BOP - Cán cân thanh toán quốc tế của

Việt Nam (2016-2021)

I. Overview of Vietnam's international balance of

payments
1. Concept of BOP:
- Balance of Payments (BOP) is a data table that provides information about the
results of a country's international transactions with the rest of the world expressed
through two main accounts: current account (CA) and capital and financial account (KA).
The current account records all transactions in goods and services such as the value of
exports, imports, income receipts or payments. The capital and financial account records
foreign borrowings or lending, direct and indirect investment flows with foreign countries
that take place during a specific period - usually a year.
-The balance of payments includes all receipts (e.g. exports, tourism services, foreign
financing) and expenditures (e.g. imports, travel expenses of foreign nationals, grants to
other country) of a country to the world during that period of time.
2. Classification:
-The balance of payments is divided into 4 main categories:
 Balance of time: Reflects foreign currency receipts and expenditures of
residents and non-residents at a certain time.
 Period balance: Reflects foreign currency receipts and expenditures of
residents and non-residents in a certain period.
 Bilateral balance: Reflects foreign currency revenues and expenditures
between two countries.
  Multilateral balance: Reflects foreign currency revenues and expenditures
between a country and the rest of the world.
3. Role:
-At the micro level: Balance of payments represents foreign currency supply and
demand and predicts exchange rate fluctuations. Besides, it also affects import-export
business and foreign currency trading.
-At the macro level: Balance of payments represents foreign policy in general and
international trade policy in particular. It controls the movement of capital flows such as
foreign investment (FDI and ODA), and capital exports. Besides, the balance of
payments will directly affect the national currency market and the management of
exchange rate policy.
For example: When the balance of payments (BOP) is in deficit, demand is greater
than supply in the foreign exchange market. At this time, the local currency will lose
value. To solve this problem, the Government often implements monetary tightening
policies to limit consumption and consumer imports.
4. Economic Significance
-Vietnam has integrated into the world economy, which is also the main driving force
for economic growth. The country has undergone a transition from an inward-looking
planned economy to a globalized, market-based economy. The big mark of Vietnam's
business market is the completion of integration with the World Trade Organization
(WTO) at the end of 2006. Small changes have brought the country's economy to a strong
position in the world. . Especially for trade and investment flows, we see a clear change
from 1988 to 2008 in terms of import and export of Gross National Assembly Product
(GDP) increasing tenfold. Over the past two decades, the average growth rates of exports
and imports were 16.4% and 18%, respectively, compared to 7.3% of GDP.
-The balance of payments is often considered the brainchild of each country. It
reflects how the economy is performing in a certain period, so it plays a very important
role, to be able to link a economy between the home country and the world.
 International financial health index:The balance of payments is often looked at
to assess whether a country is earning or spending a lot in international
transactions. If the balance of payments is positive, i.e. the country exports more
than it imports, this may indicate a degree of fiscal autonomy.
 Financial stability:A positive balance of payments is often associated with
greater financial stability, reducing the risk of financial crises and helping the
country maintain a level of financial independence.
 Impact on exchange rates:The balance of payments can affect exchange rates.
The difference between exports and imports can create pressure on the national
currency exchange rate.
 Impact on economic policy:When a country has a positive balance of payments,
it can use foreign exchange reserves accumulated from exports to invest or reduce
debt. Conversely, when the balance of payments is negative, the country may
have to seek foreign currency capital to balance the situation.
 Impact on economic development:A low balance of payments can create
pressure to increase exports and reduce imports, contributing to promoting
economic development.
 Managing energy supply and demand:If a country exports energy, its balance
of payments can affect how that country manages energy supply and demand in
world markets.
5. Establishment Principles
 Focus on Quality Exports:Maintain high-quality exports and focus on industries
where the country has a competitive advantage.
 Diversifying Markets and Supply:Identify and develop new export markets, as
well as diversify supply sources to reduce risks.
 Export Industry Support and Development:Implement support policies to
improve product quality, enhance production capacity and promote the export
industry.
 Managing Exchange Rates:Implement exchange rate management strategies to
ensure stability and competitiveness.
 Investment in Production and Supply Capacity:Increase investment in
production and supply capacity to meet international market demand.
 Developing Value-Added Export Industry:Focus on developing value-added
export industries to enhance performance and international competitiveness.
6. Situation Of BOP Of VN (2010-2020)
-From 2011 until now, Vietnam's balance of payments has continuously
maintained a surplus, especially in 2018 when both the current balance and the
capital and financial balance achieved double surpluses. In contrast to previous
years, especially 2010 when the balance of payments was often in deficit.
-These achievements are the result of the Government's significant efforts in
maintaining macroeconomic stability, while keeping growth stable at a
reasonable level. This is closely related to the application of innovative
measures in growth models and economic restructuring, in order to improve the
overall performance and competitiveness of the economy.
-Surplus reached a record high of more than 11,000 million USD. In 2013,
growth is still at a low level, the budget balance still has many challenges and
businesses have not yet escaped difficulties. However, the overall balance of
payments is still in surplus but not as high as in 2012. The balance of payments
has been in almost surplus since then, except for 2015, when the balance of
payments had a deficit of 6,000 million USD. In 2016, Vietnam's balance of
payments had an important shift from deficit to surplus and the surplus was
8,000 million USD. This is a very important position shift, causing Vietnam's
foreign exchange reserves to gradually recover, strengthening the country's
financial strength, contributing to stabilizing exchange rates, reducing pressure
on the economy. inflation expectations. In 2017, the total balance of payments
 was more than 12,500 million USD. By 2018, although the world economic
growth slowed down amid increasing trade tensions between the US and
China, the balance of payments was not only in surplus but also in a double
surplus reaching 6,000 million USD. (both current balance and capital and
financial balance)38. There are many reasons contributing to the improvement
of Vietnam's international balance of payments during this period, including
the change in thinking in determining main goals. Transition to a sustainable
growth model, prioritizing inflation control, macroeconomic stability,
reasonable growth, ensuring social security, at the same time as promoting
economic restructuring. In general, from 2011 until now, the balance of
payments surplus has contributed positively to macroeconomic stability and
economic growth of Vietnam in recent times.

II. Nội dung

1. Future Balance
a) Trade balance (tangible)
 -Reflects revenues and expenditures in import and export transactions of goods
in a certain period. A country's trade balance is in surplus meaning that it has
earned more money from exports than it has paid for imports. On the contrary, the
balance deficit shows that the country is paying more for imports than exports.
-When exporting, the value of exported goods is recorded on the Credit side
(export activities give rise to the supply of foreign currency and the demand for
domestic currency in the foreign exchange market).
-When importing, the value of imported goods is reflected on the Debit side
(Imports create demand for foreign currency).
b) Service balance (intangible):
-This balance records the flow of goods, services and money transfers back and
forth.
-The current balance is divided into 4 small groups:
 Trade in goods
 Service
 Income factor
 Net money transfer.
c) Balance collected
+ Primary income: investment income (investment profits, labor wages):
-The primary income account shows the main income streams
between resident and non-resident organizational units.
-International accounts distinguish the following types of primary
income:
 (a) employee compensation;
 (i) salaries and wages in cash,
 (ii) salaries and wages in kind, and
  (iii) employer's social contribution.
 (b) dividends;
 (c) reinvested earnings;
 (d) interest;
 (e) investment income attributable to policyholders in
insurance, standardized guarantees and pension funds;
 (f) rent; and
 (g) taxes and subsidies on products and production.

+ Secondary income: Current transfers (remittances, non-refundable aid):

-Secondary accounts represent current transfers between people
residents and non-residents.
-Current transfers directly affect the level of disposable income and
affect consumption of goods or services.
- For example, social grants and food aid are current transfer. Current
transfer is different from capital transfer.
Types of current transfers:
 (a) current taxes on income, wealth, etc.,
 (b) social contribution,
 (c) social benefits,
 (d) net non-life insurance premiums,
 (e) non-life insurance claims,
 (f) current international cooperation, and
 (g) other current transfers
d) Unilateral money transfer:
-Including one-way transfers is not possiblereturn.
 - Includes:
 Non-refundable aid.
 Compensation, gifts, gifts.
 Private subsidies, government subsidies.
 Unilateral revenues are considered to increase domestic income due to
revenues from the country foreign exchange, increasing the supply of
foreign currency (reflected on the credit side).
 Unilateral payables due to payments to foreigners (arising demand for
foreign currency (reflected on the Debit side).
2. Capital and financial balance
a) Foreign direct investment (FDI)
FDI stands for "Foreign Direct Investment", FDI refers to an organization or
individual from one country investing money, assets or other resources in another
country. Importantly, FDI allows foreign investors to participate in the management and
operations of businesses or projects in the destination country in which they invest.
Forms of FDI often include:
 Buy shares or stocks:
 Buy an asset
 Establishing a subsidiary or branch:
 Business cooperation
FDI can bring many benefits to both parties. For the receiving country, it can help
promote economic development, create jobs, provide investment capital, and transfer
technology and knowledge. For foreign investors, FDI can bring profits from business
operations in the destination country and expand global presence.
Vd: Implemented capital of foreign investment projects is estimated to reach more
than 4.3 billion USD, down 2.2% over the same period in 2022.
 There have been 67 countries and territories investing in Vietnam in the first 3
months of 2023. Of which, Singapore leads with a total investment capital of nearly 1.69
billion USD, accounting for nearly 31% of total investment capital in Vietnam, decrease
26.3% over the same period in 2022; China ranked second with nearly 552 million USD,
accounting for 10.1% of total investment capital, decrease 38.3% over the same period.
Taiwan ranked third with a total registered investment capital of more than 477 million
USD, accounting for nearly 8.8% of total investment capital, an increase of 47.5% over
the same period. Next are Korea, Hong Kong, Netherlands => In terms of number of
projects, Korea leads in both the number of new projects (accounting for 15.5%), the
number of capital adjustments (accounting for 26.9%) and GVMCP (accounting for
28.4%).
b) Foreign indirect investment (FPI)
FPI (Foreign Portfolio Investment) is the flow of capital that foreign investment
funds invest in the stock and bond markets, sometimes for speculation
Forms of foreign indirect investment:
 Foreign indirect investment in stocks
 Foreign indirect investment through bonds
Before 2015, Vietnam's FPI capital source was still relatively small, fluctuated
strongly and decreased, mainly through investment funds flowing into Vietnam.
Although this period has been volatile, it has still improved. By 2015, the amount of FPI
entering the Vietnamese market was a net outflow of about 65 million USD, but in 2016
it began to show positive signs and by 2017 reached more than 2,069 million USD, an
increase over 2016 and despite many changes. dynamic. At the end of 2018, FPI capital
still had a surplus of about 3,021 million USD.
Some differenes between FDI & FPI
FDI FPI
Investments FDI is an investment by An FPI is a passive equity
foreign investors to earn investment of a business,
profits through enterprises through financial assets.
in the receiving country.
Control Investors actively take A 3rd party will take
control of capital sources control instead of the
and can fully decide and investor.
take responsibility for
business results, including
losses and profits.
 Purpose Generate profit and Make a profit
control
Profit All profits belong to the Gaining profits can be
investor based on the done through receiving
initial capital. dividends or selling
securities at a premium.
Rotation trend The trend of transfer from There is a tendency to
developed countries to rotate between developed
developing countries. or developing countries
with each other.
c) Investment Portfolio
An investment portfolio is a set of financial assets owned by an investor that may
include bonds, stocks, currencies, cash and cash equivalents, and commodities. Further,
it refers to a group of investments that an investor uses in order to earn a profit while
making sure that capital or assets are preserved.
Types of Portfolios:
 Growth portfolio
 Income portfolio
 Value portfolio
To create a good investment portfolio, an investor or financial manager should
take note of the following steps.
 Determine the objective of the portfolio
 Minimize investment turnover
 Don’t spend too much on an asset
 Never rely on a single investment

3. Statiscial Discrepancy
REASON:
  There are many transactions between residents and non-residents. Therefore,
statistics are difficult to be accurate
 Due to mismatch between the transaction point and payment time.
 It may show that the trade deficit is much higher than the official figure or
that exporters do not transfer money from sales back to the country, perhaps
smuggling across the border is also much higher.
Vd: Vietnam's balance of payments in 2009 showed a current account deficit
of $7.1 billion; surplus capital account of $11.13 billion. Balancing these two
accounts, the balance of payments should still have a surplus of $4.03 billion to put
into foreign currency reserves. But in reality, not only does this $4.03 billion not
exist, but the balance of payments also has a deficit of about $8.8 billion.
Therefore, in the 2009 balance of payments balance sheet there was a negative
“errors and omissions” item of $12.84 billion!

4. Official Reserve Account

Official reserve account includes transactions undertaken by the authorities

to finance the overall balance and intervene in foreign exchange markets. Or to put
it simply, national foreign exchange reserves have the ability to decide. In
international trade transactions, the international trade balance has many different
parts of content, so each part will play a separate role and function. That is also an
important factor to contribute to the stability and economic development of the
country's industrialization and modernization.
Post-1945, international reserve assets comprise:
 Gold
 Foreign exchanges
 Special drawing rights (SDRs)
 Reserve positions in the IM
Vd: From 2016 to 2021, the State Bank has bought more than 81.14 billion
USD, accounting for about 65% of the total surplus in Vietnam's current balance
and financial balance. It can be seen that the State Bank has intervened in the
foreign exchange market to stabilize exchange rates. During periods of foreign
currency surplus, the State Bank continuously buys in, and in periods of shortage,
it sells, for example, in the fourth quarter of 2018, the State Bank sold more than
1.9 billion USD of reserves (this is is a time when both Vietnam's current balance
and financial balance are in deficit. In the 4th quarter of 2016, the State Bank also
sold more than 1.26 billion USD in reserves to finance the current balance deficit
during this period. this point (SBV, 2022).
5. Overall balance
The overall balance reflects all economic transactions between residents and
non-residents during the period, including goods, services, long-term investments,
short-term investments, and aid. non-refundable for investment purposes, aid
amounts are written off...
In fact, the general balance (OB) is only used at the end of a period to
determine the total ending balance of the current account balance (CA) and capital
and financial balance (KA).
 According to data just announced by the State Bank, in the second quarter,
the overall balance had a surplus of 3.04 billion USD, previously the figure in the
first quarter was 1.54 billion USD. The current balance had a surplus of 7.86
billion USD, the financial balance had a deficit of 2.7 billion USD.
Thus, after 4 quarters of 2022, the overall balance was negative, the overall
balance was in surplus at a fairly high level as predicted by many experts. ( Theo
số liệu vừa được Ngân hàng Nhà nước công bố, trong quý II, cán cân tổng thể
thặng dư 3,04 tỷ USD, trước đó con số trong quý I là 1,54 tỷ USD. Cán cân vãng
lai thặng dư 7,86 tỷ USD, cán cân tài chính thâm hụt 2,7 tỷ USD. Như vậy sau 4
quý của năm 2022 cán cân tổng thể âm, cán cân tổng thể đã thặng dư ở mức khá
đúng như dự báo của nhiều chuyên gia)
WiGroup CEO also forecasts that the overall balance will have a moderate
surplus in the second and third quarters, and the whole year 2023 will have a slight
to moderate surplus.
 III. Factors Influencing International Balance of
Payments
1. Trade Balance:
The trade balance plays a crucial role in the global economy, measuring the
difference between a country's exports and imports over a specific period. A
positive balance indicates higher exports, while a negative balance signals higher
imports. Governments may intervene to address deficits by boosting exports or
reducing imports.
2. Inflation:
Inflation significantly impacts economies and international trade. It can alter
production costs, affecting export values. When a country's currency strengthens,
import prices decrease, but export competitiveness weakens. For instance, rising
inflation in rice prices can hinder a country's competitive edge in global markets.
3. National Income Effects:
National income measures a country's total earnings over a period. If one
country's income grows faster than another's, and other factors remain constant, its
current account will decrease. Higher income leads to increased consumption,
influencing international payment balances.
4. Exchange Rate Influence:
Changes in a country's currency value affect its current account. A stronger
currency makes exports more expensive, reducing demand, while imports become
cheaper. Exchange rate fluctuations impact trade balances, with a rising exchange
rate boosting net exports and vice versa.
5. Foreign Policy and Political Stability:
 Political stability is crucial for economic development and foreign relations.
A stable political environment fosters economic growth and strengthens
international economic ties. Open foreign policies enhance business activities,
facilitating favorable conditions for domestic economic development.
6. Government Management Capability:
Each country's unique import-export policies and economic development
impact trade balances. Effective government management leads to a robust
economy and improved international economic capabilities. Therefore, a country's
international balance of payments can be positively influenced by efficient
governance.

IV. Measures to adjust the international balance of

payments
1. Cut the expense
a) Utilize monetary policies
In the current situation in Vietnam, monetary policies must ensure both
internal and external balance objectives. Therefore, the government can implement
specific policies as follows:
Vietnam's monetary policy in the present phase is characterized by currency
expansion. The increase in money supply will primarily be executed through the
augmentation of international reserves (due to a surplus in the balance of
payments) and the multiplication of the money multiplier by adjusting the required
reserve ratio. This will be coupled with a reduction in interest rates to maintain the
money supply in line with money demand. Specifically:
 Augmenting international reserves aligns with the demand for
increased imports to support economic development. Simultaneously,
 it serves to curb the appreciation of the Vietnamese dong when
attracting foreign capital and helps control the inflation rate.
 Lowering interest rates aims to restrict the attraction of short-term
capital and boost domestic investment.
 Reducing the required reserve ratio implies a decrease in taxes
imposed on the banking system, resulting in a reduction in domestic
interest rates and narrowing the interest rate differential for loans.
Thus, it ensures a balance between promoting investment and
encouraging domestic savings.
b) Exchange Rate Adjustment Measures
Some measures regarding exchange rate policies that Vietnam needs to
implement in the coming period include:
 The exchange rate policy must maintain both internal and external
equilibrium.
 Stabilize the exchange rate based on the supply and demand
relationship in the export market, stimulate exports, limit imports,
improve the international balance of payments, and increase foreign
reserves.
 Gradually enhance the reputation of the Vietnamese đồng, creating
conditions for it to become a convertible currency.
 Coordinate with foreign exchange policies to counteract dollarization
trends.
2. Measures To Promote Export And Import
a) Encourage Export
Create conditions for all economic components to develop together,
regardless of whether they are state-owned or private enterprises, to generate a
collective strength that enhances the position and competitiveness of Vietnamese
enterprises in the international market.
Enhance investment to improve production capacity and competitiveness of
export goods. Concentrate foreign investment flows on producing items for export.
Simultaneously, actively shift the investment structure towards increasing state
investment to develop service sectors and certain high-tech manufacturing
industries, promoting the export of services in line with the trends of the service
and knowledge-based economic development.
The government needs to focus on developing potentially strong private
enterprises, especially those in export-oriented manufacturing industries. Provide
increased support for organizations, businesses, and individuals to develop new
products and explore new markets.
Vietnam needs to expand its export markets, implementing a strategy of
diversification and globalization of markets and partners. Limit the dependence on
a single market for a specific product, focusing on markets with significant
purchasing power such as the United States, the European Union, Japan, China,
and Southeast Asia. Simultaneously, explore ways to penetrate and increase the
presence of Vietnamese goods in African and Latin American markets, enhancing
various forms of barter trade.
b) Regulate Imports
To simultaneously ensure economic goals and alleviate the trade deficit in
the current period, Vietnam needs to undertake the following measures:
Prioritize the import of advanced materials, equipment, and technology to
serve industrialization and modernization efforts.
Encourage increased utilization of domestically manufactured materials and
equipment to save foreign exchange and develop domestically produced goods.
 Promote the development of substitute raw materials for imports, such as
cotton, tobacco materials, corn, soybeans, and multiple raw materials, applying
new tax tools to reduce the import volume of these items.
Minimize the import of consumer goods and rigorously control the import of
automobiles and motorcycle components.
Implement policies to reduce foreign exchange spending on imports for
certain service sectors that rely on importing specialized equipment, inexpensive
and quickly perishable equipment and materials, focusing on creating conditions
for domestic production to replace imported goods.