The field of fund management services will likely be opened to greater foreign competition earlier than required by the nation’s WTO commitments, in a move intended to heighten the Government’s ability to monitor foreign indirect investment flows into the country.

The Ministry of Finance plans to petition the Prime Minister to allow foreign fund management companies to open branches or establish 100-per-cent foreign-owned fund management companies in Viet Nam.

WTO commitments only require such a move within five years of Viet Nam’s WTO membership. Foreign fund managers currently invest in the domestic stock market through local representative offices, although the nation’s laws regulate that representative offices are not allowed to conduct business.

According to ministry statistics, there are 35 representative offices of foreign fund management companies now licensed in Viet Nam. These offices get around the legal restrictions on business operations by representative offices and invest in the stock market by mandating an individual agency (usually heads of the offices or staff) to make the investments.

"That foreign fund management companies appoint individuals to invest for them creates difficulties for the State in controlling and managing the markets, and poses problems related to market manupulation," a ministry official said.

"Income from these securities trades is also not accounted for in Viet Nam, and foreign institutions are not liable to taxation. So, it not only harms the State budget, but also creates an unlevel playing field between foreign and domestic investors," he said.

Opening the market earlier than required by international commitments will lift the disguise of business activities of representative offices, and create a more stable and lawful channel for indirect foreign investment, the official added.

To improve the competitive capacity of domestic fund management companies, the Ministry of Finance would suggest the Prime Minister limit business scale and the ability of institutions to establish a branch or wholly foreign invested subsidiaries.

To receive a licence under the ministry proposal, a foreign fund management company would be required to manage securities of at least US$300 million and be free of violations of securities regulations in any foreign country for at least three consecutive years prior to being licensed.

To establish a branch in Viet Nam, a foreign fund management company would be required to have a minimum of three experience years in managing public funds with a market value in excess of $500 million.

A number of foreign fund managers are already moving to expand operations here.

BIDV-Viet Nam Partner Investment Management Co (BVMI) has also raised its managed capital to $300 million, and Credit Suisse is considering the establishment of a representative office in Viet Nam.

Enter the Dragon

Dragon Capital is planning to launch three new funds dedicated to investments in securities, real estate and infrastructure, as well as increased the amount of capital in existing funds, bringing the total capital it manages in Viet Nam up to US$3 billion, Dragon Capital chief representative Phan Minh Tuan told the newspaper Securities Investment.

"The economic picture is very positive with feasible growth targets, a situation confirmed by the increasing confidence of international investors," Tuan said. "The Vietnamese stock market has great potential, but the important thing is to find investment opportunities."

His fund sat out the high-profile IPOs of insurer Bao Viet and Vietcombank, but has bid on the IPO of the Saigon Beer and Alcoholic Beverage Co (Sabeco).

"Though the initial price of Sabeco shares is quite high, we find the potential of the beer and beverage production sector synonymous with the enterprise’s capacity for strong and stable development over the long term," Tuan explained.

Dragon Capital has based investment decisions on such criteria as sound corporate governance, clear development strategies and potential for growth, he said.


Source: Vietnam News