Vietnam business

The State Bank is setting watchful eye on the local banks’ operations to ensure banking system stability.

With Document No.1255/NHNN-TD dated May 13, 2008, the State Bank requires the commercial banks to submit daily reports to the State Bank on daily operations such as total assets, reserve requirements, capital allotments and short-term capital surplus/shortage predictions. Especially, borrowings from other banks should be specified in details.

Commercial banks are also asked to actively take part in open market operation (OMO), or via refinancing channel to source funds, in case of capital shortages. “The document was designed to address the risk of failures in banking system due to running short of capital and setting stricter controls on local banks,” said a State Bank official.

OMO is an operation which the commercial banks sell or buy the bankable papers such as treasury notes, central bank notes or municipal bonds of Hanoi and Ho Chi Minh City to the central bank. In return, the central bank would pump out or withdraw the cash from commercial banks.

Meanwhile, refinancing is a channel via which the central extends loans to the commercial banks with the bankable notes as collaterals. However, commercial banks are not allowed to use the funds obtained from refinancing channel for credit services, according to the document.

Since the beginning of the year, the issue of some commercial banks pushing credit services despite the State Bank’s call to slow down credit growth has caused trouble to the fight against inflation. With this document, the supervision on commercial banks would be strengthened.

“Though the State Bank has directed to cap credit growth at 30 per cent, some banks’ have exceeded the limit so far,” said a State Bank official “With this new document, the State Bank’s branches in provinces would be officially entitled to supervise the banks’ credit growth and conduct appropriate punishments if needed,” the official said.

Over the first four months of 2008, credit growth has hit 14.73 per cent while consumer price index has increased by 11.6 per cent. Earlier this year, the prime minister assigned the State Bank control the credit growth not exceeding 30 per cent in a bid to curb the consumer price index (CPI) increases.

In 2007, the credit growth of 53 per cent was largely attributed to Vietnam’s CPI record increase of 12.63 per cent.

(Source: VIR)

Vietnamese exporters are urged to gain some extra REACH - a new European chemical substances regulation for products exported to the EU.

Under the REACH, which stands for registration, evaluation, authorisation, and restrictions of chemicals, all chemicals produced in large volumes or considered potentially damaging to human health or the environment will be subject to registration with the European Chemicals Agency.

Launched in June 2007, REACH will be enacted in phases, beginning with pre-registration from June 1 to December 1, 2008. During this period, brand owners, manufacturers and importers need to declare information about chemical substances in their products being exported to the EU.

Bureau Veritas Hong Kong Company vice president of services development David Horlock said last week at the seminar introducing REACH to Ho Chi Minh City that although the regulation had yet to come into force, local businesses needed to act quickly as the regulation’s required process was complicated and time-consuming.

“Don’t wait until the deadline to pre-register your products’ substances, as I know this is a popular way in Vietnamese culture, unless you want to get behind the game or be totally dropped out of this largest import market. This is the “law” and everyone has no way but to comply with it and the sooner you get to know it the better your business is,” said Horlock.

As stated by the European Chemicals Agency, the full compliance with REACH for pre-registered products can then be achieved over a 10-year timeframe, to prove that the declared chemicals are not known to cause harm to human health and the environment.

From December 2008 onwards, any products with chemical substances not pre-registered must undergo a long and detailed registration process before they can be exported to the EU. “This complex law has the potential to impact almost all Vietnamese businesses exporting to European markets. As a result, developing the fullest possible understanding of REACH is essential for all Vietnamese exporters,” said EuroCham Hanoi office director Nicholas Greenfield.

“It [REACH] has a wide range of implications for brand owners, retailers and their supply chains, not only just for exporting to the EU market but also for Asia, especially Japan or US markets as well,” added Greenfield.

Horlock, however, said that the regulation now was just applied in 27 EU-member countries while the US and Japan, the two other biggest imported countries of Vietnam, are still reviewing the regulation.

“Those markets will sooner or later apply REACH as they have very big and famous franchised and exported products into the EU market, so when exporters have currently dealing with different regulations of chemical substances in exported products such as Prop 65, RoHs, EN71, and CSR, REACH will be the mixture of all these regulations and voluntary initiatives of industries,” Horlock said.

Vietnam will have its first chemical law being effective after July 1 2008, which will take law makers some more time after the effective day for issuing under-law documents for implementation instruction. REACH, in the mean time, will be the only and the most comprehensive regulation for local enterprises to manage their chemical substances in products for trading domestically and going abroad.

“While Vietnam’s chemical law requires registration of only new chemicals, REACH requires the registration of both existing and new chemicals used for even articles, Vietnamese exporters should effectively adopt REACH from now on,” said Dang Phan Thu Huong, deputy director general of the Ministry of Industry and Trade’s International Cooperation Department.

(Source: VIR)

Tax lawmakers are feeling the heat as the business community is urging the National Assembly to remove the cap on advertising and promotion tax deductions.

Several business associations have joined Vietnam Chamber of Commerce and Industry’s (VCCI) efforts to convince the country’s supreme legislative body to nullify the cap when amending the Corporate Income Tax (CIT) law. The revised law is expected to be passed by the National Assembly on June 3.

VCCI chairman Vu Tien Loc told Vietnam Investment Review that he supported businesses’ call for the abolishment of the advertising and promotion (A&P) tax deduction cap. He said the VCCI had sent an official letter to the revised CIT law drafting committee, the National Assembly’s Finance and Budgetary Committee and concerning bodies to formally request for the nullification of the cap.

“Despite the proposed CIT Law amendments insisting on capping businesses’ A&P expenses, whether the cap is to be removed or not will depend on National Assembly deputies’ ballots rather than the will of the drafting committee’s members,” said Loc.

Under the current rules and the proposed amendments, A&Ps are limited to a maximum of 10 per cent of a firm’s total reasonable expenses. The expenses that exceed this cap will not be CIT deductible.
Many business associations have also sent the same written requests to relevant National Assembly’s agencies, hoping the issue will be high on the ongoing lawmaking session.

The issue has actually turning hot on the National Assembly’s agenda, being the focus point of most of the 23 opinions on the revised CIT Law voiced in the session. “There should be no cap stipulated in the revised CIT Law,” Pham Thi Loan, a deputy from Hanoi told the National Assembly.

Even in case the cap is retained due to tax authorities’ management incapability, a common level should be applicable to both small and big enterprises, Loan suggested. The proposed amendments mandate that small- and medium-sized enterprises (SMEs) shall be subject to a 15 per cent A&P cap during their first five years of operations. Meanwhile, big enterprises are subject to a 10 per cent cap.

Mai Huu Tin, a deputy from southern Binh Duong province, recommended an ‘interim’ solution by applying a common cap of 15 per cent if the Ministry of Finance was really not able to monitor the A&P expenses at businesses.

Nguyen Thi Ly, a deputy from Thanh Hoa province, meanwhile said a 20 per cent cap on big enterprises and a 25 per cent level applicable to SMEs during their first five years of operation should be adopted. The maintenance of a cap, she explained, was to secure tax collection.

(Source: VIR)

The Canada-based Asian Coast Development Ltd (ACDL) is to break ground for the construction of a 4.2-billion-USD resort on May 24, just one day after getting a license for Vietnam’s largest tourism venture.

The Ho Tram Tourist Site will be built in the southern coastal province of Ba Ria-Vung Tau and have 9,000 luxury rooms and an entertainment site.

Once put into operation during the third quarter of 2010, the first phase of the project will see a five-star hotel with 1,100 rooms and a casino.

The second phase will be completed by 2011 with construction of a luxurious resort, a casino, 10 restaurants and a night club.

Construction of the entire project is scheduled to take 10 years.

ACDL’s CEO Paul Steelman described the project as one of their best opportunities for its location by one of the world’s most beautiful and cleanest beaches.

The New York Times selected Vietnam as one of the 53 most attractive destinations in 2008.

The country has moved up from the sixth to the fourth place in the World Travel and Tourism Council’s ranking in regard to the world’s fastest-growing tourism destinations.

In the first four months of 2008, foreign arrivals reached almost 1.7 million, up by 16 percent over the same period last year.

The same growth rate was recorded last year when 4.2 million foreign visitors were reported.

(Source: VNA)

Yahoo, the leading information technology company in the US, has revealed a strategy to increase its presence in Vietnam, offering a number of new internet products and services.

Yahoo Vietnam introduced two new products for Vietnamese customers on April 29, including a blogging tool, Yahoo!360plus and a local music service, Yahoo!Music. It also announced that it will continue developing more services in Vietnam such as Yahoo!Search and iCafe.

The company also revealed it will launch a brand advertising campaign based on the traditional Vietnamese tale, the Tam Cam. It will also aim to increase cooperation with local partners and develop a stronger local staff base.

General Director of Yahoo Vietnam Vu Minh Tri estimates Vietnam will have 30 million internet users by 2010, calling the country a promising market that should not be ignored by world Internet services suppliers.

Yahoo’s long-term strategy for Vietnam is to make Yahoo! the favoured starting point for web surfers and a partner of choice for publishers and network developers, explained Tri.

The net company will work towards this by redeveloping the clarity and diversity of the Yahoo Vietnam home page and upgrading existing services such as Yahoo Mail, Yahoo Messenger, Yahoo 360plus and Yahoo search services for mobile phone users.

IT experts say Yahoo’s established presence and investment strategy means the worldwide company remains a strong competitor for Vietnamese businesses operating in this field.

However, the set up of the Vietnam Internet Association in late 2007, by the EVN Telecom, Viettel Telecom, Saigon Postel, VNPT and NetNam company, aims to improve domestic internet service quality and create a favourable environment to develop business in this field.

According to a survey by Asia Digital Marketing Yearbook, Vietnam has the 17th highest number of internet users in the world. The total number of the users reached 18.6 million in late 2007, accounting for 22 percent of the country’s total population.

(Source: VNA)

The Japanese Minister of Economy, Trade and Industry (METI), Akira Amari, says Vietnam is an attractive destination for foreign investors, especially Japanese entrepreneurs.

The Japanese minister attributed this to the fact that both countries share similar cultural identities and Vietnam has a high-quality and creative workforce.

Meeting with Vietnamese Minister of Industry and Trade Vu Huy Hoang during an open dialogue on Japan-Vietnam contributions to Asian economic development on May 22, Minister Amari commended Vietnam ’s role in the Association of Southeast Asian Nations (ASEAN) and the Mekong sub-region.

With its great potential, Vietnam has been able to catch up with the development level of big regional countries and will become one of the leading nations in ASEAN in the future, the Japanese minister said.

At present, both sides are working hard to complete the negotiation for the signing of an Economic Partnership Agreement in order to further facilitate bilateral economic, trade and investment cooperation, he said.

Minister Hoang told his Japanese counterpart that Vietnam always considers Japan as an important leading partner.

“There are around 1,000 Japanese businesses investing more than 9 billion USD in Vietnam,” the Vietnamese minister said.

“Japan is also one of Vietnam’s biggest trade partners with two-way trade fetching almost 4 billion USD in the first four months of the year and likely to hit 15-16 billion USD this year, fulfilling the target many years ahead of schedule.”

Minister Hoang also said Japan is Vietnam’s biggest official development assistance (ODA) donor, making up around 30 percent of the Southeast Asian country’s total ODA.

Hoang said Vietnam has an abundant young workforce with around 70 percent of the population aged below 40, an increasing consumption power and a favouable geographical site which has helped the nation become a production base and part of the foreign business goods distribution chain.

A constantly improving investment environment and a stable socio-political situation make Vietnam a safe destination for investors and tourists, he added.

At the dialogue, the two ministers also discussed atomic energy cooperation.

Minister Amari said Japan is willing to provide energy saving technology to ASEAN and Vietnam in the context of an increasing demand for energy in the region and scarcer natural resources.

Vietnam and Japan have exchanged a nuclear energy cooperation document and both sides will implement cooperation in the future, he added.

Minister Hoang praised Japan’s effective assistance to Vietnam in electricity and coal mining, as well as research activities in using nuclear energy for peaceful purposes, and said he hoped both sides will further fasten their cooperation in the fields in the future.

On May 21, Minister Hoang held talks with METI Minister Amari at the METI headquarters. He also met with Japan-Vietnam Parliamentary Friendship League President Tsutomu Takebe, Japan Federation of Economic Organisations (Keidanren) Chairman Fujio Mitarai, the Japan External Trade Organisation (JETRO) Chairman Hayashi, Japan Atomic Industrial Forum, Inc. (JAIF) President Hattori and the leaders of Toyota, Sumitomo and Itochu.

(Source: VNA)

Local officials want more people to travel on the Ho Chi Minh City ’s waterways to climinate the burden on the city’s roads.

Under a new city zoning plan for the water transport to 2020, the city is scheduled to build more interior water traffic routes and trans-provincial routes connecting HCM City with southeast and southwest provinces.

The proposal aims to reduce the stress on city roads and develop tourism services on the city’s waterways.

Officials said currently there were only four waterway passenger stations – Ton That Thuyet Wharf in District 4 which links with Tra Vinh and Ben Tre provinces, Hiep An Wharf, Tan Binh Dong Wharf in District 8, and Bach Dang Wharf in District 1.

The most important tourist port, Bach Dang, handles 7,000 hydrofoil trips each year, with an average of 400,000 passengers.

The city Transportation Development Research Centre said it had not been managed well. The centre has proposed the city committee to build more wharves and terminals and create passenger boat routes throughout the city.

Le Huy Thao, director of Dong Song Xanh Company (Greenlines), which owns 10 hydrofoils that carry 50,000 passengers annually, said that the shortage of wharves made it more difficult to create a city boat network.

His company has plans to start a water-taxi and speedboat service in the city, but only if the city offers a financial subsidy, as it does for the bus system.

Trans-provincial waterway transport is in better shape, but higher fuel prices have eaten into his company’s budget.

The company plans to offer a water taxi service from Hon Chong to Phu Quoc Island in Kien Giang province.

Along with building boat and bus routes, departure and destination ports along Bach Dang-Thanh Da-Lai Thieu will be built for tourism and transport services.

The boats are expected to carry 1,000 passengers a day and will operate during the daytime like passenger buses on the roads. Each boat would be able to carry 15 to 20 passengers.

(Source: VNA)

Vietnam’s financial services markets are expanding rapidly, but retail and small-and medium-sized enterprise (SMEs) market penetration is still relatively low, according to a report from PricewaterhouseCoopers (PwC).

The report, titled Poised for Rapid Growth: Entering the Vietnamese Financial Services Sector, was delivered at the Global Tax Symposium organised by PwC in Ho Chi Minh City on May 22.

Even though Vietnam is still a largely cash-based society, use of banking services is growing rapidly.

The banking sector has been expanding at around 20 percent per year since the beginning of the decade and has now reached 80 billion USD in total assets.

The report says the revenues of the top 10 banks increased by an average of more than 50 percent and their profits by an average of 195 percent in 2006, as demand soared, efficiency improved and costs decreased.

The potential for further expansion as the economy develops and incomes increase is evident from the fact that only around 5 million people have bank accounts and even fewer have credit cards.

A key development in the credit market in recent years has been unsecured lending.

In addition to consumer lending, another potential growth area has been SME credit, a sector that up to now has been largely funded by private savings.

The expansion of the credit market and the offering of unsecured loans are placing tougher demands on risk management.

The ability to rate credit worthiness is likely to be an important competitive factor for lenders, who will need to take account of both qualitative as well as quantitative factors, and may encourage some to seek the expertise of foreign partners.

Some 230 PwC clients, partners, global and regional PwC leaders are attending the two-day symposium, held in Vietnam for the first time.

With this year’s theme, Implementing Tax Strategies in Asia -What is Possible?, the symposium focuses on the practical aspects of managing taxes and building effective tax strategies for companies in Asia.

(Source: VNA)