BUSINESS IN BRIEF 20/9 Vietnam emerges top export market of ROK Vietnam has emerged as one of the top three export destinations for the Republic of Korea (ROK), according to statistics from the Korea International Trade Association (KITA). The ratio of exports to Vietnam as a percentage of the East Asian country’s total exports for the seven months leading up to August jumped to 6.4%, nearly half (46%) of the 14% ratio for exports to the US. During the seven months, exports out of the ROK to Vietnam totalled US$18.0215 billion, up 10.1% on-year, while concurrently overall total exports out of the ROK declined by the same 10.1%. Of the top four export markets for the ROK, only exports to Vietnam showed growth with exports to China, the US and Japan (the first, second and fourth largest export markets) having fallen 13.5%, 5.4% and 12%, respectively. Last year, Vietnam became the fourth-largest export destination for the ROK by surpassing Japan. Such a rapid rise in the significance of Vietnam to the ROK economy has to do with the fact that manufacturing giants such as Samsung Electronics and LG Electronics have since 2009 been pumping tens of millions of US dollars of investment into the Southeast Asian nation. KITA statistics showed that for the period from 2009 to 2014, concurrent with the rise in investment there had been a 17.6% rise in exports of intermediate goods and raw materials to Vietnam. Commercial trade between the ROK and Vietnam, according to KITA, is likely to continue to increase in light of the fact a free trade agreement between the two countries that came into effect in December of last year has made trade more attractive. Still, KITA pointed out that ROK companies operating in Vietnam have yet to show adequate rates of return on their investments, particularly in light of the tremendous size of those investments. According to the Korea Trade-Investment Promotion Agency, ROK companies’ direct investment in Vietnam amounted to US$15 billion last year but their operating profit ratio and current net earnings ratio stood at 2.3% and 0.6%, far below their global averages of 3.2% and 1.7%. LG builds US$550 million camera module plant in Haiphong LG Innotek Co Ltd, a subsidiary company of the Republic of Korea's LG Group, has been licenced to build a camera module plant in Haiphong City. The plant will be constructed on an area of 10ha at Trang Due Industrial Park in Dinh Vu – Cat Hai Economic Zone, at a cost of US$550 million. After the plant is put into operation in the fourth quarter of next year, it will produce camera modules with an output of 30 million items per months for export. This is the third project that LG has invested in Haiphong. The first project is a US$1.5 billion complex to produce electronic equipment. The second one is a US$1.5 billion screen factory to make organic light emitting diode (OLED) display products. Thus, LG group has so far invested US$3.55 billion in Hai Phong city. Coffee export growth beyond expectations Vietnam has shipped abroad 1.61 million tons of coffee since early this year, up 33% against the corresponding period last year, according to the General Department of Vietnam Customs. In August alone, 152,678 tons of coffee was sold to foreign businesses. This figure comes above the market forecasts of 100,000-120,000 tons and the official government estimates of 140,000 tons. To some extent, Vietnam’s coffee exports in August helped balance the global market in the context of supply from Brazil was declining. The Brazilian Coffee Exporters Council (Cecafe) reported that Brazilian exports of Robusta coffee in August dipped 90% compared to the same period last year due to severe droughts in Espirito Santo – the key cultivation area. Thus, the country’s exports during the first eight months of this year dropped 12.6%, however, Cecafe President Nelson Carvalhaes forecast that coffee exports will rebound in the future. Sustainable agriculture in ASEAN integration An international conference entitled “Developing sustainable agriculture in ASEAN integration” was held in Hanoi on September 15-16 aiming to improve the quality of agricultural products, ensuring farmers’ interests, and sustainably developing agriculture. Vice President of the Vietnam Peace and Development Foundation (VPDF) Trinh Ngoc Thai said that with about 70% of the population being farmers, agriculture was an important sector which accounts for nearly 20% of the country’s GDP. The economic integration process, especially into ASEAN, has brought about considerable benefits and opportunities for farmers and the agricultural sector in Vietnam and other ASEAN member countries through the expansion of export markets, free trade, investment attraction and science-technology exchanges. During the two-day conference, jointly held by the VPDF and Rosa Luxemburg Stiftung Vietnam, participants also discussed a number of issues related to the sustainable development of agriculture, including the role of science and technology advances in the growth of goods-based agriculture, the impact of the ASEAN Economic Community on Vietnam’s agriculture sector, and green and environmentally-friendly agriculture. Brand Finance: Vinamilk No. 1 brand in Vietnam Brand Finance, the world’s leading brand valuation and strategy consultancy, published on September 15 the list of the 50 Most Valuable Brands in Vietnam in the second ranking of this kind. Brand Finance has been tracking the value of thousands of the world’s top brands for nearly two decades. The Top 50 brands from Vietnam are featured in the Brand Finance Vietnam 50, the most extensive listing of Vietnamese brand values ever announced. Brands are some of the most valuable assets that companies and other organizations possess, said Samir Dixit, managing director of Brand Finance in Asia-Pacific in connection with the publication of the list. Mr Dixit noted that understanding brand value is key to delivering maximum returns to owners of the business, and this exercise is as essential for brands in Vietnam, as in the rest of the globe. The top 50 brands in Vietnam are worth US$7.26 billion and Vinamilk with its portfolio of dairy product brands owns the largest share of the total value, says Brand Finance. The list reveals that in Vietnam, the ‘brands behind the brands’, despite being lesser-known players, are often as respectable in terms of value as their consumer facing brands. Such is the case of Masan Group, and FPT. Seminar focuses on sustainable agriculture profitability Making sustainable agriculture profitable is the subject matter of a seminar presented by the Ministry of Agriculture and Rural Development (MARD) on September 15-16 that has convened in Hanoi. Nearly 70% of the workforce in Vietnam is dependent on agriculture for their livelihood, said Trinh Ngoc Thai, vice chairman of Vietnam Peace and Development Fund, in a keynote address on the first day of the conference. Agriculture, he said, accounts for 20% of the gross domestic product (GDP) and an even greater percentage of the gross national product (GNP). However, agriculture in Vietnam today is neither sustainable nor profitable and in the midst of the transition to a more industrial society faces greater challenges than at any time in the nation’s history. Increasing crop diversity and implementing sustainable agricultural practices therefore are critically important to build better profits into current farming systems, and provide the incentive needed to implement new practices. In addition, sustainable agriculture must achieve a balance between environment and profit and that is another difficult challenge facing agriculture in Vietnam. He noted much work need be done in connection with diversifying crop rotations throughout the nation to address these issues. Le Quoc Doanh, deputy minister of MARD, in turn dilated on the need to increase labour productivity and to develop higher yielding crops to boost competitiveness of agriculture in the global marketplace. Improving rural infrastructure such as roads, he said, is also crucial to raising productivity because it reduces shipping costs and the loss of perishable produce. Lastly, DM Doanh emphasized the need for better use of information technology to support better crop, fertilizer and pesticide selection; adding that IT could also be used to improve land and water management, provide improved access to weather information, and connect farmers to sources of credit.  Vietnam consortium plans 4 major real estate developments A consortium led by Ho Chi Minh City based Truman Holdings has unveiled plans to develop four luxury residential, hotel and retail complexes at locations across Vietnam over the next four years. At a ceremony on September 14 in Thai Binh, Truman Holdings and three other companies revealed plans for the developments to be located in the four major cities of Danang, Binh Thuan, HCM City and Thai Binh.   The three other players in the project are Licogi Corporation JSC, who will serve as the construction manager for the projects, and BIDV Bank and HD Bank will provide financial backing. Details of precisely how the total estimated funds of US$27 billion will be raised were not disclosed in full, but typically construction of this nature is entirely dependent on the ability of the consortium to raise the needed equity capital through future IPOs. US livestock exporter ships breeding pigs to Vietnam Vissan Limited Company based out of Ho Chi Minh City has unveiled the receipt of 220 purebred breeding pigs shipped to Vietnam by US leading livestock exporter, Clayton Agri-Marketing. This is the third shipment of top of the breeding pyramid Landrace, Yorkshire and Duroc stock received from the US exporter and they come with the highest health status, said Vissan. After a quarantine period in Vietnam, they will be transported to their final destination: a farm in Binh Thuan where they will be used as sows to rear piglets, known for their highly efficient feed conversion capacity and meat.  Chains Caravelle Hotel has new general director Caravelle Saigon has recently seen a change in its executive management team as John Gardner, former general manager, takes over from Martyn Davies. Effective from September 1, John Gardner commenced the position of general director of Chains Caravelle Hotel Joint Venture Company Limited. In his new role, Gardner will be overseeing both Caravelle Saigon and Vegas Gaming club, working directly with Hong Kong and Vietnamese board members on major matters while maintaining a close contact with the hotel management.  “I am delighted to hand over to John - there is no one more suitable to take on this role. With his strength in leading and managing plus a pool of knowledge and understanding of both Caravelle Saigon and the hospitality industry, I am confident in his ability to successfully lead the hotel to new heights,” said Martyn Davies, former general director of Chains Caravelle Hotel Joint Venture Company Limited, who has been with the property for nearly twenty years. New Zealand native, John Gardner has more than three decades of experience at the helm of leading hotels within the Asia-Pacific region. His long career in hospitality has led him to premier hotels in cities as diverse as Sydney, Melbourne, Perth, Auckland, Bangkok, Surabaya, Singapore, Jinan, Chongqing, Phnom Penh, Shenzhen and, for the past ten years, Ho Chi Minh City. Gardner began his journey in hospitality with the Accor Group in Australia, captaining small hotels around the country before being handpicked to head the launch of the first Accor property in New Zealand in 1993. Gardner spent 18 years with Accor, striking out to the Asian continent with executive posts in Indonesia, Cambodia, China and Thailand. He also spent four years as a general manager with the 5-star InterContinental Hotels group in China, before relocating to Vietnam in 2007. Under his direction, Caravelle re-branded its signature restaurant Reflections, and celebrated its 50th anniversary with an event that drew luminaries from its wartime past such as Pulitzer Prize winner Peter Arnett. Most recently, Gardner has shepherded the property through the first stage of a significant enhancement project, which saw the refurbishing of the lobby, acclaimed buffet venue Nineteen and ground-floor lounge Café de l’Opera, along with the newly open Tapas Kitchen and Vietnam’s very first Champagne Corner, in collaboration with Moet Hennessy. New high-end apartments and villas coming to Da Nang Da Nang’s real estate market will soon welcome a number of new high-end apartments and villas in major projects such as Soleil Da Nang, Coco Bay, Da Phuoc, Han Riverside, Ariyana, Central Coast, Vinpearl Han River, and Ocean Suites & Estates. The latest report from Savills on the central city’s real estate market in the first half showed that 80 per cent of purchasers are from Hanoi, attracted by the wide a variety of products, completed infrastructure, bright tourism prospects and sales policies, and the image of a young, dynamic and green city. Successful existing projects include Ba Na Hills, Ocean Villas, Hyatt Regency, Furama, Intercontinental, and Azura. “Vietnamese residential requirements are changing,” the report noted. Household occupancy, once one of the highest in Asia, is falling rapidly, creating a greater need for housing diversity. Second homes and housing choices relating to lifestyle are becoming commonplace. Da Nang offers investors fully developed and completed infrastructure and sound urban planning. Functional satellite areas are being formed. Its northwest coastal area is taking advantage of the natural landscape to develop eco-tourism, while the conventional urban area develops towards a hub of trade, finance and education. The eastern coastal area is highlighted by hospitality and in the south a mega township and tourism area is slated for development. The appearance of the $4 billion Hoi An South casino resort, expected to be put into partial operation by 2019, will create a huge push for the formation of a hospitality strip from Da Nang to Hoi An. Major upcoming hospitality projects include Crowne Plaza Phase 2, Hilton Danang Hotel, and Four Points by Sheraton. Da Nang has been named one of the 20 ‘cleanest cities’ in the world and the ‘most livable city’ in Vietnam. Offering plenty of beautiful natural and cultural destinations, it is the tourism capital of central Vietnam.   In 2015 there were 73 three to five-star hotels with 8,485 rooms, of which seven of the eleven five-star hotels and four of the 14 four-star hotels were managed by international operators. There remains room for a higher international operator presence. Accor Hotels and Resorts Group is the largest international operator in Da Nang, managing approximately 944 rooms. Quang Chau IP attracts $500 million in new capital The Quang Chau Industrial Park in northern Bac Giang province has attracted $500 million of new investment capital from investors in China and Hong Kong. According to the Kinh Bac City Development Corporation (KBC), the owner of Quang Chau, it signed two contracts for land rentals with investors from China and Hong Kong after its representatives accompanied Prime Minister Nguyen Xuan Phuc on his official visit to China and Hong Kong from September 10 to 15. The first contract was signed with China’s JA Solar Holdings Co. to build a $300 million plant on an area of 40 ha producing solar cells. The second was signed with Hong Kong’s Technology Company Luxshare - ICT, which will invest $100 million in a project manufacturing electronic components on a area of 14 ha. JA Solar Holdings is a solar development company based in Shanghai that designs, develops, manufactures and sells solar cells and solar module products and is also engaged in the manufacturing and sale of monocrystalline and multicrystalline solar cells. Luxshare - ICT is a manufacturing company investing heavily in R&D. Its primary business is cables and connectors for 3C (computers, communications and consumer electronics), automobiles, and the medical sector. Quang Chau Industrial Park, with an area of 600 ha in Viet Yen district, boasts a favorable location, 33 km from Hanoi, 100 km from Huu Nghi Border Gate (in northern Lang Son province), and 33 km from Noi Bai International Airport. It is also close to the Hanoi - Quang Ninh and Ho Chi Minh City - Hanoi - Yunnan (China) railway lines. According to KBC, as at the third quarter Quang Chau had leased nearly all land in the second phase and plans to expand with the aim of providing more land to investors in the time to come. KBC invests, constructs, and trades in real estate in Vietnam. It develops residential areas, re-settlement areas, and industrial parks, and also leases or sells urban areas, hotels, and commercial centers, as well as plants and houses. In the first eight months Bac Giang province attracted 121 investment projects with a total of $422 million of newly-registered and additional investment capital, ranking it 10th in FDI to Vietnam by province. Vietjet to fly to Hong Kong Vietjet Air announced the opening of a new route linking Ho Chi Minh City with Hong Kong during the official visit by Prime Minister Nguyen Xuan Phuc to the territory. Flights will be begin on December 9. With a flying time of two hours and 45 minutes, flights depart daily from Ho Chi Minh City at 2.35pm and arrive in Hong Kong at 6.20pm. The return flight takes off at 7.20pm and lands at 9.05pm (all local times). Tickets are already available, at www.vietjetair.com. Vietjet is well-positioned to provide quality and creative aviation services across its primary international network while also connecting key regional destinations with each other, including Hong Kong. Vietjet’s mission is to make air travel accessible to everyone and a more popular means of transport and to create a future in the air. It believes the new Ho Chi Minh City - Hong Kong route will better connect the two dynamic financial hubs and tourism destinations. Hong Kong is a global hub for finance and trade and home to many multinational offices and headquarters in the Asia Pacific region. With such a mixed culture of East and West, diversified cuisine and entertainment, Hong Kong has long been a popular tourism and shopping destination. Vietjet Air currently boasts a fleet of 40 aircraft, including A320s and A321s, and operates 350 flights each day. It has opened 53 routes in Vietnam and across the region to international destinations such as Thailand, Singapore, South Korea, Taiwan, Malaysia, China and Myanmar. It has carried nearly 30 million passengers to date. It continues to enlarge its fleet and expand domestic and international routes in order to meet increasing travel demand among tourists, individuals and businesspeople. With high-quality services, special low-fare tickets, and diverse ticket classes, Vietjet offers passengers enjoyable flights with dynamic and friendly flight crews, comfy seats, amazing hot meals, and special surprises from the airline’s in-flight activities. Looking ahead, the airline plans to expand its network across the Asia Pacific region. To prepare for this plan it has signed agreements with aircraft manufacturers to purchase more brand-new, modern aircraft. Indochina Capital teams up with Kajima Corporation Indochina Capital signed an agreement on September 16 to establish a new joint venture with Kajima Corporation, a major Japanese construction and real estate development company with a global presence in key markets around the world. Indochina Kajima Development Ltd. (ICC - Kajima) aims to build on the success and impressive track records of the two companies, developing quality and innovative real estate projects throughout Vietnam. Mr. Peter Ryder, Founder and CEO of Indochina Capital, said: “We are very excited about utilizing Indochina Capital’s foundation - our in-depth experience in local project development and our team of seasoned and dedicated professionals - in partnership with Kajima to build quality and innovation real estate projects to take full advantage of the opportunities that Vietnam presents as it continues to march into the future.” “Vietnam has always been a market of interest for the Kajima Corporation,” said Mr. Keisuke Koshijima, who heads Kajima’s Overseas Division. “Identifying the right partner has been the critical consideration and we are pleased to partner with Indochina Capital in the formation of ICC - Kajima. We share a common goal of achieving excellence in every aspect of our operations, management, execution, people and performance. We aspire to create superior value for our investors and customers.” Indochina Capital was established in 1999 and has been a prominent name in Vietnam’s high-end real estate market. Indochina Land, its real estate division, has pioneered the domestic luxury market with a series of iconic developments around the country, such as The Nam Hai, Six Senses Con Dao, Hyatt Regency Danang, Montgomerie Links Vietnam, and Indochina Plaza Hanoi. Indochina Land has solidified its lasting reputation through a consistently strong commitment to quality, innovation, timeless designs, environmental sustainability and sophisticated luxury. Kajima Corporation, founded in 1840, is one of the big four Japanese contractors and Japan’s largest overseas real estate developer. Its global footprint comes through subsidiaries in North America, Europe, Asia and Australia. The company’s most impressive projects include the Four Seasons Resort Hualalai, Hawai, one of the world’s most breathtaking resorts, and Senayan Square in Indonesia, one of Asia’s largest multi-purpose developments, which has left a profound mark on Jakarta’s real estate landscape. It has immense financial strength and credibility, with its stock listed on four leading exchanges in Japan. “ICC - Kajima will initially focus on urban in-fill accommodation projects, in the residential and hospitality segments, in Hanoi, Ho Chi Minh City and Da Nang,” said Mr. Michael Piro, Chief Operating Officer of Indochina Land. “The company will be primarily focused on providing permanent and temporary accommodation in the form of hospitality-serviced apartments-hotels and residences for sale. These are areas where we have a market-leading track record and are highly confident of building on our success in these segments.” The move by Indochina Capital underscores the group’s continued growth and commitment to developing high-quality projects in Vietnam. “We will continue pioneering with our vision of sophistication and luxury,” said Mr. Ryder. “We have a clear strategy that addresses the current and future demands of the market with a focus on delivering accommodation-themed projects while maintaining our unwavering commitment to architectural excellence, environmental sustainability, and social responsibility. The joint venture will bring exceptional value to its partners, customers, investors and the community.” Indochina Capital and Kajima Corporation are equal partners in the new joint venture, with total investment estimated at $1 billion over the next decade. New facilities for CapitaLand's Mulberry Lane CapitaLand and its partner, the Hoang Thanh Investment and Infrastructure Development JSC, have introduced new facilities at Mulberry Lane, the leading high-end apartment complex in the west of Hanoi, where more than 1,000 apartments have been handed over to residents to date. The developer recently completed the installation of a World Health Organization-certified, state-of-the-art water purification system. The VND10 billion ($450,000) system provides residents with clean, filtered water directly from the tap. It has also opened a 3D golf practice room, a karaoke room, and a luxurious lobby with a reception area. Before the end of the year an air conditioner system will be installed in the lifts. The façade of Mulberry Lane’s five towers will undergo a full repaint before November. “Enhancing the facilities at Mulberry Lane meet the increasing demand for high living standards among residents,” said Mr. Chen Lian Pang, CEO of CapitaLand Vietnam. “We constantly strive to make Mulberry Lane the top choice of homebuyers.” Ms. Thuy Van, Second Runner-up in the Miss Vietnam beauty pageant, is to become Mulberry Lane’s brand ambassador. She is widely admired for her modern, elegant, and family-oriented lifestyle and is successful and dynamic in both her work and in her personal life. She is a true role model, representing the target customers of Mulberry Lane. She was born and raised in Ha Dong, a famous silk village in Hanoi and from where Mulberry Lane drew its inspiration. CapitaLand is present in six major cities and provinces in Vietnam - Ho Chi Minh City, Hanoi, Hai Phong, Da Nang, Nha Trang, and Binh Duong - in the residential and serviced residence sectors. It has built 7,850 apartments and eight residential projects in Ho Chi Minh City and Hanoi. The Ascott Limited, a subsidiary of CapitaLand, has a portfolio of more than 3,000 serviced apartment units in 17 Somerset properties in the six major cities, making it the largest international serviced residence owner-operator in the country. Experts dissect BOT project shortcomings Many experts have blamed lax management and lack of regulations for violations related to build, operate and transfer (BOT) projects. Le Quoc Dat, vice inspector of the Ministry of Planning and Investment pointed out several shortcomings with the current BOT projects in Vietnam. Many toll booths have been erected not on their new roads but on important old roads such as the Highway 1 and Ho Chi Minh Highway. People have no choice but to use the routes and investors can apply high toll fees for profit. Vietnam also doesn’t really have clear criteria on how to select BOT projects. Ngo Van Quy from the State Audit Office of Vietnam said there was no regulation states that a toll booth must be located within the location of the project. This creates a loophole that is easily taken advantage of and investors just place toll booth everywhere they want even on roads not built by them. In addition, each BOT project has a different toll road charge regulations. Some projects are allowed to increase the fees by 18% every three years. He pointed out four shortcomings of Vietnam’s BOT projects including how to estimate number of vehicles before approving projects as each investor has different calculating method. Secondly, it is regulated that the toll booths must be at least 70km away from each other yet local authorities still allow investors to shorten the distance. The distance between 32 out of 88 toll booths on Highway 1 is shorter than the minimum requirement. Promised profits for investors are also varied and not regulated meanwhile there is no mechanism to examine or audit a project. Quy suggested creating a favourable situation for healthy competition to choose the most suitable investors instead of appointing investors to each project like now. If this is carried out, investment costs, profits for investors and toll road charges will go down greatly. Nguyen Van Hoan from the National Assembly Office warned about lax management over government bonds and BOT projects alike. Most investors only have 11-15% of the required capital and they have to borrow the rest from the banks. That’s why the government must consider bad debts and financial security carefully. Statistics from the State Bank of Vietnam show that 22 out of 150 projects sponsored by the banks are stagnant with loans worth over USD500m. Le Dinh Thang, head of the State Audit Office in Area 6, said both government and investors must respect the market rules. Investors must accept that they might face loss from wrong estimations by them or by the government. “The government signs on BOT contract on behalf of the public, it can’t side with the corporations,” he said. Hanoi to bankrupt companies during equitisation process Hanoi People's Committee has instructed the equitisation of state-owned companies (SOEs) under their management during the 2016-2020 period, including allowing some firms to close. Under the committee instruction, 16 SOEs will be equitised during the period, including five corporations and seven one-member limited firms. Meanwhile, some SOEs such as Elenco Electrical Technical Co. Ltd and Hanoi Youth Investment and Services Company will be allowed to close. According to the municipal People's Committee, SOEs which will be equitised by 2020 are mostly those with large levels of investment, big employers and those operating at big scale. The equitisation process is intended to improve the transparency of the SOE operations. The Hanoi Department of Finance will support the municipal people’s committee for the equitisation process. The sluggish equitisation of SOEs and their ineffective operations have been the focus of the public and media for many years. Vietnam targeted to equitise 415 SOEs in 2015, however, in reality, only 70 companies were equitised last year. Under the SOE restructuring scheme through to 2020, the number of SOEs would be reduced from 1,309 to 17, while corporations holding 100% of state capital would be cut to 200. HCMC aims for higher milk output The HCMC government has set a target of having 100,000 dairy cows with annual milk output of 7,700 kilograms per cow by 2020, up 33% against 2010, in a new scheme aimed to improve the quality of cow milk in the 2016-2020 period. According to the scheme posted on the city’s portal Tuesday, the city will apply Vietnamese Good Agriculture Practice (VietGap) standards to dairy cows raised by households, with most of them located in the outlying districts of Cu Chi, Hoc Mon and Binh Chanh. The HCMC Department of Agriculture and Rural Development said in its January-July review report that the city’s cow herd had been 150,000 including 95,000 dairy cows by July, down 2% year-on-year. The decrease resulted partly from dairy companies’ policy to reduce milk purchases from farmers by 10% against the previous year. HCMC does not have many suitable areas to develop more dairy farms, so the best way is to help farmers earn more profit is to increase milk output instead of raising the number of dairy cows. The city had 79,800 dairy cows in 2010 with average annual milk output of 5,787 kilos each, showed data of the agriculture department. Through cooperation with Israel, HCMC has carried out a cow farming project using advanced technologies of Israel. By the end of July, the project had had 233 cows, including 92 dairy ones able to produce 23.4 kilos of milk per day each, or 8,541 kilos of milk per cow per year. From positive results of the project, the city will apply advanced technologies for other cow farms to improve milk output. Local firm seeks to remove Doi Canal slums Saigon Housing and Infrastructure Development Joint Stock Company is looking for the city government’s nod for a project worth over VND9.23 trillion (US$417 million) to remove houses in the slumps along Doi Canal in District 8. There are more than 5,300 slump houses with 32,000 people along the canal, including more than 4,390 houses on the southern bank. The company proposes the project be implemented under the public-private partnership. It will arrange funds for site clearance and compensation for affected households and will aid them to buy houses at social housing projects in District 8. The company wants the city government to set prices for the land lots along the canal in accordance with market levels after households move. In case the value of cleared locations is not enough for the company to recover its investment, it wants the city to allocate land in other areas or the city government will use its budget to pay the remainder. The company said it will join forces with foreign partners including Dragon Capital and CapitaLand Vietnam Holdings Pte. to implement the project if it gets approval. The HCMC Management Board of Urban Traffic Project Construction said the company’s project can help speed up the progress of removing households in the slums by canals. The city government is expected to convene a meeting to discuss the project later this week. District 8 currently has more than 9,500 canal-side slum houses. Uber agrees to pay taxes Ride-sharing company Uber International Holding B.V. has agreed to pay corporate income tax, said the Ministry of Finance. The ministry said on its website that it is helping Uber in Vietnam prepare, file and pay the tax based on the contracts it has signed with transport firms and private car owners. In addition, the firm headquartered in the Netherlands must pay valued-added tax as well as personal income tax for drivers while transport firms that have signed contracts with Uber must pay taxes. The ministry requested Uber to provide information about individuals and organizations involved in the business and their incomes for tax departments in the provinces and cities where Uber is active. Uber is required to pay a VAT rate of 3% and a corporate income tax of 2%. Meanwhile, individuals having contracts with Uber pay a 3% VAT and a 1.5% personal income tax. Transport firms having contracts with Uber must pay value-added and corporate income taxes in line with the current regulations applicable to cooperatives. Uber can authorize an organization in Vietnam to file and pay taxes. Struggling HAGL mulls rubber farm sale, share issue Hoang Anh Gia Lai Group (HAGL), which is grappling with huge debts, has unveiled plans to sell 20,000 hectares of rubber trees and issue more shares to raise funds to restructure its operations. HAGL told shareholders about the plans at a meeting in the Central Highlands province of Gia Lai on September 15. The plans were confirmed by a senior executive of the group when reached by the Daily. The group mulls issuing more shares at its agricultural arm HAGL Agrico. A report released at the shareholders meeting showed HAGL posted roughly VND3.66 trillion (around US$164 million) in net revenue in the first half of this year, soaring 121% year-on-year, and VND579 billion in gross profit. Livestock was a major contributor of the group in the period. HAGL earned revenue of over VND1.86 trillion and profit of VND211 billion from selling 62,664 cows, and VND370 billion and VND116 billion from 31,477 tons of sugar in the period. However, HAGL still racked up after-tax losses of nearly VND1.2 trillion in the first six months of the year. HAGL targets revenue of VND5.84 trillion and profit of VND737 billion in all of 2016, mainly supported by its livestock business. It is looking to sell 100,000 cows this year, generating more than VND3 trillion in revenue and VND346 billion in profit. The company estimated its total losses in 2016 at less than VND1.2 trillion, caused by its operations in rubber production and other fields. Land use tax breaks proposed for more farmers The Ministry of Finance has proposed the National Assembly (NA) Standing Committee revise the legislature’s Resolution 55 issued in 2010 on tax reductions and exemptions for agricultural land use to raise the number of beneficiaries. Minister of Finance Dinh Tien Dung said at the committee’s meeting on September 15 that under Resolution 55, almost all farmland users are exempt from the tax or enjoy a 50% tax reduction. However, just certain groups of people have benefited from the tax breaks.   Since the resolution came into force five years ago, tax exemptions and reductions have totaled VND7 trillion (US$313.9 million). Meanwhile, tax collections have amounted to VND61.1 billion with households and individuals accounting for VND34.3 billion, armed forces for VND1.9 billion and other organizations VND24.9 billion. Tax exemptions and cuts directly benefit farmers as they support them to expand production and apply modern technology to improve productivity and quality. This helps ease the burden on poor farmers.    The minister said more groups of residents should be allowed to benefit from the tax exemptions and reductions to encourage them to increase production and use advanced technology to back the development of the agricultural sector. The Government proposed the tax exemptions and reductions for farmland use until the end of 2020 for the abovementioned taxpayers. Only organizations that do not use land for farming purposes must pay tax.   Regarding impacts on State budget collections, the finance ministry said tax revenue on farmland use will reach some VND5.7 billion. Tax exemptions will total VND53.5 billion as over 77,000 people who use 93,900 hectares of farmland are expected to enjoy this incentive. Of the sum, households and individuals will not have to pay VND34.3 billion of tax on 67,000 hectares of land. The minister said tax exemptions for farmland use would not leave significant impact on State budget revenues but motivate organizations, households and individuals to invest in the agricultural sector, raise the efficiency of land use and improve the competitiveness of Vietnamese farm produce.     Vo Trong Viet, chairman of the NA Committee for Defense and Security, threw his weight behind the ministry’s proposal. NA vice chairman Do Ba Ty said the exemption of farm land use tax will encourage farmers to continue production and help ensure food security. Lenders, borrowers to decide interest rates from 2017 Banks will have to use their own capital to lend in the VND30-trillion home loan package and interest rates will be decided by the lender and the borrower if loans are disbursed from the beginning of next year.    In a document sent to the HCMC Real Estate Association (HoREA) to respond to the association’s petition about the home loan program, the State Bank of Vietnam (SBV) said it would refinance banks to provide loans under this program until December 31 this year. Regarding disbursements after that date, lender banks will have to use their own capital to lend and apply interest rates as agreed upon by the two sides.   The SBV said it must set a timetable for disbursement. In some loan contracts, lenders do not have to disburse all the loans when customers borrow from other sources, or projects are delayed for a long time.    Earlier, HoREA proposed the central bank allow customers to get disbursements until their contracts with banks end even though developers hand over homes after December 31 this year.   The association also wrote to investors of commercial and social housing projects urging them to step up construction and hand over homes to clients no later than December 15 so that homebuyers can get disbursements before December 31.    The central bank will stop refinancing banks in case investors of half-done social housing projects sold houses to clients under the program before March 31. The SBV said enterprises enjoy profit and other incentives on land and taxes when they build budget homes, and that supporting residents to acquire houses gives a boost to home sales as well.    Meanwhile, many housing projects have been moving at a snail’s pace. If the home loan program is extended to support investors of these projects, firms would rely on help from the State. According to the SBV, banks had pledged nearly VND34.83 trillion (US$1.56 billion) for 56,240 borrowers as of May 10, and VND26.73 trillion of it had been disbursed as of May 20, including VND21.67 trillion for individual borrowers. CII to raise foreign ownership cap to 70% HCMC Infrastructure Investment JSC (CII) has said it will drop a couple of sectors to pave the way for the foreign ownership limit (FOL) to rise from 49% to 70%. CII’s board of directors has approved a plan for the company to remove conditional business sectors of real estate and water exploitation, treatment and supply from its business portfolio. CII will hand over the first business to North Thu Thiem Residential Area Co Ltd and the latter to Saigon Water Infrastructure Corporation. CII got regulatory approval to transfer all its rights and responsibilities in the build-transfer (BT) Thu Thiem project to North Thu Thiem. CII will conduct necessary procedures for the FOL hike in the coming time. The enterprise has changed business sectors in its business registration license and a FOL hike registration document that was sent to the State Securities Commission of Vietnam, the Hochiminh Stock Exchange and Vietnam Securities Depository.   The Government’s Decree 60/2015/ND-CP, which came into force on September 1, 2015, and Circular 123, effective from October 1 in the same year, clarify procedures to increase the FOL. Since then, many enterprises have informed plans or carried out procedures to raise the FOL up to 100% such as Vinh Hoan Corporation, Domesco Medical Import Export JSC, Everpia JSC and Vietnam Dairy Products JSC. Official: TPP allows foreign investors to sue Govt agencies An official of the Ministry of Industry and Trade has warned that foreign investors can file lawsuits against local law enforcement agencies and the Government if they are not as well treated as committed to the Trans-Pacific Partnership (TPP) trade pact.  When the multilateral trade agreement comes into force, foreign investors could take legal action against law enforcement agencies and the Government even when they have not established legal entities in Vietnam, said Tran Ba Cuong, head of the WTO office under the ministry’s multilateral trade policy department. Speaking at a seminar on comments on policy and law making organized in HCMC on Tuesday by the Association of Vietnam Retailers, Cuong said Vietnam’s commitments to the TPP are more binding than other multilateral and bilateral free trade agreements. The TPP will allow foreign investors in the distribution sector to sue even the Government if it breaches the commitments while other trade pacts do not. The TPP clarifies mechanisms for a government to sue a government and investors to file lawsuits against a government in case they find violations. “This will be a big challenge for State management agencies and law enforcement agencies,” Cuong said. Over the past years, officials of local governments or departments of planning and investment have often asked foreign firms to gauge locations for retail store projects at their meetings with investors. In certain cases, the two sides have clinched a memorandum of understanding (MOU) giving the green light for investors to look for suitable sites for their projects. Cuong said foreign investors can bring to court the government and licensing agencies in the province where they have found proper locations for their projects if they do not get a license as wished in line with the TPP. The reason is investors usually spend much surveying sites, so they will take their case to international arbitration if they are not allowed to invest and do business in the sites. “If the situation occurs, it will cost us much time and money as some lawsuits need three years or longer to be settled,” Cuong said. “We will have to compensate the amount of money which is much higher than that spent by the investor.” Cuong said the Government and relevant agencies should be serious about their commitments as one of the measures to avoid lawsuits after the TPP takes effect. Reality showed that some investors have sued governments in a couple of provinces and cities over the past years, and some local governments have given what investors has demanded because they are afraid of losing at court. Many more foreign retailers would come to explore opportunities of Vietnam’s expanding market after the TPP comes into force, experts said at the seminar. Foreign retailers will have more favorable conditions to expand in Vietnam when the economic needs test (ENT) requirement is removed five years after the effective date of the trade pact. Overseas retailers have been permitted to invest in Vietnam since 2009 in line with the nation’s commitments to the World Trade Organization (WTO). However, foreign investors must pass the ENT requirement if they want to set up their second retail store in an area, which is seen as a protectionist measure. The ENT does not apply to foreign retailers when they open retail outlets of less than 500 square meters each in areas with developed infrastructure for sufficient commercial activities. Retail sales of goods neared US$110 billion last year, up 10.6% year-on-year. The figure is projected to soar to US$179 billion in 2020, heard the seminar. At the event, the association launched its representative office in the south based at 2 Phung Khac Khoan Street in HCMC’s District 1. The office is headed by Ha Tuan Anh, chief executive officer of QMS Co Ltd. Expert proposes using State budget to settle bad debt Slow settlement of bad debt will affect economic growth, so the State budget should be used to step up the settlement of bad debt, said Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program, at a conference in HCMC. Speaking at the conference on Vietnam’s economic prospects held by HSBC Vietnam and the Hong Kong Business Association in Vietnam on Tuesday, Thanh said Vietnam is facing a slew of short-term challenges, including inefficient banking operation and bad debt.  Reports showed the bad debt ratio has edged down over the past five years. In reality, bad debts have stayed high if debts sold to Vietnam Asset Management Company (VAMC) and those recorded in banks’ assets are taken into account. Besides, credit has grown fast but many loans are used to roll over debts.   To put the settlement of bad debt on fast track, the Ministry of Planning and Investment early last month announced a draft scheme on economic restructuring in 2016-2020. In the scheme, the ministry proposed the Government use its budget to cope with part of bad debts. Not many threw their weight behind the proposal but Thanh said the State budget can be used to handle bad debt. He pointed out many bad debts are reported by ailing banks which were acquired by the State Bank of Vietnam (SBV) for zero dong. The State is the owner of those banks, so it must deal with bad debts, Thanh said. Lenders wanted to earmark their future profit to settle bad debt but this has not been translated into reality over the past five years given their low profit. Meanwhile, if bad debt is not handled for a long time, it would put a dampener on economic growth. Thanh said investors would never take over banks with a high debt ratio and a lack of transparency. Thanh said market watchers are waiting for the Government’s next moves to restructure the banking system.  Huge public debt would challenge Vietnam in the medium term. The nation’s public debt is approaching the ceiling of 65% of gross domestic product (GDP) set by the National Assembly. If it soars to 80-90% of GDP by 2020, this would pose high risk.  The Government should cut public spending and tighten expenditures of central and local governments to reduce public debt. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR