Controlling foreign capital in intermediary payment service companies: unconvincing

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Attraction of foreign capital helps domestic businesses have more financial resources and take advantage of advanced technologies. (In the photo: customers are guided to use e-wallet to buy gasoline).

The draft decree regulating non-cash payments by the State Bank of Vietnam (SBV) says “the maximum contribution ratio of foreign investors, including both direct and indirect ownership is 49 percent of the charter capital of the intermediary payment service provider which is granted a service provision license by the State Bank”.

Controlling the contribution ratio of foreign investors is a new provision in the draft and comprehensively changes the status of this issue. The provision has received many comments from businesses, especially intermediary payment service providers whose capital is contributed by foreign investors.

According to businesses, this provision is not consistent with Vietnam's commitments in some international treaties to which Vietnam is acceded to like the WTO and CPTPP.

Meanwhile, the drafting board said the concept and scope of payment intermediary in domestic law is not in the scope of Vietnam's commitments under the WTO Agreement and the CPTPP Agreement. Thus, the provisions on managing intermediary payment service, including the provision on the ownership ratio of foreign investors in payment intermediary service providers, included in the draft decree is not within the scope of commitments and not bound by international commitments mentioned above. Vietnam is entitled to issue measures to manage payment intermediaries without being considered in violation of these international commitments.

By reviewing Vietnam's commitments in the WTO, the Vietnam Chamber of Commerce and Industry (VCCI) saw for banking and financial services, Vietnam only committed to opening 11 specific services, including "all payment and money transfer services, including credit cards, payment and debit cards, traveler’s checks and bank drafts" but excluding financial switching service, electronic clearing service and electronic payment gateway services.

For foreign investors who have made a commitment to establish a commercial presence in the banking and financial sector, Vietnam is only committed to allowing certain entities to establish a commercial presence in a certain financial sector. For example, only foreign credit institutions can establish a commercial presence providing the banking and financial services that Vietnam has committed; for each type of credit institution - for example commercial banks, financial institutions, financial leasing institutions, there is a limit to operation type.

The VCCI also reviewed the commitments on opening banking and financial services in other FTAs ​​(EVFTA and CPTPP), so the opening level for banking and financial services was basically unchanged compared to in the WTO. At the same time, even in more open aspects, the commitments to open the door in the EVFTA and the CPTPP do not automatically apply generally to foreign investors from countries outside the agreement. While this decree is generally applicable, it is not necessary to follow the opening rates of EVFTA, CPTPP or any other FTA.

Disbursed foreign capital is much lower than in the same period of 2017 VCN - According to the Ministry of Finance, the disbursement of foreign direct investment (FDI) to date ...

Consequently, the explanations of the drafting board about the commitments are reasonable; however, the VCCI said that these explanations are not clear for businesses. Therefore, VCCI asked the drafting board to carefully analyse this content to help businesses fully and accurately understand Vietnam's commitments.