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SEIKO IDEAS CORPORATION Vietnam Business Review

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Vol 35, September 16th 2015

BUSINESS REVIEW VIETNAM

www.seiko-ideas.com

Party chief holds talks with Japan's Prime Minister Abe


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INSIDE THIS ISSUE

Highlights

Vietnam to revamp corporate taxes, limit interest write-offs Foreigners can't buy, sell house with cash

Long Thanh Airport's feasibility study may cost $35.1m

Economy

Vietnam's economy likely to lag behind neighbors in 20 years

Minium wage to increase by 12.4% from next year

Banks & Finance

SBV approves merger of Sacombank and Southern Bank

Positive Q4 possible despite slump

Bankers say bad-debt ratio is not that high

Investment Japan commits ¥100b for infrastructure development

Enterprises

Vietjet signs agreement with Japan finance corporation

Sweets manufacturer sets foot in banking sector

Market & Prices Power prices stable for 2015

Vietnam's online advert market explodes

Instant noodle market's golden days are over

Legal Updates New regulations for duty-free goods applicable since November

Three noteworthy investment procedures in Vietnam Investment Law

New provisions on securities ownership rate of foreign investors in VN securities market


1

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ECONOMY

Vietnam's economy likely to

lag behind neighbors in 20

years

VOV - It will be not easy for Vietnam

to catch up with the bigger

economies in the region in the next

20 years without thorough reforms,

economists have said.

Nguyen Dinh Cung, chief of the

Central Institute for Economic

Management (CIEM), was

quoted by news website Saigon

Times Online as saying that Vietnam

can only reach the current GDP per

capita level of Malaysia if its

economy maintain an average

growth rate of 7 percent per year.

Without major reforms, particularly

in budget policies, it will be

"extremely challenging" to achieve

that growth, he said.

Cung further pointed out that since

2008, Vietnam's GDP per capita has

increased by 5 to 6 percent a year.

At a growth rate of 5 percent a

year, the country's GDP per capita,

which was US$2,052 last year, will

not be able to match even the

current levels in China and Thailand,

he said.

Cung was speaking at a

conference on Sunday, where

economists discussed the drafting

of "Vietnam 2035 Report," a

research project conducted by the

government and the World Bank.

Economist Nguyen Quang Thai,

another contributor to the report,

was concerned about Vietnam's

ability to become a knowledge-

based economy, which requires a

high level of skills and education to

create economic benefits.

Last year Vietnam scored around

3.5 out of 10 on a knowledge

economy index released by the

Asian Development Bank, far below

the Asia and Pacific average of

4.39. Meanwhile, in the last report

released by the World Bank in 2012,

it ranked 104 out of 145 economies.

Minium wage to increase by

12.4% from next year

VGP - The National Salary Council

(NSC) on September 3 agreed to a

12.4% increase in minimum wage

for 2016. The wage floor will be

submitted to the Government for

approval in October 2015.

Earlier, the NSC held two meetings

to discuss the minimum wage for

2016 without success as the VN

General Confederation of Labour

(VGCL) and the VN Chamber of

Commerce and Industry (VCCI)

failed to reach an agreement.

The VGCL, which represents

labourers, proposed a 16.8%

increase while the VCCI, which is

on behalf of businesses, was only

prepared to accept a paltry 10%

rise.

With this increase, the wage in

Region I - Ha Noi and HCMC will be

raised by VND400,000 (US$17.75) to

VND3.5 million (US$155) a month; in

Region II - Can Tho, Da Nang, Hai

Phong and on the outskirts of Ha

Noi and HCMC by VND350,000

(US$15.5) to VND 3.1 million

(US$137); in Region III - Bac Ninh,

Bac Giang, Hai Duong and Vinh

Phuc provinces and provincial cities

- by VND300,000 (US$13.3) to

VND2.7 million (US$119.5) and

Region IV - in the remaining

locations it will increase by

VND250,000 (US$11) to VND2.4

million (US$106.2).


2


BANKS & FINANCE

SBV approves merger of

Sacombank and Southern

Bank

VNS - The State Bank of Vietnam

(SBV) has approved the merger of

Saigon Thuong Tin Commercial

Joint Stock Bank (Sacombank) with

the Southern Commercial Joint

Stock Bank.

According to Sacombank's

announcement on its website, the

merger came into effect on Sep 14.

The new bank will retain the name

Sacombank. It has a syndicated

charter capital of more than

VND18.8 trillion ($837m).

Earlier, the shareholders of both

banks agreed to their merger at

meetings held in July, with 93.7% of

Sacombank shareholders and

99.88% of Southern Bank

shareholders approving it.

Each share of Southern Bank was

converted into 0.75% of one share

of Sacombank.

Sacombank was established in 1991.

The bank's assets at the end of 2014

were worth more than VND12.4

trillion ($550m). The Southernbank

was established in 1993. It had

assets worth VND4 trillion ($177m) at

the end of 2014.

Positive Q4 possible despite

slump

VIR - Local authorities and experts

remain bullish over the outlook of

Vietnam’s stock market in the fourth

quater despite a recent crash.

A number of leading experts from

the State Bank of Vietnam, the

State Securities Commission,

securities companies and financial

organisations teamed up last week

in an online discussion hosted by

VIR to offer investors eagle-eyed

and reliable information and

professional analysis.

Impacts of external factors

Dr. Nguyen Anh Tuan , VIR editor-in-

chief, noted that Vietnam’s

economy had been facing many

dismal external factors, namely the

Chinese stock market crash, the

yuan devaluation, and the global

oil price plunge. “These factors

have directly affected our stock

market,” he said.

Echoing this view, Bao Viet

Securities deputy director of

Research Department Nguyen

Xuan Binh also said: “The yuan

devaluation has caused substantial

volatility in the international market.

“As for Vietnam, the impact may

be even greater, in terms of

economics, given the country is

next door to China, and China is

also Vietnam’s biggest trading

partner.”

Right after the People’s Bank of

China devalued its currency,

Vietnam, in response, discounted

the dong by another 1%, on top of

a previous 2% depreciation. The

dong has so far declined some 5%

against the dollar since the

beginning of the year.

As the devaluation of the dong

remains lower than the decline of

regional currencies, the export

sector fears that price

competitiveness could decrease

local exports.

Meanwhile, the world oil price has

steeply declined, and is expected

to hover at $60 per barrel at the

year’s end, according to Hoang

Cong Tuan, senior analyst of MB

Securities (MBS).

“The current development of the oil

price has both positive and

negative impacts on the earnings

of listed companies in the local

stock market,” Tuan said. “For those

importing raw petroleum by-

products or oil and gas, they will

directly benefit from the diving oil

price. However, those operating in

the oil and gas services sector will

be hurt by such a price decline, as

their service prices will be reduced.”

On the rebound

Despite unfavourable external

factors, Vietnam’s macro-economy

has shown signs of steady growth.

GDP, in particular, is forecast at 6.4-


3


BANKS & FINANCE

6.5% this year, while inflation is

controlled at around 1%.

Additionally, while the dong has

depreciated 5% against the dollar

since the beginning of this year, the

rate of decline is lower than other

regional currencies. The interest

rate also holds up well, which in turn

facilitates businesses’ borrowing

and operation.

“While the stock market may move

up and down in the short-term, it

will, in the long-term, follow the

macro-economy’s prospects and

the listed businesses’ profitable

projections,” said MBS’s Tuan.

“The VN-Index can bounce back to

the 610-point benchmark or even

higher in the last quarter of the

year,” forecast Le Duc Khanh, head

of Market Strategy at Maritime Bank

Securities.

Meanwhile, MBS’s Tuan

commented that the oil price

plunge would not severely affect

the domestic stock market in the

long-term.

In theory, he said, Vietnam was a

net importer of oil and gas products,

and as such, the drop in price

would positively impact the local

economy and stock market.

Bankers say bad-debt ratio is

not that high

VNN - While economists doubt

commercial banks can reduce the

bad-debt ratio to below 3% by the

end of August, bankers said the

target was within reach because

the current situation is not as bad as

once thought.

The bad debt ratio of some

commercial banks, including the

better ones, has increased again.

VietinBank, for example, reported

that non-performing loans (NPL)

increased to VND8 trillion from

VND4.8 trillion earlier this year. The

NPL ratio rose to 1.5% from 0.9% in

late 2014.

VietinBank’s fifth-group debts (the

debts with the highest risk) by the

end of March had increased by 2.6

times from VND2 trillion to VND5.5

trillion.

By the end of April 2015, while

Sacombank’s outstanding loans

had increased by 5.6%, the bad

debt ratio had also increased to

1.19% from 1.18% at the end of 2014.

Sacombank collected VND200

billion worth of principal this year

thanks to the sale of debts to the

Vietnam Asset Management

Company (VAMC), while it is

considering selling more debts to

the company.

Though the NPL ratio has stayed at

1.42%, Nam A Bank’s situation is not

good because the fifth-group debt

accounts for over 80% of NPL.

Therefore, economists are worried

about the State Bank’s plan to

lower the bad debt ratio to below

3% prior to August 31.

Nevertheless, bankers have said

that the bad debt situation is not as

serious as reported.

An executive of Sacombank noted

that the bad debt increase in the

first quarter of the year was partly

due to the expiration of Decision

780, which allows credit institutions

to restructure their debts. Its validity

expired in April 2015.

Now banks have to classify their

debts in accordance with stricter

requirements.

The executive said that new loans

have been put under very strict

control.

The representative of ACB also was

optimistic about the bad debt

settlement, saying that the

recovery of the markets, especially

real estate, should create favorable

conditions for bad debt settlement.

Nguyen Hoang Minh, deputy

director of the HCMC Branch of the

State Bank of Vietnam, praised the

commercial banks’ efforts to

reduce bad debts.

In general, Minh said bad debt

settlement had shown satisfactory

results.

Local banks in HCMC settled

VND6.112 trillion worth of bad debts

in the first three months of 2015.

“It is quite feasible to lower the NPL

ratio to below 3% because credit

has been growing well,” Minh said.


4


INVESTMENT

Japan commits ¥100b for

infrastructure development

VGP - Japanese Prime Minister

Shinzo Abe has pledged to provide

¥100 billion in official development

assistance for VN’s North-South

road and port projects.

The commitment was made during

his talks with Vietnamese Party

General Secretary Nguyen Phu

Trong at Akasaka Palace, Tokyo,

Japan on Tuesday.

Japan also hopes to strengthen

cooperation with VN in building

Long Thanh international airport,

Ninh Thuan 2 nuclear power plant,

specialized industrial parks in Hai

Phong and Ba Ria-Vung Tau.

The two leaders agreed to further

enhance workforce training

cooperation, effectively realize the

medium and long–term vision on

agriculture cooperation, and open

their markets for farm produce like

Japanese apples and Vietnamese

mangoes since Sep 17 this year.

Both sides were unanimously

agreed to further facilitate travel of

their citizens. Prime Minster Abe

announced his Government’s

decision to extend business visa for

Vietnamese to 10 years.

The two countries also agreed to

foster defense exchanges at all

levels. Prime Minister Abe affirmed

that Japan stands ready to help VN

enhance maritime law

enforcement capacity and join the

UN peacekeeping operations.

Japanese Government decided to

continue provision of boats for VN.

The two countries agreed to foster

cooperation in traditional and non

traditional security issues.

Exchanging views on regional and

international issues, Prime Minister

Abe briefed about Japanese

Government’s positions on some

historical issues and policies

towards peace and security in the

region.

Party leader Trong voiced his

support for Japan’s constructive

contributions to peace, security,

cooperation and development in

the region and beyond.

The leaders agreed to continue

close coordination at ASEAN and

East Asia summits and other

multilateral forums and as well as

cooperation on the negotiations

and enforcement of regional free

trade agreements, including the

Trans-Pacific Partnership and the

Regional Comprehensive Economic

Partnership.

Prime Minister Abe welcomed VN’s

tentative bid for membership of the

International Whaling Commission

as well as official membership of

the Western and Central Pacific

Fisheries Commission.

He committed to supporting and

coordinating with VN in hosting the

2017 Asia-Pacific Economic

Cooperation forum.

Both sides shared their concern

over the recent complicated

developments in the East Sea while

emphasizing the importance of

abiding by international law,

especially the 1982 United Nations

Convention on the Law of the Sea

and the Declaration on the

Conduct of Parties in the East Sea,

towards the formulation of a Code

of Conduct in the East Sea.


5


ENTERPRISES

Vietjet signs agreement with

Japan finance corporation

VIR - Vietjet and Mitsubishi UFJ

Lease & Finance Company Limited

(MUL), a member of Japan’s

leading finance group Mitsubishi

UFJ Financial Group (MUFG), have

signed a memorandum of

understanding (MOU) in Tokyo on

the sidelines of the official visit of His

Excellency Nguyen Phu Trong,

General Secretary of the

Communist Party of VN, to Japan.

Japan’s PM Shinzo Abe and

General Secretary Nguyen Phu

Trong witnessed the signing of the

memorandum of understanding

(MOU), which will pave the way for

MUL to finance Vietjet’s leasing and

acquisition of three brand new

A321 aircraft, worth $347.2m, based

on manufacturer’s listed price.

These 3 aircraft are part of a

contract signed earlier between

Vietjet and European aircraft

manufacturer Airbus to purchase

and/ or lease a total of 107 aicraft

in coming years.

As planned, Vietjet will receive from

10 to 12 new aircraft every year

until the above contract with Airbus

is complete. The airline has so far

taken delivery of eight A321s and

A320s. Under the terms of the

memorandum of understanding,

Mitsubishi and Vietjet will also work

together to share best practices in

airlines operation and

management.

Mitsubishi UFJ Lease & Finance

Company Limited has a wide

business base with 23 offices and 26

group companies in Japan.

Overseas, it has a total of 18

business bases in seven countries.

Sweets manufacturer sets foot

in banking sector

Why has the Kido Group jumped

into the banking sector? And why

has it chosen the troubled Dong A

Bank?

Dong A Bank was once the bright

star that caught the eye of Citibank.

Opinions from well informed circles

said Dong A has agreed to sell its

shares to Kido, which was initially a

sweets manufacturer and has

recently decided to become a

food company.


6


ENTERPRISES

Dong A Bank’s shares are traded at

the low price of VND6,000 per share.

Sources said that Kido decided to

spend VND1 trillion to buy the

bank’s shares at the high price of

VND10,000 per share.

The information has stirred up the

investor community which cannot

understand why Kido wants to jump

into the banking sector, and why it

chose Dong A Bank.

Dong A’s total assets have

reportedly increased by 34 percent

since 2011, but its profits have

decreased, while it took a loss in

the fourth quarter of 2014.

The bank’s finance report showed it

incurred a loss of VND122 billion in

the quarter, which led to a sharp

fall of 92 percent of the bank’s

post-tax profit in 2014 to VND27

billion.

One of Dong A’s biggest problems

is bad debt. The bank reported that

the non-performing ratio had

reached 3.76 percent by the end

of 2014, or VND1.947 trillion.

However, if counting the VND3.921

trillion worth of debts it had sold to

the Vietnam Asset Management

Company (VAMC), the ratio would

be 11 percent.

An analyst said that Dong A now

needs capital to settle the

problems it is facing.

Dong A, at the 2014 shareholders’

meeting, discussed two measures

to increase chartered capital,

either through stock issuance or

through merger & acquisition

(M&A).

In early 2015, sources said that

Dong A and An Binh Bank would be

part of the M&A deal.

Cao Sy Kiem, who was then chair of

Dong A and has resigned from the

post, said that the two sides were

still thinking about the deal.

While the M&A deal between Dong

A and An Binh Bank is still an

unknown, Dong A has announced

Kido’s investment of VND1 trillion

into the bank.

The analyst said Kido has enough

money now because it has sold the

sweets production unit to a foreign

manufacturer, but it may lack

money in the future when it will will

make larger investments in the food

manufacturing sector.

Thus, Kido has now decided to

become a shareholder of a bank.

This gives it advantages in

accessing bank loans.


7


MARKET & PRICE

Power prices stable for 2015

VNS - The Electricity of VN (EVN)

and the VN Coal and Mineral

Industries Group (Vinacomin) have

assured electricity prices will remain

unchanged until end of the year.

The commitment was made

following public concern about the

possible electricity price hike after

these groups reported a loss

caused by fluctuations in foreign

exchange rates.

Earlier this month, three large

conglomerates of the Ministry of

Trade and Industry, including EVN,

Vinacomin and the VN Oil and Gas

Group (PVN) reported losses of

trillions of dong as a result of

changes in foreign exchange rates.

EVN reported losses of around

VND12 trillion ($53.2m) while

Vinacomin reported losses of

around VND1.6 trillion ($71m).

These groups said they had

borrowed large amounts of foreign

exchange to invest in big projects.

EVN supplies 50% of total power

required in the country while

Vinacomin was the third largest

power supplier in VN, accounting

for 6% of total output.

However, Deputy Director General

of EVN Dinh Quang Tri told VN

Television (VTV) yesterday that the

electricity price would be kept

unchanged from now until the end

of the year.

The group earlier proposed that the

government put in place measures

such as tax reductions and

relaxations to support businesses, as

well as policies to help them tackle

the problems arising out of foreign

exchange fluctuations.

Vietnam's online advert

market explodes

VOV - The Vietnamese online ad

market has been growing fast with

an annual growth rate of 100%,

according to Nguyen Anh Tuan,

managing director of Adtima ad

firm.

Of the population of 90 million, the

number of mobile subscribers has

reached 128 million. Vietnam has

40 million people accessing the

internet and 28 million social

network accounts.

According to the UK-based We Are

Social, a market survey firm, of the

28 million social network accounts,

24 million access networks from

their mobile devices.

Paul Webster from Facebook South

East Asia said at Go Mobile First

workshop organized by MMA, the

global mobile marketing

association, that 36% of

Vietnamese population accessed

the internet from mobile devices.


8


MARKET & PRICE

The habit by Vietnamese people of

surfing on internet and accessing

social networks has been strongly

supported not only by mobile

network operators’ connection

services but also by internet

development programs.

Emeral’s CEO Nguyen Hong Thanh

said Vietnam was following a

strategy on expanding free wifi

network coverage to public places,

such as parks, universities and

hospitals. In HCMC, free wifi will be

available throughout the city by

2016.

Promising market

The businessman noted that though

Vietnam ranks the 85th in the world

in information technology

infrastructure, the expenses on

telecommunication are very low,

which makes it very convenient for

businesses to access.

Tran Bao Chau from Viettel

Telecom noted that with

smartphones, it is no longer difficult

for businesses to access the rural

market, where 68% of Vietnamese

consumers live.

According to Chau, 34% of rural

people now have smartphones,

while 50% of subscribers read ads. .

Instant noodle market's golden

days are over

The instant noodle market has

become saturated after a long

period of hot development.

However, investors are still pouring

more money into the sector.

Since 2013, the growth has slowed

down to 5%. Manufacturers now

compete fiercely with each other

to obtain larger market shares. The

ad pieces about instant noodle

products rarely appear on TV and

mass media these days.

Some manufacturers advertised

that their products are safer than

others because their noodles are

made of potato and green beans.

Others say they do not use toxic

colorings for their products. More

recently, manufacturers rushed to

market new products – noodles

with eggs. Meanwhile, a new war

of products with spicy and sour

flavors has broken out.

Distributors have also joined the

instant noodle market with products

bearing private brands which sell at

5-10% lower prices than popular

products.

Experts noted that the technologies

used by manufacturers to make

instant noodles are nearly the same.

The differences are the types of

products and marketing methods.

The instant noodle market is

remapped every time an enterprise

succeeds with its PR campaigns.

Similar products

Analysts reported that supermarkets

in HCMC now distribute instant

noodles bearing 60 different brands,

most of which are domestically

made. Three largest manufacturers

- Vina Acecook, Masan and Asia

Food – hold 80% of the market

share.

Kido Group, a newcomer, has

signed a contract on setting up a

joint venture with Saigon Ve Wong,

while moving ahead with a plan to

build four factories throughout VN.

Japanese Nissin has also

announced it would continue

pouring capital into a factory in

Binh Duong province after three

years of operation.

Brand Footprint 2014, a report of

Kantar Worldpanel, noted that

instant noodle is now the largest

FMCG sector. However, some

analysts noted that the vast market

worth VND25 trillion a year is

saturated.


9


LEGAL UPDATES

New regulations for duty-free

goods applicable since

November

VGP - Since November 1, 2015,

airline passengers would be able to

purchase duty-free goods on

international flights to VN.

This is part of Decision No.

39/2015/QD-TTg which requires that

the airlines must be set up and

operate in accordance with

Vietnamese law.

Customers shall have to present

their passports and boarding passes.

Air stewardesses shall take note all

customers’ information about

name, number of passport, number

of flight and seat number.

Earlier, under PM’s Decision

24/2009/QD-TTg, dated February 17,

2009 and PM’s Decision

43/2013/QD-TTg, dated July 19,

2013 promulgating the regulations

on trading in duty-free goods,

enterprises were only allowed to

trade duty-free products at

international airports and fights

leaving VN to international

destinations. There were no

regulations on tax exemption for

passengers on entry flights to VN.

Meanwhile, almost all international

airlines are offering duty-

free goods on flights to VN.

The new regulation is in

accordance with international

practices and facilitate foreign

arrivals’ access to duty-free goods.

Three noteworthy investment

procedures in Vietnam

Investment Law

VNN - The 2014 Investment Law of

Vietnam has made 3 significant

modifications regarding procedures

for capital contribution registration,

share purchases, policy requests,

and investment registrations.

1. Capital contribution and

purchase of shares

It has been made mandatory for

foreign investors and foreign-

invested economic organizations,

which contribute capital or

purchase contributed capital and

shares from limited liability and joint

stock companies, to follow the

procedures of capital contribution

registration and share purchase in

the following cases:

� Foreign investors contributing

capital to or purchasing shares or

contributed capital from an

economic organization operating

in conditional investment sectors

applied to foreign investors;

� Capital contribution and

purchase of shares or contributed

capital lead to foreign investors

holding from 51% and more of the

charter capital of the economic

organization.

2. Procedure of policy requests

The procedure of policy request

applies to a number of projects that

greatly affect national security,

social order and safety, and the

environment.

Depending on each case, investors

might have to request policy at

different authorities:

� The National Assembly: Projects

that have significant effects on the


10


LEGAL UPDATES

environment or the potential to

have serious effects on the

environment; Projects that change

purposes of land meant for rice

cultivation with two or more crops

of 500 hectares or larger; Projects

that require relocation of 20,000

people or more in the highlands

and 50,000 people or more in other

areas; Projects that require to apply

special mechanisms or policies.

� PM: The following projects

regardless of capital sources:

Projects that require relocation of

10,000 people or more in the

highlands and 20,000 people or

more in other areas; Construction

and operation of airports; Air

transport; Construction and

operation of national seaports;

Foreign-invested projects in sea

transport, provision of

telecommunication services with

network infrastructure, afforestation,

publishing, journalism, establishment

of science and technology

organizations or wholly foreign-

invested science & tech companies.

� The provincial People’s

Committee: Projects that use land

allocated or leased out by the

Government without auction or

bidding; Projects that use

technologies that are on the List of

technologies restricted from transfer

prescribed by regulations of law on

technology transfer. The policies of

investment projects already

executed at industrial parks, export-

processing zones, hi-tech zones,

and economic zones in conformity

with plans approved by competent

authorities are not subject to

approval of the provincial People’s

Committee.

3. Grant of Investment Registration

Certificate

Investors shall follow the procedure

of requesting an Investment

Registration Certificate in the

following events:

� Economic organizations: the

foreign investor holds from 51% or

more of the charter capital; and

partnerships with the majority of the

general members as foreign

nationals;

� Investment projects of foreign

investors.

New provisions on securities

ownership rate of foreign

investors in VN securities

market

Circular No. 123/2015/TT-BTC dated

August 19, 2015 of the Ministry of

Finance on providing guidance on

foreign investment activities on

Vietnam’s securities market

This Circular shall provide guidance

on securities investing and trading

activities, and the rate of securities

ownership by foreign investors in

Vietnam's securities market

One of the new points of this

Circular is supplement of the

provision on the rate of securities

ownership by foreign investors in

Vietnam's securities market.

Accordingly, the maximum rate of

securities ownership by foreign

investors in Vietnam's securities

market shall be complied with

Clause 2 Article 1 of Decree

No.60/2015/ND-CP dated June 26th,

2015

Particularly, in securities trading

organizations (securities companies,

fund management companies),

the ownership rate of foreign

organizations that meet the

conditions stipulated in Clause 21

and Clause 24 Article 1 of the

Decree No. 60/2015/ND-CP is

unlimited. If the foreign

organizations fail to meet the

conditions, they shall only be

allowed to hold securities less than

51% of (Clause 5 Article 11).


11


HIGHLIGHTS

Vietnam to revamp corporate

taxes, limit interest write-offs

TNN - The Ministry of Finance has

announced a plan to amend

Vietnam's corporate tax law and

restrict tax deductions that can

potentially affect thousands of

companies, including many foreign

firms, local media reported.

Under the current law, interest paid

on business loans is tax deductible.

But in a draft recently published,

the finance ministry seems to have

changed its mind on the

deductibility rule, which in theory

could help many companies

reduce their taxable amount

significantly if they have huge

interest payments to declare.

Now the ministry says companies in

the manufacturing sector should

only be allowed to write off interest

payments if their debt-to-equity

ratio is 5 to 1, according to news

website Saigon Times Online.

For other companies, the maximum

ratio is only 4 on 1, before being

lowered to only 3 to 1 after three

years.

Interest on excessive loans will no

longer be tax deductible.

If the amendments are passed by

legislators next month, they will take

effect in 2016.

'Enormous' interest payments

When businesses are financed

through a high level of debt

compared to equity, they are

facing huge financial risks, the

ministry was quoted as saying.

It seemed to suggest that that

some foreign companies may have

claimed more deductions than

they are truly entitled to, simply by

declaring "enormous" interest

expense.

Several companies paid up to

several trillions dong a year of

interest to their own parent

companies abroad, the ministry

said, adding that they kept

reporting losses in Vietnam despite

expansion plans.

It is "necessary" to set up more

regulations in order to help

businesses guarantee their financial

safety, increase the economy's

health, and help prevent the law

from being abused, the ministry

said.

In a comment on the draft, a

representative of Earnst & Young

Vietnam suggested the ministry

delay the new rule to 2018 to

prevent it from affecting business

activities.

Dang Thi Binh An, chairwoman of

tax consultant C&A, meanwhile,

said the ministry should not set a

different ratio for each sector, but

one for all, considering that

businesses invest in multiple sectors.

Foreigners can't buy, sell

house with cash

VNA - Foreigners buying or selling

houses in Vietnam are required to

carry out transactions through

banks in the country and not in

cash, the central bank has

decreed.

They can get mortgages if they

meet banks' requirements, the

State Bank of Vietnam (SBV) said

further in a document it has issued

to guide the buying and selling of

houses by foreign individuals and


12


HIGHLIGHTS

organisations.

The tenor of the loans cannot

exceed the time they live and work

in Vietnam , while for organisations

and other legal entities, it will not

exceed their licence period.

Amendments to the Housing Law

that took effect on July 1 permit

foreigners and overseas

Vietnamese to buy housing if they

have a visa to enter the country.

They can buy, lease out, gift, and

inherit property.

There are a few restrictions, one of

which is that combined foreign

ownership should not exceed 30%

of an apartment project.

Long Thanh Airport's feasibility

study may cost $35.1m

It may cost up to US$35.1 million to

finish an 18-month feasibility study

for Long Thanh, which is set to

become Vietnam's largest airport,

according to the Airports

Corporation of Vietnam.

In a proposal recently submitted to

the transport ministry, the sole

manager of airports in Vietnam said

it will fund the study itself.

The corporation could have chosen

to receive funding from the Japan

International Cooperation Agency

for a $6.9 million, 15-month study.

However, it argued that a more

"comprehensive" study is needed.

It also proposed organizing a

design contest for Long Thanh's

terminals and air control station.

Airports Corporation originally

planned to let a single consultant

conduct the feasibility study and

design the airport to save time. The

plan drew strong objections from

local architects.

With a projected cost of $15.8

billion, the airport in Dong Nai

Province, about 40 kilometers from

Ho Chi Minh City, is slated to serve

100 million passengers and 5 million

tons of goods annually.

The first stage of the project is

scheduled for completion in 2023. It

will then be able to serve 25 million

passengers and 1.2 million tons of

goods a year, but it will achieve its

maximum capacity after the

second and third stages.

Vietnamese authorities want Long

Thanh to replace the country's

currently biggest airport Tan Son

Nhat in Ho Chi Minh City, as the

latter already reached its designed

capacity of 20 million passengers a

year in 2013.

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SEIKO IDEAS CORPORATION Vietnam Business Review … · 2015-09-19 · SEIKO IDEAS CORPORATION...

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Transcript of SEIKO IDEAS CORPORATION Vietnam Business Review … · 2015-09-19 · SEIKO IDEAS CORPORATION...