The Government
of Vietnam
has allowed commodity exchanges to make forward transactions since January
2011. However, the number of traders is not as high as expected.

Commodity exchanges put under
control of too many agencies

According
to Pham Dinh Thuong from the Legal Department under the Ministry of Industry
and Trade, “regarding commodity exchanges in the world, 90 percent of
transactions are forward transactions.” Specifically, forward transactions
account for 98 percent of total transactions at Chicago Exchange. Meanwhile, in
Vietnam,
traders mainly make spot transactions, while forward transactions only have
been made since the beginning of the year.

Thuong also
said that “the common weak point of Sacom _STE, BCEC, VNX, the most well-known
commodity exchanges now in Vietnam,
is the weak connection among the commodity exchanges, manufacturers, transport
service providers, inspectors and farmers.

Commodity
exchanges have been put under the overlapping management of too many state
agencies. The State Bank of Vietnam
takes the responsibility of setting up the regulations on payment method, while
the Ministry of Finance sets up the regulations on taxes, fees and charges.
Especially, the use of foreign trade terms in different ways has caused big
difficulties for both clients and management agencies.

Nguyen Tuan
Ha, Director of the Buon Ma Thuot Coffee Trading Center BCEC in Dak Lak, said
that since BCEC became operational in October 2008, only 1000 tons of coffee
has been traded by March 10, 2011. Meanwhile, Dak Lak is considered the biggest
coffee producer who makes 400,000 tons of coffee a year.

The
problem, according to Ha, is that “BCEC does not have stores in localities.” In
order to build the storage system, it will have to follow a lot of complicated
procedures and will have to ask for the permission from different management
agencies.

International exchanges prove to be
the top choice

When asked
why Vietnamese coffee or rubber export companies still prefer making
transactions with foreign exchanges, like LIFFE in the UK, Sicom in Singapore
or Tocom in Japan and Mymex
in the US,
the companies say “it is safer to make transactions at international exchanges.”

According
to Thuong, “when joining foreign exchanges, both sellers and buyers can be
insured for the risks in trade. However, they cannot get insured in Vietnam.”

Nguyen Cong
Thanh, Chief Representative of Techcombank in HCM City,
said “in order to provide risk insurance and create liquidity in forward
transactions, the State Bank needs to set up some concrete regulations.” He
also said that “in order to ensure the effective operation of commodity
exchanges, it is necessary to establish a good cooperation between the
exchanges and commercial banks.”

Meanwhile,
representative of an enterprise which has coffee traded at LIFFE, said the
qualification of the staffs and the technologies applied by commodity exchanges
in Vietnam
remain low, therefore, it is difficult to attract investors.

Nguyen Duy
Phuong, Managing Director of VNX, said “VNX still cannot attract many
investors, because it always meets difficulties in obeying the state’s
regulations.”

“The
Ministry of Finance has the responsibility of setting up the regulations
relating to tax, fee and charge. However, to date, the ministry has not
released any legal documents so that we can apply the regulations to
investors,” Phuong said.

Truong
Quang Hoai Nam,
Director of the Domestic Market Department under the Ministry of Industry and
Trade, admitted that commodity exchanges still cannot attract many traders
because of the lack of necessary legal documents. However, Nam said “it
will take at least five years more in order to amend the regulations in the
2005 Commercial Law.”

Source: Thoi bao Kinh te Saigon