tự do hóa tài chính ở việt nam - thực trạng và giải pháp bản tóm tắt tiếng anh

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MINISTRY OF THE STATE BANK OF VIETNAM
EDUCATION AND TRAINING
BANKING ACADEMY
******************



BUI THI THANH TINH




FINANCIAL LIBERALIZATION IN VIETNAM
CURRENT STUATION AND SOLUTIONS

MAJOR: FINANCE - BANKING
CODE 62.34.02.01




SYSNOPSIS OF DOCTORAL THESIS ON ECONOMICS

Hanoi – 2013

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This thesis was completed in Banking Academy



Scientific Instructor:
1. Asso.Prof. Dr. To Kim Ngoc
2. Dr. Dao Minh Tu



Opponent 1: Prof. Dr. Nguyen Dinh Huong

Opponent 2: Dr. Le Xuan Nghia

Opponent 3: Dr. Le Van Luyen





The thesis will be defended before the Academy-level thesis marking
council held in Banking Academy
at day month year

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INTRODUCTION

1. The urgency of the research
Through decades of severe fiscal restraint, the country is
aware of the costs, at the same time, with the new conditions of the
global environment, countries try to choose for themselves the
financial liberalization measures to increase competition in the
financial system, thereby improving allocative efficiency and
resource utilization.
The countries have certain differences, such as fundamentals
of macroeconomics, the development level of the financial system;
degree of perfection of the legal system; management capability,
governance etc. are the issues to consider when selecting and
sequencing measures financial liberalization. The main purpose is to
maximize the benefits of financial liberalization while minimizing
the damage that financial liberalization brought. The liberalization of
financial help create an environment of transparency, flexibility and
efficiency to the financial system, attract investment, stimulate
healthy competition, bring development dynamics as well as the
opportunity to use of diversified financial services at high quality.
The potential benefits of financial liberalization are great, but there
are also downsides to the cause of collapse, financial crisis.
In early 20th century, the financial liberalization has
appeared, but it only really became strong wave after World War II
ended. The developed economies of North America and Europe
conducted strong financial liberalization in the years of 1960 - 1970,
the economies of Latin America and Japan implemented it vigorously
in the 1980s while the economy developing countries in Asia
promote this process in the 1990s.
However, since financial liberalization became popular in the
world, many people saw the financial crisis occurred in many
countries in the regions such as Latin America in the 1980s or the

Asian financial crisis in 1997 and currently is global financial crisis
originating in the U.S. in 2008.

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In the context of the world economy which are so volatile
now, when the financial crisis originating from the U.S. in 2008
spread to other countries, the world economy is not showing signs of
recovery with debt problems the common European currency area
(EUROZONE), has made economic experts, researchers recognize
the problem of financial liberalization. As these countries are
increasingly having close relationship with each other, the volatility
in the financial system of a country will have strong impact on other
countries. How suitable the level of financial liberalization with each
country is for each particular stage? That is a question that should be
considered.
There is the notion that it is because the process of financial
liberalization that the financial crises had a chance to happen. Then
there are other arguments that financial liberalization is good but the
manner and conditions to conduct the new liberalization is the culprit
causing the crises.
Vietnam is in the process of international economic
integration, its financial liberalization cannot be done, especially after
Vietnam joined the WTO in 2007. Having a deep understanding of
the process of financial liberalization is essential to be able to
contribute to the success of the financial liberalization process in
Vietnam in particular and the integration of the whole economy into
the global economic system in general. The study of this issue
becomes more significant in terms of the young financial system of
Vietnam, with the background context of the current international
economy, in order to be able to take advantage of the great benefits

of financial liberalization and limit its negative impact on the
economy. The key issue is choosing a financial liberalization route
with appropriate levels in each stage. Starting from these
requirements, the author selected the topic "Financial liberalization in
Vietnam – current situations and solutions" to study.
2. Research situation
Overview of the foreign study situations

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Financial liberalization has attracted the attention of many
research scientists and organizations around the world such as the
World Bank and the International Monetary Fund The research
content of financial liberalization is very wide, but can be roughly
divided the work into the following groups:
- The theoretical and experimental aspects of financial
liberalization: the nature, benefits and costs, the preconditions, the
level of financial liberalization are mentioned in a number of studies
of J. Stieglitz (2000), Gerard Caprio, Patrick Honohan and Joseph E.
Stiglitz (2004), Abdul Abiad, Enrica Detragiache, and Thierry
Tressel (2008). Specifically: Gerard Caprio, Patrick Honohan and
Joseph E. Stiglitz (2004), Financial Liberalization: How Far? How
Fast?, Joumal of Comparative Economics, 2004, vol. 32, indicating
the nature of financial liberalization and the extent of financial
liberalization. Ronald McKinnon (1993), The Order of Economic
Liberalization: Financial Control in the Transition to a Market
Economy, Baltimore, Johns Hopkins University Press, 1993 states on
the order of financial liberalization
- Study of the experience of nations on financial
liberalization: the choice of methods and routes; analyze the causes
of success and failure. The typical authors are Akira Ariyoshi, Karrl

Habermeier, Bernard Laurens, Inci Otker-Robe (in the research
program of the IMF, the World Bank conducted after the Asian
financial crisis in 1997), John Williamson and Molly Mahar (1998)
Barry Eichengreen and Michael Mussa (1998), Bernhard Fischer and
Helmut Reisen (1992), Ronald McKinnon (1993). In the study by
Barbara Stallings (2004), it clearly points out the lesson about
success and failure from Latin America and Eastern Asia while
conducting financial liberalization
- Research on the relationship between financial
liberalization and crises includes a number of well-known
researchers: Krugman, Obstfeld Krugman (1979) was the first
scholar to explain the outbreak of financial crisis policy derived from

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capital account liberalization. He said that the nations with exchange
rate regime which is not rationally managed may lead to crisis when
foreign investors withdrew capital massively leading to the depletion
of foreign exchange reserves. Obstfeld (1996) argued on the basis of
the Krugman model and pointed out that, although the mechanism of
directing exchange rates is reasonable, the financial crisis could still
break out if the market's expectations sudden changed associated
with the attack of speculators.
Overview of research in the country.
The domestic research on this topic may include a number of
authors and works such as the ministerial-level scientific theme of
Trinh Quang Long (2006), Financial liberalization and risk arising:
International Experience and propose a roadmap for Vietnam's deep
research on financial liberalization associated with the risk involved;
The special study code QG.04.25, National University of
Hanoi, Tran Thi Thai Ha (2006). Financial Liberalization: Theory,

international experience and the problems posed to Vietnam study
mainly about financial restraint towards financial liberalization and
the experience of some countries. Bui Ngoc Son (2010), Financial
Liberalization - A global trends, a ministerial-level scientific research
theme, this topic has shown promising trend of financial
liberalization globally, this is still the problem persists despite the
volatility in the global business environment over time. Nguyen Toan
Thang (2010), Theory and practice of liberalization of capital
transactions and the stability of the financial sector of Vietnam:
Policy Framework up to 2020, the state-level scientific research
project, this topic refers to the issue of liberalization of capital
transactions in relation to the stability of the financial sector in
Vietnam. Referring to the relationship between financial
liberalization and economic growth with studies by Tran Anh Tuan
(2002), The impact of financial liberalization to economic growth
theory & practice in Vietnam, Institute of Development Studies, Ho
Chi Minh City. Some studies by the Ministry of Planning and

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Investment - The United Nations Development Program, VlE/02/009
Project, Research the competitiveness and the impact of
liberalization of financial services: the case of the banking industry,
December 2005; Nguyen Dai Lai, Financial liberalization - Trends
and policy solutions for Vietnamese banks in post-WTO era. Also
some of the content of financial liberalization is also mentioned in
the papers presented at the scientific conferences of banking, finance
and universities.
However, the above-mentioned works have not reflected the
full generalization, namely the status of the financial liberalization
process in Vietnam, not pointed out the roadmap and financial

liberalization solutions in Vietnam in the events of large fluctuations
in the economic environment both at home and abroad today. In
particular, the period from 2008 to date, when the world economic
context has many changes deriving from the financial crisis in the
U.S., Vietnam also has unavoidable impacts and is facing difficulties.
Under these circumstances, the opinions referring to financial
liberalization matter at this stage is somewhat more cautious. There
are experts who question: Do we need to conduct financial
liberalization or not? And after the crisis, what level of financial
liberalization is suitable, especially with small economies, dependent
on foreign countries?
With a desire to meet the learning needs, research and policy
planning related to such a vast and complex topic of financial
liberalization, the author selected the topic "Financial Liberalization
in Vietnam - Current situation and Solutions " to research.
3. Objectives of the study
The research objective of the thesis is:
- Pointing out the principle of financial liberalization, the
degrees as well as the implementation conditions of financial
liberalization. Countries have different conditions, do the developed,
developing economies implement financial liberalization the same or
not?

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- Analyze and determine the extent of financial liberalization
in Vietnam over time.
- Propose a roadmap and solution conditions for the financial
liberalization so that the financial liberalization is most effective with
Vietnam.
4. Object and scope of research

- The object of the thesis research is financial liberalization,
the implementation conditions of financial liberalization, the index
measuring the level of financial liberalization.
- Scope of the Study: In terms of time, the thesis focuses on
the period after the reform in Vietnam, especially the period from
2006 to 2011.
5. Research methodology
The dissertation uses a combination of measures in economic
science to analyze the issue. Statistical methods, comparisons
applicable to look for the salient features of the financial
liberalization process in countries around the world. At the same
time, the thesis uses the method of analysis, synthesis, and
systematization and generalization.
6. The scientific meaning and practice of the thesis
The thesis systematize, contributing to developing basic
theoretical issues of financial liberalization. Especially clarifying the
benefits and risks of financial liberalization, the necessary conditions,
the issue of principle quality to ensure making full advantage of the
benefits and minimize the risks of this process.
Situation analysis of the financial liberalization in Vietnam,
from which working out the roadmap, the solutions and conditions
that promote the financial liberalization in the context of international
economic integration in Vietnam today.
Besides, the thesis can be used as teaching materials,
research, education and policy proposals.
7. Structure of the thesis

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Besides the introduction, conclusion and list of references,
the content of the thesis is divided into three chapters as follows:

Chapter l: Theoretical basis of financial liberalization
Chapter 2: Current situation of financial liberalization in
Vietnam
Chapter 3: Solutions to promote financial liberalization in
Vietnam.

Chapter 1
THEORETICAL BASIS OF FINANCIAL LIBERALIZATION
1.1. CONTENT AND PRINCIPLES OF FINANCIAL
LIBERALIZATION
1.1.1. The concept of financial liberalization
According to IMF: Financial Liberalization is the process of
reducing and eventually canceling the control of the State for the
operation of the national financial system, making this system
operate freely and more efficient than the market rules.
1.1.2. Contents of financial liberalization
1.1.2.1. Liberalization of interest rates
Concept: The liberalization of interest rates is an important
part of financial liberalization. The liberalization of the exchange rate
is to delegate to the market to fully determine the equilibrium interest
rate, the central bank only uses indirect intervention tools to adjust to
suit the objectives and strategies set out in each period of economic
development.
Expression of interest rate liberalization: Liberalization of
interest rate is nuclear of the FL (financial liberalization) process.
Liberalization of interest rate is shown by allowing commercial
banks (CBs), credit institutions (CIs) to freely determine the capital
mobilization and borrowing interest rates; the Central Bank (CB)
uses the indirect interest operating mechanism instead of the direct
interest rate operating mechanism.

1.1.2.2. The liberalization of the exchange rate

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Exchange rate is the cost of money and reflecting the total
harmonic correlation of the social general price level in the domestic
market society compared to overseas markets.
Concept: Exchange rate liberalization is a process towards
allowing the exchange rate to be determined based on the market
supply and demand relationship.
Expression of exchange rate liberalization: Exchange rate
liberalization is expressed in a number of aspects such as: Remove
the fixing of exchange rates, the administrative measures on foreign
currency are eliminated and the tools bearing market characteristic
are used; exchange rate is determined based on demand and supply of
foreign currencies.
1.1.2.3. Liberalization of the activities of credit institutions and
other financial institutions in the financial markets.
Concept: Liberalization of the activities of credit institutions
and financial institutions means to remove the direct intervention of
the Government in the course of operation of these organizations, so
that these organizations operate under market rules.
Expression of the liberalization of the activities of credit
institutions and other financial institutions: (i) removal of interest
rate control, (ii) reducing reserve requirement, (iii) reduction of State
intervention towards the lending decisions of banks, removal of
directed credit to commercial banks, (iv) privatization of state-owned
banks, (v) further expansion of the domestic financial institutions and
the entry of foreign financial institutions increases.
1.1.2.4. Liberalization of capital transactions
Capital transactions are transactions related to capital

movements between residents and non-residents of a country.
Concept: Capital liberalization is a process to gradually lift
the restrictions applied to these transactions. Liberalization of capital
transactions allow the capital inflows - outflows are freely moved
under the market rules (the capital lines freely flow from a low
yielding place to high return rate). These activities take place

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naturally, not limited by national boundaries but in the trend to
minimize the direction of state intervention to market.
Expression of liberalization of capital transactions:
(i) Allowing non-residents to own the domestic financial
assets in the form of debt or stock papers, (ii) Allow the residents to
hold foreign financial assets, (iii) Allow both residents and non-
residents to freely hold and exchange financial assets in the domestic
market, this is the highest degree of liberalization of capital
transactions, as well as the highest level of financial liberalization.
1.1.3. Measuring the level of financial liberalization
There are a number of indicators measuring financial
liberalization for reference
(1) KAOPEN index measuring financial openness
(openness of the capital account)
(2) Method of measuring integration by quantitative real
flows.
(3) Schindler index to measure the degree of liberalization
of capital transactions
(4) The financial liberalization index: Measuring the level
of financial liberalization by giving marks to the components of
financial liberalization
This measure can be widely applied to all countries and

covers quite wide, to different parts of the financial liberalization not
only of capital transactions thus should be selected for use in the
thesis.
1.1.4. Principles and procedures for financial liberalization
1.1.4.1. Principles of procedures for financial liberalization
Principle 1: Financial liberalization is best done in the context of
healthy macroeconomy.
Principle 2: Financial liberalization should be closely associated with
the establishment of an institutional infrastructure possibly to reduce
the risk of financial uncertainty.

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Principle 3: To have appropriate financial liberalization speed, from
time to time, it is necessary to review the financial conditions and the
soundness of financial institutions as well as the time needed to re-
structure these institutions (if needed).
1.1.4.2. Some views on financial liberalization procedure
In fact, there may not be a unified sequence of financial
liberalization for all nations, due to the problems of national
characteristics, the time of financial liberalization as well as the
international context. There have been many different views on the
order of financial liberalization.
a. McKinnon and Shaw's view
b. Rules for financial liberalization roadmap of OECD
c. The integrated approach of the IMF
d. ADB's approach
1.1.5. The impact of financial liberalization on the economy
1.1.5.1 The positive impact
a. Allocate resources effectively on national and global scope
b. Increasing credit scale

c. Promoting economic growth
d. Promote reform in countries, improving the quality of growth
e. Avoid the costs of capital controls
1.1.5.2. The negative impact
a. FL can increase the likelihood of financial crisis
b. Exacerbate the issue of information asymmetry.
c. FL can lose the ability to regulate the financial markets of the
Government
1.2. IMPACT FACTORS AND NECESSARY CONDITIONS OF
THE FINANCIAL LIBERALIZATION PROCESS
1.2.1. Factors affecting the process of financial liberalization
Considering the objective aspect: The economic globalization trend
is the factor that promotes financial liberalization.

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Considering the subjective aspects: financial liberalization is also
affected by the subjective desire of the countries themselves in
regulating the economy.
1.2.2. Conditions required to implement financial liberalization
1.2.2.1. Healthy macroeconomic environment.
1.2.2.2. Well operated market mechanisms
1.2.2.3. Macroeconomic management capacity of government
1.2.2.4. The completeness and uniformity of the legal framework
1.2.2.5. Capacity, the development of the institutions participating
in the market
1.3. INTERNATIONAL EXPERIENCE ON FINANCIAL
LIBERALIZATION
1.3.1. An overview of the global financial liberalization the
process
The period from 1973 to the mid-1980s:

The period from the mid-1980s to mid-1990s:
The period from the mid-1990s to present:
1.3.2. Experience of financial liberalization in some countries
1.3.2.1. Korea's Experience
1.3.2.2. Thailand’s Experience
1.3.2.3. China's Experience
Through empirical study of financial liberalization in China,
we can see a number of issues:
First, China conducted the gradual liberalization, not the "Express"
campaign as in some Latin American countries.
Second, the policies associated with the domestic financial
liberalization must be carefully selected and succession should be
well planned.
Third, closely related to the point above, appropriate institutional
development is essential for the success of the financial liberalization
process, including the legal norms and strong judicial system is a
prerequisite.

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1.3.3. Lessons for Vietnam from the empirical study of financial
liberalization of the country
1.3.3.1. On the premise for the financial liberalization process
a. Financial liberalization must be conducted within the framework
of a healthy macroeconomic policy.
b. Financial liberalization will lead to collapse or financial crisis,
especially in country having weak and unsound financial system,
unless there is enhancement and improvement in the financial
sector.
c. Provide information, enhance transparency, both at macro and
micro levels is a requirement to prevent and mitigate the severity of

the crisis when conducting financial liberalization
1.3.3.2. Regarding the financial liberalization speed
It is possible to see the pace of financial liberalization in the
economies going in quite differently.
1.3.3.3. Regarding the financial liberalization order
a. Regarding the financial liberalization order domestically
The order of financial liberalization is an important factor
determining the success of this process. The actual developments in
the world in the last three decades show that many "scenarios" of
financial liberalization took place in the countries.
b. Regarding the liberalization in capital transaction with foreign
countries (liberalization of international finance)
For the input capital flows: The long-term capital inflow is
often the safest input capital form when starting the liberalization
process. Thus, usually, the countries will liberalize the long-term
capital before the liberalization of short-term capital flows.
For output flows: In fact, most countries only lift capital
controls after implementing the liberalization of domestic interest
rates and the budget discipline is maintained. For problems of
establishing the mechanisms to monitor financial liberalization, the
governments have not really seemed to pay much interest in the
reform process.
Chapter 2

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CURRENT SITUATION OF FINANCIAL LIBERALIZATION
IN VIETNAM
2.1. OVERVIEW OF THE DOOR OPENING AND
INTERNATIONAL INTEGRATION PROCESS IN VIETNAM
The bilateral and multilateral relations of Vietnam are

increasingly developing stronger upon the integration into the world
and the regional economy.
2.2. CURRENT SITUATION OF THE FINANCIAL
LIBERALIZATION IN VIETNAM
2.2.1. The liberalization of interest rates
2.2.1.1. For Vietnam dong interest rates
The process of interest rate liberalization of Vietnam dongs
took place in the following order (i) The first phase (starting from
6/1992- 12/1995), (ii) the second stage (from 1/1996-8/2000 (iii)
The third phase (from 8/2000-5/2002), (iv) The fourth phase (from
6/1/2002-5/2008): VND interest rate is totally liberalized. According
to which, credit organizations determine loan interest rates in VND
based on market supply and demand of capital, operating costs and
the level of customer risks. (v) Fifth stage (from 5/2008 to present):
From mid-5/2008 due to many factors affecting from the economy,
the interest rates liberalization is temporarily stopped. Administration
management was set up in many forms: To control the ceiling deposit
interest rate, control the ceiling loan interest rate. Additionally, the
State Bank also offers other interest rate control remedies and
conduct supervision of the observance of the ceiling interest rate
offered.
2.2.1.2. For foreign currency exchange rates
Since the fixation of the specified interest rate and lending,
the liberalization of exchange rates is also done gradually. Before
1990, the central bank specified the level of interest rates mobilized
and foreign currency loans from local banks. After 1990, the central
bank operated the foreign currency exchange rate based on market
movements at home and internationally.

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2.2.2. The liberalization of the exchange rate
The period before 2/1999: Operating rates based on the
official exchange rate, or in other words, the fixed exchange rate
regime, this shows that the liberalization of the exchange rate is
absolutely not exist.
The period from 2/1999 to 2008: Operating exchange rates
based on interbank foreign currency market, the fixed exchange rate
regime with adjustment.
The period from 2008 to the present: the intervention in the
exchange rate is applied as the macroeconomic environment is more
volatile.
2.2.3. Liberalization of the activities of credit institutions and
other financial institutions in the financial market
2.2.3.1. Liberalization of the credit operations of credit institutions
First: Separation of specialized banks from the central bank.
Second, reduction of appointed credit, separate between
policy lending and commercial lending
Third, improve the credit operation control of commercial
banks
2.2.3.2. Liberalization of the operations of institutions in the
financial markets
First: The level of the dominance of the banks under the state
ownership in the banking system is declining.
Second, market participation condition of banks, finance is loosen.
Third, the service activities of the banking system in particular,
financial institutions in general is gradually liberalized.
2.2.4. The liberalization of capital transactions
2.2.4.1. The inflows of foreign direct investment
The enactment of legislation on foreign direct investment is
the foundation of capital flow liberalization of foreign direct

investment in Vietnam. The inflow of foreign direct investment in
Vietnam is increasingly being basically expanded, but there are some
periods affected by the global economic crisis.

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Besides, the trend of foreign direct investment continues to
rise, especially after the change of the mechanism through issuing
new Investment Law, Decree 78/2006/ND-CP, even considering in
terms of the scale is not big.
2.2.4.2. Inflows of foreign indirect investment
In Vietnam there are two channels to make indirect
investments from abroad:
Firstly, through the stock exchanges: participating in release
market and listed securities transactions (including participation in
the auction, sale of bonds, stocks and other listed securities) and
trusted investment.
Secondly, through capital contributions, purchase of shares
(unlisted) of Vietnam businesses.
Indirect investment activity in Vietnam has increased, its
scale is larger and larger, accounting for the ever-increasing
proportion of total foreign investment in Vietnam. However, the fact
shows that its nature is volatile and very difficult to control the flow
of this kind of capital.
2.2.4.3. Inflows of foreign debt
Through foreign loans for capital it reveals that the capital
flow through this channel is increasing, and started to increase
drastically since 2004. This is the stage where the management of
foreign loan repayment is now easing, and the Government's ODA
loans also increased as the economy increasingly integrated.
2.2.4.4. Capital inflows in the form of cash and deposits

The amount of foreign currency moved through accounts
opened at banks are allowed to increase gradually. This reflects
foreign exchange management policy is increasingly looser, which
may include provisions to reduce the rate of foreign exchange
connection, ensure the interests of institutional investors.
2.2.5. Measuring the degree of financial liberalization of Vietnam
According to the group of scholars Abdul Abiad, Enrica
Detragiache, and Thierry Tressel, as of 2005, the liberalization mark

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of Vietnam reached only 9.5 / 21 points, thus only equivalent to that
of the economy achieved at the beginning of the opening of the
financial sector. By 2012, according to calculations by the authors,
the liberalization of Vietnam is about 11/21 points, after rising a bit
(12/21) in the years from 2008 to 2009. The reason is that in 2007
Vietnam officially joined the WTO, accompanied by the gradual
opening up of the sector in the coming years. However, in 2011,
2012 due to problems on the macro economy, thus there were some
respect that the State went back to control strictly, such as the
liberalization of credit, interest rates. Thus, to the present time,
financial liberalization in Vietnam only reaches average level.
2.3. ASSESSMENT OF THE FINANCIAL LIBERALIZATION
PROCESS IN VIETNAM
2.3.1. The achievements
The process of financial liberalization in Vietnam shall
comply with the specific steps and have achieved some results,
considering on the following specific items: interest rate
liberalization, liberalization of exchange rates , liberalization of credit
operations of credit organizations, liberalization of institutions
operating in the financial markets, liberalization of capital

transactions
2.3.3. Existing limitations and causes
2.3.3.1. The limitations
- Regarding liberalization of interest rates: (i) Although nominally
interest rates were fully liberalized, but the free state of interest rate
is not intrinsic. (ii) Operation of interest rate is still insufficient, so it
can not be said that interest rate in Vietnam has really followed
market principles.
- Regarding liberalization of exchange rates: (i) the current
exchange rate is controlled, limited by an amplitude and rate despite
improved towards the currency basket, but still pretty closely
anchored to the dollars, thus the pricing of Vietnam dongs in foreign
currency must use cross rate method not accurately reflecting the

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value of exchange between currencies. (ii) The base on average
exchange rate on interbank foreign exchange market merely to
determine the exchange rate is not appropriate, because the current
new exchange rate regime only account for the single market factors,
ignoring the macroeconomic factors (international balance of
payments, inflation, economic growth, ).
- Regarding liberalization of credit operations of credit institutions:
(i) Although nominally it has been liberalized in credit activities, a
certain number of stages, State Bank of Vietnam has implemented
control of credit growth of credit organizations rather tightly to
ensure implementation of monetary policy base. (ii) Under the
provisions of the state, the existence of preferential credits, bearing
subsidies quality, non-commercial under the auspices of the
government adversely affect the competitiveness of commercial
banks.

- Regarding the liberalization of institutions operating in the
financial markets
Currently, the operations of social insurance and life insurance are
proprietary and highly protected due to the market opening rate of
this service is very slow. The other types of financial services, such
as credit rating, analysis, evaluation and risk management of financial
institutions, fund managers, finance for lease, real estate financing,
etc. is seriously lack of supply sources of high quality and high
reputation.
- Regarding the liberalization of capital transactions
The process of capital account liberalization takes place relatively
quickly compared to the specific conditions of Vietnam has caused
negative impacts and create potential risks for financial markets
2.3.3.2.Causes of the limitations
According to the author, the cause of the limitations that
Vietnam encountered during the FL process is:
First, the FL process was done fairly quickly while
monitoring systems are not developed respectively.

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Second, Vietnam implemented financial liberalization in a
number of areas from fairly early meanwhile the condition of the
market parts are not really well prepared.
Third, macroeconomic policy coordination is ineffective.
Fourth, management and administration capacity of
government agencies is not commensurate with the practical
requirements
Fifth, the legal system framework is not really adequate and
uniform
Sixth, related to the banking system, the major financial

institutions in the financial system in Vietnam, there remain a
number of issues of institution, structure, finance and techniques.
Chapter 3
SOLUTION TO PROMOTE FINANCIAL LIBERALIZATION
IN VIETNAM
3.1. VIEWPOINTS FOR FINANCIAL LIBERALIZATION
ORIENTATION IN VIETNAM UP TO 2020
3.1.1.Financial liberalization viewpoints
The socio-economic development Strategy up to 2020
specifies that we must be active, positive in international economic
integration which extensive and efficient and the viewpoint of
financial liberalization can not lie outside of this general guidance.
3.1.2. The roadmap towards financial liberalization in Vietnam
Strategic orientation of financial liberalization in Vietnam is
as follows:
First, continue to implement the roadmap which was launched in
Vietnam's commitments to integration into the global economy, such
as the commitments to joining the World Trade Organization (WTO).
Second, the degree of financial liberalization in Vietnam in the
coming period is unable to reach the complete financial
liberalization, in each specific content there should still be cautious
strides, especially with the liberalization of capital transactions.

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Third, financial liberalization must define the operation of financial
markets on the basis of the real market relationship, through the
implementation of the basic principles is to minimize the
administrative interferencly e of the state, enhance competitiveness
and ensure prices reflect correctsupply and demand relationship in
the market (especially for interest rates and exchange rates).

3.2. ROADMAP FOR FINANCIAL LIBERALIZATION IN
VIETNAM
Roadmap for financial liberalization in bilateral trade
agreements between Vietnam - United States:
Roadmap for financial liberalization in commitments of
Vietnam upon joining the World Trade Organization:
Suggestions on financial liberalization roadmap in
Vietnam for each specific content
Regarding Interest rate: Strengthen policies to liberalize interest
rates which have been made since 2002. It is necessary to fully
liberalize of interest rates substantially. Regarding exchange rate:
Vietnam needs more transparency in the process of operating
exchange rate to avoid falling into the bipolar condition to
differentiate between the legal rate regime and exchange rate regimes
in practice. Regarding credit activities: Continue to create an
activeness for banks in the credit activities. The government narrows
down directed credit, and adjusts models and interest rate to be
consistent with the rate of inflation and other market forces.
Regarding liberalization of institutions operating in the financial
markets: reform some financial institutions, in particular, reform
comprehensively the banking system. Continue equitization of state-
owned banks. Allowing foreign banks to expand the services as
promised. Regarding the liberalization of capital transactions:
During the period of 5-7 years, Vietnam can not fully liberalize its
capital transactions. The thesis indicates the process for each aspect:
For foreign direct investment; for foreign indirect investment; for
foreign borrowing and lending; for foreign securities issuance

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In fact Vietnam has not really ensured the process of

financial liberalization, especially the roadmaps commitments upon
the joining of WTO. Therefore, it is necessary to take measures to
ensure adherence to this roadmap.
3.3. SOLUTION TO PROMOTE THE FINANCIAL
LIBERALIZATION IN VIETNAM
3.3.1. Improving soundness of macro-economic policies, creating
essential prerequisites for the success of financial liberalization.
To have a framework of healthy macroeconomic policies
there should be sound close coordination and improve the
effectiveness of macroeconomic policies: monetary policy, exchange
rate policy, fiscal policy
3.3.2. Completing regulatory framework
3.3.3. Strengthening sustainability of foreign debt
3.3.4. Developing and completing the financial market: money
market, foreign exchange market, capital market
3.3.5. Setting management and supervision framework
First: These simple measures which can still be appropriate for
Vietnam.
Second: The preventive standards should gain special interest for the
banks.
Third: The international connection of prevention norms.
Fourth: Establish and maintain prevention policies based on three
main pillars which are: the management and supervision of the
government, the practices and internal control measures; market
discipline.
Fifth: Achieving an appropriate balance between reducing the risk of
excessive risk taking and curb the liberalization of institutions to
accept the normal risks inherent in financial intermediation activities.
3.3.6. Restructuring financial system to consolidate,
comprehensively upgrade the banking system and other

institutions in the domestic financial market.

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3.3.7. Collecting, analyzing and supplying information should be
enhanced for transparency
3.3.8. Improving effectiveness of using capital in the economy

CONCLUSION
Financial liberalization is an important part of economic
liberalization. This is the inevitable trend of economic development,
participate in international division of labor for countries of the
world. The thesis " Financial Liberalization in Viet Nam – Current
situation and Solutions” focuses on research, addressing theoretical
and practical issues in financial liberalization with the main contents
as follows:
Firstly, systematizing the basics of financial liberalization
such as the concept, content, level of financial liberalization, impact
factors and conditions necessary for implementation.
Secondly, the thesis has offered overall assessment of
financial liberalization in Vietnam and studied in depth for each
specific content of financial liberalization: interest rates, exchange
rates, credit operations of commercial banks, liberalization of
operations of institutions in the financial markets and liberalization of
capital transactions. At the same time, the thesis also highlighted the
success achieved as well as limitations exist and causes.
Thirdly, the thesis points out the roadmap of financial
liberalization in Vietnam and the conditional solutions contributing to
the implementation of the roadmap of financial liberalization.
In conclusion, the thesis focused on researching, dealing with
basic theoretical and practical reasoning underlying the practice of

financial liberalization in Vietnam. To be able to work out practical
solutions, capable of implementation, the thesis has analyzed
carefully the reasoning bases and practical solutions and hope that the
solutions are supported and sympathized of training facilities,
scientists and experts.


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LIST OF WORKS CONCERNING THE THESIS CONTENT
RELEASED



1 / Ma. Bui Thi Thanh Tinh (2007), Organizing accounting
operation at Vietnam’s securities companies, Banking Science
& Training Review No.58, March 2007.
2 / Ma. Le Ngoc Lan, Ma. Bui Thi Thanh Tinh (2011), A
review on SBV
’
s Inspection and Supervision , Banking Science
& Training Review No.110, July 2011.
3 / Ma. Bui Thi Thanh Tinh, Ma. Le Ngoc Lan (2012), A
theoretical view from a financial curb to a financial
liberalization, Banking Science & Training Review No.118,
March 2012.
4 / Fellows. Bui Thi Thanh Tinh, Dr. Le Ngoc Lan (2012),
Major characteristics of the world financial liberalization
procedure, Banking Science & Training Review No.120, May
2012.
5 / Ma. Bui Thi Thanh Tinh (2012), Impact of financial

liberalization on financial crisis, Banking Science & Training
Review No.124, September 2012.