FIE equitisation extension

The move is expected to attract more applicants to the on-going FIEs equitisation process.
Official Letter No. 580/TTg-DMDN signed by Deputy Prime Minister Nguyen Tan Dung states that the end of June 2005 is the new deadline for FIEs to submit application documents for conversion into shareholding companies.
An official from the Ministry of Planning and Investment (MPI) said the new deadline is designed to provide FIEs that failed to meet the last deadline with extra time to complete application documents.
Governmental Official Letter No 1325/CP-DMDN, dated September 16, 2004, set the previous deadline. It announced the prime minister’s agreement to continue receiving FIEs’ transformation applications until the end of 2004, a nine-month extension from the initial date of March 25, 2004, following a ruling in Circular 08/2003/TTLT-BKH-BTC dated December 29, 2003.
An MPI official said several FIEs had failed to complete the required procedures on time, although they were very interested in the equitisation process.
As a result, only 10 successful candidates have received government approval despite there being a dozen eligible applicants. The MPI is expected to involve between 20 and 25 FIEs in the trial process.
The 10 successful candidates include four new companies identified by Official Letter No. 580 comprising ceramic tiles manufacturer Chang Yih, engineering enterprise Full Power, construction machinery manufacturing joint-venture Vietnam-Uraltrac, and metal can producer Vietcans.
The previous six candidates given the go-ahead were Taya, Interfoods, Austnam, Taicera, Tung Kuang and Royal International, with some of them announcing plans to issue shares to the public.
However, plans have reportedly faced a deadlock, as the approved FIEs have not received an amended investment licence, a problem that is addressed in Official Letter No. 580. The letter states that once transformed into a shareholding company, FIEs will adhere to the Enterprises Law, particularly concerning operational duration. Under the current Foreign Investment Law, FIEs are established based on specific projects and therefore have a certain lifespan, while under the Enterprises Law, projects are not restricted to a certain timespan. It also stipulates that equitised FIEs would still benefit from the investment incentives granted in original investment licences.
At a meeting between Deputy Prime Minister Vu Khoan and representatives from foreign-invested sectors late last month, a spokesperson for Austnam complained that the delayed issuing of amendment licences had blocked them from
raising funds for expansion.
Austnam has been waiting for a licence for around five months. An MPI expert explained that some procedural issues, particularly those concerning the duration of operations by the FIEs, caused the delay.
Under current Vietnamese law, FIEs can only exist in the form of a limited liability company, making them unable to issue shares to raise capital. This status also makes it difficult for investors to withdraw their stake and find a replacement investor.
The trial transformation of FIEs into shareholding companies is viewed as a positive step towards providing foreign investors with more flexibility, thereby enhancing the efficiency of business practices in Vietnam.