Weighing in on the investment climate

Viet Nam has become an attractive and safe destination for foreign investors to do business in recent years, Viet Nam News reporter sat down with foreign investors to share this view.

* Takashi Fujii – chairman and general director, Dai-ichi Life Viet Nam (Japan)

I think Viet Nam is an attractive and safe destination for foreign investors. In comparison to other countries in the region, Viet Nam has potential advantages for long-term investments because of its economy, society and political situation. Investors find it appealing because of an aggressive opening up of its market under commitments when it became a member of the World Trade Organisation (WTO), especially in the service industry.

A higher percentage of young people in the population and continually increasing per capita income have led to a higher workload as well as development of the consumer market. In terms of macro-management, the Government is striving to improve administrative procedures, offer more opportunities and help the investment environment by calling for foreign investors.

For Japanese investors in particular, Viet Nam is always an effective and safe environment for investment. A prominent symbol for this faith is the establishment of Dai-ichi Life Viet Nam, the first foreign company with a 100 per cent investment from Dai-ichi Life Japan. We generated profits just after one year of operating here.

Japanese investors used to focus on manufacturing but now they are beginning to diversify into other industries such as services, finance and banking, distribution and others.

Regarding life insurance, the business that our company is operating in, the Government is quite pro-active in their policies to encourage foreign investors as well as active in improving the legal framework for market development. Worldwide, life insurance has had a long history and become increasingly important in people’s lives.

But in Viet Nam, it has only operated for the last 10 years. In many business fields, 10 years possibly represents a set-up stage, development stage and stability stage for the industry. However, for the life insurance industry, it is just a fundamental stage. Because this field is still in its infancy, consistency in regulation is sometimes limited. We hope that these problems will soon be improved.

Frankly speaking, Dai-ichi Life Viet Nam and other life insurers have faced many difficulties in the early years of their operation in Viet Nam. These problems are due to the fact that the industry is so new, and life insurance products somehow are a new concept for the people.

Nowadays, we are very pleased that people are more familiar with life insurance products and begin to realise it as one of the most important things for their family.

* Khoo Teck Chong, general director, SetiaBecamex JSC (Malaysia-Viet Nam JV)

The economy is recovering amid the troubled global arena. We agree with analysts that the general current investment climate in Viet Nam, in light of the post-global credit crisis of 2008 and 2009, is one of recovery, which is similar to that being experienced by many other economies. We are pleased to note that despite the current challenges, Viet Nam is expected to register a respectable single digit growth for 2010.

However, the economy is not out of the woods yet. By all accounts, there is neither robust nor quality growth in the developed economies as all recent gains are the result of government stimulus policies (many of which are in the process of being withdrawn). This kind of growth does not drive consumer demand, which in turn will affect an exporting nation like Viet Nam. To compound matters, we now have to confront the sovereign credit crisis in Greece and possibly Spain, Portugal and the UK in the global arena.

These unfavourable external realities, coupled with inflationary anxieties, the twice-depreciated dong and the interest-rate scenario, have prompted us to be cautious like other foreign investors here.

However, caution is not synonymous with a lack of confidence. SetiaBecamex takes a long-term view of our presence here. This is as much a reflection of our confidence in the growth of the nation as it is on the nature of real estate investment. At our EcoLakes project in Binh Duong Province, we will be delivering the first houses to our purchasers in the next few months.

On the role of Government in the real estate arena, it should be mindful of the fact that the property sector has strong multiplier effects on the economy. A review of the various stimulus packages implemented globally in response to the global credit crisis revealed that they all contain policies to spur the property sector. These measures range from subsidies for first-time home buyers to waivers of property-related taxes.

Of course, it goes without saying that we have every confidence in the Government’s ability to steer the economy to greater heights. We are sure that the Government is aware of the many options it has when it comes to leveraging the property sector to manage to economy.

* Kan Trakulhoon, president and CEO of SCG (Thailand)

Viet Nam’s investment environment is still very attractive in the eyes of foreign investors. Despite the global economic crisis, Viet Nam is one of the fastest reformers in the area.

The Government has implemented many important regulatory changes over the past years, which has improved overall business sentiment and facilitated foreign investors, like us, in our operations.

There are more investments now than ever from many developed countries and international enterprises. Thailand, Japan, the US and several European countries are among those that contributed to Viet Nam’s growth, particularly through investment projects that created opportunities and strengthened the economy.

We appreciate Viet Nam’s governing authority for their efforts of speeding up international economic integration and creating investment stimulus packages, especially the launch of the Enterprise Law which helped reinforce investor protection. Their improved legal framework and the enhanced favourable investment climate significantly benefitforeign investors.

I believe that with the strong support from the Government of Viet Nam, coupled with an abundant labour force and rich natural resources, the country remains highly competitive and attractive toforeign investors.

VietNamNet/Viet Nam News

Office rent decline continues in Q1

Average office rent at all grades in HCMC and Hanoi continued falling in the first quarter of this year and is expected to continue the downtrend in the coming time . . .

Average office rent at all grades in HCMC and Hanoi continued falling in the first quarter of this year and is expected to continue the downtrend in the coming time because of abundant supply in the market, according to market research companies.

Oversupply of offices for lease warned

Office rental rates decrease further

Chaos looms as small businesses are forced to vacate residential towers

Savills Vietnam released a quarterly report on Tuesday, saying HCMC’s average office rent at all grades and in all districts in the first quarter of this year fell 3% from the previous quarter and 11% year-on-year.

A bird’s eye view of some office buildings located along Le Duan Boulevard in HCMC’s District.

The office market recorded an average rent of US$61 per square meter for Grade A, US$29 per square meter for Grade B and US$22 per square meter for Grade C buildings in HCMC, according to the market research company.

The decline in office rent could be attributed to an increase in supply.

Savills said the first quarter of this year witnessed total supply in HCMC’s office market increasing by 5%. The company said 42,000 square meters of office space was added in the first quarter, taking the total to around 838,000 square meters in 138 office buildings of all grades in the city, with 54% in District 1 alone.

HCMC’s office take-up in the quarter was recorded at about 39,400 square meters, and the majority of office transactions occurred for small space generally below 100 square meters.

Grade B still holds a strong preference for both new entrants and existing tenants in HCMC, according to Savills.

The average occupancy for all grades achieved 89% in the first quarter and remained stable as compared to the previous quarter. However, vacancy will increase as more products come ontothe market this year.

Savills projected an additional supply of 315,000 square meters would join the market by the end of this year, half of which comes from three notable projects including Vincom Tower, Bitexco Financial Tower and A&B Tower.

Talking about the rising vacancy in the future, Brett Ashton, managing director of Savills Vietnam, told the Daily on Tuesday that clearly the rate of vacancy would continue to rise as more products are launched ontothe market.

Ashton projected that the lack of new Grade A space coming onto the market over the next two years would lead to rising occupancy for this grade. Meanwhile office rents of the middle and low grade segments would continue to fall in the coming time.

“Grade B and particularly Grade C rents will suffer continued falls in rent through next year, but we expect to see Grade A rents stabilizing and climbing again in early 2011 given that there is no new Grade A supply currently under construction,” Ashton says.

In another market review, CB Richard Ellis Vietnam (CBRE) said the office rent in the capital city of Hanoi decreased in the first quarter of this year due to abundant supply.

Richard Leech, managing director of CBRE, said the market saw a slight decrease of 3.55% quarter-on-quarter to US$42.16 per square meter for Grade A office rent.

Meanwhile, Grade B office remained stable with rents averaging out at US$26.77 per square meter.

In the first quarter, there was a Grade B project named Capital Tower with some 21,000 square meters joining the market there.

According to CBRE, vacancy in Hanoi market totals around 80,000 square meters, the biggest number since 2004.

However, more projects due to join the market this year will cause supply to far outpace demand, and vacancy in the market will increase up to 150,000 square meters by the end of this year, according to the market researcher.

Leech of CBRE remarked that landlords at all grades of office have revised down rents to meet the market demand, but more supply will continue to put more pressure on office rent in the coming time.

VietNamNet/SGT

BUSINESS NEWS IN BRIEF 15/4

First shrimp farmer holds exclusive brand name; US$ prices listed by banks and in free market equal; Vietnam, India eye stronger business ties in several fields

World Bank hails Vietnam’s development results

The World Bank has announced a report by its Independent Evaluation Group (IEG), which highlighted recent development results in Vietnam as impressive.

As one of the fastest growing economies in the world - with average annual GDP growth of 7.2 percent during the decade prior to the fiscal year 08-09 economic slowdown - Vietnam has lifted some 35 million people out of poverty, it said on April 14.

The country’s poverty rate fell from 58 percent in 1993 to 14 percent in 2008, it added.

Water supply and sanitation facilities have expanded. Electricity reaches 95 percent of the population and 90 percent of the population is connected by all-weather roads. Health services and living conditions of people in remote mountainous areas have been improved, according to the WB.

The results from the bank’s Vietnam development support programme have been outstanding, based on the IEG evaluations of 34 completed projects. Vietnam has maintained its record of 100 percent of projects having been rated satisfactory, it emphasised.

The WB programme was to improve the business environment and governance, and strengthen social inclusion and natural resource and environmental management in Vietnam .

At the same time the WB stressed the sustainability of Vietnam’s growth will also be challenging, given increasing pressures on the country’s natural resource base, the exposure of large segments of the population to natural disaster risks, and the expected (adverse) impacts of climate change.

Institutional reforms are necessary to ensure the country’s large development agenda meets its objectives of inclusive and sustainable growth, the WB said.

The next few years will be critical for Vietnam in completing the transition to a market economy and creating the foundations of a middle income country, it forecast.

Firm wins 35 mln USD oil transport deal

The PetroVietnam Technical Services Co (PTSC) won two international tenders to provide an oil and gas vessel and services to Talisman Malaysia Co Ltd – Canada’s largest investor in Malaysia.

The two sides signed contracts totalling about 35 million USD on April 13 in Kuala Lumpur.

Under the deals, PTSC will supply a multi-functional DP2 Platform Supply Vessel to Talisman Malaysia and a “braided line” service.

Deputy president of Talisman Malaysia Wee Yiaw Hin said PTSC played a significant role in the building and maintaining of project PM3-CAA and supported the enterprise’s operations well.

PM3-CAA is being implemented in the area between Vietnam and Malaysia under an oil production sharing contract and the vessel will be used for this project.

This is the second time that PTSC has worked with Talisman Malaysia. Last December, PTSC won an international tender to supply a vessel to the partner for a total contract value of nearly 35 million USD.

Previously, the Vietnamese firm also won another international bid to supply a floating storage and offloading vessel, two service vessels and a multifunctional service vessel among others.

PTSC has exported a number of technical-service packages for the oil and gas industry in Malaysia with a total market value of hundreds of millions of US dollars, contributing significantly to its revenue, it stated.

Petroleum Technical Services Corporation (PTSC) is a member of the Vietnam National Oil and Gas Group (PetroVietnam) providing diversified technical services for the oil and gasindustry inside and outside Vietnam with total assets of nearly 200 million USD and more than 4,000 employees.

Vietnam, India eye stronger business ties in several fields

A delegation of eight leading Indian companies visited HCM City this week to seek cooperation in a number of fields, including energy, industrial machinery, steel, finance, real estate and tourism.

Speaking at the meeting on April 14, the president of the Indian Chamber of Commerce in Calcutta, V Sharan, said the visit would help promote trade and investment cooperation between the two countries.

The delegation members include the RPG Group, SMIFS Capital Markets Limited and Shree Baidyanath Ayurved Bhawan Pvt. Ltd.

Indian companies that have located in Vietnam include the Te Godrej steel furniture factory, the pharmaceutical company Ranbaxy, and the pepper processing plant Vallabhdas Kanji Limited, all of which are located in southern Binh Duong province.

Another Indian furniture manufacturer, Sudima International, has also established a base in Vietnam, along with Nagarjuna International and the KCP sugar plants in southern Long An and Phu Yen provinces.

Vo Tan Thanh, general director of the Vietnam Chamber of Commerce and Industry’s HCM City branch, said two-way trade turnover reached 2.5 billion USD in 2008, a sharp increase from 75 million USD in 1995.

Last year, despite the global economic downturn, two-way trade turnover between the two countries resulted in 2.05 billion USD. Vietnam’s exports to India reached 420 million USD million and imports 1.6 billion USD.

Thanh said last year India had invested more than 201 million USD in 38 projects, ranking 29 out of 79 foreign investors in Vietnam .

“Vietnam is an emerging country, but it has had a stable growth rate of 7-8 percent and has offered open policies to investors, including India . India is expected to rank in the top 10 among investors in Vietnam,” he said.

Handicraft producers seek road to Japan market

Handicraft producers and exporters are showcasing products at an exhibition which opened in Hanoi on April 14 with the aim of boosting exports to Japan.

As many as 26 handicraft importers from Japan visited and made transactions at the exhibition which was held under an initiative by Vietnam-Japan Special Friendship Ambassador Ryotaro Sugi.

The organisers had previously invited two design and marketing experts from Japan to help 46 domestic handicraft companies get a handle on the demands of Japanese consumers and ways to penetrate this market.

As part of the Vietnam Expo 2010, the show was co-organised by the Japan External Trade Organiation (JETRO), the Vietnam Trade Promotion Agency (Vietrade) and the Vietnam Chamber ofCommerce and Industry (VCCI).

US$ prices listed by banks and in free market equal

US$1 in the free market was sold at VND 19,060 yesterday, a reduction of VND 50, as much as the selling US$ price listed by commercial banks for the first time.

The same day, US$ prices quoted by the Vietcombank were VND 18,990 for buying and VND 19,060 for selling, a slight decline of around 20 VND/US$ as against the previous day. Meanwhile, the inter-bank exchange rate listed by the State Bank of Vietnam still stood at VND 18,544 to a US$.

The above-said phenomenon has led to the sharp increase in US$ trading in the free market because many people think that it is difficult for the US$ price to further reduce in depth in the coming time so they decide to buy the currency.

First shrimp farmer holds exclusive brand name

Vo Hong Ngoan has become the first shrimp farmer ever granted an exclusive brand name certificate ‘Clean Prawn Farming Sau Ngoan Vietnam’ by the National Office of Intellectual Property.

He resides in Bien Dong A hamlet, Vinh Trach Dong commune, Bac Lieu town, Bac Lieu province.

Currently, his industrial prawn farming covers an area of over 30 hectares, applied according to a clean and sustainable prawn raising process without using antibiotics and chemicals.

Many EU and Japanese companies have come to his farming to sign contracts to buy prawns at the price which is 15-30% higher than themarket price.

VietNamNet/VNA, Nhan dan

Small banks race to expand capital

Big banks can easily persuade shareholders to buy more shares in order to increase their chartered capital, but smaller banks cannot.

LookAtVietnam - Big banks can easily persuade shareholders to buy more shares in order to increase their chartered capital, but smaller banks find it difficult to do the same.

Many large banks with more than three trillion dong in chartered capital as required by the State Bank, plan to expand by increasing their chartered capital further.

Sacombank has chartered capital of 6700 billion dong, but its board of directors thinks that the stockholder equity is modest compared with other banks. Now the bank has decided to increase its chartered capital from 6700 billion dong to 9179 billion dong in 2010.

To raise this much capital, Sacombank plans to pay dividends to existing shareholders in stakes instead of cash, issue more shares to existing shareholders (at 12,000 dong per share) and provide two percent of stakes to bank staff.

ACB’s board of directors will submit plans to shareholders about raising chartered capital by 1563 billion dong. Other big banks such as Techcombank and Dong A Bank both want to increase their chartered capital by 1,000-2,500 billion dong in 2010.

Financial analysts remarked that it is easy to persuade shareholders to inject more money, because these banks are all big and prestigious. Bank shares have high liquidity because shareholders can sell them on the bourse.

In contrast, smaller banks are struggling. To increase chartered capital, the board of directors at small banks must persuade big shareholders to pour in more money and also persuade smaller shareholders to accept plans to issue more shares.

Small shareholders at these banks think long and hard about what they should do with their money. They can inject more money in the stakes of a small bank or purchase shares of big banks at reasonable prices. The second option is an attractive choice.

According to Hoang Van Toan, Chair of Dai Tin, bank shareholders must be persuaded that the bank is in an important development period requiring heavy investment. They must also see great potential in the bank if they are to contribute additioncapital.

Dai Tin has successfully increased its capital from 1252 billion dong to 2000 billion dong as of March 19 and plans to expand further to have three trillion dong by the end of the year as required by SBV.

Meanwhile, another joint-stock bank, whose chartered capital has just been raised to 1800 billion dong, is not as optimistic. The general director revealed that they are negotiating with foreign partners about selling stakes to them.

“We need foreign shareholders, because it will be impossible to increase capital if we continue seeking domestic partners, especially when bank shares are not attractive to them anymore,” he observed.

24/39 operational joint-stock banks have chartered capital of less than three trillion dong. Of this amount, 15 banks have chartered capital of less than 2 trillion dong, and 8 banks have 1 trillion dong in capital No less than 10 banks have officially announced plans to list on the bourse in 2010, half of which have chartered capital of less than 3 trillion dong

Source: Thoi bao kinh te Saigon

Deposit interest rates shatter 10.5 percent barrier

The deposit interest rate ceiling of 10.5 percent has been shattered when ACB raised its rates even higher.

LookAtVietnam - The deposit interest rate ceiling of 10.5 percent, which has existed for one year, has been shattered when ACB raised its rates even higher.

Banks hope for deposit interest rate autonomy

Bankers and businesses want interest rate ceiling gone

Banks want interest rate ceiling removed, central bank says ‘no’

ACB announced new deposit interest rates on April 13, with the highest at 11.6 percent per annum. This special rate applies to clients who deposit 10 billion dong or more for at least 36 months.

The interest rate will also be adjusted every 12 months in accordance with the market interest rate so that depositors will enjoy higher rates in the future, and vice versa.

The highest available rate of 11.6 percent will also be applied to other deposits when clients deposit more than 10 billion dong for 13 months.

Interest rates for one-month and longer term deposits are all higher than 10.5 percent per annum.

The ACB decision has been described as “shocking,” because the State Bank of Vietnam (SBV) has not directed the removal of the ceiling on deposit interest rates. Other commercial banks offer only care to offer the highest interest rate allowed by SBV, 10.49 percent per annum.

Meanwhile, Ly Xuan Hai, General Director of ACB, claimed that ACB is not violating the law. He stressed that the Government now seeks to liberalize interest rates based onmarket demand.

In reality, ACB’s new interest rates are old news. Banks pay high interest rates to depositors, but they quote interest rate at 10.49 percent.

Just one day after the ACB announcement, Viet A pushed its deposit interest rate beyond 10.5 percent. They are now the highest levels, offering 11 percent and higher for nearly all kinds of deposits. The highest interest rate of 11.8 percent is applied to 12-13 month term deposits. If clients deposit more than 100 million dong, they will enjoy additional interest rates of 0.03-0.1 percent.

According to Tien Phong, many other banks are also considering an interest rate hike, although they warn that the rates will not be as high as in 2008. Deposit interest rate must be lower than 12 percent per annum, because the lending interest rate has been cut to 14-15 percent. If banks mobilize capital at over 12 percent, they will not profit and must face high risks.

VnExpress quoted Cao Thuy Nga, Deputy General Director of Military Bank, as saying that the bank would raise the deposit interest rate if the ceiling rate of 10.5 percent is removed. Nga also stressed that the increase will not be decided immediately and increases will not be big, because the bank’s liquidity is not in good condition.

One year ago, SBV made an effort to stabilize the market interest rate by decided that commercial banks should not mobilize capital at higher than 10.5 percent. SBV also threatened to inspect banks offering higher rates.

Source: Tien phong, VnExpress

• Daunting tax refund process includes collecting 18...
• City inspectors seize fake detergents, cosmetics

Daunting tax refund process includes collecting 18 signatures

VietNamNet Bridge – Regulations on PIT refunds require strict procedures and place heavy burdens on the poor.

VietNamNet Bridge – Regulations on personal income tax (PIT) refunds require strict procedures and place heavy burdens on the poor.

PIT exemption for the whole 2009 suggested

Vietnam not to adjust PIT rate despite inflation

NA rejects personal income tax waiver in second half of 2009

Under the Ministry of Finance’s Circular No. 62 (dated March 27, 2009), individuals that received irregular income worth 500,000 dong or higher must temporarily pay 10 percent of PIT.

Under the Ministry of Finance’s Circular No. 62 (dated March 27, 2009), individuals that received irregular income worth 500,000 dong or higher must temporarily pay 10 percent of PIT.

At the end of the year, if individuals can prove that their annual income is lower than 48 million dong, they will receive a refund because they are not obligated to pay PIT.

Although the rules seem very clear, individuals must follow complicated procedures and wait for a long time to get their money back.

The shortcomings of current PIT payment regulations are manifest. A tax expert pointed out that, while an individual with a stable job and labor contract does not have to pay tax if their annual income is less than 48 million dong, those with no stable job must pay. Refunds come at the year’s end, but these people need money every month to care for themselves and their families.

The accountant noted that the majority of workers without stable jobs are poor people, who have low monthly income of less than 4 million dong. They will not be subject to PIT, but they are subject to complicated paperwork and lengthy waits to obtain refunds.

Taxation bodies are also unhappy because their staff must waste time calculating how much money to withhold and then turn around and add up how much to refund. Moreover, they have to complete this work within 15 working days.

According to the HCM City Taxation Department, in the first three months of 2010, the department received over 1000 refund requests, most of which come from workers with irregular incomes.

The taxation department increased its staff by two-fold to handle these requests and queries, but they are still overloaded.

Most significantly, a decision to pay a tax refund requires at least 18 signatures from competent bodies to be valid.

Financial experts have called for amending current regulations to ease the workload and reduce the time people must expend on tax procedures.

Other analysts argue that the income threshold should be raised to one million dong from the current 500,000 dong.

Source: Nguoi lao dong

City inspectors seize fake detergents, cosmetics

Ho Chi Minh City market inspectors on Wednesday found a large amount of fake fabric softeners and shampoo at a factory in the city’s outskirts.

In Binh Chanh District, the officials seized around 557 liters of fabric softener in 23,200 packs labeled Comfort, a well-known softener brand, and many empty Comfort packs.

Machines to fake the products and 125 kilograms of materials of unknown origins were also found.

There were many wrappings that carried the logos of X-men and Unilever, the officials said.

The owner of the factory had fled the site before the officials arrived.

At the Nguyen Son household factory in Hoc Mon District, they found many skin cream products that looked like fakes of Pond’s, Hazeline, Dove, Nivea and Biore products.

The factory had earlier been found with 1,200 Chinese giant lighters that were said to be highly inflammable and dangerous.

On Tuesday, city authorities had seized from District 12 more than 3,000 imported cosmetic products without any supporting documents.

Source: VNA

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