BUSINESS IN BRIEF 14/8 HCM City's IIP surges 7% in seven months   The index of industrial production (IIP) in HCM City grew by 7.05 per cent in the first seven months of 2016. Notably, key industrial sectors, such as mechanical and manufacturing industry, electronics, chemicals, rubber and plastics and food processing, posted a year-on-year rise of 7.3 per cent, higher than the average growth of industry as a whole.  This was attributed to their efforts to expand markets, update technology with new equipment and improve product quality and competitiveness, the municipal people's committee said.  Sectors that posted growth in production are food and beverages (14.3 per cent), non-metallic products (21.3 per cent) and machinery and equipment (32.1 per cent).  In July alone, the city's industrial production index rose by 3.1 per cent.  During the month, the processing sector and industrial parks focused on drawing hi-tech investment projects and supporting business activities to record turnover of US$3.16 billion in exports and $3.17 billion in imports.  The IIP in the first seven months of last year grew by 6.6 per cent.  Power sector asked to help reduce housing costs The HCM City Real Estate Association yesterday asked the local Electricity of Việt Nam (EVN HCMC) branch to pay for building the electricity grid for projects being incurred by developers. Chairman of the association Lê Hong Châu said that under the Electricity Law 2004 and the law supplementing and amending a number articles of the Electricity Law promulgated in 2012, power companies have the responsibility of building transformer stations and installing electricity meters for customers. Under the Law on Real Estate Business issued in 2014, project investors must complete infrastructure facilities before handing over houses to their clients.  Currently, property developers had to build all medium-voltage and low-voltage lines as well as transformer stations and connect power meters to the lines to distribute power to every apartment. On completion of the project, they had to pass on all the works to electricity companies without any payment, Châu said. He added that funds invested in the system supplying power for housing projects often accounted for 1 per cent to 2 per cent of total project investments. As a result, home buyers would have to pay more. "After the meeting with EVN HCMC today, the association will send a document to the municipal People's Committee and the Ministry of Industry and Trade, asking the electricity authorities to issue a payment mechanism applied for housing projects of which price is below VNĐ22 million ($982) per sq.m,"  Châu said. Deputy General Director of the EVN HCMC Phạm Quốc Bảo said the company acknowledged the situation and would report it to the EVN. Bảo said power prices would probably be affected if the electricity sector had to develop a system to distribute power to every apartment in every housing project. He said the sector would only accept paying the cost for projects of which profitability was ensured, meaning that people had to live there and consume electricity. For high-priced projects, in which nobody lived and no power was consumed, it was hard for the sector to incur the cost. A lawyer in HCM City said to thesaigontimes.vn that housing developers must complete all technical facilities, including electricity systems, within the scope of the project while power companies must supply electricity to the hedge of the projects and install power meters as requested by customers.  Vingroup to kick-off new investments in Thua Thien Hue Vingroup will invest more than VND740 billion ($33.3 million) in building a trade center and an agriculture project in central Thua Thien Hue province. The Thua Thien Hue People’s Committee granted an investment license to the North Vincom Retail LLC on August 8 to build the Vincom Huong Tra Trade Center, with investment capital of VND215 billion ($9.5 million) on an area of 12,500 sq m and four storeys.  The project includes two phases. The first, from now to May 2017, will conduct site clearance and compensation and build technology infrastructure and two floors of the trade center. This first phase will come into operation in June 2017. In the second phase, from the third quarter of 2018 to the second quarter of 2019, it will build the remaining two floors, coming into operation in the second quarter 2019. Upon completion the trade center will have shopping outlets and entertainment and other services. The People’s Committee also granted an investment license to the Vineco Agricultural Investment, Production, and Development Co. to build VinEco-Thua Thien Hue. The project has investment capital of over VND525 billion ($23.3 million) and covers an area of 213 ha. It uses Israel technology and applies VietGAP and GlobalGAP standards in its production processes. The investor will complete all construction procedures in the third quarter of this year and begin construction by the end of the year. Construction of an operations center will begin in the second quarter of 2017 and finish at the end of the year, while construction of a technology transfer center will also start in the second quarter of 2017 and be finished at the end of 2018. Last year Vingroup announced it would enter into the agriculture sector under the brand name VinEco, with the aim of providing safe and clean food resources and exporting some of Vietnam’s dominant agricultural products. With charter capital of VND2 trillion ($94 million), VinEco will build farms throughout the country with the high technology needed to grow many types of organic vegetables under VietGAP and GlobalGAP standards. The company will plan production areas under a centralized and closed model. All stages, including research, seed technology, production, harvesting, post-harvest storage, and transport will be implemented under scientific processes, with strict adherence to quality and food safety and hygiene. It will also apply the most modern and advanced technology in production lines, with the aim of optimizing efficiency and product quality. Israel, Japan, and the Netherlands are expected to partner VinEco in the transfer of technology, seeds and agricultural equipment. The Vinmart supermarket network and the Vinmart+ convenience store chain will be the final link in the chain. As Vinmart has a presence throughout the country, all of VinEco’s agricultural products have ready buyers and it will also provide other partners with safe fruit and vegetables at reasonable prices. Besides developing agricultural products, VinEco will also focus on researching methods to produce dominant products in Vietnam’s agricultural sector, contributing to promoting exports and enhancing product value. As at June 2016, Vingroup had 20 trade centers around the country. In the first six months this year it invested in four large trade centers: Vincom Plaza in Go Vap district, Ho Chi Minh City, Vincom Plaza in Buon Me Thuot city, Dak Lak province, and Vincom Plaza Le Van Viet in Ho Chi Minh City. The giant also recently launched Vincom Plaza Ly Bon in Thai Binh province, its third Vincom shopping center in the northeast region and the group’s 20th nationwide. SCB earns profit of $3 million in Q2 Saigon Commercial Bank (SCB) has released its consolidated financial statement for the second quarter of 2016, revealing after-tax profit of VND67 billion ($3 million) compared to a loss of VND7.7 billion ($345,345) reported in the second quarter of last year. As at June 30, SCB’s total assets stood at VND340 trillion ($15.2 billion), up 9 per cent since December 31, 2015. Total lending was VND200 trillion ($8.97 billion), up 17.6 per cent, while total deposits reached VND287 trillion ($12.9 billion), up 12 per cent. Operating revenue during the second quarter stood at VND1.18 trillion ($52.9 million), up 59 per cent year-on-year. Most of its operating activities grew, according to the report. Profit from banking services increased significantly, from VND18 billion ($807,300) in the second quarter of 2015 to VND236 billion ($10.6 million) in the second quarter of this year. Stock investments recorded a profit of VND174 billion ($7.8 million), up 26 per cent year-on-year. Profit from other activities stood at VND97 billion ($4.4 million), a seven-fold increase year-on-year. Only foreign currency trading saw a loss, of VND47 billion ($2.1 million), compared to a profit of VND52 billion ($2.3 million) in the second quarter of last year. Operating expenses were down 4 per cent to VND527 billion ($23.6 million). Credit risk provision rose significantly, from VND420 billion ($18.8 million) in the second quarter of last year to VND1.04 trillion ($46.6 million) in the second quarter of this year, equal to 92 per cent of the bank’s pre-provision operating profit (PPOE). Pre-tax profit was VND81 billion ($3.6 million). Consolidated after-tax profit in the quarter of VND67 billion ($3 million) was a major improvement on the VND7.7 billion ($345,345) loss recorded the second quarter of last year. In the first half SCB therefore recorded after-tax profit of VND94 billion ($4.2 million), double the result in the same period last year. Fixed assets fell slightly year-on-year, from VND3.96 trillion ($177.6 million) to VND3.94 trillion ($176.7 million).   Other assets stood at VND51.5 trillion ($2.31 billion) as at June 30, equal to 15 per cent of the bank’s total assets. Its accounts receivable were VND19.2 trillion ($861.1 million) and accrued interest was VND32.1 trillion ($1.44 billion), up 16 per cent compared to December 31, 2015. Accounts receivables and accrued interest of the bank as at the end of June therefore stood at VND51.3 trillion ($2.3 billion), considered “abnormally” high. The bank is currently undergoing a reform process. CEO Vo Tan Hoang told the annual general meeting in April that “the selling of bad debts to VAMC is an effective solution for SCB to overcome difficulties during the reform period. SCB’s risk provision has accounted for 40 per cent of total bad debts and is expected to account for 80 per cent of total bad debts in the next two years.” Steel prices set to increase Domestic steel prices are expected to rise in the near future, thanks to increasing construction demand, the real estate market's recovery and high consumption, Việt Nam Steel Association (VSA) said. Nguyễn Văn Sưa, VSA's vice chairman, said the selling price of steel billets and bars had risen since July. Specifically, steel billet prices increased from US$300-$310 per tonne in July to $315-$325 per tonne at the beginning of this month. The prices of steel bars also increased from $308-$315 per tonne to $330-$338 per tonne. The prices of building steel, excluding VAT, delivered at factories have remained stable over the past two months at VNĐ9.4 million-VND9.9 million per tonne in the north and VND9.4 million-VND9.7 million per tonne in the south. Sưa said steel prices could rise further as the prices of steel billets have been rising, while the property market was expected to develop in the last few months of the year. In addition, reports from VSA showed that the steel output of its members last month reached 1.4 million tonnes, posting a 13.6 per cent year-on-year increase. Steel sales in July reached more than 1.2 million tonnes, increasing 27.3 per cent year-on-year, and 20 per cent higher from the previous month. The exports of steel products in July also posted a 57 per cent year-on-year rise to reach 246,500 tonnes. Sưa said the surge in both steel production and consumption showed that domestic steel producers could meet the demand for building steel. However, he said steel businesses should further improve their products' quality and reduce production costs to offer more competitive prices.  Slow site clearance hits rail bridge project A new Binh Loi rail bridge on the north-south railway in HCMC has been progressing at a snail’s pace as developers are still struggling with long-delayed site clearance and design. The project got off the ground in April last year. However, a recent report of Green Urban Investment and Development Joint Stock Company and STD Construction and Investment JSC said site clearance has not been completed as power and water supply works have remained in the area. A new bridge is being built across the Saigon River to replace the old Binh Loi bridge, which has been in use for more than 110 years. At present, the Binh Thanh District part of the bridge is under construction. The investors are selecting contractors for other construction packages, according to the report released at a meeting with the Ministry of Transport last week. At the meeting, the Transport Construction and Quality Management Department under the ministry requested the project’s consultant to make clear the impact of several issues relating to the bridge design on the progress of the project before it asks the ministry to adjust the design to make it more viable. Deputy Minister of Transport Nguyen Ngoc Dong told relevant agencies to clarify why the design needs to be adjusted as well as the technical feasibility and cost of the plans proposed the consultant and the department to pick the best one. The agencies were told to inform the ministry of relevant issues on August 12 at the latest. The current Binh Loi bridge is only 1.8 meters above water, so ships and barges cannot pass at high tides. The new bridge would be seven meters above the water surface, allowing bigger vessels to pass and trains to travel at a maximum speed of 100 kilometers per hour. In addition, the ministry will implement a project to dredge a 71-km Saigon River waterway from Binh Thanh District to Ben Suc Wharf in Binh Duong Province to make it easy for big ships to move in and out of ports along the river. The project costs VND1.3 trillion (US$53.4 million). The first build-operate-transfer (BOT) waterway project in the south is scheduled for completion within 16 months after construction begins. The investors will recover capital by collecting fees, estimated at VND70 per ton per kilometer, from cargo ships which run on the dredged section. Vehicle ban planned near HCMC airport The HCMC Department of Transport may ban some types of vehicle during rush hour on the streets near Tan Son Nhat International Airport in an effort to ease rising traffic congestion. The traffic ban plan comes after gridlock traffic has surged in recent days. City transport officials are also considering setting up an extra lane on Hoang Van Thu Street to allow vehicles to quickly enter and exit the nation’s busiest international airport. A representative of Tan Son Nhat airport ascribed traffic tie-ups around the airport area over the past few days to a sudden surge in traffic on Pham Van Dong Street whose final part has just been opened. This is not because of an increase in scheduled flights at peak hours, the representative added. The airport proposed the city transport authority restrict certain types of vehicles passing through the airport area during rush hour. The number of large commuter buses should be reduced on Truong Son Street that lead to the airport, except those carrying flight passengers. Bui Xuan Cuong, director of the transport department, said the intersections around the airport are to blame for traffic gridlock and that traffic should be better controlled, even on the streets that are not immediately adjacent to the airport. Urban Traffic Management Unit No. 1 under the transport department said congestion control measures at these intersections have been implemented but this has proven to be a daunting task. For example, 17 households along Tran Quoc Hoan Street have not been relocated for the expansion of a nearby intersection. Meanwhile, the overpass across Military Zone 7 could not be built as a metro line was planned to pass by the area. In the short term, the unit will open another lane on Hoang Van Thu Street and guide traffic towards the route of Truong Son-Hau Giang-Thang Long-Phan Thuc Duyen to reduce traffic density on Truong Son Street. In addition, Cuong told the unit to add traffic signs, improve traffic regulation and limit vehicles traveling to the airport. In the long term, the Ministry of Transport has asked the Ministry of Defense to hand over 10 hectares of land near Hoang Hoa Tham Street in Tan Binh District to make room for a new airport terminal and more roads. The city is also planning to build overpasses in front of the airport and at the nearby intersections, including Nguyen Thai Son-Nguyen Kiem and Hoang Van Thu, to prevent traffic jams. Hospital wants to stop equitization Nam Thang Long Hospital has asked the Government and the Ministry of Transport for permission to terminate its equitization process that started over a year earlier, and operate as a financially independent concern. According to the hospital’s recent document sent to the ministry, the ministry got the nod in May last year to launch a pilot scheme to equitize Nam Thang Long and report the result to the Government. If the ministry gets the Government’s approval, the hospital would become the second hospital under the ministry to go public. The first equitized hospital was Vietnam Central Transportation Hospital, which sold a 30% stake to strategic shareholder T&T Group.  Nam Thang Long Hospital’s survey of over 200 employees showed that its performance did not improve in the first half after it was transformed into a joint stock company. Incomes of staff did not increase while bed occupancy was only 54%. More than 20 experienced doctors have left Nam Thang Long for other public hospitals.  Leaders of Nam Thang Long said the hospital is in Group 2 in line with the Ministry of Health’s regulations and meets requirements to operate independently in terms of regular spending and investment. At present, the hospital serves over 70,000 medically insured middle-income patients a year. They said the hospital has attracted non-State resources to back its development while the State budget cannot cover its regular expenses. The equitization may make it difficult to serve middle- and low-income laborers and result in a workforce crisis as experienced doctors would leave. Therefore, almost all staff of Nam Thang Long Hospital signed a petition seeking the Government’s approval for the hospital to operate as a financially independent entity in line with Decree 16/2015/ND-CP on financial autonomy for public utilities. This means the ongoing equitization process at the hospital would come to an end if the petition is approved. Nam Thang Long Hospital had had a book value of VND29.5 billion by end-May last year. According to a Ministry of Transport plan, the hospital will sell a 70% State stake and issue shares to increase its chartered capital. The State will hold a 30% stake in the hospital after it goes public. T&T Group has expressed interest in buying a stake in Nam Thang Long Hospital and another hospital which is also under the ministry’s umbrella. Exporters warned of stricter rules ahead of TPP The Trans-Pacific Partnership (TPP), if ratified, will require Vietnamese exporters to meet more stringent requirements and struggle with new non-tariff barriers, said the director of the Center of Integration WTO Technical Assistance of HCMC. Pham Binh An said the trade pact signed by 12 Pacific Rim countries including Vietnam would gradually bring tariffs to zero, but local firms should keep in mind that stricter controls will apply to the origin of products, aside from other barriers that might be put up by importing countries. Intellectual property is another factor which they need to pay attention to, An said at a conference on opportunities and challenges for the food processing industry in HCMC on August 8.  Domestic firms are expected to face a slew of difficulties due to complicated regulations on geographical indications, brand names and labels, he told the event held by the city’s industry-trade department and the WTO Center in HCMC. He also suggested Vietnamese exporters heed the labor commitments in accordance with regulations by the International Labor Organization (ILO). They include freedom of association, right of collective organization and bargaining, and elimination of forced labor, child labor and workplace discrimination. Last but not least, local enterprises should strictly follow environmental rules in their production process, An said. “Challenges will emerge at first but in the long run, TPP will bring countless benefits to local firms.” Experts in the food processing industry said managing material sources could be the biggest obstacle. This stage requires producers to have a certificate of origin for their input material, and to ensure that their production process meets technical standards and food safety requirements. TPP is now waiting for ratification by the legislatures of the member states, but analysts say rising U.S. opposition to TPP in the election year may put the deal in jeopardy. Agriculture insurance pushed Việt Nam must develop policies to promote the popularity of agriculture insurance, especially at a time when natural disasters are significantly impacting production, according to the finance ministry. Nguyễn Quang Huyền, deputy director of the Insurance Authority Agency under the Ministry of Finance, said it was essential to continue insurance products for the agriculture sector because the pilot implementation proved its important role as a financial solution for farmers. “Policies to encourage farmers to buy agriculture products are needed,” Huyền said. Huyền said the finance ministry would work with the Ministry of Agriculture and Rural Development and other authorities on the continued implementation of agriculture insurance products on a large scale, and on a voluntary basis with financial support being provided to vulnerable groups like the poor and near-poor. Regarding insurance for fishermen, Huyền said the ministry would push to implement Decree 67 on fishery development policies by removing bottlenecks that hurt insurance firms and fishermen. As of June 30, insurance for the fishery sector collected premiums worth VNĐ387 billion (US$17.3 million), with nearly 15,000 boats and 145,960 fishermen insured. Compensation was estimated at VNĐ59.8 billion, to date. There were four insurance firms providing insurance to fishermen, including Bảo Việt, Bảo Minh, Petrolimex and PVI. During the 2016-20 period, the ministry will focus on improving the legal framework for insurance operations, especially policies to encourage disaster insurance and diversifying insurance products to meet market demand. In addition, regulations on risk and financial management would be issued to enhance system safety, as well as the operation efficiency and competitiveness of insurance firms and the development of a market database to promote transparency and competition. The finance ministry’s statistics showed that in the first half of this year, total premiums reached more than VNĐ38.6 trillion, representing a rise of 26 per cent over the same period last year. There were 60 insurance firms and one foreign branch in Việt Nam, including 29 non-life insurance, 17 life insurance, 12 brokerage and two reinsurance firms. US to import Vietnamese fresh mango The United States Department of Agriculture is proposing to amend regulations to allow the importation of fresh mangoes from Viet Nam. According to Viet Nam's Commercial Counsellor in the United States Dao Tran Nhan, with this move, Vietnamese fresh mangoes could certainly be exported to the United States from the end of this year. Mangoes will become the sixth Vietnamese fruit to be exported to the United States. The others are dragon fruit, rambutan, litchi, longan and star apple. The announcement was published in the August 4 federal register for public approval. As a condition of entry, fresh mangoes from Viet Nam will be subject to a systematic approach that includes meeting orchard requirements, providing irradiation treatment, and submitting to port of entry inspections. The fruit must be imported in commercial consignments, accompanied by a phytosanitary certificate issued by the Viet Nam National Plant Protection Organisation, with an additional declaration stating that the consignment was inspected and found free of Macrophoma mangiferae and Xanthomonas campestris pv. mangiferaeindicae. Viet Nam expects to export 3,000 tonnes of fresh mango to the United States annually, representing less than one per cent of the United States' fresh mango imports. The United States imports nearly 400,000 tonnes of fresh mango per year from Mexico, Peru, Ecuador, Brazil and Guatemala. Although mangoes are grown in Florida and Hawaii, and in smaller quantities in California and Texas, total annual production amounts to only 3,000 tonnes. Vietnam Rubber Group reports 4% profit from latex Viet Nam's largest latex producer, the Vietnam Rubber Group (VRG), reported that latex had earned only 4 per cent of the total VND1.2 trillion (US$53.7) profit in H1. According to the financial statement for the first half of 2016, the price of rubber was VND28.3 million per tonne, VND4.4 million lower than in the previous term. As of June 30, the group had sold 110,315 tonnes of rubber, reaching 34.5 per cent of the annual target. With the H1 price for rubber, the group said it had earned a profit of VND500,000 per tonne. Sales revenue and profit from rubber reached VND3.1 trillion and VND43.9 billion, respectively. Besides latex, the group's total revenue of VND8.4 trillion comprised VND2.4 trillion from the timber industry, VND806.7 billion from supporting industries, VND870.7 billion from the industrial park and VND154 billion from hydropower, as well as VND225 billion from other industries and VND851 billion from its finance, joint ventures and associated firms. HCM City-based VRG was established upon re-structuring the Vietnam General Rubber Corporation in 2006. Its main area of operations includes planting, maintaining, exploiting and processing rubber latex. It also has operations in the fields of agriculture and forest plantation, engineering, cargo and construction materials, as well as real estate, hotels and restaurants. Currently, the group has nearly 60 parent and associated companies in Viet Nam, Laos and Cambodia.  Hanoi to make tourism key industry by 2020 The capital city of Hanoi plans to make tourism more sustainable and a key industry, hoping to welcome 30 million visitors per year, including 5.7 million foreigners, by 2020.  According to the municipal Department of Tourism, the capital recorded annual growth of more than 10 percent in tourist arrivals. The growth rate of international holidaymakers is about 14 percent per year while that of domestic visitors averages 9.2 percent.  The city received approximately 19.7 million travellers in 2015, including 3.3 million from overseas who accounted for 40 percent of foreign visitors to Vietnam.  However, the volume was much lower than that of other capital cities in the region. It was only equal to one sixth of the number of international travellers to Bangkok (Thailand), and one third of that in Singapore, and Kuala Lumpur (Malaysia).  Most foreign tourists come from China, the Republic of Korea, Japan, the United Kingdom, Australia, the United States, France, Germany and Malaysia.  About 80 percent of international visitors to Hanoi were holidaying with the remainder coming for business.  The local tourism industry earned nearly 55 trillion VND (2.47 billion USD) last year and 31.3 trillion VND (1.4 billion USD) during the first half of this year. Average spending per foreign visitor was estimated at 110 USD per day while the average domestic traveller spent 55 USD per day.  Local authorities launched a plan towards 2020 and post-2020 to boost tourism, aiming to develop infrastructure and improve tourism products in terms of quality and diversity.  Hanoi hopes to generate 120 trillion VND in revenue from tourism by 2020 with an annual growth of 15-17 percent until then. Nearly VND2 trillion to upgrade Na San Airport in Son La Province  Upgrading Na San Airport in northern Son La Province will cost an estimated VND2 trillion (US$89.3 million), according to the Civil Aviation Authority of Viet Nam (CAA). Lai Xuan Thanh, CAA's Director, said there are difficulties in arranging for funding from the State budget to develop Na San Airport, since the airport was not included in the investment plan for 2016-20 period. In order to carry out the construction of Na San Airport before 2020, the CAA proposed the Ministry of Transport seek approval from the Prime Minister for an estimated VND693 billion from the budget to build the airport. The remaining capital would be sought from the CAA and private investment. The CAA said that Na San Airport, included in the approved master airport planning for 2020, played a significant role in the nation's security and in stimulating socio-economic development of Son La Province and the northwest region. Na San Airport, 187 kilometres from Noi Bai International Airport and 110 kilometre from Dien Bien Airport, will be a 4C-class airport. A 4C airport has runway lengths of at least 1,800 metres and accommodates aircraft with a maximum wingspan of 24 to 36 metres and wheelbase of 6 to 9 metres. The airport has been temporarily closed since 2004 for upgradation. The airport was expected to have capacity of serving 0.9 million passengers per year by 2020 and 1.5 million passengers by 2030.  New customer-to-customer shopping platform launched Shopee, the first mobile-led social marketplace, has officially launched in Viet Nam after a trial run of more than a year. Supported by Garena, a Southeast Asian internet platform provider, Shopee is a customer-to-customer marketplace where customers can browse, shop and sell a wide range of products. With a range of products, secure payment methods, fully integrated door-to-door delivery services and innovative social features such as #hashtag, live chat and easy connections to social media, the marketplace empowers budding entrepreneurs to grow their business, according to Tran Anh Tuan, director of operations and finance for Shopee Vietnam. Integrated sales tools also enable entrepreneurs to promote products, manage inventories and enhance customer relations. Shopee operates in seven countries and territories, including Singapore, Malaysia, Indonesia, Thailand, Viet Nam, the Philippines and Taiwan, with 16 million downloads and 46 million items listed. In Viet Nam, it has had 1.8 million downloads and more than 3 million items listed. To celebrate its launch, Shopee is offering free shipping to sellers from August 8 to September 9. A mobile shopping experience with a variety of promotions and discounts will be organised on September 9. SOEs yet to publicize financial information as required Multiple Vietnamese state-owned enterprises (SOEs) are withholding information required by state law to be publicly disclosed, symptomatic of the lack of transparency in the country’s public sector. In 2015, the Vietnamese government issued Decree No. 81, requiring SOEs to publicize information regarding their activities including development plans, production plans, and financial statements. Mobifone, a state-owned mobile carrier, was later caught trying to conceal its acquisition of a local pay TV operator, and it is this kind of lack of transparency that seems to be the norm, not the exception, among SOEs. An official from the Ministry of Planning and Investment confirmed that out of almost a hundred SOEs, very few had followed the guidelines established by Decree No. 81. Out of twenty-two ministries within the government, some, such as the Ministry of Health and the Ministry of Education and Training, had received no report on the publication of information from the SOEs under their supervision, while others had received very few. Similarly, many locales, such as Hai Duong, Thai Nguyen, Vinh Phuc and Can Tho City, have not heard from local SOEs regarding the matter. Despite the fact that the Ministry of Planning and Investment has sent an official dispatch reminding 132 departments, agencies, and companies about the publishing of information required under Decree No. 81, many SOEs are yet to comply. State Capital Investment Corporation, an SOE that manages state-owned capital, has published its information up until 2015 only. PetroVietnam, the state-owned oil and gas group, has released its financial statement for the first six months of the same year. Viettel, another mobile phone carrier, has publicized a salary report that is only six pages in length, much shorter than the template required by the government. According to an official from the Department of Ministry and Planning, publicizing information forces SOEs to carefully consider decisions related to matters that will later be made publicly available, thus creating a change in management style and fostering a culture of transparency. Dr. Do Duc Dinh, chairman of the Scientific Council at the Center of Socio-Economic Studies, claimed that the reason behind SOEs’ reluctance to publicize information is the inherent lack of transparency of an entire system. Many SOEs have set up unofficial funds for extravagant spending and for the benefits of ‘underground’ interests. A prime example is the scandal in which a subsidiary company of one SOE spent VND500 million (US$22,420) on a birthday party for the boss’ father. The solution, according to Dr. Dinh, is increased equitization and privatization of SOEs, which will pressure them to change as their activities become more closely monitored by shareholders.  Honda Vietnam’s profit tops US$403mn in 2015 Honda Vietnam, the local subsidiary of the multinational conglomerate Honda, managed to rack up even more profit in 2015, despite a saturating motorcycle market. The motorcycle giant posted US$3 billion in revenue, a strong increase from US$2.76 billion in 2014, and US$403 million in profit, according to information released this week by the Vietnam Engine & Agricultural Machinery (VEAM). The VEAM holds a 30% stake at Honda Vietnam. The other stakeholders are Honda Motor, headquartered in Japan, and Thailand-based Asian Honda Motor. Motorcycles continue to be the driving source of income for Honda Vietnam, accounting for 95% of the company’s turnover. Currently, Honda Vietnam controls more than 70% of the motorcycle market in the country, with sales growing from 1.91 million units in 2014 to 2.03 million in 2015. Recognizing signs of saturation in Vietnam’s motorcycle market, the company has maintained its position in the domestic arena while increasing its exports to regional and global markets. Automobiles constitute the rest of Honda’s income, with sales rising 48% against 2014 to reach 8,300 cars in 2015. Last year, Honda Vietnam, determined to take advantage of an opening in the automobile market, invested US$65 million in building its first automobile factory, with an output of 10,000 cars a year. With three motorcycle factories and one automobile plant, Honda has supplied almost 20 million motorcycles and 44,000 cars in the last 20 years. Despite its commanding presence in Vietnam, the firm has rarely disclosed information about its corporate performance. The VEAM only revealed the above financial information when it is preparing to launch an initial public offering (IPO) on August 29. GE receives investment certificate for Doosan Engineering & Construction HRSG business in Vietnam GE in Vietnam has officially received the investment certificate for transferring Doosan Engineering & Construction Heat Recovery Steam Generator (Doosan E&C HRSG) manufacturing and projects in the central province of Quang Ngai’s Dung Quat economic zone to GE Vietnam. The certificate was received during a handover ceremony witnessed by Prime Minister Nguyen Xuan Phuc at the Quang Ngai Investment Promotion Conference 2016. This is an important step in GE’s acquisition process of Doosan E&C HRSG in the country.  In May 2016, GE Power, a division of GE, signed a purchase agreement to acquire the HRSG business of Doosan E&C. This acquisition, which will help GE Power meet the growing demand for its combined cycle power plants utilising HRSG technology, includes the Doosan E&C HRSG facilities and related manufacturing resources, including two manufacturing facilities located in Vietnam.  “Since the acquisition intention was announced, we’ve worked closely with Doosan Engineering & Construction to plan the integration and received tremendous support from our customers and local authorities,” said Pham Hong Son, CEO of GE Vietnam. “This acquisition has affirmed our commitment in building local manufacturing capabilities. With the expansion of our manufacturing space for HRSG, GE will continue to build and grow our total plant solutions for key power projects in Vietnam.” VEAM to launch largest IPO of the year Foreign investors are offered 167 million shares in Vietnam Engine and Agricultural Machinery Corporation (VEAM), equalling 13 per cent of its chartered capital, in its initial public offering (IPO) organised on August 29, according to information published on the Hanoi Stock Exchange (HNX) website. With the initial price of VND14,290 ($0.64) per unit, the auctioned share volume will be valued at VND2.38 trillion ($106.6 million). After the sale, VEAM’s chartered capital will increase to VND13.28 trillion ($595.5 million), equalling 1.33 billion shares. Accordingly, the state will hold 51 per cent of the chartered capital with 678 million shares, and strategic shareholders will hold 36 per cent, equalling 478 million shares. VEAM employees will hold 0.49 per cent of the company stakes. The rest will be sold at the company's IPO on HNX. Regarding strategic shareholders, Vietnam N.A Motor Co., Ltd. (N.A Motor), which spent VND1.25 trillion ($55.8 million) on acquiring a 97.7 per cent stake in Vietnam Motors Industry Corporation (Vinamotor) in January, registered to buy the assigned 36 per cent at the price of VND10.050 ($0.45) per unit, equalling VND5 trillion ($223.8 million). As of now, only N.A Motor has expressed interest in becoming VEAM’s strategic shareholder, indicating a one-sided end to N.A Motor. Established in 1990, VEAM specialises in manufacturing agricultural machinery, components, and assembling automobiles and motorbikes. The company has 20 subsidiaries nationwide, including Song Cong Diesel Limited Company, Southern Vietnam Engine and Agricultural Machinery Company Ltd. and An Giang Mechanical JSC, etc. In addition, the company currently holds a 30 per cent stake in Honda Vietnam, a 20 per cent stake in Toyota Vietnam, and a 25 per cent stake in Ford Vietnam. Furthermore, it owns numerous sizeable land plots in Hanoi, Ho Chi Minh City, Haiphong, Dong Nai, and Ba Ria-Vung Tau, among others. According to the company’s financial report, in 2015, it acquired a net profit of VND3.66 trillion ($163.8 million), VND3.39 trillion ($151.7 million) of which was distributed as dividend. Regarding N.A Motor, established in 2005, the company specialises in distributing cars and motorbikes, selling spare parts, vehicle insurance, as well as providing vehicle maintenance and repair services. The company is currently expanding its operations to the real estate sector. N.A Motor, with its solid finances, commits to making Vinamotor become the country’s leading car manufacturer and distributor. Dai Nam racecourse licence shenanigans Dai Nam JSC, the developer of the Dai Nam tourism park complex in the southern province of Binh Duong, expedited a mammoth $100-million racecourse in Dai Nam complex, capturing newspaper headlines. Accordingly, it was reported that construction of the 60-hectare racecourse has started last July and will be completed within two months. The racecourse also includes a 30-hectare parking lot and a grandstand that can accommodate 50-60,000 people. Dai Nam JSC’s chairman cum general director Huynh Uy Dung recently told the media that the company had sent the complete legal documentation and reported the project to Binh Duong province’s management authorities.  After completing the legal and administrative hurdles, the construction of the racecourse will be wrapped up in about mid-October 2016, and the racecourse will be ready to operate.  Dung also said that the racecourse will welcome local and international visitors and become a hotbed to the country’s new generation of talented racers. Also, the company has strict policies prohibiting gambling at the racecourse. The picture painted to and by the media is rather rosy; however, something is out of place behind the scenes.  In a talk with the VIR late last week, director of the Binh Duong Department of Planning and Investment Nguyen Thanh Truc said that he only learned about the project through the media.  Truc affirmed that the department had yet to receive any files or legal documents related to Dai Nam JSC’s racecourse.  Earlier, deputy director of the Binh Duong Construction Department Nguyen Loc Ha said that he was told the racecourse project already had a construction proposal and is in the process of legal setup for the licensing procedures.  An investment consultant told VIR that in light of the amended 2014 Investment Law, if Dai Nam’s racecourse project does not include gambling, it will only need to secure approval by the province’s People’s Committee.  According to Clause 33 of the 2014 Investment Law, the investor must submit the project records to the local investment registration agency (here the Binh Duong Department of Planning and Investment).  After receiving these documents, the agency will go through the necessary procedures to submit them to the provincial People’s Committee for approval.  If the media reports were true, Dai Nam JSC has not followed the regulations on investment activities.  Since the project is of a large size and involves the building of a grandstand with a carrying capacity of several dozen thousands of spectators, strictly adherence to investment and construction regulations is very important. JVC records "surprise" loss of $60m in FY2015 The Viet Nhat Medical Instrument Joint Stock Company (JVC) has released its audited financial statement for FY2015, recording an unexpected loss of VND1.34 trillion ($60.1 million). According to its auditors, KPMG Vietnam, the reason for the loss was an increase in JVC’s risk provision for bad debts, which rose from just VND1.4 billion ($62,776) as at April 1, 2015 to VND1.12 trillion ($50.2 million) as at March 31, 2016. With after-tax profit in 2014 of VND219.5 billion ($9.8 million), the loss during FY2015 has created chaos in the financial market. KPMG Vietnam revealed the risk provision was due to inappropriate use of capital by former members of the Board of Directors (BoD). Operating revenue in 2015 was VND507 billion ($22.7 million), the same as in its unaudited financial statement. Operating profit, however, was reported at VND3.4 billion ($152,456), much lower than the unaudited result of VND69 billion ($3.1 million). Risk provision for bad debts consisted of VND594 billion ($26.6 million) for accounts receivables of related parties of the former BoD. JVC’s affiliate companies with 100 per cent of their accounts receivables were considered bad debts, like Huong Dong Company with VND104 billion ($4.7 million) and Triet Ton Tien Medical Equipment Company with VND315 billion ($14.1 million), according to KPMG Vietnam, and these have a “tight relationship” with the former BoD. As a result, JVC’s total losses for FY2015 were reported at VND1.34 trillion ($60.1 million), even higher than its charter capital of VND1.12 trillion ($50.2 million). As at March 31, 2016, JVC’s retained loss was reported at VND990 billion ($44.4 million), equivalent to 88 per cent of charter capital. JVC’s audited financial statement for year-ending March 31, 2016 also revealed information regarding the use of capital gained from its public offering on October 22, 2014. According to KPMG Vietnam, the company received VND749.7 billion ($33.6 million) from the public offering and had a plan to use the capital under Resolution No. 01/2015-NQ-DHCD dated November 19, 2015. KPMG Vietnam, however, believes it has used the capital in a different manner to the resolution. Those are payments of VAT, corporate income tax, penalties for late tax payment of VND103.9 billion ($4.6 million), and a VND500 million ($22,420) capital contribution in an affiliate company. This, according to KPMG Vietnam, was not notified to the State Securities Commission of Vietnam. “The company has not completed its paperwork relating to its use of working capital gained from the public offering on October 22, 2014,” KPMG Vietnam wrote in its report. “We therefore could not determine whether the use of the rest of the capital gained from the public offering, of VND645.3 billion ($28.9 million), has been used under the resolution’s adjusted plan.” Not only had JVC inappropriately used its capital, KPMG Vietnam also noted secured transactions by JVC to two companies KPMG Vietnam believes have a “tight relationship” with the former BoD. This also does not follow policies for listed companies as it had not been approved by a shareholders meeting. Transactions relating to the purchase and sale of goods along with capital contributions to medical instrument projects of related parties to the former BoD have only been identified during this year. Those transactions were the main reason for the exceptionally large risk provision. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR