SEIKO IDEAS CORPORATION ... StoxPlus recorded 265 completed M&A deals in 2014, with value totalling $4.66 billion, an increase of 33.1 per cent from 2013. The figure did not take into

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BANKING & FINANCE

Page | 1

IN THIS ISSUE

Highlights Collaboration to strengthen Vietnam’s supporting industries to ASEAN

24

Vietnam cement Enterprises: being taken over or creates its miracle 26

Economy Enterprises

Vietnam M&A review: New law, FTAs to bolster transactions

2 Vietnam‘s Petrolimex to sell 20% to Japanese partner to reduce state holding

14

Overcoming Drag on SOE restructuring 4 CMC Telecom sold shares to TIME: Baring or strategic co-operation

15

Expanding scope of Priority Businesses 6 Hitachi Zosen keen on waste treatment projects

16

Vinamilk CEO Mai Kieu Lien receives Nikkei Asia Prize

17

Banking & Finance Market & Prices

Bad debt still awaiting radical solutions 8 Vietnamese consumers are world‘s most thrifty: Nielsen survey

18

Paving the way for insurance growth 9 VN to create prominent rice brand 19

May CPI soars 0.16 Pct due to petrol price rise

20

Investment Legal Updates

Derivatives: Opportunity for stock market restructuring

12 Increasing Environmental protection tax 21

New registration fee applied on June 6 22

Guidance for corporate accounting system amended

22

VIETNAM

BUSINESS

REVIEW

Vol 19

May 27th 2015 HCMC stocks up on toys for kid’s day

http://vietnamnews.vn/economy/270828/hcm-city-stocks-up-on-toys-for-kids-day.html


ECONOMY

Page | 2

Vietnam M&A Review: New laws, FTAs to bolster transactions

Barely halfway through

2015, Vietnam has already

witnessed a series of alliances and

acquisitions involving large

domestic names like the Vingroup,

the Masan Group, the Pan Pacific;

as well as international players

from sectors like retail, insurance,

telecommunications and legal

service.

Following the trend witnessed last

year, the consolidation and

expansion of business, marked by

the furious pace of merger and

acquisition (M&A) activities, is

expected to continue throughout

the rest of the year – across all

sectors.

Mega deals in the big picture

A report from the local financial

information

portal StoxPlus recorded 265

completed M&A deals in 2014,

with value totalling $4.66 billion, an

increase of 33.1 per cent from

2013.

The figure did not take into

account a major real estate project,

the Vung Ro Resort by the

Rockefeller family-backed Rose

Rock Group and Vung Ro

Petroleum Ltd, with a total

investment of $2.5 billion, as the

disbursement for the project is still

unclear. Counting this project, the

total M&A deal value in 2014 could

reach $7.16 billion.

The big jump was due to the

several mega deals, which

StoxPlus calculated at some $2.44

billion. Such deals are likely to

include – food firm Kinh

Do purchasing PhinDeli (undisclos

ed) and Vocarimex ($15million),

while selling its baked goods unit

to Mondelèz International ($370

million), SapuraKencana

Energy (Malaysia) acquiring two oil

blocks in Cuu Long Basil, Siam

Cement Group taking over Prime

Group ($228 million), Standard

Chartered Private Equity buying a

majority stake in An Giang Plant

Protection for $90 million, Pilmico

Philippines acquiring 70 per

cent in food processor Vinh

Hoan 1 for $28 million, and

Bien Hoa Sugar and Ninh

Hoa Sugar merger ($58

million).

There were undisclosed

value deals last year, such

as the Vingroup‘s takeover of

Ocean Retail, Power

Buy acquiring 49 per cent of

Vietnamese electronics

retailer Nguyen Kim,

and FPT Software takeover

of RWE Slovakia.

Vietnam’s M&A deal value recovered from 2013. (Source: StoxPlus’ Vietnam M&A Research Report 2015)


ECONOMY

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The most talked about deal was

the $879 million M&A between

Berli Jucker Public Company

Limited and Metro Cash & Carry

Vietnam. However, the attempt

was aborted as the Thai

company‘s shareholders rejected

the offer.

Thailand-based investors led the

inbound investment trend in 2014,

and Thai interest is expected to

increase in the coming years.

Inbound M&A into Vietnam totalled

more than $3 billion in the year, a

big leap of 64.9 per cent as

compared to only $1.83 billion in

2013. This proved that the foreign

players had regained confidence

and interest in the Vietnam market.

US investors ranked second in

terms of deal value, with 7 deals

worth $498.6 million.

Sector appetite of foreign investors

saw little change, still focusing on

consumers-oriented sectors (food

and beverage, retail, real estate),

and oil and gas. ―Foreign investors

still find it attractive to take

advantage of the big consumer

base in Vietnam, and this theme

will likely to continue in the coming

years. Meanwhile, oil and gas

acquisitions mostly happen at the

upstream, where foreign

companies acquire oil blocks

within Vietnam‘s water territory, as

local companies are still limited in

their oil exploitation capabilities,‖

the StoxPlus report wrote.

Bolstered by law and incentives

More M&As are expected to come

to Vietnam, following the

effectiveness of the amended

investment law from July. The law

will free the foreign companies

from adhering to the lengthy

investment certificate procedures

when buying stake in Vietnamese

firms.

Under current law, Vietnam has

different licensing procedures for

foreign and domestic investors.

The investment certificate serves

as business registration for foreign

investors. ―In practice, despite a 45

day maximum statutory time limit,

the investment certificate process

can take four to six months or

longer,‖ officials from law

firm Duane Morris Vietnam

LLC stated.

―The new investment law expressly

provides that no investment

registration certificates will be

required for acquisitions of target

companies. As a result, the time

needed to complete purchase of

stakes in Vietnamese entities is

expected to be reduced Thai cos led Vietnam’s inbound M&A in 2014.(Source: StoxPlus’ Vietnam M&A Research Report 2015)


ECONOMY

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Overcoming Drag on SOE Restructuring

tremendously,‖ the law firm

commented.

Buying into public companies listed

on the Vietnamese stock

exchanges will not require the

certificate either, but foreign

ownership of listed companies is

still capped at 49 per cent. Local

authorities are still working to lift

the caps. ―Until that day, investors

will need to buy unlisted

companies to take control.‖

In addition, the M&A scene will

also be fostered by a number of

international trade agreements,

which will accelerate investment

flow into the country. Most typical

are the following three agreements.

The Trans-Pacific partnership

(TPP)

TPP is a giant free trade area deal

of 12 countries including US,

Canada, Mexico, Peru, Chile, New

Zealand, Australia, Malaysia,

Singapore, Vietnam, Brunei and

Japan. It is expected to eliminate

tariffs on goods and services, tear

down a host of non-tariff barriers

and harmonize all sorts of

regulations

According to the Vietnam Ministry

of Planning and Investment,

foreign direct investment (FDI)

from TPP countries has made up

50 per cent of the total FDI into

Vietnam. As Vietnam joins the

negotiation, it will significantly

increase investment capital flow in

supporting industries, value added

services and the technology sector,

due to the free investment rule

regulated by the agreement. The

sectors which Vietnam has

competitive advantages shall

witness acceleration of M&A.

The ASEAN Free Trade Area

(AFTA)

AFTA is a free trade area

agreement, which will help in

reduction and elimination of tariffs

for items and sensitive agricultural

products, of the member countries

in South East Asia.

With the elimination of tariffs within

ASEAN, trading within the

community will be considered

―local trading‖. Given the

consumption growth potential of

Vietnam, FDI from ASEAN

countries and inbound M&A in

agricultural productions, retails and

services are expected to increase

exponentially.

For example, 2014 marked a year

of emerging Thai inbound M&A

into Vietnam.

The Vietnam – Korean Free Trade

Agreement (VKFTA)

The VKFTA, signed on May 5,

removes import tariffs of over 90

per cent of all products traded

between Vietnam and Korea.

Currently Korea is the biggest FDI

investor into Vietnam. The FTA is

expected to triple bilateral

trade between two countries up to

$70 billion by 2020, indirectly

supporting growth of inbound and

outbound M&A between the two

countries._Dealstreatasia

The process of State-owned

enterprise (SOE) restructuring

has made a considerable

progress. As of the end of the

first quarter of 2015, Vietnam

privatised 172 SOEs, a third of

the target of 432 SOEs in 2014

and 2015. In spite this progress,

it still lags behind the schedule.

PM urges equitisation

Vietnam planned to equitise 289

SOEs this year. In mid-April 2015,

the Prime Minister asked ministries,

branches and localities to firmly

complete the equitisation of 289

SOEs as planned. Persons in

charge of SOE equitisation will

face strict penalties if they cannot

lead the equitisation to a success.


ECONOMY

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Divestments by SOEs are effective.

They invested approximately

VND5 trillion but they took back

nearly VND7 trillion. Real estate

investments accounted for 45

percent of divestment proceeds.

The number of SOEs launching

IPO or share auctions via the

Hochiminh Stock Exchange

(HOSE) and Hanoi Stock

Exchange (HNX) in 2014 was 1.4

times higher than average over the

three previous years.

The Prime Minister told the

Ministry of Finance to provide

guidance to the settlement of

problems and difficulties emerging

from corporate valuation such as

reversal of provisions to State

capital, determination of long-term

investments , potential value, fully

depreciated assets, revaluation of

financial investments at the time of

converting SOEs into a joint stock

company, determination of share

price sold to employees and

unionists in SOEs transformed into

joint stock companies but yet to

launch IPOs.

Divestment from non-core

businesses is also an important

work in the process of SOE

reshuffling. Before 2011, SOEs

poured their money into banks,

insurers, securities companies,

real estate firms and venture funds.

In 2014, SOEs collected VND6

trillion from divestments, many

times that of

previous years.

Nevertheless,

this value was

very low relative

to the gross

value of non-

core investments

that the

Government

required. Many

companies

became puzzled

when they had to preserve the

original value while selling at

market prices. In 2014, the Prime

Minister urged relevant bodies to

issue regulations to handle this

issue in 2014.

Impossible mission for SCIC

Speaking at an information

conference on new policies on

divestment, share sale, transaction

registration and share listing on the

stock market in April 2015, Hoang

Nguyen Hoc, Deputy General

Director of State Capital

Investment Corporation (SCIC)

said that SCIC would have to sell

shares in more than 300

companies and hold stake in only

100 companies by the end of this

year.

In fact, in the first three months,

SCIC sold stakes in 22 companies,

far below the target of more than

300 companies. This means that

SCIC has to sell one company a

day from now to the end of the

year - an almost impossible task.

A lot of policy difficulties need to

be resolved to accelerate share

sale process. To deal with these

issues, the SCIC official suggested

the Ministry of Finance and the

State Securities Commission of

Vietnam (SSC) add new measures

to push up share sale. Specifically,

as for loss-making companies

whose corporate value is below

the share capital value and market

price is lower than the par value of

VND10,000, selling below the par

value should be allowed. ―Some

companies have the corporate

share par value of VND10,000 but

their market prices are around only

VND500," said he added.

Share sales/auction need more

support solutions to pace up the

speed in 2015. According to

Decision 51, SCIC is entitled to

consider buying back shares of

companies and shares in non-core

business investments buy credit

institutions only on the condition

that such shares cannot be sold on

the market and the SBV cannot


ECONOMY

Page | 6

Expanding Scope of Priority Businesses

handle. ―According to the spirit of

capital investment business, SCIC

can only make a purchase of

effective and profitable

investments. But, it becomes a big

problem when the purchases have

no buyers [when SCIC wants to

sell],‖ he added.

According to some experts,

strategic shareholders should be

given more favourable conditions

to buy the entirety of shares

offered by SCIC, because only

strategic shareholders have the

drive to push their companies up.

To draw strategic investors,

regulations need to be changed to

legalise entire block sale as big

investors prefer holding the

maximum to the limit to have

heavier voice in their companies.‖

Vu Bang, Chairman of the State

Securities Commission of Vietnam

(SSC), also said that legal

documents need to be amended

for entire block sale to strategic

partners. The presence of strategic

shareholders will help enhance

corporate governance after

companies go public.

In fact, many SOEs fail to sell

shares via public offering, but they

make it when they sell shares to

strategic investors. That many

private groups want to buy airports

and seaports and buy controlling

shares has recently caught public

attention._Le Minh

According to the General

Department of Vietnam Customs,

more than 50 countries in the

world are now applying a so-called

enterprise priority programme.

Although each country has

different levels of application, they

base on the common foundation:

Standard frame for security

standards and global trade

facilitation built by the World

Customs Organisation (WCO).

Currently, customs authorities of

27 countries have signed

agreements on mutual recognition

of priority businesses. In Vietnam,

the programme was started on a

pilot basis in 2011. This policy

helps beneficiaries to reduce a lot

of time and costs in dealing with

clearance procedures for goods. At

present, 35 companies are

enjoying the priority policy in

customs field. Samsung has seven

companies to be granted the

priority status - the group with the

largest number of beneficiaries at

present. More exporters and

importers are expected to be

granted the priority status in the

coming time.

Lowering revenue target

To implement new regulations on

enterprise priority in customs field

stipulated in the Law on Customs

2014 and Decree 08/2015/ND-CP,

the General Department of

Customs drafted and submitted

Circular 72/2015/TT-BTC dated

May 12 on priority mode in

customs procedure implementation,

inspection and supervision over

exported and imported goods to

the Ministry of Finance. The new

circular will replace Circular

86/2013/TT-BTC and Circular

133/2013/TT-BTC.

New contents of the new circular

include lowering export and import

revenue limit, clarifying post-

clearance examination methods

and power of issuing decisions on

examination into priority

enterprises; decentralising of the

power to receive and assess

documents of enterprises to local

customs departments instead of

sending to the General

Department of Customs as earlier;

adding key national projects to the

list of priority enterprises. New

contents are aimed to further

facilitate law-abiding businesses to

become priority enterprises. With

this view, the scope of priority

enterprises will be wider, rather


ECONOMY

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than only exporters and importers

as previously. According to the

new ruling, two new entities may

be certified priority enterprises:

customs agents and

organisations/individuals importing

goods to carry out key projects

approved by the Prime Minister.

The change in export and import

turnover conditions draws the most

attention of the business

community. According to Circular

72/2015/TT-BTC, a company

needs to have only US$100 million

upward of export and import

turnover a year to be considered a

priority enterprise instead of

US$200 million as now. The

conditional export revenue of an

agricultural and fishery company is

US$30 million a year instead of

US$50 million as now. A company

that manufactures exported goods

in Vietnam will be considered the

status if it has revenue of US$40

million a year, compared with the

current condition of US$50 million.

A customs agent will be qualified

for the status if it handles at least

20,000 sheets of procedures a

year. To facilitate and create

opportunities for more law-abiding

companies, in addition to lowering

revenue limit, the new circular

highlights internal control

conditions and export-import

supply chain security in

accordance with WCO standard

frame. According to experienced

officials in servicing priority

enterprises, those with good

internal control systems always

respect customs laws. Large-

scaled companies, both domestic

and foreign-invested, usually

perform this aspect well.

Empowering local customs

departments

The receipt and evaluation of

customs papers will be

decentralised to local customs

departments instead of the

General Department of Customs

as now because when the scope

of beneficiaries is widened, more

companies will be qualified for the

status. Hence, decentralising this

power to local authorities will be

better for all stakeholders. Local

customs departments directly

manage and have close track on

enterprises when they do customs

procedures in the past time. Hence,

in the coming time, the General

Department of Customs (Post-

clearance Inspection Department)

only receives documents from key

investment projects approved by

the Prime Minister.

Priority enterprises will be free

from post-clearance inspections at

customs offices except for cases

with signs of law violations. Post-

clearance customs shall not

perform one check at the office of

customs declarers in three straight

years except for cases with signs

of customs law violations. The

power of making post-clearance

inspection decisions at head

offices of priority enterprises is

decided by the General Director of

the General Department of

Customs. According to post-

clearance customs officers, the

new ruling will make the business

and investment environment of

Vietnam more attractive.

Le Hien


BANKING & FINANCE

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Bad Debt Still Awaiting Radical Solutions

The State Bank of Vietnam

(SBV) directed the Vietnam

Asset Management Company

(VAMC) to bring the bad debt

ratio to below 3 percent by the

end of September 2015, but

rising debt is challenging the

SBV’s objective.

Rebounding bad debt

Currently, non-performing loan

(NPL) data updated are lagged in

time and inconsistent. Two

different bad debt data are

announced by two agencies, one

by credit agencies and one by

Bank Supervision Inspection

Agency under the SBV. The value

announced by the SBV Bank

Supervision Inspection Agency is

often higher than data reported by

credit institutions, because the

former looks into the nature of bad

debts structured under Decision

780.

As of mid-May 2015, the latest

bad debt data were calculated

from January 2015 by the SBV, not

as of now.

According to data reported by

commercial banks, bad debt ratio

rebounded sharply from 3.25

percent in December 2014 to 3.49

percent in January 2015. Amid the

SBV‘s efforts to tackle bad debts,

rebounding NPL turned very

noticeable.

Bad debt had continuously

declined since June 2014, from

4.17 percent to 3.25 percent. As

bad debt data were just counted as

of January 2015, the trend for the

following months was unclear. The

SBV‘s direction on bad debt

settlement will have major impacts

in this period. The SBV has

imposed fixed bad debt ratio for

credit institutions selling debts to

VAMC. According to general

direction, member credit

institutions must sell at least 75

percent of bad debts as of June 30,

2015 and 100 percent as of

September 30, 2015.

The expiry of Decision 780 on

April 1 on debt grouping also

affects bad debt reporting. Given

sufficient counting, debt groups will

certainly continue to rise.

Unsatisfactory explanations

Some banks now have very high

NPL ratios. Southern Bank‘s bad

debt amounted to VND2,553 billion

as of the end of 2014, an increase

of VND948 billion, accounting for

5.89 percent of total loans. With its

excessive bad debt ratio, the

lender admitted the impossibility of

bringing the ratio to the target set

by the SBV and endeavoured to

take it to below 5 percent this year.

Currently, the bank is completing

its merger procedures with

Sacombank. If the SBV approves

the case, the bank expects to

finalise it in June.

According to its financial

statement of the third quarter of

2014, DongA Bank also reported

its overdue loan at nearly VND7

trillion, equal to 13.5 percent of its

total loans.

Nguyen Hoang Minh, Deputy

Director of SBV HCM City Branch,

said that bad debts of the banking

system in the city exceeded

VND60,800 billion as of March 31,

2015, representing 5.53 percent of

total outstanding loans.

The statistical data raised

concerns over alarming rising bad

debt. Worse still, there are no

radical solutions to digest bad

debts of the banking system. In

fact, bad debts are just moving

from one place to another in a

given period, rather than being

rooted out. Banks have sold debts

to VAMC to temporarily clean up

their balance sheets.

The SBV has certified in writing

that VAMC is allowed to issue


BANKING & FINANCE

Page | 9

Paving the way for insurance growth

VND80 trillion of special bonds to

get hold of bad debts in 2015. After

over one year of operation to the

end of 2014, VAMC purchased

nearly VND121 trillion of principal

debts from 39 credit institutions

and recovered over VND4.1 trillion.

If bad debt is not wiped out but

just temporarily forwarded to

VAMC, the economy will have no

capital for recovery and

development. Eventually,

fundamental solutions to bad debts

have to be sought out._ Bao Chau

The liberalisation of Vietnam’s

insurance market began on

December 18, 1993 with Decree

No100/CP issued by the prime

minister. Since then, the

country’s insurance sector has

recorded extraordinary growth.

2014 proved to be another

successful year, with high growth

in the insurance industry. As of

December 31, 2014, there were 17

life insurers, 29 non-life insurers, a

branch of a foreign non-life insurer,

two reinsurers, and 12 insurance

brokers operating in Vietnam. The

total value of insurance premiums

in 2014 increased by 17.4 per cent

for life insurance and by 12.5 per

cent for non-life insurance, totaling

VND27.327 trillion ($1.282 billion)

and VND27.391 trillion ($1.285

billion), respectively. On aggregate,

the 2014 growth rate of the

industry was 14.9 per cent. This

outperformance of the country‘s

GDP is a remarkable result for

2014, leading to a high growth of

12 per cent in total assets, 11.2

per cent in total capital, and 15.8

per cent in total investments.

The non-life insurance segment is

still dominated by local players,

with the Top 5 local non-life

insurers holding a 65 per cent

market share. Unlike non-life

insurance, life insurance is seeing

a significant contribution from

foreign companies. Four of the Top

5 life insurers are foreign players,

contributing 59 per cent to the

market share and leaving the only

domestic company in the Top 5

with a 27 per cent market share.

As in other emerging markets, the

insurance distribution channels in

Vietnam are still traditional, using

agents and brokers. Strong

brokers in the market are mainly

foreign companies. Meanwhile,

bancasurance is just in its early

stages in Vietnam.

Market opportunities

With the above achievements,

Vietnam‘s insurance market is still

seen as relatively attractive

amongst the other emerging

markets in the region. Growth is

likely to continue for the years to

come, given the existence of

various opportunities in the market.

Amongst these, the following are

considered important in making the

Vietnamese insurance market a

promising one in both the medium

and long term:

-Vietnam‘s population is over 90

million, of which over 60 per cent

are under 30 years old, and there

is an emerging middle class;

-Vietnam has been seeing

expanding urbanisation and

consumer markets, encouraging

dynamic risk management;

-Penetration of both life and non-

life insurance services remains

relatively low compared to other

countries in the region;

-Vietnam‘s economic growth is still

forecast to be relatively high as

compared to other countries in the

region, especially since strong

foreign capital inflows are

expected to continue in the coming

years;

-Vietnam‘s capital and equity

market is considered to be

relatively dynamic, with a high

interest rate and Return on Equity

(ROE) in comparison to other

countries in the region; and


BANKING & FINANCE

Page | 10

-The regulatory framework has

been improved, with the regulators‘

management and supervision

being enhanced from time to time.

Business challenges

As always, opportunities go hand-

in-hand with challenges. Despite

the market opportunities

mentioned above, Vietnam‘s

insurance market still has a

number of key challenges that

need to be collectively addressed

in order to enable it to grow

sustainably.

Firstly, it is about market

perception and customer behavior.

This factor should be considered

one of the most important drivers

of industry growth. The penetration

rate of Vietnam‘s insurance market

is below 2 per cent which is much

lower than that of other countries

in the region. The percentage of

the population regularly using

insurance services in their

personal lives is still low. One

positive signal for the corporate

sector is that large organisations

have become more dynamic in

their risk management. Risk

management needs to be a more

popular way of doing business for

private or small and medium

enterprises and in personal life.

There is a vital need to convert

those market potentials into market

needs.

The second challenge relates to

the distribution channels. Agents

and brokers play a very important

role in distributing insurance

services in Vietnam, and although

they have developed well over the

past years– their skills, experience,

and efficiency should continue to

be improved upon. For instance,

the commission expense-to-

premium ratio is still relatively high

compared to other countries in the

region. Alternative distribution to

enhance market penetration and

product development should be

considered over the medium and


BANKING & FINANCE

Page | 11

long run. Digital solutions should

also be considered, since these

now hold the key to customer

connection.

In terms of cost-effective

operations, the average cost-to-

premium ratio in Vietnam is still

relatively high. Despite high growth

in the top line, the bottom line of

most insurers operating in Vietnam

does not look so positive.

Profitability is a key factor in

driving sustainable growth for the

industry. There are many ways to

achieve profitability, but efficient

distribution and substantial

economies of scale for cost-

effective operations are crucially

important. This is a key challenge

for smaller and domestic players in

the market as it is difficult for them

to achieve economies of scale due

to the cost of investment and

expansion, and due to limited

chances to spread risks globally.

Another challenge worth looking

into concerns capital requirements,

which is hugely important in the

eyes of regulators around the

world. In Vietnam, legal capital

requirements are set for insurance

businesses. For instance, the legal

capital of VND600 billion ($28.17

million) is required for life insurers

and of VND300 billion ($14.08

million) for non-life insurers.

Insurers are required to maintain

their equity above a certain legal

capital requirement. Solvency

margins are also required to be

maintained in accordance with the

Ministry of Finance‘s guidance.

Insurance companies in Vietnam

have limited capacity to write big

commercial risks, particularly on

large-scale property and natural

catastrophe risks. To enhance the

industry‘s competitiveness, higher

capital requirements may be

considered by regulators as a way

to align the local business with

regional norms. In the long run,

adoption of a risk-based capital

(RBC) framework may be

considered by the regulators.

Currently, there are quite a number

of ASEAN markets adopting RBC,

such as Singapore, Malaysia,

Indonesia, the Philippines and

Thailand. As a result, to scale up

capital requirements would be

more demanding for running

insurance businesses in Vietnam.

Finally, qualified human resources

is still an issue for emerging

markets like Vietnam.

The skill set of the workforce in

Vietnam‘s insurance industry is not

commensurate with its

requirements. Lack of practical

knowledge and experience in the

majority of personnel, especially at

lower levels, is one of the

industry‘s main issues. The high

growth and increase in the number

of insurance companies in recent

years has also caused a shortage

of skilled personnel.―Brain-drain‖

and unfair competition to attract

experienced employees are also

existing problems within the

industry.

In summary, the insurance market

in Vietnam is still seen as a

promising market in both the

medium and long term. There are

also a number of challenges that

insurance players in the market

are facing. As a result of the focus

on restructuring from the

supervisory bodies, significant

changes are predicted within

Vietnam‘s insurance market over

the next couple of years. In

addition to stricter regulatory

adaption and compliance, each

insurer will have to back its own

survival and play to its strengths by

building trust and delivering quality

services to the customer.

Insurance firms will also need to

promote greater innovation and

technology in their product

development, distribution channels,

and various operational aspects in

order to grasp the existing market

opportunities and see that the

sector grows sustainably._ VIR


INVESTMENT

Page | 12

Derivatives: Opportunity for Stock Market Restructuring

Decree 42/2015 on regulations on

derivatives specifies that a

securities company must have a

registered capital and owner’s

equity of at least VND600 billion to

trade derivatives and the value

must be from VND800 billion if it

wants to provide derivative

brokerage services. Besides,

securities companies must also

have enough personnel and

professional expertise for the new

businesses.

Revolution for securities

companies

More securities brokerage

companies went bankrupt because

of poor performances. At present,

only over 80 securities companies

are in operation, a decrease from

20 percent from the peak several

years ago. Closures may increase

in the coming time as new

regulations on derivative business.

Indeed, some 30 securities

companies are truly operating

while 50 others cannot live on

securities businesses and they are

still alive at the will of their owners.

More companies float their shares

at the back of economic recovery

and the market liquidity is thus

improved as a result. While the

number of securities companies

declined, the source of incomes for

operational ones will increase. This

is actually a big opportunity for

securities companies and this is

also a reason for the prolonged

existence of weak performing

companies. But, according to

specialists, the development of

stock market is not easy for

securities companies to operate in

such a perfunctory way.

Securities brokerage - one of the

most important businesses of

securities companies - depends on

the registered capital value. In fact,

only securities brokerage houses


INVESTMENT

Page | 13

with a registered capital of

VND500 billion can develop their

brokerage business in a very

competitive market. But, small

securities companies are also

pleased with what they are doing

because they take less as they do

less. And, to a certain extent, the

capital scale only produces

competitive edge, not a decisive

difference. Even, some brokerage

houses can make money from

securities trading even though this

business is not as easy as earlier.

But, derivatives will certainly make

a difference as the law requires

that a securities company must

have a registered capital and

owner‘s equity of at least VND600

billion to trade derivatives and the

value must be from VND800 billion

if it wants to provide derivative

brokerage services.

The regulation on registered

capital of securities companies in

the Decree 42/2015 is within the

capacity of some companies but

beyond the capacity of others. The

capital requirements are easy for

good-performing securities

companies but very hard for weak

ones.

Pressure on securities with

small registered capital

Increasing the share capital is not

easy for all securities companies

because the stock market is still a

hard place to earn money for many.

Previously, this job was not very

difficult because they could use

their capital surplus and retained

earnings to issue bonus shares to

existing shareholders. The

secondary equity offering is more

difficult and selective. Only best-

performing companies can draw

investors.

The opportunity for unlisted

securities to lure investors is even

thinner. If they cannot hike their

share capital, they will be unable to

provide derivatives businesses.

Customers will of course come to

companies with derivatives

services as derivatives will provide

them with one more risk aversion

tool.

If they cannot use derivatives in

proprietary trading business, they

will lack an important risk

prevention tool and lack a drive for

their proprietary trading business.

The gap in operation scale and

competitive advantage will

downplay small companies and

cause their good employees to

leave. Professional expertise

related to derivatives is complex,

forcing securities companies to

supplement resources to meet

market demands and regulatory

requirements.

Currently, high-level personnel are

not enough in the securities

industry and the introduction of

derivatives will make high-quality

personnel scarcer. Without doubt,

to stay alive on the stock market,

small brokerage houses must

quickly add capital, expertise and

personnel to access derivative

securities._ Luong Tuan


ENTERPRISES

Page | 14

Vietnam’s Petrolimex to sell 20% to Japanese partner to reduce state holding

The Vietnam National Petroleum

Group (Petrolimex) on Tuesday

said it will sell 20 per cent stake to

its Japanese strategic partner, in

order to reduce the state holding to

75 per cent.

Dinh Viet Tien, the group‘s head of

supervisory board, revealed that

Japan‘s JX Nippon Oil and

Energy Corporation had been

cooperating with the group since

signing a memorandum of

understanding in December, 2014.

Meanwhile, the state ownership in

Petrolimex is currently 95 per cent.

―The Japanese investor operates

in the same industry and has a

strong financial capability. If the

government approves, the

strategic partnership can be

formed within this year,‖ said

Petrolimex chairman Bui Ngoc Bao.

Also in the remaining time of the

year, Petrolimex will boost

investment in large projects, such

as the Nam Van Phong refinery.

JX Nippon Oil and Energy will work

with the Vietnamese petrol giant

and will jointly construct the project,

which was scheduled to be

completed in 2013. However, the

project failed to meet its deadline

and the cost projections have shot

up to $8 billion (from $4.8 billion).

The southern Khanh Hoa-based

plant is re-slated for a 2020

completion. It will be capable of

handling about 200,000 barrels

daily.

In addition, Petrolimex will

implement exits and restructure its

holdings in PG

Insurance, PGBank andPetrolim

ex Land.

On May 22, PGBank

and Vietinbank inked a contract

on the two‘s merger and

partnership between Petrolimex

and Vietinbank. PG Insurance is

listed on the stock exchange, while

Petrolimex Land is currently traded

on the over the counter (OTC)

market.

Petrolimex auctioned its initial

public offer (IPO) in 2011, and has

since then restructured the entire

group, aiming to stabilise its

operations as a joint stock

company and to list shares on the

secondary market.

Although the group‘s consolidated

revenue reached VND206.8 trillion

($9.6 billion) last year, it recorded

a loss of VND9 billion,

due to the slumps in

global oil prices.

For the 2015 fiscal,

Petrolimex targets to

achieve VND2.45 trillion

in profit before tax, in

which the parent

company is expected to

account for VND448

billion._ Dealtreetsasia

Petrolimex petrol station, visual from the company's website

https://www.vietinbank.vn/web/home/vn/index.html


ENTERPRISES

Page | 15

CMC Telecom sold shares to TIME: Baring or strategic co-operation

CMC telecommunications

infrastructures join stock

company (CMC Telecom) sold

25% stake to Malaysian partner

TIME dotcom Berhad (TIME),

total value is about 12 million

USD

This time, Malaysia‘s big-man of

telecom sector entered into Viet

Nam market the first time and it‘s

also the first time, Vietnam‘s a

telecommunications infrastructures

company sold shares to a strategic

international opponent

Founded in 1996, TIME dotcom

Berhad became the top company

of Malaysia in providing solutions,

telecom for Asia-Pacific region.

TIME extended a firmly business in

Malaysia by combining other two

member companies : GT company

( Global Transit group, specializes

in providing bandwith all over the

world) and AIMS company

( providing professional and

standard Data centers). TIME‘s

shares were listed on Shares

market Bursa Malaysia since 2001

and currently the market

capitalization stands at $1 billion.

Meanwhile, CMC Telecom is a

subsidiary of CMC Corporation

(CMG code, HOSE) and now is on

Top 4 of leading

telecommunications infrastructures

companies in Viet Nam market.

According to the Netindex.com

(measurement tools, data

collection measure Internet speed),

CMCTelecom is providing the

highest downloading speed in

Hanoi. Definitely, buying shares of

Vietnam‘s big telecommunications

infrastructures is a wise move. It

helps TIME significantly shorten

time to access in a new market

compares for establishing a new

enterprise and growing it up till it

will have a famous branch name in

Vietnam market. Mr Afzal Abdul

Rahim, the CEO of TIME said that

buying shares of CMC telecom

was the first step to approach Viet

Nam market and to reach beyond

Indochina market in the near future.

TIME is now a powerful investor in

fiber optic cable market. In the last

5 years, TIME has invested more

than $ 200 million optic cable

systems worldwide. At the same

time, the partner TIME selected -

CMC Telecom – operates fiber

optic systems and owns two large

data centers. Nature of operations

and develop strategy of CMC are

suitable with the expanding

module of TIME so far.

This strategic contact of

corporation is the result of one

year researching Viet Nam market.

Representative of TIME said that

CMC Telecom has a strong growth,

stability and development

strategies consistent with TIME

to invest.

Toward CMC Telecom, working

with TIME also means objectives.

Mr. Nguyen Trung Chinh, general

director of CMC Group (CMC

Telecom‘s Mother Company ) said,

the ASEAN Economic Community

(AEC) will officially formed in late

2015, so the partnership with TIME

as a way to CMC group and CMC

Telecom are going to approach

this marketing area.

Although the role of CMC Telecom

in the CMC Group is only one of

the eight subsidiaries, but CMC

Telecom is considered as the

backbone of the CMC Group. This

company was consolidated much

stronger after the merger with a

subsidiary – CMC

Telecommunication Services JSC

(CMC TI) 2 years ago.

Before selling TIME‘ shares, CMC

Group held 75% stake in CMC

Telecom. After issuing a single

deal to sell 25% shares stake to

TIME, the percentage of shares of

CMC Group at CMC Telecom will

be decreased significantly but still

hold dominant shares in this

company. About TIME‘s side,

TIME‘s business representatives

from Malaysia said ¨TIME may

continue to pour more capital into

the CMC Telecom in the future¨.

(R&C Dept., following baodautu)


ENTERPRISES

Page | 16

Japanese precision firm starts in Da Nang

Tokyo Keiki Precision Technology Inc inaugurated its first

plant outside Japan at the city ‗s Hi-Tech Park yesterday,

following eight months of construction.

The US$40-million plant is the first to be operating in the

1,010-hectare park in Hoa Vang District, 20km west of

the city centre.

The plant will manufacture electro-magnetic and

hydraulic equipment, targeting to export more than

50,000 digital directional valves per month for the Asia-

Pacific region.

According to members of the managing board of the Hi-

Tech Park, another Japanese investor, Niwa Foundry

company, a partner of Keiki company, also has begun

construction of its first engine castings plant, at a cost of

$30 million.

It's scheduled to be put into operation in 2016.

Japanese businesses have invested $330 million in 68

projects in the city, employing more than 27,000 people.

— VNS

Hitachi Zosen keen on waste treatment projects

HCMC – Japan’s Hitachi Zosen Corporation has

asked the government of HCMC for approval to get

involved in three projects to treat garbage for

electricity and fertilizer production at a combined

cost of nearly US$80 million.

The proposal was made at a meeting between

representatives of the corporation and the city

government last week.

The first project worth around US$70 million will process

garbage for power generation with a daily capacity of

600 tons of waste. It has got the go-ahead from the city

government and the firm is working with relevant

agencies to find a site for the project and expecting to

start construction next year.

Hitachi Zosen plans to invest around US$5 million in a

waste treatment system for Binh Dien Wholesale Market.

This facility is designed to treat around 50 tons of

garbage daily to produce biogas.

The company also wants to carry out a pilot project

valued at some US$2 million to turn out gases and

fertilizer from food waste with a daily treatment capacity

of 500 kilograms.

Taiyo Miyagi, who is in charge of global business

promotion at Hitachi Zosen, said the firm has spent four

years studying garbage types in HCMC and wants to

use them as for energy generation.

Hitachi Zosen is involved in 477 waste-to-energy

projects around the world. In Vietnam, it has supplied

equipment for a project treating garbage and generating

power in Hanoi. The project with a daily treatment

capacity of 75 tons will be put into operation next year.

HCMC vice chairman Tat Thanh Cang said the city was

interested in waste treatment based on advanced

technology. The city mainly buries waste as a cheap

solution but this requires a lot of land for building landfills.

Many countries treat solid waste by burning it for energy

generation but this method is still limited in Vietnam as

garbage is classified properly, costs are high and

supporting policies for investors are unattractive.

The total garbage volume nationwide is around 76,000

tons a day, equivalent to some 28 million tons a year. Of

the volume, 80% is buried and around 20% is used to

produce fertilizer.

In HCMC alone, 7,500-8,000 tons of garbage is

discharged daily. The city expects to recycle up to 40%

of it, bury 40% and burn the remainder this year.

However, waste buried currently accounts for up to 75%

of the total. _ Thegioisaigontimes

EVENTS & FIGURES


ENTERPRISES

Page | 17

Vinamilk CEO Mai Kieu Lien receives Nikkei Asia Prize

Mai Kieu Lien, Chairwoman and

CEO of Vietnam Dairy Products

Joint Stock Company (Vinamilk)

was named the winner of the

20th Nikkei Asia Prize -

Economics and Business

Innovation, at an awards

ceremony held in Tokyo, Japan

on May 20.

Director of the Institute of High

Energy Physics, at the Chinese

Academy of Sciences, Wang

Yifang, was honoured as the

winner for the Science,

Technology and Environment

award.

The Asian Youth Orchestra was

presented with the Culture and

Community prize.

Speaking at the ceremony, Lien

said that the prize was an honour

for her and more than 5,000

Vinamilk workers, who have shown

dedication and creativity in the

company‘s development over the

past nearly 40 years.

She reaffirmed Vinamilk‘s

commitment to be a top company

for nutrition products and health

services.

She also announced a donation of

her JPY 3 million (US$41,300)

award to Nepalese children who

are suffering from the aftermaths

of the recent earthquake through

the United Nations Children's Fund

(UNICEF) in Japan.

Lien is highly appreciated for

pioneering Vietnam's dairy

products market and building

Vinamilk into a leading force in the

domestic industry. The company

has cultivated demand for products

that appeal to health-conscious

Vietnamese consumers.

In the first quarter of this year,

Vinamilk has earned nearly

VND8.1 trillion VND (US$370

million) in net revenue, an increase

of 15.6% over the same period last

year, with after- tax profits

reaching VND 6.83 trillion

(US$ 313 million).

Launched in 1996 to

commemorate the 120th

anniversary of Nikkei Inc.'s main

Japanese-language newspaper,

The Nikkei, the Nikkei Asia Prizes

honour contributions of individuals

and organisations to the

region in three fields:

economic and business

innovation; science,

technology and the

environment; and culture

and community. _ VNA

Vinamilk CEO Mai Kieu Lien (R) receives Nikkei Asia Prize


MARKET & PRICES

Page | 18

Vietnamese consumers are world’s most thrifty: Nielsen survey

Vietnamese consumers are the

most careful compared to their

global peers when it comes to

saving for a rainy day, findings

from a consumer confidence

report show.

More than two thirds of consumers

in Vietnam, or 78 percent, put their

spare cash into savings, according

to a Nielsen report released

Wednesday.

Nielsen said in its report that this is

the highest percentage in the world.

The Q1/2015 Nielsen Global

Consumer Confidence Report also

found that consumers in Southeast

Asia are diligent savers, with an

overwhelming majority, 71 percent,

intending to build savings funds

from their spare cash after they

have covered their essential living

expenses.

This represents an increase of two

points quarter-on-quarter and nine

points compared to the same time

a year ago, according to the report.

The Nielsen report only counts

Indonesia, Malaysia, Philippines,

Singapore, Thailand, and Vietnam

as Southeast Asian countries.

Southeast Asia includes the six

countries, and Laos, Cambodia,

Myanmar, Timor-Leste, and Brunei.

Those who do not save their spare

money use it to go on vacation and

buy hi-tech devices, according to

the report.

Forty-four percent of Vietnamese

consumers spend their spare cash

on holidays, and 40 percent on hi-

tech purchases.

Eighty-six percent of Vietnamese

consumers have changed their

household spending habits over

the past 12 months to save more,

with more than half of them

believing the country is in an

economic depression, according to

the report.

The report found that 62 percent of

Vietnamese consumers have cut

spending for new clothes, whereas

61 percent try to get smaller

electricity and gas bills.

Fifty-seven percent have reduced

the amount of money spent on

family entertainment activities, and

44 percent have delayed their

plans to buy new major appliances.

Vietnam scored a confidence index

of 112 in the first quarter of this

year, up six points from the

previous three-month period and

the highest since Q4/2010,

according to Nielsen.

Vietnamese consumers thus join

those in Indonesia, the Philippines,

and Thailand to be ―the most

optimistic consumers in the world,‖

the report said.

The global consumer confidence

index in Q1/2015 scored 97, up

one point from Q4/2014.

―Compared to the end of last year,

when all regional confidence

scores declined, it was a more

upbeat start to the year 2015, as

confidence increased slightly or

remained stable in every region

except Latin America,‖ the report

said.

Consumer confidence rose one

point in Asia-Pacific, posting the

highest quarterly regional index

score of 107, while North America

held steady at 106.

Confidence in the Middle

East/Africa (96) and Europe (77)

edged up one point in the first

quarter, but dropped two points in

Latin America (86)– the region‘s

lowest score since 2011. _

TUOITRENEWS


MARKET & PRICES

Page | 19

VN to create prominent rice brand

Viet Nam is aiming to develop a

Vietnamese rice brand that would

become the world's leading rice by

2030, according to a project

approved by Prime Minister

Nguyen Tan Dung last week.

The project, to develop a

Vietnamese rice brand by 2020

with vision to 2030, seeks to

improve the image recognition of

Vietnamese rice and its

competitiveness, as well as

expanding market share in the

world market and developing a

national rice brand, in line with Viet

Nam's history, culture and tradition.

The strategy to develop a national

brand for rice would focus on two

issues: identifying quality-

conscious markets, such as the

US, EU and Japan to export high-

quality varieties, and retaining

traditional markets with medium-

quality rice.

Specifically, by 2030, 50 per cent

of the nation's rice is to be

exported under Vietnamese

brands.

The national rice brand would be

protected in Viet Nam and at least

50 other countries by 2020. Also,

regional rice brand names would

be developed and protected,

based upon distributing products

that are typical to a region.

Five key sub-projects to be

implemented within the framework

includes building and managing a

national rice brand name;

developing a national rice brand

name for major rice products of

Cuu Long (Mekong) Delta region;

protecting brand and supporting

firms in registering for brand

protection; promoting Vietnamese

rice brands, and boosting exports

and expanding markets.

The project highlighted the role of

enterprises in building and

developing Vietnamese rice brand

names through developing their

own brands and rice products and

participating in the global value

chain.

The Government would provide

support to promotional activities to

enhance the image of Vietnamese

rice in the home market and

abroad, besides support to

enterprises, associations and

farmers in rice production to

increase the added value and

competitiveness of domestic rice.

The project was approved under

the condition that Vietnamese rice

exports hit difficulties during recent

years, due to harsh competition on

price and quality from other rice

exporting countries such as India,

Thailand and Pakistan.

According to the Viet

Nam Food Association,

rice exports started to

decline in both volume

and value from 2013 after reaching

a record export volume of 7.7

million tones worth US$3.45 billion

in 2012.

Statistics showed Viet Nam

exported 6.6 million tonnes of rice,

worth $2.95 billion in 2013 and 6.5

million tones, worth $2.84 billion in

2014.

In the first four months of the year,

rice exports posted a decline of 11

per cent in volume to 1.55 million

tonnes, with an average export

price of $419 per tonne, 3.7 per

cent lower than the same period

last year.

Those difficulties highlighted an

urgent need to develop a brand

name for Vietnamese rice to

enhance its competitiveness and

ensure stable prices.

Previously, the Ministry of

Agriculture and Rural Development

pointed out that although Viet Nam

was one of the top three rice

exporting countries, it lacked brand

names that were recognised in the

global market.

The Mekong Delta was the

country's largest rice cultivation

area, which accounted for around

90 per cent of the country's rice

export. Last year, delta provinces

exported 3.2 million tones of high-

quality rice. — VNS


MARKET & PRICES

Page | 20

May CPI Soars 0.16 Pct Due to Petrol Price Rise

The Consumer Price Index (CPI) in May climbed by

0.16 percent from the previous month, by 0.95

percent compared to the same months last year and

by 0.2 percent against December 2014, reported the

General Statistics Office on May 24th.

Like April, this month‘s CPI suffered main impacts from

petrol and oil price rises. In addition, electricity price

increases from March 16th showed more clearly in this

month.

The highest CPI rise in May went to housing and

building materials at 1.27 percent over a month earlier.

Despite the average petrol and gas price in May

lowering from April, the price index of the

commodity still hit a record high within the past

17 months due to the impact from electricity

price increases starting from March 16th under

the Ministry of Industry and Trade‘s decision.

Transport had the second price index rise in May at

1.02 percent. Adjustment in the local retail petrol price to

11 percent from May 5th directly affected the group‘s

CPI.

Increased travel demand during the long holiday on

National Reunification (April 30th) and International

Labour Day (May 1st) significantly contributed to the

price rise of the group.

Other commodities saw slight CPI rises while the price

of education remained stable from the previous month.

The only group witnessing a price reduction in the fifth

month of the year was

restaurants and food and

its powerful control on the

common CPI contributed

to curb this month‘s price

rise. Restaurant and food

services prices dropped

0.22 percent over a

month earlier, in which

food price decreased

0.46 percent and

foodstuff felt 0.29 percent.

In total, CPI over the past

five months soared 0.2

percent, marking the

lowest price rise within

the past 14 months._

CPV

CPI Index ( Source: Vietnam General statistics)


LEGAL UPDATES

Page | 21

Increasing Environmental Protection Tax

On May 1, 2015, Resolution

888a/2015/UBTVQH 13,

amendments and supplements

to Resolution

1269/2011/UBTVQH12 on

environmental protection tax,

started taking effect.

Accordingly, environmental

protection tax on gasoline rose

from VND1,000/litre to

VND3,000/litre; jet fuel rose from

VND1,000/litre to VND3,000/litre;

diesel from VND500/litre to

VND1,500/litre; mazut oil and

lubricant climbed from

VND300/litre to VND900/litre;

grease increased from

VND300/kg to VND900/kg.

Under commitments in the ASEAN

Trade in Goods Agreement

(ATIGA), the ASEAN–China Free

Trade Area (ACFTA) and the

ASEAN Korea Free Trade

Agreement (AKFTA), Vietnam

must follow the roadmap of cutting

preferential tariffs on oil and

petroleum products. According to

the roadmap of cutting preferential

tariffs on oil under ATIGA, ACFTA

and AKFTA agreements, the gap

between the current Most

Favoured Nation tariff (MFN) and

the tariff under those agreements

should be 5-35 percent depending

on specific category and this gap

will be widen in subsequent years.

Thus, one commodity (oil) will

have different tariffs (MFN, ATIGA,

ACFTA, AKFTA), posing risk to the

state budget, as well as to the

national economy when petroleum

exporters increase price. In order

to have one level of oil tariff only,

the MFN must be adjusted to equal

the most preferential tariffs under

international commitments

(ATIGA). This will definitely create

a negative impact, shrinking state

budget revenues.

According to the Ministry of

Finance, the increase of

environmental protection tax will

not raise prices of domestic petrol

and oil as in the same ground with

global oil prices, tax structure in

petrol price does not increase but

reduce (the increase of

environmental protection tax still

lower than the decrease of tariffs

following international

commitments). Moreover, the

increase of environmental

protection tax for petrol is

consistent with the objective of

environmental taxes, which is

attacking on commodities

adversely affecting the

environment (gasoline is a product

containing chemicals, which can

cause adverse impacts on the

environment at a large scale,

therefore, it‘s necessary to

regulate high taxes on gasoline -

previously, Resolution

1269/2011/UBTVQH12 only

regulates environmental protection

tax rate for petrol at minimum in

the tax bracket and on the same

level with the fuel cost is for the

purpose to not disturb the

management of revenue and

expenditure when switching from

fuel fees to environmental

protection tax on petrol).

Based on the environmental

protection tax on gasoline passed

by the Standing Committee of the

National Assembly, the Ministry of

Finance will implement policies of

gasoline tariff accordingly so that

the people will benefit when world

gas prices fall.

Even when added the increased

environmental protection tax on

gasoline (VND2,000/litre), Ron 92

gasoline price of Vietnam is still

lower than some countries in the

region._ Thanh Nga


LEGAL UPDATES

Page | 22

Guidance for Corporate Accounting System Amended

New Registration Fee Applied on June 6

The Ministry of Finance recently

issued Circular No. 75/2015/TT-

BTC to amend and supplement

Article 128 of Circular No.

200/2014/TT-BTC on guidance

for corporate accounting system.

According to the Circular 75,

enterprises which have to prepare

interim financial statements for

2015, starting from January 1 or

later (quarterly financial statements

and half-year financial statements)

are allowed to apply either

Decision No. 15/2006/QD-BTC

dated March 20, 2006 issued by

Finance Minister to prepare the

2015 interim financial statements.

The annual financial statements of

2015 must be prepared in

compliance with the Circular 200.

The new circular replaces the

corporate accounting system

governed by Decision No.

15/2006/QD-BTC dated March 20,

2006 of Finance Minister on the

issue of corporate accounting

system and the Circular No.

244/2009/TT-BTC dated

December 31, 2009 of the Ministry

of Finance amendments and

supplements to corporate

accounting system. Accounting

standards not contrary to these

circulars are still valid while

contradictory ones will be annulled.

Before accounting standards for

financial instruments and

instructive documents for the

implementation of accounting

standards for financial instruments

issued, businesses are

encouraged (but not required) to

present and disclose financial

instruments as stipulated in the

Circular No. 210/2009/TT-BTC

dated November 6, 2009 of the

Ministry of Finance on guidance for

application of international

accounting standards on

presentation of financial

statements and interpretation of

financial instruments. This circular

takes effect on July 14, 2015._

Hien Le

The Ministry of Finance issued Circular No.

53/2015/TT-BTC amending and supplementing

Circular No. 127/2013/TT-BTC dated September 6,

2013 of the Ministry of Finance on vehicle

registration and number plate fee collection,

payment, management and use.

Accordingly, Circular 53 amends and supplements

Clause 4, Article 4 of Circular No. 127/2013/TT-BTC

regarding fee rates in vehicle registration certification

and number plate issue. Regarding cars of organisations

and individuals licensed by competent

authorities for passenger transport,

owners must declare the number of

cars registered and categories of cars

registered.

Automobile transportation business certificates (stating

passenger transport allowed) issued by competent

authorities (notarised copy or photocopy enclosed with

original for comparison). Cars of organisations and

individuals used for financial leasing licensed by

competent authorities must have letters of

recommendation of financial leasing companies, clearly

stating the number and categories of vehicles used for

financial leasing.


LEGAL UPDATES

Page | 23

Financial leasing contracts signed

between leasing companies, which

provide passenger transport business,

and financial leasing companies must

clearly state the number of vehicles to

be leased and lease terms (notarised

copy of documents needed).

In case of change or reissue of

registration certificate and number plate

for vehicles not used for passenger

transportation or motorcycles changed

from low-fee areas to high-fee areas

(regardless of owner changes),

organisations and individuals must pay

fees in accordance with Point 2 (for

automobiles), Point 4 (for motorcycles)

of Item I, Clause 1, Article 4 (Circular

127), unless otherwise specified in Point

4.3 of this Clause.

In case automobiles and motorcycles of

individuals registered and granted

number plates low-fee regions are

moved to high-fee regions because of

business trips or residence relocation,

individuals with sufficient documents will

pay fees for registration and number plat

changes in Item II, Clause 1, Article 4.

The circular takes effect on June 6,

2015._ Le Hien


HIGHLIGHTS

Page | 24

Collaboration to Strengthen Vietnam’s Supporting Industries to ASEAN Japan External Trade

Organization (JETRO Hanoi),

Vietnam Trade Promotion

Agency (VIETRADE) and Reed

Tradex on May 20 joint together

again in contract signing

ceremony to announce the co-

located “The 6th

Exhibition on

Supporting Industries in Hanoi

2015” together with “Vietnam

Manufacturing Expo 2015” in

order to strengthen Vietnam’s

supporting industry during 10 -

12 September 2015 at I.C.E.

Hanoi (Cung Van Hoa), Hanoi,

Vietnam.

Mr. Duangdej Yuaikwarmdee,

Deputy Managing Director and

General Manager Vietnam of

Reed Tradex Co., Ltd. said that

nowadays, with Vietnam being the

initial market for foreign investment

combining with surge in local

demand for industrial parts, it is

vital for industrialists to understand

the essential factors affecting the

progression of supporting

industries which plays a major role

in the industrial development.

While the arrival of AEC is

imminent, we also have both

challenges and opportunities to

comply with, opportunities which

rely on understanding of new

machinery, technologies, and

updated knowledge. In this

September 2015, industrialists will

set out to discover a new world of

technologies and business

opportunities from 2 specialized

exhibitions which will get together

to create a force for Supporting

Industries.

For “The 6th

Exhibition on

Supporting Industries in Hanoi

2015 (SIE 2015)”, about 50

Japanese exhibitors will display

accessories they expect to

―purchase‖ in Vietnam and 50

Vietnamese exhibitors will show

their-made products they want to

―sell‖ to potential buyers. SIE 2015

will be co-organized by JETRO

Hanoi (Japan External Trade

Organization) and VIETRADE

(Vietnam Trade Promotion

Agency).

On the other hand, “Vietnam

Manufacturing Expo 2015

(VME)” will exhibit machineries

and technologies serving for

industrial production with

participation of over 200 brands

from 20 countries. This year, VME

will focus on mold making and

plastic injection technologies. You

will discover the wide range of

machine tools by leading providers

who will bring in many experts and

specialists to answer and prompt

visitors with cutting-edge solution.

A series of knowledge and know-

how on mold making and

maintenance will be introduced by

technology providers. In

addition we have international

pavilions from Thailand, Vietnam,

Japan, Taiwan, Italy, and India. It

is the first time that we are joined

by the India Pavilion and the

industrialists in Hanoi will get to

see technologies from India.

Moreover, a dedicated forum on

technology for mold making

techniques and technologies will

be another highlight you should not

miss.

According to Mr. Atsusuke

Kawada, Chief Representative

ofJETRO Hanoi Office, the current

difficulty in buying spare parts in

Vietnam is one of the big concerns

which Japanese manufacturers in

Vietnam are facing and the

concern needs to be solved. With

the aim of promoting Vietnam‘s

supporting industries, JETRO has

compiled and maintained the list of

150 Vietnamese excellent

companies which is regarded as a

useful document for not only

Japanese-invested companies in

Vietnam but also companies

considering new investment in

Vietnam, he noted.

Mr. Bui Huy Son, Director General

of Vietnam Trade Promotion


HIGHLIGHTS

Page | 25

Agency, remarked that the

success of Vietnam-

Japan Supporting Industries

Exhibition, organized for five times,

has partly contributed to increase

the bilateral trade turnover

between Vietnam and Japan in

recent years, and increase the

number of new Japanese-invested

projects in the fields of processing

and manufacturing in Vietnam.

Apart from mold making, a

significant growth in plastic

injection industry will be a major

contributor for supporting

industries such as automotive and

electronic parts, packaging, and

parts manufacturing. This can be

deemed as a huge advantage

since supporting industries in

Vietnam have already possessed

quality workforces and

technologies while Vietnamese

government now prompts to

reduce the imported plastic parts.

In this regard, Vietnam

Manufacturing Expo will answer to

these calls by promoting

competitiveness in terms of cost

reduction and optimizing

productivity with new knowledge

along with advanced technologies

and innovations.

With past success, the synergy

between VME and SIE that proved

to be a success formula that

created a highly comprehensive

event that drew in almost 10,000

industrialists from across Vietnam

and many countries to meet the

exhibitors who were immensely

satisfied. Both events were born

out of the passion of the

organizers who want to help the

industrialists in the supporting

sectors get geared up for the

upcoming AEC.

The combination of both Expos

will create an all-under-one-roof

meeting center for the

manufacturing community. Buyers

and sellers would meet, exchange

knowledge and ideas, discover

technologies, and develop their

business networks. This widely

opens doors for Vietnamese

makers to network with Japanese

industrialists for machinery import

and industrial production, and to

urge Vietnamese small-to-medium

enterprises to develop higher

competitiveness to prepare for

receiving Japan‘s investment

expansion.

Key Highlights of ―Vietnam

Manufacturing Expo 2015‖

includeThe Stars of Technology

Pavilion; Shows in Show; Meet

leading International

technologies from India, Italy,

Japan, Taiwan, Thailand and

Vietnam; Engineer Master Class

& Technology Presentations;

and Business Matchmaking

Program.

―Vietnam Manufacturing Expo

2015‖ also has strong supports

from the Ministry of Science &

Technology (MST), Ministry of

Planning and Investment (MPI),

Ministry of Information and

Communications (MIC), Ministry of

Industry and Trade (MIT), Vietnam

Electro – Technical Industry

Association (VELINA), Vietnam

Steel Association (VSA),

Singapore Manufacturing'

Federation (SMF), Taiwan

Association of Machinery Industry

(TAMI), BOI - Unit for Industrial

Linkage Development (BUILD),

Thai Subcontracting Promotion

Association._ Nam Pham


HIGHLIGHTS

Page | 26

VIETNAM Cement Enterprises: Being taken over or creates miracle

Recovering by domestic demand

and increased exports but Vietnam

cement industry‘s still needing a

long-term strategy to solve the

problems they are facing including

acerbic competition from other

opponents who wants to capture

the market currently.

After the massively wave of

takeover the weak cement

factories in Viet Nam 2 years ago,

Foreign firms are returning to

continue their intentions. Recently,

Semen Gresik Indonesia (SMGR)

has revealed the intention to

takeover more private cement

factories which are holding 4%

market share in Viet Nam. It is

expected that the deal will be

completed by the end of Quarter II

/ 2015.

SMGR is also a mother company

of Thang Long Cement company

and producing about 2,5 million

tons of cement/year in Viet Nam.

SMGR currently considers Viet

Nam as a part in a strategy to take

advantage when AEC is formed at

the end of this year. If medium-

scale producers in Viet Nam don‘t

make theirselves stronger, the risk

of being taken over is very near.

Regain growth momentum, but ...

Housing demand is heating back

and a positive outlook of foreign

investors in the real estate market

helped Vietnam cement industry

regains its momentum after the

plunge.

In 2014, total sales volume

increased 15% compared to 2013.

In particular, the domestic

consumption reached 50.98 million

tons, up 40% compared to 2010 -

the time of the crisis bottoms;

export 19.5 million tons, exceeding

the annual target and grossed

nearly $ 1 billion.

But this results can‘t help cement

industry be strong enough to

withstand tough challenges ahead,

especially as foreign giants in this

field are considered Vietnam as

part of its strategy to take

advantage of AEC.

Recently, the International Cement

Review (the Union of cement

producers in the United Kingdom)

has published the report analyzes

the Vietnam Cement Corporation

of StoxPlus. The report pointed out

the weaknesses of this sector.

The first, one of the difficulties of

the sector is low productivity

leading to higher production costs

and profit margins before

depreciation, taxes and interest

expense (EBITDA) have low

amplitude. Most of Vietnam

cement factories are only from 15

to 20% EBITDA, while the market

in the region is 25-30%. Except

few factories in the South, the rest

of the cement manufacturing

plants are unused the max

capacity. The average utilization

rate in 2012 is only around 77%,

even Northern plants only at 63%.

The second, higher fuel costs and

alternative fuel sources is limited.

Existing fuel sources such as coal,

gas and electricity take 64%

clinker production costs in Vietnam,

much higher than the regional

average. In addition, the use of

alternative fuels and raw materials

often used in other countries to

reduce costs is not popular in

Vietnam due to high production

costs.

The third, Vietnam cement industry

has being developed after

Thailand about 1) years after

China about 20 years. Therefore,

while the cement factories in China

and Thailand were fully

depreciated and cleared debts, the

Vietnam factories just start, leading

to greater depreciation, higher

interest expenses.


HIGHLIGHTS

Page | 27

The fourth, the high financial

leverage. The development of the

cement production facility in

Vietnam bases on borrowing

capital, particularly foreign

currency loans. Ratio of debt to

equity of listed cement companies

currently around 3.9 times, even in

Ha Long Cement company

amounted upto 11.5 times, Cam

Pha Cement company is 22.3

times.

Beside, Vietnam cement industry

still lacks of a long-term export

strategy. According to StoxPlus,

while the long-term export contract

brings better revenues, the cement

companies of Vietnam do not

guarantee this. "The domestic

manufacturers have no long-term

export strategy, export is still

considered only as a temporary

solution, or is seasonal, while

domestic demand is not really a

breakthrough," the StoxPlus report

said.

Strategic transformation

Vietnam needs to invest $ 220

billion to develop infrastructure in

2030, with a total construction

value is about 127 billion dollars.

Under this plan, in the next 5 years,

Vietnam will take a lot of traffic

projects. This bodes well for the

cement producers as demand

continues to increase in the

medium and long term. It is

expected that domestic

consumption in the next 5 years

will be around 51-53 million tons,

but exports are still only around 20

million tons (19.5 million tons in

2014).

In the above report, StoxPlus

assumes, although domestic

cement demand grows by 5.5%

per year, then to 2026, domestic

cement productions still exceed

the demand. Oversupply in a long

time requires investors to change

their way of thinking if they want to

continue to operate its plants

profitably.

In fact, in recenty, cement

manufacturers in the country has

taken steps to change this

situation. Since 2010, they have

exported a quantity of cement,

stable clinker, from 0.7 million tons

in 2010 rose to 9 million tons in

2012, 15 million tons in 2013 and

19.5 million tons in 2014. The main

export markets are Bangladesh,

Indonesia, Philippines, Taiwan,

Malaysia.

Rising world demand for cement in

2014 was beneficial for Vietnam

cement productions, while other

producers in Asia, such as China,

Thailand and Indonesia can‘t

increase capacity. However, this

advantage will be gradually

reduced from 2015 onwards when

the opponent could improve

productivity.

While exporting may be a good

choice for many cement plants to

maintain and enhance the capacity,

the seaport system of Vietnam

does not meet the demand.

Currently, only Thang Long

Cement, Chinfon Cement, Cam

Pha Cement can take advantage

of seaport and become the names

of the most active export market in

Vietnam.

Thus, to execute the export

strategy successfully, Vietnam

needs to have large plants located

near the port, with a good source

of raw materials and modern

production technology to be able to

compete on the domestic market,

foreign rivals and expanding

international market more strongly.

But many businesses do not wait

for it to be executed. They are

making themselves stronger.

Song Gianh Cement Factory

(XMSG) by the Central

Corporation (Cosevco) owns 100%

is an example. After 3 years of

restructuring, XMSG became

Cosevco flagship unit, with the

fastest growth rate and is one of

the few factories maintain an

average operating power 100%.

Since 2012, the plant's output has

increased strongly. 2014, they

reached 1.77 million tons, up 31%

compared to 2013 and 55%

compared to 2012; clinker output

reached 1.394 million tons, up

13% compared to 2013.

Reaching Production efficiency

110% of design capacity not only

helps XMSG to quickly overtake

other factories in Vietnam, but also


HIGHLIGHTS

Page | 28

becomes a typical risen by new

strategy and new management

after being shares chemistry. The

new investors have applied a long

term business strategy, the move

was handled flexibly as market

trends. In particular, XMSG

constructs an international

standards quality control system,

able to provide effective products

and professional customer service.

XMSG market share increased

from 14% in 2012 to 23% in 2014.

A typical case needs to mention as

a bright spot in exporting cement

is Hoang Phat Group Vissai Ninh

Binh Limited Company (The

Vissai). The Vissai currently owns

four cement plants with a total

capacity of 13.6 million tons/year.

This company owns the rights to

exploit raw materials combined

with modern technology, low cost

raw materials. In particular, the

company owns a network of 70

distributors, exports to 30 countries

and territories.

In 2010, while cement industry

needed a "miracle" when supply

exceeds demand, The Vissai was

holding a contract to export 1.2

million tons of clinkers/year for

Bangladesh. It is a stepping stone

for the company annually exports

1/3 of output. The imported

product names of The Vissai can

be mentioned as the

HeidebergCement Company

(Germany), Cemex (Mexico),

Adelaide Brighton Group

(Australia), Pagase (Switzerland).

Thus, although challenges remain

ahead as the cement industry

depends heavily on construction

activities according to the

development trend of the

economic cycle; some investors

are moving their strategy to

respond to the acerbic competition

from rivals trying to capture the

cement market in Vietnam._ (R&C

Dept)

Cement factory " Gianh River" ( Cosevo)


CONTACT

Page | 29

SEIKO IDEAS CORPORATION

Our services Training (Languages & Soft skills)

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SEIKO IDEAS CORPORATION ... StoxPlus recorded 265 completed M&A deals in 2014, with value totalling $4.66 billion, an increase of 33.1 per cent from 2013. The figure did not take into