Basic Informatics

In this subject, we learn some basic computer

techniques such as how to create design effective presentations with
PowerPoint, how to format our thesis in the right way with Microsoft Word,
how to use some common functions in Excel. Also, knowing that many
students love Google, the lecturer delivered a session on some basic Google
search tips. She helped us realize that even in such a simple task, you still
have to balance between quantity and quality, in which broader terms will
give you more results while narrower terms will give you more relevant
results. We were also reminded of Google books and Google scholar, which I
found extremely helpful in writing my thesis because there were many
documents you cant buy easily in Vietnam, and so I have to rent or buy the
electronic versions, but thats really a savior. Google Search is a full-text
and most-used search engine which uses computerized spider/robot to
index millions of pages on the webs.
~ the tilde functions as a synonym search. For example, [Google tricks~]
will result in Google tricks, Google tips, techniques, guides, etc.
Study skills
In this subject, we were taught the basic concepts and how
to effectively apply teamwork, critical thinking/positive thinking, time
management, communication skills and academic writing.
Teamwork:
phase I (getting organized): focus the team > assign roles > establish
guidelines Phase II (Producing): Plan the work > do the work > review team
performance > complete the work Phase III (Wrapping up): publish results >
reward the team > move on (adjourn).
Critical thinking: the ability to think clearly and rationally. Deeply and
broadly questioning and testing the ways in which an idea is formed as well
as how you have been interpreting and examining the idea, and to apply
criteria in forming a conclusion or evaluation about what you have been
thinking about and how you have been thinking about it.
Time management: the lecturer emphasized for us that time couldnt be
managed; we can manage only ourselves. To achieve it, we are advised to
work with our body cycles, define SMART (specific, measurable, achievable,
rewarding and time-bound) goals, set priorities (80/20 rule of Pareto: that
we should focus on 20% of activities that can give 80% of results, and catch
the time thieves such as interruptions, meetings, procrastination, etc.
Communication skills: its not only about speaking, a big part of
communication lies in listening and body language too. I really like this
module because we know some funny facts. For example when people roll
their eyes to their left, they are recalling memories and when they roll their

eyes to their right, they are visualizing images. Ive noticed that and it
works all the time.
Academic writing: we were taught to try to make our essays a knowledgetransforming, not knowledge-telling piece of work. We should try to include
evidence, introduction, context, focus and voice. Avoid unsubstantiated
generalizations, good materials without any argument of our own and
without answering the question, and visible mistakes such as punctuation
and spelling errors.
Principles of Marxism Leninism

Dialectical materialism

Econometrics In this course, we learn how to proceed econometrics

methodology, which includes firstly the statement of theory or hypothesis,
then we specify the mathematical model of the theory (the content of this
course is limited to linear relationship only), specify the econometric model
with economic variables, collect the data, estimate the parameters of our
suggested model, test the hypothesis, and use the model for control or
policy purposes. We also learn to use the statistical software Eviews version
8.1 to support us in the above steps.
In testing the hypothesis, we can
compute t value

t=

^i i
se ( ^i)

(beta-hat or beta-cap) with the critical t value or

use ANOVA approach (F-test) (there are 2 sources of variance: 1 can be

explained by the regression and the other due to residual). ANOVA provides
a test of the null hypothesis H0: 2 = 0. Compute the F ratio and compare it
with the critical F value obtained from the Fisher tables at the chosen level
of significance.
More for hypothesis testing: testing the stability of the estimated regression
model over time or in different cross-sectional units, we use Chow test;
testing the functional form of regression models, we use Mackinnon, White
and Davidson test.
Type I error: rejecting the right; Type II error: accepting the wrong.
p-value (probability value) is the exact probability of committing a type I
error.
An example of regression: the higher the rate of inflation, the lower the
proportion of their income that people would want to hold in the form of
money. Or Phillips curve: the rate of change of money wages in relation to
the unemployment rate.
Dependent variable: regressand

Explanatory variable: regressor

Homoscedasticity: equal variance
outliers: values that are very large in relation to the rest of the observations
(use White test to check the heteroscedasticity if the n.R 2 exceeds the
critical chi-square value at the chosen level of significance, there is
heteroscedasticity.
To check whether autocorrelation exists in the disturbances u i, we use
Durbin-Watson d Test. For example, consumption t = 1 + 2incomet +
3consumptiont-1 + ut (autoregression because one of the explanatory
variables is the lagged value of the dependent variable)
Standard error (se) of the estimators is used to measure their reliability or
precision.
The Gauss-Markov theorem: given the assumptions of the classical linear
regression model, the least squares estimators, in class of unbiased linear
estimators, have minimum variance, which is they are BLUE (best linear
unbiased estimator).
r2 = explained sum of squares / total sum of squares
Log-Linear model is used to measure elasticity: lnY i = ln1 + 2lnX1 + ui (the
percentage change in Y for a given small percentage change in X).
Log-lin model: the percent growth in Y for an absolute change in X
Lin-log model: the absolute change in Y for a percent change in X.
Reciprocal models: Phillips curve: actual inflation rate at time t expected
inflation rate at time t = 2 x (actual unemployment rate prevailing at time t
natural rate of unemployment). We can use the reciprocal model to see if
the unemployment rate increases indefinitely, what is the most percentage
points the change in the inflation rate will go down.

u
The Cobb-Douglas production function: Yi = 1 X 2 i X 3 i e
2

we can log-

transform this function to have a log-linear model.

Dummy variables: applying piecewise linear regression to determine
whether a threshold value/break point in the regression is suitable or not.
Detect and remedy multi-collinearity: I usually use tolerance and variance
inflation factor, since its quite easy to compute and interpret (TOL = 0 is
perfect collinearity and TOL = 1 is no collinearity at all). To remedy this

phenomenon, we can simply do nothing, add more data, drop variable(s) or

transform variables.
International Business
Textbook: International Business: Competing in the
th
global marketplace, 7 edition
International business refers to the performance of trade and investment
activities by firms across national borders.
We also learn about the emergence of some global institutions: the WTO is
primarily responsible for policing the world trading system and making sure
that nation-states adhere to the rules laid down in trade treaties signed by
WTO members. The IMF and the WB were created in 1944. IMF maintains
order in the international monetary system. WB promotes economic
development. The United Nations maintains international peace and
security; develops friendly relations among nations; cooperates in solving
international problems and promotes respect for human rights; be a center
for harmonizing the actions of nations.
I like the culture part the most, for example we must be careful when using
the thumbs-up gesture in Middle East, or the OK sign in Greece and Spain,
where it means obscene or vulgar gesture.
Main goals of a business is to increase profitability and to increase rate of
profit growth. Globalization: the world is moving away from selfcontained isolated national economies to interdependent integrated global
economic system:
Globalization of markets: the merging of historically distinct and separate
national markets into one huge global marketplace.
Globalization of production: the sourcing of goods and services from
locations around the globe to take advantages of national differences in the
cost and quality of production factors.
Drivers of globalization are decline in trade/investment barriers and
technological change.
I think there are 4 reasons why managing an international business differs
from managing a domestic business: lets face it, countries are different;
wider range and more complex problems; limits imposed by government
intervention in the international trade and investment system; and different
currencies.
IB environment: political environment (collectivism vs individualism;
democracy vs totalitarianism)

Democracy is a political system in which government is by the people and is

exercised either directly or through elected representatives.
Totalitarianism is when one person or political party exercises absolute
control over all spheres of human life and prohibits opposing political parties
(communist/theocratic (religious principles)/tribal/right-wing (economic
freedom: yes; political freedom: no)).
Political risks: conflicts and violence, property seizure (confiscation w/o
compensation; expropriation with compensation; nationalization
government takes over an entire industry), terrorism.
Legal environment: common law (precedent, tradition, custom), civil law
(detailed set of laws organized into codes), theocratic law (religious
teachings).
Legal risks: differences in contract law (shorter under civil law and more
detailed under common law); property rights (can be violated by private
actions theft, piracy, blackmail or public actions confiscation,
expropriation); IP rights (copyright literary and artistic works, patent
invention/new way/new technical solution, trademark distinctive sign,
industrial design ornamental or aesthetic aspect of an article, geographical
indication specific geographical origin with qualities and reputation,
tradename name or designation that identifies an enterprise, business
secret undisclosed and susceptible to application information obtained
from financial and/or intellectual investment)
Economic environment: command / market / mixed economy.
Cultural environment: ethnocentric (home is better), polycentric (foreign is
better), geocentric (global mindset). This includes language, religion
(Christianity, Islam, Hinduism, Buddhism and Confucianism), value and
attitude (to work, to time, and to change), aesthetics, education, social
structure (social stratification family background, occupation, income;
social mobility caste system and class system)
Entry modes of IB
Decisions: which markets, when and on what scale to enter those markets.
These decisions are associated with different levels of risk and reward.
First-mover advantages: preempt rivals and capture demand, build sales
volume and lower price; create switching cost.
Entry modes are (in the increasing level of investment and risk and degree
of ownership and control): exporting (ad valorem tariff: fixed percentage of

the value of imported good, specific tariff: fixed amount of money per
physical unit of imported good, compound tariff) < licensing (intangible
property royalty fee) < franchising (IPs, strict rules) < joint venture
(sometimes, this is the only feasible mode) < wholly owned subsidiary
(greenfield or acquisition)
Acquisitions can fail when: inadequate pre-acquisition screening < overpay
for assets < culture clash < synergies failures.
IB strategy: international strategy (taking products firstly produced for the
domestic market, selling them internationally with only minimal
customization), global strategy (economies of scale, learning effects, and
location economies), localization strategy, and transnational strategy
(achieve low costs, differentiate the product across geographic markets,
foster a multidirectional flow of skills among different subsidiaries in the
firms global network of operations).
Value chain: primary activities (R&D, production, marketing and sales,
customer service); support activities (logistics, HR, IS and company
infrastructure (the organizational structure, control systems, and culture of
the firm)).
Electronic Commerce
In this subject, we learned about some models of
e-commerce, e-marketing, e-contract and digital signature. Also, we had
about 2 sessions practice building a website with Joomla.
According to
the United Nations conference on Trade and Development, e-commerce is a
way applying electronic means and telecommunication network to do
marketing (market research, website marketing, e-mail marketing (opt-in:
sent only when the customer accepts; opt-out: sent until the customer
refuses, search engine marketing = SEO + pay-per-click, mobile marketing,
social networks) sales (customer database, automated sales process)
distribution (downloads, e-logistics, e-customs, e-warehouse, e-delivery)
payment. E-commerce is still very new in Vietnam since 55% Vietnamese
businesses didnt use ERP and 29% had no idea what it was, according to a
survey of Vecita in 2013. Law on E-commerce has been effected only since
2006 and the first payment gate SmartLink-Mastercard was established in
2009. Also, the major obstacle to applying e-commerce is awareness.
1 typical example of successful e-commerce that pops into my mind right
now is Amazon.com of Jeff Bezos, and eBay, both founded in 1995.
Well Im an e-commerce proponent myself, since it brings a lot of benefits
for producers, customers and government. Firms can reduce cost, build and
develop customer relationship, and therefore increase their

competitiveness. For customers, they can have better price thanks to price
comparison and online auctions. Your shopping experience is also simplified.
For government, I really hope that e-commerce will be utilized intensively
because its horrible when you have to queue up for hours just for
notarization or ID card issuance. Better public service will boost the whole
societys productivity and when there are more online activities, there will
be more transactions completedsomewhere in the country, supply meets
demandresulting in more benefits. However, there are many barriers,
among which I think security and privacy are the most commonly raised
concerns.
Among models of e-commerce, since we have 3 types of sellers and buyers,
who are government, business and consumers, we have 9 models in total:
for example, amazon.com is B2C, alibaba.com is B2B and eBay.com is C2C.
Basically, e-marketing is just the same marketing we know: same principles
and techniques, but they are utilized through electronic means and
telecommunication network. Compared to traditional marketing, emarketing is wider in scope of reach, more personalized and interactive and
its cost is lower in general. A large part of e-marketing, due to its low-cost
and quick-response, is targeted at consumers, who can be categorized into
3 groups: viewers, seekers and shoppers.
Building a website is not simple: domain, web design, web hosting (we can
choose between buying or renting a server). The lecturer graded our
website based on the AIDA model (attention, interest, desire and action).
In digital contracts, mostly theyre all the same with normal contracts but
theres the existence of certification authority and network supplier. In
Vietnam, parties are subject to many risks when they choose to use econtract: malicious code, phishing, hacking, cyber vandalism, credit card
theft and even insider attacks Hackers are those who want to gain an
unauthorized access to a computer system and crackers are hackers with
criminal intentions.
Digital signature: asymmetric cryptosystem (a pair of public key + private
key). Heres the signing process: to sign first:
The sender creates an original message.
The sender applies a hash function, producing a hash digest (hash value).
Hash digest is encrypted by the senders private key, digital signature is
created.

Digital signature is attached to the original message, and the sender

encrypts the signed message again using the receivers public key.
The result of this double encryption is sent over the Internet.
And then to verify:
The receiver uses his private key to decrypt digital envelope.
The receiver separates the digitally signed message into original message
and digital signature.
Hash function is applied to original message, producing hash value 1; digital
signature is decrypted by the sender public key, producing hash value 2.
The receiver compares 2 hash values to check the integrity of the original
message.
International investment Theory and models of international investment;
key modes of international investment; international investment
environment of FDI; international investment agreement, TNCs investment,
and M&A.
Host country: nc nhn u t
Investment is the sacrifice of current
consumption for future consumption (Samuelson & Nordhaus). The goals of
international investment may be profit or social benefits.
Classification:
Foreign direct investment (the aim of the foreign investors is to control or
influence the management)
Foreign portfolio investment (buy shares at the limit rate, so the investors
do not influence the management of the firm)
International credit: foreign lenders lend borrowers in other countries
International Non-private investment:
Official development assistance (targeted at developing countries)
Official aid (targeted at transition economies)
International investment theories:
MacDougall-Kemp model (MP of K hypothesis): K would move from low MPK
(K-abundant country) to high MPK (K-scarce country) countries. The result of
this K flow is that world output increases and the national income of each
parting country increases. However, income of labor in investing country
decreases, while that of labor in host country increases.

Sibert model is actually MacDougall-Kemp model with tariff barrier. The host
country gains and loses at the same time, while the investing country is less
beneficial when tariff doesnt exist.
International operation Styphen Hymer: investors choose FDI because they
possess advantange (firm-specific advantage), want to remove conflicts and
last (and least too since control is not necessarily involved) diversify.
Product life cycle theory (Raymon Vernon): the technological advantage of a
firm forms the edge in international markets:
New product (introductory) phase: innovations are created in high income
markets (US) to satisfy domestic demand. Innovators enjoy a monopoly.
Export is modest.
Growth phase: As demand rises, output is standardized and becomes large
scale. Overseas markets are supplied by exports then by FDI.
Mature phase: imitation erodes the market power of the innovator;
production shifts to lower cost locations by FDI.
Eclectic theory (Ownership-Location-Internalization paradigm) John
Dunning: OLI are 3 preconditions for firms to engage in international
production (TNC/MNEs). Ownership means the firm-specific assets
(relational capital, managerial expertise, brand, patent, ability to adapt to
changes and volatilities). Location means what are so good about the
recipient country that makes our investment profitable. Internalization
means that its more profitable for MNEs to exploit their O and L
advantages through internalization rather than using arms-length markets.
Follow the leader Frederic Knickerbocker: Examining FDI behavior of 187
US manufacturing firms over 20 years, it can be seen that they set up 2000
subsidiaries in 23 countries. Half of these were established within 3-year
clusters.
Key modes of international investment:
FDI: when the foreign direct investor has acquired, either directly or
indirectly (by having voting power in another enterprise that has voting
power in the enterprise), at least 10% of the voting power (influence; if
>50%, thats control).

International Trade Policy We have a short overview of international trade,

international trade theory, world trade organization, import policy, and
export stimulation policy.
Autarky (without trade)
Terms of trade are the rate at which 1 countrys export product is traded for
the other countrys export product. The terms of trade define the relative
export price index

prices at which 2 products trade in the marketplace. ( import price index 100 )
Economies of scale refers to the increasing returns to scale which means the
production situation where output grows proportionately more than the
increase in inputs.
Concave/bowed/outward: li ra xa gc ta .
If we have completely free trade, developed countries will benefit the most.
Thus, the focus now should be fair trade, where the benefit can be spread
more fairly among countries.
Imperfectly competitive market structure: many sellers and buyers but
unidentical products.
HS Code: create common standard in classifying commodities among
member countries. Today economic globalization reflects the historical
evolution of the worlds economic and political order. At the end of WWII, the
USA was like the only polar in this country. 1950s was when European
Community was established. 1960s was the emergence of multinational
corporations and 1970s was the foundation of Organization of Petroleum
Exporting Countries. 2000s see the rising power of China in terms of
economics. Fewer and fewer products can be produced competitively today
solely on the basis of national inputs.
For international trade to develop and exist, the existence and development
of the market economy and merchants; the existence of states and the
development of international division of labor are 2 prerequisites. (Bottom:
1970 OPEC oil crisis, 1980 Iranian revolution, 2001 dotcom bubbles
burst out and 2008 world financial crisis).
Free trade is a system in which goods, K and labor flow freely between
nations, without barriers which could hinder the trade process.
A trade bloc is a type of intergovernmental agreement, often part of a
regional intergovernmental organization, where regional barriers to trade
are reduced or eliminated among the participating states.

Free Trade Area: elimination of trade barriers Customs Union: common

external trade policies Common Market: labor/capital mobility
Economic Union: coordinated economic and fiscal policy among member
countries Political Union: coordinated political and social policy.
Everything remains the same in the course International Economics,
however, the highest level is not Political Union. In that course, I am taught
that the highest level is actually Monetary Union (a common currency
among members).
International Trade Theory:
Classical trade theories: Mercantilism (Pre-16 th century) Absolute
Advantage (Adam Smith, 1776) Comparative Advantage (David Ricardo,
1817)
Neo-classical trade theories: Factor-endowment (Heckscher Ohlin, 1919)
New trade theories:
Economies of Scale and International trade (Paul Krugman, 1980s)
International Product Life Cycle (Raymon Vernon, 1966) National
competitive advantage (Michael Porter, 1990).
Mercantilism: a nations wealth means holdings of precious metals. Trade is
a zero-sum game (the worlds wealth is fixed). A country should strive to
achieve favorable balance of trade, and the government intervention was
necessary to maximize national advantages in trade, specifically subsidies
to maximize export and tariffs and quotas to minimize imports
(representative: Thomas Mun English). However, David Hume showed that
this status couldnt be maintained for very long. Through price-specie-flow
mechanism, increasing in holdings of gold would lead to increase in money
supply, prices, and wages until imports increase and exports decrease.
Finally, exports = imports.
Absolute advantage theory: the worlds wealth is not fixed. The wealth
depends on productive capacity. Labor is the only factor of production and is
homogeneous (labor theory of value). Absolute cost advantage means using
less labor to produce 1 unit of output. In a 2-nation, 2-product world,
international specialization and trade will be beneficial when 1 nation has an
absolute cost advantage in 1 good and the other nation has an absolute
cost advantage in the other good. Absolute advantage can come from
natural advantages (climate, soil, and mineral wealth) or acquired
advantages (special skills and techniques).

Comparative advantage theory: like the absolute advantage theory, costs

are proportional to the amount of labor used. The less efficient nation
should specialize in and export the good in which it is relatively less
inefficient (where its absolute disadvantage is the least). The more efficient
nation should specialize in and export that good in which it is relatively
more efficient (where its absolute advantage is the greatest). Such an
improvement from the absolute advantage theory but it failed to specify the
terms of trade. Talking about this, John Stuart Mill (theory of reciprocal
demand) stated that the actual terms of trade are determined by the
relative strength of each countrys demand for the other countrys product.
(domestic exchange in country A < the equilibrium terms of trade <
domestic exchange in country B). To determine the revealed comparative
advantage of a country, we compute the ratio (Country As exports of
commodity X / Country As total exports) : (The worlds exports of
commodity X / the worlds total exports). If this ratio is < 1, A has a
comparative disadvantage in X.
Factor endowment theory (adding K as a production factor): this theory is
developed at the Stockholm School of Economics. It builds on the theory of
comparative advantage by predicting patterns of commerce and production
based on the factor endowments of a trading region. This theory based on
the differences in factor intensity and factor abundance between 2 countries
with 2 commodities. We can calculate based on the ratio between the K and
L or between the interest rate and wage. A country will export the
commodity that uses relatively intensively the factor that country has in
relative abundance. A country will import the commodity that uses relatively
intensively the factor that is relatively scarce in that country. There are 3
expansions of this theory: firstly, factor-price equalization, when the prices
of the output goods are equalized between countries, as when countries
move to free trade, the prices of the factors will also be equalized between
countries. That says, 2 countries should not specialize completely because
they will have to face increasing opportunity cost, and the demand will be
redirected away from the scarce resource and toward the abundant resource
in each nation. Secondly, Rybczinski said that at constant relative goods
prices, a rise in the endowment of one factor will lead to a more than
proportional expansion of the output in the sector which uses that factor
intensively, and an absolute decline of the output of the other good. Lastly,
Stolper and Samuelson said that a rise in the relative price of a good will
lead to a rise in the return to that factor which is used most intensively in
the production of the good, and conversely, to a fall in the return to the
other factor. Based on the factor endowment theory, we can expect that the

US in 1947, when it was the most K-abundant country in the world, would
export K-intensive commodity and import L-intensive commodity. However,
Leontief showed a paradox during this period: the US actually didnt try to
export K-intensive products, instead, they tried to substitute K-intensive
imports. In other words, they exported labor-intensive and imported capitalintensive commodities.
New trade theories:
Economies of scale: a reason to aim for specialization and trade even if 2
nations are identical in every aspect.
International product life cycle: Michael Posner introduced the imitation lag
hypothesis Product Cycle theory. However, the product life cycle here is
quite different from that presented in International Investment course.
Firstly, the product is invented in the inventing country and internally
consumed. Then, the inventing country starts to export the new product to
developed country (where higher purchasing power can afford the product)
and then developed countries start to export the same product since they
have similar technological background to the inventing country. Finally, the
least developed country starts to adopt the product and export it when
more developed countries start to get rid of it.
National competitive advantage (Michael Porter): Porters diamond shows us
the sources of competitive advantage: factor endowments related and
supporting industries (a challenge for Vietnam in TPP) demand conditions
(nature of demand, capacity and growth of demand, and spreading
mechanism of demand) firm strategy, structure and rivalry (vigorous
domestic rivalry is good, because firms are pressed for increasing efficiency)
(government / chance).
WTO: General Agreement on Tariffs and Trade is the predecessor of WTO. On
1/1/1995, WTO is established and replaced GATT. While the scope of GATT is
quite restricted (goods only), WTO has a broad coverage (from goods,
services, Trade-related investment measures and even trade-related
intellectual properties).
Here are the steps to join WTO: request for accession establishment of
working parties on accessions memorandum on the foreign trade regime
multilateral and bilateral negotiations General Council or the
Ministerial Committee approval.
5 principles of WTO are: without discrimination (most-favored-nation
treatment right in Article I of GATT 1994 and national treatment right in

Article III), freer trade, predictability, fair competition, and development and
reform. The most comprehensive round is Uruguay since it has 123
participating countries; it lasted almost 8 years from 1986 to my birth year;
it touched a wide variety of aspects ranging from tariffs, non-tariff-barriers,
services, intellectual property, textiles, agriculture, dispute settlement, and
last but not least, it is in this round that WTO was created in 1995. The
current round is Doha round.
About import policy, when we mention it, we actually talk about tariff
barriers and non-tariff barriers. Tariffication is an effort to convert all existing
non-tariff barriers to trade into bound tariffs (a ceiling beyond which it
cannot be increased) and to reduce these tariffs over time. Tariff escalation
is a situation where the import duties on components or raw materials are
the lowest and move progressively higher on semi-finished goods upwards
to the finished goods. There are 5 types of tariffs: specific tariff (applied on
used cars because its very hard to value used cars, limit the importation of
low quality cars and prevent loss revenue for the government), ad valorem
tariff (most common), compound tariff (a combination of specific and advalorem tariff: $5/unit + 6.25%), seasonal tariff (Higher tariffs are imposed
during harvest season). The last type is tariff-rate quota (two-tier tariff): if
the imports are within the quota, the tariff is low; beyond the quota, sorry,
the tariff is much higher. Two-tier tariff is used for salt, tobacco raw material,
poultry eggs, and sugar.
Regarding tariff rates, we have 3 kinds of tariff rates: special preferential
tariffs (within regional FTA), MFN treatment (normal trade relations (NTR),
and non-MFN (ordinary tariff rates equals to 150% MFN tariff rate).
For customs valuation, Vietnam follows the Agreement on Customs
Valuation (ACV): transaction value of goods, transaction value of identical
goods, transaction value of similar goods, deductive value, computed value
and derivative method.
Tariff welfare effects: see the image below.
Im personally not an advocate of tariff but I have to admit that tariffs have
some specific roles, including protecting domestic production (although it
appears to be inefficient to do that), raising government revenue and
promoting trade liberalization. We can have a look at the Laffer curve:
Worlds
Price price
in the+
a
b Pd c
tariff
world Rate of protection = P 1
w

(Part
WT of) MC
curve
P

Tariff revenue

Optimal
revenue

Optimal rate

Tariff rate

Non-tariff barriers include quantitative restrictions (prohibition, import quota

(whose effect is exactly like that of tariff, but now the governments revenue
belongs to someone who gets the import right granted by the government
i.e, they have the quota rent), import license), para-tariff measures (decreed
custom valuation customs duties and other charges are levied on the basis
of the decreed value of goods regardless of the transaction value; this
method transforms an ad valorem duty into a specific duty, customs/import
surcharges, additional charges (with no internal equivalent, such as tax on
foreign exchange transactions, airport license fee, statistical tax, and tax on
transport facilities), price control measures (administrative price fixing of
import prices, voluntary export price restraint (the exporter volunteers to
keep the price of his goods above a certain level or restrict its exports at the
suggestion of an importer), variable charges (the market prices of imported
products are brought close to the those of corresponding domestic products
for a given period of time and for a pre-established price, which can be
called reference price, threshold price, or trigger price). Fourthly, non-tariff
barriers can also be monopolistic measures, including the single channel for
imports and compulsory national services (services here can be insurance or
shipping). Fifthly, technical measures include technical regulations, labeling
requirements, and testing - inspection requirements. Sixthly, trade-related

investment measures require enterprise to use domestic products or limit its

use of imported products to the volume or value of local products that it
exports. Seventhly, administrative procedure measures include customs
procedure, government procurement procedure and rules of origin. Eighthly,
temporary protection measures are antidumping (dumping occurs when
foreign buyers are charged lower prices than domestic buyers for an
identical product, after allowing for transportation costs and tariff duties.
Margin of dumping is the amount by which the export price is less than its
normal value), subsidies and countervailing measures - SCM (countervailing
duty is imposed on subsidized imports that are found to hurt domestic
producers). It should be noted that Vietnam is not considered market
economy until 11 January 2019, and this is really our disadvantage. Because
in non-market economy, dumping is defined as selling below either price or
costs of production in an analogue or third country market. In WTO
terminology, subsidies in general are identified by boxes which are given
the colors of traffic lights: green (permitted), amber (slow down i.e. be
reduced), red (forbidden).
Export stimulation policy
Vietnams key export commodities are garments and textiles, crude oil, and
telephones and electronic appliances. To promote export commodity
production, we have export processing zone (Tan Thuan and Linh Trung).
EPZ is formerly free port within which goods may be landed, handled,
manufactured or reconfigured, and re-exported without the intervention of
the customs authorities. Besides EPZ, we also have industrial parks, which
are areas zoned and planned for the purpose of industrial development.
Apart from economic zones, the second category of export stimulation
policy is financial supports, including 1) export subsidy (well I know its
forbidden under WTO framework). Since export subsidy is meant to
encourage export of the goods and instead limit the circulation of this goods
in domestic market, and thus when export subsidy is granted, the domestic
price of the goods increases; 2) state export credit (export loans, export
credit guarantee or export credit insurance, although coverage is usually
below 100% and only Vietnam development bank is the only bank to
support export credit insurance); 3) exchange rate policy
(depreciation/appreciation refers to changes in currency caused by market
forces under a floating exchange rate system; while devaluation/revaluation
is the official change caused under a fixed exchange rate system); and 4)
duty and fee relating to exports (most of exports are exempt from duty, VAT
for exports is 0% and commodities imported to produce exports are exempt
from import duty. Remember, 0% VAT is different from unavailable VAT.

Finally, export promotion proves to be helpful, including buyer seller

meetings, trade delegation, international fairs, seminars, workshops,
dissemination of information, and R&D.
CS = -(a+b)
PS = +(a+b+c)
Subsid
y

Government revenue = -(b+c+d)

Net welfare = -(b+d)

International commercial transactions

Introduction to International Commercial Transactions
Distinguish between MNCs and TNCs: both are international big companies
with many subsidiaries but their differences lie in the origin of K. MNCs have
founders or shareholders coming from many different countries while TNCs
have owners at only 1 country. For example, HSBC is an MNC but Coca Cola
is a TNC. Of course its not hard to see many benefits of export, but we
should not ignore the drawbacks of export to the nation (make resources
scarce, make us more dependent on overseas markets; and make us
confront with more trade disputes) or to the company (they have to face an
increasingly complicated business environment, more fluctuations in
exchange rates, prices, and trade barriers raised by governments). In this
course, we learn fundamentals of an international sales contract. A contract
can be made verbally, in written or by a specific act (opening an L/C in a
bank). Basically, there are 20 basic terms in every sales contract, including:
Opening: Whereas: the seller and buyer, each with full corporate authority,
certifies, represents and warrants that each can fulfil the requirements of
this agreement and respectively provide the products and the funds referred
to herein, in time and under the terms agreed to hereafter;
Identification of both contracting parties: besides names and addresses, its
worth noting whether were working with a legal representative or an
authorized representative. Also, email addresses must be included in the
contract. Otherwise, the information exchange via emails may be refused by
Court of Arbitration when resolving any conflicts.

Scope of supply: how to exactly define the products (origin, main

specifications, brand name).
Quality: by technical documents, by specification, by trade mark/trade
name, by sample, by description, by the main ingredient/content, by prior
inspection/examination.
Quantity: tolerance: any quantity delivered between the tolerance shall not
be deemed a breach of contract. If theres no agreement, the person who
obtains the right to sign contract of carriage will determine the exact figures
for tolerance. For example, 5000 meters approximately 5% at the buyers
option. In general, we must pay attention to measurement unit, ways of
stipulation (by exact figures, by approximate figure).
Packing and marking
Inspection
Price: the currency used in the contract, and price is accompanied by
INCOTERMS (determining distribution of expenses on transport, customs
duty, insurance). We can choose among fixed price, deferred fixing price,
flexible price, and sliding scale price.
Terms of delivery: penalties for delay should be provided and imposed in
advance. If the parties decide to use sea transport, they can choose to sign
a carriage contract with ocean shipping company directly (such as APL) or
through an agent of ocean shipping company. In sea transport, bill of lading
is the most important legal commercial (shipping) document issued by a
carrier to a shipper. B/L has 3 important functions: receipt of shipment
(confirming whether goods have been received in good condition), evidence
of carriage contract, and a document of title (B/Ls owner is the owner of the
goods). If
Straight B/L
Negotiable B/L (to
Clean B/L
classified, B/L
order, to bearer)
To order B/L
Unclean (claused)
can be
Non-negotiable B/L
B/L (letter of
To order blank
(straight B/L)
indemnity between
endorsed
grouped into
consigner and
To order of a
carrier)
bank
5 sections:
To bearer B/L

By receiver

By
negotiability

Received for
shipment (hasn't
placed on board)
Shipped on board
B/L

By shipment
on board

By notes on
B/L

Direct B/L (only 1

ship)
Through B/L
(different ships)
Combined/Multimo
dal B/L (sea, road,
railway, airway,
pipe)

By transport
process

Right after
B/L, we
learned about
INCOTERMS
2010, which
is critical to

drawing up international sales contracts. INCOTERMS is just an international

trade practices/customs (like UCP), not international trade treaty such as
United Nations Convention on International Sales of Good contract, or
national law so it doesnt cover all obligations which the parties to a sales
contract might wish to set down. Also, it doesnt apply to contracts of
carriage. Compared to 13 terms in the 2000 version, it comes down to only
11 terms in the 2010 version, with the appearance of 2 new rules: Delivered
At Terminal (to replace Delivered Ex Quay) and Delivered At Place (to
replace Delivered Ex Ship, Delivered at Frontier, and Delivered Duty
Unpaid).
Ex works: at the sellers premises.
Free carrier: the seller must handle over the goods for carriage to the carrier
nominated by the buyer, at the sellers premises or any other places in
sellers country. Seller is obliged to have goods available and packaged, load
collecting vehicles, pre-carriage and export clearance.
Free alongside ship: for vessel only, seller must deliver goods alongside the
vessel designed by the buyer (maybe barge or quay) at the sellers port and
do export clearance. So buyer must load the goods onto the vessel, arrange
main carriage, import clearance and on carriage.
Free on board: for vessel only, 1 step further compared to Free alongside
ship
Cost and freight: for vessel only. From now onwards, the named port is on
the buyers side. The seller chooses the vessel, he signs the contract of
carriage, pays the transportation costs to the buyers port and delivers the
goods on board, and he also does the export clearance. However, it should
be noted that although the seller pays the costs up to the buyers port, his
risk bearing is only limited to on board of the vessel at his port (port of
shipment). The buyer must unload goods from the vessel.
Carriage paid to: the seller delivers the goods to the carrier and pays all
transportation costs to any place of destination designated by the buyer.
However, his risk bearing is only limited to when he finished the delivery of
goods to the carrier (so this point maybe in his premises or any other place
in his country).
Cost, insurance and freight: for vessel only, exactly like Cost and Freight, but
adding insurance of C clause (110% of goods value).

Carriage, insurance paid to: exactly like Carriage Paid To with Insurance. In
fact, all terms in C group are quite hard to deal with because the point of
transferring cost and risk is different.
Delivered at Terminal: Seller is only considered to have fulfilled his
obligations when the goods have reached the terminal (the terminal might
be located right at the destination port or somewhere very close to
destination port, where the buyer still has to do the import clearance).
Delivered At Place: exactly like Delivered At Terminal, however, while
terminal may be somewhere at or very close to the destination port, the
place mentioned in Delivered at Place is somewhere very far from the the
port of destination in the buyers country. This reminds me of the case I
worked with Mrs. Andrea Kerkhof from Holland, instead of telling her that we
would use DDU (which was already old-fashioned since it came from
INCOTERMS 2000), maybe Id better tell her to use DAP.
Delivered Duty Paid: the buyer has to do merely nothing and the price is the
highest
When the goods are packed in containers, it should be noted that the time
from when the full-container-load lies at the container yard (or less-thancontainer-load lies at the container freight station) to the time it is placed on
board is a very risky time. Therefore, the seller will be safer to end his risk
bearing right when he delivers the goods to the seller, not when the goods
are shipped on board.
Talking about delivery, it should be clearly specified in the contract the time
of delivery, place of delivery, advice/notice of delivery (vessels name,
vessel flag, ETD, ETA), and delivery instructions (number of shipment,
transshipment, third-party B/L (the beneficiary of L/C is not the seller)
accepted?, stale B/L (late-presented B/L) accepted?)
Terms of payment: time of payment (advance payment, prompt payment,
deferred payment), payment currency, mode of payment (open account,
remittance (mail transfer/telegraphic transfer), collection (clean collection /
documentary collection, like clean collection but the seller will deliver both
the goods and the commercial documents, which include CO, packing list,
commercial invoice. However, when it comes to documentary collection, we
have documents against payment and documents against acceptance),
documentary credit (L/C).
L/C is just as interesting as other parts:
Importer and exporter sign the commercial contract

Importer applies for opening the L/C

Importers bank issues the L/C to a bank in exporters country
Advising bank notifies the L/C to beneficiary (exporter)
Beneficiary prepares the shipment and delivers goods to the applicant
Beneficiary presents documents at advising bank
Beneficiary presents documents at advising bank
Advising bank checks and sends documents to issuing bank
Issuing bank checks and sends documents to applicant
Applicant checks documents and accepts to pay
Issuing bank makes payment to advising bank
Advising bank makes payment to beneficiary
Advising bank makes payment to beneficiary
We even have many types of LC:
Revocable vs irrevocable LC
LC at sight vs LC with deferred payment
Without recourse (the advising bank will not be able to recover the money
paid to the beneficiary in case the issuing bank does not pay the advising
bank) LC vs confirmed LC
Revolving LC (the amount becomes available again without issuing another
L/C and usually under the same terms and conditions) vs transferable LC
Back to back LC vs Stand by LC (actually its more like a guarantee issued
by issuing bank, not a documentary credit)
Force majeure
Insurance
Claim
Penalty and liquidated damages: fine for breach occurs when the aggrieved
party requests the breaching party to pay an amount of fine for its breach of
a contract (must not exceed 8% of the value of the breached contractual
obligation portion). Damages, ha ha, funny story: No (material and direct
loss) damage = no compensation!

Warranty
Dispute settlement: amicable negotiation/settlement, conciliation, litigation,
or arbitration.
Applicable law
Language: Of course, the contract can be translated into many other
languages, as long as those languages are mastered by both parties.
However, attention has to be paid to the problems of translation
discrepancies.
Execution
INTERNATIONAL ECONOMICS
3C Principles: Customer Company Competitor
3T revolution: Telecommunication Transportation Tourism
3F crisis: Finance Fuel Food
APEC: Asia Pacific Economic Cooperation
TNCs, not MNCs play an important role in world economy.
East West = economy in transition developed economy
Developed countries dominate international trade but developing countries
are proving their rising power in international trade.
International Trade in Services: Hey, its worth noting that trade in services
grows faster than trade in goods!
4 characteristics of services: intangible, perishable, inseparable and
heterogeneous
12 sectors of services based on the Central Product Classification list of
United Nations: business, communication, construction and engineering,
distribution, educational, environmental, financial, health-related and social,
tourism and travel-related, recreational, cultural and sporting, transport,
and other services.
4 modes of international trade in services:
Mode 1: cross-border supply (through the Internet)
Mode 2: consumption abroad (study abroad)
Mode 3: commercial presence (through local branches/subsidiaries)

Mode 4: presence of natural persons (live show)

Impacts of FDI
Firstly, some key words to remember:
Technoware: hardware and physical abilities
Vertical technology transfer: transfer of technology from basic research to
applied research to development and then to production respectively.
Horizontal technology transfer: the movement of knowledge, skill,
organization, values and capital from the point of generation to the site of
adaptation and application.
Grant-backs: development of improvements by the licensee must be
licensed back to the licensor.
Tie-ins: require the licensee to purchase various products from the licensor
Tie-outs: refrain the licensee from purchasing various products from other
parties
Boomerang effect: transferee develops the technology further and
overtakes the transferor.
International Monetary Relations: another fun fact, foreign exchange market
is actually the worlds largest market. A country cannot devalue its currency
by more than 10% without the approval of IMF.
1 commodity currency = X terms currency
For example: 1 USD = 23,000 VND (this is direct quotation: 1 foreign
currency unit = X home currency unit)
3 types of exchange rate regime: fixed (not easy to do, since central bank
must have a quite abundant foreign exchange reserve), freely floating (the
central bank will not intervene the foreign exchange market) and managed
floating (central bank takes actions to intervene in the foreign exchange
market in order to maintain exchange rate within a specific band).
The evolution of International Monetary System is as follows: the Gold
standard (full-bodied coins had their values pegged to the value of the
metal they were made of) Interwar period (Interwar refers a period of
time between the first and the second world war), during which the
attempts to come back to gold standard proved to be unsuccessful
Bretton Woods system: adjustable pegged exchange rate regime and
formation of 2 new international institutions which are World Bank and IMF.

 mixed system (the current regime falls along a spectrum of floating and
fixed regimes)
Economic integration
NAFTA: Canada, the United States and Mexico
ASEAN: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
Philippines, Singapore, Thailand, Vietnam
WTO Structure:
Ministerial
Conference

General
Council

Dispute Settlement Body

Trade Policy Review Body

Councils

Council for Trade in Goods

Council for Trade in Services
Council for TRIPS

Committees
and other
subsidiary
bodies

Some exceptions to MFN:

Generalized system of preferences (designated to developing countries)
Border trade
Regional Trade Agreement
In WTO, there are 2 kinds of agreements: plurilateral (agreement on trade in
civil aircraft and agreement on government procurement) and multilateral
agreements (such as Agreement on custom Value, Agreement on
Safeguards, Agreement on Subsidies and Countervailing Measures,
Agreement on Anti-dumping, TRIMS, GATS, TRIPS). A plurilateral
agreement is a multi-national legal or trade agreement between countries.
In economic jargon, it is an agreement between more than two countries,
but not a great many, which would be multilateral agreement.

For Vietnam, WTO is a journey. We spent 11 years with 14 meetings of

working party. The Vietnam delegates led by Mr. Trng nh Tuyn finally
succeeded in making Vietnam a WTO member, officially on 11 January 2007.
PRINCIPLES OF FINANCE
Financial system is defined as the set of markets and other institutions used
for financial contracting and the exchange of assets and risks. Financial
system include the markets for stocks and bonds, financial intermediaries
(banks, insurance companies) and the regulatory bodies that govern all of
these institutions.
Financial system plays a pivotal role in the business and economics life. It
transfers resources across time and space, it manages risks (through
futures, options, selling stocks), it clears and settles payments, it pools
resources and subdivides shares, it provides information that helps
coordinate decentralized decision-making in various sectors of the
economy, and it deals with incentive problems asymmetric information.
Time value of money: money in hand today is worth more than the
expectation of the same amount to be received in the future, because of the
existence of investment opportunity, risk (uncertain receipt), inflation and
interest rate = risk free rate + risk premium + inflation premium.
Future value = Present value x (1 +

interest rate
number of years x frequency of
frequency of compounding )

compounding

Effective annual rate (the equivalent interest rate if compounding were only
once per year) = (1 +
of compounding

Annual percentage rate with a certain frequency of compounding

)frequency
frequency of compounding

Annuity: is a stream of equal cash flows. There are 3 types: ordinary (cash
flows start at the end of the current period), immediate (start immediately)
and perpetual (continues forever).
number of years1

Future value of ordinary annuity =

= the annuity (or the cash flow) x

the annuity (1+interest rate)t

t=0

number of years

( 1+interest rate)
interest rate

number of years

Present value of ordinary annuity =

t =1

the annuity
(1+interest rate)t

number of years

= the annuity x

1(1+interest rate)
interest rate

Immediate annuity = Ordinary annuity x (1 + interest rate)

Perpetuity =

CF
i

3 interesting applications of time value of money:

Net present value is the present value of its cash inflows minus the present
value of its cash outflows. To discount the future cash flow, we have the
opportunity cost of capital.
Internal rate of return is the discount rate for which the net present value of
an investment equals 0. We should invest if the internal rate of return is
greater than the opportunity cost of the capital.
Amortization schedule: each periodic payment includes the repayment of
principal and the interest on the outstanding balance of loan. Remaining
balance = beginning balance - principal paid.
Valuation of an asset: the price of an asset is equal to the present value of
its expected income stream.
Financial markets: there are 5 pairs of types of financial markets:
Debt market vs Equity market
Debt holders will receive fixed amounts at regular intervals until a maturity
date.
Equity holders share the ownership of the firm and so they have the claims
to share in the net income (income after expenses and taxes) and the
assets of a business.
Money market vs Capital market
Money market is short-term debt instruments (whose maturity is less than 1
year). For example, Treasury bills (no interest but sold at a discount),
negotiable bank certificates of deposit, commercial paper (no interest, only
pay a set amount (face value) at maturity, maybe bill of exchange or
promissory note), bankers acceptance (a bank draft issued by a firm,
payable at some future date, and guaranteed for a fee by the bank the

stamps it accepted), repurchase agreements are money market

instruments.
Capital market is long-term debt and equity securities. For example, bonds,
stocks and mortgages. In bonds, we have corporate vs Treasury bonds;
coupon bonds vs (pure) discount bonds (no interest payment, instead, the
holder will receive the full face value at maturity, therefore, the interest rate
is called discount rate); plain-vanilla bonds vs floating rate bonds. Note also
callable bonds, which the issuer can redeem before the final maturity date.
I personally prefer learning about stocks. Shareholders are residual
claimants and they have limited liability, which means that they most
shareholders can lose in the event of failure is their original investment.
Although stocks are not the most import source of external financing for
businesses, I find it interesting because common stock holders are the ones
who take risk. Higher risk doesnt always mean higher reward, for example,
common stock payment depends not only on income but also on dividend
policy. If youre common stock holders, it will be a good news to hear that
the net profit this year increases, but thats not the whole story whether you
can have a higher dividend this year.
Mortgages are loans to households or firms to purchase housing, land, or
other real structures, where the structure or land itself serves as collateral
for the loans.
Primary market vs Secondary market
Primary markets are financial markets in which new issues of a security are
sold to initial buyers.
Secondary markets are financial markets in which securities that have been
previously issued can be resold. Secondary markets help to increase the
liquidity of the assets and determine the price of securities issued in the
primary markets.
Exchanges vs Over the counter market
Exchanges work at 1 central location, where brokers will match buyers with
sellers.
Over-the-counter markets (also called off-exchange markets) work at many
different locations, where dealers link buyers and sellers by buying and
selling securities at stated prices.
Underlying market vs Derivative market

Derivative instruments are financial contracts whose values are derived

from the values of underlying assets for the purposes of speculation or risk
management. Some types of derivative instruments are forwards, futures,
options and swaps. Forwards are agreements to buy or sell an asset at a
certain future time for a certain price (delivery price). The buyer has a long
position and the seller has a short position. Futures are exactly like
forwards, except that they are standardized and traded on organized
exchanges. Options are divided into call options and put options, in which
strike price (also called exercise price) is predetermined. Swaps are
arrangement by 2 counterparties to exchange 1 stream of cash flows for
another.
Financial intermediaries: theyre so important because financial markets
have some major problems, including adverse selection and moral hazard
due to asymmetric information. Asymmetric information is a situation that
arises when one partys insufficient knowledge about the other party
involved in a transaction makes it impossible to make accurate decisions
when conducting the transaction. Adverse selection refers to the lemons
problem: the potential borrowers who are the most likely to produce an
undesirable outcomethe bad credit risksare the ones who most actively
seek out a loan and are thus most likely to be selected.
To solve the lemons problem, we can ask for the government regulation to
increase the information offered to the investors, or the investors
themselves can privately produce information, but this is a laborious and
costly process that may lead to free-rider problem. Moreover, we can ask for
collateral (the property promised to the lender if the borrower defaults) or
net worth (the difference between a firms assets and its liabilities). But
among all of these tools, financial intermediaries exist like a savior.
Moral hazard is also a colossal problem (principal agent problem). To solve
moral hazard, insurance companies may apply deductibles.
And all those problems are also the reasons why we have financial
intermediaries. Thanks to their expertise, their economies of scale (the
transaction cost per transaction decreases as the the size of transaction
increases) and their risk sharing (through asset transformation: creating and
selling assets with risk characteristics that people are comfortable with, and
then use the funds acquired to purchase other assets that may have far
more risks, or diversification).
Also, we have a wide variety of financial intermediaries, ranging from
depository institutions (commercial banks, mutual savings banks, credit

unions) to contractual savings institutions (insurance companies, pension

funds) and investment intermediaries (such as finance companies, mutual
funds, money market mutual funds, investment banks).
Some of my friends sell insurance contracts, and I have seen them working
with potential customers. Thats a lot of talking and most of the time, people
dont really welcome insurance agents. They have life insurance, property
insurance, travel insurance, fire and casualty insurance, etc.
Corporate Finance: every business must face 3 key financial management
decisions: capital budgeting (what long-term investment to take on), capital
structure (where to get long-term financing) and working capital
management (manage short-term assets and short-term liabilities).
Accordingly, they must have 3 types of activities: operating activities,
financing activities and investing activities.
Also, they have 3 kinds of financial statements:
Balance sheet: is the financial statement that shows the firms assets (the
uses of the funds raise/what it owns) and liabilities (the sources of
funds/what it owes) at a particular time (at a point of time).
Income statement: is the financial statement that summarizes the
profitability of the firm over a period of time (it is usually a year).
Cash flows statement is a financial statement that shows all the cash that
flowed into and out of the firm during a period of time.
Some financial ratios (just to know if people ask you what it is):
Profitability ratios:
Return on sales =

Earnings before income tax

Sales

Return on assets =

Earnings before income tax

Average total assets

Return on equity =

Net income
'
Stockholde r s equity

Financial leverage:
Total debts

Debt ratio = Total assets

Time interest earned ratio =

Earnings before income tax

interest expense

(measures the firms

ability to make contractual interest payments).

Liquidity ratios:
Current ratio =

current assets
current liabilities

Quick, or acid-test ratio =

Cash ratio =

current assetsinventories
current liabilities

cash+ shortterm securities

current liabilities

Asset turnover ratios:

Inventory turnover =
Days in inventory =

Cost of goods sold

Average inventory
365
Inventory turnover

Market value ratios:

Price-Earnings ratio =

Price per share

Earnings per share

THEORY OF PROBABILITY AND STATISTICS (Dont tell anyone, to save time

and energy, in this section I will tell them the GMAT contents for Statistics
and Combinatorics. Come on, its not evil, basically theyre the same. So on
the bright side, I actually was not lying )
DIRECTIONS OF VIETNAM SOCIALIST PARTY
The establishment of Vietnam Socialist party and our directions to take over
the government during 1930-1945, the fight against French colonial and the
American empire, the directions to industrialization, towards a socialism
oriented market economy; the directions to build up culture and solve social
issues; our foreign affairs policy.
HO CHI MINHS IDEOLOGY
His ideology about liberation revolution, socialism and our transition to
socialism, about Vietnam socialist party, national great unity and
international peace, a State of people, by people and for people; culture,
morality and new Man.

PRINCIPLES OF MARXISM-LENINISM
Dialectical materialism, Historical materialism (every comparison is lame).
Theory of surplus value (surplus value is equal to the new value created by
workers in excess of their own labor-cost, which is appropriated by the
capitalist as profit when products are sold.)
Monopoly capitalism: Accumulative, concentrated production to a certain
degree will lead to the birth of monopolies. Theyre super powerful and earn
colossal profit due to their power.
The historical mission of working class and the socialist revolution:
Capitalism is not the future of humankind due to its exploitative, antidemocratic, and inhumane nature.
HISTORY OF ECONOMIC THEORIES
Mercantilism (focus on trade) Free trade (no more strong intervention
from the government)
Classical bourgeois political economy: William Petty (English): gold and
silver mining created value, other forms of labor just create property / iron
law of wages Adam Smith (replace gold with paper money) David
Ricardo (capitalism is the best, no surplus production)
Marx Lenins political economy: Profit is the expressive form of surplus
value.
Neoclassical theory: the focus now shifts from production to trade,
circulation and demand. For example, we have Gossens laws (law of
diminishing marginal utility). Karl Menger postulated that the trade value
was subjective. The economy has its own re-adjust mechanism.
Keynesian theory: Regulated capitalism (with the main goal is to create jobs)
using the method of modern macro-analysis: the government
comprehensively intervenes in the economy.
Marginal propensity to consume is affected by 3 factors: income, objective
factors (interest policy, tax policy) and subjective factors (provision
against risks, retirement savings, business plan)
Investment multiplier is the relationship between the change in revenue and
the change in investment.
The limited effectiveness of capital is due to 2 reasons:

Increase investment increase supplies decrease price decrease

future income
More capital more borrowers higher interest rate decrease producer
(borrower)s income
New liberalism: reject Keynesian theory more market, less governments
intervention.

Monetarism theory: the market has its own mechanism to adjust itself.
The government just needs to maintain a stable rate of increasing money
annually. More money than income will lead to inflation; less money than
income will lead to recession and unemployment.

Rational expectation macroeconomic: everyones behaviors are based

on his or her rational data about economy. Therefore, governments policies
will only be effective if they surprise people and cause them to incorrectly
judge the situation. But its very hard to surprise people because the
information environment has developed and people are more experienced.
Thus, the government only needs to increase the money supply at the rate
of 3 ~ 4% per year.
Social market economy in Germany: encourage individual freedom through
economic benefits, ensure social equality (income is proportional to
contribution). The social aspects are: raising the living standards of the least
disadvantaged people and protecting the societys members against
economic hardship and social risks. To achieve these goals, they use 4 tools:
economic growth, equal income distribution, insurance and social welfare.
Modern Economics: Paul A. Samuelson (American) with the concept of mixed
economy (a combination of private sector and public sector operated by the
market mechanism with the governments regulation). The governments
interventions are necessary to address many disabilities of the market
mechanism: monopoly, pollution, economic crisis, unemployment, unequal
income distribution)
Institutional economics: the motivation of economic growth is institutions
(families, states, monopolies, syndicates,). Economic categories are the
expressions of social psychology. They deny the effects of objective
economic principles and just focus on the development of production
materials.
Theories of developing economies in developing countries
Criteria to classify countries:

GNI per capita

A combination of many basic economic indices such as GDP, HDI, GNI per
capita
Characteristics of developing countries:
Low living standards
High inequality
High poverty rate
High malnutrition rate, poor health
High birth death rate
Scarce health services
Low literacy rate
Low productivity
Dependents burden
The vicious cycle of poverty and the external nudge: 4 factors are human
resources, natural resources, capital structure and technology.
BUSINESS ECONOMICS
Business Economics is concerned with economic issues and problems
related to business organization, management, and strategy. It is the study
of how to apply economic theory and quantitative methods to
analyze business enterprises and the factors contributing to the diversity of
organizational structures and the relationships of firms with labor,
capital and product markets.
Issues and problems include: an explanation of why firms emerge and exist;
why they expand: horizontally and vertically; the role of entrepreneurs and
entrepreneurship; the significance of organizational structure; the
relationship of firms with the employees, the providers of capital, the
customers, the government; the interactions between firms and the
business environment.
Opportunity Cost: the cost of the explicit and implicit resources that are
foregone when a decision is made.
Control Variable Examples:
Output

Price
Product Quality
Advertising
R&D
The organization of the firm: we learn mostly about the methods of
procuring inputs. Transactions costs are costs associated with acquiring an
input that are in excess of the amount paid to the input supplier.
3 methods of procuring inputs are:
Spot exchange (at arms length transaction): occurs when autonomous
parties exchange goods or services with no explicit or implicit agreement
that the relationship will continue into the future.
Contracts: a legal agreement which defines the conditions of an exchange
or series of exchanges.
A specialized investment is an expenditure that is made to allow two parties
to make exchanges, but has less value in alternative uses. There are 4
forms of specialized investments: site specificity, physical asset specificity
(the physical/ engineering/chemical properties of the asset are tailored to a
given set of transactions), human asset specificity, and dedication (A
dedicated asset is one that would be a complete write-off if the transactions
in question were cancelled.) Though specialized investments have some
specific uses (promote economic efficiency by identifying collaboration or
the firms would not have invested), they also create some holdup problem
(or opportunism). A complete contract is expected to remedy holdup
problem. However, a complete contract with all cases is impossible because
of bounded rationality (the world is so complex and stochastic),
measurement issues to determine a performance is satisfactory or not,
asymmetric information (hidden information adverse selection, hidden
action moral hazard). Everybody is so uncertain and alert in every
transactionthey wont fully make investment and thus lead to socially
unproductive investment (socially suboptimal quantity). And thats why we
have the third method, vertical integration.
A relationship-specific exchange is one that occurs when both parties to the
exchange have made specialized investments. These investments are called
relationship-specific investments (RSIs). Contract length is a tradeoff
MC1
MC2 complexity.
between RSIs and
The change in MB is determined by
the need of specialized investment
made.
The change in MC is determined by
the complexity of the market.

MB2
MB1

Vertical integration: the firm is facing an important decision whether to

produce in-house or contracting out. Neither of them is perfect. When
contracting out, firms have to face search cost, opportunism, incomplete
contracting and enforce legal contracts. When in-house, principal-agent
problem arises. To successfully vertically integrate, the firm must answer 2
questions: What is the objective for vertical coordination? What
organizational form (e.g., vertical contracts, equity joint ventures, mergers
& acquisitions) best achieves the desired objective(s)?
Benefits and risks of vertical integration: benefits are market power,
securing critical supplies, lowering costs, improving quality, facilitating
scheduling and planning, facilitating investments in specialized assets. Risks
are increasing costs, reducing quality, reducing flexibility and increasing the
potential for legal repercussions.
The nature of industry:
Market Structure is measured by Number and size of firms, Industry
concentration (Four-Firm Concentration Ratio and Herfindahl-Hirschman
Index (HHI)) HHI = 10,000 wi2 where wi = Si/ST, Technological and cost
conditions, Demand conditions (Rothschild index = elasticity of markets
demand/elasticity of an individual firms demand), and Ease of entry and
exit.
Conduct is measured by Pricing (The Lerner Index L (measure market
power) = (P - MC) / P, A measure of the difference between price and
marginal cost as a fraction of the products price. Rearranging the Lerner
Index and we have the markup factor is 1/(1-L).), Advertising, R&D, and
Merger activity.
Performance is measured by Profitability and Social welfare.
Integration and M&A activity (integration = merger + acquisition)
Horizontal merger: companies are in the same line of business, often
competitors.
Vertical merger: companies are in the same line of production.
Conglomerate merger: companies are in unrelated lines of business.

One of the main motives for integration is the industrys stage in its life
cycle: pioneering development rapid accelerating growth mature
growth stabilization and market maturity deceleration of growth and
decline. The primary benefit of mergers to the economy is their efficiency
potential.
Performance: Dansby-Willig Performance Index measure by how much social
welfare would improve if firms in an industry expanded output in a socially
efficient manner.
From the feedback viewpoint, market structure conduct and performance
is a cycle.
PRICING STRATEGY:
Price discrimination occurs when a business charges a different price to
different type groups of consumers for the same goods or services, for
reasons not associated with costs.
Two-part pricing: A pricing strategy where consumers are charged a fixed
fee for the right to purchase a product, plus an additional per-unit charge for
each unit of product purchased. (start with setting price at marginal cost)
Block pricing: The practice of charging different prices for different amount
or block of a good service, such as selling a package of eight paper rolls or a
six-pack of beers. (start with setting price at marginal cost)
Commodity bundling: The practice of bundling several different products
together and selling them at a single bundled price.
Peak-Load Pricing Strategy: a pricing strategy in which higher prices are
charged during peak hours than during off-peak hours.
Cross-subsidization is a strategy where support for a product comes from
the profits generated by another product.
Transfer Pricing is a term used to describe the internal price at which an
upstream division should sell inputs to the firms downstream division to
maximize the overall profits of the firm.
Price matching: A strategy in which a firm advertises a price and a promise
to match any lower price offered by a competitor. Theyre actually saying:
dont start the war game.
Inducing Brand Loyalty Strategy is a price strategy to make a consumer
buys products from its firm repeatedly rather than from competitors even if
the firm offers a (slightly) higher price.

Randomized pricing strategy is a pricing strategy in which a firm

intentionally varies its price in an attempt to hide price information from
consumers and rivals. (Reducing consumers incentive to shop for the best
price; Reducing the ability of rival firms to undercut a firms prices
reducing price wars between firms Maximizing profits)
ADVANCED BUSINESS STRATEGIES
Limit pricing: Strategy where an incumbent (existing firm) prices below the
monopoly price in order to keep potential entrants out of the market. Goal is
to lessen competition by eliminating potential competitors incentives to
enter the market. Limit pricing is profitable only if the present value of the
benefits of limit pricing exceed the up front costs
Predatory Pricing: Strategy of pricing below marginal cost to drive
competitors out of business, then raising price to enjoy the higher profits
resulting from lessened competition. Predator must have deeper pockets
than prey.
Raising a Rivals Marginal Cost
Changing the Timing of Decisions or the Order of Moves
Networks: Direct Network Externality, Indirect Network Externality or
Negative Externalities (congestion or bottlenecks) Penetration pricing.
MARKET FAILURES:
Market power: Pricing regulation requires Knowledge of MC
Externalities: A negative externality is a cost borne by people who neither
produce nor consume the good.
Public goods: Individuals have little incentive to buy a public good because
of their nonrival & nonexclusionary nature.
Incomplete Information
Rent Seeking: Government policies will generally benefit some parties at the
expense of others.
Quotas and Tariffs: Causes a shift in the MC curve by the amount of the tariff
which in turn decreases the supply of all foreign firms.
ECONOMIC DEVELOPMENT
Comparative economic development: compared to developed countries in
the past, low income countries today have 8 differences: physical and
human resource endowments, per capita income and level of GDP, climate,

population size, distribution and growth, historic role of international

migration (brain drain), international trade benefits, scientific/technological
research and efficacy of domestic institutions.
Theories of Economic Growth and Development:
First generation theory:
Harrod-Domar growth model: growth rate of GDP = savings rate / capitaloutput ratio to increase GDP growth, countries must increase savings
rate.
The Lewis dual sector model: there are 2 sectors in the economy: traditional
(agricultural) sector and modern (industrial) sector. Due to the increasing
size of modern sector and the speed of K accumulation, demand for labor in
the modern sector increases. Therefore, the wage in the modern sector
must be high enough to convince laborers to give up the opportunity costs.
As redundant labors from rural areas move to urban areas, the marginal
product in rural sector will increase and thus will get a higher income (since
now the income will be distributed based on the marginal product). Also,
when the industrial sector uses up the labor surplus from the rural area, the
employers must increase wage to attract current labors in rural area. The
turning point in industrial sector is when the wage starts to increase
dramatically.
Second generation theory:
Endogenous technical change (Romer, 1990): Knowledge is non-rivalry and
partially excludable (due to patents and copyright law). Doubling the rival
inputs will double the output, but doubling both the non-rival and rival
inputs will increase the output by a greater factor.
POVERTY, INEQUALITY AND DEVELOPMENT
To measure inequality, we can base on the Lorenz curve, in which the 45 o
line represents absolute equality. The greater the curvature of the Lorenz
line, the greater the relative degree of income inequality.
From the Lorenz curve, we can calculate Gini coefficient = area A / area of
triangle BCD. D

The Kuznets inverted-U hypothesis: As GNI per capita increases over time,
Gini coefficient will increase at first but then it will decrease. The lesson here
is that countries shouldnt intervene the inequality too soon.
POPULATION GROWTH AND ECONOMIC DEVELOPMENT: CAUSES,
CONSEQUENCES, AND CONTROVERSIES
The causes of high fertility in developing countries: the Malthusian and
household models
The demographic transition:
Stage I: high birth rates and death rates
Stage II: continued high birth rates, declining death rates
Stage III: falling birth rates and death rates, eventually stabilizing
The Malthusian population trap: rising population and diminishing returns to
fixed factors (mostly land) result in a low level of living (population trap).
We have 2 convergent points: when the population growth rate is higher
than the growth rate, income per capital will decrease and vice versa.
Malthus forgot the impact of technological progress, the correlation between
population growth and levels of per capita income.
To explain the concurrent situation, we have the function for demand for
children: demand for children is a function of the level of household income
(+), the net price of children (-), the price of all other goods (+), and the
tastes for goods relative to children (-).
Researchers still havent agreed whether population growth is a problem or
not. However, the common grounds hold that population is not the primary
cause of lower living levels, its not numbers but quality of life that matters,
and population intensifies underdevelopment. Developed countries can help
developing countries with their population programs through international
economic relations, research into technology of fertility control, and
financial assistance for family planning programs.
Education and Health in Economic Development: social returns to
investment in education = individual returns + public returns. Moreover, the
rate of return on womens education is higher than that of men in
developing countries by increasing productivity and lowering fertility. When
we talk about health in economic development, we care about life
expectancy, under-5 mortality rates, maternal mortality ratio and childrens

likelihood to die (disease burden, HIV/AIDS, malaria, and other neglected

tropical diseases).
MANAGEMENT
Management is the process of coordinating work activities so that they are
completed efficiently (do things right) and effectively (do the right things),
with and through other people.
A manager is the person who works in the organization, controls the work of
others and is responsible for their activity results. He is in charge of
planning, organizing, leading and controlling other people, materials,
finance and information effectively to achieve the goal. He needs 3 major
skills: technical skills, interpersonal skills and conceptual skills (the ability to
conceptualize and to think about abstract situations, seeing the organization
as a whole from helicopter perspective).

Managemen
t roles

Interperson
al roles

Figurehead

Leader

Information
al roles

Liaison

Monitor

Disseminato
r

Decisional
roles

Spokespers
on

Entrepreneu Disturbance
r
handler

Resource
allocator

Negotiator

Monitor: seek and receive wide variety of special information (much of it

current) to develop thorough understanding of organization and
environment; emerge as a nerve center of internal and external information
about the organization (reading periodicals and reports; maintaining
personal contacts).
Entrepreneur: search organization and its environment for opportunities and
initiates improvement projects to bring about changes; supervises design of
certain projects. (organizing strategy and review sessions to develop new
programs)

Management environment: SWOT analysis.

Internal environment: organizational culture is systems or patterns of
values, symbols, rituals, myths and practices that have evolved over time.
These shared values determine, in large degree, what employees see and
how they respond to their world and behave in their organizations. The
origin of organizational culture is normally closely associated with the vision
of the founder. Its critical because it is the source to create competitive
advantage for an organization, make their own styles and nuances, create a
total strength of the organization, attract and retain talents, encourage
innovation in business processes, and enable an efficient default controlling
system of the organization (when perfection is your companys culture, then
you dont have to worry too much about your employees performance).
Attention to
detail

Innovation
and Risk
taking

Outcome
orientation

Organizatio
nal culture
People
orientation

Stability

Aggressiven
ess

Team
orientation

External environment: 5 forces model of Michael Porter (specific

environment) and the general environment:

Potential
entrants

Suppliers

Industry
competiti
on

Buyers

Substitut
es

Global
conditions

Political/leg
al
conditions

Economic
conditions

General
environme
nt
Technologic
al
conditions

Demograph
ic
conditions

Sociocultural
conditions

Planning: is the process of defining the organizations goals, and best means
to achieve the goals.
Management by objectives (MBO): goals are jointly determined by
employees and their managers, progress towards accomplishing these goals
is periodically reviewed, and rewards are allocated on the basis of this
progress. Rather than using goals only as controls, MBO uses them to
motivate employees as well.
STRATEGIC MANAGEMENT: is the set of managerial decisions and action that
determines the long-run performance of a corporation.

Strategic management process: Identify the organizations current mission,

objectives and strategies Analyze the environment Identify the
opportunities and threats Analyze the organizations resources and
capabilities Identify the strengths and weaknesses Formulate
strategies Implement strategies Evaluate results.
3 levels of strategy: corporate strategy, business strategy and functional
strategy.
Corporate strategy: growth strategy (vertical growth, horizontal growth,
concentric (related) diversification, conglomerate (unrelated)
diversification), stability strategy, retrenchment strategy (seeks to reduce
the size or diversity of operations), portfolio analysis BCG (stars, cow,
question marks and dog).
Business strategy: cost leadership, differentiation, focus (cost-based focus
or differentiation-based focus), and stuck in the middle.
Organizing: is the process by which management seeks its objectives by
combining the efforts of people under its supervision.
Organizational structure is the formal framework by which job tasks are
divided, grouped and coordinated: work specialization, functional
departmentalization, product departmentalization, geographic
departmentalization, process departmentalization, customer
departmentalization and cross-functional departmentalization.
Leadership: is the process of influencing people and providing an
environment for them to achieve team or organizational objectives.
Managers are different from leaders. Managers are appointed to their
position. Their ability to influence is based on the formal authority inherent
in that position. In contrast, leaders may either be appointed or emerge
from within a group. Leaders can influence others to perform beyond the
actions dictated by formal authority.
Behavioral theories:
Group 1: Autocratic style, Democratic style, and Laissez-faire-style
Group 2: People-oriented behaviors, task-oriented behaviors.
Situational leadership theory (Hersey and Blanchard):
Employees are able and willing: delegating
Able and unwilling: participating
Unable and willing: selling

Unable and unwilling: telling

Path-goal theory (Robert House): directive leader, supportive leader,
participative leader and achievement-oriented leader.
Motivation: theories of motivation:
Maslows hierarchy of needs: physiological safety social esteem
self-actualization.
Clayton Alderphers ERG theory: existence relatedness growth
F. Herzbergs motivator-hygiene theory: hygienes and motivators.
David Mc. Clelands three-needs theory: achievement, power and affiliation.
How to motivate people?: Admit the personal difference, use right person
for right jobs, use challenging goals, ensure the achievability of goals,
ensure the suitability between rewards and individuals, ensure the
reasonability between rewards and work results, ensure the fairness of the
system, and money can be a motivation method, but only temporarily (so it
should only be used limitedly).
Controlling: is the process of monitoring activities to ensure that they are
being accomplished as planned and of correcting any significant deviations.
MONEY AND BANKING
A financial system is a densely interconnected network of financial
intermediaries, facilitators and markets that serves 2 major purposes:
allocating capital and sharing risks. There are 6 parts in a financial system:
money, financial instruments, financial markets, financial institutions,
regulatory agencies and central banks.
5 core principles of money and banking: time has value, risk requires
compensation, information is the basis for decisions, markets determine
prices and allocate resources, and stability improves welfare.
Money is an asset that is generally accepted as payment for goods and
services or repayment of debt.
Wealth is net worth or the excess of assets over liabilities.
Income is a flow of earnings over time, while money is a stock.
Money has 3 primary functions in any economy: as a medium of exchange,
a unit of account and a store of value (how good a store of value money is
depends on the price level inflation). Market liquidity is the ability to sell

assets for money; funding liquidity is the ability to borrow money to buy
securities or make loans.
Evolution of payment system: commodity money and fiat money (paper
currency decreed by governments as legal tender but not convertible into
coins or precious metal). Debit card works like check; it tells the bank to
transfer funds from your account to another. Credit card is a promise by a
bank to lend the cardholder money to make a purchase. They do not
represent money.
Money aggregates: M1 = currency + demand deposits + travellers checks
+ other checkable deposits
M2 = M1 + small denomination time deposits + money market deposit
accounts + others
M3 = M2 + other less liquid assets (large denomination time deposits and
repurchase agreements, Eurodollars, and institutional money market mutual
fund shares)
We probably should not pay much attention to short-run movements in the
money supply numbers, but should be concerned only with longer-run
movements.
FINANCIAL MARKETS AND INSTITUTIONS
We obtain financial resources directly from markets and indirectly from
institutions.
Financial instruments/financial assets represent a legal obligation of 1 party
to transfer something of value, usually money, to another party at some
future date, under certain conditions. Underlying instruments are used to
improve the efficient allocation of resources and derivative instruments are
used to shift risk among investors (facilitate speculation and hedging).
Unlike bonds, failure to pay the dividends of a preferred stock does not
result in bankruptcy, but instead the unpaid dividends accumulate.
Derivatives (contingent claims) are securities whose value depends on the
value of some other underlying security. Derivatives include forwards,
futures, options and swaps. Futures contracts operate using a system of
marking to market, whereby any profit or loss accruing to the futures
contract is settled on a daily basis.
Internationalization of international markets:

Foreign bonds: sold in a foreign country and denominated in that countrys

currency
Eurobond: bond denominated in a currency other than that of the country in
which it is sold
Eurocurrencies: foreign currencies deposited in banks outside the home
country
Eurodollars: U.S. dollars deposited in foreign banks outside the U.S. or in
foreign branches of U.S. banks.
Risk sharing is under 2 forms: asset transformation and diversification by
pooling and issuing new securities.
Financial institutions: securities firms include brokers, investment banks,
underwriters, and mutual fund companies. Investment banks help
companies raise capital and underwrite its issue. Mutual funds provide
investment vehicles for savers and invest in financial markets. Exchange
traded funds are like mutual funds, but they are traded on an exchange.
Hedge funds are much like mutual funds but face much less regulation and
can consequently adopt more varied investment strategies. Private equity
companies buy entire firms, often those that are underperforming, with the
aim of improving performance and re-selling them at a profit.
Governments regulations are restriction on entry, disclosure, restriction on
assets and activities, deposit insurance.
INTEREST RATES
An interest rate is the price paid by a borrower to a lender for the use of
resources that will be used during some time period then returned.
Interest rates:
Link the present to the future
Tell the future reward for lending today
Tell the cost of borrowing now and repaying later
It is expressed as a percentage per year (Percent per annum; p.a.).
1% change (or difference) = 100 basis points.
Commonly used interest rate measures:
Coupon Yield: The promised annual percent return on a coupon
instrument

Current Yield: Bonds annual coupon payment divided by its current market
price.
Yield to Maturity: The interest rate that equates the future payments to be
received from a financial instrument (coupons plus maturity value) with its
market price today.
Discount Yield and Investment Yield (the coupon equivalent yield, the bond
equivalent rate, the effective yield, or the interest yield): the implied
returns from buying a debt instrument at a price below its par value.
Discount yield relates the return to the instruments par value:
rdb =

days
FP 360
maturity
F

(trong bao nhiu ngy th li sut c nhiu , vy

nu trong 360 ngy (coi nh l 1 nm) th li sut l bao nhiu).

riy =

days
FP 365(366)

maturity

(The investment yield is generally calculated so

that we can compare the return on T-bills to coupon investment options)

In US, the current market price (100-12) is expressed a little bit different.
The (1) handle (number to the left of the -) and (2) the 32nds (number to
the right of the -). We need to convert these two components to a
percentage. Start with the 32nds; 12/32 = 0.375. Add this amount to the
handle = 100.375. Thus the market price is 100.375% of par or $1003.75.
Premium bonds: The current yield on these bonds will always be below the
coupon yield. Discount bonds: The current yield on these bonds will always
be above the coupon yield (easy to understand, right, because the smaller
denominators).