SEIKO IDEAS CORPORATION Vietnam Business Review … · 2015-09-19 · SEIKO IDEAS CORPORATION...
Transcript of SEIKO IDEAS CORPORATION Vietnam Business Review … · 2015-09-19 · SEIKO IDEAS CORPORATION...
SEIKO IDEAS CORPORATION Vietnam Business Review
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Vol 35, September 16th 2015
BUSINESS REVIEW VIETNAM
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Party chief holds talks with Japan's Prime Minister Abe
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INSIDE THIS ISSUE
Highlights
Vietnam to revamp corporate taxes, limit interest write-offs Foreigners can't buy, sell house with cash
Long Thanh Airport's feasibility study may cost $35.1m
Economy
Vietnam's economy likely to lag behind neighbors in 20 years
Minium wage to increase by 12.4% from next year
Banks & Finance
SBV approves merger of Sacombank and Southern Bank
Positive Q4 possible despite slump
Bankers say bad-debt ratio is not that high
Investment Japan commits ¥100b for infrastructure development
Enterprises
Vietjet signs agreement with Japan finance corporation
Sweets manufacturer sets foot in banking sector
Market & Prices Power prices stable for 2015
Vietnam's online advert market explodes
Instant noodle market's golden days are over
Legal Updates New regulations for duty-free goods applicable since November
Three noteworthy investment procedures in Vietnam Investment Law
New provisions on securities ownership rate of foreign investors in VN securities market
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ECONOMY
Vietnam's economy likely to
lag behind neighbors in 20
years
VOV - It will be not easy for Vietnam
to catch up with the bigger
economies in the region in the next
20 years without thorough reforms,
economists have said.
Nguyen Dinh Cung, chief of the
Central Institute for Economic
Management (CIEM), was
quoted by news website Saigon
Times Online as saying that Vietnam
can only reach the current GDP per
capita level of Malaysia if its
economy maintain an average
growth rate of 7 percent per year.
Without major reforms, particularly
in budget policies, it will be
"extremely challenging" to achieve
that growth, he said.
Cung further pointed out that since
2008, Vietnam's GDP per capita has
increased by 5 to 6 percent a year.
At a growth rate of 5 percent a
year, the country's GDP per capita,
which was US$2,052 last year, will
not be able to match even the
current levels in China and Thailand,
he said.
Cung was speaking at a
conference on Sunday, where
economists discussed the drafting
of "Vietnam 2035 Report," a
research project conducted by the
government and the World Bank.
Economist Nguyen Quang Thai,
another contributor to the report,
was concerned about Vietnam's
ability to become a knowledge-
based economy, which requires a
high level of skills and education to
create economic benefits.
Last year Vietnam scored around
3.5 out of 10 on a knowledge
economy index released by the
Asian Development Bank, far below
the Asia and Pacific average of
4.39. Meanwhile, in the last report
released by the World Bank in 2012,
it ranked 104 out of 145 economies.
Minium wage to increase by
12.4% from next year
VGP - The National Salary Council
(NSC) on September 3 agreed to a
12.4% increase in minimum wage
for 2016. The wage floor will be
submitted to the Government for
approval in October 2015.
Earlier, the NSC held two meetings
to discuss the minimum wage for
2016 without success as the VN
General Confederation of Labour
(VGCL) and the VN Chamber of
Commerce and Industry (VCCI)
failed to reach an agreement.
The VGCL, which represents
labourers, proposed a 16.8%
increase while the VCCI, which is
on behalf of businesses, was only
prepared to accept a paltry 10%
rise.
With this increase, the wage in
Region I - Ha Noi and HCMC will be
raised by VND400,000 (US$17.75) to
VND3.5 million (US$155) a month; in
Region II - Can Tho, Da Nang, Hai
Phong and on the outskirts of Ha
Noi and HCMC by VND350,000
(US$15.5) to VND 3.1 million
(US$137); in Region III - Bac Ninh,
Bac Giang, Hai Duong and Vinh
Phuc provinces and provincial cities
- by VND300,000 (US$13.3) to
VND2.7 million (US$119.5) and
Region IV - in the remaining
locations it will increase by
VND250,000 (US$11) to VND2.4
million (US$106.2).
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BANKS & FINANCE
SBV approves merger of
Sacombank and Southern
Bank
VNS - The State Bank of Vietnam
(SBV) has approved the merger of
Saigon Thuong Tin Commercial
Joint Stock Bank (Sacombank) with
the Southern Commercial Joint
Stock Bank.
According to Sacombank's
announcement on its website, the
merger came into effect on Sep 14.
The new bank will retain the name
Sacombank. It has a syndicated
charter capital of more than
VND18.8 trillion ($837m).
Earlier, the shareholders of both
banks agreed to their merger at
meetings held in July, with 93.7% of
Sacombank shareholders and
99.88% of Southern Bank
shareholders approving it.
Each share of Southern Bank was
converted into 0.75% of one share
of Sacombank.
Sacombank was established in 1991.
The bank's assets at the end of 2014
were worth more than VND12.4
trillion ($550m). The Southernbank
was established in 1993. It had
assets worth VND4 trillion ($177m) at
the end of 2014.
Positive Q4 possible despite
slump
VIR - Local authorities and experts
remain bullish over the outlook of
Vietnam’s stock market in the fourth
quater despite a recent crash.
A number of leading experts from
the State Bank of Vietnam, the
State Securities Commission,
securities companies and financial
organisations teamed up last week
in an online discussion hosted by
VIR to offer investors eagle-eyed
and reliable information and
professional analysis.
Impacts of external factors
Dr. Nguyen Anh Tuan , VIR editor-in-
chief, noted that Vietnam’s
economy had been facing many
dismal external factors, namely the
Chinese stock market crash, the
yuan devaluation, and the global
oil price plunge. “These factors
have directly affected our stock
market,” he said.
Echoing this view, Bao Viet
Securities deputy director of
Research Department Nguyen
Xuan Binh also said: “The yuan
devaluation has caused substantial
volatility in the international market.
“As for Vietnam, the impact may
be even greater, in terms of
economics, given the country is
next door to China, and China is
also Vietnam’s biggest trading
partner.”
Right after the People’s Bank of
China devalued its currency,
Vietnam, in response, discounted
the dong by another 1%, on top of
a previous 2% depreciation. The
dong has so far declined some 5%
against the dollar since the
beginning of the year.
As the devaluation of the dong
remains lower than the decline of
regional currencies, the export
sector fears that price
competitiveness could decrease
local exports.
Meanwhile, the world oil price has
steeply declined, and is expected
to hover at $60 per barrel at the
year’s end, according to Hoang
Cong Tuan, senior analyst of MB
Securities (MBS).
“The current development of the oil
price has both positive and
negative impacts on the earnings
of listed companies in the local
stock market,” Tuan said. “For those
importing raw petroleum by-
products or oil and gas, they will
directly benefit from the diving oil
price. However, those operating in
the oil and gas services sector will
be hurt by such a price decline, as
their service prices will be reduced.”
On the rebound
Despite unfavourable external
factors, Vietnam’s macro-economy
has shown signs of steady growth.
GDP, in particular, is forecast at 6.4-
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BANKS & FINANCE
6.5% this year, while inflation is
controlled at around 1%.
Additionally, while the dong has
depreciated 5% against the dollar
since the beginning of this year, the
rate of decline is lower than other
regional currencies. The interest
rate also holds up well, which in turn
facilitates businesses’ borrowing
and operation.
“While the stock market may move
up and down in the short-term, it
will, in the long-term, follow the
macro-economy’s prospects and
the listed businesses’ profitable
projections,” said MBS’s Tuan.
“The VN-Index can bounce back to
the 610-point benchmark or even
higher in the last quarter of the
year,” forecast Le Duc Khanh, head
of Market Strategy at Maritime Bank
Securities.
Meanwhile, MBS’s Tuan
commented that the oil price
plunge would not severely affect
the domestic stock market in the
long-term.
In theory, he said, Vietnam was a
net importer of oil and gas products,
and as such, the drop in price
would positively impact the local
economy and stock market.
Bankers say bad-debt ratio is
not that high
VNN - While economists doubt
commercial banks can reduce the
bad-debt ratio to below 3% by the
end of August, bankers said the
target was within reach because
the current situation is not as bad as
once thought.
The bad debt ratio of some
commercial banks, including the
better ones, has increased again.
VietinBank, for example, reported
that non-performing loans (NPL)
increased to VND8 trillion from
VND4.8 trillion earlier this year. The
NPL ratio rose to 1.5% from 0.9% in
late 2014.
VietinBank’s fifth-group debts (the
debts with the highest risk) by the
end of March had increased by 2.6
times from VND2 trillion to VND5.5
trillion.
By the end of April 2015, while
Sacombank’s outstanding loans
had increased by 5.6%, the bad
debt ratio had also increased to
1.19% from 1.18% at the end of 2014.
Sacombank collected VND200
billion worth of principal this year
thanks to the sale of debts to the
Vietnam Asset Management
Company (VAMC), while it is
considering selling more debts to
the company.
Though the NPL ratio has stayed at
1.42%, Nam A Bank’s situation is not
good because the fifth-group debt
accounts for over 80% of NPL.
Therefore, economists are worried
about the State Bank’s plan to
lower the bad debt ratio to below
3% prior to August 31.
Nevertheless, bankers have said
that the bad debt situation is not as
serious as reported.
An executive of Sacombank noted
that the bad debt increase in the
first quarter of the year was partly
due to the expiration of Decision
780, which allows credit institutions
to restructure their debts. Its validity
expired in April 2015.
Now banks have to classify their
debts in accordance with stricter
requirements.
The executive said that new loans
have been put under very strict
control.
The representative of ACB also was
optimistic about the bad debt
settlement, saying that the
recovery of the markets, especially
real estate, should create favorable
conditions for bad debt settlement.
Nguyen Hoang Minh, deputy
director of the HCMC Branch of the
State Bank of Vietnam, praised the
commercial banks’ efforts to
reduce bad debts.
In general, Minh said bad debt
settlement had shown satisfactory
results.
Local banks in HCMC settled
VND6.112 trillion worth of bad debts
in the first three months of 2015.
“It is quite feasible to lower the NPL
ratio to below 3% because credit
has been growing well,” Minh said.
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INVESTMENT
Japan commits ¥100b for
infrastructure development
VGP - Japanese Prime Minister
Shinzo Abe has pledged to provide
¥100 billion in official development
assistance for VN’s North-South
road and port projects.
The commitment was made during
his talks with Vietnamese Party
General Secretary Nguyen Phu
Trong at Akasaka Palace, Tokyo,
Japan on Tuesday.
Japan also hopes to strengthen
cooperation with VN in building
Long Thanh international airport,
Ninh Thuan 2 nuclear power plant,
specialized industrial parks in Hai
Phong and Ba Ria-Vung Tau.
The two leaders agreed to further
enhance workforce training
cooperation, effectively realize the
medium and long–term vision on
agriculture cooperation, and open
their markets for farm produce like
Japanese apples and Vietnamese
mangoes since Sep 17 this year.
Both sides were unanimously
agreed to further facilitate travel of
their citizens. Prime Minster Abe
announced his Government’s
decision to extend business visa for
Vietnamese to 10 years.
The two countries also agreed to
foster defense exchanges at all
levels. Prime Minister Abe affirmed
that Japan stands ready to help VN
enhance maritime law
enforcement capacity and join the
UN peacekeeping operations.
Japanese Government decided to
continue provision of boats for VN.
The two countries agreed to foster
cooperation in traditional and non
traditional security issues.
Exchanging views on regional and
international issues, Prime Minister
Abe briefed about Japanese
Government’s positions on some
historical issues and policies
towards peace and security in the
region.
Party leader Trong voiced his
support for Japan’s constructive
contributions to peace, security,
cooperation and development in
the region and beyond.
The leaders agreed to continue
close coordination at ASEAN and
East Asia summits and other
multilateral forums and as well as
cooperation on the negotiations
and enforcement of regional free
trade agreements, including the
Trans-Pacific Partnership and the
Regional Comprehensive Economic
Partnership.
Prime Minister Abe welcomed VN’s
tentative bid for membership of the
International Whaling Commission
as well as official membership of
the Western and Central Pacific
Fisheries Commission.
He committed to supporting and
coordinating with VN in hosting the
2017 Asia-Pacific Economic
Cooperation forum.
Both sides shared their concern
over the recent complicated
developments in the East Sea while
emphasizing the importance of
abiding by international law,
especially the 1982 United Nations
Convention on the Law of the Sea
and the Declaration on the
Conduct of Parties in the East Sea,
towards the formulation of a Code
of Conduct in the East Sea.
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ENTERPRISES
Vietjet signs agreement with
Japan finance corporation
VIR - Vietjet and Mitsubishi UFJ
Lease & Finance Company Limited
(MUL), a member of Japan’s
leading finance group Mitsubishi
UFJ Financial Group (MUFG), have
signed a memorandum of
understanding (MOU) in Tokyo on
the sidelines of the official visit of His
Excellency Nguyen Phu Trong,
General Secretary of the
Communist Party of VN, to Japan.
Japan’s PM Shinzo Abe and
General Secretary Nguyen Phu
Trong witnessed the signing of the
memorandum of understanding
(MOU), which will pave the way for
MUL to finance Vietjet’s leasing and
acquisition of three brand new
A321 aircraft, worth $347.2m, based
on manufacturer’s listed price.
These 3 aircraft are part of a
contract signed earlier between
Vietjet and European aircraft
manufacturer Airbus to purchase
and/ or lease a total of 107 aicraft
in coming years.
As planned, Vietjet will receive from
10 to 12 new aircraft every year
until the above contract with Airbus
is complete. The airline has so far
taken delivery of eight A321s and
A320s. Under the terms of the
memorandum of understanding,
Mitsubishi and Vietjet will also work
together to share best practices in
airlines operation and
management.
Mitsubishi UFJ Lease & Finance
Company Limited has a wide
business base with 23 offices and 26
group companies in Japan.
Overseas, it has a total of 18
business bases in seven countries.
Sweets manufacturer sets foot
in banking sector
Why has the Kido Group jumped
into the banking sector? And why
has it chosen the troubled Dong A
Bank?
Dong A Bank was once the bright
star that caught the eye of Citibank.
Opinions from well informed circles
said Dong A has agreed to sell its
shares to Kido, which was initially a
sweets manufacturer and has
recently decided to become a
food company.
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ENTERPRISES
Dong A Bank’s shares are traded at
the low price of VND6,000 per share.
Sources said that Kido decided to
spend VND1 trillion to buy the
bank’s shares at the high price of
VND10,000 per share.
The information has stirred up the
investor community which cannot
understand why Kido wants to jump
into the banking sector, and why it
chose Dong A Bank.
Dong A’s total assets have
reportedly increased by 34 percent
since 2011, but its profits have
decreased, while it took a loss in
the fourth quarter of 2014.
The bank’s finance report showed it
incurred a loss of VND122 billion in
the quarter, which led to a sharp
fall of 92 percent of the bank’s
post-tax profit in 2014 to VND27
billion.
One of Dong A’s biggest problems
is bad debt. The bank reported that
the non-performing ratio had
reached 3.76 percent by the end
of 2014, or VND1.947 trillion.
However, if counting the VND3.921
trillion worth of debts it had sold to
the Vietnam Asset Management
Company (VAMC), the ratio would
be 11 percent.
An analyst said that Dong A now
needs capital to settle the
problems it is facing.
Dong A, at the 2014 shareholders’
meeting, discussed two measures
to increase chartered capital,
either through stock issuance or
through merger & acquisition
(M&A).
In early 2015, sources said that
Dong A and An Binh Bank would be
part of the M&A deal.
Cao Sy Kiem, who was then chair of
Dong A and has resigned from the
post, said that the two sides were
still thinking about the deal.
While the M&A deal between Dong
A and An Binh Bank is still an
unknown, Dong A has announced
Kido’s investment of VND1 trillion
into the bank.
The analyst said Kido has enough
money now because it has sold the
sweets production unit to a foreign
manufacturer, but it may lack
money in the future when it will will
make larger investments in the food
manufacturing sector.
Thus, Kido has now decided to
become a shareholder of a bank.
This gives it advantages in
accessing bank loans.
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MARKET & PRICE
Power prices stable for 2015
VNS - The Electricity of VN (EVN)
and the VN Coal and Mineral
Industries Group (Vinacomin) have
assured electricity prices will remain
unchanged until end of the year.
The commitment was made
following public concern about the
possible electricity price hike after
these groups reported a loss
caused by fluctuations in foreign
exchange rates.
Earlier this month, three large
conglomerates of the Ministry of
Trade and Industry, including EVN,
Vinacomin and the VN Oil and Gas
Group (PVN) reported losses of
trillions of dong as a result of
changes in foreign exchange rates.
EVN reported losses of around
VND12 trillion ($53.2m) while
Vinacomin reported losses of
around VND1.6 trillion ($71m).
These groups said they had
borrowed large amounts of foreign
exchange to invest in big projects.
EVN supplies 50% of total power
required in the country while
Vinacomin was the third largest
power supplier in VN, accounting
for 6% of total output.
However, Deputy Director General
of EVN Dinh Quang Tri told VN
Television (VTV) yesterday that the
electricity price would be kept
unchanged from now until the end
of the year.
The group earlier proposed that the
government put in place measures
such as tax reductions and
relaxations to support businesses, as
well as policies to help them tackle
the problems arising out of foreign
exchange fluctuations.
Vietnam's online advert
market explodes
VOV - The Vietnamese online ad
market has been growing fast with
an annual growth rate of 100%,
according to Nguyen Anh Tuan,
managing director of Adtima ad
firm.
Of the population of 90 million, the
number of mobile subscribers has
reached 128 million. Vietnam has
40 million people accessing the
internet and 28 million social
network accounts.
According to the UK-based We Are
Social, a market survey firm, of the
28 million social network accounts,
24 million access networks from
their mobile devices.
Paul Webster from Facebook South
East Asia said at Go Mobile First
workshop organized by MMA, the
global mobile marketing
association, that 36% of
Vietnamese population accessed
the internet from mobile devices.
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MARKET & PRICE
The habit by Vietnamese people of
surfing on internet and accessing
social networks has been strongly
supported not only by mobile
network operators’ connection
services but also by internet
development programs.
Emeral’s CEO Nguyen Hong Thanh
said Vietnam was following a
strategy on expanding free wifi
network coverage to public places,
such as parks, universities and
hospitals. In HCMC, free wifi will be
available throughout the city by
2016.
Promising market
The businessman noted that though
Vietnam ranks the 85th in the world
in information technology
infrastructure, the expenses on
telecommunication are very low,
which makes it very convenient for
businesses to access.
Tran Bao Chau from Viettel
Telecom noted that with
smartphones, it is no longer difficult
for businesses to access the rural
market, where 68% of Vietnamese
consumers live.
According to Chau, 34% of rural
people now have smartphones,
while 50% of subscribers read ads. .
Instant noodle market's golden
days are over
The instant noodle market has
become saturated after a long
period of hot development.
However, investors are still pouring
more money into the sector.
Since 2013, the growth has slowed
down to 5%. Manufacturers now
compete fiercely with each other
to obtain larger market shares. The
ad pieces about instant noodle
products rarely appear on TV and
mass media these days.
Some manufacturers advertised
that their products are safer than
others because their noodles are
made of potato and green beans.
Others say they do not use toxic
colorings for their products. More
recently, manufacturers rushed to
market new products – noodles
with eggs. Meanwhile, a new war
of products with spicy and sour
flavors has broken out.
Distributors have also joined the
instant noodle market with products
bearing private brands which sell at
5-10% lower prices than popular
products.
Experts noted that the technologies
used by manufacturers to make
instant noodles are nearly the same.
The differences are the types of
products and marketing methods.
The instant noodle market is
remapped every time an enterprise
succeeds with its PR campaigns.
Similar products
Analysts reported that supermarkets
in HCMC now distribute instant
noodles bearing 60 different brands,
most of which are domestically
made. Three largest manufacturers
- Vina Acecook, Masan and Asia
Food – hold 80% of the market
share.
Kido Group, a newcomer, has
signed a contract on setting up a
joint venture with Saigon Ve Wong,
while moving ahead with a plan to
build four factories throughout VN.
Japanese Nissin has also
announced it would continue
pouring capital into a factory in
Binh Duong province after three
years of operation.
Brand Footprint 2014, a report of
Kantar Worldpanel, noted that
instant noodle is now the largest
FMCG sector. However, some
analysts noted that the vast market
worth VND25 trillion a year is
saturated.
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LEGAL UPDATES
New regulations for duty-free
goods applicable since
November
VGP - Since November 1, 2015,
airline passengers would be able to
purchase duty-free goods on
international flights to VN.
This is part of Decision No.
39/2015/QD-TTg which requires that
the airlines must be set up and
operate in accordance with
Vietnamese law.
Customers shall have to present
their passports and boarding passes.
Air stewardesses shall take note all
customers’ information about
name, number of passport, number
of flight and seat number.
Earlier, under PM’s Decision
24/2009/QD-TTg, dated February 17,
2009 and PM’s Decision
43/2013/QD-TTg, dated July 19,
2013 promulgating the regulations
on trading in duty-free goods,
enterprises were only allowed to
trade duty-free products at
international airports and fights
leaving VN to international
destinations. There were no
regulations on tax exemption for
passengers on entry flights to VN.
Meanwhile, almost all international
airlines are offering duty-
free goods on flights to VN.
The new regulation is in
accordance with international
practices and facilitate foreign
arrivals’ access to duty-free goods.
Three noteworthy investment
procedures in Vietnam
Investment Law
VNN - The 2014 Investment Law of
Vietnam has made 3 significant
modifications regarding procedures
for capital contribution registration,
share purchases, policy requests,
and investment registrations.
1. Capital contribution and
purchase of shares
It has been made mandatory for
foreign investors and foreign-
invested economic organizations,
which contribute capital or
purchase contributed capital and
shares from limited liability and joint
stock companies, to follow the
procedures of capital contribution
registration and share purchase in
the following cases:
� Foreign investors contributing
capital to or purchasing shares or
contributed capital from an
economic organization operating
in conditional investment sectors
applied to foreign investors;
� Capital contribution and
purchase of shares or contributed
capital lead to foreign investors
holding from 51% and more of the
charter capital of the economic
organization.
2. Procedure of policy requests
The procedure of policy request
applies to a number of projects that
greatly affect national security,
social order and safety, and the
environment.
Depending on each case, investors
might have to request policy at
different authorities:
� The National Assembly: Projects
that have significant effects on the
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LEGAL UPDATES
environment or the potential to
have serious effects on the
environment; Projects that change
purposes of land meant for rice
cultivation with two or more crops
of 500 hectares or larger; Projects
that require relocation of 20,000
people or more in the highlands
and 50,000 people or more in other
areas; Projects that require to apply
special mechanisms or policies.
� PM: The following projects
regardless of capital sources:
Projects that require relocation of
10,000 people or more in the
highlands and 20,000 people or
more in other areas; Construction
and operation of airports; Air
transport; Construction and
operation of national seaports;
Foreign-invested projects in sea
transport, provision of
telecommunication services with
network infrastructure, afforestation,
publishing, journalism, establishment
of science and technology
organizations or wholly foreign-
invested science & tech companies.
� The provincial People’s
Committee: Projects that use land
allocated or leased out by the
Government without auction or
bidding; Projects that use
technologies that are on the List of
technologies restricted from transfer
prescribed by regulations of law on
technology transfer. The policies of
investment projects already
executed at industrial parks, export-
processing zones, hi-tech zones,
and economic zones in conformity
with plans approved by competent
authorities are not subject to
approval of the provincial People’s
Committee.
3. Grant of Investment Registration
Certificate
Investors shall follow the procedure
of requesting an Investment
Registration Certificate in the
following events:
� Economic organizations: the
foreign investor holds from 51% or
more of the charter capital; and
partnerships with the majority of the
general members as foreign
nationals;
� Investment projects of foreign
investors.
New provisions on securities
ownership rate of foreign
investors in VN securities
market
Circular No. 123/2015/TT-BTC dated
August 19, 2015 of the Ministry of
Finance on providing guidance on
foreign investment activities on
Vietnam’s securities market
This Circular shall provide guidance
on securities investing and trading
activities, and the rate of securities
ownership by foreign investors in
Vietnam's securities market
One of the new points of this
Circular is supplement of the
provision on the rate of securities
ownership by foreign investors in
Vietnam's securities market.
Accordingly, the maximum rate of
securities ownership by foreign
investors in Vietnam's securities
market shall be complied with
Clause 2 Article 1 of Decree
No.60/2015/ND-CP dated June 26th,
2015
Particularly, in securities trading
organizations (securities companies,
fund management companies),
the ownership rate of foreign
organizations that meet the
conditions stipulated in Clause 21
and Clause 24 Article 1 of the
Decree No. 60/2015/ND-CP is
unlimited. If the foreign
organizations fail to meet the
conditions, they shall only be
allowed to hold securities less than
51% of (Clause 5 Article 11).
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HIGHLIGHTS
Vietnam to revamp corporate
taxes, limit interest write-offs
TNN - The Ministry of Finance has
announced a plan to amend
Vietnam's corporate tax law and
restrict tax deductions that can
potentially affect thousands of
companies, including many foreign
firms, local media reported.
Under the current law, interest paid
on business loans is tax deductible.
But in a draft recently published,
the finance ministry seems to have
changed its mind on the
deductibility rule, which in theory
could help many companies
reduce their taxable amount
significantly if they have huge
interest payments to declare.
Now the ministry says companies in
the manufacturing sector should
only be allowed to write off interest
payments if their debt-to-equity
ratio is 5 to 1, according to news
website Saigon Times Online.
For other companies, the maximum
ratio is only 4 on 1, before being
lowered to only 3 to 1 after three
years.
Interest on excessive loans will no
longer be tax deductible.
If the amendments are passed by
legislators next month, they will take
effect in 2016.
'Enormous' interest payments
When businesses are financed
through a high level of debt
compared to equity, they are
facing huge financial risks, the
ministry was quoted as saying.
It seemed to suggest that that
some foreign companies may have
claimed more deductions than
they are truly entitled to, simply by
declaring "enormous" interest
expense.
Several companies paid up to
several trillions dong a year of
interest to their own parent
companies abroad, the ministry
said, adding that they kept
reporting losses in Vietnam despite
expansion plans.
It is "necessary" to set up more
regulations in order to help
businesses guarantee their financial
safety, increase the economy's
health, and help prevent the law
from being abused, the ministry
said.
In a comment on the draft, a
representative of Earnst & Young
Vietnam suggested the ministry
delay the new rule to 2018 to
prevent it from affecting business
activities.
Dang Thi Binh An, chairwoman of
tax consultant C&A, meanwhile,
said the ministry should not set a
different ratio for each sector, but
one for all, considering that
businesses invest in multiple sectors.
Foreigners can't buy, sell
house with cash
VNA - Foreigners buying or selling
houses in Vietnam are required to
carry out transactions through
banks in the country and not in
cash, the central bank has
decreed.
They can get mortgages if they
meet banks' requirements, the
State Bank of Vietnam (SBV) said
further in a document it has issued
to guide the buying and selling of
houses by foreign individuals and
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HIGHLIGHTS
organisations.
The tenor of the loans cannot
exceed the time they live and work
in Vietnam , while for organisations
and other legal entities, it will not
exceed their licence period.
Amendments to the Housing Law
that took effect on July 1 permit
foreigners and overseas
Vietnamese to buy housing if they
have a visa to enter the country.
They can buy, lease out, gift, and
inherit property.
There are a few restrictions, one of
which is that combined foreign
ownership should not exceed 30%
of an apartment project.
Long Thanh Airport's feasibility
study may cost $35.1m
It may cost up to US$35.1 million to
finish an 18-month feasibility study
for Long Thanh, which is set to
become Vietnam's largest airport,
according to the Airports
Corporation of Vietnam.
In a proposal recently submitted to
the transport ministry, the sole
manager of airports in Vietnam said
it will fund the study itself.
The corporation could have chosen
to receive funding from the Japan
International Cooperation Agency
for a $6.9 million, 15-month study.
However, it argued that a more
"comprehensive" study is needed.
It also proposed organizing a
design contest for Long Thanh's
terminals and air control station.
Airports Corporation originally
planned to let a single consultant
conduct the feasibility study and
design the airport to save time. The
plan drew strong objections from
local architects.
With a projected cost of $15.8
billion, the airport in Dong Nai
Province, about 40 kilometers from
Ho Chi Minh City, is slated to serve
100 million passengers and 5 million
tons of goods annually.
The first stage of the project is
scheduled for completion in 2023. It
will then be able to serve 25 million
passengers and 1.2 million tons of
goods a year, but it will achieve its
maximum capacity after the
second and third stages.
Vietnamese authorities want Long
Thanh to replace the country's
currently biggest airport Tan Son
Nhat in Ho Chi Minh City, as the
latter already reached its designed
capacity of 20 million passengers a
year in 2013.
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