The Vietnam Association of Financial Investors (VAFI) has again urged the government to apply a more open policy that allows a higher foreign ownership ratio in local joint stock companies.

Under current regulations, foreign investors can hold up to 49% of the total shares in domestic joint stock companies. This cap, according to VAFI, should be completely removed, except for those companies belonging to conditional business fields.

The statistics showed that 70 companies have listed and are planning to list on the bourse, only five of which are operating in conditional business fields.

In order to adjust the foreign ownership ratio in local joint stock companies, the government will have to adjust Decision 238 (August 2005), which stipulates the participation of foreign investors in local companies.

VAFI Secretary General Nguyen Hoang Hai, said that adjustment of Decision 238 would be in line with the Common Investment Law, which does not set any limit on foreign investment in local companies.

Decision 238, with its more flexible regulations (compared to the previous document), has helped development in the stock market. Foreign indirect investment in Vietnam has been increasing since it was enacted, now reaching $1bil in capital. The stock market has increased in value three fold, through which local enterprises have raised several thousand billion VND in capital.

Mr Hai said that the adjustment of Decision 238 would be the next step necessary to develop the capital market of Vietnam.

Prior to that, VAFI, which was previously known for its ‘daring proposals’, asked the government and the Ministry of Finance to raise the total share proportion foreign investors can hold in joint stock banks from 30% to 49%.

Dong Hieu