Vietnam - New Investment Law, The TPP, AEC, EVFTA and Star Trek: Scotti: Beam Vietnam Up

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VIETNAM – NEW INVESTMENT LAW, THE
AEC, EVFTA, TPP AND STAR TREK:
SCOTTI: BEAM VIETNAM UP
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AGENDA:
• INVESTMENT LAW AND ENTERPRISE LAW – WHAT IS
NEW?
• ASEAN ECONOMIC COMMUNITY (“AEC”) –WHAT IS
IT? WHAT DOES AEC HAVE TO OFFER TO
INVESTORS?
• EU – VIETNAM FREE TRADE AGREEMENT (“EVFTA”)
AND TRANS-PACIFIC PARTNERSHIP (“TPP”) –
BENEFITS FOR VIETNAM
• CONCLUSION
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Vietnam 2014 Economy at a glance
• GDP: US$187.5 billion
• GDP per capita: US$2,028
• GDP Growth: 5.98 %
• Inflation: 4.09%
• Population: About 90.73
million
• Labor force aged 15 and above:
54.48 million
• Total export and import
turnover: : US$ $298 billion
• Minimum wage: VND 2.7
million (US$ 147) per month
(Jan 2015)
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Vietnam has the fastest-growing middle and affluent
class in the region (Boston Consulting Group)
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WTO analysis of liberalization of market access
Vietnam ties in first place with Singapore
• *Typical restrictions: number of opened sectors, JV
requirement, limits on foreign-owned shares, permission
requirement
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Country Limitation of
market access*
Country Limitation of
market access*
Malaysia medium Myanmar high
Indonesia medium Cambodia medium
Philippines medium Laos medium
Singapore low India high
Thailand medium China medium
Brunei high Vietnam low

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Investment environment in Vietnam
• Main governing laws: Investment Law, Enterprise Law and their
implementing documents
• Forms of doing investment in Vietnam:
– Economic entity establishment;
– Business cooperation contract: a contractual arrangement
between two or more investors without creating a legal entity
– Public-Private Partnership; a contractual agreement
between competent state authorities and investors, an
enterprise project in order to implement an investment
project;
– purchase of shares or capital contribution.
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Investment environment in Vietnam
• Forms of enterprises in Vietnam
– Limited liability company: members are liable to the extent of their
capital contributed
– Shareholding Company: charter capital (authorized share capital) is
divided into shares and members are liable to the extent of their capital
contributed
– Partnership: established between two or more partners;
– Business Cooperation Contract: an agreement without constituting a
legal entity and each party is individually responsible for paying taxes.
– Branch: a branch of a foreign company permitted to conduct
commercial activities
– Representative Office: represents the parent company, no actual
business operations. A suitable tool for market research
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Definition of foreign investor
• New Investment Law: Very simple definition!
Foreign investor is any foreign individual or
organization incorporated under foreign law doing
business investment activities in Vietnam
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Foreign investors – Who are they?
• Foreign nationals and foreign corporate entities
• Foreign Invested Economic Organizations (FIEO):
those whose members or shareholders are foreign
investors
• FIEO under the M&A rules: narrower scope
(discussed in the next slide)
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FIEO under the M&A procedures
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A
Offshore Investor
F1
Company in
Vietnam with 51%+
ownership by A
F2
Company in
Vietnam with 51%+
ownership by F1
F3
Company in Vietnam
with 51%+
ownership by A and
F1
F1, F2 and F3 are
considered as FIEO and
subject to investment
requirements applicable
for Offshore Investor
Others: subject to
requirements applicable
for domestic investor

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• Prohibited business activities:
– Trade in the narcotic substances as specified;
– Trade in the chemicals and minerals as specified;
– Trade in specimens of wild flora and fauna as specified in Appendix
1 of Convention on International Trade in Endangered Species of
Wild Fauna and Flora; specimens of rare and/or endangered species
of wild fauna and flora as specified;
– Prostitution;
– Human trafficking; trade in human tissues and body parts;
– Business pertaining to human cloning.
• Freedom to conduct business activities not prohibited by law
 less risk in doing business
Prohibited business activities
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Investment procedure
• 2 separate steps: Application for Investment Registration Certificate
(“IRC”) and Application for Enterprise Registration Certificate (“ERC”)
Step 1: IRC
– IRCs for projects required to obtain preliminary approval of the National
Assembly/ People’s Committee are issued within 05 working days upon
issuance of such approval
– For other projects, IRCs are issued within 15 days (instead of 35 days as in
the old law) upon receipt of the application dossier
• Step 2: ERC
– Submit an application dossier to the licensing authority upon issuance of
the IRC
– ERCs are issued within 03 working days upon receipt of the application
dossier
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M&A procedures for foreign investors
• Appears to be simple!!! Only registration required, no more IRC
 Satisfying the requirements for investment
 Submitting application dossier
 Assessment by the licensing authority and decision making after 15 days
• Subjects:
 foreign investors making investment in conditional business activities
applicable for foreign investors;
 F1, F2 or F3 holding 51% or more of the targeted economic enterprise as a
result of the M&A
 Exclusion: Company other than F1, F2 and F3:
 Registration to amend the ERC (for LLCs)
 Notification of the change in foreign shareholders (for JSCs)
 The change will be effected within 03 working days
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M&A procedures for foreign investors

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ASEAN ECONOMIC COMMUNITY
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AEC establishment
• AEC members: Brunei Darussalam, Cambodia,
Indonesia, Lao PDR, Malaysia, Myanmar,
Philippines, Singapore, Thailand, and Viet Nam
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AEC Market Snapshot – Asia’s main
investment hub
• GDP: US$2311.3 billion (2012)
• GDP per capita: US$3748.4 (2012)
• Population: 620 million, 60% under the age of 35
• AEC % of world GDP: ~3.3%
• AEC % of world population: 9%
• AEC’s merchandise exports: US$1.2 trillion - ~54% of total
ASEAN GDP and 7% of global exports
• If ASEAN were one economy, it would be the 7th largest in
the world – 4th largest by 2050 if growth trends continue
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Key characteristics of AEC
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ASEAN Framework Agreement on Services
• Expanding WTO commitments on services
• Free flow of services in AEC: substantially no restriction on
ASEAN service providers in providing services and in establishing
companies across national borders within the region
• Modes 1 (cross-border supply) and 2 (consumption abroad): none
except for bona fide regulatory reasons
• Mode 3 (commercial presence): gradually allow 70% foreign
(ASEAN) equity participation for all service sectors
• Removal of Other Mode 3 MA Limitations by 2015
• Set Parameters of Liberalisation for Mode 3 NT, Mode 4 (presence
of natural person), and Horizontal Limitations
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Services sectors of priority integration
• Air travel
• e-ASEAN
• Healthcare
• Tourism
• Logistics services
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Mutual recognition arrangement
• To facilitate the free flow of professional services
• Professional service providers registered/certified in their home
countries to be equally recognized in other signatory countries
• Up to now, 8 mutual recognition arrangements on:
– Engineering services
– Nursing services
– Architectural services
– Surveying qualifications
– Accountancy services
– Medical practitioners
– Dental practitioners
– Tourism professionals
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AEC perspectives – What does AEC have to
offer?
• Shared market, shared benefits - From TEN to ONE
• Simplified rules, greater access - Trading on a bigger stage
• ASEAN: Home for your investment – Partners in Business
• Making capital work for you – Expanding access to finance
• ASEAN professionals in the move – Best people and Best
practices
(Source: www.asean.org)
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6 out of 10 ASEAN countries have improved their
rankings
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EU – Vietnam Free Trade Agreement
(EVFTA)
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EVFTA – Bilateral negotiations
June 2012
October
2012
Hard work July 2015
August
2015
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Launch of
negotiations
First round
in Hanoi
15 rounds
alternately in
Vietnam and
Brussels
Last round in
Hanoi
Agreement in
principle

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EVFTA – Comprehensive agreement
• Trade in goods
Market access for goods – tariffs
Rules of Origin
Export duties
Technical Barriers to Trade (TBT)
Sanitary and Phytosanitary Measures
Customs and Trade Facilitation
Administrative Cooperation in Customs Matters
• Services and investment:
National treatment
Liberalisation commitments / market access
Investment to state dispute settlement
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Cross-cutting issues
Dispute Settlement and Investment
Dispute Settlement
Government Procurement
State Owned Enterprises & Subsidies
Intellectual Property Rights
Geographical Indications
Trade and Sustainable Development
Cooperation and Capacity building
Annexes (car; green tech and pharma)

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EVFTA – Main features
 Symmetrical elimination of nearly all tariffs (over 99%)
 Removal of almost all export duties and cap on remaining
ones
 Services commitments going beyond GATS
 Negotiations on Investment protection and disputes
settlement on-going
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EVFTA – Tariff liberlization
• Tariff liberlization:
– 99% of tariffs both value and number of tariff lines
– After 7 years for EU
– Vietnam 10 years
• Coverage at entry into force:
– 71% of value of Vietnamese exports / 84% tariff lines
– 65% value of EU exports / 49% tariff lines
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EVFTA – Service commitments beyond GATS
• Improvements in financial services, in particular insurance
• Securities
• Banking
• Elimination of Economic Needs Test on retail outlets in 5
years
• Improvements on maritime services including feedering for
one route
• Repositioning of empty containers
• Dredging services
• Certain air transport services
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EVFTA – Government procurement
• Vietnam has taken over close to 90% of disciplines
or the revised Agreement of Government
Procurement (GPA rules)
• Access to public procurement markets covering
ministries, state-owned enterprises, provinces and
regions
• Vietnam will create a web portal and publish
summary or notices in English
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EVFTA – Benefits for Vietnam
• Vietnam’s annual economic expansions rate may grow an additional 15%
every year (said Tomaso Andreatta, representative of the European Business
Association in Vietnam (EuroCham), at the Vietnam Business Forum 2014)
• Tariffs for most of Vietnamese export product to the EU will gradually
reduce to 0% and Vietnam’s export to EU is expected to grow about 35%
for next few years
• The real wages of skilled laborers may increase by up to 12% while real
salary of common workers may rise by 13%
• The EVFTA is the legal framework for a more stable relationship in bilateral
trade for Vietnam when competing in the international market
• The EVFTA will generate greater effects, e.g. increased quality of
investment flows from EU, acceleration of the process of sharing expertise
and transfer of green technology and the creation of more employment
activities
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TRANS-PACIFIC PARTNERSHIP
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How is the TPP Different?
• The TPP is the most ambitious FTA: an annual gross domestic
product of nearly $28 trillion that represents roughly 40 percent of global
GDP and one-third of world trade
• The TPP is being touted as a “high-standard agreement” meaning “a
landmark, 21st-century trade agreement, setting a new standard for
global trade and incorporating next-generation issues”
• The TPP negotiations are taking place across twenty-nine chapters and
as part of a single undertaking.
• So-called "key elements" including the notion of comprehensive
market access, a fully regional agreement, cross-cutting issues
(regulatory coherence, competiveness and business facilitation, small and
medium sized enterprises, and development), new trade challenges
(particularly rules on state owned enterprises); as well as, finally, the
notion of a living agreement.34

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How is the TPP Different?
TPP with 30 chapters covering:
• Competition,
• Cooperation and capacity building, cross-border services,
• Customs,
• E-commerce, Environment,
• Financial services, Government procurement,
• Intellectual property, investment, labour, Legal issues,
• Market access for goods, Rules of origin,
• Sanitary and phytosanitary standards (SPS), Technical barriers to trade
(TBT),
• Telecommunications, Temporary entry,
• Textiles and apparel, and
• Trade remedies.35

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How is the TPP Different?
• In terms of international treaty commitments in areas that have thus far
eluded multilateral trade rules, the TPP seems to harbor the prospect of
a new textual template that will set the tone in both the Transatlantic
Trade and Investment Partnership currently getting started between the
EU and the US, as well as - further down the road - future trade and
investment agreements.
• These “new” areas include the following:
– Regulatory coherence,
– State-owned enterprises,
– Government procurement,
– Competition,
– Investment,
– E-commerce,
– Environment and
– Labour.
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How is the TPP different?
• In areas that have long been part or were recently brought within
the purview of multilateral trade rules, the TPP seems to promise
more far-reaching commitments with regard to contracting parties‘
policy space and regulatory autonomy, particularly in policy areas
such as:
– Export taxes and restrictions,
– Subsidies,
– Sanitary and phytosanitary measures,
– Technical barriers to trade,
– Trade in services,
– Intellectual property rights.
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Government procurement agreement
• 3 out of 11 TPP negotiating countries are parties to the WTO
Government Procurement Agreement (Singapore, Japan and the United
States)
• Allows all firm operating in any signatory country to be provided equal
access as domestic firms to the domestic procurement contracts (National
Treatment principle).
• The United States is the biggest trading partner of Vietnam
 Vietnam enterprises operating in the United States have significant access
and equal treatment as the U.S. firms in the government procurement
process.
• TPP is a stepping stone for Vietnam to become party to the WTO GPA
 increase competition, enhance the efficiency and transparency of the
government procurement system  VN to attract more foreign
investment and avoid corruption.38

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Investor-state dispute settlement (ISDS)
• Through binding arbitration, including for violations of the investment
and financial services chapters.
• ISDS provisions are expected to include protections commonly found in
investment agreements such as non-discrimination; fair and equitable
treatment; full protection and security; the prohibition of expropriation
that is not for public purpose, without due process, or without
compensation; the free transfer of funds related to investments; and the
freedom to appoint senior management positions regardless of
nationality.
• Expected new protections in the TPP:
– Transparency in arbitral proceedings, disclosure of filings and arbitral awards, and
participation of interested non-disputing parties to make amicus curiae submissions
to a tribunal
– Safeguards to ensure government’s ability to regulate in the public interest (public
health, safety and the environment)39

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HOW WILL TPP BENEFIT VIETNAM?
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How will TPP benefit Vietnam?
• Vietnam will enjoy strong economic and trade expansion. Vietnam’s
GDP would add an additional increase of 13.6% to the baseline
scenario.
• Vietnam is expected to gain significantly from the TPP’s considerable
plans for tariff and duty reduction
• Vietnam’s export will enjoy the agreement’s great benefits when the
US and Japan are one of the biggest partners of Vietnam, especially
the garment and textiles sector
• Export to the US would increase by 13-20% a year until 2017,
fetching total export of US$25-30 billions
• The foreign businesses are planning to enter Vietnam in preparation
for a post-TPP business climate.
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How will TPP benefit Vietnam?
• FDI inflows grow
• Improving agricultural yield: maximising yields on
existing lands and utilizing unusable / idle land by
new deployed technology
• Reducing power and waters needs that are retarding
growth and GDP plans
• More sophisticated joining of separate business
sections to integrate into new profit streams
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TPP and AEC intersection
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Thailand
Malaysia
Brunei
CanadaAustralia
Cambodia
Indonesia Myanmar
Peru
Philippines
Japan
Laos
Mexico New Zealand
Singapore
The United States
Vietnam
Chile

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Come and invest in Vietnam now!!!
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Questions & Answers

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