Vietnam to allow foreign firms to go public
HANOI - The Vietnamese government has announced that it will allow certain foreign-invested enterprises (FIEs) to go public on a trial basis in the near future.
Making the announcement to FIEs at a meeting held in Hanoi recently, the deputy Minister of Planning and Investment, Vu Huy Hoang, said that the government's decision was aimed at providing new channels for companies to raise capital for further development. The easing of regulations will also help the country attract more foreign direct investment, he added.
"The equitization scheme will prioritize FIEs operating in business areas like manufacturing, real estate, agriculture and tourism," Hoang said. The scheme will also allow FIEs that have turned into share-holding concerns to list on the local stock exchange if they achieve good results and meet certain requirements stipulated by the government.
According to Hoang, the government's equitization plan was formulated several years ago, but its implementation was delayed due to the regional economic crisis. The ministry wants to complete the pilot scheme soon so that it can submit it to the government for approval as soon as possible as ordered by Prime Minister Phan Van Khai.
Hoang also told the meeting that Vietnam will give foreign investors more opportunities to expand their business in the country by allowing them to invest in some areas previously considered forbidden, such as shopping complex and apartment building construction.
Meanwhile, FIEs at the meeting expressed their concerns over high production costs, current tax policies and the "fast" tax cut road map for ASEAN Free Trade Area (AFTA) implementation, all of which, they say, hinders their ability to do business.
Affected enterprises proposed that the government change their process of fulfilling AFTA commitments to protect certain products manufactured by joint ventures. Kozo Murakawa, deputy general director of Sanyo, said that the tax cut process should be slowed to give businesses more time to prepare for integration.
Figures released by investment officials this week show that so far this year the capital city of Hanoi has licensed 30 foreign-invested projects with a total registered capital of US$175 million. The number of projects was equal to only 90 percent of the number in the same period last year, but the investment capital increased by 330 percent.
Wholly foreign-invested projects accounted for 72 percent of the newly licensed projects and 95 percent of the total registered investment capital. The city now has 386 projects which are capitalized at $7.6 billion and which are involved mainly in commerce and services (making up 51 percent), and industry and construction (48.4 percent).
Countries in the Association of Southeast Asian Nations, northwest Europe and North America, China, Japan, Korea, Taiwan and Hong Kong all have significant investments in Hanoi.
Five more foreign-invested projects with a combined investment capital of $131 million were licensed in Central Vietnam's Da Nang city in the first nine months of this year. The total number of foreign-invested projects in the city now stands at 38. By the end of September, these 38 projects, capitalized at nearly $360 million, had disbursed more than $169.71 million.
Almost all foreign-invested projects in Da Nang are making a profit, with their export turnovers increasing from 30 percent to 53 percent year-on-year. The revenues from this sector's exports rose from $52 million in 1999 and $80 million in 2000 to more than $60 million in the first nine months of this year, a 30 percent increase compared with the same period last year.
In the first nine months of this year, Vietnam licensed 336 foreign-invested projects with a combined investment of $1.94 billion. The figures saw year-on-year increases of 42 percent in the number of projects and 218 percent in registered capital.
In another development, most foreign-invested leasing and hospitality entities in Hanoi have reported that they are in the red due to plunging demand and price-cutting pressures.
The MPI reported that the seven five-star hotels in Hanoi, the Sofitel Metropole, Daewoo, Hilton, Horizon, Melia, Sofitel Plaza (formerly known as Meritus), and Nikko, had all issued grim reports about their performance.
They claimed to be operating at only 30-40 percent occupancy and to be reeling under heavy debt burdens and price under-cutting. All the measures to battle the industry downturn, such as cost-cutting and restructuring of investment and management, do not appear to have helped.
MPI statistics show that most of the country's hotels, with up to two-thirds of their investment being debt, are on the verge of insolvency. Some newly-built hotels have even refrained from opening for fear of losses. But it is not the hospitality businesses alone that has been ravaged; foreign-invested businesses in construction, apartment and office lease, and commercial centers, too, are in danger of going under.
The $90 million Vietnam-South Korea estate venture International Trade Center (ITC) in Ho Chi Minh City says it is incurring heavy losses from servicing its huge debts; this from a firm that has leased up to 80-90 percent of its office space and apartments.
ITC says that its needs some state assistance, particularly tax cuts, soft loans and pricing priorities, to put them on par with other domestic businesses. According to the MPI, the country now has 350 foreign-invested businesses licensed to invest in real estate at a combined capital of $13 billion. But only 8 percent of these projects, accounting for 25 percent of the total registered capital, are currently effective.
Asia Times - October 12, 2001.
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