Vietnam - News and Regulations

FINANCING - Vietnam, Indonesia and Philippines plan January global debt sales

Indonesia, the Philippines and Vietnam are competing to be among the first Asian governments to sell foreign-currency bonds in 2010, as a global economic recovery supports investor appetite for emerging-market debt.

Indonesia plans to sell as much as $4 billion of US dollar bonds with 10- and 30-year maturities, a person familiar with the matter said today. The Philippines is preparing to sell as much as $1.5 billion of debt denominated in dollars or euros, while Vietnam plans to raise as much as $1 billion in dollar bonds this month, according to people aware of the plans.

"There's appetite for high-yielders," said Michael Pisler, an emerging-market debt trader at SJS Markets Ltd in Hong Kong. "The biggest determining factor will be fund inflows into the region as the economies improve."

The difference in yield to own bonds in developing countries instead of Treasuries dropped 4.16 percentage points last year to 2.74 percentage points, according to an index compiled by JPMorgan Chase & Co. Global funds bought more than $8 billion of emerging-market debt in 2009, after pulling out $18 billion in 2008, according to data published by EPFR Global.

The government may sell global bonds through a placement "when the time is right," Finance minister Sri Mulyani Indrawati said in Jakarta today, without giving details. Indonesia hired Barclays Capital Plc, Citigroup Inc. and Credit Suisse Group AG for a sale, a ministry official said last month.

Time is Right

Indonesia, Southeast Asia's biggest economy, last sold $3 billion of bonds in overseas markets in February, and raised $650 million from the sale of Islamic dollar bonds in April. The government plans to raise $11 billion from local and overseas bond sales in 2010 to finance a budget deficit forecast at 98 trillion rupiah ($10.4 billion), or 1.6 percent of gross domestic product

Indonesia's budget deficit totalled 87.2 trillion rupiah last year, less than a forecast 129.8 trillion rupiah, the finance ministry said on January 1. The economy probably grew 4.3 percent to 4.4 percent last year, the ministry said.

Moody's Investors Service lifted Indonesia's foreign- currency debt ratings one level to Ba2 on September 16, citing the economy's resilience. The Moody's rating is two levels below investment grade.

Investors demand a 2.08 percentage points yield premium over US Treasuries to buy Indonesian debt, according to the JPMorgan EMBI+ spread. The gap narrowed 70 basis points in 2009, compared with a 167 basis points widening in 2008. The cost to protect the bonds against default also fell in 2009, according to credit-default swap prices compiled by CMA DataVision.

Philippines, Vietnam

Yields on Indonesian 30-year debt and Philippine 25-year dollar debt rose today, ING Groep prices showed.

The Philippines has sold dollar-denominated bonds every January since 2005, according to data compiled by Bloomberg. It plans to raise $2 billion from the sale of overseas debt in 2010 to fund a budget deficit that Finance Secretary Gary Teves said may climb to a record 293 billion pesos ($6.4 billion) this year.

The Philippines is "opportunistic" in its borrowing and will sell overseas bonds when it's the "right time," central bank Governor Amando Tetangco told reporters today in Manila.

The central bank allowed the government "in principle" to sell up to $1.5 billion of global bonds, a person familiar said on December 29. Separate approval was given to a plan to sell about $500 million in yen-denominated bonds, the person said.

"The government would want to put its finances in a solid footing by borrowing abroad early and at good levels," said Roland Avante, treasurer at Manila-based Sterling Bank of Asia. "That, and the huge liquidity in the local market, would help ease pressure on domestic debt."

Vietnam may sell notes with 10-year maturities, according to a person who declined to be identified before a public announcement. Vietnam hired Barclays Capital, Citigroup Inc. and Deutsche Bank AG to manage the sale, the person said.bloomberg

INSURANCE - Number of new insurance contracts up 13pct in first 9mths of 2009

In the first nine months of 2009, the number of new insurance contracts grew by 13 percent year-on-year. In which, that of investment insurance deals (including universal insurance and unit link) posted the highest growth of 78 percent, followed by term assurance about 20 percent, endowment insurance moderately up 2 percent, reported Vietnam Insurance Association.

Endowment insurance products still continue leading market in terms of number of valid contracts, but the volume of new contracts accounted for 61.2 percent only, showing that investment insurance products (especially universal insurance) are attracting the attention of customers and life insurance agents.

Takashi Fujii, general director of Dai-ichi Life Vietnam said that in the upcoming time, the universal insurance products along with traditional insurance products will become key units of insurers. According to Pham Truong Khanh, Marketing director of Korea Life, in US, the individual life insurance and permanent life insurance are taking first with the market share of 40 percent, and then investment insurance with 37.2 percent and endowment insurance 22.8 percent.

In Vietnam, in parallel with the development of life insurance segment, some products such as endowment insurance will be dominated by other products with high protective and flexibility. Thus, life insurers now are paying special attention to the development of new products to bring various options for customers, Khanh said.

The number of new investment insurance contracts in Vietnam only accounts for 16.5 percent of total new deals. Meanwhile, in China, the ratio is 31 percent and in Hong Kong 39 percent. Many specialists assessed that the volume of new investment contracts of local insurers still cannot surpass traditional insurance field. Depending on demand, income and awareness of customers, insurance counsellors will offer suitable products.

Factually, in Vietnam's life insurance market, the products are designed based on term life, endowment and universal insurance. Endowment is a type of life insurance that is payable to the insured if he/she is still living on the policy's maturity date, or to a beneficiary otherwise. But the product has no refund value and leans to the saving value through paying fixed fees in short time (commonly 10-15 years). Universal insurance allows flexible fee payment. Life insurance companies all design products based on these insurance lines and call it by different names.

Vietnam's insurance market is more developed than many countries with the quick update on new insurance products. But, the market has no annuity insurance (that aims to help insurance buyers more secured on old age).

Senior official of a life insurer shared that his firm remains hesitant in fields of annuity insurance because of without particular guidance circular of the finance ministry.DTCHK

Infrastructure - Vietnam sets minimum size for refineries

The chair of National Oil and Gas Group (PetroVietnam) said at a press conference in Hanoi yesterday that it would be inefficient to invest in small oil refineries with a capacity of just 6.5 million tonnes of crude oil per year.

"This is the lesson drawn from Dung Quat. The group has set an annual capacity of 10 million tonnes of oil for the Nghi Son and Long Son refineries," Binh La Thang said.

The investment capital for Dung Quat in central Quang Ngai Province, was around $3 billion. Thang said PetroVietnam planned to raise the capacity of Dung Quat to1 0 million tonnes of oil in the future.

To ensure that Dung Quat had enough oil to refine, Thang said oil would be sourced from a number of fields and imports; not just Bach Ho.

The plant refined nearly 2.3 million tonnes of crude oil from Bach Ho last year and processed 1.49 million tonnes of petroleum products.

The Nghi Son refinery, in central Thanh Hoa Province, has an investment capital of$6.2 billion. Phung Dich Thuc, PetroVietnam CEO, said: "We are preparing to invite tenders who have enough capacity and are suitably qualified to carry out the project. We hope a joint venture can be established in the second or third quarter of this year. "

Long Son refinery will have an expected investment capital of more than $8 billion.

"The group is talking with partners from the Middle East, Malaysia and South Korea. We hope to sign a contract with them to undertake the project this year but negotiations are rather complicated," Thang said.

At the press conference, the group reported that it expected to earn a record revenue of 329 trillion dong (US$18.3 billion) this year, up 24 percent against 2009.

Of that total, about $7 billion is expected from crude oil exports, with the price of a barrel of oil estimated to average $65. The remainder will come from oil and gas services, fertiliser and power generation. The company expects to pay 96 trillion dong ($5.3 billion) to the State budget.

Thang said PetroVietnam expected to pump up about 15 million tonnes of crude oil and 8 billion cubic metres of gas this year.

Thang said the figure was less than last year's because recently discovered oil fields were small. To raise its total output, the group plans to pump up 500,000 tonnes of crude oil abroad this year.

The group now has 60 overseas projects in 14 countries, including Russia, Venezuela and Malaysia.

"Last year, PetroVietnam signed a record 13 oil and gas exploration and exploitation contracts in the country. It also exploited a record 8 billion cubic metre of gas, a year-on-year increase of 7%, "Thuc said.

"The company also churned out a record 755,000 tonnes of fertiliser and generated 8.47 billion kWh of electricity last year," he said.

"Four other records were set in oil and gas output, revenue from services, the number of new projects implemented [14] and social welfare 940 billion dong ($52 million).

However, the group's total turnover fell 8 percent to 265 trillion dong ($14.7 billion), mainly owing to the lower price of crude oil on the world market, said Le Minh H6ng, the group's deputy director general.

"The fall was only slight thanks to great efforts to raise crude-oil output and improve services," Hong said.

PetroVietnam produced 16.3 million tonnes of crude oil last year, up 9 percent from a year earlier. It paid 91 trillion dong to the State budget.vns

PRIVATISATION - Petrolimex to equitise

Prime minister Nguyen Tan Dung has approved the privatisation plan of Vietnam Steel Corp (VNSTEEL) and Petrolimex.

As for the holding company VNSTEEL, the state will keep over 65 percent of chartered capital; appraise the corporate value (excluding corporate value of Thai Nguyen Metal Refining Vocational College.

In the equitisation plan of Petrolimex, the state's minimum holding size will be 75 percent of charter capital to shape multi-ownership group. Members of Petrolimex Group will be organised under the corporation model.

As for the training facilities of both corporations, after being equitised, VNSTEEL will continue managing Thai Nguyen Metal Refining Vocational College. Ministry of Finance ordered State Capital Investment Corp (SCIC) to separate the value of Viettronic Technological College from the corporate value of equitised VNSTEEL and transfer management on Viettronic College to Vietnam Electronic and Informatics Joint Stock Corp.

Petec Trading and Investment Corp under Petrolimex will be taken over by PetroVietnam.gov website

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.