Background of the Research

In 1986, Vietnam launched a political and economic innovation campaign called

“Doi Moi” (Open Door) in order to reform the Vietnamese economy; the challenge was to transform the economy from a central-planning economy to a socialist-oriented market economy. The Doi Moi policy has led to great changes as evidenced in significant economic growth, budgetary and tax reform, development of a private sector, changes in the legal system in order to enable a more market-friendly economy, and expansion of trade/economic cooperation with other countries around the world (Kamoche, 2001). On January 11, 2007, Vietnam became WTO's 150th member. This marked not only a significant accomplishment but also the beginning of an even higher-level opportunity to compete economically around the globe. Stemming from this recent achievement, Vietnam must now confront another set of unique challenges. As Vietnam's economic sectors open the door to increased foreign competition so too must open its doors to increased human resources challenges in the workplace. The year of 1986 was only a starting point for a long journey of reforms. Vietnam has gradually transformed from a central planning economy with a high degree of bureaucracy and government subsidies to a socialist-oriented market economy in the midst of ongoing change.

After 20 years of innovation, Vietnam has now reached a moment in its economic evolution typified by slower economic growth. Although largely dependent on external borrowing, Vietnam’s economy achieved rapid growth, improved the lives of people remarkably, enhanced facilities and created prerequisites for a new development stage of industrialization - modernization of the country. Basically, Vietnam has changed its management style from mostly being a mechanistic system to

a more fluid system. Through the innovations over the past two decades of change, Vietnam has gradually built up its role and strengthened its integration in regional and international economic affairs.

During the past 20 years of reform, the GDP growth rate of Vietnam has increased continuously. The average annual GDP growth rate of Vietnam ranged 3,9%

in the period from 1986 to 1990, then raised up 8.2% in the next period from 1991 to 1995. In the period 1996-2000 the growth rate of Vietnam's GDP is 7.5%, lower than the first half of the 1990s due to the Asian financial crisis. Specially, GDP growth dropped to 5.8% in 1998, again to 4.8% in 1999¹, but then recovered and reached 6.8 % in 2000, 7.1% in 2002, 7.8% in 2004, 8.2% in 2006 and 8.5% in 2007. However, the Vietnam’s GDP rate in 2008 was only 6.2%; this rate increased to only 5.3% in 2009.

This was the lowest increase since 2000 due to the global economic crisis from 2008 to 2009. The 2010 GDP rate is 6.7%.²

Regardless of the more recent financial slowdown, one of the most noteworthy achievements of Vietnam’s economy is shown in the overall sharp increase in the GDP per capita. The positive benefits have been significant in substantially reducing the poverty rate in Vietnam. Specifically, the GDP per capita has increased by many times starting with only 97.16 USD since 1986³, reaching $402 USD in 2000, $1064USD in 2009 ⁴and an estimated $1156 USD in 2010⁵.

The growth of the private sector and foreign sector are key features of economic development in Vietnam since transition. Private sector and foreign investment accounted near a half of Vietnam’s GDP, 45.59% in 2000, 47.68% in 2007 to 48.4% in 2009, respectively. Private sector contributed for Vietnam’s GDP was 32.31%, 29.72%

and 30.07% in 2000, 2007 and 2009, respectively.⁶ There have been 1,544 registered projects with a total registered investment capital of 21347.8 million USD and a total

1 Ministry of Foreign Affairs, Vietnam.

http://www.mofahcm.gov.vn/vi/mofa/tt_vietnam/nr040810155228/#IFiqn6X1CTPh

2 General Statistics Office of Vietnam. Growth rate of gross domestic product.

Retrieved from http://www.gso.gov.vn/default.aspx?tabid=388&idmid=3&ItemID=9897

3 NationalMaster.com. http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita&date=1986

4 General Statistics Office of Vietnam. Gross domestic product per capitas.

Retrieved from http://www.gso.gov.vn/default.aspx?tabid=388&idmid=3&ItemID=9897

5 Global Finance. http://www.gfmag.com/gdp-data-country-reports/146-vietnam-gdp-country-report.html#axzz1OKfSiSbK

6 General Statistics Office of Vietnam. Structure of gross domestic product at current prices by economic sectors &

implemented investment capital of 8030.0 million USD in the end 2007. In 2009, Vietnam has 1,208 foreign invested projects with a total registered capital of 23107.3 USD and a total implemented investment capital of 10000.0 million USD.⁷

The foreign-invested sector has brought not only capital but also new technology and advanced management skills. Preliminary estimates indicate that private businesses create nearly 90% of the total 7.5 million jobs created during the past 5 years from 2001 to 2005. The majority of the 1.6 million new jobs in Vietnam produced each year from 2006 to 2010 relied on the private sector.⁸ However, the lack of skilled labor has become a serious and highly visible problem. The concurrent growing demand and stress upon human resource development is particularly noticeable in regards to the general educational preparation for pre-hires coming from the country’s secondary high-schools as well as the specific, higher-level training needs for post-hires once they have entered the workplace.

A banking reform strategy was drafted by the Vietnamese government in May, 2006. The State Bank of Vietnam has committed to being converted into a modern central bank with a board of trustees overseeing the functioning of monetary policy and supervision of financial institutions. By 2010, commercial banks were to be completely restructured; thereafter, equitization or privatization will be part of an overall effort to improve the operational capacity of these banks. For example, in December 2006, Prime Minister Nguyen Tan Dung approved a list of state companies that would undergo equitization in the period from 2007 to 2010, including large companies such as Vietnam Foreign Trade Bank (Vietcombank)⁹, and Vietnam Industrial and Commercial Bank (Vietinbank)¹⁰. Some banks have also selected some of the world's major banks as strategic partners. Two foreign banks, The Hongkong and Shanghai Banking Corporation (HSBC) and Standard Chartered Bank, received licenses in September 2008 to operate in Vietnam as an enterprise with 100% foreign capital. This

7 General Statistics Office of Vietnam. Foreign direct investment by foreign-licensed period 1988 – 2009.

Retrieved from http://www.gso.gov.vn/default.aspx?tabid=392&idmid=3&ItemID=9923

8Asian Development Outlook 2007. Southeast Asia: Vietnam. Retrieved from http://www.adb.org/documents/books/ado/2007/vie.asp

9 The Prime Minister issued Decision No. 1289/QD-TTg on 26th September, 2008 approved equitization planning for Vietnam Foreign Trade Bank (Vietcombank). Published 24^th September, 2007. Retrieved from

http://www.tin247.com/thu_tuong_phe_duyet_phuong_an_co_phan_hoa_vietcombank-3-21221839.html

10 The Prime Minister issued Decision No. 1354/QD-TTg on 23th September, 2008 approved equitization planning for Vietnam Industrial & Commercial Bank (Vietinbank). VietNamNet.vn. Published 24^th September, 2008.

marked a big step, removing barriers for the two banks – the door has opened.¹¹

Opening the economy logically led to opening a Vietnamese stock market that officially went into operation in 2000 with the operation of HoChiMinh Stock Exchange (HSX) on 20th July, 2000 and Hanoi Stock Exchange (HNX) on 8^th March, 2005. Prior to opening, operational benchmarking and practical experience was gained with the stock exchange model under the State Securities Commission of Vietnam with the establishment of securities trading centers and organizations in the form of revenue-generating units.

Since its official opening, the Vietnamese securities market development effort has moved well beyond all expectations in just a few years with impact upon other key sectors in the society, but not without some setbacks and challenges. A law that officially established the securities and securities markets was proposed and officially enacted in January 2007.

Since that time, the number of listing companies as well as the total market value has increased exponentially. Namely, there were only two listed stocks (REE and SAM) in the beginning of 2000 at HSX. When the tax incentives for companies to list expired in the end of 2006, the number of stock listing companies had increased from 106 in 2006, 138 in 2007 and 170 in 2008. The market capitalization of stocks at HSX was VND147,967 billion, VND364,425 billion and VND169,346 billion in 2006, 2007 and 2008, respectively. The market capitalization over GDP is 15.19% in 2006, 31.85%

in 2007 and 13.93% in 2008¹². Similarly, at HNX the total number of listed companies was 87 with the total listed par value being VND11,124 billion in 2006. The total capitalization of stocks reached VND73 billion on 31^st, December, 2006, 38 times higher than that of 14^th July, 2005¹³. The total number of listed companies has increased to 168 at the company on 31^st December, 2008, with a total listed value of more than VND21.715 billion, the market capitalization value reached VND55,174 billion.

Despite market capitalization value had a reduction of 40%, the numbers of listed

11 Khanh Huyen. The banking system in the new competition. Published 10^th September, 2008. Retrieved from http://www.tienphong.vn/Kinh-Te/136313/He-thong-ngan-hang-vao-cuoc-canh-tranh-moi.html

12 Annual Report 2008 of HoChiMinh Stock Exchange (HSX).

companies strongly increased 50% in 2008¹⁴.

Then in 2007, the stock market began experiencing difficulties and to-date has remained in a period of moderate hardship due to impacts of the global financial crisis at the end of 2007 and into 2008. The VN-Index at HSX fell for 9 consecutive months, from high levels close to 1100 points in the middle of October 2007 to 921.07 points at the beginning of the year 2008, then decreased down 605.45 points (65.75%) and closed at 315.62 points by the end of 2008. On 10^th December, 2008 the VN-Index established a new bottom of 286.85 points¹⁵. On 24^th February, 2009, VN-Index hit bottom of 235.5 points. Then VN-Index steadily increased up to a higher level of 624.10 points on 22^nd October, 2009 and sharply adjusted to 434.87 points before closed at 499.77 points at the end of 2009. The HNX-Index was 242.89 points at the end of 2006, an incredible increase of 144.65 points (152,37%) comparing to the trading section on 1^st Jan, 2006¹⁶. The HNX-Index at HNX also dropped to under 100 points on 27^th November 2008¹⁷. The number of securities companies operating in the Vietnamese stock market was 99¹⁸ in 2009. On the other hand, the trading account number of stock investors in Vietnamese stock market opened by these 99 companies was over 307,000 accounts in 2007 and increased to 793,000 trading accounts of investors including 758,500 domestic accounts and 12,5000 foreign accounts by 31^st December, 2009¹⁹. This is a challenge for stock brokers in having to take good care of their customers as well as face many pressures from their customers when they cannot satisfy the needs of investors.

Generally, the financial system of business organizations and securities services developed rapidly in scale as well as capacity. A network of branches and transaction offices spread across the provinces and major cities throughout the country that made it easy for the public to access and invest in the stock market. When the stock market began operations in 2000, there were only two securities companies that offered full-service, funds management. After more than 10 years of operation, there are now 99

14 Looking back securities 2008: Hanoi Stock Exchange, forward and backward .VnEconomy. Retrieved from http://vneconomy.vn/2009011005203883P0C7/nhin-lai-chung-khoan-2008-hastc-tien-va-lui.htm

15 Annual Report 2008 of HoChiMinh Stock Exchange (HSX).

16 Annual Report 2006 of Hanoi Stock Exchange (HNX)

17 Nguyen Hien (2008). Ten highlights events of Vietnamese stock market in 2008. Dan Tri Electronic Newspaper.

Retrieved from http://dantri.com.vn/c76/s76-300317/10-su-kien-chung-khoan-noi-bat-nam-2008.htm

18 Data is updated to 31/12/2009

securities companies. The number of employees in securities companies and bank increased rapidly. However, the number of business organizations and service providers grew too fast. With limited capital capacity and only newly acquired expertise, there currently exists significant systemic risk with the overall performance capacity of the stock market.

Accompanying the fast growing economy and development in many business sectors, Vietnam has had to confront many new and substantial challenges. According to Gross (2008), while the Vietnamese economy is taking off dramatically, the rapid growth is creating new challenges for Human Resource managers.

Consider that in its high-growth environment, the workforce of Vietnam is necessarily expanding very quickly as well with 45 million working Vietnamese

20among over 86²¹ million in the whole country. Additionally, there are more companies entering Vietnam every year that must recruit skilled or talented people to employ for technical and management positions. Recruiting talented employees is becoming more difficult for those organizations; most local workers in Vietnam are not suited to the demands of foreign companies, namely Western companies. Therefore, the growth of multinational companies has created its own unique desperate need for personnel who have experience in Western companies and can speak English (Gross, 2002 & 2008).

Even while Vietnam has a relatively large and educated workforce, there is still a shortage of qualified skilled labor, particularly those who are able to be successful in foreign companies. This increasing demand for skilled workers, coupled with a low supply of potential workers has led to wage increases for these highly skilled employees.

According to a survey that was conducted by the Navigos Group in the first quarter of 2010, 63.8 percent of respondents from 168 companies operating in Vietnam ranked work engagement as the number one human resource challenge in 2010.

Mrs. Nguyen Thi Van Anh ²²(2010) said that “the second amongst the top five challenges for the businesses in 2010 is how to hire the best talent” and commented, “It has never been easy to find the right and best talent in Vietnam and the situation will

20 2008. Gross. A. Vietnam HR Update. Published in Benefits & Compensation International.

21 General Statistics Office of Vietnam. Population and population density in 2009 by province.

Retrieved from http://www.gso.gov.vn/default.aspx?tabid=387&idmid=3&ItemID=9865

22 Mrs. Nguyen Thi Van Anh is the managing director of Navigos Group – the leading and largest executive

remain unchanged in the near future”. She said that “Vietnamese employees aggressively pursue opportunities to accelerate their career track to senior positions, challenging work, stretch assignments, continual training and development and competitive pay”²³.

Companies that employ the more highly skilled employees often use financial strategies in order to improve work engagement. However, beyond the financial compensation package, as noted in the quote above, employers must increasingly show their employees that they are respected, trusted, and valued in non-financial ways as well. Hiring is one challenge, retaining is even more important. How to keep employees?

Why do some leave while others choose to stay? These questions will be addressed in the study to better understand the management of Vietnamese stock brokers in a transition economy as well as lay the foundation for future researches.