A VOV reporter interviewed Dr Vu Dinh Anh, head of the Analysis and Forecast Department of the Financial Science Institute under the Ministry of Finance.

Reporter: How will WTO commitments affect Vietnam in terms of finance?

Mr Anh: The implementation of WTO commitments will create two major impacts on the financial market, especially the capital market. First, if Vietnam cannot control big foreign investment inflows into the country investment won’t bring any efficiency. The biggest potential risk when opening the financial market is that Vietnam cannot prevent international speculation. In fact, identifying investment or speculation is not so easy so it is very difficult to find measures to control capital flows effectively, particularly inflows and outflows of foreign capital. If huge capital inflows pour into Vietnam, the whole finance system could collapse. The Asian financial and monetary crisis in 1997 is a typical example.

Second, international financial groups have strong competitive abilities and potential, therefore Vietnamese financial sanctions are in danger of being taken over by international groups, directly or indirectly. Seen from the outside, businesses look like belong to Vietnam but in fact they are owned by foreigners. Therefore, domestic financial control has to improve their competitiveness themselves. For the first reason, the State plays the key role. If the State does not control foreign capital, Vietnamese finance will be likely to loose its sovereignty and be in danger of being taken over by or dependant on foreigners.

Reporter: To cope with challenges of financial liberalisation and the mentioned risks, is it necessary for Vietnamese finance to have an early warning system?

Mr Anh: An early warning system depends on the analysis of macro financial and economic indexes. Vietnam needs to have an agency that will collect all macro-economic indexes such as economic growth rates, capital inflows and outflows, trade balances, credit growth rates, money supply and budget deficit. By analyzing these indexes, we will know whether the financial system can meet demands from the economy.

More importantly, indexes will give early warnings on financial risks, particularly risks on the use of short-term loans for long-term loans, or budget deficit. Only by having a close financial monitoring system, proper evaluation, and early and precise warnings can we give effective policies and measures to mitigate risks and make sure that financial systems operate smoothly, effectively and safely.

Reporter: Is there any agency in charge of providing early warnings?

Mr Anh: Actually, in Vietnam, there is no agency in charge of providing early warnings. Vietnam only recently joined a regional organization which includes Malaysia, Indonesia, Thailand and Singapore. Every year, the organization gives an early warning to member countries by providing analysis of financial indexes of the region.

The bottom line is that there are no agencies or organizations in Vietnam in charge of receiving and dealing with this information. The State Bank of Vietnam makes annual reports on macro-economic indexes, but the indexes mostly deal with the banking sector and have little relation to other economic and financial indexes.

Meanwhile, the use of State budget and banking activities have closer relations. Consequently, sometimes we fail to control the inflow of domestic capital. For instance, the World Bank recently announced as much as US$4 billion of indirect investment that had been poured into Vietnam, while domestic financial experts stated just US$1 billion.

It is clear that we cannot provide early warning on financial risks without a good monitoring system. Under the context of financial activities becoming more diversified and complicated, it is necessary to improve the monitoring of financial activities, managing risks and providing early warnings to meet international standards.

Reporter: Thank you very much.