Policy digest May 2012
The much-vaunted public-private partnership (PPP) model of investment has failed to realize its potential because of an incomplete legal framework and the inability of local administrations to properly assess projects.

* PPP model needs detailed guidance for takeoff: The much-vaunted public-private partnership (PPP) model of investment has failed to realize its potential because of an incomplete legal framework and the inability of local administrations to properly assess projects. To date, partners, especially foreign partners, have preferred BOT arrangements for major infrastructure projects because if they choose the PPP model, they would have to wait for a much longer time. The question here is how to make procedures for PPP arrangements as simple as those for BOT, BTO or BT projects.

The Prime Minister had asked responsible agencies to draft regulations on making pilot investment under the PPP model, but these have not been released yet.

According to Nguyen Dang Truong, deputy head of the Investment and Planning Ministry’s Bidding Management Department, it takes six processes for a PPP project to be implemented, but at present, everything is just at the beginning stage.

Dang Xuan Quang, deputy head of the Ministry’s Foreign Investment Agency, which is in charge of elaborating these regulations, said one of the most basic steps for approving a PPP project is that localities must submit good projects. However, of some 30 projects which have been chosen with a total capital of USD 20 billion, none is good enough for being submitted to the Government. The profit-making potential has not been clear in any of these projects.

* Government halts import of obsolete, inferior-quality equipment: The Government has put a halt to the import of outdated used machinery, equipment and production lines because they are energy-inefficient and harmful to the environment. This move follows a proposal of the Ministry of Science and Technology to limit the flow of antiquated technologies into the country.

Relevant ministries have plans to review the list of good items that must undergo quality inspection before import and promulgate technical standards for better management.

Earlier, the Ministry of Science and Technology recommended Vietnamese enterprises be careful of purchasing used machinery and equipment from China, which has announced plans to close 2.250 enterprises in 18 manufacturing sectors that use inefficient and obsolete technologies.

Minister of Science and Technology Nguyen Quan in a recent online dialogue with the public via the Government’s e-portal said that incentives would be given to enterprises engaged in (modern) technology transfer, adding that machinery, equipment and production lines would be quality-inspected by experts and scientists before their import into Vietnam.

* Time for securities trading settlements to be shortened: The State Securities Commission is expected to permit the implementation of a shorter securities trading settlement cycle of nine hours of T+3 (three days after transactions are completed) from current 15:30 hours of T+3, starting in early September.

This move will help investors re-sell securities right on the date of T+3 (three days after securities purchase), instead of waiting until the fourth day as at present.

The State Securities Commission is working on detailed guidance for this change and asks market members to actively coordinate with it in performing necessary preparatory steps in personnel, technology system and professional processes to meet the set schedule.

* Tax arrears of absconding foreign businesses to be closely scrutinized: The General Department of Customs has recently issued an official letter requesting local Customs Departments to scrutinize and report on enterprises whose foreign owners have absconded to dodge taxes and fines for late tax payment.

Accordingly, provincial-level Customs Departments will have to report on specific figures of tax debts of foreign businesses they deem irrecoverable due to owner runaway, the number and names of these businesses, amounts of tax and late tax payment fine debts and overdue periods, and propose measures to evaluate the current state of these businesses and measures to handle them.

According to the General Department of Customs, specific regulations should be introduced in order to closely supervise the tax payment by tax-owing foreign businesses, step up the recovery of their tax debts, and apply coercive measures against them.

* Trade officials discuss expansion of Vietnam Goods Exchange: At present, trading on the Vietnam Goods Exchange (VNX), which was licensed in 2010 and commenced its operation in January 2011, still largely depends on buyers’ preferences, putting goods producers at a disadvantage and limiting market liquidity. According to experts, this may be avoided by providing sufficient information on demands for goods which the exchange members can supply, thus helping stabilizing the market.

Pham Dinh Thuong, deputy director of the Legal Department of the Ministry of Industry and Trade said at a recent workshop on development of Vietnam Goods Exchange in the process of integration that some current regulations on trading on the Exchange remain inappropriate and inconsistent. For example, the regulation on trading limits is inappropriate because goods to be traded on the Exchange, currently including coffee, rubber and steel, are not restricted from trading. This regulation also hinders the development of a derivative market. Besides, the current trading deposit rate of 5% or higher (or the ratio of 20:1) of the value of each trading order is too low compared to the world’s common rate.

According to Thuong, the Ministry of Industry and Trade is drafting amendments to these regulations, aiming to remove the trading limits and increase the trading deposit rate, allowing investors to choose a deposit rate appropriate to traded items which may be up to 30:1 or even 50:1. Individuals will be permitted to act as dealing members of the Exchange, which currently must be businesses, or as brokerage members engaged in both clearing and non-clearing payment.

The Ministry also suggested addition of some goods items, including pepper, cotton and sugar, for trading on the Exchange. Some other goods such as precious metals (especially gold) and petroleum are also recommended to be put for trading and subject to strict management and a limit “lever” ratio of 20:1.

Proposed additional regulations include those on tax incentives for businesses engaged in via-floor trading, management of the participation in foreign goods exchanges, and formation of a specialized unit under the Ministry of Industry and Trade in charge of VNX.

The State Bank of Vietnam would additionally regulate the management of foreign-currency investment in derivative goods channels and permit the registration of special accounts for foreign investors participating in VNX.

* Effective distribution system crucial for domestic trade development: In Notice No. 100/TB-BCT recently sent to the Association of Vietnamese Retailers and related units, Minister of Industry and Trade Vu Huy Hoang stressed the necessity of associating the development of the system of domestic distribution, especially for essential goods, with the goals of supply-demand balance and domestic market price stability in the context of opening the domestic market according to international commitments.

Since the domestic trade development scheme was approved by the Prime Minister in Decision No. 27/2007/QD-TTg, domestic trade has markedly contributed to the gross domestic product (around 13-15%) and created some 5.5 million jobs. However, its development is not yet sustainable due to the planning of goods distribution is no longer appropriate, shrinking state budget allocations for trade infrastructure development which are not even reflected in a separate item in the state budget, and unstable goods supply sources.

For sustainable development of domestic trade, the Ministry is currently studying a proposal to the Government to provide domestic traders with supports in training, legal counseling, marketing and trade promotion, and create favorable conditions for domestic distributors and general retailers to absorb capital, technologies and management experiences from leading trade corporations.

It would also continue improving policies and laws on opening of the distribution service market after Vietnam’s accession to WTO to conform with international trade regulations, for instance, the economic need test regulation, in order to improve the transparency of and consistency between central and local policies, especially those on foreign investment in goods distribution channels, and devise measures to effectively mitigate adverse impacts of international trade integration.

* More transparent security asset information to minimize frauds: The National Office for Registration of Secured Transactions is drafting an inter-ministerial circular to guide the exchange of information on secured transactions among relevant agencies, including state registry offices, public notary offices, civil judgment enforcement bodies and registry offices for asset ownership and use rights, to close loopholes which might affect the rights and interests of parties to transactions.

At present, there is virtually no information sharing among nearly 600 offices and agencies providing vehicle, housing and land registration services nationwide. Once issued, this circular would create a mechanism to make the legal status of assets more transparent and help reduce frauds relating to land use rights and property registration.

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