1
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


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:
3

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-

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 4
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

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 6
commercial bank is also a firm with full normal activities like other firms, including

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. 7
- 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

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

i-1
và
∆ ROE = ROE
i
– ROE
i-1
(1.13) 9
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-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: 10
- 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

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 11
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

(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

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 (%)


13
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

- 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)

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

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,

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

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

-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

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


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

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)

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

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

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

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

- 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

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

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

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

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

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

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

-
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

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

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

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