What is the best way to quickly improve balance of payments in foreign currencies, to significantly reduce the deficit and to rapidly increase national foreign exchange reserves? There have been many ideas from management agencies and experts to solve these problems, however, according to the Vietnam Association of Financial Investors (VAFI), Vietnam needs to implement synchronised measures, particularly to remove the free trading gold bars, to speed up equitisation of large state enterprises, to further attract foreign investment, and to increase the supply of electricity.
According to VAFI, it is necessary to quickly end the free trading of gold bars in order to stabilise the currency market and to increase VND value. It is also a prerequisite for increasing foreign exchange reserves.
Recently, State Bank policy stated that the free trading of gold bars is not allowed. In order to ensure people's interests, the state will buy gold when people need to sell at international prices through a system of companies licensed to trade in gold. According to VAFI, if this policy is implemented quickly, within about seven years, the state could create a source of foreign currency of about US$15 billion, and release a huge "dead" capital to direct this hoarded flow into production and business.
Besides, according to VAFI, Vietnam needs to accelerate the equitisation of state enterprises with large-scale capital. In the present context of the very gloomy stock market, the sale of shares broadly to the public is very difficult, but there is no difficulty in the sale of shares of state enterprises with large-scale capital and effective business for foreign strategic investors at much higher prices than for domestic investors. In fact, there are many foreign investors asking to buy large businesses, such as Mobiphone, Saigon Beer, Hanoi Beer and Vinamilk at high prices.
In addition, Vietnam should have the basic and technical measures to further attract foreign investment flows into its capital markets. VAFI analysis showed that in terms of "openness" of Vietnam’s stock markets compared with other countries, the Vietnamese market is very narrow; thus, research is necessary on how to open room for foreign investors in posted enterprises and in the banking sector.
The Ministry of Finance and State Bond Committee will also need a capital-mobilising tool that many countries have applied very effectively to further attract FII capital flows. That is allowing foreign investors to purchase non-voting common shares. Thailand has applied this rule extensively, and many Thai businesses have more opportunities to mobilise capital easily.
Especially, VAFI supposed that Vietnam should have plans to further increase the supply of electricity for the steps of industrialization. The analysis shows that neither the State nor even EVN need to spend investment capital building power plants, or needs to subsidise electricity prices. A huge source of capital for building new power plants can be easily mobilised from the population, from all economic sectors and from foreign investment with only condition that price of electricity is a reasonable for the operation of factories. It is essential to quickly build reasonable electricity prices so as not to be worried about power shortages. Simultaneously, taking advantage of natural energy sources (e.g. wind energy) is a major solution to improve the balance of payments in foreign currencies.
In addition, VAFI said that Vietnam needs to have more solutions to further significantly reduce the deficit, and the import of luxury goods and goods on the list which is not encouraged. Accordingly, the Ministry of Finance should carry out a comprehensive review and impose the maximum taxes on those items. Besides taxes, it is necessary to add high fees pursuant to international common practice, such as researching and issuing fees on the purchase of new vehicles (based on the value), and using fee tools at the rate of 100 – 300 percent of the total value of the car, can reduced car import by 50 – 60 percent.
The State Bank may consider the application, in a short time, of the issuance of permits to purchase foreign currency or similar form (based on the Banking Law). Import enterprises who want to import luxury goods, airlines on the encouraged list must apply for import permits at the State Bank; or monthly the State Bank will consider and approve plans to sell foreign currency to import sensitive items from the commercial banking system.
If administrative measures or legal or other barriers are applied actively, Vietnam can reduce annual deficits on the group of items at between US$3 billion - US$5 billion.
"If the above measures are implemented in association with an appropriate fiscal policy, exchange rate policy and intelligent interest rate, Vietnam will become an export surplus country in the next 10 years - that is the specific goal for which the Government should aim,” asserted VAFI.
Hai Anh
Vietnamese
