Korean firms seek credibility, transparency
by Thuy Anh
(VNS) Korean businesses want to enhance transparency and credibility with respect to accounting information of Vietnamese enterprises and are asking the Ministry of Finance that an external audit is applied to all enterprises.
The question of transparency was raised at recent meetings with the Finance Ministry held in HCM City and Ha Noi held as part of the fifth annual dialogue between Korean firms and Vietnamese Government agencies.
The Korean firms said their request for transparency is motivated by the wish to examine the financial health of their local partners.
Currently, only State-owned enterprises, financial institutions, FDI companies and firms listed on the country's stock exchanges are required to get independent audits done.
The Korean firms also wanted tax authorities to notify them in advance of the audit time and give serious consideration to explanations by taxpayers on auditing.
Current arrangements give them little time to prepare and they are thus confused and unable to find necessary documents as well as satisfy requirements of tax authorities in a timely, comprehensive manner.
The development of an electronic system to provide free or for low charges statistical data on Viet Nam's trade including import and export would help businesses save costs and improve competitiveness, they said.
Other clarifications requested by the Korean firms included rules regarding the value-added tax, environment protection tax on plastic bags, and procedures at inland clearance depots.
Vietnamese law encourages, but does not require all enterprises to conduct independent audit.
International practice is that criteria such as capital, turnover and staff strength of a company are used to decide whether the company will have to undergo independent audit.
The Accounting Policy Department of the MoF said it would study international practices and consider making amendments to domestic laws.
Under the Law of Tax Administration, enterprises have between 10 to 15 days after they have been notified to prepare the needed documents.
If a company wants more time, a written application should be submitted, citing reasons and the extension period sought.
Sudden inspections would be carried out when there were signs of violations, or at the request of the functional organisations, MoF officials said.
They said import and export statistics compiled by the General Department of Viet Nam Customs could be found at its website at http://www.customs.gov.vn/lists/HoTroTrucTuyen/ThongKeHaiQuan.asp
However confidential information associated with a specific name and address of an organisation or individual is unavailable unless they permit its publication, officials said.
The Korean Ambassador to Viet Nam, Ha Chan-Ho, expressed his appreciation of the annual dialogue, which is in its fifth year, saying it had helped improve bilateral relations.
He said more than 2,700 Korean companies were operating in Viet Nam with a total investment capital of around US$24 billion, making it the second largest foreign investor in the country.
Several changes have taken place at the top in both life and non-life insurance market segments, statistics compiled in the first seven months of this year show.
In the life insurance area, Bao Viet Life, which ranked second previously, tops the list in terms of premium turnover from new contracts, holding a market share of 23.76 per cent. Prudential Viet Nam has lost its leading position, lagging behind the current leader by 0.58 per cent with a market share of 23.18 per cent.
Manulife was third with a share of 14.27 per cent.
Life insurance companies signed more than 413,000 new contracts that yielded a turnover of VND2.042 trillion (US$100 million).
Prudential, however, retained its highest position in term of total premium turnover with more than 34 per cent, ahead of Bao Viet Life which had almost 30 per cent.
They were followed by Manulife with almost 12 per cent, AIA (7.3 per cent), Dia-i-chi (7.24 per cent) and ACE (6.13 per cent. Seven other companies shared the remaining 3.3 per cent.
In the non-life insurance segment, PVI took over the top position with 23.8 per cent of the market share, recording a direct insurance turnover of VND3.165 trillion, followed by Bao Viet Insurance with 22.1 per cent with VND2.939 trillion.
Both companies enjoyed a higher turnover compared to the same period in 2011.
Bao Minh was ranked the third with a 9.6 per cent share, its turnover down by around 3.1 per cent at VND1.277 trillion.
Bao Viet and Bao Minh are part of the Government's two-year trial agricultural insurance programme covering paddy fields, livestock and aquaculture that began last year.
However the service represented a modest share in the overall turnover.
To date, around 100,000 farming households have joined the programme, bringing in premiums of VND60 billion.
The Finance Ministry has recently made several adjustments to its regulations on farming insurance, especially compensation, that aim to help insurers attract more farming households.
The question of transparency in
information and information disclosure was raised again in a seminar last week that dealt with regaining investors' confidence with the economy still in a difficult period.
The situation has been exacerbated by recent exposure of violations committed by high-ranking officials of several banks and securities companies, negatively affecting investor confidence in Viet Nam's stock market.
Dr. Le Dat Chi of HCM City Economics University said it was important that State management organisations and listed companies give priority to the stronger and more sustainable development of the market as well as the enterprises.
"Greed and fear always exist in the stock market, but when investors recognise profitable investment opportunities in a market with transparent operations, they will make purchases," Chi said.
Louis Nguyen, CEO of the Sai Gon Asset Management Company (SAM) compared corporate governance between firms in the US and Viet Nam. He said managing boards in American companies are willing to share information concerning administration activities, the stakes owned by executive members or the background of the general director. However, corporate officials in Viet Nam seem to provide priority to their own benefit and are unwilling to give investors information on their executive members.
"This has resulted in the lack of confidence in the managing board, making it hard to call for investment," Nguyen said.
Exchange rate fluctuation was another concern expressed at the seminar.
Pham Ngoc Bich, deputy general director of Sai Gon Securities Inc., said that a delegation of 10 foreign fund management firms with a combined portfolio of US$500 billion had recently visited Viet Nam to study listed companies.
He said their first question was about the foreign exchange rate, as they were still haunted by the case of Dragon Capital, which manages around US$1 billion in Viet Nam. The firm lost almost US$100 million in just one day when the State Bank of Viet Nam weakened the dong by nine per cent late last year.
They are also afraid that the State Bank, in an effort to address bad debt, assessed at 8.6 per cent of the total loans in the banking system, would pour money into purchasing them or provide loans to banks to ensure their liquidity, which would negatively impact the foreign exchange rate.
Foreign investors have shown little interest in companies that diversify operations out of their core business, said Alan Phan, chairman of the Hong Kong-based Viasa Investment Fund.
Several major State-owned companies that engaged in such diversification and lost a lot of money have now been asked to focus exclusively on their core businesses. — VNS