Vietnam - News and Regulations

PRIVATIZATION - Vietnam to sell part of MobiFone, Bidv in 2010: prime minister

Vietnam plans to sell stakes in leading telecoms firm MobiFone, the country's top oil product distributor Petrolimex and state lender Bidv this year among major state-owned companies, prime minister Nguyen Tan Dung said.

The sale of state-owned enterprises (SOEs), which also include textiles and steel corporations, is part of Vietnam's effort to complete a restructuring of the state sector that began in 1992, Dung told Reuters.

"The target is that by 2015 Vietnam will basically complete the work of restructuring SOEs," Dung said in written answers to questions from Reuters.

Most public offerings of state-owned firms in Vietnam leave the state with a majority stake, and they are often referred to as "equitisations."

Dung did not give specific timing for the sales of stakes in the three firms.

The sale of shares in MobiFone, a mobile phone operator owned by state group VNPT, had been scheduled for the second quarter of 2009 but has been delayed. Local media early last year cited a Credit Suisse report that valued the firm, which has subscribers across the country, at $2 billion.

Bidv, or the Bank for Development and Investment of Vietnam, is the second-largest lender by assets after state-run Agribank. A partial sale of Bidv has been expected for years after minority stakes in Vietcombank and Vietinbank were floated on the stock exchange.

Hanoi-based Petrolimex commands 55 percent of Vietnam's retail fuel market.

State-owned companies, including oil group PetroVietnam and Vietnam Electricity, currently account for 40 percent of Vietnam's gross domestic product, which grew 5.32 percent last year to nearly $92 billion, government figures show.

Dung said that by the end of 2015 there would still be 400 businesses wholly owned by the state, including those operating in the areas of security, defense and other key economic sectors.

"Vietnam encourages enterprises of all economic sectors, including the sector with foreign direct investment, to develop without any limits on their size," Dung said.

FOREIGN DIRECT INVESTMENT - MPI to have more rights in licensing of FDI projects

A big question mark still hangs over who should have the final say in licensing foreign invested projects.

According to a draft decree, which will replace Decree 108/2006/ND-CP guiding the implementation of the Investment Law issued in 2005, the Ministry of Planning and Investment (MPI) would regain its licensing agency status for specific foreign direct investment (FDI) projects.

The Investment Law, effective from July 1, 2006 put an end to the MPI's status as an FDI licensing agency and gave full power to local governments, plus industrial park and export processing zone local management authorities.

Remanding the reins of power back to the MPI is one of three options made by the draft decree's author, the MPI's Legislation Department.

If the first option gets the green light, the MPI would be in charge of granting investment certificates to strategic FDI projects, projects requiring prime ministerial approval and FDI projects to be implemented in more than one locality.

In accordance to Decree 108's Article 37 issued on September 22, 2006, FDI projects to be approved by the prime minister are those in the aviation, ports, mineral exploitation, broadcasting, casino, cigarettes production, university, industrial park, export processing zone and hi-tech park construction segments. prime ministerial approval is also needed for FDI projects with investment capital in excess of VND1.5 trillion ($78.9 million), if they are in the power, mineral processing, infrastructure, beer and wine sectors.

The draft decree adds that FDI projects covering 100 hectares in delta regions and 200ha in mountainous regions or reclaimed land accommodating more than 20,000 people would also need prime ministerial approval. "Tightening the rights of local authorities in FDI attraction will be a suitable movement to control investment quality," said Hong Sun, secretary of the Korean Chamber of Commerce and Industry in Vietnam.

It would also guarantee all FDI projects were invested under the country's master plans, he said. Hong is also the chief executive officer of Hermes & Sun Development and Construction Company – which has invested in an industrial park project in Thuong Tin district, Hanoi. Suwes Wangrungarun, deputy general director of Thailand-based Charoen Pokphand Group, said licensing agencies' ability to appraise quality FDI projects was essential.

The draft decree's other options, are for FDI projects belonging to the mentioned-above categories to be appraised by the MPI before local authorities grant them investment certificates. The third option is the MPI to lead a taskforce representing concerned state agencies for appraising those FDI projects before investment certificates are issued by local authorities

The draft decree is expected to take effect in the second half of 2010. Professor Nguyen Mai, chair of Vietnam Association of Foreign Invested Enterprises, said the decentralisation policy to simplify administrative procedures for investors when setting up investment projects had actively contributed to booming FDI projects in Vietnam in last few years. "But some local authorities do not have enough appraising ability to ensure projects' quality," he noted.tton

CAPTITAL MARKET - MoF enhances G-bond issue of 2010

Ministry of Finance has expressed satisfaction over the success of the third tranche G-bond issue of 2010 on March 10. The government raised total 3.020 trillion dong of two-year bonds and 200 billion dong of three-year bonds from the big buyers including Maritime Bank, Vietinbank, Techcombank, ACB, VIB Bank, Eximbank and Bidv.

On March 18, the following bond tender valued at one trillion dong will take place on Hanoi Stock Exchange (HNX) and this is expected to be successful also.

The factor promoting the successful bond tender of March 10 came from the attractive coupon rate. Ministry of Finance approved the winning coupon rates of both above terms (two-year and three-year) at 12 percent pa, equivalent with SBV's ceiling level and higher one percentage point than the previous tender (on February 2010). However, the winning coupon rate remained much lower than the real negotiated interest rate of enterprises at banks. Yet, credit institutions (mainly commercial banks) still purchased and used these 3rd tranche G-bonds on the open market (OMO). deputy general director of a bank said, banks can trade bonds to take the short term dong on OMO with the interest rate of about 8 percent a month for terms of 1-4 weeks.

The problem is whether banks will continue purchasing extra trillions of dong in bonds or whether the finance ministry will fix a higher coupon rate band or not. As estimated, credit institutions will not buy additional high volume of G-bonds because they could not raise much capital at low deposit rates. Furthermore, total daily trading value of OMO is limited because banks must meet a lot of strict requirements (along with valuable papers) to borrow capital via OMO. Some times Central Bank had to limit the capital pumping into OMO at the highest level of seven trillion dong a day.

MoF's coupon rate increase inflected right the demand and supply of market because from the start of March 2010, the yield rate of bonds on Hanoi Stock Exchange surpassed 11.5 percent pa. Financers forecast that the coupon rate of G-bonds could be hiked further to new highs if the problems in banks' liquidity are treated.

Currently, because of the difficulties in credit development, some banks are restructuring bond portfolio and focusing on the bond trade including both corporate and international bonds. In 2009, few banks decided to invest in short term bonds because of high safety rate instead of depositing money at foreign banks, which brought huge profits to banks.

Notably, banks paid more attention to corporate bonds. When cannot borrowing bank loans, enterprises used to issue 1-2 year corporate bonds at floating coupon rates (equalling to 12-month saving rates of credit institutions plus 3-4 percentage points). According to regulations, the coupon rate of corporate bonds is not limited by SBV's ceiling interest rate. But, domestic corporate bond is not the absolutely safe finance product. One bank bought bonds of a state-guaranteed group with the annually fixed coupon rate on every December 31. But when the interest payment date came, the group [issuer] asked to delay the payment to extra three months.

As planned, total G-bond capital assigned to ministries, sectors and local governances will be 56 trillion dong, particularly 20.2 trillion dong will be managed by five ministries of defense, traffic and transport, agriculture and rural development, health and police and the remainder will be allocated to local governances. Thus, MoF will have to issue at least 56 trillion dong of bonds to the state budget, excluding the bond volume for paying advances of State Treasury in 2009, some state corporations and groups.

Since the beginning of 2010, Vietnam has issued 3.297 trillion dong already.

In 2007, the G-bond issue in dong attracted many foreign investors. But presently, no foreign investor almost joined Vietnam's dong bond tender for the fear of the appreciation of US dollar against the dong. Since last November, US dollar price increased total 6.8 percent against the dong.VNS

Investment funds - Funds change investment targets

Foreign investment funds have started to change their investment strategies.

Previously, financial-banking sector, real estate and domestic big producers were the first choice of foreign investment funds'. However, in 2010, many funds have different perspectives on investment opportunities in Vietnam.

Dang Minh Loan, investment director of VOF fund-VinaCapital Co, said that her fund's strategy this year will be to focus on companies in fields such as education, health and agriculture. Explaining about this change, Loan analysed macro-economy this year is forecasted to have many changes. So, it is hard to predict about sectors that are being impacted directly from the macro-economy such as financial-banking and property.

In addition, VOF greatly appreciates the potential of the fields of education, health, agriculture in Vietnam. For example, as for education sector, the number of private schools currently has not met the demands of society. Even, there is still lack of standard private schools with large scale. This is similar to the health sector. Therefore the potential of these areas is very attractive.

As for agriculture field, supporting services for the development of agriculture such as pesticides, fertilisers and transportation, are a matter of VOF's concern. VOF has invested in Lam Thao Fertiliser & Chemical Co. This year, VOF expected disbursements the capital of some $50-100 million.

IDG Ventures Vietnam Fund specialising in information technology is also planning to debut a new fund with a total investment of $150-200 million to invest in health and education.

Since the beginning of March, VinaCapital has cooperated with inProjects, a group specialises in providing professional services on project management for trade centre, entertainment, tourism and hotel, to establish VinaProjects Co that will operate in field of supplying service products on project management, design and asset management in Vietnam.

Thus, VinaCapital officially expanded business to service activities of real estate sector, a very potential market.

Similarly, Louis Nguyen, director board's chair of SAM Co that is running two investment funds in securities and real estate and listing shares on German Stock Exchange, said that this year there will be many changes in investment strategy of these two funds. As for securities fund, instead of investing in big trade names and blue-chips like earlier, the fund's aim is small and medium sized enterprises (SMEs). Notably, the fund will stop disbursement on non-listed firms that were the first goals in the fund's portfolio previously.

As for real estate fund, SAM has started a new fund with the name "Smart Money" under a different investment model. The fund is cooperation between a big investor and domestic and foreign specialists in many sectors with an aim to create value for the fund. The fund's goal is to seek assets that are being evaluated below the real value and companies that plan to become public companies to invest in.

Changes in investment strategies of foreign funds will be factors that domestic investors should care about in order to have fuller look on the market.tbkt

BANKING - VIB plans to reach 2010 pre-tax profit of 906.7b dong

Vietnam International Commercial JS Bank (VIB) yesterday organised the 2010 annual shareholder meeting in which the chair Han Ngoc Vu reported that the bank last year reached total assets of 56.639 trillion dong, a year-on-year growth of 63.1 percent, total deposits of 1 at 34.210 trillion dong, total outstanding loans of 27.353 trillion dong, pre-tax profit of 614.3 billion dong, up 166.5 percent against 2008 and bad debt ratio of 1.27 percent.

Currently the bank has 117 business sites in 27 cities/provinces with nearly 2,500 staffs.

Last December, after issuing extra 60 million shares to the existing shareholders, VIB Bank's chartered capital increased to three trillion dong. The bank plans to offer 20 percent of three trillion dong to a foreign strategic shareholder but the plan yet to be fully completed.

In late 2009, VIB also established VIB Asset and Debt Management Co Ltd (operating under the one member limited company) with an initial chartered capital of 50 billion dong.

On March 17, VIB-Ngo Gia Tu Co kicked off work on VIB-NGT building at No 16 Phan Chu Trinh St, Hoan Kiem Dist, Hanoi, which will become the headquarter of VIB later.

This year VIB could hike its chartered capital from current three trillion dong to 4.250 trillion dong through three share issue phases. Firstly, the bank will issue 40 million more shares to the existing shareholders to raise capital from three trillion dong to 3.4 trillion dong. Secondly, VIB will retail 60 million shares to the foreign strategic partners. If calling capital from a foreign strategic shareholder or negotiations between two sides is not successful, VIB will delete the second capital increase phase and only reach the maximum chartered capital of 3.4 trillion dong in 2010 fiscal year.

Lastly, 25 million odd shares of VIB will be offered to the foreign strategic shareholder who bought shares of VIB in the second phase. Thanks to this, foreign strategic holding in VIB could be raised to maximum 85 million shares equalling to 20 percent of a 4.250 trillion dong chartered capital. Similar to the second phase, if facing inconveniences, the maximum chartered capital of VIB in 2010 will be only 3.4 trillion dong (ending phase 1) or four trillion dong (ending phase 1 and 2) in 2010 financial year.

In addition, Han Ngoc Vu revealed, his bank has not been able to list on the stock market because the negotiations with foreign strategic shareholder have not come into fruition. "We are [VIB] seeking a foreign strategic partner", he said. INTELLASIA

Infrastructure - Transport infrastructure projects face cash crunch

Funding is expected to be a major problem for transport infrastructure works this year, with allocation by the government falling short of requirement and investors still reluctant to open their purse strings.

The Thai Bao Kinh te Vietnam (Vietnam Economic Times) newspaper quoted the Ministry of Transport as saying on Monday that work on 40 new projects would start this year in addition to many ongoing projects.

They include the HCM City - Long Thanh - Dau Giay Expressway project, Van Phong International Port project in the central province of Khanh Hoa, and the Noi Bai - Lao Cai, Cau Gie - Ninh Binh, and Hanoi

- Hai Phong expressways in the north.

Minister of Transport Ho Nghia Dung has admitted funding would be difficult across the spectrum of official development assistance, bond issue, and built- operate - transfer (BOT) this year.

Truong Tan Vien, director of the ministry's Planning and Investment Department, said: "The amount allocated for infrastructure projects from the budget and bond issues this year is much lower than the actual need."

For instance, the allocation from bond issues is only 12 trillion dong ($628 million) while the ministry needs 17 trillion dong for projects dependent on bond funds, he said.

"If there is a cash crunch, some projects will be delayed and payment to contractors postponed," he said.

The State-run Vietnam Expressway Investment and Development Corp (VEC), which depends on BOT investors and government bond issues, said it is struggling to raise funds since commercial banks' interest rates are high, affecting bond issue.

"Last year VEC only succeeded in issuing bonds worth 423 billion dong ($22.1 million) with coupon rates of 8.9 to 10.5 percent while it needed 2.5 trillion ($130 million)," Tran Xuan Sanh, the corporation's general director, said.

Several BOT investors have said they find it difficult to mobilise capital, including for the expansion of National Highway 51 and the Trung Luong - My Thuan Expressway.vns

Economic Growth - Hanoi's Q1 GDP expected to rise 8.7pct

Prime minister, Nguyen Tan Dung, on March 17 chaired the working session between the Permanent government and leaders of Hanoi City on the implementation of large investment projects in the city and solutions for traffic jams and preparation for the Great Ceremony of 1,000 years of Thang Long - Hanoi.

Stating at the working session, PM allowed Hanoi to apply some specific mechanisms such as increasing registration fees, transportation fees for personal vehicles in the city, striving to limit the individual vehicles and particular mechanisms in dealing with violations.

PM acknowledged the efforts of the city in preventing the economic recession and maintaining high GDP growth rates at 6.7 percent in 2009 and it is expected to grow 8.7 percent in Q1, 2010.

In 2010, Hanoi's total social investment capital would be some 170 trillion dong with 352 existing projects and 206 others under preparation period.

Currently, the city is carrying out 80 key transportation projects.

In 2010, the city expects a socio-economic growth rate of 9.5-10 percent.vns

RENEWABLE ENERGIES - Vietnam government to approve renewable energy development plan next month

The Vietnamese government will approve the national renewable energy development plan between 2010 and 2015 with a vision for further development through 2025 next month, said Nguyen Anh Tuan, deputy director of Vietnam Energy Institute.

Under the plan, investors who invest in small-sized hydropower projects, wind energy, solar energy, geothermal energy, biomass and bio-fuel will receive much support from the government, Tuan noted.

Vietnam boasts a huge potential for harnessing 1,800MW wind energy, 150MW of biogas, 800MW of biomass, 350MW energy created from rubbish, 340MW of geological energy, and 4,000MW of hydropower.

Currently, renewable energy accounts for just 1 percent of Vietnam's total power capacity, or 12,000MW.

The country plans to raise the proportion of renewable energy sources to 3 percent of the national total commercial power supply through 2010, to 5 percent by 2020, and 11 percent by 2050. SGT