Vietnam needs to be careful about using foreign capital

A Chinese bank and the Shenzhen Stock Exchange (SZSE) last year co-organized a conference on attracting Chinese investment capital to Vietnam with the goal of seeking cooperation from Vietnamese securities companies.

The news appeared in local newspapers in early December 2017. But Vietnamese economists were prudent when commenting about the event.

Le Cao Doan, a respected economist, said that Vietnam needs capital from different sources. But, whether capital flows can bring benefits to the economy depends on many factors. 

Due to the differences between Vietnamese and foreign financial institutions, Vietnam needs to carefully consider cooperation projects to avoid risks, he said. 

“Financial investment cooperation is a very complex relationship with high latent risks, especially in the field of securities. Vietnam should not get involved in this if it finds itself too inexperienced,” Doan said on Dat Viet.

There are basic differences between direct loans and fundraising through the stock market. Instead of getting money directly from financiers, the borrowing is implemented at stock exchanges, securities companies and in the black market as well.

Warning that mismanagement may cause chaos and crisis to the nation’s financial system, Doan stressed that Vietnam should not take risks in trying to attract capital through stock exchanges, especially when there are still many problems in its stock market.

An analyst, agreeing with Doan, said it would be a blunder if Vietnam, with limited experience and management skills, joins the game where high risks are anticipated.

The analyst emphasized that choosing partners was important. “With Chinese capital, which has a bad reputation, economists have every reason to worry about  cooperation,” he said, adding that Vietnam should think of this only after 10 more years.

Bui Quang Tin, an economist, said: “It is necessary to think carefully before conducting capital transactions with foreign investors, especially Chinese.”

‘Chinese’ is a ‘sensitive word’ in Vietnam because of the reputation left by Chinese contractors on ODA (official development assistance) projects, the low quality of Chinese products and the tricks played by Chinese businesses to swindle Vietnamese farmers.

“Vietnam is pursuing an open policy and striving to attract foreign capital. However, I strongly recommend that Vietnam be skeptical with hot money,” Tin said.

Vietnam now has to think of attracting private capital for development projects as preferential ODA loans will now have higher interest rates.

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Thanh Lich