Duane Morris Vietnam

March 11, 2021 by Dr. Oliver Massmann

VIETNAM – TOBACCO PRODUCTION AND DISTRIBUTION UNDER LOCAL AND INTERNATIONAL REGULATIONS

In Vietnam, the Government holds a monopoly on the importation of cigarettes and cigars, except import for sales as duty-free goods. The market size remains stable with over 100 billions cigarettes per year since 2015, in which around 60% is Vietnamese products, around 22% is foreign products made in Vietnam and 18% is illegally imported products. As of 2018, the cigarettes and cigars industry has contributed USD 450 millions to the State budget

There are currently 16 Vietnamese cigarette manufacturers with Vietnam National Tobacco Corporation (Vinataba) being a prominent unit in the production, distribution and trading scene. Additionally, there are two foreign-invested joint ventures between Phillip Morris and Vinataba, and British American Tobacco and Vinataba that engaged in the production of tobacco and shredded tobacco products respectively.

Requirements for cigarette production

Under Law on Investment 2020, cigarette production is a conditional business line, meaning investors have to fulfil requirements imposed by the Government regarding licensing procedures before commencement of operation. Entities manufacturing, buying and selling tobacco products, processing tobacco materials, buying and selling tobacco materials and investing in growing tobacco plants must obtain specific licenses for such activities according to regulations.

In case of merger or joint venture with a local company, investors need to acquire Decision on Investment Policy approved by the Prime Minister to produce cigarettes.

International regulations on Vietnamese tobacco products

EU-Vietnam Free Trade Agreement: After 15 years from 1 August 2020, EU will remove import taxes on Vietnamese tobacco products and vice versa.

Vietnam-US Bilateral Trade Agreement and Vietnam-Japan Agreement on Investment Encouragement and Protection: Vietnam eliminated export requirements applicable to tobacco products for investors coming from USA and Japan.

WTO schedule: there’s currently no commitments made by Vietnam to WTO members regarding the distribution of tobacco products.

Tariff quotas from the Eurasian Economic Union in 2020, 2021 and 2022 for tobacco is 500 tons per year.

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

March 1, 2021 by Dr. Oliver Massmann

VIETNAM – THE RISING DIGITAL ECONOMY – WHAT YOU MUST KNOW

While other South East Asian countries are suffering reversed economic growth in 2020 due to Covid-19, Vietnam has recorded the highest ever level of GDP growth – even higher than China and USA. One of the contributing factors to this success is the expansion of the digital economy – which is growing at double digits (USD 14 billion as of 2020 and predicted for USD 52 billion by 2025). In the span of 4 years between 2016 and 2020, online selling-related queries in Vietnam has increased six-fold. The country also sees seventy-three percent of YTD monthly active user growth for select mobile banking apps and 46% YoY growth in the e-Commerce sector.

With one of the fastest growing online population in the world, wide-ranging online supply and remarkably supportive ecosystem, Vietnam’s internet economy is stronger than ever and should be looked out for.

The Vietnam Government has implemented numerous laws and regulations in recent years with the goal of turning Vietnam into a full-fledged digital economy during the Fourth Industrial Revolution, such as Law on Cyber Security No. 86/2015/WH13 or Decision 749/QD-TTg dated 30 June 2020 on National Digital Transformation Program to 2025. The policies focus on the establishment of e-government to enhance transparency and speed up licensing works for enterprises, the legalization of e-Commerce activities such as AI development, online ride hailing or non-cash payment etc. At the same time, stricter measures in information management have been introduced, with the notable Decree 15/2020/ND-CP dated 3 February 2020 allowing police authorities to investigate and sanction individuals and entities distributing false or defaming information on social networks.

For investors interested in the e-Commerce sector of Vietnam, it is crucial to know that the government recognizes e-commerce transactions (except those conducted via social networks) as having the same degree of legal effectiveness and enforceability as written contracts. There are three categories of e-Commerce:

(a) Business to customer (“B2C”) website which is created for commerce activities of the website’s owner only;
(b) Business to business (“B2B”) website (like Tiki, Lazada, Shopee) which is created for commerce activities of other individuals or organizations; or
(c) Digital Application (“Apps”) which is installed on electronic devices and connected to a network for commerce transactions.

Circular 59/2015/TT-BCT on e-commerce via Apps and Circular 47/2014/TT-BCT on e-commerce via B2C and B2B websites provide that owners of websites or Apps must first satisfy all legal requirements on conditional business in relation to commerce activities to be provided via such platforms. In other words, investors must first assess whether the business lines they intend to engage in require them to obtain specific licenses/certificates or approval from government authority prior to commencement of business. For instance, to provide Food provision service, investors must acquire Certificate on Food Safety. In the next step, investors must also comply with specific conditions for e-Commerce business. One of the basic phases is registration.

Depending on Categories of E-Commerce, the service providers are required to make an official notification or registration on their E-Commerce to state authority as follows:

(a) B2C Websites, the service provider is responsible to lodge a notification of B2C website via the E-commerce portal of Ministry of Industry and Trade (“MOIT”) http://www.online.gov.vn/. Within 03 days from the date of receiving a complete set of required information, MOIT will send an acknowledgement on the notification of the service provider.
(b) B2B Websites, the service provider is responsible to lodge an application for registration of B2B website via the E-commerce portal of Ministry of Industry and Trade (“MOIT”) http://www.online.gov.vn/.
(c) Mobile Applications, Similar to B2C and B2B Websites, the service provider is responsible to lodge a notification of Mobile Applications used for their commerce activities or to lodge an application for registration of Mobile Applications used for commerce activities of other individuals or organizations.

The Vietnam Government’s continuous and visible effort in attracting foreign investment as well as transforming the country into a digital economy, if not to say, a developed one comparable to Singapore, should serve as a green flag to investors interested in developing digital services in Vietnam.

February 26, 2021February 26, 2021 by Dr. Oliver Massmann

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

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

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

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

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

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

Important information investors should know

Coal usage:

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

Gas usage:

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

Renewable Energy usage:

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

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

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

Hydropower usage:

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

Others:

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

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

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

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

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

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

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

List of potential thermal power sources to be considered for investment

List of potential thermal power sources to be considered for investment

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

February 25, 2021 by Dr. Oliver Massmann

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

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

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

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

To promote the development of wind energy sources is a feasible and effective solutions to counter the imminent power shortage issue because renewable energy projects can be constructed quickly and promptly for operation in the period of 2021-2023, while taking advantage of the country’s natural potential without relying on imported fuels and is eco-friendly.

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

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

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

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

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

On 22 February 2021, the Ministry of Industry and Trade (“MOIT”) has made available to the public the long-awaited draft Power Development Planning VIII (“PDP 8”). By 2030, the total installed capacity of Vietnam’s electricity sources is predicted to be at 137.2 GW, of which 29% is renewable energy (including wind, solar, and other types of energy). At a glance, the PDP 8 reinforces the Vietnam Government’s current view on prioritizing renewable energy sources to minimize negative impacts caused by electricity production on the environment. Moreover, by 2040, the North’s commercial electricity demand will start to exceed that of the South. Hence, investors may want to switch their focus to the Southern region or develop transmission grids connecting to thereof to accommodate the increasing power demand.

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February 3, 2021April 8, 2021 by Dr. Oliver Massmann

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

Dear all,

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

Sincerely,
Dr. Oliver Massmann

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January 21, 2021January 21, 2021 by Dr. Oliver Massmann

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

Dear Mr. Biden,

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

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

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

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

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

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

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

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

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

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

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

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

America cannot wait until bilateral agreements might be settled!

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

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

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

The answer is NO!

Sincerely,
Dr. Oliver Massmann
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December 14, 2020 by Dr. Oliver Massmann

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

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

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

New Intertidal Wind Project in the Making in Vietnam

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

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

November 26, 2020December 2, 2020 by Dr. Oliver Massmann

VIETNAM — Mergers and Acquisitions — Market overview — Vietnamnews interviewing Dr. Oliver Massmann

1. What is your assessment of the M&A market in Vietnam?

Covid-19 has significantly reduced M&A activities both globally and locally in our country. With the extraordinary pandemic control, Vietnam is still emerging as a safe, attractive destination for foreign investors.

Remarkable M&A deals during the Covid-19 outbreak include the merger of VinCommerce into Masan, the acquisition of 15% of BIDV’s charter capital worth USD 878 million by KEB Hana Bank (Korea), or the acquisition of Vinhomes’ shares worth USD 650 million by KKR and Temasek.

The main industries attracting M&A deals in Vietnam from June 2019 to October 2020 are real estate, banking and finance, logistics, pharmaceutical and healthcare, and construction.

M&A activities did slow down due to the pandemic but is expected to resume its activeness in the first quarter of 2021 at earliest.

2. What is the main driver of growth of M&A activities in Vietnam, especially during the Covid-19 period?

(i) Vietnam has entered into many free trade agreements (FTAs), which help to attract investment waves from abroad. FTAs such as the CPTPP, EVFTA, EVIPA and most recently RCEP will open up more opportunities to draw in investment in the form of M&A in various sectors, especially those that require the application of high-technology such as waste-to-power energy or water treatment.

(ii) The implementation of the new Securities Law, Investment Law and Enterprise Law 2020 are also identified as an important milestone, contributing to the simplification and synchronization of relevant administrative and legal procedures. For instance, under the new Investment Law taking effect on 1 January 2021, the foreign investor threshold is lowered from 51 percent to 50 percent. In addition, the law removes the need for approval if the M&A transaction does not increase the foreign investor’s ownership ratio in the target company.

(ii) The new Government administration in Vietnam is expected to comprise of younger people with more political willingness to integrate Vietnam to the world.

3. Which are difficulties that The M&A market of Vietnam has to face in the Covid-19 pandemic?

_ Review of the purchase target: if key customers and suppliers of the target company negatively affected, potential purchaser may question the efficiency of the business model
_ Adjustment on purchase price: price agreed before the pandemic occurs are most likely based on historically high evaluations and maybe reduced upon further examination of Covid-19’s effect on the target’s operation
_ Purchase is delayed due to reduced to none site travel: For many deals, site inspection is essential for potential partners to verify information and conclude their purchase
_ Increased risk of technology fraud: e-signature can be faked, confidential information is leaked (e.g. via Zoom)
_ Dramatic reduction in stock market prices have left investors with uncertainties regarding capital market transactions

4. There is a saying that SMEs will have more benefits than a big enterprise. What do you think about that?

I think the benefits are distributed in different ways for SMEs and for large corporates. However, when looking at the Covid-19 instance, I’d say large enterprises have more benefits.

Large enterprises last against the economic downturn longer due to larger capital reserve and brand presence while we see a lot of SMEs shutting down. However, higher number of human resources also means higher expenses for large corporates. The Covid-19 outbreak, in some ways, can be said to allow large corporates and multinational companies to relocate their business operation to provinces/countries that prove to handle extraneous factors well. For example, we have seen a lot of companies relocating their production plants from China to Vietnam during the corona crisis.

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November 25, 2020 by Dr. Oliver Massmann

VIETNAM – WHAT FOREIGN INVESTORS NEED TO KNOW ABOUT THE OFFLINE GAME BUSINESS IN VIETNAM

Number and types of gaming machines

A foreign enterprise that engages in the offline prize-winning electronic game business must obtain Investment Registration Certificate and Certificate of Satisfaction of Conditions for a Gaming Business (“SC Certificate”). The SC Certificate will reflect the type and number of gaming machines that an enterprise is permitted to have. Circular 11/2014/TT-BTC (“Circular 11”) lists the following seven types of gaming machines that an enterprise is allowed to operate:

1. Coin Slot Machines
2. Roulette
3. Automatic Baccarat
4. Electronic Blackjack
5. Sic Bo or Tai Siu Machines
6. Horse Racing and Mahjong; and
7. Poker Machines

Items 2-7 above are permitted only if they are automated and do not require participation by members of staff.

The total number of gaming machines of the enterprise must not exceed the permitted number stipulated in the SC Certificate. In addition, the number of gaming machines belonging to each of categories 2-7 above must not exceed 15% of the total number of gaming machines operated by the enterprise. No maximum percentage is applied to coin slot machines.

Circular 57/2017/TT-BTC (“Circular 57”) requires the enterprise to lodge a report to the Ministry of Finance, local Department of Finance, local Department of Culture, Sport and Tourism and local Department of Taxation, describing the total number and type of gaming machines, including the ratio of each type, within 5 business days from the date of commencement of operation. Any variation in the number and type of each machine must also be reported to each of these Department and Ministry.

Back-up equipment for gaming machines

Under Circular 57, enterprises licensed with an SC Certificate are permitted to purchase back-up equipment for gaming machines. Enterprises can purchase the following items for replacement where necessary:

1. Screens
2. Cash and token receipt systems
3. Prize payment systems
4. Archiving systems
5. Circuit boards

All back-up equipment must be 100% new and cannot exceed 10% of the number of gaming machines operated by the enterprise for which that item of back-up equipment would be used.

Where back-up equipment is used by an enterprise to replace items in gaming machines, that enterprise must keep detailed records specifying the type of gaming machine, the type of equipment and the reason for replacement.

Procedures to obtain a SC Certificate

An enterprise must satisfy the following conditions in order to apply for a SC Certificate:
– Have an Investment Registration Certificate that states the business line for prize-winning electronic game business operation
– Total investment capital of at least VND 200 billions
– If the enterprise also operates tourist accommodation service, the tourist accommodation establishment must be of five-star class as ranked by a state agency
– The facility for prize-winning electronic game business must be located separately from other business areas of the enterprise and must be equipped with 24/7 CCTV
– The business facility manager must have at least a Bachelor’s degree and at least 03 years of experience in managing prize-winning electronic game business
– The business facility must satisfy conditions on security and fire safety.

Application dossier for an SC Certificate includes: standard application form, copy of Investment Registration Certificate, site plan of the business facility, proof of the business facility manager’s competence, internal regulations on management, control, anti-money laundering and game rules.

Accounting system and reporting

Enterprises that operate electronic gaming equipment must conduct separate cost accounting for revenue, expenses and profit of its gaming business, and must separately monitor items related to the gaming business in its system of accounting books and financial statements.

Circular 11 requires an enterprise to submit to local authorities the following reports on a quarterly and annual basis:

1. Financial statements
2. Report on the number and type of gaming machines
3. Report on the purchase, use, re-export or destruction of equipment of gaming machines
4. Report on the status of operation of the gaming business

The issuance of Circular 11 and Circular 57, alongside the execution of legal instruments on casino business in Vietnam, indicates the Government’s increasing willingness in attracting foreign investors for the development of these gaming industries. Investors are strongly recommended to invest in Vietnam – one of the few global economies that manage to thrive flourishingly amid the Covid-19 pandemic and also the country with the fastest increase in the number of middle-class citizens in South East Asia.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann via email under omassmann@duanemorris.com or via LinkedIn under Dr. Oliver Massmann. 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.

November 25, 2020 by Dr. Oliver Massmann

VIETNAM – REGULATIONS ON ONLINE GAMES THAT FOREIGN INVESTORS NEED TO KNOW

Guiding regulations:

Decree No. 72/2013/ND-CP on the management, provision and use of Internet services and online information;
Decree No.103/2009/ND-CP promulgating the regulation on cultural activities and commercial provision of public cultural services;
Vietnam’s Specific Commitments to WTO in Services

Enterprise Establishment:
Foreign investors who wish to engage in the online games distribution service must have either a Contract of Business Cooperation or a joint venture with a Vietnamese partner who is eligible to provide online gaming business. In case of a joint venture, the foreign investors’ capital must not exceed 49%.

The joint venture can be in the form of a Limited Liability Company or a Joint Stock Company. Generally, there are more options to mobilize capital in a Joint Stock Company.

Only Vietnamese enterprises can apply for G1, G2, G3 and G4 gaming license in Vietnam. A Vietnamese entity is defined under Law on Enterprise 2014 as an entity established or registered to establish under Vietnam laws and has headquarter in Vietnam.

Online Games Classification:
G1: Video games that have interaction among multiple players via the game server
G2: Video games that only have interaction between the players and the game server
G3: Video games that have interaction among multiple players without interaction between players and the game server
G4: Video games that are downloaded from the Internet without the interaction among players and between players and the game server

Licensing procedures for G1 Games:
G1 gaming license expires after 10 years and you can only extend it once for one extra year. The Ministry of Information and Technology is seeking to reduce the license’s validity to only 5 years.

Conditions to apply for G1 gaming license:
-Must have a headquarter and contact number
-Registered for a domain name to use to provide the service
-At least 1 personnel administers 2 servers
-The business manager must have at least a Bachelor’s degree
-Sufficient financial capacity, adequate gaming systems
-Have backup plan for equipment and connection as well as data backup plan
-Have professional measures to manage game forum content

Important documents of application dossier:
-Documents proving the ownership of domain name
-Business location rental/ownership contract
-Game service payment plan
-List of partners providing payment assistance service
-Detailed description of host devices

After attaining G1 gaming license, you would need to obtain Approval for script content for each G1 game in order to operate the G1 game

Conditions to apply for Approval of script content for each G1 game:
-Game content must be culturally appropriate
-The game’s age rating must be suitable with the content
-Have measures to manage players’ account

During operation phase, the game provider must ensure to manage under 18-year-old player’s time to not exceed 180 minutes in 24 hours each day