All posts by Giles T. Cooper

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

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

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

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

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

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

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

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

Region I (all Provinces except Region II Provinces)

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

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

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

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

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

Compulsory Social Insurance for expats working in Vietnam – who’s in and who’s out?

Ever since the Law on Social Insurance[1] was issued in late 2014, employees and employers have been on notice that “expat employees working in Vietnam” will be required to participate in the State’s compulsory social insurance (SI) regime “from 2018”.  2018 came however with no further clarity around the details.

In October 2018, the Government issued Decree no. 143/2018/ND-CP[2] guiding the Law on SI and providing that “Employees who are expats working in Vietnam shall be required to participate in the SI program if they obtain work permits, practicing certificates, practicing licenses issued in Vietnam, indefinite-term employment contracts or employment contracts valid for at least one year with employers in Vietnam.” (Article 2.1). Also in the same decree, several exceptions from SI participation are listed, including intra-company transferees and expats reaching retirement age.

According to the statistics of the Ministry of Labor, War Invalids and Social Affairs (“MOLISA”), 64% of applicable expats working in Vietnam joined the SI scheme under Decree 143[3]. Having said that, there remains confusion amongst both employers and expats employees as to the subjects of application of the law.

Finally, on 18 March 2019, MOLISA issued Official Letter no. 1064/LDTBXH-BHXH[4] clarifying the issue of exactly which expats will be required and not required to participate into the Vietnam-law SI scheme.

Specifically, expat employees working in Vietnam must satisfy all of the following criteria in order to be applicable for the SI scheme:

SI ELIGIBILITY CONDITIONS FOR EXPATS

 

NOTES
Nationality Non-Vietnamese nationals working in Vietnam An overseas Vietnamese national entering Vietnam to work via his/her passport of a foreign country would be deemed as a non-Vietnamese national working in Vietnam.

 

Licenses Work permits, practicing certificates, practicing licenses issued by the competent authority in Vietnam

 

As a side note, a work permit issued for
an expat entering Vietnam to supply services to a Vietnam-based entity would not fall under this category. 
Employment Indefinite-term or at least one-year definite-term labor contract with a Vietnam-based employer. We are of the view that a definite-term labor contract (from 12 to 24 months) would suffice in this regard.

 

It is worth noting that term of expat’s labor contract must be in line with term of his/her valid work permit, which is maximum 24 months from a theoretical perspective.

 

Age Men: Under 60 years old

Women: Under 55 years old

Please kindly be advised that these retirement ages are being proposed to increase to 62 for male and 60 for female according to the draft of new labor code.

 

Others NOT falling under the scope of statutory intra-company transferees, i.e. any expat managers, chief executive officers, experts and technicians, who have been employed by the offshore enterprise for at least 12 months and are temporarily re-assigned/ seconded to its Vietnam-based commercial presence (e.g. subsidiary, representative office, or branch). Frankly speaking, an expat deemed an intra-company transferee with his/her work permit exemption certificate would be NOT eligible to attend the SI scheme.

For ease of reference, timeline and ratio for SI contributions applicable to both employer and expat employees under Decree 143 please see the table below.

In short, employers who hire expat employees would have to bear an extra liability to ‘part’ pay SI from 1 December 2018 and to ‘fully’ pay SI from 1 January 2022 while the relevant expat employees will NOT commence contributing to the scheme until 1 January 2022.

Sickness and Maternity Labor Accident and Occupation Disease Pension

and

Death Allowance

Total
Since

1 December 2018

Employer 3% 0.5% 0% 3.5%
Expat Employee 0% 0% 0% 0%
Since

1 January 2022

Employer 3% 0.5% 14% 17.5%
Expat Employee 0% 0% 8% 8%

Importantly, please also note that there is a statutory maximum cap for all SI contribution, as with caps applicable to Vietnamese employees, if the expat employee’s actual gross salary is higher than the maximum cap, the cap becomes the basis of the % calculation. Specifically, in light of SI, the basis for % calculation would be (i) the actual gross salary OR (ii) 20 times of ‘Base Salary[5], whichever is lower. Accordingly, such cap shall apply equally to both the employer % contribution and the employee % contribution.

 

[1] Law on Social Insurance no. 58/2014/QH13 dated 20 November 2014 (“Law on Social Insurance”)

[2] Decree no. 143/2018/ND-CP dated 15 October 2018, elaborating on Law on Social Insurance and Law on Occupational Safety and Hygiene regarding compulsory social insurance for employees who are foreign nationals working in Vietnam (“Decree 143”)

[3] http://thoibaotaichinhvietnam.vn/pages/tien-te-bao-hiem/2019-03-20/hon-64-lao-dong-nuoc-ngoai-da-tham-gia-bhxh-bat-buoc-69060.aspx

[4] Official Letter no. 1064/LDTBXH-BHXH issued by the MOLISA dated 18 March 2019

[5] ‘Base Salary’ is a measure set by the Vietnamese government from time to time. The current Base Salary applicable since 1 Jan 2019 is VND 1,390,000 / month, corresponding to a monthly cap of VND 27,800,000. However, it is worth noting that the Base Salary will change effective 1 July 2019 to VND 1,490,000, corresponding to a monthly cap of VND 29,800,000.

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For more information about labor laws in Vietnam please contact Giles at Gtcooper@duanemorris.com or Nhan Le  at NTLe@duanemorris.com

Playing by the rules: what is the value of the Singapore Infrastructure Dispute-Management Protocol in Vietnam?

Can a new Singapore dispute resolution protocol spur efficient infrastructure development in Vietnam?  It’s a question worthy of examination considering a slew of high-profile disputes, delays and cost overruns on major infrastructure projects in Vietnam in recent years.  Even more so considering forecast needs to spend more than US$300 billion on infrastructure in Vietnam over the next decade in order to serve the needs of Vietnam’s rapidly growing economy.

The answer is not clear cut.  While the protocol has clear prima facie value, the current legal framework in Vietnam isn’t supportive of a key fundamental principle: that outcomes of the process are binding on the parties.  However the time is right, and opportunity is ripe, for Vietnam to embrace the concept and make bold policy decisions backed up with legislative action.

New roads, bridges, ports, and power plants are all in high need in Vietnam and the government is hard at work improving the PPP legislation to facilitate and foster the conditions for successful projects.  Many such projects are complex and challenging, with numerous parties involved, and thus prone to disputes, or simply just differences of opinions that need resolving in order that works can complete. As a result, time spent developing, agreeing and implementing dispute resolution terms between involved parties is time well spent.  However it can also be inefficient and often unnecessary for parties to agree bespoke terms on a case-to-case basis.

Cognisant of the issues, and also no doubt sensing a potential market, a number of governmental and non-governmental organizations have developed best-practice standards, protocols and clauses that project investors and contractors can look to for support.  The latest comes from Singapore’s Ministry of Law, keen to cement Singapore’s reputation as a hub for all things infrastructure in Southeast Asia.  The Singapore Infrastructure Dispute-Management Protocol (SIDP) was launched in October 2018 and is intended to help parties involved in large infrastructure projects manage disputes and minimise the risks of time and cost overruns, thus maximizing chances of efficient delivery of infrastructure.

The SIDP doesn’t hide its ambition to serve mega projects, stating in its preamble that it is “designed and recommended for construction or infrastructure projects of more than S$500 million in value”.  Only a relatively small number of projects in Vietnam would fit that criterion though that doesn’t mean that concepts and recommendations underpinning the SIDP couldn’t be replicated by smaller projects.

So, what’s so good about the SIDP? Perhaps the most highlighted feature of SIDP is that it places a heavy emphasis on preventing disputes, or at least de-escalating differences, through detailed procedural terms and collaborative tools.  When parties agree to adopt the SIDP as their dispute resolution protocol, they must appoint a Dispute Board (DB) right at the outset of the project. The DB need not consist of lawyers, but can comprise industry experts and can vary from a single-person board to a multiple-member panel. The DB commences pro-active work right after establishment in the form of regular meetings and site visits.

While regular meetings are quite common in other dispute protocols, site visits are a relatively new feature.  Pursuant to the SIDP, a DB will conduct at least three site visits every 12 months unless otherwise agreed by the parties. The site visits aim at early detection of any potential problems. After each meeting and site visit, the DB will prepare a report with recommendation for early dialogue on real or potential issues, as necessary.

If the DB becomes aware of any differences between parties through site visits or upon request of the parties, the DB may move one step further by interviewing senior representatives of the parties to try to clarify, scope, and articulate the ambit of the differences. Such interviews are relatively informal with a view to enabling the DB to provide recommendations for specific processes or measures to resolve differences, ideally before they blow up or become entrenched or intractable.  These features represent the sensible underlying philosophy of the SIDP, in contrast with more traditional dispute resolution methods, that a ‘stitch in time saves nine’.

That is not to say that the SIDP doesn’t have teeth.  Should the parties involved feel the need to refer a dispute directly to the DB, a number of options are open for the DB to resolve the dispute, including by issuing an opinion on the matter in question or bringing the parties together for formal mediation.  Crucially, the SIDP provides that such opinions or results of mediation are binding on the parties.

There is no question that the SIDP is a well-conceived and thorough tool of great value to large infrastructure project participants. But how would it work in practice in Vietnam?

Operationally there is no reason to doubt that it would work just as intended.  The big issue for Vietnam is around the fundamental agreement of the parties that a DB decision or opinion or a DB-facilitated mediated agreement can be binding on the parties.  Without that, the efficacy of the protocol as a whole is called into doubt, at least from a purely legal perspective.

Take for example a case where a Singaporean-domiciled construction company provides services to a Vietnam-domiciled entity and the parties agree to use the SIDP to manage and resolve disputes.  Imagine that the parties do in fact effectively implement the SIDP during the course of their relationship, resulting in the DB handling a dispute and giving its opinion on the same (or facilitating a mediated settlement between the parties on the same).  Imagine further that the result of that process, agreed to by the parties, is that the Vietnam entity owes $100 million to the Singapore entity. The SIDP itself provides and envisages that the result of the SIDP process is automatically binding on the parties and that the courts of Singapore can act to enforce the same in the event that the Vietnam entity fails to comply.

The fact is however that there is currently no clear mechanism to enforce that against the Vietnam entity in Vietnam.  Vietnam law contains no terms that would enable the Singapore company to automatically enforce the DB decision, or a mediated settlement, against the Vietnam company in Vietnam.  The Singapore company could seek, and presumably obtain, a Singapore court award against the Vietnam entity enforcing the DB decision but then what?  In the absence of a formal bilateral judicial assistance treaty between the two countries, no special option under their bilateral investment treaty, and rare circumstances where a case for reciprocity might be made, there is essentially nil chance that authorities in Vietnam would act to recognize or enforce the Singapore court judgment in Vietnam under Vietnam law. One only has to look at the extreme difficulties international companies have had enforcing foreign arbitral awards in Vietnam – something for which there is an express legal mechanism in Vietnam law – to know that it would be mission impossible to enforce a foreign court decision.

As long as this remains the status quo in Vietnam, the true value of the SIDP in Vietnam is in doubt.  While there is inherent value in pro-actively managing, identifying and resolving disputes, if the final “agreed binding” outcome is, for all intents and purposes, worthless, why go to the bother in the first place?

Of course this is an extreme position and mega infrastructure projects tend to have many facets to them that count in favour of commercial settlements (not least of all government to government links that can add a political element to resolving disputes).  But lenders, contractors and their lawyers are duty bound to consider the harsh legal realities which currently speak against assuming that the SIDP can be an effective tool for use in Vietnam projects, especially where purely local counterparts are involved.

The time is right then for the government of Vietnam to take bold action, similar to its recent ISDS commitments in the CPTPP, to enable private commercial agreements on use of tools like the SIDP to mean something when push comes to shove.  Actions like this are a vital key to unlocking the private funds necessary to finance Vietnam’s vast infrastructure needs.

The opportunity also happens to be on the table right now in the form of a new UN convention on enforcement of international settlement agreements. Otherwise known as the Singapore Convention on Mediation, the convention would do for mediation what the New York Convention does for arbitration: provide an avenue to directly invoke and enforce mediated agreements in Vietnam, ostensibly without the courts re-examining the issues or interfering.  The Singapore Convention on Mediation was adopted by the UN General Assembly in December 2018 and will come into force when signed by at least three States. A signing ceremony for the Convention is expected to take place in August 2019 in Singapore.  One hopes Vietnam will be at the table.

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For more information about Vietnam infrastructure projects please contact Giles at GTCooper@duanemorris.com.  Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

PM confirms new “official” proposed new solar feed in tariffs

Two weeks ago the MOIT released proposed new FiT rates for solar projects in Vietnam, to apply after the current FiTs expire on 30 June 2019.   They were pored over with great interest by many parties both currently developing projects and those interested in the market.  It seems however, that someone was jumping the gun.  The Prime Minister has just re-announced the “official” new proposed FiTs without further explanation.

The table below sets out what these new official proposed rates are.  With the sole exception of integrated projects in Region 3, these new official proposed FiTs are slightly higher across the board compared with the figures publicized by the  MOIT recently.   The new proposal also divides the country into 4 distinct regions, instead of 3 as per the MOIT’s initial information.

You can see an easier-to-read version of the table here: new draft solar FiT rates

Notably, the new information doesn’t provide for different rates for specific COD deadlines as the MOIT’s earlier information did.  At present, it is unclear what the new COD deadline will be for the below FiTs.

The Government is in the process of soliciting comments on the new proposed rates.  It remains to be seen exactly where the dust will settle on this.  We will update as more information becomes available.

Solar power types Region 1

(28 northern provinces of Vietnam)

Region 2

(6 central provinces

 of Vietnam)

Region 3

(23 southern provinces of Vietnam)

Region 4

 (6 central highlands provinces of Vietnam

VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent
Floating solar power projects 2,159 9.44 1,857 8.13 1,664 7.28 1,566 6.85
Ground-mounted solar power projects 2,102 9.20 1,809 7.91 1,620 7.09 1,525 6.67
Solar power projects with integrated storage system N/A N/A N/A N/A 1,994 8.72 1,877 8.21
Rooftop solar power projects 2,486 10.87 2,139 9.36 1,916 8.38 1,803 7.89

 

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

 

Vietnam’s draft new solar tariffs – more sun, less cents, more sense

A new proposed tariff structure for solar energy projects in Vietnam sets out different rates for different irradiation regions and gives long-awaited indication of direction for the market after 30 June 2019.  On 29 January 2019, the Ministry of Industry and Trade (“MOIT“) released parts of a draft decision to update the country’s current feed in tariff (FiT) structure which is only valid until 30 June 2019 (the “Draft”).

The Draft is of course still just that, a draft, but forecasts a clear change in strategy with respect to FiTs.

Under the current FiT policy (regulated by Decision 11 and Decision 16) there is only one FiT for all projects regardless of location.  That is an internationally respectable FiT of 9.35 US cents per kWh for all on-grid solar power projects that achieve commercial operation date (“COD”) prior to 30 June 2019 (with the exception of some projects in Ninh Thuan province which have a later COD timeline).

The Draft however sets out a wide range of differing FiTs that vary based on: (i) when COD happens, (ii) location (3 regions are identified based on solar irradiation data), and (iii) the type of solar projects (i.e., floating, ground-mounted, integrated storage system or rooftop solar).

The table below shows what the Draft contemplates:

Projects with COD from 1 July 2019 to 30 June 2020

 

Solar power types Region 1 (see regions below)

(28 northern provinces with annual solar irradiation of up to 1,432.8 kWh/m2/year)

Region 2

(6 central provinces of Vietnam with annual solar irradiation of up to 1,676.1 kWh/m2/year)

Region3

(29 central highlands and southern provinces of Vietnam with annual solar irradiation of up to 1,910.3 kWh/m2/year)

VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent
Floating solar power projects 2,135 9.35 1,838 8.05 1,612 7.06
Ground-mounted solar power projects 2,095 9.18 1,802 7.89 1,583 6.94
Solar power projects with integrated storage system N/A N/A N/A N/A 2,052 8.99
Rooftop solar power projects 2,448 9.85 1,933 8.47 1,697 7.43
Projects with COD from 1 July 2020 to 30 June 2021

 

Floating solar power projects 2,028 8.88 1,746 7.65 1,531 6.71
Ground-mounted solar power projects 1,990 8.72 1,712 7.50 1,504 6.59
Solar power projects with integrated storage system N/A N/A N/A N/A 1,949 8.54
Rooftop solar power projects 2,023 8.86 1,740 7.62 1,527 6.69

 

While no changes will please everyone, especially the many developers who have committed considerable resources based on assumptions of the current FiT rate, the changes still indicate strong support for solar power projects generally and a rational approach to reflect the markedly different irradiation levels across the country.  Such an approach should take some pressure of heavily-stretched Southern hotspots (stretched from both power infrastructure and bureaucratic bottleneck perspectives).

We will continue to monitor this and update further as possible.  Meanwhile, we’d be delighted to hear views from developers and financiers about the change of strategic policy direction and FiTs forecast by the Draft.  Get in touch and tell us what you think.

Region 1: comprising 28 northern provinces of Vietnam with annual solar irradiation of 1,225.6 – 1,432.8 kWh/m2/year or daily solar irradiation of 3.36 – 3.92 kWh/m2/day. Including: Ha Giang, Bac Kan, Cao Bang, Tuyen Quang, Thai Nguyen, Lao Cai, Yen Bai, Lang Son, Quang Ninh, Phu Tho, Vinh Phuc, Bac Giang, Hai Duong, Hoa Binh, Hanoi, Ha Nam, Bac Ninh, Hung Yen, Hai Phong, Ninh Binh, Thai Binh, Ha Tinh, Nam Dinh, Quang Binh, Thanh Hoa, Lai Chau, Nghe An and Son La.

Region 2: comprising 6 central provinces of Vietnam with annual solar irradiation of 1,456 – 1,676.1 kWh/m2/year or daily solar irradiation of 3.99 – 4.59 kWh/m2/day. Including: Quang Tri, Dien Bien, Thua Thien Hue, Quang Nam, Da Nang and Quang Ngai.

Region 3: comprising 29 central highlands and southern provinces of Vietnam with annual solar irradiation of 1,703.9 – 1,910.3 kWh/m2/year or daily solar irradiation of 4.67 – 5.23 kWh/m2/day. Including: Kon Tum, Ca Mau, Hau Giang, Binh Dinh, Phu Yen, Bac Lieu, Kien Giang, Soc Trang, Gia Lai, Can Tho, Vinh Long, Tra Vinh, Dak Lak, Khanh Hoa, Lam Dong, Ben Tre, Tien Giang, An Giang, Dak Nong, Ho Chi Minh City, Dong Nai, Dong Thap, Ba Ria – Vung Tau, Long An, Binh Duong, Binh Phuoc, Tay Ninh, Ninh Thuan and Binh Thuan.

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

New Cyber-security draft decree – better but the show goes on

In October, we reported on a first draft decree to implement the Cyber-security Law and noted many concerns about its overtly stringent terms and, in particular, the threat it caused to development of a thriving e-commerce/ Industry 4.0 landscape.  Since then, the business community, among others, have been vocal on the shortcomings of the draft and offered up many comments and suggestions to address concerns.  With the release of a new draft early Novembers, it appears that the Ministry of Public Security (MPS), the decree’s authors, have listened.

 

The first clue is in the length of the new draft: cut dramatically in size from 66 clauses to just 30, it necessarily doesn’t cover as much ground as the first draft.  But the devil is always in the detail and, although the new draft is considerably less complex, particularly when it comes to issues affecting e-commerce, a close look reveals there are still areas worthy of further advocacy.

 

The question we have been asked most frequently is whether the Cyber-security Law itself, and its impending decree, govern every company on earth accessible over the Internet to Vietnam-based users. Taking the language of the “old” draft at face value, the answer was a clear affirmative, resulting in consequences both unreasonable and unnecessary to impose as well as impossible to enforce in practice, notably an obligation to localize data and establish commercial presences.  The new draft takes a much more balanced and practical approach and suggests that a far more limited number of companies will be subject to these requirements in practice. In particular, these key obligations look set to only apply to companies (whether local or international) which meet all of the following conditions:

 

  • providing one or more of specific services to users in Vietnam, including: (i) telecommunications, (ii) internet storage, (iii) internet data sharing, (iv) web hosting services, (v) e-commerce, (vi) online payment, (vii) payment intermediary, (viii) transportation connection service (think Uber), (ix) social network and social media, (x) e-gaming, and (xi) electronic mail;

 

  • collecting, exploiting, analyzing, and processing the data of Vietnamese users (see below for what amounts to “data”);

 

  • allowing its users to conduct activities prohibited by Articles 8.1 and 8.2 of the Cyber-security Law (i.e. – key Internet-based wrongdoings such as libel, anti-government propaganda, financial fraud etc.); and

 

  • committing wrongdoings covered by Article 8.4.a of the Law [this appears to be a typo as there is no such clause in the Law] or Article 26.2.b of the Law (this obliges companies to prevent sharing of and delete certain kinds of “wrongful” information within 24 hours of receipt of a request from the Vietnamese authorities).

 

While criterion (1) is still very broad, it at least removes from the scope any and all companies that had service-offering websites accessible by Internet from Vietnam (such as our hypothetical Irish bank in our October blog post). Still, many other tech companies such as Amazon, Agoda, Google, Facebook etc. would fall squarely within one or more categories covered there. However, this is just the top of a funnel: even is a company fits within criterion 1 (and therefore almost certainly criterion 2) they will not automatically be required to localize data or establish commercial presences in Vietnam.  Following approaches of other jurisdictions to assess and handle based on risk and conduct, such companies will only be required to take such steps if they fail to comply with what the Cyber-security Law expects them to do (read: cooperate with the government). It is good for business as now they can decide to cooperate and avoid strict monitoring rules.

 

Apart from this new and more tolerant “co-operate-or-comply” philosophy, the data which companies may need to store in Vietnam is also watered down slightly. The list now “only” covers information which can help identify users (i.e. – names, nationalities, occupations, residency, contact information, ID/passport numbers, credit card numbers, health records, biometrics) and other user-created data (i.e. data which users choose to upload, friend lists, groups users join or interact with).  Data such as “philosophical belief” or “political views” are no longer covered in the new draft decree.

 

As ever, there is some bad with the good.  The new draft seems to double down on granting power to the MPS to proactively examine the information systems of companies in Vietnam where it suspects wrongdoing.  There is little or no due process involved in such cases.

 

In conclusion, the MPS has clearly taken on board much of the advice and criticism received following the broad and unworkable first draft decree and this is good news.  Whether this will ultimately be reflected in the final decree however still remains to be seen.

 

For more information about the Cyber-security Law in Vietnam, please contact Giles at GTCooper@duanemorris.com, Le Hau at HNLe@duanemorris.com. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

Draft Decree to implement Cybersecurity Law doesn’t dampen concerns

A draft Decree to implement Vietnam’s controversial Cybersecurity Law does little to assuage fears that all online commercial activity will be within its scope, mandating physical presence in Vietnam, expensive, cumbersome data localization and even a new permit.

 

Last June, Vietnam’s National Assembly overwhelmingly passed the Cybersecurity Law and it will take effect on 1 January 2019.  Despite assurances from the Ministry of Public Security (MPS) – author of the Law – that the Law is aimed at ensuring online security and protecting critical information infrastructure, its wide and unclear language caused concern for online commercial service providers whose activities are captured by its scope and worried about the cost and other implications of compliance, particularly with respect to commercial presence and data localization obligations.

 

Since the Law’s approval, many have been waiting to see the government Decree that will effectively interpret and implement the Law.  The Decree will determine whether and how the Law will truly impact online commercial activity.  Will it be business as usual for online commerce, as promised by a government that publicly embraces Industry 4.0, or will data hosting services and compliance officers be working overtime?

 

During the first half of October, two different versions of the draft Decree came into the public sphere. The latest draft, dated 11 October 2018, contains 66 clauses, touching on almost every single issue and clause of the Law itself.  While draft Decrees can and do change, the signs are that restrictions and headaches will remain for companies with online business activities.

 

Take, for example, the question of who will need to establish a commercial presence in Vietnam.  Under the Law, companies providing any kind of services related to or via telecommunication networks or the Internet, and which collect, process, analyze, or exploit the personal data of users in Vietnam (regardless of nationality) will need to establish a representative office or a branch in Vietnam (Article 26.3).  Many wondered whether this was intended to apply to every single company falling within the very broad criteria.  For example, would a bank in Ireland offering online banking services used by a handful of Vietnam-based users be subject to this requirement?  It would seem unnecessary and wholly impractical to say so.  The draft Decree however seems to support such a view.  According to Article 60 of the draft Decree, all companies providing “services through the Internet” will be subject to the requirement to establish a commercial presence in Vietnam (in the form of a branch, a representative office or other type of “establishment”).  “Services through the Internet” is understood very broadly by the draft Decree to include anyone providing: (1) internet connection services, (2) internet access services, (3) data storage, (4) social network, (5) over the top services (think, Netflix), (6) e-commerce, (7) banking and finance, (8) messaging and teleconference services, (9) live chat services, (10) search engines, (11) games, films, music.

 

While this clarifies and elaborates the Law’s general drafting, the long list is troubling as it clearly covers not only tech giants such as Facebook, Twitter, and Google, but also companies simply having auxiliary Internet-based services or the Irish bank in our example.

 

In a similar vein, the draft Decree sheds more light on the data localization rules but does little to assuage fears that the regulations are for the sake of regulation rather than based on risk analysis and purpose-driven policy.  According to Article 61 of the draft Decree, certain personal data will need to be stored in Vietnam by companies for the lifetime of the business, while certain other personal data need only be stored for three years from the date of creation. At any time, the MPS may request companies to provide copies of such data.  On the plus side, there is no indication that companies cannot transfer data abroad, provided they also maintain it in Vietnam. The list of personal data that companies need to store in Vietnam is extensive, including typical information such names, addresses and photos but also extending widely to include biometrics, financial records, health records, political views, and philosophical beliefs (items that need to be stored for the lifetime of the business).  Further information looks worrisome from a civil liberties perspective, including chat logs, and search histories, which will need to be stored for at least three years from creation.

 

Aside from the regulatory compliance burden, these requirements may put companies into difficult positions if they face conflict complying with their own local regulations prohibiting the transfer of data to foreign governments (take, for example, the US CLOUD Act).

 

A brand new element introduced by the draft Decree is an obligation on companies subject to the Law to obtain a special permit from the MPS prior to providing services in Vietnam.  No such requirement is included in the Law itself and this calls into question the legality of the MPS ‘creating’ this new permit obligation.  It’s cause for serious concern if this remains in the final Decree, not least of all because there is no guidance or explanation on procedures, information or timeline required to obtain such a permit.  It is also entirely unclear if this new permit obligation will apply retrospectively to companies already doing business in Vietnam over the Internet.  Any way you look at it, this is harmful for the business environment in Vietnam and contrary to the message delivered by the MPS and government in consultations and meetings about the Law.

 

The only good news in the draft Decree seems to be the decision that companies will have a full year to comply with the Law, meaning, in effect, that even though the Law takes effect on 1 January 2019, companies won’t need to be compliance until January 2020.

 

Time will tell what ultimately stays in and out of the Decree.  The draft is expected to be finalized and formally adopted by the government in the next weeks.

 

For more information about the Cybersecurity Law in Vietnam, please contact Giles at GTCooper@duanemorris.com, Le Hau at HNLe@duanemorris.com. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

Solar project COD extension for Ninh Thuan province finally confirmed

Prime Minister Nguyen Xuan Phuc signed Resolution 115/NQ-CP on 31 August 2018 to confirm some special policies to support Ninh Thuan province (“Resolution 115”). Pursuant to Article 1.1.e of the Resolution 115, the Prime Minister  confirmed that the commercial operation date (COD) deadline (previously 30 June 2019) for solar projects in Ninh Thuan province to enjoy the 9.35 US cents feed in tariff has been extended to the end of 2020.  This extension applies to those solar energy projects approved in the relevant Master Plan (approx. 2000MW).  Resolution 115 took effect on 31 August 2018 and lays to rest the badly kept secret that Ninh Thuan, a literal hot spot for solar projects, will enjoy more favorable terms than projects in other locations which remain bound to the 30 June 2019 COD deadline.   Clear and definitive statements as to what will happen after 30 June 2019 for projects in other locations is now desperately required.  Our view and intel is that no-one else should bank on extensions and should develop strategies now to mitigate risks of missing the 30 June 2019 date (e.g. – look to be an early mover in the hotly-anticipated DPPA (direct power purchase) market).

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

新規PPP関連法が立てうる、ベトナムのインフラ開発への道筋

著者:Giles T. Cooper

翻訳:志澤政彦(Masahiko Shizawa)

原文:https://blogs.duanemorris.com/vietnam/2018/06/19/will-a-new-ppp-law-pave-the-way-for-vietnams-infrastructure/

インフラというボトルネックに、ベトナムの急成長が直面している。政府には、今まさに必要な道路、鉄道、トンネルに資金を投下できるほどの予算がない。そこで専門家が目を向け始めているのは、民間セクターである。

この制約がある以上、非国家セクターの資金を輸送インフラ開発のため継続的に活用することが今すぐ必要となる。アジア開発銀行(ADB)によれば、2015年から2020年までの間のインフラへの投資のため、ベトナムは最大170億米ドルを必要とするだろうとのことである。

近年、ベトナム政府は官民連携(PPP)プログラムの下で投資プロジェクトに透明性を与えるよう進めてきた。PPPは、政府機関と民間投資家が協同してなす投資の一形態であり、インフラの建設、修復、運営、並びに管理、及び公共サービスの提供のために行われる。政府はPPPにより、開発目標達成のため民間セクターの効率性と専門性を活用することができる。

そうはいっても、そうしたプロジェクトの持続的な実施を阻む欠点や限界があり、現状で名乗りを上げるのに投資家は慎重を期している。

投資を勧奨する政令が提出されてきてはいる。しかし、その条件は魅力的とはいえず、そのようなプロジェクトに必要な柔軟性がないとの批判もある。PPP投資活動の主な規制は以前、PPP投資に関する政令15/2015/ND-CP号及び入札法の実施指針である政令30/2015/ND-CP号であった。

この国は、1990年から2016年までに総額162憶米ドルにも及ぶ84件のPPPプロジェクトを実施してきている。うち79%はエネルギー関連のものであった。 一方、2011年のPPPパイロットプログラムが制定されて以来、この法的枠組みを利用した新規PPPプロジェクトは一切登録されていない。

政府は最近、政令15/2015を改正し、ベトナムにおけるPPPプロジェクトの分野、投資条件、手続を特定した政令63/2018(政令63)を発行した。この新たな政令により、PPPプロジェクトにおける投資家の資本比率が20%にまで引き上げられる。政令63は2018年の6月に施行された。

これで十分といえるか

BOT(Build-Operate-Transfer)方式とBT(Build-Transfer)方式のプロジェクトに対する調査・監査結果によれば、そのほとんどにおいて、投資家選定の際の入札が限定され、低い競争性と透明性の欠如を招いたとのことである。また、プロジェクトの通知は未だにオープンな方法で実施されていない。

同時に、プロジェクト実施の管理は非効率的であり、建設作業の低質化等の様々な問題を引き起こしている。

これらの問題に対応して投資を促進するため、ベトナム国会は政府に、上記のような難点や法的制限を取り払うようなPPP関連法を作るよう求めた。

PPP関連法の成功に必要な3要素

  • 明確なリスク共有メカニズム

当局は未だ、政府がデベロッパーのため一定の最低収益を保証し、それに至らない場合に補填するようなリスク共有メカニズムを、明確に打ち出してきてはいない。この点は、プロジェクトがしばしば重大なリスクを伴うインフラの場合には特に重要である。規制の明確さにより投資家の信頼を得られるのではないだろうか。

現状のモデルでは、ほとんどのリスクを民間セクターに転嫁してしまっている。民間の投資家や事業者の誘致には、透明性のある政策枠組みと公平なリスク分配が鍵である。同様に、明確に定義されたプロジェクトの射程と期待できる金銭的な利益の適切な保証を伴った魅力的な取引のストラクチャーによって、PPPへの参加が奨励されるものと思われる。

  • 為替レート保証

長期的な融資は外貨によってなされるものの、ベトナムのインフラプロジェクトの収益は現地通貨ベトナムドンによる。これだと、プロジェクトの収益性に負の影響をもたらす。新たなPPP関連法を成功に導くには、長期的な建設プロジェクトの中で投資家が同等の交換レートを確保できるよう、政府による兌換保証メカニズムを盛り込む改善が必要となろう。

海外への外貨送金の制限も縮小される必要があろう。

こうした障害や通貨変動のリスクは、投資家の信頼に大きな影響を与える。これらを取り除くことが、この国の継続的前進に必要な種類のプロジェクト誘致に重要であろう。

  • 金銭的インセンティブ

典型的な長期投資であるインフラプロジェクトには、投資家に巨大な建築に必要な20年から30年もの間の関与をさせるため、対価としての追加のインセンティブや収益の保証が必要となろう。

このリスクを相殺するために、政府は開発の波及的効果の一部を投資家に報いることを考えてもよいだろう。インセンティブがあれば、収益が交通の流れや将来の予測不可能な状況に依存するといった、インフラ開発に内在的な不確実性を減らすことができるだろう。

要するに、やる気のある投資家の誘致にベトナムが必要なのは、信頼できる政策及び規制、加えて投資家の信頼を得られるようなPPPに特化した政府部門といった、透明性、公平性、予測可能性を確保できる枠組みである。

ライフサイクルコスト、安全性、レジリエンス(強靭性)、そして環境への影響といったその他の要素も、考慮される必要がある。

ベトナムのインフラ開発への需要は揺るぐまい。しかし、現状の立法状況が実現可能または収益性のあるPPPプロジェクトに繋がるとはいえない。PPP関連法の上述のような点をクリアにすれば、透明性を向上し、この国に目を向けている事業体のリスクを減らし、もって状況の改善が見込めるだろう。

ベトナム投資に関する情報については、GTCooper@duanemorris.comよりGiles弁護士または当事務所の弁護士一覧の弁護士にお問い合わせください。Giles はドウェイン・モリス・ベトナム法律事務所の共同代表であり、ドウェイン・モリス・ホーチミン支所の支所代表です。

Why you shouldn’t miss out on Vietnam’s industrial property market

Though comparatively young among its regional peers, Vietnam’s economy is turning up some exciting areas of opportunity. One of the most promising is the industrial property market, comprising industrial land, ready-built factories, warehouses and other logistics properties.

 

Slowly but surely, the country is moving from a labour-intensive to a capital-intensive economy, and over the next few years we will continue to see a shift towards the more value-added sector.

 

This means that the industrial sector will begin to incorporate more sophisticated requirements, demanding a higher level of expertise and technical equipment. At the moment, industrial parks remain sparse and there is no concerted effort to gather industries on a regional level.

 

However, Vietnam’s manufacturing and processing sector accounted for over 40 percent of the country’s foreign direct investment (FDI) last year, which surged to a record high of US$36 billion overall. This trend looks set to continue.

 

Get in on industry

 

Currently, the city of Hai Phong and province of Bac Ninh are the two localities boasting the highest number of industrial parks in the country. They are also the biggest draws for industrial investment in the northern economic region.

 

France’s FM Logistic, a leading warehouse supplier, recently launched a 5,000 sq.m logistics warehouse in Bac Ninh while purchasing an additional 50,000 sq.m in the north to build the first European-standard storage centre in Vietnam.

 

Other areas around the country are showing similar signs of strong development and investors would be wise to get in early.

 

In fact, the country’s largest supplier of industrial property, the BW Industrial Development JSC, debuted in the southern province of Binh Duong earlier this year. BW is a joint-venture between US private equity fund Warburg Pincus and Vietnam’s Investment and Industrial Development Corporation (Becamex IDC), with investment of over US$200 million.

 

Betting on the country’s booming manufacturing sector and rising domestic consumption, the company has bought land for eight projects in five localities around Vietnam, with a focus on developing institutional-grade logistics and industrial properties.

 

A well-connected hub

 

Among several notable advantages increasing Vietnam’s attractiveness to industrial investors, the country’s proximity to some of the world’s major sea trading routes offers huge opportunities to develop maritime transport, particularly for logistics services.

 

The country’s border with China makes it a promising option for manufacturers looking at alternative locations in Southeast Asia while operating costs in China continue to head upwards.

 

Additionally, the nation’s household income is likely to increase. According to recent research, Vietnam is expected to enjoy the strongest growth in the middle-income population bracket, with a Compounded Annual Growth Rate (CAGR) of 19 percent from 2018-2020, and an increase of 14 percent from the previous decade.

 

A young population coupled with growth in average income will boost purchasing power and help the country retain its spot as a top investment destination in Southeast Asia.

 

The fruits of free trade

 

Vietnam’s industrial real estate sector is also expected to get a helping hand once the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) comes into effect.

 

The passage of the deal has been smooth so far, and players both at home and abroad are already considering ways in which they can benefit from each other’s markets. Tariff cuts and streamlined regulations will precipitate a surge in investment, and a big slice will go into the industrial sector.

 

Acknowledging the oncoming wave of interest, the Prime Minister approved spending of up to US$921 million on infrastructure development around economic zones and industrial parks by 2020. This heavy investment has been earmarked for roads, drainage and water waste treatment facilities, as well as power infrastructure for industrial parks and clusters, hi-tech parks and hi-tech agricultural zones.

 

Major cities are also eyeing increased industrial attraction, especially from abroad. Under the development plan for Hanoi, the city will have nine more industrial parks on a total area of 2,360 hectares by 2020, an increase of 132 percent against current supply.

 

Easing the entry of foreign players to such parks would help in boosting occupancy. It remains to be seen whether the pledged cash will complete the connection of factories to road networks, as well as promote the growth of residential and commercial areas around the parks. If the strong demand is anything to go by, these requirements are likely to be met soon.

 

For these reasons, Vietnam is becoming more appealing to foreign manufacturers, their associated suppliers and supporting industries. Investor interest in the industrial market is on the up, in industrial zones as well as in income-producing industrial assets, build-to-suit opportunities and logistics-based warehousing.

 

Huge opportunities exist in Vietnam for both existing players and new manufacturing firms to snap up significant market share and get in on the ground floor. This area is certainly one to keep an eye on.

 

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