MPI – Duane Morris Vietnam

On 23rd April 2020, The Ministry of Planning and Investment issued Document No. 2640/BKHDT-TH to consult related government agencies on Draft resolution of the Government on solutions to remove difficulties for production and business, promote disbursement of public investment capital and ensure social order and safety in the context of COVID-19 (“the Draft”).

This is an effort of the Government in aiming to restore the power of Vietnam’s economy that has been negatively affected since the pandemic broke out in February.

The Draft focuses on 5 main topics, with key provisions as follow:

1. Reduce/Exempt tax:
– Exemption of guarantee fee arising in 2020 for government-guaranteed loans for aviation businesses;
– Reduction of lending interest rates for small and medium-sized enterprises which are prioritized by small and medium-sized enterprise development funds: reduce lending entrusted interest rates by around 3%; reducing direct and indirect lending interest rates by approximately 2%;
– Reduce 50% of corporate income tax for small and medium enterprises and cooperatives in 2020.
– Reduce/Exempt fees: 100% exemption of license fees in 2020 for affected business households. For those that paid, the amount paid is deducted from the obligation to pay license fees in the following year;
– 50% reduction in registration fee when registering for a car manufactured or assembled domestically by the end of 2020 to stimulate domestic consumption;
– 30% reduction in land rent for a period of 6 months for production and business establishments that have been stopped due to COVID-19.

2. Delay of tax payment time:
– Allow the postponement of special consumption tax payment for domestically manufactured cars until the end of September 2020 for amounts payable from March 2020;
– Allow deferred payment of VAT to the end of September 2020 for affected enterprises;
– Extension of the time for payment of export tax to the end of September 2020 for payables arising from March 2020;
– Extension of personal income tax payment to the end of September 2020 of individuals working in the affected businesses arising from March 2020;
– Extend the term of preferential interest rate loans to 1 year.

3. Apply special entry procedures for foreign experts working for businesses in Vietnam: extend their work permit; issue new work permits to experts, business managers, technical workers who are foreigners to replace those who cannot return to Vietnam.

4. Accelerate disbursement of public investment capital;

5. Accelerate investment procedures for projects; Attract new investment resources;

6. Forbid to apply the regulation of saving 10% of total investment for new projects starting in medium-term public investment plan 2016-2020 and allocating capital from public investment plans in 2020;

7. Temporarily suspend the application term of Decree 68/2019/ ND-CP on management of construction investment costs until the end of 2020;

8. Promulgate a resolution on conversion of investment forms for 8 projects on the North-South Expressway on the east side from public-private partnership to public investment.

Some Clarifications Required

o While the Draft proposes straightforward and welcoming measures for supporting business in this pandemic, there are a number of issues that will require additional guidance, among others, such as:
o The list of enterprises affected by COVID-19 is unclear and limited, as it does not cover the petroleum, entertainment, etc. industries that are also heavily affected.
o Besides, it is unreasonable to propose VAT reduction for some affected industries such as aviation and tourism because the current laws have specific provisions for VAT reimbursement, and it creates inequality with other affected industries;
o Extension of time limit for corporate tax payment year 2019, VAT, personal income tax and land rent are only 5 months. Given that the pandemic has occurred for approximately 3 months now and has left devastating consequences, coupled with extreme natural disasters in many regions of Vietnam in the past months, the time limit should be extended to 1 year;
o Most of the wordings in the draft are quiet general; the reduction or exemption of tax and fees should be associated with specific household/individual (poor household of specific income levels, children…)
o Proposing a 50% reduction of registration fee when registering domestically manufactured or assembled cars until the end of 2020, applying special consumption tax incentives to the domestic automobile industry is a violation of the commitment to zero discrimination between domestically produced goods and imported goods upon accession to the WTO.

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Please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC, Member to the Supervisory Board of PetroVietnam Insurance JSC and the only foreign lawyer presenting in Vietnamese language to members of the NATIONAL ASSEMBLY OF VIETNAM.

Comments to Vietnam Investment Review on a recent MPI draft decree supporting the establishment of a state-level management Committee to steer SOEs

Vietnam’s Ministry of Planning and Investment has announced a draft decree highlighting the need to establish a committee exclusively in charge of managing state-owned enterprises (SOEs). Currently SOEs are managed by different localities, ministries, and sectors.

It is expected that this Committee will manage up to 30 economic and corporations. It will also separate the state’s role of state management from the role as a trader and a producer.

Do you think that the establishment of this Committee is good for Vietnam’s economic now? Why?

I believe the establishment of a Committee exclusively in charge of managing SOEs, separating SOEs from their managing Ministries is a positive move of the Government.

The Ministries will not be put in a position when they have to adopt policies to regulate all enterprises within their managing authority and at the same time having to care about their interests in their SOEs. With the establishment of the Committee, the Ministries will have no chance or no incentive to be biased towards SOEs. In other words, all enterprises will be treated equally, regardless of whether they are SOEs or private.

The proposal to establish the Committee is extremely important, especially when SOEs are proved to continue operating at loss, investment activities are inefficient, state ownership capital is poorly managed,all leading to loss of state assets. I note that SCIC was established with the expectation to perform the same duties of representing state ownership in SOEs. However, SCIC is only an agency under the Ministry of Finance, which makes it not of equal leverage with and independent of other ministries and unable to regulate big SOEs. Thus, it is necessary to have another independent Committee to take over SCIC’s responsibilities.

In many nations, is this model applied?

This model is very similar to that in Germany when there was reunification between East and West Germany. The current model in China is considered as closely similar to the proposed one in Vietnam. However, instead of only establishing a Committee at a central level, meaning the Committee will not take over SOEs under provincial management, Ministry of Public Security, Ministry of National Defence, public enterprises and state-owned commercial joint stock banks, such Committee in China is established at all levels, from central to provincial one.

It could be a good start to have the Committee at central level. I recommend that after a trial period to supervise the efficiency of the model, it should be implemented at all provincial level under central management as well.

Do you have any recommendations?

According to the Draft Decree, chairman and vice-chairmen of the Committee will be appointed by the Prime Minister. I am concerned that ministers or vice-ministers of other ministries may have to take the chairman or vice- chairmen position of the Committee concurrently with their minister role. This will not be efficient. Instead, the management of the Committee must include both Vietnamese and foreigners. I recommend at least one foreign expert who has worked as manager for private companies and has a success track record should be member of this Committee. I can recommend some people if the Government could approve the budget for this position. I myself am very willing to be a member of the Committee to assist. The foreign expert must not necessarily be the decision-making person, but at least (s)he is there to give advice to the Committee.

Members of the Committee must be independent. They should not comprise of representatives from selected ministries who have certain interest in some SOEs, or else neutrality cannot be ensured. The Committee must act as an investor responsible for all investment activities of state capital before the Government. Only by doing so can SOEs play the same game with same rules as in the private sector.

In addition, it is important to create an operation regime for this Committee towards transparency for public supervision. Transparency is a critical issue, especially for a Committee which holds huge state assets worth around VND5.4 quadrillion.
Please do contact the author Oliver Massmann under omassmann@duanemorris.com if you have any questions. Oliver Massmann is the General Director of Duane Morris Vietnam and the Chairman of the Legal Sector Committee of the European Chamber of Commerce in Vietnam (”Eurocham” Vietnam)

Tag: MPI

VIETNAM – MPI PROPOSES MEASURES TO SUPPORT BUSINESSES – PROMOTE DISBURSEMENT OF PUBLIC INVESTMENT CAPITAL AMID COVID-19

Lawyer in Vietnam Oliver Massmann Solutions for Management of State Owned Enterprises