Tag Archives: vietnam

VIETNAM ECONOMIC TIMES INTERVIEWING DR. OLIVER MASSMANN ON DEVELOPMENT IN THE FINANCIAL SERVICE SECTOR

1. It can be said that FDI inflows has become the growth momentum for Vietnam’s banking and finance industry over the past few years. How do you comment on the changes in the local financial services sector recently?

There has been increasing foreign investment in Vietnam’s banking and finance industry, especially via M&A at the end of 2017 and the beginning of 2018. Currently, foreign investors are very optimistic about Vietnam’s steady economic growth and plan to expand their coverage in the market. They believe economic development will drive more demand for banking and finance activities, thus more opportunities for growth in the sector. Moreover, M&A activities have helped local banks improve their financial capacity and competitiveness in the market. Local credit institutions have diversified their products and services, applied more modern technology in their operation. Under competition pressure from foreign credit institutions, local ones have no way but to also enhance banking governance capacity as well as human resources quality. These in turn help local credit institutions grow in a more stable and safe manner.

2. How have foreign financial organizations been contributing to improve Vietnam’s financial services sector so far?

Foreign financial organizations which have track recorded experience in other countries, with wide network and customer resources, when coming to Vietnam have brought in high technology, wide variety of finance and banking products/ services, as well as management/ governance capacity. Vietnam’s financial organizations have learnt a lot from these new players, thus modernizing their own system, creating more products/ services for Vietnamese customers who have not become a major part of customer portfolio of foreign financial organizations. These local organizations and Vietnam’s financial services have somehow developed to a modern, internationally standardized level, thus making them more attractive to foreign investors.

3. A number of free trade agreements (FTAs) that Vietnam will ratify shortly are expected to drive FDI flows into the country’ financial services sector in the coming time. How do you see about this prospect?

Both the CPTPP and the EVFTA have higher level of market access commitments than the WTO. In addition, investors are better protected under the CPTPP and the EVFTA in Vietnam. The Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability for investors. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. Such legal certainties along with the Government’s attempts to improve investment environment drive more FDIs flows into the country.

4. How do you forecast about some investment trends of international financial organizations into Vietnam this year?

Given the Government’s recent encouragement of investing in current banks rather than establishing new ones, M&A in the sector will be very vibrant. It is the fact that in recent years many investors have expressed their interest in becoming shareholders in certain commercial banks, especially weak/ VND 0 banks that need assistance in recovery, handling bad debts and restructuring. Moreover, Basel II standards will begin to apply from 2020, so there will be huge demand for capital to meet such strict requirements. However, as local banks are still looking for appropriate partners, we expect more major successful deals in the upcoming time.

5. What should Vietnamese government do to make the local financial services sector more accessible to foreign investors?

The Government should open more room for foreign ownership in local financial institutions, as most of them have nearly reached the allowed limit. This will lure more foreign participation in the market, thus creating opportunities to local financial sectors to absorb experience, management capacity, technology, etc. to become a stable and promising market in the region. The Government should also continue to complete the legal framework on financial services sector to comply with its commitments under signed FTAs, thus raising investors’ confidence in the system and willingness to invest further.

*************
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

VIETNAM INVESTMENT REVIEW INTERVIEWING DR. OLIVER MASSMANN ON POTENTIAL FOR ONLINE SPORT BETTING

1. What potential do you see in e-sports? Is there future in the betting business for e-sports? Does this carry a risk of illegal activities like other sports?

Online sport betting is a place of unearthed opportunities in Vietnam. You can see Vietnamese people are a big fan of many sports, especially football and volleyball. Economic growth and rise in real wages have led to more and more money ending up being placed on sporting events. Though there is no official number on the amount of money that people bet in online unofficial websites during big football events, I believe the number must not be lower than millions of dollars. Legalizing online betting for sports would help reduce tax losses by the Government, thus reducing public debt. Moreover, we are now in 4.0 industry so it is an unavoidable business trend in the future. It is important that we have sufficient regulations and management capacity to prevent illegal activities in this sector.

2. Vietnam does not yet have regulations on e-sports and betting in this sector. However, the government has issued Decree No. 06/2017/ND-CP on betting business on horse racing, dog racing, and international football. Do you think that this regulatory framework can be extended to include e-sports betting?

Decree 06 sets out a pilot program for betting business on horse racing, dog racing, and international football. It is even uncertain that this activity will continue being permitted after the trial period has lapsed, as it depends on the result of the pilot program. Moreover, I understand that international football betting is currently permitted only via terminal devices and telephones (i.e., sms only). Thus, it may take some other years to implement international football betting via internet, not to mention extension to online betting for other sports.

3. Are there any international regulations on e-sports betting? What regulations could Vietnam use as a basis for the domestic management of to manage betting business in this sector?

There is no international regulations on e-sports betting but each country has its own set of regulations. Vietnam can have a look at China whose lottery market is split into two segments: Welfare Lottery (since 1987) and Sports Lottery (since 1994) or the UK, which is one of the most liberal, and yet highly regulated, gambling markets in the world.

4. It is a widely held view that e-sports target a younger audience than football and especially horse and dog racing. How is this relevant to the regulation of e-sports and betting in this area? Are there other fundamental differences setting e-sports apart from more traditional sports?

I believe the adoption of regulations on e-sports betting does not depend on the coverage of e-sports (young/ old players). As long as e-sports and e-sports betting have potential negative impacts on the society, they need to be regulated. However, it is true that how they are to be regulated depends on the age range of the players. Regulating traditional sports betting must be different from e-sports betting given the difference in their nature, the extent the players can participate in the games, interaction among players, role play, etc.

***
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

VIETNAM – SOLAR POWER – FINAL DRAFT DECISION ON SOLAR POWER FEED-IN-TARIFFS (FIT2) FOR THE PERIOD FROM 1 JULY 2019 TO 31 DECEMBER 2021

On 22 February 2019, the Ministry of Industry and Trade of Vietnam (“MOIT”) published a second draft decision of the Prime Minister on the mechanism for encouraging the development of solar power projects in Vietnam to solicit public comments (“FIT2”). The time for soliciting public comments on FIT2 draft has expired on 15 April 2019.

By 16 April 2019, Electricity and Renewable Energy Agency of MOIT (“EREA”) coordinated with VBF Power and Energy Working Group to arrange a seminar for discussion of the final draft FIT2 of EREA (the “Final FIT2 Draft”). The Head of EREA confirmed in the seminar that the Final FIT2 Draft would be submitted to the Government for evaluation and approval. It is expected that the Final FIT2 Draft would be issued with a guiding circular (including new model solar PPAs) by 30 June 2019 or earlier. Duane Morris would like to highlight some key contents of the Final FIT2 Draft as follows:

New FITs for Solar Power Projects – from 1 July 2019 to 31 December 2021

Compared to the previous drafts, the Final FIT2 Draft has (i) increased the FITs for floating solar power projects in order to compensate the high costs of this technology, (ii) removed FITs for solar power projects with integrated storage system as there is low interest on this option, and (iii) sets a single commercial operation date (COD) deadline of 31 December 2021 (instead of 30 June 2021) for this new FIT2 program. The Final FIT2 Draft also adjusted and classified solar power projects into three groups as follows:

• Floating solar power projects, which are defined as grid connected solar power projects having solar PV panels installed on structures floating on the water surface.
• Ground-mounted solar power projects, which are defined as grid-connected solar power projects having solar PV panels installed on the ground, or on rooftops or attached to civil buildings and having an installed capacity of more than 1 MWp.
• Rooftop solar power projects, which are defined as solar power projects having solar PV panels installed on the roof, or attached to a civil buildings, and having an installed capacity of 1 MWp or less.

The proposed tariffs (as below) will apply to part or the whole of solar power projects achieving actual COD before 31 December 2021 for application for a PPA term of 20 years from the COD.

No. Technology Region I Region II Region III Region IV
VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent
1 Floating solar power projects 2,281 (second draft: 2,159) 9.98 ( second draft: 9.44) 1,963 (second draft: 1,853) 8.13 (second draft: 8.13) 1,758 (second draft: 1,664) 7.69 (second draft: 7.28) 1,655 (second draft: 1,566) 7.24 (second draft: 6.85)
2 Ground-mounted solar power projects 2,102 9.20 1,809 7.91 1,620 7.09 1,525 6.67
3 Rooftop solar power projects 2,486 10.87 2,139 9.36 1,916 8.38 1,803 7.89

Region I comprises 28 northern provinces of Vietnam, including: Ha Giang, Bac Kan, Cao Bang, Tuyen Quang, Thai Nguyen, Lao Cai, Yen Bai, Lang Son, Quang Ninh, Phu Tho, Vinh Phuc, Bac Giang, Hai Duong, Hoa Binh, Hanoi, Ha Nam, Bac Ninh, Hung Yen, Hai Phong, Ninh Binh, Thai Binh, Ha Tinh, Nam Dinh, Quang Binh, Thanh Hoa, Lai Chau, Nghe An, and Son La.

Region II comprises 6 central provinces of Vietnam, including: Quang Tri, Dien Bien, Thua Thien Hue, Quang Nam, Da Nang, and Quang Ngai.

Region III comprises 23 central highlands and southern provinces of Vietnam, including: Kon Tum, Ca Mau, Hau Giang, Binh Dinh, Bac Lieu, Kien Giang, Soc Trang, Can Tho, Vinh Long, Tra Vinh, Lam Dong, Ben Tre, Tien Giang, An Giang, Dak Nong, Ho Chi Minh City, Dong Nai, Dong Thap, Ba Ria – Vung Tau, Long An, Binh Duong, Binh Phuoc and Tay Ninh.

Region IV comprises 6 central highlands and southern provinces of Vietnam, including: Phu Yen, Gia Lai, Dak Lak, Khanh Hoa, Ninh Thuan, and Binh Thuan).

Model PPA for Solar Power Projects

For all solar PPAs with EVN / its subsidiaries as buyers, a model PPA will be required. EREA said that after the PM approves the Final FIT2 Draft, the MOIT would issue a circular to promulgate new model PPAs. We asked directly their plan to disclose these model PPAs and circular but the Head of EREA could not answer, pending approval of the Final FIT2 Draft. EREA’s representative hinted that there should be not many major changes in model solar PPAs.

At the seminar, Head of EREA confirmed that the risk of network system of EVN remains the same. This means EVN shall have the right to refuse the power purchase in case any errors / curtailment issues of the power network / system.

Regarding direct PPA between generators and power purchasers (other than EVN and its subsidiaries) for rooftop solar power projects, the Final FIT2 Draft allows the parties to agree the terms of such direct PPA in line with the applicable law.

Direct PPA for Rooftop Solar Power Project and for other Solar Power Projects

Technically, the power purchaser in the Final FIT2 Draft includes EVN, EVN’s subsidiaries and other power purchasers. However, EREA’s intention in this final draft is to regulate the other power purchasers for direct PPA of rooftop solar power projects only. There is also no clear definition of other power purchasers in the Final FIT2 Draft as EREA would like to let it open for further guidance in the circulars.

The direct power purchase in the Final FIT2 Draft is for (i) rooftop solar power project of 1 MW or less installed capacity, and (ii) not connected to the grid. In this case, the price and PPA will be agreed by the parties.

The direct PPA between generators and power consumers other than EVN for solar power projects of more than 1 MW is currently under ERAV’s scheme, and not included in this Final FIT2 Draft. At the seminar, ERAV explained that they were working with counsels on this. The draft model would be likely disclosed for soliciting comments by early June 2019, then submitted to the PM for approval. If it goes smoothly, by end of 2019 – early 2020, ERAV would provide the answer on whether the DPPA scheme would be implemented.

Ninh Thuan Province – COD prior to 1 Jan 2021

In the Final FIT2 Draft, solar power projects in Ninh Thuan enjoy FiT of US cent 9.35 if (i) it has been approved in a power master plan, (ii) it could achieve the COD prior to 1 January 2021, and (iii) it is included in a group of 2000MW solar power projects. We asked about the status of 2000MW group in Ninh Thuan had been approved, and whether there is any chance for new investors to join this scheme. Head of EREA confirmed that by 31 December 2018, 1930 MW projects had been approved in Ninh Thuan. It is not legal feasible for new solar power projects in Ninh Thuan to be approved. However, it is possible for foreign investors to take over any current projects, even in the case such projects are withdrawn from current investors due to violation of Investment Law.

Solar Power Project Auction Pilot

In the Final FIT2 Draft, by 2020 MOIT will prepare and submit the draft to the Government for approval of the pilot. However, at the seminar, Head of EREA confirmed that it is impossible for implementation of power project auction prior to 2021. Thus, similar as the case of wind projects under Decision 39, it is intended that solar power project auction will be scheduled for at least since early 2021.

Power Network Bottleneck Issue

MOIT is proposing to the Government to enable private investment in network by way of BOT or a mode that allowing investors to construct and then hand-over network to EVN with some special compensation.

What if the Final FIT Draft could not be approved and issued

This is the final draft which would be submitted to the PM for approval. If it is not approved, then there will be no FIT regulations for solar power projects. EREA confirmed this situation in the seminar.

*************
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

VIETNAM – PHARMACEUTICALS – ASEAN IN CONTEXT – Come to Vietnam – you will be treated just – think no more of Indonesia

What happens in Indonesia now?

Any pharmaceutical product not being made in Indonesia must obtain a compulsory license, according to a recent new regulation adopted in Jakarta. While joint venture with a local partner is required for investors doing business in pharmaceutical sector in Indonesia, this compulsory licensing regulation has deterred foreign investment and no one wants their intellectual property stuck in the hand of their local partner. Lack of foreign investment, Indonesia has to face with challenges in establishing a knowledge-based economy due to technological expropriation.

Vietnam pharmaceutical market potential

Vietnam has a population of more than 90 million people, with its average age of 29. The Universal Healthcare Coverage in Vietnam is with 73% of the population with regards to essential health services, relatively high compared with other countries in the Western Pacific region. Vietnam’s generic penetration in tendering and ex-manufacturer prices of producers is with 97%. On the other hand, the accessibility of new pharmaceuticals is still low. Only 6% of recent launched pharmaceuticals in the last 3-7 years are available in Vietnam, thus, the value (22%) and the volume (4%) share of producers is among the lowest in APAC area. This is leading to outbound medical tourism with an estimated amount of USD2 billion a year.

According to the United Nations Fund (UNFPA), although Vietnam is still in the golden population period, the population has started aging since 2017. In a World Bank’s report, this aging process will not last very long, i.e., around 15 years and be completed by 2040. Aging population together with growing income among the Vietnamese people and a steady economic growth in recent years has led to potentially more demand for healthcare services.

Expenditure for the healthcare constituted 7.5% of the GDP (USD16.1 billion) and is expected to increase to 12.5% between 2017-2021. Between 2016 and 2020, sales of pharmaceutical are predicted to grow the fastest at 10.5%, compared to medical devices and private healthcare spending, which will grow at 9.3%and 7.2% respectively. Spending on pharmaceutical products per capital will double in 2020 (USD 85) and USD 163 in 2025, with average growth of 14%/year, according to Business Monitor International.

Medical devices are estimated to grow from US$ 981 million in 2016 to US$ 1.4 billion in 2020, while private healthcare spending is predicted to grow from US$ 6.6 billion in 2016 to US$ 8.7 billion in 2020.

Legal certainties as a result of the Comprehensive Trans-Pacific Partnership (CPTPP) and the EU – Vietnam Free Trade Agreement (EVFTA)

On 8 March 2018, the CPTPP was finally signed in Chile and officially takes effect since 30 December 2018. The effects of the CPTPP promise great benefits for pharmaceutical sector in Vietnam. The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. With the National and Most-Favored Nation Treatment principle, the CPTPP is ensuring a fair competition, which will attract new foreign investment, also in the pharmaceutical sector.

Furthermore, the investors gain some securities due to prohibition of expropriation, so that, Vietnam cannot expropriate intellectual property rights from pharmaceutical companies. However, the EVFTA will also ensure certain growth for the pharmaceutical sector in Vietnam. For instance, Article 14.2 Chapter 2 of the agreement requires Vietnam to create and implement legal instruments to allow foreign establishment in Vietnam. In addition, this Article also requires Vietnam to allow foreign invested enterprises to sell pharmaceuticals legally imported by them directly or through distributors or wholesalers who are not required to have a Good Storage Practice (GSP) certificate or directly. If the Vietnamese legislation is responsible for certification requirements and process, the EVFTA creates real influence as it encourages establishment of foreign enterprises and their extended scope of activities. Lastly, the EVFTA is removing all additional requirements for all pharmaceuticals, biologics and drugs.

Additionally, both the CPTPP and the EVFTA offer further protection for investors in Vietnam. The Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability for investors. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases. In relation to the CPTPP, the scope of the ISDS was reduced by removing references to “investment agreements” and “investment authorization”. The final settlement is binding and enforceable without question from the local courts regarding its validity.
The second instrument is the Government Procurement Agreement (GPA). The GPA in both agreements mainly deals with the requirement to treat bidders or domestic bidders with 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 GPA in both agreements 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. This instrument will ensure a fair competition and projects of quality and efficient developing processes.

Think no more of Indonesia – Come to Vietnam!

Vietnam has been proven a very attractive destination for foreign investors in pharmaceutical and healthcare sector. In particular, in 2016 and 2017, Vietnam witnessed a number of M&A deals in the sector where foreign investors accessed the market by taking over existing big local enterprises. These deals include Abbott taking over 51.69% shares in DOMESCO Medical Import-Export Joint Stock Corporation after its purchase of two factories producing Western medicines in Vietnam – Singapore Industrial Zone in Binh Duong. Taishi Corporation also became Hau Giang Pharma Company’s shareholder by owning 24.4% of its stakes. In September 2016, Vinapharm cooperated with Sanofi Corporation to produce and market Sanofi’s products in Vietnam.
In contrast, Indonesia – a country not a member to both the CPTPP and any FTA with the EU, is actively driving out biopharmaceutical and other sophisticated ventures. In its recent regulations, Indonesia requires the compulsory licensing of any pharmaceutical product not being made in the country.

It is then clear that Vietnam is creating a biopharmaceutical sweet spot in the region!

***
Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

VIETNAM – SOLAR POWER SECTOR – NEW MODEL PPA FOR ROOFTOP SOLAR POWER PROJECTS

On 8 January 2019, the Prime Minister issued Decision 02 to amend certain articles of Decision 11 on mechanism for encouragement of development of solar power in Vietnam. Decision 02 promulgates new payment scheme to replace the troublesome net-metering structure of the rooftop solar power projects under Decision 11. However, Decision 02 was alleged to be a lackluster as it did not provide any model PPA for rooftop solar power projects and it only applies to limited rooftop solar power projects which having commercial operation date – COD, together with electricity meter readings confirmation, prior to 1 July 2019. It is worth noting that Circular 16 required a rooftop solar power generator to enter into a model PPA (in the form attached to Circular 16) with EVN or its authorized subsidiary. However, such model PPA and the net-metering under Circular 16 were not supported by EVN due to its payment complexity nature. In fact, following Decision 02, Ministry of Industry and Trade (”MOIT”) did not issue any model PPA for rooftop solar power project to support Decision 02 until 11 March 2019.

On 11 March 2019, the MOIT has issued Circular 05/2019/TT-BCT (“Circular 05”) to replace old model PPA for rooftop solar power projects attached to Circular 16 and extend the FITs for all rooftop solar power projects. Circular 05 will become effective on 25 April 2019. We highlight some key items of this Circular as follows:

FITs for all Rooftop Solar Power Projects

Circular 05 has abolished the requirement on COD deadline of rooftop solar power projects to enjoy FITs in Article 16 of Circular 16.

Prior to 1 January 2018, FIT for rooftop solar power projects is VND2,086 / kWh not inclusive of VAT (approx. USD9.35 as the central exchange rate between VND / USD of the State Bank of Vietnam on 10 April 2017, i.e., VND22,316 / USD1). This FIT is supposed to apply for outstanding rooftop solar power projects came into operation prior to 1 January 2018.

From 1 January 2018 onward, the FIT must be adjusted according to the last applicable central exchange rate between VND / USD issued by the SBV on the previous year.

Improved Model PPA for Rooftop Solar Power Projects

The new model PPA has been simplified for the sale of solar power from the rooftop solar generators to EVN / power purchasers, and completely canceling the net-metering structure which mixing of sale / purchase of power between the parties. In addition, the sale of power from EVN / retail power companies to rooftop solar power generators shall be made under separate retail power purchase agreements and in accordance with the rules for supplying retail powers to end-user consumers.

We outline below some improvements:

(i) The model PPA indicates clearly that the FIT will be applicable for 20 years from the COD.
(ii) The model PPA provides a detail but simple formula to calculate the power generated and the price paid to the generators.
(iii) The model PPA separates payment and invoice procedure for corporate entities from the one for individuals / households.
(iv) The model PPA regulates the obligation of power purchasers to pay default interest (i.e., average inter-bank interest rate of 1 month issued by SBV on the payment date) on
any late payments owing to rooftop solar generators.

*************

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Anwalt in Vietnam Dr. Oliver Massmann – WINDKRAFT NEUIGKEITEN – NEUER MUSTER- STROMABNAHMEVERTRAG BESCHLOSSEN – VERBESSERTE FINANZIERBARKEIT? WAS SIE WISSEN MÜSSEN:

Vietnams Ministerium für Industrie und Handel (MoIT) veröffentlichte ein Rundschreiben 02 (gültig ab dem 28. Februar 2019) einschließlich finalem Musterstromabnahmevertrag (Power Purchase Agreement, PPA) für den Windenergie Sektor. Das Rundschreiben wurde erteilt um die 39. Entscheidung des Premierministers zur Regulierung der neuen FiT für Onshore und Offshore Windkraftprojekte in Vietnam zu leiten. Das Rundschreiben 02 wird vorherige Regelungen im Rundschrieben 32 von 2012 und Rundschreiben 06 von 2013 der MoIT ersetzten.

Rundschreiben 02 und PPA-Vorlagen werden als obligatorisch für Windprojekte eingestuft. Unglücklicherweise wurden nur wenige Verbesserungen im Vergleich zu den PPA-Vorlagen in Rundschreiben 06/ Rundschreiben 32 vorgenommen. Potentielle Investoren haben immer noch ernsthafte Bedenken hinsichtlich der Höhe und Art des Risikos, das das PPA versucht hat, auf die Anleger zu verlagern, und die vermittelte Botschaft war, dass, wenn die Regierung nicht bereit ist, einige der gleißendsten Probleme anzugehen, nur wenige seriöse ausländische Akteure der Windindustrie und, ebenso wichtig, nur wenige seriöse Finanziers bereit wären, sich zu involvieren.

Zu den Problemen gehören fehlende Maßnahmen zur Kompensation der Produzenten für die Unterbrechung der Fähigkeit Strom zu beziehen, die Bedingungen bei höherer Gewalt, Vertragsverweigerung, „Step-in“ Rechte der Kreditgeber vorbehaltlich der Zustimmung von EVN und Streitschlichtung.

Tarif mit aktuellem Wechselkurs

Mit der Bestätigung der FiT-Rate von (i) 1.1 US-Cent/ kWh für Onshore-Windenergieprojekte und (ii) 9.8 US-Cents/ kWh für Offshore-Windenergieprojekte, bestätigen Entscheidung 39 und Rundschreiben 02, dass die FiT für 20 Jahre für Projekte oder Teil-Projekte, die den kommerziellen Betrieb vor November 2021 erreichen, zur Verfügung steht. Das Rundschreiben 02 regelt ferner, dass sich der Energieentwickler bei Windkraftprojekten mit Netzanschluss mit sowohl Onshore-Turbinen als auch Offshore-Turbinen mit der EVN / den Stromabnehmern auf einen Plan für die Installation von Messgeräten und auf die Messung und Berechnung der separaten Leistung der Onshore- und Offshore- Turbinen als Grundlage für die Anwendung der entsprechenden Stromhandelspreise einigen muss.

Das endgültige PPA enthält keine Indexierung der FiT auf den Verbraucherpreisindex (CPI), um Inflationsrisiken zu berücksichtigen. Als Reaktion auf die Besorgnis über schwankende Wechselkurse wird in dem Rundschreiben jedoch festgelegt, dass der Fremdwährungskurs die zentralen Wechselkurse des vietnamesischen Dong gegenüber dem US-Dollar sein soll, die von der State Bank of Vietnam am Tag der Zahlung angekündigt wurden. Dies ist ein guter Schritt, um das Problem der Preisschwankungen anzugehen.

Ein immer noch zu hohes Risiko?

Gemäß Entscheidung 39 (die auch die FiT festlegt) und der endgültigen Fassung des PPAs im Anhang des Rundschreibens 02, ist Electricity of Vietnam (EVN) verantwortlich für den Einkauf der gesamten Stromerzeugung aus Netzverbindungs-Projekten zu den angegebenen FiT.

Das PPA befreit EVN jedoch von Zahlungspflichten in Fällen, in denen sie wegen eines Ausfalls des Übertragungs- oder Verteilungsnetzes, nicht in der Lage sind Strom zu beziehen. Da sich viele.

Windprojekte derzeit auf wenig zentrale Standorte konzentrieren, muss die Fähigkeit der bestehenden Anlagen, Energie aufzunehmen, Anlass zu einiger Besorgnis geben, da das PPA ein solches Risiko auf Stromerzeuger überträgt.

Dem PPA fehlt jeglicher Mechanismus zur Kompensation der Stromerzeuger im Falle von Unterbrechungen, die außerhalb ihrer Kontrolle liegen. Das PPA sieht nicht nur keine Fristverlängerung im Falle höherer Gewalt vor, darüber hinaus könnte, wenn höhere Gewalt einen Stromerzeuger daran hindern sollte, seine Verpflichtungen für ein Jahr zu erfüllen, die EVN das PPA sogar einseitig und ohne Entschädigungen kündigen. Bei derartigen Umständen wird der Stromerzeuger allein im Unklaren gelassen.

Solche Vereinbarungen könnten für Projekte akzeptabel sein, die es schaffen, klare “Take or Pay”- Bedingungen und/oder staatliche Garantien auszuhandeln, aber es ist höchst fragwürdig, ob und inwieweit eine dieser Optionen im aktuellen Klima möglich sein wird. Als direkte Konsequenz ist es ebenso fraglich, inwieweit private Finanziers bereit sein werden, das Risiko zu tragen, eine Tatsache, die Unternehmen veranlassen wird, günstigere Bedingungen auf anderen Märkten zu suchen.

Vietnams Spielregeln einhalten

Anleger könnten sich ferner durch das Fehlen von Besonderheiten im Hinblick auf eine investorenfreundliche Streitbeilegung entmutigen lassen. Das PPA unterliegt vietnamesischen Recht und beinhaltet selbst nicht ausdrücklich das Recht, zur Vereinbarung eines internationalen Schiedsverfahrens zur Beilegung von Konflikten, eine Bedingung, die typischerweise als wichtige Voraussetzung angesehen wird.

Nach dem Stand der Dinge können Streitigkeiten der Abteilung für erneuerbare Energien für Elektrizität (ehemals Generaldirektion der Energie) zur Mediation vorgelegt werden. Sofern dies nicht weiterhilft gibt es die Möglichkeit das Problem an die Elektrizitätsregulierungsbehörde von Vietnam (ERAV) weiterzuleiten oder einen Rechtsstreit vor Vietnams Gerichten zu führen.
Das PPA gestattet es, dass “eine weitere Streitschlichtungsstelle von den Parteien vereinbart wird”, was den Verkäufern potenziell die Möglichkeit eröffnet, mit der EVN über die Streitbeilegung, einschließlich internationaler und ausländischer- oder sogar inländischer Schiedsverfahren, zu verhandeln. Es ist jedoch nicht klar, ob die EVN einer direkten Änderung der PPAs zustimmen wird, um eine ausdrückliche vorherige Vereinbarung über ein Offshore-Schiedsverfahren zu ermöglichen oder lediglich die Tür für eine solche Diskussion zum Zeitpunkt eines Streits öffnet. Im letzteren Fall hat EVN eindeutig die besseren Karten.

Zahlungspflicht

Das PPA schließt die fälligen Zahlungsverpflichtungen der EVN / der Energieunternehmen von der Freistellung aufgrund höherer Gewalt aus und könnte sicherstellen, dass EVN und Energieunternehmen Zahlungen unabhängig von Ereignissen höherer Gewalt leisten.

Die Zeit zur Zahlung nach Erhalt der Belege wird nunmehr für EVN von 15 Tagen (aus dem alten Vorlage-PPA) auf 25 Tage erhöht.

Der Verzugszinssatz für den noch nicht gezahlten Rechnungsbetrag der Energieunternehmen an die Entwickler ist nun der durchschnittliche Interbanken-Handelszins (leicht gesunken von derzeit 1,5-mal dem durchschnittlichen Interbanken-Handelszins für einen Monat).

Step-in Rechte der Kreditgeber

Das Wind PPA scheint, obwohl der Entwurf unklar ist, es den Entwicklern, vorbehaltlich einer schriftlichen Genehmigung der EVN, zu ermöglichen, das PPA zu übertragen oder den Kreditgebern Step-in Rechte zu gewähren, sofern diese auch die EVN unverzüglich schriftlich benachrichtigen. Dies ist enttäuschend, da die alte Vorlage Kreditgebern Step-in Rechte ohne Genehmigung von EVN ermöglicht.

Ein Schritt nach dem anderen … Nur abwarten!

Das MoIT ist sich der Schwachstellen des PPA bewusst und weiß, dass dieses in seiner derzeitigen Fassung nicht die Art von Investitionen anziehen wird, die Vietnam benötigt, wenn es sowohl seinen Energiebedarf als auch seine Ziele für erneuerbare Energien decken will. Sie wissen, dass Investoren gehofft haben, dass einige der Defizite behoben sein würden, so dass das Rundschreiben ein Schritt in die richtige Richtung ist.

Wir haben Informationen von unseren Kontakten in dem MoIT, dass die Standard Solar-PPA innerhalb des nächsten Monats geändert werden wird.

********************

Für weitere Informationen über Vietnams Energiesektor kontaktieren sie bitte Dr. Oliver Massmann unter omassmann@duanemorris.com. Dr. Oliver Massmann ist der General Director von Duane Morris Vietnam LLC.

VIETNAM – WIND POWER BREAKING NEWS – NEW MODEL POWER PURCHASE AGREEMENT OUT – IMPROVED BANKABILITY? WHAT YOU MUST KNOW:

Vietnam’s Ministry of Industry and Trade (MoIT) released Circular 02 (effective from 28 February 2019) including final template power purchase agreements (PPA) for the wind energy sector. This Circular is issued to guide the Prime Minister’s Decision 39 to regulate new FiT for onshore and offshore wind power projects in Vietnam. Circular 02 will replace previous regulations under Circular 32 dated 2012 and Circular 06 dated 2013 of the MoIT.

Circular 02 and PPA templates are stated to be mandatory templates for wind projects. Unfortunately, little improvements have been made comparing with the old template PPA under Circular 06 / Circular 32. Would-be investors now still have serious concerns over the amount and type of risk the PPA sought to shift to investors, and the message delivered was that unless the government was willing to address some of the most glaring problems, few reputable foreign wind players and, just as importantly, few reputable financiers would be likely to sign up.

Issues include a lack of measures to compensate producers for interruption in the ability to receive power, force majeure conditions, contract suspension, lender’s step-in rights subject to EVN’s approval and settlement of disputes.

Tariff with actual foreign exchange rate

With the FiT rate of (i) 8.5 US cents / kWh applicable to onshore wind power projects, and (ii) 9.8 US cents / kWh applicable to offshore wind power projects confirmed, Decision 39 and Circular 02 confirm that the FiT is available for 20 years to projects, or parts of projects, that reach commercial operation before 1 November 2021. Circular 02 further regulates that for grid-connected wind power projects having both onshore turbines and offshore turbines, the power developer must agree with EVN / power buyers on a plan for installing meters and on how to measure and calculate the separate power output of the onshore turbines and that of the offshore turbines as the basis for applying the appropriate power trading prices.

The final PPA does not include any indexation of the FiT to the Consumer Price Index (CPI) to address inflation risks. However, in response to concerns over fluctuating exchange rates, the circular does state that the foreign exchange rate shall be the central exchange rates of the Vietnamese dong against the US dollar announced by the State Bank of Vietnam on the payment date. This is a good step to address the price fluctuation issue.

A risk still seem high?

Under Decision 39 (which also set the FiT) and the final version of the PPA appended to Circular 02, Electricity of Vietnam (EVN) is responsible for purchasing the entire power output from grid-connected projects at the stated FiT.

However, the PPA relieves EVN from payment obligations in cases where it is unable to take power due to a breakdown of the transmission or distribution grid. With many wind projects currently focused on few central locations, the capacity of existing facilities to absorb power must be a cause of some concern given the PPA’s transfer of such risk to power producers.
The PPA lacks any mechanism to compensate power producers should interruptions happen outside of their control. Not only does the PPA not provide for extension of time in case of force majeure, but if force majeure were to prevent a power producer from meeting its obligations for a year then EVN could unilaterally terminate the PPA with no compensation payable. In such circumstances, the power producer is left alone in the dark.

Such arrangements might be acceptable to projects that manage to negotiate clear ‘take or pay’ terms and/or government guarantees, but it is highly questionable whether and to what extent either of these will be possible in the current climate. As a direct consequence, it is equally questionable to what extent private finance will be prepared to bear the risk, a fact that will prompt capital to seek more favourable conditions in other markets.

Playing by Vietnam’s rules

Investors may be further discouraged by the lack of specifics in terms of an investor friendly dispute resolution. The PPA is governed by Vietnamese law and does not itself expressly include the right to agree on international arbitration to resolve disputes, a condition that would typically be considered an important requirement.

As it stands, disputes can be submitted to the Electricity Renewable Energy Department (formerly the General Directorate of Energy) for mediation. If that doesn’t work, there is the option of escalating the issue to the Electricity Regulatory Authority of Vietnam (ERAV) or pursuing litigation in Vietnam’s courts.

The PPA does allow for “another dispute resolution body to be agreed by the parties”, which potentially opens the door for sellers to negotiate with EVN on dispute resolution, including international and offshore or even domestic arbitration. But it is not clear if EVN will agree to directly amend PPAs to allow for express prior agreement on offshore arbitration or simply open the door for such a discussion at the time of a dispute. Clearly in the latter case the deck is firmly stacked in EVN’s favour.

Payment obligation

The PPA does exclude the due payment obligations of EVN / power companies from force majeure exemption and it could ensure EVN and power companies to make payments regardless force majeure events occurring.

The time for EVN making payment upon receipt of receipts is now increased from 15 days (from old template PPA) to 25 days.
Default interest rate for unpaid amount of power companies to the developer is now the average inter-bank trading interest (slightly decreased from current 1.5 times the average interbank trading interest rate for one month).

Lender’s step-in Right

The Wind PPA appears to enable the developers to transfer the PPA or provide step-in rights to lenders but subject to always written approval from EVN, provided that also it notifies EVN immediately in writing, although the drafting is unclear. This is a disappointment as the old template allows lender’s step-in right without approval from EVN.

One step forward… wait and see

The MoIT is well aware of the deficiencies in the PPA and knows that, in its current form, it will not attract the kind of investment Vietnam needs if it is to meet both its energy demands and renewable targets. They know that investors were hoping for some of the shortfalls to have been addressed, thus this Circular is the step in the right direction .
We have information from our contacts in the MOIT that the standard Solar PPA will be amended within coming months.

********************
For more information about Vietnam’s energy sector, please contact Dr. Oliver Massmann and lawyer Thanh Tran Minh under omassmann@duanemorris.com. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

Vietnam’s draft new solar tariffs – more sun, less cents, more sense

A new proposed tariff structure for solar energy projects in Vietnam sets out different rates for different irradiation regions and gives long-awaited indication of direction for the market after 30 June 2019.  On 29 January 2019, the Ministry of Industry and Trade (“MOIT“) released parts of a draft decision to update the country’s current feed in tariff (FiT) structure which is only valid until 30 June 2019 (the “Draft”).

The Draft is of course still just that, a draft, but forecasts a clear change in strategy with respect to FiTs.

Under the current FiT policy (regulated by Decision 11 and Decision 16) there is only one FiT for all projects regardless of location.  That is an internationally respectable FiT of 9.35 US cents per kWh for all on-grid solar power projects that achieve commercial operation date (“COD”) prior to 30 June 2019 (with the exception of some projects in Ninh Thuan province which have a later COD timeline).

The Draft however sets out a wide range of differing FiTs that vary based on: (i) when COD happens, (ii) location (3 regions are identified based on solar irradiation data), and (iii) the type of solar projects (i.e., floating, ground-mounted, integrated storage system or rooftop solar).

The table below shows what the Draft contemplates:

Projects with COD from 1 July 2019 to 30 June 2020

 

Solar power types Region 1 (see regions below)

(28 northern provinces with annual solar irradiation of up to 1,432.8 kWh/m2/year)

Region 2

(6 central provinces of Vietnam with annual solar irradiation of up to 1,676.1 kWh/m2/year)

Region3

(29 central highlands and southern provinces of Vietnam with annual solar irradiation of up to 1,910.3 kWh/m2/year)

VND / kWh US cent equivalent VND / kWh US cent equivalent VND / kWh US cent equivalent
Floating solar power projects 2,135 9.35 1,838 8.05 1,612 7.06
Ground-mounted solar power projects 2,095 9.18 1,802 7.89 1,583 6.94
Solar power projects with integrated storage system N/A N/A N/A N/A 2,052 8.99
Rooftop solar power projects 2,448 9.85 1,933 8.47 1,697 7.43
Projects with COD from 1 July 2020 to 30 June 2021

 

Floating solar power projects 2,028 8.88 1,746 7.65 1,531 6.71
Ground-mounted solar power projects 1,990 8.72 1,712 7.50 1,504 6.59
Solar power projects with integrated storage system N/A N/A N/A N/A 1,949 8.54
Rooftop solar power projects 2,023 8.86 1,740 7.62 1,527 6.69

 

While no changes will please everyone, especially the many developers who have committed considerable resources based on assumptions of the current FiT rate, the changes still indicate strong support for solar power projects generally and a rational approach to reflect the markedly different irradiation levels across the country.  Such an approach should take some pressure of heavily-stretched Southern hotspots (stretched from both power infrastructure and bureaucratic bottleneck perspectives).

We will continue to monitor this and update further as possible.  Meanwhile, we’d be delighted to hear views from developers and financiers about the change of strategic policy direction and FiTs forecast by the Draft.  Get in touch and tell us what you think.

Region 1: comprising 28 northern provinces of Vietnam with annual solar irradiation of 1,225.6 – 1,432.8 kWh/m2/year or daily solar irradiation of 3.36 – 3.92 kWh/m2/day. Including: Ha Giang, Bac Kan, Cao Bang, Tuyen Quang, Thai Nguyen, Lao Cai, Yen Bai, Lang Son, Quang Ninh, Phu Tho, Vinh Phuc, Bac Giang, Hai Duong, Hoa Binh, Hanoi, Ha Nam, Bac Ninh, Hung Yen, Hai Phong, Ninh Binh, Thai Binh, Ha Tinh, Nam Dinh, Quang Binh, Thanh Hoa, Lai Chau, Nghe An and Son La.

Region 2: comprising 6 central provinces of Vietnam with annual solar irradiation of 1,456 – 1,676.1 kWh/m2/year or daily solar irradiation of 3.99 – 4.59 kWh/m2/day. Including: Quang Tri, Dien Bien, Thua Thien Hue, Quang Nam, Da Nang and Quang Ngai.

Region 3: comprising 29 central highlands and southern provinces of Vietnam with annual solar irradiation of 1,703.9 – 1,910.3 kWh/m2/year or daily solar irradiation of 4.67 – 5.23 kWh/m2/day. Including: Kon Tum, Ca Mau, Hau Giang, Binh Dinh, Phu Yen, Bac Lieu, Kien Giang, Soc Trang, Gia Lai, Can Tho, Vinh Long, Tra Vinh, Dak Lak, Khanh Hoa, Lam Dong, Ben Tre, Tien Giang, An Giang, Dak Nong, Ho Chi Minh City, Dong Nai, Dong Thap, Ba Ria – Vung Tau, Long An, Binh Duong, Binh Phuoc, Tay Ninh, Ninh Thuan and Binh Thuan.

For more information about Vietnam’s solar and renewable energy sectors, please contact Giles at GTCooper@duanemorris.com, Tran Thanh at MTTran@duanemorris.com or any of the lawyers in our office listing.  Giles is co-General Director of Duane Morris Vietnam LLC and branch director of Duane Morris’ HCMC office.

VIETNAM – ROOFTOP SOLAR POWER PROJECTS – NEW POLICY TO ADDRESS NET-METERING ISSUE

On 8 January 2019, the Prime Minister has issued Decision No. 02/2019/QD-TTg (“Decision 02”) to amend certain articles of Decision 11/2017/QD-TTg dated 11 April 2017 of the Prime Minister on mechanism for encouragement of development of solar power in Vietnam (“Decision 11”). Decision 02, became effective on 8 January 2019, promulgates new payment scheme to address the net-metering issue of the rooftop solar power projects under Decision 11. We elaborate the above topic further as below:

In 2017, Decision 11 introduced the net-metering scheme for rooftop solar power projects. In brief, rooftop projects must be implemented in net-metering with two-way electricity meters. In a trading cycle, if the amount of electricity generated from rooftop projects is greater than the consumed amount, the surplus will be carry forward to the next trading cycle. At the end of the year or when the contract is terminated, the surplus amount of energy will be sold to EVN at the rate mentioned in the power purchase agreement signed by the seller and EVN either at the end of the relevant year or upon termination of the agreement. Circular 16/2017/TT-BCT (“Circular 16”) dated 12 September 2017 of the Ministry of Industry and Trade (“MOIT”), requires a solar power generator, as the seller, to enter into a model power purchase agreement (in the form attached to Circular 16) with EVN or its authorized subsidiary. However, in practice, the model power purchase agreement has not been applied by EVN since the MOIT and the MOF had no guidance on the finalization, payment scheme and invoicing mechanism for such net-metering purposes. Other words, EVN claimed that it is very challenging for them to calculate and invoice the power based on net-metering scheme.

In order to address the net-metering issue, Decision 02 now has introduced a new payment scheme for rooftop solar power projects. In brief, the power generated by rooftop solar power project will be metered independently and paid by EVN to the seller. The power sold by EVN or its power company to consumers being rooftop solar power investors will be metered as usual like other households / consumers.

All rooftop solar power projects having their commercial operation date (operation and metering confirmation) prior to 1 July 2019 will enjoy FIT of US$9.35 / KWh under Decision 11. The price of rooftop solar power for following years must be adjusted according to the last year exchange rate between Vietnamese Dong and USD issued by the State Bank of Vietnam.
The MOIT shall promulgate technical regulations on solar power, regulations on measurement of energy of solar power projects and provide instructions on the connection, installation of electricity meters and the calculation of rooftop solar power project.

We will keep you informed with any new guidance from the MOIT for rooftop solar power projects.

*************

Please do not hesitate to contact Dr. Oliver Massmann under omassmann@duanemorris.com if you have any questions or want to know more details on the above. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.

VIETNAM AGRICULTURE FARMING 4.0 – Issues and Solutions – Impact of the Major Trade Agreements CPTPP, EUVNFTA and Investment Protection Agreement

A. Introduction

The biggest challenge in the agriculture and farming sector is to actually take the step to invest in new digital technologies. From a short perspective, this is associated with high costs for farmers. In the long term, however, it can increase yields and protect the environment significantly. So far, there have been three key phases in the development of agriculture and farming, namely mechanization, the introduction of mineral fertilizers and industrialization. The fourth phase is the currently evolving digitization. The positive effects of intelligent and digital agriculture can be significant.

When technological agriculture started (with utilization of satellite navigation and remote sensing to farm each square meter as efficiently and sustainably as possible), it seemed to be very unlikely for the ordinary farmer to gain benefits from it since the costs were too high. However, nowadays, it is possible for many farmers to collect a tremendous amount of data and use inexpensive small processors to make use of the information and to control equipment or monitor animals with it. Through digital smartness and connectivity, the agricultural machines can collect weather data, order spare parts or access detailed information about the field from a central, cloud based farm management software.

However, the technology development in the farming sector in Vietnam is still in its infancy. The digitalization has not reached Vietnams farming sector yet. The farmers are still using basic computers, standard internet information and basic information and communications technology in general. Many did not even reach the industrialization yet, using the telephone, light bulb, and the internal combustion engine. Still, a growing number of farmers is starting to adopt digital technology and data-driven innovations.

B. Precision Agriculture

Precision Agriculture (PA) is a key component of the agricultural digitization and means to apply the exact and correct amount of inputs like water, fertilizer, pesticides etc. at the correct time to the crop for increasing its productivity and maximizing its yields. It provides farmers with information to build up a record of their farm, helps to make decisions, promotes traceability and provides better marketing of farm products. Finally, it enhances the quality of the product itself.

Efficient farming must increase and the government should support investors of this sector. For instance, from 1900 to 1930 worldwide, each farmer produced enough food to feed about 26 people. In the 1990s, the so-called Green Revolution lead to new methods of genetic modification, therefore each farmer was able to feed about 155 people. The global population is increasing and by 2050 it is expected that the worldwide population will reach to almost 10 billion, thus food production must effectively double from the current magnitude. With the introduction of new technological improvements of precision farming, each farmer could be able to feed 265 people on the same acreage.

The first steps of PA came in the forms of satellite and aerial imagery, weather prediction, variable rate fertilizer application, and crop health indicators. The second wave collects the machine data for even more precise planting, topographical mapping and soil data. Another example of developed technology is the Geo-Localization. With this, field data can be captured. An analysis of soils, residual nitrogen, soil resistance and past harvests takes place. Further, by now, self-steering tractors do most of the work. The farmer only needs to intervene in emergencies. Through GPS connection, they spread fertilizer or plough land. Another notable innovation is a solar powered machine that identifies weeds and precisely kills them with a dose of herbicide or lasers.

C. Precision Livestock Farming

Precision Livestock Farming (PLF) aims to improve the efficiency of production. It helps the farmer and ensures the well-being of the animal through applying advanced information and communication technologies, targeted resource use and precise control of the production process. Through this technology, the contribution of each animal is streamlined. By this individual approach, the farmer can deliver better results in livestock farming. Those results can be quantitative, qualitative and sustainable.

PLF can significantly improve livestock farming. It can ensure animal welfare because the whole procedure is being documented on farms. Greenhouse gas (GHG) emission can be reduced and environmental performance of farms can improve. Further, PLF can facilitate product segmentation and reduce illegal trading of livestock products.

D. Benefits and obstacles

Utilizing new technology can deliver more yields and greater environmental protection. For instance, farms in Germany using advanced digital technology have reported higher yields per hectare while reducing nitrogen levels considerably, as well as cutting herbicide and diesel use by 10% – 20%. Farmers thus obtain a return on their investment by saving on water, pesticides and fertilizer costs. The second large-scale benefit is to reduce the environmental harm. Applying the right amount of chemicals in the right place and at the right time benefits crops, soils and groundwater, and thus the entire crop cycle.

However, there are rarely any examples of successful commercialization of PLF technologies. There is currently an abundance of information available to livestock managers, but it is not generally structured in a way that can be applied readily.

The farmers and investors hesitation might be due the involving risks. The noted risks include financial failure because of unforeseen environment or market circumstances, damage to the farm infrastructure such as soils and pasture, compromises to animal health and welfare, and increased stress on farmers from managing the allegedly complicated systems. Thus, it is important to develop a management system that ensures only the most essential procedures are carried out, they are all carried out correctly and consistently, and in a way that controls risk.

E. Solutions

For the implementation of digital farming in Vietnam, a good collaboration between the public sector, industry players and the farming community is significantly important. In specific, decision-makers and the national government need to ensure that the basic digital infrastructure for rapidly growing data flows, in terms of network coverage and transmission rates in rural areas, is put in place. Further, the government must set incentives that boost investment in agriculture, especially during low time commodity prices. Lastly, it is important that the farmers accept and are able to handle the upcoming change. Not only is their attitude important, but also to ensure that they have the necessary digital skills.

The international market can only be reached by more transparency and traceability. For consumers and retailers it gets increasingly more important to trace the origin of their food. How was the crop cultivated, under what conditions did the animal grow up and be bred? At the same time, the gathering of this information can simplify the farmer´s documentation on compliance with legislation. Lastly, farmers need the security, that ownership and control of their data are protected. For this, a regulating contract law, that states that the data generated on a farm is the property of the farmer, needs to be settled.

F. Outlook on Major Trade Agreements TPP 11, EUVNFTA and Investment Protection Agreement

In January 2017, US President Donald Trump decided to withdraw from the US’ participation in the TPP. In November 2017, the remaining TPP members met at the APEC meetings and concluded about pushing forward the now called CPTPP (TPP 11) without the USA. The provision of the agreement specified that it enters into effect 60 days after ratification by at least 50% of the signatories (six of the eleven participating countries). The sixth nation to ratify the deal was Australia on 31 October 2018, therefore the agreement will finally come into force on 30 December 2018. Recently, on the 12th November 2018, Vietnam has officially became the seventh member of the CPTPP.

The CPTPP is targeting to eliminate tariff lines and custom duties among member states on certain goods and commodities to 100%. This will make the Vietnamese market more attractive due to technology advances and the reduction of production costs. The effects of the TPP 11 promise great benefits for the agriculture sector in Vietnam and will support Vietnam’s national agriculture to transform into a self-sufficient and competitive sector. Furthermore, sustainable environments are a primary concern of the CPTPP agreement. With the Most-Favored Nation Treatment principle, the TPP 11 is ensuring a fair competition, which will attract new foreign investments as well as support for the agriculture sector in its restructuring process. Moreover, national farmers must adopt high-developed technologies in nutrients and animal healthcare to be competitive. This will lead to more safety and trust of the consumer in the agriculture market in Vietnam.

One another notable major trade agreement is the European Union Vietnam Free Trade Agreement (EUVNFTA). The EUVNFTA offers great opportunity to access new markets for both the EU and Vietnam and to bring more capital into Vietnam due easier access and reduction of almost all tariffs of 99%, as well as obligation to provide better conditions for workers.
Both agreements promise great benefits for the agricultural and farming sector in Vietnam. The food industry is a very hesitating industry in general. Naturally, farmers usually invest part of their gains in technology. However, they buy just the ordinary machinery instead of new technology like software or sensors. The trade agreements could lead to the end of this hesitation and finally demonstrate the economic benefits of the new technologies. Further, the co-ordination between researches, developers and technology suppliers of PLF tools could be streamlined.

To enable at least some parts of the FTA to be ratified more speedily at EU level, the EU and Vietnam agreed to take provisions on investment, for which Member State ratification is required, out of the main agreement and put them in a separate Investment Protection Agreement (IPA). Currently both the FTA and IPA are expected to be formally submitted to the Council in late 2018, possibly enabling the FTA to come into force in the second half of 2019.

Furthermore, the Investor State Dispute Settlement (ISDS) will ensure highest standards of legal certainty and enforceability and protection for investors. Every investor should use these standards. It is going to be applied under the TPP 11 and the EUVNFTA. Under that provision, for investment related disputes, the investors have the right to bring claims to the host country by means of international arbitration. The arbitration proceedings shall be made public as a matter of transparency in conflict cases.

Further securities come with the Government Procurement Agreement (GPA), which is going to be part of the TPP 11 and the EUVNFTA. The GPA in both agreements, mainly deals with the requirement to treat bidders or domestic bidders with 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 GPA in both agreements 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.

This instrument will ensure a fair competition and projects of quality and efficient developing processes.

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

Thank you very much!