Excluding the impact of the global economic crisis, as one of the member of the WTO, Vietnam has potential to develop country on all sides of economy especially import – export operations. It makes a great opportunity for the development of trade relations between Vietnam and Taiwan. Besides, these two countries both are the members of the WTO and APEC, which shows that the relationship between them is closer. Therefore, banking services are considered as a key of international trade. The development of banking system also helps the international trade operations more efficient and promotes international economic integration of these two countries. In this chapter, the author will introduce more clearly about the research motivation and the importance of this study.
1.1 Research Background
According to Hagiwara (2010), “the economic crisis of 2008-09 has caused a serious fall in international trade around the world” and after 5 years of struggling with the financial crisis and the most severe recession so far, the world economy began to show signs of recovery. Although, it is not really stable because the US and the Eurozone continue facing financial difficulties.
For Vietnam economy, “like the rest of East Asia, Vietnam suffered a sharp decline in economic growth in 2008 and 2009 as the region felt the impact of the global financial crisis” (Manning, 2010). However, after the WTO accession, although there were many Vietnamese enterprises focused on production and business, made great profits for society.
Nevertheless, there were also a lot of firms and individuals speculated in assets and neglected their business and leading to loss-making businesses and rising bad debts. For banking sector, there are two impacts for Vietnamese commercial banks. On the positive impact, according to Nguyen (2013), commercial bank is still a major channel to meet
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capital for the economy and significant contribute to annual GDP growth. In this international integration, competition is the motivation to reform and renovate banking system. On the negative impact, those are challenges for opening the banking and finance market for Vietnamese banking system. The participation in the international economic integration means increasing risks and sensibility of domestic financial market for the fluctuations of the international market such as the international economic crisis.
Additionally, domestic banks have to face up to the competition with foreign banks in management ability, price, service, etc. (Do, 2013).
As for Taiwan’s economy, according to Taiwan commercial banking report (2012), this country is now an advanced economy, a developed industrial country with good infrastructure and high technology, workforces are trained with high quality, and the 4th largest foreign exchange reserves in the world. Contrary to these strengths, Taiwan has to face sensitive matter with the rise of China, especially in manufacturing sector. Like a small island in Asia, Taiwan still has high dependence on outside factors of this country. In general, Taiwan’s economy was also affected by the impact of global economic crisis and in addition, Taiwan has to struggle with the rise of China. It is observed from the results that banking system in Taiwan is over-fragmented, which causes many difficulties for Taiwanese banks to have a stable growth.
1.2 Problem Statement and Research Objectives
In the Taiwan’s economic policy towards ASEAN, Vietnam always occupies a priority position. Currently, the Vietnamese Government extremely concerns about foreign investors, especially Taiwanese investors. Although there are some difficulties in infrastructure, Vietnam is still a good country for investment (Nguyen & Trinh, 2011).
Many Taiwanese businesses have been familiar with the Vietnamese market and have
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achieved much success and profit in there. That is the reason why the author conducts the research regarding the banking system in both Vietnam and Taiwan.
This research studies on estimating operational capabilities as well as risk-management abilities of commercial banks in Vietnam and Taiwan. Through the input and output data taken from Financial Statement and Balance Sheet of commercial banks, and based on the DEA model and data processing, the results are evidences and tools to assess operational efficiency and risk management ability of banks. The DEA model has been used in many studies over the world and will be presented in more details in next chapter.
From background and main objective that were pointed out above, they show that although Vietnam and Taiwan are two different countries in economic level but they also have some problems with bank and finance factors. Therefore, the problem statement of this research will be presented through several research questions:
1. How do commercial banks in Vietnam and Taiwan operate?
2. What factors affect operational ability and risk-management ability of commercial banks?
3. How can the banks manage their operation and risk management well?
By following these research questions, the research objectives can be summarized out:
1. Systematize and illuminate theoretical basis in operational efficiency and risk-management of commercial bank and then investigating the factors that affect banks’ efficiency.
2. Using the secondary data retrieved from banks’ annual report to evaluate the actual situation of commercial banks in these two countries. After that, indicating how banks in Vietnam and Taiwan operate.
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3. Propose some assessments and suggestions for the banks to enhance operational efficiency as well as risk-management efficiency.
1.3 Research Significance
This research already indicated objectives of research as mentioned above, and indicated that operational efficiency and risk-management are two important factors for any commercial bank. These affect the assessment of a bank’s health. For that reason and from the results, the rankings about operations and risk-management quality of commercial banks are pointed out. Hence, it is very useful for those who are interested in banking sector such as managers, investors or government to evaluate banks’ health. For instance, they may obtain the useful information about which banks are currently good and vice versa.
Moreover, this research is also carried out on a wide scale that is evaluating efficiency of commercial banks in two countries – Vietnam and Taiwan. Therefore, it may be a quite fresh research so far because there are many previous researches done with small scale as one nation for example. Although there were a lots of researches in banking sector but most of them are only focus on individual factor such operational efficiency or risk-management efficiency. This study will be done with both factors. Thus, the author would like to analyze this problem with a two-stage DEA model. It would be better than researches whom using DEA with one-stage. This is because, at the first stage, one bank can be effective and get a high score but it may not get an absolutely score at the second stage. Based on the two-stage of DEA model, this paper will fill a gap in previous studies and help managers to conduct the assessment more objectively and precisely than other researches.
From these points, this research will have a significant implication for commercial banks in Vietnam and Taiwan in improving their operational and risk-management efficiency as well as in the national economy development.
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1.4 Research Process
Figure 1 1: Research process of this study
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