Vietnamlawmagazine

* More formality barriers down to lure foreign investment: Most foreign investors find the provision of Clause 1, Article 50 of the 2005 Investment Law requiring foreign investors that invest for the first time in the country to have an investment project to be granted an investment certificate unnecessary.

For psychological reasons, these investors have often made their investments through existing domestic enterprises or purchased projects or shares from domestic enterprises. However, it remains vague about whether a foreign investor purchasing shares of a domestic enterprise is required to apply for an investment certificate, as these domestic enterprises would be regarded as a foreign-invested enterprise.

Tran Anh Duc from the Investment and Trade Working Group of the Vietnam Business Forum suggests Article 50 be more specifically guided in the direction that an investment certificate is required only in case foreign investors participate in the establishment of a new legal entity in Vietnam, and proposes not to treat enterprises in which foreign investors hold less than 49 percent of shares as “foreign-invested enterprises” in order to simplify procedures applicable to these enterprises, thereby facilitating more foreign investment.

He also suggests local administrations to use a uniform investment certificate, especially for foreign-invested enterprises, clearly stating names and capital holdings of foreign investors.

Foreign investors will also feel more secured with some amendments likely to be made to the documents guiding the Investment Law and the Enterprise Law, especially Decree No. 108/2006/ND-CP of September 22, 2006, and Article 13 of Decree No. 102/2010/ND-CP of October 1, 2010, which may allow them to contribute capital to or purchase shares of domestic enterprises after satisfying only the conditions for investment certification and enjoy much simpler procedures for capital and investment project transfer.

* Credit institutions asked to pay more attention to money laundering: At a seminar held in Ho Chi Minh City on June 18, experts urged banks to pay more attention to combating the flow of dirty money and to the important role of informational technology (IT) in the task.

Nguyen Van Ngoc, head of the State Bank of Vietnam (SBV)’s Anti-Money Laundering Department admitted that banks’ IT staffs are confused about choosing the right software for this task and at present fewer than ten banks in Vietnam use specialized, established IT solutions for anti-money laundering even they are concerned with transaction safety.

He suggested credit institutions should not get mixed up about the purpose of their IT solutions whether for anti-money laundering or credit ratings.

At the seminar, IT solution experts from Japan and South Korea shared their experience on obligations of credit institution to verify customer identity and occupation/business at the time of transaction, purpose of transactions, beneficiaries, assets and income; preserve verification/transaction records and take measures to ensure the accuracy of the verification; and incorporate the watch list filtering, transaction monitoring and risk assessment function in their systems.

In case of large deposits or withdrawals, customers should be required to explain the purpose. Any refusal would be reported in suspicious transaction reports.

* Banks uncertain about non-performing loan settlement options: A regulation requiring banks to make provisions after selling non-performing loans (NPLs) to the planned Vietnam Asset Management Company (VAMC) has made these banks show little interest in the company.

After getting the Prime Minister’s approval last month, VAMC announced it would purchase NPLs at their book value by issuing special bonds, or at market value by using other sources. Bonds would have a maturity term of five years and banks can use them as collaterals to obtain refinancing from the SBV. However, banks must set aside 20 percent of the bond value as provisions every year until the bonds mature.

If NPLs have not been successfully resolved beyond the five-year term, banks would be required to use bonds to re-assume the debts.

Many banks complained that this mandatory provision made them wary of accepting the VAMC plan and would not help deal with NPLs.

However, as many businesses have been experiencing financial troubles, banks have no choice but staying patient and holding on to the option to nurse NPLs for a while and extend payment deadlines when necessary, if they do not want to hold bonds, experts said.

* Assistance for hi-tech exports much needed: In order to raise the proportion of hi-tech products in the total export turnover of the country to around 30-35 percent by the end of the decade, hi-tech zone management boards nationwide, especially in Ho Chi Minh City, have recently suggested the MOF should give export duty exemption for these products, apply considerably low import duty rates on imported materials, parts and components which are domestically unavailable for manufacture of hi-tech products, and permit the prolongation of the 275-day grace period for import duty payable for these imports.

In order to avoid impacts of low import duties for other imported materials and components on domestically available ones, Vietnam and other ASEAN member nations should participate in the supply chain in the world and region and choose as soon as possible their own advantageous products and allied industries to develop, experts suggested.

Over recent years, the foreign direct investment (FDI) sector in Vietnam has seen the highest growth rate in the manufacture of hi-tech products. However, the proportion of their software and hardware packages and IT services remains relatively low. This requires the nation to introduce a special mechanism applicable to importers of prototype devices for producing or testing software, and to facilitate the hire of leading foreign as well as domestic experts to take charge of designing hardware and building brands of software products and services for export.

* Small, medium-sized enterprises to get export boost: A four-year program aimed at improving the export competitiveness of Vietnamese small- and medium-sized enterprises (SMEs) through the local trade promotion network was launched by the Trade Promotion Agency of the Ministry of Industry and Trade on June 13 in Hanoi.

The two-phase program has a major contribution of USD 3.89 million from Switzerland’s State Secretariat for Economic Affairs (SECO) and domestic contribution of USD 0.57 million from the Agency and local trade promotion centers. It would be executed nationwide to strengthen the trade promotion and support system’s capacity to provide SMEs with more professional services and practical help, especially easier access to market networks, financial and technical assistance and completion of administrative procedures.

In the first phase, the program will set up a basic network and choose 13 trade promotion centers in each region’s major city (Hai Phong, Da Nang and Can Tho) to join the network and design a working mechanism for the network, and work out trade promotion plans.

In the second phase, the program will organize training to raise the capacity of local trade promotion centers’ staffs or provide direct assistance to SMEs.

SMEs to join the program will be selected by local administrations based on their business lines, export performance and potential, especially those involving local specialties like rice and aquatic products.-