Vietnam - News and Regulations

INTERNATIONAL LEGAL STANDARDS - German Law Centre opens to promote int'l standards

HA NOI — The German Law Centre at the Ha Noi University of Law formally opened yesterday to help boost the professional skills of Vietnamese lawyers, officials and scholars to international standards.

The new centre was created as part of the co-operative programme in law and justice undertaken by Viet Nam's Ministry of Justice and the German government during the 2009-11 period and will be supported by Germany's Friedrich Ebert Institute for the first three years of its operations.

Deputy Minister of Justice Hoang The Lien told the opening ceremony that the establishment of the centre, which marked the 35th anniversary of diplomatic relations between Viet Nam and Germany, would create opportunities for legal experts and academics to engage in exchanges of research and information.

Lien, who is also rector of the Ha Noi University of Law, said the centre would hold professional training courses in both Vietnamese and German with lectures given by from German professors and would set up a legal library with thousands of volumes and documents in the near future.

The head of the Friedrich Ebert Institute, Anke Fuchs, said she hoped the centre's activities would contribute to the perfection of Viet Nam's legal system through introducing experiences from Germany and other countries. — VNS

FINANCE - Ailing banks face merger danger

The deadline for Vietnamese small sized banks to raise capital to the compulsory capital level of three trillion dong is coming, but many of them have not yet known to find out the capital source for the raising plan.

20 of 37 operational banks have not reached the chartered capital level under current regulations. However, according to SBV, there to date have been six applications of capital increase of banks obtaining approval. In which, three applications were submitted by the over-3 trillion dong banks. Therefore, remaining 17 banks have big headache to arrange capital. In line with ordinary way, most banks carry out hiking capital via issuing shares to existing shareholders and employees while others are seeking domestic and foreign strategic partners or listing on the stock market. But any way is difficult.

At shareholder meetings of small banks, the important concern was how banks will raise chartered capital and sell shares. As a result, a huge volume of small sized bank shares will be offered between Q3 and Q4 of 2010 along with a lot of shares of listed banks capitalised at trillions of dong, leading to the bank share oversupply on Vietnamese stock market by the year end.

More importance is that banks will have to control the credit growth target at 25 percent. Meanwhile, network expansion of banks are more limited than previous because opening a branch will cost 100 billion dong in HCM City or Hanoi and 50 billion dong in other provinces instead of 20-50 billion dong as previously. Due to this, just if banks finish capital increase, they will be hard to ensure an expected dividend for shareholders.

On the market, the transaction of small sized bank stocks is almost frozen at a price of lower face value so these banks will face many hardships as offering new shares. Even, internal shareholders also do not like to take new shares of their banks because they only can trade shares (additionally issued stocks of banks) after two holding years from issue date according to current securities laws.

Le Ho Khoi, general director of Trang An Securities Co said that raising capital via the stock market at this time is very difficult because a line-up of enterprises (that find it hard in accessing bank loans) also use the method to hike capital.

Regarding technical factor, listing shares will help increase the liquidity for bank shares. But, this year many businesses including big banks plan to go public so the small banks will difficultly attract investors on the official stock market.

As assessed by National Finance Supervision Commission's chair Le Duc Thuy, in the current context, the faith of investors in bank shares is falling. Massive stock issues of commercial banks will damage to the interest of existing shareholders.

To finish the capital increasing plan, banks need foreign shareholders' support along with calling for capital from domestic shareholders, said Dr Le Xuan Nghia-vice chair of National Finance Supervision Commission. Factually, raising capital from foreigners is not easy for banks because current laws limit foreign ownership ratio in the banking field at no more than 15 percent.

Since the year early, only Vietnam International Bank (VIB Bank) succeeded in selling its 15 percent stake to Commonwealth of Australia Bank. Now other banks still are making negotiations.

Meanwhile, TrustBank is one of banks seeking foreign strategic investors to work out the chartered capital increase problem. Its chair Hoang Van Toan reported, TrustBank selected a foreign strategic shareholder but the director board has not agreed they [foreign strategic shareholder] to start capital contribution at this time when market price of bank shares remain low. We [TrustBank] cannot sell shares at low price and make our existing shareholders disappointed, he added.

Many banks proposed government to extend the above deadline of Decree 141 on the chartered capital roadmap of commercial banks.

Though seeing difficulties which small commercial banks have to face, Le Duc Thuy still kept his point of view that credit institutions not raising chartered capital under regulations will have to be merged to speed up banking M&As. There should not have too many small banks.

"M&A always is good for both the banks with enough chartered capital under laws and others who cannot raise capital. In addition, the M&A operation will help reduce the number of credit institutions being operational in such a small market like Vietnam", Thuy shared.

The relation between customer and bank is fairly loose so buying a bank does not mean to buy whole customer system of that bank. Moreover, a strong bank unlikely wants to shoulder an ailing bank, he said.

Quoting Hoang Xuan Quyen, deputy general director of Tan Viet Securities Co, banking is the business field with special conditions, meaning that businesses must meet standards on capital adequacy ratio (CAR). It seems that none of countries offer requirement on capital size of banks. Which basis did SBV apply to regulate in the minimum compulsory chartered capital of three trillion dong ($150 million).

The US Federal Deposit Insurance Corp (FIDC)'s statistics showed that US now has 6,839 commercial banks including 2,525 banks with total assets of below $100 million each. Total ownership capital of these 2,525 banks is $16.5 billion or average $6 million per bank. Whether only big banks can exist in Vietnam, he wondered.

Is it necessary to force small banks to reach the chartered capital scope of three trillion dong. In his opinion, there should offer requirement on minimum CAR. Depending on each character and business condition, each bank should select a suitable operation size.VNS

INFRASTRUCTURE FINANCING - Remodeling infrastructure finance

The state budgets and ODA resources from most countries across the world cannot fully meet capital demands for infrastructure development, and Vietnam is no exception. Recently, public private partnerships have emerged as a good model for infrastructure investment in Vietnam.

The model has been applied successfully over the past 20 years across the world. Public-private partnerships (PPP) describe a business venture between the government and the private sector-including both foreign and local companies-to build and operate large projects, usually public service ones, according to Tran Van Cuong, president of the real estate Nam Cuong Group.

Vietnam now has a severe capital shortage for infrastructure development. Besides the State budget and ODA resources, it would be more and more necessary to apply PPP models throughout the nation.

Both international and domestic experts emphasized that PPP was extremely essential for better infrastructure in Viet Narn, to attract more and more overseas investors and to help promote socio-economic development in the country.

The Ministry of Planning and Investment (MPI) was actively making up programmes to carry out PPP projects effectively with the hope to see $160 billion in the next 10 years for infrastructure development-half of which would likely come from the private sector, which would help ease the burden on the limited State budget.

Experts said that Vietnam's State budget only satisfied 20-30 percent of the total demand for infrastructure development.

Seven sectors would run trial PPP models, including roads, public services, airports, sea ports, railways, bridges and tunnels, according to the MPI.

In fact, there is currently no legal framework for PPP in Vietnam. minister of the MPI Vo Hong Phuc said, "The model is a new concept in Vietnam that we are researching; this form will generate great opportunities to lure investment capital for infrastructure development in the country."

Vietnam is now studying laws systems and learning experiences from PPP in other countries.

The government recently asked the MPI to co-ordinate with other relevant bodies to build up legal systems to lure investors under PPP forms. Running on trial PPP projects-a solid foundation to make policies for the model-was one of the proposals of the ministry, Phuc said.

Many international organisations such as the World Bank (WB) and the Asian Development Bank have been encouraging Vietnam to legalise PPP.

The WB was ready to back Vietnam's efforts to formulate an institutional framework and train staff for the realisation of PPP, said WB Country director Victoria Kwakwa.

Over the past two years, through policy-making assistance, the WB and Vietnamese partners had mapped out specific regulations on PPP so as to create a solid foundation for mobilising private resources for social investment projects.

The WB hoped that the policy framework for PPP would be completed and submitted to the government for ratification later this year, she said.

Experts said that a good collaboration between the government and enterprises would benefit both sides, as the State-developed public works could take full advantages of capital, skilled labour forces and the management of companies, which in turn would produce profits to support the State.

With these projects it is easier for local companies to access preferential loans, businesses say.

However, experts claimed that one of the most important factors in luring foreign and local companies to take part in PPP projects was transparency.

In the PPP legal framework, experts suggested some points. The framework should define accurately the support and warrantees of the government in each project, including advanced payments, loan access and land clearance.

It is also necessary to improve the capacity of agencies relating to PPP projects and to simplify administrative procedures in this area.

Last but not least, investors emphasized transparency in bidding procedures. The government had committed to enhancing the PPP model soon in the prioritised sectors of aviation and road transportation. The government would also strengthen the application of the PPP model in other sectors such as education, science and information technology.SGTD

NUCLEAR - Rosatom's plans in Vietnam

Electricity of Vietnam is working with the Rosatom state-run nuclear holding to build the first nuclear power plant in the Southeast Asian nation, Vietnam's government said Thursday in a statement.

Vietnam plans to build two nuclear power plants in the southern province of Ninh Thuan, near the resort city of Nha Trang, the statement said. The total capacity of the two plants will be 4,000 megawatts initially, it said.

Construction of the first plant will start in 2014 and will be operational from 2020, it said. Officials at Electricity of Vietnam were not immediately available for comment.MOSCOW TIMES

AVIATION - CAAV says aviation market back to strong growth path

Vietnam's aviation market is regaining its double-digit growth after the global economic turbulence hit the demand for international air travel, as shown in the first months of this year, according to the Civil Aviation Administration of Vietnam (CAAV).

Vo HuyCuong, director of CAAV's Air Transport Department, told the Daily on the phone that the country's overall aviation market in March expanded up to 24 percent year-on-year, leading the market to achieve higher growth this year than last year.

Cuong said more than five million passengers travelled by air within Vietnam as well as from and to this country in the first quarter of this year, up 19 percent from a year ago, when the global airline industry took a hit from the global crisis.

Cuong calculated the foreign segment accounted for 2.8 million passengers and this had been always a common trend over the years. However, the gap between the domestic and foreign segments is narrowing as domestic demand for air travel tends to grow stronger, particularly during challenging times.

Cuong said that the domestic demand for air travel continued to increase this year, encouraging both Vietnam Airlines and Jetstar Pacific to operate more flights and on new routes within the country.

Vietnam Airlines added more than 220 flights to its normal flight schedule from April 22 to May 4 to quench the thirst of people for having air-tickets to travel to their families and tourist destinations because there were major long public holidays during this period.

The national flag air carrier and Vietnam's second largest carrier Jetstar Pacific look set to increase flight frequencies and open new routes, especially from Hanoi to Nha Trang, Vinh and Chu Lai later this month and next month to transport more people from the north to sites of interest in central Vietnam during summer.

The additional flights give CAAV high hopes that Vietnam's overall aviation market will grow at least 14 percent this year. Last year, the market registered year-on-year growth ofonly8.4 percent to around 17.S million passengers.

Cuong said the 14 percent growth was a safe forecast even though VietJet Air was expected to join the market, hopefully in August this year. This first private airline licensed in Vietnam is completing procedures to commence its first commercial services, including having an air operator certificate (AOC).

* Jetstar Pacific yesterday began fare promotions which allow passengers to get much saving when flying with the low-cost carrier during the low season.

Like other Jetstar-branded airlines, Jetstar Pacific applies a programme called "Take a Friend for Free" in Vietnam. Under this promotion, every passenger who buys one of the special sale fares gets approval for one passenger to accompany them to travel for free.

Therefore, two passengers need to book fares from 415,000 dong until May 6 for their single trip with Jetstar Pacific from September 7 to October 27. The departure flights applicable to this promotion and from HCM City to Hai Phong, Hue and Vinh and vice versa will be on Tuesdays and Wednesdays from October 5 to 27.

From May 6 to 10, Jetstar Pacific will sell promotional fares from 207,500 dong for a single trip between HCM City and Da Nang; from 300,000 dong for a flight on the HCM City-Hue and Hanoi-Da Nang routes.

Fares start from 600,000 dong for a flight between HCM City and Hai Phong-Vinh, and from 650,000 dong for the HCM City-Hanoi route.

Jetstar Pacific said the discount fares were nearly 50 percent lower than normal rates and could be booked at www.jetstar.com. The allowable departure flights are from September 7 to October 27.

Other Jetstar-branded airlines are offering fares from $30 for a HCM City-Singapore flight, from $108 for the trip between HCM City and Darwin, and from $228 for the HCM City-Sydney route.SGTD

ECONOMIC GROWTH - Vietnam targets 7pct GDP growth in second half of 2010

Vietnam needs to target 7 percent economic growth in the second half of 2010 to meet its full-year expansion goal of 6.5 percent, prime minister Nguyen Tan Dung said at a ministerial meeting yesterday.

The nation's growth may increase by as much as 0.5 percentage points in the second quarter from 5.83 percent in the previous three months, according to a statement on the government's website.

Vietnam's economy has been "relatively stable" so far this year and the government will continue to prioritise the maintenance of stability as well as prevent inflation from accelerating to a very high level, according to the statement.

The Southeast Asian nation's government has been implementing measures including eliminating the links between market interest rates and the benchmark to buoy the economy. The central bank on April 14 issued guidelines for lenders to set their own rates for lending at "reasonable levels," to make it easier for companies to access funds.

Vietnam's economy may expand 7.2 percent this year, the fastest pace since 2007, according to HSBC Holdings Plc. That would be faster than the 6 percent forecast from the International

Monetary Fund.

Consumer prices climbed 9.23 percent in April from a year earlier, down from 9.46 percent in March, as food costs eased. The country expects to keep inflation at 7 percent this year.BLOOMBERG

Trade Confidence Index - Foreign investors believe in Vietnam's business environment

Vietnam ranks the third in the ranking list of UK based HSBC's Trade Confidence Index (TCI) report announced on May 4. The survey, which included 17 nations and territories, shows that Vietnam is the reliable business address for foreigners.

Accordingly, on the point ladder 0-200 pts, Vietnam was marked 143 after UAE 134 points and India 133 pts but before two Asian big business centres namely Hong Kong and Singapore with 111 pts.

Survey result of HSBC's TCI report is concurrent with other recent ranking of A.T. Kearney's FDI Confidence Index.

In FDI Confidence Index, Vietnam stood at 12th among over top 80 confident nations. Although after China, India, Brazil, Germany and Poland, Vietnam still led Asean countries in terms of FDI Confidence Index, followed by Indonesia (19th position), Malaysia (20) and Singapore (24).

Surveyed subjects of FDI Confidence Index of A.T. Kearney account for over $2 trillion of annual business profit in the world.

Meanwhile, another survey made by Singapore's InsightAsia Research Group showed that the confidence of consumers in Vietnam reached 132 points in Q1, after Singapore only but before China, Malaysia, Indonesia and Thailand.

TOURISM - Vietnam's tourism growth fourth in world

Till the end of April 2010, Vietnam ranked fourth in the world in terms of tourism growth, World Tourism Organisation reported.

Vietnam posted very impressive tourism growth of 30 percent in Jan-Apr, only after Sri Lanka, Saudi Arabia and Israel.

France took the lead among top ten countries attracting tourists.

According to statistics of Vietnam general Department of Tourism, the number of foreign tourists to Vietnam during first four months reached 1.8 million arrivals, jumping 35 percent year-on-year.VNNET

Banking - HSBC Vietnam launches new products for high-class customers

HSBC Bank (Vietnam) Ltd has introduced a new product called HSBC Premier, a comprehensive banking service for VIP customers nationwide. Using HSBC Premium, the customers can enjoy banking services wherever they live, work or travel all over the world without changing the methods to access all financial services.

The bank's new products provide customers borderless banking services, in which all the detailed information relating to credit history, bank account and contact person will be forwarded to the customers to the place they are going to live and work. Together with the standards of Global HSBC Premier, the bank also adds to the available banking products and services for individual those services that HSBC Vietnam offers.

In order to become the members of HSBC Premier, the customers are required to maintain the balance of one billion dong, equal to $50,000.vns

INSURANCE - Dai-ichi Life offers options for counter

Dai-ichi Life Insurance Co of Vietnam, Ltd, or Dai-ichi Life Vietnam, yesterday launched its Index Option with an aim to help release policy holders of its Universal Life product from inflation concerns.

The IndexOption will provide customers with higher security to make the most suitable financial plans for themselves and their families Dai-ichi Life Vietnam said in a statement obtained by the Daily.

Takashi Fujii, Dai-ichi Life Vietnam's chair and general director, explained that recent inflation had caused major concerns for financial planning, especially insurance policyholders. He added that money depreciation would affect the value of their insurance policies in the future.

"To acknowledge these concerns, we have researched to find out an efficient solution for this matter. We also expect that the Index Option will provide customers with higher levels of financial security and the ability to actively respond to changes in the economy;' Fujii said.

Policyholders have two options. With the Protection Option, life insurance protection value will automatically increase by 5 percent or 10 percent every year during the index term without medical re-examination. The increase aims to protect the life insurance value amount, especially during periods of high inflation.

With the Saving Option, the IndexOption provides a planned premium with an annual 5 percent or 10 percent increase during the index term. Therefore, the policy account value will accumulate and increase significantly. It will ease the impact of inflation and protect customers' long-term financial plans. Universal Life policyholders can choose one or both of the options. Product features like flexibility and transparency will still apply.

Dai-ichi Life Vietnam launched Universal Life in 2008. The company has since developed the product's features by determining customers' practical needs and expectations at every phase of life.SGTD

Forest Products - Forestry product producer increases chartered capital to 24b dong

Shareholders of Saigon Forest Products Import Export and Production Joint Stock Co (Vinafor Saigon) have approved the company's business plan with targeted revenue of 210 billion dong, pre-tax profit of seven billion dong and dividend ratio of 17 percent.

The company also planned to issue shares in order to raise chartered capital from 18 billion dong to 24 billion dong. In details, Vinafor Saigon will issue and allocate 600,000 bonus shares for existing shareholders at a ratio of 3:1. The company will announce to close the shareholders list for bonus share allocation after getting approval from the State Securities Commission.

Last year, the company reached total revenue of 169.08 billion dong, fulfilling 84.54 percent of the year plan; pre-tax profit of 8.97 billion dong and dividend payment of 20 percent.DTCHK