VIETNAM – PRIME MINISTER TO REVIEW THE FINAL DRAFT POWER MASTER PLAN 8 THIS WEEKEND

The Appraisal Council approved the National Electricity Development Plan for the period of 2021-2030, with a vision to 2045 (Power Master Plan VIII) in a meeting held on 3 October 2021.

Immediately after receiving the results from the Appraisal Council, the Ministry of Industry and Trade has embarked on the finalization of the Draft Power Master Plan 8 with the goal of submitting the final draft to the Prime Minister this weekend for consideration and approval.

Duane Morris will keep our readers updated of any progress on the finalization of the Draft Power Master Plan 8.

For more information on the above, 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.

VIETNAM – LOCAL REGULATION COULD LEAD TO EU-VIETNAM TRADE HINDRANCE

Under Circular No.28/2012/TT-BKHCN dated 12/12/2012, before the products are circulated on the market, the manufacturer must declare the products’ standard conformity (Declaration of Standard Conformity). A component of the application dossier for the Declaration is the assessment result of standard conformity (“Assessment”). Under Circular 28, this Assessment can be carried out either by the manufacturer themselves or a third party registered certifying organization.

On 31 December 2019, the Ministry of Science and Technology issued Document No. QCVN 19:2019/NKHCN on National Technical Regulation on LED lighting products (Document 19). Article 3.4 of Document 19, the Declaration of Standard Conformity must be based on the assessment results issued by a certification body that has registered its field of operation as prescribed in local regulations.

It has been brought to our attention that these certification bodies charge around USD 700 for each model testing. From 2022, under Decision No. 1383/QD-BKHCN dated 22/05/2020, there will be two additional tests required for the Assessment, thus it is expected that the price payable by manufacturers/distributors will increase to USD 1500 for each model of product.

Importers of LED lamps have been furious with the new Regulation, as they believe local certifying organizations do not have the capacity to assess EU-imported products, assuming that such products have not yet been certified in accordance with EU standards. Importers also feel that the Regulation has resulted in importers have to incur unreasonable additional fees. We examine this instance in light of the EU-Vietnam Free Trade Agreement (EVFTA) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

EU-Vietnam Free Trade Agreement

Under Article 5.3.2 of the EVFTA, Vietnam has the right to prepare, adopt and apply standards, technical regulations and conformity assessment procedures in accordance with the EVFTA and the TBT Agreement.

Article 5.5 (Standards) reads that With a view to harmonizing standards on as wide a basis as possible, the Parties shall encourage their standardizing bodies as well as the regional standardizing bodies of which they or their standardizing bodies are members to avoid duplication of, or overlap with, the work of international standardizing bodies. Some exported products may already undergo Assessment of standard conformity in their origin country. As a result, requiring imported products to undergo another local one may be considered as repeating the work.

In addition, under the EVFTA, Vietnam also affirmed its obligation that fees imposed for mandatory conformity assessment of imported products shall be equitable in relation to any fees chargeable for assessing the conformity of like products of domestic origin or originating in any other country, considering communication, transportation and other costs arising from differences between location of facilities of the applicant and the conformity assessment body. Importers of LED lamps could make a case if it could be established that the charges applicable to imported products are higher than those manufactured locally.

In general, it could be said that Document No. QCVN 19:2019/NKHCN on National Technical Regulation on LED lighting products does not comply with provisions under the EVFTA in the sense that it constituted a Technical Barrier to Trade upon Vietnamese importers. Consequently, it would hinder LED lighting products export from EU countries.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

Under the CPTPP, Vietnam has the right to apply the same or equivalent procedures, criteria, and other conditions to accredit, approve, license, or otherwise recognize conformity assessment bodies located in the territory of another CPTPP Party that it might apply to conformity assessment bodies in its own territory. Moreover, the CPTPP also explicitly does not preclude Vietnam from verifying the result of conformity assessment procedures undertaken by bodies located outside its territory.
As a result, it could be said that under the CPTPP, the provisions applicable to LED lighting importers allow for local regulations like Document 19.

Both the EVFTA and the CPTPP require Vietnam and other parties to the agreements to establish local Contact Points for matters arising under their chapters. It is recommended that importers or traders that are negatively affected by Document 19 should voice their concern to such Contact Points, who have the responsibility to handle your matter by working with the relevant governments in light of the EVFTA and the CPTPP.

For more information on the above, 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.

VIETNAM – NEW PRICING FRAMEWORK FOR SOLAR AND WIND POWER PROJECTS

In a press conference on 30 September 2021, the Ministry of Industry and Trade (“MOIT”) confirmed that there would be NO FIT extension for wind energy projects after 31 October 2021.

The Ministry of Industry and Trade recently issued a new draft Circular on regulations on methods of building electricity generation price brackets and determining electricity generation prices, power purchase agreement for solar and wind energy projects. This Circular will apply to solar energy projects that have not met the COD deadline of 1 January 2021 or wind energy projects that have not met the COD deadline of 1 November 2021. Though it is only at draft stage, it is expected that the Circular will come into force soon and give developers as well as investors clarity on renewable power projects development and related transactions.

According to the Draft, this Circular will apply to:
i) Ground-mounted solar energy projects, floating solar power projects
ii) Rooftop solar energy projects
iii) Onshore wind energy projects and
iv) Offshore wind energy projects.

The electricity generation price bracket is the range of values from 0 (zero) to the ceiling price of the type of solar and wind power plants corresponding to each type of solar power plant (floating, ground mounted) and wind power plant (onshore, offshore). The ceiling price is the electricity generation price of a standard solar and wind power plant. Standard solar and wind power plants are plants that have operated, are under negotiation or are selected during the year (N-1).

Electricity generation price of newly built solar and wind power plants is determined based on:

a) Reasonable expenses of the Investor in the whole economic life of the project;
b) The financial internal rate of return (IRR) is 12%.

The electricity generation price of a solar and wind power plant includes the following components:

a) Power purchase and sale contract price: To be agreed upon by the two parties and determined according to the formula specified in Article 11 of this Circular;
b) Specific connection price: To be agreed upon by both parties and determined according to formula specified in Article 14 of this Circular.

Electricity generation price of solar and wind power plant is exclusive of value-added tax and other taxes, fees and cash receipts according to the State’s regulations (except for taxes and fees already paid) included in the electricity generation price plan.

The draft Circular also provide a new Power Purchase Agreement (“PPA”) template to be used for solar and wind energy projects , including detailed procedure for PPA negotiation and checklist of documents to request for PPA negotiation.

For more information on the above, 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.

VIETNAM – CYBERSECURITY – COMPARING VIETNAM’S CYBERSECURITY LAW WITH ITS COMMITMENTS UNDER THE CPTPP, EVFTA

Vietnam’s latest Law on Cybersecurity came into force on 1 January 2019. The law sets out rights and obligations on domestic and foreign companies providing services to customers in Vietnam over telecom networks or the Internet. The two provisions of the Law that are the most controversial are arguably Data Localization (offshore and onshore online service providers are required to store Vietnamese users’ information within the country for a period of time) and Commercial Presence (the same companies must establish a commercial presence in Vietnam either in the form of a branch or representative office). It has been questioned whether these provisions are contradicting international treaties that Vietnam is a signatory to, including the CPTPP and the EVFTA. In answering this question, we shall examine Vietnam’s commitments under each Agreement.

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP):

No import tax to be imposed on e-commerce transactions. However, Vietnam has the right to impose local taxes, fees and charges on “electronically transmitted content”, provided that such taxes, fees or charges are in accordance with provisions of the Agreement.

Cross-border transfer of information by electronic means is allowed. The cross-border transfer of information, data by electronic means is only for business activities or a legal entity. Vietnam has the right to have separate requirements for data transfer by electronic means and take necessary measures to implement legitimate public policies, but on the condition that the policies does not create disguised barriers to trade or are applied in a discriminatory or arbitrary manner.

Data localization requirement is not mandatory. Vietnam is not allowed to require the use or location of servers in the host country as a business condition. However, Vietnam has the right to make specific management requirements regarding the use or location of servers, including requirements to ensure communications security and confidentiality; and take necessary measures to implement legitimate public policies, but on the condition that the policies does not create disguised barriers to trade or are applied in a discriminatory or arbitrary manner.

CPTPP countries agreed not to sue Vietnam if its cybersecurity regulations are deemed to be inconsistent with the CPTPP Agreement (specifically, two obligations of free cross-border information flow and server localization in the E-Commerce Chapter) within 2 years after the date of entry into force of the CPTPP Agreement.

Reserving measures related to national security and defense, public order and privacy. Vietnam has the right to have separate management requirements for cross-border transfer of data or information by electronic means, using or locating servers (including requirements to ensure communications security and confidentiality); Vietnam has the right to take necessary measures to implement legitimate public policies, but on the condition that they do not create a disguised trade barrier or are applied in a discriminatory or arbitrary manner.

The validity of electronic authentication and electronic signatures must not be denied. However, Vietnam may require that, for a particular category of transactions, the method of authentication meets certain performance standards or is certified by an authority accredited in accordance with its law. In practice, though not stated in the law, all application dossiers to the local Department of Planning and Investment still require wet ink signature, even if the investor is abroad.

EU-Vietnam Free Trade Agreement (EVFTA):

The issue of Cybersecurity could be found in Chapter 8 of the EVFTA, Section F of which states that “the Parties, recognizing that electronic commerce increases trade opportunities in many sectors, shall promote the development of electronic commerce between them, in particular by cooperating on the issues raised by electronic commerce under the provisions of this Chapter of EVFTA”.

As committed under the EVFTA, Vietnam and EU shall maintain dialogues on regulatory issues raised by electronic commerce, which shall, inter alia, address the following issues:

•the recognition of certificates of electronic signatures issued to the public and the facilitation of cross-border certification services;
•the liability of intermediary service providers with respect to the transmission or storage of information;
•the treatment of unsolicited electronic commercial communications;
•the protection of consumers in the ambit of electronic commerce; and
•any other issue relevant for the development of electronic commerce.

This dialogue may take the form of exchange of information on the EVFTA’s Parties’ respective laws and regulations on the issues referred to above issues as well as on the implementation of such laws and regulations.

From the above, it could be seen that the international treaties leave a lot of room for Vietnam to develop its own regulations. In other words, due to their vague language and absent of further guidance, the provisions are open to the discretion of the local authorities. As such, to answer the question at the beginning, the Law on Cybersecurity and accompanying legal documents stipulating that foreign enterprises operating commercially in cyberspace must set up a representative office and store data in Vietnam for a period of time is not contrary to international practice outlined in the CPTPP and EVFTA.

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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.

VIETNAM – Power Development Planning VIII (“PDP8”) – Vietnam Government’s plan to De-carbonize the Country – what you must know:

Question#1. What impact is PDP8 likely to have on the country’s efforts to decarbonize the economy?

Answer#1:
The draft Power Development Planning VIII (“PDP8”) reinforces the Vietnam Government’s current view on prioritizing renewable energy sources to minimize negative impacts caused by electricity production on the environment. Importation of fuels (coal, LNG) are encouraged as a way to diversify the country’s primary energy sources, and the same goes for the establishment of transmission and distribution grid links with China, Laos and Cambodia in order to maximize each country’s energy potential. Imported electricity sources from neighboring countries are to be considered as prioritized projects because imported electricity will reduce environmental impact compared to domestic production.

As of 2020, the country’s total generation capacity is about 69.3 gigawatt (GW), including 16.5 GW of solar power (approx. 24% of the total capacity) and 0.6 GW of wind power. More than 50% Vietnam’s electricity generation came from coal in 2020. Vietnam’s reliance on coal-fired power remains heavily to meet rapidly increasing electricity demand. Hydroelectric generation is also significant as the country is home to a number of large rivers. Non-hydro renewable sources such as wind and solar made up 5% of Vietnam’s electricity generation in 2020. Under the draft PDP 8, Vietnam plans to increase solar capacity to 18.6 GW and wind capacity to 18 GW by 2030.

Question#2. Does PDP8 target specific regions of the country? Are these regions that are more likely to be impacted by the transition to a low carbon economy?

Answer#2:
Yes, one of the most notable differences between the Draft PDP 8 and Revised PDP 7 (the latest official national power development planning) is the level of power demand between the North and the South. According to PDP8, the proportion of commercial electricity in the North will gradually increase from 42.4% in 2020 to 45.8% in 2045, while the South will decrease its proportion from 47.4% in 2020 to 43.6% by 2045. By 2040, the North’s commercial electricity demand will start to exceed that of the South. As a result, this will significantly affect the strategy in PDP8 to develop the transmission grid and generation sources (including RE sources) to meet the demand.

The draft PDP 8 is oriented to focus on the development of transmission grid of at least 220KV to solve overcapacity issues that has been occurring in recent years. As to grid development, in the period of 2021-2030, MOIT sees the need to build 86 GVA with a capacity of 500kV per station and nearly 13,000 km of DLZ. From 2031-2045, an additional construction of 103 GVA with capacity of 500kV and nearly 6000 stations is required. The 220kV power grid needs construction of 95 GVA, nearly 21,000 km DMZ and 108 GVA, more than 4000 km NE. Total investment capital for electricity development in the period 2021-2030 is roughly USD 128.3 billion USD, of which: USD 95.4 billion for the power sources, USD 32.9 billion for the grids. The average structure of capital investment shall be 74% / 26%.

The draft PDP8 appears to concern a surging oversupply of solar power in 2030 in many regions, such as the Central Highlands (estimated 1,500 MW but registered 5,500 MW), the South Central (estimated 5,200 MW but registered 11,600 MW), or the Southern (estimated 9,200 MW but registered 14,800 MW). The wind power shares the same situation as the registered capacity exceeds normal estimated capacity in Central Highlands (estimated 4,000 MW but registered 10,000 MW) and Southern (estimated 6800 MW but registered 17,000 MW). Accordingly, the draft PDP8 must solve this unbalance to ensure the sustainable development of the renewable energy sources in Vietnam. It is expected that future policy on renewable energy will base on auction rather than FIT.

For example, below is the draft policy for solar power projects. In late January 2021, the Ministry of Industry and Trade (“MOIT”) issued the draft Decision of the Prime Minister guiding the selection of investors implementing solar power projects under the bidding mechanism (“the Draft”). According to the Draft, the Decision would be applicable to projects with grids connected directly to the national power network. The Ministry of Industry and Trade shall coordinate with the Electricity of Vietnam and the People’s Committees of localities to organize the formulation and approval of the renewable energy power source development plan for a period of 5 years and every 2 years to serve as a basis for the bidding system. In addition, every 02 years, the Ministry of Industry and Trade shall issue a Price Framework for electricity generation in order to determine the ceiling price for bidding to select investors of solar power projects with COD in the next 02 years. The plan for development of renewable energy power sources for a period of 5 years shall include the total capacity scale for each renewable energy power source in the 5-year period, the total capacity scale for each renewable energy power source for each load region (8 regions) and a list of transmission lines and substations (220 kV at least) to be put into operation for a period of 5 years. The 02-year plan shall have similar content but for a 2-year period only and shall be more provincial specific.

Question#3. Were issues of economic, racial, and gender equity considered in the development of PDP8?

Answer#3:
Yes, any policy of the Government must consider these issues but it is very challenging to identify whether they are well reflected into the policy including PDP8. This is a very broad and difficult question.

Question#4. Was there a debate amongst political leaders about the costs and benefits of PDP8?

Answer#4: Yes, of course. It appears that the new Government now has different views and priorities than the former and as a result the PDP8 must be revised to reflect such priorities.

As you may know, in late March 2021, the very first draft of PDP8 PM Decision (“Draft Decision”) has been published through unofficial sources (i.e. not through the Ministry of Industry and Trade (MOIT)’s website). Such PM Draft Decision was planned to be signed off at the end of March during the last days of Prime Minister Nguyen Xuan Phuc’s administration, but it was delayed as the hand-over to new administration was already under way. It appeared that the investors and LNG-to-power projects in this first PM Draft Decision were scaled down comparing to those in the PDP8 proposal published by Ministry of Industry and Trade (MOIT) earlier.

On 23 April 2021, the Deputy Prime Minister (DPM) Le Van Thanh directed a Government’s meeting on the PDP8 and concluded that, among others, PDP8 must be (i) updated with qualifications for prioritized projects, and (ii) revised to reasonably review and allocate development of power sources, especially LNG-to-power projects in PDP8 in order to ensure the competition, optimization on development of power system. DPM asked the MOIT to careful review and digest opinion from EVN in its official letter No. 1645/EVN-KH dated 2 April 2021. Finally, the DPM required the MOIT to submit the updated PDP8 proposal prior to 15 June 2021.

Unfortunately, due to Covid-19 situation and heavy workload on updating the PDP8 proposal, MOIT failed to submit a revised proposal to the Government for consideration. On 17 June 2021, the MOIT Minister arranged a press meeting to update the PDP8 progress and planned to submit the revised PDP8 proposal to the Government within June 2021. So far, based on our intel, the MOIT is still reworking its draft and PDP8 is expected to be approved COB this year ideally.

Question#5. What role did various stakeholders (e.g., business, not-for-profits) take in advocating for or against PDP8 or trying to influence its development?

Answer#5:
Yes, there are many stakeholders here, e.g., EVN, local developers, business communities (such as Chambers and VBF) and state authorities. However, please kindly note that the draft PDP8 is mainly drafted by the Energy Institution (NB: an institution under EVN until it was taken over by MOIT since 2010). The MOIT was collecting opinion from all stakeholders for the draft PDP8 made by the Energy Institution. It is worth noting that the opinion from EVN is always critically important as it (including its affiliates and subsidiaries) still remains the position of a monopoly wholesaler in the market. The new Government requested the MOIT to revisit EVN’s opinion for revising the current draft PDP8.

Question#6. Which key stakeholders were in favour of PDP8? How did they organize and influence decision making?

Answer#6:
Yes, it is very challenging to answer black or white on this question. PDP8 is the prioritized policy of the Government for the energy sector. Thus, there is always a favorable trend for this policy to come out soon. We however do note that there are different views on the contents of the PDP8, but not an issue of support or opposition.

Question#7. Which key stakeholders were against PDP8? How did they organize and influence decision making? Were there specific measures to address their concerns?

Answer#7:
Yes, it is very challenging to answer a black or white question. PDP8 is the prioritized policy of the Government for the energy sector. Thus, there is always a favorable trend for this policy to come out soon. We however do note that there are different views on the contents of the PDP8, but not an issue of support or opposition.

Question#8. Has PDP8 been well-received by the public?

Answer#8:
Yes, it has been well received by the public. However, the foreign invested business communities still have some concerns, among others, over the current PDP8:
• No clear plan for variable renewable energy in the technology mix. PDP8 must ensure Vietnam planning remains cutting-edge to include full representation of variability and assessing power system reliability.
• No plan for nuclear power.
• Need to construct a regulatory and permitting environment that attracts private sector investment in clean energy generation and energy efficiency.
• Need a clear policy to ensure EVN to share the market risks: e.g., a bankable (take or pay) power purchase agreement with generators.
• Need to halt further development of coal based projects: it is recommended to suspend the approval of any new coal thermal power plants and conducting a strategic review of those that are already approved but which do not have financing or power purchase agreements.
• Need to develop a flexible transmission network in view of the market orientation and increased variable renewable energy.
• Need to build schemes to address the uncertainties: from fuel prices to demand growth and oversupply and curtailment.

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For more information on the above, 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.

VIETNAM – THE GOVERNMENT ISSUES FAVORABLE POLICIES ON TAX AND FEES FOR BUSINESSES AMID THE WORST COVID-19 OUTBREAK

Recently, the Ministry of Planning and Investment issued the Draft Decree on the Government’s incentives for businesses suffering from the consequence of the corona virus pandemic. It is aimed that by the end of 2021, at least 01 million businesses will have access to favorable credit policies, reduction or termination of payment of tax, land fees as well as electricity, water, telecommunication charges. The Draft Decree is pending the Prime Minister’s approval.

Under the Draft Decree, there are four key groups of tasks for government agencies.

Group 1: Implement flexible and effective measures to prevent and control the COVID-19 pandemic, creating conditions for enterprises to stabilize and maintain production and business activities.

Group 2: Ensure stable production, smooth and efficient circulation of goods, overcome supply chain disruptions

_ Apply fast-track customs clearance for aid or donation from abroad for the healthcare sector to deal with the pandemic
_ Allow enterprises to submit scanned copies certified by digital signatures for documents that must be submitted as originals in the form of paper/notarized/certified original to resolve bottlenecks of customs clearance of goods

Group 3: Support to cut costs, remove difficulties in cash flow for businesses

_ Propose policies suspending or reducing the social insurance premiums in 2021 for businesses until June 2022.
_ Develop a plan to support air transport enterprises, and report to the Prime Minister in September 2021.
– Requesting shipping companies to publicly and transparently list shipping rates to eliminate unreasonable increase in freight rates that lead to cost burden for enterprises
_ Reduce of electricity prices for goods warehouses of logistics and processing enterprises in the agriculture, forestry, fishery and a number of commodity industries with export turnover of over USD 1 billion USD. Continue to reduce electricity prices for tourist accommodation establishments.
– Expeditiously implement the issued policies on relaxation and reduction of taxes, fees, charges and land rents; implement preferential tax policies for imported goods to finance COVID-19 prevention and control after being approved by the Government.
– Extend the deadline for paying excise tax on automobiles manufactured or assembled in Vietnam. Continue to reduce registration fees for domestically manufactured or assembled cars for an additional period of time in line with the COVID-19 pandemic.
_ Research to allow travel businesses to temporarily withdraw deposits for domestic and international travel and tourism services; reduce deposit withdrawal settlement time from 60 days to 30 days; continue to extend the reduction of the license fee for travel service business and issue tourist guide cards until the end of 2021.
_ Continue to administer monetary policy to control inflation, contributing to stabilizing the macro-economy; encourage credit institutions to continue reducing lending interest rates for existing loans and new loans to support production and business.
_ Supplement policies on debt rescheduling, exemption and reduction of interest and fees, keeping the same debt group for customers affected by the Covid-19 epidemic
_ Research and consider the exemption of trade union fees for members of businesses affected by the COVID-19 pandemic in 2021 and 2022

Group 4: Regarding labor issues, experts

_ Propose policies to flexibly apply and relax regulations and conditions on the grant and extension of work permits for foreign experts working in Vietnam
_ Adjust regulations on tax finalization and bad debt and for borrowing capital to pay wages to employees when restoring production and business.

This is the second Draft Decree issued by the Ministry of Planning and Investment upon collection and investigation of opinions from Deputy Prime Minister Vu Duc Dam, Deputy Prime Minister Le Van Thanh and opinions of 15 ministries. As such, it has reflected the current situations as well as takes into consideration the cities’ and provinces’ proposals. The Vietnam Government has continuously proved that it accompanies the business community to immediately implementing measures to remove difficulties and bottlenecks in production and business with the motto “soonest – most effective” in order to minimize damage and negative impacts on the business sector.

For more information on the above, 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.

VIETNAM – THE LATEST DRAFT DECREE ON PROVISION OF INTERNET SERVICES AND CROSS-BORDER INFORMATION

On November 2020, we reported on the first draft decree amending and supplementing Decree No. 72/2013/ND-CP and Decree No. 27/2018/ND-CP regarding the management, provision and use of Internet services and online information. Since then, the business community, among others, have been vocal on the shortcomings of the draft and offered up many comments and suggestions to address concerns. Taking these into accounts, on 5 July 2021, The Ministry of Information and Communications issued the second Draft Decree amending and supplementing Decree No. 72/2013/ND-CP and Decree No. 27/2018/ND-CP (“the Draft”). The Draft will affect telecommunications businesses, publishers of video games and businesses that engage in producing and utilizing electronic newspapers, social networks, and sales websites.

Notable provisions in the Draft

On Aggregate information:

1. Aggregate information is information retrieved from Vietnamese press sources and must relate to the following 08 sectors: science, technology, economy, culture, sports, entertainment, advertising and social security.

2. Organizations’ internal websites and specialized website providing aggregate information must obtain aggregate information website license. This measure aims to prevent internal websites from illegally posing as aggregate information websites in order to lure in viewers. Multinationals which usually have their own global websites for staff members across the world must take extra caution when handling information already published by the Vietnamese press.

3. Aggregate information websites are also required to have electronic tools to receive and handle users’ complaints about content and copyright.

4. Press agencies that have electronic newspapers/magazines are not allowed to have aggregate information websites.

On Re-releasing published contents:

1. Aggregate information websites, application distribution stores and social networks can only re-released content published by Vietnamese press sources at least 30 minutes later than the time of publishing the source content. Re-released content must be removed immediately after the source content has been removed.

2. Agreggate information must state clearly the author’s name, the source’s name, the time of posting and place a link to the source content right below the re-released content. Aggregate information must not include readers’ comment of the re-released content (except for aggregate information websites constituted by press agencies).

3. Aggregate information must not concern other localities. This measure is somewhat impractical given the fact that in this era global events closely interwove with and have direct effects on people’s everyday life, this is especially true for international organizations, and thus viewers are increasingly looking for information about other countries. For example, the war in Yemen can drive up oil price in Vietnam or the gold price fluctuates with the hourly results of the US presidential election. Putting such measure could hinder aggregate information website’s business growth.

On Cross-border provision of public information:

Foreign entities engaging in this service must comply to Vietnam laws. Failure by investors in handling violating information can lead to the Ministry of Information and Communications proactively implementing technical interventions.

Foreign organizations and individuals providing cross-border information services that have rented a place to store digital information in Vietnam or have regular access by a number of people in Vietnam (UV- Unique Visitor) within 01 (one) month from 100,000 (one hundred thousand) people or more, have the obligation to:

– Notify/confirm the notice of operation with the Ministry of Information and Communications and coordinate with the Ministry of Information and Communications to handle violating information;
– Have a process to prevent and remove infringing services and information within 24 hours upon request from Vietnamese competent authorities.

On Social networks:

1. Social networks are classified into social networks with high levels of interaction and ones with low level of interaction based on the monthly number of interaction or registered users. Social networks with high levels of interaction (at least 1 million interactions and/or 10,000 registered users per month) have to obtain a Social Network License issued by the Ministry of Information and Communications. Social networks with low levels of interaction need only notify the Ministry of Information and Communication on its operation.

2. Only licensed social networks have the right to charge fees and perform livestream services. The Ministry of Information and Communications will also embed a tool to monitor interaction levels for licensing-related purpose.

These measures, if come into effect, would seriously hamper the development of new social networks that rely on service fees in order to further expand their business. The possibility that such new social networks have to go through lengthy administrative procedures before they can carry out any fees collection and the possibility that entities have to amend their information technology system to accommodate the Ministry’s monitoring tool would not only cause them financial burdens but also interfere with their freedom of doing business.

3. Social network owners must have a solution to prevent members from taking advantage of social networks for journalistic activities. According to the Draft, only accounts that have been identified with 2 authentication layers (authenticated accounts with real names and phone numbers) can write articles, post comments, livestream, otherwise only allowed to read news and articles.

4. The license to set up an aggregate information website and the license to provide social networking services is also shortened to a maximum of no more than 5 years and renewed only once, each time not exceeding 02 years. Previously, the maximum license term was 10 years and could be renewed twice.

On Online games:

1. The Draft removes the requirement for online game providers to obtain a master license/certificate. A Dissemination License is now only required for each G1 game, while a Certificate for Game Dissemination Registration is required for each G2-4 games.

2. Providers must also show that they have (i) A head office with clear address and contact; (ii) Capacity to register and store users’ personal information including national identification information; (iii) Capacity to control players’ playtime, including restriction on children’s playtime.
The application of an uniform policy for all online games creates an imbalance in management as new games that need to prioritize attracting players or new developers short on funds must adhere to the same standards for established games/developers, thus creating difficulties in online games distribution.

3. Payment system of online games (if any) must be located in Vietnam and connected with Vietnamese payment service providers.

4. A number of regulations were also included in the Decree for the first time, such as the application dossier for G1 video games must contain “Certificate of legal copyright and consular legalization in the host country of a written agreement for enterprises to publish online video games in Vietnam”. This is to ensure that the game is licensed with the right copyright in Vietnam.

5. The licenses shall be revoked if the enterprises do not provide online game services within 12 months from the licenses’ issuance date.

Within this era of ever-changing technological advances and the society’s increasing dependence on technology, the Draft Decree would play a very important role in managing this under-regulated sector. Duane Morris will keep our readers informed on the status of the Draft.

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.

VIETNAM – AGRICULTURE 4.0 – ECONOMIC TIMES INTERVIEWING DR. OLIVER MASSMANN

1. How would you comment on Vietnam’s advantages and disadvantages in attracting FDI into the agriculture sector?

Advantages:

In the general growth of the whole economy in the first 6 months in 2021, the agriculture, forestry and fishery sector increased by 3.82% over the same period last year (contributing 12.15% to the overall national growth).

Recently, the Government has issued many policies to attract businesses to invest in the agriculture sector. For example, enterprises with special agricultural projects that rent or sub-lease land and water surface from households and individuals to implement investment projects are entitled to the Government’s investment incentives. The country will provide funding equivalent to 20% of the land rent and water surface rent for the first 5 years since the project is completed and put into operation. Or, the government supports agricultural product processing establishments, livestock and poultry slaughter establishments with 60% of the investment capital and not more than 15 billion VND/project to build infrastructure for waste treatment, transportation, electricity, etc.

Disadvantages:

Human resources are not maximized: Abundant labor force is an advantage, but vocational training programs and projects are not really appropriate and effective, so the quality of labor is still low. In 2020, untrained agricultural, forestry and fishery workers was around 12 million people, accounting for 89.97% of the total number of agricultural, forestry and fishery workers in working age.

Small production is still the majority, quality of products is not high: Development and production is still scattered and small. Most of the production units are of small scale with low investment capital, so the production and business efficiency is not high.

Environmental pollution is still a big issue: The production of agriculture sector has revealed more and more clearly the weaknesses in protecting the ecological environment in recent years. The collection and treatment of waste are still inadequate. The disposition of bottles and packaging of pesticides right in fields, lakes, ponds, canals, rivers and streams is quite common. In 2020, there are 4,096 communes nationwide that do not have a collection point for bottles and pesticide packaging, accounting for 49.37% of the total number of communes in rural areas.

Non-advanced agricultural technology: most (if not all) of agricultural production remain outdoor, making it easily directly affected by risks from natural disasters, epidemics (in cultivation and animal husbandry, aquaculture) at any time, affecting production and profits of enterprises.

2. Under Decision No.255/QD-TTg approving the Plan on restructuring the agricultural sector in the 2021-2025 period, the country would focus on developing sustainable agriculture as well as enhancing quality, added value, and competitiveness of local agricultural product. From this, how do you forecast some prospects for appealing FDI in the agricultural sector in the years to come?

According to Decision 255, the following fields will be of focus in the next 4 years:

a) Cultivation field
Vietnam aims to increase the proportion of fruit trees to 21%, vegetables to 17% to meet the consumption demand of the market, contributing to ensuring national food security.

b) Livestock field
Adjust the structure of livestock herds, aiming to reduce the proportion of pigs, increase the proportion of poultry and herds of cattle.

c) Fishery field
Promote offshore agriculture, focusing on objects of high economic value; development of organic aquaculture.

d) Salt industry
To renovate, upgrade and modernize infrastructure, apply technical advances to increase production of industrial salt and clean salt; to form a key industrial-scale salt production area in the South Central provinces; sharply reduce the area of manual salt production, converting inefficient salt production areas to other areas with higher economic efficiency.

3. It can be said that one of the bottlenecks of investment into the agricultural sector is the local mindset. What are the solutions to overcome the barriers and attract more foreign investors into Vietnam’s agricultural sector?

– Creating investment incentives for FDI projects in the agricultural sector, for example: preferential loans for projects investing in developing raw materials for the sector, projects that apply biotechnology; support scientific research activities, tax incentives, land levy.
– Applying guarantee mechanisms for FDI businesses, work with banks to create favorable access of foreign companies to private capital.
– Developing support mechanism for projects suffering from natural disasters or at risk of market price fluctuations.
– Developing one-stop-shop regulations for FDI investors, simplify investment procedures especially with regard to land clearance.
– Developing the vocational training system in rural areas. Vietnam has a lot of protocols with other countries in the EU aiming at the exchange of agricultural knowledge in various forms that should be maximized.
– Promoting the role of local organizations in supporting FDI investors to approach local farmers.

4. As FDI into the hi-tech and sustainable agriculture is considered as a current trend and solution. What have been the main concerns of foreign agribusiness regarding sustainable development?

The biggest difficulty when investing in agriculture for FDI enterprises is securing agricultural land. Even when there is a land fund for agriculture, the procedures are also relatively time consuming and difficult. In addition, the transportation of agricultural products between production place and consumption place is still difficult due to the lack of synchronous infrastructure.

Currently, foreign investors are not allowed to receive the transfer of agricultural land use rights, are not allowed to rent agricultural land directly from households, nor are they allowed to use this leased land as collateral for loans, leading to limited access to land resources and it is impossible for foreign investors to form a large enough land area to implement big projects. Nevertheless, in some localities, if there are land funds, priority is given to the planning of industrial parks because they will generate higher and faster revenue.

5. Which strategies should the Government adopt in the 2021-2025 period in order for the country to realize those targets?

Besides those mentioned in Answer 2 above, some other recommended strategies include:

_ Guide e-commerce trading floors to facilitate sellers and traders of agricultural products to join the floor; and
_ Promote the application of high technology in transporting agricultural products. Currently, the process of transporting and exporting agricultural products often damages about 40% of products, causing great cost to the economy.

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.

VIETNAM TO IMPLEMENT DIRECT POWER PURCHASE MECHANISM AFTER 2021

On 8 April 2021, the Ministry of Industry and Trade published the latest Draft Circular on the pilot implementation of the direct power purchase between renewable power project developers (RE GENCO or GENCO) and consumers (“the Draft”). As of July 2021, it is reported that MOIT is in the middle of preparation for Applicants Conference and Launch Event for the DPPA pilot program launch as well as reviewing transaction agreements, a one-stop-shop website for all information on the scheme and facilitating an application review process.

This mechanism suits customers who are committed to clean, sustainable energy use. DPPA allows direct access to and purchase of an amount of electricity generated from a renewable-energy generating unit through a long-term, bilateral contract with the price and duration of the contract mutually agreed by both parties. As a result, DPPA can help corporates to manage price fluctuations and reduce energy bills as well as facilitating a positive public image.

The pilot is to be implemented nationwide with a total capacity of selected wind and solar projects of 1 GW (or 1000 MW) at max. The nominal capacity of each project must be 30 MW and the project must have been listed in a National Power Development Plan. The GENCO and Consumer must apply online together for participation in the pilot scheme. Consumers can directly negotiate, purchase electricity with GENCO under a Fixed-term Contract. The two parties shall agree upon electricity price and output in the Contract for future trading cycles. GENCO and the consumer must also calculate and carry out payment for the contract output under the Contract for the difference between the contract price and the market price (i.e. reference price). Do note that consumers can be a single entity or a consortium of Consumers.

Under the Draft, renewable energy generators are defined as:
• organizations, individuals owing a grid-connected solar or wind power plant;
• installed capacity of the plant is more than 30 MW (conversion rate for solar plants: 01 MWp equals 0.8 MW);
• project already included in the power development plan that has been approved by competent authority;
• have a binding principle agreement with consumers to sell electricity; and
• are selected for the pilot implementation of DPPA by competent authority.

Electricity consumers are:
• organizations, individuals purchasing electricity for industrial production at a voltage level of 22 KV or higher;
• have a binding principle agreement with the RE GENCO to purchase electricity; and
• are selected for the pilot implementation of DPPA by competent authority.

Selection criteria of the pilot implementation participants:
For electricity generators:
• have a committed COD deadline of the whole power plant of no more than 270 working days since the date of announcement on the plant being selected to participate in the pilot implementation; or
• have written document of financial institutions on the financing for the power plant.

For consumers:
• have renewable energy usage commitments or is a manufacturing enterprise in the
supply chain of corporations or enterprises that have renewable energy usage commitments; or
• commit to contract at least 80% of total electricity consumption from the RE GENCO

The evaluation and selection of registration dossiers for participation in pilot direct electricity purchase and sale shall be carried out through a service unit selected by the Ministry of Industry and Trade and announced on the DPPA website.

Applicable power purchase agreement template:
• Between developer and EVN: the published contract templates in Decree 18/2020/TT-BCT for solar energy project and in Circular 02/2019/TT-BCT for wind energy project
• Between developer and consumer: to be drafted by the parties
• Between consumer and EVN: to be drafted by EVN, taking into consideration consumers’ opinion.

Transactions in the DPPA mechanism:
a) Between GENCO and spot electricity buyer: GENCO to submit the price quotation to the electricity system and market operator in which the offer price is zero (VND/kWh) for offered capacity ranges, and the capacity in the quotation is the announced capacity of GENCO.
b) Between spot electricity buyer and EVN: Electricity purchase price and payment payable by EVN must comply with the Regulation on operation of competitive wholesale electricity market promulgated by the Ministry of Industry and Trade.
c) Between EVN and Consumer: EVN sells power to Customers as per the electricity purchase price of EVN on spot electricity market plus the cost of direct electricity trading services (e.g. transmission costs, distribution costs).
d) Between Consumer and GENCO: The price and output of electricity committed in the contract for future trading cycles shall be agreed upon by the parties.

The direct power purchase agreement mechanism can bring about numerous benefits, namely enabling the imposition of take-or-pay obligation on off-takers in order to guarantee developer’s revenue stream, fixed electricity purchase price that is not subject to change in or delay on the implementation of national legislation, flexibility in monthly exchange rate calculation and increasing consumer’s environmental commitments. Developers and consumers must incorporate international standards regarding step-in right, dispute settlement, and termination clauses in order to make the direct power purchase agreement bankable. A bankable DPPA put developers in advantage when seeking financial supports from banks and other credit institutions.

On 23 June 2021, the Renewable Energy Buyers Vietnam Working Group, alongside the Clean Energy Investment Accelerator and the USAID Vietnam Low Emission Energy Program II co-hosted a webinar to discuss the development of the DPPA pilot program. In which, it was advertised that the US International Development Finance Corporation (“DFC”) offer financing tools such as long-term loans or equity financing to political risk insurance and technical assistance development. The DFC is looking to collaborate with DPPA Pilot Program participants.

MOIT is currently reviewing the Draft DPPA Circular based on the feedback of the private sector , then will circulate throughout the rest of the government before being legally approved and going into effect, ideally by the end of 2021. Within 15 working days from the effective date of the DPPA Circular, MOIT will announce the pilot scheme for direct electricity trading. Within 15 working days after that, MOIT will open the registration portal on the DPPA website and publicize the service unit responsible for reviewing application dossiers. Duane Morris will keep our readers updated of any new revisions to or decision regarding the Direct Power Purchase Agreement mechanism.

For more information on the above, 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.

VIETNAM: DIRECT POWER PURCHASE AGREEMENTS (DPPA) AND SOLAR ROOFTOP- UPDATING DEVELOPMENT OF NEW REGULATIONS ON DPPA AND C&I ROOFTOP IN VIETNAM

Both draft regulations for the Direct Power Purchase Agreement (DPPA) pilot program and the C&I Rooftop Solar are now still under review by the competent authorities. Below are some key updates in these two sectors in Vietnam up to June 2021:

1. Key updates on the Direct Power Purchase Agreement (DPPA) pilot pro-gram:

· MOIT is still reviewing the 2nd draft Circular on the pilot implementation of the direct power purchase between RE GENCO and the consumer (“Draft DPPA Circular”). The Circular will then be circulated throughout the rest of the gov-ernment before being legally approved and going into effect, ideally by the end of 2021;

· The Draft DPPA Circular maintains a target size of 1 GW for PDP-approved wind and solar projects above 30 MWac;

· RE Generation Companies (RE GENCO) and industrial Consumer(s) must apply together for participation in the DPPA Pilot Program through the DPPA online application portal;

· The RE GENCO must commit to reaching commercial operation date (COD) within 270 working days from the date of selection announcement;

· The DPPA Mechanism per the Draft Circular dated 8 April 2021 remains un-changed.

· DPPA Pilot Program Timeline:

– Pilot Project Planning (May-December 2019): MOIT Public Consulta-tion; First Action Plan agreed with ERAV; Market Preparation;

– Legal Approval/Invitation to Participate (Q2-Q4/2021): MOIT Circular draft published for public comment; MOIT Circular goes into effect; Pilot Program launched;

– Project Selection (Q1-Q2/2022): Applications to MOIT submitted and evaluated; Transaction documents executed; Operational capacity devel-oped.

(Source: DPPA Pilot Program Update (V-LEEP II, June 2021))

2. Key updates on the C&I Rooftop Solar:

· In 2020, Vietnam recorded 102,000 rooftop systems and reached 9.58 GW in capacity;

· The FIT 2 scheme expired at the end of 2020 and now the market is still waiting for the new Government’s new regulations on FIT 3;

· The draft regulations on FIT 3 for rooftop solar projects are still under re-view with the proposed FIT 3 as below:

ℴ For projects that achieve commercial operation in 2021, the FIT-3 in-centive will depend on project size:

– Less than 20kWp system: 6.84 UScent/kWh
– 20kWp to less than 100kWp: 6.35 UScent/kWh
– 100kWp to 1,250kWp: 5.89 UScent/kWh

ℴ For projects COD in 2022 and onward: MOIT to review and propose new tariff on annual basis;

ℴ Rooftop solar systems will be required to have a minimum self-consumption rate of 20% or a maximum excess power sale of 80% gener-ation;

ℴ Rooftop solar systems over 100kWp in size may be required to install mini-SCADA systems to support remote monitoring and system controls.

For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Di-rector 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.