Tag Archives: CPTPP

VIETNAM AGRICULTURE FARMING 4.0 – Issues and Solutions – Impact of the Major Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

A. Introduction

The biggest challenge in the agriculture and farming sector is to actually take the step to invest in new digital technologies. From a short perspective, this is associated with high costs for farmers. In the long term, however, it can increase yields and protect the environment significantly. So far, there have been three key phases in the development of agriculture and farming, namely mechanization, the introduction of mineral fertilizers and industrialization. The fourth phase is the currently evolving digitization. The positive effects of intelligent and digital agriculture can be significant.

When technological agriculture started (with utilization of satellite navigation and remote sensing to farm each square meter as efficiently and sustainably as possible), it seemed to be very unlikely for the ordinary farmer to gain benefits from it since the costs were too high. However, nowadays, it is possible for many farmers to collect a tremendous amount of data and use inexpensive small processors to make use of the information and to control equipment or monitor animals with it. Through digital smartness and connectivity, the agricultural machines can collect weather data, order spare parts or access detailed information about the field from a central, cloud based farm management software.

However, the technology development in the farming sector in Vietnam is still in its infancy. The digitalization has not reached Vietnams farming sector yet. The farmers are still using basic computers, standard internet information and basic information and communications technology in general. Many did not even reach the industrialization yet, using the telephone, light bulb, and the internal combustion engine. Still, a growing number of farmers is starting to adopt digital technology and data-driven innovations.

B. Precision Agriculture

Precision Agriculture (PA) is a key component of the agricultural digitization and means to apply the exact and correct amount of inputs like water, fertilizer, pesticides etc. at the correct time to the crop for increasing its productivity and maximizing its yields. It provides farmers with information to build up a record of their farm, helps to make decisions, promotes traceability and provides better marketing of farm products. Finally, it enhances the quality of the product itself.

Efficient farming must increase and the government should support investors of this sector. For instance, from 1900 to 1930 worldwide, each farmer produced enough food to feed about 26 people. In the 1990s, the so-called Green Revolution lead to new methods of genetic modification, therefore each farmer was able to feed about 155 people. The global population is increasing and by 2050 it is expected that the worldwide population will reach to almost 10 billion, thus food production must effectively double from the current magnitude. With the introduction of new technological improvements of precision farming, each farmer could be able to feed 265 people on the same acreage.

The first steps of PA came in the forms of satellite and aerial imagery, weather prediction, variable rate fertilizer application, and crop health indicators. The second wave collects the machine data for even more precise planting, topographical mapping and soil data. Another example of developed technology is the Geo-Localization. With this, field data can be captured. An analysis of soils, residual nitrogen, soil resistance and past harvests takes place. Further, by now, self-steering tractors do most of the work. The farmer only needs to intervene in emergencies. Through GPS connection, they spread fertilizer or plough land. Another notable innovation is a solar powered machine that identifies weeds and precisely kills them with a dose of herbicide or lasers.

C. Precision Livestock Farming

Precision Livestock Farming (PLF) aims to improve the efficiency of production. It helps the farmer and ensures the well-being of the animal through applying advanced information and communication technologies, targeted resource use and precise control of the production process. Through this technology, the contribution of each animal is streamlined. By this individual approach, the farmer can deliver better results in livestock farming. Those results can be quantitative, qualitative and sustainable.

PLF can significantly improve livestock farming. It can ensure animal welfare because the whole procedure is being documented on farms. Greenhouse gas (GHG) emission can be reduced and environmental performance of farms can improve. Further, PLF can facilitate product segmentation and reduce illegal trading of livestock products.

D. Benefits and obstacles

Utilizing new technology can deliver more yields and greater environmental protection. For instance, farms in Germany using advanced digital technology have reported higher yields per hectare while reducing nitrogen levels considerably, as well as cutting herbicide and diesel use by 10% – 20%. Farmers thus obtain a return on their investment by saving on water, pesticides and fertilizer costs. The second large-scale benefit is to reduce the environmental harm. Applying the right amount of chemicals in the right place and at the right time benefits crops, soils and groundwater, and thus the entire crop cycle.

However, there are rarely any examples of successful commercialization of PLF technologies. There is currently an abundance of information available to livestock managers, but it is not generally structured in a way that can be applied readily.

The farmers and investors hesitation might be due the involving risks. The noted risks include financial failure because of unforeseen environment or market circumstances, damage to the farm infrastructure such as soils and pasture, compromises to animal health and welfare, and increased stress on farmers from managing the allegedly complicated systems. Thus, it is important to develop a management system that ensures only the most essential procedures are carried out, they are all carried out correctly and consistently, and in a way that controls risk.

E. Solutions

For the implementation of digital farming in Vietnam, a good collaboration between the public sector, industry players and the farming community is significantly important. In specific, decision-makers and the national government need to ensure that the basic digital infrastructure for rapidly growing data flows, in terms of network coverage and transmission rates in rural areas, is put in place. Further, the government must set incentives that boost investment in agriculture, especially during low time commodity prices. Lastly, it is important that the farmers accept and are able to handle the upcoming change. Not only is their attitude important, but also to ensure that they have the necessary digital skills.

The international market can only be reached by more transparency and traceability. For consumers and retailers it gets increasingly more important to trace the origin of their food. How was the crop cultivated, under what conditions did the animal grow up and be bred? At the same time, the gathering of this information can simplify the farmer´s documentation on compliance with legislation. Lastly, farmers need the security, that ownership and control of their data are protected. For this, a regulating contract law, that states that the data generated on a farm is the property of the farmer, needs to be settled.

F. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement

In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Recently, on the 12th November 2018, Vietnam has officially became the seventh member of the CPTPP.

The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will make the Vietnamese market more attractive due to technology advances and the reduction of production costs. The effects of the TPP 11 promise great benefits for the agriculture sector in Vietnam and will support Vietnam’s national agriculture to transform into a self-sufficient and competitive sector. Furthermore, sustainable environments are a primary concern of the CPTPP agreement. With the Most-Favored Nation Treatment principle, the TPP 11 is ensuring a fair competition, which will attract new foreign investments as well as support for the agriculture sector in its restructuring process. Moreover, national farmers must adopt high-developed technologies in nutrients and animal healthcare to be competitive. This will lead to more safety and trust of the consumer in the agriculture market in Vietnam.

One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers.
Both agreements promise great benefits for the agricultural and farming sector in Vietnam. The food industry is a very hesitating industry in general. Naturally, farmers usually invest part of their gains in technology. However, they buy just the ordinary machinery instead of new technology like software or sensors. The trade agreements could lead to the end of this hesitation and finally demonstrate the economic benefits of the new technologies. Further, the co-ordination between researches, developers and technology suppliers of PLF tools could be streamlined.

To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.

Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. Every investor should use these standards. It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases.

Further securities come with the Government Procurement Agreement (GPA), which is going to be part of the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.

This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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

Thank you very much!

VIETNAM – BANKING AND FINANCING SUSTAINABLE GROWTH – Issues and Solutions – Impact of the Key Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

A. Introduction

Vietnam is one of the countries in Asia with the most impressive economic growth. Inflation remains well controlled and foreign exchange reserves are at their highest levels in years and they continue to rise. The effective and economic state administration has been recognized by the international markets, most recently with the appreciation of the Vietnamese credit rating by Fitch Ratings. In the future, it is expected that Vietnam will continue to show strong economic growth. A particularly strong area is the electronics production. In addition, financing sustainable growth and providing credit and good financial services is essential to all who need it.

The focus of the government and the State Bank of Vietnam (SBV) should be geared to lending in strong sectors. This implies that quotas should be distributed appropriate and that there should be no upper limits in a given sector. Only with this credit can be provided sufficiently in the priority sectors. This will benefit strong and profitable companies while controlling and reducing risk in critical sectors.

In addition, the focus is on recapitalization and consolidation of the financial sector, which leads to fewer but stronger banks. Furthermore, the digitization of the Vietnamese economy continues to increase, with the next step being to create a comprehensive legal framework that further promotes digital development, including the use of the forthcoming national biometric identity system.

In the future, a change in banking regulations should be also considered. The rules are currently issued on the basis of basic laws such as the Civil Code. As a result, opening accounts for companies that are not legal entities is difficult. Addressing the above issues will, in the long term, lead to a strengthening of the banking sector. This will bring more and more FDI´s into the country and Vietnamese people and companies will benefit from it.

B. Decree 116 and related issues

With regard to Decree 116, there are problems in lending that banks have. There are currently challenges related to public information and verification. It is very time-consuming for the banks to obtain the relevant information from the client, there are only limited independent sources of information, and there are different definitions of the criteria used to identify beneficiaries in Vietnam and international common practices.

Banks are facing the difficult situation of being able to verify that a natural person owns 10% or more charter capital in a legal entity. Natural persons who hold 20% or more charter capital to companies whose equity capital is more than 10%; private business owners; and other persons actually controlling the company, in accordance with the provisions for determining beneficial owners referred to in Article 5.1, Decree 116/2013 / ND-CP.

The banks have difficulties in how to verify that an individual holds 10% or more charter capital in a legal entity, individuals holding 20% or more charter capital in entities having more than 10% equity in the legal entity, private business owners and other individuals who actually control the entity, under regulations on identifying beneficial owners referred to in Article 5.1, Decree 116/2013/ ND-CP.

To solve this problem, the State Bank of Vietnam (SBV) could make the following arrangements. Only the ultimate beneficial owner holding directly and indirectly 25% or more of the charter capital must be identified. Further, it is not necessary to identify ultimate beneficial owners in case the customer is rated as low-risk by financial institutions incorporated in Financial Action Task Force member nations, because these institutions have advanced anti-money laundering and financing terrorism control systems, and are monitored by relevant host country regulators.

C. Outlook on Circular 19/2014/TT – NHNN

Circular 19/2014/TT – NHNN contains revisions for foreign exchange control in direct investment and portfolio investment to be consistent with latest rules on foreign investment. One of most frequent issues related to foreign-invested companies is the Investment certificate being used as the only reference to identify a directly investing business for foreign investment capital account opening purposes. However, this does often not reflect properly the nature of the investment activity and existing regulations on investment activities (Investment Law of Nov. 26, 2014, Decree 118/2015/ND-CP, providing details and implementing guidance for specific clauses of the Investment Law).

Furthermore, given the development of derivative markets in Vietnam, the Circular can be revised to cover specifically derivative securities and include relevant reporting indicators for investment in these securities by foreign investors.

D. Outlook on the Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement

In January 2017, US President Donald Trump decided to withdraw from the US participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Recently, on the 12th November 2018, Vietnam has officially become the seventh member of the CPTPP.

The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will stimulate domestic reforms in many areas, especially the financial sector. As a result, the above mentioned issues could be addressed gradually and therefore more FDI´s will come to Vietnam.

One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers. In addition, the EUVNFTA will boost the most economic sectors in Vietnam. Due to easier opportunity on making business, trade and sustainable development will be a good consequence for an even more dynamic economy and even better investment environment in Vietnam in general and especially in the financing sector.

To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.

Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. Every investor should use these standards. It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.

Further securities come with the Government Procurement Agreement (GPA), which is going to be part of the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.

This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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

Thank you very much!

Vietnam – Mining Action Plan – Issues and Solutions – Impact of the Major Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

A. Outlook

Vietnam´s mining industry is still largely undeveloped. Most operations are insufficient and harm the environment. However, there is great potential due to the variety of unexploited mineral resources. The discovery and mining of new minerals can be significantly facilitated with Foreign Direct Investments (FDIs). This provides the opportunity to use international, modern, efficient, sustainable and secure technologies for the procedure. This implementation would have a huge impact on Vietnam’s economic growth and would lead to a reduction of public debt.

For most countries in the world, mining has been the cornerstone of economic growth and infrastructural development. It has been estimated that only about 10 percent of Vietnam’s base metal and precious metal resources have been discovered so far. This is because the country has so far never been methodically researched with modern technologies and the right know-how to find deeper, richer or larger deposits. The focus of the Vietnamese mining industry has been almost exclusively on less expensive, easily findable or near-surface energy materials such as coal and bulk commodities such as iron ore, bauxite, sand and limestone.

Vietnam’s largest state-owned mining company is Vinacomin. According to their estimates, more than 1.500 mining companies are registered in Vietnam, of which about 55% are state-owned, 36% by private Vietnamese companies and only 9% by foreigners.

B. Lack of technology

Vinacomin is the first company to acknowledge the major shortcomings and confirmed the existence of obsolete technologies, lack of mechanization, inadequate infrastructure, large workforce but with low productivity, excessive energy consumption, high safety deficiencies and unacceptable environmental pollution. In Decision No. 2356-TKV of 15 June 2016, Vinacomin has now set its priority on technological innovation.

The challenge, therefore, is to modernize the Vietnamese mining industry and make innovative technologies accessible. To do this, the government must create incentives to encourage investors, otherwise FDI’s hardly ever come to Vietnam.

C. Government´s mining policies and issues

The current mining policy in Vietnam has two major weaknesses. First, the existing laws are unstructured and are therefore applied inconsistently. There is some evidence that there are conflicting interpretations of fees, tariffs, environmental protection fees, product quality and to it related mining taxation issues between local regional authorities and ministries such as the Ministry of Natural Resources and Environment, Ministry of Industry and Trade and the Ministry of Finance.

Second, Vietnam is one of the countries with the highest taxes on mining worldwide. This has a negative impact on investments in modern technologies and technological innovations. All of this leads to further problems such as the continuation of inefficient and wasteful mining practices, the deterioration of well-known mineral deposits and the environment of Vietnam as well as the increase of illegal mining and tax evasion. Vietnam’s royalties, export duties and other charges are far above other comparable countries. As an example, the royalty for nickel is 10%, but other minerals such as tungsten and gold have even higher license rates. Many mining projects therefore fail due to lack of sufficient profitability.

Positively, there is, however one exception. A hitherto highly successful project of modern technologies and international standards on a Vietnamese mining operation is the Nui Phao. This is the largest tungsten production mine in the world to date, contributing significant value to Vietnam’s economy by converting the ore into purified chemical products before exporting. However, as with all mining projects, future development will depend on the continued evolution of global commodity prices, variability of ore grades, mining conditions, etc., and therefore the prohibitively high taxes themselves may jeopardize this project.

The reasons for the high taxation are to some extent comprehensible or the background can be explained. Hereby the aim is, to maximize benefits for the government and Vietnam´s economy. However, this can not be achieved if the taxes are so high that mines are closed because they are not profitable. As a result, this leads to a change to the contrary, namely to the loss of valuable tax revenue, because first, the tax revenue source for the government is lost (mining companies) and secondly, the number of people trying to circumvent the tax rules increases. The former also leads to the loss of legal employment opportunities.

D. Solutions and conclusion

A solution to the above mentioned conflicting legislation could be to create clear and unambiguous legal regulations. Alternatively, there is a possibility to be practice-oriented and to ensure a uniform application of the law through state support in advising the mining industry and coordinating intergovernmental departments. The effectiveness of this coordination and the associated transparency would be a clear incentive for the providers of FDI as well as for strong local investors.

Regarding the high taxes for mining, the problem can be solved by a fair tax system for the government and investors. The taxes should simply be reduced, which means no negative consequences for Vietnam’s economic budget (see above).

The advantages associated with the solutions are obvious. It goes without saying that the richest mineral deposits are located in more remote and mountainous areas. The population in these areas is usually characterized by particular poverty and the infrastructure is in need. A modern mining project would have a positive impact on both. On the one hand, every mining project creates a large number of jobs, local goods are promoted and orders are distributed to service providers. On the other hand, the infrastructure will develop significantly, because modern and efficient mining is hardly possible without a good infrastructure, so that the construction companies are forced to build the infrastructure itself.

To sum it up, there are essentially three solution concepts. First, existing mining legislation could be revised and more transparent, clearer, investor-friendly rules could be created. Second, state co-ordination of law enforcement can be established to ensure a consistent and effective application of the relevant rules. Third, a fair tax system for government and investors likewise should be created.

E. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement

In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Recently, on the 12th November 2018, Vietnam has officially become the seventh member of the CPTPP.

The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. The Agreement could bring the needed FDI to the mining industry in Vietnam. Hence new mining methods and better technologies will be introduced to the mining industry and this will lead to the spare of environment. To be able to benefit from the TPP 11, Vietnam has to amend its mining regulations, particularly, the above mentioned taxes and royalty rates must be reduced.

One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers, which is a key aspect in terms of working at mining projects. In addition, the EUVNFTA will boost the most economic sectors in Vietnam. Due to this significant boost, the government might reconsider its mining tax regulations. If that step will be eventually taken, there are good prospects for investors that bring modern technologies and international standards to the country, that their mining project will be successful just as the Nui Phao operation is.

To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.

Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. Every investor should use these standards. It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.

Further securities come with the Government Procurement Agreement (GPA), which is going to be part of the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.

This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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

Thank you very much!

Vietnam – Healthcare and Medical Devices – Investment – With Outlook on the Major Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

A. Overview of the future of Vietnam´s healthcare sector

There is no denying that Vietnam truly is an attractive investment destination in South East Asia. It has great potential to develop a qualitative, self-sustaining life science sector. Improvements on the healthcare sector will lead to several benefits. With increasing focus on healthcare, manufacturing, service providers, clinical research organizations and others are being stimulated. As a result, small and medium-sized enterprises (SMEs) are boosted and exports could replace the need for foreign aid by attracting sustainable FDIs and PPPs.

Of particular importance for a positive development is the close cooperation between the major stakeholders from the private and public sector. In this process, certain core goals should be set. Significantly, it is important to ensure swift, sustainable access to medical treatment and to urgently improve the quality of the treatment process. High-quality domestic treatments not only improve patient satisfaction but also improve one’s own economy by counteracting outgoing medical tourism.

Furthermore, it should be ensured that the existing investors remain in Vietnam and new ones are pulled ashore. To do this, investors must be shown that the Vietnamese market does not contain undetected risks, but is stable and predictable. Further, integrate opportunities for collaborations and partnerships to develop local capability.

B. Outpatient: Home care and home-treatment

One major issue regarding Vietnams Healthcare sector is the limited capacity in hospitals. There is a gap between bed capacity and demand of inpatient treatment. The Minstry of Health has his hands full to counteract the overloading of hospitals. Even institutions with larger bed capacity have eventually set up a home care service to enhance the follow-up monitoring of chronic and long-term illnesses for patients that have been released from the hospital.

The patients in Vietnam are financially overburdened with the costs of treatment, therefore affordable treatment is needed. This however, has to be reached without the loss of quality. Especially the indirect costs of healthcare, such as travelling, meals during hospitalization and loss of income during treatment put patients and their families under enormous financial pressure. Due to the overload and the fact, that the home care services are not fully developed yet, patients tend to take care for themselves with the help of their family. This causes eventually potential additional health complications due to the lack of professional follow-up. Furthermore, patients will return often back to the hospital and subsequently, in some cases, with more severe conditions.

The healthcare expanses are moreover, as in almost every country, a significant burden for the household.

Overall, professional homecare programs and access to them should be simplified and improved to counteract hospital congestion. This is especially necessary for the chronically ill. Home care and home-treatment can help to reduce public spending on chronic diseases and thus spare the health budget. At the same time, easier access helps the chronically ill.

C. Implementation

There are two major requirements for putting the whole thing into practice. Firstly, the creation of a clear legal framework. It contains incentives for small and large scale investors and creates transparency. This encourages multinational companies to invest and transfer their know-how to Vietnam, eventually ultimately work closely with the local companies. Secondly, to streamline the administrative process to shorten the process of delivering new, high-quality patient care solutions, and to respond to the growing need for a growing Vietnamese population for rapid and sustainable access.

D. Medical Devices Industry Code of Conduct

Background of the Code of Conduct for medical devices are the various risks associated with the industry, in particular unfair competition between industry players. The Code is intended to facilitate ethical interactions among members of society who develop, manufacture, sell, distribute or distribute medical technology in Vietnam and individuals and organizations that apply, recommend, buy or prescribe medical technologies in Vietnam. The content of the Code of Conduct should focus on 1) strict compliance with laws and regulations in the area; 2) prioritization of people and health and safety of patients and 3) promoting scientific and educational activities to best benefit the patient.

For multinational companies, the compliance area is usually very pronounced and strict. It is therefore particularly important to invest in an ethical business environment, especially when investing in high-risk jurisdictions. The commitment to uphold high ethical standards would certainly bring about long-term benefits for the health sector in Vietnam and attract more investors.

E. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement

In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Recently, on the 12th November 2018, Vietnam has officially become the seventh member of the CPTPP.

The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. An increase of trade will have great influence to the health- and medical sector. The agreement is suitable to support Public-Private-Partnerships (PPPs), which could lead to a positive impact in development of innovative technologies of medical devices and facilitate the transfer of necessary know-how. Lower or no trade tariffs can lead to lower import costs for the essential components of medical devices. This, in turn, results in lower acquisition costs for the medical practices and hospitals, thus eventually lowering the treatment costs.

The annexes of the CPTPP (TBT chapter) deal with specific challenges of trading regarding pharmaceuticals, medical devices and technology products. The provisions commit the Members to define what medical products are and when they are subject to the state laws. These information have to be published. Furthermore, the annexes will help to optimize regulatory approvals and make the regulations clearer. Authorization decisions are made based on certain risk-based criteria. Moreover, the regulations help to ensure timely mitigation measures if a product application is not approved or is deemed deficient. Due to this new transparency, and the tariff elimination, the CPTPP will bring great benefits for all traders of medical devices, employees in the medical industry as well as for patients.

A specific example would be, that Canada currently faces tariffs of 7% imposed by Vietnam regarding exports of life sciences products such as medicines in doses for retail sale. With the agreement to become effective, these tariffs will be fully eliminated. As a result, Canada and other countries are exporting more and more products to Vietnam, gradually improving equipment in Vietnam’s medical facilities.

One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers. In addition, the EUVNFTA will boost the most economic sectors in Vietnam. Both agreements promise great benefits for the health- and medicine sector.

To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.

Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. These standards should be used by every investor. It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.

Further securities come with the Government Procurement Agreement (GPA), which is going to be part of the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.

This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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

Thank you very much!

Vietnam – Power Energy Action Plan – With Outlook on the Major Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

A. Overview of the Power Master Plan 8

Vietnam contains huge potential regarding the production of clean energy. It has best conditions for developing solar power due to being one of the countries with the most sun hours during the year and best conditions for creating wind power due to 3000km coastline. As a result, Vietnam in general, is able to attract many Foreign Direct Investments (FDI) for developing clean energy projects.

Therefore, the aim of the current Power Master Plan 8 (PMP8) is to develop power sources, in which renewable energy (wind, solar, bio) will be prioritized, in order to stepwise increase the proportion of electricity generated from renewable energy sources. Core elements are to establish links between international and domestic companies. Thus, the international finance and technology should be connected to the domestic banks and the expertise of domestic companies. In addition, a market must be developed that attracts large-scale companies and small and medium sized enterprises (SMEs) equally.

Furthermore, there will be improvements to the solar power market and the Solar Power Purchase Agreement (PPA) model, which could apply from 1 July 2019. If the PPA is improved to meet the standards of international and domestic banks, the cost of financing solar power plants can be reduced. Feed-in tariffs could provide 2 billion USD in foreign investment in solar energy by 2020.

The new PPA should focus on the key areas termination payments, curtailment and failure to take or pay by Vietnam Electricity (EVN), dispute resolution / arbitration clauses and the application of the feed-in-tariff for 20 years the PPA for new solar projects, which reach their commercial operation date by 30th June 2021 with a reduced feed in tariff. These improvements should equally apply to the standard PPAs for wind power, biomass and waste to energy.

In addition, a government market-driven electricity price system should be created, which includes a welfare state price system and thus supports low-income citizens. To make this possible, the price for the middle class has to be raised. Furthermore, the need for government guarantees must be reduced. In order to counteract electricity wastefulness, incentives for private sector investment in distributed clean energy generation and energy efficiency with fair and transparent electricity tariffs are necessary.

With regard to the price of electricity, there will be essentially three types of movement. First, the daytime hourly tariff will be redesigned for commercial and industrial consumers. This is intended to reduce the peak load of the transmission system and transmission losses. Second, regional differences in retail tariffs are developed. Third, a market-based electricity tariff is set, which contains flexible regulations and thus allows adjustments and increases in efficiency.

It will be important for the government to upgrade transmission and distribution. A regulator regime is to build, which allows and encourages construction and use of bio-mass, solar, wind and other clean sources of power generation for private and public users – office, residential, manufacturing, communities, and industrial – small scale and large scale, and to speed up decision making and set predicative procedures to encourage development of off shore gas, LNG, efficiencies, and renewables.

B. Future recommendations for VL Direct Power Purchase Agreement

The Application of PPA should be extended and even used for commercial power consumers (offices, hotels, resorts and supermarkets), hence they can reduce their electricity costs. The project aim should be to make a major investment in clean energy generation. Guidelines could be to reach at least 300MW of new clean energy generation in 2018/2019 and to invest about 400 Million USD.

The Electricity Regulatory Authority of Vietnam (ERAV) and EVN must define as soon as possible a so-called “wheeling fee”. Wheeling is the transportation of electric energy (megawatt-hours) from within an electrical grid to an electrical load outside the grid boundaries. At least for the first 5 years of operation the fee should be fixed. Afterwards, an increase is possible in agreed in conjunction with business groups and WE.

C. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement

In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Recently, on the 12th November 2018, Vietnam has officially become the seventh member of the CPTPP.

The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will make the Vietnamese market more attractive due to technology advances, reduction of production costs and because of the high demand on renewable energy. Sustainable environments are a primary concern of the CPTPP agreement.

An increase of trade should not mean negative influence to the environment. In contrary, due to the increased focus on the need for energy efficiency and reduced emissions renewable energy could experience a crucial growth. The agreement is suitable to support Public-Private-Partnerships (PPPs), which could lead to a positive impact in development of innovative technologies and alternative energy sources. Lower or no trade tariffs can lead to lower import costs for the essential components of renewable energy production. This, in turn, results in lower investment costs and lower production costs, thus increasing the cost-effectiveness of introducing renewable energy technology.

One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers, which is a key aspect in terms of working at power plants. In addition, the EUVNFTA will boost the most economic sectors in Vietnam. Moreover, the EUVNFTA will provide certain tax reductions to 0% for clean technology equipment as well as equal treatment for companies. Due to easier opportunity on making business, trade and sustainable development will be a good consequence for an even more dynamic economy and even better investment environment in Vietnam in general and especially in the power/energy industry.

Both agreements promise great benefits for the energy sector in Vietnam and will help the PMP8 to connect international to domestic companies. The elimination of the tariff lines and custom duties are advantages to major companies and SMEs alike.

To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.

Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. We alert investors to make use of these standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.

Further securities come with the Government Procurement Agreement (GPA), which is going to be part of the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.

This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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

Thank you very much!

Rechtsanwalt in Vietnam Dr. Oliver Massmann – Sektor Infrastruktur und Abfallbehandlung – Aktuelle Themen und Lösungen für Investitionen und Ausblick auf die wichtigsten Handelsabkommen CPTPP, EUVNFTA und das Investitionsschutzabkommen

A. Überblick

Die Sektoren der Abfallbehandlung und Infrastruktur in Vietnam sehen sich verschiedenen Schwierigkeiten gegenüber. Die Abfallbehandlung ist in Vietnam ein vorrangiger Sektor, da die städtische Umgebung in den großen Provinzen dringend gereinigt werden muss. Dies führt zu einem dringenden Bedarf an Abfallbehandlungsprojekten. Die Anreize für Sponsoren sind jedoch begrenzt. Insbesondere verhindert eine Verordnung für Projekte zur Behandlung fester Abfälle, dass der von den Sponsoren erzielte Gewinn um mehr als 5% steigen kann, was sich negativ auf die finanzielle Tragfähigkeit der Projekte auswirkt.

In Bezug auf die Infrastruktur gibt es zwei Hauptprobleme. Erstens gibt es nur wenige Möglichkeiten für Sponsoren, Kapital für Infrastrukturprojekte zu beschaffen. Abgesehen von der traditionellen Projektfinanzierung haben Sponsoren von Projekten in Vietnam kaum andere Möglichkeiten, Kapital dafür zu beschaffen. Zweitens steckt die Entwicklung energieeffizienter Gebäude in Vietnam noch in den Kinderschuhen. Gebäude sind und bleiben die größten Stromverbraucher. Nur rund 100 Gebäude sind jedoch nach Green Building (GB) zertifiziert. Eine moderne, effiziente Infrastruktur ist für ein anhaltendes Wirtschaftswachstum von entscheidender Bedeutung und senkt die Geschäftskosten für alle Anleger in Vietnam.

In Bezug auf die Probleme der Abfallbehandlung kann festgestellt werden, dass aufgrund des raschen Wirtschaftswachstums und der Urbanisierung der Bedarf nicht durch die öffentlichen Mittel gedeckt werden kann. Diese Lücke muss durch andere Quellen wie private Investitionen in Form von öffentlich-privaten Partnerschaften (PPP) geschlossen werden. Um private Sponsoren für Abfallbehandlungsprojekte zu finden, kann das Problem gelöst werden, indem eine flexiblere Regelung anstelle eines festgelegten Gewinnlimits festgelegt wird.
Die Infrastrukturprobleme können vom Staat angegangen werden, indem ein staatlicher Rahmen zur Förderung alternativer Möglichkeiten zur Kapitalbeschaffung festgelegt wird. Die Problematik der Energieeffizienz von Gebäuden muss bereits während der Bauphase durch den Einsatz umweltfreundlicher Baumaterialien in Angriff genommen werden, ohne dass dabei höhere Kosten entstehen.

Außerdem bietet sich die Verwendung mehrerer Systeme und Zertifikate von “wirtschaftlichen Gebäuden” an, die den Markt bestimmen lassen, welche Praktiken sinnvoll sind. Diese Systeme könnten für den Betrieb lizenziert werden, basierend auf einer Reihe einfacher Kriterien wie Transparenz, Zuverlässigkeit und Kohärenz nach anerkannten Normen. Diese Zertifikate müssen Anreize enthalten, um Bauherren dazu zu ermutigen, energieeffiziente Gebäude zu bauen.

B. Abfallbehandlungssektor

Die Abfallbehandlung ist ein wichtiger Sektor für PPP’s. Bisher gibt es jedoch keine maßgeschneiderten Leitlinien für die Entwicklung von PPP-Projekten in diesem Sektor. Das Rundschreiben 07/2017/TT-BXD (Rundschreiben 07) regelt insbesondere die Methode zur Bestimmung des Preises für die Behandlung von Siedlungsabfällen, die als Grundlage für die Festlegung, Bewertung und Genehmigung der Preise solcher Dienste gilt. Die Regelung trat am 1. Juli 2017 in Kraft und gilt für Organisationen und Einzelpersonen.

Es ist kein Preismechanismus festgelegt, der für PPP-Projekte geeignet ist. In Rundschreiben 07 wird der Gewinn, den die Sponsoren bei Projekten zur Behandlung fester Abfälle erzielen, auf 5% begrenzt, wodurch die finanzielle Tragfähigkeit der Projekte beeinträchtigt wird.

Anstelle einer Höchstgrenze ist eine flexible Regelung erforderlich. Die zugelassenen staatlichen Stellen müssen in der Lage sein, über angemessene Servicegebühren zu entscheiden, die abhängig von den Markt- und Ausschreibungsergebnissen festgelegt werden, anstatt eine Obergrenze für die Profite festzulegen, die, wenn sie nicht dem Markt entspricht, Projekte für Investoren unattraktiv machen würde.

C. Fehlende Optionen für Sponsoren zur Kapitalbeschaffung für Projekte

Neben der traditionellen Projektfinanzierung haben Sponsoren von Infrastrukturprojekten in Vietnam kaum andere Möglichkeiten, Kapital für Projekte zu beschaffen. Die Vorschriften für Projektanleihen oder Handelskapital entsprechen entweder nicht der Art einer Infrastruktur-Projektgesellschaft (z. B. muss der Anleiheemittent im Vorjahr gewinnbringend sein, um Anleihen emittieren zu können) oder sind überhaupt nicht vorhanden (z.B. strenge Anforderungen an die Übertragung von Projektkapital, die Projektgesellschaften daran hindern, Mittel am Kapitalmarkt zu beschaffen).

Die Möglichkeit, am Kapitalmarkt Mittel zu beschaffen, würde den Sponsoren alternative Finanzierungsmöglichkeiten bieten, insbesondere angesichts der ungelösten Finanzierungsherausforderungen laufender Projekte. Die Regierung sollte einen rechtlichen Rahmen zur Unterstützung solcher Alternativen in Betracht ziehen und einführen.

D. Entwicklung von grünen Gebäuden in Vietnam und Standards

Ein Hauptproblem vor dem Vietnam steht, ist, dass es kaum energieeffiziente Häuser gibt. Derzeit hat Hanoi nur etwa 100 Gebäude, die nach Green Building (GB) zertifiziert sind oder sich einer GB-Zertifizierung unterziehen. Gebäude sind und bleiben jedoch die größten Stromverbraucher. Das rasante Wachstum der Urbanisierung und der damit verbundene Lebens- und Arbeitsstil, der eine intensive Nutzung der Klimaanlagen beinhaltet, macht einen erheblichen Teil des Energieverbrauchswachstums in den großen Städten Vietnams aus. Durch die richtige Gebäudeplanung kann dieses Wachstum für die nächsten 25 Jahre eines Gebäudes reduziert werden.

Andererseits ist eine Entwicklung zu sehen. Organisationen wie der Vietnam Green Building Council (VGBC) berichten, dass das Interesse in den letzten Jahren erheblich gestiegen ist. Viele Bauherren wurden in das Konzept von GB eingeführt. Ziel ist es, Gebäude so energieeffizient wie möglich zu machen. Um eine echte Veränderung herbeizuführen, muss das Problem auf mehreren Ebenen gelöst werden.

Erstens sollten Gebäude in jedem Fall energieeffizienter werden. Dies bedeutet keine höheren Investitionskosten. Das Verfahren kann von der Architekturphase über das passive Design und die Verwendung umweltfreundlicher Baustoffe bis hin zur Implementierung energieeffizienter Geräte während des Baus angewendet werden. Das Ziel sollte sein, dass alle Gebäude die Mindeststandards des VEEBC-Codes (oder einer vereinfachten Version) erfüllen, um die Baugenehmigung in der Basic Design Stage zu erhalten. Darüber hinaus könnte Electricity of Vietnam (EVN) ein Tarifsystem vorsehen, das Gebäude mit niedrigem Energieverbrauch mit niedrigeren Preisen belohnt und Gebäuden mit hohem Verbrauch höhere Preise auferlegt.

Zweitens muss die Regierung die Eigentümer von Gebäuden dazu ermutigen, ihre Gebäude zu zertifizieren. Neben internationalen Green Building-Zertifizierungen, die bereits in Vietnam eingesetzt werden, wie dem United States Green Building Council (USGBC), der Leadership in Energy and Environmental Design (LEED) und der International Finance Corporation (IFC) Edge, hat das VGBC das LOTUS-Zertifikat entwickelt. Zusammenfassend wäre es sinnvoll, mehrere Systeme für den Einsatz in Vietnam anzuerkennen, die den Markt bestimmen lassen, welche praktisch und nützlich sind. Diese Systeme könnten für den Betrieb lizenziert werden, basierend auf einer Reihe einfacher Kriterien wie Transparenz, Zuverlässigkeit und Kohärenz nach anerkannten Normen.

E. Ausblick auf wichtige Handelsabkommen TPP 11, EUVNFTA und das Investitionsschutzabkommen

US-Präsident Donald Trump hat im Januar 2017 beschlossen, sich von der Beteiligung der US am TPP zurückzuziehen. Im November 2017 trafen sich die verbleibenden TPP-Mitglieder auf dem APEC-Treffen und beschlossen, das nun als CPTPP (TPP 11) bezeichnete Abkommen ohne die USA voranzutreiben. Die Bestimmung der Vereinbarung sah vor, dass sie 60 Tage nach der Ratifizierung von mindestens 50% der Unterzeichner (sechs der elf teilnehmenden Länder) in Kraft tritt. Das sechste Land, das das Abkommen ratifiziert hat, war Australien am 31. Oktober 2018. Daher wird das Abkommen schließlich am 30. Dezember 2018 endgültig in Kraft treten.

Das CPTPP zielt darauf ab, Tariflinien und Zölle zwischen den Mitgliedstaaten für bestimmte Waren und Güter zu 100% zu beseitigen. Dies wird den vietnamesischen Markt attraktiver machen und mehr ausländische Direktinvestitionen nach Vietnam bringen.

Die Vereinbarung enthält ein eigenständiges, durchsetzbares Kapitel zur Umwelt. Die Kernpflichten dieses Kapitels verpflichten die Mitgliedsländer, ein hohes Umweltschutzniveau zu verfolgen, die innerstaatlichen Umweltgesetze wirksam durchzusetzen, nicht von diesen Gesetzen abzuweichen, um Handel oder Investitionen zu fördern, und die Transparenz sowie die Beteiligung der Öffentlichkeit zu fördern. Diese wesentlichen Bestimmungen werden dazu beitragen, die Sauberkeit in Vietnam zu verbessern.

Ein weiteres bemerkenswertes wichtiges Handelsabkommen ist das Europäische Union – Vietnam Freihandelsabkommen (EUVNFTA). Das EUVNFTA bietet große Möglichkeiten, neue Märkte für die EU und Vietnam zu erschließen. Es wird helfen, mehr Kapital nach Vietnam zu bringen. Darüber hinaus wird das EUVNFTA die meisten Wirtschaftssektoren in Vietnam stärken.

Beide Abkommen versprechen große Vorteile für den Infrastruktur- und Abfallbehandlungssektor in Vietnam und werden dazu beitragen, auf das schnelle Wirtschafts- und Bevölkerungswachstum zu reagieren. Zum Beispiel wird Vietnam an seine Verpflichtungen des Kapitels über das öffentliche Beschaffungswesen des CPTPP und der EVFTA gebunden, einschließlich der Verfahren zur Durchführung einer Ausschreibung und unter bestimmten Umständen, dass die Regierung eine öffentliche Ausschreibung durchführen muss. Die Investoren haben jetzt die Möglichkeit, sich an der Auftragsvergabe durch vietnamesische Regierungsbehörden zu beteiligen und die Regierung zu verklagen, wenn sie den Investoren nicht die Möglichkeit bietet, dies unter qualifizierten Umständen zu tun.

Das CPTPP und das EVFTA ermöglichen es, dass ausländische Investoren die vietnamesische Regierung für ihre Auftragsentscheidungen gemäß der Streitbeilegung durch Schiedsgerichtsverfahren verklagen können. Die verletzende Partei muss alle erforderlichen Maßnahmen ergreifen, um der Schiedsspruch umgehend nachzukommen. Bei Nichteinhaltung der Vorschriften, wie in der WTO, gestatten CPTPP und EVFTA auf Antrag der beschwerdeführenden Partei vorübergehende Abhilfemaßnahmen (Entschädigung). Der endgültige Schiedsspruch ist verbindlich und vollstreckbar, ohne dass die örtlichen Gerichte diesbezüglich Mitspracherechte haben. Dies ist für die Anleger von Vorteil, da der Prozentsatz annullierter ausländischer Schiedssprüche in Vietnam aus verschiedenen Gründen nach wie vor relativ hoch ist.

Zusammenfassend ist festzuhalten, dass das starke Wirtschaftswachstum in Vietnam und seine Nachfrage nach Infrastrukturentwicklung große Chancen für Investoren darstellen, die in Vietnam investieren möchten. CPTPP und EVFTA sind wirksame Instrumente zur Unterstützung ausländischer Investitionen in den vietnamesischen Infrastruktursektor in Form von PPP. Im Rahmen dieser Vereinbarungen könnten ausländische Investoren auf Schiedsverfahren zurückgreifen und die Schiedssprüche in Vietnam vollständig vollstrecken lassen.

Damit zumindest einige Teile des Freihandelsabkommens auf EU-Ebene schneller ratifiziert werden können, haben die EU und Vietnam vereinbart, Investitionsbestimmungen, für die eine Ratifizierung durch die Mitgliedstaaten erforderlich ist, aus dem Hauptabkommen zu ziehen und diese in eine gesonderte Investitionsschutz-Vereinbarung zu stellen (IPA). Derzeit wird erwartet, dass sowohl das FTA als auch das IPA dem Rat Ende 2018 förmlich vorgelegt werden, was möglicherweise das Inkrafttreten des FTA in der zweiten Hälfte des Jahres 2019 ermöglicht.

Darüber hinaus sorgt das Investor State Dispute Settlement (ISDS) für höchste Standards der Rechtssicherheit sowie der Durchsetzbarkeit und für Schutz der Anleger. Wir machen Investoren darauf aufmerksam, diese Standards zu nutzen! Wir können Sie beraten, wie das am besten geht! Es wird im Rahmen des TPP 11 und des EUVNFTA angewendet. Nach dieser Bestimmung haben die Anleger bei Streitigkeiten im Zusammenhang mit Investitionen das Recht, durch internationale Schiedsverfahren Ansprüche an das Gastland zu erheben. Das Schiedsverfahren wird aus Gründen der Transparenz in Konfliktfällen öffentlich gemacht.

In Bezug auf das TPP wurde der Geltungsbereich des ISDS reduziert, indem Bezugnahmen auf “Investitionsvereinbarungen” und “Investitionsgenehmigungen” als Ergebnis der Diskussion über die Zukunft des TPP auf den APEC-Sitzungen am 10. und 11. November 2017 entfernt wurden.

Weitere Sicherheiten sind im Government Procurement Agreement (GPA) enthalten, das Bestandteil des TPP 11 und des EUVNFTA sein wird. Das GPA beider Verträge regelt hauptsächlich die Anforderungen darüber, Bieter oder inländische Bieter mit Investitionskapital und vietnamesische Bieter gleich zu behandeln, wenn eine Regierung Waren kauft oder eine Dienstleistung in Höhe des festgelegten Schwellenwerts anfordert.

Vietnam verpflichtet sich, Informationen zu Ausschreibungen rechtzeitig zu veröffentlichen, den Bietern ausreichend Zeit zu geben, Angebote vorzubereiten und einzureichen und die Vertraulichkeit der Angebote zu wahren. Das GPA beider Abkommen verlangt auch, dass die Vertragsparteien Angebote auf der Grundlage fairer und objektiver Grundsätze bewerten, Angebote nur anhand der in Bekanntmachungen und Ausschreibungsunterlagen festgelegten Kriterien bewerten und vergeben, ein wirksames System für Beschwerden und Streitbeilegung schaffen usw. Dieses Instrument gewährleistet einen fairen Wettbewerb sowie Projekte von Qualität und einen effizienten Entwicklungsprozess.

Bei Fragen zu diesem Thema wenden Sie sich bitte an Dr. Oliver Massmann unter omassmann@duanemorris.com. Dr. Oliver Massmann ist Generaldirektor von Duane Morris Vietnam LLC.
Vielen Dank!

Vietnam – Infrastructure and Waste Treatment Sector – Current Issues and Solutions for Investment and Outlook on the Major Trade Deals CPTPP, EUVNFTA and the EU Vietnam Investment Protection Agreement (IPA)

A. Overview
The waste treatment and infrastructure sector in Vietnam faces several issues. The waste treatment is a priority sector in Vietnam due to the urgent need to clean up urban environments in major provinces. This leads to the urgent need of waste treatment projects. However, the incentives for sponsors are limited. In particular, a regulation regarding solid waste treatment projects prevents, that the profit earned by the sponsors can raise up higher than 5%, adversely affecting the financial viability of the projects.
Regarding the infrastructure, there are two main issues. Firstly, there are only a few options for sponsors to raise capital for infrastructure projects. Besides the traditional project financing, sponsors of projects in Vietnam have hardly any other options to raise capital for it. Secondly, the development of energy efficient buildings is still in its infancy in Vietnam. Buildings are, and will remain, the largest consumers of electricity. However, just around 100 buildings have a Green Building (GB) certification. Modern, efficient infrastructure is vital to continued economic growth and lowers the costs of doing business for all investors in Vietnam.
Regarding the problems of the waste treatment, it can be determined, that due to the rapid economic growth and urbanization, public funding is unable to meet these needs. This gap has to be filled by other sources like private investment in the form of Public-Private Partnerships (PPP). In order to find private sponsors for waste treatment projects, the problem can be solved by setting a more flexible regulation instead of a fix profit limit.
The infrastructural issues can be addressed by the state setting a governmental framework to promote alternative options to raise capital. The issue regarding the energy efficiency of buildings
must already be taken up during the construction phase by using environmentally-friendly construction materials without producing higher costs and, in addition, by using multiple systems and certificates of “economic buildings”, letting the market determine which are practical and useful. These systems could be licensed for operation based on a set of simple criteria such as transparency, reliability and coherence according to recognized norms. These certificates must include incentives to encourage builders to build energy efficient buildings.

B. Waste Treatment Sector
Waste treatment is an important sector for PPP’s. However, to date there is no customized guidance on development of PPP projects in this sector. In particular, Circular 07/2017/TT-BXD (Circular 07) regulates the method for determining the price of municipal solid waste (MSW) treatment service, which is used as the basis for setting, evaluating and approving specific prices of MSW treatment services. It came into force on July 01, 2017 and applies to organizations and individuals. It does not set out a pricing mechanism that is workable for PPP projects. Circular 07 limits the profit earned by the sponsors in solid waste treatment projects to 5%, adversely affecting the financial viability of the projects.
Instead of using a maximum limit, a flexible regulation is needed. The authorized State agencies must be able to decide on appropriate service fees which will be finalized subject to the market and tender results instead of setting a cap on the fees, which, if is not in line with the market, would make projects unattractive to investors.

C. Lack of options for sponsors to raise capital for projects
Other than traditional project financing, sponsors of infrastructure projects in Vietnam have hardly any other options to raise capital for projects. The regulations on project bonds or trading
equity are either not accommodating to the nature of an infrastructure project company (e.g. the law requires that the bond issuer must be profitable in the preceding year to be eligible to issue bonds), or not available at all (e.g. strict requirements on transfer of project equity preventing project companies from raising funds on the capital market).
Being able to raise funds on the capital market would provide the sponsors with alternative financing options, especially given the unresolved financing challenges of on-going projects. The government should consider and put into place a legal framework to support such alternatives.

D. Development of green buildings in Vietnam and standards
A major issue that Vietnam faces is that energy-efficient houses hardly exist. Currently Hanoi has only around 100 buildings that are Green Building (GB)-certified or are undergoing GB certification.
However, buildings are and will remain the largest consumers of electricity. The rapid growth of urbanization and its associated life and working style, which includes intensive air-conditioning use, accounts for a considerable proportion of the energy consumption growth in the major cities of Vietnam. Proper building design can reduce this growth for the next 25 years of a building’s lifetime.
On the other hand, a development can be seen. Organizations such as the Vietnam Green Building Council (VGBC) report a significant uptick in interest over the past couple of years. Many building owners have been introduced to the concept of GB. The aim is to make buildings as energy efficient as possible. To bring absolute a real change, the problem needs to be handled on several levels.
Firstly, buildings should become more energy efficient in any case. This does not mean higher investment costs. The process can be applied from the architecture phase, with passive design and the use of environmentally-friendly construction materials, to the implementation of energy-efficient devices during construction. The aim should be that all buildings achieve the minimum standards of the VEEBC code (or a simplified version) in order to receive the Building license at Basic Design Stage. Furthermore, Electricity of Vietnam (EVN) could impose a tariff scheme that rewards low energy consumption buildings with lower prices and impose higher prices to high consumption buildings.
Secondly, the Government must provide effective encouragement for building owners to certify their buildings. In addition to international green building certifications already being used in Vietnam, such as the United States Green Building Council (USGBC) Leadership in Energy and Environmental Design (LEED) and International Finance Corporation (IFC) Edge, VGBC has developed the LOTUS certificate.
In conclusion, it would be useful, to recognize multiple systems for use in Vietnam, letting the market determine which are practical and useful. These systems could be licensed for operation based on a set of simple criteria such as transparency, reliability and coherence according to recognized norms.

E. Outlook on Major Trade Agreements TPP 11, EUVNFTA and IPA
In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Vietnam has now officially become the 7th member of the CPTPP.
The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will make the Vietnamese market more attractive bringing more foreign direct investment to Vietnam. The agreement includes a stand-alone, enforceable chapter on the environment. The chapter’s core obligations commit member countries to pursue high levels of environmental protection, effectively enforce domestic environmental laws, not derogate from these laws to encourage trade or investment and promote transparency and public participation. Those essential regulations will help to improve the cleanliness of Vietnam.
One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both, the EU and Vietnam. It will help to bring more capital into Vietnam. In addition, the EUVNFTA will boost the most economic sectors in Vietnam.
Both agreements promise great benefits for the infrastructure and waste treatment sector in Vietnam and will help to react on the fast economic and population growth. For instance, Vietnam will be bound by its commitments in the Government Procurement chapter in the CPTPP and the EVFTA, including the procedures to conduct a tender and in specific circumstances that the Government must conduct a public tender. The investors now have the opportunity to participate in procurement by Vietnam’s government entities and challenge the Government if it does not grant the investors the opportunity to do so in qualified circumstances.
The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party. The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.
In conclusion, Vietnam’s strong economic growth and its demand for infrastructure development are great opportunities for investors planning to invest in Vietnam. The CPTPP and the EVFTA are effective tools to support foreign investment in Vietnam’s infrastructure sector in the form of PPP. Under these agreements, foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully enforced in Vietnam.
To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.
Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. We alert investors to make use of these standards! We can advise how to best do that! It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the TPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization” as result of the discussion about the TPP’s future on the APEC meetings on 10th and 11th November 2017.
Further securities come with the Government Procurement Agreement (GPA), which is going to be part of the TPP 11 and the EUVNFTA.
The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The GPA in both agreements also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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

Thank you very much!

Direct Corporate Power Purchase Agreement (DPPA) to be piloted in Vietnam in 2019 in Vietnam – Opportunities for producers of renewable energy and foreign firms as buyers – how best to use the CPTPP and the EUVNFTA to make it work

In recent years, Vietnam has enjoyed one of the world’s most rapid economic growth rates i.e., an average of more than 6% p.a. Such growth has transformed the country from one of the poorest in the world into a middle-income country. Vietnam has long recognized the important role of renewable energy in achieving energy security, sustainable development and stable growth rate.

Vietnam has a wide range of primary energy sources such as crude oil, coal, natural gas and hydro power for economic development. However, Vietnam has experienced formidable risks for its economy to be based on fossil fuels. For example, in April 2015, thousands of residents blocked a national highway for more than 30 hours in a protest against pollution by the Vinh Tan 2 coal power plants. It seems most of the hydro resource potential for hydro power plants will be fully exploited soon. Those are just two examples of incidents that could significantly affect the national power security power of Vietnam. Accordingly, Vietnam must reduce its reliance on less “environmentally friendly” primary fossil fuel, and promoting renewable energy promptly.

The revised Power Development Plan for 2011 – 2020, vision to 2030 (revised PDP VII), adopted in 2016, is evidence of a growing appreciation of the role alternative sources of energy, targets a 7% share of electricity generated from renewable energy by 2020 and 10% plus by 2030. The revised PDP VII forecasts the electricity demand using an annual average growth rate at 10% from 2011 to 2030. The demand will increase from 86 TWh in 2010 to 265 – 278 TWh in 2020 and 572-632 TWh in 2030. The estimated installed capacity would be 60 GW in 2020 and 129.5 GW in 2030.

Since early 2017, there has been a surge of solar and wind projects approved by the Government after the promulgation of new feed-in-tariffs (“FITs”) for on-grid solar projects and other reforming policies to attract foreign and local investment on this green industry.

On 12 June 2018, at a seminar on renewable energy, the Electricity Regulatory Authority of Vietnam (“ERAV”) discussed and disclosed information on regulations for implementation of a pilot for Direct Corporate Power Purchase Agreement (“DPPA”) and renewable energy sector. Generally, DPPA is an agreement made between the power generator and a corporate customer in which power output is physically delivered and sold to the corporate customer for its operation. ERAV informed that it is a time consuming process since ERAV and its consultants had to conduct research and collect massive information on fundamental issues, design, details and criteria for DPPAs, especially for similar cases such as Vietnam. It is also challenging for ERAV to cooperate and consult other departments of MOIT on the DPPA pilot.

Currently, ERAV’s consultants have submitted a first preliminary report on international experience regarding basic design, mechanism and operation of DPPA. It is known that ERAV and its consultants also sent questionnaire papers to several industry and sectors, companies and stakeholders aimed at seeking their opinion on consumer market, demand, participants, and other issues.

When such report is available, ERAV will arrange a seminar for introduction of the same and seeking opinion from all stakeholders. At this stage, there is no final decisions on capacity, licensing process, participants, location, wheeling fee, and contractual terms for the piloted DPPA. However, ERAV is considering some models as below:

• Physical DPPA: (a) onsite DPPA where the power plants to be constructed around the consumers, and / or (ii) offshore DPPA where power plants to be constructed anywhere.
• Financial DPPA: this would be formed with competitive market for selling power.

ERAV also shared that the DPPA pilot would be preferably designed for 110 KV or more system (not 220 KV or 22-25 KV) since this system is the most popular, efficient and feasible.

Market access in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and EU – Vietnam FTA (EVFTA)

Currently, there is no foreign ownership restriction in energy sector in local laws or Vietnam’s international commitments. The foreign investor may choose among permitted investment forms: 100% foreign invested company, joint venture or public private partnership in the form of BOT contract. For your information, Vietnam ties in first place with Singapore in terms of market access liberalization.

The recent conclusion of the EVFTA negotiation and legal review and the signing of the CPTPP further opens the market to foreign investors. The investors now can bring their technology and know-how, especially those from countries with high level of development in renewable sectors such as Germany, to Vietnam with less market access barriers and being more secured. In particular, the CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam’s Government for its investment related decisions according to the dispute settlement by arbitration rules. The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.

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Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com or any other lawyer in our office listing 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.

Lawyer in Vietnam Dr. Oliver Massmann – Public Private Partnerships – Enhancing Functionality – Making use of the Comprehensive and Progressive Trans-Pacific Partnership and the EU – Vietnam Free Trade Agreement for Better Functionality of the New PPP Decree

Decree No. 15/2015/ND-CP on public-private partnership (“PPP”) (“Decree 15”) when introduced in 2015 was highly praised by legal commentators to be well drafted and make the PPP Laws in Vietnam move closer towards bankable projects.

However, in implementation process, there have been conflicting legal issues that deter investors from choosing PPP as an investment method, leading to a humble number of PPP projects thus far. For example, Decree 15 made a progress in other previous PPP regulations in clearly allowing project contracts to be governed by foreign law, namely contracts involving a foreign party and government agency guarantee contracts. The issue only arises when it comes to real-estate related matters, which are not yet finally decided under the Land Law which law will be the governing law.

Moreover, as PPP laws are only at Decree level, regulatory framework for PPP projects mainly includes the Law on Enterprises, Law on Public Investment, Law on Bidding, etc. most of which regulate public investment instead of private one or investment cooperation between the Government and private investors. The investors are also concerned about the stability of PPP regulations, as they are mainly Decrees. While a PPP project could take years to complete, regulations at Decree level may change and cause investors confusion in implementation of the laws. The state agencies also face certain difficulties in managing these PPP projects. According to a real story shared by an officer at VCCI, after the Government signed a PPP contract with an investor, due to changes in policies, the Government amended its determination of the contract value. As a result, the land price increased by 14 times as much as previously agreed, leading to substantial loss for the investor.

According to the Ministry of Planning and Investment, during 2016-2020, it is expected that there will be 598 registered PPP projects with total investment amount of VND 250,000 billion. Given the shortcomings of Decree 15, it would be hard to achieve these numbers without its replacement by another Decree. In that context, Decree No. 63/2018/ND-CP (“Decree 63”) was issued on 04 May 2018 and takes effect from 19 June 2018 to eliminate bottlenecks in PPP implementation.
Decree 63 – What is new?

Capital contribution responsibility

The investor is responsible for contributing and mobilizing capital for the project implementation, in particular, the ratio of the investor’s capital in the owner’s equity is determined as follows:
– For projects with total investment amount of up to VND1,500 billion, the equity capital that the investor must maintain must be at least 20% of the total investment capital;
– For projects with total investment capital of more than VND1,500 billion:
o For investment portion of up to VND1,500 billion: the equity capital that the investor must maintain must be at least 20% of the total investment capital;
o For investment portion that exceeds VND1,500 billion: the equity capital that the investor must maintain must be at least 10% of the total investment capital.

There is no capital contribution requirement from the Government side.

Project approval authority

Decree 63 makes it clear the following authorities will approve PPP projects:
– The National Assembly decides the investment policy of important national projects;
– The Prime Minister decides the investment policy of the following projects:
o Projects Type A using state budget from 30% or above or below 30% but more than VND300 billion of the total investment capital of the project;
o Projects Type A using BT contracts.
– Ministers of relevant ministries decide investment policy of their own projects not falling within the approval authority of the National Assembly and the Prime Minister.
– Provincial People’s Councils decide investment policy of the following projects:
o Projects Type A not falling under the approval authority of the Prime Minister;
o Projects Type B using public investment budget; and
o Projects Type B using BT contracts.
– The provincial People’s Committee decides the investment policy of projects in their provinces not falling within the approval authority of the National Assembly, the Prime Minister and the provincial People’s Council.

Payment methods in BT projects

Practice shows that investors are very interested in well-located land when implementing BT projects. However, when such land fund gradually becomes exhausted, BT projects seem not to attract investors. Decree 63 has added another method in addition to the exchange of land for infrastructure, so that the investors will have more options in receiving payments. Specifically, the investor may also receive payment in the form of the transfer of right to conduct business, exploit works/ services, etc.

How to take advantage of the CPTPP and the EU-Vietnam FTA (EVFTA) in PPP projects to enhance the functionality of PPP projects in Vietnam

Covered government entities and agencies

According to Decree 63, tenders for the selection of PPP investors will follow the Law on Public Procurement. While the Vietnam’s Law on Public Procurement still shows some shortcomings, Vietnam will be bound by its commitments in the Government Procurement chapter in the CPTPP and the EVFTA, including the procedures to conduct a tender and in specific circumstances that the Government must conduct a public tender. The investors now have the opportunity to participate in procurement by Vietnam’s government entities and challenge the Government if it does not grant the investors the opportunity to do so in qualified circumstances.
The CPTPP and the EVFTA both make a list of government entities and agencies whose procurement of particular̉ goods and services at a particular amount must be subject to public tender. While the CPTPP only allows expansion of the list within 5 years upon the entry into force of the agreement, the EVFTA allows a longer period (i.e., 15 years).
Covered procurement

Government procurement of goods or services or any combination thereof that satisfy the following criteria falls within the scope of the EVFTA and CPTPP Government Procurement rules:

Criteria

How to appeal Government tender decision?

The CPTPP and the EVFTA make it possible that foreign investors could sue Vietnam Government for its tender decisions according to the dispute settlement by arbitration rules. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the CPTPP and the EVFTA allow temporary remedies (compensation) at the request of the complaining party.

Enforcement of arbitral awards

The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different reasons.

Conclusion

It is crucial that foreign investors take advantage of the requirements under the CPTPP and the EVFTA to enhance functionality of their PPP projects in Vietnam. Under these agreements, specific Vietnam Government entities and agencies when procuring goods/ services above certain thresholds must conduct public tender. In case these entities make wrongful tender decisions, foreign investors could take recourse to arbitration proceedings and have the arbitral awards fully enforced in Vietnam.

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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. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
THANK YOU !

Lawyer in Vietnam Dr. Oliver Massmann New Comprehensive and Progressive Agreement for the Trans-Pacific Partnership signed by Members States – WHAT IS IN FOR YOU?

Overview on the Trans Pacific Partnership Agreement (TPP) – now the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP)
The TPP was originally known as the Trans- Pacific Strategic Economic Partnership concluded in 2006 among Singapore, New Zealand, Chile and Brunei (P-4 agreement) as a means to promote trade liberalization in the Asia- Pacific Region. As its name indicates, the original purpose of the agreement was only to address economic issues. As the number of participating countries in the P-4 agreement increased, starting with the United States in September 2008 and other countries to follow being Australia, Peru, Vietnam, Malaysia, Canada, Mexico and Japan until July 2013, the agreement is agreed to be “a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st-century challenges” by TPP Trade ministers. In June 2015, the United States approved the trade promotion authority for President Obama. The Agreement finally becomes as it is today through tough negotiation rounds, while the last round in Atlanta in September 2015 was considered the most intensive one. The TPP was already concluded on 06 October 2015. However, in January 2017, right after President Trump took his office, the United States formally expressed its withdrawal from the agreement, leaving other 11 parties with the decision to continue the agreement without the United States or not. In November 2017, during APEC meeting in Da Nang, Vietnam, ministers from 11 countries decided to push ahead with the TPP with its new name – CPTPP with only 20 items suspended out of an around 5000-page document, mainly in the Intellectual Property chapter. On 8 March 2018, the CPTPP was finally signed in Chile. The CPTPP accounts for 495 million people representing 13.5 percent of the world total economic output – worth a total of $10 trillion.
The CPTTP will help Vietnam make good use of international cooperation opportunities, balance relationships with key markets, approach larger markets including Japan and Canada, boost import-export, reduce import deficit, and attract foreign investment. In addition, CPTTP will also help Vietnam’s economy allocate its resources more effectively, enabling active supports to the processes of restructuring, innovation and improving regulations, and improve administrative reforms.
What makes CPTPP the template for next-generations trade agreements – What commitments are beyond the WTO commitments ?
Freer trade zone
Commitments in Trade in goods
Tariff and non-tariff barriers are reduced and removed substantially across all trade in services and goods under the CPTPP. Import tariffs are reduced for 100% goods traded among member states, with more than 90% being eliminated immediately when the Agreement takes effect. The CPTPP also covers issues which have never been addressed in the WTO, including export duties, import duties for re-manufactured goods, market access for re-furbished goods, stricter regulations on import and export licensing, monopolies and goods in transit.
Lower tariff barriers from the CPTPP will give Vietnam greater access to large consumer markets in Japan, Canada and Australia. The potential positive effect on trade could be transformative, with estimates that the CPTPP will boost Vietnam’s exports by over 37% until 2025.
Commitments in Trade in services and Investment
All 11 member states give consent to a liberalized trade in this area. More sectors are opened in the CPTPP compared with the WTO, such as telecommunications, distribution and manufacturing sectors.
In addition, besides incorporating basic WTO principles (national treatment (NT), most-favored nation treatment (MFN), market access, and local presence), the CPTPP takes a negative approach, meaning that their markets are fully open to service suppliers from other CPTPP Parties, except otherwise indicated in their commitments (i.e, non-conforming measures). In order to make such reservations, the member state must prove the necessity of such preservation and negotiate with other member states. If approved, the non-conforming measures are only limited to such list, except for measures in certain sensitive sectors which are included in a separate list. Member states are only allowed to adopt policies that are better than what they commit (ratchet principle). The CPTPP also includes obligations on removal of performance requirements (i.e., no conditions on local content requirements, export conditions, use of certain technology, location of the investment project, etc.) and reasonable requirements on senior management and board of directors. Notably, the CPTPP Chapter on Investment for the first time makes it very clear and transparent concerning the MFN principle, that countries operating in multi-state regime must give foreign investors the best investment conditions of all states, regardless of the state where the investment takes place. Investors are also allowed to petition against the Government from the investment registration stage.
Textiles
Textiles are among Vietnam’s core negotiating sectors. According to suggestions by the United States, negotiations on textiles were conducted separately from negotiations on market access for other goods. To be qualified for CPTPP preferential tariff treatment, the CPTPP applies the yarn-forward principle, meaning textile products must be produced in CPTPP countries from yarn forward. However, the CPTPP includes exceptions that allow (i) certain materials to be sourced from outside CPTPP (“Short supply list”), (ii) certain manufacturing phases (for example, dying, weaving, etc.) to be conducted outside CPTPP; and (iii) one country to be able to use non-CPTPP materials in exchange for its export of certain textile goods to another country.
Government procurement
The CPTPP makes a list of government entities and agencies whose procurement of particular̉ goods and services at a particular amount must be subject to public tender. Any negotiation to expand coverage of the Government Procurement chapter, particularly in relation to state government and local government contracts, will be delayed. Parties will only initiate talks on this issue at least five years after the date of entry into force of the CPTPP.
This chapter includes NT and MFN principles, removes tender conditions favoring local tenders such as using local goods or local suppliers, conditions on technology transfer or two-way trade and investment, etc. These rules require all parties, to reform their bidding procedures and protect their own interests by disqualifying tenders with poor performance and low capacity.
Investor-State Dispute Settlement
The CPTPP aims at protecting investors and their investment in the host country by introducing requirements on non-discrimination; fair and equitable treatment; full protection and security; the prohibition of expropriation that is not for public purpose, without due process, or without compensation; the free transfer of funds related to investments; and the freedom to appoint senior management positions regardless of nationality.
For the first time investors of a party may sue the Government of the other party for its violation of investment-related commitments when the investors make investment in that party. However, please note that under the CPTPP, investors will not be able to sue the Government using ISDS clauses if there is any dispute in connection with an investment agreement. An investment agreement means a written agreement that is concluded and takes effect after the date of entry into force of the CPTPP between an authority at the central level of government of a Party and a covered investment or an investor of another Party and that creates an exchange of rights and obligations, binding on both parties under the applicable law. Investment agreement refers to an agreement in writing, negotiated and executed by both parties, whether in a single instrument or in multiple instruments. A unilateral act of an administrative or judicial authority, such as a permit, licence, authorisation, certificate, approval, etc. and an administrative or judicial consent decree or order will not be considered a written agreement.
CPTPP also includes procedures for arbitration as means of settling disputes between investors and the host state. It covers new provisions compared with existing agreements such as transparency in arbitral proceedings, disclosure of filings and arbitral awards, and participation of interested non-disputing parties to make amicus curiae submissions to a tribunal. Arbitral awards are final, binding and fully enforceable in CPTPP countries.
Application of the CPTPP and older/ existing agreements
Member states of the CPTPP acknowledge existing rights and obligations of each member under existing international agreements to which all CPTPP member states are parties (for example, the WTO Agreement, NAFTA, or bilateral agreements) or at least two member states are parties. In case there is any consistency between a provision of the CPTPP and a provision of another agreement to which at least two CPTPP member states are parties, these parties will consult with each other to reach a mutually satisfactory solution. Please note that the case where an agreement provides more favourable treatment of goods, services, investments or persons than that provided for under the CPTPP is not considered as an inconsistency.
Implementation deadline of the CPTPP
The CPTPP provides that “at least six or at least 50 percent” of the accord’s signatories must ratify for the deal to entry into force, and indicates that the threshold which applies will be “whichever is smaller.” Once such threshold is met, the CPTPP will take effect for this group 60 days after they have all notified New Zealand, the accord’s depositary.
Any signatory which ratifies the CPTPP after it comes into force will have to wait 60 days from the date when they notified their ratification for it to take effect for such signatory.

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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. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.