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Vietnam News

HEADLINES

FINANCE

Bad debt stands at 2.51pct in late July

Behind the quietness of USD/VND exchange rate

ECONOMY

GDP growth from the perspective of using GDP

Budget revenue hits 70pct of target

INVESTMENT

Foreign investment in Vietnam may reach $28 billion by end of 2017

First foreign gasoline station opens in Hanoi

REAL ESTATE

An Duong Thao Dien puts the pedal to the metal

Hoa Binh - Son La Road to become expressway

OIL&GAS&ENERGY&MINING

Pilot direct PPA to fuel local power market

Banpu seeking new ideas after coal fails to fire

LEGAL

New Railway Law

New regulations on banking guarantees for home purchases

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

Bad debt stands at 2.51pct in late July

VNA

The banking sector’s total bad debts stood at 2.51 percent as of the end of July 2017, falling from 2.55 percent at the end of 2015, according to a report by the State Bank of Vietnam (SBV) to the National Assembly.

Saigon Giai Phong daily cited the report as saying that total settled bad debts in 2016 was 118.5 trillion VND (5.2 billion USD), according to the bank, adding that the figure in the first half of this year was 46 trillion VND.

As part of efforts to realise a National Assembly resolution and a prime ministerial decision on tackling bad debts, the SBV has issued a number of guiding documents and directed the implementation of the policies.

Credit institutions are also building plans for the work with measures matching their reform plans.

The SBV has also worked with six banks and the Vietnam Asset Management Company (VAMC) to carry out bad debt settlement measures mentioned in NA Resolution 42/2017 QH14.

The VAMC has also finalised the project to restructure and enhance its capacity in 2017-2020.

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Behind the quietness of USD/VND exchange rate

Biz Live

The movements of USD/VND exchange rate in the third quarter of 2017 as well as in the first nine months of the year showed adverse fluctuations between the reference rate announced by the State Bank of Vietnam (SBV) and the actual rates listed at commercial banks. According to observation, the reference rate has always been adjusted, although the level of increase is not very significant. generally, in the first three quarters of the year, the reference rate rose by 1.4 percent compared to late 2016.

Meanwhile, the average interbank rates were almost unchanged compared to the early year. According to calculation of experts at Bao Viet Securities Company (BVSC), the Nominal Effective Exchange Rate (NEER) of VND in relation with eight currencies in the reference basket (calculated in terms of trade weight between Vietnam and other countries) tended to fall sharply in the first nine months of 2017 from 106 points in the early year to 102 points in late June and 100.3 points in late September.

BVSC stated that the downward trend of NEER is due to the strong depreciation of the USD against most other major currencies in the world (the USD Index in the end of the third quarter fell by about 10 percent compared to the beginning of the year). Since the exchange rates between VND and other currencies are all converted through USD, when USD depreciated against the euro, CNY and JPY, VND also decreased against these currencies.

In the basket of eight reference currencies, VND has depreciated 3 percent against the euro, 2.3 percent against the CNY, 0.1 percent against the KRW, 1.8 percent against the THB, 0.3 percent against the TWD, 1.4 percent against the SGD, and almost levelled off compared to JPY and USD. The number of reference currencies and the trade weight were inclined towards VND devaluation, which made the NEER to drop fairly fast.

In fact, the exchange rates fluctuations at commercial banks seemed relatively stable with very little changes compared to the end of last year. According to BVSC, the reason partly came from the favourable developments of the world currency market (as the NEER of VND declined against the basket of reference currencies) and was partly due to the actual foreign currency supply and demand movements on the market.

Specifically, although the trade balance of Vietnam (including trade in goods and services) is still in deficit status with a total estimated value of 3.2 billion USD in the first nine months of the year, the trade deficit tended to shrink. Particularly the trade deficit of goods in the first three quarters of the year remained only 442 million USD (while it was 2.7 billion USD in the first half of the year).

Moreover, the capital balance of Vietnam also recorded a good surplus thanks to the Foreign Direct Investment (FDI) and Foreign Indirect Investment (FII). Specifically, the disbursement of FDI reached 12.5 billion USD, up by 13.4 percent compared to the same period of 2016, while the FII continued to strongly flow into the Vietnam’s stock market with net buying value of foreign investors in stock and bond channels reaching an estimated value of 1.4 billion USD in the past three quarters.

The source of remittances was assessed at satisfactory level. The remittances transferred to Hochiminh city in the first nine months of 2017 was 3.3 billion USD.

Thus, all of the above sources show that the balance of foreign currency supply and demand in fact tended to be in favour of supply, which has had a supportive impact on the value of VND in the first nine months of the year. With fairly stable exchange rate movements in the first three quarters and the improvement of foreign exchange reserves, experts believed that the exchange rate will continue to be stable in the fourth quarter.

Accordingly, the depreciation of VND in 2017 will be only 1-2%. However, it should be noted that the exchange rate may be more volatile at some times in the fourth quarter due to seasonal factors as well as the unpredictable fluctuations of the currencies in the reference basket.

A special note is the risk that the USD may rebound strongly along with the expectation for the US Federal Reserve to shrink the balance sheet by not reinvesting in US government bonds and to continue raising interest rates, as well as the possibility that major US companies may transfer their accumulated profits back home when the Donald Trump’s tax cut policy is approved by the US Congress and comes into effect.

This will be a medium-term risk for SBV’s exchange rate management.

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ECONOMY

GDP growth from the perspective of using GDP

VNEconomy

The economic growth is assessed in different perspectives, not only in terms of production but also the use of Gross Domestic Product (GDP) (such as asset accumulation, final consumption and trade deficit/surplus).

So what can be seen from the perspective of using GDP in the first nine months of 2017?

Accumulation of assets is an important element in the use of GDP, which is the driving force for the GDP growth. The GDP produced cannot be completely used up but must be partly accumulated to reproduce on a larger scale.

The accumulation of assets has two effects. On one hand, asset accumulation is a precondition for investment. Investment is a precondition of growth, and also the direct factor that determines GDP growth. If the investment is lower than accumulation, it should be reconsidered because it can be a waste of resources, such as blocking capital in gold and foreign currency by a part of the population. If the investment is larger than accumulation, it may increase public debts and bad debts and that causes macro instabilities.

Information about the accumulation of assets in the first three quarters of 2017 shows that the growth rate of asset accumulation was higher than that of GDP (9.8 percent compared to 6.41%). It also points out that the contribution of asset accumulation to GDP growth was fairly good, being higher than the same period of last year. This is one of the factors contributing to make the ratio of total social investment on GDP in the first three quarters to reach 33.9%, higher than the annual plan (31.5%); and also is one of the factors supporting the GDP growth in the first three quarters to be higher than the same period of last year (6.41 percent compared to 5.99%)

Nevertheless, the growth of asset accumulation in the first nine months of the year was lower than the same period of the year ago (9.8 percent compared to 10%), which has not very positively affected the growth, because investment is the direct factor that determines the economic growth; while the economic growth is the precondition to avoid the risks of “lagging behind” and “falling into the middle-income trade” a precondition for achieving the goals of social development and environmental production and improvement, etc.

Final consumption

The final consumption has two-sided effects. On one hand, final consumption is the drive of economic growth, as it often accounts for around 70 percent of GDP, doubling the proportion of asset accumulation. It is also because in the market mechanism, the basis, starting point, and the target of all production, business and investment projects is consumption, including domestic consumption an important part which accounts for an increasingly large proportion in the final consumption.

The ratio of final consumption on GDP of Vietnam ranks high in comparison with other comparable countries and territories (5/10 in South East Asia, 18/38 in Asia, and 81/116 in the world). On the other hand, final consumption represents the living standard of the people and poverty reduction which are the goals of the economic growth.

Information about the final consumption in the first nine months of 2017 show three positive results and signs. Firstly, the growth of final consumption was higher than that of GDP (7.3 percent compared to 6.41%). Secondly, the growth of final consumption in the first three quarters of the year was larger than the same period of 2016. Lastly, the contribution of final consumption to GDP growth was very high (up to 8.75 percentage points, equivalent to 136.7 percent of GDP growth).

These above results of asset accumulation and final consumption should have supported the GDP growth in the first nine months of 2017 to be much higher than the same period of last year. However, the GDP growth in the first quarter was low (5.15%), and thanks to the higher growth in the second and the third quarter (respectively 6.28 percent and 7.46%), the overall GDP growth in the first nine months was higher than the same period of 2016 but the increase was insignificant (6.41 percent compared to 5.99%). The reason was said to be the trade deficit.

Export/import and trade deficit/surplus

In the first nine months of 2017, the exports of goods reached 154 billion USD, up by 19.5 percent compared to the same period of 2016 while that of services was 9.74 billion USD, up by 7.3%. In total, the export turnover of goods and services was 163 billion USD, up by 18.7 percent compared to the same period of the year ago.

The import turnover of goods, in the first three quarters of the year reached 154 billion USD, up by 23.1 percent compared to the same period of 2016; while the imports of services was 12.55 billion USD, up by 2.9%. In total, the import turnover of goods and services reached 167.05 billion USD, up by 21.3%.

Thus, the trade deficit of goods in the first nine months of 2017 was 0.5 billion USD, and that of services was 2.81 billion USD. In total, the trade deficit of goods and services was 3.31 billion USD. In the same period of last year, the trade deficit of goods was 3.029 million USD, and that of services was 3.12 billion USD. The trade deficit has fallen by 7.13 percentage points, equivalent to 111.3 percent of the GDP growth.

Thus, the larger trade deficit has significantly reduced the use of GDP, and the increase of asset accumulation and final consumption in the first three quarters of the year is partly due to the use of this trade deficit, which did not increase GDP as it should and also encroached the market share of domestic production, negatively impacting GDP growth. This is an important warning which should be noted and overcome in the last months of the year.

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Budget revenue hits 70pct of target

VNS

State budget revenue in the first nine months of the year totalled VND843 trillion (US$37 billion), up 13.9 per cent year-on-year and equivalent to 69.5 per cent of the annual target.

The information was released by the Ministry of Finance (MoF) during a conference held in Hanoi on Wednesday.

The finance ministry said direct revenues from production and business activities were low due to reductions in contributions from some major manufacturing sectors such as crude oil and gas, automobiles, mobile phones, and cigarettes.

Of the total, VND663.7 trillion came from domestic tax collections, up 11.4 per cent year-on-year and representing 67 per cent of the yearly target, the MoF said.

The MoF attributed the rise in total domestic revenue to higher indirect revenues, such as tax payments from housing and land (up 24.2 per cent), personal income tax (up 21.1 per cent), charges and fees (up 51.3 per cent), and income from lottery activities (up 12.4 per cent).

Forty-three out of the 63 localities nationwide collected over 72 per cent of the estimates and 58 reported higher budget collection than the same period last year.

Budget revenues from crude oil climbed 15 per cent year-on-year to reach VND34 trillion, hitting 88.9 per cent of the annual target.

Meanwhile, revenues from import and export activities reached VND214 trillion, equivalent to 75.1 per cent of the annual target, and up 10.5 per cent year-on-year.

Total State budget expenditure in the nine months stood at VND904.6 trillion, or 65.1 per cent of the year’s estimates, the ministry said.

Of the estimate, budget investment for development was VND166.6 trillion, an increase of 4.1 per cent year-on-year and accounting for 46.6 per cent of the yearly plan.

Regular expenditures over eight months were estimated at nearly VND660 trillion, equaling 73.6 per cent of the year’s estimate, up 7 per cent over the same period last year.

Payments for debts and aid totalled VND75.35 trillion in the period, meeting 76.2 per cent of the annual estimate.

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INVESTMENT

Foreign investment in Vietnam may reach $28 billion by end of 2017

VIR

By the end of 2017, Vietnam will see soaring foreign investment capital, reaching $28 billion with an expected record in disbursed FDI capital of $17 billion.

Soaring foreign investment capital

In its report submitted to the 12th Communist Party of Vietnam Central Committee’s sixth plenary meeting organised on October 4, the Ministry of Planning and Investment reported that in the nine months of this year, the country attracted $25.48 billion of foreign investment capital, including foreign indirect and direct investment capital, which was considered a spotlight of the 2017 socioeconomic indicators.

Besides, the expected figure of $28 billion for the whole year was mentioned in MPI’s report, a surprisingly strong growth in recent years.

Along with the increase in registered capital, disbursed capital for the whole year will also reach strong growth. Notably, in 2017, the disbursed capital is expected to reach $20 billion, $3 billion of which come from foreign investors’ M&A deals or foreign indirect investment capital.

The remaining $17 billion come from FDI capital, signifying an increase of 7.5 per cent on-year and 9.6 per cent higher than expectations. If the expected $17 billion in disbursed capital comes through, it will create a record to date. In 2016, the figure was $15.8 billion.

In the nine months of this year alone, $12.5 billion was disbursed, up 13.4 per cent on-year.

According to Nguyen Mai, chair of the Vietnam Association of Foreign Invested Enterprises, in recent years, one factor attracting FDI capital was that along with the strong growth in registered capital, the gap between registered and disbursed capital has been narrowed down.

In the list of billion-dollar projects registered in these nine months, the added $2.5 billion capital from Samsung has already been disbursed. As of late March, Samsung registered to invest $17.3 billion in Vietnam, $12.5 of which has been disbursed.

According to the Ministry of Industry and Trade (MoIT), in the first nine months of the year, the import turnover soared due to the increased disbursement of FDI capital, including Samsung Display and Formosa, to import machinery and equipment.

All of the above figures show that Vietnam is really an ideal investment destination for foreign investors looking to invest and expand their operations.

Golden opportunity for Vietnam

As numerous countries in Asia are experiencing political instability, Vietnam is becoming an attractive investment destination due to its long-standing stability and great potential for economic development as well as the continuously improving business environment.

Especially, Vietnam’s hosting of the Asia-Pacific Economic Cooperation (Apec) 2017 is considered a golden opportunity for Vietnam to promote cooperation with Apec economies, almost all of which are Vietnam’s leading partners, including Japan, South Korea, the US, China, Thailand, and Taiwan.

After hosting Apec 2006, Vietnam became a magnet to FDI capital, peaking in 2007-2008. The country hopes to recreate the achievement with Apec 2017.

According to Philip Falcone, chair of Harbinger Capital Partners from the US, which has poured a massive amount of money into Grand Ho Tram Strip (Ba Ria-Vung Tau province), the presence of US President Donald Trump at the Apec Economic Leaders’ Week will bring large-scale investment opportunities and help Vietnam and the US promote investment cooperation. Besides, US investors will also step up investments in Vietnam.

At the recent meeting between CEO of Samsung Group Shin Jong-kyun and prime minister Nguyen Xuan Phuc, Shin Jong-kyun affirmed that along with the $17 billion registered capital in existing projects, Samsung plans to pour capital in other sectors, including telecommunications, as well as power plant, airport, and shipbuilding development.

These movements show that FDI capital will continue to flow into Vietnam.

According to MPI’s expectations, in 2017, Vietnam will lure in $27.5-28.5 billion in registered foreign investment capital, with the total disbursed capital reaching $21 billion. $17.5 billion of the disbursed capital will come in the form of FDI, and the remaining $3.5 billion from M&A deals.

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First foreign gasoline station opens in Hanoi

VET

Idemitsu Q8 (IQ8), the first 100 per cent foreign-owned gas station in Vietnam’s petroleum retail market, officially opened at the Thang Long Industrial Park in Hanoi on October 5.

IQ8 is a joint venture between Japan’s Idemitsu Kosan Group and Kuwait Petroleum International Ltd, established in 2016. Each partner owns 50 per cent of charter capital.

The joint venture aims to develop a professional petroleum business in Vietnam in the years to come. Following this first gas station in Hanoi, IQ8 will expand to certain provinces in the south.

IQ8 is equipped with a system of automated station management software that allows card payments and the accurate management of gasoline, providing detailed reports of transactions.

Mr. Hiroaki Honjo, General Director of IQ8, said the joint venture will strive to become the leading gasoline service trademark in Vietnam.

The presence of the first 100 per cent foreign-owned company in the retail petroleum sector is expected to create a more competitive market in Vietnam, where the sector has long been dominated by State-owned monopolies like Petrolimex, PVOil, and Saigon Petro.

Idemitsu Kosan has been operating in Vietnam since the 1990s and also has stakes in the Nghi Son Oil Refinery in north-central Thanh Hoa province and has participated in several petroleum business activities around the country.

French energy group Total appeared in the retail market previously, operating mainly in the fields of liquefied petroleum gas, lubricants, and gasoline. The company now owns a number of Total gasoline stations scattered throughout the country.

Last year, Idemitsu Kosan cooperated with PetroVietnam to invest the Nghi Son Oil Refinery, to take part in the distribution of oil and gasoline.

The Vietnam National Petroleum Group (Petrolimex) signed a memorandum of understanding in 2014 on strategic cooperation with Japan’s JX Nippon Oil and Energy to implement the Nam Van Phong Oil Refinery complex.

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REAL ESTATE

An Duong Thao Dien puts the pedal to the metal

VIR

Within the first nine months of this year, An Duong Thao Dien Real Estate Trading Investment JSC (HoSE: HAR) has made itself known by a series of large-scale M&A deals, especially acquiring enterprises operating outside the real estate sector, to eye their golden land plots.

According to the latest information, HAR has announced its ambition to acquire at least 55 per cent stake of Orient Chemico Ltd.

Orient Chemico is known for specialising in manufacturing and trading in chemicals, such as detergents, perfumes, and cosmetics. Besides, it currently owns a 10,000-square-metre area with two frontages at the centre of Kim Bien Market in Ho Chi Minh City. District 5 People’s Committee granted the permit for the company to develop a shopping centre on this plot.

If the purchase is successful, Nguyen Nhan Bao, HAR general director, will join the management board of Orient Chemico, while simultaneously obtaining the advantage in developing the shopping centre by seizing a controlling stake in Orient Chemico.

In late July, HAR announced completing the purchase of a 45-per-cent-stake in Banking Mechanical JSC, which specialises in producing and trading professional products and services, facilitating money, gold, and silver storage and circulation to ensure absolute safety for the banking and treasury system and individuals as per request.

HAR’s move aims to put a hand on Banking Mechanical JSC’s land funds, including frontage lands in District 5, Phu Nhuan district, as well as the 2,317-square-metre area at the corner of Nguyen Trong Tuyen and Pham Van Hai streets.

Along with HAR’s acquiring enterprises operating outside the real estate market to take over their valuable land plots, in early July, HAR decided to wholly acquire the 100 per cent foreign-owned Nha Trang Coral Beach Resort Company Limited, which is the investor of the 13.5-hectare Nha Trang Coral Beach Resort.

HAR is involved in the development, trading, and leasing of real estate. It specialises in residential project development, including apartment buildings, student dormitories, and hotels.

HAR has developed four projects in Ho Chi Minh City, including Glenwood Plaza in Thao Dien Centre, Aurora Hotel, Glenwood Maison, and Hi-end Park Apartment.

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Hoa Binh - Son La Road to become expressway

VET

The Son La Provincial People’s Committee has recently released Official Letter No. 1313 from the Prime Minister on the addition of the Hoa Binh - Son La Road to Vietnam’s expressway development plan to 2020 and vision towards 2030.

The Hoa Binh - Son La Expressway will have a total length of 189.5 km and total investment of about VND50.27 trillion ($2.21 billion) in the public-private partnership (PPP) form.

It is expected to shorten the time to travel from northern Son La province to Hanoi to two and a half hours from the current six hours.

The investment process is divided into two phases. The first is completing the Hoa Binh - Moc Chau section before 2020, while the second is the Moc Chau - Son La section, on which construction is expected to begin after 2020.

The provincial people’s committees of Hoa Binh and Son La have a written agreement on the direction, scale, and technical standards of the expressway.

It will connect Son La province’s external transport network with Hoa Binh province and Hanoi, creating an expressway axis linking the northwest region with the northern key economic region and connecting to the northeastern border crossing and Lach Huyen international seaport.

The expressway will contribute to the socioeconomic development of localities in Hoa Binh and Son La provinces, thus facilitating economic development in the northern mountainous region.

Prime Minister Nguyen Xuan Phuc also recently approved a plan to build the first phase of the North-South Expressway, which is 684 km in length, before 2022, according to the Office of the Government.

The Prime Minister has agreed with Plan No. 1 from the Minister of Transport, which will build 684 km of the 1,372-km expressway linking Hanoi and Ho Chi Minh City through 20 cities and provinces.

The first phase has total investment capital of VND140 trillion ($6.16 billion), with State budget funding of VND55 trillion ($2.42 billion) for site clearance and resettlement and the remainder being private capital.

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OIL&GAS&ENERGY&MINING

Pilot direct PPA to fuel local power market

VIR

The upcoming Apec Economic Leaders’ Week 2017 in Vietnam might see a general statement on pilot direct power purchase agreements between end-users and renewable power generation units in the country.

This information was revealed to VIR by a US international development agency’s energy expert. “We conducted a survey with the Ministry of Industry and Trade (MoIT) and we expect to have a positive movement from the government on the occasion of US President Donald Trump’s visit to Vietnam in November to attend the Apec Economic Leaders’ Week 2017, as part of a regional tour,” said the source.

The anticipated move is considered a big push to encourage investors to make the country’s energy production greener.

According to law firm DFDL, given the increasing use of direct power purchase agreements (PPAs) worldwide as a means to secure electricity costs over the long term while allowing large corporations to reduce their carbon footprint, it would make sense for the regulatory framework in Vietnam to allow for such direct power purchases of solar energy.

Foreign investors in Vietnam and multinational corporations such as Intel, Nike, Puma, and Coca-Cola have publicly made commitments to working towards using energy from renewable, energy-efficient sources. A pilot PPA might also benefit Vietnam in attracting such companies and their high-value operations.

“A change in this policy, allowing enterprises and customers to have access to clean energy, will attract additional investment and global brands that will help carry Vietnam up the manufacturing value chain,” John Rockhold, chair of the Vietnam Business Forum’s Power and Energy Working Group, told VIR in a previous interview.

Le Van Phuong, general director of leading Vietnamese sugar producer Lam Son Sugar Cane JSC (Lasuco), which has invested in a biomass power project fed from its sugar facilities, said, “We are happy to hear this news. Vietnam’s sugar industry is preparing to face strong competition with the decrease of import duties on sugar in the framework of the Asean Free Trade Agreement. Vietnamese sugar mills are looking into the application of modern, state-of-the art technology in their production and into creating new revenue streams such as selling electricity.”

Lasuco is one of eight sugar mills in Vietnam that has grid-connected, biomass-fuelled projects. In 2016-2017, Lasuco’s 24-megawatt biomass power project generated 44.5 million killowatt-hours (kWh), half of which were fed into the grid and sold to state-run Electricity of Vietnam.

Dang Quang Vinh, consultant on two biomass power projects in Vi Thanh and Phung Hiep sugar mills, said that a pilot direct PPA between end-users and power generation units encourages use of all renewable resources, including biomass power projects, as Vietnam’s current feed-in-tariffs (FiT) for renewable energy aren’t very attractive.

“Multinational corporations agree to buy electricity in developing countries at a higher price than the current FiT to meet their targets in reducing carbon. The renewable developers will surely see benefits from that,” he said.

Vinh explained that direct PPAs need to be built into therestructured retail power market. “PPAs are incredibly flexible and effective tools for a variety of corporations looking to make their operations more sustainable. They provide price hedges against future price increases and volatility. The environmental benefits associated with a renewable energy project and steady income from PPAs drive the development of new clean energy projects that help change our energy mix,” he said.

Matthias Eichelbronner, director of consulting firm E.Quadrat GmbH, told VIR that the current FiT of 5.8 US cents/kWh for biomass power projects is not enough to attract investors. He added that sugar plants will usually have power generation for their own use, but that these technologies are low-level, with the aim of consuming waste products. Higher technologies are applied to produce more power, which can then be fed into the grid and sold at a fixed price.

Countries like Mexico, India, and Brazil, who have invested in wind energy by attracting private investment, were able to bring down wind development costs during the last five years with a combination of incentives to attract private investments, developers, and foreign investors.

According to MoIT, in parallel to the development of coal power, the government is calling on investors to invest more in renewable energy, such as wind power, solar power, and biomass power.

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Banpu seeking new ideas after coal fails to fire

VIR

Banpu Public Co., Ltd., a Thailand-based firm engaged in power production and coal mining, intends to look for more opportunities in developing renewable power in the central province of Thua Thien-Hue, after its proposed coal-fired thermal power project was deemed incompatible with the national development plan.

Voravudhi Linananda, CEO of Banpu, last week told local authorities that, “With our capacity and strengths as well as with our research, Banpu Group looks forward to co-operating with Thua Thien-Hue to invest in the development of energy resources in the province. We also want to invest in a project for biomass energy production.”

The capital for said biomass project has not been revealed, but Banpu’s proposed 1,200-megawatt (MW) coal-fired thermal power project had estimated costs of $1 billion. The moves are a part of the company’s expansion strategy in Vietnam, Indonesia, and Malaysia

A memorandum of understanding on the development of the power project was signed between Banpu and the province last year, but Thua Thien-Hue officials had expressed the caveat that the Thai investor was only on the first step of conducting research on the project and the final decision would be made after that. The coal-fired project was planned to be built in Phong Dien district, far removed from the province’s beach resort and tourism areas, according to the Thua Thien-Hue’s Planning and Investment Department.

The project, however, complied with neither the country’s power development plan nor the province’s power strategy for the 2011-2020 period, with a view towards 2030. But the province could be willing to adjust its plans if the coal-fired project was committed to using innovative technology, providing a high environmental safety level, and choosing a location far removed from its beach resort and tourism areas.

The company’s business operations are divided into two segments: coal and power. Between it and its subsidiaries, Banpu operates coal and coal-related

businesses ranging from investment, exploration, and development to production of both thermal and coking coals in Thailand, Indonesia, China, Australia, and Mongolia.

Linananda said, “While ensuring high-efficiency and environmentally-friendly technology is applied in all power plants in the pipeline, all projects in the construction phase will move forward to meet their commercial operation date targets. This is to underline the company’s commitment to creating sustainable value for shareholders and stakeholders, as a leading Asian power generating company.”

“The coal price has hit rock bottom. Some mines may encounter high production costs and shut down. We have seen an opportunity, however. We are interested in mines in the same areas as our mines in Indonesia, China, and Vietnam, where the demand for power will rise. Such mines are newly opened or still in the development process,” he said.

The company saw investment opportunities through mergers and acquisitions after the coal price bottomed out. In 2000, Banpu acquired 30 per cent of the registered capital in Amata Power (Bien Hoa) Ltd., a power production company in southern Vietnam. It also invested in a wholly owned subsidiary, Banpu Power Vietnam I.

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LEGAL

New Railway Law

VLLF

Coming into force from July next year, the 2017 Railway Law (the Law), passed by the National Assembly in June, prescribes railway infrastructure planning, investment, construction, protection, management, maintenance and development. It also stipulates railway industry and railway business.

Domestic and foreign organizations and individuals involved in railway activities in the Vietnamese territory fall within the scope of regulation of the Law.

Compared to the Railway Law enacted 12 years ago, the Law has many new provisions.

State policies on railway development

State policies on railway development are introduced in Article 5, covering investment in railway infrastructure, railway business, railway industry, and development of specialized railways.

To enable railway transport to play a key role in the national transport system, the State will prioritize and concentrate resources on investment in the development, upgrading, maintenance and protection of national and urban railway infrastructure facilities. It will also reserve planned land areas for the development of railway infrastructure and industrial works.

Particularly, priority will be given to the development of national railway infrastructure under planning through the allocation of appropriate central budget funds under medium-term and annual public investment plans.

The Law underlines that the State will encourage, support, create conditions for, and protect lawful rights and interests of, domestic and foreign organizations and individuals investing and doing business in railway transport. Organizations and individuals will also be encouraged to invest in the development of specialized railway systems.


Incentives and supports for railway activities

One among the principles set forth in the Law is that the State will guarantee healthy and fair competition among organizations and individuals of all economic sectors engaged in railway business as well as separate the state management function of state agencies from business activities of enterprises, and railway infrastructure business from transport business on state-invested railways.

Under the Law, railway infrastructure business, railway transport business, urban railway business and railway industry are business lines eligible for investment incentives.

Organizations and individuals engaged in railway activities are entitled to the following incentives and supports:

- Allocation without land use levy of land areas for construction of national railway and urban railway infrastructure; or land rental exemption for land areas used for construction of specialized railway infrastructure and railway industrial works;

- Concessional loans from the State’s investment credit source or government-guaranteed loans for investment in the development of national railway and urban railway infrastructure, procurement of rolling stocks, machinery and equipment serving railway maintenance, and development of the railway industry;

- Preferential corporate income tax rates, for railway infrastructure, urban railway and railway industry businesses;

- Exemption from import duty on machinery, equipment, spare parts, rolling stocks, raw materials and supplies used for manufacture of machinery and equipment or components, details, parts and accessories of machinery and equipment necessary for railway activities and supplies necessary for construction of railway infrastructure, which are not yet available at home.

Investors in the construction of national railway and urban railway infrastructure may receive from the State whole funds for clearance of land areas reserved for railways.

Railway infrastructure businesses will be given exclusive radio frequencies in service of railway transport administration and access to the traction power supply system in service of train operations.

In addition, the State will help railway enterprises organize transport in order to perform special or social welfare tasks on the principle of fully offsetting reasonable expenses incurred by the enterprises.

High-speed railways

This is a fresh content of the Law. The Law devotes a separate chapter, Chapter VIII, to provide for general requirements, development policies, infrastructure requirements, management, operation and maintenance, and safety management of high-speed railways. This Chapter’s provisions constitute the first legal basis for investment in high-speed railways in the coming time.

According to the Law, the State will play the leading role in construction investment, management, maintenance and operation of high-speed railways, focusing on development of high-speed railways linking key economic regions and boosting socio-economic growth.

The Law asks for assessment and certification of system safety for both new and upgraded high-speed railways before they are put into operation. It also requires high-speed railway enterprises to establish and maintain a safety management system.

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New regulations on banking guarantees for home purchases

VNS

The State Bank of Vietnam has issued a circular to amend Circular No 07/2015 on bank guarantees.

Under the Circular No 13/2017, which will take effect on November 15, commercial banks must issue guarantees for buyers of future property within 10 days from the date the real estate purchase contract is signed.

The guarantee means that banks would carry out financial obligations to the buyers on behalf of the housing developers in case they fail to hand over the property before the committed deadline without adequately refunding the advances.

The maximum guaranteed amount would be equal to the amount the developers are allowed to receive in advance from the buyers.

Banks eligible to provide a guarantee for home purchases must meet two requirements. Firstly, their establishment and operation licences should have regulations on guarantees and secondly, banks are not banned from providing guarantees in the period of being under special control.

The central bank will announce eligible banks for providing guarantees for future home purchases on its website. Banks that are removed from the list must still continue to carry out its guarantees until the validity of the agreements.

The central bank on Tuesday announced that two more banks, Woori Vietnam and CIMB Vietnam, are eligible to provide a guarantee for home purchases.

More than 30 banks in Vietnam are now eligible to provide guarantees for future home purchases.

 


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