## Mongolia

Foreign investment law was first enacted in 1990 but proved insufficient because of the lack of tax incentives, guarantees and protection measures, and the investment promotion zone. A new foreign investment law was passed in 1993 to attract foreign capital, with the same rights as Mongolian enterprises, and provided incentives of tax and remittances to overseas countries. An announcement was made in February 1991 of the government's intention to establish four "free economic zones," but little progress has been made on this.

## V ietnam

The law on Foreign Investment, proclaimed in 1988 and amended in 1990 and 1992, offers advantageous conditions to foreign enterprises. It allows 100 percent foreign invested capital, gives guarantee to invested capital, and allows remittance of profit. It also gives preferential tax treatment according to the degree of priority of projects. To facilitate export oriented foreign direct investment the government is giving several types of preferential treatment to the export oriented enterprises in export processing zones.

## 3 -1-7 Financial Reform

In order to mobilize the necessary funds for development, it is important to foster a sound and efficient financial market. The areas of reform are: the banking sector, capital markets, monetary policy measures, and so on. In centrally planned economies there is no distinction between the central bank and commercial banks. This led to inefficient allocation of funds and often monetization of fiscal deficits, the source of high inflation. Thus, reform in this sector is needed to restore macroeconomic balances and improve microeconomic efficiency. In every country the separation of central banking activities and commercial banking activities was accomplished, and private banking activity, sometimes as a joint venture with foreign banks, has been permitted. There are several criteria for financial reform: interest structures such as positive interest rates, term structure and difference in long-term and short-term interest rates. Capital markets are still underdeveloped. The stock exchange is open only in China and Mongolia. The development of a secondary market is of significant importance because of the need to finance the still-large budget deficit.

## Cambodia

Major reform in the banking system took place towards the end of 1989. The Cambodian banking system is composed of the National Bank of Cambodia, its foreign trade subsidiary, 19 provincial branches and two joint venture commercial banks. Up to 1993, 22 joint venture banks and branches have already been established. The majority of the joint ventures involved banks from Thailand, Malaysia, Hungary France and other countries.

## China

Since 1979, specialized banks were established under the mono bank system, and many non-bank financial companies like the "CITTIC" were permitted. The People's Bank of China became the central bank in 1984. From 1985, transactions between the People's Bank and other banks were transferred to a normal "Lending and Borrowing" relationship from former "Money Distribution System." Since 1986 many commercial banks were set up. In order to encourage deposits, index-linked savings deposits were introduced and the base interest rate was raised in 1990. In 1988, limited share markets were introduced and, in 1989,