COMMENTARY

Being Left -- Behind or Out?

It is a creepy feeling: projects seem to grow in spurts and then stop; Plans are made, proclaimed, and then seem to be forgotten.

Examples abound:  The Black Hole of Saigon; Dalat Dankia Resort, Dung Quat; and more recently a US billion dollar plus resort in DaNang.  Heavy industry is no better than others in surfing for success: Steel and power projects in Vung Tau, and of course Dung Quat.

We read of growth in China and now Thailand; Malaysia seems to no longer be on hold, or is it?  But here, projects don’t just plod along for the numbers of new projects seems to grow in number.  However, the overall value of Steel In The Ground is not making much headway.

The State proclaims on page 1 of the VIR for March 24-30, No. 597 “Local fallout from war ‘to be limited’,” but what does that mean?  For on page five of the same issue the below-the-fold headline reads, “Industrial sector fears knock-on effects of conflict.”

Didier Lauras’ column in the March 3, 2003 edition of the Bangkok Post was captioned, “Culture of secrecy still pervades in Hanoi.“  In part he writes,

The inner workings of the government and state-run institutions remain as opaque as ever. A nation rich in natural resources and cheap, hard working labor suffers barriers of entry due to corruption, and vast, overlapping layers of  bureaucracy.

We seek to be optimistic but when we read that technical transfers can only now escape the 20% cap (the value of foreign investment can now exceed 20% of the capital contributed to a venture), we wonder whose been sleeping at the switch and why it’s taken over 10 years to make this change?

Who is in charge? It is a collective system but that means no one ever really takes responsibility. Every theory and analysis is wrong. The reality is that no one knows how the system works.

There is precious little hard news of major industrial happenings or project development to report on this month. And we hope that is not because we in Vietnam have been left out of or behind from the growth in FDI that is still being enjoyed by some of our neighbors.

The habits of secrecy die hard in Vietnam.  No one knows what lies behind the public face of unanimity. Directives remain in force but are hardly enforced, and a flow chart of the power structure surprises many that the number one person is often not in charge

The time for brightness to shine through the veils is now, before we are all left….

DISPATCHES

Reformation of FDI rules.  The government adopted an amendment to the decree on the Law on Foreign Investment in a move to create more conducive conditions for foreign investors in Vietnam.

Decree 27/2003/ND-CP issued in late March 2003 amends and supplements 33 articles under the former decree relating to the execution of foreign investment in the country.

Alterations involve the licensing and establishment of enterprises, labor recruitment, taxes, lease, capital contribution and investment incentives.

The new decree authorizes:  

1.    foreign-invested firms to co-operate or conjoin with foreign individuals and organizations to carry out joint business contracts or set up new enterprises.

2.    foreign-invested firms to recruit their employees in Vietnam or abroad directly, provided the hiring follows the country's labor regulations.

3.    foreign-invested firms to no longer restrict capital contribution level in terms of technology transfers. Presently, foreign invested firms are restricted to applying less than 20% of the total legal capital even if technology contributed has a true higher value. The rub here is that in a joint venture, this must be agreed to by both Vietnamese and foreign sides.

4.    provincial people's committees will have the full jurisdiction to approve land leases in order to facilitate the establishment of new projects.  Previously, some foreign-invested projects were required to get the Prime Ministers consent.

5.    enterprises that produce machines or electronic and electricity components can benefit from a tax exemption on imported materials after five years of operation. The duty exemption also applies to projects which belong to the country's list of encouraged investment domains or which invest in underprivileged areas.

6.    Industrial zone-based enterprises will face a corporate income tax of 15% without the previous requirement of exporting more than half of total output.

7.    enterprises based in export processing zones will benefit from a corporate income tax of 10%.

8.    foreign direct investment (FDI) enterprises are allowed to mortgage their lease certificates and land-related assets during their lease period to access bank loans.

9.    FDI enterprises are eligible to buy foreign currencies at the country's commercial banks and to get support from the government to balance their foreign exchange in case the bank fails to meet currency requirements.

Vietnam has to date licensed 3,818 foreign investment projects with a total legal capital of US$38.42 billion, mostly in the areas of industrial production, tourism, construction and food processing.

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Driving measures to be aware of.

Nine measures to cope with traffic jams in HCM City

1. Individual transport means, in particular motorbikes, will be limited. General inspections of driver's licenses of students at schools will be conducted. Owners of new motorbikes must meet specified conditions.
2. Strict and heavy fines for traffic rule violators. Since February 2003, trucks breaching traffic rules will be handled strictly.
3. Left turns are no longer allowed at 17 more intersections. Lane partitions will be installed at 20 more intersections and 12 pedestrian lights will be installed in front of schools, markets, department stores and hospitals. Three footbridges will be built.
4. Some pairs of parallel streets will be turned into one-way streets.
5. Heavy trucks will be banned during daytime, and light trucks banned on some street during rush hours.
6. More investments in public transport are called for.
7. Different work and school hours will be applied.
8. The work progress of several important transport projects will be accelerated.
9. The efficiency of traffic control by means of signs and observation systems will be boosted.

Some sanctions for common violations by motorbike drivers

     1.    Give warning to drivers under 16 years of age.
2.    Give warning or fine VND20,000-50,000 ($1.30 - 3.26) for the following violations:
a.    Drivers of motorbikes of over 50cc aged 16-18.
b.    Drivers who do not carry registration licenses and valid civil liability insurance cards.
c.    Drivers who do not carry driving licenses. 
3.    Fine VND50,000-100,000($3.26 - $6.45) for drivers (over 18 years of age) who: 
a.     Do not have driving licenses
b.     Have driving licenses issued by incompetent authorities
c.     Do not have valid civil liability insurance cards.  
4.    Fine VND20,000-50,000 ($1.30- $3.26) for drivers of motorbikes without horns, lights, signals or rear-view mirrors, or with these parts but they are useless. The same fine applies to motorbikes with incorrect number plates.  
5.    Fine VND50,000-100,000 ($3.26 - $6.45)for drivers of motorbikes without brakes and drivers who do not transfer ownership or have changed the motorbike brand without permission.  
6.    Fine VND100,000-200,000  ($6.45 - $12.90) for drivers who use horns with the volume exceeding the permitted level but without sound reduction equipment.  
7.    Drivers who are fined VND200,000 ($12.90) or over will be recorded. Those who are recorded three times in a year will have their driving licenses revoked and will not be allowed to take driving examinations in that year.

Driving licenses for foreigners.

The application for exchanging driving license needs only certification from the employer instead from the Ministry of Foreign Affairs, the foreign embassy or consulate, the department of planning and investment, the external economic relations department, and others as before. This new rule saves time for foreigners and makes them feel at ease.

However, foreigners wishing to take driving tests in Vietnam will get into trouble as Vietnam Road Department only has questions in Vietnamese, not in English.  

Therefore, foreigners should carry with them driving licenses when they come to Vietnam and exchange them for Vietnamese equivalents. [Note, International Driving Licenses don’t count in Vietnam, unless when you produce them you proclaim loudly of Vietnam’s violation of the UN treaty on International driving.]

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The BTA Update.  America praised Vietnam's efforts to implement the bilateral trade agreement and will support Vietnam further in this respect.  

At the second meeting of the Vietnam-US. Joint Committee for Trade and Economic Cooperation in Hanoi, deputy trade representative John Huntsman said the U.S. will support Vietnam's bid to join the WTO, and bilateral talks on this issue will be held in May. Vietnam and the U.S. will also discuss a garment and textile agreement in April.

The Ministry of Trade has encouraged Vietnamese catfish businesses to increase export to Australia as they will not face many barriers like export to the U.S. At present, Australia imposes a 0% tariff on catfish import

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Gambling allowed at big hotels, resorts.  Deluxe hotels and large entertainment centers are eligible to offer electronic gambling to foreigners following a new government decision issued in late March 2003.

The Prime Minister's decision 32/2003 permits hotels of four stars or above in Hanoi and HCM City and those of three stars or above in other cities and provinces to operate slot machines. Large resorts and entertainment centers can also offer the service provided they have separate areas for the games and obtain a written request from local authorities. Slot machines cannot be put into operation until the MPI has issued licenses for foreign-invested businesses and certificates of business registration for local companies.

To operate slot machines, businesses must have staff and equipment to ensure security, check the passports of players, pay special consumption tax and register with the finance and police authorities in the localities where they are based to produce coins for slot machines.

The MPI will not license businesses to operate electronic gambling only. According to a ministry official, at least 20 businesses are seeking approval to operate slot machines. Several border provinces like Quang Ninh, Lao Cai and Tay Ninh have asked for permission to offer the service to increase revenue.

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Population Growth. Vietnam's population of 80 million is still growing but slower than in previous decades. The current rate of growth is 1.2 percent according to government sources. This is down from 2.8 from the late 1970s when Vietnam had a fairly strict two-child policy. The two-child policy was lifted in 2000, but most Vietnamese families do not have more than two children. Education and economics are the reasons most often stated about having smaller families. Vietnam is still a very young nation with 30 million people between the age of 10 and 24.

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Viet Kieu business people may stay longer. Overseas Vietnamese, Viet Kieu, will be allowed longer stays in Ho Chi Minh City to facilitate their business activity, provided they are members of the Overseas Vietnamese Business Association (OVIBA). Members are will soon be permitted to stay for up to three years, instead of one or two years as at present.

The city government gave its approval at an OVIBA meeting chaired by city Vice Chairman Nguyen Thien Nhan and attended by 80 Viet Kieu businesspeople.

OVIBA was asked to coordinate with the Overseas Vietnamese Committee in HCM City to make a list of people wishing to stay here for three years and submit it to the city government for approval.

The Law on Foreign Investment allows Viet Kieu investors to stay in Vietnam from one to three years based on their licensed business terms. However, only one of the 100 members of OVIBA has been granted a three-year residence permit

Viet Kieu businesspeople have had to seek extensions for their residence in the country - a process that is time-consuming.

The city has about 800 Viet Kieu-invested enterprises with combined investment capital of VND900 billion (US$58 million).

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