Category: Vietnam – General

1. Wird das neue ÖPP-Gesetz, welches Anfang dieses Jahres in Kraft getreten ist, dazu beitragen, dass ausländische Investitionen diese Projekte fördern.

Ja, das ÖPP-Gesetz 2020 und seine Leitverordnungen enthalten verschiedene Bestimmungen, von denen ausländische Investoren profitieren. Unter anderem, zum Beispiel:

Bestimmungen zum Eintrittsrecht der Kreditgeber unterstreichen die Bedeutung bankfähiger ÖPP Verträge: Das ÖPP-Gesetz sieht vor, dass im Falle einer vorzeitigen Kündigung des ÖPP-Projektvertrags, ein Ersatzvertragspartner ausgewählt werden muss, um den Fortschritt des Projekts zu gewährleisten. Der Kreditgeber muss sich mit dem Staat koordinieren, um einen alternativen Investor auszuwählen.

Detaillierte Investitionsanreize, die ausländische Investoren in Anspruch nehmen können: Artikel 80 des ÖPP-Gesetzes sieht vor, dass Investoren mit Sicherungen bezüglich der Landzugangsrechte, dem Landnutzungsrecht und anderem öffentlichen Eigentum, dem Hypothekenrecht, dem Recht vom Handel des Projekts und seinem Infrastruktursystem ausgestattet werden. Ferner werden Unternehmen, die ÖPP-Projekte durchführen, bei der Nutzung von öffentlichen Dienstleistungen priorisiert und die zuständigen Behörden müssen die Investoren bei der Durchführung der notwendigen Prozeduren unterstützen, um die Priorität zu optimieren.

Das Fremdwährungssicherungssystem gilt für Projekte, die von der Nationalversammlung oder von dem Erlass eines Beschlusses des Premierministers über die Investitionspolitik, abhängig sind. Letzteres gilt für Projekte mit einem investieren Gesamtkapital von mindestens 5000 Milliarden VND, was bedeutet, dass bei allen Projekten, die für ÖPP-Investitionen in Betracht kommen, automatisch das Fremdwährungssicherungssystem gilt.

Mechanismus zur Teilung des Umsatzrisikos

Erreicht der tatsächliche Umsatz mehr als 125% des abgestimmten Umsatzes im Finanzplan des ÖPP-Projektvertrags, teilt sich der Investor mit dem Staat 50% des Anstiegs zwischen den tatsächlichen und den vertraglich abgestimmten Umsatz.

Erreicht der tatsächliche Umsatz weniger als 75% des abgestimmten Umsatzes im Finanzplan des ÖPP-Projektvertrags, teilt sich der Investor mit dem Staat 50% des Rückgangs zwischen den tatsächlichen und den vertraglich abgestimmten Umsatz. Dieser Mechanismus zur Aufteilung der Mindereinnahmen wird angewandt, wenn folgende Bedingungen erfüllt sind:

1. Vertragstyp: BOT, BTO, BOO;

2. Ursache des Rückgangs ist die Änderung von Gesetzen und Richtlinien;

3. Es wurden Maßnahmen zur Anpassung der Preise des Produktes und der öffentlichen Dienstleistung umgesetzt, aber die Gesamtumsätze liegen immer noch unter 75%; und
4. Der Staatliche Rechnungshof hat die Einnahmesenkung geprüft.

2. Wurden diese Abwasserprojekte durch die Änderung des Umweltschutzgesetzes vom November 2020 vorangetrieben und ist es wahrscheinlich, dass es weitere derartige Projekte geben wird?

Ja, man kann sagen, dass die Überarbeitung des Umweltschutzgesetzes ein treibender Faktor für mehr umweltfreundliche Projekte, wie das Abwasserprojekt, ist. Ich denke jedoch, dass die wichtigsten Faktoren die Bedürfnisse des Verbrauchers und der Mangel an inländischen Finanzmitteln für diese Projekte sind. Zu Beginn erfordern Abwasseraufbereitungsprojekte in der Regel einen hohen Finanzierungsaufwand. Investoren können erst nach etwa 10 Jahren Gewinne erzielen, was ziemlich spät ist . Angesichts des raschen Bevölkerungswachstums und der Tatsache, dass nicht genügend Kläranlagen – und zwar solche mit fortschrittlicher Technologie, in Sicht sind, um die mehr als 3 Millionen Kubikmeter Abwasser pro Tag zu bewältigen, braucht Vietnam mehr Abwasserprojekte mit Finanzierung durch ausländische Investoren. In Zukunft werden wir sicherlich noch mehr solcher Projekte sehen, wenn auch mit besserer Technologie

3. Wissen wir, welches ÖPP-Modell bei diesen Projekten zum Einsatz kommen wird. Wird dies durch das neue ÖPP-Gesetz beeinflusst?

Das Modell für diese Projekte hängt von den Gesprächen und Vereinbarungen zwischen ausländischen Investoren und den vietnamesischen Behörden ab. Die Mehrheit der Großprojekte in der Vergangenheit wurden entweder nach dem BT- oder dem BOT-Modell durchgeführt.

4. Ist es wahrscheinlich, dass diese Projekte öffentlich ausgeschrieben werden, und wenn ja, wann?

Ja, es ist sehr wahrscheinlich, dass diese Projekte öffentlich ausgeschrieben werden. Der Zeitplan für diese öffentliche Auftragsvergabe hängt von den Provinzbehörden ab

Dr. Oliver Massmann ist der Generaldirektor von Duane Morris LLC, Mitglied des Aufsichtsrats der PetroVietnam Insurance JSC und der einzige ausländische Anwalt, der vor Mitgliedern der Nationalversammlung in vietnamesischer Sprache spricht.

The State Bank of Vietnam (Ngan hang Nha nuoc Viet Nam, SBV) is the central bank of Vietnam. It is a ministry-level body under the administration of the government. The SBV governor is a member of the cabinet. The prime minister and the parliament of Vietnam (National Assembly) act jointly to nominate the governor of the SBV. The SBV’s principal roles are to:
Support monetary stability and implement monetary policies.
Support institutions’ stability and supervise financial institutions.
Support banking facilities and recommend economic policies to the government.
Support banking facilities for financial institutions.
Manage the country’s foreign exchange reserves.
Manage foreign exchange and gold trading activities.
Manage the borrowing and repayment of foreign loans, the provision of loans to foreign parties and recovery of foreign debts.
Print and issue bank notes.
Supervise all commercial banks’ activities in Vietnam.
Lend State money to commercial banks
Join the Ministry of Finance in issuing government bonds and government-guaranteed bonds.
Act as an agent for the State Treasury in organizing bids and in issuing, depositing and making payment for treasury bonds and bills.
Be in charge of other roles in monetary management and foreign exchange rates.
In 1990 the bank system was reorganized. This process led to a separation of the SBV from other commercial banks and was the start of the establishment of the private banking sector. A small number of major state-owned commercial banks still dominate Vietnam’s banking sector.

However, today a process of privatization is underway and the goal is to reduce the state’s share of ownership step-by-step to at least 65 percent during 2018 – 2020, and 51 percent during 2021 – 2025 under Decision No. 986/QĐ-TTg dated August 8, 2018 of the Prime Minister approving the plan for development of Vietnamese banks up to 2025, vision to 2030.

As of 31 March 2021, the State’s ownership ratios in 4 largest state-owned commercial banks are as follows: (i) 80.99 percent in BIDV, (ii) 74.8 percent in Vietcombank, (iii) 64.46 percent in Vietinbank, and (iv) 100 percent in Agribank.

Foreign ownership restrictions for Vietnamese Credit Institutions

On January 3, 2014, the government-adopted Decree 01/2014/ND-CP on purchase by foreign investors of shareholding in Vietnamese credit institutions. Decree 01 became effective on February 20, 2014 and replaced Decree 69/2007/ND-CP on purchase by foreign investors of shareholding in Vietnamese commercial banks.

In Decree 01, Vietnamese credit institutions, which may offer shares, include:

shareholding credit institutions (i.e., a credit institution established and organized in the form of a shareholding company and include shareholding commercial banks, shareholding finance companies and shareholding finance leasing companies); and
credit institution currently converting its legal form from a credit institution operating in the form of a limited liability company to become a credit institution operating in the form of a shareholding company.
Foreign investor includes foreign organizations [institutions] and foreign individuals. Foreign organizations include:

Organizations established and operating under the laws of a foreign country and any branch of such institutions overseas or in Vietnam; and
an organization, closed-ended fund, members’ fund or securities investment company established and operating in Vietnam with foreign capital contribution ratio above 49 percent. Foreign individual means any person who does not hold Vietnamese nationality.

Decree 01 defines that shareholding ownership [shareholding] includes direct and indirect ownership. However, Decree 01 does not explain clearly the scope of direct and indirect ownership.

In a case of purchase of shareholding by a foreign investor in a Vietnamese credit institution resulting in such foreign investor’s ownership of shares below 5 percent charter capital of the Vietnamese credit institution, a prior approval of the SBV is not required. In other cases, any acquisition by foreign investors of shareholdings in a Vietnamese credit institution requires the prior approval of the SBV.

The shareholding ratio of any one foreign individual must not exceed 5 percent of the charter capital of one Vietnamese credit institution. The shareholding ratio of any one foreign organization must not exceed 15 percent of the charter capital of one Vietnamese credit institution.

Any foreign investor being an organization owning 10 percent or more of the charter capital of any one Vietnamese credit institution is not permitted to assign the shareholding it owns to any other organization or individual within a minimum three year period as from the date of ownership of 10 percent or more of the charter capital in such credit institution.

The shareholding ratio of any one strategic foreign investor must not exceed 20 percent of the charter capital of one Vietnamese credit institution. The investor may not transfer its shares in the Vietnamese credit institution within five years after becoming the foreign strategic investor in the Vietnamese credit institution.

A strategic investor is defined as a foreign organization with financial capacity and whose authorized person provides a written undertaking to have a close connection regarding long-term interests with the Vietnamese credit institution and to assist the latter to transfer to modern technology, to develop banking products and services, and to raise its financial, managerial and operational capacity.

The shareholding ratio of any one foreign investor and its affiliates must not exceed 20 percent of the charter capital of one Vietnamese credit institution. The total shareholding ownership of [all] foreign investors must not exceed 30 percent of the charter capital of any one Vietnamese commercial bank.

The total shareholding ownership of [all] foreign investors in any one Vietnamese non-banking credit institution shall be implemented in accordance with the law applicable to public companies and listed. When there are none specific regulations on the rate of foreign ownership, the maximum rate of foreign ownership will be 49% of charter capital of such institution.

In a special case in order to implement restructuring of a credit institution which is weak [and/or] facing difficulties, in order to ensure safety of the credit institution system, the Prime Minister may, on a case-by-case basis, make a decision on the total shareholding ratio of any one foreign organization [or] any one foreign strategic investor, and the total level of shareholding of foreign investors in any weak shareholding credit institution which is restructured, in excess of the limits described above.

Under the Government’s instruction in 2018, the MoF is required to draft a Government’s decree to allow foreign ownership ratio in commercial banks in Vietnam up to 50 percent. However, this decree would only be finalized and adopted in the fourth quarter of 2019. However, at the time of writing, the Government has not published any decrees allowing for the 50% rate that is foreign investors consider very attractive. Nevertheless, a point worth noting is that Vietnam committed in EU-Vietnam Free Trade Agreement and the EU-Vietnam Investment Protection Agreement to: (i) increase the share ownership ratio of European investors to 49% in two Vietnamese banks (except the aforementioned 4 largest State-owned banks) in the next 5 years; and (ii) after 5 years, there will be no limitation on foreign ownership ratio in Vietnamese commercial banks for European financial institutions. The Agreements were signed in June 2019 and the EU-Vietnam Free Trade Agreement came into force on 1 August 2020. The EU-Vietnam Investment Protection Agreement is pending ratification by EU Member States.

Foreign exchange regulations

The Ordinance on Foreign Exchange, which was enacted by the Standing Committee of the National Assembly in December 2005 and became effective in June 2006, and amended on March 18, 2013, regulates currency exchange activities in Vietnam. The government has promulgated Decree No. 70/2014/ND-CP to provide guidelines for both the Ordinance on Foreign Exchange and its amendments on March 18, 2013.

Decree 70 became effective on September 5, 2014 and replaced Decree No. 160/2006/ND-CP dated December 28, 2006 to provide detailed implementation of the ordinance.

Decree 70 governs the foreign exchange activities of residents and non-residents in current transactions, capital transactions, foreign loan borrowing, use of foreign currency and provision of foreign exchange services, the foreign currency market and rates of exchange, and the management of import and export of gold in Vietnam.

With regards to foreign loan borrowing, the government has also promulgated Decree No. 219/2013/ND-CP dated December 26, 2013 on the management and repayment of offshore loans that are not guaranteed by the government. Decree 219 became effective on February 15, 2014 and replaced Decree 134/2005/ND-CP on the same subject.

Decree 219 governs all businesses that are incorporated under the Enterprises Law, credit institution and foreign bank branches under the Law on Credit Institution, and cooperatives and unions of cooperatives established and operating under the Law on Cooperatives.

Offshore loans under Decree 219 include loans from non-residents under loan agreements, deferred payment commodities sale and purchase agreements, entrusted loan agreements and debt instruments issuance agreements that are not guaranteed by the government. In general, foreign borrowing must comply with the regulations of, and is subject to, registration with the SBV.
However, Decree 219 does not state clearly that requirements and types of loans should be registered, or any licensing/registration procedures. These issues have been addressed by the SBV’s guidelines i.e., Circular 03/2016/TT-NHNN dated February 26, 2016 providing certain guidelines on foreign exchange control in relation to foreign borrowing activities (as amended by Circular 05/2016/TT-NHNN dated April 15, 2014 and Circular No. 05/2017/TT-NHNN dated 30 June 2017). Circular 03 has helped to improve the legal framework for management of the borrowing and repayment of enterprises in general and enterprises not guaranteed by the government. Some highlights of the Circular 03 are:

Loans made in the form of deferred payment for import of goods no longer requires registration with the SBV. However, the opening and use of bank accounts and remittance activities must comply with the requirements of Circular 03.
Loans subject to registration with the State Bank include: (i) mid-term and long-term foreign loans, (ii) short-term foreign loans which are renewed to have loan terms to be more than 01 (one) year; and (iii) short-term foreign loans which are not renewed but loans’ outstanding principal amounts have not been fully repaid prior to or within 10 days after 1 year from the date of first loan withdrawal.
A borrower which is not a foreign invested enterprise must open a bank account for the purposes of the foreign loan at the authorized banks in Vietnam. For foreign invested enterprises, their direct investment capital bank accounts may be used for this purpose.
If the schedule of loan disbursement, repayment or interest payment changes by less than 10 days from the schedule already registered with the SBV, the borrower must only notify its bank, and does not need to register the changes with the SBV. However, if the schedule changes by more than 10 days, then reregistration with the SBV is required.
Circular 03 also allows notification to SBV (instead of change registration) with regards to certain corporate changes of information that has been registered with SBV such as change of address of the borrower within the province/city where it has head quarter, or change of trade names of the relevant banks who provide account services, etc.

The government issued Decree No.88/2019/ND-CP on November 14, 2019 on sanctions of administrative violations in the field of monetary and banking operations. Decree 88 became effective on December 31, 2019 and replaced (i) Decree No.96/2014/ND-CP dated December 12,2014, (ii) Decree No. 95/2011/ND- CP dated December 20, 2011, and (iii) Decree No. 202/2004/ND-CP dated December 10, 2004 on sanctions of administrative violations in the field of monetary and banking operations.

This decree was said to loosen forex and gold trading and relevant activities in Vietnam. According to this decree, monetary penalties in relation to gold and forex trading, price listing/payment/advertising in forex/gold, etc. were significantly reduced i.e., from VND 600 million (approximately $26,000) to VND 250 million (approximately $11,000). For instance, the possible penalty for violations re: trading on gold bars without license is only warning for the first-time getting caught or a possible penalty for violations re: forex activities conducted by credit organizations without licenses may be up to VND 250 million (approximately $11,000) which is about 3 times lesser than the amount stated in Decree 96. On another note, forex/gold relevant to trading violations may be confiscated and certificate of registration for forex agent and business operation license of gold of relevant parties may be also suspended or revoked.

Developments in securities regulation

In early 2007 the first Securities Law of Vietnam (No. 70/2006/QH11, 2007) came into effect, which consisted of 11 chapters and 136 articles (as amended on November 24, 2010). The Securities Law primarily covers domestic issues of Vietnam dong- denominated securities and is, therefore, limited to public issues of securities and does not apply to the private placement of unlisted securities. The term “securities” covers a wide range of valuable instruments, including:
Stocks.
Bonds.
Warrants.
Certificates.
Put and call options.
Futures contracts, irrespective of their form.
Investment capital contribution contracts.

Specifically, the Securities Law governs:
Public offerings of securities.
Listings.
Dealing.
Trading.
Investment in securities.
Securities services.

The establishment and regulation of securities companies and investment funds

The Securities Law 2019’s area of application considers the systems for trading of listed securities and the systems for trading of unlisted securities, organized and run by Vietnam Stock Exchange (VSE) and its subsidiaries. The local regulator, the State Securities Commission, controls and supervises these systems; however, they are independent legal entities. The SSC is a State body that the Ministry of Finance oversees.
The government and the MoF have issued several decrees, decisions and circulars to implement the Securities Law. Under the Securities Law, publicly offered securities in Vietnam have to be denominated in VND. A joint-stock company must satisfy the following requirements to offer its shares publicly for the first time, among others:
a) The contributed charter capital is at least 30 billion VND on the offering date according to the accounting books;
b) The company has profit over the last 02 years and has no accumulated loss on the offering date;
c) There is a plan for issuance and use of capital generated by the offering ratified by the General Meeting of Shareholders;
d) At least 15% of its voting shares have been sold to at least 100 non-major shareholders. If the issuer’s charter capital is 1.000 billion VND or above, the ratio shall be 10%.
dd) Before the offering date, the major shareholders have made a commitment to hold at least 20% of the issuer’s charter capital for at least 01 year from the end of the offering.

On January 10, 2012, the MoF issued Decision No. 62/QD-BTC re: approval of project plan for restructuring of securities companies. This decision was known as a key in the master plan to renovate the stock market/sector, insurance market and securities companies which have been submitted to the Party Politburo by the MoF. According to this decision, securities companies shall be evaluated based on available capital/risk/accumulated losses index and categorized into three groups (normal, control and special control).

The decision does not provide any clear restructuring plan but promulgates certain controlling methods and penalties applicable to securities companies not satisfying the required available capital/risk index such as disclosure/report requirements, supervising or license withdrawal.. On 28 February 2019, the Prime Minister issued Decision No.242/QD-TTg, approving the plan for restructuring.

Decree No. 155/2020/ND-CP was issued on 31 December 2020 to provide guidelines for Securities Law 2019 and the Law amending certain articles of the Securities Laws on offers for sale of securities, listing, trading, business and investment in securities, and services in relation to securities and securities market. This decree abolished Decree No. 58/2012/ND-CP dated July 20, 2012 and Decree No. 60/2015/ND-CP dated 26 June 2015.

Decree 155 does not limit foreign ownership applicable to public companies engaging in business lines that don’t have foreign-ownership threshold in Vietnam, and allow foreign companies to invest in government’s and companies’ bonds in Vietnam.

Public offerings

To open the procedure for public offering it is necessary to file an application in the form of a registration statement, which includes:
The prospectus.
The audited financial statements for the preceding two fiscal years.
The issuer’s constitutional documents and relevant corporate resolutions.
The main contents of a prospectus are prescribed in Circular No. 120/2020/TT-BTC dated 31 December 2020 of the MoF providing guidance on listing of securities on stock exchanges. Foreign investors should be aware of the lack of fixed standards for financial statements and accounting in Vietnam, which can result in inconsistencies in financial reporting and quality levels.

Private placements

A private placement is defined in the Securities Law 2019 as an arrangement for offering securities to less than one hundred investors, not including professional securities investors or for offering to professional investors only.

Securities Law 2019 provides conditions for a private placement made by public companies as follows:

a) There is a decision of the General Meeting of Shareholders to ratify the plan for issuance and the plan for use of capital generated by the private placement with specific criteria and quantity of investors;
b) The private placement is only available to strategic investors and professional investors;
c) The transfer of privately placed shares, convertible bonds and warrant-linked bonds is limited to 03 years for strategic investors and 01 year for professional investors from the ending date of the private placement, except for transfer between professional investors, transfer under an effective court judgment or decision, arbitral decision, and transfer due to inheritance as prescribed by law;
d) There is an interval of at least 06 months between two private placements of shares, convertible bonds, warrant-linked bonds;
dd) The ratio of holding of shares, conversion of bonds into shares and execution of warrants by foreign investors is conformable with law.

If an application file is incomplete and invalid, the competent State authority shall, within five days from the date of receipt of the application file for registration of a private placement of shares, provide its opinion in writing requesting the issuing organization to amend the file. The date of receipt of the valid and complete file shall be the date on which the issuing organization completes amendment and addition to the file.

Within 15 days from the date of receipt of the valid and compete file for registration, the State authority provides notification to the registering organization and publish on its website the private placement of shares of the registering organization. The issuing organization shall, within 10 days from the selling tranche completion date, submit a report on the results of the private placement to the competent State authority on the standard form annexed to Decree 155/2020/ND-CP.

Conditions for listing on Vietnam Stock Exchange (which has two subsidiaries being Hanoi Stock Exchange and Ho Chi Minh Stock Exchange)

A company may have its shares listed if:
a) It is a joint stock company whose contributed charter capital at the time of listing application is at least 30 billion VND according to the latest audited financial statement and its net worth is at least 30 billion VND according to weighted mean of buying price of shares in the latest public offering as prescribed by this Decree, or the average reference price of shares traded on UPCOM over the last 30 sessions before the application is submitted or the weighted mean of buying price in the first offering of the equitized enterprise.
b) The GMS has approved the listed; shares have been traded on UPCOM for at least 02 years unless the applicant has made public securities offering or equitized;
c) ROE of the year preceding the application year shall be at least 5% and the business performance of 02 years preceding the application year is profitable; there are no debts that have been overdue for more than 01 year up to the application date; there is not accumulated loss according to the latest audited annual financial statement or examined mid-year financial statement in case the application is submitted after ending date of the period covered by the mid-year financial statement;
d) Unless the enterprise is equitized, the applying organization shall have at least 15% of voting shares being held by at least 100 shareholders other than major shareholders; in case the organization’s charter capital is at 1000 billion VND or over, the ratio shall be 10%;
dd) Shareholders that are individuals, organizations represented by President of the Board of Directors, members of the Board of Directors, Chief Controller, Controllers, General Director/Director, Deputy Director/Deputy General Director, chief accountant, Financial Director and people holding equivalent managerial positions shall have commitment to keep holding 100% of the shares they are holding for 06 months from the first trading date of on the Stock Exchange and 50% of these shares for the next 06 months, not including the state-owned shares owned by these individuals;
e) The company and its legal representative have not face penalties for 02 years before the application date for the violations specified in Article 12 of the Law on Securities;
g) There is a securities company that provides listing advisory services, unless the applying organization is a securities company.

Registration at Vietnam Stock Exchange (VNX):

Companies wishing to register to list securities must lodge an application file for registration for listing with the VNX. An application file for registration to list shares shall comprise the following key documents, among other things:
General meeting of shareholders’ approval;
Register of shareholders, as entered one month prior to the date of lodging the application;
Prospectus;
Undertaking of certain shareholders such as members of the board of management or board of controllers, the director (general director), deputy director (deputy general director) and the chief accountant of the company, etc. to hold 100 percent of the shares they own for six months from the date of listing and 50 percent of this number of shares for the following six months;
Certificate from the Securities Depository Centre confirming registration by the institution and deposit of the shares at such Centre; and
Written consent from the State Bank in the case of a shareholding credit institution.
The VNX/HOSE/HNX shall approve or refuse to approve an application for registration for listing within 30 days from the date of receipt of a complete and valid application file, and in a case of refusal shall specify its reasons in writing.

Decree No. 155/2020/ND-CP dated 31 December 2020 on foreign ownership in stock market

In April 2009, the Prime Minister issued Decision 55/2009/QD-TTg governing the purchase and sale of “securities in Vietnam’s stock market”. It stipulates the difference between local investors and foreign investors, in accordance with foreign-invested local investment funds. It also states the 49 percent rule. This means that local investment funds and local securities investment companies are considered foreign investors if foreigners hold more than 49 percent of the interest of a corporation.

The above limitation of 49 percent was removed on September 1, 2015 under Decree No. 60/2015/ND-CP, i.e., generally there is no limitation on foreign ownership ratio except for “conditional” sectors. In particular, the limitation would be subject to the WTO commitments or other specific domestic law (e.g., the 30 percent cap in the banking sector). Under Decree 155, the above limitation is elaborated as follows:

Maximum foreign ownership ratio in a public company:
a) If the business lines of the public company are regulated by a treaty to which Vietnam is a signatory, the treaty shall apply;
b) If the business lines of the public company is regulated by regulations of law which specify foreign ownership ratio, these regulations shall apply;
c) If the business lines of the public company are on the list of restricted market access, regulations on foreign ownership ratio of each category shall apply. If foreign ownership ratio limits are not specified in such regulations, the maximum foreign ownership ratio in the company shall be 50% of charter capital;
d) If the public company does not fall into any of the cases specified in Points a, b, c, there is no maximum limit for foreign ownership ratio;
d) In case the public company has multiple business lines that are subject to different foreign ownership ratio limits, the foreign ownership ratio must not exceed the lowest limit among them;
e) In case the public company imposes a foreign ownership ratio limit that is lower than that specified in Point a, b, ,c d, dd, it must be approved by the GMS and specified in its charter.
Foreign investors may invest without limits into debt instruments of the Government, government-backed bonds, municipal bonds, corporate bonds, fund certificates, shares of investment companies, derivative securities, DRs and secured warrants, unless otherwise prescribed by relevant laws.

Circular51/2021/BTC dated 30 June 2021

At the end of 2008, two years after the first Securities Law, the SSC and the MoF enacted Decision 121/2008/QD-BTC to make the market more interesting for foreign investment as well as to penalize those who disobey the Securities Law. Decision 121 governed the activities of foreign investors in the Vietnamese securities market.

On December 6, 2012, the MoF adopted Circular 213/2012/TT-BTC governing foreign investors’ activities in Vietnamese securities market. Circular 213 became effective on February 15, 2013 and replaced Decision 121.

On August 18, 2015, the MoF issued Circular 123/2015/TT-BTC governing foreign investment activities in Vietnamese securities market (became effective on October 1, 2015), to guide Decree 60 and replace Circular 213. On 16 August 2021, Circular 123 was replaced by Circular 51 of 2021.

Circular 51 provides detailed documents and procedure for foreign investors to operate in the Vietnam’s stock exchanges. The circular streamlines the procedures for market participation of foreign investors in the Vietnam’s stock market by reducing the amount of necessary documentation and simplify the procedure. For example, the circular removes the need to translate documents into Vietnamese by allowing them to be submitted in English.
The circular sets out that foreign investors are required to apply for the Securities Trading Code (STC) before trading shares, bonds or other types of securities under the securities market regulations.

Notification procedure on foreign ownership limits (FOL)

Circular 155 requires that public companies are responsible for determining the applicable FOL. Following the determination of the FOL which is applicable to them, companies must file a notification dossier with the State Securities Commission (SSC). This dossier includes: (i) extracted information on business lines as uploaded on the National Business Registration Portal and the electronic address linking to such information; and (ii) Minutes of Meeting and the Resolution of the Board of Management approving the unrestricted FOL (if the company does not wish to maintain an FOL) or Minutes of Meeting and the Resolution of the General Shareholders’ Meeting approving and the charter providing for the specific FOL (if the company wishes to maintain FOL). The SSC will have 07 working days to acknowledge in writing the notification on FOL.

If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the general director of Duane Morris Vietnam LLC.

1. Is the new PPP law that came into effect earlier this year likely to help encourage foreign investment in these projects?

Yes, the 2020 PPP Law and its guiding Decrees contain various provisions that benefit foreign investors. Among others, for example:

Provision on lenders’ step-in right highlight the importance of bankable PPP contracts: PPP Law sets forth that in case of termination of PPP project contract ahead of the deadline and it is required to select a replacement contractor to ensure the progress of the project, the lender must coordinate with the State to select the alternative investor.

Detailed investment incentives that foreign investors can enjoy: Article 80 of PPP Law specifies that investors are provided with security regarding land access rights, right to use land and other public properties, property mortgage right, right to trade the project and its infrastructure system. PPP project enterprises are also given priority to utilize public services for implementation of the project, and competent agencies must assist investors in carrying out necessary procedures in order to optimize this priority.

Foreign currency balance-ensuring scheme is applicable to projects subject to the National Assembly or the Prime Minister’s issuance of decision on investment policy. The latter applied for projects with total invested capital of at least VND 5000 billions, suggesting that all power projects eligible for PPP investment are automatically eligible for this foreign currency scheme. In addition, there is a ceiling of 30% to be imposed for all PPP projects.

Revenue risk sharing mechanism

When the actual revenue reaches more than 125% of the revenue in the financial plan of the PPP project contract, investor to share with the State 50% of the increase between actual revenue and committed revenue in the contract.

When the actual revenue reaches less than 75% of the revenue in the financial plan of the PPP project contract, the State to share with investor 50% of the decrease between actual revenue and committed revenue in the contract. This revenue reduction sharing mechanism is applied when the following conditions are met:

1. Type of contract: BOT, BTO or BOO;
2. The cause of loss is change in laws and policies;
3. Measures to adjust product and public service prices and contract terms have been implemented but the total revenue is still less than 75%; and
4. The State Audit has audited the revenue reduction.

2. Have these wastewater projects been driven by the November 2020 changes to the environmental protection law and are we likely to see further such projects?

Yes, it can be said that the revision to environmental protection law is a pushing factor for more environmental-friendly projects such as wastewater treatment. However, I think the most important factor is consumers’ needs and the lack of domestic funding for these projects. Wastewater treatment projects tend to require a lot of funding in the beginning and investors can only receive profits after around 10 years that is quiet late. With rapidly growing population and not enough treatment plants, and those with advanced technology, in sight to accommodate more than 3 millions cubic metric of wastewater per day, Vietnam calls for more wastewater projects with funding from foreign investors. We will definitely see more of such projects in the future, albeit with better technology.

3. Do we know what model PPP these projects are likely to use and has that been influenced by the new PPP law?

The model of these projects will depend on discussion and agreement between foreign investors and the Vietnamese authorities. Most of big projects in the past follow either BT or BOT route.

4. Is it likely these projects will be publicly procured, and if so, when?

Yes, it is highly likely that these projects will be publicly procured. The timing of such public procurement depends on provincial authorities.

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Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, a Member of the Supervisory Board of the PetroVietnam Insurance JSC, and the only foreign lawyer to address members of the National Assembly in the Vietnamese language.

1. What do you think about recent rumors that factories of foreign corporations intend to move their production from HCMC to other countries due to the impact of Covid-19?

In 2020, thanks to its outstanding Covid-19 prevention, Vietnam became one of the most attractive destinations for foreign investors looking to move its production out of pandemic-ridden China. Coupled with the enforcement of the EVFTA, Vietnam was set to be the new manufacturing hub of South East Asia. However, since May 2021, the Covid-19 situation in Vietnam, especially Ho Chi Minh City, took a rapid U-turn that led to nationwide lockdown for 4 months. Factories that wished to continue production must have their employee work and live onsite, while office workers worked from home mostly. Other issues include shortage in material supply, contact restriction between enterprises and customers, expats unable to enter Vietnam,… With the sudden disruption to operation and increased costs to ensure workers’ safety and needs onsite, enterprises found themselves having to find a more efficient working way. Some started transferring part of their orders to China, some suspended their process from moving from China to Vietnam and some are looking at alternative countries like Philippines.

2. In your opinion, what major factors will likely cause these corporations’ move?

In a survey of foreign enterprises in Vietnam, to return to operation, 51% of businesses said they need at least 6 months to return to normal operations. 62% of businesses said they would stop operating if the situation did not improve in the next 12 months. 65% of them will stop working immediately if in the next 3 months the situation has not improved.
So the most important factors that will cause these corporations’ move in the near future is if the Covid-19 situation in Vietnam does not become well-controlled soon. The government should let foreign businesses clearly see the anti-epidemic plans and measures in each phase, as it can greatly support the business’s plan.

3. What factors make the remaining large brands like Néstle, Samsung, or Tetra Pak, LG continue to invest in Vietnam?

First of all, it is not easy to immediately move a production to another country. Companies may look to other alternative destinations but will keep an eye on the existing location to see if there’re any considerable new improvements. Second, the Covid-19 situation in Vietnam has greatly improved with most of the population got at least the first jab of vaccination. Third, the Government has been issuing favourable policies on tax and fees for businesses suffering from the consequence of the corona virus pandemic. It is aimed that by the end of 2021, at least 01 million businesses will have access to favourable credit policies, reduction or termination of payment of tax, land fees as well as electricity, water, telecommunication charges.

For example, the latest draft of the Ministry of Planning and Investment on this matter covered the following points to support to cut costs, remove difficulties in cash flow for businesses:
_ Propose policies suspending or reducing the social insurance premiums in 2021 for businesses until June 2022.
_ Develop a plan to support air transport enterprises, and report to the Prime Minister in September 2021.
– Requesting shipping companies to publicly and transparently list shipping rates to eliminate unreasonable increase in freight rates that lead to cost burden for enterprises
_ Reduce of electricity prices for goods warehouses of logistics and processing enterprises in the agriculture, forestry, fishery and a number of commodity industries with export turnover of over USD 1 billion USD. Continue to reduce electricity prices for tourist accommodation establishments.
– Expeditiously implement the issued policies on relaxation and reduction of taxes, fees, charges and land rents; implement preferential tax policies for imported goods to finance COVID-19 prevention and control after being approved by the Government.
– Extend the deadline for paying excise tax on automobiles manufactured or assembled in Vietnam. Continue to reduce registration fees for domestically manufactured or assembled cars for an additional period of time in line with the COVID-19 pandemic.
_ Research to allow travel businesses to temporarily withdraw deposits for domestic and international travel and tourism services; reduce deposit withdrawal settlement time from 60 days to 30 days; continue to extend the reduction of the license fee for travel service business and issue tourist guide cards until the end of 2021.
_ Continue to administer monetary policy to control inflation, contributing to stabilizing the macro-economy; encourage credit institutions to continue reducing lending interest rates for existing loans and new loans to support production and business.
_ Supplement policies on debt rescheduling, exemption and reduction of interest and fees, keeping the same debt group for customers affected by the Covid-19 epidemic
_ Research and consider the exemption of trade union fees for members of businesses affected by the COVID-19 pandemic in 2021 and 2022

4. What production shift scenarios do you predict may happen in the near future?

If Vietnam can effectively control the corona-virus pandemic in the next 6 months, I believe Vietnam will regain its position as one of the most ideal investment locations in South East Asia.

5. What should the Vietnamese government do to make production and business of foreign corporations stable?

The government must always listen to enterprises’ difficulties and guide them on how to solve it. It is imperative to reopen the economy as soon as possible while ensuring that businesses are conducted safely to prevent the spread of Covid-19. Vietnam has started to apply vaccination cards that allows people to move freely after they have had 2 vaccine injections. Policies that assist foreign enterprises to overcome issues caused by the pandemic as well as policies that assist them to reopen operation and achieve target growth are always welcome.

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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.