Vietnamlawmagazine

* Foreign investment registration renewal, licensing change to be resolved: At the meeting of the National Assembly Standing Committee on April 15, the Government proposed the National Assembly to issue as soon as possible a resolution on implementation of Clause 2, Article 170 of the Enterprise Law regarding re-registration of enterprises to facilitate re-registration and conversion of investment licenses into investment certificates of foreign-invested enterprises (FIEs).

As provided in the 2009 Law Revising a Number of Articles of the Laws Concerning Capital Construction Investment, the deadline for re-registration and renewal of investment licenses of FIEs under Government Decree No. 101/2006/ND-CP of September 21, 2006, was August 1, 2011. However, many FIEs which have not yet fulfilled this requirement are now still operating and enjoying law-provided investment incentives, though they should have terminated their operation in Vietnam under the 2009 Law when their investment licenses expired.

Before the National Assembly officially passes the revised Investment Law and Enterprise Law, the proposed resolution, to be issued according to fast-track procedures, would help legalize the status of the above FIEs and facilitate their re-registration, conversion of investment licenses into investment certificates or renewal of investment certificates under Article 7 of Decree 101.

FIEs that wish to be transformed into joint-stock companies may face higher requirements as proposed by investment-licensing agencies, especially the minimum holding rate of foreign shareholders throughout the course of operation, minimum duration of operation in Vietnam, financial status, debts, solvency and technology transfer capability.

These FIEs, especially joint ventures with the Vietnamese party being a state enterprise, should also be subject to stricter enterprise valuation and information disclosure requirements.

* Fund management companies to be allowed to hire risk management: The State Securities Commission (SSC) is currently drafting regulations guiding the establishment and operation of the risk management system for fund management companies.

Accordingly, 47 fund management companies operating in the country that have different risk structures must adopt their own appropriate processes to handle risks. Their representative boards and entrusting customers may decide on their risk management policies and portfolios of these customers.

They must adopt general risk management strategies as a basis for working out plans on management of specific risks and daily risk oversight processes, and formulating a mechanism to identify responsibilities of sections and employees engaged in at-risk business operations and facilitate the cross-supervision among them.

They may authorize (hire) independent audit firms to perform regular risk management, but must still carry out daily risk management activities.

At present, many fund management companies and securities companies do not have a serious attitude toward internal control and risk management, failing to take timely measures to prevent not only operation, credit, payment and market risks but also “compliance” risk which involves violations, especially those committed by management officers, of internal regulations on risk limit, safety ratios, securities collaterals, etc.

The similar regulations and a regulation on periodical reporting applicable to securities companies were enacted by SSC on February 26.

* Nation needs stricter control of dual-use goods: Participants in an interagency awareness and cooperation workshop on strategic trade management in Vietnam held on April 16 in Hanoi were of the opinion that Vietnam needs an effective legal mechanism to control strategic goods (sensitive or dual-use goods), regardless of whether they are produced, imported into or transited through Vietnam, without hindering foreign trade.

Dual-use goods are products and technologies normally used for civilian purposes but which may have military applications, such as machine tools, chemical manufacturing equipment, computers, smart phones, etc. Most developed countries in the world have regulations and restrictions to control dual-use goods under certain conditions to avoid the risk that such a goods might be diverted for use in a weapon of mass destruction.

For Vietnam, the Ministry of Industry and Trade and related ministries and agencies have issued numerous legal documents regulating international trade in goods and transit of goods through the country (e.g., Decree No. 12/2006/ND-CP). However, a strategic trade management mechanism, especially customs control of dual-use goods, has not yet been introduced. If the country, say, wishes to develop nuclear power plants, it would have to import nuclear technologies and therefore needs to have legal controls on them.

George Tan from Singapore’s Bryan Cave Consultants suggested that Vietnamese businesses, especially hi-tech ones, may also devise their own internal control procedures regarding these goods and stay aware of the risk of being taken advantage by foreign exporters. These procedures must cause no bar to the foreign trade flow and help facilitate foreign investment in high technologies.

As ninety percent of imports and exports can be regarded as dual-use goods, Vietnam should improve its own strategic trade control system to be conformable with that of ASEAN, an economic community and common market by 2015, draw up a list of sensitive and dual-use goods subject to control, and consider making a law on strategic trade management.

* Central Bank to double charter capital: The State Bank of Vietnam (SBV) planned to double its charter capital to VND 10 trillion (USD 476 million) from August 15 this year in a bid to better stabilize the national monetary market.

If the increase is chartered, the Fund for National Monetary Policies will also be doubled as the relevant draft regulation states that the Fund must be equal to SBV’s charter capital, and the SBV will be allowed to use the Fund to stabilize the monetary market.

Besides addressing the threat posed by credit institutions that fail to obey its guidance and violate banking regulations, SBV can also use the Fund to contribute capital to or purchase shares of credit institutions that are placed under special control due to deficient solvency.

Deposit Insurance of Vietnam will also be allowed to borrow from the Fund to maintain the stability of the deposit insurance market in case other funds are not available.

With the charter capital increase, SBV will have to set aside double provisions for the Fund to 20 percent of annual revenue-expenditure difference, half of which will be channeled to financial safety provision. These provisions must not exceed 25 percent of the SBV’s charter capital.

* Remission of old tax, fine debts for equitized state businesses proposed: The Ministry of Finance is preparing a Prime Minister decision on remission of tax and fine debts booked before July 1, 2007, for business households and individuals and equitized, transformed or dissolved state businesses.

Tax and fine arrears to be written off include license tax, value-added tax, excise tax, import and export duties, land and housing taxes, profit tax, corporate income tax, personal income tax, basic depreciations, charges, fees and other state budget remittances, and fines for delayed tax payment and tax-related administrative violations.

To enjoy the remission, a business must meet the following conditions: tax and fine arrears to be remitted have not been accounted as decreases in the state capital portion in this business; business operation by the time of business valuation or official transformation into a joint-stock company was making loss; the equitization or transformation has been conducted under Decree No. 64/2002/ND-CP or Decree No. 187/2004/ND-CP; and tax and fine arrears to be remitted do not exceed accumulated loss amounts by the time of business valuation or official transformation into a joint-stock company.

* Legal improvements urged for environmental protection in industrial parks, craft villages: Government Resolution No. 35/NQ-CP of March 18, on urgent measures to address environmental protection issues, sets out a requirement that building of complete wastewater treatment facilities must precede construction of plants and projects in industrial parks and complexes.

It also urges the elaboration of a general plan on environmental protection in craft villages and requires these villages to spare some land areas for building wastewater treatment facilities and scrap storages.

A national program on building household wastewater treatment facilities in big cities and urbanized river basins should be approved and implemented soon.

Transport and construction authorities are requested to adopt incentives for mass transit and personal vehicles consuming clean energy and introduce a mechanism for compensation for bad environmental impacts of construction activities, especially in new urban areas and public works.

Import of wastes and discarded materials will be controlled in a stricter manner under regulations which are to be issued to implement the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal.

Current regulations on licensing of temporary import for re-export, import and export of wastes must also be revised for effective management.

* Wood product exporters face stricter regulations: The forestry sector would soon face serious challenges because of newly issued regulations from key markets (the US and EU) on wood products. According to Vo Dai Hai, deputy head of the Ministry of Agriculture and Rural Development’s Forestry Department, the EU on March 3 issued a regulation that requires exporters to give proof of legal origin of timber and wood products.

The Forest Law Enforcement Governance and Trade (FLEGT) regulation will make it hard for exporters to find legal wood sources because the country remains heavily dependent on imported raw materials.

Vietnam and the EU continue to negotiate the Voluntary Partnership Agreement (VPA/FLEGT) that would build a system to ensure legality and FLEGT-licensed timber for shipments of timber and wood products exported from Vietnam. In the interim, Vietnamese companies exporting timber and wood products have to carry out due diligence under Regulation 995/2010, which requires timber from the EU to be in line with the Action Plan on FLEGT.

In Vietnam, implementation has been slow to reach the target of 30 percent of certified-forest areas by 2020 under the Government’s Forestry Development Strategy. Problems in land-dispute settlements and high certification fees were to blame.

Other reasons for failure to meet the expectations, according to the Wood Industry and Handicraft Associations, are Vietnamese exporters’ inadequate awareness about the above requirements and lack of policies to attract investment in concentrated forest plantation and wood processing plants, develop support industries that produce auxiliary materials for wood processing, and build distribution networks in foreign markets.-