The impact of financial market development on the capital structure of listed enterprises in the ASEAN Economic Community

for governments on fiscal sustainability. Therefore, private guarantors should be encouraged to design products and services based on needs and risks in line with the regulatory and supervisory framework established by governments.

Developing and promoting crowdfunding or venture capital: As SMEs remain heavily dependent on bank loans and access to capital is extremely difficult, finding and promoting alternative sources of finance for SMEs is becoming increasingly urgent. The advent of crowdfunding as well as the rise of venture capital has opened up new possibilities for securing capital for startups and SMEs. Therefore, guidelines from regulatory agencies to encourage and allow testing of innovative financial products and services within existing regulatory frameworks can be an important first step towards designing regulations that enable alternative finance to thrive in the region. Improving the investment climate and removing barriers that venture capitalists and SMEs face in accessing foreign capital will help increase the flow of finance to high-potential SMEs. Furthermore, the digitalization of financial services needs to be embraced by policymakers in the region. Harnessing technology to deepen financial inclusion in ASEAN requires greater collaboration between policymakers, industry associations, and private sector experts. Similarly, developing diverse market segments such as venture capital, factoring, and leasing markets would be a good way to improve SMEs’ access to assets. Singapore has established a social securities exchange that provides a trading platform and an efficient capital raising mechanism for social enterprises (including micro-entrepreneurs). With a significant portion of Asian SMEs in export-oriented industries, providing effective financial support in foreign exchange hedging and trade finance is also valuable.

Promoting investment, pension and insurance funds : Developing domestic capital markets and contractual savings is important to finance long-term investments. However, the shift from short-term to medium- and long-term funding requires certain policy initiatives with a long-term vision, such as

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such as gradually expanding the maturity of government and corporate bonds and accelerating pension reform. Developing the pension and insurance sectors with added value is strengthening the country's social security system. The development of liquid and well-functioning domestic bond markets provides long-term funding for infrastructure investment. A key factor in this development is the strong presence of domestic institutional investors with long maturities - such as state-sponsored pension schemes, mutual funds and domestic insurance companies. Institutional investors not only mobilize long-term savings for long-term investment, but also reinforce market discipline by exercising creditors' rights in monitoring corporate performance. In addition, well-developed pension and insurance sectors will also have an impact on the expected demand for the long-term segment of the local currency bond market in the future as the maturity of instruments gradually lengthens. Some middle-income countries including Indonesia, Malaysia, the Philippines and Thailand have promoted investment funds for the development of pension and insurance sectors, but the scale of assets under management by institutional investors in the region remains much lower than in Europe and the US.

5.2.2. Policy implications for Vietnam

The Vietnam Stock Market Development Strategy to 2030, with a vision to 2045, sets out the general goal of building and developing the stock market to become the main medium- and long-term capital channel for the economy. The specific goal is for the size of the stock market to reach 85% of GDP (adjusted) by 2025, and 110% of GDP by 2030; The bond market size strives to reach 47% of GDP by 2025 and 58% of GDP by 2030. The growth rate of emerging securities is about 20 to 30%/year, the number of investors reaches 5% of the population by 2025 and 8% by 2030 with a reasonable structure of institutional investors, professional investors, individual investors, domestic investors, foreign investors... To achieve the above goals, the Government and the Prime Minister have issued many directive documents, not only recently but also since the second half of 2021. In which, the Prime Minister has put forward 3 consistent and consistent guiding viewpoints: (1) Encourage and create all favorable conditions for organizations and individuals to participate in the market, operate healthily, effectively, and comply with regulations

law; (2) Resolutely handle individuals and organizations that intentionally violate regulations, group interests, illegally profit, and protect the interests of investors and legitimate, law-abiding businesses; and (3) Take all necessary measures to stabilize and develop a public, transparent, safe, healthy, and sustainable market, contributing to promoting socio-economic development. The spirit is: to clean and make the market healthy, protect the rights and legitimate interests of the investor and business community, and put the market on the path of effective and sustainable development. Based on that direction, management agencies have also proposed a system of solutions to develop the stock market in a synchronous manner and have initially achieved certain successes. Specifically, the financial market is increasingly developing in a balanced direction between the stock market and the bond market, in which the bond market is starting to become a medium and long-term capital mobilization channel for businesses in addition to the bank credit channel. The size of the capital market grew by an average of 28.5% per year in the period 2016 - 2021, reaching 134.5% of GDP in 2021, 3.5 times the size in 2015. Of which, the size of the stock market capitalization is equivalent to 93.8% of GDP; the size of the bond market reached 39.7% of GDP (of which government bonds are 22.7% of GDP and corporate bonds are 14.2% of GDP). Liquidity in the stock market in 2021 increased by 258% compared to the average in 2020 and continued to increase in the first months of 2022, with an average of VND 30,800 billion/session. The derivatives market continues to be vibrant, in 2021, the average trading volume of futures contracts on the VN30 index increased by 21% compared to the previous year. Along with that, in recent times, the legal framework on the stock market and bond market has been regularly improved from the level of laws, decrees, to circulars and regulations, procedures to suit the development of the market and approach international standards with the promulgation of the 2nd generation Securities Law in 2019; typically before 2019, according to the old Securities Law, the supervision of the stock market was in 2 layers: the first was the Stock Exchange and the second was the State Securities Commission, since 2019 the amended Securities Law has increased the direct review layer of securities companies when participating in the market. During the period from 2015 to present, the Ministry of Finance has submitted to the Government and the Prime Minister 18 Decrees, 06 Decisions and issued them under its authority.

over 45 Circulars. However, in addition to the positive results, the rapid growth of the stock market and the bond market in recent times has created potential risks. Specifically, in the stock market and the derivatives market, there have been increasingly sophisticated price manipulation and price fixing phenomena, many securities codes have been pushed up in price without being linked to the production and business activities of the enterprise; the information disclosure obligations of a number of public enterprises, listed companies, and investors have not yet ensured quality. The rapidly growing corporate bond market continues to create risks due to individual investors who do not fully understand the law in investing and trading individually to participate in buying bonds. Some cases have committed fraud when identifying themselves as professional securities investors to buy individual corporate bonds. The Vietnamese corporate bond market, in terms of GDP ratio, is not large compared to other countries, but it is risky because 39% of issued bonds are from real estate enterprises (while credit institutions account for only about 35%; construction sector 5.4%; securities companies 3.3%...); not only has the issuance scale increased, but the interest rate of real estate corporate bonds is also up to 12 - 13%/year. In addition, nearly 30% of real estate corporate bonds have no collateral or are secured by shares, so the quality of collateral is poor and the risk level is high; 80% of the value of issued bonds belongs to unlisted enterprises. Therefore, the ability to access information and transparency of enterprises is very limited, and information on the use of cash flow is ambiguous (as in the case of Tan Hoang Minh), leading to risks for buyers. Not only that, Vietnam currently lacks credit rating information in the debt issuance market. And more dangerously, the above risks of the corporate bond market are at risk of cross-contamination to banks and securities companies because the majority of real estate corporate bonds are held by banks and securities companies affiliated with banks (specifically, commercial banks account for 30%; securities companies 30-31%; other organizations 26%; foreign investors and individual investors only about 5%-10%). Along with that, the compliance with legal regulations of enterprises, investors, and service providers is not high; some organizations providing services in the securities market such as auditing, accounting, and valuation organizations... do not meet the requirements.

quality and professional ethics violations. Many individual investors are not fully equipped with legal knowledge and market understanding, buying and selling based on rumors, chasing high interest rates, and posing many risks. Therefore, to promote the safe, healthy and effective development of the financial market, it is necessary to protect the legitimate rights and interests of investors; to do that, it is necessary to focus on some key solutions as follows:

Market management must be associated with the completion of the legal framework : For the stock market , focus on improving the quality of goods, promoting equitization, divestment of state-owned enterprises associated with listing on the stock market; enhance compliance of enterprises in the market. Focus on implementing solutions and policies to support enterprises and increase the attractiveness of the stock market such as: cutting administrative procedures, adjusting down service prices, fees and charges in the securities sector; implementing solutions to ensure the safe and smooth operation of the trading system. For the government bond market , develop the government bond market to become a standard market in the financial market to meet the needs of capital mobilization for the state budget and support the restructuring of the budget and public debt in a safe and sustainable direction; ensure the mobilization of resources to implement the socio-economic development plan and the economic recovery and development program. For the corporate bond market , develop the corporate bond market in a sustainable direction to become an important capital mobilization channel for enterprises, focusing on developing a transparent secondary market, building market standards, clearly separating bonds issued to the public and bonds issued privately. At the same time, the Ministry of Finance needs to review and submit to the Government to amend the regulations on the issuance of private corporate bonds in Decree No. 153/2020/NDCP in the direction of tightening in a reasonable manner, strictly managing securities companies that advise on issuance; weak enterprises are not allowed to issue; narrow down the target of bond mobilization to only serve the purpose of project investment and implementation; enterprises must immediately notify the Stock Exchange, the State Securities Commission after issuance and regularly publish information on the use of money from bond mobilization; clearly stipulate the types of bonds that individual investors are allowed to buy and trade to guide

Individual investors buying corporate bonds are safer, more public and transparent. In addition, the Ministry of Finance also needs to research and recommend the Government to submit to the National Assembly a comprehensive review of the provisions of the Securities Law, including the scope of public issuance, private issuance, the concept of professional securities investors in the Securities Law and regulations on handling violations in the securities market and some related contents.

Actively implement the restructuring of the stock market, improve the competitiveness and quality of market intermediary institutions : For market intermediary organizations including securities companies, auditing organizations, valuation organizations, fund management companies, credit rating organizations, etc., focus on improving professional ethics and service quality of service providers. Review and classify each service provider, in case of violations, the license will be revoked; encourage service providers in the stock market to deploy Fintech applications, in accordance with the needs of investors and market development. At the same time, continue to develop credit rating services, encourage the provision of services and improve the capacity of these organizations. Vietnam has too few credit rating companies, so it is necessary to consider and allow the establishment of more credit rating companies, shorten the rating time so as not to lose opportunities for businesses; Along with that, we need to review the approval time and procedures to be faster. Modernize information technology, research the legal framework for developing new services and products on the Vietnamese stock market; typically, encourage and soon have guidelines for managing the use of Fintech in securities business operations: automatic trading by robots (robo-trading), automatic investment consulting (robo-advisory), automatic portfolio management (AI asset management), research and build a testing mechanism for securities products and services applying Fintech technology before officially granting a license for implementation.

Improve the quality of investment demand towards sustainable investment demand : Strengthen training and development of individual investors with full knowledge when participating in the market through propaganda work, increase the provision of official information to help raise awareness, understanding and financial skills of investors. At the same time, promote

promote the formation and operation of professional investment institutions and professional securities investors, prioritizing the development of long-term investors such as investment funds, voluntary pension funds, insurance companies... Typically, to promote the operation of pension funds in Vietnam, the thesis recommends some more specific solutions as follows: First , strengthen propaganda and raise awareness of individuals and businesses about pension insurance ; especially voluntary pension insurance, voluntary pension funds. Because actual data in Vietnam shows that only state-owned enterprises participate in compulsory pension insurance for employees, while the number of people participating in voluntary pension insurance is very small; while pension insurance and voluntary pension funds have begun to be implemented after Circular No. 115/2013/TT-BTC of the Ministry of Finance was issued and took effect from October 15, 2013. In the period of 2013 - 2017, the contribution of voluntary pension insurance was still modest compared to the entire insurance market in Vietnam, specifically the number of new contracts of voluntary pension insurance accounted for only 0.47%, the insurance value accounted for 0.21% and the insurance premium accounted for 0.94% compared to the entire market; as of May 2018, according to data from the Department of Insurance Management and Supervision, the total revenue from new premiums of voluntary pension insurance accounted for only 0.63% of the total revenue from new premiums of insurance business (Tran Nguyen Minh Hai, 2019). Therefore, the State needs to have a propaganda plan to help people understand the benefits that pension insurance brings. Second, the current policy to encourage the development of voluntary pension programs (voluntary pension insurance products and voluntary pension funds) in Vietnam only focuses on tax and fee incentives, but is still relatively low compared to countries that are applying this incentive mechanism. Specifically, in Vietnam, the voluntary pension insurance premium paid by employers for employees is deferred from personal income tax and the pension insurance premium paid by individuals will be deducted before calculating taxable income with a maximum deduction of VND 3 million/month (Decree No. 146/2017/ND-CP dated December 15, 2017 amending and supplementing a number of articles of Decree No. 100/2016/ND-CP dated July 1, 2016 and Decree No. 12/2015/ND-CP dated February 12, 2016); whereas in other countries, the tax-free portion of income from voluntary pension contributions is often set at a minimum level.

at least equal to GDP per capita. Therefore, the Ministry of Finance needs to consider comparing with Vietnam's GDP per capita to prescribe more appropriate tax exemptions.

Improving the effectiveness of supervision : To meet the requirements of market management and supervision in the context of increasingly sophisticated and diverse violations, in the coming time, the Ministry of Finance needs to continue to direct the State Securities Commission and functional units to strengthen inspection and supervision to both ensure market development and detect and handle manipulations in the stock market, especially the stock and corporate bond markets such as providing false information or using multiple unusual trading accounts... Accordingly, manipulations must be strictly punished, and businesses that comply with regulations must be supported to develop effectively and sustainably. The Ministry of Finance also needs to increase inspection resources for the State Securities Commission and apply technology to support management and supervision activities closely and promptly.

Strengthening coordination between ministries, branches and international cooperation activities : The Ministry of Finance needs to closely coordinate with the State Bank, the Ministry of Planning and Investment and relevant ministries and branches in the operation and management of the stock market, the bond market with the money market, and bank credit to ensure publicity and transparency in the capital market, stabilize the financial market, thereby contributing to stabilizing the macro economy. At the same time, regarding information and propaganda work, the Ministry of Finance and ministries and branches will coordinate with the Ministry of Information and Communications, and press agencies to strengthen the coordination mechanism to ensure the effectiveness of propaganda work, provide authentic information on the Government's viewpoints and directions to stabilize market sentiment, create favorable conditions for businesses and investors to confidently participate in capital mobilization and investment in the capital market effectively. In addition, the Ministry of Finance needs to coordinate with international organizations to implement solutions to soon upgrade Vietnam's stock market from frontier to emerging to attract investment capital (especially foreign investment capital).

Strengthen and improve the effectiveness of official communication channels : It is necessary to provide official and accurate information on policies and directions for management.

The impact of financial market development on the capital structure of listed enterprises in the ASEAN Economic Community - 21

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