Foreigners’ share limit set to be raised

The draft is scheduled to be finished by June for submission to the government for final approval.
“The draft will propose several different levels of restriction depending on the type of sector and type of company,” Dung said.
“We might allow a higher cap for foreign shareholders in those sectors in which joint-ventures or fully foreign-invested companies are already allowed to be established.
“We might also consider totally removing the barrier in non-strategic sectors such as tree plantations and confectionary production.
“In the long term there will only be limits on foreign shareholding in strategic sectors where foreign participation might affect the nation,” Dung said.
Thierry Gougy, managing lawyer of PriceWaterhouseCoopers Vietnam, welcomed the proposal as a big step forward in developing the country’s stock market and, as such, a lure to foreign investment capital.
“You’re on the right track when you decide to raise the cap and remove it in whichever sector it is unnecessary,” Gougy said.
“The current limit of 30 per cent is low compared to the national demand for investment capital. If the country wishes to lure more capital from investors it should raise the cap to at least one third of the total.”
Gougy pointed to the experience of other countries in the region, such as Thailand where the only limits on foreign participation are in some strategic sectors. The policy had proven very useful in attracting more foreign capital, he said.
According to Gougy, with only 24 companies listed on the bourse, the stock market in Vietnam is still too small for foreign investors to operate in. The cap of 30 per cent in each listed company makes investment even less attractive.
KPMG senior partner Warrick Cleine shared that view, saying that loosening barriers to all types of capital flow was important to encourage the stock market to develop.
“Vietnam intends to encourage much larger enterprises to equitise and ultimately to list on the stock exchange. This includes foreign-invested enterprises, but also SOE’s and even the recently announced plan to equitise and list some of the major Vietnamese banks,” Cleine said.
“Unless more foreign capital is allowed to flow into the domestic investment sector, these newly-listed enterprises will have trouble attracting enough capital from purely domestic sources.”
While there are concerns that foreign investors could gain control over local enterprises Cleine pointed out that both Vietnamese companies and the Vietnamese government could only profit from this happening.
“International experience is that foreign capital can improve the performance of local enterprises. In Vietnam, there is already evidence that salaries are higher in foreign-invested companies and they pay more tax. These positive aspects can be spread further,” Cleine said.
Vietnam’s stock market now has 24 listed companies with 160 foreign individual investors and 21 foreign institutional investors.
Some listed companies have foreign shareholding already at the 30 per cent limit, such as the shipping line Transimex Saigon, the agri-product exporter Lafooco, beverage producer Tribeco and basa and tra fish producer Agifish.