The Capital Market Working Group has suggested making changes to the restructuring of State-owned enterprises (SOEs) to attract more foreign investment.

The suggestions were made at the mid-term Vietnam Business Forum which began on June 9 in Hanoi.

A working group representative, Nguyen Kien, said although the State Securities Commission had been actively building more favorable regulations to support investors, the obstacles impeding the development of the stock market required timely and solid action by Government.

Vietnam has a population of 91 million people and a modest stock-market capitalisation of about 46 billion USD, equivalent to just 25 percent of the country's gross domestic product (GDP).

According to Kien, this value is much lower compared to similar figures for other ASEAN countries, such as the Philippines, which has market capitalisation of 184 billion USD, or 65 percent of its GDP.

And Thailand has a market cap of 112 percent of GDP; Malaysia, 88 percent; Singapore, 135 percent; and Indonesia, 45 percent.

"This shows that the current Vietnamese stock market is not strong enough to support the country's SOE equitisation," Kien said.

He said the total value of State enterprises to be equitised in the next three years would be about 25 billion USD. If the Government expected to sell 15 percent of these stakes, the market would need 3.75 billion USD to absorb these shares.

However, Kien said domestic funds could not afford to buy these shares and the market would need new foreign investment inflows.

The working group suggested to the Government two issues, obligatory listing for equitised businesses and increasing the sales of SOEs' shares to 25-30 percent through high-status and international securities brokers to boost liquidity.

Kien said Vietnam should also make a bold move to remove the restrictive ownership limit of 49 percent applicable to public companies to attract foreign inflows in the stock market and in newly equitised State businesses.

This would be in line with the Vietnam's commitments with the World Trade Organization (WTO) for servicing public companies, Kien said. He also suggested opening up the entire market by allowing wholly foreign ownership in companies operating in areas not covered by WTO commitments, except for conditional businesses including national security.

According to the working group's report, foreign investment in the Vietnamese stock market this year was weak, with a net inflow of 113.3 million USD in the HCM Stock Exchange and just 5 million USD in the Hanoi's exchange from the year to May 19.

The Capital Market Working Group is one of the working groups under the Vietnam Business Forum.-VNA