THE ASEAN ECONOMIC COMMUNITY AND THE COMPREHENSIVE AND PROGRESSIVE TRANS-PACIFIC PARTNERSHIP? Market access comparison – What is in for German investors?

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DUANE MORRIS VIETNAM LLC
THE ASEAN ECONOMIC COMMUNITY AND THE
COMPREHENSIVE AND PROGRESSIVE TRANS-
PACIFIC PARTNERSHIP?
Market access comparison – What is in for German investors ?
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AGENDA
• INTRODUCTION TO THE ASEAN ECONOMIC
COMMUNITY (“AEC”) AND THE COMPREHENSIVE
AND PROGRESSIVE TRANS-PACFIC PARTNERSHIP
(“CPTPP”)
• WHAT DO AEC AND CPTPP HAVE TO OFFER TO
INVESTORS?
• COMPARISON OF CERTAIN SERVICE SECTORS IN
THE WTO, AEC, EU- VIETNAM FTA AND THE CPTPP
• CONCLUSION2

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The Association of Southeast Asian Nations
(ASEAN)
• Intra-ASEAN trade was insignificant when ASEAN was
established
• The ASEAN Free Trade Area (AFTA) was established in
1992 to:
– Create a single market and an international production base;
– Attract foreign direct investment; and
– Increase intra-ASEAN trade
• The AFTA started with the introduction of the Common
Effective Preferential Scheme (CEPT) in 1993 to eliminate
intra-ASEAN import tariffs
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Does AFTA achieve its purposes?
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AEC establishment
• One of the 3 pillars of ASEAN Community, together
with ASEAN Security Community and ASEAN Socio-
Cultural Community
• Originated from ASEAN Vision 2020 adopted in 1997
on the 30th anniversary of the Association of Southeast
Asian Nations
• The realization of the end goal of economic integration
as espoused in the Vision 2020, which is based on a
convergence of interests of ASEAN member countries to
deepen and broaden economic integration through
existing and new initiatives with clear timelines.
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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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Progress of AEC formation – Single market and
production base
• 2010: duties applicable for 99.2% of tariff lines for ASEAN 6 Member States
were eliminated; for other countries (Lao PDR, Cambodia, Myanmar and
Vietnam): duty rates of 0-5% on 97.52% of tariff lines.
• Removing NTBs to intra-ASEAN trade: ASEAN Single Window Gateway,
mutual recognition arrangements, ASEAN Harmonized Tariff Nomenclatures
• ASEAN Framework Agreement on Services: ease restrictions in at least 80 sub-
sectors; gradually allow 70% foreign (ASEAN) equity participation for all service
sectors
• ASEAN Comprehensive Investment Agreement: investor state dispute settlement
mechanism based on non-discrimination principles; investment protection
• 9/2012: ASEAN Exchanges launched ASEAN Trading Link
• ASEAN Agreement on the Movement of Natural Persons
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Progress of AEC formation – Competitive
Economic Region
• Great attempts by ASEAN Member States to
introduce competition laws and policies
• On-going developed physical infrastructure:
– ASEAN Highway Network
– ASEAN Power Grid
– Trans-ASEAN Gas Pipelines
– ASEAN Open Skies Policy: liberalization of air services
– Reduced telecommunication rates within ASEAN
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Progress of AEC formation – Equitable
Economic Development
• Enhancement of competitiveness and expansion of
SMEs under the Strategic Action Plan for ASEAN
SME Development (2010-2015)
• 2011: ASEAN Framework for Equitable Economic
Development – different level of economic
development of each Member State is of utmost
consideration
• AEC benefits are evenly shared among Member
States
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Progress of AEC formation – Integration
into global economy
• A number of ASEAN+1 FTAs
• On-going negotiations for Regional Comprehensive
Economic Partnership (RCEP) – the world’s largest
trade bloc in terms of population
• Several key ASEAN Member States are members of
the CPTPP (formerly the TPP)
• ASEAN Member States are individually negotiating
FTAs with the European Union
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Vietnam’s Free Trade Agreements in ASEAN framework
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ASEAN - China
ASEAN - Korea
ATIGA
ASEAN - India
ASEAN – Australia –
New Zealand
ASEAN - Japan
RCEP
Signed
In negotiation

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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 Market Access Limitations
• 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
E.g.: a certified practicing Indonesian doctor will then be allowed to practice in Vietnam
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A sector study: Cars imported from ASEAN
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Decree No. 116/2017/ND-CP and Circular No.
03/2018/TT-BGTVT
• Requirement of submitting a Certificate of eligible imported motor
vehicle class issued by a foreign competent authority. This is said
to be not possible as most of the exporting countries do not issue
such document for types imported into Vietnam.
• Each shipment will be inspected by the quality management
authority. The model of each motor vehicle class in each
shipment will also be inspected or tested. This is new requirement
as previously, only one model of each motor vehicle class in one
shipment is tested. The next shipments of the same type were not
subject to any testing/ inspection.
 Takes time and cost for importers --> consumers have to bear
higher cars price
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Decree No. 116/2017/ND-CP (cont.)
• The inspection/ testing measure at issue is conformity assessment
procedures and falls under the scope of the WTO Agreement on
Technical Barriers to Trade (“TBT”).
• The measure at issue could be a violation of the TBT national
treatment as:
– The cars importers are treated less favorably than the local cars
assemblers / producers. In particular, local cars assemblers/ producers
are not subject to inspection if there is no change to technical and
environmental safety parameters used for the previous certificate on vehicle
class. However, imported cars have to be inspected in every shipment even
in case there is no change to technical and environmental safety parameters.
– The measure constitutes a de factodiscrimination as it is more difficult,
even impossible for cars importers to meet the requirement. The exporting
country can only issue the certificate based on its standards, which may be
not the same as those in Vietnam.19

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WTO
dispute
settlement
process

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How long to settle a WTO dispute?
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WTO dispute
60 days Consultations, mediation, etc.
45 days Panel set up and panelists appointed
6 months Final panel report to parties
3 weeks Final panel report to WTO members
60 days Dispute Settlement Body adopts report (if no appeal)
Total: 1 year (without appeal)
60-90 days Appeals report
30 days Dispute Settlement Body adopts appeals report
Total: 1 years 3 months (with appeal)

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Why doing business in ASEAN – Investors’
perspective
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Source: Economic Corporate Network

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Comprehensive and Progressive Trans-Pacific
Partnership (“CPTPP”)
• The TPP was already concluded on 06 October 2015. However, in January 2017,
right after President Trump took his office, the United States formally expressed
its withdrawal from the agreement.
• In November 2017, during APEC meeting in Da Nang, Vietnam, ministers from
11 countries decided to push ahead with the TPP with its new name – 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.
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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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CPTPP – Trade in Services
• The CPTPP takes a negative approach, meaning that their
markets are fully opened to service suppliers from other
CPTPP Parties, except otherwise indicated in their
commitments in annex(es) on:
– Current measures on which a Party accepts an obligation not to
make its measures more restrictive in the future, and to bind
any future liberalisation; and
– sectors and policies on which a country retains full discretion in
the future.
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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
AECAEC
CC
PP
TT
PP
PP

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MARKET ACCESS COMPARISON OF
CERTAIN COMMERCIAL SECTORS IN
THE WTO, AEC, EVFTA AND CPTPP
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Distribution sector
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WTO /
AFAS
EVFTA
CPTPP
Distribution of cigarettes and cigars,
publications, precious metals and stones,
pharmaceutical products and drugs, explosives,
processed oil and crude oil by foreign investors
are still prohibited

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Distribution sector
WTO / AFAS EVFTA CPTPP
The establishment of outlets
for retail services (beyond the
first one) shall be allowed on
the basis of an Economic
Needs Test (ENT)
Same as in the WTO / AFAS
but added the following:
In case of establishing an
outlet less than 500m2 within
the area planned for trading
activities and already
completed construction of
infrastructure, ENT is not
required.
5 years from the date of entry
into force of the Agreement,
the requirement of the ENT
will be abolished.
Same as in the EVFTA but
added the following:
The main criteria of the ENT
include the number of existing
service suppliers in a particular
geographic area, the stability of
market and geographic scale.
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Power/ Energy Sector
Level of commitment in Power / Energy sector
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WTO /
AFAS
EVFTA
CPTPP
N/A Low High

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Power/ Energy Sector
WTO /
AFAS
EVFTA CPTPP
N/A Unbound (meaning no commitment)
regarding:
- Production of electricity; transmission
and distribution of electricity on own
account
- Manufacture of gas; distribution of
gaseous fuels through mains on own
account
- Production of steam and hot water;
distribution of steam and hot water on
own account
Other sub-sectors: not included
(meaning no commitment) in the service
schedule.
Only the following restrictions:
- Foreign investment to own or operate
power transmission facilities in Viet Nam
may not be permitted. EVN (Viet Nam
Electricity Corporation) is currently the
sole authorised owner and operator of
power transmission facilities in Viet Nam.
- Viet Nam reserves the right to adopt or
maintain any measure with respect to
hydroelectricity and nuclear power.
- Services incidental to energy distribution:
Foreign services suppliers are not allowed
to supply the services incidental to energy
distribution. Foreign investment in these
services is not permitted.
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Transport Services
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Maritime Transport
WTO =
AFAS =
CPTPP
EVFTA
Internal Waterways Transport
WTO =
CPTPP
AFAS =
EVFTA
Rail Transport
WTO =
EVFTA
CPTPP AFAS CPTPP
WTO =
EVFTA
AFAS
Air Transport
Low High Low High

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Transport
Sub-sectors WTO AFAS CPTPP EVFTA
Maritime transport
services
Mode 3 MA: joint
venture with maximum
49% foreign ownership
Same as WTO Same as WTO Mode 3 MA: joint venture
with maximum 70% foreign
ownership
Internal Waterways
transport
+ Passenger
transport
+ Freight transport
Mode 1: No
commitment
Mode 3: joint venture
with maximum 49%
foreign ownership
Mode 1: No restriction
Mode 3: joint venture with
maximum 51% foreign
ownership
Same as WTO Same as AFAS
Rail transport
+ Passenger
transport
+ Freight transport
Mode 1: No
commitment
Mode 3: joint venture
with maximum 49%
foreign ownership
Mode 1: No restriction
Mode 3: joint venture with
maximum 51% foreign
ownership
Mode 1: No restrictions
Mode 3:
+ Freight transport:
joint venture with
maximum 49% foreign
ownership
+ Passenger transport: not
permitted
Same as WTO
Air transport
+ Selling and
Marketing of Air
Transport Services
Mode 1: No restriction
Mode 3: Airlines are
permitted to provide
service in Viet Nam
through their ticketing
offices or agents in
Viet Nam
Mode 1: No restriction
Mode 3: No restriction
Viet Nam reserves the
right to maintain or adopt
any measure.
Same as WTO
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Insurance Services
Level of commitment in Insurance sector
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EVFTA
WTO /
AFAS
CPTPP
Low Med High

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Insurance Services
EVFTA WTO / AFAS CPTPP
No commitment
regarding cross-border
supply of health insurance
services
Non-life branches of
foreign insurance
enterprises shall be
permitted subject to
prudential regulations. No
specific conditions are
specified, meaning the
Government can adopt
conditions as it wishes to.
No restriction regarding
cross-border supply of
health insurance service
Same as EVFTA
Supply of Cross-border services by foreign insurance company
must be conducted via an insurance broker which has the
license to establish and operate in Vietnam.
Non-life branches of foreign insurance enterprises shall be
permitted.
In order to be granted the license for establishment of non-life
insurance branch in Viet Nam, a foreign non-life insurance
company must satisfy the conditions under Vietnamese law,
including: (a) Operational and financial capacity and branch
management and supervisory capacity in Viet Nam of foreign
non-life insurance company. (b) The cooperation between the
foreign insurance administrative body of the country where the
company head office is located and the Vietnamese insurance
administrative body in managing and supervising the branch of
foreign non-life insurance company in Viet Nam.
The above list of conditions are closed. The Government can
adopt different conditions than what mentioned but must not
be more restricted.
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Banking Services
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WTO = AFAS =
EVFTA
CPTPP
Low High

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Banking services
WTO/ AFAS / EVFTA CPTPP
Mode 1: No commitment, except:
Provision and transfer of financial information, and financial
data processing and related software by suppliers of other
financial services; and
Advisory, intermediation and other auxiliary financial services on
all activities listed in subparagraphs from (a) to (k), including
credit reference and analysis, investment and portfolio research
and advice, advice on acquisitions and on corporate restructuring
and strategy.
Mode 3: Foreign purchase of shares in each Viet Nam's joint-
stock commercial bank may not exceed 30% of the bank's
chartered capital.
A branch of foreign commercial bank is not allowed to open
other transaction points outside its branch office, excluding
ATMs.
Mode 1: No restriction
Mode 3: No other restrictions other than:
A foreign credit institution or a foreign institution engaged in a
banking operation shall only be permitted to establish one
representative office in each province or city under central
authority.
General directors (directors), deputy general directors (deputy
directors), chief accountants, directors of branches and directors
of subsidiary companies and people assuming equivalent
positions must reside in Viet Nam during their term of office
whenever they assume the positions in the Board of Directors of
a credit institution.
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Securities services
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WTO =
AFAS
EVFTA CPTPP
Low High

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Securities services
WTO/ AFAS EVFTA CPTPP
Commitments on 6 sub-sectors
Mode 3:
foreign securities service suppliers
are permitted to establish
representative offices and joint
ventures with maximum foreign
ownership of 49%.
After 5 years from the date of
accession, securities service suppliers
with 100% foreign-invested capital
shall be permitted.
Same commitments in 6 sub-sectors
Commitments on 2 additional
services: Provision and transfer of
financial data processing; and credit
reference and analysis.
Mode 3: Same as the WTO/ AFAS
No restrictions except the following:
The operation and services provided
by branches of foreign securities
company and fund management
company in Viet Nam are subject to
approval of the Government of Viet
Nam, including the imposition of
conditions for the approval.
Foreign participation from above
49% to less than 100% of charter
capital of a securities company, fund
management company in Viet Nam
is subject to approval of the
Government of Viet Nam, including
the imposition of conditions for the
approval.
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Telecommunication Services
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WTO =
AFAS
EVFTA CPTPP
Low High

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Telecommunication Services
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Sub-sectors WTO/ AFAS EVFTA CPTPP
Non facilities-based services
Other services - Virtual
Private Network (VPN)
Mode 3: Joint venture with
maximum 65% foreign
ownership
Mode 3: Joint venture with
maximum 70% foreign
ownership
Mode 3: Upon entry into force,
Joint venture with maximum
65% foreign ownership
5 years from the date of entry
into force of the Agreement,
this capital limitation will be
75%.
Mode 3: Upon entry into force,
Joint venture with maximum
70% foreign ownership
5 years from the date of entry
into force of the Agreement,
this capital limitation will be
75%.
joint venture or purchase of
shares in a Vietnamese
enterprise, with maximum 65%
foreign ownership.
No later than 5 years from the
date of entry into force of the
Agreement, this capital
limitation will be 100%.
joint venture or purchase of
shares in a Vietnamese
enterprise, with maximum 70 %
foreign ownership.
No later than 5 years from the
date of entry into force of the
Agreement, this capital
limitation will be 100%.

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CONNECTIONS ARE BUSINESS
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LINKEDIN:
OLIVER MASSMANN
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WHEREVER YOU ARE - BE ALL THERE
Jim Elliot
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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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