March 2021 – Duane Morris Vietnam

March 30, 2021 by Dr. Oliver Massmann

EU-VIETNAM FREE TRADE AGREEMENT AND INVESTMENT PROTECTION AGREEMENT – UNMATCHED LEVELS OF MARKET ACCESS AND LEGAL CERTAINTY – WHAT YOU MUST KNOW

On 8 June 2020, Vietnam’s National Assembly ratified the EU-Vietnam Free Trade Agreement (EVFTA) and Investment Protection Agreement (EVIPA) following almost 10 years of negotiations. On 12 February 2020, the European Parliament gave it consent to the ratification of the EVFTA and EVIPA. On 30 March 2020, the Council of Europe ratified the EVFTA . Finally, on 1 August 2020, the landmark agreement entered into force. Regarding the EVIPA, the Vietnamese Government has provided the EU Delegation with a diplomatic note providing notification of the National Assembly’s ratification of the EVIPA, pending endorsement of the Member States’ parliaments.

The implementation of the EVFTA has, to date, shown many positive results. This is particularly meaningful for both Vietnam and the EU in this period when world economies are suffering from the consequences ofCOVID-19. For instance, the total value of Vietnam’s exports to the EU market reached US$ 27,65 billion in December 2020, a dramatic increase of 55.3 per cent compared to December 2019.[1] In addition, the Ministry of Industry and Trade announced that it has granted approximately 24,000 sets of Certificate of Origin with a turnover of nearly US$ 1 billion eligible for EU tariff preferences within less than 3 months of the EVFTA coming into force . As of mid-January 2021, exports to the European Union accounts for USD 12.90 billion for the following products: mobile phones and accessories, computers, electronic products and components, textiles, other machinery, equipment, tools and spare parts, footwear of all types, wood and wooden products, and fishery products.

I. LEGAL ENVIRONMENT

1. General market access for goods and services

The EVFTA is the most comprehensive and ambitious trade and investment agreement 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 helps to intensify bilateral relations between Vietnam and the EU. Vietnam now has access to a market of around 448 million people and an average GDP of US$13,918 billion (with the exception of 2020 due to Covid-19’s impacts on the economy).[2] Meanwhile, exporters and investors from the EU also have further opportunities to access one of the largest and fastest-growing countries in the region. According to a report released in early 2020 covering 130 cities worldwide,[3] Hanoi and Ho Chi Minh City are ranked among the top-10 most dynamic cities due to their low costs, rapid consumer market expansion, strong population growth, and transition towards activities attracting significant amounts of Foreign Direct Investment (FDI). According to the World Bank, Vietnam has one of the fastest-growing economies in the world — 7.1 per cent GDP growth in 2018, and 7.0 per cent in 2019, 2.91% for 2020.[4] Even though this is the lowest GDP growth level of the country in the last 10 years due to impacts by the novel corona virus, it is still among the world’s highest, especially comparing to neighbouring countries such as Singapore that saw a GDP growth of approximately minus 6.
In addition, Vietnam has the fastest-growing middle class in the region. Vietnam’s middle class accounts for 13 per cent of the total population and this figure is expected to become 26 per cent by 2026.[5] Vietnam’s super-rich population[6] is also growing faster than anywhere else, and there is no doubt that it will continue to rise over the next ten years.

Market access for goods

Nearly all customs duties – over 99 per cent of the tariff lines – will be eliminated in the next 10 years. The small remaining number will be partially liberalised through duty-free quotas. As Vietnam is a developing country, it has liberalised around 65 per cent of the value of EU exports, representing around half of the tariff lines, at entry into force. The remaining duties will be eliminated over the next decade. This is an unprecedented, far-reaching tariff elimination for a country like Vietnam, proving its aspiration for deeper integration and trading relations with the EU.

Meanwhile, the EU agreed to eliminate duties for 84 per cent of the tariff lines and 71 per cent of its trade value for goods imported from Vietnam from 1 August 2020. Within seven years from the effective date of implementation, more than 99 per cent of the tariff lines will have been eliminated for Vietnam. This is a wider reduction compared with the 95 per cent of the tariff lines that the former TPP countries offer to Vietnamese imports. In the ASEAN region, Vietnam is the top country in exporting goods to the EU. However, the market share of Vietnam’s products in the EU is still small. Because of the EVFTA, the sectors that will benefit most are the main export sectors that used to be subject to high tariffs from the EU including textiles, footwear, and agricultural products. The EU is also a good point for Vietnam to reach other further markets.

Vietnam benefits more from the EVFTA compared with other such agreements, since Vietnam and the EU are considered two supporting and complementary markets. In other words, Vietnam exports goods that the EU cannot or does not produce itself (i.e. fishery products, tropical fruits, etc.) Meanwhile, the products imported from the EU are also those Vietnam does not produce domestically, including machinery, aircraft, and high-quality pharmaceutical products.

With better market access for goods from the EU, Vietnamese enterprises can source EU materials, technology, and equipment at a better quality and price. This, in turn, improves their own product quality and eases Vietnam’s burden of over-reliance on its other main trading partners.

The EVFTA is considered as a template for the EU to further conclude FTAs with different countries in ASEAN with the ultimate aim of concluding a region-to-region FTA once there is a sufficient critical mass of agreements with individual ASEAN countries.[7] This process could take about 10-15 years. Thus, Vietnam should take advantage of this window of opportunity, before FTAs with others in the region are concluded and take effect, to become a regional hub.

Market access for EU service providers: Although Vietnam’s WTO commitments are used as a basis for the services commitments in the EVFTA, Vietnam has not only opened additional (sub)sectors for EU service providers, but also made commitments deeper than those outlined in the WTO, offering the EU the best possible access to Vietnam’s market. (Sub)sectors that are not committed under the WTO, but under which Vietnam has made commitments, include Interdisciplinary Research & Development (R&D) services; nursing services, physiotherapists and para-medical personnel; packaging services; trade fairs and exhibitions services and building-cleaning services.
When these reach international standards, Vietnam will have the chance to export high-quality services, resulting in not only an increase in export value but also export efficiency, thus helping to improve the trade balance.

Government procurement

Vietnam has one of the highest ratios of public investment-to-GDP in the world (39 per cent annually from 1995).[8] However, until now, Vietnam has not agreed to its Government procurement being covered by the Government Procurement Agreement (GPA) of the WTO.[9] 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 the Government purchases goods or requests a service worth over the specified threshold. Vietnam undertakes to follow the general principles of National Treatment and Non-discrimination. It will publish information on intended procurement and post-award information in Bao Dau Thau (Public Procurement Newspaper)[10] and information on the procurement system at muasamcong.mpi.gov.vn and the official gazette in a timely manner. It will also allow sufficient time for suppliers to prepare and submit requests for participation in responsive tenders and maintain the confidentiality of bidders 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.[11] 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.

Government procurement of goods or services, or any combination thereof, that satisfy the following criteria falls within the scope of the EVFTA Government Procurement rules:

Table: Government Procurement Rules under the EVFTA

Table – Government Procurement Rules under the EVFTA

Investment Dispute Settlement

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. To ensure the fairness and independence of the dispute settlement, a permanent Tribunal will be comprised of nine members: three nationals each appointed from the EU and Vietnam, together with three nationals appointed from third countries. Cases will be heard by a three-member Tribunal selected by the Chairman of the Tribunal in a random manner. 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 of the disputing parties disagrees with the decision of the Tribunal, it can appeal to the Appeal Tribunal. While this is different from the common arbitration proceeding, it is quite similar to the two-level dispute settlement mechanism in the WTO (Panel and Appellate Body). We believe that this mechanism could save time and costs for the whole proceedings.

The final settlement is binding and enforceable from the local courts regarding its validity, except for a five-year period following the entry into force of the EVIPA (please refer to further comments in the Legal Sector Committee’s chapter on Judicial and Arbitral Recourse).

Conclusion

The EVFTA has created sustainable growth and mutual benefits in various sectors and is, by all means, an effective tool to balance trade relations between the EU and Vietnam. Vietnam is making continuous efforts and progress to meet the high standards set out in the EVFTA, and is currently offering greater opportunities for foreign businesses entering Vietnam’s market. It is now time for foreign investors to implement their business and investment plans and grasp these amazing opportunities.

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.

March 26, 2021March 26, 2021 by Dr. Oliver Massmann

VIETNAM – INVESTORS MUST BID TO DEVELOP SOLAR POWER PROJECTS SOON

In late January 2021, the Ministry of Industry and Trade issued the draft Decision of the Prime Minister guiding the selection of investors implementing solar power projects under the bidding mechanism (“the Draft”). Since Decision 13/2020/QD-TTg applies to grid-connected projects with Commercial Operation Date (“COD”) by 31 December 2020 only, it is expected that the Draft will soon be finalized and become effective so solar energy developers as well as relevant government authorities can have guidelines for projects with COD from 2021 onward.

According to the Draft, the Decision would be applicable to projects with grids connected directly to the national power network. Every 02 years, the Ministry of Industry and Trade (“MOIT”) shall issue a Price Framework for electricity generation in order to determine the ceiling price for bids to select investors of solar power projects with COD in the next 02 years.

Some notable points in the Draft

1. Applicable solar power purchase price: is the price for the connection point proposed by the winning bidder/investor in the bidding dossier (excluding value added tax).

2. Adjustment to investment schedule: if the investor is permitted to adjust the investment schedule and the project’s COD occurs after the commitment date stated in the bidding documents, the applicable electricity price of project is the electricity selling price specified in point (1) above with a cumulative reduction rate of 4% for every 90 days of delay in investment schedule. Project delay time must not exceed 12 months.

3. Bidding procedure: People’s Committees of localities to publish the bidding dossiers. Investors to submit a Bid which includes Technical Proposal and Power Price Proposal. Bid opening will be conducted twice, with Technical Proposal will be opened right after the deadline for submission of bids and investors who satisfy technical requirements will have their Power Price Proposals examined for evaluation.

4. Bidding guarantee: Investors must apply the bid security measure, which is equal to 0.5% of the total project investment, before the bid is closed.

5. Plan for development of renewable energy sources for a period of 05 years: MOIT to coordinate with Vietnam Electricity (“EVN”) and the People’s Committees of localities to organize and approve the plan for development of renewable energy sources for a period of 05 years as well as every two years (“the Plan”). The Plan shall be used as a basis for the selection of investors, regulation of local solar power projects and construction of power transmission systems etc.
Within 6 months since the 2-year Plan is approved, the People’s Committees of the provinces must complete the plan to select investors to develop solar power projects in their localities for the coming 2 years.

Once the Draft comes into effect, the Feed-in tariff (FiT) mechanism will no longer apply to solar energy projects. MOIT has proposed that the same strategy to be executed for wind power projects after 2023. The employment of bidding method will enable for the selection of capable developers through transparent procedures in order to eliminate the quiet prevalent issue of projects running behind schedule for years.

The Vietnam Government has continuously promote the development of renewable energy sources as a feasible and effective solution to counter the country’s ongoing power shortage issue because renewable energy projects can be constructed quickly and promptly for operation in the period of 2021-2023, while taking advantage of the country’s natural potential without relying on imported fuels and is eco-friendly. In other words, there are a lot of rooms for investors looking to participate in renewable energy development in Vietnam.

March 24, 2021 by Dr. Oliver Massmann

Vietnam – Power – Direct Contracting with off-takers other than EVN and Nuclear Power – Interview Dr Oliver Massmann with Energy impact center

Question#1: Can power producers contract directly with off-takers?

Answer#1:

Yes, they can contract directly with authorized off-takers. Please kindly note that at this stage, EVN and its subsidiaries are still main and key authorized wholesale off-takers.

However, there is an exception for authorized off-takers in term of Rooftop Solar System (which refers to solar system in which solar panels are installed on the roof of the construction with no more than 1 MW in power and directly or indirectly connected to power grid with up to 35kV of the off-takers). In brief, authorized off-takers in this case may be other qualified enterprises (i.e., not EVN and its subsidiaries) which purchasing power directly from the Rooftop Solar System producers.

According to the roadmap provided under Decision No. 63/2013/QD-TTg of the Prime Minister dated 8 November 2013, the Vietnam electricity market would be liberalized as follows:

(i) Phase 1: Competitive power generation market (end of the year 2014);

(ii) Phase 2: Pilot competitive power wholesale market (2015-2016) and fully competitive power wholesale market (2017-2021); and

(iii) Phase 3: Pilot competitive retail market (2021-2023) and fully competitive power retail market (after 2023).

In order to implement fully the competitive retail market, other enterprises (in addition to EVN and its subsidiaries) would be allowed to become authorized wholesale off-takers for resale.

Question#2: Can an Independent Power Producer operate a nuclear facility?

Answer#2: Yes, in theory it is possible.

However, please kindly note that a nuclear facility project is a national important level project pursuant to Vietnamese law, which is subject to in principle approval from the National Assembly of Vietnam (“NA”). In addition, considering the investment scale and social-economic impact of a nuclear facility, to our best knowledge, EVN should be the only investor acceptable to the NA. However, frankly, we strongly believe that a Public Private Partnership form (such as BOT IPP) should be considered by Vietnam as an alternative, feasible and practical mechanism suited for running/ owning nuclear power plants in Vietnam. In fact, EVN’s financial capability and nuclear power experience are limited considering EVN and its subsidiaries’ equity and financial sources are not very likely sufficient for many other required and planned power/ grid projects in Vietnam.

FYI, two nuclear power plants in Ninh Thuan (capacity of 4,600 MW) had been approved by the NA on 25 November 2009. EVN was planned to be the sole investor of these two nuclear projects at that time. However, this in principle approval was abolished on 22 November 2016 under Resolution No. 31/2016/QH14 of the NA due to concerns over security, experience, financial capability and environment impact.

On 22 February 2021, the Ministry of Industry and Trade (“MOIT”) has made available to the public the long-awaited draft Power Development Planning VIII (“PDPVIII”). According to the draft PDPVIII, nuclear power projects would only be considered by Vietnam after 2030 until 2045.

Question#3: Can an Independent Power Producer own a nuclear facility?

Answer#3: Yes, in theory it is possible.

Please see our answer#2.

If you have any questions, please kindly let us know.

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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.

March 23, 2021 by Dr. Oliver Massmann

VIETNAM – THE NATIONAL POWER DEVELOPMENT PLANNING 8 WILL NOT BE COMPLETED IN THE CURRENT GOVERNMENT TERM

In a letter issued by Prime Minister Nguyen Xuan Phuc to Deputy Prime Minister Trinh Dinh Dung, Ministry of Industry and Trade Minister Tran Tuan Anh and Central Government Office Minister Chairman Mai Tien Dung dated 18 March 2021, the Prime Minister expressed his concern that since the PDP 8 is still currently incomplete, it is difficult to promptly issue the National Power Development Planning 8 in the current government term. This is because there was a delay in the submission of the Draft PDP 8 by the MOIT, which was originally scheduled for October 2020, yet postponed until January 2021.

The 11th session of the 14th National Assembly of Vietnam will take place in 12 days, starting from 24 March 2021. The key purpose of this session is to elect a new President, Prime Minister and Chairman of the National Assembly of Vietnam. In other words, the fastest that the PDP 8 can be finalized is in April 2021.

In his letter, Prime Minister Nguyen Xuan Phuc highlighted the following points with regard to renewable energy and LNG development specifically:

– To concentrate urgently on the completion of PDP 8 in line with Politburo’s Resolution No.55 on the national energy development strategy orientation of Vietnam until 2030, with a vision to 2045, especially the development goals;

– Planning must ensure the principles of publicity, transparency, avoiding negativity and lobbying or bribery-related conducts. The Ministry of Industry and Trade Minister shall be fully responsible for this;

– The Central Government Office is in charge of written assignment of tasks, specifying the above-mentioned issues.

March 22, 2021March 22, 2021 by Dr. Oliver Massmann

NEW DRAFT DECREE ON PERSONAL DATA PROTECTION AND CROSS-BORDER PROVISION OF DATA THE BASICS AND GUIDANCE ON PRACTICAL HANDLING

The issue of personal data processing is getting hotter than ever in this digital age with increasing cases where large conglomerate or even national governments being accused of utilizing citizen’s personal data without consent. This trend makes no exception in Vietnam.

So far, the Ministry of Public Security (the “MPS”) has finally prepared a Draft Decree on personal data protection (“Draft Decree”). The Draft Decree was shared on 9 February 2021 for public comments. We outline below some key terms and foundation of the Draft Decree:

I. The Basic: New Draft Decree on Personal Data Protection and Cross-Border Provision of Data

1. Definition

Personal data means data about an individual, or relating to the identification or possible identification of a particular individual. Personal data is comprised of two tranches: (i) Basic personal data includes name, date of birth, blood type, marriage status and most notably, data that reflects activity or history of activity of an individual on cyberspace; and (ii) Sensitive personal data concerning political opinion, health, financial details (credit history, income level…), social relationships and data considered by laws as specific and require necessary security measures.

Personal data processing is broadly defined as one or more acts having an impact on personal data, including collection, record, analysis, storage, change, disclosure, access right, extraction, withdrawal, encryption, decryption, delivery, deletion, cancelation and other related acts.

2. Consent and Exception

Generally, the Draft Decree strictly regulates that a data owner must give his/ her consent prior to any processing and disclosing such data, except for the following limited cases:
• As provided by the applicable law;
• For the sake of national security, social order and safety;
• In case of an emergency, a threat to life or seriously affecting the health of that data owner or public health as provided by applicable law; and
• In accordance with the Law on Press and not resulting in economic, honorable, spiritual or material damage to the data owner;
• For investigation and handling an act in violation of laws;
• As allowed by the regulations in international agreements or treaties to which Vietnam is a member; or
• Scientific research or statistics in encrypted form that is to be de-identified and replaced with a code.
However, Article 6.3 of the Draft Decree restricts that it is not permitted to disclose personal data that are of sensitive nature.

When requesting to process personal data, the data owner’s silence or unresponsiveness does not constitute approval. The data owner can agree only to a part of the request or approve the request with attached conditions. The data owner’s consent must be displayed in a format that is printable and copy-able in writing.

With regard to sensitive personal data, the data owner must be fully informed of the nature of the data to be processed. In case of dispute, the burden of proof lies on the data processor.

3. Prior to any processing activity regarding sensitive personal data, the processing party must register this activity with the Personal Data Protection Committee,which is an independent body to be established under the government of Vietnam,except when:
• Personal data is processed to serve the prevention, detection, investigation and handling of violations of the law;
• To carry out health care functions of health facilities and social security of state agencies;
• Serving judicial functions of the Court;
• For research, archival or statistical purposes of state agencies or scientific research organizations

4. Personal data processors have an obligation to notify the data owner prior to their processing, except for the following:
• The data owner has fully agreed with the contents and activities of processing personal data;
• The processing of personal data is regulated by laws, international agreements, international treaties;
• The processing does not affect the rights and interests of the data owner and it is not possible to notify the data owner;
• For scientific research and statistics collection.

5. Cross-border transfer of personal data of Vietnamese citizens must satisfy all following four conditions:
• The data owner consented the transfer;
• Original data is stored in Vietnam;
• Regulations on personal data protection at the receiving country are of equal or higher level compared to Vietnam’s regulations;
• There is a written approval from the Personal Data Protection Committee.

6. Penalties for violation of personal data protection rules:
• Monetary fines range from VND 50 million to VND 100 million;
• Additional penalties: Suspend the processing of personal data up to 3 months, deprive the right to use written consent issued by the Personal Data Protection Committee to process sensitive personal data and cross-border transfer of data, forcible payment of money gained from committing acts of violation.
Multiple violations of personal data protection regulations by a personal data processor in Vietnam can result in a maximum penalty of 5% of total revenue of the data processor in addition to the aforementioned penalties.

II. Preliminary Guidance on Practical Handling

Because the Draft Decree would be amended, thus our analysis and comments hereof is preliminarily made in nature (i.e., subject to change according to the final adopted Decree).

As a rule of thumb, the Draft Decree provides several obligations of the party processing and disclosing personal data, thus it is critical for employers/ enterprises (the “Employer” or “Enterprise”) to consider and adopt all those obligations into its internal rules and contracts/ agreements with third parties.

1. Internal Labor Rules and Labor Contracts

It is required for the Employer to adapt all relevant obligations in relation to personal data over its employees, staff, directors, etc. as well as those in relation to the Employer’s customers, members and their staff into the Employer’s internal labor rules/ codes and collective labor agreement (if any). This is to ensure that its employees and staff shall comply with those personal data related obligations.

Otherwise, there is a very high risk that the Employer shall be fully responsible for the unpermitted processing and disclosing made by its employees without necessary tools to address such violations. In addition, it is advisable to state clearly in the labor contracts with the employees that they must comply with requirements on personal data protection promulgated by the Employer and the applicable law.

In addition, it is advisable to negotiate and agree with the employees in the relevant labor contracts about the possible data processing made by the Employer again such employees’ personal data for the purpose of employment such as tax information, CVs, health information, etc. This would very likely prevent the future claims from the Employer’s employees over unpermitted processing of employees’ personal data. We will advise in detail if desired subject to the final Decree.

2. Contract/ Agreement with Customers/ Members

It is advisable for the Enterprise and Employer to consider, renegotiate and update all current and future contracts/ agreements between the Enterprise and its customers/ members that the Enterprise and Employer is entitled to disclose/ process a specific list of personal data and the customers/ members agree to give consents for such disclosure/ processing. The Enterprise should, with our support if desired, build a clear list and procedure for collecting, storing, disclosing and otherwise processing personal data of customers/ members.

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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.

March 19, 2021March 19, 2021 by Dr. Oliver Massmann

VIETNAM – ROOFTOP SOLAR POWER – NEW PROPOSALS ON THE DEVELOPMENT OF ROOFTOP SOLAR POWER PROJECTS

Since 1 January 2021, there have been no legal instruments in effect guiding the development of rooftop solar power projects in Vietnam (“RTS”). After a period of examining suitable power model, scale and purchase price, in March 2021, the Ministry of Industry and Trade (“MOIT”) submitted the Draft Decision on mechanisms for RTS development for the Prime Minister’s approval.

Notable provisions of the Draft Decision:

1. A rooftop solar power system must satisfy the following conditions:
• Photovoltaic panels must be installed on the roof of construction works;
• Constructions works must have independent functions and purposes (i.e. not constructed to install RTS system);
• RTS system’s capacity must not exceed 01 MWac and 1,25 MWp; and
• RTS system must be connected to a power grid of 35kV or less.

2. Electricity Buyer can be:
(i) Electricity Vietnam (EVN) or an authorized representative of EVN; or
(ii) In case the RTS system is not connected to EVN’s power grids: organizations, individuals purchasing electricity from the Seller/RTS developer or an authorized representative of such organizations and individuals.

In case the Buyer is EVN, the Seller and Buyer must sign the standard Power Purchase Agreement (“PPA”) unless agreed otherwise. The PPA is valid for 20 years from Commercial Operation Date (“COD”) Seller and other independent Buyers can discuss and agree on the order of implementation, installation, connection and maintenance as well as electricity purchase price by themselves in accordance with Vietnam laws.

3. Proposed FiT rate for RTS projects with COD in 2021 and EVN as Buyer:

No. Capacity of the RTS system / Electricity Purchase Price

1 – < 20 kWp: 1.582,16 VND/kWh (Equivalent USCent 6,84/kWh)

2 – From 20 kWp to less than 100 kWp: 1.468,82 VND/kWh (Equivalent USCent 6,35/kWh)

3 – From 100 kWp to 1,250 kWp (less than 01 Mwac): 1.362,41 VND/kWh (Equivalent USCent 5,89/kWh)

4. FiT rate for RTS projects with COD in 2022 and beyond shall be submitted by the Ministry of Industry and Trade for Prime Minister’s approval.

5. RTS system with capacity greater than 100 kWp must self-consume at least 20% of generated capacity per month and is only paid for 80% of total generated amount.

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March 18, 2021 by Dr. Oliver Massmann

VIETNAM – Mergers & Acquisitions Country Comparative Guide

1. What are the key rules/laws relevant to M&A and who are the key regulatory authorities?
There is no single document regulating M&A activities in Vietnam. The relevant rules are contained in several laws and regulations governing general corporate and investment issues. These laws and regulations include:
· Investment Law No. 61/2020/QH14 and Enterprise Law No. 59/2020/QH14 issued by the National Assembly on 17 June 2020, and their guiding documents, namely Decree No. 01/2021/ND-CP and Decree No. 118/2015/ND-CP. These laws set out the general legal framework, conditional sectors and investment procedures. The authorities responsible for enforcing these laws are the:
· Prime Minister;
· local People’s Committee;
· Ministry of Planning and Investment;
· Ministry of Industry and Trade;
· Ministry of Health; and
· Other ministries depending on the business activities of the target companies.
· Law on Securities No. 54/2019/QH14 issued by the National Assembly on 26 November 2019, and its implementing documents, in particular Decree No. 155/2020/ND-CP issued by the Government on 31 December 2020. This Law regulates the acquisition of shares in public and private companies in Vietnam, including public tender offers. The authorities responsible for enforcing the Law include the:
· State Securities Commission (SSC);
· Vietnam Securities Depository Centre; and
· Ministry of Planning and Investment.
· Competition Law No. 23/2018/QH14 issued by the National Assembly on 12 June 2018, which is enforced by the Vietnam Competition Authority (VCA). Under this Law, any M&A transaction that causes or may likely cause substantial anti-competitive effects on the Vietnamese market will be prohibited.
· Foreign exchange regulations. An investment capital account in Vietnamese dong is a condition, among others, for capital contribution/share purchase or subscription. These regulations are enforced by banks and the State Bank of Vietnam.
· Vietnam’s WTO Schedule of Specific Commitments on Services. This sets outs the ratio of shares that can be owned by foreign investors in various specific sectors.
· Other specific regulations for the acquisition of shares in Vietnamese companies operating in special sectors, such as banking and finance, insurance, and so on. These sectors are highly regulated by the relevant authorities.

2. What is the current state of the market?
Vietnam has remained an attractive destination for foreign investors: In 2020, the total FDI capital to Vietnam was USD28,53 billion. Investment in the form of capital increasement is the only increasing proportion of the total FDI that grew by 10,6%. Foreign investors contributed capital to domestic enterprises mainly in the field of processing technology and manufacturing (USD 13,6 billion) as well as water and energy sector (USD 5,1 billion).
Main investors still come from Japan, Korea, Singapore, and China. The retail, consumer goods, and real estate are also very active, and investors tend to focus on leading companies as they have a big market share and strong brand value.
The main drivers of Vietnam’s M&A market are:
· Privatization of state-owned enterprises (SOE). According to Resolution No. 01/NQ-CP issued by the Government in 2021, one of the key tasks in 2021 was to continue strengthening the restructuring, equitisation and divestment of SOEs. The government also aims to publicize equitized enterprises that are eligible but are not listed nor registered for trading on the stock market.
· Trade liberalization as a result of CPTPP, EU- Vietnam FTA, and so on.
· Resolution No. 42 on pilot program of handling bad debts of credit institutions is also the main driving force of M&A in real estate sector as bad debts in real estate sectors accounts for a high percentage of the total bad debts in Vietnam’s market.
Major deals:
· In the middle of June 2020, according to VinGroup, a group of investors led by KKR, including Temasek, spent VND 15,100 billion VND (USD 650 million) to buy more than 200 million shares of VHM, equivalent to 6 % shares of VinHomes (a subsidiary of VinGroup).
· On 9 April 2020, FWD Group announced its acquisition of Vietcombank Cardif Life Insurance Company (VCLI), a joint venture between Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and BNP Paribas Cardif.
· At the end of June 2020, after approval by the State Bank, Orient Commercial Joint Stock Bank (OCB) successfully issued 86.68 million shares to Aozora Bank from Japan, through which Aozora officially became to become a foreign shareholder owning 15% of the capital. The estimated value is more than VND 3,100 billion.
OCB also officially increased its charter capital from VND 8,767 billion to VND 10,959 billion in October 2020.
· KEB Hana became a major shareholder of Vietnam Development Bank (BIDV) by acquiring 603.3 million shares, equivalent to 15% of BIDV’s capital, in November 2019
· Bao Viet Group has completed the private issuance of more than 41 million shares, approximately 6% capital, for Sumitomo Life Insurance Company (Sumitomo Life), a strategic shareholder from Japan.
· In early April 2020, Stark Corporation (Thailand) bought 100% of the shares (USD 240 billion) of Thinh Phat Electrical Cable Joint Stock Company (Thipha Cables) and JSC Non-ferrous Metal and Copper Plastic JSC. Vietnam (Dovina).
· In November 2019, Thai WHA Utility and Power Company purchased 34% of equity in Duong River Surface Water JSC.
· Mitsui & Co. (Japan) bought 35.1% of Minh Phu Seafood Corporation’s capital.
· In April 2019, DHG Pharma officially became a subsidiary of Taisho after this Japanese unit raised its holdings to 50.78% of total shares.

3. Which market sectors have been particularly active recently?
· Processing technology and manufacturing
· Renewable energy
· Water and waste treatment
· Pharmaceuticals
· Consumer retails

4. What do you believe will be the three most significant factors influencing M&A activity over the next 2 years?
The country’s deeper and wider integration into the world’s economy is offering new opportunities for M&A activities.
Another factor includes the high pressure faced by the government to privatise state-owned enterprises to meet requirements under signed trade pacts, especially the EU – Vietnam Free Trade Agreement, which came into force on 1 August 2020.
Encouraging signs for foreign investment include:
· Reformed policies to allow wider access to foreign investors.
· ASEAN Economic Community single market and production base.
· The conclusion of free trade agreements (FTAs), including the EU – Vietnam FTA and The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
· Vietnam’s super rich population is growing faster than anywhere else and is on track to continue leading the growth in the next decade.
· Equitization of state-owned enterprises will speed up.
The introduction of the new Investment Law, Enterprise Law, Resolution No. 42 on handling bad debts and other laws and policies are creating an improved legal environment for investment and trade in general, and the M&A market in particular. However, the following factors also affect M&A transactions:
· Divergent interpretations and implementations by local licensing authorities of international treaties such as Vietnam’s WTO Commitments.
· Different licensing procedures applied to different types of transactions (for example, for foreign invested companies and domestic companies, public companies and private companies, and for buying state-owned shares or private shares).
Although legal and governance barriers, along with macro instability and the lack of market transparency are still the greatest concerns for investors, M&A deals in Vietnam are still expected to be one of the key, effective channels for market entry.
The major expected trends in the Vietnam M&A market include:
· Bank restructurings.
· Acquisitions and anti-acquisitions, particularly in the real estate sector.
· Growing Korean, Japanese and Thai investment in Vietnam through M&A transactions.
· Reform of SoEs.

5. What are the key means of effecting the acquisition of a publicly traded company?
In Vietnam, the term public company refers to a joint stock company that meets one of the following conditions:
a) The company has a contributed charter capital of at least 30 billion VND and at least 10% of the voting shares are being held by at least 100 non-major shareholders; or
b) The company has successfully made its IPO by registration with SSC.
The most common means of obtaining control over a public company are as follows:
· The acquisition of shares/charter capital through:
· buying shares/charter capital from the existing shareholders of the company;
· buying shares/charter capital of a listed company on the stock exchange; and
· public share purchase offer.
· Through a merger. The 2020 Law on Enterprises sets out the procedures for company mergers by way of a transfer of all lawful assets, rights, obligations and interests to the merged company, and for the simultaneous termination of the merging companies.
· Through the acquisition of assets.
There are restrictions on the purchase of shares/charter capital of local companies by foreign investors in certain sensitive sectors. In addition, the law is silent on merger or assets acquisition (for example, business spin-off) transactions where a foreign investor is a party. Regarding other assets acquisition transactions, if the asset is a real property, foreign ownership right will be restricted according to real estate laws.
Securities of public companies must be registered and deposited at the Vietnam Securities Depository Centre before being traded.
Depending on the numbers of shares purchased, an investor can become a controlling shareholder. Under the Vietnam Law on Securities, a shareholder that directly or indirectly owns 5% or more of the voting shares of an issuing organisation is a major shareholder. Any transactions that result in more than 10% ownership of the paid-up charter capital of the securities company must seek approval of the State Securities Commission (SSC).

6. What information relating to a target company will be publicly available and to what extent is a target company obliged to disclose diligence related information to a potential acquirer?
There is no legal requirement that a bidder must keep information about the bid a secret until the bid is made. However, this can be considered a contractual violation if the parties to the transaction have committed to secrecy in writing. Leaking information before the finalisation of the bid can lead to:
· An increase of the target’s shares price.
· Difficulties in negotiating the terms of the transaction.
· Competition in the market.

7. To what level of detail is due diligence customarily undertaken?
Before officially contacting the potential target, the bidder conducts a preliminary assessment based on publicly available information. The bidder then contacts the target, expresses its intention of buying shares/subscribing for its shares and the parties sign a confidentiality agreement before the due diligence process. The confidentiality agreement basically includes confidentiality obligations in performing the transaction. The enforcement of confidentiality agreements by courts in Vietnam remains untested.
A bidder’s legal due diligence usually covers the following matters:
· Corporate details of the target and its subsidiaries, affiliates and other companies that form part of the target.
· Contingent liabilities (from past or pending litigation).
· Employment matters.
· Contractual agreements of the target.
· Statutory approvals and permits regarding the business activities of the target.
· Insurance, tax, intellectual property, debts, and land-related issues.
· Anti-trust, corruption and other regulatory issues.

8. What are the key decision-making organs of a target company and what approval rights do shareholders have?
It is necessary to obtain the approval of the general meeting of shareholders to carry out a tender offer if the acquisition is conducted by way of a transfer of shares from an existing shareholder and results in a 25% ownership or more of the voting shares in a public company. Such approval is also required when there is a share transfer of a founding shareholder of a joint stock company within three years from the issuance of the Enterprise Registration Certificate. The approval normally includes the:
· Number of shares offered.
· Price of the offer.
· Conditions of the offer.
There is no statutory requirement that prohibits a target board from soliciting or recommending other offers before completion of a transaction. However, in practice, the parties can agree on such restrictions.

9. What are the duties of the directors and controlling shareholders of a target company?
Shareholders of a public company shall:
a) Have the right to equal treatment;
b) Have accessibility to information periodically and irregularly published by the company as prescribed by law;
c) Have their the lawful rights and interests protected; have the right to request suspension or cancellation of a Resolution or decision of the General Meeting of Shareholders or Board of Directors as prescribed by the Law on Enterprises;
d) Not take advantage of the major shareholder’s status to influence rights and interests of the company and other shareholders as prescribed by law and the company’s charter; disclose information as prescribed by law;
dd) Have other rights and obligations prescribed by law and the company’s charter.

10. Do employees/other stakeholders have any specific approval, consultation or other rights?
There is no requirement under Vietnamese law that the employees must be consulted about the offer. However, if a layoff is to be conducted, the employer must:
· Prepare a labour usage plan.
· Consult with the employee representative.
· Notify the competent labour authority on the implementation of the labour usage plan.

11. To what degree is conditionality an accepted market feature on acquisitions?
A takeover offer usually contains the following conditions:
· The terms and conditions of the offer apply equally to all shareholders of the target.
· The relevant parties are allowed full access to the tender information.
· The shareholders have full rights to sell the shares.
· Applicable laws are fully respected.
An offer can also be subject to conditions precedent. Conditions precedent are set out in the share sale and purchase agreement or the capital contribution transfer agreement. There is no specific restriction on conditions precedent other than the requirement that they cannot be contrary to law and conflict with social ethics (although the legal definition of social ethics is unclear). The most common conditions precedent are:
· Amendments to the charter/relevant licence of the target.
· Obtaining necessary approvals to conduct the transaction.
· Changes to the target’s management body.
Payment of the contract price will only be made after the conditions precedent are met.

12. What steps can an acquirer of a target company take to secure deal exclusivity?
The acquirer can enter into an exclusivity agreement, terms sheet or letter of intent or MOU that includes a legally binding exclusivity clause. The acquirer can also make use of deal protection mechanisms such as:
· No Shop Provision: included in an agreement between the seller and the buyer that prevents the latter from seeking purchase proposals from third parties in a time frame after the signing of the Letter of Intent
· Termination or Breakup Fees: if the seller accepts a bid from a third party, then they will have to pay the original buyer a fee equivalent to the breakup fee
· Lock-ups: seller is given part-ownership of stock or important assets in the target company
· Stock options: allow the buyer to purchase a number of shares in the target company if a particular pre-agreed event occurs

13. What other deal protection and costs coverage mechanisms are most frequently used by acquirers?
Besides the aforementioned, a deal protection mechanism an acquirer can make use of is matching or topping rights where the seller has to notify the bidder of any third party proposal, and the seller is entitled to match or better such a proposal.
Cost coverage mechanisms include:
· Locked Box mechanism: where the seller and buyer agree on a net purchase price upfront in the Sales Purchase Agreement and this price remains effective until the financial closing/completion date of the transaction – recommended for fast-growing target companies
· Completion Account mechanism: base purchase price, plus cash, less debt, plus excess or less shortfall in working capital

14. Which forms of consideration are most commonly used?
Under Vietnamese law, shares can be purchased by offering cash, gold, land use rights, intellectual property rights, technology, technical know-how or other assets. In practice, acquisitions are most commonly made for cash consideration.

15. At what ownership levels by an acquiror is public disclosure required (whether acquiring a target company as a whole or a minority stake)?
The offer timetable is as follows:
· The bidder prepares registration documents for its public bid to purchase shares.
· The bidder sends the bid registration documents to the State Securities Commission (SSC) for approval and, at the same time, sends the registration documents to the target.
· The SSC reviews the tender documents within seven days.
· The bidder must publicly announce the tender offer within seven days from receipt of the State Securities Commission’s opinion regarding the registration of the tender offer
· The board of the target must send its opinions regarding the offer to the SSC and the shareholders of the target within 14 days from receipt of the tender documents.
· The bid is announced in the mass media (although this is not a legal requirement).
· The length of the offer period is between 30 and 60 days.
· The bidder reports the results of the tender to the SSC within 10 days of completion.
Companies operating in specific sectors (such as banking, insurance, and so on) can be subject to a different timetable.

16. At what stage of negotiation is public disclosure required or customary?
The bidder must publicly announce the tender offer within seven days from receipt of the State Securities Commission’s opinion regarding the registration of the tender offer

17. Is there any maximum time period for negotiations or due diligence?
There are no limitations (maximum or minimum) under Vietnam law on the time period in which the parties are required to conduct negotiations and/or due diligence.

18. Are there any circumstances where a minimum price may be set for the shares in a target company?
There are no general requirements under Vietnam law that set certain minimum price for shares in a target company.

19. Is it possible for target companies to provide financial assistance?
There is no general prohibition under Vietnam law on target companies providing financial assistance to acquirers. However, such provision of financial assistance to acquirers may result in breach of fiduciary duties of directors of the target company. In this regard, the directors of the target company should be mindful of their duties to the target company because, providing financial assistance to an acquirer may be considered to be harming the target company while benefiting the majority shareholders of the target company or the acquirer, depending on the nature of such assistance.

20. Which governing law is customarily used on acquisitions?
Buyer and sellers are free to decide on the governing law of the transaction agreements. Nevertheless, in deals that involve a Vietnamese target company, the governing law is customarily Vietnam laws.

21. What public-facing documentation must a buyer produce in connection with the acquisition of a listed company?
Shares can be bought before the bid announcement provided that the number of shares sold does not exceed the thresholds requiring a tender offer. A tender offer is required in the following cases:
· Purchase of a company’s circulating shares that result in a purchaser, with no shareholding or less than a 25% shareholding, acquiring a 25% shareholding or more.
· Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% or more shareholding, acquiring a further 10% or more of circulating shares of the company.
· Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% shareholding or more, acquiring a further 5% up to 10% of currently circulating shares of the company within less than one year from the date of completion of a previous offer.
There is no guidance on building a stake by using derivatives. In addition, the bidder cannot purchase shares or share purchase rights outside the offer process during the tender offer period.
The bidder must publicly announce the tender offer in three consecutive editions of one electronic newspaper or one written newspaper and (for a listed company only) on the relevant stock exchange within seven days from the receipt of the State Securities Commission’s (SSC’s) opinion regarding the registration of the tender offer. The tender offer can only be implemented after the SSC has provided its opinion and following the public announcement by the bidder.

22. What formalities are required in order to document a transfer of shares, including any local transfer taxes or duties?
Depending on whether the seller is an individual or a corporate entity, the following taxes will apply:
· Capital gains tax. Capital gains tax is a form of income tax that is payable on any premium on the original investor’s actual contribution to capital or its costs to purchase such capital. Foreign companies and local corporate entities are subject to a corporate income tax of 20%. However, if the assets transferred are securities, a foreign corporate seller is subject to corporate income tax of 0.1% on the gross transfer price.
· Personal income tax. If the seller is an individual resident, personal income tax will be imposed at the rate of 20% of the gains made, and 0.1% on the sales price if the transferred assets are securities. An individual tax resident is defined as a person who:
· stays in Vietnam for 183 days or longer within a calendar year;
· stays in Vietnam for a period of 12 consecutive months from his arrival in Vietnam;
· has a registered permanent residence in Vietnam; or
· rents a house in Vietnam under a lease contract of a term of at least 90 days in a tax year.
If the seller is an individual non-resident, he is subject to personal income tax at 0.1% on the gross transfer price, regardless of whether there is any capital gain.
Payment of the above transfer taxes is mandatory in Vietnam.

23. Are hostile acquisitions a common feature?
Hostile bids are neither defined nor regulated under Vietnamese law. There is also no express prohibition on this type of transaction. Recommended bids often outnumber hostile bids due to limited publicly available information about the target and reluctance to disclose information.
However, the number of hostile bids in Vietnam has been increasing since 2011, for example:
· Singapore-based Platinum Victory Ptl Ltd became Refrigeration Electrical Engineering Corp (REE)’s largest shareholder, accumulating a 10.2% interest in the company.
· Chile’s CFR International Spa acquired a 46% stake in healthcare equipment company Domesco Medical Import-Export Co (DMC), making it the first foreign deal in the pharma sector.
During 2010 and 2011, there were two takeover deals in Vietnam:
· The acquisition of Ha Tay Pharmacy in 2010.
· The acquisition of Descon, a construction company, in 2011. Binh Thien An Company acquired a 35% shareholding in Descon, officially took over Descon and made significant changes to its management body.
The Government’s Decree No. 155/2020/ND-CP lifted the foreign equity cap regarding public companies, with some exceptions (a 49% cap was previously in force). Specifically, the rules on foreign ownership in a listed company can be generally classified into the five following groups:
· If Vietnamese law, including international treaties, provides for a specific ownership cap, the maximum foreign ownership (MFO) must not exceed such a cap (group 1).
· If Vietnamese law treats a business activity as conditional on foreign investment (pursuant to the list of conditional sectors under the Investment Law) but does not yet provide any ownership limit, MFO must not exceed 50% (group 2).
· In cases that do not fall within group 1 and group 2, MFO can be up to 100% (group 3).
· In case a public company operates in multiple industries and trades with different regulations on the foreign ownership rate, the foreign ownership rate must not exceed the lowest level in the industries and trades with determined foreign ownership rates (group 4).
· Where a public company decides on the maximum foreign ownership ratio lower than the rate specified above, the specific rate must be approved by the General Meeting of Shareholders and included in the company’s charter.
This lift of the foreign equity cap can introduce more hostile bids in Vietnam.

24. What protections do directors of a target company have against a hostile approach?
There are no provisions regulating hostile bids under Vietnamese law.

25. Are there circumstances where a buyer may have to make a mandatory or compulsory offer for a target company?
A tender offer is required in the following cases:
· Purchase of a company’s circulating shares that result in a purchaser, with no shareholding, or less than a 25% shareholding, acquiring a 25% shareholding.
· Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% or more shareholding, acquiring a further 10% or more of circulating shares of the company.
· Purchase of a company’s circulating shares that results in a purchaser (and affiliated persons of the purchaser), with a 25% shareholding or more, acquiring a further 5% up to 10% of currently circulating shares of the company within less than one year from the date of completion of the previous offer.

26. If an acquirer does not obtain full control of a target company, what rights do minority shareholders enjoy?
Minority shareholders continue to enjoy full rights as shareholders, such as voting rights and rights to receive distributions of dividends. However, as shareholders may only participate in the management of a company indirectly through a shareholders’ resolution, minority shareholders have limited right to affect the management of the company.
Under Enterprise Law 2020, a shareholder or group of shareholders that holds at least 5% of the ordinary shares (or a smaller ratio specified in the company’s charter) shall have the rights to:
a) Access, extract the minutes of meetings, resolutions and decisions of the Board of Directors, mid-year and annual financial statements, reports of the Board of Controllers, contracts and transactions subject to approval by the Board of Directors and other documents except those that involve the company’s business secrets;
b) Demand that a GMS be convened in case
· the Board of Directors seriously violates the shareholders’ rights, obligations of executives or issues decisions ultra vires;
· other cases prescribed by the company’s charter.
c) Request the Board of Controllers to investigate into specific matters relevant to the company’s administration where necessary

27. Is a mechanism available to compulsorily acquire minority stakes?
If the bidder acquires 80% or more of the shares of a public company, it must buy the remaining shares of the same type of other shareholders (if they so request) at the bid price within 30 days. However, there are no “squeeze-out” rights that can force the remaining shareholders to sell their shares.

March 11, 2021 by Dr. Oliver Massmann

VIETNAM – TOBACCO PRODUCTION AND DISTRIBUTION UNDER LOCAL AND INTERNATIONAL REGULATIONS

In Vietnam, the Government holds a monopoly on the importation of cigarettes and cigars, except import for sales as duty-free goods. The market size remains stable with over 100 billions cigarettes per year since 2015, in which around 60% is Vietnamese products, around 22% is foreign products made in Vietnam and 18% is illegally imported products. As of 2018, the cigarettes and cigars industry has contributed USD 450 millions to the State budget

There are currently 16 Vietnamese cigarette manufacturers with Vietnam National Tobacco Corporation (Vinataba) being a prominent unit in the production, distribution and trading scene. Additionally, there are two foreign-invested joint ventures between Phillip Morris and Vinataba, and British American Tobacco and Vinataba that engaged in the production of tobacco and shredded tobacco products respectively.

Requirements for cigarette production

Under Law on Investment 2020, cigarette production is a conditional business line, meaning investors have to fulfil requirements imposed by the Government regarding licensing procedures before commencement of operation. Entities manufacturing, buying and selling tobacco products, processing tobacco materials, buying and selling tobacco materials and investing in growing tobacco plants must obtain specific licenses for such activities according to regulations.

In case of merger or joint venture with a local company, investors need to acquire Decision on Investment Policy approved by the Prime Minister to produce cigarettes.

International regulations on Vietnamese tobacco products

EU-Vietnam Free Trade Agreement: After 15 years from 1 August 2020, EU will remove import taxes on Vietnamese tobacco products and vice versa.

Vietnam-US Bilateral Trade Agreement and Vietnam-Japan Agreement on Investment Encouragement and Protection: Vietnam eliminated export requirements applicable to tobacco products for investors coming from USA and Japan.

WTO schedule: there’s currently no commitments made by Vietnam to WTO members regarding the distribution of tobacco products.

Tariff quotas from the Eurasian Economic Union in 2020, 2021 and 2022 for tobacco is 500 tons per year.

***

March 1, 2021 by Dr. Oliver Massmann

VIETNAM – THE RISING DIGITAL ECONOMY – WHAT YOU MUST KNOW

While other South East Asian countries are suffering reversed economic growth in 2020 due to Covid-19, Vietnam has recorded the highest ever level of GDP growth – even higher than China and USA. One of the contributing factors to this success is the expansion of the digital economy – which is growing at double digits (USD 14 billion as of 2020 and predicted for USD 52 billion by 2025). In the span of 4 years between 2016 and 2020, online selling-related queries in Vietnam has increased six-fold. The country also sees seventy-three percent of YTD monthly active user growth for select mobile banking apps and 46% YoY growth in the e-Commerce sector.

With one of the fastest growing online population in the world, wide-ranging online supply and remarkably supportive ecosystem, Vietnam’s internet economy is stronger than ever and should be looked out for.

The Vietnam Government has implemented numerous laws and regulations in recent years with the goal of turning Vietnam into a full-fledged digital economy during the Fourth Industrial Revolution, such as Law on Cyber Security No. 86/2015/WH13 or Decision 749/QD-TTg dated 30 June 2020 on National Digital Transformation Program to 2025. The policies focus on the establishment of e-government to enhance transparency and speed up licensing works for enterprises, the legalization of e-Commerce activities such as AI development, online ride hailing or non-cash payment etc. At the same time, stricter measures in information management have been introduced, with the notable Decree 15/2020/ND-CP dated 3 February 2020 allowing police authorities to investigate and sanction individuals and entities distributing false or defaming information on social networks.

For investors interested in the e-Commerce sector of Vietnam, it is crucial to know that the government recognizes e-commerce transactions (except those conducted via social networks) as having the same degree of legal effectiveness and enforceability as written contracts. There are three categories of e-Commerce:

(a) Business to customer (“B2C”) website which is created for commerce activities of the website’s owner only;
(b) Business to business (“B2B”) website (like Tiki, Lazada, Shopee) which is created for commerce activities of other individuals or organizations; or
(c) Digital Application (“Apps”) which is installed on electronic devices and connected to a network for commerce transactions.

Circular 59/2015/TT-BCT on e-commerce via Apps and Circular 47/2014/TT-BCT on e-commerce via B2C and B2B websites provide that owners of websites or Apps must first satisfy all legal requirements on conditional business in relation to commerce activities to be provided via such platforms. In other words, investors must first assess whether the business lines they intend to engage in require them to obtain specific licenses/certificates or approval from government authority prior to commencement of business. For instance, to provide Food provision service, investors must acquire Certificate on Food Safety. In the next step, investors must also comply with specific conditions for e-Commerce business. One of the basic phases is registration.

Depending on Categories of E-Commerce, the service providers are required to make an official notification or registration on their E-Commerce to state authority as follows:

(a) B2C Websites, the service provider is responsible to lodge a notification of B2C website via the E-commerce portal of Ministry of Industry and Trade (“MOIT”) http://www.online.gov.vn/. Within 03 days from the date of receiving a complete set of required information, MOIT will send an acknowledgement on the notification of the service provider.
(b) B2B Websites, the service provider is responsible to lodge an application for registration of B2B website via the E-commerce portal of Ministry of Industry and Trade (“MOIT”) http://www.online.gov.vn/.
(c) Mobile Applications, Similar to B2C and B2B Websites, the service provider is responsible to lodge a notification of Mobile Applications used for their commerce activities or to lodge an application for registration of Mobile Applications used for commerce activities of other individuals or organizations.

The Vietnam Government’s continuous and visible effort in attracting foreign investment as well as transforming the country into a digital economy, if not to say, a developed one comparable to Singapore, should serve as a green flag to investors interested in developing digital services in Vietnam.