The Field That Venture Funds Target In The Early Stage Is High Technology Fields

Some Asian countries in the field of ICT such as Singapore or Taiwan have proven this.

In the current conditions of Vietnam, a country with a market economy subject to macro-regulation by the state, FDI activities are a new activity and related to many areas of the economy. Especially when Vietnam officially became a member of the World Trade Organization (WTO) on November 7, our economy will witness an "invasion" of foreign investors, and that means that the State's protection barriers for domestic enterprises will be removed, so the objectivity of the market must be paid more attention.

2. The fields that VC funds target in the early stages are high-tech fields.

The experience of countries in forming and developing FDI is all linked to the goal of developing technology to promote economic development. With the current reality in Vietnam, FDI associated with technology development needs to receive proper attention from the state and be included in the goals of FDI funds.

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In the initial phase of implementing a FDI Fund, high technology, especially the software industry, will be the focus area to promote the advantages of Vietnam's intellectual potential and not require much capital to build infrastructure and equipment. This field also creates many jobs and has great export potential. In addition, focusing on high technology fields will bring opportunities to contribute to building national technological capacity, creating economic competitiveness, promoting the country's modernization process towards a knowledge-based economy.

3. The private economic sector, small and medium enterprises are the main targets of FDI funds.

Encouraging venture capital investment in private companies and small and medium enterprises, especially those operating in the high-tech sector, must be part of the investment strategy of venture capital funds . In Vietnam today, the businesses operating are mainly small and medium enterprises (accounting for the majority).

both in quantity and scale). This is an important force that needs to be encouraged and developed to create development momentum for the economy because these enterprises are in great need of investment and support from the fund, and at the same time they are also flexible in technological innovation, adapting to the market, especially in the field of production and business based on talent and intelligence. Experience from other countries shows that through venture capital activities, small and medium enterprises can take advantage of capital sources as well as management experience from venture capitalists. Venture capital funds help enterprises overcome obstacles such as the inability to meet the conditions for borrowing from banks or mobilizing capital from the public while hybrid business projects require large capital. The fact that venture capital funds invest in small and medium enterprises in the high-tech sector also creates a driving force to promote the development of the technology industry in our country in the coming time.

4. The model of organizing a mutual fund that is considered suitable for Vietnam at the present stage is the fund - joint stock company model .

Although the limited partnership model is popular in Asia, with this model, the members managing capital investment can be individuals or legal entities, while according to the provisions of the 2005 Law on Enterprises of Vietnam, the general partners must be individuals. Therefore, if choosing this model, the existing legal provisions are not sufficient to apply.

According to the organizational experience of investment funds in Asia, this form of LLC is less common and does not develop much. However, in Vietnam, approaching the LLC model seems to be more convenient because it is easy to understand and has organizational experience from the practical situation of the domestic economy. Because the stock market in our country is not yet developed, along with the mentality of not being familiar with handing over money to professional managers for investment, the LLC model seems to be more trustworthy (because investors can directly manage their capital and assets to put into production and business). With the more open regulations of the 2005 Enterprise Law, it is completely acceptable for financial institutions to establish investment funds in the form of LLCs. Besides, this model is also easier for the establishment of joint venture funds, or 100% foreign capital.

The fund model - joint stock company is a joint stock financial organization with full legal status, which is suitable for the current situation in Vietnam because: This model demonstrates the socialized nature of long-term investment capital, with the wide participation of socio-economic components, and can be professionally managed by a company hired to manage the fund; Investors - fund shareholders can still control easily because there is no separation of capital ownership and capital usage rights. Thus, among the four operating models of investment funds, the fund model - joint stock company is considered the most suitable model for the current conditions in Vietnam.

5. The State plays an important role in facilitating the formation and development of SMEs.

 The State can directly participate in FDI activities as an investor. However, the State should only participate when it wants to provide a safety signal, encourage other investors or when other investors do not want to invest, especially in the first 3 out of 5 stages of the FDI process (because the private sector often tends to invest in the last 2 out of 5 stages of FDI due to lower risk). The State's participation must be very cautious because if the State intervenes too much, it can cause "market distortion" and weaken the competitiveness of domestic enterprises. In addition, we should also learn from the lesson of India when government policies, instead of creating a positive impact, are wasteful and ineffective while causing private investors to withdraw. The State should only directly implement the EIA for a certain period of time, in order to initiate the EIA activity and send a safe signal to the private sector to participate in this activity.

 The State can indirectly impact FDI activities by creating a stable macro business environment, developing FDI development strategies/plans, establishing legal frameworks to regulate the FDI process, and issuing policies that affect participating entities such as investment incentive policies, tax policies, credit policies, etc.

 The legal framework for venture capital activities in general and venture capital and technology sectors in particular needs to be clear, complete and consistent . In the past, awareness of this issue at all levels of ministries and sectors has been limited, thus hindering the formation and development of venture capital investment forms in accordance with their nature in Vietnam. We should learn from Taiwan's experience in promoting the role of the Government in the development of the venture capital industry. To promote its important role, the Government needs to introduce appropriate support policies to stimulate the emergence and development of this industry, such as studying the necessity of establishing venture capital funds with capital and management support from the State, and orienting the fund's operating mechanism. To take advantage of venture capital as well as management and business experience of foreign investors, the Government needs to create safe and stable macro measures, paying attention to the interests of both sides so that investors can feel secure investing in Vietnam. On the one hand, the Government allows financial companies and international organizations with experience in fund management as well as large capital scale to participate in coordination to establish venture capital funds by loosening regulations and policies on capital limits and investment fields. Because the nature of venture capital activities is related to many fields such as: stock market, foreign investment, finance, high technology, etc., the State's policies, especially in the venture capital industry, need to pay attention to suitability and consistency so that venture capital investors can choose Vietnam as the best destination. On the other hand, domestically, the Government needs to take action to protect its young enterprises and venture capital funds from fierce competition from foreign venture capital funds. The Government needs to support enterprises at the macro level through a stable and favorable legal framework for business operations. The Government's support policies are not subsidies (grants, grants if qualified) but the expansion of capital conditions and participants both domestically and internationally. Internal and external liberalization will complement each other, expanding freedom for foreign venture capital investors and capital flows from outside to inside the country and from inside to outside will help make venture capital operations safer. The case study of Singapore shows us the importance of this.

Macroeconomic stability over a period of time, avoiding economic crises or fluctuations in consumer prices are also factors that affect FDI activities. Therefore, the Government should be clear and transparent in announcing policies and regulations related to the FDI activities to help businesses and foreign investors be proactive in their activities.

Tax incentives for venture capital and innovation investments . Tax incentives can be provided by reducing capital gains taxes, which increase the supply of venture capital, or by taxing stock options, which can also have an important impact on startups. Governments can also reduce corporate income taxes for a period of time when new ventures are established or when small and medium-sized enterprises invest in technology. Provide tax incentives for those who bear the most risk, namely entrepreneurs, business managers, and private investors (e.g., low income tax rates, which help offset losses, and stock options). Entrepreneurs can be encouraged to seek venture capital through a corporate tax system that does not favor debt financing but favors equity financing.

6. Developing a sustainable economy is a process, involving many fields and must be suitable to the conditions and development level of the economy.

At the macro level, the development of ICT is related to many different issues such as the development of the financial market, the development of the science and technology system, infrastructure for full technological innovation and abundant, qualified human resources in the field of ICT, etc. Therefore, on the one hand, when designing policies related to the development of ICT, it is necessary to pay attention to ensuring that the level of development of ICT is consistent with the development of other fields. On the other hand, to develop ICT, it is also necessary to have a synchronous combination with policies in related fields.

 The financial and monetary market is stable and developed, in which the development of the stock market is an important factor in attracting venture capital. From the experience of Taiwan and Singapore, it can be seen that venture capital funds promote the issuance of shares to the public because venture capital funds focus on investing large capital in portfolio companies and exiting capital mainly through the stock market and the ultimate goal is to help these companies list on the stock market. Therefore, the development of the primary market should be focused on because it can be said that venture capital activities will not be possible without the emergence of the stock market. Currently, the stock market in Vietnam can be said to be in its infancy and operating very dimly, our country's financial market has not been opened and still has many shortcomings compared to the current financial system in the world. Therefore, when the government wants to attract foreign investors to operate in the field of FDI, the first thing is to build a stable financial market system at the macro level in which a developed stock market plays a decisive role in the success of FDI activities.

Experiences of other countries show that there is an interactive relationship between the capital market and FDI activities. The capital market is an abundant source of supply, a foundation and at the same time an output for FDI activities through stock exchanges. Conversely, the development of FDI also has a strong impact and stimulates the development of the capital market. In the orientation or policies of the state on the development of FDI activities in the countries studied above, attention is paid to the development of the financial market in general and the capital market in particular.

 Infrastructure for the process of full and developed technological innovation includes: technology parks, universities, R&D facilities ... Investment in education and research and development (R&D) will contribute to creating the demand for venture capital in the future. Besides, we also need to learn from the experience of Korea and India in forming high-tech parks, technology incubators as well as technology parks where high-tech enterprises, investment funds and research institutes, universities converge. In Vietnam, the government is currently implementing the construction of Hoa Lac high-tech park and Hoa Lac high-tech park.

Ho Chi Minh City. However, both of these technology parks have not yet come into operation, so they have not yet promoted their positive role in the activities of FDI and the field of science and technology.

A team of highly skilled technical workers and a team of professional business managers . This team includes: fund management experts, fund partners, highly skilled workers, consultants. It can be said that this is a key factor and a prerequisite for the development of the venture capital market. The experience of Singapore and India shows that some issues of concern to achieve this are: innovating the training mechanism at universities and vocational training institutions in line with the development trend of the knowledge economy; Developing human resources in high-tech fields according to standards suitable for the international working environment; Developing human resources in management fields such as business administration, finance, accounting, auditing, valuation, law, etc.

M&A is a complex type, depending on many factors such as ideas about science and technology, capital factors, primary market and OTC market, insurance, etc. Because M&A is a new type of business in Vietnam, learning from successful experiences as well as drawing lessons from failures in other countries is necessary and important to adjust to suit the economic and political conditions of our country at present.

IV. Some measures to promote venture capital activities in Vietnam

1. Perfecting the institutional environment to encourage the development of venture capital

a. Building a legal framework to support venture capital activities

The development of a legal framework for venture capital investment activities stems from the viewpoint that venture capital plays an important role in enhancing national competitiveness through promoting technological innovation, thereby contributing to improving the quality of Vietnam's economic growth in the process of international integration. Therefore, the state needs to develop a legal framework for venture capital investment activities with the aim of:

 Encourage venture capital investment in innovation.

 Protect the rights and assets of shareholders/members contributing capital to venture capital funds.

 Protect the rights and assets of the venture capital fund in the sponsored partners.

 The state controls venture capital investment activities.

Thus, in the context of Vietnam, the central government needs to present a clear and specific viewpoint on encouraging the development of venture capital investment for the purpose of socio-economic development, through a system of legal documents to institutionalize this activity. At the same time, the government needs to establish a separate State Management Committee on venture capital investment activities to develop a roadmap and implement policies to encourage venture capital investment in the innovation process. In the immediate future, the government needs to issue regulations guiding venture capital investment activities. Then, the government needs to proceed to draft a separate law for this activity. In some countries such as India, venture capital investment activities are governed by two separate laws for domestic venture capital funds and foreign venture capital funds. This is also reasonable in the transition period of developing economies in order to effectively control and attract domestic and foreign capital sources.

A separate legal framework for venture capital investment activities must also be placed within the general legal framework regulating the activities of investment funds. Therefore, the state needs to develop a set of laws governing the activities of investment funds in general, not just for securities investment funds as it is now. Legal issues related to the activities of investment funds are governed by the economic legal system related to enterprise law, domestic investment encouragement law, foreign investment law, laws related to financial institutions, etc. Thus, along with developing a legal framework for venture capital investment activities, the state needs to review all legal documents that affect the formation and development of venture capital investment companies in Vietnam. Some contents

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