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.