OMASSMANN - Vietnam’S CURRENT FOREIGN DIRECT INVESTMENT STATUS AND FUTURE OUTLOOK ON THE EU- VIETNAM FREE TRADE AGREEMENT

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OLIVER MASSMANN - Partner, General Director
DUANE MORRIS VIETNAM LLC
VIETNAM’S CURRENT FOREIGN DIRECT
INVESTMENT STATUS AND FUTURE
OUTLOOK ON THE EU- VIETNAM FREE
TRADE AGREEMENT
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AGENDA:
• VIETNAM’S ECONOMIC OVERVIEW
• FOREIGN DIRECT INVESTMENT STATUS
• WHAT ARE IN THE EU- VIETNAM FREE TRADE
AGREEMENT (EVFTA)?
• OPPORTUNITIES FOR AUTOMOTIVE INDUSTRY
• INVESTMENT GUIDANCE FOR FOREIGN INVESTORS
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WHICH COUNTRY HAS ITS TWO MAJOR CITIES
RANKED AS MOST DYNAMIC CITIES
ON THIS PLANET EARTH ?

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Welcome to the most dynamic country on this
planet : Vietnam!
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Increasing Foreign Direct Investment
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EU – Vietnam Free Trade Agreement
(EVFTA)
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EVFTA – Bilateral negotiations
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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
06/2012
10/
2012
Conclusion
of
negotiation
FTA text
released

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What happens next?
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EVFTA should
be taken into
effect
Translation into all
European languages
EVFTA should be
signed
Legal review
Current Status Middle 2017 Early 2018

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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
Investor to state dispute settlement
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Cross-cutting issues
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
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Dispute settlement
• Much faster than the WTO: 425 days under the EVFTA
compared with up to 860 days under the WTO dispute
settlement system
• A mandatory use of rosters list of arbitrators
• A more transparent system (public hearing, submission
of amicus curiae)
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Legal enforceability
• The decisions of the tribunal are enforceable
• Domestic courts cannot question the legal validity of the
decisions
EVFTA secures a modern reformed investment
dispute resolution standard
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Investment Dispute Settlement
• FTA implements investor-to-state dispute settlement (ISDS)
mechanisms – investors can claim in case that an investor
protection obligation has been breached
• Installation of a permanent Investment Court System (ICS)
• Independent International Tribunal with nine members at first
instance will be competent to all conflicts about investment
protection provisions (5 year transitional period for Vietnam)
• A court of Appeal with six members will be established
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Government Procurement
• Average government procurement in the EU is
about 16%
• Vietnam has one of the highest government procurement
rates of all countries worldwide (with about 39%)
• Vietnam is not a member of the Government Procurement
Agreement of the WTO
• Vietnam undertakes to transparency and procedural fairness
regulations
• Investors will get access to a huge market of government
procurement
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Government Procurement (cont.)
• EU companies will be able to bid for public procurement contracts
under the same conditions like Vietnamese companies for 22
central Government bodies, two state-owned enterprises (Vietnam
Electricity and Vietnam Railways), 24 public hospitals, etc.
• EVFTA even provides higher initial transitional threshold than the
TPP.
• Under the EVFTA, offsets are applied based on value of a
contract (including non-covered procurement) but in the TPP, it is
based only on the covered procurement.
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Opportunities for automobile industry
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Cars
• Tariffs:
– Cars: duty free after 10 years
– Cars with large engine (>3000 cc for petrol, > 2500 cc for diesel):
duty free after 9 years
– Motorcycles with engines larger than 150 cc: liberalized after 7 years
– Smaller motorcycles: duty free after 10 years
• Rules of origin:
– Vehicles: maximum 45% of materials not originating in either party
– Motorcycles: change of tariff heading or 50% materials not
originating in either party
– Car parts and accessories: same as motorcycles
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Automotive
• 3 years after the FTA comes into effect, Vietnam will accept UNECE
(standards adopted from the EU, U.S., Russia and many other states
which settle e.g. Worldwide harmonized Light vehicle Test Procedures)
certification without any further testing requirements
Note: Vietnam is not yet a party to the UNECE Agreement
• Demand for automobiles in Vietnam is at no other time set to surge like
this moment
• Vietnam is going to be the new production hub in Asia for the
machinery and especially automotive tier two manufacturing industry
where several German and European automotive companies already
experienced their own success story
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Remanufactured goods
• First time ever concept introduced
• Remanufactured products will received the same
treatment as new like products.
• Trade for high value products is now open, for example
car parts (especially for commercial vehicles) to serve the
aftersales market with original (manufactured) parts.
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INVESTMENT GUIDANCE FOR
FOREIGN INVESTORS
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Investment procedure under new 2014 Investment Law
• Under the Investment Law and Enterprise Law: 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
• Under recent Decree guiding the Investment Law: 2 steps can be combined and
application dossiers for IRC and ERC can be submitted at the same time to the
investment registration authority only.
• The IRC and ERC will be given to the investors at the same time at the investment
registration authority.
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INVESTMENT INCENTIVES
Items 2017
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 to183 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$113 –
US$165/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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Questions & Answers
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DUANE MORRIS VIETNAM LLC
Thank you very much!
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83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1
Hanoi, Vietnam Ho Chi Minh City, Vietnam
Tel.: +84 4 39462200 Tel.: +84 8 3824 0240
Fax: +84 4 3946 1311 Fax: +84 8 3824 0241
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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