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INVESTMENT – MPI plans to keep stricter control over equitized FIEs
TBKTVN
The
policy on equitizing foreign invested enterprises (FIEs) is being
reconsidered, after experts gave warnings about the foreign capital
withdrawal through the equitization, which may cause bad impacts on the
national economy.
The
Decree 38 promulgated in 2003 once set up strict regulations on the
equitization and share listing of FIEs, which were established under
the investment law as limited liability companies.
The
legal document stipulates that in order to go equitized, FIEs must have
had the committed legal capital, have been operating for at least
three years, while the enterprises must make profit at least in the year
latest to the equitized year.
Especially,
the total value of shares held by foreign shareholders must be at least
equal to 30 percent of the chartered capital during the
whole life span of the enterprises.
However,
after the 2005 Investment Law and the Decree 101 guiding the
implementation of the law were promulgated, the above said required
conditions have been removed. With the new law, the FIEs which want to
shift to operate as joint stock companies just have to meet the
requirements set on joint stock companies, as stipulated in the
Enterprise Law.
However,
observers have pointed out that the removal of the strict regulations
has led to some consequences. First, a lot of equitized FIEs
overvalued their assets in order to obtain the high value for their
stakes when listing on the stock market.
Second,
a lot of FIEs made the corrupt use of the equitization to capitalize
their assets: they sold parts of their shares, or even transferred
all of their capital out of Vietnam.
Third, the capital withdrawal has badly affected Vietnam’s payment balance.
The
three big problems have been reported by the State Securities
Commission (SSC) which believes that it is necessary to apply some
measures
to settle the problem. The same viewpoint has been shared by the
Ministry of Planning and Investment, which is in charge of managing the
foreign investment capital flow.
Thoi
bao Kinh te Vietnam has quoted its sources as saying that stricter
requirements would be set up on the FIEs which want to become joint
stock companies. For example, Vietnam may stipulate the minimum
ownership ratio of foreign shareholders for the whole life spans of
projects, and set the requirements on the minimum operation duration in
Vietnam.
It
may also require the FIEs to meet the criteria on capital, profits,
financial situation, debts, solvency and technology transfer.
The
FIEs, especially the joint ventures between Vietnamese state owned
enterprises and foreign partners, would have to have their enterprises
appraised. The providing of information about the FIEs during the
equitization and after the equitization would be required.
Vietnam
began allowing FIEs to equitize in 2003 on a trial basis. In September
2004, the Foreign Investment Agency (FIA) approved the equitization
plan of six FIEs, namely Taya Vietnam, International Food Processing
Industry, Tungkuang, Taicera, Austnam and Hoang Gia International joint
venture.
At
that time, according to FIA, the above said enterprises all could meet
the requirements: they had enough legal capital written down in
the investment license; they had been operating for three years at
least, and had made profits in the years before the equitization.
By
the end of 2010, nine FIEs had listed their shares on the Hanoi and HCM
City bourses. However, the majority of the enterprises continuously
reported losses recently.
The
noteworthy thing is that the enterprises have been trying to sell
stakes many times. Bourbon Tay Ninh is an example. After listing its
shares on the bourse in 20008, Bourbon group, the biggest shareholder of
the company, had sold all of its stakes to domestic investors at the
prices just equal to the face value of the stakes.
The
move by the equitized FIEs has raised a question that if FIEs really
want to be equitized in their long term development plan in Vietnam,
or they just get equitized in order to more easily withdraw capital from
the projects.
Investment incentives getting chaotic
TBKTVN
The
Ministry of Planning and Investment (MPI) has suggested that it teams
up with the Ministry of Finance (MOF), to build up the lists of
the geographical areas and the investment fields to be subject to
investment incentives.
The
information has been released after more and more foreign investors
claimed the investment incentives which go beyond the current incentives
frame stipulated by the laws.
Tax incentives did not reach out to the needed areas
Under
the current regulations, only several business fields can enjoy the
preferential tax rates at the highest level, including 1) high
technologies, scientific research and technology development 2) the
development of water, electricity plants, bridges, railways, airports,
seaports, terminals and some other infrastructure items, and 3) software
production.
However,
according to the Ministry of Planning and Investment (MPI), the current
regulations still cannot cover all the production and business
fields which Vietnam wants to attract investment to, such as supporting
industries, agriculture and rural development.
Therefore;
in the legal documents released recently, competent agencies have
offered additional investment incentives, which makes it difficult
for both management agencies and investors to apply the new policies.
The
MPI’s officials have also pointed out that there have been no concrete
regulations and detailed criteria for the projects to enjoy preferences
(amount of capital, products, and technologies applied…). This explains
why preferences still cannot reach out the projects which really need
encouragement.
MPI
believes that it is now the right time to reconsider the investment
incentive policies and clarify the business fields that Vietnam hopes
to attract foreign investments to.
Local authorities in a race for scrambling for investments
Experts
have pointed out that there are too many lists of geographical and
business fields subject to investment incentives. MPI said that
there are seven such lists, and all of them are currently valid.
They
said that the Investment Law was compiled by MPI and then submitted by
the Government to the National Assembly for approval. However,
while implementing the law, ministries and branches independently
compile decrees and legal documents to stipulate the issues relating to
their management fields. Therefore, there exist a lot of legal documents
on the same issues and the overlapping in the
management.
The
tax incentives applied to the projects in industrial zones, export
processing zones, economic zones and hi-tech zones, have been cited
as a typical example.
The
Decree 108 released in 2006, and the Decree 29 released in 2008,
stipulate that the above said industrial zones can enjoy the investment
incentives designed for the areas with difficult socio-economic
conditions.
However,
according to the currently applied corporate income tax, the
enterprises in the industrial zones cannot enjoy the corporate income
tax incentives like the ones operating in difficult socio-economic
conditions.
Similarly,
the enterprises in industrial zones also cannot enjoy the preferential
import tariff as the enterprises in difficult socio-economic
areas, because the Decree 87 promulgated in 2010 does not allow applying
the preferences.
In
the latest news, the Ministry of Finance has agreed to the proposal by
MPI, saying that the list of the geographical areas and business
fields subject to investment incentives, and the concrete preferences
would be drawn up by the two ministries for submitting to the government
for approval.
2012 Disbursed foreign investment to rise 10pct
Bloomberg
Vietnam
expects disbursements of foreign direct investment to rise by as much
as 10 percent in 2012 after forecasting it will be flat at
$11 billion this year, Dang Huy Dong, vice minister of Planning and
Investment said in an interview in Hanoi today.
The
actual amount forecast to be disbursed compares to pledged foreign
investment that may total $15 billion to $16 billion this year, Dong
said, without giving a figure for next year. Vietnam attracted $18.6
billion of committed foreign investment in 2010, according to figures on
the ministry's website.
The
government is struggling to tame inflation, which quickened at 23.02
percent in August, the fastest in 33 months and the fastest pace
in Asia. The central bank ordered lenders yesterday to set aside more
dollars as reserves for the third time this year, aiming to limit
lending growth and steady the dong.
"There
are forceful policies and we started to see positive results," Dong
said. "We believe that somewhere early next year or mid next year,
things will come back to normal as before."
The
value of expansion in existing foreign investment projects reached $1.6
billion so far this year, according to Dong. The figure "showed
that their businesses are good here. If their businesses in Vietnam are
not good, if they don't see it's good in the future, then why should
they expand their investment," Dong said.
Vietnam remains Japanese investors' top pick
SGGP
An
increasing number of Japan's foreign direct investments in the first
seven months this year shows that the Eastern Asian country recovered
from the earthquake and tsunami in March.
Many Japanese investors visited Vietnam to seek cooperation opportunities in July and August.
Among them is the industrial conglomerate Marubeni- one of the world's 500 biggest groups.
The Japanese giant entered a strategic agreement with Vietnam's leading textile maker Vinatex in May.
The cooperation will beef up Vietnam's textile export to Japan, says Katsuhisa Yabe, head of textile department of Marubeni.
Statistics
show that the turnover of Vietnam's textile export to Japan increased
more than 20 percent last year, amounting to $1.2 billion,
thanks to the Vietnam- Japan Economic Partnership Agreement.
Japan is Vietnam's third largest apparel importer.
Marubeni
also inked an agreement with food supplier Dofico to cooperate in
producing and distributing feed and agricultural products.
The Japanese conglomerate expects that the cooperation will help it become Vietnam's agricultural product and feed manufacturer.
Among
92 countries and territories making foreign direct investments (FDI) in
Vietnam, Japan ranks fourth, carrying out more than 1,500 projects
with the total registered capital of around $22 billion, according to
the Ministry of Planning and Investment.
Figures
from the ministry also indicate that there are Japan's 94 FDI projects
worth $720 million in the first seven months of the year.
Most
of the investments were pumped into sectors that Vietnam's government
is fostering, including auxiliary and hi-tech industries.
Japanese economists say Vietnam's stable politics and low-cost workforce attract Japan's investors.
The
number of Japanese investors in Vietnam soared to 1,000 last year from
around 200 in 2005 and 2006, according to Japan's Nikkei Weekly.
Vietnam
is considered as a very potential consumption and export market as it
has the Asean's second biggest population after Indonesia.
Foreign brand owners raise lawsuits against Vietnamese imitators
SGTT
Adidas
and Gucci, Honda and Microsoft, Louis Vuitton and Kimberly Clark
Worldwide have one after another, sued the Vietnamese producers
who counterfeited their products, imitated their trademarks and the
industrial design protected by Vietnamese laws.
The story of "Koteir" and "Kotex"
Lawyer
Le Xuan Loc from the Pham & Associates law office, said that
imitators now not only counterfeit luxurious products' brands like
Adidas
and Louis Vuitton, but they also try to counterfeit consumer goods'
brands. The counterfeiting of Kotex-brand sanitary napkins is a typical
example.
A
representative of the brand of Kimberly Clark, said that in the last
two years, it discovered a lot of products available on the market
which counterfeited the real products and violated the industrial
designs protected by the laws.
He said that the products have been selling nationwide and believed to be made in Hanoi, Bac Ninh province or HCM City.
In
June 2011, the market management taskforce in Nho Quan district in Ninh
Binh district discovered the sanitary napkins with the "Koteir"
brand available on the market. After that, in July 2011, the Bac Ninh
provincial police discovered a car carrying 31,200 napkins with "Koteir"
brand. The products were sourced from the workshop of Vu Thi Son,
located in Gia Lam district in Hanoi.
On
August 3, 2011, when the inspectors from the Ministry of Science and
Technology (MST), the Hanoi police and officers of the Pham &
Associates
law office inspected Son's workshop, they discovered 3840 sanitary
napkins with "Koteir" brand. A nylon roll with the Kotex brand symbol
was also found here, which was believed to be used to make counterfeited
products.
On
August 9, 2011, MST's inspectors released the decision on imposing the
fine of 4.2 million dong and forcing Son to remove the "Koteir"
signs on the 3840 sanitary napkins.
The
move by Kimberly Clark shows that the owners of well-known brands have
been determined to join forces with competent agencies to clear
up the counterfeit goods, according to Loc.
Just a "small flame"
However,
the owners of many well-known brands are not as lucky as Kimberly
Clark. Tran Dinh Thi, deputy director of MyLan Company, the owner
of MyLan paper brand, said that his company has been making every effort
to fight against counterfeited goods, but the results remain modest. He
complained that there are less real MyLan paper products available on
the market than counterfeit products.
"We
once had the counterfeited samples tested and found out that the
material to make the counterfeited products is recycled paper, which
may badly affect people's health," Thi said.
He
went on to say that since 2009, MyLan has been teaming up with
competent agencies to launch the campaigns of finding counterfeit goods
in Ninh Hiep commune in Gia Lam district, Van Canh commune in Hoai Duc
district, and in Dinh Bang district in Bac Ninh province. After every
campaign, counterfeited goods disappeared from the market for a short
time before they turned up again.
Perfetti
Van Melle, the owner of Happydent, Alpenliebe, Golia, Mentos, Big
Babol, Chupa Chups brands for sweets, also said that he is considering
raising lawsuits against the Vietnamese producers who illegally use the
registered brands. The representative of the company said that the
company has discovered the big workshops that make counterfeit goods in
Hoai Duc district in Hanoi.
He stressed that the main customers of the sweets are children; therefore, competent agencies should not ignore the violations.
However,
analysts have warned that it will be not easy for Perfetti Van Melle or
MyLan to eliminate counterfeit goods. The imitators, if
found, will just have to pay small fines which prove to make no
significance if compared with the profits they can earn from
counterfeiting goods.
According
to Lawyer Tran Manh Hung from Baker & McKenzie, the administrative
measures are not powerful enough to prevent violations. A lot
of producers would repeat offences after they pay the fine. Meanwhile,
very few enterprises want to take legal proceedings to force the
violators to compensate for the losses caused by them, because it always
takes time and money to follow the complicated
legal procedures.
Left in the lurch by foreign investors
Tuoi Tre
Many
manufacturers in the southern province of Binh Duong say working with
foreign investors has left them nothing but massive debts.
Lured
by the promises of lucrative profits, these manufacturers have agreed
to apply for business licenses for their joint ventures and borrow
bank loans under their names.
But when the going got tough, the foreign investors fled, leaving the local partners behind to shoulder all responsibilities.
Nguyen
Thanh Lien, who runs Nam Tien paper manufacturing business, said two
years ago, she worked with two Taiwanese businessmen to open
a paper plant and used her name to register for the business license and
borrow some bank loans.
Lien
said the two parties didn’t put down their cooperation in a contract.
After one year of operation, Lien was shocked to learn that her
Taiwanese partners had returned home when the plant encountered
difficulties and she was to be held responsible for the plant’s debts,
which amounted to 100 million dong (US$5,000).
Another
businessman, N.V.T., was similarly cheated. He joined hands with two
Chinese businessmen to open a company under his name under the
agreement that the profits would be equally shared among them. But when
the company was in trouble, the Chinese fled, leaving T. to shoulder a
massive bank debt he had earlier borrowed to set up production
facilities.
T.T.L.,
chairwoman of L.P. Co, also incurred a 180 million dong debt after she
applied for a license to run a textile company for a Korean
couple.
“I know I was cheated but couldn’t do anything because I didn’t have any information about the Korean partners,” she said.
Le
Viet Dung, Deputy Director of Binh Duong Department of Planning and
Investment, said foreign investors usually ask locals to apply for
business licenses under their names as the paperwork required for local
investors is much simpler.
To
avoid risks, local manufacturers should thus learn as much as they can
about their partners before agreeing to work with them, Dung said.
Phan
Le Diem Trang, Deputy Chairwoman of the Binh Duong Textile and Garment
Association, said many people agree to work with foreign investors
because they think they can earn profits and have nothing to lose in
case their ventures suffer losses.
“They don’t know that they have to be responsible for anything that is registered under their name,” she said.
ECONOMY – Retail sales growth slows due to inflation
Vietnamnews
The
total value of retail trade and service reached 1,224 trillion dong
(US$59.72 billion) during the first eight months of this year, an
increase of 22.2 percent over the same period last year, reports the
general Statistical Office (GSO).
Considering inflation, however, the value rose by only 3.9 percent, the lowest rise since the beginning of this year, GSO said.
Vu
Manh Ha, an economic expert at GSO, blamed the slower pace of retail
sales on high inflation which had led consumers to curb spending.
During
the period, commercial sector revenue, which accounted for nearly 80
per cent of the nation's total consumption revenue, rose by 22.5
percent year-on-year. This figure represented a 0.7 percent drop in
comparison with the first seven months of this year.
Time not right to declare victory in fighting inflation
The Saigon Times Daily
While
the central bank's Governor is of the opinion that conditions are
suitable for cutting the interest rate beginning next month to lend
a helping hand to enterprises, several experts are worried that a rate
cut may undermine efforts to contain high inflation. The Saigon Times
Daily talks with Louis Taylor, CEO of Standard Chartered Bank, on the
State Bank of Vietnam's intended move and possible
consequences on an interest rate cut. Excerpts:
The
Saigon Times Daily: Now that macroeconomic stability has to some extent
been achieved and inflation has shown signs of easing, do you
think that it is suitable now to think about an interest rate cut?
Louis
Taylor: The government and the State Bank of Vietnam (SBV) are right to
focus policy on reducing inflation and achieving stability
for the value of dong. High interest rates have been a significant part
of enforcing those policy aims. While the pace at which inflation is
growing has slowed down, it would be viewed badly by the market if
"victory" was declared too early and interest rates
lowered before it is clear that inflation is on a downward trend. Once
it is on a downtrend, there may be scope to reduce interest rates
gradually.
It
is not clear that the fight against inflation is won, and until that is
clear it is difficult for the authorities both to reduce interest
rates and retain the markets' confidence in its anti-inflation policy.
Recently,
the central bank has lowered the rate via open market operations (OMO),
which fairly reflected the good liquidity in the short
end of the yield curve. However, the market was very confused as to
whether the change in OMO rate marked a change in overall policy because
there was little explanation given for the rate cut. When the central
bank begins to reduce interest rates, it would
be best if it also gives the reason behind the reduction to ensure the
market understand the policy being pursued.
The
Governor has lately mentioned the aim of cutting the lending rate to 17
percent-19 percent per year. Do you think current economic conditions
in Vietnam support the move?
-
It is possible, although the timeframe is still unclear. At some point,
the SBV's policy rates will come down, and this will also affect
market rates in a similar way. At that time, it is likely that banks'
lending rates will also come down.
However,
banks' lending rates will always need to be above their deposit rates,
or else there will be a loss. If banks offer depositors 14
percent they can still profitably lend at 17-19 percent. However, if
banks offer depositors 19 percent then they can't lend at 17-19 percent
without incurring a loss.
In
your opinions, does the deposit rate need to be higher than the
inflation in a country like Vietnam to attract capital in the public?
How about this in foreign countries that you had learned of?
-
Deposit rates are generally lower than the inflation rate in most
countries. Saving cash is a relatively low risk activity compared to
investing that cash in other assets like bonds, shares, and real estate.
So it is reasonable that the rate of return on a cash deposit will be
lower than that expected from investing in assets that carry greater
risk, and reasonable that those with cash should
have to invest it in order to increase its real value relative to
inflation.
How about the forex rate, how will the rate cut impact on the foreign exchange rate?
-
While higher interest rates can lead to currency strength, if rates are
too high for too long they can reduce economic growth to the point
where confidence in the overall economy is lost. If Vietnamese interest
rates are reduced gradually once inflation is clearly on a downward
path, then there need not be an adverse impact on the forex rate.
If
interest rate cuts are timed appropriately, the foreign exchange market
will accept that it is reasonable to maintain growth in the economy,
and the currency needs not automatically depreciate further.
Does Standard Chartered Bank have any forecast about Vietnam's 2011 inflation and the forex rate at the end of this year?
-
Our economists publish forecasts for Vietnam, and their latest forecast
is for the average inflation rate in Vietnam for 2011 to be around
19 percent, and for the foreign exchange rate to be around VND20,600 per
US dollar. These forecasts assume that the authorities stick to their
stated policy objectives, and with the policy measures to achieve them.
Vietnam's Mandarins: Stuck In A Rut
Financial Times
The
Vietnamese government is stuck in an economic bind and its room for
manoeuvre continues to shrink as it struggles to avoid a nasty
inflationary
spiral.
Struggling
business owners and property developers are crying out for interest
rates to be lowered just as the government statistics office
revealed on Wednesday that inflation is continuing to rise, up to an
estimated 23 percent year-on-year in August.
While
companies are under immense pressure because of tight monetary policy,
workers are feeling the pinch of inflation, particularly with
rising food prices.
As
a result, this week the government confirmed that it was increasing the
minimum wage for non-state employees. The increase is set in a
range between 48 to 69 per cent, depending on geographic location, and
will take effect from October 1.
This
hefty hike will come into force just nine months after the last minimum
wage increase of 10 to 16 per cent for workers in foreign invested
companies and 14 to 38 per cent for those at local companies (from
October, minimum wages at foreign and local companies will be
equalised). In May, the government increased the wages of all public
sector workers by 14 percent.
With
the cost of living rising so fast, the government feels it has little
choice but to increase minimum wages. But economists are concerned
that the size and timing of this latest move may drive inflationary
expectations even higher.
Matt
Hildebrandt, an economist at JP Morgan in Singapore, wrote in a note to
clients that although he believes annual inflation may have
peaked, there was a risk that the minimum wage increase could "at least
slow the magnitude of the inflation roll down in the fourth quarter or
even delay it."
Le
Anh Tuan, head of research at Dragon Capital, a fund management firm
based in HCM City, agreed that the wage hike "could be a concern"
given that inflationary expectations are already very high.
But
he told beyondbrics that "a big jump is better than slow readjustment"
as the impact on prices may then be restricted to a month or two
rather than being drawn out over a longer period of time.
Many
factory workers in the industrial zones that proliferate around Hanoi
and HCM City already earn more than the new minimum monthly wage
level of 2,000,000 dong ($95) and many workers in the large informal
economy are not even paid minimum wages.
But
traders and retailers often take advantage of minimum wage hikes to
increase the prices of their goods and services. In Communist Vietnam's
fragmented, partly-marketised economy, there is thus a lot of room for
middlemen (or "hoarders and speculators" as the government prefers to
call them) to exploit inflationary expectations.
The
World Bank and the International Monetary Fund have consistently
advised the government that it must continue to liberalise the economy
further if it is to tame inflation in the long run.
But,
in such difficult times, the government tends to resort to
administrative measures such as price controls and import restrictions
and
other tools of the old, central planning system.
The only clear consensus is that there is no easy solution to the ongoing macro-economic instability.
Economy Moves Forward
saigon-gpdaily
The
first eight months of 2011 have seen a number of positive signals of
the national economy, including high export value, falling deficit
and rising foreign arrivals.
The
export turnover is poised to reach US $60.8 billion in the reviewed
period, or a year-on-year increase of 33.7 percent. It is estimated
that the country's export revenue would reach US $89 billion this year,
far above the record of US $72.2 billion in 2010.
High
export value helped pushed trade deficit to US $6.21 billion in the
first eight months compared to US $7.96 billion of the same period
last year. This, along side with measures for anti-dollarisation,
contributed to stabilise the exchange rate and foreign currency reserve.
Growth was recorded in various commodities. At least ten export items fetched revenue of US $1 billion each.
Industrial
production continued growing against the same period last year, making
it the locomotive of the economy while manufacturing and
processing industry posted double-digit growth of 10.7 percent,
according to the Vietnam Statistics Office.
Another
signal is FDI disbursement rate, reaching US $7.3 billion. It is likely
to gain realised FDI capital of over $11 billion in 2011.
The
FDI inflow, though fell down by 26 percent, mainly went to processing
and manufacturing industry, followed by production and distribution
of electricity and water.
The
country is estimated to receive nearly 4 million foreign visitors in
the first 8 months of this year, up 18.4 percent. Over 5.9 million
turns of international arrivals are expected in 2011.
ENERGY - Japan-Vietnam nuclear tech talks to restart in September
The Mainichi Daily News
The
governments of Vietnam and Japan will restart discussions in September
on the provision of Japanese nuclear power technology to the Southeast
Asian nation, it was revealed on Aug. 29.
Government
officials from both nations are scheduled to meet again on Sept. 8 and 9
in Tokyo to work out specific details of the nuclear
technology deal.
The
bilateral negotiations for the provision of nuclear reactors from a
Japanese group of companies — already approved by Hanoi — were halted
in the wake of the March 11 Great East Japan Earthquake and ensuing
Fukushima nuclear crisis.
Vietnam
approved the deal to contract the Japanese group of companies to
provide and build nuclear power facilities at a Japan-Vietnam leaders’
summit in October 2010. At the time, the Japanese side had stressed the
country could offer the latest nuclear power technology, training, and
financing via the Japan Bank of International Cooperation. The meetings
set for this September are expected to address
the concrete details of Japanese assistance to Vietnam, the project
structure, and investment portions of the parties involved.
Japanese
exports of nuclear power technology came into question following the
meltdowns at the Fukushima No. 1 Nuclear Power Plant and Prime
Minister Naoto Kan’s subsequent push to shift the country away from
dependence on nuclear power plants. However, the Cabinet decided on Aug.
5 to continue export negotiations — most notably with Vietnam and
Turkey — that were already under way. The most recent
Diet session, however, failed to approve the Vietnam deal, and the
government is now aiming to get the deal passed in the extraordinary
session set for this autumn.
Power prices to be adjusted quarterly
VNS
Power
prices will be adjusted every quarter instead of every year, beginning
September 1, according to a new circular issued by the Ministry
of Industry and Trade.
The
circular followed the Prime Minister’s Decision No 24, dated April 15,
on adjusting electricity prices in accordance with market mechanisms.
Accordingly,
power tariffs would be calculated and checked every month against
changes in foreign exchange, fuel prices and electricity productivity.
Electricity
of Viet Nam would check production costs and assess factors that are
likely to affect power prices prior to the 20th day of every
month.
The
group is allowed to raise the price of power by a maximum of 5 per
cent, equivalent to the rise in production costs, according to the
Ministry of Industry and Trade.
If
the group wants to raise the price by more than 5 per cent, it would
have to seek permission from the ministries of industry and trade
and finance, who then propose the hike to the Prime Minister.
If production costs decrease, EVN would be compelled to lower power prices by up to 5 per cent, according to the circular.
When
necessary, the Government would use the power price stabilisation fund
and other measures to minimise the impact of possible price hikes
on consumers.
Viet
Nam raised the average price of electricity by more than 15 per cent at
the beginning of March in an effort to build a strong power
market.
Jaks close to plugging in power project
VIR
Malaysia’s
Jaks Resources last week took a major step to kicking-off Vietnam’s
fourth foreign-invested build-operate-transfer power plant.
The
independent power producer last Friday signed build-operate-transfer
(BOT) and government guarantee agreement contracts with ministries
of Industry and Trade (MoIT), and Finance, respectively for the 1,200
megawatt plant. In addition, it also signed land leasing contract with
Hai Duong People’s Committee, power purchasing agreement with
Electricity of Vietnam and coal supply agreement with
Vietnam National Coal-Mineral Industries Group.
The
contract deals, inked two months after Jaks Resources received
investment certificate from the Ministry of Planning and Investment,
finished
three years of negotiations between the investor and the Vietnamese
government, the electricity distributor and coal supplier.
“This
event set a solid foothold for us to build a power plant in Vietnam,”
said Jaks Resources chief executive officer Ang Lam Poah.
The
power plant, located in northern Hai Duong province – about 60
kilometres east of Hanoi, has total investment capital of around $2.25
billion.
MoIT
Minister Vu Huy Hoang said the contract signing between Jaks Resources
and its partners “marks a milestone for Vietnam’s power industry”.
“From this time, Jaks Resources will officially play an important role
to ease the power shortage in our country,” he said.
Vietnam
has a great power sector potential as power demands in country are
expected to grow at 17-22 per cent during 2006-2015. However,
power supplies are way behind the curve, resulting in severe electricity
shortages in recent years. At this time, the growing shortfall is
considered as one of foreign manufacturers’ biggest concerns in Vietnam.
Hoang
said the government would do its best to help Jaks Resources put the
power plant into operation on time. Under the national electricity
master plan VII, Jaks Resources will have to operate the first turbine
at the end of 2014. The second one will be operational one year later.
Jaks
Resources is the fourth foreign investor allowed to build a BOT power
plant in Vietnam. Last year, the US’ AES Corporation received
investment certificate to build a $1.9 billion BOT power plant in
northern Quang Ninh province. The other ones are a joint venture between
Japanese Sumitomo Group and TEPCO Company and French EDF Energy with
Phu My 2.2 project and a consortium of Kyushu Electric
and Sojitz Corporation, BP and SembCorp Utilities with Phu My 3 project.
RESOURCES -
Fuel imports add to trade deficit
Tuoi Tre
The
country spent US$976 million on importing 1 million tonnes of refined
petrol and oil in August, nearly double both the imported volume
and value of the previous month, the General Statistics Office reported.
Meanwhile,
the coun-try’s export volume and value of crude oil during the period
decreased $14 million over July to $165 million, leaving
a trade deficit of more than $810 million during the month.
In
the first eight months of the year, imports of petrol and oil reached
7.55 million tonnes, worth nearly $6.89 billion, up 5.7 per cent
in volume and 55 per cent in value against the same period last year.
Meanwhile,
crude oil exports in the January-August period reached just 1.46
million tonnes, worth $1.34 billion, up 25 per cent in volume
and 74.6 per cent in value against the same period last year, and
resulting in a petrol and trade deficit of $5.55 billion, the office
reported.
Experts
said that the country’s first oil refinery Dung Quat, which became
operational in 2009, helped to make the country more independent,
imports had risen due by 7-10 per cent due to increased domestic demand
and a reduction in crude oil exploitation.
Last year’s crude oil exploitation output was 15 million tonnes, against 18.8 million tonnes in 2005.
Deputy
Minister of Industry and Trade Nguyen Thanh Bien expressed concern that
crude oil exports had not offset imports of refined petrol
and that the trend would continue this year.
Meanwhile, Dung Quat oil refinery has pumped 3.3 million tonnes of refined petrol and oil into the domestic market.
Rising petrol and oil import causes high trade deficit
VNS
The
country spent US$976 million to import one million tonnes of refined
petrol and oil in August, nearly double both the import volume and
value of the previous month, the General Statistics Office reported.
The
country’s crude oil export volume and value during the period decreased
by $14 million last month to $165 million, leaving a trade deficit
of more than $810 million for the month.
The
August figures brought the first eight months of the year’s total
petrol and oil import volume to 7.55 million tonnes worth nearly $6.89
billion, up 5.7 per cent in volume and 55 per cent in value against the
same period last year.
As
crude oil exports in the January-August period reached only 1.46
million tonnes totalling $1.34 billion, up 25 per cent in volume and
74.6 per cent in value, petrol and oil imports contributed $5.55 billion
to the country’s trade deficit in the first eight months of the year,
the office reported.
Experts
said that though the country had been able to reduce imports of refined
petrol and oil since 2009 when Dung Quat, the country’s first
oil refinery, was put into operation, it still suffered a high trade
deficit in the sector due to rising demand in the domestic market and a
reduction in crude oil output. Last year’s crude oil exploitation output
was 15 million tonnes against 18.8 million
tonnes in 2005.
Dung Quat has provided the domestic market with 3.3 million tonnes of refined products since its opening.
Huge “made in Vietnam” oil rig jacket in action
VOV
A
11,000-tonne jacket structure for the Moc Tinh oil rig has been
launched successfully at Vietsovpetro port in the southern province of
Ba Ria-Vung Tau.
The
jacket structure includes three-dimensional frames made from large
tubular steel members, allowing the jacket, which takes the loadings
from the topside and sea environment, to be attached by piles to the
seabed.
With
construction work starting in June last year by the Petroleum Equipment
Assembly and Metal Structure Joint Stock Company (PVC-MS), the
136- metre high structure is the largest manufactured in Vietnam.
In
April the company also manufactured and launched a jacket structure for
the Dai Hung oil rig that is 120m high and weighs 7,000 tonnes.
The
Moc Tinh oil rig is part of the Bien Dong 1 project, invested by the
Bien Dong Petroleum Operating Company (Bien Dong POC), and the rig’s
jacket structure will be installed offshore by September 5.
INFRASTRUCTURE -
Work on new Phu Quoc airport makes steady progress
Tuoi Tre
While
the Phu Quoc International Airport is likely to be completed on
schedule by the end of 2012, infrastructure works around it are making
slow progress.
The VND16.2 trillion ($810 million) airport in Duong To commune will replace the existing Phu Quoc Airport 10 km away.
Dang
Hai Nam, deputy head of the airport construction management, told Tuoi
Tre that work on the runways, hangars, and terminals were proceeding
on schedule.
However, several roads leading the airport were yet to be completed, he said.
The
seven-kilometer Duong Dong – Cua Lap road, for instance, was only half
complete though construction began as long ago as in October 2008,
he said. The road was scheduled for completion in November 2009.
“The road is full of dust on sunny days and becomes muddy whenever it rains,” Nguyen Thi Lien, a local, said.
Construction of the Cua Lap Bridge on the road has barely started though the contractors have been given two extensions.
Hoang
Ngoc Chinh, head of a construction team from 508 Company under the
Civil Engineering Construction Company No 5, said 10 workers from
his team were building the bridge’s abutments.
Asked when the bridge would be completed since such a small number of workers were doing the job, he replied he had “no idea.”
Danh
Thanh Vinh of the Kien Giang Province Department of Transport, admitted
all five traffic projects meant to serve the new airport were
behind schedule.
He blamed the tardiness on the lack of funds and the poor capabilities of some of the contractors.
“The provincial people’s committee planned to spend VND338 billion this year but we have only received VND200 billion.
“The five projects can meet the government’s deadlines only if we have enough money.”
Nguyen
Van Sau, deputy head of the management board for the investment and
development of Phu Quoc Island, said funds were the biggest problem.
The rainy season, which lasted for as long as six months on the island, also delayed the construction, he said.
“If the funds problem remains unresolved by next year, the construction will not be done in time,” he warned.
FINANCE -
State Bank plans to mobilise more gold from public
Tuoi Tre
The
former head of the Foreign Exchange Management Department Truong Van
Phuoc had a talk with Tuoi Tre about the State Bank of Vietnam’s
plan to mobilise a large source of gold from the public to buy foreign
currencies to strengthen reserves.
Phuoc
said the central bank planned to have commercial banks mobilize gold
deposits to make use of the gold holdings by the public, which
are estimated at about 300-500 tons.
The commercial banks would issue debentures and bonds to mobilise gold deposits from the public, he said.
“The
central bank would then use government’s bonds to borrow from the
banks’ gold holdings to increase foreign reserves and stabilize domestic
gold market.”
He
said the central bank would exchange the gold for foreign currencies to
increase the foreign reserves and create a stable source of foreign
currencies for the country.
For
instance, if the central bank mobilized 65 tons of gold, it could be
changed into $4 billion to add to the foreign reserves, he said.
“In
case domestic gold prices suddenly skyrocket compared to world rates,
the central bank will use the deposited gold to help the stabilize
the market and save foreign currencies.”
He also said banks would offer services to ensure that people can easily withdraw their gold deposits when prices fluctuate.
He
added that the central bank would allow transaction of gold via
accounts to limit the circulation of gold bullion in the market.
“People
have to open an account if they are to sell their gold deposits and the
bank will also sell their purchased gold to the foreign partners
via account transaction,” he said.
“There
would be no gold bullion circulated on the market and this would save
sellers time spent on receiving and transporting the gold bullion.”
As
of May 1 this year, banks have been ordered to stop lending gold under a
government’s measure to tighten control over the gold market
and ensure safety for banks.
Weak flicker of hope for interest rate reduction appears
Vietnamnet
VietNamNet
Bridge - The newly appointed Governor of the State Bank of Vietnam,
Nguyen Van Binh, has vowed to force the interest rates down
to 17-19 percent per annum. Commercial banks are drawing up a plan to
meet the commitment.
Commercial
banks have offered new credit packages specifically designed for
production businesses, importers and exporters, and the enterprises
in rural areas. The noteworthy thing is that not only state owned banks,
but joint stock banks have also been trying to slash interest rates.
Deputy
general director of Vietinbank, Le Duc Tho, said that his bank launched
a preferential credit package one week ago. Normal production
and business enterprises now can enjoy the interest rate of 18.5
percent, while six-month term loans are the most popular credit
products. Meanwhile, the enterprises that make products for export and
serve the rural economy development can enjoy the preferential
interest rate, which is 1.5 percent lower than the above said rate.
When
asked about the lending interest rate performance in the time to come,
Tho said that he can see some favourable conditions that facilitate
the interest rate reductions. The inflation rate, which is always
considered the basis for interest rate adjustment, has been controlled
well. Meanwhile, the demand for loans tends to decrease because of the
slow sales and increasing capital costs.
The
third factor that Tho believes is backing the interest rate reduction,
is the good liquidity of banks, which means that banks do not
have to mobilise capital at any costs.
Techcombank
has launched the credit package on funding farm, forestry and seafood
produce, which will last until the end of the year. The
enterprises, which borrow capital under the programme, would enjoy the
interest rate of 19.5 percent per annum.
Meanwhile,
Eximbank has announced that it has designed a credit programme with the
credit limit of 500 billion dong, under which, export
enterprises only pay 17 percent per annum in interest rate for three
month term loans.
Pham
Quang Thang, deputy general director of Techcombank, said that the bank
has decided to lower the interest rates in order to help enterprises
stabilise their production. He also said that the priority subjects of
the programme are the enterprises in forestry, agricultural and
aquaculture production sectors.
Bankers
have stressed that in the immediate time, the interest rate reductions
would be applied only to production enterprises, importers
and exporters, or the enterprises that serve the agriculture and rural
economy development. Meanwhile, the lending to non-production sectors,
such as securities or real estate, will still be tightened.
Tho
of Vietinbank also said, that his bank will continue strictly
controlling the lending to real estate projects. The bank would still
accept
the disbursement to feasible real estate projects, but the borrowers
would have to bear high interest rates of 21-22 percent per annum.
The
meeting between the central bank and 12 commercial banks in Hanoi came
to a conclusion; that commercial banks would try to slash the
lending interest rates to 17-19 percent. Meanwhile, the State Bank may
not inflexibly apply the regulations on the capital use ratios,
especially the ratio of the capital mobilised from the market 1 (capital
mobilised from the public and businesses) and market
2 (interbank market).
Commenting
about the plan by the State Bank to lower the interest rates, analysts
say that it will fulfill the commitments, if it is determined
to do. However, they say that it is too early to say when the average
interest rate would go down to the 17-19 percent per annum thresholds in
the whole banking system.
An
executive of a state owned bank in Hanoi also said that the interest
rate would not be slashed just after a meeting, while it will take
time. However, he said that the downward would be clearer in one or two
months.
Bank plan gets thumbs up from industry leaders
VIR
The government’s banking sector restructuring plan has been applauded by industry insiders.
Newly-elected
State Bank governor Nguyen Van Binh said the current number of banking
entities in Vietnam, up to 80, was enormous against
the size of Vietnam’s economy.
Supportive
of the idea, National Financial Supervisory Commission chairman Dr. Vu
Viet Ngoan agreed it was time to shut down feeble banks.
Reality
shows that restructuring banking sector is not a fresh issue as it was
mulled over by central bank long ago, but implementation was
at a snail’s pace.
According to former State Bank governor Dr. Cao Sy Kiem, it was time to comprehensively reorganise the banking sector.
“Before
embarking on restructuring, the State Bank needs to appraise the
banking sector’s actual performance, the root of its weaknesses
and work out concrete remedies to particular banks,” said Kiem.
Ngoan
said this was a wise step. “There are a lot of solutions for
restructuring such as hiking banks’ chartered capital or forcing banks
to apply an indicator set to enhance bank security, but first and
foremost banks should be classified into different groups with diverse
remedy measures,” said Ngoan.
Most industry experts assumed raising banking system security standards was necessary, but it must follow a solid trajectory.
National
Assembly Economic Committee deputy chairman Dr. Nguyen Duc Kien said to
step up banks’ restructuring, including merger and acquisitions,
it was crucial to perfect the relevant legal framework.
Kien
did not agree to retrench bank numbers. “If smaller banks work towards
serving socio-economic development, there is no need to force
them to merge to grow bigger,” Kien said small people’s credit funds in
several southern provinces like Binh Duong and Dong Nai were operating
efficiently though they provided farmers loans of VND5-7 million
($240-$338).
“Vast numbers of small banks are not a threat, but operational efficiency is what makes sense,” Kien said.
LEGAL NEWS - Working hard to answer foreign labour questions
VIR
The
spotlight has fallen on vast numbers of unlicensed foreign labourers
working across the country. The National Assembly’s Social Affairs
Committee deputy chairman Dang Nhu Loi tells VIR how the problem can be
addressed.
Around 70,000 unlicensed foreign labourers are working in the country. Why?
What
makes sense here is those unlicenced foreign workers belong to what
sorts of labourers and state management functions. Legally, it is
not a new issue as it was regulated in the Labour Code. Foreign-invested
enterprises and international organisations based in Vietnam have the
right to employ foreign labourers following certain conditions.
For
instance, these entities can recruit foreigners as skilled manpower and
managers for a certain number and time span, and they must present
plans to train locals to replace those foreign employees when their work
permits expire.
Besides
under current laws, foreign labourers working in Vietnam at least three
months must obtain permission from competent government agencies
in their work localities. Laws are there, so the foreign worker issue in
Vietnam can be tackled if we play by the laws.
Local
governments found it hard to control foreign workers saying that firms
were exploiting legal loopholes through employing labourers
for less than three months to evade signing contracts. Is that the case?
The
relevant law may have a shortcoming in that it just covers
foreign-invested firms and international organisations while ignoring
the
case foreign contractors winning bids to operate in Vietnam and
employing foreign workers.
However,
Clause 133 in the Labour Code regulates foreign labourers working for
any business entities or organisations in Vietnam must get
permission from local governments where they work. If the projects are
handled by foreign contractors, their foreign workers must fill up
declarations with local governments. Local governments will incur a
penalty if the law is not properly enforced.
In fact many foreign labourers working in Vietnam are unlicenced and nobody bears the responsibility. What is your comment?
Our
law enforcement is rather low. It is important to define where and who
bears the responsibility and issue punishments if their performance
leads to any problem. Here local competent bodies in areas with many
unlicenced foreign workers must suffer punishments.
Honda VN protests against $160 million tax arrears
Tuoi Tre News
Honda
Vietnam has filed a petition to the government after being told to pay
tax arrears of VND3.34 trillion (US$160 million) by local customs
agencies.
The
tax arrears bill for Honda Vietnam's imports over the past five years
was issued after a recent scheduled examination jointly carried
out by Hanoi and Vinh Phuc customs departments.
But
the firm protested and provided clarifications highlighting
misunderstandings taking root in the way some related regulations
concerning
separation level were previously and are currently understood.
The manufacturer expressed concerns over the long-term business operations should the issue remain unresolved.
Established
in 1996, Honda Vietnam started manufacturing motorcycles in 1997 and
automobiles in 2006 with the total turnover up to now of
10 million and 20,340 units respectively. The labour force now totals
100,000 people and the amount of tax contributed has reached VND20
trillion so far.
Deputy prime minister Hoang Trung Hai has requested the Ministry of Finance to report on the case, said the government Office.
The
tax arrears collection will affect the business development of Honda
Vietnam, newswire Vnexpress quoted Hiroshi Kitamura - Japanese Charge
D'Affaires in Vietnam who has sent a postal mail to the Ministry of
Finance, general Department of Customs and Ministry of Industry and
Commerce on the problem.
In
the letter, Hiroshi said Honda Vietnam is facing difficulty because of
then and now understandings of tax treatment for imported spare
parts for car assembly.
Hiroshi
added that if the tax arrears are paid, it will negatively affect the
development of business activities in Vietnam and the employment
of Vietnamese workers.
It
will also affect the confidence of foreign investors in Vietnam or
those who are prepared for investing in the country, including Japanese
companies.
Ford Vietnam last month was requested to pay VND32.5 billion by Hai Phong Customs Department due to false tax declarations.
But the total tax amounts liable have been calculated at VND40.7 billion, nearly VND8.25 billion of which has already been paid.
In
addition, 155 customs declaration forms of car parts imported through
Customs Department are being reviewed, 90 of which reveal components
for assembling Focus, 35 for Escape, 6 for Mondeo, the remaining for
Fiesta and Transit vehicles.
The additional tax collection is inevitable due to some current vague regulations, a senior customs officer told Vnexpress.
In
reality, not only Ford Vietnam but also other famed automobile
manufacturers namely Vinamotor, Vidamco and Toyota have run into trouble
making customs declarations for automobile component imports.
Imported car components that are eligible for separation level criteria can enjoy a preferential tax rate of 0-27 percent.
Meanwhile,
complete parts if detected will be imposed a tax rate of 80-82 percent
which is the tax rate for importing a whole car.
Ford
Vietnam now has 160 customs declaration forms which will be imposed car
import tax rates rather than the preferential rates due to their
failure to meet the requirement of separation level.
The
tax arrears collection has been conducted since March when some
consignment of automobile part imports of Ford Vietnam was inspected
by Hai Duong Customs Department.
Several
components failed to satisfy the required separation level in order to
be eligible for the favourable tax rate of 0-27 percent.
Oliver Massmann
Rechtsanwalt
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