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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
S M T W T F S S M T W T F S S M T W T F S
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
S M T W T F S S M T W T F S S M T W T F S
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
S M T W T F S S M T W T F S S M T W T F S
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
S M T W T F S S M T W T F S S M T W T F S
7
8 9 10
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30
S M T W T F S S M T W T F S S M T W T F S
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
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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
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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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA14 CONSTRUCTION COST DATA 15
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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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA16 CONSTRUCTION COST DATA 17
LANGDON&SEAH
VIETNA
MC
OLTD
(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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA18 CONSTRUCTION COST DATA 19
LANGDON&SEAH
VIETNA
MC
OLTD
(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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA20 CONSTRUCTION COST DATA 21
LANGDON&SEAH
VIETNA
MC
OLTD
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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA22 CONSTRUCTION COST DATA 23
LANGDON&SEAH
VIETNA
MC
OLTD
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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA24 CONSTRUCTION COST DATA 25
LANGDON&SEAH
VIETNA
MC
OLTD
Theabovecostsareat4t
hQuarter2012levels,inclusiveofpreliminariesandcontingenciesunlessotherwisestated.
**RatesarenettofGST.
++RateforAluminiumw
ithanodizedfinish;6mmthick
^
Rateforleanconcrete
blinding
Rateincludingdumpin
gcharges
+
Ratefordoubleglazed
window
##Ratefor120mmthickconcreteblockwalls
m2
m2
kg kg m2
m2
m2
m2
m2
%
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
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
MAJOR RATES FOR SELECTED ASIAN CITIES
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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA26 CONSTRUCTION COST DATA 27
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Theabovecostsareat4t
hQuarter2012levels,inclusiveofpreliminariesandcontingenciesunlessotherwisestated.
+
Ratefordoubleglazed
window
m2
m2
kg kg m2
m2
m2
m2
m2
%
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
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
DESCRIP
TION
m3
m3
m3
m3
m3
m3
kg kg m2
m2
m2
MAJOR RATES FOR SELECTED ASIAN CITIES
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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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA28 CONSTRUCTION COST DATA 29
LANGDON&SEAH
VIETNA
MC
OLTD
Theabovecostsareat4t
hQuarter2012levels,inclusiveofpreliminariesandcontingenciesunlessotherwisestated.
@
RatesarebasedonprojectsinBangaloreandarenettofVATandServiceTax.Mumbaicostsaregenerally8%higher.
*
Ratesincludelabourc
ostsandarenettofVAT
m2
m2
kg kg m2
m2
m2
m2
m2
%
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
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
DESCRIP
TION
m3
m3
m3
m3
m3
m3
kg kg m2
m2
m2
MAJOR RATES FOR SELECTED ASIAN CITIES
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
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CONSTRUCTION COST DATA1
CONSTRUCTION COST DATA30 CONSTRUCTION COST DATA 31
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
VIETNA
MC
OLTD
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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PROPERTY3
PROPERTY 71
LANGDON&SEAH
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AMC
OLTD
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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PROPERTY3
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MC
OLTD
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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MC
OLTD
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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MC
OLTD
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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PROPERTY3
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LANGDON&SEAH
VIETNA
MC
OLTD
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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MC
OLTD
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.
FINANCIAL92
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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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INSURANCE
(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
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