Copyright ©2013– 2014 VCI Legal All right reserved. This presentation and its contents are...

Copyright ©2013– 2014 VCI Legal All right reserved. This presentation and its contents are copyrighted under applicable Vietnamese and international laws. Contents of this Presentation, in whole or in part, could not be used without the authorization of the author in writing. Any unauthorized use is subject to be penalized under applicable laws and regulations

Local Insights Meet International Expertise

voted “Vietnam Corporate Law Firm of The Year” by

Tuan A. PHUNG Esq.Managing Partner |VCI LegalHon. General Consul | Finnish Consulate HCMC

DOING BUSINESS

WITH A SMILE

Investment & Opportunities In Vietnam




Business Law Firm providing “In-house Counsel Service”, specialized legal services for business and some Key Practice Areas • Corporations, M&A & Securities• Investment and restructuring• Banking, Finance & Capital Markets• Insurance• Real Estate & Construction• Petroleum, Mining & Energy • Infrastructure, Transport & Logistics • Trade Policy & Competition• Tax & Transfer Pricing • Labor, HR Management & Compliance• Alternative Dispute Resolution: Mediation, Arbitration

VCI LEGAL INTRODUCTION




LOCAL INSIGHTS MEET INTERNATIONAL EXPERTISE

A full service law firm with a seasoned team of multi-disciplinary professionals

in-depth understanding of the legal system, business environment, and cultural background in Vietnam.

Offices: Hanoi and Ho Chi Minh City Professional staff: 25 Languages: Vietnamese, English, ,

Japanese, French, Chinese, Korean


Copyright ©2013 –VCI Legal. All right reserved. This presentation and its contents are copyrighted under applicable Vietnamese and international laws. Contents of this Presentation, in whole or in part, could not be used without the authorization of the author in writing. Any unauthorized use is subject to be penalized under applicable laws and regulations

VIETNAM CORPORATE LAW FIRM OF THE YEAR

Legal500, Chambers & Partners, IFLR 1000, Asialaw Profiles and Legalese’s Tax Director Handbook (global legal directories & ranking agencies) and international professional magazines list VCI Legal among the top law firms in Vietnam for: M&A, competition law, banking and corporate, insurance, taxation, intellectual property, investment,

Acquisition International Magazine: • Vietnam Corporate Law Firm of the Year 2012-2014, • M&A Vietnam Law Firm of the Year 2013, • Real Estate Law Firm of the year 2012-2013

ACQ Global Magazine:• Vietnam Banking & Finance Law Firm of the Year 2012-2013• Vietnam Capital Markets Law Firm of the Year 2012-2013• Vietnam Corporate Law Firm of the Year 2012-2013• Vietnam M&A Law Firm of the Year 2012-2013

Finance Monthly – Law Firm of the Year 2011-2013 Corporate LiveWire – M&A Vietnam Law Firm of the Year 2012-2013 Asialaw- Highly Recommended Firm for the Year 2014

INTERNATIONAL AWARDS




SERVICES OVERVIEW Full-service business law firm: firm with

specialized business-oriented service packages: Finance, Legal & Stock Market Engineering

Service™ Investment Structuring & Placement® Legal, Compliance & Risk Management

Service®; Intellectual Properties Strategic Management

Service® IP Enforcement Service®




SERVICES OVERVIEW | 1 Corporate, Finance, Tax and Litigation on the “In-

house Counsel Services”® platform• Legal and Financial Advisory Services• Project and Contract Negotiation• Drafting & Translation• Due Diligence• Registration procedures• State & Local Government Relations• Regulatory Compliance• In-house training & workshops• Project Planning and Management• Daily Operations




WHAT SETS VCI LEGAL APART? A “Can Do” Attitude combining with a “Know How” Capacity True sense of “Lawyer for business” independent legal

professionals who were trained & practiced in international environment

Most key personnel are lawyers with in-house counsel experience and deep “local” business insights,

Not only legal practitioners but also business managers who are willing to bring “some skin in the game”;

Strong professional & cultural background; Committed to provide not only the best legal services but

also the most effective & practical business solutions; Team player and partnering with clients in resolving

business issues




INDEX

1. Why Do Business in Vietnam ?2. Potential Opportunities3. Legal Framework for Business4. Barriers to Business | Emerging Economy5. Our Team of Experts

8

9

WHY DO BUSINESS IN VIETNAM ?




COUNTRY OVERVIEW - 1

Population: 89.71 million (2013)

Median Age: 28.2 years (2012)

• Labor Force: 53.09 million (2013)

• Unemployment Rate: 2.37% (2013)

Global Competitiveness Index 2013-2014: Rank 70

GDP Growth: • 5.5% (forecast 2014)• 5.42%(2013)• 5.25% (2012)• 5.9% (2011)• 6.8% (2010)

GDP by sector (2013):• Agriculture: 18,4%• Industry: 38,3%• Services: 42.3%

10

10 Source: CIA World Fact Book, Index




COUNTRY OVERVIEW- 2

FDI: 21,6B in 2013 (↑ 55% compared to 2012)

Public Debt: • 49.6% of GDP (2013)

• 48,2% of GDP (2012)

• 48.3% of GDP (2011)

Inflation: • 5.6% (2013)

• 9,2% (2012)

• 23% (2011)

Export:

• USD 132.2B

• Growth of 15.4% in 2013 Import:

• USD 131.3B (2013)

• Growth of 15.4% in 2013

IMPORT EXPORT PARTNERS (2013)

Import Export

China (up 26.7 %) UE (↑ 18%)

South Korea (up 34.1%)

US (↑ 20.3)

Japan (down 0.18) Japan (↑ 3.8)11



voted “Vietnam Corporate Law Firm of The Year” by 12

WHY VIETNAM ? - 1• Member of WTO since 2007

• Fast Growing Economy• FDI inflows forecast remains strong• Inflation is at moderate rate • Exchange rates are stable• Stock of reserve within the SBV has doubled in the

2 past years• Political stability• Country risk is at its lowest since the economic

crisis.

* Eurocham Whitebook 2014




• Key partner country with ASEAN, Japan, Korea and Taiwan: transfer of high-tech skills and know-how.

• Privatization of SOES and liberalization of the banking sector: new entry points for foreign investors.

• Large, skilled and low-cost workforce

• Vietnam proximity to China and South East Asia: good base for foreign companies to export to the rest of Asia, and beyond.

• ASEAN coordinator for relations with the EU until 2015.

WHY VIETNAM ? - 2

BMI Vietnam Commercial Banking Report 2012




WEF GLOBAL COMPETITIVENESS REPORT

INDEX PARAMETER 2012-2013 Ranking 2013-2014 Ranking

Burden of Government Regulations

112 106

Infrastructure 95 82

Higher education & training 96 95

Financial market development

88 93

Technology readiness 98 102

Trade barriers 128 104

Intellectual Property Protection

123 116

*Source: WEF Global Competitiveness Report 2013-2014; Rank out of 148 economies



voted “Vietnam Corporate Law Firm of The Year” by 15

FDI 2013 IN FIGURES Vietnam attracted USD 21.6B FDI (increase of 54.5%).

It is the highest level since 2008

12 000 new FDI projects have been licensed

South Korea, Japan and Singapore are the main sources of FDI

Sectors of Investment:

• Manufacturing: USD 16.6B• Energy: USD 2B• Other industries: USD 3B

* General Statistic Office of Vietnam




16

RECENT LANDMARK PROJECTS

Source: FIA

Electronic:• Samsung Electronics - opens a 2nd plant in Thai Nguyen Province - USD 2B-

full production to be reached in 2015 Manufacturing:

• Pagasus Company- Japanese Subsidiary- is opening a new Factory at Long Duc Industrial Park - USD 20 M

Real Estate:• Rose Rock Group and Vung Ro Petroleum.Co plan to create the “Vung Ro

Bay”, residential and hotel project in south central coast of Vietnam-USD 2.5B

• Asian Coast Development (ACDL)- Canadian company- opened “Ho Tram Strip”, the largest tourism and recreation complex of Vietnam in Bac Ria Province-4.2 B

Retail:• Aeon- Japanese company- Opened first Vietnamese mall in Tan Phu HCMC-

USD 100 M 16

17

POTENTIAL OPPORTUNITIES




INFORMATION TECHNOLOGY

8.4% growth in 2013 and forecast of 15.5% growth in 2014 Report IDC Vietnam ICT 2014”:

• Homegrown Smartphone brands will be more competitive

• Mobile gaming to explode

• Vietnam desktop PCs continue to grow in 2014

• Reform 2G frequency for 3 G networks

• Telecommunication Companies will seek mutual partnership with OTTPs

• Local enterprise mobility partner ecosystem starting to form




REAL ESTATE

Property prices have begun to firm up and such as commercial retail prices have begun to rise.

Strong demand for retail has kicked in Q3 and Q4 2013. Commercial office demand rise in Q3 and Q4 2013 Residential property began to thaw, especially social

housing Luxury sector is expected to thaw. Expected to benefit from VAMC, increase of ownership cap,

credit growth policies, inflation control and low interests* Colliers International “the Top 7 real Estate Trends”




SECURITIES 34% jump of Vietnam’s stock exchange between Nov 2012

and April 2013 Increase of foreign investment cap in local companies VND has been stable for 3 years ( VND 21,000 for 1 USD) Inflation is decreasing and has not exceeded 25% In late 2014 or early 2015, Bill Stoops, (Dragon’s Chief

investment officer) believes Vietnam’s economy will turn a corner. When the stock market rises, he believes the skepticism about Vietnam’s markets will fade and investors will rush in. Those who invest before the rise will experience the greater benefit.

Pharmaceutical and consumer productsExport




RETAIL Young population Consistent economic growth and rising level of disposable

income Favorable policy for retailer: Circular 8 provides an exception

to the ENT process, clearer licensing process, new export rights.

WFOE will be allowed to enter Vietnam retail market in 2015 Vietnam retail Market Forecast 2014: “Vietnam total retail

market was forecasted to see an annual growth rate of 23%” “Vietnam retail Market Outlook 2017”: retail sale of goods and

services will continue to grow at a double digit rate in coming future with food retailing to account for 2/3 of the market”.




TRANSPORT, LOGISTICSAND INFRASTRUCTURE

Has been significantly expanded these past years 10% of GDP has been invested in transport,

telecommunications, energy, water and sanitation in recent years

Vietnam gives first priority to infrastructure in 2014 Budget allocated of USD 34 M From Jan 2014 WFOE are permitted to provide almost all type

of logistics services in Vietnam, including Storage and warehouse services and freight transport agency but excluded container handling services and road transport services.

WB reports: “ Efficient logistics: a key to Vietnam’s competitiveness”

Preferential policies for infrastructure development




IMPORT/EXPORT Growth of 15.3% in 2013 surpassing the target of USD 126 B TPP agreement engaging 12 countries is being finalized FTA with UE expected to be signed in 2014 Export Strength in Agricultural products, leather and coffee Rebound of garment and textile shipment in 2013 HSBC: “we expect export to rise by 20% in 2014”




ENERGY With 90 M inhabitants, Vietnam is in need of dependable

electricity supply and integrated energy solution. In 2006 Government approved a road map to restructure and

establish a competitive energy market National Power development Plan 2011-2020: energy security,

energy efficiency, power quality and establishing a competitive market

Opportunities:•Building of New Power Station: USD 83B budget allocated to

build 90 new coal fire plant by 2020.•Transmission and Distribution Grid Update: USD 730M has

been allocated from 2012 to 2020•Energy Efficiency & Smarter Grids: high levels of energy

wastage drives towards energy saving.




BANKING S&P report:

• Expect banks to benefit from stable macroeconomic conditions in 2014

• Challenge of low asset quality, low profitability and weak capitalization

• Bank profit will remain low: ROA forecasted at 0.8-1%• Liquidity of VN banks is forecasted to remain stable in 2014

From Feb 2014: limit for foreign strategic investors in credit institution is increased to 20% instead of 15%. This cap may be lifted by the Prime Minister in special cases to help weak banks “restructure and ensure their safety”.

The door is now potentially open for foreign investor to be a strategic investor in more than 1 local credit institution.

26

LEGAL FRAMEWORK FOR

BUSINESS




ENTRY METHODS AND LEGAL STRUCTURES

Direct Investment• Establish a representative office • Establish a branch in Vietnam• Establish a Wholly Foreign-owned enterprise (WFOE)• Establish a Joint venture with a local company (JV)• Investing pursuant to a contract: BCC, BO,BTO and BT• Investing in business development• Purchasing share or contribute to capital to participate in

the management of the company• M&A

Indirect Investment• Purchasing shares, bonds or other valuable papers• Investing through security investment funds• Investing through other intermediary financial institutions




INVESTMENT SECTORS Prohibited sector include:

• Projects detrimental to national security• Projects which harm peoples’ health or destroy natural

resources Conditional sectors of investment include:• Banking and Finance• Public health• Real Estate• Mining

Sectors subjects to investment incentives include:• High technologies and Bio-technologies• Agriculture, forestry and Aquaculture• Infrastructure

Indirect Investment• Purchasing shares, bonds or other valuable papers• Investing through security investment funds• Investing through other intermediary financial

institutions




COMPANY FORMATION Formation is relatively complex in Vietnam Different procedures for:

• Domestic investment project below VND 15B• Domestic investment project between VND 15 B and VND 300 B• Foreign invested Project of less than VND 300B• Foreign invested Projects of more than VND 300B• Foreign and Domestic projects in the list of conditional sectors

Registration dossier may include:• Legal Status of investor• Objectives, business plan, locations of the project• Invested capital and implementation schedule• Land Use rights• Proposal for investment incentive ( if any)• Report on investor financial ability• JV contract or BCC and Charter of enterprise ( if any)




LAND Land owned by the People LUR entitles the holder to exclusively use the land LUR Acquisition:

•Lease from State or permitted lessors

•As capital contribution from VN party to a JV Land Lease duration: 50-70 yearsMortgage and sub-lease of land Impossible but possible to

Mortgage and sub-lease LUR




31

TAXES• Corporate Income Tax

(CIT)• Standard rate 22% • Tax holiday - CIT exemption up to 4

years from the date of issuance of investment certificate followed by a period of 50% Taxes.

• 10% and 20% tax rates for investments in encouraged sectors

• Import and export duties• Investors meeting certain

conditions are entitled to incentives on import duties for initial fixed assets

• Land rental, land usage fees• Applicable to investors with

investments in an encouraged sector or region

• Exemption or reduction from land taxes, land use fees and water surface rentals.

• Allocation of land with or without land use fees

31




CAPITAL MARKETS & SECURITIES

FIE may sell shares to either foreign or local citizen or entitiesFIE sell all its shares to foreigners: Amendment of ICFIE sells all its shares to local: IC changes into Enterprise

Registration Certificate (ERC) 2 stock exchanges: HSX & HNXProposal to merge into a unique Vietnam Stock ExchangeSecurities law 2006:

•US$ 480 000 to be listed •Minimum of 100 investors




INTELLECTUAL PROPERTY IPR system is divided into 3 areas:

• Copyright and related rights- administered by the Copyright Office of Vietnam

• Industrial Property Rights: administered by the NOIP• Right to plant varieties: administered by the Plant Variety

protection Office Administrative action: fines, seizure and destruction of

counterfeit goods, business license suspension and re-exportation of infringed imported, etc

Civil Action: Preliminary injunctions and compensation for damage are available through the civil courts

Criminal prosecution: government authorities or right owners can bring prosecutions: fines, imprisonment and even death penalty in serous, organized or business-related cases.




RECENT FAVORABLE POLICIES FOR FDI-1

Foreign ownership in Vietnamese listed companies is limited to 49% instead of 30%.

Foreign ownerships in local banks is loosened:

• Individual investor: 5% cap

• Organizations: 15% cap

• Strategic investors: 20% cap

• Related parties: 20% cap

• Aggregate foreign ownership applicable to commercial banks: 30%

• Aggregate foreign ownership applicable to finance and financial leasing companies: 49%




RECENT FAVORABLE POLICIES FOR FDI-2

Equitization of SOE (573 SOE by 2015):

• Foreign investors are eligible to buy a limited amount of share in an SOE

• Share acquistion are limited to 3 strategic investors

• Strategic investors must hold their shareholding for a minimum of 5 years

Establishment of VAMC in July 2013 to resolve USD 470 M of bad debt

Tax allowances:

• CIT reduction from 25 to 22% from Jan 2014

• 20% reduction from Jan 201635




TRADE AGREEMENTSWTO Vietnam is the 150th

member of the WTO as of January 2007

Market access opened for WTO members subject to WTO market opening schedule (3-7 years)

AFTA, CEPT: reduction of tariffs between ASEAN countries of 0-5%

APEC: member of the Asia Pacific Economic Co-operation Forum

Bilateral Trade Agreement 2006 (“BTA”) : USA – Vietnam

Economic Partnership Agreement 2008: Japan -Vietnam

Bilateral Investment Treaty 2004 (“BIT”): Japan - Vietnam

Partnership and Co-operation Agreement 2012(“PCA”): EU -Vietnam

Early Harvest Agreement 2004 : EU – Vietnam

TPP Negotiation launched in 2010: Regional free trade agreement.

36

36




37

KEY TRADE REGULATIONSVarious regulations:

WTO commitments 2007: Market opening and equal treatment between foreign and domestic investors.

Bilateral / Multinational Trade Agreements

Local regulations for FDI firms, commercial laws, etc.,

foreign traders sell through local agents (importer, distributor)

Representative Office + Local Agents (invoicing & logistics)

Vietnam encourages the import of • hi-tech products and

items that Vietnam does not produce

• input materials for manufacturing

37

37

38

BARRIERS TO BUSINESS

Economy Emerging




39

Bank’s bad depts:

• Non performing loans

• lack of capital and technology to sustain high credit growth and Opaque financial accounts of many banks

Weak Infrastructures:

• Inadequate roads, railways and ports to cope with the markets economic growth and the interaction with the world.

Corruption:

• According to Transparency International's 2013 Corruption Perceptions Index, Vietnam ranks 116 out of 177countries.

Source: BMI Report Q2 2012

HOLD BACKS




WTO COMMITMENTS & IMPLEMENTATIONS

Implementation of Vietnam’s WTO commitments delayed due to administrative and procedural obstacles .

Concerns have been raised during the WTO trade policy review in 2013, including:• Lack of transparency of the regulatory and institutional

framework• Tariff and non-tariff measures• Technical standards and sanitary and phytosanitary

measures• Number of SOEs

40




LEGAL HOLD BACKS

41

Intellectual Property Rights (“IPR”)• Local IPR regulations are largely standardized with international

norms• Counterfeit, copycats, IPR infringements still common• Grassroots enforcement is not yet efficient and is very time

consuming; • Inconsistent decisions on IPR infringements by Vietnam courts• Low penalties for IPR infringement• Lack of transparency: no accurate and complete records of all

administrative fines, product confiscation or destruction and other administrative sanctions

• Unclear provisions regarding the agency responsibility for handling IPR violation




LEGAL HOLD BACKS-1

42

M&A & Foreign Indirect Investment (“FII”)• Foreign M&A often held up, delayed or blocked due to

unclear rules and regulations• Certain limited or conditional sectors delay the whole

application; • Complex licensing procedure• Discrepancies in transfer price interpretation • Unclear distinction between capital assignment and

security transfer• Slow decision of Vietnam competition Administration

Department

Immigration Law

• Restrict foreign employment in Vietnam• More complex VISA and WP procedures

43

OUR TEAM OF EXPERTS




MANAGEMENT TEAM

Tuan A. Phung, Esq. Managing Partner | Corporate & Legal

Le Trong Nhi Managing Director | Banking & Capital Markets

Kent Wong, Esq. Partner | Head of Banking & Capital Markets




MANAGEMENT TEAM

Thanh Q. Duong, Esq. Managing Counsel | DRP Head | Hanoi

Son Nguyen, Esq.Director| Banking & Corporate

Thang Dang, Esq. Of Counsel | Banking & Corporate

46

SOME REPRESENTATIVE

CLIENTS

LOCAL INSIGHTS MEET INTERNATIONAL EXPERTISES

The logo and trademarks are belong to our clients and its legitimate owners, our listing them here is for information purpose only. These show the our lawyer’s experience in working with these companies and yet provide no endorsement or implication on VCI Legal service. While VCI Legal is proud to report these reputable companies in its clientele, all goodwill associated with these logos and devices solely belong to their lawful owners

BANKS & FINANCIAL INSTITUTIONS



MINING & ENERGY



TECHNOLOGY & HEAVY INDUSTRY



REAL ESTATE & CONSTRUCTION



FMCG & LOGISTICS



HEALTHCARE, NUTRITION, GOVERNMENT & NGOs



FRANCHISING, IPR & LICENSING

DRP CLIENTS & EXPERIENCE*

54




MORE QUESTIONS?

Tuan A. PHUNG, Esq. Managing PartnerWebsite: www.vci-legal.com

Email: [email protected]: (84) 908 168 275

Tel.: (84) 38 8272 029 Fax: (84) 38 8 234 43

Ho Chi Minh City:Suite 501, 5/F, Sailing Tower111A Pasteur Street District 1, Ho Chi Minh City, Vietnam

HanoiSuite 501, North Asia Tower9 Dao Duy Anh StreetDong Da District, Hanoi, Vietnam

mailto:[email protected]




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