Foreign bank penetration in Vietnam following Vietnam’s accession to the WTO: matching expectations with reality

Pham Thu Huong1, Vo Xuan Vinh2, Nguyen Thi Hien, Bui Thi Ly1, Nguyen Ngoc Toan3
1 Foreign Trade University, Hanoi, Vietnam
2 University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam
3 Ho Chi Minh National Academy of Politics, Hanoi, Vietnam

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Abstract

Vietnam continuously liberalizes the financial market as a requirement for its accession to the World Trade Organization in 2007. This paper discusses the foreign investors’ expectation and their experience when penetrating into Vietnam’s market. The role of the foreign entrants is also assessed. By synthesizing and analyzing relevant research and reports, several important insights are discovered. Firstly, the presence of foreign investors and banks improves market competition, efficiency, and stability. Wholly and partly foreign-owned banks provide the spillover effects in management quality, in the introduction of world standard banking products and services, and in the application of information technology. Secondly, by looking into the foreign owned banks, it is found that the banks’ foreign investors are not likely to play an influential role in managing the banks they invested in. The motive of the investors to control the invested companies leads to their decision of holdings withdrawing.

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