Executive Summary

Vietnam Operations

 

 

 

Vietnam

 

Vietnam is a rich and diverse nation of over 78seventy six million people and is possessed of a labor force expanding by about 2.5% per year (Economist Intelligence Unit (EIU), Vietnam Country Report, 2001).  Rich in natural resources such as coal, oil, natural gas and metals, Vietnam also ranks second in the world in both coffee and rice exports, indicating a vibrant and successful agricultural sector. 

 

Vietnam offers a labor force that is young, skilled, educated, motivated and cost effective. Of its estimated population of 787 million, 60%50% is under the age of 25 and 7 million live in the vicinity of Ho Chi Minh City. The EIU considers literacy standards high, with a 94% literacy rate in urban areas.  The EIU also reports in its 2001 Country Report that Vietnam¡¦s school enrolment rates are at record levels. Additionally, Ho Chi Minh City area universities alone supply over 30,000 graduates per year and about 3 million overseas Vietnamese are increasingly contributing capital, knowledge and labor to Vietnam¡¦s development.

 

Vietnam¡¦s government remains stable and has committed to economic growth. The recently elected general secretary of the Communist Party, Nong Duc Manh is loyal to the party. At the same time, he is more reform- minded than his predecessor. The party has reaffirmed the goals of reducing bureaucracy and corruption while continuing to grow the economy along market lines. Time Magazine correspondent Kay Johnson described Manh as ¡§representing a new generation of leadership for Vietnam as his career was forged not in the jungles of war but in communist training schools. In nine years, Manh helped transform the National Assembly from a rubber stamp into a reasonably representative legislature with televised sessions.¡¨ Former US Ambassador Douglas Peterson is quoted as saying; ¡§Manh¡¦s deal-making prowess is probably his most valuable asset.¡¨ (Time Magazine, 28^th January 2002, Vol 159, No. 3)

 

Since the official declaration of the policy of economic renovation called Doi Moi in 1986, Vietnam has rapidly moved into market oriented reforms and modernization.  A new constitution ratified in 1992 underpinned these moves with a new commitment to a, ¡§multi-sector economy in accordance with the market.¡¨  The most recent major overhaul of the constitution was ratified in December 2001, which amended 24 articles and stipulates equal treatment of the private sector, guaranteeing no restrictions on the size of private sector enterprises and the industry in which they operate.

 

These reforms brought broad based economic growth and stability to Vietnam with Ho Chi Minh City being the real growth engine.  The year 20010 saw a 6.8% real GDP growth (EIUconomist Intelligence Unit (EIU) Vietnam Country Profile January 2002uly, 2001) with an average of 8% growth over the decade prior to 2000.  Inflation in 1999 was 4.3%; and in 2000, consumer prices actually fell by an average of 1.7% and in 2001 consumer prices fell a further 0.4% (EIU Vietnam Country Profile, January 2002uly, 2001).  Additionally, foreign direct investment (FDI) continues to experience rapid growth.  In the first half of the year, Vietnam saw a 30% and a 39% increase in the number and value of projects from the same period in the year 2000.Vietnam saw a 23% FDI growth over 2000. 

 

In the face of the type of performance listed above, as well as reforms in the legal structure, Moody¡¦s Investors Service upgraded its outlook from negative to stable for Vietnam¡¦s foreign-currency bonds and notes.  Additionally, the Spring 2001 edition of the World Bank¡¦s Vietnam Economic Monitor states, ¡§Recent surveys also confirm rising domestic investor confidence in the economy¡K for 2001, 85 85%percent [of senior executives in Vietnam surveyed by the Vietnam Investment Review] believed that their firm's financial performance would show strong or moderate growth¡¨ and ¡§rRecent approval of three large foreign investment projects in energy, augur well for the future [of foreign investment inflows].¡¨  In addition, the World Bank has recently referred to Vietnam as the safest place in East Asia for investment. (EIU Vietnam Country Profile, January 2002).

 

Vietnam¡¦s NTR status was ratified by the The recent ratification in August by the US Congress of Vietnam¡¦s NTR statusin August of 2001. Bilateral trade agreement between the US and Vietnam went into effect on 10^th December 2001. These should assist greatly in furthering economic growth and development -by both paving the way for WTO entry and in building enhanced trade relations across the board.  The EIU predicts ¡§the economy will expand briskly in 2003, at a rate close to 7% as exporters take full advantage of the benefits of the US Trade Agreement.¡¨ (EIU Vietnam Country Profile, January 2002).  

 

Looking forward, Vietnam is targeting an industrialized status by 2020. To this end, the government will aim to run an expansionary fiscal policy to stimulate growth. Efforts will continue to be made to open markets, and the State Bank of Vietnam is aiming for 20% credit growth in the 2001-2002 period. 

 

The government has promulgated a series of laws on Foreign Investment which codifies the structure under which ¡§The State of Vietnam protects the ownership of invested capital and other legal rights of foreign investors, provides favorable conditions and formulates simple and prompt procedures for foreign investors investing in Vietnam.¡¨ (Law on Foreign Investment, Article 1).   Likewise, the Banking Legislation Ccode, which was most recently updated in May of 2001, codifies, amongst other things, the rights, responsibilities and regulations covering creditors and borrowers.

 

In the year 2000, Decree 49 issued by the Government devolved responsibility for credit cycles to individual banks, clarified the functions and responsibilities of different committees and bodies within banks and allowed banks to complement their product offerings with non-core services (Vietnam Economic Monitor,.  The World Bank,. Spring 2001). 

 

Under these laws, both foreign and domestic banks offer a range of services and products in both the commercial and personal banking areas.  Currently, in Vietnam, no fewer than twenty-five foreign banks, forty-eight local joint stock commercial banks and a number of joint venture banks engage in banking activities in addition to the original state owned commercial banks.  (Vietnam Investment Review, 24^th~30^th September 24-30, 2001).  

 

Bank services currently include both foreign currency and VND denominated accounts, time deposits, L/Cs, trade financing services, foreign exchange and project financing and loan

syndication. Recent projects by foreign banks include a USD 30 million syndicated loan led by Chinfon Commercial Bank (Taiwan) to a cement project, the offering of AIA insurance products by HSBC, and the establishment of several joint venture banks with local partners.

Ho Chi Minh City

 

Within this framework for growth, Ho Chi Minh City itself has been at the center of Vietnam¡¦s economic development.  Formerly known as Saigon, Ho Chi Minh City is the historical center of business and commerce in Vietnam.  Its deep-water port, relatively developed infrastructure and abundance of human and natural resources all make it a focal point for business and development in Vietnam.   Additionally, Ho Chi Minh City¡¦s strategic location at the center of the regional business centers of Hong Kong, Singapore, Tokyo and Bangkok makes it well placed to be the gateway to Asia. 

 

Originally designed to support only 400,000 inhabitants, Ho Chi Minh City today is home to 7 million residents. Urban population growth in Vietnam currently runs at about 3.6% and the population added accounts for approximately half of the annual increase in population of the nation every year. Such explosive population growth coupled with rapid economic growth has created business opportunities that CT&D Group has responded to. Additionally, policy changes in December 2001 have devolved decision-making authority of many areas of land use, including valuation of land, issuance of land use certificates and the setting of regulations of land use, sale, and rental from the central government to Ho Chi Minh City.

 

Focused in the Ho Chi Minh City area, CT&D Group¡¦s operations in Vietnam consist of the Hiep Phuoc Power Company, The Tan Thuan Export Processing Zone, and the Saigon South Project operated by the Phu My Hung Corporation and the Hiep Phuoc Power Plant.  Operating under the conditions explained above, these enterprises have been able experience overall substantial and sustained growth and success. 

 

Additionally, with current global economic conditions leading to a flight to quality and with CT&D¡¦s now proven track record, CT&D management now feels that the time is right to seek a syndicated loan to help it even further accelerate the development of its Saigon South development projects, most particularly the Hiep Phuoc Power Plant, which is now preparing to embark on its additional improvements expansion stage as well as its plans to convert oil to gas.

Central Trading & Development Group (CT&D)

 

Central Trading and Development Group (CT&D Group) is a Taiwanese headquartered developer with over twelveeleven years of experience in Vietnam.  As a business group that has traveled down the road of development in Taiwan, CT&D Group recognized early on the potential that Vietnam held and understood Vietnam¡¦s development needs.

 

There was a clear need for modern infrastructure and increased employment through industrialization.  In combining these and other needs, CT&D Group put together a plan calling for a development agreement with the Ho Chi Minh City People¡¦s Committee.  Initially, key elements of the plan included an eExport pProcessing zZone and a 3,300 hectare infrastructure, residential, commercial and recreationalan urban development project.  Out of these plans sprang the original concepts for the Tan Thuan Export Processing Zone (TTZ) ¡V a 300-hectare (approx. 741 acres) light industrial park producing goods for export and currently employing over 35,000 workers - and the Saigon South Urban Development Project ¡V a 3,300 hectare (approx. 8,154 acres) urban development project designed to provide business, residential, and recreational facilities for Ho Chi Minh City. .  Additionally, tThe need for reliable and economical power supply have led to the development of the 375 MW Hiep Phuoc Ppower Pplant ¡V a 675MW oil-fired power plant supplying power to the TTZ, Saigon South Project, Hiep Phuoc Basic Industrial Park (HPIZ) and EVN. Also, a deep-water port surrounding the HPIZ capable of accommodating up to 40,000 tons shipping vessels will also be developed in the future (already started by the city government)..

 

CT&D¡¦s projects in Vietnam are each independent legal entities in terms of finance and management. As the major investor ofin each company with and possessing extensive investment experience in Vietnam, CT&D strategically aligns its projects in Vietnam both to optimize value potential and maximize efficient resource usage.  These major projects are:

 

¡P        Tan Thuan Export Processing Zone (TTZ) ¡V A 300 hectare light industrial park employing 35,000 workers producing goods for export.

¡P        Saigon South Development Project ¡V A large-scale urban development project including infrastructure, real estate and amenities.

¡P        Hiep Phuoc Power Company ¡V A 375 MW oil fired power plant supplying power to EVN, the Hiep Phuoc Industrial Park, the Tan Thuan Export Processing Zone and the Saigon South development.

 

Tan Thuan Export Processing Zone (TTZ)

 

The Tan Thuan Corporation (TTC) is a 30-70 joint venture between the Tan Thuan Industrial Promotion Corporation (IPC), a representative of the Ho Chi Minh City People¡¦s Committee,Vietnamese State-owned enterprise (30%) and Central Trading & Development GroupCorporation (CT&D).   TTC received  Investmentits Investment License No 245/GP from the Ministry of Planning and Investment (MPI), formerly the State Committee for Cooperation and Investment, on 24^th  September 1991.  TTChe Company is licensed to operate as a construction and business development company for the Tan Thuan Export Processing Zone (TTEPZ) for 50 years.

 

The TTZan Thuan Export Processing Zone is a light industrial park covering 300 hectares (approx. 741 acres) and services over 150 customers employing 35,000 workers.  With clients manufacturing diverse products from textiles to electronics to and from medical devices to food products, the TTEPZ is home to customers as far away as the USA and Germany, to nearby to Korea, Singapore, Taiwan and even Vietnam, amongst others.  With a combined annual import-export revenue in the TTEPZ currently exceedings USD1 billion USD, the TTEPZ is one of the most successful export-processing zone EPZ¡¦s in Vietnam. 

 

TTZ boasts of being tThe 1^st EPZ to be accredited with with ISO 140019002 worldwide. TTEPZ is built upon solid experience gained from Taiwan¡¦s successful eExport pProcessing zZones. The TTC has invested over USD 58 million into the TTEPZ¡¦s infrastructure and operation. It  and has been a profitable operation since 1993, having distributed dividends to its shareholders.  Offering a one- stop licensing service with a license time measured in days as well as convenient access to transportation and preferential tax incentives, the TTEPZ has been rated ¡§Best Industrial Park in Asia¡¨ by the reputable Euromoney Publication.  according to the Economist Intelligence Unit. TTZ was also awarded a ¡§Labor Medal Second Class¡¨ by the Vietnamese government ¡§for its bright achievements in organization, development and management of the Export Processing Zone and Industrial Zones of Ho Chi Minh City from 1996 to 2000, contributing to the attraction of investment and development of the economy of Vietnam¡¨ on 19^th September 2001. This is the first Labour Medal Award ever granted to both foreign-invested company and joint venture company.

 

 

Saigon South ProjectPhu My Hung Corporation

 

The Phu My Hung Corporation (PMH) is a 30-70 joint venture corporation between the Tan Thuan Industrial Promotion Corporation (IPC), a representative of the Ho Chi Minh City People¡¦s Committee, and the Central Trading & Development GroupCorporation (CT&D)n international company headquartered in Taipei.  PMH received its Investment License 602/GP on 19^th May 19, 1993 from the , issued by the State Committee of Cooperation and Investment (currently the Ministry of Planning and Investment¡V MPI). PMH is licensed to build and manage the Saigon South Parkway and to carry out various infrastructure development projects,  (including residential and commercial development) in 600 hectares of prime land in the Saigon South Project area (Saigon South) and150 hectares of designated public use land (hospitals, recreation facilities, schools, etc) for 50 years.

 

PMH¡¦s main activities in Vietnam center aroundon developing 750 hectares or approx. 1,853 acres of land (600 hectares or 1,482 acres of prime land and 150 hectares or 371 acres of designated public use lands such as hospitals, recreation facilities, schools etc.) in the Saigon South area as well as building and managing the Saigon South Parkway which serves the area.  The 750 hectares are to be developed to become a southern extension of Ho Chi Minh City, divided amongst the New City Center, Merchandise Centers I and II, The High-Technology Center and University Place (collectively referred to as the ¡§Project¡¨ or ¡§Projects.¡¨ Construction activities include site clearance and the development of supporting infrastructures ( (including the Saigon South Parkway) and construction of residential and commercial facilities for sale.  Sales activities include the sale of land parcels to investors for development of housing, commercial and other projects as well as the sale of developed residential and commercial facilities.

 

The entire Saigon South Area will encompasses an area of  over 3,300 hectares (approx. 8,154 acres) and is located approximately 4 kilometers south of the existing Ho Chi Minh City (HCMC) central business district (District 1) of Ho Chi Minh City.  The development of Saigon South is based upon a master plan prepared by Skidmore, Owings & Merill (USA) and is organized as a series of three balanced, parallel zones to be used for culture and recreation,; for residential and commercial purposes, and for green space and environmental protection. The master plan of the Saigon South Project has won the Honor Award for Urban Design from the American Institute of Architects (1997). The jurors commented that: ¡§This plan has its roots in the history of city-making, with its geometry derived from the history of the land.  It serves as an example for other mega-developments that are occurring in areas like Asia and Southeast Asia, as it is sensitive to the cultures, site and urban traditions.¡¨.

 

Development of the Saigon South Project will be completed in phases. Phase I development includes build-out of the new City Center (total area 409 ha or  approx. 1,010 acres) as well as the construction of the Parkway. First phase development of the Saigon South Parkway is complete, with 2-4 lanes of traffic running along the entire 17.8 km stretch from the Tan Thuan Export Processing Zone to National Highway 1.  Once fully phased, the Saigon South Parkway will span 10 lanes of traffic along its 17.8 kilometer length.

 

To demonstrate and convince its long-term commitment to Vietnam, PMH decided to focus their initial attention on education. This led to the establishment of the Saigon South International School and the Saigon South People Founded School. Subsequently, the Taiwanese School, Korean School, Japanese School locate their schools in Saigon South one after the other. The Royal Melbourne Institute of Technology of Australia has also commit to build a USD60-million campus right next to the New City Center of Saigon South. RMIT is the first 100% foreign-invested university project in Vietnam and is partially funded by ADB and IFC under the World Bank. As the schools and universities started to move in, PMH moved its effort on the development of a number of projects that will support continued growth and create critical mass. Sports and leisure facilities such as swimming pools, tennis courts, roller-skating rink, 9-hole Executive Golf Course have been constructed. In terms of healthcare, a 230-bed Franco-Vietnamese Hospital equipped with the latest health-care technology and services is set to open in April 2002. This project is a USD32 million-investment project partially funded by ADB and IFC. The creation of state-of-the-art financial districts is next in line in PMH¡¦s plans, starting with the construction Gateway Building. A future stock exchange, convention centers, merchandise centers will also be built. In addition to the above, PMH is also busy with the development and sales of several high quality  residential developments and commercial spaces. The immediate sell out of the some residential developments in just a short period of time (1 month) is testimony to the fact that PMH has been extremely successful in its development and marketing strategies. Careful planning, timely execution, enthusiastic support of the local government as well as commitment and perseverance of top management have been crucial factors in PMH¡¦s development success.

Development of the Project will be completed in phases.  Phase I development includes build-out of the new City Center (total area 409 ha) as well as the construction of the Parkway.  Development of the New City Center itself will follow a phased approach with first phases focused upon residential and commercial development as well as various school, entertainment and amenities.  The Parkway¡¦s first phase development is complete with 2-4 lanes of traffic running along the entire 17.8 km stretch from the Tan Thuan Export Processing Zone to National Highway 1.  Once fully phased, the Parkway will span 10 lanes of traffic along its 17.8 kilometer length.

Development and sales are already well underway with several residential developments already completed and sold out.  Development and sales continue of residential developments, small land parcels, large land parcels and commercial space and already brisk sales are expected to see continual growth.  Pre-sales strategies have allowed some developments to sell out in a matter of 4 months and in the case of the My Hao Villas development (46 unit villa development), within 1 monthAdditionally, Phu My Hung continues to develop a number of projects that support continued growth and create critical mass.  Such projects include the Saigon South International School, the Saigon South People-Founded School, the Saigon South Executive Golf Course, Driving Range and Recreational Facilities, a swimming pool and a roller skating rink.  PMH is a unique developer of its kind. The master plan of the Saigon South Project has been acclaimed by both architects and designers worldwide. In addition to being the first Asian City to win the Honor Award for Urban Design from the American Institute of Architects (1997), it was a recipient of the 42^nd Annual American Progressive Architecture in January 1995; featured in Industriebau Radikale Umstrukturierung Praxisreport of Germany, and a cover story of the Aquapolis, a leading Italian architecture magazine in July 1996. Most importantly, it is the only company of its kind in Vietnam to be awarded with an ISO9002 accreditation.

 

Hiep Phuoc Power Plant Company

 

The Hiep Phuoc Power Company Ltd. (HPPC) is responsible for operating the only 100% foreign-owned build-operate-own electric power utility called the Hiep Phuoc Power Plant. a wholly owned subsidiary of Power (JV) Company Hong Kong Ltd.  The Hiep Phuoc Power Company obtained its Iinvestment Llicense No 614/GP from the Ministry of Planning and Investment (MPI) on 3^rd  June 1993. 

 

HPPC operates three oil-fired steam-turbine power generating units, which has a capacity of 125MW each, for a total capacity of 375MW (Phase 1). The power plant is equipped with its own power grid, i.e., transmission lines and substations, to ensure a fully integrated power system. The HPPC is authorized to be the exclusive provider of operate a power plant and to supply electric power to the Tan Thuan Export Processing Zone (TTEPZ), the Saigon South urban development Projectproject, the Electricity of Vietnam (EVN) and other consumers located in the Hiep Phuoc Basic Industrial Zone for 50 years from the date of its the investment license.

 

The HPPC operates the first 100% foreign owned, B-O-O power plant in VietnamThe Hiep Phuoc Power Plant . The power plant is located in Hiep Phuoc Village, Nha Be District, in Ho Chi Minh City, Vietnam.  It occupies a site of 52.7 hHectares (130 acres). and operates three oil-fired steam-turbine power generating units which each has a capacity of 125 megawatts (MW) for a total capacity of 375 MW. The Hiep Phuoc Power Plant is the only power plant to be accredited with an ISO 9002 in Vietnam.

 

The HPPCiep Phuoc Power Company has generated seen an average sales growth of  12% average sales growth rate over the past three years and it is anticipated that growth will continue to escalate. Management at the plant are now able to generate and deliver electricity above its first-phase rated capacity of 375MW.expects continued growth into the future.  Currently, HPPC supplies up to half of Ho Chi Minh City¡¦s electricity demands during the dry season months.  Approximately 90% of electricity generated is sold to EVN and the remaining 10% to users in the TTEPZ, Saigon South Projects, and the Hiep Phuoc Basic Industrial Zone. and Saigon South customers.  Performance at the HPPC has been outstanding with management at the plant now able to generate and deliver electricity above its rated capacity of 375 MW. HPPC is now preparing to embark on the additional improvements expansion stage of the Hiep Phuoc Power Plant as well as plans to convert oil to gas.