Vietnam achieves very low overall compliance with international standards and codes, with a score of 8.3 out of 100 in our Standards Compliance Index. Vietnam's regulatory system is in its infancy, and its practices are not subject to international norms. This is evidenced by seven standards that lack independent assessments. Vietnam does not subscribe to the Special Data Dissemination Standard prescribed by the International Monetary Fund. Its accounting practices are not aligned to international standards. There is no legal insolvency framework in Vietnam, and its banks are not subject to the Basel Core Principles. However, Vietnam is in the process of following international best practices to build institutions by enacting and implementing new regulations. As of 2006, Vietnam had implemented an improved budget management law with an intention to improve its transparency policies. It also issued its first-ever decree on money laundering, effective since August 2005. In addition, it has submitted a final draft Law on Securities, which would regulate its capital markets in accordance with international rules.

Macroeconomic Policy and Data Transparency

As of October 2006, Vietnam is not a subscriber to the International Monetary Fund's (IMF) Special Data Dissemination Standard. However, it has been a subscriber to the IMF's General Data Dissemination System since September 30, 2003. The reliability and coverage of macroeconomic statistics have significant deficiencies. The methodology for compilation and dissemination of these statistics is in need of substantial improvement, so that data properly reflect economic developments and assist policy formulation, implementation, and monitoring. The authorities are cooperating with the IMF, but work is hampered in some areas by the lack of authorization to release data. Vietnam has few official statistical publications that provide coverage beyond the real sector. More »

Since the two-tier banking system replaced the monobank system in the late 1980s, monetary policy has been guided by multiple, and at times conflicting, policy objectives, including economic growth, price and currency stability, and financial system stability. The potential conflicts between these objectives were partially mitigated or masked by favorable domestic and external conditions in recent years. The current cycle of global tightening and rising domestic inflation poses new challenges for monetary policy in the context of the continuing opening up of the economy. The International Monetary Fund (IMF), in the 2005 Article IV consultations, urged the Vietnamese authorities to take prompt measures to improve the reliability, timeliness and dissemination of Vietnam's economic data, especially with regards to the quality of money and banking statistics to enhance their usefulness in the assessment of monetary and credit policies. However, there is no publicly available information as to Vietnam's compliance with the IMF's Code of Good Practices on Transparency in Monetary Policies. More »

In 1999, the International Monetary Fund and the World Bank published a report on how to achieve fiscal transparency in Vietnam. The report stated that Vietnam, like a number of other economies in transition, falls short in most requirements of fiscal transparency advocated to meet the Fiscal Transparency Code minimum standard. However, at the time of the report, Vietnam had made good progress in implementing fiscal management reforms of relevance to a number of important aspects of transparency. In particular, the implementation of the 1996 Law on The State Budget and the revised budget classification have led to significant improvements in the capacity of the government to produce reasonably comprehensive, timely, and analytical fiscal reports. The 2005 Article IV consultations between the IMF and Vietnam noted that the authorities have made progress in a number of areas related to fiscal transparency, including implementation of an improved budget management law and adoption of a 1986 Government Finance Statistics (GFS)-consistent budget classification at all levels of government. Starting in late 2001, the Ministry of Finance (MoF) began posting annual budget outturns and plans on its external website, including by major revenue and expenditure items. The authorities agreed that all capital expenditure should in principle be brought on budget to align Vietnam's fiscal transparency and expenditure management with best international practices. More »

Institutional and market infrastructure

According to the paper presented at the Forum on Asian Insolvency Reform in 2004, there is no comprehensive law dealing with corporate insolvency in Vietnam. Insolvency and creditor rights are regulated in many regulations including the Law on Bankruptcy, Civil Law, Ordinance on Economic Contract, etc. However, these regulations are sometime unclear, inconsistent and might lead to different interpretation and application. More importantly, the lack of enforceability means that creditor rights are not always respected and long delays in resolving debts are seen. Under the old Law on Bankruptcy of 1994, very few bankruptcy cases were realized. The Vietnamese National Assembly passed a Law on Bankruptcy on 15 June 2004 that came into force on 15 October 2004. The main objectives of the 2004 Law on Bankruptcy are to simplify bankruptcy procedures, to allow parties other than creditors to participate in bankruptcy procedures, and to give courts more flexibility in dealing with insolvent businesses. More »

All domestic companies, listed and unlisted, are required to use Vietnamese Accounting Standards (VASs), which have been developed by the Ministry of Finance (MoF). Generally, the VASs are based on International Accounting Standards (IASs) that were issued by the International Accounting Standards Board (IASB) up through 2003, though some modifications were made to reflect local accounting regulations and environment. However, according to Deloitte & Touche, as of August 2006, none of the IASB's amendments to IASs nor new International Financial Reporting Standards (IFRSs) have been adopted. As of 2006, the MoF has temporarily suspended the development of VASs due to resource constraints and is considering whether to grant rights to the Vietnam Association of Certified Public Accountants (VACPA) to formulate and update VASs. If this is formalized under the law, the VACPA, rather than the MoF, would then serve as the accounting standard setting body in Vietnam, More »

The 2006 World Bank Report on Standards and Codes (ROSC) on Corporate Governance in Vietnam states that the framework for corporate governance in Vietnam is in the early stages of development, with laws and regulations being established. A high degree of informality still exists in the corporate sector, with an unofficial securities market that is significantly larger than the formal market, and there remains a large presence of state ownership in enterprises. Institutions responsible for regulation, enforcement, and development of the capital market have limited capacity and resources. Among other key issues, investor protection is inadequate, related-party transactions are pervasive, compliance with accounting standards is insufficient, and disclosures of quality information are limited. However, the 2006 ROSC notes that Vietnam has taken important steps to establish its corporate governance framework. The recent progress provides a strong foundation upon which the next steps in the reform agenda can be taken. The World Bank points out that work is already underway to address those areas in the continuing efforts to improve and develop a strong corporate governance culture and framework in Vietnam. More »

The Ministry of Finance of Vietnam (MoF) has adopted a program for creating a system of accounting and auditing standards for Vietnam. The auditing standards will be based on International Standards on Auditing (ISAs) approved by the International Auditing Practices Committee of the International Federation of Accountants (IFAC). The standards will be applicable to all enterprises and auditing firms operating in Vietnam. As of the end of 2004, the Ministry of Finance had introduced a total of 27 Vietnamese Standards on Auditing (VSAs) standards. During 2005, the MoF issued the 6th and the 7th batches of new VSAs. However, no information as to the compliance of VSAs with ISAs is publicly available. More »

The Vietnamese government issued its first ever decree on money laundering in June 2005. This decree took effect in August 2005. The decree is applicable to all Vietnamese and foreign individuals conducting business in Vietnam. The decree also outlines the measures that can be taken against suspected money launderers including freezing of accounts, asset seizure, fines and imprisonment. It also paves the way for establishment of a Financial Intelligence Unit (FIU) in the country. However, there is no publicly available information as to Vietnam's compliance with the Financial Action Task Force's (FATF) 40 Recommendations and 9 Special Recommendations on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) More »

There is no publicly available information regarding Vietnam's compliance with the Core Principles for Systematically Important Payment Systems developed by the Bank for International Settlements (BIS). However, the World Bank is in the process of developing a viable payments system in the country. The World Bank's first Payment System and Banking Modernization Project (PSBMP), completed in 2003, sought to establish an efficient payment, clearing and settlement systems and the associated legal and regulatory framework within which a modern financial sector could operate efficiently. Under the project an internationally compatible information technology (IT) platform was established. On the foundation of this platform, a modem Inter-Bank Payment System (IBPS) and two modem Core Banking Operational and Management Control Solutions (CBS) were introduced on a pilot basis. According to the World Bank's 2005 report, the IBPS has vastly improved the payment services in the economy by reducing float, accelerating circulation of funds and increasing efficiency of funds transmission, while providing convenience and service to users. The system has also contributed to the solution of cash shortages that had existed for years in the economy. The PSBM 2 project, with a start date of June 2005, is designed to build on the foundation laid by the first PSBM and its objectives are: (1) IBPS Expansion; and (2) Core Banking Solutions (CBS) Expansion. However, there is no publicly available information regarding Vietnam's compliance with the Core Principles for Systemically Important Payment Systems developed by the Bank for International Settlements (BIS). More »

Financial Regulation and Supervision

The Vietnamese banking system continues to experience credibility problems in the international financial community. Its banks are poorly managed, not subject to standards laid out in the Basel capital accords, not audited by international caliber auditing firms (and if they are the results are state secrets), do not hold to international accounting standards and are overexposed to the state sector. However, this situation is slowly changing. In 2001, the Vietnamese government adopted a more market-oriented banking and state enterprise reform program. The goals of this reform program, supported by the International Monetary Fund, the World Bank, and other international donors, is to ensure the stability of the banking system, to expand banking services, and to rationalize domestic resource allocation by ensuring those resources are dedicated to commercially viable activities. The reform program focuses on three main areas - the restructuring of joint stock banks, the restructuring and commercialization of the state-owned banks, and improving the regulatory framework and enhancing transparency. More »

The capital market is still relatively new in Vietnam, and there are clear needs to modernize operations and continue building confidence in the markets. The weak legal and regulatory framework gives rise to inflexibility and ambiguity. Furthermore, the State Securities Commission (SSC) is only tasked to perform state administrative and organization functions in securities and securities markets, and whether it is empowered to regulate unlisted securities is ambiguous. The Government of Vietnam with assistance from the Asian Development Bank (ADB) has prepared a Capital Market Roadmap that presents a 10-year plan aimed at creating sophisticated capital markets in Vietnam with the overall vision of developing a sound, efficient, and integrated capital market to support sustainable economic growth and structural reforms. In January 2006, a final draft Law on Securities was submitted to the government by the Ministry of Finance (MoF). According to the MoF, the law will have regulations in accordance with international rules to regulate activities of domestic and foreign investors. However, there is no further publicly available information as to Vietnam's adherence to the International Organization of Securities Commissions' (IOSCO) Objectives and Principles of Effective Securities Regulation. More »

Although the insurance industry in Vietnam has been growing rapidly in recent years, in 2005 just eight percent of the country's population was actually insured. As of May 2005, there were 28 insurance enterprises conducting operations in life insurance, non life insurance, re-insurance, and intermediary insurance including two State Owned Enterprises (SOEs), 11 joint stock companies, and 15 foreign invested enterprises. However, there is no publicly available information as to Vietnam's adherence to the Insurance Core Principles (ICPs) promulgated by International Association of Insurance Supervisors (IAIS) in 2003. More »

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Credit Ratings

Moody's Ba3/Positive

Fitch BB-/Stable

Standard & Poor's BB+/Stable

Macroeconomic Data

2007 GDP (Current Prices): 70 billion USD (IMF)

2007 GDP (Per Capita): 818 USD (IMF)

2008 GDP (Growth Forecast): 7.3% (IMF)

2008 Inflation (CPI): 16% (IMF)

2007 Unemployment: 5.1% (CIA)

2006 Foreign Direct Investment

FDI (Inward): 2.3 billion USD (UNCTAD)

FDI (Outward): 0.1 billion USD (UNCTAD)

2006 Official Development Assistance

ODA (Received): 1846 million USD (OECD)

ODA (Disbursed): N/A million USD (OECD)