Category: Vietnam – General

Posted on by Dr. Oliver Massmann

VIETNAM – MOIT IS REVIEWING NEW FEED IN TARIFFS (FiTs) FOR WIND POWER PROJECTS

Recently, the Government Office has received proposals from several provincial People’s Committees on extending the current wind FiTs because many projects are being delayed due to the Covid-19 pandemic, especially the forth wave of Covid-19 since May 2021 that resulted in (almost) nationwide lockdown. Under Decision 39/2018/QD-TTg of the Prime Minister regarding development of wind power projects in Vietnam, the current wind FiTs end on 1 November 2021.

The current FiTs are as follows:

With regard to onshore wind power projects: The purchase price at the delivery point is VND 1,928 per kWh, excluding VAT and equivalent to 8.5 UScents/kWh according to the USD/VND exchange rate quoted by the State Bank of Vietnam on 30 August 2018 – USD 1 = VND 22,683. The electricity purchase price shall be adjusted according to the VND/USD exchange rate.

With regard to offshore wind power projects: The purchase price at the delivery point is VND 2,223 per kWh, excluding VAT and equivalent to 9.8 UScents/kWh according to the USD/VND exchange rate quoted by the State Bank of Vietnam on 30 August 2018 – USD 1 = VND 22,683. The purchase price shall be adjusted according to the VND/USD exchange rate.

Upon the provincial People’s Committees’ proposals, the Government Office has instructed the Ministry of Industry and Trade (MOIT) to review these proposals and report back by 30 September 2021.

Since 2020, MOIT has proposed to extend the current FiT deadline to 31 December 2023. After 2023, MOIT proposes wind energy projects to apply auction, bidding methods. MOIT also proposed to assume the responsibility of calculating new FiT rate for wind power projects, applicable from 1 November 2021 to 31 December 2023 in case the Prime Minister doesn’t agree to extend the current FiT rate.

The need to extend the deadline for current FiT rates is essential because the projects waiting to be included in the PDP VIII is unlikely to have commercial operation date before November 2021, because the construction of wind power projects takes a long time – 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 when there has been unexpected delay of equipment delivery due to the global pandemic.

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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.

Posted on by Dr. Oliver Massmann

VIETNAM – THE GOVERNMENT ENCOURAGES TRADE AND INVESTMENT FROM AUSTRIA

How strong is the Vietnamese-Austrian economic relation?

On 1 December 2022, the two countries will celebrate their 50 years of diplomatic relations.

In terms of investment relations, Austria has around 37 projects with a total investment capital of about 150 million USD, focusing mainly in the fields of manufacturing and processing industry and science and technology. In terms of trade relations, Austria has always been one of the important export markets of Vietnam and is currently in the group of 5 largest export markets of Vietnam in the EU. Bilateral trade turnover in 2020 reached 3.2 billion USD, 13 times higher than in 2010 and this is an impressive number in the context of the COVID-19 epidemic.

The Memorandum of Understanding between the Ministry of Industry and Trade of Vietnam and the Austrian Minister of Economy and Digital on cooperation in the field of Industry 4.0 and e-commerce, signed in the witness of the two Prime Ministers is an important foundation for the two sides to implement cooperation activities in the coming time.

Since the EVFTA took effect, the import and export turnover between Vietnam and Austria has increased. Vietnam is now the largest trade partner of Austria in Southeast Asia, with imports from the latter amounting to nearly 1 billion EUR. Austria is carrying out internal procedures to soon ratify the Investment Protection Agreement between Vietnam and the EU (EVIPA)

With a population almost 100 million people and rapidly growing, Vietnam is a potential market for Austrian businesses to promote their products and expand their business. Moreover, Vietnam is also a gateway for Austrian products and services to access the ASEAN market of 670 million people. With the advantage of being considered by many investors as an alternative to China as an investment location, Vietnam has developed suitable preferential policies to attract foreign investment.

In the most recent visit of the Vietnam Government to Austria last week, the two sides reaffirmed their desire to cooperate in vocational and labor training, especially in the fields of information technology and nursing – two areas where Austria has great demand for qualified workers in the future.

The two sides agreed to encourage relevant agencies to soon launch a pilot project on the implementation of the Austrian vocational training model in Vietnam. According to this model, the program will be built in the direction of spending 20% of the time studying at the training institution, the remaining 80% of the time will be spent for trainees to practice combining practical work at enterprises and other employers

Who are the pillars of Vietnam expat community in Austria?

Former Vietnamese Ambassador to Austria Le Dung
Vietnamese Ambassador to Austria Nguyen Trung Kien
Ho Xuan Thai – the most successful businessman in Austria – owner of DOTS, a restaurants/events management company

Which companies are the big players in the Vietnamese-Austrian relations?

Austria printed circuit board manufacturer AT&S has been studying several locations in Vietnam to build two factories worth €1.5 billion ($1.78 billion).

Cable car manufacturer Doppelmayr provided 25 cable cars to Vietnamese tourism industry, includes the world-record 215 meters high cable car pillar.

Fire-fighting equipment manufacturer Rosenbauer has been delivering to the country for 30 years.

Engel is a company that provides injection-molding solutions for the electronics sector. Engel has a sales and service branch in Ho Chi Minh City.

Notable start-ups include: Andritz, AVL List or Vamed

Which roles do the big cities like Hanoi, Ho-Chi-Minh-City or Haiphong play?

The Trade Office of the Austrian Embassy made its debut in Ho Chi Minh City on 16 May 2019 with the aim to connect business communities of Vietnam and Austria. The Trade Office is named IC- Steiermark Centre (ICS). The ICS’s adding Vietnam into its 2021 focus program could open up a series of events such as seminars and trips between two countries in the near future. The Austrian Embassy is located in Hanoi – the political center of Vietnam. Hai Phong is a port city where the majority of northern produce is exported from there to Europe.

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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.

Posted on by Dr. Oliver Massmann

VIETNAM – Power Development Planning VIII (“PDP8”) – Vietnam Government’s plan to De-carbonize the Country – what you must know:

Question#1. What impact is PDP8 likely to have on the country’s efforts to decarbonize the economy?

Answer#1:
The draft Power Development Planning VIII (“PDP8”) 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.

As of 2020, the country’s total generation capacity is about 69.3 gigawatt (GW), including 16.5 GW of solar power (approx. 24% of the total capacity) and 0.6 GW of wind power. More than 50% Vietnam’s electricity generation came from coal in 2020. Vietnam’s reliance on coal-fired power remains heavily to meet rapidly increasing electricity demand. Hydroelectric generation is also significant as the country is home to a number of large rivers. Non-hydro renewable sources such as wind and solar made up 5% of Vietnam’s electricity generation in 2020. Under the draft PDP 8, Vietnam plans to increase solar capacity to 18.6 GW and wind capacity to 18 GW by 2030.

Question#2. Does PDP8 target specific regions of the country? Are these regions that are more likely to be impacted by the transition to a low carbon economy?

Answer#2:
Yes, one of the most notable differences between the Draft PDP 8 and Revised PDP 7 (the latest official national power development planning) is the level of power demand between the North and the South. According to PDP8, 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. As a result, this will significantly affect the strategy in PDP8 to develop the transmission grid and generation sources (including RE sources) to meet the demand.

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%.

The draft PDP8 appears to concern a surging oversupply of solar power in 2030 in many regions, such as the Central Highlands (estimated 1,500 MW but registered 5,500 MW), the South Central (estimated 5,200 MW but registered 11,600 MW), or the Southern (estimated 9,200 MW but registered 14,800 MW). The wind power shares the same situation as the registered capacity exceeds normal estimated capacity in Central Highlands (estimated 4,000 MW but registered 10,000 MW) and Southern (estimated 6800 MW but registered 17,000 MW). Accordingly, the draft PDP8 must solve this unbalance to ensure the sustainable development of the renewable energy sources in Vietnam. It is expected that future policy on renewable energy will base on auction rather than FIT.

For example, below is the draft policy for solar power projects. In late January 2021, the Ministry of Industry and Trade (“MOIT”) issued the draft Decision of the Prime Minister guiding the selection of investors implementing solar power projects under the bidding mechanism (“the Draft”). According to the Draft, the Decision would be applicable to projects with grids connected directly to the national power network. The Ministry of Industry and Trade shall coordinate with the Electricity of Vietnam and the People’s Committees of localities to organize the formulation and approval of the renewable energy power source development plan for a period of 5 years and every 2 years to serve as a basis for the bidding system. In addition, every 02 years, the Ministry of Industry and Trade shall issue a Price Framework for electricity generation in order to determine the ceiling price for bidding to select investors of solar power projects with COD in the next 02 years. The plan for development of renewable energy power sources for a period of 5 years shall include the total capacity scale for each renewable energy power source in the 5-year period, the total capacity scale for each renewable energy power source for each load region (8 regions) and a list of transmission lines and substations (220 kV at least) to be put into operation for a period of 5 years. The 02-year plan shall have similar content but for a 2-year period only and shall be more provincial specific.

Question#3. Were issues of economic, racial, and gender equity considered in the development of PDP8?

Answer#3:
Yes, any policy of the Government must consider these issues but it is very challenging to identify whether they are well reflected into the policy including PDP8. This is a very broad and difficult question.

Question#4. Was there a debate amongst political leaders about the costs and benefits of PDP8?

Answer#4: Yes, of course. It appears that the new Government now has different views and priorities than the former and as a result the PDP8 must be revised to reflect such priorities.

As you may know, in late March 2021, the very first draft of PDP8 PM Decision (“Draft Decision”) has been published through unofficial sources (i.e. not through the Ministry of Industry and Trade (MOIT)’s website). Such PM Draft Decision was planned to be signed off at the end of March during the last days of Prime Minister Nguyen Xuan Phuc’s administration, but it was delayed as the hand-over to new administration was already under way. It appeared that the investors and LNG-to-power projects in this first PM Draft Decision were scaled down comparing to those in the PDP8 proposal published by Ministry of Industry and Trade (MOIT) earlier.

On 23 April 2021, the Deputy Prime Minister (DPM) Le Van Thanh directed a Government’s meeting on the PDP8 and concluded that, among others, PDP8 must be (i) updated with qualifications for prioritized projects, and (ii) revised to reasonably review and allocate development of power sources, especially LNG-to-power projects in PDP8 in order to ensure the competition, optimization on development of power system. DPM asked the MOIT to careful review and digest opinion from EVN in its official letter No. 1645/EVN-KH dated 2 April 2021. Finally, the DPM required the MOIT to submit the updated PDP8 proposal prior to 15 June 2021.

Unfortunately, due to Covid-19 situation and heavy workload on updating the PDP8 proposal, MOIT failed to submit a revised proposal to the Government for consideration. On 17 June 2021, the MOIT Minister arranged a press meeting to update the PDP8 progress and planned to submit the revised PDP8 proposal to the Government within June 2021. So far, based on our intel, the MOIT is still reworking its draft and PDP8 is expected to be approved COB this year ideally.

Question#5. What role did various stakeholders (e.g., business, not-for-profits) take in advocating for or against PDP8 or trying to influence its development?

Answer#5:
Yes, there are many stakeholders here, e.g., EVN, local developers, business communities (such as Chambers and VBF) and state authorities. However, please kindly note that the draft PDP8 is mainly drafted by the Energy Institution (NB: an institution under EVN until it was taken over by MOIT since 2010). The MOIT was collecting opinion from all stakeholders for the draft PDP8 made by the Energy Institution. It is worth noting that the opinion from EVN is always critically important as it (including its affiliates and subsidiaries) still remains the position of a monopoly wholesaler in the market. The new Government requested the MOIT to revisit EVN’s opinion for revising the current draft PDP8.

Question#6. Which key stakeholders were in favour of PDP8? How did they organize and influence decision making?

Answer#6:
Yes, it is very challenging to answer black or white on this question. PDP8 is the prioritized policy of the Government for the energy sector. Thus, there is always a favorable trend for this policy to come out soon. We however do note that there are different views on the contents of the PDP8, but not an issue of support or opposition.

Question#7. Which key stakeholders were against PDP8? How did they organize and influence decision making? Were there specific measures to address their concerns?

Answer#7:
Yes, it is very challenging to answer a black or white question. PDP8 is the prioritized policy of the Government for the energy sector. Thus, there is always a favorable trend for this policy to come out soon. We however do note that there are different views on the contents of the PDP8, but not an issue of support or opposition.

Question#8. Has PDP8 been well-received by the public?

Answer#8:
Yes, it has been well received by the public. However, the foreign invested business communities still have some concerns, among others, over the current PDP8:
• No clear plan for variable renewable energy in the technology mix. PDP8 must ensure Vietnam planning remains cutting-edge to include full representation of variability and assessing power system reliability.
• No plan for nuclear power.
• Need to construct a regulatory and permitting environment that attracts private sector investment in clean energy generation and energy efficiency.
• Need a clear policy to ensure EVN to share the market risks: e.g., a bankable (take or pay) power purchase agreement with generators.
• Need to halt further development of coal based projects: it is recommended to suspend the approval of any new coal thermal power plants and conducting a strategic review of those that are already approved but which do not have financing or power purchase agreements.
• Need to develop a flexible transmission network in view of the market orientation and increased variable renewable energy.
• Need to build schemes to address the uncertainties: from fuel prices to demand growth and oversupply and curtailment.

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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.

Posted on by Dr. Oliver Massmann

VIETNAM – THE GOVERNMENT ISSUES FAVORABLE POLICIES ON TAX AND FEES FOR BUSINESSES AMID THE WORST COVID-19 OUTBREAK

Recently, the Ministry of Planning and Investment issued the Draft Decree on the Government’s incentives 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 favorable credit policies, reduction or termination of payment of tax, land fees as well as electricity, water, telecommunication charges. The Draft Decree is pending the Prime Minister’s approval.

Under the Draft Decree, there are four key groups of tasks for government agencies.

Group 1: Implement flexible and effective measures to prevent and control the COVID-19 pandemic, creating conditions for enterprises to stabilize and maintain production and business activities.

Group 2: Ensure stable production, smooth and efficient circulation of goods, overcome supply chain disruptions

_ Apply fast-track customs clearance for aid or donation from abroad for the healthcare sector to deal with the pandemic
_ Allow enterprises to submit scanned copies certified by digital signatures for documents that must be submitted as originals in the form of paper/notarized/certified original to resolve bottlenecks of customs clearance of goods

Group 3: 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

Group 4: Regarding labor issues, experts

_ Propose policies to flexibly apply and relax regulations and conditions on the grant and extension of work permits for foreign experts working in Vietnam
_ Adjust regulations on tax finalization and bad debt and for borrowing capital to pay wages to employees when restoring production and business.

This is the second Draft Decree issued by the Ministry of Planning and Investment upon collection and investigation of opinions from Deputy Prime Minister Vu Duc Dam, Deputy Prime Minister Le Van Thanh and opinions of 15 ministries. As such, it has reflected the current situations as well as takes into consideration the cities’ and provinces’ proposals. The Vietnam Government has continuously proved that it accompanies the business community to immediately implementing measures to remove difficulties and bottlenecks in production and business with the motto “soonest – most effective” in order to minimize damage and negative impacts on the business sector.

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.

Posted on by Dr. Oliver Massmann

VIETNAM – THE LATEST DRAFT DECREE ON PROVISION OF INTERNET SERVICES AND CROSS-BORDER INFORMATION

On November 2020, we reported on the first draft decree amending and supplementing Decree No. 72/2013/ND-CP and Decree No. 27/2018/ND-CP regarding the management, provision and use of Internet services and online information. Since then, the business community, among others, have been vocal on the shortcomings of the draft and offered up many comments and suggestions to address concerns. Taking these into accounts, on 5 July 2021, The Ministry of Information and Communications issued the second Draft Decree amending and supplementing Decree No. 72/2013/ND-CP and Decree No. 27/2018/ND-CP (“the Draft”). The Draft will affect telecommunications businesses, publishers of video games and businesses that engage in producing and utilizing electronic newspapers, social networks, and sales websites.

Notable provisions in the Draft

On Aggregate information:

1. Aggregate information is information retrieved from Vietnamese press sources and must relate to the following 08 sectors: science, technology, economy, culture, sports, entertainment, advertising and social security.

2. Organizations’ internal websites and specialized website providing aggregate information must obtain aggregate information website license. This measure aims to prevent internal websites from illegally posing as aggregate information websites in order to lure in viewers. Multinationals which usually have their own global websites for staff members across the world must take extra caution when handling information already published by the Vietnamese press.

3. Aggregate information websites are also required to have electronic tools to receive and handle users’ complaints about content and copyright.

4. Press agencies that have electronic newspapers/magazines are not allowed to have aggregate information websites.

On Re-releasing published contents:

1. Aggregate information websites, application distribution stores and social networks can only re-released content published by Vietnamese press sources at least 30 minutes later than the time of publishing the source content. Re-released content must be removed immediately after the source content has been removed.

2. Agreggate information must state clearly the author’s name, the source’s name, the time of posting and place a link to the source content right below the re-released content. Aggregate information must not include readers’ comment of the re-released content (except for aggregate information websites constituted by press agencies).

3. Aggregate information must not concern other localities. This measure is somewhat impractical given the fact that in this era global events closely interwove with and have direct effects on people’s everyday life, this is especially true for international organizations, and thus viewers are increasingly looking for information about other countries. For example, the war in Yemen can drive up oil price in Vietnam or the gold price fluctuates with the hourly results of the US presidential election. Putting such measure could hinder aggregate information website’s business growth.

On Cross-border provision of public information:

Foreign entities engaging in this service must comply to Vietnam laws. Failure by investors in handling violating information can lead to the Ministry of Information and Communications proactively implementing technical interventions.

Foreign organizations and individuals providing cross-border information services that have rented a place to store digital information in Vietnam or have regular access by a number of people in Vietnam (UV- Unique Visitor) within 01 (one) month from 100,000 (one hundred thousand) people or more, have the obligation to:

– Notify/confirm the notice of operation with the Ministry of Information and Communications and coordinate with the Ministry of Information and Communications to handle violating information;
– Have a process to prevent and remove infringing services and information within 24 hours upon request from Vietnamese competent authorities.

On Social networks:

1. Social networks are classified into social networks with high levels of interaction and ones with low level of interaction based on the monthly number of interaction or registered users. Social networks with high levels of interaction (at least 1 million interactions and/or 10,000 registered users per month) have to obtain a Social Network License issued by the Ministry of Information and Communications. Social networks with low levels of interaction need only notify the Ministry of Information and Communication on its operation.

2. Only licensed social networks have the right to charge fees and perform livestream services. The Ministry of Information and Communications will also embed a tool to monitor interaction levels for licensing-related purpose.

These measures, if come into effect, would seriously hamper the development of new social networks that rely on service fees in order to further expand their business. The possibility that such new social networks have to go through lengthy administrative procedures before they can carry out any fees collection and the possibility that entities have to amend their information technology system to accommodate the Ministry’s monitoring tool would not only cause them financial burdens but also interfere with their freedom of doing business.

3. Social network owners must have a solution to prevent members from taking advantage of social networks for journalistic activities. According to the Draft, only accounts that have been identified with 2 authentication layers (authenticated accounts with real names and phone numbers) can write articles, post comments, livestream, otherwise only allowed to read news and articles.

4. The license to set up an aggregate information website and the license to provide social networking services is also shortened to a maximum of no more than 5 years and renewed only once, each time not exceeding 02 years. Previously, the maximum license term was 10 years and could be renewed twice.

On Online games:

1. The Draft removes the requirement for online game providers to obtain a master license/certificate. A Dissemination License is now only required for each G1 game, while a Certificate for Game Dissemination Registration is required for each G2-4 games.

2. Providers must also show that they have (i) A head office with clear address and contact; (ii) Capacity to register and store users’ personal information including national identification information; (iii) Capacity to control players’ playtime, including restriction on children’s playtime.
The application of an uniform policy for all online games creates an imbalance in management as new games that need to prioritize attracting players or new developers short on funds must adhere to the same standards for established games/developers, thus creating difficulties in online games distribution.

3. Payment system of online games (if any) must be located in Vietnam and connected with Vietnamese payment service providers.

4. A number of regulations were also included in the Decree for the first time, such as the application dossier for G1 video games must contain “Certificate of legal copyright and consular legalization in the host country of a written agreement for enterprises to publish online video games in Vietnam”. This is to ensure that the game is licensed with the right copyright in Vietnam.

5. The licenses shall be revoked if the enterprises do not provide online game services within 12 months from the licenses’ issuance date.

Within this era of ever-changing technological advances and the society’s increasing dependence on technology, the Draft Decree would play a very important role in managing this under-regulated sector. Duane Morris will keep our readers informed on the status of the Draft.

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.

Posted on by Dr. Oliver Massmann

VIETNAM – AGRICULTURE 4.0 – ECONOMIC TIMES INTERVIEWING DR. OLIVER MASSMANN

1. How would you comment on Vietnam’s advantages and disadvantages in attracting FDI into the agriculture sector?

Advantages:

In the general growth of the whole economy in the first 6 months in 2021, the agriculture, forestry and fishery sector increased by 3.82% over the same period last year (contributing 12.15% to the overall national growth).

Recently, the Government has issued many policies to attract businesses to invest in the agriculture sector. For example, enterprises with special agricultural projects that rent or sub-lease land and water surface from households and individuals to implement investment projects are entitled to the Government’s investment incentives. The country will provide funding equivalent to 20% of the land rent and water surface rent for the first 5 years since the project is completed and put into operation. Or, the government supports agricultural product processing establishments, livestock and poultry slaughter establishments with 60% of the investment capital and not more than 15 billion VND/project to build infrastructure for waste treatment, transportation, electricity, etc.

Disadvantages:

Human resources are not maximized: Abundant labor force is an advantage, but vocational training programs and projects are not really appropriate and effective, so the quality of labor is still low. In 2020, untrained agricultural, forestry and fishery workers was around 12 million people, accounting for 89.97% of the total number of agricultural, forestry and fishery workers in working age.

Small production is still the majority, quality of products is not high: Development and production is still scattered and small. Most of the production units are of small scale with low investment capital, so the production and business efficiency is not high.

Environmental pollution is still a big issue: The production of agriculture sector has revealed more and more clearly the weaknesses in protecting the ecological environment in recent years. The collection and treatment of waste are still inadequate. The disposition of bottles and packaging of pesticides right in fields, lakes, ponds, canals, rivers and streams is quite common. In 2020, there are 4,096 communes nationwide that do not have a collection point for bottles and pesticide packaging, accounting for 49.37% of the total number of communes in rural areas.

Non-advanced agricultural technology: most (if not all) of agricultural production remain outdoor, making it easily directly affected by risks from natural disasters, epidemics (in cultivation and animal husbandry, aquaculture) at any time, affecting production and profits of enterprises.

2. Under Decision No.255/QD-TTg approving the Plan on restructuring the agricultural sector in the 2021-2025 period, the country would focus on developing sustainable agriculture as well as enhancing quality, added value, and competitiveness of local agricultural product. From this, how do you forecast some prospects for appealing FDI in the agricultural sector in the years to come?

According to Decision 255, the following fields will be of focus in the next 4 years:

a) Cultivation field
Vietnam aims to increase the proportion of fruit trees to 21%, vegetables to 17% to meet the consumption demand of the market, contributing to ensuring national food security.

b) Livestock field
Adjust the structure of livestock herds, aiming to reduce the proportion of pigs, increase the proportion of poultry and herds of cattle.

c) Fishery field
Promote offshore agriculture, focusing on objects of high economic value; development of organic aquaculture.

d) Salt industry
To renovate, upgrade and modernize infrastructure, apply technical advances to increase production of industrial salt and clean salt; to form a key industrial-scale salt production area in the South Central provinces; sharply reduce the area of manual salt production, converting inefficient salt production areas to other areas with higher economic efficiency.

3. It can be said that one of the bottlenecks of investment into the agricultural sector is the local mindset. What are the solutions to overcome the barriers and attract more foreign investors into Vietnam’s agricultural sector?

– Creating investment incentives for FDI projects in the agricultural sector, for example: preferential loans for projects investing in developing raw materials for the sector, projects that apply biotechnology; support scientific research activities, tax incentives, land levy.
– Applying guarantee mechanisms for FDI businesses, work with banks to create favorable access of foreign companies to private capital.
– Developing support mechanism for projects suffering from natural disasters or at risk of market price fluctuations.
– Developing one-stop-shop regulations for FDI investors, simplify investment procedures especially with regard to land clearance.
– Developing the vocational training system in rural areas. Vietnam has a lot of protocols with other countries in the EU aiming at the exchange of agricultural knowledge in various forms that should be maximized.
– Promoting the role of local organizations in supporting FDI investors to approach local farmers.

4. As FDI into the hi-tech and sustainable agriculture is considered as a current trend and solution. What have been the main concerns of foreign agribusiness regarding sustainable development?

The biggest difficulty when investing in agriculture for FDI enterprises is securing agricultural land. Even when there is a land fund for agriculture, the procedures are also relatively time consuming and difficult. In addition, the transportation of agricultural products between production place and consumption place is still difficult due to the lack of synchronous infrastructure.

Currently, foreign investors are not allowed to receive the transfer of agricultural land use rights, are not allowed to rent agricultural land directly from households, nor are they allowed to use this leased land as collateral for loans, leading to limited access to land resources and it is impossible for foreign investors to form a large enough land area to implement big projects. Nevertheless, in some localities, if there are land funds, priority is given to the planning of industrial parks because they will generate higher and faster revenue.

5. Which strategies should the Government adopt in the 2021-2025 period in order for the country to realize those targets?

Besides those mentioned in Answer 2 above, some other recommended strategies include:

_ Guide e-commerce trading floors to facilitate sellers and traders of agricultural products to join the floor; and
_ Promote the application of high technology in transporting agricultural products. Currently, the process of transporting and exporting agricultural products often damages about 40% of products, causing great cost to the economy.

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.

Posted on by Dr. Oliver Massmann

VIETNAM – SOLAR POWER AUCTION SYSTEM: WHAT YOU MUST KNOW

In late January 2021, the Ministry of Industry and Trade (“MOIT”) issued the draft Decision of the Prime Minister guiding the selection of investors implementing solar power projects under the bidding mechanism (“the Draft”). Since the latest Decision 13/2020/QD-TTg applies to grid-connected projects with Commercial Operation Date (“COD”) by 31 December 2020 latest, it is expected that the Draft will soon be finalized and become effective so solar energy developers as well as relevant government authorities can have guidelines for projects with COD from 2021. As of July 2021, it is reported that a newer version of the Draft is being prepared by the MOIT and will soon be published for public comments. MOIT is directing its Electricity and Renewable Energy Department to coordinate with international agencies including the World Bank and Asian Development Bank to develop the bidding mechanism for renewable energy development that is expected to apply after 2021

According to the Draft, the Decision would be applicable to projects with grids connected directly to the national power network. The Ministry of Industry and Trade shall coordinate with the Electricity of Vietnam and the People’s Committees of localities to organize the formulation and approval of the renewable energy power source development plan for a period of 5 years and every 2 years to serve as a basis for the bidding system. In addition, every 02 years, the Ministry of Industry and Trade shall issue a Price Framework for electricity generation in order to determine the ceiling price for bidding to select investors of solar power projects with COD in the next 02 years.

The plan for development of renewable energy power sources for a period of 5 years shall include the total capacity scale for each renewable energy power source in the 5-year period, the total capacity scale for each renewable energy power source for each load region (8 regions) and a list of transmission lines and substations (220 kV at least) to be put into operation for a period of 5 years. The 02-year plan shall have similar content but for a 2-year period only and shall be more provincial specific.

Some notable points in the Draft

Selection of investors to implement solar power projects is conducted either by (i) Bidding to select investors according to project location or (ii) Investor approval. Bidding for projects or for project development areas will be implemented if at least 02 independent investors participate.

Requirements for Investors participating in bidding:
a) Investors must be independent legally financially independent from each other;
b) The investor is not named in two or more Technical Proposals as an independent investor or as a member of a consortium;
c) Investors do not have shares or contributed capital of more than 20% of each other when participating in the pilot program; and
d) An investor (or a member company of the investor) does not share a controlling shareholder (holding 26% of the shares of the enterprise) with any other Investor (or a member company of this investor).

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

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

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

The standard power purchase agreement issued alongside as part of the Decision must be used in transactions between Power Seller and Power Buyer being EVN or an entity authorized by EVN. The power purchase agreement is valid for 20 years from commercial operation date.

Costs associated with the investor selection process are to be borne by the local Provincial Committee or another legal funding source and to be accounted for as part of the project’s total investment capital. Expenses related to the preparation of Bids (including technical proposals and financial proposals) are the responsibility of the investor.

Bidding procedure: Within 6 months since the Ministry of Industry and Trade approved the Solar Power Development Plan for a 2-year period, the Provincial People’s Committees shall organize the formulation, approval and completion of the implementation of the Plan for selecting investors to develop solar power projects locally every 2 years.
The plan for selecting investors of a solar power project must be publicly announced on the National Bidding Network System, serving as a basis for determining the number of investors and investment projects registered to participate. The content of information to be disclosed include investor selection plan, solar power investment project, time limit for receiving bids, contact information of the bid organizer and competent state agencies.
The bidding organization applies the open bidding process according to the one-stage, two-envelope bidding process. People’s Committees of localities to publish the bidding dossiers. The investor submits a Bid which includes Technical Proposal and Power Price Proposal. Bid opening will be conducted twice, Technical Proposal will be opened right after the deadline for submission of bids, investors who satisfy technical requirements will have their Power Price Proposals examined for evaluation.

Documents to be submitted by the Investor to participate in bidding:
• Decision of the competent authority approving the inclusion of the project into a power development plan;
• Documents proving the investor’s eligibility;
• Financial statements for the last 2 years, audited or certified by tax authorities, and other documents proving the investor’s independent financial accounting;
• Documents proving the investor’s capacity and experience; and
• Documents proving the ability of the investor to raise investment capital.

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

The Vietnam Government has continuously promoted the development of renewable energy sources as a feasible and effective solution to counter the country’s ongoing power shortage issue because renewable energy projects can be constructed quickly and promptly for operation in the period of 2021-2023, while taking advantage of the country’s natural potential without relying on imported fuels and is eco-friendly. 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. The Government plans to bring the total solar power capacity to about 40 GW by 2045.

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.

Posted on by Dr. Oliver Massmann

VIETNAM TO IMPLEMENT DIRECT POWER PURCHASE MECHANISM AFTER 2021

On 8 April 2021, the Ministry of Industry and Trade published the latest Draft Circular on the pilot implementation of the direct power purchase between renewable power project developers (RE GENCO or GENCO) and consumers (“the Draft”). As of July 2021, it is reported that MOIT is in the middle of preparation for Applicants Conference and Launch Event for the DPPA pilot program launch as well as reviewing transaction agreements, a one-stop-shop website for all information on the scheme and facilitating an application review process.

This mechanism suits customers who are committed to clean, sustainable energy use. DPPA allows direct access to and purchase of an amount of electricity generated from a renewable-energy generating unit through a long-term, bilateral contract with the price and duration of the contract mutually agreed by both parties. As a result, DPPA can help corporates to manage price fluctuations and reduce energy bills as well as facilitating a positive public image.

The pilot is to be implemented nationwide with a total capacity of selected wind and solar projects of 1 GW (or 1000 MW) at max. The nominal capacity of each project must be 30 MW and the project must have been listed in a National Power Development Plan. The GENCO and Consumer must apply online together for participation in the pilot scheme. Consumers can directly negotiate, purchase electricity with GENCO under a Fixed-term Contract. The two parties shall agree upon electricity price and output in the Contract for future trading cycles. GENCO and the consumer must also calculate and carry out payment for the contract output under the Contract for the difference between the contract price and the market price (i.e. reference price). Do note that consumers can be a single entity or a consortium of Consumers.

Under the Draft, renewable energy generators are defined as:
• organizations, individuals owing a grid-connected solar or wind power plant;
• installed capacity of the plant is more than 30 MW (conversion rate for solar plants: 01 MWp equals 0.8 MW);
• project already included in the power development plan that has been approved by competent authority;
• have a binding principle agreement with consumers to sell electricity; and
• are selected for the pilot implementation of DPPA by competent authority.

Electricity consumers are:
• organizations, individuals purchasing electricity for industrial production at a voltage level of 22 KV or higher;
• have a binding principle agreement with the RE GENCO to purchase electricity; and
• are selected for the pilot implementation of DPPA by competent authority.

Selection criteria of the pilot implementation participants:
For electricity generators:
• have a committed COD deadline of the whole power plant of no more than 270 working days since the date of announcement on the plant being selected to participate in the pilot implementation; or
• have written document of financial institutions on the financing for the power plant.

For consumers:
• have renewable energy usage commitments or is a manufacturing enterprise in the
supply chain of corporations or enterprises that have renewable energy usage commitments; or
• commit to contract at least 80% of total electricity consumption from the RE GENCO

The evaluation and selection of registration dossiers for participation in pilot direct electricity purchase and sale shall be carried out through a service unit selected by the Ministry of Industry and Trade and announced on the DPPA website.

Applicable power purchase agreement template:
• Between developer and EVN: the published contract templates in Decree 18/2020/TT-BCT for solar energy project and in Circular 02/2019/TT-BCT for wind energy project
• Between developer and consumer: to be drafted by the parties
• Between consumer and EVN: to be drafted by EVN, taking into consideration consumers’ opinion.

Transactions in the DPPA mechanism:
a) Between GENCO and spot electricity buyer: GENCO to submit the price quotation to the electricity system and market operator in which the offer price is zero (VND/kWh) for offered capacity ranges, and the capacity in the quotation is the announced capacity of GENCO.
b) Between spot electricity buyer and EVN: Electricity purchase price and payment payable by EVN must comply with the Regulation on operation of competitive wholesale electricity market promulgated by the Ministry of Industry and Trade.
c) Between EVN and Consumer: EVN sells power to Customers as per the electricity purchase price of EVN on spot electricity market plus the cost of direct electricity trading services (e.g. transmission costs, distribution costs).
d) Between Consumer and GENCO: The price and output of electricity committed in the contract for future trading cycles shall be agreed upon by the parties.

The direct power purchase agreement mechanism can bring about numerous benefits, namely enabling the imposition of take-or-pay obligation on off-takers in order to guarantee developer’s revenue stream, fixed electricity purchase price that is not subject to change in or delay on the implementation of national legislation, flexibility in monthly exchange rate calculation and increasing consumer’s environmental commitments. Developers and consumers must incorporate international standards regarding step-in right, dispute settlement, and termination clauses in order to make the direct power purchase agreement bankable. A bankable DPPA put developers in advantage when seeking financial supports from banks and other credit institutions.

On 23 June 2021, the Renewable Energy Buyers Vietnam Working Group, alongside the Clean Energy Investment Accelerator and the USAID Vietnam Low Emission Energy Program II co-hosted a webinar to discuss the development of the DPPA pilot program. In which, it was advertised that the US International Development Finance Corporation (“DFC”) offer financing tools such as long-term loans or equity financing to political risk insurance and technical assistance development. The DFC is looking to collaborate with DPPA Pilot Program participants.

MOIT is currently reviewing the Draft DPPA Circular based on the feedback of the private sector , then will circulate throughout the rest of the government before being legally approved and going into effect, ideally by the end of 2021. Within 15 working days from the effective date of the DPPA Circular, MOIT will announce the pilot scheme for direct electricity trading. Within 15 working days after that, MOIT will open the registration portal on the DPPA website and publicize the service unit responsible for reviewing application dossiers. Duane Morris will keep our readers updated of any new revisions to or decision regarding the Direct Power Purchase Agreement mechanism.

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.

Posted on by Dr. Oliver Massmann

VIETNAM: DIRECT POWER PURCHASE AGREEMENTS (DPPA) AND SOLAR ROOFTOP- UPDATING DEVELOPMENT OF NEW REGULATIONS ON DPPA AND C&I ROOFTOP IN VIETNAM

Both draft regulations for the Direct Power Purchase Agreement (DPPA) pilot program and the C&I Rooftop Solar are now still under review by the competent authorities. Below are some key updates in these two sectors in Vietnam up to June 2021:

1. Key updates on the Direct Power Purchase Agreement (DPPA) pilot pro-gram:

· MOIT is still reviewing the 2nd draft Circular on the pilot implementation of the direct power purchase between RE GENCO and the consumer (“Draft DPPA Circular”). The Circular will then be circulated throughout the rest of the gov-ernment before being legally approved and going into effect, ideally by the end of 2021;

· The Draft DPPA Circular maintains a target size of 1 GW for PDP-approved wind and solar projects above 30 MWac;

· RE Generation Companies (RE GENCO) and industrial Consumer(s) must apply together for participation in the DPPA Pilot Program through the DPPA online application portal;

· The RE GENCO must commit to reaching commercial operation date (COD) within 270 working days from the date of selection announcement;

· The DPPA Mechanism per the Draft Circular dated 8 April 2021 remains un-changed.

· DPPA Pilot Program Timeline:

– Pilot Project Planning (May-December 2019): MOIT Public Consulta-tion; First Action Plan agreed with ERAV; Market Preparation;

– Legal Approval/Invitation to Participate (Q2-Q4/2021): MOIT Circular draft published for public comment; MOIT Circular goes into effect; Pilot Program launched;

– Project Selection (Q1-Q2/2022): Applications to MOIT submitted and evaluated; Transaction documents executed; Operational capacity devel-oped.

(Source: DPPA Pilot Program Update (V-LEEP II, June 2021))

2. Key updates on the C&I Rooftop Solar:

· In 2020, Vietnam recorded 102,000 rooftop systems and reached 9.58 GW in capacity;

· The FIT 2 scheme expired at the end of 2020 and now the market is still waiting for the new Government’s new regulations on FIT 3;

· The draft regulations on FIT 3 for rooftop solar projects are still under re-view with the proposed FIT 3 as below:

ℴ For projects that achieve commercial operation in 2021, the FIT-3 in-centive will depend on project size:

– Less than 20kWp system: 6.84 UScent/kWh
– 20kWp to less than 100kWp: 6.35 UScent/kWh
– 100kWp to 1,250kWp: 5.89 UScent/kWh

ℴ For projects COD in 2022 and onward: MOIT to review and propose new tariff on annual basis;

ℴ Rooftop solar systems will be required to have a minimum self-consumption rate of 20% or a maximum excess power sale of 80% gener-ation;

ℴ Rooftop solar systems over 100kWp in size may be required to install mini-SCADA systems to support remote monitoring and system controls.

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 Di-rector 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.

Posted on by Dr. Oliver Massmann

VIETNAM – POWER DEVELOPMENT PLAN VIII (PDP8) – Upcoming List of LNG-to-Power Projects – What you must know:

As you may know, in late March 2021, the very first draft of the Prime Minister’s Decision on the Approval of National Power Development Planning VIII (PDP8) (“Draft”) has been published through unofficial sources (i.e. not through MOIT’s website). Such Draft was planned to be signed off at the end of March during the last days of Prime Minister Nguyen Xuan Phuc’s administration, but it was delayed as the hand-over to new administration was already under way. It appeared that the investors and LNG-to-power projects in this Draft were scaled down comparing to those in the PDP8 proposal published by Ministry of Industry and Trade (MOIT) earlier.

On 23 April 2021, the Deputy Prime Minister (DPM) Le Van Thanh directed a Government’s meeting on the PDP8 and concluded that, among others, PDP8 must be (i) updated with qualifications for prioritized projects, and (ii) revised to reasonably review and allocate development of power sources, especially LNG-to-power projects in PDP8 in order to ensure the competition, optimization on development of power system. DPM asked the MOIT to careful review and digest opinion from EVN in its official letter No. 1645/EVN-KH dated 2 April 2021. Finally, the DPM required the MOIT to submit the updated PDP8 proposal prior to 15 June 2021.

Unfortunately, due to Covid-19 situation and heavy workload on updating the PDP8 proposal, MOIT failed to submit a revised proposal to the Government for consideration. On 17 June 2021, the MOIT Minister arranged a press meeting to update the PDP8 progress and planned to submit the revised PDP8 proposal to the Government within June 2021.

So far, it is not crystal clear whether the MOIT has finished the revised PDP8 proposal. However, on 2 July 2021, an article from Bloomberg naming “The U.S. Risks Losing Out From Its Own Trade Push in Vietnam” pointed out that Vietnam may not want to support LNG-to-power projects from USA investors as the need to reduce trade deficit with USA is phasing out due to change of strategic approaches from the President Biden’s administration. This article also questioned about the feasibility of all LNG-to-power projects proposed by USA investors so far: “The IEEFA has raised questions about the feasibility of at least seven of the proposed projects. Several of them had appeared on the nation’s previous power plan of nine proposals, or on the draft of a new plan that expanded to more than 40 projects by February. The plan, which was supposed to have been approved in early April, was kicked back to the trade ministry by Deputy Premier Le Van Thanh for reconsideration and whittling down to the most viable.” This might be a signal from the MOIT that the LNG-to-power projects in the final PDP8 would have been scaled down and restructured to greenlight only projects with strong support from USA government and clear financial capability.

Pending the draft PDP8’s finalization, we advise that the investors follow-up and coordinate with MOIT and their local partners/ consultants on the process/ progress for inclusion of LNG projects into the future PDP8. We could assist you to review and identify the application, documents and licensing process issues and advise to facilitate the process including meeting and negotiating with relevant stakeholders.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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