Tag: investor

Posted on by Dr. Oliver Massmann

VIETNAM – SOLAR POWER – AMAZING BREAKING NEWS – THE VERY FIRST SOLAR LAW – GOVERNMENT’S SUPPORTING REGIME FOR SOLAR POWER PROJECTS IN VIETNAM FINALLY OUT

 

On 11 April 2017, the Prime Minister officially approved the issuance of Decision No. 11/2017/QD-TTg on supporting regime for the development of solar power projects in Vietnam.

We note below some major points in this Decision:

Feed-in-tariff (FIT) rate

EVN is responsible for buying the whole electric output from on-grid solar power projects with the electric buying price at the point of electricity receipt to be 2,086 Vietnamese dong/kWh (equivalent to 9.35 UScents/kWh) (VAT excluded). This FIT only applies for on-grid projects with capacity of solar cell being over 16% or of solar module being over 15%.

There is no FIT for rooftoop solar power projects if such projects are not grid-connected. This is one of the differences compared with the previous Draft Solar Decision which sets a seperate FIT for rooftop projects when they are connected to the grid.

The FIT is based on the VND/USD exchange rate issued by the State Bank of Vietnam on 10 April 2017 (USD 1 = VND22,316). This FIT will be adjusted according to the fluctuation of the VND/USD exchange rate as specified in the standard Power Purchase Agreement (PPA) to be issued by the Ministry of Industry and Trade. We note that the solar PPA will have a term of 20 years from the commercial operation date of the solar plant and can be extended/ renewed based on regulations in effect at that time.

Investment incentives

Investment capital: Investors may mobilize capital from domestic or overseas organizations and individuals to invest in solar power projects.

Import duty: Solar power projects are exempted from import duty on goods imported to create fixed assets of the projects; components, materials and semi-finished products which are not available at home for the project’s operation.

Corporate income tax: solar power projects will also enjoy the same corporate income tax exemption and reduction as projects in sectors receiving investment incentives according to the current regulations on taxation. For example, corporate income tax rate of 10% will be applied for 15 years, tax exemptions within 4 years and tax reduction by 50% in the next 9 years.

Land: Solar power projects, lines and transformer stations connected to the national grid enjoy the same exemptions and reductions in land use, land rental as projects being entitled for preferential investment treatment. Such incentives, among other things, include exemption of land rental within 3 years from the operation date of the project.

Projects included in the Power Master Plan

The Power Master Plan, whether it is national or provincial, only applies for on-grid solar projects.

Projects of 50MW or below will be approved by the Ministry of Industry and Trade to be included in the Power Master Plan, while those of more than 50MW will be approved by the Prime Minister.

Thus, it could be understood that off-grid and rooftop projects do not have to be included in the Power Master Plan. This will save the investors the hassle of negotiating the PPA with EVN.

The Decision has effect from 01 June 2017 to 30 June 2019.

***

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.

 

 

Posted on by Dr. Oliver Massmann

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.

***

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!

 

Posted on by Dr. Oliver Massmann

EU-VIETNAM FREE TRADE AGREEMENT – MARKET ACCESS OVERVIEW

OVERVIEW

On 2nd December 2015, after nearly 3 years with 14 rounds of negotiations, President Donald Tusk, President Jean-Claude Juncker and Prime Minister of Viet Nam Nguyễn Tấn Dũng announced the conclusion of the negotiations of the EU-Vietnam Free Trade Agreement (EVFTA). Both parties are undertaking the necessary steps to finalise the ratification process for the Free Trade Agreement (FTA) to enter into force in 2018.

EVFTA 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 Association of South East Nations (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 Gross Domestic Product (GDP) of USD 15 000 billion (accounting for 22% of global GDP). The other way around, exporters and investors from the EU now 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 controlled. Vietnam’s business activities will be booming in the next few years once the EVFTA officially comes into force and Government’s policies, as well as institutional reforms, start showing their positive effects.

Moreover, Vietnam’s GDP is expected to increase by 0.5% annually and increase in exports of 4-6% per year. If this trend continues until 2020, Vietnam’s exports to the EU will increase by USD 16 billion. Until 2025, the EVFTA 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 liberalised through duty-free quotas. As Vietnam is a developing country, it will liberalise 65% of the value of EU exports to Vietnam, representing around half of the tariff lines, at entry into force and the remaining duties will be eliminated over the next ten years. For some products, Vietnamese duties will be eliminated over a sevenyear period such as motorcycles with engines larger than 1500cc, car parts and 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. For dairy products, after a maximum of five years. This is an unprecedented far-reaching tariff elimination for a country like Vietnam, proving its targets for deeper integration and trading relations with the EU.

From the EU’s side, the EU agreed to eliminate duties for 84% 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 will be 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 double transformation rule (instead of a strict yarn-forward rule as in the TPP) and will allow Vietnam to import fabrics from South Korea as an exception to the general rule. The EU also offers access to some Vietnamese sensitive agricultural products via duty-free quotas (rice, canned tuna, surimi, sweet corn, sugar products, etc.). Vietnamese exports of textile, clothing and footwear to the EU are expected to more than double by 2020 as a result of the EVFTA.

We note that, in the region, besides Vietnam, 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 to become a regional hub.

MARKET ACCESS FOR EU SERVICE PROVIDERS

Although Vietnam’s World Trade Organisation(WTO) commitments are used as a basis for thes ervices commitments, Vietnam has not only opened additional (sub)sectors for EU service providers but also commits deeper than in the WTO, offering the EU the 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 research and development (R&D) services, nursing services, physiotherapists and para-medical personnel, packaging services, trade fairs and exhibitions services and building-cleaning services. Moreover, it is noteworthy that the EVFTA contains a MFN clause that allows one party to grant the other party the best treatment that the former is negotiating with other partners under another framework.

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

Distribution sector

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

Distribution of cigarettes and cigars, publications, precious metals and stones, pharmaceutical products and drugs, explosives, 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/ASEAN Framework Agreement on Services (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 offers 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 the regional and global economy. It is now time for foreign investors to start their business plans and grasp the upcoming clear opportunities.

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!

 

 

 

 

Posted on by Dr. Oliver Massmann

VIETNAM FOREIGN DIRECT INVESTMENT (FDI) – LATEST UPDATE AND OUTLOOK ON EUROPEAN UNION – VIETNAM FREE TRADE AGREEMENT (EVFTA)

Vietnam has worked on attracting FDI with a reduced Corporate Income Tax for prioritized sectors, with a lowered standard rate – from 25 to 10-20 percent – and by waiving the land rental fees for Foreign Invested Enterprises (FIEs).  If the FDI are promoted, it is mainly due to the technological transfer they include.  Despite the increasing number of foreign invested enterprises in Vietnam, the spillover effects are still expected because of the lack of three conditions: dense backward linkages, geographical proximity and FDI absorptive capacity.

Our first concern tackles the lack of backward linkages created by Vietnamese firms.  More than half of the FIEs import inputs from home or from a third country, depending on several factors: the suppliers form, the sector and the country of origin.

FIEs are mainly served by private and import suppliers, even though the percentage of FIEs by suppliers’ type varies within each sector.  Finance and services are the two sectors with the most backward linkages since they rely on human capital.  In manufacturing and mining sectors, the FIEs import more than half of the inputs from another country.

Besides, the FIEs are diversifying their sources, showing a change of sourcing strategy regardless of the investment incentives they receive.  The suppliers’ types are more diverse than it used to be: in 2-year time, 45 to 68% of the FIEs served by domestic private suppliers, 10 to 20% served by household suppliers… the in-house sourcing is the only supplier form which has decreased.

The many incentives are meant to promote FDI in high-tech sector, underprivileged regions and other priority sectors, but we can question the reality of the technological transfer. Indeed the incentives target regions and sectors that are not ready to receive such advanced technologies and therefore FIEs in more developed regions do not rely on incentives.

Across provinces, the main sectors determine the source of FIEs suppliers considering the complexity of the technology needed for the activity. Vietnamese suppliers are more able to form linkages with FIEs in lower-tech sectors, where the technological gap is not prohibitively large.  Thus, more linkages are established with Taiwanese companies which concentrate on textiles, light manufacturing and light electronics, than with Japanese or Korean companies specialized in complex electronics.  FIEs are under no obligation to transfer their technology which prevents Vietnamese firms to join the high-tech supply chain and to establish forward linkages.

The geographical proximity between the FIEs centers and the domestic private firms must be greatly considered as the transfer of technology mostly occurs in face-to-face technical consultations.  Yet, it is difficult to draw a distinction between the proximity impact and the domestic firm’s strategy.  In either case, the proximity has an influence over the choice of strategy and a close proximity ensures a better technological spillover.  The establishment of a private domestic firm in an industrial zone increases the efficiency of exporting but diminished the chance of technological transfer by isolating the FIE from a larger economic pole.

Finally, the FDI absorptive capacity facilitates even more technological transfer.  Indeed, if the gap between the domestic enterprise and the FIE in matter of new technology and of work force training is too large, the potential for transfer is reduced.

In matter of labor quality, State-Owned Enterprises have a higher percentage of high-quality labor when domestic firms have less educated labor force.  The quality of the work force is crucial to adopt FIE’s technologies and management techniques.  Thus, domestic suppliers of FIEs are less likely to assimilate from their foreign clients due to a more limited absorptive capacity.  Improving labor quality is the key missing in promoting FIEs technological transfer.  The linkages and the proximity only allow people to get in touch and enhance a better spillover.

Guidance on the EVFTA

It is a golden time to invest in Vietnam due to the FTA, Vietnam being the only ASEAN country to sign this agreement with the EU (Singapore has signed the FTA in 2014 but this does not affect Vietnam’s competitiveness as Singapore mainly exports machines, chemical products and transport equipment).

Under the provisions of the agreement, over 99% of the tariff lines will be eliminated within 7 years from the effective date of the FTA.  Vietnam’s duties on EU exports will disappear in a ten-year period, EU’s duties in a seven-year period for some products (motorcycles, car parts, half of EU pharmaceutical).  The opening of the market will emphasize commercial relations between EU and Vietnam and benefit to both of them. Vietnam’s commitments to World Trade Organization (WTO) and to additional (sub)sectors such as Interdisciplinary R&D services, nursing services, packaging services etc. offer the EU partners best possible access to Vietnam’s market.

For the distribution sector, an Economic Needs Test is required, as for the WTO, but with exemptions and time delay of five years after the date of entry into force of the Agreement. Thus after 5 years, the requirement of the ENT will be abolished.

Vietnam is the most investment worthy place in ASEAN and will ensure this position partially thanks to EU-VN FTA. Its stable development of the economy and controlled inflation, its adapted legislation foster an environment proper to investment.

Most important issues

  • Consider what suppliers’ form is the most suitable to be served by, regarding the technicity of the activity.
  • Choose the relevant strategy to adopt between perceiving incentives but letting go of linkages, and establishing backward linkages with the domestic firms’ even if it means waiving incentives.
  • Decide the timing to invest: Vietnam is the new land of investment this is why investors should position themselves as early as possible to timely grab the opportunities that FTAs create when they come into effect.
  • Pay attention to the newly adopted legislation: the Government tends to improve the business climate by reforming the legislation, especially when new trade pacts are coming into effect (e.g. Investment Law, Enterprise Law, decree on Public-Private Partnership).

***

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

Thank you very much!

 

Posted on by Dr. Oliver Massmann

VIETNAM CASINO BUSINESS BREAKING NEWS  – THE LAW IS ISSUED – VIETNAMESE CAN GAMBLE – WHAT YOU MUST KNOW:

 

On 20 January 2017, the Government issued a long-awaiting casino business decree No. 03/2017/ND-CP (Casino Decree) allowing Vietnamese nationals to gamble in the country fort the first time in history on this scale.

Here are the key features of the Casino Decree:

  1. Casino business, as defined by Casino Decree, means prize winning games on (i) electronic gaming machine with prizes (i.e. – men vs. machine) and (ii) gaming table with prizes (i.e. – men vs. men).
  2. Casino business is treated as a conditional business sector. Investors must apply for a licence which is evidenced by a certificate of satisfaction of casino business conditions (the Casino Business License in short).
  3. A casino must be located inside a larger resort complex or the like. No separate casino sites are permitted. This requirement obliges the applying entities to go through 02 licensing processes, which are:

(i)         An investment registration certificate for resort complex (IRC); and

(ii)        A Casino Business License for the casino itself.

  1. A Casino Business License’s term is within 20 years from the date of issuing the relevant IRC or in-principle approval of the investment. Another 10 year extension is permitted but still within the lifespan of IRC.
  2. Conditions are various and somewhat ambiguous and discretionary including a US$2 billion of total investment capital. 50% of which must be contributed before issuance of the Casino Business License
  3. 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). Probably the Ho Tram Resort will join the list.
  4. Local players are permitted to enter casinos if they essentially satisfy 05 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;

(iv)      Not being objected in writing by siblings, spouses and/or biological and adopted parents to play at casinos;

  1. Vietnamese currency is the only currency used for conversion transactions at casinos for local players.
  2. For local players, entrance fee for a 24 hour participation is US$45 (or $1,100 for a monthly unlimited pass).
  3. Number of gaming tables and gaming machines depends on investment size. That is, for each US$10 million lot that the investor actually released, a package of 1 gaming table and 10 gaming machines are permitted.

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!

 

 

 

Posted on by Dr. Oliver Massmann

VIETNAM – GUIDE to Anti-Money Laundering

Member of Financial Action Task Force (FATF)?

No, Vietnam is currently not a member of FATF.

On FATF Blacklist?

No.

Member of Egmont?

No.

  • ML background in region
    • Overview of country risks

Vietnam’s deeper integration into regional and world’s economy for the past few years has been a great opportunity for international money laundering crimes. However, money laundering activities only become clearly visible recently though bank accounts opening, securities trading, gambling, illegal transfer of foreign currencies out of the country, use of credit cards, etc. Combating money laundering becomes one of the top concerns not only for the State Bank of Vietnam but also other relevant authorities in Vietnam. According to a report of the State Bank of Vietnam, in 2012, suspicious transactions have a total value of VND51,000 billion, while in 2013 is VND79,000 billion and in 2014, the value goes up to VND119,000 billion. This shows an increasing and alarming number of transactions suspicious of money laundering. We note that the Law on Anti-money Laundering took effect on 01 January 2013. However, it seems that the anti-money laundering legal framework is still not sufficient, guiding implementation remains unclear, awareness of credit institutions of money laundering is low, ability to detect money laundering activities is weak, information technology in anti-money laundering activities is not sufficient, and especially punishment regime for violating acts of the AML is only formalistic. The Government, especially the State Bank of Vietnam is strongly recommended to tighten their regulations in this sector.

  • Key Directives / Legislative framework
  1. Law on Prevention of and Anti Money Laundering No. 07/2012/QH13, issued by the National Assembly on 18 June 2012 (“AML”);
  2. Decree No. 116/2013/ND-CP on detailing the implementation of certain provisions of the AML (“Decree 116”);
  3. Circular No. 35/2013/TT-NHNN on guiding the implementation of certain regulations on anti- money laundering, issued by the State Bank of Vietnam on 31 December 2013 and amended by Circular No. 31/2014/TT-NHNN; and
  4. Penal Code No. 15/1999/QH10 issued by the National Assembly on 21 December 1999, as amended by Law No. 37/2009/QH12.
  • Who are the regulators / monitoring authorities
    • Who are affected / reporting entities?

According to the AML, the following state authorities are responsible for reporting, preventing, and fighting against money laundering activities:

  • SBV is mainly responsible to the Government for state administering the implementation of AML regulations;
  • Ministry of Public Security is responsible for collecting, receiving and investigating information of money laundering related crimes;
  • Ministry of Finance is responsible for implementing AML measures in insurance business, securities sector, prize-winning games and casinos;
  • Ministry of Construction is responsible for implementing AML measures in real estate business sector;
  • Ministry of Justice is responsible for implementing AML measures applicable to lawyers, legal practice organizations, notaries and notary public offices;
  • The People’s Procuracy and the People’s Court coordinate with other agencies in the investigation, prosecution, and resolution of money laundering crimes;
  • People’s Committees at all levels are responsible for conducting legal training on anti-money laundering in the province, co-ordinating with state authorities to implement policies, strategies, and plans to prevent and fight money laundering; and
  • The Anti-Money Laundering Steering Committee is responsible for assisting the Prime Minister in preparing strategy, plans, policies and programs in the process of preventing and fighting against money laundering.
  • Legal requirements for KYC
    • Customer Due diligence

According to the AML, in which cases application of measures to identify clients are required depend on the types of entities and which business activities they are conducting. In particular:

–          For financial institutions:

ü  The clients open accounts or set up transactions with the financial institutions for the first time;

ü  The clients who make infrequent transactions of high value or carry out the transaction of electronic money transfer but lack the information about the name, address, account number of the originator;

ü  There are doubts about transaction or the parties concerned in transactions are related to the money laundering;

ü  There are doubts about the accuracy or completeness of the clients identification information previously collected.

–          For relevant non-financial institutions or individuals:

ü  Doing business in prize-winning games, casinos: clients implementing high value transactions (i.e.¸ over VND60 million per day);

ü  Doing real estate management services, brokerage; real estate transaction floor: when providing these services to the buyer, purchaser and asset owner;

ü  Trading in precious metals and stones: when clients performing the sale and purchase transaction of precious metals and stones with value of over VND300 million per day;

ü  Providing notary and accounting services, the lawyer’s legal service and lawyer practice organizations: when preparing the conditions for conducting the transactions to transfer the land use right, house ownership, management of money and securities or other assets of the clients; managing the clients’ accounts at banks, securities companies; administrating and managing the operation of the clients’ companies, and participating in the activities of purchase and sale of business organizations on behalf of clients;

ü  Providing investment trust services: due diligence for the entrusting party;

ü  Providing services of establishment, management and executive of enterprise; supplying registration office, address or place of business; supplying services of company representative : clients requesting such services;

ü  Providing services of director and secretary provision of the enterprise to a third party: third party and director / secretary to such director;

ü  Providing services of representative supply for shareholders: shareholders and representatives of such shareholder.

The abovementioned services providers/ entities must update the client identification information on a regular basis during the period of having relations with the clients.

In addition, clients must also be classified into different groups, product and services used, their place of residence or headquarter based on different risk exposure levels.

  • Reporting requirements / Obligations
    • Record keeping

Records of clients’ transactions must be kept for at least 5 years from the date of the transaction. Records of customer identification, accounting documents and reports of high value transactions, suspicious transactions and transactions of electronic money transfer exceeding VND500 million or equivalent amount in foreign currency (for domestic transfer) or USD1,000 (for inbound or outbound transfer), must be kept for at least 5 years from the closing date of the transaction or the date of account closure or the reporting date.

    • Tipping off

The reporting entity/ individual is not allowed to inform a person involved in a suspicious transaction that it has reported or will report the transaction to the State Bank of Vietnam.

    • Whistleblowing

The AML only sets out regulations on reporting to the State Bank of Vietnam instead of whistle blowing.

  • Offences
    • Enforcements

If the parties related to the transactions are included in the blacklist or there are grounds to believe that the transaction required to be performed is related to the criminal activities, the reporting entity/ individual must apply measures to delay the transaction within maximum 3 working days and must immediately report in writing and notify via phone to the competent State agencies and the SBV for cooperation. If the reporting entity/ individual does not receive any feedback from the competent State agencies after 3 working days, it can proceed the transaction.

In addition, the reporting entity/ individual must block the accounts or seal or temporarily seize assets of the individuals/ organizations upon having decision of competent state agencies under the law and make report on the implementation to the State Bank of Vietnam.

    • Penalties

Persons violating the AML are subject to administrative sanctions of up to VND250 million, discipline or criminal penalty depending on the nature and seriousness of such violations. The criminal sanctions varies from one year to maximum 15 year imprisonment, together with partly or wholly confiscation of assets, monetary fine of up to 3 times of the violated amount, abandonment of holding certain positions or titles from one to five years.

  • Internal procedures & training

Pursuant to Article 20 of the AML, reporting entities/ individuals must establish internal procedures on prevention and combating money laundering with the following contents:

ü  Client acceptance policy;

ü  Processes and procedures to identify clients, verify and update client information;

ü  Transactions which must be reported;

ü  The process of review, detection, handling and reporting of suspicious transactions; the way to communicate with the clients who make suspicious transaction;

ü  Information keeping and security;

ü  Applying temporary measures and principles of handling the cases of transaction delay;

ü  Reporting and information supply regime to the State Bank of Vietnam and the competent state agencies;

ü  Professional training on the prevention of and combating money laundering;

ü  Internally controlling and auditing the compliance with the policies, regulations, processes and procedures related to the prevention of and combating money laundering, responsibilities of each individual and division in the implementation of internal rules in the prevention of and combating money laundering.

  • Sanctions
    • International conventions

International cooperation in the field of prevention of and combating money laundering includes: (i) exchange of information on prevention of and combating money laundering; (ii) determining and blocking assets of the violating persons; (iii) performing judicial assistance and cooperation in extraditing money laundering offences; and (iv) other aspects. The process, procedures and cooperation methods are in accordance with international agreements to which Vietnam is a party.

  • CTF – Countering terrorist finance

The Ministry of Public Security is tasked with the preparation of a list of organizations and individuals related to terrorism and terrorist finance (“Blacklist”). The reporting entity/ individual must promptly report to the competent anti-terrorism authorities, and at the same time send reports to the State Bank of Vietnam upon detecting organizations and individuals to conduct transactions included in the blacklist or when there is evidence that other organizations and individuals commit acts related to the money laundering crime for terrorism financing.

At the same time, the reporting entity/ individual must apply measures to delay the transaction and block the accounts or seal or temporarily seize assets of the individuals/ organizations.

  • Anti bribery and corruption laws

Corruption is widespread throughout Vietnam. For information, Vietnam ranks 111 out of 168 according to 2015 Corruption Perception Index, a barely budge compared with its rank in 2014 (119th) and in 2013 (116th). Sectors most affected by corruption are Police; Public administration; Health sector, Judiciary; and Land management. Vietnamese government has acknowledged the negative impact of corruption on both Vietnam’s future prosperity and the Party’s own legitimacy, thus has adopted one of the most comprehensive and ambitious anti-corruption laws in Asia. The anti-corruption legal framework has significantly improved after the adoption of the Anti-corruption Law by the National Assembly in 2005 and the National Strategy on Anti-corruption to 2020.

However, in the last ten years of implementation, considering the increasing level of complexity of corruption cases, the current legal framework has been proved to be inadequate to combat corruption in Vietnam. This prompted the Vietnamese Government to refine the current regime to make the policies fully effective and operational in practice.

Draft Law provides a new chapter on Assets and Income Transparency and Control.  Deputies to the National Assembly and People’s Councils, officials holding positions as from deputy head of division in People’s Committee of districts, Secretary, Deputy Secretary, Chairman, Deputy Chairman of People’s Committee, people who work in public companies, credit institutions, etc. must enumerate their assets and incomes. In case their actual assets and incomes are bigger than ones enumerated, the competent authorities shall request tax authority to collect taxes applied on the discrepancy between actual assets and incomes and the ones enumerated; initiate a law suit before courts.

A new section of “Anti-corruption at social organizations” is added.  Chairman, General Secretary, Chief Accountant of a social organization must enumerate their assets and incomes.

Draft Law also provides a new chapter on “Forming a healthy and anti-corruption business culture.” Specifically, enterprises are liable to issue and implement a code of ethics internally in order to form a healthy and anti-corruption business culture.  In its charter and operation policy, the enterprise is responsible to provide its internal control mechanism to prevent conflict of interests, bribery, abuse of powers and other corruption acts. Chairman of Board of Directors, members of Board of Directors, General Director, Directors, Head of Inspection Committee, Chief Accountant of a public company, credit institution, investment fund must enumerate their assets and incomes.  Enterprises are liable to issue their policy on control of their management staff’s assets and incomes control.

There is no definition of “bribery” under Vietnam laws. However, in essence, it could be defined as an act of offering, promising, making or receiving money or anything of value (minimum threshold:  VND 2 million (approx. US$ 100) to induce or influence an act/ omission or decision. The current laws only target people with positions and power (i.e., state officials). Please note the receipt of minimum VND2 billion is subject to death penalty.

  • Forthcoming issues/legislation

o   Money transmitters

Money transfer transactions with nature mentioned under Customer Due Diligence and Record Keeping sections are subjects of the AML. The laws regarding these issue remain in force and there is no information that these rules will be revised in the short term.

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!

 

 

 

 

 

 

Posted on by Dr. Oliver Massmann

VIETNAM INSURANCE GUIDE

Market overview

Global

  • Member of International Association of Insurance Supervisors (IAIS) ?

Yes, Vietnam became member of IAIS in 2007.

  • Global regulators, bodies and legislation applicable to country

A project “ComFrame” set up by the Internationally Active Insurance Groups (IAIG related to IAIS), is planned to establish regulatory framework with mandatory standards. For now, it remains at the test phase but would become effective by 2019. Vietnam, as a member of the IAIS will have to comply with its regulations.

As a member of the WTO and WHO, Vietnam must also comply with regulations of these organizations with respect to insurance. In its bilateral / multilateral agreements such as Korea – Vietnam FTA, EU- Vietnam FTA, Hong Kong –  ASEAN FTA, ASEAN- China FTA, ASEAN – Australia – New Zealand FTA, commitments on insurance are also binding on Vietnam

In addition, Vietnam is a member of the OECD, which issues guidelines and good practices of non-binding nature for member countries.

European (if applicable) Not applicable for Vietnam

  • Supervised by EIOPA?
  • Does Solvency II apply?
  • Key regulators and rulebooks

Domestic

  • Key regulators

The Ministry of Finance is in charge of the state regulation on insurance business. In addition, on 12 February 2009, the Ministry of Finance (MOF) issued Decision No. 288/QD-TTg to establish the Insurance Supervisory Authority (ISA) under the MOF. The ISA will assist the Minister of the MOF to regulate insurance business nationwide; directly govern and supervise insurance business activities and services related to insurance business in accordance with law.

In June 2009,  Insurance Research and Training Centre (IRTC) under the ISA was established according to Decision No.  1379/QD-BTC . The IRTC is tasked with organizing scientific study and training on insurance and insurance market.

  • Laws and relevant court decisions/judgements

The following laws and regulations mainly govern insurance business in Vietnam:

  1. Law on Insurance Business issued by the National Assembly on 09 December 2000, as amended by Law No. 61/2010/QH12 dated 24 November 2010 (Law on Insurance Business);
  2. Decree No. 73/2016/ND-CP on guiding the implementation of the Law on Insurance Business issued by the Government on 01 July 2016 (Decree 73);
  3. Decree No. 98/2013/ND-CP on administrative sanctions on insurance business and lottery business issued by the Government on 28 August 2013 (Decree 98);
  4. Circular No. 195/2014/TT-BTC on guiding the assessment and classification of insurance companies issued by the Ministry of Finance on 17 December 2014 (Circular 195);
  5. Circular No. 101/2013/TT-BTC on guiding the management and use of fund for policy-holders, issued by the Ministry of Finance on 30 July 2013 (Circular 101);
  6. Decision No. 1826/QD-TTg of the Prime Minister on approving the Plan on “Restructuring the securities market and insurance companies” on 28 December 2012 (Decision 1826).
  • Key rules and requirements may include
  • Senior management responsibilities
  1. Promulgation of legal instruments and implementing guidelines on insurance business; formulation of strategies, policies, master planning and specific plans for the development of the Vietnamese insurance market;
  2. Issuance and withdrawal of licenses for establishment and operation insurers and insurance brokers, and of licenses for establishment of representative offices of foreign insurers and foreign insurance brokers in Vietnam;
  3. Promulgation, ratification and guiding the implementation of insurance regulations, provisions, scales of premiums and commissions;
  4. Supervision of insurance business activities via professional activities, financial status, enterprise management, risk management and compliance with the law on insurers and brokers; application of necessary measures to ensure that insurers satisfy the financial requirements and fulfil their undertakings to purchasers of insurance;
  5. Organization of provision of information on the status of the insurance market and market forecasts;
  6. International cooperation in the area of insurance;
  7. Consent for overseas operations of insurers and insurance brokers;
  8. Administration of the operations of representative offices of foreign insurers and foreign insurance brokers in Vietnam;
  9. Organization of the formation and training of a workforce of insurance management personnel and insurance professional experts; and
  10. Inspection and checks of insurance business activities; resolution of complaints and denunciations, and dealing with breaches of the laws on insurance business.
  • Whistle-blowing rules

There is no such rules specifically for the insurance sector.

  • Foreign ownership limit in an existing shareholding company

ü  The maximum shareholding by an individual shareholder is limited to 10% of the charter capital of the target company;

ü  The maximum shareholding by an institutional shareholder is limited to 20% of the charter capital of the target company; and

ü  The maximum shareholding owned by a shareholder and related persons/affiliates in aggregate is limited to 20% of the charter capital of the target company.

Capital reserve requirements

Reserve funds

Insurers and insurance brokers must establish a compulsory fund to supplement their charter capital and ensure their solvency. Appropriations for the compulsory reserve fund shall be made annually at 5% of after-tax profits. The maximum amount of compulsory reserve fund is equivalent to 10% of the charter capital of the insurance enterprise or issued capital of the foreign branch.

In addition to this compulsory reserve fund, insurers and insurer brokers may establish other reserve funds from their after-tax profits of the fiscal year as determined in their charter. It is noted that after-tax profits must not be first shared among shareholders but only after 5% of such profits is contributed to the compulsory reserve fund.

Insurance reserves

Insurance reserve means an amount of money which an insurer must set aside to pay for its insurance liabilities determined in advance and arising from the insurance contracts which it has entered into.

Insurance reserve must be established for each type of insurance product or insurance contract with respect to that part of liability retained by the insurer or foreign branch. Specific amount contributed for insurance reserve is not yet provided by the MOF given the recent effectiveness of Decree 73.

Security deposit

Insurers must pay a security deposit into a commercial bank operating in Vietnam in an amount of  2% of the legal capital as specified for each type of insurance company (for example, a health insurance company must pay a security deposit of  VND6 billion or USD270,000) within 60 days from the issuance date of the operating license in Vietnam. An insurance enterprise or foreign branch may only use its security deposit to meet undertakings to purchasers of insurance when its solvency is inadequate and upon written approval of the MOF. The whole amount of their security deposit can only be withdrawn upon termination of their operation.

Product specific legislation

Relevant advisory documentation or other requirements, including tax.

  • Life

Legal capital

ü  For life insurance business (excluding unit linked insurance and retirement insurance) and health care insurance business: VND600 billion

ü  Life insurance business and unit linked insurance business or retirement insurance business: VND800 billion

ü  Life insurance business, unit linked insurance business and retirement insurance business: VND1,000 billion.

Qualifications of the appointed actuary

ü    Not be prohibited from managing an enterprise according to Vietnam laws;

ü    In the three consecutive years prior to the time of appointment:

o   Not have been subject to an administrative penalty for a breach in the insurance business sector with the form of penalty being compulsory dismissal from his or her position as a manager or executive, approved by the MOF, or with the form of penalty being suspension from a position to which such person was appointed by an insurance enterprise, insurance broker or foreign branch;

o   Not have been disciplined in the form of dismissal for a breach of internal rules on underwriting, assessment, compensation and indemnity, internal control, management of finance and investment or management of a re-insurance program in an insurance enterprise or foreign branch; or for a breach of the rules on professional insurance broking operations, on internal control or professional ethics of an insurance broker;

o   At the time of being appointed as a manager or executive of an insurance enterprise or foreign branch, not be directly related to any case prosecuted by a competent agency.

ü Have undergone training as an appointed actuary, and have at least 10 years’ work experience as an appointed actuary in the life insurance and be a fellow of one of the Associations of Actuaries which are widely recognized internationally such as the Institute of Actuaries of England; the Society of Actuaries of the USA; the Institute of Actuaries of Australia; the Canadian Institute of Actuaries; or be a member of another Association of Actuaries which is an official member of the International Associations of Actuaries; or have at least 5 years’ work experience as an appointed actuary in the life insurance or health insurance sector from the time of becoming a fellow of one of the above associations.

ü Not have committed any breach of the professional ethics of actuaries.

ü Be an employee of the life insurer.

ü Be resident in Vietnam during the term of office.

Permitted scope of business

Life insurers are not allowed to do non-life business.

Life insurance products must be approved by the MOF in advance.

Insurance reserve

Insurance reserve for life insurance companies includes: actuarial reserve, unearned premium reserve, compensation reserve, profit distribution reserve, committed interest rate reserve and balance reserve.

Investment of idle capital from insurance reserves

Investments of idle capital from insurance reserves of insurance enterprises or foreign branches may be made directly by the insurance enterprise or foreign branch or by entrusting another entity to make the investment, but shall only be invested in Vietnam in the following sectors:

ü Purchase of Government bonds, Treasury bills, Treasury bonds, public bonds for construction of the Homeland, local authority bonds and Government guaranteed bonds without any restriction;

ü Deposits with credit institutions without any restriction;

ü Purchase of shares, bonds of enterprises and fund certificates but not to exceed 50% of idle capital from insurance reserves;

ü Real estate business in accordance with the Law on Real Estate Business but not to exceed 20% of idle capital from insurance reserves;

ü Capital contribution to other enterprises but not to exceed 20% of idle capital from insurance reserves.

  • General insurance

Under Vietnam laws, general insurance is called non-life insurance, which means the types of insurance products being property insurance, civil liability insurance and other products which are not life insurance.

Legal capital

– For non-life insurance business (excluding aviation insurance business and satellite insurance business) and health insurance: VND300 billion

– For non-life insurance business (including aviation insurance business or satellite insurance business) and health insurance: VND350 billion

– For non-life insurance business, including aviation insurance business and satellite insurance business and health insurance: VND400 billion

Qualifications of an appointed actuary regarding reserves and solvency of non-life insurer

ü    Not be prohibited from managing an enterprise according to Vietnam laws;

ü    In the three consecutive years prior to the time of appointment:

o   Not have been subject to an administrative penalty for a breach in the insurance business sector with the form of penalty being compulsory dismissal from his or her position as a manager or executive, approved by the MOF, or with the form of penalty being suspension from a position to which such person was appointed by an insurance enterprise, insurance broker or foreign branch;

o   Not have been disciplined in the form of dismissal for a breach of internal rules on underwriting, assessment, compensation and indemnity, internal control, management of finance and investment or management of a re-insurance program in an insurance enterprise or foreign branch; or for a breach of the rules on professional insurance broking operations, on internal control or professional ethics of an insurance broker;

o   At the time of being appointed as a manager or executive of insurance enterprise or foreign branch, not be directly related to any case prosecuted by a competent agency.

ü Be an associate of an Association of Actuaries which is an official member of the International Associations of Actuaries; or

ü Have at least five years’ work experience in the non-life insurance sector and have evidence of passing two exams of one of the following Associations: the Institute of Actuaries of England; the Society of Actuaries of the USA; the Institute of Actuaries of Australia, and the Canadian Institute of Actuaries, or evidence of passing exams of a training course or program on actuaries recognized by the above Associations as equivalent to two exams of the above Associations; and

ü Not have committed any breach of the professional ethics of actuaries.

Permitted scope of business

Non-life insurance companies are allowed to do health insurance business.

Insurance reserve

Insurance reserve for non-life insurance companies includes unearned premium reserve, claim reserve, and large loss fluctuation reserve.

Investment of idle capital from insurance reserves

ü  Purchase of Government bonds, Treasury bills, Treasury bonds, public bonds for construction of the Homeland, local authority bonds and Government guaranteed bonds without any restriction;

ü  Deposits with credit institutions without any restriction;

ü  Purchase of shares, bonds of enterprises, fund certificates and capital contribution in other enterprises but not to exceed thirty five (35) per cent of idle capital from insurance reserves; and

ü  Real estate business in accordance with the Law on Real Estate Business but not to exceed ten (10) per cent of idle capital from insurance reserves.

  • Reinsurance

Legal capital

–          For non-life reinsurance business or both non-life reinsurance business and health reinsurance business: VND400 billion;

–          For life reinsurance business or both life reinsurance business and health reinsurance business: VND700 billion;

–          For business in all three types of life reinsurance, non-life reinsurance and health reinsurance, VND1,100 billion.

Qualifications of an appointed actuary regarding reserves and solvency of reinsurer

Same as in non-life insurance.

Permitted scope of business

ü  An insurance enterprise or may transfer part but is not permitted to assign all of the liability for which insurance has already been accepted in an insurance contract to one or a number of domestic and foreign insurance enterprises, and other foreign branches;

ü  The maximum level of the liability retained on each risk or on each separate loss shall not exceed 10% of equity.

ü  If an insurance enterprise cedes reinsurance as appointed by an insured person, the maximum rate for re-insurance by appointment shall be 90% of the liability insured;

ü  An insurance enterprise may accept reinsurance of the liability for which another insurance enterprise has already accepted insurance.

Insurance reserve

–          For non-life reinsurance: unearned premium reserve, claim reserve, and large loss fluctuation reserve;

–          For life reinsurance: actuarial reserve, unearned premium reserve, compensation reserve, profit distribution reserve, committed interest rate reserve and balance reserve;

–          For health reinsurance: actuarial reserve, unearned premium reserve, compensation reserve, and balance reserve.

Investment of idle capital from insurance reserves

–          For non-life reinsurance: same as non-life insurance

For life reinsurance and health reinsurance: same as life insurance and health insurance

  • Commercial insurance

Please refer to the Section on General insurance above.

Investment management and markets

Overview of relevant regulation affecting insurers’ investment portfolios, including Asset Liability Management (ALM).

An insurance enterprise can make investment from its equity, idle capital from insurance reserves and other lawful sources.

In addition to rules of domestic investment of idle capital from insurance reserves as mentioned above for each type of insurance business, the following principles apply:

ü  It is not permitted to borrow loans for purposes of direct investment or entrusted investment in securities, real estate, or capital contribution to other enterprises;

ü  It is not permitted to reinvest in any form [being lending to or reinvesting with] capital contributing shareholders (members) or related persons [affiliated persons] as defined in the Law on Enterprises, except for deposits with shareholders (or members) which are credit institutions;

ü  It is not permitted to invest more than 30% of its investment capital sources in companies within one Group or within one group of companies with a mutual ownership relationship (this provision shall not apply to deposits at credit institutions and offshore investment capital sources in the form of establishment of enterprises or branches overseas);

ü  In the case of investment entrustment, the organization accepting entrustment must be issued by the competent agency with a licence to carry out the activities of acceptance of investment entrustment in compliance with the contents of acceptance of investment entrustment.

An insurance enterprise may also make offshore investment but only to set up offshore insurance company or an offshore insurance branch. Such offshore investment must be approved by the MOF.

Enforcement and investigation

  • Rules of regulatory investigation

Insurance business activities must be checked without overlapping and no more than once in respect of one item in any one year with respect to enterprises (except for the case of an extraordinary or unscheduled check).

  • Complaints procedure

There is no specific rule on complaints handling procedure in insurance enterprises. Instead, such rules are as indicated in the insurance contracts and must follow relevant regulations of the Civil Code and economic agreements.

Complaints on administrative decisions will be handled according to laws on complaints and denunciations, which are applied for all sectors.

  • Redress, including Ombudsman service

Depending on the nature and seriousness of violations, the violators may be subject to administrative sanctions (warnings, monetary fines, suspension of operation, remedies) or criminal penalty. In case of causing damages, they must compensate according to Vietnam laws.

  • Insurance mediation compensation schemes

As indicated in the insurance contract. The insured person has maximum one year to claim for indemnity from the date of occurrence of the insured event. Upon occurrence of such insured event, the insurer must pay the indemnity with the time-limit stated in the insurance contract. If there is no statement in the contract, the time-limit is 15 days from the date of receipt of a complete and proper application requesting payment of indemnity.

Personal accident and health care insurance

–          Personal accident insurance: the insurer must pay insurance proceeds to the beneficiary up to the sum insured, based on the actual injury of the person insured and as agreed in the contract.

–          Health care insurance: the insurer must pay insurance proceeds to the beneficiary up to the sum insured, based on the costs of medical examination, treatment and convalescence of the insured person arising as a result of an illness or accident and as agreed in the contract.

Property insurance

–          Property insurance below value: the insurer is only responsible to indemnify in accordance with the ratio of the sum insured to the market value of the insured property at the date of entering the contract.

Double insurance contracts

Upon occurrence of the insured event, each insurer is only responsible to indemnify in accordance with the ratio of the agreed sum insured to the total sum insured under all insurance contracts which the purchaser of the insurance has entered into. The total sum of indemnity payable by all the insurers will not exceed the value of the actual property damage.

Insolvency and policy-holder protection

  • Relevant resolution regime?

There is no separate insolvency regime for insurers. Instead, the Law on Bankruptcy which deals with bankruptcy and insolvency in all sectors will apply.

The general procedure to handle bankruptcy cases is as follows:

ü  Filing the petition to the court to commence bankruptcy procedures (by creditors, employees, grass-root trade union, legal representative of the company, shareholders, Chairman of the Board of Management, etc.)

ü  The court will handle the bankruptcy case according to its competence within 6 working days from the receipt of the petition. Decisions to open bankruptcy procedure must be sent to all relevant parties and published on local newspapers and the People’s Supreme Court web portal.

ü  Calling for the meeting of creditors

ü  Depending on the Resolution of the Creditors’ meeting, the company’s operation can be recovered or the court is requested to announce the bankruptcy.

ü  Management and liquidation of assets are conducted by a liquidator or company that is appointed by the court and specializes in the management and liquidation of assets.

Data protection

There is no separate rule governing data protection in the insurance sector in Vietnam. Instead, Vietnam’s data protection laws are scattered in many legislations, which include the Civil Code, the Penal Code, the Law on Cyber Information Security, the Law on Information Technology, the Law on Telecommunications, the Law on Consumer Protection, the Law on E-Transactions and relevant Decrees guiding implementation of the mentioned laws. These laws include provisions to prevent, detect, stop and address spam, computer viruses and cyber-attacks, and protect information exchanged in cyberspace.

There is no consistent definition of “personal information” in Vietnam laws. General speaking, personal information could be any information that could be used to identify a specific person, including information on payment transactions.

Organisations processing personal information must take appropriate management and technical measures to protect personal information that they have collected and stored and ensure that the personal information is not lost, stolen, disclosed, modified or destroyed without consent.

Depending on the nature of violations of data protection policies, administrative fines (warning, monetary fine) and possible remedial measures or criminal penalties might apply.

Corporate governance

Managers and executives of insurance enterprises, foreign branches and insurance brokers are:

ü  Chairman of the board of management (chairman of the members’ council or company chairman); members of the board of management (members of the members’ council);

ü  Head of the inspection committee; head of the internal audit committee; inspectors (if the enterprise does not establish an inspection committee);

ü  General Director (Director); Deputy General Director (Deputy Director);

ü  Head of the internal control or audit division; chief accountant; branch directors; heads of representative offices; heads of professional sections; appointed actuaries (in the case of a life insurer or health insurer); appointed actuaries regarding reserves and solvency (in the case of a non-life insurer or foreign branch).

Allocation of these people must follow the below principles:

ü  A member of the board of management or members’ council of an insurance enterprise or insurance broker is not permitted to concurrently be a member of the board of management or members’ council of an enterprise operating in the same sector (non-life insurance, life insurance, reinsurance or insurance brokerage);

ü  The general director (director) or deputy general director (deputy director) of an insurance enterprise, foreign branch or insurance broker is not permitted to concurrently work for another insurance enterprise, foreign branch or insurance broker operating in the same sector in Vietnam; and the general director (director) of an insurance enterprise, foreign branch or insurance broker is not permitted to be a member of the board of management or members’ council of another insurance enterprise or insurance broker operating in the same sector in Vietnam;

ü  The general director (director), deputy general director (deputy director), a branch director or a head of a representative office of an insurance enterprise or insurance broker is only permitted to concurrently be the head of no more than one branch or representative office or professional section of the insurance enterprise or insurance broker. The director or deputy director of a foreign branch is only permitted to concurrently be the head of no more than one professional section of such branch;

ü  An appointed actuary of a life insurer or health insurer, an appointed actuary regarding reserves and solvency of a non-life insurer, of a reinsurer or of a foreign branch has the duty of organizing implementation of work to ensure the financial safety of the insurance enterprise or foreign branch. An appointed actuary or an appointed actuary regarding reserves and solvency has independent rights regarding his or her professional specialty and is not permitted to concurrently be the general director (director) or chief accountant.

Financial crime prevention

  • Member of FATF? On FATF blacklist?

Not a members of FATF and not blacklisted either.

***

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!

 

 

 

Posted on by Dr. Oliver Massmann

Vietnam – Automotive Industry – What Must Be Done Urgently:

 

“RECOMMENDATIONS TOWARDS DEVELOPMENT OF AUTOMOTIVE SUPPLY CHAIN AND INTEGRATION OF LOCAL COMPANIES BY FDI COMPANIES IN VIETNAM – OUTLOOK ON THE EU VIETNAM FREE TRADE AGREEMENT (EVFTA)

The Vietnamese vehicle market is not one of the biggest in ASEAN. Up to now, the domestic demands were provided with local suppliers, but due to the AFTA tariff elimination in 2018 and the import of vehicle manufactured in ASEAN (Thailand, Indonesia) in a foreseeable future, the development of local industry could be slowed down.

The development of the automotive supply chain in Vietnam implies the expansion of the domestic market and more precisely the increase of the domestic demands and suppliers. The supply chain involves multi-layered suppliers, as thousands of parts are needed to manufacture vehicles.

Since the local industry is composed of smaller businesses, fewer economies of scale are made and it appears more difficult for both local and foreign suppliers to meet the quality/cost/delivery (QCD) requirements. In addition, other requirements such as Research and Development (R&D) are necessary to keep up with the market, the purchasers’ needs and to maintain a continuous growth of sales.

Nevertheless, not all requirements are expected from suppliers, as it depends on their position in the supply chain. Currently, Vietnamese suppliers have to meet QCD requirements but, as they are not always fulfilled, local production still relies on imported parts. The development of local production may not prosper without resolving first the issue of insufficient capability of local suppliers.

Thus, regarding the changes Vietnam is about to face, market policies such as registration tax should be upheld and policies on local production should be clarified. A task force devoted to policies improvement would hasten the process.

Moreover, knowledge of foreign suppliers’ knowledges could benefit local ones and should be promoted through technology assistance and cooperation organization. By sharing foreign expertise with local suppliers, we obtain a win-win solution: foreign suppliers or original equipment manufacturers win in terms of competitiveness and local suppliers win in terms of knowledge.

Outlook on the EVFTA

The EVFTA signed on December 2nd 2015 opens new opportunities for both Vietnamese and European markets. As European companies are among leaders in the automotive industry, Vietnam offers a unique opportunity to extend to a promising market in South East Asia. Indeed, domestic demands are growing and expected to rise from 300,000 to 1,5 million cars sold by 2025. This can be explained by Vietnam’s young population – half is under thirty years old – and constant need of new industrial products. Human resource is one of Vietnam’s great advantages due to its young population and fast-growing middle class.

The most important issues

–      Local suppliers are not ready yet to take over the automotive supply chain and still need foreign suppliers to teach them the know-how and to meet with the standard requirements.

–      The policies are not conceived to promote local production and should be reviewed to open the market even more before the AFTA enters into force (2018).

–      Competition within the ASEAN will shake the local production and it is important for Vietnam to oblige domestic suppliers to meet with strict requirements as to prevent foreign and local demands from turning to foreign suppliers.

***

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!”

 

Posted on by Dr. Oliver Massmann

VIETNAM – GUIDANCE FOR FOREIGN INVESTORS: Sectors/sub-sectors in which representative offices and branches of foreign traders allowed to establish

According to Vietnam’s WTO Services Specific Commitments, the 2005 Commercial Law of Vietnam, Decree No. 07/2016/ND-CP dated January 25, 2016 of the Government detailing the Commercial Law regarding representative offices and branches of foreign traders in Vietnam, the following sectors/ subsectors are those in which representative offices and branches of foreign traders are allowed to establish in Vietnam:

Regarding Representative Office:

Sectors Sub-sectors
Business services
Professional Services Legal services
Accounting and auditing and bookkeeping services
Taxation services
Architectural services
Engineering services
Integrated engineering services
Urban planning and urban landscape architectural services
Veterinary services
Computer and Related Services
Research and Development Services
Rental/Leasing Services without Operators Relating to aircraft
Relating to other machinery and equipment
Other Business Services Advertising services
Market research services
Management consultant services
Services related to management consulting
Technical testing and analysis services
Services incidental to agriculture, hunting and forestry
Services incidental to mining
Services incidental to manufacturing
Related scientific and technical consulting services
Maintenance and repair of equipment
Communication services
Courier Services
Telecommunication Services
Audio-visual Services
Construction and related engineering services
General construction work for building
General construction work for civil engineering
Installation and assembly work
Building completion and finishing work
Other
Distribution services
Commission agents’ services
Wholesale trade services
Retailing services
Franchising services
Educational services
Secondary education services
Higher education services
Adult education
Other education services
Environmental services
Sewage Services
Refuse disposal services
Other services (Cleaning services of exhaust gases & Environmental impact assessment services)
Financial services
Insurance and Insurance-Related Services
Banking and Other Financial Services
Securities
Health related and social services
Hospital services
Medical and dental services
Tourism and travel related services
Hotel and restaurant
Travel agencies and tour operator services
Recreational cultural and sporting services
Entertainment services
Electronic games business
Transport services
Maritime Transport Services
Internal Waterways Transport
Air Transport Services
Rail Transport Services
Road Transport Services
Services Auxiliary to all Modes of Transport

*Please note representative offices are dependent units of foreign enterprises established according to the laws of Vietnam and are not allowed to engage in any direct profit-making activities.

Regarding branch of foreign traders:

No. Sectors/ sub-sectors
1 Legal services
2 Computer and related services
3 Management consultant services
4 Services related to management consulting
5 Construction and related engineering services
6 Franchising service
7 Financial services:

–          Insurance and insurance-related services

–          Banking and other financial services

–          Securities services

***

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!

 

Posted on by Dr. Oliver Massmann

VIETNAM – CASINO AND GAMING – BREAKING NEWS – VIETNAMESE MAY GAMBLE !

The final draft of the casino decree (‘Casino Decree’) has been passed by the Ministry of Justice and Government’s Office. It is now on the table of the Politburo and Prime Minister for their comments, which are as always, the most important. It is expected that the Casino Decree will be issued during Christmas 2016 or early 2017.

For many reasons, the text of the Casino Decree has not been made public. The Ministry of Finance has been successful in keeping the draft Casino Decree under secrecy. Again, whether Vietnamese residents are permitted to enter casinos in Vietnam is a big question that may wait for decision of the highest level of Vietnam’s political system.

The Ministry of Public Security (MPS) has proposed a draft decree that lists casino as a conditional business which is subject to license of the MPS with respect to social orders. A very interesting point is that the draft decree only prohibits Vietnamese from playing on gaming machines. It is important to note that no such prohibition is mentioned with respect to Vietnamese’s playing in casinos. This may give a hint that Vietnamese may enter casinos if they are ‘permitted’. This fact corresponds to provisions of the new Penal Code that makes it very clear that only ‘illegal’ gambling is punished.

So, though not 100% sure, more likely that Vietnamese may enter casinos and gamble but with specific conditions in 2017.

At present, pending the issuance of the Casino Decree, all projects on casino are put on hold. we will follow up and keep you updated.

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!

Oliver Massmann

 

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

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