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MINISTRY OF EDUCATION AND TRAINING
NATIONAL ECONOMIC UNIVERSITY





Do Thi To Quyen


INVESTMENT IN ENHANCING COMPETITIVE CAPACITY
AT JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF
VIETNAM


Speciality: Development Economics (Investment Economics)
Code: 62.31.05.01




SUMMARY OF ECONOMIC DOCTORAL THESIS

Hanoi, 2014


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This work has been completed at: National Economic University.






Instructor:
1. Prof. Dr Tran Tho Dat 2. Asso.Prof.Dr Nguyen Bach Nguyet





Judge 1: Asso.Prof.Dr Dao Van Hung


Judge 2: Asso.Prof.Dr Trinh Thi Mai Hoa


Judge 3: Dr Le Thanh Tam

The Thesis shall be defended in front of the State level Thesis Assessment Council
held at:
National Economic University, No. 207 Giai Phong, Hai Ba Trung, Ha Noi
At on







The Thesis can be found in the library of:



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PREFACE
1. The imperativeness of the Subject
The effectiveness and stability in the system of commercial banks in Vietnam
are under immense pressure after going through the economic recession. At the same
time, they have to face increasing greater challenges in the open financial market.
Therefore, the competitive capacity of domestic commercial banks should be re-

evaluated carefully from both theoretical and practical aspects.
Joint Stock Commercial Bank for Foreign Trade of Viet Nam (VCB) is one of
the major banks and holds significant market shares in key products, but it still have
to compete intensely against others and is at risk of a decline in market shares.
Hence, enhancing its competitive capacity is an urgent requirement for VCB.
The solutions often proposed to raise the competitive capacity for VCB are
building a business plan, developing the financial potential, modernizing technology,
diversifying products, and enhancing customer service quality, boosting promotional
campaigns and branding… However, these solutions need investment to be carried
out. Therefore, investing in enhancing competitive capacity is considered the basic
and essential task for VCB. The issue arising to VCB is how to build the investment
strategy, mobilize and allocate capital into the appropriate assets and fields… to bring
the most probable effects to VCB’s competitive capacity.
VCB, the pioneer in the banking system as well as a typical bank that not only
represents the state-owned bank but also carries new features of a joint stock bank, is
an adequate and active example to do research on the issue of investing to enhance
the competitive capacity. For this reason, I choose the subject of “Investment in
enhancing competitive capacity at Joint Stock Commercial Bank for Foreign Trade of
Vietnam” for my doctoral thesis.
2. Overview
In recent times, there have been many researches on the issue of competition and
competitive capacity of commercial banks in Vietnam, such as:
Home researches: “Competitive capacity of commercial banks on the trend of
integration” of Nguyễn Thị Quy, economic doctoral thesis “Solutions for commercial
banks to enhance their competitive capacity and integrate by 2010” of Trịnh Quốc
Trung, economic doctoral thesis “Solutions for commercial banks in Vietnam to
enhance their competitive capacity in the context of global economic integration” of
Lê Đình Hạc, doctoral thesis “Competitive capacity enhancement of commercial joint
stock banks in Ho Chi Minh City in the context of integration” of Đoàn Đỉnh Lam…
Those researches only focus on describing and evaluating factors in competitive

capacity. However, the origin of those factors were not analysed and quantified
specifically and scientifically. Those researches, thus, do not point out the role of


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investment in enhancing the banks’ competitive capacity but just indirectly mention it
while investment is the origin of many factors in competitive capacity.
Foreign researches: The research of Professor Michael Poter is outstanding one
about competitive capacity. It can be applied to all levels and sectors. However, his
research is highly level. It should have flexible uses when applying to a certain
subject and role of investment has not also been studied directly in his research.
Therefore, this thesis focuses on investment in enhancing banks’ competitive
capacity. It includes analysis and evaluation investment in enhancing bank’s
competitive capacity through specific and typical figures of VCB, building the
criteria for result and effect evaluation of these operations, proposal of the solutions
for investment in enhancing competitive capacity to bring the hightest effect to VCB.
3. Research objectives
- Developing and systemizing the theoretical issues in terms of investment in
enhancing competitive capacity at commercial banks .
- Through theory and practice, confirming a extremely critical role of investment
in enhancing competitive capacity for development of them in general and VCB in
particularly. Depending on each period, development strategy, competition strategy
and characteristics, banks implement appropriate investments.
- Finding out the solutions for investment inenhancing competitive capacity to
bring the highest effect to VCB.
4. Research subjects and scope
The research subjects are investment in enhancing VCB’s competitive capacity,
results and effects gained from these operations. The research scope is investment in
enhancing VCB’s competitive capacity in the last period (mainly 2005-2012).
5. Method for research

Many scientific methods including analysis, synthesis, comparison, statistics,
mathematics, logical deduction, etc. are applied in this thesis. In addition, the thesis
combines description and analysis of the actual data to evaluate investment in
enhancing VCB’s competitive capacityin the quantitative and qualitative manner.
6. New scientific contributions of the thesis
- In theories: The thesis develops theoretical issues regarding to investment in
enhancing banks’ competitive capacity systematically. Concepts, characteristics,
roles, influencing factors of these operations are associated with characteristics of
commercial banks. The thesis shows that operations of investment in enhancing
banks’ competitive capacity depends on competition strategy, competitive tool the
bank uses at each period. For this reason, competition strategy also influences capital
mobilization and structure of capital. For purpose of showing close relationship
between investment and banks’ competitive capacity at the same time evaluating
effect of these operations, the thesis builds process of investment in enhancing banks’
competitive capacity, critera for results and effects of investment in enhancing banks’


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competitive capacity, including direct and indirect criteria, qualitative and
quantitative criteria.
- In practice: The actual situation of investment in enhancing competitive
capacity at VCB is summarized and assessed by applying theories and practice on
multiple angles. With the current characteristics, competitive position, the thesis
points out that investment in enhancing VCB’s competitive capacity should attach
special importance to improvement of technology, human resource and development
brand and sales promotion. In the last time, structure of investment in enhancing
competitive capacity at VCB was not irrational because investment has not been
made right in the main points. The mobilization of capital with methods in
accordance with VCB, management and supervision investment on the process,
strategies also are the critical factors. By calculating criteria, the thesis shows that

investment in VCB’s competitive capacity makes a positive impact on competitive
capacity; but there still exists some limitations. Based on analysis of limitations,
causes, the thesis puts forward the practical solutions to promote effect of investment
in enhancing VCB’s competitive capacity.
7. Structure of the thesis
Besides introduction, conclusion, the thesis consists of the following three
chapters:
Chapter 1: Basic contents of investment in enhancing competitive capacity at
commercial banks.
Chapter 2: The actual situation of investment in enhancing competitive capacity
at Joint Stock Commercial Bank for Foreign Trade of Viet Nam.
Chapter 3: Some solution of improving investment in enhancing competitive
capacity at Joint Stock Commercial Bank for Foreign Trade of Viet Nam.
CHAPTER 1: BASIC CONTENTS OF INVESTMENT IN ENHANCING
COMPETITIVE CAPACITY AT COMMERCIAL BANKS
1.1. Competition and competitive capacity of commercial banks
1.1.1. Overview of the commercial banks
1.1.1.1. Concept and functions of commercial banks
The commercial bank is financial institution that provides a list of the most
diverse financial services, especially credits, savings, payment services and its
business is for profit. The commercia bank plays an important role for economy
because it has the following three basic functions: financial intermediaries, creating
the means of payment, payment intermediaries.
1.1.1.2. Activities of commercial banks
The commercial bank is a firm that provides a list of financial services to
individuals and organizations. Thus, besides specific activities of a bank, the


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commercial bank is also a firm with full normal activities like other firms, including

investment in improving competitive capacity.
1.1.2. Theories of competition and competitive capacity of commercial banks
1.1.2.1. Concept of competition and competitive capacity of commercial banks
There are many concepts of competition and competitive capacity in the
different ranges, different angles. In my opinion, competition between banks is that
the banks create and utilize the comparative advantages of supplying product and
service in the same business environment to achieve the specific targets such as
profits, sales or market share, enhance its position on the market in comparison with
other banks.
Bank’s competitive capacity is capacity the bank creates, maintains and
continuously enhances its advantages to gain higher level of product and service
quality than average level and/or have ability to reduce the relative costs, allowing
the bank to increase profits, market share and ensuring its operations safely, healthily.
Competition between banks carries many specific characteristics because the
banks operate in financial services field which is sensitive and requires high stability,
transparency: competing within cooperation; competing healthily; competing within
the framework, regulation and supervision of the state bank through policies each
period; competing under many diverse and sophisticated forms.
1.1.2.2. Competitive tools in banking
Depending on business characteristics, competition strategy in each period and
current competitive capacity, the bank selects the following competition tools:
competition on prices; competition on products; competition on distribution system;
competition on brand; competition on sales promotion programs.
1.1.2.3. Critera of commercial bank’s competitive capacity
- Criteria for financial capability: scale of charter capital, equity, total assets,
profit after tax, return on total assets (ROA), return on equity (ROE), capital
adequacy ratio (CAR), non-performing loan ratio.
- Criteria for operational capacity: sales, quality and market share of the
products; ability to develop products and services.
- Governance capacity: governance levels and monitoring capabilities of the

board; response capability of the operating mechanism for market movements;
quality and validity of implementing business policies and processes, processes of
risk management, internal control; organizational structure; level of coordination
between divisions and capability of adaptability, change of structure.
- Technological capability: technological innovation ability; the level of meeting
technology in supporting development of product, distribution channels,
management, etc.
- Staff capacity: scale, qualifications, number of trained personnel;
professionalism, service attitude; rationality and effect of the labor structure.


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- The capacity of the distribution channel system: a number of transaction
points; distribution; the reasonableness of the distribution channel.
1.2. Investment in enhancing competitive capacity at the commercial banks
1.2.1. Concept and role
Investment in enhancing competitive capacity at the commercial banks is that
the bank uses the current resources (money and other sources) to continuously
enhance the competitive advantages to achieve higher level of product and service
quality than average level and/or have ability to reduce the relative costs, allowing
the bank to increase profits, market share, ensuring safety, health in its operations.
Investment in enhancing competitive capacity plays a vital role for each bank,
helps the bank have competitive capacity and ability to win when competing through
impacts improving the basic factors such as financial resources, operational capacity,
technological capability, governance capacity, etc.
1.2.2. Characteristics
- Using a large amount of capital.
- Usually taking place because bank’s positions and competitive environment are
changeable.
- Including many operations but requiring a reasonable structure, depending on

competition strategies.
- Being influenced by external factors.
- Taking place as process.
1.2.3. Operations of investment in enhancing competitive capacity at the
commercial banks
Depending on competition strategies, competition tools at each period,
investment in enhancing competitive capacity may include the following operations :
Investment in infrastructure development; Investment in technology improvement;
Investment in human resource qualification improvement; Investment in development
brand and sale promotion.
1.2.4. Investing capital for enhancing competitive capacity at commercial
banks
Equity consists of: initial capital, capital formed during business such as retained
earnings, funds, etc.
1.2.5. Model and process of investment in enhancing competitive capacity at
the commercial banks
The model expresses close relationship, continuous interaction between
competitive position of the bank and investment in enhancing competitive capacity.
From this competitive position, through establishment of competitive strategy, the
bank will identify capital scale and make capital allocation as target. Conversely,
investment in enhancing competitive capacity makes decision of competitive position


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of the bank which is result and effect of investment in enhancing competitive
capacity . This relationship is ongoing because of changeable position of the bank
and a process with repetitive steps including:
Step 1: Assessing the competition situation.
Step 2: Building competitive strategies, strategies and plans for investment in
enhancing competitive capacity.

Step 3: Performing investment.
Step 4: Assessing the results and effects of investment in enhancing competitive
capacity.
1.2.6. Criteria for result and effect of investment in enhancing competitive
capacity at commercial banks
1.2.6.1. Criteria for result
Depending on the targets of investment in enhancing competitive capacity at
each period, the appropriate criteria in the following system will be used when
assessing the results:
(1) Group of criteria reflecting direct results:
Criterion 1: Annual increase in trained staffs (∆ĐT)
∆ĐT = ĐT
i
– ĐT
i-1
(1.6)
Criterion 2: Changes in staff structure on qualifications
Criterion (1) and (2) reflect changes in staff capacity.
Criterion 3: Annual increase in number of transaction points (∆ĐGD)
∆ĐGD = ĐGD
i
– ĐGD
i-1
(1.7)
Criterion 4: Annual increase in number of automatic transaction points (ATM
and POS) (∆ĐGDTĐ)
∆ĐGDTĐ = ĐGDTĐ
i
– ĐGDTĐ
i-1

(1.8)
(2) Criteria reflecting indirect results:
Criterion 1: Annual increase in charter capital (∆VĐL)
∆VĐL = VĐL
i
– VĐL
i-1
(1.9)
Criterion 2: Annual increase in equity (∆VCSH)
∆VCSH = VCSH
i
- VCSH
i-1
(1.10)
Criterion 3: Annual increase in total assets (∆TTS)
∆TTS = TTS
i
– TTS
i-1
(1.11)
Criterion 4: Annual increase in profit after tax (∆LNST)
∆LNST = LNST
i
– LNST
i-1
(1.12)
Criterion 5: Annual increase in profitability ratios
∆ROA = ROA
i
– ROA

i-1
và
∆ ROE = ROE
i
– ROE
i-1
(1.13)


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Criterion 6: Changes of capital adequacy ratio (∆CAR)
∆ CAR = CAR
i
– CAR
i-1
(1.14)
Criterion 7: Changes of asset quality (∆TLNX)
∆ TLNX = TLNX
i
– TLNX
i-1
(1.15)
Criterion 8: Changes of annual sales of main products (∆DS)
∆DS = DS
i
– DS
i-1
(1.16)
Criterion 9: Changes of annual market share of the main products (∆TP)
∆TP = TP

i
– TP
i-1
(1.17)
Criterion 10: Changes of income structure from business operations of the
bank.
(3) Group of qualitative assessment includes: Changes of technological
capability; changes of governance capacity; changes of service quality.
1.2.6.2. Criteria for effect
Criterion 1: Increased sales compared with investment capital (∆DS/Iv)
∆DS/Iv = (DS
i
– DS
i-1
)/ Iv
i
(1.18)
Criterion 2: Increased market share compared with investment capital
(∆TP/Iv)
∆TP/Iv = (TP
i
– TP
i-1
)/ Iv
i
(1.19)
Criterion 3: Increased profit compared with investment capital (∆LN/Iv)
∆LN/Iv = (LN
i
– LN

i-1
) / Iv
i
(1.20)
1.3. Factors influence on investment in enhancing competitive capacity at
commercial banks
- Competitive strategies of the bank,
- Resources of the bank,
- Management level and experience of the leaders,
- Corporate culture and awareness of staffs,
- Policies and regulations of the State,
- Overall development of national society and economy,
- Level of competition and strategies of competing banks,
- Openness of financial markets.
Identifying influencing factors enables the bank to control investments avoid
passive investment with ill effect or violation of the policy, guidelines of the State on
its own initiative.
1.4. Experiences of investment in enhancing competitive capacity of Banks
of China, Malaysia and lessons for Vietnam commercial banks
Lessons learned from experience of the banks of China, Malaysia are:


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- Improving capital mobilization for investment through effective channels such
as: equitization, stock issuance, bond issuance into international markets.
- Having strategies sticking closely on market, being flexible, not avoiding
competition.
- Powerfully investing in human resource and technology that is a bottom line to
compete with foreign banks. Investing in the staffs to limit brain drain and increase
quality of customer service. Investing in technology and scientific researches to

develop modern banking services, wait in front of market.
CHAPTER 2: SITUATION OF INVESTMENT IN ENHANCING
COMPETITIVE CAPACITY AT JOINT STOCK COMMERCIAL BANK
FOR FOREIGN TRADE OF VIETNAM
2.1. The needs of investment in enhancing VCB’s competitive capacity
2.1.1. Overview of VCB
Through 50 years of operation, VCB is considered as a reputable bank in
Vietnam in sectors of forex trading, import and export payment and other banking
and financial services. On basis of standing position of a wholesale bank and
promoting retail operations, VCB has transferred from a wholesale bank into a
universal bank.
VCB, an equitized state-owned commercial bank, makes application of
operating model and organizational structure towards separating retail and wholesale
business from policy department, customer department, management and supervision
department.
The business operation result of VCB is satisfactory in the last time, and VCB is
one of the most profitable banks.
2.1.2. Characteristics of VCB influencing on investment in enhancing
competitive capacity
2.1.2.1. Characteristics of models and organization: In spite of being a joint-
stock bank, the State is still a controlling shareholder holds more than 77% shares,
which influences orientation, competing objectives, competitive tools, etc; VCB is
owned by many shareholders including strategic shareholders, so there should be
unity and harmony in interests of the parties for investment decisions; VCB is a large
bank with network across the country, which requires consideration of regional
factors, geographical location when investing.
2.1.2.2. Characteristics of business operations: VCB has changed significantly
through many periods. From a specialized bank, VCB transferred to multi-state
commercial banks and then to commercial joint stock banks and occupied monopoly
position in long time. In addition, VCB is a traditional bank with strengths in the

sectors of wholesale, has good relationships with many partners, international
organizations; however, its retail sector has not had many strengths.
2.1.2.3. Characteristics of competitive position


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Two competitive tools VCB utilizes effectively consist of product quality and
price. However, other competitive tools such as distribution channels, brand, sales
promotion, and promotion have not been effectively untapped.
(1) Financial Capability: In spite of being one of the four most large-scale banks
on capital and total assets and fairly high business efficiency, financial resource of
the VCB has still been limited in comparison with other banks in the same region.
(2) Operational Capacity: VCB is strong in traditional sectors, wholesales but its
market share tends to decrease. For other retail operations, VCB is under stiff
competition with joint-stock banks.
(3) Governance capacity of the VCB has not kept up with the requirements of
modern banking.
(4) Technological capability: Although VCB has still improved its technology, it
has not met requirements of product development and management in the current
competitive conditions.
(5) Staff capacity: Human resource capacity of VCB is judged to be of high
quality, but it has been beyond international standards, professional business
etiquette.
(6) Distribution system capacity: In spite of fairly large traditional distribution
channels, modern distribution channels has not been untapped in the maximum and
effective manners.
Considering brand strength index, competition matrix through assessment of
experts shows that leading position of VCB is under threat and fierce competition
with several large banks and its many sectors decrease competitiveness.
Competitive strategies VCB is pursuing are: consolidating its position of

traditional business sectors, at the same time promoting retail services; improving of
product quality competitive tools, at the same time promoting use of competitive
tools through brand, promoting sales. The key point to enhance competitive capacity
is that VCB must invest in technology as a basis for diversifying the product,
improving features and utility of the product and investing in staff qualification
improvement, brand development, sales promotion.
2.2. The situation of investment in enhancing competitive capacity at VCB
2.2.1. Process
Investment in enhancing competitive capacity at VCB is managed, monitored
quite closely through mechanisms, decentralized administration and ensures rational
process.
2.2.2. Investing capital
Large amount of investment capital was spent for investment in enhancing
competitive capacity. In general, this amount tends to increase over years because
VCB is focusing on technology investment and branch network expansion.


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Table 2.1: Capital for investment in enhancing competitive capacity at VCB
Year
2005
2006
2007
2008
2009
2010
2011
2012
1.Iv for technology
improvement

(billion VND)
337.98
277.00
351.60
270.90
392.30
252.50
528.80
594.10
Density (%)
67.90
54.59
66.06
60.60
51.58
24.30
21.99
25.79
2.Iv for brand
development and sales
promotion
(billion VND)
21.41
26.85
31.15
35.52
30.34
33.00
41.95
68.00

Density (%)
4.30
5.29
5.85
7.95
3.99
3.18
1.74
2.95
3.Iv for staff
qualification
improvement
(billion VND)
4.87
5.01
7.81
3.43
13.89
14.01
17.15
22
Density (%)
0.98
0.99
1.47
1.44
1.83
1.35
0.71
0.95

4. Iv for infrastructure
development
(billion VND)
133.5
198.6
141.7
134.2
324
739.6
1,816.8
1,619.9
Density (%)
26.82
39.14
26.62
30.02
42.60
71.18
75.55
70.31
Total Iv (billion VND)
497.76
507.46
532.26
447.05
760.53
1,039.11
2,404.70
2,304.00
Growth (%)

-
1.95
4.89
-16.01
70.12
36.63
131.42
-4.19
(Source: Annual report of VCB in 2005 – 2012)
Investment capital was allocated in four operations in which the highest density
is investment capital for technology improvement, mainly machinery and equipment.
The density of investment development brand and sales promotions, staff
qualification improvement are small; investment in infrastructure development are
relatively large.
Investment capital of enhancing competitive capacity at VCB was primarily
mobilized from equity, supplemented from retained earnings, funds, issuance of
convertible bonds in 2006, mobilized capital from equitization in 2007, etc.
2.2.3. Operations of investment in enhancing competitive capacity
The critical objectives of VCB in competing include: diversification and
improvement of product quality, products and services features towards focusing on
wholesale sector, at the same time development of modern retail services; promotion
of the brand and image position, transformation of sales promotion into provided
invaluable support tool for competition. For these reasons, VCB should focus on
technology improvement; staff training in a basical manner; development brand and
sales promotion.
(1) Investment in improvement technology
Investment capital for technology was carried out on foundation of approved
technology projects, needs for purchasing machinery and equipment for the whole
system.

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Table 2.2: Capital for Investment in improvement technology at VCB
Year
2005
2006
2007
2008
2009
2010
2011
2012
1. Iv for machinery and
equipment
(billion VND)
331.00
243.20
303.90
269.30
372.00
189.00
424.60
477.10
- Growth (%)

-26.53
24.96
-11.39
38.14
-49.19

124.66
12.36
- Density (%)
97.93
87.80
86.43
99.41
94.83
74.85
80.30
80.31
2. Iv for software
(billion VND)
6.98
33.80
47.70
1.60
20.30
63.50
104.20
117.00
- Growth (%)

384.24
41.12
-96.65
1168.75
212.81
64.09
12.28

- Density (%)
2.07
12.20
13.57
0.59
5.17
25.15
19.70
19.69
3. Total Iv for
Technology
(billion VND)
337.98
277.00
351.60
270.90
392.30
252.50
528.80
594.10
Tăng trưởng (%)

-18.04
26.93
-22.95
44.81
-35.64
109.43
12.35
(Source: Annual report of VCB in 2005 – 2012)

Annually, VCB spent around $ 20 million of capital which is relatively large
amount in comparison with other commercial banks, for hardware and technology
solutions. However, investment capital for technology was very small in total
investment and development capital of the VCB. Investment structure on technology
components still had a lot of irrationality, especially investment capital for machinery
and equipment accounted large density (over 80%) while for software solutions was
low. For software technology, VCB attached special importance to deep investment
towards: centralizing the handling operation systems; developing application
programs to provide new products on basis of modern technology such as ebank,
internet banking, SMS banking, be in online connection with securities companies,
provide payment services for e-commerce transactions; modernizing technology for
some subsidiaries. Besides that, solutions and systems of supporting Bank
administration such as human resource management, financial management and
establishment of reserve center were also considered to invest.
(2) Investment in development Brand and Sales promotion
Investment in development Brand and Sales promotion includes many varied
activities, belongs to an overall project and are closely connected. The development
of products that is suitable for the needs and gains a solid position on the market is an
important method to build the brand. Besides that, to invest in brand development
also consists of activities to be invested towards professionalization, specialization.
Investment capital tended to significant increase from 2007 (see Table 2.1)
because VCB carried out equitization and started to operate on model of a joint-stock
corporate, which led to implementation of activities to develop its images, innovate
system of brand identity, and enhance foreign affairs. Promotional activities were


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carried out synchronously and uniformly throughout the system. In addition, VCB
establised and carried out system of VCB cultural standards. Moreover, VCB was
also interested in organizing activities of approaching individual customers and

businesses, offering products in a increasingly professional and effective process,
exploiting of customer data to approach customers and to provide the products to
meet the right demands. Besides that, promotional activities, gifts, customer policy
were performed increasingly to attract new customers and remain old customers.
However, these investment operations at VCB have not really held a proper position,
and its professionalism and synchronization have not met requirements of a large and
modern bank.
(3) Investment in improvement of staff qualification
VCB attaches special importance to invest in training and fostering staffs.
Training costs for improving staff qualification at VBC as a whole increased over the
years (see Table 2.1). Investment in training and improving staff qualification
consisted of organizing home and foreign courses about banking operations, foreign
language, operations expanded or related which are long-term or short-term;
organization of study tours in foreign banks; organization of seminars, conferences
about operations. VCB has established a Training Center that is responsible for
implementation of training operations since 2006. The Training Center launched
helps to make activities serving staff training professionally and methodically.
(4) Investment in Infrastructure
Investing in infrastructure made an impact on competitive capacity of VCB by
building distribution system, facilities, working conditions for staff, supporting
transactions, contributing in building its image, appearance of the bank.
Table 2.6: Capital for investment in infrastructure at VCB
Unit: billion VND
Year
2005
2006
2007
2008
2009
2010

2011
2012
Purchasing house and
architectural items, Land
use right
25.30
101.50
27.80
26.20
39.70
214.00
807.30
912.60
Purchasing Fixed Asset
18.00
17.50
28.90
25.30
56.50
40.20
72.20
67.4
Fundamental building
90.20
79.60
85.00
82.70
227.80
485.40
937.30

639.90
Total
133.5
198.6
141.7
134.2
324
739.6
1,816.8
1,619.9
Growth (%)
-
48.76
-28.65
-5.29
141.43
128.27
145.65
-10.84
(Source: Annual report of VCB in 2005 – 2012)
Investment in infrastructure as a whole increased annually, particularly from
2010, which is because VCB significantly invested in purchasing, building
headquarter and expanding its branches. For infrastructure investment, items that
accounted a large density was items of fundamental building and purchasing house


15
and architectural (including land use rights). This was the valuable items that was
usually present in long-term plans of the bank and was associated with network
development plan. In the last years, these investment confirmed role of supporting,

created facilities, infrastructure foundation to meet increasing demands and
requirements of works, impacted on competition capacity of VCB positively.
2.3. Assessment of the situation of investment in enhancing competitve
capacity at VCB
2.3.1. Criteria for result of investment in enhancing competitve capacity
In the last time, investment in enhancing competitive capacity at VCB have
aimed at the following contents: improving technology in concentrating and modern
direction; methodically improving human resource qualification; developing the
brand, developing measures of sales promotion modernly and professionaly. Thus,
the results of investment in enhancing competitive capacity will be reflected through
the criteria:
Criterion Annual increase in a number of trained staffs (∆ĐT)
Table 2.7: Annual increase in a number of trained staffs at VCB
Unit: person
Year
2005
2006
2007
2008
2009
2010
2011
2012
Annual number of
trained staffs
1,976
2,096
2,714
2,930
3,129

3,560
5,000
5,800
(Source: Annual report of VCB in 2005 – 2012)
Besides the direct results, investment in enhancing competitive capacity at VCB
improve important financial indicators through positive impact on product quality,
consolidation of brand advantages, effective application of sales promotion tools.
Table 2.8: Criteria reflecting indirect results of investment in enhancing
competitive capacity impacted on financial capability of VCB

Unit
Year
2005
2006
2007
2008
2009
2010
2011
2012
Billi
on
VND
1. Authorized
Capital
4,279
4,357
4,429
12,101
12,101

13,224
19,698
23,174
Increase in
Authorized capital
(∆VĐL)
73
78
72
7,672
0
1,123
6,474
3,476
2. Equity
8,416
11,228
13,528
13,945
16,710
20,669
28,639
41,553
Increase in Equity
(∆VCSH)
1,236
2,812
2,300
417
2,765

3,959
7,970
12,914
3. Total Essets
136,456
167,128
197,363
222,090
255,496
307,496
366,722
414,475
Increase in total
assets(∆TTS)
15,026
30,672
30,235
24,727
33,406
52,000
59,101
47,753
4. Profit after tax
1,293
2,861
2,390
2,728
3,945
4,236
4,217

4,427


16
Increase in profit
after tax (∆LNST)
189
1,568
-471
338
1,217
291
-19
210
%
5.1. Return on
Asset ROA
1.01
1.88
1.31
1.29
1.64
1.50
1.25
1.13
Increase in ROA
(∆ROA)

0.87
-0.57

-0.02
0.35
-0.14
-0.25
-0.12
5.2. Return on
Equity ROE
16.54
29.11
19.23
19.74
25.58
22.55
17.08
12.61
Increase in ROE
(∆ROE)

12.57
-9.88
0.51
5.84
-3.03
-5.47
-4.47
6. Capital
Adequacy ratio
CAR
9.50
9.30

9.20
8.90
8.11
9.00
11.14
14.83
Change in CAR
(∆CAR)

-0.2
-0.1
-0.3
-0.79
0.89
2.14
3.69
7. Non-performing
loan ratio (NPL)
3.40
2.70
3.87
4.61
2.47
2.83
2.03
2.4
Change in NPL
(∆NPL)

-0.70

1.17
0.74
-1.14
0.36
-0.8
0.37
(Source: Annual report of VCB in 2005 – 2012)
Investment in enhancing competitive capacity as a whole make a fairly positive
impact on financial targets of VCB.
Investment in enhancing competitive capacity influence operational capacity of
VCB. With increasingly diverse products, quality, brand reputation and widely
deployed sales promotion, VCB’s sales and market share of products had many
positive changes shown at the criteria:
Table 2.10: Changes in annual sales of the main product of VCB
Year
2005
2006
2007
2008
2009
2010
2011
2012
1. The balance of
capital mobilization
(billion VND)

108,313
120,695
144,810

159,989
169,457
208,320
241,700
303,942
Additional balance of
capital mobilization
(billion VND)

-1,829
12,382
24,115
15,179
9,468
38,863
33,380
62,242
2. Loan balance
(billion VND)
61,043
67,743
97,631
112,793
141,621
176,814
209,418
241,163
Additional loan
balance (billion
VND)

7,439
6,700
29,888
15,162
28,828
35,193
32,604
31,745
3. Import-export
payment turnover
(billion USD)
21.00
22.80
26.30
32.50
25.62
31.00
38.8
38.81


17
Additional import-
export payment
turnover (tỷ USD)
4.58
1.80
3.50
6.20

-6.88
5.38
7.80
0.01
4. Turnover of
foreign currency
trading (billion USD)
24.00
30.20
26.10
46.00
39.42
35.20
34.5
24.1
Additional turnover
of foreign currency
trading (billion USD)

6.20
-4.10
19.90
-6.58
-4.22
-0.70
-10.40
5. Issued cards (unit)

887,153
912,673

868,711
966,244
1,104,002
1,110,000
1,180,000
Additional issued
cards (unit)

23,567
25,520
-43,962
97,533
137,758
5,998
70,000
6. Turnover of
international payment
cards (million USD)

386.3
452.7
642.63
567
741
1,000
1,200
Additional of
turnover of
international payment
cards (million USD)

66.4
189.93
-75.63
174
259
200
7. Registered-SMS
Banking customers
(person)

5,000
73,000
128,794
230,745
338,308
507,059
672,442
Additional registered
customers (person)


68,000
55,794
101,951
107,563
168,751
165,383
8. Registered-

Internet Banking
customers (person)

30,500
52,000
54,711
113,370
121,511
205,626
293,183
Additional registered
customers (person)


21,500
2,711
58,659
8,141
84,115
87,557
(Source: Annual report of VCB in 2004 – 2012)
Table 2.11: Changes in annual market share of the main product of VCB
Unit: %
Year
2005
2006
2007
2008
2009
2010

2011
2012
1. Market share of
capital mobilization


9.89
9.12
8.4
8.25
8.3
8.33
8.54
Additional market
shares



-0.77
-0.72
-0.15
0.05
0.03
0.21
2. Market share of
credit

9.8
9.1
8.9

8.5
8.11
8.1
8.84
Additional market


-0.70
-0.20
-0.40
-0.39
-0.01
0.74


18
shares

3. Market share of
import and export
payment
30.00
27.00
24.10
22.70
20.40
20.00
19.2
17
Additional market

shares

-3.00
-2.90
-1.40
-2.30
-0.40
-0.80
-2.20
4. Market share of
debit card issuance

29.67
27.50
25.00
21.00
25.00
24.00
24.00
Additional market
shares


-2.17
-2.50
-4.00
4.00
-1.00
0
5. Market share of

international credit
card issuance

23.12
19.30
32.00
30
29
28
30
Additional market
shares


-3.82
12.70
-2.00
-1.00
-1.00
2.00
6. Market share of
international
payment cards

69.90
57.60
59.70
53.00
50.00
51.00

53.00
Additional market
shares


-12.30
2.10
-6.70
-3.00
1.00
2.00
7. Market share of
ATM

29.00
26.00
19.80
16.00
14.00
14.20
14.70
Additional market
shares


-3.00
-6.20
-3.80
-2.00
0.20

0.50
(Source: Annual report of VCB in 2004 – 2012)
In general, impact of investment in enhancing competitive capacity at VCB
increased turnover of the main products (excluding foreign currency trading), but the
market share tended to decrease or little change.
Table 2.12: Income structure of VCB
Year
2005
2006
2007
2008
2009
2010
2011
2012
Interest income (%)
77.25
72.17
65.51
74.07
69.98
71.05
83.00
73.00
Non-interest income (%)
22.75
27.83
34.49
25.93
30.02

28.95
17.00
27.00
(Source: Annual report of VCB in 2005 – 2012)
Under the impact of investment in enhancing competitive capacity which made
product diversification, in the recent years, there was a positive change in income
structure of VCB towards increase in the proportion of non-interest income to meet
target of diversifying income sources.
Besides quantitative criteria, the results of investment in enhancing competitive
capacity were reflected over qualitative assessments:


19
(1) Changes of technological capability: Technology foundation of the VCB
was strengthened and developed. VCB was built a Informatics Center with IT staffs
from headquarters and branches; transactions were processed in the automatical and
online direction; many new technology projects carried out supported operations and
management positively.
(2) Changes of governance capacity: Managing business operations was in
active nature and close to market movements. Along with the business operations,
risk management capabilities were also improved gradually by completing
management system, monitoring credit risk, market risk and operational risk, with
processes and modern management tools.
(3) Changes of service quality: Service quality was significantly improved:
attitude and way of service as well as sales skills, advisory capacity of transaction
staffs were increasingly assessed; transaction places were arranged synchronously,
spaciously and comfortably to facilitate and make a good impression to customers.
2.3.2. Criteria for effect of investment in enhancing competitive capacity
Assuming in calculation of performance targets that investment capital in the
year will promote its efficiency in the same year.

- Criterion 1: Additional sales turnover compared with investment capital
(∆DS/Iv): showed that how unit of turnover of each product was increased from a
million VND of investment capital for competitiveness
Table 2.14: Criterion of additional sales turnover in comparison with
investment capital in some main products of VCB
Year
2005
2006
2007
2008
2009
2010
2011
2012
Iv
i
(billion VND)
497.76
507.46
532.26
447.05
760.53
1039.11
2,404.70
2,304.00
1. Mobilized
balance (billion
VND)
108,313
120,695

144,810
159,989
169,457
208,320
241,700
303,942
∆DS/Iv

24.40
45.31
33.95
12.45
37.40
13.88
27.01
2.Loan balance
(billion VND)
61,043
67,743
97,631
112,793
141,621
176,814
209,418
241,163
∆DS/Iv

13.20
56.15
33.92

37.91
33.87
13.56
13.78
3. Turnover of
import and export
payment (million
USD)
21,000
22,800
26,300
32,500
25,620
31,000
38,800
38,810
∆DS/Iv

3.55
6.58
13.87
-9.05
5.18
3.24
0.0043
4. Turnover of
forex trading
(million USD)
24,000
30,200

26,100
46,000
39,420
35,200
34,500
24,100
∆DS/Iv

12.22
-7.70
44.51
-8.65
-4.06
-0.29
-4.51
5. Number of
issued cards (card)

887,153
912,673
868,711
966,244
1,104,002
1,110,000
1,180,000
∆DS/Iv


47.95
-98.34

128.24
132.57
2.49
30.38


20
6. Turnover of
International
payment cards
(million USD)

386.3
452.7
642.63
567
741
1,000
1,200
∆DS/Iv


0.12
0.42
-0.10
0.17
0.11
0.09
(Source: Annual report of VCB in 2005 – 2012)
In general, criteria of additional turnover out of total investment capital of VCB

was often > 0 (excluding forex trading) and that of some service products gained a
relatively high level
- Criterion 2: Additional market share compared with investment capital
(∆TP/Iv): showed how % of market share of each product was increased from a
billion VND of investment capital for improving competitive capacity.
Table 2.15: Criterion of additional market share compared with
investment capital of some main products of VCB
Year
2005
2006
2007
2008
2009
2010
2011
2012
Iv
i
(billion VND)
497.76
507.46
532.26
447.05
760.53
1039.11
2,404.7
2,304
1. Mobilized market
share

9.89
9.12
8.4
8.25
8.3
8.33
8.54
∆TP/Iv


-0.0014
-0.0016
-0.0002
0.0000
0.0000
0.0001
2. Loan market share

9.8
9.1
8.9
8.5
8.11
8.1
8.84
∆TP/Iv


-0.0013
-0.0004

-0.0005
-0.0004
0.0000
0.0003
3. Market share of
import and export
payment
30
27
24.1
22.7
20.4
20
19.2
17
∆TP/Iv

-0.006
-0.005
-0.003
-0.003
0.000
0.000
-0.001
4. Market share of
debit card

29.67
27.5
25

21
25
24
24
∆TP/Iv


-0.004
-0.006
-0.005
0.004
0.000
0.000
5. Market share of
credit card

23.12
19.3
32
30
29
28
30
∆TP/Iv


-0.007
0.028
-0.003
-0.001

0.000
0.001
6. Market share of
International payment
cards

69.9
57.6
59.7
53
50
51
53
∆TP/Iv


-0.023
0.005
-0.009
-0.003
0.000
0.001
(Source: Annual report of VCB in 2005 – 2012)


21
- Criterion 3: Additional profit compared with investment capital (∆LN/Iv):
showed that how billion VND of profit was increased from a billion VND of
investment capital for improving competitive capacity.
Table 2.16: Criterion additional profit compared with investment capital

of VCB
Year
2005
2006
2007
2008
2009
2010
2011
2012
LN
i
(billion vnd)
1,293
2,861
2,390
2,728
3,945
4,236
4,217
4,427
Iv
i
(billion vnd)
497.76
507.46
532.26
447.05
760.53
1,039.11

2,404.7
2,304
∆LN/Iv

3.09
-0.88
0.76
1.60
0.28
-0.01
0.09
(Source: Annual report of VCB in 2005 – 2012)
Investment in enhancing competitive capacity made positive impact on
technological capability, staff quality, product quality, brand and methods of sales
promotion, which increased annual turnover of the main products and annual profit of
VCB. The level of impact, however, has not been corresponding to the investment
cost. For the market share, investment in enhancing competitive capacity did not
make a positive impact on it. In fact, the market share of some main service products
of VCB has been reduced in the recent time.
2.3.3. Limitations in Investment in enhancing competitive capacity
Firstly, it’s not enough capital for investment demands. Limitation on capital
caused obstruction for bank in selecting objects and investment structure.
Secondly, competitive capacity is not been improved significantly.
Changes in competitive capacity have not been corresponding to amount of
investment capital. There was lack of strongly positive changes and many targets
have not been proximate to the targets put forward to a large and modern commercial
bank. Comparing between figures with other banks showed that: financial resource of
VCB has been inferior to many banks in the area, distance to the local joint-stock
banks has been increasingly shortened; operational capacity has occupied a large
scale but the products have not been diverse, flexible:

Table 2.17: Financial criteria of some commercial banks in the area in 2012
Bank
Unit: million USD
Unit: %
Equyity
Total Assets
CAR
NPL
ROA
ROE
Development Bank of Singapore
limited (DBS)
29,344
287,776
17.10
1.20
0.97
11.20
Maybank (Malaysia)
13,760
161,400
17.35
1.10
1.20
16.00
Bangkok Bank public Company
Limited (Thái lan)
8,788
77,709
16.21

2.34
1.46
12.84
Banco de Oro Unibank, Inc
(BDO - Philipin)
3,771
29,825
19.20
2.80
1.20
11.30
Vietcombank
1,992
19,874
14.83
2.40
1.13
12.61


(Source: Annual report of banks in 2005 – 2012)


22
Tổng tài sản
287,776
161,400
77,709
29,825
19,874

-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
DBS Maybank Bangkok bank BDO VCB

Chart 2.7: Financial criteria of some banks in the area in 2012
There have not been strong changes in income structure. The market share of
many the core products were been reduced and has not been corresponding to the
scale. Governance capacity has not been professional and has been lack of experience
in international environment; distribution system has been still cumbersome and
many modern distribution channels have been untapped.
Thirdly, investment is not timely: Typically, in technology investment:
corebanking of VCB has been invested since 1999 and has become behind the times
in comparison with other banks, but there has been a replacement project until 2012.
For this reason, technological capability is not considered as a top.
Fourthly, investment is made spreadly, not concentratively: Investment in
machinery, equipment and infrastructure has held a large proportion of the capital but
has not been developed correspondingly to software technology and skills of staffs as
well as has been lack of proper concentration on brand development and sales
promotion.
Fifthly, there are many shortcomings in management investment: Building the
projects are lack of scientific and real evidence in; inspection, supervision and
reporting have not made timely evaluation of the effect of investment, have not been
associated the effect of investment with competitiveness of the bank.
2.3.4. Causes of limitations in investment in enhancing competitive capacity

(1) Subjective causes
Firstly, it has an ill capital mobilization. The advantages of joint-stock banks
have not been brought into and bound by multiple mechanisms.
Secondly, it has lack of experience and strategies: Leaders of VCB are lucid and
drastic when focusing on investment in enhancing competitive capacity but most of
them are inexperienced in management of a modern joint-stock bank according to
international standards. Therefore, investment in enhancing competitive capacity at
VCB have not really in strategic importance.
Vốn chủ sở hữu
29,344
13,760
8,788
3,771
1,992
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
DBS Maybank Bangkok bank BDO VCB


23
Thirdly, influence of mechanism of state-owned banks in many years: VCB is
still a perennial State bank and its dominant shares are held by the State. Therefore, it
is hard to avoid limits of old operating model. Investment policies are insufficiently
active, have not promptly grasped the investment opportunities because it must

follow the mechanisms of regulations of the State.
Fourthly, unprofessional organization and unmethodical training for managers of
investment: coordination and organization between divisions have not been focused
and there is insufficiently professional knowledge of invested management for
implementation staff.
(2) Objective causes
Firstly, lack of support of state management agencies: support of the State in
policy, orientation, creating investment opportunities, partnership approach, training,
etc. are practical and comprehensive.
Secondly, incomplete legal basis: Some sectors of legal basis are incomplete and
unperfected such as sector of cards, electronic banking, investment to expand
business, capital contribution, etc. made investment activities to meet the certain
problems.
Thirdly, some activities that must follow the general policies of the State Bank:
The policies are compulsory banks not to charge or not to control the ratio of fees of
some services, making the bank not to be active in price policy and not to have
motivations to improve service quality and enhance its competitiveness.
Fourthly, competitive pressures due to increasingly open of financial markets: in
conditions of the open financial markets, the banks provide a diversified portfolio of
products with sophisticated methods of competition. Therefore, investment in
enhancing competitive capacity at VCB must meet many further requirements while
other banks also put forward investment strategies to improve their competitiveness.
Fifthly, low level of technology: The difference between the bank's
infrastructure and common infrastructure makes investment in technology
development of the bank to meet difficulties, arise many costly and inefficient
expenses of investment and depend on foreign suppliers.
CHAPTER 3: SOLUTIONS TO IMPROVE INVESTMENT IN
ENHANCING COMPETITIVE CAPACITY OF JOINT STOCK
COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM
3.1. Development trends of Vietnam financial market and Orientation of

VCB
3.1.1. Development trends of Vietnam financial market
Development trend of Vietnam financial market has advantages such as:
expansion of market in conditions of increasing infrastructure development; many
opportunities brought from international economic integration; institutional system of
currency and banking operations focused on completing. Besides that, competitive


24
pressures are increasing strongly because of operation expansion of foreign banks;
risk of brain drain; risk of complex changes in inflation, interest rate, exchange rate; a
challenge for VCB in implementing business strategy and competitive strategy in
next time being that many banks have similar competitive strategies.
3.1.2. Assessment of competitors of VCB
Assessing strengths and weaknesses of competitors is foundation for VCB to
build its competitive strategy. The analyzed competitors include: Vietinbank,
Techcombank, Sacombank, MB, ACB,…
3.1.3. Orientation of VCB
Orientation of VCB is becoming a diversified financial investment group
belonging to 70 largest financial groups in Asia before 2020. It works in both the
domestic and international financial markets and considers commercial bank as the
key of corporate model on foundation of promoting its advantages, consolidating
position of the wholesales bank and promoting retail activities. In addition, VCB
keeps being a bank holding leading position in Vietnam, one of five leading banks on
retail banking services.
3.2. Some solutions to improve investment in enhancing competitve capacity
for VCB
Based on some opinions such as: investment in the lawful manner and in the
direction of bank, promotion of strengths, overcoming weaknesses and regular,
comprehensive investment, the thesis put forward some of following solutions:

3.2.1. Organizing divisions responsible for management of investment
This is the main division including key staffs participating in management of
investment. Besides that, depending on each specific project, it is necessary to have
coordination to other relevant divisions. This division performs the main functions, as
follows: advising bank managers on investment; building a specific and detailed
project; carrying out investment; summarizing and assessing …
3.2.2. Training skill and knowledge of management investment to staffs
Management investment staffs should be trained specialized knowledge and
skills related to investment such as knowledge of tendering, establishment of
investment projects, investment project management, finance to serve management,
etc.
3.2.3. Building reasonable investment strategy
VCB should built methodical and professional invested strategy, which provides
that the strategy cannot be separated from business strategies, competition strategies.
To apply theory model “five competitive forces ” of Prof. Michael Porter, invested
trategy of VCB should be performed towards:
Investing to manage costs well: Selecting technologies to exploit the
achievements of science and technology in the best direction, to minimize the human
costs, other material costs; investment for effective network development; selecting


25
advertising channel consistent with the characteristics of the product and customer
objects; tight management, control of using the budget; saving other general
operating expenses.
Investing to differentiation of products: Appropriate investment in research
activities, policy marker: investment in building effective system of customer
relationship management; connecting with other partners to provide more
conveniences to customers; investment in building and maintaining VCB’s culture.
Investing to implementing the strategy of customer focus: Researching

market thoroughly to gain sufficient and accurate assessment; selecting market
segments the bank has strong point; selecting the most suitable distribution channels,
advertising campaigns, sales promotion for target customer approach.
Highlights of the strategy are deep investment, technology improvement,
product development on foundation of increase of conveniences for customers,
investment in service quality; focusing on investment in staff qualification, more
powerful, more professional investment in researching product development,
completing process and developing brand.
3.2.4. Enhancing capital mobilization for investment
VCB should build long-term or short-term capital project, mobilize from
resources through different methods to disperse risks, reduce costs, set out dead-line
suitable for investment, particularly own capital. In addition, VCB should also
monitor, manage and supervise tight use of capital.
3.2.5. Strengthening management, supervision of investment
Investment in construction should be managed tightly, organize procurement
methods widely. With division of focused investment management, VCB should
build system of appropriate reporting at periods of invetsment suitable for investment
objects, put forward specific criteria for right assessment.
3.2.6. Strengthening cooperation with strategic partners
For cooperation with strategic partners to bring good impact on investment,
VCB should note that: selecting partners with strengths in the sectors VCB is aiming;
selecting partners having a thorough knowledge of Vietnam market, similarities in
business practices; building and negotiating the agreements of cooperation on the
roadmap, putting forward the specific targets, meeting benefits of parties; usually
organizing activities for exchange of experiences, learning reality and assessing the
results gained after each period of cooperation.
3.2.7. Expanding operation towards the formation of Financial – Banking
Group
Forming Financial – Banking Group facilitates the Bank to expand markets to
stimulate investment. To be a group, VCB must put forward the methodical, scale

and concentrative investment activities: investment is carried out through purchase,
merger but it is required to attach special importance to selection of partners with