VIETNAM WILL MOVE ON – Dr. Oliver Massmann in interview with Vietnam Economic Times

As of the end of October, total newly-registered, additional, and paid-in capital for share purchases by foreign investors in Vietnam stood at $23.74 billion; up against the same period last year. What are your thoughts on these figures given the pandemic’s effect on the country?
Global foreign investment flows in 2021 recovered better than expected. These impressive increases are due to the fact that, in the past ten months, three major projects have been granted new investment certificates or added capital: the Long An LNG Power Project ($3.1 billion) in the Mekong Delta’s Long An province, LG Display Hai Phong in northern Hai Phong city, which increased its capital by $2.15 billion, and the O Mon II Thermal Power Plant ($1.31 billion) in the Mekong Delta’s Can Tho city, so both newly-registered and additional capital rose sharply year-on-year.
In addition, as of June, the EU had 2,221 valid projects in Vietnam, an increase of 142 over the same period of 2020, from 26 of the 27 members of the bloc, with capital totaling $22.216 billion, an increase of $449 million against the same period of 2020 and accounting for 5.58 per cent of investment into Vietnam and 6.57 per cent of projects.
Commitments on transparent governance under international agreements and commitments from the Vietnamese Government creating an open and favorable trade and investment environment have contributed to such increases.

Having been in Vietnam for many years, what do you think about the country’s business environment now that lockdowns have ended and a “new normal” appears in trade and investment post-pandemic?
A “new normal” is a necessity, and the government understands that the country cannot and should not wait to resume business only once there are no Covid-19 cases. Companies are operating on the basis of the Ministry of Health’s 5K rules, to ensure safe distancing and hygiene practices among workers and customers. The “new normal” can be seen most clearly through the tourism and hospitality industry, which has suffered more than others since the coronavirus appeared in early 2020. Vietnam has opened up its tourism sector to domestic and foreign travelers alike. One common travel safety rule will be that all tourists and tourism staff must have been fully vaccinated or can furnish a certificate showing they had contracted and recovered from Covid-19. Travel companies will only be allowed to organize tours to “green zones” – those deemed at low risk of spreading the virus. They should also have contingency plans in place in case a visitor contracts the virus.

In a recent interview with a local newspaper, you said “Vietnam will regain its position as one of the most ideal investment locations in Southeast Asia.” Why do you believe so?
First, the government has introduced policies combining fiscal policy, monetary policy, and other sectoral or social security support policies, which include a group of short-term solutions and mechanisms in a number of specific industries and fields and groups of fundamental and long-term solutions to remove difficulties facing economic growth, and supported people and businesses that suffered from the pandemic.
Second, disease control measures have been taken seriously. In a very short period of time, most of Vietnam’s population received two doses of vaccine and the country has begun to vaccinate people under 18 years of age.
Third, Vietnam has conducted intensive institutional reform to ensure its adherence to commitments made under international pacts like the EU – Vietnam Free Trade Agreement (EUVFTA).

What issues must be addressed if Vietnam is to reach its full potential in trade and investment post-pandemic?
Among other things, Vietnam must be more selective in approving foreign investment projects, with an increase in quality and a decline in quantity, in order to eliminate small-scale projects with little added value. Equally important, disease control measures must be clearly available to businesses, for them to prepare their business plans.

What do you foresee for FDI into Vietnam next year?
The government has been trying to perfect the legal framework to implement commitments made under international agreements and to reform and simplify investment and business conditions. A number of legal documents have been promulgated or amended to be consistent with existing commitments, like the Law on Intellectual Property and the Labor Code. The Ministry of Industry and Trade (MoIT) has also cut 205 business investment conditions applicable to foreign investors.
In the 2021-2025 period, the MoIT will continue to review and develop a roadmap of plans to cut business investment conditions, administrative procedures, and specialized inspections, which will help foreign investors reduce the time and cost spent on compliance. Vietnam has been making visible efforts to meet high international standards in all sectors. With a vaccine program being carried out nationwide and the country expecting to fully resume business operations by the beginning of 2022, we expect to see an increase in FDI into Vietnam in 2022.

Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, a Member of the Supervisory Board of the PetroVietnam Insurance JSC, and the only foreign lawyer to address members of the National Assembly in the Vietnamese language.

VIETNAM – FOREIGN DIRECT INVESTMENT – THE MOST INVESTOR FRIENDLY COUNTRY IN ASIA – The Hanoi Times interviewing Dr. Oliver Massmann

1. What do you think about recent rumors that factories of foreign corporations intend to move their production from HCMC to other countries due to the impact of Covid-19?

In 2020, thanks to its outstanding Covid-19 prevention, Vietnam became one of the most attractive destinations for foreign investors looking to move its production out of pandemic-ridden China. Coupled with the enforcement of the EVFTA, Vietnam was set to be the new manufacturing hub of South East Asia. However, since May 2021, the Covid-19 situation in Vietnam, especially Ho Chi Minh City, took a rapid U-turn that led to nationwide lockdown for 4 months. Factories that wished to continue production must have their employee work and live onsite, while office workers worked from home mostly. Other issues include shortage in material supply, contact restriction between enterprises and customers, expats unable to enter Vietnam,… With the sudden disruption to operation and increased costs to ensure workers’ safety and needs onsite, enterprises found themselves having to find a more efficient working way. Some started transferring part of their orders to China, some suspended their process from moving from China to Vietnam and some are looking at alternative countries like Philippines.

2. In your opinion, what major factors will likely cause these corporations’ move?

In a survey of foreign enterprises in Vietnam, to return to operation, 51% of businesses said they need at least 6 months to return to normal operations. 62% of businesses said they would stop operating if the situation did not improve in the next 12 months. 65% of them will stop working immediately if in the next 3 months the situation has not improved.
So the most important factors that will cause these corporations’ move in the near future is if the Covid-19 situation in Vietnam does not become well-controlled soon. The government should let foreign businesses clearly see the anti-epidemic plans and measures in each phase, as it can greatly support the business’s plan.

3. What factors make the remaining large brands like Néstle, Samsung, or Tetra Pak, LG continue to invest in Vietnam?

First of all, it is not easy to immediately move a production to another country. Companies may look to other alternative destinations but will keep an eye on the existing location to see if there’re any considerable new improvements. Second, the Covid-19 situation in Vietnam has greatly improved with most of the population got at least the first jab of vaccination. Third, the Government has been issuing favourable policies on tax and fees for businesses suffering from the consequence of the corona virus pandemic. It is aimed that by the end of 2021, at least 01 million businesses will have access to favourable credit policies, reduction or termination of payment of tax, land fees as well as electricity, water, telecommunication charges.

For example, the latest draft of the Ministry of Planning and Investment on this matter covered the following points to support to cut costs, remove difficulties in cash flow for businesses:
_ Propose policies suspending or reducing the social insurance premiums in 2021 for businesses until June 2022.
_ Develop a plan to support air transport enterprises, and report to the Prime Minister in September 2021.
– Requesting shipping companies to publicly and transparently list shipping rates to eliminate unreasonable increase in freight rates that lead to cost burden for enterprises
_ Reduce of electricity prices for goods warehouses of logistics and processing enterprises in the agriculture, forestry, fishery and a number of commodity industries with export turnover of over USD 1 billion USD. Continue to reduce electricity prices for tourist accommodation establishments.
– Expeditiously implement the issued policies on relaxation and reduction of taxes, fees, charges and land rents; implement preferential tax policies for imported goods to finance COVID-19 prevention and control after being approved by the Government.
– Extend the deadline for paying excise tax on automobiles manufactured or assembled in Vietnam. Continue to reduce registration fees for domestically manufactured or assembled cars for an additional period of time in line with the COVID-19 pandemic.
_ Research to allow travel businesses to temporarily withdraw deposits for domestic and international travel and tourism services; reduce deposit withdrawal settlement time from 60 days to 30 days; continue to extend the reduction of the license fee for travel service business and issue tourist guide cards until the end of 2021.
_ Continue to administer monetary policy to control inflation, contributing to stabilizing the macro-economy; encourage credit institutions to continue reducing lending interest rates for existing loans and new loans to support production and business.
_ Supplement policies on debt rescheduling, exemption and reduction of interest and fees, keeping the same debt group for customers affected by the Covid-19 epidemic
_ Research and consider the exemption of trade union fees for members of businesses affected by the COVID-19 pandemic in 2021 and 2022

4. What production shift scenarios do you predict may happen in the near future?

If Vietnam can effectively control the corona-virus pandemic in the next 6 months, I believe Vietnam will regain its position as one of the most ideal investment locations in South East Asia.

5. What should the Vietnamese government do to make production and business of foreign corporations stable?

The government must always listen to enterprises’ difficulties and guide them on how to solve it. It is imperative to reopen the economy as soon as possible while ensuring that businesses are conducted safely to prevent the spread of Covid-19. Vietnam has started to apply vaccination cards that allows people to move freely after they have had 2 vaccine injections. Policies that assist foreign enterprises to overcome issues caused by the pandemic as well as policies that assist them to reopen operation and achieve target growth are always welcome.

***

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – PRIME MINISTER TO REVIEW THE FINAL DRAFT POWER MASTER PLAN 8 THIS WEEKEND

The Appraisal Council approved the National Electricity Development Plan for the period of 2021-2030, with a vision to 2045 (Power Master Plan VIII) in a meeting held on 3 October 2021.

Immediately after receiving the results from the Appraisal Council, the Ministry of Industry and Trade has embarked on the finalization of the Draft Power Master Plan 8 with the goal of submitting the final draft to the Prime Minister this weekend for consideration and approval.

Duane Morris will keep our readers updated of any progress on the finalization of the Draft Power Master Plan 8.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – LOCAL REGULATION COULD LEAD TO EU-VIETNAM TRADE HINDRANCE

Under Circular No.28/2012/TT-BKHCN dated 12/12/2012, before the products are circulated on the market, the manufacturer must declare the products’ standard conformity (Declaration of Standard Conformity). A component of the application dossier for the Declaration is the assessment result of standard conformity (“Assessment”). Under Circular 28, this Assessment can be carried out either by the manufacturer themselves or a third party registered certifying organization.

On 31 December 2019, the Ministry of Science and Technology issued Document No. QCVN 19:2019/NKHCN on National Technical Regulation on LED lighting products (Document 19). Article 3.4 of Document 19, the Declaration of Standard Conformity must be based on the assessment results issued by a certification body that has registered its field of operation as prescribed in local regulations.

It has been brought to our attention that these certification bodies charge around USD 700 for each model testing. From 2022, under Decision No. 1383/QD-BKHCN dated 22/05/2020, there will be two additional tests required for the Assessment, thus it is expected that the price payable by manufacturers/distributors will increase to USD 1500 for each model of product.

Importers of LED lamps have been furious with the new Regulation, as they believe local certifying organizations do not have the capacity to assess EU-imported products, assuming that such products have not yet been certified in accordance with EU standards. Importers also feel that the Regulation has resulted in importers have to incur unreasonable additional fees. We examine this instance in light of the EU-Vietnam Free Trade Agreement (EVFTA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

EU-Vietnam Free Trade Agreement

Under Article 5.3.2 of the EVFTA, Vietnam has the right to prepare, adopt and apply standards, technical regulations and conformity assessment procedures in accordance with the EVFTA and the TBT Agreement.

Article 5.5 (Standards) reads that With a view to harmonizing standards on as wide a basis as possible, the Parties shall encourage their standardizing bodies as well as the regional standardizing bodies of which they or their standardizing bodies are members to avoid duplication of, or overlap with, the work of international standardizing bodies. Some exported products may already undergo Assessment of standard conformity in their origin country. As a result, requiring imported products to undergo another local one may be considered as repeating the work.

In addition, under the EVFTA, Vietnam also affirmed its obligation that fees imposed for mandatory conformity assessment of imported products shall be equitable in relation to any fees chargeable for assessing the conformity of like products of domestic origin or originating in any other country, considering communication, transportation and other costs arising from differences between location of facilities of the applicant and the conformity assessment body. Importers of LED lamps could make a case if it could be established that the charges applicable to imported products are higher than those manufactured locally.

In general, it could be said that Document No. QCVN 19:2019/NKHCN on National Technical Regulation on LED lighting products does not comply with provisions under the EVFTA in the sense that it constituted a Technical Barrier to Trade upon Vietnamese importers. Consequently, it would hinder LED lighting products export from EU countries.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Under the CPTPP, Vietnam has the right to apply the same or equivalent procedures, criteria, and other conditions to accredit, approve, license, or otherwise recognize conformity assessment bodies located in the territory of another CPTPP Party that it might apply to conformity assessment bodies in its own territory. Moreover, the CPTPP also explicitly does not preclude Vietnam from verifying the result of conformity assessment procedures undertaken by bodies located outside its territory.
As a result, it could be said that under the CPTPP, the provisions applicable to LED lighting importers allow for local regulations like Document 19.

Both the EVFTA and the CPTPP require Vietnam and other parties to the agreements to establish local Contact Points for matters arising under their chapters. It is recommended that importers or traders that are negatively affected by Document 19 should voice their concern to such Contact Points, who have the responsibility to handle your matter by working with the relevant governments in light of the EVFTA and the CPTPP.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – NEW PRICING FRAMEWORK FOR SOLAR AND WIND POWER PROJECTS

In a press conference on 30 September 2021, the Ministry of Industry and Trade (“MOIT”) confirmed that there would be NO FIT extension for wind energy projects after 31 October 2021.

The Ministry of Industry and Trade recently issued a new draft Circular on regulations on methods of building electricity generation price brackets and determining electricity generation prices, power purchase agreement for solar and wind energy projects. This Circular will apply to solar energy projects that have not met the COD deadline of 1 January 2021 or wind energy projects that have not met the COD deadline of 1 November 2021. Though it is only at draft stage, it is expected that the Circular will come into force soon and give developers as well as investors clarity on renewable power projects development and related transactions.

According to the Draft, this Circular will apply to:
i) Ground-mounted solar energy projects, floating solar power projects
ii) Rooftop solar energy projects
iii) Onshore wind energy projects and
iv) Offshore wind energy projects.

The electricity generation price bracket is the range of values from 0 (zero) to the ceiling price of the type of solar and wind power plants corresponding to each type of solar power plant (floating, ground mounted) and wind power plant (onshore, offshore). The ceiling price is the electricity generation price of a standard solar and wind power plant. Standard solar and wind power plants are plants that have operated, are under negotiation or are selected during the year (N-1).

Electricity generation price of newly built solar and wind power plants is determined based on:

a) Reasonable expenses of the Investor in the whole economic life of the project;
b) The financial internal rate of return (IRR) is 12%.

The electricity generation price of a solar and wind power plant includes the following components:

a) Power purchase and sale contract price: To be agreed upon by the two parties and determined according to the formula specified in Article 11 of this Circular;
b) Specific connection price: To be agreed upon by both parties and determined according to formula specified in Article 14 of this Circular.

Electricity generation price of solar and wind power plant is exclusive of value-added tax and other taxes, fees and cash receipts according to the State’s regulations (except for taxes and fees already paid) included in the electricity generation price plan.

The draft Circular also provide a new Power Purchase Agreement (“PPA”) template to be used for solar and wind energy projects , including detailed procedure for PPA negotiation and checklist of documents to request for PPA negotiation.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – CYBERSECURITY – COMPARING VIETNAM’S CYBERSECURITY LAW WITH ITS COMMITMENTS UNDER THE CPTPP, EVFTA

Vietnam’s latest Law on Cybersecurity came into force on 1 January 2019. The law sets out rights and obligations on domestic and foreign companies providing services to customers in Vietnam over telecom networks or the Internet. The two provisions of the Law that are the most controversial are arguably Data Localization (offshore and onshore online service providers are required to store Vietnamese users’ information within the country for a period of time) and Commercial Presence (the same companies must establish a commercial presence in Vietnam either in the form of a branch or representative office). It has been questioned whether these provisions are contradicting international treaties that Vietnam is a signatory to, including the CPTPP and the EVFTA. In answering this question, we shall examine Vietnam’s commitments under each Agreement.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP):

No import tax to be imposed on e-commerce transactions. However, Vietnam has the right to impose local taxes, fees and charges on “electronically transmitted content”, provided that such taxes, fees or charges are in accordance with provisions of the Agreement.

Cross-border transfer of information by electronic means is allowed. The cross-border transfer of information, data by electronic means is only for business activities or a legal entity. Vietnam has the right to have separate requirements for data transfer by electronic means and take necessary measures to implement legitimate public policies, but on the condition that the policies does not create disguised barriers to trade or are applied in a discriminatory or arbitrary manner.

Data localization requirement is not mandatory. Vietnam is not allowed to require the use or location of servers in the host country as a business condition. However, Vietnam has the right to make specific management requirements regarding the use or location of servers, including requirements to ensure communications security and confidentiality; and take necessary measures to implement legitimate public policies, but on the condition that the policies does not create disguised barriers to trade or are applied in a discriminatory or arbitrary manner.

CPTPP countries agreed not to sue Vietnam if its cybersecurity regulations are deemed to be inconsistent with the CPTPP Agreement (specifically, two obligations of free cross-border information flow and server localization in the E-Commerce Chapter) within 2 years after the date of entry into force of the CPTPP Agreement.

Reserving measures related to national security and defense, public order and privacy. Vietnam has the right to have separate management requirements for cross-border transfer of data or information by electronic means, using or locating servers (including requirements to ensure communications security and confidentiality); Vietnam has the right to take necessary measures to implement legitimate public policies, but on the condition that they do not create a disguised trade barrier or are applied in a discriminatory or arbitrary manner.

The validity of electronic authentication and electronic signatures must not be denied. However, Vietnam may require that, for a particular category of transactions, the method of authentication meets certain performance standards or is certified by an authority accredited in accordance with its law. In practice, though not stated in the law, all application dossiers to the local Department of Planning and Investment still require wet ink signature, even if the investor is abroad.

EU-Vietnam Free Trade Agreement (EVFTA):

The issue of Cybersecurity could be found in Chapter 8 of the EVFTA, Section F of which states that “the Parties, recognizing that electronic commerce increases trade opportunities in many sectors, shall promote the development of electronic commerce between them, in particular by cooperating on the issues raised by electronic commerce under the provisions of this Chapter of EVFTA”.

As committed under the EVFTA, Vietnam and EU shall maintain dialogues on regulatory issues raised by electronic commerce, which shall, inter alia, address the following issues:

•the recognition of certificates of electronic signatures issued to the public and the facilitation of cross-border certification services;
•the liability of intermediary service providers with respect to the transmission or storage of information;
•the treatment of unsolicited electronic commercial communications;
•the protection of consumers in the ambit of electronic commerce; and
•any other issue relevant for the development of electronic commerce.

This dialogue may take the form of exchange of information on the EVFTA’s Parties’ respective laws and regulations on the issues referred to above issues as well as on the implementation of such laws and regulations.

From the above, it could be seen that the international treaties leave a lot of room for Vietnam to develop its own regulations. In other words, due to their vague language and absent of further guidance, the provisions are open to the discretion of the local authorities. As such, to answer the question at the beginning, the Law on Cybersecurity and accompanying legal documents stipulating that foreign enterprises operating commercially in cyberspace must set up a representative office and store data in Vietnam for a period of time is not contrary to international practice outlined in the CPTPP and EVFTA.

***

Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – MOIT IS REVIEWING NEW FEED IN TARIFFS (FiTs) FOR WIND POWER PROJECTS

Recently, the Government Office has received proposals from several provincial People’s Committees on extending the current wind FiTs because many projects are being delayed due to the Covid-19 pandemic, especially the forth wave of Covid-19 since May 2021 that resulted in (almost) nationwide lockdown. Under Decision 39/2018/QD-TTg of the Prime Minister regarding development of wind power projects in Vietnam, the current wind FiTs end on 1 November 2021.

The current FiTs are as follows:

With regard to onshore wind power projects: The purchase price at the delivery point is VND 1,928 per kWh, excluding VAT and equivalent to 8.5 UScents/kWh according to the USD/VND exchange rate quoted by the State Bank of Vietnam on 30 August 2018 – USD 1 = VND 22,683. The electricity purchase price shall be adjusted according to the VND/USD exchange rate.

With regard to offshore wind power projects: The purchase price at the delivery point is VND 2,223 per kWh, excluding VAT and equivalent to 9.8 UScents/kWh according to the USD/VND exchange rate quoted by the State Bank of Vietnam on 30 August 2018 – USD 1 = VND 22,683. The purchase price shall be adjusted according to the VND/USD exchange rate.

Upon the provincial People’s Committees’ proposals, the Government Office has instructed the Ministry of Industry and Trade (MOIT) to review these proposals and report back by 30 September 2021.

Since 2020, MOIT has proposed to extend the current FiT deadline to 31 December 2023. After 2023, MOIT proposes wind energy projects to apply auction, bidding methods. MOIT also proposed to assume the responsibility of calculating new FiT rate for wind power projects, applicable from 1 November 2021 to 31 December 2023 in case the Prime Minister doesn’t agree to extend the current FiT rate.

The need to extend the deadline for current FiT rates is essential because the projects waiting to be included in the PDP VIII is unlikely to have commercial operation date before November 2021, because the construction of wind power projects takes a long time – For feasibility study reports, investors must carry out wind measurement for at least 12 months. Moreover, wind turbines are mostly imported from abroad, which costs investor extra time, especially when there has been unexpected delay of equipment delivery due to the global pandemic.

***

Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – THE GOVERNMENT ENCOURAGES TRADE AND INVESTMENT FROM AUSTRIA

How strong is the Vietnamese-Austrian economic relation?

On 1 December 2022, the two countries will celebrate their 50 years of diplomatic relations.

In terms of investment relations, Austria has around 37 projects with a total investment capital of about 150 million USD, focusing mainly in the fields of manufacturing and processing industry and science and technology. In terms of trade relations, Austria has always been one of the important export markets of Vietnam and is currently in the group of 5 largest export markets of Vietnam in the EU. Bilateral trade turnover in 2020 reached 3.2 billion USD, 13 times higher than in 2010 and this is an impressive number in the context of the COVID-19 epidemic.

The Memorandum of Understanding between the Ministry of Industry and Trade of Vietnam and the Austrian Minister of Economy and Digital on cooperation in the field of Industry 4.0 and e-commerce, signed in the witness of the two Prime Ministers is an important foundation for the two sides to implement cooperation activities in the coming time.

Since the EVFTA took effect, the import and export turnover between Vietnam and Austria has increased. Vietnam is now the largest trade partner of Austria in Southeast Asia, with imports from the latter amounting to nearly 1 billion EUR. Austria is carrying out internal procedures to soon ratify the Investment Protection Agreement between Vietnam and the EU (EVIPA)

With a population almost 100 million people and rapidly growing, Vietnam is a potential market for Austrian businesses to promote their products and expand their business. Moreover, Vietnam is also a gateway for Austrian products and services to access the ASEAN market of 670 million people. With the advantage of being considered by many investors as an alternative to China as an investment location, Vietnam has developed suitable preferential policies to attract foreign investment.

In the most recent visit of the Vietnam Government to Austria last week, the two sides reaffirmed their desire to cooperate in vocational and labor training, especially in the fields of information technology and nursing – two areas where Austria has great demand for qualified workers in the future.

The two sides agreed to encourage relevant agencies to soon launch a pilot project on the implementation of the Austrian vocational training model in Vietnam. According to this model, the program will be built in the direction of spending 20% of the time studying at the training institution, the remaining 80% of the time will be spent for trainees to practice combining practical work at enterprises and other employers

Who are the pillars of Vietnam expat community in Austria?

Former Vietnamese Ambassador to Austria Le Dung
Vietnamese Ambassador to Austria Nguyen Trung Kien
Ho Xuan Thai – the most successful businessman in Austria – owner of DOTS, a restaurants/events management company

Which companies are the big players in the Vietnamese-Austrian relations?

Austria printed circuit board manufacturer AT&S has been studying several locations in Vietnam to build two factories worth €1.5 billion ($1.78 billion).

Cable car manufacturer Doppelmayr provided 25 cable cars to Vietnamese tourism industry, includes the world-record 215 meters high cable car pillar.

Fire-fighting equipment manufacturer Rosenbauer has been delivering to the country for 30 years.

Engel is a company that provides injection-molding solutions for the electronics sector. Engel has a sales and service branch in Ho Chi Minh City.

Notable start-ups include: Andritz, AVL List or Vamed

Which roles do the big cities like Hanoi, Ho-Chi-Minh-City or Haiphong play?

The Trade Office of the Austrian Embassy made its debut in Ho Chi Minh City on 16 May 2019 with the aim to connect business communities of Vietnam and Austria. The Trade Office is named IC- Steiermark Centre (ICS). The ICS’s adding Vietnam into its 2021 focus program could open up a series of events such as seminars and trips between two countries in the near future. The Austrian Embassy is located in Hanoi – the political center of Vietnam. Hai Phong is a port city where the majority of northern produce is exported from there to Europe.

***

Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

VIETNAM – Power Development Planning VIII (“PDP8”) – Vietnam Government’s plan to De-carbonize the Country – what you must know:

Question#1. What impact is PDP8 likely to have on the country’s efforts to decarbonize the economy?

Answer#1:
The draft Power Development Planning VIII (“PDP8”) reinforces the Vietnam Government’s current view on prioritizing renewable energy sources to minimize negative impacts caused by electricity production on the environment. Importation of fuels (coal, LNG) are encouraged as a way to diversify the country’s primary energy sources, and the same goes for the establishment of transmission and distribution grid links with China, Laos and Cambodia in order to maximize each country’s energy potential. Imported electricity sources from neighboring countries are to be considered as prioritized projects because imported electricity will reduce environmental impact compared to domestic production.

As of 2020, the country’s total generation capacity is about 69.3 gigawatt (GW), including 16.5 GW of solar power (approx. 24% of the total capacity) and 0.6 GW of wind power. More than 50% Vietnam’s electricity generation came from coal in 2020. Vietnam’s reliance on coal-fired power remains heavily to meet rapidly increasing electricity demand. Hydroelectric generation is also significant as the country is home to a number of large rivers. Non-hydro renewable sources such as wind and solar made up 5% of Vietnam’s electricity generation in 2020. Under the draft PDP 8, Vietnam plans to increase solar capacity to 18.6 GW and wind capacity to 18 GW by 2030.

Question#2. Does PDP8 target specific regions of the country? Are these regions that are more likely to be impacted by the transition to a low carbon economy?

Answer#2:
Yes, one of the most notable differences between the Draft PDP 8 and Revised PDP 7 (the latest official national power development planning) is the level of power demand between the North and the South. According to PDP8, the proportion of commercial electricity in the North will gradually increase from 42.4% in 2020 to 45.8% in 2045, while the South will decrease its proportion from 47.4% in 2020 to 43.6% by 2045. By 2040, the North’s commercial electricity demand will start to exceed that of the South. As a result, this will significantly affect the strategy in PDP8 to develop the transmission grid and generation sources (including RE sources) to meet the demand.

The draft PDP 8 is oriented to focus on the development of transmission grid of at least 220KV to solve overcapacity issues that has been occurring in recent years. As to grid development, in the period of 2021-2030, MOIT sees the need to build 86 GVA with a capacity of 500kV per station and nearly 13,000 km of DLZ. From 2031-2045, an additional construction of 103 GVA with capacity of 500kV and nearly 6000 stations is required. The 220kV power grid needs construction of 95 GVA, nearly 21,000 km DMZ and 108 GVA, more than 4000 km NE. Total investment capital for electricity development in the period 2021-2030 is roughly USD 128.3 billion USD, of which: USD 95.4 billion for the power sources, USD 32.9 billion for the grids. The average structure of capital investment shall be 74% / 26%.

The draft PDP8 appears to concern a surging oversupply of solar power in 2030 in many regions, such as the Central Highlands (estimated 1,500 MW but registered 5,500 MW), the South Central (estimated 5,200 MW but registered 11,600 MW), or the Southern (estimated 9,200 MW but registered 14,800 MW). The wind power shares the same situation as the registered capacity exceeds normal estimated capacity in Central Highlands (estimated 4,000 MW but registered 10,000 MW) and Southern (estimated 6800 MW but registered 17,000 MW). Accordingly, the draft PDP8 must solve this unbalance to ensure the sustainable development of the renewable energy sources in Vietnam. It is expected that future policy on renewable energy will base on auction rather than FIT.

For example, below is the draft policy for solar power projects. In late January 2021, the Ministry of Industry and Trade (“MOIT”) issued the draft Decision of the Prime Minister guiding the selection of investors implementing solar power projects under the bidding mechanism (“the Draft”). According to the Draft, the Decision would be applicable to projects with grids connected directly to the national power network. The Ministry of Industry and Trade shall coordinate with the Electricity of Vietnam and the People’s Committees of localities to organize the formulation and approval of the renewable energy power source development plan for a period of 5 years and every 2 years to serve as a basis for the bidding system. In addition, every 02 years, the Ministry of Industry and Trade shall issue a Price Framework for electricity generation in order to determine the ceiling price for bidding to select investors of solar power projects with COD in the next 02 years. The plan for development of renewable energy power sources for a period of 5 years shall include the total capacity scale for each renewable energy power source in the 5-year period, the total capacity scale for each renewable energy power source for each load region (8 regions) and a list of transmission lines and substations (220 kV at least) to be put into operation for a period of 5 years. The 02-year plan shall have similar content but for a 2-year period only and shall be more provincial specific.

Question#3. Were issues of economic, racial, and gender equity considered in the development of PDP8?

Answer#3:
Yes, any policy of the Government must consider these issues but it is very challenging to identify whether they are well reflected into the policy including PDP8. This is a very broad and difficult question.

Question#4. Was there a debate amongst political leaders about the costs and benefits of PDP8?

Answer#4: Yes, of course. It appears that the new Government now has different views and priorities than the former and as a result the PDP8 must be revised to reflect such priorities.

As you may know, in late March 2021, the very first draft of PDP8 PM Decision (“Draft Decision”) has been published through unofficial sources (i.e. not through the Ministry of Industry and Trade (MOIT)’s website). Such PM Draft Decision was planned to be signed off at the end of March during the last days of Prime Minister Nguyen Xuan Phuc’s administration, but it was delayed as the hand-over to new administration was already under way. It appeared that the investors and LNG-to-power projects in this first PM Draft Decision were scaled down comparing to those in the PDP8 proposal published by Ministry of Industry and Trade (MOIT) earlier.

On 23 April 2021, the Deputy Prime Minister (DPM) Le Van Thanh directed a Government’s meeting on the PDP8 and concluded that, among others, PDP8 must be (i) updated with qualifications for prioritized projects, and (ii) revised to reasonably review and allocate development of power sources, especially LNG-to-power projects in PDP8 in order to ensure the competition, optimization on development of power system. DPM asked the MOIT to careful review and digest opinion from EVN in its official letter No. 1645/EVN-KH dated 2 April 2021. Finally, the DPM required the MOIT to submit the updated PDP8 proposal prior to 15 June 2021.

Unfortunately, due to Covid-19 situation and heavy workload on updating the PDP8 proposal, MOIT failed to submit a revised proposal to the Government for consideration. On 17 June 2021, the MOIT Minister arranged a press meeting to update the PDP8 progress and planned to submit the revised PDP8 proposal to the Government within June 2021. So far, based on our intel, the MOIT is still reworking its draft and PDP8 is expected to be approved COB this year ideally.

Question#5. What role did various stakeholders (e.g., business, not-for-profits) take in advocating for or against PDP8 or trying to influence its development?

Answer#5:
Yes, there are many stakeholders here, e.g., EVN, local developers, business communities (such as Chambers and VBF) and state authorities. However, please kindly note that the draft PDP8 is mainly drafted by the Energy Institution (NB: an institution under EVN until it was taken over by MOIT since 2010). The MOIT was collecting opinion from all stakeholders for the draft PDP8 made by the Energy Institution. It is worth noting that the opinion from EVN is always critically important as it (including its affiliates and subsidiaries) still remains the position of a monopoly wholesaler in the market. The new Government requested the MOIT to revisit EVN’s opinion for revising the current draft PDP8.

Question#6. Which key stakeholders were in favour of PDP8? How did they organize and influence decision making?

Answer#6:
Yes, it is very challenging to answer black or white on this question. PDP8 is the prioritized policy of the Government for the energy sector. Thus, there is always a favorable trend for this policy to come out soon. We however do note that there are different views on the contents of the PDP8, but not an issue of support or opposition.

Question#7. Which key stakeholders were against PDP8? How did they organize and influence decision making? Were there specific measures to address their concerns?

Answer#7:
Yes, it is very challenging to answer a black or white question. PDP8 is the prioritized policy of the Government for the energy sector. Thus, there is always a favorable trend for this policy to come out soon. We however do note that there are different views on the contents of the PDP8, but not an issue of support or opposition.

Question#8. Has PDP8 been well-received by the public?

Answer#8:
Yes, it has been well received by the public. However, the foreign invested business communities still have some concerns, among others, over the current PDP8:
• No clear plan for variable renewable energy in the technology mix. PDP8 must ensure Vietnam planning remains cutting-edge to include full representation of variability and assessing power system reliability.
• No plan for nuclear power.
• Need to construct a regulatory and permitting environment that attracts private sector investment in clean energy generation and energy efficiency.
• Need a clear policy to ensure EVN to share the market risks: e.g., a bankable (take or pay) power purchase agreement with generators.
• Need to halt further development of coal based projects: it is recommended to suspend the approval of any new coal thermal power plants and conducting a strategic review of those that are already approved but which do not have financing or power purchase agreements.
• Need to develop a flexible transmission network in view of the market orientation and increased variable renewable energy.
• Need to build schemes to address the uncertainties: from fuel prices to demand growth and oversupply and curtailment.

***

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.