Mid-course intermship report

FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS

INTERNSHIP REPORT Topic: Recommendations for strengthening Vietnam – Korea Korea financial cooperation relation.

Student:

Dinh Hue Phuong

Class: High quality course A Major: International Economics Student number: 05 Lecturer: Lu Thi Thu Trang H anoi, Jul y 2010 2010

Recommendations for strengthening Vietnam – Korea Korea financial cooperation relation

2010

PREFACE

International Cooperation has played an important role in the progress of founding and protecting our country. In the war time, the support in term of material and spiritual and of friends from all over the world was the motive power for us to struggle for the independence and freedom. Nowadays, international cooperation has become an more and more requisite aspect for in economic development of Vietnam. Since Vietnam issued

“Doi Moi” policy, Vietnam’s government exerted all the effort to expand e xternal relations of Vietnam to all countries in the world, and we can proud of our achievements. Vietnam joined Association of South East Asia Nations Nations (ASEAN) in 1995, The Asia Europe Meeting (ASEM) in 1996, Asia-Pacific Economic Cooperation Cooperation (APEC) in 1998, and the World Trade Organization Organization (WTO) in 2007. Vietnam has been affiliating and developing with the global economy with a extraordinary pace. In the development of international relation, Vietnam priors the closed relationship with the neighbor countries like ASEAN countries and the partner of ASEAN in Asia like Japan, China, Korea, India, etc. in which Korea has been a strategic partner of Vietnam since the official visit of Korea's CEO President Lee Myung-bak in October 2009. Vietnam has been received a lot of support packages from Korea in many areas: economic, investment, education and culture, etc. In internship period in International Cooperation Department of Ministry of Finance, I had a very good opportunity to participate in an activity under Vietnam

–

Korea financial cooperative program, receiving many instructions from experts in this department and research on this field. I think that Vietnam – Korea relationship will be better and a nd better and both Vietnam Vietna m and Korea will get a lot of benefit from each other if we have a suitable policies and actions to consolidating and improving this relation.

Therefore, I would like to choose the topic for my research be “Recommendations for – Korea financial cooperation relation” strengthening Vietnam – Korea In this research, I would like to express the financial cooperation relation between

Vietnam and Korea in the Governments’ level as well as the Ministries’ level, especially 2

Dinh Hue Phuong – HQ HQ A – International International Economics – K46 K46


2010

PREFACE

International Cooperation has played an important role in the progress of founding and protecting our country. In the war time, the support in term of material and spiritual and of friends from all over the world was the motive power for us to struggle for the independence and freedom. Nowadays, international cooperation has become an more and more requisite aspect for in economic development of Vietnam. Since Vietnam issued

“Doi Moi” policy, Vietnam’s government exerted all the effort to expand e xternal relations of Vietnam to all countries in the world, and we can proud of our achievements. Vietnam joined Association of South East Asia Nations Nations (ASEAN) in 1995, The Asia Europe Meeting (ASEM) in 1996, Asia-Pacific Economic Cooperation Cooperation (APEC) in 1998, and the World Trade Organization Organization (WTO) in 2007. Vietnam has been affiliating and developing with the global economy with a extraordinary pace. In the development of international relation, Vietnam priors the closed relationship with the neighbor countries like ASEAN countries and the partner of ASEAN in Asia like Japan, China, Korea, India, etc. in which Korea has been a strategic partner of Vietnam since the official visit of Korea's CEO President Lee Myung-bak in October 2009. Vietnam has been received a lot of support packages from Korea in many areas: economic, investment, education and culture, etc. In internship period in International Cooperation Department of Ministry of Finance, I had a very good opportunity to participate in an activity under Vietnam

–

Korea financial cooperative program, receiving many instructions from experts in this department and research on this field. I think that Vietnam – Korea relationship will be better and a nd better and both Vietnam Vietna m and Korea will get a lot of benefit from each other if we have a suitable policies and actions to consolidating and improving this relation.

Therefore, I would like to choose the topic for my research be “Recommendations for – Korea financial cooperation relation” strengthening Vietnam – Korea In this research, I would like to express the financial cooperation relation between

Vietnam and Korea in the Governments’ level as well as the Ministries’ level, especially 2



under the ASEAN +3 and ASEAN

2010

– Korea Comprehensive Economics Partnership

frameworks. As I mentioned above, this research gives some suggestions for Ministry of Finance of Vietnam

– the organization which is main responsible for managing the

financial relation with all country in the world- with its power, to consolidate and strengthen the financial relation in the future. The structure of this research consists of three chapter as follow Chapter 1: An overview about the organization structure, tasks and powers of Ministry of Finance of Vietnam and the International Cooperation Department. Chapter 2: The background of financial relation between Vietnam and Korea, both intergovernmental relation and relationship of Ministry of Finance of Vietnam and Ministry of Strategy and Finance of Korea. Chapter 3: Some suggestions for the financial relation in each criteria listed in chapter 2. Last but not least, I would like to give special thanks to all experts in International Cooperation Department and Banking Finance and Financial Institutions Department for providing me materials, information and advice during the time I interned in Ministry and prepared for the research. I also want to give a deep thank to my lecturer, Ms Lu Thi Thu Trang for her support for me in finding the topic, checking the outline and fulfill the research. Finally, it is my pleasure to receive comments and assessment from my lecturers for this research. They will be a very useful advice for me to be better in doing the final thesis as well as other researches in the future. Thank you very much. Student

Dinh Hue Phuong

ABBREVIATIONS ASIA Bond Market Initiative 3


Recommendations for strengthening Vietnam – Korea financial cooperation relation

2010

ABMI AFDM

ASEAN Vice Minister of Finance and Deputy Governor of State Bank Meeting

AFMM

ASEAN Finance Ministers Meeting

AKFTA

ASEAN – Korea Free Trade Area

APEC

Asia-Pacific Economic Cooperation

ASA

ASEAN Swap Agreement

ASEAN

Association of South East Asia Nations

ASEM

The Asia-Europe Meeting

BSA

bilateral swap arrangements

CEO

Chief Executive Officer

CMI

Chiang Mai Initiative

FDI

Foreign Direct Investment

HS

Harmonized System

ICD

International Cooperation Department

KDB

Korea Development Bank

KDI

Korea Development Institute

Kexim

Korea Export Import Bank

KIEC

Korea Export Insurance Corporation

MoF

Ministry of Finance

MOFE

Ministry of Finance and Economic

MoFV

Ministry of Finance of Vietnam

MoU

Memorandum of Understanding

SMEs

Small and Medium Enterprises

SOEs

State Owned Enterprises

VDB

Vietnam Development Bank

WTO

World Trade Organization

4

Dinh Hue Phuong – HQ A – International Economics – K46


2010

LIST OF FIGURES

1. Figure 1: Structure of International Cooperation Department – MoF of

………...12

Vietnam. 2. Figure 2: List of Projects sponsored by Korea since 2009 ………………………..13 3. Figure 3: List of projects prepared to be sponsored by Korea in the near future …14

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TABLE CONTENTS PREFACES .....................................................................................................................1 ABBREVIATIONS ......................................................................................................... 3 LIST OF FIGURES ........................................................................................................ 5 Chapter 1: Overview about the Ministry of Finance of Vietnam and the Department of International Cooperation..........................................................................................8

1.1.

The Ministry of Finance of Vietnam .................................................................... 8

1.1.1.

Tasks and powers ..........................................................................................8

1.1.2.

Organization structure of the Ministry of Finance of Vietnam ..................... 10

1.2.

International Cooperation Department ............................................................... 11

1.2.1.

Tasks of International Cooperation Department ......................................... 11

1.2.2.

Structure of the International Cooperation Department .............................. 13

Chapter 2: Financial Cooperation between Vietnam and Korea ............................... 14

Vietnam – Korea Government financial cooperation program ........................... 14

2.1.

2.1.1.

Overview of Vietnam – Korea relation ........................................................ 14

2.1.2. Financial cooperation under ASEAN + 3 frameworks . ................................17 2.1.3. Financial cooperation under the framework of ASEAN – Korea Comprehensive Economics Partnership (AKFTA). ................................................... 19 2.1.4. 2.2.

Cooperation in Taxation and Customs sectors ............................................ 19

Bilateral Cooperation between Ministry of Finance of Vietnam and Ministry of

Finance and Strategy of Korea ..................................................................................... 20 6



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2.2.1. Memorandum of Understanding in September 2006 ....................................20 2.2.2. Memorandum of Understanding on cooperation in October 2009 ............... 22 Chapter 3: Recommendations for strengthening Vietnam – Korea financial cooperation relation. .....................................................................................................25

Suggestions for strengthening Vietnam – Korea financial cooperation relation .. 25

3.1.

3.1.1.

Under ASEAN – Korea Comprehensive Economics Partnership framework 25

3.1.2.

Under ASEAN + 3 framework .....................................................................25

3.1.3. In taxation and custom sectors ....................................................................26 3.2.

Recommendations for strengthening financial relation between Ministry of

Finance of Vietnam and Ministry of Finance and Strategy of Korea ............................ 27 3.2.1. Recommendations for implementing MOU 2006 ......................................... 27 3.2.2. Recommendations for implementing MOU 2009 ......................................... 27 3.3.

Other recommendations ..................................................................................... 28

CONCLUSIONS ........................................................................................................... 29 REFERENCES ............................................................................................................. 30

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Chapter 1: Overview about the Ministry of Finance of Vietnam and the Department of International Cooperation 1.1. The Ministry of Finance of Vietnam

1.1.1. Tasks and powers The Ministry of Finance is a Government agency which has the function of implementing the State management in finance (including: State budget, tax, fees and other revenues of the State budget, national reserve, State financial funds, financial investment, corporate finance and financial services); customs; accounting; independent

auditing; insurance; prices; securities; conducting the ownership rights to the State’s investment capital in enterprises according to regulations of the Law. The main tasks and duties of the Ministry of Finance are pursuant to the Decree No

118/2008/NĐ-CP issued

by the Government as follows: -

Submit to the Government and Prime Minister for approval law and ordinance projects. Draft legal documents, strategy and development planning, long-term, fiveyear and annual plans on the fields withi n the Ministry’s authority.

-

Issue legal documents within the Ministry’s authority.

-

Instruct, guide, supervise and to be in charge of implementing the legal documents, strategy, planning, plan; to set up the propaganda, disseminate, educate legal documents on the fields within the Ministry’s authority.

-

Manage the State budget, the collection of tax, fees and other revenues under the State budget, the budget fund, the State reserve fund and other State financial funds and the national reserves.

-

Manage the State assets.

-

Manage corporate finances and the State capital at the enterprises.

-

Manage the Government borrowings and debt servicing from domestic and abroad; and international grants.

-

Implement the State management in accounting and auditing 8



-

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Manage banks and non-banking financial institutions regarding issues; financial services.

-

Manage customs operations.

-

Implement the State management in prices.

-

Issue Government bonds and participate in stock market management under the regulations of law, Manage, supervise stock and stock market.

-

Organize and guide the implementation of statistics in the fields within the

Ministry’s authority. -

Undertake international cooperation and economic integration in the fields within

the Ministry’s authority. -

Organize and guide the implementation of scientific research, scientific and technology application in the field

-

within the Ministry’s authority.

Decide specific orientations and measures and guide the operating mechanism of public services providing organizations in the fields

within the Ministry’s authority

in accordance with provisions of Laws; to manage and guide the implementation of activities of non- productive units within the Ministry’s authority. -

Implement

the

State

organizations in the fields -

management

to

associations

and

non-Govermental

within the Ministry’s authority.

Inspect, control, settle complaints and denouncements, resist corruption, and be processed by authorized level or be submitted to the competent levels for setlement in accordance to the regulations of law applied for finance-budget management regime breaks and violations.

-

Conduct administrative reform under the Government program.

-

Manage organizational structure, permanent staff; guide the implementation of the provisions on salary, bonuses, disciplines for the State officers

within the Ministry’s

authority; train and retrain staff in the whole sector. -

Manage the assigned capital and assets and the distributed budget plan under the provisions of the Law.

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1.1.2. Organization structure of the Ministry of Finance of Vietnam The Ministry of Finance comprises one Minister, six Vice Ministers who support directly to the Minister and 29 departments each specializes in a specific area related to financial issues. Furthermore, there are an organizational system of financial institutes and financial organizations of MoF in each city and province throughout the nation. 29 departments in MoF include: -

State Budget Department

-

Investment Department

-

Department No.I

-

Administrative Finance Department

-

Tax Policy Department

-

Banking Finance and Financial Institutions Department

-

Accounting and Auditing Policy department

-


-

Legal Department

-

Finance and Planning Department

-

Personnel and Organization Department

-

Commendation and Emulation Department

-

Financial Inspection

-

Ministry’s Office

-

Public Asset Management Department

-

Corporate Finance Department

-

Debt Management and External Financial Department

-

Insurance Management and Control Department

-

Price Control Department

-

Informatics and Financial Statistics Department

-

General Department of Taxation

-

General Department of Customs 10



-

General Department of State Resevre

-

State Treasury

-

State Security Commission

-

Institute of Strategy and Financial Policy

-

Financial Times of Vietnam

-

Financial Review

-

Institute of Financial Training

2010

The Minister of MoF is Mr. VuVan Ninh. He is in charge of providing general and comprehensive directions, instructions on implementation of all tasks of the whole Ministry and Finance Sector; making decisions and solutions on the Ministry and se ctor’s strategies, policies, mechanism and major tasks. Six Vice Ministers are - Vice Minister Nguyen Cong Nghiep -

Vice Minister Tran Xuan Ha

-

Vice Minister Do Hoang Anh Tuan

-

Vice Minister Pham Sy Danh

-

Vice Minister Tran Van Hieu

-

Vice Minister Nguyen Huu Chi

-


1.2. International Cooperation Department 1.2.1. Tasks of International Cooperation Department Pursuance to the Decision No

2146 /QĐ-BTC issued by the Ministry of Finance,

The main tasks and duties of International Cooperation Department are to counsel and support to the Minister of the MoF to deal with economic integration and international

financial cooperation under the MoF’s control’s fields; to manage the programs and projects which are sponsored by foreign nations and organizations to the MoF; to perform external affair issues of the MoF.

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In particular, the main tasks of International Cooperation Department includes: 

Preparing and presenting to the Ministry the projects and tentative of legal documents, strategies, action plans, long-term, medium-term and annual

plans

about international cooperation, legal documents regulate the duties and relations between departments in the MoF in implementing international cooperation tasks; Instructing and inspecting the implementations of such legal documents of departments and organizations in the MoF. 

Being main responsible for preparing contents of agreements and commitments in international financial cooperation of the MoF with the support of other related organizations in and out of the MoF, and participating in all cooperation programs based on such preparations; implementing supervision mechanism macroeconomic,

preparing

plans

for

managing,

supervising,

reporting

the

implementations of these regional and international financial cooperation agreements and commitments. 

Setting up and presenting to the Ministry the tentative for the general and annual plans about the demand for government financial supports; being responsible for asking for sponsorships or supporting to other departments and organizations in requesting for sponsorships for actions and programs in specific cooperation fields; instructing concerning departments to prepare and consider necessary documents for these programs;, negotiating with foreign partners; supervising, assessing and solving struggles in performing, managing and prepare the general report for approval of the Leader of th Ministry.



Prepare for the proc edure

to instructing, supervising and assessing the Ministry’s

departments and the administration of the Ministry’s projects; Managing action plans for in- coming and out-going delegations of the Ministry, being responsible for translation and reception duties in greeting foreign delegations to the MoF, holding and being a main responsible person in international conferences of MoF

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and being on behalf of MoF in signing cooperation agreements and commitment with approval of the Leader of the Ministry. 

Managing and announcing financial cooperation program of MoF, encouraging

MoF’s personnel to research individually or in group on economic and financial issues. 1.2.2. Structure of the International Cooperation Department To perform these above tasks effectively, the International Cooperation Department has been divided into 4 divisions, each is responsible for a specific tasks as follows: -

External Affair Division

-

Project management Division

-

Economic Integration Division

-

International Financial Cooperation Division

Figure 1: Structure of International Cooperation Department – MoF of Vietnam. The leader of the International Cooperation Department is Ms. Nguyen Thi Bich, Director General, moreover, there are three other Deputy Director Generals who are responsible for supporting Director General in the particular tasks of the Department. Presently, Deputy Director Generals are Mr. Nguyen Ba Toan, Ms. Nguyen Van Chi and Mr. Ha Duy Tung. 13



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Chapter 2: Financial Cooperation between Vietnam and Korea 2.1. Vietnam – Korea Government financial cooperation program

2.1.1. Overview of Vietnam – Korea relation In economic, Korea is one of the most important economic partners of Vietnam. FDI

from Korea to Vietnam up to now is about USD 17 billion sponsored to 2064 projects and created more than 500 thousand employees. Recently, Korea investment structure has transformed to service industry, heavy industry (steel production, construction, information technology); there are some large-scale projects (the processing and laminating steel complex project of Posco Corporation, West West Lake New Urban Area project of group of 5 Korean construction companies, Bac An Khanh Urban Area project of Posco – Vinaconex cooperation, etc.) About facilitative loan, since 2009, the MoF and Korea Export Import Bank signed the

following Agreements: No.

Unit: USD Projects

Commited value

1

Providing equipments for Pleiku Hospital

3 000 000

2

Providing equipments for Hà Trung Hospital,Thanh Hoa

3 000 000

3

Constructing motorway Hanoi- Hai Phong package No10

100 000 000

4

Hoa Khanh Tay Water Supply Project

29 998 000

5

Thanh Hoa city social-economic development project

32 730 000

6

Water supply and waste water process project in Moc Chau

12 980 000

7

Providing equipments for Thanh Hoa College of Industry

3 000 000

8

Smart motorway system Ho Chi Minh City – Trung Luong

30 000 000

9

Contructing Vinh Thinh Bridge

100.000.000 Total 314.708.000

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Figure 2: List of Projects sponsored by Korea since 2009 Source: Project Management Division – ICD - MoF Moreover, some Agreements are prepared for signing in next time including: Unit: USD No.

Projects

Committed value

1

Providing training equipments for Ayun Pa Vocational College

2.963.000

2

Providing equipments for Ca Mau Hospital

2.963.000

3

Constructing Yen Bai Complex Hospital

45.000.000

Total:

50.926.000

Figure 3: List of projects prepared to be sponsored by Korea in the near future Source: Project Management Division – ICD - MoF

Assessing the implementation of Korea’s lending Agreement: in general, the Korea’s loans are released tightly followed the schedules, meet the needs of the projects. However, there are some projects that needed to be renewal contract preparing and capital withdrawing time such as solid waste processing project in Ninh Binh, Project of constructing 5 Vietnam – Korea vocational colleges, Water supply Project in Hoa Binh. To reduce this problem, we need to focus on preparing the project before asking for approval and signing contract to maintain that the project runs fluently as expected. In international trade, Korean import export scale to Vietnam reached USD 8.85 billion

in 2008, increased 34.4% in comparison with the year 2007, stood at the forth position. Vietnam exported USD 1.78 billion (increases 42,44% in comparison with the year 2007, focused on agriculture and aquaculture products, mineral, handicraft and light industry products), imported USD 7 billion (increased 32.38% % in comparison with the year 2007, focused on industrial products and process industry products). Korea is one of six 15



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greatest trade deficit markets to Vietnam (in 2008. it got USD 5.28 billion, equal to 29.3% total trade deficit of Vietnam). The Intergovernmental Panel about economic and technology cooperation was set between two countries. About labor issue,

Korea is the third largest labor exporting market of Vietnam at th

present. There are around 54,000 Vietnamese labors working in Korea. On May 25 , 2004, we signed an agreement on moving labors from Vietnam to Korea pursuant to the Employment Permit System of Korea. In tourism factor, recent years, Korean tourists have become one of the main sources to

Vietnam: in 2007 there are 475,000 tourists, in 2008, as the affects of economic recession, this figure reduced to 450,000 people. In education and culture sector, mutual agreement between two nations in August 1994,

Memorandum of Understanding about culture, arts, sport and tourism in October 2008 and many other agreements about youth exchange and education. Two nations usually hold cultural exchange programs, exhibitions, motion-picture industry. In 2006, Korea established Korean Culture Center in Hanoi. Ministry of Education and Training chose Korea to be the strategic informatics partner in education and training. Government, universities and organizations of Korea sponsored to many project to improve education system of Vietnam such as constructing elementary schools project, Middle-Vietnam vocational schools. Scholarship funds like Korea Foundation, Samsung, Kumho, etc. provided many scholarships for poor students in Vietnam, improve language and profession skills in Korea. At present, there are about 5000 Vietnamese students studying in Korea. In the end of October 2009,on occasion of the President Lee Myung-bak had official visit to Vietnam, the Leaders improved

relation between two nations to be “strategic

partnership”

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2.1.2. Financial cooperation under ASEAN + 3 frameworks Under ASEAN +3 frameworks (comprise of 10 ASEAN member countries, and three partners: China, Japan and Korea), the financial cooperation relationship between Vietnam and Korea has not been quite plain, mostly focus on dialogues and exchanges information about the macroeconomic situations, participating in regional cooperative initiatives including Chiang Mai initiative, Asia bond market initiative and ASEAN research group. Compared to Japan, the role of Korea in ASEAN +3 finance is quite modest. However, recently, Korea has encouraged to research on improving cooperative relationship within ASEAN +3 such as analyzing the procedure of credit support for small and medium enterprises in South East Asia area. These are some initiatives of financial cooperation in ASEAN area with the participation of Korea. Chiang Mai Initiative (CMI):

Under ASEAN +3 frameworks, CMI was approved in May 2000 in order to improve cooperative relationship and facilitation in the region on foreign exchange to provide urgent aid to the countries facing temporary difficulties in terms of balance of payment. This important monetary cooperation consists of the following contents: -

Expanding the capital scale of ASEAN swap (ASEAN Swap Agreement

–

ASA) -

Establishing the system of bilateral swap arrangements (BSA) among member 8 members of ASEAN +3

-

Improving the provision mechanism and policy dialogues in ASEAN +3 in the level of: (i) Minister of Finance (AFMM +3); and (ii) Vice Minister of Finance and Deputy Governor of State Bank (AFDM +3)

The aim of

CMI is to expand the ASEAN Swap Arrangement (ASA) to all

ASEAN members and to set up a network of bilateral swap arrangements among ASEAN 17



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members and 3 partners China, Japan and Korea to provide liquidity support for member countries that experience short-run balance of payment deficits. Up to now, there are 16 bilateral swap arrangements signed, in which Korea signed 5 arrangement w ith ASEAN5. However, Korea has no action to speed up negotiation bilateral swap arrangements with other ASEAN countries including Vietnam. ASIA Bond Market Initiative (ABMI):

ASEAN +3 have prepared to implementing ABMI aims to develop efficient and liquid bond markets in Asia, which would enable better utilization of Asian savings for Asian investments. ASEAN bond market development is an important content of financial cooperation of AFMM +3, in which Korea and Japan are the leaders of this initiative. Vietnam bond market in general and capital market in particular are quite young and weak in the development process towards effectively integrate to regional bond market. Under this initiative, Vietnam has been received many supports from Japan, however, the support of Korea concentrated mostly on setting up and developing website Asianbondonline of ASEAN +3 to encourage member countries to update the development of bond markets in these countries to provide useful information to foreign investors. Up to now, this website has been run and Vietnam is one of the most active members in providing data for this website. Stimulating training and research activities:

Korea has provided some training courses for high-grade personnel of Ministry of Finance and State Bank of ASEAN countries about the regional financial system and international financial integration under ASEAN +3 financial cooperation. These course were valued quite useful and effective.

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2.1.3. Financial cooperation under the framework of ASEAN – Korea Comprehensive Economics Partnership (AKFTA). ASEAN – Korea Free Trade Area agreement had been signed officially on May th

16 2006 in Manila, Philippines, in which the tax reduction regulation will be implemented since 2006 and finished in 2011 for the founder members of ASEAN and Korea, 2016 for Vietnam and 2018 for Laos, Cambodia and Myanmar. However , tax reduction has not been performed because some ASEAN countries have not fulfilled their procedure to ratify the agreement. Korea has just ratified the st

agreement and is has been valid since June 1 2007 but they have no more legal document about tax cut and tax reduction. Vietnam finished the procedures to announce new legal document about tax reduction, these document will be valid when Korea officially announce their regulations. 2.1.4. Cooperation in Taxation and Customs sectors In tax management, there are some agreement between the governments of the Socialist Republic of Vietnam and the Republic of Korea about double tax avoidance and the prevention of fiscal evasion with respect to taxes on income and capital gains. Since 2002, the General Department of Taxation of Vietnam and the National Tax Service of Korea had some meetings and agreements of cooperative activities of these departments. According to these agreements, two parties will have some exchange programs to learn experiences in tax management of experts in Vietnam to Korea every year. In customs cooperative activities, two countries established the relationship in customs field since 1995 and recently, the Governments of two countries has signed a bilateral agreement on cooperation in customs operations between Vietnam and Korea in Korea in 2006 and MoU about information technology in customs operations on May 16

th

2006 in Korea. As these agreements, there were a lot of exchange programs of experts of Customs Departments of each country come to other country to study about customs

procedures in partner’s countries. Korea provide Vietnam many support packages to help Vietnam to modernization Custom system by facilitating equipments and technology 19



using in customs processes, risk management, export

2010

– import activities and public

relations. In the year 2008, 2009 and 2010, Vietnam has held enterprises and Customs Department dialogues platform to give explanation to Korean companies about customs procedures of Vietnam. 2.2.

Bilateral Cooperation between Ministry of Finance of Vietnam and

Ministry of Finance and Strategy of Korea

2.2.1.

Memorandum of Understanding in September 2006

Contents th

Signed on September 25 2006, the MoU is an agreement between Ministry of Finance of Vietnam and Ministry of Finance and Economic of Korea about banking and finance sectors. According to this 3 year MoU, MOFE of Korea will support to MoF of Vietnam in following activities: (i) Developing the policy system about finance and credit management and strengthening the management and provision ability of the Government in this sector (ii) Enhancing the activities of implementing and supervising credit investment and credit export policies (iii)

Developing policy system and strengthening the control of the Government in managing the actions of credit guarantee fund system for Vietnamese small and medium enterprises.

Acti viti es accordi ng to the M oU 2006

After the MoU was approved, a general action plan was designed for the period 2007 – 2009 to specify the contents of the MoU. It was also a basic for preparing activities in a synchronous and comprehensive in each step of cooperation program.

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Many specific cooperative activities about the state export credit, export credit insurance, investment credit, and credit guarantee fund were held effectively and diversely by departments, institutions and organizations of two Ministries: -

MoF of Vietnam designated to 7 delegations with 65 experts from

departments in MoF, Ministry of Industry and Trade, Vietnam Development Bank (VDB), Credit guarantee fund, and Investment and development fund of some provinces to visit Korea to study their experiences in organizing and managing the banking and finance system. Moreover, we held many conferences and dialogues with the presence of most important government organizations many enterprises of Vietnam and Korea to discuss about credit issues. -

8 experts from VDB were sent to work in government financial

organizations of Korea (Kexim, KDB and KIEC) -

Two cooperative research groups was set in order to investigate, evaluate

the situation of export credit services of Vietnam and to define the demand for these services in Vietnam; and to assess the credit guarantee funds in Vietnam and to give some recommendations to the concentrative credit guarantee fund model in Vietnam. Assessment of the success of these activiti es

Firstly, these activities were a basic for the establishment of Vietnam Development Bank

and Vietnam Export Import Bank, support for set up policies for investment credit and state export credit, supervisions and reforming of the implementations of investment credit and export credit after joining WTO Secondly, the conferences and training courses provided a useful source of information of

VDB’s personnel and Vietnamese enterprises to more deeply understand about experiences of foreign countries and the importance of risk management in banking system, especially in export

– import activities, and the process of credit guarantee

services for credit guarantee funds of SMEs.

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Thirdly, in 2009, VDB was designated to perform the policies for credit guarantee for

SME following concentrative model as well as current model. The support of Korea played an important role in the success of these policies. It also created a chance for new cooperative programs in the future. However, in the time of implementing the MoU, the activities only concentrated on

sharing knowledge and information, the requirements for practical skills for personnel of two countries were not met. They did not have chance to analysis deeply the banking and finance as well as credit guarantee issues. 2.2.2. Memorandum of Understanding on cooperation in October 2009 Contents nd

On October 22 2009, Ministry of Finance of Vietnam and Ministry of Strategy and Finance of Korea signed a Memorandum of understanding on cooperation in three years, focusing on the public finance management such as state budget management, treasury activities, state owed company control, and human resource improvement: (a) Macro-economic forecast and analysis; (b) Budget revenue management (including taxation and custom); (c) Budget expenditure management (focusing on social securities expenditure); (d) Fiscal policy and treasury policy; (e) Privatization of SOEs & public institutions management; (f) International financial cooperation; (g) Human resources management and organization structure of both MOSF and MOFV; (h) Other areas as mutually agreed by the Sides. Acti viti es accordi ng to the M oU 2006 th

On March 5 2010, the representative of MoFV and MoSF worked together to get a action plan for the year 2010 with 3 activities: 22



-

2010

On May 2010: a delegation of MoF was sent to Korea in a study tour about

the experiences in human resources management and organization structure of MoSF including organization structure, staff recruitment (standards, qualifications...) staff evaluation, staff rotation, staff retraining program, staff nomination progress, the staff training including training program, designing the training program, training content/areas, training methods. Moreover, the MoF delegation worked with the Customs Agency of Busan to discuss the organization structure of custom agency at centre and region/local level, and Taxation Agency in Busan to discuss the organization structure of tax agency at centre and region/local level -

On July 2010, in Hanoi, MoFV and MoSF held a policy dialogue program

on the topic “Post financial crisis policies and foreign investment encouraging policies”. In the conferece, MoFV updated Vietnam’s Economic of t he first six month 2010 and forecasted that of the last 6 month 2010 as well as post financial crisis policies of Vietnam. Experts from MoSF and KDI shared their experiences respond to financial crisis and foreign direct investment inducement of Korea. -

On October 2010: a training course for 15 experts of MoFV will be held in

Korea about state budget revenue management and privatization of SOEs and public institutions management. For the activities in next year, after finishing all activities in the year 2010, two ministries will have a meeting on mutual agreement of actions in 2011 and 2012 based on the MoU. Assessment of the success of these activiti es

Firstly, MoF can learn from the experience of Korea in managing human resources,

defining the personnel classification scale for organizations and departments of MoF, divide tasks and powers to each individual, supervising and inspecting regularly

individual’s work and general tasks of the organizations and departments transparently. Personnel rotation should be consider carefully to have suitable polices, take advantages of personal living condition and working condition.

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2010

Secondly, the process of staff recruitment, staff retraining, and nomination progress have

to be organized logically, flexibly with the social policies of gender equality, beneficiary of social welfare, ethnic minority, and talent inducement policy. Thirdly, the valuable experiences in inducing FDI by focusing on building special

economic zones, exporting processing zone and free trade area, stimulating the economy recovery after financial crisis. However, the working program was in very short time with a lot of tasks, therefore, the contents about human resources management were not analyzed carefully and deeply enough, the experiences is more theoretically than practically, and it should be reformed before applying in Vietnam.

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2010

Chapter 3: Recommendations for strengthening Vietnam – Korea financial cooperation relation. 3.1. Suggestions for strengthening Vietnam – Korea financial cooperation relation

3.1.1. Under

ASEAN – Korea

Comprehensive

Economics

Partnership

framework Two countries need to cooperate more effectively in supervising, inspecting the implementation of the commitment. After announcing the legal documents about tax reduction and tax cut as agreed in AKFTA, Korea have to inform Vietnam soon for the announcement of these documents in Vietnam, against unilaterally tax cutting and reducing actions. 3.1.2. Under ASEAN + 3 framework Chiang Mai initiative (CMI):

In the progress of performing CMI, Vietnam has been negotiating the first USD 1 billion bilateral agreement with Japan. As this agreement, if Vietnam had financial problem, Japanese Government can lend not exceed USD 1 billion. Therefore, if we can negotiate a similar agreement with Korea, it will a lot of benefit to Vietnam. Vietnam desires to stimulate negotiation the bilateral swap arrangement with Korea under the Chiang Mai Initiative of ASEAN +3 financial cooperative activities to enhance the financial cooperation between Vietnam and Korea Government in particular and to develop the swap arrangement system in ASEAN +3 in general with the participation of all ASEAN members. ASIA Bond Market Initiative (ABMI):

ASEAN bond market development is an important content of financial cooperation of AFMM +3, in which Korea and Japan are the leaders of this initiative. Vietnam bond market in general and capital market in particular are quite young and weak in the 25



2010

development process towards effectively integrate to regional bond market. Vietnam want to improve cooperative relationship with Korea in developing capital market, especially the support in technology and exchange experiences in managing bond market. 3.1.3. In taxation and custom sectors

Vietnam’s Government and Ministry of Finance are implem enting the project of modernization tax and customs system, and we need both support from many countries not only in ASEAN but also all over the world, in which Korea is the most important strategic partner for experiences and technology facilitation. Under Vietnam

– Korea

financial cooperation, we can give some suggestions for their supports as follows: -

Continuing the MoU on cooperation and support of Customs Department of two countries in applying information technology in customs operations.

-

The customs Department of two countries combine against violation in intellectual property right and unfair trade , including against stolen car traffic, and tightly cooperate in exchange information about investigating cheating in trade, applying consistent HS code.

-

The customs Department of two countries share experiences and profession skills in drilling special dogs

to improve the effectiveness of in narcotic

inspection activities -

Providing support for staff in customs department of Vietnam in term of training course about profession skills in customs operations such as information processing and risk management.

-

Holding the conference between representative of tax and custom departments of two countries to response to the questions of corporate and enterprises in two countries about the procedure of tax and customs operations as well as ask for recommendation in setting up tax and customs system.

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3.2.

2010

Recommendations for strengthening financial relation between Ministry of Finance of Vietnam and Ministry of Finance and Strategy of Korea

3.2.1. Recommendations for implementing MOU 2006 With the success of cooperation in 3 year valid time of MoU, the MoFV and the MOSF had agreed to expand the MoU with the same contents in two years 2010 and 2011, focusing on fulfilling the organizational structure and preparing action plan for VDB in the period 2010

– 2015; assessing the implementation of investment credit policies,

export credit and state export credit insurance. To archive these targets in the year 2010 and 2011, we have some suggestions to strengthen their cooperation as follows: -

About export credit, two Ministries should have some meetings to exchange

experiences in setting up, organizing and managing policies and credit assessment procedures of Kexim to apply to VDB -

About export credit insurance ,

MoFV’s experts will be designated to Korea

in study tour to analysis about capital raising and managing progress, furthermore, MOSF will send their experts to Vietnam to research on the potential market for export credit insurance of Vietnam. -

About investment credit, MoFV and MoSF cooperate in training for

Vietnamese experts about risk management capacity, credit assessment operations and experiences in raising fund ì international financial market of KDB and Kexim -

About credit guara ntee

fund management, Korea’s experts help Vietnam

fulfill the credit guarantee policy system with the roof is VDB -

Korea’s

Government and MoSF support for Vietnam more about the

techniques and information technologies from the experiences of make KDB become the leader of the economy. 3.2.2. Recommendations for implementing MOU 2009

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The year 2009 is the first year of implementing MoU, although there are some valuable successes, in the next 2 years, we need to focus on the agreed contents effectively, in which: -

Two Ministries have mutual agree on the action plan for each year, diversify

the activities in all agreed areas to strengthening Vietnam – Korea cooperative relation such as issuing government bonds, managing public projects, managing financial institutions and financial market more effectively. -

Utilizing the Korea Sharing Program to get experiences in risk management,

capital account liberalization,

research and development activities, capital

mobilization -

Organizing training courses for practical profession skills for Vietnamese

experts in public finance management and providing technique and information technology in financial management especially in finance system reform, financial supervision, macroeconomic, capital market development, opening financial services, etc. 3.3.

Other recommendations

The mutual benefit in international cooperation is very important. We require a lot of supports from other countries then we should show them what their benefits of coming to Vietnam are. The role of the Government is undeniable in this situation to strengthen the combination of all organizations, especially Ministry of Finance, Ministry of Industrial and Trade, Ministry of Planning and Investment in preparing a comfortable for Korean Investment to invest in Vietnamese market by open and transparent policies in business and investment, capital and profit movement facilities and strict administrative measures for ineffective investment. The transportation and telecommunication system also need to be improved to adopt with new requirement for development. Furthermore, the advantage of a stable political environment and a diversify culture with large population would be a factor to attract investors to Vietnam in the next decades. 28



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CONCLUSIONS

In the progress of international affiliation, establishing, consolidating and strengthening cooperative relation is the most important issue for all countries, especially for developing countries like Vietnam.

Recently, in general, although the financial

relation between Vietnam and Korea had some significant improvements with many

agreements and a MoU on development cooperation in 2009, Vietnam’s Government as well as other related Governmental organizations should consider to issue suitable policies and strategy to maintain our relation. In finance and economic issue in particular, Korea is a good model for Vietnam in developing and managing the economy and financial organizations, Vietnam can learn a lot from Korean experiences in macroeconomic forecast, banking finance, corporate finance, export credit, investment credit, etc. Moreover, Vietnam and Korea need to cooperate tightly to control Tax and Customs operations. Training courses and exchange programs will be very useful support of Korea for Vietnam to improve the profession skills in organizing, managing and processing financial issue in term of global financial market has been fluctuating over time. Vietnam also needs Korea to share the information technology and techniques to establish and perfect the banking system, tax and customs regulation system, and financial statistics system. To maintain the cooperative relation as well as inducing Korean investors,

Vietnam’s Government need to have open strategy for investors and businessmen to enter domestic market, show them the advantages of Vietnam with a rapid growth, potential market of more than 80 millions customers and s stable political environment. With a lot of similarities in graphical positions, culture and history, Vietnam will become one of the most important partners of Korea in Asia and in the global market. Recognizing the mutual benefit of each party in this relation will be a base to develop the relationship to be closer and closer in the future.

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Mid-course intermship report

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