VIETNAM – INFRASTRUCTURE CRITERIA FOR SUSTAINABLE INFRASTRUCTURE DEVELOPMENT AND RAPID GROWTH – HOW THE CPTPP AND THE EUVN FREE TRADE AGREEMENT AND INVESTMENT PROTECTION AGREEMENT CAN CONTRIBUTE

According to the World Bank, Vietnam has one of the fastest growing economies in the world—7.1% GDP growth in 2018, and 6.7% at the mid-point of 2019.[1] To put that in perspective, Vietnam’s GDP is growing at almost twice the rate of the USA. As a developing market, that growth cannot be maintained without sustainable infrastructure. To meet that demand, Vietnam needs to increase its energy capacity alone by 6,000-7,000 MW annually and spend close to US $148 billion on it by 2030.[2] Overall, it is projected that Vietnam will require US $605 billion in infrastructure spending by 2040.[3] The Vietnamese government has expressed that foreign-direct investment (FDI) is the key to meeting this demand as it lacks the fiscal capacity to meet financing requirements for large infrastructure projects on its own. Demand for transportation assets will be high due to a rapidly growing middle class, increasing urbanization, and increased international trade. Rail, road, and seaports will be critical to that sustainment. The recent trade agreements of CPTPP (Comprehensive and Progressive Trans Pacific Partnership) and EVFTA/IPA (European-Union Vietnam Free Trade Agreement / Investment Protection Agreement) are two new vehicles that will help Vietnam achieve a sustainable infrastructure.

CPTPP and EVFTA/IPA Direct, and Indirect, Effects on Infrastructure

CPTPP officially came into force on 30 December 2018 between Vietnam (January 2019) and Australia, Canada, Japan, Mexico, Singapore, and New Zealand when those seven countries ratified the agreement. The most significant impact CPTPP (and EVFTA) has on Vietnam is the elimination of most tariffs on goods, national treatment of goods and services, and relaxed requirements of cross-border trade of services.[4] Before CPTPP came into force, Japan entered into a Public-Private-Partnership (PPP) agreement with Vietnam to help build a light-rail and subway system in Ho Chi Minh City at an estimated US $740 million in 2007 dollars.[5] That project has had its fiscal problems since beginning in 2012; most notably the delay from opening in 2017 to now possibly 2020 (still not determined).[6] The regulatory environment when originally entered into was not the most efficient as the legal system mired-down the contractor in procedural issues and payments to them fell dramatically behind. If that PPP agreement had been negotiated under the CPTPP, costs would have been significantly less as tariffs on materials would have been eliminated or reduced, cross-border engineering services would have national treatment, and the [PPP] and investment protection chapters[7] would have streamlined the project to make it more fiscally manageable. It is likely Ho Chi Minh City would have its first light-rail commuter line operational today if that project had been governed under CPTPP.

Indirectly, Vietnam’s seaport infrastructure is benefitting from both CPTPP and the recently in-force EVFTA/IPA. While not a party to either of those agreements, South Korea [Korea] does have its own free trade agreement with Vietnam. Knowing that the enormous markets of both Oceania (not including USA) and Europe are now—in essence—dramatically opened for Vietnam, Korea is looking to invest heavily into the port system of Haiphong—Lach Huyen in northern Vietnam.[8] By having Lach Huyen as a deep sea port, it will enable direct exports from northern Vietnam to [Canada] and European markets without transit through ports in Singapore and Hong Kong[9]–significantly reducing costs associated with that. Japan initially entered into a PPP with Vietnam for the port in 2013, but since CPTPP coming into force, the project is receiving significant investment from other countries, with Korea eyeing-it extensively to support their economic triangle of Hanoi – Haiphong – Quang Ninh.[10]

How, Specifically, CPTPP and EVFTA/IPA Can Enable Further Infrastructure Development

Since Vietnam’s entry into the WTO in 2007, they have been struggling with practically adapting to the regulatory compliance issues that entailed. More and more, however, Vietnam has been operating in that new global paradigm and they are reaping the benefits. With their emergence as one of the most dominating economic forces in ASEAN comes critical infrastructure needs to support it. The one condition that must be met is the life-cycle sustainability of the project. That includes from the negotiation through development and operation until replacement. Major projects of this nature take time, skill, and experience; however, the regulatory environment supports and underpins the entire system. We have touched on how the recent agreements have had a broad effect (or could have had an effect) on foreign-direct investment into infrastructure, but how can specific provisions of the agreements immediately help attract FDI?

1. Investment Protection

The biggest hindrance to FDI in the past has been the level of investment protection and risk allocation. According to the CPTPP, investments are not only the traditional financial ones, but also an enterprise, intellectual property rights, and licences, authorisations, and permits, as well as other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens and pledges.[11] This is a remarkable concession by Vietnam considering their land-use laws relating to real property. Under Article 9.4, foreign-investors are now treated on the same footing as domestic investors. In addition, CPTPP calls for application of international law standards which can provide a hesitant investor a degree of certainty that their investment is protected.

The EVFTA/IPA is very similar in construction to the CPTPP. Both sides have pledged national treatment and most favoured nation treatment to investors of the other side, as well as fair and satisfactory treatment, safe and full protection. Both sides will allow the free movement of capital and profit abroad, pledging not to expropriate or nationalize investors’ assets without appropriate compensation.[12] Furthermore, they pledge to compensate the losses of the other side’s investors in the same way as domestic investors.

This is a dramatic shift for Vietnam and practical implementation of the recent agreements will take time and a learning-curve. However, once this major hurdle has been overcome and CPTPP and EVFTA/IPA become the new-norm, investors will be significantly more apt to engage in large, long term projects in Vietnam.

2. Tariff Elimination and Cross-Border Trade of Services

Right behind investment protection as a major incentive for investors is the dramatic elimination of tariffs and lessened restrictions on cross-border trade of services by and for Vietnam. The CPTPP’s broad tariff cuts on roughly 90% of items upon entry into force, and nearly all others within 10 years, will have an immediate impact on the relative competition. US exporters will now be disadvantaged in Vietnam to competitors in Canada, Japan, Australia, and other CPTPP member countries. The lessening of restrictions for cross-border services also has an immediate impact with regards to infrastructure as now engineering and construction services no longer have to have to comply with the formerly cumbersome registration process[13], they can freely open branch offices, and they can enter into joint ventures with domestic entities (subject to certain ownership limits in specified industries).[14]

The EVFTA/IPA mirrors the CPTPP in most respects, but now the entire economic engine of the EU has very limited barriers to entry into Vietnam. At entry into force, Vietnam commits to removing 48.5% of import tariffs on goods from the EU[15], or 64.5% of the EU’s export turnover, and that figure will be increased to 91.8% seven years later.[16] Outside of the tariff reductions and general lessening of restrictions on cross-border trade of services, probably one of the more significant aspects of EVFTA is the almost complete elimination of “local content” requirements for services.[17] For EU member countries, now they no longer will have to show that a certain percentage of their business is owned, operated by, or utilizes Vietnamese nationals. This may appear a cursory issue, but it is one that has traditionally been an administrative roadblock to many EU investors in the past.

The EVFTA goes one-step further than CPTPP with regards to infrastructure in that it has specific chapters that address both “trade and sustainable development” and “…investment in renewable energy generation”.[18] In those chapters, the parties “affirm their commitment to pursue sustainable development, which consists of economic development, social development and environmental protection”,[19] as well as to promote, develop and increase the generation of energy from renewable and sustainable sources, particularly through facilitating trade and investment.[20] This is a landmark agreement for Vietnam in that it is the first time they have—from an infrastructure perspective—committed to doing everything possible to eliminate barriers, both technical and non-technical, for sustainable development. Another hurdle has been overcome to attracting the EU’s expertise and hardware in roads, rail, and renewable energy.

All of this provides a regulatory landscape for infrastructure investment to flourish at a greatly reduced cost and administrative burden to both the investor, and to Vietnam. The framework is in place, now Vietnam needs to tailor their laws and regulations to match and support both the CPTPP and EVFTA/IPA.

3. Dispute Resolution, PPP

An often overlooked but critical aspect from the investor’s perspective has been the dispute resolution process before these trade agreements were in-force. Generally speaking, before CPTPP and EVFTA/IPA, most foreign investors only had the Vietnamese courts to address any dispute. This was a detriment to FDI as well as a significant additional expense.

Under the CPTPP, dispute settlement calls for both parties to resolve the matter between themselves first. If that fails, then the parties can choose alternative dispute resolution processes that are at a neutral venue with an impartial third panellist as chair[21]; however, if the parties cannot decide on a neutral forum, the complaining Party may select the forum.[22] Chapter 15 of the EVFTA provides the structure for dispute settlement and also calls for the parties to mutually reconcile before seeking any alternative dispute resolution mechanism. The procedures for an arbitration panel are essentially the same as the CPTPP except that under EVFTA, “If the Parties do not agree on the venue of the hearing, it shall be held in Brussels if the complaining Party is Viet Nam and in Ha Noi if the complaining Party is the Union”.[23] Chapter 3 of the EVIPA (dispute settlement) is a mirror of the EVFTA.
Why is this worth mentioning as one of the keys to successful infrastructure development? Most infrastructure projects are large-scale, cost-intensive, and long-term. Large, developed economies from the CPTPP and EU member nations have significant resources and experience that can benefit Vietnam in that respect; however, they want to protect their investment. The dispute settlement provisions of these new trade agreements are the vehicle that foreign investors have been waiting for—that added guarantee of prudent safety and protection for their millions upon millions of USD investment.

Most infrastructure investment has been through PPP agreements. PPP is the cornerstone for infrastructure development and has been utilized in the past in Vietnam with varying degrees of success. Those agreements were often legally cumbersome and were put together largely on faith that both the government and investor would live up to their end of the agreement. Unless otherwise specified in the contract (and sometimes even if it was) if a dispute arose the investor would have no recourse other than the Vietnamese courts. With the advent of CPTPP and EVFTA/IPA, now the regulatory environment has shifted towards favorable conditions for PPP to become a bedrock of Vietnam’s development if they incorporate those dispute settlement provisions into their PPP laws. Vietnam has recently put forth a new draft law on PPP with input from the private sector, and it is on the legislative docket for 2020. We will have to wait and see what the final product becomes, but with international arbitration now the standard, investors are more likely to consider long-term projects.

Summary

Vietnam is on the cusp of something very special, on the verge of becoming a solidly middle-class nation and regional economic powerhouse for the next generation. They will need quality infrastructure to support that—in the neighborhood of US $605 billion by 2040. Vietnam has set itself up for success, broadly, by entering into two of the most aggressive trade agreements in recent times, the CPTPP and EVFTA/IPA. Many former hiccups to robust infrastructure development have been removed or addressed by those agreements, and Vietnam now needs to capitalize on that by tailoring their current regulations and laws to match. Regardless of the type of infrastructure (road, rail, seaport, energy, etc.), the criteria for investment remain the same—investment protection, risk allocation, elimination of technical and non-technical barriers to trade/investment, and a neutral dispute resolution process. The CPTPP and EVFTA/IPA address all those criteria, now Vietnam needs to embrace and internalize those agreements systemically to solidify the foundation propelling their explosive growth.

***
Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Thank you!
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[1] https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=VN
[2] https://www.vietnam-briefing.com/news/vietnams-push-for-renewable-energy.html/
[3] https://outlook.gihub.org/countries/Vietnam
[4] CPTPP Chapters 2, 10; Annexes I, II. EVFTA Chapters 2, 8.
[5] Japan is a member country of CPTPP. CPTPP is not retro-active to 2012.
[6] https://e.vnexpress.net/news/news/japanese-contractor-may-stop-work-on-saigon-metro-line-3843148.html
[7] CPTPP Chapter 9 (investment); Chapters 21 and 23 (capacity building and development)
[8] http://www.hanoitimes.vn/investment/2019/03/81e0d434/south-korea-eyes-deep-sea-port-project-in-haiphong/
[9] Id. Footnote 8
[10] Id.
[11] CPTPP Chapter 9, Article 9.1
[12] EVIPA Chapter 1, Article 1.2; Chapter 2
[13] CPTPP Chapter 10; allows for recognition of professional certifications from any qualified body to administer such certifications. No longer will engineers, for example, be required to be certified by a Vietnamese body
[14] CPTPP Annex I; specified industries of national significance (which includes most infrastructure-related businesses) are restricted to between 49-51 percent foreign ownership
[15] EVFTA Annex 2, Appendix 2-A-2
[16] http://vietnamlawmagazine.vn/vietnam-eu-sign-free-trade-investment-protection-agreements-16756.html
[17] EVFTA Chapter 7; calls for the limitation of any local-content requirements, with exceptions for certain areas of national security or significance
[18] EVFTA Chapters 13 and 7
[19] EVFTA Chapter 13, Article 13.3.1
[20] EVFTA Chapter 7, Article 7.1
[21] CPTPP Chapter 28
[22] CPTPP Chapter 28, Article 28.4
[23] EVFTA Chapter 15, Article 15.3.8

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VIETNAM – CUSTOMS REFORM AND WTO TRADE FACILITATION AGREEMENT (“TFA”) – HOW CPTPP AND EVFTA CAN EFFECT CHANGE

Every day I ride a boat along the Saigon River between Districts 1 and 2 when I am in Ho Chi Minh City. Monday through Friday, it is full of container barges moving containers to and from major distribution points. Saturdays and Sundays, however, are basically void of such traffic. I wondered to myself “why?” With the amount of import/export volume funneling through this major artery to trade, how could the weekends shut-down the volume of traffic this much? After reading the law on customs and the various other regulations and laws concerning Vietnamese customs and procedures, it became clear that a substantial portion of customs clearing and private transportation services did not operate on weekends; and if they did, it was sporadic. It would seem logical to assume that since worldwide shipping did not stop transport vessels in the middle of the sea because it was the weekend that major backlogs would occur on Fridays, Saturdays, and Sundays, hindering efficient clearance of goods. Mondays would be very intensive days for customs services and transportation.

The infrastructure for Vietnamese ports is growing and several large projects are already underway to accommodate the increased volume of shipping that is occurring.[1] Ports in Ho Chi Minh City are the main gateway for the region, accounting for 67 percent of the total throughput of all Vietnamese ports.[2] The enhanced infrastructure to absorb extensive increases to shipping volume is necessary and critical for Vietnam’s economic growth sustainability; however, it is the responsibility of customs to expeditiously accept and clear those goods for shipment to their destinations within Vietnam. Many developing (and, by the way, some developed) nations and economies have struggled with customs efficiencies for this new operational environment, and Vietnam is no different. The WTO TFA (Trade Facilitation Agreement; hereafter referred to as “TFA”) which entered into force 22 February 2017 was partly enabled to assist developing nations in streamlining their customs functions to facilitate a smoother, easier, trade process through a provision of assistance and support for capacity building for implementation of Section I [of the TFA].[3] Section I of the TFA includes Article 7 (Release and Clearance of Goods) and Article 9 (Movement of Goods Intended for Import Under Customs Control). How has Vietnam been addressing the concerns raised by these articles of the TFA and how do the CPTPP (Comprehensive and Progressive Trans Pacific Partnership; 2018) and EVFTA (European Union—Vietnam Free Trade; 2019) agreements add-to, or reduce, these concerns?

Article 7 of TFA

This Article provides standards for different factors that affect the release and clearance of goods such as expedited shipments, perishable goods, electronic payments, and pre-arrival processing. Article 7.3 calls for a separation of release of the imported goods from final determination of customs duties, taxes, fees, and charges. The article states that members shall allow importers to obtain release of their goods, under a guarantee, if required, prior to the final determination and payment of customs duties, taxes, fees and charges where the final determination is not done prior to, upon arrival or as rapidly as possible after arrival.[4] This is a wonderful measure for importers (to have their goods released with a very limited delay) and also for customs-efficiency as customs can receive legal guarantees of importers paying the final determination of any incurred fees at a later date. This can have the effect of rapidly clearing goods from customs intake/staging locations to create inventory space for more goods. Any reduction in delay of release of goods is a good thing, and according to a global trade report, full TFA delivery will help…”save 1.5 days of customs clearance for imported goods, down 47% from the present average and nearly 2 days of customs clearance for exported ones, down 91%.”[5] Vietnam’s logistics’ costs account for 16% to 17% currently [2018] of GDP, with 30-40 percent of that cost associated with custom’s clearances.[6]
In response to this concern—and under Article 7.3 of the TFA—Vietnam turned to CPTPP to address it. Under recently published Decree No. 57/2019/ND-CP (26 June 2019) governing Export/Import preferential tariffs under CPTPP, “…Within 1 year from the date of…export declarations, the customs declarant shall submit all documents proving that the goods satisfy the regulations specified…”[7] This mirrors the intent of TFA Article 7.3 and directly compliments it. Now, member states of CPTPP have increased flexibility in submitting any further documentation requested of Vietnam Customs instead of having those goods held and delayed for clearance until they were obtained. This is a great example of Vietnam aggressively pushing their regulatory changes forward to comply with TFA and CPTPP.

Article 9 of TFA

This article attempts to prevent bottleneck issues from occurring (mainly in developing or under-developed countries) at a customs port of entry by requiring member states to allow a customs-declarant to move goods from a customs port of entry to another customs office within the same customs territory (under customs control), and permit that declarant to clear them at the destination rather than at the port of entry. It is a straight-forward and fairly simple sounding statement; however, in practice, it is riddled with complexities.
Vietnam’s law on customs[8] delineates authority for customs responsibilities between 1) General Department of Customs; 2) Customs Departments of Provinces; and 3) Sub-department of Customs Sub-Departments, Customs control teams and equivalent units. Additionally, under Article 16 (5) of same, “The arrangement of manpower and working time must meet the requirements of import, export, exit, entry and transit activities.” Furthermore, Article 23 (4) requires, “Customs authorities…to carry out formalities for goods on public holidays and weekends and overtime hours in order to ensure timely loading and unloading of imported and exported goods…in conformity with practical conditions of customs operating locations [emphasis added]”. On paper, this would indicate a fully-developed system for expediting customs clearances and/or processes for clearing goods through a port of entry to another custom’s operations area for clearance seven days a week (and the customs law does further state that unless a shipment requires a physical inspection for certain agricultural or health reasons, it should be expedited to a different clearance location).

In application, it can vary greatly by whoever is the customs authority in charge of the inspection location. Decree 08/2015/ND-CP (Ministry of Finance) Article 29 (2) states, “Head of the Customs Authority who is in charge of…inspection [places] shall make a decision on any change to the level or form of physical verification and bear responsibility for their decision.” This gives the customs director of a facility broad authority, but thanks to the last clause of the sentence, “…bear responsibility for their decision”, many customs officials will be hesitant to use that discretion in fear of making a “wrong” decision; therefore, they most likely will physically hold and inspect every shipment coming into their zone of control. One facility operating in that fashion can bottleneck an entire section of the country. Additionally, the provincial customs authority or facility director has broad discretion in determining the “practical conditions” to conform to. In Vietnam, it is doubtful a customs facility director will require personnel to facilitate customs procedures during “Tet” (Vietnamese New Year); therefore, for one week little customs activity occurs at that location.

Indeed, many issues that are problematic to the law on customs were supposedly being addressed by Circulars 38 and 39 (issued in 2018). In fact, on 10 July 2019 a $21.7 million USAID Trade Facilitation Program was granted to support the Government of Vietnam to adopt and implement a risk management approach to customs and specialized inspection agencies, which will strengthen the implementation of the World Trade Organization’s Trade Facilitation Agreement [TFA].[9] The General Department of Vietnam Customs (GDVC) organized six consultative workshops to gather feedback and recommendations on amending Circular 38 and Circular 39 – regulation guidance on Vietnam’s Customs Law. The workshops would help identify the challenges and practical compliance-burdens faced by import-export businesses in relation to implementation of the circulars.[10] It is evident that between the many iterations of decrees, circulars, directives, and laws regarding customs and procedures, every agency and business involved in the process is confused.

Decision 15 (12 May 2017) provides a clear example of the confusion customs officials and businesses encountered[11]; chiefly, that it did not specify what is considered the “entry gate” for carrying out customs procedures? Was it the place that goods were imported to, or the port listed on the bill of lading? Businesses (and officials) were receiving conflicting information and backlogs inevitably ensued.[12] Decision 23, recently issued 27 June 2019, addressed this issue and specifically identifies the proper port of entry for each type of transport.[13] CPTPP and EVFTA also affected Decision 23 in that it amended the type of goods requiring specific inspection procedures to comply with CPTPPs input-materials-for-production provision, and also EVFTAs (and CPTPPs) stricter requirements regarding potentially environmentally-hazardous materials.[14]

With the myriad regulations affecting customs, how can either the CPTPP or EVFTA assist Vietnam in resolving the predicament? Statutorily, the EVFTA already has. It mirrors portions of the TFA (such as creating trade facilitation committees), but also goes one step further in requiring Vietnam to comply with Article 2.12, in which Vietnam “…shall administer in a uniform, impartial and reasonable manner all its laws, regulations, judicial decisions and administrative rulings pertaining to…issues affecting…distribution, transportation…warehousing inspection…or other use of goods for customs purposes.” This section of the EVFTA is forcing Vietnam to take a hard look at their current system, and streamline and consolidate all their varying regulations concerning customs administration for efficiency. A quick solution Vietnam can implement now to help alleviate physical storage problems is EVFTA Article 2.15 which allows foreign pharmaceutical companies to establish their own warehouses inside Vietnam.[15] If Vietnam declares those warehouses as “customs operational locations”, that would free-up other customs warehousing space for other inventory.

Private Sector Must Be Engaged

Outside of the regulatory environment, private businesses have a crucial role in relieving bottlenecks. Even if everything flows smoothly and correctly through the government customs process and goods are cleared, it takes private businesses to physically move those goods out to make room for others. If the trucking company hired to move containers does not “work” on weekends, is short-staffed, can’t find anyone to work, drivers call out sick, etc., those containers do not move—they sit there. Many of the transport barges moving along the Saigon River are private contractors. You can see their entire family lives and works on that barge. If that barge does not want to work that day, it is not going to work. While most of the port terminal operations are conducted by State-owned enterprises (SOEs), they still struggle with general employment issues that affect port operations and add to the bottleneck issue as well.

Government can provide a statutory environment for success, but without private enterprise completing the circle, nothing will be resolved. Perhaps an incentive system for non-traditional work days for private contractors can help the situation; better screening of potential employees; requirements specifically spelled-out; any and all solutions need to be examined. The bottom-line is while regulatory efficiency is needed to allow for the legal and operational environment to flow seamlessly, the private sector must close the loop.

Summary

There is a regulatory quagmire surrounding Vietnam’s customs arena. The TFA is intended to assist developing and under-developed nations (primarily) with their trade processes to better facilitate trade on a global level so that all parties benefit. Vietnam’s growing economy and role as a Southeast-Asian trade hub are requiring substantial changes to current regulations and processes. Only a few examples of the many that could be given show that while Vietnam is making strides with reform, they need to accelerate that change. It cannot be haphazardly done, though. It must be structured, reasonable, and determined with both governmental and private sector collaboration. Vietnam followed that exact process for obtaining CPTPP and EVFTA. Those agreements should be the primary guiding documents for Vietnam to reform their customs legislation to, as they will affect Vietnam’s economic growth exponentially. They can provide the framework for statutory solutions to many of the customs issues Vietnam faces; however, without private-sector buy in, those statutory solutions cannot be efficiently implemented. The entire customs-cycle must be embedded into the mindset and carried out at the individual level for there to be a truly systemic change.

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyers in our office listing if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

THANK YOU !

VIETNAM – PUBLIC-PRIVATE-PARTNERSHIPS (PPP) AND CPTPP AND EVFTA/IPA DISPUTE SETTLEMENT PROVISIONS AND THE DRAFT PPP LAW

Public-Private-Partnerships (PPP) have long been used as a vehicle for both emerging and developed markets to further enhance their public infrastructure to support growing socio-economic needs. Vietnam, however, has experienced an explosive economic growth over the past decade and is poised for even further expansion with their acceding to the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) and European Union—Vietnam Free Trade (EVFTA) agreements. With these two new growth mechanisms in-force, Vietnam’s infrastructure is struggling to accommodate that growth. The statutory cap on public funds utilization of 65 percent is rapidly approaching and the most viable investment form left for Vietnam is a functional PPP program.

Both CPTPP and EVFTA/IPA (Investment Protection Agreement) lay out very broad frameworks for supporting infrastructure development such as preferring renewable energy over environmentally-damaging alternatives and establishing development committees to determine how best to support that effort.[1] With the core of those agreements addressing elimination of almost all duties and tariffs on goods and services between the parties (over time), it makes the cost of acquiring hardware for energy infrastructure less. Additionally, the restrictions on cross-border trade in services required to construct and maintain technologically advanced platforms are lessened; further reducing the cost of an infrastructure project. Vu Tien Loc (president of Vietnamese Chamber of Commerce and Industry) speaking at an event “EVFTA and EVIPA: Opportunities for Business” held on July 1 by the Ministry of Industry and Trade, stated that EVFTA is the best FTA Vietnam has ever signed.[2] Vietnam is heading towards a foreign direct investment (FDI) generation, with higher quality, more advanced technologies, higher added value and a more eco-friendly environment, so the EVFTA will open the door for EU companies to complete these targets, Loc said.[3]

With these opportunities presented for Vietnam’s economic future, a draft law on PPP was drawn to address some of the concerns foreign investors have had regarding the regulatory environment for PPP in Vietnam. Mainly that there is not an appropriate level of risk allocation (too much on the investor), and there is not enough regulatory stability to support a long-term PPP project (generally 25-30 years). Many of the primary concerns have been discussed in other various articles; however, CPTPP and EVFTA/IPA have two restrictions reserved by Vietnam that can hinder the potential for expansive FDI in energy infrastructure (specifically power distribution)—CPTPP Annex IV and EVIPA Annex 2.1. Conversely, they also include dispute settlement provisions between member countries that can attract PPP investment if incorporated into the draft PPP law.

CPTPP Annex IV and EVIPA Annex 2.1

CPTPP Annex IV states, “[Regarding] all state-owned enterprises[4]…Viet Nam may require or direct the Entity [CPTPP member] to: (b) accord preferential treatment to…enterprises that are investments of Vietnamese investors in the territory of Viet Nam…pursuant to a government measure.” EVIPA Annex 2.1 states, “Viet Nam may adopt or maintain any measure with respect to the operation of a covered investment that is not in conformity with Article 2.3 (National Treatment); (h) …power transmission and/or distribution.” Both annexes allow Vietnam to require a potential member-country investor to use only Vietnamese domestic enterprises (majority-owned by Vietnamese nationals) in accomplishing the PPP project, if Vietnam so chooses. The EVIPA Annex is even broader than CPTPP by allowing “any measure” (regarding power transmission/distribution). It is also interesting to note that in EVFTA Appendix 8-B-1[5] (Specific commitments by Vietnam) Vietnam has agreed to virtually no restrictions on any construction companies or engineering services, including having a 100% member-country-owned commercial presence in Vietnam’s territory. In essence, CPTPP and EVFTA/IPA allow freer, fairer access to goods/services and investments; however, Vietnam can require any investor to utilize strictly Vietnamese resources regarding power or energy production and distribution. Most nations want to maintain national sovereignty and control of specific industries and resources they consider critical in supporting that sovereignty—that is not the issue here. This issue raised is one of regulatory uncertainties for investors.

These competing sections can cause consternation for a potential PPP investor. They may be able to complete the project for far less costs using their own member-country resources, but arbitrarily required at some point to utilize Vietnamese-owned companies that perhaps charge far more for the same good or service. The current draft PPP law is silent on this issue. PPP investors could be reassured, through contractual stability, of the guaranteed resources and services to be provided (and by whom) from the outset of the project. At a minimum, the draft PPP law should include a method for an investor to challenge a regulatory ruling or decision through an impartial, third party. While this issue might not derail a project, it could cause a qualified, reliable investor not to even want to bid a project; therefore, possibly driving the cost up or having a lower quality platform that will cost more in repair and maintenance in the long term. What the draft PPP law needs is to adopt the dispute settlement and resolution provisions of the CPTPP and EVFTA/IPA. In its current form, it does not mirror them.

Dispute Resolution Provision

Under Article 112 of the draft PPP law (dispute resolution) parties must use negotiation and conciliation first. This is the same as both CPTPP Chapter 28 and EVFTA Chapter 15/IPA Chapter 3. Continuing, a dispute involving a foreign investor (and between a State Agency) will be resolved through a Vietnamese arbitration organization or court, “unless otherwise agreed in the contract or unless otherwise stipulated in an international treaty of which Vietnam is a member.” If not stipulated in the contract, this means that if the foreign entity is a CPTPP or EUFTA/IPA member country, those agreements’ dispute chapters apply—maybe. Both agreements state that dispute resolution will be accomplished via mediation and arbitration for disputes generated under those agreements. There is no specific PPP language in the agreements; therefore, it will have to be proven that either of the agreements govern the project. This will add time and costs to the project, the government, the investor, and ultimately, the public.

Many PPP projects do not involve one, single foreign investor. There could be any number of various investor combinations to complete a specific project. A purely domestic, Vietnamese, single investor will be required to use Vietnamese arbitration or courts under Article 112—understandable. Any dispute between investors (state agency not involved) in which there is at least one (1) foreign investor will be resolved: “First, in Vietnamese court(s); then second, Vietnamese arbitrator(s); lastly, Foreign arbitrator(s).” Unless the foreign-investor here is a CPTPP/EVFTA member, or they have an international arbitration clause in their contract, there is no real option for the investor except for Vietnamese arbitration/courts.

The current draft PPP law’s Article 112 is more in line with general business transactions and not the magnitude of most PPP investments. They generally include multiple entities and financial vehicles/lenders, both foreign and domestic, ranging in the hundreds of millions to billions of USD. With the level of involvement regarding PPP projects, the draft PPP law should just state plainly that any dispute shall be resolved through international mediation and/or arbitration (unless stipulated otherwise in the contract). In effect, mirror the CPTPP and EVFTA/IPA Dispute Settlement Chapters. This will provide potential investors with the regulatory certainty they have been looking for. It will also alleviate any concerns around objectivity and neutrality for all parties. UNCITRAL stated in their UN guidelines for PPP in 2000, “…procedures should be established for handling disputes… (This is where arbitration should be a risk concession by the government…allowing international standards of the infrastructure sector to have an equal voice) [Emphasis added].”[6] Changing dispute resolution in the draft law to mirror the current trade agreements and UNCITRAL will help attract FDI for PPP infrastructure projects.

Summary

Vietnam needs to rely on the private sector to take their socio-economic growth to the next level. Government cannot satisfy the country’s requirements without it. Regulatory reform has been one of the biggest hurdles to overcome in satisfying the private sector’s concerns. From a statutory perspective, the CPTPP and EVFTA/IPA are able vehicles that give a wide berth for PPP projects to flourish. Within those landmark agreements, some conflicting areas do remain that can cause investor concern. From an operational perspective, government agencies need to streamline their processes to deliver services effectively under the laws and regulations (another major concern of investors). Eric Sidgwick, ADB country director for Vietnam, stated that Vietnam’s average disbursement rate is much lower than that of other recipients of the Asian Development Bank’s official development assistance (ODA) loans, largely due to cumbersome and time-consuming procedures.[7] While there is never a perfect solution for all parties, compromise is usually the most effective way to ensure buy-in from all involved. A way of alleviating investor’s concern over ambiguous and regulatory stability is to change the dispute resolution Article of the draft PPP law to mirror the already successful agreements of CPTPP and EVFTA/IPA.

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

THANK YOU!

VIETNAM – CAPITAL MARKETS – HOW THE CPTPP, EVFTA/IPA CAN EFFECT MORGAN STANLEY’s 2020 RATING

One of the significant events Vietnam was hoping to occur this June unfortunately did not transpire—being on the Morgan Stanley Capital International (MSCI) watch list for emerging markets. Instead, Vietnam was not upgraded and remained on the frontier-market listing. It is estimated Vietnam could receive up to US $10 billion worth of foreign capital in frontier market-focused funds, but could receive much more from emerging market-focused funds.[1] The Vietnamese Government considers MSCI’s watch list as a top-priority target as it could lure a huge amount of foreign capital to the Vietnamese economy.[2] According to Nguyễn Thị Bích Nga, deputy director of the State Securities Commission’s International Co-operation Department, [Vietnam] has been making the best efforts to improve the legal framework, introduce new securities products and make the market more professional.[3]

One of those “best efforts” is the amendment of the securities law that would make the market fairer between domestic and foreign investors (draft law to amend law on securities; last revised by Decree 60/2015/ND-CP). That 2015 revision eased restrictions on Foreign Ownership Limits (FOL); however, MSCI wants to see even further progress on relaxing those restrictions. According to the draft version (as a general rule), foreign investors are allowed to own 100 per cent of the shares of a Vietnamese company that operates in a non-critical business sector. This applies to listed firms, equitized state-owned enterprises (SOEs), and private non-listed businesses. Shareholders of each company will decide for themselves the amount of foreign-owned shares eligible.[4] This is different from the current Securities Law, which automatically sets the FOL at listed companies in Vietnam at 49 percent. Some sectors, such as banking or aviation, have a stricter limit at only 30 percent.

Experts believe that with the relaxed rules, Vietnam would be likely to attract at least US $5 billion of new capital from abroad and receive the upgrade that it has been waiting for.[5] With fewer restrictions on foreign ownership, Vietnamese firms would become more attractive to major investment funds who are willing to pour millions of USD into Vietnamese businesses. With more foreign-ownership, companies will have a broader, global, perspective and a level of accountability to help drive transparency and change. Mai Le, analyst at PYN Asia Research, noted that out of all the changes in the Securities Law, the [capital] market is most anxiously waiting the FOL rule to take effect.[6]

MSCI Decision and Criteria

Kuwait was upgraded to the MSCI emerging market watch list (and not Vietnam) specifically because of, “…enhancements [that] removed foreign ownership restrictions on listed banks and simplification of requirements for investor registration.”[7] Not coincidentally, those are the areas that Vietnam has not satisfied under MSCIs criteria.[8] Under MSCIs criteria of “Openness to Foreign Ownership”, Vietnam ranks as improvement needed in FOL level, foreign room level, and equal rights to foreign investors. Many experts felt that Vietnam has met more standards of an emerging market than similar markets such as Pakistan and the Philippines (or Kuwait), but also had the best qualitative indicators among frontier markets.[9] While that may be true, it is apparent that MSCI is more concerned with long-term sustainability, which is why “openness to foreign ownership” is MSCIs top criteria for assessing upgrades.

CPTPP, EVFTA, EVIPA and Their Potential Effects on MSCI 2020

If Vietnam rectifies the discrepancies in their laws regarding investments and securities with the trade agreements of CPTPP (Comprehensive and Progressive Trans Pacific Partnership), EVFTA (European Union—Vietnam Free Trade Agreement), and EVIPA (European Union—Vietnam Investment Protection Agreement), they will have a greater chance at making the MSCI watch list upgrade for 2020. Vietnam will most likely not make the list if they continue to table or endlessly debate these critical, progressive revisions. Streamlining the draft laws on investment and securities with CPTPP, EVFTA, and EVIPA, and implementing them expeditiously will give MSCI hard-data to use in their June 2020 evaluation instead of mere speculation.
Moving in that direction, one of the most significant changes in the draft law on securities is the expansion of the foreign holding cap in public companies. Accordingly, public companies would be subject to no restrictions on foreign holdings, unless otherwise prescribed by “treaties to which Vietnam has acceded or a specialized law.”[10] There is a minor legal distinction between “treaties” and “agreements”; however, in the spirt of the law and especially for cementing these new trading relationships, Vietnam should draw no distinction and apply them as such. Under the CPTPP and EVFTA/EVIPA, Vietnam has expressly restricted FOL in specific, listed industries that are of national significance or security[11]; therefore, the government should aggressively restructure their current drafts to mirror that CPTPP, EVFTA, and EVIPA specific language. The CPTPP does have FOL set to what the current Vietnamese law is (currently 30 percent); however, it only states that it is relative to whatever the “current” law is—so, change the law.

This would mean removing the 30 percent FOL cap in the banking industry that is currently in place (even in the draft law to revise the law on securities).[12] According to Long Ngo, associate director at the Research Department at Viet Capital Securities, investment trends in the banking industry will depend on when the government lifts the FOL.[13] As long as the government keeps FOL at the 30 percent level, Vietnam’s capital markets will not expand and MSCI will not consider Vietnam for the watch list upgrade.[14] By maintaining their current operational paradigm, Vietnam is only hampering its own development and future.

If Vietnam would internalize operating from a global perspective, there should be no distinctions between a foreign investor and a domestic one (other than protected industries of national security). CPTPP, EVFTA, and EVIFA create “National Treatment” of any foreign-investor, which grants (in effect) domestic status.[15] Article 9.1 of CPTPP stipulates all “covered” investments (EVIPA is essentially the same list), including: (a) an enterprise; (b) shares, stock and other forms of equity participation in an enterprise; (c) bonds, debentures, other debt instruments and loans;…(f) intellectual property rights; (g) licences, authorisations, permits and similar rights conferred.[16] If Vietnam would stipulate in their draft laws this position already agreed to in CPTPP, EVFTA and EVIPA, it would virtually eliminate all three of MSCIs concerns that it has with Vietnam currently.

With the guarantee of no distinction between a foreign-investor and a domestic one, entities that have been reluctant to invest millions of USD in Vietnamese businesses will now feel much more comfortable about the investment environment; thus creating a large influx into Vietnamese capital markets. MSCI will notice these changes and most likely add Vietnam to 2020s watch list for emerging markets, creating another large inlay to Vietnam’s markets. If the government would match their investment and securities laws with the current trade agreements of CPTPP, EVFTA, and EVIPA, they would realize their self-stated goal of achieving MSCI watch list for emerging-market status.

Summary

A major goal of Vietnam’s government was not realized in July. Despite strong economic activity and other positive indicators, MSCI did not place them on the highly anticipated watch list for emerging markets. If Vietnam takes a hard look at the criteria that kept them from the upgrade, it is apparent that the solution for most of the roadblocks cited have already been addressed in the CPTPP, EVFTA, and EVIPA. The government merely needs to incorporate the trade agreement language into their existing laws. The tabling until May 2020 of the passage of the draft law to amend the law on investments through Resolution 8 (July 2019) was not a strategically beneficial move for Vietnam in order to make the 2020 MSCI watch list. Several key provisions in that draft (if in-place and operational) would give MSCI concrete data to observe (rather than speculative) and improve Vietnam’s chances of an upgrade. Additionally, changes to the draft law on the law on securities to be in line with the provisions of CPTPP and EVIPA would also be in Vietnam’s favor. Investor’s (and MSCI) minds would be eased if Vietnam will aggressively pursue regulatory reform and potentially add another US $15 billion to their capital markets.

The best indicator that reform is required to the current draft laws on amending the law on securities and investments came from the government itself. “Some items are unclear while others are unreasonable and no longer fit the Vietnamese market’s conditions,” the Government said in a report submitted to the National Assembly’s Economic Committee.[17] Those issues may “befuddle investors, market members and regulators,” adding that “policymakers must adjust the law [emphasis added] so it matches international standards and agreements to which Vietnam is committed.”[18]

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!
________________________________________
[1] https://vietnamnews.vn/economy/520886/vn-hopes-to-enter-msci-watchlist-this-year-but-experts-are-uncertain.html#3jsO5FxXs7UjKbiz.97
[2] Id. Footnote 1.
[3] Id. Footnote 1.
[4] https://www.vir.com.vn/fol-ambiguities-in-new-securities-law-64118.html
[5] Id. Footnote 4.
[6] Id. Footnote 4.
[7]https://www.msci.com/documents/10199/238444/RESULTS_OF_MSCI_2019_ANNUAL_MARKET_CLASSIFICATION_REVIEW.pdf/f134c97c-73da-71c7-4b3c-d1f637c3eaee
[8]https://www.msci.com/documents/1296102/1330218/MSCI_Market_Accessibility_Review_Country_Comparison_2019.pdf/142b5a29-e385-2922-4f79-8d6f4a04a467
[9] Id. Footnote 4.
[10] http://vietnamlawmagazine.vn/draft-securities-law-proposes-expanding-foreign-holding-cap-6517.html
[11] EVIPA, Chapter 2, Article 2.1.2 ; Annex 2

VIETNAM—FOREIGN DIRECT INVESTMENT AND UNINTENDED EFFECTS AND OPPORTUNITIES OF CPTPP/EVFTA

According to the Ministry of Planning and Investment (MPI), in the first 5 months of 2019, foreign direct investment (FDI) projects were US $7.3 billion, up 7.8% as compared to the same period in 2018. In addition, FDI contribution to the state budget rose from US $1.8 billion during 1994-2000 to US $14.2 billion during 2001-10, and to US $23.7 billion during 2011-15. In 2017 alone, FDI contributed US $8 billion to the state budget, accounting for 17% of the total state budget.[1] Phan Huu Thang, Vice Chairman of Vietnam’s Association of Foreign-Invested Enterprises, told Vietnam Investment Review that hi-tech processing and manufacturing, smart agriculture, healthcare, education and training, and renewable energy will be the hottest sectors for FDI in the coming months and years.[2] All these numbers and projections sound fantastic, but there are always impediments to a flourishing FDI program, as well as untapped (or under-utilized) opportunities. More importantly, how can the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) and European Union—Vietnam Free Trade (EVFTA) agreements foster and support FDI?

Two important draft laws affecting FDI originally slated for passage in July 2019 have, unfortunately, been postponed for passage until May 2020 per Resolution 78 (78/2019/QH14) in the Vietnam National Assembly: the Law on Investment in the Public Private Partnership Form [Law on PPP] and the Law Amending the Law on Investment and the Law on Enterprises.[3] There will be more to come on the effect of those laws after passage.

Unintended Effects of CPTPP and EVFTA on FDI

In the first five months of 2019, Vietnam’s FDI attraction reached a total value of US $16.7 billion, up 69 percent over the same period last year.[4] Currently, there are 131 countries and territories with valid investment projects in Vietnam, of which the Republic of Korea (RoK), Japan and Singapore claim the top three places (Japan and Singapore are CPTPP countries).[5] Since the beginning of 2019, however, a new top contender is emerging—China. In the past, China has been the seventh largest investor in Vietnam (with US $15 billion total); however, in the first half of 2019, their FDI alone was US $2 billion.[6] This is not a great surprise as the US—China “trade war” continues, but it does highlight that China is intending to exploit Vietnam’s entrance into the CPTPP and EVFTA (Agreements that China does not currently benefit from). This year, the Vietnamese government licensed the US $280 million ACTR tire-manufacturing project in the southern province of Tay Ninh, and a US $214.4 million project by the Advance Vietnam Tire Co., Ltd in the Mekong Delta province of Tien Giang.

ACTR manufactures steel-radial tires for trucks and busses, and is a joint venture between China’s Sailun Vietnam Co., Ltd, (with 65% equity) and the US’s Cooper Tire and Rubber Co. (35% equity). Because of the more stringent Certificate of Origin (COO) requirements under the CPTPP, China could no longer import tire components from CPTPP countries and process them domestically to obtain CPTPP member-country benefits (or vice versa—export components for assembly). They would need to have a physical processing plant located in Vietnam to claim “Made in Vietnam” COO. With that member-country COO, China now enjoys zero-tariffs on those products exported to member nations. That is a significant counter to the US—China trade tariffs, and a direct result of CPTPP. Advance Vietnam Tire Co. (owned by Guizhou Advance Type Investment co., Ltd, of China) is an almost identical example to ACTR; other than Advance is not a joint venture. China could have invested in other CPTPP countries, but Vietnam is the most attractive and cost-effective venue for FDI compared to others.

The EVFTA contains similar provisions as the CPTPP regarding tariffs and duties. With the EVFTA now in force, China has poised itself to take advantage of this new regulatory environment for the European markets. Using the examples from above, China will now be able to compete (in effect with domestic-preference) directly with Europe’s largest physically domestic producer of tires, Michelin.

Before CPTPP, EVFTA, and the US—China trade tensions, Chinese investors were mainly small businesses with out-dated technology, but now many large corporations are funding large-scale projects. Five of the seven biggest foreign-invested projects in the last five months came from Chinese backers, including not only the ones already discussed, but also a US $260 million electronic equipment and multimedia audio products manufacturing project invested by Hong Kong-based Goertek Co., Ltd.[7] Chinese investors are also increasing merger and acquisition (M&A) activities. Hong Kong topped foreign investors in Vietnam with the US $3.8 billion purchase of Vietnam Beverage Co. Ltd, in Saigon Beer-Alcohol-Beverage Corp (SABECO).

It appears clear from the investment activity in Vietnam since the onset of CPTPP that it has had a substantial positive impact on FDI. With the advent of EVFTA coming in force (and providing similar—if not more—beneficial trade platforms), Vietnam will have a multitude of investors rushing to reap the benefits of those trade agreements. For Vietnam be able to absorb this inevitable expansion of its FDI landscape the government needs to adapt holistically (and quickly) to the new global trade environment they have embarked on to realize its full potential.

EVFTA and CPTPP Vocational Training Market Opportunity

As Phan Huu Thang mentioned, education and training and renewable energy will be some of the hottest sectors in the coming months and years for FDI. An often-overlooked aspect of FDI is Vocational Training Schools. Vocational training will be critical to the long-term success of Vietnam’s infrastructure platforms, especially when operating and maintaining an enhanced energy and power sector. With highly advanced and technologically complex energy platforms (especially renewables) comes a requirement for competently trained personnel to sustain them. Vietnam has a large workforce pool; however, technical training for these opportunities is currently limited.

The EVFTA and CPTPP both have provisions easing the access of engineering and technology support to assist in achieving the required knowledge and training skillsets.[8] Vietnam recognized this also and updated their regulatory requirements regarding vocational schools through Decree 15 (15/2019/ND-CP), which specifies the order and procedures for opening foreign-invested vocational training schools.[9] The FDI project would need to be in line with the national planning of vocational training in Vietnam, but the threshold capital requirements have been lowered to VND 5 billion (US $216,000) to open a vocational training centre, VND 50 billion (US $2.2 million) for a vocational secondary school, and VND 100 billion (US $4.4 million) for a vocational college.[10] In addition, if a project is aligned with an industry of national priority or significance (enter renewable-energy), the Ministry of Labour will be the sole authority on issuing licenses[11]—a departure from the traditional methodology in an effort to streamline the process. This is good news for many renewable energy projects. Not only will a foreign business have more opportunities for development under CPTPP and EVFTA, but they can also add a minimal supplement to that investment and create the necessary workforce to support it.

An example from USA clearly demonstrates the opportunity in vocational training schools. In 2011, Boeing, Inc. opened a final assembly facility for the 787 Dreamliner in Charleston, South Carolina. Along with that came a demand for technically trained personnel to operate the complex facility and to have personnel trained in the intricate technology involved in assembling the aircrafts. Boeing invested US $80 million to have an aeronautical vocational training facility built near Boeing’s assembly plant (completed June 2019).[12] This is a win-win for Boeing. They provided the initial funding to build the vocational facility; in return, they have professionally trained personnel, and the government takes over costs of maintaining the training facility. Boeing also gets guarantees from the government to repay Boeing’s initial investment through tax incentives and bond issuance. This is a textbook case of vocational FDI supplementing an already significant investment.

As many foreign investors establish their presence even more in Vietnam’s infrastructure landscape, this is another opportunity for FDI to affect Vietnam’s (and the investor’s) bottom-line. The EVFTA and CPTPP are enablers as they both allow services to flow less restrictively between the parties. Phan Huu Thang noted that for Vietnam to realize its fourth-industrial-revolution plan (4IR), local enterprises [must] be encouraged to cooperate with foreign-invested enterprises to learn experience, transfer technology, and receive support in training.[13] Vocational training centers will help fill that need.

Summary

Vietnam’s FDI has been steadily increasing for decades. FDI has helped transform Vietnam from a poor nation to the verge of a massive middle-class population. CPTPP and EVFTA are two vehicles that will propel Vietnam across that line and perhaps even further. The tangible benefits of CPTPP are already proving themselves as evidenced by the hard-data collected. The unintended effects on FDI from non-member countries, however, have a distinct possibility of compounding those benefits exponentially as others see the potential of CPTPP and EVFTA. Traditionally under-utilized sectors for FDI in education and training are also poised to take advantage of these trade agreements. While not the most high profile, E&T are necessary support vehicles to sustain the larger sectors. Vietnam has been slow, thus far, in aggressively changing their regulatory environment to adapt; however, they need to act expeditiously to fully reform their regulatory environment in order to meet this inevitable influx of FDI.

***

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyers in our office listing. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Thank you very much!

VIETNAM—POWER, ENERGY, AND THE AFFECT OF RECENT TRADE AGREEMENTS EU VIETNAM FREE TRADE AND INVESTMENT PROTECTION AGREEMENT AND THE COMPREHENSIVE AND PROGRESSIVE TRANS PACIFIC PARTNERSHIP AGREEMENT

Vietnam has had major stressors placed upon its power and energy grid for years, and it is only accelerating. At a recent April, 2019 conference on renewable energy in Ho Chi Minh City, experts noted that annual energy consumption in [Vietnam] had risen by 10 per cent in recent years, and the country was at risk of facing power shortages in the 2020s. Several factors have had an impact on this event a 2018 Harvard University study dubbed, “a crisis of success”. The major contributing factor was inefficiencies in the utilization of energy resources and infrastructure. Over time, these inefficiencies have compounded the problem Vietnam faces now with their entry into the European Union—Vietnam Free Trade (EVFTA) and Comprehensive and Progressive Trans Pacific Partnership (CPTPP) agreements. Luckily, those challenges may be alleviated if Vietnam changes their regulatory environment and embraces a new operating paradigm based on a global trade perspective. The transition may at times be turbulent, but necessary for Vietnam to achieve robust, sustainable development to meet their future needs.

Renewable Energy under EVFTA and CPTPP

Both the CPTPP (Chapter 20) and EVFTA (Chapter 13) require the parties to mitigate any damaging effects to the environment by trade practices and to incorporate any other treaties the parties are signatories of into the agreements. As Vietnam and the other parties of both the EVFTA and CPTPP are signatories to the United Nations Paris Agreement of 2015, this means Vietnam is required to reduce its traditional coal-fired power plants in favor of cleaner or renewable energy sources. The EVFTA and CPTPP specifically mention renewable energy as the preferred alternative, and the parties all agree to promote trade to that end.

Vietnam has been making strides to address their energy utilization situation such as the Power Development Master Plan for the 2011-2020 Period with the Vision to 2030 (revised PDMP VII). PDMP VII, for example, sets out to increase energy supply from solar power from the current negligible rate to 0.5% by 2020 and 3.3% by 2030, or, 850MW solar capacity by 2020, increasing to 12GW by 2030. PDMP VII is coal-centric, which is counter to what both the EVFTA and CPTPP call for. One reason for the coal-centric approach is that it is established, known, and cheaper—it is the path of least resistance—which is one reason why Vietnam does not place tariffs on imported coal from the US, but it does place a 20 per cent tax on its own domestic offshore natural gas (which is by-far a cleaner alternative). PDMP VII also sets forth the goal of universal connectivity to the national power grid for all of Vietnam by 2030. It is a lofty goal, but it is achievable. The best chance of success for the 2030 goal is to restructure the regulatory environment to favor and exploit renewable energy sources. PDMP VIII is the next evolution for Vietnam’s energy strategy (slated for year-end 2019) and—keeping with the global investment mind-set—Vietnam should have a blend of private and public sector representation on that advisory board to ensure CPTPP and EVFTA renewable requirements and opportunities are fully integrated.

Against this backdrop, how can the EVFTA and CPTPP help Vietnam achieve sustainable energy development? Concerns from the private sector have always plagued Vietnam’s regulatory framework. Permitting, risk-allocation, land use impediments, financing, and investment protection have been major causes for project derailment in the past. The regulatory environment has been the biggest hindrance to successful exploitation and integration of renewable energy. However, Solar Power holds particular promise.

Solar Renewable Power

Solar power (according to PDMP VII) is to provide the second-largest amount of renewable energy in Vietnam by 2030—at 3.3 per cent. That figure should be adjusted higher with the incorporation of a more aggressive renewable plan in PDMP VIII. On a macro-level, solar farms are becoming more and more prevalent in Vietnam’s southern regions with most of them being developed by foreign investment. Major investors in Vietnam in the approval, construction, or completion stage include
German ASEAN Power, B.Grimm Power Public Co Ltd, Trina Solar, Schletter Group, and JA Solar, to name a few. Twenty-five solar farms have signed power purchase agreements (PPAs) with EVN, not to mention another 221 projects are awaiting approval, with a combined 13,000MW of potential output. Reuters, Inc. suggests that Vietnam’s electricity sector will be bigger than Britain’s by mid-2020s.

EVFTA and CPTPP Impacts on Solar Sector

The driving force behind this level of investment so far has been the CPTPP (notably Japan and Korea); however, with the recent enactment of the EVFTA, further investment and expansion is a realistic expectation as there are no foreign-ownership restrictions placed on investors in those agreements. Furthermore, the European Union—Vietnam Investment Protection Agreement (EVIPA) grants specific safeguards for investors regarding the free transfer of capital based on foreign exchange convertibility as well as dispute resolution governed by international arbitration rules. These have been points of contention in the past for EU investors. On a broader scale, Vietnam, the EU, and the CPTPP signatories will all benefit as reduced tariffs and duties on the machinery and hardware to produce solar facilities will make it more cost-effective to develop that sector. Large-scale investment should be noticeable in the immediate future, and should be the definitive driver after five years when Vietnam removes restrictions on local-content and domestic partnering requirements in the EVFTA. Engineering services from the EU to support renewable infrastructure will also thrive as restrictions on that service in Vietnam are relaxed, promoting technical expertise and experience exchange and cooperation. These services will be especially crucial in upgrading and enhancing Vietnam’s grid capacity to maximize renewable energy integration into it.

Vietnam is making progress on changing their regulatory framework for renewable energy utilizing input from the private sector. An example is the latest change to the Feed-In-Tariff (FIT) regulations for connectivity to EVN national grid. Up until 30 June 2019, there was a flat FIT of US $0.0935/kWh regardless of size or scope of project. The low FIT coupled with high investment costs in newer technologies has always been a point of contention for private developers. As of 01 July 2019, the FIT system was revamped and broken-down by type of solar project and zones of irradiance.

The regional scheme is determined by annual levels of irradiance and is broken-down into four regions. Regions with higher irradiance are imposed a lower FIT while remote regions with lower irradiance are imposed a higher FIT. This is a direct result of government responding to private investors’ concerns.

Rooftop Solar PV (less than 1 MWp)

The FIT schedule also applies to smaller-scale solar rooftop development. According to Vietnam Electricity (EVN), 1,800 customers, including offices, businesses and households, are installing rooftop solar systems with a total capacity of 30.12 MWp. In Ho Chi Minh City, EVN has installed rooftop solar systems with a total capacity of nearly 1,130 kWp and is continuing to deploy other systems. EVN general director indicated this amount was far below the potential of Vietnam, and directly attributed the reason to a lack of specific regulations about electricity purchases when households connect their solar power systems to the national grid. The previous flat FIT applied to rooftop solar generating less than 1 MWp as well, but was a convoluted regulatory situation on how-and-who-gets-paid-when. Now, new rooftop solar constructed or installed on or after 01 July 2019 that generates less than 1 MWp has the option of: 1) negotiating their own price between buyer and seller (as long as the project is not connected to EVN national grid) or 2) accepting the FIT schedule for the region it is located in and connecting to the EVN grid.

This is a major change and development for the solar market. The Direct Power Purchase Agreement (DPPA / PPA) allows for individuals or organizations to install rooftop solar projects and sign their own buy/sell contracts among other individuals or organizations without connecting to the EVN national grid. Any excess power generated may be sold to EVN at the established FIT for the region. This can have an enormous impact on the load capacity of the current EVN grid by reducing demand on it.

The rooftop solar sector will be a key part of the puzzle in rectifying Vietnam’s energy inefficiencies. With EVFTA and CPTPP countries enjoying reduced or no tariffs on hardware and other products to support the rooftop solar sector, coupled with the regulatory reforms, it should only be a matter of time before there is a PV panel on every residential and commercial rooftop in Vietnam.

Summary

Vietnam has been struggling with efficiently growing and sustaining its energy and power infrastructure. The regulatory environment has traditionally been one of the major hindrances to private investors in infrastructure development. Although there is always a certain amount of uncertainty in any project of this nature, both the public and private sectors would serve their communities greatly by coming to a reasoned solution that suits both. There has been notable progress by Vietnam on this regulatory-front, such as PMDP VIII and the revised FIT and DPPA. Hopefully there will be much more to come in the latter-half of 2019 and into 2020. The CPTPP and EVFTA agreements have been (and will be) a major factor in Vietnam’s infrastructure development goals. Utilizing those agreements and advice and input from the private sector, Vietnam’s power and energy situation will be poised to efficiently and effectively capitalize on its enormous potential—especially with renewables.

***
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer listed in our office list if you have any questions on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
THANK YOU VERY MUCH!

Breaking news: The EU – Vietnam FTA to be signed next Sunday (30th June)

In a notice made by the EU Council on 25 June, EU Commissioner for Trade Mrs. Cecilia Malmstrom, together with Romanian Minister in charge of business, commerce and business Mr. Stefan-Radu Oprea will represent the EU to sign the EU – Vietnam FTA (EVFTA) in Hanoi on 30th June.

On 26 June 2018, the EVFTA was split into two separate agreement, one on trade and one on investment. In August 2018, EU and Vietnam completed the legal review of the EVFTA and the EU – Vietnam Investment Protection Agreement (EVIPA). The EVFTA needs to be ratified by the European Commission and European Parliament while the EVIPA must be additionally ratified by the Parliament of each EU member countries.

The EVFTA and the EVIPA are said to bring the best advantages and benefits ever for enterprises, employees and consumers in both EU and Vietnam. Vietnam’s GDP is expected to increase by 10-15% and exports are predicted to rise by 30-40% in the next 10 years. Meanwhile, the real wages of skilled labourers could rise up to 12%, while the real salaries of common workers could increase 13%.

The EVFTA is the first comprehensive and ambitious trade and investment agreements that the EU has ever concluded with a developing country in Asia. It is the second agreement in the ASEAN region after Singapore and it will intensify the bilateral relations between Vietnam and the EU. Vietnam will have access to a potential market of more than 500 million people and a total GDP of USD15,000 billion (accounting for 22% of global GDP).

Market access for goods

The EU agreed to eliminate duties for 84% of the tariff lines for goods imported from Vietnam immediately at the entry into force of the FTA. Within 7 years from the effective date of the FTA, more than 99% of the tariff lines will have been eliminated for Vietnam.

Vietnam will benefit more from the EVFTA compared with other FTAs since Vietnam and the EU are considered to be two supporting and complementary markets: Vietnam exports goods that the EU cannot or does not produce itself (i.e., fishery products, tropical fruits, etc.) while the products imported from the EU are also those Vietnam cannot produce domestically.

Government procurement

Vietnam has one of the highest ratios of public investment-to-GDP in the world (39% annually from 1995). However, until now, Vietnam has not agreed to its government procurement being covered by the Government Procurement Agreement (GPA) of the WTO. Now, for the first time, Vietnam has undertaken to do so in the EVFTA.
The FTA commitments on Government Procurement mainly deal with the requirement to treat EU bidders, or domestic bidders with EU investment capital, equally with Vietnamese bidders when a Government purchases goods or requests a service worth over the specified threshold. Vietnam undertakes to publish information on tender in a timely manner, allow sufficient time for bidders to prepare for and submit bids and maintain the confidentiality of tenders. The FTA also requires its Parties to assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation and create an effective regime for complaints and settling disputes, and so on. These rules require Parties to ensure that their bidding procedures match the commitments and protect their own interests, thus helping Vietnam to solve its problem of bids being won by cheap but low-quality service providers.

Enforcement of ISDS

This is now covered in the EVIPA. In disputes regarding investment (for example, expropriation without compensation or discrimination of investment), an investor is allowed to bring the dispute to the Investment Tribunal for settlement (Investor-to-State dispute settlement mechanism – ISDS). This means the investors do not need to lobby its Government to file the case on their behalf. To ensure fairness and independence of the arbitration court, a permanent international investment tribunal with 9 members, 3 nationals appointed from each of the EU and Vietnam together with 3 nationals appointed from third countries. Cases will be heard by a 3-member Tribunal selected by the Chairman of the Tribunal in a random and unpredictable way. This is also to ensure consistent rulings in similar cases, thus making the dispute settlement more predictable. The EVIPA also allows a sole Tribunal member where the claimant is a small or medium-sized enterprise or the compensation of damaged claims is relatively low. This is a flexible approach considering that Vietnam is still a developing country.

In case either disputing parties disagree with the decision of the Tribunal, it has another chance to appeal it to the Appeal Tribunal. While this is different from the common arbitration proceeding, it is quite similar to the 2-level dispute settlement mechanism in the WTO (Panel and Appellate Body). We believe that this mechanism could save time and cost for the whole proceedings.

The final settlement is binding and enforceable without question from the local courts regarding its validity, except for a five-year period following the entry into force of the FTA for Vietnam.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer listed in our office list if you have any questions on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

THANK YOU VERY MUCH!

Vietnamese Clean Development Mechanism CDM market – The perspective of an emission certificate buyer

Vietnam’s commitments on emission reductions and overview of Vietnam’s CDM market

Vietnam has shown a high level of commitment on green development and environment protection for the past 20 years. It became a signatory party to the United Nations Framework Convention on Climate Change (UNFCCC) in 1994, and ratified the Kyoto Protocol in 2002. The International Cooperation Department of the Ministry of Natural Resources and Environment was assigned as the focal point for implementing the Kyoto Protocol, which was then taken over by the Department of Meteorology, Hydrology and Climate Change of the same Department in 2008.

Clean Development Mechanism (CDM) is a flexible financing mechanism under the Kyoto Protocol that allows countries with binding reduction targets to develop projects in developing countries. CDM allows emission reduction projects that contribute to the sustainable development objectives of the host country to sell the Certified Emission Reductions (CERs) resulting from CDM projects. Certain projects for the reduction of emissions in Vietnam are suitable for purchasing certified emission reductions (CERs) under the CDM. The buyers sign an agreement with local project owners in order to obtain rights to CERs from the project. Purchasers are usually ultimate consumers and speculators. Most CERs are eventually used by power companies and other purchasers from the EU area that meet the requirements as well as governments of developing countries etc.

In 2012, the Prime Minister issued the National Socio-Economic Development Strategy for 2011-2020 period and emphasized on sustainable development pathway and climate change resilience. Since then, a number of legal guiding documents have been issued to set out the overall targets and strategies for all relevant sectors and responsibilities of each in-charge ministries. The Government has also issued a number of policies to encourage Vietnamese entities to participate in the CDM, including investment incentives for CDM projects. Until May 2019, Vietnam has had 255 CDM projects registered by the Executive Board of UNFCCC, 59 projects of which are from energy sector and 10 projects are from waste sector.

Vietnam’s market potential

For the past few years, Vietnam has made the transition from a predominantly agricultural to a mixed economy with substantial development of commercial and industrial activities. Rapid growth in population and improvements in living standards together with the Government’s effort to improve access to electricity throughout the country have led to growing increase in the demand for electricity. This now poses a major challenge for Vietnam to maintain sustained growth of the power sector and to achieve energy security. Meanwhile, Vietnam’s electricity demand continues growing at double-digit number. Thus, by applying CDM, renewable energy projects present great opportunities to deal with this challenge.

By engaging in CDM, all parties have something to gain. The project owners increase the return on investment on the project by selling the obtained CERs to a buyer. The buyer obtains a cost-efficient way of meeting reduction commitments under the Kyoto Protocol. The supplier of technology and know-how for the project expand their market presence. The project developers improve know-how and contribute to the project by providing consultancy services. In addition, Vietnam gains from the improved environmental conditions, better access to new technology besides the economic benefits. It is a win-win situation.

In Vietnam, the most potential sectors for developing CDM projects are renewable energy, especially wind and solar. These types of renewable power projects have increasingly received interest by foreign investors thanks to the Government’s strong investment incentives and favorable investment conditions/ procedures.

CER portfolio management

Compliance buyers have to administer their portfolio intensively in order to reflect their intended and actually provided loans. Higher prices are paid usually in connection with project types involving high registration and verification risks. Furthermore, higher costs could be incurred within projects which are well advanced in respect of construction, but it will be dependent on this and not on increased registration risks. In case of projects which have already been started, the earlier CDM consideration as part of an additionality analysis has to be proven. Distribution of risk is an important risk management instrument. For example, many buyers may have a big percentage of their portfolio in Chinese CERs, so it is recommendable to have a look at other markets, such as SE Asia etc. Distribution of risk extends right up to technology type.

Most important CDM registered project types in Vietnam

1. Hydropower: most common CDM projects in Vietnam. Validation risks are named as medium and verification risks are low. Although in these projects are a long construction period and often numerous delays.
2. Wastewater used for generate energy: Risk of validation is low to medium, construction time is low (often less than one year) and the risks of validation is medium size.
3. Other renewable energy types: wind is a high potential. So far, 2 CDM projects have been registered. Bio energy projects also have a high potential. Risks of validation and verification are low to medium, even there is a long construction period.
4. MSW-treatment- are only few projects so far, but there is a high potential for composting. Risks of validation are low to medium, medium risks of verification and medium period of construction.

Case studies

30 MW wind farm project in Binh Thuan

This first wind farm project in Vietnam is run by the Vietnam Renewable Energy JSC and EDF Trading Limited. The first turbine group has been already installed on the construction site. In April 2009, Phase 1 of the project has been registered with the CDM Executive Board. A production of electricity of 91.571 million MWh/year is expected, whereas over 59,000 metric tonnes of CO2 emissions/year are to be reduced.

50MW Cam Lam solar project in Khanh Hoa

On 04th December 2018, EVN and Cam Lam Solar Company Ltd. signed the Power Purchase Agreement. The project has a total investment of VND930.022 billion and is expected to generate 78.831 million MWh/ year. About 62,788 metric tonnes of CO2 emissions/year are to be reduced.

Cu Chi 1000t/d MSW processing plant

This project was developed by Tam Sinh Nghia (TSN) and includes composting of 1000 t/d of municipal solid waste (MSW). The expected emissions reduction of CH4 avoidance is estimated at roughly 1 million metric tonnes of CO2 emission/year (more than seven years of credited period).

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer listed in our office list if you have any questions on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
THANK YOU VERY MUCH!

VIETNAM ECONOMIC TIMES INTERVIEWING DR. OLIVER MASSMANN ON PROSPECT FOR FOREIGN INVESTMENT ATTRACTION IN 2019

1. What do you forecast the prospect for FDI attraction in Vietnam in the last 6 months of 2019?

Vietnam continues to attract record foreign direct investment (FDI) in virtually all sectors. In the first five months of the 2019, Foreign Investment Agency (FIA) shows that FDI in Vietnam has reached a four-year high of US$16.74 billion, which demonstrates a year-on-year increase of 69.1 percent. It is expected that FDI investment will continue to grow robustly. The only barrier is to maintain its growth with appropriate strategy for government reforms. Its government has begun prioritizing ‘high-value’ FDI (advanced technology and manufacturing, tourism etc) as well as adequate training for the working population to raise the standards for specialized areas.

2. Which sectors would be the most attracted to foreign investors in Vietnam? Which countries/territories would be the top FDI ones in Vietnam?

The industry and construction sector grows the fastest at 8 percent, followed by services at 7.44 percent and agriculture, forestry and fishery at 2.90 percent. The industry sector grows at 7.85 percent. Accommodation and catering services grows the fastest at 8.98 percent. Others like the financial, banking etc. peak at 8.14 percent. Real estate business grows by 4.07 percent, its highest since 2011. These would be the most attractive sectors to foreign investors in the upcoming time.

FDI inflow from China into Vietnam has been plummeting. Investors from Singapore, Japan, South Korea will continue as top foreign investors in Vietnam.

3. Many China-based manufacturers have moved to Vietnam due to impacts of the US-China trade intensions. Could the trend influence Vietnam’s FDI performance? Why?

With the US-China trade war showing no signs of abating, Vietnam’s free trade agreements, cheap labor, and young working population provide a powerful concoction for it to thrive.
The growth in FDI inflows from China into Vietnam is expected regarding the impact of the ongoing US-China trade war with many Chinese enterprises grasping opportunities by Vietnam’s participation in many new-generation free trade agreements. Therefore, it is necessary for Vietnam to proactively choose to attract FDI projects with high technology content, ensuring the principle of generating high added-value for the economy in accordance with Vietnam’s FDI attraction policy in the new period.

4. Vietnam will not attract FDI at all cost and expects high-quality FDI inflows after CPTPP ratification. What challenges will Vietnam face when pursuing the strategy?

First, the FDI sector’s linkage with other domestic sectors remains weak and its spillover effect on productivity remains low. Second, the attraction and transfer of technology from the FDI sector has not yet achieved the expected results. Third, the attraction of foreign investment into a number of prioritized sectors of the country and from transnational corporations is still limited. Fourth, a small number of FDI projects have not yet strictly observed the laws on environmental protection, employment of foreign workers and tax. Also, the reduction and removal of import tariffs under the deal will lead to a decrease in the state revenue.

5. From your observations, how should the Vietnamese government select appropriate partners and focus on sectors with potential and advantages?

To maintain and develop bilateral investment and commercial relations, trade must be liberal and equal. In terms of geographical areas, foreign investment attraction will suit the advantages, conditions, development levels and plans of each locality and its regional linkages, ensuring economic-social-environmental effectiveness. For sensitive areas related to national defense and security, the foreign investment attraction will be strictly scrutinized, with national defense and security and sovereignty being primary concerns.
Vietnam will step up the diversification of foreign investment attraction from potential markets and partners. It focuses on top developed nations and transnationals with source and advanced technologies and modern governance expertise.

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Thank you very much!

The beat goes on: Vietnam’s new solar tariff documents add to the uncertainty

A flurry of recent official communications on the new solar FiT regime have only added to uncertainty about the income stream for solar projects in Vietnam after June 2019.

Following nearly two months of relative silence last draft proposed new FiTs were made public (read about them: here and here), the PM and MOIT have exchanged letters indicating that policy and decision makers are still some distance apart on a final position.

In a letter to the MOIT last week, the PM proposed that the provinces be divided into two regions with different tariffs, half the number of regions proposed by the MOIT recently,  and meaning lower overall tariffs for Northern provinces which have barely seen any solar project action since the sun rush kicked off a couple of years ago.

The MOIT responded by urging the PM to further consider the 4 region options it previously tabled in April and May.

On the other hand, the PM’s letter indicates some sympathy for projects struggling to meet the current 30 June 2019 COD deadline, intimating that they ought to be allowed to continue to enjoy the current 9.35c tariff  if their efforts to meet the COD deadline have been hamstrung by matters outside their control (e.g. – land clearance).  The MOIT response takes a  harder line on this, giving its view that the 30 June 2019 deadline should remain a bright line with no exceptions (outside of those Ninh Thuan projects already granted an extension last year).

With the MOIT now seeking further opinions from EVN, the MOF and MOJ, one imagines it is could be risky to assume that the new FiT rates will be officially promulgated prior to the existing ones expiring on 30 June.

The two regions and corresponding FiTs for different kinds of solar projects as proposed by the PM are:

Region I (all Provinces except Region II Provinces)

Floating solar power = VND1,758/ kwh = 7.69 US cents / kwh
Ground mounted solar power = VND1,620/ kwh = 7.09 US cents / kwh
Roof solar power = VND1,916/ kwh = 8.38 US cents / kwh

Region II (Phú Yên, Gia Lai, Đăk Lăk, Khánh Hòa, Ninh Thuận and Bình Thuận Provinces)

Floating solar power = VND1,655/ kwh = 7.24 US cents / kwh
Ground mounted solar power = VND1,525/ kwh = 6.67 US cents / kwh
Roof solar power = VND1,803/ kwh = 7.89 US cents / kwh

Be aware: these are far from final.  Watch this space.

For more information about Vietnam’s energy sector, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.