Tài liệu Developing factoring services for merchandise export in vietnam

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1 INTRODUCTION 1. The necessity of the research Factoring and Forfaiting service (collectively referred to as factoring service) nowadays has been widely applied in many countries and regions all over the world, especially in Europe and America. The reason for this development is that these countries want to have an opener payment method than other methods such as documentary credit, mail transfer, telegraphic transfer remittance and open account to boost exports while ensuring safety and effective use of capital. Thus, factoring – a mixture of payment, credit and insurance method was born hand has become a trend in international trade payment. In many countries, banks and finance companies play a very positive role in supporting exporters in this field. In Vietnam, factoring service was started since 2004, when the Central bank promulgated Regulation on Factoring operations of credit institutions; however, the service has not really developed so far. Turnover from the service is still very limited due to objective as well as subjective reasons. In the context of international economic integration with the World Trade Organization’s membership of Vietnam since 2006, due to harsh competition, enterprises must improve their conditions of payment to improve competitiveness and expand export markets. To meet that demand, the development of factoring service is a necessity. This requires awareness of the service both in theory and in practice. With the reality that there’s no in depth research on the issue in Vietnam, the author has chosen the topic "Developing factoring service for merchandise export in Vietnam" to study the theoretical and practical development of factoring service for merchandise exports in Vietnam. 2. Literature review of factoring service Factoring service is the financial product popular in many countries around the world, thus, there are many studies is done on the issue. The research of factoring and forfaiting service in the world About Factoring services, there are researches and documents such as: "Marketing Internationnal Factoring", 2000, Neitherland of International Factoring Association - FCI, “UNIDROIT Convention on International Factoring” - Ottawa, Canada, 28 May 1988); “General Rules for International Factoring” - FCI); "Reducing the Cash Gap by Factoring" of Daniel J. Borgia, Ph.D., and Deanna O. Burgess, Ph.D. (Assistant Professor of Finance College of Business, Florida Gulf Coast University), or "Factoring as a financing: Evidence from the UK", Khaled Soufani - Assistant Professor, Department of Finance Concordia University, Montreal, Quebec, Canada; ... About forfaiting services, there are researches and documents such as: "Innovative Export Financing: Factoring and Forfaiting", Business America 114 (No.1, January 11), Ring, Mary Ann, 1993; "Forfaiting A user’s Guide: What is it, Who uses it and Why? "John F Moran, Jr. (Vice President of the British Am erican Forfaiting Company), 2 2002. Additionally, there are: "What is forfaiting?", Inc. D & B Reports. New York: Sep / Oct 1993 Vol.42, Iss.5, p.46 (1 pp.), McDermott, Kevin. Dun and Bradstreet, or "The ins and outs of forfeiting," Global Trade & Transportation, Philadelphia: May 1993 Vol. 113, Iss. 5, p.20 (2 pp.), Ring, Mary Ann, or the book "Forfaiting an Introduction", Finanz AG of Zurich, Switzerland, 2001; ... The research of factoring service in Vietnam Regulation on Factoring and forfaiting operations of credit institutions (Together with Decision No. 1096/2004/QD-SBV by the Governor of the State Bank); Curriculum "International payment in foreign trade" of Prof. Dinh Xuan Trinh, Education Publishing House, 2002; “Factoring and Forfaiting Business" of MA. Nguyen Quynh Lan, National Political Publishing House, 2006; "Factoring Development for international trade finance in Vietnamese commercial banks" by Dr. Dang Thi Nhan et al, 2007; "Development of factoring business in trade finance operations and enhance competitiveness of commercial banks in Vietnam", MSc. Huynh Thi Huong Thao, 2008; ... 3. Research objectives and research questions of the thesis Objectives of the thesis Overall objective: to propose solutions for the development of factoring service for merchandise export in Vietnam. Specific research objectives: - Interpretating and systemizing the theoretical issues on the factoring service and development of factoring service, the necessary conditions for the development of factoring service. In particular it emphasizes the development of the service for merchandise export. - Assessing the conditions for the development of factoring service for merchandise export in Vietnam. - Analyzing and assessing the development of factoring service for merchandise export in Vietnam. - Proposing direction and solutions to develop factoring service for merchandise export in Vietnam. Research questions: - What is Factoring and Forfaiting? Why should we apply factoring service for merchandise export in Vietnam? - Are there any factors/conditions which affect the ability to develop the factoring service for merchandise export in Vietnam? - Why factoring service has not been developed in Vietnam yet? - How to develop the factoring service for merchandise export in Vietnam? 4. Objects and scope of the thesis The object of the thesis The object of the thesis is theoretical and practical issues on factoring service for merchandise export in Vietnam. 3 4 The thesis focuses on the development of factoring service in the economy from the perspective of an independent researcher. Therefore, factoring service is considered as a kind of services in the economy (other than those previously researches studied the service under the micro perspective, which is considered it as a bank's operation). Thus, to develop this kind of service it is necessary to look into both the supply and the demand sides as well as the macroeconomic environment (government policy) so that finding "gap" between the banks’ supply and business demand for the service, explains the question why the service has not really developed in Vietnam. The scope of the thesis The approach: Within the thesis, factoring service is considered as a kind of services in the economy. It is offered by commercial banks and financial institutions and serves payment demand of the economy, particularly the payment for export, and is subjected to the laws and policies of the Government. From this research perspective, factoring service development is considered throughout the three subjects, namely: the State - the management and adjustment subject; Banks/financial institutions - the service suppliers and import-export businesses - the service users. In particular, the study directs at developing conditions for factoring service for merchandise exports in Vietnam. The period of time: Reality of factoring service development in Vietnam is focused from 2004 – 2012. Proposed solutions are for short term and middle term (till 2020). - New approach: factoring service is considered as a type of service in the economy (other than those previously studied under the micro perspective, which is considered the service as a bank's business); - Clarify and systematize the basic theoretical issues of factoring service and the development of the service in the economy; - Focus on analyzing the necessary conditions for the development of the service and assessing these conditions in Vietnam nowadays. - Review the development experience of factoring service in several countries in the world and propose lessons of Vietnam; - Assess the demand for factoring service in the economy, thus to guide the supply, aimed at increasing the quality of services. - Analyze and evaluate completely and comprehensively the development status of factoring service in Vietnam; - Propose a system of feasible solutions aimed to develop the factoring service for merchandise export in Vietnam. 5. Research Methodology The method of dialectical materialism and historical materialism is basic research method of the thesis. In each specific content, depending on the requirements and conditions of the study, thesis using such different research methods to elucidate the problems of theoretical and practical content as synthetic, inductive, deductive, comparative methods; statistics, sample surveys, ... The thesis combines two forms of desk research and in the field research to solve the research objectives. To serve the objectives of the thesis research, the primary data was collected through surveys of the author's thesis on the subject. The survey objects are two main groups: (i) providers of factoring service (banks); and (ii) the users of factoring service (import and export enterprises) in Vietnam's economy. Data were collected by sending questionnaires directly, sending e-mails through the link www.surveymonkey.com/s/lienhuong, by mails, phone calls and direct meetings to interviewees. More than 300 questionnaires were sent to the respondents and 174 valid votes shall be refunded. Refund rate is 58% survey. 6. New contributions of the thesis 7. The structure of the thesis Besides the introduction, conclusion and appendices, the thesis is structured into three chapters: Chapter 1: Basic theoretical framework of the development of factoring service; Chapter 2: Current Development of factoring service for merchandise export in Vietnam (2004-2012); Chapter 3: Orientation and solutions to develop factoring service for merchandise export in Vietnam (to 2020). 5 CHAPTER 1 BASIC THEORETICAL FRAMEWORK OF FACTORING SERVICE DEVELOPMENT 1.1. Overview of factoring service 1.1.1. History and development of factoring service Around 2,000 years ago, factoring was born along with the emergence of the commission agents who specialize in the sale and implementation goods rotation. Until 14th and 15th century, these agents became powerful and started decentralization, they also can ensure the ability to repay debts to the buyer. To the 16th century, the American economy boomed and facilitated the development of factoring service in America and had a great influence to the European market as well as neighboring markets. The time of late 19th to early 20th century was a period of strong growth of the factoring agent in the United States. However, factoring service development only really be appreciated in the promotion of trade relation in general and international trade in particular after the World War II. Till now factoring service has been widely adopted in many countries and regions all over the world, especially in Europe and America. At the end of the 1990s, factoring service was introduced by a number of foreign bank branches operating in Vietnam to domestic banks and exporters/importers. However, by 2004, after Regulation on Factoring operations of credit institutions was enacted, banks and financial institutions began to deliver the service in Vietnam. 1.1.2. Concept and characteristics of factoring service 1.1.2.1. Concept under the Convention on International Factoring in Ottawa According to Article 1 of the Convention on International Factoring (UNIDROIT Convention on International Factoring - Ottawa, Canada, 28 May 1988): "Factoring activity is an activity which units acquired factoring of receivables from customers arising from sale transactions or provide services but late payments, whereby customers receive money advance corresponding to a predetermined percentage of the value of the receivables. The value remaining (after deducting expenses) will be paid to customers who purchase payment done" 1.1.2.2. Concept under the Regulation on Factoring operations of credit institutions (Vietnam) According to Article 2 of Regulation on factoring operations of credit institutions, by the Governor State Bank of Vietnam dated 06/9/2004 issued together with Decision No. 1096/2004 / QD-SB, the "Factoring is a form of credit issued by credit institutions to the seller through the acquisition of receivables arising from the purchase and sale of goods has been the sales and purchase agreement for the purchase, sale ". 6 1.1.2.3. Characteristics of factoring service - Credit characteristics: Factoring can be considered as a credit granted when the unit advance cash payment to the seller and was refunded when factoring unit demanded money from the buyer, the discount on the basis of values bill of sale is that users rate loan (the sale) be paid to providers of capital (factoring unit). - Collection characteristics: When using factoring service, the seller/ exporter transfers the debts (accounts receivable) for the factoring unit to receive advance payment from the factoring unit so they will no longer have to worry about the management and recovery of this debt. Factoring Unit will undertake all the work on behalf of the seller/the exporter. 1.1.3. The form of the services: Factoring and Forfaiting 1.1.3.1. Factoring Service According to Dictionary of the Economic - Christopher Pass & Bryan Lones: "Factoring is a financial arrangement by which a professional finance company (also called debt buying company - firm factor) buy the debts of a company with an amount less than the value of the debt. Profits arising from the difference between the proceeds of the debt were bought and the actual purchase price of the debt. Benefits of selling the company's creditors obtain money immediately instead of waiting until the debt repayment to avoid further inconvenience and expense in pursuing the debtor's late payment ". Meanwhile Glossary Banks - Hans Klaus said that "factoring is a type of funding in the form of debt transfer credit. A company transfers all or part of the debt for a professional finance company (the company bought the debt, usually a bank’s subsidiaries). The company is responsible for collecting debts and accounts receivable tracking procedures to effect cost and time advance loans. Normally, debt purchasing company must bear the risk of inability to pay debts". 1.1.3.2. Forfaiting Service According to the book "Forfaiting - an Introduction", Finanz AG of Zurich, Switzerland, 2001: "Forfaiting is the term used to refer to the acquisition of liabilities in the future, arising from the delivery of goods or services, mainly from commodity exports condition recourse to the exporter". In the textbook "International payment in foreign trade", Prof. Dinh Xuan Trinh, Education Publishing House, 2002, the "Forfaiting is a kind of long and medium term credit that a commercial bank or a finance company non-refundable advance exporters for a certain percentage of the total invoice amount to exercise the power to reclaim the money from the importer and assume all risk that the importer is unable to pay if it occurs. The Forfaiter only provide credit to exporters to importers of him was a bank guarantee". 1.1.4. Benefits and limitations of factoring service 1.1.4.1. Benefits of the service For sellers/exporters 7 8 - Being funded working capital on the basis of sales to revolving funds for production and faster growth. - Maintaining competitiveness by allowing buyers delayed payment for goods. - Improving operational efficiency through specialization of production. - All credit risks are insured by 100% invoice value, financial situation becomes healthier since it does not have bad loans on the financial statements. For buyers/importers - Being entitled to buy goods easily; - No need to open L/C; - Increasing purchasing power and still not exceed the credit limit allowed; - Can quickly order without delay, at no cost to open L/C, or negotiated fee. .. For service’s suppliers - Gaining the revenues from fees and interest; - Diversification of products; - Expanding the market share and raising credibility in domestic and international payment; - Having opportunities to learn from the big Factor - Providing information about the credit, and being benefited by exchanging information with the data center. For the economy - Rising currency revolving cycle, making the rotation of money in society increases. - Facilitating the implementation of the deferred contract, the motivation for promoting commercial activities both domestically and internationally, to promote the development of production. - Helping businesses avoid worries about risks in capital recovery, unpaid business, creating a stable business environment for businesses. For providers of the services May face a number of risks, including credit risk, debt collection risks; Fraud risk; Foreign exchange risk… 1.2. Factoring service development and necessary conditions for the 1.1.4.2. Limitations of the service For exporters - The factoring fee is relatively high, but the cost is usually born by the seller; - The relationship between the seller with the customers may be affected by the factoring unit, due to the fact the factoring unit will find a way to collect it from the buyer; - In some cases when disputes occurred between buyers and sellers, the supplier will not pay/or recourse to the payments/transactions in advance to dispute it. For importers - Cost of goods under contract payments using payment services which may be higher than when using other payment methods such as L/C; - Units will be monitored factoring and debt collection activities in time... development of the service 1.2.1. Concept and content of factoring service development Factoring service development in the economy is process of planning, implementing, controlling, creating favorable conditions and coordinate effectively between stakeholders in the economy to make the factoring service becoming increasingly popular, bringing practical benefits to both the business and commercial banking system, becomes a form of financial assistance promptly and efficiently, while improving the efficiency of the use of idle funds of banks, profit bank, just support and facilitate the implementation of corporate deferred contracts, promote trade and manufacturing development. Development of factoring services in the economy should lead to some major contents, such as cognitive development of factoring in all study subjects and applications of factoring services; Perfecting the system of laws and policies to develop the factoring services; Development system providing factoring services in the economy; Development for factoring services in the economy; Creating and perfecting competitive environment favorable for the development of factoring services. 1.2.2. The necessary conditions for the development of factoring service 1.2.2.1. Macroeconomic conditions - Legal Environment - Socio-economic Environment - Thriving business activities inland and export activities - Strong banking and financial system - System Information Transparency 1.2.2.2. Conditions for factoring organizations (factoring service providers) - Funds - Human resources - Network Operations - Facilities, Technology - Risk Management System - The support services and other services - The possibility of recourse debt 1.2.2.3. Conditions for import and export enterprises (factoring service users) - There is a demand for factoring service - Use the deferred payment method in payment for goods - Human resources and qualified full understanding of factoring service - Disclosure of information about business 9 10 1.3. Experience in developing factoring service of some countries in the world and lessons for Vietnam 1.3.1. Overview of factoring operations around the world Chapter 2 CURRENT DEVELOPMENT OF FACTORING SERVICE FOR MERCHANDISE EXPORT IN VIETNAM (2004 - 2012) Sales of factoring service around the world 2007 2008 2009 Europe Continent 932,264 888,528 876,649 1,045,069 America 149,673 154,195 142,013 10,705 13,263 174,244 33,780 Africa Asia Oceania Total 2010 (Mil. of EUR) 2011 2012 1,217,811 1,298,724 185,357 207,172 187,844 14,796 16,686 23,451 23,927 235,418 209,991 355,602 508,888 571,528 33,246 40,110 45,515 58,091 50,206 1,300,666 1,325,111 1,283,559 1,648,229 2,015,413 2,132,229 1.3.2. Experience in developing factoring service of some countries in the world 1.3.2.1. Experience of the UK 1.3.2.2. Experience of France 1.3.2.3. Experience of Italia 1.3.2.4. Experience of Denmark 1.3.2.5. Experience of Thailand. 1.3.3. The lessons for the development of factoring service in Vietnam - Raising deep understanding of the business and the benefits of factoring service; - Establishing a subsidiary or division/committee that specializes in factoring services affiliated banks; - Focusing on marketing for factoring services to entities in the economic understanding and awareness of the benefits of factoring services; - Improving the regulatory environment; - Paying attention to frequently raise the level of human resources; - Investing in the equipment and modern technology to enhance competitiveness and promote trade activities through the internet (e-factoring, eforfaiting); - Capital is the key issue, particularly important. The banks need to ensure funding, including funding short-term, medium-term and long-term; - Buiding an association of factoring organizations to act as the main national links, and active support for the activities of its members. 2.1. Situation of merchandise export and the use of international payment methods for merchandise export in Vietnam 2.1.1. International trade operations in Vietnam over time International trade operations in Vietnam had many changes over the past decade. From a low base, with 31.2 billion dollars in total imports and exports in 2001 (with exports of 15 billion dollars and imports 16.2 billion), after 11 years, to 2012, This figure increased by 7.3 times, up to 228.3 billion dollars (in which exports and imports 114.5 billion USD 113.8 billion). Trade Balance of Vietnam, in the 10 years from 2001 to 2011, always in deficit. The years 2001 - 2006, the balance of trade deficit of just under $ 5 billion/year, but the period from 2007 to 2011, the trade balance deficit has stood at 2 numbers (regular $ 10 billion/year). However, after a long period of time are the 2012 deficit of trade balance was a surplus of Vietnam although still modest level. 2.1.2. Current status of merchandise export in Vietnam in recent years The export structure of Vietnam over the past 10 years there have been positive changes, exports continued to increase, the share of exports in the direction of decreasing raw commodities, processing products and focus on investment and export goods with higher levels of processing. The growth of exports has been contributed largely by the FDI sector. By commodities, industrial products and handicrafts are always in the leading position with the increasing trend in the proportion of total exports of the country. Heavy industrial goods and minerals are in second place with a rate of about 30%/year in the proportion of export turnover. Third place was the team of agricultural products including: rice, rubber, coffee, cashew nuts, cassava and cassava products, pepper. Aquatic products are constantly increasing in value but decreased in proportion. By market, Asian market (with average export turnover from 2007 to 2011 approximately 31.2 billion USD/year) is still the traditional market for Vietnam's export items, in which main market countries are ASEAN’s nations and Japan. This was followed by the American market (an average of about $ 15 billion /year), Europe (about $ 13.8 billion/year), Oceania (average $ 3.3 billion/year) and Africa (average export turnover of $ 1.3 billion/year) as the potential markets for Vietnam. 2.1.3. Current status of the use of international payment methods for merchandise export in Vietnam 2.1.3. 1. International payment operations at the banks in Vietnam Imports/ exports and international payment turnover are generally proportional relationship to each other. In the structure of payments, payment of export sales typically account for about 46% of the total sales of commercial banks in international payment. 11 12 Regarding the structure of the market, currently the majority of banks in Vietnam are providing international payment services, but market share is primarily focused on four major banks that have extensive experience in providing services such as Vietcombank, Agribank, Vietinbank, BIDV. Besides, when implementing of international factoring, Vietnam also allows the parties may agree to apply the rules and international practices of factoring if that are not contrary to the laws of Vietnam. This creates favorable conditions for the development of factoring service in Vietnam in accordance with the international rules. · Relatively stable economic environment Socio-economic environment of Vietnam through time remains stable GDP growth are impressive, the rate of inflation was curbed, abundant labor resources, production capacity and demand for goods are large due to its large population. In the field of factoring service, Vietnam has caught the attention of the association of international factors - Factors Chain International (FCI). So, FCI has access initiative and willingness to help Vietnam develop this service. FCI has organized many seminars and programs to support the development of the service in Vietnam. · Import-export business activities of the enterprises are to facilitate Recently, the commercial activity in general and international trade in particular has received much attention and support facilitated by the Government. More activities are encouraged; more actors are participated partly thanks to the more liberal provisions on the right to market access. In addition, the State has taken many measures and policies to support the activities of international trade, particularly export activities oriented to reasonable protection for businesses. · Form of deferred sales growing To improve competitiveness, one of the measures which are now the business is usually applied preferential rates, the deferred payment terms for buyers/importers. The form of deferred sales growing leads to the increase in funding needs and brings new opportunities for the factoring service, in addition to the traditional services system, contributing to support and encourage the enterprise’s efficiency. These are favorable conditions for the development of factoring services in the economy, particularly international factoring. · Information base data Vietnam has a credit information center (CIC) managed by the State Bank. CIC collects information on borrowers in all credit institutions (banks) operating under the Law on Credit Institutions, and organizations such as investment and development funds, the Credit Guarantee Fund, CIC also signs and implements information exchange agreement with the international news agency to help Vietnamese banks and credit institutions have the information to do business with foreign countries. 2.1.3. 2. The proportion of payment methods used in export payments in Vietnam For the payment of export, the major commercial banks in Vietnam providing money transfer services, collection and payment services L/C, and present the vouchers as payment L/C, discount vouchers products,... Vietnamese export’s contracts increasingly use multiple methods of payment, while payment by L/C and collection tend to decrease. Using many methods of payment brings many risks for export enterprises in Vietnam. Therefore, banks need to provide more services for export credit guarantees, development of new products such as factoring services to help businesses secure when they enter foreign market. 2.2. Conditions for the development of factoring services for merchandise export in Vietnam 2.2.1. The need for development of factoring service for merchandise exports in Vietnam The development of factoring services in merchandise exports in Vietnam today is essential because: First, factoring is a financial service represents the aggregate outstanding advantages, especially in conditions of economic integration. Secondly, Vietnam's enterprises are limited in capital, human resources, market information, risk management level ... When developing this service, sources of venture capital industry will be improved and the bank will be diversifying its product. Thirdly, using factoring service is a good solution, especially for small and medium enterprises in the fierce competition conditions of the current international market, when to accept the deferred sales method. Fourth, after joining WTO, Vietnam banks must continually diversify products to meet the financial needs of customers, creating benefits for clients in order to attract customers, increase competitiveness for its banks. Factoring is one of the services to meet these requirements and should be developed by commercial banks. 2.2.2. Analysing the situation of factoring service development for merchandise export in Vietnam 2.2.2.1. Macroeconomic conditions · Legal Environment Basically, in Vietnam there was a legal framework for factoring operations. Regulation on factoring activities of credit institutions issued together with Decision No. 1096/2004/QD-SB dated 06/09/2004 by State Bank of Vietnam’s Governor initially created a legal framework for the development of factoring services in Vietnam. However, these regulations are inadequate, causing difficulties for the supply and use factoring services in Vietnam. 2.2.2.2. Conditions for factoring organizations (factoring service providers) · Take advantage of the following As a latecomer in the application of this service, Vietnam will facilitate learning experiences of other countries in the region and in the world. Through lessons learned from the advanced countries, Vietnam's commercial banks can draw their own lessons. · The market has great potential FCI has received the Asian market has a great potential to develop the factoring service. In Asia, Vietnam is a very new market, market segmentation is not 13 14 clear, the market share of the ahead organization is less, the majority of organizations are still in the process of exploration or testing experiment. Thus, opportunities for Vietnamese banks to participate and dominate this market is huge. · Capital raising activities of banks growing Banking system grows with the growing number of commercial banks. In recent years, the economic development and improving people's living standards make commercial banks to increase the ability to mobilize capital, expand capital ratio deposits. Large funding sources are good conditions to allow commercial banks to deploy factoring service. · Banking system has quickly seized the opportunities Currently export activities are facilitated, making the demand for the banks’ international payment services banks increasing. In addition, all Vietnamese banks now have close connections with the global financial system, has correspondent relations with banks worldwide. Besides, many of the commercial banks in Vietnam are seeking to expand overseas operations by setting up representative offices and branches. This enables banks to implement the provision of factoring service easier and more efficient, especially international factoring. · Human resources Currently, the human resources of commercial banks in Vietnam are plentiful, as professionals, can basically meet the requirements in part to the development of factoring services. · Management and technology systems to meet the eligibility requirements Since 2003, with the assistance of the World Bank, Vietnam's commercial banks have made the project of Modernization of banks and payment systems (INCAS), system operation management, accounting and business processing on the computer. With the conditions and management of current technologies, commercial banks in Vietnam can afford to deploy factoring service. In Vietnam today, audition has been interested by enterprises but have not really taken seriously, that information published is still dishonest. This is the reason why the information environment in Vietnam lacks transparency. It is a major obstacle to the development of factoring service in Vietnam today. 2.2.2.3. Conditions for import and export enterprises (factoring service users) Demand for using factoring service in import and export businesses Currently, Vietnam has about 500,000 small and medium enterprises, accounting for 97% of businesses throughout the country. These businesses typically have very high demand but difficult to raise capital from outside. Meanwhile, the factoring service is a powerful tool that can help businesses gain access to capital from external sources, especially from banks. So, once businesses realize the full benefits of factoring service, the demand for this service will increase in Vietnam. · Human resources of Vietnam’s export -import business Civil Vietnam’s export - import business is now capable of owning a team of qualified professionals to meet the job requirements. However, the knowledge and professional expertise as well as experience using the factoring service of the business staff in the import and export businesses (need conditions to businesses to be able to use the service effectively) is still weak. · The issue of information transparency in Vietnam’s businesses · 2.3. Analysing the real situation of factoring service’s development for merchandise exports in Vietnam (2004 - 2012) 2.3.1. Current status of the legal system and development factoring service policy The factors of institutional and policies related to the field of factoring service are still unclear, unsettled, not to support for service development yet. The birth of Regulation on factoring activities of credit institutions has created a legal framework for the supply and use factoring service in Vietnam. But basically, this regulation is not yet complete and consistent, there are inaccuracies or unclear, some rules are not consistent with international ones. There is no strategy or development plans for factoring service of the country. 2.3.2. The situation of factoring service’s providers 2.3.2.1. The number and type of units providing factoring services The introduction of Regulation on factoring activities of credit institutions in the third quarter of 2004 was initially created motivation for the credit institutions to deploy and develop the service. By 2005 there were nine commercial banks in Vietnam is licensed to deploy factoring service (including 5 Vietnamese commercial banks: VCB, ACB, Techcombank, SCB, OCB and 4 foreign banks are: Deutsche Bank AG - Ho Chi Minh City, Far East National Bank (FENB) - Ho Chi Minh City, UFJ Bank - HCMC, Citibank - Hanoi branch). Then some other banks also had to take turns, such as import-export Joint Stock Bank (Eximbank), International Bank (VIB), South East Asia Bank (Seabank), ... By 05/2008, there were 24 licensed banks offer factoring service in Vietnam, including 17 Vietnamese commercial banks. Currently, more other commercial banks in Vietnam have been approved by the State Bank to deploy factoring service (Army Bank, Dai A Bank, Petroleum Bank, ...) bringing the number of commercial banks in Vietnam allowed to provide the service to 22. In addition to commercial banks, finance companies have also implemented the factoring service. There are five financial companies (Power Finance Corporation, the Petroleum Finance Company - PVFC, Finance Company Shipbuilding Industry, Handico Finance Corporation, Coal and Minerals Financials Company) allowed to provide this service. However, the fact is that only a few banks actually have factoring transactions on the market, including Vietcombank, HSBC Vietnam, Vietnam UFJ, ACB,... but mostly in domestic payment and supplying the type of recourse factoring. 2.3.2.2. Sales of factoring service According to statistics of the FCI, factoring turnover of Vietnam continued to increase from 2005 to 2009. In 2005, sales of 2 million EUR, by 2009 this figure had risen to 95 million EUR. In particular, the year 2008 is considered to be the 15 16 most spectacular growth in sales factoring in 2005-2009, growth rate is 97.67% compared to 2007, however, move into 2010, the sales has fallen to 65 million EUR. In 2011, factoring sales showed signs of recovery despite the relatively slow pace. But by 2012 the factoring turnover of Vietnam to drop, only 61 million EUR. regular use is 47.3% and 8.3% do not use. Loan’s sources of surveyed enterprises are primarily from banks (80.2% of respondents use bank loans). Forms of bank funding that businesses are often the most used are trade credit and bank guarantees. Meanwhile, factoring has not been much interest, 74.6% of businesses never use factoring service, while enterprises can use this service only 13.3%. Sales of factoring service in Vietnam Mil. Of EUR 100 90 80 80 60 41 Domestics 42 40 40 International 40 25 25 15 20 2 0 5 2 1 21 5 0 2005 2006 2007 2008 2009 2010 2011 The usage Regularly Yes, but not often Never use Total Number of enterprises 22 20 123 165 The rate selection 13.3% 12.1% 74.6% 100% 2012 In 2010 and 2011, although the total amount of the factoring service in Vietnam reduced but that of international payment was increased (5 times the sales of international factoring in 2009), accounting for 38.5% of total sales factoring of Vietnam in 2010 and 37.3% in 2011. This shows the trends and prospects for supply and use factoring service of banks and enterprises in Vietnam gradually in line with the trend of development of an open economy towards export promotion. 2.3.2.3. Type and quality of provided service About types of the service, commercial banks in Vietnam have only provided factoring service and have provided both 2 types: domestics factoring and international factoring. And according to the survey results of the author's thesis, the commercial banks in Vietnam are mainly provided only kind with-recourse factoring, while without-recourse factoring is difficult to be provided by banks because of the ability to assess and and the banks’ low ability to prevent risks. Regarding the quality of factoring service, after a period of time, Vietnam enterprises have evaluated some remarks as follows: Service quality is not high; The high cost; Time for payments is long; Complex procedures. This is the major constraint for the development of this service in Vietnam. To assess the effects of regular use of loans for usage of factoring service by businesses, the thesis author uses the model to Chi-Square Test. The results showed that the frequency of the use of loans and how often they use factoring service closely related to each other. Specifically, businesses often use external loans tend to use factoring service more often. As for the demand and necessity of factoring service for export activities of Vietnamese enterprises, 77.8% of enterprises surveyed estimated that factoring is needed (in which 22.2 % considered “very necessary” and 55,6% considered “necessary”). Only four firms (2.9%) considered “unnecessary”. Thus, the majority of Vietnamese exporters has noticed and appreciated the role of factoring service in promoting trade activities in general and international trade in particular. This shows that the potential market is very large and has not been fully exploited. Therefore, it can be assessed that the market demand for factoring service is great. 0.7% 2.2% 22.2% 19.3% Very necessary Necessary So so Not really necessary Absolutely unecessary 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 55.6% Cost to pay for the service by the enterprise Very high Requirement by banks Quality of the current Factoring service High Medium Low Very low 2.3.3. Situation of consumer demand/ use of factoring service According to survey data, the businesses have an interest in using the loan, but the number of businesses often use loans is only 44.4%, while the proportion of non- 2.4. Assess the status of the development of factoring service in general and factoring service for merchandise exports in Vietnam in particular (period 2004-2012) 2.4.1. Achievements - Have a basic legal framework as a basis for the development of factoring service in Vietnam. - Sales of factoring service increased significantly, sales of international factoring maintain stability in certain degree. - The number of organizations providing factoring services is increasing. 17 18 - Type of factoring services by commercial banks in Vietnam to supply increasingly diverse. - Demand for factoring services by enterprises, especially Vietnamese exporters is increasing. Chapter 3 ORIENTATION AND SOLUTIONS TO DEVELOP FACTORING SERVICE FOR MERCHANDISE EXPORTS IN VIETNAM (TO 2020) 2.4.2. Limitations - Number of factoring organizations having transaction really is not high, limited supply of factoring services market. - Sales of factoring transactions are limited. - Types of the service is poor, and lack of appetite for Vietnam enterprises. - Quality of the service is not highly appreciated by the enterprises, procedures cumbersome, time evaluation by banks is slow, making it difficult for businesses. 2.4.3. Causes 2.4.3.1. Causes of macroeconomic conditions - Incomplete and not- synchronized Regulatory environment, some rules are not consistent with international. - Incomplete information and lack of transparency. 2.4.3.2. The cause of the factoring service’s providers - Many banks are not aware of the importance and the benefits of factoring service. - Banks’ financial potential is lags, lack of management experience. - Management capacity of commercial banks is still weak, the risk management system has not reached a high level; - Lack of coordination between the banks, the relationship with foreign markets of Vietnam's commercial banks is limited; - No insurance fund for bank credit; - High factoring fee hinders the development of this service. - Factoring service is not really convenient for businesses; 2.4.3.3. The cause of factoring service’s users - Deferred sales are not recognized as a common form. - The understanding and concern about factoring businesses is limited. 3.1. Economic context affects the development trend of factoring service for merchandise exports in Vietnam 3.1.1. Demand for economic integration 3.1.2. Economic growth 3.1.3. Exports and imports rise 3.1.4. Demand for funding and hedging in international payments 3.2. Development orientation of factoring services in Vietnam 3.2.1. The general development orientation of the banking sector - Meet the requirements of international and national standards; - Develop services on a large scale: in addition to commercial banking system and encourage other institutions such as financial companies in Vietnam to involve; - Develop in-depth services: building staff qualifications and experience, to diversify the types of factoring,... - Reduce costs and risks when factoring service is applied - When factoring business of the banks was strong enough, can be carried out separately factoring company established under the bank; - Strive to be a member of the association of factoring large in the world; - Gradually replace the method of credit payment by factoring. 3.2.2. Development orientation of factoring service for Vietnam’s banks - The number of banks providing factoring services: Licensed commercial banks need to quickly deploy the service; encourage and create conditions to allow banks and other financial or credit institutions in Vietnam to participate in the market of factoring service to increase the number of units provided. - The model: Establish factoring units within the suppliers’ structure; State Bank of Vietnam may also allow large international corporations established under the factoring company in order to expand the market; Establishment of support funds, construction factoring association of the country. -The type of factoring service provided: Factoring service providers should apply all types of factoring, particularly full - factoring, forward deploy forfaiting in 2015. - The quality of factoring services: Improve the quality of factoring service, developing forms of recourse factoring, expanding the application of international factoring to the whole banking system in Vietnam. - Customers: Focusing on small and medium business group; Priority businesses export of staples; provides incentives for traditional customers; Promote and introduce products to customers. - The factoring sales: To 2015 the orientation is to recover and gradually factoring turnover to 100 million EUR. In which: International factoring continues 19 20 to rise, often accounting for over 20% of total sales; the growth rate of sales per year followed by 30 to 40%. - The international cooperation: Strengthening cooperation with agents, banks around the world, facilitating the collection and evaluation of information to customers; strengthen and enhance the reputation of the commercial banks in Vietnam on the world market. each period; DN must be submitted to CIC summary audited assets, income and expenditure report, ... - CIC's unified rules which must be registered as legal collateral loans / financing by banks. - Prove to banks and businesses see the benefits that CIC gives the economy and for the banks, businesses; There are incentives obvious physical benefits to increase the performance of CIC. 3.3. Solutions to develop factoring service for merchandise exports in Vietnam 3.3.1. Macro Solutions 3.3.1.1. Completing the legal system, policy on the service’s development State Bank should continue to revise and promulgate a synchronized legal system, fully overcome the problem of incomplete and old Regulation and correspondence to the rules of the Convention on International Factoring. New legal text note to a number of issues: Separating operations and factoring loans, with management rules and controls separately, creating a legal framework to protect the basic rights of the parties ; There is clearly specified conditions for participants providing factoring services, extended supply objects, towards the establishment of an independent factoring company; There should be provisions on the rights of creditors of the receivables to minimize risk to providers of factoring services; ... Government should urgently develop a comprehensive and long-term strategy/development plan for factoring service. 3.3.1.2. Building policies to encourage and support the factoring service State should have policies and specific directions for the development of the services sector as well as building policies, appropriate measures to encourage and support the factoring services, such as loosening and improve policies on credit and financial management, policies, foreign exchange management, and administrative barriers such as administrative procedures, licenses, quotas, policies discriminate against types of businesses. 3.3.1.3. Stable and complete trade policy - Promote the foreign, especially trade with major markets such as China, ASEAN, the EU, ... - Reduce costs and increase competitiveness of goods in the regional market and the world through effective exploitation of the advantages of resources, land, people, ... - Technological innovation, improve product quality, boost exports of processed goods, ... - Implement policies to encourage exports through macro-management tools such as taxes and subsidies; ... 3.3.1.4. Improving the quality of operation of the Credit Information Center - Increase investment in facilities, equipment, staff training. - Specific regulations on banks have fully informed about the financial situation, the situation of borrowing and repayment of the company for CIC in 3.3.1.5. Establish a credit rating company To factoring services development, especially international factoring - a lot of activity underlying risks when evaluating the financial capacity of the partners need to establish credit-rating companies to can minimize these risks. To establish the credit rating company need technical assistance from a internationally renowned credit rating one. To ensure the independence and high communitiness, the credit rating companies in Vietnam should be joint – stock ones and set a percentage ownership rules reasonable with shareholders. 3.3.1.6. Intensify training on factoring service in universities and colleges The introduction of factoring not only the duty of the bank to do early just in training programs for students of economic universities and colleges. Universities and colleges need to put the theory of factoring into the curriculum to prepare students with a basic background knowledge about this issue when the school. 3.3.2. Solutions for factoring service’s providers (banks) 3.3.2.1. Recognize the necessity of the development of factoring services and the appropriate organizational model to develop the service Need aware of factoring services, the benefits that it provides, see it as a profitable opportunity for banks. Need plans and specific programs to introduce and disseminate knowledge about factoring in their bank or associated with banks, institutions, other entities organized to introduce this service to related objects. In addition, the need to build a real organizational model appropriate and effective. Could be: A business unit within the Department of the bank concerned (such as the factoring division of the International Chamber of billing, Office of international banking, credit management departments, ...) or A Room dye factoring bank/finance company, or a subsidiary of the bank, could also be a subsidiary of a corporation or financial industry, or a full company independent (possibly state-owned companies, joint ventures, foreign-owned companies, private companies) However, in the current phase, perhaps organizational model most effective and feasible as a model factoring Chamber of banking/financial company or a subsidiary of the bank/finance company. 3.3.2.2. Strengthen marketing for factoring service Promotional strategy, product marketing factoring effective way. In the future, the urgency faced by the banks is to build a marketing strategy specifically for factoring operations; The strategy must be broad and thorough individual officers and staff deployed operations. 21 To promote their products, banks can through various forms of advertising in the mass media, flyers, send letters of recommendation, ..., as well as enhance the thematic workshops "factoring services" 3.3.2.3. Develop human resources for factoring service Banks should develop a strategy specific personnel recruited from the stage to the stage of training and retraining staff to use it. In doing so, the bank should pay attention to: Build system standards in staff recruitment; Develop appropriate treatment regime; Construction plans regular training, capacity-building for human resources; Building regulations for quality testing staff periodically; At the same time, focus on building a team of managers, team leaders capable of operating with professional qualifications, moral purity, is capable of better operating activities of banks have said encouraging lower-level officials to work effectively. 3.3.2.4. Improve the financial capability of commercial banks To develop the factoring services necessary to develop a system of financial institutions and intermediaries diverse enough, on the basis of a system of regional level commercial banks and international, towards the formation of financial group universal banks likely dominate the market both at home and abroad. To enhance financial strength, commercial banks can: equitization, issuing shares to the public; or Buy and merging a number of domestic banks 3.3.2.5. Improve the quality of factoring services Improving the quality of service factoring is specifically expressed by indicators such as diversifying the types of factoring, advance percentage increase, factoring reduction, ... In Vietnam today, there is only factoring (not forfaiting) and factoring are usually with recourse factoring, in the future need more research and development of new products, such as without recourse factoring, whole factoring, partial factoring, publicity factoring ... Besides, banks need to study, to calculate factoring fees gradually reducing to attract customers using this service. At the same time, simplify procedures, create favorable conditions for businesses to use this service. 3.3.2.6. Strengthen the relationship between the factoring units Banks should actively in expanding relations with factoring organizations at home and abroad, building a strategic agency relationships. In particular need: Dedication of correspondent relations with customer relations; Actively expanding agency relationships with institutions overseas factoring; Regularly collect data on business performance and the ability of the dispute settlement factoring agent; regularly monitor and evaluate the relationship with the agent to choose the factoring unit effectiveness. 3.3.2.7. Apply effective measures to prevent risks Develop and apply tools, preventive measures appropriate risk-based: Enhancing quality appraisal; There is regular monitoring plan; Establish relationships with credit institutions to promote the exchange of information; Factors bind to ensure; Clearly specified methods of debt collection; Insurance Receivables conducted advance. 22 3.3.2.8. Select target customers Factoring Organizations must choose exactly goods and customers, thay can implement successfully and efficiently factoring transactions. For products: products that best suit a factoring service as raw materials, components and consumables (products do not require sales service or maintenance, warranty); The bill is transferred to debt collection is an unconditionally. For businesses: Enterprise Sales: Selling is being done or sales inquiries by the method of deferred payment; Financial situation, good business, good management skills; Having experience in production and export business products; Having relationships fine tradition with the purchasers; There are great deals to traditional banking, factoring organizations and units hedging. Purchase business: financial situation, stable business; Having the prestige and experience of the product on the market is factoring; Having good management. 3.3.2.9. Focus on the customer advice operation Bank may advise clients concerning matters export, import, international settlement, especially factoring, just increase the fee revenues for banks has contributed to improving business effectiveness for business, attract more customers to the bank. As consultants, should the potential customer towards changing habits to switch to a new service - factoring. 3.3.2.10. Improve banking technology; modernize the banking system under the international level Continue to innovate, modernize banking technologies, strengthening and building mechanical systems, software engineering and modern, including computer networking systems such as international SWIFT network, network Reuter, System facsimile, telex, ..., software applications are widely used in factoring services such as LTP systems EDIFACTORING or trade.net, tradesurface. Need to catch up and fast deployment of scientific and technological achievements, to modernize the banking system in accordance with international presence, by the way: Strengthening joint ventures and cooperation with other organizations in and abroad; Finalize payment technology and banking information system; Accumulation and concentration of capital for investment in technology development. 3.3.2.11. Establish the association of national factoring service Establishing a association to link factors. This association will be the focal point of the activity statistics factoring unit in Vietnam, as well as a focal point to organize professional training courses for banking organizations to provide information to businesses and the economic sectors want to find out about this service and resource lookup information on factoring unit in Vietnam, ... 3.3.3. Solutions for users of factoring service (import and export businesses) 23 3.3.3.1. Develop business strategies of enterprises Enterprises need to develop a strategy for their business and production accordingly. This is a comprehensive strategy, including the strategy of production, product strategy, market strategy, ... In addition, the formulation of strategy should be based on an assessment of the ability inside and outside, especially to market research, business partners at home and abroad, activities and trends of the major competitors in the international arena. 3.3.3.2. Improve the quality of human resources in business Need to develop strategies to foster and enhance management skills, workplace skills for workers. Need to build a new management team, management team nearby, training staff on professional expertise, in light of ethics in the import-export business contributes to accelerating deployment of factoring services factoring and forfaiting payment in Vietnam. 3.3.3.3. Diversify the use of payment methods Regular use of deferred payment method is the basis for application in practical factoring. Enterprises need to raise the level of knowledge in choosing the method of payment in commercial transactions, especially should study about factoring services domestically and internationally for more new options provide more benefits of business activity. 3.3.3.4. Raise the awareness about publicizing information Businesses need to be aware of the benefits of publicizing information, overcoming hide the truth about themselves, promote the good, conceal the true financial information. To do this requires further enhance the effectiveness of audit and issue the required regulations and publish audited financial statements. 24 CONCLUSION While factoring service is emerged from a long time in the world but is still relatively new in Vietnam. This service has been established based on the essential needs of the economy. Vietnam is promising to develop this type of service. The problem is the need to have the total solution to encourage and facilitate the development of these services in practice. With the aim of developing the factoring services in merchandise exports in Vietnam, the thesis focus on solving the problems as follows: The thesis tries to systematize the theoretical issues related to the development of factoring services such as: History and development of the concept and the characteristics of the factoring, the benefits also such limitations Factors factoring n, the form of factoring. Besides, the thesis also analyzes the necessary conditions for the development of factoring services and summarizes some of the experiences of countries around the world to find lessons for Vietnam in the process of service development this. The thesis analyzes the current situation of the use of international payment methods in payment of export goods in Vietnam as a basis for the analysis and evaluation of the necessary conditions and situation development services Factoring in merchandise exports in Vietnam. The analysis and evaluation showed that Vietnam is in the period just started implementing this new service. Although there is much potential but the current reality, factoring is not really developed in Vietnam for many reasons, including the reasons for subjective and objective reasons. The thesis also indicates the impact of factors affecting economic growth and factoring services-oriented development of factoring services in Vietnam in the coming time. On that basis, the thesis proposes a system consisting of three basic solutions to develop the factoring services in the export of goods in Vietnam, namely: macroeconomic solutions from State to As a manager, solutions for banks as providers of services and solutions for import and export businesses as users of factoring services. These solutions need to be carried out in a synchronous manner. Strengths of the study's thesis research problem is quite new and the urgency is clear. Especially the evaluation of conditions and propose solutions development services factoring in merchandise exports in Vietnam came from all three entities (the State, the service providers and service users). However, because this service is not popular in Vietnam, an investigation, data collection faced many practical difficulties, the survey sample is not large, yet highly representative. It is a weakness of the study.
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