VIETNAMESE MARKET ANALYSIS Practical and Legal Perspective

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OLIVER MASSMANN - Partner, General Director
DUANE MORRIS VIETNAM LLC
VIETNAMESE MARKET ANALYSIS
Practical and Legal Perspective
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AGENDA:
• WHY INVESTING IN VIETNAM?
• VIETNAM’S RECENT INTEGRATION TO REGIONAL
AND INTERNATIONAL ECONOMY
• CONCLUSION
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Vietnam 2015 Economy at a glance
• GDP: US$204 billion
• GDP per capita: US$2,109
• GDP Growth: 6.68 % (compared to 5.98%
in 2014, highest in the past 5 years)
• Inflation: 0.63% (lowest in the past 10
years)
• Population: About 91.70 million
• Labor force aged 15 and above: 54.61 million
• Total export and import turnover: : US$
$327.76 billion (10% increase)
• Minimum wage: VND 3.5 million (US$ 156)
per month (Jan 2016)
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Vietnam – From 1980s till now
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1980s – Rice Importer Now – 2nd Rice Exporter
Worldwide

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Vietnam to be Asia’s second fastest growing country
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2016: 6% according to World Bank
Asia’s second fastest growing
country, only after India
Vietnam tops 6 European countries
in the Global Competitiveness
Index

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Vietnam has the fastest-growing middle and
affluent class in the region
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Vietnam’s Free Trade Agreements
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FDI by province 2015 & first 7 months 2016
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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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EU – Vietnam Free Trade Agreement
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EVFTA – Benefits for Vietnam
• Vietnam’s annual economic expansions rate: additional 15% every year
• Tariffs: gradually to 0% (for most of Vietnamese export product to the
EU)
• Vietnam’s export to EU: grow ~35% for next few years
• The real wages of skilled laborers: increase by up to 12%
• Real salary of common workers may rise by 13%
• EVFTA: 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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EVFTA – Benefits for European businesses
• Vietnam as part of ASEAN gives investors from the EU better access
to this dynamic region.
• EU investors will benefit from improved investment environment,
open and internationalist regulatory policies, etc. as combined effects
of Vietnam’s deep integration to the region and the world (TPP)
• Young and educated growing middle class is valuable human resource,
considering the current aging situation in Europe.
• Growing opportunities in food & beverage sector (due to high
demand in Vietnam), machinery and chemical products (due to drastic
tariff elimination), electronic products (transportation cost will be
compensated and EU investors could compete against other Asian
investors).
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790 million people
40% global GDP
1/3 global trade

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How is the TPP Different?
• GDP of 12 TPP Members is nearly $28 trillion, 40% of global
GDP and one-third of world trade
• TPP is broader: it covers markets for all goods, services,
investment, government procurement, e-commerce with 30
Chapters included.
• TPP is deeper: it addresses new trade challenges (environment,
labor, competition, state-owned enterprises, etc.)
• 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”
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How will TPP benefit Vietnam?
• The average tax rate on textile products
into the US market is currently 17.5%,
after TPP it falls down to 0%
• The whole import tariffs on footwear
currently from 3.5% to 57.4% also falls
down to 0%
• USD 335.7 billion: According to a study
by East – West Centre (USA), Vietnam’s
GDP may increase by USD35.7 billion,
equivalent to 10.5% until 2025.
• Investment increases by 9.2%
• Create more than 6 million jobs in textile
industry until 2025
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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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INVESTMENT IN VIETNAM
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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: 2015 Investment Law, 2015 Enterprise
Law and their implementing documents in 2016
• 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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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.1,
Decree 5 law on new investment
• Reduction of conditional and prohibited activities
–Old Law
conditional activities: 386・prohibited activities: 51
–New Law
conditional activities: 267・prohibited activities: 6
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INVESTMENT PROCEDURE
• 2 separate steps: Application for Investment Registration Certificate
(“IRC”) and Application for Enterprise Registration Certificate (“ERC”)
– NOT simpler procedure BUT quicker in time
• 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
dossier26

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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
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INVESTMENT INCENTIVES
Items 2006 2016
Inside SEZ Outside SEZ
Tax rates 28% 10% for first 15
years
20%
CIT Holidays 3 years 04 years 2 years
CIT reduction 50% for subsequent
7 years
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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INVEST IN VIETNAM NOW!!!
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Questions & Answers

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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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