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Vietnam Business Review

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Vol 32, August 17th 2016

BUSINESS REVIEW VIETNAM

Vietnam's biggest M&A forum to be on 18th August 2016

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INSIDE THIS ISSUE

HIGHLIGHTS

Vietnam joining 4th industrial revolution

BOT no longer favored investment mode

ECONOMY

Cap of 5% inflation in new economic plan

"Coffee money" still prevalent in VN's public sector: UNDP

BANKS & FINANCE

$23,000 account hack: Vietcombank tightens OTP service security

Bad debts drop to 2.58%

Government approves plan to reduce cash use

INVESTMENT

$303m shopping mall to be built under HCMC metro station by Japan

consortium

$4b project in Thu Thiem new urban area may face rejection

ENTERPRISES

Vinamilk in focus of Thai Billionaire's F&N in race with Coke, Pepsi

Vietnam phone retailer fined over "model in glass box" PR stunt

Hi-tech agriculture project developed in Thue Thien Hue

MARKET & PRICES

Vietnam drug stocks surging as foreigners covet booming industry

The clean-energy game in Vietnam

LEGAL UPDATES

Representative offices in Vietnam



1

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ECONOMY

Cap of 5% inflation in new

economic plan

VNN - The Ministry of Planning and

Investment is developing a plan on

restructuring the economy by 2020

aiming to renovate the growth

model towards improving efficiency

and competitiveness of the

economy.

The ministry said that intensive

economic restructuring has

become critical for the next five-

year period due to rapid int'l

integration & technology advances

which demanded the Southeast

Asian economy to search for new

competitive advantages.

The economic restructuring

between 2010 and 2015, the

ministry said, revived macro-

economic stability and reduced

damages caused by inefficient

resource allocation, but still

generally failed to renovate the

growth model and the economic

structure.

Under the draft project, three pillars

of the economic restructuring by

2020 would be ensuring reasonable

economic growth and macro-

economic stability, boosting the

high-added-value economic sector

and developing an independent

and dynamic economy to ensure

the national security and social

order and safety.

Accordingly, inflation would be

controlled at 5% per year, the State

budget deficit would be cut to

between 3.5% and 4% of GDP,

public debts down to below 62% of

GDP and foreign currency reserve

equivalent to five months of imports.

In addition, business environment

would be lifted to be equivalent to

the ASEAN+3 level (Singapore,

Malaysia and Thailand).

Vietnam would focus on boosting

the development of key economic

sectors, including agro-forestry-

fishery sector, six prioritised service

lines such as logistics, business

development, tourism, and banking

and financial services, in addition to

university education and

vocational training, and 13

prioritised industries (including

electronics, agricultural machinery,

shipbuilding, and environment and

energy saving, in addition to

automobile, chemicals and oil).

Private firms would play a key role

in the restructuring of economic

sectors, the draft said.

Existing problems included

investment-based growth, slow

improvements in productivity as

well as disappointing results of the

restructuring of the public

investment, State-owned

enterprises, the financial system

and the agricultural sector, the

ministry pointed out.

The next restructuring phase must

focus on building a firm ground for

long-term and sustainable growth,

which could only be achieved

through improving efficiency,

productivity and quality to form a

more dynamic economic structure

with higher competitiveness and

larger growth potential, the ministry

said in the draft project on the

economic restructuring between

2016 and 2020 which is now being

raised for comments.

Policies would encourage

investments from the private sector

and FDI, the draft said, targeting at

least 150 out of 500 the leading

global multinational corporations,

together with policies to promote

the development of the private

sector, esp start-ups.

Regarding the financial market, the

draft said efforts to reduce bad

debts would continue together with

restructuring credit institutions to

limit system risk and boost operation

efficiency. The lending interest rate

http://www.seiko-ideas.com/



2


ECONOMY

would be cut to the average level

of developing countries, or around

5% while 70% of commercial banks

fully implement Basel 2 by 2020.

The draft also set goals of boosting

agricultural production towards

high quality and high added value,

promoting the co-ordination and

supply chains among regions and

sectors, improving land use

efficiency, building skilled labour

force and restructuring public

services towards efficiency.

"Coffee money" still prevalent

in VN's public sector: UNDP

TTN - A survey by the United Nations

Development Programme (UNDP)

found that petty corruption in

Vietnam’s public sector seems to

be thriving.

The survey interviewed nearly

75,000 people from 63 cities and

provinces between 2009 and 2015,

revealing that bribery is still

widespread in the Southeast Asian

country.

28% of those surveyed in HCMC

said they had been coerced into

bribing officials in order to obtain

certificates for land use rights at an

average of VND14.5 million ($650)

per instance, significantly higher

than the average VND1.2 million

($54) in Hanoi.

Over 30% of those polled in the

southern city said they had bribed

hospital staff and doctors in order

to get better treatment, a

whopping decrease from 60% in

2011.

The average amount of each

hospital and doctor bribe was

VND730,000 ($33) in HCMC, five

times lower than Hanoi’s average

of VND3.5 million ($157).

The average amount of under-the-

table money paid by parents to

primary school teachers in HCMC

public schools in 2015 was

VND853,000 ($32) per term, a rise

from VND510,000 ($23) in 2011. In

Hanoi, that amount was lower:

VND630,000 ($28) per term, a drop

from VND824,000 ($37).

According to interviewees,

personal relationships are given

considerably more weight in the

recruitment of public officials than

actual ability and over 50% of those

surveyed revealed that bribery is a

requirement to obtain public sector

employment.

More surprisingly, the threshold of

tolerance for petty corruption has

surged.

In 2011, the threshold for the

amount of under-the-table money

leading to an accusation of bribery

in HCMC was VND5.8 million ($260).

In 2015, that rose to VND34.8 million

($1,560).

Last year, only 2.3% of those in

HCMC who were asked for bribes

reported the incident, a fall from

12.5% in 2011.

The level of "coffee money" that leads to denouncing




3


BANKS & FINANCE

$23,000 account hack:

Vietcombank tightens OTP

service security

VNN - The Joint Stock Commercial

Bank for Foreign Trade of Viet Nam

(Vietcombank) on August 16

announced on its official website

changes to activation methods of

smart OTP services.

The changes to smart OTP services

are aimed at improving security

after hundreds of Vietnamese dong

were reportedly stolen from a

customer's Vietcombank account.

Hoang Thi Na Huong, a

Vietcombank customer in Ha Noi,

said she received notifications of

transfer of VND500 million ($23,000)

from her Vietcombank account

between 11pm on August 3 till 5am

the next day, while she was at

home.

The bank said on August 15 that it

had managed to cancel the last

three orders to keep VND300 million

in the bank and return the amount

to Huong.

Accordingly, customers who have

already used smart OTP and wish to

continue using the services on their

existing devices must re-activate

the service via Vietcombank's

Internet banking service.

Those who have not registered for

smart OTP services or those wanting

to change their devices, will have

to go to Vietcombank branches to

register and get the service

activated.

OTP subscribers are encouraged to

download the latest smart OTP

application from Google Play Store

and Apple Store.

Further investigations are ongoing.

Banks also urged customers to be

alert against cyber-attacks.

Bad debts drop to 2.58%

TNN - The bad debts ratio of the

Vietnamese banking sector

declined to 2.58% as of the end of

June, according to new official

figures.

It represented a decrease of

two%age points from a month

earlier, the central bank's website

reported Thursday, quoting Doan

Van Thang, deputy director of the

Vietnam Asset Management

Company.

It was also nearly equal to the five-

year low of 2.55% banks reported at

the end of last year.

Meanwhile, loans outstanding rose

by 8.54% year-on-year at the end of

July, Nguyen Tien Dong, chief of the

State Bank of Vietnam’s credit

department, was quoted as saying.

The central bank projected the

sector's credit growth at 18-20% this

year, compared to 18% last year.

Government approves plan to

reduce cash use

VNS - Gov’t has approved an e-

commerce development plan for

2016-20 that targets 50% of

consumers switching from cash to

other forms of payment.

The target has been set after

factoring in the rapid increase in

SMS OTP sent by server




4


BANKS & FINANCE

online shopping and electronic

banking.

However, the plan acknowledges

the need to significantly improve

network security to convince

residents to switch from cash.

E-commerce turnover $10b by 2020

Gov’t has set targets of 30% of the

population shopping online and

spending $350 a year each and

business-to-customer (B2C) e-

commerce turnover increasing 20%

to $10b, or 5% of the country’s total

retail and services turnover.

Besides, all supermarkets, shopping

malls and convenience stores will

accept credit cards.

Around 70% of telecom, electricity

and water service providers will

accept online payments from

customers.

Importantly, 50% of consumers in

big cities will use non-cash payment

services.

Gov’t also expects 100% of public

services and all bidding to be

online, with the contract

implementation process published

in the national bidding website.

Chiefs of several banks said the

target of getting 50% of residents in

large cities to use non-cash

payment methods would be

achieved soon since online

banking services like mobile

banking are booming.

According to the E-Commerce and

IT Department, as of last year 48

million people were using the

internet and 35 million had smart

phones.

The E-commerce Index report

showed that last year 27% of smart

phone users shopped using their

phones and mostly paid through

bank accounts, while 45% of smart

phone users searched for shopping

information more than once a day.

Vietnam is now among the top five

fastest growing smart phone

markets and one in which mobile

payment technologies are

developing rapidly.

A significant growth in the card

market also represents a growing

non-cash payment trend.

So far 45 banks have launched SMS

banking and internet banking and

25 others have launched mobile

banking.

According to statistics from the

Vietnam Banking Card Association,

82 million cards had been issued by

the end of 2015, 90% of them ATM

cards.

Along with the number of cards,

the value of payments made using

them has also increased sharply.

Huynh Trung Minh, a banking expert,

disagreed with the bank executives,

saying: “The target of 50% of

people switching from cash is very

hard to achieve because of poor

infrastructure, limited legal

framework, cash habit, and [the

fact that] some shops even charge

a fee if customers pay by card.

“If Gov’t would like to boost non-

cash payments, besides investing in

infrastructure, it has to be the

biggest non-cash customer and

provide public services with non-

cash payments.”

Convenience but safety first

Economists said the potential of e-

commerce using e-banking is huge

if users can feel secure about

making payments.

“E-commerce enterprises have not

paid enough attention to mobile

commerce,” Nguyen Dinh Thang,

deputy chairman of the VN

Computer Association.

At least 11.3 million customers have

ordered on their phones so far, but

only 15% of websites have a mobile

version. Meanwhile, consumers

remain worried about the quality of

goods they buy online and security.

The 2015 E-commerce Index

pointed out that the infrastructure

and services have not met the

demands of online payment.

Besides, while banks have issued

dozens of millions of cards, most

merchants are in big cities.




5


INVESTMENT

$303m shopping mall to be

built under HCMC metro

station by Japan consortium

A graphic image of a 45,000-square-

meter shopping mall under the Ben

Thanh station of HCMC's first metro line.

HCMC has reportedly sought

Gov't's permission to partner with a

consortium of Japanese investors to

build a shopping mall beneath a

metro station at a projected cost of

VND6.86 trillion ($303.2m).

In its proposal, the city People's

Committee said it wants to use

ODAs from Japan to build walking

streets, a square and other

infrastructure works for the mall.

Toshin Development, a known

developer of shopping centers in

Japan, will join hands with other

Japanese companies Nikken Sekkei

Civil Engineering Ltd and Osaka

Chikagai Co., Ltd. and the

country’s fund for overseas

infrastructure investment JOIN, to

build the shopping precinct.

The whole project will cover around

45,000 m2, of which the shopping

zone will take up around 40%.

It will be built under the first station

in the city's first metro line from Ben

Thanh Market to District 9's Suoi Tien

theme park. Work on the 20km

route began in 2012 and is

expected to be completed in 2020.

$4b project in Thu Thiem new

urban area may face rejection

Cafebiz - The Thu Thiem Urban Area

Management Board recently sent a

document to the People’s

Committee on the Thu Thiem

program, repeating its view that it

won’t accept investment projects

which require an adjustment of the

initial development plan.

Regarding the $4b project

suggested by a group of US

investors, the board said it needed

more research on the programming

and infrastructure functions.

In late May 2016, Johnathan Hanh

Nguyen, president of IPP Group,

and 3 investors from the US

suggested an investment project

with capital of $4b in Thu Thiem

new urban area in district 2.

The project, if implemented, would

comprise a 70-storey tower and

lower towers, an office building,

shopping mall and entertainment

area. The investors want to set up

the project in Zone 1 of the urban

area, in the northern part of the

core, designed to be a high-density

multi-functional trade & service

center. There would be several key

construction works, including a

convention center, museum, opera

theatre and programming

information center.

The construction works there are

supposed to be no more than 50

stories. The number of permanent

residents would be 14,900, while the

number of people at work 81,700.

According to the management

board, the detailed design of the

project submitted by the investors

show that only the 70-storey

building has a financial service

function, which fits the design, while

other items have functions different

from the original plan.

Nguyen The Minh, deputy head of

the Thu Thiem Urban Area Board of

Management, said Zone 1

comprises 11 land plots, but the

investors plan to use only one plot

to build towers, and another 10

plots for resorts and restaurants.

“This will spoil the initial plan which

called for the land to be an area

for finance & banking,” Minh said.

HCMC Mayor Nguyen Thanh Phong

said city authorities had also

received US investors who wanted

to build a resort in Thu Thiem, but he

turned down the project.




6


ENTERPRISES

Vinamilk in focus of Thai

Billionaire's F&N in race with

Coke, Pepsi

Bloomberg - Fraser & Neave Ltd.,

the drinks-maker controlled by

Thailand’s richest man Charoen

Sirivadhanabhakdi, is searching for

acquisitions to bolster its market

share in Southeast Asia after its war

chest grew to nearly S$1b ($745m)

with sales of beer assets.

A potential target is Vietnam Dairy

Products JSC, also known as

Vinamilk, according to Lee Meng

Tat, F&N’s chief executive officer for

non-alcoholicbeverages. Vietnam’s

largest milk producer is an example

of what F&N wants in an

acquisition: a company with market

presence, well-known brands, and

a strong distribution network.

“The ideal situation is of course to

acquire,” said Lee, referring to

F&N’s efforts to expand in Southeast

Asia, where he said the company is

a “distant third” to U.S. soft drinks

giants PepsiCo Inc. and Coca-Cola

Co. “That would give us a much

faster way into the market.”

Singapore-based F&N has S$971.8m

of cash and cash equivalents as of

end-June, after selling its stakein

Myanmar Brewery Ltd. last August,

three years after it divested its share

of Asia Pacific Breweries. In

Southeast Asia, home to nearly 600

million people and among Asia’s

fastest growing economies, the

company also plans to build its

presence from scratch in some

markets if acquisition opportunities

do not work out.

Vinamilk, VN’s biggest company by

market value, gained as much as

1.2% in HCMC on Tuesday, heading

for a fresh record high. F&N fell as

much as 1% in Singapore trading.

Vinamilk had surged to a record

last week after index compiler MSCI

Inc. said it would add the stock to

its gauge of frontier markets,

extending gains after Gov’t

scrapped the foreign ownership

limits for the company. The shares

have jumped 32% so far this year,

compared with the local

benchmark index’s 14% gain.

If more shares in Vinamilk become

“available and it makes financial

sense, we will always look at it,” said

Lee. “That has always been our

position.”

Vinamilk is not on a list of 120

companies that Gov't investment

arm State Capital Investment Corp.

plans to divest this year.

F&N is Vinamilk’s second-biggest

shareholder with a 11% stake, after

VN Gov't’s 45%.

Bottled Water

F&N's main brands include the

100Plus isotonic drink and Ice

Mountain bottled water, and it also

distributes beverages produced by

companies under its Thai owner,

such as Oishi Group Pcl's green tea


http://www.bloomberg.com/news/articles/2015-08-19/kirin-buys-myanmar-s-biggest-brewing-company-for-560-million



7


ENTERPRISES

drink and Thai Beverage Pcl’s

Chang beer.

F&N is among the top three soft

drinks players in Singapore, Thailand

and Malaysia, according to

Euromonitor International, but isn’t

ranked among the top five

in Vietnam, Indonesia and the

Philippines, where the company is

examining ways to grow.

Charoen has laid out a strategy of

expanding across Southeast Asia

after his companies completed the

S$10.5b acquisition of F&N in Feb-

2013. The Thai billionaire has set a

target of making the food and

beverage businesses of F&N and his

other companies including Thai

Beverage, Sermsuk Pcl and Oishi

among the top three brandsin

Southeast Asia by 2020.

Vietnam phone retailer fined

over "model in glass box" PR

stunt

A major Vietnamese mobile phone

store chain operator has been

fined for an ad campaign in which

a model was put into a glass box

and carried around Hanoi on a

pickup truck.

The Hanoi culture department

found the PR stunt by The Gioi Di

Dong “inappropriate to the

capital’s cultural value,” and

decided to fine the firm VND6

million ($268).

“[The Gioi Di Dong] did not inform

local authorized organizations of

the event, which violated the

regulations of advertising acts

involving human,” To Van Dong,

director of Hanoi culture

department.

The “girl in glass box” publicity was

launched on Thursday to promote

a new phablet at The Gioi Di Dong.

Photos and videos capturing the PR

girl have gone viral on the Internet,

igniting debates whether it is a

proper ad campaign.

Hi-tech agriculture project

developed in Thue Thien Hue

VNS - The central province of Thua

Thien-Hue has licenced a hi-tech

agriculture production project in

Huong Tra town and coastal areas

in Hue city with an investment of

$23.5m.

The project, invested in by the

Vineco Company, uses Israeli

technology with a production

process that meets VietGAP and

GlobalGAP standards.

Covering about 213ha, it comprises

a greenhouse and a massive field

of vegetables for domestic sale

and export, a vegetable varieties

production area, centres for

management, training and

technology transfer, a storage area

and an irrigation system.

According to provincial People’s

Committee Chairman Nguyen Van

Cao, the project aims to produce

safe vegetables for both domestic

and foreign markets through the

development of large-scale

agriculture production with the

application of advanced

technology, an area that the

province is focusing on.

It also helps attract domestic and

foreign investment and human

resources in high technology,

contributing to creating jobs and

increasing incomes for labourers,

thus boosting local economic

growth, he said.

As committed to by the investor,

the main components of the

project, including the greenhouse,

infrastructure system and irrigation

system, will be completed in

December this year.


http://www.bloomberg.com/news/articles/2016-07-04/beer-drinkers-in-thailand-power-singapore-s-best-stock-in-2016



8


MARKET & PRICES

Vietnam drug stocks surging

as foreigners covet booming

industry

Bloomberg - As Vietnam opens up

to more foreign money, the

country’s fast-growing

pharmaceutical industry is

emerging as one of the most

attractive prizes for overseas

investors.

Domesco Medical Import-Export

JSC, the third-biggest listed

drugmaker, has shot up 151% this

year as it got shareholder approval

to scrap the 49% foreign ownership

limit on its stock. DHG

Pharmaceutical JSC, the largest,

has risen 44%, with Japan’s Taisho

Pharmaceuticals Holdings Co.

buying a 24.5% stake last month.

Vietnamese health-care

companies have returned 46% in

2016, the best performance among

10 industry groups on the VN Index.

Gov't cleared Vietnam Dairy

Product JSC, the biggest listed

company, to scrap its foreign

investment cap in July, driving the

VN Index to an eight-year high

amid optimism further approvals

would follow. Overseas ownership

of many local drugmakers is

already at or near the limit,

creating pent-up demand from

money managers seeking to

benefit as the nation’s burgeoning

middle class spends more on

health-care.

“If Domesco gets approval to

remove the foreign cap, it will be a

good catalyst for the market in

general and for the stock in

particular,” said Tran Hoang Son,

the Hanoi-based head of market

strategy at MB Securities JSC. “The

pharmaceutical industry is already

an attractive sector for overseas

investors.”

Vietnam’s pharmaceutical market

is forecast to increase from $4.2b in

2015 to $7.2b by 2020 and then

maintain double-digit annual

growth through 2025, according to

a report by BMI Research. The

industry will keep growing at

around 10% to 15% a year, said

Chris Freund, the founder of

Mekong Capital Ltd., a private

equity firm.

“Vietnam’s pharmaceutical sector

is still very fragmented and the

management standards are

typically quite poor,” he said from

HCMC. “There’s an opportunity for

strategic investors to invest in

pharma companies, help them to

build their management teams, to

form international partnerships and

apply more best practices.”

Traphaco JSC, the second-biggest

local listed pharmaceutical

company, has risen 76% this year.

Imexpharm Pharmaceutical JSC

and Cuu Long Pharmaceutical JSC,

which round out the five biggest

drug companies on the HCMC

gauge, are up 41% and 151%,

respectively. The benchmark VN

Index has added 14% so far in 2016.

Domesco closed up 3.9% on

Thursday, while DHG increased 3.8%

and Cuu Long surged 6.7%.




9


MARKET & PRICES

Cheap Valuations

Even with their surging share prices,

valuations are still relatively low.

Domesco has a 12-month price-to-

earnings ratio of 7.2, DHG

Pharmaceutical is 12.3 and

Traphaco is 18.1. That compares

with a ratio of 13.4 for the Stock

Exchange of Thailand Personal

Products & Pharmaceuticals Index

and 38.3 for South Korea’s KOSDAQ

Pharmaceutical Index.

The clean-energy game in

Vietnam

VOV - Many merger and

acquisition (M&A) deals in the

energy sector have been made in

recent years, but the number of

foreign players in the field remains

modest.

The Int'l Finance Corporation (IFC)

and Armstrong South East Asia

Clean Energy Fund from Singapore

have decided to contribute a 16%

to 20% more stake, respectively, to

the Gia Lai Electricity JSC (GEC).

These are the first steps taken by

institutions in Vietnam, though they

have invested in many power

projects around the world before.

IFC invested $1.75b in 75

hydropower projects in 25 countries

in the last 10 years. Armstrong has

50 recycling energy projects

throughout the world.

The main target of the fund is South

East Asia with projects with

investment scale larger than

Vietnam’s GEC.

When int'l players like IFC and

Armstrong cooperate with

Vietnam’s GEC, they bring high

hope to Vietnam’s electricity

industry, especially clean energy.

The predecessor of GEC was the

Gia Lai Hydropower Company,

which was equitized in 2010 and

has made many M&A deals to

acquire companies in the same

field since 2013.

GEC now has six hydropower

companies with 15 plants and five

thermopower companies with eight

plants. It is focusing on three major

fields – small hydropower,

thermopower and recycling energy

- in the preparation period.

GEC, on one hand, has been

making a series of M&A deals to

acquire small hydropower plants in

the central region, and continues

developing new projects. It plans to

put 8-10 new plants into operation

with the total capacity of 271 MW

by 2020.

However, in the long-term, GEC

plans to focus on recycling energy.

It now runs a solar power system

which provides electricity and

companies of the same system. It is

following necessary procedures to

develop the 6 MW wind power

project in Ben Tre province.

In the future, the company’s solar

energy project with capacity of 10

MW would be operational.

By 2015, according to Bloomberg,

the total capital funding clean

energy projects in Vietnam had

increased to US$248 million.

The projects which had licenses

recently include the 30 MW Tuy

Phong solar energy project by

DooSung Vina which has

investment capital of $66m in Binh

Thuan province, the 96 MW wind

power project in Tra Vinh province

with the capital of $130m.

The nationalities of the investors are

more diversified. AirCraft Company

from Germany is considering a solar

energy project in central Quang Tri

province, while EGAT International

from Thailand is targeting Binh Dinh

province.

GE has signed an MOU on the

development of 1000 MW wind

power by 2025.




10


LEGAL UPDATES

Representative offices in

Vietnam

VNS - Establishing a representative

office in VN is considered a safe

initial step before traders conduct a

series of complex high-cost legal

procedures to establish a wholly

foreign-owned enterprise.

Market research

For any new foreign trader entering

VN’s market for the first time, their

initial primary purpose might be

promoting the brand, getting

acquainted with and examining

the market while preparing for

official business. Therefore, many

people establish a representative

office as an initial step.

Simple procedures

As far as establishing a commercial

presence in VN, a representative

office is considered much less

complex than a business co-

operation contract, establishing a

foreign-invested enterprise or

establishing a branch.

To establish a representative office,

the foreign trader only needs to

meet the following conditions:

• It is established and registered in

accordance with the laws of

territories and nations being

members to international treaties to

which VN is also a member, or

having been recognised by such

territories and national laws;

• Having operated for at

least one year from the

date of establishment or

registration, the

remaining operation term

must be at least one year

from the date of

submission of the

application for a

Certificate of

Establishment of a

Representative Office.

Licensing

The time to be granted a

Certificate of Establishment of a

Representative Office is quite fast.

A representative office can be

licensed to operate within about

seven working days of a sufficient

and valid dossier being submitted

to the licensing agency.

Cost savings

The establishment of a wholly

foreign-owned enterprise in

Vietnam requires many stages with

numerous procedures and

documentation. The process can

cost up to several thousand US

dollars. Spending such a large initial

investment without a clear

comprehension of VN’s market is an

insecure and risky move.

Another benefit of establishing a

representative office is that it will

not be subject to taxes due from

business activities, but will only have

to pay personal income tax for

office staff.

Pre-step to establishing a foreign

invested enterprise

Although a representative office for

a foreign company is not allowed

to perform business operations or

other profitable activities as

prescribed by the law, it can still

perform the functions of liaison

office, market research and

promotion of business investment

opportunities, etc. for foreign

traders in VN.

Once the image and brand of a

foreign trader has become familiar

and popular with clients in the

Vietnamese market, they can be

more assured to establish a wholly

foreign-owned enterprise and

officially perform commercial

activities in VN.




11


HIGHLIGHTS

Vietnam joining 4th industrial

revolution

VNS - VN must build a creative and

sustainable eco-system for the

Internet of Things (IoT) in order to

take part in the international IoT

supply chain and achieve a

turnover of $10b by 2020, a

technology insider has said.

“The IoT will require an eco-system

that will decide its success in VN,”

Nguyen The Trung, director of the

DDT Technology company said.

The IoT is a system of inter-related

computing devices, mechanical

and digital machines, objects,

animals or people that are

provided with unique identifiers and

the ability to transfer data over a

network without requiring human-

to-human or human-to-computer

interactions.

IoT allows objects to be sensed and

controlled remotely across existing

network infrastructure, creating

opportunities for more direct

integration of the physical world

into computer-based systems, and

resulting in improved efficiency,

accuracy and economic benefit.

“The fourth industrial revolution is

starting with IoT, Big Data and

Robot,” Trung said. “This is a golden

chance to boost the Vietnamese IT

industry."

But he stressed that a proper

working mechanism focusing on

important and long-term goals must

be set up.

The end-to-end working system,

meaning that all parts of a

circulation, from ideas to R&D,

commercialisation, marketing and

investment must be worked

together.

To become a regional centre for IoT

start-ups, the Government should

create a creative eco-system to

support small and medium-sized

enterprises and start-ups through

co-operation with multinational

corporations, he said.

“The system should provide

incentives to attract international

and regional start-ups to join and

exploit Vietnamese strengths like

human resources and low

production costs.”

Other IT experts said: “Along with

rolling out incentives and

development policies, IoT joint

ventures between domestic and

multinational enterprises are very

important to keep Vietnamese

enterprises on track.”

IoT start-up funds and infrastructure

for services like 4G and 5G for IoT

should be encouraged to be set up.

Huge potential

By 2025 the IoT will contribute US$11

trillion to the world economy,

according to a report by

management consultant McKinsey,

with factories generating $3.7 trillion,

cities, $1.7 trillion, and healthcare,

$1.6 trillion.

The report said the number of IoT

devices would grow very fast – five

times in the next five years from the

current 11.8 billion.

By 2019 the world economy will

spend $1.3 trillion on IoT, it said.

IoT would be present in all aspects

of life and even create more new

ideas in life and business.

In VN, IoT would be used by in smart

agriculture, transport, healthcare,

education, city, and digital

authority, it said.

“VN should pay attention to

network security, digital sovereignty,

privacy, integration, investment

and maintenance expenditure,”

Trung added.




12


HIGHLIGHTS

BOT no longer favored

investment mode

VOV - In 2011-2015, the Ministry of

Transport (MOT) raised huge funds

of VND186.66 trillion for road

transport projects, accounting for

92.15% of the total capital

mobilized.

But it is no longer easy to mobilize

capital for BOT (build, operation,

transfer) projects.

In the first quarter of the year, the

ministry could only raise VND3.35

trillion in funds for the BOT project

on upgrading Highway No 60,

which connects Rach Mieu and Co

Chien Bridges and the BOO (build,

own, operate) project on non-stop

fee collection on Highway No 1A

and Ho Chi Minh Road.

The figure was just 9% of the total

capital raised in the first quarter of

the year.

MOT’s H1 report did not mention

the non-state budget capital

mobilized for implementing projects.

In the first half of the last year,

VND27 trillion was mobilized for 11

BOT road projects.

The declared total capital to be

disbursed for transport projects in

2016 is VND67.294 trillion, which is

VND20 trillion lower than that in

2015 (VND89.907 trillion).

In the first half of 2016, MOT only

disbursed VND27.883 trillion, or

41.7% of the yearly plan.

Analysts commented that while in

2012-2013, investors had to queue

up to apply for investments in the

BOT projects on expanding

Highway 1A and Ho Chi Minh Road,

they are now hesitant about BOT

projects.

An investor implementing a BOT

project in Ho Chi Minh City, who

asked to be anonymous, said that

MOT could easily mobilize hundreds

of trillions of dong for BOT projects,

because Highway 1A is considered

a ‘delicious piece of cake’.

Since this is a north-south highway

with high traffic, investors are sure

they can take back the investment

capital from collecting tolls.

Investors have lined up to register

and some investors have even

accepted to spend their money to

implement projects first and then

apply for licenses later.

However, investors have shrunk

back recently because there is no

more ‘delicious piece of cake’.

People and businesses all have

complained that the fee is

unaffordable, pointing out that it is

unreasonable to ask them to pay

both the BOT fee and road

maintenance fee.

Meanwhile, commercial banks

have tightened lending to fund BOT

projects.

Minister of MOT Truong Quang

Nghia said at a conference in July

that the investment under BOT

mode will only be applied to new

routes and people can choose

which way to go – old roads with

no fees or new ones with BOT fees.


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