Acquiring an existing company is an increasingly attractive investment option for both foreign and domestic investors seeking to increase market share quickly.
ANCO Joint Stock Co, a domestic food and beverage maker, acquired a Nestle milk plant in the town of Ba Vi in Ha Tay Province. The acquisition includes a license to use the Nestle brand name for one year on fresh milk and yogurt products produced by the plant.
Asia Pacific Breweries Ltd, a Singapore-invested firm that owns Viet Nam Brewery Ltd (VBL), similarly expanded its capacity recently by acquiring an 80-per-cent interest in Quang Nam VBL Ltd, while Viettel bypassed the need to develop an outlet network by acquiring Nettra's.
There are a variety of factors that push one company to purchase another. Some takeovers are opportunistic and encouraged by the target company's reasonable price. Or the acquiring company expects to increase its bottom line with the acquisition of the target company.
Other takeovers are considered strategic for the acquiring company to enter into a new market without undue risk or the time and expenses needed to start a new business. The acquiring company may also aim to eliminate or reduce competition.
For the time being, acquisitions also may be the only practical means of doing business in a number of sectors. For example, the Law on Real Estate Transactions, enacted on June 29, 2006, places condition on legal capital with regard to entities wishing to operate in this sector, but the level of legal capital has not been specified. In the meantime, the registration of all real estate businesses are being held up, pending the issuance of a guiding regulation.
A few clever investors, however, have found a way to jump over this obstacle by acquiring an existing company already registered to conduct business in this sector.
Procedures for acquiring a company are specified in the Law on Competition of 2004, Decree No 116/2005/ND-CP of September 15, 2005, and Article 56 of Decree No 108/2006/ND-CP of September 22, 2006, which details and guides implementation of the Law on Investment.
The availability of acquisitions as a doorway into some markets or lines of business has, in turn, spurred the growth of business consulting and auditing services, as well as specialised transaction floors in which companies can offer themselves up for sale via professional brokers.
Established mergers and acquisitions (M&A) law in other countries classifies acquisitions into two types: share purchases, under which the target company itself is acquired, and asset purchases, under which assets of the target company are acquired but not the target company itself.
The laws of Vietnam on M&A, however, are not yet perfected, and even the definition of an acquisition is vague. Article 17.3 of the Law on Competition comes closest, stating: "Acquisition of enterprises refers to an act whereby an enterprise acquires the whole or part of property of another enterprise sufficient to control or dominate all or one of the trades of the acquired enterprise."
Decree No 116/2005/ND-CP defines control or domination to mean that the acquiring company holds more than 50% of voting rights at the general shareholders meeting or on the board of management or otherwise per the charter of the acquired company can control or dominate the financial policies and operations of the acquired company. The law, in other words, has heretofore been silent on the issue of acquisition by means of asset purchase.
Decree No 108/2006/ND-CP sets out some procedures for a foreign investor to obtain official approval of an acquisition. However, the' relationship of this approval process to procedures for obtaining an investment licence are ambiguous.
Whether it can be understood that the procedures to be followed will be those for amending an investment licence isn't entirely clear, however, so some foreign investors may run into a wall when authorised State or local authorities delay approvals of acquisitions while they await guidelines.
Acquisition deals may also be examined with respect to competition rules regarding monopolies or economic concentrations, a process that may be hampered or delayed due to the lack of official data on the market and the market share of enterprises.
Showing posts with label Law. Show all posts
Showing posts with label Law. Show all posts
Wednesday, September 05, 2007
Thursday, August 30, 2007
Rule to tighten cap on insurance company shareholding
A draft Ministry of Finance regulation would limit individuals and organisations to holding no more than 10% and 20%, respectively, of insurance company's total equity.
The policy would apply to both domestic and foreign investors, said the ministry.
The limits would help ensure that insurance companies are not dominated by a few major shareholders and would help maintain sustainable development over the long term for newly created insurance companies, said Phung Dac Loc, general secretary of the Viet Nam Insurance Association.
The director of Ernst & Young Viet Nam's business consulting sector, Allanda McConnell, disagreed, saying that the ownership limits would make investment in domestic insurance companies less attractive to foreign investors.
Local players' capacity in terms of technology, management and business strategy is still limited,. McConnell said. The presence of strategic investors with higher stakes in these local companies was a positive solution to these shortcomings.
A 49-per-cent limit, similar to the rate stipulated for foreign individuals and organisations investing in companies listed on the stock market, would be suitable, she suggested.
Currently, there are only some 40 insurers operating on the market. Many foreign insurers are eyeing the market, and many domestic banks were also developing financial group models to expand their businesses into the insurance arena.
The issuance of stricter regulations on the insurance industry has limited the number of new insurance companies, however, with Agribank Insurance Joint Stock Co, established earlier this month, the only new player on the market.
Earlier this year, the Ministry of Finance issued Decree No 46 stipulating that non-life insurance companies have legal capital of at least VND300bil (US$18.75mil), up from the previous VND70bil. Life insurers were required to have capital of VND600bil ($37.5mil), up from VND140bil.
Source: VNE
The policy would apply to both domestic and foreign investors, said the ministry.
The limits would help ensure that insurance companies are not dominated by a few major shareholders and would help maintain sustainable development over the long term for newly created insurance companies, said Phung Dac Loc, general secretary of the Viet Nam Insurance Association.
The director of Ernst & Young Viet Nam's business consulting sector, Allanda McConnell, disagreed, saying that the ownership limits would make investment in domestic insurance companies less attractive to foreign investors.
Local players' capacity in terms of technology, management and business strategy is still limited,. McConnell said. The presence of strategic investors with higher stakes in these local companies was a positive solution to these shortcomings.
A 49-per-cent limit, similar to the rate stipulated for foreign individuals and organisations investing in companies listed on the stock market, would be suitable, she suggested.
Currently, there are only some 40 insurers operating on the market. Many foreign insurers are eyeing the market, and many domestic banks were also developing financial group models to expand their businesses into the insurance arena.
The issuance of stricter regulations on the insurance industry has limited the number of new insurance companies, however, with Agribank Insurance Joint Stock Co, established earlier this month, the only new player on the market.
Earlier this year, the Ministry of Finance issued Decree No 46 stipulating that non-life insurance companies have legal capital of at least VND300bil (US$18.75mil), up from the previous VND70bil. Life insurers were required to have capital of VND600bil ($37.5mil), up from VND140bil.
Source: VNE
Ensuring IP rights, due diligence in an M&A deal
The nation is witnessing an increasing trend towards mergers and acquisitions among both Vietnamese and foreign companies. One of the most important factors in ensuring the success of an M&A deal is for the acquiring company to conduct proper "due diligence," lawyer-speak for the process whereby the potential buyer evaluates the target company and its assets.
While lawyers have long focused due diligence efforts on tangible assets, including land, buildings, and equipment, little attention has been paid to intangible assets, such as intellectual property, which can in some instances be as or more valuable to the company’s operations and profitability.
Due diligence should extend to a wide range of intangible assets related to intellectual property, including business information, employee know-how, licence agreements, marketing and distribution agreements, domain names and even intellectual property which is not legally protectable, e.g., business ideas. Like customer "good will", these types of intangible assets can be important elements of a target enterprise’s value, although evaluation of their worth is not an easy task.
Intellectual property itself is a term that has traditionally referred to copyrights, patents, trademarks and trade secrets. In Viet Nam, the new Intellectual Property Law states that "intellectual property rights are the rights of organisations and individuals to their intellectual property, including copyrights and copyright-related rights, industrial property rights and rights to plant varieties" (Article 4.1). The concept of industrial property is further understood as including industrial designs, utility solutions, layout-designs of semi-conductor integrated circuits, trademarks, trade names, geographical indications, trade secrets, and rights to repression of unfair competition under the IP Law.
Most industrial property objects are only protectable under the IP Law if they are registered with the National Office of Intellectual Property. Well-known trademarks established on the basis of use, however, may be protected independent from registration procedures. However, a claim for protection of a well-known mark is complex, as it is normally made during cancellation or infringement proceedings. Therefore, the protection afforded by registration is more effective in most ordinary cases.
Unlike industrial property objects such as industrial designs and trademarks, objects which are protected by copyright do not need to be registered to afford protection. In this respect, Vietnamese law is consistent with international definitions of copyright which provide that copyright adheres in an original work of authorship published or fixed in a particular medium. Registration of the copyrighted work serves purposes of providing notice and evidence of the copyright.
When conducting due diligence into these types of intangibles, a lawyer must ask two fundamental questions: (1) what are the key rights and intangible assets needed to operate the business successfully? and (2) how can the business be assured the benefits of those rights and assets following the acquisition?
The lawyer then must confirm licences and ownership records, evaluate contracts and licensing agreements, and check for existing litigation and infringement notices.
Issues uncovered in the course of due diligence may significantly alter the terms of an acquisition. For example, if the prospective buyer discovers the target company’s trademark is in use by another firm and rights cannot be secured to the target company, this could lead to significant costs involving re-branding and re-working marketing and promotional materials. Such information, revealed in the course of due diligence, could dramatically affect the target company’s value in the eyes of the prospective investor.
IP rights owned by another division within the target group would also need to be assigned or licensed to the target if the acquiring investor wants to secure these rights. Lawyers conducting due diligence must also ensure target company employees have signed confidentiality agreements and agreed in writing to assign inventions to their employer. This prevents critical copyrights, patents, and trade secrets from leaving the company with departing employees. For instance, a company might sell off a software division, only for the buyer to learn that it owns the copyright in original software but not in any modifications after the developer became an independent contractor.
In addition to ensuring control of IP rights before and during a merger or acquisition, lawyers must also consider what happens after the sale. Following any acquisition, patents will usually need to be re-assigned, licence agreements may need amendment, and notices about the transfer of rights may need to be issued.
Depending on the type of intellectual property, the lawyer must determine whether a particular form of intangible asset is transferable as a matter of contract or under the IP Law. For instance, most industrial property objects such as trademarks, patents, and industrial designs may be transferable, but the moral rights in a copyrighted work cannot be transferred, except under certain circumstances, pursuant to the IP Law.
In short, investigating IP issues in the course of due diligence is of paramount importance during an acquisition. Though often time-consuming and resource-intensive, solid IP due diligence will lessen risk, make valuation more accurate, and give an investor a better understanding of the target company’s business.
Source: VNS
While lawyers have long focused due diligence efforts on tangible assets, including land, buildings, and equipment, little attention has been paid to intangible assets, such as intellectual property, which can in some instances be as or more valuable to the company’s operations and profitability.
Due diligence should extend to a wide range of intangible assets related to intellectual property, including business information, employee know-how, licence agreements, marketing and distribution agreements, domain names and even intellectual property which is not legally protectable, e.g., business ideas. Like customer "good will", these types of intangible assets can be important elements of a target enterprise’s value, although evaluation of their worth is not an easy task.
Intellectual property itself is a term that has traditionally referred to copyrights, patents, trademarks and trade secrets. In Viet Nam, the new Intellectual Property Law states that "intellectual property rights are the rights of organisations and individuals to their intellectual property, including copyrights and copyright-related rights, industrial property rights and rights to plant varieties" (Article 4.1). The concept of industrial property is further understood as including industrial designs, utility solutions, layout-designs of semi-conductor integrated circuits, trademarks, trade names, geographical indications, trade secrets, and rights to repression of unfair competition under the IP Law.
Most industrial property objects are only protectable under the IP Law if they are registered with the National Office of Intellectual Property. Well-known trademarks established on the basis of use, however, may be protected independent from registration procedures. However, a claim for protection of a well-known mark is complex, as it is normally made during cancellation or infringement proceedings. Therefore, the protection afforded by registration is more effective in most ordinary cases.
Unlike industrial property objects such as industrial designs and trademarks, objects which are protected by copyright do not need to be registered to afford protection. In this respect, Vietnamese law is consistent with international definitions of copyright which provide that copyright adheres in an original work of authorship published or fixed in a particular medium. Registration of the copyrighted work serves purposes of providing notice and evidence of the copyright.
When conducting due diligence into these types of intangibles, a lawyer must ask two fundamental questions: (1) what are the key rights and intangible assets needed to operate the business successfully? and (2) how can the business be assured the benefits of those rights and assets following the acquisition?
The lawyer then must confirm licences and ownership records, evaluate contracts and licensing agreements, and check for existing litigation and infringement notices.
Issues uncovered in the course of due diligence may significantly alter the terms of an acquisition. For example, if the prospective buyer discovers the target company’s trademark is in use by another firm and rights cannot be secured to the target company, this could lead to significant costs involving re-branding and re-working marketing and promotional materials. Such information, revealed in the course of due diligence, could dramatically affect the target company’s value in the eyes of the prospective investor.
IP rights owned by another division within the target group would also need to be assigned or licensed to the target if the acquiring investor wants to secure these rights. Lawyers conducting due diligence must also ensure target company employees have signed confidentiality agreements and agreed in writing to assign inventions to their employer. This prevents critical copyrights, patents, and trade secrets from leaving the company with departing employees. For instance, a company might sell off a software division, only for the buyer to learn that it owns the copyright in original software but not in any modifications after the developer became an independent contractor.
In addition to ensuring control of IP rights before and during a merger or acquisition, lawyers must also consider what happens after the sale. Following any acquisition, patents will usually need to be re-assigned, licence agreements may need amendment, and notices about the transfer of rights may need to be issued.
Depending on the type of intellectual property, the lawyer must determine whether a particular form of intangible asset is transferable as a matter of contract or under the IP Law. For instance, most industrial property objects such as trademarks, patents, and industrial designs may be transferable, but the moral rights in a copyrighted work cannot be transferred, except under certain circumstances, pursuant to the IP Law.
In short, investigating IP issues in the course of due diligence is of paramount importance during an acquisition. Though often time-consuming and resource-intensive, solid IP due diligence will lessen risk, make valuation more accurate, and give an investor a better understanding of the target company’s business.
Source: VNS
Wednesday, August 29, 2007
SSC to have information about ATIP shares checked
The State Securities Commission (SSC) has promised to have the information about ATIP (ATI Petroleum) shares clarified after the government on August 8, 2007 requested that the Ministry of Finance and SSC provide faithful information about ATIP to investors.
According to SSC, ATIP is a foreign enterprise, established and now operating in Nevada state in the US. On July 4, 2001, ATIP got an investment licence from the Ministry of Planning and Investment for a joint venture project with PetroVietnam under the mode of PSC (production sharing contract) on exploring, developing and producing oil and gas at block No 102 and 106 on Vietnam’s continental shelf. Later, ATIP sold a part of the joint venture to Malaysia’s Petronas, and now ATIP holds 10% of total shares in the joint venture.
On January 26, 2007, Chairman of ATIP signed Decision No 01/QD on internal share issuance to 93 staffs. After buying ATIP shares, the staffs sold the shares to outside investors, and the shares have been available on the market.
SSC has checked information about the shareholders and found out that as of March 12, 2007, the number of investors who held ATIP shares was 251.
Recently, mass media have reported that ATIP shares are being listed on NYSE – Euronext, and that ATIP promised to give 10,000 ATIP shares as bonus to the national soccer squad.
The Securities Law, Enterprise Law and current guiding documents do not mention the fact that 100% foreign owned companies, established and operating in other countries, can offer shares for sale in Vietnam. However, in fact, ATIP shares have been transferred to 250 investors in Vietnam.
In order to protect the benefit of Vietnamese investors and avoid possible risks, SSC has two times asked ATIP to expose information about capital and financial situation, business performance and operation regulations of ATIP, as well as the transactions on NYSE – Euronext.
However, ATIP had not provided necessary information by August 10, 2007, except Dispatch No 10 to SSC dated August 10, 2007, saying that the company was preparing necessary documents. As the chairman of ATIP was away on business and would return in mid August, the company promised to gather all necessary documents and give explanations to the questions put by SSC at that time.
On August 17, 2007, ATIP sent a document to SSC, providing some details about the interested issues relating to the listing of ATIP on NYSE – Euronext. SSC thinks that it still needs to check the information before making it public; therefore, it plans to have a working session with ATIP to discuss related issues
Prior to that, SSC took an inspection tour of ATIP. The company organised workshops introducing its operation activities.
Source: VNE
According to SSC, ATIP is a foreign enterprise, established and now operating in Nevada state in the US. On July 4, 2001, ATIP got an investment licence from the Ministry of Planning and Investment for a joint venture project with PetroVietnam under the mode of PSC (production sharing contract) on exploring, developing and producing oil and gas at block No 102 and 106 on Vietnam’s continental shelf. Later, ATIP sold a part of the joint venture to Malaysia’s Petronas, and now ATIP holds 10% of total shares in the joint venture.
On January 26, 2007, Chairman of ATIP signed Decision No 01/QD on internal share issuance to 93 staffs. After buying ATIP shares, the staffs sold the shares to outside investors, and the shares have been available on the market.
SSC has checked information about the shareholders and found out that as of March 12, 2007, the number of investors who held ATIP shares was 251.
Recently, mass media have reported that ATIP shares are being listed on NYSE – Euronext, and that ATIP promised to give 10,000 ATIP shares as bonus to the national soccer squad.
The Securities Law, Enterprise Law and current guiding documents do not mention the fact that 100% foreign owned companies, established and operating in other countries, can offer shares for sale in Vietnam. However, in fact, ATIP shares have been transferred to 250 investors in Vietnam.
In order to protect the benefit of Vietnamese investors and avoid possible risks, SSC has two times asked ATIP to expose information about capital and financial situation, business performance and operation regulations of ATIP, as well as the transactions on NYSE – Euronext.
However, ATIP had not provided necessary information by August 10, 2007, except Dispatch No 10 to SSC dated August 10, 2007, saying that the company was preparing necessary documents. As the chairman of ATIP was away on business and would return in mid August, the company promised to gather all necessary documents and give explanations to the questions put by SSC at that time.
On August 17, 2007, ATIP sent a document to SSC, providing some details about the interested issues relating to the listing of ATIP on NYSE – Euronext. SSC thinks that it still needs to check the information before making it public; therefore, it plans to have a working session with ATIP to discuss related issues
Prior to that, SSC took an inspection tour of ATIP. The company organised workshops introducing its operation activities.
Source: VNE
Monday, August 20, 2007
Putting OTC market under management – when?
State management authorities are trying to speed up the compilation of legal documents, based on which, the OTC market will be put under management, expected for early 2008.
State Securities Commission (SSC) plans to put the OTC market under management in early 2008. However, experts fear that the short time left (four months) until early next year will not be enough time as a lot of things still need to be done.
It is necessary to build up a software system for the Hanoi Securities Trading Centre (HASTC) and software for the Securities Depository Centre in charge of managing the transaction registrations by public companies. Moreover, it will also be necessary to install software at securities companies and the system connecting securities companies and HASTC, serving the transfer of information about securities transactions and offset payment among securities companies, the depository centre and HASTC.
In the immediate time, several big companies out of the registered public companies will be selected to be put under the pilot transaction scheme. These might be big companies operating in the fields of banking, insurance and other financial institutions which have good governance systems.
The application of the transaction scheme for other public companies will be applied on a large scale in June 2008 or at the end of 2008, according to Nguyen Son, Deputy Head of the Market Development Division under SSC.
Mr Son said that SSC was considering applying the reference price scheme and trading band for the shares of unlisted public companies. The most feasible scheme and the plan which has been most suggested is the application of the trading band of +/- 20% (the ceiling transaction price must not be 20% higher than the reference price and the minimum price must not be 20% lower than the reference price).
However, problems still exist. Experts still argue about whether or not to draw up the reference price of the first trading session. Moreover, it remains unclear which basis state management authorities will use to draw up the list of fees public companies have to pay to the securities trading centre, securities depository centre and brokerage commission.
According to Mr Son, there are two factors that can decide if the project on putting the OTC market under management can be successful: technology and awareness of enterprises.
According to Mr Son, once the OTC market is put under control, the market regulator will have to manage a big number of companies, much bigger than the number of listing companies now. Will the technologies and facilities at trading centres and securities companies be able to cover such a big number of securities companies?
Mr Son has acknowledged that technology remains the biggest problem and that it needs to be fixed in 3-6 months.
“The core issue is the capacity of transaction systems. The number of public companies may reach several thousand if all the companies register. These include the ones which have very big market capitalisation volume.
“If we don’t make heavy investment in technologies, the project on putting the OTC under management will fail,” Mr Son said.
Source: VNE
State Securities Commission (SSC) plans to put the OTC market under management in early 2008. However, experts fear that the short time left (four months) until early next year will not be enough time as a lot of things still need to be done.
It is necessary to build up a software system for the Hanoi Securities Trading Centre (HASTC) and software for the Securities Depository Centre in charge of managing the transaction registrations by public companies. Moreover, it will also be necessary to install software at securities companies and the system connecting securities companies and HASTC, serving the transfer of information about securities transactions and offset payment among securities companies, the depository centre and HASTC.
In the immediate time, several big companies out of the registered public companies will be selected to be put under the pilot transaction scheme. These might be big companies operating in the fields of banking, insurance and other financial institutions which have good governance systems.
The application of the transaction scheme for other public companies will be applied on a large scale in June 2008 or at the end of 2008, according to Nguyen Son, Deputy Head of the Market Development Division under SSC.
Mr Son said that SSC was considering applying the reference price scheme and trading band for the shares of unlisted public companies. The most feasible scheme and the plan which has been most suggested is the application of the trading band of +/- 20% (the ceiling transaction price must not be 20% higher than the reference price and the minimum price must not be 20% lower than the reference price).
However, problems still exist. Experts still argue about whether or not to draw up the reference price of the first trading session. Moreover, it remains unclear which basis state management authorities will use to draw up the list of fees public companies have to pay to the securities trading centre, securities depository centre and brokerage commission.
According to Mr Son, there are two factors that can decide if the project on putting the OTC market under management can be successful: technology and awareness of enterprises.
According to Mr Son, once the OTC market is put under control, the market regulator will have to manage a big number of companies, much bigger than the number of listing companies now. Will the technologies and facilities at trading centres and securities companies be able to cover such a big number of securities companies?
Mr Son has acknowledged that technology remains the biggest problem and that it needs to be fixed in 3-6 months.
“The core issue is the capacity of transaction systems. The number of public companies may reach several thousand if all the companies register. These include the ones which have very big market capitalisation volume.
“If we don’t make heavy investment in technologies, the project on putting the OTC under management will fail,” Mr Son said.
Source: VNE
Thursday, August 16, 2007
MoF attempting to ease requirements on stock auditors
The Ministry of Finance (MoF) is trying to lower requirements on auditing companies, hoping to settle the problem of the lack of auditors for the stock market.
MoF said it was amending Decision No 76 on auditing companies eligible for the stock market, setting easier requirements on auditing companies. With the new regulation, there would be 23 auditing companies eligible to provide auditing services on the stock market instead of 13 companies as currently.
Under the current regulations, stipulated in Decision No 76, an eligible auditing company must have at least three auditors who have practicing certificates granted by the Ministry of Finance. The directors of the companies must have a certificate and three years of experience.
Bui Van Mai, Director of the Accounting and Auditing Department under the Ministry of Finance, said that Decision No 76 was enacted in 2004, when the stock market was a fledgling one with only 20 listing companies and few transactions. Since 2006, the market has witnessed vigorous development, and the number of institutions which have the demand for auditing has increased by 10 fold compared to 2004.
The problem now is that Vietnam needs more and more auditing companies eligible to provide auditing services for the stock market. And MoF thinks easing the requirements on auditing companies will provide more service providers for the market.
Mr Mai said that in the last time, as only a few auditing companies were accepted, the licenced companies did not have to compete fiercely with each other, which allowed the companies to demand abnormally high auditing fees, while companies did not have many choices.
However, Mr Mai acknowledged that it would be unfeasible to settle this problem by setting up fixed ceiling levels of fee. He said that the government was striving to remove the imposition of prices and fees on goods and services, and MOF could not act contrary to this process.
“Our principle is that MOF only guides the method of calculating fees, while not imposing,” said Mr Mai.
Regarding the concerns of the public that the quality of auditing services would be disregarded once MOF eased the requirements on auditing companies, Mr Mai said that the existence of more auditing companies on the stock market did not mean that auditing quality would become lower.
“We cannot say for sure that a company with more auditors and more experience is better than another one. The most important thing for an auditing company is that it must ensure that it can provide true information.”
Mr Mai said that the existence of more auditing companies on the market would bring more choices to companies and institutions. Big companies and groups will need big and well-known auditing service providers. Meanwhile, as for smaller companies, small auditing companies which can provide services at ‘soft’ fees would be a good choice.
Source: VNE
MoF said it was amending Decision No 76 on auditing companies eligible for the stock market, setting easier requirements on auditing companies. With the new regulation, there would be 23 auditing companies eligible to provide auditing services on the stock market instead of 13 companies as currently.
Under the current regulations, stipulated in Decision No 76, an eligible auditing company must have at least three auditors who have practicing certificates granted by the Ministry of Finance. The directors of the companies must have a certificate and three years of experience.
Bui Van Mai, Director of the Accounting and Auditing Department under the Ministry of Finance, said that Decision No 76 was enacted in 2004, when the stock market was a fledgling one with only 20 listing companies and few transactions. Since 2006, the market has witnessed vigorous development, and the number of institutions which have the demand for auditing has increased by 10 fold compared to 2004.
The problem now is that Vietnam needs more and more auditing companies eligible to provide auditing services for the stock market. And MoF thinks easing the requirements on auditing companies will provide more service providers for the market.
Mr Mai said that in the last time, as only a few auditing companies were accepted, the licenced companies did not have to compete fiercely with each other, which allowed the companies to demand abnormally high auditing fees, while companies did not have many choices.
However, Mr Mai acknowledged that it would be unfeasible to settle this problem by setting up fixed ceiling levels of fee. He said that the government was striving to remove the imposition of prices and fees on goods and services, and MOF could not act contrary to this process.
“Our principle is that MOF only guides the method of calculating fees, while not imposing,” said Mr Mai.
Regarding the concerns of the public that the quality of auditing services would be disregarded once MOF eased the requirements on auditing companies, Mr Mai said that the existence of more auditing companies on the stock market did not mean that auditing quality would become lower.
“We cannot say for sure that a company with more auditors and more experience is better than another one. The most important thing for an auditing company is that it must ensure that it can provide true information.”
Mr Mai said that the existence of more auditing companies on the market would bring more choices to companies and institutions. Big companies and groups will need big and well-known auditing service providers. Meanwhile, as for smaller companies, small auditing companies which can provide services at ‘soft’ fees would be a good choice.
Source: VNE
Tuesday, August 14, 2007
Low fines turn securities law into a toothless tiger
Authorities have recently punished a number of individuals and organisations for violating regulations in securities transactions, but analysts say the penalties haven't been strict enough.
Investors were eager when the State Securities Commission (SSC) first issued a decision to punish an investor in HCM City in late June with a fine of VND30mil (US$1,875) for entering into collusion to distort supply and demand on the market.
Less than a month later, two other individuals in the city were fined VND60mil ($3,750) and VND100mil ($6,250) for similar acts.
Among organisations, the Vietcombank, BIDV and Sai Gon Securities companies have were each fined VND10-20mil ($625-$1,250) for breaking securities management (i.e., registration, deposit, or payment) and reporting regulations.
Foreign companies were no exception. Indochina Capital was fined VND10mil for not conforming with regulations on internal transactions.
On July 25, the SSC slapped the Thien Viet Securities Co a VND50mil ($3,125) fine for its delay in publicising a change in its general director position.
On Monday, it announced a VND20mil ($1,250) fine on the Ba Ria-Vung Tau Housing Development Co for failure to make timely disclosures.
The SSC has taken great strides to make the market more transparent. However, the penalties it has issued so far have been too lightweight to have a real impact on investors, according to analysts, especially major players for whom a minor fine is mere chicken feed.
"The heaviest penalty for breaking securities laws or regulations is now only VND50mil. It's not a reasonable level," said SSC chief inspector Hoang Duc Long.
The commission is asking the Government to consider stricter penalty levels, he said, with some serious violations even subject to penal liability.
Authorities, meanwhile, face challenges in discovering all violations, Long said.
"In order to detect a lawbreaker, we have to check over 250,000 accounts on the market, and we only have about 20 inspectors," said Long.
"There have also been cases in which auditors have released inaccurate information or even colluded with enterprises to falsify reports. It's really a big concern."
Source: VNS
Investors were eager when the State Securities Commission (SSC) first issued a decision to punish an investor in HCM City in late June with a fine of VND30mil (US$1,875) for entering into collusion to distort supply and demand on the market.
Less than a month later, two other individuals in the city were fined VND60mil ($3,750) and VND100mil ($6,250) for similar acts.
Among organisations, the Vietcombank, BIDV and Sai Gon Securities companies have were each fined VND10-20mil ($625-$1,250) for breaking securities management (i.e., registration, deposit, or payment) and reporting regulations.
Foreign companies were no exception. Indochina Capital was fined VND10mil for not conforming with regulations on internal transactions.
On July 25, the SSC slapped the Thien Viet Securities Co a VND50mil ($3,125) fine for its delay in publicising a change in its general director position.
On Monday, it announced a VND20mil ($1,250) fine on the Ba Ria-Vung Tau Housing Development Co for failure to make timely disclosures.
The SSC has taken great strides to make the market more transparent. However, the penalties it has issued so far have been too lightweight to have a real impact on investors, according to analysts, especially major players for whom a minor fine is mere chicken feed.
"The heaviest penalty for breaking securities laws or regulations is now only VND50mil. It's not a reasonable level," said SSC chief inspector Hoang Duc Long.
The commission is asking the Government to consider stricter penalty levels, he said, with some serious violations even subject to penal liability.
Authorities, meanwhile, face challenges in discovering all violations, Long said.
"In order to detect a lawbreaker, we have to check over 250,000 accounts on the market, and we only have about 20 inspectors," said Long.
"There have also been cases in which auditors have released inaccurate information or even colluded with enterprises to falsify reports. It's really a big concern."
Source: VNS
Monday, August 13, 2007
Investors unsatisfied with new investment law
The new Investment Law has been in effect for more than one year and it is the improved version of the two systems of investment laws on foreign and domestic investment. However, many investors, especially foreign ones, are not satisfied with many points in the new law.
The Ministry of Planning and Investment (MPI) has recently organised a meeting with domestic and foreign investors to discuss problems associated with the new Investment Law in HCM City.
At the meeting, Nguyen Van Lai, General Director of Tovecan joint venture company, said that though the new Investment Law had been in effect for more than one year his joint venture still couldn’t transform the joint venture under the regulations of the new law because of objective and subjective reasons.
According to the new Investment Law, the legal representative of a joint venture business must be the Chairman of the Board of Directors or the General Director and this person must reside in Vietnam.
Meanwhile, the Chairman of Tovecan, which includes three partners from Vietnam, Taiwan and Japan, is a foreigner who doesn’t live often in Vietnam. Normally, if the Chairman doesn’t reside in Vietnam and can’t play the role of the legal representative for the business, the General Director will replace him.
However, it is not simple for Tovecan because the firm’s General Director is a hired personnel and no employer dares to let his hired employee be his legal representative when regulations on legal representation are not clear.
Mr. Lai said that his company had sought documents related to the responsibility and duties of the legal representative so that the company could give this role to its hired General Director.
“However, we have searched for a long time but haven’t been able to find any regulation associated with it while the law only mentions the legal representative and doesn’t explain the responsibilities and duties of the legal representative,” Mr. Lai said.
The new Investment Law has created urgent matters for foreign investors. Tran Thanh Liem, from the Investment Promotion and Consulting Centre of Long An province, said that even domestic investors couldn’t stand it so how could foreign investors.
He said that foreign investors, especially overseas Vietnamese investors, always complained to him about the difference between the new Investment Law and the Land Law.
The new Investment Law allows foreign investors to re-lease land but this regulation can’t be implemented at localities. A foreign investor who has a project in the southern province of Long An ran between local departments to ask for an investment certificate but he was always refused.
The local agencies explained that the Land Law didn’t allow foreign investors who hire land and pay land rental fees on an annual basis to re-lease the land, unless they had paid all land rental fees.
Also related to land, overseas Vietnamese investors are also considered foreign subject and are permitted to hire land but not to be allocated with land like local investors, Mr. Liem said.
Overseas Vietnamese investors who previously registered for investment under the former Law on Domestic Investment Encouragement are still allocated land under the new Investment Law but those who previously registered investment under the former Law on Foreign Investment are not permitted to enjoy this privilege.
“The new Investment Law states that investment licencing must be within 15 days of the day businesses submit applications but in fact, this process is several months because of impediments from policy implementing agencies,” Mr. Liem said.
Pham Manh Dung, Head of the Legal Department under the MPI, said that there had been many complaints from investors since the new Investment Law was applied, mainly related to formalities.
In addition, the new Investment Law also conflicts with other laws and Vietnam’s WTO commitments and its implementation is sowing discontent among ministries and agencies.
Local licencing agencies are very confused about granting licences for finance and banking projects because the new law requests $10 million of investment capital but Vietnam’s WTO commitments request $25 million. This is one problem for the implementation of the new Investment Law related to finance and banking operations.
The MPI is compiling a decree guiding the implementation of the new Investment Law under Vietnam’s WTO commitments. At present, according to Mr. Dung, when licencing domestic and foreign projects, provinces and cities must give priority to perform WTO commitments while applying legal regulations.
Source: VNE
The Ministry of Planning and Investment (MPI) has recently organised a meeting with domestic and foreign investors to discuss problems associated with the new Investment Law in HCM City.
At the meeting, Nguyen Van Lai, General Director of Tovecan joint venture company, said that though the new Investment Law had been in effect for more than one year his joint venture still couldn’t transform the joint venture under the regulations of the new law because of objective and subjective reasons.
According to the new Investment Law, the legal representative of a joint venture business must be the Chairman of the Board of Directors or the General Director and this person must reside in Vietnam.
Meanwhile, the Chairman of Tovecan, which includes three partners from Vietnam, Taiwan and Japan, is a foreigner who doesn’t live often in Vietnam. Normally, if the Chairman doesn’t reside in Vietnam and can’t play the role of the legal representative for the business, the General Director will replace him.
However, it is not simple for Tovecan because the firm’s General Director is a hired personnel and no employer dares to let his hired employee be his legal representative when regulations on legal representation are not clear.
Mr. Lai said that his company had sought documents related to the responsibility and duties of the legal representative so that the company could give this role to its hired General Director.
“However, we have searched for a long time but haven’t been able to find any regulation associated with it while the law only mentions the legal representative and doesn’t explain the responsibilities and duties of the legal representative,” Mr. Lai said.
The new Investment Law has created urgent matters for foreign investors. Tran Thanh Liem, from the Investment Promotion and Consulting Centre of Long An province, said that even domestic investors couldn’t stand it so how could foreign investors.
He said that foreign investors, especially overseas Vietnamese investors, always complained to him about the difference between the new Investment Law and the Land Law.
The new Investment Law allows foreign investors to re-lease land but this regulation can’t be implemented at localities. A foreign investor who has a project in the southern province of Long An ran between local departments to ask for an investment certificate but he was always refused.
The local agencies explained that the Land Law didn’t allow foreign investors who hire land and pay land rental fees on an annual basis to re-lease the land, unless they had paid all land rental fees.
Also related to land, overseas Vietnamese investors are also considered foreign subject and are permitted to hire land but not to be allocated with land like local investors, Mr. Liem said.
Overseas Vietnamese investors who previously registered for investment under the former Law on Domestic Investment Encouragement are still allocated land under the new Investment Law but those who previously registered investment under the former Law on Foreign Investment are not permitted to enjoy this privilege.
“The new Investment Law states that investment licencing must be within 15 days of the day businesses submit applications but in fact, this process is several months because of impediments from policy implementing agencies,” Mr. Liem said.
Pham Manh Dung, Head of the Legal Department under the MPI, said that there had been many complaints from investors since the new Investment Law was applied, mainly related to formalities.
In addition, the new Investment Law also conflicts with other laws and Vietnam’s WTO commitments and its implementation is sowing discontent among ministries and agencies.
Local licencing agencies are very confused about granting licences for finance and banking projects because the new law requests $10 million of investment capital but Vietnam’s WTO commitments request $25 million. This is one problem for the implementation of the new Investment Law related to finance and banking operations.
The MPI is compiling a decree guiding the implementation of the new Investment Law under Vietnam’s WTO commitments. At present, according to Mr. Dung, when licencing domestic and foreign projects, provinces and cities must give priority to perform WTO commitments while applying legal regulations.
Source: VNE
Thursday, August 02, 2007
OTC transactions to be put under control in early 2008
OTC share transactions will be put under control once the project on organizing and managing the transactions of public companies’ unlisted securities is completed.
The State Securities Commission (SSC) said that it has consulted with relevant ministries over the project and will open the draft for collecting opinions from securities investors in early August before bringing the project into effect.
If everything goes smoothly, transactions of OTC securities under the new scheme will be carried out in the trial basis in October, and officially applied in early 2008.
According to SSC, the securities to be put under the new scheme are the shares of public companies which have registered at state management agencies as stipulated by the current laws. These shares items will be granted codes. Investors will carry out transactions through securities companies based on their accounts to be opened at securities companies.
Under the new transaction scheme, investors will have more opportunities to access official information sources, make payment under favourable methods and minimize risks.
Currently, the preparatory works for the new transaction scheme have been kicked off at the Hanoi Securities Trading Centre. The main principle of the new scheme is to ensure the simplicity in making transaction, while allowing remote transactions which aims to create more favourable conditions for investors.
According to SSC, more than 600 companies have sent files for registering public companies. However, the number of companies completing the registration procedures remains modest.
The problem lies in the fact that the documents guiding the registration were just promulgated in April, which did not give enough time to companies to have their financial reports audited. SSC has to apply a flexible policy, which allows companies to make registration first, and then expose information to investors. The auditing results will be announced later.
June 30, 2007 was the deadline for public companies to make registration at SSC.
Source: VNE
The State Securities Commission (SSC) said that it has consulted with relevant ministries over the project and will open the draft for collecting opinions from securities investors in early August before bringing the project into effect.
If everything goes smoothly, transactions of OTC securities under the new scheme will be carried out in the trial basis in October, and officially applied in early 2008.
According to SSC, the securities to be put under the new scheme are the shares of public companies which have registered at state management agencies as stipulated by the current laws. These shares items will be granted codes. Investors will carry out transactions through securities companies based on their accounts to be opened at securities companies.
Under the new transaction scheme, investors will have more opportunities to access official information sources, make payment under favourable methods and minimize risks.
Currently, the preparatory works for the new transaction scheme have been kicked off at the Hanoi Securities Trading Centre. The main principle of the new scheme is to ensure the simplicity in making transaction, while allowing remote transactions which aims to create more favourable conditions for investors.
According to SSC, more than 600 companies have sent files for registering public companies. However, the number of companies completing the registration procedures remains modest.
The problem lies in the fact that the documents guiding the registration were just promulgated in April, which did not give enough time to companies to have their financial reports audited. SSC has to apply a flexible policy, which allows companies to make registration first, and then expose information to investors. The auditing results will be announced later.
June 30, 2007 was the deadline for public companies to make registration at SSC.
Source: VNE
Vietnam voids Intimex share sale and orders probe
The Vietnamese government said on Wednesday it has annulled the sale of shares in state-run retailer and exporter Intimex and is investigating whether securities laws were violated.
It is the first reported crackdown on share sales as the communist country speeds up its privatisation plan, which has fuelled one of the world's fastest growing stock markets.
Deputy Prime Minister Nguyen Sinh Hung ordered the Trade Ministry to void the auction of its subsidiary Intimex, which operates supermarket and exports coffee and pepper, a statement on the government's Web site (http://www.chinhphu.vn/) said.
The statement quoted Hung as saying reports from Trade and Finance ministry officials and the police showed Intimex Import Export Corp had violated the Securities Law by publishing distorted financial information and conducting insider trading.
Company officials could not be reached for comment.
On April 12, Intimex sold all 1,682,800 shares on offer, or 33.66 percent of the company, to several domestic investors in an initial public offering, raising 269.3 billion dong ($16.7 million).
The shares were sold at an average price of 160,025 dong ($9.9), way above the 10,200-dong opening price for bids, valuing the company at $49.65 million -- nearly twice the book value of $27.2 million Intimex had assessed.
The large gap -- together with the small number of winning bidders -- raised suspicion among other investors who said the company had undervalued its assets and withheld information, which was then used by a small group of bidders.
Intimex runs a number of supermarkets in Hanoi and the north but is known abroad as an exporter of robusta coffee and pepper. Vietnam is the world's top exporter of the two commodities.
Vietnam has been speeding up privatisations to boost the stock markets and raise funds to fuel the economic growth targeted at 8.5 percent this year.
Source: Reuters
It is the first reported crackdown on share sales as the communist country speeds up its privatisation plan, which has fuelled one of the world's fastest growing stock markets.
Deputy Prime Minister Nguyen Sinh Hung ordered the Trade Ministry to void the auction of its subsidiary Intimex, which operates supermarket and exports coffee and pepper, a statement on the government's Web site (http://www.chinhphu.vn/) said.
The statement quoted Hung as saying reports from Trade and Finance ministry officials and the police showed Intimex Import Export Corp had violated the Securities Law by publishing distorted financial information and conducting insider trading.
Company officials could not be reached for comment.
On April 12, Intimex sold all 1,682,800 shares on offer, or 33.66 percent of the company, to several domestic investors in an initial public offering, raising 269.3 billion dong ($16.7 million).
The shares were sold at an average price of 160,025 dong ($9.9), way above the 10,200-dong opening price for bids, valuing the company at $49.65 million -- nearly twice the book value of $27.2 million Intimex had assessed.
The large gap -- together with the small number of winning bidders -- raised suspicion among other investors who said the company had undervalued its assets and withheld information, which was then used by a small group of bidders.
Intimex runs a number of supermarkets in Hanoi and the north but is known abroad as an exporter of robusta coffee and pepper. Vietnam is the world's top exporter of the two commodities.
Vietnam has been speeding up privatisations to boost the stock markets and raise funds to fuel the economic growth targeted at 8.5 percent this year.
Source: Reuters
Friday, July 27, 2007
Selling shares to strategic shareholders to be controlled
The Ministry of Finance plans to keep stricter control over the selling of shares to strategic shareholders as it is drafting a document amending several provisions in Circular No 18 on the buying and selling of shares, and the issuance of additional shares by public companies.
If companies sell shares at preferential prices to strategic partners, it is necessary to define who will be listed as ‘strategic shareholders’ after considering the criteria as follows: suppliers of materials for production; big partners who consume products of the companies; partners that have experience in the operation fields of the issuing companies; partners that can help the companies to expand markets and develop production and business; and partners that can give advice in corporate governance and set up strategies.
The management boards of the companies issuing securities must publish the lists of strategic shareholders and the volume of shares to be sold to them and make them public for the review of shareholders. The lists also must be submitted to the State Securities Commission (SSC).
Besides the sale of shares to strategic shareholders, the draft also sets regulations on issuing shares to companies’ labourers under specific programmes, under which the issuance programmes must be approved by shareholders.
The total shares issued under the specific programmes must not be higher than 5% of the total existing shares of the companies. The price of shares to be sold to labourers must not be lower than 40% of the market price at the time of issuance and the price at which shares were sold to existing shareholders.
If companies sell shares at preferential prices to strategic partners, it is necessary to define who will be listed as ‘strategic shareholders’ after considering the criteria as follows: suppliers of materials for production; big partners who consume products of the companies; partners that have experience in the operation fields of the issuing companies; partners that can help the companies to expand markets and develop production and business; and partners that can give advice in corporate governance and set up strategies.
The management boards of the companies issuing securities must publish the lists of strategic shareholders and the volume of shares to be sold to them and make them public for the review of shareholders. The lists also must be submitted to the State Securities Commission (SSC).
Besides the sale of shares to strategic shareholders, the draft also sets regulations on issuing shares to companies’ labourers under specific programmes, under which the issuance programmes must be approved by shareholders.
The total shares issued under the specific programmes must not be higher than 5% of the total existing shares of the companies. The price of shares to be sold to labourers must not be lower than 40% of the market price at the time of issuance and the price at which shares were sold to existing shareholders.
Monday, July 23, 2007
Law allowing foreigners to own property to cause price fever?
Some experts believe that the new law allowing foreigners to own property in Vietnam will warm the market, and even create a price fever in the market, but others do not share the same view.
Under the pilot scheme on allowing foreigners to buy houses in Vietnam, 21,000 of 81,000 foreigners who have been working and living in Vietnam since 2004 will be eligible to own property.
Nguyen Manh Ha, Head of the Housing Management Department under the Ministry of Construction (MoC), the author of the pilot scheme, said that the scheme had been drawn up in a way that prevented speculation in the context of higher demand over supply in Vietnam.
In Hanoi, some 1,300 apartments with the total area of 220,000 sq m are being leased to foreigners, mostly in the districts of Hoan Kiem, Ba Dinh and Tay Ho.
In HCM City, foreigners are living in 4,000 leased apartments with the total area of 660,000 sq m, mostly in Phu My Hung new urban area, and districts of 1, 2, 3 and 5, and Phu Nhuan.
Foreigners prefer villas and high-grade apartments. In Hanoi, leasing fees range from $700 to $1,000/month on average for every apartment. In HCM City, leasing fees are usually between $1,000-1,500/month on average, and they are more for apartments in the centre of the city, at $2,500-3,000/month. The leasing duration is less than five years.
Though encouraged by the pilot scheme, foreigners still fear that the new policy will face a lot of difficulties in implementation. Richard Leech, Managing Director of CBRE, said that he would buy a house immediately when he was permitted to, but when reviewing the progress made in recent years in the policy on allowing foreigners to own property, said he believed that a lot of barriers still existed.
The Housing Law, which came into effect on July 1, 2006, stipulates that Viet Kieu have the right to buy houses in Vietnam. However, over the last one year, only several Viet Kieu have been able to buy houses in accordance with the new law.
Prior to that, in 2001, the Government enacted Decree 80 allowing several Viet Kieu subjects to buy houses in Vietnam. However, only some 100 Viet Kieu have bought houses in accordance with the decree.
The biggest obstacle, according to experts, is that the law still needs circulars and other documents to be promulgated to guide the implementation of the law. Before the Housing Law came into effect, optimists estimated that some 100,000 Viet Kieu would return to Vietnam to buy houses, and the real estate market would see some $10bil injected.
In HCM City, the Phu My Hung new urban area is the favourite of many foreigners. However, over the last one year, the capital flow into the real estate market has proved to be ‘modest’.
Meanwhile, Vietnam’s laws still do not allow foreigners to own land and property (including Land Law, Housing Law and Civil Code). If the pilot scheme is accepted and becomes the official regulation, it will still need the ratification of the National Assembly and the amendment of related laws.
Real estate developers said that the new law on allowing foreigners to own property would not likely cause a price fever.
Tran Thanh Tuan, Director of the Phuc Long Property Company, said that in Hanoi and HCM City, where many foreigners want to buy houses, the prices are too high for many foreigners to afford.
Moreover, according to Mr Tuan, the difficulties in assigning houses and the prohibition against leasing houses will also keep foreigners from owning property. Mr Ha from the Ministry of Construction himself also said that the number of foreigners eligible to buy houses was limited, and the pilot scheme would not have big impacts on the real estate market.
Thomas Tung, a Viet Kieu, who has bought a house at The Manor, related that one would think that it would be better to own a house than lease a house and pay $2,000-3,000/month. However, his friends, who heard about the new regulations, said that they would not be able to pay $200-300,000 to own an apartment.
Park Moon Sick, Business Director of V-Star high-grade apartment project, said that many South Koreans who leased V-Star’s apartments wanted to buy houses but most of them did not meet the requirements set by MoC.
Mr Park added that with the price of more than $100,000 for a medium-sized apartment in the Southern Saigon urban area, those who lived in Vietnam for less than five years would find it better to lease than buy apartments.
Meanwhile, Do Thi Loan, Secretary General of the HCM City Real Estate Association, asserted that the new law would have positive impacts on the real estate market.
According to Vo Van Lam, Deputy Director General of the Lam Phuc Property Company, a recent survey by the company shows that some 2,000 foreigners in HCM City want to buy houses at once. He said that the price fever would not occur in the first year after the pilot scheme was implemented, but said the demand would surely increase in the next years.
However, even the most optimistic are not predicting that the new law will stir a fever in the market, as the number of foreigners eligible to buy houses is not big enough. Meanwhile, a series of real estate projects to be put into operation in two or three years will help balance supply and demand.
Source: VNE
Under the pilot scheme on allowing foreigners to buy houses in Vietnam, 21,000 of 81,000 foreigners who have been working and living in Vietnam since 2004 will be eligible to own property.
Nguyen Manh Ha, Head of the Housing Management Department under the Ministry of Construction (MoC), the author of the pilot scheme, said that the scheme had been drawn up in a way that prevented speculation in the context of higher demand over supply in Vietnam.
In Hanoi, some 1,300 apartments with the total area of 220,000 sq m are being leased to foreigners, mostly in the districts of Hoan Kiem, Ba Dinh and Tay Ho.
In HCM City, foreigners are living in 4,000 leased apartments with the total area of 660,000 sq m, mostly in Phu My Hung new urban area, and districts of 1, 2, 3 and 5, and Phu Nhuan.
Foreigners prefer villas and high-grade apartments. In Hanoi, leasing fees range from $700 to $1,000/month on average for every apartment. In HCM City, leasing fees are usually between $1,000-1,500/month on average, and they are more for apartments in the centre of the city, at $2,500-3,000/month. The leasing duration is less than five years.
Though encouraged by the pilot scheme, foreigners still fear that the new policy will face a lot of difficulties in implementation. Richard Leech, Managing Director of CBRE, said that he would buy a house immediately when he was permitted to, but when reviewing the progress made in recent years in the policy on allowing foreigners to own property, said he believed that a lot of barriers still existed.
The Housing Law, which came into effect on July 1, 2006, stipulates that Viet Kieu have the right to buy houses in Vietnam. However, over the last one year, only several Viet Kieu have been able to buy houses in accordance with the new law.
Prior to that, in 2001, the Government enacted Decree 80 allowing several Viet Kieu subjects to buy houses in Vietnam. However, only some 100 Viet Kieu have bought houses in accordance with the decree.
The biggest obstacle, according to experts, is that the law still needs circulars and other documents to be promulgated to guide the implementation of the law. Before the Housing Law came into effect, optimists estimated that some 100,000 Viet Kieu would return to Vietnam to buy houses, and the real estate market would see some $10bil injected.
In HCM City, the Phu My Hung new urban area is the favourite of many foreigners. However, over the last one year, the capital flow into the real estate market has proved to be ‘modest’.
Meanwhile, Vietnam’s laws still do not allow foreigners to own land and property (including Land Law, Housing Law and Civil Code). If the pilot scheme is accepted and becomes the official regulation, it will still need the ratification of the National Assembly and the amendment of related laws.
Real estate developers said that the new law on allowing foreigners to own property would not likely cause a price fever.
Tran Thanh Tuan, Director of the Phuc Long Property Company, said that in Hanoi and HCM City, where many foreigners want to buy houses, the prices are too high for many foreigners to afford.
Moreover, according to Mr Tuan, the difficulties in assigning houses and the prohibition against leasing houses will also keep foreigners from owning property. Mr Ha from the Ministry of Construction himself also said that the number of foreigners eligible to buy houses was limited, and the pilot scheme would not have big impacts on the real estate market.
Thomas Tung, a Viet Kieu, who has bought a house at The Manor, related that one would think that it would be better to own a house than lease a house and pay $2,000-3,000/month. However, his friends, who heard about the new regulations, said that they would not be able to pay $200-300,000 to own an apartment.
Park Moon Sick, Business Director of V-Star high-grade apartment project, said that many South Koreans who leased V-Star’s apartments wanted to buy houses but most of them did not meet the requirements set by MoC.
Mr Park added that with the price of more than $100,000 for a medium-sized apartment in the Southern Saigon urban area, those who lived in Vietnam for less than five years would find it better to lease than buy apartments.
Meanwhile, Do Thi Loan, Secretary General of the HCM City Real Estate Association, asserted that the new law would have positive impacts on the real estate market.
According to Vo Van Lam, Deputy Director General of the Lam Phuc Property Company, a recent survey by the company shows that some 2,000 foreigners in HCM City want to buy houses at once. He said that the price fever would not occur in the first year after the pilot scheme was implemented, but said the demand would surely increase in the next years.
However, even the most optimistic are not predicting that the new law will stir a fever in the market, as the number of foreigners eligible to buy houses is not big enough. Meanwhile, a series of real estate projects to be put into operation in two or three years will help balance supply and demand.
Source: VNE
Friday, July 20, 2007
Will foreign banks take further steps?
The trend of selling stakes to foreign bankers, which blossomed 1-2 years ago, now has seemed to subside. Only one successful affair has been reported so far this year.
The deal in which Southern Bank sold 10% of its stakes to Singapore’s UOB in January 2007 was considered the first sale of the year. An ‘engagement’ was made nearly six months later, between Habubank and German Deutsche Bank, but the deal has not been officially inked yet.
An official from the State Bank of Vietnam said that foreign banks had regular meetings and discussions with the central bank every time they planned to buy stakes in local banks. There were many meetings in the past, but very few at this moment. The official said that no official proposal on purchasing stakes in local banks had been made recently.
The agreements signed before by local banks and their partners all contained the provision which said that the foreign partners would raise their ownership ratios to the ceiling level once this was allowed by the central bank. However, as the official said, besides the Hong Kong and Shanghai Banking Corporation HSBC, which has raised their capital contribution ratio in Techcombank to 15% from 10%, no other foreign banker had mentioned the increase of share proportion in local banks. 15% foreign ownership in local banks was approved by the Government in Decree 69 dated in April.
In fact, no official proposal has been made, but local and foreign banks are still discussing issues relating to the selling of stakes to foreign bankers. Luu Duc Khanh, Director General of An Binh Bank, said that the bank was negotiating with four foreign partners, and everything would be concluded in the fourth quarter of the year at the latest.
Pham Van Thiet, Director General of Eximbank, said that the bank would wrap up negotiations this year, after which the bank would sell 15% of its shares (500,000 shares) to foreign strategists.
Director General of Asia Commercial Bank ACB Ly Xuan Hai said that the foreign ownership in ACB had hit the ceiling of 30%. With the current regulations, ACB cannot sell more shares, though foreign bankers still want to buy.
Local bankers said that the ceiling ratio of foreign ownership was a barrier for them and foreign bankers. One of the four partners who sought to buy An Binh’s shares wanted the promise that it would hold up to 30% of the bank’s shares once the Government accepted. However, Mr Khanh said that the bank would only accept the provision if it found a very good partner.
Before the Government promulgated Decree 69, foreign bankers expected that the ceiling ratio for foreign strategic investors would be 30%, while the ratio for all foreign investors would be 49%. However, the ceiling levels have turned out to be 15% and 30% only.
Explaining why foreign bankers were still hesitating to raise their ownership of local banks, Dominic Scriven, Director of Dragon Capital, which now holds shares of many local banks, said that foreign bankers needed some more time to decide whether to inject more money in local banks or set up subsidiaries to develop their own networks.
It is the right time for the foreign banks to consider whether to make further investment or curb investment at the current level. Foreign bankers also need to consider if the mode of cooperation applied in the last time was good for both parties. If everything is okay, they will progress.
Mr Scriven also said that one of the things that made foreign bankers hesitant in stepping forward was the increased value of local banks in the last time.
The value of banks has been overly high, and Dragon Capital will not accept such high prices, he said.
HSBC is the first and only foreign bank that raised its ownership in a local bank after the new decree No 69 came into effect. One year ago, in order to obtain 10% of Techcombank’s shares (the chartered capital was VND580bil, or $36.7mil), HSBC had to pay $17.6mil. However, HSBC had to spend $16.4mil only to buy 5% more of Techcombank shares (VND1,500bil, or $93.1mil), though banks share prices have been skyrocketing so far this year.
Source: VNE
The deal in which Southern Bank sold 10% of its stakes to Singapore’s UOB in January 2007 was considered the first sale of the year. An ‘engagement’ was made nearly six months later, between Habubank and German Deutsche Bank, but the deal has not been officially inked yet.
An official from the State Bank of Vietnam said that foreign banks had regular meetings and discussions with the central bank every time they planned to buy stakes in local banks. There were many meetings in the past, but very few at this moment. The official said that no official proposal on purchasing stakes in local banks had been made recently.
The agreements signed before by local banks and their partners all contained the provision which said that the foreign partners would raise their ownership ratios to the ceiling level once this was allowed by the central bank. However, as the official said, besides the Hong Kong and Shanghai Banking Corporation HSBC, which has raised their capital contribution ratio in Techcombank to 15% from 10%, no other foreign banker had mentioned the increase of share proportion in local banks. 15% foreign ownership in local banks was approved by the Government in Decree 69 dated in April.
In fact, no official proposal has been made, but local and foreign banks are still discussing issues relating to the selling of stakes to foreign bankers. Luu Duc Khanh, Director General of An Binh Bank, said that the bank was negotiating with four foreign partners, and everything would be concluded in the fourth quarter of the year at the latest.
Pham Van Thiet, Director General of Eximbank, said that the bank would wrap up negotiations this year, after which the bank would sell 15% of its shares (500,000 shares) to foreign strategists.
Director General of Asia Commercial Bank ACB Ly Xuan Hai said that the foreign ownership in ACB had hit the ceiling of 30%. With the current regulations, ACB cannot sell more shares, though foreign bankers still want to buy.
Local bankers said that the ceiling ratio of foreign ownership was a barrier for them and foreign bankers. One of the four partners who sought to buy An Binh’s shares wanted the promise that it would hold up to 30% of the bank’s shares once the Government accepted. However, Mr Khanh said that the bank would only accept the provision if it found a very good partner.
Before the Government promulgated Decree 69, foreign bankers expected that the ceiling ratio for foreign strategic investors would be 30%, while the ratio for all foreign investors would be 49%. However, the ceiling levels have turned out to be 15% and 30% only.
Explaining why foreign bankers were still hesitating to raise their ownership of local banks, Dominic Scriven, Director of Dragon Capital, which now holds shares of many local banks, said that foreign bankers needed some more time to decide whether to inject more money in local banks or set up subsidiaries to develop their own networks.
It is the right time for the foreign banks to consider whether to make further investment or curb investment at the current level. Foreign bankers also need to consider if the mode of cooperation applied in the last time was good for both parties. If everything is okay, they will progress.
Mr Scriven also said that one of the things that made foreign bankers hesitant in stepping forward was the increased value of local banks in the last time.
The value of banks has been overly high, and Dragon Capital will not accept such high prices, he said.
HSBC is the first and only foreign bank that raised its ownership in a local bank after the new decree No 69 came into effect. One year ago, in order to obtain 10% of Techcombank’s shares (the chartered capital was VND580bil, or $36.7mil), HSBC had to pay $17.6mil. However, HSBC had to spend $16.4mil only to buy 5% more of Techcombank shares (VND1,500bil, or $93.1mil), though banks share prices have been skyrocketing so far this year.
Source: VNE
Thursday, July 19, 2007
Stock market investors fined for rigging
The State Securities Commission (SSC) found Huynh Thanh Minh and Bui Quang Thanh, both individual investors on the Ho Chi Minh City market, guilty of “illegal cooperation” in securities trading.
According to the commission, the two worked together to create fake demand and rig the prices of VietFund’s mutual fund VFMVF1.
The SSC slapped Minh with a VND60 million penalty, VND30 million of which was for creating fake demand and rigging stock prices, while the rest was for soliciting other investors to by and sell.
Thanh was hit with a VND100 million fine, split evenly for the same two illegalities.
But the market regulator did not disclose whom they might have been in collusion with, nor was any information released on the difference of the fining rate.
The two men are the second set of investors to be fined for stock rigging.
The fine amount is the lowest possible for such an offense, with the maximum being VND50 million.
Earlier this month SSC also imposed a VND30 million ($1,589) fine on Nguyen Diem Khanh, a director of the Ho Chi Minh City-based LiLi Joint Stock Company for a similar violation.
Further details have yet to be released on that case.
The SSC’s actions had hit protests from investors who are indignant that the SSC took nearly one month to carry out the fines after making the decision on May 30.
Investors, both individuals and institutions, were unhappy with the market regulator’s handling of the situation.
Many investors see providing full and immediate information on each case immediately as necessary to protecting investors’ benefits.
They also urged the SSC to levy more drastic penalties on offenders in such cases.
The Vietnamese securities watchdog announced Wednesday it would fine two investors a total of VND160 million (US$9,925) for manipulating stocks.
Source: Thanh Nien
According to the commission, the two worked together to create fake demand and rig the prices of VietFund’s mutual fund VFMVF1.
The SSC slapped Minh with a VND60 million penalty, VND30 million of which was for creating fake demand and rigging stock prices, while the rest was for soliciting other investors to by and sell.
Thanh was hit with a VND100 million fine, split evenly for the same two illegalities.
But the market regulator did not disclose whom they might have been in collusion with, nor was any information released on the difference of the fining rate.
The two men are the second set of investors to be fined for stock rigging.
The fine amount is the lowest possible for such an offense, with the maximum being VND50 million.
Earlier this month SSC also imposed a VND30 million ($1,589) fine on Nguyen Diem Khanh, a director of the Ho Chi Minh City-based LiLi Joint Stock Company for a similar violation.
Further details have yet to be released on that case.
The SSC’s actions had hit protests from investors who are indignant that the SSC took nearly one month to carry out the fines after making the decision on May 30.
Investors, both individuals and institutions, were unhappy with the market regulator’s handling of the situation.
Many investors see providing full and immediate information on each case immediately as necessary to protecting investors’ benefits.
They also urged the SSC to levy more drastic penalties on offenders in such cases.
The Vietnamese securities watchdog announced Wednesday it would fine two investors a total of VND160 million (US$9,925) for manipulating stocks.
Source: Thanh Nien
Wednesday, July 18, 2007
M&A trend arouses monopoly fears
Economists are concerned that the growing number of merges and acquisitions (M&A) - the latest trend in the market as smaller companies learn to be lean and mean - will progress unabated, giving way to monopolies and anti-competitive behaviour.
According to First Asia Finance Group, a Hong Kong based financial advisor, more than half of the roughly 300,000 small and medium-sized enterprises (SMEs) currently in the market will either close or merge with other companies over the next six years due to stronger competition and the rich environment for M&A activity.
There have already been some major deals signed this year. The Dai-ichi Group acquired Bao Minh-CMG Life Insurance in a coup de main to quickly breach the Vietnamese market.
In addition, VinaCapital purchased a 70 per cent stake in both the Metropole Hotel and the Sai Gon Ommi earlier this year through its VinaLand fund. Executives say the fund is hunting for other high-end hotels to buy.
Don Lam, director of VinaCapital, said the recent wave of M&A in Viet Nam may be a necessary step to improve the efficiency of many poorly run companies and create better economies of scale.
M&A could also lead to improved brand recognition on a national and international scale, say experts, as companies use their combined strengths to reach more consumers.
"Mergers and acquisitions has also proven to be a new and important channel to attract foreign investment," said Nguyen Thi Bich Van, deputy director of the Ministry of Planning and Investment’s Foreign Investment Agency.
There are concerns, though, that if left unchecked M&A activity could lead to anti-competitive behaviour and the emergence of monopolies.
Legal regulations to ensure competition should, therefore, be streamlined, especially as Viet Nam opens its market under the WTO agreement to well-funded multinational corporations, says Nguyen Nhu Phat, deputy chairman of the State and Law Institute.
M&A activity is currently regulated under several laws - the Investment Law, Enterprise Law and Securities Law - which causes regulatory overlaps.
The Ministry of Trade’s Competition Administration Department will have to take a bigger role in preventing unwanted monopolies, says Phat. He also worries that regulators may be restricted given the department has three roles: administrator, investigator and executor.
Dinh Thi My Loan, director of the Competition Administration Department, says there are plans to streamline regulatory procedures for mergers and acquisitions. The department, though, will have to co-operate closely with the State Securities Commission, the Ministry of Planning and Investment.
Source: VNS
According to First Asia Finance Group, a Hong Kong based financial advisor, more than half of the roughly 300,000 small and medium-sized enterprises (SMEs) currently in the market will either close or merge with other companies over the next six years due to stronger competition and the rich environment for M&A activity.
There have already been some major deals signed this year. The Dai-ichi Group acquired Bao Minh-CMG Life Insurance in a coup de main to quickly breach the Vietnamese market.
In addition, VinaCapital purchased a 70 per cent stake in both the Metropole Hotel and the Sai Gon Ommi earlier this year through its VinaLand fund. Executives say the fund is hunting for other high-end hotels to buy.
Don Lam, director of VinaCapital, said the recent wave of M&A in Viet Nam may be a necessary step to improve the efficiency of many poorly run companies and create better economies of scale.
M&A could also lead to improved brand recognition on a national and international scale, say experts, as companies use their combined strengths to reach more consumers.
"Mergers and acquisitions has also proven to be a new and important channel to attract foreign investment," said Nguyen Thi Bich Van, deputy director of the Ministry of Planning and Investment’s Foreign Investment Agency.
There are concerns, though, that if left unchecked M&A activity could lead to anti-competitive behaviour and the emergence of monopolies.
Legal regulations to ensure competition should, therefore, be streamlined, especially as Viet Nam opens its market under the WTO agreement to well-funded multinational corporations, says Nguyen Nhu Phat, deputy chairman of the State and Law Institute.
M&A activity is currently regulated under several laws - the Investment Law, Enterprise Law and Securities Law - which causes regulatory overlaps.
The Ministry of Trade’s Competition Administration Department will have to take a bigger role in preventing unwanted monopolies, says Phat. He also worries that regulators may be restricted given the department has three roles: administrator, investigator and executor.
Dinh Thi My Loan, director of the Competition Administration Department, says there are plans to streamline regulatory procedures for mergers and acquisitions. The department, though, will have to co-operate closely with the State Securities Commission, the Ministry of Planning and Investment.
Source: VNS
Monday, July 16, 2007
Banks get VND1tril in chartered capital ahead of schedule
It is very likely that joint stock banks will fulfill the plan to raise the chartered capital to VND1tril before the end of 2008.
The State Bank of Vietnam has inspected the implementation of the plan on raising chartered capital to meet the regulation on required minimum legal capital of VND1tril ($62.5mil) by the end of 2008.
Several banks have completed the raising of chartered capital to VND1tril, the level required for the deadline of the end of 2008. Other banks are moving ahead with their plan to raise chartered capital and they are likely to fulfill the plan by the end of 2007, ahead of schedule.
According to the central bank, by May 30, 2007, 12 joint stock banks had had the chartered capital exceeding VND1tril, while 22 other banks still had the capital below VND1tril. None of the joint venture banks could reach the required VND1tril level, while 33 foreign bank branches had more than $15mil in capital as required on bank branches, and two other had the capital below the level.
The central bank said that the joint stock banks that have not raised enough capital to meet the required level yet, all plan to raise capital within 2007.
Under the Decree 141, the minimum legal capital required on state owned banks is VND3tril ($187.5mil), joint stock banks VND1tril ($62.5mil), foreign bank branches ($15mil), the banks for social policies VND5tril ($312.5mil), investment banks VND3tril ($187.5mil), development banks VND5tril ($312.5mil), cooperation bank VND1tril.
The banks and non-bank credit institutions, if they cannot meet the requirements on minimum legal capital, will have to be either merged into other banks, or have their licenses revoked.
Source: VNE
The State Bank of Vietnam has inspected the implementation of the plan on raising chartered capital to meet the regulation on required minimum legal capital of VND1tril ($62.5mil) by the end of 2008.
Several banks have completed the raising of chartered capital to VND1tril, the level required for the deadline of the end of 2008. Other banks are moving ahead with their plan to raise chartered capital and they are likely to fulfill the plan by the end of 2007, ahead of schedule.
According to the central bank, by May 30, 2007, 12 joint stock banks had had the chartered capital exceeding VND1tril, while 22 other banks still had the capital below VND1tril. None of the joint venture banks could reach the required VND1tril level, while 33 foreign bank branches had more than $15mil in capital as required on bank branches, and two other had the capital below the level.
The central bank said that the joint stock banks that have not raised enough capital to meet the required level yet, all plan to raise capital within 2007.
Under the Decree 141, the minimum legal capital required on state owned banks is VND3tril ($187.5mil), joint stock banks VND1tril ($62.5mil), foreign bank branches ($15mil), the banks for social policies VND5tril ($312.5mil), investment banks VND3tril ($187.5mil), development banks VND5tril ($312.5mil), cooperation bank VND1tril.
The banks and non-bank credit institutions, if they cannot meet the requirements on minimum legal capital, will have to be either merged into other banks, or have their licenses revoked.
Source: VNE
How to control manipulation of the securities market?
The Securities Market Supervision Board aims to monitor all market fluctuations to keep the securities market purring along while controlling acts of manipulation.
The State Securities Commission (SSC) has submitted the Government a project to establish a Securities Market Supervision Board, which will closely work with the securities trading centres to set up a uniform continuous supervision system.
Supervisory results from the board will provide an important foundation for inspectors to handle violations of the securities market. SCC Vice Chairman Nguyen Doan Hung talks about this issue.
How have the securities market’s activities been supervised?
The supervision process occurs on three different levels: Firstly supervising areas related to the SSC, secondly supervising the market’s operations at the stock exchanges and securities trading centres and thirdly, supervising securities companies and funds. The SSC currently focuses on monitoring securities companies, fund management companies and organisations licensed by the SCC.
The SSC is managing the issuance of securities by public companies, which has been approved by the SSC.
What is the most important task of the Securities Market Supervision Board and how will it impact on the securities market?
The board will monitor all fluctuations on the market to ensure its table operation. However, there is a difference between inspection and supervision. Inspection is conducted by a functional board. For instance, securities and fund management companies are under the supervision of the business management board. When signs of violation are detected among these companies, they will be reported to the securities inspection board to consider and deal with under punitive laws. However, supervision and analysis of transactions on the securities market in Vietnam remains weak while many other countries can use a standard information and technology (IT) supervision system to find out violations of transaction regulations. We are trying our best to build a modern IT system to raise the SSC’s supervisory efficiency.
How about the exercise of supervision at the stock exchanges and securities trading centres in Hanoi and Ho Chi Minh City?
Securities companies are members of the stock exchanges and securities trading centres. The stock exchanges and securities centres have specific regulations to supervise transactions made by their members. If any unusual transaction is discovered, all members of securities companies will be notified. If it is a serious violation, the case will be moved to the SSC for consideration. In addition, the securities custodies also supervise securities trading activities.
People say that the SSC has not controlled the influx of foreign investment in the securities market. What is your idea opinion?
Regarding the management of foreign currencies, the Government has assigned the State Bank of Vietnam (SBV) and the SBV’s Department of Foreign Currency Management in particularly to supervise the flows of direct and indirect foreign investment into Vietnam and out of the country.
The SBV has strict supervision regulations. For example, investors must open an account at the SBV so that the bank can monitor the account and regulate the country’s monetary policy and State budget balance.
For the SSC, the commission is interested in foreign investment funds, as they can be set up quickly with a large capitalisation. Under the law on securities and new regulations, the SSC will be in charge of supervising the funds. The regulation stipulates that foreign investment funds must report to the SSC on the establishment of the fund, the origin, the capital source of the fund and investment plans in Vietnam. We hope that the law and new regulations will help monitor the effectiveness of direct and indirect foreign investments in Vietnam.
source: VNE
The State Securities Commission (SSC) has submitted the Government a project to establish a Securities Market Supervision Board, which will closely work with the securities trading centres to set up a uniform continuous supervision system.
Supervisory results from the board will provide an important foundation for inspectors to handle violations of the securities market. SCC Vice Chairman Nguyen Doan Hung talks about this issue.
How have the securities market’s activities been supervised?
The supervision process occurs on three different levels: Firstly supervising areas related to the SSC, secondly supervising the market’s operations at the stock exchanges and securities trading centres and thirdly, supervising securities companies and funds. The SSC currently focuses on monitoring securities companies, fund management companies and organisations licensed by the SCC.
The SSC is managing the issuance of securities by public companies, which has been approved by the SSC.
What is the most important task of the Securities Market Supervision Board and how will it impact on the securities market?
The board will monitor all fluctuations on the market to ensure its table operation. However, there is a difference between inspection and supervision. Inspection is conducted by a functional board. For instance, securities and fund management companies are under the supervision of the business management board. When signs of violation are detected among these companies, they will be reported to the securities inspection board to consider and deal with under punitive laws. However, supervision and analysis of transactions on the securities market in Vietnam remains weak while many other countries can use a standard information and technology (IT) supervision system to find out violations of transaction regulations. We are trying our best to build a modern IT system to raise the SSC’s supervisory efficiency.
How about the exercise of supervision at the stock exchanges and securities trading centres in Hanoi and Ho Chi Minh City?
Securities companies are members of the stock exchanges and securities trading centres. The stock exchanges and securities centres have specific regulations to supervise transactions made by their members. If any unusual transaction is discovered, all members of securities companies will be notified. If it is a serious violation, the case will be moved to the SSC for consideration. In addition, the securities custodies also supervise securities trading activities.
People say that the SSC has not controlled the influx of foreign investment in the securities market. What is your idea opinion?
Regarding the management of foreign currencies, the Government has assigned the State Bank of Vietnam (SBV) and the SBV’s Department of Foreign Currency Management in particularly to supervise the flows of direct and indirect foreign investment into Vietnam and out of the country.
The SBV has strict supervision regulations. For example, investors must open an account at the SBV so that the bank can monitor the account and regulate the country’s monetary policy and State budget balance.
For the SSC, the commission is interested in foreign investment funds, as they can be set up quickly with a large capitalisation. Under the law on securities and new regulations, the SSC will be in charge of supervising the funds. The regulation stipulates that foreign investment funds must report to the SSC on the establishment of the fund, the origin, the capital source of the fund and investment plans in Vietnam. We hope that the law and new regulations will help monitor the effectiveness of direct and indirect foreign investments in Vietnam.
source: VNE
Sunday, July 15, 2007
Foreigners to own property under new law
Foreigners and foreign institutions in Ha Noi and Ho Chi Minh City would be allowed to buy property in Vietnam under a new regulation pending approval from the Ministry of Construction.
Eligible foreigners include foreign investors in Vietnam and individuals who have contributed significantly to Vietnam’s development and have been formally recognised by the President, the Government or the Vietnam Fatherland Front President for their efforts.
Cultural specialists, academics and scientists working in Vietnam will also be eligible as would be spouses of Vietnamese citizens residing in Vietnam. Foreign-invested businesses or organisations in Vietnam could also take advantage of the new regulation. Overseas Vietnamese have been allowed to buy property for the last six years.
Apart from papers proving eligibility, the regulations also stipulate that foreigners and foreign companies must have been in Vietnam for at least one uninterrupted year.
The Ministry of Construction said the regulation, if approved, would first be applied during a 3-5 year trial period in Ha Noi and Ho Chi Minh City.
The change in ownership of property comes at a time when the Government is trying to encourage foreign investors to transfer their expertise and technology to Vietnam.
Many foreigners working here long-term have wanted to buy property, but legal hindrances barred them from owning property outright, so many have bought property through Vietnamese partners.
On Phu Quoc Island, for example, many foreigners have bought land and built hotels, restaurants and bars under the name of Vietnamese nationals.
Nguyen Manh Khoi, an official of the Construction Ministry, said, however, that only about 20 percent of the some 81,000 foreigners living in Vietnam would be qualified for property ownership if the proposal was approved.
The conditions for ownership could be discouraging since the regulation requires that foreigners sell or transfer their real estate to another party after departing the country.
In addition, the regulations are still unclear about the procedures for foreigners to follow or the means by which authorities can control the movement of foreigners to other cities or provinces, or even their final departure from the country.
Christine Kieffel, an American businesswoman, was sceptical when asked about the prospect of owning a house or an apartment, saying that the paperwork was complicated and that she would have to ultimately sell the property anyway
Source: VNE
Eligible foreigners include foreign investors in Vietnam and individuals who have contributed significantly to Vietnam’s development and have been formally recognised by the President, the Government or the Vietnam Fatherland Front President for their efforts.
Cultural specialists, academics and scientists working in Vietnam will also be eligible as would be spouses of Vietnamese citizens residing in Vietnam. Foreign-invested businesses or organisations in Vietnam could also take advantage of the new regulation. Overseas Vietnamese have been allowed to buy property for the last six years.
Apart from papers proving eligibility, the regulations also stipulate that foreigners and foreign companies must have been in Vietnam for at least one uninterrupted year.
The Ministry of Construction said the regulation, if approved, would first be applied during a 3-5 year trial period in Ha Noi and Ho Chi Minh City.
The change in ownership of property comes at a time when the Government is trying to encourage foreign investors to transfer their expertise and technology to Vietnam.
Many foreigners working here long-term have wanted to buy property, but legal hindrances barred them from owning property outright, so many have bought property through Vietnamese partners.
On Phu Quoc Island, for example, many foreigners have bought land and built hotels, restaurants and bars under the name of Vietnamese nationals.
Nguyen Manh Khoi, an official of the Construction Ministry, said, however, that only about 20 percent of the some 81,000 foreigners living in Vietnam would be qualified for property ownership if the proposal was approved.
The conditions for ownership could be discouraging since the regulation requires that foreigners sell or transfer their real estate to another party after departing the country.
In addition, the regulations are still unclear about the procedures for foreigners to follow or the means by which authorities can control the movement of foreigners to other cities or provinces, or even their final departure from the country.
Christine Kieffel, an American businesswoman, was sceptical when asked about the prospect of owning a house or an apartment, saying that the paperwork was complicated and that she would have to ultimately sell the property anyway
Source: VNE
Friday, July 13, 2007
25% tax on securities earnings not too high
The Deputy Minister of Finance, who drafted the bill on personal income tax, Truong Chi Trung, explained why the tax rate on securities earnings should be 25%.
Some experts said that the suggested 25% tax rate on capital assignment proves to be too high. What is the basis for the compilation committee’s decision that the tax rate should be 25%?
When designing the tariff, we planned to set the same tax rate on the capital assignment and real estate assignment at 25%, to make the tariff transparent and simple. The basis for the decision is the currently applied tax rate of 28% imposed on the earnings from securities investments of institutions and enterprises (individual securities investors now enjoy tax exemption).
The compilation committee thinks that there should not be a too big gap between the tax rates on individuals and institutions, which would prompt tax evasion. In other countries in the region, the tax sums securities investors have to pay may be ½, ¼ or 1/5 of the income from capital assignment. We have considered these cases thoroughly, and decided that the 25% rate would be a suitable rate, not overly high if compared to other countries.
VAFI (Vietnam Association of Financial Investors) has proposed lower tax rates, 5%-10%. What would you say about the suggestion?
As for the income tax, it is impossible to design different tax rates for different investors. We can only impose different tax rates on residential and non-residential investors. As I have said, the too big gap between the rates on individual and institutional investors will encourage institutional investors to evade tax by assuming individuals’ names. This is a taboo in designing tax policies.
In fact, individual investors cannot get big profit as institutional investors can, because individuals do not have much experience in doing business. Do you think that it would be unreasonable to impose the same tax rates on individuals and other subjects?
As for individual investors, tax policies always aim to encourage investment. The tax designed for these investors has never been too high to keep them away from the market.
In the last few years, the state, aiming to stimulate the market, has been applying policies of tax exemption for many subjects. In fact, the collection from securities earnings has just accounted for a small proportion of the state budget collection. However, as the market develops, it would be necessary to amend the policies to make them more suitable to the new circumstances. Besides domestic investors, foreign investors have also joined the market, and it would be unfair to collect tax from foreign investors while leaving domestic investors exempt from tax.
In fact, if deducting 0.1% of transaction value for every transaction, this sum proves to be even lower than the brokerage fee investors have to pay to securities companies, now 0.5% at maximum. Foreign professional investors are still heavily investing in Vietnam, which shows that the current tax policies are suitable.
The principle of tax calculation is imposing on income (the margin after deducting the prime cost and additional expenses from the turnover). How can we calculate the additional expenses?
Investors must show vouchers, for example, the consultancy contracts, the contracts on borrowing money for investment deals. State management authorities will promulgate documents guiding the issue after the law is enacted
Could you please tell us more about the tax collection method?
When investors transfer their shares, securities companies will automatically withhold 0.1% of the total value of the assigned shares. At the year’s end, the earners have to go to taxation agencies to declare the total income and the total tax they have to pay. If the tax sums they have to pay are higher than the sums they temporarily paid, they will have to pay additional sums. Meanwhile, if the tax sums they have to pay are lower than the temporarily paid sums, they will get the tax refund. The method is now being applied for collecting tax from foreign investors.
As for the OTC market, where transactions cannot be controlled well, VAFI has suggested that the taxation bodies will collect 0.2% of the share face value. What would you say about the proposal?
In designing tax policies, there should not be the overly big difference between the policies applied to different subjects. In principle, the tax on OTC securities will be similar with the listing securities. At this moment, it seems to be difficult to collect tax from OTC securities investors. However, the situation will be different in two or three years. The OTC market will also have a watchdog, while public companies will have to register their business, and OTC share transactions will have to go via securities companies.
How will you deal with the opinions and suggestions from experts and the public on the personal income tax bill?
The compilation committee is collecting opinions from the public. On August 15, the opinions will be classified into groups for discussion.
Source: VNE
Some experts said that the suggested 25% tax rate on capital assignment proves to be too high. What is the basis for the compilation committee’s decision that the tax rate should be 25%?
When designing the tariff, we planned to set the same tax rate on the capital assignment and real estate assignment at 25%, to make the tariff transparent and simple. The basis for the decision is the currently applied tax rate of 28% imposed on the earnings from securities investments of institutions and enterprises (individual securities investors now enjoy tax exemption).
The compilation committee thinks that there should not be a too big gap between the tax rates on individuals and institutions, which would prompt tax evasion. In other countries in the region, the tax sums securities investors have to pay may be ½, ¼ or 1/5 of the income from capital assignment. We have considered these cases thoroughly, and decided that the 25% rate would be a suitable rate, not overly high if compared to other countries.
VAFI (Vietnam Association of Financial Investors) has proposed lower tax rates, 5%-10%. What would you say about the suggestion?
As for the income tax, it is impossible to design different tax rates for different investors. We can only impose different tax rates on residential and non-residential investors. As I have said, the too big gap between the rates on individual and institutional investors will encourage institutional investors to evade tax by assuming individuals’ names. This is a taboo in designing tax policies.
In fact, individual investors cannot get big profit as institutional investors can, because individuals do not have much experience in doing business. Do you think that it would be unreasonable to impose the same tax rates on individuals and other subjects?
As for individual investors, tax policies always aim to encourage investment. The tax designed for these investors has never been too high to keep them away from the market.
In the last few years, the state, aiming to stimulate the market, has been applying policies of tax exemption for many subjects. In fact, the collection from securities earnings has just accounted for a small proportion of the state budget collection. However, as the market develops, it would be necessary to amend the policies to make them more suitable to the new circumstances. Besides domestic investors, foreign investors have also joined the market, and it would be unfair to collect tax from foreign investors while leaving domestic investors exempt from tax.
In fact, if deducting 0.1% of transaction value for every transaction, this sum proves to be even lower than the brokerage fee investors have to pay to securities companies, now 0.5% at maximum. Foreign professional investors are still heavily investing in Vietnam, which shows that the current tax policies are suitable.
The principle of tax calculation is imposing on income (the margin after deducting the prime cost and additional expenses from the turnover). How can we calculate the additional expenses?
Investors must show vouchers, for example, the consultancy contracts, the contracts on borrowing money for investment deals. State management authorities will promulgate documents guiding the issue after the law is enacted
Could you please tell us more about the tax collection method?
When investors transfer their shares, securities companies will automatically withhold 0.1% of the total value of the assigned shares. At the year’s end, the earners have to go to taxation agencies to declare the total income and the total tax they have to pay. If the tax sums they have to pay are higher than the sums they temporarily paid, they will have to pay additional sums. Meanwhile, if the tax sums they have to pay are lower than the temporarily paid sums, they will get the tax refund. The method is now being applied for collecting tax from foreign investors.
As for the OTC market, where transactions cannot be controlled well, VAFI has suggested that the taxation bodies will collect 0.2% of the share face value. What would you say about the proposal?
In designing tax policies, there should not be the overly big difference between the policies applied to different subjects. In principle, the tax on OTC securities will be similar with the listing securities. At this moment, it seems to be difficult to collect tax from OTC securities investors. However, the situation will be different in two or three years. The OTC market will also have a watchdog, while public companies will have to register their business, and OTC share transactions will have to go via securities companies.
How will you deal with the opinions and suggestions from experts and the public on the personal income tax bill?
The compilation committee is collecting opinions from the public. On August 15, the opinions will be classified into groups for discussion.
Source: VNE
Vietnam to keep watch over foreign capital on stock market
Nguyen Doan Hung, Deputy Chairman of the State Securities Commission (SSC), talks more about the project on setting up the market monitoring committee which SSC has submitted to the Government.
Under the project, the market monitoring committee will cooperate closely with securities trading centres to form a constant supervising system which can inspect activities on the stock market.
What is the most important task of the market monitoring committee?
It, as a watchdog, keeps watch over the market’s performance, gives analysis and thus ensures the stability of the market. You should differentiate between ‘inspection’ and ‘monitoring’. The monitoring work will be carried out by functional divisions. For example, the Division for Business Management will supervise securities companies and fund management companies, while the Division for Securities Issuance Management will supervise public companies. If signs of law violations are found, the cases will be transferred to inspectors for further investigation and resolution. Inspectors will decide how heavily to punish violators.
I can say that Vietnam is still weak in monitoring and analysing transactions on the market. In other countries, there exists a good monitoring system that allows for the reconstruction of all transactions in the past to find signs of insider trading or illegal activities. That explains why we are striving to set up the monitoring committee, as well as build a modern information base in order to heighten the effectiveness of the committee’s monitoring system.
How would you explain the fact that SSC did not do anything even when a lot of share items continuously increased to the ceiling price levels in five consecutive trading sessions?
A good monitoring system will automatically interrupt and halt transactions when it discovers any items that have prices increasing continuously in five consecutive trading sessions. Such a system is being installed in Vietnam, and it is expected that by 2008 we will have a fully worked out system. Our current system is facing some problems in information technology.
As you may know, some experts have criticised SSC for failing to control the foreign capital flow into Vietnam’s stock market. What would you say about that?
Currently, the work of forex management is being carried out by the State Bank of Vietnam, which is responsible for controlling the inflow and outflow of foreign direct and portfolio investment. The central bank has set specific regulations to take control over the foreign capital flow.
For example, foreign investors must open specific accounts, which must be registered at the central bank, to serve their transactions in Vietnam.
In fact, SSC is also very interested in foreign investment funds, which have injected big amounts of money in Vietnam’s stocks. According to the Securities Law and the regulation on the market monitoring committee to be promulgated, SSC will also keep watch over the foreign capital flow.
Under the draft regulation, foreign investment funds will have to register at the committee and provide information about the sources of fund’s capital, origin and investment plans in Vietnam.
Source: VNE
Under the project, the market monitoring committee will cooperate closely with securities trading centres to form a constant supervising system which can inspect activities on the stock market.
What is the most important task of the market monitoring committee?
It, as a watchdog, keeps watch over the market’s performance, gives analysis and thus ensures the stability of the market. You should differentiate between ‘inspection’ and ‘monitoring’. The monitoring work will be carried out by functional divisions. For example, the Division for Business Management will supervise securities companies and fund management companies, while the Division for Securities Issuance Management will supervise public companies. If signs of law violations are found, the cases will be transferred to inspectors for further investigation and resolution. Inspectors will decide how heavily to punish violators.
I can say that Vietnam is still weak in monitoring and analysing transactions on the market. In other countries, there exists a good monitoring system that allows for the reconstruction of all transactions in the past to find signs of insider trading or illegal activities. That explains why we are striving to set up the monitoring committee, as well as build a modern information base in order to heighten the effectiveness of the committee’s monitoring system.
How would you explain the fact that SSC did not do anything even when a lot of share items continuously increased to the ceiling price levels in five consecutive trading sessions?
A good monitoring system will automatically interrupt and halt transactions when it discovers any items that have prices increasing continuously in five consecutive trading sessions. Such a system is being installed in Vietnam, and it is expected that by 2008 we will have a fully worked out system. Our current system is facing some problems in information technology.
As you may know, some experts have criticised SSC for failing to control the foreign capital flow into Vietnam’s stock market. What would you say about that?
Currently, the work of forex management is being carried out by the State Bank of Vietnam, which is responsible for controlling the inflow and outflow of foreign direct and portfolio investment. The central bank has set specific regulations to take control over the foreign capital flow.
For example, foreign investors must open specific accounts, which must be registered at the central bank, to serve their transactions in Vietnam.
In fact, SSC is also very interested in foreign investment funds, which have injected big amounts of money in Vietnam’s stocks. According to the Securities Law and the regulation on the market monitoring committee to be promulgated, SSC will also keep watch over the foreign capital flow.
Under the draft regulation, foreign investment funds will have to register at the committee and provide information about the sources of fund’s capital, origin and investment plans in Vietnam.
Source: VNE
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