Vietnam Overseas

The Associated Press, posted Friday, October 5, 2007

Taiwanese laptop maker Compal Electronics Inc. has received a license to invest US$500 million (€354 million) in manufacturing facilities in Vietnam, the second major high-tech investment announced for the country in little over a month, reflecting its growing appeal to global electronics companies.

The investment license, issued by northern Vinh Phuc province near Hanoi, is a green light for Compal to start building production facilities in the Ba Thien Industrial Park this year, said Nguyen Van Lai, director of the province’s investment department.

The Taiwanese company, the world’s second-largest contract maker of laptop computers by output, aims to produce 800,000 laptops in 2009 in Vietnam and 6.5 million laptops in 2010, most of which will be for export, Lai said.

Compal’s investment plans underscore Vietnam’s growing appeal as a location for high-tech manufacturers, who value the country’s inexpensive labor force and relatively stable economic regime.

In late August, Taiwan’s Hon Hai Precision Co., the world’s biggest electronics contract manufacturer by revenue, said it would quintuple its planned investment in Vietnam to US$5 billion over the next five years.

Last year, U.S.-based Intel Corp. said it would build a US$1 billion semiconductor testing and assembly plant near Ho Chi Minh City in the south. Call centers and other outsourcing operations also have established themselves in Vietnam.

Lai said the provincial authorities have agreed to provide 360 hectares of land to set up factories, where Compal and about 24 other Taiwan companies have pledged to invest a total of US$1.1 billion by 2012.

Compal said these companies will serve its demand for electronic parts, and will also produce parts and accessories for cell phones and personal computers, according to Lai.

Compal said it is investing in Vietnam because of customer requests.

“We are currently investing in Vietnam, because of our customers’ demand,” Compal spokesman Chang Chih Ming said. “They want to diversify their investment (from China) to minimize risks.”

Compal had said in August that it plans to spend US$30 million on the initial phase of a manufacturing site in Vietnam.

“The US$30 million should be used by middle of next year, and we will decide the next step by evaluating the progress,” said Chang.

By Jason Folkmanis, Bloomberg News, posted Wednesday, October 10, 2007

Prudential of Britain has opened a consumer finance unit in Ho Chi Minh City as it tries to leverage a leading position in the Vietnamese insurance market.

Prudential, the second-biggest British insurer after Aviva, has a 42 percent share of the Vietnamese life insurance market as measured by total premium income at the end of 2006, the company said Tuesday.

Prudential Vietnam Finance will offer consumer loans and mortgages and may eventually offer credit cards. Retail sales in Vietnam are rising about 25 percent a year, according to a report last week from HSBC Holdings. Economic growth has averaged 7.8 percent over the past five years.

“They need to invest all these premiums they’ve generated, and the current options are pretty limited,” said Thomas O’Dore, president of the Vietnam unit based in Ho Chi Minh City, of Liberty Mutual Group, based in Massachusetts. “This is a logical extension of their business here, to generate the kind of returns their policyholders expect.”

Prudential got a Vietnamese government license last year to operate a finance company in the country. Société Générale, one of the largest French banks, has opened a unit in Vietnam to offer loans for cars, motorbikes and household goods, the State Bank of Vietnam said last month.

The move into consumer finance is a “logical extension” in a country where Prudential is the No. 1 life insurer and asset manager, the company’s chief executive, Mark Tucker, said in an interview in Ho Chi Minh City.

“We have a significant customer base here. We have excellent brand recognition,” he said.

Prudential’s expansion in Vietnam comes amid rising foreign interest in the insurance industry in the country, home to 85 million people. HSBC, the world’s second-largest bank after Citigroup, said last month that it would pay $255 million for a 10 percent stake in Bao Viet Insurance & Finance Group, the biggest government-owned insurer.

The previous day, AXA, the insurer based in Paris, said it had agreed to pay €54 million, or $76 million, for a 16.6 percent stake in Bao Minh Insurance, the second-biggest Vietnamese state-owned insurer.

The value of life insurance premiums in Vietnam rose 4 percent last year to almost 8.5 trillion dong, or $523 million, according to a June report in the Thoi Bao Kinh Te Saigon paper.

“Economic growth is having a very positive influence on the insurance sector,” said Pham Que Phong, general manager of Bao Minh’s property and engineering insurance division, in an Oct. 4 interview in Ho Chi Minh City. “Demand for insurance products is getting much higher.”

Executives of China’s state-owned enterprises, who have been earning salaries for their work, is expected to become shareholders of their own enterprises.

China will speed up the move to design and issue long and middle-term encouragement policies for executives of central state-owned enterprises, which should be substantial, effective market measures such as shares or options, said Li Rongrong, director of State-owned Assets Supervision and Administration Commission (SASAC) under the State Council, on Friday.

This is the first time for China to raise such a suggestion at the government level to offer shareholdings for managers of 169 central state-owned enterprises as encouragement.

Offering shareholdings for managers will be first practiced in enterprises listed overseas, then in those listed at home and finally in other central state-owned enterprises, an official with the SASAC told Xinhua.

Enterprises first chosen should be those of standard corporate governance and proper management, he said.

According to the official, the revision of the Corporate Law and the issuance of the notice regulating management buyouts by SASAC constitute a legal premise for the establishment of a shareholding encouragement system.

The SASAC, along with the Ministry of Finance, jointly issued the provisional regulation in April this year prohibiting management buyouts of state assets of large state-owned businesses, but allows such transactions at small- and medium-size ones.

The regulation was issued when the reform of changing the split-share structure in China’s capital market has started, the official acknowledged.

There has existed a large volume of non-tradable state and corporate shares in China’s capital market. Before the reform was launched this May, only about one-third of the shares in domestically listed companies are floated on the market, which has been blamed as one of the major causes of China’s sluggish stock markets and putting public investors at a worse position than the actual controllers of the listed companies.

Taking shareholding offer as an encouragement refers to permitting managers to hold certain percentage of increased shares of the enterprises, including those from IPO or refinancing, he said.

“In fact, some enterprises listed overseas have begun such practice. What we are lacking now is just particular measures,” said the official.

However, he added, despite such an encouragement itself being beyond dispute, the biggest obstacle is China’s current environment, such as a share market incapable of objectively reflecting investment value of companies.

As for the percentage of shareholding, the official said that different percentage will be implemented in different companies, but there will be no an upper limit.

Pay for managers of China’s state-owned enterprises has been short of a reasonable standard as some executives managing an enterprises of dozens of billion-dollar capital earns only hundreds of thousands of dollars a year no matter whether the enterprise’s profits are good or not.

In 2003 and 2004, the SASAC has issued provisional regulations for work assessment and pay standards of managers of central state-owned enterprises which links their pay to the assessment results.

In 2004, the first year when the assessment and pay system was performed, 25 large state-owned firms got A, the best level, while 13 enterprises got D or E for failing to reach the goal.

Executives of enterprises getting an A level, will get an annual salary of two or three times more than ever, said Xiong Zhijun, director of Enterprise Distribution Bureau of SASAC.

Source: Xinhua

The Bank for Investment and Development of Viet Nam (BIDV) yesterday said the Government has approved plans to establish the Viet Nam Aircraft Leasing JSC (VALC), which is seen as a major move in liberalizing the airline industry.

Founding shareholders include major State enterprises: BIDV may hold up to 20% of the company once the plans are finalized; Vietnam Airlines, Viet Nam Oil and Gas Group (Petro Vietnam) and Viet Nam Shipbuilding Industry Group (Vinashin) could hold over 10% each; and Phong Phu Corp, a leading textile producer, may acquire 8%.

The conglomerate will consider bringing on strategic partners and is currently finalizing documents to officially open VALC.

Under the proposed development plan, VALC must have at least US$200mil in charter capital in its first phase from 2007-14, which will be increased to $1bil by 2025.

VALC will deal in various aircraft from helicopters to cargo planes. The aircraft will be used for long term lease or short hire. The company will provide other relevant aviation services including asset management, insurance, maintenance and even financial lending.

VALC is negotiating with Airbus, Boeing and other manufacturers to buy or hire planes. In the first phase of its development plan, VALC will provide long and medium range aircraft.

VALC’s first major client will be Vietnam Airlines, but plans to target other companies in the region.

“We also expect that once the company is profitable VALC will join the stock market and make other long term investments. Personally, [the plan] is not too ambitious,” said BIDV General Director Tran Bac Ha.

The leasing company will help meet growing domestic demand for aircraft, especially among private civil aviation companies such as Sai Gon Air Corp.

“We will surely help their in-house aviation company as there seems to be a real potential in the market,” said Ha.

Posted September 25, 2007, Vietnam Net Bridge, source: Viet Nam News