Vietnam to reform law to boost investment

Vietnam to reform law to boost investment

HANOI (Reuter): Vietnam is preparing a radical reform of its
land and credit laws to stimulate investment in the Southeast
Asian country, an official said yesterday.

New regulations, which will be published soon in the form of
an "interpretation" of Vietnam's recently announced Civil Code,
will for the first time allow foreign companies to mortgage
Vietnamese property to raise money.

"We would like these regulations published as soon as early
next year but it may have to wait until July 1 (1996)," an
official of the State Bank of Vietnam (SBV) told Reuters.

The official, who declined to be identified, said the
regulations were currently being drawn up by the SBV's Department
of Economic Research, and would soon be passed to the central
bank's Governor Cao Si Kiem for final approval.

Vietnam's National Assembly on Oct. 28 approved a Civil Code,
laying down in more than 830 articles the legal framework for the
rights of its 74 million people and the future basis of
legislation. It comes into effect on July 1, 1996.

Foreign businesses and legal experts greeted the Civil Code as
a significant step in Vietnam's recent move to a market economy
but cautioned that it set out few clear rules.

The new guidelines attempt to address problems for foreigners
and overseas-owned firms in the area of mortgages, loans and
medium- to long-term credit, the official said.

"Their importance is that they address the right to mortgage
and use land as collateral," the official said. "And foreigners
will be allowed the same right. The last regulation did not
mention foreigners -- this one will."

There is no freehold property in communist Vietnam as all land
is owned ultimately by the state. But individuals and firms are
allowed to hold long leases. Vietnamese can use these leases to
raise money but foreigners have never had this right.

Foreign firms say financing is one of the biggest headaches
facing potential investors in Vietnam as many home countries have
no track record of lending to the newly opening country and
Vietnamese mortgages have never been available to them.

"It has been a major obstacle in structuring financial
packages in the past," said Iris Fang, chief executive of
Standard Chartered Bank in Vietnam.

"If, in fact, the new regulations are as reported, it would be
a major step forward for foreign companies," Fang said.

A Hanoi-based banker agreed: "I think it will help foreign
companies to do business in Vietnam," he said.

"In the past there has been some question over whether banks
can lend money to foreign companies using land as collateral. If
it is definitely allowed, it will be real progress."

Vietnam's property market has boomed since the government took
its first tentative steps towards reform in the late 1980s and
the right to mortgage would free up a major source of new capital
from inside the country.