Full share of joint venture's profits not coming way of local partner.
The Phu My Hung Development Corporation reported profitable business results between 2010 and 2014 yet the Vietnamese partner in the property development joint venture has not received an adequate share of profits, according to documents the Ho Chi Minh City People's Committee sent to the Ministry of Planning and Investment (MPI) recently.
Phu My Hung is a joint venture between Taiwan’s Central Trading & Development Corporation and the State-owned Tan Thuan Industrial Promotion Co. based in Ho Chi Minh City.
The corporation’s legal capital is $60 million, of which the local partner contributed $18 million and holds 30 per cent, while the Taiwanese partner holds 70 per cent, or $42 million.
Under this ratio the Vietnamese partner should have received VND1.4 trillion ($66.2 million) in profits last year but only VND600 billion ($27.5 million) came its way.
“This is a typical case of where State-owned enterprises set up joint ventures with foreign companies but receive an inadequate share of profits despite the joint venture earning major profits,” the People's Committee said in the document. “As they do not hold the majority stake in a joint venture, many local partners are unsure about how profits are to be shared.”
In this particular case the local partner has many times requested its share of profits be forwarded but has been rebuffed.
The People's Committee has asked that MPI propose amendments to regulations on profit sharing in joint ventures, requiring profits be shared annually after tax and other financial obligations have been met.
According to a representative from Phu My Hung, the corporation had to pay land taxes amounting to VND6 trillion ($275 million) before profits were shared. The Board of Directors therefore decided to postpone profit sharing in the 2010-2012 period for both partners at a meeting held on May 8, 2014.