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Traders still turn their back on commodity exchanges
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.”
vietnamnet, TBKTSG
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