Vietnam – Banking Sector – Current Issues and Solutions for Banking and Outlook on Major Trade Deals TPP 11 and EUVNFTA
Vietnam had an impressive economic growth with 6.7% GDP in the last year and is therefore one of the best performing economies in the world. Contributed by a successful monetary and credit policies, stable FX rate and NPL resolution efforts. With a great determination the Government, the National Assembly, the State Bank of Vietnam and other Ministries worked on the Resolution for Non-Performing Loans to address this core issue of the banking sector and released capital resources for the private sector to grow.
One important issue is the digitalization of every sector in the economy. In this field, the government shows effort, on handling the coming difficulties. The government should focus in this relation on the Industrial Revolution 4.0, which will lead to major changes in the near future. But to handle the upcoming changes properly the Government needs to support the State Bank of Vietnam which had taken proactive actions recommended necessary changes on Vietnams politics.
Also, the non-cash payment strategic plan must be implemented to make easier ways for payments. The Government should consider allowing pilot programs similar to the sandbox tool that has been used effectively by many Governments, for which is Singapore an excellent example.
The Government and the responsible ministries like the MOF, MO and MP has not reacted properly on the issue of FDI and the need for a better liquidity management. However, there is yet any regulation to enable advanced account structure like pooling in Vietnam. BWG appreciate SBV hosting workshops for international experts to share best practices.
2. Simplification of Banking Documentation
A problem in the banking sector is also the FX management regulation. Due to different interpretations by the banks and law enforcement agencies over the rules for supporting documentation checking.
The State Bank and the Government have to show effort on simplify banking documentation.
3. Bank Accounts of entities who are not legal persons under the Vietnam Civil Code.
Entities, which are not legal persons under the Vietnam Cicil Code (VCC), shall not be independent entities to enter civil transactions contracts (including opening and using bank accounts). This is an unsolved problem which should be handled as soon as possible by the Vietnamese lawmakers.
C. Outlook on major trade agreements TPP11 and EUVNFTA
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The agreement shall be signed by all member states by the first quarter of 2018. After that, it has to be ratified in each member state before taking effect.
The effects of the TPP 11 promising great benefits for banking sector in Vietnam. The TPP 11 is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will make the Vietnamese market more attractive and could cause motivation for foreign enterprises to settle to Vietnam because the market is becoming more dynamic with the TPP.
One another notable major trade agreement is the EUVNFTA between the European Union and Vietnam. The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam. It will help to bring more capital into Vietnam. In addition, the EUVNFTA will boost the economy in Vietnam.
Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. We alert investors to make use of these standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA) which is going to be part of the TPP 11 and the EUVNFTA.
The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing processes.
If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under firstname.lastname@example.org. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Thank you very much!