Mercedes-Benz project faces difficulties in extending investment

The Mercedes-Benz Automobile Assembly Plant Project (in Ho Chi Minh City) was approved in principle for an investment extension, but after more than 2 years, it has not been able to complete the procedures due to problems in determining whether the Project land is subject to rearrangement and handling of public assets or not.

Car assembly in Mercedes-Benz Vietnam Factory

Nearly 30 months of application, still no license extension granted

The Mercedes-Benz Automobile Assembly Plant Project on Quang Trung Street (Ward 8, Go Vap District, Ho Chi Minh City) is a joint venture project between Mercedes-Benz Group AG (MBG AG) and Saigon Transport Mechanical Corporation (Samco). In April 1995, Mercedes-Benz Vietnam Co., Ltd. (abbreviated as MBV Company) was licensed to operate in Vietnam, with the Project completion date on April 14, 2025.

In September 2021, MBV sent a document requesting to extend the Project's operating period by 5 years, that is, until April 2030. Although the Ho Chi Minh City government has approved the extension of the Project and land lease period, the procedures have not yet been completed.

The investor has sent many petitions to the Ho Chi Minh City government. On March 5, 2024, MBV Company continued to send Document No. 83/MBV/2024/CV to the Prime Minister and many ministries and branches, proposing to remove obstacles related to the Project.

Mercedes-Benz Group AG holds 70% of the charter capital and Samco holds 30% of the charter capital, contributing with the value of land use rights, in the Mercedes-Benz Vietnam Project (MBV). Up to now, Samco has completed its capital contribution with the value of land use rights, so from July 14, 2020, MBV directly pays the annual land rent to Ho Chi Minh City.

In this document, MBV stated that the Company has completed the necessary licensing steps and fully complied with the legal documents. However, the problem in extending the Project is that the state agencies have not yet clarified whether the Project land is subject to rearrangement according to the provisions of Decree No. 167/2017/ND-CP regulating the rearrangement and handling of public assets (Decree 167) or not.

With the Project ending on April 14, 2025, the foreign investor MBG AG set a final deadline for completing the extension in the first quarter of 2024. If the extension is not completed before this deadline, MBG AG and Samco will be forced to take steps to terminate the joint venture and close the Mercedes-Benz Factory in Vietnam.

Confusion over whether the Project needs to be rearranged

In Document No. 83/MBV/2024/CV sent to the Prime Minister, MBV and the foreign investor - parent company MBG AG - stated that MBV's project is not subject to Decree 167, because MBV is directly managing and using the land lot at 693 - Quang Trung (Go Vap District, Ho Chi Minh City) as an independent land lessee since 2020 and paying land rent directly to the State. Furthermore, MBV is an enterprise with 30% of Samco's capital, so it is not in the group of enterprises subject to the provisions of Clause 1, Article 2, Decree 167.

According to investors, the Ministry of Finance 's claim that MBV's Project is subject to Decree 167 and must wait for the Decree amending and supplementing Decree 167 to be passed to have a clearer legal basis for extending the Project has led to delays, affecting the rights of investors.

“MBV respectfully requests the Prime Minister to give special approval for the extension of the MBV Project based on the original spirit of Decree 167 and direct relevant ministries and branches to hold an urgent meeting with the participation of MBV to agree on a solution to complete the extension of the Project in the first quarter of 2024,” MBV proposed.

On the domestic enterprise side, on April 4, 2024, Samco issued Document No. 16/SC-HDTV reporting to the Ho Chi Minh City People's Committee on the extension of the Project's operating period. In the document, Samco affirmed that, through reviewing legal regulations, there is sufficient basis to determine that the land at 693 - Quang Trung (Go Vap District, Ho Chi Minh City) used by MBV does not have to be rearranged at the present time, according to the provisions of Clause 3, Article 3, Decree 167 because the joint venture and association period has not ended.

At the same time, Samco believes that there is sufficient basis to consider extending the operating period of MBV's Project because Decree 167 and Decree 67/2021/ND-CP (amending and supplementing a number of articles of Decree 167) do not stipulate the extension of joint venture and association activities, and the operating period of an enterprise's investment project. On the other hand, MBV proposes to extend the operating period by 5 years to April 14, 2030. In case of approval for extension, the total operating period of the Project is 35 years, so it is still in accordance with current planning laws.

According to Samco, during its operation, MBV has always complied with and ensured that it does not pollute the environment or use resources intensively. In the period 2016 - 2020, MBV invested more than 25 million USD in improving vehicle production and assembly processes. It is expected that in the period 2021 - 2030, MBV will invest an additional 30 million USD in vehicle assembly and production technologies. The company is creating jobs for 550 employees.

Samco believes that, with the above conditions, MBV's Project meets the conditions for extending the operating period in Article 44 of the Investment Law and Article 27 of Decree No. 31/2021/ND-CP dated March 26, 2021 of the Government detailing and guiding the implementation of a number of articles of the Investment Law, and should be considered for an extension of the operating period.

Therefore, Samco proposed that the Ho Chi Minh City People's Committee approve the policy of adjusting the operating time of MBV's Project by 5 more years (until April 14, 2030).

Source