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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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www.duanemorris.com 15

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

Canada Australia

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 24

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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

dossier

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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

Thank you very much!

HANOI OFFICE HO CHI MINH CITY OFFICE

Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower

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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