Tuesday,  Aug 21, 2018,11:49 (GMT+7) 0 0
Stop being an egg
By Son Nguyen
Thursday,  Aug 9, 2018,20:47 (GMT+7)

Stop being an egg

By Son Nguyen

The business deal between VinaCapital and local trader of poultry egg and meat Ba Huan never gets hatched, as the foreign investment fund has finally agreed to terminate the cooperation agreement as sought by the local firm. It is normal business when two parties in a deal fail to have common voice and part company with each other, but the divorce between VinaCapital and Ba Huan unveils numerous abnormalities that stun experts and the general public alike.

The case steals the limelight in local media this week as it becomes known that Ba Huan has sent a letter to the Prime Minister seeking help to sever ties with VinaCapital.

In the proposal sent to the Government early last month and becoming public now, Phan Thi Huan, the owner of Ba Huan, claims that the company has been cheated by VinaCapital, according to Thanh Nien. The woman accuses VinaCapital of seeking to rob Ba Huan of its brand-name and violating prevailing regulations.

Ba Huan in its petition to the Government refers to an investment agreement reached between the two sides in February this year, under which VinaCapital Vietnam Opportunity Fund pledged to invest US$32.5 million in the local company. Instead of cooperation for mutual development, says Ba Huan, “VinaCapital wants to take over the management of Ba Huan Joint-stock Company, and to seize the brand name of Ba Huan… via illogical demands, showing signs of not observing the law of Vietnam,” Thanh Nien reports, quoting the petition sent to the Prime Minister.

The owner states that the agreement was made in both English and Vietnamese, and the two sides have signed the English version. However, there are differences between the two versions, and the contents are not consistent to the initial negotiations, says the local firm. Specifically, “VinaCapital deliberately included in the agreement requirements for an internal rate of return (IRR) at 22%, three times higher than the interest rate. This IRR is totally the expectation of VinaCapital, completely different from the consensus between the two sides,” Thanh Nien reports.

All such assertions by Ba Huan are rejected by VinaCapital.

The investment fund says that all terms included in the signed agreement are in accordance with market practices and comparable to other deals that VinaCapital has successfully executed previously, according to news website VietnamFinance. The fund also stresses that there is no difference between the two versions of English and Vietnamese, and that all such provisions in the agreement are totally in accordance with the Vietnamese law.

According to the investment fund, throughout the process of over six months from the initial negotiations to the signing of the agreement, Ba Huan has fully comprehended obligations that they have pledged to abide by.

Given the war of words, VinaCapital has decided to suspend its investment in Ba Huan, and “the two sides are in talks to terminate the deal in the spirit of compliance with the law and harmonization of interests of both sides,” the fund is quoted as saying on VietnamFinance.

Don Lam, CEO of VinaCapital, says on another news website, VnExpress, that the fund and Ba Huan formally terminated the agreement yesterday, adding “this is the first unsuccessful investment by VinaCapital among over 100 deals the fund has signed to inject capital after over a decade operating in Vietnam.”

Despite the dispute being settled, the big question arises over why a company should have sought the Government’s rescue to unlock a business deal between partners without resorting to court. All point the finger at the local firm’s lack of business sense.

“Sending a plea of rescue to the Prime Minister in this case is deadly wrong,” says Vo Tri Hao, a law lecturer at the HCMC Economics University. “All disputes between two enterprises should either be negotiated between themselves, or settled at court or by economic arbitration,” Hao says on the news site Tri Thuc Tre.

If the Prime Minister stepped in as requested, that would set up a bad precedent, Hao says. He explains that the Prime Minister could only intervene if there are apparent violations on the part of State agencies, or if there are infringements of policies, and such intervention is meant to protect the business environment only.

Nguyen Duy Hung, chairman of Saigon Securities Inc., shares this view, saying on Dan Tri news website that only the court could settle the dispute based on terms and conditions set out in the contract, without being affected by a third party.

“In the time of international integration, there is no other way for enterprises to protect their legitimate interests than to take prudence before signing a contract, and the court will have the final say,” Hung is quoted by the news site.

In an article on Zing.vn, Dinh The Hien, an economic expert, says it is weird when a company seeks the Prime Minister’s help when it feels disadvantageous in a business deal, and in doing so, Ba Huan shows that it does not understand the law. Moreover, its owner Phan Thi Huan admits that she signed a contract without fully understanding its contents, which the expert says is unacceptable.

Bui Quang Tin, a financial expert and a member of the HCMC Bar Association, says in Lao Dong that given the controversy, the business circle has clearly seen many local enterprises as unprofessional when cutting deals with foreign partners.

Commenting on the absence of professionalism, Nguyen Duy Hung of SSI says on Dan Tri that it is the poor understanding of local firms that leads to the collapse of business deals with international partners in many cases. While investment funds always have legal counselors in business negotiations, many Vietnamese business owners resort to verbal commitments only, Hung says on the news site.

Citing experts, VnExpress says that the call for help by Ba Huan is due to the prospect of itself being taken over. In addition, facing new changes in terms of governance and the participation and supervision of new shareholders, many Vietnamese family-owned companies like Ba Huan cannot adapt itself to the new conditions. 

After the collapse of the deal, says Vnexpress, Ba Huan will have its fame tainted and will find it difficult to look for new capital from investment funds. In the international integration process, there are many lessons for local firms to learn if they are to tie up with international partners. Professionalism, trust, sincerity and rule of law among other virtues must be held aloft, if they don’t want to become a bad egg.

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