news collection 2016 vol 050

SEIKO IDEAS CORPORATION

Vietnam Business Review

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Vol 50, December 21st 2016

BUSINESS REVIEW VIETNAM

How will the real estate market perform in 2017?

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http://english.vietnamnet.vn/fms/business/169453/how-will-the-real-estate-market-perform-in-2017-.html



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INSIDE THIS ISSUE

HIGHLIGHTS

How will the real estate market perform in 2017?

Alarm bells ring over Vietnam catfish exports quality

The side effects of FDI tax loss

Vietnam loses nearly $450m in petroleum revenue because of tax cut

ECONOMY

Trump tells Vietnam PM he hopes ties will grow stronger

Vietnam – Japan sign Mekong deal

Construction industry to thrive in 2017

FINANCIALS

Many joint stock banks to list soon

Banks fear new law may hinder debt collection

INVESTMENT

RoK – leading foreign investors in Vietnam

Japanese capital poured into “intensive farming” in Vietnam

Hanoi seeks software park funds

ENTERPRISES

Masan to issue $300m non-convertible bonds to foreign investors

Vietjet test listing on homeground in February 2017

MARKET & PRICES

Imported meat forecast to flood Vietnamese market

Vietnam telecoms market needs boost

Urban FMCG market recovering, rural market slowing

LEGAL UPDATES

The new list of conditional business lines



1

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ECONOMY

Trump tells Vietnam PM he

hopes ties will grow stronger

Reuters - In a telephone call, U.S.

President-elect Donald Trump told

Vietnam's prime minister he wanted

to further strengthen fast-warming

ties between the two countries, the

government of the Southeast Asian

nation said on Thursday.

Vietnam has advanced ties with

the United States to a new level

under the Obama administration as

it faces down communist neighbor

China's challenge to its territorial

claims in the busy waterway of the

South China Sea.

During Wednesday's conversation,

Vietnamese premier Nguyen Xuan

Phuc congratulated Trump on his

election win and stressed the

importance of maintaining

friendship and cooperation.

"President-elect Trump spoke highly

of the achievements of Vietnam, as

well as the positive developments in

bilateral ties," Vietnam's

government said on its news

website.

"He also asserted his wish to

cooperate with Vietnam to

accelerate the relationship

between the two countries."

Trump has had conversations with

several leaders of countries locked

in maritime disputes with China,

among them Japan, the Philippines

and Taiwan.

His trade platform runs counter to

Vietnam's interests, however, with

his opposition to a Trans-Pacific

Partnership proving a major

setback for Southeast Asia's biggest

exporter to the United States.

Just days after Trump's win, Phuc

told parliament that ratification of

the TPP would be shelved because

of political changes in the United

States, but Vietnam still wanted

good relations with Washington.

In a separate development, a U.S.

guided-missile destroyer, the Mustin,

visited Cam Ranh international port

on Thursday in a routine technical

stop, the U.S. embassy said.

The ship's visit was "an example of

the depth of our comprehensive

partnership and the importance of

strengthening our civilian and

military ties," said U.S. Ambassador

Ted Osius.

Vietnam – Japan sign Mekong

deal

VNS - The Viet Nam Chamber of

Commerce and Industry’s branch

in Can Tho City and Japan’s Brain

Works Co signed a memorandum

of understanding (MOU) to

stimulate Japanese investments in

the Cuu Long (Mekong) Delta

region and enhance trade co-

operation between the two

countries.

VCCI Can Tho and Brain Work Co,

a Japanese enterprise specialising

in investment advice, ICT and

human resource training with 20

years of experiences in Viet Nam,

will promote a programme to boost

annual trade exchanges between

businesses from both countries.

The programme will include market

research, business consulting,

training and connecting businesses.

The two sides agreed to establish a

Research and Development Centre

of Information Communication

Technology (ICT) in the Mekong

Delta region in 2017.

The centre will consist of 11

members, including a non-profit

organisation in charge of

supporting and developing the

Japanese business community in

Asia, together with 10 Japanese

software programming, ICT, Internet

of things (IoT), education, health

and investment promotion firms.

Vo Hung Dung, Director of VCCI

Can Tho, said the centre is critical

to boosting ICT development in the

region and also a breakthough in

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2


ECONOMY

attracting foreign investments in this

sector in line with the socio-

economic development direction

of Viet Nam, in general, and Can

Tho City, in particular.

Dung noted, however, that most

businesses in the region are of small

and medium size, which remains a

problem since they mainly operate

in the field of exports such as rice

and seafood and few are in raw

materials. “Therefore, to meet

market requirements, it is inevitable

to apply modern technology in

production to create high value-

added products as well as

improving governance,” Dung said.

Noboru Kondo, President of Brain

Works said that Can Tho Province

has huge development potential

and plays an important role in

connecting Vietnamese and

Japanese businesses in the Mekong

Delta region.

Although Japan’s FDI places

second in Viet Nam, with more than

US$40 billion, its FDI in the Mekong

Delta remains modest. As of 2016,

Japan had 140 new projects in the

Mekong Delta with a total capital

of over $645 million.

Japan’s Aomori apples come to

Viet Nam

Fresh apples marketed by Aomori,

one of the biggest apple producers

in Japan, will be available on the

shelves of several supermarkets

from now.

Aomori apples will debut in Intimex,

BigC and Unimart stores on

December 18.

Dinh Tien Thanh, general director of

Intimex Viet Nam, said that it took

two years to work with Aomori on

the deal, which will include the two

most popular types of Aomori

apples, Fuji and Kinsei.

Construction industry to thrive

in 2017

VNE - Vietnam’s construction

industry will grow by 6.3% in real

terms of 2017 and 6.1% in 2018,

according to Business Monitor

International (BMI) Research, a

Fitch Group Company.

“We have a positive outlook for

Vietnam ' s construction and

infrastructure industries, with growth

supported by high-value transport

and energy projects, regulatory

reforms and favorable economic

conditions.” the report stated.

Vietnam has a strong project

pipeline, particularly in transport

and power, as it seeks to improve

logistics and address electricity

shortages. Gov’t is seeking to draw

in foreign private sector expertise

given the high technical

requirements of these projects.

Ongoing regulatory reforms

intended to privatize and break up

state-owned enterprises and

encourage private-sector

participation in the infrastructure

space bodes well for continuing

levels of investment.

Vietnam scores of 54.4 in our Asia

Pacific infrastructure risk/reward

Index. It remains in the lower half of

the rankings in 13th position, out of

21 countries. This is largely owing to

the high business risks due to

corruption and significant potential

for delays to project development.

The country also scores 40.0 in

industry risks, well below the

regional average of 61.0, reflecting

structural weaknesses in the

infrastructure sector.




3


FINANCIALS

Many joint stock banks to list

soon

VNA - OCB shareholders decided

at a recent meeting that there will

be a change of listing plans. The

bank’s shares will now be listed on

the Ho Chi Minh Stock Exchange

and not on the Unlisted Public

Company Market, or UPCoM, as

decided earlier.

In the second quarter, the lender’s

annual shareholders meeting had

approved a plan to list on UPCoM.

The recent meeting also tasked

OCB’s executive board with

completing the required paperwork

and choosing a suitable time to list

on HOSE.

The change is expected to improve

the liquidity of its shares.

Besides OCB, many other joint stock

banks have also opted to list their

shares on HOSE or on the Hanoi

Stock Exchange (HNX) instead of

trading on UPCoM.

The director of a joint stock bank

based in HCM City revealed that

after approving a plan to sell 50%

stakes to foreign investors, his bank

would begin the process of listing

on HOSE.

On December 12 more than 564

million shares of Vietnam

International Joint Stock

Commercial Bank (VIB) were

registered with the Vietnam

Securities Depository, the first step

for the bank to on the stock

market.

VIB is a bank that takes good care

of its shareholders. In 2014 it paid 9%

in cash and 14% in the form of

bonus shares.

In 2015 they were respectively 8.5%

and 16.5%.

Techcombank has already sought

shareholder approval for registering

with the VSD and listing on

HOSE/HNX.

The executive boards of VPBank

and VietA Bank have also said they

are waiting for guidelines from the

State Securities Commission to

complete the required procedures

to list their shares on the stock

market.

The State Securities Commission

(SSC) issued Circular 180/2015/TT-

BTC on unlisted public companies,

which took effect on January 1,

2016.

According to new rules it laid out,

public companies which are not

eligible for listing on the two stock

exchanges and equitised

enterprises must register for trading

on UPCoM within 30 days from their

registration as a public company.

Within 30 days of the last day of an

initial public offering, unlisted public

companies and equitised

enterprises must register for trading

on UPCoM.

The new rules were aimed at

preventing eligible companies from

avoiding listing and deliberately

delisting, actions that could harm

investors’ interests.

The authorities expect listing to

improve the transparency and

operational efficiency of

companies.

Meanwhile, according to data

released by the SSC on November

30, 2015, more than 1,000 public

companies had listed neither on

the stock exchange nor on UPCoM.

The new circular stipulates a

deadline of December 31, 2016, for

listing by companies that have not

yet listed.

Because of this, many public

companies, including joint stock

banks, have been hastily

completing the required

procedures to list their shares to

before the deadline.




4


FINANCIALS

By June this year shares of 686

companies had been traded on

the two national stock exchanges,

while the number on UPCoM stands

at over 280.

Banks fear new law may

hinder debt collection

VNN - Commercial banks said the

2015 Civil Code, to take effect on

January 1, 2017, stipulates that if

asset holders refuse to hand over

their assets, which act as collateral

for loans, banks will only have the

right to sue for assets.

Article No 301 of the 2015 Civil

Code means that the

government’s Decree No 163 on

secured transactions will no longer

be valid. As such, credit institutions

will not be able to seize collateral

used to mortgage loans in case

borrowers cannot pay debts on

schedule.

“We still don’t know what we need

to do to collect debts from 2017,

which is the most powerful

instrument that helps us recover

debts, and now it no longer exists,”

said Thieu Anh Duong, CEO of

Techcombank’s asset

management company.

Bankers said Decree 163 helps them

collect debts. They reportedly have

settled 55 percent of bad debts,

but there is still a big amount of

existing bad debt that needs to be

recovered.

According to Nguyen Kim Anh,

Deputy Governor of the State Bank,

there are many barriers that hinder

the banks’ process of debt

collection.

About 45 percent of bad debts

have been sold to the Vietnam

Asset Management Company

(VAMC), a 100 percent state

owned company, to the Debt &

Asset Trading Company (DATC) put

under the management of the

Ministry of Finance. It has been

transferred to banks’ asset

management companies. Most of

the debts are unsettled at the

companies.

A report of the central bank

showed that commercial banks’

non-performing loan (NPL) ratio has

decreased to below 3 percent as

expected.

Meanwhile, Vu Dinh Anh, a

respected economist, commented

that though the goal is attainable,

the bad debts have just been

‘transferred’ to other bodies. The

key to the bad debt settlement lies

in the treatment of mortgaged

assets.

VAMC has bought hundreds of

trillions of dong worth of bad debt

in the last three years while it did

not have to pay any dong in cash,

but in special bonds issued by the

company. Commercial banks,

which sell bad debts to VAMC, still

have to make provisions for the

debts sold.

According to Colonel Nguyen

Trong Long from C46 Agency, in

many cases, commercial banks

cannot collect debts because the

borrowers are uncooperative. The

creditors deliberately refuse to pay

debts, even though they have

closed unprofitable businesses and

set up new ones.

Under the new law, banks won’t be

able to seize the assets mortgaged

for loans to collect debts, but will

have to bring the cases to court.

This is expected to be a long and

complicated process which takes

time and money.




5


INVESTMENT

RoK – leading foreign investors

in Vietnam

VOV - The Republic of Korea ranks

first among 68 foreign investors in

Vietnam in the first 11 months of this

year with a total new and

additional registered capital of

US$5.29 billion, according to the

Ministry of Planning and Investment.

The Korean Trade Counselor to Ho

Chi Minh City said Korean

businesses began investing in

Vietnam in the 1990s in cheap

labour industries and later to

manufacturing, electronic, food,

consumer goods, services and

entertainment industries.

Vietnam has so far attracted nearly

5,656 Korean investors with a total

registered capital of US$51.5 billion.

In November alone, Korean

businesses invested in 709 new

projects with a total value of US$4.8

billion and added US$470 million

capital to 362 existed ones.

Major companies and groups such

as Samsung, Lotte, GS, Hyosung, LG,

Doosan, Kumho, and Posco are

currently operating in Vietnam.

Korean investment in Vietnam

provides a good chance for the

country to draw investment in the

support industry and hi-tech.

According to preliminary reports of

the Vietnam Customs, the RoK

exported US$28.8 billion worth of

products to Vietnam in the period,

up 13.4% against the same period

last year.

Major export products to Vietnam

included machines, equipment,

electronic components, computers

and components.

The Korean Trade Promotion

Agency in HCMC expects the

number of Korean investors in

Vietnam will increase in the coming

time, opening more job

opportunities for VN people.

Japanese capital poured into

“intensive farming” in Vietnam

VNN - The number of Japanese

investors who want to develop

agriculture and fishery projects in

Vietnam is on the rise as more

Vietnamese favor Japanese food

items.

One kilo of Japanese grapes is sold

at over VND1 million in large cities in

Vietnam. Despite the sky high prices,

it still has been selling like hot cakes

in the last two months.

Vietnamese consumers have also

been hunting for Yoshimoto

mushroom, which can be eaten

raw because it is safe and fresh. The

product, made by a Japanese

company in Lam Dong province in

Vietnam, also has very high selling

price of VND500,000 per kilo at

minimum.

Their products from farms in

Vietnam sell well in the country, but

also could be exported back to

Japan with a preferential export

tariff of zero percent under the TPP

Agreement.

Analysts said the new policy of

Japanese Prime Minister Shinzo Abe,

under which agriculture would be

developed into one of the key

export sectors in the next three

years, will force the country to take

more drastic measures to increase

farm produce supply to satisfy

demand for domestic consumption

and export.




6


INVESTMENT

Vietnam has every reason to

welcome the Japanese investment

wave in agriculture. About 70

percent of Vietnamese population

works in agriculture, fisheries and

forestry production which makes up

20 percent of the country’s GDP.

Its soil and weather conditions are

suitable for agriculture

development. Meanwhile, its

geographical position allows to

connect easily with neighboring

markets such as ASEAN and China.

According to JICA, the number of

Japanese enterprises which want

to develop agriculture projects in

Vietnam has been increasing

rapidly.

OTA Kaki has a project to develop

a high-quality flower market with an

effective distribution network in Lam

Dong province. Also in the province,

Nikko Foods is implementing a

$822,000 project on developing

high-quality tomatoes.

However, analysts pointed out that

Japanese investment in Vietnam’s

agriculture remains modest: 35

Japanese enterprises have invested

$234 million in the sector so far.

Explaining the Japanese investors’

reluctance, Nguyen Anh Minh from

MARD said the long-term

investment and lower investment

efficiency compared with

investments in industry are major

risks. Meanwhile, the low

productivity and quality of

Vietnam’s production, and

problems in supply chains in

Vietnam also make them hesitant

to invest.

Japan cooperates with Vietnam in

agriculture production via the

Payroll Outsourcing model.

Japanese companies invest in

Vietnam and hire local workers to

implement the projects. With the

model, Vietnamese outsourcing

companies can learn about their

experiences, improve skills and

receive technology transfer.

Hanoi seeks software park

funds

The People’s Committee of Ha Noi

is seeking financial support from the

central budget to build a software

park project under the 2016-20

national target programme on

information and technology.

The city wants a supporting budget

to build the infrastructure of the

research and development (R&D)

zone, which will be carried out in

2017 and 2018.

The park aims to develop a

knowledge-based economy and

the information and technology

industry, especially the software

sector of the capital city.

The park is also expected to create

favorable opportunities for

investment activities in and outside

the country; create a modern

international-standard working

environment to attract high-quality

employees; enhance the

competitive capacity of software

companies and contribute to the

country’s economic growth.




7


ENTERPRISES

Masan to issue $300m non-

convertible bonds to foreign

investors

VIR - Masan Group Corporation

(MSN) has received the

shareholders’ approval to issue a

non-convertible international bond

volume worth $300m to foreign

investors.

The bond is valued at US$1,000 per

unit with the duration of 5-10 years.

These bonds will be issued in

accordance with Regulation S

and/or 144A of the US Securities Act.

The bonds are put on sale for

international organisations, foreign

investment funds as well as non-

public banks. After issuance, these

bonds will be listed on the

Singapore stock exchange.

Singapore’s Credit Suisse Ltd. and

Deutsche Bank AG’s Singapore

branch are advising Masan Group

on the deal.

MSN is one of Vietnam’s largest

private sector business groups,

focusing on the consumption and

resources sectors.

MSN established Masan Consumer

Holdings as the primary platform to

further exploit opportunities in the

Vietnamese consumption segment.

It operates in three business lines,

namely food and beverage,

animal protein. It primarily offers

animal protein, as well as soy sauce,

fish sauce, chilli sauce, instant

noodles, instant coffee, instant

cereals, and bottled beverages. Its

core holdings include Masan

Consumer and Masan Brewery.

In early November, MSN

announced plans to buy a 27.3%

stake and become the full owner of

Masan Resources Corporation

(MSR), owner of Nui Phao Mining

Company.

MSN offered VND15,500 ($0.68) for

each MSR share. The purchase,

which will be carried out through its

subsidiary Masan Horizon

Corporation (MH), is expected to

be completed this year.

Vietjet test listing on

homeground in February 2017

VNN - Vietnam’s only private airline

Vietjet will list its shares on the HCM

Stock Exchange (HoSE) in late

February 2017, before moving to list

in Hong Kong or Singapore,

according to newswire Vietnambiz.

Previously, Luu Duc Khanh,

managing director of Vietjet, said

that the purpose of listing its shares

on the domestic stock exchange

before listing aboard is to have a

test run in a market the company

understands better, and where the

brand is better known.

Khanh added that Vietjet expects

to conduct its initial public offering

(IPO) in Vietnam in December.

However, as of now, it has yet to

release any official information

about its IPO.

Starting operation in December

2011, low-cost carrier Vietjet is

seeking to expand in Vietnam’s

airline market that has produced a

20% annual growth in the last three

years.

In 2015, Vietjet made up 37.1% of

the domestic airline market share.

At present, Vietjet operates more

than 250 flights a day along 50

routes in Vietnam and across the

region, to countries such as

Thailand, Singapore, South Korea,

Taiwan, China, Myanmar, and

Malaysia.

In the first six months of this year,

Vietjet earned VND12.6 trillion

($554.04m) in revenue with

VND1.237 trillion ($54.4m) in after-

tax profit, which is expected to

increase to $100m by the end of

this year.




8


MARKET & PRICES

Imported meat forecast to

flood Vietnamese market

Tuoitrenews - Imported meat has

been forecast to prevail in the

Vietnamese market, posing

challenges for domestic products

and businesses.

Vietnam’s husbandry sector is

expected to face myriad difficulties

in the near future when trade

barriers are removed following the

ratification of free trade

agreements.

Along with Australian beef, meat

imported from Europe, Japan, and

Indonesia is anticipated to steal the

heart of Vietnamese customers

thanks to attractive quality and

affordable prices, while domestic

food is still offered at a rather high

quote.

During the 14th Vietnam

International Trade Fair recently

held in Ho Chi Minh City, many

visitors were intrigued by the

presentation of a type of premium

beef from Indonesia’s PT Santosa

Agrindo company.

Safuan Kasno Soewondo, vice-

president of the firm, was

advertising his product to the

Vietnamese consumers and

seeking partners in the country.

Earlier in November, 42 businesses

from member nations of the

European Union had conducted a

survey on the Vietnamese market.

According to Phil Hogan, EU’s

commissioner of agriculture and

rural development, the companies

hoped to push forward their export

of beef and pork to the Southeast

Asian country once the EU-Vietnam

free trade agreement takes effect.

Meat imports are still in high

demand from local restaurants and

hotels despite the currently high tax

rate, between 14% and 30%,

experts said, asserting that the

products would flood the market if

tariffs are removed.

Fierce competition

While Indonesian and European

businesses are aiming at the high-

end segment in Vietnam, Australian

beef is dominating the lower end of

the spectrum.

According to the Animal Husbandry

Association of Vietnam (AHAV),

cost of domestic meat is high due

to a limited source of animal feed

and technology, making it difficult

for Vietnamese meat to compete

against its foreign equivalent.

Local businesses will grapple with

more challenges when tax and

other trade barriers are counted in

as the result of free trade

agreements.

“The poultry industry in the country

has been heavily affected by

cheap imported chicken. The beef

and pork sectors could suffer as

well,” said Nguyen Van Ngoc, an

official from the AHAV.

The Vietnamese husbandry sector is

still sluggish compared to other

nations, Ngoc remarked, adding

that it was not due to the lack of

technology but how local

businesses run their operations.

Vietnam telecoms market

needs boost

VNE - The overall growth of

Vietnam’s telecom market will start

to decline following a period of

rapid development, according to

“The Emerging Asia-Pacific

telecoms market: trends and

forecasts 2016-2021” released by

The Report Linker.

Their information comes from more

than 10,000 trusted sources such as

government agencies, international


http://static.english.vov.vn/w490/uploaded/wzzqbijjvws/2016_12_20/Imported_meat_GCWB.jpg

http://static.english.vov.vn/w490/uploaded/tmt2b47lhgly8uzveukg/2016_12_20/ttvt_ZKES.jpg



9


MARKET & PRICES

organizations, consultancies and

industry associations.

Vietnam’s mobile penetration,

according to the report, is already

high and only mild growth is

forecast, unless new drivers such as

a 4G launch emerge. In addition,

the country’s fixed broadband

market will continue to experience

healthy growth in the future.

The report also stated that

competition is strong in the telecom

market in emerging Asia-

Pacific (EMAP) due to the presence

of three or more operators in each

key market (except the Philippines),

and pressure on pricing has

restricted growth in this region.

Revenue for core services (voice

and messaging) will decline, but

growth in mobile data, IoT, fixed

broadband and IPTV services will

compensate for this, generating

positive overall growth during 2015-

2021.

Mobile revenue growth is slowing in

emerging Asia–Pacific, and

migrating mobile subscribers from

prepaid to postpaid subscriptions is

one way operators can mitigate

this.

“Operators in emerging Asia–

Pacific could increase their

postpaid mobile subscriber bases

by offering fixed broadband

access,” said Mr. Stephen Wilson,

Principal Analyst at Analysys Mason,

a global specialist adviser in TMT

(telecoms, media and technology)

for more than 30 years.

However, total telecom retail

revenue in emerging Asia–Pacific

will grow at a CAGR of 2.3%,

increasing from US$278 billion in

2015 to US$319 billion in 2021,

according to analysts from Analysys

Mason.

Recently, Reportbuyer report also

stated that Vietnam’s mobile

market had reached 147%

penetration coming into 2016. The

fixed-line market continues to be in

decline, having dropped by 70%

from its 2009 peak.

In late October, the Ministry of

Information and Communications

licensed four telecommunication

carriers, including Viettel,

VinaPhone, MobiFone and

Gmobile, to establish the network

and provide 4G LTE-Advanced

public land mobile

telecommunication services.

Vietnam’s telecommunication

market has become saturated with

the number of mobile subscribers

exceeding the population,

according to local industry insiders.

Meanwhile, the three largest

operators are accounting for about

95% of market shares. Given that

fact, 4G will be an opportunity for

both large and small-sized mobile

network carriers to change the

current market share balance.

Urban FMCG market

recovering, rural market

slowing

VNE - The urban fast-moving

consumer goods (FMCG) market is

exhibiting signs of recovery while

the rural market is experiencing a

slowdown, according to the latest

report from Kantar Worldpanel

Vietnam.

The following are the key market

highlights for November.

Key indicators

The CPI in November came in at a

high 4.5% year-on-year due to

increases in crude oil prices.

December’s CPI is forecast to be

even higher due to rising demand

for goods for upcoming festivals at

the end of the year.

FMCG growth

The urban 4 key cities FMCG market,

which includes Hanoi, Ho Chi Minh,

Da Nang and Can Tho, has

recovered compared to the same

period last year in both the long

term and the short term. The rural

FMCG market has experienced a

slowdown as a result of

environmental disasters and

drought in the first half of the year.




10


MARKET & PRICES

Key growing sectors are different

between the urban 4 cities and

rural markets. Packaged food and

homecare saw outstanding

performance in urban areas while

dairy and personal care were

growth drivers in rural areas.

Hot categories

Liquid detergent and hair

conditioner were fast growing

categories in the urban 4 cities and

rural markets, respectively. Their

growth is mainly driven by shoppers

buying more volume than last year.

There is still huge potential for both

categories to recruit more buyers as

currently only one in five people

purchase them.

Retail landscape

Mini-stores (including minimarkets

and convenience stores)

maintained their strong growth

momentum and continued to gain

market share in the urban 4 cities.

Hypermarkets and supermarkets

are expected to perform better in

the last month of the year with big

shopping baskets thanks to the

rising demand for Tet and other

holidays at the end of the year.

Spotlight of the month

Kids are taking nutrition drinks as a

daily need, especially those under

seven years old, who drink nutrition

products more than twice a day.

Adults over 50 years of age also

consider nutrition drinks a daily

need.




11


LEGAL UPDATES

The new list of conditional

business lines

VLO - Law No. 03/2016/QH14 dated

November 22nd, 2016 of the

National Assembly on amending,

supplementing to Article 6 and

Appendix 4 regarding the List of

conditional business lines of the Law

on investment No. 67/2014/QH13

One of the noticeable new points

of this Law is that the trading in

bangers is supplemented to the list

of business lines banned from

trading. Under the earlier provisions,

this business line was permissible to

be engaged under license

In addition, this Law also replaces

the List of conditional business lines

(Appendix 4) issued together with

the Law on investment

No. 67/2014/QH13 . Accordingly,

this Law supplements the trading in

disguise equipment, software used

for audio or video recording and

positioning; and car manufacture,

assembly and import into the List of

conditional business lines

This Law takes effect from January

1st, 2017, except for the regulations

on the following conditional

business lines shall take effect from

July 1st, 2017:

a) Trading in disguise equipment,

software used for audio or video

recording and positioning;

b) Car manufacture, assembly and

import.

To abolish some clauses, articles of

the following Laws:

a) Clause 1 Article 19 of the Law on

Bidding

No. 43/2013/QH13 regarding

conditions on facilities holding

activities of training and capacity

building on bidding

b) Article 151 of the Law on

construction

No. 50/2014/QH13 regarding

conditions on organizations

formulating and verifying

construction investment projects.


http://www.vietlawonline.com/vbpl/80784/foreign-investment/the-new-list-of-conditional-business-lines-.vlo

http://www.vietlawonline.com/vbpl/64284/foreign-investment/law-on-investment-2015-.vlo

http://www.vietlawonline.com/vbpl/64284/foreign-investment/law-on-investment-2015-.vlo

http://www.vietlawonline.com/vbpl/56240/bidding/law-on-bidding-2014-.vlo

http://www.vietlawonline.com/vbpl/60777/construction/the-construction-law-2015.vlo



12


HIGHLIGHTS

How will the real estate market

perform in 2017?

VNN - While some experts believe

the real estate market will be active

in 2017, others think the market will

cool down and encounter

difficulties.

Tran Kim Chung, deputy head of

the Central Institute of Economic

Management (CIEM), said he can

see three factors which can serve

as an impetus for real estate market

development in 2017.

First, stable economic development.

Economists predicted that the

national economy will perform

better than in 2015 and 2016 with a

higher growth rate and better

exports.

Second, the indexes related to the

real estate market are good. Bad

debts have been settled and banks

have increased lending to real

estate projects, while idle capital in

the public is flowing to the real

estate market.

Third, the State has applied many

policies to organize a transparent

market. “The transparent state

management will help businesses

and investors feel secure,” Chung

said.

Tran Ngoc Quang, secretary

general of the Vietnam Real Estate

Association (VnREA), also thinks the

high economic development, the

deeper global integration will bring

benefits to all the business fields in

the national economy, including

the real estate sector. The

development would lead to higher

demand for infrastructure, houses,

urban areas and industrial zones.

Ndh.vn cited a report from JLL, a

real estate service provider, as

showing that international investors

see great opportunities in the

Pacific Rim real estate market and

that capital flow to the market is on

the rise.

The merger & acquisition (M&A)

market is very busy in 2016 and the

tendency is expected to continue

in 2017. The most noteworthy

transaction this year includes the

ones in which CapitalLand Vietnam

Holdings spent $52 million to take

over the project located in the 0.5

hectare ‘golden land’ area in Cau

Kho ward of district 1 in HCM City.

VinaCapital spent $13.8 million to

take over the International Center

Building in Hanoi.

In July 2016, The Manor Central Park

in Hanoi was transferred by

Vietnam’s Bitexco Group to

Mitsubishi. The value of the deal

remains a secret.

Meanwhile, Dinh The Hien, a

respected economist, in a report on

Vietnam economy prospects in

2017, said that the real estate

market would cool down in 2017.

He said though the real estate

market would still be a popular

investment channel, its scale would

narrow because of decreased

speculation and bank loans.

Hien analyzed the figures from

official reports to show that the real

estate market in 2014-2016 grew

more rapidly than the national

economy, with a very high number

of projects marketed, which went

beyond the consumption capacity.

This will create an oversupply.

Alarm bells ring over Vietnam

catfish exports quality

VOV – Vietnamese catfish exports

to the EU continue to plummet

amid long-standing concerns with

respect to the quality of the

controversial farm-raised pangasius

species, commercially sold as basa,

tra or swai products.

It has been widely reported by

industry leaders in the EU that they

continue to face “severe problems

with pangasius."




13


HIGHLIGHTS

The latest official statistics of the

Vietnam government showed that

for the ten months leading up to

November 2016 catfish exports to

the EU dipped 11.5% to US$217.7

million, extending an already

established downward trajectory.

The news comes on the heels of

concerns first raised more than two

years ago by EU buyers over the

issues of excessive water weight

and the presence of unacceptable

levels of chemical and drug

residues by import inspectors.

Speaking at a recent industry forum

in Hanoi, Charles Diener, director

and founder of OFCO Sourcing

Vietnam, said that Vietnam fishers

likely will lose the entire EU market

due the quality concerns.

Back in 2009, he said, the segment

in Vietnam was healthy and his

business was profitably shipping

frozen catfish fillets to the EU.

However, since then the industry

has been on a downward spiral,

experiencing a steady decline in

price, quality and profits.

Currently, he said there are no

controls in place in the segment to

ensure quality— and consequently,

it is impossible for the industry

overall to comply with the strict

food safety requirements of the EU.

If something isn’t done to right the

ship and change the course the

industry is on, the entire catfish

segment may be gone in a few

short years, as current practices are

unsustainable.

US fish distributors and consumer

advocacy groups are also calling

for stricter inspection for pangasius

imports from Vietnam, he said,

noting Vietnam has been the

largest Asian supplier of pangasius

to the US market.|

The US farmed fish segment is

relatively small in relation to the

market demand and of necessity

must import right at 90% of its farm

raised fish and seafood to meet it.

Most of their imports come from

Asia.

However, exports to the US market,

like that of the EU, also began to

decline in 2009 said Mr Diener. and

just reached US$285.1 million in 2015,

down nearly two-fold for the seven-

year period.

The only thing keeping the industry

afloat is the fact that Chinese

imports of Vietnamese catfish have

skyrocketed over the past year.

In the first 10 months of 2016,

Chinese imports surged 76.1% on-

year to US$235.5 million, accounting

for a 16.9% market share, making it

likely that in 2017 Vietnam’s

northern neighbour will become the

largest global consumer of the

country’s catfish.

The side effects of FDI tax loss

VIR - Investment experts reiterate

the need for incentive application

to attract foreign investment

projects, despite the warning of a

global race to the bottom on

corporate tax to lure investors.

Oxfam, a non-governmental

organization group working

worldwide to fight against poverty

and injustice, recently released

new research on the world’s 15

worst corporate tax havens.

These nations are facilitating ‘the

most extreme form of tax dodging’

which gives way to the race to the

bottom in the taxation of global

corporations. As a result, countries

are being deprived of billions of

dollars needed to tackle poverty

and inequality.

All nations worldwide were

reported to have engaged in the

race. “In an attempt to attract

investors, countries are slashing

corporate tax, doing harm to their

economies and process,” Oxfam

warned, assuming that ending the

corporate tax race to the bottom is




14


HIGHLIGHTS

particularly important to

developing countries, including

Vietnam.

In its recommendation, Oxfam

stressed that foreign direct

investment (FDI) into Vietnam from

tax havens has continued to

increase, representing a 47% jump

in the past year.

Some territories which were

blacklisted such as the British Virgin

Islands, Jersey, the Cayman Islands,

and Bermuda are stepping up

investment in Vietnam.

“Not having a suitable

management mechanism in place

will bring a risk that the profits of

these investments might not be

kept in Vietnam,” Oxfam

commented.

The group claimed that in Vietnam,

albeit tax incentives have been

widely applied, there have been

few evidences that show tax breaks

help increase investment or boost

economic growth.

In fact, this is not the first time an

international organization raised

such a warning. Earlier, experts of

international non-governmental

organization ActionAid and some

local economists have more than

once questioned Vietnam’s

generous policies towards foreign

invested businesses.

Senior FDI expert and prominent

economist Nguyen Mai, however,

repeatedly confirmed the

importance of preferential policies

to foreign invested projects.

“Other countries are offering huge

incentives to attract foreign

investors. If Vietnam provided fewer

incentives, FDI could flow to other

countries like Malaysia or Indonesia,

rather than Vietnam,” Mai said.

Echoing Mai’s view, Christopher

Jeffery, vice chairman of the British

Business Group Vietnam, told VIR

that “One of the key issues is that

investment no matter where it

comes from needs to support a

country’s development. If tax

havens’ investment in Vietnam

creates jobs, value, and

opportunities for the workforce to

develop, and contribute to the

country’s development and

taxation, then I partly believe that it

is the right thing for the country.”

“In addition, Vietnam is now

competing globally for investment.

Thus, it has to create an enabling

environment, otherwise the country

will miss out on investment

opportunities,” he added.

The Provincial Competitiveness

Index Report 2015 released by the

Vietnam Chamber of Commerce

and Industry (VCCI) early this year,

showed that developing countries

are offering the best incentives to

FDI businesses to attract investment.

“Malaysia is an example. In 1996,

policies attracting investment

caused this country US$2.4 billion

less in tax contribution from business

tax and progressive income tax

erosion. In exchange, Malaysia

received a benefit equivalent to

US$30,000 for each job an FDI firm

created,” the report states.

From Mai’s perspective, one should

not only look at the loss in tax

contribution, but must be fair, and

examine the benefits that FDI

projects can bring to an economy-

such as job creation, an increase in

export value, and research and

development activities stimulation.

However, Oxfam have reasons for

their warnings because in fact,

many foreign investors did profit

from ‘tax incentives’, while

countries lost out on funding to

solve critical issues of poverty and

social injustice. The organization,

therefore, recommended the

Vietnamese government to review

preferential tax policies, and

carefully make cost-benefit

analyses for the long-term, before

the enactment and after the

implementation of related

incentive policies.




15


HIGHLIGHTS

Vietnam loses nearly $450m in

petroleum revenue because of

tax cut

A loss of VND10 trillion (over $445

million) in tax revenue from

petroleum imports occurred in the

first 11 months of the year,

according to a report released by

the General Department of

Customs (GDC).

The loss was due to FTAs under

which Vietnam has to cut import

tariffs on petroleum products.

Luu Manh Tuong, director of the

GDC’s Import/Export Tax

Department, said the crude oil

exports in 2016 see sharp decreases

in both quantity and export prices.

However, he stressed that the major

reason behind the sharp reduction

in tax revenue is the

implementation of a series of FTAs,

including the Vietnam-ASEAN and

Vietnam-ROK agreements.

The tariff cuts applied to specific

markets have prompted

Vietnamese importers to place

orders with new markets.

Under the Vietnam-ROK FTA, which

took effect recently, import petrol

from ROK is taxed 10 percent, just

half of the MFN tax rate.

Diesel imports from ROK are taxed 5

percent, mazut zero percent,

kerosene 5 percent and air fuel 5

percent, while MFN rates are 10

percent, 10 percent, 13 percent

and 10 percent, respectively.

The lower tariffs on imports from

ROK and ASEAN countries explain

why the imports from Taiwan and

China have decreased sharply.

Kuwait was the third largest

petroleum exporter to Vietnam in

2012. But in 2016, Vietnamese

enterprises have not imported

products from the market.

Instead of these markets,

Vietnamese enterprises have found

new suppliers, mostly ASEAN ones

(Singapore, Malaysia and Thailand)

and South Korea.

The petroleum imports from three

ASEAN countries have been

increasing since 2013. The increases

were 22 percent in the first 10

months of 2014, 70 percent in the

first 10 months of 2015 and 27

percent in the first 10 months of

2016.

As for South Korea, the imports only

began increasing last December,

when the Vietnam-ROK FTA took

effect and tariffs cut to 0-10

percent.

The tariffs are the most competitive

in markets from which Vietnam

imports petroleum products.

Vietnamese enterprises have

shifted to import from South Korea.

By the end of October 2016,

Vietnam had imported 1.34 million

tons of petroleum products from

South Korea, up five times

compared with the same period

last year. No other exporter has

gained such a high growth rate like

South Korea.


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