122 VIETINBANK MTO II’S BUSINESS STRATEGY FOR FOREIGN CURRENCY BANKNOTES

122 VIETINBANK MTO II’S BUSINESS STRATEGY FOR FOREIGN CURRENCY BANKNOTES

LINCOLN UNIVERSITY OAKLAND, CA, USA INTERNATIONAL PROGRAM

VIETINBANK MTO II’S BUSINESS STRATEGY FOR FOREIGN

CURRENCY BANKNOTES

A RESEARCH PAPER SUBMITTED TO

THE GRADUATE FACULTY OF LINCOLN UNIVERSITY FOR

THE MASTER OF BUSINESS ADMINISTRATION

BY NGUYEN NGOC THANH

OCTOBER, 2008

Since the Vietnamese government promulgated Decision No.170/1999/QD-TTg dated 12/09/1999 encourage Vietnamese people in foreigncountries to transfer money to beneficiaries in Viet Nam through the bankingsystem, by post, through the account (deposits and foreign currency savings) of theindividual beneficiaries or organizations or individuals are allowed to do service toreceive and pay foreign currencies, the active transactions presence of foreigncurrencies System Commercial Bank in Ho Chi Minh development is quite strong

It is significant money transfers overseas remittance and purchase foreigncurrencies face for the needs tourism, treatment, study, work, etc Foreigncurrency has transactions of goods by the fastest-growing customer personaltalents deposit and foreign currency savings in the bank, when it should be entitled

to withdraw money by foreign currency cash Individuals have foreign currencycash also added to your account deposit foreign currency savings in commercialbanks The practice shows that when exchange rates stable, interest rates depositforeign currency and local currency difference is not much different, the amount offoreign currency customer personally sent to commercial banks increased and viceversa when the exchange rate variable the deposit interest rate foreign currencylower than deposit interest rates of currencies, the amount of foreign currency-sidecustomers to withdraw or to sell the bank also increased strongly It can beconcluded one of the factors directly as the need to use foreign currency is theincreasing presence of overseas remittance money Throughout nearly 10 years,overseas remittance money transfer system through commercial banks in the

province of Ho Chi Minh City has increased continuously, from 829 million USD

in 2001 has reached 3.6 billion U.S dollars in 2007 (equal to 35% total export

turnover of goods from crude oil city of Ho Chi Minh in 2007) Money transferoverseas remittance is concentrated especially on the year and the end of the year.This is also a time of active air-conditioned foreign currency cash in commercial

banks in the province of Ho Chi Minh City in which Vietinbank MTOII oftenfaced with a lack of foreign currency while in the remaining months in the year toadmit foreign currency cash

Although Vietinbank MTOII have been business strategy overall to developthem in 2010 to become a banking business operations of currency with highefficiency, the position has strong financial, banking technology advancedproducts, services - diversity and makes up market share to compete in theprovince of Ho Chi Minh City now but I still do not have a business strategy toface foreign currency restrictions overcome the current status or lack of surplusforeign currency such as the above aspects in order to further improve theefficiency of business in foreign currencies solutions, appropriate measures areeconomical, high in attracting, exploitation and adjust management foreigncurrencies cash

Therefore, we have made this thesis to the official presentation of theoryand practical meaning of business strategy foreign currency face analyze thereality of business operations in foreign currencies face Vietinbank MTOII from

2004 to present, competitive position, market share of import-export foreigncurrency Vietinbank MTOII aspects of the total value of import-export foreigncurrency aspects of the bank trade in the province of Ho Chi Minh City to on thebasis of that proposed solutions, measures in strategic business aspects of foreigncurrencies Vietinbank MTOII by 2010 in order to contribute to the harmoniousoperation more foreign currency revenue side, improving the efficiency ofbusiness operations, foreign currency to meet present needs foreign currency tocustomers face consistent with trends integration of the commercial banks inVietnam

The purpose of this thesis to give the solution, measures to:

+ Attract foreign currency from the face of commercial banks in theprovince of Ho Chi Minh City, branches in the south of the banking systemVietinbank, the tables and cleaning agents and foreign currency exchange, the

anonymous customer, the customer needs to send money to save foreign currency,foreign currency, etc and submit the cash to Vietinbank MTOII.

+ To supply the foreign currency cash demands for withdrawal or bringforeign currency to face valid of all customers through banking services such aspay deposit savings, paying money overseas remittance, foreign currencywithdrawn read surface of the water from outside the deposit accounts opened intheir Vietinbank MTOII, selling foreign currency for international students,customers traveling, business, healing go abroad, etc

+ Consolidate and further expand banking network - customers dealingwith Vietinbank MTOII

+ Efficient processing status of foreign currencies or face excessive lack ofbusiness activities, provision of services for bank customers

+ Improving the quality of banking services related to income - moreforeign currency cash

+ Increased revenue for Vietinbank MTOII

Requirements of the thesis:

+ Specify actual work trang incomes and expenses in foreign currenciescash Vietinbank MTOII during the past

+ If the advantages and disadvantages in the business operations foreigncurrencies cash of Vietinbank MTOII

+ Outline orientation and business solutions, appropriate measures to bringthe actual effect of foreign currency business presence and customer service

+ Propose recommendations withVietinbank MTOII, Vietinbank HO andlocal governments to improve feasible strategy for the foreign currency cash inbusiness

Objectives of the this study:

+ Improving competitive positions of Vietinbank MTOII to serve the bestneeds more income foreign currency cash of customers, especially for individualcustomers

+ Through the ability to timely meet all needs more income Foreigncurrency present a reasonable customer's personal effects will create psychologicalwell in customer on the increase the conversion of money in comparison withVietnam foreign currency because every individual customer who can use thedomestic currency to buy foreign currency now is when there is a reasonabledemand in the transaction is allowed in Vietinbank MTOII

+ Withdrawn from the lessons of experience in operating effectivelymanage foreign currency present at transactions II of Vietnam Commercial Bank(defined survival rate of foreign currency funds present a reasonable choice andoptions for revenue foreign currencies surface optimization)

CHAPTER I REVIEW OF THE LITERATURE

I/ DEFINITION OF TERMS

The terminology used in this research has the following meaning:

1) Foreign currency: means the currency of a foreign State or a commoncurrency of many States

2) Foreign currency banknotes: Lawful currencies of foreign countries beingcirculated in the forms of bank-notes

3) Foreign exchange rate means the value of a foreign monetary unitcalculated in Vietnam's monetary unit

4) Licensed credit institutions are banks and non-bank credit institutions inVietnam which is allowed by the State Bank to provide and carry out foreignexchange transactions

5) Foreign exchange Desk is an organization allowed by the State Bank tocollect and exchange foreign currencies in cash Conditions for being allowed tocarry out foreign exchange transactions for foreign exchange desks, are: (a)Having convenient locations for transactions or places where foreign exchangedemand exits; (b) Having enough equipment and material bases to meet therequirements of the exchange of foreign currencies in cash; (c) Having personnelwith good knowledge about cash-related transactions and capability to carry outcurrency exchange operations

6) Foreign exchange agent is an organization acting as the authorized agent ofthe credit organizations and allowed to operate after has register certificationforeign exchange agents by the State Bank branch province, city directly under thecenter government on area only The foreign exchange agents only operationunder form used Vietnam dong to buy foreign currency cash of individual and notsell foreign currency cash for individual to take Vietnam dong (except foreignexchange agents put on isolate zones in national border gates) The foreign

exchange agents must sell all foreign currency bought for credit organizations onend of the working day except of foreign currency able to leaving by agreementwith credit organizations (maximum is not over 2,000 USD or other kind foreigncurrency has the same value)

7) Residents are the following organizations and individuals:

a) Credit institutions are established and doing business in Vietnam (hereaftercalled credit institutions);

b) Economic organizations set up and doing business in Vietnam except abovecredit institutions (hereafter called economic organizations);

c) State agencies, armed forces units, political organizations, social-politicalorganizations, social-political professional organizations, social organizations,social-professional organizations, social funds and charity funds, which areoperating in Vietnam;

d) Vietnamese diplomatic missions, consulates operating overseas;

e) Representative offices of all above-said institutions, organizations operatingoverseas;

f) Vietnamese citizens residing in Vietnam; Vietnamese citizens residingabroad for less than 12 months; Vietnamese citizens working in organizations(which stipulated in above-said items “d” and “e”) and their dependents;

g) Vietnamese citizens going abroad for tourism, study, medical treatment orvisits;

h) Foreigners residing in Vietnam for 12 months or more except in casesforeigners entering Vietnam for study, medical treatment , tourism or working inforeign representative diplomatic agents, consulates offices and organizations inVietnam

8) Non-residents being organizations or individuals have not yet beenstipulated as above residents

9) SWOT Analysis is a strategic planning method used to evaluate theStrengths, Weaknesses, Opportunities, and Threats involved in a project or in a

business venture It involves specifying the objective of the business venture orproject and identifying the internal and external factors that are favorable andunfavorable to achieving that objective.

II/ REVIEW OF THE LITERATURE

This research describes “Vietinbank MTOII’s business strategy for foreigncurrency banknotes to the year 2010”, so the concepts of strategy and strategicmanagement should be defined and frameworks in strategic planning process such

as SWOT analysis which will be used in analyzing the status-quo of Vietinbank

MTOII’s business activities for foreign currency banknotes

II.1) WHAT IS STRATEGY?

Strategies are plans for achieving organizational goals A strategy is anintegrated and coordinated set of commitments and actions designed to exploitcore competencies and gain a competitive advantage

When choosing a strategy, firms make choices among competingalternatives In this sense, the chosen strategy indicates what the firm intends to

do, as well as what it does not intend to do

Strategies provide focus for decision making and tactics are the methodsand actions used to accomplish strategies

II.2) STRATEGY AT DIFFERENT LEVELS OF A BUSINESS

Business-level strategy is an integrated and coordinated set of commitmentsand actions the firm uses to gain a competitive advantage by exploiting corecompetencies in specific product markets Every firm must form and use abusiness-level strategy However, every firm may not use all the strategies –corporate-level, acquisition and restructuring, international, and cooperative – Afirm competing in a single-product market area in a single geographic locationdoes not need a corporate-level strategy to deal with product diversity or an

international strategy to deal with geographic diversity In contrast, a diversifiedfirm will use one of the corporate-level strategies as well as choose a separatebusiness-level strategy for each product market area in which it competes.Business-level strategy is the core strategy – the strategy that the firm forms todescribe how it intends to compete in a product markets.

Because customers are the foundation of successful business-levelstrategies, therefore, when selecting a business-level strategy the firm determines(1) who will be served, (2) what needs those target customers have that it willsatisfy, and (3) how those needs will be satisfied

II.3) STRATEGIC MANAGEMENT

The strategic management process is the full set of commitments, decisions,and actions required for a firm to achieve strategic competitiveness and earnabove-average returns The firm’s first step in the process is to analyze its externaland internal environments to determine its resources, capabilities, and corecompetencies – the sources of its “strategic inputs.” With this information, thefirm develops its vision and mission and formulates its strategy To implement thisstrategy, the firm takes actions toward achieving strategic competitiveness andabove-average returns Effective strategic actions that take place in the context ofcarefully integrated strategy formulation and implementation actions result indesired strategic outcomes It is a dynamic process, as ever-changing markets andcompetitive structures are coordinated with a firm’s continuously evolvingstrategic inputs.”

Vision is a picture of what the firm wants to be and, in broad terms, what itwants to ultimately achieve It is the foundation for the firm’s mission

Mission is the reason for the existence of an organization A missionspecifies the business or businesses in which the firm intends to compete and thecustomers it intends to serve

II.4) EXTERNAL FACTORS TO AFFECT BUSINESS STRATERGY FOR FOREIGN CURENCY BANKNOTES

II.4.1 DOLLARIZATION

Concepts of dollars:

Dollar's is to use foreign currencies instead of the currency to perform some

or all of the functions of the currency in a country Therefore, when it comes to theeconomy is dollar and means the residents of the country that use foreigncurrencies instead of the currency reserves in the value of, or paymentcalculations, the price of goods

For the economy is in the process of transition like Vietnam, departingpoint still low, the currency did not have the ability to convert the status of dollarsstatus of dollars in the market and financial Viet Nam is unavoidable

The process of dollars in Vietnam at present affected by the following ten factors:

a) Source of overseas remittance increased rapidly, each year an averageincrease of 52% (See the sub-I attached), private Ho Chi Minh City in the past 4years the average increase is 47% per year

b) The number of tourists and international increasing, in 2006, has3.600.000 turns’ people, in 2007 with 4.171.564 people turn to Vietnam Only HoChi Minh City in 2006 received 2.350.000 turns’ people

c) The wages paid in foreign currency for the Vietnamese to work inforeign

d) Foreigners come to Vietnam (who do not reside) is increased

e) Money financing from foreign country

f) Foreign investment in Vietnam's steady growth through the year, onaverage each year increased 30%

g) Export turnover of Vietnam is increasing rapidly (see the sub-2attached) In 2007, export turnover reached 48 billion USD (an increase of 8,2

billion compared to 2006) in which its own in Ho Chi Minh City reached 10,3billion USD (not including export turnover of crude oil)

h) Tend to increase the number of absolute mobilization of capital andloans in foreign currency of commercial banks in the province of Ho Chi MinhCity (see the sub-3 attached)

k) Source of foreign currency circulation on the free market througheconomic activities and other underground, such as purchase and sale of anyestate, jewelry, vehicles and other assets valued other, etc

l) Foreign currency from the smuggling operation (black market)

This reality has created the environment for work early every time theexchange rates fluctuation

Statistics of the state bank in the province of Ho Chi Minh City showed that:

- Dollars of assets in debt banking system through reduced year The rate ofdeposit U.S dollars in total deposits at commercial banks from 32,5% at the end

of 2004 was reduced to 20,74% at the end of 2007 However, the absolute number

of 101.020 billion of the total capital raised in foreign currencies into VND to theend of 2007 it has doubled compared with the end of 2004 (as 48.857 billion ofVND)!

- Dollars of assets in the banking system but reducing the speed is reduced

to less than the dollars and assets The rate of loans in foreign currency debtbalance of the total credit at commercial banks from 35,1% at the end of 2004 wasreduced to 25,60% at the end of 2007 However, the absolute number of 104.010billion of VND of total debt balance of loans in foreign currencies into VND to theend of 2007, it has also risen more than doubled last year compared with 2004 (as47.968 billion of VND)

- Dollars in economic conditions can be calculated in billions of USD by thepercentage of the total means of payment for USD to be transferred to Vietnamthrough non-official channels such as through the path's personal residence and

non-residents (do not move directly through the banking system) However, canalso imagine is some level of growth of state dollars and through the number offoreign currencies face of the U.S dollar, which commercial banks in the province

of Ho Chi Minh City has gained and to produce the foreign banks increasedcontinuously from 775.989.069 USD in 2003, up to 1.533.948.150 USD in 2007and only the first 6 months of the year 2008 this figure had reached1.084.580.000USD!

-II.4.2 VIETNAMESE GOVERNMENT DECREE No 160/2006/ND-CP

It is issued on December 28th, 2006 and apply to organizations andindividuals being residents and non-residents engaged in foreign exchangeactivities in Vietnam as well as organizations and individuals being residentsrelated to the management, inspection, and handling of violations

 Regarding the liberalization of current transactions, Decree stipulates that inVietnamese territory all payment and money transfer transactions for currenttransactions of residents and non-residents are freely made in accordance withDecree and relevant legal provisions on the following principles:

- Residents and non-residents may purchase, transfer or carry foreign currencies abroad in service of their demands for payment and money transfer for current transactions;

- Residents and non-residents shall present documents according to regulations of credit institutions upon purchase, transfer or carrying of foreign currencies abroad and take responsibility before law for the truthfulness of those documents, but they are not required to present documents certifying the fulfillment of their tax obligations towards the Vietnamese State

 Regarding individuals and organizations’ rights to use foreign currencies) cash,Decree stipulates that:

- The residents, who do not reside there is a personal foreign currency cash isentitled to store, carry people, for, gift, inheritance, selling for credit organizations

are allowed to, move, bring the foreign service for the purpose of the legal andpayment for people who are collecting foreign currency as stipulated by the law onmanagement of foreign exchange

- Residents who are individuals with foreign currency cash added savings inforeign currencies held are allowed to withdraw money origin, interest in foreigncurrency cash as stipulated by the law on sending foreign currency savings

- Who residents, who do not reside is held open and use your deposit inforeign currency credit organizations are allowed to carry out the transactionrevenue, more foreign currency cash after :

+ Collect foreign currency cash from abroad in accordance with regulations

of the State Bank of Vietnam

+ Only withdraw foreign currency cash (or converted into other currencies

by their cash) for individuals working for organizations when it is sent overseas work

+ Only withdraw foreign currency cash (or converted into other currencies

by their cash) to pay salary, bonus, allowances for non-residents, the residents are foreigners

- Who residents, who are not homeless personal residence is open and useyour deposit in foreign currency credit organizations are allowed to carry out thetransaction revenue, more foreign currency cash follows:

+ Revenue foreign currency cash from abroad to bring under of the State Bank of Vietnam

+ Only withdraw foreign currency cash (or converted into other currencies

by their cash)

II.4.3 DECISION No 170/1999/QD-TTg DATED AUGUST 19 TH , 1999 ON ENCOURAGING VIETNAMESE EXPATRIATES TO TRANSFER MONEY HOME

Decision No 170/1999/QD-TTg decides that:

The Government encourages and creates favorable conditions forVietnamese expatriates to transfer money home provided their remittance iscompliant with the law of Vietnam and the law of country where they reside andhave a demand for remitting money to Vietnam.

Foreigners who transfer money to Vietnam in order to assist their families,relatives, or to donate to charity shall be got similar treatment as the Vietnameseexpatriates as stated hereof

Vietnamese expatriates and foreigners shall be entitled to transfer money toVietnam under the following forms: (1) Through an authorized Credit Institution;(2) Via International Postal finance services Providers; (3) Cash brought along byindividuals

The Vietnamese beneficiaries have right : (1) To receive the proceeds inforeign currency or in Vietnamese Dong upon request; (2) In case of receiving in

foreign currency, the beneficiary may : + Sell it to the authorized credit institutions; + Transfer it into his foreign currency Deposit Account and use it in compliance with the prevailing regulations on foreign exchange management; + Deposit it in his foreign currency Savings Account with the authorized credit institutions; or + Use it for other purposes as stated by the law of Vietnam; (3)

To enjoy income tax exemption

CHAPTER 2 REALITY OF BUSINESS OPERATIONS IN FOREIGN CURRENCIES

FACE VIETINBANK MTOII

I Situation of business operations in foreign currencies Vietinbank MTOII I.1) Reality surplus, a lack of foreign currency aspects of commercial banks in the province of Ho Chi Minh City

1.1.1) network held commercial bank off the province of Ho Chi Minh City

Ho Chi Minh City is an economic center of the country, where there aremany types of services and economic activities simmering, and the market is avery dynamic sensitive in the process of integration with other countries in theregion and internationally, future have the ability to become a financial markets -currency of the region by the scale of activities and diversity in the area ofoperations currency - credit - payment

Up to 31 July 2008, based on proprietary components and scope of thebusiness operations of the monetary credit organizations can share network tocredit institutions in the province of Ho Chi Minh City to 4 banking systemcommercial needs more income foreign currency as demand:

+ Banking system commercial state enterprises: 01 of the assembly, 3 ofthe transaction, 86 branches, 206 rooms transactions, transactions 62 points and 20savings

+ System of commercial banks shares: 17 of the Assembly, 08 of thetransaction, 607 branches and transaction dependent

+ Banking system overseas: 30 bank branches overseas

+ Banking system linked Company: 05 banks

Network of organizations such as credit has been dominant on the capitalmarkets in the province of Ho Chi Minh City in many channels to mobilize capitalvary, but each system of commercial banks with many branches and units directlyunder the direct participants or indirect participation of business operations forforeign suppliers have the products and services diversity, creating many utilities

for customers should have attracted a good deal of capital from the economy andforeign quite large for investment in economic sectors for all enterprises to expandproduction scale and development in order to explore thoroughly resources of thebanking system and improve their competitive advantage in business andeconomic foreign relations

1.1.2) Aspects of Vietinbank and Vietinbank MTOII

of last year

Up to the end of July 2008, Vietinbank’s equity capital is VND11.310.508millions equivalent to USD 685.609.989 at exchange rate 16.497 VND/USD

Having an extensive network throughout the country with Vietinbank

Head Office, 3 main transaction offices, 142 branches and 575 transaction

counters and nearly 1,000 ATMs

Being diversified with 03 independent accounting subsidiaries: VietinBankLeasing Company, VietinBank Securities Company, Ltd., VietinBank AssetManagement Company and 02 non-profit making units: VietinBank InformationTechnology Center and VietinBank Training Center

 Being the founder of the following Financial Credit Institutions:

+ Saigon Bank for Commerce and Industry

+ Indovina Bank (the first joint-venture bank in Vietnam)

+ Vietnam International Leasing Company – VILC (the first financial leasingcompany in Vietnam)

+ VietinBank- Asia Insurance Company

 Being the official member of:

+ Vietnam’s Banker Association

+ Asian Banker’s Association

+ Society for Worldwide Interbank Financial Telecommunications (SWIFT)+ Visa International Services Association

It has signed 8 framework-credit Agreements with foreign countries,including: Belgium, Germany, South Korea, Switzerland and establishedcorrespondent relationship with 600 large banks of 50 countries and territories allover the world It is being the first bank in Vietnam to apply modern technologyand e-commerce in its banking operations

After 15 years of construction and development, VietinBank has overcomemany difficulties and challenges, becoming the leader in the market mechanism,making contribution to the active implementation of the State and Government’sPolicies The bank has been continuously striving to go ahead in order toconsolidate its position as one of the leading commercial banks in Vietnam,procuring fast development, reaching great achievements in all business areas,developing both internally and externally, deploying state of the art bankingtechnologies, all in all to strengthen its image in the mind of domestic as well asforeign clients

VietinBank has to realize the following target to the year 2010: "Building Vietnam Bank for Industry and Trade (VietinBank) to become a mainstay and modern State-owned commercial bank with high efficient business activities, healthy financial position, high banking technology, diversified products and services and big market share".

Providing a variety of banking products and services for individuals andenterprises In order to participate actively in fulfilment of above-said target ofVietinbank to 2010, we – Vietinbank MTOII – has had a corporate strategy andoutlined our strategic vision and mission for its business operation from now tothe year of 2010 and subsequent years, as follows :

To make Vietinbank MTOII become a multi-function bank, which is strongly

reformed its business structure To combine wholesale and retail bankingoperations, in which we strongly develop our retail banking with highcompetitiveness Firmly maintain our credit market share in line with investment,credit portfolio restructure for customers and industries with welldeveloping prospect

To expand our non-credit market share : becoming one of the top commercial

banks in developing card service, overseas study remittance, overseas Vietnameseremittance, safe deposit locker rental … with diversified products, outstandingadded value, second to none quality of service, making us as a bank with aseparate competitiveness, brand name and image

To become a bank with modern technology science, exploring efficiently new

technologies in our business and management; applying and providing ourcustomers with modern electric banking products/services

To form a network of banks and customers in order to serve our customers in a

most convenient and effective way

+ A network includes over 10.000 customers who are dealing with Vietinbank MTOII

+ Be able to attract many customers of all economic sectors

+ Cooperate with over 70 overseas study assistance centers.

+ Deal with over 40 foreign exchange agents

+ Cooperate with service suppliers such as post office, electricity, water supply, etc in the field of non-cash payment.

+ Cooperate with Auditing organizations, Assets valuation, Insurance, Transport logistics services companies for providing services to customers.

However, Vietinbank MTOII has not had a separate business strategy for foreigncurrency banknotes

1.1.3) on a number of professional activities of commercial banks in the province of Ho Chi Minh City and Vietinbank MTOII affect the construction business strategy in the face of foreign currencies Vietinbank MTOII

1.1.3.1) on mobilizing capital, loans, purchase and sale of foreign currency, foreign currency exchange and transfer money overseas remittance of commercial banks in the province of Ho Chi Minh City

To mobilize capital and loans

Interpreting on buying and selling foreign currencies, transfer money

overseas remittance and money exchange:

3/.The company moved overseas remittance of money

4/.Total (buying) foreign currency exchange aspects

of the U.S dollar (USD million)

5/ The percentage of foreign currency bought on

the total value of foreign currencies was attributed

USD

10.04% 7.34% 7.21% 2.76%

1.1.3.2) Interpreting mobilization of capital, loans, purchase and sale of

foreign currency, foreign currency exchange, remittance and overseas

remittance income and expenses in foreign currencies cash Vietinbank

Interpreting on buying and selling foreign currencies, transfer money

overseas remittance and exchange currency

4/ Total purchase (the collection) Foreign currency

5/ The rate of foreign currency bought on the total

value of foreign currency purchases provided USD 23.29% 16.73% 19.46% 21.36%

Vietnam's foreign currency face read

1/ Foreign currency revenue side of the U.S dollars

(USD million)

2/ more aspects of foreign currencies into U.S.

dollars (USD million)

1.1.4) Cost increases in management reasons legacy status, lack of presence of

foreign currencies Vietinbank MTOII and commercial banks in the Ho Chi

Minh City:

In general of Vietnam and Ho Chi Minh City in particular did not have a

central air-conditioned foreign currencies face to air-conditioned source foreign

currency for the present commercial banks Therefore, commercial banks have to

be air-conditioned foreign currencies face their own ways in face of foreign

currencies abroad (when excess foreign currency side) and enter the face of

foreign currency from abroad (when the present lack of foreign currency) As a

result, costs for the management of foreign currencies increased surface because

they must pay the cost of buying and selling foreign currency surface, transport

and insurance for foreign currency import / export

According to statistics from the state banks in Ho Chi Minh City, theamount of foreign currency cash import, export through commercial banks from

2003 to 2008 in Table Ho Chi Minh City, as follows:

Unit: measured in U.S dollars Year process ( In

there at…) Value of foreign currencyImported Value of foreign currencyExported Value Foreign currencyExport > Import

Unit: measured in U.S dollars Year Process Costs for import of

foreign currencies cash foreign currencies cashCosts for export of The total cost of importexport of foreign

from the management to use funds that commercial banks are losing by disparity

in interest rates to mobilize term is not between VND larger foreign currenciesUSD the purchase of foreign currencies into USD in cash and payment in VND.Level disparity in interest rates raised short-term up to date 30 June 2008 betweenVND and USD at Vietinbank MTOII is at 4,5%/ year (interest rate mobilize VNDdeposits is 6% and raised deposit USD is 1,5%)

II Scale transaction revenue and expenses in foreign currencies cash Vietinbank MTOII

II.1) Source revenue foreign currency cash:

Vietinbank MTOII foreign currency revenue from surface activities orprovision of services and deposit money at the request of customers:

+ Foreign currency cash by the branch in the South of Vietinbank submitted

to Vietinbank MTOII to be credited to your account deposit of foreign currenciesbranch in Vietinbank Head Office

+ Cash foreign currency sent by customers in savings Vietinbank MTOII + Money buying currencies gained through the transaction contracts signedwith foreign currencies on credit institutions: Vietinbank MTOII receive cashforeign currency of credit, charges filed and present foreign currency transferforeign currency into the account of the credit institutions in Vietcombank orbanks abroad

+ Foreign currency cash by customers are economic organizations (business operations are allowed to sell goods, provision of services to customers in Vietnam to collect money in foreign currencies) to submit financial of units open

at Vietinbank MTOII

+ Foreign currency cash receipt of Vietinbank HO to ensure pay foreigncurrency as a customer of Vietinbank MTOII air-conditioned or foreign currency

in the face of system Vietinbank

Vietinbank MTOII collects foreign currency cash business in foreign currencies:

+ Cash income in foreign currencies by buying foreign currencies face of the

anonymous (personal customers, tourists, customers who are not residents, etc)

+ Cash into foreign currency income by buying foreign currencies aspects ofour clients are the economic organizations of business operations are allowed tosell goods, provision of services for customers in Vietnam

+ Cash into foreign currency income by buying foreign currency aspects ofthe agents Foreign exchange Vietinbank of the table and money exchange in theprovince of Ho Chi Minh City

+ Cash into foreign currency income by buying (import) of foreign currencybank foreign agents, such as HSBC, UOB, AMERICAN EXPRESS BANK

II 2) Source of foreign currency cash:

Vietinbank MTOII more foreign currency as a customer at work orprovision of services and deposit money at the request of customers:

+ Branches of the South Vietinbank withdraw cash in foreign currenciesVietinbank MTOII

+ Customers withdrawing cash from foreign currency savings accounts inforeign currencies Vietinbank MTOII

+ Organizations receive credit for cash of foreign currency VietinbankMTOII and return by writing for Vietinbank MTOII through foreign accountsExchange Rate of through foreign currency accounts of Vietinbank HO foreignentire value of foreign currency received fees plus exchange currency transferforeign currency surface obtain under contract transactions signed with foreigncurrency Vietinbank MTOII

+ Customers are organizations in domestic and foreign, who do not reside(the Embassy, consular, etc.) have deposit accounts in foreign currenciesVietinbank MTOII withdraw cash foreign currency under the provisions

+ Companies overseas remittance withdraw cash in foreign currenciesVietinbank MTOII to pay for paid to customers under contract agents pay overseasremittance has signed with Vietinbank MTOII

+ Customers personally receive money overseas remittance in foreigncurrency cash + Cash foreign currency transfer for Vietinbank HO tomediation in the face of foreign currencies Vietinbank system

Vietinbank MTOII more foreign currency cash for business operations,foreign currency:

+ Cash read out foreign currency by selling and / or foreign currencyexchange thoai face for the anonymous customer (customer individuals, tourists,customers who are not residents )

+ Foreign currency cash out by selling more foreign currency for the presentcredit organization under contract buying and selling foreign currency creditorganizations signed with Vietinbank MTOII

+ Foreign currency cash out by selling more (in) a foreign currency bank toforeign agents, such as HSBC,UOB, AMERICAN EXPRESS BANK;

II 3) Cost foreign currency transactions present:

Customers pay for Vietinbank MTOII when submitting to withdraw cashfrom foreign currency deposit accounts opened in payment Vietinbank:

Bank / Customer Vietinbank MTOII collect maximum % on number of foreigner currencies

cash of customers Pay accounts in foreign currency

deposits Withdrawn from the account depositforeign currencies U.S dollars Currency U.S dollars Currency

individuals /////////////// ////////////////// 0,15% 0,2%

Customers individuals 0,5% 0,7% 0,15% 0,2%

Vietinbank MTOII pays for customers are foreign banks when selling (orbuying) foreign currency with the face of this bank and return (or return) inforeign currency transfer the same type For agents collect change, VietinbankMTOII buy foreign currency to pay by VND cash and pay the additional feeincome for commission change

Bank / Customer Vietinbank MTOII must pay % maximum on the amount of foreigner

currencies cash have

U.S dollars Currency U.S dollars Currency

At Vietinbank MTOII business foreign currency trading is done face in theroom features:

1) Forex Service Department

2) Customer’s accounts Department

3) Card service Department

4) Cash services Department

5) Planing Department

III.2) TRANSACTION FLOW CHART (Please see Attached appendix No 4

to 8)

1) Foreign Currency bank-notes Exchange

2) Credit Card (C.C.)/ Travelers Cheques (T.C.) Payment

3) Overseas Vietnamese Remittance Payment

4) Selling Foreign Currency notes to eligible

5) Foreign currency bank-notes dealing with banks in Ho Chi Minh city:

+ Delivering foreign currency bank-notes

+ Receiving foreign currency bank-notes

IV Network customers - the bank's foreign currency transactions with Vietinbank MTOII

IV 1) Banking network, customers filed into the face of foreign currencies Vietinbank MTOII

Unit: measured in U.S dollars Analyze revenue (revenue from Vietinbank

MTOII) Total value of foreign currencies face Vietinbank MTOIIrevenue in the year

Credit organizations in the province of Ho

Chi Minh City

2006 is 49 % In 2007 and is 45% This source of revenue can bring VietinbankMTOII advantages and disadvantages of benefits, as follows:

+ Advantages:

Vietinbank MTOII of foreign currency to meet present timely for allcustomers including customer deposit savings in foreign currencies there needs towithdraw foreign currency face there needs to withdraw foreign currency in theface Vietinbank MTOII, enhancing competitiveness and quality of servicesuppliers to customers This is a source of foreign currency income VietinbankMTOII surface that can take advantage of the cost to acquire the number of readout, such as offering transactions with other banks, or used to pay money overseasremittance in foreign currencies or face the customers' needs to withdraw foreigncurrency from the face of foreign currency accounts opened in Vietinbank MTOII.+ Disadvantage:

Foreign cash of revenue will increase capital funds cash in VietinbankMTOII and if consumption is not timely will cause waste of capital Conservationfund cash foreign currency (excessive necessary) the higher the efficiency inforeign currencies cash the lower

According to regulations of the Vietinbank HO Vietinbank MTOII not beallowed to refuse to receive foreign currency face by branches of Vietinbanksubmitted to the cruel face of foreign currency funds in Vietinbank MTOII wasexcessive needed

2) The amount of foreign currency to buy surface Vietinbank MTOII throughthe collection directly from agents and foreign currency exchange accounted for20% of the total value 20% of the total value of foreign currency income in theface of Vietinbank MTOII (2004 is 23%, 2005 is 17%, 2006 is 19% and 2007 is21%) while the percentage who bought this in the City lake Chi Minh City withonly 10% in 2004 and reduced to 3% in 2007 This source of revenue can bringVietinbank MTOII advantages and disadvantages of benefits, as follows:

+ Advantages:

This is the revenue side with foreign currency flexibility becauseVietinbank MTOII information can be collected in quantities through theVietinbank MTOII Announced exchange rate Foreign exchange surface if youwant to collect more foreign currencies face the Vietinbank MTOII purchase priceyet to face high foreign currency (or pay fees rose Foreign exchange surface forthe collection agents) and vice versa if they do not want to return to face theforeign currency Vietinbank MTOII price yet to buy foreign currencies face low or

no notice to buy foreign cash

+ Disadvantage:

Foreign currency revenue in the face of mainly just to solve the demand offoreign currency deficits cash immediate with few or to balance foreign currencystatus Therefore, if not to return for the purpose will be used to fund conservationwork for foreign currencies to increase and exceed the needs and increase the cost

of capital In four consecutive years 2004, 2005, 2006 and 2007 VietinbankMTOII receivable in foreign currencies with large numbers from the table andcleaning agents and buying foreign currencies change also reflects a dependent onVietinbank MTOII (in management, adjust cash foreign currency) from supplyingthe foreign currency with the high costs of this Moreover, economic efficiencyless of foreign currency revenue from the table surface change and cleaning agents

of foreign currency exchange will increase if Vietinbank MTOII right to buyforeign currency with prices in line with the selling rate of foreign currencies inwhich the free market In fact, the rate is usually higher than the rate on the sale offoreign currency market and inters bank rate purchase and sale of foreigncurrencies by Vietinbank MTOII posted

3) Total value of foreign currency receipts from side to send customers to saveforeign currency equivalent to the total value of foreign currencies face forcustomers to withdraw savings deposits in foreign currencies in three years.However, in the short period of time with the fluctuation of interest rates tomobilize foreign currency exchange rate to buy or sell foreign currency, it always