Tag Archives: Vietnam law

The Opportunity in Vietnam’s Spat with China

Last week’s anti-China riots in Vietnam spooked investors, rattled the stock exchanges, threatened foreign business deals, and ignited conversation about whether that the political and economic risks in that region outweigh the potential rewards.  But where some see the unraveling of peaceful co-existence in Southeast Asia, others see a golden opportunity.

Are businesses and investors over-reacting?  Consider some of the more encouraging news coming out of Vietnam this month:

  • Samsung is going ahead with expansion of manufacturing in the northern provinces of Thai Nguyen and Bac Ninh.  As a result, about 50% of its smart phones made globally will be made in Vietnam.  Already, Samsung’s factory in Bac Ninh was one of its largest worldwide, and the company accounted for $24 billion in exports from Vietnam.  The Thai Nguyen factory opened in March will employ 16,000 workers and produce eight million units per month.
  • The Saigon port welcomed the largest ship ever docked there,  a 54,000 ton vessel able to navigate the river safely thanks to a mammoth dredging project that will allow ships of this size to save $500,000 a year in transit costs.  The port projects moving 120-150 million tons by 2025.

  • The investment ministry unveiled a proposed law that will cut red tape and streamline foreign investment by eliminating certificates for many projects, simplifying procedures, ending favorable treatment of domestic investors, and improving transparency.

  • Foreign investors have been snapping up stocks that domestic investors are rushing to sell in an over-reaction to last week’s riots.  Foreigners are taking advantage of sharp drop in the VN Index, which peaked at 610 points earlier this year and fell below 530 before climbing back to 544 today.

  • McKinsey released a study concluding that ASEAN, composed of Vietnam and nine other countries, will be the world’s 4th largest economy in 2050.

Business is getting done in Vietnam.  Opportunities abound.  The ugly events of last week are not likely to lead to war in the South China Sea.   More likely, they will turn out to have been an exchange of moves in a chess game of diplomacy that will help clarify the figurative boundaries between two of the world’s fastest growing economies.

Vietnam’s Hard Line on Soft Drinks

Vietnam isn’t being very hospitable to two of its most prominent American multi-nationals.  Starting next July, the finance ministry wants to impose a 10%  tax on carbonated soft drinks — which is to say Coke and Pepsi.

The rationale is these beverages are harmful to public health, just like other products consumers want — but which health officials don’t want them to have — like  cigarettes and alcohol.

The new tax is getting criticism from foreigners who are thinking more about profits than health.  A consultancy that focuses on global interests in Vietnam says the tax will hurt consumers and the local sugar industry, retail distribution system and retailers.

The American Chamber of Commerce, whose members include Coke, Pepsi, Miller beer, Philip Morris tobacco, Dow chemical and other companies that give Vietnamese health officials pause, calls the proposed tax unfair to consumers.

Meanwhile, Vietnamese officials aren’t in agreement with each other.  The Viet Nam Tax Consultancy Association favors the tax, but the Central Institute for Economic Management suggests it would be counterproductive — bringing in $8.4 million tax revenue but costing the beverage industry $41 million and Vietnam’s economy $12 million because demand for soft drinks would decline 28%.

The proposed tax is testing Vietnam’s Communist Party ideal of creating an enduring socially responsible free enterprise economy.  That won’t be easy to do as the country opens its door ever wider to the global marketplace.

How Vietnam Handles Corporate Malfeasance

Not long after Wall Street brought down the global economy five years ago, Vietnam experienced a series of corporate scandals that — like the American banking crisis — has stalled its economy ever since.  This week two top business executives learned that the consequences of corporate malfeasance are different in Vietnam than in America.  They were sentenced to death.

A Vietnamese court imposed the ultimate penalty on two senior executives of the state-owned shipping company Vinalines.  The men had been accused of embezzlement, and Vietnam’s authorities decided to send a message to its own business executives — and to wary foreign investors — that they take corruption seriously.

Last year Vinalines nearly collapsed under $3 billion of debt in one of several high profile scandals at large state-run companies.  Its former chairman Duong Chi Dung and CEO Mai Van Phuc were given the death penalty for embezzling $1.5 million.  Eight other former executives of Vinalines and other state-owned companies  were sentenced to between four and 22 years in prison.

Last month a former banker and his business associate at a large state bank were sentenced to death for embezzling $25 million.  Last year nine former executives at the state shipbuilder Vinashin were given lengthy jail terms after the company nearly collapsed in 2010 under billions of dollars of debt.

If the penalties seem harsh, they are explained by more than resentment of ordinary Vietnamese people who blame corruption and mismanagement for the country’s sluggish economy.

Another consideration is foreign governments and corporations that have been looking for signs that Vietnam’s government can be trusted to protect their investments.  That’s not a significant concern in the US, which helps explain why nobody on Wall Street has gone to the gallows.


Vietnam’s Approach to Gender Roles at Work

About the time the Vietnam/American War ended, American women started progressing toward gender equity in the workplace, and now it’s hard to imagine the US government doing what Vietnam just did:  banned employers from hiring women in 77 job categories.  

Effective Dec. 15, Vietnam’s new labor decree is aimed at protecting women’s health.  It prohibits women from working in jobs that adversely affect their  reproduction and child raising duties as well as jobs that require frequent submersion in water.  The list includes metal processing, oil well drilling, gas exploration, work on high-voltage power lines, repairing the exterior of tall buildings, boiler operation, and anything that involves carrying things heavier than 120 pounds.

Women also won’t be allowed to do sewer dredging, mining, underwater concrete construction, or anything that requires workers to stay in dirty and stinky water for 12 hours or more a week.

Further, women who are pregnant or raising infants aren’t allowed to do work that exposes them to electromagnets or radioactive substances, or chemicals that can cause gene mutation or cancer.  And they won’t be allowed to carry more than 50-pound objects, or work in dirty water, excessive heat, excessive cold, or stagnant air.

Some feminists might consider the new rules appalling, but they seem to reflect a profound cultural difference between East and West when it comes to acknowledging and honoring gender differences and protecting the health of not only women but also the next generation.

And anybody who wants to complain that Vietnam’s male-dominated government is being sexist will have to explain why the country’s males will be ending up with most of the dirty work.

Vietnam’s Cops May Get a Lot Friendlier

For years, Vietnam enjoyed a reputation as a destination where tourists were relatively safe from petty thieves and bag snatchers foreigners  encounter worldwide.  That has changed.

Vietnam is considering creating an English-speaking tourism police force to treat foreign visitors kindly and crack down on anyone who hassles them.  That’s because a slowdown in visits to Vietnam was attributed in part to experiences like that of a Chinese tourist who was robbed at knife point by a taxi driver last month in Hanoi’s Old Quarter.

Like most sectors in Vietnam, tourism has become a huge, and fast-growing business — $7.6 in revenue last year (6% of GDP).  Foreign tourists increased from 1.4 million in 1995 to nearly 7 million in 2012.  The growth in Vietnamese traveling in their own country is even greater — up 7 million to 33 million over the same period.

So far in 2013 foreign visitors increased 2.6% over last, compared to 14% and 18% the previous two years.  Authorities say the decline has been accompanied by more incidents of swindling, extortion and hassling — especially in Hanoi, Saigon, and beach areas.  Also, a new European Union-funded survey of tourist facilities finds that languages and soft skills remain a big problem for Vietnam’s tourism industry.

The prime minister has ordered his government to make sure Vietnam is safe and friendly.  Police have been told to be friendly to visitors and step up patrols in tourism destinations — eliminating thieves, aggressive street vendors, and extorting taxi drivers.  Also, each large tourist destinations will open an assistance center for tourists.


Silencing Foreign Television in Vietnam

Vietnam’s mass communications regulators are risking cutting off their information-obsessed citizens from TV stations CNN, BBC, Discovery, CNBC and others by requiring them to pay for translation of all their programming into Vietnamese.

That may not happen in some cases, and the decree that took effect last week could simultaneously stifle millions in the entrepreneurial Vietnamese workforce from getting information they crave and undermine their passion to learn English.

It may be understandable that the government wants to preserve Vietnamese culture, including the language, but at what cost?  Vietnam government  French broadcaster Canal+ and Vietnam’s national TV broadcaster suspended retransmission of 21 TV channels, and Reporters Without Borders complained the decree is too costly and facilitates censorship.

The simultaneous translation decree applies to four categories: movies, news, educational programs, and entertainment (including sports and music).  Some stations — Cinemax, Fox Sports, and others — have already met the translation requirement and obtained licenses from Vietnam’s information ministry. Sixteen stations have yet to comply, and some probably never will.

Vietnam’s plunge into the 21st Century global economy can be painful for traditionalists.  Even so, for Vietnam’s millions of hungry capitalists, it’s too late to put the genie back in the bottle.




Borrowing the Vietnamese People’s Property

Starting this weekend, foreigners in Vietnam’s capital city can get 50-year certificates of land use rights and home ownership.  This is a significant development in a communist country where the land belongs to the people.

The Hanoi People’s Committee will not grant foreign ownership for farmland or public parks or gardens, and the ownership certificates ultimately expire.  Even so, it’s hard to imagine the regulatory structure being anything like it is today in fast-moving Vietnam a half century from now.

Economics appears to be a driver of the new policy.  Vietnam is experiencing a prolonged stagnation in real estate values.

Under current regulations, a foreigner is allowed to lease land on a long-term basis, but they cannot own houses; there are  427 exceptions countrywide, but very few foreign home-ownership permissions have been granted over the past five years.

In any case, opening home ownership to foreigners in Hanoi could be a turning point for Vietnam’s dismal real estate market.