6.
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With Compliments
Oliver Massmann
Rechtsanwalt
General Director – Duane Morris Vietnam LLC
Hanoi Office: 13th Floor, Suite 1307/08 Pacific Place, 83B Ly Thuong Kiet, Hoan Kiem District
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INVESTMENT - German Chancellor Merkel at business forum in Vietnam - German investors most interested in clean energy
Photo: AFPGerman investors are most interested in developing renewable energy and high-technology in Vietnam, a forum has heard.
Speaking
at the Vietnam – Germany Economic Forum held yesterday in Ho Chi Minh
City, Vo Quang Hue, CEO of Bosch Vietnam, said high-technology
production was very appealing
to German investors.
He
said German businesses, which are renowned worldwide for clean and
renewable energy, especially solar and wind power, could contribute
greatly to boost Vietnam’s economic
competitiveness.
Oliver
Massmann, director of Duane Morris law firm, which has been consulting
many German investors, also said most of his customers wanted to invest
in renewable energy
and high-technology machinery here.
But
he said inconsistent implementation and understanding of Vietnam’s law
system had prevented many investors from entering the local market.
“Vietnamese
people have also missed the chance to access green technology since
your legal system lacks regulations about renewable energy,” he said.
He
suggested the Vietnamese government should allow foreign investors
without any further delay to directly distribute their products in
Vietnam to attract more investments
to the country.
For
her part, German President Angela Merkel said Germany wished to work
with Vietnam in many sectors including infrastructure and education.
She
said the two countries had signed a EUR450 million deal on cooperation
in profession training, public health and the environment.
“We need a trustworthy legal framework and a transparent administrative system from Vietnam,” she said.
Vietnam’s
Deputy Prime Minister Hoang Trung Hai said Germany had been Vietnam’s
biggest commercial partner in the EU with bilateral trade reaching
US$4.1 billion last year.
So
far this year, German investors have been operating 167 projects with a
total investment of $850 million in Vietnam, Hai said.
He urged German and Vietnamese businesses to boost their trade promotion to strengthen bilateral trade.
“Vietnam will provide the most convenient conditions for German businesses to operate here,” he said.
German investors like good laws
VNS
HCM
CITY — Visiting German Chancellor Angela Merkel said yesterday that a
reliable legal framework was one of the essential conditions for
German businesses to invest in Viet Nam.
Speaking
at the Germany - Viet Nam Economic Forum in HCM City on 12 October, she
said German businesses also need a transparent administrative
mechanism "without red tape and subsidies," and good infrastructure.
She urged Viet Nam to continue with its open-door policy as well as a privatisation process.
Since
investments by German companies would be for the long term and they had
advanced technologies, they were in a good position to participate
in Viet Nam's modernisation process, she said, citing the example of HCM
City's underground project.
Deputy Prime Minister Hoang Trung Hai highlighted the potential opportunities for bilateral co-operation.
"Viet
Nam's socio-economic development strategy in 2011-20 focuses on major
targets with a stress on quality, effectiveness, sustainability,
human-resource development and skilled labour," he said.
Higher priority would be given to investment in projects that use high technology and are environmentally friendly.
Since adopting its renovation policy, Viet Nam had achieved average annual economic growth of 7 per cent in recent years.
The country had managed to contain its high inflation, stabilise the economy, and address businesses' difficulties.
This year actual FDI inflows in the first nine months were US$8.2 billion, a year-on-year increase of 2 per cent.
German investment in Viet Nam remained modest at $850 million in 167 projects, just fifth among EU economies and 24th overall.
Bilateral trade had topped $4.1 billion last year.
"This
economic forum is an important event in the German chancellor's working
visit to Viet Nam and it also serves as a chance for Viet Nam
to deliver its messages on trade and investment and its strategic
development orientation to German investors and companies," Hai said.
Viet Nam appreciated the economic co-operation extended by Germany, he stressed.
Germany to grant $598m for development projects
VNS
HA
NOI — Germany will provide Viet Nam with financial assistance totalling
US$598 million for development of infrastructure and human resources,
the German Embassy in Ha Noi has announced.
A
co-operation agreement was signed on Monday, witnessed by visiting
German Chancellor Angela Merkel and Vietnamese Prime Minister Nguyen
Tan Dung, creating the foundation for German assistance to eight
bilateral development projects in Viet Nam, a press release from the
embassy said.
The
assistance would be focused on environmental protection, adaptation to
climate change, urban development, energy, job training and healthcare.
German
Development Bank KfW will be responsible for disbursing the money to
the projects, which come within the framework of the negotiations
between the two governments in Bonn in October 2010.
With the assistance, Germany will retain its status as one of the major donors to Viet Nam.
Experts urge higher capital requirement for FIEs
Saigon Times
Local
experts have suggested increasing the ratio of foreign capital in
foreign-invested projects in Vietnam to at least 80 percent to force
foreign-invested enterprises (FIE) to bear the responsibility for their
business in this country.
Nguyen
Dinh Cung, vice head of the Central Institute for Economic Management
(CIEM), said the high capital requirement would help prevent
ailing FIEs escaping the country and thus leaving bad debts in the local
banking system.
Vietnam in the past saw many poorly-performing FIEs disappear while their bad debts in local banks have soared to $80 million.
A
number of bank branches in Hai Duong and Phu Tho Province face these
bad debts, including one from Kenmark of Taiwan. The company registered
to pour $500 million into Hai Duong but escaped after leaving $50
million in debts at some domestic banks.
For
Agribank's Phu Tho branch, four South Korean enterprises fled as they
failed to pay debts totalling $12 million. The lender has recovered
just a modest ratio of the debts by liquidation or leasing their assets.
Do
Nhat Hoang, head of the Foreign Investment Agency under the Ministry of
Planning and Investment, said FIEs used to be regulated to have
30 percent of capital in a project while they could borrow the remaining
70 percent in Vietnam.
The rule was lifted in 2005, allowing all foreign firms to use capital from local sources when required.
The
investors are also allowed to use their projects to be developed as
collateral for loans. As a result, many lenders are careless in
evaluating
their assets, giving them an abundance of money to pour into
poorly-chosen projects.
According
to a local banker, FIEs can enjoy lower lending rates at foreign banks
in Vietnam but when they reach local banks for loans, they
might fail to meet high requirements at foreign banks. Therefore, banks
should consider their applications carefully, the banker told the Daily
on Tuesday.
Hoang
of the Foreign Investment Agency said the ministry had suggested
reinstating the pre-2005 capital requirement of 30 percent. Meanwhile,
Cung of CIEM said the ratio should be raised to at least 80 percent.
"The
government's policy is to attract foreign capital into the economy, not
invite FIEs here to use domestic funds. It is time for the government
to tighten foreign investment rules in the country and banks to
carefully evaluate foreign-invested projects before lending to the
investors," Cung added.
Cung
advised authorities to follow the progress of foreign-invested
projects. Local authorities should withdraw investment certificates if
FIEs fail to start work within 12 months. Besides, banks should refer to
the provincial departments of planningand investment to know about
FIEs' scale and capital mobilisation progress while evaluating their
projects.
Why is FDI decreasing?
VCCI
Foreign direct investment (FDI) volume reached over US$9.9 billion, just as 72.1 percent as in the same period last year.
The
current statistics indicate a sharp decline in the amount of foreign
direct investment (FDI) in Vietnam. By the end of September, FDI
volume reached over US$9.9 billion, just as 72.1 percent as in the same
period last year.
Economists
suggest that the Vietnamese Ministry of Planning and Investment (MPI)
and other relevant ministries and institutions need to set
up a strategy of attracting FDI and solutions for enterprises involved
in this sector so that Vietnam’s economy will achieve its targets in the
last months.
Recently,
the MPI’s forecast has revealed that by the end of 2011, the expected
FDI will be unlikely to reach US$20 billion as planned. According
to economic experts, FDI is going to reach only about US$17 billion.
Moreover, economic experts also predicted that if the foreign and
domestic economies tend to be stagnant as currently, expected FDI will
reach a humble number of $15 billion which will show
clearly a significant decline.
According
to economists, the decline in the flows of FDI is a worldwide
phenomenon, not unique to Vietnam. In the widespread economic turmoil,
the difficulties of foreign investors are the most important reason for
that decline.
As
for domestic reasons, necessary conditions to attract the FDI are still
stuck at some stages, such as: infrastructure, facilities and
quality of human resources which have not met the requirements of
international contractors. Furthermore, in this tightened economy, the
government has issued many policies to narrow preferences for foreign
investors.
According
to Bui Quang Vinh, minister of Planning and Investment, Vietnam has to
adjust its strategy of attracting FDI and turn it into a
new phase with particular criterion.
Specifically,
Vietnam should target powerful corporations, which have great
potential, high-tech properties and investments in conformity
with Vietnam’s orientation. Nokia Corporation, for example, planned to
launch a phone production project in Bac Ninh province, and proposed
some preferences from preferential policy for high-tech companies. The
leaders of Bac Ninh province also submitted this
suggestion to the government for some special treatments.
Accordingly,
the Nokia investor announced to build a factory of 80,000 sq.m in the
Vietnam – Singapore Industrial Park (VSIP) of Bac Ninh
province with the cost of 200 million euros. However, the government
generally stated that the preferential policy is applied for Nokia only
as an export – processing enterprise. And as for high-tech companies,
which successfully reach the standards of high-tech
companies, can apply for the high-tech preferential policy.
By
this example, the government has shown that it did analyse and refine
projects and investors rather than satisfy most requirements of
foreign investors like before.
Moreover,
in order to attract inflows of investment, many provinces have to
change local planning schemes approved by the government. This
really is the potential risk for the sustainable development of Vietnam
economy and it also leads to the danger that projects cannot be
implemented in practice.
Facing
new trends of economy, focal refinement and selective attraction of
foreign investors is a curable dose for Vietnam to grasp potential
investors with full of capacity; increase the amount of FDI in the
future.
Germany supports Vietnam-EU FTA
VOV
Germany
supports Vietnam's bids to win European Union recognition as a market
economy and its negotiations on signing a free trade agreement
(FTA) with the EU, says German Chancellor Angela Merkel.
Germany
will continue to support Vietnam in promoting comprehensive cooperation
with the EU, Ms Merkel told the Vietnam-Germany economic
forum in HCM City on October 12.
She
also confirmed that Germany will maintain the provision of official
development assistance (ODA) for Vietnam in the coming years, focusing
on such areas as sustainable development, environmental protection,
health care and vocational training.
She
expressed her optimism about the prospect of bilateral economic ties
between Germany and Vietnam, saying both countries want to increase
economic and trade cooperation.
German
businesses are keen to invest in the longer term in Vietnam, Ms Merkel
assured forum participants who were representatives of leading
businesses, professors, and economic experts from both countries.
She
went on to say that German businesses are willing to invest in
infrastructure development and human resource training projects in the
Southeast Asian nation.
For
his part, deputy prime minister Hoang Trung Hai confirmed that the
Vietnamese government wants to expand cooperation with Germany in
all areas.
As
Vietnam is implementing its 10-year socio-economic development strategy
until 2020, it prioritises projects using advanced,
environmentally-friendly
technology, said Hai.
He
noted that economic cooperation between Vietnam and Germany has
developed significantly in recent years, with two-way trade reaching
$4.1
billion last year.
However,
he said, German investment in Vietnam remains modest. The European
nation has invested in 167 projects in Vietnam capitalised at
$850 million, ranking 5th among EU investors and 24th among all foreign
investors.
He
expressed hope that the forum and Chancellor Merkel's visit will open
up new opportunities for increasing bilateral economic ties.
Forum
participants focused their discussions on urban planning and
sustainable development, sustainable industrial production and
sustainable
investment.
Later,
Chancellor A. Merkel left HCM City, concluding her official visit to
Vietnam at the invitation of prime minister Nguyen Tan Dung.
FDI firms reduce 3.6tr dong losses in Jan-September
Vietbiz24
Tax
inspection at 500 FDI (foreign direct investment) enterprises indicated
a reduction of over 3.6 trillion dong of their losses in the
first nine months of this year.
The
reduction of losses caused their corporate income tax (CIT) increase by
1.2 trillion dong. As planned, 700 remaining FDI firms will continue
to be inspected by tax agencies from now till the end of this year.
To
prevent the price transfer, the Ministry of Finance proposed the
National Assembly Financial Budget Committee that management agency
should
be entitled to determine the tax when enterprises have signs of price
transfer to evade taxes.
According
to deputy minister of finance, Do Hoang Anh Tuan, when investing in
Vietnam in the upcoming time foreign enterprises may have to
negotiate with management agencies about the business plans, minimum
income or financial standards to prevent price transfer.
PPP projects await private investors
Vietbiz24
PPP projects await private investors
Several
public-private partnership (PPP) projects out of a tentative list of 24
ones will be put forth soon to call for private investors,
local and foreign alike, the Vietnamese Ministry of Planning and
Investment said at a conference here in HCM City on Thursday.
Dang
Xuan Quang, deputy director of the ministry’s Foreign Investment
Agency, said the 24 PPP projects required total investment capital
of $20 billion, but authorities would sort out some projects only for
the trial scheme of promoting PPP projects.
The
government will launch these PPP projects on a trial basis within a
short period of three to five years, and in its preparations, the
government will conduct international tenders to choose consultants and
investors for these projects, Quang told the Southeast Asia Private
Equity Conference.
Vietnam is in dire need of private investments and the participation of private firms in large-scale projects, he said.
“The government wants to tap the huge private capital resource,” he said.
Quang
explained that the country needs at least $160-180 billion for basic
infrastructure, half of which should come from the private sector.
There
will be an important shift in Vietnam’s investment structure in the
near future, making it more sustainable and less dependent on
traditional
capital sources such as official development assistance (ODA) or
government bonds. A strong cut in public investments is therefore
needed, Quang said.
Answering
investors’ questions on the falling foreign direct investment (FDI)
flow in the country, Quang said the quality should prevail
over quantity.
“This
year’s FDI flow has reached $9.9 billion, while FDI disbursements has
totalled $8.2 billion to date, and we will try to attract good
FDI projects instead of counting on many projects,” said Quang.
“I
think two issues that the government will focus on in the future are
how to attract private investments into infrastructure and develop
the supporting industry.”
Private
investors and regional investment funds at the conference all expected
that forthcoming PPP projects should be commercially viable,
and that there is a solid foundation for the State and the private
sector to cooperate in the long term.
Jonathan
Pincus, a well-known economist at the Fulbright Economic Teaching
Programme, suggested that there must be harmony in ensuring benefits
for both the State and the private sector.
“The interest must be balanced,” he said.
ECONOMY - Rising exports help narrow trade gap
VOV
Exports
have risen 35.4 percent since the beginning of this year to $70
billion, the Ministry of Industry and Trade (MoIT) told a conference
in HCM City on October 11.
The
domestic export sector accounted for $31.9 billion, up by a third, and
foreign firms for $38 billion, a growth of 37.5 percent.
The biggest export earners are plastics, textile and garments, footwear, iron and steel, machinery and equipment.
Vietnam's exports to most markets rose. They were 170 percent higher in Africa and 41 percent higher in Asia.
Besides,
with imports growing at a much slower rate of 26.9 percent, the
country's trade deficit has shrunk to jus 9.8 percent, much lower
than the government's 16-18 percent target set out in Resolution 11.
Exports
during the rest of the year are expected to hit $8 billion every month
as a result of the government's measures to curb inflation,
lower lending interest rates and maintain stability in the foreign
exchange market.
MoIT
proposed that the State Bank of Vietnam further reduce lending interest
rates for businesses involved in production and trading and
give priority to those buying agri-products for processing and exports.
For
its part, the ministry pledged to carry out the National Trade
Programme to support exports and start a pilot project for export credit
insurance soon.
TRADE – Vietnam is fastest growing ‘major’ US trade partner
Market Watch
HSBC
is forecasting a 73 percent growth in global trade over the next 15
years, up to $43.6 trillion from $27.2 trillion currently.
US trade is seen growing at a slower rate over the period, 62.3 percent, according to the quarterly global trade forecast.
“China
is the USA’s most important trading partner in 2010 and will remain the
country’s most important partner throughout the period to
2025,” according to HSBC.
However, more trade corridors are opening. For instance, US trade with Qatar is expected to grow sharply over the period.
Vietnam
is the United States’ fastest growing “major” trade partner. (Major
trade partners have measurable trade flow volumes over $1 billion.)
The USA.’s top 10 growing trade corridors, according to HSBC
1. Vietnam
2. Egypt
3. Turkey
4. Poland
5. India
6. UAE
7. Switzerland
8. Russia
9. Brazil
10. China
Steel exports increase sharply
VOV
Vietnam
has exported 1.87 million tonnes of steel so far this year, up nearly
44.5 percent over the same period of 2010, announced Pham Chi
Cuong, Chair of the Vietnam Steel Association (VSA).
Of
the figure, about 285,600 tonnes of steel ingot have been shipped
abroad while the consumption volume of the product has reduced sharply
in the domestic market.
According
to Cuong, the steel export revenue in the past nine months reached $1.3
billion. The increasing volume in steel exports shows a
positive sign for the local steel industry, in which the supply
currently doubles the demand, he said.
VSA
is cooperating with businesses to boost steel export turnover to
explore the opportunity arising from the increasing demand for steel
in the global market. At present, Vietnamese steel is selling well in
many countries, including the US, Thailand, Indonesia and Malaysia.
FINANCE - Vietnam's Dong Drops for Second Day on Trade Deficit; Bonds Gain
Bloomberg
Vietnam's
dong held near a two-week low on speculation policy makers will allow
the currency to weaken as the nation's trade deficit widens.
government bonds gained.
The
shortfall jumped to $1 billion last month from a revised $396 million
in August, government data show. The exchange rate is under "large"
pressure as the nation's foreign-exchange reserves remain "thin,"
Communist Party general Secretary Nguyen Phu Trong said in the text of a
speech posted on the government's website on October 10.
The
dong traded at 20,873 per dollar as of 2:50 p.m. in Hanoi, compared
with 20,868 yesterday, according to data compiled by Bloomberg. The
central bank set the currency's reference rate at 20,668 today, the same
as yesterday, according to its website. It weakened the reference rate
for the fourth time this month yesterday, from 20,653 on October 10. The
local currency is allowed to trade up to
1 percent on either side of the fixing.
The
central bank may weaken reference rate by less than 1 percent by the
end of the year, Marc Djandji and Doan Thi Thu Hoai, analysts at
Viet Capital Securities Joint-Stock Co. in HCM City, wrote in a research
note yesterday.
"The
central bank may choose to adjust the official exchange rate on a daily
basis rather than a one-time adjustment to avoid a shock," the
analysts wrote.
The
yield on Vietnam's five-year bonds fell one basis point, or 0.01
percentage point, to 12.41 percent, according to a daily fixing price
from banks compiled by Bloomberg.
Experts say it's impossible to keep exchange rate fluctuation at below 1pct
VnExpress
The
official exchange rate fluctuation in recent days is not the thing
experts are worried about. However, they have expressed the doubts
about the feasibility of the government's plan to curb the exchange rate
fluctuation at below one percent by the end of the year.
Prior
to October 5, the interbank dong/dollar exchange rate announced every
day by the State Bank of Vietnam always stayed at 20,628 dong
per dollar. However, since October 5, the State Bank has continuously
raised the interbank exchange rate to 20,638 dong, then to 20,648 dong,
and to 20,653 dong per dollar on October 7.
Commercial
banks have immediately raised their quoted exchange rates to the
ceiling levels, while the gap between the sale and the purchase
price has been narrowed. In many cases, the actual dollar prices applied
in transactions were higher than the quoted prices.
Commenting
about the move by the State Bank to raise the official exchange rate
continuously over the last few days, Dr Le Tham Duong from
the HCM City Banking University, said that the increases have been
insignificant which should be seen as an adjustment to "explore the
situation".
Regarding
the statement by the State Bank of Vietnam that the exchange rate will
not fluctuate by more than one percent from now to the end
of the year, Duong said that this shows the determination to keep the
exchange rate stable. The central bank has every reason to believe that
the goal is attainable: Vietnam has the foreign currency reserves worth
16 billion dollars, the surplus in payment
balance, the positive position of foreign currencies of commercial banks
and the controlled outstanding loans in foreign currencies.
However, Duong said, "the exchange rate may bear the influences of many unforeseen factors."
One
of the "unforeseen factors", according to Duong, is that despite the
determination to force the foreign currency lending (the required
compulsory reserve ratio for deposits has been raised), the outstanding
loans in foreign currencies keep rising. Meanwhile, the gold prices have
been fluctuating heavily with the domestic prices always higher than
the world's price. This will prompt gold smuggling,
which may push the dong/dollar exchange rate up.
He
went on to say that the forecast bad performance of the world's economy
would also have bad impacts on the Vietnamese economy and made
the plan to congest the exchange rate fluctuation impossible.
"The
pressure on the exchange rate seems to be bigger than the determination
and the strength of the central bank. Therefore, the State Bank
needs to keep cautious, or the dollar price would increase, thus badly
affecting the plan to fight against the inflation," Duong said.
Le
Dang Doanh, a well known economist, has also expressed his worries that
the central bank may fail to carry out the plan to control the
exchange rate fluctuation.
Doanh
said that the foreign currency supply and demand much depends on the
import and export, while Vietnam still imports more than exports.
Meanwhile, Vietnamese enterprises have borrowed a big amount of dollars
(they prefer dollar to dong loans because the dong interest rates are
overly high), which would put a hard pressure on the exchange rate.
Also
according to Doanh, the dong has lost 22 percent in its value in
reality, but the currency still has been overvalued, which is not
beneficial
for export.
"It
is necessary to force the inflation rate down to keep the exchange rate
stable. It will not have much significance if we try to keep
the exchange rate stable in the context of high inflation," Doanh said.
Dr
Le Xuan Nghia, deputy Chair of the National Finance Supervision
Council, also said that the pressure on the exchange rate is hard. The
outstanding loans in foreign currencies have reached 30 billion dollars,
while the mobilised capital has been 22.5 billion dollars only, which
means the gap of 7.5 billion dollars between the lent and the mobilised
money.
"7.5
billion dollars is not a big sum, but it would be dangerous if all the
loans become mature in the last three months of the year," Nghia
warned.
Vietnam to restructure local banking system, M&A possible
StoxPlus
Vietnam to restructure local banking system, M&A possible
The
State Bank Governor Nguyen Van Binh has ordered relevant departments
and offices to prepare for restructuring the banking system, including
the possibility of merger and acquisition of small banks.
The
State Bank Governor Nguyen Van Binh has ordered relevant departments
and offices to prepare for restructuring the banking system, including
the possibility of merger and acquisition of small banks, to ensure the
health of the whole banking system, the local online newspaper Saigon
Tiep Thi reported.
The
central bank may encourage mergers and acquisitions (M&A) of small
and inefficient banks, adjust banks’ ownership structures, and
standardize
the risk management system to restructure the local banking system, the
newspaper detailed.
Restructuring
the banking system is the most important task as for now, emphasized Le
Xuan Nghia, deputy chairman of the National Finance
Supervision Committee, saying that bad debts of the whole banking sector
continued to rise, in which debts in category 5 (loss) accounted for as
much as 47%. Bad debts at some banks exceeded shareholders’ equity and
may not be recovered, Nghia added.
It
is necessary to restructure the banking system, said Vu Ngoc Duy Deputy
Director of the Banking Strategy Institute, the State Bank of
Vietnam, adding that there is a need to develop a restructuring roadmap,
in which merger and acquisition of banks is of much importance. Duy
noted that M&A in the banking industry should be conducted basing on
scales and operation efficiency of banks.
Vietnam banks association proposes deposit rates cap at 13.5% for big banks
StoxPlus
Vietnam banks association proposes deposit rates cap at 13.5% for big banks
The
State Bank of Vietnam, the country’s central bank, is suggested to cap
interest rates at 13.5% for big banks while leaving the 14% rate
cap unchanged for other small ones to balance the deposit inflows
between big and small banks.
The
State Bank of Vietnam, the country’s central bank, is suggested to cap
interest rates at 13.5% for big banks while leaving the 14% rate
cap unchanged for other small ones to balance the deposit inflows
between big and small banks, the local online newspaper Thanh Nien
quoted Duong Thu Huong, Secretary General of Vietnam Banks Association
(VNBA), as saying.
Small
banks found themselves in shortage of funds after the central bank took
measures to strictly reinforce the interest rate cap at 14%.
Total deposits outflows at these banks were estimated up to tens of
trillions of dongs.
The
SBV should apply different rate caps for small and big banks, said Tran
Dang Khoa, Deputy CEO of SHB, worrying that savings will flowed
to big banks, given the same level of interest rates.
However,
an unnamed representative of BacA Bank doubted the feasibility of the
VNBA’s suggestion, questioning which banks will have to mobilize
funds at 13.5%.
It
is difficult to place different rate caps for different banks’ scales,
commented Nguyen Thi Nguyet Thu, Deputy CEO of BaoViet Bank, adding
that the SBV is expected to increase the tender winning rates on OMO to
help small banks overcome their serious liquidity problems.
Domestic capital too costly, businesses seeking foreign capital
Vietnamese businesses
The
overly high interest rates in the domestic capital market, caused by
the tightened monetary policies, have prompted businesses to seek
capital from foreign sources.
Foreign sources offer huge capital, reasonable interest rates
In
May 2011, the fact that Hoang Anh Gia Lai Group successfully issued 90
million bonds on the international market stirred up the public.
The bonds with the fixed interest rates of 9,875 percent, will be
matured after five years. Credit Suisse was the only guarantor for the
bond issuance.
Explaining
the decision to seek foreign capital, Doan Nguyen Duc, President of
Hoang Anh Gia Lai, said that the domestic capital is too costly,
and he has to seek cheaper capital sources.
Also
according to Duc, Hoang Anh Gia Lai’s bonds were issued in accordance
with the New York law, which allows enterprises to buy back the
bonds within three years since the day of issuance.
Seeking
foreign resources is also the way that many banks are following. A lot
of domestic banks have called on foreign investors to purchase
stakes in order to increase their chartered capital. Calling for foreign
investment has been described as a wise move for now, when the stock
market seems to be “paralyzed” which does not allow banks to seek more
capital.
An
Binh Bank two times successfully sold stakes to foreign investors to
increase its chartered capital. Especially, in 2008, when the global
economy fell into recession, An Binh bank still could sell stakes to
foreign partners at high prices.
Maybank,
Malaysian biggest bank, purchased 15 percent of the total shares of An
Binh Bank at the price which was five times higher than the
face value, worth 2138 billion dong.
In
mid 2011, the Malaysian bank once again affirmed its commitment to make
long term investment in Vietnam, announcing the plan to purchase
five more percent of stakes in order to obtain 20 percent of An Binh
Bank’s stakes, the maximum allowed ownership ratio
An
Binh Bank has also got 60 billion dong more in capital from the
International Financial Corporation (IFC), an arm of the World Bank. IFC
has made the investment deal in An Binh Bank to become a shareholder
with 10 percent of chartered capital.
In
2010, while banks struggled to mobilize domestic capital to increase
their chartered capital to 3 trillion dong as required by the State
Bank of Vietnam, some banks successfully sought enough capital prior to
December 31, 2010, the deadline by selling stakes to foreign partners.
OCB
Bank, for example, sold stakes to French BNP Parisbas, to increase its
chartered capital from 2600 billion dong to 3000 billion dong.
Meanwhile, Southern Bank has got the approval on increasing capital from
3049 billion dong to 3212 billion dong by selling stakes to Singaporean
UOB
VIB
and Mekong Bank have also reportedly found several hundreds of capital
more by selling stakes to some big financial institutions from
Australia and Singapore.
Information transparency is the key
In
principle, the international capital market is very big, where all
businesses can seek capital. However, it is not easy to mobilize capital
in the market
Analysts
said that the biggest anxiety of foreign investors, who plan long term
investment, is the lack of information transparency.
Therefore,
in order to successfully call for foreign investment, domestic
enterprises need to create confidence among foreign investors.
Investors have the right to know all the information relating to
enterprises, both good and bad, so that they can weigh pros and cons
before making investment decisions.
Vietnamese
banks still can sell their stakes to foreign partners, though it is now
the difficult period for Vietnamese bankers. Therefore,
experts say foreign investors are always interested in the opportunities
to make investment in
RESOURCES – Petrolimex denies putting pressure
Saigon Times Daily
Vietnam
National Petroleum Corporation (Petrolimex) insists that it has put no
pressure on the Ministry of Finance to adjust the price of
fuel this year.
The
ministry has made a number of changes in the price of fuel in 2011 and a
source from the ministry claims Petrolimex is lying.
“Since
the beginning of the year, Petrolimex hasn’t proposed increasing or
cutting the fuel price despite the current huge gap between local
and world prices reaching up to $40 a barrel,” Tran Minh Hai, a
representative of Petrolimex said in a statement.
Hai
stressed that his company had strictly adhered to the instructions from
the Minis try of Finance and Ministry of Industry and Trade.
However,
a source from the Ministry of Finance told the Daily that this year the
ministry has received four separate petitions from Petrolimex
for raising the fuel retail price or hiking the proportion of money from
the price stabilisation fund.
The
first document was sent to the ministry on February 16, suggesting
increasing the retail price of gasoline by 17 percent-24 percent.
The
ministry later decided to increase the price by 2,900 dong to 19,300
dong from 16,400 dongper litre for gasoline and by 3,550 dong to
18,300 dong from 14,750 dong per litre for diesel.
After
that, the ministry received three other proposals on March 24, April 26
and May 31 from the company and also adjusted the prices accordingly.
The
Ministry of Finance asserted that its management and decisions are
based on reality, including suggestions for price hikes from fuel
traders.
ENERGY – Hanoi needs vnd20.7tln for electricity development in 2011-2015
Stoxplus
Hanoi
is estimated to a total capital of VND20.7 trillion for electricity
development in the city in the 5 year period from 2011 to 2015,
the metropolitan Department Of Industry And Trade said in a meeting on
October 12.
In
the meeting on electricity development planning held by Hanoi
Department Of Industry And Trade, it said the city’s planned budget was
only VND6.5 trillion and it must raise VND14.2 trillion from other
sources. It however, did not mention where to take money from.
The money is projected to build and reconstruct under 220KV electricity system in the area.
It
is estimated that Hanoi’s electricity demand will be around 16,196
million kWh in 2015 while the new and recycled electricity capacity
from solar, waste and biogas will be only more than 600,000 Mwh.
To
make the project feasible, People’s Committee of Hanoi City will
support landing for approved works and also will consider to support
electricity distribution. However, it did not elaborate the plan.
POWER - Fast-track approach to power projects
VIR
The new government move will help shorten build-operate-transfer power projects’ pre-licencing preparations.
In light of Document 1604/TTg-KTN, build-operate-transfer (BOT) power projects are eligible to apply some sharp legal clauses.
Accordingly,
BOT project developers can apply foreign laws in dispute cases using
English language if differences persist in projects’ Vietnamese
and English documents.
BOT
power projects also enjoy corporate income tax (CIT) exemption in the
first four years since they generate incomes, 5 per cent CIT tax
in the following nine years and 10 per cent in BOT contracts’ remaining
years.
Besides,
developers benefiting from land rental exemption and have the right to
mortgage the land use rights and relevant assets at credit
organisations and authorised credit agents operating in Vietnam to take
loans.
In
case land with relevant assets is transferred, the new owners will
inherit the land use rights and usage of relevant assets in contracts’
remaining time and they must not alter the land use functions.
The
Vietnamese government also guarantees the power cost payment
obligations of Electricity of Vietnam in power purchase agreements. The
government also stands surety for payment obligations of state groups
through BOT contracts for contracts using coal provided by Vinacomin and
gas supplied by PetroVietnam.
Gas-fuelled power projects are set to have 20-year terms, while the duration for coal-fired projects is 25 years.
According
to experts joining BOT project negotiations, presenting a general frame
for BOT power project implementation would create a level
playing field to developers and shorten the negotiation process.
Deputy
Minister of Industry and Trade Hoang Quoc Vuong suggested developers of
BOT projects under negotiation focus on power purchase agreements
and BOT project contents which were recently ratified by the government,
to facilitate the negotiation process.
Reality
shows that the Vung Ang 2 BOT power project developed by Hong
Kong-based One Energy and Vietnamese Lilama Group and REE with a
capacity
of 1,300 megawatts per year, reflected divergences in negotiations
between the developer consortium and local ministries and branches.
Most
of contract terms were yet to be finalised since many divergences exist
between developers and Vietnamese competent state agencies relative
to tax, foreign currency conversion, law changes, compensation methods,
infrastructure sharing or water supply contracts.
“The
developer gave out too many proposals having no precedents in
previously licenced BOT contracts, making state agencies confused about
how to negotiate,” said a member of the Ministry of Industry and Trade’s
BOT power project negotiation team.
“To
keep negotiations rolling on, the developer should decide on what
further contents to be negotiate based on Document 1604 relative to
BOT power project developer rights,” said the expert.
More than $4.6b invested in Son My power centre project
Vietbiz24
The
group of investors namely IP (UK), Sojitz (Japan) and Pacific (Vietnam)
are building feasibility study report for Son My 1 power project
and common infrastructure for Son My power centre project.
Son
My power centre project with a total capacity of 3,000 MW will use
liquefied natural gas as input fuel. The project with total investment
of $4.667 billion includes two plants of Son My I and Son My II.
Of
which, Son My I power project including five turbines with capacity of
390 MW each will be developed under the BOT (build-operate-transfer)
method by investors, which is expected to start operations in 2018-2019.
INFRASTRUCTURE – Japan’s ODA important for building infrastructure
VNS
Official
Development Assistance from Japan had played an important role in
infrastructure construction, poverty reduction and economic development
of Vietnam, said National Assembly vice Chairwoman Nguyen Thi Kim Ngan.
She
expressed thanks to the government and people of Japan for continuing
providing ODA for Vietnam, focusing on infrastructure development,
human resources training, environmental protection and coping with
climate change.
Ngan
made the statement while receiving Chair of the Japan-Vietnam
Friendship Parliamentary Alliance Takebe Tsutomu on a visit to Vietnam
from October 7-11.
Ngan
hoped that national assemblies and friendship parliamentary
organisations of the two countries would continue increasing exchanges,
cooperation and experience sharing for mutual understanding and
benefits.
For
his part, Tsutomu said the alliance would try its best to enhance the
friendship with Vietnam and wished that the younger generations
of the two countries would increase exchanges and mutual understanding.
Contract for building Hai Phong International Port
Vietbiz24
Vietnam
National Shipping Lines Corp. (Vinalines) signed the joint contract for
building Hai Phong International Port with Japan-based Molnykit
Corp. yesterday October 12, 2011.
In
details, the two parties planned to start construction the first two
harbors of Hai Phong International Port with total investment value
of 30 billion yen in the fourth quarter (Q4) of 2012.
After completion, this will be one of the largest container ports in Vietnam.
At
the signing ceremony, Nguyen Canh Viet, Vinalines’ general director
stated that the construction works would be conducted in two parts.
Part A would be carried out under PPP method (Public Private
Partnership), using ODA fund and counterpart capitalworth about $900
million while Part B to be implemented by Vinalines and Japanese
investors with total investment capital of $321 million.
Hanoi aims to complete zoning plans by 2015
VIR
One of Hanoi’s major tasks is to complete zoning plans for the entire city by 2015.
Hanoi
should make strategic changes in its planning to improve the
unsynchronized infrastructure. Many regions of the city have not
developed
evenly and they lack green space. Therefore, Hanoi’s Municipal Party
Committee recently agreed that the major, urgent issue from now until
2015 is to renew the city's zoning plan with a particular focus on
technical and social infrastructure.
With
the master plan for the development of the capital until 2030, with a
vision to 2050, approved, the municipal authorities are now trying
to complete hundreds of zoning plans in the next four years, aiming to
build a modern and civilized capital city.
Lack of concrete strategy leads to “empty” urban areas
VIR
Hoang
Trong Hanh, former rector of the Hanoi University of Architecture, said
that due to lack of strategic planning, the capital's development
has been slow. For example, 50-80 per cent of its capital resources for
projects have been used as compensation for clearing sites for “the most
expensive roads on the planet” such as Kim Lien-O Cho Dua road which
has used VND600 billion for site clearance,
six times more money than is required to build the actual road.
In
addition, poor transport planning has also caused serious traffic
congestion in Hanoi. Since the beginning of the year, the city has
licensed
more than 24,000 new cars, making up 22 per cent of the newly registered
cars in the country. To cope with this situation, municipal authorities
have issued regulations to restrict means of transport, but they
realize that these are only temporary solutions.
Mr
Hanh added that the most worrying issue is “empty urban areas” that
lack schools, kindergartens, trees and public spaces. Without a detailed
strategy, there will be major conflicts between Hanoi’s ancient streets
and the new urban areas, said Mr Hanh.
After
Hanoi expanded its administrative borders, the issue of planning has
become more urgent and the time has come to establish an overall
long-term plan to create a modern and civilized capital city. The
municipal authorities will have greater responsibilities in the future.
Prime
Minister Nguyen Tan Dung has ratified a master plan for Hanoi, aimed at
building a modern city with satellite urban areas. This has
laid the foundation for hundreds of detailed zoning projects but the
core matter is how to avoid conflicts and overlaps.
In
the immediate period, It is therefore necessary to immediately suspend
more than 750 projects in Hanoi’s inner and outlying districts
to stop them overlapping before a common plan is drawn up.
Nguyen
Doan Hoan, Chairman of the Thach That district People’s Committee, said
all communes and agencies in his district have been asked
to reconsider projects in various fields in order to implement Hanoi’s
common plan.
70 per cent of land for public construction
The
Hanoi municipal People’s Committee recently discussed measures to step
up the zoning plans for urban construction and management, and
considers this one of its five key tasks from now to 2015.
Hanoi
aims to complete all zoning plans, in which about 70 per cent of land
will be allocated for public construction. The city is expected
to complete 17 zoning plans for key urban areas in 2011, and iron out
snags related to “empty” urban areas and the present asynchronous
technical and social infrastructure.
Hanoi
Mayor Nguyen The Thao showed a strong determination to realize all the
zoning plans. He said municipal authorities and relevant agencies
are making efforts to touch upon every zoning project in the next four
years.
“However,
there is a shortage of qualified human resources involved in the zoning
plans. Hanoi will coordinate with the University of Architecture
to organize short training courses for officers,” he said.
Since
it was liberated 57 years ago, Hanoi has implemented seven zoning
plans, however, the city still faces numerous challenges. It is expected
that the Prime Minister’s newly-approved master plan until 2030, with a
vision to 2050, will remove obstacles and erase the shortcomings of
previous plans.
Under
the master plan, the capital city will include a central metropolitan
area, five satellite urban areas - Hoa Lac, Son Tay, Xuan Mai,
Phu Xuyen and Soc Son - and several towns linked together. It will also
have modern infrastructure while still retaining its cultural and
traditional heritage sites.
Hanoi’s
leaders have shown determination to effectively implement zoning plans
and help the city fulfill its set targets for industrialization
and modernization a couple of years ahead of schedule, thus establishing
a modern and civilized Hanoi.
LEGAL NEWS - HCM City slow e-customs clearance worries businesses
Tuoi Tre
Many
import-export businesses are encountering delays in clearing customs at
HCM City-based Cat Lai Port due to network congestion in e-customs
declaration and shortage of equipment for loading/unloading containers.
The businesses said their containers had to stay at the port for several days before the e-customs clearance was completed.
An
executive of a customs service provider said his company had received
customers' complaints for being tardy in getting customs clearance.
He said the company had recently made customs declaration for four batches of goods, all of which had encountered problems.
"It now takes us 3 days to get the e-customs clearance while we used to need only 1 day," he said.
Nguyen
Thong, director of HCM City-based Lien Anh Freight Forwarding Co., said
his company also had problems in getting e-customs clearance.
"Whenever we send the e-customs declarations, the network reports error," he said.
An
executive of the Customs Department of Saigon Port zone 1 in Cat Lai
admitted that the e-customs clearance had been stuck with the network
congestion during the past three days.
The Internet line was too busy to transmit businesses' data to the customs centre, he said.
He said the congestion was a technical problem and thus was "out of our control."
The
businesses added that some equipment for container loading services at
the port had been operating on slow progress, delaying the time
for their containers to leave the port by three to four days.
The
container lifters occasionally stopped working for even half a day,
preventing enterprises from loading or unloading their goods, they
said.
A business owner said the loading services were often on slow progress.
"There are cases when the businesses have to wait three days to have their containers unloaded," he said.
Commercial Law inconsistent with other laws
VNS
The
National Assembly's passage of the Commercial Law in 2005 was a
significant event in promoting commerce and a healthy business climate.
However,
after nearly seven years in effect, the law has revealed some
shortcomings, making it imperative that the law be amended in order
to create the most favourable conditions for commercial development in
Vietnam.
For
instance, the definitions of terms used in the law, e.g., "business
entities", "commercial activities", and "commodities exchanges",
are inadequate and unclear, and provisions on penalties, promotions and
complaints are incoherent. Overall, the law contains many provisions
inconsistent with other laws and regulations.
The
concept of "business entities" as defined in Article 6.1 of the
Commercial Law is confused and appears to conflict with Article 7.
Article
6.1 provides that "business entities shall be comprised of economic
organisations which have been lawfully established... and have business
registration.
"However,
an enterprise is already considered lawfully established only if it has
been established in accordance with the procedures prescribed
by law and have obtained business registration. Yet Article 6.1 also
says that "business entities shall consist of economic organisations
which conduct commercial activities independently and frequently." This
condition is both unclear and unnecessary, as
the law is otherwise silent as how an economic organisation may be
judged to have satisfied such a requirement.
Regulations
on commodities exchanges are also incomplete. In particular, the
Commercial Law only defines some concepts related to commodities
exchanges and the primary rights and obligations of parties engaged in
the trading of goods via a commodities exchange. It does not provide for
the organisation, management or operation of commodities exchanges and
lacks regulations on the transactions and
allocation of risks among parties trading on a commodities exchange. The
law is not sufficiently comprehensive to support the development and
operation of these markets for goods in Vietnam.
The
Commercial Law also provides for remedies for breach of contract.
Article 300 defines the remedy as one in which "the aggrieved party
requires the defaulting party to pay a penalty for breach of contract if
so agreed and recorded in the contract." In other words, the remedy is
only available if it has been expressly agreed upon by the parties and
recorded in the contract. In the case of
a breach, neither party has the right to seek such a remedy from the
other unless it is so stipulated in the contract.
Article
301 also limits the damages available, stating, "The penalty rate in
respect of any one breach of a contractual obligation or the
total penalty rate in respect of more than one breach shall be as agreed
by the parties in the contract, but shall not exceed 8 per cent of the
value of the contractual obligation which is the subject of the breach."
This
contradicts Article 422.2 of the Civil Code, which stipulates that "the
penalty rate shall be as agreed by the parties" without limiting
the maximum penalty. Lawmakers should revise the limit on damages of 8
per cent of the value of the contractual obligation to be consistent
with the Civil Code. It is the nature of a contract that is an agreement
between the parties and the parties therefore
bear responsibility for setting an applicable penalty rate.
With
respect to the right to claim interest in the case of late payment,
under Article 306 of the Commercial Law, "the aggrieved party shall
have the right to demand the defaulting party to pay interest on late
payment amount at the average interest rate applicable to overdue debts
in the market at the time of such payment for the delayed period."
However, the Commercial Law offers no detailed
guidance on how to determine the average interest rate applicable to
overdue debts on the market, or which banks' rates would be used in that
calculation.
The
Commercial Law should be revised to address these inconsistencies to
encourage and promote the healthier and more stable development
of the economy and of commercial relationships in Vietnam.
Experts urge change to fuel price rule
Tuoi Tre
Insiders
of the fuel sector are calling for a change in Decree No 84 which they
say are preventing domestic petrol wholesalers from earning
profits.
Under
the Ministry of Finance's Circular No 84 which took effect in December
2009, wholesalers' prime cost for petrol is made up of the average
price paid for petrol imported from Singapore within 30 days, taxes,
marketing, distribution costs and a "rationed profit" of VND300 a litre.
With
this calculation, the current prime cost of gasoline is higher than the
retail price by VND900 a litre. But as the prime cost already
includes the "rationed profit" of VND300 a litre, the real loss of
distributors on every litre of gasoline is VND600.
Experts
said domestic fuel distributors shouldn't operate with losses
considering the price of crude oil has being falling sharply recently.
On
October 5, Brent crude oil slumped to only $99.79 a barrel, the lowest
price since last February, making the gasoline price in Singapore,
which is Vietnam's main supplier, fall to $113.85 a barrel.
Should
the prime cost calculation be applied with this imported price instead
of the average number of the last 30 consecutive days, local
wholesalers' prime cost of gasoline is only VND20,140 a litre, lower
than the current retail price by VND660 a litre.
If
the average imported gasoline price within the last 10 days is used for
calculation, wholesalers still earn a profit of some VND800 a
litre as the prime cost will be VND20,000.
Experts thus blamed Decree No 84 for handicapping domestic fuel price adjustment.
An
expert said since the world fuel price often fluctuated in a period of
seven to ten days, Vietnam would likely miss the chance to adjust
fuel retail prices if they had to wait 30 days to get the average
imported price.
In fact, consumers have twice missed the chance to enjoy a price cut in June and August because of this shortcoming.
An
executive of a fuel analysing company suggested that prime cost should
be calculated based on the average imported price in seven days
to enable wholesalers to adjust prices in time with the global
fluctuation.
Other experts also said the average time of ten days would be more reasonable.
They
also urged the Ministry of Finance to remove the "rationed profit" from
the prime cost to increase the transparence when it comes to
a comparison between the retail price and prime cost.
Oliver Massmann
Rechtsanwalt
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