The State Bank of Vietnam (Ngan hang Nha nuoc Viet Nam, SBV) is the central bank of Vietnam. It is a ministry-level body under the administration of the government. The SBV governor is a member of the cabinet. The prime minister and the parliament of Vietnam (National Assembly) act jointly to nominate the governor of the SBV. The governor is in charge for five years. The SBV’s principal roles are to:

• Support monetary stability and implement monetary policies.
• Support institutions’ stability and supervise financial institutions.
• Support banking facilities and recommend economic policies to the government.
• Support banking facilities for financial institutions.
• Manage the country’s foreign exchange reserves.
• Manage foreign exchange and gold trading activities.
• Manage the borrowing and repayment of foreign loans, the provision of loans to foreign parties and recovery of foreign debts.
• Print and issue bank notes.
• Supervise all commercial banks’ activities in Vietnam.
• Lend State money to commercial banks.
• Join the Ministry of Finance in issuing government bonds and government-guaranteed bonds.
• Act as an agent for the State Treasury in organising bids and in issuing, depositing and making payment for treasury bonds and bills.
• Be in charge of other roles in monetary management and foreign exchange rates.

In 1990 the bank system was reorganised. This process led to a separation of the SBV from other commercial banks and was the start of the establishment of the private banking sector. A small number of major state-owned commercial banks still dominate Vietnam’s banking sector. However, today a process of privatisation is underway and the goal is to reduce the State’s share of ownership step-by-step to at least 65% during 2018 – 2020, and 51 percent during 2021 – 2025 under Decision No. 986/QĐ-TTg dated August 8, 2018 of the Prime Minister approving the plan for development of Vietnamese banks up to 2025, vision to 2030. Until June 30, 2018, the State’s ownership ratios in 4 largest state-owned commercial banks are as follows: (i) 95.28% in BIDV, (ii) 77.1% in Vietcombank, (iii) 64.46% in Vietinbank, and (iv) 100% in Agribank.

Foreign ownership restrictions for Vietnamese Credit Institutions

On January 3, 2014, the government-adopted Decree 01/2014/ND-CP on purchase by foreign investors of shareholding in Vietnamese credit institutions. Decree 01 became effective on February 20, 2014 and replaced Decree 69/2007/ND-CP on purchase by foreign investors of shareholding in Vietnamese commercial banks.

In Decree 01, Vietnamese credit institutions, which may offer shares, include:

1. shareholding credit institutions (i.e., a credit institution established and organised in the form of a shareholding company and include shareholding commercial banks, shareholding finance companies and shareholding finance leasing companies); and
2. credit institution currently converting its legal form from a credit institution operating in the form of a limited liability company to become a credit institution operating in the form of a shareholding company.

Foreign investor includes foreign organisations [institutions] and foreign individuals. Foreign organisations include:

1. organisations established and operating under the laws of a foreign country and any branch of such institutions overseas or in Vietnam; and
2. an organisation, closed-ended fund, members’ fund or securities investment company established and operating in Vietnam with foreign capital contribution ratio above 49 percent. Foreign individual means any person who does not hold Vietnamese nationality.

Decree 01 defines that shareholding ownership [shareholding] includes direct and indirect ownership. However, Decree 01 does not explain clearly the scope of direct and indirect ownership.

In a case of purchase of shareholding by a foreign investor in a Vietnamese credit institution resulting in such foreign investor’s ownership of shares below 5 percent charter capital of the Vietnamese credit institution, a prior approval of the SBV is not required. In other cases, any acquisition by foreign investors of shareholdings in a Vietnamese credit institution requires the prior approval of the SBV.

The shareholding ratio of any one foreign individual must not exceed 5 percent of the charter capital of one Vietnamese credit institution. The shareholding ratio of any one foreign organisation must not exceed 15 percent of the charter capital of one Vietnamese credit institution.

Any foreign investor being an organisation owning 10 percent or more of the charter capital of any one Vietnamese credit institution is not permitted to assign the shareholding it owns to any other organisation or individual within a minimum three year period as from the date of ownership of 10 percent or more of the charter capital in such credit institution.

The shareholding ratio of any one strategic foreign investor must not exceed 20 percent of the charter capital of one Vietnamese credit institution. The investor may not transfer its shares in the Vietnamese credit institution within five years after becoming the foreign strategic investor in the Vietnamese credit institution.

A strategic investor is defined as a foreign organisation with financial capacity and whose authorised person provides a written undertaking to have a close connection regarding long-term interests with the Vietnamese credit institution and to assist the latter to transfer to modern technology, to develop banking products and services, and to raise its financial, managerial and operational capacity.

The shareholding ratio of any one foreign investor and its affiliates must not exceed 20 percent of the charter capital of one Vietnamese credit institution. The total shareholding ownership of [all] foreign investors must not exceed 30 percent of the charter capital of any one Vietnamese commercial bank.

The total shareholding ownership of [all] foreign investors in any one Vietnamese non-banking credit institution shall be implemented in accordance with the law applicable to public companies and listed companies (i.e., 49 percent of charter capital of such institution).

In a special case in order to implement restructuring of a credit institution which is weak [and/or] facing difficulties, in order to ensure safety of the credit institution system, the Prime Minister may, on a case-by-case basis, make a decision on the total shareholding ratio of any one foreign organisation [or] any one foreign strategic investor, and the total level of shareholding of foreign investors in any weak shareholding credit institution which is restructured, in excess of the limits described above.

Under the Government’s instruction in 2018, the MoF is drafting a Government’s decree to allow foreign ownership ratio in commercial banks in Vietnam up to 50%. However, this decree would only be finalized and adopted in the fourth quarter of 2019.

Foreign exchange regulations

The Ordinance on Foreign Exchange, which was enacted by the Standing Committee of the National Assembly in December 2005 and became effective in June 2006, and amended on March 18, 2013, regulates currency exchange activities in Vietnam. The government has promulgated Decree No. 70/2014/ND-CP to provide guidelines for both the Ordinance on Foreign Exchange and its amendments on March 18, 2013.

Decree 70 became effective on September 5, 2014 and replaced Decree No. 160/2006/ND-CP dated December 28, 2006 to provide detailed implementation of the ordinance.

Decree 70 governs the foreign exchange activities of residents and non-residents in current transactions, capital transactions, foreign loan borrowing, use of foreign currency and provision of foreign exchange services, the foreign currency market and rates of exchange, and the management of import and export of gold in Vietnam.

With regards to foreign loan borrowing, the government has also promulgated Decree No. 219/2013/ND-CP dated December 26, 2013 on the management and repayment of offshore loans that are not guaranteed by the government. Decree 219 became effective on February 15, 2014 and replaced Decree 134/2005/ND-CP on the same subject.

Decree 219 governs all businesses that are incorporated under the Enterprises Law, credit institution and foreign bank branches under the Law on Credit Institution, and cooperatives and unions of cooperatives established and operating under the Law on Cooperatives.

Offshore loans under Decree 219 include loans from non-residents under loan agreements, deferred payment commodities sale and purchase agreements, entrusted loan agreements and debt instruments issuance agreements that are not guaranteed by the government. In general, foreign borrowing must comply with the regulations of, and is subject to, registration with the SBV.

However, Decree 219 does not state clearly that requirements and types of loans should be registered, or any licensing/registration procedures. These issues have been addressed by the SBV’s guidelines i.e., Circular 03/2016/TT-NHNN dated February 26, 2016 providing certain guidelines on foreign exchange control in relation to foreign borrowing activities (as amended by Circular 05/2016/TT-NHNN dated April 15, 2014 and Circular No. 05/2017/TT-NHNN dated 30 June 2017). Circular 03 is expected to improve the legal framework for management of the borrowing and repayment of enterprises in general and enterprises not guaranteed by the government. Some highlights of the Circular 03 are as follows:

• Loans made in the form of deferred payment for import of goods no longer requires registration with the SBV. However, the opening and use of bank accounts and remittance activities must comply with the requirements of Circular 03.

• Loans subject to registration with the State Bank include: (i) mid-term and long-term foreign loans, (ii) short-term foreign loans which are renewed to have loan terms to be more than 01 (one) year; and (iii) short-term foreign loans which are not renewed but loans’ outstanding principal amounts have not been fully repaid prior to or within 10 days after 1 year from the date of first loan withdrawal.

• A borrower which is not a foreign invested enterprise must open a bank account for the purposes of the foreign loan at the authorized banks in Vietnam. For foreign invested enterprises, their direct investment capital bank accounts may be used for this purpose.

• If the schedule of loan disbursement, repayment or interest payment changes by less than 10 days from the schedule already registered with the SBV, the borrower must only notify its bank, and does not need to register the changes with the SBV. However, if the schedule changes by more than 10 days, then reregistration with the SBV is required.

• Circular 03 also allows notification to SBV (instead of change registration) with regards to certain corporate changes of information that has been registered with SBV such as change of address of the borrower within the province/city where it has head quarter, or change of trade names of the relevant banks who provide account services, etc.

The government issued Decree No. 96/2014/ND-CP on October 17, 2014 on sanctions of administrative violations in the field of monetary and banking operations. Decree 96 became effective on December 12, 2014 and replaced (i) Decree No. 95/2011/ND-CP dated December 20, 2011, and (ii) Decree No. 202/2004/ND-CP dated December 10, 2004 on sanctions of administrative violations in the field of monetary and banking operations.

This decree was said to tighten up forex and gold trading and relevant activities in Vietnam. According to this decree, monetary penalties in relation to gold and forex trading, price listing/payment/advertising in forex/gold, etc. were significantly increased i.e., from VND 5 million ($240) to VND 600 million ($29,000). For instance, the possible penalty for violations re: trading on gold bars without license may be up to VND 500 million ($24,000) or a possible penalty for violations re: forex activities conducted by credit organizations without licenses may be up to VND 600 million ($29,000). In addition, forex/gold relevant to trading violations may be confiscated and certificate of registration for forex agent and business operation license of gold of relevant parties may be also suspended or revoked.

Recent developments of securities regulation

In early 2007 the first Securities Law of Vietnam (No. 70/2006/QH11, 2007) came into effect, which consisted of 11 chapters and 136 articles (as amended on November 24, 2010). The Securities Law primarily covers domestic issues of Vietnam dong-denominated securities and is, therefore, limited to public issues of securities and does not apply to the private placement of unlisted securities. The term “securities” covers a wide range of valuable instruments, including:

• Stocks.
• Bonds.
• Warrants.
• Certificates.
• Put and call options.
• Futures contracts, irrespective of their form.
• Investment capital contribution contracts.

Specifically, the Securities Law governs:

• Public offerings of securities.
• Listings.
• Dealing.
• Trading.
• Investment in securities.
• Securities services.

The establishment and regulation of securities companies and investment funds.

The Securities Law’s area of application considers two types of domestic securities trading market — the Securities Trading Centre and the Stock Exchange. The local regulator, the State Securities Commission, controls and supervises both markets; however, they are independent legal entities. The SSC is a State body that the Ministry of Finance oversees. The government and the MoF have issued several decrees, decisions and circulars to implement the Securities Law. Under the Securities Law, publicly offered securities in Vietnam have to be denominated in VND. The par value of a listed share is VND 10,000; however, the minimum par value of a publicly offered loan is VND 100,000.

On January 10, 2012, the MoF issued Decision No. 62/QD-BTC re: approval of project plan for restructuring of securities companies. This decision was known as a key in the master plan to renovate the stock market/sector, insurance market and securities companies which have been submitted to the Party Politburo by the MoF. According to this decision, securities companies shall be evaluated based on available capital/risk/accumulated losses index and categorised into three groups (normal, control and special control).

The decision does not provide any clear restructuring plan but promulgates certain controlling methods and penalties applicable to securities companies not satisfying the required available capital/risk index such as disclosure/report requirements, supervising or license withdrawal. On August 2018, the Deputy Prime Minister Vuong Dinh Hue instructed the MoF to do research and issue a new plan for restructuring the securities market up to 2020, vision to 2025. The detail project plan is expected to be promulgated and implemented early next year 2019.

Dated July 20, 2012, Decree No. 58/2012/ND-CP was issued to provide guidelines for the Securities Law and the Law amending certain articles of the Securities Laws on offers for sale of securities, listing, trading, business and investment in securities, and services in relation to securities and securities market. This decree abolished Decree No. 14/2007/ND-CP dated January 19, 2007, Decree 84/2010/ND-CP dated August 2, 2010 and Decree 01/2010/ND-CP dated January 4, 2010 and Decree No. 58/2012/ND-CP.

On June 26, 2015, the government promulgated Decree No. 60/2015/ND-CP amending certain articles of Decree 58 and providing guidelines for Securities Laws. Decree 60 became effective on September 1, 2015 and abolish Decision No. 55/QD-TTg dated April 15, 2009 of the Prime Minister on foreign ownership ratio in Vietnamese stock exchanges.

Decree 60 does not limit foreign ownership applicable to companies engaging in non-conditional businesses in Vietnam, and allow foreign companies to invest in government’s and companies’ bonds in Vietnam.

The draft amended Law on Securities is underway and expected to be promulgated in the fourth quarter of 2019. This draft is aimed at restructuring the stock markets, re-organizing and improving securities and fund companies, and lifting further outstanding limitation on foreign ownership of public companies in Vietnam.

Public offerings

With the promulgation of the Securities Law and its amendments, guidelines, rules, procedures and restrictions were set down for the issuance of public shares and bonds. According to Article 12.1 of the Securities Law and its amendments, an issuer must have already deposited nominal capital amounting to at least VND10 billion at the time of registration of the offer. In addition, an applicant for quotation has to prove profit was made in the year before the offering.

The establishment of a fund stipulates a minimum capital of VND50 billion. Other types of enterprise may have to apply to additional conditions e.g., a public company registering a public offer of securities must provide an undertaking, passed by its general meeting of shareholders, to place the shares for trading on an organised trading market within one year from the date of completion of the offer tranche (Law amending certain articles of the Securities Law dated November 24, 2010 and Decree No. 58/2012/ND-CP dated July 20, 2012 guiding Securities Law and Law amending certain Article of the Securities Law).

To open the procedure for public offering it is necessary to file an application in the form of a registration statement, which includes:

• The prospectus.
• The audited financial statements for the preceding two fiscal years.
• The issuer’s constitutional documents and relevant corporate resolutions.

The main contents of a prospectus are prescribed in Circular No. 29/2017/TT-BTC dated April 12, 2017 of the MoF providing guidance on listing of securities on stock exchanges. Foreign investors should be aware of the lack of fixed standards for financial statements and accounting in Vietnam, which can result in inconsistencies in financial reporting and quality levels.

Private placements

A private placement is defined in the Securities Law and its amendment as an arrangement for offering securities to less than one hundred investors, not professional securities investors, without using mass media or the internet. Decree 58/2012/ND-CP dated July 20, 2012 (as amended by Decree 60/2015/ND-CP dated June 26, 2015) and Securities Law provide conditions for a private placement made by public companies as follows:
o Resolution of the general meeting of shareholders approving the plan for a private placement of shares / convertible bonds and utilisation of proceeds earned from the offer tranche; and this plan must specify the objective, target investors and criteria for selection of target investors, the number of investors and proposed offering scale;

o The lock-up period on transfer of the private placed shares or convertible bonds is a minimum one year from the date of completion of the offer trance, except for certain cases such as a private placement pursuant to a plan selecting employees, etc.;

o The issuing company is not the parent company of the company which purchasing private placed shares; or neither of companies are subsidiary companies of a parent company;

o There must be a minimum interval of six months between tranches of private placements of shares or convertible loans; and

o Other conditions set out by the applicable law.

If an application file is incomplete and invalid, the competent State authority shall, within five days from the date of receipt of the application file for registration of a private placement of shares, provide its opinion in writing requesting the issuing organisation to amend the file. The date of receipt of the valid and complete file shall be the date on which the issuing organisation completes amendment and addition to the file.

Within 15 days from the date of receipt of the valid and compete file for registration, the State authority provides notification to the registering organisation and publish on its website the private placement of shares of the registering organisation. The issuing organisation shall, within 10 days from the selling tranche completion date, submit a report on the results of the private placement to the competent State authority on the standard form annexed to Decree 58 (as amended).


Ho Chi Minh Stock Exchange (HOSE)

Decree 58/2012/ND-CP provides conditions for listing shares in HOSE as follows, among other things:
• The company has its paid-up charter capital of one hundred and 120 billion dong or more at the time of registration for listing;

• The company has operated for at least two years in the form of a shareholding company calculated up to the time of registration for listing; the ratio of equity over after-tax profit (ROE) in the most recent year was a minimum five percent and the business operation in the two consecutive years immediately preceding the year of registration for listing must have been profitable; it does not have debts payable which are overdue for more than one year; it does not have accumulated losses calculated to the year of registration for listing; and it complies with the provisions of law on accounting and financial statements;

• Any member of the board of management or board of controllers, the director (general director), deputy director (deputy general director), chief accountant, a major shareholder and affiliated persons must make public disclosure of any debts they owe to the company;

• At least 20 percent of the voting shares in the company must be held by at least 300 shareholders who are not major shareholders; and

• Certain shareholders such as members of the board of management or board of controllers, etc. must undertake to hold 100 percent of the shares they own for six months from the date of listing and 50 percent of this number of shares for the following six months.

Hanoi Stock Exchange (HNX)

Decree 58/2012/ND-CP provides conditions for listing shares in HNX as follows, among other things:

• The company has its paid-up charter capital of 30 billion dong or more at the time of registration for listing;

• The company has operated for at least one year in the form of a shareholding company calculated up to the time of registration for listing; the ratio of equity over after-tax profit (ROE) in the most recent year was a minimum five percent; it does not have debts payable which are overdue for more than one year; it does not have accumulated losses calculated to the year of registration for listing; and it complies with the provisions of law on accounting and financial statements;

• At least 15 percent of the voting shares in the company must be held by at least 100 shareholders who are not major shareholders; and

• Certain shareholders such as members of the board of management or board of controllers, etc. must undertake to hold 100 percent of the shares they own for six months from the date of listing and 50 percent of this number of shares for the following six months.

Registration at HOSE and HNX

Companies wishing to register to list securities must lodge an application file for registration for listing with the HOSE/HNX. An application file for registration to list shares shall comprise the following key documents, among other things:

• General meeting of shareholders’ approval;

• Register of shareholders, as entered one month prior to the date of lodging the application;

• Prospectus;

• Undertaking of certain shareholders such as members of the board of management or board of controllers, the director (general director), deputy director (deputy general director) and the chief accountant of the company, etc. to hold 100 percent of the shares they own for six months from the date of listing and 50 percent of this number of shares for the following six months;

• Certificate from the Securities Depository Centre confirming registration by the institution and deposit of the shares at such Centre; and

• Written consent from the State Bank in the case of a shareholding credit institution.

The HOSE/HNX shall approve or refuse to approve an application for registration for listing within 30 days from the date of receipt of a complete and valid application file, and in a case of refusal shall specify its reasons in writing.

Decree No. 60/2015/ND-CP dated September 1, 2015 on foreign ownership in stock market

In April 2009, the Prime Minister issued Decision 55/2009/QD-TTg governing the purchase and sale of “securities in Vietnam’s stock market”. It stipulates the difference between local investors and foreign investors, in accordance with foreign-invested local investment funds. It also states the 49 percent rule. This means that local investment funds and local securities investment companies are considered foreign investors if foreigners hold more than 49 percent of the interest of a corporation.

The above limitation of 49 percent was removed on September 1, 2015 under Decree No. 60/2015/ND-CP, i.e., generally there is no limitation on foreign ownership ratio except for “conditional” sectors. In particular, the new limitation will now be subject to the WTO commitments or other specific domestic law (e.g., the 30 percent cap in the banking sector).

If there is a conditional business that specific foreign ownership restriction under domestic law has yet to be specified, then the limitation is 49 percent. If there is no restriction and the sector is not a conditional business under domestic law (e.g., distribution companies), then there is no limit for the foreign shareholding ratio.

This rule also applies to equitized state-owned enterprises in order to attract more foreign investments. Decree 60 also removes all restrictions to foreign investors to invest in bonds. With respect to securities investment certificates or derivative products of stocks of public companies, the restriction will be also removed.

Circular 123/2015/BTC

At the end of 2008, two years after the first Securities Law, the SSC and the MoF enacted Decision 121/2008/QD-BTC to make the market more interesting for foreign investment as well as to penalise those who disobey the Securities Law. Decision 121 governed the activities of foreign investors in the Vietnamese securities market.

On December 6, 2012, the MoF adopted Circular 213/2012/TT-BTC governing foreign investors’ activities in Vietnamese securities market. Circular 213 became effective on February 15, 2013 and replaced Decision 121.

On August 18, 2015, the MoF issued Circular 123/2015/TT-BTC governing foreign investment activities in Vietnamese securities market (became effective on October 1, 2015), to guide Decree 60 and replace Circular 213.

Circular 123 provides detailed documents and procedure for foreign investors to operate in the Vietnam’s stock exchanges. The circular streamlines the procedures for market participation of foreign investors in the Vietnam’s stock market by reducing the amount of necessary documentation and simplify the procedure. For example, the circular removes the need to translate documents into Vietnamese by allowing them to be submitted in English.

The circular sets out that domestic business organizations with foreign ownership of 51 percent or more, are required to apply for the Securities Trading Code (STC) before trading shares, bonds or other types of securities under the securities market regulations.

Notification procedure on foreign ownership limits (FOL).

Circular 123 requires that public companies are responsible for determining the applicable FOL. Following the determination of the FOL which is applicable to them, companies not subject to any limit are obliged to file a notification dossier with the State Securities Commission (SSC). This dossier includes: (i) extracted information on business lines as uploaded on the National Business Registration Portal and the electronic address linking to such information; and (ii) Minutes of Meeting and the Resolution of the Board of Management approving the unrestricted FOL (if the company does not wish to maintain an FOL) or Minutes of Meeting and the Resolution of the General Shareholders’ Meeting approving and the charter providing for the specific FOL (if the company wishes to maintain FOL).

The SSC will have 10 working days to acknowledge in writing the notification on FOL. Within one working day of the receipt of SSC’s acknowledgment on the applicable FOL, public companies are required to publish this information on their website, which gives effect to the published FOL.

Circular 123 provides that foreign ownership in securities companies is unlimited. However, foreign investors must satisfy certain qualification and conditions provided by the applicable law. A qualified foreign investor who wishes to own more than 51 percent in a securities company must obtain the SSC’s prior approval, which may be issued within 15 days from the date when the SSC receives the application and the transaction resulting in the change of ownership must occur within six months from the date of SSC approval. If this does not occur then SSC approval will be revoked automatically.

Please do not hesitate to contact Dr. Oliver Massmann under 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.

Vietnam – Solar Energy – Action plan for getting deals done with the new Power Purchase Agreement

Interview with Dr. Oliver Massmann\

1. Which significant changes does the new PPA contain for the solar energy sector?

Decision 11 introduces the Feed-in-Tariff (FiT) rate of UScents 9.35 per kWh. The FiT rate is only applicable for on-grid solar power project with efficiency of solar cells greater than 16% or with efficiency of the modules greater than 15%. The FiT rate depends on the currency exchange rate of the Vietnamese Dong and the US-Dollar. The rate remains the same throughout the whole year. It is adjusted by the Vietnamese State Bank on the last working day of the year for being used in the following year.

As a result, the financial planning is easier and it grants certain security for investors such as protection against currency fluctuation.

2. Which aspects in the new PPA have changed compared with the draft PPA from April 2017?

Compared with the draft PPA, the FiT rate is now indicated in the final version and there is reference to the adjustment of the FiT in case of USD/VND exchange rate fluctuation.

The MoIT made no big changes regarding the shortcomings of the draft of the PPA from April 2017.

The investor still has to bear the biggest risk.

3. Is the PPA bankable?

No, in general the PPA is not bankable in its final version.

4. Is there a way to make it bankable?

Yes, it is possible to make the PPA bankable. We have 20 years of experience making PPAs bankable for gas and coal fired power plants and wind energy plants in Vietnam. The investor should use all business channels and experienced negotiators to make the PPA bankable.

It is a matter of negotiation and experience. Decision 11 is granting investors the possibility to negotiate the conditions with EVN. The price remains fixed.

Agreements such as the EU – Vietnam Free Trade Agreement (“EVFTA”) or the Trans-Pacific Partnership (“TPP”), which is now called the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (“CPTPP”), lay a big milestone for making the PPA bankable.

The EVFTA was signed in 2015 and is expected to be ratified by all member countries by 2018. It is probably going to take effect in 2019. It is estimated to generate an increasing GDP and to liberalize the economy of Vietnam. Another aspect is the elimination of almost all custom duties (over 99% of all tariff lines). As a result, there will be a huge impact on trade development and the interest of investors.

Another important agreement is the CPTPP. On 4th February 2016 the TPP was signed between 12 countries. The signing nations made up 28% of the global trade and 40% of the global GDP. However, at the beginning of 2017, the US President Trump decided to withdraw from the TPP. The remaining 11 member states discussed the future of the TPP in APEC event in Da Nang, Vietnam and agreed to push ahead with the TPP but now under the name of CPTPP. Furthermore, the states agreed to work out a new framework agreement, which includes changes to the previous TPP agreement. The largest amendment was made in the field of intellectual property, for example, easing the protection of copyright or the special protection of biologics and pharmaceuticals.

However, the level of market access is still the same as in the first TPP. For some countries, further negotiations have to take place and they need time to adapt their laws to the CPTPP rules. The negotiators have set the goal of signing the revised TPP by the first quarter of 2018. After 6 countries have ratified the partnership, it will come into effect.

With the CPTPP, market access to more sectors will be opened than the WTO such as telecommunication, distribution of goods, manufacturing and fabrication. However, there will remain a few restrictions in the power/energy sector as discussed below.

As a result of the EVFTA and the TPP, Vietnam will get access to a huge part of international markets. This gives Vietnam the possibility to increase the amount of imports and exports (estimated up to 37% higher until 2025) and to improve foreign investments.

Another essential instrument is the Investor-State Dispute Settlement (ISDS)[N1] which is going to be applied under the EVFTA and the TPP. 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.

As a conclusion, the bankability of the PPA will get enhanced as a consequence of the EVFTA and TPP in the next few years if the legislative framework is being reformed in the right direction. The economy will become more dynamic because of access to other markets and further foreign investments. With the implementation of the ISDS in the TPP, investors will be more secured in relation to dispute resolution and protection against the risks of international trading. As a result, banks will be more willing to finance PPAs.

Our recommendations: For now, the bankability of the PPA is not as it is expected. But you should be aware of the upcoming agreements which will lead to a big impact on the economy growth and the economy itself. If everything is improving in the right direction as it is now, the PPAs will be more bankable in the future and there will be better investment opportunities.

5. How was the bankability issue handled in the past years?

The TPP and the EVFTA are not the only agreements regarding the bankability of the PPA.

Vietnam and the USA signed the Bilateral Trade Agreement (BTA) in 1999 which was implemented in 2001. It was a huge success and very important agreement for the economy of Vietnam. It was the first opening of the Vietnamese market and important for the creation of more business opportunities and new standards for financing projects.

Another important fact was Vietnam’s accession to the WTO in 2007. This has improved trade relations between Vietnam and other countries by removing trade barriers and the commitment to non-discrimination. It was also a political sign to show Vietnam’s will to get integrated in the international trade by accepting international trading rules.

To be able to fulfill the commitments, it is necessary to make legislative adjustments and adopt laws that ensure the viability and efficiency of the projects. In the last years, many important laws have been introduced. They have helped to enhance the bankability of the PPA, for example, the 2014 Investment Law, 2014 Enterprise Law, 2012 Labor Law, etc.

In addition, in 2011, the legal framework for wind power projects was introduced.

Our recommendation: You should use existing international agreements and local laws as the bases for negotiation. Remember to rely on existing precedents and keep in mind that there are some difficulties for project development. But with a well-structured project development, it is still possible to getting a bankable PPA done.

6. What are the main risks of the PPA for investors?

With many solar projects currently focused on a few central locations, the capacity of existing facilities to absorb power must be a cause of some concerns given the PPA’s transfer of such risk to power producers.

EVN holds a monopoly of distribution, repair, maintenance, inspection and examination of the grid.

There is a big risk because of the lack of the government’s guarantee for EVN’s payment obligation in cases energy is provided from the producer but cannot be transmitted due to interruption of EVN’s grid connection. One solution for bridging that guarantee gap can be the use of the MIGA backup from the Worldbank (Multilateral Investment Guarantee Agency) or backup from the Asean Development Bank.

Reasons for the interruption can be, for example: force majeure or termination of contracts. EVN can refuse transmitting the energy in cases of maintenance or repairing.

Circular 16 does not contain any guarantee or compensation for investors in these cases.

Our recommendations for avoiding potential risks: Be aware of veto rights of EVN and Vietnamese authorities. You have to be patient because the decision making process in Vietnam goes through many levels and takes time.

7. There will be conflicts between the investors and EVN because of the shift of risks to the investors. Which means of conflict resolution does the PPA grant to investors?

In general, the PPA is governed by the Vietnamese law.

The PPA does not provide for international arbitration as a means of dispute resolution.

Conflicts can be submitted to the Department of Electricity and Renewable Energy. If this option fails, investors can seek help at the Electricity Regulatory Authority of Vietnam (ERAV) or with application to a Vietnamese court.

The PPA implicitly allows the involvement of domestic and offshore arbitration. However, whether it can be a prior agreement with EVN in the PPA or only until there is an arising dispute simply lies in the hands of EVN.

Our recommendations for successful negotiations with EVN: You have to understand how EVN is working and what their targets are. Be aware of their monopoly position in the energy sector in Vietnam. Don’t try “to reinvent the wheel”!

Do not overexert them with too ambitious intentions related to the development proposal. They might be afraid of so many new things. Rely on workable precedent strategies and make reference to successful projects.

8. Which view does the MoIT hold regarding the shortcomings of the PPA?

The MoIT knows about the shortcomings of the PPA and is aware about the fact that the PPA will not attract investors to meet the power demand or to solve problems regarding the development of renewable energy.

The MoIT also knows that the solar energy sector in Vietnam has a lot of potentials.

Finally, the MoIT expects to attract smaller investment projects where bankability is not really an issue for the investors.

9. Is the view of the MoIT realistic?

In our opinion, the MoIT’s view is not realistic. It may lead to unfeasible projects because of the existing risks of the final version of PPA and without assurance for supportive services from a bank. Furthermore the success of projects depends on the result of the negotiation with EVN.

10. Which advice can you give to future investors regarding their project development?

Be aware! You have to take care of your project on a step-by-step-base and get well prepared for the negotiations with EVN when you decide to invest in an on-grid power project.


Please do not hesitate to contact Dr. Oliver Massmann under 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.


Thank you!




Vietnam Guidance on Import of Used Goods – Relaxation of Import Duties for Finance Leasing Companies



Circular No. 23/2015/TT-BKHCN on promulgating the import of used machinery, equipment and manufacture lines, issued by the Minister of Science and Technology on November 13 2015 (Circular 23) sets up conditions on the import of Used Equipment. As the conditions of machinery under 10 years of age and in compliance with standards of safety, energy saving and environment protection, were too strict for foreign projects, a list of exemptions approved by competent authorities has been established. Circular 23 needs to be clarified concerning the criteria – of exemption, of compliance with the National Technical Regulations and National Standards – which Used Equipment imported in Vietnam must satisfy.

Three recommendations can be articulated: if the Used Equipment is imported for new or expanded investment projects, the Circular should define precisely the competent authority to issue the certification list and guide the import procedure. Moreover, the Ministry of Science and Technology should promulgate more detailed provisions on safety and energy saving and environment protection. Finally, officials in charge of examination of standards should be dispatched prior to the shipment.

Part 1 of Official Letter 504/TXNK-CST issued by the Import-Export Department of Customs General Department on March 22 2016 (Letter 504) stated that Decree 39/2014/ND-CP of the Government dated 7 may 2014 was not applicable to goods imported by a finance leasing company to an export processing enterprise (EPE). This means that a declaration and the payment of the import duties in compliance with the laws are needed. Nevertheless, Letter 504 points out that the procedure is different from the one to create fixed assets for the EPE. The EPE bears the duty to declare and pay for the import in order to use the finance leasing assets, even though it is already included in the leasing contract and that it should be exempted of it.

An exemption of import duty for the leased equipment imported by an EPE is necessary, as it was stated in the previous Letter 16587/BTC-CTCHQ of the General Customs Department on November 29 2013. Official Letter 4463/BTC-TCHQ issued on April 4 2016 recognizes the effectiveness of Letter 16587 in part, in spite of Letter 504, but its coverage is limited.

In case of agreements to purchase the machinery at the end of the finance leasing, the equipment becomes a fixed asset of the lessee. It is easier to raise the import duty on goods imported to create fixed assets to the EPE. If the procedure to import leasing goods is carried by an EPE, it should be exempted through a Letter amending Letter 504.

The taxes on assets imported for leasing should be equal to those paid when carried by the EPE itself. The applicable Decree 39/2014/ND-CP does not have specific regulations for finance leasing assets contrary to the previous Decree 16/2001/ND-CP. It should be reintroduced so a more practical regulation on import of goods under finance leasing contract prevails.

Another issue deals with the payment of the taxes related to Incoterms’ conditions on import of goods into Vietnam’s territory. Under Circular 103/2014/TT-BTC guiding the tax liability of foreign entity doing business in Vietnam, a Foreign Contractor Tax (FCT) including Value Added Tax (VAT) on input and output and Corporate Income Tax (CIT) must be applied. Pursuant to the circular, if a foreign entity sells goods under Incoterms rules, it is responsible for any risk relating to goods delivery in Vietnam. Nonetheless, the transportation and delivery of goods is mostly carried out by transportation agencies. The foreign entities do not benefit from transportation but must pay the CIT from the goods and services receivable by the buyer. Moreover, in case of import with a delivery duty paid (DDP) condition, the buyer will pay the VAT output when it should be at the expense of the seller. There may be some difficulties for the buyer to be refunded.

The calculation of the FCT should be reviewed to ensure the true purpose of the FCT : the responsibility of the seller at any risk until the goods are delivered. Besides, regulations for the deduction of VAT import for the seller under DDP conditions should be considered.

One of the concern deals with the restriction on import of used equipment. The provisions of Circular 23 are explicit: machinery over 10 years cannot be imported, unless it constitutes an exemption listed by a competent authority. Through this regulation, importers must provide certificate of the age and manufacturing standard of Used Equipment, facing bigger costs and complications since pieces of Used Equipment can be of different ages.

Besides, this regulation prevents enterprises from repairing their machinery and is not realistic regarding external factors such as: quality of the equipment, time of use, maintenance, repairing conditions etc. A newer but lower quality equipment would be preferred leading to bigger costs of repair, energy and finally to a higher impact on the environment.

Two cases of exemption are stipulated in Circular 23 to import Used Machinery over 10 years of age. The first one is the equipment belonging to an investment project with a decision of the competent authority on investment policies plus an investment registration certificate issued in accordance with the Law on Investment. The second one occurs when an enterprise has to import a piece of machinery older than 10 years, to sustain its manufacturing or business operation. It needs then the cooperation of the Ministry of Science and Technology to consider the firm’s proposal and document. More details to implement these procedures should be given.

Outlook on the EVFTA

The FTA is expected to enter into force on January 2018. This agreement will eliminate almost all tariff lines (99%) however, a few steps should be planned in advance for its implementation. For the first six years, 65% of the import duties on EU exports will be liberalized, the remaining duties being eliminated over the next ten years. For a few sensitive products, EU duties will be eliminated over a seven-year period.

These provisions prove the Vietnam’s tendency to open to new markets with deeper integration. Thus Vietnam will attract more quality investment from the EU and this will probably impact its legislation and regulations, such as the regulation on import of Used Equipment for instance. Indeed, the cooperation and the proximity with the EU will probably bring closer the Vietnamese and the European Laws.

Most important issues

–      With the regulation on Used Equipment, investors may hesitate to invest because of the higher costs induced.

–     The taxation deriving from this regulation remains unclear and not quite appropriate.

–     The relevant regulations must be amended as the EVFTA will enter into force.


Please do not hesitate to contact Oliver Massmann under 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!


Vietnam – Banking – Solutions for Liquidity and Non-performing Loans

The State Bank of Vietnam (SBV) is in the verge of creating a better administered and transparent banking system. To become an international attractive financial market, the SBV needs to implement the planed Circulars and adopt international financial standards as described below.
Foreign exchange governance
The Foreign Exchange Ordinance is revised by Article 1.4, Ordinance No. 06/2013/PL-UBTVQH13 which specifies that enterprises with foreign direct investment and foreign investors shall set up a direct capital account in an eligible credit institution, and all transactions regarding equity financing and capital earnings shall be made through this account. The SBV implemented Circular 19 to guide the Ordinance and clarified that foreign invested companies and foreign investment projects have to comply with all relevant national regulations, i.e. Investment Law, Enterprise Law, Personal income-tax Law, Corporate income-tax Law.
It is recommended that SBV includes and provides guidance on the transfer in foreign currency since it is only allowed to take US$ 5,000 abroad and the transfer of funds in foreign currencies is restricted.
Possible additional banking products by the SBV
The draft Circular which is replacing Decision 1627 is not specific enough on debt restructure lending. Credit institutions and branches of foreign banks have adopted a various number of procedures to restructure loans without altering their nature or mask bad debts, for example, by using mid-term or long-term loans to restructure a short-term loan or lending in foreign currency to restructure a VND loan. Allowing such restructuring measures would help the borrower to stabilize their business, financially recover and be able to repay the loan.
The Government is recommended to allow banks to carry out activities in both domestic and international markets in order to provide their clients with necessary information and service while doing business in Vietnam and overseas. This is to ensure their liquidity and more importantly, there should not be any limitation on basic foreign exchange activities.
Furthermore there is a need to update general banking licenses. All applications for re-issuance of the eligible certificate are put on hold and this could raise certain legal risks to banks.
Even if Article 89.1 of the Law on Credit Institutions requests branches of foreign banks have a written approval for the time being, the approval procedures are pending at the Licensing Department because there is no guideline on how to approve the organizational structure of branches of foreign banks.
The SBV is recommended to push the process and allow branches of foreign banks to implement their structure without its approval during the interim period.


Please do not hesitate to contact Mr. Oliver Massmann under if you have any questions on the above.

© 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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