Casino ban may be lifted for Vietnamese citizens

The latest draft decree issued by the Ministry of Finance proposes allowing Vietnamese residents to enter casinos.

According to the draft, residents aged 21 or over, and considered 'financially capable', may be allowed to enter casinos.

The details of the draft regulation have not been announced and the prime minister will have the final decision as to which customers will be allowed to visit casinos.

Currently, casinos in Vietnam are only open to foreigners. After a five-year debate over the issue, Vietnamese may gamblers may finally be welcome, pending the decision. In June 2013, the Politburo approved a pilot programme to give access to Vietnamese customers to casinos within the Van Don Economic Zone in Quang Ninh Province.

NA Justice Committee Chairman Nguyen Van Hien said, "It is a matter of fact that Vietnamese citizens are already flocking to casinos in other countries. We need to legalise gambling for our own citizens with foresight, because of the growth of criminal elements around the industry without strict management."

Requirements for investors opening new casinos system would also be loosened. Previously, gaming companies were required to have a minimum of 10 years experience in the industry to commit to investments of no less than USD4 billion. This stipulation made it nearly impossible for Vietnamese firms to operate in the industry.

The new draft only requires 5 years of experience. Other details from the draft regulation have also been leaked, such as a minimum requirement of USD20 million committed investment for a company wishing to open an operation with one gambling table and 10 machines.

The Ministry of Finance will work together with the Ministry of Planning and Investment and the Ministry of Culture, Sports and Tourism to regulate casino advertisement.

Companies running casinos would also retain the right to refuse turn away customers if they do not meet the requirements. The companies would also be asked to take active measures to prevent criminal activities such as money laundering.

The draft also states that the maximum fine for any violations would be VND200 million. Companies found to have committed violations more than once would have their licenses revoked for a period of 18 months. Other bans, such as online gambling, would remain.

HCM City backs halt to auction of prime land lot in District 10

The HCMC Department of External Affairs has proposed the Government suspend the auction of a land lot at 1 Ly Thai To Street in District 10 and allow a local tourism agency to run business and help preserve greenery and old villas in this area.

In 2010, the Prime Minster approved plans of the Ministry of Foreign Affairs and the Ministry of Finance to auction the 3.7-hectare land plot which is currently home to the Government Guest House to raise funds for key projects.

The lot is estimated to cost thousands of billions of dong as it lies in a prime area bordered by districts 1, 3, 5 and 10, and surrounded by Ly Thai To, Hung Vuong and Tran Binh Trong streets. There are seven French-architecture villas built in 1950 and shadowed by trees that are nearly 100 years old.

Nguyen Hong Linh, director of the HCMC Department of External Affairs, told the Daily on the sidelines of a review meeting on activities of the department in the first six months of this year last week that the Government approved the auction of the location in 2010 but it has not been sold due to stagnation of the property market in the past years. The land lot will not generate revenue as expected in the current situation.

HCMC also wanted to preserve the old villas and greenery in the area, Linh stressed.

Linh said leaders of HCMC have plans to allow Saigontourist Travel Service Company to use the area more efficiently.

The two ministries have agreed to ask the Government to suspend this auction and are now waiting for a final decision.

Savills Vietnam: M&A activity in property recovers

Savills Vietnam forecast merger and acquisition (M&A) activity in Vietnam’s real estate market to show more signs of recovery in terms of transactions and investments after rebounding in the first half of this year.

The property service provider quoted statistics from the Ministry of Planning and Investment as saying that the country registered US$5.7 billion in disbursed foreign direct investment (FDI) in the first half of the year, rising 1% year-on-year. Of which, the FDI flow into the property sector made up some 10% (nearly US$700 million), mainly through M&A deals.

The company gave an example that the Hong Kong-based Tung Shing Group took a 53% stake in Mövenpick Saigon Hotel in Phu Nhuan District in January and later South Korea’s retailer Lotte Mart expanded its operations by acquiring Pico Plaza.

Sun Wah Vietnam Real Estate has committed to investing in the Bay Water project owned by domestic firms, according to the HCMC Department of Planning and Investment. In Khanh Hoa Province, an Israeli investor has pledged US$300 million for Bai Rong Resort and renamed it into Alma Resort.

Savills Vietnam said domestic M&A deals have also attracted local companies. In May, Hoang Anh Gia Lai announced its divestment from Dong Nam project in HCMC and transferred it to Him Lam Corporation. Other major residential focused deals include the sale of the Water Garden project from PPI to Dat Xanh Group and the acquisition of a 95% interest in the Sky Park Residence by Thanh Hoa Construction Corp.

Savills Vietnam said the revival of the property market and liquidity improvement has been credited to the Government’s efforts to prop up the market. Besides, some property developers have sold their projects to ease financial burdens while the enterprises with strong financial resources have bought into such projects to cash in on the improving realty market.

The completion of infrastructure and road connectivity among major metropolitan areas and satellite cities has also made the property sector attractive, Savills Vietnam said.

The improving property market will be supported by the revised Land Law, which took effect last month and is expected to ensure transparency and offer opportunities for investors in this market.

Su Ngoc Khuong, associate director of investment at Savills Vietnam, said the market continues to see residential development projects changing hands, including apartment and township projects.

Investors are also keen on operational assets with stable yields and lower risks. In the hotel sector, growing numbers of both domestic and international tourists as well as direct international flights to multiple Vietnamese provincial airports are fundamental reasons for investors to pour money into inner-city hotels and seaside resorts.

“The interest of Japanese and Korean investors, who have accounted for a majority of M&A deals in the last two years, is expected to stay strong. Besides, there is growing demand from Singapore and Taiwan groups for both residential and commercial office buildings,” Khuong said.

Khuong projected M&A activity and investments continue in these segments of the property market in the final months of 2014 and next year.

Neil MacGregor, managing director of Savills Vietnam, said at the Vietnam-Singapore Business Forum held in HCMC in June that investors in the region have ample funds and prefer Vietnam’s real estate market to that in other countries such as Thailand and Indonesia.

MacGregor said Vietnam’s property market has hit rock bottom and investors are managing to capitalize on the opportunities in this market with a focus on office, hotel and housing projects.

Businesses seen enjoying more legal protection

Private enterprises would feel safer to make long-term investments and enjoy increased protection if amendments to the Enterprise Law are passed by the National Assembly (NA), said Nguyen Dinh Cung, head of the Central Institute of Economic Management (CIEM).

The NA Standing Committee discussed the amendments to the law on August 11 morning and most deputies agreed that enterprises should be allowed to do what is not prohibited under the amended law, Cung said at a project launch workshop in Hanoi on August 11 afternoon.

Cung, who had attended the session of the committee, said there are up to 400 documents on conditional business sectors in Vietnam, causing many obstacles to enterprises.

The committee requested that the list of conditional business activities should be clarified if the Government wants the amendments to the Enterprise Law to be adopted at the forthcoming session later this year.

The move will ensure the legitimate rights and interests of businesses and remove many hurdles that enterprises have faced in their operations in Vietnam. If the new law is passed, conducting businesses that are not registered is no longer a crime and this helps businesspeople feel safer when making long-term investments, Cung said.

The contents go in line with the project themed “Restructuring for a more Competitive Vietnam” launched by the Australian government. The project is worth 3.1 million Australian dollars.

The project will point out privileges for State-owned enterprises which have distorted the business environment in Vietnam. The problems should be eliminated, Cung said.

In addition, the project will help re-allocate resources across the country and in each region to ensure the efficient use of resources.

Raymond Mallon, senior consultant of the project, said interest groups, especially State-owned enterprises, may curb fair competition by limiting participation of other companies.

Australian Ambassador to Vietnam Hugh Borrowman said Vietnam is engaging in regional and international economic agreements which embody a new generation of reforms. Australia stands ready to support Vietnam in this important reform process.

Deputy Minister of Planning and Investment Dang Huy Dong said Vietnam has coped with an economic slowdown and high inflation. Besides, macro-economic improvements are not sustainable; foreign and public debts remain high and banks’ bad debt still increases.

Military Bank wins GPEA award for excellence

The Asia Pacific Quality Organization (APQO) has selected the Vietnam Military Commercial Joint Stock  Bank (MB) for its coveted World Class Global Performance Excellence Award (GPEA) for 2014.

MB is the only bank in Vietnam to have ever been nominated for the prestigious award. Annually the APQO honours exemplary organizations from six Asian and Pacific Rim Countries for world class quality performance.

Criteria for the award include the role of leadership, strategic planning, orientations for target customers and markets, measurement, analysis and management of knowledge and the development of human resources, as well as management of business results.

The awards ceremony is scheduled for Kuala Lumpur, Malaysia from November 23-26 on the occasion of the 20th APQO International Conference on Quality.

At present, MB is one of few Vietnamese banks which have applied several international quality standard systems such as ISO 9001, Lean-Six Sigma in their business procedures.

Exports to Colombia, Bangladesh increase

Vietnam’s export turnover to Colombia and Bangladesh increased 50 percent and 51 percent over the same period last year, reaching US$111.22 million and $370.16 million respectively in early months this year, according to the Ministry of Industry and Trade.

Seafood exported to Colombia brought highest export value with $32 million, up 35.04 percent while phones and components yielded $21 million, up 35.16 percent.

The highest increase was on fibre which brought $12 million, increasing 109.47 percent

Bangladesh is a market with high demand of construction materials hence clinker and cement exports to the South Asia country created $196.3 million, accounting for 54 percent of total export value.

Export turnover of iron and steel to Bangladesh was up 414 percent over the same period last year to yield nearly $24 million. Fibre and rubbery products surged 15.49 percentand brought about $20 million.

Sustainable dairy zone breaks ground in Ha Nam

FrieslandCampina Vietnam on July 16 kicked off the construction of a dairy Zone project in Moc Bac commune in the northern province of Ha Nam’s Duy Tien District, with an aim to establish and develop specialized dairy zones for family farms, contribute to food security, create jobs and reduce milk imports.

This project is a partnership between FrieslandCampina- a leading dairy company in the Netherlands, the Dutch partners, Ha Nam authorities and the Dutch government within the Facility for Sustainable Entrepreneurship and Food Security (FDOV) for the period from 2014 to 2018.

The project seeks to establish three dairy zones by 2018, each zone having about 50 dairy farms, producing at least 7,000 tons of fresh milk per year and creating approximately 350 jobs.

Farm exports on the rise despite demand fears

Despite concerns about the slump in demand for Vietnamese farm produce in traditional markets like China, the country's exports in the first seven months were worth US$17.5 billion, an increase of 11.8 per cent year-on-year.

According to figures from the Ministry of Agriculture and Rural Development, major increases were reported in the exports of coffee, pepper, seafood, and wooden products.

But other items like rice, rubber, tea, and cassava and its products have seen a slump due to a decline in exports to China.

Many items have been sold to the EU, the US, Japan, and South Korea.

Green-skinned pomelo and dragon fruit, for instance, have been shipped to 40 countries and territories around the world.

Last year Viet Nam exported around 326,000 tonnes of dragon fruit for over $200 million. In the first quarter of this year prices of dragon fruit exported to Canada rose by nearly 16 per cent from last year to $2,300 per tonne.

Nguyen Xuan Hong, deputy head of the Ministry of Agriculture and Rural Development's board for promoting exports of vegetables, flowers and fruits, said to maintain growth in exports of farm produce, local firms must look for new markets while strengthening relations with traditional markets through improving quality by further investing in post-harvest technologies.

"Local businesses should invest in advanced technologies for processing farm produce.

"For example, they can build plants to produce ethanol from cassava and make wood products from shavings instead of importing them."

New technologies have helped increase the value of produce.

Binh Dinh Fishery Joint Stock Company (Bidifishco) exported its first batch of ocean tuna to Japan on August 6. The company's director, Cao Thi Kim Loan, said using advanced Japanese fishing technologies helped fishing vessels catch ocean tuna that meet Japanese market standards.

She added that tuna weighing 40-50kg each would be exported to Japan by air at $8-9 per kilogramme.

By applying CAS technology (which helps preserve fruits for a year while retaining quality), Luc Ngan District in Bac Giang Province has exported over 20 tonnes of lychee to Japan this year.

According to the Ministry of Agriculture and Rural Development, exports of farm produce, seafood, and forest produce accounts for nearly 20 per cent of the country's total exports on average.

Dong Nai to build clean cashew producing area

The Donafoods Dong Nai has co-operated with Target Co, Ltd of Germany to build a cashew producing area in the southern province of Dong Nai, said Nguyen Thai Hoc, general director of the Donafoods.

The two companies will start studying the cashew area and giving consultation for farmers in the two districts of Xuan Loc and Dinh Quan in September.

In the first seven months of this year, the provincial cashew export reached 15,200 tonnes, earning US$98.6 million, up 22.5 per cent in volume and 30.6 per cent in value compared to the same period last year.

The provincial cashew exporting markets are the US, China, Canada, Russia, the United Kingdom, the Netherlands, Australia and Thailand.

Tra Vinh grants VietGAP certificate for mangosteen

The Mekong Delta province of Tra Vinh's Department of Science and Technology yesterday granted VietGAP certificates for mangosteen products from Tan Thanh Cooperative and mandarin orange products of Thuan Phu Cooperative.

The certificates could help the cooperatives to expand their market reach by ensuring output and raising earnings for farmers.

There are 130 hectares of mangosteen in the province with the average production of 1,000-1,300 tonnes per year and 306 hectares of mandarin orange with the average production of 2,200-2,500 tonnes per year.

MoF calls for milk price stabilisation

The Ministry of Finance on Monday urged provincial and municipal finance departments to stabilise prices for milk consumed by children under six.

The ministry has asked departments to require dairy companies to adhere to the price ceiling.

The ministry also urged for an inspection team to be set up to take control of milk prices and tackle violations in a timely manner.

Fibre plant provides key textile inputs

The Dinh Vu Polyester Fibre Plant exported nearly 5,500 tonnes of products to the European market in its first three months of operation, according to the Ministry of Industry and Trade.

The plant has so far produced 15,500 tonnes of products, more than 8,600 tonnes of which were sold. Product quality has been tested and is equal to that of Thai, Taiwanese and Chinese products.

Covering 15 ha in Dinh Vu Industrial Park in the northern port city of Hai Phong, the US$325 million plant has a designed capacity of 150,000 tonnes yearly. The investor, Petrochemical and Textile Fibre Joint Stock Company (PVTEX), used modern technology from Germany and Switzerland. PVTEX representative Pham Anh Tuan said that capacity would be raised to roughly 77,500 tonnes this year.

The plant will supply about 40 per cent of the materials needed for Viet Nam's textile industry, helping save about $400 million per year. Each year, roughly 3,700 local textile and garment enterprises had to import fibre worth $1.3 billion from Taiwan, South Korea and India.

PVTEX is also constructing the $6.8 million Phu Bai Fibre Plant in the same area.

Deputy Minister of Industry and Trade Do Thang Hai said that Viet Nam had encouraged domestic and foreign enterprises to invest in cotton, fibre and cloth production to create a textile and garment supply chain. This was being done to add value to textile and garment products and take advantage of export opportunities after signing trade agreements, such as the Trans-Pacific Partnership Agreement and Viet Nam-EU Free Trade Agreement.

Domestic fibre supply has also increased in recent years because local enterprises have expanded production to improve the competitiveness of garment products.

The Viet Nam Textile and Apparel Association (Vitas) announced that domestic enterprises had many large projects to expand fibre production so local garment manufacturers could reduce imports.

Vitas noted that the increase in local fibre products had even led to exports, pointing out that exports of material and sub-material products, including fibre, increased to $2 billion last year.

Japan’s investment in Binh Duong quickly disbursed

Japanese investors in southern Binh Duong province have complied with their commitments to quickly disbursing investment of their projects, which were licensed last year, said local official.

Among the projects, the 95-million-USD Binh Duong Canary mall funded by the Japanese leading retailer Aeon Corp. is in its final phase and will be put into operation in November, said Mai Hung Dung, Director of the southern province’s Department of Planning and Investment.

Located at the Vietnam – Singapore Industrial Park 1 in Thuan An township, the shopping centre offers 45,000sq.m out of its 75,000sq.m for business activities. Once completed, it is expected to generate jobs for over 1,500 workers

Meanwhile, the Tokyu Binh Duong Garden City, which is being developed with an investment of 1.2 billion USD by Becamex Tokyu - a joint venture between Becamex IDC and Japanese town developer Tokyu Corp., has also completed disbursement for its sub-projects.

Its sub-project Sora Gardens I, which consists of a residential, service and shopping complex, is scheduled to be operational this year.

According to the provincial People’s Committee, the locality has so far attracted more than 2,300 foreign-invested projects with a total registered capital of nearly 19.8 billion USD.

Japan remains the largest investor in the southern province with over 220 projects and nearly 5 billion USD disbursed, focusing on high technology, electronics, medical equipment, food processing, infrastructure and urban areas.-

RoK-funded project helps modernise Mekong Delta’s agro-production

The Korea-Vietnam incubator park ( KVIP) project, which aims to help modernise food processing and agricultural mechanics in the Mekong Delta region, is keeping to schedule and will officially run in Can Tho city in early June, 2015, according to local officials.

Director of Can Tho City’s Department of Industry and Trade Nguyen Minh Toai said at a recent meeting that 32 percent of the workload has been completed, and from now to the end of the first quarter of 2015, training courses will be held to teach Vietnamese personnel how to operate the project.

According to the Department, the KVIP is being built at a cost of over 21 million USD, with 17.7 million USD funded by the Republic of Korea government and the remainder sourced from Vietnam’s counterpart capital.

Under the agreement between the two governments, the RoK side will build the facilities and provide equipment for the incubator, which occupies an area of 4.5 ha in Tra Noc 2 Industrial Park in O Mon district.

Kim Hee Sup, KVIP managing director, said the project aims to assist the development of rice processing industry in order to improve competitiveness of regional rice in the global market.

The incubator will also provide technology to modernise aquaculture in the region through popularising good aquaculture practice.

Another goal of the project is to develop made-in-Vietnam agricultural machinery with a localisation rate of up to 95 percent within the next ten years.

FTAs buoy up businesses

A recent survey has shown that despite the risks to domestic market share, the majority of enterprises in Vietnam found that free trade agreements the country has inked with its partners to be hugely beneficial, the Vietnam Investment Review (VIR) reported on August 12.

The HSBC-sponsored survey on free trade agreements (FTA) conducted by the Economist Intelligence Unit reviewed the opinions of 800 senior executives from companies in Australia, China, Hong Kong, India, Indonesia, Malaysia, Singapore and Vietnam – 100 from each locality.

Results showed that Vietnam was ranked among the top three countries in the region for FTA usage. On average, each FTA signed by the country is used by 37 percent of its exporters. Sixty five percent of respondents said they were benefiting from the FTA with Australia and 14 percent from New Zealand. In terms of exports, 87 percent reported an increase in exports thanks to the usage of FTAs, with 34 percent reporting a “significant increase” and 53 percent reporting a “moderate increase”. Only 12 percent reported that their exports had “remained the same”.

They also specified other direct benefits that the FTAs have provided for their companies.

According to a report by the EU-funded Multilateral Trade Assistance Project (Mutrap) released in March on the sustainable impact assessment of the Vietnam-EU FTA expected to be inked by late 2014, tariffs on footwear, for instance, will be reduced to zero percent by 2020, down from the existing 12.4 percent.

However, the Mutrap report also warned that reducing tariffs will have a massive impact on the volume and prices of electronic products imported from Europe. The FTA will grant a business advantage to European exporters compared to their Asian competitors.

Regarding the automation sector, Vietnam can benefit from the increase in foreign direct investment from European manufacturers, while the high-quality products from Europe can obtain a significant market share in Vietnam as well as in neighbouring countries like Laos and Cambodia.

According to Mutrap, the EU FTA would enable Vietnam to have annual gains in welfare of about 1.5 billion USD in 2020 when most of the tariff reduction will have been implemented. The estimated bump in gross domestic product is about 2-2.5 percent and real wages are estimated to improve by around 5 percent.

Locally-owned Hung Yen Garment Joint Stock Company enjoyed an export turnover from EU trade of 21 million USD last year, and expects even greater benefits once the EU FTA is signed.

“If the average export tariff is slashed to zero percent thanks to this FTA, this figure will be far higher,” the company’s General Director Nguyen Xuan Duong was quoted by VIR as saying.

According to the Vietnam Timber and Forest Product Association, who saw an export turnover of 756 million USD last year from EU trade, Vietnam’s timber industry will boom once the trade tariffs averaging 20-25 percent are removed.-

Mekong Delta increases competitiveness to draw investors

The Mekong Delta is stepping up efforts to increase its competitiveness to create a more attractive environment for businesses to run investment in the region.

The three provinces of Kien Giang, Dong Thap and Ben Tre will strive to keep their place in the “very good” group, while Tra Vinh province and Can Tho City should move one grade higher from the current “good” rating. The remaining provinces, currently rated in the median range will try to enter the “good” group.

The delta, which comprises 12 provinces and one city, plans to inject 87 trillion VND (4 billion USD) into building infrastructure for land, water and air transport. Programmes will be carried out to help local businesses enhance their capacity in terms of finance, corporate governance and marketing.

Human resources training and administrative reform are also two urgent tasks, said Director of the Vietnam Chamber of Commerce and Industry (VCCI) in Can Tho city Vo Hung Dung.

The Mekong Delta region has so far attracted 1,600 domestic and 836 foreign investment projects worth 416 trillion VND (26 billion USD) and 11.8 billion USD, respectively.

The outcome was attributed to the delta’s incentives in a wide range of fields such as tax, land rent, scientific research and technology transfer, said deputy head of the Steering Committee for the Southwest region Nguyen Phong Quang.-

Electronics firms ignore consumer rights

With a population of more than 90 million, Viet Nam is an attractive market for domestic and foreign producers and distributors of electronic products, but many companies continue to ignore consumer rights' laws, according to the Ministry of Industry and Trade.

Speaking at a seminar on protecting consumers' rights in the electronics sector in HCM City yesterday, Ho Tung Bach of the Ministry's Domestic Market Department, said with increasing income, demand for electronic products had increased strongly in recent years.

According to GFK, a market research company, Vietnamese consumers spent a total of nearly VND35 trillion (US$1.64 billion) for electronic products in the first half of the year, a year-on-year increase of 27.5 per cent, he said.

Forty retail electronics stores were established from early 2013 to June this year, Bach said.

"This proved that the Viet Nam's electronics market is a fertile land for producers and distributors of electronics," he said.

In the last two years, electronics firms had expanded their distribution networks from urban to rural areas to increase their market share, he said, noting that there was fierce competition among electronics firms, not only in terms of prices but also in services.

With diverse products, distribution methods and suppliers, the electronics market in Viet Nam had brought more choices for customers and met their demand, he said at a seminar organised by the ministry and LG Electronics Viet Nam.

But along with an increase in demand for electronics products, violations of the law on protection of consumer rights in the electronics sector had also increased, the seminar heard.

Cao Xuan Quang, head of the Viet Nam Competition Authority's Consumer Protection Division, said violations of consumer rights in the electronics sector were mainly about guarantees, insufficient information to customers, dubious promotion programmes and exaggerated advertising.

For instance, many businesses launched promotions with discounts of 50 per cent, but in reality the sale prices after discount were still higher than market prices, he said.

In another case, electronics stores said they would offer gifts worth VND2 million ($94.18) for customers who buy TVs, but the value of the gifts were not that high, just about VND200,000-300,000 ($9.5-14.3), he said.

As for guarantees according to the law on protection of consumers' rights, businesses must exchange the product or refund customers if the company cannot repair the product after three consecutive attempts during the warranty period.

In addition, businesses must bear the cost for transporting the products during the warranty period and provide customers another product for temporary use while it is being repaired.

"However, few electronics businesses have followed these regulations," he said.

He blamed the situation on a lack of understanding about regulations on protection of consumers' rights among businesses.

"Some understand, but they deliberately violate the law," said Nguyen Phuong Nam, deputy head of the Viet Nam Competition Authority, adding that "such cases must be strictly dealt with".

"On the other hand, Vietnamese customers are not fully aware of their basic rights, and they do not know where to complain or ask for compensation when their rights are violated," he said.

Pham Thi Viet Thu, deputy chairwoman of the Consumers' Rights Protection Association of HCM City, said many consumers were afraid of complaints, so they ignore them.

Thus, companies ignored their responsibilities to obey regulations on protection of consumers' rights, she said.

Legal documents clearly stipulate that consumers have eight basic rights, including safety, information, choice, complaints and compensation.

In the past three years, the Viet Nam Competition Authority had co-operated with localities to organise more than 500 workshops nationwide to raise awareness about consumers' rights among people, Nam said.

Awareness about consumers' rights had increased but not as expected, he said.

His agency would continue work to help Vietnamese consumers understand more about their rights.

"It is time for large electronics producers to train and instruct their sale agents about the importance of conducting accurate advertising as well as provide customers with sufficient information about products that customers intend to purchase," Nam said.

MoF pulls u-turn on fizzy beverage tax position

The Ministry of Finance has decided not to include carbonated soft drinks in its list of items subject to special consumption tax – a radical shift from the policymaker’s previous view.

After ardently supporting the addition of carbonated drinks to the list of SCT goods, the MoF has relented,

Huynh Vuong Nam, a senior official of the General Department of Tax Policy under the Ministry of Finance (MoF), confirmed with VIR at July’s regular government meeting that the MoF had submitted the final amended draft of the Law on Special Consumption Tax (SCT), in which it asked the government not to apply the 10 per cent SCT on carbonated beverages.

Nam said the Vietnamese government agreed with the MoF’s final decision and would submit the revised draft law to National Assembly deputies for discussion this October. If passed, it will take effect in July next year. Accordingly, carbonated beverages such as Coca Cola, Pepsi and others would not be taxed. However, Nam refused to comment as to why the MoF made this turnabout.

The ministry previously stated that carbonated soft drinks should be on the list, and cited their harmful effects, including diabetes and obesity, as the main cause behind the move. The ministry proposed an SCT rate of 10 per cent and projected that the volume of these drinks sold in Vietnam would reduce by more than 6.8 per cent due to a likely price hike.

In previous comments to VIR, Ngo Huu Loi, head of the MoF’s Tax Policy Department, said the proposal to enact a 10 per cent SCT on carbonated drinks was called for, and claimed that research conducted by health organizations showed that carbonated drinks, if consumed in large quantities, could cause obesity, diabetes and gout. He added that more than 50 countries, mostly in Europe, applied an SCT to carbonated drinks. Some neighboring countries such as Cambodia and Thailand have also put an SCT rate on carbonated drinks.

The proposal received pronounced opposition from both government bodies and beverage companies, and most notably, foreign beverage producers in Vietnam from the minute it made the headlines.

The Ministry of Industry and Trade expressed concerns that the tax would adversely impact both foreign and domestic carbonated drink producers.

Vietnam’s beverage market has for a long time been a key market for foreign firms. According to figures from the MoF, last year Vietnam consumed 925 million litres of carbonated soft drinks, of which foreign firms such as Coca Cola and PepsiCo made up the largest market share with 88 per cent.

Since it is near to impossible to compete with foreign beverage giants, domestic companies have focused on non-carbonated alternatives.

The MoF’s decision to not include carbonated drinks in the law takes the pressure off of concerned beverage companies throughout the country, particularly foreign firms, which would have been hardest hit.

Adam Sitkoff, executive director of Amcham Hanoi said, “We are pleased that the Vietnamese government has decided not to move forward with this harmful tax and the results of the government’s consultations with the business community sent a positive signal to international investors about the country’s commitment to creating a more open and competitive business environment.”

Germany’s Bosch to allocate $214.7mn for Vietnam business in 2015-2017

German engineering-electronics giant Bosch has announced a plan to channel 160 million euros ($214.7 million) into Vietnam over the next three years.

The fresh money will be used to expand its existing production site for push-belts for continuously variable transmission (CVT) in automobiles and a recently opened automotive research and development (R&D) center in southern Vietnam, Peter Tyroller, member of the board of management for the Bosch Group overseeing Pacific Asia, said in a press release this month.

In late October 2013, Bosch obtained the license for an additional investment of $240 million for its Vietnamese business, Robert Bosch Vietnam Co Ltd, to set up a new plant in the southern province of Dong Nai.

The additional investment would be used to construct the plant that makes spare car parts and fund training programs for local workers, said Vo Quang Hue, managing director of Robert Bosch Vietnam.

Robert Bosch Vietnam on July 16 announced the establishment of an automotive research and development center in Ho Chi Minh City, the second R&D center of Bosch in Vietnam. The first one, specializing in software and engineering R&D, was set up in the southern city four years ago.

The automotive R&D center initially focuses on computer-aided design (CAD), simulations and testing of automotive technologies such as CVT and fuel injection, Hue said.

The new facility is located next to the software and engineering R&D center, offering smart solutions-embedded software, hardware, IT tools, mechanical design, business IT, and IT-enabled services at the E-Town tower in Tan Binh District.

The software and engineering R&D center has grown faster than Bosch initially planned by 18 months, Hue said, adding that the center, the first of such Bosch facility in Southeast Asia, reached the milestone of 500 associates in May 2014.

In April 2011, Robert Bosch Vietnam launched its automotive belt factory covering 160,000 square meters in Long Thanh Industrial Zone in Dong Nai.

The firm began the construction work on the factory, specializing in manufacturing push-belts for CVT for a variety of car models, in September 2008.

Robert has also announced that it invested some 3.3 billion euros ($4.43 billion) in Pacific Asia in 2010-2014 to increase the localization contents of products to reach its 2020 target.

Accordingly, the Pacific Asian region continued to be the number one growth region for Bosch with sales doubling to some 11 billion euros ($14.76 million) over the past decade by the end of 2013.

The growth in the region has enabled Bosch to set higher growth rates for the next stage which will last until 2020.

“By 2020, we aim to double our sales in the region once again,” Tyroller said during a meeting at Bosch’s headquarters in July last year.

“Our investments in the coming years in Pacific Asia will remain at a high level and we will further intensify our localization efforts,” the board member added.

Bosch sees localization as the key success factor for the continuous growth in Pacific Asia, including local manufacturing, product management, engineering and a high share of local supply, the German firm said.

Bosch considers that continuous investments will strengthen its regional footprint. Today, the company is present in 16 countries in Pacific Asia with 120 locations and 52 manufacturing facilities.

Earlier this year, Bosch inaugurated a new software research and technology center in India with a focus on the Internet of Things and Services (IoTS).

In Japan, the firm’s packaging technology division moved into a new location this April, facilitating the expansion of its global center of competence for pharmaceutical inspection technology.

Bosch will also further ramp up its automotive manufacturing capacity in China by opening two new sites for exhaust gas turbochargers in Shanghai and for clean diesel systems in Qingdao by the end of the year, both located on the country’s east coast.

In mid-June, the company’s first plant in Indonesia commenced production for automotive parts such as fuel injectors and oxygen sensors.

The recently opened automotive plant in Thailand for gasoline system-related products is scheduled to expand its portfolio to chassis systems products later this year.

In 2013, Bosch focused on expanding its manufacturing capacity for automotive components by creating a Pacific Asia-wide production and engineering hub for automotive aftermarket parts in China, where a plant and testing facility for driver assistance and safety products was also opened.

In South Korea, the plant for gasoline and diesel direct injection systems expanded its capacity, and a new plant for innovative automotive technology was inaugurated in India.

The company also invested in a new production facility for its drive and control technology division which manufactures hydraulics components and systems in South Korea.

In the fast growing Southeast Asian region, Bosch extended its footprint with additional offices in Thailand, Indonesia and the Philippines, and by opening a representative office in Myanmar.

Indebted Canadian gold miner denies central Vietnam tax allegations

A debt-stricken Canadian gold mining company on Thursday continued to reject a VND297 billion (US$13.98 million) tax row in central Vietnam, while the local taxman asserted it has full data to back up its allegations.

Besra Vietnam, which manages two mining companies that are exploiting gold in central Quang Nam Province, made headlines last month for refusing to pay VND297 billion tax arrears despite repeated requests by the provincial tax department.

But David Serton, chairman of Toronto-based Besra Gold Inc, said at a media meeting on Thursday that there has been misleading information about the debt status of Besra Vietnam.

Serton made accusations that a series of newspapers have published inaccurate, misleading, and groundless reports on the gold miner, affecting its plan to resume operations.

Besra Vietnam has had its bank accounts frozen and is currently under coercive measures by the Quang Nam tax department for its repeated refusal to pay taxes.

Phuoc Son Co Ltd and Bong Mieu Co Ltd, the two subsidiaries of Besra Vietnam, have paid VND1.11 trillion ($52.25 million) worth of taxes to the central province, according to the chairman.

The Canadian company has so far invested VND3.25 trillion ($152.97 million) in its Vietnam operations, Serton said, adding that these figures prove that Besra is an excellent business that brings economic and social benefits to the Southeast Asian country.

But the press representatives attending the meeting disagreed with Serton’s arguments, saying they have accurately reported the issue, with official data provided by authorized agencies.

Luong Dinh Duong, deputy head of Quang Nam’s Tax Department, asserted that all of his statements, as well as responses to the media regarding the debt status of Besra Vietnam are totally correct and accurate.

“Phuoc Son Co Ltd and Bong Mieu Co Ltd owe VND297 billion in total,” Duong said, adding that the taxman cannot “keep silent about it any longer.”

“There is nothing to hide,” he said.

“It’s obvious that the companies have been exploiting tons of gold, and their debts are recorded clearly in books and records.”

Both of the representatives of Besra Gold Inc and the Quang Nam tax department admitted that they have failed to reach a solution to the issue after several previous meetings.

Serton even said he had written a letter to Vietnamese Prime Minister Nguyen Tan Dung, asking him to order relevant agencies and departments to lift the coercive measures.

At the end of the press meeting, the chairman withdrew his criticism against the media, saying he fully understood the situation by then.

Agri sector taps vast potential

Foreign firms are showing huge interest in Vietnam’s lucrative livestock production sector.

In early August 2014, the Philippines’ Pilmico International Pte Ltd signed the papers on the purchase of 70 per cent of the local firm Vinh Hoan 1 Feed JSC, under Vinh Hoan Corp, one of Vietnam’s leading aquatic product exporters. The remaining 30 per cent is to be purchased by Pilmico over the next five years at an agreed price. The transaction value totalled $28 million.

In June, an agreement on the deal was inked, which was aimed at empowering Pilmico to expand its core feeds business into the Vietnamese market.

Earlier this month, Japan’s Maguchi group representatives worked with the Binh Dinh Provincial People’s Committee for co-operation opportunities in producing aquatic products in the province for export to Japan.

“We think agriculture is a sector that has great potential. We have seen other investors turn their eye to this area and we have also seen that Vietnamese companies not only need foreign capital, but also foreign investors who bring to the table experience and strength that can help their businesses grow. They need expertise and access to international markets,” said Nguyen Thuy Hang, special counsel with international law firm Baker & McKenzie.

In July 2013 Baker & McKenzie advised Minh Phu-Hau Giang Seafood Processing Company (MPHG) on a $19 million acquisition by Japan’s Mitsui & Co, which purchased a 30 per cent stake of the firm.

Animal vaccine and pharmaceutical company Medion, based in Indonesia’s Bandung city, inked a co-operation deal last month with Vietnamese animal vaccine maker Greenvet to produce animal medicines in Vietnam.

Under the agreement, Medion will transfer its knowhow and technology to Greenvet. Greenvet’s plant in Hanoi will produce vitamins for poultry, then expand into veterinary medicines for pigs.

In late June 2014, Dutch-backed Rabobank clinched a memorandum of understanding on food and agribusiness (F&A) co-operation with Vietnam’s Sacombank, with the former to provide the latter with F&A expertise and know-how.

“Vietnam’s huge raw material potential and attractive investment policies are attracting many foreign husbandry firms that make animal medicines, feeds, process meat or raise poultry and cattle,” said Hoang Thanh Van, head of the Ministry of Agriculture and Rural Development’s Livestock Production Department.

Sooksunt Jiumjaiswanglerg, general director of C.P. Vietnam Livestock Corporation, said the Thai group would continue building more food processing factories in Vietnam, in addition to its existing eight animal and aquatic feed plants with the total capacity 3.8 million tonnes, and one corn semi-processing plant.

“We will also expand our products out to provinces, not only urban areas. We will also boost co-operation with local farmers,” he said.

The US’ Cargill in May 2014 completed its $20 million expansion of an animal feed mill in the central province of Binh Dinh, raising the mill’s annual capacity four fold, from 60,000 to 240,000 tonnes.

As one of Cargill’s eight compound feed mills in Vietnam, this expansion brings the company’s total investment in Vietnam’s livestock and aquaculture industry to over $110 million over 10 years, with the total compound feed capacity of 1.4 million tonnes. In 2012 Cargill committed to building more animal feed mills in Vietnam, doubling its feed capacity to 1.5 million tonnes per year by 2015.

Australian-Vietnamese joint venture Ausfeed, Indonesia’s Japfa Hypor Genetics and China’s New Hope are also operating well in Vietnam with their own plants. China’s Tongwei Hoa Binh was licensed in May 2014 to build an animal feed plant worth $10 million in the province. The plant is expected to go into service by late 2015 with production set at 200,000 tonnes.

Dutch animal feed maker De Heus is building a $30 million factory in the northern province of Vinh Phuc, its fifth facility in the country. The company’s spokesperson Nguyen Thai Van confirmed that the firm planned to build two more plants by late 2015.

Meanwhile, Chinese animal feed producer Tequhope plans to set up 12 more animal feed plants in Vietnam by 2020. The company currently has a factory in the northern province of Bac Giang.

Malaysia’s UBM Asia, a leading exhibition organiser, is co-operating with the Livestock Production Department to organise Vietstock 2014 Expo and Forum, Vietnam’s number one feed and livestock sector event. It is planned for October 15-17 in Ho Chi Minh City.

The event will be joined by a record number of 250 plus foreign husbandry firms from over 30 nations around the world, including the US, the UK, the Netherlands, Singapore, France and China, reported the department.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR