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VN Business News (May 22)
May 22: New rules a bad advert for Vietnam
investment
May 22: Hanoi And Prague Aim To Boost
Economic Cooperation
May 22: Australian firm wins bid to build
first Mekong bridge in Vietnam
May 22: Thai Companies Lead Race to
Invest in Vietnam
May 22: Asian Cash Rice Down;
Vietnamese Farmers Hoarding Paddy
May 22: Vietnamese Gov't Subsidizes
Pharmaceutical Sector Development
New rules a bad advert for
Vietnam investment
By Andy Soloman
Asia Times
Hanoi -- Vietnam is planning stringent new
rules to attempt to limit the amount of money
foreign companies spend on advertising, a
move observers said would do little to
enhance Vietnam's already tarnished
reputation among foreign investors.
"It's just typical of the amateurish way the
country is being managed," said a foreign
advertising executive in Ho Chi Minh City.
"It shows an amazing misunderstanding of
how a market economy works."
The Finance Ministry plans to cap
tax-deductible advertising and sales
promotion expenses for foreign invested
companies to only two percent of total
allowable business expenses.
The move is likely to anger foreign
in-vestors that already complain of high
start-up costs and a fast changing and
inconsistent legal environment in a country
that is increasingly being seen as failing to
live up to its promise.
The advertising executive added that normal
spending for foreign producers looking to
market packaged goods to Vietnam's
population of 76 million accounts for 10
percent to 15 percent of total business
expenses, and in the start-up phase the
figure often tops 20 percent.
In a competitive environment with many new
foreign arrivals jockeying for position in the
nascent market, some producers will have to
swallow increased losses, but others are sure
to become more cost conscious.
"I think its going to be very negative [for the
advertising industry]. It'll hurt the media,
including the state-owned media. Television
will be the first to get hit because that's the
most expensive, the advertising agencies
both local and foreign and of course all the
press," said the advertising executive.
Companies will be able to spend more than
the two percent cap on advertising, but will
not be able to offset the extra costs against
tax.
Vietnam's recently amended foreign
investment law, introduced to great fanfare
late last year, appeared to allow five percent
for advertising and sales promotion expenses,
but now the Finance Ministry is looking to
tighten the rules further.
"This is much lower [than under other
jurisdictions]. The five percent was already
very conservative and was the lowest that you
find in the region," a foreign lawyer in Ho
Chi Minh City said.
Dang Thi Binh An, director of the
Department of Foreign Investment Enterprise
Taxation at the general Department of
Taxation that comes under Finance Ministry
authority, said the new circular was likely to
be published by the end of May and that once
approved would be applied retroactively and
used to calculate company taxes during the
current 1997 fiscal year that ends on
December 31.
She refused to comment in detail as the draft
has yet to be submitted to the government.
The lawyer said the new regulation would not
be positive and would raise the entry costs for
companies that were new to Vietnam and
were looking to carve out a market niche.
"First of all it hurts their own advertising
industry which they've been trying to
develop, so it will take away jobs and
business from that sector," he said.
Advertising, while tolerated, sits uneasily in
communist Vietnam. Foreign producers,
especially soft drink giants Coca-Cola and
Pepsi, have been accused by domestic
companies of deliberate loss-making
strategies to capture market share.
Cash-strapped Vietnamese companies claim
they cannot compete and are slowly being
driven out of business.
Last month, Ho Chi Minh City authorities
instructed Coca-Cola to stop a promotional
campaign where consumers had to collect six
different bottle caps or ring pulls to win a
mountain bike, saying it was in "violation of
the law". The campaign was allowed to
continue unfettered in the capital Hanoi.
This followed sweeping new regulations
banning advertising and promotion of
tobacco and alcoholic spirits, rules on
pharmaceutical advertising and requirements
that producers apply for permits in advance of
any sales promotion plan.
The lawyer said that far from getting a
simpler business environment in which to
operate, foreign investors were seeing new
layers of bureaucracy added.
"These [advertising regulations] are very
broadly defined. Anything that is linked to
bringing your product to people's attention,
or selling it is a big issue now. It requires a
permit to engage in any promotional activities
in advance," he said.
Foreign investment inflows to Vietnam
slowed considerably in the first quarter of this
year with 38 projects worth about US$200
million receiving approval.
"I think already foreign producers are
disenchanted with Vietnam and nervous
about it, and I know personally of some
international companies who are
reconsidering whether they should bother
coming in here or not," the advertising exec-
utive said.
He added that the new rules, if approved,
would restrict business. "[International
companies] are just amazed at the
short-sightedness of it. They've been
accepted as investors and yet they're
restricted in the way they can operate," he
said.
"Advertising [in Vietnam] is very effective
and consumers are generally interested ... but
it just seems that the government wants to
control everything and they impose new
restrictions that make it hardly worth it."
But a foreign market research consultant said
that even if operations become more
expensive large multinationals will probably
continue with heavy advertising spending.
"It's not going to affect the big guys much
because they have to buy market share now
when its cheap," he said.
"None of them are making money anyway. If
they're going to lose US$10 million what
does it matter to lose US$11 million?"
The financial controller for a major
multinational consumer goods producer said
two percent was a ridiculously low figure by
any standard, especially considering that
most companies are still in the early phases
of their Vietnam operations and very few
have moved into profit.
"Percentages must be high. In their first few
years most companies will be spending fairly
high and you don't see a stabilization to what
you would call normal until at least the third
year," he said.
"Hopefully the law will see the light of reason
on this one. I think the industry should voice
their opinion and make some effort to get
together on this."
Hanoi And Prague Aim To
Boost Economic Cooperation
Prag (dpa) - Vietnamese Prime Minister Vo
Van Kiet held talks in the Czech Republic
Thursday in what was heralded by both sides
as a sign of impending expansion in bilateral
economic relations.
Czech radio said the economic significance of
the visit became clear during a meeting
Thursday afternoon between Vo Van Kiet
and Czech President Vaclav Havel.
The Vietnamese premier arrived earlier on a
two-day visit, the first to the Czech Republic
by a senior Vietnamese politician for more
than 20 years.
On Friday, Vo Van Kiet was due to meet his
Czech colleagues Vaclav Klaus and Foreign
Minister Josef Zieleniec.
During the visit the two sides are due to sign
an agreement designed to avoid double
taxation and another treaty on civil aviation.
Vo Van Kiet is being accompanied by a
delegation of Vietnamese businessmen.
The previous lively economic interplay
between Prague and Hanoi tailed off
considerably after the onset of democracy in
1989 in what was then Czecheslovakia. In
recent years bilateral trade was worth about
30 million dollars, an upturn of 10 per cent
on 1995.
Experts from both countries see potential for
further intensifying economic links.
Australian firm wins bid to
build first Mekong bridge in
Vietnam
Hanoi (AFP) ) - Australia's Baulderstone
Hornibrook Engineering has won a bid to
build a 70 million dollar bridge, the first
across the Mekong river in southern
Vietnam, the Australian embassy said
Thursday.
The builder of the Glebe island bridge in
Sydney became the sucessful tenderer to
build the My Thuan bridge, Australia's
biggest aid project to Vietnam so far, the
embassy said in a statement.
Total cost for the projects jointly funded by
the Australian and Vietnamese governments
was 70 million dollars, of which some 46
million dollars will come from the Australian
government as aid.
The 1,535-meter (5,066-foot) long bridge
would replace an existing ferry service which
transports up to 20,000 people, 4,000 tonnes
of freight and thousands of passenger
vehicles each day.
It would help to transport more than half the
rice grown in Vietnam to the populous areas
around Ho Chi Minh City.
Construction is to begin in June 1997 for
completion by the end of 2000, the embassy
added.
Up to 300 Australians and more than 1,500
Vietnamese are to be employed during the
life of the project.
Thai Companies Lead Race
to Invest in Vietnam
Business Day (Thailand)
Copyright 1997 Business Day
THAILAND was the biggest investor in
Vietnam in the first quarter of 1997,
according to statistics published by
Vietnam's Ministry of Planning and
Investment (MPI) which reviews investment
license applications.
According to the MPI's Department of
Foreign Investment, 67 projects were
licensed in Vietnam during the first quarter of
1997. Six of these were from Thailand.
With a total capital of $252 million,
Thailand's six projects were by far the largest
in Vietnam.
They easily outranked Vietnam's
second-biggest investor, Japan, which has
$82 million worth of new investments.
Asian Cash Rice Down;
Vietnamese Farmers Hoarding
Paddy
SINGAPORE (Dow Jones)--Cash rice
offers are largely down late Thursday in Asia,
with Vietnamese farmers holding on to their
paddy, market sources said.
Vietnamese farmers aren't willing to sell,
preferring to hold out for better prices, said a
Ho Chi Minh-based trader.
Buyers, for their part, aren't pouring in
either, as they wait for prices to descend, he
said.
'Its unlikely prices can fall much further as
Vietnamese rice are currently the cheapest in
Asia,' the Ho Chi Minh-based trader said.
Offers for the Vietnamese 25% broken rice
are heard at $193/ton for end-May to June
shipment, down from $195/ton Wednesday
while the 5% brokens are offered at $235/ton
for June shipment.
In Thailand, exporters are still fulfilling their
Iranian buyers' orders, said to be about
300,000 metric tons of 100%B grade rice,
said a Bangkok-based trader with a local
exporting house.
About 45,000 tons of 100%B rice has been
shipped to Iran, with about 255,000 tons left
to be delivered by end-September, he said.
Thai offers for the 25% broken rice are at
$260/ton, with $335/ton the offer price for the
100%B rice.
In India, enquiries are sluggish because of
cheaper alternatives from Vietnam , said a
New Delhi-based general manager with an
exporting house.
'We're waiting for the new rice crop from
Southern India which is expected end-June
and prices should taper off by then,' he said.
The current Northern India rice crop is
nearing an end, he said.
Indian 25% broken rice is offered at
$280-$285/ton, from $285/ton Wednesday,
and Pakistani 25% broken is offered at
$230/ton, down from $230-$235
Wednesday.
-By Bernice Han 65-421-4824
Vietnamese Gov't Subsidizes
Pharmaceutical Sector
Development
Comline Daily News Biotechnology and
Medical
Vietnam -- The Ministry of Health is
designing a pharmaceutical development
project that will be submitted to the
government for approval soon. Changes are
targeted for the year 2000 and include
upgrading pharmaceutical enterprises and
factories to satisfy international standards
(including ASEAN standards) as well as the
construction of two new manufacturing
facilities. The $20-30 million factory
upgrading costs as well as the expense of
constructing new factories would be paid for
by the government, according the Health
Ministry's plans. The new plants would be
located in Hanoi and Ho Chi Minh City. The
development project also plans to lessen the
country's dependence upon imported
medicines by meeting 40-50% of local needs
with domestic facilities. Currently, only
20-30% of these needs are met by
Vietnamese companies.
Reference: The Saigon Times Daily,
05/13/97
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