New regulations to improve Vietnam commodity exchange
Updated : Thursday, May 17, 2018 9:31 AM (GMT+0700)

Tradingthrough commodity exchanges will be more convenient in Vietnam with the Government’snew regulations on the establishment and trading on the commodity exchange.

Trading through commodity exchanges will be more convenient in Vietnam with the
Government’s new regulations on the establishment and trading on the commodity
exchange - Photo:

Decree No. 51/2018/ND-CP,which will be effective from June 1, 2018, amends and supplements a number ofarticles of the Government’s Decree No. 158/2006/ND-CP, dated December 28,2006, on the conditions for the establishment of commodity exchange.

According to Nguyen VietVinh, general secretary of the Vietnam Coffee and Cocoa Association, the newdecree has solved many problems in trading activities on the commodity exchangein Vietnam and is expected to open a new era for both businesses and farmers toboost their sales through this channel.

Decree 51 expands the listof goods traded on the commodity exchange, allowing all commodities that arenot prohibited by the State and those subject to conditional trading, includingthe Vietnamese export commodities, as well as goods that Vietnam needs toimport to serve the local production.

The new regulations alsoextend the forms of trading order by accepting written documents and otherforms such as telegraph, telex, fax or data message.

An important content in thisdecree is that foreign investors will be allowed to contribute capital toestablish commodity exchange in Vietnam. Their ownership in the exchange shouldnot exceed 49 percent of its charter capital.

Foreign investors are alsopermitted to trade goods on the commodity exchange as clients and can becomemembers of the exchange (brokers or traders) without ownership restraint.

In addition to this, thedecree allows the interconnection of Vietnamese and global commodity exchanges.This is expected to help promote the integration process and development of theVietnamese commodity exchanges.

“This (interlink) willcreate a lot of advantages in terms of commodity trading volume and valueinformation, better market assessment and stronger capital capacity to prop upinfrastructure and human resources of local exchanges”, Vinh said at a recentconference introducing the decree.
Underdeveloped market

It has been eight yearssince the Vietnam Commodity Exchange, Vietnam’s first commodity exchange,became operational in 2010. Since then, very few exchanges have beenestablished.

The total value oftransactions through commodity exchanges has reached only 8 trillion VND (351million USD) since, of which most transactions are focused on coffee products.

Traders are mainlyenterprises while farmers have no idea of the exchanges.

According to Nguyen Loc An,deputy head of the Domestic Market Agency under the Ministry of Industry andTrade, commodity exchange in Vietnam is still underdeveloped mainly due to manylegal obstacles.

An said Decree 51 providedbetter legal basis for enterprises and farmers to participate and trade on theexchange as well as for welcoming foreign investment in the exchanges.

With these changes alongwith hedging tools, the commodity exchange is expected to help businessesmitigate risks and secure operations as well as enhance their position in boththe domestic and global markets.


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