Vietnam Business Newsletter
Banking & Finance

Traders warned to quote prices in dong not dollar

Many local traders are continuing to quote the price of goods in U.S. dollars despite the recent announcement from the State Bank of Vietnam (SBV) stating that it would be taking strong measures to stop this practice.

The central bank is speeding up its investigation into traders suspected of violating the ban on listing prices in a foreign currency. If found guilty violators can be fined between VND5-70 million (US$315-4,400).

The ban was made in 1999 with the aim of restricting the ongoing dollarization process in the country, but it has not been strictly followed and traders still quoting in dollars have said the ban would affect their business with foreigners.

"Since the Government's ban, we had to quote our prices in Vietnamese dong, but this has caused us many troubles as most of our customers are foreigners. Since they are not quite familiar with dong value, they cannot decide whether the goods are expensive or not," a souvenir trader in the Dinh Liet street said.

Computer companies and hotel owners who often quote their prices in dollars said that they face a similar problem even though their customers are Vietnamese.

Many traders have chosen to quote prices in both dong and dollar as a compromise, but Ho Huu Hanh, deputy director of the SBV's HCM City branch, said this double quoting system is not allowed.

He said the ban has been in place since 1999 and traders should already be following the regulations not giving reasons for not following the rule.

"We admit that dollarization is popular in economies in a transition period. However, it is unacceptable if prices are quoted and payments are made in foreign currency," said Truong Van Phuoc, head of the SBV's Foreign Exchange Management Department. (VNS)

FDI businesses' remittance to State budget on the rise

Contributions by foreign direct invested (FDI) businesses to the State budget rose sharply in the first half of this year, accounting for 53.2% of the target and increasing by 43.9% compared with the same period last year.

The surge was attributed to an increasing number of FDI businesses that are no longer in their tax-free period.

According to the General Tax Department, domestic tax collection (excluding tax on crude oil) in the first six months of this year was 53.9% of the target, a 21.5% year-on-year increase. State-owned businesses' remittance to the State budget accounted for 50.2% of the annual plan, a 16% year-on-year increase.

The customs sector has so far this year collected VND22.375 billion (roughly US$1.4 billion), including an import-export tax collection worth VND1,579 billion (roughly US$100 million), and a value added tax collection of VND11,747 billion. (VNA)


Foreign companies get nod to set up subsidiaries

Foreign-invested enterprises, already allowed to convert to joint stock companies, will shortly be able to re-organize under the parent-subsidiary model, under a plan approved in principle by the Prime Minister.

The Ministry of Planning and Investment (MPI) will begin working this week with relevant offices on regulations that would govern a foreign-invested enterprises (FIEs) organization as a parent company.

"The parent-subsidiary model for FIEs is new in Vietnam so the country does not yet have regulations on the operation of this model," said deputy head of the MPI's Foreign Investment Agency Nguyen Anh Tuan. "The ministry expects to have general management regulations on parent companies next week."

Panasonic Vietnam could become the first FIE to set up a parent-subsidiary company in Vietnam, said Tuan.

Under its plan, Panasonic Vietnam would become a parent company with two subsidiaries, one operating its current factory in Hanoi and the other a HCM City-based trading and distributing company for Panasonic products.

The new parent company would have a total capital of US$30 million, US$8 million from the HCM City-based company and US$22 million from Hanoi-based factory.

There is some confusion whether parent companies will be permitted to import goods into Vietnam for sale, an issue that regulations are] expected to clarify. (VNS)

Malaysian leading retailer opens 1st store in VN

Parkson Vietnam Co. inaugurated its first department store last night after three months of preparation, and Saigon-tourist Plaza became Parkson Saigontourist Plaza.

Parkson has leased the building from Vietnam's Saigontourist Holding Co. for 25 years to sell Vietnamese and foreign brand clothes, cosmetics and other products, modernizing the country's retail industry.

"We foresee a promising future for Parkson in Vietnam, and we intend to satisfy the growing needs of the Vietnamese consumers by introducing branded merchandises to all," said Tham Tuck Choy, general director of Parkson Vietnam.

The brand distribution manager for Bossini, Baleno and S&K said he rented 160 square metres to sell Baleno, S&K and Jornano outfits and bags.

Parkson will run various seasonal promotions and sales, which are still uncommon in Vietnam. The group's marketing will focus on attracting youths, and middle-class and high-income people.

The new department store, which has a 50-year license and US$7 million in capital, will provide direct and indirect jobs for 1,000 people.

Parkson plans to set up about 10 department stores in HCM City, Hanoi, Da Nang, Can Tho and Hue, spending an estimated US$70 million.

Parkson, a member of the Lion Group, started off in Malaysia in 1987 and is now a major retailer in Malaysia and China. (SGT)

Import - Export

IFC finances VN furniture exporters

The International Finance Corp. (IFC) - a financial arm of the World Bank - has agreed to grant furniture exporter Khai Vy a five-year loan of US$6 million to boost the latter's business.

Representatives from the IFC and the Khai Vy Corp. signed the funding contract on June 29.

Khai Vy was established in 1995 and currently runs four factories, one in HCM City, two in Binh Dinh province and one in Binh Phuoc province.

Khai Vy's factories produce enough furniture to fill 4,100 containers annually, according to Khai Vy general director Doan Van Trang.

The company's export turnover was almost US$37 million in 2004, and revenues reach US$50 million this year, Trang said.

"Markets in the EU, including the UK, France, Germany and Spain, represent around 70% of our sales, and America and several other markets take the remaining 30%," he said.

According to Doan Kham, an IFC investment officer in Vietnam, the IFC will not only provide the loan but also support this furniture manufacturer with regard to management, environment and market information.

On June 30, Kham said, the IFC will sign a similar contract worth US$8 million to support another furniture manufacturer, Theodore Alexander, a British invested company in HCM City. (VnMedia/VNS)

Vietnam struggles to boost fragrant rice exports

Vietnam - the world's second largest rice exporter - is struggling to boost exports of its fragrant rice due to low product quality, according to industry experts and businesses.

This year, fragrant rice exports, will drop as much as 30% from last year's volumes despite high prices, which could reach US$360 per tonne, industry experts predict.

But, fragrant rice sales have always been sluggish for Vietnam in the past. Usually, fragrant rice only makes up 3 to 5% of the country's total rice exports.

For example, in 2004, the country exported 3.5 million tonnes of rice, but only 99,614 tonnes was fragrant rice. (TN)

More businesses

VN becoming market economy: EU

The European Union (EU) has yet to accept Vietnam as a market economy, however, the bloc has recognized the country's progress in meeting requirements to become one.

It was announced by the EU's market economy status mission whose participants were on a two-day working visit in Hanoi. The mission said that the EU will continuously consider Vietnam's detailed report on the country's standing as a market economy.

At the working visit, which ended on Tuesday, Fritz Harald Wenig, director of the EU's Trade Defence Directorate, said the EU will recognize Vietnam as a market economy as soon as possible.

Vietnam filed a request to the EU for market economy status three years ago, and the Ministry of Trade (MoT), in May last year, sent a preliminary report on the country's legal system and economic situation to the EU for consideration.

The EU then required a more detailed report and the MoT supplemented additional information to the preliminary report to meet the bloc's requirement.

Though the EU recognized Vietnam's multi-faceted achievements and progresses in economic development and integration, the EU has not yet recognized Vietnam as a market economy, and has only offered Vietnam temporary market economy status.

The temporary status gives an advantage to Vietnamese exporters to the EU in cases of anti-dumping litigation, as firms may be able to prove they are operating under market mechanisms. (VNS)

VN's franchising industry to be on a roll

The franchising industry is seen to be growing strongly in near term given Vietnam's efforts to provide a full legal framework for the new activity and corporate eagerness to get involved in franchise deals.

Vietnam is creating an emerging franchise business climate that is catching up with international standards, VinaCapital managing director Louis Nguyen told the seminar, which was organized bu VinaCapital in HCM City on June 28.

Vietnam now has different laws on franchising and its newly-revised Commercial Law provides more details in this regard, said Baker & McKenzie managing partner Frederick Burke. The legal environment is good enough for the development of franchising.

Nguyen Tran Quang, marketing director of coffee processor Trung Nguyen, said on the sidelines of the meeting that his company would franchise an additional 200 coffee shops by the year-end.

Nam An Group, meanwhile, plans to opens five franchised restaurants in the rest of this year on top of its current chain of twelve Pho 24 noodle restaurants, founder and managing director Ly Quy Trung said.

Kinh Do Corp., which now has 25 bakeries including one franchised, plans to franchise tens of shops in the coming time, chief operating officer Patrick Ho Loke Yin said. (SGT)

IDG to promote Vietnam's hi-tech park abroad

International Data Group (IDG) will market and promote northern Vietnam's Hoa Lac Hi-Tech abroad following a memorandum of understanding (MoU) inked with the Ministry of Science and Technology.

Hugo Shong, senior vice president of IDG and president and CEO of IDG Asia, and Deputy Minister of Science and Technology Tran Quoc Thang signed the deal at the MIT campus in Cambridge on June 25.

Prime Minister Phan Van Khai witnessed the signing while he was in Massachusetts as the last stop of his historic visit to the United States from June 19-25.

IDG said in a statement that the deal was designed to help build high-tech research and development capacity, promote the development of high-tech industries, and encourage technology innovation and commercialization of technology products in Vietnam.

The world's leading global technology media, research and event management company also agrees to provide advice and support for the ministry as it plans construction and operation of a hi-tech conference and exposition centre in the Hoa Lac Hi-Tech Park.

Both organizations will study the possibility of signing a long-term contract where IDG will rent the centre on an annual basis to help construct an exhibition hall.

Also on June 25, Shong of IDG signed an MOU on co-operation with Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI). (SGT)

Vietnam Business Day to take place in Berlin

The Germany-Vietnam Friendship Association (DVG) will organise a Vietnam Business Day at the fifth Asia and Pacific Week (APW), scheduled from Sept. 19 - Oct. 2 in Berlin.

The DVG will work with the Asia and Pacific Forum in Berlin and German tourism group (TUI) to dvertise about Vietnam's tourism potential. A seminar themed "Vietnam - 30 years after the war" is also expected to take place.

They are among more than 200 cultural, scientific, economic and tourism events during the festive week. About 20 countries in the world have registered to attend this year's APW.

On the initiative of the Governing Mayor, the APW has taken place in Berlin every two years since 1997. The Republic of Korea will be the focus country of the fifth APW which will focus on economic and scientific aspects. (VNA)

25 foreign firms in Vietnam to convert to joint-stocks

By the end of this year, Vietnam will likely allow up to 25 foreign-invested companies in the country to convert into shareholding firms, the Ministry of Planning and Investment has announced.

Most of the companies that are expected to convert are operating in industrial and construction areas, the ministry said in a recent statement. Investment capital of a vast majority of the companies is higher than US$10 million.

So far, the green light has already been given to two foreign companies: Hoang Gia Company Ltd, a US$46-million hotel developer, and Austnam, a US$1.9-million metal roofing manufacturer.

The ministry is currently taking steps to give licenses to four other foreign enterprises to convert into joint-stock firms. Also, the government has agreed, in principle, to allow five other foreign companies to follow the same step.

The number of companies seeking government permission to become stake-holding firms is rising.

Under current law, foreign-invested enterprises in Vietnam can only exist in the form of a limited liability company, making them unable to issue shares to raise capital. (TN)