Future of Hanoi Securities Trading Centre

3:26:33 PM | 7/8/2005

Future of Hanoi Securities Trading Centre 


The Hanoi Securities Trading Centre (HASTC) is set for inauguration and operation on March 8. What are the differences between the Hanoi Securities Trading Centre and the Ho Chi Minh Securities Trading Centre, and who can join the Hanoi centre? VIB Forum's reporter Thi Van had a talk with Mr. Tran Van Dung, director of the Hanoi Securities Trading Centre about future operations of the centre.


How is the Hanoi Securities Trading Centre different from the Ho Chi Minh City one?


The clearest difference between the two centres is their operational models. The centre in Ho Chi Minh City is centralised securities market for listed firms and is directed to become the Stock Exchange while the one in Hanoi is a simple over-the-counter market which carries out registration and trading of unlisted shares, ineligible shares or eligible shares that are not listed on the centre in Ho Chi Minh City.


The second dissimilarity is that the Ho Chi Minh City centre clearly classifies shareholders into enterprise insiders and outsiders while the Hanoi centre allows an enterprise to make transactions if it has a chartered capital of VND5 billion (US$318,470), a healthy financial situation and 50 shareholders regardless if they are enterprise insiders or outsiders.


Another difference lies in information publication conditions: annual audited financial reports are the same as in Ho Chi Minh City centre but special information publication conditions in Hanoi are minimised. The Ho Chi Minh City centre special information publication is provided by the stern Decree 144 while the Hanoi centre imposes much fewer conditions which can been seen at the decision by the State Securities Commission.


What do you think about the operations of the Hanoi Securities Trading Centre in 2005?


In my opinion, the Hanoi Securities Trading Centre will have few players in the initial months but the number will grow more and more from the middle to the year's end. This is mainly attributable to the application of Decree 187 on equitisation - a replacement of the Decree 64. As known, the Circular 126 conducting the implementations of the Decree 187 became effective on January 31 but the Vietnam's traditional New Year fell in February when local business activities slow down. Therefore, enterprises need more time to realise Decree 187.


What's more, auctions via the securities trading centre were previously optional but currently compulsory. The auction is obligatory if selling over VND10 billion (US$636,940) to outside investors.


According to the Government's plan, 1,500 enterprises will be equitised from this year and many large firms are required to auction shares on the Securities Trading Centre. We hope more and more enterprises will auction and combine auctions with the transaction registrations from the middle of or late this year.


In reality, over 2,000 enterprises have been equitised but only about 30 of them are eligible for listing on the Ho Chi Minh City centre. All most all shares and coupons are selling through over-the-counter market. Therefore, the opening of the Hanoi Securities Trading Centre will help transaction of these shares become more transparent and more lucrative for both businesses and the State.


Do you think there are still obstacles to enterprises to enter the Hanoi Securities Trading Centre?


Yes, of course. Business tradition is the biggest barrier. Enterprises fear that transparency will lead to their business information and plans being disclosed and that various shareholders may lead to uncontrolled conditions and limitations to business decisions.


It is intelligible in Vietnam as secrecy has become rooted in businessmen's minds. When the Accountancy and Auditing Law goes into effect, enterprises are obliged to make annual financial reports and auditing results are publicized, which are expected to fill the gap between listed firms and outsiders and make the whole economy more open and transparent. As a result, firms will not fear  joining the stock exchange. They will rather consider benefits from stock exchange participation and strive to reach standard norms to play a role in the stock market.


How will information about the Hanoi Securities Trading Centre be publicized?


The Hanoi Securities Trading Centre will employ the best routes to send information to investors. Therefore, besides by traditional means, information will also be sent via the Internet. Internet information must be ample. In particular, information related to ongoing transactions on the Hanoi Securities Trading Centre will also be posted on the Internet.


Much to be Adjusted in Unified Draft Enterprise Law

After collecting its inputs and comments, the drafting board of the Unified Enterprise Law has recently introduced its first draft of the law. Recently, the Vietnam Chamber of Commerce and Industry co-operated with the board to collect inputs and comments from experts and enterprises at a seminar, which heard 19 new ideas. Apart from supplementing articles, the participants discussed what needed to be adjusted in the draft law.

With a target of issuing a complete law for improving the business environment in Vietnam and acting as a momentum for Vietnam to further integrate into the world economy, the issuance of the Unified Enterprise and Investment Laws will supplement shortcomings in the existing business law in Vietnam. Dinh Van An, head of the drafting board, said that the organisation and activities of enterprises in the Unified Enterprise Law will replace those in the Law on State-owned Enterprises and the Law on Foreign Investment. However, specific regulations on State-owned and foreign-invested enterprises will be observed according to the Law on State-owned Enterprises and the Law on Foreign Investment, respectively. Regulations on legal capital or minimum capital for joint ventures or 100 per cent foreign-owned enterprises will be in line with the Law on Foreign Investment.

Ideas raised at the seminar concentrated on regulations on business licences, partnership companies and the control of investment in other enterprises. Regarding business licences, Tran Van Tien, director of the Duc Tien Company, said that the regulation in the draft law was not suitable. He said that when enterprises were allowed to do business in fields which were not prohibited by the State, it was not suitable for them to get more licences to do business in other fields, which were not prohibited by the State. Talking about partnership companies, Le Thi Thu Huong, director of the Cong Ly Consultancy Company, said that regulations on fields in which partnership business was required should be removed. She stressed that business conditions mentioned in other specialised legal documents should not be mentioned in the Unified Enterprise Law, or they would become barriers to business activities.

State management has not yet been agreed. Many participants suggested that State management should be removed for enterprises to become free in business activities. Many other ideas stated that there were no countries in the world who have removed State management. All business forms need public power, so impacts from many sides on enterprises are unavoidable.

For Vietnam to join the World Trade Organisation (WTO) early, a legal framework, closers to the international legal system is needed. An said that the drafting board would co-operate with relevant agencies to promote the issuance of the Unified Enterprise Law.

Discrimination between State-owned and private enterprises should be removed, lawyer Tran Vu Hai, director of the Hanoi Legal Company

At present, most State-owned enterprises do not bring wealth to the State but losses. Each year, the State must clear debts worth tens of thousands of billions of Vietnam dong. A few State-owned enterprises are profitable. Their profit is very low, at between one and three per cent. A handful of enterprises gain high profits but the State does not enjoy the profits as the State collects profit and other taxes but not taxes on other incomes. For example, the State does not collect taxes on dividends. These are mainly monopoly enterprises in the fields of post office, petrol and oil, and aviation. The State's approach is to convert State-owned enterprises into joint stock and limited companies. We wish that the Unified Enterprise Law would adjust, amend or replace the Law on State-owned enterprises to completely remove the discrimination between State-owned and private enterprises.

Investment in other enterprises should not be controlled, Tran Van Tien, director of the Duc Tien Company

I think that the Unified Enterprise Law should not include the control of enterprises' investment in other enterprises. Enterprises in the market mechanism seek business fields, which generate high profits. In Vietnam, small and medium-sized enterprises account for a large number. These enterprises have a small production and business scale, so they are very flexible in shifting their production materials, capital and workers from one business field to another. Therefore, to invest in other enterprises is the right of enterprises as well as to accept investment or not is their right.

Unified Enterprise Law should include regulations on rights and obligations of enterprises' branches, Nguyen Minh Phu, director of the Trans-Pacific Service Company

At present, many enterprises, in particular service ones, do not dare to expand their business to other places by setting up branches as there is no law to regulate this relationship. I think the Unified Enterprise Law should include a chapter of regulations on the rights and obligations of branches to create a legal corridor for enterprises to control their branches in terms of finance and legal observation. The fact shows that after relying on enterprises in both prestige and capital, directors of branches find ways to separate their branches from parent enterprises. Even though legal representatives of enterprises decide to terminate activities of branches' directors, enterprises cannot recover their stamps. In addition, directors of branches are often account holders of branches. In the draft law, there is no legal corridor for enterprises to control activities of their branches' directors or heads of their representative offices, so it is difficult to control them when they manage both finance and legal personality of branches or representative offices.

Unlimited liability should be stipulated for business fields which risk causing high damage, Professor Associate and Dr Nguyen Nhu Phat from the Institute of State and Law

The Enterprise Draft Law stipulates that partnership enterprises will exist only in four groups of services, including accounting and auditing, construction design, medical check-up and treatment, and legal services, in order to prevent risks. Usually, these enterprises invest much lower than the damage they may cause. Therefore, if these enterprises compensate within their capital contribution, their compensation will be unable to cover damages. Unlimited liability should be stipulated for all business fields which risk causing high damage. As far as I am concerned, the four service groups mentioned in the draft must be stipulated with unlimited liability. Also, business households should be allowed to join businesses mentioned in the draft law. 

  • Nguyen Thoa