Lawyer in Vietnam Dr. Oliver Massmann ASEAN AFTER CPTPP - Vietnam Focus

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DR. OLIVER MASSMANN - Partner, General Director
DUANE MORRIS VIETNAM LLC
ASEAN AFTER CPTPP
Vietnam focus
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AGENDA
• COMPREHENSIVE AND PROGRESSIVE TRANS-
PACIFIC PARTENRSHIP (“CPTPP”) –WHAT IS IT?
• WHAT DOES CPTPP HAVE TO OFFER TO
INVESTORS?
• INVESTING IN VIETNAM – WHY?
• CONCLUSION
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Comprehensive and Progressive Trans-Pacific
Partnership (“CPTPP”)
• On 8 March 2018, the CPTPP was finally signed in Chile. The
CPTPP accounts for 495 million people representing 13.5% of the
world total economic output - worth a total of $10 trillion.
• CPTPP will lead to an increase of 1.32% in Vietnam’s GDP
• Vietnam will have access to newer markets and can expand their
exports to countries such as Canada, Mexico, and Peru with whom
it does not have a trade agreement.
• Opportunity for Vietnam to re-structure the export market
portfolio, not rely too much on the United States.
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New areas in the CPTPP compared with existing FTAs
– Regulatory coherence
– State-owned enterprises
– Government procurement
– Competition
– Investment
– E-commerce
– Environment and
– Labour.
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CPTPP Trade in Goods
• Tariff and non-tariff barriers on most industrial goods are
eliminated immediately, with tariffs on some sensitive products will
be phased out as agreed by the CPTPP Parties.
• Each CPTPP Parties provide a tariff schedule covering all goods.
• Parties agree not to use performance requirements, such as local
production requirements.
• Parties agree not to impose WTO-inconsistent import-export
restrictions and duties. If any, they are required to notify the others
about the procedures to ensure transparency and promote trade
flows.
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Trade in Services
• Negative approach, meaning that their markets are fully
opened to service suppliers from other CPTPP Parties,
except otherwise indicated in their commitments (non-
conforming measures)
• In order to make such reservations, the member state must
prove the necessity of such preservation and negotiate with
other member states. If approved, the non-conforming
measures are only limited to such list, except for measures in
certain sensitive sectors which are included in a separate list
• Ratchet approach: Member states are only allowed to adopt
policies that are better than what they commit
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Investor-state dispute settlement (ISDS)
• Through binding arbitration
• Arbitral awards are final, binding and fully enforceable in CPTPP
countries
• ISDS provisions 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.
• New protections in the CPTPP:
– 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)8

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Rules of Origin
• Originating goods:
– Wholly obtained or produced goods;
– Produced in and from materials originating from CPTPP countries; or
– Produced in and using material not originating from CPTPP countries nut
satisfying CPTPP rules of origin.
• Separate rules of origin for each specific type of goods
• Separate chapter on rules of origin for textile products
• Rules of origin in CPTPP are predominantly based on a specified
shift in tariff classification, regional value content and production
stages
• No requirement for certificates of origin under CPTPP, or third-
party certification of origin but self-certification is sufficient
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CPTPP - Textiles and Apparel
• Vietnam’s garment and textile exports to the CPTPP countries now account for
13% of the total value.
• Fabrics imported from CPTPP countries is currently 1.5% of fabrics import
value of Vietnam.
• Most tariffs on textiles and apparel will be eliminated immediately, although
tariffs on some sensitive products will be phased out as agreed by the CPTPP
Parties.
• Yarn-forward RoR: all products in a garment from the yarn stage forward,
including yarn spinning, knitting and dyeing, must be made in one of the
countries that is party to the agreement in order to qualify for preferential
treatment under CPTPP.
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15-20% import
tariff rate
0%

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Exceptions to the yarn-forward rule
– A carefully tailored short supply list (when certain yarns and fabrics
not widely available in the region can be permanently sourced from
outside the region for qualifying products or only within 5 years
from the CPTPP’s entry into force).
– Cut and sew rule: bras, synthetic baby garments and textile bags. For
those things, you can use yarn or fabric from anywhere and cut and
sew within the CPTPP.
– de minimis: total weight of a textile or apparel’s non-CPTPP yarn does
not exceed 10 percent of the main fabric.
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Yarn-forward rule: Impact on Vietnam’s textile industry
• Current status and Issues:
– Around 6,000 textile companies in Vietnam - ~600,000 machines have to be replaced
– 60% of imported materials sourced from other non-CPTPP countries (mainly China)
– Domestic production of materials has not met the demand
– Yarn production must go together with weaving and dying but environment protection
is currently an issue.
• Impacts and what to do next:
– More foreign investment in textile industry with investment value of up to USD1
billion.
– Sourcing managers are looking for alternatives due to rising costs, labor shortages, strict
compliance and environmental regulations and a move to production of high value
products in China
– Establish domestic supply chain
– Bring into operation domestic yarn production factories
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CPTPP - Gains for Vietnam
• Sectors that benefit the most from the CPTPP:
– Textiles, clothing, footwear
– Food, beverages and tobacco
– Chemicals, transport equipment, plastic parts
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CPTPP - Gains for Vietnam (cont.)
• Opportunity to involve in new supply chain in the region given
strict Rules of Origin
• More incentives for Government institutional and economic
reforms towards more transparent, open and predictable
investment environment, attracting more foreign investment in
Vietnam
• More sophisticated joining of separate business sections to
integrate into new profit streams
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Potential challenges for business in Vietnam
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Fierce foreign competition in domestic market
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CPTPP - Challenges for business in Vietnam
• Weak supporting industry
• Stagnation of the enterprise system
• Role of SOEs in the system
• Level of IP protection
• Corruption
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How business should prepare for it?
• Be aware of the obstacles when the market is more liberalized
• Actively participate in international trade and regional supply
chains
• Carefully examine the CPTPP to find out where the benefits they
expect are, what are the conditions to reap such benefits, etc. Each
sector will need to do their own homework.
• Learn the rules of the game; and
• INVEST IN VIETNAM BEFORE IT IS TOO LATE!
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CPTPP and AEC intersection
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Thailand
Malaysia
Brunei
CanadaAustralia
Cambodia
Indonesia Myanmar
Peru
Philippines
Japan
Laos
Mexico New Zealand
Singapore
Vietnam
Chile

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AEC Market Snapshot – Asia’s main
investment hub
• GDP: US$2,432 billion (2015)
• GDP per capita: US$3,867 (2015)
• Population: 629 million, 60% under the age of 35
• AEC % of world GDP: ~3.3% (2015)
• Annual GDP growth: 4.7% (2015)
• AEC’s merchandise exports: US$2.2 trillion
• ASEAN could be the 4th
largest economy in the world by
2030
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Key characteristics of AEC
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Why doing business in ASEAN – Investors’
perspective
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Source: Economic Corporate Network

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WHY VIETNAM?
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Vietnam 2018 Economy at a glance
• GDP: US$220.3 billion
• GDP per capita: US$2,385
• GDP Growth: 7.08% (record breaking since 2008)
• Inflation: 3.54%
• Population: About 91.70 million
• Labor force aged 15 and above: 54.61 million
• Total export and import turnover: : >US$482
billion (14% increase compared with 2017)
• Regional Minimum wage (Region I): VND 4.180
million (US$ 180) per month (Jan 2019)
• Vietnam’s average age: 29 years old
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Welcome to the most dynamic country on this
planet : Vietnam!
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Growing middle-class
(doubled by 2020 to
33 million people
according to Boston
Consulting Group)
Fastest-growing ASEAN economy
in 2018 and 2019, as in 2017 –
Standard Chartered Bank predicts

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Increasing Foreign Direct Investment
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Vietnam’s super rich population is growing
faster than anywhere else….
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… and is on track to continue leading
the growth in the next decade

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Communist Vietnam Has More Millionaires
Than Capitalist Philippines
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Female Business Ownership
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* Similar to Thailand, Hong Kong and Switzerland
** Far above Singapore, Myanmar and Indonesia
Source: Mastercard Index of Women Entrepreneurs 2018

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Vietnam’s Free Trade Agreements
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ASEAN - China
ASEAN - Korea
ATIGA
ASEAN - India
ASEAN – Australia –
New Zealand
ASEAN - Japan
RCEP
Vietnam - Chile
Vietnam - Korea
Vietnam – Eurasian
Economic Union
Vietnam - EU
Vietnam - EFTA
CPTPP
ASEAN – Hong Kong
Vietnam - Israel
Vietnam - Japan
Signed
In negotiation/
Negotiation concluded
In negotiation

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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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Investment Law 2014 - New Negative List!
• All non-prohibited business activities are permitted
“Investors are entitled to conduct business investment activities in
industries and trades which are not prohibited by this Law.” (Art. 5.1,
Investment Law 2014)
•Removal of many baby permits
• Reduction of conditional and prohibited activities
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M&A procedures for foreign investors under new 2014
Investment Law
• 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
 Save up to 4-6 months
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INVESTMENT INCENTIVES
Items 2018
Inside SEZ Outside SEZ
Tax rates 10% for first 15
years
20%
CIT Holidays 04 years 2 years
CIT reduction 50% for subsequent
09 years
50% for subsequent
04 years
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• Carrying forward losses
• Reduction or exemption of land rental, land use fee
• Incentives for enterprises employing female workers

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Personal Income Tax
– Subjects:
 Vietnam residents: those individuals residing in
Vietnam for 183 days or more in a calendar year, or in
12 consecutive months from the first date of arrival
 Non-residents: an individual staying in Vietnam from
90 to 183 days in a tax year
– Tax rates: varied for employment and non-employment
income (employment income: graduated tax rates from 5-
35%; non-employment income: depending on each type
of income)
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Taxation in Vietnam
• Value-added Tax (“VAT”)
– Tax applied to goods and services used for
production, trading and consumption in Vietnam
(including goods and services purchased from abroad)
– Tax rate: 0-10% depending on types of goods and
services
• Other taxes: special sales tax (applied to luxury goods or
amusement places), natural resources tax, land and
housing tax, etc.
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Labor and Employment
• Minimum regional wages: ranging from US$123 –
US$175/month
• Social security:
– both employer and employee have to contribute to social fund (social
insurance, health insurance, unemployment insurance)
– The Fund covers the employees’ benefits during sick leave, maternity leave,
retirement, allowances for work related accidents and occupational diseases,
and survivors’ benefits
• Pension: Monthly pensions are provided from the Social
Insurance Fund where an individual has contributed social
insurance for more than 20 years and when they reach 60 years
of age for men, or 55 years of age for women.
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CONNECTIONS ARE BUSINESS
PLEASE CONNECT WITH ME ON
LINKEDIN:
OLIVER MASSMANN
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WHEREVER YOU ARE - BE ALL THERE
Jim Elliot
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DUANE MORRIS VIETNAM LLC
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Contact email:
omassmann@duanemorris.com
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References (1)
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References (2)
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References (3)
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References (4)
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