These were also the main topics of the ‘Funds World Vietnam 2007’, which opened on October 31 in HCM City.

Poor infrastructure discourages investors

Dr Adam McCarty, Chief Economist of Mekong Economics, an economics consultancy firm, said that the infrastructure system, including roads, water and electricity items, were overused, and had become a barrier to national economic development.

Phan Huu Thang, Head of the Foreign Investment Agency under the Ministry of Planning and Investment, admitted that traffic jams were really a big problem and blackened the investment environment. This problem is now a top priority for the government to settle.

Don’t be too miserable about inflation

Participants at the workshop all said that Vietnam seemed to be paying excessive attention to curbing inflation, while inflation should be seen as a part of development.

“I’m very surprised that Vietnam decided that the inflation rate must be lower than the GDP growth rate. Why set this goal?” said Mr McCarty.

Vietnam is trying to control interest rates, exchange rates, and all this aims to curb inflation. Meanwhile, the government should not strive to curb inflation at any cost. It should only set main goals for development, and then let the market perform itself.

Property prices skyrocketing

The workshop participants also discussed Vietnam’s overly hot real estate market, which may push investment costs up in Vietnam.

According to the leaders of some investment funds participating in the workshop, in 2006, Vietnam received $4.8bil worth of overseas remittance. However, the huge sum of capital has not been ‘cared’ for by the government of Vietnam. The capital has not been used to serve national economic development, but kept in the hands of people who make investment in land speculation. As a result of the land speculation, real estate prices have been skyrocketing.

Is it necessary to control foreign capital?

The representative from the Ministry of Planning and Investment could not give an answer to the question of how much foreign capital had come into Vietnam. The question of how much foreign capital was awaiting to be disbursed for upcoming IPOs also could not find an answer. Finally, investment fund leaders estimated that some $4-5bil was waiting to be disbursed.

However, Alex Hambly, Managing Director of Prudential Vietnam Fund, has warned that the money could be withdrawn as quickly as it had been brought in.

This then raised the question: How will Vietnam control and manage foreign-sourced capital?

Nguyen Thanh Long, Deputy Head of the Securities Business Management Division under the State Bank of Vietnam, said that Vietnam had no regulations that could block indirect investment flow, though it is clear that the capital can bring risks as well.

“We have decided that the capital flow will be regulated by the market itself, not by administrative measures,” said Mr Long.

He added that Vietnam was trying to find the most suitable treatment in dealing with foreign sources of capital, after considering the experiences of other regional countries.

The Ministry of Finance is going to submit to the Prime Minister a draft regulation on the operation and rights of state agencies in case of discovering signs of risks, he said. However, the aim of the regulation is to prevent risks rather than correct errors.

Source: Tuoi tre