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EU-Vietnam FTA Finally To Come Into Force In Early 2019? Comments on Government Procurement

Image on "EU-Vietnam FTA" created by authorVietnam Investment Review reported that the European Union-Vietnam Free Trade Agreement (EVFTA) will likely be ratified in October or November 2018 and come into effect in early 2019:

“EU firms to bid on public contracts”

Besides quotations from our Co-General Director in Vietnam, my  comments on government procurement under the FTA were featured in the above article as follows:

“The government procurement provisions in the EU-Vietnam FTA are a big step for Vietnam. Vietnamese suppliers will have access to the EU’s US$500 billion public procurement market. For Vietnam and its people, the EVFTA’s government procurement provisions should, over time, improve access to high-quality goods and services from EU suppliers.

Improvements are especially expected in the healthcare and life sciences sectors, as Vietnam’s public procurement in these sectors takes up 67% of the total market value. Vietnam has committed to give EU suppliers the right to bid for up to 50% of the pharmaceutical purchases by the Ministry of Health and many of the hospitals under its control, as well as major research facilities. Even so, this is a very gradual process over a period of 15 years after the FTA comes into effect.

The right to participate in Vietnam’s public tenders will initially be limited to relatively high-value contracts – those worth at least SDR 1.5 million (currently, $2.1 million) or SDR 3 million ($4.2 million) depending on the procurement agency. For construction work, the initial thresholds are even higher at SDR 40 million ($56 million). This is probably meant to protect Vietnamese small and medium-sized businesses.

The EVFTA also contains specific transparency and other requirements to support the procurement process itself, including an independent administrative or judicial authority where suppliers can challenge awards.”

Besides public procurement in healthcare, the EVFTA also provides access to other important government contracts. EU suppliers will be able to bid for contracts from Electricity of Vietnam, the State-run power company, and those of other major infrastructure projects, including roads, railways, and airports.

For more information, please contact Manfred Otto at MOtto@duanemorris.com or any other lawyer at Duane Morris.

The firm’s disclaimer applies to this post.

Cometh the EU-Vietnam Free Trade Agreement

The Vietnam – EU Free Trade Agreement (EVFTA), a new-generation free trade agreement between Vietnam and the EU’s 28 member states, is a comprehensive and high-quality trade pact that is expected to bring a range of benefits to both Vietnam and the EU.

For many years the EU has been the second largest overseas market for Vietnamese products and Vietnam’s second most important two-way trading partner after China. On average, Vietnam’s exports of commodities to the EU account for around 19 percent of its exports to global markets. This figure has seen double-digit growth for the past decade, annualised at 13-15 percent, and even reaching 25 percent in certain years.

The EVFTA, which is expected to be signed this year, will have a wide-ranging impact on bilateral trade and investment thanks to tariff cuts and strong commitments from both sides. The deal has been heralded as the most ambitious of its kind between the bloc and a developing nation, and one which will put an end to 99 percent of customs duties on goods. Some predictions are that the agreement will boost the Vietnamese economy by up to 15 percent of GDP and exports to Europe by a third or more.

On top of providing more development opportunities for Vietnam’s industries it will also help to improve the country’s investment environment and raise the quality of its export products.

What can investors expect to change with the new deal?

The most prominent benefits to be expected are an increase in the trade of goods promoted by the reduction or elimination of tariffs and non-tariff barriers, whereby key economic sectors as textiles, footwear and the high-technology industries in Vietnam would benefit most.

One sector in particular hoping for a big boost is fisheries. Under the EVFTA, aquatic products, excluding canned tuna and fish balls, will enjoy a zero tax for a maximum of seven years. Similarly, in good news for shrimp processing firms, Vietnam will enjoy a reduction in import duties on raw shrimp and export duties on processed shrimp to the EU.

The reduction of tariff lines will help Vietnamese seafood exporters reduce prices significantly, improve competitiveness and export turnover. Vietnamese aquatic firms will also have space to improve technology and product quality, join regional supply chains and diversify supply sources.

Additionally, Vietnam’s commitments to ensure an open and transparent investment and business environment will help to boost high quality investment from the EU into Vietnam.

Sink or swim

However, Vietnamese companies should also be aware of the challenges brought about by free trade agreements, and especially the EVFTA. These are related to higher requirements from the EU market in terms of transparency and competition, both for private and state-owned enterprises (SOEs).

The FTA is not necessarily seeking complete privatisation, but rather the opening up of those economic sectors where SOEs are present. Vietnamese enterprises may expect to see an impact from this process, provided that the FTA promotes reforms in public procurement.

The tax cuts will put a greater burden of competitiveness on domestic producers in terms of prices, product quality and food hygiene and safety. Firms will face a choice – either adapt and move up the global supply chain, or stand by while imported goods flood the market.

The livestock industry is forecast to be at the biggest disadvantage as taxes on chicken and pork will be cleared under an 8 to 10-year roadmap, while import duties on beef, milk and dairy products will be eliminated over a shorter period of 3 years. Consequently, over the short and long term, the animal husbandry industry will be under fierce competition with products imported from the EU.

Additionally, many Vietnamese products have not yet met the necessary food hygiene and safety regulations or the technical standards of importers.

To benefit from the trade deal’s incentives will require exports to satisfy the EU rules of origin, which presents its own challenges for several Vietnamese sectors. For instance, the EU has set rather stringent rules of origin on the cashew nut sector that depends on 63 percent of imported materials. To satisfy all EU regulations, Vietnam is required to use local raw material supply.

The EVFTA also stipulates detailed regulations on procedures and legally binding conditions covering the time-limit and manner in which countries must obey certificates of origin procedures for each specific case. This is a big challenge for Vietnam as the origin traceability capacity to prove those origins remain inadequate and the necessary system for such diligence is yet to be seen.

Short term pain, long term gain?

As Vietnam’s economy grows and the country continues to integrate more deeply into the global marketplace, the kind of dilemmas thrown up by pacts like the EVFTA will become more commonplace. In the short term, domestic firms may feel the heat as increased competition takes its toll. However, greater export opportunities and requirements to reach higher standards will underpin future economic growth.

If predictions are correct and the EVFTA is signed within the next few months, Vietnam is destined to become the most promising business destination for European businesses in ASEAN.

For more information about investing in Vietnam, please contact Giles at GTCooper@duanemorris.com or any of the lawyers in our office listing. Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

Rechtsanwalt in Vietnam Oliver Massmann POWER UND ENERGIE IN VIETNAM – AUSBLICK FÜR DAS EU – VIETNAM FREIHANDELSABKOMMEN (EVFTA)

Vietnam hat das Bestreben zum Ausdruck gebracht, zu erneuerbarer und umweltfreundlicher Energie zu wechseln, wobei regional gewonnene Energie hinsichtlich sozialer, wirtschaftlicher und energieschonender Faktoren bevorzugt wird. Die zunehmende Nachfrage nach Energie drängt Vietnam dazu, lokale Ressourcen zu erschließen, was private Investitionen erfordert.

Vietnam ist bislang nicht unabhängig genug, um die der lokalen Nachfrage entsprechende Energie zur Verfügung zu stellen. Um Energieeffizienz zu erreichen, muss Vietnam eine doppelte Maßnahme anstrengen: die Entwicklung des lokalen Sektors durch private Investitionen und die Einrichtung von Verwaltungsmaßnahmen zur Senkung der Stromverschwendung durch die Nutzer.

Ein Bericht der “Made in Vietnam Energy Plan” -Kommission, kommt zu dem Schluss, dass Vietnam weiterhin die Nutzung herkömmlicher Energiequellen (Gas, Kohle, Wasserkraft, Öl, Wind, Solar) bis zur Entwicklung einer künftigen grünen Energie nutzen sollte. Aufgrund der erwarteten Wiedereinführung der Kohlenutzung, würde die Modernisierung von Kohlekraftwerken die Verschlechterung der Luftqualität verlangsamen, die durch ältere Kohlekraftwerke verursacht wird. Darüber hinaus könnten weitere Maßnahmen von der Regierung eingeleitet werden.

Förderung der Erdgas-Energie

Vietnam verfügt über Erdgasvorkommen, dessen Verwendung dem Kohleverbrauch vorzuziehen ist. Erdgas ist flexibler, billiger und sauberer als Kohle. Aufgrund vieler internationaler Vereinbarungen, die die erneuerbare Energieentwicklung fördern, wird es für Vietnam einfacher sein Investitionen für erneuerbare Energien als für Kohleenergie zu finden.

Investitionen in die Erdgasförderung sollten stark gefördert werden, da sie den internationalen Verträgen folgen und eine gute ökonomische und ökologische Alternative bieten. Die Regierung sollte daher Rahmenbedingungen und Regulierungen vorbereiten, um ausländische und inländische Investitionen, Technologie und Erfahrungsaustausch auszubauen und erfolgreiche Märkte zu entwickeln.

Darüber hinaus scheint die Entwicklung von Offshore Gas-to-Power eine weitere günstige und wirtschaftliche Alternative zu importierter Kohle zu sein. Nicht nur die Kosten der Erdgasausbeutung sind niedriger als die Kosten für saubere Kohleimporte oder –produktion, soweit Steuern und Lizenzgebühren im Zusammenhang mit Gaspreisen berücksichtigt werden, darüber hinaus würden auch mehr Investoren darauf aufmerksam werden. Außerdem würde es den Staat von hohen Ausgaben befreien, da der Internationale Währungsfonds (IMF) schätzte, dass die Gesundheits- und Umweltausgaben mit dem derzeitigen Energieentwicklungsplan, der auf Kohle abstellt, bis 2030 jährlich 15 Milliarden USD betragen würden.

Entwicklung von Power Purchase Agreements (PPAs)

Die Deutsche Gesellschaft für internationale Zusammenarbeit (GIZ) hat Empfehlungen für Wind- und Solarenergie-Kaufverträge (PPAs) für erneuerbare Energien abgegeben. Sie beinhalten eine spezifische Bewertung der Kosten und Tarife für PPAs, um mehr diskontfähig zu sein. Sicherzustellen, dass ihre Umsetzung stark gefördert wird, ist zur Förderung von dauerhafter und nachhaltiger Entwicklung empfehlenswert.

Unternehmen die sich öffentlich verpflichtet haben erneuerbare Energien zu nutzen und andere Großverbraucher, sollten das Recht haben, Direktverträge (DPPAs) mit Stromversorgern zu unterzeichnen. Bisher werden zum Beispiel in den Fällen von Nike, Coca-Cola, Apple, Google etc. nach der vietnamesischen Gesetzeslage DPPAs nicht ermöglicht. Durch die Änderung dieser Rechtslage, werden ausländische Investitionen in die Wertschöpfungskette der grünen Energie zunehmen.

Kontrolle der Stromnutzung und Reduzierung von Energieverschwendung

Durch eine effizientere Nutzung von Strom und eine Verringerung der Energieverschwendung wäre Vietnam eine wettbewerbsfähige und tragfähige Alternative für ausländische Direktinvestitionen. Die Gewährung steuerlicher Anreize für einzelne Haushalte und Unternehmen, die ihren Energieverbrauch reduzieren, sowie die Förderung von Solarenergie, Windenergie oder anderer erneuerbaren Energien, würde das Vertriebssystem entlasten und die Verbraucher fortbilden.

Die Entwicklung von Stromgewinnung aus Abfall in Gemeinden hätte einen doppelten Nutzen: die Verbesserung der Gesundheit und Hygiene sowie die Erhöhung der Stromversorgung und Entlastung der Stromverteilung. Die Kohlenstoffemissionen würden automatisch gesenkt.

Die Festlegung eines Energiepreis-Fahrplans mit marktbasierter Preisgestaltung und variablen Preisen unter Berücksichtigung der privaten, gewerblichen oder industriellen Nutzung sollte Vorrang haben. Die Überzeugung, dass der Energiepreis weiterhin von der Regierung subventioniert wird, macht jede Anstrengung zunichte, um Investitionen und Innovation in den Bereichen Energieeffizienz zu fördern. Außerdem kann ein Bewusstsein für die Energiekosten Verbraucher und Investoren dazu bewegen, effizientere Geräte und Verfahren zu gebrauchen.

Empfehlungen für Regierungsverordnungen

Um die vietnamesische Regierung zu unterstützen Umweltziele zu erreichen, sollte die Bonität des staatseigenen Unternehmens „Electricity of Vietnam“ (EVN) verbessert werden. Die Versicherung von EVN für erneuerbare Energieversorger zu zahlen durch die Erhöhung der internationalen Geber, wird dazu beitragen die Durchführbarkeit der Projekte zu gewährleisten und Investitionen zu fördern.

Ein nachhaltigerer Plan kann implementiert werden, wenn er mit ordnungsgemäßen Rahmenbedingungen umgesetzt wird. Die wichtigste Empfehlung zur Sicherstellung einer umweltfreundlicheren Zukunft ist es den Anteil der Kohlekraftwerke im Energieentwicklungsplan bis 2030 zu senken.

Es könnte ein flexibler Plan zur Anpassung der zukünftigen Nachfrage und zur Verhinderung von Schwankungen in der Nachfrage erstellt werden. Dieser Plan sollte ausländische und inländische Investoren anziehen und den Rückgriff auf ausländische Regierungen reduzieren. In jedem Fall würde die Regelung von obligatorischer Energieeffizienz und von Anforderungen im Bauwesen für die Wohnungs-, Büro- oder Einzelhandelsentwicklung sich positiv auf den Bereich der erneuerbaren Energien auswirken.

Ausblick auf die EVFTA

Die EVFTA, die am 2. Dezember 2015 unterzeichnet wurde, wird voraussichtlich bis Januar 2018 in Kraft treten. Die Beziehungen zwischen Vietnam und der EU werden stark intensiviert, zumal Vietnam das zweite Abkommen mit der EU nach Singapur unterzeichnet, das nicht konkurriert Die gleichen Felder. Viele Investoren werden von der EU nach Vietnam fließen und neue Technologien und Techniken einführen.

Ein Kapitel in der EVFTA ist der nachhaltigen Entwicklung gewidmet, und es steht zu erwarten, dass die EU als Verteidiger der erneuerbaren Energien, Vietnam dazu bewegen wird, seinen Energieentwicklungsplan in absehbarer Zeit zu überprüfen.

Die wichtigsten Fragen

– Der Kohle-Sektor soll nach dem Stromentwicklungsplan wiederbelebt werden, obwohl sauberere und wirtschaftlichere Alternativen Vietnam offen ständen.

– Der IMF schätzt, dass jährlich 15 Milliarden US-Dollar für Gesundheits- und Hygienekosten bereitgestellt werden müssen. Luftreinigung sowie ein Ende weiterer Luftverschmutzung ist ein Thema, für das dringender Handlungsbedarf besteht, was sich zusätzlich dramatisiert aufgrund der Wiedereinführungspläne der Kohleenergie.

– Die Gewährung von DPPAs würde Investitionen und Innovationen im Bereich der erneuerbaren Energien fördern und das Vertriebssystem entlasten.

– Die Fortbildung von Lieferanten, Verbrauchern und Investoren durch eine Energiepreis-Übersichtskarte, die Entwicklung von Stromgewinnung aus Abfall und steuerliche Anreize ist der effektivste Weg, um die Einhaltung der Umweltschutzmaßnahmen der Regierung zu gewährleisten.

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Bitte zögern Sie nicht, Herrn Rechtsanwalt Oliver Massmann unter omassmann@duanemorris.com zu kontaktieren, sofern Sie Fragen haben oder mehr darüber erfahren möchten. Oliver Massmann ist der Geschäftsführer von Duane Morris Vietnam LLC.

Vielen Dank!

 

 

EU- VIETNAM FREE TRADE AGREEMENT – MARKET ACCESS OPPORTUNITIES

On 02 December 2015, after nearly 3 years with 14 rounds of negotiations, the Minister of Industry and Trade of Vietnam, H.E. Vu Huy Hoang and the European Commissioner for Trade, H.E. Cecilia Malmström have signed the Vietnam-EU Free Trade Agreement (FTA). Both parties will finalize the ratification process as soon as possible for the FTA to take effect from the beginning of 2018.

The FTA is considered one of the most comprehensive and ambitious trade and investment agreements that the EU has ever concluded with a developing country. It is the second agreement in the ASEAN region after Singapore and it will intensify the bilateral relations between Vietnam and the EU. Vietnam will have access to a potential market of 500 million people and a total GDP of USD15,000 billion (accounting for 22% of the global GDP). The other way around, exporters and investors from EU have further opportunities to access one of the fastest-growing countries of more than 90 million people in the region.

The real wages of skilled laborers may increase by up to 12% while real salary of common workers may rise by 13%. The macro economy will be stable and inflation rate is controlled. Vietnam’s business activities will be booming in the next few years once the EU- Vietnam FTA officially comes into force and Government’s policies as well as institutional reforms start showing their positive effects.

Vietnam’s GDP is expected to increase by 0.5% annually; increase in exports is 4-6% per year. If this trend continues until 2020, Vietnam’s exports to EU will increase by USD 16 billion. Until 2025, the FTA is estimated to generate an additional 7-8% of GDP above the trend growth rate.

Market access for goods

 Nearly all customs duties – over 99% of the tariff lines will be eliminated. The small remaining number is partially liberalized though tariff tare quotas. As Vietnam is a developing country, it will liberalize 65% of import duties on EU exports to Vietnam at entry into force and the remaining duties will be eliminated over the next ten years. For some products, EU duties will be eliminated over a seven-year period such as motorcycles with engines larger than 150 cc, car parts, about half of EU pharmaceutical exports. The market will be opened for most of EU food products, i.e. wine, spirits and frozen pork meat after seven years and for dairy products after a maximum of five years. This is unprecedented far-reaching tariff elimination for a country like Vietnam, proving its targets of deeper integration and trading relations with the EU.

From the EU side, it agrees to eliminate duties for 85% of the tariff lines for goods imported from Vietnam immediately at the entry into force of the FTA. Within 7 years from the effective date of the FTA, there is more than 99% of the tariff lines being eliminated for Vietnam. The EU will eliminate duties for some sensitive products in the textile and footwear sector over a 5-7-year period, with a fabric-forward rule (instead of a strict yarn-forward rule as in the TPP) and allowing Vietnam to import fabrics from South Korea. The EU also offers access to some Vietnamese sensitive agricultural products via tariff rate quotas (TRQs), in addition to a number of main Vietnamese exports such as mobile phones, computer accessories, and sport shoes. Vietnamese exports of textile, clothing and footwear to the EU are expected to more than double in 2020 as a result of the FTA.

We note that besides Vietnam in the region, Singapore also concluded an FTA with the EU in 2014. However, this does not affect the competitiveness of Vietnam in trading with the EU. This is due to the fact that Vietnam mainly exports textiles, footwear, agricultural products, etc. while Singapore’s main exports are machines, chemical products and transport equipment. Moreover, while the EU is accelerating procedures to negotiate FTAs with different countries in the ASEAN region, Vietnam should take advantage of this golden time before FTAs with others in the region are concluded and become effective.

 Market access for EU service providers

Although Vietnam’s WTO commitments are used as a basis for the Chapter on Trade in Services and Commitments, Vietnam has not only opened additional (sub)sectors for EU service providers but also commits deeper than in the WTO, offering its EU partners best possible access to Vietnam’s market.  (Sub)sectors that are not committed under the WTO but under which Vietnam makes commitments are, for example:  Interdisciplinary R&D services; Nursing services, physiotherapists and para-medical personnel; Packaging services; Trade fairs and exhibitions services; Building-cleaning services. Moreover, it is noteworthy that the FTA contains a provision that allows one party to grant the other party the best treatment that the former is negotiating with other partners under other framework (for example, TPP, Regional Comprehensive Economic Partnership,  Vietnam – European Free Trade Association) on 17 July 2015.

We set out below certain Vietnam’s commitments in key sectors with reference to its commitment in the WTO.

 

Distribution sector

WTO requires an Economic Needs Test (ENT) for establishment of outlets for retail services (beyond the first one). EVFTA requires the same but adds cases for ENT exemption and timeline for ENT abolishment.

 

processed oil and crude oil by foreign investors are still prohibited

WTO EVFTA
The establishment of outlets for retail services (beyond the first one) shall be allowed on the basis of an Economic Needs Test (ENT) In case of establishing an outlet less than 500m2 within the area planned for trading activities and already completed construction of infrastructure, ENT is not required.

5 years from the date of entry into force of the Agreement, the requirement of the ENT will be abolished.

 

Power/ Energy

 

WTO EVFTA
N/A Commitments are made in 3 sub-sectors: (i) Production of electricity; transmission and distribution of electricity on own account; (ii) Manufacture of gas; distribution of gaseous fuels through mains on own account; and (iii) Production of steam and hot water; distribution of steam and hot water on own account.

 

Maritime Transport

 

Sub-sectors WTO EVFTA
Maritime transport services Mode 3 Market Access (MA): joint venture with maximum 49% foreign ownership Mode 3 MA: joint venture with maximum 70% foreign ownership
Internal Waterways transport

+ Passenger transport

+ Freight transport

 

Mode 1: No commitment

Mode 3: joint venture with maximum 49% foreign ownership

Mode 1: No restriction

Mode 3: joint venture with maximum 51% foreign ownership

 

Securities services

 

WTO EVFTA
Commitments on 6 sub-sectors

 

 

Mode 3:

foreign securities service suppliers are permitted to establish representative offices and joint ventures with maximum foreign ownership of 49%.

 

After 5 years from the date of accession, securities service suppliers with 100% foreign-invested capital shall be permitted.

Same commitments in 6 sub-sectors

 

 

Commitments on 2 additional services: Provision and transfer of financial data processing; and credit reference and analysis.

 

Mode 3: Same as the WTO

 

Telecommunication Services

 

  • Non facilities-based services: WTO/ AFAS: maximum 65% foreign ownership forever but in the EVFTA after 5 years, this could be 75%.
  • Other services – Virtual Private Network (VPN): maximum 70% foreign ownership forever but in the EVFTA after 5 years, this could be 75%.

Conclusion

 Vietnam is a country of changes and currently offering increasing opportunities for foreign businesses. The underlying strength of the economy is reflected in, among others, controlled macroeconomic indicators, strong productivity gains and extensive integration into regional and global economy. It is now exactly time for foreign investors to start their business plans and grasp the upcoming clear opportunities.

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Please do not hesitate to contact 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 Oliver Massmann EU-VIETNAM FREE TRADE AGREEMENT OFFICIALLY SIGNED

On 02 December 2015, after nearly 3 years with 14 rounds of negotiations, the Minister of Industry and Trade of Vietnam, H.E. Vu Huy Hoang and the European Commissioner for Trade, H.E. Cecilia Malmström have signed the Vietnam-EU Free Trade Agreement (FTA). Both parties will finalize the ratification process as soon as possible for the FTA to take effect from the beginning of 2018.
The FTA is considered one of the most comprehensive and ambitious trade and investment agreements. It is the second agreement in the ASEAN region after Singapore and it will intensify the bilateral relations between Vietnam and the EU.
The agreement has separate chapters on Trade of Goods, Rules of Origin, Customs and Trade Facilitation, Sanitary and Phytosanitary measures and Technical Barriers to Trade, Trade in Services, Investment, Trade Remedies, competition, State-Owned Enterprises, Government Procurement, Intellectual Property, sustainable Development, Cooperation and Capacity Building, Legal and Institutional Issues.
Nearly all customs duties – over 99% of the tariffs will be eliminated. The small remaining number is mainly due to the transition period. Vietnam will liberalize 65% of import duties on EU exports to Vietnam at entry into force and the remaining duties will be eliminated due to the next ten years; EU duties will be eliminated over a seven year period. The market will be opened for most of EU food products, i.e. wine, spirits and frozen pork meat will be liberalized after seven years and dairy products after a maximum of five years. The EU will eliminate duties for some sensitive products in the textile and footwear sector. The EU has offered access to Vietnamese exports via tariff rate quotas (TRQs), because some sensitive agricultural products will not be fully liberalized. Furthermore, the agreement will contain an annex with provisions to address non-tariff barriers in the automotive sector. Vietnamese exports of textile, clothing and footwear to the EU are expected to more than double in 2020 as a result of the FTA.
The FTA will help to increase quality of investment flows from EU, accelerate the process of sharing expertise and transfer of green technology and the creation of more employment activities.
The real wages of skilled laborers may increase by up to 12% while real salary of common workers may rise by 13%. The macro economy will be stable and inflation rate is controlled. Vietnam’s business activities will be booming in the next few years once the EU- Vietnam FTA officially comes into force and Government’s policies as well as institutional reforms start showing their positive effects.
Vietnam’s GDP is expected to increase by 0.5% annually, increase in exports is 4-6% per year. If this trend continues until 2020, Vietnam’s exports to EU will increase by USD 16 billion. Until 2025, the FTA is estimated to generate an additional 7-8% of GDP above the trend growth rate.
***
Please do not hesitate to contact 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.

BREAKING NEWS – EU – Vietnam Free Trade Agreement: In-principle agreement reached – Vietnam to benefit from greater market access for its goods and services – WHAT YOU MUST KNOW:

The Minister of Industry and Trade of Vietnam, H.E. Vu Huy Hoang and the European Commissioner for Trade, H.E. Cecilia Malmström agreed in principle on the Vietnam-EU Free Trade Agreement (FTA).
After a teleconference on the 4th August 2015 and three years of negotiations with commitments taken by both sides the FTA is considered one of the most comprehensive and ambitious trade and investment agreement. The legal text will be negotiated after the summer break and both sides are aiming to sign and ratify the agreement within this year. It is the second agreement in the ASEAN region after Singapore and it will intensify the bilateral relations between Vietnam and the EU.
The agreement will comprises of Trade of Goods, Rules of Origin, Customs and Trade Facilitation, Sanitary and Phytosanitary measures and Technical Barriers to Trade, Trade in Services, Investment, Trade Remedies, competition, State-Owned Enterprises, Government Procurement, Intellectual Property, sustainable Development, Cooperation and Capacity Building, Legal and Institutional Issues.
The FTA is considered to bring a positive impact for both sides especially for the Trade and Investment Sectors.
Nearly all customs duties – over 99% of the tariffs will be eliminated. The small remaining number is mainly due to the transition period. Vietnam will liberalize 65% of import duties on EU exports to Vietnam at entry into force and the remaining duties will be eliminated due to the next ten years; EU duties will be eliminated over a seven year period. The market will be opened for most of EU food products, i.e. wine, spirits and frozen pork meat will be liberalized after seven years and dairy products after a maximum of five years. The EU will eliminate duties for some sensitive products in the textile and footwear sector. The EU has offered access to Vietnamese exports via tariff rate quotas (TRQs), because some sensitive agricultural products will not be fully liberalized. Furthermore, the agreement will contain an annex with provisions to address non-tariff barriers in the automotive sector.
Regarding the investment sector, the FTA will be able to ensure an open and conductive business and investment environment, particularly will it help to promote the capital flow from the EU and gives Vietnam the opportunity to become a hub whilst connecting the EU’s trade and investments with the region. Both sides have achieved a lot, but the provisions concerning the investment protection and dispute settlements are still being negotiated.
The commitments made concerning investment, trade in service, government procurement, intellectual property rights, etc. will ensure an overall balance between both sides. Even Vietnam has to adapt new regulations. Those adjustments are in content with the Vietnamese attempt of administrative reforms to strengthen the country. Moreover Vietnam will achieve a grade of transparency and procedural fairness.
In the context of Intellectual Property Rights Vietnam has itself committed to standards which go beyond those of the WTO TRIP agreement and is creating a safer environment for EU innovations and brands and a stronger enforcement of those provisions.
Signing the FTA will have a broad impact on Vietnam, i.e. create more jobs and stabilize the welfare for Vietnam. Furthermore, there will be many opportunities to get access to modern technology and sharpen management skills.
There will be a framework within the FTA to resolve any future disagreement which may follow about the understanding and implementation of the agreement.

—o0o—

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

THANK YOU VERY MUCH!