What are your views on the government’s efforts to welcome foreign investors to Vietnam throughout the years? What has and has yet to be done?
We welcome and appreciate the government’s timely passing of several regulations, namely Decision No.51/2014/QD-TTg, Decree No.60/2015/ND-CP, and Circular No.180/2015/TT-BTC, which require newly-equitised state-owned enterprises (SOEs) to be listed on Vietnam’s stock exchanges.
We also value the government’s intention to open up the foreign ownership limit in the stock market, as evidenced by Decree 60.
However, the impact of these regulations on the stock market has been very limited. For example, in the eight months since Decree 60 came into effect, only three of approximately 700 listed companies have been able to increase their foreign ownership limits.
One of the key reasons for this problem is the local authorities’ confusion between direct investment (FDI) under the Law on Investment and indirect investment (via stock markets) under the Securities Law.
In our view, listed securities, public companies, public funds, and the foreign ownership limit in them should be governed only by the Securities Law passed by the Ministry of Finance and the State Securities Commission.
Moreover, in our opinion, a critical shortcoming in SOE equitisation is the lack of effective mechanisms to force equitised SOEs to abide by the listing calendar. This is the main obstacle for future equitisation efforts, standing in contrast to its purposes of improving transparency and transforming companies’ management systems.
To our knowledge, the government has been preparing and seeking public consultation on the draft Decree on Provident Funds for over a year, but it has not passed this decree as of yet. The intention is good, but the delay in signing this decree has been really disappointing.
If you were to represent foreign funds in Vietnam to propose changes to PM Nguyen Xuan Phuc, what would be your main message?
The capitalisation of the Vietnamese stock market is only about 30% of its GDP, while the figure for neighbouring countries is 90% on average. Our market size is only one-eighth of nearby countries’ and, in reality, foreign participation is still mostly capped at 49%. All of these factors shrink the Vietnamese market in the eyes of foreign investors.
Thus, we believe Vietnam needs to significantly enlarge its market capitalisation and increase foreign participation. In order to do this, we recommend that the government consider three main actions.
Firstly, Vietnam should make listing a part of companies’ equitisation process. Secondly, the efforts to lift the foreign ownership limit should be clarified and streamlined. Non-voting depository receipts (NVDR) for foreign investors should also be introduced.
Last but not least, as mentioned beforehand, we would like to urge the government to ratify the Decree on Provident Funds.