Foreign Companies Get the Nod to Set Up Subsidiaries

HA NOI — Foreign-invested enterprises, already allowed to convert to joint stock companies, will shortly be able to reorganize under the parent-subsidiary model, under a plan approved in principle by the Prime Minister.

The Ministry of Planning and Investment (MPI) will begin working this week with relevant offices on regulations that would govern a foreign-invested enterprises (FIEs) organization as a parent company.

"The parent-subsidiary model for FIEs is new in Viet Nam so the country does not yet have regulations on the operation of this model," said deputy head of the MPI’s Foreign Investment Agency Nguyen Anh Tuan.

"The ministry expects to have general management regulations on parent companies next week."

Panasonic Viet Nam could become the first FIE to set up a parent-subsidiary company in Viet Nam, said Tuan. Under its plan, Panasonic Viet Nam would become a parent company with two subsidiaries, one operating its current factory in Ha Noi and the other a HCM City-based trading and distributing company for Panasonic products.

The new parent company would have a total capital of US$30 million, $8 million from the HCM City-based company and $22 million from Ha Noi-based factory.

There is some confusion whether parent companies will be permitted to import goods into Viet Nam for sale, an issue that regulations are expected to clarify.

Equitization of FIEs

Meanwhile, the first foreign-invested enterprises have been licensed to convert into joint stock companies by the MPI. They are Austnam Joint Stock Co, capitalized at $2 million, and Hoang Gia International Ltd Co, capitalised at $65 million.

Allowing FIEs to raise capital by selling shares will help Viet Nam attract higher levels of foreign direct investment, said the ministry.

The ministry has further plans to grant licences to four other FIEs to reorganise, including Tung Kuang Ltd Co, Taya Electric Line and Cable Ltd Co, Taicera Ceramics Ltd Co and Industrial and Food Processing Co (Interfood).

The Prime Minister has also approved in principle conversion of four other companies into share-holding companies.

They are Chang Yih Ceramic Co Ltd, Full Power Co Ltd, Viet Cans Co Ltd, and the Ural-Trac Construction Joint Venture, according to the ministry.

The ministry expects that 20-25 FIEs will be equitized by the end of this year. They include four enterprises each with capital of less than $5 million, two enterprises with capital of $5-10 million, and the others each with capital of more than $10 million. Most of them are in industrial or construction sectors.

Viet Nam News, June 29, 2005