Vietnam - News and Regulations

INFRASTRUCTURE - Vietnam needs support of private firms in infrastructure development under PPP form

Noi Bai Airport expansion development project with total capital of over $5 billion recently was introduced at the conference on the applying of Public Private Partnership (PPP) form in airport projects in the country.

Though the project represented a proposal to pilot PPP form, foreign investors paid much attention to particular PPP projects in Vietnam. Attending the conference were top global well known air carriers namely Airis International Holdings LLC and Zurich Airport, and HSH Nordbank, KFW and ADB being known as capital providers for big projects.

According to Ronald Factor, managing director of Airis International Holding LLC, the project is designed on total 3,500 hectares aiming to build an airport capable of receiving 22 million passengers a year. Airis expected Noi Bai would become a multifunctional airport with logistic, training area and technical logistic.

Vietnam needs to develop modern airports with open-projection and long term vision to upgrade its competitive strength. Along with this proposal, Ronald said, PPP form is very suitable to develop airport infrastructure in Vietnam.

In three phases of this project, the first phase is estimated to cost about $1.4 billion dong to project and build service works, a part of logistic area and road leading to the airport. As the second phase, completion on five functional areas and aircraft parking will be done. In the final phase, some works like passenger station, research area and transport means will be built also.

Sharing Ronald's point of view, Jean Hubert Lebet, Swiss Ambassador in Vietnam said that the development process requires Vietnam to further strengthen infrastructure specially road system, seaports and airports. "Vietnamese government could not unilaterally carry out infrastructure projects without private companies. PPP is the significant form for Vietnam to do this," he said.

Factually, PPP investment form attracted special attention of Vietnamese government. Dang Huy Dong, vice minister of Planning and Investment (MPI) said that investment capital from private companies is a very important source to supplement the limited capital supply of state economy. Vietnam is always calling for the participation of private businesses in infrastructure construction in the country.

Along with Dau Giay-Phan Thiet expressway project, some investors lately made official proposal to apply PPP form in their projects, for example Dau Giay-Lien Khuong project.

A legislative foundation for applying PPP form in Vietnam is needed.VNS

BANKING IN VIETNAM - Foreign banks up smelling of rose

Locally incorporated foreign banks are upbeat about expanding their businesses after a year operating in Vietnam. In its first year as a locally incorporated bank, HSBC reported that it gained a pre-tax profit of one trillion dong ($52.63 million). Its net operating income before loan impairment charges was 2.4 trillion dong ($126.3 million), with a 19 percent return on shareholders' equities. Its total assets as of December, 31 last year amounted to 36 trillion dong ($l.9 billion).

HSBC Vietnam chief executive officer Thomas Tobin said the bank had continued to grow strongly throughout 2009, despite the global financial crisis.

"We see Vietnam as an important part of our emerging market strategy and are pleased to be contributing to the development of a robust and vibrant market for financial services," said Tobin.

Among the five licensed locally incorporated foreign banks in Vietnam, South Korea's Shinhan Bank was the only one yet to launch a locally incorporated bank in Vietnam, but had continued preparing for opening its head offices in HCM City and Hanoi, and possibly a Dong Nai branch this year.

ANZ outlined a new regionally-based strategy to accelerate its progress toward becoming the leading foreign bank in the Greater Mekong region in early March this year, after opening its 10th branch in Vietnam.

Key elements of ANZ's greater Mekong growth strategy included expanding capabilities in trade and supply chain finance, cash management, foreign exchange, debt markets and corporate banking services, as well as in retail banking and wealth services while expanding its branches and ATM networks.

"We are already making good progress in developing new products and services to support our regional franchise. We are now the leading bond underwriter in Vietnam and we've also introduced online liquidity and cash management tools which provide real time liquidity management to our clients, who are based in or operating in the greater Mekong region," said Thuy Dam, ANZ greater Mekong CEO.

Malaysia's Hong Leong bank opened its locally incorporated bank in October, last year with one head office and a branch in HCM City.

A central bank report on foreign banks in Vietnam reads that in 2009 foreign bank branches and locally incorporated foreign banks earned a total pre-tax profit of 2.6 trillion dong ($137 million). The year on-year credit and deposit growth rates of these credit institutions were 17.8 and 10.8%, respectively. Total assets grew by 14 percent against 2008. "Foreign banks are operating in a potentially lucrative market, and will invest to further participate in Vietnam's financial market through new services," reads the report.VIR

INSURANCE =- Insurance market promises strong growth

Although 2009 was not an easy year for any business sector, life insurers still posted very good results with growth of 14 percent in total premiums.

Therefore, 2010, which promises to see a strong recovery of the local economy, will also be a good year for general insurance companies to widen their operations and meet their business ambitions. In early 2009, as the global financial crisis hit the local economy, hardly any enterprises dared to set high business targets and almost all investment channels went through a dreary period. At that time, banks drastically lowered their interest rates, the real estate market froze and the stock market plunged to a bottom of 235 points, but insurers still had to ensure interest rates of about 5 percent to 8 percent per year for policyholders during the contract period.

However, general insurers still managed not only to maintain their existing operations but also to launch new products and to post good business results by the end of the year. According to the Association of Vietnamese Insurers, the life insurance industry achieved 11.86 trillion dong in premium turnover, an increase of 14 percent from the previous year with 4.26 million general insurance policies, a 10.2 percent growth rate compared to 2008. Of these policies, new contracts amounted to about 758,900, up by over one-third from a year earlier.

Despite the difficult year, the number of insurance agents also increased by one-third to over 94,600 by the end of 2009. Of those, Prudential had the largest number with over 33,300, Bao Viet was next with 18,150, and Dai-ichi Life was third with nearly 11,100.

In terms of premiums, according to the Association of Vietnamese Insurers, big names continued to hold the leading positions in 2009 as Prudential led the market with 4.73 trillion dong, Bao Viet ranked second with 3.72 trillion dong and Manulife was next with 1.26 trillion dong. Those were also the same positions in terms of premiums on new policies.

Commenting on last year's results, Jack Howell, CEO of Prudential Vietnam Assurance, said: "We had a very good year in 2009, with a very strong increase in APE (annual premium equivalent) and total premiums, the number of policies and agents, and case size." With strong support from Prudential Pic plus a set of strategic focuses in Vietnam, Prudential Vietnam Assurance has successfully sustained its position as the market leader in life insurance in Vietnam, he added.

Other companies also posted two-digit growth last year. Manulife Vietnam reported 25 percent growth in new premium value. Meanwhile, ACE Life Vietnam said it achieved growth of 60 percent in premiums last year.

Another foreign insurer, Dai-ichi Life Vietnam, obtained 744 billion dong from insurance premiums last year, with new policies increasing by 39 percent. This was the second straight year the Japanese-invested company posted profits from the local market in three years of operation.

Given such successes in the local market, insurers are setting even higher targets this year. In 2010, besides expanding agent networks and improving products, insurance companies said they would continue training and developing their agents to be more professional because of the important role agents play in explaining the usage of each insurance product as well as in taking care of customers during the contract period.

Howell of Prudential Vietnam presented an ambitious plan for this year as he said the company is planning to achieve a strong double-digit growth rate by increasing the number of agents and offices and improving productivity through innovative training programmes. "We will continue to be a market leader in profitable, growing product segments with a strong focus on unit-linked and protection products while protecting the margins," he added.

The company will also deliver superior customer service by improving key service areas including premium collection, customer communication, orphan customer management and claim processing, said Howell.

The representative of ACE Life said that the company is highly aware that every good product can be imitated, but service quality and human resources cannot. ACE Life now has enough products to meet local insurance demands, so what the company has to do this year is to develop human resources and enhance service quality, the source said.

Meanwhile, for Manulife who is one of the top three life insurance companies, developing products to meet the diverse demands of people in Vietnam will be the next significant step to deepen its presence here. The firm's market share is 10 percent, so it hopes to double the figure in the next five years, according to the company's leader.

Carl Gustini, CEO of Manulife Vietnam, said: "In Vietnam, a key part of our strategy is geographic and product diversification. We want to be able to serve all Vietnamese people. We will continue to develop innovative products meeting the specific needs of all customer segments, especially mixed products offering both investment and insurance protection."

Vietnam's economy is predicted to be one of the fastest growing ones among Asean countries in the decade to come. This means there will be an emerging middle class with higher disposable incomes, so the demand for better healthcare services will increase, Gustini said. "Therefore, there will be a huge need for medical and hospital insurance. Investment and healthcare products will be our immediate focus, and pension plans and retirement product development will follow," he revealed.

Meanwhile, Japanese-invested insurer Dai-ichi Life Vietnam wants to combine developing service quality with diversifying products to meet the target of increasing its market share in Vietnam.

Dai-ichi Mutual Life Insurance Co. acquired Bao Minh-CMG joint venture in 2007 to establish Dai-ichi Life Vietnam. It expanded its market share from 4.8 percent to around 7 percent in 2009 and plans to serve 8 percent of the market this year, then increase the figure to 10 percent in two years.

To reach these targets, Dai-ichi Life Vietnam plans to improve the human resources in its agent system and launch more products this year to meet various demands. "We hope that our agents will be pioneers in Vietnam in using netbooks with new software to provide consultancy for customers," Dai-ichi Life Vietnam general director Takashi Fujii said.

The company is the first insurer in Vietnam to use insurance request forms with five questions instead of 31. It has also had Japanese experts design documents in the style of Japanese comic books to help customers learn about complicated financial concepts.

The pie is still big

Most insurance companies entering Vietnam say that the local insurance market has yet to develop to its potential. Therefore, besides the old names, the market in recent years has welcomed new insurers such as Korea Life Insurance (Vietnam) and Great Eastern Life (Vietnam).

The representative of Prudential Vietnam pinned high hope on economic growth as he said that Vietnam would continue to be a high growth market. "With the entrance of more players in the market, more consumers will be able to appreciate the benefits of life insurance and learn how life insurance can help them secure their future," CEO Jack Howell said.

Meanwhile, Gustini of Manulife said that the life insurance market was just in its infancy, as industry revenues currently make up just 2 percent of the country's gross domestic product (GDP) while the share in developed countries is usually 8-15 percent of GDP.

"Figures from the Ministry of Finance show that about only 5 percent of the population has life insurance, much lower than in other developing countries, which have over 30 percent penetration rates. So, Vietnam represents a promising market with great potential and it is expected that the life insurance sector will continue to grow at double-digit rates in 2010," he added.

Some new market entrants have emerged and more will come because Vietnam is seen by many as a highly attractive market and this will raise standards and benefit consumers, the CEO of Manulife said.

"The challenge though is how we can maintain healthy competition. This is an area in which the industry and the regulators will have to work closely together to ensure the healthy and proper development of the Vietnamese insurance market," he concluded.

STOCK MARKET - Vietnam among cheapest markets, Mark Mobius says

Vietnam is one of the world's "cheapest" stock markets and Templeton Asset Management Ltd is "finding lots of bargains," Chair Mark Mobius said. The benchmark index rose the most in three months.

"Prices in Vietnam are very, very low," Singapore-based Mobius, who oversees about $34 billion in emerging markets, said at a briefing hosted by the Institute for Global Economics in Seoul today. "If you buy and hold, and if stocks are good, I think you should do very well."

Mobius told the briefing he recently visited Vietnam Dairy Products Joint-Stock Co., a "fantastic, very well-run" company, and said after his speech that he wasn't making a recommendation. Vinamilk, as the company is known, trades at 12.1 times estimated earnings, compared with a 12.3 multiple for the benchmark VN Index.

The measure of 224 companies on the HCM City Stock Exchange has climbed 7 percent this year, extending last year's 57 percent advance. The gauge today jumped 1.9 percent to 529.31, the most since January 26, and the best performer among 92 global indexes tracked by Bloomberg, after Vietnam News reported that inflation in Vietnam's capital city Hanoi slowed in April from March on lower prices of food and restaurant services.

The data indicates that "inflation is not that severe," said Nguyen Hoai Nam, an analyst at Kim Eng Vietnam Securities. "Therefore, monetary policy won't be as tight as the previous period. This boosted investors' sentiment today."

Saigon Securities

Saigon Securities Joint-Stock Co., the most active stock by volume and the second-biggest brokerage, rose by the daily limit of 5 percent to 44,200 dong, the most since December 21. The HCM City-based company said net income increased nine-fold to 271 billion dong in the first quarter on gains in stock investments, according to a statement on the exchange's Web site.

Overseas investors bought a net 179 billion dong ($9.4 million) of stocks on the exchange today, the most since April 2, boosting purchases this year to 3.6 trillion dong, according to the bourse's Web site. Net foreign purchases by companies and funds fell to 2.7 trillion dong last year, from 5.8 trillion dong in 2008 and 23 trillion dong in 2007.

Vietnam's price-earnings multiple is the fourth-lowest in Asia, ahead of South Korea, Thailand and Pakistan. The VN Index is less than half the record high of 1,170.67 on March 12, 2007, and it has slid 15 percent from last year's high of 624.1 on October 22. "Vietnam's stock market is undervalued, compared with peer countries around the region," Choi Chang Hoon, chief investment officer and acting chief executive officer at Hanoi-based Thang Long Meritz Fund Management Joint Stock Co., said in a phone interview today.BLOOMBERG

BIDDING RULES - New bidding rules for state projects

The government has passed new regulations that prioritise Vietnamese contractor and materials in State-funded projects.

Directive 494/CT-TTg states that global tenders [or goods and equipment can only be accepted if local bids do not meet required standards or when official development assistance CODA) stipulates that outside contractors must be considered.

State-financed projects, plans and programmes must be properly designed so that domestic contractors can undertake them, prime minister Nguyen Tan Dung said.

For the procurement of goods for ODA projects, international contractors are invited to join in the bidding when domestically made goods, materials and equipment are unavailable or Vietnamese enterprises fail to meet necessary standards, he said.

In addition, all transactions relating to the bidding process must be in dong unless goods and services are imported. The use of foreign labour is forbidden when suitably qualified Vietnamese workers are available, says the directive.

The directive also bans the organisation of international bidding for engineering procurement and construction (EPC) contracts if domestic bidder are capable of doing parts of the packages.VNS

WTO TRADE DISPUTE - Vietnam sues US over anti-dumping tax

Vietnam has filed a lawsuit with the World Trade Organisation (WTO) over anti-dumping tax imposed by the US on its frozen shrimp, Xinhua reported Thursday.

Vietnamese foreign ministry spokeswoman Nguyen Phuong Nga made the announcement here Thursday. This is the first time Vietnam takes such an action since it joined the WTO in January 2007.

Nga said the US decision to apply anti-dumping tax on Vietnamese frozen shrimp is irrational and unfair. Vietnamese enterprises do not dump this product in the US market.

At the meeting of WTO's Dispute Settlement Body (DSB) April 20, Vietnam requested the DSB to establish a panel on inquiring the US anti-dumping measures on frozen shrimp from Vietnam, said Nga.

In November 2004, the US Commerce Department said Vietnam was dumping frozen shrimps in the US market. The anti-dumping tax rates for Vietnamese shrimp exporters were fixed between 4.13 and 25.76 percent.

According to the general Department of Vietnam Customs, the country exported 210,000 tonnes of shrimp in 2009 and earned $1.67 billion, up 9.4 percent in volume and three percent in value over the past year.TIMES OF INDIA

POWER - AES Corp signs power purchase agreement in Vietnam

AES Corp said Thursday that one of its subsidiaries has signed a power-purchase agreement for a coal-fired plant in Vietnam.

Such agreements allow companies or investors to buy energy or energy capacity while providing operating income for the power provider.

Along with this agreement, the subsidiary, AES VCM Mong Duong Power Company Limited, signed an agreement with state-owned Vietnam National Coal-Mineral Industries Group to supply coal to the plant.

Both supply and power-purchase agreements are for 25 years.

The company said that it's working on other associated agreements for the power plant and expects to close the deal in the first half of 2011. AES expects to invest $400 million in the project. Its subsidiary already has 90 percent ownership of the project.

The power plant is expected to begin operating at the end of 2014.BUS WEEK

FUND INVESTMENT - Foreign funds renew interest in Vietnam

After two years of ignoring emerging markets due to the global crisis, foreign portfolio investors began paying attention to Vietnam again as the global economy began to recover.

Fund managers have now increased the mobilisation of foreign capital for investment in the country. Vietnam Asset Management (VAM) combined with Hong Leong Asset Management opened a second fund last month for individual investors in Malaysia to invest in Vietnam. Nguyen Xuan Minh, CEO of VAM, said that foreign investors, including individuals, were interested in the Vietnamese market.

Up to 40 percent of the $31 million expected to raise in the first month were registered by the investors within the first week. Meanwhile, Chris Freund, managing partner of Mekong Capital, said the company was raising funds from overseas investors in the US, Europe and Asia to set up a new fund named

MEF III with an expected size of USS150 million. "The fund will target consumer-driven sectors that benefit from the growth in Vietnamese consumer demand and the adoption of international business practices in those sectors in Vietnam," he said.

MBCapital, a local fund manager, is also in the process of meeting local and foreign investors to raise capital for its new fund. Nguyen Hai Ha, investment director of the company, said that the fund would hold about 300 billion dong and expect to close and disburse in May or June this year. He also said that in general, all potential foreign and local investors approached by the fund had a positive view on the Vietnamese market in the long term.SGTD