BUSINESS IN BRIEF 4/1
Tet shipments for Vietnamese abroad on the rise
Businesses are busy shipping their special commodities for Vietnamese nationals residing overseas as the traditional lunar New Year (Tet) festival is drawing near.
The Big C supermarket announced on January 2 that it is exporting four containers of Tet specialties to French Groupe Casino-invested supermarket chains in France, Brazil and Thailand to meet the demand of overseas Vietnamese during the Tet holiday.
Tran Thanh Phu, director of Tan Dong Co. Ltd., said that the company has exported approximately 2 tonnes of Chung cake and other specialty rice cakes to the European market in addition to significant quantities of frozen and dried food.
Other Hanoi-based companies are also actively promoting Vietnamese goods to foreign markets. For example, Huong Canh Co. Ltd. has exported two containers of pickled onions to Japan while Vinamit Joint Stock Company is preparing to ship 20 tonnes of dried farm produce to the US, Canada and China, alongside new products such as dried lotus, soya beans and black beans.
Many supermarkets and businesses in HCM City are also energetically promoting Vietnamese goods to foreign markets.
Do Kim Dung who is in charge of purchasing frozen and fresh products for Metro Trade Office said that Metro Cash & Carry Vietnam, Metro Trade Office in Singapore and affiliated Vietnamese businesses are closely cooperating to market Vietnamese farm produce at the Metro system worldwide.
Last year, Metro Cash & Carry Vietnam directly purchased farm produce valued at over US$6 million from Vietnam’s agricultural sector to supply to the Metro retail network worldwide. In 2014, the value of purchasing contracts is expected to rise to over US$12 million, with key products such as fruits and vegetables.
HCM City faces budget collection pressure in 2014
Ho Chi Minh City has been assigned to collect VND226 trillion (US$10.7 billion) for the State budget in 2014, or 29 percent of the total revenues of the state coffer.
The figure is down 4.45 percent from the 2013 estimate but it is still a tough task for the city considering a slew of new policies that can affect collection of taxes and fees, according to Director of the municipal Department of Finance Dao Thi Huong Lan.
Speaking at a conference on January 2 on measures to carry out tasks in the New Year, Lan cited the amended Law on Corporate Income Tax as an example. Under the law, corporate income tax is revised down to 22 percent from the previous 25 percent. The value-added tax (VAT) has also been cut, and automobile registration fee is reduced from 15 percent to 10 percent.
Chairman of the municipal People’s Committee Le Hoang Quan urged departments, agencies and districts to devise their concrete plan so as to achieve the targets set for the year.
He noted that while the quota for State budget collection is lower than that of 2013, caution is needed and all possible economic developments should be taken into account.
The city mayor also required sectors and local administrations to come up with ways to stimulate production while promoting trade both at home and overseas markets.
Attention will continue to be paid to health care, education-training, culture, science-technology and social welfare, he said.
Last year, HCM City contributed US$11.3 billion to the State budget, meeting 100.41 percent of the estimate, up 12.44 percent from that of 2012.
This year, the city aims for a GDP growth of 9.5-10 percent and a 10 percent increase in export turnover. The rate of poor households according to the new poverty line of US$760 a year is projected at 6.8 percent.
Gov’t intensifies crackdown on trade fraud
The government has asked relevant ministries and localities to adopt tougher measures to combat smuggling and trade frauds during the coming lunar New Year (Tet) holiday.
The government office on January 2 announced Deputy Prime Minister Nguyen Xuan Phuc’s conclusions at a recent meeting that smuggling and trade frauds are complex in the lead up to the Tet holiday, and opportunists make full use of legal loopholes and lax management to corner the market, injuring production and damaging people’s health.
Phuc asked designated agencies to work closely together to prevent smuggling and related activities in hotspots such as border areas and big cities.
He stressed the need to keep a close watch on the production, transportation and trading of goods to nip any market law violations in the bud.
It is also essential to strictly deal with violations and impose heavy punishment on officials who are found attempting to cover up such violations, he added.
The Deputy PM suggested increasing capacity for market management officers, and honouring those who uncover and assist the government to bring smuggling and trade frauds to light.
Restrictions on foreign currency tightened
The State Bank of Vietnam (SBV) has issued regulations on restricting the use of foreign currency in the country.
Under Circular 32/2013/TT-NHNN, in the territory of Vietnam, except for cases allowed, all transactions, payments, quotations, advertisements, pricing, prices in contracts, agreements and similar forms (including conversion or adjustment of prices of goods and services, the value of contracts and agreements) of residents and non-residents will not be allowed to be conducted using foreign currency.
Currently, Circular 16 also specifies those cases in which foreign currency exchanges are allowed in Vietnam and in which banks, non-bank credit institutions and branches of foreign banks licensed to do business and provide foreign exchange services are allowed to perform transactions, payments, quotations, advertisements, pricing, prices in contracts, agreements in foreign exchange within the scope of business and foreign exchange services permitted by the State Bank of Vietnam (SBV) in accordance with the law.
Other cases that allow foreign exchange transactions will be considered and approved by the SBV Governor based upon actual situations and the necessities arising with each case.
The Circular will take effect on February 10, 2014.
The central bank recently confirmed that it will seek to maintain the dollar/dong exchange rate to within 2 per cent of current value next year. This follows the dong being depreciated by 1 per cent in 2013.
The central bank weakened the dong by 1 per cent against the US dollar in June last year, in what it said was a move to accurately reflect supply and demand on foreign currencies.
No gov't back up for foreign loans
The Vietnamese Government will not be responsible for foreign loans that it has not guaranteed, according to a new prime ministerial decree.
The decree will come into effect on February 15, 2014.
Borrowers impacted by the new decree include enterprises that have been established and are operating under the Enterprise Law, credit institutions and foreign bank branches operating under the Law on Credit Institutions, or co-operatives and co-operative associations operating under the Law on Co-operatives.
The decree requires the State Bank of Vietnam and the ministries of Finance and Planning and Investment to watch closely the situation of foreign loans against the nation's macro-economic indicators and report their findings to the Prime Minister.
Their findings will be the basis for the Prime Minister to approve ceilings for enterprises' foreign loans and repayments.
In case the market requires increases in capital mobilisation, surpassing the limit for enterprises' self loans and repayments, requests should be submitted to the Prime Minister for a final decision.
The borrowers also have to report their capital withdrawals and payments of foreign loans, and repaying signed by themselves, as requested.
Ministries and SBV will be responsible for keeping track of cash flows related to foreign loans and carrying out regular inspections, examinations and supervision.
Individuals and organisations violating the decree's regulations will be liable for administrative penalties or could be held criminally responsible.
Manufacturing output rises at fastest pace, says HSBC
Vietnam’s manufacturing output increased for the third month running, and at the sharpest pace since April 2011, said HSBC in its latest report.
The Hong Kong and Shanghai Banking Corporation (HSBC)’s Purchasing Managers’ Index (PMI) report showed that business conditions in the Vietnamese manufacturing sector improved in December as output and employment increased at sharper rates supported by new order growth.
Meanwhile, purchasing activity rose at the fastest pace in the series history. The rate of input cost inflation accelerated slightly, but manufacturers lowered their output prices in an attempt to support growth of new business, said the report.
The headline seasonally adjusted PMI – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted 51.8 in December, up from 50.3 in November. The reading signalled a fourth successive monthly improvement in operating conditions, and the second-strongest in the history of the series.
New orders increased for the third time in the past four months during December as panellists reported improving client demand. Moreover, new business rose at a pace that was only slightly slower than October’s series record. On the other hand, new export orders decreased for a second consecutive month.
Growth of new orders led firms to raise their production. Stocks of finished goods fell solidly as firms delivered products to customers. The depletion of post-production inventories was the strongest in seven months.
HSBS said rising workloads had a positive impact on employment in December, with the rate of job creation picking up to the strongest in three months. Meanwhile, the rate of expansion of purchasing activity hit a record high as panellists reported a greater need for inputs in response to rising client demand.
Input prices increased further in December, with some panellists linking inflation to a scarcity of raw materials. In contrast, manufacturers lowered their output prices for the first time in three months. According to panellists, attempts to encourage new business had been behind the fall in charges, while competitive pressures were also mentioned.
HSBC Asia Economist Trinh Nguyen said the manufacturing sector continues to punch its weight in stabilizing growth in Vietnam.
“The rise of the new orders sub-index is a sign of gradually rising domestic demand, albeit slowly. The new export orders index improved slightly but external demand was still a drag. We expect demand for employment and quantity of purchases to offset sluggish growth in other sectors. We expect 2014 to be a slightly better year, with the manufacturing sector providing an anchor,” she predicted.
Vietnam attracts nearly US$22 bln in FDI
Vietnam lured a total of US$21.6 billion in foreign direct investment (FDI) in 2013, a year-on-year increase of 54.5%, according to the Foreign Investment Agency.
Of the total, US$14.3 billion came from newly registered projects, up 70.5%, and US$7.3 billion was worth of additional capital from 472 operational projects, up 30.8%.
FDI businesses also disbursed US$11.5 billion in 2013, representing a 9.9% rise over 2012.
The manufacturing and processing industries topped the FDI list, with 605 newly licensed projects and combined new and additional capital of US$16.64 billion, or 76.9% of the total value.
Japan remained Vietnam’s biggest foreign investor, funnelling US$5.75 billion, or 26.6% of the total. It was closely followed by Singapore (US$4.38 billion) and the Republic of Korea (US$4.3 billion).
Thai Nguyen province in the north was Vietnam’s biggest FDI attractor, totalling US$3.4 billion. It was supported by a US$2 billion electronic product manufacturing and assembling plant invested by Samsung Electronics Vietnam (SEV).
Thanh Hoa province in the north-central region came in second, with US$2.92 billion, and Haiphong port city in the north ranked third, drawing US$2.6 billion.
FDI businesses raked in US$88.5 billion from exports (including crude oil), a 22.4% year-on-year improvement, and making up 66.9% of the country’s total export value.
These businesses also enjoyed a trade surplus of nearly US$14 billion last year.
Vietnam accelerates trade agreement negotiations
The Ministry of Industry and Trade has updated the public on its latest international cooperation efforts and progress in ongoing trade agreement negotiations.
It has completed the final draft on international economic integration outlook towards 2020, including the “trade and services” and “investment” chapters of the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP) as well as the necessary preparations for signing the ASEAN-India Free Trade Agreement.
The Ministry announced plans to begin bilateral free trade agreement negotiations with the Republic of Korea in an effort to rebalance Vietnam’s current trade deficit.
American Chamber of Commerce (Amcham) in Vietnam Managing Director Adam Sitkoff told Tuoi Tre news wire many American businesses have been involved in all 19 Trans-Pacific Partnership (TPP) Agreement negotiations. Vietnam and 11 other negotiators hope to finalise the crucial agreement in 2014.
Vietnamese Ambassador to the US Nguyen Quoc Cuong admitted American business interests are proportionately over-represented in TPP negotiations.
He warned Vietnam should be wary of the US business community’s attempts to position itself as the primary beneficiary of the TPP.
Tender law offers value for contractors’ money
The National Assembly has adopted the Law on Tendering or the Law on Public Procurement, which is expected to encourage a more competitive environment for government bid packages. Le Net and Thai Huynh Ngoc Kim Ngan at LNT & Partners take some highlights on the document, passed on November 26, on Vietnam Investment Review.
The Law on Tendering will come into effect on July 1, 2014. Notable changes include the repealing of Section 1, Chapter VI of the Law on Construction (N°16/2003/QH11) and Article 2 of the Law Amending and Supplementing a Number of Articles of the Law relating to Capital Construction Investment (N°38/2009/QH12). With these changes, the new law will resolve the overlaps between the Law on Tendering and other laws such as the Law on Construction.
Aimed at addressing certain loopholes and issues related to the current legal framework on procurement, the new Law on Tendering was intended to provide new provisions to clarify these issues. It devotes a separate chapter to each of the following subjects:
Selection via online or e-procurement mechanisms to help simplify the bidding process and implement legislative information disclosure requirements for better transparency throughout the bidding process and project implementation;
Several options, including application of modified criteria (specifically on cost and contractor qualifications), in the evaluation of bidding dossiers by bidding organisers; and
Involvement of foreign contractors being made subject to two new conditions; namely, that they must (i) work in partnership with a Vietnamese company or sub-contract a local company; and (ii) employ only foreign workers when there are no qualified Vietnamese workers available for the project.
As such, the amended provisions are also designed to support local contractors participating in international projects. In addition, the Law on Tendering also includes many new terms and some new principles that aim to actively enhance competitiveness, decentralise public procurement and promote anti-corruption measures. It also introduces a new scope of application for official development assistance (ODA) projects. It is expected that the implementing regulations will rein in ODA projects to a more efficient level. Ideally, the regulations aim to determine the steps towards controlling procurement activities, ensuring fairness between the parties, and limiting corruption.
There are two examples where the Law on Tendering has proven its efficiency.
Total estimated costs and the procedure for bidding supplements
During the process of implementing the winning package, contractors often apply to adjust costs of the project scale related to the bid cost adjustment. Actual evidence shows that many projects are won by bids that are deliberately lower, but which later apply for an adjustment in the scale of investment leading to increased levels of investment. Therefore, this new regulation is intended to overcome this issue, through the appointment of sub-contractors via bidding. As a result, this regulation should contribute to restricting wastage of the state budget.
Responsibility of competent persons in bidding and direct appointment of contractor
Regarding the determination of competent persons, the regulation as described in Article 4(3) is a step forward. This allows quick decisions to be made on small packages. To avoid the downside of this regulation, the responsibility of the authorised individual is clearly defined. As a result, this restricts the abuse of power by an authorised individual, closes a loophole and creates a healthier bidding environment.
However, apart from progress on this issue, there remain a number of practical issues that should be supplemented and rectified in the decrees implementing the law.
Broad definition of state capital
The provisions of the applicable object are always a matter of controversy and present an interesting point. This law provides that procurement activities include “implementation of investment projects developed by organisations other than those specified in points a and b of this paragraph may use state capital, capital of state-owned enterprises, 30 per cent or more or less than 30 per cent but more than 500 billion VMD in total investment of the project be approved”.
Article 4(44), closely outlines the definition of “state capital”. The law defines state capital to include both equity and loan capital for the purposes of this provision, including capital of State-owned enterprises or loans that are guaranteed by the state or secured against state assets. Due to this broad definition, most private public partnership projects (PPP) may fall into the scope of this application, because most public infrastructure projects may require state guarantees.
Consequently, the status of state capital under this law poses a great challenge to the current legal framework. As a result, different types of “State capital” outside the traditional meaning of “state capital” will be restricted. The broad application of this law may further delay the implementation of many projects to organise tendering, such as joint ventures between foreign investors and state owned enterprises, or PPP projects in which the State participates.
Time is not the only concern with the Law on Tendering. Quality is also an issue because it could be compromised by cost. Assessment methodology bids as described in Article 38 (1) of the Law on Tendering introduced lowest cost methods. This method is commonly used in a number of developing countries. However, in theory, businesses cannot simultaneously meet the multiple requirements of better quality and cheaper prices. Regrettably, the new law still follows the “cheap price” approach, which may turn out to be expensive in the long run because of low product quality.
The low price approach may also be paralysed by price adjustment provisions in the granting of the project. We understand that an adjustment in prices is “unavoidable” because the country’s macro-economy is still unstable. However, the particular price may be flexible, but the total price should be fixed, since all the risks, such as the escalating price of materials and labour costs, should be taken into account in the bidding price from the start. In reality, the adjustment of prices has led to the situation where the prices of all projects have been driven up to levels higher than the bids with many contractors intentionally delaying the construction process to have the prices adjusted.
Managing direct appointment of contractors
The method for the direct appointment of contractors should reflect real world practices but at the same time, promote openness, transparency and prevention of corruption in the bidding process. This is a significant change from the former Law on Tendering in that it now prescribes fixed price, cost evaluation and technical and cost methods.
The consideration should also be made when adding provisions that ensure objectivity, transparency, efficiency and limiting of corruption to the lowest price method. For that purpose, the law provides that the direct appointment should be adopted in simple or small-scale cases. However, what packages should be deemed as simple or small-scale? The current regulations are quite unclear, leading to several interpretations and different applications. Therefore, this should be further considered when applied in reality.
In addition, this new regulation resolves situations where projects win the bid but fail to meet their deadline because contractors lack capacity (only winning the bid on the basis of lowest price alone). The weight given to the lowest bid as a decisive factor and failing to take into account other factors, is a main cause for faulty and low quality projects. This new regulations also prove that selection of contractors should not only be based on the “lowest bid” but also take into account contractor capacity, qualifications and experience, and sources of supply. However, the regulations on evaluating contractors should further focus on contractor capacity because “quality of the project as the first and foremost priority”.
Overall, there are many positive improvements in the new Law on Tendering, and an intention to enhance investment efficiency and reduce corruption.-
HCM City firms prepare for Tet season surge
Despite the economic situation, companies and traditional village-based producers are making all efforts to meet the usual surge in demand during Tet (the Lunar New Year) and improve quality and design, a HCM City official said.
Le Ngoc Dao, deputy director of the Department of Industry and Trade, said at a seminar on new Vietnamese products and special features for Tet, "With higher quality, Vietnamese products have met the increasing demand of consumers and gradually competed with imports."
Around 20 firms like Vissan, Pham Nguyen Bakery, An Giang Fruit-Vegetables and Foodstuff Joint Stock Company, Sai Gon Food, Phu Le Wine JS Company, and Hanh Phuc Fish Sauce Company displayed many new products they plan to produce for Tet.
They assured adequate supply besides promotions to meet customers' needs during the country's biggest festival.
Phan Van Dung of Vissan, one of the country's biggest meat processing firms, said production for Tet had begun as long ago as June to ensure enough supply so that prices remain stable until after the festival.
"Along with supermarket chain Co.opmart, his company would slash meat prices on the last two days before Tet – which falls on January 31 this year – to enable poor people to buy since prices spike at traditional markets on those days," he said.
Le Thanh Truc of Phu Le Wine JSC, said local specialities like traditional wine are very popular during Tet.
The company would unveil many new designs for gifts during the New Year, she said, adding that it plans to increase supply 10-fold to avoid a shortage like last year.
Sai Gon Food also plans to increase supply this year after a shortage last Tet, Le Thi Thanh Lam, the company's deputy general director, said.
Tran Thai Ha, managing director of the Binh Duong branch of Huu Nghi Food JSC, said the company would supply 5,000 tonnes of confectionery in the south during Tet, expecting sales to increase by two or three times.
Nguyen Thanh Nhan, deputy general director of Sai Gon Co.op – which owns Co.opmart – said: "Demand is expected to increase by 10-20 per cent over last Tet."
Sai Gon Co.op's supply of essential goods during the New Year will increase two – or three-fold over the normal time.
It will organise 150 mobile sales trips to rural areas and industrial parks and hopes to sell goods worth more than VND20 billion (almost US$1million).
Apart from selling essential goods at 10 per cent less than market prices under the city's price stabilisation programme, Sai Gon Co.op will also cut prices of other products by 10-50 per cent in co-operation with suppliers just ahead of Tet.
Domestically made products would continue to dominate the market due to their reasonable prices, Nhan said.
Dao said since supply would be ample, prices would not increase suddenly during Tet.
In any case, the department would monitor markets and severely punish hoarders and black-marketers, she said.
The conference was held in HCM City yesterday by the High Quality Vietnamese Products Business Association, Tuoi Tre newspaper, and Co.opmart as part of a programme called "Vietnamese Tet-Vietnamese goods."
VN, Japanese IT firms ink strategic pact
FPT Software, Viet Nam's leading software outsourcing company, signed a strategic cooperation agreement in the field of software development with Japan's Recruit Technologies.
Inked on Sunday in the central city of Da Nang, the agreement aims to help FPT Software expand its operations in Japan, considered the most important market in the company's globalisation strategy.
It will also offer new employment opportunities for Vietnamese students studying information technology, telecom electronics and Japan studies.
Under the agreement, FPT Software will recruit a significant number of employees every year for joint projects between the two companies. In the 2014-16 period, the company's office in Da Nang is expected to employ about 2,000 people.
Established in 1988, FPT Software is a division of FPT Corporation, a leading information and communication technology group in Viet Nam.
Through years of development, FPT Software has become the country's top supplier of software outsourcing, with almost 5,000 employees in Viet Nam, Japan, the United States, France, Germany, Singapore and Malaysia.
In 2012, it was listed among the top 100 global service suppliers by Italy's Global Services company and the US's Neo Group.
In September, the company was named one of the 500 largest software suppliers in the world by the US's Software Magazine.
GE turbines to power wind farm
GE Power and Water, a unit of GE, signed a contract with Cong Ly Construction-Trade-Tourism Ltd (Cong Ly Ltd.) last Saturday to provide 52 wind turbines for phase two of the project.
The signing ceremony was witnessed by US Secretary of State John Kerry during his recent visit to Viet Nam.
The turbines, which have total output of 83.2 MW, will start commercial operations in October next year.
"We are delighted that Phase One of the Bac Lieu wind farm has been completed and connected to the national grid," said To Hoai Dan, Chairman of Cong Ly Company Ltd.
"This paved the way for Phase Two, which will continue to improve the social and economic conditions of the province by creating hundreds of jobs requiring technical and industrial skills, while contributing more power to the national grid.
"We also hope this project will help attract further investment into Bac Lieu Province and provide momentum to move forward with wind power development in the region and in Viet Nam," he said.
GE provides technological support for a variety of power generation projects throughout the country. With an installed base of more than 2,000 megawatts, GE equipment today supplies approximately 10 per cent of Viet Nam's power generation capacity.
In 2009, GE increased its investment in the future of Viet Nam by establishing a wind-turbine components manufacturing plant in Hai Phong.
The facility has created over 600 local jobs and exported thousands of units of generator systems and wind turbine components that contribute to global energy solutions.
Nguyen My Lan, CEO of GE in Viet Nam said: "As a part of our ‘company-to-country' strategy, the Bac Lieu project is a clear demonstration of our commitment to supporting the development of local partners as well as contributing to the renewable energy development in Viet Nam.
"With the huge potential of Viet Nam's wind power, we hope to continue cooperating with Vietnamese partners to pioneer wind power projects in the future."
SSC to tighten stock market monitoring
The State Securities Commission (SSC) said the restructuring and supervision of the stock market would be improved next year to ensure the market's transparency and efficiency in operating.
Minister of Finance Dinh Tien Dung said at SSC's meeting last week that the commission should focus on solutions to expand the scale of operations and improve the market's quality, according to Vneconomy newspaper.
SSC's statistics showed that the stock market maintained growth during 2013, reflected through increases in the benchmark indices.
The VN-Index on the HCM City Exchange rose 22 per cent, in comparison with the end of last year, while the HNX-Index in the northern bourse was 13 per cent higher. The increases in benchmark indices placed Viet Nam among the ten countries with the strongest stock market recoveries in the world.
Also, the market capitalisation reached VND964 trillion (US$45.9 billion), an increase of VND199 trillion ($9.47 billion), equivalent to 31 per cent of the country's gross domestic product (GDP).
Meanwhile, the average trading value reached VND2.578 trillion ($123.190 million) each session, representing an increase of 31 per cent over last year, mainly thanks to the transactions of Government bonds, which witnessed a rise of 90 per cent to VND1.257 trillion ($59.85 million) per session.
The stock market also attracted many foreign investors, with registered accounts rising about 55 per cent.
Dung said enacting the restructuring of the stock market, which was approved by the Prime Minister, must be quickened, focus on enhancing its quality, financial capacity and management capacity.
In addition, the management and supervision of the market must be improved, as the stock market becomes more developed and sophisticated, to ensure transparency and a market that remains healthy.
Pham Hong Son from SSC also said that the commission would determine how to eliminate weak securities companies through acquisitions, mergers or dissolutions.
More than 60 per cent of securities companies reported losses this year, which is slightly less than last year.
Nghi Son still faces hardship
Despite having completed their financial arrangements with banks, investors in the $9 billion Nghi Son oil refinery and petrochemical complex in the central province of Thanh Hoa have been tied up in legal paperwork, delaying implementation of the giant project.
An anonymous source familiar with the case said the joint venture between Vietnam’s state-run PetroVietnam, Kuwait Petroleum International, Japan’s Idemitsu Kosan and Mitsui Chemicals had failed to receive legal opinions of the Ministry of Justice (MoJ) to certify the legality of the project documents.
Without the MoJ’s legal opinion, the banks would not disburse their pledged loans for the project. A legal opinion issued by the MoJ would mean the Vietnamese government has taken on the role as guarantor for any risks incurred by the project.
The MoJ explained that it had not yet provided a legal opinion to certify the legality of the project documents, because the ministry would only certify 15 documents while the joint venture had asked for the ministry’s legal opinions on 150 documents. Many of these documents are contracts and agreements with other partners of the joint venture that the MoJ refused to provide a legal opinion on.
The MoJ normally only provides legal opinions on infrastructure projects under the build-operate-transfer (BOT) investment model, in accordance with the governmental Decree 108/2009/ND-CP guiding the implementation of BOT, build-transfer-operate and build-transfer investment models.
However, as the Nghi Son oil refinery and petrochemical complex is a vital national project which has received the Vietnamese government’s guarantee, the MoJ agreed to provide legal opinions to the project.
But the ministry confirmed that it would provide legal opinions to 15 documents previously clearly defined. For other documents, it is only willing to provide legal consultancy to the joint venture.
The Nghi Son complex, which received an investment certificate in 2008, would have an annual refining capacity of 10 million tonnes of crude oil. The Japan Bank for International Co-operation and the Export-Import Bank of Korea committed financing of $2.3 billion for the project, while a $2.7 billion sum would be provided by commercial banks, with the remainder from the project’s shareholders.
This is the second oil refinery to be built in Vietnam, following the first in the Dung Quat Economic Zone in the central province of Quang Ngai.
In January, the joint venture signed an engineering, procurement and construction contract with a consortium led by Japan’s JGC Corporation. Construction began on the refinery two months ago and according to the joint venture, the project will start commercial operations in mid-2017.
Sacombank spends $4 mln on new e-banking services
Ho Chi Minh City-based Sacombank launched on December 16 a $4 million new internet banking system as a partnership with Infosys, an Indian multinational provider of business consulting, IT, software engineering and outsourcing services.
In addition to providing all e-banking services, the new system can help the users manage their activities and act as a reminder.
The Vietnamese major lender is running a promotional programme until January 2014 for existing and newly registered customers of the system at www.isacombank.com.vn.
Firms welcome tax revisions
The business community may celebrate upcoming new changes to corporate income tax policy.
The Ministry of Finance recently posted its draft circular guiding the implementation of the Law on Corporate Income Tax (CIT) which amends and supplements a number of articles on its website for public comment.
“One notable change likely to have an impact on fast moving consumer goods companies and the structure of their promotional campaigns is that they are no longer required to include give-aways or gifts in their revenue calculations. The costs are treated as a capped A&P expenditure,” said Thomas McClelland, tax partner of Deloitte Vietnam.
Currently, give-aways or gifts are valued at market price and included as taxable revenue.
McClelland added that businesses had welcomed the reintroduction of tax incentives for expanding investment, which were removed in 2009.
Businesses qualify for incentives for expanding investment under three conditions including increasing fixed assets and increasing design capacity.
Expansion plans in certain locations or industries can choose between incentives for the remainder of the investment license or tax exemptions.
Notably, there is no reduced tax rate for investment expansion.
One point likely to disappoint some companies is that only businesses that qualified for incentives prior to January 1, 2014 or new projects opened after that date can qualify. New projects before January 1 are not eligible, said McClelland.
Another new point under the draft is interest deductibility. For some time, companies have been unhappy that interest on loans for investment was not included as a deductible outlay. Several appeals have been made to change this, for example in the EuroCham Whitebook 2014.
The draft law stipulates that interest on loans for investment is deductible but only by adding it to the cost base of the investment, meaning the deduction only occurs if the capital is sold at some point in the future. This is unlikely to fully appease companies.
On the same note as deductible expenses, McClelland explained that provisions in the draft, resembling those in the VAT law, require evidence of payment through a bank for purchases exceeding VND20 million (around $1,000). This is part of the government’s desire for Vietnam to move away from a cash economy and to increase tax revenue.
Mo Market transaction mired in long dispute
The long dispute between two main partners on the massive upgrade of Mo Market shopping centre in Hanoi came to a head last week as the sides in the row began preparing legal documents for a potential court case.
The conflict has continuously simmered between the centre’s developer - the Vinaconex Trading Development Joint Stock Company (VTDC) and VPCapital who had bought into five podium storeys of more than 21,000 square metres at a price of $30.6 million back in 2010.
Conflicts between two sides, mainly focusing on construction quality, payment schedules, appraisal dossiers and hand-over procedures have raged for most of the life of the project’s construction.
According to Thai Quoc Minh, chairman cum general director of VPCapital, the developer is now two months behind schedule on construction, delaying the operation of the site.
VTDC’s authorised legal representative lawyer Nguyen Thanh Son however claimed that the comapny had not violated the contract and VP Capital had not concluded its obligations in order to be handed over the property.
Minh retorted that VTDC’s incompetence had cost millions of dollars to the VP Capital, including heavy implications for loan interest repayment totalling more than VND170 billion ($8 million) after the hand-over deadline was missed.
Despite this, Minh promised that he would work closely with VTDC to find a solution in order to put the centre into operation as soon as possible.
The conflicts come to the boil last week when the two sides were preparing documents for an approaching court case.
VP Capital said it regretted going to court, but other investors had forced their hand.
With the total investment of more than VND1,500 billion ($71.4 million), Mo Market Shopping Centre will consist of one 15-floor block and another 25-storey building, connected via a five storey podium.
Deep sea ports to be developed
The Viet Nam Maritime Administration has proposed that the Government build and develop deep sea ports to international standards for large-tonnage ships from now until 2020.
Following the proposal, development will be concentrated on the country's international gateway ports in the northern province of Hai Phong and the southern province of Ba Ria – Vung Tau.
The Van Phong Port in the central region, which officials anticipate will be an entry port, will also become a national general port.
"Such deep sea ports have been established throughout the country, such as SP-PSA, CMIT, SP-SSA in Ba Ria – Vung Tau province, which allow access to 100,000 dead weight tonnage (DWT) ships," Chief of the Viet Nam Maritime Administration, Nguyen Nhat, told Giao Thong (Transport) newspaper.
"Many large shipping companies throughout the world, including Denmark's Maersk A/S, Hong Kong's Hutchison Whampoa Limited, and UAE's DP World, have taken an interest in Viet Nam's seaports. We have established many direct routes for maritime transport to Europe and America, which help reduce the cost of goods and increase their intensity of competition in global markets," Nhat said.
He added that the country's seaport system still had many shortcomings, such as a lack of comprehensive development and management of infrastructure of seaports, ineffective development and exploitation of the potential of seaports.
To tackle the shortcomings, the Ministry of Transport has reviewed the plan to develop the country's seaport system by 2020, with orientation toward 2030 to submit for the Prime Minister's approval.
According to the Portcoast Consultant Corporation under the Ministry of Transport, which is in charge of the review, total fund for investment in the development of Viet Nam's seaport system by 2020 is estimated to reach VND200 trillion to 280 trillion (US$9.5 billion - 13 billion).
The amount of capital needed for investment in public infrastructure of seaports will account for 45 per cent of the total, worth about VND 90 – 120 trillion ($4.2 billion – 5.7 billion). The remaining money will be spent on the development of wharf infrastructure facilities.
"The Government should lay emphasis on applying public-private partnership (PPP) to developing large-scale ports and wharf areas. Organisations and enterprises from all economic sectors should create favourable conditions for investment in the country's seaport system," a representative of the corporation told Giao Thong (Transport) newspaper.
It is estimated that cargo transported through the country's seaport systems will reach 400 – 410 million tonnes in 2015, and increase to 640-680 million tonnes by 2020, according to the corporation.
Agriculture sector eyes global integration
Viet Nam's agriculture sector must take advantage of global integration to increase its competitiveness and access new markets, experts said at a meeting held recently in Ha Noi.
At the meeting, Agriculture Minister Cao Duc Phat said the sector has been the bedrock of the economy, even when economic conditions were not favorable. In 2012, agriculture provided an estimated US$27.5 billion in export revenues to the economy.
Since entering WTO in 2006, Phat said farmers had become used to market rules, but are still vulnerable to changing conditions and economic shocks due to low-scale production, shifts in agricultural labourers to non-agriculture sectors and dwindling land resources.
The Ministry estimates that about 70 per cent of the population works in agriculture and nearly 10 million small households participate in the sector.
According to Phat, the Ministry is working on a draft project on positioning the global integration effort of the agriculture sector until 2020, with a vision onwards to 2030.
Priority will be given to supporting small-holders and integrate technology into production, link farmers with businesses and improve public-private-partnership models, he said.
US Ambassador in Viet Nam David Shear said Vietnamese agriculture could employ more people in higher-skilled jobs, while exporting higher-value agricultural commodities and play an even larger role in ensuring global food security.
Shear noted that the ongoing Trans-Pacific Partnership trade negotiations would increase Viet Nam's competitiveness and access to markets representing approximately 10 per cent of the world's population, and importing about 25 per cent of the world's food and agricultural products in 2012.
It was noted that the successful completion of TPP, as well as other agreements Viet Nam is negotiating with trading partners, will lower tariffs and strengthen the rules-based international trading regime.
"This further integration will open the door to investment in more modern equipment and technology, helping to modernise the agricultural sector and make it more efficient," Shear said.
Luong Hoang Thai, director general of the Multilateral Trade Department of the Industry and Trade Ministry, said challenges would include further reducing tariffs in agriculture and completely eliminating them by 2015, improving transparency of government agencies, while supporting businesses and associations by providing more access to information.
Further, Nguyen Lan Huong, a representative from Food and Agriculture Organisation in Viet Nam, said Viet Nam must focus on small-stakeholders in agriculture to help them integrate into the global supply chain and work with stricter requirements for products.
New Mekong Delta plan targets sustainable use
The Viet Nam-Netherlands Inter-governmental Committee on climate change adaptation and water management has made public a plan to develop Viet Nam's Mekong Delta.
The committee convened its third meeting in Ha Noi yesterday in the presence of Deputy Prime Minister Vu Van Ninh.
The Mekong Delta plan, which was grounded on the Netherlands Delta plan and has benefited from the close cooperation between the Governments of Viet Nam and the Netherlands, sets a long-term vision together with proposals for the Mekong Delta to adapt to climate change, manage its water resources and prosper sustainably in the coming years.
At the meeting, both countries evaluated the process of implementing the strategic partnership agreement signed in 2010, covering university and higher education partnerships, water management and climate change adaptation.
A high-level roundtable conference discussing joint coordination with international donors to aid the Mekong Delta's development was held, which included representatives from the committee, the World Bank and the Asian Development Bank.
On the sidelines of the meeting, the Delft University of Technology of the Netherlands and Viet Nam's Water Resource University (WRU) signed an agreement on the establishment of the Viet Nam-Netherlands Water and Environment Centre (Vinwater).
The centre will offer services, including applicable research in water resources and flood risk management, consultation in related thematic fields to contribute to forming a master plan, feasibility studies, knowledge transfers and capacity building.
At the signing ceremony, Professor Dr. Nguyen Quang Kim, Rector of WRU, said that with the support of the Netherlands, the centre will adapt global innovative solutions to the local situation in Viet Nam to better serve the needs of local and international organisations and address the challenges of the water sector in the country.
Professor Dirk Jan van den Berg, president of Delft University, said the establishment of this science and technology organisation would not only form a stronger and more effective partnership between the two universities, but also contribute to the development of Viet Nam's water management sector and strengthen the relationship between the two nations.