. B. Inversely. rated Vietnam as CCC for economic or financial risk.000. Another example is ranking from Euler Hermes UK by analyst David Atkinson 2009 which rated Vietnam at grade D according to Country Risk Grades on a scale of AA.

foreign investors need to expand their business and also make more investments in different Vietnamese industry. Moreover. they can keep their strong position in Vietnam market and also stand outstandingly in Vietnamese consumers’ mind. However. It is showed in the chart in Appendix 8. Vietnamese government now has visions and expectations of foreign direct investment in 2010.Du lÞch Th¸ng 5 . as stated above 77% of Vietnamese customers prefer foreign brand. the highest risk grade for economic risk. Best company. From then. understanding this chances. As analyzed above. they will receive highest level of benefits and advantages which are brought from government. it will threaten foreign investors’ future earnings. we did release only several recommendations for foreign investors who invest in Vietnam. foreign producing firms need to take it into consideration so that they will have appropriate and quick response in the changing demand of Vietnamese people. Despite the fact that foreign investors who want to do business in Vietnam may face high risks. government continues to attract foreign investors to make investment in Vietnam. If so. Therefore. they can still gain a lot of earnings only if they understand thoroughly opportunities and threats of doing business here. they evaluated Vietnam to be high in political and economic risk and very high for financial risk. making use of favorable conditions that Vietnamese government give. the results that researchers have found are equivalent to those our group has studied and come up with. expanding business into Vietnam market is one of many foreign investors’ targets. The final one recommended is the country risk report of A. From -192- . understanding the importance of FDI in economic development of Vietnam. Regarding political risk in Vietnam that investors may encounter. Recommendation Due to limited scope of our research. foreign investors will have the advantages over tax reduction and land renting expenses. 2. Therefore. this situation might be changed in the future sooner or later because now Vietnamese government is having a campaign of “let’s buy domestic products”. Thus. However. Taking advantage of Vietnamese consumer’s preference. with P3 for political risk (P1: the best. the government must have detailed policies to provide foreigners incentives for foreign direct investment in Vietnam.25 billion USD which is increased by 10% comparing with 2009. therefore. Investing in Vietnam now brings to foreign investors a lot of benefits because Vietnam is one of the most attractive countries to make investment in Southeast Asia with GDP growth rate just behind China. it can be concluded that Vietnam is seen as a highly risky place for foreign investors to invest in.M. It will create very big opportunities for foreign producers because they can compete very easily with domestic producers.2010 level. it is likely that high risk brings high return.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Vietnam is still one of potential places for investments in foreign investors’ eyes all over the world. P4 the highest risk) and E6. Finally. Inc (AMB) in 2009. With the aims of speeding economic growths. foreign investors should keep their quality and also their service in order to satisfy and retain loyal Vietnamese customers. In order to achieve objective of FDI in 2010 of 22 .

and the option contracts to reduce the possibility of financial risk. HSBC and many other banks in Vietnam even have a team of specialists available to advice and support for these companies if they need more information. The primary goal when hedging is to protect company's profits from exchange rate and interest rate uncertainty at the lowest possible cost. the foreign investors have to take into account their risks and opportunities carefully when deciding to invest in Vietnam. do not keep the belief that bribery and bureaucracy can help you to have a sustainable position here. The research shows not only the foreign investors the risks they may face in Vietnam but also some suggestions to help them invest in Vietnam more effective. Interest rate swaps can be used by hedgers to manage their fixed or floating assets and liabilities. Therefore. in that case. Regarding bureaucracy and corruption. Efforts to be clean of corruption in Vietnam will take a long time to complete despite the fact that the country has positive policies to wash out bribery and bureaucracy. This is a really interesting topic. Doing business in an unethical way does not only can cost investors a huge sum of money but also can put them into prison. the swaps. the foreign investors who want to invest in Vietnam can choose some hedging tools like the forward contracts. How can a business protect itself against currency and interest rate volatility? One risk management tool that can help a business protect its profits from unforeseeable changes in the currency market is hedging. Therefore. Vietnamese Government has taken part in an anti-corruption. It can help changing from the floating to fixed interest rate (without changing others conditions) to reduce interest rate risk of rising (in case the company are borrowing fixed rates) and vice versa. they have existed in Vietnam for a long time so that they cannot be eliminated in a short run. these companies can enter into the forward exchange contract which is a binding obligation to buy or sell a certain amount of foreign currency at a pre-agreed rate of exchange. hope that there will be more deep researches to help investors understand more about Vietnam and also help Vietnam see itself and have appropriate policies to attract more DFI to develop the home economy. -193- . Therefore. Actually. foreign companies may be required to make payments or to receive payments in a local currency.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Refer to the forward contract. About the swap. bribery to Government official is not a wise idea because nowadays. Vietnam now strengthens the enforcement of copyright law which guarantees foreign investors’ intellectual property and ensures fairness for all businesses.Du lÞch Th¸ng 5 . on a certain future date with a bank. many banks offer the interest rate swap which is a derivative in which one party exchanges a stream of interest payments for another party’s stream of cash flows. they may reduce cost of production and give out products at lower prices comparing with recently in order to compete with small and medium sized firms which receive a lot of Vietnamese government subsidy.2010 then.

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distribution. Since then. In Vietnam. -196- . food safety system. every year it still witnesses thousands of cases of food poisoning. known as Critical Control Points (CCPs) can be taken to reduce or eliminate the risk of the hazards being realized. Nguyen Thi Thuy (2KT-07) Supervisor: Nguyen Thi Cuc I. especially fresh and raw foodstuffs. Therefore. and also suggest some recommendations which help to minimize the gap. Literature review 1 Major international standards on Food Hygiene and Safety: As mentioned before. HACCP is used in the food industry to identify potential food safety hazards. there are a lot of international standards which are set before. II. in this research we based on some basic ones such as Hazard Analysis Critical Control Point (HACCP). it is the fact that the quality of food. science-based. HACCP was initially set on three principles but now on seven principles (Please see appendix 2).Du lÞch Th¸ng 5 . It also affects directly and significantly the people’s health. This research paper will bring a deep view about the variances between the regulation and its implementation. recently. Hazard Analysis Critical Control Point (HACCP) is a systematic preventive approach to food safety and pharmaceutical safety that addresses physical.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Good Agricultural Practices (GAP) and Good Hygiene Practices (GHP). has been under serious threats of being unhygienically or unsafely grown. Good Manufacturing Practices (GMP). etc. the food quality is concerned at not only individual.2010 GAP BETWEEN ORDINANCE AND SMALL-SCALE RETAILERS’ MANAGEMENT ON FOOD HYGIENE AND SAFETY Written by: Nguyen Thi Thanh Huong (3K-08) Hoang Thu Ha (CN2-08). produced and handled. The system is used at all stages of food production and preparation processes including packaging. This can be partially explained by the loosen management on food hygiene and safety during stage of microscale retailing. HACCP itself was conceived in the 1960s by Pillsbury with the aim of providing a basis to design and manufacture the first foods for space flights for the US NASA (National Aeronautics and Space Administration). so that key actions. Although the Vietnamese government has already launched the Ordinance on Hygiene and Safety of Foodstuffs in 2003 in responding to a number of requests from different related parties. However. Therefore. food quality is a globally concerned issue. national but also international level. and biological hazards as a means of prevention rather than finished product inspection. HACCP has been recognized internationally as a logical tool for adapting traditional inspection methods to a modern. INTRODUCTION Food is one of the most necessary things for human’s life. chemical.

and have created their own GMP guidelines that correspond with their legislation.Food hygiene has been defined as “all conditions and measures necessary to ensure the safety and suitability of food at all stages of the food change” (Codex Alimentarius). foods. capturing new market advantages by modifying supply chain governance. The objective of these GAP codes. (Please see appendix 2 for the principles) Good Agricultural Practices (GAP) are "practices that address environmental. Their purpose varies from fulfillment of trade and government regulatory requirements (in particular with regard to food safety and quality). and/or creating new market opportunities for farmers and exporters in developing countries. standards and regulations include: ensuring safety and quality of produce in the food chain. and result in safe and quality food and non-food agricultural products". preparing and storing food in ways that prevent food borne illnesses.Food safety refers to the discipline that involves describing. food safety and hygiene. handling.GMPs are guidelines. delivery. and in some countries such as the USA regulations. processing. preparing the tools needed to clean the areas. pharmaceutical products. to more specific requirements of specialty or niche markets. diagnostics. These include a number of standard operating procedures that should be followed to avoid potentially severe health hazards. It encompasses a wide range of measures that can be applied from the growth of food products and the raising of food animals. that outline the aspects of production and testing that can impact the quality of a product. improving natural resources use.1 Food hygiene and food safety . economic and social sustainability for on-farm processes. Concepts in food hygiene and safety.2010 Good manufacturing practice (GMP) is part of a quality system covering the manufacture and testing of active pharmaceutical ingredients. food hygiene will be equated with cleanliness. Many countries have legislated that pharmaceutical and medical device companies must follow GMP procedures.Du lÞch Th¸ng 5 . disassembling areas and/or equipments and method of cleaning and sanitizing in general. through harvesting and slaughter. the cleanliness of food premises and food handlers. GAP has been developed in recent years by the food industry and producers organizations. -197- . and medical devices. . 2. GAP focus on 4 criteria: manufacturing technique. (Please see appendix 3 for the principles and scopes of examination) 2. Some of these standards include cleaning of areas. Good Hygiene Practices or GHP: All practices regarding the conditions and measures necessary to ensure the safety and suitability of food (GHP) at all stages of the food chain.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . storage and final sale. in case of refresh or raw foodstuffs. working environment and origin trace. workers health and working conditions. The reason behind this is that food transmits disease from person to person as well as serves as the breeding ground for bacteria that can cause food poisoning. However. aiming to codify agricultural practices at farm level for a range of commodities.

fruits. poultry or marine creatures which died from disease. slaughtered flesh like chicken. beef or fish to ready-to-eat materials) to consumers. poison or uncertain causes.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . or partially or fully processing. Manufacturing and trading animals or plants which contain germs which are able to be transmitted to people. Manufacturing and trading: (a) Foodstuffs which are stale. poultry or marine creatures which died from disease. (g) Foodstuffs which are beyond their use expiry date. . catching and trapping.Du lÞch Th¸ng 5 . 4. transporting or selling foodstuffs in contravention of the law. (b) Foodstuffs which are toxic or poisonous. boutiques or kiosks in small or individual lots for direct consumption by the purchaser.Retailing consists of the sale of goods or merchandise from a very fixed location. (d) Domestic animals. 2. collecting and gathering. either directly through wholesaler. preserving. In commerce. Ordinance on food hygiene and safety in terms of fresh and raw foodstuffs (extracted where relevant). Retailers are at the end of the supply chain.Micro. 3.scale food retailers are simply defined as which shops and stores which sell food and foodstuffs (both dried and fresh food ranging from vegetables. (c) Foodstuffs which contain parasites causing disease or which contain microorganisms causing disease or micro-organisms beyond the prescribed levels. -198- . Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. deteriorated or contaminated and dirty and which may cause harm to people's health and lives. such as delivery. 3. packing. animals or plants. poison or uncertain causes. Article 8: The following conduct shall be prohibited: 1. products manufactured or processed from domestic animals. (d) Meat foodstuffs or foodstuffs manufactured from meat not subject to veterinary examination or which was examined but failed to satisfy requirements.2010 2. (e) Foodstuffs which are contaminated or dirty because their packaging or container became dirty. Manufacturing and trading foodstuffs from raw materials other than food or from chemicals which are not on the list of substances permitted to be used. broken or torn during transportation. Planting crops. sand then sells smaller quantities to the end-user. a “retailer” buys goods or products in large quantity from manufacturers or importers. such as department stores.2 Retailing and micro-scale food retailers . Retailing may include subordinates services. raising animals. pork. Retail establishment are often called shops or stores. rotten.

Article 14. 1. Raw materials used for food processing must ensure hygiene and safety according to law provisions. isolated from places where chemicals. constructed. cultivated or traded in shall not be polluted by surrounding environments and must be isolated from areas where environmental pollution and/or food contamination may occur. The food. households and individuals that produce and/or trade in fresh and raw food must apply measures to treat wastes according to the law provisions on environmental protection. Using polluted transportation facilities or transportation facilities which have transported toxic substances in order to transport food. households and individuals that produce and/or trade in fresh and raw food shall have the responsibility: 1. must not have any contagious disease. To be accountable for the origins of food they have produced and/or traded in. chiefly toxic chemicals. Article 9. Article 29 1. -199- . or other dishonest conduct regarding hygiene and safety of foodstuffs. 6. households or individuals must be located at places which meet the food hygiene and safety conditions. nutritious micro-substances. Article 10. Persons who are directly involved in the manufacture and trading of foodstuffs must satisfy fully health standards. high risk food. food preserved by irradiation methods or genetically modified food which has not yet been permitted by the competent State administrative body. animals and/or plants. installed and operated to satisfy the food hygiene and safety requirements. functional food.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Article 13. The food-processing establishments must ensure that the processing process is conformable with the law provisions on food hygiene and safety. and must be knowledgeable about hygiene and safety of foodstuffs. Manufacturing and trading food additives. Article 12. Providing false information. 2. 2. are preserved and other pathogenic sources. Food-processing sites of organizations. substances assisting food processing. Organizations. 3.2010 5. Organizations. households and individuals that produce and/or trade in fresh and raw food must ensure that the places where the food are reared.processing sites must be designed. Organizations.Du lÞch Th¸ng 5 . advertising or labeling. 1. are preserved at clean places. To ensure that the food they have produced and/or traded in are not polluted. The food-processing establishments must apply all measures to keep food from being contaminated or infected with pathogens which may spread to humans. 7. 2.

family households and individuals manufacturing and trading foodstuffs shall be responsible to ensure the health standards of persons who are directly involved in manufacturing and trading at their establishments in accordance with law. the main objectives of our study are to: 1.2010 2. What should be done to narrow the gap? IV. AIMS AND OBJECTIVES The purpose of our research is to work out the gap between the ordinance and the current implementation situation carried by small-scale retailers. By analyzing the results and findings of our survey and then some discussions. a research paper named “Gap between ordinance and small-scale retailers’ management on Food Hygiene and Safety” was conducted. and suggest short term and long term solutions to deal with the problems which is believed to enhance the performance of the micro-scale food retailers. The reason why the ordinance stills remains new to micro-scale food retailers and some recommendations to narrow the gap is another objective of our study. work out the problems in management practices of micro-scale food retailers in terms of maintaining food hygiene and safety. More specifically. Specifically.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . RESEARCH QUESTION Of all the controversial issues taken most concerns recently. 2. however. which brings customers more value concerning to the food hygiene and safety issues. In order to give more information on this concern and some figures to clearly prove the weakness of this ordinance implementation. figure out the main reasons for the problems. we try to answer two following questions: 1. 3. its effects are still relatively small up to expectation. 2. The Ministry of Health shall provide regulations on health standards and on requirements on knowledge about hygiene and safety of foodstuffs applicable to persons who are directly involved in the manufacture and trading of foodstuffs.Du lÞch Th¸ng 5 . -200- . III. Organizations. The Ministry of Health shall provide regulations on health checks applicable to workers at establishments which manufacture and trade foodstuffs. Article 30 1. The purpose of our study has been to work out the gap between Ordinance and its implementation by micro-scale food retailers. What is the gap between the Ordinance and its implementation by Microscale Food retailers? 2. food hygiene and safety is considered the most debated one. The ordinance on food hygiene and safety has been come into force since 2003. the causes of this lag will be pointed out and then some related recommendations will be discussed in order to curb the real problems in retailing industry sector. as appropriate for each manufacturing or trading branch and trade.

a set of 11 questionnaires was designed. the traditional markets still play an important role in retailing industry. Thanh Xuan. and both the Vietnamese and English version can be found at Appendix. So we only focus on the subject. some secondary data were exploited to provide this paper with a great deep and comprehensive view.Du lÞch Th¸ng 5 . Using many types of questions such as yes/no questions. After collecting the data. 1. it tends to widen & widen by the profits through this channel increases 45 %(2009) compared to those of 2008. the questionnaire was easy and convenient for the respondents to answer. This method of doing research is relatively reasonable and straight-forward to harvest accurate outcomes. With the cooperation of the sales in this market. the result accuracy. we use quantitative method to have numbers and figures supporting the gap with some evidences. The surveys. We helped them read the question and marked their choices instead. the sample size of 30 was believed rational and large enough to present the characteristics of the population. conducting a survey with such small sample size was reasonable and effective. due to the lack of time and human resource. multiple choice questions. To collect the data. Although more people are familiar to modern channel. and having a clear guide. our samples are 30 microscale retailers in Phung Khoang market(Nguyen Trai street. Furthermore.traditional market.2010 V. some could not write directly the answers to the survey paper. Both primary and secondary data were analyzed and made full use to create completion for this research paper.they account for 68% market share. Data analysis With the large size of retailing industry in Viet Nam. 2010. just like face-to-face interview technique but the main difference is the aid of ready-made questionnaire.supper market. therefore.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . METHODOLOGY In order to work out the gap between the ordinance and the current situation of implementation on the Food Hygiene and Safety issues of small-scale retailers’ management. DATA ANALYSIS AND DISCUSION. thirty (30) copies of questionnaires were delivered to small-scale food retailers located in Phung Khoang market during their business time with 100% returned. Basing on the reasons of population size. we translate the survey into English. Last but not least. Ha Noi). Besides. VI. Because we asked them when they were doing their business. time and the number of group members. a sample size of 30 small-scale retailers out of the population of all participating in the retailing sector located at Phung Khoang market was considered suitable for us to conduct the survey. we did collect & gather the information and the results are illustrated in the following table: -201- . On May 11. was conducted in Vietnamese since majority of salespersons in small-scale retailers had little proficiency in English.

3% 93.5% 5-10years 12 ever 16 never 28 no 20 Sometimes 13 Newspaper 4 Salesperson 11 Often 4 salesperson’s health condition 0 Through prestige supplier 6 Import from relatives/ friends 12 36.3% 66.3% 10 40% 20% 11 60% 40% After collecting the survey from Phung Khoang market. only 2 out of 30 admitted to be trained in this kind of courses.7% Stall section’s clearances 18 30 60% 30 40% 30 0% 30 Never 6 Others 0 30 20% 24 0% 30 6.7% 0 30% 46. may be the first time they hear about it.3% 23. no one makes sure he/she can fully aware about the Decree on Food Hygiene and Safety (signed 2003). retailers with 1-5 years doing this job account for 20% With the large proportion of the sample.83 % 16. whether or not they pay enough attention on food hygiene and safety? Not surprisingly. Intensive course on Food hygiene and safety seem to be stranger to them.3% 40% 53. The rest has never been trained. 50% has ever heard about that.34 % 45.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .7% 13.2010 Question 1 2 3 4 5 6 7 8 9 10years 9 Never 14 Ever 2 Yes 4 Always 7 TV 9 food caregiver 14 Very often 0 Salesperson’s personal hygiene 2 Through wholesale market 12 Import from prestige supplier 18 46. almost of them do not have time to study it or this decree has not popularized to them. working in retailing industry in long time (>5years). Only 10% of our sample has just entering this industry.7% 0% 33.7% never 86. 30% of retailers asked seem to have more experience with more than 10 years working in this field.6% 13.67 % 1-5years 6 Fully aware 0 20% 0% <1year 3 10% 30 30 30 Not sure 6 Seldom 4 Medical staff 11 consumer 5 Occasionally 26 Stall’s clearances 10 Through relatives/ friends 12 Never know 0 30 20% 13.33 % 37. 70%. and the rest 50% do not know what the decree is.33 % 16. Another part. some ones have never -202- . may be the new one.7% 6.Du lÞch Th¸ng 5 .7% 43. we can realize that the biggest percentage of our sample (40%) is person who worked 5-10 years in retailing industry.

by the relative information about the situations & figures that may attract and affect the retailers positively& deeply. Finger3: How did you get the information? -203- . almost of them might not recognize the important of the course. TV spends more time on Food hygiene and safety. 23. because they believe in their experiences and they always do something out of habits. After a lot of epidemic diseases. they though it not necessary. Finger1: Have you been given the information about the conditions to run a food business? When asking” Have you been given the information about the conditions to run a food business?” “Sometimes” is the answer which be chosen by nearly half of the sample. by this way retailers may pay more attention. Surprisingly. be improved in awareness faster although this method is costly in terms of time & finance. face-to-face method between medical staffs and small-scale retailers’ makes up to approximately 50% of all kinds of method.Du lÞch Th¸ng 5 .33% of responders can get the information frequently while the same amount 20% conceded not be given the relative information. Especially.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . As can be seen clearly from the following bar chart. TV and medical staff seem to be the most effective media to small-scale retailers.2010 heard about that before.

cultivated or traded in shall not be polluted by surrounding environments The factual situation We can see some simply ways to protect their foods such as: protective curtain. That causes the polluted surrounding environment of not only the shops/stores but also the nearby settings. the traders still heavily rely on their experiences as well as their habit. The reasons may come from the competitive price in comparison to prestige suppliers. however. it can be seen that the majority of our sample-70% respondents work in retailing industry at least 5 years.2010 Guarantee food hygiene and safety. The brief summary of these responses can be compared with the Decrees given by the Ordinance in the following table: Compared Criteria Food protection The Ordinance Retailers must ensure that the places where the food are reared. small-scale retailers often place confidence through wholesale market or through relatives/ friends. etc. It also can be shown that they are lack of appropriate awareness about food hygiene and safety but they seem not to be interested in updating information on it. Many shops are near polluted areas (waste. dish-cover.that will not make sense in the case they do not pay enough attention to the surrounding areas where the bacterium are likely to come from. Discussion: From the response for the question about the knowledge on the Ordinance.which affect directly to the food. dirty water…) or the fresh food is next to dried foodstuff… The waste is not gathered & fixed immediately but left until the end of the day or the next day outside or inside the shop/store premises. showcase…. As for the origin of food. Environmental protection Retailers must apply measures to treat wastes according to the law provisions on environmental protection. Cleaning the premises was not considered very crucial factor to traders. they did not focus on simple things like Salesperson’s personal hygiene (courtesy clothes. Gutters can be the resources which every kind of waste may put into. The gap These facts show that the food could surely have serious influences or been contaminated by the trading settings.condition Stall’s clearances….Du lÞch Th¸ng 5 . -204- .).Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . hair. On conducting the business. salesperson’s health. however Ordinance on food hygiene and safety in terms of fresh and raw foodstuff is still not familiar with them. clean hands. 2.

Therefore. even if they may be aware of these as well as the hazards of food borne illnesses. Only 20% of the materials sold are wholesalepurchased from prestige suppliers. Viewed all together. Almost of owners of the micro-businesses mentioned run the businesses to meet their and their family demand. They face with the financial pressures of their daily expenses rather than the pressures of a strategic or long-term development for the business. This fact suggests the origins of food cannot be guaranteed. This reflects high risks for foods being infected by the infectious diseases of the traders if any. It is the fact that the managers of these businesses are often the owners of the shops. Therefore. over 90% correspondents do not pay much attention on the health condition. have to reach the standards about health condition. how to be done.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Objectively. it is due to the weak legal requirements from the related authorities. the rest places their confidences on wholesale markets or anonymous sole traders. In some cases. leading to the interwoven between the duty of one to -205- . the Ordinance is still not popularized widely for retailers in traditional markets even very limitedly known. They are often not highly literate to be well aware of the hygiene and food safety themselves. the workers of these businesses are often poorly-qualified who are often the family members or relatives without formal training generally or ethic training particularly. when to be done… The obligation of each authority agencies is still not transparent. Subjectively. they are too busy running the business daily or they are unable to practice the standards professionally. it is due to ethical problems of both managers and workers. Next. Negatively. it is seen that despite being launched 7years ago. According to Nguyen Thi Cuc (2010). The legal requirements tend to reach larger scale businesses and those that apply to micro-scale businesses often minimized to only undocumented requirements.Du lÞch Th¸ng 5 . it is likely that they often perform poor practices in handling the food generally. the possible causes leading to the failure of ordinance application can be both subjective and objective. Legal requirements cannot be imposed on any anonymous sources. they can be considered profit-oriented and often show little concern over the hazards that maybe caused from the food they sell. The regulations in the standards would surely be too detailed or too strict compared with their traditional way of dealing with food. They may think salesman’s health condition does not match with the safety of food. it is due to the limited knowledge of both managers and workers about the standards. do not get communicable diseases. Salesman’s health condition People who directly sale the raw and fresh foods.2010 Origins of food Retailers are accountable for the origins of food they have produced and/or traded in. Additionally. The requirements of the Ordinance seem to overlapped and too general to define clearly what to be done.

Additionally. it is the high cost for applying the standards ranging from consulting services. the Ministry of Commercial and Food Administration Office to small market management board. The Ministry of Agriculture and Rural Development would take the responsibility to manage the quality of import food and foodstuff. improving facilities and training employees. in the proposal for Law on Food Safety and Hygiene which will be ractified in the next National Assembly meeting and Ordinance on Goods Quality must go inline with international regulations and support each other in guaranteeing the act of relevant party in order to provide a comprehensive legal framework for Food Safety and Hygiene implementations.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . CONCLUSION AND RECOMMENDATIONS It can be concluded from the above analysis that. fishery products. examine and supervise Food Hygiene and Safety law implementation and enforce the law to give strict discipline for regulation violators. the Ministry of Health would be the agency to implement the technical standard and other requirements on Food Safety and Hygiene. delivery to distributions to small-scale retailer through supplier intermediaries (Anonymous. the responsibility of food hygiene and safety’s implementation and supervisor belongs to the Ministry of Health. Therefore in order to well manage the activity of retailing sector. VII. A tight relationship amongst the Ministry of Health. the Ministry of Agriculture and Rural Development. receive the register for food retailing from businesses. a branch of Ministry of Commerce.2010 another and the avoidance of accountability once problems occur. no clearly-defined or stated punishments announced officially therefore these businesses do not find it compulsory or necessary to apply the standards. small market management boards is needed to well manage the act of food and raw foodstuff retailing from the quality of input material. there is a big gap between the Ordinance regulations and the factual situations in managing Food Safety and Hygiene in the micro-scale food retailers in general and in the correspondents of the research in particular due to a number of subjective and objective reasons. Firstly. it is the task of the government to deliver the compatile instruction document paraleled with the articles in the Food Safety and Hygiene Ordinance to give -206- . at the governmental level.Du lÞch Th¸ng 5 . the responsibility of authorities must be seperated and transparent assigned in order not to avoid their task when problems occur. 2009). The responsibility for process chain is for the Ministry of Agriculture and Rural Development and the market place products’ quality guarantee belongs to Food Administrator Office. As mentioned in Proposal. Specially. including the activities from manufacturing process to food retailing business. Particularly. 2009). Furthermore. the Ministry of Agriculture and Rural Development and Food Administrator Office. the processed goods and other domestic agriculture. Last but not least. The Ministry of Commerce will have accountability to manage the manufacturing process domestically and import/exported goods (Anonymous. Furthermore. it is due to the limited knowledge of consumers on their own food intakes’ hygiene and safety due to poor living conditions or the unselected purchasing habit. we suggest some recommendations.

Besides.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the Association will be the agent to collect feedback and submit them to the Food Administration Office for their consideration. the Food Administration Office do take their supervising daily in market business time. taking as a channel for them to receive directly the Ordinance of Food Safety and Hygiene and other food retailing business related documents from the Food Administration Office. a training course to differentiate the real and fake goods. These preventions take place only in peak seasons such as Tet holidays. the Association of Consumers’ -207- . the goods with quality and hygiene and safety should be delivered to consumers. which is held by the Association of Consumers’ protection. it is inefficient for Food Administration Office to do examine the safety and hygiene implementation of retailers (include small-scale retailers) strongly and actively just in prevention periods.Du lÞch Th¸ng 5 . the local radio channels need to be improved and broast-casted during their business activity conducted to attain most widely attention from small-scale food retailers. A meeting held weekly is necessary to conclude some problems each week of their caring areas and then analysis. In the short term. Better quality products following the hygiene and safety criteria would gain more customers through words of mouth. Secondly. The 134 instruction documents provided by cities and provinces must be written off as soon as the common instruction ractified by government take effect. Information should be publicized from news agencies to each retailers and customers by any means from mass media to words of mouth.2010 comprehensive and clearly overview to retailers on their tasks and responsibility for the health of other people. It is expected that the salesmen participate actively into the Association’s activities such as weekly meeting to discuss the problems they face when applying the ordinances. the Association will guide its members to put the requirements of Food Hygiene and Safety into their practice under the Ordinance. summer holidays and other vacations like or other prevention programmes carried out by government once high risk phenomena happens. “Being a smart consumer” is a slogan of programme held by the Association of Consumers’ protection has earned a great attention from the public. Besides. This practical training course should give salesmen aware about hygiene and safety requirements market knowledge needed and their role in retailing industry as well as helping them retain positive attitude towards managerial staff. The customers will have to learn how to say “no” or boyscot the unsafe products to protect themselves. Also. The Association should be given more preference on accessing the high risk food and foodstuff from the list of Food Administration Office directly to stipulate all information needed for the small-scale retailers promptly. it is necessary for almost the small-scale retailers form an Association of Retailers. It is recommended that instead of supervising the Food Hygiene and Safety implementation of small-scale retailers in peak occasions. Based on this success. at the business level. The practical training course for salesmen needs to be held by the Association of Retailers with the assistance of the Ministry of Health. summarize the possible solutions to form a timely action to promptly tackle the problem.

2009).epi [accessed 16 May 2010]. Anonymous.com/Info/ Du-thao-Luat-ATTP-Cac-Bo-can-tiep-suc-cho-nhau/45/3199894. Áp dụng chuẩn quốc tế về vệ sinh an toàn thực phẩm: Khó khăn từ các cửa hàng nhỏ bán lẻ thực phẩm.2010 protection should cooperate with the Association of Retailers to inform its members about the benefit of using and selling safety and hygiene products and the retailers meet all the safety food requirements will gain their customers through the advertising activities supported by the association of consumers’ protection (Thien Chi. 2. Vietnam Government. 5.epi [accessed 17 May 2010]. The Ordinance on Food Hygiene and Safety. Báo Kinh tế Việt Nam.net. we hope that further research will be conducted by us on the field to extend the scope of research or sharpen the research outcomes. Thien Chi. [online] Available at: http://vbqppl. 4. Bộ Công Thương. 3. [internet] Available at: http://www.htm [ accessed 17 May 2010]. Proposal for Law on Hygiene and Safety Food – Improve the effectiveness of People’s Health Protection.Du lÞch Th¸ng 5 .moj. Tháng 1/2010. Số 2. Due to limited time given doing the research.baomoi. 2009. An Ninh Thu Do – Proposal for Law on Food Hygiene and Safety. 2009. REFERENCES 1. -208- . 2003. Cooperation among ministries is needed. Hong Son.gov.vn/20090824041251920p0c1000/nang-cao-hieu-qua-bao-ve-suc-khoenhan-dan. [online] Available at: http://www.baomoi. Nguyễn Thị Cúc.com/Info/Xay-dung-mo-hinh-an-toan-thuc-pham-tu-trangtrai-den-ban-an/45/2867782.vn/vbpq/Lists/Vn%20bn%20php%20lut/View_Detail. 2009.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Build a food hygiene and safety model from farm to eating table.aspx?ItemID=21036 [accessed15 May 2010]. [internet] Available at: http://giadinh.

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The development of Standby Credit and its application in Vietnam
Written by: Le Thi Thu Huong, Nguyen Thi Thanh Nga Nguyen Thi Ha Nhung, Nguyen Phuong Van Supervisor: Phan Thi Kim Ngan
Abstract In recent times globalization trend has played such a crucial role in enabling not only the incorporation of Vietnam- an emerging economy towards outside world but also the development of Money and Banking Market along with Market for Guarantee. As a matter of fact, the considerably increasing demand for international contract in the field of commerce, construction investment, service results in the growing need for domestic assurance and the variability of guarantee forms. Furthermore, the expansion of such a preeminent instrument as Standby Credit in the United States and other countries all over the world has a great contribution in introducing this advanced means of guarantee into Vietnamese market for the past few years and promisingly bringing it about a prospective popularity. It is the truth that Standby Credit has its part in reducing unexpected risks in many fields of transactions, diversifying and improving the guarantee market in particular and market for money in general so as to keep up with the pace of world modern banks. Thus, based on several researches together with online references this secondary research is conducted on the purpose of studying and exploring the nature, procedure and the real life popularity of this modern American guaranteeing product-“Standby Credit” as a fairly new instrument in Vietnam. As such, it is our belief that this report can serve as prototype as well as potential stimulus for larger and further studies in the future

I.INTRODUCTION It is true that nowadays many businesses still choose to obtain a loan from banks to fill a gap in their cash flow, finance an profitable investment project, sign a post-paid sales contract with their suppliers or for any other favorable business purposes. But few know a “bank’s letter of standby credit” is also a useful and excellent tool in various business circumstances. Indeed, standby credit is useful when one party wants additional evidence and proof of another’s financial capability and creditworthiness. This particular application of standby credit as a secondary payment mechanism, therefore, explains the reason why many trade dealers find this tool extremely helpful in facilitating them to develop relationship and open line of credit with more and more suppliers. Apart from this, using standby credit can even bring cost advantages to the applicant in comparison with the choice of getting a bank direct loan. To take a quick mathematical example, assume business A chooses to borrow $15,000 from his local bank for 30-day period at interest rate of 10 % per annum. This financing option will pose the business to a repayment of $125 apart from the principal at the end of the borrowing period. However, the amount will become much less if the standby letter of credit method is applied, which accounts for just $18.75 in addition to principal for a
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typical bank charge of 1.5% per annum on the face value of the standby LC. And for any business, reducing financing charges definitely goes hand in hand with improving its producing efficiency. Thus, based on these fundamental benefits of standby credit, there is no doubt about the fact that SBLC should be widely applicable in various business sectors as a profitable device to enhance a firm’s operating efficiency and empower trading activity. Nonetheless, not so many companies all around the world as well as in our nation put a deep consideration into the use of this wonderful credit method. Furthermore, there are still not so many available academic researches on domestic scale focusing on the detailed explanations of standby credit in an picture of various corners. Bearing this in mind, this academic research conducted by a group of students from Hanoi University has aimed to attack the very details of standby credit. The research is clearly categorized into separate parts under different crucial headlines for the purpose of readers’ easy understanding and taking notes. The very first part comes with Nature of Study, where a thorough presentation with regard to Rationale for study, Literature review and Research methodology is mentioned. Following this part, a deeply analyzed discussion covering almost every aspect of standby credit becomes the main proportion of our research. This part includes from a very basic description of a backward history of standby origins in association with a most general definition of itself, a detailed illustration of operating process and a clear picture about standby LC’s natures together with its categories. Additionally, a section with full comparison of standby credit with normal commercial credit that has been non-popularly described ever is a worth noting point of our research. And discussion part is finally made more complete by the incorporation of Application section where the most updated facts and figures about the popularity of this special credit device on both national and international scale is provided. Closing up, the research comes to a Conclusion and Recommendation part with several crucial suggestions for the greater domestic development of standby LC as a result of all information collected above. II. DISCUSSION A. NATURE OF STUDY 1. Rationale for study During nearly twenty years of Doi Moi period, especially, after joining WTO in 2007, Vietnam’s economy has been growing significantly. More and more foreign investors come to Vietnam thanks to efficient monetary polices and incentives from the Government. Factually, commercial exchanges among nations are indispensable for the world development, which lead to the increasingly importance of International Payment. On the other hand, making business transactions across borders contain so many risks for the investors. As a result, they require a document to guarantee their profits and

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limit losses. From that demand, standby L/C is brought into the economic world as a mean of assurance for financier in exchange transactions. As stated in the introduction, standby credit, which serves as secondary payment mechanism, is very similar to a guarantee of transactions among parties involved. According to the definition, the beneficiary can show standby credits along with the evidences needed to get money in case of failure to perform the obligations of the applicant. Therefore, it becomes more and more popular in helping reduce the overall risks in commercial operation. Besides, it can be used to support the payment of financial obligations or contractual agreements maintain capital for other personal or business needs, and ease the establishment of new business relationships. However, in Vietnam, standby credit seems to be inexperienced and strange. Not many individuals know how to make full uses of this kind of L/C to strengthen the assurances and increase the profits. Hence, we do this research to help the readers understand deeply the approaches and the process of utilizing standby credits. 2. Literature Review From judgments above, standbys, as they are called, get more and more well-liked in the modern life. As a result, there are loads of investigations about this attractive field. In one research of Buddy Baker, an analyst of ABNAMRO- a Dutch bank in March 7, 2005 (link address: http://www.docstoc.com/docs/29073887/STANDBYLETTERS-OF-CREDIT/), he explained the differences between commercial letters of credit, standby letters of credit, and demand guarantees through procedures and usages in order to show the importance of standby L/C among other types of L/C. He also mentioned some cases in which standbys might not work out. For example, when they are expired L/C or issued during political or economic events in the country of the issuing bank happen, bankruptcy preference period, etc. Thanks to this study, standbys can be used more effectively and suitably. Another amazing comment of Victoria Duff, the reporter of eHow magazines, showed clearly the way standby L/C can be considered as beneficial collateral in business transactions (link address: http://www.ehow.com/how_5703255_use-lettercredit-collateral.html). Not only did she prove that advantage of standbys in guaranteeing contracts, but she also provided some tips for Issuing Bank to secure the guarantee of payment by requiring offsetting deposits or physical collateral adding to the original standby L/C. Thanks to her, our group found out more pros of L/C which are very useful for our research. The last reference we want to point out is some judgments of Vietnamese analysts. As known, although standbys are very preeminent and easy to use, they have not been widespread in our country yet. Therefore, not many studies have been made about this topic so far, which is a main reason that we collect remarks merely upon standbys from several economic websites. Most of them focus a lot on the importance of standby credits in the modern life when financial boundaries are reduced and people make business more freely. In addition, there has also been a research by Dang Lan Anh, a
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student of A7-K35C, Foreign Trade University, that systemized all risks associated with standbys transactions as well as recommendations to put up the popularization of standby L/C in Vietnam. In another discussions, economists also mentioned the most suitable and effective ways to use standbys applying ISP 98 or UCP 600. 3. Research Methodology In this research, we do take advantages of various data collection methods such as reports from journals, books, magazines, internet, etc. Especially, our group catches the valuable consultancy from banking experts. They give us practical experiences and guidance in lieu of theories, from which we can acquire information of real situations of using L/C in Vietnam. Moreover, in order to catch readers’ interest as well as ensure for their deep comprehension of standby credits, some statistical tools are also added like diagrams, flow charts showing the process of applying standby L/C or demonstrating particular types of L/C in general accompanied with comparison and contrast analysis. B. HISTORY AND DEFINITION OF STANDBY CREDIT Well-known as a superior means of international payment,Letter of Credit is considered one of the oldest forms of transporting money developed by European bankers just before and during the Renaissance (http://library.law.columbia.edu/CircularLetterOfCredit/). Throughout world history, Letter of Credit, whose primary function is aim to serve as the highest level of security in international commerce, has still evolved to various types of credit in order to fulfill a wide range of newly arising business context, scenarios, objectives. While Documentary Letter of Credit was early used around 1840 and especially witnessed the exceptional growth after the First World War (1914-1918), the period during World War II(1939-1945) was the occasion of the increased use of Commercial Letter of Credit. It was not until after the Second World War that Standby Credit emerged a new preeminent means of securing performance under the type letter of credit because of the fast change such as monetary regulations, currency fluctuations and import restriction. In spite of the fact that Letter of credit originated in Europe, its variant-Standby Credit was derived from the history of the United States. The book “The law of letters of credit and bank guarantees” by Agasha Mugasha reveals that back to the middle of 19th century, as a consequence of the released legislation from the Federal Reserve, no federally chartered banks were allowed to undertake the issuance of guarantee on behalf of the third parties. That regulation, also recognized as “No guaranty”, was taken into enforce due to several factors. First and foremost, there was a judge-made rule that chartered banks must engage directly to business of banking within its scope. This principle from the judge then permitted that this guaranteed should be responsible by only surety company which later developed. Second, the nonappearance of domestic surety companies at that time, undeniably, was the incentive for customers to ask bankers act as their sureties. Like a coin has two sides, the surety action also had to face up with the severe problem which stemmed from customers’ default-the inability to make payment. If so, banks always repudiated their liability since that banker’s act of
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surety apparently were ultra vires banks’ power and banks could not take action of guarantee on behalf of clients due to shortage of legal capital. Last of all, it was the ultra vires doctrine that the courts readily applied to treat banks as other corporations17. Reversely, the end result of the Second World War had essential function in expansion of such credit. As in a position of becoming not only victory and almost unaffected country thanks to the separate geographic location, the United States, which has been famous for both developed economy and rich natural resource, took the chance to boost the major economy more by entering a large amount of international contract. However, the another issue regarding to international trade became apparent as a result of incapability of American surety companies that at that point of time had tendency to operate within the domestic market, which means that there would be no means of guaranteeing the performance outside the USA-a potential risk for counter partners of American business people. Having realized the necessary importance of guaranteeing instrument, several major banks began to issue “guaranty letters of credit” which nowadays is legally known as Standby Letter of Credit. Moreover, it can not be denied the help of some other crucial factors that also made great contribution the rapid growth of SBLC. First, it is evident that Standby credit was a must to fill the gap in international trade. Next, the rising previous problem concerning to ultra vires doctrine seemed to be increasingly dubious; together with this banks were permitted to have freedom in operating banking business. Last but not least, as a preferred superior toolSBLC protects the interests of each party involved. Obviously, much cheaper costs would be paid by the applicants; more income flowed to banks along with the certain protection for the beneficiaries. Consequently, it it appears that the expanding of United States economy led to the increased use of Standby Credit, whose role are both financing transactions and securing performance. Standby Letter of Credit (Standby L/C) is an irrevocable undertaking from Issuing Bank to support payment, when due or after default, of obligations based on money loaned or advance, or upon the occurrence or nonoccurrence of another contingency. Standby LC, therefore, can be functioned as a Guarantee or an LC where the Beneficiary can receive payment from the bank on presentation of compliance documents. C. OPERATION PROCESS: Honestly, it can not be ignored that there are many parties engage in procedure of operating the standby letter of credits. Each participant has its own role and responsibilities. Rather than a three-party agreement, standby L/C is an independent agreement issued by Issuing Banks (bank of the Applicant) to pay specified amount to the Beneficiary upon the presentation of required documents in case of nonperformance of the Applicant. Another party involved is Advising Bank, representative of the beneficiary.

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-214- . an applied standby will be sent to the Issuing Bank to get the acceptance of opening a LC in favor of the beneficiary.2010 With an aim to provide readers with detail procedures. D. the Advising Bank will check all terms and clauses of the documents to assure that the Beneficiary can have a guarantee in dispatching the goods and services. forward a standby L/C to an Advising Bank or Confirming Bank that are usually located in the same geographical region as the Beneficiary. Following of this. After the Beneficiary make the performance done. after a contract is made between Applicant and Beneficiary. As indicated by this chart. after a contract is made between Applicant and Beneficiary. Advising Bank will claim the fund by asking for the Issuing Bank accompanied with sending those documents to that bank. Issuing Bank has to check the documents again for compliance. he/she has to bring the required documents to the Advising Bank to get payment. send it back to the Applicant and debit his/her account. an applied standby will be sent to the Issuing Bank to get the acceptance of opening a LC in favor of the beneficiary.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . NATURE The standby documentary credit is considered as the obligation on the part of the issuing bank to pay the beneficiary in case of non performance of the applicant. If all the documents are accepted. In the last step. the Issuing bank will approve the credit worthiness of the Applicant and then.Du lÞch Th¸ng 5 . Secondly. a flow chart is thoroughly vital for translating all the complex explanations into clear steps: As indicated by this chart.

applicant in to guarantee construction .2010 Therefore sometimes Standby letter credit is also called “non performing letter credit”. When issued. Performance Standby is used some sort of performance of a contractual obligation. Last but not least. This kind of credit is to protect the seller from non performance of the buyer. there is no amendment or cancellation to the issuer’s obligation except it is provided in the standby or it is consented by all the parties involved that the amendment or cancellation is asserted. standby LC is deemed to be irrevocable because it can’t be revocable. it is flexibly used. when issued it is an irrevocable. Compliance of the document shall be determined by the international standard practice. it is considered as binding. A standby letter of credit will then be presented along with the needed information to show that the buyer has not paid for the merchandise. Also. All the documents must be carefully examined to ascertain whether or not. Under this kind of document the bank proceeds to reimburse the exporter when the importer defaults the payments. For example. binding is also an important feature of standby LC. the issuer’s knowledge of performance or breach of any reimbursement agreement is independent from standby LC. Secondly. Next. obligation of issuer depends on the presentation of documents and examination required documents on their face. E. documentary is the third characteristic of standby LC. independent. so it is enforceable against an issuer whether or not the applicant authorized its issuance.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . they appear on their face. It means that once LC is stated irrevocable. the issuer receive a fee or the beneficiary received or relied on the standby or the amendment. a -215- pay money. In reality.Du lÞch Th¸ng 5 . It is also because they are only used as the back up payment method if the collection on the primary payment method is pass due. documentary and binding undertaking. Standby LC in some ways is different from the traditional commercial LC. Because standby LC is documentary. standby LC is independent which means that the enforceability of the issuer’s obligation under the standby LC does not depend on the issuer’s right or ability to obtain reimbursement from the applicant. it is also separated from the reference in the standby to any reimbursement agreement. to be in compliance with the terms and condition ò the credit. the beneficiary’s right to obtain payment from applicant. In nature. underlying transaction. CLASSIFICATION When referring to Standby LC there are many kinds used in each specific conditions. This instrument expresses an obligation to perform other than to including the purpose of covering losses arising from a default of the completion of the underlying transactions. Another popular type of Standby LC is performance Standby. In the first place. The most commonly used is the commercial standby credit that supports the obligations of an applicant to pay for goods or services in the event of non-payment by business debtor.

The last one used in construction is bid bond or tender standby LC. The Documentary Credit is conditioned on the performance of the Beneficiary. however if the contractor abandoned the project midway through completion or if the bridge were unsafe. Hinlkeman See Appendix 1 for a Sample SBLC -216- . importer can require the issuing bank to issue standby LC to repay advancement and all the cost related to opening LC for them. The standby acts as a blanket guarantee for the overall obligations of the buyer to pay and does not contains specifics related to any one particular shipment. ongoing trade shipments for an extended period of time. the distinctions between the two are significantly worth being discussed as they are subject to fundamental differences in terms of role. On one hand. The UCP states that it applies to both without specifically defining them. the standby letter of credit could be drawn upon for its specified dollar amount. To ensure the benefit for importer in case the exporter has received LC. In contrast with performance standby. COMPARISON OF STANDBY CREDIT WITH COMMERCIAL CREDIT As both documentary and standby credit are undertakings to pay against the presentations of one or more documents (as reflected by their mutual features of being independent and documentary). meaning that 18 19 International course on trade service – Edward G. the UCC that also takes care the application for both gives no room to distinguish them at all. the distinction between them is almost nowhere precisely stated. but hasn’t fulfilled his obligation to delivery goods as stipulated in LC. advance payment. a thorough understanding about their discrepancies undoubtedly can help improve the appropriate use and application of each type under necessary cases to maximize benefits and minimize risks for all involved parties. This standby supports an obligation of the applicant to execute a contract if the applicant is awarded a bid18. F.2010 company building a highway bridge might be required by the highway department to put up a performance standby letter of credit ensuring that they will complete the project contracted or to warranty the work. Moreover. deposit…. Therefore.Du lÞch Th¸ng 5 . contractor will be the person who opens standby LC according to the requirements of the project’ s owner to ensure the project execution19. advance payment standby is the one which is used in advance payment method. Financial standbys are frequently used between buyers and sellers who have frequent. conditions as well as governing rules. This instrument supports an obligation to account for an advance payment made by the beneficiary to the applicant. As can be seen from above. Under normal circumstances the standby would not be drawn upon. nature. the outstanding nature of each seems to have contrasting feature. Nevertheless. there exists many types of standby LC and each has its own function so used in different case. financial standby LC is to support obligation to pay money. Similarly. including instruments evidencing obligation to repay money or outstanding loan. In this case.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

As the presentation of documents under documentary credit is a sign that the transaction is generally proceeding as according to schedule. it is worth taking into account the different set of governing rules. It is used to support an obligation by the applicant to make advance payment. In other words. the required documents are quite simple with all the proof. there is no doubt about another dissimilar characteristic in associated with the role of two credit types.2010 the Beneficiary is entitled to get payment strictly based on the obligation completion of himself. who asks for the opening of Standby credit. ISP98 is an important reference source besides the general application of UCP600. a standby credit is given to support an obligation of the applicant in a variety contract types applied in numerous industries. On the contrary. UCP600 (for the latest) is the reference source of Commercial letter of credit while for Standby letter of credit. As an indication that something has gone wrong in the underlying transaction. Last but not least.Inc -217- . the set of documents under Standby credit is neither numerous nor complicated. it is rational to understand why Standby credit is often issued with an expectation that it will not be drawn on by the beneficiary. it is used as bid bonds to assist the bidder’s duty to execute a contract.Du lÞch Th¸ng 5 . documents required may include important ones such as B/L. If the Documentary credit is universally implemented in the trade world as a mechanism of payment. the opposite site holds for the case of normal credit. In a traditional letter of credit. the beneficiary in Standby credit is entitled to get payment in case of applicant’s failure to perform20. Inc in the US “reflects generally accepted custom. the requirement for documents to be presented under two types also stands out as a point of distinction.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the beneficiary obtains payment against documents evidencing performance. ISP98 is devoted specifically to Standby credit and therefore has become the most widely applicable reference source for parties involved in standby transactions. As a consequence of application under likely expectations about the unexpected. practice and usage of standby credit in a comprehensively detailed way”21. On the other hand. clarifications and statements that applicant has defaulted or failed to complete his task. the set of documents required under L/C that follows the rule of UCP600 is both numerous and complicated. as a means to add assurance as well as higher level of trust to the beneficiary. In fact. 20 21 The Complete guide to Documentary Credit/Chapter 3/Use of Standby Credit “A guide to the use of ISP 98”. Frequently. the Standby credit is conditioned on non-performance or default by the applicant party. In pursuant to this big difference. Unlike UCP600 that covers generalized terms and conditions of all types of credit. insurance certificate…Any lack of the required documents or inconsistency in information between these and L/C content will become absolute obstacles to the right of receiving payment for the beneficiary. the Standby credit is generally accepted as a mechanism of guarantee rather than a means of payment. commercial invoice. However. In contrast. ISP98 (short for “international standby practice”) that was prepared by Institute of International Banking Law & Practice. published by Institute of International Banking Law and Practice. it is also referred to as an excellent tool in loan transaction to ensure repayment of the borrower.

if applied for the case of standby cause confusion in both interpretation and application. -218- . yet. 1983 revision. To clearly illustrate. specifically in Article 1 “These articles apply to all documentary credits. At first. standby letters of credit.encyclopediaofcredit. which was unquestionably based on the significant power of this North American country.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . custom. Application A. International use of Standby letter of credit (SBLC) As mentioned above. in facts made use of economic strength to force many countries both developing as well as developed partly or even wholly rely on it.com/WebHelp/international_credit/financing_internat ional_sales/isp98_rules. This standardized text is intended to be the typical reference for the use of standbys worldwide and offers a precise and detailed framework for practitioners dealing with standby letters of credit.S economy witnessed the birth of Standby Credit . Japanese banks also issue standby letters of credit for similar reasons. UCP 500 and UCP 600 have a handful of articles pertaining directly to standby and there are several articles. Consequently. the Institute of International Banking Law and Practice has obtained the approval of the international banking community for the introduction of separate rules for standby letters of credit. It is surprising enough that it was until 1983 that there was the first reference of SBLC in UCP (Uniform Custom and Practice for Documentary Credits). it was from the period of post World War II the U. In recognition of the need. the limited adequacy of UCP to Standby Credit became more acute with the increasing growth of standby credit.2010 III. and usage of standby letters of credit. the use of SBLC is actively encouraged in many developing countries. It provides separate rules for standby letters of credit that are more specialized than those outlined in the Uniform Customs and Practice for Documentary Credits (UCP500) (http://www. actively raised the demand for legal framework. and are binding on all parties thereto unless otherwise expressly agreed. ICC Publication No. known as the International Standby PracticesISP98. The International Standby Practices 1998 (ISP98) is a carefully written set of 89 rules designed to facilitate the domestic and international use of standby letters of credit as well as reflects generally accepted practice.a newly strong means of guarantee. the case of Japan should be taken as a clearcut example where there used to be the existence of legislative prohibition of issuing guarantee. As having advantage in not only the field of economy but military also. including to the extent to which they may be applicable. They shall be incorporated into each documentary credit by wording in the credit indicating that such credit is issued subject to Uniform Customs and Practice credits. the major participants in international trade.Du lÞch Th¸ng 5 .htm). this upward trend in the use of SBLC in banks. Such considerable condition was the main factor bringing a prospective future for SBLC outside its motherland. the United States has widened out its global business relationship with a variety of countries. Apparently. it just took a short time to spread out in other parts of the world. 400” Nevertheless. this newborn form was applied within the domestic banking system. Moreover.

The specific examples for using SCF of IMF is the recent IMF’s supply for 15month standby credit of SRD 22. Among all of the International Finance Corporations using SCF.A (one of the leading airline in Latin America with wide network).1 billion) would be made available under the Supplementary Reserve Facility.wikiversity. it places greater emphasis on the country’s poverty reduction and growth objectives. The support of SCF can be under a wider range of circumstances.com/Product/ProductInfo. (http://www. The facility will help strengthen the airline’s long term working capital position. and can be used on a precautionary basis which means that the countries that no longer face protracted payment of balance problem but may need help and can be used on precautionary basis to provide insurance. carries a lower interest rate.2010 Throughout nearly half of the 20th century. It is formed to replace the High-Access Component of the Exogenous Shocks Facility. "http://en. SCF has been used for a long period of time.org/wiki/Letters_of_Credit/Types_of_Letters_of_Credit The SCF is available to PRGT-eligible member countries facing an immediate or potential balance of payments need. an SCF arrangement can be extended or cancelled. and consecutive arrangements can be approved.4 billion) to support the Brazil’s economic and financial program through December 2003. it can not be denied the extremely vital contribution of these uniform rules in reducing the cost and time of drafting. http://www. an SCF arrangement can range from 12–24 months. Especially many International financial corporations have used it as an effective tool to make more flexible and better tailored financial support to meet diverse needs of the low income countries(LICs).imf. the equivalent of SRD 7. In IMF. -219- . limiting problems in handling and avoiding countless disputes and unnecessary litigation that have resulted from the absence of internationally agreed rules on standby. thus establishing a sustainable macroeconomic position. its use is normally limited to two and a half out of any five years. which has signed an agreement to provide a medium-term standby revolving credit facility of $30 million to LanChile S.htm. allows for higher access. About duration.iccbooks. Subject to these limits. standby credit facility was created under a newly established Poverty Reduction and Growth Trust (PRGT-the program established by IMF with the objective of poverty reduction and growth by lending operation to its poorest countries).aspx?id=201) Standby Credit Facility by international financial institutions As can be seen from above. Of the standby credit.org/external/np/sec/pr/2002/pr0240.8 billion(about USD 30. SFC is also used by other corporation such as World Bank Group.6 billion(about USD 10. As the SCF is intended to address episodic short-term needs.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .And in particular. where the country’s financing and adjustment needs are normally expected to be resolved within two years. International Monetary Market is the one mostly use SCF because it plays the very important role in helping IMF supporting poor countries.Du lÞch Th¸ng 5 . This is IFC's first project in this sector in Latin America. From all mentioned above. Furthermore.

In Vietnam. Most of our local financial healthy banks such as Vietinbank. bank guarantee has occupied an increasing important position in a diversification strategy of local banks nowadays. bank guarantee can be understood as an undertaking by a bank to pay the beneficiary a certain sum to cover the action or default of a third party22. credit operation. Basically. Domestic use of Standby letter of Credit: 1.Ẻric Bishop. advance payment and other forms of bank guarantee when Beneficiary is a foreign individual or organization”. Also. B.Du lÞch Th¸ng 5 . in accordance with regulation of State bank of Vietnam under Decision No 26-QD-NHNN. prudent developers 22 “Finance of International trade” . “banks that are permitted to provide international services may issue guarantee for loan. published by Elsevier 2004 -220- . Therefore. In fact. In reality. it is financial organizations that operate under the national Law for financial institutions and commercial banks are allowed to provide bank guarantee services. bidding and other forms for individual. Indeed. Military bank have been able to satisfy customers with various forms of bank guarantee like loans. advance payment. contract performance. The SBLC has evolved into a complex instrument that encompasses a much wider range of uses than that covered by bank guarantee.2010 we can find that the contribution of SCF is not negligible and it’s likely that in future SCF will be much more widely used. It has developed into an all-purpose financial support instrument while demand guarantee has not become so powerful widespread. from a legal point of view. discounting and rediscounting commercial and valuable papers. EXIM bank. the popular term in domestic banking industry normally comes with “bank guarantee” rather than “standby credit”. credit institutions. besides a variety of services that are offered by urban joint-stock commercial banks such as mobilizing funds. BIDV. Vietcombank. Maritime bank. The most outstanding feature that separates the two lies in the range of application. standby credit is equal to demand guarantee in terms of producing the same results to parties involved. Current situation of standby products in Vietnam As a result of a significant development in the domestic financial market that often goes hand in hand with the domestic economic progress.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . As a result of an unofficial release of several local banking experts’ research in the field of bank guarantee. it is true that the nature of construction projects is such that significant money must be spent and liabilities incurred prior to the completion and delivery of a final product. However. Because of huge uncertainties involved in the process. it is commented in the ICC publication number 511 that “ it was unanimously agreed that the Standby credit is not to be merged with Bank guarantee regulated under URDG (Uniform Rule for Demand Guarantee)”. standby credit in Vietnam has also been steadily applied though not yet rapidly. bid bond and performance bond guarantee have been ranked as the most popular type of guarantee services being offered by Vietnamese banking sector. ACB.

Guarantee for product quality .15 %/m Advising fee: USD 20 Amendment fee: same as Issuing • fee /USD 20 • 2. the construction sector of Vietnam has been flourishing for the past few years with the goal of completing the process of industrialization and modernization. to limit the risks and assure profits for the beneficiary.Payment guarantee .Bid Bond Guarantee EXIM Bank -Bid bond Guarantee .05-0.Tax submission guarantee Issuance fee: 100% margin: 0.Commercial Guarantee. quick and convenient procedures23.Loan guarantee . experienced and skilled staff with professional knowledge and polite conduct to help improve applicant’s prestige with their partners and strengthening the possibility of successful transactions. Hence. However. standby credits have some drawbacks that restrain Vietnamese entrepreneurs from utilizing and making full use of this kind of 23 See Appendix 2 “What should be in a Bank guarantee” -221- . particularly. local banks have been competing with each other in terms of bank guarantee service fee in association with other accompanied services like free consultancy on the issues related. it can be stated that standby L/C is extremely important in business transactions.2010 often require the tender to submit an acceptable bid bond as an assurance that the tender cannot walk away from a contract once it has been awarded to him. In other word. In addition with that. A quick comparison at the type of guarantee products and fee schedule of two local banks that are quite successful at implementing this service is incorporated for further reference (next page). Reasons for underdevelopment of demand for SBLC in Vietnam Thanks to the examinations above.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Performance Guarantee .1-0. standby credits are often used as a bank guarantee in the international trade.2%/m Advising fee: USD 20 Amendment fee: same as Issuing fee / VND 200. .Du lÞch Th¸ng 5 .Performance guarantee .06%/m Below 100% margin: 0. German.Advance Payment Guarantee . etc.000 FEE SCHEDULE • • • Issuance fee: • 100% margin 0. in developed countries such as United States. next to obvious advantages. Hundreds of investment projects financed with both domestic and foreign capital have been in progress with an aim to upgrade our infrastructure system has reinforced the need of bid and performance bond.06%/m Below 100% margin: 0. VCB PRODUCTS . it has been applied effectively and extensively all over the world. In common sense.Advance reimbursement Guarantee .

it can not denied the nice effects of standby L/C. standbys just protect the beneficiary through promising to pay him/her in case of nonperformance of the applicant. therefore. customs and the usages of standby credit. Vietnam’s economic management system is quite complicated and overloaded which makes entrepreneurs meet many obstacles in operating their business. Recommendations Standbys are definitely subject to a seemingly bewildering array of rules and laws. and standby letter of credit in detail. This problem can put the economic growth of our country at the considerable disadvantages in trading domestically and internationally. First and foremost. standby L/C is quite new in Vietnam. individuals do not really prefer and raise awareness of standbys. 3. The second reason is that standby L/C serves as a secondary payment mechanism. the Vietnam’s economy does not develop strongly enough to run huge projects. Of course. ISP (short for International Standby Practices) 98 and UCP (short for Uniform Customs and Practice for Documentary Credits) 600 are the most familiar sets of regulations that stipulate and reflect generally accepted practices. Consequently. factually. Until now.2010 letter of credit. there are some other causes for the limited distribution of standbys in our country. As a result. standbys are not remarkably needed. our group tried to analyze the reasons why standbys are not popular in Vietnam. it is known from the part of comparison between normal L/C and standby letter of credit that the normal L/C supports equal gains as well as securities for both parties of applicant and beneficiary engaged in international trade. Hence. standby credit is more effective and useful in complicated infrastructure projects or contracture obligations. it is not a significant requirement of using that type of letter of credit. Meanwhile.Du lÞch Th¸ng 5 . The precision and detail -222- . normal letter of credit can be used as a stipulated document of making payments in business world.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . but in case of business that focus merely on receiving money. Last but not least. Moreover. it is easily understood that people use letter of credit more widely than standby credit in common judgments. not a main means of payment. There are not numerous specific instructions as well as detailed laws for applying standbys. from which we would give out useful recommendations to improve that issue in the later part. businessmen have been facing with many difficulties whenever they want to use standby credit as an assurance in business undertakings. in most normal operations with the main purpose of making profits basing on the amount of money received. Furthermore. it is the fact that not many Vietnamese people can understand these two documents deeply and accurately. Lastly. However. For example. Hence. Vietnam lacks of talented people who work on the major of international payment in general. More detailed. in this research. which indicates that standby credit is just used as a backup payment method. Even the banks that promulgate many of these rules have not settled definitely on whether to use the ISP 98 or the UCP for the simplest standbys. In addition.

Moreover. hence assisting users to make wise and suitable decision when incorporating either in a standby contract. However. REFERENCE “A guide to the use of ISP 98”. May 2010) 24 See Appendix 3 for a complete guide to ISP 98 -223- . Unlike popular recommendation part that aims to provide too macro suggestions or solutions to solve a particular problem. Consequently. drawing documents that appear on their face to be inconsistent with one another will be considered as not in compliance with the LC. it is well advised that banks should consider carefully before making the decision to choose which one to include in the standby contract.2010 of the UCP and more especially of the ISP 98.14(a) of ISP 98. Unlike that. Force Majeure Under ISP 98. To summarize.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . then the last day for presentation is automatically extended to the day occurring thirty calendar days after the place for presentation reopens for business. However. (Assessed on 7th. SBLC is not transferable unless it is stated to be so. Following Article 3. banks don’t have to bear any responsibility for the interruption of their business due to causes beyond their control and it is the beneficiary who may suffer from risk. ISP contains several rules crafted for SBLC that differ from their UCP 600 counterparts. published by Institute of International Banking Law and Practice. under UCP600. in order to help parties involved (especially banks) have the right selection to apply the most appropriate one for each specific case. beneficiary doesn’t have to suffer from risk when applicant is subject to force majeure. in whole or in part.Du lÞch Th¸ng 5 . The most fundamental issue facing the SBLC users is whether to choose to be governed by UCP 500 or ISP 9824. This is certainly an advantage for Beneficiary when there is a dispute between beneficiary and applicant. it is our intention to clarify the representative characteristics of two basic governing rules of SBLC as a way to resolve the confusion between them. are intended to maintain confidence in the continued use and acceptance of standby letters of credit for a wide range of assurance across diverse industries and through the world. the final part of our research is aimed at providing readers with a deeper look at the main discrepancies in terms and conditions of the two governing rules for SBLC. each presented document needs to be complied only with requirements provided in the LC. however. under UCP 600. transference can be conducted more than once while it is restricted to be once only under UCP. In terms of condition for complying presentation Documents presented under ISP needn’t be examined for consistency and therefore. ISP addresses several topics that are not addressed by UCP at all or addressed only generally. Inc. if the place for presentation is closed on the last business day for presentation. In terms of transference Under both ISP 98 and UCP 600. Thus.

2010) Letters of Credit/Types of Letters of Credit. (Assessed on 5th May.html. http://www. (Assessed on 3rd.google. (Assessed on 7th May. May. May. 2010) The Circular Letter of Credit.htm. may 2010) The Complete guide to Documentary Credit/Chapter 3/Use of Standby Credit. (Assessed on 10 .2010 Agasha Mugasha. (Assessed on 8th.com.ehow. 2010) IMF Approves US$30. 2010) STANDBY LETTERS OF CREDIT. May 2010) UCP 500.com/docs/29073887/STANDBYLETTERS-OF-CREDIT. may 2010) th Letters of Credit/Types of Letters of Credit. 2010) Victoria Duff.edu/CircularLetterOfCredit. (Assessed on 4th.4 Billion Stand-By Credit for Brazil.org/wiki/  Letters_of_Credit/Types_of_Letters_of_Credit. (Assessed on 6th. (Assessed on 9th. May.imf.vn/ books?id=7SO3WUrTN-IC&pg=PA14&lpg=PA14&dq=characteristics+standby+letter+of+credit& source=bl&ots=THtb5FGv4d&sig=nXAp0SKlPo7A-CsOREs_kVb-Vvo&hl=vi&ei=88qsS-7Mijk ssgOtm9WFDA&sa=X&oi=book_result&ct=result&resnum=6&ved=0CCMQ6AEwBTgK#v=onepage &q=characteristics%20standby%20letter%20of%20credit&f=false. 2010) ISP 98.law. eHow Contributing Writer –“How to Use a Letter of Credit As Collateral”. (Assessed on 8th. th http://www. May 2010) -224- . 2010) International course on trade service – Edward G. “The law of letters of credit and bank guarantees. http://www. (Assessed on 11th.encyclopediaofcredit.com/ WebHelp/international_credit/financing_international_sales/isp98_rules.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . May. http://www.wikiversity. May.docstoc. (Assessed on 6th.Du lÞch Th¸ng 5 . May 2010) UCP 600. Hinlkeman.org/external/np/sec/pr/2002/pr0240.com/how_5703255_use-letter-credit-collateral. http://books.columbia. (Assessed on 4 . http://library. http://en.htm.

com). After all. Besides. endorsement and endorsement process are peculiarly taken into account by entrepreneurs and parties involved in Bill of lading’s usage for the reason that it links up to the matter of goods’ ownership. Nguyen Le Quyen (FB-07) Supervisor: Phan Thi Kim Ngan Abstract Among a variety of paper instruments utilized in international payment.2010 BILL OF LADING AND ENDORSEMENT PROCESS Written by: Nguyen Van Anh (FB-07) Kieu Thi Thu Hang. companies and organizations for the reason that L/C can assure the interests of both parties – exporter and importer. 1. commercial documents and the very essential one – transport documents. this empirical research is under a great effort of researching group. in the hope that the students and the learners could exploit this as a helpful reference for further study in this area. For that reason. it is noticeable that ocean B/L is account for 80% of trading volume globally (vietship. sales contracts. Another issue arising from this feature of B/L involves the matter of endorsement in B/L. it is undeniable that Bill of Lading (B/L) is one of documents which deserve ultimate attention from the traders throughout the world.Du lÞch Th¸ng 5 . for instances. In addition. the transactions from nations to nations are operated mainly through paperwork. The purpose of this research is to investigate the issue of Bill of Lading in a fairly broad scope.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the exporters always take B/L into cautious consideration since the accuracy and coherency in handling B/L have strong impact on the success of payment process. this research paper introduces detailed guidelines to apply B/L properly and in standard procedure for B/L users. applying L/C as method of payment would benefit exporters and importers in the way that it reduces the risks that may appear in transaction through a credit-worthy intermediary – the bank. the use of L/C is the most favorable choice for many corporations. ocean B/L is specifically prevalent and gets a great concern from the traders. documentary collection. The materials and information used are incorporated with both external sources and internal sources to conduct this research. As for the nature of international commerce. Under the legal terms related to Bill of Lading. The importance of B/L in L/C transaction arises from the sheer nature of B/L. which is derived from usage of B/L. open account. insurance documents. advance payment and letter of credit (abbreviated as L/C). Bill of Exchange (B/E). Introduction Among the four international payment methods. it is the ocean bill of lading (B/L) which is considered as the heart of transport documents. Exceptionally. First and foremost. B/L endorsement importance to practical cases for B/L usage in reality. -225- . In the process of presenting the full set of document to advising bank. the evidence of possession of goods exported for the legally – accepted bearer.

in which a person will receive a ticket when he stored his bike in the parking lot. At this time trades among the ports of the Mediterranean began to grow significantly. the legal procedures associated with B/L endorsement are a fairly thorny problem requiring the involving parties to study in detail. or B/L) is a document issued to acknowledge that specified goods have been received on board as cargo for conveyance to a named place for delivery. However. it is vital to comprehend precisely the term “Bill of Lading”. Originally. this document is a proof that shipment of goods had been happened and the goods was delivered to the receiver.2010 Similarly to other types of documents as bill of exchange or Letters of Credit. The earliest and most fundamental application of B/L dated back from the thirteenth century. and then he gives back the ticket to the conductor when he takes out his bike. With regard to the interpretation of “Bill of Lading”. And this is a document of evidence that the goods had been shipped on board and delivered at the port. With general understanding of bill of lading (sometimes referred to as a BOL. Some record of the goods shipped was required. An interesting section of this part is to provide the readers with information about the brief usage of Bill of Lading in the old time along with the legal source to control and manage the use of B/L internationally. however. the usage of B/L and B/L endorsement can be conducted in proper manner. In this result. As time elapses. and the most natural way of meeting this need was by means of a document so called “ship's register”. in the scenario of international payment.Du lÞch Th¸ng 5 . the purpose of this research paper is to help the readers by bringing them a comprehension to the B/L issue and related information about B/L definition and its functions in international payment. the empirical information about B/L would open up the a closer view about how B/L endorsement is performed in actual fact and how far the distance of B/L endorsement application is between practice and theory. “bill “is translated as any written paper containing a statement of particulars. 2. compiled by the ship's mate. -226- . Loosely speaking. this primary document of shipment is accepted by the law makers. A predominant part of this research gives out more details about B/L endorsement process as well as noticeable matters of it. the name of it has changed to “Bill of Lading” and it is added in with more functions than long-ago. it means the act of constituting a load / freight / burden on a ship. “Bill “can be understood with many different meanings. the purpose of this document was considered as a bill of the carrier to confirm the receipt of goods to deliver. which means the ex-owner of the goods transfers the possession of goods to another person by endorsing. the ownership of B/L can be transferred from one person to another one or another organization by endorsing.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . What is more. The aim of ship's register was compared to the bicycle ticket at the present. Literature review Prior to entering a great volume of information about Bill of Lading. Similarly to the case of the ship's register.

Furthermore. this Law is similar to Hague Rules – Visby. with the usefulness of searching tool – internet – the process of finding data is conducted with rapidity. Another valuable source for this research to be worked out is through external source – through the support of officers and specialists who have worked directly with profession related to B/L. Methodology In the work of conducting this research. clause b of Hague Rules and article 81. a number of academic writings and many needed laws and codes are widely posted on websites.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . “The bill of lading determines the legal relationship between the carrier and the consignee. This did help the researchers to obtain official information at ease. the data and information are in great need to support the working group. the carriers. the use of B/L on carriage of goods on sea has officially accepted and recorded in Maritime Law of Vietnam. the usage of B/L has been far and widely accepted and governed under the international convention of rules related to Bill of Lading during the twentieth century. the researching group attains supportive information which is not available online or in text books. which are International Convention for the Unification of Certain Rules of Law relating to Bills of Lading (known as "Hague Rules") and United Nations Convention on the Carriage of Goods by Sea ("Hamburg Rules"). the researching group have chance to get closer to the profession of dealing with B/L in reality. Maritime Law of Vietnam was released on June 6. for instance. clause 3 of Maritime Law of Vietnam. its starting date to be in valid is on January 1. In terms of references books. the information and materials and documents necessary are sought through two types of source: external sources and internal sources. there are 2 main kinds of international conventions constituted for the merchants to comply on international trade.2010 The bill of lading issued by different shipping offices and agents would be different in terms of appearance. With the great effort of the whole group. the companies all over the world and in Vietnam can implement their international carriage on sea route with the most standard practice. 1991 and amended in 2005. But all of the B/L issued to ship the goods in sea route internationally must be controlled by the only international source: the International Convention on the bill of lading and sea transport. Provisions of the contract of carriage are binding upon the consignee only when the bill of lading refers thereto” In general. Owing to the prevalent existence of these rules. 3. In principal. the obligations and responsibilities of shippers. The data taken from external source are mainly available on internet and reference books which provide with core knowledge about B/L. For Vietnamese merchants. The relation between the carrier and the consignee under B/L has been claimed in article 1. These international rules stipulate the significant issue. the authors give clear and systematic presentation about the overview of the issue and details of the matters from different angles with the clear-cut view. When implementing business in transaction of goods by sea. the B/L content as well as problems of claim for compensation and other legal actions. Especially. the traders must refer to these two conventions as a prerequisite. Moreover. Currently.Du lÞch Th¸ng 5 . 1990. -227- . By conveying face-to-face interview as well as telephoning interview.

freight details/charges. Due to issuing this receipt the transporter has responsibility to ensure the amount and state of goods along with deliver these to who show a legal B/L issued by the transporter. (A Bill of Lading sample is in appendix 1) 4. The task of carrier can be considered complete when one original Bill of lading is recovered and then the other originals are worthless. it is a confirmation about receiving cargo with quantity and quality noted in the Bill of lading. notifying about delivery and making import and export clearance. are non-negotiable. and a document of title to goods . or owner of a vessel. names of the ports of departure and destination. notify party and carrier’s name and address. other than a set of numbered originals the carrier can issue some copy ones as required.1 Definition A Bill of lading (Ocean Bill of Lading or Marine Bill of Lading – abbreviated B/L) is one kind of transport documents by sea-way. In the front side.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . or owner of a vessel. which can be made up by any number of originals but two or three are the most usual. yet sometimes these terms and conditions are set in the front side and the back side is blank. each company has its own form of Bill with different color and content. Firstly. place and date of issue and signature of captain. These terms and conditions are in accordance with the provisions of conventions and international custom and practice on carriage of goods by sea. consignee. a contract of the carriage and the engagement to deliver goods at the prescribed port of destination to the lawful holder of the Bill of lading. currently there are two major sources of international law applied: Brussels Convention 1924 and United Nations Convention on the Carriage of Goods by Sea (The Hamburg Rules). in addition a receipt of the goods (cargo) which must be presented for taking delivery at the destination. agent. evidence of a transportation contract between carrier and shipper. Terms and conditions of shipping company are printed in the back side. issued by a carrier (a transporter of goods) or carrier‘s agent to a shipper (an exporter).2010 4. The Bill is issued in a set of originals. Content of the B/L is exposed in both sides of paper.Du lÞch Th¸ng 5 . These copies do not have legal status as originals. therefore. used in case of checking goods. the carrier prints and issues the B/L to the shipper by himself. however. name of the vessel. it contains some main parts such as: shipper (consignor).proofs of who has title to the goods covered by the document. It is. -228- . when the bill of lading in the hands of the shipper. gross weight/volume of cargo. it still has the core parts written above. In fact. marks and numbers on packages. and signed by the captain.2 Functions The Bill of lading has three functions. carrier’s agent. Bill of lading 4. it becomes a receipt for the quantity of goods received by the carrier. which are a receipt of goods being transported. list of being transported goods with number of packages and kind of packing.

The Bill of lading is independent to transportation contract if any. cannot endorse. The endorser (the previous beneficiary) signs on the back of the B/L and hand over the B/L to the endorsee (the subsequent beneficiary). Last but not least. a bank … With the exporter. in other words. However. B/L is a document confirmed that goods has been sent to the carrier for delivering to the importer. the Bill of lading can be easily to trade and transfer in the market by endorsement. the function as a document of title is presented that the person who holds the legal original Bill of lading will take possession of cargo noted on the Bill. is clarified as following: “Endorsement is an act of transferring the proprietorship of a beneficiary to another beneficiary. it has to notice that in two basic types of B/L – a straight bill and an order bill . 5.2010 Secondly. B/L is a receipt helping to receive goods at a port of destination as well as a document to possess cargo. Although it is not an actual contract. Endorsement of Bill of lading 5. hence content of Bill of lading is used to deal with any conflicts arising between the carrier and a holder of Bill of lading. it also expresses the legal relation with the carrier and the way to pay freight charge. Legally. as well as other types of document such as Letter of credit. However. this is totally acceptable understanding of this term. or anyone keeps B/L in hand (in case of endorsement B/L in blank).the straight Bill of lading is a non-negotiable document as it is made out to a specially named consignee so the consignee cannot trade or transfer this transport document.1 Definition Bill of lading. From time to time. In side of the importer. it can be seen the Bill of lading is significant to each parties involved – an exporter. Bill of lading is regarded as evidence of a transportation contract because it contains only one signature. endorsement should be understood in relation with involved individual or with another party. or an endorsee of B/L (in circumstances of an order bill). a contract must have two signatures of two parties. or other written instruments documents. According to practices. As functions mentioned above. The holder of Bill of lading can be a person named on B/L (in case of a straight bill). Thanks to this function. Therefore this person has right to offer the carrier to deliver goods at the place of destination. Endorsement is generally known with common knowledge as the act of signing on the back of a note. an importer. it still has legal value as a real contract. bill. the definition of endorsement. In this understanding. bank has to stipulate the exporter present a full set of original B/L. according to a legal understanding.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the -229- . While issuing L/C. Bill of lading contributes an important role in the document package needed to present. if not it must be issued to the order of bank so that bank could have a right to control goods. the endorsement function is applied to only an order bill in two kinds of B/L.Du lÞch Th¸ng 5 . For that reason. under B/L. Insurance document or bill of exchange. engages with one of distinguishing characteristics in general international payment – endorsement. Under the letter credit (L/C) method of payment.

Du lÞch Th¸ng 5 . there are three types of document. the endorser is not allowed to require any condition enclosed with B/L for the endorsee to obey. The readers can be aware of two main features of endorsement as following: • Endorsement is unconditional and abstract. for the reason that. the application of endorsement in B/L requires the involvement of at least two parties – the previous beneficiary and the subsequent beneficiary. 5. or informing the previous transferor and the carrier of his endorsement to another beneficiary. With the wide network of international trade.3. It is to say that endorsement is applicable to Bill of lading and Multimodal Transport only. the uses of Seaway bill (SWB) and Multimodal transport B/L are mentioned briefly.2010 action of endorsing of endorser on the B/L means the acceptance of endorser to reject his proprietorship of goods reported in B/L and to transfer it to another beneficiary” Consequently. In the view of ocean transportation. 5. multimodal transport. 5. which are Bill of Lading and Multimodal Transport. the current endorser confirms to transfer the obligation and responsibility of the previous endorser to the current endorsee. It is noticeable that the functions of the three transport documents are the stressing point in order to explain the existence of transferable feature for each.2 Features of endorsement in B/L In accompany with definition of endorsement under B/L. The operations of pick-up and delivery of goods carried out in performance of a uni-modal transport contract. only two of them have the property of negotiability or transferability. -230- . shall not be considered as international multimodal transport” (United Nation Convention on international multimodal transport of goods. 5/24/1980). railway bill of lading or inland bill of lading. It means that the endorser is able to endorse without any action of making a list of causes to endorsement. Simultaneously. In the context of profound study of Bill of Lading.1. ocean traffic becomes more and more essential.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . • Endorsement is the claim of endorser that he has undertook to confirm the ownership of goods reported on B/L is given to the endorsee. airway bill. these are the guidelines to general instruction of endorsement. which are Bill of lading.3 Types of transport document with transferable feature Transport documents comprise many types of instrument. Therefore. seaway bill. Definition of Multimodal transport and functions of Multimodal transport B/L “International multimodal transport means the carriage of goods by at least two different modes of transport on the basis of a multimodal transport contract from a place in one country at which the goods are taken in charge by the multimodal transport operator to a place designated for delivery situated in a different country. as defined in such contract. Multimodal transport and Seaway bill. truck bill of lading. which are Bill of lading (used for ocean transportation). Geneva. Nonetheless. it is crucial to pay attention to the relating properties of endorsement.

In short. Due to the fact that the subsidiaries belong to one company. Seaway bill (SWB) and its functions Seaway bill is used as a non-negotiable shipping document issued by shipping company as an alternative for Bill of Lading. first is a receipt for the delivered goods and second is the proof of the previous contract between the carrier and the shipper. Definitely. Unlike a through bill of lading. multimodal transport bill of lading and ocean B/L have an additional function as being a title document to loaded goods. This is to say that B/L is fairly preferable and flexible in circulation.2010 Multimodal transport bill of lading is B/L issued for containerized door-to-door shipments that have to use different ships and/or different means of transportation (aircraft. endorsement has improved the liquidity of B/L in the free–trade market.a receipt of goods and a contract of the carrier. trucks.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . SWB has two functions. 5. B/L can not only be considers as document of title but also as a collateral in the market. Both multimodal transport and ocean B/L have three main functions as shown below: • Being a receipt for the delivered goods. ships. this is very convenient for the trade of goods among the subsidiaries and agents of a company.4 The significance of endorsement under B/L Under the light of 3 main functions of B/L as indicated previously. 5. the endorsement of B/L can be utilized to transfer the ownership for unlimited times.Du lÞch Th¸ng 5 . becomes a non-negotiable instrument. This function is the determinant key for the application of endorsement so that multimodal transport bill of lading and ocean B/L can be negotiable in the market while SWB. the transfer of B/L would be done even before the shipment of goods approach the named place. as a result.3. -231- . • Being the proof of the previous contract between the carrier and the shipper. B/L is totally regarded as a valuable instrument. the buyer can use the original B/L in exchange for other kinds of asset or cash. the three above transport documents have two similar functions. without the third function. Besides. These functions are applicable the same as multimodal transport Bill of lading and ocean B/L. etc.2. However. The significance of B/L endorsement results from the feature that ownership of B/L is transferable from one to another. the principal carrier or the freight forwarder (who issued the multimodal B/L) takes on full liability under a contract of carriage for the entire journey and over all modes of transport. In particular. it is undeniable that endorsement plays an important role to contribute the prevalence of B/L in the worldwide trade as today. railcars.) from departure to destination. In reality. • Being a title deed to loaded goods on board. the buyer can resell the goods to another agents and this process still goes on and goes on.

bank has more security and assurance when bank pay money on behalf of the buyer. It is a continuous succession. referring to the endorsee.5 Parties involved in the B/L For any document. it is negotiable. no matter it is. In reality. it is very necessary to shed light on (make clear) each party involved in the process. the issuing bank or a third party. an organization or a company. it can be known as a person or firm to whom a negotiable instrument transferred by endorsement. -232- . B/L is such a beneficial document because the endorsement process in B/L would improve the circulation of cash flow in the market.which are all under “the order of a named party” type. however. Hence. which is very convenient in commercial trade. with the view to controlling the merchandises. is. such as an individual. either shipper. it is automatically understood that the shipper will be the party – which can endorse the B/L. endorsed in almost of the transactions in international payment. which parties can act as endorser? Which one can be the endorsee? What are their senses of duties? First of all. Like other types of financial documents such as Bill of Exchange. Especially.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In this case. can endorse it to another party. We also take concern about the endorser and endorsee for the case of the Bill of Lading or Multimodal transport comprised the endorsement. It is also called a transferee or payee. endorser and endorsee are always the two main mentioned parties. in practice. 5. Why? As mentioned above. when the Issuing bank acts as a consignee.2010 Another reason that B/L plays a vital role as a necessary document in Documentary Credit is that B/L is used a tool of hedging risk for Bankers. The endorsee becomes a holder-in-due-course upon delivery of the endorsed document. or “blank endorsed”. If the importer wants banks to transfer the ownership of goods to him. therefore. deliver orders. Besides. Secondly. Furthermore. the Bill of lading. Whenever the Bill of lading is made out to “the order” or “to the order of the shipper”. from the angle of buyers or importers. the issuing bank or a third party. the terms and conditions in Bill of Lading also allow the endorsees to prolong the endorsement list. he is in need of capability to pay full or partial of the amount of money to bank. for any endorsement document in the international payment. totally can be traded in the market. After all. Definitely. In other situations. endorsers. can be known as the shipper. It is proved that. on the whole. many banks require their exporters to indicate bank as consignee in B/L. it also means that bank will be the endorser party. In reality.as long as they own the B/L. bank is in possession of goods and bank has full right and obligation to goods on shipment. the Issuing bank often regulates that the goods would be delivered to their order. because Bill of Lading represents a very important function: title of document.Du lÞch Th¸ng 5 . the endorser can also be another third party. because it would help to determine the obligations and responsibilities of each one to the others. it would be clarified in this research in detail. makes no difference to which party is the endorser. It.

In conclusion. “B/L to the order of…” and “to bearer B/L”.Du lÞch Th¸ng 5 . The non-endorsement is also applied the same for the bearer B/L. among those above kinds of B/L. More particularly. they may cope with unexpected matters. What rules should be followed for different situations of B/L endorsement? Within the scope of this research. this represents that anyone who keeps this B/L is the legal owner of the goods. And the appearance of the phrase “without recourse” is extremely important for the endorsers. straight B/L cannot be endorsed for another party. Thirdly. we only concern about the Bill of Lading endorsement rather than the endorsement for the MTD. the main duty of the endorsee is to take over the B/L to get the goods (in case of no other endorsements). it is divided into three different kinds of Bill of lading. parties involved should always be taken into account carefully.which allows anyone who holds the B/L to be the consignee. Basing on the title of the goods. The second kind is the “bill of lading to the order of a named person…” This is known as the most popular endorsement type. due to the feature of unknown B/L holders. understanding the requirements and tasks of each party also plays a very important role in making the international transactions smooth and fluent. In order to avoid any responsibility -233- . The Straight Bill of lading is issued when the goods are consigned to a specified person named on the consignee blank of B/L.which can benefit all parties and make the endorsement process become more flexible and convenient (Huy. They are: “straight B/L”. Any mistake or discrepancy should be dealt basing on the full set of original Bill of Lading.6 The endorsement process Endorsing is a complicated process that is always performed cautiously by the bank checker. the B/L is endorsed to a named person. Under the second kind of B/L. The endorser will be responsible for transferring the ownership of the B/L. 2008). Finally. to avoid any troublesome things.2010 Finally. One of their duties is to determine which kind of the B/L belongs to. However. the endorser will prefer the second type to the first one. only the “B/L to the order of…” is employed in case the endorser wants to transfer their ownership of the goods to another party. in fact.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the endorser can leave blank or write “deliver to order of bearer” at the back of the B/L.which implies that only the one with the precise name on the back of the B/L can be the consignee and can get the goods. This is really very significant and vital for both of the endorsers and endorsees. due to the inconvenience of this form. otherwise. whereas. First of all. 5. In reality. and he/she can totally transfer the B/L to any other parties. we now keep on breaking up it into different forms of order B/L. bearer order bill is not widely brought into play. for either Bill of lading or Multimodal transport comprised of seaway document (MTD). it is also crucial for the endorsee to bear in mind that he/she can only recourse their previous endorser for any unexpected problem. it may concern the related parties an issue about the responsibility of each others in case there is any inconsistency or any problem. For this characteristic. While conducting the endorsement.

the rule of “without recourse” is not applied for the shipper. the carrier will issue a bill of lading “to the order of the Issuing bank”. the endorser often adds a notation “without recourse” beside their signature. while making the Letter of Credit (L/C). if there is any misunderstanding or litigation. The reason is that the bank has engaged itself in the L/C that it will act as the consignee. comprises of some steps (refer to the appendix): • Application for an endorsement of Bill of lading • Documents attached (Bill of lading. for the sake of bank. because they are always the final party to bear the responsibilities if all other endorsers record without recourse. The guidelines for this claim will vary from bank to bank due to the reason that there is no common. However. each bank will make up its own instruction. the Issuing bank often requires that they would perform as the consignee of the goods and it must be stated very obviously in the L/C. As the result. With the aim of making it clearly in terms of the endorsement process. Still. later on. As the rule of the bank. The purchaser wants to get the commodities. it. the request of making an ordered endorsement must be submitted by the applicant of L/C (the importer).Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2010 with those holding on this bill of lading. Following that requirement. therefore.Du lÞch Th¸ng 5 . Consequently. In practice. in general. It is open to a question that why the applicant needs to summit the order while they are not the endorser. but those three-mentioned necessities above are the focus. they need to make an ordered endorsement application for the bank to endorse the B/L later on. sale contracts…) • The commitment of the company (importer) It may appear some other requirements at other banks. Figure1: The first and the back side of an endorsement application: -234- .which means that they are the owner of the goods. the endorser can use the B/L without recourse as an evidence for their immunity. this report will give out the step-by-step procedure in the case that the bank acts as a consignee and they have the right to endorse the Bill of lading. detail and specific instructions about the Bill of lading and the endorsement process. commercial invoice.

Du lÞch Th¸ng 5 . Practice • Document submission With the intention of matching up the theory and the practice in the use of endorsement the bill of lading. in this case. or. And most banks are applying this in their transactions.which means that no other party except the bank can get the merchandises. after checking. All of the information is gathered not only in the Internet or newspapers. the B/L can consist of a sole original B/L. the full set as so issued.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . After the seller has finished shipping goods to the importer. but it is also the experience of the researchers at banks. for their sake. Even though it may not be stated in the L/C but the exporter always needs to submit the full set of original documents. the bank normally insists on their consignee position.2010 Figure 2: A bill of lading with the endorsement “to the order of…” 6. At this time. as mentioned above.UCP 600). In accordance with the theory. the report has mentioned some necessary steps that must be complied with if there is an order of the endorsement. together with the B/L issued by the carrier for the bank to check. Thus. the bank also strictly requires the exporter to hand in the original B/L. According to article 23. However. -235- . they will have to send the L/C. UCP 500 (article 20. the importer needs to produce “an authorized letter to receive goods” for the bank to authorize them to get the cargos. if issued in more than one original. Basing on this article. It happens that the B/L is issued under the “straight B/L” term to the bank. bank will require the importer to make the “application for endorsement” (see the appendix). At the previous. bank will send directly the B/L to the importer for them to get the cargos. this study tends to provide some information about the actual daily transactions of the bank dealing with endorsement orders. in case the bank does not act as the consignee (which has already been stated in the L/C at the Consignee box).

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .which can be seen as a reminding for the endorsers. Therefore. So. or engage in some forms of collateralizing. the bank will ask for an authorized letter signed by the exact endorser (say.where many international payment transactions are performed every day. in that situation. he said that he had resolved quite many cases of endorsement. The name of the endorsee at the back of the bill of lading is inconsistent with the actual person to receive the B/L. write their name and the endorsee party. Especially. The statistical data at the bank shows that there has been a numerous of circumstances of wrong endorsers as described above. However. By that way. director).who signs the B/L. From the opinion of another interviewee. or. Agribank asks their client to escrow 100 % of the payment value so that the bank can trust them and agree to endorse the B/L.Mitsubishi bank. the endorser will sign at the back of the B/L. From the opinion of one banker in the Bank of Tokyo. This fault may occur when the endorser writes wrongly the name of endorsee party. sometimes. It is also very important to bear in mind that any correction of the Bill of Lading endorsement will not be allowed and must follow the instruction from the bank. confirming that he had given permission to his assistant to sign on behalf of himself. the B/L can be acknowledged and become effective. borrow at the bank. One of the most complicated cases that the bank checker may cope with in dealing with endorsement the Bill of lading is the wrong endorser or endorsee in the B/L.Du lÞch Th¸ng 5 . she has experienced some very difficult circumstances that she had never learned through books before. “The theory and the practice are at the two different sides” she said.2010 The necessary documents needed to be presented: Application for endorsement/ an authorized letter to receive goods Commercial invoice Original bill of lading Identity card The bank may also ask for some other requirements to guarantee that the importer will pay them money. Hence. these situations do not appear in any book. How to fix this problem? According to the banker. not the named party anymore. we also discover some very interesting things about the endorsement in practice. For example. what does it mean by wrong endorser? As we know. and just doing practice reveals it. Vietcombank may ask the customer to fulfill some commitments such as to escrow. or head department… B/L will not be accepted by the bank and they consider it as the discrepancy. • Wrong endorsers. they want to endorse to another person later on. there are also mistakes referred to the endorsees. Besides the mistakes related to the endorsers. what are the -236- . wrong endorsees When conducting several interviews with few staffs in banks. for the case of a company. must be the director of that business or bank branches. Or. when endorsing. if there is signature of any other people such as the vice-president. it requires that the endorser .a staff at the Eximbank.

Limitations. the findings in this study still do not achieve such a perfect outcome in consequence of lack of information and database.Du lÞch Th¸ng 5 . It is definite that B/L and B/L endorsement have closed relation with involved parties .the companies and the entrepreneurs who operate their transaction oversea. although we have chance to interview some bank checkers. how they deal with problem of B/L when performing international transaction what disadvantages or difficulties have come up with them. The lack of data and practical information leads to the absence of description overall outlook of B/L and B/L endorsement usage in Vietnam. in reality. type and its use is an important operation in the commercial trade. the importer but also the bank. It relates to not only the exporter. there is not much prior research worked out in this issue. The endorser party needs to commit that he will bear all the responsibilities in case there is any unexpected problem.which is the -237- . which may have been an attractive part to concern in our study. our carrying out this research has met some obstacles and inconvenience. 7.2010 solutions for this state? Normally. conclusion and recommendation • Limitations of research In spite of enormous endeavor from the researching group. but the information got are not enough to bring more reality into the research. he will notify the correct name of the endorsee. especially in the import and export operation. Consequently. it is known that the straight B/L is endorsed to a specific named person. As a result. it cannot be used to negotiate. to make everything become easier and smooth for all parties. • Conclusion In conclusion. In addition. bank may ask the endorser to fill in a “confirmation letter”. In addition. therefore. in Vietnam. affirming that he/she is wrong and then. this research has excluded the proximate view of entrepreneurs. In particular. • Particular situation of the straight B/L to be endorsed As mentioned at the beginning of this finding and discussion. It is a regrettable restriction in this research. stated that the straight B/L. The bank may accept the confirmation of the endorser party afterward and allow the B/L to become effective. transfer or trade in the market. This approval of the authority can make the trading market of documentary credit happen to be more flexible. With little assistance from the person who works directly with B/L. it can be seen very obviously that Bill of lading has become very popular in the world.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . understanding its functions. still can be utilized to trade if it has got the official permission from the local authority. But in the textbook “ Thanh toan quoc te va tai tro ngoai thuong” of Master Nguyen Van Tien and in article 84 of Maritime Law of Vietnam 2005. Even though a lot of useful information is available on external sources such as on websites or in book materials but there is still a shortage of statistical data under the content of B/L and B/L endorsement. databases and figures on the official websites is virtually inadequate and unavailable.

it is very important for Vietnamese businesses and banks to fully comprehend the context and the procedure of ordered bill endorsement. agent. they have to bear all demurrage and/or damage to risk of cargo and container. The last recommendation is given about a wrong endorsement situation mentioned in the practice section. With the purpose to promote the development in the international payment. consignee.which can help to increase significantly the numbers of international transactions between Vietnam and the worldwhich.exim-pro. An authenticity of Bill of lading (check up the signature on Bill of lading of captain. As stated. enforce the economy to grow up (Ngan. this case occurs when a person who does not have enough right to endorse the Bill of lading signs as an endorser or when the endorser writes name of endorsee incorrectly. Any amendment and supplement on B/L need confirming by signature and printer of a shipper. carrier or captain. the endorsee should pay attention to the authority of the person who is regarded as the endorser – whether he has a right to endorse or not.http://www. The role of the bank turns out to be more significant when there exists the appearance of the endorsement operation for the bill of lading. Bill of lading is an important document in document package presented to the issuing bank. vneconmy.Du lÞch Th¸ng 5 . Both cases can lead to a dispute about title to goods in the future unless any correction is made at once. Whether name of port of loading and port of discharge are the same as what is noted in the L/C or not. or owner of a vessel and his legal status). invoice … or not. in turn. -238- . • Recommendation As mentioned above. notify party are matched with a content in a L/C or not. Whether Goods is identical to what is described in the letter of credit and other documents like insurance documents.com). Moreover. The second recommendation is consignee or anyone who is authorized to receive goods should notice time to take delivery of goods because over free time from the date of discharge. Therefore. According to Eximpro webpage (a website supports to import and export .com/) some points which bank should notice while checking the Bill are: Whether name and address of shipper.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the endorsee and the endorser should check up again a name of endorsee in order not to arise this mistake.2010 intermediary providing the services for both parties. Type and number of original Bill of lading. Transport condition and fee charge. so that bank should check B/L carefully to prevent from any dispute about cargo afterward.

Brussels. 2008. Available at URL: http://www. Vũ Hoàng Anh. 2003.php?p=300 (Accessed 12 May 2010) • • • • • • • • • • -239- .letterofcreditforum.TS Nguyễn Văn Tiến (Banking Academy).php?t=630 (Accessed 8 May 2010) Cục Hải quan TP. United Nations Convention on the Carriage of Goods by Sea ("Hamburg Rules"). Available at URL: http://vietforward. Vietnam. 2009.vietship. Nghiệp vụ thanh toán quốc tế.com/showthread. Vietnam. 2nd edition. PGS. International Convention for the Unification of Certain Rules of Law relating to Bills of Lading ("Hague Rules").com/doc/21199789/van-don-duong-bien-va-chung-nhan-thucxuat (Accessed 12 May 2010) Edward G. A short course in International payments. Thống kê publisher.B/L)”. Hamburg. “TO ORDER BILL OF LADING AND ENDORSEMENT”.com/lcfbackup/content/how-do-i-make-blank-endorsed-lc (Accessed 10 May 2010) Nguyen Huu Duc. “Vận đơn đường biển và chứng nhận thực xuất”. 2010. 25 August 1924.Du lÞch Th¸ng 5 .2008. Thanh toán quốc tế và tài trợ ngoại thương. Tài chính publisher. California. “Encyclopedia of Credit”. Thống kê publisher. Vietnam. “Original B/L & Copy B/L”.scribd. 2009. 2nd edition. Available at URL: http://www. Available at URL: http://www. Cẩm nang thanh toán quốc tế bằng L/C. PGS.TS Nguyễn Văn Tiến (Banking Academy).Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . and Protocol of Signature. 14/6/2005. Hinkelman. Michael Dennis.vn/showthread.TS Nguyễn Thị Thu Thảo (National Economics University).com/mroldmanvcb/blog/2010/03/06/to-order-bill-oflading-and-endorsement (Accessed 10 May 2010) PGS. World Trade Press publisher. “Vận đơn đường biển (Ocean Bill of Lading . Available at URL: http://my.HCM.opera. Maritime law of the Socialist Republic of Vietnam number 40/2005/QH11. 31 March 1978.2010 REFERENCES • • 2007. 2010.

for example: “The term training refers to the acquisition of knowledge. This research paper. Definition In Human Resource Management. Hence. some recommendations to make training become more innovative. however. This method is generally known as innovative training. its methods. any organization which wants to survive in such an aggressive business world should be able to invest in its workforce. whether only training is enough is still a rough question for every company. finance and technology. Innovative training can take different forms. One common method used is training. Every new entry to an unfamiliar occupation needs to be trained in order to desirably undertake the tasks required. discusses how it is employed around the world as well as in Vietnam and finally. Training can take both two stages in a career of an employee: the job orientation. distance. etc or they have insufficiencies in work performance.Du lÞch Th¸ng 5 . training plays as a key role in the employee development.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . they also learn how to work effectively. THEORETICAL UNDERSTANDING 1. The workforce belonging to each company. This paper will provide a glimpse into the concept of innovative training. skills. Training: a. The need to have innovative training emerges to not just provide practitioners the skills required in a more advanced way with regards to time. Nguyen Hai Yen (1D-07) Supervisor: Nguyen Le Phuong Tram ABSTRACT Training refers to a process of acquiring different skills and competencies through a series of learning activities specifically designed for increasing performance. dependent on the culture and the organizational mission and goal. some companies have changed their traditional training method into better ones which fully exploit employees’ potential. technology. how it is applied from industries to industries and finally. II. Nonetheless. for a parttime cleaner to a highly professional Wall-street trader. some of which are not feasible to be accumulated through one’s life. they aim for better future income. Different company employs different method. Training is a major input of skills.when employees just begin their job or during their job. besides being trained about the company philosophy. but also to collaborate other methods of training to create the most all-rounded entries. INTRODUCTION Nowadays. and -240- . Training can be defined in some ways. with the purpose of providing more information on this new type of training.while either they cannot catch up with some changes with equipment. what can be done to improve innovative training in Vietnam. I.2010 EFFECTIVENESS OF INNOVATIVE TRAINING Written by: Do Duc Thu (4K -07) Duong Hong Hanh. Training traditionally takes two forms which are on-the-job training and off-the-job training.

Role of Training: -241- . b. when training ends. The sooner the need is recognized.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .2010 competencies as a result of the teaching of vocational or practical skills and knowledge that relate to specific useful competencies” or “Training is about the acquisition of knowledge. Training process: A training process normally takes three steps: First. The second step is to gather employees who need training to deliver training. it is from the organization itself. skills. c. Finally. it should be evaluated under tight control to see if the training provided is working appropriate or not.Du lÞch Th¸ng 5 . top managers should always be kept updated with changes or challenges in the outside or even inside the organization. the sooner it is likely to be tackled. and abilities (KSA) through professional development” or just simply “Training is the process of providing employees with specific skills or helping them correct deficiencies in their performance”.

That is. no business does not face with any challenges or movement of the environment. using the actual tools. the focus is mainly on the current job whilst in development. Finally. Innovative training is of great variation. Types of Training: Training in any organization can take two forms: On-the-job training: On-the-job training takes place in a normal working situation. Employees are gathered to study in a classroom — implying that the employee does not count as a directly productive worker while such training takes place. This type of training has proven more effective in inculcating concepts and ideas. the success of the whole business. Off-the-job training: Off-the-job training takes place away from normal work situations. Training and Career Development: Training and Career development differentiate themselves to some respects: In training. the trainees lack realism. However. INNOVATIVE TRAINING 1. the goal of training is enhance the workers’ performance quickly and the development goal is to enrich the overall human resource of a company. hence. depending on the very nature of the industry. Off-the-job training has the advantage that it allows people to get away from work and concentrate more thoroughly on the training itself. since the trainees still lack skills and job experience. equipment. These are known as innovative training. What they have to do is to adapt to the changes and challenges through training their own staff. documents or materials will be demanded.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . development tends to associate with the work force skills and versatility. d. When those things happen.Du lÞch Th¸ng 5 . -242- . On-the-job training has a general reputation as most effective for vocational work. this type of training can cause slowdowns that decrease production or even irritate customers. Through learning and training. documents or materials that trainees will use when fully trained. On another extreme. training focuses on the immediate need of the organization when development can be saved for the future use. time for getting used to the actual tools. The scope of training is on individual employee while that of development is on the whole work group and organization. Innovative training can be understood as a collaboration of activities which differentiates from the past methods. Another difference is. This surely leads to the enhancement in their job and generally. the staff may comprehend how to adjust themselves to the job and to get it done with more ease. the focus is on both current job and the future jobs that employees may hold in their career paths. equipment. training job specific and it is used to tackle deficits or problems existing in the job. they cannot stand in one place unless they want to be the losers or go bankrupt. However. 2.2010 As the diagram illustrates. III. It is though hard to find out the most apparent definition of innovative training or what it is combined of. Definition of Innovative Training: Recently there are influxes of new training definitions that focus on competencies rather than purely performance orientated methods.

evaluate and implement training snippets with appropriate instructional strategies and delivery methods. Table 2 Snippets design strategies. How to apply innovative training in an organization: Table 1: Organizational Training Development Refining Process Effective training strategies are core to the development of an effective training solution including snippets.2010 2.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . delivery and evaluation mechanism -243- . develop.Du lÞch Th¸ng 5 . one can design. By integrating instructional strategies with appropriate delivery mechanisms. Guided by the framework. organizations achieve better results and a high return on investment.

7. employee training has become an essential component to maintaining a competitive edge. It helps in developing communication. It helps in developing better understanding of the issue a better decision making 4. 2.2010 An example provided by Chaturvedi (2008) on taking role-play as an innovative training method. She also identified the benefits of applying role-play in the training process as follow: 1. 3. It helps in bringing attitudinal changes in the employees as trainees It is a more practical approach than other technique since in this the learning by doing and feedback that whether a behaviour reflected is acceptable or requires change can be given. management development and leadership quality 6. Hilton Garden Inn Austin NW hotel which is in the Northwest Arboretum area of Austin*s Golden Triangle uses Innovative -244- . It helps in both cognitive and effective development of trainees and better learning by doing. it is not surprising when recognizing that Innovative Training has been employed in different kinds of business across many countries in the world. It also helps in improving human relation since it helps I developing empathy 4.Du lÞch Th¸ng 5 . INNOVATIVE TRAINING TREND 1. Innovative Training program which has recently played a significant role in improving the employee’s work outcome and the performance of a huge number of organizations as well. It helps in developing a better understanding of the job 2. Being the pioneer in the hospitality industry. It helps in making people sensitive towards others 5. The objectives of this activity are: 1. 6. It helps in better SWOT analysis of individuals and thus the feedback given helps in identifying and overcoming the deficiencies. It helps in improvement of interpersonal relationship. It helps in providing an insight to understanding behavioral patterns of others. In the world: In today's fast-paced business world. The trainee develops a strategy to how should he react or think in a particular situation and possible suggestive solutions for resolving the problem or analyzing the situation. It permits practice by repetition and helps in better reinforcement 3. Especially. This technique thus not only leads to self learning about expected job outcome or to create a fit in the job but also helps in understanding others perception about the task or issue. IV. It helps in understanding how to handle a particular situation. It enables the role player to control his behavior and enact as if he is enacting in a real life situation 7. Training programs not only benefit the organization as a whole but help boost employee morale through enrichment of their professional development. Therefore. It helps in anticipating reaction of other party 5.He also learns and forecasts what the other party or as per the case may be what can be the other reaction.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

Florida Power & Light Company (FPL) and the International Brotherhood of Electrical Workers (IBEW) and is designed to support workforce development and respond to the growing energy need in the Miami-Dade County area for employees trained in the latest energy technologies. This program was an innovative partnership between Miami Dade College (MDC). This program is initially being rolled out to hotels in the United States with global implementation to follow in the later part of 2009. This partnership addresses that challenge.” said James Auld. college and community coordinator for FPL. “I finally feel I have plotted the right course for me. food and beverage.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . each hotel will receive a PSP handheld entertainment system and the Ultimate Team Play game featuring guest satisfaction training for positions in housekeeping. my family and this community. engineering and maintenance. After an intense introductory session Hilton Garden Inn General Managers Conference now underway in Austin. These words describe this great program. and the front desk. “We are pleased to be able to tap into a natural resource in our area – students eager to learn important and valuable skills – and offer them the opportunity to build a career with FPL for years to come. brand management . This situation is particularly acute in the nuclear energy sector. Ultimate Team Play puts team members in a 3-D virtual Hilton Garden Inn hotel where they must choose how to respond to various guest-related scenarios in a given timeframe while also ensuring that they complete their specific hotel duties and so forth. senior vice president.” said Adrian Kurre.Hilton Garden Inn.” said a jubilant Victor del Cid who graduated and received a job offer from FPL. Progressive. We all benefit from this partnership. Hilton Garden Inn launched of its training program on January 2009.Du lÞch Th¸ng 5 .Electrical Power Technology Program has filled critical need as well as brought bright futures for next generation of energy industry employees in Miami since June 2009 which used to be in the midst of difficult economic times. checking guests in and out.” -245- .’s PSP system. “The nation is experiencing a critical shortage of energy and nuclear-skilled workers. the Innovative Training Program . “Ultimate Team Play responds to the evolving training needs of our employees while focusing entirely on enhancing the guest experience which has made Hilton Garden Inn an industry leader. “Groundbreaking. The level and speed as well as the appropriateness of their response directly affect the simulated guest’s satisfaction. and general guest interaction (in the front desk scenario). “We take the guest experience as well as our team member training very seriously but we believe that having a little fun along the way will enhance our team members’ ability to deliver incredible service to our guests.” In addition. it is imperative that each interaction with our guests acknowledges their needs as effectively and efficiently as possible. it is also the world’s first hotel brand to offer an interactive employee training system created specifically for Sony Computer Entertainment Inc. Innovative.2010 Game-Based Technology to Enhance Guest Experience and Recruit Next Generation Team Members. Particularly in this economy. Ultimate Team Play for PlayStation Portable (PSP).” Not only is Hilton Garden Inn the first in its industry to develop a game-based training tool in the hospitality industry. Another famous ones. answering the telephone.

Degree level at Center For Innovative Training And Education top out at the Certificate. but also build on local South Australian resources which can service other similar projects nationally and worldwide.” SA Water ADP Project Director Milind Kumar said. train and enhance the skilled resource capacity in the area of specialized welding. Mr.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .Du lÞch Th¸ng 5 . PA.2010 Additionally. today’s Innovative Training providers are increasingly in many fields under the pressure of the demand of many organizations. Table 3: Center For Innovative Training And Education Programs (2008-2009) General Category Office And Administration Most Common Majors Office data entry. Tracey who was the Adelaide Aqua Project Director said he envisaged the creation of a specialized welding expertise and resource pool which will benefit many local industries well beyond the project’s completion date. Furthermore. due to the highly-technical infrastructure for its seawater reverse osmosis operations. SA Water ADP Director Milind Kumar said the desalination project has a need for specialized welding trade’s people. The specific aim is to attract.8 billion was launched on February 2010 by Adelaide Desalination Project South Australia Water and Adelaide Aqua that was developed to help secure skilled welders for South Australia. welding supervision and welder qualifications. Moreover. in Philadelphia. general office occupations Business And Management Banking Table 4: Student Body’s Diversity in Center For Innovative Training And Education (2007-2008) Age 20-21 22-24 25-29 30-34 35-39 40-49 50-64 Percent 4% 6% 26% 23% 17% 20% 4% White Black Hispanic Asian Race Percent 10% 77% 11% 2% -246- . an innovative training program as part of a joint initiative to proactively plan and secure the availability of key skilled resources for the $1. “This joint initiative will build essential capability and capacity not only to service the needs of the highly specialized area of welding for the ADP. Center For Innovative Training And Education could be a typical illustration. for – profit institution. The school is a private. It is located in a large city.

Moreover. The other instance that is The Innovative Training Company (TITC) made up of a team of experts who initially supplied successful training and consultancy solutions to the financial. Recruitment and Selection to meet all requirements. Novell Quick Classroom allows for dramatically reduced classroom set-up time for Novell classes and freeing technical staff. Focusing on providing bespoke training and consultancy. Furthermore. Leadership and Management. most of trainees are adults being from 25 to 34 year olds. WMware. -247- . is also one of the leading providers offering an innovative training solution for the of Net services software.Du lÞch Th¸ng 5 .2010 The table 3 and table 4 show that Innovative Training can be employed in various majors with the diversification of educators in terms of both age and race. which when applied to a clients’ business adds real value and has helped to distinguish TITC. a number of candidates enjoying the Innovative Training are black people contributing approximately 77 % in total. Especially.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Training centers can better manage their hardware resources since VMware Workstation allows a complete network to be built on a single computer. Available immediately worldwide to Novell authorized education partners. equipment and classrooms for billable training activities. Furthermore. TITC provides tailored training and consultancy solutions developed by the unique combination of practical skills. students can freely experiment without damage to the operating system and its applications. manufacturing and technology service industries in the United Kingdom. Inc. industrial experience and training interventions for a range of clients in the area of Information Technology Security.

Moreover. job skills. it also shakes hand with some universities and vocational training college such as Hanoi University of Technology. one of the most vital factors contributing our company’s success is the way we training the workforce that helps to level up and encourage the job skills for each employees” said Mr. Furthermore. Marlin Training Company. the revenue of company had increased by 15 times in the period between 2000 -248- . the network of VMware has been extended in all most continents on the earth that shows off the popularity and vitality of Innovative Training highly appreciated by customers. Nguyen Quang Mau. behavioral culture and creative working environment has been ignored by lots of Vietnamese companies since they are production. Viglacera Ha Long Company often sends its co-workers abroad to learning technology and experience so that they can apply better to the practical condition of company. Hong Cam Vocational Training College and Training Center of Quang Ninh Province to hold some classes trained employees in order to improve the quality of staffs. facilities and budget to encourage its employees enjoy training courses. Viglacera Ha Long Company is one of those clear-sighted enterprises in Vietnam. the huge amount of money has been flown in terms of budget spent and productivity reduction.and long-term courses that offer not only professional knowledge but also job skills. they often regard training workforce as “cost” instead of “investment”. DOCEP SafetyLine Institute and so forth. all officials are motivated to take a part in English and computer skill course meeting the changing work’s requirement. All those are very supportive and helpful in Innovative Training programs of companies who are both performance. Nowadays. there are a lot of other companies working quite well such as Heartland Innovative Training Company. In Vietnam: In spite of the application of innovative training popularly and effectively in the world. Especially. However.and market share-oriented. Therefore. there are still some companies being aware of the significant role of innovative training in keeping pace with the changing business environment. Besides those providers offering The Innovative Training. Viglacera Ha Long Company has gained the great achievements since applying this strategy focusing on fostering employees. Another reason is their special characteristic that is almost Vietnamese enterprises being small and medium.2010 As seen from the list above.Du lÞch Th¸ng 5 . Hanoi University of Civil Engineering. due to the limited capital. Hence. the effectiveness of innovative training has been not appreciated highly as a solution improved employees’ performance that plays an important role in the development of an enterprise. company always creates the dynamic and creative working environments in every activity originated from for innovation. Viglacera Ha Long has provided employees with both short. Additionally.and employee-oriented. Moreover. the improvement of the knowledge. Praesto Company. It could be the typical illustration in fostering workforce provided worth experiences that others should study and learn. Viglacera Ha Long Company’s CEO. Due to innovative training for workforce. Viglacera Ha Long usually brings favorable conditions in terms of time. Besides. “In the corporate strategy in development. Recently. For instance. some traditional training methods have been applied usually despite its ineffectiveness and obsolescence. 2. Impressively.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . there is no attention paid to creating the innovation in training workforce.

and only 15 would show up. not only in terms of output. E-Learning – A innovation solution for innovative training The Internet has been a very influential medium that fueled the technological movement of the 21st century.Du lÞch Th¸ng 5 . where information dissemination could automatically spell life or death for a company. The Internet has also helped companies manage internal workforce performance. Sales increased." Mr. its employees also take a part in both the short.and long-term courses abroad go along with self-studying.the foundation of the constant development”. In recent years. as did demand for more courses. offers about 120 training courses -249- .5 million per month on average. especially innovative training. Dam's company tried planting some seeds in a new field – online training. Mr. employees’ average salary also goes up constantly and it is expected to be VND 2. Based on the results. was frustrated with his company's sales-training program for 250 employees and 2. In 2008. Traditional corporate training methods have been replaced by an innovative approach called E-Learning. Golden Harvest.. in 2009 International Human Resources Development Corporation – the top consultants in human resource development of petrol field . and the sessions took valuable time out of workers' days. Fuel prices were making travel more expensive. David Dam. Neb. In addition.2010 and 2007. PVEP set the plan to training staffs and had salary. but also in terms of developing skills of new and existing employees. Petro Vietnam Exploration Production Corporation (PVEP) has been well-known with the successful application of innovative training in developed human resource strategy since it has the guideline of “People. Mr. to produce and post online videos for teaching sales reps how to sell Golden Harvest seeds. Thereby. Beside trying to attracting talent and excellent candidates and providing with the favorable environment. Dam tracked the results and found that employees were watching the videos.helped PVEP standardize the evaluating workforce system. V. and training costs fell to less than $100 per person from between $175 and $200. Louis. Additionally.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Any company owner in the world would not contend with the fact that Internet and the booming information technology have paved the way for more efficient operations. That has been expected to bring new success and achievement in the near future of PVEP. Golden Harvest hired EJ4 LLC. It has an encompassing effect on our society most especially on the corporate world. PVEP has also paid attention to the training workforce. "This would have been next to impossible if we had just standard [face-to-face] training. Viglacera Ha Long Company has given a good lesson for other Vietnamese companies in terms of taking the full advantage of the innovative training. a video-based online trainer in St. Moreover. Dam says.000 independent crop-seed dealers. of Waterloo. the level of job satisfaction is also improved with the happiness and passion when working. But in the spring of 2004.. Now. it offered new employees training programs giving good conditions to revise the theoretical knowledge and approach the modern technology of PVEP as well with the purpose of simulating the work passion and creation ability. and of course the ability to connect to various markets that were impossible to reach in the past. mostly on Saturdays or Monday mornings. Dam would rent meeting rooms for 30 people. A few years ago. compensation as well for each position and job type. He had trouble finding great trainers. head of sales development for Golden Harvest Seeds Inc. Mr.

Figure 1: Corporate Training Methods: -250- .Du lÞch Th¸ng 5 .000 page views a month. with 2. "We're getting more done with less money.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh ." he says.2010 on its internal Web site.

Adam (1995) found an average delivery variance of 59% between presentations by classroom by instructors. lots of times those trainers can miss lines and make mistakes. No matter how many times you view the film or tape it will be the same. Minimizing travel costs For years corporate America realized that travel and entertainment (T&E) made up the bulk of their training costs. Other studies have shown that if implemented properly these costs can be reduced by at least 80% (Hemphill 1999). it is ideally suited for training employees who are dispersed globally. the cost per trainee is dramatically reduced. More recently. E-Learning is very similar to a performance until it is just right. Moreover. e. a. Baradley (1994) and Hofstetter (1994) later confirmed these results across several years and hundreds of studies. d. Hemphill (2005) found that E-Learning saves time but it does not negatively impact effectiveness of learning. Cantwell (1993). Meeting better the needs of geographically diverse employees E-Learning is flexible.2010 Many people may question why E-Learning has been used in training workforces popularly and utilized effectively. Saving time without decaying learning benefits and minimizing time away from work Fletcher (1990) after carefully reviewing over forty independent studies found that E-Learning used for training workforces yielded timesaving of 35-45% over traditional classroom instruction while obtaining equivalent or better gains in learning retention and transfer. b. c. There are days when a particular actor may feel good and give a good performance as well as those in which they may feel bad and give a poor performance.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . In contrast.Being cost effective Numerous studies have shown that the cost of developing multimedia training is significantly higher than creating custom classroom instruction approximately four times (Hall 1997). Since lots of imagining benefits that it could bring for users. However. E-Learning is easily modified thus making it more adaptable for translation an change of content for different cultures and languages. Likewise Hall’s (1997) in-depth review of over 130 case studies found that computer-base training required significantly less time than instructor-lead training. As such. it can reach more people in a shorter amount of time than traditional learning. The amount of reduction in time ranged from 20-80%with 40-60 % being the most common range for timesaving. This is obviously not cost effective for small class size but as the number of employees increases. Adams (1992).Du lÞch Th¸ng 5 . This is the cost efficiency of e-learning. -251- . It is self-paced and can occur any time any place. numerous studies have shown that E-learning can cut the travel and entertainment cost associated with training by at least 50% (Hall 1997). Whereas. when a performance is filmed or taped the actors and director can review their performances and redo as well as edit those areas that are not up to the standards. Providing more consistent course delivery We are all aware that “live” theatrical performances vary in times and sometimes obviously ways from one performance to another.

it is believed that. As an example. reinforce the topic of the training session.You can also use this ice breaker for topical discussion. It would also help industries measure the impact of human resource development programs on employee performance and its return on investment. Gains and achievements of employees will be transformed into a comprehensive and quantifiable report that managers and executives can use to evaluate and assess their business development. quality service. . or their five favorite novels. The topic can be five of anything .most liked or disliked. in a training class. in a session on team building. VI. or their five least liked films. Even though it is not widely applied. engineering. (You do this because people generally begin a meeting by sitting with the people they already know best. Recommendations: Recommendation: To make use of Innovative training and apply it successfully in your organization. and help employees learn. . which would contribute to better performance. Firstly. a trainer should think about how to develop an Ice Breaker? You can develop an ice breaker that will warm up the conversation in your training class. Professionals from different parts of the globe can now have access to the latest practices in their field. with the help of technology and changes is competitive advantages. information technology. "What are five dysfunctional behaviors you have experienced when participating on an unsuccessful team?" Or. and growth of their industry.) . through out this paper. VII.Du lÞch Th¸ng 5 . What are five key factors that made it your best or most successful team?" -252- . in the future. and ensure that participants enjoy the training.Tell the newly formed groups that their assignment is to share their five favorite movies of all time. capture imagination. This training innovation has found its way into various industries. and the health care industry. Conclusion In short. "Think about the best team you have ever been on. It not only motivates trainees but also benefit the businesses to some extent. training icebreakers.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . you might ask. That will help your training classes hold interest. it has been found out that innovative is even more essential to organization. This ice breaker helps the group explore shared interests more broadly and sparks lots of discussion about why each person likes or dislikes their selected five.2010 It is not a surprise that most industries would rather integrate e-learning into their system rather than using traditional modes of improving the performance of their employees. innovative training will become more popular among the workforce. such as. and so forth. our group has some suggestions considered as training tips.Divide the meeting participants into groups of four or five people by having them number off. architecture. Investing in the workforce is the most precious investment of a business.

why leave team interaction to chance? Form team relationship guidelines or team norms early to ensure team success. You can also catch the drift of the conversation in the small groups based on the transitions made from item to item. There are a couple of secrets to what employees want from training and development opportunities. you have to invest in an ice breaker. interests. training and development opportunities are not just found in training classes and seminars.2010 .Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Training and Development for Motivation and Retention: Training and Development Options: One key factor in employee motivation and retention is the opportunity to continue to grow and develop job and career enhancing skills. that more than one person had in common and shared as their favorite. -253- . ask the rest of the participants if they have anything they'd like to add to the discussion before moving on with the rest of the session. Thirdly. • Figure out the characteristics. Tips about How to Develop an Ice Breaker: • Decide how much time. including the ice breaker. and preferences of the participants for whom you want to develop the ice breaker. the facilitator should talk and present 60-70% of the time. depending on the number of groups that need to report their discussion. how to create team norms? The members of every team and work group develop particular ways of interacting with each other over time. Thus. Keep in mind that with adult learners.Du lÞch Th¸ng 5 . This team building icebreaker takes 10 – 15 minutes. . for example. is the goal to let the attendees participate in an activity that will demonstrate insights about the participants' functioning together? The ice breaker can combine any of these goals. the reading of the lists generates a lot of laughter and discussion. Secondly. Just match the goals to the needs and preferences of your participants. Determine the goal of your ice breaker. Is the purpose of the ice breaker to warm up the group and provide the opportunity for participants to meet each other? Is the goal to bridge the group into the topic of the training session? Is the goal of the ice breaker to allow participants to demonstrate what they know or have experienced on a particular topic? • Or.Tell the groups that one person must take notes and be ready to share the highlights of their group discussion with the whole group upon completion of the assignment. however. relative to the length of the training session. Or ask the volunteer to list any movies. Different groups have varied preferences. Effective interpersonal communication among members and successful communication with managers and employees external to the team are critical components of team functioning. . Then. ask each group to share their whole list with the whole group. Because people are almost always your best source for laughter and fun.Debrief the team building ice breaker by asking for a volunteer to read their list of five of anything. Plus. is 30-40% of the training time. your time for trainee participation. With the potential power of the impact of these interactions on team success.When the volunteer from each group is finished.

watching others working and handling problems in real can be an interesting experience because no matter how much theory they have. • Enable the employee to attend an internally offered training session. The development of a life-long engaged learner is a positive factor for your organization no matter how long the employee chooses to stay in your employ.2010 Training and Development Option: Job Content and Responsibilities: You can impact training and development significantly through the responsibilities in an employee’s current job. • Provide more access to important and desirable meetings. or other formal educational sessions. let them spend some time observing the real work by themselves. • Purchase business books for the employee. during. They can make questions on the work if they want to. • Provide a flexible schedule so the employee can take time to attend university. and after a training session to ensure that the learning is transferred to the employee’s job. • Provide more opportunity to establish goals. • Assign reporting staff members to his or her leadership or supervision. • Provide the opportunity for the employee to cross-train in other roles and responsibilities.Du lÞch Th¸ng 5 . There. • Assign the employee to head up projects or teams. • Provide more authority for the employee to self-manage and make decisions.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . and in your confidence. the real situation is varied and different. college. • Reassign responsibilities that the employee does not like or that are routine. besides sitting in the class. -254- . Expand the job to include new. and measurements. priorities. • Perform all of the activities listed before. • Invite the employee to contribute to more important. Last but not least. • Ask the employee to train other employees with the information learned at a seminar or training session. • Enable the employee to spend more time with his or her boss. higher level responsibilities. Sponsor a book club or offer the time at a department meeting to discuss the information or present the information learned to others. • Pay for the employee to take online classes and identify low or no cost online training. Besides. department or companywide decisions and planning. an internal company website. • Provide tuition assistance to encourage the employee's pursuit of additional education. the trainees should be taken out on field trip to the place will be working on. • Provide more information by including the employee on specific mailing lists. • Offer commonly-needed training and information on an Intranet. Use these training and development activities to ensure that you optimize the employee's motivation and potential retention. Training and Development Option: Formal Training and Development • Enable the employee to attend an external seminar. This can help trainees somehow understand the operation of the company. in company briefings.

eu (Accessed 18th May 2010) Journalist. Leonardo da Vinci. Index of innovative training practices in SME.html (Accessed 16th May 2010) Anonymous. Marlin Training [online]. Urdan.educause. Available at URL: http://www. Available at URL: www. page 239-250.adb.Du lÞch Th¸ng 5 .2010 REFERENCES Luis R. 2007. Availlable at URL: http://www.cfm/hid/11294433 (Accessed 19th May 2010) E-learning – An Innovative Training Approach to Improve the Workforce [online]. Robert L.sara.org/Documents/TARs/AFG/ tar-afg38044. [online]. Weggen. [online]. William Wiggenhorn. [Online]. Corporate E-Learning: Exploring a new frontier.newsmaker. Available at URL: https://www. 5 edition. 2009.edu/Resources/AVisionofELearningfor AmericasW/151554 Accessed 17th May 2010) Anonymous. Available at URL: http://www. Available at URL: www.heartlandinnovativetraining.. Innovative Training Company [online]. Available at URL: http://www.aspx?id=240&lang=vi&Cate=35 (Accessed 16th May 2010) AdelaideAqua.wa. (Accessed 16th May 2010) Licensed training providers [online].smelearining. Hilton Garden Inn Austin NW/ Arboretum. A vision of E-Learning for America’s workforce.net/tonydestroni/elearning-an-innovative-trainingapproach-to-improve-the-workforce (Accessed 19th May 2010) Tín hiệu mới cho E-Learning tại Việt Nam [online].vmware.marlinnet.istaygreen.org/property.slideshare. 2002.pdf (Accessed 18th May 2010) Journalist. 2010./CorporateELearningExploringaNe/151480 (Accessed 18th May 2010) Journalist. 2006.com/product. Available at URL: http://online. Cornellia C. David.html (Accessed 19th May 2010) Anonymous.cdc.gov/niosh/topics/Training/ (Accessed 19th May 2010) Anonymous..Cardy.wsj. [online]. 2000. Available at URL: http://www. Trace A. 2005.html (Accessed 19th May 2010) Anonymous.educause.com/. [online].theinnovativetrainingcompany.com. Journalist. Available at URL: http://www. Available at URL: www. Firms Go Online to Train Employees [online]. Manfred Walleborn.Balkin. A.vn/detailNews.gov. Managing Human Resources.cfm (Accessed 16th May 2010) VMware Partners With Novell to Provide Innovative Training Solution [online]. Training Research and Evaluation [online].co.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . Available at URL: http://bizline.com/article/SB118704261866596434. Available at URL: http://www. Innovative training for poverty reduction in rural central asia.com. Available at URL: http://www.au/news/2447 (Accessed 16th May 2010) Heartland Innovative Training [online]. Available at URL: http://www.edu/.html (Accessed 16th May 2010) th -255- .Gosmez-Mejía. Innovative training course developed to help secure skilled welders for South Australia [online].com/company/news/releases/novell.uk/firstaid/OutdoorFA.au/ safetyline/pages/providers.docep.

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ANALYSIS OF THE DEPENDENCE OF TOURISM REVENUE ON THE NUMBER OF VISITORS, INVESTMENT, CPI
Written by: Hoang Thi Hue, Ngo Van Lung (TR-08) Supervisor: PhD DAO Thanh Binh
Abtract Nowadays, tourism is considered a very important industry with many chances to enlarge and develop. Each year, tourism has a big contribution to GDP of the whole country (15.7%). Tourism not only supports for government in general but also increases the standard of living for the people participating in tourism industry. Being concerned about this fact we decide to do this project with the topic: “Analyzing the dependence of tourism revenue on the number of visitors, investment, and CPI in Viet Nam from 2000 to 2007”.After collecting the data from some believable sources we have the model with three independent variables: visitors, investment and CPI. Firstly, we do model specification to make an overview about the model and have some predictions of the sign of the independent variables. Next, we do the individual partial test to find out the impact of each predictor on the prediction. Also, we do the test of overall significance as well as the test of drop variable. Moving violations part, we do with three problems that may be exist in the model, they are multicollinearity,heterocedasticity, autocorrelation. Seeing R2 and t-statistics of coefficients and using auxiliary regression, we can conclude that multicollinearity exists in our model. About heterocedasticity, we use white’s Heterocedasticity test without cross term to detect it. Similar to multicollinearity and Heterocedasticity problems, the violation of one of the OLS assumptions gives rise to autocorrelation. We use Durbin- Wastson d test to detect autocorrelation.

1. Introduction The issue of priority to tourism development, creating the best conditions to convert tourism into the spearhead economic sector of our country is currently being concerned more and more by the Party and the State of Vietnam. Like many countries, our tourism is being viewed as one of the leading economic sector by the huge benefits of economy and society that the tourism industry itself brought about.In addition to economic efficiency, the development of tourism also impacts directly the national economy, promotes the production and services sectors. In fact, the tourism performance has brought the growth of important steps to contribute to the industrialization, modernization of the country, reflected in the proportion of GDP of the sector in the economy(according to the General Statistics Office, in 2005 the revenue reached $2.3 billion, in 2008 has reached over $ 4 billion and the average growth rate reached 15.6% per year), offering great revenue to the country, creating jobs for the society, contributing to ensuring and maintaining the security and defense. This project with the objective of forecasting the tourism revenue of Vietnam, actually, based on the secondary research and the information resources available in the

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Internet and others printed media is to test how the number of visitors, the total investment as well as the CPI affected the revenue of Vietnam Tourism for the period of 2000-2007. This study was conducted on the basis of constructing a model to reflect the relationship between the variables just mentioned above, testing their significance and the errors of the model to find out the BLUE one. Due to the limit of time and available resources, the project cannot cover all the factors influencing the revenue of Vietnam Tourism, rather than the number of tourists, the total investment and the consumer price index. The object of this study is to give the readers and the people who are concerned the detailed insight into the inter-relationship between the revenue of Vietnam Tourism and the influential factors, the importance degree of each factor so that ideas can be formed to foster the further development of Vietnam Tourism in the coming years. 2. Sample data Obs 2000 2001 2002 2003 2004 2005 2006 2007 Revenues (billion VND) 4458.5 5869.4 7855.9 8649.8 10734.5 14693.4 16732 20078.4 Number of visitors (thousands) 12727.8 17205.4 24280.5 24660.4 29257.4 32339 33004.3 37233.6 Investments (billion VND) 4453 2975 3847 4230 5549 6628 8613 9899 CPI (%) 100 100.1 100.3 100.2 100.8 100.7 100.5 101

Table 1: Data table includes one dependent variable and three independent variables. Acording to the collected data, it can be seen that all the variables have the same trend which increased through the period from 2000 to 2007. It seems that there is a relationship between the independent and depependent variables. Thus, to check it, we do the hypothesis testing 3. Model specification Base on the data of “Vietnam National Administration of Tourism & General Statistic Official”, in this project we will define whether Y-Revenue of Tourism is influenced by three factors: the number of tourist visited, the consumption price index and the governmental projects invested in Tourism. Applying the economic theory, we construct the following model: Y= β 1 + β 2 * X 2 + β 3 * X 3 + β 4 *X 4 Y: revenue of tourism X2: number of visitors X3: investment X4: consumption price index In the model above, Y is set to be dependent variable and the rest are independent one.

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The first concept is Y-the revenue of Tourism yield. This concept is measured in billion people that means total number of money created by Tourism. Understanding this concept seriously is very important because it helps us to see a large of distribution of Tourism to GDP every year and crucial role as the whole in economy. For example: it makes rising in GDP, change the face of centre and countryside, create many different jobs to local community as an result is the living standard of citizens improves, motivate trading not only between people inside the county also people outside of country, etc. The second concept is X2-the number of tourist. It is clear that the number visitor is the most important factor which affects to the revenue of tourism. Base on the searching, we see that in recent years the number of tourists visit Viet Nam has increased significantly. In 2000 there are 12727.8 foreigners went to VN, however, it tripled in 2007 at 37233.6 (people). This result made dramatic increase in interest of tourism, reached 51 billion VND and played an important role in GDP. Another example about influence of number of tourist on revenue is event in 2009, with global crisis and going down in economy of almost countries, inflation rose as a result the price was high. That is the reason why foreigners trended to save money and cut-off spend on relax activities such: travelling or entertainment. It made a remarkable decrease in total number of tourist at 8% in comparison with last year and had negative effects on tourism. In contrast with outbound tourist, inbound tourist in Viet Nam had strong upward trend with 19% equal 25million visitors. GDP gained 70billion from tourism in 2009. The third one is investment in tourism. As we know just 20 years ago, tourism in Viet Nam was far from foreigners’ knowledge, only a little awareness they had. But it changes; Viet Nam is well-known country not only in Asia but also in all over the world, nowadays. Now, people in the world know Vietnamese characteristics, history, traditional value,etc. We have those achievements are due to governmental projects, plans, and strategic marketing to show images of our country. Furthermore, tourism organizations have combined together to improve and develop tourism and make tourism –“smokeless industry” become a real strength in the near future. In recent years, seeing the importance of tourism in developing economy, most of provinces have noticed their potentials, invested more to exploit and get revenue. Some typical governmental strategies as positive prospects to motivate tourism with projects: “Viet Nam-hidden charm”, “amazing Viet Nam” “develop in 2010-2913, the view in 2020”… others: national action on tourism is granted 40 billion VND, to promote products related to tourism, human resource, promotion tourism programs, building infrastructure, resort to attract more tourist. Therefore, Investment is factor that has to be noticed if we want develop tourism. The last concept is CPI; in this case CPI is the price of goods and services. We have to know that, when do travelling, tourist will be willing to spend much on recreation such as: shopping, movie, theater or outdoor activities,etc. From the matter of fact that most of foreigners said that: “Viet Nam is a cheap place”. Actually, the price of goods and services in Viet Nam is very low compared with around countries, that is the reason

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why revenue of tourism still low level. To some extent, if CPI increases reasonably, people are still willing to travel and the revenue of tourism also rises. To sum up, we can estimate the sign of all parameters ( 4. Result & Discussion: 4.1 Hypothesis testing 4.1.1 Eview table & Interpretion Dependent Variable: Y Method: Least Squares Date: 05/18/10 Time: 14:36 Sample: 2000 2007 Included observations: 8 Variable Coefficient C 122850.1 X2 0.384061 X3 1.210804 X4 -1282.461 R-squared 0.985694 Adjusted R-squared 0.974965 S.E. of regression 873.5519 Sum squared resid 3052371. Log likelihood -62.75946 Durbin-Watson stat 2.754617 Interpreting the result From the Eview table, we have the summary for the results of regression analysis: Y = 122850.1 + 0.38* X2 + 1.21* X3 – 1282.5* X4 Se t p R2
∧ ^

,

,

) are positive.

Std. Error t-Statistic 217767.0 0.564136 0.106824 3.595266 0.248612 4.870259 2190.142 -0.585561 Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic)

Prob. 0.6028 0.0229 0.0082 0.5896 11133.99 5520.925 16.68986 16.72959 91.86822 0.000382

= (217767) (0.10) (0.25) (2190.14) = (0.56) (3.59) (4.87) (-0.58) = (0.6028) (0.0229) (0.0082) (0.5896) = 0.985694, df =7

β 1 = 122850.1 is the intercept of the line, which indicates that Tourism revenue
will be 122850.1 billions VND on average when the number of visitors and investment and CPI are equal to zero. It has no economic meaning because they are never equal to zero.

β 2 = 0.38 is the slope of the line which shows that tourism revenue will increase by
0.38 billion VND on average when the number of visitors increases by 1 thousand, holding other independent variables constant

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β 3 = 1.21 means that the tourism revenue will be higher by 1 billion VND on average when the investment rises by 1 billion VND, holding other independent variables constant.

β 4 = -1282.5 indicate that tourism revenue will decrease by 1282 billion VND
when CPI increases by 1%, holding other independent variables constant. To test the influences of independent variables on the tourism revenue, we make hypothesis testing. 4.1.2. Individual partial coefficient test: This hypothesis testing is the test for the impact of each independent variable on the dependent variable. All of the test below is tested through a time- series of 8 years, from 2000 to 2007 and at the level of significance: α = 0.05 Test for the number of visitors: Ho: β 2 = 0 H a: β 2 ≠ 0 t- statistic: t =

β 2− β2
se ( β 2 )

=

0 . 38 = 3 .8 0 .1

Critical value: tc = t0.05,7 = 1.895 We have: tsta > tcri => reject Ho Conclusion: the number of visitors is statistically significant and is significantly different from zero. Test for the investment: Ho: β 3 = 0 Ha: β 3 ≠ 0 t-statistic:

t=

β 3 − β3
se( β 3 )

=

1.21 = 4.84 0.25

Critical value: tc = t0.05,7 = 1.895 We have: tsta > tcri => reject Ho

-260-

3.14 Critical value: tc = t0.98 /(4 − 1) F= = = 65. The new model after dropping X4: -261- .05. ( β 2 ≠ 0.59 Decision: Fsta > Fcri => Reject Ho Conclusion: There is evidence to conclude that there is at least one variable has effect on the tourism revenue.5896). Test for CPI: Ho: β 4 = 0 H a: β 4 ≠ 0 t-statistic: t = β4 − β4 se( β 4 ) ∧ ∧ = − 1282.6 2190.value (P-value of X4 = 0.3.895 Decision: t sta < t cri => Do not reject Ho Conclusion: The CPI is not statistically significant and is not significantly different from zero.5 = −0.05.test as well as the P.98) /(8 − 4) F-critical value: Fcα.n-k = Fc0. we use this test to find out whether our model be better if we drop the last independent variable (X4) out of the origin model. Testing the overall significance of the multiple regression: Now.1. Consequently. that means whether the value of tourism revenue is linear related to all the number of visitor. at least one variable has the effect. F-statistic: R 2 /(k − 1) 0. β 3 ≠ 0. This test is a test of overall significance of observed or estimated regression line.1.7 = 1. we can see that CPI (X4) is not statistically significant or have a very small effect on the tourism revenue. or β 4 ≠ 0).k-1.2010 Conclusion: the investment is statistically significant and is significantly different from zero. and CPI Ho: All variables are zero effect. investment.33 2 (1 − R ) /(n − k ) (1 − 0.4 = 6. ( β 2 = β 3 = β 4 = 0) Ha: At least one variable is not zero effect. we consider a joint null hypothesis that all β are jointly or simultaneously equal to zero.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . 4. 4.Du lÞch Th¸ng 5 .4 Testing the drop variable in the regression model: From the result of t.

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .0035 11133.187886 Prob.E.925 16. of regression Sum squared resid Log likelihood Coefficient Std.984468 ) /(8 − 3) (1 − R 2 new ) /( n − k ) 2 ∧ ∧ F-critical: Fcα.19*X3 Ho: β 4 =0 H a: β 4 ≠ 0 F-statistic: F= ( R new − R 2 old ) /# drop (0.4557 0.08843 t-Statistic -4.52211 16.744549 New model: ^Y= .0062 0.978255 Durbin-Watson stat 2.D.000030 ^ ∧ ∧ ∧ Mean dependent var S.984468 − 0.k-1.230139 0.4664.n-k = Fc0.395 (1 − 0.99 5520. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) Adjusted R-squared 0. -262- .2010 Y = β 1 + β 2 *X2 + β 3 *X3 New Eview table: Dependent Variable: Y Method: Least Squares Date: 05/18/10 Time: 14:39 Sample: 2000 2007 Included observations: 8 Variable C X2 X3 R-squared S.1. -63.058 1028.193937 0.533352 5.1280 3314022.832 0.0041 0.985694 ) / 1 = = −0. 0.011308 5.058 + 0. Error -4664.338058 0.5 = 6.61 Decision: Fsta < Fcri => Do not reject Ho Conclusion: There is evidence to conclude that X4 (CPI) is not relevant to drop out of our model.067459 1.984468 814.05.55190 158.Du lÞch Th¸ng 5 .34*X2 + 1.

1 + 0.1 Multicollinerity Dependent Variable: Y Method: Least Squares Date: 01/01/06 Time: 03:18 Sample: 2000 2007 Included observations: 8 Variable C X2 X3 X4 R-squared Adjusted R-squared S.99 5520.2010 4. R2= 0.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . -62.925 16.585561 Prob.985694 very high t stat = 0.461 0.0 0.754617 Std.0082 0.75946 2.870259 -0.1 0.2.142 t-Statistic 0.384061 1. Violations 4. From then. Imperfect multicollinearity cause some consequences:From the model.595266 4.248612 2190.210804X3 – 1282.985694 0.E.585561 is not significant Multicollinearity may be exist -263- . dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) Y ∧ = 122850. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient 122850.000382 Mean dependent var S. 0. we want to check whether the multicollinearity exists in our model or not.384061X2 + 1.564136 & t stat = -0.5519 3052371.0229 0. In another word.210804 -1282.974965 873. we want to find out the relationship among independent variables.5896 11133. the solution to address this problem will be given in order to help us have better model with more reliable statistics.72959 91.Du lÞch Th¸ng 5 .461X4 Using Eviews software.68986 16.6028 0. Error 217767.2.106824 0.86822 0.564136 3.D.

861659 / 4 − 1 F stat = ≈ F = 15.23 0.3 0.861659) / 8 − 4 Choose α = 0. of regression Sum squared resid Log likelihood Durbin-Watson stat ^ Coefficient -1494685. n-k) = F c (0.214732 2.0608 0.E.875 19.2787 0.426978 Prob.384061X2 + 1.806322 3657.D.23X4 Ho: multicollinearity doesn’t exist Ha: Ho is false From the model.079 66871135 -75.57125 0.2010 Auxiliary regression Dependent Variable: X2 Method: Least Squares Date: 01/01/06 Time: 00:50 Sample: 2000 2007 Included observations: 8 Variable C X3 X4 R-squared Adjusted R-squared S.57125 (1 − 0.914562 6212.0596 26338.76 Compare: F stat > F c ^ F-stat = R' / k − 1 2 Reject Ho. 1.05 F c (k-1. 0.55 8309. we have R '2 = 0.10685 1.210804X3 – 1282. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) Y = 122850. -264- .007118 Mean dependent var S.556388 Std.461X4 X 2 = -1494685 + 1.3.1 + 0.110948X3 + 15078.55650 15.Du lÞch Th¸ng 5 .411014 1. Error 619940.110948 15078.52671 19.759 t-Statistic -2.6) = 4.05.861659 Compute F statistic: ≈ F (1 − R' 2 ) / n − k 0.861659 0.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

we use the White‘s general heteroscedasticity test without cross term: Ho: homoscedasticity Var (ui) = H1: heteroscedasticity Var (ui) = White Heteroscedasticity Test: F-statistic Obs*R-squared 0.058 + 0.293521 Probability 5.2010 There is enough evidence to conclude that multicollinearity exist in the model. we need to give remedial method to correct the problem and make our model better. Remedical measure: From the problem above.2.102631 Probability 0.885543 0.19*X3 Interpretation for the final model Final model: ^Y= .058 + 0.19*X3 β 1 = -4664.2.Du lÞch Th¸ng 5 .984468. 4. We choose CPI variable to drop it because it has no statistical significance on tourism revenue. It has no economic meaning because they are never equal to zero.4664. which indicates that Tourism revenue will be 122850 billion VND on average when the number of visitors and investment and CPI are equal to zero.985694 to 0. we see that R2 falls from 0. Final model: ^Y= . It is still high and shows the goodness of fit in our model. Using this method.384 billion VND on average when the number of visitors increases by 1 thousand.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . After dropping it. Heteroscedasticity Heterosedasticity is the problem of violating the assumption about variance of error terms.34 is the slope of the line which shows that tourism revenue will increase by 0.530719 i Test Equation: Dependent Variable: RESID^2 Method: Least Squares Date: 01/01/06 Time: 03:16 Sample: 2000 2007 Included observations: 8 -265- . The best way here is dropping one variable from the model. Furthermore. holding other independent variables constant ∧ β 3 = 1.statistics are more statistical significance in the model.4664.058 is the intercept of the line. t. The existence of heteroscedasticity means that the variance of ui is not constant for all the observations.34*X2 + 1.19 means that the tourism revenue will be higher by 1.19 billion VND on average when the investment rises by 1 billion. ∧ ∧ β 2 = 0. holding other independent variables constant. it is clear that our model becomes more accurate and significant. To see whether this problem exists in our model.34*X2 + 1.

461X4 u = -4. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) Y = 122850. 4.53515 0.5005 0.384061X2 + 1.1 29.210804X3 – 1282.1 + 0.637829 = 5.503 X3 + χ 2 (0.293521 0. k’= 3 -266- . Error 7.E.613130 -0.2.535198 713975.10E+11 -110.223 0.59 Compare W & χ 2 we have seen that: W< χ 2 Do not reject Ho There is not enough evidence to conclude that Heteroscedasticity exist in the model.Du lÞch Th¸ng 5 .754671 α = 0.05. X 4 ^ 2 Compute W = n * R 2 = 8*0.088215 1.6) = 12.102631 ^ – 1139.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .66E+08 -4795803.612275 -0.87E+10 – 290.885866 0.754617 *.003997 -1139.3.344893 0.074313 Std.885543 Mean dependent var S. we use Durbin – Watson test DW 2.020192 1141.078147 X 3^ 2 9.05. 0.5364 0.6502 0.6498 0.503 0. ρ ∧ = 1=1= -0. of regression Sum squared resid Log likelihood Durbin-Watson stat ^ Coefficient -4.5385 0.3773 2 2 Negative autocolerration.2010 Variable C X2 X2^2 X3 X3^2 X4 X4^2 R-squared Adjusted R-squared S. Ho: ρ = 0 no autocorrelation Ha: ρ < 0 yes.5845X2 + 0.58E+09 7844231.8756 0.611380 Prob.4 448412.637829 -1. negative autocorrelation We have DW = 2.078147 9.7886 0. 0.8626 3.197921 -0. t-Statistic -0.94E+10 842.6507 381546.5845 0.66E+08 X4 – 4795803.46564 29. N=8.998493 0.003997 X 2 ^ 2 0. Autocorrelation To check whether this disturbance term of 1 observation has influence on the error term of the other observation.4 5.D.87E+10 -290.

368 d u = 2. -267- .287 Not reject Ho There is not enough evidence to conclude that Autocolerration exist in the model.754617) < 2. especially to improve the quality of services in order to increase tourism revenue 2. They are very statistically significant and show the goodness of fit in our model. Dropping a variable is very important because it helps our model more accurate and significant. In addition to.tests and R2. we can fix the multicollinearity problem. we would like to give out some recommendations for Vietnam tourism following: 1. Have a clear objectives and a strategic plan to attract the visitors come to Vietnam.368 < 1.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . If we drop CPI from the model.2010 Look at the table D.368 < (4 -2. three errors in our model are illustrated and fixed necessarily. This is one reason to increase the sale revenue.5A we find that: d l = 0. Recommendations: Through our research. there are many changes in t. 5. the government should have policies to attract more the investment projects from both domestic and foreigner investors in tourism industry.245< 2.287 If d l ≤ (4-d) ≤ d u not reject Ho We have 0. Generally.Du lÞch Th¸ng 5 . CPI seems that it has no impact on tourism revenue. After using remedial method. Two rest problems are heterocedasticity and autocorrelation is shown that they doesn’t exist in our model. ttests.287 0. It imply that tourism revenue depend a lot on number of visitors and investment.

Mathematics mark of university entrance examination. a regression function illustrating the relation between statistics mark and some of its explanatory variables was successfully established despite of the unexpected absence of self-study time (of Statistics). the White Heteroscedasticity Test revealsed the Heterocesdasticity did not exist. Luu Dieu Linh (BA-08) Nguyen Thi Dung (BA-08) Supervisor: PhD.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . the result appear to be negative. In details. Also. 1. while the variables of Mathematics mark and Entrance exam mark and Self-study time appeared to be the determinants. The data collected are used to test how significant the FMT-08 students’ result of Statistic and Probability is affected by the factors such as: gender. the Test of Significance showed that the variable of Calculus mark did not have much impact on the Statistics’ result. A multiple regression model was estimated using figures with the help of Eviews software. and the results of our FMT’s students did appear to be generally low. our group which consists of three students from Econometrics Tutorial 3-BA08 has decided to conduct a survey regarding the results of Statistics and Probability as well as the factors affecting this subject’s result. IELTS mark. Depart from that fact. time of self-study and the participation in part-time jobs. Eventually. Then.Du lÞch Th¸ng 5 .It was carried out in the end of April 2010. using questionnaires distributed to 45 FMT-08 students. Surprisingly. the Test of Heteroscedasticity was based on White Heteroscedasticity Test and scatter diagrams and the Test of Auto-Correlation was carried out by the Durbin-Watson d Test. etc. Based on some subjective ideas. Tests of Significance. Finally. we target the following variables as the explanatory variables for our models: • Entrance Mark (Group D) • Math Mark • Self-study time per week • Calculus final average mark -268- . we are interested in finding out the possible relation (if any) between the Statistics final results and a number of relating variables. Dao Thanh Binh Abstract Realizing that the subject of Statistics and Probability much related to the subject Econometrics which is being learnt by almost all of the students in Faculty of Management and Tourism – Hanoi University (FMT – HANU). the Test of Significance was tested directly by the t-test and F-statistics shown in the estimation output table obtained by running Eviews. Test of Heteroscedasticity and Test of Autocorrelation were carried out.2010 THE FACTORS AFFECTING STATISTICS FINAL RESULTS OF FMT STUDENTS Written by: Pham Viet Dung. INTRODUCTION Statistics in the last semester was considered one of the most challenging subjects. the Test of Multicollinearity was conducted by the Auxiliary Regression method. The test of Multicollinearity unexpectedly forced us to drop Self-study time though it at first is considered to be the key factor. Test of Multicollinearity. by using the Durbin-Watson d Test to detect the Auto-correlation.

which are considered a big advantage when studying at Hanoi University generally. econometrics… we expect a student who is good at calculus to perform well in statistics. Practice also suggests bad marks for those who spend just limited time and effort studying this subject. Then we test our established model with the test of significance. DATA Entrance Mark (Group D) Since entrance mark is a good indicator of general competences of students. in -269- .Du lÞch Th¸ng 5 . Practice suggests a high mark for a student who spends enough time and puts adequate effort on Statistics Course since it is very hard to be handled. we expect a positive value for the slope coefficient going with this variable Calculus final average mark Since calculus is a subject focuses more on the mathematic knowledge relating to economics and well supports the academic subjects like statistics. Source of data: The data for this variable is collected directly from the survey Expectation: Obviously. Having the right model on hand. cannot be refused as it is obviously one of the most influencing factors that can affect the result of any subjects. Source of data: The data about Entrance mark (group D) collected directly from the real survey. English is included as a subject in the entrance exam for group D and it is even double counted. Self-study time per week One may think that Math Mark and Entrance Mark are not really good determinant of Statistics result. Moreover. so that a high entrance mark should illustrates good English skills.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . high entrance mark perhaps reveals some advantages for a student regarding to his/her mentality. we first specify the model and identify the one the best fit the data and illustrate appropriately the relation between statistics final mark and the explanatory variables. Source of data: The data for this variable is collected from the real survey Expectation: A positive value of slope coefficient attaching to Math Mark is expected. On the other hand. some ending conclusions are given about the concerned relation between statistics final mark and the explanatory variables. and it is his choice. test of multicollinearity. Expectation: It is expected that the slope coefficient for that variable take positive value Math Mark Math refers to logical analysis. we estimate the slope coefficients for each regressor and provide the explanation for them. however. 2. and studying Statistics particularly.2010 After collecting necessary data from both our real survey and from the internet.After all. and high Math mark means good logical analyzing skills which are necessary to study such a subject like Statistics. Self-study time. test of heteroscedasticity and test of autocorrelation.

731127 0. Now we wonder whether it is appropriate dropping that variable or not and a formal drop test is employed: -270- .543378 3. Source of data: From the website of Hanoi University – FMT.CAL Unit: point Dependent Variable: STA Method: Least Squares Date: 05/16/10 Time: 23:15 Sample: 1 45 Included observations: 45 Variable C ENTRANCE MATH SELF CAL R-squared Adjusted R-squared S.259617 30. 3.143841 t-Statistic -1.106197 0.108035 0.379016 Std.119336 0.408691 0. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) It is clear that the variable Calculus average mark (or Cal) appears to be insignificant.058877 2.216512 1. Error 3.0000 0. and it means that we have to re-calculate all the total mark based on the internal marks of each student in our list of interviewees Expectation: We expect a positive relation between Statistics mark and Calculus final average mark.050027 0.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . The data we use include unrounded figures rather than the rounded total mark available.SELF Unit: hours Abbreviation.E.151730 Prob.329212 0. Drop test Base on the draft calculation from Eview as follow: Eview result.000000 Mean dependent var S.925378 1.239909 2.Du lÞch Th¸ng 5 .755570 0.523061 0.166739 0.1306 0. we first examine the linear model with four explanatory variables including: • • • • Math mark Entrance mark Self-study time Calculus average mark a.2563 6.2010 Hanoi university that subject is taught and tested in English which is quite similar with Statistics course.642930 16. Since the p-value of Cal is about 0. MODEL SPECIFICATION From the data collected.911111 1.32473 2.ENTRANCE Unit: point Abbreviation.424695 4. that is significantly different from the math in the entrance exam. 0. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -4.165666 0.MATH Unit: point Abbreviation.2563.0014 0. the probability to make Type-I error is more than 25% which is pretty high.linear regression of statistics final marks and the 4 regressors Abbreviation.53435 -41.2309 0.91146 0. the null hypothesis: β5 =0 is not rejected.D.

Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .335532 0.08266 -42.556702 5.645485 17.392544 Prob.194495 0.45101 0. we can drop the variable “Cal” from the model.E.linear regression of statistics final marks and regressors after dropping variable “cal” Dependent Variable: STA Method: Least Squares Date: 05/16/10 Time: 23:28 Sample: 1 45 Included observations: 45 Variable C ENTRANCE MATH SELF R-squared Adjusted R-squared S.Du lÞch Th¸ng 5 .000000 Mean dependent var S.05877 2. -271- . Without that variable in the model.755570 Rnew2 = 0.555000 0.239909 2. 0.0731 0.207649 40.2608 0. of regression Sum squared resid Log likelihood Durbin-Watson stat F-Test: Ho: β5 = 0 H1: β5 ≠ 0 Rold2 = 0. Error 3.102920 t-Statistic -1. the one which has least CV will be chosen.747464 0. the latter is the new one.140336 1. to find out the one providing the least coefficient of variance (CV) In different words.2010 The following result is for the model omitting Cal as an explanatory variable: Eview result. as well as the linear model.3160 < Fcritical ≈ 4 (with α = 5%) -> Do not reject Ho Coefficient -3. the next step is to test and find out the best function for the relation between the regressand and the regressors b.105731 0.047056 2.728986 0.839528 3. We regress all the functional models.D. Functional model test Then it is the time to test for the best model illustrating the relationship between Statistic Final Mark and the explanatory variables.119103 0.747464 F* = = 1.803626 0. now we have only 3 independent variables. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) The former is the old model.0010 0.911111 1.0000 6.259929 Std.423612 0. and the model then is better. Conclusion: Base on the result of the F-test.

0415 0.04% on average.Du lÞch Th¸ng 5 .919611345 + 1.0980 0.056491 THE LOG-LOG MODEL CV= =0.2010 CV= THE LINEAR MODEL: CV= = 0.127018 0. 0.1775794188*LOG(SELF) Explanation of parameter From the model. Error 1. it is obvious that there is a positive relationship between Log(STA) and Log(ENTRANCE).051617 THE LIN-LOG MODEL CV= =0.495089 0. -272- . Result Estimation and explanation of parameters Estimation of parameters By regressing the dependent variable Y (which is Log(Sta)) on the independent variables (Log(Math).177579 Std.0000 Formally we obtain the following sample regression: LOG(STA) = -2. Log(Self).093398 THE LOG-LIN MODEL CV= =0.5475306843*LOG(MATH) + 0.089668 Since CV is the criteria and CV corresponding with the LOG-LINEAR MODEL is the least out of 4 CVs We determine that LOG-LINEAR MODEL is the model best fit the data and well illustrates the relation between dependent variable and independent variables Conclusion: the model specification process ends with the following result: LOG(STATISTICS_MARK)^= β1^ + β2^LOG(ENTRANCEMARK) + β3^LOG(MATH_MARK) + β4^LOG(SELFSTUDY_TIME) c.104839 4. and Log(Entrancemark)).919611 1. we obtain the following results: Slope coefficients of the 3 regressors (excluding the intercept term) in the Log-Liner model of the regression Variable C LOG(ENTRANCE) LOG(MATH) LOG(SELF) Coefficient -2.01) changes in entrance mark results in an increase on the STA mark by 1. 1 %(0.0001 0.032380 t-Statistic -1.547531 0.693130 2.310646 5.724387 0. Other things holding constant.042083192*LOG(ENTRANCE) + 0.484282 Prob.042083 0.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

0.127018 0.Du lÞch Th¸ng 5 .915773 0. the estimated STA increases by 0.2010 Likewise.919611 1.177% on average. Error t-Statistic C LOG(ENTRANCE) LOG(MATH) LOG(SELF) -2.68% of variation of STA can be explained by variation of ENTRANCE.104839 4.0980 0.544372 42.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .495089 0.D. Model testing Test of significance • Individual partial coefficients Individual partial coefficient.177579 0.032380 -1.Result from Eview Variable Coefficient Std.704965 -1.0415 0.032380 t-Statistic -1.177579 1.E.0980 0.01).0000 It is clear from the result that. which is the coefficient of determination of the line.484282 Prob. The value of estimated slope coefficient of SEFT = 0.310646 5.5475306843 indicates that if the MATH mark increases by 1% (0. d.484282 Prob. the slope coefficient of SEFT is also positive.042083 0.53917 0. the math mark is positively related to The STA mark.547% on average with assumptions that other things hold constant.0001 0.168499 Std. the STA mark will increase by 0.Log-linear model of regression function of statistics final marks and the 3 regressors Dependent Variable: LOG(STA) Method: Least Squares Date: 05/17/10 Time: 16:08 Sample: 1 45 Included observations: 45 Variable C LOG(ENTRANCE) LOG(MATH) LOG(SELF) R-squared Adjusted R-squared S. other things hold constant. Moreover.098888 0.127018 0.756846 0.724387 0.000000 Mean dependent var S.310646 5.193584 -1.547531 0. MATH. This indicates the positive relationship between STA and SEFT. indicates that approximately 75.739054 0.919611 1.693130 2. and SELF.042083 0.495089 0. Error 1.05 all other slope coefficients are statistically significant since their p-values are not greater than 5% • Overall significance testing Eview result.756846.400935 42. dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) -273- .104839 4.0415 0.547531 0.0000 1.724387 0.36171 2. 0.693130 2. The positive coefficient slope of log(MATH) = 0.0001 0. The value of R 2 =0. of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient -2.1775794188 reveals that as SEFT time rise by 1%. given the significant level α = 0.

5) ) = 11.000000 0. Then we formally use the white’s general heteroscedasticity (with cross term) to detect heteroscedasticity.000000 0.267310581*LOG (ENTRANCE_MARK) + 0. The following table provides E-view result of the model which has just been adjusted to fix the error of multicollinearity (by dropping Log(self)). we collect necessary data from our real survey at Hanoi university and examine the information on hand. there is no auto-correlation 4.53917 which is indeed big enough to conclude that the regressors in fact have impacts on the regressand Test of multicollinearity.457087 LOG(MATH) 0.R2 = 9.476393 0.611080901 + 2. Model specification process (which we do to determine the best model possible) and testing process to determine the significance of the model.178240 0. self-study time and entrance examination mark. we successfully establish a regression function estimating the relationship of the variables.476393 1.457087 1.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh . as well as ensure the model is free from some serious problems such as multicollinearity.33382 (which is small) lead to the conclusion of no multicollinearity. the variable “Log (Self)” is regressed on the other independent variables. heteroscedasticity and autocorrelation are completed. We can now safely provide our model to illustrate the relation between statistics final mark and some affecting factors as follow: LOG(STATISTICS_FINAL_MARK)^ = -7. n.R we conclude that there is no heteroscedasticity. The F-statistic obtained from the auxiliary regression F=12. which is greater than du and smaller than 4 – du. specifically they are: Math mark.Du lÞch Th¸ng 5 . From the output of Eview.262378.05.0705 > n. CONCLUSION Since the interest is to find out whether there is any relation between the statistics final marks of FMT students and other suspicious factors which are in focus. we first establish the correlation matrix among the independent variables: Correlation matrix among 3 regressors LOG(ENTRANCE) LOG(ENTRANCE) LOG(SELF) LOG(MATH) 1. We continue to use Durbin Watson d test to detect autocorrelation in the model.2010 We conduct F-test to test the overall significance for the model and since F-statistic = 42. We decide to form the auxiliary regression. Base on Eview package. we suspect there may be multicollinearity in the model established.178240 LOG(SELF) 0. and the output of Eview show dstatistic = 2. heteroscedasticity and auto-correlation In order to test multicollinearity to see whether it exists or not.000000 Since the correlation between Log (SELFSTUDY) and Log (ENTRANCEMARK) appears to be relatively high.Thus.8471985753*LOG(MATH_MARK) -274- .212771 follows the chi-square 2 2 distribution and since (0.

Du lÞch Th¸ng 5 . there can be inaccuracy figures that are submitted to us from the interviewees due to many reasons.2010 5. the result may also be depended on other variables apart from the indicators that we chose. -275- . we could only implement a small survey which provided a small number of figures as our model’s raw data. our conclusion in this writing is supposed to subjective to some extents. Furthermore. LIMITATION Due to limitations in time and capability. therefore. Due to the nature of the survey.Héi nghÞ khoa häc Sinh viªn Khoa Qu¶n trÞ kinh doanh .

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