April 2020

Asia Counsel Insights provide an overview of the key trending legal and business issues in Vietnam and how they may impact your business. Please enjoy your read.

Deal Update

• Assisted the project owner with the  divestment of a 50MW solar power project  in Ninh Thuan Province. 
• Assisted a ride sharing operator in raising  a series seed round.  
• Assisted a provider of online education  services in its bridge funding round.

Insights

Public Private Partnerships

The Vietnamese Government has  proposed a draft law to supplement  Decree No 63/2018/ND-CP on PPP  investment. The draft law will permit  PPP projects in a wider range of  sectors, allow for greater assumption  of risk by the State, and set the  minimum investment amount to US$4.4  million for healthcare and education  projects in remote and extremely  disadvantaged areas, and US$8.8  million in other sectors and areas. Investors in PPP projects will be  required to have at least 15% equity,  and the projects must have a single  purpose. Contracting state agencies  will be permitted to guarantee certain  levels of project revenue and foreign  exchange balance.  

If passed, this new law will promote  greater investment in Vietnamese  infrastructure projects. The World Bank  estimates that Vietnam will need US$25  billion of annual infrastructure  investment in the coming years.

Competition Law

Last month we examined Decree 35/2020/ND-CP, detailing the regulations of provisions in the Competition Law (“Decree 35”) and focused on when notifications are required in relation to a merger or economic concentration. In this edition, we focus on abuse of dominant position and anti-competitive agreements.
Decree 35 sets the factors that the National Competition Commission will consider on whether an enterprise or a group of enterprises will have substantial market power. These factors include:

• The comparative market shares of enterprises in the relevant market.
• Financial strength including access to capital, number of employees, production scale and distribution network.
• Barriers to market entry including legal and financial barriers, initial costs, consumption habits, business practice and infrastructure access.
• Ability to switch sources of supply and demand to other relevant goods or services

including the costs and time for consumers to switch to an
alternative.
Decree 35 also details the factors the NCC will use to assess any agreement in restraint of trade that will have a substantial anti-competitive effect on the market. The decree elaborates on the list of factors that already appear in Article 13 of the 2018 Law on Competition.

Decree 35 also provides that an agreement is deemed not to have any significant restraint of trade include (a) an agreement between enterprises in the same relevant market but their combined market share is below 5%; and (b) any vertical restraint of trade agreements whereby the enterprises’ market share in the relevant market is below 15%.

Employment

On 24 April 2020, the Prime Minister  issued Decision No. 15/2020/QD-TTg  regulating the implementation of  policies on supporting businesses 

affected by the COVID-19 pandemic  (“Decision 15”), which took immediate  effect. Under Decision 15, employers  meeting the below conditions are  eligible to take collateral-free and 

interest-free loans from the Vietnam  Bank for Social Policy to pay wages for  their employees who have been  suspended. 

• This policy applies to least 20% of  the employees or at least 30  employees who are making  social insurance contributions for  at least one consecutive month,  and at least 50% of the wage for  work suspension must have been  paid to the employees during the  period from 1 April to 30 June. 
• The employer is facing financial  difficulties and does not have  sufficient funds for payment of wages for work suspension after  using up their wage reserve fund.
• The employer does not have any  bad debt at any credit institution  or branch of foreign bank as at 31  December 2019.

Deferred of Tax and Land Rental Payments

On April 8, 2020, the Government  of Vietnam issued Decree No.  41/2020/ND-CP on deferral of  payment of taxes and land  rental (“Decree 41”). Eligible enterprises and  organizations can defer their  value added tax amount  payable for the assessment  periods of March, April, May and June of 2020 (for monthly tax  declaration cases) or the first two  quarters of 2020 (for quarterly tax  declaration cases) for five  months. They can also defer their  final corporate income tax  payment of 2019 and their  corporate income tax provisional  payments for the first two  quarters of 2020 for a period of  five months.  For land rental payments,  enterprises, organizations,  households, and individuals who  lease land directly from the State  can defer the first installment of  their annual land rental  payment, due on 31 May 2020, for five months. Decree 41 took effect on the  date it was issued. 

EU-VN Free Trade Agreement

On 30 March 2020, the European  Council adopted a decision on the  conclusion of a free trade agreement  (FTA) between the EU and Vietnam.  Procedurally, the FTA can enter into  force after the National Assembly of  Vietnam ratifies it and 30 days after  the completion of the notification procedures of the EU and Vietnam. The FTA provides for the almost  complete (99%) elimination of  customs duties between the two  parties. 65% of duties on EU exports to  Vietnam will disappear as soon as the  FTA enters into force, while the  remainder will be phased out  gradually over a period of up to 10  years. 71% of duties on Vietnamese  exports to the EU will disappear upon  entry into force, the remainder being  phased out over a period of up to 7  years. The FTA will also reduce many  of the existing non-tariff barriers to  trade with Vietnam and open up  Vietnamese services and public  procurement markets to EU  companies. 

The FTA also contains important  provisions on intellectual property  protection, labour rights and sustainable development. 

Source: Council of the EU press release.

EU-VN Free Trade Agreement

Japan, and the Middle Eastern market, enterprises exporting labor,  upon satisfaction of additional requirements, must: 

• For Taiwan, have a reference letter from the MOLISA to the competent authority of Taiwan. • For Japan, have its name under the list of eligible enterprises to be referred to competent  authority of Japan issued by MOLISA. 
• For Middle Eastern countries, have an approval for exporting labor to work as housemaid  from the MOLISA.

Exporting Labor

Decree 38/2020/ND-CP was issued on 3 April to replace Decree 126/2007/NĐ-CP detailing  and guiding the implementation of a number of articles of the law on Vietnamese laborers to  work abroad under contracts and will take effect on 20 May 2020 (“Decree 38”). Decree 38 provides that for a license to provide services of exporting labor, inter alia,  enterprises must be established under Vietnamese law, have 100% of their charter capital  contributed by a Vietnamese entity, and possess minimum legal capital of VND 5 billion.

With respect to Taiwan, Japan, and the Middle Eastern market, enterprises exporting labor, upon satisfaction of additional requirements, must:

• For Taiwan, have a reference letter from the MOLISA to the competent authority of Taiwan.
• For Japan, have its name under the list of eligible enterprises to be referred to competent
  authority of Japan issued by MOLISA.
• For Middle Eastern countries, have an approval for exporting labor to work as housemaid
  from the MOLISA.