Lawyer in Vietnam Oliver Massmann BREXIT IMPACT ON VIETNAM AND SOLUTIONS Making Vietnam ready for competition – Making Vietnam the ASEAN No. 1

The UK withdrawal from the European Union (EU), often known as Brexit, has become one of the most remarkable events in the history of not only the UK, but also the world. Brexit refers to a political movement which would result in the expiration of the British membership in the EU after a referendum held on June 23, 2016. This event will not simply affect the economy of the UK as well as other nations in the EU but will also have influential impact on the global market in general; and Vietnam is not an exception.
Being one of the most active trade partners with the EU, Vietnam accounted for nearly 20% of the total trade between EU and members of the Association of Southeast Asian Nations (ASEAN) in 2015. More importantly, the United Kingdom (UK) has become Vietnam’s largest trading partner in the EU, with a bilateral trade reaching US$5.4 billion last year. In addition, although not currently ratified, a Free Trade Agreement (FTA) between Vietnam and the EU, also known as the EU – Vietnam Free Trade Agreement (EVFTA), has been concluded and is expected to be in force in 2018.

Immediate Impact
Several experts and policymakers have predicted the impact that Brexit would have on Vietnam as well as some solutions to this situation. According to Trinh D. Nguyen, an economic expert on Asian emerging markets, Vietnam could be the most heavily affected economy among Asian emerging markets as a result of the predicted EU economic downturn after Brexit.
Regarding the immediate or short-term impact, despite the fact that the UK is the largest trading partner of Vietnam in the EU, the UK only accounts for 10% – 12% of the total export volume of Vietnam to the EU. Although trading activities between Vietnam and the UK are likely to be affected as the EVFTA will not be applicable between the two countries, this will not have an immediate or sufficient impact on Vietnam’s economy due to minimal trade volume.
Another aspect that attracts substantial attention after Brexit is market volatility. After the result of the vote was announced, the British Pound fell dramatically, hitting a 31-year low against the US dollar, with a decrease of more than 10%. When this currency is compared to the Vietnamese Dong, its value has dropped a massive 12.55%.
In addition, other sectors of the market including gold and stocks in Vietnam also experienced some fluctuations. Particularly, gold price in Vietnam rocketed to $1,601 per tael, the highest in the past 10 months. Meanwhile, in an opposite direction, the stock market in the country dropped 11.5 points or 1.85 percent to 620.77 immediately after Brexit. The same trend was also experienced in the global stock market. However, many experts believe that this was a result of investors’ panic instead of direct negative influence of Brexit on Vietnam.

Long-term Impact
As mentioned, the British Pound reacted shortly after this nation voted to leave the EU. Although this was an immediate reaction, its consequences, according to several experts, could lead to a number of long-term effects. Since the Pound devaluated, it is expected that imported goods’ price would increase. As a result, the EU demand for these products, including those imported from Vietnam, would decline. Therefore, the devaluation of the Pound is likely to affect the Vietnamese economy to some extent despite Vietnam’s low export volume to the EU.
However, the Pound is not the only currency that decreased in value after Brexit. In fact, the Euro also experienced a similar trend. After Brexit, the Euro itself lost 4% in value. Again, this would limit the EU demand for imported products, affecting the Vietnamese economy where the EU has become one of the most important trading partners. On another hand, value of the US Dollar has increased significantly compared with other currencies, resulting in potential more investment from US investors in the country.
Nevertheless, it is argued that as the Pound itself lost value, imported products from almost anywhere in the world would increase in prices. Moreover, the demand is always present although it could decrease by a few percent. Therefore, Brexit should not have an enormous impact on imported products in Vietnam. However, this claim has not considered all aspects of the matter. Although it is undeniable that prices of the majority of imported products in the UK would increase, products from Vietnam are likely to increase more in prices when being compared to those of others as the value of the Vietnamese Dong accelerated excessively after Brexit. Particularly, in ASEAN, the Vietnamese Dong is the currency that increased the most in value when compared to both the British Pound and the Euro after the event. Therefore, Vietnamese exported products might suffer the most in the area.
Brexit will divert British investment and British business strategy in Vietnam will be affected. Although direct investment from the UK is not significant, capital influx via the UK is. Therefore, in the long term, there could be certain difficulties in attracting these capital flows.
Vietnam is the only Southeast Asian nation that has finalized its FTA with the EU. Although the EVFTA has not yet been ratified, it is an advantage to Vietnam when competing with other ASEAN nations in the EU market, especially when after Brexit, these nations could face several obstacles before reaching a final agreement. Despite this, as the UK has ended their membership in the EU, the EVFTA is no longer applicable between Vietnam and the UK. Brexit has temporarily been disrupting the process of reducing trade barriers between Vietnam and the EU. As a result, a new FTA must be negotiated between the two countries or the UK must build a similar regime as the GSP in the EU to reduce impact of Brexit on bilateral trade with Vietnam.
In order to maintain the trading partnership between Vietnam and the UK, the solutions must come from the Governments.

Solutions for Vietnam
Appreciations in other currencies as a result of Brexit would help improve Vietnam’s competitiveness over other countries, for example, Japan and China. If Vietnam’s Government takes timely action to make its economy more stable and improve business environment, Vietnam would be an attracting destination for capital inflows.
In order to achieve such objective, macro policies must be more flexible. The Government should also pay special attention to coordinating monetary and fiscal policies to ensure harmonization between policy flexibility and economic stability. The appreciation of the US Dollar as a global safe haven currency has introduced further opportunities for US investors in Vietnam, especially when many trade restrictions will soon be lifted following the ratification of the – already signed – Trans-Pacific Partnership Agreement.

Institutional Reform – A MUST
Comprehensive institutional reform of the state-owned enterprise (SOE) sector is of highest importance. It could be done by real privatization with majority options for investors. Investors must be granted with real performance control and business management control for SOE management every year. These reforms should be fully implemented until end of 2017 or it will be too late to grasp the benefits of the upcoming EVFTA and the TPP.
Leader in ASEAN – Learn from Germany in the EU
Last but not least, Brexit has handed Germany the leading role in Europe. Vietnam should forge even stronger ties with Germany and make use of Germany’s recipe for its economic strength.

Please do not hesitate to contact Mr. Oliver Massmann under if you have any questions on the above or should you request our assistance. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.


Lawyer in Vietnam Oliver Massmann Asean Economic Community Impact on Real Estate Sector

Often compared to the European Union (EU), the AEC is a community formed in order to promote economic integration in South East Asia. The aim of this community is to create a market where member countries are able to develop competitively and cooperate with fewer barriers including free movement of goods, services, investment, freer flow of capital as well as substantial growth in workforce and demanding occupations. In order to achieve this, there are several tasks that need to be fulfilled such as diminishing the gap between developed and developing nations or enhancing communications connectivity and infrastructure.

Due to this, it is expected that the AEC would have a significant impact on the members’ economies in general, and on their real estate sectors in particular; and Vietnam is not an exception. Considering market fluctuations, it can be seen that an excessive amount of foreign capital has been invested into properties recently. In reality, until June 2015, a total of $16.6 billion from ASEAN investors had been poured into this market, despite the fact that AEC was not formed until December last year. This is partly because of the recently applied Housing Law and the Law on Real Estate Business which allow foreign investors to legally own, sell and transfer real properties. Regardless, the influence of AEC is undeniable. Also, similar trends were found in other ASEAN nations including Thailand or Singapore.

This has led many experts to predict that the involvement of Vietnam in AEC would result in prosperity in the real estate market. Vietnam can well compete with its ASEAN member countries in the Real Estate sector.

Vietnam has the most liberalized Real Estate Sector of all Asia allowing free hold ownership of land and houses for foreigners who are married to Vietnamese nationals.

There are still a number of challenges ahead of us such as weak management or lack of skilled labors and unclear procedures. As a result, although with its diversity, the ASEAN real estate market is an attractive destination to several investors, individual countries including Vietnam are required to improve systematically in order to compete in the global market.

Please do contact the author Oliver Massmann under if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Vietnam Foreign Direct Investment

By Oliver Massmann and Manfred Otto – Duane Morris Vietnam LLC

Foreign Direct Investment

A Brief Overview
Vietnam is undergoing fundamental changes to form the basis for its attractiveness and competitiveness in preparation for the ASEAN Economic Community (AEC), the upcoming trade agreements including the EU-Vietnam FTA and the Transpacific Partnership Agreement (TPP).
Since July 2015, a number of new laws and regulations governing foreign investment, enterprises, real estate and foreign ownership limits have come into effect. For example, the new Law on Investment and the new Law on Enterprises:
(i) clarify definitions of foreign-invested enterprises;
(ii) facilitate M&A activities;
(iii) reduce the number of prohibited and conditional business sectors;
(iv) reduce statutory business licensing times;
(v) provide more flexibility with regard to corporate governance (such as multiple legal representatives and lower voting thresholds); and
(vi) create more favourable conditions for shareholder lawsuits.
In addition, new laws and regulations affecting foreign ownership of real estate have come into effect. Foreigners can now own apartments and for the first time buy houses. They are now also permitted to sublease and inherit real estate.
With the coming into effect of several international trade agreements and more particularly, the EVFTA, EuroCham members are looking forward to the positive changes that will be implemented and that will further business incentives as well as contribute to Vietnam’s growth.
Vietnam as an attractive FDI destination
In addition to the numerous legal changes, Vietnam has fundamental elements that participate to its continued growth. For instance, Vietnam is in a demographic golden age, with 25% of its 90 million people population between 10 and 24 years old. GDP per capital is increasing drastically as Vietnam has the fastest-growing middle class in South East Asia – (12.9% per annum over the period 2012-2020). Along with a high literacy rate and education levels, comparatively low wages, connectivity and central location within ASEAN, more and more foreign investors choose Vietnam as their hub to service the Mekong region and beyond.
Vietnam’s attractive profile is reflected in its generally welcoming of foreign direct investment (FDI) in manufacturing activities. The gradual opening of most service sectors under Vietnam’s WTO commitments schedule that began in 2007 has been completed in 2015. Domestic law has expanded market access in some sectors beyond those of Vietnam’s WTO commitments. For example, foreign shareholding in public companies that was previously capped at 49% is now generally open for to up 100% foreign ownership. Vietnam also grants investment incentives including tax breaks in areas, such as high-tech, environmental technology, and agriculture, where European businesses are global leaders.
Furthermore, in 2014, Vietnam recorded $21.92 billion in FDI with a total of 1843 investment licenses for foreign invested projects with a registered capital of $16.5 billion, representing a 14% increase from the previous year. Among the foreign investors, the EU is an increasingly important source of FDI for Vietnam as ‘according to the Foreign Investment Agency of the Vietnamese Ministry of Planning and investment, investors from 23 out of 28 Member States of the EU injected a total committed FDI worth US$19.1 billion into 1566 projects over the course of the past 25 years (by 15 December 2014)’. With this strong activity, in 2014, the EU positioned itself as fifth in the top FDI partners of Vietnam with a combined committed FDI of US$587.1 million.

Source: ‘Vietnam’s logistics market: Exploring the opportunities, Hong Kong Trade Development Council (HKTDC)

In addition to FDI, the EU-Vietnam’s strong trade relationship can be seen through programmes like the Multilateral Trade Assistance Project (MUTRAP) which accounts for over €35.12 billion. MUTRAP has been instrumental in supporting Vietnam’s negotiating efforts during the WTO accession process and now continues to assist Vietnam in the implementation of trade commitments. In terms of trade, both the EU and Vietnamese businesses are expected to benefit under the EVFTA. The FTA will gradually eliminate tariffs for over 99% of goods and services besides other mechanisms to support bilateral trade. On 4 August 2015, the EU and Vietnam reached an agreement in principle for the free trade deal, an agreement that will also attract further FDI into the country.
Vietnam’s top trading partners 2013
Finally, the EU’s strong commitment to support Vietnam in its modernisation and integration in the world economy is mirrored by the aid programmes. In line with Vietnam’s 2020 socio-economic plan, the EU has increased its aid by 30 % reaching 400 million euros via its multi-annual indicative programme for the period of 2014-2020 focusing on the development of clean energy in Vietnam.

Further improvements necessary
It is clear that Vietnam’s development and its attractiveness to foreign investors are undeniable as Vietnam is constantly improving its business environment.
However, as of this writing, guiding regulations for many new laws have still not been published, and investors are experiencing delays in the processing of applications. We expect processing times to improve once the new implementing regulations come into effect and officials get accustomed to the changes.
Another issue that has been highlighted by our members is that many foreign investors still face significant challenges when dealing with Vietnam’s bureaucracy. Tax filing, customs clearance, business registration and licensing, and other administrative procedures are often delayed, outcomes can be unpredictable, and businesses find themselves spending resources on administration that they would prefer to invest in expanding their core activities.
Despite remaining hurdles, the national government of Vietnam has expressed an understanding of the issues surrounding foreign investment. Providing foreign investors increased access to its market, the stream of FDI is expected to continue. For many foreign investors the positive economic development of the country and its fundamentals substantially outweigh potential risks.
In this light, EuroCham wishes to present the key issues that our members face in their activity in Vietnam along with some key recommendations. EuroCham hopes to engage in a constructive dialogue and increasing cooperation with the relevant authorities on all the issues presented in this edition in order to improve the business environment for all enterprises in Vietnam and contribute to the country’s fast modernisation.


1‘Vietnam; from golden age to golden oldies’, UK FOC, 07/01/15. Available at
2‘Report revises 2014 FDI figures’ Viet Nam News, 18/03/15. Available at
3‘Investment -EU-Vietnam economic and trade relations’, Delegation to the European Union to Vietnam, 2015. Available at
4‘Vietnam’s logistics market: Exploring the opportunities, Hong Kong Trade Development Council (HKTDC), 20/01/15. Available at
5‘Trade – EU-Vietnam economic and trade relations’, Delegation to the European Union to Vietnam, 2015. Available at
6‘European Union, Trade in goods with Vietnam’, European Commission DG Trade, 10/04/15, p.9. Available at
7‘Development Cooperation’, Delegation to the European Union to Vietnam, 2015. Available at

Continue reading “Vietnam Foreign Direct Investment”

Lawyer in Vietnam Oliver Massmann New Vietnam investment law won’t help public sector

“As only a minority of the shares is offered for sale, the investors are not quite interested.” Oliver Massmann, General Director, Duane Morris Vietnam LLC
A new investment law that took effect in July is likely to keep investment flowing to Vietnam’s private sector but won’t help Prime Minister Nguyen Tan Dung achieve this year’s target for selling minority stakes in several hundred public-sector firms.
Prime Minister Nguyen Tan Dung’s push to sell minority stakes and reduce bloat in nearly 300 Vietnamese state-owned firms by the end of the year is unlikely to be successful despite recent reforms in business laws implemented in July that make it easier for foreign investors to acquire companies.
“This seems to be an ambitious target as the number of privatized enterprises is only 61 in the first six months of 2015,” Oliver Massmann, general director at the Hanoi office of corporate law firm Duane Morris LLP, tells MGO via email. “Moreover, as only a minority of the shares is offered for sale, the investors are not quite interested in the transaction, especially when they would not have any decision-making power or their involvement in the management of the enterprise is very limited.”
Public sector firms account for 30 percent of Vietnam’s GDP, and the country has been seeking to privatize and restructure them in order to reduce their debt, confine spending to core business activities, and help them acquire strategic foreign partnerships. According to a piece Mr. Massmann wrote for industry magazine The Asia Miner last year, state enterprises own 70 percent of property in Vietnam and account for 60 percent of commercial bank credit.
But despite initiating the process of restructuring and reforming public firms several years ago, Vietnam has been unable so far to address a number of factors that are hampering the divestment process.
Vietnam law continues to cap foreign ownership at 49 percent in listed firms, which many public sector enterprises are. And in most cases Vietnam is not selling stakes anywhere near the 49 percent limit — or even large enough to give investors decision-blocking powers.
In addition, it remains difficult for investors to value the shares that are being offered, given the lack of adequate audit reports. As a result, the Vietnamese Ministry of Finance is carrying out valuations of each firm. As recently as last month, Asian Development Bank’s chief economist Aaron Batten noted that only 8 percent of state firms publish financial reports on their websites, according to a report in the English-language daily Viet Nam News.
Due to these unresolved factors, Vietnam also fell short of its disinvestment target in 2014. Now, with stock markets in the region wobbly, public sector firms are likely to have an even harder time than they did last year, when as many as 143 firms were able to privatize some shares, according to Vietnamese media reports.
Mr. Massmann clarified, however, that the lack of investor interest in public enterprises comes against the backdrop of an improved overall investment and business climate in the country.
The 2014 Investment Law, which went into effect July 1, does away with something called an investment certificate, a business registration for foreign investors that was supposed to be approved in 45 days but in practice took four to six months to process, according to Mr. Massmann’s firm.
The law has also reduced the number of “conditional” business activities, areas of the economy in which investors have to seek approval with provincial planning departments. Construction, urban planning and education continue to remain conditional activities, but even in these sectors, acquisitions should become much easier, business analysts say.
Meanwhile, earlier tax law changes have also drastically cut the hours businesses spend on tax preparation and filing,
Vietnam has made “positive changes to improve the business environment and strengthen the economy’s ability to compete in 2015 and 2016,” Mr. Massmann tells MGO.
The apparel and textile manufacturing sector has drawn a large share of investment this year and is likely to continue to do so. Seafood processing, electronics manufacturing and retail and banking are also likely to attract investment into next year.
Mr. Massmann also foresees that the government will try to make investing in state firms more attractive by increasing the share of equity for sale, something that has so far been resisted by the management of many state firms, who perhaps fear that equity shares that allow for closer scrutiny of corporate governance could expose poor management or even corruption.


Please do not hesitate to contact Mr. Oliver Massmann under if you have any questions on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

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

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