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.

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

VIETNAM – 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.

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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.

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.

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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.

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.

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

VIETNAM – THE DRAFT NATIONAL ELECTRICITY DEVELOPMENT PLANNING FOR 2021-2030, WITH A VISION TO 2045 IS PUBLISHED


Vietnam’s GDP growth for 2021-2030 is forecasted to reach an average of 6.6%/year and an average of 5.7% for 2031-2045. Correspondingly, the Institute of Energy has calculated that commerical electricity will reach 491 billion kWh by 2030, and 877 billion kWh by 2045. By 2030, the total installed capacity of Vietnam’s electricity sources is predicted to be at 137.2 GW (of which coal-fired power: 27%, gas thermal power: 21%, hydroelectricity: 18%, renewable energy: 29%, imported energy about 4%, pumped hydroelectricity and other energy storage devices about 1%).

The Draft Power Development Planning VIII (“PDP 8”) reinforces the Vietnam Government’s current view on prioritizing renewable energy sources to minimize negative impacts caused by electricity production on the environment. Importation of fuels (coal, LNG) are encouraged as a way to diversify the country’s primary energy sources, and the same goes for the establishment of transmission and distribution grid links with China, Laos and Cambodia in order to maximize each country’s energy potential. Imported electricity sources from neighboring countries are to be considered as prioritized projects because imported electricity will reduce environmental impact compared to domestic production.The Draft PDP 8 is oriented to focus on the development of transmission grid of at least 220KV to solve overcapacity issues that has been occurring in recent years.

As to grid development, in the period of 2021-2030, MOIT sees the need to build 86 GVA with a capacity of 500kV per station and nearly 13,000 km of DLZ. From 2031-2045, an additional construction of 103 GVA with capacity of 500kV and nearly 6000 stations is required. The 220kV power grid needs construction of 95 GVA, nearly 21,000 km DMZ and 108 GVA, more than 4000 km NE.

Total investment capital for electricity development in the period 2021-2030 is roughly USD 128.3 billion USD, of which: USD 95.4 billion for the power sources, USD 32.9 billion for the grids. The average structure of capital investment shall be 74% / 26%.

One of the most notable differences between the Draft PDP 8 and Revised PDP 7 (the latest official national power development planning) is in the level of power demand between the North and the South. According to PDP 8, the proportion of commercial electricity in the North will gradually increase from 42.4% in 2020 to 45.8% in 2045, while the South will decrease its proportion from 47.4% in 2020 to 43.6% by 2045. By 2040, the North’s commercial electricity demand will start to exceed that of the South.

Important information investors should know

Coal usage:

Coal inventory at power plants was at a record low level in 2018 – many plants did not have enough coal to operate that led to reduced capacity or even suspension of working units. For instance, Quang Ninh factory sometimes had to stop 2/4 of its units due to coal shortage. The ability to produce domestic anthracite coal for supply to the Northeastern region is only approximately 35 million tons or 88% of the total demand, so coal must be imported and mixed to meet consumption request. In the coming years, the demand for anthracite coal will continue to increase when a number of new plants come into operation such as: Na Duong II, Hai Duong, Thai Binh 2, An Khanh-Bac Giang.

Gas usage:

In the period 2010-2019, the annual natural gas output extracted was 9-10 billion m3 / year on average. Gas is currently being exploited at 26 gas fields and combined oil and gas fields such as Lan Tay, Lan Do, Bach Ho, Rang Dong, etc. There are around 30 fields that have not yet any development plan because most of them are small or located in deep water, far from shore, with difficult geographical and geological conditions.

Renewable Energy usage:

By the end of 2020, the total solar power capacity (including floating solar energy systems) put into operation was about 17 GW, concentrated in the southern provinces and the Central Highlands. Transmission grids are not enough in quantity, especially in Ninh Thuan and Binh Thuan provinces, to accommodate the increasing number of solar power projects with faster-than-ever construction time as a result to advanced technology. Consequently, most projects that have come into operation in such localities are being subjected to daily decrease in generating capacity to avoid overloading the regional grid.

The total capacity of wind power put into operation by the end of 2020 is about 600 MW, much less than the total wind power capacity approved to be included in the the revised PDP 7 which has reached 12 GW. By 2021, the remaining projects are expected to come into operation mainly in the Southwest and South Central regions.

The Vietnam Government is examining, implementing in small scale and encouraging the development of energy from flammable ice gas, shale gas, coal gas, liquefied hydrogen gas, biomass, and waste.

Hydropower usage:

Vietnam’s total capacity of medium and large hydropower plants that were built up to 2019 is about 17,930 MW. The total small hydropower potential (less than 30 MW) of the country is about 10 000 MW. Due to the impact of small hydroelectricity on the environment and forest conservation, MOIT has conducted a review of sites and rejected around 4000MW.

Others:

Thermal power projects included into the revised PDP7 and with operation commencement date set for 2021-2025 are considered as projects that will definitely be built and prioritized for development.

Power source projects with capacity of 500 MW or more and acting as base plant will also be considered priority investment projects.

At the date of writing, there isn’t available a list of projects included or to be included in the Power Development Planning VIII. We provide hereunder lists of potential offshore wind power projects and thermal power sources to be considered for investment. Please do note that:
(i) Not all the projects listed herein will be included in the PDP 8;
(ii) A number of projects included in the lists are already included in the Revised PDP 7.

To have your project considered for inclusion in the National Power Development Planning, investors must carry out an assortment of procedures and obtain several permits, including Feasibility Study and roadshows or conference with relevant authorities. For example, wind energy developers may have to obtain temporary construction permit for erection of wind measurement towers or approval for vertical clearance if your project site is near to aviation boundaries.

When a project is included in the National Power Development Planning, it means that the Government has officially approved the implementation of that project. This is one of the most critical steps in energy project development in Vietnam, because without the Government’s approval for project inclusion in the PDP, there is no way investors can execute a project. After this step, investors will need to acquire Decision on Investment Policy, followed by Investment Registration Certificate.

List of potential offshore wind power projects to be considered for investment

List of potential offshore wind power projects to be considered for investment


List of potential thermal power sources to be considered for investment

List of potential thermal power sources to be considered for investment

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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.

VIETNAM – WIND ENERGY – LATEST UPDATE ON TARIFFS – Vietnam Economic Times interviewing Dr. Oliver Massmann

1. As the new proposed FiT extention by the Ministry of Industry and Trade (MoIT) would reduce tariffs for onshore and intertidal wind power by 17.4 per cent and 13.6 per cent respectively, one of the most dramatic reductions seen for wind power globally. How would you comment on the impacts of this new Draft on Vietnam’s wind power market? How would this move affect wind power developers in the country and investment attraction in the local wind power market?

It can be seen that the Government has continuously encouraged the development of wind power projects. The new, attractive proposed FiT rate for wind power plants and extended the deadline of FiT rate for wind power projects are an indication that there are a lot of rooms for investors looking to participate in this sector of renewable energy development.

By the end of 2020, the total solar power capacity (including floating) put into operation was about 17 GW, concentrated in the southern provinces and the Central Highlands. Transmission grids are not enough in quantity, especially in Ninh Thuan and Binh Thuan provinces, to accommodate the increasing number of solar power projects and reduction in construction time of them due to advanced technology. As a result, most projects that have come into operation in such localities are being subjected to daily decrease in generating capacity to avoid overloading the regional grid.

To promote the development of wind energy sources is a feasible and effective solutions to counter the imminent 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.

2. As the Covid-19 pandemic has continued causing regulatory challenges and delays to many wind power projects in Vietnam, what are your proposals to the Government in extending tariff policies to support wind power developers in the country?

The need to extend the deadline for current FiT rate is essential because the projects waiting to be included in the National Power Development Planning is unlikely to have commercial operation date before November 2021, because:

– The supplement into PDP for new wind power sources was suspended for more than 1 year (from October 2018) because there were no guidelines to implement the Planning Law;

– The construction of wind power projects takes more time than that of solar power projects. For feasibility study reports, investors must carry out wind measurement for at least 12 months. Moreover, wind turbines are mostly imported from abroad, which costs investor extra time, especially there is unexpected delay of equipment delivery.

3. How would you forecast Vietnam’s wind power market in 2021?

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 (“PDP 8”). By 2030, the total installed capacity of Vietnam’s electricity sources is predicted to be at 137.2 GW, of which 29% is renewable energy (including wind, solar, and other types of energy). At a glance, the PDP 8 reinforces the Vietnam Government’s current view on prioritizing renewable energy sources to minimize negative impacts caused by electricity production on the environment. Moreover, by 2040, the North’s commercial electricity demand will start to exceed that of the South. Hence, investors may want to switch their focus to the Southern region or develop transmission grids connecting to thereof to accommodate the increasing power demand.

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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.

VIETNAM – IMPLEMENTATION OF EU-VIETNAM FREE TRADE AGREEMENT (EVFTA) – Dr. Oliver Massmann from Duane Morris named Lead Advisor

Dear all,

We are pleased to inform that the European Commission and the EU Trade Delegation in Vietnam has selected as the lead advisor Dr. Oliver Massmann and his team to advise and assist in a project to support the implementation of the EU – Vietnam Free Trade Agreement (“EVFTA”), one of the most important Free Trade Agreements for Vietnam. The Agreement is anticipated to bring significant advantages for enterprises, employees and consumers in both the European Union (“EU”) and Vietnam. According to analysis carried out by the Government as well as the World Bank, Vietnam expects an increase in the country’s GDP to be 2,18 – 3,25% (years 2020 – 2023); 4,57 – 5,30% (years 2024 – 2028) and 7,07 – 7,72% (years 2029 – 2033). In addition, with the possibility of skilled laborers’ wage to rise by up to 12%, with salaries of common workers increasing by 13%, the Agreement can help lift around 800,000 people out of poverty by 2030. After the entry into force of the Agreement on 01 August 2020, and once Government policies and institutional reforms begin to take effect, Vietnam’s business activities will boom.

Sincerely,
Dr. Oliver Massmann

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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.

Letter to President Biden re: CPTPP – Do Not Drop Your Slice of the Pie

Dear Mr. Biden,

With respect to your recent statement that you will rejoin the Paris Climate Agreement, we kindly request you to also reconsider the possibility of your coming back to the CPTPP.

Dropping the CPTPP means that the U.S has lost access to government procurement of other CPTPP countries, which amounts to USD 1.469 trillion. The high standard of the government procurement chapter in the CPTPP can nowhere be found in existing international agreements. Moreover, it could take the U.S another decade to reach a bilateral agreement with government procurement standard as high as in the CPTPP. It is of utmost importance for the U.S to save time, jobs, and of course, billions of dollars by rejoining the CPTPP instead of negotiating a new one.

We believe the following facts will help with your decision and clearly show how CPTPP would help you to make America great again. What may interest you is the extremely high number of government procurement in the CPTPP country members from which America could benefit.

As you may already know, the population of the CPTPP countries exceeds 513 million people as of October 2020. The CPTPP countries account for 44.8 percent of U.S. total exports and 37.6 percent of U.S. general imports in 2014. By cutting over 18,000 taxes in regards to CPTPP, there would be a great benefit for American im- and exporters by enabling them to enter new markets.
As the U.S. international trade commission estimates, the U.S. exports of goods and services to the world would expand by USD27.2 billion by 2032 thanks to the CPTPP, while U.S. imports would expand by USD48.9 billion.

In the following table, the data of each CPTPP country is listed to show you the procurement market American investors may get access:

GDP (USD) Government procurement’s percentage of GDP (%) Total value of Government procurement (USD)
Australia 1.33 trillion 13.15 174,489,500,000
Brunei 10.65 billion 4.1 436,665,000
Canada 1.6 trillion 13.43 214,881,800,000
Chile 245.41 billion 2.9 7,116,890,000
Malaysia 336.33 billion 25 84,082,500,000
Mexico 1.04 trillion 5.16 53,664,600,000
New Zealand 193.55 billion 14.69 28,432,495,000
Peru 195.76 billion 17.6 34,453,376,000
Singapore 337.45 billion 10.25 34,588,625,000
Vietnam 340.6 billion 12 40,872,000,000
Japan 4.91 trillion 16.22 796,402,000,000

Note: Data taken in 2019 based on the IMF’s World Economic Outlook database, October 2019.

As shown above government procurement of the CPTPP states is $1.469 trillion in total!

How could America not want to get a slice of this fat pie?

The great advance of the CPTPP will be that even the three countries Vietnam, Malaysia and Brunei which have not agreed to coverage of their government procurement ever before and are currently not covered by an existing U.S. Free Trade Agreement or the Government Procurement Agreement of the WTO (GPA), have undertaken to do so. This is a key export opportunity for U.S. goods producers and services companies. Currently Chinese companies profit the most. 90% of power, mining, manufacturing, ferrous and chemical projects of state-owned companies in Vietnam are awarded to Chinese contractors. China State Construction Engineering Corp. (CSCEC) keeps winning important contracts although it has a poor track record and has even been blacklisted by the World Bank due to bribery charges. With CPTPP that market would be open to US companies which probably would be welcomed.

Some Asian-Pacific and other countries have formal policies in place disadvantaging foreign tenderers. CPTPP will make it possible for the first time that an American cooperation could sue for example the Republic of Vietnam or Malaysia. The procedural and legal changes regarding government procurement will enable U.S. exporters to reach markets that were closed before and compete more effectively.

In addition Canada has agreed to replace the commitments in NAFTA and update them to the level of CPTPP. The new level of GPA is based upon the WTO 2014 guidance and provides stronger commitments than the NAFTA.

America cannot wait until bilateral agreements might be settled!

On 08 March 2018, the CPTPP was officially signed in Santiago, Chile. As international agreements like NAFTA (4 years), COMESA (16 years) or SAFTA (9 years) require a lot of time to be settled, bilateral agreements will do so as well. And there is no guarantee of success. In fact it is rather unlikely. Countries like Malaysia, Brunei and Vietnam took huge steps by agreeing to a regulation of government procurement. How long a bilateral agreement would take, may be shown by the European Union – Vietnam Free Trade Agreement (EVFTA) which took 5 years to reach the final negotiation. However, the EVFTA does not reach the standard of the CPTPP regarding the Chapter on Government Procurement. The creation of a fair, transparent, predictable and non-discriminatory market should not be postponed. The level of GPA might be as high as never before. It is extremely unlikely that a better agreement could be negotiated but more likely that the U.S. will be replaced by China or Russia. Japan’s Prime Minister Shinzō Abe already stated that China would be a possible replacement. But not only Japan would turn towards China. Negotiations of Australia, New Zealand, Vietnam, Malaysia, Singapore, Brunei regarding an FTA with China already began. This is the time for the U.S. to take advantage of the CPTPP to create an alternative economic power balance in Asia against China.

Skipping this agreement would cost America billions of money and would cut off American jobs. Negotiating bilateral agreements would cost America many years, billions of Dollars and it is highly unlikely that it would reach a GPA standard that would be even close to CPTPP.

Does the U.S. have time to wait to rejoin the CPTPP?

The answer is NO!

Sincerely,
Dr. Oliver Massmann
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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.

VIETNAM – DUANE MORRIS ASSISTS CLIENT IN DEVELOPING THE LARGEST INTERTIDAL WIND POWER PROJECT IN VIETNAM

Duane Morris Vietnam has been retained by Trading Construction Works Organization (“WTO”) to advise and assist them in the development of the 350 MW intertidal Ca Mau 1 Wind Farm, one of the largest offshore wind power projects in Vietnam.

Duane Morris Vietnam assisted WTO in the preparation, negotiation and execution of the EPC Contract between our client and China Gezhouba Group Company (“CGGC”). On 11 November 2020, WTO and CGGC signed the EPC Contract, marking the first large-scale intertidal wind power project signed by CGGC in Southeast Asia. Photo from the signing ceremony can be found here:

New Intertidal Wind Project in the Making in Vietnam

The project, located off Ca Mau Province, will add about 1.1 billion kWh to Vietnam’s electricity network each year.

The cross-border Turbine Supply Agreement was signed on 11th December. Currently, Duane Morris Vietnam is advising WTO on the execution of other key documents for the project.

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.