Tiểu luận môn tài chính quốc tế the stucture of international balance of payments of vietnam during the period 2010 2015 and meanings of the research problem

Tài chính quốc tế - Nhóm 2

ts of Vietnam during the period 20

Group 2
Đặng Hải Linh
Nguyễn Hữu Bảo
Nguyễn Huy Minh
Đỗ Thị Mỹ Hạnh
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Đỗ Quang Huy

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A1.

Definition




OVERVIEWS

The balance of payments, also known as balance of international payments and
abbreviated B.O.P., of a country is the record of all economic transactions between the

residents of the country and the rest of the world in a particular period (over a quarter
of a year or more commonly over a year).
According to the Government's Decree No. 164/1999 / ND-CP of November 16, 1999
on the management of Vietnam’s international balance of payment, the international
BOP is prescribed by a systematic comprehensive balance sheet. Set of indicators on
transactions between residents and non-residents in a given period. Accordingly, the
State Bank of Viet Nam was designated as the main chair for the establishment,
monitoring and analysis of the BOP

2. Structure of BOP



Trade Balance
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
-

-

-


-

-



It is the difference between exports and imports of items, typically referenced as
visible or tangible items. In case the exports are higher compared to imports, you will
see trade surplus and if imports are more than exports, you will have trade deficit.
Trade balance shows whether a nation enjoys a surplus or deficit. Developing countries
usually have trade deficit. The trade balance is a part of current account.
Current Account
In the current account, merchandise trade is entered first. There are actually a large
number of distinct items which belong to the goods category. Export receipts are
shown on the credit side and the imports are shown on the debit side. The second
item that is recorded in the current account is invisibles. T
he current account consists of trade in services, dividends, unilateral receipts,
investment income, etc. After entering the details, balancing is performed for the
current account. This balance is referred to as the balance of current account. When
debits are more than credits deficit occurs.
Current account surplus will take place when credits are higher than debits. Current
account balance is extremely important. It exhibits a country’s earning and payments
in foreign currency. A surplus balance improves the country’s financial position. It may
be utilized for growth and development of the country.
Capital Account
The Capital account includes all the short-term and long-term transactions between a
country and the world. Usually, these types of flows of money are related to saving and
investment, but speculation has turned into a major component of the account in
recent times.
In the capital account, both direct and portfolio foreign investment is
recorded. External assistance and commercial borrowing are presented net
repayment. Direct investment identifies the money which moves across national
boundaries with the intention of investing in a business. Portfolio investment moves

across national boundaries with the intention of purchasing shares and bonds. The
Official reserves means the reserves of gold and foreign exchange kept by the Reserve
Bank of India to be used by the government.
Errors and Omission
According to double entry book – keeping concept for every credit, there exists a
matching debit and thus, there must be a balance in BOP as well. In reality BOP may
not balance. Once various types of international financial flows are recorded, the
statistical discrepancy, referred to as errors and omissions, is also recorded. The
statistical discrepancy occurs due to complications associated with collecting balance
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

of payments data. You can find different sources of data which occasionally differ in
their approach.
Foreign Exchange Reserves
Foreign exchange reserves exhibits the reserves that are kept in the form of foreign
currencies. If the overall balance is surplus, it is moved to the official reserves account
which raises the foreign exchange reserves. It may be in form of dollar, pound, gold
and Special Drawing Rights (SDRs).

3. Impact of balance balances to economic
The balance of payments affecting the economy in general and international trade in
particular is expressed in the following aspects:
 Affecting the exchange rate:
-

The relationship between balance of payments and exchange rates is reflected by the
following simple model:

Balance of
current
account
(X – M)

+

Balance of
capital
(CI – CO)

Balance of
official
reserves
(FXB)

+

=

Balance of
payment
(BOP)

X: export turnover

M: import turnover

CO: capital outflow

FXB: foreign exchange reserves of a country.

-

CI: capital inflow

In a fixed-exchange monetary system, governments will ensure the balance of
payments, if the balance of payments is disequilibrium, the government will intervene
in the money market through foreign currency reserve account.
•

If the sum of the current balance and the capital balance is greater than 0, the
domestic currency demand, the government will intervene in the market by selling
domestic currency to foreign currency and gold to bring the balance of payments back.
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•

If the total of the current balance and the capital balance is less than 0 (zero), the
government must intervene through the purchase of local currency in foreign currency
or gold reserves.

-

In a floating-exchange monetary system, the government has no role in intervening in

currency markets. The balance of the current balance and the capital account will be
established automatically through exchange rate changes.

 Influence on floating exchange rate management:
-

Although exchange rates are determined based on market conditions, countries are
still trying to maintain their desired exchange rates. So most countries have sought to
change the market value of a currency by indirect tools instead of direct intervention.
One of those tools is interest rates.

-

A country that wants to protect its money in the currency market may choose to raise
its local currency rate to attract additional external funds. This changes market factors
and creates a need for additional local currency. In the process, governments have
entered the currency market to implement solutions to maintain value for money.

 Impact on economic development:
-

Although a surplus or deficit of current account can not be said to be good or bad for a
country, from a national income perspective, the deficit of current accountmay
negatively affect total national product and employment. Conversely, the surplus will
have a positive effect.

-

Economic development always requires the import of goods and services from the
source of foreign currency for export, if the import is larger than the amount of foreign

currency earned, the trade balance deficit. However, some developing countries need
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to import material and technology that can be used to industrialize and modernize the
economy, the "deficit" is a necessity. Moreover, from a capital mobility perspective,
trade deficit means that the country is establishing long-term credit holders with the
rest of the world while only short-term debtors.
 Impact on foreign currency sources and use of foreign currency funds:

The balance of payments of a country is quite adequate for a country's income and
money flows. All economic and business activities occurring within a country are
usually expressed in domestic currency but international transactions are usually
expressed in foreign currency, so the deficit or surplus of the balance of payments both
affect foreign currency sources and the ability to use foreign currencies and
transactions.
 The source of the debt crisis:

The source of foreign currency into a country such as investing and transferring money
can make the country's balance of payments surplus, but a major problem is growing
foreign debt:
•

Firstly, your debt is foreign currency debt, of which more than 90% is usually US dollar.
This debt usually has to be paid both principal and interest from three main sources:
(1) Foreign currency earnings from exports;
(2) Additional foreign debt for debt repayment;
(3) Foreign direct investment.

However, creditors often want countries to pay off their debt by foreign exchange
earnings from exports, but not every country can borrow from it.
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•

Secondly, global economic crises have exacerbated inflationary pressures and made
the developed economies (usually creditors) suffer from currency hardship, which
could raise interest rates, offer limited solutions to the borrowing countries that make
it difficult for their economic activities.

THE STRUCTURE OF INTERNATIONAL BALANCE OF
PAYMENTS OF VIET NAM DURING THE PERIOD 2010-2015

B-

I.Current Balance
1.
-

-

-

Balance of trade
In 2011-2015, The improved trade balance contributes positively to economic growth
and is one of the most important factors in reducing exchange rate pressures and
improving overall balance. However, the trade deficit rate was mainly due to a

slowdown in domestic production (including reduction in imports of manufactured
goods, machine, equipment, consumer goods).
On exports: In the period 2011-2015, exports of goods have achieved high growth
rates, more than three times the GDP growth rate. The proportion of Vietnam's
exports in total world exports has more than tripled in 15 years from 0.25% in 2001 to
0.8% in 2015, Vietnam agricultural products. Although the share of contribution is low,
this indicates a greater degree of deepening and widening participation of Vietnam in
the world value chain, significantly improving the position of Vietnam in general and
Vietnamese goods. in particular.
On imports, the share of imports in total export turnover tends to decrease,
contributing to improving the trade balance of Vietnam. In the period of 2011-2015,
Vietnam's average import increased by 14.36% / year, lower than the two periods
(2001-2010).

Figure 1. The balance of trade Vietnam 2011-2015
Unit: million USD
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-

However, in the period 2011-2015, the improvement of the trade balance is not really
sustainable, which is due to:
Exports of the FDI sector tended to increase in the structure of imports and exports,
indicating the dominance of the FDI sector as well as the difficulties and weaknesses of
the domestic sector. From 2000 to now, turnover Exports of FDI sector continued to
increase with high growth rate, especially after 2008, contributing to strengthening the
position of this sector in the total export of Vietnam. This is also one of the reasons

that the structure of importation by commodity of Vietnam has changed, the
proportion of imported raw materials auxiliary materials for FDI sector increased while
the proportion of imported goods to the zone The domestic sector continues to
decline.

Figure 2. Structure of Vietnam's exports by sector exports
Unit: %

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-

The structure of export goods is mainly low-value items. Although the share of value of
agro-forestry -fishery products, heavy industry and minerals (except for 2012) tends to
decrease while the proportion of light industrial products increases, the main export
items are High-labor intensive goods such as textiles and garments, footwear,
telephones, computers, etc., thus, the actual value added for Vietnam is decreasing.

Figure 3. The structure of exports by commodity group
Unit: %

-

The export market structure is slowly changing. Vietnam's main consumer markets are
ASEAN, the United States, Japan and China. This increases the dependence of Vietnam
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-

on these countries, especially China. In the period 2001-2015, the trade deficit
between Vietnam and China has increased continuously, with China's trade deficit on
China's total exports to China at 13.32% in 2001 and rising Up to 192% by the first nine
months of 2015.
However, averaging over the 5-year period, it can be seen that this proportion of the
period 2011-2015 is lower than in the previous period 2006-2010 and higher than in
the 2001-2005 period. Specifically, the proportion of China's trade deficit on total
exports to China in 2011-2015 is estimated at 161%, 190.41% for 2006-2010 and
52.69% for the period 2001-2005.

2. Balanced service

Table 1. Balance of services Vietnam 2009-2014
Unit: million USD

-

-

Năm

2009

2010

2011

2012

2013

2014*

Thu

5766

7460

8879

9400

10500

11000

Chi

8178

9921

11859

12500

13200

15000

CCDV

-2421

-2461

-2980

-3100

-2700

-4000

So far, Viet Nam's balance of payments has always been in deficit. From 2010 up to
now, the balance of service deficit has started to increase at a rapid pace and there are
signs of concern. If the deficit was $ 2.42 billion in 2009, the figure was $ 2.98 billion in
2011, and $ 3.1 billion in 2012, down slightly in 2013, then in 2014 then deficit
Reaching a high of $ 4 billion. The previous year (2008 pouring) deficit is always less
than $ 1 billion.
The balance of services of Vietnam is always deepening because import of services is
always more than export. Vietnam is still large trade deficit due to trade deficit in
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transport services, insurance services. Despite the trade surplus in tourism but not
offset.

Table 2. Export-import tourism services-transport 2010-2014 (billions of USD)
Unit: billion USD
Xuất khẩu

-

-

-

Nhập khẩu

Du lịch

Vận tải

Du lịch

Vận tải

2010

4,45

2,3

1,47

5

2011

5,62

2,5

1,71

8,22

2012

6,6

2,1

2

8,7

2013

7,5

2,2

-----

-----

2014

7,3

-----

-----

8,1

According to GSO statistics, service exports in 2014 reached $ 11 billion, increase
2.8%, of which tourism services reached US $ 7.3 billion, accounting for 66% of total
turnover and did not change much compared to In the previous year, service import
reached $ 15 billion, up 5.6%, of which transport and insurance services accounted for
$ 8.1 billion, accounting for 5.4% of total turnover and up 12.6% The case for 2014 is
about $ 4 billion and has been on the rise in recent years mainly due to imports of
transport services as imports from abroad are still in the mainstream. When Vietnam
undertook commitments to open services markets within the framework of the WTO
and the ASEAN Community from 2015 and the Pacific Economic Partnership
Agreement TPP in the near future.
In terms of exports of travel services (transport, telecommunications, insurance,
government services and other services), tourism services exports increased with
highest speed at 16% half of the corresponding increase in total exports of services.
Tourism services account for the largest share of total service exports and are

constantly increasing (in 2005, 53.9% in 2005, 71.7% in 2005, 59.7% in 2013).
The proportion of export turnover in total exports of goods and services is low and
decreased from 9.4% in 2010 to 7.7% in 2012 and 7.4% in 2013. Export turnover ratio
Services on GDP by service sector are low and fall to 19.7% in 2015 to 17.8% in 2010
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-

and 14.2% in 2013. This rate in 2013 of service exports is low and far from the export
of goods to GDP 77.1%
The propotion of exports of transport services in total service exports was completed
and dropped rapidly from 30.9% in 2010 to 25.6% in 2011, to 21.5% in 2012 and into
20.9% in 2013 ................

II. Capital Account


Foreign Direct Investment :
-

-



According to statistics of the Foreign Investment Department (Ministry of Planning and
Investment), as of 20.12.2016, both countries have 22 509 valid projects with a total
registered capital of 293.25 billion close USD. Implementation of capital accumulated

FDI projects estimated at more than US $ 154.54 billion (roughly 53% of total
registered capital in force). FDI was invested in 19 of 21 sectors, including industrial
sectors processing and manufacturing accounting for the largest proportion (58.8%
accounted for the total registered capital), business real estate ranked second (17.7%
of the registered capital). There are 116 countries and territories have invested in
Vietnam, of which South Korea is the largest investor with 5,747 valid projects, the
total registered capital of over US $ 50.7 billion (representing 17.3% of total
investment); 2nd Japan with 3,280 valid projects, the total registered capital of over 42
billion dollars (14.3% of total investment).
Now, FDI has been present throughout the 63 provinces and cities across the country,
focusing mainly in the key areas, have advantages. Ranked by size of capital, Ho Chi
Minh City 6737 project led to valid, registered capital of 44.82 billion US dollars,
accounting for 15.3% of total registered capital of the country; second is the Ba Ria Vung Tau 342 projects with registered capital of US $ 26.86 billion, accounting for 9.2%
of the total registered capital of the country; ranked third with 3,035 projects in Binh
Duong, the registered capital of 26.96 billion US dollars, accounting for 9.1%.

FDI has brought positive value to the economy, as indicated in the following points:
First, promote economic growth
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•

Looking at Figure 1 you can see the trend movement of the rate of economic growth
and total FDI in Vietnam implemented basically in phase with each other. Only in
2008 while FDI implemented capital increase but due to inflation policy of the
Government and the global economic downturn, should economic growth rate fell
sharply compared to 2007. On the long term, we I can confirm that FDI is one of the
important factors affecting the economic growth potential of Vietnam.

Figure 1. Relationship between GDP growth and total realized capital

On the other hand, the contribution rate of FDI in GDP in the region is higher than
the previous year. If in 1992, the rate was 2%, but in 2005 was about 15%, is above
17% in 2015. This confirms the position, the role of FDI in the national economy.
FDI sector also contributed significantly to revenues with increasing values. Period
1994-2000 is $ 1.8 billion, rising to $ 14.2 billion in 2001-2010 and 23.7 billion in
2011-2015.
Second, promote the restructuring of the economy towards modern
• FDI is an important factor promoting the development of many industries and new
products, generating over 50% of industrial production, contributing to the
formation some key industrial sectors of the economy, such as oil and gas,
electronics, information technology, steel, cement ... increasing the production
capacity of the national economy due to the economic structure more progressive.
•



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FDI also contributes to certain on restructuring agriculture, diversification of
products, enhance the value of agricultural goods exported and absorb some of the
advanced technology, plant varieties, the yield quality high.
• FDI enterprises have focused investments in some important sectors in agriculture
and rural areas, such as processing of agricultural products after harvesting,
processing and animal feed, ... create more new products and increasing

competitiveness of agricultural products.
• In the services sector, FDI appears many new services are of high quality, such as
banking, insurance, auditing, shipping, logistics, hotels, offices, apartments for rent
some industry international standards, gradually facilitate market development
services and increased international economic integration.
Third, increase the scale of investment capital for the economy
• With Vietnam, are in the process of promoting industrialization and modernization,
the demand for capital of the national economy is very large, FDI supplements a
significant portion needs. Reality in Vietnam showed that FDI plays an important
role, as shown by the total capital investment in the development of this area is
increasing (Figure 2).
•



Figure 2. Percentage of FDI in total social investment capital (current prices)

•

In 2011-2015, the FDI sector contributed over 22% of total social investment
capital. However, while FDI is external force is important for the process of
investment development of the national economy, but to note if we use would
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



effectively negative impact on planning, as imbalances in investment structure,
regional structure, which can pollute the environment and absorb the backward
technology.
Fourth, improve the technological level
• Improve the technological level of FDI is considered as an important channel to
develop the technological capacity of the country receiving the
investment. Through FDI, Vietnam has access to the advanced technology of the
world to develop the economic sector using modern technologies, such as precision
engineering, electronics, software industry, postal - telecommunications,
biotechnology ...
• FDI is contributing to the rapid development of export processing zones, Industrial
Zone with advanced technological level. Many new and modern technology was
transferred through FDI activity, creating an important landmark in the
development of some key economic sector of the country.
Fifth, promote export, expanding external relations and enhance economic
integration International
• In recent years, exports of regional FDI has "turn" their sales to customers of
Vietnam, promote national brands, became the "bridge", is a good condition to
Vietnam quickly approaching and conducted cooperation with many countries,
international organizations, the economic center, engineering and technology in the
world, gradually improve the position and strength of our country in the context of
globalization.

Figure 3. The value of merchandise exports FDI.

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Non-oil and rice, no exports exceeding US $ 100 million / year. When FDI
enterprises in Vietnam went into the development phase, the rate of export growth
of this sector has contributed to the export growth of the whole country. From
1991 to 1995 exports of FDI reached US $ 1.12 billion, coming in 1996-2000
reached $ 10.6 billion, up more than 8 times higher than 5 years ago and accounted
for 23% of exports country. In the 2011-2015 period, also continued to increase, in
2015 reached nearly 80 billion US dollars and 67.4% of total export turnover of the
country. By exports from FDI, the trade balance is not only improved, but also
generate a trade surplus in recent years.
Sixth, improve the quality of human resources
• Employed workers in FDI enterprises is increasing, if in 1990 the percentage of
workers in this sector accounted for only 0.04% of the workforce across the
country, then by 2007 the rate was 1.6%. In 2010, FDI has attracted over 1.7 million
direct employees, including direct employees working in the industrial sector
accounted for nearly 80%, in 2015 2.2 million workers, accounting for 4, 2% over
the whole country. In addition, FDI also creates jobs for about 2.5 million workers
indirectly. FDI is considered a pioneer in in-house training and external training,
raising the level of workers, technicians, managers. Part of which has the capacity to
manage, the scientific, technological substitution enough foreign experts. including
direct employees working in the industrial sector accounted for nearly 80%, in 2015
2.2 million people, accounting for 4.2% of the whole country.
•



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•

In addition, FDI also creates jobs for about 2.5 million workers indirectly. FDI is
considered a pioneer in in-house training and external training, raising the level of
workers, technicians, managers. Part of which has the capacity to manage, the
scientific, technological substitution enough foreign experts. including direct
employees working in the industrial sector accounted for nearly 80%, in 2015 2.2
million people, accounting for 4.2% of the whole country. In addition, FDI also
creates jobs for about 2.5 million workers indirectly. FDI is considered a pioneer in
in-house training and external training, raising the level of workers, technicians,
managers. Part of which has the capacity to manage, the scientific, technological
substitution enough foreign experts.

2. Long & Medium-term loans

Situation of ODA attraction in period of 2010-2014

-

Total ODA disbursement by the end of 2014 is expected to reach $ 48.23 billion,
accounting for 69.71% of total signed ODA. In the past two years, thanks to the high
determination of the Government, the efforts of various sectors at all levels and
donors, disbursement of some large donors such as Japan, the World Bank, has had
great progress: Japan's disbursement rate in Vietnam in 2011 ranked second and in
2012 ranked first worldwide; WB's disbursement rate in Vietnam increased from 13%
in 2011 to 19% in 2012

-

Results of ODA commitments, signing and disbursement in 2011-2014:

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



Commitment: $ 20,872.77 million
Signing: $ 23,436.63 million
Disbursement: $ 18,470 million

Over the years, the commitment, signing and disbursement levels have made certain
progress, increasing gradually over the years. However, in the 2011-2014 period, the
amount of commitments is lower than that in 2006-2010 period, but the number of
contracts is higher than in 2006-2010 and higher than the commitments in the same
period. This represents the great efforts of Vietnam and the donors to improve and
harmonize processes, procedures, institutional refinement, and capacity improvement
at all stages of resource mobilization. (Project documents; expertise and approve
projects,negotiate and conclude the agreement; organize, manage and implement the
project) as well as the donors belief in Vietnam. The share of borrowings in total ODA
tends to increase from 80% (1993 - 2000) to 81% (2001-2005), 93% (2006-2010) and
now stands at 96% (2011 - 2014).

III.

1.
-

-

OUTSTANDING RESULT ON EXCHANGE RATE FOR
THE PERIOD 2011 – 2015

Active, flexible in exchange rate stability
In implementation of the Government's Resolution No. 02 / NQ-CP dated 09/02/2011
on the major solutions to guide and administer the implementation of the 2011 socioeconomic development plan, the SBV issued the Decision 230 / QD-NHNN dated
11/2/2011 adjusted the average interbank exchange rate to 20,693 VND, up 9.3%
compared to 18,932 VND before, and narrowing the trading band from ± 3% down ±
1%; Promulgated Circular No. 07 / TT-NHNN dated March 24, 2011 to narrow the
subjects of foreign currency lending by credit institutions (CIs) to borrowers being
residents.
Following this, the SBV issued a series of documents to lower the US $ deposit interest
rate ceiling rate from 6% per annum to 2% per annum, increasing the compulsory
reserve requirement for CIs by 2% to 6%. Expanding the state-owned enterprises to sell
foreign currencies to credit institutions, gradually moving the domestic foreign
currency mobilization and lending relations of credit institutions to foreign currency
trading and dealing with foreign currency transactions Legally on the free market.
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-

2.
-

-

-

-

With the drastic measures of the SBV mentioned above, the foreign currency market
has gradually stabilized, exchange rate tensions have been pushed back. At the end of
2011, the official exchange rate increased only by 10.01% y / y and stood at
VND20,828. The exchange rate quoted by commercial banks was relatively stable and
was in the range of Permission, foreign exchange status of commercial banks
improved; The trade deficit was reduced sharply and was only 10.4% of export value,
much lower than the 18% proposed, with the overall balance of payment surplus of
USD 3.1 billion, compared to the deficit $ 3.07 billion in 2010.
Price stabilization, market support
Promoting the results achieved in 2013, the SBV has set the goal of stabilizing the
exchange rate in 2014 within ± 2%, combining exchange rate and interest rate policy. At
the same time, closely watching the developments in the foreign currency market and
the international payment balance, continue to reduce interest rates on USD deposits
and average interbank exchange rates in line with changes in foreign currency supply
and demand On the market, ensure the foreign exchange market works smoothly.
In the context of slow credit growth, the SBV loosened foreign currency borrowers
under the Government's policy, focused on the priority areas and ability to balance
foreign currencies of commercial banks. With interest rates less than 4-5% per annum
over VND loans, businesses can access cheap credit, helping to reduce costs in finding
new alternative markets to reduce dependency. Into the Chinese market. Due to the
high foreign currency credit, the USD selling price was maintained at a high level, along
with the expectation of the possibility that the SBV will adjust the exchange rate soon
after the Governor's message and the exchange rate policy direction. In 2014, the SBV
decided to raise the official exchange rate by 1% to 21,246 VND / USD, effective from
19 June 2014.
The decision to adjust the exchange rate by 1% has contributed to stabilizing the
market and supporting exports in the last months of the year, thereby supporting

economic growth. Stepping on to 2015 is a turbulent and challenging year for the
management of monetary policy in general and the exchange rate policy in particular
in the context of the continuous appreciation of the USD due to the expectation of the
Federal Reserve to raise interest rates. And China suddenly adjusted strongly the
exchange rate of the Chinese Yuan, which led to a sharp drop in the currencies of
Vietnam's major trading partners.
In Vietnam, raising large government bonds to offset the unsuccessful budget deficit
has pushed up government bond yields, putting double-pressure on the money
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-

-

-

market: Short term interest rates are rising in the long run, which indirectly hinders the
goal of further lowering lending rates and stabilizing the exchange rate.
Faced with that situation, the SBV has been very active and flexible in executing to
come up with suitable solutions to the new conditions and situation. In fact, just after
the central bank unexpectedly devalued the renminbi on Aug. 11, on August 12th, the
SBV flexibly and promptly adjusted the exchange rate band between VND and USD
from +/- 1% to +/- 2%. Then continue to actively lead the market, eliminate the
psychological expectations, anticipated the adverse impact of the Fed's ability to raise
interest rates and fluctuations in the world financial markets, on August 19, The SBV
adjusted the average interbank exchange rate between VND and USD by 1% and
widened the exchange band from +/- 2% to +/- 3%. Adjustment has also been clearly

communicated to the market to explain why the adjustment was aimed at neutralizing
and protecting the economy from external shocks.
As a result, the market welcomes this move, international financial and monetary
institutions (IMF, WB), international banks (HSBC, ANZ, Standard Chartered, Citibank,
etc) Appreciated is the "initiative", "necessary", "quick" and "timely" responses.
Exchange rates and foreign exchange markets have quickly stabilized, market
sentiment has cleared.
With the active and flexible exchange rates, the exchange rate and the foreign currency
market in this period have been more stable than in the previous period, the exchange
rates of commercial banks fluctuated flexibly in the amplitude. allow. The foreign
currency liquidity of the entire banking system in Vietnam has been improved, the
confidence in the value of the dong has been strengthened, and the "dollarization"
situation has drastically reduced. Credit institutions tend to buy foreign currencies
from customers. And sold to the SBV, the balance of payments improved gradually and
was surging at a high level. The SBV bought a large amount of foreign currency to
increase the State's foreign exchange reserves.

C-

MEANINGS OF THE RESEARCH PROBLEMS

1. Capture the situation of export and import of that country in a year
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The international balance of payments helps us to assess the flow of foreign currency in
or out of a country with other countries in the world, show the economic relationship
between the two countries together.

2. Analysis the imbalance of balance of payments

-

Affect to foreign currency sources and using foreign currency funds: The balance of
payments of a country expresses quite fully country’s income and money flow. All
economic and business activities of a country usually expressed in local currency but
international transactions are usually expressed in foreign currency, so the deficit or
surplus of the balance of payments affect to foreign currency sources and the abilities of
using foreign currencies and transactions

-

Affect to the economic growth: Not only affect to exchange rate, it also affect to the
economic growth. Although the surplus or current account deficit can not be said to be
good or bad for a country, but from a GNI ( Gross National income ), the deficit of
balance of current account can have bad affect to GNP ( Gross National Product) and
jobs. Reserve that, surplus has good affects.

-

Economic growth always requires the import of good and services from foreign currency
source export, if the import is greater than the amount of foreign exchange earned,
balance of trade deficit. However, some developing countries need to import production
material, technology to be able to industrialize and modernize the economy so the
deficit is necessary. Further, from a capital mobility perspective, deficit of balance of
trade means the country is establishing a long-term net pure creditor position with other
countries in the world while only being a short-term debtor.

-

The source of the debt crisis: The source of foreign currency into a country such as
investment, money transfers can make the country's balance of payments surplus, but a
major problem is growing foreign debt. Despite the many factors that emerging foreign
debt crisis, but in terms of balance of payments, two fundamental issues are often
mentioned.



First, the foreign debt usually be paid capital and interest from 3 sources:
(1): Foreign income from export
(2) Addition foreign debt to payments
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

(3) foreign investment
However, Creditors usually expect countries to pay debt by (1) but not any
coutries can increase export from that capital.
Second, global economic crises have increased inflationary pressures and made
the developed economies (often creditors) suffer from monetary difficulties that
could raise interest rates, offer solutions to limited the borrowing countries that
make it difficult for their economic activities.

3. Adjust the balance of payments:
-

In the currency system under the fixed exchange rate regime, governments will ensure
the balance of payments, if the balance of payments is disequilibrium, the government
will intervene through foreign currency account. If the total of balance of current and
balance of capital bigger than zero, the government will intervene in the market by
selling the local currency to foreign currencies and gold, making the balance of
payments return to normal. If the total of balance of current and balance of capital is
less than zero, the government must intervene through the purchase of local currency in
foreign currency or gold reserves. Clearly, the government of the nation maintains a
balance of foreign exchange reserves are important, so they can timely intervention in
the currency market in order to maintain exchange rate stability in order to stabilize
national economic and trade activities.

-

Although exchange rates are determined based on market conditions, countries try to
maintain exchange rates as desired. So most countries have sought to change the market
value of a currency by indirect instead of direct intervention. One of those tools is
interest rates. A country wishing to protect its currency in the money market may
choose to raise local currency rate to attract additional external funds. This changes
market factors and creates a need for additional local currency. In the process,
governments have entered the currency market to implement solutions to maintain
value for money.

4. Graph the economic situation in Vietnam and analyze the factors affecting the

current account of Vietnam.

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-

The current account is a major part of the international balance of payments; it records
international trade in goods and services; Net income and transfers from abroad; And is
one of the key indicators for assessing the behavior of future of the economy. According
to the interim approach, the current balance reflects the difference between domestic
savings and investment. The current account deficit means that domestic savings are not
sufficiently large to invest in the country, requiring the attraction of external sources
such as FDI, remittances or foreign loans. With a high growth economy and at an early
stage of development like Vietnam now, the current account deficit is understandable.
Even in some respects, it is necessary for Vietnam to make use of external capital to
develop its economy.

-

The current account deficit may affect a country's solvency, potentially high risks and
adverse effects on the economy. This effect can occur as a shock to the external balance
of the economy in two forms:
 The currency crisis is accompanied by a sharp depreciation of the domestic
currency or the depreciation of foreign currency reserves
 Foreign debt crisis, in the form of insolvency of foreign debt or the inability to
borrow foreign debt.


A persistent of the balance of current deficit, if not funded by the balance of capital
surplus, would lead to a deficit in the balance of payments, putting downward pressure
on the domestic currency.

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