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Official Gazette

Saturday, September 19, 2020

Policy digest August 2013

Updated: 10:48’ - 03/09/2013

* Lack of transparent information inhibits export of fisheries products: Vietnam was one of the largest fisheries exporters in the world market, but almost all Vietnamese processors and exporters did not have proper awareness about the necessity of providing transparent product information, including product origin, production process and export formalities, to importers, complained Dang Kim Son, head of the Agriculture and Rural Development Ministry’s Policy and Development Institute.

This reality has badly affected honest export businesses and trademarks of fisheries products, leading to trade fraud (selling poor-quality products together with genuine products) and loss of foreign customers’ confidence.

He urged fisheries exporters to consider product information transparency as an effective tool to improve their products’ competitiveness.

He suggested the State should prescribe provision by fisheries exporters of traceable product information as an obligation of these exporters and guarantee for traceability of fisheries product information as a duty of competent authorities in charge of fisheries quality.

Relevant agencies should issue regulations on assurance of export fisheries quality up to international standards, and introduce a mechanism for sanctioning exporters that hide product information to sell poor-quality products.

* House purchase, ownership limits to be lifted for foreigners: More foreign entities, including Vietnam-based investment funds, banks, branches and representative offices of foreign businesses, should be allowed to purchase and own homes in Vietnam under a proposal made by the Ministry of Construction on August 9, in furtherance of the National Assembly’s Resolution No. 19/2008/QH12 on a pilot scheme to allow foreign organizations and individuals to purchase and own homes in Vietnam.

However, diplomatic missions, non-governmental organizations and their expatriate employees are not included in the list of proposed house purchasers.

All foreigners who are granted Vietnamese visas which are valid for three months or more would be allowed to purchase and own homes in the country.

According to the two proposed options regarding quantity of purchased houses, foreign purchasers may purchase and own (i) no more than two apartments or individual houses or villas or, (ii) unlimited number of apartments and houses.

Each individual house or villa must be located within a land plot of under 500 square meters leased with land use rights.  

The house ownership duration would be limited at (i) 50 years plus a 50-year extension or, (ii) 70 years without extension.

Foreign ownership of houses would be restricted in border areas.

Foreigners would be allowed to lease, sell or donate houses that they own 12 months after obtaining house ownership certificates.

Current regulations restrict foreign ownership of housing to apartments of which the land use rights remain in the hands of property developers.

* Domestic non-performing loans attractive to foreign investors: The legal framework concerning limits of property ownership and stockholding by foreign parties remains a question to foreign investors that are interested in purchasing domestic non-performing loans (NPL).

Recently interviewed by Dau Tu (Investment) newspaper, John M. Sheehan, Southeast Asian director of the Capital Services Group, said that current NPL volume of Vietnamese businesses could not be wholly serviced by the Vietnam Asset Management Company with a charter capital of VND 500 billion and therefore needed foreign capital. Foreign investors may pay 30-35 US cents for each US dollar of NPL provided Vietnam offered favorable legal framework and financial mechanisms. Otherwise, each US dollar of NPL could be sold at only two US cents, he said.

He suggested the country should learn from experience of regional countries, such as Thailand, which in 1998 permitted foreign investors to own houses used as mortgages for NPL they would purchase, and the Philippines, which in 2002 revised the tax regulations applicable to foreign investors in order to attract more foreign capital for servicing NPL.

Domestic banks should seek as soon as possible capable foreign asset management companies to sell NPL so as to avoid devaluation of security assets and save servicing costs.

The Government should also seek technical and financial assistance from the International Monetary Fund for settlement of domestic NPL.

* Time to resume temporary import for re-export of some goods: Prime Minister Directive No. 23/CT-TTg of September 7, 2011, has reportedly helped state management agencies better control smuggling and trade frauds in temporary import for re-export. However, some restrictions imposed by this Directive have prevented domestic enterprises engaged in temporary import for re-export from taking wholesome business opportunities.   

Therefore, the Ministry of Industry and Trade recently proposed the Government to permit resumption of temporary import for re-export of frozen foods being cattle and poultry by-products and offal, used household appliances (television receivers, refrigerators, air conditioners, washing machines etc.), especially those to be re-exported to China; re-export of goods eligible temporary import for re-export under the Ministry’s licenses through international border gates, major border gates, and border gates and customs clearance points of border-gate economic zones.

The Ministry also proposed the Prime Minister to promulgate a decree in replacement of Decree No. 12/2006/ND-CP to prolong the time limit for each lot of temporarily imported goods for re-export to stay in Vietnam from current 45 days (with one extension of 15 days) to 60 days (with two extensions of 30 days), and the Ministry of Finance to issue guidance on tax guarantee procedures and consider further simplifying administrative procedures for tax refund for businesses.

* Legal barriers to foreign capital inflow through merger and acquisition addressed: As an effective channel for foreign investment in the country, recent merger and acquisition (M&A) deals have contributed greatly to the economic restructuring and helped domestic businesses access to modern technologies and business administration knowledge and expand their outlets.

However, current regulations regulating or relevant to M&A still lack uniformity and specificity, especially those concerning foreign businesses.

Leading experts in the field recently proposed some legal improvements to facilitate these activities according to international practice:

Definitions of legal terms relating to M&A, including foreign investors, Vietnamese businesses, investment accounts, payment currency, assets contributed as capital, etc., in legal documents should be consistent with the Enterprise Law and Competition Law;

Administrative procedures for business registration (in case foreign holding of merged or consolidated companies’ charter capital is up to 49 percent), grant of investment certificates (in case foreign holding is over 49 percent), opening of investment accounts, reporting on economic concentration, etc., should be simpler for foreign investors;

There should be an agency managing or monitoring a single legal framework on business registration and grant of investment certificates and concurrently managing M&A activities;

Fields in which M&A is permitted or prohibited should be specified; and,

Regulations permitting Vietnamese businesses to merge or acquire wholly or partially foreign businesses, swap stocks with foreign businesses, list their stocks on foreign markets, etc., should be issued.

* Currency derivatives need a more favorable legal framework to offset risks: As reported by the banking system, such modern currency derivatives as forward exchange contracts, option exchange contracts and foreign exchange futures have brought about large profits for commercial banks and also proved effective in offsetting financial risks incurred to businesses which borrow Vietnam-dong loans at a floating interest rate or foreign-currency loans for importing goods or are forced to sell goods (farm produce, metal minerals, energy) at prices below their average prices on the world market.   

However, the number of providers and beneficiaries and turnover from implementing these derivatives remain too low (10 percent of total banking service turnover); and foreign-current sale and purchase transactions at domestic commercial banks are mainly spot transactions.

Nguyen Thi Loan, a banking law expert from Ho Chi Minh City Banking University proposed the State Bank to broaden the scope of these derivative tools, devise measures to limit their disadvantages, revise regulations on monetary trading and derivative tools to be conformable with international practice, and intensify remote surveillance of risks through the information and reporting system of commercial banks as well as on-spot inspection in order to promptly detect and prevent monetary trading risks.

The Ministry of Finance should elaborate and promulgate standards related to currency derivatives and regulations on tax accounting relating to these derivatives applicable to businesses.-


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