MBC welcomes our New Corporate Members “CHIN WELL FASTENERS (VIETNAM) CO., LTD”,” GAMUDA LAND (HCMC) JOINT STOCK COMPANY”,” HAWE INDUSTRIAL CONSTRUCTION JOINT STOCK COMPANY”, ” PANPAGES VIETNAM LTD”,” TUAN LE CONSTRUCTION COMPANY LIMITED” and ” ZICOLAW (VIET NAM) LTD”---MBC welcomes our New Individual Members “ALAN NG AIK HOW from TAN VIET XUAN PRODUCTION JOINT STOCK COMPANY “, “GAN YEE CHUN from SAMTEC VIETNAM COMPANY LIMITED “, “GARY LIT from GL TRAINING & CONSULTANCY”,” GOH SHUI HSIN from HEXACHEM CO., LTD”, “GRATIA GADING GEORGE from KRETOP INTERNATIONAL CONSTRUCTION CHEMICAL”, “HOW YEN LING from GLOBAL TRAINING NETWORK ALLIANCES SDN BHD”, “LENG TZE SING from CT TNHH MOC CAPITAL VIETNAM”,” LIM HOCK SIN from FURNITECH COMPONENTS VIET NAM CO., LTD”, “MARTIN WONG SIEW BING from SOUTHEAST ASIA TELECOMMUNICATIONS HOLDINGS PTE.LTD “,”MICHEL KHAOU from AGILITY CO., LTD “, “PETER LIM WEI HENG from TEXCHEM MATERIALS (VIET NAM) CO., LTD “, “ROGER YAP WENG FOOK from CONG TY TNHH MOLUTION”, “TAN JING KUAN from NORD ANGLIA EDUCATION GROUP”,” TAN LAI SEE from ABS ENGINEERING VIET NAM LIMITED”, “TAY KENG CHONG from NIRO CERAMIC VIETNAM”, “TEO SECK CHUAN from SEAMASTER PAINT VIETNAM CO.,LTD”,” TEOH TEAN TIAR from GTC VIETNAM SERVICE AND TRADE COMPANY LIMITED”.

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Vietnam News

HEADLINES

 

FINANCE

Deposit rates fall further

When is debt trading market established?

 

ECONOMY

Sugary drinks may get unsavoury tax

Contractor Kumho wins $1.5 million in debt trial

 

INVESTMENT

PT Intra Asia Indonesia to build $1-billion coal port in Vietnam

Green growth- a magnet for foreign investors

 

REAL ESTATE

JLL: Real estate M&As more virbrant

CII sells stake to quench capital thirst

 

OIL&GAS&ENERGY&MINING

Nghi Son oil refinery gets first crude oil shipment

Bac Lieu Province hopes to attract wind energy investment

 

LEGAL

Finance Ministry mulls 1% tax on M&A deals

The controversial acquisition of zero dong banks will be incorporated into the law

 

Source:

Dr. Oliver Massmann

International Attorney at Law
Certified Financial Accountant and Auditor
General Director of Duane Morris LLC
Partner of Duane Morris LLP
Member to the Supervisory Board of PetroVietnam Insurance Holdings Joint Stock Company

FINANCE

Deposit rates fall further

Vnexpress

The latest deposit rates have been announced by Vietnam Export Import Commercial Joint Stock Bank (Eximbank) on August 17. Of which, customers who newly deposit one-month term only enjoy end-term interest rate at 4.6 percent instead of the 4.8 percent like before. For 24-36 month terms, banks still maintains the interest rate of eight percent per year. This is also the bank’s highest interest rate.

Earlier, Techcombank, VPBank, etc. also applied new interest rates towards the reduction of 0.1 percent-0.2 percent interest rates in some short terms. Currently, Techcombank’s highest interest rate is 6.7 percent for 15-month term and above, while the highest interest rate in VPBank is 7.5 percent per annum.

However, the market has now also witnessed some banks who adjust up deposit rates in long terms. For example, Sacombank has just raised 0.05 percent interest rates for 13-month term to 7.6 percent per annum.

Deputy general director of a joint stock bank said the aforementioned move is mainly to restructure the bank’s deposit rate in a more reasonable way. As per Circular No.06/2016, since the beginning of 2017, the ratio of short-term capital for medium and long-term loans of banks decreased from 60 percent to 50 percent. To meet this regulation, banks must raise medium and long-term capital. Therefore, some banks focus on medium and long-term capital by raising interest rates to balance the capital source.

Meanwhile, the lowering of short-term deposit rates is considered as a way to help banks reduce lending rates to businesses because at the beginning of July, the State Bank issued a decision on reduction of maximum short-term lending rates in dong at credit organisations by 0.5 percent per annum.

“Then, a series of banks announced to reduce short-term lending rates. Therefore, the move to reduce short-term deposits is indispensable for banks having cheap capital source to lower lending rates”, he said.

At the government’s regular meeting in June 2017, the prime minister directed the banking sector to lower interest rates by 0.5 percent-1 percent and the fact shows that banks have already completed this task.

As per the latest data from the State Bank, as of June 30, 2017, credit grew 9.06 percent while the capital mobilisation swelled 7.43 percent from the end of 2016.

 

 

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 When is debt trading market established?

DTCK

According to the latest information of the State Bank of Vietnam (SBV), the on-balance sheet bad debt ratio of the entire system of credit institutions (CIs) as of May 2017 was 2.53 percent, higher than the 2.46 percent recorded in the end of 2016.

The financial statements in the first six months of 2017 of banks such as Vietcombank, VietinBank, BIDV, ACB, MBB, Eximbank, VIB, VPBank, Techcombank, NCB, SHB, and Sacombank showed that their total bad debts reached about 66 trillion dong, up by 10.7 percent compared to the beginning of the year. All of these banks recorded bad debt rise in absolute number. Particularly for Vietcombank, BIDV, MB, SHB, VPBank, VIB, Techcombank, and NCB, the debt group five (irrecoverable debts) also increased by 5.8 percent to nearly 31.9 trillion dong, accounting for nearly 52 percent of the total bad debts.

BIDV recorded the largest amount of bad debts with nearly 15.4 trillion dong, up by 6.6 percent compared to the beginning of the year, in which irrecoverable debts reached nearly seven trillion dong (slightly up by 1.2 percent), while doubtful debts grew by up to 74.9 percent to 1.8 trillion dong.

NCB’s bad debts increased by over 60 percent compared to the early year with 608 billion dong, in which irrecoverable debts rose by nearly 52 percent to 309 billion dong, accounting for 51 percent of the bank’s total bad debts, while doubtful debts rose by 5.4 times to over 121 billion dong.

Techcombank’s report showed that the bank’s bad debt ratio was 2.06 percent while it was 1.58 percent in the beginning of the year. In particular, the bank’s bad debts increased from over 2.2 trillion dong to 2.7 trillion dong, equivalent to 21 percent growth, in which the irrecoverable debts also rose by over 11 percent to 1.5 trillion dong, accounting for 56.3 percent of the total bad debts.

Closing the second quarter of 2017, ACB’s bad debts reached over two trillion dong, up by 41.2 percent compared to the beginning of the year. The bank’s bad debt ratio was 1.1 percent, higher than the 0.87 percent recorded in the early year.

Sebastian Eckardt, Chief economist of the World Bank (WB) said that although some measures have been taken to settle bad debts, the asset quality remains a matter of concern.

The process of dealing with bad debts so far still shows many unresolved difficulties, deputy Chair of the National Assembly Economic Committee Nguyen Duc Kien admitted.

Regarding the bad debt issue, Dr Can Van Luc believed that the key solution is still the policy and mechanism.

Economic expert Dr Nguyen Tri Hieu once again emphasized the need to establish a debt trading market and to securitise the debts on this market in order to accelerate the bad debt settlement. Dr Hieu gave an example, that a bank collects ten 100 billion dong debt items which are secured by assets and securitise these debts by issuing securities worth one trillion dong. The buyers, on paper, do not directly buy these debts but buy the securities issued by banks, which are secured by the debts and the secured assets of these debts.

“We repeatedly talk about the need to establish the debt trading market but there is so far no legal regulation for this market, and only the Debt and Asset Trading Company (DATC), Vietnam Asset Management Company (VAMC), banks and Asset Management Companies (AMCs) of banks carry out the debt trading activities”, said Dr Hieu

He added that the recently issued resolution 42/2017/QH14 on piloting the bad debt settlement of CIs has started to create the basis for forming the debt trading market. Dr Hieu believed that SBV should take the lead in setting up this market and drastically carry out immediate implementation. In the conditions of having budget and human resources, the market for debt trading is hopefully established within one year.

However, Decree 69/2016/ND-CP on the conditions to carry out debt trading services dated July 1st 2016 which took effect on the same date, clearly stipulated at Chapter 3, Article 9 on the responsibilities of the Ministry of Finance that the agency is responsible to the government for state management of the enterprises doing debt trading business; responsible for managing, inspecting and supervising according to its competence the debt trading business activities; and responsible for guiding the implementation of Decree 69.

Article 12 of Decree 69 on the responsibilities of SBV clearly stipulated that SBV shall coordinate with the Ministry of Finance to review, inspect and supervise according to its competence the debt trading business services in accordance with Decree 69 for AMC directly under commercial banks. An economist commented that it means that the Ministry of Finance is the governing body which is responsible for creating the platform, infrastructure and regulations, etc. of the establishment of the debt trading market. However, to date, there has been no fundamental moves for this establishment.

In the Scheme to restructure the system of CIs associated with the bad debt settlement in the period of 2016-2020 which has recently been approved by the prime minister, SBV mentioned in the section on orientation and solutions for dealing with bad debts that the agency will continue to coordinate with the ministries, industries, the People’s committees of provinces and cities directly under the central government and relevant agencies in reviewing legal difficulties and barriers in the settlement of bad debts and secured assets of CIs and VAMC; at the same time developing the debt trading market to actively amend, supplement and submit the government, National Assembly and the Standing Committee of the National Assembly in the direction of:

(1)       To study and complete the legal framework on debt trading activities of enterprises; and the legal framework for the establishment, development and management of the debt trading market, including studying and removing the obstacles in the Land Law on accepting mortgages of land use rights from organisations other than CIs.

(2)       To study and complete the legal regulations on securities, including the establishment of legal framework for securitisation of debts, contributing to create the legal basis for the implementation of debt transactions on the stock market and transfers of bad debts to into securities for transparent trading at the right time, etc.

Talking to Dau tu Chung khoan newspaper, leader of SBV’s Legal Department added that “the individual transactions (carried out by individuals wishing to purchase bad debts) will be implemented in accordance to Resolution 42/2017/QH14. However, since these transactions have certain limitations, they can hardly speed up the bad debt settlement process. Meanwhile, DATC, VAMC, banks and AMCs of banks are still the only members contributing to the establishment of the debt trading market”.

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ECONOMY

 

Sugary drinks may get unsavoury tax

 

VIR

 

The Ministry of Finance is proposing the levy of a special consumption tax of 10-20 per cent on sugary drinks to combat obesity rates, though a similar proposal was rejected by the government three years ago. VIR’s Van Thu offers insight into the hot debate surrounding the new proposal.

As the mother of an obese 10-year-old boy from Hanoi, Nguyen Huong Lan has to do battle with retailers, friends, family, and nursery workers to police her son’s intake of sugary drinks.

“I have become the sugar police, the woman who nags the nursery, all because I want my son to keep fit he’s already hit 50 kilogrammes, the same weight as me. I’m concerned. Even the term obesity is scary to me,” Lan said.

It is not a rare case, as childhood obesity is a new and emerging problem in Vietnam. And now, Vietnamese tax authorities are citing this problem as grounds for their new proposal for a special consumption tax (SCT) on sugary drinks.

Stopping the sugar high

Last week, the Ministry of Finance (MoF) the compiling body of the revised draft on the SCT introduced the draft amendments to tax laws for public comments: one with a tax rate of 10 per cent, and the other with a tax rate of 20 per cent. Both would take effect in 2019.

If approved, the proposal would see the tax imposed on carbonated and non-carbonated soft drinks, energy drinks, sports drinks, and bottled instant coffee and tea. It is widening the list of items subject to the SCT to “direct the consumer trend”, given their harmful effects. The MoF’s proposal of three years ago set the SCT at 10 per cent on only carbonated drinks.

“The imposition of the tax aims to regulate the consumption of sugar-based beverages according to international practice,” explained Pham Dinh Thi, director of MoF’s Tax Policy Department.

The ministry also pointed to a World Health Organization (WHO) report that shows that the abuse of soft drinks leads to obesity. The proportion of overweight and obese adults in Vietnam now stands at 25 per cent of the population. Obesity rates among children under five years old are also increasing rapidly, and this puts them at future risk from cardiovascular disease, hypertension, stroke, atherosclerosis, and other ailments.

MoF seeks to follow the practice of many countries by imposing excise taxes to limit the consumption of sugar-based drinks. In Thailand, for example, non-alcoholic carbonated soft drinks are subject to a tax rate of between 20 and 25 per cent. Laos imposes 5 to 10 per cent tax on soft drinks, and Cambodia 10 per cent.

Thi quoted experts as saying this tax will hike the prices of unhealthy drinks and reduce the number of people who consume large quantities of them. Sugar-sweetened drinks are known to be a contributor to obesity, particularly in children and young people.

With a forecasted annual growth rate of 6 per cent to 2020, the beverage industry in Vietnam is one of the fastest growing consumer goods segments. According to Canadean, a world-class research company focusing on international soft drink and alcoholic beverage industries, growth in Vietnam’s alcoholic beverage market has averaged 6.4 per cent per year over the last decade, and 5.7 per cent over the last five years.

Well-known investors such as Coca-Cola, PepsiCo, Nestle, URC, and Tan Hiep Phat have also increased their share in Vietnam or conducted merger-and-acquisition activities with local firms to bolster their market share.

Battling mixed opinions

The MoF’s proposal, however, has encountered protests from business associations and companies saying it is not justified.

Adam Sitkoff, executive director of American Chamber of Commerce (AmCham) in Hanoi told VIR, “Our members do have concerns about MoF’s proposed tax rates and manner of beverage taxation. The proposed 10 per cent excise tax would double the rate of taxation of this category of products.

“AmCham recognises the need for the Vietnamese government to collect revenue, and we support tax regimes that are fair and don’t discriminate against certain industries or groups of taxpayers. I believe that this suggested tax increase and subsequent rates could halt growth and investment in this business sector.

“The sudden introduction of excise taxes at the suggested levels would require manufacturers to raise prices accordingly, which hurts the spending power of Vietnamese consumers.”

Nestle Vietnam’s statement to VIR reads, “We have reservations about selective taxes on food and beverage products, as there is currently no clear evidence that they are effective in combating obesity. We see them as a narrow tool to address these critical public health concerns.”

Nestle’s statement also pointed out that as part its global Commitment on Nutrition, Health and Wellness, “we have group-wide policies to proactively reduce sugar across our relevant product categories, through ongoing product reformulation”. Nestle confirmed that the company shares the concern of governments and health authorities on obesity and related non-communicable diseases.

Coca-Cola stated that it does not oppose taxation, and that the company has consistently paid all taxes according to local laws. But it stressed, “Coca-Cola opposes efforts that isolate non-alcoholic beverages for additional, discriminatory taxes. Such discriminatory taxes conflict with the best practices in international fiscal policy, of broad-based taxes with low rates and few exceptions.”

Jonathan L. Moreno, chair of AmCham in HCM City, warned that if such proposals are made law, there could be unintended consequences. These taxes could prompt consumers to substitute carbonated soft drinks with other non-taxed products with some of the same attributes, and be a poor message for potential investors to Vietnam.

He said, “As a general rule, we oppose taxation which might be considered to be discriminatory. The challenge with taxation focusing on a specific product category with the purpose of protecting health is that other categories which might have similar or worse health consequences are not subjected to the same market limiting factors. Therefore, broad based and measured tax approaches seem to be a more prudent approach.”

Seeking a root cause

“Obesity is complex and isn’t caused by one unique factor. Telling people that eliminating one product from their diet is a silver bullet solution to certain health issues such as obesity is misleading,” said AmCham’s Sitkoff.

He raised the question of whether concerns over unhealthy foods and drinks will spread. “Will MoF apply this tax to bun cha (noodles with grilled pork), che (sweetened bean soup), and fried nem (spring rolls)?” he asked.

“I strongly support efforts to improve the health and well-being of people. I even try to eat a well-balanced diet myself. However, being healthy is a combination of many things, including lifestyle. Sugar has been around for more than 2,000 years, and consumers want to be able to choose products they enjoy.”

Lan, mother of the obese 10 year-old, said, “The tax might change people’s behaviour, but it is not enough. Taxes do not teach healthy lifestyles; if we want a healthier country, we need better education about exercise and balanced diets.”

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 Contractor Kumho wins $1.5 million in debt trial

VIR

At the second trial of the debt collection lawsuit between plaintiff Kumho and the defendant, the Justice Council of the Hanoi People's Court has ruled in favour of the plaintiff and ordered the defendant to pay $1.5 million, equivalent to VND37 billion.

Contractor hands in claim for stalling project

According to the petition filed by Kumho Industrial Co., Ltd. (South Korea), on December 17, 2011, the company signed a contract for the construction of a building located at 1A Lang Ha Street, Thanh Cong Ward, Ba Dinh District, Hanoi. The main investor of the project was Lang Ha JSC and Kumho Industrial Co., Ltd. was the main contractor.

Prior to this, the area had been used to develop the $100-million Kinh Bac Tower, which was invested by Kinh Bac City Development Holding Corporation (KBC). The former investor also signed a contract with Kumho Industrial Co., Ltd. in November 2010.

At the time KBC was deep in debts, having taken up huge loans to fund a lot of the corporation’s real estate development projects. However, experts found that many projects had been left idle a short time after being kicked off. They also expressed suspicions that the investor only tried to register projects and then transferred them to others for profit.

Regarding Project 1A Lang Ha, after signing the preliminary agreement with Kumho on December 17, 2011, the bank issued a letter of guarantee on December 28, committing to pay out Lang Ha JSC. The value of the guarantee was $14.3 million and the term of validity was 17 months.

Before 2012, it was widely believed that the defendant bank had close connections with the chairman of KBC, the well-known stock millionaire Dang Thanh Tam, who owned another commercial bank and several real estate agencies.

Three out of five board members of this bank were key leaders of KBC. According to its first quarter financial report in 2012, KBC held 26.55 million shares or an 8.85 per cent stake, which had a par value of VND265 billion (or $12.8 million), in the bank. The real estate market’s downturn in 2012 had pushed Kinh Bac into continuous losses, sparking speculations that Tam would divest some of his assets. In early September 2012, KBC announced that it no longer held stocks of the bank.

As mentioned above, by 2012—only six months after the implementation of the project—the real estate market fell into a quiet phase and the investor was mired down in a host of financial difficulties. The project was suspended and has been stalling so far.

According to the contractor Kumho, the firm had asked the owner to pay for the completed work. However, Lang Ha JSC was unable to meet its financial obligations under the contract. Kumho had no other choice but to take the case to court, requesting the bank to perform the payment obligations stipulated in the letter of guarantee.

At the time, Kumho's debt claim encountered several difficulties because the defendant was in the process of merging with another financial institution as part of the Vietnamese central bank's scheme to restructure lenders saddled with mountains of bad debts.

In 2013, the merger was successfully finalised. The new bank took over all assets and liabilities of the former one. Shareholders of both sides, meanwhile, would also be transferred to the merged bank, with all rights and responsibilities reserved.

In 2015, the case was brought to trial which was subsequently cancelled because the parties failed to agree on their statistical records of debts and late-payment penalties.

Before the second trial on August 16, 2017, Kumho and Lang Ha JSC confirmed the original loan of $1.4 million. According to calculations by Kumho, the investor had delayed its payment (from 2012 to 2017) for 1,539 days. Given the basic interest rate announced by the State Bank of Vietnam of 9 per cent per annum, Kumho requested a late payment penalty of $552,000. The total amount claimed by Kumho against the bank was $2.09 million.

Original contract lost during merger

Before Kumho's court filing, the new bank established after the merger had been repeatedly refusing to fulfil the obligations stipulated by the payment guarantee. The bank's rationale was that during the merging process it had not been handed any guarantee contract or related documents by the former bank. Also, data extraction from the information system did not find the original guarantee contract.

With regards to the documents issued by Kumho, the bank confirmed that the letter of guarantee had violated the Law on Credit Institutions. Lang Ha JSC is a subsidiary of the bank, yet the contract was not secured by collateral property nor ratified by the Board of Directors.

Kumho did not accept the above explanation as the bank’s record keeping and its personnel rearrangements were out of the company’s control. According to Kumho, the contract of guarantee was an independent transaction and Kumho only looked to the legal representative who had signed the letter of guarantee to request payment.

It is known that currently the new bank holds a 94 per cent stake in Lang Ha JSC. Thus, it is not only the guarantor, but also the main investor of the project. To some extent, it appears to be rational for the project owner to pay the contractor.

Conflict over late-payment penalty arrangements

The construction contract between Kumho and the main investor did not specify whether the late payment penalty would be payable in VND or USD. In its petition against the project owner, Kumho cited Article 305 of the Civil Code 2005 and Decision No.2868/QD-NHNN to require a late payment interest of 9 per cent per year in VND.

Lang Ha JSC did not agree with Kumho’s calculations. The investor said that the difference between VND and USD interest rates was significant. The contract value was termed in USD, so the interest rate must be calculated based on the average USD mobilisation interest rates over the years. Accordingly, the interest rate should be 3 per cent per year.

The calculation method of Lang Ha JSC was approved by the Justice Council of the Hanoi People's Court. Consequently, the total amount payable to Kumho includes a principal sum of $1.4 million and a late-payment penalty of $184,224, which is equivalent to over VND37 billion.

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INVESTMENT

 

PT Intra Asia Indonesia to build $1-billion coal port in Vietnam

VIR

Seeing opportunities in Vietnam’s increasing demand for imported coal, Indonesian firm PT Intra Asia Indonesia is seeking the opportunity to build a coal port in southern Vietnam with a total investment capital sum of $1 billion.

On August 23, PT Intra Asia Indonesia signed a memorandum of understanding (MoU) with Hong Phat Coal and Resources Company in connection with its plan to develop a coal port in southern Vietnam, according to newswire Jakarta Post.

“The port will be mainly used for cargo and logistics that will serve export and import between Indonesia and Vietnam, particularly coal,” said Intra Asia Indonesia commissioner Lutfi Ismail.

The port has a designed capacity of 15-20 million tonnes of coal per year and would cut logistics costs for coal imports from Indonesia by a significant margin.

The construction of the port would facilitate the sustainability of coal exports from Indonesia to Vietnam and would help fuel power plants in the country.

“Indonesia targets to export 4.5 million tonnes of coal to Vietnam this year. We hope that the cooperation will boost Indonesian coal exports to Vietnam,” Lutfi Ismail added.

In recent years, coal imports have increased due to the rising demand of domestic thermal power plants. Indonesia is one of the largest coal exporters to Vietnam.

According to statistics published by the General Department of Vietnam Customs, in the first seven months of this year, Vietnam imported 7.92 million tonnes of coal worth $801 million, with Electricity of Vietnam (EVN) alone importing five million tonnes. The figure is expected to increase to 11 million tonnes by 2020 and 19 million tonnes by 2025.

EVN mostly uses imported coal to fuel coal-fired thermal power plants, including Vinh Tan thermal power plant in the southern province of Binh Thuan and Duyen Hai 3 and 4 thermal power plants in the southern province of Tra Vinh, among others.

In early August, Deputy Prime Minister Trinh Dinh Dung requested the Ministry of Transport and other relevant authorities to study plans to build a coal port to meet the increasing demand for coal for thermal power plants in the south.

According to the national power development plan, there will be seven large-scale thermal power centres in the Mekong Delta, namely Long Phu, Song Hau, Duyen Hai, Bac Lieu, An Giang, Kien Luong, and Tien Giang. The total coal demand of these thermal power centres will reach 43 million tonnes by 2030.

 

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Green growth- a magnet for foreign investors

VOA

Green development projects in Vietnam are catching attention of foreign investors on account of the Government’s favourable policies on land, taxes and capital as well as a large number of potential customers in the country, said Duong Thanh An, Head of the Policy and Legal Affairs Department.

A survey on Japanese investment trend in Vietnam in 2017 held by the Japan External Trade Organisation (JETRO) in Vietnam revealed that at least 25 Japanese businesses have the intention to invest in improving environment quality in Vietnam, such as in waste water treatment for plants and urban areas.

Other businesses said they will design warning software for storms, flash floods and tsunami.

The Japanese Government has taken measures to support its enterprises’ investment in this segment in the Southeast Asian nation, including Official Development Assistance and Public Private Partnership policies.

Currently, Japanese businesses are making a beeline to study investment opportunities in waste water treatment for for-export processing areas and industrial zones in Dong Nai and Binh Duong provinces and Ho Chi Minh City.

Kobelco Eco-Solutions Co., Ltd has recently proposed a clean water treatment project in Dong Nai province after investing in sewage treatment systems in Loteco and Long Duc industrial parks in the locality.

Meanwhile, high technology, clean and renewable energies and electrical sectors hold the attention of European businesses.

Royal HaskoningDHV from the Netherlands has signed a 9.5 million EUR (11.2 million USD) contract with the Ba Ria-Vung Tau Urban Sewerage and Development Company to implement a comprehensive waste water treatment for Phu My new urban area. The plant, which has designed capacity of 30,000 cubic metres per day, will become operational in December, 2019.

Investors from the Republic of Korea and China tend to invest in renewable energies. The JA Solar Vietnam, developed by Chinese investor at 280 million USD, is one of the most noticeable projects.

Targeting a green economy, the Vietnamese Government and local authorities are tightening the control of environment quality while domestic environment service is unable to meet local demand, posing huge potential for foreign investors.

At the same time, the Government has issued a series of preferential treatment policies in terms of land, capital and tax for investors in environmental protection. Increased awareness about the issue among the public and Vietnam’s commitments during the integration process also provide necessary pressure for the shift of investment flow.

According to the Ministry of Natural Resources and Environment, there were 458 solid waste landfills in Vietnam and over 100 low-capacity waste furnaces which possibly emit hazardous dioxin and furan. 

Regarding waste water treatment, the country has 283 industrial parks discharging over 550,000 cubic metres per day and night. Especially, nearly 790 urban areas across the nation dispose 3 million cubic metres of sewage every day, most of which is untreated.

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REAL ESTATE

 

JLL: Real estate M&As more virbrant

SaigonTimes

M&As in real estate likely to reach record levels this year and next, according to JLL.

Vietnam’s vibrant real estate market will elevate the number of merger and acquisition (M&A) deals to a new record this year, according to Mr. Stephen Wyatt, Regional Director of JLL. “Growth in M&As in Vietnam is accelerating partly because of its continued global integration, socio-political and macroeconomic stability, as well as structural reform in banking and finance, public investment, and State-owned enterprises,” he said. 

Foreign investment in real estate ranked fifth in the first half of the year, with total investment capital of $700 million, up 16 per cent year-on-year, with 39 newly-registered projects worth $500 million.

Vietnam’s real estate market continues to have irresistible appeal to foreign investors, mostly through M&As. Joint ventures have become popular, with foreign developers who have strong financial capacity and track record joining forces with local developers who own land and have strong connections with the local community.

JLL observed that there are hundreds of millions of dollars waiting to be poured into the market in most segments, including residential, office, retail, hospitality, and industrial. Investors are from many different countries, such as Japan, South Korea, and Singapore, with an increasing number of groups from mainland China, including CFLD, Country Garden, Jiayuan, and others.

Japanese investors are interested in increasing their presence in Vietnam. Last September, Kajima, one of the four largest contractors in Japan, set up a joint venture with Indochina Capital to invest $1 billion over ten years. The primary focus will be on residential and hospitality projects in Hanoi, Ho Chi Minh City, and Da Nang. “We expect Japanese investors will be one of the most active groups in the market this year,” said Mr. Wyatt. “Their main focus is residential and operating assets such as serviced apartments and Grade A office space.”

There have been several notable transactions in the industry since the beginning of this year. In March, Singaporean company Keppel Land acquired the remaining stake (16 per cent) of the Southern Waterborne Transport Corporation (Sowatco) in Saigon Centre through subsidiary Krystal Investment Pte., Ltd. Hongkong Land will become a potential strategic partner with the Ho Chi Minh City Infrastructure JSC (CII) in developing residential housing in the Thu Thiem New Urban Area.

In May, Quoc Cuong Gia Lai sold its project in Ho Chi Minh City’s Nha Be district to Sunny Island Investment for an undisclosed sum. Recently, Phat Dat Corporation announced it has transferred part of its Everrich 3 project in Ho Chi Minh City. Hung Thinh Real Estate has its own strategy to purchase 20 long-delayed projects, ten of which have seen construction or sales begin.

In addition, the VinaCapital Vietnam Opportunity Fund Limited announced it has divested its 70 per cent stake in the 198.5 ha-Dai Phuoc Lotus real estate project, a residential-township development located in Dong Nai province, to China Fortune Land Development (CFLD). CFLD has also signed an MoU with the Tin Nghia Corporation to build a New Industry City (NIC) at the Ong Keo Industrial Park, aligning with its plan to build dozens of industrial cities around Southeast Asia. Other Chinese developers are considering real estate projects in Vietnam, according to JLL.

There are more foreign investors entering Vietnam and opening new offices. These investors were on a fly-in fly-out basis in their first investment, while now, for subsequent investments, they have set up local teams comprising a combination of local and expat operators. “Due to the strong focus on Vietnam from regional investors, we expect M&A activities to reach record levels in 2017 and 2018,” Mr. Wyatt said.

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CII sells stake to quench capital thirst

VIR

Ho Chi Minh City Infrastructure Investment JSC (CII) will sell a large volume of shares to cover its capital demand to develop numerous large-scale projects, according to newswire CafeLand.

Notably, CII will sell 123.12 million shares at the price of VND15,000 ($0.66) for its existing shareholders. CII expected to divest at least 50 per cent worth VND923.4 billion ($40.6 million) via the sale.

After the sale, CII plans to sell 17.71 million individual shares to South Korean Rhinos Asset Management Co., Ltd. (RAM) at the price of VND26,040 ($1.16) apiece.

After these sales, CII’s chartered capital is expected to reach VND4.2 trillion ($184.7 million).

RAM was also a partner in a previous deal. Earlier in November 2016, CII signed a deal to sell a convertible bond volume worth $40 million to KEB Hana Banktrustee and Custodian Business. Under the contract, CII would issue 400 non-guaranteed convertible bonds at the price of $100,000 per unit and an annual yield of 1 per cent for five years.

CII is entitled to redeem bonds from the third year after the sale, but the buyback amount cannot exceed 50 per cent of the total bond volume. Accordingly, RAM is allowed to convert at most 50 per cent of the bonds into shares with a conversion price of VND38,500 ($1.71) per share or resell the bond volume at the initial price to CII and enjoy a yield of 4.5 per cent a year.

CII has a portfolio of strategic infrastructure assets, including water treatment plants. The water company also holds a stake in Thu Duc Water BOO Corp., a water treatment company now 49 per cent owned by Manila Water.

In addition to water infrastructure, CII holds several toll road concessions, such as the 15.7-kilometre expansion of Hanoi Highway, which connects Ho Chi Minh City with southern industrial hub Bien Hoa.

In July, CII signed a memorandum of understanding with Hong Kong Land to jointly develop luxurious high-end apartments on a prime land site that local authorities agreed to give to the company as it conducted the build-transfer (BT) infrastructure project in Ho Chi Minh City's Thu Thiem area.

The joint venture will develop luxury residences, promising to set a new quality standard for Vietnam. The projects will consist of approximately 965 units including luxury apartments, airy villas, and garden apartments enjoying the scenic views of the Saigon River and the surrounding green areas.

These projects will also offer apartment units designed in a variety of sizes ranging from one to four bedrooms, with amenities such as swimming pools, public green areas, and boutique supermarkets to ensure a lush and comfortable living environment.

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OIL&GAS&ENERGY&MINING

 

Nghi Son oil refinery gets first crude oil shipment

The Saigon Times

Nghi Son Oil Refinery and Petrochemical Complex in Thanh Hoa Province on Tuesday received the first 270,000 tons of crude oil, or about two million barrels, from Kuwait, according to local media.

Crude oil was pumped from the oil tanker Millennium to the refinery’s storage facilities through two 35-km undersea oil pipelines, reports Dan Tri news website.

Nguyen Van Thi, head of the Nghi Son Economic Zone and Thanh Hoa industrial parks authority, was quoted by Dan Tri as saying that this is an important event in the refinery’s trial operation.

Nghi Son oil refinery and petrochemical project in Nghi Son Economic Zone with a total investment of US$9.2 billion and a processing capacity of 10 million tons of crude oil a year is currently the nation’s biggest oil refinery.

The plant was inaugurated on April 30 after 40 months of construction. Nghi Son Oil Refinery and Petrochemical Co Ltd will receive crude oil from three vessels of Kuwait a month when it is put into commercial operation.

 

 

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Bac Lieu Province hopes to attract wind energy investment

VOV

Local authorities from southern Bac Lieu Province on Wednesday, August 23, expressed their interest in attracting wind energy investment from companies based out of the Republic of Korea.

Duong Thanh Trung, chair of Bac Lieu People’s Committee, announced that it hopes to add more wind power projects with a capacity of 99.2 MW of renewable energy capacity over the next few years.

But this target can only be reached if Bac Lieu Province can find foreign direct investment from companies such as those from the ROK to fund the projects, he told a contingent of ROK companies at a conference.

Trung, said he believes that wind power projects are viable due to the largely untapped 56-km coastline of the province, which provide strong stable winds year around that are conducive to developing wind as well as solar power generators.

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LEGAL

Finance Ministry mulls 1% tax on M&A deals

SaigonTimes

To prevent tax evasion in mergers and acquisitions (M&A) deals, the Ministry of Finance has proposed a 1% tax on the value of each successful transaction.

According to a ministry report on proposed amendments to the corporate income tax law with regard to M&A activity with foreign involvement, this law allows the Government to levy an income tax on M&A deals involving foreign firms which are not present in Vietnam.

The Government issued Decree 12/2015/ND-CP governing the tax on M&A deals in 2015 but the decree provides no specific percentage. Therefore, the ministry temporarily applies a 20% income tax.

But this income tax rule has not worked as foreign companies often put the value of an M&A deal on par with the cost of the transacted venture, resulting in no tax payment. Meanwhile, Vietnam has no way to verify the value of an M&A contract.

There have been major M&A deals happening in recent times, such as the acquisition of the Big C supermarket chain by Thailand’s Central Group and the transfer of Holcim Vietnam from LafargeHolcim to Thailand’s Siam City Cement. But tax agencies have had a hard time taxing such transactions as they could not determine the actual transaction value.

Therefore, the Ministry of Finance has proposed an income tax of 1% for M&A activity based on declared transaction value. For M&A deals in the oil and gas sector, the ministry would have specific instructions.

Similarly, individuals involved in M&A deals would also pay a 1% tax on transaction value, instead of 20% on income.

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The controversial acquisition of zero dong banks will be incorporated into the law

DTCK

One of the important contents of the draft Law amending and supplementing a number of articles of the Law on Credit Institutions (CIs), according to director of Legal Department under the State Bank of Vietnam (SBV) Doan Thai Son, is the solution to compulsory transfer CIs which are under special control.

According to the draft law, the conditions for the compulsory transfer include (1) the CI failed to build a recovery plan or its recovery plan was not approved, or approved but could not be carried out; (2) the CI was unable to change the legal status (conducting merger or consolidation, or transfer of all shares and contributed capital to new investors); (3) the CI’s actual value of charter capital and reserve funds is negative; and (4) for some CIs, other investors requested the compulsory transfer.

The form of compulsory transfer is to assign other CI or investors to compulsorily receive the transfer. The unit authorised to approve the transfer plan is SBV (submitted to the government for approval). In fact, the acquisition of three zero-dong banks by SBV in the past was compulsory transfer. Although the current Law on CIs stipulated that SBV has the right to directly make compulsory purchase of shares, this move of SBV to buy three zero-dong banks remains controversial. Therefore, the revised law this time more strictly regulates this content.

In addition, SBV in the recent time has requested many banks such as VietinBank and Vietcombank, etc. to support weak CIs but there are no specific guiding documents, causing banks to concern about bearing responsibility and piled up bad debts. Thus, this draft law supplements the rights of the CI which is assigned to receive the compulsory transfer. Accordingly, CI receiving compulsory transfer can own 100 percent charter capital of the transferred CI but does not have to carry out the consolidated financial statement for the transferred units, and can exclude the compulsorily transferred unit when calculating the consolidated capital adequacy ratio.

Moreover, the amount of contributed capital will not be provisioned for devaluation of investments, will be excluded when calculating the limit of capital contribution and share acquisition of CI that receives the compulsory transfer. The CI receiving compulsory transfer has the right to sell and issue shares of the transferred CI to appropriate foreign investors.

The draft law introduces numerous regulations on special control. Currently, due to inadequate legal framework, SBV has no legal basis to thoroughly settle the CIs that are under special control if their shareholders object or refuse to cooperate and intentionally prolong the processing time of financial responsibility. Thus, the draft law this time supplements regulations on the cases to put CIs under special control, and clearly specifies the authority to handle and terminate the special control.

In addition, the draft law also clearly stipulates the authority of the government, the prime minister and SBV in dealing with and restructuring the CIs under special control.

Accordingly, the government decides the policy and approves the plans of conducting bankruptcy or compulsory transfer of the CIs under special control as proposed by SBV. The prime minister decides the policy to restructure and settle the legal status of commercial banks, cooperative banks, finance companies which are under special control, and decides the special loans at preferential interest rates offered to CIs under special control at the request of SBV, except when bankruptcy plan is approved. SBV has the right to approve the restructuring plan and plan to handle legal status of the People’s credit funds and microfinance institutions, etc.

 


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