Vietnam - News and Regulations

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INVESTMENT - Bright spots amid plummeting FDI

VIR



Short-term economic pain has deterred foreign investors from entering the real estate sector, but manufacturing opportunities are still being grasped.



Official statistics show pledged foreign direct investment (FDI) into Vietnam in the first four months of 2011 was $4.02 billion, down almost 48 per cent from a year earlier. Disbursed FDI gained 0.6 per cent to $3.62 billion.



The newly-registered FDI drop underlines the downward trajectory of FDI commitments during the past two years.



According to the Ministry of Planning and Investment (MPI), the biggest decline was seen in the real estate sector, which was the most attractive to foreign investors during 2007-2009.



“Foreign investors are showing less interest in Vietnam’s real estate market which has been slowing down over past two years,” said Prof. Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises.



Notably, apart from skyrocketing land compensation costs due to Decree No. 69/2009/ND-CP dated August 13, 2009 which provides that land compensation is based on market land prices and the adjustments to devalue the dong against the US dollar, the Vietnamese government’s on-going tightened monetary policy has dealt a blow to real estate developers.



On the bright side, according to the MPI, half of the projects registered during January-April involve the industrial manufacturing and processing sectors, followed by the construction and service sectors. Only four property projects were licensed during the period, capitalized at $234.6 million.



Vietnam now faces some tough policy questions on how to deal with the consequences of a tanking economy. Rising inflation, which reached 9.64 per cent in April against the end of 2010 and currency pressures top the government’s agenda in getting the economy back on track.



Foreign investors, however, believe the government’s policy focusing on fighting inflation and trimming away trade deficit should help stabilize the macro-economy. Foreign investors would keep sight of Vietnam’s medium and long-term prospects.



“The solid fundamental advantages like a young population and workforce, political stability, an abundance of various natural resources and a favorable geographical location close to China are attracting foreign investors,” Ray Ferguson, chief executive of Standard Chartered Bank in South East Asia, told VIR.

He said the domestic market expansion was also a reason for investors to continue to invest in Vietnam.



According to Credit Suisse, the average urban income in Vietnam is more than double rural incomes and Vietnam’s urbanization has had a profound impact on domestic consumption.



“It is easy to see why Vietnam remains an attractive investment destination for global companies in spite of the recent global crisis and its short term challenges,” said Lito Camacho, vice chairman for Asia Pacific at Credit Suisse.





World Bank backs Vietnam’s macroeconomic stabilization

Tuoi Tre



World Bank expert has suggested Vietnam to continue key measures to curb inflation, stabilize the macro economy and ensure social welfare.



Vietnam should continue implementation of the Government’s Resolution No.11 in a stable and effective way to reset three macro-economic indices of inflation, forex rate and foreign reserve.



WB chief economic expert Deepak Mishra at the press conference Thursday prior to the Consultative Group’s mid-term meeting in Hanoi, said Vietnam had achieved success in stabilizing the macro economy.



These included easing inflation, narrowing the gap between official and black market forex rates while foreign reserve was kept at import value for two and a half months.



The WB expert, however, refused to say whether Vietnam would be able to achieve the three targets as it depended on the effects of the Government’s short term measures in Resolution. 11.



A mid-term consultative group meeting for Vietnam will take place in central Ha Tinh Province next week, announced World Bank Country Director for Vietnam Victoria Kwakwa at the press conference.



The two-day meeting will focus on four main themes: macroeconomic stabilization, protection of poor people, fighting corruption in the mining industry and the effectiveness of aid, she said.









M&A takes off thanks to Vietnamese businesses

The hanoitimes



Merger and Acquisition (M&A) in Vietnam is no longer “an exclusive game” for foreign businesses and multinational companies but is drawing the enthusiastic participation of domestic enterprises in the role of purchasers.



Dang Xuan Minh, Director of the AVM Vietnam Company, said that many series of large private groups in Vietnam , after gathering financial resources, have sought to purchase or merge with other businesses operating in the same field to increase their strength in the market.



Statistics show that the number of Vietnamese enterprises which buy Vietnamese o­nes accounts for up to 40 percent of the total M&A transactions.



A 30 million USD deal transaction between the Lilama Hanoi Joint Stock Company and the Vietnam Steel Corporation (VNSteel) was o­ne of the most well-known recent transaction.



VNSteel acquired an 85 percent stake in Lilama Hanoi’s zinc-plating factory at the Hanoi-based Quang Minh Industrial Zone through the legal entity, the VNSteel Thang Long Corrugated Iron Plated Joint Stock Company.



Not to stop at domestic M&A transactions, Vietnam ’s large businesses have also targeted M&A in foreign markets. The military-run telecom group Viettel offered 300 million USD for a 60 percent stake in Teletalk Bangladesh Ltd., Co. and 59 million USD for 70 percent of equity of Haiti ’s Teleco Company.



According to a recent survey by the international consulting company Grant Thornton, 17 percent of Vietnamese businesses said they planned to boost growth through M&A compared to 19 percent in 2010 and 15 percent in 2009. Up to 20 percent of Vietnamese businesses said they expected changes in their ownership relations, doubling the global average rate.



Lawyer Le Dinh Vinh, Deputy General Director of the SMIC law firm, said that there are many favourable factors for boosting M&A activities in Vietnam, especially more open and transparent legal and investment environments four years after Vietnam’s World Trade Organisation (WTO) accession, the government’s efforts in foreign investment attraction with M&A being a key activity, and foreign investors’ close attention to M&A, which is seen as attractive.



From this fact, the Competition Management Department under the Ministry of Industry and Trade forecast that M&A in Vietnam will continue flourishing in 2011 and the following years, with a growth rate of 30-40 percent.



According to EuroCham Managing Director Matthias Duehn, in 2011, M&A activities will take place strongly in several areas, particularly production, finance, banking and infrastructure.



However, a lack of a legal framework for M&A activities, has stringent liquidity conditions and businesses’ limited human resources and understanding o­n M&A, makes the expansion of this activity slower than expected.



The year 2010 saw 345 M&A transactions with a total value of 1.7 billion USD, up 65 percent over the previous year. This was the highest growth of the M&A activity in Vietnam so far.





Foreign firms cannot keep talent despite pay hike

Tuoitre



Companies continue to hike wages to retain talent but are not succeeding, a bi-annual survey by US-based Towers Watson Vietnam has found.



The survey of 167 foreign-invested enterprises (FIEs) in nine industries in Vietnam as of March 1 found that with employee turnover increasing by 2 percent year on year to 17.8 percent, the war for talent has intensified.



The pay gap between industries has widened due to the need for specialized talent, the survey, which polled manufacturing, financial services, high technology, pharmaceutical/healthcare, fast moving consumer goods (FMCG), trading, chemicals, petrochemical/oil and gas, and others, said.



Accordingly, the average salary increase by employee level varied from 14.4 to 16.4 percent in 2011, and projected increase for 2012 varied from 13.5-13.9 percent.



In terms of average salary increase by industry, manufacturing, trading, and FMCG enjoyed the highest rates of 16.1 percent, 15.1 percent, and 15 percent in 2011.



Next year chemicals and high technology are projected to enjoy the highest rises at 14.7 percent, followed by FMCG and pharmaceutical/healthcare with 14.2 percent.



Pharmaceutical/healthcare, FMCG, and manufacturing saw the highest staff turnover at 20.2 percent, 19.4 percent, and 17.7 percent respectively.



The labor market trend in Vietnam reflects a sustainable economic recovery, the survey said, since hiring projections continue to rise.



The average hiring trend for all levels for 2012 is 83 compared to 63 in 2011, of which the employment of clerical/general staff and officer/supervisor/technical staff will see the strongest growth of 89 and 21 compared to 74 and 17 this year respectively.



The trend will focus on sales, marketing and manufacturing with a growth of 21.8 percent, 10.4 percent and 9.1 percent respectively.



Training and development is the key reason (61.1 percent) for the increase in HR budgets, followed by introduction of new benefit policy (53.3 percent) and upgrade of HR functional capacity (3.9 percent).



Towers Watson’s report, the May 2011 HR Market Trends Survey, holds a positive view on long-term economic growth, saying business expansion will continue and competition to retain talent remains fierce.



Major concerns related to career development, including leadership development and succession and salaries will continue to rise with incentives being used increasingly as a motivational tool, it adds.



“Organizations should have a positive approach to the 2011 salary budget preparation, be open to add increments for key talent, and be able to adopt more flexible and practical ways to attract and retain talent,” Mark Mamalateo, Towers Watson’s project manager for data services, Asia-Pacific region, said.



“Focusing on tailor-made career development programs and designing medium- to long-term performance rewards are keys to keeping high performers and transform them into next generation leadership candidates,” he said.



Towers Watson has carried out its semi-annual salary surveys in Vietnam for the last seven years.







Japan enthusiastic about investment in Vietnam

Vietnamplus



Despite a decrease in FDI attraction, Japanese investors want to inject more investment or increase their involvement in Vietnam through purchasing Vietnamese company shares.



Many Japanese investors have recently sought further information on investment in Vietnam, especially on supporting industry companies, said Phan Huu Thang, director of the Foreign Investment Research Centre.



"If the trend comes to fruition, it will help Vietnam very much," Thang said, adding that he will soon lead a group of Japanese businesses to inquire into investment in a southern province.



Hirokazu Yamaoka, Chief Representative of the Japan Trade Promotion Organization (JETRO) in Vietnam, said more than 500 Japanese companies came to Vietnam to learn about investment information from April, 2010 to March, 2011.



Japanese firms were interested in production of auto and motor spare parts, electric and electronic appliances, machinery components and packaging materials.



At a press conference on the fourth Vietnam-Japan supporting industry exhibition last March, Hirokazu Yamaoka described Vietnam as an attractive destination for production in comparison with other regional countries thanks to its workforce and low costs.



JETRO provided a program to assist Japanese firms to make direct contact with leaders of 100 major Vietnamese companies for investment information.



Apart from learning about investment information, Japanese companies have recently bought shares of Vietnamese firms. For example, the Asia DI industrial investment fund a joint venture between Dream Incubator Vietnam and Orix Company, bought around 25 percent of shares of the Vietnamese company Nutifood.



Earlier, Japan 's Nippon Meat Packers and a joint stock company in Long An province cooperated to set up the Nippon Golden Pig joint venture.



Shinichiro Hori, director general of Dream Incubator Vietnam joint stock company, acknowledged that many Japanese companies wanted to invest in Vietnam, but, he added, it was difficult to encourage a wave of investment from Japan like that in late 1990s, due to woes in Vietnam's macro-economy.



He suggested Vietnam do more because the country's foreign investment attraction is not as competitive as other nations. Low'cost labour is not an advantage for competitiveness, because investors need skilled workers, he said.



According to the Ministry of Planning and Investment, Japan had by April 2011 run 1,472 valid FDI projects with a total registered capital of 21.2 billion USD, ranking fourth among 92 countries and territories investing in Vietnam.





ENERGY - Electricity prices will not rise in June

VnExpress



The Electricity of Vietnam Group (EVN) said it would not increase electricity prices in June, despite taking losses.



"The group has suffered losses, but we cannot increase power prices as the country's economic conditions remain difficult," EVN deputy general director Dinh Quang Tri told VnExpress.



Meanwhile, the Electricity Moderation Department under the Ministry of Industry and Trade said it would soon finish a fact sheet outlining the implementation of Decision 24 by the prime minister about the adjustment of power prices based on market conditions from June 1.



Under the Decision, if market changes cause electricity production costs to increase by 5 percent, EVN will raise power prices at the same rate, subject to approval from the Ministry of Industry and Trade.



Within five business days, the finance ministry will give its feedback to the Ministry of Industry and Trade, which will then perfect the plan and submit it to the prime minister.



Within 15 days of receiving the plan, if the prime minister has no opinion about it, EVN has the right to increase electricity prices by 5 percent.



The average price of power has increased by 15.28 percent since March 1, but both the ministries of Finance, and Industry and Trade said the rate was too low and the electricity sector still suffers losses.







RESOURCES - UPDATE 1'Vietnam's Petrolimex to sell 5 percent stake in IPO'govt

Reuters



Petrolimex, Vietnam's top oil importer and distributor, has received government approval to sell around 5 percent of its shares in an initial public offering.



The state would retain a 94.99 percent of stake after the share sale and would reduce it to 75 percent at a later stage, deputy prime minister Nguyen Sinh Hung said in a directive signed on Tuesday and seen by Reuters.



Petrolimex is the latest of a handful of major state companies to get the go'ahead for a partial privatisation, a two-decade long process dubbed by Hanoi as "equitization". In most cases the government still owns the majority of shares.



The privatisation process virtually ground to a halt from 2008 as market conditions in Vietnam soured when the economy overheated and the global financial crisis hit. The government had pledged to step it up again this year.



Hanoi-based Petrolimex would auction 27.43 million shares, representing just 2.56 percent of its registered capital of 10.7 trillion dong ($522 million), to the public while selling 1.98 percent to employees and another 0.47 percent to the firm's trade union branch, the directive said.



It gave no date for the IPO or details on possible foreign ownership.



Petrolimex, also known as the Vietnam National Petroleum Corporation, has around half of the domestic fuel and oil products market.



Vietnam imported 5.14 million tonnes of oil products between January and May, down 6.9 percent from a year ago, government data show.



The import volume is expected to rise in coming months as Dung Quat oil refinery, the country's sole facility, shuts down between mid'July and mid'September for its first scheduled maintenance after two years of official operation.



Petrolimex bought 2.27 million tons of oil products in the first five months of 2011, 780,000 tonnes of which came from Dung Quat refinery, said a state media report posted on Petrolimex web site (www.petrolimex.com.vn) on Sunday. ($1=20,500 dong)







PM approves equitisation and restructuring plan for Petrolimex

VietBiz24



Vietnam National Petroleum Corp (Petrolimex) with a chartered capital of 10.7 trillion dong will auction 27,425,933 shares or 2.56% of its chartered capital to the public.



The prime minister Nguyen Tan Dung recently approved the equitisation and restructuring plan for Petrolimex whereby the state holding will be retained and the company will issue more shares to hike its chartered capital. The state will hold minimum 75% stake.



Petrolimex with a chartered capital of 10.7 trillion dong will make its IPO (initial public offering) of 1.07 million shares, of which, the shares held by the state are 1,016,401,867 units or 94.99% of its chartered capital.



The remainders will include 21,172,200 preferential shares for the employees (1.98% stake), five million shares for the company's trade union (0.47% stake) and 27,425,933 shares for auction to the public (2,56% stake).



The representatives for the state holding into Petrolimex after the equitisation will be the Ministry of Industry and Trade (MoIT), Vietnam Oil and Gas Corp and member companies will be restructured to become an associated company group under the parent-subsidiary operation model.



After restructuring, members of Vietnam Oil and Gas Corp will include three corporations namely Petrolimex Petroleum Waterway Transport Corp, Petrolimex Construction Corp and Petrolimex Service Corp (PSC).





BUSINESS – Vinashin asks bondholders to write off 90pct of debt after default in April

Bloomberg



Vietnam Shipbuilding Industry Group, the state-owned company with more than $4 billion of debt, asked holders of a local-currency bond it defaulted on in April to write off as much as 90 percent of the money owed, according to a bondholder who met company officials last week.



Vinashin told creditors at the meeting in Hanoi it is unable to make any loan payments until 2015 at the earliest, Pham Viet Bac, general director of HCM City'based Sabeco Fund Management, which holds 30 billion dong ($1.5 million) of Vinashin bonds, said by phone yesterday.



"I'm very disappointed," said Bac. The shipbuilder also declined to provide a copy of its latest audit, he said. Vinashin failed to pay a 9 percent coupon due on April 13 on a 3 trillion dong, 10-year bond issued in 2007.



Vinashin's financial difficulties have raised concerns about government support for state-owned companies as it tries to speed up a privatization drive, locally referred to as equitisation. prime minister Nguyen Tan Dung has also asked police to investigate whether there are any signs of corruption at the shipbuilder.



"I want the company to be transparent to its creditors," Bac said. "We have the right to know."



Vinashin Chief Executive Officer Truong Van Tuyen declined to comment when reached by phone at his office yesterday. Calls to Chair Nguyen Ngoc Su weren't answered.



The shipbuilder also asked foreign lenders for a one-year extension after missing a $60 million principal payment in December for a $600 million loan, Chair Su said in February. The company hired KPMG to conduct a business review, he said.



The December missed payment showed that government support for banks and state companies isn't guaranteed, Moody's Investors Service said in an April 20 report.



Moody's cut Vietnam's credit rating one level to B1 on December 15, citing the risk of a balance of payments crisis and Vinashin's "debt distress." Standard & Poor's and Fitch Ratings Ltd also cut Vietnam's credit rating last year.







Government set to slash public investment

Vietnamplus



The Vietnam government will take drastic measures to rectify the direction of the economy, by reducing public investment outlays totalling over 80 trillion dong, equal to 9 percent of the total social investment in 2011.



The action is part of measures to curb inflation and stabilise the macro-economy as proposed in government Resolution No 11/ NQ-CP, which is being carried out nationwide by ministries, sectors and local authorities.



The Ministry of Planning and Investment (MoIP) revealed, after three months of implementing the Resolution, relevant ministries and branches have managed to reduce 5.5 trillion dong of investment from the State budget in 2,048 projects and 2.77 trillion dong in 126 projects funded by government bonds.



State'owned economic have postponed 907 projects, with total investment capital of 39.2 trillion dong, equal to 10.7 percent of planned development investment capital this year.



In parallel with reducing public investment, ministries, sectors and localities nationwide have cut their regular expenditure by 10 percent or 3.85 trillion dong and will strive to reduce overspending to less than 5 percent of GDP. The savings from regular spending will be used for social welfare/.



FINANCE - Vietnam tells state firms to sell dollars to help prop currency

AFP



State-owned firms in communist Vietnam have been ordered to sell US dollars to commercial banks, official media said Thursday, to address a rising trade deficit and stabilize a weak currency.



The State Bank of Vietnam has instructed firms that are more than 50 percent government-owned to sell their dollars held in fixed term and non-term deposit accounts from July 1, the Vietnam News reported.



It said the move was part of efforts to regain control of unstable foreign exchange markets and to ease downward pressure on the dong that has led to several currency devaluations, higher inflation and a widening trade deficit.



Companies will be able to buy dollars from the banks if needed.



The report cited central bank governor Nguyen Van Giau as saying 78 state firms held more than $1.6 billion, including $376 million on fixed terms, at the end of March.



Prime minister Nguyen Tan Dung flagged the sale of state firms' funds in February as part of measures to stabilise an economy facing challenges including inflation close to 20 percent, one of the highest rates in the world.



"We are in economic turbulence now," said Giang Thanh Long, a vice dean at the National Economics University in Hanoi.



With prices soaring, Vietnamese householders are unwilling to give up their extensive personal holdings of dollars, which they see as a safe-haven. This has forced authorities to turn to the extensive reserves held by some government-controlled firms in a bid to boost the State Bank of Vietnam's coffers, Long said.



"This is really a serious issue in Vietnam now," he said.



Central bank reserves can be used to support a weak currency.



Vietnam has been spending more on imports than it earns from exports, with the trade deficit reaching about $6.6 billion in the first five months of the year, up 23 percent from the same period of 2010.



In February Vietnam announced a 9.3 percent devaluation of the dong, which is good for exports but has also driven up imports costs.



Economists say the central bank wants to avoid further devaluation.



Long said the exact amount of Vietnam's foreign exchange reserves is a secret but it could be as low as about $10-15 billion, which is below the ideal range of about $20 billion to $25 billion.



State firms typically buy and sell foreign exchange at the official rate, which on Thursday was 20,638 dong to the dollar, against up to 20,650 on the black market.



World Bank officials said Thursday the official and unofficial rate gap has narrowed, in one sign that government measures are helping to restore economic stability.



But the Hanoi Young Business Association said in a report last week that workers, consumers and companies are "losing confidence in the home currency and existing monetary, foreign exchange and banking policies."



Some state firms have already been selling their dollars so it was unclear what additional benefit would accrue from the central bank's directive, said Deepak Mishra, the World Bank's lead economist in Vietnam.



Similar efforts in the past were not strictly implemented and led to only short-term results, he said.



There has been a "biased allocation of funds to inefficient state-owned conglomerates," the Hanoi Young Business Association said.



Problems at state-owned firms were dramatically illustrated at shipbuilder Vinashin, which government inspectors accused of "rampant and inefficient investment" that left debts of about $4 billion at the end of 2009.



Lao Dong newspaper reported the inspectors' findings on Thursday.



It said that since 2006 Vinashin had signed 85 contracts worth 58,224 billion dong ($2.8 billion) but fulfilled only 15 of them.



A police investigation is under way into former executives of the firm.-By Ian Timberlake







Local banks unease as property prices down, trading frozen

StoxPlus.com



Local banks are unable to sit still near the property loan collection deadline as the property market is going down, the local newswire VnMedia reported June 2.



There's only one month left till June 30, 2011 when all the banks must pull down outstanding loans for non'manufacturing factors (property, securities, and consumption) to 22 percent of total loans. However, local lenders have been struggling in collecting property loans and even selling off collaterals to make up for the loan default.



Nguyen Trong Ky, Techcovina's deputy general director said frozen real estate market poses risks to not only investors but also to local lenders, adding that if the market continues to go down and liquidity goes worse, the banks likely won't be able to sell off collaterals and take money back.



Buyers couldn't afford to buy houses as they struggled to access to bank property loans, partly making real estate trading sluggish, experts said. Meanwhile, investors were unable to sell property for loan repayment, forcing real estate prices to go down further.



Sharing the same view point, Nguyen Thi Mui, an economist said most risks will expose to small lenders whose non-production loans make up about 40'50 percent of total loans, making it very hard for them to meet the deadline of property loan collection.



As of December 31, outstanding property loans of the whole banking system were estimated at VND228 trillion, up 23.5 percent on year and making up about 10 percent of total loans, according to the State Bank of Vietnam (SBV).



ECONOMY - World Bank: Worst is over for Vietnam

FT.com



Annual inflation has hit 20% and rising, the trade deficit is widening and the first signs of financial distress are appearing in the real estate sector. But the worst of Vietnam’s latest bout of macro-economic instability is behind it, WB said.



At a briefing in Hanoi on Thursday, Deepak Mishra, the World Bank’s lead economist in Vietnam, argued that the country was now “on a declining path of instability”.



The World Bank, which has around $8bn of outstanding loans in Vietnam, argued that confidence was returning thanks to the successful (thus far) implementation of the government’s crisis-busting package of monetary and fiscal tightening and anti-dollarisation measures, known as Resolution 11.



For the first time in 37 months, US dollars are being sold by banks for less dong (Vietnam’s currency) than the official exchange rate set by the central bank, Mishra noted. And spreads on Vietnam’s sovereign bonds have narrowed to below emerging market averages.



So far, so good. But, given Vietnam’s reputation for what one analyst previously called “whack-a-mole” economic policy, the key question about Resolution 11, which was introduced in February, has always been whether the government will stay the course.



Like every good financial institution, the World Bank is hedging its bets on this front. With the government already coming under pressure from some companies to reduce interest rates, which it has hiked to as much as 14 percent, Mishra warned that it must not “prematurely declare victory” in the battle for macro-economic stability.



He also urged the government to do more to rein in the state investment budget, to show concrete progress on the reform of state-owned enterprises and improve communications with the market.



Few analysts would disagree that these measures are vital if Vietnam is finally to tame inflation and restore medium-term confidence in the sickly dong. But cutting spending and reining in the powerful SOEs are political challenges rather than economic ones.



And progress on many key reforms has been held up while Communist-ruled Vietnam has been going through its protracted process of political renewal. The new government will not be confirmed until late July/early August, when the recently-elected National Assembly approves it, over a year after the jockeying for position began in earnest.



A number of investors have told beyondbrics that, once the new team of ministers is finally in place, they expect to see action on a range of important issues from improvements to the illiquid stock market to the debt default at Vinashin, a troubled state-owned shipbuilder. Critics say this is little more than wishful thinking.



Even if the government, led by Nguyen Tan Dung, the prime minister, can muster the political will to force through key reforms, Vietnam is unlikely to return to the 7 per cent plus levels of annual GDP growth it experienced before the global financial crisis, Mishra warned.



He expects GDP growth to come in at the bottom end of the government’s 6 percent-6.5 percent range this year and to improve slightly in 2012.



But, after moving from boom to bust to boom to bust in less than five years, most investors and citizens would doubtless appreciate some boring, old stability.







PROPERTY - Land of opportunity for a range of new projects

VIR



Investors who want to bid for land-using projects in Vietnam will be subject to some new conditions.



The Ministry of Planning and Investment (MPI) is drafting a circular guiding the selection of investors to conduct such projects. This circular will oust the MPI's existing Circular 03/2009/TT-BKH dated April 16, 2009.



The new circular will be applicable for state-owned agencies and enterprises, local and foreign investors with such projects prescribed in this circular as investing in production and business establishments, hotel complexes, office buildings, commercial centres, cultural centres, education, vocational training, health care and sports centers.



One of the new circular's highlights is that in order to bid for a project, investors are required to have equity capital which is not less than 15 per cent of projected total invested capital for a project using less than 20 hectares. This percentage is at least 20 per cent for the project using land of more than 20ha.



"In case of resorting to loans, the investor must ensure its capacity in capital and resource mobilization via loan-giving commitments by banks or financial and credit organizations. In case of its own capital, it must prove the source of this capital," the draft circular stated.



Particularly, "the investor is required to vow in written form affirming that its business is not getting bogged down in bankruptcy or insolvency, and that his business is not dissolving or concluded by authorized agencies to have weak financial health and that its business is not under any punishment under the law," it stated.



The MPI said that the investor would also be subject to new conditions in bid security. Under the existing regulation, bid security would be between 1 to 3 per cent of the proposed price in the bidding dossiers or request dossiers. Contract performance security would be equal to 5 to 10 per cent of total invested capital of the winning investor.



However, the darft circular specifically stipulates that with a project having total investment capital of 1.5 trillion dong ($75 million), the bid security value will be 1 per cent of the project's total investment capital, under the bidding dossiers or request dossiers. With a project having total investment capital of over 1.5 trillion dong ($75 million), the bid security value will be only 0.5 per cent-less than 1 per cent of the project's total investment capital, under the bidding dossiers or request dossiers.



According to the MPI, the new circular also underlines risks for investors, if they fail to meet requirements by authorized bodies.



It said the investor would not be able to carry out the project, while having the investment certificate revoked if it failed to design and carry out the project, transfer the project when the project's construction remained unfinished.



Especially, the same punishments would also be imposed on the investor if it made dishonest report and could not manage the project's land given by the state, and built works which were not listed in the state construction planning. The investor would also face such punishments "if he fails to use the land within 12 months or his speed of using land is lower than 24 months, as compared to the speed prescribed in the project's report."







Four sectors allowed to enjoy incentives in ODA loan access

VNS



Under the Decision No 29/2011/QD-TTg dated June 1, 2011 by the prime minister Nguyen Tan Dung, from July 20, some sectors will be allowed to enjoy the preferential lending rate when re-borrowing the ODA (official development assistance) capital of the government.

Accordingly, four fields will be allowed to enjoy the incentives including economic-technical-social infrastructure, industry, finance and credit and other projects at localities suffering the difficult socio-economic conditions.



In the economic-technical-social infrastructure sector, the decision will give preferences for seven types of projects including some projects to build clean water supply system for industry and urban living, projects to collect and deal with urban and industrial solid wastes, industrial waste water treatment, and projects to build vocational, training and education facilities, build railway, highway and deep water port.



In the industry sector, three types of projects are allowed to enjoy the incentive including project to build power plant using new energy and renewable energy sources to protect the environment, project to build and install distribution grid and power transmission in rural area and project to build and install the information and technology and telecommunication infrastructure and telecommunication network in rural areas.



In the finance and credit sector, the incentives will be given to credit programs via the Vietnam Bank for Social Policies or other credit institutions to relend borrowers under the government policy.



Reportedly, under the Decree No 78/2010/ND-CP dated July 14, 2010, the preferential interest rate will equal to 30% of the relending rate in foreign currency or Vietnamese dong, but no lower than the foreign lending rate.







Policies fail to increase forestry investment

VNS



HA NOI — Favorable conditions and policies will continue to be offered to attract sustainable and environmentally sound private investment in the forestry sector, an official of the Ministry of Agriculture and Rural Development's forestry department has said.

Nguyen Nghia Bien, head of the department's planning division, said businesses which invested in reforestation and wood processing projects in targeted areas would receive tax exemptions.



"In addition, investors have received low-interest loans, support for transportation and personal income tax exemptions," Bien said.



Despite the incentives, investment in the sector had been limited, he added, with foreign investment accounting for only 1.2 per cent of the total forestry industry.



Private enterprises had invested in wood processing but paid little attention to sustainably forestry and afforestation, said the deputy head of the ministry's Forest Research and Planning Institute's northwestern region branch, Duong Van Coi.



"The investment trend could result in unsustainable development as most of the wood processed in the country is imported or illegally exploited from prohibited forests," Coi said. "Policies encouraging private sector to invest in forestry would create materials for wood processing and more stable development."



Private and foreign investment in the forestry sector had increased, with the former recently surpassing State investment, he noted. Last year, total investment in the sector reached VND704 trillion (US$33.5 billion), with VND278 trillion ($13.2 billion) coming from the domestic private sector, VND245 trillion ($11.6 billion) from State sources, and VND181 trillion ($8.6 billion) from foreign investment.



Forestry department statistics show that there are more than 2,300 non-governmental businesses operating in the sector in the north, including 54 major operators and the rest small- and medium-sized enterprises. Up to 88 per cent of all enterprises are engaged in wood processing, while only 4 per cent in reforestation.



Truong Loc Construction Investment and Commerce Co general director Hoang Van Huyen said the slow process to receive land use right certificates had created difficulties for companies seeking to do business in sustainable forestry.



"It has also been difficult to access bank financing, and the short-term nature of most loans were insufficient to allow time for reforestation," Huyen said.



"Forest land allocation policies that are unclear as to rights, investment and technical support have contributed to the problem," Coi agreed. "There's an overlap among relevant agencies supervising forest land allocation."



"Forest land planning which was not suited to reality and the process of clarifying the distinction between protective and special function forests have slowed down forest land allocation," Bien added.



Households working in the sector, meanwhile, had been given two years to decide on reforestation methods and plans to sustainably exploit forests to which they had been assigned, he said. The Government would also assist households to borrow VND 10 million ($476) for a five-year term to carry out their plans.