Vietnam - News and Regulations

[Thank you for your interest in this topic. This communication may be considered promotional in nature.]

With Compliments

Oliver Massmann

Rechtsanwalt

General Director – Duane Morris Vietnam LLC

Hanoi Office: 13^th Floor, Suite 1308 Pacific Place, 83B Ly Thuong Kiet, Hoan Kiem District

Ho Chi Minh City Office: 15^th Floor, Suite 1503/04, Saigon Tower, 29 Le Duan Street, District 1

ENERGY - Vietnam Oil And Gas Report Q4 2010 - New Market Report Published
The latest Vietnam Oil & Gas Report from BMI forecasts that the country will account for 1.52 percent of Asia Pacific regional oil demand by 2014, while providing 4.19 percent of supply. Regional oil use of 21.42mn barrels per day (b/d) in 2001 is set to reach a forecast 27.15mn b/d in 2010, then to rise to around 30.21mn b/d by 2014. Regional oil production was around 8.35mn b/d in 2001 and is forecast to average an estimated 8.82mn b/d in 2010. It is set to increase only slightly to 8.89mn b/d by 2014. Oil imports are growing rapidly, because demand growth is outstripping the pace of supply expansion. In 2001 the region was importing an average of 13.07mn b/d. This total will rise to a projected 18.32mn b/d in 2010 and is forecast to reach 21.32mn b/d by 2014. The principal importers will be China, Japan, India and South Korea. By 2014 the only net exporter will be Malaysia. In terms of natural gas, in 2010 the region will consume an estimated 496bn cubic metres (bcm) and demand of 625bcm is targeted for 2014. Production of a forecast 415bcm in 2010 should reach 522bcm in 2014, which implies net imports rising from around 81bcm to 104bcm. This is thanks to many Asian gas producers being major exporters. Vietnam's estimated share of gas consumption in 2010 is 1.84 percent, while its share of production is put at 2.20 percent. By 2014, its share of gas consumption is forecast to be 2.56 percent, with the country accounting for 4.60 percent of supply. We continue to predict a 2010 OPEC basket oil price level of $83.00/bbl. This equates to Brent at just under $85.00, WTI at almost $87.60, Urals averaging $83.60 and Dubai at $83.55. The 2011 OPEC assumption is $85.00/bbl, rising to an average of around $90.00 in 2012 and beyond. For the whole of 2010, we are currently assuming an average global jet fuel price of $95.50/bbl, compared with around $70.66 in 2009. The 2010 average global gasoil price, calculated by BMI, is $92.67/bbl, against $68.96 in 2009. The 2010 average naphtha price is estimated at $83.09 - compared with $59.30/bbl in 2009. For global unleaded gasoline, BMI is now forecasting an average $95.66/bbl in 2010, up from around $70.17/bbl in 2009. Vietnamese real GDP growth in 2010 is assumed by BMI to be 4.4 percent, followed by a forecast average annual 5.9 percent increase during 2010 to 2014. Exploration success has been on the rise in Vietnam, with a growing number of international oil companies (IOCs) teaming up with PetroVietnam and finding and developing hydrocarbon resources - particularly gas. We are assuming oil and gas liquids production peaking at 400,000b/d in 2010, before easing back to 372,000b/d by 2014. Beyond 2009, consumption is forecast to increase by around 5-7 percent per annum to 2014, implying demand of 460,000b/d by the end of the forecast period. Gas production is forecast to increase from the estimated 2010 figure of 9.1bcm to 24.0bcm by 2014 - providing a basis for exports. Between 2010 and 2019, we are forecasting a decline in Vietnamese oil production of 18.75 percent, with crude volumes peaking at 400,000b/d in 2010, before slipping to 325,000b/d by 2019. Oil consumption between 2010 and 2019 is set to increase by 68.13 percent, with growth beyond 2009 ranging from 5.0 percent to 7.0 percent per annum and the country using 625,000 b/d by 2019. Gas production is expected to rise from an estimated 9.1bcm in 2010 to 34.0bcm in 2019. With 184 percent demand growth, we see potential for exports later in the period. Details of BMI's 10-year forecasts which provide regional and country-specific projections, can be found at the end of this report. Vietnam takes fourth place, behind China, in BMI's composite Business Environment (BE) league table, which reflects largely its strong upstream position. The country now holds third place, behind India, in BMI's updated upstream Business Environment Ratings, with its ranking reflecting a reasonable resource position, better-than-average growth outlook, attractive licensing terms and an IOC-friendly competitive environment. There is a comfortable seven-point gap between Vietnam and fourth-placed Papua New Guinea (PNG), which should keep it safe from any near-term challenges. Vietnam ranks 12th, just behind Hong Kong and Pakistan, in BMI's downstream Business Environment Ratings, reflecting its modest (but growing) refining capacity, above-average oil and gas demand growth outlook, and low level of retail site intensity. please see weblink for more info on this topic: Vietnam Oil and Gas Report Q4 2010: http://www.companiesandmarkets.com/r.ashx?id=73558897I342700&prk=b36991e0f7e857abbdbce25da3034ecb http://www.officialwire.com/main.php?action=posted_news&rid=211353

FINANCE - Vietnam's deposits soar, interest rates fall till August 17

By mid-August, deposit interest rates in dong at commercial banks have fallen 0.3 percent, while loan interest rates was down by 0.4 percent against June 30, 2010, the Vietnam Financial Times quoted the State Bank of Vietnam's Governor Nguyen Van Giau as saying in his report yesterday September 2.

Although interest rates were down from last June, total mobilised deposits in dong continued increasing, by 1.13 percent in July after a rise of 5.97 percent in June.

The volume and speed of capital mobilisation by organisations was larger than loan disbursement as most credit institutions all have ensured the liquidity and ability to expand lending.

According to Giau, currently the pace of deposit rate reduction has slowed down as loan interest rates cannot be reduced quickly, but credit institutions are actively raise capital with financial support from the central bank to meet credit demand of the economy.

The SBV Governor said that short-term interest rates would drop significantly, while medium and long term lending rate will require more time due to partly the mobilised funds that are usually growing slowly and making up a very low proportion of the total mobilised capital.

The SBV is continuing to allow credit institutions use 30 percent of short-term moblised capital to offer medium and long term loans.

The central bank said, that by August 17, total mobilised capital of the dong rose 17.44 percent, while total outstanding loans increased 14.15 percent.

The SBV Governor said that Vietnam would be able to control inflation at around 8 percent, GDP growth of about 6.5 percent this year and thereby the credit will grow by 25 percent as the proposed goals.

According to statistics from the State Bank, deposit rates now average at 11 to 11.2 percent per annum for a term of three months - 12 months, and 10.5 to 11.2 percent for terms of more than 12 months.

The lending interest rate of agricultural sector, rural and exports is from 12 percent to 15.5 percent per year (short terms from 12 percent to 14.5 percent, medium and long terms from 13 percent to 15.5 percent per year).TBTCH

Banks should be cautious in lending dollars: Economists

Outstanding loans in US dollars at commercial banks in HCM City reached 172.5 trillion dong, making up 28.2 percent of total outstanding loans, up 44.2 percent compared to the same period last year, while outstanding loans in dong rose 20.5 percent, according to the HCM City Statistics Office.

Nguyen Huu Dang, director general of HD Bank said that, export companies are now borrowing dollars at an interest rate of 5 percent - 5.5 percent per year (3-6 months) and import companies are offered with dollar loans at 5.5 percent to 6.5 percent per year, which is seen quite attractive in comparison with dong negotiable interest rates ranging from 13 percent to 14 percent a year.

"If no big changes from now to the end of this year occur, the demand for loans in US dollar from export and import businesses would be higher than loans in dong," Dang forecast.

However, according to economic experts, at this time, commercial banks should be also careful to promote the development of the dollar credit, especially in the context of outstanding US dollar loans of the entire banking system to total mobilised dollars in excess of about 40 trillion dong at present.

Thus, the increased deposit rates in the dollar by banks are recently also aimed to again balance the supply - demand, especially banks have boosted lending in dollars during the past seven months.

On the other hand, many financial experts say that companies who need to borrow the dollar loans used for billing purposes must also carefully calculate the growth rate of outstanding loans at a high level in seven months is also a issue of concern. The reason is the possibility of rising dollar demand to repay bank debts (when more dollar lending contracts matures) would affect the supply of dollars, which may put more pressures on interest rates.

Therefore, the best is that only companies, who have revenues in dollars, should consider new loans in dollars. Moreover, banks also need to select customers for greenback loans, especially for businesses that are importing raw materials to produce goods for sales in the domestic market and have no revenues in dollars. In addition, enterprises should use foreign currency exchange rate hedging measures.

Dr Tran Du Lich, member of National Currency - Financial Advisory Council says that after the inter-bank rates increased recently, importers that do not have revenues in the foreign currency will surely have to switch to borrow dong loans. Specifically, compared to before August 30, the exchange rates of many commercial banks are now higher than 300-400 dong/US dollar (reaching 19,500 dong/US dollar - sold out).

In fact, many export companies are continuing to choose dollar loans, rather than switch to dong ones as predictions were made previously. Thus, banks are continuously raising deposit interest rates in the greenback aimed at drawing dollar capital to meet the needs of businesses.

Most recently, Southern Bank has increased interest rates on dollars savings, with the extra rate increase from 0.4 percent to 0.7 percent per year. Previously, Vietnam Eximbank raised deposit rates in US dollars to the maximum of 4.45 percent per year, while the Asia Commercial Bank also increased the rate from 0.15 to 0.20 percent per annum for US dollar deposits. The savings interest rates in US dollars are also adjusted higher at small-scale banks.DAUTU

BANKING - Vietnam's lending rates to drop - central bank's governor

Short-term lending rates in Vietnam are expected to come down, thanks partly to funds the central bank has extended to banks, State Bank of Vietnam governor Nguyen Van Giau was quoted on Wednesday as saying.

Lending rates were not falling quickly at present because banks were cutting deposit rates slowly, Giau said in an interview published by the finance ministry-run Vietnam Financial Times newspaper.

"But credit institutions are actively raising funds in coordination with funding support from the State Bank to meet credit demand for the economy," Giau said in the interview.

"So, short-term lending rates will fall significantly, while the reduction of medium- and long-term lending rates requires time because long-term deposits often rise very slowly and account for a low proportion of overall deposits," Giau said.

The central bank injects funds into banks via open market operations. For details of the transaction this year click on .

Bank deposits in Vietnam as of August 17 had risen 17.44 percent from the end of 2009, while credit expanded 14.15 percent, Giau said without giving any values.

Credit demand is expected to rise as usual in the last months of the year, Giau said, pledging further steps to keep annual inflation at around 8 percent, economic growth of 6.5 percent and an annual credit growth at 25 percent, as targeted.

The average rate for one-month interbank loans dropped to 8.56 percent during the week ending August 26, from 8.67 percent a week ago, and the rate on three-month loans also eased to 9.74 percent from 9.99 percent, central bank reports said.VNNEWS

FOREIGN DIRECT INVESTMENT - Japanese investors evince interest in Vietnam

Apart from three large groups of Itochu, MOL and NYK, many other Japanese investors have evinced interest in investing in Vietnam.

A leader in Japan-based Itochu Group, during his business trip to Vietnam in early last week revealed that his group was interested in Vietnamese markets via conducting four projects in Vietnam such as setting up a joint venture with Vinalines (Vietnam) and two other Japanese groups of MOL and NYK in realising Hai Phong's Lach Huyen Port; and cooperating with Phu Thai group, and Family Mart to build a chain of convenience stores in Vietnam.

The group has already set up detailed plans for the two fore-mentioned projects. If the prime minister approves for the Lach Huyen Port project, in early September, Itochu Group and other partners will cooperate closely to follow all the terms in the joint venture, re-valuate the projects and adjust the proposed design so that Lach Huyen Port can receive the cargo ships with loading capacity of 80,000 to 100,000 tonnes, instead of 50,000 tonnes as being approved previously.

Meanwhile, as for the project of setting up a chain of convenience shops, Itochu Group has lately released that the group and Phu Thai Group and Family Mart had already submitted the application profile for investment licence to HCM City People's Committee.

The other two projects that Itochu Group were keen on including Long Son oil refinery and Hanoi-Noi Bai Airport railway.

With total investment capital of $3.7 billion, Long Son oil refinery project was supposed to be conducted by Thailand-based Siam Cement Group, and other two Vietnamese groups of the National Oil and Gas Group (PetroVietnam) and Vietnam Chemicals Group since 2008. However, there appeared some problems relating to ground clearance works. By the end of last year, Siam Group, with holdings rate of 71 percent of total investment capital, signed a cooperation contract with Qatar Petroleum International Co to make capital contribution to carrying out the project. At present, Siam was seeking another partner and Itochu Group would likely be the chosen one.

Meanwhile, as for Hanoi-Noi Bai Airport railway project, the official proposals have already been submitted to ministry of planning and investment, and the ministry also sent document to Japan International Cooperation Agent for considering the feasibility of the project. It was expected to have Jica's response by the end of this year.

Apart from the three Japanese groups, there were other large groups from Japan showing their interest in making investment in Vietnam such as Tokyo Electricity, Chubu Electricity, Kansai Electricity, Toshiba, Hitachi, Mitsubishi and Japan Nuclear Energy Group with main focus of atomic energy.

As planned, in October, those seven leading groups would establish an international nuclear power development Co in order to meet all Vietnamese demands relating to constructing and developing nuclear power industry. These groups would like to set up the second nuclear power station in Vietnam, to be located in Ninh Thuan province.

This is one of the plans under supporting package from Japanese government to help Vietnam develop nuclear power, said Masayuki Naoshima, Japanese minister of Economy, Trade and Industry mentioned in his visit last week.VNNEWS

POWER- VSH boosts Kon Tum plant project construction

Vinh Son – Song Hinh Hydropower JSC (VSH) would seek approval in the period of Sep 10 to 25 for designing and building package of Kon Tum hydropower's energy system invested by the firm, said Nguyen Van Thanh, chair of management board.

VHS will sign the 1.137 trillion dong and $25 million contract with two Chinese bidders: East China Investigation and Design Institute, the Railway Administration No18.

As planned, the project would be finished after 36 months of construction at total investment of 5.744 trillion dong with two 220 megawatt – turbines (average output volume 1.094 billion kWh per year. The first turbine is planned to be put into operation in the third quarter 2013 and two rest turbines a following year.DTCHK

HIGHWAY - Duc Long Gia Lai Group to upgrade National Highway No 14

On Sep 11, the southern bourse-listed Duc Long Gia Lai Group Joint Stock Co (coded DLG) would kick off the upgrading project of National Highway No 14, from Bridge 20 (Km 817) to Cay Chanh (Km 887), Dak Nong province at a total investment capital of about 1.4 trillion dong.

The project will be carried out under BOT method. The road has total length of 57 kilometres, road width of 21.6 metres and designed speed of 80 kilometres per hour, to be built under level 3 standards for delta road. Vietnam Bank for Industry and Trade (Vietinbank) - Gia Lai Branch has committed to fund credit for DLG in realising this project.

In addition, the group also plans to start rubber tree plantation of 6,000 hectares, exploiting 10 mines of construction materials and coloured metals, constructing Dong Nai hydropower plants No 6 & 6A with designed capacity of 250MW) and other traffic roads under BT, BOT methods in Dak Nong province.VIETSTOCK

RAILWAY - Government determined to pursue express railway project

The government has reiterated its intention to press ahead with a controversial big-ticket project to build the country's first express railway linking the two biggest cities, Hanoi and HCM City, but two priority stretches will be studied first.

"(Vietnam) cannot help having a second north-south (express) railway after the existing one," minister of Transport Ho Nghia Dung told reporters in Hanoi on Tuesday, days after news reports said the project had resumed though the National Assembly disapproved of it two months ago.

Dung said the project should start with the reservation of land for a dozen years later but when the government would forward the project to the legislature for approval remained unknown because it would take years to collect as sufficient data as needed.

Local media has in recent days reported that the ministry was considering developing the first two sections of the cross-country railway, with one connecting Hanoi and Vinh and the other linking HCM City and Nha Trang, instead of the whole line worth around $56 billion as originally proposed.

The government approved in principle a proposal on July 23 to allow the ministry and the Vietnam Railways Corporation to get technical assistance and grants from the Japanese government to conduct a feasibility study for the two said sections and that for a rail line between Hanoi and Noi Bai International Airport.

"This is a feasibility study and it will take three to four years to finish before it goes before the National Assembly," said the transport minister.

He went on to say that the government had found it necessary to study the project to make clear the points questioned by National Assembly duties during their meeting in Hanoi in June, including scale, time frame, efficiency and financial viability.

There is concern that once Vietnam receives Japanese grants to do the feasibility study, it will have no choice but to opt for Japanese contractors and technology suppliers. minister Dung, however, said, "We will reserve the right to choose technology and contractors."

But Japan is now Vietnam's largest bilateral aid donor and its aid normally goes to key social and economic infrastructure.VNNEWS