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.