Vietnam intends to closely supervise FDI projects’ progress

A draft version for a new decree intended to replace the current Decree on supervising and evaluating investment (No. 113/2009/ND-CP) has been publicized by Vietnam Ministry of Planning and Investment to obtain public opinions. What’s new in the draft? The intended new decree shall not only govern state-owned investment as previously but also cover the FDI and PPP sectors also. If approved and passed, the new decree would be an import legal instrument that foreign investors in Vietnam shall have to pay attention to.

According to the draft, foreign investors shall have to regularly send reports to relevant authorities describing the status of their investment projects, including

1.  Progress of Business Registration (according to the new Law on Investment, foreign investors shall have to apply for Business Registration after obtaining an investment certificate; in another word, an investment certificate shall no longer serve also as a Business Registration as per the Investment Law promulgated in 2005 which is going to expire in the next few months),

2.  Project implementation status and project’s goal implementation status.

3.  Progress of investment capital contribution, charter capital contribution and legal capital contribution, if any,

4.  Project operation status: business operation results, labour and employment, investment for R&D, enterprise’s financial status and the status of other criteria dependent on the specific industrial sector of each enterprise,

5.  The observation of legal requirements on environmental protection, land use, and use of natural resources,

6. The observation of regulations stated in the investment certificate and letter of approval of investment policy (if any),

7. The observation of the conditions set forth for investment projects of the conditional sectors.

8.  Status of investment incentives exercise.

Meanwhile, relevant authorities shall closely supervise FDI projects in the following aspects,

a) The implementation of the provisions in the investment certificate;

b) Progress of the project, including charter capital contribution, legal capital contribution, investment  capital disbursement, loans obtaining and progress of the project objectives.

c) The observance of the regulations on environmental protection, land use, use of natural resources;

d) The fulfillment of conditions for investment, conditions to be eligible for investment incentives and the implementation of the commitments promised by the foreign investors (if any);

e) The observance of the legal provisions regarding taxes, labor, insurance, foreign exchange management, construction, fire fighting and prevention;

e) The observance of the provisions on supervision and evaluation of investment and statistical reporting regime as regulated;

g) The execution of the rulings on discovered issues.

It’s still unknown how the draft decree would be revised after obtaining the public opinions and when it will be officially promulgated. However, there is high possibility that the new decree would be issued in concurrence with the time the new Laws on investment and enterprises of Vietnam are effective in July 2015. 

The main theme of "tightening" in the decree may not be changed so much since authorities see the need to closely and strictly supervise the status of FDI projects in Vietnam, under the circumstances of many reports on long  and wasteful delayed projects after obtaining the license and the land which authorities find complicated to revoke the license and deal with the consequences. 

Dung Quat Refinery: The ball of oil rolls on the field of tax and tariffs

Vietnam Ministry of Finance has promulgate Circular No. 48/2015/TT-BTC to reduce the MFN import tariffs on some petroleum products, releasing the high-raised concerns by Binh Son Oil Refinery and Petroleum Company (BSR) over the possible profit loss and even business closure facing the Dungquat refinery.

In a simple logic, currently supplying around 30% of the domestic demand for petroleum products, if the Dungquat refinery had not faced some kind of “import tariff”, the state budget would have lost a considerable amount of revenue coming from taxes imposed on petroleum imports. Meanwhile, this refinery was initially invested by the state budget. Therefore, contrary to the thinking of many outsiders, Dungquat oil refinery despite being a domestic-based oil producer still has to pay the some  import duties imposed on its oil and gas products sold domestically under a special tax adjustment mechanism stipulated by the Vietnam prime minister under a regulatory decision promulgated since 2009 – the year this refinery was completed and put into operation.

According to the said mechanism, such import duties are lower than and based on the applicable import tariffs framed by the National Assembly and regulated in details from time to time by the Ministry of Finance. The specific rates shall be the MFN import rates deducted certain percentages dependent on each type of petroleum products (7% for petrol and diesel; 5% for LPG and 3% petrochemical products). This factor in combination with some new arising factors have stirred a intense controversy in local mas media in April 2015.

Dropping crude oil prices can lead to dropping business?

When crude oil prices started to decrease dramatically last year, the debates over the scenario of Vietnam economy, under end-users, enterprises and government perspectives, also began to get heated. Considering the fact that taxes collected from crude oil export and oil products import constitute a high percentage in the state revenue.

In reaction to that circumstance, Vietnam Ministry of Finance in late 2004 decided to raise the import tariffs on petroleum products. A decision by the Ministry clearly defined that import tax on petroleum products would be based on the price of crude oil, in the principle that the lower crude oil price is, the higher import duties are. Accordingly, if the Platt's crude oil price is below $60 per barrel, the import duty of petrol, kerosene, diesel, fuel oil shall be at the maximum rate of 40%. For example, if the price of crude oil is at around $ 52 per barrel as recently, the import duty for fuels and oil products can be raised to the rate of 40%; when crude is priced at 60-75USD per barrel, the import duty on kerosene, gasoline and diesel fuel would be at 35%, fuel oil at 30%.

Meanwhile, earlier this year, it was estimated that Petro Vietnam Group’s total revenues in 2015 could drop to 434.5 trillion VND (20.2 billion USD) and remittance to the State budget would be only 79.8 trillion VND (3.7 billion USD) in case the oil price was 40 USD per barrel compared to 33.4 billion USD and 7.4 billion USD, respectively, if the price was 100 USD per barrel.

The two factors including the decreasing crude prices and increasing duties seemed to put Dungquat refinery at an hard time of business, and warnings of possible business loss were widely circulated.

The coming “threats” from ASEAN petroleum products?

In application of the ASEAN Trade in Goods Agreement (ATIGA), Ministry of Finance in Nov 2014 , specified the tariffs for imported goods from the ASEAN member countries, of which the rate imposed on petroleum products  have been significantly lower than those applied by the MFN tariffs (normal rate) to which Dungquat refinery’s products are subject to. For example, the ATIGA import rate for petrol (HS 2710) shall be only 20% in 2015-2018; meanwhile, the MFN rate for the same goods at that time was at a high level of 35%.

Sensing the possible threats coming from ASEAN petroleum products because they are enjoying lower tax rates, PVN and BSR raised their voices of concerns and petitions in early April 2015 to Ministry of Finance and some other ministries. They said that such tax situations would make their petroleum products less competitive in the local market and the closure of the young and first refinery in Vietnam may happen, and petitioned to the Ministry to lower the MFN rates on petroleum to the same rates as per ATIGA.

 Some observers commented that the said spoken concerns by BSR were groundless; however Ministry of Finance on 13^th April 2015 issued Circular No. 48/2015/TT-BTC cutting the MFN import tariffs for petrol from 35% down to 20%, diesel from 30% down to 20%, jet fuel from 25% to 10%. These rates are largely similar to these of ATIGA and the concerns by BSR are said to be released.

 Upon issuing that new circular, a representative from Ministry of Finance did not forget to note in a news conference that the cut taxes would make the state revenue reduced by VND 13,000 billion (~ USD 600 million). However, consumers in Vietnam shall not benefit so much from this tax cut because the environmental protection levy imposed on petrol will be tripled from the current 1.000 VND (~4.62 cent) per liter to 3.000 VND (~14 cent)/liter since May 2015.

At this point of time, the situations seem to be harmonized somehow, however, another issue relating to the above-mentioned “special tax adjustment mechanism” may arise when the MFN import tariffs are lower than the “deducted rates”, and shall be analyzed in another article.

I4G

What's new in Vietnam's Law on Enterprises 2014

The new Law on Enterprises (2014) was passed by the National Assembly in November 2014 and shall be effective as of 1^st July 2015. New and existing foreign investors in Vietnam may be curious to have a look at what’s new in the Law and how the regulatory changes shall affect their business operations in Vietnam. A news article from VCCI has noted major legal updates to come into effect in the next few months.

The new law is said to provide just a general frame governing the operations of enterprises; meanwhile it seems to let enterprises to decide many details of how to organize themselves and operate accordingly.

The new Law seems to make room for information technology to take a much bigger role in the business life; the National  Business Registration Portal (currently at http://dangkykinhdoanh.gov.vn), for instance, is assigned to be place where enterprises must publicize their business establishment announcement or their dissolution decision. Another example is the legal recognition of electronic, audio minutes of meeting instead of requiring minute book as the sole recognized form.  According to the law, general meeting of shareholders can be organized under the form of video conference (involving many locations, and the place of the meeting chairperson shall be recorded as the meeting’s location) and shareholders may cast their electronic or email votes legitimately.

The format of business registration certificate is regulated to incorporate only 4 items, namely (1) the name and code of an enterprise, (2) its location, (3) information about the legal representative and (3) charter capital instead of 10 items as regulated in the past law (scope of business, list of founding shareholders, name of representative office, branch, business location have been removed from the format).  Enterprises’ operations shall be no longer restricted within certain scopes of business indicated in the business registration certificate as before, so companies seem to able to do whatever businesses which are not prohibited under the National Constitution.

Under the new regulations, enterprises may determine the format, the quantity and the indicated information of their seal at their discretion (but the seal must at least indicate the name and code of company) enterprises shall only be required to report their seal’s shape to the business registration office for the purpose of publicizing the seal shape in national business registration portal. This approach was of much debate during the law drafting process and treated with contradictory opinions among the lawmakers. But eventually the new law regulates a flexible approach to the matters relating to company seal. According to the past regulations, Vietnamese enterprise seals was in a standard shape regulated by Ministry of Public Security (Police) and “being stamped” was widely recognized as the condition for a document issued by the enterprises to be valid and effective, even it was signed by the legal representative.

Enterprises may determine the format, the quantity and the indicated information of their seal at their discretion

In coherence with the Investment Law 2014, the new enterprise law also officially abolishes the past regulation defining that an Investment Certificate served also as the Business Registration Certificate (2 in 1) for the case of companies established by foreign investors. Thereby, under the new legal regime, the foreign investors wishing to establish enterprises in Vietnam must obtain an investment certificate for their project first in accordance with Investment Law 2014 and after that shall register to establish their enterprise under the provisions of the Law on Enterprises 2014.

Compiled by I4G

[VNA] Falling oil price and impacts on Vietnam’s economy

VietNamNet Bridge – The sharp decrease in world oil price over the past three months is expected to affect Vietnam’s oil export earnings as well as a wide range of socio-economic aspects.

  

As the budget revenue estimate for 2015 was calculated based on the oil price of around 100 USD per barrel, the Government recently had to convene a meeting to discuss ways to respond to this trend.

The meeting agreed that with the low world price, it is inevitable that the country would have to reduce output and even suspend production at some wells where pumping cost is high.

According to the Industry and Trade Ministry, when the price falls to 40 USD per barrel, crude oil output and export would be cut by between 1.8-2 million tonnes. As a result, the production target of 14.74 million tonnes of oil equivalent this year would not be met, not to mention adverse impacts on oil exploitation and refinery projects both at home and abroad.

Nguyen Xuan Son, Chairman of PetroVietnam Member Council, said the group has developed its own scenarios for 2015. Accordingly, the group’s total revenues would drop to 434.5 trillion VND (20.2 billion USD) and remittance to the State budget would be only 79.8 trillion VND (3.7 billion USD) in case the oil price is 40 USD per barrel compared to 718 trillion VND and 159 trillion VND, respectively, if the price is 100 USD per barrel.

Minister of Planning and Investment Bui Quang Vinh noted that every 1 USD reduction in oil price means a loss of nearly 1 trillion VND (46.5 million USD) for the country, and if the world price falls to 40 USD per barrel, Vietnam’s earnings from oil will be slashed by nearly 70 trillion VND (3.25 billion USD).

He nevertheless said that the losses can be made up with increases in economic growth and tax collections. According to the ministry’s calculation, budget revenues will be reduced by 1.5 trillion VND when the oil price stands at 60 USD per barrel, 9.5 trillion VND when the price drops to 50 USD and 11.5 trillion VND when oil is at 40 USD per barrel.

The economic growth is also expected to suffer from the oil price fall, and in the worst scenario with oil price at 40 USD per barrel, the growth for this year would be only 5.2 percent instead of the targeted 6.2 percent, according to Minister Vinh.

He was quick to add that even then, there would be good things for the economy such as less dependency on oil export and more economical spending.

However, many economic experts said the falling world oil price is not that worrying, as the public and society has benefited greatly from it. As petrol price has reduced by more than one third, from 25,000 VND per litre to nearly 16,000 VND, transport costs have begun to decrease, helping businesses cut costs and increase profit.

According to statistics experts, a 20 percent reduction in petrol price could bring about a GDP growth of between 1.8 and 2 percent.

VNA

Dung Quat Refinery expansion plan fixed at 8.5 mln tons of crude and investment of USD 1.82 billion

After much study and calibration, the ambitious plan to expand and upgrade the Dung Quat oil refinery based in Dung Quat Economic Zone of central coastal Quang Ngai province has been eventually fixed and ratified by an Investment Certificate issued by the local government. The target capacity is announced to be 8.5 million tons of crude per year (192,000 barrels per day),  lower than the figure of 10 million tons as tentatively publicized previously. The total cost for this plan is said to be roughly 1.81 billion USD, 30% of which shall be contributed by the involved partner(s) and the remaining 70% shall comes from loans, according to a news article from PVN/BSR.

A ceremony was organized on 23rd Jan 2015 at Dungquat EZ to officially announce the expansion project.

The expansion plan will involve the construction of some new technological units, upgrade the capacity of existing units, building more crude oil tanks, product tanks, upgrading the existing loading jetties ... so that more crude can be processed, a wider variety of crude input types can be handled by the refinery, and the products can meet the environment standard of Euro V. Besides the current single point mooring (SPM) accessible for  150,000 DWT crude vessels, another SPM for vessels up to 300,000 DWT will also be built.

Layout of the Dung Quat Refinery expansion area.

It’s projected that the work for FEED contract and license contract shall finish in Q. II 2015, EPC contract shall be executed since Q.IV 2017 until Q.III 2021 and the expanded refinery shall be put into operation before 2022.

The investment certificate came after an announcement on the Prime Minister’s approval for this expansion plan. Accordingly, the Prime Minister agreed to let Petrovietnam invest this project on its own in parallel with negotiating with Gazpromnheft (Russia) about the [possibility/options of] transferring. Considering the dropping oil price, it seems that Petrovietnam will still maintain its role as the sole owner of Dungquat refinery until there is an official announcement on when and how the Russian oil giant will become a stakeholder in this project.

According to PVN yearly review for 2014, the operator of Dungquat refinery being Binh Son Refining and Petrochemical Company (BSR) under PetroVietnam  processed 6.4 million tons of crude into 5.81 million tons of oil products and reached a revenue of approximately USD 6 billion, contributed to the state budget more than USD 1 billion.

The revenue targeted for 2015 was announced to be lower than last year, at roughly USD 5.75 billion. 

Dungquat’s refinery upgrade and expansion plan estimated to cost $2 billion

PetroVietnam Deputy General Director Le Manh Hung acknowledged during a recent meeting with the Authority of Quang Ngai, where the Dungquat refinery is located, that the plan to upgrade and expand this refinery shall be kicked off in Q.1 2015, clear site should be available in Q2 2016, and construction will commence in Q.3 2017 and expectedly complete in 2021.

The upgrade and expansion plan is estimated to cost between 1.8 to 2 billion USD and shall raise the refinery’s annual capacity from the current 6.5 million tons of crude oil to 10 million tons.

Surroundings of the current refinery

Much hope is being casted on the formation of a giant refining-petrochemical center in the Dung Quat area where there would be many petrochemical plants to follow, not just an alone oil refinery because after upgrade and expansion, the refinery can handle more diversified types of crude oil, with more types of by-products to be used as input materials for downstream petrochemical plants. 

Research and preparation work for this project started since 2009 - the time when the Dungquat oil refinery was completed and put into operation. According to the latest study, two options are now under consideration: the project shall be invested solely by Vietnam or it shall be joined by a foreign partner, possibly Russian Gazprom group.

The necessary area for the upgrade and expansion of the refinery area is 108.2 hectares, of which 94 hectares shall be used for construction works, the safety corridor is around 14.2 hectares. In order to get such space for expansion, it’s projected to relocate around 400 families away from the area and remove some existing civil facilities.

In the latest event, Deputy Prime Minister has ordered PetroVietnam to complete the investment Project and submit to the Industry and Trade Ministry in November this year for evaluation. The project shall be evaluated by a Council to be set up by Ministry of Industry and Trade, with the participation of related Ministries and Quang Ngai province People’s Committee, and then be reported to Prime Minister by the end of 2014.

JFE discontinues plan for steelworks in Vietnam

In  a press release made on its website, JFE has officially announced its decision to quit involvement in the Guang Lian Steel project located in Dung Quat Economic Zone, Quang Ngai province, leaving E-United Group alone with the project.

The press release did not reveal the reasons for JFE Steel’s discontinuing the participation in the project; however, insiders tend to link this leaving decision to the fact of unapproved investment incentives and the fierce competitions from giant steel mills under construction in Vietnam and in the region.  The situation raises the questions over whether E-United Group would go on with the project and how it would arrange the finance to feed this big steelwork.

Source from Dungquat Economic Zone Authority was quoted as saying that if the investor wants to move on, it has to pledge to follow a clear construction road map otherwise the province would consider revoke the investment certificate, recover the allocated land, and pay back to the investor what it has spent legitimately.

In a report by local authority addressed to the government late 2012, the disbursed investment capital of the project was said to be valued at around $ 50 million then as declared by the investor.

While the 9.9 billion Formosa steel project is on its good progress in north central Ha Tinh province, it’s not clear to outsiders which path  the Guang Lian project is heading to.

Related News:

Guang Lian Steel Project in Dung Quat: in the balancing art of "give-and-take"

SCIC told to invest in Thai Nguyen steel project

Source: Saigon Times

Friday,  Aug 29,2014,22:51 (GMT+7)

HANOI – The Government has asked the State Capital Investment Corporation (SCIC) to pour capital in Thai Nguyen steel expansion project’s second phase, and urged banks to restructure debts to ease difficulties for the project owner.

According to the Prime Minister’s instructions, the project invested by Thai Nguyen Iron and Steel Corporation (TISCO) and still remaining uncompleted after seven years will continue to be implemented as proposed by the Ministry of Industry and Trade.

SCIC will have to draw up a capital contribution plan to pour at least VND1 trillion on behalf of the State. Capital contributed will be sourced from the Enterprise Reform Support Fund.

Over the past few years, apart from existing State stakes at some steel enterprises that were previously State-owned enterprises, the State has no longer poured capital in the industry. Vietnam Steel Corporation, the parent company of TISCO, has lagged behind due to the harsh competition in the steel industry from private and foreign-invested enterprises.

The aforementioned project has not been put into operation seven years after its commencement. The project’s investments were initially approved at VND3.84 trillion but have been revised up to VND8.1 trillion.

Some VND4.330 trillion has been disbursed, according to TISCO’s first-half report, but the project has ground to a halt since late last year as banks have stopped lending. This is also the second time in the past seven years the project has deadlocked due to a capital shortage.

As of June 30, 2014, TISCO owed VND7.541 trillion while its equity is only VND1.717 trillion. Due to a lack of capital, the second phase had to be suspended while pending instructions from the Ministry of Industry and Trade and the Government.

While deciding to inject capital so that the investor can finish its project, the Government still requires the industry ministry and the steel corporation to be responsible for the cost-effectiveness of the project and appraise the feasibility of the borrowing plan.

The Thai Nguyen steel expansion plan’s second phase was approved in 2005 to have a capacity of 500,000 tons of steel billet and 500,000 tons of rolled steel, and is one of the projects of Group A to receive preferential loans of the Government.

However, at this moment when the project has fallen far behind schedule, the production capacity of the industry has doubled the demand and many steel plants have to run at less than 50% capacity to avoid inventories.

As a result, the industry ministry has asked the investor to invest in facilities to produce iron and steel billet first. With such an adjustment, only one-fourth of the project is finished while its investments have doubled.

Vung Ro - the third refinery project in Vietnam kicks off

Vietnam has begun construction of Vung Ro oil refinery and petrochemical project in Phu Yen province in the Southern Central Coast of Vietnam. The project, which has an investment of nearly $3.2 billion, is designed to have a capacity of refining 8 million tons of crude per year, and cover an area of 538 hectares, including the area to develop a supporting seaport, according to the Vietnam News Agency.

Groundbreaking Ceremony of Vung Ro Refinery & Petrochemical Project in the south central coast province Phu Yen.

The refinery configuration allows producing fuel products of high quality (LPG, Gasoline RON 92/95, Jet Fuel, Diesel, Fuel Oil) and petrochemical products (Benzene, Toluene, Mixed Xylene, Polypropylene). The products are said to satisfy both current Vietnam specifications and international standards.

Product Slates	VRP Blend (Yield, TPA)	Arabian Light (Yield, TPA)
LPG	388,293	236,307
Gasoline RON 92/95	2,168,403	2,011,559
Jet Fuel	665,546	528,828
Diesel	2,633,036	2,398,811
Fuel Oil	0	867,500
Benzene	73,217	44,069
Toluene	182,869	169,336
Mixed Xylenes	349,082	311,953
Polypropylene	564,222	390,375
Sulfur	7,981	94,037
Total	7,032,649	7,052,775

Source: VRP website

Upon completion, the refinery is expected to create around 1,300 jobs, not to mentioned around 15,000 headcounts shall involve in the construction period and around US$ 110 million of various taxes shall be paid per annum.

General layout of Vung Ro Refinery & Petrochemical Complex. Source: VRP

This is the third refinery project launched in Vietnam, after the Dungquat refinery operating since 2009 and the Nghi Son refinery being now under construction. The latest news from Binh Dinh Province Authority on 11^th Sept 2014also revealed that detailed ffeasibilitystudy for the US$ 22 billion refinery project of 400,000 bpd has been submitted to Vietnam Ministry of  Industry and Trade for consideration. This project is invested by Thailand-based PTT Group and Saudi Aramco Group and is expected to be joined by other partners.

Under the circumstances of several refineries to come on stream in the next few years, including the fact that the current Dung Quat refinery is working on upgrade and expansion plan, experts foresee the situation of fuel supply exceeding domestic demand; then there’s a high possibility that Vietnam would become a petroleum exporter in the future. 

Guang Lian Steel Project in Dung Quat: in the balancing art of "give-and-take"

Various news sources recently reported that authorities allowed corporate income tax rate of 10% to be applicable for only 15 years, instead of for the project's whole lifetime (nearly 69 years) as petitioned by by JFE Steel Corporation (Japan) regarding their tentative investment in the current Guang Lian steel mill project located in Dungquat Economic Zone in Quang Ngai province. This is one of petitioned-but-rejected incentive proposals made by the investor who is found to be in the dilemma of whether to going ahead with the project.

A rescuing hand for a steel mill in stagnancy?

Licensed in 2006, the sole investor for that giant project had been initially Tycoons Group (Taiwan), later joined another Taiwanese investor - E-United who became the majority stakeholder then, resulting in the increase of registered capital to $3 billion and changing the project name into Guang Lian Steel Mill. A commencement ceremony was organized in October 2007, followed by the construction of some civil works and ground piping, then all execution started to suspend since 2010 end until now. After 7 years of commencement, the project remains in a stagnant situation which has been raising much debates among related parties.

Early 2012, JFE expressed its intention to participating in the project, in the form of purchasing controlling stakes in the owners-fluctuating project to become the majority stakeholder (or the real owner), then raising the mill's capacity, changing the configurations to manufacture other types of steel products, and raising the project capital to $4.5 billion. According to its initial plan, the final decision on investment would be made in early 2013, to be followed by application for investment certificate amendment and construction kick-off in July 2013. However, this plan has not been materialized. A new plan was proposed for July 2014, and seems to be missed again.

Give-and-take dilemma

The JFE's participation is expected by local authorities to be the rescuing hand for the long stagnant steel mill project which is now leaving hundreds hectares of land in waste in dim hope. That's what JFE really means to the local community. However, the investor as normal is also keen on benefiting something from the local investment environment. "If, by the end of this year [2012], the study reaches a favorable conclusion, including the feasibility of developing required infrastructure and the availability of incentives, JFE Steel expects to partner with the E United Group to launch a steel-production operation in Vietnam", read a press release announced by JFE Steel in March 2012. 

After great efforts to make a pre-feasibility study available, in 2013, JFE wrote to the authorities to ask for additional incentives such as the allocation of 210 hectares of land and waters to increase the total project area to more than 700 hectares. The Japanese investor also insisted to ensure adequate water supply of 200,000 m3 per day, connecting  its electricity system to the national power grid, and especially the very preferential enterprise income tax for the entire project ..., stated by various reports by local government.

Most of the requirements on infrastructure seemed to get nod from the local government (Dung Quat Economic Zone Authority and Quang Ngai Provincial People's Committee). Quang Ngai Authorities was said to agree in principle to allocate additional 185 hectares of land, adjusting the master plan of Dungquat port complex No. 1 to arrange water area for extra terminals serving the steel mill, coordinating with water and power suppliers (both private and state-owned) to secure the utilities for this power-consuming project. 

Balancing art needs the balance.

However, the financial incentives prospects have been reportedly cashed dim light over the fate of the project. The investor petitioned to enjoy the preferable corporate income tax (CIT) rate of 10% applicable for the whole project lifetime (including for the expanded capacity when raising the investment capital from $3 billion to $ 4.5 billion); however, CIT rate of 10% was tentatively  approved to be applied for only the first 15 years for the expanded capacity, VOV quoted a representative from Quang Ngai authority as saying in July 2014. The source also revealed that the proposals of state budget covering the expenses of additional land compensation and port channel dredging was also turned down by the government, that means, the investor would have to handle these works at their own cost, if he wished to proceed with.

Which or what way to go?

Under such circumstances, it's not difficult to imagine how JFE is in the dilema of "give-and-take" when setting up their presence in Vietnam. At the end of 2012, Eiji Hayashida, president of JFE Steel was quoted as saying about JFE's plan for pouring capital to steel mill project in Dung Quat, “Things won’t go smoothly until we make sure that we’ll beat the competition as many projects are being lined up to build new mills in southern China and Vietnam.”, and “We initially said a conclusion will be reached by the end of this year [2012], but we’ll need a bit more time,” said in an interview 05 Dec 2012 at the company’s Tokyo headquarters. And it seems to outsiders that it's now late 2014 and even more time shall be needed.

Vietnam ranks 68th, up two, in global competitiveness report 2014-2015

While the region of Asia and Pacific is home to three of the 10 most competitive economies in the world: Singapore, Japan, and Hong Kong SAR and a further three economies are featured in the top 20; Vietnam advances 2 places to the rank of 68th out of 144 in the list, according to the Global Competitiveness Report 2014-2015 released by World Economic Forum. Vietnam is among the five largest Southeast Asian economies (ASEAN-5) featuring in the top half of the rankings, and making strides in the edition for 2014-2015. 

Steady improvement in the macro economy, public institution and labor market 

At the rank of 68th, Vietnam’s performance remained almost unchanged from the past 2 years (70/144 for the 2012-2013 and 2013-2014). Following an experience of high inflation in 2011, the country’s macroeconomic situation continues to improve (75th, up 12 positions), as inflation declined to 6.6 percent. Institutions pillar also receive a better assessment (92th, up six), on the basis of better property rights protection and improved efficiency. 

Comparison of the 12 GCI Pillars between Vietnam and Emerging & Development Asia. Source: World Economic Forum

According to WEF’s definition, the institutional environment is determined by the legal and administrative framework within which individuals, firms, and governments interact to generate wealth. The importance of a sound and fair institutional environment has become all the more apparent during the recent economic and financial crisis and is especially crucial for further solidifying the fragile recovery, given the increasing role played by the state at the international level and for the economies of many countries. 

In a region where many countries have poorly functioning labor markets, Vietnam ranks a satisfactory 49th, its best showing among the 12 pillars combined to determine the competitiveness index, especially thanks to the “pay and productivity” aspect ranking 23rd. The highest ranking pillar for Vietnam is the market size (34th). The quality of transport and energy infrastructures also improves slightly. 

Much concerns over access to financing and low readiness for technology 

Vietnam’s financial sector and its banks remain vulnerable. Technological readiness remains low (99th, up three). The country’s businesses are especially slow in adopting the latest technologies (with technology readiness ranking 99th) thus forfeiting significant productivity gains through technological transfer. The degree of business sophistication is low (106th, down eight), with companies typically operating toward the bottom of the value chain (nature of competitive advantage and value chain breadth rank extremely low at 128th, 112th respectively). 

Vietnam's GCI for 2014-2015. Source: World Economic Forum

The report also lists the most problematic factors for doing business in Vietnam, based on the opinions of respondents. Of major concerns are the factors of, among others, access to financing, inadequate educated workforce and policy instability.

150,000 DWT oil tanker accesses Dungquat SPM

According to news released by PVN, on 23^rd August 2014, Binh Son Refining and Petrochemical Company Limited (BSR) successfully received crude oil tanker of 150,000 DWT to import 1 million barrels of AZERI crude oil from Azerbaijan through the Single Point Mooring (SPM) system of Dung Quat Oil Refinery. This is the biggest first-ever oil tanker accessing this facility after 5 years of operation; in the past, only tankers of up to 110,000 DWT could visit here.

During the 2^ndoverall maintenance of the refinery which lasted 57 days, nearly 7,000 items were done with the involvement of 3,400 professional staffs of BSR, contractors, partners. It was divided into 5 main packages, notably the the package 4 was implemented by BSR themselves including the maintenance of rotating equipment, electrical equipment, automation equipment, a number of simple static devices and oil pipelines. Meanwhile, the repair of defects for thermal expansion joints EX-101 in RFCC workshop was conducted by Technip/JGC contractor (EPC contractor of Dung Quat Oil Refinery Plant) and connection of awaiting ends for SRU 2 project was implemented by JGC contractor.

The first 150,000 DWT Oil Tanker at Dungquat SPM. Photo courtesy: PVN

Following the successful maintenance and upgrading of single-point mooring buoy, BSR imported the first crude oil from tanker of 150,000 DWT instead of 110,000 DWT previously. At transformation cost of US$ 300,000 only, SPM system has been improved to receive crude oil vessels of double capacity from Aframax vessel size (80,000 - 110,000 DWT) to Suezmax vessel size (150,000 DWT). Currently, BSR is capable of receiving crude oil from different regions of the world such as West Africa, the Mediterranean ... to help diversify sources of crude oil for processing at Dung Quat Oil Refinery, improving efficiency, reducing production costs and saving USD 10-15 million .

It was the 398^thcrude oil vessel received BSR through this SPM since the plant was put into operation in 2009, with totally 31,288,140 million tons of crude oil handled, approximately 27,985,737 tons of products refined.

SOE equalization to fuel M&A activity

Experts forecast equitizing hundreds of State-owned enterprises (SOEs) between now and next year as ordered by the Government will lead to stronger merger and acquisition (M&A) activity in Vietnam, the Saigon Times Daily reported on August 12.

The M&A activity is also expected to accelerated by the fact that State business groups and corporations required to divest from non-core business areas (mostly including banking, real estate and securities investments) to focus on their respective core industries.  Thanks to that, SOEs will provide the market with a huge amount of capital via their divestments of non-core investments and equitation, and these are great opportunities for investors.

Sam Yoshida, senior managing director of Recof, an M&A consulting firm in Japan, was cited by the Saigon Daily as saying that more investors from this Northeastern Asian country in are keen on the Vietnamese market thanks to low labour cost, a plentiful supply of labour, political stability and great potential for growth.

It is expected that the target for 432 SOEs to go public by the end of 2015 is possible as the pace of SOE equalization in the past seven months of this year was fast, according to the Steering Committee for Enterprise Reform and Development. In the January-July period, State corporations and groups divested a total of 2.975 trillion VND, three times higher than that of last year, but the divestment process remained slow. There have been 76 enterprises restructured in the year to date, with 55 equitized, two dissolved, one sold, 15 merged and three filing for bankruptcy.

As of last month, the Prime Minister had approved the restructuring plans of 20 State groups and corporations, including Vietnam National Textile and Garment Group (Vinatex) which is scheduled to offer its initial public offering (IPO) on the Hochiminh Stock Exchange (HOSE) in September this year.

According to Vinatex’s equalization plan approved by the Government, the group has total chartered capital of 5 trillion VND. After the group goes public, the State will retain a 51% stake while 24% will be offered to strategic investors, 24.4% put up for auction and 0.6% sold to employees.

Another State corporation, Vietnam Airlines, is proceeding with a plan to launch an IPO later this year and sell shares to strategic investors around the end of this year. According to Decision by Minister of Transport, the value of holding company Vietnam Airlines was more than 57.1 trillion VND (over 2.7 billion USD) as of March 31 last year, with State capital making up more than 10.5 trillion VND. Vietnam Airlines wants to sell 25 percent of its chartered capital to investors at the IPO. Later, the State shares at this corporation will gradually lower to 65%.

Compiled from VNA & Saigon Daily

Development master plan set for Dungquat Port Complex II

Further to the expansion plan for Dung Quat Economic Zone which now covers an area of more than 45,000 hectares, a master plan to develop Dung Quat Port No. 2 in area of 1,850 hectares of land and waters has been revealed, following the approval by  Ministry of Transportation.

Dungquat Port II is designed into specialized berths dedicated to giant plants adjacent to port and the factories not adjacent but not so far away, and general cargos berths to be commonly used for the locality and the neighboring areas.

In the first phase of development expected to finish by 2020, the southern part of the port shall be built first, including a 450m long terminal for bulk cargos vessels of 200,000 DWT, 03 terminals for bulk general cargos vessels of 50,000DWT with combined berth length of 850m; a break water of 2,050m length; entrance channel of 300m width and depth of -20,5m. Further development shall be started in the northern part of the port complex in the second phase until 2025.

Then for the third phase until 2030, another terminal shall be constructed for general cargoes vessels of 50,000DWT, and around 11 terminals more are intended to set up after 2030.

Rubber-tired cranes exported at Doosan Vina Specialized Port located in the Dungquat Port Complex No. 1

The port complex No. 1 of Dungquat is now almost fully occupied, including the specialized berths for Dungquat Shipyard (dock for building ships), for Korean-invested Doosan Vina to export huge structures of boilers, cranes, desalination plants … and for the pending Guanglian steel mill. The current port also includes berths of Gemadept and PTSC for general cargoes vessels, where woodchips is extensively exported in recent years. Embedded along the huge break water of the port are petroleum jetties where oil products made at Dungquat Refinery is loaded to oil vessels.

Decision by Ministry of Transportation 2955 on the master plan of Dungquat Port Complex II

No “syndrome” of oil refineries in Vietnam, lawmakers reassured

24^th Nov 2013

At a recent addressing at the National Assembly, Vietnam Prime Minister reassured the lawmakers on their concerns over the so-called oil refinery “syndrome” in the country that implicated that the oil refining projects Vietnam are blooming unnecessarily. The Prime Minister said there was no such syndrome except for the fact that the state-owned Thai PTT's proposed mega-refinery to be located in Binh Dinh province is the only one so far not included in the master plan [for oil refinery and petrochemical projects].

“This project is invested by a big Thai oil refining corporation and it’s just in the pre-feasibility study stage; after the study, only when both economic and social effectiveness is proven, then it would be included in the national master plan” he further explained.

He also cited some facts that the Dungquat oil refinery is running at its full capacity of 6 million tones/year and brings about obvious effectiveness; and Russian Gazprom and Vietnamese PVN already inked a cooperation agreement on raising its capacity to 10 million tons/year during a recent visit by Russian president to Vietnam. The work will also upgrade the technical efficiency of motor fuel production to meet the Euro-5 standard. “We basically do not have to pour more money to raise Dungquat refinery’s capacity because its share shall be sold to Gazprom [and Vietnam will use the capital from such sales]”, he acknowledged.

Meanwhile, PetroVietnam and its partners began construction at the 200,000 b/d Nghi Son refinery and petrochemical complex last month. This project is jointly invested by Vietnamese PVN (25% of shares), an Kuweit Petroleum Corporation (35%) and Mitsui Petrochemical Inc (40%) with the total investment estimated at US$ 9 billion. The refinery is planned to finish construction within 40 months and to start commercial operation in 2017. According to Prime Minister Dung, this project will be also very effective because the Kuwait pledges to supply 100% of the input crude oil for the refinery during its lifetime.

Two other proposed 200,000 b/d refinery and petrochemical projects -- PVN's Long Son complex in the southern province of Ba Ria Vung Tau and state-owned Petrolimex's Nam Van Phong project in the central province of Khanh Hoa -- are looking for foreign investors, the prime minister said. Meanwhile, the refinery project in Can Tho (2 million tons per year) is said to face difficulties in financial arrangement and would be likely to be revoked.

JGC led JV Awarded Contract for Refinery and Petrochemical Complex in Vietnam

Jan 2013

               

Yokohama Japan – JGC Corporation (JGC), Chiyoda Corporation (Chiyoda), Technip, and South Korean contractors GS Engineering & Construction (GS) and SK Engineering & Construction (SK) today jointly announced that the joint venture, formed by JGC, Chiyoda, Technip, GS and SK, has received notification of the award of a contract for the Nghi Son refinery and petrochemicals complex in the Nghi Son economic zone in northern Vietnam. The contract was awarded by the Nghi Son Refinery Petrochemical Limited Liability Company, a joint venture between Idemitsu Kosan Co., Ltd (35.1%), Kuwait Petroleum International (35.1%), Vietnam Oil and Gas Corporation (25.0%), and Mitsui Chemicals, Inc. (4.8%). The lump-sum turnkey contract calls for the engineering, procurement, construction (EPC) and commissioning work for an oil refinery with a production capacity of 200,000 barrels per day. The complex, scheduled for completion in late 2016, will be located in the Thanh Hoa Province in Vietnam, 200 km south of the capital city of Hanoi. The value of the contract was not disclosed.

This project, which is being promoted by Idemitsu Kosan Co., Ltd., Kuwait Petroleum International, Vietnam Oil and Gas Corporation, and Mitsui Chemicals, Inc. is a grassroots oil refinery and petrochemical complex project in Vietnam. This project will be the second constructed in Vietnam, and is aimed at satisfying increasing demands for petroleum products to support the progress of Vietnam's motorization, as well as produce petrochemicals for export. Together with Vietnam's first refinery, the Dung Quat refinery (constructed by a consortium of JGC, Technip and others, and completed in 2009), the Nghi Son refinery and petrochemical complex will be a major pillar supporting the country's economic development.

JGC has been targeting marketing activities toward Southeast Asian countries, including Vietnam, and has been concurrently working on strengthening and expanding JGC Vietnam, an EPC subsidiary of JGC established in Vietnam in 2009. Part of JGC's portion of this project is scheduled to be constructed by JGC Vietnam.

JGC plans to become involved in many more oil refining and petrochemicals projects in Vietnam in the future. JGC has been responsible for the construction of more than fifty oil refineries, and JGC and JGC Vietnam are focusing marketing activities on Southeast Asia in hopes of contributing to building Vietnam's industrial base and furthering economic development.

Source: JGC

Russia to sell Vietnam more military hardware

Russian President Vladimir Putin has said his country is going to increase the assortment of military hardware it sells to the Vietnamese army.

The announcement comes on the heels of Putin’s one-day trip to Hanoi where he met with President Truong Tan Sang and other leaders.

The Russian president has said the two nations today signed a new military deal that will see Russia train Vietnamese navy and armed forces.

Russian firms Rosneft and Gazprom also signed a raft of deals with state energy firm Petrovietnam tackling oil exploration and modernization of Vietnam’s oil refinery.

Putin said Gazprom was to supply the Dung Quat refinery with oil and help it market the produce.

Moscow has also promised to help Hanoi develop its nascent energy industry, building a nuclear energy plant and training its atomic experts. Russia will take part in creating the country’s first Center of Nuclear Science and Technology.

The countries concluded a package of cooperation contracts in ecology, healthcare and industry, including textile manufacturing.

In the meanwhile, the International Investment Bank and the Vietnamese Investment bank have agreed a $50 million loan to Vietnam to boost its small business.

Source: Voice of Russia