The Government's clear message: Protect businesses and investors

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Assoc. Prof. Dr. Tran Dinh Thien: Individuals must take personal responsibility. Corporate property is not just personal property. Instead, it must also be considered a national resource that should be protected against those taking advantage of opportunities to make money and appropriate when incidents occur. Photo: VGP/Hoang Giang

Developing the stock market is a principled direction that is focused on by all normal market economies around the world. Simply because this is the most important capital market and the leading resource circulation channel of the economy.

However, according to Assoc. Prof. Dr. Tran Dinh Thien, without timely, strong and correct solutions to keep market confidence, the risks will be very unpredictable.

In order to prevent the risk of "amplifying" negative impacts, the Government promptly took strong and resolute solutions towards violations in securities trading and corporate bonds which have made negative impacts, causing market instability and loss of assets for businesses.

The Prime Minister's direction via "urgent" cables shows a resolute approach to the issue, which has clarified the situation, responsibilities and directed coordinated actions.

The cables clearly stated the message: Handle the case with the right person, with the right crime, without blaming personal wrongs, causing harm to businesses and destabilizing the business environment.

This is a positive approach, helping to restore and strengthen market and business confidence in the government's operations.

'Cleaning' the market

Recently, the authorities have prosecuted and detained FLC Group Chairman Trinh Van Quyet and Tan Hoang Minh Group Chairman Do Anh Dung for violations in the field of securities and corporate bond issuance, drawing public attention. What do you think about these two cases?

As we can see, not only two business leaders, but a series of other people were arrested. These violations have created negative market effects, causing concern among the business community, because many believe that the operation of these markets has many negative effects and is currently facing escalating instability.

This is a natural reaction of the market, especially when the cases are not clearly explained, and the public is informed.

But it is necessary to look at this impact also from a different perspective. In line with the general trend, the trust of society and businesses in the Government's macro-management in the fight against the pandemic, economic recovery and trust in the Vietnamese business community is increasing. Through these events, it seems that society is shaping that the arrest of some businessmen who break the law is the beginning of the process of "cleaning up" the business environment, openly and transparently as expected.

Observing the Government's activities, especially in the last two years, it is certainly to assume that the handling of stock and bond cases that the Government is doing is the starting actions for the process of "cleansing" the business environment of Vietnam.

Objectively, the Government needs to consider this as an opportunity to review the system of mechanisms and policies, to detect loopholes and irregularities that easily form "traps" and are easily "evaded", or conflict points to change, improve, but not to just punish wrongdoers and individuals.

The stock market is the most important capital supply channel

After the above two incidents, to some extent, investors must be worried. However, it is believed that the market turmoil is only temporary and that the stock market is still an important channel for raising capital. What is the basis of this, sir?

For a long time, our capital supply has faced many risks especially in "maturity deviation" in credit activities when using short-term loans for medium-long-term loans which can result from the dependence of the capital supply for the economy on the bank credit channel.

In the world, the stock market is the most important capital supply channel for the economy, especially long-term investment capital. This market is "complementary" to the bank credit market - the main channel providing short-term capital.

That is the reason why the development of the stock market is always paid special attention to by countries following a market economy.

In an effort to rapidly transform and develop a market economy, it is difficult to avoid obstacles, especially for high-level, complex and sophisticated markets such as the stock market.

It must be affirmed that the stock market in Vietnam still needs to be promoted to thrive, so that, together with the banking system, it becomes a factor to ensure macroeconomic stability, and promote economic growth and development most effectively.

A highly speculative nature is an inherent feature of the stock market, which bears potential risks. The management agency must pay special attention to this feature in order to have synchronous and close solutions along with highly effective sanctions.

The stock market and corporate bonds need to be placed in a strict, public, and highly transparent governance system from the very beginning. That's the classic way of controlling risk. Otherwise, the economy will easily fall into instability, and inefficiency, and be seriously damaged; and the business and its managers are easily "in danger".

The recent "incidents" of stocks and bonds are an opportunity for us to review issues related to these markets, the operational structure of the financial-banking system and the related banking laws.

The correction, improvement and innovation of the system on that basis will reduce the risk of speculation - manipulation or "backyard" relationships in the capital market connection channels which lead to shocks to the economy and business activities of enterprises.

No damage to business assets

In addition to detecting and strictly handling violations, recently, Prime Minister Pham Minh Chinh and Deputy Prime Minister Le Minh Khai have successively sent messages related to the stock market and the issuance of corporate bonds. How do you rate the Government's measures and actions to manage this relatively new field?

It is high time we stopped considering the stock market and corporate bonds "new" things for Vietnam and stopped an argument to justify the errors and weaknesses of the system.

It must be frankly acknowledged that the approach to developing these markets is still not methodical, not drastic enough, and not really "sincere" to build a true, healthy and higher-order market system as required.

In that situation, for the past cases, the Government has tried to act quickly, calmly, and decisively. A very important part is that the Government has learned from previous market events to handle it properly this time, helping to prevent panic.

Amid the pandemic, businesses are still suffering, if the Government's response is not decisive and strong enough; it will be difficult to stop the trend of the negative development of the market and can stimulate speculations and psychological instability.

Regarding the action, the Government has been on the right track to solving the current "unsettled" problems of the market.

Typically, the unusual land auction in Thu Thiem, the Government did not underestimate its negative impact, did not consider this a small incident, but calmly identified it to react promptly and in the right direction.

Given the arrest of some people after illegal acts, disturbing the market, the government had a clear message about strictly handling criminals and was required to protect the market, creating a positive impact.

I appreciate the "don't damage business assets" message. This is a very important orientation because "business leaders" and "enterprises" are entities with different roles in economic life. Individuals are personally responsible. Corporate property is not just personal property; instead, it must also be considered a national resource that should be protected against those who take advantage of opportunities to make illegal money.

In the context that the economy is trying to overcome difficulties caused by the pandemic, that right action will certainly make the business community and private economic groups more confident in the macroeconomic operations of the government.

However, that direction of action must be thoroughly and consistently understood in the policies and activities of ministries, sectors and Government agencies, to ensure consistency, to avoid the situation that each department acts "in accordance with the law function" without coordination and does not take into account the common and overall benefits, as well as not take into account the consequences suffered by other sectors of the economy.

It is impossible to beat the market because of a few cases of breaking the law and circumventing the law

So, do you have any suggestions for the healthy development of the stock market and corporate bond issuance? What is your advice to investors and businesses today, sir?

As for the Government, it is still necessary to stick to the stance of "handling the case with the right person, with the right crime", upholding the spirit of protecting corporate assets such as property and resources of the country, minimizing the trend of civil violation criminalization and business principles.

At the same time, efforts must be made to make the business environment transparent, simplifying but also clarifying the legal corridor. Thereby, investors can be legally protected and considered a national resource.

Currently, monetary policy is under too great a "load" in promoting growth and ensuring macro stability. Overloading is easy in causing risks. Many years of experience show that the more “overloaded” monetary policy is, the more likely it is to suffer a "malfunction".

But on the other hand, in the current functional area of ​​"real estate lending", monetary policy needs flexibility. A "tightening of the currency" on the whole line of the real estate market can lead to unfortunate consequences.

Real estate does not only includes an array of "speculation to create waves” but also relates to activities that create the foundation for development, such as industrial real estate, urban real estate, and tourist real estate. These are the driving forces for development, and are especially important for the current post-pandemic economic recovery and development.

It is necessary to distinguish specific types of real estate markets in order to provide adequate credit support or restraint. It should be remembered that the excessively comprehensive "currency tightening" in 2011-2012 did not bring stability to the economy. On the contrary, it resulted in "suffocative" instability and slowed down growth for a long time.

Another point is to consider corporate bonds an effective capital mobilization tool for economic development. We are still in the process of "transition" and in the lack of a complete legal framework for these important markets.

Therefore, there have been "system malfunctions" rather than simply "crimes" of some businesspeople. As a matter of fact, once there are loopholes in the law, someone will take advantage of it.

As a result, the government needs to study and detect "loopholes in the law" instead of just finding and punishing those who "dodge" the law.

This means that it is necessary to have a "transitional mechanism" attitude towards the corporate bond market. It is impossible for a few cases of breaking the law and circumventing the law to smash this market because it will contradict the economic recovery purposes set by the government along with the economic development after the COVID-19 pandemic.

If the bond market is not protected and not encouraged to develop in order to create stable support for investors, the economy will lose a large and efficient capital mobilization channel which does really terrible damage to the economy.

The Government's message is very clear to protect investors and strengthen the legal and institutional system towards transparency. It is hoped that this spirit will be strongly deployed, specifically and closely coordinated in all sectors.

For investors, I don't think we should be too worried. Instead, calmness and clarity is most essential at this time.

Thank you very much!