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VN business news (Apr 2, 1997)
Saigon Floating Hotel finally cuts loose from Vietnam
Vietnam will stick to Dung Quat oil refinery location: report
Vietnam Seen Importing More Soybean Meal For Feed Use
Petrofina makes fifth oil strike offshore southwest Vietnam
Trade with Vietnam Increases by 20 Percent
Vietnam's banking woes linked to corruption: official
New Laws Could Ease Climate For Foreign Firms in Vietnam
Vietnam Issues Secrecy Rules But Won't Say What They Are
Vietnam premier glosses over banking crisis fears
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Saigon Floating Hotel finally cuts loose from Vietnam
Hanoi (AFP) - The luxury Saigon Floating Hotel on Tuesday finally
broke free from its moorings, six months after the expiry of its
business licence last year, a report said Wednesday.
The 186-room hotel on moored to the Saigon riverfront in Ho Chi Minh
City was towed to Singapore on Tuesday for a refitting and will
eventually be relocated and used as a casino off the tiny tropical
island of Palau in Micronesia the Lao Dong newspaper reported.
The delay in the removal of the luxury hotel, owned by Japanese firm
EIE International and managed by an Australian chain Southern Pacific
Hotels, was attributed to customs clearance problems.
The "Floater" as it was known by locals, was the first luxury hotel to
open in Vietnam in 1989 and was a symbol of the country's new economic
openness. It was closed in 1996 when authorities refused to renew its
licence.
Critics have charged that the barge-like hotel that was originally
moored off the Great Barrier Reef in Australia was an eye-sore that
had outlived its usefulness since Ho Chi Minh City is now glutted with
luxury hotels for visiting executives
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Vietnam will stick to Dung Quat oil refinery location: report
Hanoi (AFP) - Vietnam will stick to plans to locate the first oil
refinery at Dung Quat in the impoverished province of Quang Ngai, a
report said Wednesday.
"The government chose Dung Quat to establish the first oil refinery
and it still affirms its decision," the Saigon Times daily quoted a
senior government official as saying.
Despite claims by foreign oil companies that the location is
uneconomical because of its distance from the supply of oil and
potential markets, Vietnam has insisted on building the 1.2 billion
dollar refinery in Dung Quat to help kick start the local economy.
In February, Vietnam rejected the feasibility study prepared by a
consortium including South Korea's LG International, Malaysia's
Petronas, Conoco of the United States and Taiwan's Chinese Petroleum
Corp. and China Investment Development Corp.
Hanoi said it would go forward with its own plans to build the Dung
Quat refinery without the help of foreign partners.
On Tuesday it was reported that the government was considering scaling
back the project to make it more realistic and attractive to foreign
investors.
The official from the Ministry of Planning and Investment denied
reports in foreign media saying that the Vietnamese government was
considering building two smaller oil refineries in the north and south
instead of Dung Quat.
The failure of the Dung Quat consortium to win approval for their
feasibility study has struck a mood of scepticism among foreign oil
and gas companies.
French oil giant Total pulled out of a joint venture with PetroVietnam
in late 1995 on the grounds that Dung Quat was uneconomical.
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Vietnam Seen Importing More Soybean Meal For Feed Use
SINGAPORE (Dow Jones)--A fast growing feed industry in Vietnam is
expected to raise the country's yearly imports of soybean meal for
feed usage by up to 20% until the year 2000, says a trade source in
Hanoi who acts as a consultant to the U.S. Feed Grains Council and the
American Soybean Association.
The source asked to remain unnamed.
Vietnam's present feed capacity is placed at 1.2 million metric tons,
of which up to 800,000 tons are likely coming from five foreign-owned
feed mills, he says.
Already, two foreign-owned feed mills with a combined capacity of
500,000 tons are scheduled to start operating by the end of the year,
trade sources say.
By the year 2000, Vietnam's feed capacity could increase to three or
four million tons, which should see the country importing at least
300,000 tons of soybean meal.
Soybean meal generally makes up 10%-15% of a feed diet.
Vietnam's 1997 imports of soybean meal are estimated at 200,000 tons,
a figure already up 50,000 tons from a year earlier, according to the
Hanoi trade source.
The demand in soybean meal should drive up Vietnam's soybean
production which currently stands at about 120,000 tons. But with
soybean production projected to rise at most to 160,000 tons by the
year 2000, trade sources say the rate of increase simply isn't
expected to keep pace with demand.
And without any proper processing facilities to produce proper soybean
meal, imports of the product are inevitable, they say. Vietnam only
has one factory to produce soycake, an inferior form of soybean meal.
Locally produced soycake contains 8%-10% oil compared with imported
soybean meal which usually contains less than 1% oil, is of much
better quality, and doesn't go rancid, the trade source says.
The bulk of Vietnam's soybean meal imports come from India, with the
remaining share largely taken by Brazil and Argentina, trade sources
say, adding some 70% of 1996 soybean meal imports came from India.
Like Indonesia, Vietnam favors importing soybean meal from India
rather than the U.S., largely because of the flexibility of buying in
much smaller quantities.
However, this may change in three to five years' time when large
deep-water ports will likely be built, says the Hanoi trade source.
'Then we can have the larger U.S. vessels carrying 50,000 tons,' he
says. 'The U.S. meal is also cheaper.'
Vietnam can't import from the U.S. because the latter, according to
the Hanoi trade source, can't supply soybean meal in small quantities,
but Vietnam's three biggest ports can only unload vessels with
capacity of up to 30,000 tons.
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Petrofina makes fifth oil strike offshore southwest Vietnam
BRUSSELS (AFX) - Petrofina SA said its unit Fina Exploration Minh Hai
BV made its fifth oil and gas strike offshore southwest Vietnam in
Block 46.
Fina Exploration Minh Hai holds a 75 pct interest in the block, along
with Sodec Vietnam, an affiliate of Showa Shell.
Once development starts under the production sharing contract, the
state company PetroVietnam has the option of taking an interest of up
to 15 pct, it said.
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Trade with Vietnam Increases by 20 Percent
The Korea Herald
Korea's exports to Vietnam and its imports from the Southeast Asian
nation increased by over twenty percent last year, allowing it to push
past Japan and emerge as Vietnam's second largest trading partner, the
Korea Trade-International Trade Agency (KOTRA) said yesterday.
According to a report by KOTRA's Hanoi bureau, the two-way trade
figure jumped to $2.45 billion, with Korean exports to Vietnam
reaching $1.89 billion, and its imports from Vietnam amounting to $558
million.
The Korea- Vietnam trade figure was slightly higher than the Japan-
Vietnam figure which stood at $2.21 billion, with Japanese exports
reaching $1.26 billion, and its imports, $947 million.
Singapore remained Vietnam's largest trading partner, with a hefty
$3.97 billion in two-way trade.
The emergence of Korea as the second largest trade partner for Vietnam
is all the more significant, considering the fact that Korean exports
are being sidelined by Japanese ones in many Southeast Asian
countries.
Market observers attributed the growth in bilateral trade to the
Korean firms that have set up clothing and footwear plants in Vietnam,
importing raw materials and plant facilities from Korea.
President Kim Young-sam's state visit to Vietnam also helped reduce
the red tape at Vietnamese customs offices, which had been one of the
major hurdles in exporting goods to the Southeast Asian country, they
pointed out.
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Vietnam's banking woes linked to corruption: official
Hanoi (AFP) - A high-ranking government official on Wednesday drew a
strong link between individualism and corruption which he said are
responsible for problems in Vietnam's banking sector. Le Khai Phieu,
head of the Ministry of Interior, the body responsible for internal
security, linked "individualism" to a host of evils including
corruption, drugs and the banking system, which has been rocked by
scandal and mishap this year. "Banks lend people the money but they
use it for gambling and on spending on parties -- that is
individualism," he told reporters during a recess at the opening day
of the National Assembly Session here. Khieu echoed sentiments of
President Le Duc Anh, who in his speech before deputies at the opening
of the National Assembly on Wednesday, identified "individualism as a
wicked enemy of the socialist state." Khieu said that individualism
and corruption were two sides of the same coin. "There is a close
relationship between corruption and individualism," he said, noting
that many individuals were abusing their power and influence for
illegal gain.
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] New Laws Could Ease Climate For Foreign Firms in Vietnam
Hanoi (WSJ) -- Life for foreign companies in Vietnam could become less
murky -- in theory, at least -- if the National Assembly passes three
new business laws up for consideration at its next session, which
opens Tuesday.
However, observers say that since legislators are treading in
unfamiliar territory, loopholes could leave any new laws open to a
wide range of interpretations, spawning headaches.
A proposed "commercial law," which would revamp the onerous rules
under which some foreign firms must operate, could have the broadest
effect on the way business is conducted in Vietnam. The assembly also
is considering a value-added tax and a corporate income tax.
The three have been billed as clearing Vietnam's bureaucratic
investment environment. But observers fear that the laws'
contradictory or vague wording could lead to delays and frustration as
each layer of government goes to work interpreting them, and as
foreign investors try to figure out how they apply.
Still, the changes would be "a step in the right direction, if not a
complete one," says Harold Fiske, a partner in the Hanoi branch of law
firm Russin & Vecchi.
According to the most recent draft available of the commercial law,
foreign "merchants" in Vietnam would be able to open branch offices,
instead of just representative offices. This suggests that foreign
companies -- and it is not entirely clear how the term "merchants"
would be defined -- could find it much simpler to collect revenue and
provide services, two activities heavily regulated at the moment.
Indeed, the scope of representative offices currently is so restricted
that many overseas companies risk fines just conducting day-to-day
business, Mr. Fiske notes. The stocking of company products, for
example, isn't allowed at representative offices. Neither is
collecting revenue.
If new commercial codes are passed, they should fill that legal void.
Some businesses currently flout the existing law, but the new law
could allow them to carry out those activities legally -- and be taxed
on them as well.
Of course, a new commercial law isn't likely to overturn Vietnam's
extensive licensing regulations, meaning that firms interested in
doing business here will still have to run a gantlet of ministries and
bureaucrats before setting up shop. And it is not clear from the draft
whether foreign merchants will be required to form joint ventures with
local partners to open branches; would, for example, the foreign
partner in an existing joint venture be allowed to set up its own
branch?
It is also uncertain whether foreign companies will be able to import
goods for resale in the domestic market. As much as foreign traders
and manufacturers would like this to happen, Mr. Fiske thinks it is
unlikely.
The other two proposed laws -- the value-added tax and corporate
income tax -- aim to simplify procedures and raise revenue for the
state budget. (A value-added tax is a consumption tax, common in
Europe, that accumulates over the stages of a product's manufacture
and distribution.) If passed, they are expected to take effect Jan. 1,
1999. Vietnam's taxes have been criticized by foreign investors as too
complex and excessively high.
But some tax specialists say the new laws could lead to more
complications and higher costs.
Implementing a VAT could help foreign investors by raising more
government revenue, which in turn could lead to reduced corporate
taxes. But business taxes appear to be headed in the other direction.
The proposed corporate income-tax law would raise rates on foreign
enterprises to 33% from a current 15% to 25% range. That would put
foreign and domestic enterprises on a more level playing field,
according to a National Assembly press statement.
But such an increase appears to conflict with last year's
foreign-investment law, which businesses are only just coming to grips
with. That law aimed to provide tax holidays and preferential rates to
encourage overseas investment.
Given such conflicts, and a lack of technical expertise, "there's
going to be a period of time when no one, including the tax
authorities, will know what is to be done," a Hanoi-based tax
accountant predicted.
A value-added tax would be no easier to put in place. "In the best of
worlds, VAT law is incredibly complicated, so it's going to be a
nightmare to implement here," says Tony Foster, a lawyer with the
international law firm Freshfields. Such a tax system could require
businesses to keep extensive records, but average businesses here
don't know enough about record-keeping, he says.
State-controlled local media have said that most laws will go through
in this session. However, some lawyers have doubts that the commercial
law will proceed, since it would be such a big step.
Meanwhile, two long-awaited banking laws have been delayed until the
legislature's autumn session, according to a National Assembly press
statement. The laws were to liberalize the banking sector for foreign
branches and tighten the regulations for domestic banks, which have
been embroiled in several corruption scandals in recent months. State
bank officials apparently still haven't reached consensus on some of
the laws' provisions.
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Vietnam Issues Secrecy Rules But Won't Say What They Are
By Richard Schumacer
Hanoi (WSJ) -- Vietnam has imposed strict new rules restricting
publication of banking "secrets." Don't tell anyone.
At least that seems to be the official policy regarding the new
regulations. So far there has been no formal distribution of the
circular announcing the secrecy rules, which require journalists to
"consult" with the State Bank before writing about "highly
professional information" and to get permission before printing
articles that deal with subjects on an official list of banking
secrets.
That is hardly surprising. This isn't one of Asia's more open
societies. Indeed, in a land where secrecy is more fetish than mere
policy, most useful information about the country is already
classified, restricted, or otherwise locked away. So how will the new
measures affect the already sclerotic flow of information? Like much
else in Vietnam, the answer isn't clear.
One view is that little will change. "In Vietnam, regulations are
sounding boards," says a U.S. lawyer with long experience in the
country. "They're put out, and after a while people don't give a damn.
It's culturally recognized as such." One regulation issued last year,
for example, which jacked up taxes on rented property, was
conveniently ignored by everyone after an initial outcry.
On the other hand, the government obviously isn't happy with a recent
spate of stories about the perilous state of the banking sector, and
might be inclined to try to further limit what little information
leaks out.
"Inaccurate information can affect the activities of the whole banking
sector," says Nguyen Van Binh, director of the governor's office at
the State Bank. He adds that even accurate information isn't always a
good thing. "Maybe the information is right, but the timing isn't good
because it will hurt economic development," he says. "If very
sensitive information is released, then maybe there will be some
reaction in the public. We should publish it, but at the right time,
the right place."
Still, it is unclear how successful any attempt to tighten
restrictions will be. After all, foreign journalists managed to get
hold of both the circular and the list of taboo topics. These include
items like the physical location of central bank gold, passwords used
in transporting money and blueprints of government mints, as well as
information about changes in interest and exchange rates before they
have been announced.
And while Vietnamese law prescribes harsh sentences for revealing
"state secrets" -- which it doesn't define -- penalties for breaking
this new regulation haven't yet been drafted, according to an official
in the central bank's economic information department. Or perhaps that
is also a secret.
___________________________________
Wednesday, Apr 02, 1997 ... Back to headlines
[INLINE] Vietnam premier glosses over banking crisis fears
Hanoi (Reuter) - Vietnamese Prime Minister Vo Van Kiet took a swipe at
bureaucracy, incompetence and the communist government's lack of
transparency on Wednesday, but glossed over growing fears about the
health of the country's banking system.
A champion of reform, Kiet said at the opening of the National
Assembly's spring session that the country faced a string of problems
which had to be tackled head on.
He said inefficient management was partly to blame for an
ever-widening gap between rich and poor, growing unemployment, low
standards of education, red tape and society's moral decline.
``Of course, we have many achievements,'' he said, summing up the
record of the government's 11-year experiment with reform along market
lines. ``But there are also many problems.''
However, Kiet made only passing reference to the country's financial
system, which has come under scrutiny in recent weeks following a
string of revelations about bad bank debt.
Speaking to reporters later, he said there were no particular problems
in the banking industry and noted that rice traders were having less
difficulty borrowing from banks than a year ago.
The debt problem came under the spotlight in February after reports
that a highly respected private bank had failed to meet the payment
deadline on a deferred letter of credit.
The industry was shaken again last week when two prominent business
executives were arrested in Ho Chi Minh City for their alleged
involvement in a massive bank loans scam.
Analysts say that the country's state-owned banks, which were spun off
from the central bank as the reform process gathered steam in 1990,
are still sitting on a mountain of bad debt left from years of
politically inspired lending to the state sector.
Many state-owned and private banks also have heavy exposure to the
ailing property market and many issued short-term letters of credit
last year which are now falling due.
In his speech, Kiet called for efforts to develop the private sector
and was critical of the administration's failure to level the playing
field for private and state enterprises.
He also called for the red tape which frustrates and sometimes deters
foreign investors to be cleared away and a better regulatory framework
to be put in place.
Kiet was preceded by a surprise speaker, President Le Duc Anh. Looking
frail and unsteady on his feet after suffering a stroke last year, the
76-year-old army general spoke for about 15 minutes on the victories
of economic reform and dangers that lay ahead.
``...we have defeated all the schemes and actions of sabotage of all
enemies to maintain and reinforce political stability and further
reinforce the country's defence capability,'' he said.
However, he warned that ``individualism'' had emerged as a new and
overarching threat to the communist country.
The country's most powerful military figure, Anh is a member of a
leadership triumvirate alongside Communist Party Secretary General Do
Muoi, 80, and Prime Minister Kiet, 76.
Political analysts believe Anh may be replaced when his five-year term
of office expires in September.
Kiet, asked about his future, said he believed he could still make a
contribution for many years to come. But he said it was up to the
people to decide if he should stay on as prime minister.