CAPITAL FLOW, FUNDRAISING AND FOREIGN EXCHANGE POLICIES
By the closing of the 9th Session, Vietnam’s National Assembly ratified the Resolution on the International Financial Center of Vietnam (IFC) with the aim of upgrading Vietnam’s position in the international financial network; promoting green, sustainable finance, capital flow, fintech; engaging high-quality human resources, experts and entrepreneurs; and creating fortunate working and living environment.
- Free flow of capital
In terms of capital flow and fundraising, IFC members will be permitted to set up holding companies to raise offshore funding. The question is whether the holding company will be subject to merger control regulations, for example, if the holding company and its group companies reach a particular threshold under the antitrust rules.
Members of the IFC are entitled to mobilize capital from organizations, individuals outside of Vietnam’s territory, and non-residents sans licensing procedures required. One captivating aspect to encourage startups and innovation in the country and create novel channels for startups is that they will be vested, withal, with the right to do crowdfunding or private placement via a licensed platform.
Another key consideration is that direct investment capital accounts and indirect investment accounts will pose no challenge compared to investments outside the IFC, as there will be no “capital” account requirement within the IFC. Instead, only payment accounts (in foreign currencies), which can be easily registered at credit institutions and foreign bank branches, will facilitate the transfer of funds in and out of the IFC.
- Foreign exchange policies
Members’ transactions are designed to use foreign currencies between members and with foreign parties, on the other hand, transactions between members with organizations and individuals in Vietnam who are non-IFC members will be subject to foreign exchange control regulations.
The investment and foreign exchange of IFC members into other parts of Vietnam will be elaborated by the Government based on the special/favorable frameworks and regulations.
Regarding borrowing activities, an area of ambiguity remains while members are permitted to borrow foreign currency-denominated loans from credit institutions and foreign bank branches in Vietnam, what about loans from alternative sources? This should also be permissible. Additionally, the exclusion of foreign-invested companies in this regard requires further interpretation by the Government.
