Foreign capital inflows perked up by multibillion-dollar power plant licensing
Source: Vietnam Investment Review
The Vietnamese government’s granting of investment certificates to thermal power plants with a total investment capital of $8.37 billion contributed to raising the total value of foreign investment capital in Vietnam to $33.09 billion in 11 months of 2017. According to information published by the Ba Ria-Vung Tau People’s Committee, Summitomo Group from Japan has been granted the investment registration certificate for its Van Phong 1 coal-fired thermal power plant with a total investment capital of $2.58 billion and capacity of 1,320 megawatts after 11 years of waiting. In 2006, Sumitomo proposed its interest in developing a 2,640MW thermal power plant on an onshore and offshore area of 350 hectares. The construction would be divided into two phases, with the first carrying an investment capital of over $2 billion. In 2009, the government agreed to Sumitomo to implement the project under the build-operate-transfer (BOT) form. However, during the process of completing the investment procedure, the investor faced numerous difficulties, especially in the negotiation of the BOT contracts, thus construction works have yet to be kicked off. Besides, the project required a large area, leading to difficulties in site clearance. Additionally, the long-delay in construction after completing site clearance also made residents extremely anxious. At present, having received the investment certificate, the investor expects to accelerate completing the remaining procedures so that the construction can be kicked off in early 2018. Along with Van Phong 1 thermal power plant, two other large-scale thermal power plants received the investment certificate since early 2017. These include the $2.79-billion Nghi Son 2 located in the central province of Thanh Hoa and the $2.07-billion Nam Dinh located in the northern province of Nam Dinh. Both projects would be develop under the BOT format. Regarding the contribution of thermal power plants to foreign investment capital inflows, for 11 months of this year, the power production and distribution sector ranked second on the list of industries receiving the largest FDI in the country, following the manufacturing and processing sector, with a total investment capital of $8.37 billion, making up 25.3 percent of total foreign investment inflows. According to statistics published by the Ministry of Planning and Investment’s Foreign Investment Agency, in the 11 months of this year, Vietnam received $33.09 billion in foreign investment capital, up 82.8 percent on-year. Notably, there are 2,293 newly-registered projects worth $19.8 billion, up 52 percent compared with the same period last year. 1,100 existing foreign invested projects raised their investment capital with the total value of $8 billion, posting a year-on-year increase of 57.6 percent. Foreign investors also spent $5.29 billion (up 57.6 percent) buying stakes in local companies.
Work still to be done on EU trade deal: experts
The EU-Vietnam Free Trade Agreement (EVFTA), set to be signed next year, will benefit both sides, a workshop heard in Ho Chi Minh City on November 28. “The EU is a very important partner with significant impacts on the development of Vietnam,” said former trade minister Truong Dinh Tuyen.
“The EVFTA has become more important to the country after the US’s withdrawal from the TPP,” he noted. Phan Duc Hieu, deputy director of the Central Institute for Economic Management, said the EVFTA negotiations were concluded in 2015, and this is the time for a general review and assessment of the deal. Dr Claudio Dordi, team leader of the European Trade Policy and Investment Support Project (EU-MUTRAP), said: “There is still a lot of work to be done in Europe” due to several reasons. Firstly, trade agreements and trade negotiations are not really popular in western countries now, especially with US President Donald Trump’s policies creating uncertainties in global trade, he said. Secondly, after a lot of jobs were lost in Europe to the economic downturn, EU countries are fearful of competition from others, he said. Thirdly, Europe prefers to deal with countries that have a level playing field, he said. Besides, there are several issues related to sustainable development that need further assessment, but the two sides are working very hard to sign the agreement as early as next summer (around July or August), he added. Once the agreement comes into effect, the EU will remove all import taxes on Vietnamese goods within seven years, while Vietnam will do so within 10 years. This means many of Vietnam’s main export products will be able to enter the EU completely without tariffs, and experts said this would be a huge boost to the country’s exports to the EU. According to a study by EU-MUTRAP, the EVFTA can boost Vietnam’s GDP by 3.2 billion VND by 2020 and 7.2 billion USD by 2030. Its exports to the EU will rise to 42 billion USD by 2025 and 47 billion USD by 2030. Fifty percent of the tariff lines on aquatic products will be removed right after the FTA takes effect. There will be no tax on rice (with a quota of 20,000-30,000 tonnes a year). Goods like coffee, pepper, cashew, honey, fresh vegetables, fruits and their processed products or juice will also see tariffs removed instantly. They attract rather high tariffs at the moment of up to 20 percent on some items. Apparel and footwear are two of Vietnam’s major export items to the EU, with shipments of 3.5 billion USD and 4 billion USD a year. They will see tariffs cut after the FTA takes effect. Wood and wood products, computers and electronic products and components will also see rates cut. Despite the tax breaks, the EU is a very demanding market in terms of quality, food hygiene and safety standards and protection of consumer rights. Therefore, Vietnamese businesses must first upgrade their value chain and play by the rules of the EU, especially with respect to those on origin, experts warned. “EVFTA will provide a lot of important opportunities for Vietnamese business, but of course they should be able to exploit them,” Dr Dordi said. He said Vietnamese businesses usually focus on the last part of production which has very little value. For example, if Vietnam produces garments from home-made fabrics rather than from imports, it would benefits more from the EVFTA, he said. “In general, many key export sectors such as footwear, textiles and garments, fisheries, wood and wooden products are growing at slow speeds because most of the production in these sectors is based on low value-added stage of production.” They should upgrade their value chain and start more “made in Vietnam” manufacturing, improve their capacity to produce processed foods and high value-added products to take full advantage of the EVFTA, he added. The workshop was held to discuss the potential impacts of the EVFTA. The EU is an economic union consisting of 28 member states and a population of 508 million, with a total GDP of 18 trillion USD, making it the largest single market in the world. It is one of Vietnam’s leading trade partners, accounting for 19 percent of the country’s exports. Vietnam-EU exports were worth 20.6 billion USD in 2015.
M&A in Vietnam – Attractive investment channel
Mergers & Acquisitions (M&A) activities in Vietnam has become an attractive investment channel for enterprises planning to expand business activities, as well as looking for new way of doing business. Recently, the scale of M&A activities has become bigger with positive impact from the global integration process. According to the Director of Vietnam M&A Forum Dang Xuan Minh, in 2016, total M&A deals in Vietnam was 500 deals, contributing to 5% of total M&A deals in South East Asia with value of 5.8 billion USD. In which, investors are mainly from Singapore, Japan, Korea, and Hong Kong, with Korea in the top 4 of highest M&A deals in Vietnam. As such, fields such as consumption, retail, industrial production, real estate, education, media and finance are attracting huge amount of financial resources; and on top is M&A in retail sector. Many investors are planning to acquire Vietnamese companies to expand market shares, namely Thailand’s investors acquiring Metro, BigC and Nguyen Kim. In real estate, Korea has some big M&A deals such as the take over of Kangnam building and Hanoi-Deawoo Hotel. “Recently, Vietnam’s government has eased regulation on the limit number of assets owned by foreign investors. As such, there are big opportunities for foreign investors during the process of state owned enterprises equitization” – Minh said. Vice Director of Korea’s M&A Center of Korea Trade – Investment Promotion Agency (KOTRA) Mchael D. Choi said, recently, many Korean enterprises are showing interest in M&A deals in Vietnam. As such, the two countries can cooperate efficiently through M&A deals. At present, Korean investors are negotiating with 12 Vietnamese enterprises in fields of food production, pharmacy, and finance. From expert’s perspective, in order for M&A activities to be more efficient, and contributes more to the economic growth, it is necessary to have appropriate mechanism and policies to support. For example, it may be the policies to facilitate the equitization process of SOEs, speeding up the divestment process for foreign investors, supporting domestic enterprises mobilizing financial resources in foreign stock markets. Besdies, the government need to pay attention and create more chances for foreign investors taking part in M&A deals in Vietnam. According to Michael D. Choi, Korea are giving priority to allocate financial resources for investment fund focusing on M&A deals. In Korea, there are 14 organizations and investment funds with capital of up to 1 billion USD. Therefore, in order to have more M&A deals between Korea and Vietnam, Vietnamese enterprises need to have more accurate information and issuing financial report in a timely manner. Statistics from the State Capital Investment Corporation (SCIC) showed that, in 2017, SCIC will divest the government fund from 114 out of 132 SOEs. At present, this process is completed in 30 enterprises, with the remaining enterprises are expected to be complete by the end of this year. Despite the limited time left, but there are high chances that it will be success with many big SOEs such as Sa Giang, Tien Phong Plastic, Binh Minh Plastic, Bao Minh Insurance and FPT Group.
Foreign investors interested in waste treatment in HCM City
Several Finnish businesses have expressed their desire to work with Vietnam Waste Solutions Co., Ltd. (VWS) in converting waste into renewable energy during their recent trip to VWS’s Ho Chi Minh City-based Da Phuoc waste treatment complex. Petri Peltonen, Finnish Deputy Minister of Economic Affairs and Employment, said he believes that collaboration will help produce more solutions to treat waste and create renewable energy, meeting sustainable development requirements. He noted that as a big and populous city, HCM City needs more cutting-edge technologies to facilitate waste treatment and renewable energy creation. The Finnish firms were interested in advanced technologies used in the complex, which handles up to 5,000 tonnes of waste a day. Kevin Moore, VWS Managing Director, said the company plans to treat unsorted waste that contains impurities in order to collect organic waste. This waste will be processed at an incineration plant with an output of 1,000-1,500 tonnes per day. Only the leftover after incineration (about 5 percent of the mixed waste) will be buried in landfills. VWS will build transfer stations that link the Da Phuoc waste treatment complex in the city with the Green Technology Park, also invested by the company in the southern province of Long An, using barges that form a closed system. The project is scheduled to be completed by 2020. Recently, 42 experts from the Korea Association of Waste to Energy Technology (KAWET) also visited the Da Phuoc waste treatment complex. Yongseung Yun, KAWET President, said the visit will serve as a basis for them to study, evaluate and plan for investment in the environmental sector in Vietnam, especially in waste treatment.
Circular a help card for casinos
After a casino decree was issued earlier this year, a corresponding circular has recently been released to guide casino operators in their implementation, considering factors such as taxation, regulatory oversight, and the allowance local gamblers. Back in late January, the government issued the long-awaiting casino Decree No. 03/2017/ND-CP. Although the issuance of the casino decree after almost 10 years of waiting has opened doors to the lucrative casino industry, foreign investors have been very hesitant about making their entry, and instead are laying low, awaiting further clarification from relevant authorities. More than six months after Decree 03’s effective date, on October 5, the Ministry of Finance issued Circular No. 102/2007/TT-BTC guiding the decree. The new circular helps to complete the regulatory framework for casino business in Vietnam, giving the young industry a much-needed push.
Locals throw the dice: Local Vietnamese will be permitted to gamble at specific casinos approved by competent authorities on a three-year trial basis, calculated from the first opening day of the authorised resort. According to the media, only two casinos are currently implementing the three-year pilot scheme to allow Vietnamese gamblers. One is located within Phu Quoc district in Kien Giang province in southern Vietnam, and the other is located in Van Don district in Quang Ninh province in the north. There is also a small likelihood that the casino in The Grand Ho Tram Strip will join the list.
Local players are only permitted to enter casinos if they are at least 21 years old, they earn a monthly salary of at least VND10 million ($454), they pay an entrance fee of VND1 million ($45) for 24 hours or VND25 million ($1,136) per month, and have no outstanding objections in writing from siblings, spouses, parents, or other family members. These conditions however – especially the monthly income requirement – are complicated to prove and were not delineated in Decree 03. The circular further details the requirements. Local gamblers must have:
– Documents (tax declarations or a confirmation from tax authorities) proving taxable income at level three or above pursuant to the Law on Personal Income Tax;
– A notarised house or assets lease contract, where the total monthly rent is VND10 million or above;
– A notarised bank savings book or bank statement with a term of one year or more showing no less than VND10 million;
– Other documents proving that their usual monthly income is VND10 million or above;
– Or, in cases where a single document is not sufficient to prove the player’s monthly income, they can submit several documents to prove that their earnings are at or above the required threshold.
Casino-operating enterprises must arrange an appropriate area on their premises for state authorities to perform management and surveillance activities either directly or via electronic equipment and camera systems. Transactions under supervision include both monetary transactions and ones involving tokens that are used in lieu of currency. These transactions must be recorded and reported to relevant tax authorities.
In addition, state authorities will also supervise – either directly or via electronic and camera systems – the calculation of transactions performed at cashier areas where tokens and bills are counted and stored.
Casino-operating enterprises must exchange VND or other currencies for tokens and vice versa when players cash out. The exchange rates between tokens and currency must be based on the daily rates of the licensed bank where the casino’s specialised foreign currency account is opened. Regarding weekends and bank holidays, the exchange rates will be based on the previous day’s rates. A casino-operating enterprise may accept bank cards, but all transactions must be in VND. If Vietnamese players win, they are only allowed to receive their winnings in VND – whether in cash or by bank transfer. This is not the case for foreign players, who are allowed to receive winnings in foreign currencies.
What it all means: The issuance of Decree 03 and Circular 102 will help Vietnam’s young casino industry to attract foreign investment while limiting foreign currency losses to casinos in neighbouring countries. According to recent statistics, Vietnam loses about $800 million in tax revenue annually from players who cross the border to gamble in Cambodia. Additionally, many places in the region already allow casino business, such as Macau, Singapore, the Philippines, South Korea, and Japan. In this context, Vietnam still has a lot to do in order to not only retain Vietnamese players in the market, but also to attract foreign players who are already familiar with other regional casinos.
OTHER NEWS ON THE AUSCHAM WEBSITE
In the toolbar of this website, click on “NEWS” for the drop down menu which includes: