Bridge to Promenada solution is called for

The call was made by the Netherlands’ ECC, the major shareholder of the Promenada, in the Canary township complex in the province’s Thuan An district, amid the possibility that the project’s investment certificate would be revoked in early January.

Ton Nguyen, ECC’s business development manager, said ECC was seeking local government authorities’ approval for delaying the date of its investment certificate withdrawal so that it could have further time to settle a dispute with its partner, Singapore’s GuocoLand Vietnam.

“We are still strongly interested in the Promenada and are financially capable for the next step of this project if GuocoLand Vietnam respects the agreed financial structure of the project,” Nguyen said.

The Promenada shopping mall was licenced on January 5, 2010, with the first phase of construction on 25,066 square metres to be developed within 32 months from the issuance of its investment certificate and the second phase on  21,651sqm within 52 months.

At the request of GuocoLand Vietnam, the originals of the notarised land use rights transfer agreement was not released to the joint venture company until the first payment of the transfer worth of $7.84 million was paid by the joint venture company to GuocoLand Binh Duong (GLBD), a subsidiary solely owned by GuocoLand Vietnam. In return and as one of the conditions for this payment, GLBD had to undertake to assist the joint venture company in transferring all design approvals of the Promenada including approval of construction master plant 1/500 and approval of basic design of the shopping mall, which had been granted in the name of GLBD, to the name of the joint venture company.

ECC and GuocoLand Vietnam agreed that within 30 days from the date all the conditions for the first payment were met, both parties would have to make capital contribution of 40 per cent of the charter capital of the joint venture company worth $13.2 million for funding the first payment and starting the construction of the Promenada.

“Until now, the conditions for first payment have not met because the design approvals have not been transferred to the name of the joint venture company. These unfinished conditions are very crucial as we can not start construction without such approvals,” said Nguyen.

On June 9, 2010, ECC arranged the meeting with Binh Duong Department of Construction with the presence of GuocoLand Vietnam. The department advised GuocoLand Vietnam a very flexible and constructive solution for fast procedure to start construction. ECC also confirmed to accept the situation and waived for the conditions to be fulfiled by GuocoLand Vietnam.

“But suddenly on June 14, GuocoLand Vietnam sent the notice of joint venture company termination, for which it has given us a untrue reason that the conditions did not satisfy, therefore GuocoLand Vietnam decided to terminate the joint venture agreement,” said Nguyen.

Lawrence Peh, general director of GuocoLand Vietnam, told VIR that the land transfer agreement could not proceed because no payment was made.

“Land payment is the only a small portion of the total overall development cost. Therefore, if there is already problem with this small initial payment, there will be big problem to finance the actual development work. This is why GuocoLand Vietnam decided to terminate the joint venture in accordance with the joint venture agreement provisions to avoid further delays and trouble,” Peh said.

“The retail component is an important part of the whole Canary complex so it is not GuocoLand Vietnam’s interest to delay the development,” he added.

However, president of ECC IP Holdings Tjeert Kwant said that financial issue was never mentioned as the reason of the termination under the notice given by GuocoLand Vietnam.

“In fact, ECC had proven its financial capability to GuocoLand Vietnam before we signed the joint venture agreement and once again this year,” Kwant said.

“We see that the long-term success of the Promenada is not only our ambition but also the Binh Duong authorities,” he said.

A Binh Duong Planning and Investment Department official confirmed that the local authorities had actively supported the Promenada project because investments in retail sector was a rising trend in the province.

“The issue is now upon both parties’ abilities to settle down their dispute,” he said.