-i- STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING BANKING ACADEMY Faculty of Foreign Language ---------- GRADUATION THESIS SOLUTIONS TO ENHANCE THE OPERATIONAL EFFICIENCY OF VIETNAMESE ENTERPRISES AFTER GLOBAL FINANCIAL CRISIS Lecturer : NGUYEN PHUONG LAN (MA) Student : NGUYEN VAN ANH Class : ATCC – K14 Hanoi May 20, 2015 -i- DECLARATION I declare that this thesis is the product of my own work and has not been previously submitted for my degree or examination in any other university. All the sources I have used have been indicated and acknowledged by means of complete references. -ii- ACKNOWLEDGEMENT This graduation thesis would not have been possible without the guidance and the inspiration of several individuals who in one or another way contributed and extended their valuable assistance in the preparation and completion of this study. First of all, I would like to convey my deepest gratitude to my beloved supervisor, Ms.
Nguyen Phuong Lan (M.A), for her great inspiration and constant guidance. She encouraged me to set the target of writing thesis for graduation when I was a second-year student of her English for Banking and Finance IV class. Then, in spite of her busy schedules, she always found the time to guide me through this thesis. Next, I would like to express my sincere thanks to all the teachers in Banking Academy of Vietnam, especially those of the Faculty of Foreign Language who have provided me with a huge source of knowledge during my four years at university.
Last but not least, I also owe my heartfelt gratitude to my family and my friends, who have been a constant source of love, concern, support and strength, greatly assisting me in completing my work. Because of time constraints and limited capacity of the writer, this thesis will certainly not be free from defect. Therefore, it is my hope that lecturers and readers of the thesis will sympathize and offer further contribution to it. -iii- ABSTRACT The joining of Vietnam into the World Trade Organization (WTO) has brought the economy a lot of growth potential as well as opportunities.
By taking part in global economic integration, Vietnamese economy in general and Vietnamese enterprises in particular might not only raise the position in global economic market but also be easily affected by the downsides of economy in the world which include the global financial crisis in 2008. This paper studies the impacts of the global financial crisis on Vietnamese enterprises. It goes ahead to understand theoretical underpinnings relating to financial crisis in general before critically analyzing the influence of the global downturn on Vietnamese enterprises. The theory mentions three fundamental aspects of financial crises, including definition, classifications, and their consequences on economy.
Particularly, the global financial crisis in 2008 was proved to be a typical fiscal turmoil possessing all specific features of a financial crisis. A study of its development, causes, and effects was conducted with an emphasis on the situation of enterprises in Vietnam. Finally, in an attempt to make Vietnamese enterprises operate more effectively after being impacted by the crisis, some recommendations are proposed to the government and enterprises. -iv- LIST OF ABBREVIATIONS Abbreviation Original ASEAN Association of Southeast Asian Nations CDOs Collateralized debt obligations EU European Union EUR Euro FDI Foreign Direct Investment FDIC Federal Deposit Insurance Corporation FED Federal Reserve FII Foreign Indirect Investment FTA Free Trade Agreement IMF International Monetary Fund GDP Gross Domestic Product GBP Great Britain Pounds JPY Japanese Yen LIBOR London Interbank Offer Rate M&A Merger and acquisition MBS Mortgage-backed securities SBV State Bank of Vietnam SMEs Small and Medium Enterprises UK United Kingdom US United States USA United States of America USD United States Dollars VAT Value Added Tax VND Vietnamese Dong WTO World Trade Organization -v- LIST OF TABLES AND FIGURES Figure 3.
House prices during the housing market bubble in the US (Source: Wikipedia). The movement of some indexes on stock market in 2008 (Source: Wikipedia). Sales Prices of New Houses Sold in the United States 2002 – 2010. Prices of some exported commodities (Source: Thomson Rueters).
Overnight LIBOR based on USD (Source: Sober Look). Treasury and Mortgage-Backed Securities Held (Source: Sober Look). FDI into Vietnam (Source: GSO). The number of unemployed people in Jan 2009 (Source: GSO).
Situation of SMEs in Vietnam in 2008. 30 -vi- TABLE OF CONTENTS DECLARATION. iii LIST OF ABBREVIATIONS. iv LIST OF TABLES AND FIGURES .v TABLE OF CONTENTS.
vi CHAPTER 1: INTRODUCTION. Rationale of the study. Aims of the study .2 CHAPTER 2: LITERATURE REVIEW. Types of financial crisis.
Speculative bubbles and crashes. International financial crises. Wider economic crisis. Causes and consequences of financial crisis.
Strategic complementarities in financial markets. Asset-liability mismatch. Uncertainty and herd behavior .11 SUMMARY OF CHAPTER 2 .11 CHAPTER 3: RESEARCH METHODOLOGY & DATA ANALYSIS. Global financial crisis in 2008.
Development of the crisis. Causes of the crisis. Effects on the global economy. Impacts of global financial crisis on Vietnamese enterprises.
Enterprises lacking production capital. High price of input factors. Reduction of output markets. Reduction in profit.
Current economic conditions of Vietnam encouraging enterprises. Positive signals for recovery by 2014 .32 SUMMARY OF CHAPTER 3 .33 CHAPTER 4: RECOMMENDATIONS AND CONCLUSION. Recommendations for the government. Continuing to implement production capital support policy.
Promoting investment along with solving employment problems. Continuing to implement business tax support policy. Recommendations for Vietnamese enterprises. Changing business strategies.
Focusing on domestic market. Controlling finance effectively.39 SUMMARY OF CHAPTER 4 .42 -1- GRADUATION THESIS BANKING ACADEMY CHAPTER 1: INTRODUCTION 1. Rationale of the study The financial crisis is a phenomenon that its influence is far-reaching for the economy not only just in a single country but also in the whole region. It causes the fall in growth rate and investment, leading high inflation, rising unemployment, and so on.
The global financial crisis in 2008 had a huge impact on the economy in the countries, especially developed countries such as Russia, Japan, Germany, and the EU. This does not mean that developing countries are not affected. The crisis had a huge influence on enterprises, corporations. In reality, many businesses that had survived more than a hundred years with full of experience, position and brand had to declare bankruptcy.
Therefore, we can imagine that businesses in developing countries including Vietnam would also face difficulties. Accordingly, I choose the topic “Solutions to enhance the operational efficiency of Vietnamese enterprises after global financial crisis” as my graduation thesis’s title in the hope of illustrating the real situations during crisis period and making some recommendations to enhance the effectiveness of Vietnamese enterprises. Aims of the study The thesis aims at analyzing the impacts of the global economic crisis on Vietnamese enterprises in terms of capital, labor, business markets, and so on. Firstly, the thesis shows research about basic theoretical contents about financial crisis.
Together with that, it also aims at finding out government measures to support enterprises overcome the hard time. Furthermore, I would like to provide information indicating that businesses themselves have been made effort to develop after the global financial crisis. -2- GRADUATION THESIS BANKING ACADEMY 1. Research questions This thesis aspires to provide answers to the following questions: What are the impacts of the global financial crisis in 2008 on Vietnamese enterprises? What are the feasible recommendations to help Vietnamese enterprises take advantages of current conditions to develop after the crisis? 1.
Research methodology The secondary data, which comes from websites and organizations’ reports, is predominantly used in the thesis. The theoretical framework is abstracted from some books and websites. The data is generalized to tables and figures. Upon analysis and discussion, I try to figure out the challenges as well the opportunities and try to make recommendations to the case study of enterprises in Vietnam.
Research scope The thesis accentuates the situation of Vietnamese enterprises under the impacts of the global financial crisis in 2008 and the current conditions that can encourage Vietnamese enterprises to develop after the crisis. Thesis organization The thesis consists of four main chapters: (i) Introduction; (ii) Literature review; (iii) Research methodology & data analysis; (iv) Recommendations and conclusion. In the first chapter, the author explains how the main topic is chosen. The introduction part also states aims of the study, research questions, methodology and the organization of the thesis.
In the second chapter, the literature review of the financial crisis has been illustrated with the definition, the different types, the causes and consequences of the financial crisis. -3- GRADUATION THESIS BANKING ACADEMY In the third chapter, the author gives the readers an insight into the global financial crisis in 2008 and it impacts on Vietnamese enterprises as well the current conditions encouraging the enterprises to develop in 2015. In the last chapter, some recommendations will be suggested to improve the operation of Vietnamese after the crisis. -4- GRADUATION THESIS BANKING ACADEMY CHAPTER 2: LITERATURE REVIEW 2.
Definition Financial crisis is a situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution. Types of financial crisis 2. Banking crisis When a bank suffers a sudden rush of withdrawals by depositors, this is called a bank run.
Since banks lend out most of the cash they receive in deposits, it is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run renders the bank insolvent, causing customers to lose their deposits, to the extent that they are not covered by deposit insurance. An event in which bank runs are widespread is called a systemic banking crisis or banking panic. Examples of bank runs include the run on the Bank of the United States in 1931 and the run on Northern Rock in 2007. Banking crises generally occur after periods of risky lending and resulting loan defaults.
Currency crisis There is no widely accepted definition of a currency crisis, which is normally considered as part of a financial crisis. Kaminsky et al. (1998), for instance, define currency crises as when a weighted average of monthly percentage depreciations in the exchange rate and monthly percentage declines in exchange reserves exceeds its mean by more than three standard deviations. Frankel and Rose (1996) define a currency crisis as a nominal depreciation of a currency of at least 25% but it is also defined at least 10% increase in the rate of depreciation.
In general, a currency crisis -5- GRADUATION THESIS BANKING ACADEMY can be defined as a situation when the participants in an exchange market come to recognize that a pegged exchange rate is about to fail, causing speculation against the peg that hastens the failure and forces a devaluation or appreciation. Speculative bubbles and crashes A speculative bubble exists in the event of large, sustained overpricing of some class of assets. One factor that frequently contributes to a bubble is the presence of buyers who purchase an asset based solely on the expectation that they can later resell it at a higher price, rather than calculating the income it will generate in the future. If there is a bubble, there is also a risk of a crash in asset prices: market participants will go on buying only as long as they expect others to buy, and when many decide to sell the price will fall.
However, it is difficult to predict whether an asset's price actually equals its fundamental value, so it is hard to detect bubbles reliably. Some economists insist that bubbles never or almost never occur.