Vietnam to relax foreign investment rules

As part of its ongoing privatisation push, Vietnam will remove caps on foreign ownership

 
Business as usual: fishermen in Halong City, Vietnam. The country has relaxed its foreign investment rules to increase privatisation in the country
Business as usual: fishermen in Halong City, Vietnam. The country has relaxed its foreign investment rules to increase privatisation in the country 
Author: Tom Bailey
June 30, 2015

Vietnam is set to abolish its caps on foreign ownership, which would allow foreigners to own a full 100 percent of a firm. Previously, the Communist-run state placed a cap of foreign ownership on certain firms and industries at 49 percent, to prevent foreign businesses from gaining a majority stake.

Vietnam was attempting to make the case for upgrading its classification from frontier market status to emerging market status

The reform is part of wider privatisation push within the country. Vietnam has gradually liberalised its economy since the 1980s, but some leftover state controls remain from the days of the command economy. According to the Financial Times, “The new rules are part of a broader push by Vietnam to step up a sluggish privatisation programme, strike trade agreements with the US and EU, and boost its status in the widely followed MSCI world markets indices.”

It can also been seen as part of a push for reclassification by the Morgan Stanley Capital Index. As Bloomberg reported back in 2014, Vietnam was attempting to make the case for upgrading its classification from frontier market status to emerging market status. The Vietnamese State Securities Commission was tasked with investigating how to go about this, with a reduction on foreign ownership caps said to be one reform that would be pursued.

The latest MSCI market classification review, released in June 2015, however, made no mention of the South East Asian nation, instead focusing on China, Pakistan and Saudi Arabia. This would suggest that Vietnam will have to wait until the 2016 review to hear whether or not it will be considered for reclassification.