To replace Resolution No. 54/2017/QH14 of the National Assembly dated 24 November 2017 (“Resolution 54”), Resolution No. 98/2023/QH15 was recently passed by the National Assembly on 24 June 2023 with effectiveness from 1 August 2023 (“Resolution 98”). At a glance, Resolution 98 sets out several breakthrough mechanisms for the development of Ho Chi Minh City on a wide variety of aspects. It is expected that, should the mechanisms be implemented properly in practice, Ho Chi Minh City will be “unleashed” and its development in the future will be worth watching. We would like to point out some notable mechanisms of the Resolution 98 as follows:
Overview
Compared to Resolution 54, the number of mechanism offered by Resolution 98 is relatively more than its precedessor. In total, there are 44 mechanisms menionted in Resolution 98 in 7 sectors being (i) investment management; (ii) State finance and budget; (iii) urban and natural resources and environment management; (iv) attracting strategic investors; (v) science and technology management and innovation; (vi) organizational structure of the City; and (vii) organizational structure of Thu Duc City.
Investment management
According to Article 4.1 of Resolution 98, public investment capital is piloting to be allocated to support poverty reduction and create jobs. The lending policy for this mechanism is assigned by the People’s Committee to the Bank for Social Policies – Ho Chi Minh City branch to implement to support poor households, near-poor households, and households that have just escaped poverty, and to create jobs.
On another note, Ho Chi Minh City will implement a pilot program of urban planning and transit-oriented development (TOD) to utilize the open spaces along the Ring Road 3. To implement this program, local budget will be used to implement compensate, support and resettle for investment projects under a separate urban design plan, urban planning project in the vicinity of railway stations as approved by competent authorities, in the vicinity of intersections along the Ring Road 3 in the territory of the city for land recovery, urban embellishment and development, resettlement, creation of land fund for auction and selection of investors in development investment projects of urban, commerce and services in accordance with the law.
Regarding the public-private partnership investment projects (“PPP projects”), Ho Chi Minh City is set to apply the PPP form for the projects in sports and culture sector. Moreover, BOT contracts can be used by the City to upgrade, expand and modernize any existing road works in accordance with the approved planning for the main urban streets, elevated roads. BT Contracts are also brought back in Resolution 98 as a mean to utilize public investment capital
State finance and budget
With respect to the budget of the City, Resolution 98 provides that there will be an amount of 2% to 4% of the toal budget expenditure of districts for prevention, combat and overcoming of consequences of natural disasters and epidemics, incidents, disasters, hunger relief, important tasks for national defense and security and other necessary tasks. The Chairman of the People’s Committee of urban district is assigned to decide to spend from the unallocated amount and is obliged to periodically report to the City People’s Committee. Meanwhile, for the implementation of regional and inter-regional road traffic projects and works located within the administrative boundaries between the City and other locality, the City People’s Council will decide the use of the City’s budget for such projects.
To manage the City’s budget, Ho Chi Minh City Finance and Investment State-Owned Company (“HFIC”) – a wholly state-owned company – is assigned to implement the function of a local investment fund. It is provided under Resolution 98 that revenue from the equitization of 100% State-owned companies represented by the City People’s Committee will be arranged by the City People’s Council to increase the charter capital of HFIC. HCMC is also allowed to allocate public investment capital to provide interest rates support to projects that receive loans from the HFIC in the priority sectors for socio-economic development in the City.
Resolution 98 introduces the pilot financial mechanism for implementation of measures to reduce greenhouse gas emissions under the carbon credit exchange and offset mechanisms with the following rules (i) Carbon credits generated from programs and projects under the exchange and offset mechanism of carbon credits invested from the capital of the City’s budget are traded with domestic and international investors; (ii) revenue from carbon credit transactions is a source of revenue wholly enjoyed by the City’s budget; (iii) the City People’s Council decides to use the revenue from carbon credit transactions for programs and projects to respond to climate change, develop green economy, digital economy, circular economy in the City.
As for the energy-related issue of the headquarters of administrative agencies, public administrative units, offices of agencies and units, the City People’s Committee retains the right to decide to install rooftop solar power systems to provide electricity for the operation of the headquarters. The City People’s Committee will organize the installation and management of the solar power system to ensure the appropriate elements in terms of aesthetics, architecture and regulations of relevant laws.
Urban and natural resources and environment management
According to Article 6 of Resolution 98 on the regulations on social housing, detailed planning tasks are regulated to be formulated concurrently with detailed planning projects; social housing land fund can be arranged withint the cope of commercial housing project or have the planning approved, arrange the social housing land fund in another location of equivalent size, outside the scope of the commercial housing project; specific types of land for social housing development are also regulated.
Attracting strategic investors
The list of prioritized business lines for attracting strategic investors to the City includes (i) investment in construction of innovation centers, research and development (R&D) centers; investment in research and support of high technology transfer in the fields of information technology, biotechnology, automation technology, new material technology, clean energy with an investment capital from VND 3,000 billion; (ii) investment in projects in the field of semiconductor integrated circuit industry, design technology, component manufacturing, integrated electronic circuit (IC), flexible electronics (PE), chip, new battery technology, new materials, clean energy industry with an investment capital from VND 30,000 billion VND; (iii) investment in the construction project of Can Gio international transshipment port according to the master plan with an investment capital from VND 50,000 billion.
Meanwhile, a strategic investor must satisfy one of the following conditions (a) having a charter capital of VND 500 billion or more when implementing an investment project specified at point (i) above and having investment experience in projects in a similar sector with a total investment capital of VND 2,000 billion or more; (b) having a charter capital of VND 5,000 billion or more or having total assets of VND 25,000 billion or more when implementing an investment project specified point (ii) above and having investment experience in projects in a similar sector with a total investment capital of 10,000 billion VND or more; (c) having a charter capital of VND 9,000 billion or more when implementing an investment project specified at point (iii) above and having investment experience in a similar sector with a total investment capital of VND 25,000 billion or more. Further, the strategic investor must have a written commitment to training and developing human resources, meeting the conditions for ensuring national defense, security and environmental protection as prescribed by Vietnamese law.
In case a prioritized project is registered and a strategic investor is chosen, such strategic investor is entitled to include in deductible expenses to determine taxable income for research and development (R&D) activities equal to 150% of the actual cost of this activity when calculating corporate income tax and to enjoy the priority regime for customs procedures in accordance with the relevant laws.
Science and technology management and innovation
To support innovation and start-up activities, innovative start-ups, according to Resolution 98, is exempted from corporate income tax (CIT) for a period of 05 years from the time of arising of payable income tax. Further, individuals and organizations implementing business in relation to the transfer of contributed capital or the right to contribute capital to innovative start-up enterprises in the City are also exempted from personal income tax (PIT) and CIT for such business. It is also regulated in Resolution 98 that, During the implementation of the Resolution, experts, scientists, people with special talents, creative start-up individuals working at innovative start-up enterprises, science and technology organizations, innovation hubs and intermediary organizations supporting innovative start-ups in the city are exempt from PIT for a period of 05 years for incomes from salaries and wages
Organizational structure of the City
To improve the living standard of its citizen, the City People’s Council decided to establish Department of Food Safety, which is a specialized agency under the City People’s Committee with its functions, tasks, powers and organizational structure being defined on the basis of transferring the function of state management of food safety, inspection, examination and handling of administrative violations on food safety, the issuance of certificates of quarantine of animal products out of the city from the Department of Health, the Department of Agriculture and Rural Development, the Department of Industry and Trade to the Department of Food Safety.
According to Resolution 98, the People’s Committee of districts in HCMC; and wards, communes, and towns with a population of 50,000 and above will have no more than three Vice Chairpersons.
Organizational structure of Thu Duc City
To bring the concept of “city within city” to life, Resolution 98 sets out regulations on the structre and operation of the People’s Committee of Thu Duc City. The People’s Council of Thu Duc City will establish the Urban Committee under the People’s Council of Thu Duc City and will have no more than 02 Vice Presidents and no more than 08 full-time delegates. People’s Committee of Thu Duc City has no more than 04 Vice Chairmans.
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Please do not hesitate to contact Dr. Oliver Massmann at omassmann@duanemorris.com in case you need more analysis on Resolution 98. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.