Pricing of construction contracts

On 29 July 2010, the Ministry of Construction issued Circular No 08/2010/TT-BXD guiding price adjustment methods regarding construction contracts for projects funded with 30 per cent of the State capital.

Circular No 8 regulates the principles regarding price adjustments. Price adjustments can only be possible during the implementation of the signed contract, including the extended period as agreed in the contract; the project owner is entitled to approve the adjusted price if the new price does not exceed the approved total invested capital. Otherwise, it will be decided by the person who has the power to make such investment.

Price adjustment methods are also stipulated in the details of the Circular. For instance, for lump sums and percentage based contracts, price adjustments are permitted only in respect to quantity beyond which the parties have agreed to. In these circumstances, the parties must sign an appendix which specifies additional works and the respective unit prices. Regarding lump sum contracts, the parties shall determine the new unit prices for additional works in the absence of prior agreement; otherwise the agreed unit prices shall be applied.

Lending ODA funds

On 14 July 2010, the Government issued Decree No 78/2010/CP on relending foreign loans, which will come into force on 30 August 2010 and abrogates Decision No 181/2007/QD-TTg.

Decree 78 stipulates some noteworthy provisions as follows: (i) Foreign loans eligible to relending are ODA loans, foreign commercial loans and foreign preferential loans; (ii) Borrowers may select Vietnamese currency (Viet Nam dong) or the original foreign loan currency as the relending currency, subject to the purpose of the loan and credibility of the borrower; (iii) The relending interest rate is the foreign loan interest applicable to the Government in case of foreign commercial loans and foreign preferential loans. For ODA loans, interest shall be determined on case-by-case basis depending on the credit-worthiness of the domestic borrower, kind of projects and the currency used for the loan; and (iv) The Ministry of Finance or the financial organisation or credit institution authorised by Ministry of Finance shall be responsible for the evaluation and decision on relending.

Rules to guide securities law

On 2 August 2010, the Government issued Decree No 84/2010/CP amending and supplementing Decree No 14/2007/ND-CP guiding the Law on Securities. Decree 84 shall come into force on 20 September 2010.

Under Decree 84, provisions on public companies, credit institutions, fund management companies (including foreign-invested fund management companies and branches of foreign fund management companies) and foreign organisations issuing securities in Viet Nam have been substantially amended and supplemented. A public company (excluding companies which have already issued securities to the public or have been listed on the Stock Exchange) shall have to conduct the procedures for suspending its public status within thirty (30) days from the date that it no longer has at least one hundred (100) investors owning its stocks.

With regards to credit institutions, Decree 84 permits credit institutions in the form of joint stock company to list their stocks if approved by the State Bank.

For all types of fund management companies, the charter capital has been set at VND25 billion (US$1.3 million).

Decree 84 also permits foreign organisations to issue securities and be listed on the Vietnamese stock market if they have already approved investment projects in Viet Nam and satisfy other conditions provided by law.

Recording of security interests

The Government issued Decree No 83/2010/ND-CP on July 23, replacing Decree No 08/2000/ND-CP on recording of security interests.

The new decree amends regulations on the powers and responsibilities of the Ministry of Natural Resources and Environment regarding mortgages based on land-use rights and assets attached to the land, as well as powers and responsibilities of the ministries of Justice and Transport and provincial People’s Committees.

In order to remedy insufficiencies and inconsistency in State administration of secured transactions, the new decree requires provincial departments of justice to assist People’s Committees in recording security interests at a local level.

The new decree takes effect on September 9.

Tags: Vietnam Construction, Vietnam construction contracts