VN business news (July 14)

[van <van@rock.civil.saitama-u.ac.jp>]

Vietnam: Construction Cos To Vie For 1st Refinery
Vietnam, Kuwait Finalize July-Dec Distillates Term Prices
Vietnam To Limit Letters Of Credit To 'Efficient' Cos
Vietnam Govt Opens Investigation Into VP Bank
Malaysia Petronas Heads Consortium In Oil Search Off Vietnam
Sumitomo Bank opens Vietnam leasing office in Ho Chi Minh City
Vietnam to pump cash into ailing state-owned enterprises
Cardin Takes New Vietnam Partner after Fakes Row
Vietnam Reports Lower than Expected Budget Revenue

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Vietnam: Construction Cos To Vie For 1st Refinery

Hanoi, July 14 (Dow Jones) -- Foreign firms have been asked by the Vietnamese
government to signal their interest in providing consulting and engineering
services in the construction of the country's first oil refinery.

In a letter dated July 7, state-owned oil and gas company Petrovietnam
asked companies to notify them of their interest in the 130,000 barrels
a day Dung Quat refinery by July 14.

Bechtel Group Inc. Hong Kong-based spokesperson Jennifer Gee said that
the company has submitted an expression of interest in the Dung Quat
refinery to the Vietnamese government.Bechtel is a construction and engineering 
company.

The Vietnamese government decided on July 10 to begin construction of
the Dung Quat refinery and to raise most of the financing itself after
several years of unsuccessful talks with possible foreign partners.

Two foreign companies, Malaysia's state oil company Petroliam Nasional
Bhd. and South Korea's LG Group, members of the last failed consortium
and which recently expressed continuing interest in the refinery project,
declined to comment on the Vietnamese Prime Minister Vo Van Kiet's decision
to move forward with the project last week.

'The capital will be mobilized from many sources, both from home and
abroad provided that they can provide good credit terms,' an official
from the oil department of the Prime Minister's office told Dow Jones
Monday.

He added that these financing sources will be able to work with either
the Central Bank or with Petrovietnam.

According to the July 7 Petrovietnam letter, consulting and construction
services would be divided into four categories; review of terms and conditions
of the project management consultant contract; project management consultant
services; processing licensers services and engineering, procurement,
and construction services.

According to Vietnamese newspaper reports, total investment in the project
is estimated at $1.5 billion and the refinery is to have a capacity of
130,000 barrels a day.

'The crude oil used to feed the refinery has a high concentration of
paraffin, and crude imported from elsewhere for refining will have to
have similar characteristics,' the Vietnam News reported Monday.

The paper said construction is to begin this year and is to be completed
by 2001 and that the central government will pay $600 million while the
other $400 million is to be raised by issuing debenture bonds and from
deferred bank loans from foreign sources.

It wasn't immediately clear from where the remaining $500 million will
be raised or if foreign oil and gas companies will be able to invest
directly in the project. Officials contacted at Petrovietnam wouldn't
comment.

In addition to the recently failed consortium involving Petronas, LG
Group, Conoco Inc. and two Taiwanese companies, France's Total SA pulled
out of the project back in 1995, complaining that the refinery would
be located too far from offshore oil production areas.

According to Monday's newspaper report, Petrovietnam says the refinery
will be operational in the next five years. Around 10 refined products
will be produced including propylene, liquefied petroleum gas, unleaded
gasoline, aviation fuel, kerosene and several kinds of diesel oil mainly
for domestic consumption.

Last year, Vietnam exported about 10 million tons of crude and imported
about six million tons of refined oil products.

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Vietnam, Kuwait Finalize July-Dec Distillates Term Prices

SINGAPORE, July 14 (Dow Jones) -- Vietnam's national oil company, Vietnam
National Petroleum Import-Export Corp., has finalized its July to December
1997 gasoil and jet fuel term price with Kuwait Petroleum Corp., officials
of both companies told Dow Jones Monday.

For gasoil cargoes shipped to Ho Chi Minh City, premiums are 70 cents
a barrel to the Singapore mean; to Hongai, premiums are 90 cents/bbl;
and to Danang, premiums are 80 cents/bbl. All are on cost and freight
bases.

Jet fuel cargoes are fixed at premiums of 80 cents/bbl to the Singapore
mean for delivery to Ho Chi Minh City, $1.00 a barrel for delivery to
Hongai and 90 cents/bbl for delivery to Danang, CF.

For gasoil and jet fuel cargoes on free on board bases, premiums above
5 cents to the Singapore mean have been agreed upon.

Four combination cargoes of a total volume of 95,000 metric tons are
to be supplied to Petrolimex every 40 days. For these cargoes, 10,000
tons must be jet fuel and 85,000 tons must be gasoil, a Petrolimex official
said.

Petrolimex and KPC's term contract covers January 1997 through December
1998, with prices fixed every six months.

KPC has a commitment to deliver 670,000 tons of gasoil and 140,000 tons
of jet fuel a year, the officials said.

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Vietnam To Limit Letters Of Credit To 'Efficient' Cos

AP-Dow Jones News Service

Hanoi -- Vietnam's state bank has decided that only 'companies operating
efficiently' will be allowed to take out deferred letters of credit as
of July 16, the Saigon Times reported Monday.

The newspaper said the State Bank of Vietnam will require 'entities to
have good financial health and feasible business plans.'

They will also have to make a deposit, mortgage their property or obtain
guarantees from banks or other enterprises, the paper said.

Letters of credit have been a subject of controversy in recent weeks
as some of the country's banks defaulted on payments to overseas creditors.

Observers say some local banks, including some of the major state-owned
banks, were far too lax in their issuing of letters of credit to local
companies.

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Vietnam Govt Opens Investigation Into VP Bank

Hanoi, July 14 (Dow Jones) -- Vietnam's interior ministry has decided
to start proceedings for the possible prosecution of two former directors
of the Vietnam Joint Stock Commercial Bank for Private Enterprise, or
VP Bank, a Vietnamese newspaper reported Monday.

Thanh Nien, a newspaper which comes out three times a week, reported
the government accused the former directors of 'misappropriating socialist'
property and opening letters of credit in breach of banking regulatons.
They are also accused of using money and goods from deferred letters
of credit and embezzling client funds meant to pay for letters of credit.

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Malaysia Petronas Heads Consortium In Oil Search Off Vietnam

KUALA LUMPUR, July 14 (Dow Jones) -- Malaysia's national oil company
said Monday that VN has approved its bid to lead a consortium to search
for oil in the Dai Hung offshore field.

Mohamad Hassan Marican, president of National Petroleum Ltd., or Petronas,
said his company will hold a 63.5 percent interest in the search consortium.

BHP Petroleum of Australia, the previous leader of the search, has pulled
out of the consortium, Hassan said.

Petronas bought its 63.5 percent equity from the other consortium members
that controlled BHP Petroleum's interest, he said.

The field, about 250 kilometers (150 miles) southeast of Vung Tau in
southern , pumped its first crude on Oct. 16, 1994. The field reportedly
yielded 300 metric tons of crude a day during the first five months of
this year.

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Sumitomo Bank opens Vietnam leasing office in Ho Chi Minh City

HANOI, July 14 (AFP) - SB Leasing Co. Ltd., a Japanese affiliate of Sumitomo
Bank, has opened a representative office in Ho Chi Minh City, a Sumitomo
official said Monday.

The SB Leasing office will help facilitate leasing imported equipment
and machinery in transportation, health and environmental protection,
but all business must be billed offshore, he said.

Leasing is still in its infancy in Vietnam where cashing a check is still
considered the cutting edge of financial instruments.

Vietnam's first state-owned leasing company was formed only two years
ago under the country's largest bank, the bank for Foreign Trade of Vietnam
(Vietcombank), and there are currently two leasing companies with foreign
participation in Vietnam.

The first to receive a licence was 100 percent foreign-owned Kexim Vietnam
Leasing Co., a wholly-owned subsidiary of the Korean Export Import Bank.

The second is the Vietnam International Leasing Corp., a joint venture
between between Vietincombank and a foreign consortium including the
International Finance Corp, Nippon Credit Bank of Japan, Banque Francaise
du Commerce Exterieur of France and Korea Industrial Leasing Corp.

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Vietnam to pump cash into ailing state-owned enterprises

HANOI, July 14 (AFP) - The Vietnamese government has decided to pump
cash into ailing state-owned enterprises (SOEs), the Vietnamese finance
minister was quoted as saying on Monday.

Nguyen Sing Hung said the government would mobilize "thousands of billions
of dong" (hundreds of millions of dollars) into government enterprises
beginning mid July, the Saigon Times daily reported.

Hung said that firms which are "operating efficiently" could have their
outstanding loans converted into capital provided by the State Budget.

The move is likely to meet with disapproval from foreign investors and
private sector businessmen alike, who complain that the playing field
is already tilted overwhelmingly in favour of the state sector.

Earlier the government announced that state-owned enterprises could borrow
from banks without a mortgage and that credit ceilings would be based
on "performance" rather than capitalization, effectively allowing them
unlimited leverage.

According to an earlier report in the official Nhan Dan daily, 17 percent
of the country's 6,250 state enterprises in the whole country are suffering
losses.

All Vietnamese state enterprises are now facing a liquidity crunch, with
many carrying domestic and external debts amounting to as much as two-and-a-half
times their equity capital, it said.

Hung also said the government was considering profit tax breaks for "efficient
enterprises" but did not indicate how performance would be measured.
The efforts to prop up SOEs comes against the backdrop of softening domestic
demand and stockpiling of key products including steel and cement.

Although Hung told AFP earlier this month that gross domestic product
was likely to grow 9 percent this year, foreign economists predict growth
could drop to seven or eight percent in 1997.

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Cardin Takes New Vietnam Partner after Fakes Row

HANOI, July 14 (Reuter) - French fashion house Pierre Cardin has taken
a new partner to produce its shirts in Vietnam after sacking a state-owned
firm for producing and selling fakes.

Nguyen Du, Pierre Cardin's managing director for Indochina, said on Monday
the company had withdrawn state-owned Viet Tien's exclusive producing
and distributing rights and authorised the privately run An Phuoc Garment
Company to make its shirts.

Du told Reuters that Viet Tien, which was supposed to sell the shirts
at around $35-40 each, had been caught selling fakes for as little as
$5-6 each at a trade fair this year.

Du said sales of Pierre Cardin products in Vietnam came to less than
$250,000 a year, but insisted that it was worth keeping a presence in
the country despite huge copyright problems.

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Vietnam Reports Lower than Expected Budget Revenue

HANOI, July 14 (Reuter) - Vietnam's communist government said on Monday
that budget revenue had been lower than expected during the first half
of 1997, and pointed to slow growth in the state sector as a leading
cause for government concern.

The official Vietnam News Agency quoted Deputy Prime Minister Phan Van
Khai as saying at a conference that revenues for the period were estimated
at only 41.4 percent of the 1997 target, while expenditure was at 40.5
percent.

The budget deficit was put at 35.4 percent of the total permitted by
the National Assembly for the year as a whole. Actual figures on the
budget were not available.

The reasons for the shortfall were not detailed, but Khai said revenue
collection had been lower than expected, chiefly because of a $272-million
fall in import taxes resulting from a government decision to halt imports
of non-essential goods.

He also pointed to slow growth in output from the centrally controlled
state sector as a main cause for government concern, together with slow
disbursement of funds including overseas aid, foreign and state capital
and bank loans.

Vietnam's economy has run into problems over the past two years following
the spectacular success of a decade of free-market economic reforms.

A bad loans crisis in the domestic banking industry has led to problems
in the issuing of new credit. Economists say they are concerned that
Vietnam's capital-starved state industry -- a leading source of state
revenue -- could be adversely affected.

Added to that are further problems for Hanoi in getting to grips with
a trade deficit that reached $4 billion last year, representing an unsustainably
high level of around 17 percent of gross domestic product.

But Khai pointed to positive indicators and said year-on-year growth
over the past six months had topped nine percent, while industrial output
remained at a healthy 13.6 percent and inflation had fallen.

The latest data showed inflation rose 2.1 percent year-on-year in June
1997.

He urged the financial sector to "attach importance to providing capital
for profitable state-owned enterprises", and said the government should
take steps to streamline the disbursement of official development aid.

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