Updated on : Thứ Tư, 22/08/2018 - 9:45 SA
Deputy PM Vuong Dinh Hue worries about thin cap of enterprises

VGP - The Government pays great attention to the health of market participants and the thin capitalisation status of enterprises, said Deputy Prime Minister Vuong Dinh Hue at the Viet Nam Economic Forum (ViEF) 2018 held in Ha Noi on August 21.

Deputy Prime Minister Vuong Dinh Hue speaks at the forum, Ha Noi, August 21, 2018

Addressing the session entitled "Expanding Viet Nam's capital and finance market - Challenges and solutions", part of the Viet Nam Economic Forum, Deputy Prime Minister Vuong Dinh Hue said it is necessary to look into the imbalance between the credit market and the capital market, between credit and other added services in banks’ credit activities, and between the short-term and long-term markets, particularly the bond market.

He cited the figure of 53 percent of businesses operating unprofitably as of the end of 2016, saying that one of the reasons for this is the lack of capital.

Many companies depend on bank loans to operate, so their financial expense is very high, plus other high expenses like market access and logistics costs, which hampered their business performance, the Deputy PM said.

Deputy Governor of the State Bank of Viet Nam Nguyen Thi Hong said over the past years, the financial market hasn’t developed as expected, but the stock and money markets have grown strongly and become the main sources of capital for the economy.

The stock market has recorded many breakthroughs in recent years with total market capitalisation surpassing 70 per cent of the country’s GDP in 2017. In the money market, the credit-to-GDP ratio is about 130 per cent. Government bonds (G-bonds) still dominate the bond market, while corporate bonds account for only 1.25%.

All of them are short-term capital sources whilst the demand for medium- and long-term loans is big, thus putting pressure on credit institutions, Hong said.

Tran Van Dung, Chairman of the State Securities Commission of Viet Nam, said Viet Nam’s capital – financial market aims to ensure the balance among the banking market, the stock market and the bond market.

The country now has a very developed G-bond market and will boost the corporate bond market in the time ahead, he added.

At the forum, other speakers called for solutions to existing flaws of the domestic capital – financial market such as the shortage of medium- and long-term capital sources.

Ketut Kusuma, a senior specialist at the World Bank, said the structure of Viet Nam’s long-term capital market has shown many positive signs. To expand the long-term market, the country should increase data and information transparency, modernise the legal framework and the market’s infrastructure, and improve its monitoring capacity.

For the stock market, it needs to integrate the equitisation of State-owned enterprises into the market development strategy. Meanwhile, the G-bond market should continue to be reformed to join global emerging market indexes, he added./.-VNA



 

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