Need to narrow capital costs for businesses

One of the major challenges in operating economic policy in Vietnam is not only the scale of FDI capital but also the cost of capital used by businesses.

Resolution No. 10-NQ/TW (Resolution 10) on foreign-invested economic development identifies the foreign-invested economy as an important part of the national economy.

"This is an important resolution for international investors", Mr. Dominic Scriven, Chairman of Dragon Capital, emphasized in an exchange at the recent national conference on Resolution 10.

He also expressed his excitement when the resolution identified the capital market and investors in the capital market as an important part of the foreign-invested economy.

However, to meet Vietnam's growth goals, a significant challenge is price per capital.

The proof is that the State Treasury has very successfully issued bonds with an interest rate of about 4%/year while businesses have to bear interest rates of 10 - 12% when issuing 3-year bonds and can hardly issue 5-year bonds.

"The difference is too high, we must strive to influence this difference", Mr. Dominic Scriven pointed out.

Dragon Capital Chairman proposed that the Government research a mechanism to encourage FDI enterprises to retain profits in Vietnam instead of transferring all of them abroad.

In particular, it can be considered to build a suitable interest rate mechanism for USD deposits of foreign-invested enterprises in the Vietnamese banking system, contributing to adding a stable source of foreign currency capital to the economy.

He also said that it is necessary to continue to accelerate the process of upgrading Vietnam's stock market, aiming to become an emerging market before 2030.

In particular, consider loosening or adjusting regulations on foreign investor ownership limits for industries and businesses that are not in key fields related to national security.

At the same time, continue to improve the foreign exchange trading mechanism to create more convenience for foreign investors when participating in Vietnam's capital market.

Regarding listing conditions on the stock market, Mr. Dominic Scriven said that the regulation not allowing businesses with accumulated losses to be listed is creating a significant barrier for many businesses operating in the field of digital economy and artificial intelligence. create.

The reason is that these are businesses that often have to go through a long investment period, accepting losses in the early stages before generating profits. Therefore, it is necessary to research and adjust this regulation to better suit the characteristics of innovative enterprises.

In addition, Dragon Capital's chairman also proposed to continue promoting the development of financial centres in Ho Chi Minh City and Da Nang, opening up opportunities to build a specialised private placement mechanism for international professional institutional investors. This is considered a very effective capital mobilisation channel for the economy.

Not only that, Vietnam also needs to promote the development of a system of domestic institutional investors, creating an important foundation to help the capital market develop stably, sustainably and reduce dependence on short-term capital flows.

Accelerate to be upgraded by MSCI

In addition to the issue of capital costs, attracting investment funds is also a solution to encourage long-term, stable foreign capital flows.

According to Mr. Michael Kokalari, economist of the VinaCapital Investment Fund, Vietnam needs to continue pursuing large-scale and ambitious infrastructure development programmes - an important foundation to maintain long-term growth.

However, infrastructure projects require huge financial resources. In that context, taking advantage of foreign investment capital to develop infrastructure is completely normal and has been successfully applied by many countries.

Mr. Michael Kokalari gives an example, even the United States in the 19th century mobilised international capital, especially from England, to build the railway system and develop national infrastructure.

From experience and network with many markets and global investors, representative VinaCapital recommends that Vietnam needs to prioritize completing the goal of being upgraded to an emerging market by MSCI after being upgraded by FTSE Russell in recent times. This will be an important turning point to help attract large-scale passive and active investment capital flows from international funds.

Accordingly, to fully meet MSCI's upgrade criteria, Vietnam needs to continue to complete a number of contents such as early implementation of the central clearing partner mechanism.

Along with that, it is necessary to allow the implementation of exchange rate risk prevention tools for indirect investment activities, continue to consider loosening foreign ownership limits in appropriate areas and further improve standards of information transparency and corporate governance.

Mr. Michael Kokalari said that there are currently many international investment funds with a scale of up to hundreds of billions of dollars that are closely monitoring the Vietnamese market. Therefore, it is forecast that a large amount of capital will be disbursed into the Vietnamese market if MSCI upgrades it.

Not only that, Vietnam needs to soon achieve an investment grade credit rating from international credit rating organisations such as S&P, Moody's or Fitch.

In addition, according to Mr. Michael Kokalari, Vietnam needs to more strongly promote the equitization process of state-owned enterprises, initial public offerings as well as other forms of capital mobilisation.

This helps expand the scale and improve the quality of goods in the capital market, thereby attracting more international investors.

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Source: TheLeader — theleader.vn. The article is reposted for the purpose of sharing knowledge for the founder and investor community in the ecosystem HCM VIF.