Tag Archives: goverment

CASINO BUSINESS UNDER STRICT REGULATIONS

On 20 January 2017, the Government issued a long-awaiting casino business decree No. 03/2017/ND-CP (Casino Decree). Although the issuance of the Casino Decree after almost 10 years of waiting opens a promising market to casino industry, foreign investors have been very hesitant and in the waiting mode for further clarification documents from competent authorities. Finally after more than six months since the Casino Decree’s effective date, on 05 October 2017, the Ministry of Finance issues Circular No. 102/2007/TT-BTC (Casino Circular) guiding the Casino Decree. The Casino Circular helps complete the regulatory framework for casino business in Vietnam and put the young industry in momentum growth.

Local Vietnamese eligible for gambling

Local Vietnamese will be permitted to gamble at specific casinos approved by competent authority on a 3-year trial basis (i.e. – calculating from the first day opening of the authorized integrated resorts). According to the public media, only 02 casinos are open to Vietnamese individuals on a 3-year piloting scheme, which are located within complex resorts in Phu Quoc District, Kien Giang Province (South Vietnam) and Van Don District, Quang Ninh Province (North Vietnam). A small likelihood that Ho Tram Resort would join the list.

Local players are permitted to enter casinos if they essentially satisfy the following conditions: (i) 21 years old or above; (ii) monthly salary of VND10 million or more (equivalent to approximately US$440); (iii) paying entrance fee of VND1 million (US$44)/24 hours/ person or VND25 million (USD1,100)/ month/ person; and (iv) not being objected in writing by siblings, spouses and/or biological and adopted parents to play at casinos. However, these conditions, especially the monthly income requirement, are complicated to prove and were not previously dealt with in the Casino Decree. The Casino Circular then substantiates this requirement as below:

– Having documents (tax declarations/ confirmation by tax authorities) proving taxable income at level 3 or above pursuant to the Law on Personal Income Tax;

– Notarized house/ assets lease contract, where the total monthly rent is VND 10 million or above;

– Notarized bank savings book or bank statement of savings with a term of one year or more and having monthly interest from VND10 million or above;

– Other documents proving that the usual monthly income of players being VND 10 million or above; or

– In case a single document mentioned above is not sufficient to prove the VND10 million monthly income, players can submit several documents to prove such total monthly income.

Casinos under strict supervision of tax authorities

Casino-operating enterprises must arrange a place in the casino with necessary means and equipment for state authorities to perform the casino management and surveillance directly or via electronic equipment and camera system. Transactions under supervision are monetary transactions and/ or tokens related ones. These transactions must also be recorded ad reported to the tax authorities.

In addition, state authorities also supervise, either directly or via electronic and camera system, the inventorying and calculation of transactions performed at cashier area and/ or areas for counting and storing cash and tokens.

Foreign currency control in casino business

Casino-operating enterprises must exchange Vietnamese Dong or other currencies for tokens and vice versa for players.

The exchange rates for Vietnamese Dong or other currencies to tokens and vice versa must be based on the purchasing rates on the transaction date announced by the licensed bank where the casino-operating enterprise’s specialized foreign currency account is opened. In case the transaction date falls on days off or public holidays, the exchange rates must be based on the rates announced on the previous transaction date.

A casino-operating enterprise may accept bank cards of players to exchange for tokens when they play in the casino. The transaction must be in Vietnamese Dong.

In case the Vietnamese players win the prizes, they are only allowed to receive the prize in Vietnamese Dong (whether in cash or by bank transfer). This is not the case for foreign players where they can also receive the prize in foreign currency.

Conclusion

The issuance of the Casino Decree and the Casino Circular timely open Vietnam’s young casino industry to attract foreign investment and limit foreign currency loss to other neighbouring countries. According to recent statistics, Vietnam loses about USD800 million in tax revenue annually from gamblers who cross the border to Cambodia. This is even more critical as many countries in the region already allows casino business such as Macau, Singapore, Philippines, Korea and recently Japan. In such scenario, the Vietnam Government still has a lot to do in order to not only retain Vietnamese players in the market but also attract foreign players who are already familiar with other casinos in the region.

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

Thank you very much!

 

 

 

Lawyer in Vietnam Oliver Massmann – First time in history – Government Procurement Tender Decisions will be subject to International Arbitration and Investments subject to Investor State Dispute Settlement And Enforcement

Vietnam is one of the countries with the highest ratio of public investment to GDP on the world (i.e., 39% annually from 1995). However, Vietnam has not agreed to coverage of their government procurement by the Government Procurement Agreement of the WTO (GPA). Indeed, Vietnam for the first time has undertaken to do so in a recent Free Trade Agreement with the EU (EVFTA).

Currently Chinese companies profit the most from Vietnam’s procurement market. 90% of power, mining, manufacturing, ferrous and chemical projects of state-owned companies in Vietnam are awarded to Chinese contractors. China State Construction Engineering Corp (CSCEC) keeps winning important contracts although it has a poor track record and has even been blacklisted by the World Bank due to bribery charges. With the EVFTA that attractive market would be open to European companies which probably would be welcomed.

How is government procurement addressed under the EVFTA?

The EVFTA on Government Procurement mainly deals with the requirement to treat EU bidders or domestic bidders with EU investment capital and Vietnamese bidders equally when a government buys goods or requests for a service worth over the specified threshold. Vietnam undertakes to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The EVFTA also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc. These rules require all Parties, especially Vietnam, in the context of China’s bidders predominantly win the bids with cheap offer price but low-quality services, to reform their bidding procedures and protect their own interests by disqualifying tenders with poor performance and low capacity.

What is the covered procurement?

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

Criteria EVFTA
Monetary values that determine whether procurement by central government is covered under an agreement 130,000 Special Drawing Rights (SDRs) (US$191,000) after 15 years from the entry into force of the agreement

 

Initial transitional threshold: 1.5 million SDRs (US$2.23 million)

Procurement of construction services by central government entities Initial threshold: 40 million SDRs (US$58.77 million)

After 15 years, 5 million SDRs (US$7.35 million)

Entities covered 22 central government bodies

 

42 other entities (including 2 utility-related state-owned enterprises, 2 universities, 2 research institutes and 34 public hospitals under the control of the Ministry of Health

 

Sub-central government coverage: including Hanoi and Ho Chi Minh

Exclusion of preferences for SMEs Broad exclusion
Application of offsets Based on value of a contract

Currently the EU investors are expressing great interest in Long Thanh Airport project, whose total investment amount is approximately USD16 billion. This project is located in Dong Nai, 40km East from Ho Chi Minh City. When it is completed in 2025, it will become the biggest airport in Vietnam. The project is now at the feasibility study stage. Its result will be submitted to relevant authorities for approval in Q3 2017. It is expected that in 2019, the investor – Aviation Corporation of Vietnam will select the main constructor for the project. Selection form and requirements are not available at the moment. This is a great opportunity for European investors, considering that the next phase of the project will start when the EVFTA is already in effect.

How to appeal Government tender decision?

EVFTA makes it possible that the EU could sue Vietnam (or vice versa) for its tender decisions according to the dispute settlement by arbitration rules in a separate chapter of the EVFTA. The violating party must take all necessary measures to promptly comply with the arbitral decision. In case of non-compliance, as in the WTO, the EVFTA allows temporary remedies (compensation) at the request of the complaining party.

Enforcement of arbitral awards

In disputes regarding investment (for example, expropriation without compensation, discrimination of investment), an investor is allowed to bring the dispute to the Investment Tribunal for settlement (Investor-to- State dispute settlement mechanism – ISDS). The final arbitral award is binding and enforceable without any question from the local courts regarding its validity. This is an advantage for European investors considering the fact that the percentage of annulled foreign arbitral awards in Vietnam remains relatively high for different  reasons. According to report of the Supreme Court of Vietnam, the biggest reason lies in the relevant courts which are responsible for implementing the procedures for recognition and enforcement of foreign arbitration bodies. Specifically, in-charge judges do not fully understand nature of Vietnam’s commitments to New York Convention 1958, wrongly apply Vietnamese proceeding rules and, in some cases, are simply corrupted by the losing parties, often the local defendants.

Different from investment related disputes, disputes over a Government tender decision must be brought to the arbitration panel by a Government against the other Government.  It is not clear whether local courts could annul arbitral awards of the arbitration panel regarding a wrongful tender decision.  However, it is gradually becoming a less significant issue as over time, the number of rejected enforcement of arbitral wards in Vietnam is substantially on decline. The recognition and enforcement process is also shortened and is getting more straightforward and transparent. This is thank to efforts of the Supreme Court of Vietnam in training courts of lower levels, voices raised by foreign business communities and drastic changes in Vietnam’s proceeding laws recently.

We believe that the procedural and legal changes regarding government procurement will enable EU exporters to reach markets that were closed before and compete more effectively.

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

Thank you very much!

 

Lawyer in Vietnam Oliver Massmann Equitization Quality over Quantity

VIETNAM – Comment on a recent draft from the Ministry of Finance on strategic investors purchasing stakes from equitized state-owned enterprises (SOEs)

Author: Oliver Massmann – Chairman of the Legal Sector Committee – European Chamber of Commerce in Vietnam

On 4th August, the Ministry of Finance announced a Draft Decree on converting 100% state-owned enterprises (SOEs) into joint stock companies, which will replace Decree No. 59/2011/ND-CP, Decree No. 189/2013/ND-CP and Decree No. 116/2015/ND-CP.

Although the currently in force Decrees have brought positive results in  the re-structuring of state-owned enterprises since the beginning of the process in 2011, the restructuring quality has proven to be inefficient considering the small percentage of private participation in the company’s charter and management after the privatization. In addition, many big corporations with long financial history will need much more time and have to follow specialized rules to complete the privatization procedure. Many strategic investors have thus found it less attractive to participate in the process.

In order to tackle the above issues and bring substance to the equitization process in the context of new Enterprise Law, Investment Law, etc., there is a need to introduce a new Draft Decree on converting 100% state-owned enterprises into joint stock companies.

In particular, the draft’s Article 6 stipulates that a strategic investor must have the same business sectors as equitized SOEs. In addition, the strategic investor must have at least two years of profits (as of the time for buying stake of SOEs). Moreover, its equity in the latest financial report (which has to be audited by an independent auditing firm) must be sufficient for purchasing the stakes that it registers to buy.

Under the current regulations in Decree 59/2011/ND-CP, the strategic investor is only required to have sound financial capacity, and have a written commitment endorsed by an authorised agency. The commitment must state that after SOEs are equitized, the strategic investor must support SOEs in terms of technology transfer, human resource training, corporate governance, material supply and development of output markets.

This new stricter regulations in the draft will affect foreign firms who wish to buy stakes from SOEs and become strategic partners. In particular, foreign firms must be aware that they are not allowed to freely invest in any SOEs that have business activities not relevant to what they are doing, despite their strong interest in those sectors. This is to prevent cases where inexperienced foreign investors get into the management of the SOEs without having track record ability to manage them, and for example, aim at targeting Vietnam as a trial market for their business expansion.

In addition, we believe that the Government is showing its strong effort to select eligible investors to improve the equitization quality, and to make sure that the investors have proven financial status to efficiently recover the operating at loss status of SOEs. With stricter requirements, the Government will be able to attract investors with serious investment targets and with ability to contribute to the long-term development of SOEs.

Considering these new proposed stricter requirements, it is highly recommended that foreign investors conduct sufficient due diligence on the targeted SOEs, prepare themselves ready in terms of financial capacity and proven management skills, obtaining knowledge about Vietnam’s stock exchange market as well as regulations on bidding to come to a smart investment decision. We expect that with more substantive equitization, foreign investors will have more voice in the SOEs, via which being able to adopt development plans that serve the equitized companies’ future business outcomes, not any individual’s benefits.

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 Oliver Massmann interviewed by Channel News Asia on Reaction to new Vietnamese Government from the Business Community


1. Vietnamese legislators will elect the country’s new PM, President & NA Chair three months ahead of schedule. Reaction from business community?

So far, there has been no recorded official reaction from business community. But some unofficially view this move as unprecedented (though not entirely unusual).

As a foreigner having lived here for more than 20 years, I myself am not surprised at this change. The election result (who plays which role) perhaps has been set. This in fact is speeding up of the final formation process.

2. Does it show or mean anything about the “new regime”?

The expression of “new regime” isn’t one I would support and it is still too soon to conclude how the new premiership will unveil Vietnam politically and economically. It should be noted that Vietnam is a single party democracy therefore “regime change” is not technically correct in this case whatsoever.

However, the election result could be a signal that the Congress, or in other words, the conservative side, has gained an upper hand. This raises a concern about the reform progress in the upcoming time.

My recommendation to the Vietnamese Government at this stage: The new Government should not hesitate and make very clear via official channels that it will continue with its excellent strategy of high level international integration and speedy implementation of its signed trade pacts to pave the way for market access and strong growth in Foreign Direct Investment into Vietnam.

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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. Mr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Thank you!

Vietnam – Energy Sector – Direct Awards of Public Procurement Projects and The Trans-Pacific Partnership Agreement – What You Must Know

Q: Under what conditions can power projects be awarded without Government tender?

A: Power projects can be awarded directly without Government tender if the projects are not:
a. Investment projects for development using state funding by state agencies;
b. Investment projects for development of state-owned enterprises;
c. Investment projects for development other than those in a) and b) which are financed by the state; has 30% or more of total investment capital contributed by state-owned enterprises ; or less than 30% but more than VND 500 billion of the total investment capital of the project;
d. Procurement projects using state funding to provide public goods and/ or services; or
e. Investment projects in the form of public-private partnership or investment projects using land.

Q: Under which circumstances is direct appointment of an investor applied?
A: Direct appointment of an investor applies in the following cases:
a. There is only one investor registering the project’s implementation;
b. There is only one investor being able to implement the project as the project is related to intellectual property, commercial secret, technologies or capital arrangement;
c. The investor who proposes the project satisfies requirement of implementing the project with the highest feasibility and efficiency in accordance with regulations of the Government.
However, please note that direct appointment of an investor is still a part of a Government tender, meaning that this applies only when the abovementioned cases occur in the Government tender process.

Q: Under which circumstances is direct appointment of a contractor applied?
Direct appointment of a contractor applies in the following cases:
a. An event of force majeure such as disasters, war, change of the state policies, …which are objective, unpredictable and cannot be solved despite using all necessary measures within one’s own capacity. Vietnam is likely to face energy crisis in the coming years due to significant growth in energy demand. Thus, this is a good chance and foreign energy investors and companies should be prepared.
b. Bid packages need to be performed to ensure national secrets. National secrets are information in politics, national defence, security, foreign affairs, economics, science, technology sectors and other sectors that has not been disclosed or will not be disclosed by the state, and if disclosed, it will cause damage to the country.
c. Urgent bid packages need to be carried out to protect national sovereignty, national borders, and islands;
d. Bid packages of providing advisory services, non-advisory services, procurement of goods which must be purchased from previous contractors to ensure the compatibility of technologies and copyright which are unable to be purchased from other contractors; bid packages with research and testing nature; purchase of intellectual property right;
e. Bid packages of providing advisory services for making feasible study reports, construction designs which have been appointed to authors of designs of architectural works who won in a selection or are selected when authors have full capability in accordance with regulations; bid packages of constructing statues, reliefs, monumental paintings, art works in association with author right from the creation stage to construction stage of the works;
f. Bid packages of relocating technical infrastructure works directly managed by a specialized unit for site clearance;
g. Bid packages of providing public goods and services, bid packages with bid package price ranging from VND 500 million to VND 1 billion depending on types of projects.

Q: How is government procurement addressed under the Trans-Pacific Partnership Agreement (“TPP”) ?
A: The TPP on Government Procurement mainly deals with the requirement to open up bidding to companies in other nations when a government buys products or orders a public works project worth over a certain amount. Governments undertake to timely publish information on tender, allow sufficient time for bidders to prepare for and submit bids, maintain confidentiality of tenders. The TPP also requires its Parties assess bids based on fair and objective principles, evaluate and award bids only based on criteria set out in notices and tender documentation, create an effective regime for complaints and settling disputes, etc. These rules require all Parties, especially Vietnam, in the context of China’s bidders predominantly win the bids with cheap offer price but low-quality services, to reform their bidding procedures and protect their own interests by disqualifying tenders with poor performance and low capacity.

Q: How to appeal Government tender decision?
A: The TPP aims at protecting investors and their investment in the host country by introducing requirements on non-discrimination; fair and equitable treatment; full protection and security; the prohibition of expropriation that is not for public purpose, without due process, or without compensation; the free transfer of funds related to investments; and the freedom to appoint senior management positions regardless of nationality.
TPP also includes procedures for arbitration as means of settling disputes between investors and the host state. It is expected to cover new provisions such as transparency in arbitral proceedings, disclosure of filings and arbitral awards, and participation of interested non-disputing parties to make amicus curiae submissions to a tribunal.

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If you would like to have a legal concept for direct awards or detailed guidance on this topic please contact Oliver Massmann under: omassmann@duanemorris.com. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Breaking News – Vietnam – Broadcasting Market – First time Investment of foreign investors possible!

Breaking News – Vietnam – Broadcasting Market – First time Investment of foreign investors possible!

For your information, on 7 January 2015, the Prime Minister of Vietnam issued Decision 01 amending the “master plan on radio and television transmission and broadcasting through 2020” (the “Master Plan”). Decision 01 officially came into effect as of 15 March 2015.

The biggest change that Decision 01 makes is involvement of enterprises of all economic sectors, arguably including foreign invested enterprises, in the transmission and broadcasting market of Vietnam. Before Decision 01, only State owned enterprises or enterprises where State has majority ownership were given access to such markets.

As a matter of fact, VTV and its affiliates/subsidiaries hold a dominant role in the TV market. The “group” is responsible for both content provision and transmission/broadcasting. When a number of software/telecommunication giants such as (Viettel, the biggest telecomunication or FPT, the largest telecommunications and software companies respectively) start their TV business by taking advantages of their available infrastructure, VTV has sought to isolate them by offering content to its affiliates and subsidiaries first. This results in a modest expansion of newcomers like FPT and Viettel for the last two years.

The cause behind such change is, on one hand, the Government’s plan to separate the pay TV transmission/broadcasting and content provision which fall inside the sphere of the Law on Telecommunications and the Law on Media of Vietnam respectively. On the other hand, the Government wishes to form major transmission/broadcasting companies of large scale which are able to cover services nationwide.

We hope the above is useful for your consideration and will keep you updated of latest developments in this sector from time to time.

Please do not hesitate to contact 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.

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!