Q4 2013 Colliers Vietnam Investment Digest (EN)


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Read and follow the top economic indicators for Vietnam, M&A activity, and major developments in finance, banking, and legal. Published Monthly with contribution from LNT & Partners Law Firm.

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Q4 2013 Colliers Vietnam Investment Digest (EN)

  1. 1. > Investment Digest Vietnam COLLIERS INTERNATIONAL Quarter 4 | 2013 There have been more winners than losers in 2014. A late surge in GDP highlighted a positive forth quarter despite muted CPI growth. Some of the major winners include a Q4 GDP of over 6%, a surge in FDI of over 50%, trade turnover’s continued strong growth, PMI’s continued growth, and an inflation of just 6.04% for the year. There were few losers this quarter, which included a weak credit market, underperforming retail market, and weak domestic industrial growth. The investment environment continues to improve as the macroeconomics stabilizes and structural reform continues to show progress. State interests continue to recede ponderously, through divestments of the SCIC in the Hanoi stock exchange, opening the door to the private sector. *Arrows indicate monthly trends **Data is accurate as reported by the source on the indicated date OverviewMarket Indicators 30-Day Trend Indicator December November Date 10-year bond yield 8.9% 8.84% 12/30 Credit Market +9.5% - 11% ytd +5.83% ytd 01/01 Deposit Rate 7%-8% 7% 01/01 Exp/Imp +15.4%/+15.4% yoy +15.7%/+15.5% yoy 12/24 FDI +54.5% yoy to $21.6b +36% yoy to $15b 01/01 FDI Disbursement +9.9% yoy to $11.5b +6.4% yoy 01/01 Fitch B+ B+ 01/01 GDP +6.04% Q4, +5.42% +5.14% ytd 12/24 Inflation +6.04% ytd, 6.04% yoy +4.63% ytd, 7.5% yoy 12/24 Lending Rate 7-9% short, 9-11% long 7-9% short, 9-11% long 01/01 Moody’s B2 B2 01/01 Overnight Rate 3.37% 2.77% 01/06 PMI 51.8 51.5 01/06 Refinance Rate 7% 7% 01/06 Repurchase Rate 5% 5.5% 01/06 Retail Sales +12.6% yoy +13.7% yoy 12/24 Standard & Poors BB- BB- 01/01 VND-USD 21,036 21,117 01/06 VN-Index 504,63, +21,63% ytd 492.63, +17.7% ytd 12/31 1 Vietnam Investment Digest | 4Q 2013 | Market Indicators COLLIERS INTERNATIONAL Access more reports and connect with us at bit.ly/investVN & slideshare.net/ColliersVietnam
  2. 2. Dung has promised in 2014. Circular 02 was also pushed to June 1st, which it lays down new guidelines for classifying assets and provisioning for risk. As for the non-competitive and highly leveraged SOE sector, the target is to equitise 500 over the next two years, which will be a tall order considering only 40-50 were equitised in 2013. There are approximately 1,200 SOEs in operation currently, down from a high of an estimated 12,000 in 1990. The second key factor is deleveraging. We’re witnessing an environment where the banking system is flush with capital, but is unwilling to lend amid current reforms and high levels of NPLs. At the same time, firms are unwilling to borrow, as many are still fixing their balance sheets and reducing their level of debt. Both lenders and firms are too engrossed in deleveraging to focus on investment activities – which is the real driver behind domestic demand and GDP growth. We do expect foreign demand to pick up due to the recovery of leading global economies. Keep in mind the FDI sector accounts for 2/3rds of exports, for which approximately 80% of inputs are imported. While industrial and manufacturing will experience strong growth in the year ahead, it will have a muted affect on the economy due to low localization ratios - another area for investment opportunities. What does this mean for the investment environment in Vietnam? There are opportunities abound that are being left on the table due to a focus on deleveraging and limited access to capital. It’s a good time to get your feet on the ground just before the economy shifts into gear – driving valuations upwards and squeezing yields. There’s a one to two year window before structural reform is sufficiently implemented and firms shift from deleveraging to expansion. For Vietnam to approach its development potential, the private sector will have to address acute needs in the following arenas over the next 5-10 years: 1. Banking and Finance 2. Support and Supply Chain 3. Infrastructure 4. Education and Human Resource 5. Retail 2013 will be remembered as a stabilizing year. While the macroeconomic environment improved significantly over 2012 and 2011, weak structural fundamentals is still a major roadblock to strong recovery. Let’s take a glance at 2013, which was really a tale of two halves as the economy shifted into second gear by early third quarter: 4Q of 2013 was a very strong quarter with GDP rising over 6% – pulling the year’s GDP to 5.42%. Manufacturing output rose to the highest level since mid-2011 according to HSBC’s PMI and domestic orders were on the rise. Somewhat surprisingly, inflation slowed and ended the year at 6.04% despite the jump in GDP. Trade continued its strong run this year with both exports and imports rising 15.4% and registered FDI soared 54.5% to US$21.6b – with over 75% committed to industrial and manufacturing. Foreign currency reserves have reached the highest level in years at over US$30 billion, or just under 3 months of import coverage. Equities experienced a strong year as well, with the VN-Index rising 21.6% to 504.6 and the HXN-Index rising 18.83% to 67.8. Rounding out the overview, the residential market has finally picked up in the 2nd half, showing strong gains in low-income and mid-income units of 50-80sqm and in commercial properties, the year ended on a positive note with the completion of the Gemadept Tower sale to Korea’s CJ Group. While the market looks to be picking up steam as we enter 2014, let’s shift our focus to two key trends driving market recovery: structural reform, which includes banking sector, SOEs, and public investment, and deleveraging. These two key factors will dictate when the economy will truly turn. Structural reform has been a focus of the government since 2011 and mixed progress has been achieved thus far. In banking, the VAMC has purchased nearly US$2 billion of NPLs over the past 6 months and plans to address a further US$4.76- US$7 billion in 2014 and set up a debt trading market. The actual restructuring of banks has been limited where only a handful of banks have been consolidated or dissolved. Foreign ownership limits remain low as protectionism is still high on the agenda. The market is still waiting for more progress including stronger oversight, more transparency, elimination of cross-ownership, higher foreign ownership limits, and the entry of international- standard credit rating agencies – all of which Prime Minister Investment Manager’s Letter KYNAM DOAN Investment Manager kynam.doan@colliers.com +84 1223 128 032 2 Vietnam Investment Digest | 4Q 2013 | Investment Manager’s Letter COLLIERS INTERNATIONAL
  3. 3. Investment Headlines VAMC Buys VND39 Trillion of NPLs in 6 Months The Viet Nam Asset Management Company (VAMC) purchased VND38.9 trillion (US$1.85 billion) worth of bad debts below a cost of VND32.4 trillion ($1.54 billion) in the form of special bonds from 35 credit institutions in 2013 While the underlying assets haven’t been “resolved,” this move will increase liquidity in the marketplace and takes us one step closer to deleveraging credit institutions by reducing their level of risk provisions. The VAMC has indicated a focus on selling these debts in 2014 and are considering several different mechanisms. VIETNAM INVESTMENT DIGEST | 4Q 2013 3 Vietnam Investment Digest | 4Q 2013 | Investment Headlines COLLIERS INTERNATIONAL Bond Market Gaining Momentum Vietnam’s bond market continues to grow at a healthy pace and fluctuated between $25 and $30 billion in 2013 according to Asian Development Bank. According to other reports, approximately $1.9 billion worth of corporate bonds was publicly issued, which doesn’t account for private placement. Bond issuers included VIPD Group ($362 million), Vingroup ($143 million), CII ($48 million), Hoang Anh Gia Lai ($45 million), BIDV Bank ($150 million), VP Bank ($214 million), Vinacomin ($357 million), and Masan ($105 million). Annual interest rates ranged from 9.8% to 15.5% for 2-5 year bonds. The bond market is about to benefit from the establishment of at least one credit rating agency in 2014, but still lacks some basic infrastructure such as secondary transaction systems and a bond yield curve. Credit Rating Agencies The Ministry of Finance (MOF) is expected to launch a new state- run credit rating agency in 2014. The MOF also expects independent CRAs to establish themselves this year. This long-awaited move should help shore up structural reform as it helps establish one reliable measure of risk. Retail Up 12.6% YOY Retail sales and service revenues reached US$124.66 billion in 2013, up 12.6% over the year before. While this number looks strong, it is the lowest growth rate since 2010. Retail grew 24.5% in 2010, 14.2% in 2011, and 16% in 2012. However, retail supply is experiencing somewhat of a boom as both foreign and local retailers are investing in the mid and long term. The long-game has always looked very promising in Vietnam as modern retailing accounts for only 25% of the entire retail market. Compare this with modernization rates of 33%, 34%, 51%, 60%, and 90% in the Philippines, Thailand, China, Malaysia and Singapore, respectively. On the ground in Ho Chi Minh City, one cannot help but notice the proliferation of retail outlets rapidly gobbling up high visibility frontage properties. Both foreign and local brands are bidding up rental rates along all major streets in District 1 and spilling out to other districts such as D2, D3, D4, D5, D7, D10, and Phu Nhuan. F&B is leading the way with foreign brands such as McDonalds, Burger King, Starbucks, and Coffee Bean & Tea Leaf. Several new malls have also launched this past quarter including AEON Tan Phu Celadon, the Japanese retail group’s first shopping mall with approximately 50,000 sqm of retail area. Following their first Vietnamese Mall, they plan to open a second in the southern area of Binh Duong. Cantavil Premier has also opened in December in District 2 with 23,000 sqm of retail area. A little earlier in the year, in 3Q, Vincom’s Megamall opened in Hanoi with an impressive 230,000 sqm of retail. Vincom also plans to open VinKC, the largest commercial zone targeted towards children ages 0-15, in 2014. HCMC Residential Q4 Quarter 4 has seen some of the fastest residential absorption in the past several years. Approximately 3,700 units were sold in the quarter, up from 2,800 the quarter before. Compare this with 1,300 in Q1 and 1,600 in Q2. Total inventory at the end of 2013 stands at around 7,800 compared to 11,200 units the year before. Demand for low-income housing still leads the way as HCMC continues to experience high rates of urbanization. However, supply still remains low due to low margins and difficulty accessing government incentives such as the VND30 trillion preferential loan package. Some of the larger residential offerings in Q4 were Nam Long’s Ehome 5 in D7 with almost 600 units at around US$48,000 per, CapitaLand’s PARCSpring in D2 with nearly 400 units offered at US$800/sqm, and Hung Loc Phat’s Hung Phat stage 2 in Nha Be District with 80 units at US$720/sqm. Bank Ownership Limits to 20% Strategic foreign investors will now be able to own 20% of a local bank without requiring approval from the Prime Minister, while the cap for total foreign holdings remains at 30%. As is par for the course, the Prime Minister will be able to raise this limit for special cases such as for struggling banks. This new cap will take effect after Tet on February 20th. Non-strategic foreign investors will have their cap raised to 15% from the current 10%. According to the decree, strategic investors must meet a set of requirements, including establishing a long-term relationship.
  4. 4. 4 Vietnam Investment Digest | 4Q 2013 | Investment Headlines COLLIERS INTERNATIONAL VIETNAM INVESTMENT DIGEST | 4Q 2013 Investment Headlines M&A » Nov 2013: Vietnam-based Indochina Land enters into a 35/65 co- development deal with Vietnam’s Nam Long to develop Ehome 3 project. The 35% share is worth approximately US$24.5 million. » Dec 2013: The sale of Gemadept Tower to Korea’s CJ Group has finally gone through valuing the property at approximately US$44 million. » Dec 2013: Vietnam-based Vinamilk acquires 70% of US-based Driftwood Dairy for US$7 million, valuing the company at US$10 million. » Dec 2013: UK-based Tesco lead a US$250 million round of funding in Lazada, a seller of non-food consumer goods in southeast Asia with a major presence in Vietnam. » Dec 2013: Hong Kong-based GaoLing Fund purchased a 24% share in Bien Hoa Vinacafe for approximately US$42 million, valuing the company at US$175 million. OTHER NOTES » Cell Phones topple Garments as top export: It comes as no surprise, but 2013 was a major year for cell phones and their parts as shipments jumped 70% over the year before and exceeded US$21.5 billion. Cell phones has now surpassed textiles and garments, at US$17.9 billion, which had long been the country’s number 1 export. » Metro Line 1 Progress: It was announced that contractors will begin work on the 3rd and final section of Metro line 1 by the end of this year with a target to complete in 2017. » Gold Successfully Tackled : Gold prices have fallen by a record US$545/tael in 2013 and the price difference between domestic and world gold prices shrank from US$314/tael to US$190/tael. This drastic drop has reduced gold’s demand as a safe haven and has helped increase short-term money supply. » In their fight against dollarization, the SBV has successfully reduced foreign currency deposits and loans to 16.3% and 16.9% from 17.8% and 22% the year before. SOE Reforms Slow There are currently around 1,200 SOEs in operation today and both the Prime Minister and Deputy Prime Minister have voiced intent to eliminate most of them by 2020, including 400-500 this year. Given the recent track record of eliminating only double digit numbers of SOEs in each of the past two years, these targets overly optimistic. Instead, expect more modest progress, such as 50-100 equitisations per year. According to the plan, the government will no longer hold controlling stakes in industries such as production of science, documentary, and cartoon films. The government will hold over 50% stakes in industries such as tobacco, environmental sanitation, urban electricity, marine transportation, railway, aviation, finance and banking. In addition, industries such as petroleum, food, process of oil and natural gas, and airport and road maintenance would no longer be wholly state-owned. Over the next three years, the State Capital Investment Corporation (SCIC), representing the state’s interest in the private sector, will reduce its ownership at 376 companies, but will continue to retain stakes in non-essential firms such as Vinamilk, FPT Telecom, Hau Giang Pharmeceuticals, and Vietnam National Reinsurance Corporation. The SCIC will continue to partner with the Hanoi Stock Exchange to divest their shares as they have done so in the past. As Vietnam strives to reduce the stagnant role of SOEs in the economy, many opportunities will arise for the private sector. HCMC Office Sector During last quarter, Grade A office buildings retained upward trend in both asking rents and occupancy rate. The median rentals gained 3% while occupancy rate also rose 3% q-o-q. Rents fell slightly for Grade B while occupancy grew approximately 3% q-o-q as well. Approximately 75,000 sqm of Grade A and Grade B+ space will enter the market in 2014. We expect that this 8% growth in floor area will be efficiently absorbed given rising market demand. Premium location and larger floor plates are highly sought after. Vietnam’s Corruption Rating Improves 7 spots to 116/177 Transparency International’s Corruption Perceptions Index ranks 177 countries and territories based on how corrupt their public sector is perceived to be on a scale from 0 (very corrupt) to 100 (very clean). Vietnam scored a 31/100 and rose 7 spots to which is 116/177 from 2012. In general, a score below 50 represents significant risk due to corruption.
  5. 5. Major Economic Indicators VIETNAM INVESTMENT DIGEST | 4Q 2013 5 Vietnam Investment Digest | 4Q 2013 | Major Economic Indicators COLLIERS INTERNATIONAL GDP Gross domestic product rose 6.04 percent in the fourth quarter from a year earlier, quickening from a 5.54 percent gain in the three months through September, according to data released by the General Statistics Office. For the full year the economy grew 5.42 percent, faster than a 5.25 percent pace in 2012, and beating the median estimate of 5.3 percent in a Bloomberg survey. Services, which made up 43% of the economy, grew 6.6% in 2013 from a year earlier, while industry and construction, which accounted for 38% of GDP, expanded 5.4%. Trade Vietnam has once again run a trade surplus, repeating the feat it accomplished in 2012. According to the General Statistics Office, export turnover in 2013 reached US$132.2 billion, up 15.4% compared with 2012, and import turnover in reached US$131.3 billion, up 15.4% over the previous year. As has been the norm, the FDI sector’s contribution to trade turnover continues to far outpace the local sector. Of exports, the FDI sector accounted for 66.9% to US$88.4 billion, up 22.4% over the year before. The local sector contributed US$43.8 billion, which is only up 3.5% over the year before. For imports, the FDI sector accounted for 56.7% to US$74.5 billion, up 24.2%. The local sector accounted for US$56.8 billion, up 5.6%. The FDI sector posted a surplus value of nearly US$14 billion while the local sector suffered a deficit of US$13.1 billion. EU, America, ASEAN are Vietnam’s top 3 export markets with value of $24.4bn (up 20.4% over 2012), US$23.7bn (up 20.3% over 2012), and US$18.5bn (up 6.3% over 2012), followed by Japan and Korea. Meanwhile, the largest Vietnam import markets are China with total value of US$36.8bn, up 26.7% compared with 2012. China was also the major cause of Vietnam trade deficit with the largest deficit value FDI FDI has been accelerating quickly over Q3 and into Q4 with a year- end figure of US$21.6bn, up 54.5% compared to 2012. FDI disbursed 2013 is estimated to reach US$11.5 billion, up 9.9%. FDI was pumped primarily in the processing and manufacturing industry with approximately US$16.6 billion, accounting for 76.9% of registered capital. Korea and Singapore lead all other countries with pledged investments of US$3.75 billion and US$3.01 billion respectively. Receive this and other reports by joining our group: http://bit.ly/investVN
  6. 6. Strong Stock Market Performance In 2013, the VN-Index posted an increase of 22% and closed the year at 504.63 with foreign investors as net buyers for the year with over US$250 million in capital inflows. Earlier in the year, the VN-Index hit a high of 527.95 on June 7. Vietnam emerged as the strongest performer in South East Asia with Malaysia coming in far behind at 11.22%. The HNX-index was also up 18.83% to 67.8. However, the stock market’s strong performance was dampened by a record high of 37 de-listings. To explain the strong performance and net foreign capital inflows, analysts have pointed to a stable political climate amid Thailand’s strife and China’s strong geopolitical movements, strengthening structural reforms such as the VAMC, and improved macroeconomics such as falling lending rates and stabilized exchange rates. Inflation December inflation grew only slightly at 0.51% month-over-month despite the end-of-year holiday demand that usually drives prices upwards. The GSO reported that inflation eased to 6.04% from 6.81% the year before and well below the target of 7.05%. Topping gains of 2013 were health care by 62.7% and education services by 15.7%, while food decreased by 2.2%. Credit Growth Between 9.5% and 11% It is unclear at what rate credit grew in 2013 as conflicting numbers have been published between 9.5% and 11%. However, what is clear is that a focus on deleveraging, fixing balance sheets and a lack of credit rating agencies are the limiting factors, and not liquidity among credit institutions. Currency Remains Stable The Vietnam Dong has shown stability over the past two years and has remained unchanged since late June’s 1% devaluation. The SBV has indicated that the US dollar-VND exchange rate will not grow more than 2% in 2014. With strong forward guidance for 2014, the SBV hopes to allay any fears a weaker than expected currency. The Dong is propped up by anti-dollarization policies, high remittances, strong FDI disbursed, and and a trade surplus over the past two years. Index of Industrial Production (IIP) Up 8% in 4Q2013 According to the GSO, quarterly IIP increased 5%, 5.5%, 5.4%, and 8% from quarters 1 through 4 – ending the year at 5.9% Garment and textile industry, production of leather and related products, production of prefabricated metal products (excluding machineries and equipments), production of motor vehicles are among top gain in IPP last year. The highest gain belongs to garment and textile industry with 21.8%, followed by other gainers such as production of leather and related products (up 15.3%), production of prefabricated metal products (excluding machineries and equipments), up 14.4%, and production of motor vehicles (up 13.5 %). Manufacturing continues its torrid growth (HSBC’s PMI) Vietnam’s manufacturing output increased for the fourth month in a row following four months of decline. December’s index of 51.8 marked the strongest growth since April of 2011 and improved upon November’s reading of 50.3. New orders increased (increase in domestic orders outweighed decrease in export orders), job creation increased, input prices increased, output prices decreased, and inventories declined. Manufacturing Major Economic Indicators VIETNAM INVESTMENT DIGEST | 4Q 2013 QUARTERLY INVESTMENT DIGEST This digest is published quarterly by Colliers Vietnam Investment Services, led by Peter Dinning and KyNam Doan, with contribution from our legal partner, LNT-Partners. We advise an asset portfolio that focuses on appropriate returns to match diverse risk-return profiles. Our portfolio tracks a wide range of assets including land, developments, and income-producing properties across all market sectors - commercial, hotel, industrial, residential, and retail. Contact us to learn more. General Director Peter.Dinning@colliers.com Investment Manager | HCMC KyNam.Doan@colliers.com Investment Manager | Hanoi Tung.Nguyen@colliers.com COLLIERS INTERNATIONAL VN 6 Vietnam Investment Digest | 4Q 2013 | Major Economic Indicators
  7. 7. Circular No. 30/2013/TT-BTNMT A new circular guiding Decree No. 88/2009/ND-CP was issued on 14 October 2013 and took effect from 29 November 2013. Accordingly, stages of measurement, revising cadastral maps, detailed measurement of cadastral maps in the field, demarcated plots of land etc. will be integrated with other works to shorten the time for granting certificates of land use rights. Obtaining these certificates and/or housing title certificates for the sold units is often a nightmare for property developers. With the issue of this Circular, it is hoped that the formalities are more transparent and less time-consuming, thereby benefiting both property developers and homebuyers. Dispute on Calculating Apartment Area Following the advent of numerous disputes between residents and owners on how to calculate the area of apartments, the Ministry of Construction has cited Circular No. 16/2010/TT-BXD as grounds to settle the disputes. Accordingly, there are two methods to calculate the floor area of the apartment: either determination on the principle of calculating the apartment’s clearance or determination by calculating the area from the middle of the surrounding walls and walls separating apartments. In addition, the method of calculating the floor area of the apartment in one of the above two methods do not infringe on the buyer’s interest and may benefit the seller. However, homebuyers are not satisfied with these methods to calculate the apartment area under the Circular No. 16/2010/TT-BXD due to the inconsistency with the regulations of the Housing Law and Decree No. 71/2010/ND-CP. This has been the leading cause of recent property disputes. The disputes may be concluded only when the State stipulates one method to calculate the apartment area. In common, the best method to calculate the area is the principle of calculating the apartment’s inner area necause this method truly reflects the area of the buyer’s demand. The National Assembly passed the revised Land Law On 29 November 2013, the National Assembly passed the revised Land Law with 89.96% of the delegates agreeing. Notably, the new Land Law clearly stipulates competence to recover land as referred to in Article 62 (recovery of land for the development of socio- economic, national purpose, community) in order to avoid arbitrary recovery of land. The Land Law also has a new article for sequences and procedures of coercive land recovery. With detailed regulations for procedures in land recovery, this will motivate the implementation of real estate projects. Particularly, the new law stipulates that “suspended projects” (or inactive projects) must continue to be implemented or they will be recovered without compensation for land and assets attached to land from the competent authority, unless due to force majeure (Article 64). Furthermore, adjustments to the land price brackets and land price tables according to market volatility have also been added to the new Land Law. The State determination on land prices will also become more objective and more specific when the price was determined based on considering the valuation of the organization with valuation consultancy functions (Article 114.3). This factor is directly related to the financial problems that real estate investors have to weigh when deciding whether to invest or not. The new Land Law shall take effect from 1 July 2014. Decree No. 164/2013/ND-CP On 12 November 2013, the Government issued Decree No. 164/2013/ ND-CP amending and supplementing a number of articles of Decree No. 29/2008/ND-CP stipulating provisions for industrial parks, export processing zones and economic zones. Notably, this new Decree supplements Article 21(b) on the rights and obligations of enterprises operating in industrial parks and economic zones and investors in the construction and business of industrial parks and economic zones. The rights of management bodies in the industrial parks and economic zones are expanded as a local government in such areas as environmental and labour management. This will facilitate the operation and business of those enterprises in the industrial parks and economic zones. This Decree shall take effect from 1 January 2013. Decree No. 188/2013/ND-CP stipulating the development and management of social housing This new decree amending Decree No. 71/2010/ND-CP and guiding the Law on Housing was issued on 20 November 2013 and will take effect from 10 January 2014. This Decree will provide more incentives to developers who invest in social housing projects (or low-cost housing projects), including 50% reductions in land use levies for social housing project land, local government provides assistance in site clearance and compensation and allowance for infrastructure investment to the boundaries of the projects. The homebuyers of social housing projects may sell the sold unit with certain conditions attached within the first 5 years, but they may freely sell the unit after these 5 years. The issue of this Decree is expected to facilitate the development of social housing projects and enhance the purchasing power of products in these projects. Together with the real estate stimulus package of VND 30,000 billion designed for low-income homebuyers, the segment of low- end housing units is expected to significantly improve in the near future. VIETNAM INVESTMENT DIGEST | 4Q 2013 7 Vietnam Investment Digest | 4Q 2013 | Legal Brief COLLIERS INTERNATIONAL Legal Brief
  8. 8. VIETNAM INVESTMENT DIGEST | 4Q 2013 8 Vietnam Investment Digest | 4Q 2013 | Legal Brief COLLIERS INTERNATIONAL Legal Brief Constitution 2013 On 28 November 2013, the National Assembly approved the new Constitution in 2013, which includes 11 chapters and 120 Articles (a reduction of 1 chapter and 27 Articles compared with 1992 Constitution). Notably, under this new Constitution, everyone has the right to do business freely in business lines that are not prohibited by law. Also, the Constitution stipulates the recovery of land for the purpose of national defense and security and socio-economic development in order to avoid arbitrary recovery of land. The new Constitution shall take effect on 1 January 2014. Decree No. 155/2013/ND-CP On 11 November 2013, the Government issued Decree No. 155/2013/ND-CP stipulating the administrative sanctions in the field of investment and planning. The Decree focuses on investments sourced from the State’s financial sources and business registration and operation, and imposes fines for failures to carry them out in accordance the required procedures and formalities. Notably, for violations of domestic investment provisions, the minimum penalty is set at VND 5 million and the maximum penalty is VND 80 million. For administrative violations in tendering, the penalty level ranges from VND 1 million to VND 40 million. These penalty levels, which are applied to organizations, are twice as much as those applied to individuals. Decree No. 155/2013/ND-CP replaced Decree No. 53/2007/ND-CP and shall take effect from 1 January 2014. Amendment on Regulations of Construction Contract On 11 December 2013, the Government issued Decree No. 207/2013/ ND-CP amending and supplementing a number of articles of Decree No. 48/2010/ND-CP dated 7 May 2010. The new Decree supplements some articles regarding signing construction contracts, prices of construction contracts and conditions for application, security for construction contract performance and guarantee for contract advance payment and construction contract advance payments. The new Decree more comprehensively regulates the contents of construction contracts and protects the rights of contracted parties. This Decree shall take effect on 1 February 2014. Construction contracts which have been signed and performed prior to the effective date of this Decree shall not be required to conform to provisions of the Decree. Joint Circular No. 20/2013/TTLT-BXD-BNV Joint Circular No. 20/2013/TTLT-BXD-BNV was issued on 21 November 2013 to guide some provisions of Decree No. 11/2013/ ND-CP dated 14 January 2013 on investment management of urban development. Notably, depending on the needs of urban development and suggestion of the owner, the Provincial People’s Committee shall define the areas, with infrastructure built by the owner, of which land use rights can be transferred to households or individuals. This regulation may increase liquidity in the land market and will attract new inflows into it. Decree No. 182/2013/ND-CP On 14 November 2013, the Government issued a new decree stipulating region-based minimum wage levels for laborers working in enterprises, cooperatives, cooperative groups, farms, households, individuals and agencies, organizations employing laborers. These wage levels will be approximately 14% higher in comparison with those stipulated in Decree No. 103/2012/ND-CP (which was replaced by Decree No. 182/2013/ND-CP). These wage levels shall be applied from 1 January 2014. Decree No. 187/2013/ND-CP: Supplementing List of Prohibited Import and Export Goods Decree No. 187/2013/ND-CP was issued on 20 November 2013 to detail the implementation of the Commercial Law with respect to international purchases and sales of goods, activities of agencies for sale and purchase, and processing and transit of goods involving foreign parties. In comparison with Decree No. 12/2006/ND-CP which was replaced by this Decree, the list of prohibited export goods have been expanded to include certain types of publications and postal stamps as prescribed by the Law on Post, radio equipment and equipment emitting radio waves in accordance with the Law on Radio Frequencies, all types of automobiles in which the structure has been changed as compared to the original design or in which the frame or engine number has been erased, changed or remade, and chemicals stipulated in Annex III of the Rotterdam Convention. The new Decree adheres to the Vietnam’s commitments to the WTO and resolves current issues in import/export. The new Decree shall take effect from 20 February 2014.January 2014. The Government Issued New Decree Guiding Amendments of Law on Value-Added Tax (VAT) On 18 December 2013, Decree No. 209/2013/ND-CP was issued to instruct the implementation of the Law on Value-Added Tax. Accordingly, organizations and individuals that transfer investment projects for production of and trading in goods or services subject to VAT to enterprises or cooperatives shall not be required to declare, calculate and pay VAT. Also in this Decree, VAT on provision of goods and services outside Vietnam must be stated and paid (it was previously exempt from tax in Decree No. 121/2011/ND-CP). This Decree takes effect on 1 January 2013.
  9. 9. 9 Vietnam Investment Digest | 4Q 2013 | Investment Services LEGAL PARTNER LNT & PARTNERS is a leading full-service independently ranked local law firm in Vietnam with offices in Ho Chi Minh City, Hanoi, Hong Kong, and San Francisco. The firm is among Vietnam’s most prominent, representing a wide range of multinational and domestic clients, including Fortune Global 500 companies as well as well-known Vietnamese listed companies on a variety of business and investment matters. LNT & PARTNERS Partner Binh.Tran@LNT-Partners.com + + Reach out to the Vietnamese investment community. To contribute to Colliers’ Investment Digest, contact kynam.doan@colliers.com VIETNAM INVESTMENT DIGEST | 4Q 2013 Colliers International Investment Services Colliers International is a world leader in connecting capital with real estate investment opportunities. We provide breadth and depth of services to both international and local investors, developers, and landowners. Colliers Vietnam is committed to helping our clients make informed decisions - whether it's through investing, divesting, or holding - to increase the value of their porfolios and achieve target liquidity, risk, and returns. We manage a portfolio of opportunities that offer strong returns along a spectrum of well-understood levels of risk. This portfolio includes bare land, distressed developments, and income-producing properties across all market sectors - commercial, hotel, industrial, residential, and retail. Backed by an outstanding track record, wealth of knowledge and strong regional presence, our team is able to deliver the Acquisitions > Identify & secure opportunities to help you achieve your porfolio targets > Assist/Conduct negotiation of letter of intent through to settlement of contract > Conduct Market and Financial Due Diligence as well as advise on best use of land Dispositions > Execute marketing of asset through our strong network of relationships with institutional investors, banks, developers and high net worth individuals in Vietnam and throughout the Asia Pacific > Conduct initial due diligence of interested parties prior to negotiation > Assist/Conduct negotiation through to completion of divestment
  10. 10. Accelerating success With more than 100 professionals in 2 offices in Vietnam, the team is market driven and has proven and successful track record with both international and local experience. From Hanoi to Ho Chi Minh City, we provide a full range of real estate services • Research > Market research across all sectors > Market analysis, advisory, and strategy • Valuation & Advisory Services > Valuation for land, existing property or development sites > Feasibility studies to determine NPV, IRR and highest & best use • Office Services > Tenant Representation > Landlord Representation • Residential Sales & Leasing • Retail Services • Investment Services • Real Estate Management Services • Corporate Services • Industrial Leasing The foundation of our services is the strength and depth of our experience. COLLIERS INTERNATIONAL HO CHI MINH CITY Bitexco Office Building, 7th Floor 19-25 Nguyen Hue Street District 1, HCM City, Vietnam Tel: + 84 8 3827 5665 HANOI Capital Tower, 10th Floor 109 Tran Hung Dao Street, Hoan Kiem District, Hanoi, Vietnam Tel: +84 4 3941 3277 This document/email has been prepared by Colliers International for advertising 482 offices in 62 countries on 6 continents Accelerating success About Colliers International Colliers International is a leader in global real estate services, defined by our spirit of enterprise. Through a culture of service excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. We connect through a shared set of values that shape a collaborative environment throughout our organization that is unsurpassed in the industry. Publication Coverage Frequency Content Availability Research & Forecast Report Vietnam Cities Quarterly All market sectors Publicly available CBD Report HCMC CBD Monthly Office, Retail, Hotel and Serviced Apartment Publicly available Asia Pacific Office Report Asia Pacific in- cluding Vietnam Quarterly Office market Publicly available Vietnam Property Market Report Vietnam cities Quarterly All market sectors On subscription Development Recommendation Vietnam cities At request All market sectors On subscription With more than 100 professionals in 2 offices in Vietnam, the team is market driven and has proven and successful track record with both international and local experience. From Hanoi to Ho Chi Minh City, we provide a full range of real estate services Valuation for land, existing property or development sites Feasibility studies to determine NPV, IRR and highest & best use The foundation of our services is the strength and depth of our experience. COLLIERS INTERNATIONAL HO CHI MINH CITY Bitexco Office Building, 7th Floor 19-25 Nguyen Hue Street District 1, HCM City, Vietnam Tel: + 84 8 3827 5665 HANOI Capital Tower, 10th Floor 109 Tran Hung Dao Street, Hoan Kiem District, Hanoi, Vietnam Tel: +84 4 3941 3277 482 offices in 62 countries on 6 continents Colliers International is a leader in global real estate services, defined by our spirit of excellence and a shared sense of initiative, we integrate the resources of real estate specialists worldwide to accelerate the success of our partners. We connect through a shared set of values that shape a collaborative environment throughout unsurpassed in the industry. collaborative environment throughoutcollaborative environment throughoutcollaborative environment throughoutcollaborative environment throughout $2 billion in annual revenue 2.5 billion square feet under management 13,500 professionals and staff www.colliers.com/vietnam Please contact, If you would like to recieve our other research reports PETER DINNING General Director peter.dinning@colliers.com +84 903 322 344 KYNAM DOAN Investment Manager kynam.doan@colliers.com +84 1223 128 032