Vietnam - News and Regulations

INFRASTRUCTURE/POWER-“BUILD OPERATE TRANSFER” NEWS- HIGHLIGHTS OF THE NEW BOT DECREE ON INVESTING IN INFRASTRUCTURE”

The Government of Vietnam issued Decree 108 regulating investment on the basis of BOT, BTO and BT contracts on 27 November 2009. It will take effect on 15 January 2010 and completely replace previous regulations on BOT, BTO and BT investment in Vietnam.

Decree 108 provides regulations on sectors, conditions, order and procedures for investment, investment incentives applicable to, and the rights and obligations of parties to BOT, BTO and BT contracts. Decree 108 shall apply to investors, to State bodies authorized to enter into and implement project contracts, and to other bodies, organizations, individuals and enterprises involved in implementation of projects.

Pursuant to Decree 108, the Government encourages the implementation of projects for building, operating and managing new infrastructure facilities or projects for renovating, expanding, modernizing, operating and managing existing works of the following sectors:

- Roads, bridges, tunnels and road ferry landings;

- Railways, rail bridges and tunnels;

- Airports, seaports and river-ports;

- Water supply systems; drainage systems; and waste and sewage collection and treatment systems;

- Power plans and power transmission lines; and

- Other infrastructure facilities as decided by the Prime Minister.

The selection of investors can be accomplished in two ways:

Where there are two or more investors register the project with the Authorized State Body within 30 working days from the last publication date of the relevant published list of projects, the selection of investor for the project must be through tender process.

There are two cases where direct appointment may be applied, namely: (i) where there is only one investor registers the project with the Authorized State Body within 30 working days from the last publication date of the relevant published list of projects; and (ii) the project is required to be implemented in order to satisfy an urgent need to use infrastructure facilities as permitted by the Prime Minister.

An investor who is selected through tender process or direct appointment must agree with the Authorized State Body on the terms and conditions of the BOT, BTO and BT project contracts and other related contracts (if any). Upon agreement, the investor and the Authorized State Body will sign off the BOT, BTO or BT project contracts and related contracts (if any). Then the investor must apply for issuance of investment certificate to the project company. Regarding foreign invested project company, the investment certificate is also considered as the business registration certificate of the project company. After the project has been issued with an investment certificate, the investor and the State Authorized Body will officially sign the project contracts.

Rights and obligations of project companies must be agreed in one of the following ways, (i) the project company shall sign the project contract and become, jointly with the investor, one party of the project contract, or (ii) the Authorized State Body, the investor and the project company shall sign a document permitting the project company to assume and exercise the rights and obligations of the investor.

Security for the obligation to perform the project contract may be provided in the form of a bank guarantee or other security for obligations as prescribed in the Civil Law.

Under the old Decree 78, the security ratio for the contract obligation must not be lower than 3%, 2% and 1% of the total investment capital of the project, subject to the level of total investment capital of the project. Decree 108 has adjusted the security ratio and the capital level, e.g. for projects with total investment capital up to VND 1,500 billion, the security ratio must not be lower than 2% of total investment capital.

From 15 January 2010 (the effective date of Decree 108), not only the Ministry of Planning and

Investment but also provincial people’s committees shall have power to issue investment certificates for BOT, BTO and BT contract projects in certain cases. Regarding tax incentives, Decree 108 only provides general statement whereby tax incentives applicable to BOT, BTO and BT project contracts shall be in accordance with the applicable tax laws and regulations. BOT and BTO companies shall be exempt from land rent for the whole duration of implementation of the projects and BT companies shall be exempt from land rent and land use fees for the area of land used to construct the BT project works for the duration of construction of the works.

Decree 108 contains the following transitional regulations:

Investors implementing BOT, BTO and BT contract projects for which an investment certificate was issued prior to 15 January 2010 shall continue to implement in accordance with their current project contracts and investment certificates.

BOT, BTO and BT contract projects which already had a decision on selection of investor prior to 15 January 2010 shall not be required to apply the procedures on tendering in Decree 108.

Unless otherwise decided by the Prime Minister, any investor who entered into a BOT, BTO or BT project contract prior to 15 January 2010 and who has not yet been granted an Investment Certificate must amend the current project contract and carry out procedures for issuance of investment certificate as required by Decree 108.

INSURANCE - HSBC Vietnam helps life insurer collect premium

HSBC Bank (Vietnam) is supporting Bao Viet Life Insurance Corp in collecting the insurance premium from the company's agent at over 1,600 post offices nationwide.

After its successful cooperation with Vietnam Post Corp (VNPost) for offering HSBC Bank's services via 1,600 post offices in all over the nation in September 2009, HSBC Bank (Vietnam) Ltd signed an agreement for collecting insurance premium for Bao Viet Life Insurance Corp.

HSBC Bank (Vietnam) is the first foreign bank to introduce this service in Vietnam and Bao Viet Life Insurance, the member company in Bao Viet Group, one of the bank's strategic partners has become the first corporate customer to launch the product.

The bank chose Ha Tay as the pilot destination and up to 2010, HSBC Bank (Vietnam) will develop the service for every individual customers of Bao Viet Life Insurance Corp so that they can pay the premium at any post office nationwide.

Nguyen Quang Tam, Bao Viet Life Insurance Corp's vice general director said after successful Bancassurance network, his corporation and HSBC Vietnam made one step forward when cooperating with VNPost to bring the customers convenient services with the purpose of helping Bao Viet Insurance Co become the leading life insurer in Vietnam.CAFEF

BILATERAL TRADE - HK puts more emphasis on Vietnam

Hong Kong is exerting greater efforts to speed up trade and investment expansion with Vietnam, even in the difficult time of global economic downturn, given the double-digit growth in two-way trade.

Bilateral trade between Hong Kong and Vietnam in the first 10 months of this year grew 14 percent year on-year to exceed $3.5 billion, according to figures of the Hong Kong Trade and Economic Office. The growth is higher than that in the first nine months, when figures of the Hong Kong Trade Development Council (HKTDC) showed that two-way trade had expanded by some 13.6 percent year-on-year to over $3 billion.

HKTDC assistant chief economist Dickson Ho and Simon Galpin, director general of investment Promotion at the agency InvestHK, shared with the Daily about what Hong Kong is doing to speed up trade and investment links with Vietnam. Ho said HKTDC was leading business delegations to emerging markets including Vietnam. "Vietnam is definitely the target of HKTDC. We take companies over to see Vietnam which is obviously a place we call alternative production:'

Ho said many Chinese companies were manufacturing garments and shoes as well as electronic and telecommunications items, which are more hi-tech and value-added, and that Vietnam was moving in this way to more value-added products. Ho said some of the Hong Kong businesses were relocating facilities to Southeast Asia, including Vietnam, where labour cost is relatively low, as a result of global supply chain.

Galpin of InvestHK said if companies wanted to find locations for manufacturing and cheap land and labour, mainland China and Vietnam would be.their destinations of choice. He said InvestHK would arrange more visits to Vietnam for Hong Kong businesses to gauge this market and also attract more Vietnamese firms to start up and list in Hong Kong, particularly next year when their agreement on avoidance of double taxation comes into effect. "We think that the agreement on avoidance of double taxation between Hong Kong and Vietnam will facilitate two-way investment flows between the two destinations;' Galpin said.

Galpin said Hong Kong was successful in attracting companies from mainland China which use Hong Kong as a place to raise capital and as a window and platform to draw the rest of the world. For this reason, he expected Vietnam could be the next big source of projects for Hong Kong and pledged the same level of support to Vietnamese companies.

Galpin said InvestHK would provide Vietnamese companies with free information about this market as well as practical assistance in finding offices and staff and getting media coverage and publicity for their expansion as well as ongoing support. He said Hong Kong was an open and transparent market where most of the companies that start up with small business were able to afford a base in Hong Kong because taxes were simple and low. On top of that, Galpin said companies also paid no sales, import or capital gains taxes.

"Hong Kong only taxes the income generated in Hong Kong;' Ho said, adding that Hong Kong was a renowned service and financial platform in Asia for Vietnamese companies to raise funds through getting their stocks listed on the stock exchange there. He said the advantage of listing stocks in Hong Kong was that Vietnamese companies attracted international investors and made their business known on the global arena.

"In the past two years, the Hong Kong Stock Exchange has made very clear that it wants more overseas companies. Vietnam is a place that we target because we want to diversify... and want different kinds of companies to be listed in Hong Kong;' Ho said.SGTD

RESOURCES - Thaioil enters solvents business

HCM CITY — Shell’s solvent business in Viet Nam had been handed over to TOP Solvent Co Ltd, a subsidiary of Thaioil Group, after the assets purchase agreements were signed between Thaioil and Shell in October 2008, TOP Solvent announced on Wednesday.

"Thaioil’s expansion into solvents is in line with the company’s business strategy to strengthen its long-term growth and establish a presence in the international markets," said Surong Bulkul, CEO of Thai Oil Public Co Ltd.

He said in 2008 Thaioil branched into a retail trading segment by acquiring solvent operations both in Viet Nam and Thailand from the Shell group.

Thaioil has established TOP Solvent Co, acquiring 80.5 per cent of shares from Sak Chaisidhi Co and its distribution business in Thailand to operate solvents businesses in Thailand and Viet Nam.

"Our focus is on expanding the refining operation that is linked to petrochemical production and directly to end-users," Surong said.

TOP Solvent offers a wide range of solvent products as well as chemical solvents for various uses, including the manufacturing of coatings, thinners, resins, inks, adhesives, electronics, cleaning agents and petrochemicals, with a market share of 30 per cent in Thailand. — VNS