2013 - Langdon Seah - Vietnam - Construction Cost Handbook

7/25/2019 2013 - Langdon Seah - Vietnam - Construction Cost Handbook

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2 3

LANGDON&SEAH

VIETNA

MC

OLTD

Copyright Statement and information

caveat

Sixth Edition 2013

Langdon & Seah Vietnam Co Ltd

All rights reserved. No part of this publicat ion

may be produced, copied, stored or transmitted

in any form without prior written permission

from Langdon & Seah Vietnam Co Ltd.

The information contained herein should be

regarded as indicative and for general

guidance only. Langdon & Seah Vietnam Co

Ltd makes no representation, expressed orimplied, with regard to the accuracy of the

information herein and cannot accept any

responsibility or liability for any errors or

omissions that may be made.

Unless otherwise stated, costs reflected in this

handbook are current as at 4th Quarter 2012.


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LANGDON&SEAH

VIETNA

MC

OLTD

Credits to KPMG, Jardine Lloyd Thompson.

KMPG Vietnam

http://www.kpmg.com

Jardine Lloyd Thompson

http://www.jltasia.com

CB Richard Ellis.

CB Richard Ellis

ht

tp://www.cbrevietnam.com

Project featured on Cover Page:

1. Ben Thanh Tower, Ho Chi Minh City, Vietnam

(upper left side)

2. China Central TV Tower, Beijing, China

3. ION Orchard and Orchard Residences, Singapore

(upper right side)

4. Johor International Convention Center, Johor,

Malaysia (middle left side)

5. Hyderabad International Convention Center,

Hyderabad, India (lower side)

Lan gdo n & Sea h Vie tna m Co. , Ltd . wou ld like toacknowledge the invaluable support and advice fromthe following organisations:

4 5


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6 7

TABLE OF CONTENT

Table of Content 6

Calendars 8

Introduction 9

1. CONSTRUCTION COST DATA

Construction Market 2013 Outlook 12

Major Rates for Selected Asian Cities 22

Construction Costs for Selected Asian Cities 30

M&E Costs for Selected Asian Cities 38

Utility Costs for Selected Asian Cities 46

2. GENERAL CONSTRUCTION DATA

Material Price Indices 52

Import Duties 54

Progress Payments 55Estimating Rules of Thumb 56

3. VIETNAM BUSINESS ENVIRONMENT

Building Control and Procedures 60

Project Closed Out Procedures 64

Typical Submission Flowchart 65

Plot Ratios and Site Coverage for Buildings 66

Key Design Criteria 67

Building Areas Definitions 69

Procurement Strategies 74Contractor Selection Strategies 77

Property Overview 84

Page No.

4. PROPERTY INVESTMENT

Language 92

Accounting System 92

Banks 93

Government Administration 94

Taxation 96

Insurance 100

Workforce 103

5. OTHER INFORMATION

Vietnam Map 108

Domestic Routes 109

Relevant Websites 110

Public Holidays 112

Prime Rates 121

IDD Codes and Time Differences 122

Conversion Factors 124

Some Interesting Facts 126

Vietnam Key Data 127

Directory Of Offices 130

Page No.

LANGDON&SEAH

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INTRODUCTION8 INTRODUCTION 9

CALENDARS INTRODUCTION

JAN FEB MAR

APR MAY JUN

JUL AUG EP

OCT NOV DEC

JAN FEB MAR

APR MAY JUN

JUL AUG EP

OCT NOV DEC

2013

2014S M T W T F S S M T W T F S S M T W T F S

1 1

5 6 2 3 4 5 6 7 8 2 3 4 5 6 7 8

12 13 14 15 16 17 18 9 10 11 12 13 14 15 9 10 11 12 13 14 15

19 20 21 22 23 24 25 16 17 18 19 20 21 22 16 17 18 19 20 21 22

26 27 28 23 24 23 24 25 26 27

S M T W T F S S M T W T F S S M T W T F S

1 2 3 7

4 5 6 7 8 9 10 8 9 10 11 12 13 14

11 12 13 14 15 16 17 15 16 17 18 19 20 21

18 19 20 21 22 23 24 22 23 24 25 26 27 28

25 26 27 29 30

S M T W T F S S M T W T F S S M T W T F S6

7 8 9

14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29


1

5 6 7 8 9 10 11 2 3 4 5 6 7 8 7 8

12 13 14 15 16 17 18 9 10 11 12 13 14 15 14 15 16 17 18 19 20

19 20 21 22 23 24 25 16 17 18 19 20 21 22 21 22 23 24 25 26 27

26 27 28 29 23 24 25 26 28 29 30

1 2 3 4

7 8 9 10 11

25 26 28 29

6 7

13 14 15 16 17 18 19

20 21 22 23 24 25 26

27 28

1 2 3 4 5

8 9 10 11 12

28 29

6 7

13 14 15 16 17 18 19

20 21 22 23 24 25 26

27 28 29

1 2 3 4 5

8 9 10 11 12

1 2

3 4 5 6 7 8 9

10 11 12 13 14 15 16

17 18 19 20 21 22 23

24 25 26 27 28 29

1 2 3 4

27 28

29 30 27

30

29 30

1

30 30

1 2 3 4 5

10 11 12 13

30 29

61 2 3 4 5

9 10 11 12 13

31 28

31

30 31

2 3 4 5 6

31

31

30

31

30

31


1 2 1 2

6 7 3 4 5 6 7 8 9 3 4 5 6 7 8 9

13 14 15 16 17 18 19 10 11 12 13 14 15 16 10 11 12 13 14 15 16

20 21 22 23 24 25 26 17 18 19 20 21 22 23 17 18 19 20 21 22 23

27 28 29 24 25 24 25 26 27 28


1 2 3 4 1

5 6 7 8 9 10 11 2 3 4 5 6 7 8

12 13 14 15 16 17 18 9 10 11 12 13 14 15

19 20 21 22 23 24 25 16 17 18 19 20 21 22

26 27 28 23 24 25 26 27


7

8 9 10

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30


1 2

6 7 8 9 10 11 12 3 4 5 6 7 8 9 8 9

13 14 15 16 17 18 19 10 11 12 13 14 15 16 15 16 17 18 19 20 21

20 21 22 23 24 25 26 17 18 19 20 21 22 23 22 23 24 25 26 27 28

27 28 29 30 24 25 26 27 29 30 31

1 2 3 4 5

8 9 10 11 12

26 27 29 30

7 8

14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29

1 2 3 4 5 6

9 10 1 1 1 2 13

29 30 28 29

7 8

14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29 30

1 2 3 4 5 6

9 10 1 1 1 2 13

1 2 3

4 5 6 7 8 9 10

11 12 13 14 15 16 17

18 19 20 21 22 23 24

25 26 27 28 29 30

1

1 2 3 4 5

28 29

30 31 28

31

30 31

30

31 31

2 3 4 5 6

11 12 13 14

31 30

71 2 3 4 5 6

10 11 12 13 14

This version of LS Handbook - Vietnam 2013, as other

future annually published handbooks, focuses on the

construction cost profile of Vietnam and those of the

major cities in Asia.

The handbook is structured to serve as a general

reference guide on construction cost indicators in Asia.

The information contained in this handbook has been

compiled by Langdon & Seah Vietnam Co Ltd. Any

further information and/or if advice relating to particular

projects in specific region is required, please contact

any of the regional offices listed under the Directory of

Langdon & Seah Offices at the end of this handbook.

Langdon & Seah Vietnam Co Ltd

LANGDON&SEAH

VIETNA

MC

OLTD


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1CONSTRUCTION COST DATAONSTRUCTION COST D T

Construction Market 2013 Outlook

Major Rates for Selected Asian Cities

Construction Cost for Selected Asian Cities

M&E Cost for Selected Asian Cities

Utility Cost for Selected Asian Cities


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CONSTRUCTION COST DATA1

CONSTRUCTION COST DATA12 CONSTRUCTION COST DATA 13

LANGDON&SEAH

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CONSTRUCTION MARKET2013OUTLOOK

2013 will not see any significant turnaround in the global

economy and this will be due in significant part to the

political dynamics of the western world namely Europe

and the USA. To understand what is happening in both

these regions it is prudent to have read Franz Kafkas

The Castle which concerns a surveyor (not from

Langdon Seah) who leaves his village to gain recognition,

fortune and ideological attainment at the aforementioned

Castle. The surveyor never reaches the Castle and

instead amuses himself along the way by gaining small

rewards and petty victories. In essence the continued

intransigence and point scoring of politicians in Europe

and USA will continue to ensure that the global

economy underperforms well beyond 2013.

2012 has been a difficult year globally with a high level

of political intransigence in the; United States, China,

Europe and Japan. Sovereign debts and the ability for

such debts to be repaid or restructured have led to a

high level of pessimism which continues to pervade into

the private sector of the world economy. There have

been signs of economic improvement driven by some

greater flexibility at government level in the; USA,

Europe and currently Japan most of this government

flexibility however has emanated through forms of

quantitative easing which further compound to increasegovernment debts.

Notwithstanding the sovereign debt crisis in Europe we

do see a level of global recovery in 2013. This we

believe this will mostly be driven by: China, Japan and

with its party positions consolidated will now take a more

proactive stance in ensuring a higher degree of GDP

growth than in 2011 and 2012. Japans new government

seems to taking positive efforts to resuscitate global

exports and is further expected to inject further moneys

into its public sector. The particular dynamics of both

Japan and China will undoubtedly have an effect on

neighbouring economies such as Vietnam.

There was also some positive news from Europe

concerning the European Central Bank proposal to re

purchase bonds of Euro countries and the processes to

widen European Banking responsibilities are positive

and this should provide some optimism going forward to

2013 and particularly in respect to increased flows of

Foreign Investment. Notwithstanding Europe and its

sovereign debt will continue to cause economic

concerns in 2013 and beyond.

THE VIETNAM ECONOMY

GDP in Vietnam has been affected by a combination of

global events and domestic policy, consequently GDP

growth in 2012 is circa 5% lower than 2011 and we note

there has been a downward trend in GDP growth in

Vietnam since 2008. Vietnams GDP growth over thelast few years has been slightly higher than the South

East Asian GDP average however Vietnams growth

should be higher when we consider Vietnams relatively

low GDP per capita.


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At present State companies account for 40% of

Vietnams economic output and this is unlikely to change

however we are more likely to see greater levels of

transparency in this sector as Vietnam is acutely aware

that it need to raise levels of investment confidence in

order to attract greater levels of FDI.

There is likely to be an increase in Japanese investment

next year both in terms of ODA loans and private invest-

ment. In light of the current relationships between China

and Japan it is feasible that Japan may divert some

investment from China to Vietnam.

Both inflation and the VND should be fairly stable in

2013 with inflation in single digits and VND remaining

around VND 21,000 per USD. GDP growth if forecast to

be 6% for 2013 which is a slight improvement on 2012.

CONSTRUCTION MARKET

The construction sector accounts for about 7% of the

Vietnam Economy which equates to circa US$ 8bn in

2011 and most likely this sector will grow in line with

GDP growth in 2013.

For reasons cited above PDI has been flat in 2012 with

few new startups in the major cities namely HCMC and

Hanoi. HCMC in 2011 and 2012 has seen a number of

commercial developments suspend construction and

residential and office sectors have been hardest hit. In

Hanoi a number of residential developments had

suspended construction in 2012.

Construction output in 2013 will most likely grow in line

with GDP growth and the driver most likely to gain

significant growth in 2013 with be that of Private

Domestic Investment.

CONSTRUCTION MARKET2013OUTLOOK

Up and to 2009 the economy exhibited high growth

spurring high inflation (over 20%) and significant current

account deficits. Active measures by the Government in

2011 have cooled down the country significantly. The

active government measures comprised; a devaluation

of the VND in early 2011 by circa 10%, increasing ofCentral Banks Base rates to over 12% and the introduction

of a capping on lending into the domestic sector

(especially property and construction). The measures

have achieved their intended effect and inflation is down

to single digits and current accounts are achieving a

surplus.

Central Bank Base rates have been reduced by 2% in

2012 to 9%, the VND seems stable. However there

remains a capping on lending into the domestic

markets.

The Private Domestic investment (PDI) sector has been

subdued in 2011 and 2012, further we note that Foreign

Direct Investment (FDI) has tailed off considerably since

2009 and FDI commitments are down some 70% - this

is no worse than the International market.

THE VIETNAM ECONOMY 2013 and BEYOND

The capping of investment into the private domestic

sector should be alleviated in 2012 and this should help

spur growth in the domestic sector.

We also anticipate that a low cost base country such as

Vietnam will further attract FDI and at a rate higher than

other more expensive international markets.


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(Source: Vietnam Investment Review) (Source: Vietnam Investment Review)

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

RegisteredCap

ital(bnUS$)

5.10

2.57

2.84

3.14

3.00

3.19

4.55

6.84

12.00

21.30

71.73

22.63

18.60

12.70

12.18

LegalCapital(

bnUS$)

2.47

0.98

1.31

1.71

1.27

1.14

1.22

1.97

4.67

6.04

11.50

10.00

11.00

10.05

10.00

No.ofProjects

285

327

391

555

808

791

811

970

987

1544

1557

1155

969

919

980

0200

400

600

800

1000

1200

1400

1600

1800

0.

00

10.

00

20.

00

30.

00

40.

00

50.

00

60.

00

70.

00

80.

00

Bill ions US$

AnnualForeignInvestment(1998-2012)

Nos. of pro jects

Taiwan

Malaysia

Japan

S.Korea

Singapore

B.V.Islands

HongKong

Thailand

United

States

China

RegisteredCapital

26.40

11.34

29.00

24.65

24.64

15.97

11.96

5.99

10.45

4.56

LegalCapital

10.22

3.84

8.35

8.43

7.02

5.40

3.88

2.69

2.48

2.30

No.ofProjects

2,266

432

1,800

3,159

1,091

519

693

297

634

878

0500

1000

1500

2000

2500

3000

3500

0.

00

5.

00

10.0

0

15.0

0

20.0

0

25.0

0

30.0

0

35.0

0

FDIbyc

ountriesasofNov2012

Bill ion US$

Nos. of Projects


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(Source: Vietnam Investment Review)

FDI BY SECTORS AS OF NOVEMBER 2012 VIETNAM ANNUAL ODA

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

ODACommitment

2.20

2.15

2.40

2.40

2.46

2.83

3.44

3.75

4.44

5.43

5.91

8.06

7.90

7.88

7.39

ODADisbursement

1.24

1.35

1.65

1.50

1.52

1.42

1.65

1.79

1.79

2.18

2.25

4.10

3.54

3.65

3.65

Billion US$

(Source: Ministry of Planning and Investment)

SectorNo. ofprojects

Registered

Capital

(mn US$)

Legal

Capital

(mn US$)

Legal

Capital

(%)

1 Industry and construction 11,538 197,479 65,919 92%

Manufacturing 8,061 105,203 37,596

Property 388 49,821 12,668

Accommodation 330 10,602 2,761

Construction 918 10,273 3,586

Mining 74 3,020 2,414

Electricity, gas and water

production and distribution85 7,485 1,686

Information and Communication 799 6,086 3,337

Wholesale & Retail; Repair 854 2,587 1,309

Water supply & Waste 29 2,402 561

2Agriculture & Forestry &

Aquaculture502 3,296 1,687 2%

3 Service 2,324 12,071 4,470 6%

Hotel & Restaurant

IT

Art & Entertainment 133 3,688 1,101

Logistics 345 3,476 1,064

Finance, Banking & Insurance 76 1,322 1,172

Health care & Social welfare 80 1,166 223

Science & Technology 1,299 1,066 534

Education and Training 158 433 125

Administration & Supporting

services113 193 100

Others 120 728 150

Total 14,364 212,847 72,076 100%

92%

2%6%

Industry and construction Agriculture & Forestry & Aquaculture Service


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GDP GROWTH RATE CONSTRUCTION OUTPUT

(Source:GeneralStatisticsOffice)

(Source:GeneralStatisticsOffice)

2000

2001

2002

2003

200420

05

2006

2007

2008

2009

2010

20112012f

GDPGrowthRate

5.35

5.8

5.89

6.05

6.23

6.

35

6.62

6.96

6.48

6.65

7.03

6.41

5.37

012345678%

2000

2001

2002

2003

20042

005

2006

2007

2008

2009

2010

2011

2012

ConstructionOutput

1.63

1.94

2.07

2.39

2.823

.35

4.09

4.94

5.8

6.19

7.26

7.79

5.08

0123456789

Billion US$

Note:2012

fromJ

an

toNov


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Theabovecostsareat4t

hQuarter2012levels,inclusiveofpreliminariesandcontingenciesunlessotherwisestated.

#

RatesarenettofVAT

.

*

Ratefor9mmgymsumboard.

m2

m2

kg kg m2

m2

m2

m2

m2

%

493,600

2,608,000

30,120

34,240

49,200

69,100

250,400

302,400

64,150

8-12

55-60

350-500

6.00-7.50

6.00-7.50

15-22

15-22

50-70

30-45

3.50-4.50

6-12

1,200

6,500

60 60 220

220

1,200

800

120

1015

58.00

160-21

0

3.50

3.20

9.00

8.00

30.00

26.00

5.00

5-8

190

940

20 20 48 53 120

110*

19 5-10

12.

"KliplokColorbond"0.6

4m

mprofiledsteelsheeting

13.

Aluminiumcasementwind

ows,

singleglazed

14.

Structuralsteelwork-beams,

stanchionsandthelike

15.

Steelwork-angles,

chann

els,

flatsandthelike

16.

25mmCementandsand(1:3)paving

17.

20mmCementandsand(1:4)plastertowalls

18.

Ceramictilesbeddedtofloorscreed(m/s)

19.

12mmfibrousplasterboardceilinglining

20.

Twocoatsofemulsionpainttoplasteredsurfaces

Averageexpectedpreliminaries

KUALA

LUMPUR

RM

HOCHIMIN

H#

VND

BANGKOK#

BAHT

BRUNE

I

B$

JAKARTA#

RP'000

1.

Excavatingbasementnote

xceeding2mdeep

2.

Excavatingforfootingsnot

exceeding1.5

mdeep

3.

Removeexcavatedmateria

lsoffsite

4.

Hardcorebedblindedwithfinematerials

5.

Massconcretegrade15

6.

Reinforcedconcretegrade

30

7.

Mildsteelrodreinforcemen

t

8.

Hightensilerodreinforcement

9.

Sawnformworktosoffitsofsuspendedslabs

10.

Sawnformworktocolumn

sandwalls

11.

112.5

mmthickbrickwalls

Unit

DESCRIP

TION

m3

m3

m3

m3

m3

m3

kg kg m2

m2

m2

70,000

67,000

69,000

334,900

1,421,000

1,830,000

21,870

20,635

181,000

223,000

164,670

15-20

15-20

20-25

60-70

230-250

250-280

3.70-3.90

3.70-3.90

30-40

30-40

32-45

120

120

120

650

2,400

2,800

29 28 450

450

750

3.60

3.20

3.00

43.00

124.00

145.00

1.20

1.20

15.00

15.00

17.50

25 35 30 290

760

910

10.70

10.70

130

130

130

MAJOR RATES FOR SELECTED ASIAN CITIES


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**RatesarenettofGST.

++RateforAluminiumw

ithanodizedfinish;6mmthick

^

Rateforleanconcrete

blinding

Rateincludingdumpin

gcharges

+

Ratefordoubleglazed

window

##Ratefor120mmthickconcreteblockwalls

m2

m2

kg kg m2

m2

m2

m2

m2

%

12.


4m


13.


ows,

singleglazed

14.



15.

Steelwork-angles,

chann

els,

flatsandthelike

16.


17.


18.


19.


20.



1.


xceeding2mdeep

2.


exceeding1.5

mdeep

3.


lsoffsite

4.


5.

Massconcretegrade15

6.


30

7.


t

8.


9.


10.


sandwalls

11.

112.5

mmthickbrickwalls

Unit

DESCRIP

TION

m3

m3

m3

m3

m3

m3

kg kg m2

m2

m2


S

INGAPORE**

S$

HONGKONG

HK$

MANILA

PHP

350

275

250

3,000

3,800

5,000

47 48 850

800

N/A

900

9,000++

110

100

350

350

1,200

1,300

400

8-15

16.50

16.50

45.00-50.00

50.00

202.00^

155.00-170.00

1.60-1.75

1.60-1.75

30.00-33.00

30.00-33.00

30.00-35.00

43.00

290.00

4.80-5.80

4.80-5.80

11.00

15.50

65.50

30.00

3.50-4.00

12-15

140

130

200"

700

920

1,150

9.80

9.80

250

250

230

630

1,900

26 28 90 100

300

460

45

10-15

20 25 30 150

525

571

5.80

5.80 68 58 62 N

/A780+

10 9 22 24 120

140

30

5-10%

30 25 105

168

400

470

6.00

6.00 55 55 60

##

N/A

600

12.00

10.00

35 28 160

170

32 3-8

BEIJING

RMB

SHANGHAI

RMB


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+

Ratefordoubleglazed

window

m2

m2

kg kg m2

m2

m2

m2

m2

%

12.


4m


13.


ows,

singleglazed

14.



15.

Steelwork-angles,

chann

els,

flatsandthelike

16.


17.


18.


19.


20.



1.


xceeding2mdeep

2.


exceeding1.5

mdeep

3.


lsoffsite

4.


5.

Massconcretegrade15

6.


30

7.


t

8.


9.


10.


sandwalls

11.

112.5

mmthickbrickwalls

DESCRIP

TION

m3

m3

m3

m3

m3

m3

kg kg m2

m2

m2


SHENZH

EN/

GUANGZ

HOU

RMB

CHONGQING/

CHENGDU

RMB

25 20 68 140 400 450 6.50 6.50 55 55 75 N/A550 10 10.00

30 35 130 180 28 5-10

18 40 45 130

360

400

5.50

5.50 65 65 50 N

/A750+ 10

10.00

28 22 130

150

30 5-10

20 20 34 N/A

401

494

5.94

5.94 79 77 67 N

/A615+ 11

11.32

23 25 162

102

29 5-10

25 30 28 170

420

500

5.80

5.80 80 80 70 N

/A630+ 12

12.00

37 50 140

120

30 5-10

SHENYANG

RMB

DALIAN

RMB

Unit


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@

RatesarebasedonprojectsinBangaloreandarenettofVATandServiceTax.Mumbaicostsaregenerally8%higher.

*

Ratesincludelabourc

ostsandarenettofVAT

m2

m2

kg kg m2

m2

m2

m2

m2

%

12.


4m


13.


ows,

singleglazed

14.



15.

Steelwork-angles,

chann

els,

flatsandthelike

16.


17.


18.


19.


20.



1.


xceeding2mdeep

2.


exceeding1.5

mdeep

3.


lsoffsite

4.


5.

Massconcretegrade15

6.


30

7.


t

8.


9.


10.


sandwalls

11.

112.5

mmthickbrickwalls

DESCRIP

TION

m3

m3

m3

m3

m3

m3

kg kg m2

m2

m2


MACA

U

MOP

INDIA@

Rs

50 60 60 600 760 815 9.00 9.00 200 200 250 N/A1,850

27 32 80 95 400 360 806-12

%

135

150

NA

3210

4400

5375 45 47 46

0490

775

1050

4100 82 82 32

5250

1150

900

145-10

1,800

1,800

9,500

27,800

60,600

73,500

1,100

1,110

24,500

24,500

41,800

36,800

300,000

1,400

1,500

3,000

8,300

61,200

25,000

7,500

6-11

SEOUL*

KRW

Unit


16/71



225-370

375-480

375-480

375-475

605-695

345-405

450-475

475-600

715-795

VND20,866

465555

465565

540305350440905

RM3.06

598N/A

598N/A

690361N/AN/AN/A

Baht30.46

484N/A

442N/A

N/A495695795N/A

B$1.24

N/AN/A

290N/A

420290N/AN/AN/A

IDR9,600

INDUSTRIAL

Lightdutyflattedfactories

Heavydutyflattedfactoriesandwarehouses

Singlestoreyconventionalfac

toryoftructural

steelwork

Owneroperatedfactories,lo

wrise

OTHERS

Basementcarpark(=15 20 3.0 5.0

Type of building1 space of carparking

(25m2) for

- Hotel from 3-Star

standard upwardevery 5 guest rooms

- High-grade office,foreign affairs offices

every 150m2floor area

- Super market, bigshops, conference centre,exhibition, show room

every 75m2floor area

- High gradecondominium

every apartment

LANGDON&SEAH

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PLOT RATIOS AND SITE COVERAGE FOR BUILDINGS KEY DESIGN CRITERIA

Plot Ratios and Site Coverage

I. High-rise building :

Pursuant to the TCXDVN 323 : 2004 promulgated to

Decree 26 dated 2 November 2004 of Ministry ofConstruction on Design standard for high-rise building

and Decree No 21/2006/QD-BXD dated 19 July 2006 of

Ministry of Construction on amending and supplementing

articles of TCXDVN 323 : 2004 as follows:

Plot Ratios and Site Coverage:

- The site coverage of high-rise building must be less

than 40%.

- The plot ratio is less than 5.0.

- Other cases will be applied to the detail planningapproved by authorities.

Parking space:

- Car parking space: 1 car parking space / 4 to 6 units

with standard area 25m2/car.

- Motorcycle parking space: 2 motorcycles / unit with

standard area 2.5 to m2/motorcycle.

- Bicycle parking space: 1 bicycle / unit with standard

area 0.9m2/bicycle.

Height from floor to ceiling soffit:

- > 3m but < 3.6m.

- In some high standard building, the height from

floor to ceiling soffit may be lower, but not less than

2.7m.


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BUILDING AREAS DEFINITIONSKEY DESIGN CRITERIA (contd)

Road for fire protection :

- Width of road > 3.5m.

- Clearance Height > 4.25m.

- Area for making U-turn > 15x5m

II. Non High-rise building :

Pursuant to the Vietnamese building code volume 1

promulgated to Decree 682/BXD-CSXD dated 14

December 1996 and Decree 04/2008/QD-BXD dated

03 April 2008 of Ministry of Construction on amending

and supplementing articles of TCXDVN 323 : 2004 as

follows :

Type of building

Ratio (%)

Maximum of

site coverage

Minimum ofLandscaping

ratio

1. Dwelling House

- Villa 30 40

- Condominium 50 20

2. Public building

- Kindergarten, School 35 40

- Hospital 30 40

- Culture house 30 30

- Religious constructions 25 40

3. Factory

- Scattered construction 50 20

- Combined block 70 20

The following guidelines are derived from the RICS

Code of Measuring Practice: A Guide for Surveyors

and Valuers. 5th Edition' and the RICS 'Standard Form

of Cost Analysis, Principles, Instructions and Definitions.

Gross External Area (GEA)

Gross External Area is the area of a building measured

externally at each floor level.

Includes:

Perimeter wall thicknesses and external projections

Areas occupied by internal walls and partitions

Columns, piers, chimney breasts, stairwells, liftwells,

and the like

Atria with clear height above, measured at base level

only

Internal balconies

Structural, raked or stepped floors are to be treated

as a level floor measured horizontally

Horizontal floors, whether accessible or not, below

structural, raked or stepped floors

Mezzanine areas intended for use with permanent

access

Lift rooms, plant rooms, fuel stores, tank rooms which

are housed in a covered structure of a permanent

nature, whether or not above main roof level

Outbuildings which share at least one wall with the

main building

Loading bays

Areas with a headroom of less than 1.5m

Pavement vaults

Garages

Conservatories


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BUILDING AREAS DEFINITIONS (contd)

Excludes:

External open-sided balconies, covered ways and

fire escapes

Canopies

Open vehicle parking areas, roof terraces, and the like

Voids over or under structural, raked or stepped floors

Greenhouses, garden stores, and the like in residentialproperty

Gross Internal Area (GIA)

Gross Internal Area is the area of a building measured

to the internal face of the perimeter walls at each floor

level.

Includes:

Areas occupied by internal walls and partitions

Columns, piers, chimney breasts, stairwells, lift-wells,

other internal projections, vertical ducts, and the like Atria with clear height above, measured at base level

only

Internal open-sided balconies and the like

Structural, raked or stepped floors are to be treated

as a level floor measured

Horizontal floors, with permanent access, below

structural, raked or stepped floors

Corridors of a permanent essential nature (e.g. fire

corridors, smoke lobbies, etc.)

Mezzanine areas intended for use with permanent

access

Lift rooms, plant rooms, fuel stores, tank rooms whichare housed in a covered structure of a permanent

nature, whether or not above main roof level

Service accommodation such as toilets, toilet lobbies,

bathrooms, showers, changing rooms, cleaners' rooms,

and the like

Projection rooms

Voids over stairwells and lift shafts on upper floors

Loading bays

Areas with a headroom of less than 1.5m

Pavement vaults

Garages

Conservatories

Excludes:

Perimeter wall thicknesses and external projections

External open-sided balconies, covered ways and

fire escapes

Canopies

Voids over or under structural, raked or stepped floors

Greenhouses, garden stores, fuel stores, and the

like in residential property

Gross Floor Area (GFA)

Gross Floor Area is the total of all enclosed spaces

fulfilling the functional requirements of the building

measured to the internal structural face of the enclosing

walls.

Includes:

Areas occupied by partitions, columns, chimney breasts,

internal structural or party walls, stairwells, lift-wells, and

the like

Lift, plant, tank rooms and the like above main roof

slab


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BUILDING AREAS DEFINITIONS (contd)

Note:

Sloping surfaces such as staircases, galleries, tiered

terraces and the like should be measured flat on plan.

Excludes:

Any spaces fulfill ing the functional requirements of

the building which are not enclosed spaces (e.g.openground floors, open covered ways and the like). These

should each be shown separately

Private balconies and private verandahs which should

be shown separately

Net Internal Area (NIA)

Net Internal Area is the usable area within a building

measured to the internal face of the perimeter walls at

each floor level.

Includes: Atria with clear height above, measured at base level

only

Entrance halls

Notional lift lobbies

Kitchens

Built-in units, cupboards, and the like occupying usable

areas

Ramps of lightweight construction to false floors

Area occupied by ventilation/heating grills

Area occupied by skirting and perimeter trunking

Ar ea s se ve re d by int er na l no n- st ru ct ur al wa ll s,

demountable partitions, whether or not permanent,and the like, where the purpose of the division is

partition of use, not support, provided the area beyond

is not used in common

Pavement vaults.

Excludes:

Those parts of entrance halls, atria, landings and

balconies used in common

Toilets, toilet lobbies, bathrooms, cleaners rooms,

and the like

Lift rooms, plant rooms, tank rooms (other than

those of a trade process nature), fuel stores, andthe like

Stairwells, lift-wells and permanent lift lobbies

Corridors and other circulation areas where used

in common with other occupiers or of a permanent

essential nature (e.g. fire corridors, smoke lobbies,

etc.)

Areas under the control of service or other external

authorities including meter cupboards and statutory

service supply points

Internal structural walls, walls enclosing excluded

areas, columns, piers, chimney breasts, other

projections, vertical ducts, and the like The space occupied by permanent and continuous

air-conditioning heating or cooling apparatus, and

ducting in so far as the space it occupies is rendered

substantially unusable

Areas with headroom of less than 1.5m

Areas rendered substantia lly unusable by vir tue

fhaving a dimension between opposite faces of

less than 0.25m

Vehicle parking areas (the number and type of spaces

noted)

Building Footprint

Building Footprint is not a term defined by the RICS, but

is generally understood to mean the area of the land

upon which the building sits (excluding all basements),

measured to the outside face of external walls.


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PROCUREMENT STRATEGIES

Overview a) Traditional Lump SumMost contracts are let in Vietnam on a lump sum basisusing a modified FIDIC Contract which in its unamendedform is a measure and value contract. This methodrequires appointment of independent design consultantsby the employer and a sufficiently developed designpreferably frozen prior to tender. Bills of Quantities areusually provided for information only to the contractor

who normally provide their own quantities with their tenderfor comparison purposes only and only the rates arecontract rates with any errors and omissions not beingsubject to remeasurement after the lump sum is finalized.Prime costs sums for nominated subcontracts for mechani-cal and electrical and lift sub-contracts are widely used.

b) Construction ManagementThis form of procurement is often portrayed as fast-trackas tender packages are often let successively throughoutthe design process with no need to wait until detail designis complete. A construction management consultant isengaged normally for a fixed percentage fee to procureand manage the individual trade contracts which areplaced by the employer. This necessitates effective cost

management as the total construction budget is notfinalized until the final packages are let. The employerbears not an insignificant risk in terms of price certainty,delays, disruption, design and coordination problems.Clients adopting this approach need to be conversant withthe local environment and have the requisite in-houseskills to deal with issues as they arise.

c) Framework AgreementsFramework agreements referred sometimes as call-offcontracts between investors with a pipe-line of projectsand contractors can result in significant savings to bothparties using any of the procurement options above. Theadvantages are time reduced for tendering and negotia-tions, improved processes and knowledge transfer, bulk

order costs savings, reduced confrontation and economiesof scale due to continuity of workflow. All these advantagesare extremely important in the Vietnam context because itis of paramount importance to maintain healthy relation-ships between employers and contractors as unforeseenevents are prevalent during the design and procurementstages in Vietnam.


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d) Public Private Partnership (PPP)

PPP is the generic term for the relationships formed

between the private sector and public bodies often with

the aim of introducing private sector resources and / or

expertise in order to help provide and deliver public

sector assets and services. The term PPP is used todescribe a wide variety of working arrangement from

loose, informal and strategic partnerships to design,

build, finance and operate type services contract and

formal points of joint venture companies. The PPP

mechanisms would help attract commercial capital and

other sources of capital that private investors will seek

for PPP projects. In that way, investment efficiency will

be improved while public debts controlled at safe levels.

Investors of projects will be chosen via competitive

bidding in order to maximize benefits and create equal

opportunities for domestic and foreign investors. On 9

November 2010 the Prime Minister of Vietnam

authorized the issue of detailed regulations covering thepiloting of investment in the form of Public Private

Partnerships (PPPs) in Vietnam. The PPP Regulations

became effective on 15 January 2011 and will continue

to be implemented over the next three to five years. The

Vietnamese Government intends to carry out PPP

programme according to a list of defined projects to

ensure that investors are provided with carefully

prepared projects with a view to creating a real PPP

commercial market in Vietnam. In the coming years the

government will carry out some pilot projects. The PPP

projects in the country will concentrate on core technical

infrastructure that requires much capital, and further-

more, mechanisms to mobilize private investment: (i)

Roads, Road bridges, road tunnels, ferry road stations;

(ii) Railway, railway bridges, railway tunnels; (iii)

Airports, sea ports and river ports; (iv) Clean water

supply systems; water drainage systems; liquid and

solid waste collection and treatment systems; (v) Power

plants, electricity transmission cables; (vi) Hospitals;

(vii) Other infrastructure projects.

PROCUREMENT STRATEGIES (contd)

ProjectCriteria

AppropriatenessofContractStrategy

Parame

ter

Objectives

PPP

Traditional

Management

Contracting

Construction

Management

Design

and

Construct

Prim

e

Contrac

ting

Framework

Agreements

Timing

EarlyCompletion

Cost

Preconstructionpricecertainty

Quality

Designprestige

Variatio

ns

Avoidprohibitivecostofchange

Comple

xity

Technicallyadvancedorhighly

complexbuilding

Responsibility

Singlecontractuallink

Professional

Responsibility

Needfordesignteamtoreport

tosponsor

Risk

Avoidance

Desiretotransfercompleterisk

Dama

ge

Recovery

Facilitytorecovercostsdirect

fromcontractor

Buildab

ility

Contractorinputtoeconomic

construction

Table A - Procurement Strategy


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INDICATIVERISK

ALLOCATION

ContractStrategy

Client

Contracto

r

PublicPrivatePartnerships

DesignandConstruct

PrimeContracting

Traditional

FrameworkAgreements

ManagementContracting

ConstructionManagement

Table B - Risk Allocation CONTRACTOR SELECTION STRATEGIES

There are four tiers of contractor available for

tendering foreign investment projects, these tiers are

not official classifications.

Tier 1 Foreign contractor from Japan, Korea,

Singapore, Hong Kong, Europe

Australia

Tier 2 Foreign contractor from China, Russia,

Taiwan and Malaysia

Tier 3 Local private and Joint Stock contractors

Tier 4 State contractors

There is a considerable diversity between these tiers in

terms of general expertise, technological know-how,

human-resource skills and training which leads to a

different risk profile for delivery of buildings to time,

quality and cost targets. The lowest tiers use less

modern equipment, machinery and system formwork

and have much lower human resource costs. This is

inevitably leading to higher tender returns. A rigorous

pre-qualification procedure is recommended with

weighted scoring in line with project objectives eg.

lowest cost objective will have an inevitable impact on

quality and time.

A typical pre-qualification assessment might cover

(indicative weighting for Vietnam 1 through 10, 10

highest)

Vietnam experience (if foreign) 8

Project type experience (local and foreign) 7

Financial capacity (particularly local) 8

Plant and equipment inventory (particularly local) 7

Direct labour strength (local and foreign) 6


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CONTRACTOR SELECTION STRATEGIES (contd)

Proposed joint venture / sub-contracting arrangements

(local and foreign) 7

Planning and programming capability (particularly local) 8

Cognizance of international procedures, codes and

specifications (local) 8

Financial capacity (local)

Local contractors now have access to bank funding but

should not be expected to finance projects by punitive

cash-flow arrangements. Most contracts are let with

investors paying 10-15% advance payments which is

re-couped from subsequent milestone or interim

payments. Deductions for defective works and liquidated

damages may compound problems so careful diplomacy

is often more productive. Claims for additional costs due

to prevailing market conditions are more common in

todays climate but also for misinterpretation of contract

obligations making the need for good quality contractdocumentation essential.

Plant and Equipment Inventory (local)

State firms tend to share or pool plant and equipment for

example tower-cranes and piling rigs. It is often impossible

to determine the true owner of plant and equipment

on-site in the event of premature demobilization.

It is essential that the pre-qualification process

determines that a contractor owns plant of sufficient

size, capacity and suitable state of repair as contractorsmay not have full control of leased equipment suddenly

required on other job-sites.

Direct labour strength (local)

The source of labour supply, also being verified as labour

strength, may be topped-up by importing unskilled

and untrained workers from remote provinces, who

often are not legally resident at their working destina-

tion.

Contractors should be asked to prove their direct labour

records and declare any labour only sub-contracting

arrangements. The tier 1 contractors will not have any

full-time dedicated labour on their payroll. Tier 2contractors often import workers from their home

country for the project duration and shall be responsible

for all associated costs and taxes.

Labour is not usually permitted to reside on site.

Contractors shall provide details of training curriculums

for each trade discipline when tendering as well as

health and safety programmes.

Proposed sub-contracting arrangements (local)

Sub-contracting is prevalent in Vietnam so it is essential

to check the percentage of work subcontracted out toensure quality control issues are minimized. It is highly

unlikely that any one firm will possess the required

human resource and plant and equipment to complete a

project using in-house resources. Foreign contractors

largely act as management function providing only

project engineers, site supervisors, health and safety

officers and planners. Both foreign and local contractors

rarely directly employ foremen, gang-leaders or indeed

skilled and unskilled operatives. These arrangements

are perfectly normal and accepted but it is preferable to

know in advance the exact arrangements being

proposed to ensure no conflicts of interests with otherprojects and to understand fully the amount of control

the appointed contractor has on the works he is

engaged to undertake.

Planning and programming capability (local)

This capability needs careful verification from the lowest

tier contractors. The use of first principle time resourced


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CONTRACTOR SELECTION STRATEGIES (contd)

planning is rarely used. The approach adopted is often

rule of thumb whereby planners determine critical

activity durations using their knowledge of other projects.

Floor/structure cycle times are often inconsistent and

the lack of recording and reutilization of historical data

means the planning process can be crude at best. Time

or delay is a perennial problem in Vietnam sometimesdue to employer delays such as site clearance or permit

issues or neutral delays such as weather but contractor

culpable delays should not be of any surprise. The use

of critical path analysis, planned impacted analysis,

window analysis and collapsed asbuilt are not widely

known in Vietnam. This means time recovery analysis

and the implementation of acceleration measures are

not readily adopted and time for completion can

become unpredictable. The input of experienced

Project Management might be invaluable in reducing

delays and formulating time recovery plans.

International experience (local)

The influx of foreign invested projects has brought with it

an influx of different standards and procedures normally

from the source country. It is essential to determine the

degree of exposure local contractors have had to

international standards, procedures and indeed

expectations. The Vietnamese Codes and Standards

whilst detailed need to be used concurrently with

international standards such as American, Australian,

British or Japanese standards and specifications as

they are not comprehensive enough to stand-alone onan international standard project. There is no uniform

and widely accepted standard or specification. The nett

result is a hybrid where every project has a unique and

bespoke set of standards depending on the investor and

his consultant source country. The appointed design

team will naturally look to use their familiar off the shelf

specifications and tendering contractors should be

asked to list the standards they have successfully built

for the key trades and building elements. There is a

move to produce a set of consolidated Vietnamese

standards but this is some way off and the hybrid

approach will continue for some time to come.

However, no international standard shall over-ride any

mandatory Vietnam building code or standard. Design

consultants should provide a translated bi-lingual

version of their specifications and locally registered

design firms shall provide localization of the design to

obtain local approvals. The contractors should also be

asked to list investments such as system formwork and

their use of recent technology and list previous employers

and consultants whom they have worked with.


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Pharmaceutical, legal, and oils & gas who still havewealthy budget played a major role in driving demandfor new office spaces in 2012 and will continue so in2013.

Falling rental prices and the tightened availability offinancing have cause most developments to slow oreven stall. In 2012 HCMC welcomed only one Grade Boffice buildings, An Phu Plaza come online. Besides,Times Square, President Place and Empress Towerhave been leased out even thought they have not hadgrand openings yet. In 2013, it is expected a number ofthese projects will come on stream, including and LimTower, Le Meridien and Saigon Airport Plaza. With thedelays to ongoing developments and mothballing ofproposals, future supply is now anticipated to be notablylower than that forecast 12 months ago. Accordingly wesee supply side pressure as having a lesser impact onrental rates than had otherwise been feared. We expectto see the expansion of prime space supply ceaseduring the course of 2013 and feel it is increasinglylikely that a bottom in the market is approaching for

HCMC.

The situation is set to come under further pressure forHanoi, particularly so for older office buildings, as thesupply of new office space in the capital city willcontinue to increase in near future, the majority of whichare better quality projects. Rental levels continue to falland market sentiment is clear that the city office sectornot seen the bottom yet. Landlords have already begunadopting different, unique and dynamic strategies tosurvive. In exchange for higher occupancy and togenerate cash flow, some are willing to accept lowerrents, others more favourable incentives includinglonger fit-out and rent free periods, attractive signage,reduced or even free parking fee.

The bargaining power is certainly in the hands oftenants and is likely to remain so for the foreseeablefuture.

RESIDENTIAL SECTOR

The market continued to see a decrease in sell ing priceacross all segments, in which the high-end sector had

PROPERTY OVERVIEW

2012 ended with CPI at 6.8% y-o-y, better than target of8%, thanks to the Governments efforts in keeping pricepressure down, which in turn opens the door for furthermonetary easing in 2013. Rediscounting and refinancingrate have been cut 1% in the final weeks of the yearwhile the base rate unchanged. The motion is leadingto a decrease in deposit interest rate cap by 1% to 8%in an attempt to lower lending costs by reducing banksfinancing costs.

Owning to low imports, Vietnam witnessed the firsttrade surplus in the last 20 years, which was USD284million.

GDP growth reached only 5.03%, lower than therevised target of 5.5%. In the midst of sluggisheconomy, FDI disbursement unavoidably dropped by5% y-o-y. It shows the first sign of losing Vietnamscompetitiveness, which is more a concern.

Bad debts reached VND250 trillion, equal to 8.8 % oftotal debt. Resolving bad debts together with prioritising

sustainability over rapid growth are challenges for 2013.VNIndex moved out of the downward trend in Decemberas investors regained confidence on risky assets due torecent releases of CPI, trade balance, interest rates cutand sealed M&A deals between the large local firmsand strategic foreign investors.

OFFICE SECTOR

With rents in HCMC and Hanoi falling for a thirty sixthconsecutive month, office landlords had another difficultyear. Significant excess in supply of office space hasforced landlords to compete aggressively, offeringgenerous discounts to secure tenants rather than facingempty space. This resulted in sharp drops in average

asking rents in each submarket throughout 2012. Themarket-wide asking rent in HCMC saw a drop of 8.2%,from US$22.98 psm in 2011 to US$21.08 psm in 2012.While office landlords suffered from the downturn of themarket, most tenants were happy as they enjoyedbetter choices with more atractive rental terms offeredby the landlords such as including longer fit-out period,free/reduce parking fee and more flexible leasing termsand conditions, discount for upfront payment.


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budget of expatriates working in Vietnam. In order tocompete with an increasing addition of new or newly-renovated projects as well as from buy-to-let subsitutes,landlords of the established serviced recidences havebecome more flexible by offering 10%-15% discount onasking rents and free car parking, daily breakfast orhigher utility allowance.

To cope with the challenges in the market, landlordstend to priority occupancy over rents. In the samefashion, Grade A rents were revised downward for fivequarters in a row since the third quarter of 2011, a dropof 14.5% y-o-y, from US$38.18 psm in the third quarterof 2011 to US$29.76 in the fourth quarter of 2012.Consequently, the Grade A building saw a slightincrease in occupancy (4.3 percentage points y-o-y).

On a brighter side, the first half of 2013 will witness theintroduction of some branded serviced apartmentprojects in HCMC including Capri by Fraser @ District 7in Phu My Hung, Somerset Vista in District 2 and TimesSquare in District 1. 2012 also witnessed major

ground-breaking ceremonies, with expected completionbeyond 2014. Projects include Saigon Centre Phase2, The One Ho Chi Minh City, and SC VivoCity theretail component of Saigon South Place Complex,which also plans to include serviced apartment in laterphases. It is interesting that most projects have movedout of the traditional core (the CBD) to the decentralisedarea (District 2 and District 7) with an emerging expatcommunity and also home to a lot of buy-to-let competi-tion. Moreover, these projects involve internationalplayers, which promises to bring in the world-classexperience for a better-shaped market.

RETAIL SECTOR

While most of real estate sectors were facing difficultiesin attracting tenants, holding occupancy rate as well asrents firm, the retail market remained a spotlight in thegloomy real estate picture in 2012. The last quarter ofthe year witnessed the the opening of two shoppingcentres: Vincom Center A in District 1 with 38,000 smGFA and Pandora City in Tan Phu District with 40,000sm GFA. Both achieved optimistic occupancy rate in ashort time: Vincom Center A has committed occupancyrate at 95% while this number is 80% at Pandora City.

PROPERTY OVERVIEW (cont d)

the highest decline (7.3% y-o-y). This was mainly due tothe low demand driven by the limited financial capacity.Some developers gave the direct and official price cutwhile others reduced price indirectly through discounton upfront payment, giving vouchers, overseasholidays, gold, interior furniture or lending rate support.

A stagnant market and buyers weak confidence havediscouraged developers to launch new projects.Launches in the primary market therefore continued tofall in 2012 (72.8% y-o-y) compared to the previousyear. However the number of completed units was17.2% higher y-o-y. This shows efforts from developersto complete their developments in attempts to attractbuyers.

Transactions appear to be broken into two distinctbrackets. The top tier was transactions at affordableand mid-end developments where the prices weresuitable to buyers budget. The second group werethose in the high-end segment. Most transactions of thistier were concentrated at projects with good location,developed to a high quality and developed by

well-known developers.

The nature of these transactions have partly reflectedthe markets sentiment. Buyers felt doubtful about theproject completions given recent failures of developersto delivery. They felt reluctant to spend money onproject under construction unless it is developed byprestigious companies. This is particularly true for thehigh-end segment.

It is expected that there would not have significantturnaround in the residential market in the near, it islikely to take at least five years for the oversupplysituation to reach equilibrium. For this reason we expectto see further policies directed at the residential real

estate market, both on the demand and supply sides.There are stirrings of market confidence, but this is stillhighly fragile and full blown recovery will definitely be agradual process.

SERVICED APARTMENT SECTOR

Landlords of serviced apartment buildings had anotheryear of difficulty due to the fierce competition frombuy-to-let houses and the tightening in accommodation


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PROPERTY OVERVIEW (cont d)

Together with their opening, many flagship stores fromhigh-end international retailers first appeared inVietnam, such as Hugo Boss, Banana Republic,Hermes, Christian Dior, Sisley, Ermenegildo Zegna, 7For All Mankind, Ralph Lauren and the mass-marketfashion brand Payless.

Along with fashion brands, fast-food chains also set toexpand in Vietnam: Subway announced the plan toopen 10 shops in 2013; Burger King has opened fivestores by the end of 2012; Lotteria and KFC both striveto have 200 shops in the next years; Mc Donald,Starbucks and 7-Eleven plan to enter Vietnam in 2013.In spite of the new supply in the final quarter, vacancyrate in shopping centre of the whole city dropped by 8percentage points y-o-y thanks to the improved take-upspaces at Vincom Center B and Crescent Mall. Theaverage market-wide asking rent also increased due tothe higher-than-average asking rent of Vincom Center

A. Branded retailers such as Takashimaya (Japan),AEON (Japan), VivoCity (Mapletree, Singapore) startedto eye on Vietnam as a potential and untapped retail

market in the context of the sluggish economic growthin almost every market around the globe.

With a strong growths of the Vietnam demographics,retail revenue, income per capita, combined with thelack of good-quality, international-standard retail space,Vietnam continues to be an attractive retail destinationto investors, especially the branded ones.

(Reproduced by kind permission of

CB Richard Ellis)


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4VIENAM BUSINESS

ENVIRONMENT

Language

Accounting System

Banks

Government Administration

Taxation

Import

Insurance

Workforce


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LANGUAGE

BANKS

The Vietnamese banking system was restructured in

the 1990s separating the State Bank of Vietnam

(Central Bank) from commercial banks and paving the

way for the entry of foreign banks presently offering a

range of banking services comparable to overseas

banking facilities. Today there exists the State Bank of

Vietnam, State Owned Banks, Joint Stock Commercial

Banks, Foreign Bank branches / representative offices

and Joint Venture Banks. The law allows foreign entities

and individuals to hold foreign currency accounts and

local Vietnamese dong accounts. Banks requires

document applicable to foreign currency transactions

for domestic payment and cross border transfer via

capital/current account. Banks can provide customers

with all of the guarantee types commonly used in the

economy such as bid bond, a performance guarantee, a

loan under guarantee by a third party, a deposit guaran-

tee , tax/custom guarantee ...Guarantee fee will be

regulated by each bank and depended on guarantee

amount and term. Letters of credit are the most

commonly used method of transaction for trade. Bank

will blockade a part or the whole money amount of client

account upon receipt of decision or written request of a

competent organizations according to the provisions of

law.

ACCOUNTING SYSTEM

Foreign-invested business entities are generally

required to adopt the Vietnamese Accounting System

("VAS"). If a company strictly follows the VAS, registra-

tion with the Ministry of Finance ("MoF") is not required.

However, if the VAS is modified, a written approval from

the MoF is required before implementation.

Accounting records are required to be maintained in

VND. A foreign-invested business entity can

self-assess to select a foreign currency to be used for its

accounting records and financial statements and notify

its local tax authority. Accounting records are required

in Vietnamese language, although a commonly-used

foreign language can be used at the same time along

with the Vietnamese language. The annual financial

statements of all foreign-invested business entities

must be audited by an independent auditing company

operating in Vietnam. Audited annual financial

statements must be completed within 90 days from the

end of the year.

Vietnamese was declared the official language of

Vietnam in 1945, as much as 70% of the vocabulary is

borrowed from Chinese and the intonation is similar to

Cantonese. It is spoken by approximately 90% of the

Vietnamese population and ranked as the worlds 15th

most spoken language. English, however, is widely

used in the business community.

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GOVERNMENT ADMINISTRATION

The Peoples Supreme Court is the highest judicial

organ of the Socialist Republic of Vietnam. The court

consists of the Tribunal President, Vice Tribunal

President, judges, the juror and the secretary of the

court. Moreover, the court is composed of the judge

Council, judge Committee, the Military Court andcriminal court, civilian court, the court of appeal and the

assistant apparatus.

The National Assembly is the highest representative

organ of the people and the highest organ of the state

power of the Socialist Republic of Vietnam. Members

are elected for a five year tenure through nation wide

elections. Sittings of the National Assembly are held

twice a year and have full constitutional and legislativepowers. The standing committee of the National

Assembly is responsible for enforcement of laws. Its

functions are carried out through the Ministries, State

Committees and General Departments by promulgating

and explaining the Constitution, law and decree-laws.

The Countrys President is the head of state, elected by

the National Assembly from among its members to

represent the Socialist Republic of Vietnam in internal

and foreign affairs. The Vice President is proposed by

the President and elected by the National Assembly

from the representatives. The National Defense and

Security Council has the duty to mobilize all forces and

potentials of the country to defend the Homeland.

The Government is the executive organ of the National

Assembly and shall report to the National Assembly, the

National Assembly standing committees and the

Countrys President. The Government consists of the

Prime Minister, Deputy Prime Minister, Ministers and

Heads at ministerial level. The Prime Minister is

presented by the President and elected by the National

Assembly and has the term of 5 years. The Deputy

Prime Ministers are the assistants of the Prime Minister

and may be delegated by the Prime Minister during his

absence. The Ministers and Heads at ministerial levels

take on the State management of allotted branches or

fields.


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TAXATION

II. Value Added Tax ( VAT)

The transfer of a LUR without any related infrastructureis not subject to VAT. Conversely, the transfer of LURwith an infrastructure and building component isgenerally subject to VAT at 10%. However, the landvalue can generally be excluded from the revenue

subject to VAT.

Output VAT is fully payable on advances or depositamounts and input VAT incurred for construction costscan generally be claimed as an input VAT credit.III. Stamp Duty

Stamp duty is payable at the transfer of title of realestate property by the buyer. Some specific transfersmay be exempted from the stamp duty. Stamp duty isimposed at 0.5% on the value of the property up to VND500 million (approx. USD 25,000) per asset pertransaction.

IV. Foreign Cont ractor Tax (FCT )

Foreign companies with no legal entity set up inVietnam (i.e. classified as a Foreign Contractor orFC) supplying goods and services to Vietnamesebuyers and deriving income from Vietnam (e.g.construction contractor or project management service)are subject to Vietnamese FCT.

VAT and CIT are the two components of the FCT.There are three tax filing and payment options: (i) Fullregistration method with maintenance of books andaccounts in Vietnam under Vietnam AccountingSystem; (ii) Deemed Withholding method and (iii) theHybrid method, which consists of paying VAT on the

conventional deduction method like a Vietnamesecompany but paying CIT on a Deemed Withholdingmethod basis.

The Deemed Withholding method is the most commonapproach in practice by which the contracting Vietnameseparty is responsible for registering, withholding,filing andpaying the FCT due from each payment made to theFC. The applicable rates vary depending on the nature

TAXATION IN THE REAL ESTATE INDUSTRY

I. Corporate Income Tax (CIT )

Organizations established in Vietnam deriving incomefrom transferring or leasing property are subject toCorporate Income Tax (CIT) at the standard tax rate

of 25%.

Real estate developers generally are not given prefer-ential tax rates, tax holidays, or other tax reductionsexcept, for special cases such as projects located inpoor social-economic regions or projects for construc-tion of residential houses for the poor or workers.

For advanced payments for properties under develop-ment, real estate developers are required to payprovisional CIT, either at 25% on provisional income ifthe corresponding expenses can be determined andmatched with the revenue or 1% on advancedpayments if not.

Where the enterprise sub-leases out a property, if thelessee pays a lump sum for a number of years andcertain conditions are met then the lessor is able torecognise revenue by one of the two methods: (i) onallocated year-by-year basis or (ii) lump-sum basis.

Losses incurred in a given year can be consecutivelycarried forward for 5 years. However, losses fromactivities other than real estate cannot be offset againstreal estate income.

Land use rights (LUR) with indefinite terms may notbe depreciated for tax purposes. However, LURs withdefinite term used for production or business activities,can be amortized over the prescribed land use

duration.

Any gains from the revaluation of a LUR for capitalcontribution purposes related to residential housingshould be recognized as income in the current taxperiod. However, such a revaluation for capitalcontribution in the case of income generating assetprojects can generally be recognized as income over aperiod of up to ten years.


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TAXATION

of goods and services provided. For projects having asubstantial portion of local purchases, the Hybridmethod is often applied so that the FCs can claim crediton the input VAT incurred on local purchases but canstill pay the CIT on a deemed basis.

V. Personal Income Tax (PIT )

Generally, real estate (other than a property used as asole residential property and some other specificexempt transactions) transferred by the individual issubject to PIT. Property transactions subject to PITinclude the transfer of the right to buy, the transfer ofthe right to lease.

Typically, a Vietnam tax resident has to pay PIT underone of the following two methods:

(i) At 25% on the net gain assessed by the differencebetween the transaction price less the cost andrelevant expenses; or

(ii) 2% on the transfer price, if the cost cannot bedetermined.

However, recent practice has indicated that (ii) abovewould apply in most cases.

The treatment of non-Vietnamese tax residents is lesscomplicated as they simply must pay PIT at 2% of thetransfer price.

VI. Non-agricultural land-use tax

In addition, effective 1 January 2012, non-agriculturalland-use tax is generally applicable to the followingtypes of land: Non-agricultural land used for residential,

production or business purposes.

The calculation of the tax liability is generally based onthe land area, price of land and tax rate. For residentialland holding a multi-floor building or non-agriculturalland holding a production or business establishment,the applicable tax rate is 0.03%.

Organisations granted with the land-use-rights andexisting land users are required to submit an initial taxdeclaration (for the year 2012) at the tax office of therelevant district no later than 30 June 2012. Subsequently,no further declaration is required if there is no change intax payer or tax liability. If there is any change, the taxpayer is required to submit an amended declarationwithin 30 days following the date on which thechange takes effect. The tax payer may opt to paythe non- agricultural land-use tax on one-off basis ortwice a year but the annual payment of tax may notbe later than 31 December each year.

(Reproduced by kind permission of KPMG)


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OverviewMost risks that a company would insure anywhere elsein the world can be adequately insured for in Vietnam.Rates and terms are generally a function of the worldmarket with due consideration given to local factorshowever it should be noted that VAT of 10% applies toinsurance premiums on policies written within Vietnam.While the overall ability to insure large or complicated

risks entirely within Vietnam is limited, the Vietnameseinsurance industry can nonetheless insure any size riskthrough reinsurance arrangements with internationalreinsurance organisations. The leading reinsurers andthose who carry more than 10% have to be rated atleast BBB by Standards & Poors or B++ by AM Best orBaa by Moody's or equivalent.

Vietnam passed a comprehensive Insurance Law inDecember 2000 which took effect on April 1, 2001. The

Amendment of Insurance Law has been passed andwas effective as at July 1, 2011. The key changes arefocused at keeping up with any WTO commitmentssuch as: the insurance market is professional & open,foreign insurers are allowed to establish a branch in

Vietnam or issue an insurance policy into Vietnam.However, the law gives the power to the government torelease detailed guidance and to license such transac-tions. The Decree No. 123/2011/ND-CP was issued on28 Dec 2011 to provide guidance on the implementationof the Amended Insurance Law. In addition, the govern-ment issued Circular No. 124/2012/TT-BTC andCircular No. 125/2012/TT-BTC on 30 Jul 2012 witheffective from 01 Oct 2012 to guide on the operationand finance of the insurance market.

Construction All Risks (CAR) insurance, including thecovers for the Contract Work & Third Party Liability, ispopular in Vietnam. Recently, owners of larger projectshave shown interest in considering more technical

coverages such as Advance Loss of Profit (ALoP) /Delay in Start-Up (DSU), USA/Canada Jurisdiction,Completed Ooperation/Product Liability insurance toprotect their anticipated profit/fixed costs or liability of aparticular project.

Construction insurance still tends to be left to thecontractor to arrange rather than the owner which cangive rise to gaps in cover when projects are delayed orsplit into smaller packages. There may also be gapswhen the project passes from construction to operation.

INSURANCE

Compulsory Insurances in Vietnam

Compulsory insurances are regulated in insurance laws

& some specialised laws. Below is the consolidation:

Technically there is no requirement for worker

compensation insurance. However since there is a

liability regarding employees under the Vietnamese

labour law the purchase of worker compensation

insurance can act as a risk transfer method to protect

against these liabilities.

Insurance Class Status

Professional Indemnity for Insurance Brokers

Professional Indemnity for Lawyers Eff ected. W aiting f or guidance

Professional Indemnity for Securities Companies(Stockbrokers)

Professional Indemnity for Fund Management Companies Effected. Waiting for guidance

Professional Indemnity for Architects & Engineers

Professional Indemnity for Auditing Firms

Professional Indemnity for Evaluation Firms

Professional Indemnity for Public Notary Offices Effected. Waiting for guidance

Construction Works Insurance Waiting for guidance

Compulsory Fire & Explosion Insurance Effected. Compulsory wordings& tariff according to Circular220/2010/TT-BTC

Environmental Liability Insurance Waiting for guidance

Compulsory Professional Insurance, Civil LiabilityInsurance and Environmental Damage CompensationLiability Insurance applicable to Organizations andIndividuals performing Radiation Jobs

Effected. No compulsorywording & tariff

Aviations Liability Insurance Effected. Compulsory limits

Compulsory Vehicle Owners Civil Liability Effected. Compulsory wordings,limits & tariff

Travel Insurance for Vietnamese traveling overseas Effected. Waiting for guidance

Not really compulsory as evaluationfirms are obliged either to purchase

professional liability insurance forpracticing auditors or to set upprofessional risk reserve fund inaccordance with provisions of theMinistry of Finance

Not really compulsory as auditing

firms, branches of foreign auditing

firms in Vietnam are obliged either

to purchase professional liability

insurance for practicing auditors or

to set up professional risk reserve

fund in accordance with provisions

of the Ministry of Finance

Effected. Waiting for guidance.Government project ownersoften required & referred tothis regulation

Effected. A fine of VND50,000,000 toVND70,000,000 is imposed for failureto buy professional liability insurancefor its securities business operation

Effected. A fine of VND30,000,000

is imposed for failure to buy

professional liability insurance for

its insurance broking operation


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(Reproduced by kind permission of Jardine Lloyd Thompson )

WORKFORCE

The population of Vietnam is circa over 87,84 million (as

the Population forecast of Vietnam stating in the book

edited by General Statistics Office) with a labour force

estimated at 51.39 million, literacy rates are one of the

highest in the region. The Ministry of Labour, Invalids

and Social Affairs MOLISA for short is responsible for

all labour related issues and sets the minimum age for

full-time employment is 15 years old. The minimum

wage for FDI enterprises is USD 112 per month

(Pursuant to the Decree No. 103/2012/N-CP of the

Government dated 04th December 2012). Working

hours are 8 hours per day, 6 days working weeks have

largely been replaced by 5 days working weeks and 12

days annual leave plus statutory public holidays.

Vietnam having strong socialist origins has quite heavy

protectionist policy for female working for enterprises

from 1st May 2013, a female employee shall be entitled

to maternity leave prior to and after the birth of her child

for a total period of six months. (Pursuant to the Article

157 of Labor Code of Socialist Republic of Vietnam No.

10/2012/QH13 of the National Assembly)

For jobs requiring high techniques or managerial jobs

for which Vietnamese laborers have not yet been

qualified, the enterprises may recruit foreign laborers for

a certain period but must explain the need of foreign

laborers recruitment and obtain the approval by letter of

the State management over labor before recruitment aswell as must work out programs and plans to train

Vietnamese laborers so that they can take over such

jobs from the foreign laborers according to the

Governments regulations. (Pursuant to the Article 169

170 of Labor Code of Socialist Republic of Vietnam

No. 10/2012/QH13 of the National Assembly)

Market PlayersInsurersThere are numerous domestic and foreign companieslicensed to provide non-life insurance, includinginsurance for construction sectors in Vietnam.State-owned:Vietnam Insurance Corp (Bao Viet), Bao MinhInsurance Corp (Bao Minh)

Group-controlled:Petro Vietnam Insurance JSC (PVI), PetrolimexInsurance JSC (Pjico), Post & TelecommunicationInsurance JSC (PTI), Global Insurance Co. (GIC),Vietnam Aviation Insurance JSC (VNI), MilitaryInsurance Co. (MIC), SHB Vinacomin Insurance JSC(SVIC)Bank-based:Vietinbank Insurance Co. (VietInsco), BIDV InsuranceCo. (BIC), Agriculture Bank Insurance JSC (ABIC)Private:Nha Rong Insurance JSC (Bao Long), Vien Dong

Assurance Corp (VASS), AAA Assurance JSC (AAA),Bao Tin Assurance Corp (BAC), Hung King InsuranceCorp (HKI), Great Mountant Insurance JSC (GMIC)Foreign:Gan-Groupama, QBE, Chartis, ACE, Liberty, Fubon,MSIG, CathayJoint Venture:Bao Viet Tokyo Marine, United Insurance Co. (UIC theJV among Bao Minh, Sompo & LG), Samsung VinaInsurance (SVI)There is only one reinsurer: Vietnam National InsuranceCorp (VinaRe).

BrokersAs insurance is best arranged through a licensedinsurance broker who can help companies to assessthe underlying ris

Documents

2013 - Langdon Seah - Vietnam - Construction Cost Handbook