Widening channels to promote stronger foreign investment inflows to Vietnam

September 18, 2018 | 14:07
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Alongside opening its doors wider for foreign direct investment (FDI), Vietnam has been developing the legal framework and its range of institutions to attract investors to acquiring the shares of local companies to diversify their porfolios and business lines in the country.
widening channels to promote stronger foreign investment inflows to vietnam

The launch of the stock market has helped improve the structure of the local financial market and create a channel to mobilise long-term capital for development and investment, thus facilitating the industrialisation and modernisation of the country. Under the leadership of the Party, the government, the direct guidance of the Ministry of Finance (MoF), and the coordination of ministries, as well as support from the press, the local stock market apparatus has overcome many difficulties and challenges to secure the great achievements that we can be proud of today.

First of all, we have created an institutional framework for the stock market which is suitable to the development level of Vietnam, which is progressively catching up with international standards and international and regional markets.

Second, we have been able to build and further develop a legal framework ranging from decrees, circulars, regulations to procedures in line with the current state of the economy in order to ensure smooth, safe, transparent, and efficient trading as well as operation and management of the stock market. In 2017 along with the focus on completing policies for the stock market, MoF has submitted a document, based on Resolution No.83/NQ-CP, to the government to request an amendment to the Law on Securities. This is the first achievement, which is a critical ground to continue forming laws to perfect mechanisms and policies for the steady and stable development of the stock market.

Third, the stock market has confirmed its important role as a channel to mobilise funds for the economy. The market capitalisation in 2017 reached over VND3.5 quadrillion ($155.55 billion), equivalent to 70.2 per cent of the GDP and exceeding the target set by the government for 2020. In 2018, the stock market has continued its momentum, with the market capitalisation reaching VND3.846 trillion ($170.93 million) by May 24, 2018, up 9.4 per cent against the end of 2017 and equivalent to 76.8 per cent of the GDP.

The G-bond market has gone through radical development, thanks to the government’s efficient fiscal management. Government bonds registered have mounted to VND997.5 trillion ($44.33 billion), equivalent to 20 per cent of the GDP in 2017. In 2017, the prime minister also approved “A roadmap for bond market development for the 2017-2020 period, with a vision to 2030.” It aims to develop a stable bond market with a complete and synchronous structure of supply and demand while attracting more investors, increasing the volume and quality of operations, diversifying products, and step-by-step getting closer to international benchmarks and practices.

Fourth, the stock market has made robust contributions to the equitisation and reform of state-owned enterprises (SOEs). 2017 was the year of SOE divestments, with the total volume soaring up to about VND123 trillion ($5.46 billion), 7.8 times as much as in 2016. The state budget, as a result, recorded a surplus of over VND1.9 trillion ($84.44 million). In particular, the state divestment at Sabeco brought approximately VND110 trillion ($4.8 billion) and became the biggest ever M&A transaction in Vietnam. At the same time, the divestment at Vinamilk last year attracted a great deal of attention among equity investors in the region and around the world.

Fifth, the stock market has lured in a large number of domestic and foreign investors. In 2017, foreign investment in the stock market hit a record high, with a net buying of VND47.864 trillion ($2.13 billion, approximately eight times the value reported in 2016). Foreign investors’ portfolio value increased sharply as a result of a robust net buying of large cap stocks. By the end of 2017, the total portfolio of foreign investors reached approximately $32.9 billion, an increase of 90 per cent on-year. In 2018, the number of investor transaction accounts has continued to increase. As of April 27, the accounts have reached 2.04 million, in which foreign investor accounts take up 25,171, up 6 per cent year-to-date. Foreign investors’ portfolio remained high at $36.2 billion by the end of April 2018, up 10 per cent year-to-date.

Sixth, the launch and operation of the derivatives market on August 8, 2017 marked the development of the local stock market structure. The derivatives stock market going into operation is not only evidence of the development of the local financial market, but also meets great market demand. The launch has made Vietnam the fifth market in the ASEAN and the 42nd country in the world that incorporates a derivatives market in its financial system.

widening channels to promote stronger foreign investment inflows to vietnam
MoF will continue working with the State Securities Commission to improve the legal framework for foreign investment to develop the securities market

In its economic development strategy, Vietnam firmly intends to promote international integration with an emphasis on economic integration. With the new policy framework being built, we believe that we will maintain the average GDP growth rate in 2017-2020 at 6.7-7 per cent a year, while stabilising interest rates, exchange rates, inflation, public debt, and other macroeconomic factors. Vietnam will continue to be a dynamic nation and an attractive investment destination for international investors. Given this spirit, we at MoF are fully committed to maximise our efforts to accompany international investors, and we particularly welcome long-term investment in the Vietnamese financial market.

In the near future, MoF will continue to work with the State Securities Commission and related authorities to improve the legal framework for foreign investment, contributing to the growth of the stock market, as well as the entire financial sector, in a safe and sustainable manner. There are five main areas of focus:

1. Drafting the revised version of the Law on Securities, ensuring that the stock market operates in a transparent, sustainable and fair manner, creating a better environment for foreign investors to join in the market;

2. Taking comprehensive solutions to upgrade the Vietnamese stock market; adopting criteria for credit rating agencies and setting up some credit rating agencies to build a solid foundation for the bond market and other products;

3. Continuing to speed up the process of equitisation and state divestment at SOEs; requiring SOEs to list on the stock exchanges; boosting corporate governance and introduce corporate governance policies, strictly monitoring the transparency of information in financial reports of public companies;

4. Undertaking the sustainable development plan for the corporate bond market; making extensive preparations to launch this market in 2018; encouraging large businesses to issue bonds and list them on the stock market; and

5. Assisting companies in the securities system by cutting red-tape, reducing process time for applications, answering questions promptly, promoting new laws and helping the companies understand and implement them; improving tax laws to create a better legal framework for these companies.

By Dinh Tien Dung Minister of Finance

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