ANNUAL VIETNAM BUSINESS

FORUM 2015

Hanoi, December 1, 2015

Annual Vietnam Business Forum 2015

ENHANCING ENTERPRISE
COMPETITIVENESS FOR GLOBAL
INTEGRATION

Hanoi, December 1, 2015

DISCLAIMER
The Vietnam Business Forum (VBF) is a structured and ongoing policy dialogue between the
Vietnamese Government and the local and the foreign business community for a favorable
business environment that attracts private sector investment and stimulates sustainable
economic growth in Vietnam.
This publication was created for the Annual Vietnam Business Forum on December 1, 2015 in
Hanoi.
The conclusions and judgments contained in this publication, as well as presentations made by
businesses representatives at the Forum, should not be attributed to, and do not necessarily
represent the views of, the VBF Consortium Board, or the VBF Secretariat, or its co-chairing
institutions including Vietnams Ministry of Planning and Investment, the World Bank Group,
and IFC - a member of the World Bank Group. These parties do not guarantee the accuracy of
the data in this publication and the aforesaid presentations, and accept no responsibility for any
consequences of their use.
This publication is distributed subject to the condition that it shall not, by way of trade or
otherwise, be lent, re-sold, hired out, or otherwise circulated on a commercial basis.

TABLE OF CONTENTS
TENTATIVE AGENDA
Section I: REVIEW OF BUSINESS CLIMATE
1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
1.7.

Vietnam Chamber of Commerce and Industry - VCCI

American Chamber of Commerce - AMCHAM
European Chamber of Commerce - EUROCHAM
Korea Chamber of Commerce - KOCHAM
Japanese Business Associations in Vietnam - JBAV
Australian Chamber of Commerce - AUSCHAM
Nordic Chamber of Commerce - NORDCHAM

Section II: INVESTMENT & TRADE, BANKING AND CAPITAL MARKETS

2.1.
2.1.1.
2.1.1.a.
2.1.1.b.
2.1.2.
2.1.3.

INVESTMENT AND TRADE

Position Paper of VBF Investment & Trade Working Group
Attachment 1 to the Position Paper Foreign Arbitral Awards
Attachment 2 to the Position Paper Petition from the Association of Vietnamese
Insurers on Decision 35/2015/QD-TTg
Report of Investment & Trade Working Group on Investment & Enterprise Laws
Investment & Trade Progress Report

2.2.
2.2.1.
2.2.2.

BANKING
Position Paper of VBF Banking Working Group
Banking Progress Report

2.3
2.3.1.
2.3.2.
2.3.3.

CAPITAL MARKETS
Position Paper of VBF Capital Markets Working Group
Talking points with the State Securities Commission on Capital Markets Issues
Meeting Notes with the State Securities Commission on October 27, 2015

Section III: AGRICULTURE, EDUCATION & TRAINING, HR AND GOVERNANCE & INTEGRITY
3.1.
3.1.1.

AGRIBUSINESS
Position Paper of VBF AgriBusiness Working Group

3.2.
3.2.1.
3.2.2.
3.2.3.

EDUCATION & TRAINING

Position Paper of VBF Education & Training Working Group
Education & Training Progress Report
Meeting Notes with Ministry of Education and Training on Decree 73 on Nov 13,
2015

3.3.
3.3.1.

HUMAN RESOURCE
Position Paper of VBF Human Resource Working Sub-Group
Page 1 of 2

3.3.2.
3.3.3.

Human Resource Progress Report

Meeting Notes with Ministry of Labor, Invalids and Social Affairs on Draft Decree
amending Decree 102/2013/ND-CP on August 6, 2015

3.4.
3.4.1.

GOVERNANCE & INTEGRITY

Position Paper of VBF Governance & Integrity Working Group

Section IV: INFRASTRUCTURE, AUTOMOTIVE AND MINING

4.1.
4.1.1.
4.1.2.

INFRASTRUCTE
Position Paper of VBF Infrastructure Working Group
Infrastructure Progress Report

4.2.
4.2.1.
4.2.2.

AUTOMOTIVE
Position Paper of VBF Automotive Working Group
Automotive Progress Report

4.3.
4.3.1.
4.3.2.

MINING
Position Paper of VBF Mining Working Group
Mining Progress Report

Section V: REPORTS FROM OTHER WORKING GROUPS

5.1.
5.1.1.
5.1.2.
5.1.3.
5.1.4.

TAX
Position Paper of VBF Tax Sub- Working Group
Tax Progress Report
Talking points with Ministry of Finance on Some Tax Related Issues
Meeting Notes with Ministry of Finance on Double Taxation Agreement on August
25, 2015

5.2.
5.2.1.
5.2.2.

LAND
Position Paper of VBF Land Sub-Working Group
Land Progress Report

5.3.
5.3.1.
5.3.2.

POWER AND ENERGY

Position Paper of VBF Power & Energy Sub-Working Group
Meeting Notes with Ministry of Industry & Trade and Ministry of Planning &
Investment on Power & Energy Related Issues

5.4.
5.4.1.

PORT AND SHIPPING

Position Paper of VBF Port & Shipping Sub-Working Group

5.5.
5.5.1.
5.5.2.

TOURISM
Position Paper of VBF Tourism Working Group
Meeting Notes with Vietnam National Administration of Tourism on Related Issues
on October 8, 2015

Section VI: APPENDIXES

6.1.

Summary Notes of Mid-term Vietnam Business Forum June 2015

6.2.

Prime Ministers Speech in Mid-term Vietnam Business Forum June 2015

Page 2 of 2

ANNUAL VIETNAM BUSINESS FORUM 2015

[Enhancing Enterprise Competitiveness for Global Integration]

Date and Time: 7:00 13:30, Tuesday, December 1, 2015
Venue: JW MARRIOTT HOTEL HANOI, No.08 Do Duc Duc Road, South Tu Liem Distr., Hanoi

TENTATIVE AGENDA
7:00 8:00

Registration

Opening Remarks
8:00 8:15

Ministry of Planning and Investment H.E. Mr. Bui Quang Vinh, Minister
International Finance Corporation Mr. Kyle F. Kelhofer, Regional

Manager

Vietnam Business Forum Consortium Mrs. Virginia B. Foote, Co-Chair

SESSION 1

Review of Business Climate

Vietnam Chamber of Commerce and Industry Dr. Vu Tien Loc,

President
8:15 8:45

American Chamber of Commerce Ms. Sherry Boger, Chairwoman

European Chamber of Commerce Mr.Tomaso Andreatta, Vice

Chairman

Korea Chamber of Commerce Mr. Ryu Hang Ha , Chairman

Japanese Business Associations in Vietnam Mr. Shimon Tokuyama,

Chairman

Australian Chamber of Commerce Mr. David W. Carter, National Board

Member

SESSION 2
Investment & Trade, Banking and Capital Markets

Presentation of Investment & Trade Working Group: Mr. Fred Burke and

Mr. Tran Anh Duc WG Co-Heads

8:45 9:45

Presentation of Banking Working Group: Mr. Nirukt Sapru WGs Head

Presentation of Capital Markets Working Group: Mr. Dominic Scriven

WGs Head and Mr. Terry Mahony, WGs Representative

Responses from the Government
Ministry of Planning and Investment
Ministry of Justice
Ministry of Science and Technology
Ministry of Information and Communications
Ministry of Finance
Page 1 of 2

Ministry of Public Security

Ministry of Transport
State Bank of Vietnam
State Securities Commission of Vietnam

9:45 10:00

Keynote Address by DEPUTY PRIME MINISTER H.E. Mr. VU VAN NINH

10:00 10:15

COFFEE BREAK
SESSION 3
Agriculture, Education & Training, HR, and Governance & Integrity

Presentation of Agri-Business Working Group: Mr. David Whitehead,

WGs Head

10:15 11:15

Presentation of Education and Training Working Group: Mr. Brian

O'Reilly, WGs Head

Presentation of HR SubGroup: Mr. Colin Blackwell, Sub-WGs Head

Presentation of Governance & Integrity Working Group: Mr. Phil

Newman, WGs Representative

Responses from the Government (40)

Ministry of Agriculture and Rural Development
Ministry of Education and Training
Ministry of Labor, Invalids and Social Affairs
SESSION 4
Infrastructure, Automotive and Mining

Presentation of Infrastructure Working Group: Mr. Tony Foster, WGs

Head

Presentation of Automotive Working Group: Mr. Wail A Farghaly, WGs

Head

11:15 12:00

Presentation of Mining Working Group: Mr. Bill Howell, WGs Head

Responses from the Government (30)

Ministry of Industry and Trade
Ministry of Finance
Ministry of Natural Resources and Environment
SESSION 5

12:00 12:15

12:15 13:30

Closing Remarks
World Bank in Vietnam Mrs. Victoria Kwakwa, Country Director
Vietnam Business Forum Consortium Dr. Vu Tien Loc, Co-Chair
Ministry of Planning and Investment H.E. Mr. Bui Quang Vinh, Minister

LUNCHEON
VIP Lunch By Invitation Only
Event Room 3 JW MARRIOTT Hanoi Hotel
Networking Lunch
JW Caf Restaurant Area & Fountain Area

Page 2 of 2

Section I

REVIEW OF
BUSINESS CLIMATE

THE VIETNAM CHAMBER OF COMMERCE AND INDUSTRY (VCCI)

RECOMMENDATIONS
Vietnam Business Forum 2015
Ha Noi, December 1,2015

Prepared by
The Vietnam Chamber of Commerce and Industry
I.

RECOMMENDATIONS FOR CUSTOMS ADMINISTRATIVE REFORM

The 2015 Survey of Business Satisfaction with the Customs Administrative Procedures is a
collaborative effort of the Vietnam Chamber of Commerce and Industry (VCCI), the General
Department of Vietnam Customs (GDVC), and the Vietnam Governance for Inclusive Growth
project (USAID GIG). The survey received 3,123 responses from businesses engaging in regular
import export activities. This paper documents a summary of recommendations by businesses
as a result of the mentioned above survey.

Summary: In 2015, the Customs Service has continued its reform efforts towards facilitating
businesses. Remarkable progress has been recognized by the business community concerning
the improvement of the customs legislation system, transparency of access to legal
information and customs procedures as well as prompt and effective support of customs
authorities. Businesses are expecting stronger and more drastic reforms of the Customs
Service in many areas such as improving quality of customs legal normative documents,
further simplifying and making public and transparent of administrative procedures, improving
tax related processes and procedures, focusing more on specialized inspection, enhancing the
effectiveness of cooperation between customs authorities and other agencies involved in the
implementation of customs procedures for businesses.
In 2015, the Vietnam Customs has made continued efforts for reform and modernization in
support of compliance with the international standards, practices and commitments. Many
synchronized measures have been actively undertaken by the Sector in term of completing the
customs legal system in the direction of simplifying the administrative procedures,
implementing the automated customs clearance system VNACCS/VCIS nationwide,
strengthening the employment of information technology (IT) through the application of
electronic signatures, electronic paymentand receipt of cargo electronic manifestsat seaports;
expanding the application of barcodes in port monitoring... and implementing the Declaration
of Customer Service revised in 2015, undertaking proactive measures to prevent negative
affairs and corruption. These are the specific measures being adopted by the Customs Service
to realize the reform goals in the Customs Development Strategy until 2020, the Plan for
reform, development and modernization of the Customs Service for the 2011-2015 period,
especially at Resolution No. 19/2014/NQ-CP and Resolution No.19/2015/NQ-CP of the
Government to reduce Vietnams customs clearance time to the level of the ASEAN-6 countries
Page 1 of 12

by 2015 and of the ASEAN-4 countries in 2016 and at Directive No.24/CT-TTg dated 08/05/2014
of the Prime Minister on strengthening the tax and customs administrative reform and
managementto further promote the customs modernization.
These measures have achieved remarkable results, helping lower the costs and time
ofcustoms clearance of goods for export and import businesses. However, the survey also
noted the fact that the business community still has high hopes for more drastic and stronger
reforms of the customs service acrossvarious aspects. Below is a summary of specific
recommendations by businesses for the Customs in the time to come:
1. Improving quality of customs legal normative documents
The quick revision and finalization of the provisions of Customs legislation in recent years has
created favorable conditions for businesses engaging in import and export activities. However,
the issuance of amendments, supplements and replacements takes place so quickly, causing
the risk that no sooner had many enterprises got the hang of old circulars, new circulars were
already issued, (e.g Circular 22/2014/TT-BTC took place in a very short time was already
replaced by Circular 38/2015/TT-BTC).
Besides, there exists the fact that those documents are too long and their provisions are
unclear and vague, making it easier to be differently interpreted and applied by customs
authorities and businesses. Given quality of such documents, it also caused inconsistent
implementation of customs procedures by different customs units and officers. Some amongst
them stick to such rigid regulations, for example concerningquality check of leatheretete on
the seat of mobility disablity chairs. Some do not fully comply with regulations of dossiers &
documents as prescribed but require businesses to present additional documents, causing
difficulties for businesses.

Recommendations: It is necessary to improve the quality of customs legal normative

documents which should have explicit contents, creating a unified understanding between
customs authorities, other relevant agencies and businesses.
2.

Further simplifying some customs procedures

Regulations on customs procedures: Some regulations on customs procedures are unclear

and unreasonable, say, procedure of cancelling customs declaration, procedure of on spot
import and export; the analysis and classification of goods take too long and require too many
samples; the regulation on time for temporary import for re-export of vehicles is too
cumbersome; the regulation on deadline to submit quality check results is not suitable with
the goods of heavy machinery, large shipments; as well as the regulation that does not allow
revision of location codes is not reasonable.

Actual inspection of goods and customs supervision: The procedure of implementing actual
inspection and customs supervision at many local customs agencies remains unclear. It is
suggested by businesses that this procedurebe revised in order to avoid inadequacy for businesses

Post-clearance checks: This procedure is assessed by businesses as inadequate as this is

required even for the declaration that already went through actual inspection. The settlement
of difference in terms of inventory data by customs authorities and businesses for the type of
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processing and export production is not reasonable. That the customs authorities collect tax
arrears on this difference is not consistent with reality, causing businesses dissatisfaction.

Reporting on liquidation for processing and export production: This procedure is not provided
with specific guidelines. Many businesses said they do not know how to make reports and it
takes them lots of time to do it and so they prefer the old liquidation procedure better.

Regulations on customs procedures implemented by amongst customs authorities and by

other management agencies are not consistent, for instance: it isnt required by customs
authorities to have certification on declaration form while it is required by tax agencies to do
so.
3.

Improving tax related processes and procedures

Tax-related policies have some irrational points: many businesses reported on irrationalities in
regulations concerning the tax on goods temporarily imported for re-export and or goods
imported via express courier and sold through contract with processing enterprises. The tax
reduction and exemption procedure that is stipulated by the Ministry of Planning and
Investment in Circular No.04/2012/TT-BKHT remains unclear, even for the category of goods
that can be locally produced. The regulation of tax payment prior to customs clearance for
good compliants is not reasonable either, which is not encouraging for businesses. It is
suggested to reconsider the time for tax payment for the input materials for export in the case
of production duration over 275 days; the procedures of tax exemption are cumbersome & time
consuming for businesses that have to make many trips back & forth to revise and provide
additional documents.

Circulation of tax payment documents between bank, treasury and customs is not good,
causing inconvenience to businesses in proving that they already paid tax for the opened
declaration form. The working time of the bank and customs agency regarding the
implementation of this procedure is not well coordinated: The declaration is already made but
tax cant be paid for clearance as the banks close early on weekdays and are not open on
weekends, public holidays, or Tet holidays.

Identification of HS code and tariff. There still exists the fact that a same goods item is subject
to different HS codes at different customs branches, causing troubles for many businesses.
Vietnam participates in many trade agreements and there are corresponding import - export
tariff that should be timely and comprehensively disseminated to enterprises so that they know
and benefit from the signed agreements.

Prices for tax and fee calculation. Despite new regulations, price consultations have been done
correctly. There remains the cases where price consultation is required for every importation
even when the enterprise import the same goods with stable price determination factors. The
price Database is not transparent and open to for enterprises to check on their own. Customs
fee is not significant but businesses have to take time for such payment procedures.

Certificate of origin for imports. Many businesses report that the signatures on preferential
C/Os are not timely updated, unlike the sample signature, and take time to verify; Form D C/O
is received after the goods ... In such cases, the customs authorities often require businesses
to pay taxes at high rates and receive refund later upon having verification results, the
procedure for which is very complicated. The procedures for checking the C/O are not
Page 3 of 12

consistently implemented across different units. For instance, one C/O is accepted as valid at
the dossier receiving section, but is not accepted by the sections of reexamination or postclearance checks and businesses are required to pay tax arrears.
4.

Improving the effficiency of methods and means of customs management, professional

skills, attitudes of customs officers
VNACCS system has some shortcomings yet: This system is evaluated by businesses to have
many advantages, but some shortcomings remain, say, wrong notification of pending customs
declaration, tax & fee payment; failure to declare re-export of temporarily imported equipment
under the category of G23, S0218-SS1-0000 error (failure to browse/select export license);
overlapping of code contents; liquidation errors (data is inaccurate & ineffectively used, which
is very time consuming for businesses); import tax and VAT are unclear & duplicated; entry for
3 digits of the declared weight is not allowed & places of figures in USD is not suitable with
international standards; declaration only allowed after 24 hours of adjustment of tax
enforcement is unreasonable. The declaration form is difficult to see & its layout looks
confusing, which makes it very easy to do wrong; the section of code of reference legal
documents & digital signatures is complicated for the shipments that have many goods items.
There are many problems in using the customs declaration software: When declaration errors
happened, businesses asked for help from customs agency that forwarded the question to the
Thai Son software company. But when the businesses reached Thai Son, this company said
they only provided terminal softwares, not customs management softwares. Businesses were
very unhappy with this problem.

Customs information technology infrastructure has some limitations yet: The infrastructure of
information technology is not synchronized with slow traffic and constantly jammed network
and errors; which results in slow updates on tax payment of businesses, sometimes for 2 3
days; the 3G internet is not available at remote border gates, which is very difficult for
businesses to open or revise declarations...The lookup of tax debt on the Portal of General
Department of Customs may cause the risk of disclosing information of businesses. It is
recommended to provide a single user and password (not log in using indentity card and tax
code). In case of forgetting password, re-registration is required and password will be sent to
the email that is registered before.

Spirit of service, professional competence of customs officers: Some customs officials still
harass and cause troubles for businesses in the process of implementing customs
administrative procedures; some customs officers are assessed as weak at professional
competence and limited legal knowledge about using HS code of goods in specialized
technical areas,inconsistent in implementation,low technical capability, limited
knowledge of regulations and documents, different explanation by different customs
officers, provide verbal guidance only, refuse to sign on professional form to avoidhaving to
take responsibility; some customs officers are not polite,not enthusiastic or cooperative in
their support for businesses, or sometimesindifferent, insensitive to the difficulties and loss
of businesses, undemocratic and harrassing businesses.
5. Problems concerning specialized management of imports and exports
Currently, there are too many documents issued by ministries and agencies concerning
specialized management of export and import goods. Many provisions are unclear with constant
changes; the validity of newly issued documents is too short which makes it difficult for businesses
Page 4 of 12

to fully update. The contents of some regulations are incomplete and confusing to businesses (e.g.
Decision No. 11 039/QD-BCT of the Ministry of Industry and Trade stipulates that the import of
relays is subject to examination and energy stamping but does not specify which agencies or
organizations are in charge of this, the businesses therefore dont know where to go to for
following this procedure....).The contents of regulations on categories of goods subject to
specialized examination is fragmented, unclear and difficult to find, resulting in different
understanding and explainations between customs authorities and businesses, or amongst
different State management agencies, for instance the regulation concerning the weight of
container trucks, tractors, etc.

Regulations of specialized management and examination are overlapping: One item is subject to
both product certification and examination of each individual import shipment. The same product
item is, all the time, subject to application for permits, quality check. Too many licenses/permits
are required and repeated for many times.

Scope of specialized examination is too wide and unncessary in many cases: For instance, it is
required to do specialized examination for the products imported, packed with other products
and exported (e.g. the sauce bags are imported, and then packed with locally produced prozen
potato products and later exported); examination, performance and energy stamping are
required for specialized equipment and materials of mineral & coal industry which have
special high technical and safety requirements and are under management by specialized
agencies; quality check is required for materials, equipment....imported in service of
processing contract of ship building for export); the same thing happens to the export of
fertilizers; forest service procedures are required for the export of cinnamon oil and quality
check is even required for the goods that already go through international inspection...

Specialized inspection time is too long, for example, quality check of steel as defined in
Circular 44 / TTLT BCT-BKHCN dated 31/12/2013 lasts 2-4 weeks; time for quality check of
seed corn is 7 10 days long; time for examination and certification of food safety by health
agencies is too long, which results in failure to ensure the deadline of submission to the
customs within 30 days. It takes about 15 days to get the permit from the Telecom Bureau for
electronic equipment...Specialized inspection results amongst different agencies and units are
not consistent. This agency says yes while another says no to the same results.

Documents are not conforming to reality, for example, the list of machinery, equipment, raw
materials that can be domestically produced stipulated in Circular 04/2012 /TT-BKH dated
08/13/2012: The list is not concrete, too general and contains many items which either can not
be produced domestically or can be produced but o do not meet the quality requirements for
high-tech manufacturing sectors (eg in the oil and gas field).

Lack of coordination and information sharing amongst agencies: This results in the fact that
businesses, for many times, have to provide the same information and documents to many
agencies. For instance, many paper works have been reduced and cut thanks to the electronic
customs system but this is not synchronized and recognized by other relevant agencies, like
banks and tax authorities. Some papers are, therefore, not provided by the customs service but
still required by banks or tax authorities.

Page 5 of 12

Recommendation: The customs authorities should share information and data via the network
with specialized management and inspection agencies to reduce the burden of paperwork,
time and costs for businesses. It is recommended to remove the requirement of state quality
check for those goods that already go through international registration inspection. Before the
issuance of any regulations, reality check should be done; application of any new regulations
should be announced on the media at least 3 6 months before their effective date to avoid
damages and losses to businesses.

The quarantine certification of imports exports is currently causing troubles for businesses.
For the exports since 1/1/2015, it is required by the phytosanitary agency that the exports
including agricultural products, forest products such as cashew nuts, cassava, wood chips,
coffee ... must be subject to phytosanitary certification before being exported, even where it is
not required by the foreign side. This results in increase in customs clearance time and costs
(including quarantine cost, storage cost, cost of ship missing, labor cost,..) for businesses.
Time of quarantine check is too long (it was reported by some businesses as 15 days);
quarantine check cost is unreasonable (phytosanitary control additionally charged for
businesses is 14,000vnd/ton for export starch); duplication check are done by agencies,
causing difficulties for businesses; colostrum powder milkis subject to both animal quarantine
(implemented by animal health agency) and food safety control (health agency). Many
requirements by state agencies are impossible for businesses to comply with, for instance:
pressed wood pallets are not subject to quarantine control and fumigation under the
international convention (ISPM15), so businssess can not acquire the deed from suppliers but
businsses are still required to submit this document to the quarantine agency under the
Circular Circular 30/2014/TT-BNN; the quarantine agency also require certification of plant
origin for the goods that are stuffed or packed with wooden materials....

Recommendation: It is recommended by many businesses to remove the requirement of

export quarantine in the case where it is not required by foreign buyers in the exporting
countries. In considering this deregulation, it is proposed to allow businesses to submit the
quarantine certificate after the goods have been cleared/ or after the ship has departed in
order to avoid ship missing ( especially onSaturdays, Sundays and holidays)

Declaration of chemical substances: it was reported by many businesses that many products
that are regular exports have to be subject to declaration all the time. One cheminal substance
having many different colors is required by the customs agencies to acquire separate
certification for each individual color. Currently, only Bureau of Cheminal Substance is allowed
to grant certification, which is not convenient to businesses. It takes too long time to receive
results (5- 10 days, or even 3 4 weeks in case of errors); the requirement of having to acquire
certification before customs clearance is troublesome to businesses, especially for import
shipments from near markets (E.g import from Thailand, shipment takes 3 days only and
businesses, therefore, cant acquire certification before customs clearance); certification often
has mistakes regarding product name or invoice number...);

Recommendation: it is recommended by businesses to annul the procedure of declaration of

chemical substances, arguing that the objectives of this procedure is unclear and increases
costs (official fees, storage costs, informal charges)for businesses; allow submission of
Page 6 of 12

certification within 15 days after clearance of goods; apply electronic declarationand

certificationto better facilitate the compliance with this procedure.

In summary, the survey result of business perception in 2015 revealed that the Customs
Service has worked out many solutions to reform administrative procedures in order to
facilitate import-export operations - contributing to the economic development. Electronic
customs procedures are implemented but because its effectiveness is related to the
management responsibility of many ministries and agencies, the declaration system remains
complex and unsynchronized. The ministries and the Customs Service should improve
coordination efficiency, creating more favorable conditions for businesses in import and export
activities. At the same time, the Customs Service also need to strengthen professional training,
improve behaving culture for public servants so as for the system to operate more efficiently.
II.

RECOMMENDATIONS FOR TAX REFORM

The Vietnam Chamber of Commerce and Industry (VCCI) in coordination with the Prime
Ministers Advisory Council of Administrative Procedures Reform, the World Banks International
Finance Corporation and the General Department of Taxation have conducted the survey on
Evaluation of tax administration reform: Businesses satisfaction levels in 2014. There were
2,542 responses received from businesses for the survey carried out on national scale for the
first time on this tax field. This paper documents a summary of recommendations by businesses
as a result of the mentioned above survey.
Dramatic changes can be seen in tax policy and legislation as to implement the Governments
Resolution No.19 on improving business environment and enhancing national competitiveness
since mid-2014. This has been demonstrated by the issuance of a series of documents
including Circular No. 119/2014 / TT-BTC dated 08/25/2014 of the Ministry of Finance
amending and supplementing 07 circulars on taxes; Decree No. 91/2014 / ND-CP dated 01 /
10/2014 amending and supplementing 04 decrees on taxes, Circular No. 151/2014 / TT-BTC
dated 10/10/2014 guiding the implementation of Decree No. 91/2014 / ND-CP, Law No. 71 /
2014 / QH13 amending and supplementing a number of articles of the Laws on taxes (05 Laws),
Decree No. 12/2015 / ND-CP dated 12/02/2015 of the Government detailing the implementation
of the Law amending and supplementing some articles of the Laws on tax and amending and
supplementing some articles of the decrees on taxes..Etc.
These tax reform efforts have promoted the positive impacts to the business community. A
series of important changes including the deregulation of control for the cost of advertising
and promotion ... of businesses, the deregulation of having to submit a list of invoices of goods
and services sold or purchased when filing dossiers of corporate income tax, the extension of
subjects eligible for quarterly declaration of VAT, the deregulation of the businesses having to
adjust input VAT when they cannot acquire payment documents from bank on the due date, the
revision of regulations to allow businesses to pay tax by quarter, and settle by year-end ... are
working well in practice and contributing to dealing with difficulties, promoting investment,
production and business for businesses. The application of electronic tax declaration and
payment has helped reduce time and costs for businesses.
However, businesses still have expected the tax service to continue its efforts for further
reform. The tax policy and legislation should be developed in a transparent, clear, and easy to
Page 7 of 12

implement fashion. It is needed to enhance the effectiveness of information dissemination to

support businesses to timely update on new tax policies. The tax refund for businesses is to be
conducted more quickly. The tax sector should enhance IT applications, but need to ensure
stability in the use of declaration software by businesses. Besides, it is necessary to create the
interconnection between the tax authority and other state agencies concerned, and enhance
transparency in the work of inspection and examination of businesses and improve the quality
of tax cadres and civil servants.
1.

Developing tax policies and legislation in a transparent, clear and easy for
implementation
Many businesses reported on the situation of many tax laws being unlikely to be directly
applied in practice. Very often, it requires the issuance of too many circulars, dispatches,
guidelines for the tax laws to be implemented. This makes the tax legislation system way too
complex, easy to be interpreted in different ways, making it difficult for businesses to comply
with as a result.
It was said by many businesses that some tax laws are currently unclear, difficult to apply,
lacking of consistency between businesses and tax authorities, and between tax authorities
and other agencies concerned, or even within the tax service department itself. For example, a
number of provisions relating to the determination of the reasonable expenses to be deducted
when calculating corporate income tax are not clear, and not suitable with the businesses
requirements of being vibrant and competitive. Similarly, provisions concerning the time of
issuing invoices is not consistent with the business practices. The regulation on the
abbreviated names and addresses on the bill has not yet been clearly defined. This might
causes lots of troubles because many businesses or consumers have very long names and
addresses, even there is insufficient room to print the bills with the smallest font size words,
and the handwriting if used often has errors. It is needed to have a specific list of words to be
abbreviated, even truncated and if a tax code or an industry code is available, these codes
should be used while other information doesnt matter much. Regulations related to the
personal income tax are yet less favorable. Personal income tax should only be settled for
cases where arising payable tax, there is no need to declare or settle for the cases where no
taxes are payable.

Recommendation: The tax policies and legislation need to be developed in a transparent, clear
and easy to implement fashion as well as to be highly stable and predictable. The guidelines
need to be concrete, with examples being provided and easy for businesses to grasp. After a
new document is issued to amend, revise, supplement or repeal the old regulations, it should
be codified into a system so that businesses just need to simply refer to the final text to comply
with and dont have to go through a series of previously issued versions.
2.

Strengthening communication, information support for businesses concerning new tax

policies and legislation
Relatively quick changes in tax policies and procedures are making it difficult for businesses to
effectively grasp information and comply with those regulations. Although many changes are
needed which tend to facilitate the businesses, but these amendments, if codified and timely
updated to businesses, will help businesses to capture new documents and comply with in an
easier way.
Page 8 of 12

Many reported that the tax information was slow and difficult to access. Some modes of
information dissemination were yet less effective, for instance, dispatches and documents sent
by some tax departments by post to the businesses are often delayed, or not in time. Training
courses are still organized by the tax service concerning the new issuance of tax circulars,
decrees, and policies new, but some businesses do not receive any notifications and
information about those courses. Many businesses update themselves through the sites and
notifications from consulting firms, saying that they rarely get updated by the tax authorities.

Recommendation: The tax authorities at all levels need to innovate in their activities of
communicating, propagating and updating on new tax policies for businesses. Tax agencies
should schedule training sessions to make it convenient for businesses to fully participate
without affecting their production and business activities. The local tax departments should be
more positive, more proactive to timely update businesses on changes in tax policies and
legislation. It is suggested to notify businesses via email on the issuance of new tax policies
and legal documents. Before the tax policies and legislation take effect, it is necessary to
timely notify tax payers so that they are aware of and find it easier to comply with.
3. Speeding up the tax refund to businesses
Many businesses reported on slow receipt of tax refund. The settlement of tax documents can
be fast but businesses have to wait for many months before they can actually receive the
refund money. According to regulations, the tax refund period is within 12 months and even
under the new regulations, the refund can be even made on monthly or quarterly basis for the
export businesses whose to be deducted VAT is of up to 300 million dong, the enforcement in
fact remains troublesome for businesses due to long waiting time. This does not correspond
with the fact that businesses are to be immediately fined if they make late payment of taxes.

Recommendation: The tax refund to businesses should be made quickly, to solve problems and
create the favorable conditions for businesses.
4. Implementing inter-connection between the tax authorities and relevant state agencies
As it was reflected by many businesses, business related administrative procedures
implemented by the relevant government agencies are not connected effectively. Data between
tax departments, tax branches and department of planning and investment remain
unsynchronized and businesses, therefore, have to prepare many declaration forms and
provide a same kind of information for many different state agencies while these agencies may
share the same database with each other. The relevant authorities (such as investors, State
Treasuries at all levels ...) are responsible for issuing payment receipts to the taxpayers and
notify directly the tax authorities. The amount paid by businesses at the treasuries are not fully
updated to tax authorities but the businesses must provide documents to prove them having
paid. There are some cases where businesses already paid taxes but it is still reported on the
system of tax authorities as tax debts, affecting the interests and reputation of the businesses.

Recommendation: It needs to be inter-connected and timely shared the information amongst

tax authorities, and between tax authorities and other relevant agencies in the process of
settling procedures for businesses.

Page 9 of 12

5. Simplifying the tax declaration forms

Many businesses rated tax declaration forms as complicated and cumbersome with some
duplicate information and unnecessary indicators. The forms use many jargons which are
difficult to understand for businesses, while they do not receive timely instructions from the
tax authorities. Some forms are constantly changed along with the changes of circulars despite
negligible changes in the contents of these forms, which is unnecessary and causes troubles
for businesses, making them to spend more time on studying and updating on these changes
while more mistakes may occur also.

Recommendation: It is recommended that tax authorities develop simpler, easier to

understand forms and remove unnecessary indicators, especially should limit constant
changes in the forms. It is not necessary to issue a new form if the old form is still usable
under the new regulations. Illustration examples and attached forms should be provided
available on the website of tax authorities concerning each individual problem. A tax officer
with good professional competence should be assigned to work as a telephonist to provide
necessary guidance to businesses. Workshops should frequently be organized to update
businesses on new tax policies and answer their questions and complaints concerning tax
related issues. Additionally, online tax declaration should be employed as a measure to
minimize errors and misunderstanding about the forms. The form templates should be
provided with consistent guidance for businesses to avoid unnecessary confusion
6. Implementing consistently tax procedures
There currently exists inconsistency regarding the sequences and procedures of handling work
amongst departments in some local tax authorities, as well as between the tax authorities and
other relevant agencies. This is the main reason leading to different guidance provided to
businesses, causing difficulties in the process of implementing corporate tax obligations. For
example, there is no consistency between the customs authorities and the tax authorities in
dealing with the amount of tax payable for the imports or inconsistency between the tax
authorities and the banks concerning electronic tax payment, etc.

Recommendation: It is necessary to better define the sequences and procedures of handling

work between higher and subordinate tax authorities, and between tax authorities and relevant
authorities. Also, it is needed to anticipate possible conflicts once applicable and provide
redress mechanism.
7. Performing inspection activities in a transparent manner
Tax inspections remain a burden for many businesses. According to some businesses,
prolonged tax examinations and inspections are troublesome and costly for them. It was
reported that before tax inspections were conducted once every two years on average but now
tend to be done once a year. It was also said that tax related inspections are carried out so
frequently but repeated, which is time consuming for businesses. Currently, too many different
state agencies are authorized to carry out tax related inspections. Tax authorities do not timely
notify and provide adequate guidance to businesses while they impose rigid administrative
sanctions when inspecting businesses. Many businesses said that their objectives are to do
business, create jobs and make profit which later is contributed to state budget. Therefore, the
State management agencies that perform inspections/examinations should focus on
supervising and reminding and creating favorable conditions for businesses.
Page 10 of 12

Recommendation: It is recommended by businesses to develop a clearer and more

transparent inspection process. The selection of sample for inspection should be done
scientifically to avoid that some same businesses are inspected for too many times. Also, time
for inspection visits should be shortened to avoid affecting business activities
8. Applying a stable tax declaration software
The tax declaration software is assessed to have many advantages but the support for using
this software have not met the needs of businesses. Despite continuous upgrades, the software
still fails to facilitate the data export from the accounting software of businesses to the tax
declaration support software (for example, the data of revenue can be well exported from the
accounting software to VAT declaration software, but as for the declaration of special
consumption tax, the data fail to be exported or it takes lots of time and has to go through
many steps as the software does not support automatic export to the declaration form but
requires manual inputting)
Many businesses also said that the tax declaration software still incurred errors, the old data
is often lost when new version is updated. Barcodes for submitting a tax declaration cant be
scanned from time to time. In addition, the software has not been updated as much as to keep
up with the changes of forms issued along with the guiding circulars of the Ministry of Finance,
many forms are yet missing and paper versions are listed instead . This leads to incorrect
declarations, and often it is late after it is revised. Some businesses said they were even fined
because of this situation. The declaration support program yet lacks many items, so online
declaration is impossible, for example, there are items for financial statement, documents for
personal income tax withholding, or fee forms... Therefore, besides online declaration,
businesses still have to directly submit some reports. It can be said that despite changes,
nothing much is done to actually help save time and cost for businesses and tax authorities.
There is no delivery confirmation on the software, so businesses are easily prone to violation of
time limit whether they submit on time or not.

Recommendation: The tax service is recommended to first focus on accounting operations to

be really complete and stable before any application of information technology to facilitate
businesses. Many businesses suggested that it is needed to improve the software to better
support businesses to declare more easily and add to the software the forms that are to be
filled regularly by businesses. Whenever one new regulation is issued, relevant support should
be updated on the software. And when the software is upgraded, it is necessary to notify
businesses so that they know how to declare correctly and avoid having to declare again and
again.
It is also proposed by most businesses to upgrade transmission lines to ensure quick and
smooth declaration. The declaration software should supplement and upgrade forms and
mode of online submission of reports instead of businesses having to make submissions
directly at the tax offices. In the meanwhile, submission of report should be allowed via email
with registered addresses and digital signature. The software also needs to be upgraded to be
compatible with different browser types to better enable the declaration. In addition, the
deadline for declaration should be extended and fine on late submission can be imposed later
accordingly.

Page 11 of 12

9. Regarding civil servants

The quality of tax officers is assessed as the critical factor determining the quality of tax
administrative procedures. Therefore, the tax service should prioritize recruitment of
competent and virtuous employees. It is necessary to regularly provide training for capacity
building for tax officers in order to have a strong and competent staff. This service is easily
prone to the abuse of power, strict sanctions against acts of harassment of taxpayers should,
therefore, be imposed.

Page 12 of 12

American Chamber of Commerce in Vietnam

AMCHAM STATEMENT
Annual Vietnam Business Forum
Hanoi, December 1, 2015

Presented by
Ms. Sherry Boger
Chairwoman, AmCham Vietnam
Prime Minister and Ministers,
Business leaders
Distinguished Delegates
Ladies and Gentlemen
1. This is a key moment for Vietnam, the beginning of a new era with the XII Party
Congress early next year and leaders for 2016-2020.
2. Vietnam has succeeded at attracting FDI and increasing trade. U.S. - Vietnam trade in
2015 will likely reach over $45 billion, another annual increase of over 20%.
3. The TPP is a promise, not yet a reality. It covers many issues we have discussed for
years at VBF. It offers a framework and focus for efforts in 2016.
Regulatory Coherence, Transparency and Meaningful Public Comment (TPP Chapter 25) is
an essential first step to implement Vietnams commitments for public comment on
proposed administrative regulations from citizens and businesses that would be affected.1
Education, a key development driver (TPP Chapter 23). We need work-ready graduates,
science and technology, research, and innovation. AmCham companies are involved in a
number of education projects. We encourage the government to lead a large-scale
transformation to scale HEEAP 3.0 nation-wide, supported by both Vietnamese and FDI
business associations and companies.
Very few Vietnam enterprises are part of global supply chains. Although Vietnam has
attracted FDIwith significant export growth,more than two-thirds of Vietnams exports are
from FDI factories; and imported materials and components account for 90% of the export
value. AmCham companies, together with VCCI and other business associations, are
cooperating in supplier development so that Vietnam companies will qualify to join global
supply chains.
Efficient Customs Administration and Trade Facilitation (TPP Chapter 5) is essential for
1

This was a key point in the Prime Ministers New Year Message on Jan 1, 2014" interaction
between State agencies, between the State apparatus and socio-political organizations .Dialogues with the people and businesses
to promote closer relationships between the State, cadres, civil servants and the people and better match policy and legislation
with reality." From the Prime Ministers New Year Message, January 1, 2014.

Page 1 of 2

Vietnam enterprises to join global supply chains. We have established a Vietnam Trade
Facilitation Alliance, (VTFA), in cooperation with VCCI and leading export industry
associations, to provide technical assistance to build capacity for Vietnam Customs to
implement TFA commitments.
4. We highlight two concrete targets from the many issues covered in our written
statement.
Technical Barriers to Trade a specific example Vietnams restrictions on imports of
Used Machinery and Equipment (TPP Chapter 7)
Circular 23/2015, issued on Nov 13, 2015, with entry into effect on July 1, 2016(to replace
Circular 20/2014) is universally opposed by FDI and domestic business associations. It
would cause delays in customs processing, have a negative impact on modernization and
industrialization, especially of supplier industries, discriminates against domestic
industries, and is not in accordance with Article 2.2 of the WTO Technical Barriers to Trade
Agreement or the TPP Chapter on TBT.
We raised this issue in many consultations and at the June VBF. We againrequest that
restrictions on imports of machinery and equipment based on any arbitrary time standard
be removed, administrative procedures to ensure compliance with international standards
of safety, energy savings and environmental requirements be simplified and incorporated
into the National Single Window project, and any quality standards be based on
international standards.
Visas: Temporary Entry for Business Persons (TPP Chapter 12)
Vietnams revised Immigration Law became effective on January 1, 2015. According to some
provisions, U.S. citizens will receive Vietnam visas that have a three-month validity, and a
single entry, while Vietnamese citizens receive U.S. visas with multiple-entry, one year
validity.
We raised this issue at the June 2015 VBF and heard in July that U.S. citizens would receive
one-year validity, multiple-entry visas, but we have not yet seen any. We hope that this issue
will be resolved soon.
5. Conclusion
We appreciate the guidance in the Prime Ministers 2014 New Years Message, in
Resolutions 19/2014 and 19/2015 and this opportunity for " interaction between State
agencies, between the State apparatus and socio-political organizations .Dialogues with
the people and businesses to promote closer relationships between the State, cadres,
civil servants and the people and better match policy and legislation with reality."
I wish participants good health, happiness and success.
Thank you.

Page 2 of 2

American Chamber of Commerce in Vietnam (AmCham)

AMCHAM STATEMENT
Annual Vietnam Business Forum
Hanoi, December 1, 2015

Presented by
Ms. Sherry Boger
Chairwoman
Prime Minister and Ministers,
Business leaders
Distinguished Delegates
Ladies and Gentlemen
I am pleased to participate in this important VBF Meeting.
2015-2016: A WATERSHED MOMENT IN TIME
We are now at the end of a very meaningful year, and the beginning of a new moment for
Vietnam. In April this year, Vietnam celebrated the 40th Anniversary of peace. In August, we
celebrated the 70th Anniversary of Vietnams National Foundation Day. This year also
marked the 20th Anniversary of the normalization of relations between Vietnam and the
United States, and the 15th Anniversary of the Vietnam-U.S. Bilateral Trade Agreement.
We are half way through the Social Economic Development Strategy 2011-2020, where the
objective was to move from a low-income, agricultural country to a middle-income,
industrialized country by 2020, based on modernization, industrialization, and integration
into the international economy. In October, Vietnam joined other TPP countries in reaching
agreement on a 21 Century agreement that will help achieve that objective. And early next
year, Vietnam will convene its XII Party Congress to elect leadership for the coming five
years, and to plan specific programs and activities to achieve the 2020 objective of becoming
a middle-income, industrialized country.
st

We share Vietnams vision for 2020: a middle-income, industrialized country, a thriving

commercial environment with efficient trade and robust local and foreign investment, a
coherent regulatory environment that is efficient, transparent, logical, predictable, and
consistent; where investors, business persons and tourists can enter Vietnam with
minimum cost or inconvenience; where legitimate businesses local and foreign, can quickly
establish a business; hire and develop talented staff at a fair and competitive wage; quickly,
easily and confidently determine customs and tax liabilities; and where supply chains are
speedy, reliable, and cost effective.
VIETNAM HAS SUCCEEDED AT INTEGRATION INTO THE INTERNATIONAL ECONOMY
First, Vietnam has been extremely successful in international economic integration in
general and with the United States in particular. This year, total trade between our two
countries is likely to increase again by more than 20% and reach $45 billion, and could
exceed $80 billion by 2020 if present trends continue, and even more with TPP. Moreover,
Page 1 of 10

Vietnam has increased its standing as the leading ASEAN country supplier to the United
States: Vietnams share was 22%, and could exceed 30% by 2020, if present trends
continue.
On the other hand, Vietnam is the lowest-ranked of the ASEAN - 6 countries for imports
from the U.S., at about $6.7 billion in 2015. This figure could certainly be increased by
improving Vietnams business environment for exporters from the U.S. and other countries,
and importers in Vietnam and their distributors.
At the same time, revenues of AmCham companies and their partners in Vietnams
domestic market continued to grow, and a number of AmCham companies have increased
their FDI in Vietnam.
Business and Government leaders are increasingly aware of the growing importance of the
Asia Pacific Region and the associated benefits of TPP. Global middle-class spending is
projected to increase from $21.3 trillion in 2009 to $55.7 trillion in 2030. Asias share
should increase from 23% in 2009 to 59% in 2030.
TRANSPACIFIC PARTNERSHIP A PROMISE, NOT YET A REALITY
Vietnam could be the largest beneficiary from the TPP in relative terms. Some experts
predict that Vietnams exports will increase by 28.4% with TPP. The expected export
baseline in 2025 without TPP of $239.0 billion could grow to $307 billion. In addition, the
expected GDP growth benefits are substantial. Vietnams GDP in 2025 could be 10.5%
higher than the baseline estimate.
After five years of negotiations, and nearly ten days of marathon negotiations in Atlanta, the
TPP negotiations were concluded successfully on October 5, 2015.
However, the TPP is still a promise, not yet a reality. Each TPP country has its own
procedures for ratification, implementing legislation, and administrative actions, which will
be difficult. The TPP covers many of the issues that we have discussed for years in the
Vietnam Business Forum. It is a framework for action, and should be a focus in 2016.
TRANSPARENCY AND MEANINGFUL PUBLIC COMMENT (TPP CHAPTER 25)
Local and national Government agencies must improve their competitiveness and robustly
implement streamlined procedures as Government service providers to businesses and
citizens to help prepare for international economic integration.
An essential first step is to implement Vietnams domestic and international commitments
for public comment on proposed administrative regulations from citizens and businesses
that would be affected.
This is required by the Law on Promulgation of Legal Documents and Vietnams
international commitments in the Bilateral Trade Agreement, the WTO Accession
Agreement, etc. Laws and regulations must be reviewed by VCCI, the Fatherland Front, and
several ministries, including Justice, Internal Affairs, Finance, and Foreign Affairs, which
will assess whether the drafts are in accordance with prevailing regulations and
international commitments. However, this requirement seems to be followed in very few
cases.

Page 2 of 10

EDUCATION: (TPP CHAPTER 23)

Education of work-ready graduates for industry is essential if Vietnam is to become a
middle-income industrial country by 2020. And AmCham companies are pleased to be
involved in a number of projects either leading or contributing to vocational, practical and
curriculum modernization. Notably, the Higher Engineering Education Alliance Program
(HEEAP) 2.0 is a public-private partnership over the period 2012-2016 with an estimated
target investment from current and future industry, Government, and education partners of
$40 million. Vietnamese engineering programs are being brought into compliance with
requirements set by leading higher education accrediting organizations, specifically ABET
(the Accreditation Board for Engineering Technology) and the CDIO INITIATIVE
(Conceive, Design Implement, Operate), an innovative educational framework for
producing the next generation of engineers.
USAID will soon announce a new five-year program to support a strategic collaborative
dialogue with industry and Vietnamese Government, by supporting an alliance of U.S.
universities and businesses to develop a dynamic innovation ecosystem of students, faculty,
industry and Government. The alliance will implement institutional policy change, student
learning platforms, maker innovation spaces, faculty instructional innovation, and applied
curricula in the areas of science, technology, engineering and math (STEM), providing
students the work-ready competencies to invent-build-launch solutions and value for
Vietnams social and economic viability.
We encourage the Government to lead a large scale transformation to scale HEEAP in the
period 2017-2021 with HEEAP 3.0 across the country, with support from Vietnams business
associations and companies as well as FDI companies, to achieve internationally recognized
accreditations, support basic and applied research, and develop a foundation for innovation
and entrepreneurship.
SUPPLY CHAIN AND INTERNATIONAL ECONOMIC INTEGRATION (TPP CHAPTER 22)
Vietnam has been extremely successful in attracting FDI and benefitting from significant
export growth from FDI factories, but Vietnams enterprises have had limited results in
participating directly in that success. More than two-thirds of Vietnams exports are from
FDI factories; and Vietnams main contribution to the FDI production/supply chains is lowskilled labor. The cost of imported materials and components is estimated to equal 90% of
the value of Vietnams exports of manufactured goods.
Last November, our Manufacturing Committee organized a supplier development day with
the participation of a number of Vietnam companies. This year, our Manufacturing
Committee and member companies will organize two days of supplier training and
development. In addition, AmCham and VCCI will cooperate in orientation programs for
Vietnamese enterprises in the food, apparel, footwear and furniture sectors to prepare
them for a Women Owned Business Supplier Development Conference on behalf of a
major U.S. retailer in HCM City in January. We would like to extend this program, in
cooperation with the Ministry of Planning & Investment, VCCI, and other Vietnam business
associations.
CUSTOMS ADMINISTRATION AND TRADE FACILITATION (TPP CHAPTER 5)
Complementing their WTO efforts to facilitate trade, the TPP Parties have agreed on rules
to enhance trade facilitation, improve transparency in customs procedures, and ensure
integrity in customs administration.
We have established a Vietnam Trade Facilitation Alliance (VTFA) led by VCCI and
Page 3 of 10

AmCham, with the participation of leading export industry associations to facilitate regular
Government-business consultations and help achieve the customs KPI in Resolutions
19/2014 and /2015.
Supported by a grant from the USAID Governance for Inclusive Growth Program and
contributions from business associations, part of the World Bank Trade Facilitation Support
Program of technical assistance provided by the developed countries to the developing
countries under Section II of the WTO Trade Facilitation Agreement, the VTFA is working to
establish formal consultative relationships between the General Department of Vietnam
Customs (GDVC), and other Government agencies involved in international trade, and
business associations, as provided for by the WTO Trade Facilitation Agreement and by the
WCO Revised Kyoto Convention, as well as the TPP and other Free Trade Agreements.
The VTFA is intended to serve as a national coalition for business and trade stakeholders to
provide regular consultations with GDVC and other ministries or agencies regulating
international trade, through regularly scheduled formal monthly and quarterly public
meetings.
We look forward to close cooperation between business associations and customs
agencies, to achieve the efficiencies and benefits expected from robust implementation of
the Trade Facilitation Agreement commitments.
FOOD SAFETY - SANITARY AND PHYTOSANITARY (SPS) MEASURES (TPP CHAPTER 6)
In developing SPS rules, the TPP Parties have advanced their shared interest in ensuring
transparent, non-discriminatory rules based on science, and reaffirmed their right to
protect human, animal or plant life or health in their countries. The TPP builds on WTO SPS
rules for identifying and managing risks in a manner that is no more trade restrictive than
necessary. TPP Parties agree to allow the public to comment on proposed SPS measures to
inform their decision-making, and to ensure traders understand the rules they will need to
follow. In addition, TPP Parties commit to improve information exchange related to
equivalency or regionalization requests and to promote systems-based audits to assess the
effectiveness of regulatory controls of the exporting Party. In an effort to rapidly resolve
SPS matters that emerge between them, they have agreed to establish a mechanism for
consultations between Governments.
We look forward to developing a public-private partnership to provide technical assistance
to build capacity in this chapter, as well.
TECHNICAL BARRIERS TO TRADE (TBT) (TPP CHAPTER 7)
In developing TBT rules, the TPP Parties have agreed on transparent, non-discriminatory
rules for developing technical regulations, standards and conformity assessment
procedures, while preserving TPP Parties ability to fulfill legitimate objectives. They agree
to cooperate to ensure that technical regulations and standards do not create unnecessary
barriers to trade.
TBT Specific Case: Imports of Used Equipment (proposed revised Circular 20)
At meetings in both HCMC and Hanoi, businesses universally opposed the revised circular,
which was intended to promote development of manufacturing industries by encouraging
imports of new machinery, equipment and production lines that are manufactured with the
latest technology. The draft is now in its ninth revision, as of August 18, 2015, but the
comments and recommendations of businesses have not been taken into account
Page 4 of 10

sufficiently.
The restrictions in the draft Circular are likely to have the opposite effect, and discourage
manufacturing industries, because of coverage of long-term capital equipment, parts and
accessories due to the broad scope of the Harmonized System customs classification codes
involved. An extensive global trade in used manufacturing equipment has developed,
particularly in capital-intensive industries, because it is often preferable for an investor to
obtain high-quality used or remanufactured equipment, often moving equipment from one
of their own existing factories in another country to Vietnam, rather than order new
equipment with long delivery lead times and much higher cost. The Japanese Business
Association of Vietnam has stated that Japanese used machineries function properly even
after having been used for half a century, and it is common to use them in Japan as well. As
the used machinery import regulations could prevent the development of
upstream/midstream industries, we would like the Government to ease the used machinery
import regulations.
1

In addition to its negative impact on Vietnams modernization and industrialization, the

proposed regulation is not in accordance with Article 2.2 of the WTO Agreement on
Technical Barriers to Trade.
The prohibition of imports of equipment and machinery older than 10 year-old involves
application of a single arbitrary time standard to numerous classes and categories of
machinery and production equipment. This time standard is not based upon available
scientific and technical information with respect to the many different kinds of machinery
and equipment, whose useful production lives and uses vary widely.
We respectfully request that the restrictions on imports of machinery and equipment
based on an arbitrary time standard be removed , administrative procedures to
ensure compliance with international standards of safety, energy savings and
environmental requirements be simplified and incorporated into the National Single
Window project, and any quality standards be based on international standards. (See

attachment 3 for details).

STATE OWNED ENTERPRISES (TPP CHAPTER 17)

TPP Parties recognize the benefit of agreeing on a framework of rules on SOEs, where
private sector and the state sector compete on a level playing field Vietnams 1992
Constitution was revised in 2013 and included change in the role of the State Sector.
AmCham, along with many others, submitted a viewpoint with recommendations regarding
the State Sector. In the revised constitution as approved by the National Assembly, Article
51, paragraph 2 stated, All components/varieties of the economy are important parts of the
nations economy. All owners of all components/varieties of the economy are equal, [and]
cooperate and compete according to the law. This is roughly congruent with AmChams
recommendation to the National Assembly that The final version of the Constitution would
be improved through a provision that clearly states that private enterprises are entitled to
treatment no less favorable than that accorded to SOEs under the law. We hope for the
rapid implementation of this principle.

International Conference Proceedings: Vietnam to be a New Processing and Manufacturing Center of the World after 2015, Oct 24, 2015.
Organized by the World Bank, the State Bank of Vietnam, and the Central Committee of the Fatherland Front of Vietnam, p 126.

Page 5 of 10

LABOUR (TPP CHAPTER 19)

All TPP Parties are International Labour Organization (ILO) members and recognize the
importance of promoting internationally recognized labour rights. TPP Parties have agreed
to adopt and maintain in their laws and practices the fundamental labour rights as
recognized in the ILO 1998 Declaration. Each of the 12 TPP Parties commits to ensure
access to fair, equitable and transparent administrative and judicial proceedings and to
provide effective remedies for violations of its labour laws. They also agree to public
participation in implementation of the Labour chapter, including establishing mechanisms
to obtain public input.
The commitments in the chapter are subject to the dispute settlement procedures laid out
in the Dispute Settlement chapter. The Labour chapter establishes a mechanism for
cooperation on labour issues, including opportunities for stakeholder input in identifying
areas of cooperation and participation, as appropriate and jointly agreed, in cooperative
activities.
AmCham cooperated closely with MOLISA, VCCI, and VGCL, supported by the ILO, in the Tripartite Partnership to consult on revisions of the Labour Code during the years 2008 2012.
We look forward to renewing our cooperation and developing a public-private partnership to
provide technical assistance to meet the commitments in the TPP Labour Chapter, as well.
TECHNICAL ASSISTANCE FOR DEVELOPMENT AND CAPACITY BUILDING (TPP CHAPTER
21)
The TPP includes specific commitments on development and trade capacity building to
ensure that all Parties are able to meet the commitments in the Agreement and take full
advantage of its benefits. AmCham is already cooperating with VCCI and other leading
Vietnamese business associations in the Vietnam Trade Facilitation Alliance to provide
technical assistance to Vietnam Customs for capacity building under Section II, paragraph
9, to implement the commitments of the WTO Trade Facilitation Agreement, and we are
ready to cooperate on TPP commitments as well, including food safety and labour.
VISAS: TEMPORARY ENTRY FOR BUSINESS PERSONS (TPP CHAPTER 12)
Almost all TPP Parties have made commitments on access for each others business
persons, which are in country-specific annexes. However, Vietnams Immigration Law was
revised in June 2014 and became effective on January 1, 2015, without reference to the TPP.
We think this change was a major step backwards. According to some provisions of the law,
U.S. citizens that plan to visit Vietnam under the equivalent of a U.S. B-1 or B-2 visa will
receive visas that have, at most, a three-month period of validity, and a single entry only.
This development has already resulted in significant impediments to business and pleasure
travel both ways between Vietnam and the U.S., and could reduce the large revenues that
tourism generates, not to mention the negative impact on the planned development of
tourism as one of the five priority industry clusters in Vietnam.
We raised this same issue at the June 2015 Vietnam Business Forum and heard in July that
U.S. citizens would receive one-year validity, multiple-entry visas, but we have not yet seen
any.
If the Government of Vietnam does not align its process with the multiple entry 12-month
temporary business/tourism visa provided by the U.S. to Vietnamese citizens, then in the
near future, based on reciprocity, U.S. visas for Vietnamese citizens that are temporary
visitors could be reduced to match the one entry, 3-month visas currently provided to U.S.
Page 6 of 10

citizens. The U.S. Mission to Vietnam reports that the issue is currently in active discussion
within the Government of Vietnam, and if recent Vietnam media reports are an indication,
the hope is this issue will be resolved within the next few months. (See attachment 4).
TAX
We have raised with both the Ministry of Finance and the Ho Chi Minh City Peoples
Committee a particular situation where U.S. importers and their distributors are being
disadvantaged by a requirement to pay Value Added Tax on imported goods twice. The tax
authorities froze distributors bank accounts while the case was under appeal. This case
has now been resolved satisfactorily, after more than two years of effort. There are a
number of other cases involving tax issues that we will raise.
INEFFICIENT CURRENCY CONTROLS, NOT IN ACCORDANCE WITH IMF ARTICLE VIII
The Government of Vietnam notified the International Monetary Fund (IMF) that it accepted
the obligations of Article VIII, Sections 2, 3 and 4 of the IMF's Articles of Agreement, with
effect from November 8, 2005.
Under Article VIII, Sections 2, 3 and 4, IMF members undertake not to impose restrictions
on the making of payments and transfers for current international transactions, and not to
engage in, or permit any of their fiscal agencies to engage in, any discriminatory currency
arrangement or multiple currency practice, except with IMF approval.
By accepting the obligations of Article VIII, Sections 2 (Avoidance of restrictions on current
payments), 3 (Avoidance of discriminatory currency practices) and 4 (Convertibility of
foreign-held balances), Vietnam signals to the international community that it will pursue
economic policies which will make restrictions on the making of payments and transfers for
current international transactions unnecessary, and will contribute to a multilateral
payments system free of restrictions.2
However, Vietnam does not seem to follow the commitments. We realize there may be
concerns about the stability of the financial system, but we do not hear of IMF approval
when there are restrictions on making payments and transfers for current international
transactions. When the market price of dollars exceeds the band of the official rate, there
are simply no dollars to be purchased. Also, all fees and charges incurred on a foreign
currency denominated transaction need to be detailed in a contract between the parties in
order for the Vietnamese based party to secure the foreign currency to settle the
transaction, even where these are global standard fees charged against a transaction of
this nature.
In addition to the difficulties that importers and exporters face in acquiring dollars because
of Vietnams inefficient foreign exchange controls, we note that the first factor to consider
In making an Non-Market Economy - country determination under section 771(18)(A) of the
U.S. Tariff Act of 1930, as amended, Section 771(18)(B) requires that the U.S. Department of
Commerce take into account the extent to which the currency of the foreign country is
convertible into the currency of other countries.
INEFFICIENT FINANCIAL REGULATORY CONTROLS
Accounting standards for business entities provide a framework for transparency,
accountability, and efficiency of financial markets.
2

https://www.imf.org/external/np/sec/pr/2006/pr0602.htm and https://www.imf.org/external/pubs/ft/aa/#art8 Section 2. Avoidance of

restrictions on current payment no member shall, without the approval of the Fund, impose restrictions on the making of payments and
transfers for current international transactions.

Page 7 of 10

In Vietnam, accounting standards are issued by the Ministry of Finance of Vietnam and are
known as Vietnam Accounting Standards The Department of Accounting and Auditing
Policy of the Ministry of Finance has formed the Vietnamese Accounting Standards Board
(VASB) to develop and approve the standards. To date the Ministry of Finance has issued a
number of VAS, plus additional mandatory implementation guidance known as circulars.
The Ministry of Finance states that it takes International Financial Reporting Standards
(IFRS) into account in developing VAS. However, the IASB web site states clearly that
Vietnam has not yet adopted the IFRS or the IFRS for SMEs (Small and Medium Entities):
Some Vietnamese companies prepare IFRS financial statements for the purpose of
reporting to foreign investors. However, those IFRS financial statements are supplementary
financial statements published in addition to not instead of financial statements
prepared using Vietnamese Accounting Standards (VAS). The VAS financial statements
are the statutory and primary financial statements.3
As a result, both foreign and domestic businesses are subject to additional record keeping
requirements that add complexity, time and cost to their statutory reporting commitments.
In addition, domestic Vietnamese businesses may be restricted in their access to foreign
capital to support their growth and development.
CORRUPTION
We know the Government shares with us the concern that corruption has become corrosive
and widespread in Vietnam and is dangerous to the economy and society as a whole. While
there have been some actions from the Government, it is time to address corruption in a
wider fashion by implementing systems well known to reduce the opportunities for illegal
payments as well as incorporating a code similar to the U.S. Foreign Corrupt Practices Act
(FCPA) or the UKs Bribery Act. A significant step forward would be to take actions that
greatly limit the use of cash payments and face-to-face transactions, and to increase the
use of e-Commerce in Vietnam.
CONCLUSION
Once again, we express our appreciation for the guidance in the Prime Ministers 2014 New
Years Message, in Resolutions 19/2014 and /2015 and this opportunity for interaction
between State agencies, between the State apparatus and socio-political organizations.
Dialogues with the people and businesses to promote closer relationships between the
State, cadres, civil servants and the people and better match policy and legislation with
reality.4
We look forward to close cooperation and support through regular and meaningful
Government - Business consultations at all levels of Government, with concrete targets to
be achieved. We remain active in support for the TPP and the preparations in Vietnam
needed to bring further success.
On behalf of all AmCham members,
I wish distinguished participants good health, happiness and success.
Thank you very much.
3

http://www.ifrs.org/Use-around-the-world/Documents/Jurisdiction-profiles/Vietnam-IFRS-Profile.pdf

Strengthen interaction between the authorities in the state apparatus, and between the state apparatus and political - social organizations.
Expand the dialogue with citizens and businesses in various forms to help the State, officials and civil servants are more close, which makes
guidelines, policies and legislation be more closely with reality.

Page 8 of 10

Attachments
1.
Vietnam U.S. Trade, 2000 2020e
2.
ASEAN U.S. Trade, 2000 2020e
3.
Comments re Draft Circular to Revise Circular 20/2014/TT-BKHCN
4.
Visa Reciprocity of TPP, ASEAN Countries (Validity, Multiple or Single Entry)
Attachment 1

Vietnam U.S. Trade, 2000 2020e

Source: U.S. Department of Commerce, 2000 2014 actuals; 2015 2020 estimates
http://www.census.gov/foreign-trade/balance/c5520.html#2010

Page 9 of 10

Attachment 2 ASEAN U.S. Trade

Source: U.S. Department of Commerce, 2000 2014 actuals; 2015 2020 estimates
http://www.census.gov/foreign-trade/balance/c5520.html#2010

Page 10 of 10

ATTACHMENT 3 TO AMCHAMS STATEMENT

COMMENT ON DRAFT CIRCULAR REPLACING CIRCULAR 20/2014/TT-BKHCN ON
IMPORTATION OF USED MACHINERY, EQUIPMENT AND PRODUCTION LINES
The Circular is expressly intended to encourage imports of new machinery, equipment
and production lines that are manufactured with the latest technology, presumably to
enhance economic growth and development.
Regrettably, the new restrictions in the draft Circular (v.8, July 9, 2015)1 are likely to
have an effect opposite to that intended. A practical example: progressive dies or other
specialized new tooling and high-tech controls items are used with multi-ton and multiyear capital equipment such as, stamping presses or machine tools in many industrial
applications.
While the dies, specialized tooling and computerized controls items may be new, the
presses and machine tools in which they are used have useful lives of many years, well
exceeding the limits of 10 years stated in the draft Circular.
Rather than restriction, the goal of encouraging imports of manufacturing equipment for
high technology industries is better served by providing new duty and tax incentives for
investment in such new equipment and technologies.
The restrictions in the draft circular will actually discourage such investments and imports
because of likely unintended coverage of long-term capital equipment, parts and
accessories due to the broad scope of the Harmonized System customs classification
codes involved.
The consideration of slowing or limiting transfer of useful high-technology manufacturing
equipment to Vietnam is particularly applicable to machines and equipment used for
semiconductor, automotive, flat panel, optical and solar cell industries.
This is because it is faster and more cost-effective for an investor to obtain high-quality
used manufacturing machines for this industry, often moving equipment from an existing
factory in another country, for example, China, Mexico, Costa Rico, Malaysia, etc., than to
order new equipment because of long lead times for such equipment and greater
expense. Here is what a company in California that specializes in such equipment
reports:
...Since the demand for used semiconductor fabrication equipment gained traction in the
late 1990s, around 2,000 companies emerged worldwide as buyers and sellers. The
reason for the demand for used or remanufactured equipment remains the same as when
SEC/N President Gary Alexander stated in 2000: that quality remanufactured equipment
is often available at a fraction of the cycle time and cost of new equipment.
In todays world of multi-million dollar capital equipment, the cost savings when buying
used can average as much as 50%. While the benefit of lower costs continues to be a
primary driver, other considerations have emerged as critical factors such as installation,

http://www.dncustoms.gov.vn/web_english/english/btc/20_TT_BKHCN_15_7_2014.htm

Page 1 of 2

parts availability, maintenance, service, quality, training and safety2

The new draft Circular is also intended to ensure that such goods meet requirements of
quality, safety, energy saving and environment protection. However, instead of enacting
new trade-restricting measures, a better approach that involves modernization and
enhancement of existing compliance regulations and their enforcement by regulatory
agencies through up- to-date implementation of international standards and electronic
processing of administrative procedures is recommended. Such an approach will be in
keeping with international trade agreement requirements for implementation of the
National Single Window by Vietnam.
As a result, AmCham recommends that the restrictions on imports of machinery and
equipment contained in article 6, paragraph 1 a) of service length of no longer than 10
years, and elsewhere in the draft Circular be removed, while administrative procedures to
ensure compliance with international standards of safety, energy savings and
environmental requirements be simplified and incorporated into the National Single
Window project.
We also recommend that any quality standards included in the Circular be based on
international standards. For example, for the semiconductor industry, SEMI
(Semiconductor Equipment and Materials International)3 has developed over 800
standards,4 including equipment interface and reliability, Environmental, Health, Safety,
and Energy Conservation.

http://www.cacci.us/pdfs/CCCi_Important_Considerations.pdf California Code Compliance, Inc. and Gary Alexander,

President, SEC/N (acquired in 2008 by SEMI (Semiconductor Equipment and Materials International). He also represented
Motorolas Semiconductor Products Sector on the SEMATECH Surplus
3
http://en.wikipedia.org/wiki/Semiconductor_Equipment_and_Materials_International and
http://www.semi.org/en/About
4
http://www.semi.org/en/Standards/P_000787 and "Overview of the SEMI International Standards Program"
http://www.semiconwest.org/sites/semiconwest.org/files/file_attach/SEMI%20Standards%20Overview%202011Jul12%20 v8.p
df

Page 2 of 2

ATTACHMENT 4 TO AMCHAMS STATEMENT: VISA RECIPROCITY SCHEDULES BETWEEN U.S., TPP AND OTHER TRADE PARTNERS
Country

Other regional trade

TPP Members

Vietnam
Canada
)P
Mexico T
Peru ip
sh s
Chile
re
b
Japan artm
e
Singapore
ne M
Malaysia
cif
Brunei i
c
p
Australia
an
T
New Zealand

Max B1/B2 validity

(entries/month)s)
M/12*
M/120
M/120
M/120
M/120
M/120
M/120
M/120
M/120
M/12 (M/60 with
$25 fee)
M/120

Max B1/B2 validity

(entries/months)
N/A
No visa required for
stays of 180 days or less
180
N/A days or less
N/A
Visa Waiver Program
(VWP)**
Visa Waiver Program
(VWP)Waiver Program
Visa
(VWP)
N/A
Visa Waiver Program
(VWP)
Visa Waiver Program
(VWP)
Visa Waiver Program
(VWP)
N/A

Myanmar

B1 or B2 1/3 ($32), B1
M/12 ($162)

China

M/120

N/A

Indonesia

M/60

N/A

Thailand

M/120

N/A

Cambodia

2/3

N/A

Philippines
India

M/120
M/120

N/A
N/A

Treatment for U.S. citizens

M/3 (M/6 for family visits)
No visa required for stays of 180 days or less
No visa required for stays of 180 days or less
No visa required for stays of 90 days or less
No visa required for stays of 90 days or less
No visa required for stays of 90 days or less
No visa required for stays of 90 days or less
No visa required for stays of 90 days or less
No visa required for stays of 90 days or less
No visa required for stays of 90 days or less. Electronic
Travel Authority (ETA) approval required prior to
departure (20 AUD/1 year).
No visa required for stays of 90 days or less
Visa required, valid for up to three months from date of
issue. Max stay is 28 days for tourists; 70 days for business
travelers. e-Visa option
Visa required, M/120
Visa required, can be obtained upon arrival, valid for 30 days
(extendable for additional 30 days)
No visa required for stays of 30 days or less
Visa required, can be obtained upon arrival or online, valid
for 30 days
No visa required for stays of 30 days or less
Visa required. Valid M/120 for stays of six months.

*
M/12 = multiple entries, 12 months
** Nationals from Visa Waiver Program (VWP) countries can enter the United States for business or pleasure for 90 days or
less. All VWP travelers must receive Electronic System for Travel Authorization (ESTA) approval prior to embarking on a plane
for the U.S. ($14/2 years)

European Chamber of Commerce in Vietnam (EuroCham)

Annual Vietnam Business Forum
Hanoi, December 1st 2015

Presented by
Mr. Tomaso Andreatta
Vice Chairman
KEY POINTS FROM EUROCHAM
EuroCham is pleased to acknowledge the recent efforts that the Vietnamese Government
has made to further improve the business environment and to increase Vietnams
competitiveness. 2015 has been a significant year for Vietnam and its relationship with its
European counterparts. The agreement in principle on the European Union- Vietnam FTA
(EVFTA) in the same year as the celebration of the 25 anniversary of their diplomatic
relations is a significant step for the future of the EU Vietnam business relations. We
strongly believe that the negotiations, which were launched in 2012, have resulted in a
comprehensive, mutually beneficial and balanced agreement. As a result of its entry into
force, it is estimated that Vietnams gross domestic product (GDP) could rise by over 15%
and that the value of its exports to the EU could increase by almost 35%.1In addition this
year Vietnam has signed the TPP and Eurasian Economic Union FTA, and is part of the
forthcoming ASEAM EC, making it one of best positioned countries to benefit from
international trade. If properly implemented, these agreements will facilitate trade through
the removal of tariffs but they could also help Vietnam to align its safety and quality
standards with those in Europe and other Western countries. Further opening the market to
foreign direct investment can lead to an increased transfer of skills and technology, which
will help Vietnam to avoid the middle-income trap.
th

In the past year, Vietnam has put in place key changes that will affect all of EuroChams
business community. Examples include the entry into force of the new Law on Investment,
the new Law on Enterprises, the new Law on Real Estate Business and the new Law on
Housing.
As Vietnam continues its path to further international integration and its promotion of itself
as an attractive FDI destination, EuroCham wishes to highlight five key issues that need to
be resolved to substantially enhance Vietnam competitiveness in global trade, which will
also benefit the European business community in Vietnam.
1. Protection of the environment and energy
As Vietnam moves into more capital intensive industries to increase local content, the
government can focus its industrial policy of completing the supply chain and increasing
local content with processes that are environmentally friendly or have adequate recycling
facilities, as Vietnam is one of the countries most exposed to global climate change and
where pollution is directly proportional to the economic growth. Furthermore import of fuel

Annex on Vietnam to the Position Paper on the Trade Sustainability Impact Assessment of the Free Trade Agreement between the
EU and ASEAN, European Commission, 2015. Available at (http://trade.ec.europa.eu/doclib/docs/2013/may/tradoc_151230.pdf)

Page 1 of 4

from abroad will create major pressure to the logistics as well as the balance of payments
of the country.
For these reason Eurocham offers to the Vietnamese Government the example and support
of the European experience and technology in energy conservation and efficiency, in
renewable energy, in clean production.
Western governments and consumers are becoming more discriminating in terms of the
products they accept to buy, and they choose the ones produced with processes that are
environmentally friendly and where labor practices are most comparable to the home
standards.
Renewable sources of energy may have smaller scale than alternatives but they have much
faster implementation time, and they do not constrain the country to a long term
commitment to the same source of energy, as for example coal fired plants built in BOT
require.
2. Improve logistics in a sustainable manner
Rapid economic growth and urbanisation is driving high demands for roads, power, ports,
waste and water treatment, hospitals, and other public infrastructure for goods and
services. However, the State budget is estimated to be able to meet only about 50% of
Vietnam's infrastructure needs (estimated at USD 170 billion from 2011-2020).2The balance
would need to come from other sources, including from private investments in the form of
Public-Private Partnerships (PPPs).On 14 February 2015, the Government promulgated
the long-expected PPP Decree, which took effect on 10 April 2015.3 Together with a new
Decree on tendering for investors for PPP projects, which became effective on 5 May 2015,
the PPP Decree replaced the previous regulatory framework relating to BOT projects and
pilot PPPs.4 Although the new PPP Decree constitutes an important legal development, this,
of itself, will not translate into a series of successful privately invested infrastructure
projects. EuroCham wishes to highlight the need for a further coordination amongst related
Government agencies, as well as the need to adopt further detailed implementing
regulations, including with respect to the allocation and procedures for utilising viability
gap funding (VGF) for the emergence of successful and visible projects.
Local solutions to the mobilization of funds for growth from the families mattrasses come
from further enhancing transparency in the capital markets, extending the fields of
investment of pension and insurance funds as well as giving them clear and simple rules
and implementation (perhaps with the creation of an independent Supervisory body).
3. Improve legal system by opening it to external world and improving the way it now
works, especially IP and Judicial Recourse
A strong protection of IPR is essential to encourage foreign investment in Vietnam. Even
though Vietnam has improved its legal framework and enforcement of IPR in recent years,
infringements and the enforcement of IPR laws remain a concern for European and
Vietnamese businesses alike. EuroCham therefore calls on the Vietnamese Government to
step up its efforts in guaranteeing an effective protection of IPR in order to develop
technologically-advanced industries and to promote innovation. The foregoing may result in
2

Strengthening Public-Private Partnerships, VCCI News, 16/04/14.Available at

(http://vccinews.com/news_detail.asp?news_id=30318)
3
Decree No. 15/2015/ND-CP dated 14 January 2015.
4

Decree No. 30/2015/ND-CP dated 17 March 2015.

Page 2 of 4

more foreign investment in manufacturing, research and development, but it will also
encourage Vietnamese companies to invest in innovative activities. We believe that
enforcing a good protection of IPR can only be achieved by ensuring that trademark and
copyright infringers face dissuasive legal sanctions. At the same time, we note that
infringement of online IPRs is becoming more important with the growth of the number of
internet users. Enforcement is particularly difficult here, especially when it comes to illegal
trading in copyright-protected work and infringing goods, but also with regard to
infringements on websites and abusive domain name registration and maintenance.
EuroCham recommends that the administrative fines against individuals committing
copyright infringements will be increased and that law enforcement efforts against
infringing websites shall be strengthened, in particular that Cease and Desist Decisions be
immediately enforceable, to limit/reduce the damage to the IPR legitimate owner. The
adoption of a uniform domain name dispute-resolution policy system to resolve disputes
around .vn domain names as well as a more effective dispute settlement mechanism in
general would also be welcome.
Further solutions proposed by the European business community to address IPR-related
issues include the creation of shortlists of geographical indications, the protection of
regulatory data and trademarks, and a more efficient enforcement of IP laws. Once more,
EuroCham would like to stress the importance of strong IP protection standards in Vietnam
to increase its regional competitiveness in attracting foreign investment and encouraging
innovation.
Where the value of a contract is substantial, foreign investors in Vietnam generally choose
to provide for dispute resolution by international arbitration. Although international
arbitration may be costly and time consuming, an international arbitral award is generally
enforceable in most jurisdictions around the world under the 1958 New York Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (NYC 1958), of which
Vietnam is a member. The vast majority of member states properly apply the provisions of
the NYC 1958 in practice and duly recognise and enforce foreign arbitral awards within their
own jurisdictions. However, our members have found that it is extremely difficult in practice
to achieve the recognition and enforcement of foreign arbitral awards through the
Vietnamese courts. The main difficulties encountered are the reversal of the burden of
proof in respect of objections to applications for recognition and enforcement of foreign
arbitral awards, and the rejection of applications by the Vietnamese courts for reasons that
are not consistent with the NYC 1958 Convention.
4. Protect Vietnamese consumer and offer more choice food safety and pharmaceuticals
Vietnamese citizens and international consumers alike are concerned about the partial
effectiveness of food safety measures and the reliance on local testing for which no
adequate capacity has been set up yet. On the one hand Vietnam could accept more readily
international quality standards and their certification, on the other it has to be even more
encompassing in ensuring that all local products are safe and clean and produced without
dangerous processes or substances. With adequate disclosure of the product
characteristics, consumers around the world can enjoy a variety of choices in both foods
and pharmaceutical products, that is partially denied to Vietnamese consumers, through
tariff or non-tariff barriers.
The Ministry of Health is in the process of reviewing the Government procurement scheme
(i.e. new tender circular and tender lists) in line with the regulations of the new Law on
Bidding, which entered into force on 1 July 2014. In this process, a number of issues need to

Page 3 of 4

be effectively addressed. As foreign companies are currently not allowed to directly attend
pharmaceutical tenders in Vietnam, some of the newly proposed initiatives, such as price
negotiations, would be very difficult to implement in practice. We believe that there is an
inherent need to ensure a level playing field in public tenders through the direct
participation of foreign companies, instead of relying on local partners replicating the
level playing field offered in other ASEAN countries. Furthermore, a level playing field will
provide procurement agencies with more choice in terms of price and quality, contributing
to the improvement and efficiency of expenditures on State budgets and health insurance
funds.
Our Wine & Spirits Sector Committee is concerned about further changes to the Special
Consumption Tax (SCT) on wine and spirits, as discussed during the 10 Session of the 13
National Assembly of Vietnam. In the current draft, which would be the second amendment
to the SCT Law in a very short time, the taxable value will change from import prices to
import prices and resale prices. As a result, the SCT will increase, which would nullify and
impair the benefits of any tariff cut negotiated under the EVFTA on imported spirits. Witness
how, HK has become the biggest market for quality wine in Asia thanks to slashing tariffs
that were before at Vietnamese levels and how this has reduced the incentives to
contraband and illegal distilling
th

th

5. Coordinate with provinces to ensure uniform application of laws and policies

Many investors in Vietnam find more problems in opening their facilities from
administrative challenges at provincial level than at national level. This is due to nonuniform application of laws and policies even with regard to taxes and customs, which are
clearly national responsibilities, and even more in permissions to use the land or other
requirement.
Provinces are competing for investment and it should be their interest to be as open and
transparent as possible, and coordination with the central government is essential when
investors are present in different provinces, so that the investor is consistently treated.
Within their powers, provinces could be open even more than FTAs require, for example in
opening some important procurement to international bidders, thus securing more quality,
variety and potentially sources of funds for their projects.
Eurocham has signed an MOU with the MOFA to address the international perspective of the
Vietnamese provinces and help them in becoming attractive for European and international
investment.

Page 4 of 4

European Chamber of Commerce in Vietnam (EuroCham)

EUROCHAM POSITION PAPER
Annual Vietnam Business Forum
Hanoi, December 1st 2015

Presented by
Mr. Tomaso Andreatta
Vice Chairman
Honourable Ministers, Ambassadors, Your Excellencies, Ladies and Gentlemen, on behalf
of EuroCham and its partner European Business Associations, I would like to thank the
Ministry of Planning and Investment and all the authorities represented here today for
facilitating this on-going constructive dialogue with the private sector though the Vietnam
Business Forum.
EuroCham is pleased to acknowledge the recent efforts that the Vietnamese Government
has made to further improve the business environment and increase Vietnams
competitiveness. 2015 has been a significant year for Vietnam and its relationship with its
European counterparts. The agreement in principle of the European Union Vietnam FTA
(EVFTA), together with the 25 anniversary of the establishment of EU Vietnam diplomatic
relations, are significant steps for the future of EU-Vietnam business relations and will
provide an array of new opportunities. We believe that the negotiations have resulted in a
comprehensive, mutually beneficial and balanced agreement. Furthermore, EuroCham
would like to congratulate all Ministries on the recent granting of visa exemptions to 5
major European countries and on the very recently announced reduction in visa fees.1
th

In terms of taxation, we would like to highlight the efforts that have been made such as the
removal of the cap on deductibility of advertising and promotional expenses, the
reintroduction of incentives for business expansions and for enterprises located in
industrial zones, as well as a number of positive personal income tax and VAT (Value Added
Tax) changes. In addition several measures were implemented to reduce filing
requirements for all taxes.
Moreover, since July 2015, a number of new laws and regulations governing foreign
investment, enterprises, real estate and foreign ownership limits have come into effect,
such as the new Law on Investment and the new Law on Enterprises. These laws are
expected to mark a new positive milestone for the legal framework for M&A activities in
Vietnam. In addition, new laws and regulations affecting foreign ownership of real estate
have come into effect. Foreigners can now own apartments, buy houses and are permitted
to sublease and inherit real estate. Although both laws have developed from previous
legislation, there are still several shortcomings regarding bank guarantees for off-the-plan
real estate, house ownership of foreign individuals as well as conditions for transferring
investors real estate projects.
1

Vietnam slashes visa fees in bid to boost tourism, Thanh Nien News, 13/10/2015. Available at
(http://www.thanhniennews.com/travel/vietnam-slashes-visa-fees-in-bid-to-boost-tourism-52402.html)

Page 1 of 9

With the coming into effect of several international trade agreements and more
particularly, the EVFTA, the AEC and the TPP, EuroCham members are looking forward to
the positive changes that will be implemented and that will further business incentives as
well as contribute to Vietnams growth. Nevertheless, some concerns remain among
European companies. This paper aims to identify those issues and propose solutions to
further improve the business climate in Vietnam.
I. INCREASING THE LIVELIHOOD OF THE PEOPLE
1. Safe medical access and pharmaceuticals
In terms of access to safe pharmaceuticals, Vietnam and the Ministry of Health (MOH)
have made significant progress, both in terms of healthcare indicators in a number of
areas, generic penetration being one of the highest in the world and prices for medicines
being among the lowest in the region, according to an IMS report from this year. One of the
key issues for the Government in the coming years will be to find the right balance between
ensuring quality and affordability. Below are our views on how to help ensure that
Vietnamese patients have fast and sustainable access to high-quality, safe and innovative
medicines. These recommendations will not only improve health outcomes in Vietnam, but
also bring back some of the USD 2 billion spent on medical tourism every year.
a. Patient access to pharmaceuticals Sustainable and fast access to innovative
medicines for Vietnamese patients in line with other ASEAN countries timelines. A
more efficient drug registration process, elimination of local clinical trial requirements,
and a timely drug reimbursement process are key to improving patient access.
b. Equal access - Allowing foreign invested enterprises to participate on par with local
companies in Public Procurement to meet demands of a modern and innovative
universal healthcare system.
c. Legal presence and developing local industry Clear and practical guidelines for
foreign invested enterprises with full trading and distribution rights. Providing
establishment incentives to the innovative pharmaceutical industry to invest in local
industry, including tech transfer.
Thanks to determined action by the Vietnamese Government and the strategic plan of H.E.
Prime Minister Nguyen Tan Dung based on protecting, caring and improving the peoples
health in 2011-2020, with a vision to 2030, remarkable progress has been achieved over the
last 10 years with regards to healthcare-indicators. Ensuring that every citizen has access
to basic healthcare services, and to expand the access and use of quality healthcare
services is a key objective of the Vietnamese Government. However, a number of obstacles
still remain in providing Vietnamese patients with a high quality healthcare system at the
same level as neighbouring countries.
With a population of over 90 million people, a fast growing middle class and a promising
economic growth in the upcoming years, the medical devices market in Vietnam will
continue to expand. Furthermore, with an increasing openness to international markets
mirrored by the several trade agreements signed like the EVFTA and the TPP, there is no
doubt that Vietnam will see an increase in health spending. In 2013, more than 30.000
Vietnamese went abroad for treatment, representing USD 1 billion per year. By 2015, the
increase estimated reaches 40.000 Vietnamese going abroad for treatment, amounting to a
total of USD 2 billion per year. This trend illustrates the need for further improvement to

Page 2 of 9

respond adequately to peoples medical needs in Vietnam.2 Vietnam encourages the market
of medical devices because the local production cannot meet the demand of the national
healthcare system.3 Currently, Vietnam currently imports over 90% of its devices and only
has about 50 firms making 600 products that are officially licensed by the MOH.4 However,
Vietnam is increasingly building its status as a low cost manufacturing base and in 2013, the
US represented 24.3% of Vietnamese medical devices exports.5
Vietnamese authorities are aware that public healthcare is in need of improvement and
drastic modernisation. The budget has therefore increased for this sector. However, issues
remain as many hospitals do not have enough qualified staff to deal with overcrowded
facilities and cannot provide adequate attention to all patients. Moreover, medical
equipment is out-dated and needs replacement especially when it comes to surgery and
intensive care units.6
2. Energy and electricity
With a fast development and a growing middle-class, the Government of Vietnam is aware
of the changes occurring in its consumption of energy as well as on the effect it can have on
the long term not only in terms of growth but also for the overall climate. With this in mind,
the Government of Vietnam has positioned sustainable urban development as an important
policy item in the National Strategy on Climate Change and the Green Growth Strategy
2012. Among other things, the Green Growth Strategy and Action Plans (2014) address the
advancement of greener urban development master plans as vital targets.7 However, plans
and commitments are lagging behind and this remains an issue especially when it comes to
the impact in all areas of waste treatment, low carbon development, resource efficiency,
urban infrastructure, energy and energy efficiency measures. In the past few years, energy
demand has been growing by 15% per year.8 In 2014, it increased again by more than 10%
per year.9 To meet such a demand, Vietnam currently still prioritises low-cost sources of
power generation, including coal fired power plants and hydropower which are power
sources that nearly take a decade to plan, construct and operate. This is in a context where
Vietnam has an excellent potential for development for renewable energy generation. With
a clear policy framework, the wind power sector in Vietnam will be able to attract
substantial private investments, from both foreign as well as domestic capital
investments that the public sector does not have to make. At the same time, if capacities
and skills are built up at all levels, there will first be hundreds, and later thousands of jobs
created by the renewable energy industry.

Vietnam Market for Medical Devices, US Commercial Service, June 2014, p.1. Available at
(http://www.export.gov/vietnam/build/groups/public/@eg_vn/documents/webcontent/eg_vn_076824.pdf) and Fleeing bad hospitals,
Vietnamese patients spend $2 billion abroad, Thanh Nien News, 27/01/13. Available at
(http://www.thanhniennews.com/health/fleeing-bad-hospitals-vietnamese-patients-spend-2-billion-abroad-3636.html)
3
Vietnam Market for Medical Devices, US Commercial Service, June 2014, p.2. Available at
(http://www.export.gov/vietnam/build/groups/public/@eg_vn/documents/webcontent/eg_vn_076824.pdf)
4

Ibid.

Vietnam Medical Devices Market, Espicom Business Intelligence, 11/06/14. Available at (http://www.espicom.com/vietnammedical-device-market.html)
6
Ibid.
7

Vietnam National Green Growth Strategy, Approved on September 25th 2012 by the Prime Minister, decision 1393/QD-TTG.
Available at (http://www.greengrowth-elearning.org/pdf/VietNam-GreenGrowth-Strategy.pdf)
8
Vietnam Hydro Project to Help Meet Growing Energy Demand While Avoiding 1 Million Tonnes of CO2 Emissions, The World Bank,
26/04/11. Available at (http://www.worldbank.org/en/news/press-release/2011/04/26/vietnam-hydro-project-help-meet-growingenergy-demand-avoiding-1-million-tonnes-co2-emissions)
9
Nuclear power plants delayed as electricity demand lower than predicted, VietNamNet, 02/03/15. Available at
(http://english.vietnamnet.vn/fms/science-it/124198/nuclear-power-plans-delayed-as-electricity-demand-lower-thanpredicted.html)

Page 3 of 9

3. Food safety and toddlers nutrition

For a large number of products, Vietnam still ranks in the top five of exporting countries.
Nevertheless, compared to products from other exporting countries, Vietnamese products
are still perceived as of lower quality and value. In our view, this perception needs to be
changed as it does not do justice to the Vietnamese products and limits export
opportunities.10 With this years major changes in terms of Free Trade Agreements (FTA)
and the entry into force of the ASEAN Economic Community, Vietnam has new possibilities
to export its agricultural products. With these new structural changes in mind, it becomes
even more important that the following issues are addressed: food safety,11 export of highend manufactured products (not only commodities), diversification of products,
commercialise by-products and correct use of pesticides, antibiotics and fertilisers.12
Further attention also needs to be paid to label requirements13 and to mechanisation,
modernisation and restructuring of the agriculture.14
With regard to infant and child nutrition, while the National Nutrition Strategy considers
that milk products are important and encourages their use to improve the nutrition status
of Vietnamese children, the observed 11% decline in milk volume sales since last year when
price controls were imposed indicate that Vietnamese children are drinking less milk and
thus, getting fewer nutrients. The negative psychological impact of the price ceilings on
consumers behaviour and the actual modest rise in prices of economy-tier products
suggest that the policy may have failed in its stated humanitarian objective of lowering
prices for low-income consumers. We are concerned that this will in the future impact
directly and negatively the National Nutrition goals on improving Vietnamese childrens
health status.
II. INCREASING CONSUMERS CHOICE
1. Wine and Spirits
The industry is concerned by the recent Ministry of Finances (MOF) proposal to revise the
Law on Special Consumption Tax (SCT Special Consumption Tax (the 2 Amended SCT Law)
during the 10 session of the 13 National Assembly. In the current draft format the 2
Amended SCT Law changes, inter alia, the tax base and the method for SCT calculation on
imported spirits which leads the increase of SCT payment. The increase will nullify and
impair the benefits of any tariff cut negotiated under the EU Vietnam Free Trade
Agreement in relation to imported spirits. The 2nd Amended SCT Law will amend the 1st
Amended SCT Law which was passed only in late 2014 and is not due to come into effect
until 1 January 2016. Any legislation, including the 2nd Amended SCT Law, if hastily passed
can be negatively viewed by foreign investors as being indicative of an unpredictable legal
system, which will negatively impact the image of Vietnam as a premium investment and
nd

th

th

nd

10

See footnote 1 and Expanding export markets for Vietnamese farm produce, Vovworld, 27/08/2014. Available at (vovworld.vn/enUS/Economy/Expanding-exports-markets-for-Vietnamese-farm-produce/266152.vov;
vccinews.com/news_detail.asp?news_id=32038 and www.vir.com.vn/bright-prospects-for-agriculture.html)
11
See Food safety vital to win EU Market,Vietnam Plus, 10/06/2015. Available at (http://en.vietnamplus.vn/food-safety-vital-to-wineu-market/78465.vnp) and Producers, traders blamed for substandard food safety, Viet Nam News, 25/11/2014. Available at
(vietnamnews.vn/society/263169/producers-traders-blamed-for-substandard-food-safety.html) and Asian importers apply EU
standards to seafood imports from VN, The Saigon Times,08/07/2015. Available at (english.thesaigontimes.vn/41839/Asianimporters-apply-EU-standards-to-seafood-imports-from-Vietnam.html)
12
See chapter 3.2 Agribusiness and Food Safety of EuroCham Whitebook 2015. Available at
(http://www.eurochamvn.org/Whitebook) and Annual report spotlights enterprise role in agriculture, Vietnam Plus, 15./04/2015.
Available at (en.vietnamplus.vn/Home/Annual-report-spotlights-enterprise-role-in-agriculture/20154/64259.vnplus)
13
See chapter 3.4 Fast Moving Consumer Goods of EuroCham Whitebook 2015. Available at
(http://www.eurochamvn.org/Whitebook)
14
Industrialising agriculture: The only solution for Vietnam, VietnamNet, 05/05/2015. Available at
(english.vietnamnet.vn/fms/special-reports/129352/industrializing-agriculture--the-only-solution-for-vietnam.html)

Page 4 of 9

business destination for multinationals. This will lead to decrease in government revenue
and an increase in illicit trade. The sudden and significant increase of SCT on imported
spirits will inevitably lead to sharp increases in resale prices followed by a decrease in
demand and a subsequent negative impact on government revenue. Furthermore, it will
only serve to foment fraud and illicit trade which reduce government revenues, weaken the
rule of law, undermine confidence in safe international trade imperative for continued
economic growth and development, impact government policies and put at risk public
health. The industry strongly believes that keeping the current system fully consistent with
international practices will be in the interest of all parties.
2. Motorcycle
Motorcycles have consistently been serving, on average, over 60% of travel needs in
Vietnam and there are now over 39 million motorcycles in the country.15 Vietnam is also
currently the 4 largest market for motorbikes, still growing strongly and steadily, both in
terms of size and quality. However, amongst other issues the industry faces, the Law on
Special Consumption Tax (SCT) No. 27/2008/QH12 is one of them. Passed by the National
Assembly on 14th November 2008 and effective from 1 April 2009, a SCT of 20% was
introduced for motorcycles with a capacity of over 125cc.16 In addition, pursuant to the new
Law No. 70/2014/QH13 amending some articles of Law No. 27 and effective from 1 January
2016, the SCT rate for motorcycles with a capacity of over 125cc is still 20%. This has had a
significant negative impact on manufacturers, which offer over-125cc motorcycles and
limits consumers choice. Since 2008 until now, the economic and social conditions of
Vietnam have developed; under current economic and social conditions, a motorcycle,
especially 150cc motorcycle, is not considered a luxury good, but just a popular private
means of transportation.
th

3. Automotive
Tax impediments are also a concern in the automotive industry. While the Ministry of
Industry and Trade (MOIT) has been making efforts to develop the automotive industry,
the Ministry of Transport (MOT) and the Ministry of Finance (MOF) have been concerned
about road congestion and have therefore imposed high taxes and fees on cars. Despite an
increase in the numbers of cars in the country, the automotive market crashed by 50% due
to the increase of the registration tax. In 2014, the Vietnamese market for new vehicles
reached 157,810 Complete Knock Down (CKD) and Complete Built Up (CBU) imported
passenger cars and commercial vehicles. Under the ASEAN Trade in Goods Agreement,17
Vietnam has committed itself to reducing its import duties to zero for all vehicles
manufactured within ASEAN as from 2018, which is extended to ASEAN+3 (China, Japan and
Korea). In turn, it will benefit Vietnamese customers in terms of choice and access to a
diverse range of products.
III. LEGAL FRAMEWORK
Corporate governance practices in Vietnam are not at the foreground of decision-making.
Assistance from the regulators in introducing a more detailed and robust corporate
governance framework for Vietnam will facilitate the transition towards a more compliant
corporate governance culture as a standard part of business practice.

15

Hansen, A, Hanois Looming Traffic Nightmare, The Diplomat, 08/09/14/ Available at (http://thediplomat.com/2014/09/hanoislooming-traffic-nightmare/)
16
Cubic centimetres refers to engine capacity
17

ASEAN Trade in Goods Agreement, ASEAN, 2015. Available at

(http://www.asean.org/images/2013/economic/afta/atiga%20interactive%20rev4.pdf)

Page 5 of 9

Among other things, Vietnam needs to prioritise the protection of IPR to encourage foreign
investment in Vietnam. Even though Vietnam has improved its legal framework and
enforcement of IPR in recent years, infringements and the enforcement of IPR laws remain
a concern for European and Vietnamese businesses alike. EuroCham therefore calls on the
Vietnamese Government to step up its efforts in guaranteeing an effective protection of IPR
in order to develop technologically advanced industries and to promote innovation. The
foregoing may result in more foreign investment in manufacturing, research and
development, but it will also encourage Vietnamese companies to invest in innovative
activities. Needless to say, counterfeit products in sectors such as agriculture and
pharmaceuticals may even pose risks to consumers health.
Moreover, our Members have increasingly expressed their concerns about the lack of a
well-developed and transparent system of judicial recourse in Vietnam. As an example, in
many countries around the world, a popular way to settle investment disputes is to start
proceedings before a civil or commercial court. In theory, this option is also available in
Vietnam, but foreign investors generally opt for arbitration, partly due to a lack of
transparency of the Vietnamese court system.
However, our Members have found that it is very difficult in practice to achieve the
recognition and enforcement of foreign arbitral awards through the Vietnamese courts. The
main difficulties encountered are the reversal of the burden of proof in respect of objections
to applications for recognition and enforcement of foreign arbitral awards, and the rejection
of applications by the Vietnamese courts for reasons that are not consistent with the NYC
(1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards).
IV. INCREASING VIETNAMS COMPETITIVENESS
1. Taxation
While there have been many positive developments in the tax laws as well as in reducing
the time it takes taxpayers to comply with their tax obligations, we have observed that the
practical implementation of the laws in general appears to have become more challenging.
As an example, while Vietnam has an extensive tax treaty network with over 60 active
treaties and new treaties continuing to be signed, the practical implementation of the
benefits under tax treaties has recently become even more difficult.
In addition, it seems like non-compliance with non-tax rules and regulations, even where
these may not be clear is often used by tax authorities as a basis to either increase taxable
income, impose withholding tax, deny a tax deduction, deny a VAT input credit or reject a
VAT refund, while in our view, the most appropriate consequence should be an
administrative penalty.
This focus on form rather than substance also extends to documentation requirements,
which are not always known in advance. They can differ between tax auditors, and can be so
onerous that they are extremely difficult to comply with in practice.
2. Information Technology
When asked how the internet reliability has affected their business this year, EuroCham
members answered in the following way: the largest group of participants at 47% replied
that their business has been notably affected, with the second largest group of
participants at 31% stating that it has somewhat affected their business. Only 2% of users
said they noticed no interruption at all. 13% said the interruptions were hardly
noticeable and 8% said their business was severely affected. The more the IT industry
and Internet usage advance in Vietnam, the more crucial it becomes to have a stable and
Page 6 of 9

uninterrupted access to the Internet. The stability of worldwide connections is key, not only
for all business sectors but also because it affects people's lives. We believe that the
frequent lack of a stable connection to the outside world will drastically affect investments
from foreign enterprises not only into Vietnam's IT sector but in Vietnam's market in
general as all business sectors today rely and demand stable uninterrupted internet
connections to connect with their clients all over the world. Outage of Vietnam's internet
mainline decreases the trust and confidence for foreign business in being able to conduct
business sustainably in Vietnam especially in the wake of the implementation of
international free trade agreements such as the EVFTA and the TPP.
3. Human Resources
Although the training of the Vietnamese workforce is increasing annually and
improvements are made, Vietnam still lacks the skilled workforce in primary industries and
sectors that are keys to achieve rapid growth and a higher comprehensive workforce. The
Vietnams Socio-Economic Development Strategy (SEDS) 2011-202018 defines promoting
human resources/skills development as one of the three breakthrough areas. Moreover,
the formation of the ASEAN Economic Community by the end of 2015 and the other
economic linkages Vietnam is participating in the period 2011-2020 require further reform.
Improving training, education and legal systems on managing labours will help meet the
demand for skilled workforce, promote a competitive and healthy investment environment
for the progress of transfer of knowledge and more generally for the development of
Vietnams economy.
4. Tourism
The objectives targeted in the Governments National Strategy (for 2020, vision 2030)
regarding the development of the tourism industry are to: attract 10-10.5 million
international visitors by 2020, serve 48 million domestic tourists and increase tourism
revenue to US$ 18-19 billion by 2020.
However, it seems that the sector of travel and tourism is often neglected even though it is
a major contributor to Vietnams employment and GDP. The total contribution of travel &
tourism to GDP (including wider effects from investment, the supply chain and induced
income impacts) in 2013 was 9.6% of GDP and 9.3% of GDP in 2014. In 2014, total
contribution of travel & tourism to employment, including jobs indirectly supported by the
industry was 7.7% of total employment.19 Moreover, direct contribution of travel & tourism
to GDP is expected to grow by 6.6% per annum to 4.8% of GDP by 2025. On the employment
front, in 2014, travel & tourism directly supported 3.7% of total employment. It is expected
to be roughly the same for 2015.
Taking these key figures into consideration, attractive entry visa policy should be a major
policy for the Government as it has the biggest impact on international tourism flow. At the
moment, the strict visa policy for most countries requiring a visa prior to travel or a visa on
arrival together with the relatively high cost is deterring higher spending tourists. We
recommend the Ministry of Tourism, amongst other measures, to extend the number of
countries with visa exemption, extend the exemption period and allow a return into Vietnam
within 30 days if the passenger can show a departing flight within that period. These new
measures will increase Vietnams competitiveness, attract direct investment and

18

Socio-Economic Development Strategy (SEDS) 2011-2020), Ministry of Foreign Affairs, 2015. Available at
(http://www.mofahcm.gov.vn/vi/mofa/nr091019080134/nr091019083649/ns111003074416)
19
Travel & Tourism Economic Report 2014 World, World Travel and Tourism Council, p.1. Available at (http://www.wttc.org//media/files/reports/economic%20impact%20research/regional%20reports/world2014.pdf)

Page 7 of 9

international tourist flows in order to increase foreign currency income and create jobs that
could contribute to 6.5-7% of GDP by 2020.
5. Infrastructure
Modern, efficient infrastructure is vital for continued economic growth. It also lowers the
costs of doing business for all investors in Vietnam. Rapid economic growth and
urbanisation is driving high demands for roads, power, ports, waste and water treatment,
hospitals, and other public infrastructure for goods and services. However, the State budget
is estimated to be able to meet only about 50% of Vietnam's infrastructure needs which are
estimated at USD170 billion from 2011-2020.20 The balance would need to come from other
sources, including from private investments in the form of Public-Private Partnerships
(PPPs).
The success of the PPP Decree and the robust legal reform process of Vietnam in the last 5
years will largely depend on the government's ability to bring about and promote viable
projects. In order to boost the credibility of Vietnam as a potential destination for PPP
investment, in particular due to the absence of implementation of any PPP project under
the previously existing pilot PPP regime under Decision 71, it is, in our view, essential that a
small number of PPP projects be identified and prioritised for tendering to the market
rapidly. Further implementing regulations are required to provide detailed guidance for the
interpretation and application of the PPP Decree.
In terms of transport and logistics, with the advent of the European Union Vietnam Free
Trade Agreement (EVFTA), the need to create a Regional Transport Hub in Cai Mep has
never been as great as now. The resultant increase in trade (and therefore container traffic
in and out of Vietnam) is now expected to far exceed the previously expected growth of 7%
to 8% from now until 2020. Trade between the EU and Vietnam has on average increased by
23.1% between 2010 and 201421 and in order to maximise the further increase in trade
volumes that the EVFTA will undoubtedly bring to Vietnam, it is essential that an efficient
deep sea container terminal exists to cater for such a demand. The current reliance on the
HCMC City Terminals is not sustainable both from an operational and a commercial point of
view.
CONCLUDING REMARKS
2015 has seen major changes in terms of trade and competitiveness for businesses in
Vietnam. Once again, we would like to thank the Government for the efforts made and for
the successful trade agreement between the EU and Vietnam, which paints a positive
picture for the upcoming years. Nevertheless, some challenges remain to improve
Vietnams competitiveness, especially at a time where neighbouring countries will also
challenge Vietnams competitive advantages in the region.
We therefore invite and encourage the Vietnamese government to address the issues
outlined in this Position Paper and to comfort the expectations of the European business
community in Vietnam. Please note that our suggestions in this Position Paper are made on
behalf, and in the interest of our Members, the European business community in Vietnam.
However, it is clear that in the vast majority of cases these suggestions are clearly in the
long-term interest of the Vietnamese Government and the Vietnamese people.

20

Strengthening Public-Private Partnerships, VCCI News, 16/04/14. Available at

(http://vccinews.com/news_detail.asp?news_id=30318)
21
Eurostat COMEXT, 10 April 2014.

Page 8 of 9

We sincerely hope that our suggestions in this Position Paper will help the Vietnamese
Government to reach its goals and EuroCham will continue to assist wherever possible. We
are therefore looking forward to working with the Government of Vietnam and all our
Members and partners, both Vietnamese and European, to enhance Vietnams
competitiveness.

Page 9 of 9

Korea Chamber of Commerce in Vietnam (KoCham)

POSITION PAPER
Annual Vietnam Business Forum 2015
Hanoi, December 1, 2015

Presented by
Mr. Ryu Hang Ha
Chairman
INTRODUCTION
Honourable H.E Deputy Prime Minister, Ministers, Ambassadors, Co-Chairs of the Vietnam
Business Forum (VBF), Ladies and Gentlemen: On behalf of the Korea Chamber of
Commerce in Vietnam (Kocham), we would like to first thank the Vietnamese Government
for facilitating this ongoing dialogue at the VBF. We sincerely appreciate the opportunity to
contribute at this forum.
Please find below a summary of five (4) key issues that are of concern to Korean
enterprises in Vietnam. We hope the legislators will consider it and address them in a
prompt manner.
I. LOAN TERMS OF FOREIGN INDIVIDUALS
Comments
As stipulated in Article 10 of the Regulations on lending by credit institutions to clients
issued with Decision 1627/2001/QD-NHNN of the Governor of State Bank of Vietnam dated
31 December 2001 (the Regulation), the loan term applicable to foreign individuals by the
credit institution shall not exceed the permitted period of residence and having activities of
the foreigner in Vietnam. This would be interpreted that the loan term applicable to foreign
individuals is limited during temporary residency card or visa period. This regulation or
restriction may be out of date in comparison with other laws of Vietnam. In accordance with
Law on Residential Housing 2014, foreign individuals permitted to enter Vietnam are
eligible to own residential houses in Vietnam with the term of not more than fifty (50) years
which can be extendable. Such foreign individuals have same rights of residential house
owners as Vietnamese citizens of which they are entitled to mortgage residential houses to
banks or credit institutions for loans. Therefore, loan term applicable to foreign individuals
should not be restricted within the temporary residency card or visa period as mentioned
above.
st

Recommendation
We highly recommend that the loan term applicable to foreign individuals should be based
on their repayment capacity rather than upon their permitted period of residence as stated
in the aforesaid Regulation. Accordingly, the loan term can be extended until the expiry of
remaining term of residential houses (for instance, 50 years) if they are provided as a
security. This regulation would support the development of financial industry of Vietnam.

Page 1 of 3

II.

EXTENSION OF THE PROBATION PERIOD

Comments
Pursuant to Article 27 of the Labour Code 2012, the duration of a probationary period shall
depend on the nature and complexity of the work, but there may only be probation on one
occasion for one job, and probation must ensure the following conditions:
1. The probationary period must not exceed sixty (60) days for working in a position
requiring high-level specialized or technical expertise.
2. The probationary period must not exceed thirty (30) days for working in a position
requiring intermediate level specialized or technical expertise or for technical workers
and professional staff.
3. The probationary period must not exceed six (6) days for other work.
As to a heavy equipment operator, in practice, many enterprises must apply Article 27.2 of
the Labor Code 2012 as above. However, one month probationary period applicable to the
heavy equipment operator is not sufficient to thoroughly examine the relevant employee's
character and ability. It would be difficult to determine whether the enterprise should
employ him/her as a full-time employee within one month probation period.
Furthermore, the employee usually seems to work hard during the probationary period, but
start slowing down after becoming a full-time employee. Hence, it's necessary for the
enterprise to have sufficient time to review the employees character and ability by way of
extending the probationary period up to 2 or 3 months.
Recommendation
In Korea, the probation period usually takes from 3 6months in practice and there is no
limit on probationary period under the laws of Korea. Therefore, we would like to propose to
extend the probation period as per suggestions above.
III.

OVERTIME RESTRICTION OF 30 HOURS PER MONTH

Comments
In respect of overtime work limits, Article 106 of the Labor Code 2012 stipulates that the
employer must ensure the number of overtime hours of the employee does not exceed 50%
of the normal working hours in one day, and if the employer stipulates work on a weekly
basis then the total of normal working hours plus overtime hours must not exceed twelve
(12) hours in one day, and does not exceed 30 hours in one month, and the total overtime
hours must not exceed two hundred (200) hours in one year, except in a number of
special cases regulated by the Government where the number of overtime hours worked
must not exceed three hundred (300) hours in one year.
The Labor Code 2012 limits the overtime hours to 30 hours per month as maximum
regardless of peak-season and off-season of each enterprise. Accordingly, it is extremely
difficult for manufacture enterprises to meet production orders or due date requested by
buyers if fully complying with this restriction. It may seriously affect the business operation
and will force enterprises to increase the number of shifts during peak-season, which will
result in a substantial increase in labour costs. Air transport costs for delivering the
products would be incurred and sometimes enterprises have to provide discount on product
price in favor of buyers according to the conditions set by such buyers.
Page 2 of 3

Recommendation
The above-said overtime restrictions are often pointed out by foreign invested enterprises,
particularly in manufacturing and other labour intensive industries that take advantage of
the cheap labour costs when investing into Vietnam. This limitation may greatly impact on
foreign investors decisions on investing into Vietnam. Therefore, we would highly
appreciate if Vietnamese Government would consider removing the overtime restriction of
thirty (30) hours per month, adjust and apply the overtime work regulations more flexibly
in the following measures:
1. During peak-season, the enterprise may flexibly extend the overtime of the employees
to satisfy the due date set by a client/customer;
2. During off-season, the enterprise may flexibly reduce the working hours/ the overtime
of the employees.
IV.

BURDEN ON EXPENSES DUE TO THE CHANGE OF DEFINITION OF WAGES

Comments
According to new regulations of the Labor Code 2012 and its guidelines, wages is defined
as money which the employer pays to the employee in order to undertake the work as
agreed and it includes wage rates for the work plus wage allowances and other additional
items. As to the new definition of wages, employers shall have to pay extra amounts
relating to social insurance, overtime wages and accordingly labor costs shall extremely
increase. It is known that social insurance should be covered by State Treasure however the
way in which enterprises are forced to mostly bear such expenses like in Vietnam seems to
be an issue. We see no country where enterprises must bear huge expenses on social
insurance which are equivalent to 22% of wages fund payable to employees as Vietnam
does. Moreover, the regional minimum wages have been increasing quickly at from 10% to
15% per year. It means that the change of ratio for the payment of social insurance together
with the calculation of overtime wages and expenses on meals for employees makes the
labor costs in Vietnam significantly increased and the manufacture industry therefore has
been losing its attractive competition.
Recommendation
Due to the change of world economic situation and change of calculation of overtime wages
as well as other factors which may cause significant effects to the burden on expenses
borne by enterprises, we would like to recommend Government of Vietnam to re-consider
to not include the additional items to the wages which are based for calculation of
payment of social insurance .

Page 3 of 3

The Japan Business Association in Vietnam (JBAV)

KEY ISSUES FROM JAPAN BUSINESS ASSOCIATION IN VIETNAM (JBAV)

Annual Vietnam Business Forum 2015

Hanoi, December 1, 2015
H.E. Mr. Nguyen Tan Dung, Prime Minister of the Socialist Republic of Vietnam,
H.E. Mr. Bui QuangVinh, Minister of Planning and Investment,
Ladies and gentlemen,
With the progress of trading policies such as TPP, importance of industrial policies will be
more significant. In particular, to contribute to the development of Vietnam, we Japanese
Business Association, together with the government of Japan the largest ODA provider, see
the need to share discussion and take joint actions with you.
1. Improvement in infrastructure for a long-term and sustainable development
For improvements in infrastructure, the investment source of Long-term but at a low
interest rate ODA from Japan is effective, and we hope Vietnamese Government utilizes
Japanese ODA through the modification in the Decree No. 38.
2. Improvements in the investment environment
Our proposal includes the regulation on foreign-invested enterprises, ENT inspection, and
logistics foreign investment, and policies on automobiles and housing industries as below:
(1) Automobile industries: clarifying incentives for domestic production which leads to
continuous development of supportive industry, further GDP growth, and also WTOs
commitment.
(2) Logistic foreign investment: permitting establishing 100% of foreign owned company of
CPC 742 and 748.
3. Improvements in business and production environment:
Our proposal includes the regulations on minimum salary, over time work, work permit, pay
roll table, also especially the restriction of importing used machine and unofficial customs
expense as below;
(1) The restriction of importing used machine:non-restrictions in foreign investment in
importing used machines and equipment.
(2) Unofficial customs expense: continue activities to grasp on unofficial expenses.
Page 1 of 2

4. Improvement on related decrees of Law on Investment and Law on Enterprise:

(1) Protection of the incentives once given to investors (Law on Investment)
(2) Protection from change in law (Law on Investment)
(3) Smooth registration of Charter Capital Increase in case of huge Infrastructure Project
(Law on Enterprise)
5. Relaxation of the conditions for re-entry under a Visa exemption, requesting as below;
We suggestthat the conditions for Japanese citizens immigration be changed in immigration
rules of the Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam,to allow
them to enjoy the visa-exemption, regardless of the time restriction of their last departure
from Vietnam, as stated in the law prior to the amendment.
6. Challenges and difficulties
We positively welcome the general statements of free trade agreement; however, we are
afraid that the deterioration of trading balance of payments would lead the macro economy
to the circumference of a circle of exchange risk occurrence; therefore it would badly affect
the future economic growth. Foreign investors will not aggressively invest unless they are
persuaded that the macro economy would continue to grow steadily. Although the textile
industry is expected to dramatically expand thanks to the free trade agreement, there are
concerning voices of the negative influence on other fields such as automobile. It is required
for government to have an explanation on estimation of how much change in trading balance
of payment brought by regional enterprises, otherwise, how much investment should be
gathered/ called for these effected fields and how to materialize. As the Chamber of
commerce, we are willing to discuss on this issue.

Page 2 of 2

The Japan Business Association in Vietnam (JBAV)

Statement by JBAV
Annual Vietnam Business Forum 2015, Hanoi
Hanoi, December 1, 2015

Presented by
Mr. Shimon Tokuyama
Chairman
Respectfully addressed to:
His Excellency Nguyen Tan Dung, Prime Minister of Socialist Republic of Vietnam,
His Excellency Bui Quang Vinh, Minister of Planning & Investment,
Ladies and Gentlemen from the Government Bodies and business community present at the
Forum today.
On behalf of Japanese enterprises, I would like to express my sincere appreciation to
Ministry of Planning and Investment and representatives to Business Associations in
Vietnam to permit me to present here today. Vietnam Japan relationship has been closely
and deeply nurtured, especially after the official visits to Japan in July by the Prime Minister,
His Excellency Nguyen Tan Dung and the General Secretary, His Excellency Nguyen Phu
Trong in September. In such context, the JBAV members in November 2015 stand at 1,510,
although doubles compared with that in 2008, it tends to increase annually with a higher
interest of Japanese enterprises investment in Vietnam. On the occasion of the Forum today,
I would like to make some comments on policies by the Vietnamese Government and their
influences on Japanese enterprises activities. In addition, I also would like to make a
presentation on pending issues for improving the investment environment.
1. POLICIES ON COMMERCE AND INDUSTRIAL DEVELOPMENT INCLUDING TPP
By 2015, the Vietnamese Government has actively and successfully deployed commercial
policies such as Vietnam EU Free Trade Agreement and Trans-Pacific Partnership
Agreement (TPP). Nevertheless, there should be some concern that lifted import tax will
bring Vietnam facing competition with other nations in the region. Vietnamese Government
needs to clarify his industrial policies. Otherwise, Vietnam shall only become attractive to
enterprises as a potential market where many products can be sold. It shall be difficult to
assure for employment for the swift increasing of young generation and improvement of the
living standards. It is extremely crucial for Vietnamese Government to put forward policies to
nurture the industry for the long-term.
Page 1 of 7

2. IMPROVEMENT IN INFRASTRUCTURE FOR A LONG-TERM AND SUSTAINABLE

DEVELOPMENT
We know that public debt-related issue was ebulliently discussed last year. We suppose that
it is extremely crucial for the financial solutions to be assured for gradual and solid
improvements in such infrastructure as electricity, communications, and transportation
works. The investment source of Long-term but at a low interest rate ODA from Japan may
be used in the infrastructure field. We believe that ODA source shall be utilized in an
extremely effective way. We also know that the Vietnamese Government considers the
modification in the Decree No. 38 on Management and Utilization of Official Development
Assistance (ODA) and Concessional Loans from Donors and hope the improvements in
procedures toward swift deployment of projects will be made.
3. IMPROVEMENTS IN THE INVESTMENT ENVIRONMENT
a. Improvements in environment for foreign-invested enterprises
Many Japanese strategic investors choose to participate in management in destinations of
investment and gain back their capitals by creating new values at those investment
destinations. We wish the Government to positively consider loosening the regulation related
to restrictions in capital share rates to listed companies, and State-owned enterprises.
Furthermore, from a viewpoint of diversifying investment modes, we hope that conditions to
set up foreign holding companies will be clarified and procedures will be simplified.
b. Automobile industry-related tax laws
After tax barrier applied to the automobile industry in ASEAN region is lifted in 2018 for
automobile enterprises further production in Vietnam, we wish incentives, mainly financial
supports offered to domestic production, to be clarified.
We know that at present, the Government considers a remarkable reduction on special
consumption tax (SCT)/luxury tax imposed on automobiles with small engine capacities and
abrogating import tax on automobile components. This policy, however, might not lead to the
promotion of domestic production because the remarkable decline in SCT relates to both
domestic automobile production and imported automobiles. In addition, the lift of import tax
on automobile components, which shall shorten the cost gap between import automobile
and domestic production (around 20%), is not realized yet. Some calculations show:
Compared with simply selling imported automobiles, domestic automobile production is
triple-fold effective and positive for GDP and tenfold for employees. In addition, we also
would like Vietnamese Government to thoroughly understand that: With the industrys
natures, if automobile enterprises do not make production continuously, the supportive
industry including the manufacturing sector of automobile components shall not develop.
Page 2 of 7

Year 2018 is approaching in the context of compliance with WTOs commitments, we expect
the Government to early make studies on how to effectively apply policies such as some
schemes on subsidiary for domestic manufacturers.
c. Development in the housing industry
The development in the housing industry can effectively expand the supportive industry of
steel and chemical products. Furthermore, this is the industry that can be expected with
spreading effects on businesses such as electrical home appliances. We expect Vietnamese
Government to make studies on policies for housing development for the middle class,
especially supports from the Governments financial source in order to provide loans at fixed
interest rates for long-terms the risk that commercial banks cannot shoulder.
d. Popularization of the up-to-date retailing sector
In order to engage retailing enterprises in the market, we make three following proposals:
firstly, Clarifying a list, standards, and procedures for ENT inspection; secondly, clarifying
the list and standards for inspection by Department of Police, Department of Health and
lastly, master planning of the sector; publicizing information on applications for licenses to
open stores, approved rates, and inspection time, etc.,
e. Restrictions in logistics foreign investment
After 1st November 2014, Japanese enterprises is allowed to set up 100% foreign-owned
companies in Vietnam in order to fully or partially provide services coded CPC 742 and 748 in
goods logistics or transportation. However, Ho Chi Minh Municipal Department of Planning
and Investment replied that upon the guidance by Ho Chi Minh Municipal Peoples
Committee and due to incomplete but essential legal system, 100% foreign-owned
companies establishment had not been permitted. The same answer was also made in case
Japanese enterprises wish to buy-back shares owned by Vietnamese ones that are partners
in the above-mentioned service joint-venture suppliers in order to set up 100% Japan-owned
subsidiaries after 1st November 2014. In line with the commitment after joining WTO,
however, the establishment of 100% foreign-owned enterprises must be permitted at least
for the above-mentioned CPC business lines after 1 November 2014. Therefore, we suppose
st

that the refuse by Ho Chi Minh Municipal Department of Planning and Investment may
infringe the commitment to WTO. We hope concerned Bodies will make decisions that
respect commitments to WTO.
4. IMPROVEMENTS IN BUSINESS AND PRODUCTION ENVIRONMENT AND MAINTAINING
INTERNATIONAL COMPETITIVENESS
a.

Thoughts on minimum salary

The minimum salary increased by 15.1% in 2015, a much higher ratio than the inflation rate.
We understand that the Government makes an objective to increase it by 4,000,000 dongs by
Page 3 of 7

2018, therefore, the Government works out a guideline of gradually annual increase. We do
not intend to reject a better life for the Vietnamese because it is also one of necessary factors
to boost up domestic needs. However, in order to encourage enterprises to develop and
contribute to the development of industries in Vietnam, we hope that the minimum salary is
calculated based on the accurate consideration of the inflation rate, unemployment rate and
the anticipated GDP rate. . In addition, employees at those enterprises that pay higher
salaries than the minimum one compare the rises with the minimum salary or those at
neighboring enterprises. In case their rises of salary are lower than others, labor disputes
may rise. It is essential to work out a consistent definition on salaries in Labor Code so that
laborers can explain the minimum salary more easily and popularize it widely.
b.

Restrictions on Overtime Work

According to Article 106.2(b), the amount of overtime work is restricted not to exceed 4 hours
per day, 30 hours per week and 200 hours per year. However, meeting production orders
while fully complying with this restriction on the amount of overtime work will force
employers to increase the number of shifts, which will result in a substantial increase in
labor costs. We are, from the view of both employers and employees, think that it is
reasonable to allow employers to extend the least overtime hours to a reasonable level.
Besides, for works which achievements do not correspond with working hours such as
research and development, engineering work, it is hoped that flexible timing can be applied
so that each individual can decide starting and finishing time of their work for work and life
balance.
c.

Proposals related to the Draft of the Modulated Decree No. 102

Firstly, we wish the seniority of 5 years formulated in Point c) Item 3, Article 3 to be

shortened down to 3 years. Also, to keep excellent staffs, skilled engineers in Vietnam, we
hope that the submission of qualifications can be replaced by submission of affidavit on
recruitment for professional positions by the enterprises. Secondly, because the Vietnamese
Government agrees with Foreign laborers do not need granting with Work Permits as
pledged when joining WTO. This, nevertheless, is not formulated in Article 172 in the Labor
Code and Article 7 in the Decree No. 102. We wish this content to be supplemented. Besides,
Point i) newly supplemented in this Draft makes regulations on those foreigners who work in
Vietnam continuously for 30 days. We expect it to be modulated into 90 days depending on
titles and work types. Thirdly, criminal records granted within the latest 6 months are
requested in the Work Permit-related file. However, in case the temporary residence period
is short, it is very time consuming to deal with related procedures. Cases in which it is
difficult to apply for a Criminal Record may occur. We wish the Government to consider the
division of temporary residence in Vietnam into less than 6 months and over 6 months
upward to modulate papers of submission.
Page 4 of 7

d.

Review on 5% and 7% gaps in Pay rolls

Articles 7.2 and 7.3 in the Decree No. 49/2013/N-CP formulate that: the gap between the
two successive pay rates must be at least 5% different, and the lowest pay rate for works or
titles that request for trained employees must stand at 7% at least higher than that of the
regional minimum salary. Pay rates and professional skills vary depending on different
sectors and enterprises. The request to build up either consistent 5% or 7% gaps in pay rolls
without considering this diversification shall badly affect flexible and proper assessments by
enterprises on employee work performance. We expect the regulation on gaps in pay rolls to
be reviewed and abrogated.
e.

Application of industrialization at high schools

It is necessary to apply technology education, skills for industrialization in high schools and
implement policies to increase human resources as foundation of the industry. For example,
it is seen in Japan that, in high schools, academic subjects account for about 56%, industrial
subjects account for about 5%, commercial subjects account for about 10% and agricultural
subjects account for about 5%, professional training starts very early. Currently, Vietnam is
establishing more universities, building capacity of vocational colleges to work towards
industrialization process. Besides, it is hoped that the Government will soon study the
education system which includes specialized training, in order to gain more of skilled
manpower for the future.
f.

Regulations on restriction of used machine and equipment import

We continue to raise expectations of no-restrictions in foreign investment in importing used

machines and equipment stipulated in the Circular 20 to Ministry of Science and Technology.
After the meeting with Ministry of Science and Technology on 22 September, we, once again,
nd

presented our expectations in writing in the proposal dated 01 October to the 9 Draft of the
st

th

above Circular. We make proposals based on the two following theoretical points. Item 2,
Article 6: Restrictions in imports are not applied to new investment and expansion
investment as well; Item 2, Article 1: Clarity of the List of machines and equipment (Group
2).
g.

Proposed activities on unofficial customs expenses

After VNACCS was put into use in April 2014 and related to some local customs officers
requests for unofficial customs expenses. In January 2015, we discussed with the General
Director of Customs on this issue, nevertheless, members in JBAVs Logistics Group have
applied their own separate settlements so far. We wish, in the context of stabilized VNACCS,
concerned Bodies to further continue activities to grasp if there are unofficial expenses or
not.
Page 5 of 7

5. IMPROVEMENT ON RELATED DECREES OF THE LAW ON INVESTMENT AND LAW ON

ENTERPRISE
a.

Protection of the incentives given to investors (Law on Investment)

A draft decree to implement the Law on Investment 2014 provides that the investors should
return the incentives to the State in a case where the investors have lost their eligibility to
enjoy the incentives. This is less favorable than the decree to implement the Law on
Investment 2005, particularly in a case where the investors are not at fault and the investors
met the condition of eligibility in some parts of the investment projects duration. This
provision in the draft decree should be deleted and instead, it should be provided that the
investors shall not enjoy the incentives any further in such a case. Also, the grace period to
continue to enjoy the incentives in order for investors to adjust their projects should be
granted in a case where the investors are not at fault in having lost its eligibility to enjoy the
incentives.
b.

Protection from change in law (Law on Investment)

The new Law on Investment 2014 provides protection of the incentives from change in law
only. However, it should also provide protection on lawful interests which do not amount to
incentives from change in law, as the Law on Investment 2005 provides for. We believe that
the Law on Investment 2014 should not exclude protection of lawful interests from change in
law, as it has been granted to large scale BOT project contracts in the past.
c.

90-day deadline for charter capital contribution in an LLC (Law on Enterprise)

The Law on Enterprise 2014 changed the 3-year grace period for charter capital contribution
in an LLC which is provided in the Law on Enterprise 2005, and sets the 90-day deadline for
charter capital contribution. We are concerned that if the registration of increase of the
charter capital is delayed, it will cause a delay in the disbursement of the additional capital
which is necessary for the business operation, such as continuous construction of the
facilities for the projects. We would like to request the Vietnamese government to take
necessary measures not to cause delay in the registration of the charter capital increase
under the Law on Investment 2014 and Law on Enterprises 2014.
Also, Article 48.3(b) of the Law on Enterprises 2014 provides that if a member of an LLC fails
to contribute the capital within 90 days from the day on which the Enterprise Registration
Certificate is issued, each member has the rights and obligations proportional to their
capital contribution already paid. However, since the decision of each member to reduce the
agreed and registered capital contribution amount is required to obtain the amended (or
new) Enterprise Registration Certificate and the Investment Registration Certificate, if the
member who fails to contribute its capital contribution does not issue the decision, this
article does not work. So, the decree to implement the Law on Enterprise should provide that
in a case where a member of an LLC fails to contribute the capital within the statutory capital
Page 6 of 7

contribution period or the agreed period, the capital contribution ratio is automatically
changed in accordance with the amounts of the disbursed capital contributions of the
members in the LLC. This automatic reduction of the registered capital contribution amount
and the rights of the member should also be applied to failure to contribute capital in an LLC
which was established before July 1, 2015.
d.

Concerns of procedure complicatedness

Under the former Investment Law, the sole License of Investment, the Investment Certificate,
was needed for foreign enterprises. In line with the new Investment Law and Enterprise Law,
this License is divided into the Investment Registration Certificate and Enterprise
Registration Certificate. Accordingly, foreign enterprises located in Industrial Zones which
enjoyed the one-door services under the former Investment Law have to deal with not only
the Industrial Zone Authority but also Department of Planning and Investment in charge of
the business area when they change the contents of the Investment License, such as
increasing the charter capital or the total project investments. Therefore, we are worried that
the one-door services provision shall fail. We wish for the concerned authorities to take
necessary measures not to cause delay in changing the contents of the Investment License
due to the division of the Investment License.
6. RELAXATION OF THE CONDITIONS FOR ENTRY UNDER A VISA EXEMPTION
Due to the amendment of the immigration rules of the Law on Entry, Exit, Transit and
Residence of Foreigners in Vietnam, Japanese citizens are denied re-entry into Vietnam
within 30 days if they do not have the Visa. This change of Visa exemptions limits the
opportunities for Japanese citizens who wish to visit Vietnam more frequently for business or
tourism. We request that the conditions for Japanese citizens immigration be changed to
allow them to enjoy the visa-exemption, regardless of the time restriction of their last
departure from Vietnam, as stated in the law prior to the amendment.
7. CONCLUSION
Accompanying together with the Government of Japan, we pledge ourselves to make further
proposals and actions for the development of Vietnams economy and industry. We hope the
above-presented aspirations by JBAV will be reflected in Vietnamese Governments policies
so as to help Japanese enterprises further contribute to Vietnams economy and industry. We
wish to gain more opportunities to exchange constructive opinions with the distinguished
concerned Bodies. I would like to put an end to my presentation here. I am grateful for your
attention!

Page 7 of 7

Australian Chamber of Commerce, Vietnam (AusCham)

AUSCHAM STATEMENT
Annual Vietnam Business Forum
Hanoi, December 1, 2015

Presented by
Mr. David W. Carter
We take the opportunity to comment on [three] specific areas of note and interest to our
members and other Associate Member chambers of commerce.
1. Lack of implementing regulations
This year has seen several important new law or law changes come into effect, notably the
new Investment Law and new Enterprise Law, both of which took effect on 1 July 2015. It
was encouraging to note that drafters of those laws incorporated comments from the
investment community.
For practical purposes however such laws are all but ineffective without implementing
legislation in the form of Decrees and Circulars to provide both clarity for investors and
guidance for the regulators to give effect to the governments intent. It was widely expected
that implementing Decrees for the Investment Law in particular would be issued, following
opportunities for consultation, before 1 July 2015. Unfortunately, to date, no such Decree
has been issued.
The consequence has been uncertainty, development of differing practices among
provincial authorities and thus a lost opportunity to capitalize on the many positive changes
introduced in the law itself. Clear and detailed guidelines are required for the full impact of
the new law to be realised and we hope the government will address this as a matter of
urgency.
2. Visa waiver issues
The Governments recent decision to increase the number of countries on the list of visa
exempt countries was very welcome. Currently Vietnam has visa waiver or exemptions for
citizens of 21 countries which is far lower than neighboring competitors such as Malaysia
(with 164), The Philippines (with 157), and Thailand (with 52). Despite this positive move,
AusCham still has several concerns in this area.
First, we strongly recommend promptly extending the list of visa waiver countries to
include Australia and New Zealand as a means of further facilitating trade, investment and
tourism between the nations.
Secondly, we recommend the exemptions be for 30 days not the current 15 days with
returns allowed within 30 days as a means of encouraging people to use Vietnam as a hub.
3. Strengthening market institutions
Vietnam has taken important steps recently to improve and enhance the market institutions
that underpin a successful and sustainable economy. Notable improvements are the
Page 1 of 2

Investment Laws terms with respect to freedom to do business in areas not prohibited by
law, prohibitions on ministries and local authorities imposing business conditions by the
back door and renewed focus on restructuring of the State-owned enterprises sector.
Nevertheless, as Vietnam integrates deeper into the global economy, particularly following
the conclusion of the Trans-Pacific Partnership and other free trade agreements, it is
imperative that Vietnam takes bold steps to continue improving market institutions and
economic freedom. For example, while conditional investment sectors are justified, they
also create de-facto barriers for entry often well beyond the stated rationale of the
conditions in question. The list of conditional sectors is too broad and the consequences are
also often unclear. We note for example that the recent Decree 60 concerning foreign
ownership limits in public companies provides that if a business activity is considered as
conditional for foreign investment purposes but there is no specific foreign ownership limit
with respect to such activity, then the level of foreign investment is capped at 49%. We
would propose that the opposite conclusion would be more appropriate and in keeping with
Vietnams commitments towards economic freedom. Majority foreign ownership does not
mean investment conditions cannot be met.
Another area of note is with respect to the role of State-owned enterprises. SOEs continue
to dominate many areas, crowding out private enterprises, particularly SMEs, who are not
competing on a level playing field. Such companies, given the space and opportunities they
need to flourish, will ultimately deliver more efficient and sustainable growth for Vietnam.
In absence of that there is a risk that the foreign-led manufacturing sector will become the
key sector of the economy, adding less value to the economy with little of the manufactured
product consumed in Vietnam.
4. Restrictions affecting foreign real estate developers
We note that the new Law on Real Estate Business continues to provide for unnecessary
differences between foreign and domestic real estate developers. For example, foreign
developers are not permitted to transfer land use rights in the form of division of land into
plots for sale whereas domestic developers enjoy such rights. Further, enterprises with
foreign owned capital are permitted to collect up to only 50% of the value of the contract for
sale and purchase or hire-purchase of real estate to be formed in the future whereas the
applicable percentage to local developers is 70%. It is not clear why this difference in
treatment is necessary and this inconsistent treatment creates inefficiencies and impairs
the competitiveness of the industry in general.
We would recommend that differences in treatment between foreign invested and
Vietnamese developers be removed to ensure a fair and level playing field for all in the real
estate sector in Vietnam.

Page 2 of 2

INVESTORS FEEDBACK

Prepared by
Nordic Chamber of Commerce
Vietnam Business Forum (VBF)

Government leaders, business representatives, ladies and gentlemen, The Nordic Chamber
of Commerce Nordcham, appreciates this opportunity to share its views on the business
climate in Viet Nam.
As a small Nordic business community with a long history in Viet Nam we would like to
share our view on s few specific areas which Nordic investors focus on.
POWER AND ENERGY
The Nordic business sector in Southern Vietnam has concern that the Power Development
Plan VII, confirmed by Deputy Minister of Industry and Trade Mr. Hoang Quoc Vuong,
forecasts delays in sources of new energy which will lead to power shortages in 2017/2018,
and will require power transferred from Northern Vietnam for sufficient supply. Other
concerns are the long timeframe to mobilize financing for the transmission lines.
Additionally, private investors move to invest in new power sources is being postponed in
long and complex negotiations. The Governments regulatory frame work is still a barrier,
and licensed projects are failing to attract financing.
According to Decision No. 8266/QD-BTC, the timing of full implementation has been
determined to be 2019. Nordcham suggests that in order to maintain a stable power supply,
an urgent priority to attract private investment to the energy market in Vietnam is needed.
Therefore, Nordcham asks MOIT to accelerate the implementation of this key market
reform.
While Vietnam Electricity (EVN) remains the monopoly buyer of power, its financial status
continues to cause concern for investors of new power plants who are required by law to
sell power to EVN. Nordcham asks MOIT to consider new methods to enhance the
creditworthiness of EVN, in addition to continued effort to increase power tariffs to cover
costs of supply.
Nordcham notes with enthusiasm the possibility of other large power consumers becoming
power buyers and would suggest to encourage interest in this important role in the market
that MOIT immediately publishes guidance on what criteria such companies must meet to
satisfy MOITs requirements to take on this role.
Because low-income citizens will suffer from higher tariffs, Nordcham supports that the
Government subsidize them (30kWh/month free) and ensure the rural population does not
suffer from power cuts favoring industries. Business would benefit if MOIT would share a
road map of Retail Power Pricing as it moves to prices decided by market with Government
management. This will open access to required private investment, both domestically and
internationally, and will stimulate greater energy efficiency efforts from end-use
customers.
Page 1 of 3

WATER AND ENVIRONMENT

Water quality, flood protection and waste water management continues to have an impact
on Foreign Direct Investment planning and costs for Vietnam. Municipal water and waste
water control projects continue to fall behind with negative impact on our environment.
Noting the high risk of climate related disasters in coastal, low-lying areas, and urban
flooding in Vietnam, continued efforts at mitigation and adaptation are needed. Progress is
notable in some areas, but the challenge is serious and needs attention. Recent
improvements in the PPP and BOT legislation have been positive, but will are behind on
PPP and BOT structure similar to other ASEAN countries to attract private investments.
LABOR AND HUMAN RESOURCES
The Vietnamese workforce is young and dynamic, even compared to other Asian countries,
and is one of the main and important assets of Vietnam, which can stimulate further foreign
investment.
Many of our companies have difficulties in recruiting skilled workers and also engineers.
We believe it is necessary for the authorities to focus and invest more in education,
particularly vocational schools and engineering, in order to upgrade the knowledge and
standard of the workforce.
As to foreign experts that are needed in the initial phase of the establishment of new
investments, it should not be made to complicated, as they are needed for a proper
technology transfer. For the Nordic companies we believe that the cost of bringing in
foreign nationals will anyway limit their use, to only the period the investors judge it
feasible.
LOGISTICS/TRANSPORT/PORT SITUATION.
Many of our member companies are still experiencing great problems due to increased
transport and logistic cost as a result of port congestion and lack of handling capacity in the
major Vietnamese ports. In order for Vietnam to remain competitive compared with its
neighboring countries it is important to improve the cargo handling capacity and cost.
Present ports need to be improved and new ports need to be built, this applies both for
container terminals and bulk-steel cargoes. We recommend that in order to accelerate
investment in this important sector the policy is eased to allow 100% foreign shareholding
in transport and port investment projects.
The new trucking rules regarding maximum weight trucks can carry have sharply added
transport cost and are quite different from international standard. Furthermore the rules
and regulations are continuously changed/amended making difficult to even follow what the
current regulations are. We agree that maximum weight has to be applied, and we do in
general fully support this new measure, however it is today not always applied equally
between ports and regions. Furthermore a fully loaded 20 feet container can be transported
on a 20 feet trailer in loading ports around the world, but in Vietnam it can now only be
transported on a 40 feet trailer. We therefore suggest that relevant rules and regulations
are modified to apply international standard so that particularly containers can be
transported in a more efficient and safe way.
Finally we have noted that as per WTO commitment as from January 2014 foreign
companies should be able to operate in the logistic field as fully foreign invested
companies, however the regulations on how to apply the new rules have not been issued.
Page 2 of 3

We recommend that comprehensive regulations are issued without further delay enabling
foreign companies to make needed investment in the logistic field, which will make the
logistic services more competitive and reduce exporter and importers cost.
LEGAL FRAMEWORK FOR FOREIGN INVESTORS
In a recent legal case where the Appellate Court of the Supreme Peoples court of Ho Chi
Minh City revoked an investment certificate from 2007 related to the Conversion of Baria
Serece port Co from a joint venture to a joint stock company, and furthermore an transfer of
shares in 2010 from one foreign shareholder to another, both of which are our Nordcham
members. The claim was filed by one minority Vietnamese 10% shareholder against the
People Committee of Baria Vung Tau and its Department of Planning and investment DPI.
All shareholders had agreed and signed on the relevant company decision to convert from
J/V to STC, but some details in the new charter was not agreed to by this shareholder. The
company has 70% foreign shares and 30 % Vietnamese shares and is operating the most
successful Port in the Baria Vung Tau area. With the decision by the court 8 years after
conversion and 5 years after a share transfer the company now has undefined legal status
as this is unprecedented, and there is no legal clear guidance about how the company can
now function/operate. To have an investment certificate revoked after such a long time,
seriously affecting the operation of a successful company, is a great concern to the foreign
shareholders who also have other large investments in Vietnam.
From Nordchams perspective, our members are confident about their investment in
Vietnam which is based on a long term view. Several new Nordic companies have increased
their present investments and new companies have been established during the past year.
We appreciate this opportunity to participate in the Vietnam Business Forum and thank for
this opportunity to exchange views and enhance understanding between the Government of
Vietnam and the business community.
We wish good health to the Minister, representatives of business associations, and the
diplomatic corps, and all the representatives here today.
Thank you.

Sigmund Strmme
Chairman Nordcham Ho Chi Minh City, October 30th, 2015

Page 3 of 3

Section II

INVESTMENT & TRADE,

BANKING AND
CAPITAL MARKETS

2.1. INVESTMENT
AND TRADE

Report from Investment and Trade Working Group

Vietnam Business Forum, 2015

REPORT FROM INVESTMENT AND TRADE WORKING GROUP

Presented by
Mr. Fred Burke
Investment and Trade Working Group

On behalf of the Investment & Trade Working Group, I respectfully wish to present five
issues for consideration at today's Forum. Some of these issues have already been the
subject of Working Group meetings and stakeholder consultation events, and much
progress has been made in certain areas. The Working Group's Progress Matrix reflects
some of the highpoints of such progress. Please forgive us for using our valuable time to
focus on the issues that still need more work, and new issues that have arisen recently.
I. WEAK ENFORCEMENT OF INTERNATIONAL ARBITRATION AWARDS
1. Background, Recent Developments and Current Status
Over the past year and a half, we have raised the issue of the weak performance of the
Vietnamese courts when it comes to recognizing and enforcing international arbitration
awards, whether they are rendered by the Vietnam International Arbitration Centre (VIAC)
or a foreign arbitration institution. This is a critical issue for the confidence of international
investors in the rule of law in Vietnam and it directly impacts the cost of capital Vietnam has
to pay.
Responding to these concerns, the Ministry of Justice and other relevant authorities
organized several stakeholder meetings and work has been done on the draft amendments
to the Civil Procedure Code. This work is encouraging, but concrete results remain elusive.
Moreover, some of the proposals for the amendments to the Civil Procedure Code were
quite alarming. For example, one proposal was that after a foreign arbitration award had
been granted, the losing party would have the right to request a Vietnamese court to refuse
to recognize and enforce such award. This idea is absolutely inconsistent with how
arbitration and the enforcement of arbitral awards work around the world under the
Convention on Recognition and Enforcement of Foreign Arbitral Awards (1958).
Moreover, there have been no reported inspections of the cases in which arbitration awards
have been invalidated for spurious reasons.
2. What is the Issue? Mainly - "inconsistent with the principles of Vietnamese law"
One of the bases Vietnamese courts most commonly cite as the reason for declining to
recognize a foreign arbitration award is that the award is somehow "inconsistent with the
principles of Vietnamese law." In the last Forum, we asked the question what are the
"Principles Vietnamese law" for this purpose, and we acknowledged that this standard
varies from one country to another. But having now done some research into the matter,
we can only conclude that Vietnam's courts are taking this basis far beyond the
international accepted scope. We attach some preliminary research as Attachment 1 to
illustrate how the standard is applied elsewhere.
3. International Practice
The common standard among other Parties to the New York Convention is that each
country, with the exception of Vietnam, interprets and applies the public policy exemption
extremely narrowly and rarely uses public policy as a basis to set aside a foreign arbitral
award. The next common similarity is where there is a breach of a domestic law, whether
substantive or procedural, it is not considered as a violation of the public policy. For
Page 1 of 12

Report from Investment and Trade Working Group

Vietnam Business Forum, 2015

example, in almost all of the cases examined, the foreign arbitral award would constitute a
violation of a domestic regulation and the respondents are attempting to set-aside the
award. However, countries have taken a narrow approach and tend to respect foreign
arbitral proceedings by enforcing an arbitral award even if it is inconsistent with a domestic
law. This common theme has led to setting aside awards only if they violate fundamental
public policies, such as a contract for slavery or awards that lead to illegal and criminal
activity. Overall, there is a general consensus that an award that violates a domestic law is
not within the narrow scope of the public policy exemption, and setting aside awards will
only occur when a core, human right will be violated by enforcing the award. (See
Attachment 1 for more information and analysis.)
4. Recommendations:
Globalization and cross-border investment, trade and commerce have led to an increased
use of arbitration, especially in Asia, a rapidly growing economic region. To adequately
respond to this trend, Vietnam should introduce new arbitration rules to cater to the
growing demands of the global business community and align Vietnam's arbitration
practices with the international community. As a signatory of the Convention, Vietnam
should respect international comity. More specifically, Vietnam needs to clarify and narrow
the scope of the "fundamental principles of Vietnamese laws" when setting aside both
domestic and international arbitral awards. The recent interpretation of "fundamental
principles of Vietnamese laws" to be general principals governing the making and
implementation of Vietnamese law, such as principles of civil transactions under the Civil
Code (as provided in Resolution 01/2014 of the Judges Council of the Supreme Court
guiding the setting aside of domestic awards) does not meet the international standards
and practices. Finally, judicial officers must be trained on the importance of international
arbitration and the need to limit their review of arbitral awards with regards to public policy.
Specifically, we propose removing the following draft amendments to the Civil Code,
Section 7 Chapter XXXV and Chapter XXXVI), as they will create more restrictions and
obstacles to the recognition and enforcement of foreign arbitral awards in Vietnam:
a. Removing the new conditions for international awards which may be recognized and
enforced in Vietnam (Article 422 of Draft CPC), in addition to the prescribed grounds for
refusal to recognize;
b. Removing Article 446 of Draft CPC which provides a time limit of three (03) year as from
the effective day of such awards, for submitting an application to ask for recognition and
enforcement of foreign awards - this is an additional restriction to the recognition and
enforcement;
c. Removing Article 452 of Draft CPC that the Court is entitled to request the arbitral
organization to explain unclear points in the foreign awards. The Court should NOT be
entitled to request the arbitral organization to explain unclear points in the foreign
awards and the Court cannot set aside awards due to lack of comprehension (Article 452
of Draft CPC) - this is because firstly, in most arbitrational rules, the parties have a
window (e.g., 30 days) to request the tribunal to clarify the award and secondly, in most
cases the arbitral tribunal no longer exists at the time of enforcement.
d. Removing the proposed procedure for losers in foreign arbitration to request Vietnamese
Courts to refuse the recognition and enforcement of foreign arbitral awards (Articles
442-445 Draft CPC) as this runs against the New York Convention.
5. Further Reasoning
These proposed changes to the draft CPC regarding arbitration enforcement do not
represent an intrusion on the judicial system. These changes would allow for foreign
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commercial entities to freely and confidently embark upon dispute resolution within
Vietnam. This would significantly reduce the cost of doing business in Vietnam, and
therefore, attract more foreign investors. For example, the Convention allows a company to
take the arbitral award to any of the Convention's state member, and have the award
enforced as judgments of the courts of both countries with only minimal scrutiny. This
saves parties huge cost arising from multiple litigations.
Most of the disputes arising from Vietnamese commercial activity are handled by either the
Singapore International Arbitration Center or the Hong Kong International Arbitration
Center. If Vietnam can elevate its arbitration landscape to greater heights, companies will
be able to cut costs by choosing an arbitration center in Vietnam. More importantly,
increased arbitration activity will generate substantial revenue for Vietnam, like it has for
Singapore and Hong Kong.
Given the seriousness of this issue in Vietnam, we would encourage (1) more stakeholder
consultation and capacity building be done to strengthen and unify the approach of local
courts on this issue going forward (2) to set up mechanism in which the Court in higher
level is entitled to re-consider the decision of the Court which directly considers the award
of VIAC; and (3) to very clearly specify definition of principles of Vietnamese laws and
where principles of Vietnamese laws can be determined, referred to for instance, only
criminal law matters of a certain degree of seriousness, in the Constitution or preferably
other clearer legal reference, to avoid continued arbitrary application by the Judges in
charge.
6. An Additional Proposal - Commercial Mediation
Finally, there is positive movement towards the adoption of rules governing commercial
mediation, which is different from and more informal than arbitration or litigation. We
strongly encourage this development because it may, if done properly, help fill some
serious gaps in the current laws. For example, the most commonly used engineering,
design and construction contracts in Vietnam today are the FIDIC contracts, but those forms
use a form of mediation to resolve disputes that is not supported by existing Vietnamese
law. Here as with the case of arbitration, it will be very important to the integrity of the
system that the discretion of courts to refuse to recognize settlement agreements or remediate disputes already settled according to the contractual agreement of the parties be
limited to the very narrowest of basic principles. We encourage the drafters of the Draft
CPC and Draft Decree on Commercial Mediation to mobilize stakeholders to see their
constructive comments and suggestions on this important law.
II. CIRCULAR ON IMPORT OF USED EQUIPMENT, SIMILAR IT RULES
A. Circular 20 and Circular 23 to replace it: Used Equipment and Machinery
Circular 20/2014/TT-BKHCN (Circular 20) on the importation of used machinery,
equipment and production lines, generally prohibited the importation of used machinery,
equipment and production lines (Used Equipment) that had:
been used for more than 10 years; or
a remaining value of less than 80%.
The implementation of Circular 20 was suspended on 1 Sept 2014 following complaints
from members of the business community.

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On 13 November 2015, the Ministry of Science and Technology issues Circular 23/2015/TTBKHCN (Circular 23) replacing Circular 20 and governing the same. According to Circular
23, Used Equipment is allowed to be imported if they meet the following requirements:
The Used Equipment's age is less than 10 years; and
Manufactured under the standard complying with the National Technical Regulations
(QCVN), or National Standard (TCVN) of Vietnam, or requirements for safety, energy
saving and environment protection of G7 countries.
This Circular shall take effect from 1 July 2016.
1. Background and Context
We have been following the drafting process of Circular 23, and we appreciated that
Ministry of Science And Technology ("MOST") has taken into consideration the stakeholder
consultation during the drafting process. This Circular 20 has been a source of concern to
many manufacturers, particularly those in the high tech sector who would like to move to
Vietnam with the used, but effective, machinery and equipment they are currently using in
other countries. What our stakeholder consultations have brought to light is that even the
most modern products sometimes involve used machinery or equipment. For example, the
installation of a computer chip assembly and testing line required the importation of a
purpose built, specially designed crane that was last used in Malaysia.
Vietnam is at a very important crossroads - supply chains are shifting around the region
and thanks to the Trans Pacific Partnership, the EU-Vietnam Free Trade Agreement, the
ASEAN-China Free-Trade Agreement, and other important trade agreements, many
international manufacturing giants are considering a move to Vietnam, with the potential
creation of millions of jobs, taxes and technology transfer. But if we don't adjust the
domestic regulatory environment in this and other areas we take the risk of losing this
historical opportunity.
2. Current Status: Circular 23 (Circular 23) on the importation of used machinery,
equipment and production lines
So where do we stand? After many in the business community raised this point with the
drafters, the implementation Circular 20 was suspended on 1 Sept 2014. However, the
MOST had begun drafting a replacement circular that would retain the essential elements
of Circular 20. On November 13, 2015 MOST issues Circular 23 to replace Circular 20. In
brief, these remaining concerns include the following:
3. Main Concerns
Summarized below are our main comments on the Circular 23:
a. Expanded Scope of Application
Previous drafts of Circular 23 only covered certain 4-digit HS commodities codes under
Chapter 84 and 85 of the List of Goods for Importation and Exportation. Circular 23 now
covers all commodities listed in Chapter 84 and 85. This represents a step backward,
because many types of Used Equipment that were not covered under the 7th version of the
draft would now be covered under the Circular 23.
b. Elimination of the 80% Remaining Value Criterion
Under Circular 23, all Used Equipment must meet the following standards in order to be
imported:

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The Used Equipment's age is less than 10 years;1and

Manufactured under the standard complying with the National Technical Regulations
(QCVN) or National Standard (TCVN) of Vietnam or requirements for safety, energy
saving and environment protection of G7 countries.

This Circular also adds a requirement that imported Used Equipment must satisfy the
relevant national technical regulations and technical standards or equivalent G7 standard,
like the latest draft did. Although this change removes the onerous quality testing
requirement, it may have the undesirable effect of prohibiting the importation of Used
Equipment that is aged less than 10 years, but which fails to meet these standards.
In response to comments made by the business community, this Circular now provides an
exemption for otherwise covered Used Equipment (more than 10 years of age or failure to
meet the National Technical Standards) - if the Used Equipment was listed in an approved
FDI project application. This is intended to facilitate the relocation of production machines
and equipment to Vietnam when foreign investors apply for Investment Certificates. This
provision may be problematic because it would give considerable power and discretion to
the MPI and DPI - which approve FDI projects.
Further, national technical regulations apply to all imports in general. However, because
the wording of this Circular could be interpreted to mean that Used Equipment listed on
approved FDI project applications do not need to comply with the national technical
regulations, this may create a conflict with the goods quality regulations.
c. Importation Dossier
Under this Circular 23, technical documents which are used to identify the year of
manufacture of Used Equipment consist of: (1) a testing certificate from a third party, or (2)
a confirmation letter from the manufacturer. The testing certificate must be issued within 6
months before the date of importation. These documentation requirements remain the
same, despite previous comments from the business community during the drafting
process requesting changes.
d. Focus on Post-clearance Inspection
Circular 23 is aligned with the new customs procedures by specifying that inspection for
compliance with the Circular 23 will take place after customs clearance. Although this may
help expedite customs clearance, a risk will remain that the Used Equipment will be
deemed non-compliant with Circular 23 after the consignment has been released from
customs and they will be prohibited from distribution in Vietnam.
B. Used Electronic Devices (IT/C)
Similar and possibly overlapping issues arise in respect of usedinformation technology
equipment under the jurisdiction of the Ministry of Information and Communications
("MIC"). Where used information technology imports are concerned, an additional set of
regulations apply. The new rules, our concerns and suggestions follow:
1. E-Waste Circular
On 29 October 2015, the MIC issued Circular 31/2015/TT-BTTTT (E-waste Circular),
effective from 15 December 2015, replacing Circular No. 11/2012/TT-BTTTT (Circular No.
11), and promulgating a List of Used Information Technology Products Banned from
1

TheUsed Equipment's "age" is defined as the number of years from the manufacture year to the year such equipment is imported
to Vietnam.

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Importation into Vietnam. The intent of the E-waste Circular is to prevent the importation of
harmful e-waste into Vietnam where it may be recycled in the informal economy and
disposed of improperly, causing environmental harm.
Generally speaking, unless an exemption applies, all used electronic products or parts are
banned from being imported by the E-waste Circular. Annex 1 of the E-waste Circular
contains a comprehensive list of common e-waste products banned from importation. The
E-waste Circular removes several of the exemptions contained in Circular No. 11 so that
there are now only the following two exemptions to the E-waste Circulars importation ban:
- Imports for scientific use.
- Imports for processing, recycling, repair for foreign merchants but must then be reexported.
The MIC may approve or reject applications for these exemptions on a case-by-case basis.
Under the E-waste Circular, the MIC has seven (Exemption 1 above) or fifteen (Exemption 2
above) working days to review, and decide upon, a complete and valid application dossier
for these exemptions.
The following exemptions were previously available under Circular No. 11 and are no longer
available under the current E-waste Circular for products:
- Re-imported after being brought abroad for warranty, maintenance, repair or renewal.
- Imported in the form of movement of production means within the same agency or
organization.
- Imported as used special-use information technology products, with special feature
servicing for specific branches such as measurement, automatic, medicine equipment,
biology and other branches, and having time limit from day of manufacture to day of
opening Customs declaration not exceeding 03 years.
- Imported for use as production means, control, operation, exploitation, inspection of
activity of a part or entire of production system or production line.
- Imported as renewed, refurbished or remanufactured information technology products
for production under specific projects, which when implemented will bring about socioeconomic benefits or serve security or national defense.
- Imported used and empty ink cartridges, after repair, renew, or remanufacture to
supply, distribute in domestic market or re-export.
- Imported to service for other special purpose implements under guides for each specific
case by the MIC.
2. Recommendations
Taking this shifting landscape into account, the business community has proposed the
following key suggestions in respect to the prior draft decision for implementing Circular
No. 11/2012/TT-BTTTT that remain as valid comments for this E-waste Circular:
-

The exceptional circumstances under which used IT products can be imported are too
narrow. The E-Waste Circular should include all of the Circular No. 11/2012/TT-BTTTT's
exemptions and further expand them to cover the following:
If the products are being imported as part of the provision, expansion and/or
maintenance of commercial telecommunications service production networks.
If the products are to be used to control, operate, implement or inspect the
operation of Commercial Licensed Telecommunications Services.
If the products are used in support of a licensed service with active customers.

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Article 6 of the E-waste Circular requires that the applicant submit, inter alia, the
applicant's capacity statement (including production line, equipment sufficient to
provide the processing service for the relevant products; and personnel and financial
capacity to carry out the service). The MIC should clarify what types of documents would
meet this requirement and/or provide examples of such documents.

Under the E-waste Circular, the importation of refurbished products is only permitted
for replacement or repairs, and these items must be later re-exported. Refurbished
products are sold with warranties and are quality certified. Thus, their importation
should not be limited only to circumstances of replacement and repairs for reexportation.

To further streamline import procedures, the E-waste Circular should also provide:
That the period for application processing and issuance of the MIC's approval be
shortened to 3 working days (from the current 07 and 15 working days reflected in
the E-waste Circular); and
A blanket exemption, from the import permit requirement, for importers with
Authorized Economic Operator (AEO) status.

III. TAX ISSUES

1. Investment protection
- Some local tax authorities already have different practices in their treatment of
taxpayers and incentives as compared with the current guidance of the Government, and
they have even rejected the incentives specified in the Investment Certificate of the
enterprise, requiring instead the application of current legal provisions, making
difficulties for enterprises in implementing their investment projects and manufacturing
in Vietnam market.
- Consistent guidance should be instructed to local tax authorities in respect of
Investment incentives for the enterprises that are fully specified in their Investment
Licenses or Investment Registration Certificates, avoiding the inconsistent treatment
that causes concerns and undermines the confidence of foreign investors in the
investment environment.
2. Expenses related to service contracts signed with Parent Company
- Tax authorities are taking a harsh line on expenses related to service contracts signed
with Parent Company and they are raising doubts on transfer pricing issues. Some local
tax departments treat these expenses as management fees allocated for permanent
establishments. Besides, the tax authorities also impose unreasonable documentation
requirements for these fees.
- Consistent guidance should be given to tax authorities to have reasonable treatment for
service fees paid to Parent companies or corporations in order to reflect exactly the
characteristics of these fees. Besides, services received from affiliated parties should
be regarded as deductible expenses for Corporate Income Tax purpose.
IV. INTELLECTUAL PROPERTY IN THE COMINGTPP ERA
Twelve countries, including Vietnam, accounting for nearly 40% of global GDP and over 30%
of global exports, have agreed on the text of a path-breaking new multilateral trade
agreement The Trans-Pacific Partnership ("TPP") that will give Vietnam more access to
lucrative export markets in return for, among other things, raising the standard of
protection of intellectual property rights (of locals as well as foreigners). In order to
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prepare for the entry into effect of the TPP, we wish to note the following areas where the
impact on Vietnam's current laws and practices may be greatest. We note that at the time
of writing this paper, the final text of the TPP was not yet available, so it is not certain that
the following terms will be exactly replicated in the final draft of the agreement, but they
represent the best information available to date.
1. Online Copyright Infringement
Copyright infringement is becoming a major issue in Vietnam, especially in the Internet era.
There are more and more Internet Service Providers (ISP) available, which offer a number
of online services for the transmission or storage of digital online material. The Internet
carries serious risks of copyright infringements, as Internet users can easily gain access to
and download movies, songs or books, just by a simple click. They can even upload
unlicensed video clips or films on intermediary service platforms. Authors of such works
suffer great loss when their products are distributed throughout the world for free.
Vietnamese regulations on the responsibilities of ISPs on protecting copyright and related
rights in the Internet and telecommunication networks environment are not sufficient.
According to the Joint Circular No. 07/2012/TTLT-BTTTT-BVHTTDL dated 19 June 2012 of
the Ministry of Information and Communications and the Ministry of Culture, Sports and
Tourism ("Circular 07"), ISP must have in place a system of inspection, supervision,
process of information input, storage, transmission to help prevent violation of copyright
and related rights.
Circular 07 stipulates the responsibility of ISPs to pay damages for the infringing acts of
copyright and related rights in instances where they are the sources initiating the
publication, transmission or supplying of digital information on the Internet and
telecommunication network without the permission of the rights holders. However, to date,
there has not been any specific provision detailing these responsibilities. Furthermore, it is
unclear whether there are any legal mechanism for ISPs to escape from liabilities, in cases
where they are not directly involved in copyright infringements occurring on their respective
systems.
The new TPP Agreement should not only facilitate the continued development of legitimate
online services operating as intermediaries, but it should also provide enforcement
procedures permitting effective action by rights holders against copyright infringements
that occur in the online environment. Accordingly, under a rather dated leaked version of
the IP Chapter of the TPP Agreement, the ISP might enjoy certain "safe harbours" in
respect of the online services that they provide. Specifically, ISPs will not be subject to
monetary fines for copyright infringements beyond their control. Domestic law may need to
be adjusted to reflect this reasonable balance of interests and practicality.
2. Protection for Untraditional Trademarks
Today, an increasing number of companies seek to link their brands to the consumers'
heart and mind via every human sense not only vision, namely by means of sound and smell
(e.g., ringtones of iPhone or Nokia, start/shutdown sounds of Microsoft Windows). Taking
into account the functionality of such means, that is, differentiating goods/services
originating from different undertakings, smells and sounds should be treated as
trademarks. Regrettably, our current IP regulations only accept the protection of
trademarks which are visible in the form of letters, words, drawings or images or a
combination thereof, represented in one or more colours. However, in light of the TPP
Agreement, Parties including Vietnam may be required to recognize the registrability of
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trademarks containing sound elements and make best effort to register scent marks. This
innovation will encourage every company to invent and apply new effective branding and
marketing tools on the one hand, but will require Vietnamese legal system to have
significantly advanced regulations on the registration and enforcement procedures in
relation to those untraditional trademarks on the other hand.
3. Patent Issues
Among the patent issues negotiated under the TPP agreement, the most controversial one
related to pharmaceutical products/drugs.
Data exclusivity in pharmaceutical/ agricultural chemical products
In respect of pharmaceutical products, companies are permitted to keep their test or other
data, concerning the safety and efficacy of the products, undisclosed for at least 5 years
from the date of the marketing approval of the new agricultural chemical product, in the
territory of the Party. The terms for biotech pharmaceutical products and agricultural
chemical products are 8 years and 10 years, respectively. To market the same or a similar
pharmaceutical product, third persons, without the consent of the person who previously
submitted safety and efficacy information, are required to:
-

wait 5-10 years from the expiry date of the patent to apply for a marketing approval; or

carry out all tests concerning the safety and efficiency of the new similar products on
their own to gain similar information.

These provisions demonstrate a stronger legal framework to protect legitimate rights of

companies capable of conducting exceptionally costly tests of the pharmaceutical safety
and efficacy, especially US pharmaceutical producers. However, this will also obstacles to
Vietnam, as its citizens often cannot afford to buy expensive original pharmaceutical
products.
Extension of Term of Protection
According to TPP proposals, competent state agencies, at the request of the patent owner,
may be required to adjust the term of a patent to compensate for "unreasonable delays"
that occur in the granting of the patent. An "unreasonable delay" shall include a delay in the
issuance of the patent of more than five years from the date of filing of the application in the
territory of the Party, or three years after a request for examination of the application has
been made, whichever is the later. This also would extend the patent protection term
beyond 20 years, which would further prolong the entry of inventions into the public domain,
including pharmaceutical products.
These among others are the issues that will need to be addressed in domestic legislation as
the entry into effect of the TPP approaches.
V. DUPLICATIVE REGISTRATION AND APPROVAL OF INSURANCE CONTRACT FORMS
1. Administrative Procedure Reform
In the Vietnam Business Forum, we often raise concerns in cases where administrative
procedures are proposed or adopted that are duplicative, unnecessary or overly
burdensome. We all agree that administrative procedures should be as automatic and as
transparent as possible, putting as little burden as possible on the applicant as reasonably
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required to achieve the legitimate public policy interest underlying the administrative
procedure. With these policies in mind, we would like to raise our concern today about
Decision 35/2015/QD-TTg on the registration and approval of insurance contracts.
2. Concerns regarding New Registration and Approval Rules
The Association of Vietnamese Insurers (AVI) and Life Insurance Companies (the LICs)
has already expressed its concerns about Decision No. 35/2015/QD-TTg (Decision 35)
issued by the Prime Minister dated 20 August 2015 amending and supplementing certain
provisions of Decision No. 02/2012/QD-TTg (Decision 02) dated 13 January 2012 on
regulating list of essential goods and services (List) which standards contract
forms/general trading conditions must be registered under the Law on Protection of
Consumers rights. According to Decision 35, life insurance products have been added to
the List.
The consequence of this is that life insurance contract templates must now be reviewed by
an additional authority, when the existing rigorous review procedure of the MOF should be
adequate.
3. Summary of Main Suggestions
The AVI and LICs have prepared a detailed letter outlining their concerns and
recommendations, which we attach to this paper as Appendix 2. In light of the difficulties
the industry faces as a result, it has requested among others the following for consideration:
-

Allow the temporarily suspension the application of Decision 35 for life insurance until a
consolidated set of guidelines can be jointly issued by the Ministry of Finance and the
Ministry of Industry and Trade. Such guidelines should include a procedure for
combining and harmonizing the ratification mechanism for life insurance product at the
Ministry of Finance and the registration mechanism for life insurance contracts at the
Ministry of Industry and Trade. The combined procedure could help to reduce
overlapping regulations and simplify administrative procedures, and help to reduce cost
arising to the insurers.
Allow insurers to register an insurance contract after obtaining the Ministry of Finances
approval on relevant insurance product. The official letter on ratifying a insurance
product under Circular 124 shall be both simultaneously sent to the Ministry of Industry
and Trade and an insurer for registration completion.
Though the LICs are included within the scope of Decision 35, the LICs did not receive
any official letter for collecting stakeholder opinions on the draft of Decision 35. Only the
AVI had a chance to provide its comments. Further stakeholder consultation should be
sought to give full play to the practical constructive suggestions that the industry may
offer.

Decision 35 took effect from 15 October 2015, The Association of Vietnamese Insurers and
the LICs hope to get the attention of The Prime Minister and Ministries to solve above
difficulties.
More detailed analysis of this issue is set forth in Attachment 2.

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V. CONCERNS ABOUT LIMITS ON FOREIGN INVESTMENT IN EDUCATION

1. Encouraged, but Limited, Especially in Primary and Secondary areas
The Education Working Group has provided regular constructive feedback on issues facing
the education sector in Vietnam. From the perspective of some foreign investors in this
sector, there remain some fundamental issues to be addressed before foreign investment
can be mobilized to the full extent Vietnam needs to meet its own educational needs, must
less the legitimate interests of the investors in this sector.
We note that as a general principle, in accordance with the 2014 Investment Law,
investment in education is a highly encouraged investment sector. Vietnam's WTO
commitments, the Investment Law and the other guiding regulations also encourage
foreign investment in education, allowing among other things a foreign ownership
percentage of up to 100%. This progressive policy lays the groundwork for mobilizing
foreign investment in all sorts of different educational activities, which has already been
helpful in enabling Vietnam to meet its socio-economic development objectives.
However, back in 2012 the Government issued Decree No. 73/2012/ND-CP on foreign
investment and cooperation in education sector (Decree No. 73), which still has a limiting
effect on the availability of foreign invested educational establishments can have.
Specifically, in accordance with Article 24 of this Decree, a foreign invested educational
institution may enroll Vietnamese students, but the number of Vietnamese students at the
primary and junior high level must not exceed 10% of the total number of foreign enrolled
students, and that in senior high level must not exceed 20% of the total number of foreign
enrolled students.
2. The Issue
The problem encountered by some foreign invested educational businesses here is that the
percentage of Vietnamese students allowed to study is calculated based on the number of
foreign enrolled students. In the simple calculation, only 01 Vietnamese student of 10
foreign enrolled students is allowed to study in a foreign invested institution. If the foreign
invested institutions have inadequate numbers of foreign students, Vietnamese students
are not allowed to be enrolled to study.
This provision is causing problems for some foreign investors environment in the education
sector outside the main cities. The fact is in most second-tier-provinces outside Hanoi and
Ho Chi Minh there are very few foreigners residing there to work and live. With a lack of
foreign students, it is not possible to create a viable business investing in education for
local students. As a consequence, foreign investment in primary and secondary education
is effectively closed in second-tier cities of Vietnam.
3. Discussion
There is no doubt about the need for more investment in second tier and rural schools.
Based on the report of the Department of Foreign Training under the Ministry of Education
and Training, the number of Vietnamese students go to overseas for study is increasing
every year with current now is more than 110,000 students in 47 countries with the school
fees from 30,000 USD to 40,000 per year per student. In other words, Vietnamese is
exporting about 3 billion USD every year to send its children overseas for education.

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4. Suggestion
In this context, we respectfully suggest that the Vietnamese government reconsider the
limitation on the ratio of Vietnamese students who may study in international schools as
provided at Article 24 of the Decree No. 73. Perhaps a more flexible policy would be
appropriate in areas with few foreign students, or perhaps different curriculum
accreditation rules might apply. Those are matters that may be more effectively pursued
through the Education Working Group, but for the time being we merely wish to note that a
potential for mobilizing foreign investment in the development of rural areas and second
tier cities is being missed.
* * *
We are grateful for the opportunity to share our views through the Vietnam Business Forum.
We hope that as a result of these exchanges, we will continue to overcome challenges and
achieve successes.

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ATTACHMENT 1
MEMORANDUM ON: INTERNATIONAL STANDARDS FOR RECOGNIZING, ENFORCING AND
SETTING ASIDE FOREIGN ARBITRAL AWARDS BASED ON
"FUNDAMENTAL PRINCIPLES OF LAW" EXEMPTION
Introduction
Arbitration has become the preferred mechanism for resolving both commercial and
investment disputes between international entities and an area Vietnam must turn in its
efforts to attract foreign investment and business expansion. Vietnam ranked 36th out of
182 in terms of GDP. However, the nation ranked 99th out of 188 in terms of ease of doing
business. A wide discrepancy between these two rankings indicates a need for a legal
reform, particularly in arbitration. Although Vietnam, along with 156 other countries, have
signed and ratified the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards of 1958 ("Convention"), Vietnam is still behind in applying and
enforcing the Convention. A common understanding between countries ensures seamless
and efficient arbitral proceedings and guarantees consistency between each proceeding. In
addition, the Convention has proven to be a powerful tool for not only for the business
community but also the local court systems. Local courts will be able to focus their efforts
on local disputes and become more efficient to serve the local population, while arbitration
centres can increase the number of proceedings. Overall, a well thought out set of
arbitration regulations allows for efficiencies across the board and reduces risk for foreign
commercial entities, thereby reducing the risk of doing business in Vietnam and attracting
more investments.
The purpose of this paper is to explore and develop an in-depth understanding of
international best practices for recognizing and enforcing foreign arbitral awards, and gain
insight on the "public policy" exemption under Article V(2)(b) of the Convention, a ground
often invoked in Vietnam to set aside arbitral awards. In addition, this paper will propose
changes for the Vietnamese judicial system to take a different approach when interpreting
the "public policy" exemption so that Vietnam can become a desirable hub for arbitration,
and ultimately for business.
Vietnam's arbitration law and interpretation of the "public policy" exemption in Vietnam
Arbitration in Vietnam is governed by Law on Commercial Arbitration ("LCA"), which was
enacted and approved by the National Assembly in 2010. In order to further improve the
effectiveness of the LCA, the Supreme People's Court of Vietnam issued Resolution
01/2014/NQ-HDTP ("Resolution"). The Resolution clearly indicates that Vietnam's judicial
system is moving towards reducing the number of set-asides of foreign arbitral awards,
and hopefully, increase the number of foreign arbitral awards that are recognized and
enforced within Vietnam. This Resolution establishes a supportive role of courts in
arbitration proceedings, however, the Resolution also outlines bases of annulment of
foreign arbitral awards.
Under Article 14 sub-paragraph (dd), the Resolution states that the arbitral award is void
when "[the] arbitral award contravenes the basic principles of Vietnam's Law." The
Resolution continues to explain that an award shall be set-aside after proving that the
award contravenes one or some basic rules of Vietnam's law. Vietnam defines "public
policy" as the "fundamental principles of Vietnamese law" and regularly cites this as a
reason to void a foreign arbitral award. This language and broad interpretation of the
meaning of violations of "public policy" has led to a poor enforcement rate of foreign
arbitral awards within Vietnam. Vietnamese courts uphold less than half of arbitral awards
Page 1 of 15

that are challenged, whereas Japan has a 100% success rate and over 90% in China and
Hong Kong. The low enforcement rate is quickly becoming an issue and causing real
concern in the international business community. Foreign investors perceive this lack of
enforcement as a threat and risk to business operations and dispute resolution. However,
this risk can be easily mitigated by examining the interpretation of the "public policy" in
Vietnam and understand the differences between Vietnam and international best practices.
What is considered as a violation of the fundamental principles of Vietnamese laws?
- Due to the regulations of Vietnamese laws, court documentation is not made public, but
the Resolution has outlined a few examples of this type of violation.
- An agreement between the parties includes a clause on dispute settlement, but when
the parties concluded arbitral proceedings, the arbitral tribunal did not recognize that
clause and ruled against it. However, under Vietnamese law, Article 11 of the Law on
Commerce allows parties to voluntarily agree to business agreements, thus, the arbitral
award would be considered unenforceable because it contravenes a basic rule and
violates the fundamental principles of Vietnamese law.
- Another basis for setting aside a foreign arbitral award is that the procedure used to in
the arbitration is not consistent with provisions of Vietnam's Civil Procedure Code
("CPC"). Applying the CPC, Vietnamese courts would be able to find a basic and
technical reason to void a valid arbitral award.
Overall, the Resolution has taken a positive step and clarified the definition and application
of the fundamental principles of Vietnamese law. Unfortunately, it is now clear that the
Vietnamese judicial system interprets the "public policy" clause in the New York Convention
broadly. Essentially, this interpretation nullifies many foreign arbitral awards and tends to
increase dispute expenses for foreign investors. This interpretation is contrary to
international best practices, where many member states of the New York Convention take a
narrow approach when applying the "public policy" exception. The following sections
explore how other countries around the globe interpret the "public policy" exception and
draws comparisons to the Vietnamese judicial system.
Interpretation of the "public policy" exemption in the international community

Brazil:
Brazil defines a violation of public policy as "the social, political and legal basis of a State,
which is considered indispensable to its survival, which may exclude the application of
foreign law." Letter rogatory no CR 9,970/EU, Reporting Justice Marco Aurelio de Mello,
decided on 18 March 2002.
This definition seems as a broad interpretation of the "public policy" exemption, but in
practice and shown by case law, Brazil takes a narrow and more stringent approach when
interpreting the "public policy" exemption of the New York Convention.
The Brazilian court system has been respecting foreign governing laws in determining
arbitral awards - this is more consistent with the international community where
international public policy is a narrow and stringent standard rather than meeting local
mandatory rules.
Examples that are not considered as a violation of public policy:
- In L'Aiglon S/A v. Textil Uniao S/A, arbitration was done in London and award was given
without grounds to the decision. Respondent opposed the enforcement in Brazil but the
Page 2 of 15

Superior Court of Justice ("STJ") held that the absence of reason was consistent with
the arbitration rules, and did not violate public policy in Brazil.
This is shown in a case where a Brazilian citizen was summoned to appear in US District
Court of NJ for violating laws in the US but the Brazilian citizen did not violate any laws
in Brazil. Letter rogatory no CR 9,970/EU, Reporting Justice Marco Aurelio de Mello,
decided on 18 March 2002.
In Thales Geosolutions Inc. v. Fonseca Almeida Representacos e Comercia Ltda., the
arbitration took place in Houston and the respondent claimed that the panel failed to
take into consideration a principle of Brazilian contract law. But this argument was
rejected by the STJ because violation of domestic law does not amount to violation of
international public policy.

Examples that are considered as a violation of public policy:

- The STJ, at first, denied to recognize a foreign arbitral award only on four occasions.
Enforcing an arbitral award when there was an absence of arbitration agreements
between the parties would be violation of public policy. However, after further review,the
court ultmately uphelp the award.
- http://latinlawyer.com/reference/topics/45/jurisdictions/6/brazil/.
- Another example that may give reason to not enforce a foreign arbitral award is when
foreign arbitration proceedings do not adhere to Brazil's Code of Civil Procedure. In
particular, the rules of discovery differs between the U.S. and Brazil. However, there
have been almost no instances of these types of violation, and the STJ are respecting
foreign procedures and do not enforce local laws on foreign proceedings.
http://latinlawyer.com/reference/topics/45/jurisdictions/6/brazil/.

China:
China has adopted the term "social and public interest" instead of the "public policy" set out
by the Convention.
- This term appears in the Arbitration Law, Civil Procedure Law, and mutual
arrangements between Hong Kong and Macau.
- Under the civil procedure code, grounds for setting aside an arbitral award can be done
under public policy interests for domestic and foreign disputes. (Article 213-domestic
and Article 258-foreign).
- Under article 70 and 71 of Arbitrational Law - set aside can be made for an award that
would harm the "sovereignty, security or public interest" of the nation.
Defining what constitutes as "public policy:"
- There is a common misconception that Chinese courts frequently cite a violation of
public policy to set aside foreign arbitral award. In fact, contrary to public views,
Chinese case law shows a narrow interpretation of what would constitute as a violation
of public policy under the New York Convention.
-

What does not constitute as a public policy violation:

Damage to interest of state-owned enterprises. Kaifeng Dongfeng Garment Factory v.
Henan Garment Import and Export Group.
Damage to state-owned assets. Shenzhen Boasheng Jinggao Environment
Development Co., Ltd. v. Hefei City Appearance Environment Hygiene Bureau, [2005]
Min Si Ta Zi [Civil Court Ruling] No. 45, SPC reply, issued on 23 January 2006.
Violation of domestic law does not violate the social and public interest. ED&F Man
(HK) v. China Sugar and Wine Company (Group), [2003] Min Si Ta Zi [Civil Court
Ruling] No. 3, SPC reply, issued on 1 July 2003.
Page 3 of 15

Administrative regulations do not generally appear to constitute as public policy.

Even a breach of a mandatory law would not fall under this provision. Mitsui Co.
(Japan) v. Hainan Textile Industy General Co., [2001] Min Si Ta Zi [Civil Court Ruling]
No. 12, SPC reply, issued on 12 July 2005.
Fairness of outcome is not a relevant consideration for determining violation of
social and public interest. Shanghai Feilun v. GRD Minproc, Ltd.

What does constitute as a public policy violation:

If a foreign law violates the fundamental principles of china's laws, national
sovereignty, basic moral order, customs or traditions, then it violates the social and
public interests of China.
Live performance of heavy metal music without approval of Ministry of Culture was
considered as a public policy violation because the music was not suitable for and
had a negative effect on Chinese society. American Production Co. and Tom Flight Co.
v. Chinese Women's Travel Agency, Ta [1997] No. 35, SPC reply, issued on 26
December 1997.
In 1977, a U.S. band entered into a contract to perform a concert, and during the
performance, the concert was suspended. The Chinese authorities asserted that
the band had breached the contract by performing heavy metal music, which was
not approved by the Ministry of Culture of China.
After not being paid, the band commenced arbitration in China pursuant to an
arbitration clause in the contract. The tribunal awarded damages to the U.S.
band.
However, when the SPC reviewed the arbitral award, the court concluded that
the band violated the social public interest of China and that the arbitral award
would not be enforced.
It must be noted that this case took place in 1977, before China adopted its
reform and open door policy. Today, the performance of a heavy metal concert
would certainly not rise to the stringent level of public policy violation in China.

Overall, China has a very narrow approach to the notion of public policy arguments to set
aside foreign arbitral awards and it is difficult to reach the strict level required by the
SPC to be considered as a violation of public policy.

France:
-

France distinguishes between international and domestic arbitral awards - this includes
procedural and substantive elements. Code of Civil Procedure Article 1520(5).

Procedural element includes due process, equality of parties and deception of

arbitrators. Cass. Civ. 1, 7 January 1992. DUTCO, no. 8918708, 89-18726. CA Paris, 1 July
2010 - THALES v. Maine de la Republique de Chine, Rev. Arb. 2010, p. 863 et seq.
International arbitral awards that do not state a reason does not constitute as a violation
of international public policy.

Substantive violations of international public policy are few and rare.

Examples of awards that are contrary, at the time of the award, to French law and
public policy:
Upholding religious, racial, or ethic discrimination. Similar to the Jivraj case
(Jivraj v. Hashwani [2011] UKSC40, 27 July 2011).
Upholding a contract for an illegal activity (slavery), violation of European
competition law, and some provision of French bankruptcy law.
Page 4 of 15

The French courts have also established a severity threshold. CA Paris, 18

November 2004, Thales v. Euromissile, no. 2002/19606, which states in French that
the violation must "crever les yeax.'
Most courts have said the violation of international public must be considered as
"flagrant, effective, and concrete."
Some courts have gone further and said the violation must be "blatantly
obvious."

Overall, the approach taken by French courts is restrictive and does not give the local
system much control of arbitral awards on the grounds of violating international public
policy. Therefore, very rarely setting aside foreign arbitral awards in France.

Germany:
-

In Germany, the courts have used a general definition of public policy determined by the
European Court of Justice. Case C-7/98 [28 March 2000].
Violation of public policy principles constitutes "a manifest breach of a rule of law
regarded as essential in the legal order of the State in which enforcement is sought
or of a right recognize as being fundamental within that legal order."

Like many other countries, public policy arguments in Germany can be invoked for
breaches of either procedural or substantive.

Examples of violations of substantive public policy (reference to pg 219 of the arbitration

handbook):
An arbitral award that would render an impossible performance or performance that
would constitute a criminal offense. Schwab/Walter, Chapter 24, note 41.
An award obliging a party to perform an act that could not be enforced under
German law, for example, voting in a certain manner at a shareholders' meeting.
RGZ 131, 179.
An award that is contradictory in terms. Schwab/Walter, Chapter 24, note 41.
An award that would constitute a violation of German competition or antitrust law,
export and import regulations or money laundering provisions. European Court of
Justice, judgement of 1 June 1999, Case C-126/97 ("Eco Swiss");
Bockstiegel/Kroll/Nacimeiento-Kroll/Kraft, Sec. 1059, note 83.
An award that was obtained by means of bribery, fraud, or false statements.
An award that provides for punitive damages. It is a basic principle of German law
that damages may only be compensatory. To the extent an award grants a party
punitive damages, the award would not be enforceable in Germany.

Examples of violations of procedural public policy:

Right to be heard (including proper service, sufficient time to file briefs,
representation in the proceedings, consideration of submissions and evidence
provided). Court of Appeal of Cologne, decision of 23 April 2004, file no. 9 Sch 01/03,
SchiedsVZ 2005, 163.
Procedural neutrality of the tribunal. Munchener Kommentar-Munch, Sec. 1059,
note 45.
Instances that would, under domestic procedural law, allow a res judicata case to be
re-opened. This would include false testimonies under oath by either party or a
witness, use of forged documents, conduct of judges, or extortion of judges.
Schwab/Walter, Chapter 24, note 51.
The notion and purpose of procedural public policy is to ensure that the arbitral
proceedings have met minimum standards (of fair trial) set out by German law.
Page 5 of 15

However, the threshold for procedural breach is high. Only grave breaches of
procedural rules can give rise to a denial of recognition. File No. III ZB 50/05.
-

Example that does not violate public policy:

An arbitral award that provides for payment of compound interest, German law do
not recognize an entitlement to compound interest. However, an award that ordered
a respondent to pay compound interest would still be declared enforceable in
Germany.

Hong Kong:
-

The expression "public policy" is a multi-faceted concept. Woven into this concept is the
principle that courts should recognize the validity of decisions of foreign arbitral
tribunals as a matter of comity, and give effect to them, unless to do so would violate the
most basic notions of morality and justice. (reference to pg 240 of the arbitration
handbook).

The public policy exception is drawn very narrowly in Hong Kong. "Public policy" must
not be extended to include every conceivable kind of error (reference to pg 242 of the
arbitration handbook).

"International public policy" should be taken to mean only those elements of a state's
own public policy that were so fundamental to its notions of justice that its courts felt
obliged to apply the same not only to purely internal matters, but also to matters with a
foreign element, that may affect other states (reference to pg 242 of the arbitration
handbook).

Examples of proceedings that do constitute as a public policy violation:

An arbitral award that was obtained by fraudulent behaviour. E.g. corruption, actual
bias, behaviour that is oppressive or otherwise immoral or unconscionable.
Shangdong Textiles Import and Export Corp v. Da Hua Non-Ferrous Metals Co. Ltd.
[2002] 2 HKC 122.

Examples of proceedings that do not constitute as a public policy violation:

Apparent bias would not necessarily amount to a breach of public policy. The court
must consider what is acceptable in the place of arbitration (pg 244). For example, if
it is common for mediation to be conducted over dinner at a hotel in mainland China,
an award would not be enforced in Hong Kong because in Hong Kong, such conduct
might give rise to an appearance of apparent bias. However, a PRC court is better
able to decide what is acceptable or unacceptable in the PRC (pg 245). It is conferred
that court should look at the time, place, manner of the arbitration.

India:
-

In Supreme Court of India, Associate Builders v Delhi Development Authority, 25

November 2014, the Supreme Court has clarified the scope of the public policy ground
to set aside awards, recognizing that an award could only be set aside on grounds of
public policy in very limited circumstances.

An award would violate public policy where it was:

Contrary to the fundamental policy of Indian law;
Contrary to the interests of India;
Contrary to justice and morality; or
Patently illegal.
Page 6 of 15

Examples of proceedings that do constitute as a public policy violation:

Foreign Exchange legislations are violated;
Orders of superior courts are disregarded;
Binding judgments of superior courts are ignored;
The tribunal fails to adopt a judicial approach. A judicial approach is where the
tribunal acts bona fide and deals with the subject in a fair, reasonable and objective
manner and that its decision is not actuated by any extraneous consideration;
The Tribunal fails to make its decision in accordance with well accepted principles of
natural justice. In this context, the court strongly recommended recording reasons
in support of any decision; and
The tribunal reaches a decision which is so perverse or so irrational that no
reasonable person would have arrived at the same. The court noted that where an
arbitral tribunal takes into account something irrelevant to the decision which it
arrives at; or ignores vital evidence in arriving at its decision, such decision would
necessarily be perverse.

Examples of proceedings that do not constitute as a public policy violation:

Violation of domestic evidentiary rules does not constitute a violation of public policy.
The court however cautioned that even when considering whether an award is
contrary to the fundamental policy of India, due weight must be given to a
determination by an arbitrator especially on questions of fact.
http://hsfnotes.com/arbitration/2015/02/09/supreme-court-of-india-clarifies-thescope-of-public-policy-grounds-for-challenging-a-domestic-arbitration-awardunder-section-34-of-the-arbitration-and-conciliation-act/
http://www.advocatekhoj.com/library/judgments/announcement.php?WID=5346

Singapore:
-

Singapore has recognized that it is public policy to ensure that courts minimize their
involvement in matters where parties have agreed to submit to arbitration. (Tjong Very
Sumito v. Antig Investments [2009] 4 SLR 732, at [29]).

There is no difference between the concept of public policy as a ground for setting aside
an award made in Singapore and for not recognizing and enforcing of a foreign arbitral
award. (AJU v. AJT [2011] SGCA 41, at [31].)

A public policy objection for resisting enforcement of an award must involve either
exceptional circumstances which would justify the court in refusing to enforce the
award or a violation of the most basic notions of justice. The scope is also construed
very narrowly. (Ibid.)

Examples of proceedings that do constitute as a public policy violation:

An award that enforces an agreement that undermines the administration of justice,
such as an agreement to stifle the prosecution of a non-compoundable offense. (AJU
v. AJT [2010] 4 SLR 649, at [28], [31]-[32]).
An award that enforces an agreement where the object of which was a breach of
international comity, in the sense that the object is to do something illegal under the
law of the place of performance. (AJU v. AJT [2010] 4 SLR 749 at [21]).
Corruption, bribery or fraud. (PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA
[2006] 1 SLR 197, at [59]).

Examples of proceedings that do not constitute as a public policy violation:

Page 7 of 15

Errors of law or fact, except an error of law as to what constitutes the public policy
of Singapore. (AJU v. AJT [2011] 4 SLR 749 at [21]).
Enforcement of an award that seeks to bind a non-signatory. (Aloe Vera of America,
Inc. v. Asianic Food (S) Pte Ltd. and another [2006] 3 SLR(R) 174 [75] - [76]).
The tribunal failed to decide the matter in accordance with the facts and evidence
presented by the parties (Galsworthy Ltd. of the Republic of Liberia v. Glory Wealth
Shipping Pte Ltd. [2011] 1 SLR 727, at [17]).
Any principle that costs incurred (and therefore awarded) should be proportional to
the amount in dispute. (VV v. VW 2 SLR(R) 929 at [28]-[31].

United States of America:

-

Precedents have shown that U.S. courts will uphold this defence only where
enforcement would violate the forum state's "most basic notions of morality and
justice." The court expressly noted that the scope of public policy must be construed
narrowly if the NYC was to be effective. As a result, a public policy defence has rarely
been successful before U.S. courts.

Federal courts have almost uniformly enforced foreign arbitral awards despite claims
that the enforcement of the very substance of the award would violate U.S. public policy
(pg 567).

There has also been little success in invoking the public policy defence in connection
with attempts to demonstrate procedural infirmities with the arbitrations in which the
disputed awards were rendered (pg 567).

Examples of proceedings that do constitute as a public policy violation:

U.S. courts have been unwilling to enforce awards that are penal in nature. In
Laminoirs-Trefileries-Cableries de Lens, S.A. v. Southwire Co., the court found that
the use of the French legal rate of interest in the award was permissible but rejected
the provision in the award increasing the interest rate awarded to 14.5 and 15.5
percent if the award was not satisfied by a certain date. The increase was rejected as
a penalty because the French interest rate was unreasonably high. The court noted
that because the interest awarded had no "reasonable relation to any probable
damage which may follow," the interest award would not be enforced. 484 F. Supp.
1063 (N.D. Ga. 1980).
The U.S. court, in Sea Dragon, Inc. v. Gebr. Van Weelde Sheedvaartkantoor B.V.,
declined to enforce a foreign arbitration award that conflicted with the a foreign
court decree. The court said that absent any evidence that the award violated U.S.
law or policy or that the foreign court lacked jurisdiction, it was the firm and
established policy of American courts to respect a valid foreign decree. 574 F. Supp.
367 (S.D.N.Y. 1983).

Examples of proceedings that do not constitute as a public policy violation:

In Parsons, the Court refused to equalize foreign policy with public policy. Parson &
Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier (RAKTA), 508
F.2d 969, 973 (2d Cir. 1974).
In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., the United States
Supreme Court set aside Article II(1) of the Convention, allowing certain claims to be
removed from arbitration if they were "not capable of settlement by arbitration."
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 661, 105 S. Ct.
3346, 3371, 87 L. Ed. 2d 444 (1985). In Mitsubishi, a U.S. party filed a claim in U.S.
district court under the federal antitrust laws. The First Circuit ruled that antitrust
Page 8 of 15

cases are too complex to arbitrate. The Supreme Court reversed the decision and
reaffirmed its strong presumption in favour of enforcement of freely negotiated
contractual choice-of-forum provisions. The Court said that "concerns of
international comity, respect for capacities of foreign and transnational tribunals,
and sensitivity to the need of the international commercial system for predictability
in the resolution of disputes" require enforcement of transnational agreements to
arbitrate. (Id. 629).
In Waterside Ocean Navigation Co. v. International Navigation, Ltd., the court held
that the admission and consideration of inconsistent and allegedly false testimony
on an issue material to the arbitration, did not meet the high threshold for setting
aside the award under the public policy exception. (737 F. 2d 150 (2d Cir. 1984).
Similarly, in Avraham v. Shigur Express, Ltd., the court noted that the admission of
evidence in an arbitration that might be precluded in a U.S. court does not
sufficiently undermine or make illegitimate an award, unless the mistake is so gross
as to amount to fraud or misconduct. (No. 91 Civ. 1238 (SWK), 1991 U.S. Dist. LEXIS
12267, *7-8 (S.D.N.Y. Sept. 3, 1991).
In National Oil Corp v. Libyan Sun Oil Co., the court held that even when actual fraud
occurs by a witness in an arbitral proceeding, "courts must be slow to vacate an
arbitral award." 733 F. Supp. 800, 814 (D. Del. 1990); See also Newark Stereotypers'
Union No. 18 v. Newark Morning Ledger Co., 397 F. 2d 594, 600 (3d. Cir. 1969).
In Generica Ltd. v. Pharmaceutical Basics, the court enforced an award regardless
of arbitrator's failure to allow adequate cross-examination, refusal to accept
rebuttal evidence and refusal to require the parties to disclose the basis for their
damages claim. No. 95 C 5935, 1996 U.S. Dist. LEXIS 13716 (N.D. Ill. Sept. 16, 1996).
In Steel Corp. of the Phil v. Intl' Steel Serv., a pending motion to vacate an arbitral
award in a foreign jurisdiction does not prevent a U.S. court from recognizing and
enforcing the same disputed award. Enforcing the disputed award would not be
against the U.S.'s most basic notions of morality and justice. 354 Fed. Appx. 689, 695
(3d Cir. 2009).

United Kingdom:
-

English courts rarely rejected enforcement of arbitral awards by reason of public policy
(reference to pg 542 of the arbitration handbook).

A successful challenge on this ground is likely to require some form of reprehensible or

unconscionable conduct, such as illegality, fraud, bribery or corruption. Profilati Italiia
SrL v. Paine Webber [2001] EWHC Commercial 24, [17]; Cutflet Chartering v. Caroussel
Shipping [2001] 1 All E.R. (Comm) 398).

The English courts have set aside permission to enforce an award made in England
where the award referred on its face to an illegal object and was therefore found to be
contrary to public policy. (Soleimany v. Soleimany [1999] Q.B. 785, in which the arbitral
tribunal had found a contract to smuggle carpets out of Iran to be illegal under Iranian
law).

Recognition or enforcement of a NYC award may also be refused by English courts on

public policy ground. (Arbitration Act, s. 103(3)).

Public policy, for the purposes of the English courts, confined to public policy of England
as the country in which enforcement is sought. The enforcement must be "wholly
offensive to the ordinary reasonable and fully informed member of the public" to meet
Page 9 of 15

the public policy exception standard. (See, e.g., Deutsche Schachtbau - und TiefbohrGesellschaft m.b.H. v. Shell International Petroleum Co. Ltd. [1990] 1 A.C. 295).
-

"Clearly injurious" and "wholly offensive" principles have been crucial to interpret the
public policy defence. (Richardson v. Mellish [1824] 2 Bing 229/252).

Examples of proceedings that do constitute as a public policy violation:

In Soleimany v. Soleimany, the public policy defence was admitted by the Court of
Appeal of England and Wales and the enforcement of arbitral award was rejected. In
this case, Abner Soleimany was directed to Iran by his father, Sion Soleimany, in
order to recover the carpets confiscated by Iranian customs authorities. However,
the distribution of profits between Sion and Abner created the dispute between
parties. The Court ruled that exporting the carpets subjected to the agreement
composed of smuggling is illegal. The action is "clearly injurious" and "wholly
offensive." Soleimany v. Soleimany [1999] Q.B. 785.

Where enforcement of an award would result in a breach of England's treaty obligations,

then the English courts will not enforce such an award on public policy grounds. For
example, awards in favour of drug trafficking will be set aside, whatever their proper
law, and wherever the place of performance (reference to pg 546 of the arbitration
handbook).

Examples of proceedings that do not constitute as a public policy violation:

Enforcement of contracts that violate rules of public policy based on purely domestic
concerns that are not performed within the jurisdiction of the English courts.
(Westacre Investments Inc. v. Jugoimport-SPDR Holding Co. Ltd. [1999] Q.B. 740,
applied in R v. V [2008] EWHC 1531 (Comm).

Page 10 of 15

Comparison of countries
Example of not a
Example of a violation of
violation of public policy
public policy

Interpretation and
application of the
"public policy"
exemption
Narrow interpretation
and rarely a basis for
setting aside foreign
arbitral awards.

Country

Definition

Brazil

Violation of public policy

is a violation of social,
political and legal basis
of a State that is
considered
indispensable to its
survival, which may
exclude the application
of foreign law.

The arbitral award failed

to consider Brazilian
contract law but was still
enforced by Brazilian
court.

Violation of the social

and public interest that
would harm the
sovereignty, security or
public interest" of the
nation.

The arbitral award

would damage state
owned assets but was
still enforced by Chinese
court.
The arbitral award
violated a domestic law
but was still enforced by
Chinese court.

Narrow interpretation
and rarely a basis for
setting aside foreign
arbitral awards.

Violation of public policy

is flagrant, effective,
concrete, and blatantly
obvious.

The arbitral award did

not state a reason and
violated a domestic law
but was still enforced by
French court.

Narrow interpretation
and rarely a basis for
setting aside foreign
arbitral awards.

Violation of public policy

manifests a breach of a

The arbitral award

enforced compound

China

France

Germany

An arbitral award that

would render an
Page 11 of 15

Narrow interpretation
and rarely a basis for

Notes
Respecting the
proceedings of foreign
arbitral tribunals even
when a Brazilian law is
being violated.
They take an
international public
policy route.

An arbitral award that

would render an
impossible performance
or performance that
would constitute a
criminal offense. similar
to Germany.

Country

Definition

Example of not a
Example of a violation of
violation of public policy
public policy

rule of law regarded as

essential in the legal
order of the State in
which enforcement is
sought or of a right
recognize as being
fundamental within that
legal order.

interest payment which

violates domestic law
but was still enforced by
German court.

Violation of public policy

is breaching policies that
are so fundamental to
its notions of justice that
its courts felt obliged to
apply the same not only
to purely internal
matters, but also to
matters with a foreign
element, that may affect
other states.

Arbitration proceedings
that are acceptable in
the country of
proceeding, but are not
acceptable in Hong Kong
would still be recognized
and enforced in Hong
Kong.

Narrow interpretation
and rarely a basis for
setting aside foreign
arbitral awards.

India

Violation of public policy

is an award that is
illegal, contrary to the
fundamental policy of
Indian law, contrary to
the interests of India,
and contrary to justice
and morality.

The arbitral award was

determined by
insufficient evidence
which is a breach of
domestic law but was
still enforced by the
Indian court.

Narrow interpretation
and rarely a basis for
setting aside foreign
arbitral awards.

Singapore

Violation of public policy

is a violation of the most

The arbitral award

sought to bind a non-

Narrow interpretation
and rarely a basis for

Hong Kong

impossible performance
or performance that
would constitute a
criminal offense.

Interpretation and
application of the
"public policy"
exemption
setting aside foreign
arbitral awards.

Page 12 of 15

Notes

The Singaporean judicial

system, through

Country

Definition
basic notions of justice
and morality.

Vietnam

Example of not a
Example of a violation of
violation of public policy
public policy
signatory which is a
violation of domestic law
but was still enforced by
the Singaporean court.

Violation of public policy

is violating any
fundamental principles
of Vietnamese law.

USA

Violation of public policy

is a violation of the most
basic notions of justice
and morality.

UK

Violation of public policy

is clearly injurious and
wholly offensive
performed by a fully
informed member of the
public.

The arbitral award was

reached by violating a
law in Vietnam's Civil
Procedure and,
therefore, was deemed
as a violation of public
policy by the Vietnamese
court.

Interpretation and
application of the
"public policy"
exemption
setting aside foreign
arbitral awards.

Broadly interpreted and

used frequently to set
aside foreign arbitral
awards.

Narrow interpretation
and rarely a basis for
setting aside foreign
arbitral awards.
The arbitral award
enforced a contract that
violated domestic
contract law but was still
enforced by the British
court.

An arbitral award that is

likely to require some
form of reprehensible or
unconscionable conduct,
such as illegality, fraud,
bribery or corruption.

Page 13 of 15

Narrow interpretation
and rarely a basis for
setting aside foreign
arbitral awards.

Notes
legislation, minimizes
involvement of courts in
the arbitration
proceedings and
enforcement.

Common themes and international best practice

The table has outlined several factors that have been commonly used to develop
international best practices when interpreting the public policy exemption of the New York
Convention and enforcing foreign arbitral awards. The most obvious similarity is that each
country, with the exception of Vietnam, interprets and applies the public policy exemption
extremely narrowly and rarely uses public policy as a basis to set aside a foreign arbitral
award. The next common similarity is where a breach of a domestic law, whether
substantive or procedural, is not considered as a violation of the public policy. For example,
in almost all of the countries examined, the foreign arbitral award would constitute a
violation of a domestic regulation and the respondents are attempting to set-aside the
award. However, countries have taken a narrow approach and tend to respect foreign
arbitral proceedings by enforcing an arbitral award that violates a domestic law. This
common theme has led to setting aside awards that only violate fundamental policies of
countries, such as a contract for slavery or awards that lead to illegal and criminal activity.
Overall, there is a general consensus that an award that violates a domestic law is not
within the narrow scope of the public policy exemption, and setting aside awards will only
occur when a core, human right will be violated by enforcing the award.
Proposal, Advice, and Impact
Globalization and cross-border investment, trade and commerce have led to an increased
use of arbitration, especially in Asia, a rapidly growing economic region. To adequately
respond to this trend, Vietnam should introduce new arbitration rules to cater to the
growing demands of the global business community and align Vietnam's arbitration
practices with the international community. As a signatory of the Convention, Vietnam
should respect international comity. More specifically, Vietnam needs to clarify and narrow
the scope of the "fundamental principles of Vietnamese laws" when setting aside arbitral
awards. Finally, judicial officers must be trained on the importance of international
arbitration and the need to limit their review of arbitral awards with regards to public policy.
The proposed changes regarding arbitration enforcements do not represent an intrusion on
the judicial system. These changes would allow for foreign commercial entities to freely
and confidently embark upon dispute resolution within Vietnam. This type of reform would
significantly reduce the cost of doing business in Vietnam, and therefore, attract more
foreign investors. For example, the Convention allows a company to take the arbitral award
to any of the Convention's state member, and have the award enforced as judgments of the
courts of both countries with only minimal scrutiny. This saves parties huge cost arising
from multiple litigations.
Most of the disputes arising from Vietnamese commercial activity are handled by either the
Singapore International Arbitration Center or the Hong Kong International Arbitration
Center. If Vietnam can elevate its arbitration landscape to greater heights, companies will
be able to cut costs by choosing an arbitration center in Vietnam. More importantly,
increased arbitration activity will generate substantial revenue for Vietnam, like it has for
Singapore and Hong Kong.
Conclusion
International arbitration can no longer be ignored by an economy that is interested in
attracting foreign investments to stimulate and grow economic activity. Outside traditional
jurisdictions like France, England and the United States, recent years have seen increased
activity in other jurisdictions such as Singapore and Hong Kong. These non-traditional
venues have embarked on extensive reform aimed at making the practice of international
arbitration in their respective countries more efficient in order to attract foreign
Page 14 of 15

investments. The swing towards arbitration in Asia has been clearly demonstrated by the
launch of numerous arbitration centers. Kuala Lumpur has emerged as a strong contender
to become a credible arbitration hub in Asia. Seoul has opened its own International Dispute
Resolution Centre in May 2013. Cambodia has also launched its first arbitration venue - the
National Arbitration Centre in Phnom Penh in March, 2014. With the suggested reforms,
and because of its unique location, size of its economy and recent positive development in
arbitration, Vietnam can become one of the central hubs for dispute resolution in Asia.

Page 15 of 15

ATTACHMENT 2
THE ASSOCIATION OF VIETNAMESE INSURERS
Hanoi, September 15, 2015
No: 162/HHBH/2015
Re: Petition on implementation of Decision 35/2015/QD-TTg
Respectfully to:

- The Prime Minister

- The Ministry of Finance
- The ministry of Industry and Trade

The Association of Vietnamese Insurers (AVI) and Life Insurance Enterprises (the LIEs)
has received Decision No. 35/2015/QD-TTg (Decision 35) issued by the Prime Minister
dated 20 August 2015 amending and supplementing certain provisions of Decision No.
02/2012/QD-TTg (Decision 02) dated 13 January 2012 on regulating list of essential goods
and services (List) which standards contract forms/general trading conditions must be
registered under the Law on Protection of Consumers rights. According to the Decision 35,
life insurance products have been added to the List. After reviewing all provisions of Law on
Insurance Business and Law on Protection of Consumers rights for implementation, the
LIEs are suffering many difficulties in implementing such provisions, detailed as follows:
I. Provisions on protection of consumers rights (life insured) are provided under the
legal documents including Law on Insurance Business and Law on Protection of
Consumers Rights. According to the mentioned legislation, State administrative agency
who supervises insurance business activities is the Ministry of Finance, especially the
Insurance Supervisory Authority via the approval of life insurance products (pre-control)
and audit, inspection and handling the LIEs yearly violations (post-control).
A. In accordance with Law on Insurance Business and guiding provisions:

Decree No. 45/2007/ND-CP dated 27 March 2007

-

Article 20.2 and Article 20.4 of the policy terms and conditions, premium rate provide as
follows:

"2. With respect to life insurance products, personal accident and health care insurance
subsidiary to life insurance products, life insurers must comply with the policy terms
and conditions (policy wordings) and premium rate ratified by the Ministry of Finance.
4. Policy terms and conditions, premium rate formulated by insurers must ensure the
following contents:
Compliance with Vietnamese laws, normal practice, ethical standards, customs and
culture of Vietnam;
The language used in policy terms and conditions, premium rate must be accurate
and must use simple means of expression which are easily understandable. For
technical terms which require clear content, such terms must be defined in policy
terms and conditions;
The following content must be clearly defined explained: insurable interests; insured
objects; insured scope and insured risks; rights and obligations of the policy holders
and of the life insured; responsibilities of the insurer; exclusion; method of paying
insured amount or; and provisions on dispute resolution;
Page 1 of 7

Premium rate must be formulated on the basis of statistical data, must ensure the
solvency of the insurer, and must correspond to the insurance conditions and
insurance liability."

Article 21 on Procedure for ratification of insurance products:

"1. With respect to insurance products for which the Ministry of Finance shall ratify the
policy terms and conditions and premium rate under Article 20.2 of this Decree,
insurers must forward a written request to the Ministry of Finance enclosing the
following documents:
Policy terms and conditions, premium rate and commission rate in relation to the
insurance products which it is proposed to underwrite;
Formula, method and explanation of the basis of premium calculation and the
insurance reserves for the insurance products which it is proposed to underwrite.
2. Within 30 days from the date of receipt of a complete and valid application dossier,
the Ministry of Finance shall be responsible for providing a written reply with its
ratification or refusal to ratify, with an explanation of its reasons in the case of
refusal."
Circular No. 124/2012/TT-BTC dated 30 July 2012
-

Article 39.1, Article 39.3, Article 39.4 and Article 39.5 on ratification of insurance
products and health care insurance products are regulated as follows:

1. A life insurer must, prior to underwriting life insurance products, or an enterprise

conducting insurance business or a foreign branch must, prior to underwriting health
insurance products, submit one (01) set of an application file requesting approval of the
insurance product(s) proposed to be underwritten. The enterprise conducting insurance
business or the foreign branch must correctly implement the policy terms and
conditions and premium rate of insurance products approved by the Ministry of Finance.
3. The application file requesting approval of life insurance products or health care
insurance products shall comprise the following data:
Request to the Ministry of Finance for approval of products, in which the enterprise
or the foreign branch undertakes to be responsible for the contents and legality of
the policy terms and conditions;
Policy terms and conditions and premium rate of insurance products proposed to be
underwritten which comply with Article 20.4 of Decree 45/2007/ND-CP. The
enterprise conducting insurance business or the foreign branch is encouraged to
use the standard policy terms and conditions formulated by the Association of
Vietnamese Insurers;
Formula, method and explanation of technical bases used to calculate premiums
and professional reserves of insurance products proposed to be underwritten.
In the case of life insurance products which distribute dividends, a life insurer must
explain in the bases for calculating premium for the proposed product, the
principles, methods and the percentage dividend distribution which is committed to
be paid to clients.
Relevant documents comprising: sample application form, illustration material on
products and services of the insurer or foreign branch, sales brochures, and other
sample forms which clients must sign when purchasing insurance. These
documents shall be considered as part of the insurance contract.
The application file for approval of life insurance products or health insurance
products must be signed by the legal representative of the insurer or foreign branch
Page 2 of 7

and must be certified by the appointed actuary (in the case of life insurers) and the
actuary for professional reserves and solvency margins (in the case of non-life
insurers, health-care insurers and foreign branches).
4. The following items shall be evaluated prior to providing approval to a life or health care
insurance product:
A check of the validity of the application dossier and compatibility of the policy terms
and conditions with the current regulations. If such policy terms and conditions are
prepared according to the standard form, then the Ministry of Finance shall only check
the validity of the application dossier;
The economic and technical feasibility of the insurance product shall be evaluated on
the basis of an opinion and certification from the appointed actuary (in the case of life
insurers) or the actuary for professional reserves and solvency margins (in the case of
non-life insurers, health-care insurers and foreign branches);
Where a non-life insurer or foreign branch underwrites package insurance products
which include health insurance, it must comply with this Article regarding approval of
health insurance products.
5. Term of ratification on a life or health care insurance product:
The Ministry of Finance shall, within thirty (30) days from the date of receipt of a
complete and valid application file stipulated in clause 3 of this Article, provide a letter
approving or refusing to approve. In the case of refusal, the Ministry of Finance must
specify its reasons
B. Regulations of Law on Protection of Consumers rights and guiding provisions

Law on Protection of Consumers rights

Article 19. Control of standard contract forms and general trading conditions:
1. Any trader conducting business in goods or providing services that fall under the list of
essential goods and services promulgated by the Prime Minister of the Government
must register its standard contract forms and general trading conditions with the State
administrative body for consumer protection.
2. The State administrative body for consumer protection shall on its own initiative rescind
or amend, or shall require the trader to rescind or amend a standard contract form or
general trading conditions on discovery that such contract or conditions breach
consumers rights.
Decree No. 99/2011/ND-CP dated 27 October 2011
1. The registration dossier of standard contract forms and general trading conditions shall
comprise the following documents:
- Registration application specifying the address and business lines of the trader, The
Ministry of Industry and Trade shall provide guidelines for registration application
forms;
- Draft standard contracts forms and general trading conditions;
2. A registration dossier may be directly submitted, sent by post or sent via electrical
means in the quantity of one (01) dossier to the competent authority.
3. If the registration dossier is not completed as regulated, within 5 working days from the
date of receipt, the competent authority shall have the right of request for
Page 3 of 7

supplementing the documents, dossiers. The trader shall be responsible for

supplementation within 3 working days from the date of receiving the request from the
competent authority.
4. During the process of consideration of registration dossier, the competent authority for
registration shall have the right to request that the trader explain the issues relating to
the contents of standard contract forms and general trading conditions and the right to
consult with relevant agencies, organizations, individuals.
5. The competent authority shall consider the following contents of standardcontract
forms and general trading conditions:
a. Invalid contents as follows:
- It (the clause or conditions) excludes statutory liability of the trader;
- It restricts or excludes the right of consumers to lodge a complaint or to institute

legal proceedings;
It allows the trader to unilaterally change contractual conditions previously agreed
with the consumer; or the contract fails to specifically set out the rules and
regulations on sale of goods or supply of services applicable to consumers when
they purchase and/or use such goods or services;
- It allows the trader to unilaterally determine that the consumer has failed to
discharge one or more of the consumers obligation;
- It allows the trader to fix or change the price at the time of delivery of goods or
supply of services;
- It allows the trader to give its own interpretation of a contract containing contractual
clauses which may be interpreted in different ways;
- It excludes liability of the trader when the trader sells goods or supplies services via
a third party;
- It provides that it is mandatory for the consumer to discharge its obligations before
the trader has fully discharge its own obligations;
- It allows the trader to assign rights and obligations to a third party without the
consent of the consumer.
b. The language used is Vietnamese, the contents must be clear and easy to understand;
the font size shall be at least 12 pt; the background paper and ink color presenting the
contents of standard contract forms and general trading conditions must be in contrast.
c. Conformation with provisions of the Law on Protection of Consumers rights and
general principle of contract execution.
-

6. If the contents of standard contract forms and general trading conditions are in breach
of the law on protection of consumers rights or are contrary to the general principles of
contract execution, the competent authority shall have right to request that traders
amend or cancel such content in breach.
7. If the contents of standard contract forms and general trading conditions are not clear
or can be interpreted in many different ways, the competent authority shall have right to
request that traders explain and clarify the contents of such standard contract forms
and general trading conditions.

Page 4 of 7

8. Within 10 working days from the date of receiving the request from the competent
authority, the trader must amend, cancel the contents in breach and notify consumers
who have executed contracts under such standard contract forms. If amendment,
cancellation of the contents in breach renders any provision of the executed contract
invalid and gives rise to damage to the consumers, the provisions of civil laws shall be
applied.
II. Difficulties in compliance with Decision No. 35/2015/QD-TTg
1. Before underwriting life insurance products, the insurers must submit the standard
contract forms or general trading conditions regarding such insurance products to the
Ministry of Industry and Trade for approval parallel with waiting for ratification of the
Ministry of Finance on such insurance products in accordance with regulation and
inspection contents in Circular 124. Such regulations arise many issues, such as doubling
administrative procedures regarding life insurance business activities, overlapping the
State administrative functions and content of initial control of the Ministry of Finance
applied to a life insurance product. Accordingly, new regulation regarding life insurance
under Decision 35 is not compatible with the spirit of administrative procedure deduction in
accordance with the Resolution No. 19/ND-CP issued by the Government. In the light of a
period of time taken for above procedures, the LIEs is unable to satisfy customers daily
demands regarding insurance.
2. There is a competent overlap between the Ministry of Finance and the Ministry of
Industry and Trade regarding life insurance management. In case that the Ministry of
Industry and Trade requests for amending some contents, mean of interpretation in the
submitted standard contract forms, the LIEs must amend the equivalent contents in
application dossiers submitted to the Ministry of Finance for re-submission which prolongs
the term of such ratification procedure. Additionally, if the Ministry of Finance has not
ratified, any insurance products shall not be supplied. If the Ministry of Finance does not
ratify any amendments or supplementations as requested by the Ministry of Industry and
Trade, the insurers shall fall into dilemmatic circumstances which result in cancellation of
an insurance product pre-approved by the Ministry of Finance for the prevention of violating
requests from the Ministry of Industry and Trade. Additionally, costs of research, design,
development for insurance product and distribution channel per a insurance product, which
are at about 1 million up to 10 millions, shall be wasted.
3. Some provisions are not compatible with actual implementation of life insurance. In fact,
during product implementation process in accordance with demands and changes of social
economy and life insurance purchasers, the LIEs may amend or supplement some of
contents regarding insurance policy terms and conditions, premium rate, insurance
contract, insured term, term of premium payment, insured interest, etc. In such
circumstances, the LIEs specify that the LIEs must submit above amendments to the
Ministry of Finance while the compulsion of submission regarding such amendments to the
Ministry of Industry and Trade is not clarified. If the Ministry of Industry and Trade does not
approve such amendments and supplementations ratified by the Ministry of Finance,
difficulties will be arisen as equivalent to Item 2 presented above.
4. Actually, a set of insurance contract includes many different documents and group of
subsidiary contracts enclosed in accordance with specific demands of each insurance
purchaser, if any. Thus, without any initial consolidated guides and in the light of unclarified
registration procedure, the LIEs shall have many difficulties and face with risks in legal
Page 5 of 7

compliance. Furthermore, the supply of life insurance into market shall be delayed in the
light of waiting for guides.
5. As the LIEs understanding of Decision 35, from 15 October 2015, regarding insurance
product ratified by the Ministry of Finance before the effective date of Decision 35 and being
supplied in the insurance market, the LIEs must register such relevant executed standard
contract forms at the Ministry of Industry and Trade for continuous distribution into the
market. In fact, in 2014, the statistics of revenues of the whole insurance market is about
2,362 billions per month and is approximately about 3,000 billions per month in 2015. Thus,
as particular characteristics of life insurance, damages in business while waiting for
registration guides are huge. Additionally, suspension of life insurance distribution shall
have direct affects in relation to at least 338,000 agents, calculated until the end of June
2015.
6. Life insurance is a sensitive sector of the economy. Insurance premium collected during
the term of insurance contracts from 5 years to 30 years shall be used to invest in the
Governments bonds, shares and other financial investment to get interest for paying
dividends to insured person. Pursuant to Article 19.2 of Law on Protection of Consumers
Rights, the Ministry of Industry and Trade on its own may rescinds any life insurance
contract. This will lead to the situation where all the policyholders terminate their
insurance policies at the same time. Policyholders may not distinguish between the
insurance product and the insurer. If they got the information that an insurance product
related to an insurer being cancelled, they will immediately request to terminate the policy.
Such circumstances shall disturb the life insurance market and the financial market.
7. Term for implementation Decision 35 counting from issuance date to effective date is to
rush considering the fact that all LIEs manage insurance policies using IT system. These
changes will lead to many complication as discussed, also will require all data systems
must be amended, require the involvement from many departments inside the LIEs
including data system of overseas holding company. It is anticipated that the LIEs shall take
several months with high cost to implement such changes.
III. Petition: The Association of Vietnamese Insurers petitions the Prime Minister and
Ministries system for following contents
1. Allow the temporarily suspension the application of Decision 35 for life insurance until a
consolidated guidelines mutually issued by the Ministry of Finance and the Ministry of
Industry and Trade. Such guide shall include a combination procedure between the
ratification mechanism for life insurance product at the Ministry of Finance and the
registration mechanism for life insurance contract at the Ministry of Industry and Trade.
The combined procedure will help to reduce overlapping regulations and simplify
administrative procedures, helps to reduce cost arising to the insurers.
2. Allow insurer to register an insurance contract after obtaining the Ministry of Finances
approval on relevant insurance product. The official letter on ratifying a insurance product
under Circular 124 shall be both simultaneously sent to the Ministry of Industry and Trade
and an insurer for registration completion.
3. Though the LIEs are in governing scope under Decision 35, the LIEs did not receive any
official letter on collecting opinion for draft of Decision 35. As received information from
Legal Department of the Ministry of Finance, the permanent agency of AVI has provided
comments and opinions to the Ministry of Industry and Trade and drafting group but these
Page 6 of 7

comments were not accepted. Thus, the LIEs expect to receive drafts in relation to
insurance business activities afterwards (if any).
Decision 35 shall be effective from 15 October 2015, and the Association of Vietnamese
Insurers and the LIEs hope to get the attention of The Prime Minister and Ministries to solve
above difficulties.
Kind regards./.
Received:
- As above;,

- Ministry of Justice;
- Saved by AVI.

THE ASSOCIATION OF VIETNAMESE

INSURERS

Page 7 of 7

Investment and Trade Working Group - Position Paper

Vietnam Business Forum, 2015

CONTINUATION IN IMPLEMENTING SOLUTIONS TO ENSURE THE IMPLEMENTATION OF

REFORMS IN THE LAW ON INVESTMENTAND THE LAW ON ENTERPRISES

Prepared by
Investment and Trade Working Group
Vietnam Business Forum
SUMMARY OF CONTENTS
Vietnam Business Forum has recognized great efforts of the Government and the Ministry
of Planning and Investment in directing the drafting of the Law on Investment and the Law
on Enterprises as well as Decrees guiding the implementation of these Laws. We perceive
that such laws and Decrees have produced breakthrough improvements that help improve
the business and investment environment in a way which is more transparent and
favourable so as to meet requirements of Vietnams integration, including innovations in the
procedures for the registration of enterprises and investment. In order to realize such
important reforms, we, the Investment and Trade Working Group, would like to have the
following opinions and proposals:
I. LAW ON INVESTMENT
1. It is necessary to establish a one-stop shop mechanism in dealing with the
procedures for the registration of enterprises and investment
The Law on Investment 2005 only regulates one type of certificate to be issued to foreign
investors that is Investment Certificate, which would concurrently be Business Registration
Certificate. The Law on Investment 2014 has changed this provision of the Law on
Investment 2005 by detaching the contents of business registration from the Investment
Certificate, and at the same time legalizing regulations on the procedures for decisions on
investment policy to be issued by the National Assembly, the Prime Minister of the
Government and provincial Peoples Committees.
Recommendation: To avoid the procedures that are being conducted under the Law on

Investment 2005 being affected by the changes in the Law on Investment as above-stated
and to avoid causing unnecessary disorders to enterprises business, we recommend that a
one-stop shop mechanism should be established to deal with the procedures for
investment registration and enterprise formation of foreign investors. Accordingly, foreign
investors are entitled to submit their applications to a focal authority where they will
receive the results of their applications also. In this regard, we have recognized and highly
appreciated efforts of the Ministry of Planning and Investment in designing the above-said
procedures as presented in Article 24 of Decree No. 118/2015/ND-CP, and we are willing to
coordinate with professionals from the Ministry of Planning and Investment in designing
detailed regulations on such procedures to be contained in the Circular guiding the
implementation of the Decree.
2. Removal of overlapping documents in application dossiers for the registration of
investment and enterprises
We have recognized that, under the Law on Investment and the Law on Enterprises, there is
an overlap between applications for issuance of Investment Registration Certificate (or
registration of capital contribution, acquisition of shares, portion of capital contribution) and
applications for enterprise establishment (or notification/registration of change of

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Investment and Trade Working Group - Position Paper

Vietnam Business Forum, 2015

enterprise registration contents). This is possibly the consequence of the fact that such
procedures are regulated in two different laws.
Recommendation: We recommend that regulations on dossiers required to be submitted to

regulatory bodies should be uniformly stipulated and that overlapping documents should be
removed. In consultation with professionals from the Ministry of Planning and Investment,
we are aware that such issue may be settled completely in the Circular guiding the
implementation of one-stop shop mechanism in dealing with the procedures for the
registration of enterprises and investment under Article 24 of Decree No. 118/2015/ND-CP.
We are willing to coordinate with the Ministry of Planning and Investment in continuing to
perfect regulations on such issue.
3. Promptly announce the conditions for investment applicable to foreign investors
We have realized that Decree No. 118/2015/ND-CP has solved a number of difficulties in
applying the conditions for investment applicable to foreign investors in accordance with
the law of Vietnam and international treaties. In this regard, we have highly appreciated
efforts of the Ministry of Planning and Investment in drafting regulations relating thereto.
However, as the List of investment conditions applicable to foreign investors has not yet
been published, foreign investors and local regulatory bodies have, over the last time, found
it confused to implement the procedure.
Recommendation: To enhance the transparency and publicity of the legal system and to

ensure the implementation of important reforms in the Law on Investment in this regard,
we recommend that the List of investment conditions applicable to foreign investors in
accordance with laws, ordinances, decrees and international treaties on investment should
be urgently published.
II. LAW ON ENTERPRISES
1. Continuation in simplifying the procedures for relocation of head offices of
enterprises to a different province or city
Pursuant to Decree 78, when moving head office to a different province or city, enterprises
must register change of head office and must submit 5 following documents as
attachments:
- The amended Charter;
- Approval of the General Meeting of Shareholders on amendment of the Charter;
- List of founding shareholders (only in case where there is shareholder being foreign

investor);

List of foreign shareholders (only in case where there is shareholder being foreign

Authorized representative of foreign shareholders.

investor);

Recommendation: We recommend that the above attachments should be removed, and

enterprises merely need to deliver the notice of registration of change of headquarter to the
business registration office.

2. Simplification of the procedures for changing enterprise registration contents

In many procedures for registration of changes, Decree 78 requires supplement a number
of documents to be attached thereto.

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Investment and Trade Working Group - Position Paper

Vietnam Business Forum, 2015

Example: For changing foreign shareholders, Decree 78 requires that 5 other documents
must be submitted as attachments:
- Decision and valid copy of meeting minutes of the General Meeting of Shareholders;
- List of foreign shareholders;
- If the transferee is a foreign organization: Valid copy of decision on establishment or
other equivalent document and valid copy of one of the documents proving personal
identification of the authorized representative(s) and the corresponding decision on
authorization, or
- If the transferee is a foreign individual: Valid copy of ID card, passport or other lawful
personal identification;
- Written approval from the Department of Planning and Investment on the contribution of
capital or acquisition of shares or portion of capital contribution by the foreign investor;
and
- Share transfer agreement or other papers proving completion of the transfer.
Recommendation: We recommend that enterprises will be permitted to submit the Notice

of Change only to the exclusion of the attached documents as required under Decree 78.
3. It is necessary to publish the list of business lines and strictly implement the
provisions on freedom in doing business in the business lines which have not yet been
included in the System of Economic Branches of Vietnam
Under Decree 78: As regards business lines not appearing in the System of Economic

Branches of Vietnam but not yet prescribed in other legal instruments, such business lines
shall be considered by the Business Registration Office to be recorded on the National
Enterprise Registration Database.
Recommendation: We recommend that all business lines should be gathered and posted

on the website of the business registration office for ease of reference for enterprises. In
case of registration by enterprises of a business line not prohibited by the laws and not yet
appeared in the announced System of Economic Branches of Vietnam, the business
registration office shall be responsible for registering and recording such business line on
the National Enterprise Registration Database.
4. Some provisions of the new laws intervening too much in enterprises discretion
Previously, a limited liability company (LLC) has a time-limit of 3 years to contribute charter
capital. However, the new laws require that charter capital must be fully contributed within
90 days. Such time-limit is too short for major projects with charter capital of hundreds of
millions of dollars; and thus, it would greatly affect BOT projects and real estate projects.
Recommendation: We recommend that enterprises should be permitted to contribute

charter capital in accordance with project implementation progress.

III. COMMON PROBLEMS OF IMPLEMENTING 02 LAWS
After 05 months of the effective date of the Law on Investment and the Law on Enterprises,
local licensing authorities still have to consult with the central authorities about business
lines that are not prohibited or restricted. Such consultation process has prolonged the
time-limit of license issuance.
To ensure the efficient implementation of significant innovations in the Law on Investment
and the Law on Enterprises, we recommend that:

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Investment and Trade Working Group - Position Paper

Vietnam Business Forum, 2015

Firstly, certain regulations should be promulgated to limit consultations/collection of

opinions with respect to such business lines as provided for by the laws, international
treaties, or already licensed in practice.
Secondly, there should be a mechanism to control the investment and enterprise
registration process; refusal of receiving application dossiers is not allowed, and
requirements for supplementing documents should be limited.

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Investment and Trade Working Group - Position Paper

Vietnam Business Forum, 2015

DETAILED CONTENTS
The Law on Investment No. 67/2014/QH13 (the Law on Investment 2014) and the Law on
Enterprises No. 68/2014/QH13 (the Law on Enterprises 2014) have become effective from 1
July 2015, which is expected to change the investment and business environment in
Vietnam in a positive way with procedures being more simplified and especially investors
freedom in doing business being more respected. After nearly four months from the date of
application in practice of the two laws above, we have found a number of restrictions and
difficulties as detailed below.
1. Overlapping documents
The procedures for investment registration (or registration of capital contribution or
acquisition of shares or portion of capital contribution) and the procedures for enterprise
establishment (or notification/registration of change of enterprise registration contents) are
overlapped in terms of application dossiers and documents. This is possibly the
consequence of the fact that such procedures are regulated in two different laws. For
example, the procedures for registration of capital contribution or acquisition of shares or
portion of capital contribution under Article 26.3 of the Law on Investment 2014 are
stipulated as follows:
-

An investor shall submit an application dossier for registration of capital contribution or

acquisition of shares or portion of capital contribution as prescribed in Article 26.2 of
the Law on Investment 2014 to the Department of Planning and Investment of the
locality where the head office of the economic organization is located; please note that
this application dossier already comprises 2 documents: (i) Written form for
registration of capital contribution or acquisition of shares or portion of capital
contribution (in standard form); and (ii) Copy of identify card, ID card or passport in the
case of investors being individuals; copy of the Incorporation Certificate or other
equivalent document(s) certifying the legal status in the case of investors being
organizations.
Where the contribution of capital or acquisition of shares or portion of capital
contribution by the foreign investor satisfies the conditions prescribed in Articles 22.1(a)
and (b) of the Law on Investment, the Department of Planning and Investment shall,
within a time-limit15 days from the date of receipt of a complete application dossier,
notify in writing the investor for the latter to carry out the procedures for changing a
shareholder or member in accordance with law. In the case of failure to satisfy the
conditions, the Department of Planning and Investment shall notify the investor in
writing and specify the reason therefore.

If the economic organization whose portion of capital contribution is acquired is a single

member LLC, the procedures for registration of change of the owner of a single member
LLC under Article 46 of Decree 78 are as follows: If the company owner transfers the entire
charter capital to an individual or organization, then the transferee must register the
change of company owner. The application dossier for registration of such change shall
comprise:
- Notice of change of enterprise registration contents signed by the former owner or its
legal representative and also signed by the new owner or its legal representative;
- Valid copy of one of personal identification documents prescribed in Article 10 of Decree
78 of the transferee if the transferee is an individual; or valid copy of Business
Registration Certificate or other equivalent document(s) if the transferee is an
organization [Overlapping with the documents which have already been included in the

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application dossier for registration of purchase of portion of capital contribution as

above-mentioned]; List of authorized representatives and valid copy of one of the
personal identification documents as stipulated in Article 10 of Decree 78 of such
authorised representatives, and letter of authorization of the owner with respect to such
authorized representatives;
Valid copy of the amended, supplemented Charter of the company;
Capital transfer contract or documents proving completion of the transfer of capital;
Letter from the Department of Planning and Investment approving the contribution of
capital or acquisition of shares or portion of capital contribution by a foreign investor in
such circumstances as prescribed in Article 26.1 of the Law on Investment: In order to
obtain this written approval, the transferee is already required to prepare the
application dossier in accordance with Article 26.2 of the Law on Investment (which
comprises the transferees enterprise registration certificates that are now required to
be submitted again and such documents are required to be consularized and legalised).

To take another example, an investment project application dossier for issuance of an IRC
under Article 33.1 of the Law on Investment 2014 shall comprise:
- Written request for implementation of the investment project (in standard form);
- Copy of identity card, ID card or passport in the case of investors being individuals; copy
of the Incorporation Certificate or other equivalent document(s) certifying the legal
status in the case of investors being organizations;
- Proposal for the investment project comprising the following items: investors
implementing the project, investment objectives, investment scale, investment capital
and method of raising capital, location, duration, investment schedule, need for labour,
proposal for enjoyment of investment incentives, assessment of impact and socioeconomic efficiency of the project;
- Copy of any one of the following documents: financial statements for the last two years
of the investor; undertaking of the parent company to provide financial support;
undertaking of a financial institution(s) to provide financial support; guarantee for the
financial capability of the investor; or a document proving the financial capability of the
investor;
- Proposal for a need for land use or a copy of the site lease agreement or other
document(s) certifying that the investor has the right to use the site for implementation
of the investment project.
Upon being issued with an IRC, the investor must continue to submit an application dossier
for enterprise registration. For instance, the application dossier for enterprise registration
for an LLC under Article 22 of the Law on Enterprises 2014 shall comprise:
- Written request for enterprise registration (in standard form).
- Charter of the company.
- List of members.
- Copies of the following documents:
Citizen's identity card, ID card, passport or other lawful personal identification of
members being individuals;
Incorporation decision, Enterprise Registration Certificate or other equivalent
document(s) of [members being] organizations and power of attorney; Citizen's
identity card, ID card, passport or other lawful personal identification of the
authorized representative of the member being an organization [Overlapping with
the documents as above-said].

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In the case of a member being a foreign organization, the copy of Enterprise

Registration Certificate or equivalent document(s) must be consularized and
legalised;
Investment Registration Certificate applicable to foreign investors as stipulated in
the Law on Investment.

Recommendation: We recommend that application dossiers to be submitted to State

authorities should be united and overlapping documents should be removed.

2. Simplification of the procedures for changing enterprise registration contents
After more than two months of the effective date of the Law on Investment 2014 and the
Law on Enterprises 2014, the Government officially promulgated Decree No. 78/2015/NDCP dated 14 September 2015 on Enterprise Registration, with effect from 1 November 2015
(Decree 78). Decree 78 requires enterprises to supplement many additional documents
with the phrase the notice prescribed in this clause must be accompanied by: Article 40
(registration of change address); Article 41 (registration of change of name); Article 42
(registration of change of partnership members); Article 45 (registration of change of
members); Article 49 (registration of change of business lines); Article 52 (registration of
change of a foreign shareholder in an unlisted company); Article 57 (temporary suspension
of business); Article 59 (registration of dissolution of enterprise); Article 60 (termination of
operation of a branch).
Example 1: When registering a change of foreign shareholder(s) in an unlisted company,
Decree 78 requires a number of documents to be attached therewith:

The Notice must be accompanied by the Decision and valid copy of meeting minutes of the
General Meeting of Shareholders on the changes of shareholders being foreign investors;
list of foreign shareholders after the change; share transfer agreement or documents
proving completion of the transfer; valid copy of decision on establishment or other
equivalent document and valid copy of one of the documents proving personal identification
as prescribed in Article 10 of this Decree of the authorized representative(s) and the
corresponding decision on authorization if the transferee is a foreign organization, or valid
copy of ID card, passport or other lawful personal identification as stipulated in Article 10 of
this Decree if the transferee is a foreign individual; and written approval from the
Department of Planning and Investment on the contribution of capital or acquisition of
shares or portion of capital contribution by the foreign investor in accordance with the Law
on Investment.
Example 2: Under Article 46.2 of the Law on Enterprises 2014, the procedures for
establishing branches are as below:

2. In the case of establishment of a branch or representative office in Vietnam, the

enterprise shall send an application dossier for registration of operation of the branch or
representative office to the competent Business Registration Office in the locality where
such branch or representative office of the enterprise is located. Such application dossier
shall comprise:
- A notice of establishment of the branch or representative office;
- A copy of the establishment decision and a copy of the minutes of the meeting on
establishment of the branch or representative office of the enterprise; a copy of the
citizen's identity card, ID card, passport or other lawful personal identification of the
head of the branch or representative office.

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Therefore, according to this provision, the application dossier for registration of operation
of the branch includes only 3 documents.
However, under Article 33.1 of Decree 78, the application dossier for registration of
operation of the branch includes:
- A notice of establishment of the branch (including stipulated contents);
- The notice prescribed in this clause must be accompanied by:

Decision and valid copy of minutes of meeting on establishment of the branch or

representative office of the Members' Council for an LLC with two or more
members, or of the company owner or of the Members' Council or company
Chairman for a single member LLC, or of the Board of Management for a
shareholding company, or of the partners in the case of a partnership;
Valid copy of the decision appointing the person who will act as head of the branch or
representative office [The laws do not require this];
Valid copy of one of the documents on personal identification as prescribed in Article
10 of this Decree of the person who will act as head of the branch or representative
office.

Therefore, Decree 78 requires more documents compared to those required by the Law on
Enterprises 2014 (the law does not require the decision appointing the person who will act
as head of the branch or representative office) and requires beyond the laws (the laws
merely require a copy of establishment decision while Decree 78 requires the original one).
Recommendation: Subordinate legislation shall not require more documents other than

those required by law.

3. It is necessary to publish the list of business lines and strictly implement the
provisions on freedom in doing business in the business lines which have not yet been
included in the System of Economic Branches of Vietnam
Article 7 of Decree 78, the person establishing the enterprise or the enterprise itself shall

select a level 4 business line from the System of Economic Branches of Vietnam in order
to record the same on the Written Request for Enterprise Registration, on the Notice of
Change of Enterprise Registration Contents or on the Request to Exchange for an
Enterprise Registration Certificate. The specific contents of level 4 economic lines shall be
recorded in accordance with the Decision of the Minister of the Ministry of Planning and
Investment on the promulgation of regulations on the System of Economic Branches of
Vietnam Decision 337/QD-BKH dated 10 April 2007 is still being applied for the time being.
Pursuant to Decree 78:

For conditional business lines as prescribed in other legal instruments, such business
lines shall be recorded in accordance with the business lines prescribed in such legal
instruments. As regards business lines not appearing in the System of Economic Branches
of Vietnam but not yet prescribed in other legal instruments, such business lines shall be
considered by the business registration office to be recorded on the National Enterprise
Registration Database so long as they are not prohibited lines of business, and at the same
time the business registration office shall notify the Ministry of Planning and Investment
(General Statistics Office) to add such new business lines.
Recommendation: We recommend that all business lines should be gathered and posted

on the website of the business registration office for ease of reference for enterprises. In
case of registration by enterprises of a business line not prohibited by the laws and not yet
appeared in the announced System of Economic Branches of Vietnam, the business
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registration office shall be responsible for registering and recording such business line on
the National Enterprise Registration Database.
4. New laws applied in the old way
4.1 Local licensing authorities consulting with ministerial-level authorities
Despite being granted with the discretion to proactively process application dossiers within
its authority under the new laws, local investment management and enterprise registration
agencies still have, in practice, consulted with ministerial-level authorities on investment
projects, which has prolonged the duration of processing applications for investment
registration. From our experience, Departments of Planning and Investment (the DPI) still
consult with the Ministry of Planning and Investment and other related ministries
unnecessarily. For example, a foreign investor whose headquarter is located in ABC nation
a WTOs member registers to establish a one-member limited liability company in
Vietnam with capital valued at around US$100,000 for the purpose of providing technical
support services for products of its group. The services as registered to be supplied by the
foreign investor are wholly consistent with the Vietnams WTO Commitments and the
Vietnamese applicable laws, particularly:
- According to the Vietnams WTO Commitments, there are now no restrictions imposed
on such services(except for the service whose code is CPC 663 Repair services for
personal goods and home appliances) the foreign investor does not provide services
for personal goods and home appliances.
- Pursuant to Decision No. 337/QD-BKH, the services as registered to be supplied by the
company are under CPC 33 Services for repairing, maintaining, and installing
machinery and equipment, which are not included in the list of prohibited, restricted, or
conditional business lines as stipulated under the Vietnamese applicable laws.
The foreign investor submitted the complete application dossier to the DPI in May. Under
the Law on Investment 2005, this investment project is not in the category subject to
verification, but the DPI served official letters to the Ministry of Planning and Investment
(the MPI) and the Ministry of Industry and Trade (the MOIT) for their opinions on this
investment project, which unnecessarily prolonged the process.
This led to the consequence that till the effective date of the Law on Investment 2014 (nearly
two months after the submission date of the application dossier), the application for the
issuance of the IC had not yet been considered. The foreign investor then had to wait for
guidelines from the MPI and the DPI on how to deal with the applications submitted before
01 July 2015, and its application for establishment of enterprise was not processed until the
promulgation of Official Letter No.4366/BKHDT-PC dated 30 June 2015 and Official Letter
No. 5122/BKHDT-PC dated 24 July 2015 (nearly one month after the effective date of the
Law on Investment). Then, the DPI requested the foreign investor to give its opinions in
writing on whether it agreed to have the submitted application dossier processed in
accordance with the provisions of the new law. The foreign investor was issued with the IRC
early in September 2015, and then with the ERC early in October 2015. Overall, it took
nearly 5 months for this foreign investor to establish an enterprise with simple business
lines and charter capital of about US$100,000 as it had to meet several requirements for
documents (to be elaborated in the following sections), which materially affects its regional
business plans(concurrently causing delays in its M&A activities).
To take another example, in conducting the procedures for registering foreign investment
projects relating to goods trading activities (distribution) in Vietnam not in the category that

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requires a decision on the investment policy under Articles 30, 31 and 32 of the Law on
Investment 2014, investors are only required by the law to conduct the procedures for the
issuance of an IRC as below:
- The investor submits an application to the investment registration agency;
- Within a period of fifteen (15) days from the date of receipt of the complete dossier, the
investment registration agency shall issue an IRC; in the case the dossier is rejected by
the investment registration agency, it shall notify the investor in writing and specify the
reason therefore.
However, the DPI, in practice, still requests for opinions from the MOIT on such projects
under Decree No. 23/2007/ND-CP and Circular No. 08/2013/TT-BCT on goods trading
activities conducted by foreign traders in Vietnam; and thus, the said 15-day period is
completely not achievable.
Recommendation: We recommend that certain regulations should be promulgated to limit

consultations/collection of opinions with respect to such business lines as provided for by

the laws, international treaties, or already licensed in practice.

4.2 Careless consideration of investors application dossiers

Although investment registration and business registration agencies have required
investors to submit plenty of documents and written explanations, it seems that they have
reviewed the dossiers without care and overlooked lot of information. Specifically, in the
case of the investor mentioned above, the MOIT, upon receipt of the request for its opinions
from the DPI, asked the foreign investor to explain what the products of the group are
without being aware that the foreign investor had already explained and provided in the
application dossier initially submitted a list of the groups products in relation to which the
company to be established in Vietnam is about to provide technical services for.
Another example was the case of an enterprise with foreign invested capital registering to
establish branch(es).Officials of the DPI, upon receipt of the application dossier, examined it
and issued a receipt thereof. Nonetheless, when the enterprise came to receive the result,
the DPI issued an official letter requesting the enterprise to prepare the application in
compliance with Article 46 of the Law on Enterprises even though the initial dossier was
prepared strictly in accordance with such said provision with further reference to Article
33, Decree 78 on application dossiers to be submitted together with notice of registration of
operation of the branch. When the enterprise contacted the DPI for further clarification, it
was told by the DPIs officials that the dossier was sufficiently complete.
Recommendation: We recommend that there should be a mechanism to control the

investment and enterprise registration process; refusal of receiving application dossiers is

not allowed, and requirements for supplementing documents should be limited.
5. Difficulties in implementing certain regulations in practice
5.1 Residence condition applicable to legal representative
Under Article 13 of the Law on Enterprises 2014 regulating legal representatives of
enterprises, an enterprise must ensure that there is always at least one legal
representative residing in Vietnam; if the enterprise has only one legal representative,
such person must reside in Vietnam and must authorize in writing another person to
exercise the rights and perform the obligations of the legal representative when the former
exits Vietnam. Pursuant to the Law on Entry, Exit, Transit, and Residence of Foreigners in

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Vietnam, residence means the permanent residence or temporary residence of a

foreigner in Vietnam. Accordingly, the temporary residence in Vietnam may still be deemed
to have satisfied the residence condition under Article 13 of the Law on Enterprises 2014.
However, due to the lack of specific guidelines, many business registration offices have
required legal representatives to present their temporary residence card if they are
foreigners (along with work permits). The temporary residence, nevertheless, may be
proven by a temporary residence permit(which means The immigration control unit

shall issue temporary residence permits to foreigners by affixing a seal to their passports
or visas), without requiring a temporary residence card (except for certain individuals
who must be issued with temporary residence cards as stipulated under Article 36 of the
Law on Entry, Exit, Transit, and Residence of Foreigners in Vietnam).
5.2 Time-limit for capital contribution payment of shares being too short
The time-limit for capital contribution payment of shares as regulated by law is too short,
causing several problems to investors and also restricting investors participation in
projects whose total investment capital is of high value. In particular, Article 48 of the Law
on Enterprises 2014 prescribes that members of an LLC must contribute their shares of
capital contribution to the company in full and in the type of assets as undertaken within 90
days from the date of issuance of the ERC. Similarly, Article 112 of the Law on Enterprises
2014 also provides that shareholders must pay in full for the number of shares which have
been registered for subscription within 90 days, except where the Charter of the company
or share subscription agreement stipulates a shorter time-limit. The above provisions
have brought lots of difficulties to investors, especially to investment projects whose total
investment capital is of high value, and therefore, the charter capital required to be
contributed within 90 days is also a huge amount. A typical example is the case of
investment projects in the real estate sector with projects whose total investment capital
amounts to millions and even billions of United States dollars. Under Article 14.2 of Decree
43/2014/ND-CP detailing the implementation of a number of articles of the Law on Land
2013, investors must have their own capital for implementation of the project not less than

20% of the total investment for projects using less than 20 hectares of land; or not less
than 15% of the total investment for projects using 20 hectares of land or more. For this
reason, as regards to projects using large areas of land, the enterprises must contribute
huge amounts of capital within a very short time-limit 90 days whereas the time-limit for
the last contribution of capital by each member in the case of an LLC shall, under the Law
on Enterprises 2005 and Decree No. 102/2010/ND-CP, not exceed 36 months since the date
of issuance of the ERC to the company.
In addition, investors of enterprises doing real estate business, besides the obligation to
make charter capital contribution (or to pay for the subscribed shares), still have to perform
their financial obligations once the enterprises are granted with lands or leased the lands.
The time-limit for performing such financial obligations is also very short 90 days from
the date of notification. According to Article 14.4 of Decree No. 45/2014/ND-CP stipulating
the time-limit for paying land use fees, land users shall, within 90 days of the date of
Notification from the tax authority, pay 100% of the land use fee under the Notification. The
time-limit for paying land rent is also stipulated as within 90 days (under Article 24.4 of
Decree No. 46/2014/ND-CP).
5.3 Clear regulations found inadequate in practice
As regulated by Article 26 of the Law on Investment 2014, an investor shall carry out the
procedures for registration of its capital contribution or of purchase of shares or portion of
capital contribution to an economic organization in the following circumstances:
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The foreign investor makes capital contribution to or purchases shares or portion of

capital contribution of an economic organization which operates in conditional business
lines applicable to foreign investors;
The capital contribution or purchase of shares or portion of capital contribution shall
result in the fact that the foreign investor or economic organization prescribed in Article
23.1 of this Law holds 51% or more of the charter capital of the economic organization.

The Law on Investment 2014 does not provide for any exclusion in neither of the above
circumstances. However, when we liaised with a DPI on the procedures for a foreign
investor to acquire in whole the capital contribution portion of an economic organization
with 100% foreign invested capital in Vietnam that conducts goods trading activities
(distribution), we were instructed by such DPI that it is not required to conduct the
procedures for registration of the purchase of the capital contribution portion under Article
26 of the Law on Investment 2014, reasoning that such procedures only apply to the
purchase of capital contribution portion or shares in a Vietnamese economic organization.
We have wondered if this is an official instruction.
To the contrary, we were also aware of a case when a foreign investor conducting the
procedures for acquiring 49% of the shares of a Vietnamese economic organization that
does not trade in conditional business lines applicable to foreign investors. While such
foreign investors acquisition of shares was approved by a DPI, the foreign investor was
required by such DPI to conduct the procedures for the issuance of an IRC.

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INVESTMENT & TRADE WORKING GROUP

PROGRESS MATRIX
Category
14.
Investment
and Trade

No.

Age

Issues

Suggested/ Agreed Action

Progress

New

Burdensome investment and

business registration

Implementing decree of the new IL

should clarify the procedure for
investment registration in case of
investment in uncommitted
business sectors so that the
Investment Registration
Certificate issuing process will
become more transparent and
predictable.

Decree 118 fails to

provide clear
guidance on how to
conduct the
investment
registration in case of
investment in
uncommitted
business sectors.

To ensure that local licensing

authorities will comply with the
statutory timeline provided under
the laws - and if having to miss
these deadlines, to provide
reasonable response to the
applicants.

In terms of business
registration, there
are good reports that
some DPIs are doing
their best to fasten
the licensing process
and timely notify the
investors upon any
issues with the
licensing process. Yet
the normal time
attributable for
issuance and
amendment of the
ERC is still dragging
from 5 - 7 working

New IL and EL introduce the

new timeline for the licensing
authorities to issue the
Investment Registration
Certificate (15 working days)
and the Enterprise Registration
Certificate (3 working days).
However, there are many cases
where licensing authorities miss
such deadlines. For instance, in
terms of foreign investment of
uncommitted sectors, local
licensing authorities continue to
seek opinions of relevant
ministries for foreign
investment registration
(although the new IL does not
provide as such) - and this
process is very time-consuming.
Decree 78 implementing
Enterprise Law also imposes
additional requirements in
terms
Solving issue progress scale
0 = Still existed issue; 1 = Partially solved issue; 2 = Solved issue
1-10:10 is the highest priority
Score = (Progress point) x (Priority)

Page 1 of 12

1
x

2 Priority
8

Score
8

Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

Old

14.
Investment
and Trade

Old

of documentation for licensing

purposes, in comparison with the
Enterprise Law.
Inventory Resolution: Clear
Backlog of old inventory

Cap on wholesale price of dairy

products
Decision 1079/QD-BTC (effective
on 01 June 2014)capped
thewholesale price of dairy
products for children under six
years old. The aim is to
lower retail prices, which must not
exceed 15% of the ceiling
wholesale prices. In the long run,
this measure can distort the free
market since it prevents the price
system from rationing the
available supply, causing excess
demand,resources misallocation
and welfare loss. The measure
may also disrupt Vietnam's efforts
in being recognized as a market
economy. In addition, as the price
ceiling only applies to 25 products
(mainly imported products), a
violation of Article III:9 of the GATT

days.

Stimulate domestic economic

growth rate
Expand export markets
Join TPP, RCEP, EU -FTA and
other market-opening treaties.

Much good work has

been done on the
TPP, EU FTA, AEC
2015 and RCEP
agreements. But in
all four cases
everything depends
on getting the
agreements signed
and ratified.

(i) Removing the price control

will allow the market to freely
function to find its equilibrium,
which has always been the
rationale behind the "market
economy" terminology. At the
moment, the US is considering
to recognize Vietnam as a
market economy, which will
bring Vietnam many business
opportunities. Removing this
price ceiling may add helps to
such consideration.
(ii) Instead of applying the
internal maximum price control,
it would be much better to
liberalize the supply chain for
distribution to increase
production efficiency, thereby
reducing prices and increasing
product affordability.

The price controls on

infant formula have
not worked. New
investors who might
increase supply have
shied away from
Vietnam due to the
risk the price
controls pose for
their business,
creating a viscous
cycle of scarcity and
regulation.

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Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

14.
Investment
and Trade

New

Old

(non-discrimination principle)
would likely arise.
Draft Circular on Food Safety of
Imports
The Draft Circular proposed new
regulations on food inspection
which if adopted in such form,
would cause a lot of difficulties to
the businesses. Some examples
include reducing the number of
inspection methods from 4 to 3,
which effectively would reduce the
flexibility in inspection
compliance; requiring that
GMP/HACCP qualified food would
be subject to sensory inspection of
the whole consignment, and also
subject to further testing if the
inspection agency detects any
sensory suspicion; etc.
Onerous enterprise dissolution
procedure
The current dissolution procedure
is considered onerous, causing
many enterprises failing to die.
Tax audit delay is the main reason,
as the tax offices claim that they
dont have enough officers to do
tax audit.

To remove these items out of the

Draft Circular.

According to industry
sources, the
contentious items
have been removed.

To amend the dissolution

procedures - considering the
option below:
Accepting the private auditors
to conduct tax audit for the
tax authorities. Private
auditors will be responsible
before the tax authorities and
the law for the accuracy,
truthfulness and
completeness of the tax audit
reports.
Tax authorities will collect the
ERC/IC and chop of the
dissolved enterprises, instead
of the licensing authorities

The Administrative
Procedure Control
Committee has
welcomed the
business
community's input in
this area. We need
experts who can
devote their time to
help.

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Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

New

Streamlining the licensing

process
DPI HCMC has beenstreamlining
the licensing process, as
promised by the Vice Chairman of
HCMC PC during the VBR forum in
HCMC. Specifically, the DPI keeps
investors informed via email from
time to time the status of the
application dossier. Some other
licensing authorities started
providing investors the investment
registration number so investors
can check their licensing status on
the website.

(e.g. DPIs) - The owner of the

enterprises will only have to
notify the licensing authorities
about such collection.
This initiative is a very good
improvement which should be
employed by other licensing
authorities as well.

However, we have
recently seen issues
with this system as
well sincethe IT
system has yet been
properly operating
and the officers do
not take initiative to
do their works and
heavily rely on the
system.
Specifically, the IT
system has a clear
error, but the officer
is based on the
system to refuse the
submission of an IC
application. In
addition, many times
the HCMC DPI fails
to inform the
investors about the
status of the
application dossier
via emails.
DPIs of some
provinces (e.g., Binh
Duong, Da Nang) are
also endeavouring to
streamline the
licensing process,

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Investment & Trade Working Group reportsVietnam Business Forum, 2015

motivating investors
to invest more in
these provinces.
Some
provinces/cities still
lagged behind (e.g.,
Hai Phong, Hanoi).
14.
Investment
and Trade

14.
Investment
and Trade

New

Old

Shorter timeline for capital

contribution
The EL requires the owner(s) to
fully contribute the charter capital
within 90 days from the date of the
enterprise business registration
certificate. This is not feasible for
an enterprise with large charter
capital.For example, requiring
real estate companies to deposit
cash funds for a project which
might take years to initiate is
practically impossible for foreign
investors. Furthermore, the setup
of the bank account and all other
steps leading to such will take
almost 3 months.
Market access for border-gate
transhipment business
The border-gate transhipment
business without passing through
the border-gates of Vietnam
appears not to be opened to 100%
foreign-invested enterprises,
although Decree 187/2013/ND-CP
allows enterprises to engage in
this business without having to

The implementing decrees

should provide different time
schedule for different amounts
of capital.

In accordance with Decree

187/2013/ND-CP and because
this business activity in nature
still pertains to the export,
import and distribution of goods,
100% foreign-invested
enterprises licensed to conduct
the import-export-distribution
activities must also be allowed
to conduct this business.

Page 5 of 12

Consider adding
exceptions for big
investment projects
to contribute capital
following their
specific schedule to
reduce their risks of
investment.
To balance the
interests between
licensing authorities
and the investors to
ensure that
procedural
requirements will
not hamper
investment and
development.

Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

14.
Investment
and Trade

10

New

New

perform customs procedures or

obtain any licenses from the
Ministry of Industry and Trade.
Limited scope of trading
Foreign invested enterprises are
only allowed to trade products
identified with specific HS Codes
designated their Investment
Certificate. This requirement
causes delays in their ability to
meet market demands, often by 6
months or more. The current
requirements cause a de facto
discrimination against foreign
invested enterprises because local
companies do not need specific HS
Codes for trade authorization.
Recognition of foreign arbitral
awards
After nearly two decades of being
a member of the 1959 Convention
on the Recognition and
Enforcement of Foreign
Arbitration Awards, Vietnam
remains very poor in its
recognition and enforcement of
foreign arbitral awards. The lack
of enforcement is seriously
undermining the confidence of
foreign investors.

The current HS Code

requirement for foreign invested
enterprises should be
eliminated from the Investment
Law.

New Investment Law

does not abolish this
requirement. The
new Investment
Registration
Certificate still
records specific HS
codes which foreign
invested enterprises
are entitled to trade
in Vietnam.

Vietnam must commit itself to

the enforcement and recognition
of these foreign awards while
the Vietnam International
Arbitration Centre develops as
an international centre of
arbitration.

The Ministry of
Justice has held a
workshop on this
subject.
In addition, the
Council of Judges of
Supreme People's
Court has issued the
Resolution
No.01/2014/HDTP on
guiding the
Implementation of
Certain Provisions of
Law on Commercial
Arbitration. That
said, this Resolution
does not address the
issue of recognition
of foreign arbitral

Page 6 of 12

10

10

Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

11

New

List of conditional sectors under

Investment Law
Investment Law compiles an
exhaustive list of 267
industries/sectors which are
considered conditional under the
existing international treaties,
laws, ordinances and decrees (and
thus foreign investors investing by
way of M&A in these areas will be
subject to the M&A registration
requirement). However, unclear
description of the business lines
causes a lot of difficulties to the
investors and local DPIs in
determining whether their
business lines may be considered
conditional or not.

The implementing decree of the

IL must clarify what laws would
prevail if there is a discrepancy
between the IL (and its
implementing decree) and the
specific laws. The implementing
decree of the Investment Law
should also clarify whether
there is any procedure that
foreign investors must
undertake to demonstrate that
their investment is not subject to
the M&A registration
requirement. However, the MPI
has only been able to identify the
conditions for about 120
business lines (based on
domestic laws and international
treaties). For the remaining
business lines, given that laws
and treaties are silent, the MPI

Page 7 of 12

awards.
The current Draft
Civil Procedural
Code being
presented for public
opinion will
introduce some
provisions which
may be viewed
contradicting to the
New York Convention
(e.g., additional
conditions for the
recognition of
foreign arbitral
awards).
Decree 118
implementing
Investment Law does
not clarify this issue.

Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

12

New

The relation between charter

capital and contributed capital

needs to consult with other

ministries to work out the
applicable conditions for them.
Also, if there are changes to this
list of 267 conditional business
lines, it is important to identify
what laws (i.e., the IL or the
specific laws) will enact such
changes?
Implementing decrees must
clarify the relationship between
these two capitals.

Under the new IL and EL, the

charter capital and contributed
capital are two different concepts,
where charter capital is
contributed by an investor to
establish the legal entity, and the
contributed capital is contributed
by the investor to implement an
investment project. The charter
capital must be contributed within
90 days from the establishment of
the legal entity, whereas the
contributed capital can be
contributed as required in
accordance with the progress of
the investment project. However,
the legal entity is established in
order to own and operate the
investment project, and it is
unclear how these capital
amounts relate to each other on
the various important documents
of the legal entity, including the
Investment Registration
Certificate (IRC), the Enterprise

Page 8 of 12

Still pending

Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

13

14.
Investment
and Trade

14

Old

Investment Certificate (ERC), and

its balance sheet and financial
statement. If IRC and ERC co-exist
for a legal entity that reflect 2
different equity amounts, would
M&A transactions be conducted to
sell the charter capital under the
ERC, or the contributed capital
under the IRC? This question
becomes a little uncertain under
the new laws.
Double Taxation Agreement:
In order to apply for tax exemption
under Double Tax Agreements
("DTA"), Circular No. 156/2013/TTBTC required foreign shipping
lines to submit certain documents
to demonstrating their direct
vessel operation. This
requirement appeared to be too
cumbersome and cause many
difficulties for enterprises.

Old

Cap on Advertising and

Promotion Expenses

To abolish the requirement on

documents evidencing the direct
vessel operation.

To abolish the cap on deductible

A&P costs.

Under the former legislation on

Corporate Income Tax,
enterprises were allowed to
deduct A&P costs up to 15% of the
deductible amount. This

Page 9 of 12

This problem has

been solved by the
issuance of Circular
26/2015/TT-BTC,
taking effective since
1 January 2015.
According to which,
vessel documents
are no longer
required to foreign
shipping lines in
applying DTA
exemption. This
guideline applies
retrospectively to all
the DTA applications
submitted before the
effective date.
Amended Law on CIT
has abolished this
provision on the
capped deductible
A&P costs effective
since 1 July 2015.

10

10

Investment & Trade Working Group reportsVietnam Business Forum, 2015

14.
Investment
and Trade

15

New

restriction on deductibility of A&P

costs was not in line with
international practices, causing a
lot of disadvantages for
enterprises in Vietnam, and
decreasing the attraction of
foreign investment to Vietnam.
Need for kindergartens in
industrial parks and export
processing zones
Vietnamese workers at industrial
parks and export processing
zones are facing the difficulties in
finding suitable kindergartens for
their children as the childcare
centers at these areas have poor
quality while public kindergartens
are closed off to children of
migrant workers.

To adopt solutions for handling

issues regarding kindergartens
and kindergarten classes in
industrial parks and export
processing zones.

Page 10 of 12

On 22 May 2015, the

Prime Minister
issued Directive No.
09/CT-TTg on
promoting the
implementation of
solutions for
handling issues
regarding
kindergartens and
kindergarten classes
in industrial parks
and export
processing zones. In
particular, the PM
requires the plan on
development of
industrial parks to be
associated with
housing plans for
employees working
therein up to 2020,
and must satisfy the
demand for
kindergartens and
kindergarten classes
in such industrial
parks. The Directive
also imposes certain
obligations and

Investment & Trade Working Group reportsVietnam Business Forum, 2015

responsibilities over
relevant People's
Committees and
Ministries in
ensuring the
development of
kindergartens in
industrial
parks/export
processing zones.

14.
Investment
and Trade

16

New

Importation of used equipment

Ministries are endeavouring to
tighten regulations for import of
used equipment. Decree
87/2013/ND-CP provides cases
where importation of used
equipment is allowed but subject
to approval of the PM. In practice,
there are cases where enterprises
need to import used equipment as
per their business demands (R&D,
software processing, intra-group
investment, refurnishing business,
etc.). The Ministry of Science and
Technology is preparing the draft

To evaluate and re-consider

the criteria for used
equipment to be imported
into Vietnam;
To eliminate Circular 20 and
let other governing
legislation apply (e.g.,
environmental, customs);
If not, then to add exceptions
for the proposed
restrictions.

Page 11 of 12

That said, shortage

of lands is
preventing provinces
and cities from
building
kindergartens for
children of workers
at industrial parks
and export
processing zones.
The draft Decision of
the PM on 7 cases
where importation of
used IT products is
allowed is recently
introduced for public
opinion. Notably, the
draft recognizes
importation of used
IT products for
refurnishing and
redistributing in VN
as one of the
permissible cases. If
passed in current
form, this Decision

Investment & Trade Working Group reportsVietnam Business Forum, 2015

Circular replacing Circular

20/2014/TT-BKHCN (which has
been suspended from
implementation soon after being
issued) and businesses believe the
issuance of such circular will
hamper their investment plans.

14.
Investment
and Trade

17

New

Registration of standardized
insurance contracts

will partly solve the

current issues
relating to
importation of used
equipment which
hamper businesses'
investment plans.

Under Decision No. 35/2015/QDTTg, life insurance products are

added as one of the essential goods
and services which standard
contract forms/general trading
conditions must be registered to the
MOIT under the Law on Protection of
Consumers' rights. This causes
many difficulties to insurance
businesses and doubles
administrative procedures
regarding life insurance business
activities, as they must conduct such
registration in parallel with the
ratification procedure with the MOF.

To temporarily suspend the

application of Decision 35;
To allow insurers to register
the insurance contracts
after obtaining the MOF's
approval on relevant
insurance product;
To stipulate a clear scope of
review of each ministry to
ensure that the MOIT's
MOF's authorities will not
double the administrative
procedures and hinder
businesses.

Page 12 of 12

On the other hand,

Circular 23/2015/TTBKHCN replacing
Circular 20 imposes
even more difficult
standards for
importation of used
equipment, with
wider product line
coverage.
Pending for opinions
from the PM and the
Ministries.

2.2. BANKING

Banking Working Group - Position Paper

Vietnam Business Forum, 2015

BANKING POSITION PAPER

Prepared by
VBF Banking Working Group
MACRO ISSUES
1. Developing Cash management products
Cash management services help the businesses to effectively manage their cash flow and
liquidity. The typical cash management products include Cash sweeping and pooling, intercompany lending and entrustment lending. However, in an absence of specific legal
framework and guidance from SBV on such products, banks are not able to provide cash
management services to clients. This prevents the enterprises, especially the multinational companies who have many subsidiaries and affiliates to access effective liquidity
management tools. This could adversely impact the competitiveness of the Vietnam-based
enterprises and the banking system as well as making the investment environment less
attractive. We would like to recommend that SBV promptly adopt the legal framework for
cash management activities so that local banks and foreign bank branches could utilise
cash management services and provide necessary support to their clients.
2. Risk management framework for enterprises
The foreign and local companies involved in large projects have strong demand to
effectively manage their Foreign exchange, Interest rate and Commodity rate risks. We
suggest SBV to further develop regulatory framework in this area such as issuing circular
on commodity derivatives, permitting to conduct CCS on top of interest risk hedging for
foreign currency loans for the purpose of full protection, recognize Net Opening Position of
Cross currency swap, especially the close-out netting scheme allowed in events of violation
to create favorable conditions for the corporate to hedge their business risks at low cost.
We look forward to working closely with SBV in this area.
3. Digitisation
We are all experiencing the dominance of technology not only in business but also in every
other aspect of life and society. Tech-innovation in financial services, which we call
fintech, has become increasingly prominent in recent years. Vietnam, with young, tech
savvy population and 23 million smart phones in operation and 55 million mobile phone
subscribers offers significant demographic advantages for the development of financial
technologies. We are seeing more and more local fintech products and solutions such as
mobile wallet platform, peer to peer lending, crowd funding platform which require strong
partnership between technopreneurs and banks. The formation of informed and timely
policies for these non-cash management solutions is important to facilitate favourable
market conditions and bring benefits to both urban and rural communities.
We therefore would encourage SBV to put digitisation high on your agenda and we are
delighted to assist you to develop a relevant FinTech ecosystem in Vietnam.
4. Regulatory enforcement
There are some regulations adopted with immediate effect (for example: Circular
15/2015/TT-NHNN issued on October 2 ,2015, came into effect on October 5 2015 came into
effect on September 28 , 2015). In practice, it is very challenging for banks to implement
new regulations immediately without a proper preparation process. . Banks need to revise
their procedures, processes and products, to conduct employee training and to inform the
nd

th

th

Page 1 of 9

Banking Working Group - Position Paper

Vietnam Business Forum, 2015

customers and clients about the upcoming changes. Therefore, it requires some time for
banks to implement new regulations properly and to fully comply. We strongly recommend
that for upcoming new regulations, there should be a deadline of minimum 45 days for the
regulations to take effect
In addition, there exist grey and impractical areas in some new regulations that make
implementation and compliance a challenge. For example, the requirement to identify
related persons for the control of single borrowing limit; and the restriction on opening no
more than one Indirect Foreign Investment Capital account by foreign investor, entrustment
lending and refinancing and requirements on translation of documents for account opening
in circular 23/2014/TT-NHNN.
We would like to recommend SBV to offer banks more opportunities to provide comments
and feedback on existing and new regulations before adopting the regulations. We believe a
greater focus on consultation process will make regulation even more effective and
efficient and will help improve regulatory enforcement.
TECHNICAL ISSUES
SECTION A KEY AND EMERGING ISSUES
The VBF Banking Working group (BWG) hereby presents to the State Bank (SBV) the
following key issues:
1. Circular 07/2015/TT-NHNN on Bank guarantees
In the calculation of single credit limit in banking activities, local regulations including
circular 07 on banking guarantees only exclude guarantee balance in case the guarantee
issuance is on the basis of the counter guarantee by local credit institutions or foreign bank
branches in Vietnam. In case the guarantee is issued on the basis of the counter guarantee
that by a foreign bank overseas, for example, the foreign branches of the foreign bank
branches in Vietnam or the mother bank of the guarantee issuing bank, such a guarantee is
still subject to single credit limit calculations. In fact, in both cases, the credit risk for the
guarantee issuing bank associated with this guarantee is almost the same since it already
rests with the counter guarantee issuing bank. This is also not in line with international
practices. The non-recognition of the counter guarantee issued by a foreign bank as an
exclusion in the single credit limit calculation would potentially restrict the capacity of
foreign bank branches in Vietnam to issue large-amount guarantees to support large FDI
projects in Vietnam. With this, foreign bank branches in Vietnam could only rely on local
banks as a counter guarantee issuer with more limited capacity in terms of capital and
credit worthiness in comparison with foreign banks.
We recommend that SBV would allow the exclusion of the guarantees which are issued on
the basis of a counter guarantee issued by foreign banks overseas out of the single credit
limit calculation to be in line with international practices. In case of being concern by SBV
on unable to manage the Credit Institutions and Foreign Branches overseas, we
recommend SBV to request such organizations for provide the Annual report of these
overseas names and the rating of the international Agencies for SBVs assessment and
comfort.

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Banking Working Group - Position Paper

Vietnam Business Forum, 2015

2. Simplifying requirements for account opening and market entry dossiers for foreign
investors
Circular 123/2015/TT- BTC of the Ministry of Finance dated August 18, 2015 provides
guidance on foreign investment activities in Vietnam's stock market has removed many
rules to simplify the documentation for the foreign investors' participation in the
Vietnamese stock market, including(1) removal of the consularizing requirements; (2)
removal of the requirement for translation of certified documents in English; (3) removal of
notarized translation for other documents in English.
But a foreign investor looking to set up a cash account at a bank must adhere to Circular
23/2014/TT-NHNN, guiding on opening and use of transactional accounts at banking service
providers, where the client must submit a notarized translation of the applications for
account opening and also notarized translations of ID paper/passport that have been
consularized in another country for the account holder. The requirements of Circular 23
results in the inability to benefit from the paperwork simplifying efforts offered by Circular
123.
In addition, Circular 23 also requested the authorization to use the account in writing,
together with the signature registration form and a valid copy of identity card or passport of
the authorized person, while according to international practice, the global custodian banks
only send commands and instructions to the depository bank in Vietnam through SWIFT
from the registered SWIFT addresses, thus ensuring optimal accuracy of instructions and
directives. These organizations do not use the paper forms to send orders / instructions to
custodian banks in Vietnam. Therefore, the request for authorization documents, sample
signature and copy of identity card / passport of the authorized person is not suitable to
customers using SWIFT.
We hope SBV considers simplifying further administrative requirements for foreign
investors to ensure consistent application of documentary requirements for foreign
investors, as well as facilitate their participation in Vietnam's stock market or to be specific:
(1) removing the requirement for ID paper provision for the registered agent or proxy of the
account holder; (2) removal of the need for translation of notarized English documents; (3)
removal of notarized translation need for other documents in English; and (4) removal of
the need for consularization of the copies of relevant documents.
3. Recommendation for addition of banking products in SBVs upcoming normative
regulation amendment and enactment
a. Refinancing for offshore loans - draft Circular on lending
BWG provided comments on the draft circular, suggesting SBV consider allowing loans
used for repaying loans acquired from lending credit institutions and foreign bank branches
and/or other credit institutions and foreign bank branches on the basis that the Bank
maintains clear procedures to identify that such loans are not granted to conceal bad debt.
In practice, there are many companies borrowing foreign currency loans overseas (thanks
to relationships of their parent company) when they were first established in Vietnam.
However, because of their revenue in VND and when their financial and business status
become stable, these companies then would like to borrower VND to repay foreign currency
loans. So, once again we suggest SBV consider this proposal in order to facilitate customer
business in case loan purposes are clearly not to conceal bad debt. We also recommend
SBV to allow rollover loans for the aim of transparency reporting and liquidity gap
management instead of re-pricing.
Page 3 of 9

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Vietnam Business Forum, 2015

b. Agent banking
Article 106, CI Law, specifies that commercial banks may act as agents in areas related to
banking activities, insurance brokerage and wealth management in line with the State
Banks rulings. But SBV has not released an implementing Circular addressing agent for
banking activities. The Banking working group is ready to share information on
international practices and work with SBV in pushing out early these rules to facilitate and
meet real users needs for agent banking offerings and developments of this field of
expertise.
c. Cash Management product
Cash management activity offered by banks will provide clients with effective solutions in
the management of clients cash flow and liquidity. In Vietnam, the Law on Credit
Institutions classifies cash management as one of the banking activities which commercial
banks and foreign bank branches in Vietnam can provide to clients.
However, in an absence of a specific legal framework and/or guidance from SBV on cash
management, banks could not be able to provide cash management service to clients. This
would cause clients; particularly multi-national companies with many subsidiaries and
affiliates to lack access to effective liquidity management tools such as cash management
offered by local banks and foreign banks in Vietnam. This could potentially have an adverse
impact on the competitiveness of Vietnams banking system as well as the attraction of
foreign investment into Vietnam. We recommend that SBV be able to lay out the legal
groundwork for cash management so that local banks and foreign bank branches in
Vietnam could be able to offer this service to clients.
d. Non- recourse discounting and factoring
Laws on Credit Institutions and Circular 04/2013/TT-NHNN dated March 1,2013 only
recognize discounting and factoring activities on a with recourse basis to the seller. This is
not in line with international practices, for products/ solutions such as factoring, bill
discounting and any other product where the bank has enforceable recourse to the buyer or
the buyers bank.
The recourse imposed on the exporters restricts them from accessing good quality funding
to finance their working capital and reduce the payment risks from the buyer. Aligning
Vietnam with the international trade finance standards would help protect exporters in
Vietnam against buyers default and delays of payment, ensuring a steady source of funding.
As these products offer risk protections against buyers and buyers country risks,
Vietnamese exporters would be more comfortable developing commercial relationships
with new markets or counterparties to grow their exports. We recommend that SBV issue
the regulations allowing discounting and factoring activities on a with recourse basis to
both the seller and the buyer.
Notwithstanding the above, we would like the SBV to consider issuing a new or
supplementing regulation on business of discounting bills, notes and other valuable papers
without recourse and/or bill of exchange. By nature, it is a transaction under which the bank
extends credit to the buyer for yearly payments to the seller for purchase of goods/services.
Provided that the seller transfers its whole rights relating to the sale contract/invoice
executed with the buyer, and the buyer accepts to pay the whole contract price/invoice
amount to the bank by the original due date. The discounting charge shall be the difference
between the invoice amount and the one duly paid early to the seller, converted into a
percentage. The terms and conditions of this type of credit extension are quite similar to
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Vietnam Business Forum, 2015

lending to the borrower and disbursing funds to the supplier of the borrower. The current
guideline given by the SBV under OL 3212 of 08/05/2013 and OL 7294 of 05/10/2013 said that
the above transaction scheme (i.e. discounting bills, notes and other valuable papers
without recourse and/or bill of exchange) is not for credit businesses but would be regarded
as international payment services. Kindly be advised that under the (international) payment
service, (i) the bank only collect remittance fees (not the discounting charge) and (ii) the
bank shall take the fund of the buyer and transfer it to the seller, but not by using its own
fund to pay to the seller first, then collecting it from the buyer afterward.
4. Accounting Treatment under UPAS LC
Usance Payable at Sight (UPAS) LC provides an option to beneficiaries to choose sight
payment terms, within a usance payment documentary credit transaction. If the option is
exercised, Reimbursing bank nominated by Issuing bank will make payment at sight to
beneficiary. At maturity, Issuing bank will reimburse Reimbursing bank for the face value of
the LC plus accrued interests. Official Letter (OL) No. 3333/NHNN-TCKT dated 13 May 15
issued by the SBV provides guidance on accounting treatment for Bank-to-Bank LC
reimbursement. Under this guidance, LC reimbursement must be accounted as Borrowing
from Reimbursing Bank and Advances to applicant customers (at time of payment by
Reimbursing Bank to beneficiary. The accounting treatment for the reimbursement activity
varies within the market place. In line with international practice majority of banks consider
a UPAS transaction as normal import bill (accepted by applicants) payable at maturity by
Issuing bank. As such, it does not fall within the purview of OL 3333. While as per OL 3333
and treat UPAS bills as Loans/Advances to customers. This inconsistency has created some
confusion in the market place and in the minds of some customers.
Clarification is being requested from the SBV if UPAS reimbursement is within the scope of
OL 3333. If that is the case, all LC reimbursements should be treated as Borrowing from the
Reimbursing Bank and as an Advance/Loan to Applicants/Customers.
5. Circular 36/2014/TT-NHNN on stipulating prudent ratios in operations of CIs and
FBBs
Circular 36 is a great step to enhance safety and transparency criteria in the operation of
Credit Institutions, restricting cross shareholding and accelerating the banking
restructuring. We appreciate the intention of SBV to impose the limit of using short term
funding to fund for long term asset. However, we would like to bring the attention of the
SBV 2 key issues faced by the BWG members:
The first issue in Circular 36 is the stipulation of 15% and 35% limit ratio of Government
bonds holding per short term funding for Foreign Bank Branches and Commercial Banks
respectively is not in line with Basel II and III where banks are required to hold substantially
more Government bonds. In addition, banks are perhaps the biggest (if not only) buyers for
Government bonds and this requirement may adversely impact the Government plan in
funding fiscal deficit next year and the development of an active primary and secondary
securities market.
The second issue is the identification of related persons for controlling credit granting limit
is extremely important though it becomes a huge administration steps for banks. The BWG
members have taken positive steps in developing a uniform template which include all
regulatory requirements on related persons in circular 36 for common use. However, both
the banks and customers have faced tremendous difficulty in identifying and verifying the
information on related persons which we do not think as an effective way to ensure
compliance. We recommend that the SBV either amend the definition of related persons in
Page 5 of 9

Banking Working Group - Position Paper

Vietnam Business Forum, 2015

line with international standards or provide guidance to banks on how to identify those
subjects for controlling the single borrowing limit.
6. How SBV could play a role in setting up an open platform for better market
transparency, benchmark fixing and conduct management
Recently, in response to the growing number of misconduct incidents (e.g.: Libor / foreign
exchange fixing), global regulators have been imposing very stricter standards on market
conduct. As the Vietnam market grows in size and complexity, the demands for higher
ethical conduct and uniform practice increase correspondingly. In helping to foster the
market, we believe that Vietnam should adopt the international best practices as well as
safeguard the soundness of the system. We therefore would like to recommend the
introduction of market conduct, which covers the dealing in money market, foreign
exchange, derivatives and other market instruments as follows:
a. General market conduct to ensure the right behavior of financial institutions towards
their clients and counterparties in the financial markets.
In particular, it should provide basic dealing guidelines:
- Communication: e.g.: Dealer must not willfully spread rumors or disseminate false or
misleading information. In addition, care must be exercised when handling
unsubstantiated market information. Client communications in particular should have a
reasonable basis, be fair and balanced, and not contain any inaccurate or misleading
information.
- Conflict of interest: e.g.: Dealer should act in good faith and in the best interests of
clients. Banks should implement internal policies and procedures which prohibit all
forms of market misconduct.
b. Benchmark rate setting
Benchmark rate setting to ensure it is reliable, transparent and subject to clear governance
and accountability mechanisms. Currently, there are some major benchmarks such as HNX
fixing for bond market (Ha No Exchange) and VNIBOR for money market. The HNX fixing is
monitored by the HNX and contributed by its members in accordance with Decision 56/QSGDHN of HNX - Ha Noi Stock Exchanged dated 06 Mar 2013 and the Decision 160/QUBCK dated 15 Mar 2013 of the SSC - State Securities Commission. For Money market and
may be for foreign exchange or swap market in the future, it is necessary to set out the
governance, requirements and supervision.
7. Progress of court cases on non-performing loan and mortgaged asset disposal under
Civil Litigation Code 2014
Banks are having difficulties with the progress of the court cases on a number of cases
where banks are trying to retrieve funds.
a. Complicated and long process
In case the customer does not cooperate with lending bank (in most of bad debt cases), the
bank must sue the customer before the Court and spend 01 to 02 years to receive the
judgment. After receiving judgment or the decision on acknowledgment of agreements of
the parties, the bank must submit the Sentence Execution Agency application and spend
more 02 to 03 years to auction the collateral. This long process increases the bad debt
settlement expenses and decreases the value of the collateral, affecting negatively the
efficiency of loan collection.
b. Unreasonable decisions and requests of the Court or the Sentence Execution Agency
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In many cases, the unreasonable decisions and requests of the Court or the Sentence
Execution Agency make the process of collateral disposal for debt recovery at the bank go
to dead-lock. In case individual customer runs away, the Court does not receive the lawsuit
document or suspends the lawsuit for not being able to find the current address of the
defendant. For the corporate customer as 100% foreign capital company, in case the legal
representatives of the company runs away to their home country, the Sentence Execution
Agency requests to perform the foreign judicial authorization procedure via the Ministry of
Foreign Affairs to notify the decisions and documents of the Sentence Execution Agency to
the legal representatives of the company. In practice, this judicial authorization procedure
takes long time without any result and delay the auction process many years.
c. Unfeasible asset disposal via non-litigation process
The Joint Circular No 16/2014/TTLT-BTP-BTNMT-NHNN dated on 06/6/2014 between Ministry
of Justice, Ministry of Natural Resource and Environment, SBV allows the Bank to take the
collateral into custody and dispose for debt recovery without the mortgagors agreement.
However, because there is not active support from the police department and the local
authorities for the bank to take the collateral into custody, the implementation of the Joint
Circular 16 is not feasible.
BWG therefore would like to propose some recommendations as follows:
- Shorten the time of the Court and the Sentence Execution Agency process;
- In case the individual borrower or the legal representative of the corporate borrower
run away, the Court can open the hearing in the absence of the borrower and it is not
necessary to perform the foreign judicial authorization procedure;
- SBV should cooperate with the relevant authorities to elaborate a clear and detailed
legal framework regulating the cooperation between the police department, the local
authorities, the relevant authorities and the Bank to support actively the Bank in taking
the collateral into custody and disposing the collateral for debt recovery without the
mortgagors agreement or cooperation.
Solving these difficulties and obstacles shall improve the efficiency of bad debt settlement
task in all banking system.
SECTION B REVIEW OF PENDING AND LONG OUTSTANDING ISSUES
The working group respectfully recommends that SBV reviews and provides its guidance on
the following matters raised previously.
1. Anti-Money Laundering (AML)
The working group is delighted that Circular 31/2014/TT-NHNN, revising Circular
35/2014/TT-NHNN on anti-money laundering was released on Nov. 11, 2014, in which many
BWGs recommendations have been accepted. There are, however, several points in the
Circular 31 revising Circular 35, and Decree 116 that are in fact very hard or impossible to
implement. So the BWG would hereby update SBV of the following information:
KYC activity
a. Collect identification information on branches or same group foreign associated
companies using the banking services or bank accounts opening in Vietnam.
Regarding the cases of subsidiary(ies) or other foreign affiliates of the same corporate
structure (eg. a bank branch in country X) being customers of the bank in Vietnam, due that
these branches / affiliates share structure, executive management and internal policies

Page 7 of 9

Banking Working Group - Position Paper

Vietnam Business Forum, 2015

which is similar to the bank in Vietnam and being managed/supervised by the same Group,
from risk-based approach, we propose to have a deviation for customer identification/KYC.
b. Implementation of group's internal procedures on customer identification
As financial Institutions setup Relationship Management Application (RMA); or companies
those have normal international trade payments, theres no regular banking transactional
movements. According to internal regulations of the group, the bank has implemented
minimal KYC measures such as:
-

With regards to LC advising, LC confirmation, Collection, Guarantee, Discount, issuing

bank must have existing relationship with the bank group when the bank in Vietnam
plays the Confirming Bank or Discounting Bank role.
Company names, Legal Rep, Authorized Signers have been screened against applicable
sanctions or local lists prior to transaction processing or as and when there is
update/change of the applicable sanctions or local lists.
Verify customer name and address via business registration or reconcile with
information provided by other bank, in financial report or their official business website.
Other Compliance checks will be done for example: Anti-Boy-Cott, AML red flags or
other independent check.
Closely monitoring the transaction frequency for more stringent control.
With regards to the Supplier Financing Program, companies those are buyers must be
existing clients of the bank in Vietnam which means all necessary customer
identification have been done. Financing for Suppliers (Sellers) is to support for the
Companies (Buyers).

Therefore, we suggest SBV to allow the FBBs and 100% foreign capital banks apply internal
simplified procedures.
2. Decree 96/2014/ND-CP on Civil penalization in relation to monetary and banking
practices
Decree 96/2014/ND-CP on Administrative sanctions in relation to monetary and banking
violations does not provide the mechanism of applying alleviation when banks have selfidentified the breaches, conducted necessary preventive measures and reported to SBV.
This may prevent the banks from self-improving their internal control system. Decree 96
also does not distinguish whether these breaches are systematic or isolated then applying
relevant alleviative or strict measures to tackle this. We suggest that SBV should work with
Government to consider amending Decree 96.
3. Reimbursement of interest subsidy
Over the last years, banks have been waiting for the reimbursement of 20% of due interest
subsidies under the interest rate support initiative that ended in 2009. Following our
previous meetings with SBV in late 2012, we note that the figures has been checked and
finalized for a number of BWG members. We also understand that this is a complicated
matter that may have bearings on the public funding balance sheet and national financial
health. However since the unpaid accumulated reimbursements are presenting themselves
as a problem with the banks in relation to their internal accounting systems and audited
financial statements, the working group would appreciate if SBV wraps this up and starts
releasing this interest rate refund as soon as possible.

Page 8 of 9

Banking Working Group - Position Paper

Vietnam Business Forum, 2015

CONCLUSION
Many of the issues and comments mentioned in this paper come from a clear and urgent
drive by the State Bank of Vietnam to create a better governed more transparent banking
system. We are moving steadily and progressively to this aim and there is increasing
confidence that we are moving in the right direction. As noted in the beginning, we believe
that Vietnam can shortly begin work on other aspects of developing the financial markets,
so that Vietnam has a solid and robust financial sector for future growth.
The BWG remains committed to help in any way possible in furthering Vietnams financial
market development to serve the needs of our customers and the nation.

Page 9 of 9

Banking Progress Report

Vietnam Business Forum, 2015

BANKING PROGRESS REPORT

Prepared by
Banking Working Group

Solving issue progress scale

0 = Still existed issue; 1 = Partially solved issue; 2 = Solved issue
1-10:10 is the highest priority
Score = (Progress point) x (Priority)
No.
Age
Issues
1
06/2015 Circular 07/2015/TT-NHNN on
Bank guarantees
Inclusion of offshore counter
guarantee in single lending limit
calculation

Suggested/Agreed Action
We recommend that SBV would
allow the exclusion of the
guarantees which are issued on the
basis of a counter guarantee
issued by foreign banks overseas
out of the single credit limit
calculation to be in line with
international practices.
In case of being concern by SBV on
unable to manage the Credit
Institutions and Foreign Branches
overseas, we recommend SBV to
request such organizations for
provide the Annual report of these
overseas names and the rating of
the international Agencies for
SBVs assessment and comfort.

Progress
Under discussionwith the State
Bank of Vietnam (SBV)

0 1 2 Priority
x
10

Score
10

BWG raised the

implementation difficulties by
comments sent to SBV in July
and September 2015.

11/2014 Circular 30/2014/TT-NHNN on We recommend SBV to coordinate SBV issued OL8480/NHNNproviding guidance for the with relevant ministries to provide TTGSNH dated November 5th,
operations of entrustment and specific guidance for this kind of 2015 providing guidance on the

10

20

Important Note: This "Progress Matrix" was prepared based on the voluntary submissions of the various Working Groups and Sub-Working Groups of the Vietnam Business
Forum from 2011 - 2015. In terms of both the feedback and the rankings/progress evaluations, it is not intended to be either complete or scientific. It does nevertheless
reflect many issues of concern that have come up in the various Working Groups, and their constructive proposals for solutions. It is hoped that it will provide a useful
reference to track and guide progress as the Government and the business community continue their collaboration to improve the business environment though the channel
of the Vietnam Business Forum. Among other things, it should be noted that many issues already fully resolved have been dropped from this Progress Matrix to limit the
size of the document, and almost all of the issues noted are those that still need more work.

Page 1 of 8

Banking Progress Report

Vietnam Business Forum, 2015

No.

0 1 2 Priority

Age

03/
2014

Issues
Suggested/Agreed Action
Progress
activity
for
implementation
to
avoid
aforesaid
issue.
entrustment receipt of Credit
Institutions (CIs) and Foreign potential violation.
Bank Branches (FBB)
Unclear guidance for CIs &
FBBs
to
implement
the
entrustment and entrustment
receipt services
Coordination between SBV, a.
Ministry of Finance and State
Securities Commission of the
regulations
applicable
to
indirect foreign investment in
Vietnam stock market:
a. An account structure that
allows
foreign
portfolio
investors
to
maintain
multiple accounts at a same
custodian bank
b. Simplifying requirements for
account opening and market
entry dossiers for foreign
investors
b.

We hope that SBV considers Under discussion with SBV

adopting a more flexible VND
account
structure,
with
multiple VND accounts for use
by foreign investors, providing
that custodian banks ensure
segregated monitoring and
reporting of the in and out cash
flows for each investor to meet
SBVs forex administration
needs, while maintaining the
integrity and compatibility with
a flexible depository account
structure and the use of
multiple stock trading ID
number for major foreign
investors.
We hope SBV considers
simplifying
further
administrative requirements
for foreign investors to ensure
consistent
application
of
documentary requirements for
foreign investors, as well as
facilitate their participation in
Page 2 of 8

Score

Banking Progress Report

No.

Age

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action
Vietnam's stock market.

Progress

09/2015 1. Refinancing for offshore

loans - draft Circular on
lending

BWG provided comments on the Under discussion with SBV

draft circular, suggesting SBV
consider allowing loans used for
repaying loans acquired from
lending credit institutions and
foreign bank branches and/or
other credit institutions and foreign
bank branches on the basis that
the
Bank
maintains
clear
procedures to identify that such
loans are not granted to conceal
bad debt.

2. Agent banking

BWG is ready to share information Under discussion with SBV

on international practices and work
with SBV in pushing out early these
rules to facilitate and meet real
users needs for agent banking
offerings and developments of this
field of expertise.

3. Cash Management product

We recommend that SBV be able to Under discussion with SBV

lay out the legal groundwork for
cash management so that local
banks and foreign bank branches
in Vietnam could be able to offer
this service to clients.

06/2013 4. Non- recourse discounting

and factoring
a. Laws on Credit Institutions

a. We recommend that SBV issue Under discussion with SBV

the
regulations
allowing
discounting
and
factoring
Page 3 of 8

0 1 2 Priority

Score

Banking Progress Report

No.

Age

Vietnam Business Forum, 2015

Issues
and Circular 04/2013/TTNHNN dated March 1,2013
only recognize discounting
and factoring activities on a
with recourse basis to the
seller. This is not in line with
international practices.
b. The current guideline given
by the SBV under OL 3212 of
08/05/2013 and OL 7294 of
05/10/2013 said that the
above transaction scheme is
not for credit businesses but
would be regarded as
international
payment
services.

06/2014 Guidance
on
implementation

Suggested/Agreed Action
activities on a with recourse
basis to both the seller and the
buyer.
b. We would like the SBV to
consider issuing a new or
supplementing regulation on
business of discounting bills,
notes and other valuable
papers
without
recourse
and/or bill of exchange.

Progress

Have been resolved

FATCA We suggest SBV to:
a. inform FFIs in Vietnam when the
previously submitted Form
8966s have been submitted to
the IRS.
b. have formal discussions with
the IRS on behalf of all Vietnam
FFIs to confirm that the IRS will
accept the submission from SBV
as fulfilling FFIs in Vietnams
reporting obligations under
their
respective
FFI
Agreements.
c. suggest SBV to accelerate the
signing of Model 1 IGA with US
government so that FFIs in
Page 4 of 8

0 1 2 Priority

10

Score

Banking Progress Report

No.

Age

Vietnam Business Forum, 2015

Issues

10/2015 Accounting Treatment under

UPAS LC
Under the provision of OL
3333/NHNN-TCKT, UPAS bills
are treated as Loans/Advances
to customers, which is different
to the international practice.
This inconsistency has created
some confusion in the market
place and in the minds of some
customers.
11/2014 Circular 36/2014/TT-NHNN on
stipulating prudent ratios in
operations of CIs and FBBs
a. the stipulation of 15% and
35% limit ratio of
Government bonds holding
per short term funding for
Foreign Bank Branches and
Commercial Banks
respectively is not in line
with Basel II and III where

Suggested/Agreed Action
Vietnam no longer need to
report directly to the IRS. If
none of the above suggestions
are possible, or they cannot be
achieved quickly, alternatively,
SBV shall allow FFIs to send
reports (which have previously
submitted to SBV) directly to the
IRS electronically to avoid
violation of FFI Agreements.

Progress

0 1 2 Priority

Score

We would like SBV to clarify Under discussion with SBV

whether UPAS reimbursement is
within the scope of OL 3333. If that
is the case, all LC reimbursements
should be treated as Borrowing
from the Reimbursing Bank and as
an
Advance/Loan
to
Applicants/Customers.

a. We propose that SBV considers Under discussion with SBV

changing the maximum ratios
for purchase of and investment
in Government bonds for
foreign bank branches to 35%,
equal that applicable to joint
stock commercial banks, joint
venture banks and wholly
foreign-owned banks.
b. (ii) We recommend that the
SBV
either
amend
the

Page 5 of 8

Banking Progress Report

No.

Age

Issues
banks are required to hold
substantially more
Government bonds.
b. the identification of related
persons for controlling
credit granting limit

Vietnam Business Forum, 2015

Suggested/Agreed Action
definition of related persons in
line
with
international
standards or provide guidance
to banks on how to identify
those subjects for controlling
the single borrowing limit.

Progress

10/2015 Set up an open platform for

better market transparency,
benchmark fixing and conduct
management

We
propose to
adopt the Under discussion with SBV
international best practices as well
as safeguard the soundness of the
system by setting out the
governance, requirements and
supervision.

10/2015 Progress of court cases on

non-performing loan and
mortgaged asset disposal
under Civil Litigation Code 2014
Banks are having difficulties
with the progress of the court
cases on a number of cases
where banks are trying to
retrieve funds.
a. Complicated
and
long
process
b. Unreasonable decisions and
requests of the Court or the
Sentence Execution Agency
c. Unfeasible asset disposal via
non-litigation process

BWG therefore would like to Under discussion with SBV

propose some recommendations
as follows:
a. Shorten the time of the Court
and the Sentence Execution
Agency process;
b. In case the individual borrower
or the legal representative of
the corporate borrower run
away, the Court can open the
hearing in the absence of the
borrower and it is not necessary
to perform the foreign judicial
authorization procedure;
c. SBV should cooperate with the
relevant authorities to elaborate
a clear and detailed legal
framework
regulating
the
cooperation between the police
Page 6 of 8

0 1 2 Priority

Score

Banking Progress Report

No.

Age

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action
department,
the
local
authorities,
the
relevant
authorities and the Bank to
support actively the Bank in
taking the collateral into
custody and disposing the
collateral for debt recovery
without
the
mortgagors
agreement or cooperation.

Progress

10

11/2014 Anti Money Laundering (AML):

There are positive changes in
the Circular 31/2014/TT-NHNN,
revising Circular 35/2014/TTNHNN on anti-money
laundering was released on
Nov. 11, 2014. However, there
are still several points hard or
impossible to implement as
follows: KYC activity:
a. Collect identification
information on branches or
same group foreign
associated companies using
the banking services or bank
accounts opening in
Vietnam.
b. Implementation of group's
internal procedures on
customer identification

KYC activity:
a. We propose to have a deviation
for customer
identification/KYC.
b. We suggest SBV to allow the
FBBs and 100% foreign capital
banks apply internal simplified
procedures.

11

12/2014 Decree 96/2014/ND-CP on Civil

penalization in relation to

We suggest that SBV should work Under discussion with SBV

with Government to consider
Page 7 of 8

0 1 2 Priority

Under discussion with SBV

Score

10

Banking Progress Report

No.

12

Age

Issues
monetary and banking
practices
Decree 96/2014/ND-CP on
Administrative sanctions in
relation to monetary and
banking violations does not
provide the mechanism of
applying alleviation when banks
have self-identified the
breaches, conducted necessary
preventive measures and
reported to SBV.
12/2014 Reimbursement of interest
subsidy
We understand that this is a
complicated matter that may
have bearings on the public
funding balance sheet and
national financial health.
However since the unpaid
accumulated reimbursements
are presenting themselves as a
problem with the banks in
relation to their internal
accounting systems and audited
financial statements.

Vietnam Business Forum, 2015

Suggested/Agreed Action
amending Decree 96.

Progress

BWG suggets SBV to wrap this up Under discussion with SBV

and starts releasing this interest
rate refund as soon as possible.

Page 8 of 8

0 1 2 Priority

10

Score

2.3. CAPITAL MARKETS

Capital Markets Working Group Position Paper

Vietnam Business Forum, 2015

CAPITAL MARKETS WORKING GROUP

POSITION PAPER

Prepared by
Capital Markets Working Group
Vietnam Business Forum

The Capital Markets Working Group Vietnam Business Forum highly appreciates the
efforts of the Ministry of Finance, the State Securities Commission (SSC), the Stock
Exchanges and the Vietnam Securities Depository (VSD) in recent years to improve the legal
framework in order to create more favorable conditions for indirect investment activities of
investors. For your consideration, we would also like to share some of the difficulties that
we are facing, they are as follows:
PART 1 KEY MATTERS
1. Privatization of SOEs
We welcome and appreciate the decision of the Prime Minister on the state divestments in
the Official Letter No.1787/TTg-DMDN dated October 8, 2015 (hereinafter referred to as the
Official Letter 1787/2015). According to this document, the Government will have a
divestment plan of the state capital in 10 companies, including Vietnam Dairy Products JSC
(Vinamilk), FPT Telecom Corporation, and Bao Minh Insurance Corporation. We think this is
a wise decision, showing the determination of the Prime Minister and the Government for
equitization. The decision along with allowing the increase in foreign ownership is a
breakthrough to bring Vietnam's stock market to the "emerging markets" ranking.
In our opinion, compulsory listing of privatised SoEs under Decision 51/2014/QD-TTg dated
15/09/2014 and under the Decree 60/2015/ND-CP dated 26/06/2015 (hereafter referred to
as the Decree 60/2015) issued by the Prime Minister are proper provisions and very
encouraging signs.
However, we wish to emphasize that the State divestment in a transparent manner through
bidding, and the compliance and enforcement of, as well as the supervision of compliance
and enforcement of, the Decree 60/2015 will play a crucial role in the success of the
privatization of the SOEs.
To make the privatization process succeed, and also meet the expectation from both the
Government and investors, we would like to emphasize on the following:

the State divestment in a number of businesses in the Official Letter 1787/2015 must
be carried out in a transparent manner through public bidding;
the Government should strictly request privatized SoEs fully complies with the
provisions on compulsory listing under Decree 60/2015;
the Government should publicly publish a list of SoEs to be privatized. The list should
contain names of SoEs, estimated time for privatization, and estimated price to be
offered to the public;
to create liquidity for the after market, the privatizations should be done through a
global syndicate and 25-30% should be sold off;
the Government should pro-actively establish rules on good corporate governance
based on the international practice, and apply those rules to the privatized SoEs; and
Page 1 of 2

Capital Markets Working Group Position Paper

Vietnam Business Forum, 2015

the Government should expedite the creation of domestic pension funds as these
funds will provide a significant demand for the financial market and privatization.

2. Decree 60/2015/ND-CP on Foreign ownership limits

We welcome the passage of Decree 60/2015 by the Government to increase foreign
ownership limits (FOL) in public companies.
The decree has shown the Governments important direction and openness in promoting
foreign investments in public companies and securities funds in Vietnam. Also under the
decree, foreign investors may establish a new 100% foreign owned securities company or a
fund manager in Vietnam, or acquire up to 100% interest in an existing local securities
company or fund manager.
However, there are at least 2 major hindrances to the implementation of this Decree 60:
First, the Government has not still publisized the lists of sectors and business lines,
which require conditions for foreign investments and set out clearly FOLs applicable
to each of those sectors and business lines. As a result, the lack of the lists in fact
effectively stops the operation of the Decree 60;
Second, the Law on Investments 2014 is not clear on the scope of its application. As
a result, domestic enterprises, local investors, foreign investors in the stock market
in Vietnam, and the regulators, being the State Securities Commission, the Ministry
of Finance, cannot have a correct answer to the following question:

Do the Law on Investments 2014, particularly, Articles 23, 24, 25 and 25 of this law,
apply to domestic enterprises, local investors, foreign investors when they buy
shares in listed companies, or when they invest in securities investment funds and
securities in Vietnam?

We understand that the Ministry of Planning and Investment, the State Securities
Commission and the Ministry of Finance are cooperating to resolve this issue in the
law guidelines. We also appreciate and thank the Ministry of Planning and
Investment, the State Securities Commission for having dialogues and consultations
with us when building these legal texts.

We suggest that:

The Government urgently pass the lists of sectors and business lines, which require
conditions for foreign investments and set out clearly FOLs applicable to each of
those sectors and business lines; and
The decree to interpret the Law on Investments 2014 to be passed by the
Government should clearly state as follows:

Investments in public companies, investments in securities investment funds and

securities in Vietnam will be governed by the Law on Securities and relevant
regulations.
3. Pension Funds
To our understanding, the MoF is now completing the draft Decree on Pension Fund (Draft
Decree). However, we also understand that the Ministry of Labours, Invalids and Social
Affairs (MOLISA) has been also drafting a similar decree on pension fund.
We would recommend the government to direct the stakeholders to not overlap each
other's works in building the decree on voluntary pension funds and ensuring the decree to
be issued as soon as possible.
Page 2 of 2

Capital Markets Working Group Talking points with SSC

Vietnam Business Forum, 2015

TALKING POINTS
MEETING BETWEEN STATE SECURITIES COMMISSION AND
CAPITAL MARKETS WORKING GROUP VIETNAM BUSINESS FORUM
The Capital Markets Working Group Vietnam Business Forum highly appreciates the
efforts of the Ministry of Finance, the State Securities Commission (SSC), the Stock
Exchanges and the Vietnam Securities Depository (VSD) in recent years to improve the legal
framework in order to create more favorable conditions for indirect investment activities of
investors. For your consideration, we would also like to share some of the difficulties that
we are facing, they are as follows:
PART 1 KEY MATTERS
1. Privatization of SOEs
In our opinion, compulsory listing of privatised SoEs under Decision 51/2014/QD-TTg dated
15/09/2014 issued by the Prime Minister is a significant breakthrough and a wise decision,
showing the Prime Ministers and Governments determination towards the process of
privatization.
However, we wish to emphasize that the compliance and enforcement of, as well as the
supervision of compliance and enforcement of, the Decision 51/2014 will play a crucial role
in the success of the privatization of the SOEs.
To make the privatization process succeed, and also meet the expectation from both the
Government and investors, we would like to emphasize on the following:
-

the Government should strictly request privatized SoEs fully complies with the
provisions on compulsory listing under Decision 51/2014/QD-TTg dated 15/09/2014
issued by the Prime Minister;
the Government should publicly publish a list of SoEs to be privatized. The list should
contain names of SoEs, estimated time for privatization, and estimated price to be
offered to the public;
to create liquidity for the after market, the privatizations should be done through a
global syndicate and 25-30% should be sold off;
The Government should pro-actively establish rules on good corporate governance
based on the international practice, and apply those rules to the privatized SoEs; and
The Government should expedite the creation of domestic pension funds as these funds
will provide a significant demand for the financial market and privatization.

2. Decree 60/2015/ND-CP on Foreign ownership limits

We welcome the passage of Decree 60/2015 by the Government to increase foreign
ownership limits (FOL) in public companies.
The decree has shown the Governments important direction and openness in promoting
foreign investments in public companies and securities funds in Vietnam. Also under the
decree, foreign investors may establish a new 100% foreign owned securities company or a
fund manager in Vietnam, or acquire up to 100% interest in an existing local securities
company or fund manager.
However, there are at least 2 major hindrances to the implementation of this Decree 60:

Page 1 of 12

Capital Markets Working Group Talking points with SSC

Vietnam Business Forum, 2015

First, the Government has not passed the lists of sectors and business lines, which
require conditions for foreign investments and set out clearly FOLs applicable to each of
those sectors and business lines. As a result, the lack of the lists in fact effectively stops
the operation of the Decree 60;
Second, the Law on Investments 2014 is not clear on the scope of its application. As a
result, domestic enterprises, local investors, foreign investors in the stock market in
Vietnam, and the regulators, being the State Securities Commission, the Ministry of
Finance, cannot have a correct answer to the following question:

Do the Law on Investments 2014, particularly, Articles 23, 24, 25 and 25 of this law,
apply to domestic enterprises, local investors, foreign investors when they buy shares in
listed companies, or when they invest in securities investment funds and securities in
Vietnam?
[if the answer were yes, the whole stock market in Vietnam would stop working].
We suggest that:
-

The Government urgently pass the lists of sectors and business lines, which require
conditions for foreign investments and set out clearly FOLs applicable to each of those
sectors and business lines; and
The decree to interpret the Law on Investments 2014 to be passed by the Government
should clearly state as follows:

Investments in public companies, investments in securities investment funds and

securities in Vietnam will be governed by the Law on Securities and relevant
regulations.
3. Coordination between the State Bank of Vietnam and the Ministry of Finance to govern
the foreign indirect investment capital in securities market
Foreign investors when investing in the Vietnam securities market have not only to comply
with regulations on securities and securities market set forth by the Ministry of Finance
(MOF) but also to comply with regulations on foreign exchange management set forth by the
State Bank of Vietnam (SBV). However, there have been various instances of lacking /poor
coordination between the two ministries leading to difficulties for foreign investment in
securities markets. Key issue is that when the regulations on securities and securities
market becomes more and more flexible and adaptive to the international investment
practices, SBVs regulations do not move in the same pace with changes in the market in
general and the securities market in particular. More specific, we would like to discuss on
account structure for foreign indirect investors having multiple securities accounts at a
custodian bank, allowing additional indirect investment accounts at different custodian
banks for foreign investors being government investment institutions, inter-government
institutions and simplification of account opening document & market access documents
for foreign investors. These issues are currently having great impacts on foreign
investment activities and are very much in need of cooperation between the SBV and the
Ministry of Finance. Details of these issues will be demonstrated in Part 2.II.2 of this paper.
4. Pension Funds
We appreciate the effort of the Ministry of Finance (MoF) in preparing the draft Decree on
the pension funds. We very much hope that the draft Decree will be submitted to the
Government in August this year under the current schedule, and be soon passed by the
Government so that the market participants will be able to establish the pension funds at
the earliest.
Page 2 of 12

Capital Markets Working Group Talking points with SSC

Vietnam Business Forum, 2015

We particularly appreciate the Governments effort to set up a legal frame work for the
pension funds for following reasons:
- these funds will provide a significant demand for the financial market and privatization;
- the capital invested in the pension funds will be used to re-invest in the Government
bonds (our research shows that, according to the international practice, 40 to 60% of the
assets of pension funds are invested in the Government bonds. This practice is also
reflected in the draft Decree on pension funds). The capital invested in the pension
funds will also help reducing the investment in Government bonds by commercial
banks, which is currently at the alarming level (the commercial banks currently hold
83% of the total issued Government bonds as at the end of 2014);
- the establishment of the pension funds will also help to reduce the pressure on the
current Social Security Fund (SSF). The SSF has been going through many changes
(including amendments on the Law on SSF) to ensure that it will sustainably grow and
not make losses. The pension funds will also provide Vietnam with an advanced social
security platform, being multi-tiered system, which is well recognized to enhance
benefits for employees; and
- the pension funds will enhance benefits for their members as there is no contribution
limit in those pension funds (as opposed to the limited contributions to the current SSF).
To our understanding, the MoF is now completing the draft Decree on Pension Fund (Draft
Decree). However, we also understand that the Ministry of Labours, Invalids and Social
Affairs (MOLISA) has been also drafting a similar decree on pension fund.
We suggest the Government check and give clear instructions on which ministry is in
charge of preparing such a decree so that the decree on pension fund could be finalized and
passed at the earliest.
We understand that Article 19 of the Draft Decree (prepared by MoF) allows pension funds
to invest in corporate shares and bonds. In our view, those provisions will create significant
risks for pension funds.
For this very beginning stage of pension funds, we suggest that the funds should only be
allowed to invest in:
- Government bonds;
- Securities Investment Open-End Funds;
- Term deposit;
- Other open funds meeting the MoFs requirements.
Our suggestion is based on the following:
- Pension funds would be on the safe side when investing in government bonds and funds.
Investments in open-end funds are safer compared to direct investments in shares as
risk allocations often exist in open-end funds. As the large institutional investors
participation in the stock market in Vietnam is still limited, investments in open-end
funds would reduce the downside caused by the markets volatility.
- Investments in open-end funds are also consistent with the current tendency in
developed countries, which promotes investments in regulated financial products.
Particularly, open-end funds in Vietnam have been subject to investment restrictions
similar to UCITS (Undertakings for the Collective Investment of Transferable Securities).
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- Finally, a schedule gradually loosening investment restrictions for pension funds in the
future would ensure a stable and healthy development of pension funds during its
inception, and build up trust from investors.
PART 2 OTHER ISSUES
I - Pending issues from the Meeting on May 2015
1. Allowing right trading in stock exchanges
Practice/Reason for the change
Transactions of the rights of listed shares are being executed between the investors in OTC
market during one month and a half or two months from the record date of the event to the
subscription date. The transfer of the rights is made through the VSDs system.
In many markets, the rights are traded as securities via the trading system of stock
exchanges.
Recommendations
We propose the SSC to consider allowing right trading via the system of stock exchanges.
2. Removal of pre-funding requirements and enhancement of risk mitigating measure in
securities trading
Practice/Reason for the change
While there is no doubt that the requirement of pre-funding serves the purpose of keeping
failed trades to a minimum, it is inefficient from the perspective of foreign investors. In
most markets, foreign investors have to fund their accounts in the market on the
settlement date, whereas in Vietnam accounts have to be funded 3 days prior to settlement
date in the case of equity trades. This prevents effective utilization of investors assets and
lowers the returns generated.
In addition, this requirement has created a manual process in the market wherein brokers
have to confirm sufficiency of balances in investors accounts with custodians. This is done
via phone callsand is a risk-prone process as several brokers could be calling custodians in
a very short window of time. As volume of trading grows, this risk will only increase.
Recommendations
We recommend the SSC to replace the pre-funding requirements with other risk mitigating
measures (i.e. CCP with a settlement guarantee fund and a CCP driven buy-in mechanism)
for the cash equities market to begin with and not wait for a derivatives market to be
established.
In case our recommendation cannot be implemented in the near future, we propose that
the VSD should leverage its new gateway to allow brokers to confirm balances in an
automated manner. Custodians could be asked to upload cash and securities balances into
a VSD run database to which the brokers could connect and block balances real-time.

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3. Ensuring meeting materials and final voting items are sent to shareholders along with
the meeting invitations for annual/extraordinary shareholder meetings
Practice / Reason for the change
Clause 4.2 Article 7 Circular 52/2012/TT-BTC on Information disclosure in securities market
stipulates that: Such public company shall publish on its website all documents regarding

the annual/extraordinary General Shareholder's Meeting: meeting notices, proxy

designation forms, agendas, ballots, discussion documents as the basis for decisionmaking and draft resolutions on each issue set forth in agendas and send notices of such
meeting and guidance on logging on the website on such meeting and documents regarding
such meeting to shareholders fifteen (15) working days at the latest prior to the
commencement of such meeting.
However, per our observation, issuers usually send the meeting invitations within the above
timeline; meanwhile, meeting materials are sent to the shareholders much later (usually
no sooner than 5 days prior to meeting date, or even later). In many cases, the voting items
stated in the meeting materials (sent to the shareholders earlier) are changed/added
during the meeting without any prior notice to the investors.
These have been causing many difficulties to investors, especially for foreign investors and
their proxy, due to the 2 following reasons:
- Due to language barriers, foreign investors must wait until the meeting materials to be
translated into English so that they can read, understand and decide their votes. In
most of the cases, foreign investors must rely on their depository members to obtain
English version of such documents. Late dispatch of the meeting materials will not
allow foreign investors/depository members to have sufficient for all these steps.
-

Foreign investors are usually not able to physically attend the meetings to cast the
votes, but authorize their proxy to vote on the items specified in the meeting materials
they received before the meetings. Late dispatch of the meeting materials or sudden
changes of voting items with no prior notice would not allow foreign investors to
prepare the authorization for their proxy as well as provide the voting instructions to
their proxy.

Recommendations
We recommend the SSC to stipulate new sanctions for this violation in relevant regulations
to enforce public companies to strictly comply with the stipulations on information
disclosure as mentioned above, and amend Article 3 Circular 121/2012/TT-BTC to specify
the shareholders rights/public companys obligations to receive/provide full information of
the meeting, including meeting materials, final voting items, draft resolution, etc. at least
15 days prior to meeting date. This timeline is also in compliant with relevant stipulations in
Circular 52/2012/TT-BTC on Information disclosure in securities market.
4. Procedure for handling collaterals being securities in transactions of commercial
loans with the involvement of the VSD
Practice/Reason for the change
In VSDs new rules on securities registration issued in March 2015, it is stipulated that in
case the borrower and lender authorize the VSD to be the intermediary to manage the
collaterals, the dossiers and procedure for handling of the pledged securities would be
subject to the contract signed by the VSD with the 2 parties. This new rule has drawn the
attention of many foreign investors (being financial institutions) looking for involvement in
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commercial loans with collateral securities in Vietnam but still concerning about the risks
arising during the handling of the pledged assets. However, currently, detailed guidance for
this case is not available so that the new rule can be implemented in practice.
Recommendations
We recommend the SSC/VSD to provide detailed guidance on the procedure for the abovementioned cases to support commercial loans of foreign investors in Vietnam.
5. Electronic system for proxy voting (E-voting)
Practice/Reason for the change
We appreciate VSDs proposal on an electronic system for proxy voting to support investors
in exercising their voting rights in Vietnam. For a country with stretching geography and
more than 31 million internet users like Vietnam, local investors also benefit from e-voting
system. Korea, Taiwan and India are few examples of using e-voting systems.
The new Law on Enterprises has also introduced new provisions being the very first legal
base for the operation of such e-voting system.
However, this is a brand new system and its inauguration may reveal technical issues of the
system its own or issues from depository members sides (due to the limitations of their
systems, techniques, operational processes, internal policies, information security,
limitation on human resources, etc.) Therefore, the members do need sufficient time for
comprehensive preparation before the inauguration of e-voting system.
In addition, the investors also need sufficient time to study and prepare to contribute
comments to the design of the system, as well as prepare to participate in the voting via evoting system in Vietnam.
Recommendations
We would propose the SSC and the VSD to share with the members and investors further
details on the proposed operating model of e-voting system and VSDs draft rules on voting
activities via this system, so that the members/investors can contribute consistent,
comprehensive, useful comments to VSDs draft rules.
6. Odd-lot transactions via HOSE system
Practice/Reason for the change
Currently, the process of odd-lot trading in Vietnam market is actually inconsistent. For
securities listed on HNX, investors can carry out odd-lot transactions through the stock
exchanges system and make settlement through VSD system which is similar to round-lot
transactions. However, for shares listed on HOSE, odd-lot transactions are still executed
off-exchange, the investor will have to sign a contract with a securities company or the
issuer. Settlement processes for cash and securities for odd-lot transactions of securities
listed on HOSE are completely separated and depend on the agreement between the buyer
and the seller. Regarding securities settlement, investors will have to prepare and submit
dossiers for transfer of odd-lot securities through VSD as per stipulated process.
For foreign investors who do not have a commercial representative in Vietnam, the biggest
difficulty in the preparation process for transfer of odd-lot shares is the title verification for
authorized signatures. In many cases, proving the legality and validity of the odd-lot
transactions of listed securities on HOSE and completing the transfer procedures via the
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VSD system are very expensive compared to the value of the odd-lot transactions and very
time consuming due to the notarisation/consularissation procedures.
Many investors when carrying out odd-lot transactions have requested to write-off their
ownership of odd-lots securities. However, the legal framework in Vietnam market has not
provided any stipulation on write-off securities ownership.
Recommendations
We recommend the SSC and HOSE to consider including odd-lots trading in the existing
trading system (which is similar to odd-lot transactions via HNX system) at the soonest to
reduce the trading costs and minimize difficulty on execution of odd-lot transactions of
securities listed on the HOSE.
At the same time, we also recommend the SSC to consider approving a mechanism
allowing investors to write-off ownership of odd-lot securities. These securities can be
transferred back to the issuer without any payment obligation or transferred to a joint
account at the VSD to be centrally handled by the VSD, the issuers or securities companies.
II. Recommendations and other issues needed further guidance from the SSC
1. Difference in application documents required to open trading accounts at securities
companies for foreign investors having securities account at custodian bank
Practice/Reason for the change
As stipulated in Article 48, Circular 210/2012/TT-BTC dated on 31 November 2012 of
Ministry of Finance guiding on opening trading accounts, dossiers to open trading account
at securities companies including a trading account opening form and an account opening
contract. In accordance with Clause 1 Article 7 of Circular 74/2011/TT-BTC dated on 1 June
2011 of Ministry of Finance (Circular 74), investors shall take responsibility to provide
sufficient and accurate information when opening trading accounts. The draft Circular
replace Circular 74 also supplement and clarify further clients information provided by
investors being identity information(Clause 1 Article 7). In fact, according to feedbacks from
foreign institutional investors having securities accounts at custodian banks and trading
accounts at securities companies, each securities company requires different supporting
documents for trading account opening applications. Supporting documents may vary but
basically include (i) copy of securities trading code (STC), (ii) identification documents
similar to those of securities trading code application (iii) possibly FATCA documents. In
some cases where foreign investors are investment funds, some securities companies
require each fund to submit separated document; however, some other securities require
opening account dossiers submitted at fund management company level (i.e. all funds
under the umbrella of the same fund management company shall collectively submit 01
application dossier). Therefore, in case securities companies require for many supporting
documents, the time span for opening account could be extended to several weeks/months.
Recommendations
We propose the SSC to guide a standard required application documents to open securities
trading accounts for foreign investors at securities companies.

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2. Issues related to coordination between the SBV and the Ministry of Finance to
navigate difficulties for foreign investors coming into Vietnams security market
2.1
Account Structure for foreign indirect investors having multiple securities
accounts at a custodian bank
Practice/Reason for Change
There are foreign investors being foreign governments/global investors with a diversified
range of investment portfolios managed by multiple specialized fund managers. In
accordance with certain laws and regulations on portfolio asset protection, these clients
and their fund managers must segregate the assets, e.g. segregation of equities and
Government-bond portfolios. Thus, these foreign investors have the need to open multiple
cash and safekeeping accounts in order to segregate the fund and the assets of each
portfolio.
Circular 05/2014/TT-NHNN dated 12 March 2014 allow only ONE indirect investment
account in VND for one foreign investor.
Circular 05/2015/TT-BTC dated 15 Jan 2015 allow the flexible custody account structure,
under which each foreign investor shall open 01 custody account at a custodial
bank/custodial member, and under each custody account, the foreign investor can open
multiple custody accounts for different investment purposes. This flexible custody account
structure allows the investor to segregate multiple portfolios. In addition, Circular
123/2015/TT-BTC, guiding on foreign investors activities in Vietnamese securities market,
increases more flexibility by allowing government investment institutions and intergovernment investment institutions having separated investment portfolios to be granted
one securities trading code for each portfolio at a custodian bank. For each granted STC,
these institutions shall open one respective securities account at a custodian bank.
Hence the restriction of ONE indirect investment account for one foreign investor may (1)
not meet the eligible needs/requirement of portfolio separations for big investors with
sophisticated portfolios, (2) not be in consistent with flexible custody account structure and
(3) cause challenging for existing process of trade balance confirmation/trade settlement in
case eligible investors open multiple custody accounts and can only open one VND account.
Please kindly note that the current structure of one client master ID with multiple VND
accounts under such master ID in the system of custodians still ensure the funding flow
management and reporting requirements separately for each foreign investor, meeting
SBVs expectation in this regard.
Recommendations
We recommend the SSC/MOF to give comments to the State Bank of Vietnam to allow
flexible VND account structure with multiple VND accounts for foreign investors, provided
that the banks can monitor/report the funding flow in/out for each investor separately,
meeting SBVs expectation from Foreign exchange management perspective, and
meanwhile, in line with the flexible custody account structure and multiple trading codes
for big foreign investors.

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2.2
Allowing additional indirect investment accounts at different custodian banks for
foreign investors being government investment institutions, inter-government
institutions
Practice/Reason for the change
We are highly appreciated the effort by the SSC and the MOF to issue legal framework
which has been increasingly closer to the international investment practices, including the
regulation allowing foreign investors having segregated investment desks, investment
portfolios to have multiple STCs and multiple securities accounts respectively.
Old Circular 213/2012/TT-BTC previously allowed foreign institutional investors being
foreign brokers, multiple-investment-managers funds having more than one STC to
separate their different investment portfolios. Recently, Circular 123/2015/TT-BTC, guiding
on foreign investors activities in Vietnamese securities market, increases more flexibility
by allowing government investment institutions and inter-government investment
institutions if having separated investment portfolios shall be granted one securities
trading code for each portfolio at a custodian bank. For each granted STC, these institutions
shall open one respective securities account at a custodian bank.
However, according to the existing foreign exchange regulations, each foreign investor is
allowed to open only one foreign indirect investment capital account at a licensed bank and
all cash transactions related to foreign investment operation in Vietnam must be conducted
via this account. Due to the segregation of investment portfolios of foreign government
institutions and inter-government investment institutions, the usage of the same indirect
investment capital account in a bank for different portfolios custodized at different
custodian banks will cause big difficulties in monitoring cash flow and investors assets.
Additionally, transactions to be done via cash account and deposit securities account shall
require a complicated confirmation processes between the bank having indirect investment
capital account and the bank having securities account.
At present, despite of the fact that securities regulations become more and more open,
flexible to the international investment practices, the foreign exchange regulations by the
State Bank of Vietnam do not support foreign investors to remove this existing barrier when
investing in securities market.
Recommendations
We recommend the SSC/MOF to give comments to the State Bank of Vietnam to remove
such barrier for of foreign investment activities in Vietnam market, i.e. to allow foreign
investors being government investment institutions and inter-government institutions to
open additional indirect investment capital accounts corresponding to each additionally
granted STC/securities account at second custodian bank onwards.
2.3 Simplification of account opening document & market access documents for foreign
investors
Practice/Reason for the change
The foreign investor community as well as market stakeholders highly welcome SSCs
efforts on relaxation of market entry document for foreign investors under Circular
123/2015/TT-BTC (removal of (1)consularization request, (2) translation request for
notarized English document; (3) notarized translation for other English documents). Of note,
under Law on Securities and its detailed guidance, the requirement of information slip for

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foreign investors representative including information of his ID/Passport was removed long
time ago.
Nevertheless, when opening cash account at banks, foreign investors are governed by
Circular 23/2014/TT-NHNN, on opening and using transactional accounts at payment
service providers which requires notarized translations of account opening documents and
notarized/consularised/notarized translated copy of ID/PP of account owners. This SBV
requirement prevents the application of document relaxation under Circular 123. In
addition, Circular 23 also requires a written authorization to use an account, together with
the registration form of specimen signature and a copy of identity card or valid passport of
the authorized person. According to international practice, large institutional investors and
global custodian banks only send requests and instructions to custodian bank in Vietnam
via registered SWIFT address, in order to ensure optimal accuracy of instructions and
requests. These organizations do not use any written requests/ instructions to
communicate with custodian banks in Vietnam. Therefore, the requirement to provide
written authorization, registration of specimen signature, copy of ID card/passport of
authorized person cannot be applicable to clients using SWIFT message.
Recommendations
We do hope that SSC/MOF can help us to discuss with the State Bank to ensure consistent
improvement of document requirements for foreign investors, including: (1) Remove
requirement of providing ID/passport of legal representative or authorized representative of
the account holder, (2) Remove the requirement to translate notarized English documents,
(3) Remove the requirement to translation any other English documents, remove the
requirement of legalization for copied documents, (4) Remove the requirement to provide
written authorization, registration of specimen signature, copy of ID card/passport of
authorized person in case client uses SWIFT message.
3. Further guidance from the SSC is needed regarding regulations on security market
3.1 Funds investment cap
3.1.1 Application of the investment cap for investments in money market instruments
In accordance with Circular 183 (Article 15.2.b), assets that an open-ended fund can invest
in consist of: money market instruments, foreign exchange, commercial paper and
negotiable instruments in line with prevailing banking laws and regulations.
The existing banking regulatory framework does not provide any official definition of money
market instruments. However, according to Circular 224 (Article 9.2.d) and Circular 229
(Article 14.2.a), which provide regulations on the eligible portfolios of private equity funds
and ETF funds, these funds may invest in money market instruments, including
commercial paper and negotiable instruments in line with prevailing banking laws and
regulations.
Here, we hope to receive SSCs elaboration on the definition of money market instrument
in Circular 183 to allow supervisory banks (SBs) to monitor the performance of openended funds.
3.1.2 Identification of corporate groups having cross-ownership relationships for
application of the 30% investment cap
According to Article 15.4.b, Circular 183, Funds must not invest more than thirty percent
(30%) of their total asset value in instruments referred to in (a), (d), (d), (e) and (f),
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paragraph 2 of this Article, issued by a company or corporate group having crossownership relationships, out of which, the portion of investment in derivatives must equal
the committed value of the contract as determined in Appendix 13 of this Circular.
Circular 183 however neglects to provide a definition of corporate groups with crossownership relationships. Nevertheless, Circular 229/2012/TT-BTC and Circular
224/2012/TT-BTC did provide a definition corporate groups with ownership relationships
are corporations having relationships between a holding company, subsidiaries, joint
venture companies and affiliates. We understand SBs may refer to this definition to
conduct supervision of the adoption of the 30% investment cap by open-ended funds.
Additionally, when a managed fund invests in a state-owned enterprise that has gone
public, where the government holds the controlling equity (more than 50%) and may exert
influence on the issuer, how should the 30% cap be monitored? Can SBs rely on the agent
representing the state ownership (e.g. SCIC or the provincial level People's Committee) to
do this?
Moreover, in its monitoring role, a supervisory bank can only capture information on
corporate groups with ownership relationships through the website of the issuer or
brokerage firm (if any).We look forward to receiving SSCs instructions on the reliable
sources that SBs can use to gather necessary information in monitoring compliance with
the statutory cap.
3.2
Regular reconciliation between SBs/counterparty bank and fund management
company (FMC)
In accordance with Article 24.4, Circular 212, In case of investment or contribution of
equity, or trading of assets, equity and non-listed shares on a fiduciary basis, fund
management companies must retain the originals of contracts, incorporating and operating
licenses or business registration certificates (if any), shareholder book or deeds of asset
ownership at depository banks or supervisory banks, to allow these institutions to conduct
regular reconciliation with the recipient of the investment fund. As no specific frequency
for reconciliation is given, can SBs/counterparty banks understand that it can be agreed
upon between the SB/counterparty bank and FMC?
3.3
Monitoring scope of SBs related to the rules and methods to determine the net
asset value of a Fund
In accordance with relevant regulations (Article 37.1a Circular 183, Article 29.2a Circular
224, Article 23 Circular 229), the monitoring scope is limited to the operations of the fund
management company related to the funds that a bank performs monitoring on. In its
monitoring role, the supervisory bank must:
a) Work with the fund management company to review on a regular basis internal
procedures related to the rules and methods to determine the funds net asset value;
examine and monitor the determination of the funds net asset value; and make sure that
the net asset value of a fund unit is determined properly, accurately and in compliance with
applicable laws and the funds Articles of Association.
Speaking of working with an FMC to regularly review internal procedures related to the
rules and methods of determining the funds NAV, as we understand, a SBs responsibility
should be limited to making sure that valuation to determine the FMCs NAV is consistent
with the funds valuation handbook, rather than extended to determining the
appropriateness or accuracy of the valuation method.
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3.4

Revenue and spending management, settlement and monitoring investment

activities
According to the current laws (Securities Law and Circulars related to managed funds,
Circular 224, Circular 183 and Circular 229), SBs are responsible:
-

To perform revenue and spending management, settlement and transfer of cash and
stock related to the funds operations based on legitimate requests of the FMC; monitor,
ensure the legitimacy, and only execute payment from the funds assets, and for
expenses that comply with applicable laws and the funds charter; monitor the funds
investment activities and asset transactions, in line with applicable investment and
lending restrictions defined by law and the funds charter, among others;

Where infringements of the law or the funds charter are found, the SB must
immediately report SSC and FMC within 24 hours following the discovery, and at the
same time demand corrective or remedial actions within a specified time line.

In the principle of the law, SBs have the liability to report once they detect any misconduct.
To that end, we understand that this monitoring role (including cap, purpose of investment
and compliance with existing law monitoring) should be guided by post-transaction rules
(after a transaction is completed and after the net asset value determining period), with
notification made to the FMC and SSC after misconducts are detected.
We must also note that post-NAV check is a common practice for investment cap
verification and monitoring, because in almost every case, cap-related wrongdoings may
only be monitored after the transactions and NAV determining period have completed (for
example with listing transactions, SBs only have the information after the transaction has
successfully completed at the Stock Exchange, and most investment caps are developed
based on the funds NAV and can only be determined after NAV determination has
completed).
We need SSCs elaboration on this issue and our understanding related to SBs to be able to
effectively monitor the funds activities.

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CONSULTATION MEETING BETWEEN THE STATE SECURITIES COMMISSION AND

CAPITAL MARKET WORKING GROUP - VIETNAM BUSINESS FORUM

- Time: 14:00 17:00, Oct. 27, 2015

- Venue: Room 403, Securities Commission headquarters, 164 Tran Quang Khai, Hanoi
I. KEY CROSSCUTTING ISSUES
1. Partial privatization of state-owned enterprises
Mr. Kien Nguyen, Capital Market working group
- While the Capital Market working group (CMWG) welcomes the Prime Ministers
Decision 51, which mandates companies going public to be listed, what is going on in
real life seems very disappointing.
- The government needs to take bolder steps to translate policies to actions with these
companies.
Response by Mr. Nguyen Thanh Long, Vice Chairman, State Securities Commission
(SSC):
The government is now drafting Decree 108 on administrative penalization. CMWG's
comment is duly noted.
2. Decree No. 60/2015/N-CP enlarging foreign equity
Mr. Kien Nguyen, Capital Market working group, VBF
- The Ministry of Planning and Investment (MPI) has responded positively to our
recommendations regarding the adverse restrictions of Decree No. 60/2015/N-CP.
- There are two points related to foreign ownership here:
Applicability to foreign investors and foreign investors ownership in these
conditional investment sectors.
Investment Law of 2014: a clear line should be drawn on the applicability of the
Investment Law and Securities Law. Are investments in public companies, managed
funds and stock subject to the provisions of the Investment Law?
Mr. Nguyen Thanh Long, Vice Chairman, SSC
- MPI is only authorized to assemble a portfolio from existing rules of different sectorspecific laws, not to make a new list.
- MPI has been discussing with SSC on how to divide more clearly between investment in
equity markets and investments that are subject to investment laws, and has reached
agreements on how the inefficiencies of Article 23, Decree 60, should be addressed, and
not just in relation to recipient of investment capital, i.e. listed companies trading on
stock exchanges, but individual investors.
- The Ministry of Finance has also had in place draft implementing documents for Article
23, Decree 60.
Response by Mr. Do Van Su, Head of Foreign Investment Division, Foreign Investment
Administration, MPI
- List of conditional investment sectors for foreign investors:
Basically, the Investment Law seeks to regulate foreign investors based on
international treaties that Vietnam is a party to, as well as applicable local laws and
regulations on foreign investors access to local markets.
When it comes to application of international treaties, it is a common rule that
international agreements come before local laws, and take effect directly without

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the need for implementing documents. Only a few key clauses of international
treaties are translated to local laws through sector-specific laws.The bottom line is
international commitments will take effect directly.
As access to information by local governments is still limited,there is a need for a
pathway to create opportunities for public officials to have access to sufficient
information to ensure consistency in enforcement.To that end, national level
agencies need to gather and compile a summary list.
Time of publication:the plan is after the government releases Decree No.
60/2015/N-CP, we will publish the list on the national portal for foreign investment.

Investment Laws scope of coverage for stock markets:

Article 23 has established that securities laws are to be adhered to, and the Ministry
of Finance will be responsible to provide operating guidance for publicly traded
companies, brokerage firms and listed companies, which will follow the rules of
foreign laws rather than the Investment Law.
The Ministry of Finance will promptly release detailed guidance to avoid any imprint
on investments on stock markets.

Mr. Kien Nguyen, Capital Market working group

- Could SSC let us know if there is a plan to release an implementing document for
Decree 60 and an implementing Decree for the Investment Law, which elaborate on the
parts under the jurisdiction of SSC?
- Through discussions, CMWG understands that the upcoming list of conditional lines of
business to be released by the MPI will include also conditional lines of business which
are not subject to investment restriction and still adopt the 49% ratio.Can SSC confirm if
this understanding is correct?
Response by Mr. Do Van Su, head of Foreign investment division, Foreign Investment
Administration
- For the lines of business eligible to adopt the select and granted rule, international
treaties will apply.But for sectors not included in our investment commitments, as a
rule, Vietnam is not responsible to open up its markets.
- As a general rule, lines of business not included in Vietnam's investment commitments
will be divided into three groups:
Group 1 lines of business that are not subject to international treaties but there
are already applicable local laws, where these local laws will apply;
Group 2 lines of business that are not included in the commitments and there are
no applicable local law, but permission has been granted to foreign investors, where
the market will continue to be opened to these business lines;It is estimated that
there are about 125 business lines of this type.
Group 3 lines of business that are not listed in the above two groups, where the
regulatory agencies of the relevant investment sectors will consult specific
ministries in charge on what ruling to apply, and notify MPI for update on the
national portal.
- A second rule applies in case of investors who are subject to other international
treaties, where these investors only need to adhere to the provisions of such standalone international treaties without consulting relevant ministries or line agencies.
Response by Mr. Nguyen Thanh Long, Vice Chairman, SSC
- Regarding individual foreign investors, SSC, Ministry of Finance and MPI have agreed on
the bottom line to be integrated in the draft Circular replacing Circular 74 to provide
clear regulations in this respect.
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But there is a fact that for listed companies, changes in foreign ownership ratios are
impossible to keep track of.So we need some specific rule for this.Thus, SSC has
integrated this rule in the draft Circular that will replace Circular 74 for the Ministry of
Finance to consider.

3. Collaboration between the State Bank and Ministry of Finance in the management of
foreign portfolio investment in the stock market
Mr. Kien Nguyen, Capital Market working group
There is a need for more tightened and effective collaboration between the State Bank and
Ministry of Finance in releasing securities-related guidelines to avoid overlaps and
inconsistency between these two guidelines.
Response by Mr. Nguyen Thanh Long, Vice Chairman, SSC
SSC duly takes notes of this issue, and may continue working with CMWG in discussions
with SBV where there is an opportunity to do so.The working group can also take the issue
and solutions directly to SBV for consideration.
4. Voluntary pension fund
Mr. Kien Nguyen, Capital Market working group
- Pension funds are only allowed to add to their portfolios regulated products.
- There is no ruling on how taxes will apply when foreign investors transfer funds from
existing schemes to newly established funds in line with the provisions of the Decree
being drafted.We would appreciate if the Ministry of Finance considers granting tax
exemption for these fund transfers.
Response by Ms. Pham Thanh Tam Manager, Finance-Banking Department, Ministry of
Finance
- The Ministry of Finance recognized CMWGs comments on how investment portfolio
expansion should be done in a viable manner, and the draft Decree it submitted to the
government for release has established that investments are only allowed with stock
certificates and Government bonds.
- In the making of the Decree, the Government Office has simultaneously consulted both
the Ministry of Finance and Ministry of Labor-Invalids-Social affairs.Recently however,
the Prime Minister has advised the Ministry of Finance to quickly finalize the draft
Decree on voluntary pension funds, providing in details eligibility criteria to do business
for voluntary pension funds, similar to conditional business lines, to be referred to the
government within December.
- The Ministry of Finance will take this discussion into account for update of the draft
Decree regarding guidance on tax transition between voluntary pension funds.
II. SPECIFIC ISSUES
A. Pending issues from the May 2015 meeting
1. Allowing stock option trading on stock exchanges
Ms. Thuy Bui, HSBC Bank
- The working group welcomes the ruling on stock option trading:release of ISIN numbers
for call options has been made specific in Circular 05 and various implementing
documents related to the Stock Depository.
- We would appreciate if SSC considers allowing these options to be eligible for formal
trading on stock exchanges systems.

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Response by Mr. Nguyen Son, head of the Market Development Department, SSC
- Segregation between 1-2 month short-term stock options and 6-9 month warrants is
needed.
- SSCs suggestion is that warrants will adopt procedures for normal listed
trading.Currentprocedure:option owners may sell their options through brokerage
firms, and then initiate normal settlement procedures.This is because options have
short life cycles, while procedures related to issuing entities, consulting firms, listed
companies and so on are many and complicated.
- About CMWGs recommendation:as impracticable at the present as it is, it is quite
feasible in the long run when new systems are available.
2. Improving risk mitigation for securities trading instead of requiring margin/advance
Ms. Thuy Bui, HSBC Bank
We suggest that SSC considers replacing the margin/advance mechanism with other
hedging tools.
Response by Mr. Nguyen Son, Head of the Market Development Department, SSC
- Circular No. 74/2011/TT-BTC now allows sales of en-route securities, or relieves
investors of the margin liability at the time of placing orders without guaranteeing
sufficient settlement capacity on the day of transferring funds to the system.
- The Depository is working on better ways to handle liquidity risk and other concerns,
including sales of en-route stock, use of stock borrowing/lending systems and so on,
which will also be taken into consideration in the drafting Circular replacing Circular 74.
3. Ensuring meeting documents are sent to shareholders at the same time with the
invitation to annual/adhoc shareholders meetings
Ms. Thuy Bui, HSBC Bank
- While this has been made quite clear in current rules, most foreign investors have
reported that meeting documents are often not enclosed with invitation, and even if they
are there, most of these documents are in Vietnamese, making it hard for foreign
investors to understand what they are about.We hope that SSC has in place better
enforcement solutions and monitors compliance more effectively.
Response by Mr. Nguyen Son, head of the Market Development Department, SSC
- The Ministry of Finance has released Circular No. 155/2015/TT-BTC in lieu of Circular
No. 52/2012/TT-BTC, where no longer than 10 days before the annual general meeting
starts, information related to the meeting must be fully disclosed.Wealso specifically
made clear that any changes to the documents pertaining to shareholders' meetings
must be kept up-to-date on websites.
- If changes are at too short notice prior to the meeting commencement, the documents
may still be accurate but there will be no time for translation and distribution to foreign
investors.
- SSC recognizes the working groups recommendations and will reflect them in the draft
Decree revising Decree No. 108/2013/N-CP on civil penalty related to securities
trading.
4. Handling stock collaterals in pledging, mortgaging and depositing with the
involvement of VSD
Ms. Thuy Bui, HSBC Bank
The Stock Depositorys rules introduce a very new point, allowing pledging and mortgaging
parties to enter into direct agreements with VSD, or offering collaterals to obtain loans
from Vietnamese credit institutions.However, we will need more specific guidance on this.
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Response by Ms. Phuong Hoang LanHuong, Vietnam Stock Depository (VSD)

- VSD plays a middle role in collateral management in the relationship between banks,
and has actually worked on this with a number of banks.
- Each bank, however, has their unique systems and needs.As a result, specific
implementing challenges have emerged, e.g. which laws should apply.We suggest using
Vietnamese laws, because obviously, asset relationships and transactional relationships
occur in Vietnam.
- Any banks with interest or queries may directly get in touch with us for information.
5. Using electronic voting systems to help investors exercise their voting rights
Ms. Thuy Bui, HSBC Bank
The working group hopes that the electronic voting system is quickly installed in the near
future and that SSC and VSD share more on how the system is expected to work, to allow
invsetors to do some homework and make better contributions to ensure that the system
functions more smoothly and successfully.
Response by Ms. Phuong Hoang LanHuong, Vietnam Stock Depository (VSD)
- VSD has set the process in motion and made steps to accelerate the progress so that
the system can go live in the 2016 shareholder meeting season. This is an add-on
service rather than a mandatory public service that VSD offers.
- In the process, emerging issues will also be considered, for example, what to do in case
of voting through emails prior to the meeting and then new proposals are passed in the
meeting.
- Legally speaking, enterprise laws have addressed and formalized electronic voting, but
the Ministry of Planning and Investment has not introduced any implementing
guidelines for it.
- VSD will set up the system before working with stakeholders to agree on specific
procedures and rules applicable to meetings.
6. Odd lot trading on HOSE
Ms. Thuy Bui, HSBC Bank
We urge that SSC and HOSE consider formalize odd lot trading (similar to the odd lot
trading system on HNX) as soon as possible to minimize costs and challenges in trading odd
lot listed stock on HOSE.
Response by Mr. Nguyen Son, head of the Market Development Department, SSC
- As the current technology used on HOSE is a system built with support from Thailand,
any system intervention is impossible.
- So CMWGs recommendation unfortunately is not viable.
- We expect custodian banks to provide information on international common practices
and rules related to option trading.
B. Recommendations and other issues to be advised by the State Securities Commission
1. Difference in requests on applications for transactional account setup at brokerage
firms from foreign investors having depository accounts at custodian banks
Ms. Thuy Bui, HSBC Bank
We urge that SSC sets uniform rules on a standard sample application dossier for stock
trading account setup by foreign investors at brokerage firms.
Response by Mr. Bui Hoang Hai, head of the Business Administration Department, SSC
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SSC duly takes notes of this proposal and will reflect it in the revision of Circular No.
210/2012/TT-BTC.
2. Allowing foreign investors who are governmental investment organizations and
international intergovernment investment organizations to set up more indirect
investment capital accounts at different custodian banks
Ms. Thuy Bui, HSBC Bank
Circular No. 05/2014/TT-NHNN of the State Bank, related to opening portfolio investment
accounts by foreign investors, establishes that no matter how many portfolios, activities or
trading codes a professional investor may have, he/she may only have one indirect
investment capital account in VND.This makes life very difficult for foreign investors.
Response by Mr. Nguyen Son, head of the Market Development Department, SSC
- The single account rule is unreasonable.While SBVs Circular 05 was designed on the
platform of the 2005 Investment Law, Securities Law and Amendments of the Securities
Law, these very platforms have become rather obsolete and need revising.
- CMWG and Banking working group should jointly raise this issue on the Forum.
3. Issues that need SSCs advice regarding securities-related regulations
Ms. DinhLinh Chi, Standard Chartered Bank
We expect SSC to advise on various securities-related rules, including applying limits for
investment in money market instruments, identification of corporate groups with ownership
relations to apply the 30% investment cap, and regular reconciliation between the
supervising bank and fund management company (FMC).
Response by Mr. Nguyen QuangThuong, Deputy Director, Fund Management Department,
SSC
- Application of investment cap for investments in money market instruments:SSC is
drafting amendments to Circular No. 183/2011/TT-BTC (Circular 183) and will take
into account CMWGs recommendations.
- In respect of identifying corporate groups with mutual ownership relations to adopt the
30% investment cap, SSCs current stand is that the 30% rate has nothing to do with the
governments equity.Accordingly, the information that the supervising bank needs to
gather in monitoring this rate will not change.
- About regular reconciliation between the supervising/counterparty bank and fund
management company (FMC):From the perspective of the Fund Management
Department, how frequent this should be done is similar to reporting.Fund management
companies should look more deeply into this issue.
- About the scope of monitoring by the supervising bank related to the principles and
methods for net asset value determination of the fund, Article 18.4, Circular 183,
establishes that The principle and detailed steps of valuation referred to 3.b of this
Article must be clearly defined and reasonable for uniform application in different
market conditions, and must be verified by the supervising bank and approved by the
representatives of the fund and investors meeting". Custodian banks should look
further into that.
- About monitoring investment activities, with regards to comments that limit abuses may
only be controlled after the transactions have been completed and following the net
asset value determination cycle, actually there may be both ex post and ex ante
monitoring.Specifically which transaction will be subject to ex ante or ex post
monitoring will be provided in the relevant Circulars. For example, NAV determination,
monitoring investment cap based on the net asset value, funds gross asset value and so
on may adopt ex post monitoring, while legitimacy of instructions for release of payment
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from the funds assets, compliance with applicable laws of expenses and so on can use
ex ante supervision.
LIST OF PARTICIPANTS
Name
Nguyen Thanh Long
Do Van Su
Pham Thanh Tam
Nguyen Son
Phuong Hoang Lan
Huong

Title
Organization
STATE SECURITIES COMMISSION
Vice Chairman
SSC
Head of Foreign Investment
Division
MPI
Finance Banking Dept.,
Manager
MOF
Head of the Market Development
Department
SSC
Chairwoman

VSD
Fund Management
Nguyen QuangThuong
Deputy Director
Department, SSC
And Representatives from SSC, MPI and other related agencies
CMWG
Nguyen Thi Thu
Vice President
Bay Global Strategies
Pham Quang Nghia
Country ICG Legal.
Citibank
Le Ha Thuy
Country ICG Compliance.
Citibank
Securities and Market Product
Tran Thi Huong Giang
Dept.
Citibank
Nguyen KhacHai
DCEO
SSI Asset Management
Vietcombank Fund
Nguyen Thi Hang Nga
Portfolio Manager
Management
Dao Yen Nhi
An Binh Bank
Steven Derek Brown
Manager Institutional Sales
SSI Securities Services
Kien Nguyen
Legal Counsel
Dragon Capital
VP, Market & Product
Thuy Bui
Development
HSBC Securities Services
Dinh Linh Chi
Head of CIC Compliance
Standard Chartered Bank
Dang Thi Van Anh
VBF Coordinator
VBF Secretariat
Nguyen Ngoc Anh
VBF Officer
VBF Secretariat

Page 7 of 7

Section III

AGRIBUSINESS,
EDUCATION & TRAINING,
HUMAN RESOURCE,
GOVERNANCE & INTEGRITY

3.1. AGRIBUSINESS

AgriBusiness Working Group Position Paper

Vietnam Business Forum, 2015

AGRIBUSINESS POSTION PAPER

Prepared by
AgriBusiness Working Group

INTRODUCTION
This Position Paper reflects the concerns and issues affecting the international community
in Vietnam involved in Agribusiness. Inputs for this paper have come from the members of
the Vietnam Business Forum (VBF) Agribusiness Working Group, the International Finance
Corporation IFC) and the Food, Agri and Aqua Business Sector Committee (FAASC) of the
European Chamber of Commerce in Vietnam. I would like to thank them all for their time,
effort and contributions.
Several of the issues have been previously brought to the VBFs attention by this Working
Group but they are raised here again because in our view they have not been (properly)
addressed or are still not resolved. This year we have added a part on Food Safety as this is
an important topic in the light of the various Free Trade Agreements that have been
reached. The Government is taking various actions, but considering the high number of
rejections of Vietnamese agricultural products at the border of for example the United
States, Japan, Australia, and the European Union, it apparently is not enough.1
The Position Paper is divided into 4 sections: comments on the Draft Decree on Policies
promoting Foreign Investment in Agriculture, Modernisation and Sustainability of the
Agriculture Industry in Vietnam, other Agricultural related issues, such as Intellectual
Property Rights, Pesticides and Fertilisers and we conclude with Food Safety. You will find
first an executive summary containing a short overview of the various issues in these
sections as well as our recommendations related to that part. After that you will find a
detailed description of these issues as well as what the impact is, but also how we believe
this can be addressed.
EXECUTIVE SUMMARY
1. Draft Decree on Policies promoting Foreign Investment in Agriculture
In our view the Draft Decree is still quite general and lacks specifics in a number of places.
At the same time there is subjective decision-making built into the Decree. Further to this,
the Draft Decree applies only to foreign investment. We wonder why that is the case when
Vietnam has a unified legal system for both domestic and foreign investment (law on
Investment 2014). Important is also that with regard to the agricultural sector, the Ministry
of Agriculture and Rural Development (MARD) is implementing the Agricultural
Restructuring Plan (ARP) which will focus on enhancing private sector investment both
domestic and foreign.
The Draft Decree also issues a list of sub-sectors and refer to the list of locations entitled to
incentives. However, it is not clear what the logic is for providing incentives for such
activities and locations. We suggest MARD conducts a formal investor survey to define the
effectiveness of the current incentives as well as to determine objectively which incentives
are really decisive to attract foreign investors.
Finally, the Draft Decree mentions an investment promotion arrangement which in our view
is very vague and therefore meaningless (Chapter IV). We would like to encourage MARD
1

See Meeting Standards, Winning Markets, Trade Standards Compliance 2015, UNIDO
(www.unido.org/tradestandardscompliance.html)

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and/or the Task Force (on private sector investment)to define what specific services and
assistance they will offer to an investor.
Recommendations
- Make the Draft Decree more specific;
- Link to investment promotion;
- Enlarge the scope of the Draft Decree and do not limit it to foreign investment;
- Conduct a formal investor survey to define effectiveness of current incentives to attract
foreign investors; and
- Define and specify what specific services and assistance will be offered to an investor.
2. Modernisation and Sustainability of the Agriculture Industry in Vietnam
An issue that prevents Vietnam from being an overall key-player on the agricultural export
market is the lack of sustainability, part of which is stemming from the fact that and that
there are mainly small-holders in agriculture. The latter one prevents the use of machines
which can improve the quality and quantity as the investment costs cannot be borne by a
single small-holder and the size of land is too small to use machines. The Government has
realised that this issue needs to be addressed and is taking measures to attract foreign
direct investment to modernise and mechanise agriculture. It is developing hi-tech
agricultural areas and putting programs in place which will make borrowing money to
modernise and mechanise farming much easier.2 We believe also that the Government
should create incentives that will encourage farmers to cooperate. Businesses can also
play a role by introducing incentives to encourage farmers to further cooperate. We are
aware that mechanisation will increase unemployment in rural areas as many people
depend on agriculture for their daily income and we support the idea of building factories in
rural areas in order to sustain employment in the concerned areas. In order to put this
strategy and these programs in place, money is needed. In recent years investment in
agriculture has not been in line with the contribution agriculture made to the GDP. We fully
support the view laid down in the Vietnam country paper for the FFTC-NACF seminar, that
investments in agriculture are important to ensure food security and sustainable
agricultural development in Vietnam.3 We also believe that a modernised and mechanised
agriculture system will result in an improved quantity and quality of agricultural produce. In
order to achieve this it would be helpful if a level-playing field would be created with regard
to all aspects of doing business in the agricultural sector for foreign companies. Especially
taking into account the expertise and knowledge these companies can bring to Vietnam
which will help to upgrade the sector. In this aspect it is also important to consider the way
the agricultural sector is structured and what kind of products are exported. We believe
there is a need and a possibility to do this. Considering the various initiatives we believe the
Government is already aware of this. It is also important to open up markets to export
Vietnamese products, not only countries like the United States, Japan or the European
Union, but also neighbouring countries. Currently Vietnam imports many products from for
example Thailand or China, but the export to these countries has not been fully utilised yet.
Market access to these and other countries for Vietnamese products needs to be
negotiated.
Even if the level of investment by the Government is not enough, it is still possible to
modernise and upgrade through Foreign Direct Investment (FDI) and Private-Public
2

See (vietnamnews.vn/society/263713/farmers-reap-modern-farming-gains.html)

See Vietnam country paper for the FFTC-NACF International Seminar on Threats and Opportunities of the Free Trade

Agreements in the Asian Region, held in Korea on 11-15 September 2013,

(www.agnet.org/htmlarea_file/activities/20110719103351/2007013101.pdf)

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Partnerships (PPP). To attract more FDI there are several challenges that need to be
overcome, even though the before-mentioned Draft Decree will help when our
recommendations have been taken into consideration. It is for example necessary to create
clear and transparent trade policies and administrative procedures. Furthermore, it is
important that equal access is given to small and large-scale farmers and enterprises.
Finally, it should be noted that the tax system is not as competitive as in the countries in the
region.4 We are pleased with the view of the President that some regions should try to
attract FDI and use hi-tech farming techniques to develop the sector.
With regard to further developing the PPPs we believe that it is important to realise that in
order to continue and maintain this success. In our view the Government should put a
monitoring system and right policies in place to ensure that best practices can be applied
by the farmers in that aspect. We fear that if this does not happen, there is no level-playing
field for all companies involved. The lack of concrete Government policies will in our view
result in companies being discouraged to invest in a PPP despite the positive results of the
PPP.
Another way to improve sustainability of agriculture is providing crop nutrition solutions for
growers by the companies. One of the common activities of companies active in that
industry is organising farmer meetings. These meetings are aimed at transferring
advanced technologies to farmers and help them to understand more about integrated crop
nutrient management which in return will increase crop yield and quality as well as income
and economic return for the growers. The farmer meetings are usually organised at the
village level. However, prior to handling of farmer meetings, a company needs to get
permission from the Department of Industry and Trade (DOIT) at provincial level. We believe
that the implementing process can be simplified and harmonised, because to obtain
permission every time for organising these farmer meetings is quite burdensome and
differs per province. There are also some issues with regard to obtaining permission for a
foreigner to be active in certain areas. In our view this should be simplified as well. This can
for example be done based on the fact that a company already has a distribution license. We
also believe that in case a foreigner has a valid work permitor resident card the
requirement to obtain permission should be abolished. Finally, we have experienced that
occasionally governmental officials and industries are not fully aware of the implications of
new regulations. We therefore believe it would be helpful to organise trainings in to
increase an effective implementation process.
Recommendations
- Upscale the agriculture sector;
- Encourage cooperation;
- Continue to create easier access to financing for farmers and put incentives in place to
stimulate farmers who are willing to modernise and mechanise;
- Support farmers leaving the profession to find another job by encouraging construction
of factories in rural areas;
- Encourage development of more best practices or PPP;
- Develop a monitoring system and right policies in place to ensure that best practices can
be applied by the farmers;
- Create a level-playing field in all aspects by:
giving equal access to financing in and outside Vietnam;
giving equal access to raw materials in and outside Vietnam;
providing equal treatment in obtaining a business license; and
4

See (ap.fftc.agnet.org/ap_db.php?id=106&print=1)

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providing equal treatment with regard to other sector-specific requirements.

- Shift from exporting commodities and low quality products to high-end products;
- Transform by-products into attractive products for export;
Diversify products and give the same support as is done for coffee, tea, pepper, seafood
and rubber;
Encourage investment for production, the post-harvest phase, and the processing and
preserving sectors;
Create market access in neighbouring countries for Vietnamese products.
Simplify and harmonise procedures to obtain permission to organise farmer meetings;
Simplify entry permission for foreigners of companies that have a distribution license;
Abolish the need to obtain an entry permission for a foreigner who has a valid work
permit or resident card; and
Organise trainings for Governmental officials and industries to increase the effectiveness
of the implementation process of new regulations.

3. Quality Agricultural Inputs including Pesticides and Fertilisers

A recent report has indicated that 50% of fertilisers by authorities were off-specification or
sometimes even fake. This report indicates that the loss for the economy is estimated at
USD 800 million. Counterfeit and illegal crop protection products are also on the rise,
creating devastating losses for farmers and the agricultural industry. Counterfeit pesticides
are rarely tested and may contain unknown toxic impurities which may pose risks to
farmers and consumers health. Furthermore counterfeit products can severely damage
crops or can lead to rejection of the produce by food companies due to unwanted residues.
All these factors can put the income of farmers in jeopardy. We believe that stricter
registration and enforcement will allow increasing the potential of Vietnamese products
and exports to the EU market. This in return will increase the position of the Vietnamese
farmers as well.
In our view the lack of leadership activities ensuring safe and proper usage of inputs and
low quality inputs distributed to farmers lead to environmental and safety issues. Good
quality inputs are not affordable to small farmers so they cannot compete with larger
companies. However, the negative impact of it is considerable. Proper use of good quality
inputs will reduce production cost, improve crop productivity/quality and limit the impact of
fertiliser usage on environment. At the same it is important that awareness is created about
the risk of using fake fertilisers and pesticides for humans health as well the impact it has
on the reputation of Vietnamese products for export. Products are often rejected at the
border of other countries for import as they contain too high levels of pesticides or other
harmful chemicals (as a result of using the wrong or fake products). We believe
improvement can be achieved by introducing training programs as well as by sharing the
latest information and technology with farmers. It would also help if a clear distinction is
made between NPK fertilisers and other chemicals with regard to the HS code. We also
think that companies that produce or import high-quality products which are safe for the
environment and the population should be treated differently with regard to licensing
requirements. Finally, we would like to make some remarks on the new regulations on
fertiliser management. They have brought a new wind to the fertiliser market. The aim of
these new law and regulation are to restructure the fertiliser market in Vietnam and
gradually eliminate fake and poor quality products from the market. We welcome this but
the implementation needs improvement as sometimes the result is that companies with
good products end-up in having difficulties. Therefore it is important to use the correct
sampling method to avoid unreliable and false results when on the market.
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Recommendations
- Strengthen IPR protection measures through strict implementation of legal action
against counterfeiters and enforcement at the market place; and seize illegal products
from the market;
- Raise awareness through Governmental mass media communication explaining the risks
for farmers, the population and the economy if farmers use (cheap) fake inputs;
- Apply stricter regulations and market control on poor quality and fake fertilisers;
- Embed IPR requirements in the registration framework to ensure IPR protection starts
from the registration point;
- Implement a strict review of trademark registrations, and enforce removal of me-too
brands, logos, visuals etc.
- Address corruption at the local level and make it more difficult for small input
companies to be opened and closed;
- Introduce education programs to promote balanced nutrition, appropriate product usage
protocols to reduce over-usage of inputs;
- Establish a training program to encourage applying balanced crop nutrition in 4-R
concept (right product, right rate, right time and right place) as well as to tackle the
situation of wrong and/or over-usage of inputs; from that will reduce production cost,
improve crop productivity/quality and limit the impact of fertilizer usage on environment;
- Update the knowledge of extension agents on crop nutrition and plant protection, and the
impact of agri-inputs on the environment in order to implement a training program
effectively;
- Encourage transfer of new knowledge and new research results to farmers as soon as
possible;
- Promote a level playing field by removing import tax for quality compound NPK
fertilisers (fertilisers produced with advanced technology, good performance in the field,
safe to human health, with non or less impact on the environment, etc.) to encourage
import, /production and use of these products;
- Differentiate fertilisers from generic chemicals and allocate an appropriate HS code to
fertilisers to avoid confusion on levy;
- Ensure mandatory leadership programs in all companies with regard to training on safe
crop protection product usage;
- Establish a supporting stewardship infrastructure for safe crop protection product
usage;
- Develop policies to encourage investors to develop quality infrastructure to enable
testing, and monitoring of the quality of farm output.
- Remove the one-time license requirement for companies whose business license
already include import rights
- Remove the requirement that a confirmation letter from the bank is needed for obtaining
permission to import fertilisers into Vietnam;
- Focus on checks on the internal, local market to control the input market in Vietnam;
- Make a distinction in companies that have a license for local production and distribution
and those that only have a distribution license;
- Set up technical barriers to eliminate the use of high-risk pesticides which can harm
human beings and the environment;
- Encourage responsible and ethical management and use of (good quality and safe)
pesticides following good practices in selling products;
- Encourage proper labelling of pesticides in compliance with the provided instructions;
- Establish regulation with specific criteria to encourage the introduction of new-class
crop protection products with advanced techniques and technologies;
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- Put qualified education programs in place for farmers to reiterate the importance and
benefits of proper use of pesticides and following instructions on labels.
- Encourage using the correct sampling method to avoid unreliable and false results; and
- Put in place guidelines which will help following the correct sampling method.
4. Food Safety
Food safety is a major issue for the agricultural sector but also for the population. As the
World Health Organisation (WHO) writes: Unsafe food has been a human health problem
since history was rst recorded, and many food safety problems encountered today are not
new. Although governments all over the world are doing their best to improve the safety of
the food supply, the occurrence of food-borne disease remains a significant health issue in
both developed and developing countries.5
In the first nine months of 2015, the number of reported food poisoning cases was 129,
3.436 people got sick and 20 people died.
Food safety issues not only cause people to get sick, but they also limit the export
possibilities for Vietnam and damage the reputation of Vietnamese products. In 2014 trade
commissions in the European Union (EU), Japan and the United States received many
warnings about seafood shipments containing antibiotic residues exceeding the permitted
level. In 2015 various issues with exports have been reported: exports to Saudi Arabia, the
United States, and Japan.6 From January till now the Rapid Alert System for Food and Feed
(RASSF)of the EU rejected 21 products coming from Vietnam at the border of one of the EU
member states. 17 other products were stopped and further information is needed before a
decision can be taken. In light of the upcoming signing and ratification of various FTAs, it is
important to detect multi-residue levels (MLRs) as competition will be fiercer.7
It is also worth realising that the high levels could be caused by counterfeit and illegal
ingredients or raw material which on top of damaging the reputation of Vietnamese
products also may pose risks to farmers and consumers health.8 Sometimes it also
involves products that are already forbidden for a long time in other countries, but they can
still be used in Vietnam; because they are not forbidden yet, regulations are not clear, or
they are used due to lack of enforcement.9
It is well-known that inadequate post-harvest handling, storage and distribution impact the
rate of success of producing countries and impacts food safety.10 This could partly be
achieved by introducing a Food Safety Agency with one ministry responsible, harmonisation
and coordination of laws and regulation. This would mean less administrative hassle and a
more efficient quality and safety control, which would enable greater stakeholder
involvement.
5

Five keys to safer food manual by the World Health Organisation, see

(http://apps.who.int/iris/bitstream/10665/43546/1/9789241594639_eng.pdf?ua=1)
See (tuoitrenews.vn/business/28078/vietnam-produce-exports-should-meet-food-hygiene-safety-requirements-in-overseasmarkets-ministry)
7
See (http://english.vietnamnet.vn/fms/business/141921/agriculture-sector-faces-tough-times-ahead.html),
(en.nhandan.org.vn/business/economy/item/3044802-agricultural-export-revenue-sets-new-record-of-us$30-8-billion.html),
(vietnamnews.vn/economy/271524/vn-produce-losing-their-edge.html), (vovworld.vn/en-US/Economy/Expanding-exportsmarkets-for-Vietnamese-farm-produce/266152.vov); (vccinews.com/news_detail.asp?news_id=32038) and
(www.vir.com.vn/bright-prospects-for-agriculture.html)
8
See (tuoitrenews.vn/society/26193/toxic-tet-kumquats-highlight-vietnam-s-pesticide-problem)
6

Agribusiness and Food Safety Chapter of the Food, Agri and Aqua Business Sector Committee in the White book 2015 of the
European Chamber of Commerce, paragraph 3.1.5 on legal framework, coordination and enforcement.
10
See Project VIE/61/94, May 2009, page 17 and (www.fao.org/ag/agn/CDfruits_en/launch.html)

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We know that the Government is aware of these issues and is taking initiatives to address
them. In 2013 and 2014, several regulations have entered into force.11 In particular, Joint
Circular 13/2014/TTLT-BYT-BNNPTNT-BCT (Joint Circular 13) is a significant step forward
as it intends to avoid overlapping in food management by the various Ministries, but still this
does not eliminate potential confusions. Also, considering the still occurring issues, it is not
enough yet.
The current system makes it also difficult to have consistency in the process of drafting,
implementing and application of the regulations. It becomes even more complicated
because at a local and provincial level the regulations are sometimes interpreted in
different ways or allow different ways of dealing with for example samples. It can happen
that inspectors come check on three, maybe even four occasions and they check the same
or different things, contra-expertise is sometimes possible, but not always. This all means
that it is quite costly and time-consuming for both companies and government authorities.
This will probably result in higher consumer prices, but not necessarily higher food safety.
We believe that there are various ways to obtain ones goal. The quality of laboratories and
testing methods are also important to improve food safety. We also believe that all
companies should be treated in the same way and the control of products should be the
same before they are allowed to enter Vietnam. Practice has shown this is not always the
case. A recent case also has shown that improvement is necessary, because two tests by
different testing agencies for the same product had different results, and were therefore
inconclusive as to whether the product was safe or not. Sometimes it is also impossible to
perform a test; or products that would improve the visibility of Vietnamese products -can
be legally used within the EU but cannot be imported into Vietnam. This means that the
locally cultivated fruit is compared to fruits produced elsewhere and treated with this wax
less attractive for export. In our view food safety issues can be addressed in various ways,
such as a good legal framework, a traceability-system, a centralised Food Safety Agency,
IPR, pesticide control and management, good testing facilities and effective legal
enforcement. Note that the Food Safety Agency could be involved in various ways in the
supply chain.
Recommendations
- Further clarify the scope of Joint Circular 13;
- Establish a working group consisting of representatives of relevant ministries/agencies
and organisations active in the food, agri and aqua business (such as the Agribusiness
Working Group of the VBF and the Food, Agriculture and Aquaculture Business Sector
Committee of EuroCham);
- Amend the Food Law and create a centralised Food Safety Agency with one Ministry
responsible as soon as possible;
- Assign the following tasks to the Food Safety Agency:
Inspection, certification and control in relation to import, export and transhipment of
ingredients, raw material and food products
Food testing and certification;
Food labelling and advertisements;
Reporting on food alerts related to the food supply chain including pesticide, fertiliser,
feed, etc.
11

For example: Decree 178/2013/ND-CP dated 14 November 2013 on sanctions of administrative violations on food safety, Decree
119/2013/ND-CP dated 9 October 2013 on sanctioning of administrative violations in the domains of veterinary medicine,
livestock breeds, and livestock feeds (Decree 119) and Joint Circular 13/2014/TTLT-BYT-BNNPTNT-BCT dated 9 April 2014 on
allocation of tasks and cooperation among regulatory agencies in food safety.

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Licensing and registering food traders and establishments, food processors and food
warehouse;
Providing education and trainings on food safety and food safety awareness;
Assistance in developing best practices related to food safety; and
Organisation of inspections and providing input for criminal investigations related to
feed and food safety.
Incorporate existing structures in the Food Safety Agency in order not to lose existing
knowledge and experience;
Cooperate with neighbouring countries to address cross-border food safety issues;
Encourage companies to introduce a traceability system;
Enforce existing legislation on traceability;
Change the law so that all labs in Vietnam, being local or international, use the same
internationally recognised and standardised testing methods;
Promote the VILAS accreditation scheme and use that as the only scheme;
Take measures to improve the reputation of labs in Vietnam;
Encourage enforcing the requirements to remain VILAS accredited; Accept results of a
(foreign or Vietnamese) lab that is accredited according to international standards in the
same way as test results are accepted for local laboratories without the need to do
another test in order to obtain a license or certificate;
Increase the testing methods available in Vietnam;
Harmonise the working methods of laboratories and develop best practices;
Take care that current initiatives are implemented in a harmonised way;
Reduce red tape when laboratory tests need to be done abroad;
Amend testing requirements in such a way that a speciation analysis is requested for
heavy metal;
Test the species of the heavy metals on harmfulness with regard to mobility,
bioavailability, and bioaccumulation;
Encourage upgrading of testing methods and facilities to be in accordance with modern,
international standards such as accredited by ISO, AFNOL, AOAC to ensure accurate
testing results, prevent any undue delay and/or arbitrary or unjustifiable discrimination;
Allow importing companies to store frozen food products in their own or neutral storage
facilities for quarantine and food safety inspections in order not to break the cold-chain;
Allow products that can be legally used in other countries, to be imported into Vietnam
without additional documents; and
Enforce existing laws, especially if public health is affected.

We appreciate the opportunity to present these issues at the VBF. In the document we have
described our concerns and views, as well as the benefits when our recommendations will
be implemented for each of the before-mentioned items. In the full text you will find some
further guidance to certain topics in the overview for 2016.

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DETAILED POSITION PAPER

In this position paper you will find a detailed description of the issues, how it impacts
agriculture, the economy, the population as well as export possibilities for Vietnam as well
as our recommendations on how these issues can be addressed.
1.

Comments of the Draft Decree on Policies promoting Foreign Investment in

Agriculture
We note that the Draft Decree applies to only foreign investment. Vietnam has a unified
legal system for both domestic and foreign investment (Law on Investment). In regard to
the agricultural sector, MARD is implementing the ARP which will focus on enhancing
private sector investment both for domestic and foreign companies.
The Draft Decree issues a list of sub-sectors (Appendix 1) and refers to the list of locations
entitled for incentives. It is not clear what the logic for providing incentives for such
activities and locations is. In addition, there is subjectivity in the decision-making built into
the Decree. This is not good international practice which is defined by transparency and
predictability of the criteria and implementation rules. Long-term investment decisions
demand policy security and investors will be concerned if some current incentives could be
removed over time. With regard to the level and type of financial incentives, global evidence
suggests strongly that tax incentives are not effective for investors location choice.
Similarly, evidence worldwide suggests that resource seeking or market seeking investors,
most of whom this Draft Decree is targeting, do not require incentives as they will be more
persuaded by the extent of opportunities in the country they seek to exploit. We suggest
MARD to conduct a formal investor survey to define the effectiveness of the current
incentives as well as to determine objectively which ones are decisive in attracting foreign
investors.
.
The Draft Decree also mentions investment promotion arrangement which is very vague
and therefore meaningless (Chapter IV). The Draft Decree mandates that MARD will
develop a foreign investment promotion function. Recently MARD has set up a Task Force to
coordinate private sector investment promotion. In this case, it is not clear why the MARD
would require a separate facility for FDI promotion over and above what the Task Force can
achieve and what specific services/assistance an additional facility would offer investors?.
2.

Modernisation and Sustainability of the Agricultural Sector in Vietnam

2.1. Small-holders: up-scaling

An issue that prevents Vietnam from being an overall key-player on the agricultural export
market is the lack of sustainability, part of which is stemming from the fact that and that
there are mainly small-holders in agriculture.12 The latter one prevents the use of machines
which can improve the quality and quantity as the investment costs cannot be borne by a
single small-holder and the size of land is too small to use machines. The Government has
realised that this issue needs to be addressed and is taking measures to attract foreign
direct investment to modernise and mechanise agriculture. It is developing hi-tech
agricultural areas and putting programs in place which will make borrowing money to
modernise and mechanise farming much easier.13 We are aware that mechanisation will
12

See at (english.vov.vn/Economy/Agricultural-restructuring-focuses-on-scientific-application-production/286519.vov),
(vietnamnews.vn/society/261897/farmers-reap-benefits-from-innovations.html) and (english.vov.vn/Economy/Why-Vietnamsagriculture-industry-is-unsustainable/287883.vov)
13
See (vietnamnews.vn/society/263713/farmers-reap-modern-farming-gains.html)

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increase unemployment in rural areas as many people depend on agriculture for their daily
income and we support the idea of building factories in rural areas in order to sustain
employment in the concerned areas. We believe that the Government should create
incentives that will encourage farmers to cooperate. Businesses can also play a role by
introducing incentives to encourage farmers to further cooperate.
A modernised and mechanised agriculture system will result in an improved quantity and
quality of agricultural produce. This in return will put Vietnamese agricultural products on
equal footing with products from other exporting countries. We hope that the farmers
benefiting from these changes will improve their living conditions and that agriculture will
become more sustainable.
Recommendations
- Upscale the agriculture sector;
- Encourage cooperation;
- Continue to create easier access to financing for farmers and put incentives in place to
stimulate farmers who are willing to modernise and mechanise; and
- Support farmers leaving the profession to find another job by encouraging construction
of factories in rural areas.
2.2. Small-holders: transferring knowledge through farmer meetings
Since 2014, the management of inorganic fertiliser has been handled by the Ministry of
Industry and Trade (MOIT) instead of MARD. Circular 29/2014-TT-BCT dated 30 September
2014 was issued by MOIT regulating the production and trade of inorganic fertiliser. It is
understandable that in the transition period several things do not go well yet and need to be
improved to support the development of industries.
To provide crop nutrition solutions for growers, one of the common activities that industries
usually do is organise farmer meetings. These meetings are aimed at transferring
advanced technologies to farmers which help them to understand more about integrated
crop nutrient management. This will in return increase crop yield and quality as well as
raise the income of the farmers. The farmer meetings are usually held at the village level.
Prior to holding these farmer meetings, the industry needs to get permission from
Department of Industry and Trade (DOIT) at a provincial level. We understand this
regulation but we believe that the implementing process can be improved, as currently
obtaining permission to organise farmer meetings is complicated and times-consuming.
The issues currently faced are the following. The procedures of permission granting are not
clearly regulated and are implemented differently from location to location. The same
company needs to prepare different documents to submit to a DOIT depending on the
province. In some provinces, a company needs to get permission from 2 different local
authorities and has to submit the dossier to the district level to get an additional permission
from them after getting permission from the DOIT. We believe this is unreasonable and
differs from the practice under MARD, when companies only needed permission from the
Department of Agriculture and Rural Development (DARD) at a provincial level. We also
have noticed that the officers of DOIT seem not to have completely understood the
procedures yet. This causes confusion as because they are not yet able to provide clear
answers to questions of the companies.We therefore suggest that trainings for
governmental officers as well as companies should be organised when new regulations are
published. This will help to have an effective implementation process.

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Another burdensome requirement is that a foreigner, even in the possession of a resident

permit, can only participate in a farmer meeting after an approval process. Without
approval from local authorities, foreigners are not allowed to engage with farmers. We
believe that this requirement exists to protect the farmers, which we fully support.
However, it also limits the transfer of knowledge about sustainable agriculture
technologies. The process to obtain permission takes quite long and is especially very
complicated to organise for overseas persons. This while it is often important to be able to
organise a meeting at short notice or on a frequent basis, and sometimes fly-in experts
from overseas to inform the farmers about the latest technology and insights. It would help
if companies can obtain clear guidance on procedures of permission granting for farmer
meeting and these procedures should be harmonised across the country. Return to the
practice that only permission from one level (DOIT) needs to be obtained and not two as
currently some provinces required. Further to this the time the time to obtain permission
for a foreigner to attend these farmer meetings should be shortened for those companies
that already have a distribution license and for these foreigners that have a valid working
permit or resident card the requirement for entry permission should be abolished.
As in our view farmer meetings are one of the most effective approaches to transfer
advanced technologies to farmers, and taking in to consideration that this is a common
industry activity, we believe this issue can be addressed as follows and we would like to
make the following recommendations:
- Simplify and harmonise procedures to obtain permission to organise farmer meetings;
- Simplify entry permission for foreigners of companies that have a distribution license;
- Abolish the need to obtain an entry permission for a foreigner who has a valid work
permit; and
- Organise trainings for Governmental officials and industries to increase the effectiveness
of the implementation process of new regulations.
2.3. Climate changes and shift of focus
The agricultural sector is also a vulnerable sector, as climate change and the economic
situation have an impact on its output. The vulnerability especially applies to the people
working in it.A study of the Institute of Policy and Strategy in Agriculture and Rural
Development (IPSARD) and Oxfam shows that the risk ratio for farmers is 70-80% with a
profitability ratio of just 20%.14 Dependence on weather conditions and fluctuating prices
limits the possibility to increase the export volume of products such as rice, coffee and
tea.15 At present, Vietnamese products are competitive on price but not on quality, and there
is a need, and a possibility, for improvement. Once the focus is not mainly on production,
but also on market and consumer needs, there are in our view many opportunities that
open up. We believe that the agri and aqua business sector can grow and export more and
different products in a sustainable way.
This objective can be achieved in various ways. One way is to shift from exporting mainly
commodities and low-end mass production goods, such as cashews, pepper, and coffee to
exporting high-quality end manufactured products. This will allow Vietnam to enter other
markets and earn more.16 We are pleased with the initiative for coffee and the plans the
MARD has drafted.17 A second possibility is that instead of only cultivating and selling rice,
14

See (vccinews.com/news_detail.asp?news_id=30755)

15

See (vccinews.com/news_detail.asp?news_id=30288)

16

See (vccinews.com/news_detail.asp?news_id=30497)

17

See (www.livetradingnews.com/vietnam-works-to-increase-export-value-of-coffee-66189.htm#.U_QEsPmSwpU)

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the husk is used in the energy sector.18 Yet another way is to diversify the range of export
products. Fruits and vegetables are also potential products to export. However, there are
some issues that need to be addressed.19 Government support for these products is needed
in the same way as for rice, seafood, rubber, tea and coffee. It is also important to open up
markets to export Vietnamese products. In this regard Vietnam should not only focus on
markets such as the US, Japan, or the EU, but also neighbouring countries. Currently
Vietnam imports many products from for example Thailand or China, but the export to
these countries has not been fully utilised yet and is even quite difficult, not to say
impossible. Market access to these and other countries for Vietnamese products needs to
be negotiated. Furthermore, investments for production, the post-harvest phase, and the
processing and preserving sectors are needed, and it is important that farmers and
producers will be instructed about food safety and hygiene. We also believe it is necessary
to introduce a high logistic level and innovative management scheme.20 In short, a strategy
is needed to upgrade and modernise the value chain, which will improve efficiency,
competiveness, sustainability, product quality and meet consumer demand.21
Recommendations
- Shift from exporting commodities and low quality products to high-end products
- Transform by-products into attractive products for export;
- Diversify products and give the same support as is done for coffee, tea, pepper, seafood
and rubber;
- Encourage investment for production, the post-harvest phase, and the processing and
preserving sectors; and
- Create market access to neighbouring countries for Vietnamese products.
2.4. Level playing-field
The findings of the Food Agriculture Organisation of the United Nations (FAO) in its report
'World agriculture: towards 2015/2030, an FAO perspective' are in our view important and
still valid, even though they date back to 2003.22 The FAO writes that foreign direct
investment (FDI) is the main instrument through which multinational corporations (MNC)
expand their reach globally. In that way MNCs can affect production levels and composition,
production technologies, labour markets and standards. MNC can also make an important
contribution as vehicles of capital, skills, technologies, access to both domestic and export
marketing channels, and creation of linkages to the rural economy, for example through
contract farming. This is supported by discussions during the plenary session of the
International Support Group of the World Bank, about the difficulties and challenges such
as investment capital for agriculture, sustainable agricultural development, improved
competitiveness and participation facilitation of the private sector in agricultural
development.23
We share and support those findings as it is in our view important to create a level playing
field for small, large, local and international companies regardless of legal entity, size and
nationality, based on a common interest, and to create and to provide as much as possible:
18

See (vietnamnews.vn/economy/255018/high-tech-agriculture-needs-funding.html)

19

These constraints are laid down in the Vietnam country paper for the FFTC-NACF International Seminar on Threats and
Opportunities of the Free Trade Agreements in the Asian Region, held in Korea on 11-15 September 2013, See:
(www.agnet.org/htmlarea_file/activities/20110719103351/2007013101.pdf). Note that we mention only a few of the constraints.
20
See (ap.fftc.agnet.org/ap_db.php?id=106&print=1 and http://vccinews.com/news_detail.asp?news_id=30501)
21

See (ap.fftc.agnet.org/ap_db.php?id=106&print=1), (vccinews.com/news_detail.asp?news_id=30501) and

(en.vietnamplus.vn/Home/Modernising-agriculture-opportunities-and-solutions/20148/53514.vnplus)
22
Ibid, page 273.
23

See(www.isgmard.org.vn/News.asp?Status=1&InfoID=756)

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equal access to financing in or outside Vietnam, equal access to raw materials in or outside
Vietnam, equal treatment in obtaining a business licence in Vietnam, and equal treatment
with regard to other requirements that are related to the sector. This could also attract FDI.
Recommendations
- Create a level-playing field in all aspects by:
- giving equal access to financing in and outside Vietnam;
- giving equal access to raw materials in and outside Vietnam;
- providing equal treatment in obtaining a business license; and
- providing equal treatment with regard to other sector-specific requirements.
2.5. Financing: FDI
Once a strategy has been developed, money is needed to put this strategy in place. In recent
years investment in agriculture has not been in line with the contribution agriculture made
to the GDP. For example in 2012 agriculture was about 19.7% of GDP, while only 5% of the
Government's total investment was dedicated to the agricultural sector.24 We fully support
the view laid down in the Vietnam country paper for the FFTC-NACF seminar, that
investments in agriculture are important to ensure food security and sustainable
agricultural development in Vietnam.25 Even if the level of investment by the Government is
not enough, it is still possible to modernise and upgrade through FDI and Private-Public
Partnerships (PPP). Noteworthy is also that Agribank, a Vietnamese bank, has started a
program to finance the introduction of hi-tech agriculture in Vietnam.26
In 2013 the sector only received 0.6% of the FDI invested in Vietnam.27 To attract more FDI
there are several challenges that need to be overcome. For example it is necessary to
create clear and transparent trade policies and administrative procedures. Furthermore it
is important that equal access is given to small and large-scale farmers and enterprises.
Besides that it should be taken into account that there is often a shortage of high-skilled
labour resources in the agricultural sector as industrialisation attracts most young workers
in rural areas to industry zones. Finally, it should be noted that the tax system is not as
competitive as in the countries in the region.28 We are pleased with the view of the President
that some regions should try to attract FDI and use hi-tech farming techniques to develop
the sector.29 And that some provinces, such as Dong Thap, Lam Dong and Son La, have
already achieved that objective.30
Recommendations
- Continue to create easier access to financing for farmers and put incentives in place to
stimulate farmers who are willing to modernise and mechanise; and
- Support farmers leaving the profession to find another job by encouraging construction
of factories in rural areas.
2.6. Financing: PPP
24

See (vietnamnews.vn/economy/255018/high-tech-agriculture-needs-funding.html)

25

See Vietnam country paper for the FFTC-NACF International Seminar on Threats and Opportunities of the Free Trade

26

Agreements in the Asian Region, held in Korea on 11-15 September 2013,

(www.agnet.org/htmlarea_file/activities/20110719103351/2007013101.pdf)
See (bizhub.vn/banking/6726/agribank-finances-credit-programme-for-hi-tech-agriculture.html)

27

See (vccinews.com/news_detail.asp?news_id=30755)

28

See(ap.fftc.agnet.org/ap_db.php?id=106&print=1)

29

See (vietnamnews.vn/economy/259037/bac-giang-told-to-attract-fdi-to-agriculture-sector.html)

30

See (vccinews.com/news_detail.asp?news_id=30999), (www.vir.com.vn/lam-dong-promotes-high-tech-agriculturalprojects.html) and (vccinews.com/news_detail.asp?news_id=31126)

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PPP is another way to attract more investment into the agriculture sector.31 Existing PPP
projects have boosted agricultural output 2-3 times, and farmers incomes have
successfully increased with 10-15%. In this way production chains32 can be created that
meet international standards, which make it easier to penetrate supermarket chains33 and
improve sustainability of the sector. Hereafter you will find some examples of PPP projects
that have been successful or that are being put in place now; and can be used as best
practice for that specific part of the sector. PPP or best practices make it possible to
increase the output in the sector in a sustainable way providing the farmers with a higher
income. At the same time it increases the quality of the product and this will allow
Vietnamese products to be exported easier as they will get a better reputation.

2.6.1 Coffee PPP

As mentioned already, Vietnam is the number one exporter of coffee in the world. Coffee
farmers in Vietnam are only smallholders and the number one in the use of fertilisers. This
use has a negative impact on the environment, and it does not necessarily mean that they
have a better output. If farmers want to improve production, they have to do that in a
sustainable manner, using the limited quantity of farmland in an optimal way. This reduces
pressure for deforestation, GHG emissions, water loss and loss of biodiversity. In 2010 an
initiative was started to improve the coffee output involving the whole coffee value chain.
The project is done in the form of a PPP and participants are from the private sector, public
sector, some associations, so Vietnamese authorities, companies and of course local
farmers. The local farmers are engaged as ambassadors to spread the best practices
amongst their peer farmers. The result of the project is that the output has increased while
the carbon footprint, water usage and quantity of fertiliser have been reduced. Another
result of this initiative is also the recently formed Vietnam Coffee Coordinating Board aimed
to strengthen Vietnams position as exporter of coffee while producing it in a sustainable
way.34
In 2009 Minister Coa Duc Phat of MARD embraced the New Vision on Agriculture of the
World Economic Forumto reduce the carbon footprint by 20%, increase profit for farmers by
20% and increase productivity by 20% in the coffee production sector.35 After 5 years of
collaboration between the various partners such as the Government, private (local and
foreign) companies, Non-Governmental Organisations (NGO), on sustainable agriculture on
coffee many of the objectives have been achieved. The focus was mainly on reducing the
carbon footprint and improving water management. The coffee PPP showsindeed a
reduction of 50% of the carbon footprint and usage of only 33.3% of the water with the same
yield results. However, in order to continue and maintain this success, we believe the
Government should put a monitoring system and right policies in place to ensure that best
practices can be applied by the farmers in that aspect. We fear that if this does not happen,
there is no level-playing field for all companies involved. The lack of concrete Government
policies will in our view result in companies being discouraged to invest in a PPP despite
the positive results of the PPP.
31

See (english.vietnamnet.vn/fms/business/101550/ppp-will-make-vietnam-the-world-s-rice-field--cook-house.html),
(vccinews.com/news_detail.asp?news_id=30501), and (www.talkvietnam.com/2013/11/ppps-foster-sustainable-agriculturalgrowth-in-vietnam/)
32
PPPs can for example help in the processing industry, storage, applying international certification, applying modern packaging
technology and traceability systems, applying technology in market information and agricultural product marketing.
33
See (vccinews.com/news_detail.asp?news_id=30720)
34

See (www.idhvietnam.com/site/getfile.php?id=227)

35

See (www3.weforum.org/docs/WEF_CO_NVA_Overview.pdf),
(www3.weforum.org/docs/IP/2013/NVA/WEF_IP_NVA_New_Models_for_Action_report.pdf) and
(www.weforum.org/news/agriculture-vietnam-gets-boost-new-public-private-sector-project)

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2.6.2 Milk PPP

A project that has started recently and that is funded by the Dutch Government consists of a
cooperation between companies, the Vietnamese authorities, farmers, and a university.36
The demand for fresh milk in Vietnam is growing, but the dairy sector in is underdeveloped
and around 75% of all dairy products is imported. This means that local dairying must
develop to meet this growing demand. However, family-owned farms in Vietnam are very
small, with an average of less than 10 cows per farm; and they often lack knowledge and
skills. This project is intended to develop the sector in a sustainable way while increasing
the production of fresh milk, meeting market demands. Within five years three dairy zones
will be set up, and each dairy zone will consist of fifty farms with each fifty milking cows.
Investments are made to make dairying at family-owned farms more professional. At the
same time proper infrastructure systems will be setup to guarantee the highest quality
milk.
Recommendations
- Encourage development of more best practices or PPP; and
- Develop a monitoring system and right policies in place to ensure that best practices can
be applied by the farmers.
3.

Good quality Agricultural Input including Pesticides and Fertilisers

3.1 Quality and proper use of agricultural inputs

A recent report indicated that 50% of randomly tested fertilisers by authorities were offspecification and the loss for the economy is estimated at USD 800 million. In addition,
there has been a significant increase of fake (counterfeit) products, misleading growers and
leading to the development of counterfeit manufacturing. At the same time, public
awareness and demand for traceability and food safety is increasing. The Vietnam PPP
Coffee Task Forces latest report indicated that Good Agricultural Practices (GAP) combined
with good quality imported inputs can increase yield and profitability by 10% while reducing
carbon footprint by 50%. A lack of adequate quality testing infrastructure hinders the
adoption of better technologies for higher quality output, hampering export
competitiveness. Lack of leadership activities to ensure safe and proper usage of inputs and
low quality inputs distributed to farmers leads to environmental and safety issues. Good
quality and environmentally friendly inputs are not affordable to small farmers as the as
they have a 6% import duty compared to other products. This increases the price for
farmers and farmers will be inclined to use poor quality inputs or even fake products. This
will lead to a risk of limiting crop productivity (or even damaging crop), affecting the
produce quality and food safety. Some of these bad quality or fake products can even result
in acidified and contaminated soil. There is a risk of increased usage of fertilisers while
Vietnam is already one of the highest fertiliser consumers per hectare in the world. The
increased usage of low quality crop protection products adversely impacts crop, soil and
human health. In our view it is important to set up technical barriers to eliminate the use of
high-risk pesticides which can harm human beings and the environment.
The improper use and application of poor quality pesticides is a key challenge in the food
production process. This can adversely affect the health of pesticide applicators and
consumers of the agricultural produce, as well as harm the environment. In addition, it can
economically affect exported agriculture produce as this can be rejected due to the
36

See (www.talkvietnam.com/2014/07/sustainable-dairy-zone-project-breaks-ground-in-ha-nam)

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exceeding of maximum residual levels. It has been reported that the associated dangerous
practices are still widespread in Vietnam despite the technical training that a large
percentage of the farmers have received from state and non-state actors.37 It is said that
their practices remain strongly influenced by their traditional routines and experiencebased assessments of risks instead of formal technical guidelines. By ensuring safe food
production, particularly in the context of pesticide use, Vietnam can increase their export
value of agricultural goods, which will increase the inflow of foreign currency. Furthermore,
this can help enhance Vietnams reputation as a reliable source of safe food for major food
importing countries. This will in turn benefit and improve the income situation of
Vietnamese farmers.
At the same time it is important that for selling these products good practices with regard
to responsible and ethical management and use of (good quality and safe) pesticides are
followed. In this respect it is important that pesticides are properly labelled in compliance
with the provided instructions. We also believe that a regulation with specific criteria to
encourage the introduction of new-class crop protection products with advanced
techniques and technologies should be put in place. It is in our view important that
education programs are put in place for farmers to reiterate the importance and benefits of
proper use of pesticides and following instructions on labels. There should also be
education programs to promote the balanced nutrition, appropriate product usage
protocols to reduce over-usage of inputs as well as training programs to encourage
applying balanced crop nutrition in 4-R concept (right product, right rate, right time and
right place). These trainings will also tackle the situation of wrong and/or over-usage of
inputs. This will result in reduced production costs but improve crop productivity/quality
and limit the impact of fertiliser usage on environment. Further to this it is important to
update the knowledge of extension agents on crop nutrition and plant protection, and the
impact of agri-inputs on the environment in order to implement a training program
effectively; In this aspect it is important that new knowledge and new research results are
transferred as soon as possible to farmers. Finally we believe that the lack of an adequate
quality testing laboratory infrastructure and third party investments also limits realising the
benefits of better technology usage.
Recommendations
- Ensure mandatory leadership programs in all companies with regard to training on safe
crop protection product usage;
- Set up technical barriers to eliminate the use of high-risk pesticides which can harm
human beings and the environment;
- Encourage responsible and ethical management and use of (good quality and safe)
pesticides following good practices in selling products;
- Encourage proper labelling of pesticides in compliance with the provided instructions;
- Establish regulation with specific criteria to encourage the introduction of new-class
crop protection products with advanced techniques and technologies;
- Establish a supporting stewardship infrastructure for safe crop protection product
usage;
- Put qualified education programs in place for farmers to reiterate the importance and
benefits of proper use of pesticides and following instructions on labels;
- Introduce education programs to promote balanced nutrition, appropriate product usage
protocols to reduce over-usage of inputs;
- Establish a training program to encourage applying balanced crop nutrition in 4-R
concept (right product, right rate, right time and right place) as well as to tackle the
37

P. Van Hoi, Governing pesticide use in vegetable production in Vietnam, see (http://library.wur.nl/WebQuery/wda/1928507)

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situation of wrong and/or over-usage of inputs; from that will reduce production cost,
improve crop productivity/quality and limit the impact of fertiliser usage on environment;
- Update the knowledge of extension agents on crop nutrition and plant protection, and the
impact of agri-inputs on the environment in order to implement a training program
effectively;
- Encourage transfer of new knowledge and new research results to farmers as soon as
possible; and
- Develop policies to encourage investors to develop quality infrastructure to enable
testing, and monitoring of the quality of farm output.
3.2 One-time licensing process to import fertilisers
Circular 35/2014/TT-BCT of MOIT dated 15 October 2014 regulates the automatic import
license applicable to fertilisers. A company has to apply for a one-time license for each lot
of fertiliser it imports, even though a company already has a business license for importing
and trading fertiliser in Vietnam. Further to this there is an additional requirement for
issuing that one-time license which is to have a confirmation from a specific bank at the
time of the importation. In our view the first requirement is unnecessary and only
complicating the import without having added value. The additional requirement is in our
view unreasonable and also not practical as companies are uncertain what bank they will
select for payment to the supplier at the time of importation. It depends on the
competitiveness of banks and exchange rates when payment to the supplier is due.
We understand that the Government would like to control mechanisms in place. However,
in our view controls should focus on checks on the internal market in relation to for
example counterfeits. It should not be done by slowing down the process to import high
quality inputs, in particular not for companies that already have a local production and
distribution license, and not just a trading license.
These procedures are not only burdensome but this process is also quite costly for the
companies38, due to the required documentation and time. In return this will only increase
the cost of the product. These costs do not have an extra value, but only will limit the
farmers access to these products because of the increased price with as a result a
negative impact on health and environmental issues.
Recommendations
- Remove the one-time license requirement for companies whose business license
already include import rights;
- Remove the requirement that a confirmation letter from the bank is needed for obtaining
permission to import fertilisers into Vietnam;
- Focus on checks on the internal, local market to control the input market in Vietnam;
and
- Make a distinction in companies that have a license for local production and distribution
and those that only have a distribution license.
3.3 Tax
Vietnam is already one of the highest fertiliser consumers per hectare in the world.
Incorrect use or use of fake products limits the crop productivity and can even damage the
crop. It also affects the produce quality and food safety; and finally it can cause acidifying
and contaminating the soil which makes the use in the future more difficult. An increased
usage of low quality crop protection products adversely impact crop, soil and human health.
However, products that are of good quality and environmental friendly input have a 6%
import duty compared to poor quality inputs, or even fakes. This high tax increases the
38

Companies have to pay demurrage to the shipping lines as a result of this time-consuming process.

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price and encourages farmers to use poor quality inputs or even fake products. Besides this
there is also a problem with the HS codes, as the one for generic chemicals used to make
fertiliser on the spot, is currently the same as the one for fertilisers.
Recommendations
- Differentiate fertilisers from generic chemicals and allocate an appropriate HS code to
fertilisers to avoid confusion on levy; and
- Promote a level playing field by removing import tax for quality compound NPK
fertilisers (fertilisers produced with advanced technology, good performance in the field,
safe to human health, with non or less impact on the environment, etc.) to encourage
import, /production and use of these products.
3.4 Quality control
The promulgation of Decree 202/2013/N-CP and relevant Circulars of MOIT on fertiliser
management have brought a new wind to the fertiliser market. The aim of these new law
and regulation are to restructure the fertiliser market in Vietnam and gradually eliminate
fake and poor quality products from the market. We welcome this but the implementation
needs improvement as sometimes the result is that companies with good products end-up
in having difficulties. To illustrate this we would like to give the following example.
Companies are importing high quality fertilisers from for example Europe and have an
issue when the Market Control Team inspects the product at retailer shops39 and it is
concluded that the product does not meet the technical regulation standards. If a company
makes a complaint, the inspector can make another analysis which sometimes gives even
worse results. This situation is very complicated to handle because all official documents
required for import, such as the CoA from the plant where it is produced and the analysis
performed by Customs at the port of importation in Vietnam indicate that the products are
all within specifications. We believe that the wrong results might be the outcome of the
sampling during the inspection process. The samples are taken from one product bag only,
while the TCVN 5815 on sampling process requests taking samples from at least five bags.
The samples are not taken by a proper tool such as spear and are contained in a market
nylon bag instead of a poly-ethylene bag as stipulated in TCVN 5815/2001. There is no
reference sample left at the retailer shop as recommended in TCVN. The big difference in
analysis of the two labs also raises doubts with regard to the analytical methods used.
As we understand, sampling and analysis of fertilisers are the main concern of fertiliser
producers and traders in Vietnam. In our view the following guidelines would be helpful to
address and improve the issue as has just been described. Importers cannot be responsible
for retail level checks, especially if they do not have representatives on site on that same
day. A relevant company representative should be present at the time of sampling to be
sure that the sampling process is properly followed. If the company representative or
dealer sees that the sampling process is not followed according to the regulations, he can
refuse signing the inspection minute. To guarantee that the sample sent to lab for analysis
is genuine and intact, after taking the samples and sealed, the one for lab analysis should
be sent immediately by post to the lab instead of bringing it to the market control team
office and send it later as is currently done. After a second sample analysis, in case the
company (producer or importer) still does not agree with the result, they can propose an
independent (international) accredited and certified lab can be asked do the analysis and
the cost of this analysis would be for the company. Another option would be to take four
samples per one inspection instead of three as stipulated in TCVN 5815. On sample is kept
39

Considering that companies distribute their products through local distributors, who subsequently sell to retailers who sell to
farmers.

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at the dealers shop and two are brought to the management team office. The company
(producer or distributor of the product) will take one sample and send it to an
(international)accredited and certified lab for analysis. At the same time the market control
team also sends one of the two of their samples to another accredited and certified lab for
analysis. After that a comparison between the two lab results will make the results more
reliable. In this way there will be a guarantee that analysing methods used are not that
different. Those changes will make the issue of sampling and analysing become more
reliable and transparent and at the same time the concern of the fertiliser company or
trader will be in principle be addressed.
Recommendations
- Encourage using the correct sampling method to avoid unreliable and false results; and
- Put in place guidelines which will help following the correct sampling method.
3.5 IPR
Weak enforcement of IPR indirectly causes harm to the agricultural industry in particular
and society as a whole. This problem also limits the ability of the industry to drive
innovation in the market. Counterfeit and illegal crop protection products are on the rise;
counterfeit pesticides are rarely tested and may contain unknown toxic impurities which
may pose risks to farmers and consumers health. Furthermore, counterfeit products can
severely damage crops or can lead to rejection of the produce by food companies due to
unwanted residues. All these factors can put the income of farmers in jeopardy. In relation
to this, we are pleased with Decree No. 08/2013/ND-CP on administrative penalties for
producing and trading counterfeit products. However, in our view the penalties should be
higher to make it unattractive for offenders to disregard the law.
Recommendations
- Strengthen IPR protection measures through strict implementation of legal action
against counterfeiters and enforcement at the market place; and seize illegal products
from the market;
- Raise awareness through Governmental mass media communication explaining the risks
for farmers, the population and the economy if farmers use (cheap) fake inputs;
- Put in place effective regulatory rules which do not compromise safety and efficacy;
- Put stricter regulations and market control on poor quality and fake fertilisers;
- Embed IPR requirements in the registration framework to ensure IPR protection starts
from the registration point; and
- Implement a strict review of trademark registrations, and enforce removal of me-too
brands, logos, visuals etc.
3.6 Other issues
Some products that are long forbidden in other countries because of health issues can still
be used in Vietnam, either because not forbidden yet or existing regulations prohibiting
these products are not enforced. On the other hand products that can be legally used in
other countries cannot be imported in Vietnam.40 For example, a wax from the EU could be
used to better present a locally cultivated fruit destined to be exported. This wax can be
legally used within the EU. However, documents needed according to Vietnamese law to
approve the import of this by the MOH cannot be obtained from the EU member State
because such a document is not issued there. This means that the MOH will not approve,
and the locally cultivated fruit is compared to fruits produced elsewhere and treated with
this wax less attractive for export. If Vietnam accepts products that are approved for use
40

See paragraph 3.1.5 in Whitebook 2015 on legal framework, coordination and enforcement.

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in other countries, Vietnam can export a product with high potential to the EU for example.
Vietnamese producers will be able to grow export and compete with fruit exporters in the
rest of the world who are allowed to use this product.
Recommendations
- Allow products that can be legally used in other countries, such as EU-members, to be
imported into Vietnam without additional documents;
- Put in place effective regulatory rules which do not compromise safety and efficacy.
4.

Food Safety

4.1 Introduction
Early August the Free Trade agreement between the European Union (EU) and Vietnam was
signed. According to Jean Jacques Bouflet, (now former) Minister-Counsellor and head of
the Trade and Economic section of the EU delegation to Viet Nam, the EU's quality
requirements, especially for food products, are high and Vietnamese firms should move to
meet the requirements.41 This means that companies need to meet the requirements that
are set at a higher level than in Vietnam.42 It is expected that more will be exported to the
EU as a result of this agreement, which will help to reach the export goal set by the
Vietnamese government.43
However, as the World Health Organisation (WHO) writes: Unsafe food has been a human
health problem since history was rst recorded, and many food safety problems
encountered today are not new. Although governments all over the world are doing their
best to improve the safety of the food supply, the occurrence of food borne disease remains
a signicant health issue in both
developed and developing countries.44
In an opinion poll conducted by Food
Industry Asia (FIA)45 on 16 April 2015, food
safety ranked on top as the issue that
would have the greatest impact on
consumer preference in Asia in
2015/2016. It ended up considerably higher than the other topics.
4.2 Food safety issues in Vietnam
What is food safety or safe food and why is food safety important? Safe food is food that
does not make you sick immediately after you have eaten it, but also that does not make you
sick in the long run. If food does contain unacceptable levels of hormones, pesticides,
certain heavy metals or other chemical ingredients you can become sick only after some

41

See( http://vietnamnews.vn/economy/274021/eu-vn-agree-on-free-trade-after-three-year-talks.html)

42

See (vietnamnews.vn/economy/271524/vn-produce-losing-their-edge.html), (vovworld.vn/en-US/Economy/Expanding-exportsmarkets-for-Vietnamese-farm-produce/266152.vov), (vccinews.com/news_detail.asp?news_id=32038);

(en.vietnamplus.vn/Home/Food-safety-vital-to-win-EU-market/20156/66823.vnplus),
(vietnamnews.vn/society/263169/producers-traders-blamed-for-substandard-food-safety.html) and
(english.thesaigontimes.vn/41839/Asian-importers-apply-EU-standards-to-seafood-imports-from-Vietnam.html)
43
See (en.nhandan.org.vn/business/economy/item/3044802-agricultural-export-revenue-sets-new-record-of-us$30-8billion.html), (vietnamnews.vn/economy/271524/vn-produce-losing-their-edge.html) and (www.vir.com.vn/bright-prospects-foragriculture.html)
44
Five keys to safer food manual by the World Health Organisation.
45

See (foodindustry.asia/food-safety-key-to-consumer-preference-in-asia)

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time.46 The WHO defines unsafe food as food containing harmful bacteria, viruses,
parasites or chemical substances and can cause more than 200 diseases ranging from
diarrhea to chronic diseases such as cancer.
Food safety is still an issue in Vietnam. In the period 2011-2013, the number of food
poisoning related incidents decreased.47 In 2014 about 5,000 people were reported to have
been suffering from food poisoning in Vietnam and 16 people died, and this number covers
only the official cases of food poisoning that have been reported and registered.48 In the
first nine months of 2015 the number of reported food poisoning cases is 129, 3.436 people
got sick and 20 people died.49 We have seen results of efforts conducted by the Government
to improve food safety.50 Nevertheless, unsafe food is still a major public health issue in
Vietnam, like in other developing countries, not because of food poisoning, but because of
hidden food safety issues caused by the use of forbidden products like hormones,
antibiotics, pesticides, etc. which cause health problems for the population in the long term.
51

4.3 Limitation of export opportunities

Food safety issues not only cause people to get sick, but they also limit the export
possibilities for Vietnam and damage the reputation of Vietnamese products. In 2014 trade
commissions in the European Union (EU), Japan and the United States received many
warnings about seafood shipments containing antibiotic residues exceeding the permitted
level. In 2015 there have already been reported various issues with exports to Saudi Arabia,
the United States, and Japan. From January till now the Rapid Alert System for Food and
Feed (RASSF)of the EU rejected 21 products coming from Vietnam at the border of one of
the EU member states. 17 other products were stopped and further information is needed
before a decision can be taken. In 2014 as many as 130 products were not allowed to be
imported directly into the EU. About 51 shipments contained too high levels of chemicals
and antibiotics, a sevenfold increase from 7 in 2013. In general the reasons imports were
stopped because they contained too high levels of certain heavy metals, bacteria, virus,
moulds or other prohibited substances.
52

53

4.4 Importance of addressing food safety issues

In light of the upcoming signing and ratification of various FTAs, it is especially important to
detect multi-residue levels (MLRs) as competition will be fiercer. For instance, tariffrelated advantages emanating from the FTA will require products to be up-to-standard if
Vietnam wishes to increase exports, especially as it will also have further competition from
the region. In our view, the quality of seafood and fish exports is quite good but other
products such as pepper, tea, and coffee still need quality improvement.
54

46

Agribusiness and Food Safety at Chapter of the Food, Agri and Aqua Business Sector Committee in the Whitebook 2015 of the
European Chamber of Commerce.
47
See (english.tapchicongsan.org.vn/Home/Vietnam-on-the-way-of-renovation/2013/396/Viet-Nam-continues-implementingnational-target-programs-on-healthcare.aspx)
48
See (www.thanhniennews.com/health/5000-had-food-poisoning-in-vietnam-last-year-who-40796.html), and
(www.24h.com.vn/suc-khoe-doi-song/gan-700-nguoi-chet-do-ngo-doc-pham-c62a662299.html)
49
See (vietnamnews.vn/society/276516/20-food-poisoning-deaths-reported-in-nine-months.html)
50

See (vietnamnews.vn/society/258361/advertising-hygiene-violations-cost-firms.html) and (www.vietmaz.com/2014/08/vietnamtightens-control-over-imported-agricultural-produces/)

51
52
53
54

See (english.tapchicongsan.org.vn/Home/Vietnam-on-the-way-of-renovation/2013/396/Viet-Nam-continues-implementing-national-target-programson-healthcare.aspx)
See (tuoitrenews.vn/business/28078/vietnam-produce-exports-should-meet-food-hygiene-safety-requirements-in-overseas-markets-ministry)
RASSF portal of EU: ec.europa.eu/food/safety/rasff/index_en.htm
See (http://english.vietnamnet.vn/fms/business/141921/agriculture-sector-faces-tough-times-ahead.html),
(en.nhandan.org.vn/business/economy/item/3044802-agricultural-export-revenue-sets-new-record-of-us$30-8billion.html), (vietnamnews.vn/economy/271524/vn-produce-losing-their-edge.html), (vovworld.vn/en-US/Economy/Expanding-exports-markets-forVietnamese-farm-produce/266152.vov); (vccinews.com/news_detail.asp?news_id=32038) and (www.vir.com.vn/bright-prospects-foragriculture.html)

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As mentioned before, the fact that Vietnamese products are being rejected for import in
other countries damages the reputation of Vietnamese products in general. It might be just
one producer or exporter, who does not follow the rules or is not conscious of products not
meeting requirements, but the reputation of all Vietnamese products is at stake and all
Vietnamese products will be scrutinised in detail. In this aspect it is also important to
realise that importing countries often have set a standard that is higher than met by
Vietnamese products and higher than required by Vietnam. It is important to address the
issues to reach the set export goal of USD 32 billion.
It is also worth realising that the high levels could be caused by counterfeit and illegal
ingredients or raw material which on top of damaging the reputation of Vietnamese
products also may pose risks to farmers and consumers health. Sometimes it also
involves products that are already forbidden for a long time in other countries, but they can
still be used in Vietnam; because they are not forbidden yet, regulations are not clear, or
they are used due to lack of enforcement.
Not only managers of food companies worry about food safety, the Vietnamese people also
worry about food safety and what it means for their well-being and health. Considering the
number of events organised also by the various ministries and agencies, it is clear that food
safety is also an important topic for the Government. However, it seems not enough and
addressing the issue is important as food safety is said to be the solution to agricultural
growth.58
55

56

57

4.5 Who should address these issues

It is well-known that inadequate post-harvest handling, storage and distribution impact the
rate of success of producing countries and impacts food safety. It is also important to have
a value/supply chain approach to analyse where the food safety issues occur and how they
can be best prevented, as food safety issues can happen in the whole value and supply
chain. There have been initiatives to develop best practices in the (value) chain approach,
both by the Government and retailers/wholesalers. We believe that a chain-approach is the
best way, because it will allow a retailer/wholesaler to steer the process and provide
feedback as they know what their customers are looking for. Retailers/wholesalers could
be encouraged to adopt this approach if it will mean they will have an advantage as well.
This could partly be achieved by introducing a Food Safety Agency with one ministry
responsible, harmonisation and coordination of laws and regulation. This it would mean
less administrative hassle and a more efficient quality and safety control, which would
enable greater stakeholder involvement.
59

60

61

Value chain approach

Farm
Work
ers

Producers

Processor

Retailer

Consumer

Source: Sustainable Food Lab

Several best practices and certifications to address these issues have been developed
worldwide and in Vietnam. Fish and seafood producers have been quite successful and are
55
56
57
58
59
60
61

See (tuoitrenews.vn/society/26193/toxic-tet-kumquats-highlight-vietnam-s-pesticide-problem)
Agribusiness and Food SafetyChapter of the Food, Agri and Aqua Business Sector Committee in the Whitebook 2015 of the European Chamber
of Commerce, paragraph 3.1.5 on legal framework, coordination and enforcement.
See(thediplomat.com/2014/01/vietnam-back-to-organic)
See (english.vov.vn/Economy/Food-safety-optimal-solution-to-agricultural-growth/283734.vov)
Project VIE/61/94, May 2009, page 17 and at (www.fao.org/ag/agn/CDfruits_en/launch.html)
See (aciar.gov.au/files/food_safety_from_farm_to_fork.pdf)
See (www.fao.org/ag/agn/CDfruits_en/launch.html )and (vietnamnews.vn/society/244563/seminar-promotes-safer-agri-food-chain.html)

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exporting their products. However, in general the possibility to qualify for certification and
therefore export is often very difficult and maybe even impossible, considering the mainly
small scale and the high costs involved.
This approach could start with small steps, to begin with for example by training farmers
without the necessity to obtain a certification; but they would work in the same way. The
Government can support communities and stimulate farmers to participate. Farmers can
also be encouraged to form a farmers association. In a report written for a project from the
Asian Development Bank can be read that similar associations are quite successful as
regular suppliers of supermarkets and are also more likely to receive government support
in technical training and quality development than individual farms.
The direct cooperation between retailer/wholesaler and producer means that the producer
will receive a better price because the middleman has been cut out. It also means that
breaks in the cool chain will occur less, products will be of a better quality because of fewer
handling steps in between, and food safety will increase. If the final part of the chain has
less administrative hassle; it could even mean that prices could go down. The sector will
become more competitive and the consumer will be the overall winner of this (value) chain
approach development.
62

However, the Government also needs to be involved, especially at the beginning of the chain
with clear legislation and at the end of the chain when it comes to enforcing legislation. We
also believe that a centralised Food Safety Agency (FSA) could play a role in addressing food
safety issues.
4.6 How to address food safety issues
Food safety issues can be addressed in various ways, such as a good legal framework, a
traceability-system, IPR, pesticide control and management, good testing facilities and
effective legal enforcement.

4.6.1 Legal framework

It starts with a good legal framework and ends with enforcing the regulations. As the Food
and Agriculture Organisation writes in its guidelines on food control: "In many countries,
effective food control is undermined by the existence of fragmented legislation, multiple
jurisdictions, and weaknesses in surveillance, monitoring and enforcement."63 We fully
understand this as we believe the current legal framework is one of the main issues why it
is difficult to have an effective food safety control and enforcement. The content of the Food
Law in itself is not the problem, but the fact that at the moment many ministries and
government agencies are involved in managing chemical substances and antibiotics as well
as the management of food hygiene and safety.64
In 2013 and 2014, several regulations have entered into force.65 In particular, Joint Circular
13/2014/TTLT-BYT-BNNPTNT-BCT (Joint Circular 13) is a significant step forward as it
intends to avoid overlapping in food management by the various Ministries, but still this
does not eliminate potential confusions. For instance, if a vitamin additive is added to milk,
62
63

See (http://mpra.ub.uni-muenchen.de/42591/1/MPRA_paper_42591.pdf), page 11.

See (www.wpro.who.int/foodsafety/documents/docs/English_Guidelines_Food_control.pdf)

64

Such as the Ministries of Health (MOH), Industry and Trade (MoIT), Agriculture and Rural Development (MARD), Science and
Technology (MoST), and Natural Resources and Environment (MoNRE), as well as National Agency for Food Hygiene and Safety,
NAFFQAD; see : (cip.cornell.edu/DPubS/Repository/1.0/Disseminate?view=body&id=pdf_1&handle=dns.gfs/1265385755)
65
For example: Decree 178/2013/ND-CP dated 14 November 2013 on sanctions of administrative violations on food safety, Decree
119/2013/ND-CP dated 9 October 2013 on sanctioning of administrative violations in the domains of veterinary medicine,
livestock breeds, and livestock feeds (Decree 119) and Joint Circular 13/2014/TTLT-BYT-BNNPTNT-BCT dated 9 April 2014 on
allocation of tasks and cooperation among regulatory agencies in food safety.

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this product will fall under a different Ministrys competence than just milk, which makes it
complicated for the producer. More generally we believe clarification is needed. We are not
aware of any assessments on the impact of Joint Circular 13, the issue remains that
multiple parties remain involved in the decision-making process with regard to food safety.
In our view, this will not be as efficient and effective as having only one responsible entity.
The current system makes it also difficult to have consistency in the process of drafting,
implementing and application of the regulations. It becomes even more complicated
because at a local and provincial level the regulations are sometimes interpreted in
different ways or allow different ways of dealing with, for example, it can happen that
inspectors come check on three, maybe even four occasions and they check the same or
different things, contra-expertise is sometimes possible, but not always. This all means
that it is quite costly and time-consuming for both companies and government authorities.
This will probably result in higher consumer prices, but not necessarily higher food safety.
In our view a centralised Food Safety Agency could address and solve many of the current
food safety issues. We realise this change takes time but in the light of the FTAs we believe
it is paramount to start preparations to reach the objective of a centralised FSA. There are
some points we would like to make about the FSA as some parts of the current structure
should not be discarded.
A centralised Food Safety Agency needs to:
- incorporate current national and local structure(s) in the new structure
- harmonise and coordinate local and provincial level; and
- cooperate with neighbouring countries to address cross-border food safety issues (as
food safety does not stop at the border).
A centralised Food Safety Agency could:
- advise policy makers such as the prime minister and national assembly;
- be involved in import, export and transhipment of food requirements related to
inspection, certification and control;
- deal with food labelling and advertisement;
- license and register food traders and establishments, food processors and food
warehouse;
- organise inspections and provide input for criminal investigations related to feed and
food safety;
- report on food alerts related to the food supply chain including pesticide, fertiliser, feed,
etc.;
- provide information when necessary;
- provide education and trainings on food safety and food safety awareness; and
- assist in developing best practices related to food safety.
A centralised Food Safety Agency would:
- improve the management and quality of food safety control;
- improve and boost the reputation of Vietnamese products for consumption in Vietnam;
- reduce the likelihood of export products being rejected;
- improve and boost the reputation of Vietnamese products abroad;
- reduce costs for companies and improve (international) competitiveness;
- reduce health risks;
- support more sustainable and fair trade; and
- make enforcement of violations straightforward and transparent.
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Recommendations
- Further clarify the scope of Joint Circular 13;
- Establish a working group consisting of representatives of relevant ministries/agencies
and organisations active in the food, agri and aqua business (such as the Agribusiness
Working Group of the VBF and the Food, Agriculture and Aquaculture Business Sector
Committee of EuroCham);
- Amend the Food Law and create a centralised Food Safety Agency with one Ministry
responsible as soon as possible;
- Assign the following tasks to the Food Safety Agency:
Inspection, certification and control in relation to import, export and transhipment of
ingredients, raw material and food products
Food testing and certification;
Food labelling and advertisements;
Reporting on food alerts related to the food supply chain including pesticide, fertiliser,
feed, etc.
Licensing and registering food traders and establishments, food processors and food
warehouse;
Providing education and trainings on food safety and food safety awareness;
Assistance in developing best practices related to food safety; and
Organisation of inspections and providing input for criminal investigations related to
feed and food safety.
- Incorporate existing structures in the Food Safety Agency in order not to lose existing
knowledge and experience;
- Cooperate with neighbouring countries to address cross-border food safety issues.

4.6.2 Traceability
Another important part of achieving a good food safety environment is traceability. That is a
track-and-trace system that allows companies and authorities to know where products
have gone through the food chain. It will help to improve food safety and to avoid or mitigate
health and economic impacts.66 The economic effects are not only related to public health,
but also to businesses. The consequences of a product recall can be considerable as a
product being out of the market for a certain period of time can lead to loss of shelf space,
or in the worst case scenario to loss of customers.
Therefore it is important for a company to successfully track and trace its products through
the supply chain and retrieve them. Traceability is about risk management and mitigation,
about lowering the impact of recalls and lowering liability costs, but it is also about
regaining consumer confidence. Besides this, it is an important part in the decision-making
process by the relevant authorities in relation to closing-out a product recall.67
However, food traceability is not only about recalls. Consumers also require more
information on the origin of products and its ingredients in the whole supply chain: from the
farm to the consumer with the processing industry, and the retail and foodservice industry
in between. Finally traceability is also about reducing incidences of food fraud as well as
unintentional or intentional adulteration; disease management; and environmental
emergencies.

66

See (www.foodsafetymagazine.com/enewsletter/the-importance-of-food-traceability/)

67

See (www.foodmag.com.au/features/the-importance-of-traceability-in-your-supply-chai)

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Traceability is also important as sometimes counterfeit or illegal products regain consumer

confidence by providing information on the origin of products in the supply chain.68 In our
opinion, the centralised FSA could play an important role in this.
Recommendations
- Encourage companies to introduce a traceability system; and
- Enforce existing legislation on traceability.

4.6.3 Laboratories and testing

4.6.3.1 Introduction
Even if laws with regard to traceability would be better enforced the laboratories and
laboratory tests in Vietnam are not up to standard yet and do not guarantee safe food.69 In
light of the upcoming signing of various free trade agreements, it is especially important to
detect multi-residue levels (MLRs) to be able to export Vietnamese products to for example
the EU. However, tests that can easily detect MRLs such as a broad spectrum analysis of
active ingredients cannot be performed in Vietnam. Also a more specific analysis for heavy
metal presence is needed to focus only on those types of heavy metal that actually affect
human, animal and plant health.
Another issue is that test results from foreign laboratories are still not accepted in the
same way as test results from local laboratories, even though these international labs have
obtained a world-wide recognised accreditation, such as the International Organisation for
Standardisation (ISO) 17025.

4.6.3.2 International accreditation

On the website of the international organisation for accreditation bodies, the International
Laboratory Accreditation (ILAC)70 it reads: The arrangements71 support the provision of
local or national services, such as providing safe food and clean drinking water, (). In
addition, the arrangements enhance the acceptance of products and services across
national borders, thereby creating a framework to support international trade through the
removal of technical barriers.
According to the ILAC accreditation is The independent evaluation of conformity
assessment bodies against recognised standards to carry out specific activities to ensure
their impartiality and competence. Through the application of national and international
standards, government, procurers and consumers can have confidence in the calibration
and test results, inspection reports and certifications provided.72 This has as a result that
technical barriers should be reduced because products should be accepted across national
borders and there is no need for additional calibration, testing, and/or inspection of imports

68

See (http://www.foodmag.com.au/features/the-importance-of-traceability-in-your-supply-chai)

69

Agribusiness and Food Safety Chapter of the Food, Agri and Aqua Business Sector Committee in the Whitebook 2015 of the
European Chamber of Commerce, paragraph 3.1.4 on quality of laboratories and testing.
70
ILAC is the international organisation for accreditation bodies operating in accordance with ISO/IEC 17011 and involved in the
accreditation of conformity assessment bodies including calibration laboratories (using ISO/IEC 17025), testing laboratories
(using ISO/IEC 17025), medical testing laboratories (using ISO 15189) and inspection bodies (using ISO/IEC 17020). See for more
about ILAC at (ilac.org/about-ilac/).
71
Arrangements = Multi-Recognition Arrangement (MRA) Accreditation bodies, that have been evaluated by peers as competent,
sign arrangements that enhance the acceptance of products and services across national borders, thereby creating a framework
to support trade.
72
See (ilac.org/about-ilac/)

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and exports. ILAC Multi-Recognition Arrangement (MRA) could promote international trade
and the goal of accredited once, accepted everywhere can be realised.73
This means that accreditation bodies could play an important role in ensuring safe food. In
Vietnam there is an accreditation body. However, the problem is not only legal enforcement
of existing regulations, but also the fact that results from accredited labs, established in
Vietnam or elsewhere, foreign or Vietnamese, are not recognised in Vietnam while this according to the ILC MRA - should be the case.

4.6.4 Vietnam Laboratory Accreditation Scheme

4.6.4.1 Introduction
The Bureau of Accreditation (BoA), established in 1995 under the Ministry of Science and
Technology (MoST), offers accreditation programs for laboratories, certification bodies and
inspection bodies.74 One of the schemes offered is the Vietnam Laboratory Accreditation
Scheme (VILAS). This scheme is established under the Directorate for Standards and
Quality (STAMEQ).75 VILAS follows the requirements of the ILAC and Asia Pacific Laboratory
Accreditation Cooperation (APLAC)76. This should mean that VILAS needs:
- to maintain - amongst others - conformance with ISO/IEC 17011; and
- to ensure that all its accredited laboratories and inspection bodies comply with relevant
ISO/IEC schemes.77
However, it seems that the requirement under 2 is not always maintained in Vietnam as it
appears to be quite easy to obtain and keep an accreditation without the proper regular
checks.

4.6.4.2 Accreditation
Before a laboratory, foreign or local, can be active in Vietnam it needs to be accredited
according to the VILAS scheme. This means the labs are accredited in accordance with the
STAMEQ regulations and ISO/IEC. When a lab is accredited according the VILAS scheme it
does, however, not mean that automatically all organisations/ministries accept the results
of the labs. Depending on the kind of test a lab would like to perform it would need
additional accreditation of for example Quatest, Vietnam Food Administration (VFA), the
Ministry or Department of Health, etc. Sometimes this only means that they check if a lab is
accredited according VILAS, while it takes time and costs money before this additional
accreditation is obtained.

73

See (http://ilac.org/ilac-mra-and-signatories/), SO/IEC 17011 on Proficiency testing (for accreditation bodies). Clause 7.12.1
(ISO/IEC 17011) The accreditation body shall have and apply procedures to demonstrate the competence of its accredited
laboratories by their satisfactory participation in proficiency testing activity, where such activities are available and appropriate.
Where such activities are available and appropriate, the minimum amount of proficiency testing shall be specified. The amount of
proficiency testing and frequency of participation have to be seen in relation to other surveillance activities.
Clause 7.12.2 (ISO/IEC 17011) The accreditation body may organize proficiency testing or other inter-laboratory comparisons
itself or may involve another body, judged to be competent.
Clause 7.12.3 (ISO/IEC 17011) The accreditation body shall ensure that proficiency testing activities that its accredited or
applicant laboratories have to undertake are effective, linked to the assessment process and appropriate corrective action are
carried out when necessary.
74
See (www.boa.gov.vn/)
75

STAMEQ has responsibility for advising the Government on the scientific, technical and legislative requirements of the national
measurement standards system and has specific responsibilities for coordinating the national measurement standards system,
and legal metrology.
76
Asia Pacific Laboratory Accreditation Cooperation, APLAC is a cooperation of accreditation bodies in the Asia Pacific region that
accredit laboratories, inspection bodies and reference material producers https://aplac.org/
77
ILAC is the international organisation for accreditation bodies operating in accordance with ISO/IEC 17011 and involved in the
accreditation of conformity assessment bodies including calibration laboratories (using ISO/IEC 17025), testing laboratories
(using ISO/IEC 17025), medical testing laboratories (using ISO 15189) and inspection bodies (using ISO/IEC 17020).

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4.6.4.3 Foreign labs

It, however, also does not mean that companies or foreign or national inspection services
can use these labs to have their products checked when they want to obtain a license to
import or export their products. For this they would need to use local Vietnamese labs.
Often they would use foreign labs present in Vietnam, such as SGS, Bureau Veritas,
Intertek, TUV or InvivoLabs. Reason for this is that the company exporting Vietnamese
products would like to be sure the standards for import in their home country are met with
regard to multi-residue levels of for example hormones, pesticides and levels of heavy
metals. They would not risk the products being rejected at the border and not being allowed
to enter the country.
According to the Vietnamese law producers, importers and exporters can only use certain
(Vietnamese) inspection services, such as VinaCert, VinaControl or NAFIQAD.78 These
inspection services can only use the Vietnamese labs such as Quatest 1, 2 or 3, VinaControl,
Case, EDC or NAFIQAD. Foreign inspection services such as Intertek, TUV, Control Union,
Bureau Veritas, Asia Inspection and SGS are used by exporters and they often will use the
foreign labs.

4.6.4.4 Mutual recognition

If an importing company provides a lab test or inspection report by a foreign lab or
inspection service it is not recognised and the testing needs to be done in Vietnam. Even
when the results of the Vietnamese lab have as a result that the license is not given and the
results of the international lab would prove the opposite result, they cannot be submitted.
This working method is not in line with the goal of ILAC: accredited once, accepted
everywhere. We believe this should be changed. However, in order to achieve that and
Vietnamese labs having the same level as foreign labs another issue needs to be
addressed: proficiency testing.

4.6.4.5 Proficiency testing

In order for a laboratory to know if its performance is in line with other labs, and results do
not deviate from other labs it is important for labs to participate in proficiency testing. For
this a lab will send samples to other labs and it will receive samples from other labs to test.
The results will be collated and evaluated centrally and the standard will be set. Each lab is
informed of this result and its performance in relation to the other participating labs and
the results of the test. However, a problem in Vietnam is that labs are accredited by VILAS
but the requirements as set by ILAC and APLAC are not strictly followed. For example labs
are not required to participate in proficiency tests following a global standard. Currently
some proficiency testing is done within Vietnam, however, the level is too low and this
means that results do not have the same value as of international labs participating in
global proficiency tests.79 This makes it difficult to compare results as the methods might
differ from methods used by other labs. It is also not guaranteed that the results are
reliable as the methods are not always according to the agreed international standards.

78

It depends on the product which inspection services can or needs to be used.

79

A proficiency test is one of the best ways for a laboratory is to monitor its performance it to participate in proficiency testing
scheme. Proficiency testing is a type of inter-laboratory comparison exercise in which samples are circulated to the participating
laboratories, results are then collated and evaluated centrally. Each laboratory is then informed of its performance relative to
the other laboratories in the scheme and relative to either true or consensus result for the sample. Performance is usually
quoted in terms of the number of standard deviations between the achieved value and the consensus or true value. In some
schemes participants are given a pass/fail rating, see (www.labnetwork.org/en/testing-areas/chemical-lab/108-proficiencytesting)

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4.6.4.6 Range, kinds and methods of tests and testing

Many key measures linked to laboratory performance and quality, are being implemented.80
However, as there are many laboratories belonging to multiple entities with different
responsibilities, those measures and programs may not be implemented in a uniform way
which should be avoided. The way testing currently takes place is costly, time-consuming
and often no guarantee for detection of food safety issues. If the current system can be
changed, it will be cheaper for companies which will probably result in a lower consumer
price, but certainly in higher food safety. This will make Vietnamese products more
competitive. We believe that to improve food safety and competiveness of the sector it is
paramount that the quality of laboratories improves, while testing methods should be
modernised and brought to international standard. The problem is though that not all tests
can be performed in Vietnam and that the range of what can be tested is still limited.81This
means that products being exported sometimes will be rejected because too high levels of
pesticides, hormones, heavy metals. It also happens that despite positive test results a
product is still considered unsafe and will be destroyed.82
Testing methods are also not always in accordance with modern and international
standards or the equipment is not up-to-date enough to test adequately. Testing food
products, imported or local, for contaminants such as bacteria, total plate count, yeast and
mold for the purpose of food safety and food microbiological quality is for example done
through so-called traditional methods (growing sample bacteria in petri dishes). These
procedures are complicated and time-consuming, which causes companies to be less
competitive. New technology is needed as well, to increase the ability to detect residue of
antibiotics and pesticides in food.
Another issue is that there is no lab in Vietnam that can perform a broad spectrum analysis
of active ingredients (AI), the lab needs to be told for which AI the product needs to be
tested.83 The test also takes longer than in Europe where in a short time the result is
available of which of the 500 AIs are found. At the same time it is problematic that test
results of foreign laboratories certified to perform specific tests on food safety are not
accepted in the same way as test results from local laboratories.
Besides this, the test method does not always guarantee safe food. For example sanitary
and phytosanitary requirements on heavy metals, such as mercury and arsenic, should not
be tested for the total concentration of heavy metals. More specific analyses, focusing only
on those species of heavy metals that actually affect human, animal and plant health are
needed. Reason for this is that certain harmful species of heavy metals can be very present
and concentrated while the total concentration is still acceptable. The current, general
testing method is not in line with international and EU standards.
The way of taking samples can also be improved; now often samples are not taken
randomly but are prepared by companies. Further to this, it can become quite expensive if
you need to test things that currently cannot be tested in Vietnam. The whole process is
further complicated by the fact that you might need a license to export samples.
Besides this it is problematic that if third party labs are certified to perform specific tests,
80

International programs financed by JCEA, UNIDO, WHO, GTZ, etc. and national programs.

81

See (http://pops.org.vn/UserPages/News/detail/tabid/138/newsid/833/language/en-US/Default.aspx)

82

See (vietnamnews.vn/society/258756/probe-launched-into-customs-food-tests.html)

83

An active ingredient is a component that can affect the structure or any function of the body of a human-being. The active
ingredients list is the part of the ingredient label that must adhere to specific regulations mandated by food safety agencies.

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the results should be accepted and approved in the same way as local ones. For example,
the result of Quatest 3 is always considered as the final result in order to import goods into
Vietnam, even though there might be test results from an international lab. We already
mentioned that it can even happen that a test result is wrong, but a contra-test is not
accepted or possible. In order to improve the quality of laboratories we would like to point
out the outlines drafted by Food Law Enforcement Practitioners (FLEP).84
Another issue is that sometimes product receive permission to be imported as all the test
results are according to specification. However, when the company subsequently would like
to obtain a permit to sell the product the product is not according to specification anymore.
It is not clear though where the problem if there is really one starts and why at first
there is no problem but later there is.
Finally, a problem is that under Circular 128/2013/TT-BTC, quarantine and food safety
testing must be carried out at a customs checkpoint. The facilities at such customs
checkpoints are often insufficient, causing delays which have a big impact on the product,
as the cold-chain is broken. So this requirement causes food safety issues as well as
financial damages for the company. In our view the FSA as described above could also play
a role in improving the current system.
Recommendations
- Change the law so that all labs in Vietnam, being local or international, use the same
internationally recognised and standardised testing methods;
- Promote the VILAS accreditation scheme and use that as the only scheme;
- Take measures to improve the reputation of labs in Vietnam;
- Encourage enforcing the requirements to remain VILAS accredited;
- Accept results of a (foreign or Vietnamese) lab that is accredited according to
international standards in the same way as test results are accepted for local
laboratories without the need to do another test in order to obtain a license or certificate;
- Increase the testing methods available in Vietnam
- Harmonise the working methods of laboratories and develop best practices.
- Take care that current initiatives are implemented in a harmonised way
- Reduce red tape when laboratory tests need to be done abroad;
- Amend testing requirements in such a way that a speciation analysis is requested for
heavy metal;
- Test the species of the heavy metals on harmfulness with regard to mobility,
bioavailability, and bioaccumulation;
- Encourage upgrading of testing methods and facilities to be in accordance with modern,
international standards such as accredited by ISO, AFNOL, AOAC to ensure accurate
testing results, prevent any undue delay and/or arbitrary or unjustifiable discrimination;
- Allow importing companies to store frozen food products in their own or neutral storage
facilities for quarantine and food safety inspections in order not to break the cold-chain;
- Allow products that can be legally used in other countries, to be imported into Vietnam
without additional documents; and
- Enforce existing laws, especially if public health is affected.

84

See (www.flep.org/downloads/Products/Enforcement/Official_labs.doc). FLEP is a forum which brings together representatives

of European food control authorities, exchange information, address inconsistencies and explore practical enforcement
difficulties.

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4.7 Legal enforcement

In the earlier mentioned report of the FAO it reads: "Sound food safety legislations and
policies are meaningless unless they are effectively enforced through monitoring of
inspection service."85
Even if, in principle, the legal framework in its current form allows for higher food safety,
we believe that the main problem lies in enforcing compliance. In our view the lack of
effective enforcement and too low fines contribute to low food safety. Infringers calculate
the costs of getting caught and having to pay a low fine and the costs to comply with the
rules.
An example used to illustrate difficulties with enforcement of food safety standards in
Vietnam is related to potassium bromate (E924), an additive often used in the bread-baking
industry. It has been banned in the EU since 1990 and in many countries world-wide, as it is
carcinogen and can be replaced by other products.86 It is not on the list of authorised
additives in the food industry in Vietnam either. Despite verbally agreeing that such
additives should not be used, Government agencies do not seem to be willing to issue a
statement in writing that the additive is not allowed. Such a document could make
enforcement easier, although problems have been identified with the enforcement of the
regulation by relevant authorities. Considering the negative effects of potassium bromate
on public health we believe that the authorities should enforce the regulation and no longer
allow use of this additive. In other countries the authorities managed to ban the use of the
product. Therefore, we believe it is also possible in Vietnam, especially as it is very easy,
quick and low-cost to check if the additive is present. No highly equipped laboratory is
needed; it is possible to do a simple test on-site. Enforcing the ban of this additive will
improve, or at least not damage, the health of the population; not only the people working in
the bread-baking industry, but in general. It can be done without losing the possibility to
bake bread as alternatives exist.
Another issue is that several small animal-feed manufacturers add growth hormones to pig
feed. This is done to shorten the growth period of the animal, to make the animal look
better (before selling), and to have leaner meat. However, the use of these hormones has
damaging effects on the health of consumers.87 Because of the carcinogenic risks, the use
of growth hormones has been banned in the EU since 1989. The use of growth hormones is
not allowed in Vietnam either, but often enforcement of this regulation is weak. In 2014,
several provinces in North Vietnam have strictly enforced the regulations forbidding the use
of these hormones.88 This has discouraged many producers from putting growth hormones
in animal feed and many farmers no longer buy this animal feed.89 However, in 2015 the
problem seems to be even more problematic than before and is said to be mainly an
enforcement problem.90 Therefore we ask the Government to enforce existing legislation
strictly and even make it more severe. Companies will infringe regulations less as there is
no cost advantage anymore. In short, food safety improves. This will also make export
easier, as there will be fewer issues with food safety causing the products to be refused.
And the health risk decreases which saves costs within several years.
85

Ibid.

86

See (www.ncbi.nlm.nih.gov/pmc/articles/PMC1567851/)

87

See (www.com/consumers/general/hormones_meat.htm) and (ec.europa.eu/food/fs/sc/scv/out21_en.pdf)

88

See (vietnamnews.vn/society/259271/pig-farmers-targeted-in-chemical-probe.html)

89

Decree 119 and see (www.iasvn.vn/san-pham/tin-thi-truong/cong-ty-thuc-an-chan-nuoi-dung-chat-cam-da-co-gay-nhung-aixu.html)

90
See (english.vietnamnet.vn/fms/society/140769/pork-safety-risk.html)

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These are just some examples, but there are unfortunately many more that could be
mentioned here. The guidelines developed by the FAO seek to provide advice to national
authorities on strategies to strengthen food-control systems to protect public health,
prevent fraud and deception, avoid food adulteration and facilitate trade.91 These could be
taken as a starting point to strengthen the enforcement in Vietnam.
Recommendations
- Allow products that can be legally used in other countries, to be imported into Vietnam
without additional documents; and
- Enforce existing laws, especially if public health is affected.
4.8 Conclusion
We believe that food safety is important for the following reasons:
- Food safety is an opportunity to upgrade quality standards;
- Food safety increases the probability to successfully meet foreign standards;
- Food safety drives the upgrade of the agriculture sector to ensure the quality of
processed food products and the productivity;
- A food safety crisis can be a financial disaster: sales suffer, costs of recall of products,
fines, public relation expenses, etc.;
- Communication about a food safety program helps to reassure existing customers and
secure prospective ones;
- A more efficient and effective food safety management and enforcement will:
improve food safety;
boost exports;
reduce costs; and
make enforcement of violations straightforward and transparent.

91

See (www.wpro.who.int/foodsafety/documents/docs/English_Guidelines_Food_control.pdf)

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3.2. EDUCATION
& TRAINING

Education & Training Working Group - Position Paper

Vietnam Business Forum, 2015

EDUCATION AND TRAINING POSITION PAPER

Prepared by
Education and Training Working Group
Vietnam Business Forum
Executive Summary
The Vietnamese economy continues to grow and in order to sustain this growth at desired
levels the need for quality education and training is imperative. Vietnam needs to improve
the productivity of its workforce and although a challenge at the present time with effective
strategies it can become an opportunity. This will be best achieved through a coordinated
effort by all major stakeholders lead by the Vietnamese Government.
The paper focuses on two main areas firstly, Decree 73 and secondly, issues relating to
Technical and Vocational Education and Training (TVET).
Decree 73 applies to foreign investment and cooperation projects in education in Vietnam.
The quality of education in Vietnam has been an issue and this can be improved, in part, by
attracting foreign institutions that have a record of delivering quality education.
A number of issues and recommendations have been raised and made to help make decree
73 more effective in establishment of quality education institutions in Vietnam.
Having effective TVET institutions lays the foundation for economic growth by supplying
work ready graduates with the necessary knowledge, skills, and attitude to make a positive
contribution in the workplace. To achieve this it is necessary to know what competencies
are needed by industry and then developing and delivering curriculum to produce the
graduates that industry needs.
The capacity of the institutions needs to be raised to the required levels to be able to
produce these graduates. This requires training of TVET staff in areas such as leadership,
curriculum development, market research and analysis etc. In addition, TVET institutions
need to be able to attract capable students and the development of a National Qualifications
Framework (NQF) and a single articulation system for Vietnamese education.
In conclusion the Vietnamese economy continues to grow and this is of benefit to the
citizens of Vietnam. There are opportunities for Vietnam, however, it needs a highly
competent workforce to drive growth in the economy.
Quality education and training is required and this would also require the combined efforts
of relevant stakeholders working closely together to find effective solutions. The Education
and Training Working Group, through the VBF, will continue with its commitment to assist
Vietnam in achieving it economic potential.

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1.
Introduction
The Vietnamese economy is entering a new era with the formation of the ASEAN Economic
Community (AEC) and the Trans Pacific Partnership (TPP). This should lead to many growth
opportunities in the Vietnamese economy. However, in order to take full advantage of these
opportunities the Vietnamese workforce needs relevant knowledge and skills. The size of
the Vietnamese workforce has been a key factor in Vietnams economic growth, however,
this cannot continue. Vietnam needs to focus on making its workforce more productive.
A recent report from the International Labour Organisation (ILO) showed that Vietnams
labour productivity rate in 2013 was among the lowest in Asia Pacific. It was 15 times lower
than Singapore, 11 times lower than Japan, and 10 times lower than South Korea. In
addition, another report stated that despite considerable improvement in recent years,
Vietnams labour productivity is lagging decades behind regional countries. The opportunity
for Vietnam is to increase the skills of its workforce to rapidly improve the productivity of its
workforce.
The World Bank report Skilling up Vietnam: Preparing the workforce for a modern market
economy states that Equipping its workforce with the right skills will, therefore, be an
important part of Vietnams effort to accelerate economic growth and further its economic
modernization in the coming decade and more. Therefore, efficient and effective education
and training is integral to the development of the Vietnamese workforce and economic
growth.
The success in improving the quality of education and training in Vietnam will require the
combined efforts of relevant stakeholders working closely together to find effective
solutions. The Education and Training Working Group, through the VBF, will continue with
its commitment to assist Vietnam in achieving it economic potential through improvements
in education and training.
This report will focus primarily on Decree 73 and the Technical and Vocational Education
and Training through the identification of relevant issues and opportunities to improve.
2.
Decree 73
Decree 73 replaces Decree 06, and applies to foreign investment and cooperation projects
in education and vocational training in Vietnam including foreign-invested tertiary
institutions, schools and kindergartens, twinning programs, and representative offices of
foreign education institutions. We firmly believe that the most important goal is to have
quality graduates entering the workforce and that Decree 73 is integral in this respect. The
following are the main issues raised by the education and training working group with
proposed recommendations.
2.1

Licensing-related issue

2.1.1 Requiring 3 kinds of licenses

Under the Decree 73, the working group views it as being much more complicated than in
the past, as it requests to have an investment license, then an establishment license, then
an operations license. This applies even when setting up a branch of an already licensed
organization. A lot of paperwork/steps are repeated during these processes and assessed
by many of the same departments. This results in an inefficient use of time for
investors/organizations and agencies issuing licenses.
New investors to Vietnam, as well as current investors, feel that it is far too onerous to
overcome all these complicated licensing procedures. In addition, this is in contradiction
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with what was stated by the Government and National Assembly on the investment law (i.e.
simplifying administrative procedures for investors).
The license application now has 3 steps instead of 2 like before (the additional step is the
establishment license). The application required is exactly the same for all 3 licenses and
involves the same departments for approval, which is duplicating processes and, therefore,
simplification is strongly recommended.
The investment certificate requires the involvement of 7 departments/government bodies
including the Department of Planning and Investment, the Department of Education and
Training (DOET), the Construction Department, the People Committee of the District (they
need to get 2 more Departments approval: the Architects Department, and the Fire
Department then finally approval by the Peoples Committee.
The establishment license requires the involvement of 3 departments/government bodies,
which are DOET, the Provincial Peoples Committee, and the Department of Internal Affairs.
The operations license requires only the approval of DOET.
Recommendation
Retain the two-step process previously provided in Decree No. 06 and Circular 14.
2.1.2 The list of application documents
Currently, the list of application documents is not clearly understood and it leads to
licensing authorities requiring similar documents for 3 kinds of licenses. This poses a big
challenge for investors.
For example, at the stage of applying the establishment license, the completed profiles of
foreign teachers that need to be submitted, include their work permit and labour contract
However, the foreign invested educational institution are not allowed to start operating until
the operation license is granted.
Articles 38 and 48 of Decree 73 states that it needs 60 working days to issue the
establishment license and 32 working days to issue the operation license. Therefore, the
total duration is 92 workings days, approximately 4 months. This means that the foreign
invested educational Institution must pay 4 months salary to these teachers until they
obtain the necessary licenses to commence operations.
Recommendations
- That the documents required to obtain each type of license are clarified.
- Circulars to guide the implementation of the Decree 73 need to include clear penalties
when government officials process applications in order to avoid time-consuming delays
and unnecessary costs for investors.
2.1.3 Inspection the facilities of foreign invested educational Institution
Due to ambiguous regulations in Decree 73, licensing authorities need to conduct a number
of inspections of the facilities before issuing each license. Prior to commencing operations,
each educational institution will have 3 inspections by three different licensing authorities
at the same location. This is an inefficient use of both time and manpower for both investors
and licensing authorities.

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Recommendations
Decree 73 should include provisions that classify at which period of the license application
the facilities of the foreign invested educational institution need to be inspected.
2.2
The limitation on the percentage of Vietnamese students. (Article 24)
The limited percentage 10%, 20% of Vietnamese students allowed to join international
schools as per provided in Article 24 of Decree No.73 are extremely unreasonable because
of some reasons:
The demand of Vietnamese students in international school is more and more increasing. If
the Government does not allow them to join international schools in Vietnam, they will go
oversea. In fact, the number of Vietnamese students go to overseas for study is increasing
every year with current now is more than 110.000 students in 47 countries with the school
fee is from 30,000 USD to 40,000 per year. Vietnamese is exporting about 3 billion USD every
year to overseas for education.
With this limitation, the foreign investment in education is closed in second-tier cities of
Vietnam because the calculation of percentage 10%, 20% of Vietnamese students allowed to
join international schools is based on the number of foreign enrolled students. If the foreign
invested institutions have no foreign students, then no Vietnamese students can enrol. The
fact is almost second-tier provinces besides Hanoi and Ho Chi Minh where have a few
foreigners come to work and live, it seems having no foreign students for enrolment, it
shall have no Vietnamese students are allowed to study. As consequence, foreign
investment in education is closed to second-tier cities in Vietnam.
Some concern that a great number of Vietnamese students studying at international
schools will lead to the loss of Vietnamese cultural identity. However, this seems to be a
conservative opinion because if these students are not allowed to enrol at international
schools in Vietnam, they will go abroad upon their demand. And therefore, the Vietnamese
cultural identity will be more difficult to be maintained. Furthermore, some subjects such
as: History, Geography, Literature and Vietnam study are compulsory in international
schools.
Recommendation
The quality of the Vietnamese education system needs to improve and to achieve this the
presence of foreign investment in education is very necessary. The Government should end
this limitation but add more conditions to ensure that Vietnamese students in international
schools to learn and retain their Vietnamese culture and traditions.
2.3
Article 74 Point 1
The following is stipulated in Decree 73.
Implementation Provisions - Article 74. Transitional provisions

1.Foreign-capitalized educational institutions and their campuses that have been issued
with the Investment certificates concurrently, the Business registration certificates and the
Licenses to provide education before this Decree takes effect are exempted from
reappraisal, but must supplement and complete the dossiers within 06 months since the
effective date of the Decree in order to be issued with the Decisions on approving the
establishment of educational institutions and campuses

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Recommendations
If the establishment license is still retained, we respectfully recommend the Ministry to
amend Article 74 of Decree 73 as recommended below so that non state higher education
organizations can obtain a decision on approving the establishment of educational
institutions and campuses in a timely manner.
Currently, some members of the Education and Training Working Group are preparing
dossiers following the requirements as set out in this Article. However, officials are
requesting that new requirements under Decree 73 must be met instead of requirements
under Decree 06. We respectfully request that the Ministry indicates in the guiding
regulations of Decree 73 that it does not require retroactive applications when applying for
the decision.

Suggested modification to Article 74.1.

1. Foreign-capitalized educational institutions and their campuses that have been issued
with the Investment certificates concurrently, the Business registration certificates and the
Licenses to provide education before this Decree takes effect are exempted from
reappraisal, but have to submit an application for establishment license and report actual
activities in the last 3 years must supplement and complete the dossiers within 06 months
as from this Decree takes effect in order to be issued with the Decisions on approving the
establishment of educational institutions and campuses.
2.4
Implementing the transitional provisions on enrolment of Vietnamese students
and teaching international curriculum (Article 12, Circular No. 34)
Clause 2: The foreign invested schools who already owned the pilot license on teaching
international curriculum and bilingual language for Vietnamese students issued by the
competent authorities before the effective date of Decree No. 73 shall be permitted to
continue the issued pilot license. However, there is inconsistent application between the
DOET by DOET. Some accepted and followed this guidance while others did not accept it
with the opinion that it is only pilot license.
For example: Previously, in accordance with Decree No. 06 and Circular No. 14, the foreign
invested schools were allowed to provide educational service for Vietnamese students at
senior high school level but only piloted in Hanoi and Ho Chi Minh city. Based on this
regulation, the schools had been granted the pilot license from Department of Planning and
Investment and Department of Education and Training provide educational service for
Vietnamese students at senior high school level but only piloted in Hanoi and Ho Chi Minh
City.
In accordance with Article 12 of the Circular No. 34 as abovementioned, we understand that
the schools who already obtained this pilot license shall be permitted to continue that one.
On 08 July 2014, MOET issued Official Letter No. 4774 to re-confirm about this matter.
However, in fact, some DOETs accepted and followed this guidance while others did not
accept it
Recommendation
We would like to request MOET to have instructions to all DOETs for consistence

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2.5
Invested Capital (Article 28.6)
Article 28.6: The projects of investment in establishing higher education institutions must

reach at least 150 million VND per student (not including the expense on land tenancy). The
total minimum capital is calculated when the estimated education scale is greatest, but
must not be lower than 300 billion VND.
This provision lacks clarity and creates confusion for investors.
Recommendations
It is requested that the total invested capital to be calculated based on the total number of
full-time equivalent students, instead of basing it on the time when the estimated education
scale is greatest. In reality, the total education and training capacity can be 3 times greater
than the total number of full-time equivalent students.
In addition, the total invested capital for the project will be disbursed through each stage of
the projects expected implementation. Thus, the invested capital must be registered on the
investment certificate based on each implementation stage.
2.6
Conditions for approving educational activities (opening a new degree program)
The establishment of disciplines of university and college is prescribed in Circular No.
08/2011/TT-BGDDT dated February 17, 2011 of the Ministry of Education and Training
stipulating conditions, dossiers, procedures for opening disciplines of training university,
college level. However, this regulation on establishing disciplines is very complicated and
not in accordance with foreign-invested educational institutions.
Recommendations
- It is proposed that there should be separate regulations on establishing educational
disciplines of foreign-invested educational institutions.
- We respectfully request to make the guiding regulations of Decree 73 clear in term of
establishing new disciplines for foreign educational institutions to come under one set
of separate regulation OR, as an alternative, to come under the existing regulations on
establishing new disciplines under colleges and universities issued by the MOET.
2.7
Facilities and equipment (Article 29)
Not all students are present at campus at a single point of time. A student may register
from one to four courses per semester, and thus shall attend class for 3-12 hours per
week. Students will have to spend time for preparation and doing assignment that do not
require them to be present at the campus. Therefore, stipulating minimum land/floor
areas for students without taking into account the number of students present at the
campus at a point of time is not reasonable, and may bring higher costs to education
institutions that will then increase tuition fees.
Recommendations
Minimum land/floor areas for students should not be specified in proportion to number of
students. Decree 73 should be amended to provide that the minimum land/floor areas for
students should be in proportion to the maximum number of students present at the
campus at a point of time, and not simply in proportion to number of students.
Furthermore, the facilities and equipment requirements on non-state higher education
student ratio etc. may become an increasing challenge with land pressures. Therefore, we
suggest greater transparency in how the specific ratios were determined; perhaps this ratio
could be lowered.
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2.8
The lack of a legal framework for extension of operation term of educational
institution
Decree 73/2012 regulated that if the educational institution registers its operation term for
more than 20 years it must meet the condition of construction its own buildings. There is no
requirement of construction its own buildings if it registers for less than 20 years.
However, the decree does not mention the situation where the operation term of the
educational institution has expired. In this case, the licensing authority will add the previous
term to the extended term, and is the total is greater that 20 years then the conditions of
construction of its own building will apply. This is deemed very unfair and needs to be
revised.
Recommendations
- We respectfully request the MOET to amend Article 29.6 of Decree 73 as follows: A

foreign-capitalized educational institution that register or applies for extension of

operations license for less than 20 years do not have to build their own facilities.

The amendment to Decree 73 should add more regulations on registering extension the
operation term is less than 20 years, will not require construction of its own buildings.

2.9
The teaching staff (Article 31)
2.9.1 Minimum qualification of instructors
We are very much concerned about requirements for teaching staff being too
high/challenging for some transnational education delivery especially:
- For tertiary education institutions, 60% of course modules must be delivered by
permanent teachers, and 80% of teaching staff must hold postgraduate degrees.
- Article 10.2.b. mandates the minimum qualification of instructors at college level to be a
master degree.
Recommendation
We respectfully request the Ministry and the Government to re-consider amending this
clause to reflect the reality that professional instructors in a range of fields may not have
post graduate education. However, they earn their expertise and mastery through years of
practicing, which may be certified by a professional association. Their instruction is
indispensable to the students in the program. Examples of those fields include culinary art,
performing art, and fashion design amongst others.
2.9.2 Years of teaching experience of foreign lecturers
A number of foreign lecturers are highly experienced experts in their professions,
especially in design, fashion and textile programs. However, they do not possess 5 years of
teaching experience in the same teaching area. As the requirements for study in those
programs have increased, we have tried hard to find appropriate candidates with 5 years of
teaching experience in the same teaching area, but still are not be able to recruit sufficient
lecturers meeting these requirements
Recommendation
It is recommended that Decree 73 be amended to decrease number of years of teaching
experience of foreign lecturers in special teaching areas such as design (digital media),
fashion (merchandise management) to less than 5 years. The combination of experience
and qualifications in the relevant field should be considered.

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2.9.3 Requirements for recruitment of English language teachers

As with the case of foreign lecturers in special teaching areas as mentioned above, the
recruitment of English teachers has been difficult due to scarcity of supply in the
Vietnamese market. In reality, very few English teachers possess Bachelor degrees in
linguistics or English language teaching (as required by Decree 73).
Moreover, we need to recruit seasonal or part-time English teachers who are currently
teaching at some other foreign language centres, as long as they meet our qualification
requirements. Even though they have already obtained work permits to teach at other
centres, we must also submit another complete work permit application package for
obtaining another work permit for such sessional or part-time English language teachers
(as required by Decree 102). Such regulations and administrative procedures have been
very time consuming and costly for our operations.
Recommendations
Our recommendations are as follows:
- Recruitment of English teachers who possess Bachelor degrees in any field of study (not
necessarily in linguistics or English language teaching), as long as they are native
English speakers; and
- Part-time or sessional English language teachers to use one work permit to teach
at multiple schools or language centres.
2.10 The lack of a legal framework on operation area of foreign-invested educational
schools (kindergarten to senior high schools) after obtaining the operating license and
starting operations
Currently, there is only Decree 73/2012/ND-CP governing INVESTMENT but there is no
clear regulations in place at this time governing the OPERATIONS of schools (kindergarten
to senior high schools). Therefore, during the operations of educational institution, it is not
clear of what regulation will be applied that lead the different authorities will have different
opinions on regulation application. Even some authorities used the regulations applicable
for local school to apply for foreign invested school with the view that foreign invested
school must meet minimum regulations of local schools.
For example: with regard to the appointment and recognition of a school principal, different
authorities have different opinions. Some authorities have asked that the principal is
required to be registered and formally recognized while others advised that there is no
need to for formal recognition when it is autonomic decision of school.
Recommendation
We recommend having transparency and clarity in the legal documents that regulate the
operation area of foreign-invested educational institutions. Furthermore, there should be a
clear classification between foreign-invested educational institutions and 100% Vietnamese
institutions to avoid misunderstanding and wrong application. Without the clarity, it will be
difficult for state authorities to manage effectively the area of foreign-invested educational
institutions.
2.11 Hospitality education
We also respectfully request the Ministry to add new clauses to address the absence of a
legal framework to allow a university to operate a commercial restaurant or hotel as a
practicum facility where full time training takes place. This format of hospitality education
enables students to conveniently and smoothly learn theory, to practice with real
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customers, and to return to theory afterwards. This format requires the learning
environment to be the same as the practical one, where real customers are served. There is
a great need for teachers with experience in the field and that students have the opportunity
to practice in the field to become work-ready graduates.
3
Technical and Vocational Education and Training (TVET)
In order to improve the Vietnamese economy and to take advantages of the opportunities
from membership of the AEC and TPP, Vietnam will need a high-skilled workforce. The
Vietnamese Government has put vocational skills training and boosting employment at the
heart of its development goals. Its plan is that by 2020, trained skilled workers will make up
55% of the labour force. The Government also wants to tailor its vocational training more to
the needs of the business community, so it is promoting the expansion of vocational
education and training provision and improvements in the quality and needs-based focus of
training. The Government also wants to tailor its vocational training more to the needs of
the business community, so it is promoting the expansion of vocational education and
training provision and improvements in the quality and needs-based focus of training.
3.1
Meeting industry needs
In order to reduce the mismatch of skills demand and supply at the technician level,
Technical and Vocational Education and Training (TVET) institutions should make more
effort to improve training programs by carefully analysing the needs of industry. This will
ensure that graduates from TVET institutions have the skill sets required by industry both
now and in the future.
To accomplish this would require coordination between the MOET, MOLISA, TVET
institutions, Industry and also the involvement of initiatives funded by foreign governments.
The Vietnam Development Partnership Forum (VDPF) TVET sector network organized by
GDVT would also be able to provide support here in addition to other areas of TVET
activities.
Recommendation
It is recommended that the skills needs of Vietnamese industry be identified to provide the
TVET institutions with the market knowledge they need to develop appropriate curriculum
for the market. The colleges should be involved in identifying the needs of industry to meet
local demand and have autonomy to link more closely with industry.
3.2
Building the capacity of TVET Institutions
In addition to identify in the needs of industry the capacity of the TVET institutions needs to
be raised in order to provide them with the capability to meet the needs identified in 3.1
above. Areas including the following need to be addressed:
- Organization and Management
- Vocational Teachers and Teacher Development
- Quality Assurance and System Accreditation
- Curriculum development
- National Skills Standards and Certification
- Assessment and Certification
There are already a number of initiatives underway including the following:
- The Vietnamese Skills for Employment Project (VSEP) - Canada
- Vietnamese - German Programme Reform of TVET in Viet Nam
- Japan International Cooperation Agency (JICA)
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- The Higher Engineering Education Alliance Program (HEEAP) - USA

Recommendations
- It is recommended that the Vietnamese Government liaise with the various initiatives
mention above and other initiatives to have a coordinated approach to the capacity build
of the TVET institutions. It would also help the various projects focus on their outcomes
while taking into account the outcomes of the other initiatives. It would also help reduce
overlap.
- The Vietnam Development Partnership Forum (VDPF) TVET could help with this
coordination work.
3.3
Attracting students into TVET institutions
One of the issues facing TVET institutions is the fact that high school students want to go
directly into University. In addition, it is now easier to enter University due to the lower entry
requirements. University degrees are held in high regard even though many graduates with
University certificates are unable to find relevant work.
The formulation of a single articulation system for Vietnamese education would also help to
make TVET more attractive. The reform of the TVET system needs a coordinated,
articulated approach so that students training is not dead-ended and they system as a
coordinated whole will attract high-achieving students into careers with a future.
Recommendations
- In order to persuade more high school students to become interested in vocational
training programs, it is suggested that the Government should improve the paths that
vocational college graduates can use to transfer to university courses. It is
recommended that the Vietnamese Government continue working on a National
Qualifications Framework (NQF) so that students undertaking studies at TVET institution
can have this study officially recognised. This will also provide TVET students with
recognition for prior learning if they want to continue their studies at University.
- Industry also needs to work with TVET institutions so that students graduating from
TVET institutions, with work ready skills are given recognition by industry for having
these skills.
- It is recommended that MOET and MOLISA work together to develop a single articulation
system for Vietnamese education.
4

Other Issues

4.1
Overseas/Online Learning
The Vietnamese regulatory environment makes it difficult for students to gain recognition
for overseas qualifications delivered in Vietnam part online (i.e. blended learning modes)
even though these qualifications are issued by the overseas university as meeting all the
same quality assurance requirements as the same courses delivered by 100% face-to-face
mode.
In Australia, for example, where there is a robust quality assurance system in place, a
university must satisfy the national regulator - The Tertiary Education Quality and
Standards Agency (TEQSA) that blended courses leading to an Australian qualification meet
the course accreditation standards and are equivalent wherever the qualification is
delivered regardless of delivery mode. Online/blended delivery is an emerging global trend
and is a cost-effective, flexible and innovative way to deliver quality education. It can help
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Vietnam improve access to quality education and overcome challenges such as an

imbalance in the level of development in different regions of the country.
Recommendation
The VBF would like to see greater flexibility in the regulation to allow the Vietnamese
Government assess applications for course accreditation from Foreign education providers
to deliver courses with an online component and to recognise the qualifications of students
undertaking such courses.
5
Conclusion
The Vietnamese economy continues to grow and this is of benefit to the citizens of Vietnam.
With membership of the TPP and AEC Vietnam has a great opportunity to grow it economy
and become an even more prosperous nation. To achieve this Vietnam needs a highly
competent workforce with the knowledge and skills to drive growth in the economy.
Quality education and training is required to provide the skilled workforce to maintain this
growth. We have focused on two main areas in this paper that will help Vietnam to raise the
quality of its education. Through effective legislation and a robust TVET system Vietnam will
continue to prosper and take advantage of the many opportunities coming its way.
As mentioned in our introduction this would require the combined efforts of relevant
stakeholders working closely together to find effective solutions. The Education and
Training Working Group, through the VBF, will continue with its commitment to assist
Vietnam in achieving it economic potential.
We look forward to seeing progress in the above areas and again would like to thank the
VBF for inviting us to contribute to this important forum.

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Education and Training Progress Report

Vietnam Business Forum, 2015

EDUCATION AND TRAINING PROGRESS REPORT

Prepared by
Education and Training Working Group
Vietnam Business Forum

Scoring to be rated as follows:

In progress report:
0 = issue remains; 1 = partially somewhat resolved; 2 = issue has been solved.
Priority (1 -10: highest).
Score = (Progress) x (Priority)
No
1

Age
New

Issues
Providing more autonomy to
Higher Education Institutions

Suggested/Agreed Action
Progress
Some recommendations to improve the Slow progress is being
quality of higher education in Vietnam:
made on this issue.
The law is giving more
- The Law on higher education has given autonomy but we need
autonomous rights to foreign-invested to work closely with
higher education institutions; however, MOET to ensure it
there is no detailed legal framework to happens in practice.
stipulate the level of these autonomous
rights. Law and the by-law should include
transparency provisions on autonomy.
- The reputable universities should have
more autonomy to recruit students.
- Give institutions some autonomy/flexibility
to adapt curriculums to meet the fast
changing needs of industries in Vietnam.

New

The quality and relevance of

Higher Education

- Make it easier licensing wise for already Have had discussions

established
reputable
educational with MOET but no
organizations to expand into new locations.
actions taken (yet)

1
x

Priority Score
10
0

Important Note: This "Progress Matrix" was prepared based on the voluntary submissions of the various Working Groups and Sub-Working Groups of the Vietnam Business
Forum from 2011 - 2014. In terms of both the feedback and the rankings/progress evaluations, it is not intended to be either complete or scientific. It does nevertheless
reflect many issues of concern that have come up in the various Working Groups, and their constructive proposals for solutions. It is hoped that it will provide a useful
reference to track and guide progress as the Government and the business community continue their collaboration to improve the business environment though the channel
of the Vietnam Business Forum. Among other things, it should be noted that many issues already fully resolved have been dropped from this Progress Matrix to limit the
size of the document, and almost all of the issues noted are those that still need more work.

Page 1 of 4

Education and Training Progress Report

No

Age

Old

Issues

Specific regulatory issues re

Decree 731 and Decree 1022:
1. The conditions of granting
work permits and working
conditions in Vietnam of the
foreign teachers regulated in
Decree 73 and Decree 102 are
still very tight, they have not
been amended yet to be
consistent with the resolution
No. 473 of the Government
which have relaxed the
condition of 5 years
experiences.
2. The new legislation is
recently promulgated, it
seems to be more
complicated than before.
Requiring many children
licenses after granting
investment license. The FDI

Vietnam Business Forum, 2015

Suggested/Agreed Action
Progress
- Implement a transparent and independent following discussions.
ranking system for all higher education
institutions.
- Soon issuing specific legal instruction for
the launching of new programs by foreigninvested higher education institutions
1. Decree 73 and Decree 102 should be
amended soon to help remove obstacles of
conditions to grant work permits which all
foreign teachers are now faced with. The
amendment should be: conditions for
granting WP for foreign teachers: University
degree and teaching certificate must be
externally assessed and certified by a
recognized body.
2. MOET should consider to promulgate
separately the legal regulations for each type
of education, from simple to complicated
ones, due to the conditions to set up a foreign
language training centre are quite different
and more simple than the conditions to set up
the general education institutions (primary
and secondary education) as well as
establishment
of
higher
education
institutions.

1. Government have
promulgated the
Resolution 47 to relax
the conditions of WP
issuance.
2. The circular to guide
the implementation of
Decree 73 has been
promulgated.
3. Decree 73 and
Decree 102 are under
amendment. However,
it needs to push to
promulgate soon.

3. The Decree 73 and the Circular to guide the

implementation the Decree as well as

Decree No. 73/2012/ND-CP dated September 26, 2012 of the Government on the foreign cooperation and investment in education
Decree No.102/2013/ND-CP dated September 05, 2013 on the issuance of work permits to foreign citizens
Resolution No.47/NQ-CP dated July 08, 2014 regarding the Government's regular meeting in June 2014

Page 2 of 4

Priority Score

10

Education and Training Progress Report

No

Age

Issues
enterprises will only be
allowed to come into
operation after these children
licenses have been granted.

Vietnam Business Forum, 2015

Suggested/Agreed Action
relevant regulations should be promulgated
within a year.

Progress

Priority Score

4. The legal procedures to grant license for

the re-investment or expansion projects must
3. There is no legal framework be simple and mentioned clearly in the
for foreign-invested higher
amendment to Decree 73.
education institutions. At
present, there is only Decree
5. The amendment to Decree 73 should add
73 which manages the
more regulations on registering extension if
operation of foreign-invested
the operation term is less than 20 years, it
higher education institutions.
will not require construction of its own
building.
4. Legal procedures for reinvestment projects and
expansion should be different
to those for newly established
projects in order to create the
favorable condition for
investors who have already
contributed successfully for
many years.
5. A lack of legal framework
for the extension of operation
term of educational
institutions.
4

New

Vocational Education and

Training

- The responsible government agencies

should encourage vocational training
institutions to improve their programs by
carefully analyzing industry needs.

Page 3 of 4

Progress is slowly
being made when the
Law on Vocational
Training is being
revised.

10

Education and Training Progress Report

No

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action
- The Government should urge high schools
to promote vocational training courses as a
future option to their students.
- The Government should consider how
graduates from vocational training courses
can have a fair social and economic status
in their careers, in close partnerships with
business communities.
- The
Government
should
organize
awareness raising activities for changing
people's mind-set that graduates of
vocational training courses will fall into a
low social status.
- The Government and vocational training
institutions should consider how to attract
more female students to courses such as
machinery processing, where few females
students tend to apply
- The Government should improve the paths
that vocational college graduates can
transfer to university courses.

Page 4 of 4

Progress

Priority Score

Education & Training WG Summary of discussions on Decree 73

Vietnam Business Forum, 2015

SUMMARY OF DISCUSSIONS ON THE GOVERNMENT'S DECREE NO. 73/2012/N-CP ON

INTERNATIONAL COOPERATION AND INVESTMENT IN EDUCATION, BETWEEN THE
MINISTRY OF EDUCATION & TRAINING AND EDUCATION & TRAINING WORKING GROUP,
VIETNAM BUSINESS FORUM

Time: 15:00 16:30, Friday, Nov. 13, 2015

Venue: Ministry of Education and Training, 35 Dai Co Viet, Hanoi
Participants: Attachment 1
I. KEY DISCUSSION POINTS
- Summary of specific issues and comments/recommendations of the Education and
Training Working group (Working group), Vietnam Business Forum (VBF), related to
the governments Decree No. 73/2012/N-CP, dated Sep. 26, 2012 (Decree 73):
Regulations on international cooperation and investment in education
- Feedbacks from representatives of relevant departments of the Ministry of Education
and Training ("MOET")
- Open discussion.
II. SUMMARY
Mr. Pham Chi Cuong, Deputy Director General, International Cooperation Department,
MOET
Decree 73 has been in place for three years, as an implementing document to two laws Investment Law of 2005 and Education Law. Implementation of this legislative tool is
however still facing specific challenges. MOET is therefore looking to revise the Decree by
moving toward minimizing administrative procedures as instructed by the Prime Minister
and ease the bottlenecks for investors in education. MOET wants to know any challenges
faced by investors in areas ranging from seeking an investment license and operations
license, to various governance dimensions, as well as to hear recommendations from
stakeholders to take into account in the revised Decree.
Ms. Phan Thi Hoang Hoa, representing the Education & Training Working group, VBF /
Apollo Education and Training Organization
Taking this opportunity, the Working group wants to make our case on several concerns
and recommendations that have arisen from foreign companies doing business in Vietnam.
While Decree 73 has been a major leap forward from the former Decree 06, given the
unique nature of education, one Decree 73 cannot possibly regulate or cover all the aspects
involved. This has caused burdens to investors in education. The working group would
hereby represent specific comments and recommendations on how Decree 73 should be
interpreted, implemented and applied by practitioners, to help MOET to make adjustments
to related rules to better keep in touch with the current investment landscape which is
being increasingly encouraged to expand, while remaining within the regulatory framework.
Ms. Nguyen Kim Dung, Apollo Education & Training Organization
In August 2014, the Working group had a meeting with MOET on similar concerns, and in
today's meeting, we will go into details on our recommendations for each clause as drawn
from the real challenges we met in operation, to help MOET consider and revise Decree 73
to remain in touch with real life operation of foreign investors in education.

Page 1 of 8

Education & Training WG Summary of discussions on Decree 73

Vietnam Business Forum, 2015

1. Issues related to licensing

Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Different types of licenses: Under former rules, setting up a foreign-owned academic
institution requires two types of license - investment license and operations license. Since
Decree 73 came out, in addition to these two licenses, educational investors/institutions
also need an establishment license. As with the investment license, the Investment Law
being introduced has in part answered the question of too long licensing time. For the
establishment license, applications should be lodged with the relevant licensing agencies
and often entail very long waiting time. And while the applications for an establishment
license requires the estimated faculty and staff size, enforcement and law making
authorities have very different interpretations, and often ask for the teachers' personal
files, including legal work permits at the time of licensing. This means that practitioners
should hire teachers, sign work contracts, pay salary and obtain work permits for these
teachers when the business is not even in operation. Furthermore, the review and approval
process goes through a large variety of licensing agencies and functions. And when an
establishment license is obtained, an operations licensing process will set in with almost
identical steps.
Recommendations: The Working group would propose revising the Decree, clearly spelling
out that the tentative list is not tantamount to the need for full dossiers, including work
contracts and work permits, to make sure that enforcement and licensing authorities do not
ask for any other application documents that are not listed in the Decree.
Inspection of physical facilities before granting the license: For the three licenses, there
are three rounds of physical inspection, though the new Investment Law has cut it down to
two rounds at a same site.
Recommendations: The revised Decree 73 should reduce this to a single physical
inspection before the operations license is released. It should be made clear that physical
inspection will be done only at the operating licensing stage, and no more approvals should
be needed in the establishment licensing phase, apart from those referred to in the Decree.
Making rules clearer will ensure that enforcement and licensing agencies do not translate
the rules differently and apply them consistently in different municipalities.
Mr. Phan Manh Hung, Kinderworld Group
I agree with Mr. Pham Chi Cuong that education is a conditional area of investment. Some
rules in Decree 73 may cause problems for both investors and regulatory agencies.
Investors have to deal with lengthy procedures that cost them a lot of time. With the
addition of the establishment license, a single business will have two legal entities the
school and the investor. This will entail more risks for regulatory agencies in
administration.
General recommendations: MOET can consider skipping the establishment licensing step,
and stick to the investment license and operations license like with Decree 06, and the
requirements for an establishment license may be integrated in the operations license.

2. Vietnamese student percentage restriction

Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Decree 73 now introduces a cap on Vietnamese students allowed to apply to international
schools at 10-20%. This will be a barrier for schools planned to be created and take on
students in Vietnam.
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Education & Training WG Summary of discussions on Decree 73

Vietnam Business Forum, 2015

Mr. Phan Manh Hung, Kinderworld Group

Students demand for international schooling is increasing fast. Surveys indicate that
Vietnamese spend USD 3 billion studying overseas. With this rule in place, investment in
provinces/cities other than Hanoi and HCMC at the primary education level is virtually
impossible.
Recommendations: The government can consider removing this restriction to provide
Vietnamese students better access to Vietnam-based international academic institutions,
rather than seeking international grade education elsewhere. The government can also add
other eligibility criteria for Vietnamese students who want to learn at international schools,
so as to keep intact Vietnamese traditional culture or the statutory curricula provided by
MOET, possibly by adding Vietnamese traditions and culture as major fields of training.
Response by Mr. Pham Chi Cuong, Deputy Director General, International Cooperation
Department, MOET
MOET must take into account a conjoint perspective as the Vietnamese and international
curricula differ, and there is a lack of mutual recognition between the two. Vietnamese laws
now do not recognize a foreign high school diploma to allow the holder to enter
undergraduate, community college or graduate education in Vietnam.
The Working groups recommendations on percentage: Up to 50%; a 30%-50%-70%
roadmap; and investors must meet the requirements corresponding to different steps of
the percentages and compatibility between Vietnamese and foreign training programs.

3. Transition article
Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Article 74 of Decree 73 regulates that foreign-capitalized educational institutions and their
campuses that have been issued with the Investment certificates concurrently, the
Business registration certificates and the Licenses to provide education before this Decree
takes effect are exempted from reappraisal, but must supplement and complete the
dossiers within 06 months since the effective date of the Decree in order to be issued with
the Decisions on approving the establishment of educational institutions and campuses. But
in practice, when investor comes and applies for an operations license, the licensing
authority will ask for updates as specified in Decree 73, requiring full physical facility
compliance, which is a major barrier to investors.
Recommendations: The revised Decree 73 should clearly regulate that foreign-capitalized
educational institutions and their campuses that have been issued with the Investment
certificates concurrently, the Business registration certificates and the Licenses to provide
education before this Decree takes effect are exempted from reappraisal, but have to
submit an application for establishment license and report actual activities in the last 3
years in order to be issued with the Decisions on approving the establishment of
educational institutions and campuses. Moreover, the Decree should also be specific that
no more documents are required other than the ones specified in the Decree and included
in the list, like in the Investment Law.
Response by Mr. Nguyen Tien Dung, International Cooperation Department, MOET
Decree 73 and its implementing Circular 34 have actually been specific enough that
repetition of approval for the criteria of Articles 36 and 41 is not needed. The question here

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Education & Training WG Summary of discussions on Decree 73

Vietnam Business Forum, 2015

comes down to how the rules are interpreted and applied on the ground. Investors may
send petitions through formal written route asking for clear explanations.

4. Investment capital
Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Under Article 28.6, the total investment capital of an investment project to set up a higher
education institution should at least be determined at the expected time the institution
reaches its largest scale of operation, but no less than VND 300 billion. This rule is very
vague and may be a major implementing challenge for investors. To be specific, at VND 300
billion and VND 150 million for each student, a school can recruit no more than 2,000
students, which should be understood as its largest scale. These numbers may apply in the
formula for public schools, but foreign colleges use a course credit approach and
classroom attendance with an instructor, followed by online hours of study, self-study,
library study, and with online programs, library-to-library connections and links with
international libraries, a physical classroom may not even be needed. For example, a
college may have 4,000 students/shift x 3 shift/day, which equals 12,000 students. In this
case, the total investment capital will be determined based on the number of full time
equivalent students - 4,000, instead of 12,000.
Recommendations: We suggest that the total investment capital is determined based on
the fulltime equivalent number of students rather than the expected point in time where the
student count reaches its climax.

5. Regulations on opening new programs for foreign-owned educational institutions

Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Opening new university and junior college programs are currently subject to Circular No.
08/2011/TT-BGDT, Feb. 17, 2011. But the Working group realizes that these procedures
may apply only to public schools, rather than foreign-owned educational institutions, whose
curricula are imported and subject to approval and accreditation of foreign universities,
which unlike Vietnamese counterparts, adopt a credit system, with the ministry being kept
updated.
Recommendations: We suggest that the Ministry of Education and Training has in place
specific rules as soon as possible on opening new programs for foreign-owned institutions,
with clearly spelled out ruling in the implementing document for Decree 73 that
establishment of new programs for foreign-owned educational institutions is subject to
current rules on opening new programs for universities and junior colleges released by
MOET OR foreign-owned schools should do this in line with MOETs specific rules.

6. Credential recognition
Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Decree 73 establishes that students applying to undergraduate level twinning programs
must possess b2 level language proficiency in the European reference standards or
equivalent, but B2 here is only an intermediate level. However, students completing 3-year
twinning Bachelors programs (e.g. students of the British University) seeking recognition
of their degrees at Department of Examinations and Education Quality Assessment have
been asked by the Department to obtain an IELTS certificate to qualify for the recruitment.
The working group believes that this is a major concern since an IELTS certificate is not on
par with the English proficiency of a graduated college student, and for students applying to
a course who do not have an IELTS certificate but have completed the English course

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Education & Training WG Summary of discussions on Decree 73

Vietnam Business Forum, 2015

recognized by the twinning school to be qualified and recruited in such undergraduate

twinning program, their degrees should be recognized.
Recommendations: MOET, in revising the Decree, can consider adding guidance on
credential management and recognition, apart from existing rules.

7. Facilities and equipment (Article 29)

Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Recommendations: We propose that the revised regulations should not set a minimum
land area and built complex area corresponding of the number of students. The revised
Decree 73 should specify that the minimum land and built structure area for students use
must correspond to the maximum number of students present at a specific time, rather
simply the general number of students. We expect MOET to provide more specific rules
here.
8. Lack of legal framework for operation extension
Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Decree 73 requires educational institutions registered for operation in more than 20 years
to build their own facilities and does not mandate this on those in operation for less than 20
years, but it is silent on how institutions can apply for operation extension.
Recommendations: The Working group urgently recommends that MOET revises Article
29.6, adding: short-term educational institutions registering or applying for operating
extension of less than 20 years are not required to build their own facilities. We propose
that MOET considers this modification, and if possible, release a separate Decree amending
this clause, like the case of Article 31 before.
Response by Mr. Nguyen Tien Dung, International Cooperation Department, MOET
In the intent of Decree 73, an investor committed to do business for a long time should have
his own facilities built, and short-term investment, with the need for multiple extensions to
avoid property development is not encouraged. MOET nevertheless takes into account the
working groups recommendations and will keep relevant functions updated.
Ms. Nguyen Kim Dung and Ms. Phan Thi Hoang Hoa, Apollo Education & Training
Organization
Recommendations: To be committed, investors should have their own facilities built, but
this legal framework should also be widened and applied differently for individual types.
Property development may apply to higher education, rather than to other short-term
training programs. For these short-term training types, MOET may set a minimum
requirement for property lease agreements, e.g. 5-10 year spans, which should improve
strict compliance, while meeting consumers' needs and helping to relieve the current
transportation pressure.

9. Teaching Staff (Article 31)

Ms. Nguyen Kim Dung, Apollo Education & Training Organization
Decree 73 regulates that:
- For tertiary education institutions, 60% of course modules must be delivered by
permanent teachers, and 80% of teaching staff must hold postgraduate degrees.
- Article 10.2.b. mandates the minimum qualification of instructors at college level to be a
master degree.

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Education & Training WG Summary of discussions on Decree 73

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Recommendations: The Working group suggests that MOET considers adding more specific
criteria applicable to instructors in special fields of training such as culinary art,
performance art and fashion design, to reflect a fact that while these instructors may not be
a Masters degree holder, they do have rich professional knowledge and skills over many
years of field practice.
Mr. Phillip Dowler, RMIT University Vietnam
In some specific lines of training such as design or fashion, some instructors may not have
the qualifications required but well more than five years of teaching experience, while
others may have a Masters degree but less than five years of work experience. We suggest
MOET considers reducing the years of work experience for the instructors in the above
mentioned special fields to less than five years.
Response by Mr. Mr. Nguyen Tien Dung, International Cooperation Department, MOET
Public colleges have actually made similar comments and recommendations. The
government released the new Decree 73 in 2015, providing norms for stratification;
accrediting classification and standards for higher education institutions; procedures and
steps for stratification and accreditation of higher education institutions. The practice
college model should also be considered.

10. Recruitment of English teachers

While this regulation is not really relevant to Decree 73, it is a real barrier at the moment.
Foreign teachers having a work permit in Vietnam who want to switch between school sites
within a same training center still have to apply for a different permit. Foreign teachers are
also facing challenges from the criminal record requirement.
The Working group hereby raises this issue and its recommendations for MOET to seek
consultation and cooperation with the Ministry of Labor-Invalids-Social affairs to improve
this rule and facilitate foreign teachers to work in Vietnam.
Summary of key recommendations
Ms. Nguyen Kim Dung, Apollo Education & Training Organization
- The Working group proposes that MOET directly embed in the revised Decree 73 the
group's recommendations, or release a separate implementing document to this
Decree to support foreign-owned educational institutions in a timely manner.
- Applications for establishment licenses should not require documentary evidence along
the line of required portfolios at the time of releasing the establishment license, but
instead only requires these at the time of granting the operations license.
- Operation extension: short-term foreign-owned educational institutions with a life-cycle
of less than 20 years, or those applying for extension for less than 20 years will not need
to build their own facilities. Specific rules are in place for different types of training
(university, junior college, short-term programs).
- MOET has in place clearly spelled out implementing guidance to avoid different and
abusive interpretation and application by execution agencies.
- The E&T Working group may send its experts to help MOET in the consultation and
amendment of Decree 73.
Ms. Phan Thi Hoang Hoa, representing the Education & Training Working group, VBF /
Apollo Education and Training Organization
- A Q&A manual for Decree 73 would be welcomed to allow investors to raise questions
on implementing aspects and receive feedbacks from MOET.
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Education & Training WG Summary of discussions on Decree 73

Vietnam Business Forum, 2015

In the upcoming annual Business forum on Dec. 1, the Working group will also have a
short speaking slot to revisit the isues and recommendations made here today related
to Decree 73.

Mr. Pham Chi Cuong, Deputy Director General, International Cooperation Department,
MOET
After today meeting, the Working group has had significant contributions for MOET to know
of the challenges and barriers faced by businesses to consider and revise the Decree
accordingly.

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Education & Training WG Summary of discussions on Decree 73

Vietnam Business Forum, 2015

Attachment 1. Participants
No.

Name

Position

Organization/Agency

Representatives from the Ministry of Education and Training

1

Mr. Pham Chi Cuong

Deputy Director

Mr. Nguyen Tien Dung

Official

Mr. Dang Van Huan

Official

Mr. Nguyen Van Hai

Vice Manager,
Organization Staffing Division

International Cooperation
Department, Ministry of Education
and Training
International Cooperation
Department, Ministry of Education
and Training
International Cooperation
Department, Ministry of Education
and Training
Organization and Human resources
Department, Ministry of Education
and Training

Representatives from the Education and Training Working Group, Vietnam Business
Forum
1

Ms. Phan Thi Hoang

Hoa

General Director
Head of Legal,
Compliance and
Government
Relations
Head of Campus Hanoi

Apollo Education & Training

Organization
Apollo Education & Training
Organization / British University

Ms. Nguyen Kim Dung

Mr. Phillip Dowler

Ms. Nguyen Thi Minh

Chau

Assistant

Hanoi Branch, RMIT University

Vietnam

Mr. Phan Manh Hung

Director of Legal

Kinderworld Group

Ms. Nguyen Thi Thanh

Senior Legal Officer

Kinderworld Group

Ms. Ha Thi Hang

Executive Director

London College for Design and

Fashion in Hanoi

Ms. Nguyen Vinh Thuy

Head of Operations

British University Vietnam

Ms. Dang Thi Van Anh

Coordinator

Vietnam Business Forum

Secretariat

Page 8 of 8

Hanoi Branch, RMIT University

Vietnam

3.3. HUMAN RESOURCE

Report from Human Resource Sub-Working Group

Vietnam Business Forum, 2015

REPORT FROM HUMAN RESOURCE SUB WORKING GROUP

IMPROVING COMPETITIVENESS OF VIETNAMESE WORKFORCE
Enhancing Enterprise Competitiveness for Global Integration

Prepared by
Mr. Colin Blackwell
VBF Human Resource Sub-group
EXECUTIVE SUMMARY
-

One clear way to enhance enterprise competitiveness is to bring overtime caps in line
with global standards.
Vietnam has one of the lowest overtime limits in the region and the world.
If the workforce, unions and employers are all willing to have more overtime, flexibility
from the authorities would be constructive.
We offer to support with advice on a flexible system modeled on Japans own successful
solution to this.
Addressing this issue would be a boost to attracting more export manufacturing
investment.
We thank the government for the positive progress made on work permits.
We look forward to the finalization of the work permit implementation provisions.

Page 1 of 4

Report from Human Resource Sub-Working Group

Vietnam Business Forum, 2015

DETAILED REPORT
Firstly, we would again like to thank the Ministry of Labor, Invalids and Social Affairs for the
excellent corporation with the HR sub working group and the business community. Especially
appreciated was the good positive progress being made on foreigner work permits and
providing us the opportunity to contribute to the process of revising the regulations. Thank
you.
1. OVERTIME
We all support economic growth in Vietnam and understand that business practices being
competitive with other countries is important to achieving this - The better Vietnam
compares to especially its regional peers, the more attractive Vietnam is to foreign
investment. Whilst excellent progress has been made on many fronts, there is one measure
where Vietnam is significantly less competitive than almost any other country in the world.
This is Vietnams overtime cap, which is significantly below that of other ASEAN countries.
By restricting business operations especially in export manufacturing, the current overtime
cap also limits GDP growth. Labor productivity measures for Vietnam are well below the
ASEAN average, but allowing more overtime flexibility would contribute towards improving
this and enhancing enterprise competitiveness for global integration.
Overtime flexibility is particularly important in the export manufacturing sector. If a factory
in Vietnam is bidding for an international export contract, it has to be able to quickly
increase production to meet an export order. If a similar factory in another ASEAN country
is more flexible to increase production quickly by having their workers work overtime, they
can put in a more competitive bid. This is why export manufacturing investors from Japan
and Korea in particular are very concerned about this issue. The good Vietnamese
workforce attracts manufacturing investors, but the overtime cap makes them in part
reconsider.
Vietnams existing annual overtime cap is 200 hours and 300 hours under special
circumstances. The overtime cap is far below that of regional competitors.

Maximum overtime hours per year

2000
1800
1600
1400

1200
1000

1872

800

1456

600

1248
864

400

728

200

540
200

Thailand

Korea

Malaysia Singapore Indonesia

Page 2 of 4

Laos

Vietnam

Report from Human Resource Sub-Working Group

Vietnam Business Forum, 2015

We appreciate that the Ministry of Labor, Invalids and Social Affairs is concerned about
increasing the overtime cap. We agree that this is a sensitive topic and that any changes
should continue to protect Vietnamese workers. Any change has to be well regulated and be
something that workers will also benefit from. We understand the Ministrys concern and
would like to provide ideas as to how increasing the overtime cap can actually be beneficial
to workers as well as to Vietnams economy.
The Ministry of Labor, Invalids and Social Affairs had previously said that that the overall
health of the Vietnamese people is lower than in other countries and that increasing the
overtime cap will negatively affect workers health and well-being. Reviewing the leading
statistics on health, among which those of the World Health Organization, the World Bank
and the United Nations Development Program, we have found that Vietnamese people
actually tend to be very healthy. In terms of life expectancy, Vietnam ranks 60 out of 196
countries. With an average life expectancy of 76 years, Vietnam ranks higher than countries
such as Thailand, the Philippines and Malaysia. Moreover, whereas globally the average
healthy life expectancy is only 62 years, Vietnamese people are expected to live 66 years of
their life in good health.
th

With regard to nutrition, Vietnamese people are also relatively well-off. The prevalence of
undernourishment is 8.3% in Vietnam, as opposed to 11.8% in the Asia and Pacific region
and 12% globally. Similarly, the average Vietnamese person has a daily calorie intake of
2745, which is more than sufficient to lead a healthy life. Obesity rates are some of the
lowest in the world. So, in reality, Vietnamese people are not any less healthy than people in
other parts of the world. In fact, their health may actually be above average. So, we question
the assertion that Vietnamese are less able to work longer hours to meet production needs,
than other people in the world.
With a literacy rate of 97% and a labor force participation rate of 80%, Vietnams labor force
is one of its greatest competitive advantages with huge potential. One way of achieving this
is by increasing the overtime cap to global norms.
To assist in resolving this, we have a suggestion from the Japanese business groups in
Vietnam. Their suggestion is an alternative to increasing the overtime cap for all industries.
It follows the experience Japan has had in finding a good solution for themselves, which has
worked extremely effectively for many years. This alternative, included in the Japanese
labor code as Article 36, holds that people are allowed to work overtime when both the
employer and the employee agree and the relevant government agency has been notified.
Basically, if everyone is happy with working overtime the employee, the employer and the
union, then the government in Japan should facilitate them.
To clarify more precisely the content of Japans Article 36 is: an employer shall conclude a
written agreement with the labor union or with an employee representative , where
upon the submission of the concluded written agreement to the administrative authority,
overtime work exceeding statutory work hours and/or work during statutory holidays, is
made permissible. The Japanese government has set a maximum number of hours
permitted for overtime, however, limited to exceptional circumstances under which work
hours must exceed [this number], the parties under the labor-management relationship are
permitted to provide in writing the fact that work hours exceeding the maximum hours for
overtime shall be allowed. In practice this allows for more overtime without the need to
change the labor law.

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Report from Human Resource Sub-Working Group

Vietnam Business Forum, 2015

Article 36 has proven very successful in Japan and demonstrates that having a higher
overtime cap does not need to have a negative impact on workers. This law has been in
place for over 50 years and has ensured proper working conditions for people this entire
time, a period of immense economic growth in Japan. Considering that an increase in the
overtime cap can lead to greater productivity, the introduction of a policy similar to that of
the Japanese could thus significantly benefit the Vietnamese economy, while still protecting
workers. The Japanese business groups are willing to assist the Vietnamese government
with researching alternatives for new overtime regulations and can help the Ministry of
Labor in designing inspection systems for companies to qualify for exemptions for
additional overtime hours. Such a measure will increase worker productivity and, as a
result, will enhance Vietnams competitiveness on both a regional and a global scale.
Aside from drawing in foreign investment, increasing the overtime cap will also benefit
workers. Many Vietnamese people are motivated to work extra hours if they are
compensated for this work. It is our opinion that, if people want to work in order to earn
extra income, they should be allowed to do so, as long as proper safeguards and regulation
remain in place. There is no harm in having people work overtime if they are healthy and
are willing to do so. Reducing the limits on overtime hours will thus be good for individuals
as well as for the Vietnamese economy as a whole.
2. WORK PERMITS
In the past two years VBF has raised several practical issues related to decree
102/2013/ND-CP on the work permit regulation. To reduce administrative burden and
streamline procedures for qualified foreign nationals has been a necessity and we are
grateful that the MOLISA has collaborated with VBF and the business community in the
right direction. A consultative meeting between the MOLISA, MPI representatives and VBF
HR sub working group has taken place on August 6th, 2015 in which a new version of draft
decree amending decree 102 was introduced.
This new draft decree is positive and addresses main concerns from the business
community, but it has yet been approved. While MOLISA confirmed that the objective is an
implementation of the new decree before the end of 2015, we would like to highlight the
urgent need to revise current decree 102. Indeed, while we understand and share the view
that the Vietnamese workforce shall remain a priority, the implementation of decree 102
has generally increased timeliness of work permit issuance for qualified foreign nationals.
Its also accompanied with inconsistent implementation and advices in provinces and
unreasonable requirements such as a Vietnamese police clearance certificate to foreign
nationals who visited Vietnam once on short Business trip visit before applying for work
permit.
This has in the past resulted in lack of understanding from everyone, cost increases and
productivity issues for companies which are in need of qualified foreign nationals for their
operations in Vietnam. We are happy that significant progress has been made on this and
look forward to the final resolution of this topic.

Page 4 of 4

Human Resources Progress Report

Vietnam Business Forum, 2015

HUMAN RESOURCES PROGRESS REPORT

Prepared by
Human Resources Sub-Group
Vietnam Business Forum

Scoring to be rated as followings:

In progress report:
0 = issue remains; 1 = partially somewhat resolved; 2 = issue has been solved.
Priority (1 -10: highest).
Score = (Progress) x (Priority)
Sqt
1

Age
Old

Old

Issues
Amended Labor Code: In
light of intensifying regional
competition and in light of
weak export markets,
enterprises are concerned
that the draft amendments
to the Labor Code will
increase employment costs
and undermine
competitiveness, resulting
in job losses.

Suggested/Agreed Action
Measured increases in wages and other
benefits, and also reform to the approval
process for industrial action and strikes to
help manage the on-going plague of illegal
work stoppages that occasionally disrupt
production. Overtime restrictions should be
no more strict than ILO and regional
standards, and maternity leave should be
left unchanged.
Work permits for
foreigners should not be more difficult than
in other countries in the region. New labor
rules should rather help Vietnam climb the
"value added" ladder, by means of allowing
outsourcing arrangements, non-compete
and other Knowledge Economy principles.

Progress
Some changes have been clarified,
particularly with regard to maternity
leave. However, there is still a lack of
clarity in other areas, such as the new
social security regulations.

Workforce education is
insufficient for skilled labor
positions.

More vocational training needed, including

by foreign-invested educational institutions.

Encouraging progress has been seen

in the context of specific public-private
partnerships such as the MOET's work
with Intel. On the other hand,
investment and management of
vocational training have been less
satisfactory.

Page 1 of 4

1
x

Priority
7

Score
7

10

10

Also, it is important that overtime caps

are in line with regional standards,
which is currently not the case.

Human Resources Progress Report

Vietnam Business Forum, 2015

Sqt
3

Age
Old

Issues
Sub-leasing introduced by
the new Labor Code is only
allowed in certain job
sectors and mainly focused
on full-time work. There
are restrictions on the
length of duration an
employee can be used by
the user enterprises, with
outsourcing services being
banned, sub-leasing does
not cater for the majority of
user enterprises needs for
a flexible workforce.

Suggested/Agreed Action
Introduction of a full temporary services
addressed in future Social and Medical
insurance laws where there is a minimum
threshold based on a minimum wage.
Dialogue with CIETT globally and in Vietnam
on best practices for the industry, including
ratification of Convention No. 181 in
Vietnam.

Progress
New rules are too narrow, should be
expanded
to
support
additional
sectors/skills.

New

Restrictions on overtime
hours
and
increasing
overtime pay means that
employees have no means
of
earning
additional
income and has led to many
strikes in manufacturing
and production industries.
Public
holiday/holiday
overtime payment is high
and companies are not
able to afford to operate
during these periods.

Overtime limits should come up to regional

competitive standards. A suggestion is to
use something similar to the Japanese
Article 36 system.

Marginal progress under new Labor

Code

New

Work Permit exemption as

per
Vietnam's
WTO
commitment on services:
Request for update on
Circular providing guidance
on
the
basis
and

The provision of decree 102/2013/ND-CP

dated September 5th 2013, article 7, point
2.a stating that foreign nationals who are
assigned to Vietnam within the enterprises
engaged within 11 service industries in the
commitment on services between Vietnam

The circular #41/2014/TT-BCT was

issued at the end of 2014 but several
situations remain unclear where the
Identification of the business code
listed in companys business license is
not exactly the business code listed in

Page 2 of 4

1
x

Priority
6

Score
6

10

10

Human Resources Progress Report

Sqt

Vietnam Business Forum, 2015

Age

Issues
procedures to certify that a
foreign employee is an
Intra-company transferee
operating within the 11
sectors listed in Viet Nams
WTO service commitment

Suggested/Agreed Action
and
WTO,
including:
business,
communication, construction, distribution,
education, environment, finance, health,
tourism, entertainment, and transportation,
has
yet
been
enforced.
Intra-company foreign national transferees
who fall in this category have been required
to obtain a work permit while they should be
exempted by law.

Progress
the appendix of decree 41. (such as a
sub codes).
MOLISA should work
efficiently with MOIT to provide prompt
response to companies which are in
such situation.

New

Qualification
document
requirement
for
work
permit applicant remains
the
most
challenging
requirement
for
work
permit
application
in
Vietnam.

The law should be more comprehensive

with regards to the qualification documents
for work permit application according the
work performed in Vietnam. Provincial labor
department should be more aware and
understanding according to the nature of
the work/assignment for the approval of
qualification document required.

Resolution 47 was a good sign of

improvement and welcomed by the
foreign business community but is not
sufficient to solve this issue.

Lack of guidelines and

discrepancies
in
the
procedures
and
implementation of the labor
code, decree 102 and
circular
#3 on
work
permits, between different
provinces.

Request all provinces of Vietnam not to

request foreign nationals who just visited
Vietnam once to provide a Vietnam police
record in addition to a foreign police record
when filing work permit applications.
Processing time to obtain Peoples
committee approval on the foreign labor
demand should be no more than 15 days as
stated in circular No. 03/2013/TT-BLTBXH,
whereas the practice is about 60 days in

Positive development: As per the draft

decree amending decree 102/2013/NDCP that is expected to be implemented
by the end of 2015, the local police
clearance
certificate
should
be
removed.

New

Page 3 of 4

Priority

Score

The requirement from some provincial

labor departments to provide a work
experience letter from one and only
one company to justify a 5 years
experience is not justified. Some
applicants have 2 experience letters
from different employers justifying the
5 years experience. This shall be
accepted.

Timeline to obtain the approval for

foreign labor demand report remains
an issue. The 15 day timeline is not

Human Resources Progress Report

Sqt

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action
some provinces. This has significantly
delayed the processing time to obtain a
work permit and has had a negative impact
on companies operations.
The request for short-term foreign
assignees - whatever the duration of their
mission - to apply for similar work permits
as long term foreign assignees is not
reasonable
and
workable.
Lighter
administrative requirements when a
foreigner is only working for a short period
of time such as a couple of weeks or even
days is required.

Page 4 of 4

Progress
respected
by
provincial
departments.

0
labor

The similar work permit requirements

procedure for short-term and longterm assignees remains an issue.
Lighter administrative requirements
and shorter timelines are required
when a foreigner is only working in
Vietnam for a short period.
The proposal from MOLISA to give
companies the choice to lodge work
permit applications at the provincial
DOLISA or at the MOLISA is a great
initiative which would allow companies
to appeal for consideration in specific
cases that may be rejected at the
provincial DOLISA.

Priority

Score

Human Resources Sub-Working Group Meeting with MOLISA

Vietnam Business Forum, 2015

CONSULTATION MEETING BETWEEN VBF HUMAN RESOURCE SUB WORKING GROUP &
MINISTRY OF LABOUR INVALIDS AND SOCIAL AFFAIRS; MINISTRY OF PLANNING &
INVESTMENT ON DRAFT DECREE AMENDING DECREE 102/2013/ND-CP
MEETING NOTES

Time: 2:00PM, Thursday, August 6, 2015

Venue: Meeting Room 308, MPI Premises, 6B Hoang Dieu, Hanoi
AGENDA

Introduction
VBF comments and recommendations on the draft
Responses and updates on new provisions from MoLISAs drafting team
Any other business

MEETING SUMMARY
1. VBF comments and recommendations on the draft amending Decree
No.102/2013/NDCP
- HR WG understands and encourages the principle of drafting the new draft.
- HR WGs main concerns are content clarification, effective implementation for foreign
investors to comply with local laws, regulations and related processing times.
2. Responses and updates on new provisions from Ministry of labour - Invalids and social
affairs (MoLISA)s drafting team
- The previous Decree No.102 was established based on Article 242 of the Labor Code.
- There are three key reasons for establishment of the new draft:
To address practical issues that have arisen from implementation of the previous
decree.
To reduce administrative burdens and streamline procedures related to work permit
applications and identify responsibilities of agencies/organizations to enable and
facilitate foreign workers needed in Vietnam.
To ensure the Vietnamese workforce remains a priority over the foreign workforce,
especially regarding skills available in Vietnam.
- The drafting team took into account comments/recommendations from appraisal
workshop and HR WG before proposing to the government for adoption.
Responses and updates from the drafting team
- On July 13, 2015 the MoLISA issued a new Circular No.24 guiding implementation of
Decree No.87 for work permits for Vietnamese workers working abroad and for foreign
workers working in Vietnam. Advantageous provisions in the new draft decree for
amendment of Decree No.102/2013/NDCP are as follows:
Work Permit Exemption
As per the draft decree, work permit exemptions will be granted for foreigners
working in Vietnam for less than 30 days (per visit), for foreign interns and students
working in Vietnam for less than 90 days.
No qualification documents are expected to be required for an individual eligible for
such a work permit exemption.

Page 1 of 3

Human Resources Sub-Working Group Meeting with MOLISA

Vietnam Business Forum, 2015

The foreign labor demand report for Peoples Committee approval as well as
confirmation of work permit exemption(s) by the Department of Labor, Invalids and
Social Affairs shall not be required in the following cases:
Foreigners coming to Vietnam for less than 3 months to address urgent
technical issues.
Foreigners coming to Vietnam for less than 3 months for the marketing/sales of
products and services.
Foreigners coming to Vietnam for less than 30 days.
The MoLISA shall study and consider further cases under World Trade
Organization commitments currently not covered by Decree No.102.
Practical issues incurred during the work visa procedure: When a foreigner does
not require a certificate for exemption, how does she/he request a work visa?
Clear guidance for implementation is required to support foreign investors.
Work Permit exemption certificates (when applicable) should be valid for up to 2
years.
Expert definition
In accordance with Resolution No.47, foreign experts and specialists are required to
provide either a bachelors degree (or higher) or an engineering qualification (or
equivalent). If the expert or specialist has neither a degree nor qualification, an evidence
of work experience of minimum 3 years in the related field shall be accepted.
In the education sector, internationally recognized qualifications will be recognized
equivalently by Vietnam if there are agreements between Vietnam and these countries or
official acceptance by the Ministry of Education and Training.
Health Check Certificate and Police Clearance Certificate requirements
Health Check Certificate validity for the work permit application should be 12
months, instead of 6 months. The employer shall also confirm in a letter that the
employee is in good health to perform his/her work in Vietnam.
Applicants should have the choice to provide either a Foreign or Vietnamese police
clearance certificate regardless of the duration and place he/shes been living
(including Vietnam).
Work Permit renewal simplified
The work permit renewal dossier should be accepted by a Department of Labor
Invalids and Social Affairs (DoLISA) up to 45 days before the current work permit
expiry date. This will provide more time for an applicants immigration document
renewal process.
The procedure for work permit re-issuance in case of change of work location
(different province), change of position or change of employer should be simplified.
Work Permit issuance place
The MoLISA has proposed companies are given the choice to lodge work permit
application dossiers at either the provincial DoLISA or MoLISA in Hanoi regardless
of where the assignee is working.
This measure would be a significant improvement, allowing companies to appeal to
the MoLISA to reconsider an application in specific cases where is has been
rejected by the DoLISA.

Page 2 of 3

Human Resources Sub-Working Group Meeting with MOLISA

Vietnam Business Forum, 2015

Processing Time:
Processing time to apply for work permit reduced to 7 working days. The MoLISA
has stated that its objective in the future is to reduce it further to 3 working days.
LIST OF PARTICIPANTS
No.
Name
GOVERNMENTAL AGENCIES

Title

Deputy Director
General
Deputy Director
2
Mr. Le Quang Trung
General
3
Ms. Phuong
Officer
4
Ms. Van
Officer
VBF HUMAN RESOURCES SUB-WORKING GROUP
Sub-Working Group
5
Mr. Collin Blackwell
Head
1

Mr. Nguyen Noi

Mr. Laurent Quistrebert

Enterprises
representatives

Phung Thi Thu Ha

Representative

Company
Foreign Investment Agency, MPI
Department of Employment,
MoLISA
Public procurement agency, MPI
Department of Legislation, MPI
VBF HR Sub-Working Group
VBF HR Sub-Working Group
Canon
Mitsui.

Coordinator

Page 3 of 3

VBF Secretariat

3.4. GOVERNANCE
AND INTEGRITY

Governance & Integrity Working Groups - Position Paper

Vietnam Business Forum, 2015

GOVERNANCE AND INTEGRITY WORKING GROUP REPORT

Prepared by
VBF Governance & Integrity WG
Vietnam Business Forum
This year of 2015, marks a turning point in Vietnam's economic integration goals - TPP, the
EUVN FTA, an FTA with South Korean and the full ASEAN integration all concluded. To
further prepare and to bring Vietnam standards up to global best practices, the Vietnam
Business Forum (VBF) has increased its effort on transparency, governance and integrity.
The VBF Governance and Integrity Working Group (G&I WG) is the re-named and expanded
VBF Governance and Transparency Working Group. The re-naming reflects the intent to
highlight organizational, structural and individual integrity in promoting a fair, level and
sustainable business environment, and of Government to support and enable this through
regulation and implementation. Activities of this G&I WG include the role of the private
sector to support and take responsibility for contributing to both a fair and level playing
field in Vietnam, as well as with both government and the business to reduce administrative
inefficiencies and avenues for corruption, and improve integrity and good governance in
business. The overall intention is to improve the competitiveness of both the private sector
in Vietnam, and particularly of small and medium enterprise to be regionally and
internationally competitive.
British Prime Minister, David Cameron, at a seminar hosted by this VBF Working Group in
HCMC, this fall, emphasised together with Deputy Prime Minister Nguyen Xuan Phuc that
at the heart of efficient and effective markets is trust, that is, trust in common and
generally accepted standards of behavior and adequate penalties for rule breaking. These
leaders also emphasised that the ultimate responsibility is for both government and
regulators, but also for private enterprise leadership to promote such environments. Prime
Minister Nguyen Tan Dung has also spoken very clearly about the Rule of Law, as a basis
for Vietnam resurgence.
A key element of this organizational integrity is corporate governance. It is well known,
from research and practice that setting the tone from the top is central to developing the
kind of fair business environment necessary to repel and repair unethical and corrupt
behavior and business practices. Look at how the case of FIFA has tarnished and affected
the image of not only the leadership, but also the game, and the events, and the
sponsorship. FIFA is also competing, much like a country does for investors and business,
and has lost billions in sponsorship, simply due to a lack of integrity, starting at the top.
WORKSHOPS
In our last 9 months since establishing ourselves, the G&I WG has been extremely active.
We have reorganized and expanded our base of committed companies from X to Y. We have
also conducted a series of practical workshops in both HCMC and Hanoi. These have
included: Current Trends for Business in Compliance and Integrity series, which served
as a platform for leading practitioners from Australia, Singapore, Canada, and Vietnam to
gather and share information on risk controls and compliance with practical international
case studies. There was wide Chamber support for this series from the Australian Chamber
of Commerce Vietnam (AusCham), the British Business Group Vietnam (BBGV), the
Canadian Chamber of Commerce Vietnam (CanCham), the European Chamber of

Page 1 of 4

Governance & Integrity Working Groups - Position Paper

Vietnam Business Forum, 2015

Commerce in Vietnam (EuroCham) and the German Industry and Commerce Vietnam
(GIC/AHK).
The first workshops were co-hosted by EuroCham in Hanoi and Ho Chi Minh City on the 16
and 17 of June. The key message was that for both governments and companies, high
standards of integrity provide a competitive advantage.

th

th

There were approximately 100 participants, including business leaders, legal and
compliance experts, as well as diplomatic mission representatives.
International
perspective on recent development trends were shared including, with notable recognition
of a greater awareness among business leaders of the costs of corruption. Companies need
effective compliance programs but they cannot solve all problems on their own.
Governments need to implement an enabling environment in order to attract high-quality
investors.
The second set of workshops was co-hosted by CanCham and took place in Ho Chi Minh City
and Hanoi on 25 and 26 of June. The key message was that business integrity is as much
to do with how profits are made as it is to do with how profits are spent.
th

th

Participants at the workshops concluded that concrete actions are required to improve
matters of integrity and compliance including training and information sharing, as well as
to build on existing legislation and government oversight. There was also broad agreement
that foreign and domestic Chambers of Commerce should develop initiatives to effectively
support the governments anti-corruption strategy and efforts. In this context, participants
were broadly in favor of developing an informal Business Code of Conduct drawing on the
willingness of large and experienced companies to share their experiences and best
practices. Such a Code of Conduct would act as voluntary guidance only but would serve to
bring together multiple private sector experiences into a valuable and Vietnam-specific
working document.
The third G&I WG seminar Improving Business Competitiveness was chaired by UK Prime
Minister David Cameron and included presentations from Deputy Prime Minister Nguyen
Xuan Phuc as well as VCCI. The Prime Minister of UK indicated that transparency and
integrity are key for UK business investment and cooperation to greater ensure safety of
their investments. Prime Minister Cameron requested that he be kept informed of
developments and progress, with subsequent meetings already organized.
Building on these strengths, the G&I WG plans to expand our work to include a greater
number of business associations, businesses, and in collaboration with government policy
intentions and agendas.
Specifically, G&I WG workshops are planned with a focus now on practically strengthening
the integrity of supply chains and distribution channels. These will involve real-world
experience from companies in Vietnam who will share their best practices and experiences
with risk assessment, management and monitoring. Here, the emphasis is on private
enterprise to take responsibility for their own operational transparency and integrity, and to
encourage other like minded private sector to participate.
This is as a direct result of the persistent theme raised by companies during our prior
events of the need to and benefit from successfully improving integrity standards of supply
chains and distribution channels in enhancing an increasingly integrated and competitive
trading environment in Vietnam. In other words, as Vietnam becomes more and more tied
Page 2 of 4

Governance & Integrity Working Groups - Position Paper

Vietnam Business Forum, 2015

through trade agreements, Vietnamese companies, in particular, are now increasingly

aware of the risks that third-party agents, suppliers and business partners can put them
under with increasingly stringent and far-reaching national and international anticorruption and compliance legislations; highlighted by a growing number of U.S. Foreign
Corrupt Practices Act (FCPA) corruption cases that have touched on activities in Vietnam.
Companies now clearly want to understand:
- tools and practices international companies use to manage risk in Vietnam;
- key risk points and mitigation strategies that can be adopted internally; and
- particularly how can SMEs adopt such strategies and conduct due diligence with limited
resources;
- the role of accounting standards - how are VN standards different from global
standards;
- how to limit the use of cash and therefore decrease the areas of abuse within a
company.
Our upcoming G&I WG workshops will seek to address these areas as well as offer practical
tools, and methods that work in Vietnam so that local companies can reduce risk and
improve integrity standards.
NEW SYSTEMS
Secondly, in a view to the Provincial Competitive Index, which reports that perceptions of
corruption among foreign investors are getting worse despite efforts made by Vietnamese
authorities to address the problem and investor concerns about the effect of corruption on
their operations and relationships with government authorities, the G&I WG has discussed
with VCCI, how the business community can join with the government to fight administrative
inefficiencies and corruption. Key themes and targets include continuing to work to
encourage ways to reduce the use of cash, paper, and face-to-face financial transactions
for business-to-business and business-to-government payments. Paper, cash and face-to
face transactions take time, open the door for illegal payments, and add administrative
costs for business and government.
NEW LAWS
A third key theme that has emerged from the work done by the G&I WG to date has been
with respect to supporting Governments legislation and agenda with regards to the
criminalization of private bribery and whistle blowing. As Vietnams law currently stands
bribery is only criminalized where it involves State actors. Private sector bribery is not
expressly criminalized or sanctioned. Vietnams ASEAN and regional neighbors such as
Singapore, South Korea, Malaysia, the Philippines, China and Hong Kong all criminalize
private sector bribery. This is in part recognition of the fact that increasing privatization of
governmental services, blurring of separation between private and public functions, and the
growth of trans-national business transactions all increase the importance of clarifying
laws in this regard to promote a clean and healthy market.
The G&I WG proposes that the government establishes a working group, directly involving
both foreign and domestic private sector companies, to examine and consider the issue of
criminalizing private bribery. Such working group would support Governments rapid
examination of the situation in other countries, particularly with a focus on ASEAN nations,
and propose to the government recommendations for Vietnam so as to comply with ASEAN
AEC requirements and 2016 integration.

Page 3 of 4

Governance & Integrity Working Groups - Position Paper

Vietnam Business Forum, 2015

Fundamentally, the G&I WG considers that promoting good governance, transparency,

integrity and accountability is at the heart of successful and sustainable anti-corruption
efforts. We seek to support and assist both government and private sector to identify and
pursue practical, results-driven strategies to achieve such ends. We consider our role to be
cross-cutting with all other VBF Working Groups and intend to work further with each to
devise and implement practical strategies.
We see as key to our activities integrating within the governments actions, including close
coordination with government initiatives such as Project 12, and similarly close
coordination with private sector associations, such as the VCCI and YBA, and private sector
companies, both domestic and foreign-invested.
We recognize that, in addition to efforts by public and private sector groups, active
participation of the broader community plays a very important role. The G&I WG wishes to
contribute where possible to helping ensure that there is greater general knowledge and
awareness of the issues and support for regions and provinces seeking to inform and
involve the broader community, and to achieving concrete results.
The success of Vietnam's new FTAs will depend on the success of Vietnamese businesses.

Page 4 of 4

Section IV

INFRASTRUCTURE,
AUTOMOTIVE
AND MINING

4.1. INFRASTRUCTURE

Infrastructure Privatization Status Report

Vietnam Business Forum, 2015

INFRASTRUCTURE PRIVATISATION STATUS REPORT - DECEMBER 2015

Prepared by
Infrastructure Working Group
Vietnam Business Forum
The Government has for years been encouraging a more efficient business sector. One aspect of this has been the effort to reduce the
dominance of inefficient State-owned enterprises in the economy.
A lot of focus has been placed on equitizing SOEs. Yet often the equalization is economically unimportant because few shares of the
former SOE are sold, and those that are sold are sometimes sold to passive investors, including banks, that will not have the interest to
improve management efficiencies.
The VBF Infrastructure Group has been concerned about the progress of equalization in the infrastructure sector, both in terms of quantity
and quality. As this is sometimes difficult to evaluate, this status report is a discussion document.
The status column of this report has been divided into several sections:

Private sector potential strategic investor means that there are reports that the State or SOE are attempting to sell an interest to a strategic
investor, but this has not yet occurred.
Private sector actual substantial sale means that there has been a sale of a substantial portion of a company but not to a strategic
investor. Such sales are often of non-core subsidiaries.
Private sector actual minor sale means that there has been a sale of SOE shares but the State (or SOE) still owns more than 75% of the
equity and so has complete control over all corporate activities. The VBF Infrastructure Group if of the view that this is a start but a clear road
map should be in place for increasing private shares of those companies that are not on the Governments list of strategically important
companies.
State to State transfers means that the State or an SOE has transferred an equity interest but only into an entity that is directly or indirectly
owned by the State.
Not clear means that the status of the equitization or sale is not publicly available to the best of our knowledge.

Page 1 of 16

Infrastructure Privatization Status Report

Vietnam Business Forum, 2015

The VBF Infrastructure Group welcomes the Governments input on the matters listed so that a more accurate report can be produced at
future VBF meetings in order to chart the progress that has been made.
NO.

1.

SOE
PetroVietnam
(PVN)

RESTRUCTURING
DECISION
Decision 46/QD-TTg
of the Prime
Minister dated 5
January 2013
approving the plan
for restructuring
PVN 2012-2015
Decision 1011/QTTg dated 3 July
2015 amending the
plan for
restructuring PVN
2012-2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

DEVELOPMENT

PVN will sell ownership stakes in the

following:
- Binh Son Oil Refinery (49 per cent
for sale or equitisation with PVN
holding no more than 65 percent
of stakes);

Ca Mau Fertiliser Plant (49 per

cent for sale);

Dung Quat Shipyard (64 per cent

for sale);

http://www.thesaigontimes.vn/133598/Loc-hoa-dau-Binh-Son-chua-ban-duoc-co-phan-cho-Gazprom-Neft.html

http://cafef.vn/doanh-nghiep/pvn-lo-ke-hoach-thoai-von-tai-dam-ca-mau-2015080514571491.chn

Page 2 of 16

End of July 2015 - PVN was

negotiating with Gazprom Neft to
sell 49% of Binh Son Oil Refinery.
The parties reportedly could not
reach agreement on the price. If
PVN cannot reach an agreement
with Gazprom Neft, PVN may
equities Binh Son Oil Refinery.1
December 2014 - initial public
offering (IPO) of Ca Mau
Fertiliser Company. Selling
128,951,300 shares to public. PVN
holds 75.56% of shares in Ca Mau
Fertiliser Company. In June 2015,
PVN registered to sell 13 million
shares in Ca Mau Fertiliser,
representing about 2.4% of the
share capital of the company but
the offer was not successful.2
Dung Quat Shipyard was
originally a wholly-owned
subsidiary of Vinashin. After
Vinashin was restructured, Dung
Quat Shipyard was transferred to
PVN in July 2010. Due to losses,
it is not qualified to be equitised.

CURRENT
STATUS

Private sector
potential
strategic
investor

Private sector
actual
minor sale

State to State
transfers

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

PVN Oil Corporation (25 per cent

for sale) - after 2015;
PVN Power Corporation (25 per
cent for sale) - after 2015;

DEVELOPMENT

PVN plans to transform Dung

Quat Shipyard into a joint stock
company (JSC) and sell its stake
to the State Capital Investment
Corporation (SCIC) after 2015.3
PVN plans to equitise PV Oil
Corporation and PV Power
Corporation after 2015.4 Previous
effort to find a strategic investor
for PV Gas did not succeed.

CURRENT
STATUS

Not clear

PVN Transport (approx. 7 per cent

for sale);
- PVN Energy Technology
Corporation (5 per cent for sale);
- PVN Construction (approx. 20 per
cent for sale);
- PVN Petrochemical and Textile
Fiber (20 per cent for sale)
Vinatex also has to sell its 14 per
cent stake in this company;
- PVN Insurance (4 per cent for
sale).
PVN will sell its entire ownership in
the following companies:
- Lai Vu Industrial Park (100 per
cent for sale);
- Ocean Bank (20 per cent for sale);

June 2015 - PVN handed over the

Lai Vu Industrial Park to Hai
Duong Peoples Committee.5

State to State
transfers

May 2015 - the SBV acquired

State to State

http://tinnhanhchungkhoan.vn/doanh-nghiep/pvn-chay-nuoc-rut-co-phan-hoa-106237.html

http://kinhdoanhnet.vn/chung-khoan/trong-nuoc/pvn-da-thoai-von-hon-270-ty-dong-tai-3-doanh-nghiep-thanh-vien_t114c17n22957

http://petrotimes.vn/chinh-thuc-ban-giao-kcn-lai-vu-ve-hai-duong-189481.html

Page 3 of 16

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

PVcomBank (78 per cent for sale);

Page 4 of 16

DEVELOPMENT

100% of the shares of Ocean Bank

for the price of VND0 due to
Ocean Banks poor performance
and losses.
July 2015 - State Bank of Vietnam
(SBV) confirms that it has
received information from PVN
regarding the plan to hand over
VND 4,680 billion of shares of
PVN in PVcomBank to the SBV for
its management. It is expected
that the transfer will be
completed by the end of 2015.

CURRENT
STATUS

transfers

State to State
transfers

Infrastructure Privatization Status Report

NO.

SOE

2.

Vietnam Coal and

Mineral Corporation
(Vinacomin)

RESTRUCTURING
DECISION
Decision 314/QTTg of the Prime
Minister dated 7
February 2013 on
restructuring of
Vietnam National
Coal - Mineral
Industries Holding
Corporation Limited
(Vinacomin)

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

DEVELOPMENT

Vinacomin will fully divest from 9

subsidiaries including:
- SHB-Vinacomin Insurance Joint
Stock Company
- VNA Insurance Company
- Saigon Hanoi Commercial Joint
Stock Bank
- SHS Securities Company
- Vinacomin Finance Company
- Hai Ha Economic Zone
Development Company
- BIDV VN Partners Investment
Management Company
- Vinacomin Infrastructure and
Housing Development Company
- Vietnam Professional Football
Joint Stock Company

In June 2015, IPO of Vinacomin

Shipbuilding Company was conducted
offering for sale of 49% of charter
capital of the company. All the offered
shares were sold to one investor at a
price that was as twice the starting
price.
August 2015, Vinacomin has fully
divested from five companies
including:6
- SHB-Vinacomin Insurance Joint
Stock Company
- VNA Insurance Company
- Saigon Hanoi Commercial Joint
Stock Bank
- SHS Securities Company
- Vinacomin Finance Company

Equtisation of the following wholly

state-owned companies:
- Vinacomin - Viet Bac Mining
Industry Corporation (up to 25 per
cent for sale);

30 December 2014 - the Prime

Minister issued Decision 2388/QDTTg approving the equitisation plan of
VinacominMinerals Holding
Corporation (Vimico). The IPO was
conducted on 23 April 2015.
Vinacomin sold 2.8% of its shares.7
- 26 January 2015 - the Prime

http://cafef.vn/thi-truong-chung-khoan/vinacomin-da-thoai-von-khoi-shb-201408251908351538.chn

http://bizlive.vn/doanh-nghiep/ipo-vimico-e-hon-97-co-phan-959108.html

Page 5 of 16

CURRENT
STATUS

Private sector
actual
substantial
sale

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

DEVELOPMENT
Minister issued Decision 132/QDTTg approving the equitisation of
Vinacomin - Viet Bac Mining
Industry Corporation. At the IPO
on 27 May 2015, only 28 investors
participated and 1.6% of the
shares of the company were
sold.8

Vinacomin Mining Corporation (35 - 49

per cent for sale);
Vinacomin Electricity Corporation (35 49 per cent for sale);

Vinacomin Material, Transport, and

Stevedoring Company (35 - 49 per cent
for sale);

Thai Nguyen Non-ferrous Metals

Company (35 - 49 per cent for sale);

http://baodautu.vn/mo-viet-bac-chi-ban-duoc-16-co-phan-ipo-d27433.html

http://www.bvsc.com.vn/Sites/QuoteVN/SiteRoot/Phuong%20an%20CPH%20.pdf

10

https://vcsc.com.vn/Shared/Views/Web/MessagesDetail.aspx?menuid=4&id=164505&catid=1239&tab=&title=&lang=vi-vn

Page 6 of 16

CURRENT
STATUS

Private sector
actual
minor sale

19 January 2015 - the Prime Minister

issued Decision 85/QD-TTg approving
the equitisation of Vinacomin
Electricity Corporation. At the IPO on
27 May 2015, only 28 investors
participated and about 5% of the
shares of the company were sold.

Private sector
actual
minor sale

The IPO of Vinacomin Material,

Transport, and Stevedoring Company
was conducted on 26 February 2015
offering to sell to the public 17.96% of
the charter capital of the company.9
Only 11.9% of the offered shares were
sold.10
The IPO of Thai Nguyen Non-ferrous
Metals Company was conducted on 17

Private sector
actual
minor sale

Private sector
actual

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

Development of Mining Technology and

Equipment Company (35 - 49 per cent
for sale);
Lam Dong Aluminium Company (35 49 per cent for sale); and
Vinacomin Shipbuilding Company (up
to 50 per cent for sale).

DEVELOPMENT
April 2014 offering 23.3% of shares of
the company.11The shares were sold
to one institutional shareholder and
one individual shareholder.12However,
after the IPO, it was discovered that
the company had issued a guarantee
and the beneficiary had made a claim
against the guarantor. As this was not
disclosed in the IPO prospectus, the
investors who bought the shares of
Thai Nguyen Non-ferrous Metals
Company in the IPO are requesting
the competent authorities to
repudiate the IPO results. The case
has not been resolved to date.13

minor sale

In June 2015, IPO of Vinacomin

Shipbuilding Company was conducted
offering for sale of 49% of charter
capital of the company. All the offered
shares were sold to one investor at a
price that was as twice the starting
price.

Private sector
actual
substantial
sale

11

http://www.thesaigontimes.vn/128956/Cong-ty-khoang-san-lon-nhat-nuoc-ban-dau-gia-co-phan.html

12

http://ndh.vn/ipo-kim-loai-mau-thai-nguyen-2-ndt-mua-het-100-gia-thanh-cong-cao-hon-gia-khoi-diem-88--201404170137149p4c146.news

13

http://baodautu.vn/trach-nhiem-phia-sau-ban-cao-bach-cua-cong-ty-kim-loai-mau-thai-nguyen-d26035.html

Page 7 of 16

CURRENT
STATUS

Infrastructure Privatization Status Report

NO.

3.

SOE

Electricity of
Vietnam (EVN)

RESTRUCTURING
DECISION

Decision 1782 dated

23 November 2012
on restructuring
EVN

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE
In addition, Vinacomin will reduce its
ownership stake to 50 - 65 per cent in
other 11 companies in the industry and
mechanics, tourism, investment, and
transportation sectors, and to less
than 50 per cent in 11 others.
EVN will sell its interests in An Binh
Bank, An Binh Securities, Global
Insurance JSC, Saigon Vina Real Estate
JSC, EVN Land and Construction
Electricity Company by the end of 2015.
EVN must limit its ownership to 50 per
cent in various engineering
companies.

DEVELOPMENT

EVN has officially declared that it will

sell all of its stakes in An Binh Bank
(approximately 81.6 million shares).
By the end of August 2015, EVN has
fully divested all of its stakes from
three real estate companies (Vietnam
Investment and Construction
Electricity Company, Saigon Vina Real
Estate JSC and EVN Land).

CURRENT
STATUS

Private sector
actual
substantial
sale

EVN has sold 1 million shares in

Global Insurance JSC to ERGO
International Group, decreasing its
shares in Global Insurance JSC from
22.5% to 20%.
EVN must limit its ownership to less
than 50 per cent of EVN Finance, Vinh
Tan 3 JSC, and ThuanBinh Wind Power
JSC.

Page 8 of 16

EVN decreased its shares in EVN

Finance from 40% to 16.5% by selling
58.75 million shares. EVN is
negotiating with other investors to
sell its 3.75 million shares in EVN
Finance (accounting for 1.5% of the
total shares of EVN Finance).

Private sector
actual
substantial
sale

Infrastructure Privatization Status Report

NO.

4.

SOE
Power Generation
Corporation 3
(Genco3)

RESTRUCTURING
DECISION
Decision 9494/QDBCT of the Ministry
of Industry and
Trade dated 22
October 2014 on
equitisation of the
Genco 3

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE
The content of the Decision 9494/QDBCT is not available.

DEVELOPMENT
Genco 3 is still in the process of
preparing and finalising the detailed
equitisation plan. The plan may be
completed in 2015 to be submitted for
approval by EVN and Ministry of
Industry and Trade. The IPO is
scheduled to happen in March 2016.14

CURRENT
STATUS

Not clear

Genco3 will be the first to equitise,

followed by Genco 1 and Genco2.

5. Vietnam Airlines
(VNA)

Decision 172/QDTTg of the Prime

Minister dated 16
January 2013

Vietnam Airlines will be equitised in

2013 with the State retaining at least
50 per cent ownership;

Vietnam Air Petrol Company

14

http://tinnhanhchungkhoan.vn/doanh-nghiep/sap-trinh-phuong-an-co-phan-hoa-genco-3-130819.html

15

http://vietnamnet.vn/vn/xa-hoi/207240/ipo-thanh-cong--vietnam-airlines-thu-ve-hon-1-000-ty-dong.html

Page 9 of 16

The Prime Minister issued

Decision 1611/QD-TTg dated 10
September 2014 approving the
equitisation plan of VNA.
Accordingly, that State will retain
75% of VNAs charter capital.
20% will be sold to strategic
investor, 0.722% will be sold to
the trade union and the
employees and the remaining
3.48% will be offered to the
public. In the IPO on 14
November 2014, 3.48% of VNA
was sold, primarily to two local
banks.15
VNA has been searching for a
strategic investor.

Private sector
actual
minor sale

Private sector
potential
strategic
investor
Not clear

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE
(Vinapco) and three ground
services companies (Noibai, Da
Nang and Tan Son Nhat
International airport ground
services companies) will be
equitised with Vietnam Airlines
retaining at least 50 per cent
ownership;
- Vietnam Air Caterers will be
equitised when the joint
venturebetween Vietnam Airlines
and Cathay Pacific Catering
Services ends;
Vietnam Airlines will sell interests in
nine companies in the insurance,
banking, securities, post, telecoms,
aviation services and logistics sectors,
including:
- Vietnam Air Service JSC;
- High Grade Plastic Joint Stock
Company (APLACO);
- Aviation Logistics Service (ALS);
- Aviation Hotel JSC (SHJSC);
- Vietnam Airlines Investment JSC;
and
- Techcombank;
- Bao Minh Insurance;
- Hoa Binh Securities.

16

DEVELOPMENT

Not clear

To date, VNA has fully divested from

the following companies:16
- Techcombank;
- Bao Minh Insurance;
- HoaBinh Securities;
- Aviation Logistics Service;
- Vietnam Air Service JSC;
- VNA Insurance.
- Vietnam Airlines Investment

http://cafef.vn/thi-truong-chung-khoan/vietnam-airlines-thoai-von-dat-hon-90-45-2015102111251666.chn;and https://www.bsc.com.vn/News/2015/7/20/465043.aspx

Page 10 of 16

CURRENT
STATUS

Private sector
actual
substantial
sale

Infrastructure Privatization Status Report

NO.

SOE

6. Airport

Corporations of
Vietnam
(ACV)

7.

Vietnam Railway
Corporation
(VNR)

RESTRUCTURING
DECISION
Decision 1710/QDTTg of the Prime
Minister dated 6
October 2015
approving the
equitisation plan of
ACV
Under Decision 198
of the Prime
Minister dated 21
January 2013 on
restructuring
Vietnam Railway
Corporation (VNR)

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

DEVELOPMENT

CURRENT
STATUS

Pursuant to the EP, the State will

continue to own 75% of ACV. 20% of
shares will be sold to strategic
investors. 1.4% of shares will be sold
to employees of ACV. 3.47% will be
offered for sale to the public.

EP has just been issued.

Not clear

Not clear

VNR will hold 100% of the charter

capital of 23companies operating
in railway transportation sector;
from 50 to 60 per cent capital in
two companies; and up to 50 per
cent of chartered capital in 22
subsidiaries in railway operation,
construction, printing and other
railway services;

Page 11 of 16

In 2015, VNR has just divested

43.87% of its shares in Civil
Engineering Construction
Corporation No. 6 (CIENCO 6).
According to the plan, VNR has to
complete divesting in 27
companies, however, as of now,
only 6 of them have been
completed.
In the upcoming period, VNR will
divest 100% of its stakes in 10
other subsidiaries, which are My
Trang Stone JSC, Hanoi
Construction Investment JSC,
Hanoi Railway, Hanoi Railway
Tourist Service JSC,
Transportation Investment and
Construction Consultant
JSC,Vietnam Railway Signal
Telecommunication JSC, Vinh
Nguyen JSC, Da Nang
Construction JSC, Road And
Bridge Engineering & Mechanical
Joint Stock Company, Civil
Engineering Construction

Infrastructure Privatization Status Report

NO.

8.

SOE

Vietnam National
Shipping Lines
(Vinalines)

RESTRUCTURING
DECISION

Decision 276/QDTTg of the Prime

Minister dated 4
February 2013 on
restructuring
Vinalines

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

VNR will fully divest from the following

six companies:
- Vietnam Railway Transport Service
JSC;
- Saigon Train JSC;
- Zone 1 Railway Transport Service
JSC;
- Chu Lai Stone JSC;
- Southern Railway Construction
and Material JSC; and
- Hai Van Nam Hotel JSC.
- Vinalines will be equitised in 2015;

DEVELOPMENT

Corporation No. 2, and Railway

Infrastructure Development JSC.
In 2014, VNR has fully divested
from 5 companies, including Chu
Lai Stone JSC; Southern Railway
Construction and Material JSC,
SaiGon Train JSC, Da Nang
Railway and Mechanics JSC and
Transportation Construction and
Investment JSC.

CURRENT
STATUS

Private sector
actual
substantial
sale

Vinalines has submitted the

equitisation plan of Vinalines to
the Prime Minister. Vinalines is
preparing for its IPO which is
expected to take place in 2015.17

Private sector
actual
minor sale

On 30 June 2015, IPO of Saigon

Port was conducted. All the
offered shares of Saigon Port
Company, representing 16.5% of
the charter capital of the
company, were sold.

Private sector
actual
minor sale

Vinalines has to withdraw from the

Van Phong international port
development project, leaving this
opportunity open for other capable
investors;
The following companies under
Vinalines will be equitised and
available for outside investors brought
in:
- Saigon Port (25 per cent for sale);

17

http://kinhdoanhnet.vn/chung-khoan/trong-nuoc/vinalines-se-thuc-hien-ipo-vao-quy-iii2015_t114c17n22656

Page 12 of 16

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

HaiPhong Port (25 per cent for

sale);

DEVELOPMENT

- On 14 May 2014, IPO of HaiPhong

Port Company was conducted,
offering to sell 11.51% of the
shares of the company. In the IPO
47% of the offered shares were
sold to 78 investors with one
being an institutional investor.18

CURRENT
STATUS

Private sector
potential
strategic
investor

- Three investors are interested in

becoming the strategic investor of
HaiPhong Port Company
including State General Reserve
Fund of Oman (or its subsidiary);
VietinBank; and Vingroup.19

- Da Nang Port (25 per cent for sale);

- On 19 January 2015, the IPO of Da

Nang Port was conducted and
about 5% of the shares were sold.
After the IPO Vinalines still owned
95% of the shares of Dai Nang
Port Company.2010% will be
offered to strategic investors.21

Can Tho and Cai Chui Ports (25 per

cent for sale);

- The IPO of Can Tho port22was

conducted on 31 December 2014

18

Private sector
actual
minor sale

Private sector
actual

http://www.bvsc.com.vn/Sites/QuoteVN/SiteRoot/10%20Phuong%20an%20CPH.pdf and http://cafef.vn/thi-truong-chung-khoan/ngay-145-ipo-cang-hai-phong-voi-gia-binh-quan-la-13507-dongco-phan201405151536495903.chn

19
http://cafef.vn/vi-mo-dau-tu/he-lo-nha-dau-tu-chien-luoc-cua-cang-hai-phong-20150907093956469.chn
20

http://cafef.vn/thi-truong-chung-khoan/vinalines-chao-ban-tiep-20-co-phan-cua-cang-da-nang-201412181521451708.chn
http://www.vinalines.com.vn/?mod=news&view_news_name=phe-duyet-phuong-an-co-phan-hoa-cang-da-nang

21
22

file:///C:/Users/ngnguyen/Downloads/20141204_20141203%20-%20PHUONG%20AN%20CPH%20CANG%20CAN%20THO%20FINAL%20FINAL.pdf

Page 13 of 16

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

DEVELOPMENT
and 2% of the offered shares
were sold.23

QuyNhon Port (25 per cent for

sale);

QuangNinh Port (25 per cent for

sale);

NhaTrang Port (25 per cent for

sale);

Cam Ranh Port (25 per cent for

sale);

NgheTinh Port (25 per cent for

sale);

KhuyenLuong Port (35 - 50 per

cent for sale);

Nam Can Port (35 - 50 per cent for

sale);

East Sea Transportation (35 - 50

per cent for sale);

Vinalines Shipping Company (35 50 per cent for sale);

Vinalines Container Shipping

Company (35 - 50 per cent for

23

http://vietstock.vn/2014/12/ipo-cang-can-tho-chua-day-2-co-phan-chao-ban-co-nguoi-mua-746-398213.htm

Page 14 of 16

CURRENT
STATUS

minor sale

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE

DEVELOPMENT

CURRENT
STATUS

sale);

9.

Decision 753/QDVietnam Military

Telecommunications TTg of the Prime
Minister dated 17
Group (Viettel)
May 2013 on
restructuring Viettel

VinalinesHaiPhong Shipping
Service Company (35 - 50 per cent
for sale);

VinalinesNhaTrang Shipping
Company (35 - 50 per cent for
sale).

By the end of 2015, Vinalines will have

to sell its interests in numerous other
businesses in various sectors.
Viettel will own more than 50 per cent
of charter capital in seven joint stock
companies, including Viettel Post,
Viettel Global, Viettel Construction
Engineering, Viettel Consultant and
Design, Viettel CHT, Viettel
HancicHousing Development, Viettel
Peru; and less than 50 per cent in four
others, namely Vinaconex, Military
Bank, Vinaconex-Viettel Urban
Development, Vinh Son Joint Stock
Company.
Viettel will fully divest from five
businesses:
- ViettelTechnologies Corporation,

Vinaconex Commercial

24

http://ictnews.vn/kinh-doanh/doanh-nghiep/cac-dai-gia-vien-thong-cap-tap-thoai-von-dau-tu-ngoai-nganh-130193.ict

Page 15 of 16

By September 2015, Viettel has fully

divested from:24

ViettelTechnologies Corporation;
and

Private sector
actual
substantial
sale

Infrastructure Privatization Status Report

NO.

SOE

RESTRUCTURING
DECISION

Vietnam Business Forum, 2015

BUSINESSES
SCHEDULED FOR EQUITISATION/SALE
Development JSC,

10. Mobifone

Decision 888/QDTTg of the Prime

Minister dated 10
June 2014 on
approving the restructuring scheme
of Vietnam Posts
and
Telecommunications
Group (VNPT) for the
period 2014-2015

EVN International JSC,

Coecoo Rubber Industry JSC, and

Vinaconex Viettel Finance JSC.

Mobifone will be handed over to

Ministry of Information and
Communication and will no longer
be a subsidiary of VNPT.

Ministry of Information and

Communication will prepare and
submit the plan for equitisation of
Mobifone for submission to the
Prime Minister in 2014.

25

DEVELOPMENT

Page 16 of 16

Vinaconex Commercial
Development JSC

To date, Ministry of Information and

Communication does not appear to
have finalized the plan for equitising
Mobifone.25

http://vietnamnet.vn/vn/cong-nghe-thong-tin-vien-thong/250697/co-phan-hoa-mobifone---khong-ban-co-phan-lay-duoc--.html

CURRENT
STATUS

State to State
transfers

Not clear

Infrastructure Working Group Progress Report

Vietnam Business Forum, 2015

INFRASTRUCTURE WORKING GROUP - PROGRESS REPORT

Prepared by
Infrastructure Working Group

Scoring to be rated as followings:

In progress report:
0 = issue remains; 1 = partially somewhat resolved; 2 = issue has been solved.
Priority (1 -10: highest).
Score = (Progress) x (Priority)
No.
1.

Age
Old

Issues
Municipal governments have made
impressive
advances
in
road
infrastructure, bridges and bypasses.
But with increasing vehicle numbers
and inadequate public transport, urban
traffic is overly congested and
dangerous.

2.

Old

Purifying of water and handling of waste

fall behind international standards,
causing risks to health and safety.

3.

Old

Flood protection and water runoff

management are sorely needed in
urban areas.

Suggested/Agreed Action
A comprehensive planning program
for developing integrated urban
transport solutions should be
accelerated.

Progress
Many plans are afoot, but
coordination, transparency and
accountability
could
be
improved.

1
x

Some municipal water control

projects have been constructed and
implemented and this has had an
impact. Noting the high risk of
climate related disasters in coastal
and low-lying areas, continued
efforts at mitigation and adaptation
are needed.

Progress is notable in some

areas, but the challenge is
serious
and
needs
more
coordinated attention.

Priority
10

Score
10

Important Note: This "Progress Matrix" was prepared based on the voluntary submissions of the various Working Groups and Sub-Working Groups of the Vietnam Business
Forum from 2011 - 2014. In terms of both the feedback and the rankings/progress evaluations, it is not intended to be either complete or scientific. It does nevertheless
reflect many issues of concern that have come up in the various Working Groups, and their constructive proposals for solutions. It is hoped that it will provide a useful
reference to track and guide progress as the Government and the business community continue their collaboration to improve the business environment though the channel
of the Vietnam Business Forum. Among other things, it should be noted that many issues already fully resolved have been dropped from this Progress Matrix to limit the
size of the document, and almost all of the issues noted are those that still need more work.

Page 1 of 6

Infrastructure Progress Report

No.
4.

Age
New

Issues
Tendering process (i.e tender for
selection of investors and tender of
construction work) is not transparent
and competitive: rules are complex and
inconsistent.

5.

New

Decision 71
harmonized

6.

New

PPP:
(1) It is unclear whether Decree 108 or
Decision 71 would apply to a
particular
PPP
transaction

and Decree 1084 are not

Vietnam Business Forum, 2015

Suggested/Agreed Action
Implement administrative reform
more strictly in this area. More to
more transparent online bidding
systems.

Progress
Decree 301 (effective as from 5
May 2015) and Decree 632
(effective as from15 August
2014) together with a number of
implementing
Circulars
of
Ministry
of
Planning
and
Investment have provided a
more detailed guidance on
tendering for selection of
investors
and
tenders
of
construction works.

Harmonize the two sets of rules

and eliminate the common features
that discourage investment in
infrastructure
(e.g.,
allow
international legal principles and
dispute resolution to apply).

The government promulgated

Decree 155 consolidating the
PPP scheme under Decision 71
and the BOT regime under
Decree 108 and replacing both
Decrees. Decree 15 became
effective on 10 April 2015,
creating
a
unified
legal
framework for boosting private
and foreign investment in
infrastructure in Vietnam.
(1) Decree 15 is the unified law
regulating PPP transactions.

1
x

Priority
6

Score
6

18

(2) Decree 15 has removed the

30%
cap
on
state

Decree 30/2015/ND-CP of the Government dated 17 March 2015 implementing a number of provisions of the Law on Public Procurement relating to selection of
investors.
2 Decree 63/2014/ND-CP of the Government dated 26 June 2014 on selection of contractors.
3
Decision 71/2010/QD-TTg on 9 November 2010 of the Prime Minister on pilot investments in the form of public-private partnership.
4
Decree 108/2009/ND-CP on 27 November 2009 on investment following the form of Construction Contract - Business - Transfer, Construction Contract - Transfer
- Business, Construction Contract - Transfer
5
Decree 15/2015/ND-CP of the government dated 14 February 2015 on public-private partnership investment form.

Page 2 of 6

Infrastructure Progress Report

No.

Age

Vietnam Business Forum, 2015

Issues
(2) Decision 71 do not define the scope
of state contribution and fail to
provide a transparent mechanism
for determining the same. This
leads to difficulties determining the
scope of viability gap funding under
Decision 71.

Suggested/Agreed Action

(3) Lack of a single PPP unit that is

empowered to act on behalf of the
government and address investor
concerns

Progress
contribution in a PPP
project. Together with the
new
Law
on
Public
6
Investment , Decree 15 sets
out a more transparent
mechanism for determining
the
scope
of
state
contribution.

Priority

Score

(3) Decree 15 provides for a

clear institutional structure
for the States management
and implementation of PPP
projects with the Ministry of
Planning and Investment
being
the
central
coordinator of the PPP
program.

(4) Lack of principles guiding risk

allocation among parties, leading to
significant variations from one deal
to another

(4) While the government has

taken efforts to provide
certain guidance in Decree
15 on risk allocation ,
Decree 15 is not clear on a
number of issues.
7.

New

Risky

aspects

in

BOT

regime:

(1) Foreign exchange guarantee is 100%

under the implication and practice of
Decree 108 (BOT) so far. 30% is
stipulated
by
law.
(2) Mortgage of land use rights and
assets attached to land to foreign
6

(1)
Strengthen
government
guarantee of foreign exchange.
(2) Allow mortgage of land use
rights. Issue regulations clarifying
that domestic banks can hold
mortgages of land use rights as
security agents for foreign lenders.

Law on Public Investment No. 49/2014/QH13 of the National Assembly dated 18 June 2014.

Page 3 of 6

No material improvement under

Decree 15 regarding risk
sharing mechanism in PPP
projects.

Infrastructure Progress Report

No.

Age

Issues
lenders is not permitted under Land
Law.

(3) Double licensing of BOT procedures.

Vietnam Business Forum, 2015

Suggested/Agreed Action
(3) Amend Decree 108 to stipulate
that after project documents are
agreed by relevant ministries and
initialed by the authorized state
bodies, the IC will be promptly
issued without going through a
second round of review by the
ministries.

Progress

Priority

Score

Assume the cost of land, prepare

for land clearance and
compensation in advance.
Provide supporting infrastructure
Reduce administrative complexity.
8.

New

PPP regime:
(1) The PPP provisions in the Law on
Public Procurement are
underdeveloped
1.1. Definitions of key terms are not
clearly drafted making the law
difficult to interpret
1.2. Unclear linkage between PPP
provisions under Decree 108 and
Decision 71

(2) The draft decree needs to be

further revised so that it can
address better the investor's
concern and make a PPP project
viable
and
bankable.

(2) A new draft Decree replacing

Decision 71 and Decree 108 is being
developed. There are several issues
relating to the regulations on PPP
under the draft Decree:
2.1. The relationship and interaction
between Decree 108/2009/ND-CP
and draft Decree (transition clause)
are unclear.

(5) Introduce PPP type feasibility

study requirements.

(4) VGF on PPPs be backed by a

state fund that ensures there is
balance of budget to fund VGF
commitment
across
projects.

(1) Decree 30 provides for

transparent principles for
tendering PPP projects. In
principle,
international
competitive
bidding
is
required for all PPP projects
except for limited special
cases where limited tender
or direct appointment may
be apply subject to approval
of competent authorities.
(2) Decree 15 provides detailed
and clear guidance on
preparation for, selection
and implementation of PPP
projects.
2.1. Decree 15 clears the
confusion between Decree
108 and Decision 71.

Page 4 of 6

Infrastructure Progress Report

No.

Age

Issues
2.2. An additional evaluation procedure
will be required for the issuance of
the IC
2.3. The Draft Decree stipulates many
specific detailed contents of the
Project
Contract,
which
are
expected to be discussed in the
project Contract
2.4. The investors will be in charge of
conducting
land
clearance,
compensation and resettlement
procedure. The investors will be
exempt from land use fees/rental in
accordance with the land law
2.5. Foreign law could be applied to (i)
Project Contracts; and (ii) Contracts
guaranteed by the competent
authority, but only if the application
of foreign law does not contradict
the laws of Vietnam. This is not
likely to be provable and hence the
use of foreign law will not be
possible

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress
2.2. Decree 15 still requires an
additional
evaluation
procedure for issuing IC.
2.3. Contract forms are defined
with
certain
flexibility
permitted subject to the
nature of specific projects.
2.4. The provincial government
will be in charge of land
clearance and resettlement.
The investors or project
companies will be entitled to
exemption or reduction of
land rental or land use fees.
2.5. Application of foreign laws
to project contracts are
permitted but still subject to
broad
and
ambiguous
conditions.
(3) Decree 15 has not fully
resolved the outstanding
risk
allocation
and
bankability issues of PPP
projects.
3.2. There
is
no
explicit
guarantee
on
foreign
currency convertibility.
3.3. Although Decree 15 appears
to recognize availability
payment, the mechanism for
determining and making
payment is unclear.
3.4. Mortgage of land use rights
and assets attached to land
to foreign lenders is still not
recognized under the Law
on Land.

(3) A number of bankability and risk

sharing issues remain unresolved
3.1. The Government will not provide
guarantees on exchange rates for
the conversion of local currency
back
into
foreign
currency.
(3.2) No mechanism for viability gap
funding
3.1. Mortgage of land use right to
foreign lenders is still uncertain.
(4) No viable project pipeline

Page 5 of 6

Priority

Score

Infrastructure Progress Report

No.

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Page 6 of 6

Progress
(4) Since the effectiveness of
Decision 71 in 2011 on pilot
PPP program, no highprofile PPP projects have
been
successfully
implemented under the PPP
regime. To date, no official
tangible list of PPP projects
has been published by the
government.

Priority

Score

4.2. AUTOMOTIVE

Automotive Working Group Report

Vietnam Business Forum, 2015

AUTOMOTIVE WORKING GROUP REPORT

Prepared by
Automotive Working Group
Vietnam Business Forum

The Automotive Working Group Vietnam Business Forum comprises interests of the
following sub sections of the industry:
- Four Wheelers (Passenger Cars and Commercial Vehicles)
CKD (Local Assembly/Manufacturers)
CBU (Import)
- Two Wheelers (Scooters/Motorbikes)

We would like to express our high appreciation for the Governments Resolution No.
19/2015 to improve business environment and national competitiveness. We specially
thank the Governments specific instructions, MOFs and MOITs efforts in reviewing and
proposing certain policies, especially remarkable changes in tax laws including special
consumption tax (SCT) recently submitted by Government to National Assembly to
encourage the automotive industry development in accordance with the approved
Strategy for Vietnam automobile industry development to 2025 with a vision to 2035 and
the approved Master Plan for Vietnam automobile industry development to 2020 with a
vision to 2030. This reinforces the interest of the Government to development of the
Vietnam automobile industry by enabling healthy competition and promoting a level
playing field for all players.
I. FOUR WHEELER INDUSTRY (CKD/CBU)
Thanks to the Governments efforts in addressing our raised issues and the remarkably
increasing economy growth this year, automobiles including CKD and CBU have been
recovered and surpassed the milestone of 2009 (160,000 units) in Sept. 2015. With the
current trend of growing in the first 9 months of 2015, it is estimated that automotive
market size may reach over 210,000 units (including CKD and CBU vehicles) in 2015. Even
so, the growth in the overall automotive sector with more than 20 players and 40 brands in
Vietnam has not been as per expectations of both- the investors and the Government in
reference with the total available assembly capacity of ~500,000 units/year. The current
total Industry structure of CKD and CBU vehicles with the CKD being approx. 74% of the
industry, the overall capacity utilization is a mere ~30%. Lack of sub optimal capacity
utilization to grow has hurt the investor confidence and also questioned the future returns
for new investments.
A key factor to attract investment in a country is to grow the overall size of the market and
drive cost competitiveness of the CKD and Component industry.
In addition to adding automobile and its supporting industries in the incentive investment
sector list and proposing some tax policy review recently, the Government of Vietnam
should consider further steps to accelerate growth of the overall industry and to drive cost
competitiveness of CKD to maintain a sustainable automotive industry in Vietnam. These
factors will lead to suppliers and investors coming to Vietnam and support the growth and
development of the industry.
Based on the above and the working of the group and interactions with different bodies, and
with estimation that the latest draft of law on revising laws on taxes will be adopted by
Page 1 of 6

Automotive Working Group Report

Vietnam Business Forum, 2015

National Assembly at the 10th session of the National Assembly XIII by end of November
2015, we find there are still some pending issues that we raised since 2013. In this part, we
would like to emphasize on the two main issues as below:
1. Cost gaps and weak cost competitiveness of local CKD operations
The policy should aim at recognizing the investments of CKD players in Vietnam and
ensuring safe guarding of interest of CKD during the transition to ASEAN AFTA regime from
2018 onwards. Due to disadvantages of small production and economic scales, it is
estimated that automotive production costs in Vietnam are approx. 20% higher than those
of automobiles imported from Thailand.
Recommendations: Some of the actions have been under process and others need to be
considered to retain cost- competitiveness of CKD industry are:
-

Eliminating import duty for automotive parts that Vietnam has not yet produced
Applying stricter control and enforcing transparency on import of CBU vehicles
Verify declared value of imported cars
Tighten the control of Used Car import
Providing adequate production linked incentives acceptable under WTO for CKD

2. High taxes and fees levied on automobile

Vietnam is going to fully integrate in ASEAN by 2018 and other FTAs (EVFTA, TPP, ) will be
signed and/or come effect in a couple of years, the future (survival and growth) of Vietnam
automobile manufacturing industry largely depends on the Governments policies on taxes
and fees in which the SCT is of importance.
Recommendations: We highly appreciate the Government in revising the SCT calculation
method in Govt Decree 108/2015/ND-CP dated 28 Oct. 2015 and in proposing to amend SCT
tax rates in recent draft of Law on revising, supplementing to tax laws. However, to let the
industry of automobile manufactures in Vietnam live up to its full potential, automobile
manufacturers in Vietnam would respectfully request the Government further consider the
followings:
-

Have necessary incentive policies for the local production to compensate for higher
production costs, especially in the context of transition period when the market size is
not big enough. We would like to propose production incentives that are in compliance
with WTO norms i.e. amount equivalent to 10% of SCT taxable price for 10 years from
2018.
Eliminate the SCT rate for (16-24)-seat-buses and retain the current SCT rate for pickups as they are commercial vehicles that are supporting a lot of Vietnamese people in
travel or carry goods, especially in suburban areas and/or countryside
Have clear and feasible definition for environment friendly vehicles and provide more
incentives to encourage such vehicles. VBF proposes a joint workshop industry and
Government to align for definition for environment friendly vehicles if needed.
Eliminate import duty for automotive parts that Vietnam has not yet produced and
further review import duty for all other automotive parts and components.
Further review other taxes and all the fees related to motor vehicles in accordance with
the approved strategy for automobile industry development.

Page 2 of 6

Automotive Working Group Report

Vietnam Business Forum, 2015

II. TWO WHEELER INDUSTRY (Scooters and Motorcycles)

1. More incentives, encouragement for development of two-wheeler manufacture
industry:
During many years developing and improving, the two-wheeler motorcycle industry has
reached specific significant achievement and contributes to the development of Vietnamese
production industry. This industry also creates a cluster of two-wheeler motorcycle
manufacturers with the leading of 5 foreign directed investment companies such as Honda,
Yamaha, Piaggio, Suzuki, SYM and theirs suppliers, who supply parts, components to
motorcycles manufacturers. Such investments and commitments have brought great
contribution to the local economy by generating jobs for the local population, transferring
technology and know-how, and increasing revenues. In addition, currently, we have also
strengthened the exportation of our motorcycles not only to the Asia Pacific but also to
European area. The Vietnamese motorcycle market is considered as a promising industry
for manufacturers with high growth rates both in terms of revenues and consumption in the
future, particularly if supported by a clear and transparent development strategy from the
Vietnamese Government. Furthermore, the motorcycle industry has also been conducting
various social activities contributing to the development of society especially many activities
to improve road traffic safety in Vietnam.
Recommendation: It cannot deny significant contribution of motorcycles industry to the
development of production industry of Vietnam; meanwhile we have not received equivalent
and sufficient support and encouragement from the Government. Through this position
paper, we wish to receive from Government more attention, incentives and reasonable
policies, strategy to develop stably the motorcycles manufacture industry.
2. Remove motorcycle from 125cc in the list of goods imposed Special Consumption Tax
(SCT)
As we have previously stressed in some meetings organized by VBF, we would like to keep
proposing that motorcycles of which the cylinders are from over 125cc to under 175cc,
should not be considered as luxury goods, which are subject to SCT, but as popular means
of transportation as other motorcycles, to which the SCT is not applicable (same as applied
for motorcycle driving licenses and in other countries like Thailand and Malaysia).
Our above proposal has based on following grounds:
-

In respect of technology sector, the structure and utilization of motorcycles of which the
cylinders are from over-125cc to under-175cc (particularly, we refer to 135cc and 175cc
motorcycles which currently exist in market) are not much different from the same of
125cc motorcycles, except for its engine size. We can also see in the category of
motorcycles for granting driving license in Vietnam, motorcycles from 50cc to under
175cc are in the same A1 category. A2 category is only applied to over-175cc
motorcycles.
In respect of economical-social sector, since the SCT has been applied, customers have
become less willing to buy over-125cc motorcycles, and in practice, the sale volume of
over-125cc motorcycles have dropped significantly, meanwhile they used to have a quite
big market in Vietnam as they are ergonomically suitable for the traffic infrastructure
and community of some countries in Asia. It has had a significant negative impact on
local manufacturers which produce over-125cc motorcycles. We actually feel that the
application of SCT puts pressure on local manufacturers. The SCT has also impacted on
the industrys growth and development potentiality. As a result of that, we are less
willing to invest in over -125cc motorcycles meanwhile these vehicles are considered as
Page 3 of 6

Automotive Working Group Report

Vietnam Business Forum, 2015

transportation means with advanced technology, comfortable, environmental friendly

used, and potential exporting market in regional area. Given such modern technology
and advantages of this product, the Government should not limit the consumption of this
kind of motorcycles via imposing SCT, but should consider applying other alternative
methods for providing orientation on the consumption/utilization/circulation of
motorcycles, accordingly, only limit low quality motorcycles. Furthermore, the current
economical-social conditions are much different from and developed in comparison with
those in year 2008, when the SCT was first issued. Therefore, scooter over 125cc should
not now be considered as luxury goods which are subject to SCT.
In respect of policies sector, it can be seen that other tax and fee policies relating to
motorcycle manufacture in Vietnam have the same treatment for motorcycles of which
the cylinders are from over 125cc to under 175cc. Particularly, import tax has not
distinguished when applying import tax rate for motorcycles from 50 to 200cc.
Particularly, according to Chapter 87 in the Tariff, HS 871120, the motorbike is
internationally categorized by engine capacity of >50cc; 200cc; 250cc and the
import tax rate applied to all of them are the same. Currently, in a proposal of the
Ministry of Transportation on the imposition of transporting/circulating fees against
cars and motorcycles during rush hours within five big cities, motorcycles with cylinders
over 175cc, (rather than over 125), is subject to VND 1 million per year of
transporting/circulating fees during rush hours.
In respect of contribution to the State budget, the application of SCT to 130cc and 150cc
motorcycles have not contributed much more to the State budget, on the other hand, it
has caused the less contribution of Value Added Tax (VAT) due to the decreasing in the
sale volume of those vehicles (since customer has to pay more tax when purchasing
them). In addition, the application of SCT to those vehicles make our customers lose
their opportunities to own the advanced technology over-125cc motorcycles and make
us lose our encouragement to invest in this business segment.

Recommendations:
Given the above developments, we, again, strongly recommend the National
Assembly/Ministry of Finance to reconsider the issue, in the process of its
amendment/issuance of a revised or new Law on Special Consumption Tax, so that SCT
should not be applied to motorcycles of 150cc or more. As a result of that, no SCT tax
should be applied to motorcycles; or at least, it could be envisaged to reduce the SCT tax
rate for scooters over 125cc for several years, then finally remove over 125cc motorcycles
from the list of goods subject to SCT.
3. Challenge regarding the deductibility of the input VAT of invoices
As manufacturing enterprises, during production process, we signed mold purchasing
contracts with suppliers to produce components for manufacturing activities. Our mold
orders are different from the normal one-off purchase of goods because it often took a long
time from the stage of designing molds to other stages of manufacturing sample spareparts from the mold, supervising and testing the mold before putting into the mass
production of parts. Under our agreed agreement with suppliers, the suppliers would issue
invoices and we would make payments corresponding to progress of the work done.
In addition, in order to reduce administrative works, some companies in the group invested
in soft wares (SRM software) that can be able to place the order, check progress and
confirm the completion of final product, delivery and inspect the molds. We and our
suppliers would monitor and confirm the production stage by this software. Our authorized
persons would control, supervise and sign to confirm the completion of each process. The
software was developed to ensure the authorization of monitoring the mold manufacturing
Page 4 of 6

Automotive Working Group Report

Vietnam Business Forum, 2015

process between two parties is properly set up. However, to protect the environment, we
and suppliers did not print and sign on the hardcopy minutes. All the acceptance documents
have been fully recorded on the software system and the company might be able to present
to authorities at any time of your request. The handover process via this system that we
have invested hundreds thousand USD is totally accurate and reliable. However, these
systematical management procedures caused challenge to us regarding the deductibility of
the input VAT of invoices in relation to the molds purchasing from suppliers at the time that
handover minutes were not available
Recommendation
We understand that these procedures are in compliance with law and regulations
[particular Circular 06/2012/TT-BTC (Circular 06) and Circular 219/2013/TT-BTC
(Circular 219)] providing conditions for VAT input to be creditable; therefore, our VAT input
of mold invoices met the condition to be creditable. Ministry of Finance should take it into
consideration and issue a specific instruction for this case so that related companies in our
group can resolve this issue soon.
III. COMMON ISSUES ACROSS TWO WHEELER / FOUR WHEELER VEHICLES
1. End of life treatment for products
We highly appreciate for the Govt efforts in considering our issues raised in the annual VBF
2014. Govt Decree 38/2015/ND-CP dated 24 April 2015, PM Decision No. 16/2015/QD-TTg
dated on 22 May 2015 were issued to replace PMs decision 50/2013/QD-TTg related to ELV
treatment. Thereby, automobile makers, importers are responsible to arrange ELV
collection points, transport them to relevant waste treatment establishments from 1 Jan.
2018. For others related: battery and oils, air-con., tires: will be applied from July 2016.
In order to implement the above Decision 16, group of two-wheeler manufacturers has
conducted trial activities to collect oil in Hanoi area. Besides positive results, we have also
realized some difficulties that we would like to propose to Government for consideration
and support.
Almost our authorized ELV collection points have not set up and registered with competent
authorities their Commitment to Protect Environment as required by the Law on
Environment Protection due to their lack of acknowledge about law and regulations of
Environment Protection over the past. Currently, they are willing to correct their mistake
but still afraid of administrative punishment from Government for their mistake/violation in
the past.
Recommendations
To effectively implement the above Decision 16 and encourage those collection pilots
attending in our trial project for ELV collection, we recommend the Government to delay the
application of administrative punishment to them who are now setting up their Commitment
to Environment Protection to join in our ELV collection trial project. Further, the relevant
competent authority should closely work with automotive manufacturers to set up/adjust
standards/criteria applicable to warehouse storing discard/ELV products for consistent with
our current conditions and situation. Moreover, as many of issues are not clear or
transparent guidelines in the PM Decision, we need to have feasible and proper circular to
guide certain details for the ELV treatment implementation at least 6 months prior to the
effective date for enterprises to prepare for its compliance.

Page 5 of 6

Automotive Working Group Report

Vietnam Business Forum, 2015

2. Improved road safety needs

Although 4 wheelers are safer than 2-wheelers, the era of motorization will also bring its
own potential challenges a key challenge being safety requirements (e.g. driving skills
and traffic rule compliance, vehicle safety features, upgraded infrastructure, etc.)
Therefore, the Government should approach safety from the aspects of:
- People (compliance attitudes and skills of drivers, passengers and other traffic
attendants),
- Vehicles (step-by-step enhancing vehicle safety features in line with regional level)
- Further improve traffic infrastructure status (including road, parking and traffic control
system, etc.).
Since the issues in the above area need longer gestation time frames, we recommend that
the Government should start to develop a joint forum for a comprehensive dialogue inviting
representatives from different ministries MOST/MOF/MOT (VR) etc. to discuss and develop
a policy framework with key parameters and milestones for the automotive industry of
Vietnam.
3. Government policy Information sharing on time
We highly appreciate MOF and MOIT in sharing information and considering enterprises,
associations comments prior to FTAs negotiations. However, it seems often late to have
detail information shared by relevant authorities after FTAs negotiation concluded (like
EVFTA, TPP, etc.) that may make enterprises take much time to look for the required
information and rather short time to prepare proactive actions plan accordingly.
IV. OVERALL CONCLUSION
Joint working and cooperation with industry bodies like VBF to address the situation in the
automotive sector will help in having inclusive growth policies that will develop the overall
industry and serve to increase tax revenue for the Government.
The players in the automotive industry are committed to develop the industry in Vietnam
and we request the Government to kindly consider the above mentioned key factors for both
-Two wheeler and Four wheeler vehicles (CBU-CKD).

Page 6 of 6

Automotive - Progress Report

Vietnam Business Forum, 2015

AUTOMOTIVE PROGRESS REPORT

Prepared by
Automotive Working Group

Scoring to be rated as followings:

In progress report:
0 = issue remains; 1 = partially somewhat resolved; 2 = issue has been solved.
Priority (1 -10: highest).
Score = (Progress) x (Priority)
No.
1.

Age
Old

Issues
Cost gaps and weak cost
competitiveness of local
CKD operations
.

Suggested/Agreed Action
Some of the actions that may be considered
to
retain
costcompetitiveness of CKD industry are:
- Provide adequate production linked
incentives for CKD
- Review the methodology of taxation
across the industry for example
SCT.
- Impose stricter control and enforce
transparency on import of vehicles
Verify declared value of
imported cars
Tighten the control of Used
Car import

Progress
Govt has just reviewed SCT
calculation method rather fair
for both imported CBU and
CKD vehicles
Improved in stricter control
and enforce transparency on
import of vehicles but still need
further manage:
Verify declared value of
imported cars
Tighten the control of
Used Car import
Not
yet
find
feasible
approaches
to
provide
adequate production linked
incentives for CKD

Old

Need for transparency

and speed on duty road
map within ASEAN &

Since the year 2018 is very significant

for integration with ASEAN for Vietnam
and is only 3 years away, we sincerely

CEPT roadmap for 2015 2018 was issued

Often late to share the ongoing

1
x

Priority Score
1
4

Important Note: This "Progress Matrix" was prepared based on the voluntary submissions of the various Working Groups and Sub-Working Groups of the Vietnam
Business Forum from 2011 - 2014. In terms of both the feedback and the rankings/progress evaluations, it is not intended to be either complete or scientific. It
does nevertheless reflect many issues of concern that have come up in the various Working Groups, and their constructive proposals for solutions. It is hoped that it
will provide a useful reference to track and guide progress as the Government and the business community continue their collaboration to improve the business
environment though the channel of the Vietnam Business Forum. Among other things, it should be noted that many issues already fully resolved have been dropped
from this Progress Matrix to limit the size of the document, and almost all of the issues noted are those that still need more work.
Page 1 of 9

Automotive Progress Report

Vietnam Business Forum, 2015

No.

Age

Issues
Other FTAs
.

Suggested/Agreed Action
request the Government to finalize this
import duty road map. It will also be
helpful to share the ongoing
discussions with regards to different
Free Trade Agreements (bilateral or
otherwise) and possible impact to the
auto sector.

Progress
discussions with regards to
different Free Trade
Agreements (bilateral or
otherwise) and possible impact
to the auto sector.

Old

Continued high
taxes/Special
Consumption Tax
(SCT)_

To let the industry of automobile manufactures in Vietnam live up to its

full
potential,
automobile
manufacturers in Vietnam would
respectfully request the Government consider revising SCT tax rate applied
to the industry as followings:
-

Refused to apply the ex-factory

price
for
CKD-produced
automobile SCT calculation as
it does in Thailand, Indonesia.
No incentive policies for the
local production.
The reduction in SCT for cars of
2.0L
Reduction of SCT for the low
fuel
consumption
and
environmental- friend vehicles
in
accordance
with
the
approved Master Plan for
Automobile
Industry
development toward 2020,
vision to 2030.
Not yet issued clear definition
for
environment
friendly
vehicles.
Have reduced somewhat in the
SCT rate for (16-24)-seatbuses but increase SCT for
pick-ups

a. Apply the ex-factory price for CKD- produced

automobile
SCT
calculation as it does in Thailand,
Indonesia.
b. Have necessary incentive policies
for the local production to
compensate for higher production
costs, especially in the context of
transition period when the market size is not big enough. We would
like
to
propose
production
incentives that are compliant with WTO norms i.e. amount equivalent
to 10% of SCT taxable price.
c. The reduction in SCT will help
expand market and support the
manufacturers to improve the

Page 2 of 9

Priority Score

Automotive Progress Report

No.

Age

old

Issues

Number plate fee

Of 2-whellers.

Vietnam Business Forum, 2015

Suggested/Agreed Action
Progress
economics of scale for small
passenger
cars.
A
potential
roadmap if shared will help the
industry and customers to plan.
d. Reduction of SCT for the low fuel
consumption and environmentalfriend vehicles in accordance with
the approved Master Plan for
Automobile Industry development
toward 2020, vision to 2030. VBF
proposes a joint workshop
industry and Government to align
for definition for environment
friendly vehicles.
e. Eliminate the SCT rate for (16-24)seat-buses and pick-ups as they
are commercial vehicles that are
supporting a lot of Vietnam people
in travel or carry goods, especially
in suburban and/or countryside
This issue has been raised since 2013; Remain unchanged
however, it has not yet been solved.
Therefore, we would like to reiterate
this issue with a recommendation that
the highest fees should not be imposed
on motorcycles with a value of VND40
million. In addition, we strongly
recommend the Government to work
on more sustainable solutions such as
development of public transportation
means, road infrastructure in big cities,
as well as education on good traffic
practices for traffic users that will

Page 3 of 9

Priority Score

Automotive Progress Report

No.

Age

Old

Issues

Remove motorcycle
from 125cc in the list to
apply SCT

Vietnam Business Forum, 2015

Suggested/Agreed Action
effectively resolve the traffic
problems in the long-term.

Progress

Priority Score

jam

In accordance with the Draft Law, SCT Remain unchanged

is still applied to motorcycles with
capacities over 125cc with the rate at
20%. In fact, this provision is no longer
practical, therefore, we strongly
recommend the National Assembly and
the Government, during its legislation
making to amend the Law amending
and revising a number of Articles of the
Law on Special Consumption Tax, to
consider NOT applying SCT to
motorcycles with capacities under
150cc or at least having a roadmap
reducing the SCT tax rate for scooters
over 125cc.

Page 4 of 9

Automotive Progress Report

No.
6

Age
Old

Issues
Limitation on the
number of two wheel
vehicles up to 2020

Vietnam Business Forum, 2015

Suggested/Agreed Action
Progress
We would like competent authorities to No official clarification on this
consider the following factors when issue.
working on their goal/schedule, such
as the referencing and harmonization
of some factors such as:
Big immigration numbers in big
cities;
People travel demand;
A mechanism to manage the exact
number of motorcycles circulating
on the road;
The effects to the local economy
These elements could be taken into
account in order to build effective
objectives and implement the relevant
roadmaps on Decision No. 356and on
the Development Scheme of suitable
transportation means in big cities in
Vietnam, in order to minimize the
negative impacts of such limitation on
society and the motorcycle industry.
The decree should also be applied to
none
projects meeting conditions to enjoy
incentives but operated before the
effective date of the decree (provided
that those projects are still running in
the period for enjoying tax incentives).

Old

Corporate Income Tax

(CIT) incentives for
supporting industries

Old

CIT
incentives
for We respectfully request the
expansion projects prior Government and the MOF to allow the
tax incentive entitlement for
to before 1 Jan 2014
investment expansion which has been
implemented during the period from 1
Page 5 of 9

None

0
x

Priority Score
6
0

Automotive Progress Report

No.

Age

Issues

Old

Importation of
Remanufactured Parts

10

Old

End of life treatment for

products

Vietnam Business Forum, 2015

Suggested/Agreed Action
Progress
January 2009 to 31 December 2013, if
all criteria for tax incentive are met, to
investments implemented in other
periods.
We, once again, recommend the It is still pending
Government of Vietnam to allow the
import of re-manufactured parts
subject to clear definitions. Genuine remanufactured parts meet the same
quality standards as brand new parts.
They are produced according to strict
quality requirements and undergo final
quality examination with exactly the
same standards as brand new parts.
Furthermore,
genuine
remanufactured parts are supplied by car
makers with the same warranty as for
new parts, and are more cost effective
for customers and they align with
environmental protection trends.
Based on discussions between VAMA
and Vietnam Environment
Administration (VEA), MONRE would
draft some legal documents including
update of relevant decrees and
issuance of circulars instead of only
one circular for detailing and guiding
the implementation of Decision No.
50/2013/QDTTg

Page 6 of 9

We highly appreciate for the Govt

efforts in considering our issues
raised in the annual VBF 2014.
Govt Decree 38/2015/ND-CP dated
24 April 2015, PM Decision No.
16/2015/QD-TTg dated on 22 May
2015 were issued to replace PMs
decision 50/2013/QD-TTg related
to
ELV treatment. Thereby,
automobile makers, importers are
responsible to arrange ELV
collection points, transport them to

Priority Score

10

Automotive Progress Report

No.

Age

11

Old

12

Old

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress
relevant
waste
treatment
establishments from 1 Jan. 2018.
For others related: battery and
oils, air-con., tires: will be applied
from July 2016.

Law making process

We
recommend
improved
time
planning between date of decision
making, announcement and effective
date. We also urge the Government to
discuss proposals and changes with
industry bodies to assess the
implication of changes prior to
announcing the proposals in the media
and also look at ways to reduce time
gap between announcement and
implementation
especially
when
reducing duties.

it seems often late to have detailed

information shared by relevant
authorities after FTAs negotiation
concluded (like EVFTA, TPP, etc.)
that may make enterprises take
much time to look for the required
information and rather short time
to prepare proactive actions plan
accordingly.

Greater incentive for

Eco-Green Vehicles

With the current motorization, the Govt have proposed somewhat

Government should also start to SCT reduction for such vehicles
consider factors that can impact
automotive solutions for Vietnam in the
medium to long term. Some of these
are:
a) Environment Friendly solution:
Currently the availability of eco/
environment friendly cars is limited
primarily due to costs and
infrastructure. The Government
should
consider
promoting
increased
availability

Page 7 of 9

Priority Score

10

10

Automotive Progress Report

No.

13

Age

Old

Issues

Improved road safety

needs

Vietnam Business Forum, 2015

Suggested/Agreed Action
eco/environment
friendly
technologies in the auto sector. The
Government
should
consider
abolishing duties and taxes for
eco/environment friendly cars with
a defined road map. The current
duty advantage is not adequate to
promote these vehicles.
b) Fuel Efficiency/Emission
Guidelines
The Government should consider
investment
to
enhance
infrastructure as road conditions
and traffic management play a key
role in improving fuel efficiency.
Additionally the Government should
commence work on guidelines for
establishing benchmarks for fuel
efficiencies for example: CAFE
(Corporate Average Fuel Efficiency)
norms in developed countries.
Since the issues in the above area need
longer gestation time frames, we
recommend that the Government
should start to develop a joint forum
inviting a comprehensive dialogue from
different ministries MOST/MOF/MOT
(VR) etc. to discuss and develop a policy
framework with key parameters and
milestones for the automotive industry
of Vietnam

Page 8 of 9

Progress

Government have approached

safety from the aspects of:
- People (compliance attitudes
and
skills
of
drivers,
passengers and other traffic
attendants),
- Vehicles
(step-by-step
enhancing
vehicle
safety
features in line with regional
level)
- improved traffic infrastructure

Priority Score

10

Automotive Progress Report

No.

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Page 9 of 9

Progress
status (including road, parking
and traffic control system,
etc.).

Priority Score

4.3. MINING

Mining Working Group - Executive Summary

Vietnam Business Forum, 2015

EXECUTIVE SUMMARY
THE IMPORTANCE OF INTERNATIONAL INVESTMENT AND HIGH TECHNOLOGY
IN EXPLORATION, MINING AND PROCESSING OF VIETNAMS MINERALS FOR
NATIONAL INDUSTRIALIZATION, MODERNIZATION AND INFRASTRUCTURE
DEVELOPMENT AS PART OF VIETNAMS GLOBAL INTEGRATION
The Prime Ministers Directive No.2/CT-TTg of January 2012 recognized that Vietnams
mineral wealth is an important element for national industrialization and modernization
and that the countrys minerals need to be mined and processed by advanced and
environmentally friendly technology.
The commitment to back investment in mining by modern, high technology can be a key
contributor to Vietnams economic growth and infrastructure development. Unfortunately,
major foreign and strong local investment is unlikely to be forthcoming while Vietnam
maintains one of the most investor - unfriendly mining legislations in the world, including
the highest royalty rates and other taxes and fees which make even advanced and high
technology mining not economically viable in the country.
A new proposal has been made since the last Forum in June 2015 which appears to make
the situation worse. The MOF has requested opinions on a Draft Resolution to the National
Assembly Standing Committee proposing to replace Resolution No.712/2013/UBTV-QH13 by
substantially increasing royalty tariffs once again by the order of 2-7%. If this proposal goes
ahead, it will potentially, and in most cases almost certainly, effectively make any modern
mining operations in Vietnam unprofitable, lead to mine closures; result in the termination
of a valuable source of tax revenue for the Government; and condemn Vietnam to ongoing
environmental damage and safety issues associated with the outdated mining methods and
practices currently used by most Vietnamese companies.
At its meeting in Beijing in June 2014 of APEC Ministers Responsible for Mining (MRM),
Vietnam was represented by MOIT as the designated mining ministry. The Ministers joint
statement recognized the significance of sustainable development in mining, and believe
this could be achieved through regional integration, fostering sustainable investment,
increasing social responsibility, and innovation and environmental advances in mining and
metallurgy and the Ministers encouraged APEC economies to improve their mining
investment environments, administration and services and stressed the importance of
promoting open, transparent and well-operating markets in the mining sector, as well as
investment and financing cooperation for win-win development.
It is to be hoped that Vietnam will be keen to improve its mining status by following the
objectives of the APEC Ministers joint statement, to which Vietnam was a signatory, before
it chairs APEC in 2017.
It is further hoped that the main ministries concerned, namely MONRE, MOIT and MOF, with
the help of MPI if needed, can cooperate to recommend to the Prime Minister the necessary
Page 1 of 2

Mining Working Group - Executive Summary

Vietnam Business Forum, 2015

steps which will lead to mining legislation and regulations that will provide the incentives
to:
Encourage exploration to increase Vietnam's mineral inventory by new, deeper
discoveries using modern technological methods;
Allow sustainable mining and processing of the country's mineral wealth by advanced
high technology practices in an environmentally responsible, efficient and safe way;
Increase revenue to government and communities;
Accelerate development of infrastructure and service industries in the more remote and
often mountainous parts of Vietnam with poor socio-economic conditions, where
mineral deposits tend to be found;
Enable the mining sector in Vietnam, which is currently almost isolated, to benefit from
global integration within APEC, the TPP and other free trade agreements;

Page 2 of 2

Mining Working Group - Position Paper

Vietnam Business Forum, 2015

THE IMPORTANCE OF INTERNATIONAL INVESTMENT AND HIGH TECHNOLOGY

IN EXPLORATION, MINING AND PROCESSING OF VIETNAMS MINERALS FOR
NATIONAL INDUSTRIALIZATION, MODERNIZATION AND INFRASTRUCTURE
DEVELOPMENT AS PART OF VIETNAMS GLOBAL INTEGRATION

Prepared by
Mr. Bill Howell
VBF Mining Working Group

INTRODUCTION
The Prime Ministers Directive No.2/CT-TTg of January 2012 recognized that Vietnams
mineral wealth is an important element for national industrialization and modernization
and that the countrys minerals need to be mined and processed by advanced and
environmentally friendly technology.
The commitment to back investment in mining by modern, high technology which can be a
key contributor to Vietnams economic growth and infrastructure development is welcomed
by the Mining Working Group. Unfortunately, major foreign and strong local investment is
unlikely to be forthcoming while Vietnam maintains one of the most investor-unfriendly
mining legislations in the world, including the highest royalty rates and other taxes and fees
which make even advanced and high technology mining not economically viable in the
country.
EMERGING ISSUE - PROPOSAL TO INCREASE MINERAL ROYALTY TARIFFS EVEN HIGHER
Resolution No.712/2013/UBTV-QH13 dated 16 December 2013 of the Standing Committee of
the National Assembly promulgating the royalty tariff on minerals raised the royalty rates
of a number of minerals by 1-5%. The new royalty rates applied to minerals such as
wolfram (tungsten) 18%, antimony 18%, titanium 16%, copper 13%, iron 12%, manganese
11%, and nickel, cobalt, molybdenum, mercury, magnesium, vanadium and other metallic
minerals at 10%. Minerals for which the royalty rates were not increased, but were already
in the range of 10-15% were platinum, gold, silver, alumina and bauxite, tin, lead and zinc.
These are the highest royalty rates in the world and are the single greatest disincentive for
potential major investors wishing to come to Vietnam with advanced, high technology
exploration and mining methods. For example, the royalty rate on gold averages 1-5%
world-wide on the sales value of the metal produced compared with 15% applied in
Vietnam.
Unfortunately, a new proposal has been made since the last Forum in June 2015 which
appears to make the situation worse. The MOF has requested opinions on a Draft
Resolution to the National Assembly Standing Committee proposing to replace Resolution
No.712/2013/UBTV-QH13 by substantially increasing royalty tariffs once again by the order
of 2-7%. If this proposal goes ahead, it will potentially, and in most cases almost certainly,
effectively make any modern mining operations in Vietnam unprofitable, lead to mine
closures; result in the termination of a valuable source of tax revenue for the Government;
and condemn Vietnam to ongoing environmental damage and safety issues associated with
the outdated mining methods and practices currently used by most Vietnamese companies.

Page 1 of 4

Mining Working Group - Position Paper

Vietnam Business Forum, 2015

COMPARISON WITH SIMILAR MINERAL-RICH COUNTRIES

It is to be hoped that when considering the proposal to increase mineral royalty tariffs
again, the Government will take into account the mining legislation and regulatory
environment of other countries which have attracted significant investment in developing
their mineral resources. One example is Peru which will take the chair of APEC in 2016,
before Vietnam does so in 2017.
Peru encourages foreign investment in its minerals industry and since 2004 has applied a
1-3% royalty on the commercial value of sales (recently changed to 1-12% of operating
income for new projects). This approach has led to mining (excluding oil and gas)
comprising 55% of all exports, has allowed Peru to maintain a fiscal surplus when many
countries have high debt problems and there is nearly US$60 billion of planned future
exploration and mine development investment in the pipe-line (Ernst & Young, 2015).
Other factors that the Government should consider are:
IMF EXPERT OPINION
It is worth referring to the words of the International Monetary Fund in its IMF Country
Report No.12/219 of August 2012 requested by the Government of the Philippines. The IMF
recognizes that a royalty rate of any higher than the 5%, as currently applied in the
Philippines, would particularly when combined with other production-based levies, make
the fiscal regime uncompetitive. For any contemplated royalty rate higher than 5%, the
IMF recommended that mining companies be allowed a tax credit against their income
tax for the amount of royalty in excess of 5%.
The IMF recommended that the Philippines should adopt a fiscal regime for the mining

sector that is simple, predictable and transparent. This fiscal regime should ensure a fair
distribution between mining companies and the government of the economic benefits
from mining with fiscal regulations that are complemented by an efficient and
transparent tax administration.
The IMF further commented that there is a market test for any mining fiscal regime -

can the country attract investment in its mining sector? If not, the fiscal regime may be
inappropriate for the country, given its exploration, development and production costs;
the size and quality of its mineral deposits; and investor perception of commercial and
political risk.
Vietnam can learn from the IMFs words, because at present the country cannot answer
IMFs market test in the positive. It cannot attract investment into its mining sector, as
evidenced by the lack of any major mining companies coming to Vietnam to carry out
modern mineral exploration and mining.
APEC MINING TASK FORCE AND APEC MEETINGS OF MINISTERS RESPONSIBLE FOR
MINING
On 25-26 August 2015 in Cebu, Philippines, Head of the VBF Mining Working Group was
invited by the APEC Mining Advisory Board to attend the APEC Mining Task Force (MTF)
Workshop and Public-Private Dialogue, as well as the main session of the MTF9 meeting of
all 21 APEC members.

Page 2 of 4

Mining Working Group - Position Paper

Vietnam Business Forum, 2015

Other attendees from Vietnam were the Ministry of Foreign Affairs Deputy Director-General
in her role of preparing Vietnam to be National Secretariat of APEC Vietnam 2017, plus two
representatives from MOIT. MOIT was present because at the meeting in Beijing in June
2014 of APEC Ministers Responsible for Mining (MRM), Vietnam was represented by MOIT
as the designated mining ministry.
The Ministers joint statement recognized the significance of sustainable development in
mining, and believe this could be achieved through regional integration, fostering
sustainable investment, increasing social responsibility, and innovation and environmental
advances in mining and metallurgy and the Ministers encouraged APEC economies to
improve their mining investment environments, administration and services and stressed
the importance of promoting open, transparent and well-operating markets in the mining
sector, as well as investment and financing cooperation for win-win development.
It is to be hoped that Vietnam will be keen to improve its mining status by following the
objectives of the APEC Ministers joint statement, to which Vietnam was a signatory, before
it chairs APEC in 2017.
CONCLUSION AND RECOMMENDATIONS
Although minerals are a non-renewable resource, most of the countrys mineral wealth has
yet to be discovered. Only a fraction of Vietnam has been explored using advanced,
internationally accepted technology, which will almost certainly lead to the discovery of
new, major deeper ore bodies than have been found so far at or near surface. As a result,
very little mining is being carried out using advanced and high technology methods.
As long as Vietnams royalties, fees and taxes are significantly higher than world averages,
international best-practice methods and investment in Vietnam's mining industry will
continue to be discouraged and will go to countries with preferable investment conditions.
This in turn will encourage the continuation of inefficient and wasteful mining practices and
degradation of Vietnam's existing known mineral resources and its environment, and also
encourage increased illegal mining and export of minerals on which little or no tax is paid.
To achieve the objectives of the Prime Ministers Directive No.2/2012/CT-TTg, we
respectfully urge the Government to improve investment confidence in Vietnams minerals
industry by:

Re-examining existing legislation and Introducing more investor-friendly, competitive

mining legislation which includes an equitable tax system that is fair to both the
Government and the investor, and legislation that provides for consistent policies for
long-term commitment; and

Establishing a task-force to investigate the incorporation of the best elements of other

successful mining legislation around the world where a balance has been achieved
between attracting modern, high technology in exploration, mining and processing of
mineral resources while at the same time returning equitable revenue to the host
nation whose resources are extracted.

Page 3 of 4

Mining Working Group - Position Paper

Vietnam Business Forum, 2015

This means, as an essential step, reducing royalty tariffs to be competitive with other
countries.
These steps will help to:

Encourage exploration to increase Vietnam's mineral inventory by new, deeper

discoveries using modern technological methods;

Allow sustainable mining and processing of the country's mineral wealth by advanced
high technology practices in an environmentally responsible, efficient and safe way;
Increase revenue to government and communities;

Accelerate development of infrastructure and service industries in the more remote and
often mountainous parts of Vietnam with poor socio-economic conditions, where
mineral deposits tend to be found;

Enable the mining sector in Vietnam, which is currently almost isolated, to benefit from
global integration within APEC, the TPP and other free trade agreements.

The Mining Working Group sincerely hopes that the main ministries concerned, namely
MONRE, MOIT and MOF, with the help of MPI can cooperate to recommend to the Prime
Minister the necessary steps which will lead to mining legislation and regulations that
will provide the incentives to deliver on the objectives listed above.

Page 4 of 4

Mining Progress Report

Vietnam Business Forum, 2015

MINING PROGRESS REPORT

(DECEMBER 1, 2015)

Prepared by
Mining Working Group
Vietnam Business Forum

Scoring to be rated as followings:

In progress report:
0 = issue remains; 1 = partially somewhat resolved; 2 = issue has been solved.
Priority (1 -10: highest). Score = (Progress) x (Priority)
No

Age
Old

Issues
Excessive and inconsistent taxation and
other regulatory controls on mining
continue to leave Vietnam in the position
of being by-passed for vital international
and local investment funding and
modern high technology that should be
flowing into the country to build the
mining sector as an important part of,
and sustainable contributor to,
Vietnam's growth including vital
infrastructure development in more
remote, low socio-economic parts of the
country.
This situation is contrary to the Prime
Ministers Directive No.2/CT-TTg of
January 2012 which recognized that
Vietnams mineral wealth is an
important element for national
industrialization and modernization and

Suggested/Agreed Action
MOIT, MONRE and MOF cooperate
with MPIs assistance to recommend
to the Prime Minister measures to:
1. Reduce royalties to international
levels and introduce new legislation
to make Vietnam more competitive
with other mineral-rich countries.
This will:
- encourage exploration to increase
Vietnam's mineral inventory by
new discoveries using modern
technological methods;
- allow development of the country's
mineral wealth in an
environmentally responsible,

efficient and safe way;

- increase revenue to government
and communities;
- accelerate development of
infrastructure and service

Progress
The VBF Mining Working
Group in collaboration with
MPI and VCCI convened a
series of meetings from
August to October 2015 to
bring together
representatives of MOF,
MONRE and the General
Department of Taxation to
discuss issues surrounding
the proposal to increase
mineral royalty tariffs yet
again:

0
x

Priority
9

Score
0

- 4 August 2015:
MPI and MONRE hosted a
discussion with the MOF
Drafting Team which the
MWG attended, along with
the main mining companies

Important Note: This "Progress Matrix" was prepared based on the voluntary submissions of the various Working Groups and Sub-Working Groups of the Vietnam
Business Forum from 2011 - 2014. In terms of both the feedback and the rankings/progress evaluations, it is not intended to be either complete or scientific. It
does nevertheless reflect many issues of concern that have come up in the various Working Groups, and their constructive proposals for solutions. It is hoped that it
will provide a useful reference to track and guide progress as the Government and the business community continue their collaboration to improve the business
environment though the channel of the Vietnam Business Forum. Among other things, it should be noted that many issues already fully resolved have been dropped
from this Progress Matrix to limit the size of the document, and almost all of the issues noted are those that still need more work.
Page 1 of 3

Mining Progress Report

No

Age

Issues
that the countrys minerals need to be
mined and processed by advanced and
environmentally friendly technology.
Vietnam will be further disadvantaged if
the MOF proceeds with requested
opinions on a Draft Resolution to the
National Assembly Standing Committee
proposing to replace Resolution
No.712/2013/UBTV-QH13 by
substantially increasing royalty tariffs
once again by the order of 2-7%. If this
proposal goes ahead, it will potentially,
and in most cases almost certainly,
effectively make any modern mining
operations in Vietnam unprofitable, lead
to mine closures; result in the
termination of a valuable source of tax
revenue for the Government; and
condemn Vietnam to ongoing
environmental damage and safety
issues associated with the outdated
mining methods and practices currently
used by most Vietnamese companies.

Vietnam Business Forum, 2014

Suggested/Agreed Action
industries in the more remote and
often mountainous parts of
Vietnam, where mineral deposits
tend to be found.

2. Establish a task-force to
investigate the incorporation of
constructive elements of other
successful mining legislation around
the world where a balance has been
achieved of attracting modern, high
technology in exploration, mining
and processing of mineral
resources, while at the same time
returning equitable revenue to the
host nation whose resources are
extracted.

Progress
operating in Vietnam and the
Australian Trade
Commissioner;
- 25-26 August 2015:
The APEC Business Advisory
Board invited MWG to
participate as a speaker at
the annual APEC Mining
Task Force meetings of the
21 member countries in the
Philippines, the current
APEC chair, together with
representatives from MOIT
and Vietnams Ministry of
Foreign Affairs.
- 8 September 2015:
VCCI organized a seminar
with the MOF Tax Policy
Department to point out the
serious implications for
Vietnams mining industry if
royalties are increased
again; and

As long as such high royalties/fees exist,

international best-practice methods and
major investment in Vietnam's mining
industry will continue to be discouraged,
which in turn only encourages increased
illegal mining, inefficient and wasteful
mining practices and degradation of
Vietnam's existing known mineral
resources and its environment.

- 12-13 October 2015:

The Budget & Finance
Committee of the National
Assembly has invited the
MWG to participate in
another seminar on the
royalty issue in an allVietnamese speaker list.

Page 2 of 3

Priority

Score

Mining Progress Report

No

Age

Vietnam Business Forum, 2014

Issues

Suggested/Agreed Action

Page 3 of 3

Progress
These initiatives are most
welcomed and the dialogue
encouraged. However, as of
30 October 2015, no
feedback has been
forthcoming on this
important issue, where the
main objective should be to
create incentives to bring
modern technology and
major investment to the
minerals sector in Vietnam.

Priority

Score

Section V

REPORTS FROM
OTHER WORKING GROUPS

5.1. TAX

Tax Sub Group Position paper

Vietnam Business Forum, 2015

TAX SUB GROUP POSITION PAPER

Prepared by
Ms. Huong Vu
Head of Tax Sub-group

Global integration is putting significant pressure on the economy and business community
in Vietnam. In order to continuously support the enterprises, constantly in the past years,
the Government has issued Resolution and Decree to provide tax solution that remove
difficulties for enterprises as well as enhance the investment, manufacturing and trading
activities. In additional, it has strengthened administrative procedures and administrative
reform in taxation customs, in which the main task is completing mechanisms and
policies, promoting reform and administrative procedures in competent authorities as
mentioned in Resolution No. 63/NQ-CP dated 25/08/2014, Decree No. 91/2014/ND-CP dated
01/10/2014, Law No. 71/2014/QH13, Decree No. 12/2015/ND-CP dated 12/02/2015, etc.
However, in practice, the application of regulations and policies of the tax authorities at
lower levels still exist some problems, difficulties that not actually create the most
favorable conditions for the enterprises for investment and trading in Vietnam. At this
dialogue, we would like to raise some tax issues, as follows:
1.

Investment Protection

Issue
When foreign enterprises invest their capital in Vietnam, they shall be entitled for incentives
regulated by the Government of Vietnam. All tax incentives that enterprises enjoy are
specified in their Investment License or Investment Certificate. Hence, investors are
guaranteed to receive incentives as stipulated on these licenses even in the case the law
has changed. Law on investment also recognizes, maintains the stability and protects the
investment incentives, income and legal rights and benefits of the investors, acknowledges
the existence and long-term development of investment activities.
However, some local tax authorities already have difference treatment and perspective with
the current guidance of the Government, rejected the incentives specified in the Investment
Certificate of the enterprise, and require for the application of current provisions, making
the difficulties for enterprise in conducting investment process, manufacturing in Vietnam
market.
As tax authorities require enterprise to apply current regulation and reject tax incentive
that already stipulated in their Investment License, it would be regarded as contrary to the
spirit of Vietnamese Government and not guarantee the benefit of the investors.
Proposal
Kindly request the Government, the Ministry of Finance for the instruction and consistent
guidance to local tax authorities in respect of Investment incentives specified clearly in
enterprisess Investment License, avoiding inconsistent treatment that causes concerns
and reduce foreign investors confidence in investment environment of the Government.

Page 1 of 6

Tax Sub Group Position paper

2.

Vietnam Business Forum, 2015

Expenses related to service contracts signed with Parent Company

Issue
Currently, in Vietnam market, there are many foreign invested companies have been
licensed to operate and bring significant economic benefits for Vietnam. The subsidiaries
that operated in Vietnam are independent facilities with the tax code and seal prescribed by
Law in Vietnam. However, in practice, these subsidiaries are only links in business chains of
foreign enterprises, global companies, or multinational corporations. In an open economy,
it is essential that these companies should operate flexibly and smoothly among different
markets, and comply with business management, and standards defined by Parent
Companies. To optimize the business efficiency, multinational corporations regularly
establish member companies to cary out a certain function in the global value added chain
and to receive services from a professional service providers in the area (e.g.:
project/service management, marketing, sales, administration and data management
system, information management, etc.) The member companies in the region, instead of
establishing a fully and costly functional operation, they could use services from Parent
Company, or from their regional headquarter. This approach offers many benefits such as:
ensuring consistency, create advantage in negotiating economic contracts with third
parties, cost savings, and more importantly to increase the competitiveness of companies
in Vietnam market as well as in the world market. The use of services from the Parent
Company or headquarter, subsidiaries in Vietnam shall bear the costs corresponding to the
value of services received, this is fully consistent with international practices, ensure
fairness and compliance with the principle of revenue recognition which requires the
recognition of relevant costs.
However, tax authorities are having a harsh viewpoint on these expenses and always raising
doubts on transfer pricing issue. Some local tax departments only rely on the method of
allocating service fees prescribed under contracts in order to jump into conclusions that
these fees are management fees allocated for permanent establishments. Besides, the tax
authorities also impose unreasonable requirements of documentation for these fees so as
to not recognize these fees as reasonable and legitimate expenses of subsidiaries for tax
purpose in Vietnam.
Proposal
Kindly request the Government and the Ministry of Finance to provide consistent guidance
to tax authorities so that they will have a fair treatment for service fees paid to Parent
companies or corporations. This will correctly reflect characteristics of the above
mentioned fees and to create a business environment relevant to international practices.
Furthermore, the Ministry of Finance should also provide more specific guidance,
particularly documentation standards so that subsidiaries in Vietnam can prepare them to
prove that services received from affiliated parties should be regarded as deductible
expenses for Corporate Income Tax purpose.
3.

The term of Warranty that is stated in sale contract with Foreign contractor

Issue
In relation to the warranty term stated in sale contract with foreign sellers in Vietnam, this
is a common and reasonable rule and should be considered as a condition that sellers can
ensure the goods quality in order to protect the right of buyers. The term is always stated in
purchase contracts even though this is an disadvantage that both parties do not want to
apply. In respect to this case, warranty is not a service which accompanied with the
Page 2 of 6

Tax Sub Group Position paper

Vietnam Business Forum, 2015

machine as well as cannot be separated from the value of machine. The warranty service
(which is provided by sellers and charged fee to buyers) shall be incurred in case the buyers
have demand in repairing or maintaining the goods when the period of warranty term stated
in contract expired. At that time, this warranty service shall be considered as actually
performed.
In relation to the calculation of Foreign Contractor Tax (FCT) regarding to warranty fees, the
Government of Vietnam in general and the Ministry of Finance in particular has made a
huge step forward from the previous regulations before Circular No 103/2014/TT-BTC
(Circular 103), this regulation reaffirms the straightforward and decisive attitude of
Vietnam in making right decisions that are consistent with international rule as well as in
assisting enterprises operation in Vietnam. Circular 103 clarifies that the purchase
contracts that deliver goods at border gate with warranty term is not subject to FCT.
However, for those contracts before the effective date of Circular 103, there is no specific
and consistent guidance even though this issue has been requested for guidance repeatedly
in previous forum for dialogue between the Ministry of Finance and Enterprises and has
been agreed on viewpoint by the Ministry of Finance already.
Proposal
Therefore, in order to avoid undesirable problems in the implementation of Corporate
Income Tax (CIT) obligations, confusion for enterprises, as well as for foreign suppliers
when supplying goods and services in Vietnam, and in order to unify the method on
implementation process of tax policies at all level of tax authorities, VBF once again kindly
requests the Ministry of Finance to have an official and specific guidelines for issues in
connection with warranty terms stated in purchase contract with foreign contractors in a
way that supplying goods accompanied with free of charge warranty term is sellers
obligation and no other services have been performed in Vietnam shall not be subject to
FCT. Moreover, kindly request Ministry of Finance to have guidelines for similar situations
of contracts signed before the effective date of Circular 103.
4.

Issue on application of Double tax agreement in determining permanent

establishment for tax exemption/reduction as per regulations

Issue
Currently, issues on determination method of permanent establishment in Vietnam have
attracted many attentions from enterprises that are going to have the plan to do business in
Vietnams economic market, especially for some pure trade activities of foreign contractors
such as on-the-spot import/export, goods distribution, sales with deliver point at bonded
warehouse, etc. Circular 205/2014/TT-BTC and some other guidance from Tax departments
have explained the wide definition of permanent establishment to conclude whether a
foreign company has permanent establishment in Vietnam or not. Tax departments at all
level sometimes do not focus on the nature of transaction as well as consider the
international practices on trade, including:
-

Regarding on-the-spot import/export: Tax departments interpret that if an enterprise

delivers goods to another enterprise in Vietnam under assignment of foreign contractor,
the enterprise shall be regarded as doing business on behalf of the foreign contractor.
Accordingly, it is the same as implementing business and production in Vietnam via a
permanent establishment. However, in fact, assigning a Vietnamese enterprise to
perform deliver service is merely a normal trading agreement to optimize goods
circulation as well as reasonable cost-saving of normal trade activities.
Page 3 of 6

Tax Sub Group Position paper

Vietnam Business Forum, 2015

Regarding goods distribution activity in which the foreign contractors may have control
on selling price in Vietnam market: currently, the tax departments are arguing that if a
foreign enterprise has control on price, it means that it has control on sales operation of
Vietnamese enterprise, making the Vietnamese enterprise to be the permanent
establishment of the foreign enterprise. Whereas implementation of price strategy is an
integral part of business scheme, especially in integrated economy.

Proposal
Such above arguments have led to loss of proper rights of enterprises, in the meantime led
to difficulties for applying Double tax agreements of foreign enterprises. VBF would kindly
request Ministry of Finance to consider and issue guidance for local tax departments when
explaining agreements to reflect the true nature of transaction as well as based on
international customs view to consistently apply.
5.

Management fees

Issue
In relation to the tax policy in respect to foreign organization hiring cost for business
management, inter-ministerial Circular No. 13/TTLB (Circular 13) dated on 08/10/1997 of
Ministry of Planning and Investment and Ministry of Finance providing detail guidance on
the implementation of Decree 12-CP dated on 18/02/1997 of the Government which
provides detail guidance on the implementation of Foreign Investment Law in Vietnam
regarding the hiring of foreign organization for business management purpose of
enterprises with foreign investment capital as following: Management fees: include basic

fees, incentive fees, and fees for consultancy, marketing, reservations and use of
signboards and names (trademark). In principle, the parties may stipulate different
methods of calculating management fees of various rates. However, the maximum total
management fees calculated by any method in comparison with turnover and gross
operating profit shall not exceed the rates stipulated in the enclosed appendix, etc.
However, inter-ministerial Circular 13 which has been issued on 08/10/1997 provided detail
guidance on the implementation of Decree 12-CP dated on 18/02/1997 of Government
providing detail guidance on the implementation of Foreign Investment Law in Vietnam.
However, Decree 12-CP has been expired and replaced by Decree No. 24/2000/ND-CP of
Government issued on 31/07/2000 regulating the detail implementation of Foreign
Investment Law in Vietnam. Until 2005, the entire contents of Foreign Investment Law in
Vietnam was rejected by the regulation of Investment Law and guided by Decree
108/2206/ND-CP. Therefore, we understand that the content of Circular 13 has been
replaced by the content in respect to the hiring management organization and management
fee regulated in Decree 24 and Decree 108. Additionally, the implement regulation in
Decree 24 and Decree 108 both stipulated that: All previous regulations contrary to this
Decree are totally annulled.

However, the local tax department currently applies the regulations stated in interministerial Circular 13 to challenge enterprises.
Proposal
Kindly request the Ministry of Finance to provide detailed guidance in connection with the
validity of inter-ministerial Circular No.13/1997 so that enterprises have the grounds to
comply with the law.
Page 4 of 6

Tax Sub Group Position paper

6.

Vietnam Business Forum, 2015

Customs procedures in relation to the Export Processing Enterprises performing the

trading business

Issue
When the export processing enterprises ("EPEs") performs the purchase of machinery and
equipment from overseas for the purpose of business production, the EPEs shall not be
subject to import duty and VAT in accordance with current regulations. However, as the
businesses switch the using purpose of the products, i.e without using this kind of goods for
the purpose as originally declared, that is changing into disposal and liquidation of
machinery, equipment and transportation for creation of fixed assets in Article 79 of the
Circular 38/2015/TT-BTC, upon completion of liquidation procedures, the EPEs shall
register imported goods declaration for changing purposes of use; import duty base and
VAT at the importation is the taxable value, the tax rates and the exchange rates at the time
of declaration registration of changing purposes of use; customs procedures are not
required for goods domestically sold. The General Department of Taxation has guidance on
the invoice issuance in this case that EPEs shall purchase retail VAT invoices in the tax
office and issue corresponding output VAT for the goods domestically sold. Thus, the
current regulations do not have official mechanisms in guiding declaration and deduction
(or refund) for the VAT amount paid.
Proposal
Kindly request the Ministry of Finance for simplified and clear guidance to solve current
concerns of businesses: EPEs are not required to declare changes use purpose in respect
to the liquidation of machine and equipment in the domestic markets. When selling to
domestic enterprises, the two parties carry out customs procedures and domestic
enterprises shall declare and pay import duty and VAT at the importation for these machine
and equipment.
7.

VAT rates with respect of imported raw materials for production and sales for
domestic enterprises

Issue
In case EPEs import raw materials for production and sales for domestic enterprises, the
enterprises purchased products from EPEs shall have to pay import duty at the rate of the
finished products in accordance with (i) the values of the finished products, or (ii) the values
of the materials comprised in the finished products. Before the Circular 38/2015/TT- BTC,
this is regulated quite favorable to allow the businesses to be selected: (1) applying the tax
rates and the values of the finished products; (2) or apply the tax rates and the values of
corresponding imported raw materials.
Proposal
Kindly request the Ministry of Finance to consider the application of previous regulation
before the Circular 38 for this case, in order to ensure consistency in the calculation of
different types of raw materials or finished products.
8.

Value Added Tax Refund

Issue
Pursuant to Point b, Clause 12, Article 1, Circular 26/2015/TT-BTC dated 27 Febuary 2015 of
the Ministry of Finance:
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Tax Sub Group Position paper

Vietnam Business Forum, 2015

4. In the month (if tax is declared monthly) or in the quarter (if tax is declared quarterly), if

input VAT on exported goods and services that remains after deduction is 300 million VND
or above, such input VAT shall be refunded by month or by quarter; if the aforementioned
input VAT in the month or quarter is below 300 million VND, it shall be offset against tax
incurred in the next month or quarter.
Where a taxpayer both exports and domestically sells goods/services in the month/quarter,
such taxpayer may receive a refund of VAT on exported goods/services if the input VAT that
remains after being offset against VAT on goods/services sold domestically is 300 million
VND or above.

Regarding the VAT refund, as prescribed for business basis paying VAT under the deduction
method where input VAT has not been deducted accumulatively after at least consecutively
twelve months from the first month or at least four quarters from the first quarter arising
input VAT amount having not yet fully deducted, business basis carries out tax refund in
accordance with the prevailing tax regulations. Hence, we can understand that the
enterprise need to have the taxable income that incur during 12 months, but input VAT
might be creditable is still higher than the VAT payable, the enterprise will has the right to
perform the VAT refund. This regulation is fully consistent with the commercial enterprises
having monthly or quarterly business revenue.
However, enterprises with specific charateristics such as enterprises in the ship-building
sector, they can only issue VAT invoice and having revenue upon completion of the ship and
transferring to customers, while the time to perform shipbuilding lasts for a very long time
(with complex cases requiring 2-3 years or more to complete the ship for exportation and
delivery to customers). Meanwhile, input costs of shipbuilding activity is very high, which
can be up to millions of dollars a month/quarter. If ship-building enterprise is not deducted
input VAT on monthly basis, fund for the business activities of enterprises will be affected
greatly.
Proposal
With the above mentioned issues, we very much hope that Government policies shall be
consistently applied in all levels in order to maximize their effectiveness and efficiency.
Kindly request the Vietnamese Government and the Ministry of Finance to consider and
provide detailed guidance, including specific conditions allowing shipbuilding enterprises to
perform monthly VAT refund, so as to cover the investment costs of materials, input costs
of production and business activities that businesses have spent on. Moreover, shipbuilding
is an advantage of Vietnam in the international market; the Government of Vietnam should
have policies to boost its development.
With aforementioned recommendations, we expect that the Governments guidelines and
policies shall be in conformity and synchronized at all levels in order to maximize its
effectiveness.

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Tax Sub-Group Progress Report

Vietnam Business Forum, 2015

TAX SUB-GROUP PROGRESS REPORT

Prepared by
Tax Sub-Group
Vietnam Business Forum
Solving issue progress scale
0 = Still existed issue; 1 = Partially solved issue; 2 = Solved issue
1-10:10 is the highest priority
Score = (Progress point) x (Priority)
No.
1

Age
Old

Issues
Investment Protection:
For All FDI companies being granted
with the Investment Certificate/
Investment License by the licensing
authorities, the tax incentives they are
entitled have been quoted in the granted
IC/IL. However, these tax incentive rates
are challenged and reduced by the local
tax office although the conditions for
those tax incentives are satisfied.

Suggested/Agreed Action
The Government to consider and provide a
legislative principle that any tax incentive
which is already stated under the companys
Investment Certificate shall not be changed
by any State authority if the conditions for
that tax incentive is satisfied.

Progress
Government has positive
feedback on this proposal
and issued some guidance
on some specific cases

Old

Retrenchment Allowance:
Circular 180/2012/TT-BTC Regulation
on the outstanding balance of provision
for retrenchment allowance: Under this
regulation, in the year 2012, upon the
preparation of financial statements, any
outstanding balance of the provision for
retrenchment allowance (after actual
payment during 2012) shall not be
carried forward to the following years
but shall be recorded as other incomes
in 2012, thus this provision will be taxed
at current CIT rate of 25%.

The Government should consider the

continuance of the severance provision to
subsequent years until it is used up. In case,
Government still require enterprises to
reverse this provision, Ministry of Finance
should allow enterprises to apply the
corresponding incentive tax rate of the years
the provision amounts were made.

Have not been resolved

Page 1 of 3

1
x

Priority
5

Score
5

Tax Sub-Group Progress Report

Vietnam Business Forum, 2015

No.
3

Age
Old

Issues
Personal Income Tax:
According to Circular 84, we see the
inconsistency between the start date to
determine residency status and the start
date of tax year for resident individuals.

Suggested/Agreed Action
We recommend that the point to determine
the residency status and the point to
determine tax assessment year should be
consistent and calculated from the first date
of arrival to Vietnam. They will:
Be in accordance with international
practices; and
Minimize the burden of administrative
procedures for tax payers, avoiding the
double taxation.

Progress
Circular 111/2013 has
provision that the point to
determine the tax
assessment year calculated
from the first date of arrival
to Vietnam, however the
provision is only applied for
countries having
Agreement with Vietnam

Old

Foreign Exchange Rate:

In accordance with the Circular and
Official Letter guiding PIT finalization
from year 2009 to 2011, there is no clear
regulation on foreign exchange rates
applied to PIT finalization declaration.

We propose MoF to provide detailed

guidance on average inter-bank FX rate
applied to annual tax finalization.

Have not been resolved

New

Criteria to define enterprises

investment expansion for the period
prior to 2014
Currently, there is lack of specific
guidance although VBF has proposed
many times to MoF

For the consistency between Investment

Law and Tax Law, VBF would propose to
Government and Ministry of Finance to
provide more specific guidance to identify
investment expansion for the period prior
2014 in the way that would base on invested
capital which includes charter capital and
loan capital and is reflected by the value of
fixed asset after accumulated depreciation
on the Balance Sheet. In case enterprises
use internal cash flow generated from
depreciation source to purchase assets, it
cannot be considered as expanding
investment. In case enterprise used up all
registered capital but invest retained
earnings to purchase asset to maintain the
manufacturing activities without any
increase in capital, capacity, scale of

Page 2 of 3

1
x

Priority
2

Score
2

Tax Sub-Group Progress Report

No.

Age

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action
business, then the investment should not be
deemed as expanded investment and shall
be able to applied corresponding tax policy
in each period.

Progress

Priority

Score

Issues on application of Double Tax

Agreement (DTA)

6
6.1

New

6.2

New

There is no detailed guidance on

determining Permanent Establishment
as well as method on calculating tax,
withholding tax regarding to cases when
foreign entities supply e-commerce
service, not through an agent or partner
in Vietnam, and receive money from
Vietnam through internet.
There is no detailed guidance on DTA
application and tax calculation for case
of transferring indirect shares/capital

E-commerce is currently developing very

quickly, we request the Ministry of Finance
to have specific guidance in order to avoid
the case that enterprises shall be subject to
tax recollection and unwanted penalties.

VBF would request the MOF to have specific

guidance on this matter: Is the income from
this transfer subject to tax, How to calculate
taxable income, Who will be the payer and
How to apply DTA?

Page 3 of 3

Have not been resolved

Have not been resolved

Tax Meeting Talking Points with Ministry of Finance

Vietnam Business Forum, 2015

TALKING POINTS WITH MINISTRY OF FINANCE ON SOME TAX RELATED ISSUES

Prepared by
Tax Sub-Group
Vietnam Business Forum (VBF)
A APPLICATION OF DOUBLE TAX AGREEMENT BETWEEN VIETNAM AND OTHER
COUNTRIES
1. Residency
Issue 1: A Vietnamese company pays interest to the branch of a foreign bank which is the
resident of a country signing the Double Tax Agreement (DTA) with Vietnam. In this case,
the DTA between Vietnam and this country cannot be applied to the interest payment.

Our question: How will the enterprises adopt DTA for the above case? Is there any basis for
allowing the application of the DTA between Vietnam and the home country of the foreign
bank branchs head quarter?
Issue 2: Vietnamese authority shall normally consider a person staying in Vietnam for more
than 183 days within a year as a Vietnamese tax resident for and therefore subject to
Personal Income Tax (PIT). However, there may be arguments that the individual should
be treated as tax resident of the foreign country where his property/houses as well as
family are located.

Our question: What is the view and treatment of the MOF for the case above? Enterprises
propose the MOF to assess the tax residency not only based on the time period that person
living in Vietnam but also other aspects such as: family, personal properties, etc...
2. Permanent Establishment (PE)
Issue 1: Service PE
Some DTAs between Vietnam and other countries have no provisions on a service PE.
Enterprises are of the opinion that for the application of the DTA, the service provided by
foreign enterprises in Vietnam will not constitute a permanent establishment for foreign
companies based on such DTAs. In other cases, although service contracts last for several
years, the majority of service is provided from overseas, the service provider is only present
in Vietnam within a very short period of the year; not exceeding six months within a twelve
month period.
The enterprises kindly request the MOF to clarify the determination of PE for the service
provision as above.
Issue 2: Agency PE
How commonly the agency PE is determined? What are the major considerations for
assessment of independent PE vs. dependent PE?
Issue 3: Goods supply
Does the regular supply of goods of a foreign company in Vietnam under the delivery
Incoterm Group D including the case of on-the-spot import and export constitute PE for the
foreign company?
Enterprises are of the opinion that this should not constitute a PE for the foreign company
because it is merely an agreement on the delivery location within the importing country.
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The seller (the foreign company) does not perform business activities through any fixed
place, or through any agent in Vietnam.
Issue 4: PE issue in e-commerce activity
Please share with us your experience in PE treatment to the case of a foreign company
providing e-commerce services, not through any agent or partner in Vietnam and earns
money from Vietnam under online payment methods Can the foreign company be
considered not having a PE in Vietnam and hence apply for the income tax exemption under
the relevant DTA?
3. Indirect share transfer
Enterprises understand that indirect share transfer is subject to income tax in Vietnam. For
example, a foreign Company A (a tax resident of Country 1) holds shares of Company X in
Vietnam. Foreign Company B (a tax resident of Country 2) is the owner of foreign Company
A. When the foreign Company B transfers its capital in Company A to foreign Company C
then this capital transfer activity may be subjected to income tax in Vietnam.
For the case above, assuming Vietnam has DTA with Country 1 and Country 2, then for this
case, which DTA will be applied for the taxable income in Vietnam. And how will the tax
payable amount be calculated if the DTA is applied.
4. Beneficial owner
Please share your analysis on the beneficial owner in the case of the owner of interest and
royalty? What guidance, criteria, conditions or evidence are required to prove who the
beneficial owner of such payment is?
5. Royalty
Will it be considered royalty income if a foreign company receives income for the provisions
of design services, ideas, advertisement models to a Vietnamese company and not holding
the ownership and exploitation right in respect to such ideas, designs and models any more
after transferring such items to the Vietnamese company?
Enterprises are of the opinion that the above activity is only a normal service activity and the
income from this activity is not considered as royalty for purposes of applying the DTA.
6. Loan interest
Are various fees (e.g. loan arrangement fee, commitment fee) to be paid to the lender in the
loan agreement considered as loan interest earnings under the Agreement? The current
Circular 103 on withholding tax indicates that loan interest consists of any fees payable by
the borrower under the loan agreement. Most of the Agreements define loan interest as
earnings from loans in any forms. Meanwhile, loan arrangement fees and commitment fees
may exist even when the borrower has not withdrawn or refuses to withdraw the fund.
MOFs clarification of its position on earnings classification for the fees related to loan
agreements for the purpose of applying Agreements is also needed.
While Vietnam has been engaging in nearly 70 double taxation agreements with other
countries and territories, application of these agreements in practice does not always
reflect the exact intent of the agreements or international practice. Revenue services often
tend to interpret the agreements in ways to win the taxing right for Vietnam and to ask
investors to pay tax credit in the host country. Paying tax credit in the host country is in
many instances impossible as foreign revenue services do not agree with Vietnam on the
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taxing right. As such, the meaning and purpose of double taxation agreements has in fact
been substantially weakened.
B THE ROADMAP FOR ALIGNMENT OF SOME OF VIETNAMESE TAX TREATMENTS WITH
THOSE OF OTHER REGIONAL COUNTRIES
Issue
At this stage, amongst the tax issues receiving high attention of multi-sector enterprises
whose business activities include; real estate is the issue related to the offset of losses of
other business activities against the gain of real estate activity.
Current tax regulations do not allow enterprises to offset the gain of real estate activity
against the loss of other business activities. This treatment creates an unfair business
environment for multi-sector enterprises, causing difficulties for enterprises in terms of
mobilizing and utilizing their capital, not promoting the development of the economy as well
as not being in line with the tax practices of other countries and in the world over.
Enterprises proposal
With a view to contributing to the sustainable real estate business; establishing equal
treatment amongst the enterprise community as well as aligning the Vietnamese tax
treatment with the regional tax practices, VBF propose that the MOF consider revising the
current regulations such that the multi-sector enterprises involved in the real estate
business, are allowed to offset losses against the gains of their business activities
(including the gains derived from their real estate business).
C OTHER ISSUES
1. Investment protection
Issue
Investors seeking to do business in Vietnam prior to 2004 may have the governments
pledge to demonstrate any incentives they are entitled to in the Investment license and
business incorporation certificate. After the Enterprise Law and Investment Law came out
in 2005, businesses had to reapply and change their investment certificates to investment
certificates under Decree N 101/2006/N-CP, which made clear that following the
renewal, all previous entitlements and obligations would still apply. Many licensing
authorities however have altered the eligible incentives businesses are originally entitled to
in this process. Through reference, businesses often choose to reapply for the incentives
they are entitled stated in the incorporation license, but this may be rejected by the tax
authority on account of the renewed investment certificate has provisions allowing it to
replace the original investment license.
Recommendations
Foreign Investment Law of 2000, Investment Law of 2005 and Investment Law of 2014 all
recognize the principles of investment protection. The incentives stated in the incorporation
license prior to 2004 provide the basis for determination of the incentives businesses are
entitled to and cannot be replaced. Renewal of the investment license is just an
administrative procedure, and must not be used as grounds to refute eligible incentives.
MOFs review and response to this issue is needed.

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2. Investment expansion
Issue
Criteria to tell whether a company actually had any business expansion prior to 2004 still do
not have any specific implementing guidance on, despite VBFs repetitive reminder of the
issue to the Ministry of Finance, resulting in various practical challenges:
Any FDI companies must register their total investment capital to obtain an incorporation or
project license, which is used as a benchmark for how sizable the companys investment is.
The total investment capital includes charter capital and mid/long-term loans for capital
investment, and does not include working capital. The closest indicator in a companys
financial statement that reflects how much capital has been paid in is the value of capital
assets, minus accumulated depreciation from the initially registered capital. If this figure is
smaller than the registered capital in the license, one can hardly say the company has been
engaging in any expansion. Yet, many tax authorities are treating any assets purchased
from 2009 to date as business expansion operations, or, through comparison of the total
historical cost of capital assets and the registered project capital stated in the investment
certificate, determine that business expansion has taken place if there is any surplus.
Recommendations
To harmonize between the Investment Law and tax laws, VBF suggests that the government
and MOF provide a clearly defined premise for the criteria used to determine business
expansion prior to 2004, which should be the investment capital, including the charter
capital and loans obtained by the company, reflected through the value of capital assets,
less depreciation as stated in the financial statements. If a company uses cash flows
generated internally, such as depreciation funds, to purchase assets, it still cannot be
ascertained that the company has made any business expansion. For companies where the
registered capital has been fully paid in, and earnings are used to purchase assets to
maintain current business operations, without any increased capital, increased output or
increased operation scale, such increase in assets should not be treated as business
expansion either, and should be subject to relevant tax regimens over time.
3. Input VAT credit
Issue
VAT is by nature an indirect tax, imposed on the added value of goods and services
providers. From a buyers perspective, if goods or services are purchased for business
purposes, they should be considered for deduction, regardless of the buyer generating
sufficient revenue and output VAT to offset with input VAT. Given the risky nature of doing
business, if a project fails, the investor will suffer full losses for the entire expenses
incurred. The losses incurred by the investor will be ten times more than the input VAT and
are entitled unanticipated.
Added to that, some manufacturers may provide their dealers with sales support but do not
use the VAT invoices issued by the dealers to them. While the use of VAT invoices with a
10% tax rate in this case is inconsistent with the law, it does not affect the tax obligations of
the parties, and is simply a case of invoice misuse.
Recommendations
We understand that strict control of VAT excess credit refund is a way to avoid uses of shelf
companies and fraudulent transactions to solicit VAT excess credit refund. If the
transactions are real and actually stem from real business operations, VAT excess credit
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refund will be consistent with the intents of VAT, i.e. VAT only exists if added value is
created in the value chain till the end-use stage.
Accordingly, we suggest that MOF considers allowing investors to withhold input VAT for
procurements made for business purposes, regardless of whether sufficient output is
generated to offset input. We also advise that in case of invoice misuse where the issuers
has fully paid any payable VAT, the recipient also may benefit from the VAT credit refund, if
the transactions area real and actually take place in the course of business operations.
OTHER ISSUES (ADDITION TO THE CURRENT AGENDA)
1. Investment in business expansion
Issue
When it comes to investment in business expansion, it is often understood by companies
that expansion should mean larger size, output, capacity, or more services delivered than
before.Some companies however may bring in more capital to transform their business
pattern or help improve risk management performance.For example, a company may start
with leasing office space for sublease.After that, the company injects more capital in to buy
the leased property, while its sublease agreement remains unchanged, hence no change to
the companys ability to provide subleasing service.
Recommendations
From a businessmans perspective, switching from leasing for sublease to procurement for
sublease is only a change in the way the company does business, rather than enlarging the
capacity or size of the business, and therefore is no business expansion as referred to in the
Investment Law.MOFs clarification is very much expected.
2. Withholding VAT for franchising
Issue
Franchising VAT has had unclear and conflicting guidance from the General Department of
Taxation.Until before Official letter 631/TCT-CS, Mar. 3, 2014, all GDTs guidelines pointed
out that franchising is not subject to VAT.After OL 631 however, local revenue services
started to collect withholding VAT for franchising contracts with foreign parties, but with
different tax rates, causing disputes between tax offices and tax payers.At a consultation
between MOF and Eurocham in December 2014, Vice Minister Do Hoang Anh Tuan said that
added value ratios will apply with other lines of business (and not services), but until now,
MOF still does not disseminate any guidelines in writing to local revenue services.
Recommendations
We urge that MOF gives uniform guidelines to local revenue services regarding the added
value ratios applied to franchising in 2009-2014 (before Circular 103) in other lines of
business for consistent adoption by local tax offices.
3. Deductible expenses in determining corporate income tax for hotel management fee
Issue
Inter-ministerial Circular No. 13/TTLB, dated Oct. 8, 1997, providing implementing guidance
for the governments Decree 12-CP, Feb. 18, 1997, the implementing document to the Law
on Foreign Investment in Vietnam, establishes that deductible hotel management fee for
taxation purposes must not exceed 1%-3% of the revenue, and 5%-10% gross profit.The
Investment Law introduced in 2006 however rules that this fee should be agreed upon by
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the parties involved and is deductible for taxation purposes based on the signed
management service agreement.Notwithstanding, Circular 13 still remains in effect,
resulting in varying tax treatment among with the tax system.
Recommendations
To avoid inconsistency in the application of tax policies for tax treatment, the Ministry of
Finance can work with the Ministry of Planning and Investment to release a guideline
defining the validity of Circular 13. If such a joint guideline is not yet available, the Ministry
of Finance can provide internal directives to ensure consistent application of regulations
and tax treatment.
4. Withholding tax rate for construction with building material cost included
Issue
In Circular 134 and Circular 60, guiding on withholding tax for offshore contractors, in
addition to the tax rates applicable to construction and building works with material or plant
and equipment cost included, the CIT rate on taxable revenue was 2% of the total contract
amount. If a foreign contractor has a contract with a subcontractor to hand over all works
or work items with material or plant and equipment cost covered, and the foreign
contractor is only responsible for the remaining value in the contract, the CIT rate on
taxable revenue for service sectors (5%) will apply. If the contractor provides part of the
materials (or equipment), and management or supervision services, a 2% withholding tax
rate will apply.
But in some cases, local tax offices still apply the 5% tax rate if a building contractor shares
part of the job to subcontractors, and provide part of the materials (or equipment) and
management or monitoring services, leading to inconsistency in the application of tax
policies.
Recommendations
To avoid inconsistency in the application of tax policies for tax treatment, the Ministry of
Finance can provide internal directives to ensure consistent application of regulations and
tax treatment.
5. VAT filing for companies having multiple sales outlets
Issue
According to the Tax Administration Law, eatery service providers and restaurants will have
their place of VAT filing determined by the head of the local tax office.But in practice,
inconsistent instructions are being provided by different tax office across the country for
companies with similar accounting system and sales management systems.In fact, filing
VAT separately for every shop in a same province or city will increase substantially the
administrative procedure burden, while the gross revenue for the state budget does not
change.
Recommendations
The Ministry of Finance can provide consistent guidance to allow shops located in a same
province or city with the headquarters or a companys branch to make VAT filing together
with the headquarters or branch to minimize the administrative procedure burden.

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6. VAT credit early released invoices

Issue
As instructed by VAT regulations, to be eligible for input VAT credit, companies need to
present eligible VAT invoices and documentary evidence of cashless payment for purchased
goods and services worth more than VND 20 million. The Circular also provides on
instances where input VAT credit is not allowed, including:VAT invoices not specifying VAT
amounts; invoices without or with incorrect information on either the name, address, tax ID
of the seller, making it impossible to identify the seller; invoices without or with incorrect
information on either the name, address, tax ID of the buyer, making it impossible to
identify the buyer; fake invoices or VAT payment statements, defaced invoices, blank
invoices (without any recorded goods or services); invoices presenting the wrong value of
the goods or services purchased, sold or traded.This means there is no ruling that
disqualifies entitlement to input VAT deduction due to early release of invoices.
Particularly in the case of ordering customized products which requires payment by
progress, the producer will release output VAT invoices for each time payment is received
and submit output VAT filing. Yet, local Tax departments refuse to let buyers register input
VAT credit for these invoices, on account of invoices being issued at the wrong time.
Recommendations
Because the buyer has actually paid VAT when he/she receives the VAT invoice from the
supplier, the buyer should be allowed to deduct input VAT, providing that the invoices are
legitimate and not in breach of the tax deduction rules of the Circular. This will also be
consistent with the common sense and international common practice, help avoid any
imprint on the buyers cash flow and promote business development for the buyer. We
propose that the Ministry of Finance considers advising local Tax departments for
consistent implementation and to make doing business easier for stakeholders.
7. Cost allocation in the group of companies model
Issue
As the private sector evolves, having a centralized service hub inside the holding company
has increasingly become a common approach. The holding company, as the equity holder at
its subsidiaries, acts as a service center serving the groups member companies, as a way
to improve governance, unify operational codes, strengthen bargaining power with
partners, and reduce the overall overheads for the group.The holding company does not
directly provide services or goods to the market, and earns its revenue only from the
services it offers.This model resembles the globally common multinational corporation
setup.
A unique approach as it is, the holding company claims its service fees from subsidiaries
using viable distribution criteria for each type of service (e.g. revenue, staff size and so on
as criteria).But when it comes to paying taxes, the revenue service will ask for a detailed
break-down of the services that the holding company renders to every subsidiary, and the
corresponding cost. While this is doable, it may lead to a massive workload in terms of
filing, presentation of documentary evidence and a whole lot of other administrative work.
Recommendations
To stay in touch with what is going on in the business environment, we suggest that MOF
considers a common approach for the group of companies model, particularly the
centralized service hubs, and like what has been done in other countries in the region and
around the world, to recognize and encourage companies to setup and operate these
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service hubs for cost saving purposes.What tax administration agencies should rely on to
review and recognize costs are the organizational setup and the roles of relevant functions
as reflected in the uniform codes agreed upon by the parties involved, as well as the
aggregate cost reflected on accounting books and sound cost distribution methods.Tax
offices should not ask companies to provide detailed description of the jobs done because in
practice, most of these are outsourced services, which renders traditional note taking
method (on papers, with signatures of the parties involved) unrealistic and unfeasible.
8. Incentives for projects constituted within industrial parks in areas of disadvantaged
socioeconomic conditions
Issue
Circular No. 151/2014/TT-BTC rules that investment projects located in industrial parks in
areas with advantageous socioeconomic conditions are not entitled to incentives, while
elaborating that areas with advantageous socioeconomic conditions are defined as inner
city districts of special class cities, central-level Class I cities, and provincial Class I cities,
not including urban districts of special class cities, central-level Class I cities, and
provincial Class I cities recently upgraded from rural districts following Jan. 1, 2009.
We understand that the government introduced this rule as a way to ease the bottlenecks
businesses having investment projects in industrial parks, especially projects formed in
2009-2013.
However, provincial Class I cities have no administrative units called urban districts, just
rural districts, towns and townships.According to Decree No. 42/2009/ND-CP on city
classification, there are four types of cities Class I, II, III and IV cities. Normally, for an
administrative unit to be recognized as a Class I city, it has to be originally a Class II or
Class III (very rare) city, and no current rural district will be upgraded to a Class I city.
Moreover, in the current administrative unit denomination system (in the Constitution),
provincial cities are district level units (equivalent to a rural district), thus there will be no
provincial Class I city upgraded from a rural district.
Only urban districts of central-level cities recently upgraded from rural districts may apply
this rule.
Therefore, the part on not including provincial Class I cities recently upgraded from rural
districts following Jan. 1, 2009 above does not exhaustively cover all the cases and may
result in unfair treatment.
Recommendations
We propose that the Ministry of Finance explains what the above statement in Circular 151
actually means. We assume that cities recently upgraded to Class I cities following Jan. 1,
2009 are all in areas without advantageous socioeconomic conditions. Is that right?
For example,before Apr. 20, 2011, Nam Dinh City is a provincial city of Nam Dinh province
and rated as a Class II city.
On Apr. 20, 2011, it was recognized through a governments decision as a Class I city.
Is Nam Dinh city an area without advantageous socioeconomic conditions, and entitled to
CIT incentives?

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9.

Vietnam Business Forum, 2015

Aggregate VAT invoice for multiple shipments

Issue
The current rules require businesses to issue invoices for every shipment.Nevertheless, as
many large sized companies have multiple shipments in a day, this may lead to a heavy
administrative burden and large financial costs for businesses in terms of issuing,
managing and adjusting the invoices.We learned that for this very reason, MOF has agreed
to let some companies issue an aggregate invoice for multiple shipments if the companys
software system can ensure reliability, and there is other documentary evidence to
substantiate the origin of the goods in transit.
Recommendations
We suggest that MOF considers adding ruling to allow special parties, specifically major
companies with large volumes of transactions and high reliability to issue weekly or
monthly aggregate invoices, if these companies so request and their requests are accepted
by the head of the corresponding local tax office.This will help cut costs for businesses in
terms of time and manpower, and improve performance.

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SUMMARY OF CONSULATION RELATED TO THE APPLICATION OF THE

DOUBLE TAXATION AGREEMENT BETWEEN VIETNAM AND OTHER COUNTRIES

Time: 14:00 18:00, Wednesday, Aug. 25, 2015

Venue: Ministry of Finance, 28 Tran Hung Dao, Hanoi
Participants: See Appendix 1
A. CONTENTS
- Summary of proposed points of discussion related to the implementation of double
taxation agreements
Concerns about the adoption of the agreements
Tentative pathway for tax-related treatment between Vietnam and other countries in
the region
Other issues
- Response by the Ministry of Finance
- Discussion
- Closing
B. SUMMARY OF THE MEETING
POINTS OF DISCUSSION RELATED TO THE ADOPTION OF DOUBLE TAXATION
AGREEMENTS BETWEEN VIETNAM AND OTHER COUNTRIES
1. Resident persons
Issue 1. A Vietnamese business paid loan interest to a branch of a foreign bank that is a
resident person of a country having an agreement with Vietnam. In this case, the agreement
between Vietnam and the other signatory nation does not apply to this interest amount.
How will the business apply the agreement in this case? Will the company be able to apply
the agreement between Vietnam and the domicile signatory country where the parent bank
of the said foreign bank branch is a resident person for tax purposes?
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
Article 1 Scope of the agreement specifies that the agreement applies to resident persons
of either or both the signatory countries.
In this case, as this is a resident person of a third country, it does not fall within the scope of
the agreement. So when the Vietnamese company paid loan interest to the branch of an
offshore parent bank, both the agreements entered into by Vietnam and the domicile
country of the branch, and by Vietnam and the domicile country of the parent bank will not
apply.
The General Department of Taxation has had Official letter 3244, dated Aug. 12, 2015,
elaborating on a specific case for a Singapore-based branch and its parent bank in Korea.
Issue 2. Vietnamese tax administration agencies often consider a foreign individual living in
Vietnam for more than 183 days in a year as a Vietnamese resident person, who has to pay
personal income tax. However, many have argued that the individual should only be
considered as the resident person of the country where that persons family and property
are based.

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Can the Ministry of Finance elaborate on this? It would be reasonable if the Ministry of
Finance identifies a resident person based on other factors such as the persons family and
property, rather than exclusively the length of stay of such non-national.
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
Article 4 of the agreement regarding resident person and Article 2.2, PIT Law both
recognize an individual having family and property in another country as a resident person
of such country. Thus, the individual will be a resident person in both countries. In this case,
the residence status of the person will be determined based on his/her personal
relationships and economic interests.
An individual living in Vietnam for more than 183 consecutive days in 12 months is
considered as a Vietnamese resident person because he/she may have economic interests
in Vietnam for more of the time.
The General Department of Taxation had Official letter 2178, dated June 11, 2014,
responding to Bac Ninh Tax Department on this issue.
Ms. Huong Vu, head of the Tax Working group
Here, there are two concepts permanent residence and temporary residence. If a nonnational having a home in another country, that will be his/her permanent residence; and if
he/she comes to Vietnam and lives in a house for rent or a hotel, it will be temporary
residence in accordance with the Civil Code. Is it reasonable to consider living in a leased
house or hotel in Vietnam for a short period of time, for example, two years permanent
residence?
Mr. Bass, DTA consultant
When we look at the residence concept, normal practice in many countries will be to look at
different data and information in a comprehensive manner to tell which country an
individual is a resident person in, for example, they will look at the persons property in the
country he/she lives, and his/her family relationships. Using exclusively a length of stay of
more than 183 days is not a common approach.
Response by Mr. Do Hoang Anh Tuan Vice Minister, Ministry of Finance
Both the agreement and local law recognize the individual as a resident person, of both
countries. If an individual is a resident person of two countries, the taxation right will belong
to the country where the person lives in more often and against his/her income (more than
183 days in 12 consecutive months).
2. Resident interests
Issue 1. Resident points of service
Some agreements between Vietnam and other countries do not comprise a clause on
resident points of service. Businesses may contend that when these agreements apply,
provision of services by a foreign company in Vietnam will not constitute a resident business
establishment for such foreign firm, in line with the agreements. Moreover, it is also
common that while a service agreement may exist for many years, most of the related
services may be delivered in another country, and the service provider may be present in
Vietnam for a short period of time each year, often not exceeding six months in 12
consecutive months. Can the Ministry of Finance elaborate on how residence status is
defined for this case of service agreement?

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Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
Determination of residence status often relies on Clause 5 of the agreement. As for local
laws, it is determined based on these three criteria:
- Maintaining in Vietnam an establishment such as a property, office building or part of
that property or office building; a vehicle or piece of equipment, and so on; and
- Such establishment is permanent in nature.
- And the company runs part or all of its business through this establishment.
In view of these, saying that service delivery by a resident person of a signatory country in
an agreement with Vietnam that has no provisions on resident service sites will not
constitute a resident interest is inaccurate, if the act of service delivery meets the above
three criteria.
If the service provider shows up in Vietnam for a short while but such presence meets the
above criteria an annual basis, that act will still constitute a resident interest in Vietnam.
The question here is how earnings should be distributed in this case. The General
Department of Taxation is working on that and will submit its proposals to the ministry on
this.
Ms. Huong Vu, Head of the Tax Working group
A Malaysia-based company provides consulting services for a client in Vietnam through a 2year contract.
While the services are being delivered, no expatriate consultants are sent to Vietnam as the
Malaysia company only provides strategic, policy and business expertise advice. Does this
constitute a resident status or not?
Response by Mr. Do Hoang Anh Tuan Vice Minister, Ministry of Finance
As an overall rule, the agreement is the dominating normative reference. If there is no
definition in the agreement, what is written in a law still cannot be used.
The solution may be twofold:
- If the agreement does not provide a definition of resident service site, the governments
of the two countries may discuss and agree on an additional schedule.
- The definition of a resident manufacturing facility may be borrowed for resident service
sites. Technically, a business establishment must exist, or a physical facility is leased,
or humans or equipment must be on site to constitute a resident status.
In the above example, if the provision of the consulting services is not conducted through a
Vietnam-based entity, and no personnel is sent to Vietnam, the definition for resident
manufacturing facilities may apply to resident service sites.
Ms. Huong Vu, Head of the Tax Working group
In investors mind, reference to Article 5.b would clearly indicate that the services above do
not constitute a resident status. Nevertheless, local revenue services tend to refuse
applying the Agreement for service agreements that span more than six months.
Circular 205 should clarify this point to make it easier to understand and apply for both
local tax authorities and businesses.

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Response by Mr. Do Hoang Anh Tuan Vice Minister, Ministry of Finance

For Agreements without a clause on resident service sites, the tax departments answer
above would be correct. For Agreements that include provisions on resident service sites,
tax administration agencies will be open to discussion and reconsideration.

Issue 2. Resident dealers

How are independent dealers defined? Which criteria are often used to determine whether
a dealer has independent status or not?
Mr. Arne Schuckmann, Finance Director, Bayer
Bayer provides services to a client in Hong Kong. The contract price is determined through
cost-plus pricing. This is a common type of deal in commercial transactions between two
parties. Since the price is determined through cost-plus pricing, we agree in the contract
that the offshore company may examine Bayers books to verify whether Bayers invoice
values are correct.
The revenue service however sees the foreign companys checking Bayers books as an act
of monitoring or controlling Bayers business in Vietnam. We respectfully disagree with this
position because it is actually and simply a commercial agreement between the parties for
price validation purpose, rather than to control something.
The services we provide to the foreign customer are often of supporting nature, such as
order notice and collection reminder, and have nothing to do with risk taking for product
sales in Vietnam of the Hong Kong company. All sales activities are executed directly by the
foreign firm with buyers in Vietnam. Obviously, we are not a resident dealer of the foreign
firm.
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
As the Agreement does not provide a definition for independent dealers, determination of
independent dealer status will rely on applicable trade laws. But to identify whether a
dealer is independent or not, Clause 7 of the Agreement can be used.
In the case of Bayer, going into details about the independence or dependence of the parties
will not be realistic given the time constraints of this meeting, so we can set up another
meet with Bayer so that we can look further into this case, report to the Ministry of Finance
and get back to you.
Ms. Huong Vu, Head of the Tax Working group
When Bayer, like many other companies, provides services to another country, the costplus pricing method is often used. As such, examination of the actual cost by the foreign
partner to validate the payment amount is inescapable, which is the ground for the parties
to come to an agreement that the Vietnamese party lets the foreign partner to check its
books to validate the integrity of the costs incurred. This can in no ways turn the
Vietnamese firm into a dependent dealer of the foreign partner.
Response by Mr. Do Hoang Anh Tuan Vice Minister, Ministry of Finance
The bottom line in the Bayer case is that the company only provides sales supporting
services, so it is not a distributor working on a commission or discount.

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Issue 3. Provision of goods

Will provision of goods from a foreign supplier, with an Incoterm Group D shipment clause,
including in-country import/export, constitute a resident status for the company in
question? The business communitys position is No, because this is simply an agreement on
the place of delivery inside the importing country. The seller does not engage in any
business transaction whatsoever through any establishment of permanent nature, or any
dealer in Vietnam.
Ms. Tran Thi Hang, Finance Director, DTI
Our company, DTI, buys from our subsidiary in Vietnam for resale to customers.
Sometimes, we buy from Vietnam and deliver to buyers in other countries, and at other
times, we sell to our customers in Vietnam, and to save costs, we would agree with our
subsidiary in Vietnam that instead of shipping to us, they can ship directly to our buyer in
Vietnam. In this case, we believe that we do not create a resident establishment in Vietnam
because the shipment agreement is simply a commercial one, and we do not sell our
products through any other business facilities in Vietnam.
Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
This is similar to the first case mentioned above, to which the General Department of
Taxation had provided general guidance. To be specific, a Malaysia company had agreed and
paid taxes in Vietnam. The question that remains here is how taxable earning is distributed
and the 1% tax rate, which is being studied by us before we report to the government to
come up with more specific guidance for easier implementation.
Ms. Huong Vu, Head of the Tax Working group
Our point is not 1% or 5%, but the point is such transactions like these do not create any
resident interest in Vietnam.
In case merchandise bought from Vietnam is exported by order of a foreign firm, which may
then ship the products to its buyers in Vietnam, the deals should be viewed as purely
commercial contracts, where no resident interest is created. Ironically, when businesses
try to capitalize on the good side of the in-country export/import scheme in trade, they
would be deemed to create a resident interest, whereas the nature of the transaction
remains the same.
Ms. Dang Thi Hoai Thu, Tax Director, Samsung Vietnam
This is also a problem with many suppliers for Samsung, typically Dongyang. Dongyang
Vietnam is a subsidiary of Korea Dongyang. Samsung has a purchase contract to buy from
Korea Dongyang, which in turn buys from Dongyang Vietnam. When Dongyang Vietnam
sells to Korea Dongyang, by instructions of the holding company, Dongyang Vietnam will
ship to Samsung.
Samsung and Korea Dongyang both believe that in this transaction, Korea Dongyang does
not create any resident interest in Vietnam, but simply wants to make the shipment from
one of its subsidiary to Samsung. The local tax administration however disagrees and
insists that Korea Dongyang pays the 1% withholding tax. Despite disagreement, Korea
Dongyang had accepted to pay the tax since 2010. But after paying the tax in Vietnam, they
take the tax statements home to Korea for tax credit discount only to face objection from
the Korean government, which believes that Vietnam does not have the authority to tax this
income.

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Korea Dongyang is now preparing proposals for a bilateral agreement between the revenue
services of Vietnam and Korea to address this issue.
Ms. Huong Vu, Head of the Tax Working group
Taking this opportunity, we would like to bring to the table an issue of much interest by
various businesses, which is application of the Agreement. Vietnamese revenue service
requires paying taxes in relation to in-country import/export, but businesses paying taxes in
Vietnam cannot get rebate from the tax authorities in their home countries, which object
that Vietnam has the right to tax such transactions. This will render the signing of the
Agreement meaningless as businesses still have to pay taxes twice.
Similarly, shipment to bonded warehouses as instructed by an offshore party to its
Vietnamese suppliers to deliver to bonded warehouse located deep inside Vietnamese soil
is also deemed by local tax authorities as constituting resident interests.
Mr. Bass, DTA consultant
Regarding in-country import/export transactions, there is no dealer relationship between
the offshore seller and the party making the shipment in Vietnam, as it is strictly a normal
commercial activity with the point of delivery inside Vietnam territory. The Vietnam party
has no capacity to ship on behalf of the foreign party.
Secondly, when it comes to delivery to bonded warehouses, the Agreement also provides
exceptions. To be specific, if the foreign party has a warehouse in Vietnam used for
inventory, demonstration and shipment, there is no way this will create resident interests.
Furthermore, if the Vietnamese government still considers in-country import/export or
shipment to bonded warehouses as creating a resident interest, then we should look at the
question of how the taxable earnings are distributed. In this case, it is same-price
transactions and the tax has been paid by the Vietnamese firm, so there will be no more
earnings to be distributed to the resident establishment in Vietnam.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
For the question of shipment to bonded warehouses, we will look again at the Agreement,
and if the Agreement has exceptions for warehouses in Vietnam used for inventory and
demonstration, its provisions will apply.
Regarding in-country export/import, we admit that two streams of views currently exist,
one arguing that a subsidiary in Vietnam is basically a resident facility of its offshore parent
company. But according to the Investment Law and Trade Law, a subsidiary and its holding
company are independent legal entities.
In case of in-country export/import without the involvement of a Vietnam-based holding
company, without personnel sent over to supervise the subsidiary, and without leases of
plant and equipment, no resident interests will be created.
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
The General Department of Taxation has sent our head of the International Cooperation
Department to negotiate with the Korean revenue service on this issue, namely the case of
Dongyang Co., to make sure that the principle of no double taxation is observed.

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Issue 4. Resident interests in provision of electronic commercial services

The business community understands that a foreign company providing electronic trade
services not through a dealer or partner in Vietnam, and collecting payment from Vietnam
through on-line payment modes will not be deemed to have resident interests here, thus is
entitled to corporate income tax exemption in accordance with the Agreement. What is the
Ministry of Finances position on this matter?
Ms. Huong Vu, Head of the Tax Working group
We hope to hear from the Ministry of Finance on whether tax credit rebate is required in
this case.
Our position is that in reference to local laws, this activity will be subject to withholding tax
as it creates income in Vietnam. Determining the tax rebate side however is not that simple,
and if the Agreement applies, can the Ministry of Finance share its view on whether
provision of electronic trade services creates resident interests?
Mr. Dave, DTA consultant
There are mixed views on how to determine the existence of resident interests for
electronic trade services. By OECD standards, it should rely on where the server is located
and the degree of server control to determine whether a resident interest is created. If the
service provider only uses the server for administrative work such as credit card check or
leases part of the server to perform the services through cloud computing, there will be
insufficient grounds to say that resident interests have been created.
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
Yes, there are mixed views about this issue. As a rule, the Ministry of Finance agrees that
the electronic trade service provider in this case has income generated in Vietnam. How
taxes are collected and tax credit refunded however needs to be further looked at.
We acknowledge the concern and will report it to the Ministry of Finance/government and
come up with specific guidance for implementation, ensuring the goal of promoting
business development and alignment with international practices.
Mr. Mark Gillin, Head of the Customs Working group
E-commerce is in a trend of strong growth. We urge the Ministry of Finance to provide
specific implementing guidance soon to avoid a situation where companies involved in past
transactions are subject to unnecessary tax clawback or fines while waiting for the
guidance.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The Ministry of Finance does not have yet specific guidance on this. We will however take a
precautious approach in doing this, consulting relevant partners and international
organizations to come up with the guidelines as soon as possible. Businesses should wait
for guidance to come out before taking further steps.
3. Indirect transfer of shares
We understand that indirect transfers of shares/equity may be subject to income tax levy in
Vietnam. For example, a foreign company A (a tax resident person of Country 1) holds equity
in a company X in Vietnam. A foreign company B (a tax resident person of Country 2) is the
owner of the foreign company A. When company B transfers its shares in company A to
another foreign firm C, such equity transfer may be subject to corporate income tax in
Vietnam.

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In this case, assuming that Vietnam has had a double taxation agreement with Country 1
and Country 2, which of these agreements will apply to the taxable income in Vietnam? If
this tax must be paid, how will the tax liability be determined?
PWC representative
We hope the Ministry of Finance lets us know how the Vietnamese government determines
this is a case of indirect transfer of shares when no change of name appears on the license.
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
This is a new point to consider in the policy. The Ministry of Finance is working on
implementing guidelines for it.
4. Real beneficiary
What criteria, evidence or determinants are often used to determine the beneficiary in
copyright transfer and loan interest payment transactions? We hope to hear the Ministry of
Finances elaboration on this.
Ms. Huong Vu, Head of the VBF Tax Working group
This concern has actually been recently attended to satisfactorily by the General
Department of Taxation. We suggest including guidance on this concern in a Circular to
align implementation with local tax administration agencies and avoid any confusion in the
process, resulting in businesses having to make their cases to the higher levels, which is
very time consuming.
5. Copyright/royalty
If a foreign company provides services in the form of designs, concepts or advertising
mockups to a Vietnam company, with waiver of any ownership or entitlement to such
concepts, designs or mockups following the transfer, will this be considered as a form of
copyright transfer? We believe that this should be viewed as a normal act of service
delivery, and earnings from it should not be considered as royalty for the purposes of the
Agreement.
Ms. Que Tran, representative of WPP Thailand
WPP Thailand has a service agreement involving designs, concepts and mockups for P&G
Vietnam. In this agreement, all designs, concepts and advertising strategies transferred to
P&G Vietnam will be property of P&G Vietnam, and only P&G Vietnam has the right to use
these designs and concepts. The Vietnamese revenue service however informs that the pay
we get will be taxed as income from royalty as it is related to designing.
As far as we are concerned, this earning is not royalty-related income because we do not
have ownership, use right or entitlement over the property. We provide services to P&G in
all ASEAN countries, but only in Vietnam, we are deemed to have income related to royalty.
Moreover, Article 23, Circular 205 specifies Regulations on copyright taxes only apply to
the recipients who are also the real beneficiaries of any earnings from such copyright,
meaning that these persons have the ownership, use right and entitlement over the
copyright. Thus, they will not apply to recipients of payments for copyrights/royalty who do
not have ownership, use rights and entitlements over copyrights/royalty.
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
Article 12 of the Agreement provides a definition of copyright/royalty, which includes
designs, mockups. The presented case falls under the scope of this definition.
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Nevertheless, right before the conference, the Ministry of Finance has taken the lead in
holding consultation with stakeholders and gathered quite a few mixed opinions on this. The
concern is duly noted and we will further consult the Ministry of Science and Technology
and Ministry of Industry and Trade to find an answer to it.
Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
Only designs for which the ownership belongs to the author will entail the copyright
concern.
Mr. Mark Gillin, Head of the Customs Working group
In terms of accounting, transfer of intellectual properties will involve changes to intangible
assets. Obviously in this case, there is no asset but only expenses incurred to generate
income from the services rendered. Moreover in advertising, design is but a very small part
of the entire process. Designs or concepts need to be realized if they want to offer any real
value.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
General Department of Taxation will take into account the above comments and rethink the
implementing guidance.
6. Loan interest
Are fees (e.g. loan arrangement fee, commitment fee) payable to the lender as stated in the
loan agreement considered as loan interest income in the Agreement? The current Circular
103 on withholding tax specifies that loan interest encompasses fees that the borrower has
to pay in accordance with the loan agreement. Most of the Agreements define loan interest
as income from loans in any forms. However, arrangement and commitment fees may arise
even when the borrower has not or will not withdraw the fund. We need the MOF to clarify
on how earnings from fees related to loan agreements are classified for the purposes of the
Agreement.
Ms. Huong Vu, Head of the Tax Working group
What we need here is to clarify whether loan arrangement fee is part of the loan interest or
business earnings, because if it is part of the loan interest, Article 11 of the Agreement will
apply, and if it is business earnings, Article 7 of the Agreement will set in.
Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
To tell whether the fee is loan interest or earnings for the purposes of applying the
Agreement, we should rely on the definition of loan interest in the Agreement and the terms
and conditions of the contract.
Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The Ministry of Finance, General Department of Taxation and business community need to
look further into how the Agreement should be applied in respect of this matter to come up
with something specific for investors.
7. Issues
One of the current tax concerns that members of the developer community of our
association is very interested in, especially multi-industry companies that do business in
real property, planning to do business on a large scale an in a sustainable way, is one that
relates to swapping losses from other businesses with real property to offset profit from
real property business.
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Current rules do not allow offsetting profit from real property transfer with losses from
other business activities. The application of this rule is giving rise to an unfair business
environment for multi-industry companies, giving a hard time for businesses in harnessing
and rolling over capital, fails to create momentum for the economy to grow and is not in
harmony with tax best practices in other countries in the region and the world.
The recent revised law has attempted to address this issue in ways that allow offsetting
profit and loss from real property business with other undertakings. To help create a
healthier real property market, ensure fair treatment for multi-industry businesses, and
stay aligned with international best practices, we would appreciate if the Vice Minister
supports the draft for it to be translated into real life.
8. Investment protection
Toto representative
Toto had its investment license in 2002 with incentives in the form of 2-year tax exemption,
3-year tax reduction, and 15% tax rate for the entire project life. In 2008, we renewed our
license as required by the Investment Law of 2005, where the eligible incentives turned out
to be less favorable than the 2002 license. So we chose to fall back to the initial license by
applying rulings on investment protection.
While export proportionate incentives were cancelled in 2008, implementing documents
were only available for textile companies. It was until 2012 implementing documents were
released for other types of businesses. So in 2008, we could not figure out which incentives
might be the best for us, and were only able to see that in 2012 when the new guidelines
came out.
Response by a representative of the Policy Department
The Policy Department had consulted the Ministry of Justice and MPI before responding to
the queries.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The initial incentives stated in the license of 2002 remained valid even if the company
renewed its license in 2008. What the company wanted was to keep the 15% tax rate for the
remaining project life by adopting applicable WTO incentive swap rules. I will look back at
this matter. As a rule, if the ministries concerned have varying ideas, the matter should be
referred to a higher-level authority.
9. Investment in business expansion
Ms. Huong Vu, Head of the Tax Working group
Determinants of whether a company invests in business expansion prior to 2014 are still
supported with specific guidance, despite VBFs multiple petitions to the Ministry of Finance
in this regard, resulting in inconsistent implementation in practice. Some local revenue
services have treated any newly purchased assets from 2009 as business expansion, or they
would compare the total historical cost of fixed assets with the registered capital of the
project stated in the investment certificate, and any surplus would be considered as
evidence of business expansion, while it is actually not.
Representative of Yamaha
We now have the gross asset value greater than total investment capital as we used
depreciation fund to buy capital assets. Production output however remains unchanged, as
does investment capital. Will this be treated as business expansion?
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Response by Mr. Cao Anh Tuan, Vice General Director, General Department of Taxation
We totally agree with the arguments raised. The Ministry of Finance is drafting
implementing documents for this and consulting other relevant ministries.
10. Input VAT credit
Mr. Sambuy Constantino, representing Piaggio
We order dies from suppliers to make parts. As it takes a long time to make dies, we often
pay suppliers on a schedule, and the suppliers will issue their VAT invoices to us. Also to
relieve the administrative burden, our suppliers and we use the SRM software for order
placement, progress monitoring, handover and acceptance of products.
The revenue service however does not approve our claim for tax credit rebate for the
invoices issued by the suppliers, saying that the invoices were released too soon and that
acceptance certificates are missing. We believe that stage-based invoicing by our suppliers
is like in construction, and when the invoices are released, the suppliers have already paid
any liable taxes required. Our use of the software for product acceptance is also consistent
with the current trend of environmental protection. So we are asking to be allowed input tax
credit for these invoices.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The Ministry of Finance agrees with the request and proposes confirmation for this
particular case, as with other similar instances.
A representative of Ford Motor
Applicable policies for 2008-2010 rule that support for dealers is not required to be
invoiced, and instead, only receipts or payment statements will suffice, but recently invoices
have been required for such support.
In our case, if we provide sales volume support for our dealers, we would ask the dealers to
issue a VAT invoice, which is the most reliable evidence for the support we provide our
dealers with. While the use of VAT invoices at a 10% tax rate for 2008-2010 was not
consistent with applicable laws, it did not affect the tax obligation of the parties involved
with the revenue service, but it even does more good than harm as when a dealer issues an
invoice, it will have to file and pay VAT and CIT in full. The revenue service however still
refuses to let us claim credit rebate for these invoices.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
As the invoice issuing party has filed and paid VAT, input tax credit rebate should be
considered for the recipient. This is a matter of retrospective processing, and approval
should be given.
A representative of Doosan Heavy Industry
Doosan Heavy Industry is a prime contractor for a construction project in Vietnam. As the
developer was not in a good financial shape, it delayed payment to us, and as a result we did
not have an output. Notwithstanding, we approached our holding company to look for
support to try and pay our subcontractors in time. As a result, we had more input VAT than
output and needed to claim for refund. Given the dispute between the developer and prime
contractor, which is being handled by the court, the tax administration refused to refund the
tax credit to us until a judicial award was released.
Our position: VAT is the tax money we actually paid from our pocket to the state budget. In
the face of the developers poor financial performance, we were the one taking the risk for
Page 11 of 16

Summary of meeting between the Tax WG and MOF

Vietnam Business Forum, 2015

the costs incurred. And now if we are not allowed to claim the input VAT excess credit
refund, our risk will double. We therefore urge the Ministry of Finance to take a look at our
case.
Ms. Huong Vu, Head of the Tax Working group
We share the views of policy makers that input tax credit refund where only input tax is
reflected, without output, should be strictly controlled to avoid scams of using shelf
companies and phony transactions to claim input VAT excess credit refund. But in the case
of Doosan, it is the developers poor financial state that led to its failure to pay the main
contractor, hence the absence of the output side. It would be a long time to wait for the
court to give its award before the company can claim its refund. We urge the Vice Minister
to look at this companys case.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The issue is duly noted and we will ask the relevant tax administration agencies to report to
the ministry for consideration. Meanwhile, related files can be submitted to the Ministry of
Finance for our review.
Mr. Mark Gillin, Head of the Customs Working group
Court proceedings and VAT processing are two different matters. The suppliers
(subcontractors) already paid VAT when they issued the invoices. By nature, value added tax
is levied on the incremental value of goods and services. If the goods and services are not
used (no output), there will be no added value, thus no tax. Doosans claim for refund only
applies to the tax money already paid by the suppliers.
11. HS code classification
Mr. Adachi Yasuhiro, General Manager, Hi-lex
Our company has been using imported goods for business purposes. When we import the
goods, we would consult the HS code classification function of the General Customs
Department to apply the right codes for the goods we import. In 2010 and 2014, the
Customs Department of Haiphong City checked and accepted the HS codes filed by us. But
in 2015, Haiphong customs checked again and surprisingly refused to accept the HS codes
that we used, and also initiated tax clawback procedures and imposed fines that tripled the
value on us.
Regarding HS codes, we do not import motorcycle parts, but instead we import semifinished products, which have to go through multiple technical stages at our factories
before becoming parts and assemblies. These semi-finished products therefore should not
be treated as finished parts, like commercially imported parts.
We believe that the customs verdict was in breach of the current investment protection
policy of the Vietnamese government and Vietnam-Japan Investment protection agreement,
and a setback in efforts to promote supporting industry development in Vietnam.

Response by a representative of the General Department of Vietnam Customs

Regarding HS code classification, before Nov. 1, 2013, the General Department of Customs
had three independent code classification centers to cater to businesses proposed code
classification. Given the sometimes complex and hard to classify nature of some products,
inconsistency had emerged between the three centers. Therefore, after Nov. 1, 2013, the
General Department of Customs resorted to one classification result only that endorsed
by the General Director of the General Department of Customs. But Article 6.4, Circular
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Summary of meeting between the Tax WG and MOF

Vietnam Business Forum, 2015

14/2015 of the Ministry of Finance specifies that in case the customs approved a registered
HS code classification and later changed its verdict, such new decision will apply only from
the time it came out.
To help us look further into your case, you can provide necessary documents to Haiphong
customs for further reporting to the General customs department for consideration.
Mr. Mark Gillin, Head of the Customs Working group
Now that Vietnam is a member of the World Customs Organization (WCO), HI-lex can
provide HS classification from other countries for reference by the local customs. Hi-lex
can also access the WCOs website, GRI section to look for classification information there.
Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The new Customs law being in effect from Jan. 1, 2015 has clauses stating that Vietnam
fully recognizes and respects international customs code classification. In your case, it is
just a matter of conflicting ideas between the customs and taxpayer, rather than an official
award has been given. So you can make your case to the Ministry of Finance and General
customs department so that we can follow-up and make sure your rightful interests are
protected.
12. Customs valuation
A representative of Tetra Park
We are an importer of milk packaging materials. It is out holding companys policy that
packaging prices may vary based on market conditions, and the prices are often lower in
Vietnam. But when we do the import, we are often asked by the customs why the prices are
low, and clearance is often not as smooth as expected, affecting our ability to ensure
continuing supply for production.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The Customs Law specifies that in case any difference of positions exists between the
customs and importers, the customs still have to clear the imported goods no later than 24
hours to make sure that production does not suffer. Any disputes will be handled later,
after clearance. In case the contract price is the paid price and the one factored in the
product cost, the customs has to accept it as a market price.
13. Withholding VAT for franchising
Ms. Huong Vu, head of the Tax Working group
Franchising VAT has had unclear and conflicting guidance from the General Department of
Taxation. Until before Official letter 631/TCT-CS, Mar. 3, 2014, all GDTs guidelines pointed
out that franchising is not subject to VAT. After OL 631 however, local revenue services
started to collect withholding VAT for franchising contracts with foreign parties, but with
different tax rates, causing disputes between tax offices and taxpayers. At a consultation
between MOF and Eurocham in December 2014, Vice Minister Do Hoang Anh Tuan said that
added value ratios will apply with other lines of business (and not services), but until now,
MOF still does not disseminate any guidelines in writing to local revenue services.
We urge that MOF gives uniform guidelines to local revenue services regarding the added
value ratios applied to franchising in other lines of business for consistent adoption by local
tax offices.
PWC representative
Levy of withholding VAT should only start when specific guidelines come out.
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Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance

The Tax Policies Department, Ministry of Finance, has been consulting relevant agencies
and international best practices to decide whether taxing is needed, and if yes, how much.
Mr. Sambuy Constantino, representing Piaggio
Since Official letter 631 came out, we have been filing and paying VAT, but the revenue
service now asks us to retrospectively pay taxes for amounts before Official letter 631. We
urge the Ministry of Finance to give specific instructions on the timing of tax collection.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
We have agreed that the Ministry of Finance and General Department of Taxation will
review Circular 103 and other implementing documents to come up with more specific
guidelines. The principle however is to impose tax from the time an implementing
document comes out.
14. Investment in business expansion
A representative of Parkson
We started doing business here in 2006 through subleasing levels 1-4 of the trade center.
Subleasing however did not give us control over the rent and space, so in 2008, we decided
to acquire the whole building. To buy the building, we need to increase investment capital
and renew the license.
After we bought the building, the business at levels 1-4 remained the same, and we only
renewed the lease contract for level 5 to be consistent with the ownership change.
We understand that despite our increased capital, there was no increase of business size,
except some extra income from leasing level 5. Earnings from the on-going business at
levels 1-4 therefore should not be treated as business expansion.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
For your particular case, please send your file to the Ministry of Finance for our review.
Nissin Brake
We manufactures motorcycle brakes. We had our investment license in 1996, stating the tax
incentives we were entitled to. In 2007, we added some lines of business and investment
capital, and obtained an Investment certificate. In the Investment certificate of 2007, the
licensing agency kept the incentives of the investment license of 1996 intact, and we have
followed these incentives in the investment certificate of 2007 to date. We believe that in
accordance with the current investment protection policy, the tax incentives stated in the
license are the highest benchmark for our implementation. Can the Ministry of Finance
validate our understanding?
Also, we urge the Ministry of Finance to walk us through how to determine business
expansion investment based on the total investment capital for our correct application.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
Regarding investment incentives, we agree with the investment protection rules you raised,
as they are defined in the law. For wrongly defined incentives stated in the investment
certificate, like the Honda case, we would address the issue in the principle that if the
regulatory agency is at fault, it should bear the consequences. So the company will continue
to benefit from the incentives stated in the license. In your case, if things are as you
reported, you can send a request to the Ministry of Finance for specific guidance.
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Vietnam Business Forum, 2015

In respect of how to identify business expansion investment, the Ministry of Finance is

working on a specific scheme. We agree with the recommendation from this forum that
increase of assets from retained earnings and depreciation fund, without making the
business size to enlarge will not be deemed business expansion.
15. Withholding tax rate for construction with building material cost included
A representative of Falcon
Falcon is the main contractor of the Tram Lake project. We signed the contract in 2011 and
2012, and applied Circular 134 for the tax rates applicable to construction and building
works with material or plant and equipment cost included, for which the CIT rate on taxable
revenue was 2% of the total contract amount. If a foreign contractor has a contract with a
subcontractor to hand over all works or work items with material or plant and equipment
cost covered, and the foreign contractor is only responsible for the remaining value in the
contract, the CIT rate on taxable revenue for service sectors (5%) will apply.
We received Official letter 3602, Mar. 19, 2015 from the Ministry of Finance, asking us to use
the 5% CIT rate in case we hand over all construction works to subcontractors and retain
only the supervision part. The official letter however was not specific on whether, we, in
both a supervision and partial material (or plant/equipment) provision capacity, can use the
2% rate.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The Ministry of Finance agrees that if a main contractor transfers all construction works,
material and equipment provision to subcontractors, and only retains the supervision part,
the 5% rate will apply; if the main contractor is in charge of both supervision and material
provision, the 2% rate will apply.
The current 5% applied on project management is unreasonable. The Policy Department
will consider revising the Circular to increase its real value.
16. Issuance of cumulative VAT invoices for multiple shipments
A representative of Honda
Honda has a wide dealer network all over the country. For every shipment now, we release
an invoice. But given the large number of dealers, we need a large volume of invoices
accordingly. We suggest that the Ministry of Finance allows us to issue invoices on a
monthly basis to relieve the paperwork burden. The reason behind that proposal is that we
have a good software system that is capable of strictly controlling orders, and we have
shipment notes listing fully VIN numbers.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
The government is about to release a Resolution on electronic invoicing to relieve the
paperwork burden for businesses. Only the sample invoice and how the invoices are used
will be registered to the tax office to become recognized. To safeguard your own interest,
you can register for use of electronic invoicing. For special cases, MOF has delegated GDT
to address businesses concerns.
17. A representative of Vinaflour
We are based in an industrial park in Ha Long City, Quang Ninh province a Class I City
upgraded from a Class 2 city in 2013. We are engaging in a business expansion project, but
as we are located in an industrial park in a better-off municipality, we do not have any
incentives. But Circular 151 has specified on criteria to define areas with advantageous
socioeconomic conditions as urban districts of special class, Class 1 central-level, and
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Summary of meeting between the Tax WG and MOF

Vietnam Business Forum, 2015

Class 1 provincial level cities, and not including districts of special class cities, central level
Class 1 cities and Class 1 cities of new provinces formed from districts since Jan. 1, 2009.
We would appreciate if the Ministry of Finance helps us determine if we are located in a
non-advantageous site as indicated in Circular 151.
Response by Mr. Do Hoang Anh Tuan, Vice Minister, Ministry of Finance
You are based in Ha Long City a Class 1 city, so no incentives.

Page 16 of 16

5.2. LAND

Land Sub-Group Position Paper

Vietnam Business Forum, 2015

LAND SUB-WORKING GROUP POSITION PAPER

Prepared by
Mr. David Lim
Head of Land Sub-Working Group

A. INTRODUCTION
With the new Law on Real Estate Business 2014 (LREB) and the Law on Residential Housing
2014 (LRH) taking effect on 1 July 2015, we have seen renewed interest and activity in the
nations real estate market. Decree No. 76/2015/ND-CP guiding the LREB was officially issued
on 10 September 2015 (Decree 76).It is encouraging to note that some of the key comments
on the draft Decree 76 raised at the Vietnam Business Forum Meeting held on 9 June 2015
were incorporated. At the same time, Decree No. 99/2015/ND-CP guiding LRH was officially
issued on 20 October 2015 (Decree 99).
In light of the theme Enhancing Enterprise Competitiveness for Global Integration for the
Annual Meeting 2015 organized by the Vietnam Business Forum, we set out our comments in
respect of the key provisions in the relevant laws which may restrict competitiveness in the
real estate industry and our recommendations to address such issues.
B. ISSUES
1. Restrictions on sources of capital
Article 69 of the LRH and Article 19 of Decree 99 provide a list of sources of capital for
residential housing projects. This list limits the sources of capital for residential housing
developers. This reduces the ability of real estate developers to raise capital effectively and
directly affects the competitiveness of such developers. There is no need to limit the ability of
property developers from raising capital from legitimate sources. If there is a concern about
the sources of capital, measures should be introduced to ensure that the sources are
legitimate. A blanket restriction is not the most efficient way to deal with this issue.
Recommendation
We suggest inserting the right to raise capital from offshore credit institutions and non-credit
institutions; and capital from other sources which are not prohibited by laws.
2. Restrictions Affecting Foreign Developers
According to Article 11 of the LREB, foreign developers are not permitted to transfer the land
use right in form of division of land into plots for sale whereas Vietnamese real estate
developers are permitted to do so. Further, enterprises with foreign owned capital are
permitted to collect up to only 50% of the value of the contract for sale and purchase or hirepurchase of real estate to be formed in the future whereas the applicable percentage to
Vietnamese real estate developers is 70%. It is not clear why this difference in treatment for
foreign invested and Vietnamese real estate developers is necessary. This inconsistent
treatment creates inefficiencies within the real estate sector and impairs the competitiveness
of the industry in general.

Page 1 of 4

Land Sub-Group Position Paper

Vietnam Business Forum, 2015

Recommendation
We would recommend that any difference in treatment between foreign invested and
Vietnamese developers to be removed to ensure a fair and level playing field for all in the real
estate sector in Vietnam.
3. Notarization of Contracts for Sale and Purchase of Residential Houses
According to Article 93.3(b) of the law on residential housing in 2005, contracts for residential
houses to which a party is a real estate business enterprise shall not be required to be
notarized. However, pursuant to Article 122 of the LRH, all contracts in relation to the sale and
purchase of residential houses are required to be notarized/ certified. This implies that
contracts for sale and purchase of residential houses entered into with the seller being a real
estate business enterprise are also required to be notarized/certified. However, this Article is
not consistent with Article 17.2 of the LREB which provides that the notarization/certification of
contracts for real estate business shall be subject to the agreement between the parties, while
it is mandatory for the real estate agreements entered into between individuals/households to
be notarized/legalized. It is not clear if the intention is to require all contracts in relation to the
sale and purchase of residential houses to be notarized including contracts in which one of the
parties are the real estate business enterprises.
Recommendation
We suggest clarifying this point in the Draft Decree by providing clearly that contracts for sale

and purchase of residential houses entered into with the seller being enterprises having
function of doing real estate business need not be notarized/certified to be consistent with the
provision under the LREB.
4. Capital Reserve
According to Article 108.1(b) of the LRH, the developers are required to contribute 2% of the
value of apartments which are not sold at the time of commissioning of the apartment building
for maintenance of parts under common ownership of the apartment building. Such value is
calculated based on the highest selling price of the apartment in an apartment building. As
there are many categories of apartments with different designs or floor areas in an apartment
building, there are significant differences in the prices of the apartments. Therefore, this
requirement is not practical and causes much difficulty to developers. Further, there is no
mechanism to deal with payments made for this purpose where the apartments are sold at a
later stage.
Recommendation
We suggest amending such provision as follows: this value is calculated based on the

highest selling price of the apartment in the same category within the apartment building.
Further, there should be a mechanism for the capital reserve paid by the developers to be
refunded or retained by the developer when the apartment is sold to the buyer.
5. Foreigners Buying Real Estate in Vietnam
Article 161.2(a) of the LRH allows foreign individuals/organizations to own a maximum number
of 250 individual residential houses in a ward, comprising villas and terraced houses. We note
however that Article 68.4 of the Draft Decree introduces an additional restriction whereby
foreign organisations/individuals may own no more than 10% of the total number of individual
Page 2 of 4

Land Sub-Group Position Paper

Vietnam Business Forum, 2015

housing in each residential housing project. We are of the view that the number of maximum
units which the foreign individuals and organisations are allowed to own are further limited
and not consistent with the LRH.
Further, according to Article 67 of the Draft Decree, foreign individuals and organizations are
not entitled to own residential houses in areas where foreigners are prohibited or restricted
from residing or travelling as provided under the law on residence and travel. We note however
that according to Article 159.2(b) of the LRH, foreign individuals and organizations are only
prohibited to purchase houses in national defense and security area. Article 67 of the Draft
Decree has introduced a wider restriction for areas which foreign individuals and organization
are allowed to purchase houses.
Moreover, Articles 69.2(b) and 69.3(b) of the Draft Decreeprovide another additional restriction
in the one-time extension of residential housing ownership requested by foreign owners. Such
restriction will cause concerns to foreign buyers and may cause negative impact to business
development of developers. We propose that unlimited extensions should be provided except
where foreign individuals and organisations are not allowed to own such residential houses for
national defence and security reasons only.
Recommendation
We suggest removing such additional restrictions under the Draft Decreeas such restrictions
may deter the foreign investors from purchasing real estate in Vietnam and affect the ability of
real estate enterprises to conduct business. These restrictions also cause Vietnam to lose
competitiveness in comparison to other countries which have fewer restrictions on foreigners
owning real estate.
6. Timeline for Capital Contribution
It is provided in Articles 48.2 and 74.2 of the Law on Enterprise 2014 that the members of a
limited liability company are required to contribute capital in full within 90 days from the date
of issuance of the enterprise registration certificate. Investors are required to contribute
capital within a short period of time notwithstanding that the implementation of the project
may be conducted over an extended period of time. This requirement is unrealistic as a
substantial amount of capital may not be required at the beginning of the project. An example
of this is large scale projects e.g. township developments and infrastructure projects. These
requirement disincentives developers from undertaking large scale projects which are
necessary for organised and coordinated development. This requirement will also lead to
inefficient use of capital and inhibit business competitiveness in the real estate industry.
Recommendation
We propose incorporating provisions which allow capital to be contributed according to the
implementation of the project. Flexibility is also required for extended period for contribution
of capital in large scale projects.

Page 3 of 4

Land Sub-Group Position Paper

Vietnam Business Forum, 2015

C. CONCLUSION
The points we have highlighted limit the rights of real estate enterprises hence affecting the
competitiveness in the real estate industry. The additional restrictions, onerous contribution
obligation and delay in introducing necessary guidelines provided in the draft decrees create
the impression that the investors will face many hurdles to invest in the real estate sector in
Vietnam. The impact of the new laws to increase competitiveness in the real estate industry
would therefore be diminished. In view of the issues above and the governments objective to
ensure growth in the real estate industry, it is crucial that clear and consistent guidelines are
provided to eliminate any complications or confusion to the investors and real estate buyers.
The administrative procedures should also be simplified to expedite the process and onerous
requirements should be removed to provide more flexibility to the investors.These changes are
critical to ensure that Vietnam continues to remain competitive in the region.

Page 4 of 4

Land Progress Report

Vietnam Business Forum, 2015

LAND PROGRESS REPORT

Prepared by
Land Sub-Group

Scoring to be rated as followings:

In progress report:
0 = issue remains; 1 = partially somewhat resolved; 2 = issue has been solved.
Priority (1 -10: highest).
Score = (Progress) x (Priority)
No

Age

Issues

Suggested/Agreed Action

Progress

Do away with the requirement that

leases must be negotiated with the
State. Allow land use rights
certificate to be issued to foreign
investors before issuance of the IRC
and ERC.

Not addressed.

Priority

Score

Part I. Law on Land

1

Old

Foreign investors are disadvantaged

in securing property because of
arduous, discriminatory procedures. A
lease must be negotiated with the State
and an investment registration
certificate (IRC) and an enterprise
registration certificate (ERC) must be
obtained before a foreign investor may
compensate the land user.

These procedures disadvantage foreign

investors relative to local developers.
Obtaining the IRC and ERC are lengthy
process, and land users will be unlikely
to wait for their issuance before
compensation.
2

Old

Decree 84/2007/ND-CP, art. 32, allows

foreign developers to secure 70-year
lease terms for residential leases,
indefinitely extendable without

At a minimum, clarify that the

extendable 70-year term is available
to any project with a residential
component. Additionally, it would be

5
0
Decree 71/2010/ND-CP (Decree x
71) defines developments to
include mixed use developments
with residential component.
Important Note: This "Progress Matrix" was prepared based on the voluntary submissions of the various Working Groups and Sub-Working Groups of the Vietnam
Business Forum from 2011 - 2014. In terms of both the feedback and the rankings/progress evaluations, it is not intended to be either complete or scientific. It does
nevertheless reflect many issues of concern that have come up in the various Working Groups, and their constructive proposals for solutions. It is hoped that it will
provide a useful reference to track and guide progress as the Government and the business community continue their collaboration to improve the business environment
though the channel of the Vietnam Business Forum. Among other things, it should be noted that many issues already fully resolved have been dropped from this
Progress Matrix to limit the size of the document, and almost all of the issues noted are those that still need more work.
Page 1 of 32

Land Progress Report

No

Age

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action

Progress

additional rent. However, "residential"

is not a defined term and it remains
unclear as to what will be considered a
"residential" project in the context of
mixed-use development. This
uncertainty causes disincentives for
highly beneficial mixed-use projects.

beneficial to provide the same lease

terms to any project regardless of its
"residential" nature.

Article 17 of Law on Residential

Housing dated 25 November
2014 (New LRH) provides the
same as Decree 71. However, it
is not clear if the 70 year lease
terms apply to such mixed use
developments or not. This
should be clarified.

Priority

Score

Article 126 of the Law on Land

dated 29 November 2013 (New
Land Law) provides that the
lease term shall be 50 years for
all projects and it may be
extended by the State. The land
user shall pay the land use fee
for the extended term.
3

Old

Old

The interpretation of "economic

organisation" provided under the Land
Law dated 26 November 2003 (Old
Land Law) refers only to local
enterprises, is inconsistent with the
definition provided in art. 103 of the
Civil Code.

Investment approval for real estate

projects is impossible to obtain under
current circular, multi-step
procedures.

Amend the Old Land Law to clearly

provide that the term "economic
organisation" refers to "local
enterprise."
This is a fundamental legal
inconsistency that requires technical
correction to harmonise the laws on
land development.

Amend arts. 7, 12 of Decree 71 as to

simplify the approval procedure and
remove circularity. Approval should,
ideally, be a one-step procedure.

Page 2 of 32

The New Land Law provides

definition of "Foreign invested
enterprises"(FIE) and
"Economic organisations".
Accordingly, FIE include joint
venture (JV) enterprises,
enterprises with wholly or partly
owned by the foreign company.
Economic organisations refer to
local enterprises only.
The law on real estate business
2014 (New LREB) does not
provide definition of Enterprises
with foreign owned capital
The head of the Property Market
and Management
Administration, Ministry of
Construction, points out that
Decree 71 applies only to

10

Land Progress Report

No

Age

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action

Progress

Art. 29.1(e) of the investment law 2005

(Old LOI) requires an Investment
Certificate before implementation of a
project. Decree 108, arts. 11.2, 4647,
conditions the certificate on the
presentation of various documents,
including (under Decree 71, art 7.) an
Investment Approval. Such approval is
itself conditioned on a Certificate of
Recognition of Investor (see Circular
16/2010/TT-BXD, art. 6.1), which,
circularly, is conditioned on an
Investment Certificate (see Decree 71,
art. 12).

There should be specific procedure

for land clearance and land
compensation process without
involvement of State. Also, this
should be treated the same as
projects involving the State.

residential projects.
Nonetheless, circularity appears
to persist.

VCCI's proposal to reduce

procedures for land development
projects from five days to three days
should be supported.

Article 23 of the investment law 2014

(New LOI) provides that foreign
investors must obtain the IRC prior to
establishment of enterprises in
Vietnam. Article 170 of the New LRH
provides that an in-principle
investment approval (IIA) shall be
obtained if the residential housing
project is not subject to the in-principle
investment decision (IID). It is
unclear whether the IIA shall be
obtained prior to or after the issuance
of the IRC/ERC.

The New Land Law does not

adequately address this and still
does not separate investment
and land approval procedures.
Also New Land Law only
provides for procedures for land
clearance and land
compensation involving the
state, but is silent for
procedures where investor
undertakes compensation
process.
Article 58.3 of the New Land Law
requires that investors must
prove their financial capacity and
make deposit in order to be
allocated land or leased land by
the State for investment
projects. Details for such
requirements are however not
clear under the New Land Law.
Such conditions are investment
requirements and should be
separated from land related
procedures.
Article 42 of the New LOI
provides that investor must
provide an escrow deposit (1% to
3% of investment capital of the
project) as the security for
performance of the project for
which the State allocates or

Page 3 of 32

Priority

Score

Land Progress Report

No

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress

Priority

Score

leases out land or permits

conversion of the land use right.
5

Old

Land Compensation is unavailable

following the recovery of leased land,
whether or not the lease is paid in
advance as a lump sum. See Old Land
Law, art. 43.1(dd).

Amend the law to provide for

compensation to all lessees
regardless of where payment is
made annually, lump sum or with
rental exemption.

The New Land Law provides

compensation for lump sum
payment only and not annual
payment or rental exemption.

This is at odds with the treatment of

land allocated from the State under art.
43.1(d), where compensation is
available. This distinction is unfair and
cuts against foreign investors.
According to Article 83.5 of the Draft
land law, Land Compensation is not
applied for the recovery of leased land,
which the lease is paid annually, or as a
lump sum for the whole term of lease
and being entitled to lease exemption.
6

Old

Old Land Law, art. 90.4, seems to allow

subsequent investors in industrial
zones the choice between lease and
allocation from the State, but art. 90.3
and Circular 01/2005/TT-BTNMT make
it clear that subsequent investors may
only receive their assignments/leases
directly from the original developer.

Amend art. 90.4 to remove any

reference to lease/allocation directly
from the state in the case of
subsequent investors.

According to Articles 149.2 and

149.3 of the New Land Law, it is
clear that the subsequent
investors can only sub-lease
land from the original developer.

Old

Land disputes (under Land Law, Arts.

136) must undergo conciliation before a
local People's Committee before
referral to a court or provincial/district
People's Committee for final
resolution. The minutes from
conciliation must be signed by both

Amend the law to provide for the

refusal of a party to attend
conciliation, perhaps by treating an
absence as an unsuccessful
conciliation capable of referral.

Article 88.1 of Decree

43/2014/ND-CP dated 15 May
2014 (Decree 43) provides that
if one of the parties to the
dispute is absent for the second
time, the conciliation is deemed
unsuccessful and shall be

16

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parties before referral.

Progress

Priority

Score

resolved by either the Peoples

Committee and Peoples Court.

This process may be abused by an

uncooperative party. A refusal to attend
conciliation prevents the creation of the
minutes necessary for a referral. The
law does not currently address such a
situation.
8

Old

Old Land Law Art. 93.3 prohibits

foreign investors from
leasing/subleasing from individuals or
households for business/production.
No such restriction applies to
Vietnamese economic organisations.

Amend the Old Land Law to allow

foreign leasing from individuals and
households.

Not addressed in the New Land

Law.

Old

Presently, the ability to mortgage a

land use right is severely restricted for
individuals, households, and economic
organisations:

Amend the Old Land Law to allow for

more flexible mortgage
arrangements. Specifically:
Amend 113.7 to allow individuals
and households to mortgage their
land use rights for non-business
purposes.
Amend 119.3(d) to allow economic
organisations to mortgage their land
use rights to domestic economic
organisations in addition to credit
institutions.
Amend 119.3(d) to allow economic
organisations to secure a mortgage
from offshore lenders.

The New Land Law has

incorporated many of
recommendations by removing
restrictions on purpose of
mortgaging land; however, the
New Land Law still limits for
economic organisations,
Vietnamese residing overseas
and FIE to mortgage to credit
institutions authorised to
operate in Vietnam.

Individuals/households may only

secure a mortgage for production or
business purposes. See Old Land Law,
Art. 113.7
Economic organisations (both
domestic and foreign) may only secure
mortgages from on-shore credit
institutions. See Old Land Law, art.
119.3(d).
These restrictions fail to recognise the
non-commercial reasons why
individuals may wish to borrow, and fail
to recognise the importance of flexible
mortgage laws to corporate financing.

Land users should be permitted to

mortgage land use rights to
domestic economic organisation or
individual and not just a credit
institution, which will create more

Page 5 of 32

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flexible investment mechanism.

10

Old

There is uncertainty as to whether the

rights of real estate (enumerated in
Decree 108/2006/ND-CP (Decree
108), art 2.1) and the "right to develop
on land" are assets attached to land.
Certainty is required to clarify what
capital contributions land use rights
holders may make with their land.

Amend the Old Land Law to include

rights of real estate and the right to
develop projects on land as assets
attached to land.

Not addressed in the New Land

Law

11

Old

Annual land rental tariffs, under

Circular No. 94/2011/TT-BTC, are set at
1.5% of the published land price.
However, local authorities may instead
set this rate as high as 3% if the
property provides "special profits" or
"outstanding advantage." These
ambiguous terms gives the authorities
a great deal of discretion over rental
tariffs without any guidance as to
where the higher rates may be
appropriate.

Provide more detailed guidance as to

where the higher tariffs are
appropriate.

Not addressed in the New Land

Law and Decree 46/2014/ND-CP
dated 15 May 2014 (Decree 46)
on collection of land rent and
water surface rent.

12

Old

Leases obtained by FIE are almost

identical (particularly in cost) to a land
allocation made to a local or overseas
Vietnamese investor (see Decree
69/2009/ND-CP (Decree 69), art. 13)
yet the leases made to FIE generally do
not share the stability or longevity
associated with allocations. This
discrimination seems unfair.

Amend the Old Land Law to allow

FIE the same terms given to local
investors.

Significant improvement in the

New Land Law, where rights of
lands users are adjusted so
economic organisations and FIE
have more equal rights to obtain
land allocation/land lease from
the state. Right of land users to
obtain allocation/lease now
based on project rather than
land users being foreign or

Page 6 of 32

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Progress
domestic. In particular, land
allocation applicable to all
entities who invest in residential
housing projects for sale/for sale
and lease provided allocation is
within term of project; land lease
with one-off payment/annual
payment applicable for these
entities that invest in residential
projects for lease, commercial
projects and other
agriculture/non-agriculture
projects.
However, according to Article
127.3 of the New Land Law,
economic organisations are
entitled for land use right for use
on a stable and long term basis
upon conversion of land use
purpose from non-agricultural
land use right for use on a stable
and long term basis to nonagricultural land use right for a
definite duration or from nonagricultural land use right for a
definite duration to nonagricultural land use right for
use on a stable and long term
basis. This provision is however
not applicable for FIE.
Further, according to Article 55.4
of the New Land Law, economic
organisations are entitled to be
allocated land for grave
yards/cemetery for business

Page 7 of 32

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purpose, which is not granted to

FIE.

13

Old

Decree 69, art. 11, allows for the redetermination of land prices, creating
investor uncertainty regarding the full
costs of an investment. Furthermore,
the decree provides no objective
guidance as to how the recalculated
prices are determined, compounding
its inherent problems.

Remove the provision completely. At

a minimum, ensure that objective
guidelines are provided as to when
and how redeterminations are to
occur.

Article 114 of the New Land Law

provides a price list which is
prepared for a 5 year period and
can be adjusted when the
common market price increases
by 20% or more as compared to
the maximum price or decreases
by 20% or more as compared to
the minimum price in the land
price list. We agree that the use
of a price list provides more
certainty but a 5 year period is
too long to properly reflect
changes to the market prices.

Amend Circular 94 to allow for the

deduction of all legally documented
compensation payments against any
payments due to the State.

Decree 46 provides that land

compensation and clearance
shall be deducted from the land
rent payable if the person
leasing land from the State
voluntarily advances the
payment for compensation and
site clearance.

Under the Land Law relating to land

prices, land prices are to be
determined according to market
prices. Unfortunately, there is a lack of
transparency and clarity on the
procedures to determine land prices
and this has caused great difficulties to
developers and caused projects to be
delayed unnecessarily.
14

Old

Circular 94/2011/TT-BTC (Circular

94), art. 8.2, repealed provisions
allowing for land compensation and
clearance deductions for agreements
reached directly between land users
and FIE or overseas Vietnamese. This
arrangement unnecessarily penalises
developers for directly negotiating their
agreements.

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Progress

15

Old

Decree No 02/2006/ND-CP (Decree

02), art. 12.1(e) gives developers of
"New Urban Zones" the right to assign
or sublease their interest in the land.
However, there are no implementing
guidelines, and it remains unclear how
these rights are properly exercised.

This is an important mechanism to

encourage healthy urban
development.

Marginal progress.
Decree 02 is no longer valid.

The Old LOI is unclear about what

percentage of foreign ownership is
required to distinguish a FIE from a
domestic enterprise. See Old LOI, art.
3.6. The determination materially
affects the procedures for acquiring
land. See Old Land Law, art. 108.

Provide clear guidance as to the

threshold at which a domestic
enterprise becomes a FIE. Definition
of "Foreign Invested Enterprise"
status triggers WTO market access
and National Treatment limitations,
so it should be linked to voting
control (i.e., the 51/65% threshold
under the enterprise law).
Clarify what steps a land-holding
domestic enterprise must take upon
becoming a FIE. Specifically,
address whether land allocations
must become leases and the
process for doing so.

The New Land Law has not

provided with the threshold at
which a domestic enterprise
becomes a FIE.

Amend the Old Land Law to provide

a legal framework for alternative

Clause 140 of the Draft Law

provides that inland water

16

Old

Article 3.17 of the New LOI provides

that Economic organization with
foreign investment capital means an
economic organization with a foreign
investor being a member or
shareholder. Further, Article 23 of the
New LOI provides that in case the
foreign ownership is from 51% or
more, such enterprise shall be subject
to investment procedures applicable to
foreign investors. However it is unclear
whether enterprises with less than
51% of foreign ownership will be
treated as local investors, except from
investment procedures.
17

Old

Land with water surface area is

narrowly restricted in its use. See Old

Priority

Score

10

Clarify the requirements on the

assignment/subleasing of New
Urban Zones.

Page 9 of 32

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Progress

Land Law, arts. 7880. Various

recreational, commercial, and
residential uses are not currently
provided for, making investment in
such properties very difficult.

uses for water surfaces.

surface shall be leased to

Domestic Entities, Foreign
Entities and JV Entities for
purposes of aquaculture,
agricultural or agricultural
combined with non-agricultural.
Suggest removing restrictions
on inland water surface use
purpose and setting out clearly
the form of water surface lease
applicable to investors for
clarity.
Not addressed in the New Land
Law.

This is a technical correction and

should be easy to make.

Not necessary to set out in the Draft

Law any limitation of the use purpose
of the inland water surface.

18

Old

Difficulties of businesses in obtaining

and developing land outside of
industrial zones, particularly in urban
centres where it affects the services
economy.

The Government should issue a

decree or implement other forms of
guidance to free up more idle land
for development.

The Government is driving

developments toward areas
outside of the traditional city
centres. Article 93 of the Old
Land Law and Article 153 New
Land Law was specifically
amended to allow FIE to lease
land from non-State land use
right holders outside industrial
zones. However, without legal
elaboration in a decree or
implementing circular, most
provincial authorities refuse to
allow this type of land use except
in a few cases for port projects.
There is still no decree or
implementing circular regarding
the procedures to obtain and
develop land outside of
industrial zones.

Page 10 of 32

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Age

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Suggested/Agreed Action

Progress

19

Old

The Old Land Law's use of "foreign

investor" is interpreted too narrowly.
Currently, the Old Land Law embraces
only FIE. This interpretation is
inconsistent with the Old Land Law,
Art. 3.4, and Decision No. 88/2009/QDTTg, which include enterprises with
49% foreign ownership.
Please see Item 16 for the New LOI.

Amend the Old Land Law to provide

a definition matching that of the New
LOI.

Article 5 of New Land Law

provides a clear definition of
enterprises with foreign invested
capital (please see item 3 for
further details).

20

Old

Conversion of land use purpose,

Article 58.1 of the draft land law, the
following types of land have been
additionally included in those that must
get the approval of the authorities for
conversion of land use purposes: (i)
Conversion of land for other annual
crops to land for raising and planting
salt-water aquatic products, salt
production, land for raising and
planting aquatic products in the forms
of ponds, lakes, marshes; (ii)
Conversion of forest land for
production purpose to forest land for
other purposes; and (iii) Conversion of
land for construction of public building
works, land used for public purpose
with business purposes, land for nonagricultural production [and/or]
business not being land for
commercial, service purpose to land
for commercial service purpose;
conversion of land for commercial,
service purpose, land for construction
of public building works to land for
non-agricultural production
establishments.

It is not clear why the requirement

for approval has been inserted. To
avoid additional administrative
burden, we suggest retaining the
provisions of the Old Land Law which
do not require the approval of the
authorities for conversion of land
use purposes.

Article 57 of the New Land Law

provides that foregoing types of
land are required to apply for the
approval of the authorities for
the conversion of land use
purposes.

Page 11 of 32

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Progress

Provide more guidelines on this in

the draft land law

Article 65 of Decree 43 provides

the order and procedures for
land resumption in areas with
environment contamination
posing a threat to human life;
residential land likely to suffer
from landslides or subsidence or
to be affected by some other
natural disaster, causing a
threat to human life.
Accordingly, provincial and
district-level Peoples
Committees shall have
authorisation to assign
competent agency to determine
the level of pollution and/or the
threat of landslide. The specific
competent agency has not been
determined.

Priority

Score

In the Old Land Law, such types of land

are not required to apply for approval
of the authorities but just need to be
registered with registration office for
land use rights.
21

Old

Recovery of the residential land which

is under pollution or in a threat of
breaking down and detrimental to
human lives.
Article 68.1(dd) has provided the
provisions on recovery of the
residential land which is under
pollution or in a threat of breaking
down and detrimental to human lives. It
is however unclear under the draft land
law as to which criteria and who is
entitled to determine if residential land
is under pollution and/or the threat of
breaking down and detrimental to
human lives.

However, Decree 43 does not

provide the criteria to determine
whether any residential land is
affected by pollution and/or the
threat of landslide which may be
detrimental to human lives.

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Progress

22

Old

Land use right certificate (LURC)

which has been issued with wrong
information
According to Article 107.2(d) of the
draft land law, the State shall be
entitled to withdraw the LURC which
has been issued with wrong
information on authority, land user,
land area, without satisfaction of all
conditions for issuance of LURC, with
wrong land use purpose, land use term
or land use source in accordance with
the land laws unless the land user has
transferred the land and the assets
attached with the land in accordance
with the land laws.

Clarify the action after the land use

rights certificate is withdrawn. There
should be a provision for reissuance
of a corrected land use rights
certificate.

According to Article 86 of Decree

43, land user or owner of assets
attached to land can submit an
application to request for
correction in the case the error
is due to the fault of the land
user or owner of assets attached
to land; or the land registration
office requests the land user or
owner of assets attached to land
to submit the issued LURC for
correction in case the land
registration office discovers an
error in the issued LURC.

Provide the time for calculating for

payment of the land use fees/land
rentals should be at the date of
issuance of the decision on land
allocation/land rental, on conversion
of land use purpose or recognition of
land use right by the State but
payment to be made at the time the
compensation and clearance
procedure have been completed

Article 108 of New Land Law has

recognised our recommendation
by providing that the timing for
calculating land use fees/land
rental shall be at the date of
issuance of the decision on land
allocation or land lease, on
conversion of land use purpose
or recognition of land use right
by the State.

Priority

Score

10

Note however that the draft land law

does not mention if the State shall
issue a new LURC in which the wrong
information has been corrected to the
land user especially in the case where
the mistake is not the fault of the land
user.
23

Old

The time for calculating for payment

of the land use fees/land rentals
Article 109.3 of the draft land law
The land use fees/land rentals shall be
calculated and paid from the date of
issuance of the decision on land
allocation/land rental, on conversion of
land use purpose or recognition of land
use right by the State.
In practice, after the issuance of the
decision on land allocation/land rental,
it may take a long time for the land

Decree 45/2014/ND-CP dated 15

Page 13 of 32

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Suggested/Agreed Action

users to compensate and clear the land

from the previous land holders. In the
circumstances, it is not reasonable to
ask the land users to pay for the land
use fees/land rentals for the time they
have not been yet handed over the
cleared land.
24

Old

Specific regulations on allocation or

lease of land in relation to specialised
use forest land
Article 77.6 of the Old Land Law
provides that The Government shall
provide specific regulations on
allocation of specialised use forest
land; on the rights, obligations and
interests of organisations, family
households and individuals being
allocated specialised use forest land;
on allocation or lease of land in buffer
zones of specialised use forest land;
and on lease of specialised use forest
land in combination with the joint
landscape and ecologicalenvironmental tourism business.

Old

Regime on land for construction of the

apartment blocks
The draft land law only mentions that
the Government shall provide the
specific regulations of the regime on

Priority

Score

May 2014 and Decree 46 provide

that the payment of the land use
fees/land rental with one off
payment must be made within 90
days after the notice from the tax
authority.

Provide the specific regulations on

allocation or lease of land in relation
to specialised use forest land

Article 68.2 of Decree 43

provides the order and
procedures for land allocation,
land lease and conversion of
land use purposes on
specialised use forest land for
implementation of investment
projects.

16

The New Land Law however fails

to provide specific regulations on
the rights, obligations and
interests of organisations, family
households and individuals being
allocated specialised use forest
land; on allocation or lease of
land in buffer zones of
specialised use forest land; and
on lease of specialised use
forest land in combination with
the joint landscape and
ecological-environmental
tourism business.

Note however that this provision has

been removed from Article 138 of the
draft land law.

25

Progress

Provide the specific regulations

relating to the regime on land for
construction of the apartment
blocks.

Page 14 of 32

Regime on land for construction

of the apartment blocks has
been provided in Article 49 of
Decree 43.

Land Progress Report

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Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress

Priority

Score

land for construction of the apartment

blocks and land for construction of
works servicing directly the lives of the
households in apartment blocks.
26

Old

Land recovery due to failure of

investors to meet implementation
schedule: draft land law retains
provision in Article 38.12 of Old Land
Law that provides that the State will
recover land if it allocate or lease the
land for investment project and that
land is not used for a period of 12
consecutive months or the actual land
use schedule is 24 months behind
schedule recorded in investment
project, and adds an additional
requirement that an extension shall be
granted one time for a maximum
period of 24 months. Also shall be no
compensation or refund by the State to
investors for their expenses/assets
attached to land as result of land
recovery.

Remove additional requirements as

the State already has the authority to
make the decision not to grant an
extension.
Institute clearer appeal mechanism.

Article 64 of New Land Law has

no change in substance.

27

Old

Issues related to compensation in

draft land law:
(1) According to Articles 71 and 72.2 of
the draft land law, the compensation
council shall attend to the
compensation process. However, it
does not specify who comprises in the
compensation council. Therefore, it is
still unclear if the representative of the
investor can be entitled to attend to the
compensation process or not
(2) Lack of clarity in determination of

(1) It should be clear in the draft land

law who comprises in the
compensation council. The investors
who are determined and approved
in-principle by the State authorities
as the investor for a specific
investment project should be
entitled to attend to the
compensation process, so that they
can observe the process and make
complains/recommendations if their
rights and benefits are affected.

Not addressed in the New Land

Law.

10

Page 15 of 32

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28

Age

Old

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action

fault in land compensation if there is a

difference in price at point of decision
versus actual time of payment (Clause
95.1).

(2) Not clear which entities will have

the right to determine fault and how
this will be done, clearer procedures
needed.

Right to receive land use right

Discrimination between Domestic
Entities and Foreign Entities/JV
remains in the new provision of the Old
Land Law regarding receipt of the land
use right. Foreign Entities can (i)
receive land use right pursuant to an
agreement in a mortgage contract for
debt settlement/ an administrative
decision of State body resolving a
complaint or denunciation relating to
land/judgment of relevant enforcement
body/legal instrument on division of
land use right in accordance w/ law and
(ii) receive of assignment of investment
capital being value of land use right.
The JV can receive assignment of land
use right by receiving capital
contribution in form of land use right.
The draft land law however does not
set out the rights of Foreign Entities in
respect of the land use right received
and what they can do to deal with such
land use right

Discrimination between the

Domestic Entities and Foreign
Entities should be eliminated by
giving the Foreign Entities the same
rights to receive the land use right
as the Domestic Entities. Also, the
draft land law should also set out
rights of Foreign Entities/JV Entities
in respect of land use right received
and ability to use such right to land.

Page 16 of 32

Progress

Not addressed in the New Land

Law.

Priority

Score

Land Progress Report

Vietnam Business Forum, 2015

No

Age

Issues

Suggested/Agreed Action

Progress

29

Old

Draft land law does not set out clear

procedures and required documents
for issuance of land allocation/land
lease decision applicable for land with
and without completion of clearance
and compensation.

There should be specific procedures

and required documents for land
allocation/land lease applicable for
land with and without completion of
clearance and compensation. Such
procedures should separate the
requirement on investment
procedures from land procedures to
avoid confusion and unnecessary
delays.

Not addressed in the New Land

Law.

30

Old

Clause 167.3 of draft land law proposes

for notarisation/certification of the
transactions involving land use right as
follows:
Notarisation/certification shall be
compulsory for transactions regarding
assignment, bequeathal, donation,
mortgage, and capital contribution of
land use right/asset attached to the
land. Such requirement however shall
be optional to transactions regarding
exchange of agricultural land use right,
lease/ sub-lease land use right/assets
attached to land.

Notarisation/certification shall be
optional of all transactions involving
land use rights to enable real estate
transactions to be conducted easily

Article 167 of New Land Law

provides that contracts
regarding performance of rights
of a land user must be
notarised/certified, except for
the case that one or more
parties participating in the
transaction are organisations
conducting real estate business
activities.

The draft land law also provide that (i)

the notarisation shall not be required
for transactions regarding assignment
of land use right/asset attached to the
land if one party is a real estate
enterprise; and (ii) the notarisation for
transactions regarding bequeathal
shall comply with provisions of the Civil
Code.

Page 17 of 32

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Score

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No

Age

Issues

Suggested/Agreed Action

Progress

31

Old

Articles 910 of the Law on Real

Estate Business 2005 restricts the
conduct of foreign organisations and
individuals in their real estate
transactions and businesses. Foreign
entities may not lease or purchase
houses or construction facilities for the
purpose of sale, lease, or sublease, and
may not invest in or lease land for the
purpose of improvement and
subsequent lease or sublease. These
restrictions unnecessarily restrict
investment in Vietnam's real estate
sector. They may also affect the
activities of non-real estate foreign
invested entities in acquiring facilities
for their own use.

Remove the restrictions in Articles

910 so that the foreign and
domestic investors will have the
same rights and obligations.

The New LREB provides to

foreign organisations and
individuals and to Vietnamese
residing overseas the rights as
follows: (i) invest in the
construction of residential
housing for sale, sub-lease or
lease purchase; (ii) lease
houses, buildings for subleasing;
(iii) invest in construction of
construction works which are
not residential on leased land for
sale, sub-lease or lease
purchase; (iv) receive
assignment of whole or part of
real estate project; (v) invest in
construction of houses,
construction works on leased
land (applied to foreign entities),
or on leased land and land got
from assignment (applied to
Vietnamese residing overseas) in
industrial zones, industrial
complexes, export processing
zones, high tech zones or
economic zones for business in
accordance with the land use
purpose, and (vi) provide real
estate business services.
Note however that foreign
organisations and individuals
and Vietnamese residing
overseas are still prohibited
from undertaking the following:
(i) purchase houses and
buildings for sale, lease, lease-

Page 18 of 32

1
x

Priority
8

Score
8

Land Progress Report

No

32

Age

Old

Issues

Article 4.3 of the draft LREB issued in

2013 (Old Draft LREB): Removing
the word create
The word create is used when
referring to the business activities of
foreign owned capital enterprises. This
suggests that construction works must
be created which could exclude
renovation works.

Vietnam Business Forum, 2015

Suggested/Agreed Action

Remove the word create for

Articles 4.3, 15 and 16; replace with
renovation for Article 4.14 and
adding the word renovation after
the word creation for Article 10.1
(a).

Page 19 of 32

Progress
purchase; (ii) receive the
transfer of land use right; (iii)
invest in construction of
technical infrastructure works
on allocated land, land from
assignment or lease, land under
lawful using right for
assignment and lease of land
already having technical
infrastructure thereon (the right
to invest in construction of
technical infrastructure works
on leased land is removed); (iv)
assign land use right in the
allocated land in form of land
plots which is inconsistent with
the Land Law; (v) lease land
from other organisations or
individuals to invest in
construction of houses,
construction works for sell,
sublease, lease purchase; and
(vi) invest in the construction of
houses, construction works on
land got from assignment and
land under lawful using right for
sell, lease out, lease-purchase.
The New LREB has replaced the
word create and renovation
with the word construct.

Priority

Score

10

Land Progress Report

Vietnam Business Forum, 2015

No

Age

Issues

Suggested/Agreed Action

Progress

33

Old

Article 7 of the Old Draft LREB:

Conditions applicable to real estate
made available for business
The Old Draft LREB has no provision on
cases of houses and buildings under
new urban area projects, residential
housing projects which have been
completely constructed but have not
been issued with a certificate of land
use right, ownership of residential
house and other assets attached to the
land (the Certificate). However, this
may be deemed as existing houses and
buildings and not the assets to be
formed in the future.

Add cases of houses and buildings

under new urban area projects,
residential housing projects which
have been completely constructed
but have not been issued with a
Certificate.

Not addressed in the New LREB

34

Old

Articles 7.2(e), 26.4(a) and 50.1 of the

Old Draft LREB: the term technical
infrastructure is not clearly defined.
This has caused uncertainty and lack of
clarity.

Insert clear definition of technical

infrastructure in Article 7.2(e);
Article 26.4(a) and Article 50.1

Not addressed in the New LREB

35

New

Articles 8.1, 18 and 19.2(b) of the Old

Draft LREB and Articles 25.2 (c), 69, 70
and 72 of the Old Draft LRH on legal
capital
The Old Draft LREB requires investors
to have legal capital but a specific
amount of legal capital is not yet
provided. Further, the Old Draft LRH
laws also specify certain sources of the
capital to be mobilised which limit
investors ability to raise capital. In
addition, the Old Draft LREB also
requires the placing of a deposit in an
escrow account for investment
commitment.

Since there are already

requirements on compulsory charter
capital contributions which are a
percentage of the investment capital
required for a project, requirements
on legal capital, these requirements
are unnecessary. Remove the
requirements on legal capital, the
source of capital and placing a
deposit in an escrow account for
investment commitment.

Article 10 of the New LREB

requires investors to have legal
capital of VND20 Billion and the
New LRH also requires the
investor to place a deposit for
investment commitment.

Page 20 of 32

Further, Article 69 of the New

LRH also specify certain sources
of the capital to be mobilised
which limit investorsability to
raise capital.

Priority

Score

Land Progress Report

Vietnam Business Forum, 2015

No

Age

Issues

Suggested/Agreed Action

Progress

36

Old

Article 8 of the Old Draft LREB:

Conditions applicable to organisations
and individuals engaged in real estate
business

Add the form of entering into a

business cooperation contract
without establishment of a legal
entity in order to conduct real estate
business.

Not addressed in the New LREB

Priority

Score

The Old Draft LREB stipulates that any

organisation or individual conducting
real estate business must establish an
enterprise or co-operative. However
according to laws on investment,
organisation or individual may also
conduct real estate business by way of
entering into a business cooperation
contract without establishment of a
legal entity.
37

New

Articles 8, 61 and 66 of the Old Draft

LREB: Practising cards
(1) The words practicing cards in
Articles 8.1, 8.2, 61 and 66 of the Old
Draft LREB do not conform with the
term that has been used in other
regulations.
(2) Article 66 providing on the real
estate valuation practicing cards is not
necessary since the Law on Price
already has such provisions in relation
to Price Evaluator Certificate, including
real estate valuation service.

(1) Replace the words practicing

cards with practicing certificates
in Articles 8.1, 8.2, 61 and 66 of the
Old Draft LREB;
(2) Remove Article 66.

The New LREB has replaced the

words practicing cards with
practicing certificates and
removed Article 66.

38

Old

Article 11 of the Old Draft LREB:

Publicity of information about
property which is made available for
business.
(1) The Old Draft LREB has no specific
regulations regarding the time to
publicise information about the
properties, and the cases in which the

(1) Clarify the time and cases

requiring publicity of properties
information.
(2) Exclude the cases of transfer of
real estate project from cases
required information publicity.

Not addressed in the New

LREB.

Page 21 of 32

Land Progress Report

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Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress

Exempt foreign individuals and

organisations who make
investments in Vietnam for the first
time from these requirements.

Not addressed in the New LREB

and the New LRH
Decree 76/2015/ND-CP dated 10
Sep 2015 (Decree 76) has
recognised our recommendation
in the previous report. Article
12.2d of this decree provides that
foreign investors who make
investment in Vietnam but has
not established a company are
not required to establish an
enterprise prior to receiving
transfer of real estate project.

Priority

Score

publicity of information about the

properties is required.
(2) The Old Draft LREB requires the
transfer of a real estate project
between investors to be published. It
may cause adverse impact to the
project as well as to the business
operations of the concerning investors.
39

New

Article 19 of the Old Draft LREB and

Articles 25.2 (a) (b) and 116 of the
draft LRH issued in 2013 (Old Draft
LRH): Selection of investors for real
estate project for business
The draft laws require two conditions,
inter alia, which are being an
enterprise established and operating in
accordance with the provisions of law
concerning enterprises and having
registered to conduct real estate
business. This shall cause difficulties
to investors being foreign individuals
and organisations who make
investment in Vietnam for the first
time. Further, this provision is in
conflict with the law on investment
which requires that a foreign investor
who makes investment in Vietnam
must have an investment project to be
entitled to establish an enterprise.

Article 21.3 of the New LRH

provides that the investor must
be a real estate enterprise to
undertake commercial
residential project. Article 23 of
the New LOI provides that the
foreign investor wishes to
establish an enterprise must
obtain the IRC and ERC. Article
170 of the New LRH provides
that an IIA shall be obtained if
the residential housing project is
not subject to the IID. It is
unclear whether the IIA shall be

Page 22 of 32

Land Progress Report

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Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress

Priority

Score

obtained prior to or after the

issuance of the IRC/ERC.
40

Old

Article 20.6 of the Old Draft LREB.

Rights of investors of real estate
projects
The Old Draft LREB provides that
investors are entitled to exemption or
reduction of land use fees or to be
entitled to pay land use fees by
instalments in accordance with the
project schedule. However, there are
no specific regulations on the criteria
for eligibility.

Provide the specific regulations on

the criteria for eligibility.

The New LREB has removed the

provision on the right of
investors to be exempted or
reduced land use fees or to be
entitled to pay land use fees by
instalments in accordance with
the project schedule.

41

Old

Article 26 of the Old Draft LREB and

Articles 31.4 and 122.1 (c) of Old Draft
LRH. Payment for real estate
transactions
The draft laws provides some methods
of payment applied to real estate
transactions including party to receive
payment, maximum amount of advance
payments and deposit allowed, fixed
late payment interest rates. Parties
should be free to agree on these
processes without restrictions.

Remove restrictions in Article 26 of

the Old Draft LREB and Articles 31.4
and 122.1 (c) of the Old Draft LRH

Article 57 of the New LREB

provides that the first payment
for real estate to be formed in
the future cannot exceed 30% of
the contract value.

For the domestic investors, in

any case the seller cannot obtain
more than (i) 70% of the contract
value before the handover of the
houses and buildings; and (ii)
95% of the contract value before
the issuance of the Certificate.
For the foreign investors, in any
case the seller cannot obtain
more than (i) 50% of the contract
value before the handover of the
houses and buildings, and (ii)
95% of the contract value before
the issuance of the Certificate.

Page 23 of 32

Land Progress Report

Vietnam Business Forum, 2015

No

Age

Issues

Suggested/Agreed Action

Progress

42

New

Time of transferring ownership

Article 26.3(c) of the Old Draft LREB
and Articles 13 and 150.3 of the Old
Draft LRH provides that the purchaser
shall be entitled to own the property
after having made payment in full or
upon the time the contract on capital
contribution is notarised or certified.
However, pursuant to the New Land
Law, the time of transfer of the
property shall be the time such
transaction is registered with the land
use right registration office.

Amend such provisions for

consistency with the land law: the
purchaser shall be entitled to own
the property after being issued with
the Certificate.

Article 19.5 of the New Draft

LREB issued in 2014 (New Draft
LREB) and Article 12.3 of the
New Draft LRH provide that the
ownership of the property shall
be transferred upon the
handover of such property.

Article 27 of the Old Draft LREB and

Article 4.21 of the Old Draft LRH on
guarantee
There are no provisions on what the
guarantee will be and how it will be
implemented.

Clarify who the third party having

right to provide guarantee is, how
much the guarantee fee is, terms
regarding responsibilities of the
guarantor and investor, how it is
performed.

43

New

Priority

Score

Article 19.5 of the New LREB and

Article 12.3 of the New LRH
provide that the ownership of the
property shall be transferred
upon (i) the handover of such
property, (ii) the payment in full
of the purchasing price, or (iii)
otherwise agreement of the
parties.
Article 56 of the New Draft LREB
provides that the guarantee will
be provided by the financial
institution or credit institution
licensed to operate in Vietnam.
In addition, this Article also
provides the contents and
guarantee fee will be agreed by
parties in the contract.
Article 57 of the New LREB
provides that such guarantee
will be provided by eligible
commercial banks.
The Circular 07/2015/TT-NHNN
dated 25 June 2015 (Circular
07) provides conditions and
procedures for commercial

Page 24 of 32

Land Progress Report

No

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress

Priority

Score

banks to provide guarantees.

Following Circular 07, the State
Bank of Vietnam issues a list of
33 commercial banks qualified
to provide guarantees. On 28
August 2015, five more banks
are added to such list. On 29
September 2015, the total
number of qualified banks
increases to 40.
44

Old

Articles 28 and 32 of the Old Draft

LREB: Sale and purchase of houses
and buildings
(1) Regarding Article 28.2: The Old
Draft LREB fails to mention the
transfer of ownership of common areas
in cases of selling houses and buildings
not in mixed use buildings or in cases
of villas/individual residential houses
having common areas.
(2) Further, the form of land use rights
for the non-residential components
(i.e. office for lease and/or commercial
centre area) is not provided yet.

45

New

Articles 49, 50 and 51 of the Old Draft

LREB: Assignment of the real estate
project.
The Old Draft LREB provides that the
assignment of a real estate project
must be approved by competent

(1) The transfer of ownership of the

common areas in non-mixed use
building projects, villas and
individual residential housing
projects with common areas should
be treated the same way with those
in mixed use buildings.
(2) Clarify that form of land use
rights should follow the land use
purpose e.g. long term and stable
use for residential components and
lease for the non-residential
components.

(1) Not addressed in the New

LREB.

Provide that the competent authority

will consider if the parties satisfy the
conditions for assignment and
receiving such assignment (not just
approval or disapproval for
assignment) before the parties enter

The criteria as well as the

competent authority for
approving the assignment of the
project have been addressed in
the New LREB.

Page 25 of 32

18

(2) The New LREB only provides

that the land use right of owners
after purchasing areas within a
mixed use building must
throughout follow either of the
forms being long-term and
stable or lease. Note that the
New LREB fails to clarify that the
form of land use right being long
term and stable use will be
applied to residential
components, and the form of
land use right being lease
applied to the non-residential
components.
x

Land Progress Report

No

Age

Issues

Suggested/Agreed Action

Progress

authority. However, the draft LREB

does not provide the criteria as well as
specific competent authority for
approving the assignment of the
project.

into the assignment contract; and

remove the restrictions on cases of
transfer of real estate project.
Provide further that approvals and
consents from the State should be
automatically assigned and
transferred to, and be received by
the receiving investor without any
further procedures for re-approval
or for name replacement if there is
no other change needed in the
content of the approvals.

Further, the restriction on

numbers of cases in which
transfer of real estate project is
permitted has been removed. In
addition, the New LREB provides
that the assignees are not
required to prepare the project
dossiers, construction plan and
construction permit if there is no
change under the in principle
approval and decision of
investment in the project.

In addition, the transfer of project is

associated with the transfer of land
use right, therefore, the Old Draft
LREB should provide regulations on
the conversion of the form of land
use from land allocation to land
lease or vice versa in case of
transfer of projects from domestic
investors to enterprises with foreign
owned capital, and regulations on
whether the Certificate of the
assignees shall reflect the origin of
land use being receipt of transfer in
part/entirety of project or the form
after converting to land lease or land
allocation.

Decree 76 also provides detailed

regulations on transfer
procedures of whole or part of
project.

Remove the clause on

notarisation/certification of real
estate business services contracts
and stipulate only the main and
essential contents of real estate
business services contracts.

The New Draft LREB still

remains that the
notarisation/certification of real
estate business services
contracts shall be as agreed by
the parties.

Further Old Draft LREB only provides a

number of cases in which transfer of
real estate project is permitted. These
restrictions may cause difficulties to
investors in their business activities,
especially in the performance of
procedures.
In addition, currently many State
regulatory agencies require that the
name of the investor must be the same
in all of the project documentations
even though the project is permitted to
be transferred and actually has been
transferred (entirely or in part) to
another investor. This is unnecessary
in case there is no change needed in
the content of the approvals except the
name of the investor.

46

New

Vietnam Business Forum, 2015

Article 53 of the Old Draft LREB: Real

estate business services contract
The Old Draft LREB provides that the
notarisation/certification of real estate
business services contracts shall be as
agreed by the parties. Since the law
does not require

Page 26 of 32

Priority

Score

Land Progress Report

No

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

notarisation/certification of real estate

business services contract, it is
unnecessary to specify this which leads
to more confusion.

Progress

Priority

Score

Article 122 of New LRH provides

that all contracts of sale,
purchase of residential houses
are required to be notarised and
legalised.

Article 53.3 of the Old Draft LREB

provides that the Government will
specify the content of each type of real
estate business services contracts.
This is unnecessary since parties
should be free to specify the content of
the contracts according to their needs.
If at all, the Government only needs to
specify the main and essential
contents.

The New Draft LREB has

recognised our recommendation
in the previous report by
inserting a provision on main
content of a real estate business
services contract, instead of
providing that the Government
will specify the content of each
type of real estate business
services contracts.
Article 7 of the Decree 76
provides that the real estate
contract templates shall only be
for reference and the parties
may amend the provisions,
provided that they comply with
the laws.

47

48

New

Old

Article 62.2 of the Old Draft LREB:

Market price
The Old Draft LREB provides that a
valuation of real estate must be based
on the market price at the time of
valuation. However, it is unclear what
market price is and how to determine
market price at the time of price
valuation.

Article 131 of the LRH restricts the

Provide clear regulations on what is

market price and the method for
determining market price.

The real estate valuation

business has been removed
from the New Draft LREB.

The New LREB has also removed

the activity of real estate
valuation service.

DRAFT LAW ON RESIDENTIAL HOUSING

Allow all resident and non-resident
According to Article 159.1 of the

Page 27 of 32

Land Progress Report

No

49

Age

Old

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action

Progress

lease of residential property to those

foreign organisations and individuals
permitted to stay in Vietnam for a
period of 3 months.
Purchasing residential property is
likewise restricted by Resolution
19/2008/NQ-QH12, art. 2, to very few
classes of foreign individuals those
with direct investment in Vietnam,
those honored by the President or
Prime Minister, those educated and
working in desirable technical fields,
those married to Vietnamese citizens,
and non-real property foreign
enterprise that have employee housing
needs.

foreign individuals and organisations

to own and lease all types of
property with the same term as
applied to Vietnamese.

New LRH, only foreign

individuals who are permitted to
enter Vietnam will have the right
to own houses in Vietnam. We
are of the view that this condition
is unnecessary and can lead to
confusion.

Article 10 of the Old Draft LRH:

Recognising ownership over
residential houses
The Old Draft LRH provides that the
State shall only recognise the
ownership rights of purchasers by
issuance of a Certificate. This will not
be done for the investors. This will
cause difficulty to investors who invest
in construction of houses for sale
where there is a large number of
unsold houses, and who invest in
construction of houses for leasepurchase while waiting for the lesseepurchaser to pay the price in full. In
particular, the investors are restricted
from having the rights to mortgage
residential housing units the
construction of which have been
completed but not yet being issued with

Provide that the State shall issue the

Certificate to investors at the
request of investors which construct
residential houses for lease, for sale
but have not successfully sold them,
or for lease-purchase but have not
received the payments in full from
the lessees-purchasers.

Priority

10

Score

Further, the foreign entities

rights are restricted by the
maximum number of units of
apartment/ houses, and the term
of ownership is 50 years at
maximum which may be
extended in accordance with
laws.

Page 28 of 32

Addressed in Article 9 of the

New LRH.

Land Progress Report

No

Age

Issues

Vietnam Business Forum, 2015

Suggested/Agreed Action

Progress

Priority

Score

the Certificate in order to raise capital.

50

Old

Article 12.1 of the Old Draft LRH:

Ownership over individual residential
houses
The Old Draft LRH fails to provide the
multiple ownership and common use
rights in respect of common areas in
the individual residential houses
projects (such as swimming pools,
gymnastic rooms), which currently
exist in many projects of investment in
construction of individual residential
houses.

Provide that owners of individual

residential houses shall have the
right of multiple ownership and
common use rights in respect of
common areas in the residential
projects if so agreed between
owners and developer.

Not addressed in the New LRH.

51

New

Article 12.3 of the Old Draft LRH: term

of ownership of apartment building
There is a proposal in the Old Draft
LRH to define the term of ownership of
apartment unitson construction level
and conclusion on evaluation of quality
of construction. According to the draft
provision, apartment unit owners are
required to surrender their apartment
units and land to the authorities at the
end of the ownership term so that the
apartment building can be demolished.
The apartment owners will be resettled
by the State. This shall have a very
negative impact on the housing market
on the whole and create great
dissatisfaction among apartment unit
owners.

This provision should be rejected

swiftly.

Not addressed in the New Draft

LRH.

10

Articles 14, 160 and 163 of the Old

Remove the discrimination between

52

New

Article 99.2 New LRH: term of

utilisation of apartment building
Upon the expiry of utilisation
term of apartment building, the
apartment is not automatically
demolished; instead, the
competent authority shall
conduct a quality inspection
regarding the status of the
building.
If such building is considered
safe for use, the owners are
allowed to continue using.
If such building is considered as
serious damaged, in danger of
collapse or unsafe, it shall be
demolished.

Page 29 of 32

According to the New LRH, there

Land Progress Report

No

53

Age

Old

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action

Progress

Draft LRH: Rights of owners of

residential houses
There is a significant improvement in
the Old Draft LRH where rights of
owners of residential houses are
adjusted so that Domestic Entities and
Foreign Entities have more equal
rights. However there still exists the
discrimination among rights of owners
being domestic organisations and
individuals and of Vietnamese residing
overseas and foreign individuals and
FIE regarding their ownership over
residential houses. Particularly, in
comparing with rights of domestic
organisations and individuals,
Vietnamese residing overseas, foreign
individuals and FIE are lacking in the
following rights: to lease-purchase; to
own residential houses other than
residential houses in commercial
residential housing project; to lend
residential houses, to permit others to
reside with them; to make capital
contribution by residential houses; to
exchange residential houses; to
request to recognise the ownership
over residential houses which are
lawfully created; and to own residential
houses on a long-term and stable
basis.

domestic organisations and

individuals, Vietnamese residing
overseas and foreign individuals and
FIE with respect to residential
housing ownership.

is no discrimination between
domestic organisations and
individuals, Vietnamese residing
overseas and FIE and individuals
with respect to residential
housing ownership, except for
the type of residential houses in
commercial projects.

Article 21 of the Old Draft LREB and

Articles 20, 32, 36, 37 and 42 of the Old
Draft LHR: Social houses
The draft laws provide that the
investors have to reserve a land area

Provide that the investors shall not

be obliged to reserve a land area for
housing construction with completed
technical infrastructure within the
project for constructing social

Not addressed in the New LRH.

Page 30 of 32

Priority

Score

Land Progress Report

No

Age

Vietnam Business Forum, 2015

Issues

Suggested/Agreed Action

for housing construction with

completed technical infrastructure
within the project for constructing
social houses. This provision may
impact the housing market and create
dissatisfaction among investors.

houses, but they may choose other

methods such as contributing in
cash, arranging another land area in
other project, or making
coordination with the investor of
other project to jointly contribute
social residential houses.

Progress

54

Old

Articles 47 and 60 of the Old Draft

LRH: Sale of commercial residential
houses to the State
The Old Draft LRH does not clarify if
investors of commercial residential
houses are required to sell commercial
residential houses to the State to be
used as official residential houses or
residential houses for resettlement
upon request or not. If this is the case,
then the fact that investors do not have
the right to discuss and agree on the
selling price on negotiation basis is
unfair and is detrimental to investors.

This should be provided as

agreements between the State and
investors.

The New LRH has recognised

our recommendation in the
previous report by removing the
provision on selling price of
commercial residential houses
to the State.

55

Old

Article 85 of the Old Draft LRH:

Warranty of residential houses
The Old Draft LRH provides that the
main structural part of a residential
house shall be beams, pillars, floors,
ceilings, roof, walls, pavings, tilings
and plasterings. In practice, if the parts
being the pavings, tilings, plasterings
are also deemed as the main structure
and thus are guaranteed in accordance
with the current provisions, e.g. 60
months for apartment buildings from 9
floors or more, it is too onerous to the
investors.

Remove the parts being the pavings,

tilings, plasterings from the main
structure part of a residential house.

Not addressed in the New LRH.

Page 31 of 32

Priority

Score

16

Land Progress Report

Vietnam Business Forum, 2015

No

Age

Issues

Suggested/Agreed Action

Progress

56

Old

Article 132 of the Old Draft LRH:

Unilateral termination of performance
of residential housing lease contract
The Old Draft LRH provides regulations
on the unilateral termination of
performance of residential housing
lease contract. However, the Civil Code
also governs this issue. Furthermore it
should be agreed by the parties to
decide on this.

Remove this provision.

Not addressed in the New LRH.

Page 32 of 32

Priority
6

Score
0

5.3. POWER AND

ENERGY

Power and Energy Sub Working Group Position Paper

Vietnam Business Forum, 2015

POSITION PAPER
POWER AND ENERGY SUB-WORKING GROUP

Prepared by
Power and Energy Sub-Working Group

The Vietnam Business Forums (VBF) Power and Energy Sub-Working Group agrees with
Mr. Hoang Quoc Vuong, Deputy Minister of the Ministry of Industry and Trade (MOIT). At the
9th June, 2015 VBF meeting, the Deputy Minister remarked that since 2011 there has been
a reliable power supply for Vietnam, with a 20% reserve margin. Yet, in some local areas
network quality is not assured, and old transmission lines require financing to upgrade.
Nevertheless, reliable power has been essential in developing the current Vietnamese
business and investment climate.
The business sector in Southern Vietnam has concern that the Power Master Plan VII,
confirmed by Deputy Minister Vuong, forecasts delays in sources of new energy which will
lead to power shortages in 2017/2018, and will require power `transferred from Northern
Vietnam for sufficient supply. Other concerns are the long timeframe to mobilize financing
for the transmission lines. Additionally, private investors move to invest in new power
sources is being postponed in long and complex negotiations. The Governments regulatory
frame work is still a barrier, and licensed projects are failing to attract financing.
The Power and Energy Working Group has the following old and new positions:
1. Competitive Electricity Wholesale Market for Vietnam - Decision No. 8266/QD-BTC
issued on 10th August 2015
The VBF Power and Energy Sub-Working Group representing, in particular, its Chamber
members AmCham, EuroCham and NordCham, offers the following commentary and
suggestions to MOIT following the publication of Decision No. 8266/QD-BTC.
According to Decision No. 8266/QD-BTC, the timing of full implementation has been
determined to be 2019. VBF suggests that in order to maintain a stable power supply, an
urgent priority to attract private investment to the energy market in Vietnam is needed.
Therefore, VBF asks MOIT to accelerate the implementation of this key market reform.
While Vietnam Electricity (EVN) remains the monopoly buyer of power, its financial status
continues to cause concern for investors of new power plants who are required by law to
sell power to EVN. VBF suggestsMOIT to consider new methods to enhance the
creditworthiness of EVN, in addition to continued effort to increase power tariffs to cover
costs of supply. Foreign donors, who wish to support sustainable energy development in
Vietnam, may be willing to improve the creditworthiness of EVN with specific risk
guarantees where the power seller is a renewable energy project. A mechanism which
could engage foreign donor support in this way would be very welcome and end the current
burden on the Ministry of Finance providing guarantees to all power sellers. In particular,
developers of renewable energy and small power plants in Vietnam need support because
the increased cost of commercial debt, guarantees, and delays are a significant barrier to
investment.
VBF previously noted that many energy resources, in particular wind power, are not
included in the remit of the competitive wholesale market. VBF also noted the reference to
other detailed regulations that would determine how wind power is promoted in Vietnam.
VBF suggests that wind power could be included in the market and points to the successful
Page 1 of 4

Power and Energy Sub Working Group Position Paper

Vietnam Business Forum, 2015

development of wind power in other developing countries, such as Mexico, under direct
power purchase agreements (PPAs). VBF would welcome urgent guidance from MOIT
indicating whether such PPAs may be implemented in Vietnam and incorporated into the
structure of the competitive wholesale market. VBF would welcome the opportunity to
continue its dialogue with MOIT on this subject and to provide support from the wider
international experience of its members.
An essential element of a functioning open power market is that the key players operate
independently of each other and their relationships are governed by commercial contracts
that are transparent. VBF notes that the five regional power buying corporations listed in
Decision No. 8266/QD-BTCare within the legal structure of EVN and therefore associated
with the largest producers of power in Vietnam, EVNs power generation companies
(GENCOs). Until the GENCOs are substantially equitized (more than 50% of the equity being
held by non-state shareholders), VBF doubts that an independent wholesale market can be
established. While the timetable to begin initial partial equitization of a minority share of the
GENCOs is well-known, VBF would welcome guidance on how MOIT intends to complete the
dis-establishment of GENCOs and the five PPAs from EVN.
VBF notes with enthusiasm the possibility of other large power consumers becoming power
buyers and would suggest that to encourage interest in this important role in the market
that MOIT immediately publishes guidance on what criteria such companies must meet to
satisfy MOITs requirements to take on this role.
In countries where stable electricity supply is invested by private sectors for prospect
profits, liberalization of the wholesale electricity market may bring about a reduction in
electricity price thanks to the competitive environment. However, at this moment, if
Vietnam faces with this kind of competition for electricity, we are concerned that necessary
investment in power industry including electricity transmission cannot be secured, but also
leads to a higher retailing electricity price. Besides, in the context of insufficient electricity
generation comparing to the growth in the electricity demand, especially the shortage in
electricity supply in the South that most of our manufacturing companies and all members
are experiencing, we firmly expect for the secured stable electricity supply. In this field, in
order for the 7th Development Plan (PDP7) to be implemented steadily and the electricity
capacity expanded, we hope that measures to invite foreign investment such as long-term
Purchase Price Allocation (PPA) contract or Government Guarantee and Undertaking (GGU)
between Government and EVN should be implemented.
Finally, the energy regulator also should be wholly independent of executive government
influence to play the necessary role of oversight of a de-regulated market. VBF would urge
consideration to giving Electricity Regulatory Authority of Vietnam (ERAV) a status which is
entirely independent of MOIT as in other developing countrys energy markets.
2. Electricity Tariff Road Map
Even though the Prime Ministers decisions on electricity tariffs since 2012 have helped the
market, EVN continues to operate at a loss, and electricity costs remain the lowest in the
region. This limits direct investment in new power sources, grid infrastructure, and
discourages energy efficiency efforts by customers and businesses. VBF suggests MOIT
continues adjusting energy tariffs to create sustainable power sector development in
Vietnam. Because low-income citizens will suffer from higher tariffs, VBF suggests that the
Government subsidize them (30kWh/month free) and ensure the rural population does not
suffer from power cuts favoring industries. Business would benefit if MOIT would share a
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road map of Retail Power Pricing as it moves to prices decided by market with Government
management. This will open access to required private investment, both domestically and
internationally, and will stimulate greater energy efficiency efforts from end-use customers.
VBF supports the use of donor funds to off-set Government guarantees as the Government
reaches it limits in the coming year.
3. Renewable Energy
As Minister Hoang stated on 9th June 2015, fossil fuels are a finite resource and will
eventually become economically unfeasible, forcing Vietnam to import energy and threaten
its energy security. Environmental, Social and Public Health protection is an issue further
encouraging Vietnam to expand renewable energy (RE) development. VBF congratulates
authorities for Prime Ministers Decisions on Solar and Biomass. Our detailed comments to
the Draft Decision on Mechanism to Support Development of Solar Energy Projects in
Vietnam is an annex to this paper. The 5% RE target set for 2020 could increase to much
more than 5% with proper incentives on RE production, such as solar and wind power. VBF
feels RE is best positioned to support Vietnams current energy needs due to its scalability
during a short time frame. In order to bolster RE, the Power and Energy Working Group
supports the creation of an attractive investment environment for these sectors. As such,
the Group backs the recommendations put forth by MOIT consultants (UNDP and GIZ),
which calls for an increase in the feed-in tariff (FIT) levels for solar and wind energy and
simplification of the application process. Our main comment on solar is also the low
$0.11/kWh electricity tariff for grid connected solar power projects. The present RE tariff
levels seem to have been set at a low level to attract donor support by use of their
concessional loans with grant facilities, rather than private investments.
4. Direct Power Purchase Agreements
The Power and Energy Working Group has shared information to MOIT consultants working
on Direct PPAs option between electricity end-users and independent Vietnamese power
producers. There is high interest of implementing this model from Vietnamese private
developers and businesses, and providers of technology, as well as finance banks. Direct
PPAs have worked well in Mexico, India, and Brazil, especially in areas not needing
Government Guarantees.
5. National Power Master Plan VII
The Power and Energy Working Group looks forward to receiving the updated National
Power Master Plan VII for commenting on as mentioned by MOIT on 15 May, 2014.
6. EVN Rescue Plan
The EVN Rescue Plan has been updated by EVN and plans to be published in September
2015; VBF looks forward to receiving a copy. VBF understands from the World Bank that the
10 year roadmap of reforms that EVN should take to meet certain financial indicators and
standards. But as above, a road map must come from the final authority.
7. Exploitation of Natural Resources
The Power and Energy Working Group emphasizes that the proposed strategy to support
Vietnams successful exploitation of natural resources for stable energy supply is in-line
with the expected realization of Free Trade Agreements (FTAs) while strengthening the
private sector and small and medium-sized enterprises (SMEs).The expected boost in
Vietnams GDP and economic development, which is expected as a result of FTAs, will be
founded on aliable power supply.

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8. Coal Policy
Lastly, the Power and Energy Working Group is concerned about the slow progress of the
planned increased coal policy over rapid reductions in cost of Vietnams natural resources
of natural gas, sun and wind. As stated above, the Build-Operate-Transfer negotiations are
long and complex. The scale up of coal will require a major increase in infrastructure by
2020 to import 38 million tons. VBF is not clear who pays for the needed infrastructure for
coal imports.

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Power & Energy Sub-Working Group Position Paper

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COMMENTS ON PM DECISION ON MECHANISM TO SUPPORT DEVELOPMENT OF SOLAR ENERGY PROJECTS IN VIETNAM

Prepared by
Power & Energy Sub Working Group
Vietnam Business Forum
No.
1

Draft Decision

Comments/Feedback
A rooftop solar PV system that is grid connected but aiming primarily at
Article 1.3
The regulated entities of this Decision include local power consumption might not be called a project (d n in mt
organizations and individuals related to the development of tri) in the same way as solar power plants. Therefore in this article
solar power projects in Vietnam.
there should already be a clear separation of solar power plants (projects) which have the purpose of selling all power produced into the
grid (who trade in power) and rooftop & community solar PV systems
(other types of projects) that aim to consume most produced power on
site and only feed a small fraction into the grid.
Article 2.2
The electricity sellers are organizations and individuals
that have licenses for electricity activities in the sector of
electricity generation from solar power plants. For roof-top
solar power projects that have the capacity smaller than
500kW do not need licenses for electricity activities.

A household, community or enterprise that put a small solar PV system

on the roof and are grid connected should be treated fundamentally
differently from power plants and should be subject to simpler licensing
etc.
For success there is a need for a very simple administrative procedure.
500 kW of rooftop systems is relatively large when considering
households (typically: 2kWp), however, some large scale foreign direct
invested business and industries are expected to be interested in larger
systems and consider as much as 2 MW.
It is recommended to increase the maximum limit to 10MW, as there is
no clear reason to limit the upper scale of rooftop power production and
larger installations will be better value for money. This would also
minimize the impact on land use and increase the efficiency of
investment.

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Draft Decision

Comments/Feedback

This is problematic, because it does not provide a clear distinction

Article 2.10
Power Purchase Agreement form for the grid-connected between rooftop and power plants. What is the lifespan of the PPA,
solar power project is the Agreement issued by the recommend 20 years and/or that of the solar PV.
Ministry of Industry and Trade, is the basis for the
application in selling and purchasing electricity from gridconnected solar power project.

Article 8: Termination of implementation of projects

This should also be explicitly made to apply only to power plants for
which some kind of advanced planning permission / license must be
issued. A rooftop system should not be subject to such a process, since it
complicates.
The owner of a rooftop project should be able to proceed with the project
after having notified the local EVN distribution company in writing of their
intention to invest in a project and describing the scale of the project and
the amount of energy likely to be produced by it. That should be the only
regulatory requirement on a rooftop project.

Article 9.6
The purchaser is responsible for buying all electricity
generated from roof-top solar power projects and paying
the seller in accordance with Section 2 of Article 15 of this
Decision. Metering technology is not in place for
households to execute this Article.

Bidirectional meters and billing will be important here to have

households invest in solar, as this is the incentive and way to cover
capital investment costs. The intended solar power produced by
households is possible only after they have meters capable of measuring
hourly power consumption and bidirectional power flows. Households do
not have such meters and each solar PV project household would need to
include the cost of a new meter being installed. Would the cost fall on the
household or EVN?

MOIT issues a standardized PPA, is MOIT responsible for deciding who

Article 10.2
The electricity purchasing and buying is done through could be investors / producers and who are eligible for getting the FIT. It

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No.

Draft Decision
Comments/Feedback
Power Purchase Agreement follow the Power Purchase is important that the FIT (in Art 13) is linked to the USD price over 20
Agreement form applies for grid-connected solar power years, which should be feature of the standard PPA
projects, issued by the Ministry of Industry and Trade.

9
10
11

Is this for both solar power plants and rooftop systems?

Article 11: Incentives on investment and tax
Dose this only apply to commercial solar power plants?
Article 12: Incentives on land
Calculations from MOIT consultants suggest that a of over 15 USD Cents
Article 13.1
with electricity tariff at the connection point is 2352 (over 20 years) would attract investors. The. 11.2 USDC) will not attract
any new investment capital to Vietnam. Solar can play a positive role in
VND/kWh (equivalent of 11.2 US cents/kWh)
reducing the Peak Hour power supply pressure in Vietnam in 9.30am
11.30 am daily by displacing demand and adding supply to the grid. If the
government sees this as the main benefit of supporting solar PV
development, we would ask them to note the following:
1. Power Price paid to Small Hydro to supply power to EVN in Peak
Hours in the Dry Season is currently 2,783 VND or 12.38 US
Cents/kWh.
2. The Retail Power Peak Hour Price paid by high voltage connected
customers (Average of the Commercial and Manufacturing Tariffs) is
3,225 VND or 14.4 US Cents/kWh. (Commercial 3,829VND and
Manufacturing 2,556 VND)
We would suggest that the Minister sets the initial solar power plants
with reference to:
1. The Avoided Cost of peak hour retail power and;
2. The higher investment costs for solar than small hydro (Hydro
$1m/MW capacity v Solar $1.6m /MW capacity).
3. The cost savings to EVN of having less power supply pressure on the
transmission grid and reduced power transmission losses during
peak hours of demand
4. The recommended PPA price provided by the foreign consultants
(UNDP) to the Ministry
5. Experience in other countries in the South East Asia which began with
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Draft Decision

Comments/Feedback
a high to attract initial investment and to develop supporting services
for solar in Vietnam and then gradually reducing the level for new
projects after the industry has established itself and has become
more competitive with lower development and financing costs.
And increases in the peak hour Avoided Cost for the remaining 20 years
of the PPA, increased annually.
The over 20 years of USD0.19 is needed for island situations.

12

13

Article 13.2

When electricity generated is higher than electricity

consumed, the difference shall be purchased by the
purchaser at the connection point, with the electricity tariff
is 3150 VND/kWh (excluding value added tax, equivalent
of 15 USDcents/kWh). Electricity tariff shall be adjusted
according to the fluctuations of the exchange rate
between VND/USD.

The USD0.15 (only for excess production and off-set against monthly or
annual bills) is reasonable, and believe even rural households will be
interested, but this is mainly targeting customers who currently pay the
highest tariffs. The situation may however change soon (perhaps as fast
as 2-3 years), as national retail tariffs are expected to be forced up.

Timing of Implementation

When will the MOIT develop detailed regulations and implement them.
When will the draft SPPA be available for consultation and feedback?
Will the SPPA include the improvements and revisions suggested by GIZ
in their report to the Ministry on Wind Power PPAs in June 2015?
SPPA should clearly state EVNs responsibility to purchase all solar
power provided from projects.
Inclusion of Power Projects in the Master Plan VII how will this be
achieved?

It is the value of the avoided cost of EVN supplied energy which will
determine demand for investing in solar rooftop power. We urge the
Minister to follow up his commitment to VBF in June 2015 to publish a
roadmap of retail power pricing for the next period of planning to 2030.
Potential investors in rooftop solar could then make decisions informed
with the value of the benefit of energy savings that are created by selfgenerating energy with solar PV.

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No.
14

Draft Decision
Promote Local Assembly and Manufacturing

Comments/Feedback
Provide a higher price for projects and power plants which use locally
sourced equipment (to be defined with similar provisions of domestically
produced in free trade agreements). We would suggest 10% higher than
for those projects using wholly imported equipment.

15

Remove the barriers to accessing Project Finance Loans Project developers in wind and biomass have failed to attract project
to develop Power Plants is blocked by EVNs poor credit finance loans because the PPA is with EVN, which is regarded as an
uncredit worthy off-taker of power by the commercial banks, who have
status.
solar PV project financing experience. While we await an improvement in
EVNs financial status, we would urge the Minister to seek donor support
to provide limited performance guarantees to support EVNs liabilities to
pay for power under the PPA. Thus project developers could attract
commercial project finance loans to build projects without increasing the
cost of energy unreasonably and relieving the Ministry of Finance from
the burden of guaranteeing all grid connected energy projects in
Vietnam.

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Summary of Meeting with MPI and MoIT

Vietnam Business Forum, 2015

ROUNDTABLE DISCUSSION ON POWER AND ENERGY RELATED ISSUES WITH THE

MINISTRY OF INDUSTRY AND TRADE AND MINISTRY OF PLANNING AND INVESTMENT
-

Date and Time: 2PM-4PM, Tuesday, 10th November, 2015

Venue:
General Directorate of Energy, 23 Ngo Quyen , Hanoi
Participants:
Appendix 1

A. MEETING AGENDA
- Competitive Electricity Wholesale Market for Vietnam - Decision No. 8266/QD-BTC
issued on 10th August 2015
- Electricity Tariff Road Map
- Renewable Energy
- Direct Power Purchase Agreements
- National Power Master Plan VII
- EVN Rescue Plan
- Exploitation of Natural Resources
- Coal Policy
- Comment on PM Decision
B. MEETING SUMMARY
1.

Competitive Electricity Wholesale Market for Vietnam - Decision No. 8266/QD-BTC

issued on 10th August 2015
Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- The business community would like to see the competitive electricity market move
forward quicker, especially with approximately 28 billion dollar investment flow from
private sector over the next 15 years into new power resources in Vietnam.
Response from Mr. Le Tuan Phong Deputy Director, General Directorate of Energy
- Vietnam's Government has promulgated special mechanisms to accelerate progress of
thermal power plant projects in Vinh Tan, Long Phu and Song Hau power areas to
address power shortage in Southern Vietnam. All of them are coal power plants.
- Gas in Mekong River Delta has been exploited (petroleum gas and natural gas), in
addition to coal-fired energy to respond to power shortage. Apart from coal energy, no
other sources of energy can be exploited to tackle this problem.
- The proposal to turn large power consumers into seller is already embedded in power
market development roadmap prepared by General Directorate of Energy.
Response from Mr. Pham Quang Huy Deputy Director, Electricity Regulatory Authority
of Vietnam
- According to the roadmap in Decision 8266/QD-BCT approving the competitive
wholesale power market, the market will be piloted and officially scaled up as of 2019.
- MOIT is working with internatonal consultants on developing wholesale power market
rules.
- The biggest difference in the competitive wholesale market in the coming time is that
power wholesale buyers/major customers meeting MOIT's requirements will be able to
purchase power directly from customers or from the market on market-contract
mechanism.
- It is not rational to include wind power in the wholesale market. The current average
retail price of power in Vietnam is 7.25 cents/kWh. Meanwhile on average, power
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generation costs account for only 70% of such price. This means average price of input
power is quite low compared to the production costs of wind power. With Vietnam's
existing capacity, we think it is better not to include wind power in the competitive power
wholesale market in early phase, especially when wind is a natural resource which is
not predictable in the long run.
-

Regarding the issue of 5 regional power buying corporations under legal structure of
EVN associated with major power generation companies where EVN holds controlling
shares (GENCO): ERAV, in coordination with MOIT, is developing the power market
restructure plan to submit to the Prime Minister in December this year. In the draft,
MOIT proposed to cap EVN's holding share in 3 GENCO (directly under EVN) no higher
than 50%. The equitization of these 3 GENCO will be completed by 2017.

Criteria for major power consumers to participate in the competitive power wholesale
market: it is expected that in initial phase, large entities directly connected to the
transmission grid may participate in the first competitive power wholesale market
because transmission fees can be determined. Next will be customers connected to
Grid 110.
It is recommended that regulatory agencies should operate independently: we need to
have a roadmap and this totally depends on competition level in power market.

2. Electricity Tariff Road Map

Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- VBF suggests MOIT continues adjusting energy tariffs to create sustainable power
sector development in Vietnam. Energy efficiency could save a lot of money for Vietnam
in not just producing power but using the power that we have in a more sustainable way.
- Business would benefit if MOIT would share a road map of Retail Power Pricing as it
moves to prices decided by the market.
Response from Mr. Pham Quang Huy Deputy Director, ERAV
- Existing regulatory approach on power price: MOIT has been following market
mechanism so far through 2 instruments namely average retail price and average price
adjusting mechanism.
- Bracket of retail electricity rates in the 2013 - 2015 period is regulated in Decision
2165/QD-TTg of the Government and mechanism for average electricity retail price
adjustment is regulated in Decision 69/2013/QD-TTg.
- To stabilize power price and ensure consumers' rights, time and level of adjustment will
be in alignment with socio-economic conditions of each phase.
- Every year, when adjusting power price, MOIT will coordinate with involved ministries to
conduct end-line inspection and publicly disclose details related to production costs.
Such results will be posted on MOIT's website.
3. Renewable Energy
Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- We believe that there is still room in the Prime Minister Decisions for the renewable
energy. We understand that it is expensive but we have cases where we see that once
you start investing in renewable energy, prices will fall quite quickly.
- With wind energy, our position remains that feed-in tariff (FIT) needs to be raised higher
than the 7.8 cents/kWh rate at the moment if the Government wants to see more
investment in this particular area.
- It has been promised and this PM Decision on solar and biomass has shown the
Governments effort in this matter.
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However, we do hope that the regulations on direct power purchase agreements need to
be clearer, especially with rooftop energy purchase agreements. Solar power plants at
11 cents/pWh is relatively low to start an investment.
We understand from a meeting with the World Bank that there will be a top off on top of
the 11 cents/pWh. For example, South Africa started off with 20 cents/pWh, however,
today, that same energy cost only 6 cents/pWh. We believe that Vietnam can follow that
learning curve, starting at a high price, when the market gets more investment, more
competitive, we will see the price drop quite quickly.

Response from Mr. Le Tuan Phong Deputy Director, General Directorate of Energy
- Wind power price: In calculating the price for investors to invest in wind power, our
initial price was 10 cents/kWh. Taking into account incentives including concessional
loans from development banks, tax exemption or reduction, import tax removal, etc. the
price dropped to 7.8 cents/kWh, including 1 cent subsidized by the Government.
- Instead of making investors apply for individual incentive, MOIT is recommending the
Government to apply a specific negotiable price of about 10 cents/kWh.
- MOIT is also designing support mechanisms to develop renewable energy for each type.
Among these, we are proposing subsidy mechanism for wind power and will take into
account comments from your subworking group.
- Compared to some other countries like South Africa where there is enormous potential
in terms of wind availability, cloud coverage, number of sunshine hours, solar radation
intensity and other natural conditions, all are much better than Vietnam, resulting in
much lower production costs for wind power. That is not to say we will not move
towards producing wind and solar power due to these constraints, but it requires a stepby-step roadmap. Once again we would like to assert that it is impossible to include
wind power in the competitive wholesale market but we will consider solar power.
4. Direct Power Purchase Agreements
Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- There are corporations in Vietnam here that are willing to purchase wind energy at 13
cents to 15 cents/kWH as they see that they can sell their products overseas for
approximately 10 to 15% more.
- These businesses have their green energy policies within their corporations where they
need to meet their own target world wide.
- One of the positive outlooks with the direct power purchase agreements is that it will
create revenue for EVN as investors will pay EVN to use their grid. These agreements do
not require any Government guarantees (100% financed by the private sector), hence we
see it as a win-win proposition for Vietnam to move this direction.
- VBF is preparing a proposal to the Ministry of Investment and Trade (MOIT) and the
Prime Ministers Office where we will show a number of corporations that are willing to
invest, how to carry out these direct power purchase agreements and how it has been
successful in countries like Brazil, Mexico and India. We look forward to a fruitful
discussion on our proposal when it is sent to you.

Response from Mr. Le Tuan Phong Deputy Director, General Directorate of Energy
- We have not received the sub working group's proposal. But we promise to review once
receiving it.

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5. National Power Master Plan VII

Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- Part of the master plan VII has been introduced at a workshop in Da Nang, and it is
focusing on coal.
- We would like to see Vietnam move to a made-in Vietnam power plan as we believe
that Vietnam can still rely on its natural resources and do not have to import so much
coal.
- A number of corporations here in Vietnam are working on a plan where Vietnam can
make use of its natural resources and still have the same results with the current
Master Plan VII which depends heavily on coal. We hope it will be ready to share with
you by the end of 2015.
Response from Mr. Le Tuan Phong Deputy Director, General Directorate of Energy
- Due to global economic crisis, MOIT hired consultants to adjust National Power Master
Plan VII before submitting to the Government by end 2015.
- Vietnam has been exploiting all major hydro power resources, and there are only 4,000
kWh remaining small hydro-power to be developed.
- In the long run, the importation of coal for power generation will apply clean coal
technology and CCS (Carbon capture and storage).
6. EVN Rescue Plan
Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- We understand that there is a rescue program for EVN put up by the World Bank to help
investors when dealing with the banks and to reduce the current burden on the Ministry
of Finance providing guarantees to all power sellers.
Response from Mr. Le Tuan Phong Deputy Director, General Directorate of Energy
- The basic issue in rescuing EVN is power price as we presented.
7. Exploitation of Natural Resources
Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- We believe that the gas field can be developed.
- Even though price is an issue but if you look at the whole price of gas, it would be very
competitive for Vietnam. We hope that negotiations with all the gas suppliers will move
forward.
Response from Mr. Le Tuan Phong Deputy Director, General Directorate of Energy
- MOIT's proposition is to prioritize gas development as production costs for gas power
are much lower than those for coal power and the time required to build gas power
plants is also shorter.
- Vietnam is studying the exploitation of blue whale gas field. Once the power supply
which can potentially be exploited from blue whale gas field is determined, the
proportion of coal power will be reduced. In addition, Vietnam has been purchasing
power from Southern China, and plans for investments in hydroelectric projects in Laos
and transmission to Vietnam as well as developing nuclear power plants.

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8. Coal Policy
Mr. John Rockhold Head of the Power & Energy Sub-Working Group, Vietnam Business
Forum (VBF)
- We would also like to see the coal negotiations between Vietnamese Government and a
number of our companies move forward after being long dragged down.
- Many of these coal power plans were actually supposed to start construction already.
Investors start to worry about future power supply.
- Vietnam will need to improve road and port infrastructure if it is going to import
approximately 30 million metric tonnes of coal by 2020.
- We hope that with other resources, Vietnam will lower its coal consumption and try to
use more natural resources.

Response from Mr. Le Tuan Phong - Deputy Director, General Directorate of Energy
- Regarding infrastructure for the importation of coal, JICA and MOIT has researched and
are in the process of finalizing location, scope and plan for expansion in different
phases. The Government has instructed Vietnam National Coal - Mineral Industries
Group (Vinacomin) to finalize the plan for building station for coal importation to be
submitted to the Government by the end of 2015.
- Regarding guarantees for imported coal: Vietnam's Government encourages
investments in BOT. Investors bring capital into Vietnam, construct factories/plants and
import coal for production and sale of power to Vietnam market. Profits made by
investors in VND, after subtracting all costs, will be converted back to foreign currency
and returned to investors. Of which, Vietnam's Government commit to provide
guarantee for 30% of conversion needs and the remaining 70% will be covered by
commercial banks. If within 7 days and commercial banks cannot provide enough
foreign currencies needed by investors, the State Bank of Vietnam will intervene to
support commercial banks in resolving the problem within the next 7 days.
- Delays in signing BOT contracts are not soly attributed to Vietnam's Government but
also due to many involved parties, including the Government, investors and banks.

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Appendix 1: List of participants

Name
Title
REPRESENTATIVES OF GOVERNMENT BODIES
1 Mr. Nguyen Noi
Deputy Director

Mr. Le Tuan Phong

Deputy Director

Mr. Pham Quang Huy

Deputy Director

Mr. Nguyen The Huu

5
6

Mr. Tran Hong Ky

Mr. Vu Quoc Huy

Mr. Pham Minh Tuan

Mr. Nguyen Anh

Tuan
Ms. Le Nguyet Anh

Director of the Center for

Power Market Development
Research and Training
Energy Specialist
Deputy Director of Economic
Zone Management
Department
Deputy Director of Power
Market Department
Deputy Director

Deputy Manager of Policy

Division

Organization
Foreign Investment Agency,
Ministry of Planning and
Investment
General Directorate of Energy
Electricity Regulatory Authority
of Vietnam
Electricity of Vietnam (EVN)

The World Bank

Ministry of Planning and
Investment
EVN
Institute of Energy

Foreign Investment Agency,

Ministry of Planning and
Investment
Representatives from Departments of the General Directorate of Energy
VIETNAM BUSINESS FORUM POWER AND ENERGY SUB-COMMITTEE
10 Mr. Mr. John Rockhold Head
VBF Power & Energy Sub-Working
Group
11 Shenbagam
Chief Representative TATA Power Ltd
Manthiram
Vietnam
12 Thuy Nguyen
Government Affairs and
GE Global
Policy leader
13 Do Duc Tuong
Clean Energy Specialist
U.S. Agency for International
Development
14 Sean Chung
Vice President
ExxonMobil
15 Sagara Hirohide
Chief Representative Marubeni Corporation
Vietnam
16 Sato Susumu
Deputy Director
Jetro Hanoi Office
17 Ngoc Nguyen
Associate
Freshfields Bruckhaus Deringer
LLP
18 Tran Hong Viet
Senior programme
Embassy of Denmark
Manager
19 Hoang Thanh
Programme Officer
EU Delegation
Cooperation &
Develompent Section
20 Nguyen Ngoc Anh
VBF Officer
VBF Secretariat
21 Dang Thi Van Anh
VBF Coordinator
VBF Secretariat

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5.4. PORT AND

SHIPPING

Port and Shipping Sub-Group - Position Paper

Vietnam Business Forum, 2015

PORTS AND SHIPPING POSITION PAPER

Prepared by
VBF Port and Shipping Sub-Group
EXECUTIVE SUMMARY
The Ports and Shipping Sub Group of the Vietnam Business Forum wishes to emphasize
again the importance of creating a domestic and international transshipment hub in Cai
Mep, that will not only contribute to solving the excessive demand / supply container
terminal imbalance in South Vietnam, it will also, as a direct consequence, create the
necessary scale to operate the required deep sea terminal for Vietnam and for all of her
importers and exporters.
Whilst it is recognized that the drive towards this ambition is well known within the Ministry
of Transport and the Ministry of Planning and Investment, this position paper draws the
support from a number of previous reports and recommendations together current
information, sourced from Government Departments as well as the Port and the Shipping
Industries themselves.
This Position Paper aims to bring together the recommendations of these different
government departments, organizations and business communities in order to demonstrate
that the overall aims of such groups are in fact the same. This would indicate that with such
common support, there lies a golden opportunity for the Vietnamese Government to make a
small number of decisions, in order to create significant positive impact for Vietnamese
importers and exporters.
With the advent of the Trans Pacific Partnership and the European Free Trade Agreement,
the need to create such a terminal has never been so great as now. The resultant increase
in trade (and therefore container traffic in and out of Vietnam) is now expected to far exceed
the previously expected growth of 7% to 8% from now until 2020. In order to maximize the
potential that both the TPP and European FTA will bring to Vietnam, it is essential that an
efficient deep sea container terminal exists to cater for such a demand. The current
reliance on the HCMC City Terminals is not sustainable both from an operational and a
commercial point of view.
In order to create this scale, it is essential first to create a competitive environment in
which to operate the container terminal. As described on a number of occasions before, the
first and critical steps in this regard are as follows:
- A reduction in port dues for certain sized vessels. Note that in reducing the port dues
per vessel, a greater number of vessels will call in Vietnam, with the resultant increase
in overall income for the Country.
- A relaxation of the Cabotage Regulation. Whilst it is understood that there is a
reluctance to carry out a relaxation, the current local services on offer are not of the
required standard and they are currently prohibitively priced, which on both counts, are
blocking the progress. It is of course only a requirement to relax such a regulation in
and out of Cai Mep. In this way, a more competitive environment will be created as
Vietnam aims to take market share away from other hubs such as Hong Kong and
Singapore.
- In line with the changes of Customs processes and regulations that are taking place,
the Ports and Shipping Sub Group focuses on the key areas of the required customs
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reform. This focus and action is fundamental, if Vietnam is to remain competitive with
other Asean Countries.
Potential Financial Gain For Vietnam:
- For every Feeder Vessel that is no longer required to transport Vietnamese cargo
to/from existing Hubs such as Singapore and Hong Kong, there is a saving of transport
costs of at least USD 7 million per year.
- For each Mainliner call that would berth in Vietnam if the above 3 items are resolved,
there would be an additional income to Vietnam (through Port Dues) of around USD 1
million per year.
- Initial estimations of 2 feeders to be reduced and 10 mainline calls to be added, implies
a saving on feeder costs of USD 14 million and an additional income to Vietnam of USD
10 million per annum through Port Dues.
The Draft Decree on publication of ocean freight rates and surcharges
Background:
Under the draft proposal of the new Decree, shipping liners are requested to publish the
followings on shipping liners and Vinamarines websites:
- Shipping liners costs paying to the service providers
- Ocean freight rates for all serving port pairs
- Freight related surcharges and local surcharges (including destination surcharges)
- Any changes to ocean freight rates and surcharges (increase) must be effective only
after 30 days from the notification day.
Liner industry position:
If the draft proposal is implemented, it will not be beneficial to the development of
Vietnamese export and import trade due to the below reasons:
- The draft proposal is inconsistent with international practice
- It will not enhance competition
- It increases state intervention and burden

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Port and Shipping Sub-Group - Position Paper

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DETAILED CONTENT
I. BRIEF REPORTS FROM RELEVANT STAKEHOLDERS
The following organizations, presentations and reports have been consulted and they have
all, within the past 2 years, advocated the creation of a hub of sufficient scale in South
Vietnam. In order to achieve this, the solving of the three issues above is deemed essential
for progress.
- Report to Deputy Prime Minister Hai 6th August 2013
The Value of the Hub
- The Transport and Logistics Sector Committee of the European Chamber of Commerce
Within the Whitebooks of 2014 and 2015
- Efficient Logistics Report written by The World Bank, published 2014
Efficient Logistics, The Key to Vietnams Competiveness
- The Vietnam Trade Facilitation Alliance (American Chamber of Commerce and Vietnam
Chamber of Commerce and Industry)
Discussed with them in the American Chamber of Commerce April 2015
Particular emphasis on Customs Reform
- Transport and Logistics Partners Quarterly Meeting(TLPQM)
A group conceived in February 2014 comprising of the Department of Transport and
Industry Leaders.
- Current Input from Ports and Shipping Sub Group March 2015
From Shipping Lines: Maersk Line, CMA CGM, MSC, APL
From Container Terminals CMIT, SSIT
1. Value of a Hub: Report to Deputy Prime Minister Hai 6th August 2013
On the 6th August 2013, a report was written to the Deputy Prime Minister Hai. The report
summarized the value of creating a Hub in Cai Mep. Since then, the Operating Cooperation
Contract has been signed between CMIT and Saigon Newport and this is a good step
forward as the Hub concept is developed. Whilst some of the figures in the report are now
out of date, it was clear even then that the reduction of port dues and the relaxing of the
cabotage regulations are two vital ingredients if the Hub creation is to materialize.
2. Whitebooks (European Chamber of Commerce) 2014 and 2015
In relation to separate reports written by the European Chamber of Commerce, through its
Whitebooks of 2014 and 2015, it has been made clear that the reduction of Port Charges and
the relaxing of the Cabotage Law (Section 2.8.2 Whitebook 2014) and similar
recommendations in the 2015 Whitebook (Section 2.9.2), are necessary actions if the Hub is
to be created.
3. Efficient Logistics: The World Bank - 2014
Published in 2014, the World Bank presented the extensive report entitled Efficient
Logistics A Key to Vietnams Competitiveness. In that report (Chapter 3, pages 71 and 79)
it was recommended that Vietnam needs to relax its Cabotage regulations. In addition, also
in Chapter 3, pages 80 to 82, there are a number of recommendations in relation to the
need to improve the Customs Regulations. Both aspects have the direct link to the
development of the Hub in Cai Mep.
4. Vietnam Trade Facilitation Alliance (VTFA) - 2014
In conjunction with the American Chamber of Commerce, the Vietnam Trade Facilitation
Alliance is organized to provide advisory support to the General Department of Vietnam

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Customs and other agencies of the Government of Vietnam whose regulatory requirements
are enforced by the GDVC with imports and exports.
By definition, the VTFA therefore is particularly keen that the Customs Procedures are in
line with the target of creating the Hub Port.
See the Press release as announced on 12th December 2014:
Ho Chi Minh City, December 12, 2014 - The U.S. Agency for International Development
(USAID) today joined the American Chamber of Commerce in Vietnam and the Vietnam
Chamber of Commerce and Industry to formally establish a new Vietnam Trade Facilitation
Alliance (VTFA) through a memorandum of understanding. The private sector-led alliance
will provide policy and technical assistance to the General Department of Vietnam Customs
and relevant trade facilitation agencies and authorities in Vietnam to advance Vietnams
competitiveness.
Trade facilitation is a powerful tool for integrating small and medium enterprises (SMEs)
into domestic and global value chains, which makes growth more inclusive, said USAIDs
Acting Assistant Administrator for Asia Anne Aarnes. The VTFA will be an important voice
for these SMEs that too often are not well-represented in policy processes.
A number of USAID programs, including the Provincial Competitiveness Index (PCI),
highlight the importance of SMEs, including women-led enterprises, to Vietnams growth
and the value of involving business in policymaking.
With todays launch, the VFTA will support the implementation of the Trade Facilitation
Agreement (TFA) in Vietnam, as well as next generation free trade agreements such as the
Trans-Pacific Partnership (TPP). The Alliance also aims to improve competitiveness of
Vietnams domestic and foreign companies through a more predictable and transparent
business enabling environment. There will be special emphasis on helping Vietnam achieve
the target it established in Resolution No. 19/NQ-CP to improve its performance trading
across borders by significantly reducing the time and cost of importing and exporting to
regional averages.
Through its multi-stakeholder networks, the VFTA will improve information sharing on
trade facilitation including participation in the annual Traders Satisfaction Survey,
implemented by Vietnam Chamber of Commerce and Industry in partnership with General
Department of Vietnam Customs, and the sharing of private sector generated data on
customs performance.
USAID has been working closely with the Vietnamese government and business groups to
develop and implement effective trade facilitation assistance to enable Vietnam to meet the
commitments in the TFA and prepare Vietnam for the implementation of the TPP. USAID
support for the VTFA will enable Vietnam to build a sustainable and open public-private
partnership to facilitate trade, thereby reducing poverty and promoting inclusive growth.
The VTFA is a pioneering effort for USAID under its global trade facilitation programming.
See more of USAIDs work on trade and other issues on www.usaid.gov/vietnam.
5. Transport and Logistics Partners Quarterly Meeting
In conjunction with the World Bank, the Ministry of Transport has established the Transport
and Logistics Partners Quarterly Meeting (TLPQM).
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The main purpose of the TLPQM is to facilitate an effective interaction between the Ministry
of Transport and the transport/logistics stakeholders. This will assist all TLPQM
participants to better understand the common issues that relate to Government
policies.Therefore it will pave the way to pragmatic and workable solutions to any concerns
that may exist with the Logistics Industries of Vietnam.
Central to the aims of the TLPQM is the creation of a Hub in South Vietnam and this will
require the customs procedures to be made more efficient, cabotage regulations to be
relaxed and port dues to be reduced.
6. Input from the Ports and Shipping Sub Group
The comments that are made below have been made and brought to the attention of the
Ports and Logistics Sub Group of the VBF. All comments have been made from Shipping
Lines and Port Operators.
Benefits to Vietnam through the creation of a Hub:
- There will be less pollution for Ho Chi Minh City by diverting the truck flow within HCMC
into Cai Mep
- There will be less traffic and less risk of port congestion, since there is a far greater
port capacity in the Cai Mep region. The consequence of having less inner-city traffic will
be an improvement in safety and less risk of cargo delay. Reducing the risk of cargo
delays,improvesthe overseas buyers satisfaction through the reliability of Vietnamese
export cargo which, in turn,leads to an increase in purchasing orders.
- There will be less river traffic due to fewer barges and vessel traffic. The river could be
deployed for tourism purposes with river tours and river activities thus attracting
greater revenue for Vietnam; a similar approach to that successfully adopted in
Bangkok.
- The considerable risk associated with not making the change quickly enoughis quite
simple: there will be insufficient capacity to cater for the growth of the TPP and
European FTA. Through the TPP, Vietnams economy has been identified to have
potential growth of up to 35% by 2020. Exports are a major factor when influencing this
growth. The exports with the US have been growing between 10-11% in the past years
and the TPP will open up even more growth. It is essential that Vietnam capitalizes on
this opportunity immediately after the TPP has been signed. Failing to capitalize runs a
significant risk of damaging the direct foreign investment that is already underway and
indeed any further potential direct foreign investment.
- As long as Vietnam continues to rely on river ports, cargo will rather find its way on
feeders to connect over other established hubs in the region, such as Singapore ad HKG.
This adds cost, increases inefficiency and reduces the competiveness of Vietnam.
- Consolidation provides the critical mass to cater for larger services; thus saving cost
and making it more worthwhile for direct call services
- For as long as river ports remain an option for the Intra-Asia businesses, carriers will
find it difficult to run a more optimal panama size service (larger vessels) into Cai
Mep, given the concerns with shipper/consignee acceptance.
Attached below (via YouTube) explains the scale of change at the Port of Shanghai. It is
clear and evident that one of the central pillars of Chinas growth in exports is the
establishment of a Port with sufficient scale. This video summarizes how it was achieved.
https://www.youtube.com/watch?v=MlQmMTp_T0M

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Cost Savings from the reduction of feeder services to/from existing hubs in Singapore
and Hong Kong
- The weekly cost of running an 1100 TEU sized vessel is around USD 136,000, implying an
annual cost of around USD 7 million
- The weekly cost of running a 1700 TEU vessel is around USD 208,000, implying an
annual cost of around USD 10 million.
Weekly cost FIO/1100 teu
usd 136,324
Weekly cost FIO/1700 teu
usd 208,444
Additional income to Vietnam if Cai Mep can attract additional mainline calls
If Port Dues charges are set at USD 20,000 per call, additional income to Vietnam per year
per additional mainline call is USD 1 million. Potentially, through the creation of a hub and
the resolution of the 3 recommendations above, at least 10 mainline calls can be attracted,
generating a further USD 10 million per year.
II. THE DRAFT DECREE ON PUBLICATION OF OCEAN FREIGHT RATES AND SURCHARGES:
Background
On 18 March 2015 Deputy Prime Minister Hoang Trung Hai requested the Ministry of
Finance, the Ministry of Industry and Trade, and the Ministry of Transport to investigate the
imposition of maritime transportation surcharges by shipping lines operating in Vietnam.
Subsequently, on 13 April 2015 a number of shipping lines were invited to a meeting at the
offices of the Ministry of Transport, following which, a number of lines were subject to an
inspection by the Ministry of Finance.
There followed the release of the Draft Decision (it has been advised the Decision is
upgraded into a Decree) which would require shipping lines to publish the followings on
shipping liners and Vinamarines websites:
- Shipping liners costs paying to the service providers
- Ocean freight rates for all serving port pairs
- Freight related surcharges and local surcharges (including destination surcharges)
- Any changes to ocean freight rates and surcharges (increase) must be effective only
after 30 days from the notification day.
Liner industry position
Based on data collection of the 5 representative shipping lines APL, CMA-CGM, Hapag
Lloyd, Maersk Line and MSC:
- Transparency of information: ocean freight rates, surcharges and local surcharges are
updated and available on the shipping liners websites.
- Customers are informed to all adjustments to rates and surcharges by email in advance
with 30 day advanced notification for FMC trade and 15 day advanced notification for
non-FMC trades (as per international maritime regulation).
- As per historical data of the above mentioned 5 shipping liners, local surcharges have
been very stable over the year. In last 4 years, local surcharges (THC and
Documentation fee) have been increased with an average rate at 2-4% only (in
comparison with average inflation rate at 10%).
Impacts if the Draft proposal is implemented
- The draft proposal is inconsistent with international practice:
No other jurisdiction in the world requires carriers to publish the transportation
rates they agree to with their customers in a confidential contract. If the Draft
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Decision is adopted, Vietnam would be the only country in the world with this
requirement.
This requirement would also directly contradict government trade policies of other
countries and lead to trade conflicts. All other jurisdictions also either require, allow
or encourage contract confidentiality. As a result, the Draft Decision is contrary to
current international practice and may lead to conflicts with trading partners, such
as the U.S., European Union, China, Taiwan, Japan, Korea and Australia.
Adoption of the Draft Decree also would require carriers to breach the terms of
hundreds if not thousands of existing contracts which require the terms of those
contracts to be kept confidential. It would also expose carriers and their customers
(including their Vietnamese customers) to legal risk for violating the laws of
jurisdictions which require the terms of ocean shipping contracts to be kept
confidential.

It will not enhance competition

By requiring disclosure of confidential contract rates of shipping liners and their
service providers, it removes the confidentiality and hence it will run contrary to
international experience and would be likely to decrease, rather than enhance,
competition.

It increases state intervention and burden

The imposition of an obligation on the Lines to announce Freight Rates, Surcharges
and costs increases, rather than minimizes, State intervention. It would directly lead
the Vietnamese government into an examination of the operational costs of
international shipping lines. No other jurisdiction in the world engages in such an
examination.
The Draft Decision would impose a substantial burden on the Vietnam Maritime
Administration, and possibly other governmental bodies, which would have to
process thousands of transactions on a daily basis at various times during the year.
The Draft Decision would also impose significant additional administrative burdens
on the Lines at a time when the Government is trying to reduce such burdens on
business. It is likely that extra filing would lead to delays in providing rates to
importers and exporters in the Vietnam trade. Moreover, the increased costs of this
burden would be passed on to customers in whole or in part in the form of higher
rates. Added cost, delay, and uncertainty would make Vietnamese exports more
expensive and less competitive.

Proposal: Removal of the followings on the Draft Decree:

- To remove the requirement to shipping liners to publish shipping liners costs paying to
the service providers
- To remove the requirement to shipping liners to publish all ocean freight rates and
surcharges on Vinamarines website given the information is available on the shipping
liners websites. Vinamarine will create a web link to shipping liners websites where
Vietnamese shippers can connect for information on shipping schedules, ocean freight
rates and surcharges.
- Advanced notifications to rate and surcharge adjustment to be aligned international
maritime regulation. This means 30 day advanced notification for FMC trade and 15 day
advanced notification for non-FMC trades.

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III. FLOOR RATES AT ALL VIETNAMESE PORTS

Background
- The following section is put forward by the Shipping Line Community
- Whilst it is understood that the current floor rate mechanism is currently in place within
the CaiMep-Thi Vai port complex, the expansion of that mechanism to be applied to
Ports nationwide has no basis.
Proposal: NOT to implement the floor rate:
- With the exception of the CaiMep-Thi Vai complex, Ports across the nation are
operating at very high utilization levels (in some cases demand outstripping supply). In
such a favorable environment, it is irrational to apply a floor price. In any case, it can be
argued that extension of a false pricing mechanism merely develop complacency among
enterprises to improve service standards.
- The floor rate does not benefit the importers and exporters. Rather it only benefits
existing port operators, many of which have reported healthy profits over many years.
- Carriers have valid contracts with terminal operators. These contracts were awarded
based on cost competitiveness and service level through tender process and are legally
binding.
- Setting a pricing mechanism for services goes against free market competition,
particularly in light of various free trade agreements currently being negotiated and
close to finalization including the Transpacific Partnership Agreement (TPP) and
Europe Free Trade Agreement (EU-FTA).
- There is no basis for including terminal container handling services as a price
stabilization items under the Law of pricing, alongside essential commodities such as
rice, milk powder and fuel and it raises concerns about the stability of policies and the
involvement of the State in commercial activities of enterprises. Article 16 of Law on
Pricing sets outs two conditions under which price stabilization should be introduced: 1)
for goods and services listed under the Act; and 2) where price level changes affect
social-economic stability. Price setting of port services (i.e. Decision No. 1661) does not
fulfill any of these requirements. In fact, goods and services that do not fall under such
conditions but involves sellers in a dominant market position, entitle buyers to seek the
help of the Government to negotiate prices and such buyers are not to be subjected to
any price setting mechanism. On 7 January 2013, the Government issued Resolution
02/NQ-CP aimed at helping enterprises overcome business difficulties by lowering
costs. Decision No. 1661 is counter-productive to such efforts. Further, there are
Implications of Decision No. 1661 on prevailing Competition Law since this may be
tantamount to price fixing by a group of enterprises in a dominant market position.
- Should a national floor price be set for additional terminals, the impact to foreign
shipping lines is estimated to be approximately US$85 million. This would only add to
the cost of shipping services and erode competitiveness, in an environment where the
cost of calling Vietnamese ports is high by regional standards.
- Shipping and the maritime industry at large in Vietnam have made considerable
progress in its development over the past 15 years. A floor rate mechanism, if applied,
will regrettably lead to a set back of the industry.

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5.5. TOURISM

Tourism Position Paper

Vietnam Business Forum, 2015

TOURISM POSITION PAPER

Presented by
Mr. Ken Atkinson
Tourism Working Group

OVERVIEW
Whilst visitor arrivals in 2014 were up by 4% from 2013 levels at approx. 7.9 million, there
was a worrying trend with year on year decreases in arrivals for 13 months in a row but year
on year increases in the months of June to September has increased business sentiment in
the sector. This led to a year on year decrease of 11.3% for H1 2015 and 5.9% at the end of
September 2015.
The impact of the political tensions with China and the problems faced by the Russian
economy as a result of political tensions with the US and Europe were the main
contributors to the decrease in arrivals from June 2014 to June 2015. Notwithstanding the
above, mainland China is still the largest inbound market with 1.26 million arrivals in the
first 9 months of 2015 (down 18.2% on 2014).
In 2014, visa waiver countries (South Korea, Japan, Norway, Sweden, Finland and Denmark)
except Russia showed an average a 5% year on year increase and in H1 2015 there was an
average 8% increase over the corresponding H1 of 20141. South Korea registered the
biggest growth with 13% in 2014 and 31.4% in the first 9 months of 2015.
Travel and tourism is a major contributor to both employment and to GDP and in
comparison to other major contributors, seems often sadly neglected. Direct contribution of
travel & tourism to GDP in 2013 and 2014 was 4.6%. The total contribution of travel &
tourism to GDP (including wider effects from investment, the supply chain and induced
income impacts) in 2013 was 9.6% of GDP and 9.3% of GDP in 2014. Moreover, direct
contribution of travel & tourism to GDP is expected to grow by 6.6% per annum to 4.8% of
GDP by 2025.On the employment front, in 2014, travel & tourism directly supported 3.7% of
total employment. This is expected to be 3.6% in 2015. In 2014, total contribution of travel &
tourism to employment, including jobs indirectly supported by the industry, was 7.7% of
total employment.2
The objectives targeted in the Governments National Strategy (for 2020, vision 2030)
regarding the development of the tourism industry are to: attract 10-10.5 million
international visitors by 2020, serve 48 million domestic tourists, increase tourism revenue
to US$ 18-19 billion by 2020 and contribute 6.5-7% of GDP by 2020.There are several key
issues that we continue to believe need to be addressed in order for the travel and tourism
industry to achieve its full potential and for Vietnam to achieve its development plan 2020
and Vision 2030.
Prior to addressing these, we would like to congratulate all Ministries on the recent
significant enablers to the industry which include: the granting of visa exemptions to 5
major European countries plus Belarus; the minor improvements in the processing of E
visa applications at Tan Son Nhat International Airport in particular; on the bold move to
allow foreign ownership of residential property, which we anticipate will increase the
percentage of return visitors to Vietnam;and on the very recently announced reduction in
1

Vietnam National Administration of Tourism (VNAT). Data available at (http://vietnamtourism.gov.vn/english/index.php/cat/1501)

Travel & Tourism Economic Report 2014 World, World Travel and Tourism Council Council, p.1. Available at
(http://www.wttc.org/-/media/files/reports/economic%20impact%20research/regional%20reports/world2014.pdf)

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Visa fees to levels on a par with Cambodia and Laos, which will take effect from late
November.
Some of the major hindrances which we wish to see addressed include Entry Visa Policy;
Destination Marketing, Land Use costs and tax issues, MICE travel and Tour operator
accreditation.
1. VISA POLICY
Whilst the addition of the 5 European Countries and Belarus, to the list of visa exempt
countries was very welcome, there are still several issues in this area:
-

Currently Vietnam has Visa waiver or exemptions for citizens of 21 countries3 which is
far lower than our neighboring competitors such as Malaysia 164, Philippines 157,
Indonesia 45 Thailand 52, (however it is important to note that Indonesia and Thailand
offer most countries true visa on arrival). The list of Visa exempt countries needs to be
further expanded and there are common complaints from representatives of foreign
investors that they still require to obtain visas. We believe that it is inconsistent and
somewhat illogical to have free trade agreements with countries and to maintain the
requirement that Visas are required by visitors from those countries. We understand
that another 19 countries are under consideration and we urge the Government to
expedite these approvals;

The announcement that the exemption for the new visa waiver countries is for 1 year
only also limits the positive effect as most long haul tour operators and travelers plan
their trips up to a year ahead so a longer trial period is required. To maximize the
benefit of these trials, the period needs to be extended longer than 1 year so the
industry as a whole can maximize the benefits this offers;

Extend the Visa Waiver to 30 days instead of 15 as for many long haul tourists 15 days is
not enough. We have already heard reports from tourists that to take advantage of the
visa waiver they have had to curtail their visits and shorten their itineraries and in
support of this we have heard from some home stay businesses that since the
introduction of the visa waiver they have seen a significant reduction in home stay visits;

The problem of not allowing a return visit within 30 days, for persons with visa
exemption seems to have in part been resolved with the imposition of a US$ 5
administration fee it is not yet clear how this will operate in practice. This is major
hindrance to visitors who take flights to Vietnam and return from Vietnam but who want
to visit Cambodia and or Laos during their trip. So clear regulations and guidance on
implementation needs to be issued;

The Government should consider the issuing of Visas on line E Visas, which can be
printed on line and handed in at immigration to avoid the often long delays at the
airports of Hanoi and HCMC. The current on line application system works very well
there are often considerable delays experienced by passengers collecting visas in Ho
Chi Minh City and less so in Hanoi. There seems no reason why Visas could not be
issued on line as they do in Cambodia to avoid the unnecessary delays on arrival;

Vietnam Visa Exemption, Vietnam Visa Easy, 2015. Available at (http://www.vietnamvisa-easy.com/pages/vietnam-visaexemption)

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With Vietnam Airlines upgrading its aircraft on its European Routes there is an
opportunity to attract transit traffic and passengers to stop over in Vietnam when in
transit from other Asian destinations. Vietnam should consider to introduce a system for
72 hour transit visas to be issued free of charge at international gateways (Hanoi, HCMC
and Danang) for passengers transiting on International inbound and outbound flights.

Recommendations
- The list of Visa exempt countries needs to be further expanded to include all countries
with whom Vietnam has Free Trade Agreements, significant trading or investment
partners and targeted inbound tourism markets e.g. India;
- To extend the period of recently announced Visa exemptions and new exemptions to 5
years not 1 year;
- To extend the visa exemption from 15 days to 30 days;
- To urgently clarify the procedures and rules allowing returns within 30 days for visa
exempt travelers;
- To move to a system of E Visas allowing visas to be issued on line rather than the E
application as currently in use;
- To allow transit visas to be issued on arrival for up to 72 hours for passengers with
connecting flights.
2. MICE TOURISM
The MICE segment has long been desired segment for any country seeking to generate
growth in the Tourism arrivals. The revenue generated by these types of groups crosses
many aspects of the city that they are accommodated in. Revenue is generated by airline
travel fees, transportation, visas, hotels, restaurants and catering, sight-seeing and
tourism attractions and the before and after opportunities that attendees take advantage of
to spend time visiting and exploring the country they are hosts of.
Often it is the MICE segments that lay the foundation for future tourism travel as FIT visitors
and event individual travel from their initial preview of a city within a country.
MICE has not been a large portion of the arrivals for Vietnam as the developed MICE hotels
or Convention centers have not been large enough to accommodate the needs of the
segment. This accommodation is slowly developing and with formidable convention space
now available, MICE could see a very large growth if professionally and properly marketed
and pursued.
Several impediments remain before we can truly say that MICE events are sincerely coveted
by the Vietnamese Tourism Ministry. MICE competition is extreme and many Asian
countries are heavily focused on attracting regional and international MICE events.
Countries such as Thailand, Cambodia, Bali, Indonesia, Philippines and Kuala Lumpur are
considered the more valued locations with seasonal pricing. Singapore, Hong Kong and
Seoul are the more costly but also considered more mature and providing more attractions
for MICE entertainment.
Below are those issues that we believe currently prevent Vietnam from being considered a
competitive force in the MICE segment and need to be addressed in order to create
demand; such actions would certainly establish Vietnam as a formidable location for MICE
events in Southeast Asia and beyond. Many of these issues are similar to those faced by the
film industry which offers huge potential for world-wide (free) publicity.

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Visas
Visa costs are a prime example of how we fare with those countries that are visa cost free.
Many companies/organizations/associations will see this additional cost and will look more
favorably towards countries that do not have visa requirements and fees or if so, a fixed rate
and inexpensive cost. Process is also deemed as important to insure that individuals will
not be disqualified from attending these events. Visa waiver announcements will be helpful
but the big opportunities still exist with USA, Australia, India and China, as combined these
countries have over 1 billion individuals that have the income to travel independently from
their business travel. In addition, 30% of corporate and association attendees seem to
originate from China currently.
Registration of MICE Events
This has been deemed as a hassle and many customers have the feeling that they are not
wanted Vietnam for corporate meetings or international organizations. The current policies
of requiring registration of events and approval of content is not only laborious but
outdated; and
Convention Bureau Sponsorship
As we have no Convention Bureau, we are beginning to run up against those countries/cities
that do. Many, Thailand, Singapore, and Manila, Philippines are now promoting incentives
for bringing MICE events to their respective cities with sponsored programs, welcome
receptions, transportation and complimentary entrances to some tourism destinations. We
particularly are seeing this with International Organizations involving medical, healthcare
and educational events, where sponsorship is necessary to make the event viable to hold
for the organization.
Customs Clearance
The process of getting equipment and tools in for these exhibitions, is deemed long, difficult
and without procedures and posted costs. Receipts are not readily available. Companies
have said they will seek alternative locations for these events in the future based on
experiences. These tools, equipment are key to the successful execution of events.
Airline Lift and Frequency
Compared to several Asian countries, it is quite difficult to schedule trips to Hanoi with
some major cities having only single flights and some not daily. Long haul routes from
Australia and US make it easier to attend events in Korean and Japan as well as China,
Hong Kong, Singapore and Thailand. We have only one flight direct from India to HCMC and
none to Hanoi! This in itself causes many Southeast Asian MICE events to go to Thailand,
Singapore and Bali due to ease and cost of transportation.
Lastly, if you look at the cable airwaves these days, you are likely to see MICE promotions
from Countries such as Cambodia, Thailand and Singapore. Obviously others from Malaysia
Indiana and even Myanmar. Vietnam desperately needs to visually promote the cultural City
of Hanoi, the beautiful beaches of the country and the MICE venues that have begun to show
what can happen if they choose Hanoi.
We are very confident that should we make headway in these initiates that are holding back
the MICE explosion that is available to Hanoi and Vietnam, we will see the great many
benefits that will come from increased arrivals, revenues expenditures and more service
jobs, not just in Hotels, but throughout.

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Tourism Position Paper

Vietnam Business Forum, 2015

Recommendations
- Whilst the announced reduction in Visa fees will be of value in attracting MICE groups
consideration should be given for a fixed fee for group visas (not related to the number
of people) so that fees will be even lower for groups of say larger than 50;
- Relax the requirements for MICE event registration as these are internal events and any
registration requirements handle through the venues themselves;
- Create a one Stop Shop for MICE groups either through the establishment of the
Convention Bureau or through the provincial tourism offices;
- Create a simple system for import of items required by the MICE groups including
corporate gifts, re-export of hardware and unused items.
3. DESTINATION MANAGEMENT & MARKETING
a. Public-private partnership and destination competitiveness
To compete effectively, destinations have to deliver superb experiences and excellent value
to visitors. The business of tourism is complex and fragmented and, from the time that
visitors arrive in the destination until they leave, the quality of their experience is affected
by many services and experiences, including a range of public and private services, the
environment and community welcome. Delivering excellent value depends on many
organisations working together in unity. Destination management calls for a coalition of
these different interests to work towards a common goal to ensure the viability and integrity
of the destination now and in the future. This is a key challenge in a region where there is
limited cooperation and communication between the public and private sectors, and
between competing private sector companies, at present.
Most destination management issues arising in the region need to be addressed at the
provincial level. This is where structures of Government exist to address them and can be
strengthened. It is therefore important that effective governance structures for tourism are
in place locally. It is at the local destination level that many services vital to tourism are
delivered and where the positive and negative socio-economic and environmental impacts
of tourism are most apparent, requiring sound local planning and management.
Destination management at present is largely the responsibility of Departments of Culture,
Sport and Tourisms (DCSTs) reporting to Peoples Committees and, occasionally, to the
Vietnam National Tourism Administration (VNAT). In general, there are no structures for
shared responsibility between Government agencies which impact tourism, or between
DCSTs and the business sector. DCSTs do not formally meet with the business sector, and
industry representation organisations in the provinces are weak. Financial resources for
marketing are very constrained and not transparent.
In order to better serve the customers of the tourism sector in Vietnam and improve the
destination development and management, the Ministry of Culture, Sports and Tourism
(MCST) and VNAT have started a strategic planning initiative by strengthening destination
management structures at destination levels. The EU-funded Environmentally and Socially
Responsible Tourism Capacity Development Programme (ESRT) with VNAT are supporting
the collaboration of provinces and business sector stakeholders to jointly work on
destination management issues. With this support, existing Provincial Steering Committees
have been strengthened to include the business sector, and developing practical agendas
for them.

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Tourism Position Paper

Vietnam Business Forum, 2015

The overall performance of the tourism industry gives cause for concern, however. There
has been a decline in occupancy as accommodation supply is increasing. The collapse of
the Chinese market and the Russian market in 2014 has brought the need for better
destination management regarding accommodation supply, and the need for a more
strategic, broad-based marketing approach.
Tourists are not restricted by provincial boundaries when they travel. They visit and travel
throughout regions based upon the product offerings available. However, working at a
destination/regional level needs to be carefully guided by development of destination bodies
that develop and implement projects based upon strategic regional tourism plans.
We believe it would also be helpful if tourism planning and tourism products would be
further improved. In particular, a regional approach to tourism which goes beyond
provincial borders and allows joint product development will encourage tourists to stay
longer as well as encourage return visits to different parts of the country.
Effective stakeholder engagement and mechanisms for collaboration such as public-private
partnerships, and coordination bodies for destination management in the regions will
contribute to enhance competitiveness and distinguish Vietnam, as a destination that
delivers high quality, sustainable tourism experiences that benefit local people and respect
and conserve national resources.
Recommendations
Our members feel that active involvement of the Ministry and the Government in enabling
and supporting the development of destination management structures in key provincial
regions is necessary. Furthermore, we believe that the private industry should be
incorporated into these destination management bodies as key stakeholders.
We also recommend the following specific measures:
-

Establishing improved mechanisms for communication between tourism-related

businesses, associations and the public sector; to work with industry groups and
associations in working groups on a regular basis; to coordinate organisational
structures;
Putting in place region-wide coordination structures to focus and maximise the actions
of cooperating provinces and facilitate cooperation;
Strengthening Tourism Associations in creating co-operation and representatives for
the business sector in order to contribute to important issues within the tourism sector;
Strengthen public-private cooperation for promotion and marketing at destination levels
to support responsible tourism products and services;
Adopting green and responsible tourism agendas and implementing them;
Improving the product, province by province, to meet (future) market needs and
providing more things to do for visitors staying in the regions expanding
accommodation base;
Develop stronger regional products that clearly reflect destinations and attractions of
Vietnam; Create the regional linkage in tourism product development;
Apply responsible promotion and marketing programmes, which create a competitive
advantage, increase value and demand, customer loyalty and satisfaction, and facilitates
more respectful interaction in destinations;

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Tourism Position Paper

Vietnam Business Forum, 2015

Delivering professional marketing, focussed on specific target markets and addressing

issues such as greater awareness, electronic media and seasonality to improve
business viability.

b. Joint marketing initiative between TAB & VNAT

Following the establishment of the Tourism Advisory Board (TAB) in 2013, industry
stakeholders have worked with officials from the Vietnam National Administration of
Tourism (VNAT) to strengthen Vietnams competitivenesss as a tourism destination. One of
the main focuses is to improve the countrys international marketing efforts.
VNAT and the TAB are undertaking a joint marketing initiative focused on key international
markets. The aim of this program will be to develop an internationally recognized, digital
platform for marketing Vietnam globally. Central objectives of the marketing initiative
include:
-

Position Vietnam as a must-see tourism destination in SE Asia

Develop internationally recognized branding materials
Focus marketing activities on select key markets
Increase international arrivals to Vietnam
Attract high value visitors with longer stays and higher spends
Enhance industry cooperation to leverage resources

The main focus of TAB is to increase Vietnams competitiveness as a travel and tourism
destination by allowing government and industry leaders to pool their resourcesfinancial,
human and intellectual. To achieve this mission, the TAB has established a joint marketing
initiative with VNAT focused on key international markets. The specific aim is to redevelop
key assets (e.g. website, , branding campaigns) and programs (trade shows, junkets, etc).
Funding for these projects will be contributed to from public and private sources.
c. Appointment of a Third Party Agency
In May 2015, the TAB and VNAT formally launched a tender to identify a digital marketing
agency to develop a global E-Marketing campaign. Digital marketing is an extremely
effective channel that offers increased engagement with visitors and the travel trade, highly
measureable performance, rapid strategy adjustment and enhanced targeting capabilities.
Developing a strong digital marketing campaign is crucial given the governments limited
marketing budget.
In October 2015, VNAT and TAB identifed OgilvyOne Worldwide Vietnam, as the selected
agency and are targeting to launch the campaign in Q1 2016. OgilvyOne Worldwide is one of
the most trusted names among national tourism boards, having represented Australia,
Great Britain, Hong Kong, Japan and India. Appointing an international recognized agency to
market Vietnam globally sends a strong statement to the internaitonal travel trade and
demonstrates that Vietnams tourism authorities are thinking progressively about the
future of the industry.
d. Key Target Markets
The campaign goals will focus on markets where travelers are already searching for
Vietnam related travel offerings. This will yield higher results as there will be a closer
correlation to online marketing efforts and actual visitation. The eight countries that we will
focus on include: USA, Germany, France, UK, Japan, Singapore, Malaysia, and Australia.
Consideration of additional markets will be made on a case-by-case basis.
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Tourism Position Paper

Vietnam Business Forum, 2015

The aim of this global marketing program is to create an effective platform to broadly
position Vietnam as a top-tier tourism destination. The ultimate objective is to identify key
segments within each target market that will yield the highest value visitor. We are focusing
on visitors that offer extended length of stay and higher levels of local expenditure. We want
high-yielding visitors, which in turn will promote a more sustainable industry environment.
e. Budgetary Constraints
This joint marketing initiative is unprecedented in Vietnam and entails collaboration
between public and private stakeholders. The long-term objective of this marketing
initiative will focus on building VNATs capacity to administer similar, best-in-class
campaigns and to collectively lobby support for the government to contribute additional
funding towards the promotion of Vietnams tourism industry.
In order for this partnership to work, the TAB is requesting for formal commitments from
MCST/VNAT to contribute funds to a joint marketing initiative to be administered by TAB in
conjunction with VNAT. The aim is to achieve a 1:1 matching of Public-Private contributions.
At present, the funding that is contributed to marketing Vietnam globally is less than
US$1.5 million. This amount is substantially inadequate for VNAT to be effective and is a
fraction of what Vietnams neighboring competitors contribute to their national tourism
boards. We cannot emphasize enough the importance of the travel and tourism industry to
Vietnams economy. The industry generates nearly 10% of GDP on an indirect basis. Thus,
it is imperative that the government recognize the industrys contribution to the
socioeconomic welfare of the state and to properly support the industry with an adequate
budget for international marketing.
Recommendations
Our membership strongly advocates that the Government recognize the importance of the
tourism industry and its socioeconomic impact by contributing additional funding in
promoting Vietnam tourism internationally. In addition to public funding, the Government
should make possible public-private partnerships for building trade alliances and
marketing initiatives.
We also recommend the following specific measures:
-

Vietnams tourism promotion budget should be increased significantly to reflect the

socioeconomic impact of the tourism industry;
VNATs marketing budget should entail increased contributions to online marketing as
well as trade promotions;
VNAT should be given authority to work with private stakeholder groups (e.g. the TAB) in
developing public-private funding mechanisms;
The government should develop broader initiatives with the private industry to
undertake destination marketing as well as destination management activities;
Marketing activities should become increasingly sophisticated to allow for targeting key
countries, profiling select traveler types and positioning the appropriate products
To develop world class initiatives, VNAT should work more closely with the private
industry and also appoint internationally recognized agencies (e.g. advertising and
branding agencies).

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Tourism Position Paper

Vietnam Business Forum, 2015

4. LAND AND TAX ISSUES

Investment decisions made around the level and scope of tourism and hospitality projects
are driven significantly by the implications of land policy.
a. Land Acquisition and Land Use Policy
Vietnams constitution and the Land Law, 45/2013/QH-13 dated 29 November 2013, provides
that all land is owned collectively by the People and that only land use rights may be
granted to individuals and enterprises either through an allocation or a lease arrangement.
For leased land, which is generally the form of acquisition for tourism and hospitality
investment, the tenor of the lease is 50 years with some exceptions for 70 years and this is
relevant as it imposes a fixed period over which the value of the investment can be realized
and therefore is a significant factor in financial feasibility and return calculations.
Regional competitors in comparison, allow for some form of freehold which provides both
for the ability to front-load the return profile and create a more robust financial return
profile.
Investment incentive is further limited by the lack of clear regulations and policy direction
with respect to the ability to include residential components for master plan approval
(zoning) on land which is located on beach front property adjacent to the ocean. There has
been inconsistent treatment by provincial authorities with respect to this. The successful
development of a critical mass of high quality, high-end resorts in Da Nang and Quang Nam
can be attributed to a more liberal view on the ability to develop vacation residences (with
the issuance of pink or even red books) by these provincial governments. When a
vacation residence in a resort is owned, but put back into a hotel rental pool
arrangement, this has the benefits of a) creating a cheaper source of financing (buyer
financing) for the investor for the development of high-quality tourism products and b)
creating an incentive for repeat visitation to the property by the owner as well as an
incentive to promote the tourism property due to an economic interest in the success of the
hotel room rental pool. Given the recent legal development allowing foreigners to own real
property assets in Vietnam, this could potentially be a strong promotional scheme to
encourage improvement of the return visitation rate which has been very poor for
international visitors as recently reported at being only 5%.
b. Land Rent
The Land Law, 45/2013/QH-13 dated 29 November 2013 and Decree 46/2014/ND-2014,
dated 15 May 2014, are the most relevant documents for guiding the determination of land
use rent to be paid by lease-holders. A major change from the previous legal framework is
that land prices will be published every five years rather than annually with a mechanism
for adjustment only in the event that prices are deemed to have changed by a factor of 20%.
The coefficient method for land valuation still applies under Decree 46/2014/ND-2014 and
continues to apply a single rate for all land whether there is land with tourism structures
(hotel buildings, restaurants) built on them or landscaped areas and mandatory areas for
supporting infrastructure or community services such as circulation for emergency
services such as fire prevention. For many tourism developments, this results in a very
heavy burden of cost and since this method has been put in place in late 2010 many
companies have seen their annual land rental cost increase by as much as 19 times.
The biggest area for concern and potential gain is to make Vietnam more competitive for
investment capital compared with its regional competitors. Table 1 shows Vietnams
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Tourism Position Paper

Vietnam Business Forum, 2015

position relative to the competitive based on proximity and some level of similarity in both
offering and target markets for inbound tourism (hereafter called collectively the
Competitive Set Appendix 1):
- Cambodia
- Malaysia
- Philippines
- Thailand
It is difficult to make a direct comparison given the difference in the treatment of land
under the differing legal systems. However, it is clear that the more successful attractors
of inbound tourism provide clear incentives. Malaysia and Thailand have substantial
incentives for the development of tourism businesses, including hotel development.
Malaysia has programs of Pioneer Status and Investment Tax Allowances which offer
substantial economic benefit to developers of hotels.
The development of the tourism industry should be viewed in the same context as other
industries, recognizing that there is competition not only for attracting visitors, but also
competition for attracting capital to the tourism and hospitality infrastructure which will
help to attract and support those visitors.
Recommendations:
- Master Plans for key areas with development potential for tourism should be given
priority both at the central and provincial levels and should be coordinated with a unified
tourism development strategy and plan. Particular attention should be provided to
ensuring that infrastructure development is
- A framework should be put in place to clearly instruct and allow the relevant authorities
to have a graded or preferential land use pricing for tourism projects (particularly those
within an identified tourism focused master plan) and should allow flexibility on the
rates applied for land that is used for the construction of structures versus landscaping,
infrastructure and circulation.
- Support should be given for providing formal clarification and support for the
permission to designate some portion of beach front land adjacent to the ocean. It is
recommended that projects that are licensed for the development of five-star,
international standard developments, particularly those that have a distinct destination
element (such as golf courses, entertainment centers, access to medical tourism, etc.)
should be given priority to develop a component of the project as residential for sale.
5. SUSTAINABLE TOURISM
In 2005, the Vietnamese law on tourism has clearly defined sustainable tourism as
development of tourism that meets the needs of the present without harming the ability of
the future to meet tourism needs4. As well the first paragraph of article 5 is stating that in
Vietnam tourism development will rely on developing sustainable tourism in line with
master plans and plans, ensuring harmony between socio-economic development and
environmental protection; develop cultural and historical tourism and eco-tourism in
priority and key regions; and conserve, embellish and promote the values of tourism
resources.

Other definitions given by the Tourism law Eco-tourism: means a type of tourism that is based on nature, connected with the local
cultural identity and with the participation of local communities for the sake of sustainable development.
Cultural tourism: means a type of tourism that is based on the national cultural identity with the participation of local communities
in order to preserve and bring into full play their traditional cultural values.

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Tourism Position Paper

Vietnam Business Forum, 2015

According to recent figures and to Mr. Nguyen Van Tuan General Director of the Vietnam
National Administration of Tourism, during the last two decades, Vietnam tourism has
strongly grown; representing an impressive annual growth of 12%; contributing to
developing national economy, eradicating hunger and poverty, ensuring social security,
preserving and upholding cultural values, protecting environment, maintaining national
security. However, the current tourism development still faces many challenges, especially
the competitiveness of destinations and sustainability5.
These initiatives could be further develop among the industry with best practices sharing
and detailed guidelines, enabling each stakeholder of the tourism industry to play its part
towards sustainability.
Nowadays, sustainable certification schemes are being developed in Vietnam especially for
accommodations (such as Green Lotus Award, ASEAN Green Award and other private
initiatives Planet 21 from ACCOR, Intercontinental Green Engage, Hilton Clean Air etc..)
which allow to enhancing the application standard systems in the industry. However, they
are often only considering basic environmental aspects of sustainability and not taking into
the account the social impacts caused by the tourism businesses.
One of our members EXO Travel a Destination Management Company, is committed to a
sustainable certification scheme developed by Travelife, in order to share best practices
and to be able to better promote our suppliers also involved as key stakeholders in the
development of responsible tourism. Tour operators and Travel agents play a central role in
the tourism industry. As intermediates between tourists and tourism businesses they can
influence the choices of consumers, practices of suppliers and the development within
destinations. Through their unique position travel companies can make an important
contribution to the protection of the environment and culture and in promoting social and
human rights in the destinations they operate in.
However, the lack of standards for Tour Operators, Travel Agents and other tourism
businesses is a hindrance to promote the ones that are taking actions. Following a
sustainable certification scheme and committing to responsible tourism helps to raise the
standards of the industry as a whole. The lack of knowledge about responsible tourism and
best practices for sustainability is an impediment to future development and sound
governance of the industry. Trainings and raising awareness campaigns are deeply needed
to boost understanding of this pressing situation (such as tourism in sensitive areas etc).
Recommendations
- Expedite the application of industry standard systems; to create a healthy competitive
environment in the sector;
- Raise awareness of all administrative levels, sectors and the whole society about the
position and role of tourism to the countrys socio-economic development; giving
prominence to social and environmental responsibility in all tourism activities;
- Encourage and incentives the adoption of a certification scheme that meets the
Vietnamese requirements and conditions.

Author Hong Nhung Source: http://vietnamtourism.gov.vn/english/index.php/items/6531

Page 11 of 11

APPENDIX 1
No.

Categories

Governing
Laws

Tenure of
Land

Taxes and
Fees

Real Estate
Business Law
Long-term or
term Use Right
max 50 yr with
renewable to
additional 50
years
Permanent or
term- ownership.
From July 1, 2015
foreigners are
allowed
conditional
ownership of
landed and
apartment
properties

Tenure of
Property for
Developers
and Owner

Land and Property Taxes

One-time fee
and Taxes Acquisition
and/or
purpose
change

Vietnam

Acquire
directly from
the
government
to attract
Investment
Transfer Tax
Fees

Cambodia

Philippines

Land Law

Real Property
Law

Real Estate
Taxes

Free-hold and
Lease hold upto
99 years

Free-hold and
Lease-hold

Conditional
Free-hold and
Lease-hold

Permanent or
termownership.
Foreigners can
conditionally
own properties

Permanent or
termownership.
Foreigners are
allowed to own
properties.
Special
government
program:
MM2H

Only Filipinos or
companies with
domestic equity
of > 60% can
Permanent or
termownership.

Data still to be
sourced

2% of
Property/Land
Value
Re-registration
fee of 0.5%

Malaysia

4% on all "hard
title'

Page 1 of 2

Market-based.
GST tax of 6%
and Stamp Duty
tax of up to 3%

Market-based.
VAT charge of
12% on
transaction and
a Documentary
stamp tax of
1.5% on
conveyance.
0.25-0.75% of
selling or zone
value
Documentary
stamps 1.5%

Thailand
Building and Land
Act
Free-hold and
Lease-hold.
Foreigners are
allowed max 30-yr
Lease renewable to
add 30-yr

Permanent or
term- ownership

Market-based. Land
tax of 3.3% and
Documentary
stamp tax of 0.5%
on conveyance.

No.

Categories

Taxes and
Fees

Vietnam

Cambodia

Malaysia

Philippines

Thailand

Ongoing and
recurring

Land - undeveloped

Property Tax

Rental Taxes

0.03% annual on
gov pricing

No applicable law
regarding
property tax

Individual on PIT
of taxable invoice
income on the
person receiving
income.
Consolidated year
end with other
income

An annual land
tax of 2% is
levied on all
unused
properties on
market price by
sqm

Small tax depend

on location. Will be
< 0.5% if
commercial and
<0.1% of residence

0.10%

Real property
tax 1- <2%
depends on
locations
payable 1st
quarter of Yr

Exempt for the 1st

owner occupied, but
not quite on other
owners properties.
Foreigners own
through a company
will have to pay
property tax even
wihout rental.
New Property Tax all - <0.5% of
commercial use
and <0.1% if own
use

Local residents
have much
better
deductible rate
otherwise nonresident
foreigners pay
25% of rental

12.5% of annual
rental value or
annual assessed
rental value
whichever higher

6% annual
payment

22.4% after
deducting all
relevant costs
including
withholding tax
depreciation,
of 10% on rental
annual property
amount
tax, operation
expenses
(mgmt,
services)

Page 2 of 2

Tourism WG Roundtable Discussion with VNAT

Vietnam Business Forum, 2015

ROUND-TABLE DISCUSSION BETWEEN TOURISM WORKING GROUP AND VIETNAM

NATIONAL ADMINISTRATION OF TOURISM (VNAT)
- Time: 2:00PM, October 8, 2015
- Venue: VNAT premises, 80 Quan Su, HoanKiem, Hanoi
Mr. Ken Atkinson Head of Tourism Working Group, VBF
- In preparation for the Annual VBF on December 1, the VBF Tourism Working Group
would like to touch on the following issues:
Visa policy
Destination marketing
MICE
Land use fees and tax issues
Responsible and sustainable tourism
1.

VISA POLICY

Feedback from Mr. Nguyen Van Tuan Director General, Vietnam National Administration
of Tourism (VNAT)
- We would like you to emphasize impacts of visa exemption policy, especially the
following 3 key points:
Visa exemption policy only lasts for one year. The Government should commit to
extend the visa exemption period to more than one year.
15-day-visa waiver shall be extended to 30 days as this limitation does not encourage
tourists to come to Vietnam.
Tourists are not allowed to have a return visit within 30 days, the tourism working
group should propose the Government to lift off this barrier as this is major hindrance
to visitors who take flights to Vietnam and return from Vietnam but who want to visit
Cambodia and or Laos during their trip. We understand that these barriers come from
the old immigration law, the Government and the National Assembly should take this
issue into consideration and amend the law in the future.
- Recently, Vietnam has granted visa waiver to 6 new countries which is seen as a positive
progress but it is still not enough to increase Vietnams competitiveness. The list of visa
exemption countries should be extended, especially for key target markets, and only
except some countries with problems that needs further consideration. Priority shall be
in the following orders: 1st:the remaining European Union countries, 2nd: India,
Australia, New Zealand, Canada,3rd: SNG and Eastern European countries.
- Visa is the first key to attract tourists coming to Vietnam, increase the competitive
advantage, and develop tourism industry.
Feedback from Mr. Ha Van Sieu Deputy Director General, VNAT
- Visa fees should be used to invest back to tourism to improve technologies including visa
on arrival and e-visa system in order to create incentives and to smooth the process.
Mr. Ken Atkinson Head of Tourism Working Group, VBF
- The 30 day return rule is a major problem not only for tourists but also for business
travelers.
- Transit visa: With Vietnam Airlines upgraded aircraft and new routes to European
countries, there is an opportunity to attract transit tourists and passengers to stop over
in Vietnam when in transit. Vietnam should consider introducing a 72-hour transit visas
for passengers with connecting flights.

Page 1 of 5

Tourism WG Roundtable Discussion with VNAT

Vietnam Business Forum, 2015

Feedback from Mr. Nguyen Quy Phuong Director, Travel Department, VNAT
- Before the immigration law, transit visa was allowed under the name of transit-no-visa
which was applicable to both air travel and sea travel tourists. However, when the
immigration law is introduced, tourist must have a visa when coming to Vietnam.
- To improve this issue, Deputy Prime Minister Vu Duc Dam has allowed tourists transit in
Vietnam to apply for a visa without having to present police check. Deputy Prime Minister
Vu Duc Dam has also asked the Ministry of Finance to review and lower the visa fees for
transit tourists from 45 dollars to 10 dollars.
- Visa exemption period should be extended to attract more travelers. In Vietnam,
countries with visa exemption can stay up to 15 days, but in Phu Quoc, tourists from all
destinations can enter with 30-day-visa exemption. However, now we can only choose 1
out of 2 options. In order to encourage more customers to travel to Phu Quoc, it is
proposed that the Government allows choosing both options.
2.

DESTINATION MARKETING

Feedback from Mr. Nguyen Van Tuan Director General, VNAT

- The VBF Tourism Working Group should emphasize the importance of introducing a
Tourism Development Fund.
- Comparing with other neighboring countries, the amount of Government funding Vietnam
is using for destination marketing is too little. The Government should contribute
additional funding towards the promotion of Vietnams tourism industry.
- It is very important to promote Vietnam tourism at the international border gates,
especially airports, sea ports, land border crossings and more in flight advertisements
on international flights to Vietnam.
- Vietnam needs to set up overseas tourism offices to promote Vietnam image. This is not
a new proposal but the Government should really take action on this.
Feedback from Mr. Ha Van Sieu Deputy Director General, VNAT
- A single national image should be identified and used across all industries activities
within Vietnam and overseas. We recommend that Vietnamese tourism image should be
used to attract overseas travelers and investors.
Mr. Ken Atkinson Head of Tourism Working Group, VBF
- We would also like to include the point on adopting green and responsible tourism
agendas as tourists nowadays are getting more and more green conscious.
Feedback from Mr. Nguyen Van Tuan Director General, VNAT
- We are very aware and supportive of green and sustainable tourism and will include this
as a separate chapter when we revise the Tourism Law.
- Taking this chance, we would also like to promote role and responsibility of Environment
and Socially Responsible Tourism Capacity Development Programme - ESRT and
recommend to legalize sustainable and responsibility tourism.
- Accordingly, we should focus on quality rather than quantity with mass-tourism. Green
tourism focuses not only on the environment but also on ethnicity and cultural
environment.

Page 2 of 5

Tourism WG Roundtable Discussion with VNAT

3.

Vietnam Business Forum, 2015

NATIONAL TOURISM PROFESSIONAL BOARD (NTPB) & NATIONAL TOURISM

CERTIFICATION BOARD (NTCB) UNDER VIETNAM TOURISM CERTIFICATION BOARD
MEETING (VTCB)

Feedback from Mr. Ha Van Sieu Deputy Director General, VNAT

- Currently, in Vietnam VTCB include responsibilities of NTPB and NTCB. According with
the new labor law, NTCB is assigned to the MOLISA but no detailed instructions are
introduced, thus, at the moment VTCB has not have its official status.
- In the near future, tourism industry will try its best so that VTOS standards will be
passed as national standards.
- In order for Vietnam tourism to stay competitive in ASEAN, the Government has to be
fully aware of the importance of national standards, clear guidance and consistent
regulation and laws.
4.

MICE TOURISM

Mr. Ken Atkinson Head of Tourism Working Group, VBF

- We believe that the issues faced by MICE tourism are similar to the issues that have been
faced bythe film industry. The film industry is a great opportunity to promote Vietnam as
a destination all over the world.
- There are some critical issues that MICE tourism are facing:
Customs clearance: The process of bringing promotional goods, equipments and
tools in for conventions, exhibitions, is very long and difficult. We need to work with
the customs department to fast track and reduce the custom time, and simplify
customs procedures.
Registration of MICE Events: foreign groups often face difficult registration
requirements with local authorities.
National Convention Bureau: some countries have established their own National
convention bureau to help organize MICE events. We should study these best
practices and establish one stop shop to support MICE tourism.
Recommendations from ESRT Representatives
- There is a possibility for Vietnam to establish and promote MICE tourism in Hanoi, Ho Chi
Minh, and possibly in Da Nang in the future. Our contact point should be the Department
of Tourism.
- ESRT proposes a separate meeting with TAB, VNAT to discuss further on development of
MICE tourism in 2016.
Feedback from Mr. Nguyen Van Tuan Director General, VNAT
- Vietnamese Government should encourage MICE tourism because this kind of tourism
includes event organization, leisures and shopping.
- In order to encourage MICE tourism, the Government should facilitate more favour
conditions by:
simplifying licensing process
delegating a contact point to be in charge.
- Vietnam needs to position or identify destinations relating to MICE tourism to include
Hanoi, Ho Chi Minh, Ha Long, Da Nang, Nha Trang and Phu Quoc.
- The VBF Tourism Working Group should send a strong message to the Government so
that they are aware of all benefits from the MICE tourism.
- A number of opportunities that MICE could look into including golf tournament, surfing
competition, sailing competition and any other international sport events.

Page 3 of 5

Tourism WG Roundtable Discussion with VNAT

5.

Vietnam Business Forum, 2015

LAND USE FEES & TAX

Mr. Ken Atkinson Head of Tourism Working Group, VBF

- There are a lot of differences in different provinces about land allocation, whether
investors can have long or short term use. Pricing policy tends to have a standard price,
which will have major impacts on the cost of developing resorts.
Feedback from Mr. Nguyen Van Tuan Director General, VNAT
- This is also an issue that VNAT is working on at the moment.
- It is best if VBF prepares a detailed report on land use fees for us to use as reference to
submit along with our documents and proposals to the Government in November 2015.
- Policy is decided by Chairman of the Peoples Committee in each province, therefore,
there is a difference between provinces. We should propose to the Government that
Vietnam should have a consistent policy on land use fees and tax that improve liquidity of
land and resorts.
- Before 2010, the base price used for tax calculation purpose is very low. However, after
2011, the Government decided to move the price closer to market price, pushing it a lot
higher. The tax is equally treated between construction area, greenery area or unused
areas. Therefore, the larger the area, the more difficult investor will face.
- The Government is suggested to look carefully into this problem to reduce the cost
burden for businesses.
Mr. Ken Atkinson Tourism Working Group
- Included in this section, we would like to focus on the need for master planning
development areas to keep investment sustainable.
6.

RESPONSIBLE AND SUSTAINABLE TOURISM

Mr. Ken Atkinson Tourism Working Group

- Focusing on setting standards & accreditations for tour operators, trying to get
accreditation system that lays down minimum standards.
- One way to get it done is that we may use overseas accreditation agency as a
professional third party to have periodical audit and provide certification if the Vietnam
tour operators meet the minimum standards.
Feedback from Mr. Nguyen Van Tuan Director General, VNAT
- It is best if VBF could send us recommendations and feedbacks on this for us to reflect in
the revised Tourism Law.
7.

VTOS

Mr. Ken Atkinson Tourism Working Group:

- There is an additional issue for the international 4 - 5 stars hotel who already spent a lot
of money training their staff up to international standard. However, it is required that 70 75% of their staff have to be VTOS accredited. Following this requirement, there will be
huge additional cost for them.
Feedback from Mr. Nguyen Van Tuan Director General, VNAT
- The hotel groups internal training standards are not accredited by an authorized
organization, hence, cannot be accepted here in Vietnam.

Page 4 of 5

Tourism WG Roundtable Discussion with VNAT

Vietnam Business Forum, 2015

LIST OF PARTICIPANTS
No. Name
1
Mr. Nguyen Van Tuan
2
Mr. Ha Van Sieu
3
4
5
6
7
8
9

Tile
Director General
Deputy Director
General

Mr. Nguyen Ngoc Duc

Director

Mr. Nguyen Quy Phuong

Mr. Vu Van Thanh
Mr. Vu Quoc Tri
Ms. Mary McKeon
Ms. Dang Thi Van Anh
Ms. Nguyen Ngoc Anh

Director
Director
Project Director
Team Leader
VBF Coordinator
VBF Officer

Page 5 of 5

Organization
VNAT
VNAT
International Cooperation
Department, VNAT
Travel Department, VNAT
Hotel Department, VNAT
ESRT
ESRT
VBF Secretariat
VBF Secretariat

SECTION VI

APPENDIXES

MIDTERM VIETNAM BUSINESS FORUM

Hanoi, June 9, 2015

OPENING REMARKS
Vietnamese Government H.E. Mr. Bui Quang Vinh, Minister of Planning and Investment
While Vietnam has achieved positive socio-economic results by early 2015, it still faces
difficulties such as the economys weak competitiveness in the context of deeper international
integration. Therefore, the Government is focused on breakthroughs in economic restructuring
to transform the growth model, encourage investment in the form of public-private
partnerships (PPP) and into supporting industries, reform public investment as well as the
financial system and banks to insure efficiency and recover bad debts. It is also working to
accelerate the equitization of State-owned enterprises (SOE) and drastically reduce
Government-held capital in equitized enterprises, improve business efficiency and achieve
equality in market mechanisms and allocation of resources. Todays midterm VBF has the
theme Enhancing enterprise competitiveness for global integration and will address six key
areas: trade, tourism, investment, banking, capital markets and infrastructure. These areas are
closely linked with innovation requirements for Vietnam to achieve on its path to deeper
integration into the global and regional economies and create a favorable investment
environment for businesses in 2015.
International Finance Cooperation Mr. Kyle Kelhofer, Regional Manager
Vietnams economy is standing at a critical juncture. The first wave of global integration in the
1990s spurred growth and the second such wave has coincided with the ASEAN economic
communitys emergence and important trade agreements such as Trans-Pacific Partnership
(TPP) and EU-Vietnam Bilateral Trade Agreement to kick-start the next stage of growth. Such
opportunities include development of innovative domestic private sector companies integrated
into global supply chains with greater access to global technology, partnerships and funding to
improve Vietnams competitiveness. To achieve this, policies that encourage more innovation
and risk-taking are needed to grow the next generation of competitive entrepreneurs. To
achieve this, Vietnam should continue investment climate efforts through transparency and
predictability. Equally important for business development and competitiveness, is the rule of
law and enforceability. A key competitiveness determinant will be Vietnams ability to
efficiently channel scarce capital to more effective uses, while banking restructuring remains
vital.
Finally, continued development of infrastructure to enable growth is critical, especially in power
and energy. Energy efficiency and renewable energy can help address power demands in an
environmentally safe way. Clear legal and regulatory frameworks, improved pricing policies and
accessible commercial financing would be beneficial. Overall, a more competitive Vietnam will
further improve peoples lives and achieve competitive growth.
Vietnam Business Forum Consortium Mrs. Virginia B. Foote, Co-Chairman
Significant progress has been made on issues important to the business community, especially
Resolution 19. However, the implementation of some influential laws has raised concern. The
countrys goal to aspire to the standards and success of the ASEAN six and transition from
factor-driven to efficiency-driven economies is commendable. To achieve this, productivity and
strengthening enterprise competitiveness will be key. While trade agreements of potential are
Page 1 of 18

in the pipeline, high standard laws and regulations as well as administrative reforms are needed
to help companies take advantage of integration into global supply chains and attract
supporting industries. VBFs partnership with the Vietnam Chamber of Commerce and Industry
(VCCI) under Project 12 on how the business community can join the Government to reduce
administrative inefficiencies and corruption is taking shape, while integrating Vietnam Integrity
Alliance activities into VBF work on how enterprises can learn from international governance
best practices is equally promising.
AmCham continues to encourage and support ways to reduce the use of cash, paper and faceto-face financial transactions for business-to-business and business-to-Government payments.
It is also willing to help address troublesome restrictions on domestic and foreign internet
companies that hinder connectivity and innovation beneficial to all enterprises. Meanwhile,
bringing Vietnams accounting system closer to global standards is encouraging. Finally, the
new Investment Law could prove challenging as its 267 lines of conditional business is
significantly more than regional competitors and approval processes are more complicated. The
Government to encouraged to ensure the law does not impede firms.
SESSION 1 BUSINESS INVESTMENT CLIMATE
Vietnam Chamber of Commerce and Industry Dr. Vu Tien Loc, President
Acceleration of negotiations and endorsement of a series of free trade agreements (FTAs) as
well as transforming the regulatory framework and administrative procedures under Resolution
19 embody two recent major Government reform efforts. A VCCI survey in April 2015 indicated
that 46% of Vietnamese private firms and 50% of FDI enterprises planned to increase the scale
in the near future. However, this contrasts with the domestic private sectors limited ability,
resulting in a shortage of medium-sized firms to act as bridges to connect with global value
chains or infiltrate international markets. The domestic private sector must drive the local
economys self-sufficiency and make effective connections between the FDI sector and
domestic business community. To realize this, the Government must consider to:
-

Develop a National program for starting a business to navigate a career path for younger
generations, encourage supporting industries to help give Vietnam a competitive edge,
simplify criteria to start and run a business and enhance education standards, especially
skills training in universities and vocational schools.

Enhance effective lending programs, other forms of financial incentives and developmental
funds, especially those to support small and medium-sized enterprises (SMEs) and private
investment.

Strengthen information systems for technology and markets as well as promote SME trade
and investment through business associations.

Resolution 19 has paved the way for groundbreaking administrative procedure reforms.
Unnecessary business and business licensing criteria among the 5,000 procedures and
business-related criteria for 267 conditional lines of business specified in the new
Investment Law should be screened for removal, while other criteria outside this list of 267
business lines should be annulled from July 1, 2015.

Increase judiciary reform parallel to administrative reform to build trust among businesses.

Better inform businesses about the opportunities and challenges from upcoming FTAs.

Page 2 of 18

Request FDI firms play a more active role in implementing support programs for domestic
SMEs, especially in supporting industries, to help them become supply chain partners and
suppliers.

American Chamber of Commerce Ms. Sherry Boger, Chairman

Vietnam could be a large beneficiary of the TPP, which will help lay a foundation for regional
integration and be an engine for a comprehensive U.S.-Vietnam partnership. Regarding
enterprise competitiveness, integration into global supply chains with access to global sources
of funding, technologies and global markets is vital. Action plans should include private sector
cooperation to better inform Government and companies on SME development incentives and
necessary requirements for joining global supply chains. On Government competitiveness, local
and national Government agencies must improve competitiveness as service providers. There
should be meaningful Government cooperation and consultation with businesses on a monthly
and quarterly basis to assess progress. Further to this, the Vietnam Trade Facilitation Alliance
will facilitate regular Government-business consultations. However through Governmentbusiness dialogues, AmCham members and prospective FDI investors have been frustrated by
persistent delays and uncertainties regarding projects, policies and regulations. In the
automotive sector, the lack of a clear road map has dampened investor confidence and risks
manufacturers considering alternate plans within ASEAN. Banking policies are well intended,
but delays are challenging. Additionally, banking system and State-owned enterprise reforms,
non-performing loans and corruption remain perennial policy challenges.
European Chamber of Commerce Mr. Tomaso Andreatta, Deputy Chairman
To achieve growth, prosperity and improve firms competitiveness, there needs to be enhanced
infrastructure investment, liberalization surrounding national trade and investment and a more
flexible labor market. Infrastructure is another key issue, with logistics and energy prioritized.
Vietnam needs an effective railway, roads and ports to enhance industrial production capacity.
To achieve this, project financing must be bankable and authorities must facilitate projects by
taking rapid and transparent decisions. Market liberalization, especially adjustment of
electricity prices, is needed. To realize a greater level of environmental protection, cleaner
sources of energy must be created through new technology and incentivizing renewable
sources. A reduction in State monopolies will benefit this process, with privatization of
electricity generation through the sale of assets and allowing local and international companies
to build new power stations. Professional training and modernization of schools at all levels is
also essential, especially in high technology and tourism. Overall, Vietnam can attract
companies relocating from neighboring countries and skilled workers by maintaining flexibility
and ensuring higher salaries match productivity increases. Facilitating foreign, qualified workers
will allow for knowledge transfers and enhance the Vietnamese workforces productivity.
Korean Chamber of Business Mr. Ryu Hang Ha, Chairman
KorCham has four major issues to raise. The first relates to difficulties in the import of used
machinery and equipment. Draft Circular 20 contains restrictive conditions on imported used
equipment of concern to foreign-invested enterprises. In particular, clear criteria are needed to
evaluate the usage period and remaining quality of equipment. Secondly, there is potential for
a serious power crisis as early as 2018 due to delayed power projects, including nuclear ones.
The Government is encouraged to expedite power projects undertaken by trusted and wellknown companies. Thirdly, under current labor laws and regulations in Vietnam, an employer
cannot immediately terminate a labor contract or dismiss an employee who falsifies
qualifications, skills or experience. The termination process is cumbersome and a revision of
Page 3 of 18

such regulations is needed. Finally, regarding changes in HS code applications, during the
course of implementation of Circular 164, the following case may occur: the goods which is
previously exempted from import duty may become the goods which is imposed the import
duty. In some cases, the goods which used to be exempted from the import duty can be
imposed retroactively. The Government of Vietnam should consider not imposing the import
duty retroactively in respect of the goods which was imported before the Circular 164/2013/TTBTC took effect.
Japanese Business Associations in Vietnam Mr. Shimon Tokuyama, Chairman
The Japanese business community remains committed to further promoting economic and
industrial development in Vietnam. To achieve these goals, fiscal discipline and infrastructure
development must be balanced. While fiscal discipline is welcomed, sufficient finance must be
channeled into quality infrastructure projects for further economic growth. To achieve this
growth, further FDI is needed as well as enhanced manufacturing for domestic markets,
especially automobile industry development. However, many manufacturers face unfavorable
legislation. To enhance international competitiveness in manufacturing, restrictive legislation
on overtime work must be addressed, a clear explanation on the revised decree on importing
used machines and a framework on annual minimum wages with inputs from businesses are
needed. Regarding visa exemptions for Japanese visitors, more flexible conditions are needed
to enhance business and tourism activities.
Hanoi Young Business Association Mr. Tran Anh Vuong, Standing Deputy Chairman
Regarding the Science and Technology Law 2013, a step-by-step procedure is needed to
enhance its simplicity and the Government must invest sufficient and sustainable capital to
support science and technology development. Businesses investment in supporting industries
should be encouraged, especially investment from private SMEs. A dedicated decree on
supporting industries should be issued soon and could concentrate on development of craft
villages and household businesses to become outstanding supporting industry units, while
more SME-sized industrial clusters could be created through formalized incentives and venture
capital from Government funding with preference to start-ups, especially joint venture
companies. After a period of implementation, specific businesses could be merged into a
network of promising supporting technology firms, while more robust Government investment
funds must focus on small and micro companies to build their own factories. Regarding
enhancement of enforcement and healthy competition for businesses, poor quality audits and
inspections could lead to unqualified businesses slipping through. Meanwhile, the Government
is recommended to issue specific policies in order for SMEs to meet requirements, such as
those related to environment and fire controls.
Regarding education, the Education and Training Law 2012 gave autonomy to academic
institutions. However, it has had little impact on public universities. Despite limited
advancement in raising skills and competencies of graduate students, the quality of graduates is
still not good enough. This low quality human resources will hamper Vietnams productivity and
blunt its labor-related competitive edge.
SESSION 2 TRADE, TOURISM AND INVESTMENT - ISSUES OF IMPLEMENTATION OF NEW
LAWS ON INVESTMENT, ENTERPRISES, IMMIGRATION, RESIDENTIAL HOUSING AND REAL
ESTATE BUSINESS

Page 4 of 18

1.

Investment and Trade

Investment and Trade Working Group Mr. Fred Burke, Co-Head

-

The first area of concern is the failure to recognize and enforce Vietnamese or foreign
arbitration awards. Feedback from stakeholders points to weaknesses in the courts to
support arbitration. While the law and institutions have developed into reliable dispute
resolution mechanisms, the courts lag behind. As a result, Vietnams record in enforcing
arbitration awards is poor compared to regional countries. Two reasons for this trend have
emerged. The first is procedures used in arbitration not viewed as consistent with Vietnams
Civil Procedure Code. The second is courts in Vietnam are prone to quoting the
fundamental principles of Vietnamese law as the basis for setting aside arbitration awards,
despite the New York Convention. To address this situation, an appropriate body should
comprehensively review the legal basis of awards set aside in the past few years to judge
whether courts have applied the convention correctly. Greater transparency to enhance
accountability of judgments and skills training are also needed.

The second area of concern is increased non-tariff barriers, which contradict the
Governments call to reduce red tape. For example the new Investment Law, contrary to
business community inputs, has persevered the replacement of the old one-step licensing
process with the new two-step one. Now a foreigner to invest in Vietnam must get investor
and business registration certificates. Similarly, administrative reform concerns have
emerged in the context of several new non-tariff barriers, as noted by business chambers
today, such as the recent Circular requires imported equipment to be at least 80% or more
of its initial design capacity and less than ten years old. Another two examples are two new
draft circulars on food safety only introducing greater administrative burdens and cost on
food imports and on cosmetics management requiring Notification Number printed on the
packageing of the cosmetic products. However, the most egregious example of how
administrative procedures are abused is in tax administration, as a World Bank survey of
manufacturers and traders this year ranked Vietnam as the worst country in Asia-Pacific
regarding tax administration. Meaningful deadlines, accountability standards and resources
to help taxpayers file correct tax returns are needed. A tax website could highlight frequent
mistakes discovered in the post-audit assessment process and provide help-lines for
taxpayers.

The last is the continuing difficulties in getting work permits for foreigners and we would
like to see tangible progress of this issue.

Response by Ministry of Planning and Investment H.E. Mr. Bui Quang Vinh, Minister
-

Lists of banned and conditional lines of work for investment and business: The Government
is committed to making investment more transparent and drafters of the new Investment
Law aggregated all current regulations on banned and conditional business lines, and
respective eligibility criteria from different legislation. From 51 banned business lines and
386 conditional business lines, the lists have been narrowed to six banned and 267
conditional business lines. Furthermore, the Investment Law requires annual reviews of
such lists, with the Ministry of Planning and Investment (MPI) the lead agency. Moreover,
relevant ministries will finalize respective eligibility criteria with updated information on
national websites. The new Investment Law clearly specifies that conditional business lines
will be provided in normative regulations at decree level and above. Article 4.2, Investment
Law of 2014, specifies that if discrepancies exist between the Investment Law and other
Page 5 of 18

sector-specific laws regarding banned or conditional business lines, the new Investment
Law will apply.
-

Investment and business registration certification into two different procedures: The
Investment Law of 2014 intends to provide openness and opportunities for businesses. To
achieve this, it requires foreign investors to first acquire an investment certificate within 15
days (previously 45 days), then the business registration certificate can be released within
two days. Investors are not required to submit other documents aside from documents
specified in the Enterprise Law.

Response by Ministry of Finance H.E. Mr. Dinh Tien Dung, Minister

- In the spirit of Resolution 19, the Ministry of Finance (MoF) has initiated administrative
procedure reforms to enhance national competitiveness in taxes and customs, including:
+ As of January 2015, 370 hours for tax filing and payment have been shed from the
previous total of 537 hours.
+ Tax administration and customs agencies are encouraged to increase application of
information technology in revenue and customs governance. More than 97% of
businesses have used electronic filing and more than 140,000 firms switched to
electronic tax payments.
+ Future steps: (i) cutting hours spent paying taxes and clearing customs to ASEAN 4 level,
(ii) review regulations and operating procedures to curtail/simplify at least 10% and 20%
of tax-related administrative procedures, respectively, while modifying all operating
procedures related to taxpayers; (iii) ensure businesses usage of electronic tax payment
modes to achieve 90% by end of 2015, (iv) work with the MPI and ministries to create a
single identification number for transactions with all ministries/line agencies, (v) release
a circular on risk management as recommended by the World Bank and (vi) accelerate
initiation of a national single window for ministries/line agencies and a ASEAN singlewindow mechanism.
-

Development of new food safety standards to avoid adverse impacts on food imports and
exports: The MoF is developing a project to improve the effectiveness of specialized
inspections and audits of import and export goods to clearly divide responsibilities of
relevant ministries in sector-specific regulations to ensure smooth clearance of goods and
support business operations.

Pricing controls of milk products for under-6 children: Recent average sales prices for
formula milk for under-6 children in Vietnam have been higher than some regional
countries. Milk pricing controls in Article 18.4, Pricing Law and Article 6.4, Decree
177/2013/ND-CP provide implementing details and guide specific Pricing Law provisions.
These are necessary to protect consumers, businesses and national interests.

HS codes for import and export goods: According to Article 6.4, Circular 14/2015/TT-BTC, if
a guiding document on goods classification affects the customs declaration process in terms
of ID numbers, tariff rates and potential profit and loss-making for declarers or taxpayers,
goods classification and applied tariff rates will apply as soon as the revised guidelines come
into effect. Accordingly, any previous goods classifications and ID numbers with lower tariff
rates subject to higher duty rates once the revised guidelines apply, will not be considered
for retrospective law application.

Page 6 of 18

Response by Ministry of Health - Mr. Nguyen Viet Tien, Vice Minister

-

Conditional lines of work for investment and business in health: The Investment Law of
2014 states that any applicable eligibility criteria must be enacted through decrees for every
respective conditional business line and made public on the national portal for business
registration. The health sector, under the Investment Law of 2014, has 19 conditional
business lines regulated through specialist laws under the specialist jurisdiction of the
Ministry of Health (MoH). The Investment Law of 2014, however, requires such eligibility
criteria be made specific in Government decrees and achieved within a one-year
transitional period.

Importation of used medical equipment: Based on the Trade Law, the MoH released
Circular 24/2011/TT-BYT making clear that imports of used medical equipment are
prohibited. Any acceptance of used medical equipment will only apply to non-refundable
projects of offshore non-governmental organizations in accordance with Decree
93/2009/ND-CP, and apply to simply - structured equipment with Prime Ministers
approval. The MoH, in collaboration with the Government Office, will submit to the Prime
Minister a list of used medical equipment with more than 80% of remaining value, which
can be imported without the Prime Ministers approval. The need for equipment quality
meeting the 80% requirement subject to declaration by the donor, confirmation of source
country or inspecting agency verification in the source country/Vietnam must also be
highlighted.

Draft food safety regulations for imported and exported food products: The Food Safety
Law identifies trading in foods as a conditional line of work. Food safety governance should
rely on codes and norms released by authorities and regionally-accepted standards. All rules
should ensure the interests and health of consumers are protected, not contrary to
international practices and do not interfere with legitimate trade activities.

Publication of identifier numbers, barcodes and registration numbers on packaging of

cosmetics and food products: ASEAN practices do not mandatorily require disclosure of
identifier numbers, barcodes or registration numbers on packaging for cosmetics nor
prohibit it. The draft aims to support management of product information/quality and
information transparency.

Response by Ministry of Science and Technology H.E. Mr. Nguyen Quan, Minister
- Permitting imports of used plant and equipment: Circular 20/2014/TT-BKHCN is being
modified with business community inputs. For FDI enterprises, if the investment project
proposal provides information on production lines and equipment accepted by Vietnamese
authorities and the project is approved, there is no need for quality or use period
inspections for project technologies or equipment. For plant and equipment not listed in
the investment project proposal or imported after the project, businesses could choose
between two criteria, a use period of less than 10 years or over 70% remaining quality.
Businesses are encourage to obtain a quality inspection certificate prior to importation.
Once equipment is in operation, the quality inspection process will kick-in and the importer
will bear costs if equipment fails to live up to declared standards. Meanwhile, other specific
criteria may be imposed by authorities, such as in sectors requiring machines and
equipment to have more than 70% remaining quality, for example, healthcare equipment or
equipment which may generate impacts on environment.

Page 7 of 18

Response by Ministry of Labor, Invalids and Social Affairs H.E. Mrs. Pham Thi Hai Chuyen,
Minister
-

Overtime work: Article 106, Labor Code of 2012, clearly specifies that overtime work must
not exceed 200 hours and 300 hours for some special cases. Questions and
recommendations raised on overtime work, however, are duly noted for further
consideration. The ministry has counseled the Government to provide guidance on selected
industries and sectors where overtime work not exceeding 300 hours is allowed in line with
Article 106, Labor Code.

Decree 102/2013/ND-CP providing implementing details for specific Labor Code provisions
related to guest workers operating in Vietnam is under review to provide opportunities for
non-national employees in Vietnam, taking into account the following considerations:
+ Narrowing work experience for non-national employees from five to three years
+ Non-nationals staying and working in Vietnam for less than consecutive 30 days will not
be required to obtain a work permit
+ The procedure for certification of personnel not required to obtain a work permit will be
waived in several instances, including non-nationals working in Vietnam for less than
three months on complex technological incidents or situations, and non-nationals
working for less than 30 days
+ A maximum validity of six months for health certificates from issuance till submission for
work permit applications
+ Requiring a legal background certificate from Vietnam or the home country of the guest
worker, which is a reduced burden from the previous ruling which requires legal
background certificates from both sides.
+ Simplifying work permit applications in specific cases such as for employees with valid
work permits who seek another job without changes to employer, employees with
expired work permits and non-nationals with a Masters degree or higher doing
research and teaching work at educational institutions
+ Lead-time for work permit release reduced from 10 to seven days
+ Expanding applicability for individuals who may receive a work permits compared to
Decree 102
+ Additional attribution for the Ministry of Labor, Invalids and Social Affairs to issue work
permits to adapt to changes.

Minimum wage: Article 91, Labor Code, specifies that, based on minimum living needs of
workers and families, socio-economic conditions and market pay levels, the Government
will set regional minimum wages, following consultation with the National Pay Council. The
current annual regional minimum wage should be adjusted as it fails to meet the minimum
living needs of workers and families.

KorChams recommendation that an additional ruling on employment contract termination

for employees found to be provide fraudulent information on competencies and work
experience is supported. The Labor Code does not provide details on employment contract
terminations in such cases.

Public-private mix in upgrading human resources quality: The Government has a

occupational education reform strategy. It allows importation of equipment, teaching
Page 8 of 18

manuals and teachers for occupational education institutions, application of mixed publicprivate provision in vocational training facilities, foreign investors setting up joint ventures
in vocational education as well as opening schools.
Response by People's Supreme Court Mr. Dang Xuan Dao, Economics Court Chief Judge
-

Recognition/non-recognition, execution of foreign arbitration awards in Vietnam and

consideration of requests for annulment/non-annulment of domestic arbitration awards:
The Commercial Arbitration Law of Vietnam authorizes the court to consider requests for
annulment of arbitration awards. The Civil Litigation Code allows the court to consider
execution of foreign arbitration awards in Vietnam. While considering requests for
annulment/non-annulment of an arbitration award or allowing execution of a foreign
arbitration award in Vietnam, some judges may fail to follow book rulings on civil litigation,
Commercial Arbitration Law and the New York Convention of 1958 on recognition and
execution of foreign arbitration awards. Concerns emerging from implementation of these
rules are known to the People's Supreme Court, which has responded with various remedial
actions. To be specific, the People's Supreme Court has delivered trainings for judges. The
Justice Board of the People's Supreme Court has also released resolutions explaining a
number of rules from the Commercial Arbitration Law. The National Assembly is studying
the draft revised Civil Litigation Code, which is strict on procedures for recognition and
execution of foreign arbitration awards in Vietnam.

Disclosing court decisions on handling requests for voiding arbitration awards or recognition
and execution of foreign arbitration awards in Vietnam on court websites: The People's
Supreme Court has adopted this kind of disclosure and the People's Supreme Court
published a collection of decisions passed by its Justice Board.

Response by Ministry of Justice Mr. Nguyen Khanh Ngoc, Vice Minister

-

Vietnam is undertaking far-reaching legal and judicial reforms to meet the countrys
changing development needs. The legal system has been reviewed and modified to reflect
the Constitution 2013, with a focus on international integration.

The Government and Ministry of Justice (MoJ) have made concerted efforts to achieve civil
sentence execution targets set by the National Assembly, specifically through amendments
to the Civil Sentence Execution Law 2014. The MoJ has also looked at a public-private mix in
civil sentence execution with trial bailiff services in 13 provinces/cities. If this succeeds, the
MoJ will propose a set of rules to be formalized in the existing civil sentence execution
system.

2. Tourism
Tourism Working Group Mr. Ken Atkinson, Head
-

Each month this year, there has been a decrease in visitor arrivals against the same period
last year, with a 12.2% fall in the past four months. However in the first quarter of 2015,
visa waiver countries showed a 7% increase over 2014. The direct contribution of travel and
tourism to GDP is close to 5% and including the supply chain it is approximately 10%, a
significant part of Vietnams economy. While Vietnam attracted 7.9 million visitors in 2014
and granted visa waivers and exemptions to 16 countries, such figures are dwarfed by
regional competitors. As well as requiring visas for the majority of international visitors,
Vietnam has the second highest visa costs. One of the biggest obstacles to more visa
Page 9 of 18

exemptions is the loss of such fees. However, this argument is short sighted. Visa
exemptions for the EU, North America, Australia and New Zealand are needed. Revenue
generated by current visa fees would be heavily outweighed by spending from increased
visa-free arrivals. Overall, Vietnam must seriously examine its current visa regime from a
neutral perspective, without undue influence from individual stakeholders to encourage
tourism and business travel, which would be further enhanced by a true E-visa system and
development of Vietnam as a transit hub.
Response by Ministry of Culture, Sports and Tourism Mr. Huynh Vinh Ai, Vice Minister
- The Government recently unilaterally exempted visas for tourists from 16 countries and the
Ministry of Culture, Sports and Tourism (MoCST) will work with the ministries of Public
Security and Foreign Affairs to propose a list of countries to further benefit from Vietnams
unilateral visa waiver. The Prime Minister has also instructed the MoCST to propose ways to
further simplify visa issuing procedures, while mainstreaming visa issuance at airports,
transit visas, electronic visas and possible visa fee travel. The MoCST is also working to
enhance tourism development in Vietnam and importantly the Prime Minister has assigned
it to quickly make proposals for a Tourism Development Fund, with a focus on PPP.
Response by Ministry of Public Security - Mr. Tran Viet Tan, Vice Minister
The new Entry, Exit, Transit, and Residence of Foreigners in Vietnam (Law No.
47/2014/QH13) in effect since early 2015 has widened the applicability of visas on arrival
and the Ministry of Public Security (MoPS) is working with other ministries to consider
options to streamline the issuance of visas on arrival and the scope of unilateral visa
exemptions. The new law specifies visas or residence cards for guest workers are valid for
two years and five years for investors, and allows residential non-nationals in Vietnam to
invite their families to Vietnam. The law also specifies that transit visitors to Vietnam are
not required to obtain a visa for the transit period. For visitors entitled to visa exemption
returning to Vietnam within 30 days or wishing to stay on longer, the Ministry of Public
Security and other relevant ministries and line agencies have reported to the government
an option for this situation, which is granting visitors a visa on arrival valid for no longer
than 15 days. During these 15 days in Vietnam, if the visitors take travel tours in Vietnam
from local travel agencies, they will receive another 15-day extension. Overall, the visa
issuing procedure has been improved. Visitors for work, investment or employment,
including tourists with an institutional invitation, will be considered for visa issuance within
five days. More urgent cases, with a request from the inviting entity, may receive the visa
within one working day. The recommendation that visa fees be lowered to become more
competitive with other countries will also be examined.
3. Land and Property
Land Sub-Group - Mr. David Lim, Head
- The real estate industry has welcomed the passing of the new Real Estate Business and
Residential Housing laws to streamline investors rights and allow greater foreign
participation. But, there is concern that implementing decrees and circulars have not been
passed. Regarding the draft decrees, they stipulate higher minimum legal capital of VND50
billion for property projects subject to investment in-principle decisions or approvals. Such
requirements will discourage companies from undertaking small projects, lead to inefficient
capital use and inhibit business competitiveness. Legal capital should only be applicable to
the value and scale of projects. If more capital is required, a percentage of total investment
Page 10 of 18

capital should be applied. Secondly, members of a LLC are required to contribute capital in
full within 90 days from issuance of enterprise registration certificates, which is unrealistic
and will disincentivize developers from undertaking large projects. Provisions should allow
for capital contributions according to a projects implementation. Clarity is also needed on
the implementation of agreements already signed under old laws, especially in relation to
method of calculation and record of the residential housing area, the warranty period and
the parking plot. Moreover, under the new laws the sales and lease-purchases of residential
houses must be guaranteed by a commercial bank of Vietnam. But, implementing
provisions have not been issued. Necessary provisions and detailed guidelines must be
issued urgently. Regarding the rights of foreigners to own property in Vietnam, the draft
decrees provide further restrictions that could dilute the positive impacts of the new laws.
Response by Ministry of Construction Mr. Pham Hong Ha, Vice Minister
-

The Government will release five implementing decrees, submitted for approval in the first
weeks of July 2015, as part of the roll out of the Real Property Trading Law and Housing
Law.

Legal capital top-up: The Ministry of Construction (MoC) has noted the recommendation to
remove the requirement that real property investment projects subject to a preliminary
decision or acceptance procedure must have a statutory capital of no less than VND50
billion. Thus, the final draft submitted to the Government will not include this legal capital
requirement.

Legal capital: The Real Property Trading Law requires legal capital be not less than VND20
billion. Of the 306 property projects suspended and 460 other projects in need of
modification after recent scrutiny, most belong to project owners with limited legal capital.
Hence, this requirement is needed to filter out incompetent property market participants.

Sunset clause for completion of contracts under the former Real Property Trading Law and
Housing Law: Contracts signed before the Real Property Trading Law and Housing Law come
into effect will continue in line with applicable laws at the time of contract execution.

Foreign investors acquiring property in Vietnam: The draft decree specifies that foreign
entities and individuals may own no more than 10% of total housing units in a number of
projects. This is necessary, as the law allows foreigners to own no more than 250
independent housing units in a ward-equivalent resident area, in which there may be many
on-going development projects. Thus, the ruling ensures compliance with the law on the
250 housing unit restriction.

Draft implementing decree to the Housing Law being more restrictive than the law itself on
non-nationals subject to limited ownership of residential houses in Vietnam: The MoC
welcomes further inputs from the working group as the draft decree submitted to the
Government will undergo some modifications, in which, Ministry of Public Security and
Ministry of Defence shall be requested to concretize circumstances where foreign
individuals are prohibited or restricted for residence.

The MoC notes the recommendation regarding the inclusion of the company registration
certificate in project transfer dossiers impeding foreign investors investing in Vietnam for
the first time.

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SESSION 3 BANKING AND CAPITAL MARKETS NEEDS FOR POSITIVE GROWTH

1. Banking
Banking Working Group Mr. Nirukt Sapru, Head
-

For Vietnamese companies to capitalize on fresh market opportunities and withstand more
intense regional competition, they need tools to benefit from an integrated market. This
includes greater access to information on utilizing free trade pacts. The Government could
also consider a sustainable lending program to SMEs, while credit guarantee funds need
developing. As Vietnam integrates into global supply chains, stronger SMEs participation
will improve efficiency and strengthen confidence in the financial institutions supporting
them. For enterprises, adopting international corporate governance, risk management, law
and compliance standards will improve their competitiveness and help Vietnam fully
integrate into global supply chains. Regarding banking-specific issues, the BWG appreciates
SBV efforts to improve the sectors regulatory framework and is ready to help enhance the
consultation process to benefit regulatory reform. The Government and SBV have helped
stabilize financial and monetary markets, but a differentiated policy approach is more
appropriate as different banks have different levels of risk management, governance,
liquidity, capital capacity and business plans. For example, the credit growth cap policy is
helping big banks, not good ones. Regarding financial market development, the BWG has
agreed to set up a Financial Markets sub-committee to assist companies involved in large
projects manage foreign exchange, interest and commodity rate risks. Furthermore, the
BWG is working on a shared manifesto to manage risk to raise the bar on conduct and
compliance to better develop the financial services system.

Overall, the BWG has some important recommendations. Firstly, all requests for banking
license updates are on hold until the new licensing re-issuance regulation is issued. The SBV
is requested to allow for a continuation of business activities pursuant to applicable
regulations to avoid banks being subject to legal risks. Secondly, regarding entrustment
lending in Circular 30, the MPI is requested to provide clearer implementation guidance to
be compliant with applicable laws and regulations. Thirdly, while Vietnam is about to sign
the Inter-Governmental Agreement with the United States, FATCA reporting is looming and
there is concern there will be no formal basis for banks to report Vietnam-related data to
the IRS. The SBV is asked to allow foreign bank branches and foreign-owned banks to send
data to head offices for onward reporting to the IRS.

Response by State Bank of Vietnam Mrs. Nguyen Thi Hong, Deputy Governor
-

Directional credit policies for 2016: By the end of this year, the State Bank of Vietnam (SBV)
will calculate credit growth and specific regulatory solutions. Such policies will promote
expansion, maintain safety and performance, with a further focus on production and trade.

Entrusted loans under Circular 30: The SBV has requested departments examine this issue
and work with the MPI for action.

Banking licensing under newly released rulings: The SBV is finalizing enacting procedures to
update licensing mechanisms for credit institutions for smooth operations.

Compliance with reporting requirements under FATCA: The SBV has actively participated in
bilateral negotiations between Vietnam and the US Government on implementation of
FATCA. The SBV will wrap up necessary procedures so an IGA agreement can be entered
into by June 30 to support credit institutions.
Page 12 of 18

Guidance on bank guarantees for selling houses taking shape in the future: The SBV is
working on a new circular on guarantees with a specific provision providing guidance on this
issue.

2. Capital Markets
Capital Market Working Group Mr Kien Nguyen, Representative
-

Vietnam has a stock market capitalization of approximately $46 billion, only 25% to its GDP.
As a result, Vietnams stock market will be unable to support the privatization process. If
the estimated total value of SOEs to be privatized in the next three years is US$25 billion
and the Government offers to sell only 15% of shares, the market will need US$3.75 billion
to buy such shares. Thus, the capital mobilized locally will not be insufficient and a new flow
of foreign capital will be needed. To develop the local stock market, we suggest:

Privatization and listing of SOEs: The Government should ensure privatization in step with
the listing of privatized companies. And to create liquidity, a global syndicate with 25-30%
sold off should be considered.

Increasing foreign ownership limits: To attract foreign capital to the stock market and newly
privatized SOEs, Vietnam should abolish the 49% foreign ownership restriction applicable to
public companies and apply World Trade Organization (WTO) commitments on public
companies providing services and open up the stock market by removing ownership
restrictions on public companies doing business not under Vietnams WTO commitments,
excepting for businesses which affect national security.

Creation of pension funds: The Government is urged pass the draft decree on pension funds
as they will provide a significant demand for the financial market and privatization and help
reduce pressure on the Social Security Fund.

Response by Ministry of Finance H.E. Mr. Dinh Tien Dung, Minister

-

Recommendations for stock market development are aligned with Government intentions
and stated policies. The MoF has advised the State Securities Commission (SSC) to work
closely with relevant ministries/line agencies to expedite new mechanisms and policies to
further the corporatization and public divestment processes.

Recommendation for sales of 25-30% of equity of a company going public through

international and professional brokers: Regarding the working groups 25-30% figure, is it
based on the gross owners equity or the offering amount of each issue? Decree
59/2011/ND-CP on conversion of SOEs into joint stock companies allows sales of equity
through guarantees, but few companies have chosen this method. The MoF will undertake
research and address the remaining questions.

Increase in foreign ownership: The MoF has proposed revising Decree 58/2012/ND-CP,
including expansion of foreign equity in line with Vietnams WTO commitments. Except for
conditional business lines and restricted investment areas, other investments will be
considered for a higher foreign ownership rates in accordance with Vietnams WTO
commitments. The Government will soon make a decision on this issue.

Recommendation on early release of a decree on voluntary pension funds: The MoF has led
the decree drafting and consultations with relevant ministries/line agencies, businesses and
public. The draft decree is now being finalized by the MoF.

Page 13 of 18

SESSION IV INFRASTRUCTURE, REQUIREMENTS FOR PPP IMPLEMENTATIONS, PORT

STRENGTHENING AND POWER GENERATION NEEDS IN MASTER PLAN VII
1. Infrastructure
Infrastructure Working Group Mr. Tony Foster, Co-Head
- Businesses remain concerned about infrastructure development delays. The MPI reports
that VND500 billion is needed for hard infrastructure over the next 10 years, of which the
private sector will provide VND300 billion. However, equity and debt markets are
insufficiently developed to realize such infrastructure needs. This places a big burden on
PPP, which is still evolving in Vietnam despite many positive steps forward. While Decree 15
is encouraging, it is unlikely to help raise the needed capital. The Infrastructure Working
Group recommends the fast implementation of PPP, infrastructure projects under the
Investment Law - even outside the PPP framework and a greater focus on infrastructure
financing mechanisms.
Infrastructure Working Group Mr. Tran Tuan Phong, Co-Head
-

Impact on current infrastructure projects: Many projects, particularly projects in the power
sector, are discussed and negotiated under current BOT framework of Decree
108/2009/ND-CP. However, the transitional provisions of Decree 15/2015/ND-CP on
investment in the form of public-private partnerships ("Decree 15") does not seem to
encompass BOT projects, which has completed negotiations or are being negotiated and
waiting for approval of the Prime Minister. Therefore, more procedures may incur under
Decree 15, which leads to prolong negotiation process.

The competitiveness of Vietnam's economy depends heavily on the implementation of

Decree 15. Decree 15 should try to limit making rigid, unclear rules, and need to clarify how
specific issues and risks are allocated, standard templates for each infrastructure sector in
the guiding Circular to avoid different interpretations of ministries. In addition, there should
be a specific communication channel for attractive and feasible PPP projects for structural
infrastructure that Vietnam visibly needs and that also attract investors. The scope of
available guarantees and further visibility into viability gap funding principles are among the
main gaps that ideally would be filled before starting bidding out a comprehensive PPP
program. These gaps can be filled on a project by project basis, but the expense of
preparing project proposals without having guidelines on what support is available will
make such preparation unattractive.

Response by Ministry of Planning and Investment H.E. Mr. Bui Quang Vinh, Minister
-

Decree 15, incorporating Decree 108 and Decision 71, toward public investment reform is
welcomed and is consistent with international practices. However, several implementing
concerns will be addressed.

The PPP decree needs to adapt to specific needs of Vietnam. Accordingly, Decree 15 will not
only open doors to large-scale infrastructure, but also rural water/sanitation as well as
agriculture and rural development.

Financing projects: The viability gap fund is being rolled out and projects may receive
Government support, based on specific cost-effectiveness calculations.

Page 14 of 18

Sunset clause: Implementing circulars for Decree 15 will provide specific provisions for
unapproved BOT projects, that could be approved if not contrary to Decree 15 or only parts
in conflict with Decree 15 will be reviewed.

Foreign exchange guarantee: The Government will warrant foreign exchange purchases for
investors and enterprises, but not guarantee exchange rates as they fluctuate over time.
However, the Government will safeguard foreign exchange purchases and some projects
could receive special treatment, as decided by the Prime Minister.

Decree 15 provides fundamentals for the PPP model as it designates specific ministries to
release implementing circulars for respective areas of governance to negate rules from
being overly rigid or out of touch with realities on the ground.

2. Power and Energy; Port and Shipping

Power and Energy Sub-Group Mr. Sean Chung, Representative
- While Vietnam has provided a stable power supply to consumers, business concerns about
future power shortages could be a deterrent to attract further domestic and foreign
investment. Such concerns are exacerbated by current low power tariffs. In the first
quarter, VBF met FDIs, held workshops and sent out questionnaires on Vietnams power
supply. The clear response was energy security was the most important issue, above energy
prices and the majority had no opposition to planned power increases. Energy investors
will have greater confidence in the sector if power tariffs reflect the true cost of generation
and a clear roadmap of expected power pricing and policies is needed. The VBF Power and
Energy Working Group will develop more information/data related to cost-benefit analysis
on Vietnam's domestic natural resources and renewable energy to be compared to major
planned increases in imported coal as well as direct power purchase agreements used by
similar countries to Vietnam. This analysis will assist dialogue on balanced energy security,
environmental solutions and create energy supply options. In summary, the Governments
power tariff increases are encouraging, but careful examination of domestic energy supply
development policies is needed.
Port and Shipping Sub-Group Mr. Robert Hambleton, Head
- Creation of a domestic and international transshipment hub in Cai Mep remains of vital
importance to address the demand/supply container terminal imbalance in southern
Vietnam and create an effective deep-water port for Vietnam. In general, the Government
has a golden opportunity to make a small number of decisions to significantly help
Vietnamese importers and exporters. This is especially important, as the numerous trade
agreements in the pipeline will increase container traffic. Current reliance on HCMC urban
terminals is not sustainable and an internationally competitive environment to operate
container terminals is needed. To achieve this, a reduction in port dues for certain sized
vessels is required, as is a relaxation in cabotage regulations. Local services are substandard and prohibitively priced as well as a barrier to progress. Another important area is
reform of customs regulations, essential if Vietnam is to remain competitive with other
ASEAN countries. If Vietnam fails to take advantage of such opportunities, the main supply
route in and out of the country could be jeopardized, resulting in higher costs and a less
internationally competitive environment.

Page 15 of 18

Response by Ministry of Industry and Trade H.E. Mr. Vu Huy Hoang, Minister
-

Electricity and energy: Power generation and supply in Vietnam is in its best position since
2011, with 20% of output in reserve. However, the quality of electricity may not be well
guaranteed due to an outdated power distribution system in certain areas. The Ministry of
Industry and Trade (MoIT) has advised the electricity sector to raise capital from different
sources to upgrade the power system for corporate users.

A potential supply shortage is forecasted in 2017-2018 for southern Vietnam and in

response the Prime Minister has tasked the sector to undertake urgent projects in the
south. The Government intends to encourage domestic and foreign investors to engage in
power development, mostly through BOT or BOO models.

Power tariff change roadmap: The Government believes power tariffs must be marketdetermined, but regulated by the Government as well as ensure reasonable payback and
profits for the sector. Nevertheless, applying higher power prices will burden poor and
disadvantaged members of society. As such, the Government will provide direct subsidies
from the budget for poor households. And by early 2016 power tariffs will become entirely
market-determined.

Renewable energy: The Government intends to increase the use of safe and renewable
energy to ensure sustainable development and a controlled environmental footprint. The
Government has requested the MoIT work with the electricity sector to recalculate and
increase renewable energy use to more than 5% of total energy sources in Vietnam by
2020.

Roadmap for electricity retail sales:

+ Competitive power generation levels: From 2012 power plants have made offers to the
electricity sector to buy electricity
+ 2015-2020: Trial a competitive wholesale electricity market
+ From 2021: Introduction of a competitive retail electricity market.

Automotive industry: The MoIT is working with the MoF to draft a decision for the Prime
Minister on mechanisms and policies to materialize the Strategy for Automotive Industry
Development in Vietnam by 2025 and vision to 2035.

Special sales tax for automobiles: The MoF is taking the lead in building a formula for
determination of the special sales tax, ensuring equality between locally
manufactured/assembled cars and imported CBUs.

Supporting industries: The current legal framework for supporting industry development
remains narrow. As a result, the Prime Minister requested the MoIT draft a decree on
supporting industries, which is complete.
In addition, the National Assembly has agreed to give its opinion and pass the draft law on
supporting SMEs, respectively in October 2015 and 2016. Moreover, the recent National
Assembly, also endorsed new laws, including the Enterprise Law, Investment Law and
amendments to the Tax Laws. These laws provide specific tax and administrative procedure
incentives for supporting industries.

ADDRESS OF PRIME MINISTER H.E. Mr. NGUYEN TAN DUNG

The socio-economic picture of Vietnam in the first months of 2015 is more promising than
2014. However, there is still room for improvement. First, the Government will continue
macroeconomic stability, with inflation not exceeding 5%, stable exchange and interest rates,
Page 16 of 18

build foreign currency reserves, maintain Government over-expenditure at 5% for 2015 and less
than 5% for the next five years, restructure Government debt, enhance investment efficiency
and achieve an average export revenue growth of 10%-15% per year.
Second, the Government will ease bottlenecks and provide opportunities for the business
community to enhance production and trade to help achieve economic growth goals for the
industry, agriculture and services sectors. Restructuring SOEs will be prioritized as will
corporatization in parallel to Government divestment from companies. Also, restructuring
process of banks and financial institutions will be accelerated towards efficiency and
transparency.
Third, Vietnam will accelerate its international economic integration and meet trade agreement
commitments that will be a cornerstone to establish markets and enabling environments for
investment and business activities.
Fourth, Vietnam is concentrating efforts in a three-pronged strategic approach:
-

Ensure the local economy operates according to market economy rules and values, with
disclosure, transparency and fair competition.

Concentrated efforts will be made to improve the regulatory system and safeguard the rule
of law. The legal system will be enhanced in alignment with international laws. In tandem,
improvement in governance capacity as well as Government administration and regulations
will be emphasized for better public services and the right to do business in accordance
with the prevailing law and to fight corruption more effectively.

Resources will be mobilized for infrastructure development, with a focus on increased

investment in transport infrastructure and energy and power supply to drive economic
growth. At the same time, Vietnam is working towards an electricity pricing market
mechanism, with a power tariff pathway to provide investors with certainty. Engaging the
private sector through PPP in line with international best practices will also be encouraged.

+ A focus on better leadership in human resources development will harness local training
capacity and open doors to international education to help improve workers skills and
quality and ultimately labor productivity.
CLOSING REMARKS
The World Bank in Vietnam Mrs. Victoria Kwakwa, Country Director
The assurances from the Prime Minister and various ministries today are a demonstration of
the strong partnership between the Government and business community to develop Vietnam.
In particular, the Prime Ministers assurances for macroeconomic stability are welcomed. For
Vietnam to take full advantage of deeper trade integration with various trade agreements in
the pipeline, it is apparent that strengthening implementation of existing and new laws as well
as monitoring their impacts will be vital. The Government and line ministries are encouraged to
continue to work with the private sector to secure more efficient regulations and regulatory
frameworks for a healthy business environment. Moreover, promoting a strong and vibrant
domestic private sector is important. For this to be achieved, a level playing field between SOEs
and private sector is needed, with a particular focus on SMEs and micro enterprises.
We also look forward to further progress in the financial and banking sectors, such as
strengthening of the regulatory framework for asset management companies. Infrastructure
Page 17 of 18

remains a significant issue and further development of PPP with private sector support is
needed. Power remains critical and assurances today that more will be done in terms of pricing
is encouraging. Again, the support and valuable inputs from the Prime Minister, Minister Vinh
and all ministers are welcomed and we look forward to continue working together for a
prosperous Vietnam.
Government of Vietnam H.E. Prime Minister Nguyen Tan Dung
Commitments for administrative procedure reform have been made in Resolution 19, to
improve the investment and business climate and heads of ministries have made commitments
to achieve or outperform Resolution 19 targets. Public administration reform, by the end of
2015, will help Vietnam to reach ASEAN 6 block status and by late 2016 on par with ASEAN 4.
Vietnam Business Forum Consortium Vu Tien Loc, Co-Chairman
Through dialogue, the gap between the business community and Government has narrowed
and many recommendations have been addressed. The business community appreciates the
Prime Ministers attendance at the forum and pledges to continue working closely with
Government agencies to promote economic development.

Page 18 of 18

ADDRESS OF PRIME MINISTER H.E. Mr. NGUYEN TAN DUNG

At Midterm Vietnam Business Forum 2015
8am 12.30pm, June 9, 2015
Lotte Hanoi Hotel

The socioeconomic picture of Vietnam in the first months of 2015 has shown more promising
developments, with more solid and efficiency over 2014, which is a result of Vietnams general
efforts, as well as its particular focus on the coordinated execution of targeted solutions. The
outcomes, however, remain insufficiently sustainable and not on par with the countrys
potentials and inherent advantages. Vietnam can do better, and in a more effective and solid
manner.
To that extent, Vietnam will be rolling out in a coordinated fashion the following major action
items.
First, the government of Vietnam will continue its governance and regulatory role in ways that
maintain and enhance macroeconomic stability. This specifically entails better inflation
containment to make sure that the inflation rate does not exceed 5%; keeping exchange rates
and interest rates level, responsive to market signals; building the foreign currency reserves;
maintaining government over-expenditure at 5% according to the plan for 2015, and less than
5% for the next five years; keeping government debts within a safe limit; conducting effective
restructuring of government debt for more concentration and efficiency; enhancing the
investment efficiency of the economy; and achieving an average export revenue growth of
10%-15% per year, and a trade gap of no more than 5%.
Second, the government of Vietnam will focus its leadership efforts in easing the bottlenecks
and providing opportunities for the business community to further prosper in its production
and trade activities, to help achieve the set economic growth goals for all the three sectors of
industry, agriculture and services. The government will further press ahead restructuring
toward higher productivity, quality, performance and competitiveness. Concentrated efforts
will be made in restructuring state-owned enterprises for better performance and competition
on an equal ground with other stakeholders. The government will make sure that
corporatization takes place according to the approved plan and pathway, in parallel to
divestment of the government from companies that the governments dominating or
controlling holding is no longer necessary. In the meantime, reorganization of banks and
financial institutions will also be accelerated for more efficiency, disclosure, transparency and
soundness.
Third, Vietnam will make active efforts in propelling international economic integration. It will
seriously fulfill its parts in the trade agreements it endorsed. Recently, Vietnam had closed
more free trade agreements with Korea and the Eurasian Economic Union. For now, Vietnam is
in the final negotiating stages for the free trade agreements with the European Union, as with
the Trans-Pacific Partnership (TPP). These will be the key cornerstone to establish the markets
and enabling environments for investment and business activities, not just for Vietnamese firms
but also foreign corporations doing business in Vietnam.
And fourth, Vietnam is currently concentrating its efforts in a three-prong strategic approach:
-

Ensuring that the local economy operates fully according to the rules and values of the
market economy, with disclosure and transparency, and on a fair competition basis, while
Page 1 of 2

the government, with its available instruments, policies and resources, works to guarantee
cultural development, social advancement and equality, social security, and improved living
standards, and achieve good poverty reduction outcomes.
-

Concentrated efforts will be made to improve the regulatory system and safeguard the rule
of law with a government that is truly of the people, by the people and for the people, as
democracy and freedom are ensured for citizens in line with the newly released
Constitution. The legal system will be improved over time, with effective enforcement. In
the context of Vietnam having made its way far and wide to the international community,
local laws need to approach and absorb the quintessence and advancement of the world,
and remain in alignment with international laws. In tandem with the improvement of the
rule of law, enhancement of governance capacity and the governments administration and
regulation will need to be emphasized to offer better public services and provide citizens
with better democracy and freedom, as well as the rights to freedom in doing business of
enterprises in accordance with the prevailing law, and fight corruption more effectively.

Mobilizing resources for infrastructure development: investment to provide adequate

infrastructure facilities for both economic and social development needs, with a focus on
increasing investment in transport infrastructure and provision of sufficient energy and
power supply. This will go hand in hand with solutions to provide sufficient power supply for
economic growth, while focusing on efficiency and quality enhancement. At the same time,
Vietnam has also made serious efforts in adopting the market mechanism in electricity
pricing, as the power tariff pathway will soon be announced to provide investors with
certainty as they consider investing in this field. In addition, engaging the private sector
through public-private partnership (PPP) in line with international best practices will also be
encouraged.

Focus for better leadership in human resources development: capitalizing on the local
training capacity, while opening doors to international education to help improve workers
skills and quality, and labor productivity. This will be a key driving force in enhancing
corporate and national competitiveness.

Page 2 of 2

In partnership with:

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Hanoi, Vietnam

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Tel: 84-804 8416

Email: info@vbf.org.vn

Fax: 84-4-3734 3769

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