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In a move to bolster the Vietnamese stock market and attract greater foreign investment, the State Bank of Vietnam (SBV) is drafting a new circular to better manage foreign indirect investment protocols. This initiative seeks to simplify the opening and use of Vietnamese dong-denominated accounts for foreign investors, streamlining procedures and creating a more favorable investment environment.
The SBV’s efforts to draft this new circular align with the broader government objective of upgrading and developing the Vietnamese stock market. As part of this initiative, the Prime Minister has directed the SBV to collaborate with the Ministry of Finance, the State Securities Commission, and other relevant agencies to review and propose necessary amendments to legal regulations.
The existing framework for foreign exchange management of foreign indirect investment activities is governed by Circular 05/2014/TT-NHNN, issued in 2014. However, this circular is now considered outdated, as it was designed based on the Investment Law of 2005, the Securities Law of 2006, and the Law on Credit Institutions of 2010. These laws have since been replaced by the Investment Law of 2020, the Securities Law of 2019, and the Law on Credit Institutions of 2024. As a result, an updated regulatory framework is necessary to address the current legal landscape and market dynamics.
Key Features of the Draft Circular
The amended circular under development will focus on simplifying procedures for foreign investors, particularly in the following areas:
- Account Opening: The new circular will streamline the process of opening indirect investment accounts for foreign investors, offering the ability to open these accounts online. This represents a significant improvement over the current procedures.
- Multiple Investment Accounts: Foreign investors will be allowed to open multiple indirect investment accounts, each corresponding to their granted securities transaction codes. This change is designed to accommodate a more dynamic investment approach and provide flexibility to foreign investors.
- Vietnamese Dong-Denominated Accounts: As per the draft circular, all revenue and expenditure related to foreign indirect investment activities must be processed through accounts denominated in Vietnamese dong. This will help in maintaining better oversight of foreign investments and align with the country’s foreign exchange management policies.
- Restrictions on Savings and Term Deposits: The draft circular explicitly states that the balance in the indirect investment accounts of foreign investors cannot be transferred to term deposits or savings deposits, ensuring that these accounts are used solely for investment purposes.
Impact on Foreign Investors
This upcoming regulatory change reflects the Vietnamese government’s commitment to fostering a more favorable and accessible investment climate. The proposed measures, particularly those aimed at simplifying account-opening procedures and allowing the use of online platforms, should significantly reduce administrative burdens and make it easier for foreign investors to participate in Vietnam’s rapidly growing stock market.
The new circular is expected to enhance Vietnam’s attractiveness as a destination for foreign indirect investment by addressing the gaps in the existing regulations and offering a more streamlined process. This move also signals the government’s intention to modernize its financial regulations and keep pace with global standards.
As the SBV continues to draft and refine this new circular, foreign investors can expect improved access and greater convenience in conducting investment activities in Vietnam. The simplified procedures for account management, combined with the enhanced regulatory framework, are poised to contribute positively to the growth and development of Vietnam’s stock market, aligning with the government’s long-term economic goals.
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