International Finance Corporation, the World Bank, and the Australian Government have partnered to promote the equity capital market in Vietnam, helping the country sustain economic activities and continue growing in the wake of Covid-19 impacts.

Investors at a securities company in Hanoi. Photo: Tran Quynh

A conference jointly held by the World Bank Group (WBG) and the State Securities Commission (SSC) on August 31 to discuss the Draft Securities Market Development Strategy 2021-2030 prepared by the SSC and a multi-phased roadmap proposed by the WBG for equity capital market development with a focus on improving investor accessibility.

Regulators from the Ministry of Finance, the State Bank of Vietnam, the Ministry of Planning and Investment, the National Finance Supervisory Commission, development partners including Australia and Switzerland, and market stakeholders also discussed the regulatory implementation progress and proposed cross-work among multiple ministries and government agencies to facilitate market development.

“The aim of the strategy is to build capital market into an important medium and long-term capital conduit for the economy, unlocking the market’s potential to effectively serve the economic growth and opening up reasonable and well-balanced sources of capital to the economy and enterprises. The plan is developed to be in line with international best practices and standards, ensuring investor protection and market confidence,” said Vu Chi Dung, Director General of International Cooperation Department, State Securities Commission.

The proposed roadmap addressed key constraints to foreign investor accessibility by including new mechanisms to ease the pre-funding requirement for securities trades, solutions to address the limitation of foreign ownership of stocks, and improvements in disclosures in English.

“Deep, efficient, and well-regulated local capital markets create access to long-term, local-currency finance necessary for the development of a thriving private-sector—the key driver of jobs and sustainable growth,” said Lam Bao Quang, IFC Acting Country Manager for Vietnam, Cambodia, and Lao PDR. “Accelerated reforms are urgent and more critical than ever to enable a broad and diversified investor base for Vietnam’s capital market as public resources become scarce and the country will need large volumes of long-term, local currency financing to recover and continue investing in sustainable growth given the impact of Covid-19.”

IFC and the World Bank, in partnership with the Australian government, are implementing a multi-year advisory program to facilitate Vietnam’s stock market development by improving the regulatory framework, market infrastructure, capacity of regulators, and new product development.

This program is part of the Joint Capital Market Development Program (J-CAP)—a WBG initiative working on local debt and equity capital market development in selected countries worldwide, including Vietnam. The J-CAP initiative was established in 2017 to help developing countries realize the benefits of strong local capital markets.

“Mature, well-regulated capital markets that meet international standards are critical for diversifying financing options and will be pivotal for Vietnam's next development phase. More sophisticated capital markets will be a crucial source of domestic financing and also support higher levels of higher quality foreign investment,” said Mark Tattersall, Deputy Head of Mission of the Australia Embassy in Vietnam.

“Following Australian Prime Minister Morrison’s announcement in January 2021 of A$2.2 million to support Vietnam’s capital market development, Australia is pleased to announce our partnership with the World Bank Group and SCC through the J-CAP program to support equity market development and reform.”

Support from the Australian government that enables J-CAP’s work on equity market development in Vietnam comes alongside support from the government of Switzerland which enables closely related work on bond market development. JCAP’s wider work elsewhere is also supported by the governments of Australia, Germany, Japan, Luxembourg, Norway, the Netherlands, as well as Switzerland.