The Competition Administration Department (CAD) under the Ministry of Trade is building up a legal framework for corporate trading activities, which have not been put under the necessary strict management.

No corporate trading deal in Vietnam?

Tran Phuong Lan, Head of CAD’s Competition Supervision and Management Division surprised many people when stating at the workshop on May 15 that CAD had no statistics about corporate trading affairs in Vietnam, meaning that the State agency did not know how many trading deals had been carried out.

Mrs Lan said that many corporate trading deals occurred in 2003-2004, but they were all small affairs, and no one had made reports to CAD.

In fact, many corporate trading deals, both small and big, occurred in the last time in Vietnam. Several thousand offers for sale and purchasing can be found on the websites run by TigerInvest or IDJ.

Lawyers Pham Tri Hung from the Hanoi Law University and Nguyen Van Chan from the National Economics University have cited several big corporate trading affairs. Thai Picnic Gas bought a factory that makes gas tankers from a private company, and a workshop trading LPG belonging to a Vietnamese company. Christian Bernard Diffusion (CBD), a French company, bought Yue Cheong Co Ltd, specialising in making jewelry for export.

Moreover, Malaysian Trenergy Gas sold a big factory to V-Trac before it put an end to its operations in Vietnam. The Transport Works Company No 677 under the Ministry of Transport’s Cienco 6 is being offered for sale.

The report released by the two lawyers showed that a lot of Vietnamese companies have been bought by foreign investors and the turnover of corporate trading has been gradually increasing in the last years, worth $74mil in 2004.

Mrs Lan said that under the Competition Law, enterprises that initiate trading activities which can bring the market share of 30-50% after trading must report the deals to the competition administration department. However, she said, enterprises seem to not care for the provision.

“It is likely that Vietnamese enterprises do not think they can hold up to 30% of the market share, or they do not have thorough knowledge about the Competition Law and don’t think that the corporate trading is regulated by the law,” she said.

Mrs Lan has acknowledged that it is very difficult to supervise all the trading activities and define the market share after trading.

Looking for suitable mechanism to control corporate trading

According to Lawyers Hung and Chan, Vietnam has 6,000 foreign invested enterprises, 170,000 domestic owned, 5,000 State owned enterprises, and 15,000 cooperatives. If State management authorities can set up a suitable legal framework, it will see a big volume of corporate trading in the market.

Tran Duy Hung, Director of First Asia Ltd, said that the establishment of many new enterprises would be the source of commodities for the corporate trading market. It is estimated that the market would see the growth rate of 30-40% annually.

According to Mr Hung, more than 50% of small- and medium-sized enterprises shut down and have ownership transfer after six years of operation. He said that the percentage of successful transactions remains low.

A question has arisen about whether a corporate trading market has taken shape in Vietnam. Lawyers Hung and Chan said that such a market can form only when enterprises are considered as a kind of commodity, and the market operates based on the legal framework promulgated by the State.

Ngo Hoang Oanh, an expert from the Economic Institute, has also called on management authorities to lay down a legal framework for corporate trading activities. She has warned that international groups may attempt to take over domestic companies if the corporate trading cannot be effectively controlled.

Source: VietnamNet