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					                                                CATALOG OF LEGAL UPDATES:
                                             VIETNAM TRADE POLICY REGIME
                                                                        15 January 2005

                                                                                     by the
                                 U.S.- Vietnam Trade Council Education Forum
                                                                          with support from




The U.S.-Vietnam Trade Council has worked to promote economic and political
normalization between the two countries since its founding in 1989. Its affiliate, the U.S.-
Vietnam Trade Council Education Forum, provides technical assistance to Vietnam on
issues relating to the BTA, WTO, and international economic integration. This document
is compiled by our in-country technical assistance team, with support from Phillips Fox
Lawyers. For additional information, please visit our website at http://www.usvtc.org.
                    VIETNAM TRADE POLICY REGIME
The U.S.-Vietnam Trade Council Education Forum has since July 2000 worked to catalog legislation
and regulatory efforts made by Vietnam in areas affecting its international trade policy regime,
including commitments made under the U.S.-Vietnam Bilateral Trade Agreement (BTA) and related
WTO disciplines. This is a working document, updated monthly, with new items identified in the
margins.

                                JANUARY 2005 HIGHLIGHTS
           Updates on Vietnam’s WTO Working Party Meeting in December 2004.
           Updates on the legislative schedule for 2005 and 2006 in order to meet WTO obligations
           The elimination of Vietnam’s two-tier price structure system for registration of intellectual
           property.
           New regulations applicable to accounting and auditing practices undertaken by foreign
           invested enterprises.
           Updates on a draft decree implementing the Law on Credit Institutions (as amended)
           Elimination of dual pricing with regard to electricity pricing



Commonly used abbreviations

BCC            business co-operation contract
BTA            U.S.-Vietnam Bilateral Trade Agreement
FIE            foreign invested enterprise
IP             intellectual property
JVE            joint venture enterprise
100% FOE       100% foreign owned enterprise
MoCI           Ministry of Culture & Information
MoF            Ministry of Finance
MoJ            Ministry of Justice
MPI            Ministry of Planning & Investment
MoPT           Ministry of Posts & Telecommunications
MoST           Ministry of Science & Technology (formerly Ministry of Science, Technology &
               Environment
MoT            Ministry of Trade
SBV            State Bank of Vietnam
SOE            State owned enterprise
VND            Vietnamese Dong
                                             TABLE OF CONTENTS
VIETNAM TRADE POLICY REGIME................................................................................................... 2
1. Status of U.S.-Vietnam Bilateral Trade Agreement (BTA) ........................................................ 6
    1.1   Ratification: ....................................................................................................................... 6
    1.2   Consultations: ................................................................................................................... 6
    1.3   Annual NTR Status Renewal: ........................................................................................... 6
    1.4   Duration of the BTA: ......................................................................................................... 7
2. Status of Vietnam’s WTO Accession ......................................................................................... 7
    2.1   WTO Accession – Multilateral Negotiations: ..................................................................... 7
    2.2   WTO Accession – U.S. Bilateral Negotiations:.................................................................. 8
    2.3   WTO Accession - EU Bilateral Negotiations:.................................................................... 8
    2.4   WTO Accession – Singapore Bilateral Negotiations: ........................................................ 9
    2.5   WTO Accession – Chile, Argentina, and Brazil Bilateral Negotiations:.............................. 9
    2.6   WTO Accession – Japan Bilateral Negotiations: ............................................................... 9
    2.7   WTO Approval of Vietnam's Accession:............................................................................ 9
    2.8   Vietnam Ratification of WTO Accession – Necessary Action by Vietnam: ........................ 9
    2.9   U.S. Ratification of WTO Accession – Permanent NTR for Vietnam: ................................ 9
3. General and Legislative Action Plans for Implementation of BTA and WTO Accession..... 10
    3.1   Overall Action Plan for Implementation of the BTA: ........................................................ 10
    3.2   Legislative Plan for Implementation of the BTA:.............................................................. 10
    3.3   Legislative Action Plan for WTO Accession: ................................................................... 11
4. Legislative Developments 2002 - 2004 .................................................................................... 12
    4.1   Legislative Developments in 2002: ................................................................................. 12
    4.2   Legislative Program 2002 - 2007: ................................................................................... 12
    4.3   Legislative Developments in 2003: ................................................................................. 12
    4.4   Legislative Developments in 2004: ................................................................................. 14
    5.1   Most-Favored-Nation Status: .......................................................................................... 19
    5.2   National Treatment: ........................................................................................................ 19
    5.3   Tariffs:............................................................................................................................. 20
          MFN Tariffs ..................................................................................................................... 20
          AFTA Tariffs.................................................................................................................... 20
          Tariffs – Electronic Components: .................................................................................... 21
    5.4   Application of Internal Taxes on Imported Goods ........................................................... 22
    5.5   Customs: ........................................................................................................................ 22
          Customs Valuation.......................................................................................................... 22
          Post-Entry Audit .............................................................................................................. 24
          Inspection ....................................................................................................................... 24
          Other 24
    5.6   Non-Tariff Barriers: ......................................................................................................... 25
    5.7   Tariff Rate Quotas:.......................................................................................................... 25
    5.8   Trading Rights: ............................................................................................................... 26
          Domestic Enterprises – Trading Rights........................................................................... 26
          Foreign Enterprises – Trading Rights.............................................................................. 26
    5.9   Import Licensing: ............................................................................................................ 27
    5.10  Sanitary and Phytosanitary (SPS) Measures: ................................................................. 28
          Plant Health .................................................................................................................... 28
          Animal Health ................................................................................................................. 29
          Food Safety .................................................................................................................... 29
          Enquiry Point / Notification Point..................................................................................... 29
    5.11  Standards and Technical Barriers to Trade (TBT):.......................................................... 30
          Product Inspection .......................................................................................................... 31
          Product Safety ................................................................................................................ 31
          Recognition..................................................................................................................... 31
          TBT Enquiry Point / Notification Point ............................................................................. 31
    5.12  Export Subsidies: ............................................................................................................ 32
    5.13  Domestic Support: .......................................................................................................... 32
    5.14  Trade Remedies: ............................................................................................................ 33
          Safeguard Measures....................................................................................................... 34


                                                                                                                                                3
              Anti-Dumping Measures ................................................................................................. 34
              Anti-Subsidy Measures ................................................................................................... 35
6.     Intellectual Property Rights ................................................................................................... 36
     6.1      Intellectual Property Rights Regime: ............................................................................... 36
              International IP Conventions ........................................................................................... 36
              Legal Framework ............................................................................................................ 36
     6.2      MFN and National Treatment:......................................................................................... 37
     6.3      Copyright: ....................................................................................................................... 37
              Registration..................................................................................................................... 37
                       Royalties ............................................................................................................ 37
     6.4      Industrial Property:.......................................................................................................... 38
              Patents ........................................................................................................................... 38
              Compulsory Licensing..................................................................................................... 38
              Trademarks..................................................................................................................... 38
              Geographical Indications ................................................................................................ 39
              Industrial Designs ........................................................................................................... 39
              Inventions and Utility Solutions ....................................................................................... 40
              Layout Designs of Integrated Circuits ............................................................................. 40
              Plant Varieties................................................................................................................. 41
              Industrial Property Fees & Charges ................................................................................ 41
     6.5      Enforcement of Intellectual Property Rights: ................................................................... 41
              Administrative Measures................................................................................................. 42
              Criminal Procedures ....................................................................................................... 43
              Border Measures ............................................................................................................ 44
              Provisional Measures...................................................................................................... 43
7.    Trade in Services...................................................................................................................... 45
     7.1      MFN and National Treatment:......................................................................................... 45
     7.2      Legal Services (CPC861): .............................................................................................. 45
              Market Access and Commercial Presence ..................................................................... 45
              Domestic Regulation....................................................................................................... 46
     7.3      Accounting and Auditing Services (CPC 862): ................................................................ 47
              Domestic Regulation....................................................................................................... 47
              Accounting Standards..................................................................................................... 49
              Auditing Standards.......................................................................................................... 50
     7.4      Advertising Services (CPC 871):..................................................................................... 50
     7.5      Communication Services: ............................................................................................... 52
     7.6      Construction Services (CPC 511, 512,513, 514, 515, 516, 517, 518) ............................. 55
     7.7      Distribution Services (CPC621, 622, 631, and 632)........................................................ 56
     7.8      Educational Services (CPC 923)..................................................................................... 57
     7.9      Financial Services........................................................................................................... 58
     7.10     Transport and Delivery Services ..................................................................................... 76
8.   Investment ................................................................................................................................. 76
     8.1      MFN:............................................................................................................................... 76
     8.2      National Treatment: ........................................................................................................ 76
     8.3      Trade Related Investment Measures (TRIMS):............................................................... 77
     8.4      Bilateral Investment Treaties........................................................................................... 78
     8.5      Profit Repatriation: .......................................................................................................... 79
     8.6      Investor-State Arbitration: ............................................................................................... 79
     8.7      Investment Registration: ................................................................................................. 79
     8.8      Legal Entity Restrictions: ................................................................................................ 80
     8.9      Technology Transfer Issues............................................................................................ 84
     8.10     Land Use and Leasing Rights: ........................................................................................ 86
     8.11     Equity Investment ........................................................................................................... 87
     8.13     Investment/Export Incentives in Industrial, Export Processing and High-Tech Zones: .... 88
     8.14     Foreign Contractor: ......................................................................................................... 89
9.     Transparency.......................................................................................................................... 89
     9.1      Publication of Laws: ........................................................................................................ 89
     9.2      Official Gazette: .............................................................................................................. 91
     9.3 Public Commentary: ........................................................................................................... 91
     9.4      Formulation of Laws:....................................................................................................... 92



                                                                                                                                                  4
   9.5   Judicial Reform: .............................................................................................................. 93
   9.6   Enforcement of Civil Judgments: .................................................................................... 94
   9.7   Administrative Appeals: .................................................................................................. 94
10. Other........................................................................................................................................ 94
   10.1  Textiles: .......................................................................................................................... 94
   10.2  Competition and Monopoly Pricing: ................................................................................ 96
   10.3  Tendering:....................................................................................................................... 98
   10.4  Labor: ............................................................................................................................. 98
   10.5  Environmental Standards:............................................................................................... 99
   10.6  Taxation: ......................................................................................................................... 99
   10.7  Commercial Arbitration: ................................................................................................ 100
   10.8   Secured Transactions: ................................................................................................. 101
   10.9  Printing and Publishing: ................................................................................................ 102
   10.11 Business Registration and Commercial Rights ............................................................. 103
   10.12 Electronic Commerce:................................................................................................... 104
   10.13 General Fees and Charges:.......................................................................................... 104
   10.14 Penalties and Fines: ..................................................................................................... 105
   10.15 Constitutional Amendments: ......................................................................................... 105




                                                                                                                                                  5
1.    Status of U.S.-Vietnam Bilateral Trade Agreement (BTA)
1.1   Ratification:
      Vietnam’s National Assembly (its highest legislative body) ratified the BTA on 28 November
      2001. Resolution 48-2001-NQ-QH10 of the National Assembly on Ratification of Vietnam-U.S.
      Bilateral Trade Agreement dated 28 November 2001 passed by a vote of 278-85, with 17
      absentees. The United States acted by granting Vietnam Normal Trade Relations (NTR) status
      through a voice vote in the U.S. House of Representatives on 6 September 2001 and in the U.S.
      Senate by a vote of 88-12 on 3 October 2001. As discussed below, under the Trade Act of
      1974, NTR status is subject to an annual Presidential renewal. The U.S. and Vietnam
      exchanged letters in Washington, DC, bringing the BTA into force on 10 December 2001.

      A Summary of the BTA – prepared for the Trade Council by Sidley Austin Brown and Wood, LLP
      in cooperation with Vietnam's Ministry of Trade, the U.S. Trade Representative, and the U.S.-
      Vietnam Trade Council Education Forum is available at:
      http://www.usvtc.org/Documents/BTA%20Summary%20and%20FAQs/BTA%20description%20
      page.htm. In addition, as a useful starting point for identifying areas to examine in assessing
      required changes and possible areas for further technical assistance, in March 2001 the U.S.-
      Vietnam Trade Council prepared, at the conclusion of BTA negotiations, a Roadmap for BTA
      Implementation,                                   available                                  at:
      http://www.usvtc.org/BTA/Roadmaps/Roadmap%20Descriptions.htm.

1.2   Consultations:
      The Joint Committee on Development of Economic and Trade Relations - a bilateral committee
      established under the BTA - provides a forum for the discussion and review of BTA compliance
      issues and for promotion of trade between Vietnam and the U.S. Decision 53-2002-QD-TTg of
      the Government dated 23 April 2002 formally establishes Vietnam's Joint Committee on
      Development of Economic and Trade Relations. Chaired by Deputy Minister of Trade Luong
      Van Tu, Vietnam's standing members include officials from the Office of Government, Ministry
      of Trade ("MoT"), Ministry of Foreign Affairs, Ministry of Planning & Investment ("MPI"), Ministry
      of Finance ("MoF"), Ministry of Justice ("MoJ"), Ministry of Culture & Information ("MoCI"), and
      Ministry of Science & Technology ("MoST"). The Office of the U.S. Trade Representative
      (USTR) chairs the interagency committee on the U.S. side. Deputy USTR Ambassador Jon
      Huntsman visited Hanoi from 6-7 May 2002 for the first official meeting. The second annual joint
      committee meeting was held from 4-10 March 2003. In 2004, joint committee meeting took
      place from 17 – 21 May 2004 in Washington, DC. Bilateral discussion and consultation were
      again held during a visit to Hanoi led by Deputy USTR Josette Shiner July 21-23, 2004.

1.3   Annual NTR Status Renewal:
      Under U.S. trade law, Vietnam currently has conditional normal trade relations (NTR) status
      which must be renewed annually. The underlying key condition is Vietnam’s compliance with
      the freedom-of-emigration requirement of the Jackson-Vanik amendment, a provision of Title IV
      of the Trade Act of 1974. Under this statute, based on freedom of emigration criteria, the
      President can grant a one-year extension of NTR, EXIM, OPIC and USAID operations for
      Vietnam. The President’s decision goes forward unless both Houses of Congress pass a joint
      resolution of disapproval by 1 September each year.

      On 3 June 2004, the President sent his recommendation to U.S. Congress that the Jackson-
      Vanik Amendment for Vietnam be waived allowing for the renewal of NTR status for another
      year. Congress took no additional action.

      In 1998 the House voted for the first time 260 – 163 in favor of the Jackson-Vanik waiver, in
      1999 the House voted 297-130 in favor of the Jackson-Vanik renewal, in 2000 the vote was



                                                                                                      6
      332-91 in favor, in 2001 the vote was 324-91 in favor, in 2002 the vote was 338-91 in favor, in
      2003 and 2004 no vote was held, therefore renewal continued.

      Further information is available at http://www.usvtc.org/Jackson_Vanik/usvtc_jv_info.htm

1.4   Duration of the BTA:
      According to Chapter VII, Article 8 of the BTA, the Agreement remains in force for 3 years (until
      10 December 2004) and is renewable for successive 3 year terms if neither the United States
      nor Vietnam notifies the other of its intent to terminate the BTA at least 30 days before the
      expiration of any 3-year term. The continuation in force of the agreement is also subject to the
      requirement in Section 405(b)(1)(B) of the Trade Act of 1974 (19 U.S.C. 2435(b)(1)(B), which
      applies to any trade agreement concluded under Title IV with a Non-Market Economy (NME).
      Under that provision, the agreement is renewed triennially if a satisfactory balance of
      concessions has been maintained during the life of the agreement and the President determines
      “that actual and foreseeable reductions in United States tariff and non-tariff barriers…are
      satisfactorily reciprocated by [Vietnam].”

      On 10 December 2004, President Bush renewed the BTA “having determined that actual or
      foreseeable reductions in U.S. tariffs and nontariff barriers to trade resulting from multilateral
      negotiations are being satisfactorily reciprocated by Vietnam”, and that “satisfactory balance of
      concessions in trade and services has been maintained during the life of the Agreement on
      Trade Relations between the United States of America and the Socialist Republic of Vietnam.”


2.    Status of Vietnam’s WTO Accession
      Vietnam applied for WTO membership in January 1995 and is among 25 countries (including
      Saudi Arabia, Russia, and Ukraine) seeking WTO accession. Vietnam has set a goal of
      acceding to the global trading body in 2005.

      148 countries are currently members of the WTO. WTO accession for Vietnam involves
      agreement by Vietnam to accept the WTO rules through multilateral negotiations, and to
      conclude bilateral negotiations with interested Members on market access for goods and
      services. Through its Bilateral Trade Agreement (BTA) with the U.S., Vietnam has already
      accepted many core WTO principles such as Most-Favored Nation (MFN), national treatment,
      and transparency, thereby providing a solid basis for its accession. Under the BTA, Vietnam
      has also committed to a substantial portion of multilateral WTO disciplines, including the WTO
      disciplines on trade in goods, Trade-Related Investment Measures (TRIMS), Trade-Related
      Aspects of Intellectual Property Rights (TRIPS), General Agreement on Trade in Services
      (GATS), and the WTO’s Basic Telecom Reference Paper. These commitments are likely to be
      multilateralized as a requirement for accession, in addition to other commitments being added.
      For a comparison produced by the Trade Council of BTA commitments to the commitments of
      other recently acceding country, click on:
      http://www.usvtc.org/Documents/USVTC%20TA/WTO%20Charts/trade%20commitments%20ch
      art%203Feb04.pdf

2.1   WTO Accession – Multilateral Negotiations:
      In October 2003, Vietnam submitted materials, including its applied tariff schedule, and a new
      services offer to its WTO Working Party. Action plans, including a general legislative action
      plan, were also submitted on the implementation of the WTO Agreement on Customs Valuation
      (CVA), WTO Agreement on Import Licensing, Agreement on Sanitary and Phytosanitary
      Measures (SPS), Agreement on Technical Barriers to Trade (TBT), Agreement on Trade
      Related Investment Measures (TRIMS), and Agreement on Trade-Related Aspects of
      Intellectual Property (TRIPS).

      On 10-11 December 2003 at its 7th Working Party Meeting in Geneva, Working Party Members
      continued to discuss issues relating to Vietnam’s general application of MFN, phase-in periods
      relating to its CVA, SPS and TBT Action Plans, and whether or not to move towards drafting the
      Elements of a Final Report. While noting progress overall, Working Party Members reiterated
      the importance of improved goods and services offers, and commitments to achieve full



                                                                                                      7
          implementation of WTO multilateral disciplines upon accession. Bilateral talks also took place
          with Argentina, Brazil, India, Japan, Canada, EU, Norway, Switzerland, Paraguay, New Zealand,
          Australia, Korea, and the United States.

          In late April 2004, Vietnam submitted to its Working Party new paperwork including revised
          goods and services offers. Its new tariff offer binds close to 100% of its tariffs in agricultural and
          non-agricultural goods. Vietnam’s new services offer now includes many commitments equal to
          what Vietnam has committed to in the U.S.-Vietnam Bilateral Trade Agreement (BTA), as well
          as commitments in service areas not committed to in the BTA. In addition, revised action plans
          for implementing overall legislation, and the Agreements on Customs Valuation, SPS, TBT, and
          TRIPS were submitted.

          On 15 June 2004, Vietnam had its 8th Working Party meeting in Geneva, with plurilateral
          discussions on Agriculture held the day prior. As next steps, Members agreed to produce a
          Draft Working Party Report and hold the 9th Working Party session in early-December 2004.
          Members were expected to submit new questions by the end of July, and Vietnam will circulate
          replies by the end of September. Bilateral negotiations were also conducted with the EU,
          Australia, the U.S., and other Working Party members during this time. Vietnam closed its first
          market access bilateral with Cuba.

          In late August 2004 Vietnam received follow-up questions from the 8th Working Party and a new
          round of paperwork was submitted in response to the Working Party in October 2004.

          Vietnam’s 9th Working Party meeting was held in Geneva on 15 December 2004. The meeting
NEW!!     moved Vietnam’s accession process towards an initial draft report while examining new
          documents and legislation submitted.         Of significance, Vietnam has committed to the
          implementation of the SPS Agreement upon accession, and has pledged to speed up the
          passage of pending bills for accession in 2005.

          The WTO is expected to hold its next Ministerial in December 2005 in Hong Kong.

    2.2   WTO Accession – U.S. Bilateral Negotiations:
          In March 2002, USTR issued a request for comment by interested U.S. parties on pending WTO
          accessions, including Vietnam’s accession. This notice was published in the Federal Register,
          and     is     available    at:        http://www.usvtc.org/WTO/Fed%20Reg%20Notice%20-
          %20march%202002.pdf

          In July 2004, informal WTO bilateral negotiations with the U.S. were conducted during a visit to
          Hanoi led by Deputy USTR Josette Shiner July 21-23 to discuss issues relating to the
          implementation of the BTA. A new offer was submitted to the U.S. in September 2004.

          A second round of bilateral negotiations with the U.S. was held in Washington DC on 26-28
          October 2004. Led by Deputy Trade Minister Luong Van Tu, the delegation held intensive
          discussions with key counterpart Dorothy Dwoskin, Assistant U.S. Trade Representative for
          WTO and Multilateral Affairs. The two sides discussed the same offer presented by Vietnam to
          the U.S. in May 2004 but held greater in-depth discussions on specific issues including
          agricultural subsidies, industrial subsidies, sectoral initiatives, tariff-rate quotas, TRIMS, TRIPS,
          and specific service sectors such as insurance, banking, audio-visual, express delivery, and
          distribution.

          Vietnam is expected to have another round of bilateral negotiations with the U.S. when U.S.
          trade negotiator Elena Bryan visits Hanoi in late January 2005.

   2.3    WTO Accession - EU Bilateral Negotiations:
          Vietnam and the EU have recently concluded bilateral negotiations. On 9 October 2004, EU
          Trade Commissioner Pascal Lamy and Vietnam Trade Minister Truong Dinh Tuyen announced
          the successful conclusion of an agreement including agreement to reduce tariffs for agricultural,
          fisheries and industrial products to an average of 24%, 22%, and 16% respectively. Reportedly,
          the EU obtained fewer concessions from Vietnam than they had hoped for in sensitive areas
          such as telecommunications, banking, insurance and tourism. The agreement however is a



                                                                                                              8
      significant step towards the conclusion of bilateral negotiations with Vietnam’s other major
      trading partners.

2.4   WTO Accession – Singapore Bilateral Negotiations:
      Singapore and Vietnam have also successfully concluded bilateral negotiations. Concluded on
      25 November 2004, the bilateral negotiations reached consensus on the opening of the goods
      and services sectors as well as multilateral rules. The agreement was formally signed by
      Singapore Prime Minister Lee Hsien Loong and Vietnam Prime Minister Phan Van Khai on 6
      December 2004 in Hanoi.

2.5   WTO Accession – Chile, Argentina, and Brazil Bilateral Negotiations:
      During the APEC Summit held in Chile in November 2004, Vietnam also concluded agreements
      with Chile, Argentina and Brazil.

2.6   WTO Accession – Japan Bilateral Negotiations:
      Vietnam began a new round of bilateral negotiations with Japan on 29 November 2004.

2.7   WTO Approval of Vietnam's Accession:
      Once the Working Party process and the bilateral negotiations conclude, the Working Party will
      adopt Vietnam's accession package, which includes the Working Party Report, the Draft
      Protocol of Accession (incorporating Vietnam's commitments on market access, services, and
      agriculture), and a Draft Decision inviting Vietnam to accede as a member of the WTO. This
      package is ready to be adopted by WTO Members if a two-thirds majority agree either at a WTO
      Ministerial Conference or at a meeting of the WTO General Council.

2.8    Vietnam Ratification of WTO Accession – Necessary Action by Vietnam:
      To complete the process, as with the BTA, Vietnam's National Assembly will be expected to
      ratify the WTO accession package and enact requisite implementing legislation possibly in an
      omnibus packet, before it formally joins the organization. The full National Assembly typically
      meets twice a year, with May and November sessions. Once Vietnam completes its domestic
      ratification procedures, it can become a WTO Member 30 days after depositing its "acceptance"
      with the WTO Director General.

      Vietnam's Ministry of Foreign Affairs is currently drafting a Law on Signing and Implementation
      of International Treaties. The draft Law was submitted to the National Assembly at its
      November 2004 Session (as scheduled) and is expected to be passed at the National
      Assembly's May 2005 Session. The provisions of this Law will govern the process of Vietnam's
      ratification of the WTO accession package and the enactment of implementing legislation, while
      clarifying the hierarchical order of treaties in the legal system of Vietnam.

2.9   U.S. Ratification of WTO Accession – Permanent NTR for Vietnam:
      As noted in Section 1.3 above, Vietnam does not currently have unconditional normal trade
      relations (NTR) status (also known as permanent normal trade relations (PNTR) status) with the
      U.S. Unconditional NTR is enjoyed by virtually all U.S. trading partners. As a Member of the
      WTO, the U.S. is obligated to grant on a reciprocal basis immediate and unconditional most-
      favored-nation treatment to the products of all other WTO Members. Therefore, upon Vietnam’s
      accession to the WTO, the U.S. must grant Vietnam unconditional NTR status, unless the U.S.
      invokes the “non-application” clause of Article XIII of the WTO Agreement before Vietnam's
      accession. If the “non-application” clause is invoked, however, Vietnam will have the right to
      withhold from the U.S. the benefits of its WTO accession commitments (i.e., those that go
      beyond the BTA), denying to the US market access gains which would otherwise have been
      afforded to U.S. goods and services and that all other WTO Members will enjoy.

      Irrespective of Vietnam's accession to the WTO, if the U.S. does not invoke WTO Article XIII,
      the U.S. can extend PNTR status to Vietnam through the procedure that has been used for
      granting PNTR status to Albania, Bulgaria, China, Czech Republic, Estonia, Georgia, Hungary,
      Kyrgyzstan, Latvia, Lithuania, Mongolia, Romania and Slovakia. The procedure consists of the
      enactment of a statute authorizing the U.S. President to terminate the application of Title IV of
      the Trade Act of 1974 with respect to Vietnam and to extend PNTR status to it. The legislation
      would move through Congress under normal procedures - there are no special or “fast track”



                                                                                                     9
      procedures for a bill to terminate the application of Title IV of the Trade Act of 1974. Upon
      introduction in the House and the Senate, the bill is referred to the House Ways & Means
      Committee and Senate Finance Committee for consideration. The bill is open to amendments
      and Congressional rules that typically govern any ordinary bill would apply. Upon enactment of
      the statute, the U.S. President would implement the extension of PNTR status by a Presidential
      proclamation.


3.    General and Legislative Action Plans for Implementation of BTA and WTO
      Accession
3.1   Overall Action Plan for Implementation of the BTA:
      Resolution 48-2001-NQ-QH10 of the National Assembly on the Ratification of Vietnam-U.S.
      Bilateral Trade Agreement dated 28 November 2001 (clause 4) calls for the Standing Committee
      of the National Assembly, the Government and agencies to formulate concrete and
      comprehensive action plans to amend and supplement legal documents according to the BTA
      schedule, to strengthen the legal system, to finalize policies, to enhance human resources
      training and to create favorable conditions for businesses. Decision 35-2002-QD-TTg of the
      Government dated 12 March 2002 outlines Vietnam’s overall plan for implementing the BTA,
      including calling for: 1) public awareness through dissemination via public media, public
      education of ministries, universities and businesses; 2) legal review of Vietnamese law; 3)
      preparation for and evaluation of increased competition by government agencies and
      businesses, and plans for increasing foreign direct investment; 4) preparation for the protection
      of IP rights; 5) preparation for promoting trade, investment and tourism in the U.S. market; 6)
      preparatory plans by relevant ministries in areas that affect national security in Vietnam; 7)
      training of the labor force; and 8) overall organizational issues by the joint bilateral committee,
      various ministries, agencies, and People’s Committees.

      As a useful starting point for identifying areas requiring changes and possible areas for further
      technical assistance, the U.S.-Vietnam Trade Council prepared at the conclusion of BTA
      negotiations      a      Roadmap          for     BTA       Implementation,    available       at:
      http://www.usvtc.org/BTA/Roadmaps/Roadmap%20Descriptions.htm.

3.2   Legislative Plan for Implementation of the BTA:
      In December 2001, the Prime Minister approved the initial review by the MoJ of legal
      instruments that need to be amended in order to comply with Vietnam's international
      undertakings, including under the BTA. Official Letter 6172-VPCP-TCQT of the Office of
      Government dated 18 December 2001 instructs ministries, branches and people's committees
      to continue to check the legal instruments within the sectors for which they are responsible and
      the instruments issued by them. The MoJ has the specific tasks of “commencing work with the
      National Assembly and the Government to prepare the program for drafting laws for the year
      2002-2003, aimed at complying with Vietnam's international undertakings, including the BTA;
      [presiding] over drafting a Government program for submission to the National Assembly on
      amending the legal system for the whole period of the 10th Session National Assembly 2002-
      2003, giving priority to the need to implement the BTA and to be able to provide undertakings
      when Vietnam joins the WTO; [reviewing] and [providing] statistics on the number of
      international treaties in which Vietnam participates and the number of new ones that Vietnam
      must sign during the process of integration into the international economy; [taking] charge of co-
      ordination with ministries, branches and people's committees to strengthen step by step the
      legal systems of ministries, branches and enterprises; and [providing] legal training for staff of
      ministries, branches, localities and enterprises, in order to satisfy the requirements for providing
      undertakings during the process of integration into the international economy”.

      On 8 April 2002, the Minister of Justice reported that the first stage of review of all laws issued
      by ministries and central bodies had been completed and that amendments to 150 legal
      instruments are required. It then conducted the second stage of reviewing laws issued by
      administrative bodies, in particular for the major cities of Hanoi, Ho Chi Minh City, Da Nang and
      Hai Phong. The MoJ is currently reviewing the next round of laws in light of the third year of
      implementation of the BTA.




                                                                                                       10
3.3   Legislative Action Plan for WTO Accession:
      In October 2003, the MoJ completed its review of 265 items of legislation and identified the
      legislative reforms required for WTO accession, including 94 items of legislation identified as
      requiring amendment or formulation (which included 24 Laws and 15 Ordinances).               As
      instructed by Official Letter 1273-CP-QHQT of the Government dated 19 September 2003, a
      legislative action plan was submitted to the WTO Working Party. This action plan outlines
      timelines for the amendment and promulgation of laws including: the Law on National Security,
      Law on Competition, Law on Signing and Implementing International Treaties, Law on
      Enterprises, Article 8 of the Law on Value Added Tax (Amended), Article 7 and Article 16 of the
      Law on Excise Tax (Amended), Ordinance on Foreign Exchange, Law on Foreign Investment in
      Vietnam (Amended), Law on Domestic Investment Promotion (Amended), Ordinance on Anti-
      Dumping Measures, Ordinance on Countervailing Measures, Commercial Law (Amended),
      Ordinance on State Auditing, Law on Maritime (Amended), Law on Civil Aviation (Amended),
      Law on Construction, Law on Tourism, Law on Railways, Law on Credit Institutions (Amended),
      Ordinance on E-Commerce, Law on Securities, Law on Lawyers, Article 7 of Law on Import-
      Export Duties (Amended), Ordinance on Procedures for Settlement of Administrative Cases
      (Amended), Law on Claims and Accusation (Amended), Code on Civil Proceedings, Law on
      Customs (Amended), Ordinance on Standardization, Civil Code (Amended), Law on
      Implementation of Civil Judgments, and Law on Fisheries. A number of these laws have now
      been promulgated, see Section 4 on “Legislative Developments 2002 – 2004” below.

      With the assistance of various ministries, the MoJ has now formulated a revised action plan. In
      response to Official Letter 139-TB-VPCP of the Office of Government dated 22 July 2004
      requesting plans for formulating laws to assist with WTO negotiations, the MoJ issued Official
      Letter 30-TP-ASEAN-WTO dated 17 August 2004 proposing a program for formulating laws
      servicing negotiations for WTO accession.           Many of these proposals include the
      recommendation for laws and implementing documents to be promulgated in the 2005-2006
      timeframe (see updates on the laws to be promulgated, considered and drafted in Section 4.5
      below).

      To accelerate the schedule for drafting laws, Vietnam’s Ministry of Trade (MoT) issued Official
      Letter 4447-TM-DB dated 10 September 2004 to suggest that MoJ separate out two different
      lists of legal instruments – those that are requirements for Vietnam’s WTO accession; and those
      that would be amended or drafted depending on the results of the negotiations for WTO
      accession. The former would need to be issued in 2005, or in the first half of 2006 at the latest
      as legal instruments within the promulgating jurisdiction of the Government or of the Prime
      Minister. The latter list would include legal instruments in the service sectors the details of
      which would depend on the outcome of negotiations. The MoT also suggested that the MoJ
      coordinate with other ministries and branches to continue review of current legal instruments
      against WTO regulations based on the results of the check in 2003, while accelerating the
      speed of drafting, paying special attention to the contents of legal instruments to make sure they
      would conform with WTO regulations, and accelerating the drafting of the Law on
      Implementation of Undertakings on WTO Accession.

      The National Assembly of Vietnam is planning to consider 20 Laws and 12 Ordinances in 2005
      related to WTO accession. It is expected that Vietnam will need to revise at least 30 Laws and
      Ordinances for the purpose of WTO Accession.




                                                                                                     11
        4.    Legislative Developments 2002 - 2004
        4.1   Legislative Developments in 2002:
              As scheduled under Resolution 52-2001-QH10 of the National Assembly dated 25 December
              2001 on the Program for Formulation of Laws and Ordinances in 2002, the following legislation
              was promulgated in 2002:

                          Legislation                 Promulgated     Effective Date           Notes
               Ordinance 40-2002-PL-UBTVQH10          26 April 2002   1 July 2002       See Section 10.2
               on Prices                                                                on “Competition &
                                                                                        Monopoly Pricing”
               Ordinance 41-2002-PL-UBTVQH10          25 May 2002     1 October         See Sections 5.1,
               on MFN and National Treatment                          2002              5.2, 6.2, 7.1, 8.1
                                                                                        and 8.2 on “MFN”
                                                                                        and “National
                                                                                        Treatment”
               Ordinance 42-2002-PL-UBTVQH10          25 May 2002     1 September       See Section 5.14
               on Self-Protection in Import of                        2002              on “Trade
               Foreign Goods into Vietnam                                               Remedies”
               Ordinance 43-2002-PL-UBTVQH10          25 May 2002     1 October         See Section 7.5 on
               on Post & Telecommunications                           2002              “Communication
                                                                                        Services”
               Ordinance 44-2002-PL-UBTVQH10          2 July 2002     1 October         See Section 10.14
               on Dealing with Administrative                         2002              on “Penalties &
               Offences                                                                 Fines”
               Law 01-2002-QH11 on State Budget       16 December
               (Amended)                              2002
               Law 02-2002-QH11 on Amendment          16 December                       See Section 9.1 on
               of Law on Promulgation of Legal        2002                              “Publication of
               Instruments                                                              Laws”

        4.2   Legislative Program 2002 - 2007:
              On 16 December 2002, the National Assembly passed Resolution 12-2002-QH11 on the
              Program for Formulation of Laws and Ordinances by the National Assembly during Legislature
              XI (2002 – 2007) and for 2003. On 26 November 2003, the National Assembly passed
              Resolution 21-2003-QH11 on the Program for Formulation of Laws and Ordinances in 2004. On
              25 November 2004, the National Assembly passed Resolution 35-2004-QH11 on the Program
NEW!!         for Formulation of Laws and Ordinances in 2005. Together Resolutions 12, 21 and 35 provide
              for the passage of a total of 154 laws, ordinances and resolutions by the National Assembly in
              the 2002-2007 period, including the legislation listed in Sections 4.3 and 4.4 below.

        4.3   Legislative Developments in 2003:

              As scheduled under Resolution 12, the following legislation was promulgated in 2003:


                            Legislation                Promulgated     Effective             Notes
                                                                       Date

               Ordinance 07-2003-PL-UBTVQH11           25 Feb 2003     1 June          Replaces 1993
               on Private Medical and                                  2003            predecessor
               Pharmaceutical Practice

               Ordinance 08-2003-PL-UBTVQH11           25 Feb 2003     1 July 2003     See Section 10.7 on
               on Commercial Arbitration                                               “Commercial
                                                                                       Arbitration”




                                                                                                         12
Ordinance 09-2003-PL-UBTVQH11          25 Feb 2003    1 July 2003
on Industrial Mobilization

Law 03-2003-QH11 on Accounting         17 June 2003   1 Jan 2004    See Section 7.3 on
                                                                    “Accounting        &
                                                                    Auditing Services”

Law 04-2003-QH11 on Statistics         17 June 2003   1 Jan 2004    See Section 7.3 on
                                                                    “Accounting        &
                                                                    Auditing Services”

Law 05-2003-QH11 on Supervisory        17 June 2003   1 Aug 2003
Activities of the National Assembly

Law 06-2003-QH11 on National           17 June 2003
Border

Law 07-2003-QH11 on Amendment          17 June 2003   1 Jan 2004
of Law on Value Added Tax

Law 08-2003-QH11 on Amendment          17 June 2003   1 Jan 2004
of Law on Special Sales Tax

Law 09-2003-QH11 on Corporate          17 June 2003   1 Jan 2004    See Section 10.6 on
Income Tax (Amended)                                                “Taxation”

Law 10-2003-QH11 on Amendment          17 June 2003   1 Aug 2003
of Law on State Bank of Vietnam

Ordinance 23-2003-PL-UBTVQH11          26 July 2003   1 Nov 2003    See Section 5.10 on
on Food Safety and Hygiene                                          “SPS”

Law 11-2003-QH11 on Organization       26 Nov 2003
of People's Committees and People's
Councils

Law 12-2003-QH11 on Election of        26 Nov 2003
Representatives of People's Councils

Law 13-2003-QH11 on Land               26 Nov 2003    1 July 2004   See Sections 7.9 on
(Amended)                                                           “Financial Services –
                                                                    Banking” & 8.10 on
                                                                    “Land Use Rights”

Law 14-2003-QH11 on State Owned        26 Nov 2003    1 July 2004
Enterprises (Amended)

Law 15-2003-QH11 on                    26 Nov 2003    1 July 2004
Commendation and Rewards

Law 16-2003-QH11 on Construction       26 Nov 2003    1 July 2004

Law 17-2003-QH11 on Aquatic            26 Nov 2003    1 July 2004
Products




                                                                                        13
       Law 18-2003-QH11 on Amendment          26 Nov 2003      1 Jan 2004
       of Law on Co-Operatives

       Law 19-2003-QH11 on Criminal           26 Nov 2003      1 July 2004   See Section 6.5 on
       Prosecution (Amended)                                                 “IPR Enforcement”


4.4   Legislative Developments in 2004:

      As scheduled under Resolutions 12 and 21, legislation promulgated in 2004 includes:


       Legislation                            Promulgated      Effective     Notes
                                                               Date

       Ordinance 14-2004-PL-UBTVQH11          24 March         1 July 2004   See Section 10.6 on
       on Amendment of and Addition to        2004                           "Taxation"
       Ordinance on Income Tax on High
       Income Earners

       Ordinance 15-2004-PL-UBTVQH on         24 March         1 July 2004   See Section 6.4 on
       Protection of Domestically Developed   2004                           "Industrial Property"
       New Plant Varieties

       Ordinance 16-2004-PL-UBTVQH11          24 March         1 July 2004
       on Livestock Breeds                    2004

       Ordinance 18-2004-PL-UBTVQH11          29 April 2004    1 October     See Section 5.10 on
       on Veterinary Medicine (Amended)                        2004          “SPS Measures”

       Ordinance 20-2004-PL-UBTVQH11          29 April 2004    1 October     See Section 5.14 on
       Against Dumping of Imported Goods                       2004          “Trade Remedies”
       Into Vietnam

       Law 20-2004-QH11 on Amendment          15 June 2004     1 October     See Section 7.9 on
       of Law on Credit Institutions                           2004          "Financial Services"

       Law 21-2004-QH11 on Bankruptcy         15 June 2004     15 October    Replaces 1993 Law
                                                               2004          on Business
                                                                             Bankruptcy

       Law 22-2004-QH11 on Inspection         15 June 2004     1 October     Replaces 1990
                                                               2004          Ordinance on
                                                                             Inspections




                                                                                                     14
Law 23-2004-QH11 on           Inland   15 June 2004    1 January
Waterway Transportation                                2005

Civil Procedure Code 24-2004-QH11      15 June 2004    1 January     Consolidates     the
                                                       2005          procedures for all
                                                                     types of civil legal
                                                                     proceedings
                                                                     (including marriage
                                                                     and family matters,
                                                                     economic        and
                                                                     commercial matters,
                                                                     and labor matters).
                                                                     See Section 6.5
                                                                     "Enforcement of IP
                                                                     Rights."

Law 25-2004-QH11 on Amendment          15 June 2004    1 January     Replaces 1991 Law
of and Addition to the Law on                          2005          on Protection, Care
Protection, Care and Education of                                    and Education of
Children                                                             Children

Law 26-2004-QH11 on Amendment          15 June 2004    1 October
of and Addition to Law on Complaints                   2004
and Denunciations

Ordinance 21-2004-PL-UBTVQH11          18 June 2004
on Religion

Ordinance 22-2004-PL-UBTVQH11          20     August   1 January     See Section 5.14 on
on Measures Against Subsidized         2004            2005          “Trade Remedies”
Goods Imported into Vietnam

Ordinance 23-2004-PL-UBTVQH11          20     August   1 October     Replaces         1989
on     Organization of Criminal        2004            2004          Ordinance          on
Investigations                                                       Organization        of
                                                                     Criminal
                                                                     Investigations

Ordinance on Judicial Assessment       28 September    1 January
                                       2004            2005

Law 27-2004-QH11 on Competition        3 December      1 July 2005   See Section 10.2 on
                                       2004                          “Competition and
                                                                     Monopoly Pricing”

Law 28-2004-QH11 on Electricity        3 December      1July 2005    For the first time,
                                       2004                          provides for
                                                                     "competitive
                                                                     electricity market" in
                                                                     Vietnam

Law 29-2004-QH11 on          Forest    3 December      1 April       Provides for
Protection and Development             2004            2005          management,
                                                                     protection,
                                                                     development and
                                                                     exploitation of forests




                                                                                              15
               Law 30-2004-QH11 on Publishing             3 December     1 July 2005   See Section 10.9 on
                                                          2004                         “Printing &
                                                                                       Publication”

               Law 31-2004-QH11 on Promulgation           3 December     1 April
               of Legal Instruments of People’s           2004           2005
               Councils and People’s Committees

               Law 32-2004-QH11        on   National      3 December     1 July 2005
               Security                                   2004

        4.5   Legislative Developments in 2005:
              Under Resolution 35, 22 Laws and 16 Ordinances are scheduled to be passed by the National
NEW!!         Assembly in 2005. The following 11 Laws are scheduled to be passed at the National
              Assembly’s 7th Session in May 2005:

               Legislation                                      Notes
               Commercial Law (Amended)                         Draft 8 of this Law was considered at the
                                                                National Assembly's November 2004
                                                                Session. See Sections 5.8, 10.10, and
                                                                10.11 on “Trading Rights”, “Commercial
                                                                Contracts”, and “Business Registration &
                                                                Commercial Rights”
               Civil Code (Amended)                             A report only (not a draft) was considered at
                                                                the National Assembly's November 2004
                                                                Session.
               Maritime Code of Vietnam (Amended)               Considered at the National Assembly's
                                                                November 2004 Session
               Law on Pharmacy                                  Considered at the National Assembly's
                                                                November 2004 Session
               Law on Railways of Vietnam                       Considered at the National Assembly's
                                                                November 2004 Session
               Law on Signing, Accession to and                 Considered at the National Assembly's
               Implementation of International Treaties         November 2004 Session.         This Law is
                                                                expected to govern the signing and
                                                                implementation of international treaties by
                                                                the State of Vietnam and by the Government
                                                                of Vietnam only (not by ministries and other
                                                                government bodies). The Law is expected
                                                                to provide for supervision by the National
                                                                Assembly of the signing and implementation
                                                                of such treaties.
               Law on National Defense                          Considered at the National Assembly's
                                                                November 2004 Session
               Law on State Auditing                            Considered at the National Assembly's
                                                                November 2004 Session
               Law on Education (Amended)                       Considered at the National Assembly's
                                                                November 2004 Session. See Section 7.8
                                                                on “Educational Services”
               Law on Amendment of the Law on Customs           See Section 5.5 on “Customs Valuation”
               Law on Amendment of the Law on
               Compulsory Military Service




                                                                                                             16
                                                                          th
11 Laws are scheduled to be considered at the National Assembly’s 7 Session in May 2005
and passed at its 8th Session in October 2005:

 Legislation                                       Notes
 Law on Tourism
 Law on Protection of the Environment              See Section 10.5 on “Environmental
 (Amended)                                         Standards”
 Law on Negotiable Instruments in Banking
 Law on Intellectual Property*                     See Section 6.1 on “Intellectual Property
                                                   Rights Regime”
 Law on Electronic Transactions
 Law on Residential Housing
 Law on Export and Import (Amended)
 Law on Youth
 Law on Amendment of the Mineral Law
 Law on the People’s Police
 Anti-Corruption Law*

(* New additions to 2002-2007 Legislative Program under Resolution 12)




                                                                                               17
The 16 Ordinances scheduled to be passed by the Standing Committee of the National
Assembly in 2005 include:

 Legislation                                    Notes
 Ordinance on Tendering
 Ordinance on Legal Aid
 Ordinance on Amendment of Ordinance on
 Resolution of Administrative Cases
 Ordinance on Amendment of Ordinance on
 Thrift to Reduce Expenditure
 Ordinance on Procedures for Resolution of
 Strikes

9 Laws are scheduled to be considered at the National Assembly’s 8th Session in October 2005
(and expected to be passed at its 9th Session in May 2006):

 Legislation                                    Notes
 Uniform Enterprise Law                         A common enterprise law applicable to
                                                domestic and foreign enterprises, see
                                                Section 8.2 on “National Treatment”
 Common Investment Law                          A common investment regime applicable to
                                                domestic and foreign investment, see
                                                Section 8.2 on “National Treatment”
 Law on Social Insurance                        See Section 10.4 on “Labor”
 Law on Real Estate Business
 Law on Civil Aviation of Vietnam (Amended)
 Law on Information Technology
 Code on Enforcement of Judgments               See Section 9.6 on “Enforcement of Civil
                                                Judgments”
 Law on Cinematography
 Law on Registration of Real Estate

The 16 Laws and 8 Ordinances scheduled to be drafted in 2005 include:

 Legislation                                            Notes
 Code on Dealing with Administrative Offences
 Securities Law
 Law on Permanent Residence
 Law on Personal Income Tax
 Law on Equality of the Sexes
 Law on Transfer of Technology*
 Law on Legal Profession
 Law on Occupational Training*
 Ordinance on Registration of Security Transactions
 Ordinance on Foreign Exchange*



                                                                                           18
5.    Trade in Goods
5.1   Most-Favored-Nation Status:
      On 25 May 2002, the Standing Committee of the National Assembly approved Ordinance 41-
      2002-PL-UBTVQH10 on MFN and National Treatment in International Commerce, codifying
      important principles in the BTA and Vietnam’s other bilateral trade obligations.

      Ordinance 41 introduces the concept of MFN, applicable to imports and exports, services and
      foreign-service providers, investment and foreign investors, and foreign holders of IP rights.
      MFN is applicable: 1) where Vietnamese law requires that it is applicable; 2) where Vietnam has
      signed an international treaty requiring that MFN be granted; 3) to countries that Vietnam has
      reciprocal MFN arrangements; and 4) in other cases as determined by the Government.
      Ordinance 41 lists exceptions for the application for MFN in trade in goods, including 1) in cases
      where Vietnam is member to international treaties granting preferential treatment; 2) in cases
      where Vietnam extends preferential treatment with countries sharing territorial borders; 3) in
      cases of preferential treatment afforded to developing or under-developed countries; and 4) in
      cases where Vietnam is member to an international treaty for transit of goods.

      Under Ordinance 41, the application of MFN extends to 1) taxes, fees and other charges
      relating to imports, exports or anything relevant to import/export; 2) payment methods and
      payment transfers for import/export; 3) regulations and procedures relating to import/export; 4)
      taxes, direct and indirect charges for imports; 5) quantitative restrictions and import/export
      licenses; 6) other legal regulations affecting orders, purchases, transportation, distribution, and
      warehousing in Vietnam.

      The MoT is the State body responsible for State administration of MFN and National Treatment,
      with responsibilities for promulgation and implementation of legal documents; decisions on
      application or non-application; signing, participation and implementation of international treaties
      concerning MFN and National Treatment; establishment of implementing policies; gathering and
      provision of information; inspection of activities enforcing MFN and National Treatment; and
      resolution of any complaints and related violations. Ordinance 41 became effective as of 1
      September 2002. Detailed implementing regulations are yet to be issued by the Government.

      MFN for the EU
      Official Letter 250-VPCP-QHQT of the Office of Government dated 15 January 2002 on MFN
      between EU and American enterprises in economic and trade cooperation confirms that
      Vietnam will not discriminate against EU companies and will treat companies of EU origin no
      less favorably than US companies. While European companies may be able to attain similar
      tariff levels for goods entering Vietnam through MFN stipulated through bilateral agreements
      with individual European states, the enforceability of Official Letter 250 remains uncertain for
      European companies seeking market access in the areas of investment and services.

      (In the area of banking services, as of 1 April 2004, EU bank branches in Vietnam are now on a
      par with US bank branches with respect to access to VND deposits. See Section 7.9 on
      “Financial Services - Banking Services.”)

5.2   National Treatment:
      Ordinance 41-2002-PL-UBTVQH10 on MFN and National Treatment in International Commerce
      introduces the concept of national treatment, applicable to imports and exports, services and
      foreign-service providers, investment and foreign investors, and foreign holders of IP rights. The
      provision of national treatment in international commerce is defined as the provision of treatment
      no less favorable than that provided to domestic goods. The provision of national treatment in
      general is subject to the following exceptions including: 1) procurement conducted by the
      Government of Vietnam; 2) Government subsidies and supports provided to domestic
      manufacturers and their use of domestic content products; 3) time allotment restrictions on
      broadcasting and television production and 4) domestic transportation costs calculated on the
      basis of commercial activities of transportation.




                                                                                                      19
        5.3   Tariffs:
              Vietnam adopted the Harmonized System for classification of tariffs on 1 January 2000.

              MFN Tariffs
              In July 2003, the MoF released the new MFN tariff schedule under Decision 110-2003-QD-BTC
              dated 22 July 2003, listing 10,721 items. Decision 110 replaced Decision 1803-1998-QD-BTC
              of the Ministry of Finance dated 11 December 1998. Table I of the new list came into effect on 1
              September 2003, with a few select tariff lines in Table II coming into effect on 1 January 2004.
              The tariff schedule is based on version HS 2002 by the World Customs Organization and the
              ASEAN Harmonized Tariff Nomenclature (AHTN). Vietnam’s current simple average tariff rates
              are approximately 29.37% for agricultural goods and 17.03% for non-agricultural goods. This is
              Vietnam’s applied tariff schedule and will be the basis for the classification of export-import
              categories and national statistics on foreign trade. The schedule was submitted to Vietnam’s
              WTO Working Party in October 2003 as the basis for market access negotiations
              (WT/ACC/SPEC/VNM/1/Rev. 2).

              Tariffs for U.S. goods will be reduced from 35% to 26% for approximately 244 bound items,
              phased in over a period of 3 years from entry into force of the BTA. 80% of these tariff items are
              for agricultural goods while 20% are for industrial goods. To implement the tariff reductions due
              by 10 December 2004, the MoF has issued Decision 90-2004-QD-BT dated 25 November 2004
              regulating import duties applicable to certain commodities. Of note, the tariffs imposed on scent
              products and perfume will decrease to 30% from the current 50%, while cosmetic imports will go
              down to 20-30% from 50%. The new tariff levied on cameras will be 20%, down from 30%.
              Refrigerators with a capacity less than 900 liters will face import tariffs of 20-40%, down from
              current 30- 50%. These import tariffs will apply to commodities that have certificates of origins
              (C/O) from the US as well as other countries that have MFN status.

              AFTA Tariffs
              In accordance with Vietnam’s obligations under the ASEAN Free Trade Agreement ("AFTA")
              Common Effective Preferential Tariff (CEPT) Scheme, tariff rates since 2000 have been reduced
              for 4230 categories of products. Tax cuts have been applied since then to a further 1,900
              categories. In an effort to accelerate on its commitments related to AFTA, Vietnam has also
              further increased the number of goods under which tariffs are to be reduced to 0-5% by 2003.
              This brings into force 80% of Vietnam’s tariff reductions under AFTA. By July 2003 it will
              additionally reduce import tariffs on 2,250 commodities, including 750 that had been on the
              Temporary Exclusion List. Such commodities include cement, paper, electronics, engineering
              products and construction materials. Vietnam has also committed to lowering the duty on 6,130
              categories to 0-5% by 2006 and on nearly all commodities to 0% by 2015.

              To implement Vietnam’s AFTA commitments, the Government issued Decree 78-2003-ND-CP
              reducing import tariffs for 1,416 products to under 20% beginning on 1 July 2003. The MoF
              estimates that average rate of CEPT will fall to 9.3 per cent in 2003 and 3.0 per cent in 2006.

              Decree 78 is supplemented by Circular 64-2003-TT-BTC dated 1 July 2003 on Introduction of
              Vietnam’s list of goods and tariff rates to implement the ASEAN CEPT Scheme for the period
              2003-2006. According to Circular 64, goods from ASEAN countries must have a Certificate of
              Origin (Model ‘D’). Further, if the existing MFN import duty rate is lower than the CEPT rate, the
              MFN rate applies. Imported items for production and assembly of mechanical, electrical, and
              electronic products that meet both CEPT and MFN conditions will be levied the lower of the two
              rates.

              On 24 December 2004, the Government issued Decree 213-2004-ND-CP adding 19 items for
NEW!!         the period 2004-2006 to Vietnam's list of goods and tariff rates under Decree 78 above. Duties
              on 19 imports, including tires, engines and other automobile, motorcycle and bicycle parts, will
              be cut to 20% in 2004 to 10% and 15% in 2005 and to 0% and 5 % in 2006. Currently, the
              country imposes a tariff of 30 - 100% on such items on countries for which it has MFN. The duty
              reduction will be available retrospectively for registered imports from 1 January 2004.




                                                                                                             20
ASEAN countries have supplementary explanatory notes ("SEN") for a number of unique goods
items with detailed specifications and illustrating pictures. Vietnam's SEN are issued under
Circular 85-2003-TT-BTC of the Ministry of Finance dated 29 August 2003.

Effective as of 27 August 2004, Decree 151-2004-ND-CP of the Government dated 5 August
2004 amends the import duty rate for cements, polymers and carboxylic acids (HS 2523, 3904,
2917) under Vietnam’s list of goods and tariff rates to implement ASEAN CEPT program issued
with Decree 78 for the period of 2004-2006.

Under Decision 81-2004-QD-BTC of the Ministry of Finance dated 15 October 2004, import
duties for 37 items will be zero while that of 53 others will be lowered. The duty free imports
comprise buckwheat, barley, oat, PVC powder, lactic acid, and PVC in other forms, transmitter
devices for TV, some television and broadcasting equipment, camera, digital camera, internet-
based conference equipments, transmitter devices for telephone, telegram, television,
specialized devices for television such as decoding box. Among the 53 imports for which tariffs
are to be reduced are: hand-phones tariffs (reduced to 5% from 10%), reactive dish of parabolic
antenna applied for multi-media TV and accessories (reduced to 10%). Decision 81 will replace
Decision 17-1999-QD-BVGCP dated 3 April 1999 and Decision 03-2000-QD-BT dated 7
January 2000.

Automobile tariffs
Under Decision 177-2004-QD-TTg dated 5 October 2004, the Government has approved the
plan for the development of the automobile industry to 2010-2020. Under this plan, a new tariff
schedule has been issued for automobiles and a new system introduced. Accordingly, tariffs will
be applied on the basis of individual imported parts, components, instead of the current system
based on CKD and IKD packages as regulated under Decision 110-2003-QD-BTC dated 25 July
2003.

Effective as of 5 October 2004, Decision 177 provides for the following preferential taxation
treatment: components set in the form of CKD and IKD will not be subject to import duties;
components and parts imported for domestic manufacture will be subject to import duty in
accordance with the tariff schedule; trial products will be exempted from CIT for one year of its
presence on the market. Preferential treatment will be enjoyed by foreign invested projects in
supporting industries, such as the manufacture of engines and parts, and by projects of large-
scale manufacture of products facilitating the increase in localization and exports.

Preferential Tariffs for Wine from the EU
On 12 February 2004, the Ministry of Finance issued Decision 17-2004-QD-BTC providing
preferential tariff rates on wines & spirits (HS 2204, 2005, 2008) and CKD scooters (HS 8711) of
EU origin entering Vietnam. Effective 1 January 2004, these preferential tariff rates are
according to the Decision, pursuant to the Agreement on Revising the Textiles and Clothing
Agreement between the EU and Vietnam of 15 February 2003. Such action has however
instigated Vietnam’s trading partners to raise questions on its general MFN obligations. After
several weeks of consideration, Vietnam has agreed to provide similar products from the U.S.
and Australia with the same preferential tariff rate. Under Official Letter 5327-TC-CST of the
Ministry of Finance dated 19 May 2004, wine commodities belonging to the groups 2204, 2205,
2206, 2208 of the Import Incentive List that are imported from U.S. and Australia are subject to a
tariff rate of 80% as from 1 May 2004. This is the same tariff rate applied to wine imported from
the EU as stipulated in Decision 17-2004-QD-BTC dated 12 February 2004.

Tariffs – Electronic Components:
Vietnam’s Ministry of Finance is currently considering an overall strategy for the development of
the electronic components sector, including the reduction of import tariffs and the re-
categorization of electronic groups. Specifically, it is considering the maintenance of 5% for the
groups of electronic products having the current MFN rate of 5% or less (including springs, IC,
rheostats, some kinds of capacitors, resistance, transistors, optical lens). It is also proposing
the division into smaller groups for groups of electronic products that currently have the MFN
rate of more than 5%. These include domestically produced components (such as speakers,
micro, conductor wires). The Ministry of Finance is also considering the maintenance of current




                                                                                               21
      tariff levels for electronic groups with the import duty rate of 15-30%. Finished electronic goods
      are currently levied at 30-50%.

5.4   Application of Internal Taxes on Imported Goods

      Excise Taxes
      The application of excise taxes is currently governed by Law 05-1998-QH10 on Special Sales
      Tax dated 20 May 1998 (as amended by Law 08-2003-QH11 dated 17 June 2003). Vietnam
      currently applies discriminatory excise taxes on a number of imports including automobiles.
      Article 16 of the Law on Special Sales Tax (as amended 17 June 2003) stipulates that excise
      tax exemption and reduction for car assembling enterprises are subject to a phasing out
      schedule until 31 December 2006 as follows: exemption and reduction for domestic automobile
      enterprises shall be 70%, 50%, 30% and 0% in 2004, 2005, 2006 and 2007 respectively.
      Excise taxes are also applied on imported tobacco products. These discriminatory taxes are
      expected to be phased out upon Vietnam’s WTO accession.

      The Ministry of Finance is currently finalizing a circular on amendment of and addition to its
      current guidelines on special sales tax issued under Circular 119-2003-TT-BTC dated 12
      November 2003. Reforms are expected to include: passenger cars of less than 24 seats
      imported into export processing zones, and export processing enterprises will be subject to
      excise taxes of 25% instead of the current 0%; an all kinds of passenger cards used in theme
      parks and sporting centers will not be subject to excise tax. The new Circular will also amend
      and clarify excise tariffs applied to processed goods; the application of excise tax on passenger-
      cargo trucks; declarations and payments; violations; and time limits for excise tax finalization.

5.5   Customs:
      In June 2001, Vietnam’s National Assembly passed a new Law on Customs introducing several
      GATT based policies and measures including customs valuation based on transaction pricing,
      among others. The General Department of Customs ("GDC") is currently in the process of
      reviewing the 2001 Law in an attempt to settle issues that have arisen during implementation of
      the new customs laws and regulations. Amendments to the 2001 Law are scheduled to be
      passed by the National Assembly at its May 2005 Session. Reportedly, the amendments will
      address further implementation of the WTO Customs Valuation Agreement, Agreement on Pre-
      Shipment Inspection, and Agreement on Rules of Origin. To help modernize its current regime
      and to transition to a system of automatic clearance and post entry auditing, the amendments to
      the 2001 Law are also expected to introduce a new chapter on post clearance inspection and
      articles on automatic clearance.

      Customs Valuation
      Vietnam is currently transitioning from valuation of imports based on reference or minimum
      pricing to valuation based on transaction pricing as required under the WTO Agreement on
      Customs Valuation (CVA). Prior to mid-2001, Vietnamese law provided for all imported goods to
      be subject to reference pricing or “check pricing” if the declared value is 70% less than what is
      referenced. Under Decision 164-2000-QD-BTC dated 10 October 2000, Vietnam also maintains
      minimum prices for a list of seven items including (1) Assorted drinks (alcoholic beverages);
      (2)Tires, pneumatics inner tubes and fenders of various kinds (used for automobiles,
      motorcycles & bicycles); (3) Walling and flooring tiles, sanitary ware (toilet sinks, urinals, wash
      basins, bathtubs); (4) Flat glass, white, colored, light reflecting mirrors and glass, water flasks
      (non-electric), vacuum inner flasks; (5) Motors, generators (other than used for automobiles,
      motorbikes and other special-use vehicles such as bulldozers, crane trucks); (6) Electric fans
      (except industrial fans under sub-heading 84 14 59 00; 7) Motorcycles. By Decision 136-2001-
      QD-BTC dated 18 December 2001, tobacco was added to the minimum price list.

      To implement the 2001 Law with respect to customs valuation based on transaction pricing, the
      Government issued Decree 60-2002-ND-CP on Determination of Dutiable Price for Imported
      Goods Subject to Import Duties in conformity with Principle of the Agreement on Implementation
      of Article 7 of the GATT dated 6 June 2002. To meet the BTA’s two year deadline for Vietnam’s
      commitment to provide for customs valuation based on transaction pricing, the MoF issued
      guidelines for implementation of Decree 60 under Circular 118-2003-TT-BTC dated 8 December
      2003. Effective as of 28 December 2003, customs valuation based on transaction pricing



                                                                                                      22
        applies to goods of U.S. and ASEAN origin entering Vietnam. Circular 118 is supplemented by
        the following legal instruments of the MoF and GDC: Decision 1723-TCHQ-QD dated 22
        December 2003 on dutiable price for imported goods and guidance for customs declaration,
        Decision 1774-TCHQ-QD-KTTT dated 29 December 2003 on verification and determination of
        dutiable price by customs agencies, Official Letter 192-TCHQ-CV dated 13 January 2004
        providing guidance for scope of application of Circular 118, Official Letter 35-TCHQ-KTTT dated
        2 January 2004, and Official Letter 191-2003-TCHQ-CV dated 13 January 2004 providing
        guidance on dutiable price on declaration forms. Effective 1 August 2004, Decision 733-2004-
        TCHQ-QD-KTTT of the General Department of Customs dated 19 July 2004 provides revised
        regulations on verification and determination of dutiable price of imports under Circular 118
        (repealing Decision 1774 above) and also provides regulations on customs clearance and
        inspection of declaration forms.

        Pursuant to Decision 164 and Decision 136 above, Vietnam had maintained eight exceptions to
        the application of transaction pricing. By Decision 1291-TCHQ-KTTT dated 25 March 2004, the
        MoF clarified that customs valuation for such 8 products was to be determined according to
        Circular 118, thereby abolishing all exceptions to the CVA for goods of U.S. and ASEAN origin.
        By Circular 87-2004-TT-BTC dated 31 August 2004 providing guidelines on implementation of
        the Law on Export and Import Duties, the MoF has abolished the calculation of import duties
        according to the minimum price list. The MoF and the GDC are reportedly drafting guidelines
        with respect to price fraud by importers. Systems for keeping customs authorities up-to-date
        with world commodity prices are also being considered.

        In addition to goods of U.S. and of ASEAN origin, Vietnam has extended the application of
        transaction pricing for valuation of imports to countries with which it has committed to provide
        MFN treatment and also to countries that have offered reciprocal treatment of Vietnamese
        imports, in particular to:
        -     Pakistan, India, South Africa, and Turkey (Official Letter 1644-TM-XNH dated 6 April
              2004)
        -     Australia (Official Letter 5326-TC-CST dated 19 May 2004, effective 1 May 2004)
        -     New Zealand, Spain, Taiwan, Portugal, Hong Kong, Sweden, Mongolia, UK, Norway,
              Italia, Ukraine, Poland, Austria, Czech, Belgium, Estonia, Denmark, Lithuania, Finland,
              Latvia, France, Hungary, Greece, Slovakia, Holland, Slovenia, Ireland, Malta,
              Luxemburg, Cyprus and Germany (Official Letter 5312-TC-CST, effective 6 May 2004)
        -     China, Japan and South Korea (Official Letter 6047-TC-CST dated 4 June 2004,
              effective 19 May 2004)
        -     Bangladesh and Peru (Official Letter 6646-TC-CST dated 16 June 2004)
        -     Brazil, Argentina, and Mexico (Official Letter 8380-TC-CST dated 29 July 2004, effective
              15 July 2004)
        -     Columbia (Official Letter 9669-TC-CST dated 31 August 2004, effective 23 August 2004)

        To provide guidelines for Decree 60 above, the GDC issued Decision 5783-QD-TCHQ-KTTT
NEW!!   dated 29 November 2004 providing price data and Decision 1361-2004-TCHQ-QD-KTTT dated
        25 November 2004 issuing Regulations on Review of Dutiable Prices in accordance with WTO
        Customs Valuation Methods. Under Decision 1361, review shall be conducted if the declared
        dutiable prices of imported goods are lower than one of the following five declared dutiable
        prices:
           -    Declared value is lower than 90% of the public offer price on the internet or the public
                quotation, or of the total expenses of main materials used for production of imported
                goods (raw materials, components and spare parts imported or publicly offered);
           -    Declared value is lower than 90% of the sale price to the third country;
           -    Declared value is lower than the transaction value of similar or identical imported goods
                to be exported within 60 days (prior to or after the export date of the consignment that
                has been inspected);
           -    Declared value is lower than the local sale price, after deducting taxes and other
                reasonable expenses arising after importing goods (normally it is not exceeding 30% of
                local sale price);
           -    Declared value is lower than 90% of the inspection price provided in the current price
                data of the GDC.




                                                                                                      23
The authorities entitled to review the dutiable prices of imported goods are the pricing division or
the professional division under customs departments and local customs departments (for
imported goods subject to preferential import duty rate of 10% or less).

Post-Entry Audit
To facilitate customs clearance, the GDC is gradually introducing and phasing-in post-entry
audit procedures for importers. Circular 96-2003-TT-BTC dated 10 October 2003 provides
guidelines for the implementation of Decree 102-2001-ND-CP of the Government dated 31
December 2001 making detailed provisions on inspection with respect to imports and exports
after customs clearance.

Circular 96 entitles customs offices to inspect documentation relating to imports and exports for
up to 5 years (60 months) after customs clearance in cases where there is evidence of a breach
of customs laws, tax laws or import-export management policy. Circular 96 also lists the types
of documentation which may be subject to post-customs clearance inspection.                Such
documentation may be in the possession of the actual customs declarations, their customs
agents, agents trading the imported and exported goods, or entities holding or using the
imported and exported goods. Circular 96 became effective as of 2 November 2003 and
repealed Decision 1558-QD-TCHQ of the General Department of Customs dated 28 December
2001.

Inspection
Regulations have also been introduced to streamline processing and administrative tasks in this
area, including the shift to exemption from inspection of numerous categories of goods, random
inspection of specified categories of goods, and actual inspection of goods only where a breach
of law is suspected or the goods owner is a repeat customs offender. Initial testing has been
conducted at Saigon Port #2 and Hai Phong Port #1. Results from these trial runs have been
complimentary, with quicker goods clearance (reduction of inspection officials per shipment from
17 to 6 individuals). In Ho Chi Minh City, seaports of the Saigon Port system are running trials
aiming at completing procedures within an hour and reducing required documents by half to two
thirds by the usage of common documents in some cases. Procedures will be conducted at the
port offices instead of the ship, and fax and email documents will be considered legal dossiers.
A foreign ship will not need permission to dock at Saigon port if it has already completed
procedures at another port in Vietnam.

Details of the new streamlined customs clearance process under the Law on Customs were
provided in Decree 101-ND-CP and Decree 102-ND-CP of the Government dated 31 December
2001 and a number of provisional decisions of the GDC (those provisional decisions have now
been replaced by subsequent circulars).

Circular 32-2003-TT-BTC of the Ministry of Finance dated 16 April 2003 provides guidelines on
customs procedures specifying preferential exemption from on-the-spot customs checks for
prescribed importers (importers of equipment, machinery, fresh food, goods needing special
care, goods to be stored in bonded warehouses and goods to be imported into export
processing zones, provided that they have not violated any customs regulations for 2 years) and
exporters (exporters of farm produce, aquatic products, garments, footwear, latex, fresh and
processed food and goods needing special care, provided that they have not violated any
customs regulations for 1 year, and those who have been engaged in export activities but
whose exports are on the list of preferential treatment). Persons involved in import activities
who have not violated any custom regulations after a number of on-the-spot checks will be
entitled to random cargo checks.

Other
In an attempt to speed up procedures for claiming duty exemptions, reductions and refunds for
importer and exporters, the MoF has increased the authority of Customs Offices. Under
Decision 140-2003-QD-BTC, the GDC is now responsible for deciding the eligibility of
businesses for preference duties. Previously, the General Department of Taxation approved
import and export duty exemptions, reductions and refunds. Decision 140 also now allows
businesses to receive refunds immediately, therefore clearing a significant backlog of duty
applications at Customs Offices. Decision 140 became effective as of 1 September 2003 and



                                                                                                 24
      repeals Decision 70-1999-QD-BTC of the Ministry of Finance dated 6 July 1999. Duty
      exemptions, reductions and refunds apply to businesses that import materials for processing
      exports, import goods temporarily for re-export, and import goods for sale at duty-free shops.

      Under Decree 106-2003-ND-CP of the Government dated 23 September 2003 Providing
      Guidelines for Dealing with Administrative Offences in Charges and Fees, administrative
      offences committed by responsible authorities in the process of collection of fees and charges
      may attract fines between Vietnamese dong ("VND") 20-50 million.                 Guidelines for
      implementation of Decree 106-2003-ND-CP were issued under Circular 06-2004-TT-BTC of the
      Ministry of Finance dated 4 February 2004 (and corrected by Official Letter 1571-TC-VP dated
      18 February 2004).

      To address customs violations by importers and exporters in the area of import declarations,
      Vietnam has recently issued Decree 138-2004-ND-CP dated 17 June 2004 applicable to
      organizations and individuals that commit administrative violations in the customs domain.
      Accordingly, such organizations and individuals are to be subject to warning, fines, and possible
      additional sanctions such as revocation of permits and confiscation of material evidence.
      Reportedly, depending on the seriousness of the violations in customs, parties may be fined
      from 50,000 to 70 million VND.

      To promote effective implementation and increase trade facilitation, the MoF issued Decision
      3597-QD-BTC dated 4 November 2004 encouraging taxation and customs authorities to
      conduct regular dialogue with business taxpayers and customs declarers. Decision 3597
      authorizes businesses to send proposals and petitions for the adjustment and supplementation
      of tax and customs related policies, reforms of tax and customs procedures etc.

5.6   Non-Tariff Barriers:
      Decision 46-2001-QD-TTg of the Government dated 4 April 2001 effectively eliminated non-tariff
      barriers and quantitative restrictions for most products by 2003. While restrictions on some key
      products remain, Decision 46 seeks to streamline Vietnam’s trading regime through the general
      elimination of non-tariff barriers, import and export licensing, and quantitative restrictions.
      Currently, seven items - petrol, glass, iron, vegetable oil, sugar, motorbike and nine-seat
      motorized vehicles – remain on the mandatory import license list.

5.7   Tariff Rate Quotas:
      In 2004, Vietnam will apply tariff rate quotas on the following seven items: raw tobacco, salt,
      cotton, condensed milk, non-condensed milk, maize seed, and chicken eggs.

      On 10 July 2003, the MoT issued Circular 04-2003-TT-BTM Providing Guidelines for
      Implementation of Decision 91-2003-QD-TTg of the Government dated 9 May 2003 on
      Application of Customs Quotas With Respect to Imports into Vietnam. According to Circular 04,
      import quotas will be applied to the following 3 commodities from 1 August 2003: salt, cotton,
      and tobacco. On 7 August 2003, the MoF issued Decision 126-2003-QD-BTC imposing a 60%
      tariff on extra-salt imports including unprocessed rock, refined and industrial salt. This Decision
      came into effect on 5 September 2003. The salt import quotas, granted by the MoT in
      November each year, will be based on domestic consumption and production and a 30% import
      duty will be charged on such quotas.

      On 15 December 2003, the MoT extended application of import quotas to four additional
      commodities under Circular 09-2003-TT-BTM Providing Guidelines for Implementation of
      Decision 91-2003-QD-TTg of the Government dated 9 May 2003 on Application of Customs
      Quotas With Respect to Imports into Vietnam for 2004. Under Circular 09, from 1 January 2004,
      revised import quotas will apply to 7 commodities in total - raw tobacco, salt, cotton, condensed
      milk, non-condensed milk, maize seed, and chicken eggs. The MoT will grant permits to traders
      authorized to import the above commodities. When carrying out import procedures, traders are
      required to present permits to the customs offices. Traders granted import permits may entrust
      the import to other traders but the sale, purchase or transfer of quotas is strictly prohibited.
      Traders importing according to the MoT’s import volumes must pay usual import duties.




                                                                                                      25
              Regulations governing import quotas applicable to the above 7 commodities (mentioned above)
NEW!!         have been issued under Circular 10-2004-TT-BTM of the Ministry of Trade dated 27 December
              2004 providing guidelines for implementation of Decision 91-2003-QD-TTg of the Government
              dated 9 May 2003 on Application of Customs Quotas With Respect to Imports into Vietnam.
              The MoT remains in charge of issuing import permits for commodities subject to import quotas.
              Circular 10 allows a corporation to register and receive import quota for its subsidiaries.

        5.8   Trading Rights:
              For the purposes of this section, trading rights is extended when a company is granted the right
              to directly import and export goods, without having to go through a state-owned or local trading
              company. Trading rights permit the import and export of goods only and do not cover the ability
              to distribute goods once they are imported. The distribution of goods is subject to GATS
              distribution services commitments, or in the case of the BTA, Annex G.

              Domestic Enterprises – Trading Rights
              The Law on Enterprises dated 12 June 1999 governs companies’ commercial rights and in its
              application extended both trading and distribution rights to all Vietnamese enterprises
              (previously restricted to only State trading entities). See also Section 10.11 on “Business
              Registration and Commercial Rights” for domestic enterprises.

              Foreign Enterprises – Trading Rights
              Foreign enterprises currently do not have full trading and distribution rights, although licenses
              have occasionally been granted on a case by case basis. Under the BTA, Vietnam has
              committed to open its trading (import-export) sector to non-state and U.S. companies. In
              particular, the BTA requires Vietnam to extend trading rights to all domestic enterprises upon
              entry into force (already introduced, as noted above) and phases-in such rights for U.S. firms
              over a period of three to seven years. U.S.-invested JVEs and U.S. invested manufacturers
              may engage in trading activities in most products beginning in December 2004 provided that
              U.S. ownership is limited to 49%. 100% U.S.-invested companies may be established to
              engage in import/export activities beginning in December 2008.

              Currently, under Decree 24-2000-ND-CP of the Government dated 31 July 2000, foreign direct
              investment in the import and distribution sector is subject to the condition that it must be
              implemented in accordance with separate regulations issued by the Prime Minister. No such
              separate regulations have yet been issued. As a result, a legal vacuum confronts investment
              projects in import and distribution services - they are not prohibited but there is no enabling
              legislation (as confirmed in Official Letter 3067-TM-DT of the Ministry of Trade dated 7 August
              2002). This continues to be the case under Decree 27-2003-ND-CP of the Government dated
              19 March 2003 amending Decree 24.

              To a very limited extent, Vietnamese law already provides for foreign commercial branch offices.
              Decree 45-2000-ND-CP of the Government dated 6 September 2000 and Joint Circular 20-
              2000-TTLT-BTM-TCDL of the Ministry of Trade and General Department of Tourism dated 20
              October 2000 stipulate the regime for licensing and operation of foreign commercial branch
              offices. The commercial activities of foreign commercial branch offices are limited to exporting 5
              categories of goods and importing (under permit) 3 categories of goods for sale in the
              Vietnamese market only and subject to the restriction that turnover from import may not exceed
              turnover from export. Foreign commercial branch offices are not permitted to purchase goods in
              Vietnam for resale in Vietnam.

              The MoT, in co-ordination with the MPI and the MoJ, has been charged (under Official Letter
              2630-VPCP-KKTH of the Office of Government dated 20 May 2002) with the task of preparing
              the necessary laws to address BTA and WTO obligations and to progress towards less
              discretionary and wider licensing of foreign participation in the import and distribution sector. At
              the time that the MoT was charged with this task, the Commercial Law was expected to be
              promulgated and be effective by the end of 2004. With this intended timeframe in mind, the
              MoT proposed (under Official Letter 2177-TM-DT of the Ministry of Trade dated 5 June 2002)
              the following mechanism to achieve Vietnam's BTA obligations:
              -        First, the scope of applicability of the 1997 Commercial Law would be expanded to
                       provide for establishment of new foreign invested enterprises ("FIEs") and foreign



                                                                                                               26
              branch offices to conduct commercial activities solely and for existing FIEs in the
              manufacturing sector to engage in commercial activities (where "commercial activities"
              would include import/export and distribution); and
      -      Second, the Government would issue a decree on implementation of the Commercial
             Law with respect to commercial activities (including import and distribution business
             activities) of FIEs and foreign branch offices in Vietnam.

      Reform of the Commercial Law will be undertaken by way of issuance of a completely revised
      Commercial Law (as opposed to amendments the current Commercial Law). Draft 8 of the
      revised Commercial Law was considered by the National Assembly at its November 2004
      Session, but is not scheduled to be passed until the National Assembly's May 2005 Session.

      Like Draft 6 (August 2004) before it, Draft 8 (November 2004) of the revised Commercial Law
      contains a simple provision only, enabling foreign branch offices, 100% FOEs and JVEs to be
      licensed to engage in "commercial activities" only (i.e. not invest in production but solely conduct
      commercial activities). "Commercial activities" is defined as activities for profitable purposes,
      including: sale and purchase of goods, provision of services, commercial promotion, investment,
      and other activities for profitable purposes. Although there is no specific reference to
      "import/export" or "distribution", it is expected that "other activities for profit making purposes"
      will be interpreted to encompass import-export and distribution activities (consistent with Draft 3
      in April 2004 which had specifically included "distribution" in the definition of "commercial
      activities"), based on Phillips Fox's discussions with the MoT's Commercial Law Drafting
      Committee in early December 2004. Foreign participation in import and distribution activities is
      still expected to be regulated in detail in a decree implementing the revised Commercial Law.

      Of interest, Draft 8 provides for a separate regulatory framework for FIEs and foreign branch
      offices "specialising" in import and distribution activities (ie where no manufacturing is
      undertaken) under the control of the MoT. (This would be similar to foreign credit institutions in
      Vietnam which are governed by a separate regulatory framework from the Law on Foreign
      Investment and under the control of the SBV.) Under Draft 8, other FIEs undertaking
      commercial activities in addition to manufacturing would remain under the control of the MPI.

      As a stop-gap pending promulgation of the revised Commercial Law and the necessary
      implementing decree, and in order to meet the BTA's December 2004 schedule for allowing US
      participation in trading and distribution, the MoT is drafting a specific decision (most likely a
      Prime Ministerial decision) on foreign investment in commercial activities in importation and
      distribution, to be effective in the first quarter of 2005. The decision will be very limited in scope
      in that it will only provide for foreign investors to establish joint ventures with Vietnamese
      counterparts in which the foreign investor may contribute up to but not more than 49% of legal
      capital (i.e. Vietnam's minimum commitments under the BTA). However, of note, the decision
      will apply to non-U.S. and U.S. investors without distinction. Which superior legislation this
      decision will be issued pursuant to is not yet clear.

5.9   Import Licensing:
      Vietnamese enterprises registered under the Law on Enterprises are entitled to import in
      accordance with the business line(s) prescribed in their business registration certificates. They
      are not required to apply for an import license, except where the imported goods are prescribed
      by the MoT as requiring a non-automatic import license.

      Import licensing procedures and regulations for FIEs are governed separately by the Law on
      Foreign Investment and its implementing regulations, and in detail in Circular 22-2000-TT-BTM
      of the Ministry of Trade dated 15 December 2000 (as amended 4 December 2001) on Export
      and Import Activities and Other Commercial Activities of Enterprises with Foreign Owned
      Capital. According to Circular 22, FIEs are only permitted to import the following: (1) goods for
      the purposes of adding to their fixed assets, including equipment, machinery, means of
      transportation, and materials for their initial investment, to expand their production, or to replace
      or renew technology; and (2) raw materials for production and business, subject to the approval
      of an import plan.




                                                                                                         27
     To address the implementation of import licensing procedures as required for Vietnam’s
     accession to the WTO and the implementation of commitments made under the BTA, the
     Government is currently considering a proposal from the MoT to liberalize import regulations
     relating to FIEs in Vietnam. The proposal will allow FIEs to import spare parts, components and
     raw materials for production without the MoT's approval, as allowed for domestic firms (as noted
     above, under the current regulations, the MoT must annually ratify an FIE’s import plans).
     Reportedly, if given the go-ahead, the FIEs can contact customs officials directly in order to
     complete procedures for importing these kinds of products. Reports indicate that import
     products subject to five-year tax exemptions, imports for fixed assets, and marketing products
     will be excluded from the new regulation.

     The proposed revision of the Commercial Law (see Section 5.8 above) will also address import
     licensing issues as provided in the WTO Agreement on Import Licensing Procedures. Fees
     associated with obtaining an import license, if any, (as per the Ordinance of Fees and Charges,
     see Section 10.12 on “General Fees & Charges”) are reportedly equivalent to the costs of
     services rendered.

5.10 Sanitary and Phytosanitary (SPS) Measures:
     Vietnam is currently working on the establishment of an SPS regime based on international
     standards, guidelines and recommendations. Its current regime is based on CODEX and
     FAO/WHO standards, the standards of regional or developed countries, or national standards.
     It has recently committed to the full implementation of the SPS Agreement upon accession.

     Plant Health
     The plant quarantine system in Vietnam is under the management of the Plant Protection
     Department (PPD), which has the overall responsibility to monitor the performance of plant
     quarantine tasks at the national level and to formulate plant quarantine policies and standards.
     There are 9 Regional Plant Quarantine Sub-departments (PQSD) and a Post Entry Quarantine
     Center located in different areas within Vietnam and responsible for inspection of cross-border
     plant commodities. These PQSDs maintain the operation of 50 Plant Quarantine Stations at sea
     ports, airports and along land borders with China, Lao PDR and Cambodia. The National Plant
     Quarantine Laboratory under PPD handles technical issues such as pest identification, PRA and
     quarantine treatment. Plant quarantine activities include inspecting plant commodities for import
     and export, issuing phytosanitary certificates for the export of commodities, supervising
     phytosanitary treatments of plant commodities either for import or export, carrying out domestic
     and post entry quarantine procedures, and conducting research and development activities with
     regard to plant quarantine.

     Vietnam is currently undergoing a review of its regulations relating to plant quarantine. To
     supplement existing national standards, PPD has adopted international standards such as the
     Glossary of Phytosanitary Terms, Plant Quarantine Principles related to International Trade, and
     Guidelines for Pest Risk Analysis.

     SPS measures for plant protection were first written in February 1993 but are now regulated
     under Ordinance 36-2001-PL-UBTVQH10 on Plant Protection and Quarantine dated 25 July
     2001 (which replaced the 1993 Ordinance). Revised detailed regulations on plant protection
     and quarantine and management of plant protection medicines were issued under Decree 58-
     2002-ND-CP of the Government dated 3 June 2002 (which replaced the 1993 Regulations).
     Administrative offences in plant protection and quarantine are now governed by Decree 26-
     2003-ND-CP of the Government dated 19 March 2003 (which replaced the 1996 Decree) and
     Circular 71-2003-TT-BNN of the Ministry of Agriculture and Rural Development dated 25 June
     2003 (which replaced the 1997 Circular).

     Vietnam is also in the process of reviewing and amending its subsidiary legislation (such as
     Decision 118-2000-QD-BNN of the Ministry of Agriculture and Rural Development dated 20
     November 2000 on Procedures for Plant Quarantine Inspection of Regulated Articles and
     Recording; Decree 07-CP of the Government dated 5 February 1996 on Plant Seed
     Management, Decree 78-CP of the Government dated 29 November 1996 on Dealing with
     Administrative Offences in the Field of Plant Protection and Quarantine) to ensure consistency
     with the amended Ordinance and the new implementing regulations. The review is also



                                                                                                   28
focusing on Vietnam’s WTO Accession, in particular legislation on phytosanitary measures in
the light of the WTO SPS Agreement, the IPPC and other international standards to harmonize
phytosanitary measures. To date, the Ministry of Agriculture and Rural Development has issued
Decision 84-2002-QD-BNN dated 24 September 2002 on State Management of Fumigation of
Regulated Articles and Decision 89-2002-QD-BNN dated 8 October 2002 on Importation of
Plant Varieties and Beneficial Organisms.

Animal Health
Animal inspection policies and procedures are now governed by the new Ordinance 18-2004-
PL-UBTVQH11 on Veterinary Medicine (Amended) dated 29 April 2004, effective as of 1
October 2004. Ordinance 18 introduced improved inspection procedures for veterinary hygiene
and food safety and for veterinary medicines and vaccines. Ordinance 18 replaced the
Ordinance on Veterinary Medicine dated 15 February 1993. A new implementing decree to
replace Decree 93-1993-ND-CP of the Government dated 27 November 1993 is due to be
issued in 2005.

Food Safety
Issues relating to food safety are regulated by the Ordinance on Food Safety and Hygiene,
passed by the National Assembly on 26 July 2003, effective 1 November 2003. The Ordinance
is aimed at ensuring the safety and hygiene of foodstuffs during the process of their
manufacture and trading and the prevention and remedy of poisonous foodstuffs and contagion
via foodstuffs. All Vietnamese and foreign organizations and individuals must satisfy the
business conditions prescribed in the Ordinance for manufacturing and selling fresh and raw
foodstuffs, processing foodstuffs, storing and transporting foodstuffs, and importing and
exporting foodstuffs in Vietnam. For "high-risk" foodstuffs, State certification of satisfaction of
business conditions is required. The Ordinance also regulates the proclamation of food
standards and the advertising and labeling of foodstuffs.

Decree 163-2004-ND-CP of the Government dated 7 September 2004 (effective 29 September
2004) provides detailed regulations for implementation of the Ordinance. Decree 163
specifically identifies and regulates in detail ten food products vulnerable to breaches of food
safety and hygiene standards. Decree 163 includes detailed provisions on the conditions for
manufacture and trading of foodstuffs and import of foodstuffs, as well as the State
management responsibilities of ministries, branches and people’s committees for the
implementation of foodstuff hygiene, safety standards and inspection of safety and hygiene
practices, as well as the prevention of poisonous foodstuffs and contagions. Decree 163 also
details the authority and procedures for the issuance of certificates of satisfaction for foodstuffs
hygiene and safety. Of interest, foodstuffs may not be imported into Vietnam if the remaining
period of use is less than 66.6% of the period of use stamped on the label. Unprocessed
foodstuffs derived from animals and vegetables must be granted a certificate of quarantine by
competent State agencies. All materials and chemicals used in processing of foodstuff,
packaging directly touching foodstuffs, imported additive foodstuffs and imported foodstuffs must
be inspected. Foodstuffs which are not subject to inspection include: foodstuffs accompanying
people for personal use; foodstuffs which are gifts or diplomatic/consular bags, foodstuffs re-
exported after being temporarily imported, foodstuffs in transit, and foodstuffs being kept in
bonded warehouses. All Vietnamese and foreign organizations and individuals manufacturing,
importing and/or trading foodstuffs within the territory of Vietnam must comply with the
Ordinance and Decree 163.

Thus far, Vietnam has adopted about 60% of CODEX standards relating to food and foodstuff
and is planning to adopt all remaining CODEX standards. Vietnam is also currently drafting a
decree on safety management of Genetically Modified Organisms (GMO) Labeling designed to
formulate compulsory standards for products using GMO technology based on specific evidence
or labeling as "products using GMO technology."

Enquiry Point / Notification Point
The Ministry of Agriculture and Rural Development currently serves as a general enquiry point
for information on sanitary and phytosanitary requirements. Responsibility for sanitary and
phytosanitary control, plant and animal quarantine, health quarantine and fisheries inspection is
further assigned to various Ministries and agencies.



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     To address WTO obligations with regard to the establishment of a single enquiry point, Vietnam
     is currently focusing on capacity building in preparation for a fully operational enquiry and
     notification point upon accession. This enquiry and notification point will be established within
     the Ministry of Agriculture and Development and will be responsible for notice and comment
     procedures as required by Annex B of the WTO Agreement on Sanitary and Phytosanitary
     Measures.

     In the interim, a provisional focal point has been established at:

            International Cooperation Department (ICD), Ministry of Agriculture and Rural
            Development (MARD)
            2 Ngoc Ha, Ba Dinh,
            Hanoi, Viet Nam
            Tel: 84-4-845 9672
            Fax: 84-4-733 0752
             E-mail : htqtmard@fpt.vn

     Currently, SPS related legal documents are accessible through: http://www.mard.gov.vn and
     http://www.ppd.gov.vn

5.11 Standards and Technical Barriers to Trade (TBT):
     Under Decision 346-QD-BKHCN of the Ministry of Science & Technology, Vietnam is working to
     ensure that all new technical regulations, standards, and conformity assessment procedures are
     in full compliance with the international standards. It has committed to the full implementation of
     the WTO TBT Agreement upon accession and without a transition period. The main Ministries
     involved in standardization and quality requirements are the Ministries of Science & Technology;
     Industry; Fisheries; Health; Trade; Agriculture and Rural Development; Culture & information;
     and Transport.

     The Directorate for Standards & Quality (“STAMEQ”) under the Ministry of Science &
     Technology ("MoST"), is generally responsible for advising the Government on issues relating to
     standards, measurements and quality and its tasks include: drafting rules and regulations;
     supervising and controlling implementation of rules and regulations; formulating national
     standards; performing quality system certification, product certification and accreditation of
     testing and calibration laboratories, quality inspection bodies and quality certification bodies;
     implementing State supervision of quality requirements related to goods; organizing and guiding
     activities of verification, calibration, and certification of measuring instruments and patterns;
     participating in international co-operation.

     On 24 December 1999, the National Assembly passed Ordinance 18-1999-PL-UBTVQH10 on
     Quality of Goods to replace the Ordinance on Quality of Goods dated 27 December 1990.
     Effective as of 1 July 2000, Ordinance 18 governs (i) promulgation and application of goods
     quality standards, (ii) goods quality certification, (iii) recognition of quality control systems, (iv)
     inspection of goods quality. Under Ordinance 18, three types of quality standards are applicable
     in Vietnam, including Vietnamese standards, Industry standards and Basic standards.
     Ordinance 18 also provides for the voluntary application of foreign and international standards
     which are consistent with Vietnamese law and international treaties to which Vietnam is a
     signatory or party. Quality certification under Ordinance 18 includes goods quality certification
     and certification of quality control system in compliance with Vietnamese standards. Ordinance
     18 also encourages all producers and traders to implement quality control systems and to seek
     goods quality certification and certification of quality control systems, on a voluntary basis.
     Goods producers and traders are responsible for the quality of their goods, must publish goods
     quality standards and must ensure that such standards are met by way of internal goods quality
     inspections, and ensure the truthfulness and accuracy of any information and advertising
     provided by them with respect to the quality of their goods. The goods quality should be clearly
     recorded on the labels of goods, with the particular characteristics and use of the goods. The
     condition for use of goods, their expiry date, any warranty details and goods user instructions for
     customers should be also published. The MoST in coordination with the MoT and other
     ministries and Government bodies is responsible for unified state management of goods quality.



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Product Inspection
Imported and exported commodities subject to mandatory quality inspection are listed on
STAMEQ’s website (http://www.tcvn.gov.vn). The most recent list contained in Decision 117-
2000-QD-KHCNMT dated 26 January 2000 is currently undergoing revision. Mandatory
registration of product quality was abolished in early 2001. In addition, inspection procedures
for imported and exported goods have been simplified by moving towards a system of type
testing. The requirement to inspect each individual consignment can be waived for companies
with a proven track record of quality. This principle of simplified inspection procedures
applicable to imported and exported goods is embodied Decision 1091-1999-QD-BKHCNMT
dated 22 June 1999. The detailed conditions under which simplified inspection procedures can
be applied are specified in regulations issued by STAMEQ and line management Ministries for
each type of goods.

To implement Ordinance 18, the Government issued Decree 179-2004-ND-CP dated 21
October 2004 providing regulations on State management of quality of goods and services
during production and circulation in the domestic market as well as export and import. Decree
179 provides that the State will focus management on improving the quality of goods and on
ensuring that they comply with international standards. Goods under State scrutiny include food
products and goods related to safety, hygiene, health and environment. The list of goods and
services subject to quality standards will be considered, drafted and issued on an annual basis
by the MoST in partnership with other relevant ministries. Various goods will be subject to
compulsory certification of quality and every lot must be inspected and certified prior to
circulation. For other goods, after they have been certified as in conformity with Vietnamese
quality standards, they will be exempt from inspection, but remain subject to random inspection
in cases where offences are indicated (based on inspection results, State authorities will decide
whether to revoke or continue the inspection exemption for such goods). Decree 179 provides
for certification in Vietnam and recognition of overseas certification. Of note, Decree 179
encourages and offers favourable conditions to regional and international organizations to join in
certification and recognition activities in Vietnam as well as to join their Vietnamese counterparts
in mutually recognizing standards.           In addition, Decree 179 deals with offences by
manufacturers and traders and by officers of State management bodies.

Product Safety
Safety certification is currently being developed, including type testing and post-certification
surveillance in the market or at the production site. Fees for testing, verification and related
administrative formalities have yet to be determined, but the MoF would, in principle, calculate
the fees on the basis of the costs of the services rendered.

Decision 2424-2000-QD-BKHCNMT dated 12 December 2000 and Decision 2425-2000-QD-
BKHCNMT dated 12 December 2000 currently govern procedures related to safety certification.
Decision 2425 introduced the provisional system of declaration of goods quality standards as of
1 January 2001. Decision 2424 introduced the provisional system of declaration of compliance
with declared standards after self-evaluation (following testing) or third party certification.

Recognition
Vietnam currently allows for many forms of acceptance of quality testing results or quality
certification by foreign organizations, including:
-      Bilateral and multilateral mutual recognition agreements between Vietnam and exporting
       countries;
-      Unilateral acceptance by Vietnam of foreign laboratories or certifying organizations;
-      Import quality inspection (without doubt or complaint).

TBT Enquiry Point / Notification Point
On 25 March 2003, Vietnam's TBT Enquiry and Notification Point was formally established
(Decision 356-QD-BKHCN of the Ministry of Science & Technology) in the offices of the
STAMEQ under the Ministry of Science & Technology. The TBT Enquiry and Notification Point
is the national desk that receives enquiries about and gives notification of technical regulations,
standards and conformity assessment procedures concerning TBT under the guidance of the
WTO.



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            Viet Nam WTO/TBT Office
            Address: 70 Tran Hung Dao St., Hanoi, Viet Nam
            Tel: 84 4 942 6087
            Fax: 84 4 942 6087
            E-mail: vptbt@fpt.vn
            Website: http://www.tcvn.gov.vn/wtovn

     This Enquiry and Notification Point is not expected to be fully operational until the end of 2005,
     or upon Vietnam’s accession to the WTO.

     For the purpose of commentary on draft standards, STAMEQ has since 2002 posted its annual
     standards preparation program on the Internet. This program lists the names of standards
     scheduled to be issued, its basis of preparation standard, the names of committees and sub-
     committees involved, and scheduled times of issuance. Interested parties may ask for draft
     standards for consideration and comment if necessary.

     Under Decree 29-2004-ND-CP of the Government dated 16 January 2004 which revised the
     functions, duties, powers and organizational structure of the Ministry of Trade, the Department
     of Goods Quality and Measurement Management of the Ministry of Trade has been subsumed
     into the Ministry of Science and Technology's STAMEQ as of 14 February 2004. Under
     Decision 140-2004-QD-TTg of the Government dated 5 August 2004, STAMEQ now has
     responsibility for administration of standards, measurement and quality of commodities and
     products.

5.12 Export Subsidies:
     Government programs are currently made available to exporters in the form of direct tax
     reductions or exemptions; tax deductions on interest rates incurred from bank loans; direct
     financial support (particularly to first-time exporters) for exports to new markets, or goods
     subjects to major price fluctuations; and export bonuses (as stipulated in Decision 02-2002-QD-
     BTM dated 2 January 2002 promulgating a regime of export awards). An Export Support Fund
     is also available to assist, encourage and promote exportation. Export-import enterprises,
     manufacturing enterprises exporting their own goods directly, and other enterprises as decided
     by the Prime Minister are eligible. Export support is also available in the form of support to
     cover losses for enterprises exporting rice, pork, coffee, canned vegetables, canned fruit, and
     ceramics as applied in accordance with the MoF.

     Recently, the Prime Minister approved a strategy to develop the export market in 2004-05.
     According to Decision 266-2003-QD-TTg dated 17 December 2003, to raise the competitiveness
     of exports, various policies on finance, credit, investment, fees and charges are to be amended
     or expanded, with the focus on long-term credit for investment to raise production capacity,
     especially for industries turning out raw materials for the production of exports. In addition,
     commercial credit guarantees are to be expanded with attention being paid to investment
     projects on new technologies for exports, and to export contracts with high efficiency; credit will
     also be provided gradually to those importing large amounts of Vietnamese goods regularly for
     the regional market. According to Decision 266, items entitled to export preferences shall be
     reduced, along with rewards for focus on highly competitive key commodity lines and those
     using local raw materials and supplies in large volumes. Direct financial support is also to be
     limited and replaced with support for suppliers of raw materials, and technological, scientific and
     technical solutions for improving production of exports.

     For more information on export incentives in Export-Processing Zones and Hi-Tech Zones,
     please see Section 8.13.

5.13 Domestic Support:
     Domestic support programs are available in the form of import duty reductions, investment
     incentives, development assistance, assistance channelled through a Development Assistance
     Fund, and investment assistance.




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     Domestic and FIEs producing or assembling mechanical, electric or electronic products and/or
     parts of these products are eligible for import duty reductions contingent upon the use of local
     content.

     Investment incentives are provided in the form of exemption or reduction of land rental and land
     use tax, and extended corporate income tax exemption and reduction, preferential tax rates, and
     exemption of import duties. Eligible applicants include labor-intensive enterprises, domestic and
     FIEs employing a large number of female employees, export oriented FIEs, domestic
     enterprises producing goods for exports, foreign invested and domestic firms operating in
     certain business fields and sectors of national development priority, and enterprises operating in
     socio-economic disadvantaged areas. Decree 24-2000-ND-CP of the Government dated 31
     July 2000 (as amended by Decree 27-2003-ND-CP dated 19 March 2003) lists investment areas
     in which FIEs are entitled to incentives such as preferential corporate income tax rates,
     corporate income tax exemptions or reductions, import duty exemption and preferential
     remittance tax rates (this last is no longer applicable, see 8.5). Domestic firms operating in
     prescribed areas can benefit from exemption or reduction in land use payment, land rental, and
     land use tax; preferential corporate income tax rates and exemptions and reductions; exemption
     or reduction of the corporate income tax payable on the income attributable to expansion and/or
     enhancement investments; exemption from supplementary corporate income tax and personal
     income tax; and import duty exemption on equipment and machinery constituting an enterprise's
     fixed assets.

     Support is also provided to enterprises implementing projects to promote the development of
     priority industrial products. These include enterprises producing the following products including
     sea-going vessels of 11,500 tonnes, internal combustion engines under 30 horsepower, and
     color TVs. Under Decision 37 and Circular 02-2000-TT-BCN of the Ministry of Industry dated 31
     May 2000, assistance provided is in the form of import duty exemptions, preferential corporate
     income tax, preferential access to the State's development investment credits, and reduction of
     land rentals. Support was extended to enterprises producing computers under Decision 19-
     2001-QD-TTg and Circular 04-2002-TT-BCN of the Ministry of Industry dated 6 June 2001.
     However, Circular 86-2000-TT-BTC dated 16 August 2000 provides for the State's programs
     providing tax assistance to end on 31 December 2003.

     A Development Assistance Fund was established in 1999 (pursuant to Decree 50-1999-ND-CP
     of the Government dated 8 July 1999 and Decision 231-1999-QD-TTg of the Government dated
     17 December 1999) to assist in the implementation of important economic projects and the
     development of disadvantaged areas. Benefits granted include preferential investment credits,
     post-investment interest-rate support, and investment credit guarantees. Program assistance is
     provided in the form of preferential credits, corporate income tax exemption or reduction,
     exemption from export duties, and import duty exemption on components, accessories,
     materials and equipment. Enterprises manufacturing bicycles, electric fans, small-size power
     engines, and maritime ships facing difficulties in raising capital to upgrade the technology used
     in production are eligible.

     Newly-established or expanding Vietnamese enterprises and those moving to mountainous,
     island and other disadvantaged areas are entitled to exemption and reduction in corporate
     income tax. Corporate income tax holidays are also granted to domestic enterprises engaged in
     scientific research; technical services related to agriculture; vocational training for disabled
     persons, ethnic minority people, and children from families in difficulties; production, training or
     services to households earning less than the minimum salary of State employees; and
     enterprises employing disabled persons.

5.14 Trade Remedies:
     The trilogy of Ordinance 42 of May 2002, Ordinance 20 of April 2004 and Ordinance 22 of
     August 2004 represent a new limb of Vietnam's developing legal framework to regulate imports
     in anticipation of the opening of its markets under the terms of the BTA and its WTO accession.
     An Ordinance on Countervailing Measures was expected to be added to the trilogy, but is not
     scheduled to be passed by the Standing Committee of the National Assembly in 2005.




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Safeguard Measures
Regulations and procedures on trade remedies through safeguards are governed by Ordinance
42-2002-PL-UBTVQH10 on Self-Protection in Import of Foreign Goods into Vietnam dated 25
May 2002 and its implementing Decree 150-2003-ND-CP of the Government dated 8 December
2003 Providing Detailed Guidelines for Ordinance 42-2002-PL-UBTVQH10 on Self-Protection in
Import of Foreign Goods into Vietnam.

Effective as of 1 September 2002, Ordinance 42 allows Vietnam to take protective measures in
order to safeguard its domestic manufacturing industries against serious losses in
circumstances where there is a sudden increase in import of goods "beyond the levels", which is
defined as "the import of goods in a volume, quantity or at a value which increases in an
absolute or relative way in comparison to the volume, quantity or cost of equivalent goods or of
directly competitive goods which are manufactured domestically" (article 4.1).

The MoT may investigate the need for application of self-protective measures on its own
initiative or upon request by any domestic manufacturer which manufactures at least 25% of the
volume of similar or directly competing domestic goods. A wide consultative process is provided
for prior to any decision by the MoT on application of self-protective measures. Pending any
such decision, the MoT may impose the requirement for import permits for goods under
investigation (purely for statistical purposes, not to limit volumes of goods) for a maximum 200
days. The matters to be investigated include: changes in market sales, changes in volumes
being manufactured, employees’ productivity, coefficients of utilization of production capacity,
profit and loss figures, employment figures for the industry which manufactures the goods the
same as the import goods, and ratio of import goods over similar or directly competing goods
being sold on the domestic market. The time-limit for investigations is 6 months (may be
extended for 2 months in unspecified cases of necessity) and any decision must be publicized.
The duration of application of self-protective measures is limited to 4 years, except in specified
cases where application may be extended for another 6 months. Re-application of self-
protective measures is subject to conditions. A complaints procedure is provided for.
Compensation is payable for any loss resulting from application of unwarranted self-protective
measures.

Decree 150 provides for six defensive measures to deal with the excessive import of goods into
Vietnam that cause serious losses to domestic manufacturers: i) increasing the level of import
duty compared to the current level; ii) imposing import quotas; iii) imposing tariff rate quotas; iv)
applying absolute taxes; v) import licensing to control the volume of imported goods; and vi)
imposing surcharges on the imported goods, in addition to the general and undefined "other
measures". Decree 150 prescribes in detail the procedures for investigations into application of
self-protective measures and for the actual application of such measures (including public
notification and consultation requirements). Decree 150 requires the Ministry of Trade to keep
confidential all information provided by State bodies, organizations and individuals relating to
investigations. Specific provision is made for application of self-protective measures to
underdeveloped countries.

Anti-Dumping Measures
On 29 April 2004, the Standing Committee of Vietnam’s National Assembly ratified Ordinance
20-2004-PL-UBTVQH11 Against Dumping of Imported Goods in Vietnam. Aimed at limiting the
adverse impact on domestic Vietnamese manufacturing industries caused by dumping of
imported goods in Vietnam, Ordinance 20 prescribes a range of measures which may be
applied to prevent dumping and the investigations which must be undertaken to apply such
measures. Goods imported into Vietnam will be deemed to be dumped when they are sold at a
price lower than the normal market value of such goods in the exporting country. Ordinance 20
prescribes the method of determining "normal market value".

Anti-dumping measures will only be applied after an investigation by the MoT concludes that
imported goods have been dumped at a significant dumping margin, that the volume and value
of dumped is not insignificant, and that the importation and dumping of such goods directly
causes, or threatens to cause, significant loss to a domestic manufacturing industry. The
dumping margin will be significant where the difference between the normal market price of
imported goods and their export cost at the date of import into Vietnam exceeds 2%. The



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volume and value of dumped goods from any one country will be insignificant if it is less than 3%
of the total volume and value of similar goods imported into Vietnam, unless the total volume
and value of goods imported from a number of countries exceeds 7% of the total volume and
value of similar goods imported into Vietnam. "Significant loss to a domestic manufacturing
industry" is defined as a significant reduction in the volume and level of domestic consumption;
in manufacturing profits; in the developmental speed of manufacturing, job creation and
investment and in other indicators of a domestic manufacturing industry; or means a situation
leading to difficulty for the formation of a domestic manufacturing industry. "Threat to cause a
significant loss to a domestic manufacturing industry" is defined as a certain, clear and proven
capacity for significant loss to a domestic manufacturing industry.

The MoT may conduct an investigation on its own initiative or at the request of the
representative of a domestic manufacturing industry (provided prescribed conditions and
procedures are satisfied). Any decision to conduct an investigation must be notified to the
exporter and the administrative authorities of the country or territory exporting the goods which
are subject to investigation, as well as any other parties concerned. The duration of an
investigation may not exceed 12 months (in especially complex cases, this may be extended by
up to 6 months). During an investigation, based on a preliminary conclusion of dumping, the
MoT may apply for up to 4 months interim anti-dumping measures, being interim anti-dumping
duty or payment of a deposit or pledge of collateral to ensure payment of interim duty.
Alternatively, the MoT may accept an undertaking from the manufacturer or exporter of goods
under investigation to adjust the price of the goods imported into Vietnam or to limit the quantity
of imported goods dumped in Vietnam. If such undertaking resolves the loss, or threat of loss,
to a domestic manufacturing industry, the MoT will cease its investigation. If no undertaking is
given, upon a final conclusion of dumping, anti-dumping duty (being an extra import duty, not
exceeding the specific dumping margin) will be applied for up to 5 years (extendable where a
check by the MoT concludes that anti-dumping duty should continue to apply). Ordinance 20
provides for retrospective application of anti-dumping duty.

Ordinance 20 became effective as of 1 October 2004. For more details please refer to our
website at http://www.usvtc.org/Documents/Misc/Legal%20Docs%20by%20Phillips%20Fox.htm

Anti-Subsidy Measures
On 20 August 2004, the Standing Committee of Vietnam’s National Assembly passed Ordinance
22-2004--PL-UBTVQH11 on Measures Against Subsidized Goods Imported into Vietnam.
Ordinance 22 creates a legal framework for application of measures to protect domestic
manufacturing industries when importation of subsidized foreign goods into Vietnam causes or
threatens to cause substantial loss to a domestic manufacturing industry. Ordinance 22
regulates the following forms of subsidy (defined as "financial assistance by a government or
governmental body provided to an organization or individual when manufacturing and exporting
goods into Vietnam, which subsidy carries a benefit for such organization or individual):
 -      a government or a governmental body transfers capital to an organization or individual in
        the form of issuance of capital, transfer of shares, provision of a loan with preferential
        interest rate, or provision of a guarantee for a loan with an interest rate less than it would
        be for a loan not so guaranteed;
 -      a government or a governmental body does not collect items which are collectible from
        the organization or individual under an obligation to pay such items;
 -      a government or a governmental body provides goods or services other than common
        infrastructure or purchases goods or services at a higher than market price and on-sells
        them to an organization or individual at a lower than market price;
 -      a government or a governmental body contributes money to a subsidy regime, or
        assigns to a private organization for implementation or orders a private organization to
        implement one or more of the above forms of subsidy;
 -      other forms of subsidy, which shall be determined in a way which is fair, reasonable and
        not contrary to international practice.

Ordinance 22 provides for 2 anti-subsidy measures: (i) anti-subsidy duty and (ii) an undertaking
to be given to the competent Vietnamese body by the subsidized organization or individual or by
the government of the country of manufacture/export that subsidization will be voluntarily
terminated or reduced, that export price will be voluntarily adjusted or that other appropriate



                                                                                                   35
      measures will be voluntarily applied. The MoT may investigate the need for application of anti-
      subsidy measures on its own initiative or upon request by the representative of domestic
      manufacturers which manufacture at least 25% of the volume of similar or directly competing
      domestic goods. Ordinance 22 became effective on 1 January 2005.


6.    Intellectual Property Rights
6.1   Intellectual Property Rights Regime:

      International IP Conventions
      Vietnam is Party to the Paris Convention for the Protection of Industrial Property and the Madrid
      Agreement on International Registration of Marks, became a member of the Convention
      Establishing the World Intellectual Property Organization in 1976, joined the Patent Cooperation
      Treaty in 1993. The Government is now preparing for its accession to the Geneva Convention
      for the Protection of Producers of Phonograms Against Unauthorized Duplication of their
      Phonograms, the Brussels Convention Relating to the Distribution of Programme-Carrying
      Signals Transmitted by Satellite, and the International Convention for the Protection of Plant
      Varieties (UPOV). Vietnam is also considering accession to the Rome Convention for the
      Protection of Artists, Performers, Phonogram Producers and Broadcasting Agencies.

      On 7 June 2004, Vietnam officially signed on to become a member of the Berne Convention on
      Copyright Protection for Literary and Artistic Works (Official Letter 163-BQTGVHNT-QLBQ of
      the Ministry of Culture and Information dated 16 July 2004 on Accession to the Berne
      Convention for Protection of Literary and Artistic Works in Vietnam). Provisions of the Berne
      Convention became effective in Vietnam beginning in October 2004. The Berne Convention is
      Vietnam’s first multilateral agreement on copyright. Under the Berne Convention, Vietnam must
      provide copyright protection for literary and artistic works from 155 other member nations, and
      will have reciprocal protection for Vietnamese works in those countries.

      Vietnam has bilateral agreements on the protection of intellectual property with the EU,
      Switzerland and the U.S. Through the BTA, Vietnam has committed to most obligations covered
      by the WTO TRIPS Agreement.

      Legal Framework
      Intellectual property protection and civil violations are currently governed by provisions of
      Vietnam’s Civil Code, Decree 76-CP on Implementation of Certain Provisions Concerning
      Copyright of the Civil Code dated 29 December 1996, and Decree 63-CP of the Government
      dated 24 October 1996 (as amended by Decree 06-2001-ND-CP of the Government dated 1
      February 2001). Vietnam’s Criminal Code covers criminal violations of intellectual property
      rights. To address its international obligations, the Government is currently assessing its
      intellectual property regime as it relates to the BTA and its WTO accession.

      In addition to action plans for Vietnam’s accession to and implementation of various intellectual
      property conventions, the Government is also considering a new consolidated Law on
      Intellectual Property (separate from the Civil Code that currently governs intellectual property
      protection, violations and remedies) and the establishment of one authority for the uniform State
      administration of the intellectual property regulatory regime (Official Letter 147-VPCP of the
      Office of Government dated 9 January 2003).

      By Official Letter 3895-2004-VPCP-KG dated 3 August 2004, the Government has instructed
      the MoST and MoJ to prepare drafts of a proposed Law on Intellectual Property and proposed
      Law on Technology Transfer. The Law on Intellectual Property is scheduled to be considered at
      the National Assembly’s 7th Session in May 2005 and passed at its 8th Session in October 2005.
      The Law on Technology Transfer is scheduled to be drafted in 2005 and expected to be passed
      in late 2006.

      Amendments to the regime for administrative penalties for IP offences have been drafted and
      are currently being considered by the Government (see 6.5 below for more detail).




                                                                                                    36
      While Vietnam is creating a respectable body of substantive law for protecting IP rights, the
      specific procedural rules for enforcing such rights lag behind. For example, relevant laws set
      out only general provisions on the basis of which injunctive and other forms of pre-trial relief can
      be granted. Vietnamese law also lacks provisions on how damages and other remedies in
      actions for infringements should be calculated.

6.2   MFN and National Treatment:
      Ordinance 41-2002-PL-UBTVQH10 on MFN and National Treatment dated 25 May 2002
      provides for MFN and national treatment applicable to foreign organizations or individuals
      holding IP rights, including rights of authors (copyright) & relevant rights; industrial property
      rights (including patents, utility solutions, industrial designs, trademarks, geographical
      instructions, appellations of origin of goods, trade names, trade secrets, layout designs
      (topographics) of integrated circuit, and plant species); and “rights to oppose competition
      deemed unfair by the law on IP rights, and other IP rights.” Ordinance 41 extends no less
      favorable treatment than that extended to domestic organizations and individuals on the
      acquisition, protection, enjoyment and enforcement of all intellectual property rights and any
      benefits derived thereof from organizations and individuals of the country.

6.3   Copyright:
      Copyright in literary, artistic, scientific and “other” works is currently protected under Article 747
      of the Civil Code of Vietnam dated 28 October 1995. Authorship is currently protected for the
      lifetime of the author and 50 years after death (in case of co-authored works, 50 years after the
      death of the last surviving author). Cinematographic works, radio, television, video, sound
      recordings and works published posthumously are protected for a period of 50 years from the
      date of first publication. Works of foreign individuals and organizations are protected under
      Article 836 of the Civil Code and Decree 60-CP of the Government dated 6 June 1997, including
      (i) works created and displayed in a certain material form in Vietnam; (ii) works made known
      publicly or disseminated in Vietnam for the first time; and (iii) works protected in Vietnam under
      international treaties signed or adopted by Vietnam.

      Based on the Berne Convention on Copyright Protection for Literary and Artistic Works which
      Vietnam has recently signed, the Ministry of Culture and Information has issued an official
      document tightening copyright regulations on musical and theatrical works from 1 October 2004.
      The Official Document places the responsibility on all organizers, like radio and TV stations,
      publishing houses and professional organizers, for ensuring that the use of any foreign musical
      and theatrical works comply with the copyright laws. All foreign musical and theatrical works,
      except classical music and folk songs and arts, must have permission in writing from their
      authors, owners, or legal representatives before being performed.

      Registration
      Copyright registration is regulated under Article 762 of the Civil Code and Articles 23-26 of the
      Decree 76-CP of the Government dated 29 December 1996. Applications and supporting
      documents are filed by the author(s) or the copyright owner(s) of a work at the Copyright Office
      of Vietnam. Copyright certificates are granted within 10 days from the date of receipt of
      application.

      Circular 04-2003-TTLT-BVHTT-BXD dated 24 January 2003 providing guidelines on
      architectural copyrights prescribes the definition of architectural works and copyright registration
      procedures. Circular 04 came into effect as of 10 February 2003.

      Royalties
      Decree 61-2002-ND-CP of the Government dated 11 June 2002 introduced a new regime for
      copyright royalties, pursuant to the copyright provisions of the Civil Code and Decree 76-CP of
      the Government dated 29 November 1996. Effective as of 26 June 2002, Decree 61 prescribes
      the royalty regime for authors and copyright owners of written works, lectures and speeches,
      theatrical works and other forms of artistic performance, cinematographic and video works, radio
      broadcasting and television broadcasting works, press works, musical works, architectural
      works, sculptural works and applied fine art, photographic works, scientific projects, architecture
      or scientific projects, translated, adapted, and rewritten, transformed, compiled and annotated
      works, books of selected works and anthologies; and computer software. Decree 61 prescribes



                                                                                                         37
      a royalty framework applicable to each category of works and the methods for calculating royalty
      payments.

6.4   Industrial Property:
      The National Office for Intellectual Property (“NOIP”) under the MoST has jurisdiction over
      industrial property under Decree 54-2003-ND-CP of the Government dated 19 May 2003 on
      Functions, Duties, Powers and Organizational Structure of the Ministry of Science & Technology
      (as amended by Decree 28-2004-ND-CP of the Government dated 16 January 2004). Under its
      new charter issued with Decision 14-2004-QD-BKHCN of the Ministry of Science and
      Technology dated 25 June 2004, the NOIP has responsibility for procedures for establishment,
      amendment and transfer of IP rights as well as dealing with IP disputes.

      Patents
      Patents are currently protected under Article 782 of the Civil Code and Decree 63 (as amended
      by Decree 06). Article 782 of the Civil Code states that patent applications are subject to
      examination as to form and substance, and time limits for such procedures range from 3 to 18
      months. Subject matter excluded from protection falls within three main categories: (1) those
      not considered as inventions, including scientific principles, theories and mathematical methods;
      aesthetic creations; economic management methods and systems; educational, teaching, training
      methods and systems; computer programs; designs and planning schemes for construction works;
      projects for regional development and planning; (2) subject matter which should be protected
      under other forms of protection other than patents, e.g. layout design of integrated circuits, or plant
      and animal varieties; and (3) those not industrially applicable such as methods for the prevention,
      diagnosis, and treatment of human or animal diseases, essentially biological processes for the
      production of plants or animals other than non-biological and microbiological processes.

      Patent owners have the exclusive right to use, transfer, and license rights to other persons.
      They also have the right to demand that other persons stop infringements and seek
      compensation for damages caused by acts of infringement. The term of protection is 20 years
      from the official filing date.

      Compulsory Licensing
      According to the Civil Code, the rights to a patent (invention) can be restricted when provisions
      concerning prior user rights (Article 801) or compulsory licensing (Article 802) are applied.
      Conditions and procedures for granting compulsory licensing are prescribed in Decree 63 (as
      amended by Decree 06).

      The grantee of a compulsory license to an invention is required to pay royalties to the owner.
      Compulsory licences can only be granted upon expiry of a 4 year period after the filing of an
      application for a certificate of protection or 3 years after such certificate has been issued. The
      patent owner is entitled to request the termination of the use of a compulsory licence if the
      circumstances which led to it have ceased or are unlikely to recur, provided such termination
      does not prejudice the grantee of the compulsory licence.

      The MoST is responsible for granting and suspending compulsory licences. The MoST notifies
      the patent owner within 15 days of a request for a compulsory licence, and the owner then has
      30 days to comment. The MoST can request the parties to renegotiate with a view to agreeing
      to a voluntary contractual licence, but if no agreement is reached, the MoST has 3 months to
      issue a decision. The decision to grant a compulsory licence has to be published in the Official
      Gazette on Industrial Property within 1 month from the date of issuance of the licence. The right
      holder has 1 month to comply with the conditions in the decision. The patent owner and the
      grantee can appeal against the decision to the Minister of Science & Technology or, in last
      instance, to the Prime Minister or can initiate an administrative court case.

      Trademarks
      Vietnam's Civil Code, Decree 63 (as amended by Decree 06), and Circular 3055-TT-SHCN of
      the Ministry of Science, Technology & Environment dated 31 December 1996 provide protection
      for trademarks on the basis of registration. Registration of trademarks is carried out with the
      NOIP. Vietnam is a "first-to-file" jurisdiction.




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Trademark protection is available for service marks, collective trademarks, affiliated trademarks
and now also well-known trademarks (a trademark which has been continuously used for
prestigious goods so that such trademark has become widely known).

The provisions on industrial designs and on inventions and utility solutions in Circular 3055 have
been repealed (see below). However, the provisions of Circular 3055 on transfer of industrial
property rights and trademarks remain effective.

Geographical Indications
Geographical indications are protected under the Civil Code and Decree 54-2000-ND-CP of the
Government dated 3 October 2000 on Protection of Industrial Property Rights With Respect to
Trade Secrets, Geographical Indications, Trade Names and Protection Against Unfair
Competition. Decree 54 provides for automatic protection of industrial property rights in
geographical indications without registration if all prescribed conditions are fully satisfied.

Appellations of origin are protected under the Civil Code, Decree 63 (as amended by Decree
06) and Circular 3055. Registration is required for protection and the term of protection is
indefinite.

Registration of a trademark identical or confusingly similar to protected geographical indications,
including appellations of origin, is prohibited.

Industrial Designs
Industrial designs are protected under Article 784 of the Civil Code, Decree 63 (as amended by
Decree 06), and now Circular 29-2003-TT-BKHCN of the Ministry of Science & Technology
dated 5 November 2003 Providing Guidelines for Implementation of Procedures for Protection of
Industrial Property Rights with respect to Industrial Designs (which repealed the industrial
design provisions of Circular 3055 as of 27 November 2003).

Circular 29 provides guidelines on: content of and procedures for submission of an application
for a certificate of protection of industrial property rights with respect to industrial designs;
procedures for issuance and amendment of certificates of protection by the NOIP; suspension
and revocation of certificates of protection; and fees payable for certificates of protection. The
owner of industrial property rights may either carry out the procedures directly at the NOIP or
authorize another organization or individual to do so. Of note, under Circular 29, the time-limit
for issuance of certificates of protection in regular cases has been reduced from 12 months to 7
months.

As part of an application for protection, Circular 29 requires an applicant to name the products
bearing the industrial design, the field in which they are used, and the most similar known
industrial designs to the one for which protection is sought, and to set out the basic as well as
new or distinctive "special shaping features" of the industrial design. An applicant may request
a certificate of protection for an industrial design for one product or a set of products and may
include a number of different plans or versions of the industrial design.

Circular 29 provides detailed guidelines on the rules in Decree 63 (Article 5) which require that
an industrial design must be capable of mass producing products by industrial means and which
refuse protection for the external appearance of a building, for the appearance of a product
which cannot be seen whilst in use, and for the appearance of a product which only has
aesthetic value.

In order to assess the novelty of a design, the NOIP will refer to all earlier industrial designs on
its database. The NOIP's working method is similar to that for inventions and utility solutions
(see below), namely it must select a "confronting" or the most similar known industrial design
and make a comparison of differences. The new design will be accepted if a "confronting"
design cannot be found.

The initial term of protection of an industrial design is 5 years from the filing date, renewable for
2 consecutive terms of 5 years. Owners of protected industrial designs have the exclusive right
to use, transfer or license the right to use such industrial design to other persons, the right to



                                                                                                  39
request the NOIP to compel other persons to stop infringements, and the right to claim
compensation for damages caused by such acts of infringement (the Civil Code expressly
covers the making, selling and importing of designs which are “substantially a copy” of a
protected industrial design). Rights are restricted when provisions concerning prior user or
compulsory licensing are applied.

Inventions and Utility Solutions
Inventions and utility solutions are protected under the Civil Code, Decree 63 (as amended by
Decree 06) and now Circular 30-2003-TT-BKHCN of the Ministry of Science & Technology
dated 5 November 2003 Providing Guidelines for Implementation of Procedures for Protection
of Industrial Property Rights with respect to Inventions and Utility Solutions (which repealed the
inventions and utility solutions provisions of Circular 3055 as of 27 November 2003).

Circular 30 provides guidelines on: contents of an application for a certificate of protection of an
exclusive patent for an invention or utility solution, and procedures for submission and
verification of an application; procedures for issuance, amendment and re-issuance of
certificates of protection; suspension and revocation of certificates of protection; and fees
payable for certificates of protection. The procedures for application for a certificate of
protection are carried out at the NOIP. Applications are subject to examination as to form and
substance. The time-limit for examination as to form has been reduced to 1 month (from 3
months). The time-limit for examination as to substance is now 12 months (reduced from 18
months for inventions and increased from 9 months for utility solutions).

Circular 30 now gives substantive guidelines on what constitutes a "technical solution",
"novelty", "creativity" and "uniformity" of an application; and also on gene
sequences/biotechnical inventions. In some cases, full disclosure of inventions in application
documents is no longer required. Under Decree 63, protection is not available to (i) scientific
principles, theories and mathematical methods; aesthetic creations; economic management
methods and systems; educational, teaching, training methods and systems; computer programs;
designs and planning schemes for construction works; projects for regional development and
planning (none of which are considered as inventions); (ii) subject matter which should be
protected under other forms of protection, e.g. layout design of integrated circuits, or plant and
animal varieties; and (iii) inventions which are not industrially applicable, such as methods for the
prevention, diagnose, and treatment of human or animal diseases, essentially biological processes
for the production of plants or animals other than non-biological and microbiological processes.
Patent owners have the exclusive right to use, transfer, and license the right to use the invention
to other persons. They also have the right to demand that other persons stop infringements and
to seek compensation for damages caused by acts of infringement. The term of protection of a
patent is 20 years from the official filing date.

Layout Designs of Integrated Circuits
Under Decree 42-2003-ND-CP of the Government dated 2 May 2003 providing guidance on
protection of industrial property rights with respect to layout of integrated circuits, Vietnam now
provides protection for layout of integrated circuits belonging to Vietnamese and foreign
organizations and individuals. Adapting the Washington Treaty on IP in respect of Integrated
Circuits (“IPIC Treaty”) and the TRIPS Agreement’s wording, Decree 42 defines integrated
circuit as a product, in its final form or an intermediate form, in which the elements, at least one
of which is an active element, and some or all of the interconnections are integrally formed in
and/or on a piece of material and which is intended to perform an electronic function which is
often used inter-changeably with such terms as integrated circuit topography (“IC”), chip, micro-
electronic device. Topography is a three-dimensional configuration of miniature electronic
circuits and interconnections of an integrated circuit. Together, integrated circuit topography is
protected under Decree 42.

Decree 42 does not protect: principles, process, methods performed by such IS, and
information, software which are included in IC. Title for protection of an IC will be granted as
soon as the originality can be proved, which means that IC must be a result of the creative
working of the creator and not yet widely known among IC creators and manufacturers. This
requirement of originality is basically the same as the one applied to copyright subjects. Decree
42 stipulates that IP rights for an IC of the owner/author are established upon issuance of a



                                                                                                  40
              certificate of registration of IC by the NOIP. The validity of the certificate commences on the
              date its issuance and lasts until one of the following times, whichever comes first: (1) the final
              date of the 10-year period from the granting of the certificate; (2) final date of 10-year period
              since application for the protection of an IC was submitted by an empowered applicant, or since
              such empowered person allowed the IC to be commercially exploited any where in the world; or
              (3) the final day of a 15-year period since the date of IC creation.

              Plant Varieties
              Protection of plant varieties is currently governed by Decree 31-CP on Innovations and
              Inventions, Inter-ministerial Circular 01-NN-KCM on Remuneration of Authors of Plant Varieties
              and Animal Species, and Decree 07-ND-CP dated 5 February 1996 on the Management of
              Plant Varieties.

              A plant variety needs to be novel, stable, uniform and useful to obtain protection, and only the
              creator of a plant variety is entitled to be registered with the MoST for author's rights. Authors
              are protected by a system of Plant Variety Author Certificates, valid for 15 years from the date of
              filing of the application. Apart from moral rights, the author of a protected plant variety has the
              right to remuneration paid by the users. The exclusive right over the plant variety belongs to the
              Government. Vietnam is currently considering provisions on the protection of new plant
              varieties in accordance with UPOV standards. Current regulations are outlined in Decree 13-
              2001-ND-CP dated 20 April 2001 on protection of new plant varieties and supplemented by
              Circular 119-2001-TT-BNN of the Ministry of Agriculture and Rural Development dated 21
              December 1996 providing guidance to implement Decree 13-2001-ND-CP on protection of new
              plant varieties.

              In preparation for Vietnam’s accession to the UPOV Convention, the National Assembly’s
              Standing Committee on 24 March 2004 passed Ordinance 15-2004-PL-UBTVQH on the
              Protection of Domestically Developed New Plant Varieties. According to the Ordinance, plant
              varieties first imported into Vietnam may also be protected as new plant varieties if they meet all
              legal requirements. The Ordinance details the "new" characteristic of plant varieties as (i) plant
              varieties which have never been traded in Vietnam; or (ii) plant varieties which have been traded
              overseas for a maximum 6 years for wooded plant varieties and grapes, and 4 years for other
              plant varieties.

              Foreign individuals and organizations are allowed to apply for plant patent protection in Vietnam.
              The Ministry of Agriculture and Rural Development still maintains the authority to grant a title of
              protection. The Ordinance provides a clearer and more specific test for new varieties. Tests
              comprise of the DUS test (in order to test the "distinctiveness", "uniformity" and "stability" of the
              plant) and VCU test (in order to test the value of cultivation and use of the plant) and will be
              conducted by an organization determined by the Ministry of Agriculture and Rural Development
              and the Ministry of Fisheries. The tests shall be made under a contract between the applicant
              and the testing organization. The Ordinance stipulates that the owner of a new plant variety
              must commercially utilize the new plant if it ultimately is enumerated on the National List of Plant
              Varieties which are acceptable for production. There is no change in the length of protection
              under the Ordinance. Grapes and wooded plant varieties are protected for 25 years and others
              for 20 years.

              Industrial Property Fees & Charges
NEW!!         The two-tier price structure for fees and charges relating to IP registration has been abolished
              under Circular 132-2004-TT-BTC of the Ministry of Finance dated 31 December 2004 Providing
              Guidelines for Regime of Collection, Payment, Control and Utilization of Industrial Property Fees
              and Charges. Circular 132 replaces Circular 23-TC-TCT dated 9 May 1997. Now, the same
              level of fees and charges apply to Vietnamese and foreign applicants for IP protection.

        6.5   Enforcement of Intellectual Property Rights:
              Under Vietnamese law, right holders whose IP is infringed may choose to pursue administrative
              remedies (through administrative agencies under Ordinance 44-2002-PL-UBTVQH10 on
              Dealing with Administrative Offences dated 1 July 2002), civil remedies (through the civil court
              under Vietnam’s Civil Code), or criminal prosecutions (under Vietnam’s Criminal Code).




                                                                                                                41
Administrative Measures
Administrative procedures are the most practical and most often utilized means for enforcing IP
rights in Vietnam. They are also the most cost-effective and least time-consuming. They do
not, however, allow for substantial compensation awards.

Regulations on administrative remedies in the field of industrial property (patents, industrial
designs, utility models and trademarks) are provided under Decree 12-2000-ND-CP of the
Government dated 6 March 1999. The procedures as to how a right holder lodges a complaint
with the competent authorities is provided in the Law on Complaints and Denunciation dated 2
December 1998 (as amended by Law 26-2004-QH11 on Amendment of and Addition to Law on
Complaints and Denunciations dated 15 June 2004, effective as of 1 October 2004). Fines for
importers or manufacturers found to have infringed on trademarks range from VND5-20 million
(USD$330 - $1300), and include suspension from circulation, confiscation and destruction of
goods and compulsory compensation.

Administrative recourse for copyright violations is governed by Decree 31-2001-ND-CP of the
Government dated 26 June 2001 on Dealing with Administrative Offences in the Culture-
Information Field.

Ordinance 44 raised the limit on fines of up to VND100 million for IP offences. Other penalties
include revocation of business license, confiscation and destruction of goods, and compulsory
compensation. Because Decrees 12 and 31 pre-date Ordinance 44, they are now repealed to
the extent that they are inconsistent with Ordinance 44. New decrees to replace Decrees 12
and 31 are expected to be issued in early 2005 to implement the Ordinance 44 reforms.

Vietnam’s MoCI has recently submitted to the Government its draft new decree to replace
Decree 31 dealing with administration fines in copyright violations. Under this draft decree, a
harsher punishment and higher fines are to be imposed on copyright infringers. Accordingly,
organizations or individuals involved in copyright offences may be subject to temporary or
permanent revocation of their business license, while producers and sellers of fake products
could face fines of up to 100 million VND. A fine of 1-3 million VND will be applied to
organizations or individuals giving false information regarding rights ownership of any item
instead of the current 0.5-2 million VND. Penalties will also be based on the value of the
property in question. A fine of 15-30 million VND is proposed for producers of counterfeit goods
worth 20-50 million VND.

The MoST submitted its proposed new decree to replace Decree 12 to the Government at the
end of October 2004 (after collecting opinions from IP agents and the NOIP in August-
September 2004). The new decree deals with IP offences in procedures for establishing and
exercising IP rights; in relation to consultancy services and IP representation; in relation to IP
obligations; in IP protection; in IP rights; counterfeiting; and illegal obstruction of IP
investigations, inspection and examination. As per Ordinance 44, penalties will increase to 100
million VND. The ambit of the new decree will be wider than Decree 12 in order to cover the
new areas of IP now protected under Vietnamese law (see Decree 54 and Decree 42 above).

Following promulgation of the Vietnamese Labeling Regulations in 1999, a number of new
administrative offences with respect to goods labeling were created, including trading,
transporting or storing for sale, and manufacturing or importing, any kinds of goods labels or
packages bearing signs which coincide with or are similar to protected trademarks, thus causing
confusion amongst them.

Civil Procedures
Although Vietnam's civil courts do not currently offer an effective remedy against IP infringement
(for various reasons including costly and time-consuming procedures), an IP holder has the right
to file civil proceedings against infringements of its IP rights and seek damages through the
courts. The court of jurisdiction over IP infringements or disputes in Vietnam is the People's
Court of the city or province where the defendant is located. Where one of the parties to the
case is foreign, the case will fall under the authority of the People's Court in Hanoi or HCMC.

As of 1 January 2005, the conduct of civil proceedings is governed by the new Civil Procedure



                                                                                               42
Code 24-2004-QH11 dated 15 June 2004 (replacing the Ordinance on Procedures for Civil
Cases dated 29 November 1989). The Civil Procedure Code regulates the conduct of legal
proceedings for all types of civil disputes, including marriage and family matters, economic and
commercial matters, and labor matters.

In December 2001, Vietnam’s Supreme Court issued specific guidelines to ensure uniform
application of the Civil Code during the resolution of copyright disputes in civil courts. The
guidelines include information on the types of copyright disputes and jurisdiction, right to initiate
legal action, applicable laws involved, and guidelines for the co-ordination between courts,
inspectorates and copyright offices.

In a recent patent case, a Vietnamese pharmaceutical firm, Phu Tho Pharmaceuticals Joint
Stock Company (Fushico), has been just ordered (under Article 24 of Decree 54-2000-ND-CP of
the Government dated 3 October 2000 governing unfair competition relating to IP rights) to
cease production of its alcohol metabolism drug ME-21 as it violates the patent of American
company Spirit Science USA Inc. The NOIP concluded that Fushico was conducting unfair
competition by producing and distributing ME-21, which was ruled to be too “similar” to RU-21, a
drug manufactured by Spirit Science, and causing confusion for consumers. The ruling also
directed law enforcement agencies to force the domestic firm to suspend production and
circulation of the drug. The RU-21 has been distributed on the Vietnamese market since May
2004 and went on to be sold at 2,000 pharmacies across the country.

Provisional measures in civil proceedings
Under the Civil Procedure Code, during the course of (or, in undefined urgent cases, at the time
of commencement of) civil proceedings, concerned parties may apply to the court for application
of provisional measures, including: prohibition on dealing with disputed property, freezing of
bank accounts, specific non-performance or performance (Article 102). In some cases, a
security deposit is required to be lodged by the applicant to prevent abuse of provisional
measures. Only a limited range of provisional measures may be ordered by a court on its own
initiative. Of note, the Civil Procedure Code provides for compensation of persons adversely
affected by the imposition of provisional measures that were wrongfully determined and applied.
Provisional measures will be lifted upon request by the applicant, when performance of obligations
are otherwise secured, or when obligations terminate. Court decisions with respect to provisional
measures are subject to appeal. Vietnam is currently considering further detailed provisions on
provisional measures through a joint circular of the Supreme People's Court, the Supreme
People's Procuracy and the MoST.

Criminal Procedures
In serious cases, IP rights infringers can be subject to criminal prosecution. Such cases
typically involve large volumes of goods. Vietnam’s Criminal Code provides for any person who
infringes IP rights for commercial purposes, causing serious consequences, or any offender who
has been punished administratively or convicted of the same or similar offences before his
criminal record has been expunged, to be fined from VND20-200 million. Counterfeiters or
traders of counterfeit goods (being foods, fertilizers, veterinary medicines, plant preservations,
animals and plant strains) could face punishment of 1-5 years imprisonment or up to 15 years in
serious cases. Counterfeiters or traders of counterfeit goods (food and medicines for humans)
may be imprisoned for a period from 2 to 7 years, and in serious cases may be subject to 20
years or life imprisonment or death penalty.

An amended Criminal Procedure Code was passed by the National Assembly on 18 November
2003 and became effective as of 1 July 2004. Amended provisions with respect to
investigations, prosecutions and hearings are aimed at ensuring democratic rights during
criminal proceedings, the right of lawyers to participate, and the supervision of the whole
process of criminal proceedings. The People’s Procuracy will have the right to supervise
prosecutions throughout all stages, ensuring the right defendant is being prosecuted and for the
correct crime. The head of the Procuracy will be required to repeal (within 3 days) any decision
to prosecute or not prosecute by the head of the investigative body which is without grounds.
Only the head of the Procuracy will have the power to approve the arrest and detention of
citizens. Lawyers are now entitled to participate in the investigative stage immediately after
someone is arrested, in order to prevent infringement of the democratic rights and liberty of



                                                                                                  43
citizens. Lawyers will be able to be present when the investigative body takes a statement from
someone who is arrested or temporarily detained and to read all minutes of legal proceedings
and decisions relating to their clients. During court hearings, lawyers will be entitled to lead
evidence, to express their opinions about the prosecutor’s argument and to submit their own
proposals. For the first time, the Criminal Procedure Code provides for complaints to be made
with respect to application or alteration of measures such as arrest and temporary detention.

Border Measures
Articles 57 and 59 of the Law on Customs dated 29 June 2001 (effective 1 January 2002)
provide substantive and procedural basis for owners of IP rights protected in Vietnam to register
their IP rights (including trademarks) with Vietnamese Customs and to request the provisional
suspension of customs procedures for imported or exported goods suspected of infringing IP
rights. Decree 101-ND-CP of the Government dated 31 December 2001 provides more detailed
guidelines on this area. To exercise this option, an owner of IP rights must submit a request
application, evidence of lawful IP rights, and evidence of infringement of IP rights to the customs
office; and pay in advance or submit a letter of guarantee issued by a credit institution for
potential compensation for any damage and expenses caused by an improper request for
provisional suspension of customs procedures.

Specific guidelines for customs protection of imports and exports subject to copyright were
issued in Inter-ministerial Circular 58-2003-TTLT-BVHTT-BTC of the MoCI and the MoF dated
17 October 2003. Effective as of 17 November 2003, Circular 58 prescribes in detail the
procedures for registration at customs offices for protection of goods subject to copyright (except
humanitarian aid, temporary imports for re-export, goods in transit and goods being gifts which
are duty free according to customs law, to which protection does not extend). Applicants may
register for long-term protection of copyright or protection on a case-by-case basis. Customs
offices are responsible for monitoring, identifying and inspecting consignments of goods which
are suspected of infringing copyrights as registered. Customs procedures will be suspended
temporarily in respect any consignment suspected of copyright infringement, pending verification
of the legal status of copyright in the goods. If a copyright infringement is verified, an
administrative penalty will be imposed (expenses and damages may also be payable). Of
interest, Circular 58 entitles copyright owners to assist customs offices in the task of copyright
protection by providing information relating to their registered copyrights; by providing training
courses for customs officers to recognize lawful copyright goods and copyright-infringing goods;
by providing financial support to customs offices for disposal by way of destruction of
consignments of copyright-infringing goods.

The MoST has issued Instruction 18-2004-CT-BKHCN on Strengthening Implementation of
Intellectual Property Rights and Management of Quality of Products and Goods Traded
Domestically and Products and Commodities for Export. According to the Instruction, the
MoST’s inspectors must cooperate with STAMEQ, the NOIP and other MoST services to devise
plans and urgently carry them out. The Instruction also requires inspectors to keep inspecting
and resolving administrative breaches of IP rights, including the quality of products and
commodities traded on the domestic market and products and goods for import and export.

Other
Following Official Letter 4992-VPCP-KG of the Office of Government dated 10 October 2003 in
which the Prime Minister announced his in-principle approval of the proposal by a number of
FIEs for the establishment of an association to combat circulation of fake goods and to promote
implementation of IP rights in Vietnam, the Vietnam Association of Anti-Counterfeiting and
Trademark Protection (VATAP) was inaugurated in Hanoi on 28 May 2004. The association will
represent local businesses on coordination with other organizations and state agencies to fight
the production and trading of counterfeit goods, and consult with businesses on building brand
names and the protection of intellectual property rights.




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7.    Trade in Services
7.1   MFN and National Treatment:
      Ordinance 41-2002-PL-UBTVQH10 on MFN and National Treatment dated 25 May 2002
      provides for the extension of no less favorable treatment than that extended to a third country
      for like services and service suppliers in Vietnam. MFN is not applicable in the following cases
      including 1) the extension of and exceptions on MFN in services as stipulated in bilateral or
      multilateral agreements to which Vietnam is party to; 2) the advantages extended to services or
      service providers of adjacent countries in order to facilitate exchanges limited to contiguous
      frontier zones of services that are both locally produced and consumed; 3) preferential treatment
      extended to services and service providers as stipulated in regional economic agreements, free
      trade agreements and other agreements that Vietnam is party to; 4) the tendering activities of
      service providers on projects using funds from international organizations, other countries or
      other projects as stipulated by the Government; and 5) other cases as decided by the
      Government.

      Ordinance 41 also extends no less favorable treatment than that accorded to like domestic
      services and service suppliers to services and service suppliers of another country. The
      provision of national treatment in general is subject to the following exceptions including: 1)
      procurement conducted by the Government of Vietnam; 2) Government subsidies and supports
      provided to domestic manufacturers and their use of domestic content products; 3) time
      allotment restrictions on broadcasting and television production and 4) domestic transportation
      costs calculated on the basis of commercial activities of transportation.

7.2   Legal Services (CPC861):
      Vietnam’s foreign legal services market is now regulated under Decree 87-2003-ND-CP of the
      Government dated 22 July 2003 on Practice by Foreign Lawyer Organizations and Foreign
      Lawyers in Vietnam (replacing Decree 92-1998-ND-CP) and implementing Circular 06-2003-TT-
      BTP of the Ministry of Justice dated 29 October 2003. Effective 1 September 2003, Decree 87
      substantially reformed the regulatory framework for the operations of foreign law practices and
      foreign lawyers in Vietnam, in particular expanding the scope of operation for foreign law firms to
      meet requirements of the BTA.

      Market Access and Commercial Presence
      Under Decree 87, a foreign law organization lawfully established and currently operating
      overseas (“offshore foreign law firm”) may be permitted to operate in Vietnam subject to the sole
      condition that it “has goodwill towards the State of Vietnam” (undefined). Previously, offshore
      foreign law firms wishing to operate in Vietnam were subject to additional requirements such as
      1) having foreign clients carrying on business and investment activities in Vietnam; 2) having a
      good reputation in providing legal consultancy services; 3) having an operational plan and
      undertaking to fulfill obligations; and 4) having material facilities necessary for its operations.

      Decree 87 provides for offshore foreign law firms to operate in Vietnam in the following 3 forms:
      1) “Branch” (established as a subsidiary of an offshore law firm); 2) “Foreign law firm”
      (established by one or more offshore foreign law firms); or 3)”Foreign-Vietnamese law
      partnership” (established between one or more offshore foreign law firms and one or more
      Vietnamese partnership law firms on the basis of a partnership agreement).

      Circular 06 clarifies that an offshore foreign law firm may establish any number of branches in
      Vietnam provided that they (i) implement separate application procedures for each branch and
      (ii) have only one office in each province, city under central authority. Under the former Decree
      92, the number of branches was limited at two. Foreign law branches licensed under the former
      Decree 92 may continue practicing until the date of expiry of the license. After the expiry date of
      the license, if they desire to continue practicing in Vietnam in form of a branch, they have to re-
      apply under Decree 87. Where foreign law branches wish to convert into onshore foreign law
      firms under Decree 87, they must submit an application for conversion to the MoJ.




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Domestic Regulation
The scope of practice of foreign law firms in Vietnam has been substantially broadened under
Decree 87. Foreign law practices are no longer restricted to advising on foreign and
international law in the fields of business, investment and commerce. They are now permitted to
“provide legal consultancy services and other legal services”, including consultancy on
Vietnamese law where a foreign law practice a) employs a Vietnamese lawyer or b) employs a
foreign lawyer who (i) has been issued with a certificate to practice in Vietnam, (ii) possesses a
Vietnamese university law degree and (iii) has been issued with a certificate of satisfaction of
conditions for providing consultancy on Vietnamese law. Circular 06 prescribes the contents of
the application file and the procedures for issuance of (iii).

Foreign law practices in Vietnam may employ Vietnamese lawyers (previously prohibited). The
scope of legal consultancy and legal services by Vietnamese lawyers is unrestricted and may
extend to foreign and international law as well as Vietnamese law. However, participation by
foreign lawyers in Vietnamese court proceedings are prohibited still and further extended to
Vietnamese lawyers and trainee Vietnamese lawyers employed by foreign law practices. Of
note, under Circular 06, Vietnamese citizens who permanently reside in Vietnam and have a
foreign legal practicing certificate have the option to practice as a foreign lawyer in Vietnam if
they comply with the requirements of Decree 87.

Circular 06 provides detailed guidelines for implementation of Decree 87 with respect to:
-      Documentation to be submitted as part of an application to establish a foreign law
       practice in Vietnam, and authorization to sign such documentation;
-      Mandatory elements of the name of any foreign law practice in Vietnam;
-      Procedures for issuance and amendment of licenses for foreign law practices in Vietnam;
-      Establishment and registration of branches of onshore foreign law firms and foreign-
       Vietnamese law partnerships;
-      Consolidation and merger of onshore foreign law firms;
-      Temporary suspension of foreign law practices in Vietnam;
-      Employment of Vietnamese trainee lawyers;
-      Certification of foreign lawyers advising on Vietnamese law; and
-      Inspection of and reporting by foreign law practices in Vietnam.

Aspects of Circular 06 which are of particular interest include:
-     In order to be permitted to advise on Vietnamese law, foreign lawyers are required (i) to
      have been issued with a certificate to practice in Vietnam, (ii) to possess a Vietnamese
      university law degree and (iii) to be issued with a certificate of satisfaction of conditions
      for providing consultancy on Vietnamese law. Circular 06 prescribes the contents of the
      application file and the procedures for issuance of (iii).
-     Vietnamese citizens who permanently reside in Vietnam and have a foreign legal
      practicing certificate are given the option to practice as a foreign lawyer in Vietnam
      provided that they comply with the requirements of Decree 87.
-     Circular 06 clarifies that an offshore foreign law firm may establish any number of
      branches in Vietnam provided that they (i) implement separate application procedures for
      each branch and (ii) have only one office in each province, city under central authority
      (previously, the number of branches was limited at two).
-     Foreign law branches licensed under the former Decree 92 may continue practicing until
      the date of expiry of the license. After the expiry date of the license, if they desire to
      continue practicing in Vietnam in form of a branch, they have to re-apply under Decree
      87. Where foreign law branches wish to convert into onshore foreign law firms under
      Decree 87, they must submit an application for conversion to the MoJ.

Unfortunately, Circular 06 fails to clarify how advice is actually issued by a foreign law practice in
Vietnam which employs a foreign lawyer certified as permitted to advise on Vietnamese law or a
Vietnamese lawyer. Circular 06's failure to clarify this issue is regrettable, in particular because
it means the scope of permitted activities of foreign law practices in Vietnam remains unclear -
this is significant because a foreign law practice in Vietnam operating beyond the scope of its
permitted activities may be subject to a fine from VND10-20 million (and also, where aggravating
circumstances, revocation of its license).




                                                                                                   46
      The fees for the establishment, operation, registration, change of license, and practice
      certificates of foreign law firms and foreign lawyers are regulated under Decision 75-2004-QD-
      BTC dated 16 September 2004.

      For more detailed information on Decree 87, please refer to our website at:
      http://www.usvtc.org/Foreign%20Law%20Firms%20August%202003.pdf

7.3   Accounting and Auditing Services (CPC 862):
      Vietnam’s new Law on Accounting and Law on Statistics, both dated 17 June 2003, replace the
      1998 Ordinance on Accounting and Statistics and became effective as of 1 January 2004.

      Domestic Regulation
      The Law on Accounting regulates the contents of accounting work and the organization of
      accounting departments, accounting staff and professional accounting activities. The Law on
      Accounting is applicable to FIEs, foreign company branches and foreign company
      representative offices, individuals involved in accounting, as well as most Vietnamese entities.
      The Law includes general provisions on accounting duties and requirements (such as to record
      accurately, fully, promptly, clearly and truthfully all economic and financial transactions),
      accounting principles and standards, and accounting periods. The currency unit used in
      accounting activities is VND, with specific provisions for economic and financial transactions
      arising in a foreign currency. The language to be used in accounting is Vietnamese, with
      provision for accounting in foreign language in addition to Vietnamese.

      The Law includes detailed provisions on preparation, management and use of accounting
      vouchers (including electronic vouchers); accounting accounts, charts of accounts, and
      accounting books; preparation, auditing and publication of financial reports; accounting
      inspections; inventory of assets, preservation and archiving of accounting data; accounting work
      upon division, demerger, consolidation, merger, conversion of form of ownership, dissolution,
      termination of operation, or bankruptcy. With respect to accounting departments and
      accountants, the Law includes detailed provisions on organization of accounting departments;
      standards, rights and responsibilities of accountants; duties, standards and conditions for chief
      accountants; responsibilities and rights of chief accountants. The Law also includes provisions
      on persons who are not permitted to act as accountants and provisions on accountancy
      practice; hiring accountants and chief accountants; accountancy practicing certificates;
      professional accountancy associations.

      In order to be issued an accountancy practicing certificate, a foreigner must satisfy the following
      standards and conditions:
      - be permitted to reside in Vietnam;
      - have a certificate as an accounting expert or an accountant’s certificate issued by a foreign or
         international accountancy organization recognized by the MoF;
      - pass examinations held by the competent State body in Vietnamese law on economics,
         finance and accounting.

      Detailed regulations for implementation of the Law on Accounting with respect to entities
      engaged in business operations were issued under Decree 129-2004-ND-CP of the
      Government dated 31 May 2004. Effective as of 30 June 2004, Decree 129 governs accounting
      by FIEs, foreign branch offices and representative offices of foreign companies operating in
      Vietnam, as well as SOEs and private Vietnamese entities.

      Decree 129 stipulates the standards and conditions for appointment of a person to act as chief
      accountant. In the case of FIEs, the chief accountant must have professional accounting
      qualifications and skills at the university or higher level and at least 2 years actual accounting
      work experience; or professional accounting qualifications and skills at the college level and at
      least 3 years actual accounting work experience. In the case of foreign branch offices, the chief
      accountant must have professional accounting qualifications and skills at the intermediary or
      higher level and at least 3 years actual accounting work experience.

      As an alternative to an internal personnel appointment, a business entity may hire an external
      accountancy firm or certified practicing accountant to act as its chief accountant and/or



                                                                                                      47
accounting personnel. In all cases, the person appointed as chief accountant must have
attended and passed a chief accountant training course in accordance with regulations of the
Ministry of Finance.

Accountancy firms may be established and operate in one of three forms: limited liability
company, partnership, or private enterprise. A certified practicing accountant may register a
sole practice. Decree 129 regulates accountancy examinations, issuance of accountancy
practicing certificates, training courses, the scope of accounting services which may be
provided, and the rights and responsibilities of accounting personnel.

Complementing Decree 129, the Government issued separate detailed regulations applicable to
the State accounting sector in Decree 128-2004-ND-CP of the Government dated 31 May 2004.
Decrees 128 and 129 follow after Decree 40-2004-ND-CP of the Government dated 13 February
2004 providing guidelines for implementation of the 2003 Law on Statistics.

New regulations on auditing have been issued under Decree 105-2004-ND-CP of the
Government dated 30 March 2004. Effective as of 21 April 2004, Decree 105 replaces Decree
07-ND-CP of the Government on Independent Auditing dated 29 January 1994. The new
regulations govern the auditing of accounting materials, data and financial statements of
enterprises in Vietnam (including FIEs) and the auditing profession in Vietnam. Under Decree
105, all FIEs, banks, insurance companies, listed firms, SOEs and balance sheets of projects in
nationally important Group A must be audited. Under Decree 105, Vietnamese auditing firms
may be established in the form of partnership, private enterprise or FIE. Decree 105 requires
existing State owned, limited liability and shareholding auditing companies to convert into one of
those 3 forms within 3 years (by April 2007). Decree 105 requires an auditing firm to have at
least 3 certified practicing auditors (previously 5 under Decree 07), 1 of whom must be involved
in management of the firm.

Foreign auditing firms are still required to establish FIEs in order to participate fully in the
auditing sector in Vietnam. However, of significance, Decree 105 now allows foreign auditing
firms to participate in auditing activities in Vietnam by other more limited means:
 (i)   A foreign auditing firm may admit a Vietnamese auditing firm as a member of its
       organization; audits must be performed in the joint names of the foreign and Vietnamese
       firms;
 (ii)  A foreign auditing firm may co-operate with a Vietnamese auditing firm (including a FIE)
       in order to perform a one-off audit in Vietnam but the audit report must be signed by the
       Vietnamese auditing firm;
 (iii) A foreign auditing firm may independently perform an audit in Vietnam and circulate the
       audit report in Vietnam only with the approval of the Ministry of Finance for each specific
       audit.

In (i) and (ii) above, 1 of the 2 auditors signing the audit report must be a Vietnamese auditor.
To work within an auditing firm in Vietnam, a foreign individual must be issued with an auditors
practicing certificate after passing the MoF exam and must attend annual updating courses.

Also of significance, Decree 105 expands the range of activities which Vietnamese auditing
firms may undertake. In addition to auditing services, firms may now register to provide the
following services: financial consultancy; tax consultancy; manpower resources consultancy; IT
application consultancy; management consultancy; accountancy services; property valuation
services; finance, accounting and auditing training; and other relevant finance, accounting and
tax services in accordance with law. Notably, an auditor may not be involved in the audit of an
entity at the same time as or within a year of providing these other services to that entity.

Guidelines for implementation of Decree 105 were issued under Circular 64-2004-TT-BTC of the
Ministry of Finance dated 29 June 2004. Of note, Circular 64 regulates in detail the auditing
profession and auditing requirements.

Detailed provisions for implementation of the Law on Statistics were issued under Decree 40-
2004-ND-CP of the Government dated 13 February 2004.




                                                                                               48
        New regulations on certification of auditors and now also accountants have been issued with
        Decision 59-2004-QD-BTC of the Ministry of Finance dated 9 July 2004. Under the new
        Regulations on Auditor Entrance Examinations and Issuance of Auditor Certificates and
        Accounting Practicing Certificates, Vietnamese individuals and foreign residents in Vietnam who
        satisfy prescribed qualifications (including having a bachelor degree in economics specializing in
        banking-finance or accounting-auditing and having worked in the finance-accounting-auditing
        sector for at least 5 years or as an assistant auditor in an auditing enterprise for at least 4 years)
        may sit the entrance exam to qualify to practise auditing or (now also) accounting in Vietnam.
        Persons already possessing a foreign auditing or accounting practising certificate and wishing to
        be issued with a Vietnamese auditing practising certificate must sit an exam in knowledge of
        relevant Vietnamese laws. Persons issued with an auditor’s certificate are permitted to register
        to practise as an auditor and provide auditing, accounting and other services as stipulated in
        Decree 105 above and to register for the business of accounting services as stipulated in
        Decree 129 above. Decision 59 repeals the former Decision 53-2002-QD-BTC of the Ministry of
        Finance dated 23 April 2002 and its Regulations on entrance examinations and issuance of
        auditor certificates (which replaced Decision 237-TC-QD-CDKT dated 19 March 1994).

        Decision 76-2004-QD-BTC of the Ministry of Finance dated 22 September 2004 provides
        regulations on the criteria and conditions for auditors and auditing firms to be approved to audit
        listed companies, securities brokers, and investment fund management companies has been
        issued; the cases when approved status of auditing firms may be suspended or revoked; and
        the rights and obligations of approved auditing firms. Domestic auditing companies are required
        to have a minimum chartered capital of 2 billion VND while foreign auditing firms are required to
        have at least US$300,000. Both domestic and foreign auditing firms must have at least ten
        auditors on the payroll, meet regulated standards, have been established and operating in
        Vietnam for at least five years, and have at least thirty annual audited clients. In addition,
        foreign practising auditors must have practised auditing in Vietnam for at least two years. The
        MoF will select and approve all auditing firms and auditors every two years.

        Effective as of 29 November 2004, Decree 185-2004-ND-CP of the Government dated 4
        November 2004 on Dealing with Administrative Offences in Accounting Sector is applicable to
        domestic and foreign individuals and organizations. Decree 185 covers offences relating to
        accounting vouchers, accounting books and accounts, financial statements, accounting
        inspections, maintenance and retention of accounting documents, asset inventory, accounting
        personnel, accountancy practices, application of accounting standards and systems. Sanctions
        include fines from VND200,000 to VND20 million. Additional measures, such as license
        revocation, may be imposed. New offences, such as signature of accounting vouchers beyond
        competence, delayed submission of financial statements, and accountancy practice without
        business registration or practising certificate, have been prescribed.

        On 22 December 2004, the MoF issued Circular 122-2004-TT-BTC Providing Guidelines for the
        Implementation of Accounting and Auditing Regulations Applicable to Foreign Invested
NEW!!   Enterprises and Organizations Operating in Vietnam. All FIEs must apply the Vietnamese
        accounting system, unless the MoF has approved application of another accounting system.
        Any amendments or additions to an FIE's accounting system must also be approved by the
        MoF. Circular 122 replaces Circular 60-TC-CDKT of the Ministry of Finance dated 1 September
        1997 and amending Circular 155-1998-TT-BTC of the Ministry of Finance dated 8 December
        1998.

        Accounting Standards
        On 31 December 2001, the MoF released the first batch of Vietnamese accounting standards.
        Effective as of 15 January 2002, the four new standards are largely based on International
        Accounting Standards (IAS) and comprise norms on inventories (Standard 02); tangible fixed
        assets (Standard 03); intangible fixed assets (Standard 04); and revenue and other income.
        (Standard 14). Circular 89-2002-TT-BTC of the Ministry of Finance dated 9 October 2002
        provides guidelines for implementation of the above 4 accounting standards.

        The second batch of Vietnamese accounting standards based on IAS was released by the MoF
        on 31 December 2002 under Decision 165-2002-QD-BTC. Effective as of 1 January 2003, the
        six new standards comprise: general standard on accounting (Standard 1); lease of property



                                                                                                           49
      (Standard 06); impact of changes in foreign exchange rates (Standard 10); construction
      contracts (Standard 15); financing costs (Standard 16), and cash flow statements (Standard 24).
      Circular 105-2003-TT-BTC of the Ministry of Finance dated 4 November 2003 provides
      guidelines for implementation of the above 6 accounting standards.

      On 30 December 2003, the MoF released six more Vietnamese accounting standards,
      applicable to businesses of all economic sectors. Decision 234-2003-QD- BTC lists the six
      standards, namely real estate and property investment - regulations and guidelines on principles
      and accounting approach (Standard 05); Accounting of investments in business associations -
      regulations and guidelines on principle and accounting approach (Standard 07); Financial
      information on capital contribution to joint-ventures - regulations and guidelines on principles
      and accounting approach (Standard 08); Presentation of financial statement - regulations and
      guidelines on principles and methodology for preparation and presentation of financial
      statements (Standard 21); Consolidated financial statement and accounting of investments in
      affiliates (Standard 25); and Information on involved third-parties (Standard 26).

      Circular 55-2002-TT0BTC of the Ministry of Finance dated 26 June 2002 Providing Guidelines
      on Vietnamese Enterprise Accounting System Applicable to Enterprises and Organizations with
      Foreign Owned Capital Operating in Vietnam provides revised guidelines for application of the
      Vietnamese accounting system by FIEs in Vietnam, including projects licensed under the Law
      on Foreign Investment (100% FOEs, JVEs and BCCs) and other foreign entities (resident
      establishments of foreign companies in Vietnam, branches of foreign law firms, commercial
      branch offices, petroleum contractors and other foreign contractors conducting business in
      Vietnam). The revised guidelines apply as from the year 2002.

      A new regime for management, use and depreciation of fixed assets has been issued under
      Decision 206-2003-QD-BTC of the Ministry of Finance dated 12 December 2003, replacing the
      former Decision 166-TC-QD-CSTC of the Ministry of Finance dated 30 December 1999 The
      new depreciation regime is applicable as of the fiscal year 2004.

      Auditing Standards
      The MoF is on its way to finishing a Vietnamese auditing system that will bring the country in line
      with international auditing standards.

      Decision 143-2001-QD-BTC of the Ministry of Finance dated 21 December 2001 introduced 6
      new standards (on fraud, planning, risk assessment and internal supervision, sample selection,
      checking of audit estimates, and internal audits). Decision 28-2003-QD-BTC of the Ministry of
      Finance dated 14 March 2003 issued another 5 new standards for external audit of financial
      statements, including: quality control of auditing activities (Standard 220); essentials in audits
      (Standard 320); additional auditing evidence in respect of special accounting and events
      (Standard 501); events occurring after the closing date of books of accounts (Standard 560);
      using other auditors’ materials (Standard 600).

      Another 6 auditing standards were issued under Decision 195-2003-QD-BTC of the Ministry of
      Finance dated 28 November 2003 and became effective as of 1 January 2004. These include
      auditing in informatics technology (Standard 401); relating parties (Standard 550); constant
      activities (Standard 570); auditing reports on special audits (Standard 800); review of financial
      reports (Standard 910); inspection of financial statements on advanced consensus (Standard
      920).

      The Ministry is expected to release further new standards over the next two years, including
      guidelines on environmental audits, use of experts, comparative data and financial reports.

      Regulations on certification of auditors are provided in Decision 53-2002-QD-BTC providing
      dated 23 April 2002 on regulations on recruitment examinations and the issuance of auditors’
      certifications. Decision 53 replaced Decision 237-TC-QD-CDKT dated 19 March 1994.

7.4   Advertising Services (CPC 871):
      The Ordinance on Advertising was passed on 16 November 2001 and came into force as of 1
      May 2002. Implementing regulations were issued under Decree 24-2003-ND-CP of the



                                                                                                      50
Government dated 13 March 2003 (and became effective 18 April 2003), followed by detailed
guidelines issued under Circular 43-2003-TT-BVHTT of the Ministry of Culture & information
dated 16 July 2003.

Market Access and Commercial Presence
Foreign advertising service providers (organizations and individuals) have long been able to
open representative offices in Vietnam but such offices are not permitted to engage directly in
advertising activities. The Advertising Ordinance provided, for the first time, for foreign
advertising service providers to be able to establish branch offices to engage directly in
advertising activities. Under the Advertising Decree, the following conditions must be satisfied
for a foreign advertising service provider to establish a branch:
 -      it must have valid business registration for advertising business in its home jurisdiction;
 -      it must have operated for at least 5 years as from the date of its business registration;
        and
 -      it must have had a representative office in Vietnam for at least 7 years (this 7 year period
        will be calculated from December 2001) and have not breached the laws of Vietnam.

Of note, this last condition will delay the licensing of foreign advertising branch offices in
Vietnam until December 2008 at the earliest.

The Advertising Ordinance provides for foreign advertising service providers to co-operate with
domestic advertising service providers to invest in the Vietnamese advertising market. The
Advertising Decree elaborates as follows:
 -      Foreign direct investment may only be conducted in the form of a BCC or JVE. (As
        noted above, foreign investment may be implemented indirectly via branches or
        representative offices in Vietnam)
 -      Only domestic advertising service providers with a business registration certificate
        issued by a provincial-level Business Registration Office are permitted to co-operate
        with foreign investors.
 -      BCCs and JVEs must be licensed by the MPI. Provincial and municipal people’s
        committees do not have any licensing authority with respect to foreign investment in the
        advertising sector.
 -      During the foreign investment evaluation process, the opinion of the MoCI (as well as
        other relevant State bodies) must be obtained by the MPI. In determining its opinion,
        the items to be evaluated by the MoCI include: the degree to which the project complies
        with advertising master planning; the technical and technological standard of the
        advertising by the foreign investor; the socio-economic benefits; the scope and sector of
        advertising; other regulations of the law on advertising.

Domestic Regulation
The Advertising Decree also includes detailed provisions on application files for and issuance of
licenses for foreign advertising branch offices and representative offices of foreign advertising
business, the scope of activities of branch and representative offices, and provides for the MoCI,
and provincial and municipal people’s committees to have authority to issue, amend or revoke
branch office and representative office licenses respectively. Specific regulations on foreign
advertising branches and representative offices are provided to be issued by the Government,
but have not yet been.

Under the Advertising Ordinance, advertising permits are required to be issued for a range of
advertisements. Permits for advertisements on computer information networks, for specialized
advertising programs on radio and television and for specialized advertising printed material are
issued by the MoCI. Permits for advertisements on billboards, placards, panels, banners and
screens placed in public places, on objects illuminated or appearing in the air or underwater, on
means of transportation or on other mobile objects are issued by local Departments of Culture &
information.

The Advertising Decree sets a time-limit of 10 working days (from date of application) for
issuance of advertising permits, but also prescribes a number of prior conditions to be satisfied
for advertisements of products to which Vietnamese industry or other standards compulsorily
apply; medical drugs, raw materials for making up medical drugs, cosmetics, vaccines,



                                                                                                 51
      biological immunizing products, medical instruments and equipment, medical services and
      foodstuffs; biological products servicing plant cultivation and livestock breeding, feed for
      livestock, veterinary drugs, plant protection agents, fertilizer, seed and seedlings. Of particular
      note, the Advertising Decree omits the requirement for a certificate confirming legal import to be
      submitted in order to obtain a permit to advertise foreign goods imported into Vietnam.

      Specific regulations on advertising permits will be issued by the MoCI. For example, Circular 43
      provides detailed guidelines with respect to a number of specific types of advertisements,
      including advertisements in newspapers, advertisements for alcoholic beverages and tobacco,
      outdoor advertisements, and advertisements on the internet. Circular 43 also deals in more
      detail with the procedures and authority for registration of advertisements on the internet and
      licensing of outdoor advertisements, as well as the responsibilities of local Departments of
      Culture & information for State administration of advertising. A number of sample forms are
      issued with Circular 43, including application for registration of an advertisement on the internet;
      application for an advertising permit; advertising permit; and application for a foreign advertising
      branch or representative office license.

      The Ministry of Finance has recently issued Circular 67-2004-TT-BTC dated 7 July 2004
      providing for the regime of collection, payment and management of use of fees for issuance of
      advertising permits. Reportedly, fees are capped at VND1 million.

      Specific sub-regulations on advertising in the HCMC area were issued under Decision 108-
      2002-QD-UB of the HCMC People’s Committee dated 25 September 2002. In large part, the
      HCMC advertising regulations repeat the provisions of the Advertising Ordinance, but also
      provide for detailed restrictions on advertising, including that of size, location and length of time
      of advertisements. The HCMC advertising regulations provide for advertising permits to be
      issued by the Department of Culture & information (or the district people’s committee, in some
      cases). Permit application procedures are prescribed. Permits will be only issued in
      accordance with the master plan for advertising in HCMC.

7.5   Communication Services:
      Ordinance 43-2002-PL-UBTVQH10 on Posts & Telecommunications dated 25 May 2002 (which
      became effective as of 1 October 2002) reforms the existing State monopoly in the posts and
      telecom sector in light of Vietnam's international commitments. The State monopoly remains
      with respect to provision of postal services to the public but domestic mail delivery services have
      been opened to enterprises from all economic sectors. With respect to telecoms, there will no
      longer be a State monopoly over provision of network infrastructure, but provision of network
      infrastructure is still restricted to SOEs or State controlled enterprises. However, telecom
      services have now been opened to enterprises from all economic sectors.

      Under Decree 157-2004-ND-CP of the Government dated 18 August 2004 making detailed
      provisions for implementation of a number of articles of the Ordinance on Posts and
      Telecommunications with respect to Post, Vietnam Post (“VNP”) retains its monopoly over the
      public post network throughout Vietnam. Other enterprises are permitted to engage in domestic
      and international post delivery only. To do so, such enterprises must satisfy the conditions
      prescribed in Decree 157 and apply for a license from the MoPT. All FIEs are excluded from
      engaging in domestic post delivery. Only JVEs are permitted to engage in international post
      delivery. The capital contribution ratios of the foreign and Vietnamese parties in a JVE
      engaging in international post delivery will be as determined by the Prime Minister. VNP and
      enterprises conducting international post delivery are entitled to be agents of foreign post
      delivery enterprises subject to approval of the MoPT. In an attempt to resolve the issue of
      liability for damage in the posts sector, Decree 157 stipulates the cases in which the various
      enterprises supplying postal services in Vietnam will be responsible for compensation for any
      damage caused. Decree 157 became effective as of 10 September 2004.

      Decree 160-2004-ND-CP of the Government dated 3 September 2004 making detailed
      provisions for implementation of a number of articles of the Ordinance on Posts and
      Telecommunications    with    respect   to    Telecommunications     specifically  regulates
      telecommunication networks and services, operations of service providers and users, licensing
      procedures, establishment of service provider networks, public telecom services and service



                                                                                                        52
prices and provides guidelines on the design, installation and subscription of terminals, fixed
telephone service, mobile phones, selling or leasing mobile phone terminals, and telecom
services. Only SOEs or an enterprise in which the State holds controlling shares or special
shares will be licensed to establish telecom networks. Enterprises from any sector may be
licensed to provide telecom services. Decree 160 became effective as of 26 September 2004.

Decrees guiding the implementation of Ordinance 43 with respect to frequencies and
investigation are also scheduled to be drafted by the MoPT and passed by the Government.

Industry Regulator
Decree 90-2002-ND-CP on Functions, Duties, Powers and Organizational Structure of the
Ministry of Post and Telecommunications dated 11 November 2002 established a separate
Ministry of Posts & Telecommunications ("MoPT") to regulate the industry and abolished the
Vietnam Post & Telecom’s (VNPT) monopoly over the provision of telecom services.

Basic Telecommunication Services

Under Decree 160, basic telecommunications services are defined as fixed and mobile calls,
including calls via satellite, data transmission, video transmission, leased channels, telex and
maritime television.

Market Access and Commercial Presence

Cross border supply and foreign invested commercial presence for provision of basic telecom
services is currently restricted to BCCs with Vietnam’s gateway operators authorized to provide
basic telecom services. Under the BTA, Vietnam has committed to allow U.S. companies to
establish 49% U.S. equity JVEs beginning in December 2005 (for non-voice services such as
data) and beginning in December 2007 (for voice telephone services).

In 2002-2003, with the lifting of the State monopoly of telecom services, new domestic service
providers such as Military Communications Co (Vietel), the semi-private Saigon Posts and
Telecommunications (Saigon Postel), and the Electricity Telecommunications and Information
Company (ETIC) have entered the market. VNPT has also allowed one of its affiliates, Cable
and Telecommunications Material Co (SACOM), to undergo privatization and it is now listed on
Vietnam's stock exchange. ETIC, an affiliate of the state utility Electricity of Vietnam, now has a
license to lease its cables for domestic long-distance service. The monopoly on international
basic telecommunication services is however expected to continue although Vietnam Shipping
Telecom Company (Vishepel) has applied to provide this service and is expected to receive its
license in the next two years.

The country’s first privately invested mobile phone venture based on CDMA technology has
recently been introduced. S-Fone, is a project operated by a South Korean joint venture, SLD
Telecom (SK Telecom, LG Electronics and Dong A Telecom), and the semi-private Saigon Post
and Telecommunications Co (Saigon Postel).

Cost-based Pricing
On 27 October 2003, the Prime Minister issued Decision 217-2003-QD-TTg to lower post and
telecoms fees. Effective as of 14 November 2003, Decision 217 provides that post and
telecoms fees must be calculated on the basis of input costs and be comparable to telecoms
rates in the region and the world. Where it is deemed necessary, "the State will make
interventions to stabilize telecoms fees to protect the legitimate rights and interests of users and
telecoms businesses". Decision 217 also reportedly seeks to prevent unhealthy acts of
competition by regulating the charges of services provided by long-time big players to
newcomers. Accordingly, telecoms connection charges for corporate clients shall be based on
market prices. Affiliates of a telecoms service company will be charged the same as other
corporate clients for the same service, and no price discrimination is allowed. Both the MOPT
and the MoF will have to calculate and consider a price frame for the telecoms fees before
submitting the rates to the Government for approval. Decision 217 is another effort by the
Government to further open up the market to young players, several of whom have made




                                                                                                 53
repeated complaints about unfair acts by the VNPT to knock out potential rivals. Decision 217 is
also expected to herald a new cost-cutting move among industry players.

Value-Added Telecommunication Services

Under Decree 160, value-added telecom services include e-mail, voice mail, online data access,
electronic data exchange, restoring, sending and accessing facsimiles, code and protocol
exchange and data and information processing.

Market Access and Commercial Presence
Foreign investment in the provision of value-added telecom services is currently restricted to
BCCs with Vietnamese partners authorized to provide such services. Under commitments
made in the BTA, Vietnam has agreed to permit U.S. companies to establish 50% U.S. equity
JVEs with Vietnamese partners to provide value-added telecom services such as email,
voicemail, fax services, data and code services, beginning in December 2003. For Internet
services, this commitment phases-in in December 2004. The MPI is reportedly preparing to
allow foreign investors to establish JVEs in value-added telecom services in order to meet
Vietnam's commitments under the BTA. To introduce such reform, the foreign investment
regulations (Decree 24-2000-ND-CP of the Government dated 31 July 2000) would have to be
amended.

New rules easing restrictions on the provision of internet services were issued under Decree 55-
2001-ND-CP of the Government dated 23 August 2001. Non-State owned or controlled
enterprises are now eligible to provide internet access services in Vietnam and the former
monopoly of Vietnam's telecom regulator, the General Department of Post &
Telecommunications ("GDPT"), over provision of internet connection services has been
abolished (effective 7 September 2001).

Gateway provider Vietnam Data Corp (VDC) has recently signed an agreement with Singapore’s
Singtel to be its primary Internet bandwidth provider. Another contract has been signed
between VDC and US based Teleglobe Communications to open direct satellite
communications circuit with North America IP trunk to increase international data transmission
speed. In another significant development, the GDPT has awarded Financing & Promotion
Technology ("FPT") Company and Vietnam’s military-owned telecom company, Vietel licenses
to provide internet access services, breaking VDC’s monopoly in this sector. Several additional
Internet Access Providers (IXPs) are expected to be licensed by 2005, as are 40 Internet
Service Providers (ISPs) and numerous Online Service Providers. (OSPs). 8 of VNPT’s affiliate
companies including VDC have been converted into limited liability companies, still owned by
the State but now operating under the Law on Enterprises and open to competition. U.S.
telecom firm ITXC Corp has recently signed a deal with Vietel giving it access to IXTC's global
Internet-based network. Vietel is one of 4 State-run telecom firms and its service is currently
limited to domestic VOIP calls. VNPT has also recently launched Asymmetric Digital Subscriber
Line (ADSL) high speed Internet service under a joint venture with Korean Telecom.

Domestic Regulation
Circular 04-2001-TT-TCBD of the General Department of Post & Telecommunications dated 20
November 2001 provides guidelines for implementation of Decree 55, including detailed
provisions on the rights and obligations of internet-related enterprises and the conditions and
procedures for licensing.

On 27 June 2003, the MoPT issued Decision 476-QD-BBCVT on Implementation of Provision of
Internet Telephony Services in Form of Domestic and International PC to PC and Out-going
International PC-to Phone and Official Letter 1091-BBCVT providing guidelines on provision of
Internet Telephony services. 7 new companies offering international calls via the internet have
been licensed by the MoPT since then in an effort to speed up introduction of the new service.
The new providers, called OSPs or Connection Internet (OCI), belong to information technology
and telecommunication service provider EIS-and TIE, an electricity import-export company
based in Ho Chi Minh City. 4 enterprises which are authorized by the MoPT to provide internet
telephone services are VNPT, Saigon Post and Telecom Joint Stock Company, FPT and the
One Connection Inc. (OCI).



                                                                                             54
     Implementing Decree 55, Circular 09-2003-TT-NHNN of the State Bank of Vietnam dated 5
     August 2003 (effective as of 2 September 2003) governs the provision of banking services on
     the internet (for which permission from the State Bank Governor is required) as well as the use
     of intranets by organizations and entities within the banking sector (which are not permitted to
     be connected directly to the internet and which must be managed by a specific-purpose
     management committee established within the organization or entity).

     Notwithstanding the easing of restrictions on internet service provision, there is no expectation
     of any easing of "content" restrictions in the internet sector. Under Decision 27-2002-QD-
     BVHTT of the Ministry of Culture & information dated 10 October 2002, permits are required to
     be obtained by Vietnamese and foreign entities from the MoCI prior to the establishment of and
     supply of information via websites on the internet. It remains unclear whether websites
     containing information about Vietnam but which are hosted on overseas servers are also subject
     to the permit requirements under Decision 27. Foreign entities (including FIEs) must submit
     application files comprising a pro-forma application, notarized copies of investment license or
     representative office license, a detailed plan on supplying information on the website, and the
     CVs of persons responsible for contents of the website and of members who supply information.
     A time-limit of 30 days is fixed for the processing of permit applications. The type of information
     which may be supplied via websites on the internet is also restricted.

     Advertisements on the Internet are also subject to regulation. Guidelines on registration of such
     advertisements were included in Circular 43-2003-TT-BVHTT of the Ministry of Culture &
     information dated 16 July 2003 (for more details on advertising, see 7.4 above).

7.6 Construction Services (CPC 511, 512,513, 514, 515, 516, 517, 518)
    Construction services in Vietnam are currently governed by the Law 16-2003 QH11 on
    Construction dated 26 November 2003. Effective as of 1 July 2004, the Law provides an overall
    structure for conducting construction activities in Vietnam, including the rights and obligations of
    both domestic and foreign organizations and individuals investing in construction of works and
    engaging in construction activities.

     To implement the new Law on Construction (effective 1 July 2004), the revised foreign
     investment regulations (amended in March 2003) and the revised tendering regulations
     (amended in July 2003), the Government has issued new regulations on the management of
     foreign construction contractors in Vietnam.

     Decision 87-2004-QD-TTg of the Government dated 19 May 2004 issuing Regulations on
     Management of Operations of Foreign Contractors in the Construction Sector in Vietnam
     governs the operations of foreign contractors – organizations or individuals; head contractors,
     general contractors, contractors in partnership or sub-contractors – in the sectors of construction
     consultancy, supply of technological materials and equipment where that forms part of technical
     services relating to construction works, and execution of construction works. Decision 87
     maintains that a foreign contractor must be issued with a contractor’s permit in order to operate
     in Vietnam. This permit remains specific to the construction contract being performed. In all
     cases, a foreign contractor must have a partnership with a Vietnamese contractor or must
     engage a Vietnamese sub-contractor (unless exempted by the Prime Minister or under
     Vietnamese Law). For more information on the Law on Construction and Decision 87, please
     refer                  to                   the                   following                    link:
     http://www.usvtc.org/Documents/Misc/Legal%20Docs%20by%20Phillips%20Fox.htm

     Updated administrative procedures for issuance of permits to foreign contractors operating in
     the construction field in Vietnam have been issued under Circular 05-2004-TT-BXD dated 15
     September 2004. According to Circular 05, the Ministry of Construction issues/withdraws
     permits to/from foreign contractors being organizations, which execute tender packages
     belonging to Group-A projects and other tender packages located in two or more provinces.
     Local Departments of Construction are responsible for foreign contractors executing Group-B
     and C projects.




                                                                                                      55
7.7   Distribution Services (CPC621, 622, 631, and 632)
      Foreign participation in Vietnam's distribution sector is currently restricted. Under Decree 24-
      2000-ND-CP of the Government dated 31 July 2000, foreign direct investment in the import and
      distribution sector is subject to the condition that it must be implemented in accordance with
      separate regulations issued by the Prime Minister. No such separate regulations have yet been
      issued. As a result, a legal vacuum confronts investment projects in import and distribution
      services - they are not prohibited but there is no enabling legislation. This continues to be the
      case under Decree 27-2003-ND-CP of the Government dated 19 March 2003 amending Decree
      24.

      To date, foreign investment licenses in the distribution sector have been issued on a case by
      case basis. Under commitments made in the BTA, beginning in December 2004 (ie three years
      after entry into force of the BTA), U.S. companies may establish JVEs with Vietnamese partners
      to engage in distribution services, with up to 49% U.S. equity. Beginning in December 2008, or
      seven years upon entry into force of the BTA, 100% U.S. invested distribution companies will be
      permitted. One retail outlet may be established as a right, while additional outlets will be
      considered on a case-by-case basis. For some industrial products, Vietnam’s market access
      limitations in the distribution services sector are subject to the additional limitations contained in
      a separate Annex to the Agreement, which provides phase-out periods for such restrictions
      (BTA, Annex D).

      To satisfy the BTA's December 2004 deadline, a specific decision providing for up to 49%
      foreign equity in JVEs in the distribution sector is currently being drafted by the MoT and is
      expected to become effective in the first quarter of 2005. For more information, please refer to
      Section 5.8 on “Trading [and Distribution] Rights for Foreign Enterprises.”

      Direct or Pyramid Distribution
      Multi-level selling (also known as pyramid selling) is now regulated under the Law on
      Competition, approved by the National Assembly on 9 November 2004 and to become effective
      as of 1 July 2005.

      The Law on Competition prohibits enterprises from conducting 4 acts in order to sell goods at
      multi-levels aimed at obtaining illegal profit from employment of new participants: (1) requiring
      persons who wish to participate to pay a deposit or to buy a fixed quantity of goods in the first
      instance in order to have the right to participate in multi-level selling of goods; (2) failing to
      undertake to re-acquire the goods sold to the participant at least 90% of their original price; (3)
      allowing participants to receive commission, bonuses and/or other economic benefits only or
      essentially only from their enticing other participants into the network for multi-level selling of
      goods; (4) providing false information about the benefits of participation in the network for multi-
      level selling of goods or false information about the quality and use of goods in order to entice
      other participants.

      The MoT has already prepared a draft decree on supervision of multi-level selling and this is
      expected to be issued shortly as the Prime Minister has called for strengthened supervision of
      multi-level selling (Official Letter 4893-VPCP-KTTH dated 14 September 2004). According to
      the draft decree, enterprises must have a "certificate of satisfaction of business conditions for
      multi-level selling" issued by the MoT. To obtain such certificate, applicants must declare a list
      of founding members and persons proposed for key positions as well as their planned structure
      and method of calculating commissions, bonuses and other economic benefits of participants.
      Multi-level selling enterprises must sign a contract (with prescribed contents) with each
      participant in a sales plan. Participants may unilaterally terminate their contract by giving 15
      days notice prior to withdrawing from the sales network, in which case the enterprise must take
      back the goods, must refund all payments made by the participant for the goods, and must pay
      all commissions and other monies to which the participant is entitled. When refunding payments
      made by the participant for goods, the enterprise may deduct an amount for reduction in value
      of the goods (provided that it can prove same) but not more than 10% of their initial value.

      Prohibited conduct of multi-level selling enterprises includes: requiring participants to pay fees
      for study or training courses, seminars, social activities or any other similar activities; requiring
      participants to purchase goods in quantities which an average person clearly could not sell



                                                                                                         56
     within a short period (unless the multi-level selling enterprise permits the participant to pay after
     the goods have been sold); granting one or more specific persons preferential economic
     benefits contrary to the multi-level selling plan or basically for introducing further participants into
     the multi-level selling network without directly selling to consumers. If a participant causes loss
     to a consumer, the enterprise must compensate the consumer and thereafter reclaim damages
     from the participant.

      The draft decree prohibits certain types of person from engaging in multi-level selling and
      prohibits the following goods from this form of distribution: goods the circulation of which is
      prohibited from circulation or the trading of which is restricted; human medicines; all types of
      vaccines; biological products; medical equipment and apparatus; veterinary drugs; plant
      protection agents; toxic chemicals and products containing toxic chemicals."

7.8 Educational Services (CPC 923)
    For-profit foreign invested education projects are regulated by the Law on Foreign Investment in
    Vietnam and Decree 06-2000-ND-CP of the Government dated 6 March 2000 on foreign co-
    operation and investment in the fields of medical examination and treatment, education and
    training, and scientific research. The Ministry of Education and Training is currently finalising
    guidelines for implementation of Decree 06. Not-for-profit foreign invested education projects
    are regulated under Decree 18-2001-ND-CP of the Government dated 4 May 2001 issuing
    Regulations on establishment and operation of foreign cultural and educational establishments
    in Vietnam and implementing Circular 15 of the Ministry of Education and Training dated 31 May
    2003. International co-operation in the education sector is regulated under Decree 165-2004-
    ND-CP of the Government dated 14 September 2004.

     Market Access and Commercial Presence
     Under Decree 06, for-profit foreign invested education projects may be licensed in the following
     areas of education and training:
     (a)    Education at all levels for foreigners currently working in Vietnam for a fixed duration;
     (b)    Secondary education for foreigners and Vietnamese;
     (c)    Professional secondary education, foreign language teaching, vocational training for
           foreigners and Vietnamese; and
     (d)   Tertiary (college, university) and post-graduate education for Vietnamese and foreigners
           in technological science, technology, natural sciences, economic management science
           and languages.

     Under Decree 06, for-profit foreign invested education projects may take the following forms:
      -    JVEs, BCCs and 100% FOEs may be established to undertake (a), (c) and (d) above;
      -    Pilot JVEs and BCCs may be established in Hanoi and HCMC to undertake (b).

     The conditions for establishment and operation of foreign invested educational projects under
     Decree 06 are as follows:
     -     They must accord with the plan for the education and training network as approved by
            the authorized State body;
     -     They must have qualified teaching staff as stipulated by the law of Vietnam;
     -     They must have technical infrastructure, facilities and equipment commensurate with the
            scale and level of education and training; and
     -     They must have appropriate curricula and curricula content as stipulated by the Law on
            Education and other relevant provisions.

     According to the foreign investment regulations, licensing of Decree 06 foreign invested projects
     in the areas of pre-tertiary education, college, undergraduate and postgraduate training or
     equivalent levels is subject to Prime Ministerial approval (although the actual license application
     is submitted to the MPI). Projects in all other areas are subject to licensing by the MPI.
     Provincial and municipal people's committees have no licensing authority with respect to foreign
     invested education and training projects.

     Of note, since Official Letter 180-VPCP-QHQT of the Office of Government dated 10 January
     2003 on Consideration of Foreign Invested Projects in the Field of Education and Training, the
     consideration and licensing of new foreign invested projects in the field of university education



                                                                                                          57
    has been suspended and will remain so until issuance of guidelines by the Ministry of Education
    and Training for implementation of Decree 06. Any applications for investment projects in the
    field of university education which were already under consideration at the time of Official Letter
    180 were permitted to continue to be evaluated, but on the basis of the following principles:
    balancing regional master planning; priority to high quality manpower training, the scientific and
    technical branches, cutting edge technology, and the selection of entities with adequate
    capability and experience in university training and with an international reputation, ensuring a
    stable team of lecturers and a quality training program, with the necessary material facilities.

    Under Decree 18 and Circular 15, the following types of not-for-profit foreign invested
    educational establishments (“FEEs”) may be established in the areas of pre-school education,
    primary and secondary school, tertiary and post-graduate education:
    -     Representative office, with the task of representing its parent foreign educational
          organization in promoting and formulating co-operative projects and programs in the
          education sector which are of interest to Vietnam; and of activating and supervising the
          implementation of agreements on co-operation in education which have already been
          signed with Vietnamese educational organizations;
    -     Joint FEE, established on the basis of an international treaty to which the Socialist
          Republic of Vietnam is a signatory, or on the basis of an agreement between a foreign
          party and a Vietnamese educational organization;
    -     Independent FEE, the operation of which are organized and managed by a foreign
          educational organization and all costs of constructing the material and technical facilities
          are borne by such organization.

    Circular 15 stipulates the following sectors as those in which the Government encourages the
    opening of FEEs: training technicians; training scientific and management personnel to a high
    level in the fields of economics, technology, technical sciences, natural sciences and
    environment; and training experts in the field of culture, fine arts, music and information.
    Circular 15 also details the contents of and procedures for submission and evaluation of license
    application files for establishment of FEEs. The Prime Minister has licensing authority with
    respect to independent FEEs and tertiary and postgraduate FEEs (although the actual license
    application is submitted to the Ministry of Education and Training). The Minister of Education
    and Training has licensing authority with respect to other FEEs. Circular 15 also provides
    guidelines on registration and termination of operations and on inspection of FEEs.

    Domestic Regulation
    All foreign invested education projects are subject to the Law on Education. Amendments to the
    Law on Education were considered at the November 2004 Session of the National Assembly
    and are scheduled for promulgation at the May 2005 Session. In cases where for-profit foreign
    invested educational projects provide education for foreigners only, the curricula and curricula
    content is required only to be registered with the authorized State body (not approved, as is the
    case where they provide education to Vietnamese students).

    Decree 165 provides in detail for the legal framework for international cooperation in the
    education sector by Vietnamese bodies (such as ministries, Government bodies, provincial-level
    people’s committees, socio-political organizations, schools and educational establishments) with
    foreign parties. Decree 165 focusses on international co-operation in the form of ODA and
    foreign non-governmental aid funded cooperation projects and programs with foreign parties;
    exchange of information and experience in education sector; and international conferences,
    meetings and seminars on domestic and foreign education. Decision 165 was effective as of 5
    October 2004.

7.9 Financial Services

    Insurance

    Vietnam’s insurance industry is regulated by the Law on Insurance Business dated 9 December
    2000 (effective 1 April 2001), implementing Decree 42-2001-ND-CP of the Government dated 1
    August 2001 and Circular 98-2004-TT-BTC of the Ministry of Finance dated 19 October 2004,
    and Decree 43-2001-ND-CP of the Government dated 1 August 2001 and Circular 99-2004-TT-



                                                                                                    58
BTC of the Ministry of Finance dated 19 October 2004 on financial regime applicable to insurers
and insurance brokers.

Market Access and Commercial Presence
Under the Insurance Law, foreign invested insurers and brokerage companies are permitted to
set up full business operations in Vietnam in the form of 100% FOEs or JVEs with Vietnamese
partners. However, 100% FOEs are only permitted “subject to the development needs of
Vietnam’s insurance market”, and subject to consideration such as the number of existing
suppliers, the operation of these enterprises, and their impact on the stability of the market,
overall economy, and society. Representative offices may also be established, but may not
conduct business operations.

Under the BTA, Vietnam agreed to allow market access for the cross-border supply of insurance
services to FIEs or foreigners working in Vietnam. Three years after the entry into force of the
Agreement (December 2004), U.S. companies will be permitted to form JVEs with a Vietnamese
partner, as long as U.S. equity participation does not exceed 50%. Five years after entry into
force (December 2006), percentage limitations on U.S. equity will be eliminated. For a period of
three years (between December 2001 and December 2004) after the effective date of the
Agreement, companies with U.S. equity participation are prohibited from providing motor
vehicle, construction and other types of “mandatory” insurance. After this period, JVEs with
some U.S. equity participation will be permitted to provide this type of insurance, and after six
years (December 2007), 100% U.S.-invested companies may be licensed to do so. Until five
years after the effective date of the Agreement (December 2006), reinsurance must be
conducted through the Reinsurance Company of Vietnam and must be in a minimum proportion
of 20%.

Currently, only 3 100% FOEs have licenses to provide life insurance services in Vietnam – AIA,
Prudential, and Manulife Financial Corporation. Allianz/AGF currently has a JV license to
provide non-life insurance services and is seeking to convert this into a 100% FOE license. US
based Crawford Company has also been granted a 100% foreign owned license to provide
investigative services to insurance companies, self-insured companies and government entities.
In May 2003, Vietnam approved a license for France’s Gras Savoye to provide insurance
brokerage services. U.S. insurer Marsh Inc. has recently received a 50-year operating license,
becoming the third 100% foreign-owned company to offer brokerage services in Vietnam.

Several U.S. companies are currently seeking life insurance licenses to sell directly to the
Vietnamese market These include ACE, New York Life, and Liberty Mutual. AIG is also
seeking a general license to provide non-life services in Vietnam.

In an attempt to de-politicize the market entry process of foreign insurance companies seeking
licenses in Vietnam, the MoF is reportedly drafting new regulations and criteria for the approval
of licenses for foreign invested insurance companies. These rules are reportedly based on
similar provisions issued by China’s Insurance Regulatory Commission (CIRC) in May 2004.
[China’s Detailed Implementing Rules on the Administration of Foreign Insurance Companies
(13 May 2004) came into effect on 15 June 2004 and include requirements and application
procedures for foreign insurers’ opening new branches, rules on foreign insurers; disbanding,
liquidating and closure. The rules stipulate that foreign funded insurers operating in China need
to have no less than US$24 million in registered capital or operational capital and that those that
have not met this requirement must do so within two years after the rules come into force.
China’s rules also clarify regulator’s obligations including how long the CIRC (in this case 20
days) has to decide on the approval of applications. To view the PRC’s Detailed Implementing
Rules on the Administration of Foreign Insurance Companies (13 May 2004) – currently
available     only    in     Chinese       –    please     click   on    the     following     link:
http://www.circ.gov.cn/policy/list_detail.asp?Auto_ID=200]




                                                                                                 59
Domestic Regulation
Under Vietnam’s Insurance Law which applies to both domestic and foreign companies, all
insurance companies must: (1) have at least USD$10 million in capital; (2) have experienced
and effective management; and (3) they must provide economic proof that there is a need for
such services.

In 2003, the Prime Minister approved Decision 175-2003-QD-TTg dated 29 August 2003 on the
Strategy for Development of the Insurance Market in Vietnam for the 2003-2010 Period. The
strategy restricts the licensing of foreign invested insurance businesses operating in Vietnam
must conform to the market development scope and requirements, the integration roadmap and
international commitments. Decision 175-2003-QD-TTg states that to receive a license, a
foreign-invested insurance company should: (1) be a large company with experience in the
insurance business with an international network; (2) be a company of a country that is a big
investor or have a large trade and investment volume with Vietnam; (3) be a company with long
term investment, and contribute to market development through training cooperation programs,
technology transfer, and technical assistance to Vietnam.

The strategy further calls for the mobilization of "domestic and foreign resources for socio-
economic development" and is aimed at developing a "comprehensive, safe and healthy
insurance market in response to the demand of the economy and inhabitants, ensuring that
organizations and individuals alike have access to insurance by international standards". It
recognizes the need to "raise enterprises' business and financial capacity to meet the demand
of competition and international integration".

According to Decision 175, foreign invested insurance businesses which invest their collected
insurance premiums in Vietnam will be entitled to the investment mechanisms and policies as
provided for domestic insurance businesses. They are also entitled to expand the content and
scope of operation and increase their charter capital if they satisfy the conditions prescribed by
law.

On 22 September 2003, the MoF introduced (under Decision 153-2003-QD-BTC) a new system
of "watchdog" indicators which insurers must calculate and report to the MoF at the same time
as they lodge their annual financial reports. The new system applies to all insurers in Vietnam
(State owned, private and foreign invested life and non-life insurers) as from financial year 2003.
The new system is designed to detect as early as possible any risk of insolvency of an insurer
so that measures can be taken promptly to resolve such risk and to protect the lawful interests
of insured persons. The new system is designed as a tool for external supervision by the MoF
but also as a tool for internal supervision by insurers themselves.

Under Decree 118-2002-ND-CP of the Government dated 13 October 2003, which became
effective as of 2 November 2003, administrative offences in the insurance sector include
breaches of licensing provisions, unauthorized assignment of insurance contracts, unlawful
competitive acts (such as providing false information about insurance conditions; obstructing,
enticing, bribing, or threatening staff or clients of other insurers, insurance agents or insurance
brokers; unlawful promotions; agreements in restraint of competition causing loss to insurance
purchasers), forcing persons to buy insurance or to use insurance or reinsurance broking
services, breaches of mandatory capital, security deposit and reserve requirements, and
breaches of capital investment restrictions and solvency requirements. Insurance businesses
may be fined up to VND20 million for unlawful competitive acts, up to VND5 million for forcing
persons to buy insurance, and up to VND30 million for breaches of capital investment
restrictions and solvency requirements. A fine of up to VND70 million may be imposed on any
insurer which fails to maintain solvency at any time during its operation.

Effective as of 1 January 2005, Circulars 98 and 99 introduce significant changes in Vietnam's
insurance industry (replacing Circular 71-2001-TT-BTC of the Ministry of Finance dated 28
August 2001 and Circular 72-2001-TT-BTC of the Ministry of Finance dated 28 August 2001
respectively). Circular 98 provides detailed guidelines for the establishment and operation of
insurance enterprises, insurance brokers, insurance marketing activities, reinsurance, insurance
agents, and representative offices of insurance enterprises and foreign insurance brokers in
Vietnam. Of interest, Circular 98 provides the following major changes:



                                                                                                60
-   Applicants for a licence to operate as an insurer or insurance broker will not be able to use
    their real estate holdings to prove financial capacity.
-   The regulations requiring insurers to register their insurance rules, terms and conditions,
    and premium rates have been altered on the principle that insurers are liable for the legality
    of these application files, so the procedures have been simplified and the MoF will now just
    certify that an insurer has fulfilled its obligation to register within the time-limit of 3 days from
    the date an insurer lodges complete documents. The MoF will no longer automatically
    check the contents of the application during the registration process, however, as industry
    regulator, it retains the right to check if it so wishes.
-   The provisions requiring insurers to obtain approval of life, health and personal accident
    insurance products prior to underwriting same have been expanded. Insurers must now file
    more material comprising sample form for request for insurance cover, the insurer's
    explanatory material on its products and services, sales literature and sample forms of
    information which a client must disclose and sign when purchasing insurance. In the case of
    life products which distribute dividends, the bases for calculating premium for the proposed
    product must include principles, methods and the percentage dividend distribution the
    insurer promises to clients which must not be less than 70% of the total revenue from the
    insurance contract following the method agreed by the MoF. (This provision will only apply
    to contracts signed as from 1 January 2006). The application file for approval of a life
    product must be signed by the appointed actuary.
-   There is a completely new section on appointed actuaries of life insurers, for the first time in
    Vietnam (although applicable in many other markets around the world). It will also apply as
    from 1 January 2006. The aim is to make the life product design stage more professional
    and to raise the quality of financial management of insurers. An appointed actuary must
    have at least 5 years' work experience as an actuary in the life insurance sector, and be a
    member of an internationally recognized association of actuaries. The requirement in an
    earlier draft of Circular 98 for an appointed actuary to have Vietnamese citizenship has not
    been adopted. The actuary must be approved by the MoF, and will fulfil tasks of signing
    applications for approval of insurance products, establish mathematical reserves for life
    insurance contracts, approve distribution of any annual surplus of the policy owners' fund,
    and maintain a watch over the insurer's solvency.
-   Insurers may only arrange reinsurance overseas with companies which comply with
    international credit ratings; and insurers may only retain a maximum liability for each risk or
    each loss up to 10% of owner's equity.
-   The provisions on agents have been amended so that any agent who commits a serious
    breach of law will be unable to obtain an agency with another insurer for 3 years.
-   Insurers are now restricted to using a maximum of 2% of insurance premiums actually
    retained in a fiscal year to expend on measures of loss prevention and limitation.

Circular 99 provides for the following notable changes:
-   The sections on establishment of insurance reserves by non-life insurers and by life
    insurers have been re-written.
-   For non-life insurance, the method of establishing unearned premium reserve as a
    percentage of total insurance premiums will be abolished from January 2006, and in the
    meantime the unearned premium reserve for goods' insurance has been increased from
    17% to 25% of the total retained premiums, being consistent with international practice and
    making for a safer industry.
-   Circular 99 also contains detailed instructions for non-life insurers using the method of
    establishing reserves as a co-efficient of the term of insurance contracts, and the provisions
    on the reserve for payment of unresolved claims have been re-written for consistency with
    international practice and to make the reserve more accurate.
-   The regulations on reserving by life insurers have also been re-written, but both non-life
    insurers and life insurers may use more prudent or more conservative reserving methods
    than those specified in Circular 99 with approval from the MoF.
-   Some of the principles for calculation of the timing of receipt of revenue have been
    amended so that in some cases insurers must account for revenue before premium is
    actually paid.
-   There are new provisions requiring accounting for policy owners' fund and shareholders
    fund to be separate from accounting for premiums received, in conformity with international
    practice and as a further protection to policy owners.



                                                                                                      61
        -   There is a new section requiring insurers and brokers to announce publicly certain
            information to meet the information needs of the public and of people buying insurance, and
            again this new regulation is consistent with international (and indeed Vietnam) market
            practice.

        Banking

        Decision 42-2003-QD-NHNN of the State Bank of Vietnam dated 13 January 2003 outlines
        plans for reform in Vietnam’s banking sector. Decision 109-QD-NHNN of the State Bank of
        Vietnam dated 30 January 2004 lists legislation for issuance by the State Bank in 2004.

        Market Access and Commercial Presence
        Banking services in Vietnam are governed by the Law on Credit Institutions dated 12 December
        1997. Currently, licensing of foreign investment in banking services is subject to the
        development needs of Vietnam’s banking sector, and takes into consideration the number of
        credit institutions in the market, the scope of the credit institutions, and their impact on the
        economy.

        At its May-June 2004 Session, the National Assembly passed the Law on Amendment of and
        Addition to the Law on Credit Institutions. The amendments to the Law on Credit Institutions
        became effective as of 1 October 2004. Under the amended Law on Credit Institutions, the
        forms in which foreign commercial banks are permitted to establish a commercial presence in
        Vietnam will be expanded from joint venture banks (with foreign capital contribution not
        exceeding 50% of charted capital), foreign bank branches and representative offices to also
        include 100% foreign owned banks.

        Under Vietnam's BTA commitments, U.S. financial service providers may establish bank
        branches and joint ventures with Vietnamese banks - this is currently permitted under the Law
        on Credit Institutions. During the first nine years of the BTA (ie until December 2010), U.S.
        equity in joint venture banks must be between 30% and 49%. Under the BTA, U.S. banks will
        be permitted to establish 100% U.S. owned subsidiary banks after December 2010 - in fact, this
        is now permitted under the amended Law on Credit Institutions as of 1 October 2004 (more than
        6 years ahead of schedule).

        Another important reform introduced by the amended Law on Credit Institutions is that, as of 1
        October 2004, foreign credit institutions are permitted to contribute capital to and purchase
        shareholdings in banks operating in Vietnam in accordance with Government regulations (not
        yet passed). The SBV is currently revising its regulations governing foreign shareholdings in
        Vietnamese joint stock commercial banks ("JSCBs") to implement this reform. The revised
        regulations are expected to increase the cap on shareholdings of any one foreign organization
        in JSCBs from 10% to 15%. The cap on shareholdings of any one foreign individual is expected
        to remain unchanged at 10% and the cap on total foreign shareholdings is expected to remain
        30% of charter capital.

        Provisional regulations on procedures for registration for SBV approval of share listings and
        public share issues by JSCBs were issued under Decision 787-2004-QD-NHNN of the State
        Bank of Vietnam dated 24 June 2004. Only after SBV approval is obtained may a JSCB then
        apply to the State Securities Commission ("SSC") for permission to list shares and conduct a
        public issue at a Securities Trading Centre - the SSC procedures are not dealt with in Decision
        787.

        As of December 2007 - eight years after the effective date of the BTA - credit institutions with
        U.S. equity will be allowed to issue credit cards on a national treatment basis.

        To implement the amendments to the Law on Credit Institutions with respect to foreign
NEW!!
        investment in Vietnam's banking sector, a revised decree on the organization and operation of
        foreign credit institutions and representative offices of foreign credit institutions in Vietnam is
        currently being drafted by the SBV (to replace Decree 13-1999-ND-CP of the Government
        dated 17 March 1999 which currently governs establishment of foreign credit institutions in
        Vietnam). However, the current draft of the revised decree has been criticized as not meeting



                                                                                                        62
the BTA commitments, in particular with respect to national treatment. Reportedly, instead of
entitling foreign credit institutions to provide the same products and services which domestic
banks are currently permitted to provide, the draft revised decree provides for the SBV to issue
permits to foreign banks on a discretionary case-by-case basis. The draft revised decree also
imposes a number of restrictions on foreign credit institutions which do not apply to domestic
credit institutions, e.g. foreign bank branches must have legal capital requirements valued at
VND20 billion; 100% foreign owned banks must have legal capital requirements of VND10
billion. A welcome reform is deregulation of the ratio of a foreign party's capital contribution in a
joint venture bank.        However, only domestic banks (not other domestic non-banking
organizations) will be permitted to partner with foreign banks in joint venture banks. The
drafting of the revised decree is expected to be completed in the first quarter of 2005.

Vietnam has thus far issued commercial branch licenses to U.S. banks Citibank (in Hanoi and
Ho Chi Minh City), JP Morgan Chase and Far East National Bank (in Ho Chi Minh City). Other
foreign banks that have been granted commercial licenses include ANZ (in Hanoi and Ho Chi
Minh City), Hong Kong & Shanghai Bank (in Ho Chi Minh City), and Singapore’s United
Overseas Bank (in Ho Chi Minh City).

The SBV is drafting an Ordinance on Banking Operations of Non-Credit Institutions, but this is
understood to still be in initial draft stage.

Domestic Regulation

Limitations on VND Deposits
Under the BTA, Vietnam has agreed to an eight to ten year phase-in period over which U.S.
bank branches will be permitted to increase the amount of deposits relative to the branch’s paid-
in capital that they can accept in Vietnamese dong from Vietnamese legal and natural persons
with which they do not have a credit relationship. After this phase-in period, U.S. bank
branches will be entitled to full national treatment.

Official Letter 404-NHNN-CNH of the State Bank of Vietnam dated 22 April 2003 restates the
commitment made by Vietnam in the BTA with regard to the percentage of charter capital and
the limit on VND deposits that an U.S. foreign bank branch is allowed to accept from
Vietnamese legal entities or natural persons with which it does not have a credit relationship.
According to commitments made in the BTA, as of 10 December 2002, U.S. foreign bank
branches were allowed to accept up to 100% of their chartered capital in VND deposits. As of
10 December 2003, U.S. banks are now allowed to accept up to 250% of their chartered capital
in VND deposits.

Under Decision 1084-2003-QD-NHNN of the State Bank of Vietnam dated 16 September 2003
Adjusting the Rate for Acceptance of VND Deposits Applicable to Foreign Bank Branches
Operating in Vietnam, non-U.S. foreign bank branches are now allowed to accept non-term and
term deposits in VND equal to 50% of their statutory capital (as of 1 October 2003).

As of 1 April 2004, under Decision 327-2004-QD-NHNN of the State Bank of Vietnam dated 1
April 2004, the SBV has eased limitations on VND deposits in the case of foreign bank branches
from EU countries. EU foreign bank branches are now allowed to accept VND deposits up to
250% of chartered capital from Vietnamese legal entities and natural persons with which it does
not have a credit relationship. The equal treatment of EU foreign bank branches with US foreign
bank branches was granted under Decision 327 in exchange for an increase in apparel quotas
from the EU of 55 – 70% for 2004, and permission for Vietnam to use leftover quotas from 2003.

Joint venture banks have been permitted to receive both VND on-call and term deposits from
such depositors without limit since 1 December 1999 under Decision 424-1999-QD-NHNN5 of
the State Bank of Vietnam dated 30 November 1999.

Foreign Currency Regulation
An Ordinance on Foreign Exchange is scheduled to be drafted in 2005 (to replace existing
Decree 63 on Foreign Exchange Control dated 17 August 1998 (as amended 17 January 2001))
and is expected to be issued by the Standing Committee of the National Assembly in 2006.



                                                                                                  63
        Foreign currency is currently regulated under various Decisions and implementing documents
        issued by the SBV.

        Under Decision 46-2003-QD-TTg of the Government dated 2 April 2003, the Prime Minister
        effectively abolished the obligation for compulsory conversion of current income in foreign
        currency by Vietnamese economic organizations, FIEs, foreign BCC parties, foreign company
        branches, foreign contracts, contracts in partnership with foreign entities. Originally introduced
        in September 1998 at 80%, the percentage of foreign currency income which was required to be
        sold to Vietnamese banks was gradually decreased in August 1999, May 2001 and May 2002 to
        50%, 40% and 30% respectively. As of 7 May 2003, the percentage was reduced to 0% under
        Decision 46.

        On 21 May 2003, the SBV issued Circular 08-2003-TT-NHNN providing for the implementation
        of the significant reform introduced by Decision 46 above. With respect to the obligation to sell
        foreign currency, Circular 08 repeats the 0% provision of Decision 46 and entitles resident
        organizations to use any legitimate foreign currency revenue for necessary requirements or to
        sell to the banks. Resident organizations that are entitled to purchase foreign currency to satisfy
        their current transactions and other permitted foreign exchange transactions (upon presentation
        of prescribed documentation) include: resident Vietnamese organizations such as economic
        organizations, socio-politic organizations, military forces, employment organizations, social
        funds, charity funds, FIEs, foreign BCC parties, foreign company branches and foreign
        contractors. These resident organizations are not entitled to any guarantee of foreign currency
        availability and must rely on the foreign currency reserves of credit institutions. A guarantee of
        foreign currency availability is only granted by the Prime Minister to resident FIEs and foreign
        BCC parties that invest in “specially important” projects in accordance with Government
        programs. In such case, if the selling bank does not have sufficient foreign currency funds to
        satisfy their foreign currency needs, the bank must report to the SBV which will arrange
        supplementary foreign currency funds. Resident FIEs and foreign BCC parties that invest in
        projects for construction of infrastructure facilities or in other important projects are entitled to an
        assurance (only) of foreign currency balancing, which means if the selling bank does not have
        sufficient foreign currency funds to satisfy their foreign currency needs, the bank must report to
        the SBV which will make a submission to the Prime Minister to consider and issue a decision on
        assistance in foreign currency balancing.

        Circular 08 also adds new provisions on (i) the purchase of foreign currency for prior payment to
        foreign parties on contracts for the import of goods and services which do not yet have customs
        declarations and for advance payment to foreign parties on services contracts; and (ii) the
        purchase of foreign currency for remittance of profits abroad by foreign contractors. Purchase of
        foreign currency for repayment of principal, interest and fees on foreign loans and for remittance
        of foreign currency overseas by FIEs and foreign BCC parties are no longer specifically dealt
        with.

        In another effort to give the currency market more freedom to operate, the SBV issued Decision
        679-2002-QD-NHNN on Foreign Currency Trading by Credit Institutions Authorized to Conduct
        Foreign Currency Trading to broaden the trading band for banks to set their United States dollar
        ("USD") exchange rates. As from 1 July 2002, credit institutions can set their spot rates for USD
        within 0.25% of the SBV’s inter-bank exchange rate, previously set at 0.1%. In addition to this,
        the SBV also made across the board increases in bands for the forwards and swap USD
        transactions of banks, ranging from 0.5% for 7-30 days to 2.5% for 91-180 day periods
        (previously 0.4% and 2.35% respectively). Now, under Decision 648-2004-QD-NHNN of the
        State Bank of Vietnam dated 28 May 2004 amending Decision 679, commercial banks are free
        to agree with their customers on the forward exchange rate between VND and US dollars so
        long as it does not exceed a prescribed limit (according to a prescribed formula); and are free to
        agree with their customers on the forward exchange rate between VND and other foreign
        currencies or as between different foreign currencies without the above limit.

        On 10 November 2004, the SBV issued Decision 1452-2004-QD-NHNN on Foreign Exchange
        Transactions by Credit Institutions Permitted to Conduct Foreign Exchange Operations in
        Vietnam, repealing Decision 17-1998-QD-NHNN7 of the State Bank of Vietnam dated 10
        January 1998 and its regulations on foreign exchange transaction. Decision 1452 updates
NEW!!


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Vietnam's regulations on foreign exchange transactions by credit institutions, provides for spot
forward and swap transactions, as well as regulates the new commodity of “option to conduct a
foreign exchange transaction” and other foreign exchange transactions as permitted by SBV.
Decision 1452 significantly simplifies the foreign exchange controls of authorized banks in
Vietnam. Of note, authorized banks are no longer required to satisfy prescribed conditions and
obtain specific licenses from the SBV to conduct spot, forward and swap transactions. The
mandatory contents of transaction contracts are no longer prescribed, and transacting parties
are now free to agree on the contents of the transaction contract. Authorized banks however
must still comply with the foreign currency position specified by current SBV regulations, but
they may maintain a total value of options without corresponding transactions at a maximum of
10% of their equity. Authorized banks are no longer permitted to collect transaction fess for spot
forward and swap transactions, but are permitted to do so for options to conduct a foreign
exchange transaction provided fees are specified in the transaction contract. The term
applicable to forward and swap transactions between VND with a foreign currency may now be
anything from 3 to 365 days. There is no term restriction on such transactions between foreign
currencies or on options to conduct a foreign exchange transaction. However, transacting
parties must fix and record in the transaction contract the date of maturity for payment and
transfer of monies.

On 21 January 2003, the SBV issued Official Letter 78-NHNN-QLNH providing guidelines on
opening foreign currency accounts overseas. Under Official Letter 78, credit institutions
authorized to conduct foreign exchange transactions may open an additional foreign currency
account overseas at the discretion of the general director but subject to registration of the
account at the SBV. On 22 March 2004, the SBV issued Decision 293-2004-QD-NHNN, under
which foreign bank branches and joint venture banks are now entitled to decide at their own
discretion to open at-call deposit or fixed term deposit accounts at credit institutions overseas
(provided that the opening and operating of bank accounts overseas complies with foreign
exchange control and other regulations of Vietnam).

Foreign Currency Lending
Seen as a boost for resident developers who for a long time have been seeking the SBV’s nod
to borrow in foreign currencies, the SBV amended the categories of resident borrowers in
foreign currency from credit institutions in Vietnam on two occasions in 2003. Amending its
Decision 418-2000-QD-NHNN7 dated 21 September 2000, the SBV first issued Decision 343-
2003-QD-NHNN dated 10 April 2003 (effective 20 May 2003) and then Decision 996-2003-QD-
NHNN dated 22 August 2003 (effective 17 September 2003).

Under Decision 966, the range of capital requirements for which foreign currency loans may be
made by credit institutions in Vietnam to resident borrowers now comprises: (1) to make
payment to overseas parties for the import of goods and services in support of production and
business operations (as under Decision 343); (2) to implement investment projects and plans for
production and trading of goods and services for export; investment projects and plans for
production and trading which earn foreign currency revenue within the territory of Vietnam (as
under Decision 343); (3) to negotiate export documentation (formerly, "discounting export
documentation" under Decision 343); (4) to provide loans to employees going overseas to work
for a definite period (as under Decision 343); (5) to implement investment projects pursuant to a
decision of the Prime Minister (formerly, only "overseas direct investment projects pursuant to
decision of Prime Minister" under Decision 343; (6) to make early repayment of a foreign debt if
the loan satisfies the following conditions: the investment project or plan for production and
trading has used such foreign loan effectively; the enterprise has the ability to repay principal
and pay interest on the foreign currency loan; the costs are less than those for obtaining a
foreign loan (formerly, only the first condition applied under Decision 343); (7) to meet
requirements for short-term loans for production and trading of borrowers which do not have any
foreign currency revenue if the credit institution permitted to conduct foreign exchange activities
has guaranteed in writing to sell foreign currency [to such borrowers] or signed a forward
contract for purchase of foreign currency for loan repayment (formerly, Decision 343 did not
provide for the short-term limit nor require a written forex agreement); (8) with respect to other
requirements for capital, prior approval in writing from the SBV Governor is required (as under
Decision 343). Further, now, where any foreign currency loan is used domestically, the client
must sell the amount of foreign currency of such loan to the lending credit institution (under



                                                                                                65
Decision 343, the obligation to sell back foreign currency was limited to where the foreign
currency loan had been made for the purpose of payment of overseas parties, expressly
"payment for import of goods and services in support of production and business operations,
payment in support of essential financial requirements of employees going overseas to work for
a limited period, and repayment of foreign loans").

Interest Swaps
On 30 September 2003, the SBV issued Decision 1133-2003-QD-NHNN providing regulations
on performing transactions with interest swaps, effective 1 November 2003. Eligible cases for
interest swap include interest swap for VND or any foreign currency between a bank and a
business borrowing capital from the bank, between a bank and a business borrowing capital at
another credit institution, between the two banks and between a bank and a foreign credit
institution. In order to perform interest swaps, a bank must have total equity of VND 200 billion
or more or assets with equivalent value; have sufficient procedures for interest swap including
risk prevention; have positive net profit from interest swap transactions otherwise maximum
negative net profit is allowed to be equal to 5% of total equity of the bank. In case of a business,
it must satisfy two conditions: have transactions of borrowing capital or buying goods in form of
deferred payments and have sufficient financial capacity.

The SBV's Decision 1229-2003-QD-NHNN allows large commercial banks to offer a commodity
swap service to help clients wishing to control the risks of price fluctuation. Decision 1229 is
also expected to offer commercial banks a chance to diversify their services in order to get
benefits from price fluctuation. Local banks can even avert the possible risks by re-swapping
such prices with an overseas bank. Decision 1229 specifies that only banks with at least
VND200 billion in chartered capital can offer the service. These banks need to obtain the SBV's
permission to engage in foreign exchange for the commodity swap service. The SBV in 2002
has allowed U.S. Citibank branches in Vietnam to provide the service for Swiss cement
producer Holcim as a pilot scheme.

Under Decision 648 (see "Foreign Currency Regulation" above) commercial banks may now
engage in forward and swap deals with their clients for 3 to 365 days, instead of 7 to 180 days
as at present. The commercial banks can now offer such derivatives for their clients who want
to buy the US dollar in longer terms. Import and export companies can also fix the dollar/dong
exchange rate for a longer period.

Loan Security
The SBV has issued Circular 07-2003-TT-NHNN dated 19 May 2003 providing guidelines for
implementation of a number of provisions on security for loans from credit institutions. Circular
07 provides guidelines on a number of the provisions of Decree 178-1999-ND-CP of the
Government dated 29 December 1999 on Security for Loans Obtained from Credit Institutions
(as amended by Decree 85-2002-ND-CP of the Government dated 25 October 2002). Circular
07 omits the requirement for any mortgages of assets attached to land to be accompanied by a
mortgage of the associated land use rights (this mandatory requirement was abolished by
Decree 85). Where there are multiple guarantors of a single borrower, they will be jointly liable
to perform the guarantee, unless there is a specific agreement or legal regulation to the effect
that the guarantee is of independent sections. Circular 07 reiterates the relaxation of the "one
lender” rule introduced by Decree 85, now allowing a single asset to be used as security for
multiple obligations to multiple lenders, and repeats the relaxed conditions for banks to provide
loans without collateral also introduced by Decree 85. The autonomy in loan decision-making
granted to credit institutions in 2002 has now been enshrined in the amended Law on Credit
Institutions as of 1 October 2004.

Interest Rates
Effective 1 February 2002, commercial banks have been given greater autonomy over lending,
including improved policies aimed at making access to loans for small and medium enterprises
easier. Effective as of 1 June 2002, loan interest rates have been de-regulated. Under
Decision 546-QD-NHNN of the State Bank of Vietnam dated 30 May 2002, commercial banks
may now set their own interest rates on VND loans (as they been able to do for foreign currency
loans since mid-2001). The SBV increased the basic interest rate for VND loans to
0.625%/month or 7.5% per year for market reference purposes under Decision 285-2003-QD-



                                                                                                 66
NHNN of the State Bank of Vietnam dated 31 March 2003, effective 1 April 2003. This is the
second increase since statutory interest rate caps on VND loans were removed as of 1 June
2002. On 30 July 2003, the SBV issued Decision 834-2003-QD-NHNN adjusting the maximum
interest rates for USD deposits of legal entities at credit institutions from 0.5% down to 0.4% per
annum for term deposits up to six months, and from 1% down to 0.8% per annum for term
deposits over six months. The maximum interest rate for on-call deposits remains set at 0.1%
per annum. Decision 834 was effective as of 1 August 2003.

Decision 1429-QD-NHNN of the State Bank of Vietnam dated 29 October 2003 confirmed a
number of interest rates applicable from 1 November 2003: the basic interest rate for VND loans
remains 7.50% per year (0.625% per month); the refinancing rate of the SBV applicable to other
credit institutions is 5.0 % per year (0.416% per month); and the discount rate of the SBV to
other credit institutions is 3.0% per year (0.250% per month). The basic interest rate for VND
loans remains at 0.625%/month or 7.5% per year for market reference purposes.

Compulsory Reserves
On 4 July 2002, the SBV issued regulations on compulsory reserve payments in VND by credit
institutions involved in the inter-bank electronic system. Decision 700-2002-QD-NHNN applies
from the compulsory reserve period for July and sets out the responsibilities of credit institutions,
provincial and municipal SBV branches, the SBV Transaction Office and the Information and
Technology Department of the SBV relating to compulsory reserve deposits of credit institutions
involved in the inter-bank electronic system.

Decision 1081-2002-QD-NHNN of the State Bank of Vietnam dated 7 October 2002 allows
banks to keep USD or any other foreign currency at as much as 30% of their chartered capital.
Previous forex regulations capped the forex position of banks at no more than 15% for USD,
and 30% for the basket of foreign currencies. The rule on the money basket remains
unchanged at 30% under Decision 1081, but banks can keep any single foreign currency at their
will to the limit of 30%. However, Decision 1081 expressly excludes foreign bank branches or
joint venture banks.

Decision 1277-2002-QD-NHNN of the State Bank of Vietnam dated 18 November 2002
(effective as of December 2002) adjusts the compulsory reserve ratio of foreign currency
deposits on call and on terms of less than 12 months to 5% (down from 8%) of the total of such
deposits, applicable to foreign bank branches and joint venture banks, as well as State
commercial banks, commercial shareholding banks, co-operative banks, finance companies,
and people’s credit fund. This was the second reduction in 2002. The reserve ratio was
reduced from 10% to 8% by Decision 270-2002-QD-NHNN of the State Bank of Vietnam dated 1
April 2002.

As of August 2003, the compulsory reserve obligations of credit institutions have been adjusted
under Decision 581-2003-QD-NHNN of the State Bank of Vietnam dated 9 June 2003 on
Regulation of Compulsory Reserves of Credit Institutions and Decision 582-2003-QD-NHNN of
the State Bank of Vietnam dated 9 June 2003 on Adjustment of Compulsory Reserve Ratio of
Credit Institutions. Decision 582 reduces the compulsory reserve ratio of foreign currency
deposits on call and on terms of less than 12 months to 4% (down from 5%) of the total of such
deposits, applicable to foreign bank branches and joint venture banks, as well as State
commercial banks, commercial shareholding banks, co-operative banks, finance companies,
and the Central People’s Credit Fund. (The above ratio was reduced from 10% to 8% in May
2002 and from 8% to 5% in December 2002). Decisions 581 and 582 now also provide for
credit institutions to maintain compulsory reserves with respect to foreign currency term deposits
from 12 to less than 24 months, at the rate of 1% of the total of such deposits, applicable to
foreign bank branches and joint venture banks, as well as State commercial banks, commercial
shareholding banks, co-operative banks, finance companies, finance leasing companies, and
the Central People’s Credit Fund.

Beginning 1 July 2004, the compulsory reserve ratio for VND deposits has been adjusted.
Under Decision 796-2004-QD-NHNN of the State Bank of Vietnam dated 28 June 2004, for VND
deposits under 12 months, the compulsory reserve rate increases from 2% to 5% of the total
VND deposit balance, applicable to State owned banks, joint venture banks, foreign bank



                                                                                                  67
branches and financial companies. The rate of 4% will be applied to the Bank for Agriculture
and Rural Development, up from the previous 1.5%. A rate of 2% is applicable for cooperatives
and the People’s Credit Fund, up from the previous 1%. For VND deposits of between 12 and
24 months, the rate is 2%, up from the previous 1% rate.

Decision 796 also adjusts the compulsory reserve ratio for deposits in foreign currencies. For
on-call deposits and term deposits under 12 months, the ratio is now 8%, up from the previous
4% of the total balance of foreign currency deposits. For such deposits from 12 to 24 months,
the ratio is now 2%, up from 1% previously.

From 5 August 2004, the interest rate on compulsory reserve deposits of credit institutions at the
SBV Bank within the above prescribed compulsory reserve ratios will be 1.2% for compulsory
reserves in Vietnamese dong and 0% for foreign currency deposits; the interest rate for any
surplus above the prescribed compulsory reserve ratio in foreign currency or in Vietnamese
dong will be 1%, according to Decision 923-2004-QD-NHNN dated 20 July 2004 providing
regulations on compulsory reserves of credit institutions. Decision 923 amended Article 16.1 of
Decision 581 and Article 6 of Decision 582 above.

Bank Guarantees
On 11 February 2003, the SBV issued new regulations on bank guarantees. Decision 112-
2003-QD-NHNN is applicable to guarantees provided by joint venture banks, foreign bank
branches and other Vietnamese credit institutions. Now, all domestic and foreign organizations
and individuals may be provided with guarantees, except for the (i) members of the board of
management or inspection committee or the general director or deputy general director of the
credit institution; (ii) officials and staff of the credit institution who undertake the task of
evaluating and making a decision to provide a guarantee; (iii) parents, spouses or children of the
persons listed in (i) above; (iv) parents, spouses or children of the director or deputy director of a
branch of a credit institution (at the discretion of the credit institution). (Previously, the
guarantee regulations prescribed the types of entities which could be provided with bank
guarantees, rather than the exceptions as now.)

A credit institution may not provide guarantees without security or with preferential treatment to
its auditor, its chief accountant, inspectors, major shareholders, or any enterprise in which any
person listed in (i) above owns more than 10% of the charter capital. The total amount of any
guarantee made to these persons is restricted to 5% of the equity of the credit institution.

The conditions for bank guarantees have been simplified, giving credit institutions larger
decision-making powers. Entities seeking for bank guarantees are no longer required to have (i)
a good credit rating with the bank or (ii) a feasible and effective investment projects or
production/business plan, foreign economic organizations are no longer required to be
authorized to conduct investment or business or to participate in tendering in Vietnam (although
the regulations on control of foreign loans are still applicable). The conditions now are quite
general such as (i) the purpose for which the guarantee is provided must be lawful and (ii) the
entity must have the financial capacity to discharge the guarantee obligation within the time-limit
promised. The Decision also relaxes provisions on the joint guarantees and security. Detailed
procedural requirements for joint guarantees are no longer stipulated and whether or not
security will be taken for a bank guarantee is now at the complete discretion of the bank and its
client (except in the cases referred above on the entities seeking for bank guarantees.

Land Use Rights ("LURs") as Collateral for Overseas Loans
Legislative reforms to allow FIEs to use LURs as collateral for loans provided by overseas banks
have been deferred. A proposal to introduce this reform was submitted by the SBV to the
Government early in 2003 and was reportedly supported by the Government. It was widely
anticipated that the revised land law would introduce this reform. The MPI had also planned to
provide for this reform under the Law on Foreign Investment (which currently restricts FIEs to
using LURs as collateral for loans from onshore banks only). However, the Law on Land
(Amended) passed by the National Assembly in November 2003 does not provide for the use of
LURs as collateral for overseas loans. Reportedly, the Government is now considering allowing
FIEs to use LURs as collateral for overseas loans on a trial basis only.




                                                                                                   68
        Issuance of bonds, short-term or long-term deposit certificates and promissory notes
        On 22 November 2002, the SBV issued Decision 1287-QD-NHNN on Issuance of Valuable
        Papers by Credit Institutions to Raise Domestic Capital. Decision 1287 allows the credit
        institutions such as State owned credit institutions; State and People’s Shareholding credit
        institutions; Central People’s Credit Fund; and Joint-Venture credit institutions and other foreign
        credit institutions operating in Vietnam to issue valuable papers beginning 1 January 2003. In
        the case of State owned credit institutions, joint venture credit institutions and other foreign
        credit institutions, the decision on approval of issuance of valuable papers will be made by the
        SBV Governor. Permission from the SBV will be granted within 15 days of application if a credit
        institution satisfies the following conditions: 1) it complies with the regulations on prudential
        limits stipulated in the Law on Credit Institutions and 2) it is assessed by the Banking
        Inspectorate as being in healthy financial state. In addition, the SBV Governor will have to
        approve the issuance of valuable papers by State owned credit institutions, joint-venture credit
        institutions and other foreign credit institutions. These valuable papers may be purchased by
        Vietnamese organizations and individuals and foreign organizations and individuals earning a
        living and operating legally in Vietnam. Valuable papers may be issued in VND or foreign
        currencies and they are fully transferable. Credit institutions may decide on the applicable
        interest rate “consistent with market interest rates and ensuring economic effectiveness and
        operational safety of the credit institution.”

        Effective as of 9 December 2003, Decree 141-2003-ND-CP of the Government dated 20
        November 2003 on Issuance of Government Bonds, Bonds Guaranteed by the Government and
        Local Authority Bonds replaces the earlier Decree 01-2000-ND-CP of the Government dated 13
        January 2000 Issuing Regulations on Issuance of Government Bonds. Reportedly, Decree 141
        provides for bonds in foreign currency to be issued to credit institutions operating under the Law
        on Credit Institutions, insurance companies, insurance funds, investment funds legally operating
        in Vietnam, and branches of foreign investment operating in Vietnam to fund key national
        projects upon the Prime Minister’s approval.

        Recently issued Decision 51-2004-QD-TTg of the Government dated 31 March 2004 on
        Government's Action Program for Implementation of Resolution of 9th Conference of the
        Executive Committee of the Central Party has scheduled Decision 1287 (above) for amendment,
        in order to implement Article 46 of the Law on Credit Institutions after its amendment by the
        National Assembly in May 2004. No timing for amendment has been announced.

        Central Bank Restructuring
        The SBV is reportedly preparing to undertake the SBV Reform Project aimed at restructuring
        plans to implement monetary policies more efficiently. Under the Reform Project, the SBV will
        establish a system of monetary policy instruments that fall in line with international practice.
        These will include open market operations, and discount and rediscount operations. The SBV
        will also establish banking inspection standards in accordance with the Basel Committee on
        Banking Supervision.

        To ensure the safety of all operations of credit institutions in Vietnam, the penalties for
        administrative offences in the field of banking and monetary operations were updated under
        Decree 202-2004-ND-CP of the Government dated 10 December 2004. Administrative offences
NEW!!   include violations with respect to establishment and operating licenses, structures of credit
        institutions, management, administration, auditing, capital mobilization, lending, guarantee,
        discount, financial leasing, foreign currency management, gold trading management, payment,
        procurement, investment into fixed assets and real estate trading, illegal competition and others.
        Violations of regulations governing establishment and operating licenses of credit institutions,
        capital mobilization, foreign exchange management, and gold trading management may be
        fined up to VND70 million. Violations relating to administration, management and audit may be
        fined up to VND40 million. Violations relating to lending, bank guarantees, discounts and
        financial leasing or on payment related to the purchase of, or investment in, fixed assets and
        real estate business may be fined up to VND50 million.




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Non-Banking Financial Services

Implementing the Law on Credit Institutions, Decree 79-2002-ND-CP of the Government dated 4
October 2002 on Organization and Operation of Finance Companies provides for the
establishment and operation of finance companies in Vietnam, including joint venture and 100%
foreign owned finance companies, with no distinction between the scope of activities of foreign
invested and domestic finance companies.            Previously, State owned corporations had
established prototype joint-stock finance companies pursuant to the 1997 Law on Credit
Institutions but in the absence of specific regulations governing such finance companies. A
“finance company” is defined as a non-banking credit institution which uses its own capital or
raises capital to conduct lending and investment and provides financial and monetary
consultancy services, but which is not permitted to provide payment services or to receive
deposits for a term of less than a year. Foreign exchange activities and debt factoring may be
permitted with SBV approval. Finance companies will be licensed by the SBV for a 50 year
duration (extendable). Decree 79 also regulates commencement of operations (mandatory
within 12 months of licensing), establishment of branches and subsidiaries, raising capital and
credit activities. Finance companies are subject to mandatory requirements with respect to risk
reserves, prudential limits (the total loan balance to any one customer may not exceed 15% of
the equity of the finance company), reporting and inspection, as currently applicable to other
credit institutions.

Circular 06-2002-TT-NHNN of the State Bank of Vietnam dated 23 December 2002 provides
guidelines on a range of matters relating to the organization and operation of finance companies
including State owned finance companies, shareholding finance companies, finance companies
that are subsidiaries of credit institutions, joint venture finance companies and 100% foreign
owned finance companies. Issues covered include: 1) Shareholders, shares, share certificates
and charter capital (including capital contribution ratios, capital assignment and profit
distribution); 2) Conditions for the issuance of license for the establishment and operation of a
finance company (including additional conditions applicable to the foreign party in a joint venture
finance company and 100% foreign owned finance company); Contents of and procedures for
submission and consideration of, application files for a license for a finance company (including
principal contents of a charter); 3) Deposit of charter capital of a finance company into escrow
account at least 30 days prior to the date of commencement of operations, and transfer of the
amount from the escrow account into its operating accounts upon commencement of operations;
4) Requirements for commencement of operations; 5) Grounds for withdrawal of license; 6)
Changes in finance companies requiring approvals from the SBV; 7) Organizational structure,
management, operation, and control of finance companies (including regulations on standards
of professional ethics; expert qualifications and executive capability of board of management,
inspection committee, and general director).

General provisions on raising capital, on credit provision, on opening deposit accounts and
conducting fund services, on restrictions to ensure the safety of operations, on finance and
accounting, on auditing and reporting, on inspection, special control, bankruptcy and liquidation
apply to finance companies as detailed in Decree 79 and guidelines of the SBV and the MoF.
Standard forms of license are appended to Circular 06. Finance companies established and
operating pursuant to a license issued by the SBV prior to the date of effectiveness of Decree
79 (19 October 2002) are not required to apply for re-issuance of their license, but they must
amend their charters in compliance with Decree 79 and relevant guidelines by 19 October 2003.
The SBV is authorized to amend the contents of and scope of operation in previously issued
finance company licenses in accordance with the provisions of Decree 79 and the guidelines of
the SBV. The duration of operation of already licensed finance companies will remain as
stipulated in the issued license.

Regulations on Organization and Operation of the Board of Management, Inspection Committee
and (General) Directors of Non-Banking Credit Institutions ("NBCIs") issued under Decision 516-
2003-QD-NHNN of the State Bank of Vietnam dated 26 May 2003 (effective as of July 2003)
apply to: a) NBCIs belonging to credit institutions and finance companies belonging to State
corporations, where those NBCIs have their own boards of management and boards of control
(collectively referred to as dependent non-banking credit institutions); and b) joint venture NBCIs
and 100% foreign owned NBCIs (collectively referred to as NBCIs involving foreign elements).



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Decision 516 does not apply to joint-stock NBCIs or to subsidiaries of NBCIs which do not have
their own boards of management and boards of control.

Financial Leasing

Implementing the Law on Credit Institutions, Decree 16-2001-ND-CP of the Government dated 2
May 2001 on Organization and Operation of Finance Leasing Companies provides for the
establishment and operation of finance leasing companies in Vietnam, including joint venture
and 100% foreign owned finance leasing companies. Circular 08-2001-TT-NHNN of the State
Bank of Vietnam dated 6 September 2001 provides detailed guidelines for implementation of
Decree 16 with respect to organization and operation of finance leasing companies. Circular
07-2004-TT-NHNN of the State Bank of Vietnam dated 1 November 2004 provides for
amendment of article 17.2 of Circular 08 with respect to the procedures and application files for
obtaining the necessary SBV approval of changes to the name, charter capital, office locations,
operations, major shareholdings, and management personel of a finace leasing company
(effective as of 25 November 2004).

Under Article 25.4(b) of Circular 08, finance leasing companies are permitted to undertake
finance leasing transactions in foreign currency. Under Official Letter 18-NHNN-CSTT dated 7
January 2003, the SBV has provided guidelines to all finance leasing companies for undertaking
finance leasing transactions in foreign currency. Conditions to be satisfied by the finance
leasing company and the lessee in order for a finance leasing transaction to be undertaken in
foreign currency include: i) the finance leasing company must be licensed to operate in Vietnam
and be expressly permitted to conduct foreign exchange activities; ii) a finance leasing company
wishing to conduct finance leasing transactions in foreign currency must apply to the SBV for a
license to conduct finance leasing activities in foreign currency (or, in the case of a foreign
invested finance leasing company, must apply for express addition to its existing license to
conduct foreign exchange activities).

To implement Decree 79 on finance companies and Decree 16 on finance leasing companies,
the SBV issued Regulations on Opening and Termination of Operation of Branches and
Representative Offices of Non-Banking Credit Institutions (finance leasing companies and
finance companies, including JVEs and 100%FOEs, and any other non-banking credit
institutions) under Decision 24-QD-NHNN dated 7 January 2003.

According to Decision 731-2004-QD-NHNN of the State Bank of Vietnam dated 15 June 2004
providing regulations on operating-lease activities of finance leasing companies, joint venture
finance leasing companies and 100% foreign owned finance leasing companies are allowed to
provide asset renting service. In order to become eligible to provide this service, a finance
leasing company must (i) have operated at least two years, gained profits, with overdue debts
not exceeding 5% at the end of the quarter before it begins providing the service; and (ii) have
to meet certain conditions on safety and maintenance service for the rented property. The total
value of assets leased to a client must not exceed 30% of the finance leasing company’s own
capital and that the total value of assets used for operating leases must not exceed five times
the finance leasing company’s own capital.

Securities

As of 12 March 2004, the transfer of the State Securities Commission ("SSC") into the Ministry
of Finance under Decree 66-2004-ND-CP of the Government dated 19 February 2004 became
effective. The functions, duties, powers and organizational structure of the SSC are now
regulated under Decision 161-2004-QD-TTg of the Government dated 7 September 2004.
Under Decision 161, the SSC has the functions of State management over securities and the
securities market, including licensing, supervision and dealing with offences in the securities
sector.




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        Market Access and Commercial Presence
        Under the 2002 Action Plan for Vietnam’s Stock Market, authorities aimed to have between 20
        and 25 companies, including partially foreign-owned companies, list their stocks in 2002. To
        date, only 21 companies are listed on the stock market. At present, there is only one Securities
        Trading Centre (in HCMC) operating in Vietnam. A second Securities Trading Centre (in Hanoi)
        is expected to commence trial operation in mid-2004.

        Foreign participation in Vietnam's securities market is subject to various limitations. The
        percentage securities holdings of foreign investors is capped (see Decision 146 and Circular
        121 below). Under Decree 144-2003-ND-CP of the Government dated 28 November 2003 on
        Securities and Securities Trading, the SSC may license foreign securities businesses to invest
        in securities companies, securities investment funds and fund management companies, subject
        to satisfaction of prescribed criteria and subject to foreign equity caps as regulated by the Prime
        Minister (currently 49%).

        On 17 June 2004, the MoF issued Decision 55-QD-BTC issuing Regulations on Organization
        and Operation of Securities Companies. In order to be licensed to conduct securities trading
        activities in Vietnam, foreign firms must set up joint venture companies with Vietnamese
        partners and apply to the SSC for securities trading licenses. Under Decision 83-2004-QD-BTC
        of the Ministry of Finance dated 11 November 2004 issuing Regulations on Establishment and
        Operation of Representative Offices of Foreign Securities Trading Organizations in Vietnam, a
        cap has been imposed on the number of representative offices which may be established in
        Vietnam by foreign securities trading organizations. No more than 3 representative offices may
        be established to conduct market research and to seek and develop investment and cooperation
        opportunities in the securities sector. Only foreign securities trading organizations which have
        been in operation for at least 3 years (among other conditions) may establish representative
        offices in Vietnam. Representative offices are not permitted to trade securities. Representative
        offices and their personnel are not permitted to act as the representative of any businessperson
        or economic organization (domestic or foreign) in the securities sector. Representative office
        licenses will be valid for five years only, extendable upon application for successive 5 year
        periods.

        On 3 September 2004, the MoF issued Decision 73-2004-QD-BTC on Regulations on
        Organization and Operation of Securities Investment Funds and Fund Management Companies.
        Effective as of 3 October 2004, Decision 73 provides in detail for the operation of securities
        investment funds and fund management companies as well as criteria for an investment fund to
        list units on the stock market. Decision 73 pertains to two types of funds: public funds and
        private member funds. Public funds are required to issue certificates to the public. A private
        member fund must have at least 49 members who contribute money to the fund. Both types of
        funds must contain a minimum of 5 billion VND. Establishment and listing of a public fund is
        subject to licensing by the SSC.

        In April 2002, foreign-owned Vietnam Frontier Fund was given in-principle approval to invest in
        Vietnam’s securities market, becoming the second Fund (after Vietnam Enterprise Investment
        Limited) to partake in such activity.

        Domestic Regulation
        A Law on Securities is scheduled to be drafted in 2005. The SSC is in charge of drafting. The
        draft Law is expected to be considered by the National Assembly at its May 2006 Session and
        passed at its November 2006 Session.

        Administrative offences in securities and securities market are regulated under Decree 161-
        2004-ND-CP of the Government dated 7 September 2004, fines up to 70 million VND may be
NEW!!   imposed for administrative offences in the securities sector, effective as of 1 October 2004. To
        further implement Decree 161, the MoF issued Circular 130-TT-BTC dated 29 December 2004.

        Foreign Exchange
        A significant reform introduced under Decision 998-2002-QD-NHNN of the State Bank of
        Vietnam dated 13 September 2002 on Foreign Exchange Control Applicable to Purchase and



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        Sale of Securities by Foreign Organizations and Individuals at Securities Trading Centers was
        permission for foreign individuals and institutions investing in the Vietnamese securities market
        to exchange VND revenue from stock sales for foreign currency and transfer the monies abroad
        without SBV approval (but subject to presentation of prescribed documentation to the remitting
        bank). Under the BTA, Vietnam was not required to eliminate such restrictions until 3 years
        after the BTA came into force.

        Decision 998 has now been replaced by Decision 1550-2004-QD-NHNN of the State Bank of
        Vietnam dated 6 December 2004. Major reforms include the repeal of the one year time
NEW!!   restriction on remittance abroad of investment capital (from the date such funds are transferred
        into the securities trading account) and significant reduction in the documentation required to be
        presented for transactions into and out of accounts. (See Section 8.11 on “Equity Investment”
        below).

        Listings
        Effective as of 16 December 2003, Decree 144-2003-ND-CP of the Government dated 28
        November 2003 on Securities and Securities Market represents the first update of Vietnam's
        securities market legislation. Decree 144 is more sophisticated and extensive than the original
        securities legislation issued under Decree 48-1998-ND-CP of the Government dated 11 July
        1998 and now also regulates treasury shares, bonus shares, share purchase rights, share splits
        and consolidations, and acquisitions of 25% or more of listed shares.

        Decree 144 introduces a number of reforms to stimulate the lagging Vietnamese securities
        market. Public issues of securities are now subject to registration with the SSC (previously, they
        were subject to licensing by the SSC). The prescribed conditions for registration are more
        relaxed than those previously applicable to licensing. This is expected to speed up the
        securities issue process. The minimum number of investors external to an issuing organization
        which must purchase securities in a public issue has been reduced to 50 (from 100). With
        respect to the conditions for initial public issues, of particular note, the minimum required level of
        paid-up charter capital for an issuing organization is now VND5 billion (approx. USD320,000,
        down by half from the previous VND10 billion) and its business operations must now have been
        profitable for only 1 year (previously, 2 years) immediately preceding registration. To assist the
        funding of infrastructure and high-tech projects, initial share issues in these sectors are
        exempted from the above conditions. Of interest, for public bond issues, the minimum level of
        paid-up charter capital remains VND10 billion but the profitability period has been reduced to 1
        year.

        Decree 144 introduces separate conditions for SSC licensing of securities listings. The
        minimum level of paid-up charter capital is VND5 billion (as for public issues), however,
        operations must have been profitable for 2 years immediately preceding. To encourage the
        Iisting of equitized SOEs, they are required to have made a profit only in the preceding financial
        year (not 2 years) if they list immediately after equitization. At least 20% (or 15% in the case of
        companies with a share capital of VND10 billion or more) of listed share capital must be held by
        at least 50 shareholders external to the issuing organization (previously, this minimum
        percentage of share capital was required to be held by 100 shareholders). Further,
        shareholders being board members of the listing company must undertake to hold at least 50%
        of the shares they own for a period of 3 years after listing (previously, they were required to hold
        at least 20% of total share capital for 3 years).

        Public issues and listing of investment fund certificates are now provided for in detail in Decree
        144, along with licensing of securities investment funds and fund management companies.
        Conditions for listing certificates are: the minimum total value of issued investment fund
        certificates is VND5 billion and the minimum number of certificate holders is 50. Founding
        members of a fund must undertake not to assign the investment fund certificates they own for 2
        years after listing. Establishment of investment funds by capital contribution from members is a
        new feature. Restrictions on investment by fund managers have been relaxed. Supervising
        banks must meet certain criteria, including a custodian license granted by the SSC, having no
        ownership of the securities investment fund and no relation to the fund management company.

        Decree 144 now includes detailed provisions on trading of listed securities. In particular, the



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grounds for monitoring listed securities and for suspending securities trading are now
prescribed. Internal trading and trading of treasury shares are now regulated. Of note, any
transaction increasing or reducing the shareholding of any organization or individual (either
alone or with related persons) having 5%, 10%, 15% or 25% of the share capital in a listed
company must be reported in writing to the SSC and other prescribed entities. Significantly, any
proposal to acquire 25% or more of listed securities of one listed entity must be approved by the
SSC and publicly announced. (These notification and approval restrictions complement the
merger and acquisition provisions of the Competition Law, passed by the National Assembly at
its November 2004 Session. See 10.2 for more on competition law.) Stricter disclosure and
insider trading provisions are reassuring.

Implementing Decree 144, the following legislation has recently been issued by the MoF:
-   Circular 57-2004-TT-BTC dated 17 June 2004 on Disclosure of Information in the Securities
    Market;
-   Circular 58-2004-TT-BTC dated 17 June 2004 Providing Guidelines for Securities
    Membership and Trading;
-   Circular 59-2004-TT-BTC dated 18 June 2004 Providing Guidelines for Listing Shares and
    Bonds in the Securities Market;
-   Circular 60-2004-TT-BTC dated 18 June 2004 Providing Guidelines for Issuance of Shares
    to the Public;
-   Circular 75-2004-TT-BTC dated 23 July 2004 Providing Guidelines for Issuance of Bonds to
    the Public.

Foreign Securities Holdings
On 17 July 2003, Decision 146-2003-QD-TTg of the Government on Percentage of Participation
by Foreign Parties in the Securities Market of Vietnam was issued. Decision 146 repeals
Decision 139-1999-QD-TTg of the Government dated 10 June 1999 and became effective as of
11 August 2003. As widely expected, Decision 146 raises the cap on total foreign
shareholdings in domestic shareholding companies listed on the Vietnamese securities market
to 30% (from 20%) of the total shares of any one listed company. This cap applies to the total
aggregate shareholdings of all foreign shareholders in any one listed company, not the total
shareholdings of each foreign shareholder. Decision 146 also abolishes the specific caps on
total shareholdings of any one foreign organization or individual (formerly 7% and 3%
respectively) in any one listed company.

Previously, the caps on foreign shareholdings in listed domestic shareholding companies and
unlisted Vietnamese enterprises were inconsistent (20% and 30% respectively). By aligning the
caps on foreign investment at 30%, Decision 146 resolves a significant flaw of the former
regulatory framework.

Decision 146 also introduces the following reforms:
-   The percentage holding of foreign organizations and individuals of bonds circulating on the
    securities market of Vietnam will be unrestricted, abolishing the former 40% cap on total
    foreign holdings of bonds of any one listed company.
-   The maximum foreign capital contribution in a joint venture securities company will be
    increased from 30% to 49%.
-   Joint venture investment funds management company will be permitted, with up to 49%
    foreign capital contribution.

Decision 146 however omits any reference to foreign investment in securities investment funds.
Formerly, total foreign holdings of investment fund certificates was capped at 20% of total
certificates of any one securities investment fund, with holdings of any one foreign organization
or individual capped at 7% and 3% respectively.

On 12 December 2003, the MoF issued Circular 121-2003-TT-BTC Providing Guidelines on
Decision 146-2003-QD-TTg of the Government dated 17 July 2003 on Percentage of
Participation by Foreign Parties in the Securities Market of Vietnam. Circular 121 reiterates the
reforms introduced under Decision 146. With respect to convertible bond holdings by
foreigners, Circular 121 clarifies that the 30% cap on foreign shareholdings in listed companies
will apply upon conversion of bonds into shares. Under Circular 121, foreigners purchasing or



                                                                                              74
selling shares in Vietnam's securities market must register for a foreign investment management
code with the STC (Stock Exchange Department) through a depository as prescribed by the
SSC. Circular 121 became effective as of 30 December 2003.

Under Decision 51-2004-QD-TTg of the Government dated 31 March 2004, the Ministry of
Finance was instructed to submit to the Prime Minister in the third quarter of 2004 draft
amendments to Decision 146 on participation by foreign investors in the Vietnamese securities
market. No change in the current 30% cap is expected. No draft amendments have yet been
publicly released.

Circular 73-2003-TT-BTC of the Ministry of Finance dated 31 July 2003 provides guidelines with
respect to sales to foreign investors of shares in listed Vietnamese companies. The sale must
be a public sale on the securities market in accordance with Vietnamese securities law. Where
existing shareholders sell their shares to foreign investors, they must register with the
shareholding company to ensure that the level of foreign invested capital in the company does
not exceed the 30% cap. The sale price for shares in a listed company is the share market
price. For shares belonging to existing shareholders, the sale price may be agreed between the
shareholder and the foreign investor, but must not be less than the share market price. For
more on Circular 73, see Section 8.8 on “Legal Entity Restrictions.”

Under the amended Law on Credit Institutions, foreign banks are allowed to purchase shares in
Vietnamese joint stock commercial banks as of 1 October 2004. The SBV is currently revising
its regulations governing foreign shareholdings in such banks to implement this reform. For
more details, see Section 7.9 "Financial Services - Banking Services" above.

Taxation
To encourage further participation in the Stock Market, the MoF approved in principle the
proposal by the SSC to suspend the collection of the following fees applicable to the following
securities business: fees for trading membership, fee for trading shares, bonds and/or
investment funds certificates, fee for annual management of listing, fee for depository
membership, fee for share depository, and fee for bond depository. Other fees and charges
continue to apply as per the current regime. (Official Letter 14365-TC-TCNH of the Ministry of
Finance dates 31 December 2002.)

Guidelines on the application and calculation of VAT and CIT for the securities industry has
been provided under Circular 100-2004-TT-BTC dated 20 October 2004. Under this Circular,
securities brokerages, securities self-trading, management of securities investments, guarantee
and agency for issuing securities, consultancy on securities investment, securities custody,
representation of bonds’ owners will not be subject to VAT. In addition to specific detailed
provisions on CIT calculation and deductible expenses for securities business, preferential CIT
rates are available to securities companies and fund management companies, which will enjoy
the CIT rate of 20% for first 10 years of operation (then standard CIT rate of 28%). Any such
companies already in operation and paying CIT at the rate of 32% (for domestic enterprises) or
25% (for foreign invested enterprises) now will enjoy the CIT rate of 20% for the remaining
period of their first 10 years in operation.

Foreign Invested Shareholding Companies
The first pilot conversions of selected FIEs into foreign invested shareholding companies
("FISCs") are currently awaiting approval by the Prime Minister. Under Decree 38-2003-ND-CP
of the Government on conversion of a number of FIEs to operation in the form of FISCs and
Joint Circular 08-2003-TTLT-BKH-BTC of the Ministry of Planning & Investment and Ministry of
Finance dated 29 December 2003 implementing Decree 38, foreign investors, existing FIEs and
domestic Vietnamese investors will be permitted to purchase shares in FISCs. FISCs will be
permitted to list on the Vietnamese securities market and on overseas securities markets (the
latter subject to approval from the responsible authority). For more detail on FISCs, see Section
8.8 on “Legal Entity Restrictions.”

Under Decision 51-2004-QD-TTg of the Government dated 31 March 2004, the Ministry of
Finance and the Ministry of Planning and Investment have been instructed to co-ordinate to
commence drafting of guidelines for listing of FISCs on the securities market.



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7.10 Transport and Delivery Services

      Maritime Transport Services
      Vietnam has recently opened up all of its domestic ports to foreign shipping lines. Although
      meant to help reduce freight costs for exporters, Decision 4306-QD-BGTVT also provides
      greater access for importers while eliminating licensing requirements for foreign shipping lines to
      operate to and from Vietnam. Decision 4306, however, still requires foreign shipping lines to
      enter Vietnam using Vietnamese agents.

      In a recent decision, the Vietnam Maritime Bureau has allowed foreign shipping lines to set up
      JVEs with domestic partners. This new policy is part of a push to implement the ASEAN
      Maritime Agreement. Under the new regulations, foreign sailors will be permitted to make up to
      one third of a Vietnam-based ship’s crew in a JVE, but will not be allowed to become
      commanding officers. It is also hoped that discrimination between domestic and foreign
      commercial ships regarding docking, warehousing, piloting and cargo handling charges will end.

      Express Delivery Services
      The Prime Minister has recently assigned to the Ministry of Posts and Telecommunications
      ("MoPT") the responsibility for State administration of express delivery or courier services.
      Decision 190-2004-QD-TTg of the Prime Minister dated 8 November 2004 provides for the
      MoPT to have jurisdiction over the following services:
      -   Services of domestic and international receipt, sorting, transportation and delivery by
          physical means;
       - Information exchanged in form of addressed or non-addressed documents, including hybrid
          mail services and direct mail services;
      -   Parcels and packages with a receiving address.

      Express mail services include the services mentioned above but with higher delivery speed and
      reliability. Express mail services usually include value-added elements such as at-home
      services, search and stationing, delivery certification, changeability of addressees, and others.


8.    Investment
8.1   MFN:
      Ordinance 41-2002-PL-UBTVQH10 on MFN and National Treatment dated 25 May 2002
      extends the provision of no less favorable treatment than that accorded to investors and
      investments of a third country in like situations. The scope of application of MFN for investment,
      as stipulated in the Ordinance, includes that relating to the establishment, selling, purchasing,
      expansion and management operations of businesses and investments. MFN exceptions for
      investments or investors should be in accordance with Vietnamese law or international treaties
      to which Vietnam is party to.

8.2   National Treatment:
      The provision of national treatment in investment is defined in Ordinance 41 as the provision of
      treatment no less favorable than that provided to domestic goods. The provision of national
      treatment in general is subject to the following exceptions including: 1) Procurement conducted
      by the Government of Vietnam; 2) Government subsidies and supports provided to domestic
      manufacturers and their use of domestic content products; 3) Time allotment restrictions on
      broadcasting and television production and 4) Domestic transportation costs calculated on the
      basis of commercial activities of transportation.

      Currently, foreign investors operate under the Law on Foreign Investment while local companies
      operate under the Law on Promotion of Domestic Investment. To narrow the gap between the
      foreign and domestic investment regimes, the government has commenced a trial of "foreign
      invested shareholding companies" (see Section 8.8 on “Legal Entity Restrictions”).

      Preliminary drafting of a Common Investment Law commenced in April 2004. To support the
      Common Investment Law, a Unified Enterprise Law applicable to foreign, domestic private and



                                                                                                      76
              SOEs (and possibly cooperatives) is being drafted simultaneously. The Common Investment
              Law will regulate investment guarantee measures, sectors and areas where investment is
              encouraged, and the investment incentives that will be applied in common to both domestic and
              foreign investors. The Uniform Enterprise Law will regulate the establishment forms and
              procedures, organization and management, and dissolution of enterprises, that will apply to
              enterprises of all economic sectors. Both Laws are scheduled to be considered at the National
              Assembly's October 2005 Session and expected to be passed at its May 2006 Session.

              Elimination of Dual Pricing
              Vietnam is gradually eliminating its dual pricing system in areas such as tourism, air, rail
              transportation, seaport charges, charges for TV advertising and utilities such as telephone
              charges, electricity and water.

              Dual pricing of domestic air tickets has been scrapped as of 1 January 2004 under Official Letter
              3293-2003-CAAV dated 2 December 2003. Airfares are now uniform for foreigners, overseas
              Vietnamese and locals on domestic Vietnam Airlines and Pacific Airlines flights.

              Under Official Letter 6842-2004-TC-CST dated 21 June 2004 by the Ministry of Finance, in
              2004, fees that are priced in two tiers for Vietnamese and foreigners will be adjusted to become
              one common fee level. All kind of fees in customs, advertising, intellectual property, road traffic
              and such like will be modified so all fees applied to foreigners and Vietnamese will be the same.
              It is understood that the MPI is also currently drafting legislation that proposes the elimination of
              dual pricing on land.

              According to Official Letter 12665-TC-CST dated 3 November 2004 of the Ministry of Finance,
              the fee level of testing and checking medicinal products, medicinal samples, materials for
              making medicines and cosmetic products will be applied in accordance with the one-price policy
              between Vietnamese and foreigners.

NEW!!         Under Decision 215-2004-QD-TTg of the Prime Minister dated 29 December 2004, a common
              electricity price schedule will apply to FIEs and foreign residents in Vietnam as well as
              Vietnamese enterprises and individuals beginning 1 January 2005.

        8.3   Trade Related Investment Measures (TRIMS):
              Under the BTA, Vietnam has committed to eliminate certain trade-related investment measures,
              including trade-balancing measures and foreign exchange controls on imports upon entry into
              force (10 December 2001), and all other prohibited TRIMs such as local content requirements
              by the earlier of December 2006 (five years upon entry into force of the Agreement) or the date
              of its WTO accession.

              Under its Action Plan for the implementation on the WTO TRIMs Agreement, Vietnam has
              committed to full implementation without a transition period.

              Trade Balancing Measures
              Vietnam has eliminated trade-balancing requirements previously undertaken through restrictions
              on the importation of goods used for production by foreign investors. In the same vein, export
              performance requirements have been eliminated for most goods - currently only 14 items remain
              on the compulsory export list. Previously investors in most categories were required to export
              80% of output. With the lifting of these restrictions, the licenses of foreign investors with export
              performance requirements will be modified.

              Foreign Exchange Controls
              Foreign exchange controls for importation of products by foreign investors have been eased
              over the years. Under Decree 27-2003-ND-CP of the Government dated 19 March 2003
              amending the foreign investment regulations issued with Decree 24-2000-ND-CP of the
              Government dated 31 July 2000, FIEs and foreign BCC parties are permitted to purchase
              foreign currency to satisfy their current transaction requirements and for other permitted
              transactions from any banks (previously only from authorized commercial banks) licensed to
              trade in foreign currencies in Vietnam.




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      On 25 May 2004, the State Bank issued Circular 03-2004-TT-NHNN regulating foreign
      exchange activities relating to capital contribution to or purchase of shares in Vietnamese
      enterprises by foreign investors, including (i) transfer of foreign currency capital into Vietnam for
      capital contribution or purchase of shares; (ii) conversion of foreign currency into Vietnamese
      dong; (iii) opening and use of a Vietnamese dong account for capital contribution or purchase of
      shares; (iv) conversion of Vietnamese dong dividends and profits into foreign currency; and (v)
      remittance of foreign currency abroad.

      In order to contribute capital to, or purchase shares in, Vietnamese enterprises, foreign investors
      must open a special “capital contribution-share acquisition in Vietnamese dong” account at a
      commercial bank operating in Vietnam. All transfers and other activities relating to capital
      contribution or purchase of shares by foreign investors must be conducted via this account.
      Such account is to be used solely for the purpose of capital contribution to or purchase of
      shares in Vietnamese enterprises. This special account must be registered with the SBV within
      2 working days from the date of opening. Any change of the details of such account must also
      be registered. The above account must be closed in following cases: (i) remittance of the total
      balance of the account abroad or to a securities operation account; (ii) liquidation, bankruptcy
      and termination of an investor being an entity, and in other cases as provided by the SBV.
      Circular 03 became effective in mid-June 2004.

      Local Content Requirements
      Vietnam continues to require some foreign investors to use local content. This is particularly so
      for the electronics, motorcycle manufacturing and automobile sector as stipulated in Decision
      648-1999-QD-BKHCNMT of the Ministry of Science, Technology and Environment Promulgating
      Regulations of Types of Motorcycles Assembly and Manufacture dated 17 April 1999. Under
      Circular 215-HTDT-LXT, automobile manufacturers face high tariffs on imported components
      and have to satisfy requirements as high as 30 to 60% of the total value of an engine in local
      content (Implementation of the automobile components production program is a necessary
      condition for granting an investment license. The value of components and spare parts
      manufactured in Vietnam must account for at least 5% of the value of the finished automobile no
      later than the fifth year from the date of commencing production and must annually increase to
      reach at least 30% of the automobile value at the tenth year of production). Other sectors
      requiring the use of local raw material that include cane sugar, paper processing, vegetable oil,
      wood processing, and milk.

8.4   Bilateral Investment Treaties

      UK-Vietnam Investment Agreement: On 1 August 2002, the United Kingdom and Vietnam
      concluded a bilateral Agreement on Promotion and Protection of Investments. The assets
      covered by the Agreement includes: 1) moveable and immoveable property and any other
      property rights such as mortgages, liens or pledges; 2) shares in and stock and debentures of a
      company and any other form or participation in a company; 3) claims to money or to any
      performance under contract having a financial value; 4) IP rights, goodwill, technical processes
      and know-how; 5) business concessions conferred by law or under contract, including
      concessions to search for, cultivate, extract or exploit natural resources. The Agreement
      extends protection for covered investments including the provision of MFN and national
      treatment; compensation from losses; protection from expropriation including guarantees on
      prompt adequate and effective compensation against losses in cases of expropriation;
      repatriation of investments and returns; investor-state dispute settlement including access to
      international arbitration mechanisms; and guarantees of dispute settlement between contracting
      parties through local tribunals. An annex to the Agreement lists exemptions on national
      treatment for investment.

      Japan-Vietnam Investment Protection Agreement: On 14 November 2003, Vietnam and
      Japan signed an Agreement on Investment Protection. In principle, the Agreement guarantees
      national treatment and most-favored national treatment to investors and their investment in both
      countries at the initial stage of investment. In addition, it prohibits the respective authorities from
      imposing so-called performance requirements to provide the rules in terms of liberalization,
      promotion and protection of investment in a comprehensive manner. Reportedly, the




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              Agreement appendix of industries and sectors to be excluded from the regulations imposed by
              the compact is still under consideration.

        8.5   Profit Repatriation:
              Vietnam’s Law on Foreign Investment guarantees foreign investors the ability to repatriate
              profits and invested capital. The Law also permits foreign investors to remit abroad payments
              for the provision of technology or services, the principal and interest on offshore loans incurred
              over the course of their operations, and other monies and assets in their lawful ownership.

              Prior to the 2004 tax year, profit repatriation was taxed at 2-7%. Now, under the new Law on
              Corporate Income Tax and implementing regulations Decree 164-2003-ND-CP of the
              Government dated 22 December 2003 and Circular 128-2003-TT-BTC of the Ministry of Finance
              dated 22 December 2003, withholding tax is no longer payable by foreign investors when
              remitting their profits (see Section 10.6 on “Taxation” below for more details).

              The Ministry of Finance has recently issued Circular 26-2004-TT-BTC dated 31 March 2004
              providing guidelines on profit remittance tax and refund of corporate income tax upon
              reinvestment by foreign investors. Circular 26 clarifies that profit remittance tax is not payable in
              respect of any remittance abroad of lawful income as of 1 January 2004 (including remittances
              of profits arising prior to 31 December 2003). However, prior to any remittance of profits abroad,
              Circular 26 requires foreign investors to prepare a Declaration of Remittance of Profit Overseas
              on the form in the Appendix issued with Circular 26 and to submit it to the tax office directly
              managing the enterprise in which such foreign investor invested capital. Circular 26 became
              effective as of 23 April 2004.

              Under Circular 124-2004-TT-BTC of the Ministry of Finance dated 23 December 2004 providing
NEW!!         guidelines for Implementation of provisions on profit remittance by foreign economic
              organizations and individuals investing under the Law on Foreign Investment in Vietnam, foreign
              investors are entitled to remit abroad (i) profits from investment activities in accordance with the
              Law on Foreign Investment, (ii) profits from capital assignment after fulfilling obligation o
              corporate income tax, and (iii) income being corporate income tax refunded for reinvestment of
              profits or due to overpayment. Provisional profit remittance abroad may be made only when the
              foreign investor has completed the declaration of corporate income tax of the financial year, has
              provisionally paid quarterly corporate income tax as provided for by law, and does no gall within
              one of the following cases: (i) the enterprise in which the foreign investor invested and from
              which it obtained profits did not declare corporate income tax for the financial year; (ii) the profits
              are not in accordance with current legal provisions on tax and accounting of Vietnam; (iii) the
              profits are of the final year prior to termination of operational duration in accordance with the
              investment license or termination of its operations under decision of investor or competent State
              authority. Profit remittances shall be made at (i) annual remittance of all profits after termination
              of financial year, (ii) provisional remittance during the financial year every quarter or every 6
              months after paying corporate income tax (unless exempted from corporate income tax); (iii)
              profit remittance upon termination of business activities in Vietnam. Circular 124 also provides
              in detail for the determination of the amount of profits permitted to be remitted abroad at the time
              of making the profit remittance abroad.

        8.6   Investor-State Arbitration:
              Vietnam's plans for accession to the 1965 Washington Convention, also known as the
              Convention of the International Center for Settlement of Investment Disputes ("ICSID
              Convention") are progressing slowly. There is currently no submission on accession to the
              ICSID Convention before the Government. Under the provisions of the Investment Chapter in
              the BTA, Vietnam has consented to allow investors to submit disputes arising out of or relating
              to investment authorizations, investment agreements or alleged breaches of the investment-
              related provisions of the BTA to local courts of tribunals, previously agreed to dispute settlement
              procedures, or to international arbitration. Vietnam’s accession to the ICSID Convention would
              send a strong signal of commitment to the foreign investment community.

        8.7   Investment Registration:
              Vietnam has committed to the elimination of investment licensing for most sectors and is shifting
              towards an investment registration regime.



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      Following Decree 27-2003-ND-CP of the Government dated 19 March 2003 amending the
      foreign investment regulations issued with Decree 24-2000-ND-CP of the Government dated 31
      July 2000, the conditions for investment registration under Article 105 of Decree 24 (Amended)
      are as follows:

      Projects must satisfy all of the following mandatory conditions:
       (i)   not being Group A projects;
       (ii) conforming to the approved planning (now clarified as) for development of the relevant
             industry or planning for products, in the absence of which the consent of the ministry in
             charge of the industry is required.
       (iii) not requiring an environmental impact statement.

      Projects must satisfy one of the following alternative conditions:
       (i)   exporting 80% of products (relaxed from 100%);
       (ii) investing in an encouraged or specially encouraged project located in an industrial zone,
             but not a Group A project (previously, investing in an industrial zone and satisfying export
             ratio criteria); or
       (iii) belonging to the manufacturing sector with up to USD5 million invested capital (no longer
             required to also export at least 80% of products).

      Other reforms in Decree 27 include: (i) the number of sets of a registration file which must be
      submitted to the investment licensing body is reduced from 5 to 3 sets; and (ii) the express
      statement that, where a project satisfies all necessary conditions for registration under article
      105, the investment licensing body must issue the investment license without obtaining
      recommendations from any other body.

      According to Decree 27, a site master plan will have to be submitted as part of the investment
      license application file for investment projects in the construction sector only: bridges, roads,
      airports, ports, industrial works in Group A, infrastructure facilities of industrial zones, export
      processing zones and high tech zones, urban areas, tourism zones, entertainment areas, works
      for artistic performance; advertising works; residential houses, hotels, offices and apartments;
      schools; hospitals and sports facilities. Only the master plan will be evaluated during the
      investment license evaluation process.

      Registration processes under the jurisdiction of the Ho Chi Minh City Department of Planning &
      Investment have been streamlined and sped up tremendously. For example, registration for
      projects in the largest category (Group A) has been reduced to a maximum of 15 days. As
      regulated under Decision 236-2004-QD-UB of the HCMC People’s Committee dated 14 October
      2004 on Regulations on procedures, orders and regimes for dealing with issues relating to
      foreign direct investment in Ho Chi Minh City, the time-limit for investment licensing is 10-20
      days for projects subject to evaluation (which is most foreign investment projects), or 2-5 days
      for projects subject to registration for investment licensing (the time limit is 30-45 days and 15
      days respectively under the Government’s foreign investment regulations). Ho Chi Minh City’s
      online facilities for investment licensing (for foreign investment projects) and business
      registration (for domestic businesses) have reduced application processing time significantly.
      Other foreign investment-related matters are also now able to be managed via its online facilities
      such as registration of changes in board members. The post-licensing administrative procedures
      have also been shortened: 2 days for issuance of seal for enterprises (instead of 15 days as
      before) and issuance of import-export code, 8 days instead of 15 days for issuance of tax code
      registration. In Da Nang, the government is piloting the registration of foreign invested projects
      in 20 hours and hopes to see this reduced to 15 hours soon.

8.8   Legal Entity Restrictions:
      In 2003, Vietnam introduced a number of reforms to expand the options for foreign investment,
      to enhance the efficiency of existing FIEs, to promote the development of the domestic sector,
      and to boost the Vietnamese securities market. The options for foreign investment in Vietnam
      now include:
       -     Foreign investment under the Law on Foreign Investment in Vietnam;
       -     Foreign shareholdings in foreign invested shareholding companies ("FISCs");



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 -     Foreign shareholdings in/capital contribution to Vietnamese enterprises not listed on the
       Vietnamese securities market;
 -     Foreign shareholdings in Vietnamese companies listed on the Vietnamese securities
       market (see Section 7.9 on “Financial Services - Securities” above).

Legal Entity Restrictions under the Foreign Investment Law
In addition to new BCCs, JVEs and 100% FOEs, the following is permitted under the Law on
Foreign Investment in Vietnam due to reforms introduced under Decree 27-2003-ND-CP of the
Government dated 19 March 2003:
 -    A new 100% FOE may be formed between an existing 100% FOE and (i) another existing
       100% FOE and/or (ii) foreign investor(s);
 -    A BCC may be entered between an existing JVE or 100% FOE and another foreign
       organization or individual;
 -     A new JVE may be established between an existing 100% FOE and a Vietnamese
       enterprise or between an existing 100% FOE and an existing JVE. A JVE may not be
       established between an existing 100% FOE and a foreign investor or an overseas
       Vietnamese investor.

Foreign Invested Shareholding Companies (FISCs)
As part of an effort to unify the laws governing foreign invested and domestic enterprises, the
MPI issued Decree 38-2003-ND-CP of the Government dated 15 April 2003 providing for
conversion of a number of FIEs to operation in the form of FISCs.

The conversion option is only available to JVEs and 100% FOEs. The conversion may take the
form of (i) retention of the value of the FIE and of the investor(s); (ii) assignment of a part of the
value of the FIE to new shareholders; (iii) either of (i) or (ii) together with issuance of additional
shares to raise additional investment capital. A FISC must continue to implement the approved
investment project of the former FIE and will be entitled to preferential treatment under the Law
on Foreign Investment and its implementing regulations. However, the rights of FISC
shareholders and the organizational structure of the FISC will be governed by the Law on
Enterprises - the same as for domestic shareholding companies.

To qualify for conversion, a FIE must have been operating for at least 3 years in the industrial,
agricultural or services sectors; its operations must have been profitable in the year immediately
preceding conversion; and its legal capital must be fully paid up. All conversions are subject to
Prime Ministerial approval. Joint Circular 08-2003-TTLT-BKH-BTC of the Ministry of Planning &
Investment and Ministry of Finance dated 29 December 2003 excludes the following FIEs from
eligibility for selection by the MPI for conversion into FISCs: i) any FIE which has committed to
transfer its assets to the State or Vietnamese partners without any compensation upon expiry of
licensed duration; ii) any FIE with pre-paid income operating in businesses of infrastructure of
industrial zones or new urban areas, of construction of housing for sale or pre-paid lease or of
offices and apartments for pre-paid lease, of golf courses, of services with membership cards, of
pre-paid sub-lease of land; iii) any FIE operating in form of build-operate-transfer (BOT), build-
transfer (BT), and build-transfer-operate (BTO); iv) any FIE with total investment capital
exceeding US$70 million or below US$1 million; v) any FIE having cumulative losses equal to or
higher than legal capital, and (vi) any FIE having unrecoverable bad debts higher than legal
capital.

The deadline for conversion applications was 25 May 2004. Of the 29 applications received by
the MPI, only 12 applications were forwarded to the Prime Minister for his consideration. As
recommended by the MPI, 6 FIEs were approved by the Prime Minister in September to
participate in the first round of pilot conversions (which the MPI expects to be completed within 6
months). This number is much lower than the target of 20-25 participants set by the MPI.
Reportedly, the MPI has proposed to the Prime Minister that a new round of applications be
accepted to the end of 2004.

In 2005, after the first pilot FISCs have been trialed, the Decree 38 conversion regime will be
reviewed by the Government and may be extended to a wider range of FIEs.




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Reflecting one of the many Vietnamese concerns about the introduction of the FISC investment
vehicle, the MoF has requested that the MPI specifically consider how FISCs converted from a
JVE where the Vietnamese party is a SOE should be managed and whether controls are
required to avoid the situation of the foreign party conducting a general meeting of shareholders
and making unilateral decisions on all issues (Official Letter 5037-TC-TCDN of the Ministry of
Finance dated 13 May 2004).

Foreign investors, existing FIEs and domestic Vietnamese investors will be permitted to
purchase shares in FISCs. A FISC must have a minimum of 3 shareholders (individuals or
organizations), with at least one foreign founding shareholder. There is no restriction on the
maximum number of shareholders.             The total shareholding of the foreign founding
shareholder(s) must be at least 30% of carter capital throughout the life of the FISC.
Shareholdings will be freely assignable, subject to (i) the requirement for a minimum total foreign
founding shareholding of 30% of charter capital at all times and (ii) the approval by the MPI of
the assignment of foreign founding shareholdings. Proceeds of any assignment of foreign
founding shareholdings to domestic Vietnamese investors must be re-invested in Vietnam,
unless the MPI approves the remittance of the proceeds outside Vietnam. FISCs will be
permitted to list on the Vietnamese securities market, however, listing of FISCs on overseas
securities markets will be subject to approval from the responsible authority.

One important issue of concern, both to Vietnamese legislators and foreign investors, is how to
reconcile the minimum 30% foreign shareholding required under the FISC regime with the
current maximum 30% foreign shareholding in listed domestic shareholding companies. The
question is whether the foreign investors in FISCs will be required to divest of shares beyond
30% when FISCs list on Vietnam’s securities market. Reportedly, the following resolution of this
problem is being considered: (i) 30% of share capital of a FISC must be retained by the foreign
investors and can never be traded and is therefore excluded from the listing of a FISC; (ii) when
the remaining 70% of share capital is listed, foreign investors would be permitted to hold and
trade up to 30% of that 70%.

Foreign Investment in Non-listed Vietnamese Enterprises
Revised regulations on foreign shareholdings in/capital contribution to Vietnamese enterprises
which are not listed on the Vietnamese securities market were issued under Decision 36-2003-
QD-BKH of the Government dated 11 March 2003 (replacing Decision 145-1999-QD-TTg of the
Government dated 28 June 1999) and became effective as of 18 April 2003.

The new Decision 36 governs purchase of shares and also capital contribution by the following
foreign investors: (i) foreign economic and financial organizations established pursuant to
foreign law and conducting business overseas or in Vietnam; (ii) foreigners not residing in
Vietnam; (iii) foreigners who reside, earn their living and live long-term in Vietnam; and (iv)
overseas Vietnamese.

The above foreign investors are permitted to contribute capital to and purchase shares in the
following Vietnamese enterprises: SOEs conducting equitization, shareholding companies,
limited liability companies, partnerships, co-operative unions and co-operatives conducting
business in the sectors of industries and trades currently listed in Decision 260-2002-QD-BKH of
the Ministry of Planning & Investment dated 10 May 2002. Previously, only share purchases in
equitized SOEs and shareholding companies operating in a more limited range of sectors was
permitted. Effective 25 May 2002, Decision 260 lists sectors in which foreign investors may
purchase shares (maximum 30%) in unlisted non-SOEs including agriculture, forestry and
fishing; industry and processing; hotels and tourism; transport; storage; communications;
technology & science; medical care and education.

An important reform is that Prime Ministerial approval is no longer required for the sale of shares
to foreign investors. However, the maximum level of capital contribution and purchase of shares
by any one or more foreign investor in Vietnamese enterprises remains capped at 30% of the
charter capital of the Vietnamese enterprises.

Foreign investors may purchase shares in the initial issue of shares by a newly-equitized SOE
but only in an additional issue of shares by any other shareholding company (or by way of



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acquisition of shares from an existing shareholder). Foreign investors are not permitted to be
founding shareholders of Vietnamese shareholding companies other than former SOEs.
Foreign investors may make capital contribution to (or acquire the capital contribution share of
an existing member of) a co-operative union or co-operative, limited liability company or
partnership.

Any capital contribution or share purchase must be carried out in (i) VND (foreign currency must
be converted into VND) or (ii) by way of contribution of assets (including but not limited to
machinery and equipment, raw materials, goods, technology transfer, IP rights, valuable
securities) which must comply with the provisions of Vietnamese laws on technology, culture
and the environment.

Decision 36 provides regulations on procedures for capital contribution and sale/purchase of
shares, selling price, and confirmation of shareholding or capital contribution. Foreign investors
are allowed to (i) mortgage or pledge shares in credit relations and as security for the discharge
of civil obligations in accordance with the laws of Vietnam; (ii) transfer their shares, and to trade
them on the securities market if the shareholding company is listed on the Vietnamese securities
market; (iii) assign their capital contribution; (iv) convert their investment capital (principal and
interest), income from the sale of their shares or assignment of their capital contribution and
other legal income in Vietnam into foreign currency for remittance abroad upon fulfillment of all
financial obligations and compliance with the Vietnamese regime on foreign exchange control;
(v) be granted incentives under the Law on Promotion of Domestic Investment or the Law on
Foreign Investment if the foreign investor uses its income from investment being capital
contribution or purchase of shares in a Vietnamese enterprises for re-investment in a
Vietnamese enterprise; (vi) a foreign investor being an individual will be exempted from personal
income tax on income earned from capital contribution or purchase of shares in a Vietnamese
enterprises; (vii) be entitled to the same rights and interests as other Vietnamese shareholders
or members of the shareholding company, limited company, partnership, co-operative union or
co-operative; (viii) foreigners residing in Vietnam and overseas Vietnamese may participate in
the management of the enterprise.

Notable reforms include: (i) the abolition of the former restriction on transfer of shares by foreign
investors for 1 year (or 3 years if the foreign investor participated in the management of the
shareholding company) from the date of ownership of shares; (ii) offshore executives of a
foreign investor are not permitted to participate in management; (iii) the right to mortgage or
pledge shares as security for the discharge of civil obligations is a new feature.

Circular 73-2003-TT-BTC of the Ministry of Finance dated 31 July 2003 provides guidelines for
implementation of Decision 36, including with respect to authority to make decisions on receipt
of capital contribution from and sale of shares to foreign investors and determination of share
sale price/capital contribution value. With respect to the conduct of capital contribution and sale
of shares:
 (i)     SOEs conducting equitization must, after approval of the equitization plan, make a
          public announcement of the sale of shares outside the enterprise on the mass media.
          In particular, essential information (being name and address of the SOE and number of
          shares for sale or amount of capital contribution to be received) must be provided for
          the reference of foreign investors.
 (ii)     In the case of an existing shareholding company listed on the securities market, the
          sale must be a public sale on the securities market in accordance with Vietnamese
          securities law.
 (iii)    In the case of an existing shareholding company which is not listed on the securities
          market, the sale may be held at the enterprise or via an intermediary financial
          organization established pursuant to the provisions of law. A public announcement of
          the sale of shares to foreign investors must be made on the mass media. In addition to
          the announcement of the number of shares, proposed selling price, date of
          commencement, and other basic information, information on the business status of the
          company and its capital and funds in the current year and for the two preceding years
          must be provided to foreign investors. (It is unclear whether SOEs are required to
          provide this additional information.)




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       (iv)    Where existing shareholders sell their shares to foreign investors, they must register
               with the shareholding company to ensure that the level of foreign invested capital in the
               company does not exceed the cap of 30% of charter capital.

      Interestingly, where a number of foreign investors register to contribute capital or purchase
      shares at a value higher than the cap of 30% of charter capital of an enterprise, the enterprise
      may select for itself its preferred foreign investors or may conduct an auction (either itself or via
      an intermediary financial organization). Previously, an auction was mandatory. Information
      about the share sale and the selling company must be provided on the mass media (radio,
      television, central and local newspapers) on a minimum of 3 consecutive occasions at least 30
      days in advance of a sale to foreign investors, irrespective of whether or not an auction is held.
      If an auction is to be held, the conditions for participating in the auction must be published.
      Within 15 days of completion of a share sale or receipt of capital contribution from foreign
      investors, the results must be reported to the superior body of a SOE or the business
      registration body of a shareholding company, limited liability company, partnership, co-operative
      union or co-operative. Circular 73 does not apply to the sale of shares in FISCs.

      New guidelines on foreign exchange activities relating to above capital contributions and share
      purchases were issued in May 2004, see section 8.3 above.

8.9   Technology Transfer Issues
      Article 4.1(d) of Decree 59-2002-ND-CP of the Government dated 4 June 2002 on revocation of
      a number of licenses and substituting a number of licenses with other methods of management
      (effective as of 3 July 2002) replaced the requirement for approval of technology transfer
      contracts with the requirement for registration in the following cases:
       -      Contracts for domestic technology transfer;
       -      Contracts for technology transfer from abroad to Vietnam with respect to investment
               projects not funded by State owned capital; and
       -      Contracts for technology transfer from abroad to Vietnam with respect to investment
               projects funded by State owned capital the value of which is equivalent to less than
               USD30,000.

      Circular 11-2002-TT-BKHCN of the Ministry of Science & Technology dated 29 November 2002
      (effective as of 14 December 2002) provided guidelines for implementation of article 4.1(d) of
      Decree 59 above, including:
       -      Files for (i) must be submitted to the Department of Science & Technology in the province
              or city under central authority where the transferee has its head office. Files for (ii) and
              (iii) must be submitted to the MoST.
       -      Files for registration of technology transfer contracts must comprise: standard form
              application; original contract; explanatory paper on the technology transfer contents or a
              copy of the feasibility study report; estimated total price to be paid for the technology
              transfer for the duration of the contract; investment license or decision or business
              registration certificate or decision on establishment of the transferee and other certificates
              from State administrative bodies for the specialist branch (if any); and receipt for payment
              of fees for registration of the technology transfer contract.
       -      If, within 15 working days of receipt of a file, the competent body does not request
              amendments or additions, the technology transfer contract will be deemed to be
              approved and will be effective; and the competent body must forward a slip confirming
              registration of the technology transfer contract to the transferee. If the competent body
              requests amendments or additions, the technology transfer contract will remain
              ineffective; if, within 5 working days of receipt of an amended file, the competent body
              does not request further amendments or additions, the technology transfer contract will
              be effective, and the competent body must forward a slip confirming registration of the
              technology transfer contract to the transferee.
       -      Any technology transfer contract which was approved prior to the date of effectiveness of
              Decree 59 (3 July 2002) will continue to be implemented in accordance with the
              provisions in force as at the date of approval of the contract.
       -      On 30 January each year, Departments of Science & Technology in provinces and cities
              under central authority must send to the MoST a written report listing the technology
              transfer contracts registered at the Department in the previous year.



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NEW!!    A Law on Technology Transfer is scheduled to be drafted in 2005 and expected to be passed
         in late 2006.

        Capital Requirements
        Decree 27-2003-ND-CP of the Government dated 19 March 2003 amending the foreign
        investment regulations issued with Decree 24-2000-ND-CP of the Government dated 31 July
        2000 abolished the restriction that any legal capital (equity) in the form of technology transfer
        must not exceed 20% of legal capital, and is subject only to agreement by the parties (Article 81
        of Decree 24 as amended).

        Appraisal of Projects - Technology and Environment: Circular 55-2002-TT-BKHCNMT of
        the Ministry of Science, Technology and Environment dated 23 July 2002 provides guidelines on
        appraisal of technology and environment of investment projects (both foreign and domestic
        investment projects), replacing the former guidelines issued under Circular 1940-TT-BKHCNMT
        dated 15 November 1997. As previously stated in Circular 1490, “appraisal of technology”
        under Circular 55 means the process of considering and assessing the suitability of the
        technology specified in an investment projects for all objectives and contents of the project on
        the basis of State guidelines, policies and planning available at the date of project evaluation.
        “Appraisal of environment” means considering and assessing the impact of the project on the
        environment and any measures to minimize adverse affects in accordance with current State
        regulations on environmental protection (previously limited under Circular 1490 to the impact of
        the technology on the environment).

        The following matters must be considered during the appraisal process:
         -     What products will be created by the technology and their market outlets. In addition to
               factors previously required to be considered under Circular 1490, an examination of the
               rationality of the scale of technology and the capacity the equipment is required under
               Circular 55.
         -      Technology selected. As previously, modern technology is preferred, but Circular 55
               defines “modern technological line” as specialized and mechanized production line in
               which at least 1/3 of the automatic equipment is program-controlled, requiring no hard
               manual labor, and which is arranged in a space satisfying industrial hygiene, occupational
               safety and environmental hygiene/sanitation standards. In addition, Circular 55 expressly
               requires the enterprise management system to be an advanced system, i.e. there must
               be a number of computerized sections such as technology management, procurement,
               marketing etc.
         -      Equipment in the technological line (as previously)
         -      Raw materials, components, spare parts to be used for manufacturing (as previously)
         -      Site selected. This is a new feature of Circular 55, requiring specific consideration of the
               suitability of advantages and disadvantages of the site for implementation of the project,
               and of the advantages of the selected site in comparison with other sites.
         -      Technology transfer (as previously).
         -      Impact of the project on the environment: Assessment of factors which may be
               adversely affect the environment, such as any pollutants during manufacturing; any solid,
               liquid and gas waste discharged during the production process etc.; Assessment of the
               latent risks of an environmental incident; Consideration of any measures to be taken to
               minimize adverse impact on the environment as well as any measures which will prevent
               environmental incidents; Categorization of projects for which environmental impact
               assessment reports must be prepared (Category I projects) or for which certificates of
               registration of satisfaction of environmental standards must be granted (Category II
               projects) pursuant to Circular 490-TT-BKHCNMT of the Ministry of Science, Technology
               & environment dated 29 April 1998 on Evaluation of Environmental Impact Assessment
               Reports.
         -      Effectiveness of the project, such as socio-economic benefits and financial feasibility of
               the project (as previously)
         -      Other relevant matters, if any, such as labor/training and occupational safety and
               hygiene/fire and explosion prevention and fighting (previously specific matters for
               consideration under Circular 1490) and also the necessity for the project and its
               compatibility with State policies, laws and planning as well as the legal status of the



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            project investor, its specialist qualifications, financial capacity etc. (new features of
            Circular 55)

8.10 Land Use and Leasing Rights:
     Although foreign entities continue to be denied land use rights ("LURs"), Vietnam has extended
     such rights to overseas Vietnamese. LURs are extended to FIEs (being Vietnamese entities).
     Further, FIEs are permitted to mortgage the value of LURs with Vietnamese joint stock banks,
     joint venture banks, foreign bank branches and other credit institutions in Vietnam. Decision 79-
     2001-ND-CP dated November 1, 2001 of the Government on the amendment of and
     supplementation to Decree 17-1999-ND-CP dated March 29, 1999 on procedures for Exchange,
     Transfer, Lease and Sub-Lease of a Land Use Right and Mortgage of the Value of Land Use
     Rights, and Decree 81-2001-ND-CP dated 5 November 2001 Allowing Overseas Vietnamese to
     Buy a House in Vietnam provides guidance on these changes.

     A revised Ordinance on Rights and Obligations of Foreign Individuals and Organizations
     Leasing Land in Vietnam was drafted by the General Department of Land Administration and
     submitted to the Prime Minister in 2002, addressing land transferal, increasing land lease
     periods, and providing for leasing land from private individuals. The Law on Land (Amended)
     passed by the National Assembly in November 2003 and effective as of 1 July 2004 repealed
     the 1994 Ordinance on Rights and Obligations of Foreign Individuals and Organizations Leasing
     Land in Vietnam but the revised Ordinance has not been scheduled for promulgation,
     consideration or even preparation by the National Assembly in 2005.

     Significant changes to the legal regime governing security for loans obtained from Vietnamese
     credit institutions were recently introduced under Decree 85-2002-ND-CP of the Government
     dated 25 October 2002 amending Decree 178-1999-ND-CP of the Government dated 29
     October 1999 on Security for Loans Obtained from Credit Institutions. Effective 10 November
     2002, lenders and borrowers may agree to mortgage (or use for guarantee) fixed assets
     attached to land together with the associated LURs or choose to deal with fixed assets and the
     associated land-use rights separately. As Decree 178 previously required any mortgage of fixed
     assets attached to land to be accompanied by a mortgage of the associated LURs and as land
     laws currently prohibit LURs being mortgaged (or use as guarantee) in favor of offshore lenders,
     it has been impossible for fixed assets to be used as security for off-shore loans. Decree 85
     allows for off-shore lenders to take security over fixed assets such as buildings and factories in
     Vietnam.

     Early in 2003, the Prime Minister approved in principle a proposal by the SBV to allow FIEs to
     mortgage LURs in favor of offshore lenders and reportedly authorized the drafting of enabling
     legislation. However, this reform was not introduced in the Law on Land (Amended).
     Reportedly, the Government is now considering the introduction of this significant reform on a
     trial basis only.

     Decree 181-2004-ND-CP of the Government dated 29 October 2004 to implement the Law on
     Land (Amended) became effective on 16 November 2004. Decree 181 deals, amongst other
     things, with procedures for expiry and extension of land use terms, registration of mortgages
     and guarantees using LURs, and real estate market development. Of note, under article 101.1
     of Decree 181, subdividing land with infrastructure into lots for sale without building residential
     houses by any entity (including Vietnamese companies) is prohibited. This restricts property
     developers to selling houses and apartments only (not vacant land lots). Decree 181 also
     addresses the resolution of disputes relating to the term of land use in cases where the land has
     been allocated by the State for residential use, borrowed by the State, or compulsorily acquired
     by the State. Decree 181 provides for the extension of land use terms of foreign invested
     projects if the project licenses are extended, but not for longer than the original term.
     Application must be made to the Ministry of Natural Resources & Environment 6 months before
     expiry of the term; necessary documentation is prescribed in Decree 181. There are however
     no provisions on how assets on land will be handled in the event that the term of land use by a
     foreign investor is not extended. Decree 182-2004-ND-CP of the Government dated 29 October
     2004 deals with administrative penalties for breaches of the Law on Land (Amended).




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        8.11 Equity Investment

            Foreign Exchange Control and Repatriation
            On 6 December 2004, the SBV issued Decision 1550-2004-QD-NHNN on Foreign Exchange
            Control Applicable to Purchase and Sale of Securities by Foreign Organizations and Individuals
NEW!!       at Securities Trading Centers. Decision 1550 replaces Decision 998-2002-QD-NHNN of the
            State Bank of Vietnam dated 13 September 2002 on the same subject. Decision 1550 provides
            regulations with respect to (i) remittance of funds into Vietnam in order to purchase and sell
            securities, (ii) conversion of foreign currency into VND, (iii) opening and use of VND bank
            accounts in order to purchase and sell securities, (iv) conversion of VND into foreign currency,
            and (v) remittance abroad of foreign currency. Foreign investors stipulated herein comprise
            foreign economic organizations established under foreign law, non-resident foreign individuals,
            overseas Vietnamese, and resident foreign individuals. Decision 1550 does not govern foreign
            exchange transactions by foreign investors relating to foreign direct investment projects in
            Vietnam under the Law on Foreign Investment in Vietnam nor foreign exchange transactions by
            foreign investors relating to capital contribution to and purchase of shareholding in unlisted
            Vietnamese enterprises. Although it stipulates that the purchase and sale of securities by
            foreign investors must be implemented in VND, the following sources of VND funds may be
            used or foreign currency funds may be converted into VND for use for purchase of securities: (i)
            foreign currency transferred from abroad into Vietnam; (ii) foreign currency and VND in accounts
            of foreign investors opened at authorized banks; (iii) VND in capital contribution accounts or
            share purchase accounts of foreign investors opened at commercial banks in Vietnam (not
            previously expressly provided for); (iv) any share of profits distributed to foreign investors from
            direct investment activities in Vietnam; (v) revenue of foreign organizations and individuals from
            assignment, liquidation or dissolution of direct investment activities in Vietnam; (vi) salary,
            bonuses and other legal income of foreign individuals in Vietnam; and (vii) other sources if
            approved by the State Bank (a new option under Decision 1550). For the purchase and sale of
            securities, a foreign investor must open a VND securities trading account at a securities
            company. The specialized, on-call foreign currency or VND deposit account must be opened at
            an authorized bank in Vietnam. No foreign currency conversion guarantee is provided to foreign
            securities investors. Major reforms include the repeal of the one year time restriction on
            remittance abroad of investment capital (from the date such funds are transferred into the
            securities trading account) and significant reduction in the documentation required to be
            presented for transactions into and out of accounts.

            New guidelines on foreign exchange control with respect to capital contribution to and purchase
            of shares in unlisted Vietnamese enterprises were issued in May 2004, see Section 8.3 on
            “TRIMS – Foreign Exchange Controls” above.

            Income Tax
            Official Letter 4321-TC-TCT of the Ministry of Finance dated 7 May 2002 on Tax Policy
            Applicable to Organizations and Individuals Engaging in Securities Investing in Vietnam
            confirms that (i) foreign individuals investing in securities continue to be exempt from personal
            income tax, as provided under Decision 39-2000-QD-TTg dated 27 March 2000 issuing
            provisional regulations on preferential tax treatment for securities trading; and (ii) the profits from
            securities investment of foreign companies carrying on business in Vietnam other than under the
            Law on Foreign Investment are subject to tax under Circular 169-1998-TT-BTC dated 22
            December 1998. Official Letter 4321 also noted that, upon remittance of profits overseas, both
            foreign companies and individuals investing in securities in Vietnam must pay 5% withholding
            tax. However, withholding tax has been abolished as part of the tax reforms introduced in mid-
            2003 and effective as of 1 January 2004 (see Section 10.6 on “Taxation” below for more
            details).

            Decision 36-2003-QD-BKH of the Government dated 11 March 2003 revising the regulations on
            foreign shareholdings in Vietnamese companies which are not listed on the Vietnamese
            securities market provides for a foreign investor being an individual to be exempted from
            personal income tax on income earned from capital contribution or purchase of shares in an
            unlisted Vietnamese enterprise. For more details on foreign investment in unlisted Vietnamese
            enterprises, see Section 8.8 on “Legal Entity Restrictions” above.




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     Decree 147-2004-ND-CP of the Government dated 23 July 2004 providing detailed regulations
     for implementation of the Ordinance on Income Tax of High Income Earners continues to
     provide for exemption from personal income tax for income of individuals from activities of
     investing in securities. The Ordinance and Decree 147 apply as from 1 July 2004.

8.12 Grandfathering: Decree 24-2000-ND-CP of the Government dated 31 July 2000 (as amended
     by Decree 27-2003-ND-CP of the Government dated 19 March 2003) expressly provides that
     any new legal provisions which offer foreign investors more favorable treatment than previous
     ones will apply automatically, following amendment of existing investment licenses at the written
     request of foreign investors. Upon license amendment, such favorable treatment will apply as
     from the date on which the legal provision providing for such favorable treatment comes into
     effect (that is, not only from the date on which the amended investment license becomes valid).

8.13 Investment/Export Incentives in Industrial, Export Processing and High-Tech Zones:

     High-tech zones: In light of the new Regulations on High-Tech Zones ("HTZs") issued under
     Decree 99-2003-ND-CP of the Government dated 28 August 2003 and the various land,
     corporate income tax ("CIT") and personal income tax ("PIT") reforms introduced in 2004, the
     Government has revised the preferential treatment available to domestic and foreign investors in
     HTZs and to the Vietnamese and foreign individuals working for investment projects in HTZs, as
     follows:

     CIT: Investors are entitled to CIT rate of 10% for the whole duration of project implementation;
     and to CIT exemption for 4 years as from when they have taxable income; and to 50% CIT
     reduction for subsequent 9 years.

     PIT: Vietnamese individuals (including overseas Vietnamese) are entitled to PIT
     exemption/reduction such that their PIT obligations are equal to those of foreign individuals with
     the same level of income.

     Land use: A uniform land leasing price will apply to domestic and foreign investors in HTZs.
     Investors are permitted to mortgage land use rights and assets attached to land during the term
     of lease or sub-lease of land to credit institutions operating in Vietnam in accordance with law.
     Investors implementing a project on research and development of technology or on high level
     skills training in science and technology will be exempt from land rent.

     Credit: Domestic investors in manufacturing in a HTZ will be considered by the Development
     Assistance Fund for medium or long term credit with a preferential interest rate, for a loan
     guarantee, and for assistance with interest after the investment. Any investor will be entitled to
     State preferences regarding credit assistance for export when it directly exports products; and
     the regime on export awards shall apply to such investors.

     Visas: Foreign individuals and overseas Vietnamese investing or working in HTZs and
     members of their families are entitled to multiple entry visas with a term compatible with the
     duration of their work and operation in the HTZ.

     Housing: Favorable conditions will be created for all investors and workers in HTZs with respect
     to their residence and renting/purchasing houses in HTZs.

     In addition, uniform prices for public services will apply to domestic and foreign investors and
     workers in HTZs. Investors in designated "specially important projects" may be entitled to
     additional preferential treatment.

     Industrial and export processing zones: Amending Decree 164-2003-ND-CP of the
     Government dated 22 December 2003 making detailed provisions for implementation of the Law
     on Corporate Income Tax, the Government has issued Decree 152-2004-ND-CP dated 6 August
     2004 revising the preferential CIT treatment to which newly established investment projects in
     industrial zones ("IZs") and export processing zones ("EPZs") are entitled. Decree 152 provides
     for the following preferential CIT rates and CIT exemptions and reductions:




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       -     Entities supplying services in IZs: CIT rate of 20%; 2 year CIT exemption and 6 year 50%
             reduction of CIT payable tax;
       -     Entities supplying services in EPZs and manufacturing establishments in IZs: 15% CIT
             rate; 3 year CIT exemption and 7 year 50% reduction of CIT payable;
       -     IZ and EPZ infrastructure development entities and export manufacturing enterprises
             (whether in or outside of EPZ): 10% CIT rate; 4 year CIT exemption and 7 year 50%
             reduction of CIT payable.

      Decree 152 is applicable as from the 2004 taxation period. By Circular 88-2004-TT-BTC dated
      1 September 2004, the MoF provides for corresponding revision of the guidelines on preferential
      CIT treatment.

8.14 Foreign Contractors:
     The MoF is drafting amendments to the tax policy applicable to foreign individuals and
     organizations doing business in Vietnam outside the forms of foreign investment under the Law
     on Foreign Investment (currently regulated under Circular 169-1998-TT-BTC). Amendments
     include specific guidelines on tax payment by foreign equipment suppliers. The draft circular
     attempts to remove obstacles during implementation of Circular 169-1998-TT-BTC including
     differentiating goods supply in form of import and goods supplied in Vietnam. The regulations in
     the draft circular also ease the tax burden for foreign contractors such as sales of equipment
     and materials which are not produced in Vietnam will be exempted from VAT, a low tax rate of
     1% will apply to equipment value, and services value is separated out for purpose of tax
     calculation. Other amendments relate to ship leasing contracts and VAT exemption for
     equipment leasing. Objectives of the MoF's amendments are to complete administrative
     procedures and to clarify documentary and procedural requirements in a bid to ensure
     transparency, to create better conditions for taxpayers and tax agencies, to minimise
     "ambiguous" regulations causing adverse effects on tax declaration and business environment
     of foreign contractors as well as investment environment in general. No amendment of the
     method of tax collection is expected. To date, tax collection applicable to foreign contractors
     has been based on deduction at income source (except in some cases which have separate
     instruction documents of the Ministry of Finance), which conforms with international practice.


9.    Transparency
9.1   Publication of Laws:
      Vietnam has committed to ensuring the publication of all legal instruments and regulations
      concerning issues covered by the scope of the BTA. Amendments of the Law on Promulgation
      of Legal Instruments passed by the National Assembly on 16 December 2002 introduce a
      number of important reforms in an attempt to improve the quality of legal instruments (at both
      draft and final stage), the consistency of the Vietnamese legislative framework, and the
      efficiency of the National Assembly's legislative functions, including:
       -       In the process of preparation of new legal instruments, the drafting body is required to
               obtain opinions from all relevant bodies, organizations and individuals (including but not
               limited to the Vietnam Fatherland Front and its member organizations, social
               organizations, economic organizations, State bodies, and units of the armed forces)
               and, in particular, from subjects directly affected by the legal instrument. Opinions which
               are contributed must be investigated by the drafting body in order to determine any
               appropriate revision. (Article 3) See Section 9.3 on “Public Commentary” below for
               more details.
       -       Any body promulgating a legal instrument is expressly required to identify and list any of
               its own previously promulgated legal instruments (or articles, sub-articles or clauses
               thereof) which are inconsistent with the new legal instrument; and to amend such prior
               inconsistent legal instruments (or articles, sub-articles or clauses thereof). (Article 9)
       -       The provisions governing the composition, operation and responsibilities of drafting
               committees have been revised. For the first time, drafting committees are responsible
               for the speed of the drafting process. (Articles 25, 60 and 61)
       -       Draft legal instruments proposed by a body, organization or National Assembly delegate
               are required to be submitted to the Government for its opinion at least 45 days (in the
               case of laws and ordinances of the National Assembly) or 40 days (in the case of



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       ordinances or resolutions of the Standing Committee of the National Assembly) prior to
       the opening of a National Assembly session. (Article 28)
 -     An Evaluation Council must be established by the Minister of Justice for evaluation of
       law projects, ordinance projects and draft resolutions in cases where the MoJ has
       presided over the drafting thereof. The matters for evaluation are stipulated. Where
       necessary, the Evaluation Council may require the MoJ to report on issues pertaining to
       the contents of the law project, ordinance project or draft resolution; or may organize
       (itself or jointly with the MoJ) an actual survey of such issues. The MoJ must consider
       the opinions of the Evaluation Council and make appropriate revisions prior to
       submission to the Government. Any difference of opinion must be reported to the
       Government for its consideration and decision. (Articles 29a and 63)
 -     A Legal Committee of the National Assembly is provided for, to assist in the verification
       of the constitutionality, legality and consistency with the legal system of any law or
       ordinance prior to its submission to the National Assembly or the Standing Committee of
       the National Assembly. If the Legal Committee has an opinion different from that of the
       body presiding over verification, it must report its opinion to the National Assembly or to
       the Standing Committee of the National Assembly. (Article 34a)
 -     A cap of two National Assembly sessions has been set for the consideration and
       promulgation of laws. (Article 45)
 -     The specific steps for consideration and promulgation of laws and ordinances by the
       National Assembly have been revised. In particular, the National Assembly must
       consider the basic contents of a law and the major issues on which there are differing
       opinions (rather than discussing each article or chapter, as previously) and must review
       the whole revised draft prior to approval. (Articles 45 and 47)
 -     The Prime Minister is expressly permitted to assign the Office of Government to publish
       a draft Government resolution or decree or Prime Ministerial decision or directive on the
       mass media and on the internet for the purpose of obtaining opinions from relevant
       bodies, organizations and individuals. Individuals may contribute opinions via bodies or
       organizations, directly or by sending a letter to the Office of Government or to the
       drafting body, or via the mass media. The drafting body must research any opinions
       received. (Articles 62 and 65)
 -     Legal instruments of the Government, the Prime Minister, ministers, heads of ministerial
       equivalent bodies, the People’s Supreme Court, the People’ Supreme Procuracy and
       joint legal instruments will be effective after 15 days from the date on which they are
       published in the Official Gazette (previously, 15 days from the date of signing), unless a
       later effective date is stipulated in the legal instrument. In the case of a legal instrument
       of the Government or of the Prime Minister which provides for implementing measures
       in an emergency situation, the legal instrument may provide for an earlier effective date.
       (Article 75)
 -     The MoJ is responsible to assist the Government in the work of checking the compliance
       of new legal instruments with the law and to assist the Prime Minister to check and deal
       with any legal instrument contrary to the law of a ministry, ministerial equivalent body, or
       provincial people’s council or people’s committee (Article 83). The role of the People's
       Inspectorate in checking the compliance of legal instruments with the law has been
       abrogated (Article 85).

Ministries and government bodies have also established web sites for the notification of
information under their jurisdictions. These include:
SPS (MARD)                                           http://www.mard.gov.vn
       (Plant Protection Department)                 http://www.ppd.gov.vn
TBT/Standards (STAMEQ)                               http://www.tcvn.gov.vn
Finance/Taxation/Budget (MoF)                        http://www.mof.gov.vn
Customs                                              http://www.customs.gov.vn
Foreign Relations (MoFA)                             http://www.mofa.gov.vn
Trade Statistics/Trade Agreements/Laws (MoT)         http://www.mot.gov.vn
Foreign Investment/Licensing (MPI)                   http://www.mpi.gov.vn
Investment Licensing (HCMC DPI)                      http://www.dpi.hochiminhcity.gov.vn

Utilizing the Internet as an effective means by which Vietnamese citizens can participate in the
law-making process, drafts of the Criminal Procedure Code (Amended,) the Law on Land



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      (Amended), and the Law on Competition were published in their entirety on the Internet prior to
      their promulgation by the National Assembly at its October-November 2003 and 2004 Sessions
      respectively.

      In November 2001, Vietnam issued a Decision to require the mandatory publication of all
      statistics relating to its State budget.

9.2   Official Gazette:
      A priority project for the Vietnamese Government is to improve the publication of all legal
      documents and Vietnam's agreement to international conventions in both hard copy and
      electronic official gazette form in a timely manner. Legal documents issued by local authorities
      must also be announced in local gazette publications. According to the MoJ, this project will
      include the compilation of a specific decree on publishing legal gazettes, establishment of close
      and compulsory interaction between legislative bodies and gazettes' editorial offices, and
      increased government expenditure to modernize the way official gazettes are issued.

      To address the delay problem in publication of legal instruments in the Official Gazette, Official
      Letter 309-CP-PC of the Government dated 20 March 2003 requires (i) for any body
      promulgating a legal instrument to forward a copy to the Office of Government within 2 days of
      promulgation; and (ii) for the Office of the Government to publish legal instruments in the Official
      Gazette within 15 days of promulgation.

      The number of issues of the Official Gazette published in Vietnamese and English increased
      from 4 issues to 6 issues per month as of April 2002, to 20 issues per month as from June 2003,
      and beginning 1 July 2003, the Official Gazette has become a daily publication.

      According to the amendments of the Law on Promulgation of Legal Instruments passed by the
      National Assembly on 16 December 2002, the legal instruments of the Government, the Prime
      Minister, ministers, heads of ministerial equivalent bodies, the People’s Supreme Court, the
      People’ Supreme Procuracy and joint legal instruments will be effective after 15 days from the
      date on which they are published in the Official Gazette (previously, 15 days from the date of
      signing), unless a later effective date is stipulated in the legal instrument. In the case of a legal
      instrument of the Government or of the Prime Minister which provides for implementing
      measures in an emergency situation, the legal instrument may provide for an earlier effective
      date (Article 75). For more details, see Section 9.1 on “Publication of Laws” above.

      Decree 104-2004-ND-CP of the Government dated 23 March 2004 was issued recently.
      Pursuant to the Law on Promulgation of Legal Instruments (As amended), Decree 104 sets out
      the position and functions of the Official Gazette; the duties, organization and activities of the
      Official Gazette Agency; the procedures for forwarding, receiving and publishing legal
      instruments in the Official Gazette; and the responsibilities of State agencies regarding
      publication of legal instruments in the Official Gazette.

9.3   Public Commentary:
      Article 3 of the amendments of the Law on Promulgation of Legal Documents addresses the
      important provision of seeking public commentary on draft laws in Vietnam. It stipulates that
      during the process of drafting legal documents, depending on the nature and contents of a bill or
      draft, the agency and organization concerned shall facilitate other agencies, organizations and
      individuals to participate by providing their opinions, and shall gather opinions from those
      directly affected by the legal documents within an appropriate scope and appropriate form.
      Opinions contributed to a bill or draft of a legal normative document must be investigated in
      order to accept revision of the bill or draft document.

      The Law on Promulgation of Legal Documents (as amended) also stipulates the responsibilities
      of each agency and organization in gathering opinions on the draft of legal documents, in
      particular, in gathering opinions from those directly affected by such documents (Articles 26.4
      and 61.4). With regard to drafts of Resolutions and Decrees of the Government, Decisions and
      Instructions of the Prime Minister, Articles 62.2 and 65.4 require the Office of the Government to
      publish such drafts in the mass media and on the internet for comments by agencies,
      organizations and individuals. The gathering of opinions, in principle, should be arranged



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      flexibly depending on the nature, contents and the scope of effect of the document concerned.
      The amendments to the Law, therefore, do not stipulate a common and "fixed" provision on this
      issue.

      To implement Article 3, Vietnam is currently drafting a decree consisting of a charter on
      gathering opinions. Reportedly, the draft will clarify responsibilities, form and methods of
      gathering opinions on drafts of legal documents. These include the provisions on preparing the
      issues subject to comments; the address to send comments; an appropriate period that
      gathering agency must reserve (20 days) for agencies, organizations and individuals directly
      affected by the legal normative document in question to contribute their opinions; and the
      investigation of such opinions to revise the draft. The draft decree will require for the opinions
      gathered to be attached to the bill or draft documents upon submission to competent authorities
      for consideration and approval. The Law on Promulgation of Legal Documents of People’s
      Councils and People’s Committees (scheduled to be promulgated by the National Assembly at
      its November 2004 Session, after initial consideration at the May-June 2004 Session) is also
      expected to provide for the gathering of opinions on drafts of legal documents issued by local
      authorities.

      Other proposals being considered relating to the implementation of Article 3 include:
      -     Proposal for gathering public opinions on bills of law and ordinances prepared by the
            Office of the National Assembly;
      -     Proposal of the Government on improving the quality of bills of law and ordinances
            submitted by the Government (prepared by the Office of the Government) to the National
            Assembly, the Standing Committee of the National Assembly, whereby the following
            regulations are expected to be issued: regulations on attracting experts and scientists in
            the process of drafting and evaluating drafts of legal documents; and regulations on
            gathering opinions from those directly affected by the legal documents.
      -     Program on upgrading the preparation, drafting, and improving the quality of legal
            documents conducted by the Ministry of Justice according to the Decision 909-QD-TTg
            dated 14 August 2003 of the Prime Minister. (See Section 9.4 on Formulation of Laws
            below)

9.4   Formulation of Laws:
      To implement one of the pivotal elements of its action plan for overall State administrative
      reform, the Government approved (under Decision 909-2003-QD-TTg dated 14 August 2003,)
      the action plan to reform the formulation and promulgation of legal instruments and to raise the
      quality of legal instruments. A Steering Committee for Reform of Formulation and Promulgation
      of Legal Instruments and for Raising Quality of Legal Instruments will be established, chaired by
      the Minister of Justice with a deputy Minister-Head of the Office of Government as deputy
      chairman, with members selected from the MoF, the MPI and the Ministry of Interior.
      Importantly, the action plan provides for foreign experts to be engaged as part of the taskforce
      to undertake the reform projects. Reform projects comprise:
       -       Reform of the process for producing long-term and annual programs for formulation of
               proposed legal instruments by the National Assembly, the Standing Committee of the
               National Assembly, the Government and the Prime Minister. Over the period from the
               4th quarter of 2003 to the 4th quarter of 2005, the MoJ will assess and report on the
               current process and will devise a new coordinated regime for producing effective and
               adequately funded annual law programs.
       -       Perfecting the process for formulation and promulgation of legal instruments by the
               Government, the Prime Minister, ministers and heads of ministerial equivalent bodies.
               By a 2 stage process over the period from the 4th quarter of 2003 to the 4th quarter of
               2007, the Office of Government will assess and report on the current process and
               investigate a number of reforms, including:
                  (i)      Ensuring sufficient, appropriate and effective detail in legal instruments so
                           that guidelines are not required before they can be implemented;
                  (ii)     Fixing clearly the specific roles and responsibilities of, and sanctions
                           applicable to, each competent agency or person in order to overcome delays
                           in law projects;
                  (iii)    Increasing the time that the Government devotes to law making;
                  (iv)     Fixing clearly the law projects requiring establishment of a drafting committee



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                         or independent evaluation council;
                 (v)     Increasing and strengthening the staff of the MoJ and of the Office of
                         Government so as to improve the regular checking of consistency of legal
                         instruments issued by ministries, branches and local authorities;
                 (vi)    Modernizing the checking and proclamation of legal instruments by the
                         Government by applying information technology achievements on the basis
                         of substantial investment in building and developing the national laws
                         database.
       -      Establishing a process for formulation and promulgation of legal instruments by People’s
              Councils and People’s Committees. Over the period from the 4th quarter of 2003 to the
              4th quarter of 2005, the MOJ will assess and report on the actual status of the
              formulation and promulgation of legal instruments by local authorities and the
              organization of the implementation of such laws over recent years. The action plan
              anticipates the proposal of a single Law on Promulgation of Legal Instruments to be
              uniformly applicable to all central and local State agencies (in replacement of the current
              Law).
       -      Strengthening the taskforce of agencies and officials directly engaged in formulation and
              promulgation of legal instruments. Over the period from the 4th quarter of 2003 to the 4th
              quarter of 2005, the MoJ will prepare a plan for training and application of information
              technology in drafting and evaluating legal instruments.
       -      Formulating an effective regime for attracting the participation of experts, scientists,
              concerned parties and citizens in the process of formulating and promulgating legal
              instruments. Over the period from the 4th quarter of 2003 to the 4th quarter of 2005, the
              MOJ will assess the current situation, investigate reforms (including a regime for drafting
              committees to sign contracts with scientific establishments, universities and leading
              experts to assist in drafting legal instruments) and prepare a plan to achieve an effective
              regime for wider participation in formulation of legal instruments.

      Under Decree 135-2003-ND-CP of the Government dated 14 November 2003 on the Scrutiny of
      Legislative Normative Documents Issued by Ministers, Heads of Ministerial Bodies and People’s
      Committees, all legislative normative documents will be subject to close scrutiny for any error in
      both form and content. Decree 135 also imposes administrative penalties and criminal liability
      on persons or bodies issuing illegal documents.

      Decree 135 is supplemented by Circular 01-2004-TT-BTP of the Ministry of Justice dated 16
      June 2004. Accordingly, every legal instrument must be scrutinized to ensure that (i) it is
      consistent and complies with the Constitution, Laws, Resolutions of the National Assembly and
      documents issued by State bodies at higher level; (ii) it is being issued in the correct form for its
      content; and (iii) its contents are within the competence of the issuing-body.

      By Decision 933-QD-TTg dated 27 August 2004, the Government has approved a new Program
      on Improving Quality of Legislation Building of the Government.

9.5   Judicial Reform:
      Judicial tasks have been transferred from the MoJ to the Supreme Court of Vietnam by the
      National Assembly under its Resolution 08-2002-NQ dated 2 January 2002 on Key Reforms in
      the Judicial Sector in an effort to develop a more independent judiciary.

      Contributing to this effort, recent amendments introduced by the National Assembly in
      November 2003 to the Criminal Procedure Code enhance the responsibilities of the Procuracy
      and the participation of lawyers and promote democratic rights during criminal proceedings and
      supervision of the whole process of criminal proceedings.

      The Ordinance on Judges of People's Courts and the Ordinance on Prosecutors of the People's
      Procuracy issued in October 2002 also guide developments in the area of judicial reform.
      Effective 8 November 2002, the Ordinances regulate the activities permitted to be undertaken
      by judges and prosecutors in an effort to limit corruption and restore public confidence in the
      judiciary and procuracy. Accordingly, the Vietnamese courts and judiciary will receive greater
      autonomy in dealing with both substantive matters brought before them and in arranging the
      funds for its operation.



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      Under Decision 23-2004-QD-TTg of the Prime Minister dated 25 February 2004 on
      Establishment of Institute of Justice, Vietnam has for the first time an institute dedicated to
      training judicial officers (including judges, prosecutors, lawyers, judgment enforcers, notaries)
      and to conduct research in the justice sector. It will have an office in each of Hanoi and HCMC.

9.6   Enforcement of Civil Judgments:
      Circular 05-2002-TT-BTP of the Ministry of Justice dated 27 February 2002 providing guidelines
      for referral of civil cases to local people’s committees responsible for direct enforcement of
      judgments reflects Vietnam's attempt to improve the enforcement of civil judgments, particularly
      in the provinces. Ordinance 13-2004-PL-UBTVQH11 of the Standing Committee of the National
      Assembly dated 14 January 2004 on Execution of Civil Judgments replaces its 1993
      predecessor as of 1 July 2004. A major reform is that Ordinance 13 expressly provides for
      enforcement of Vietnamese arbitration awards as well as Vietnamese court judgments on civil,
      marital/family, labor, and economic matters and foreign court judgments and arbitration awards.
      Previously, there was no mechanism for enforcement of Vietnamese arbitration awards. A Law
      on Enforcement of Judgments is scheduled to be drafted in 2004 and may be considered by the
      National Assembly in 2005.

9.7   Administrative Appeals:
      Currently, pursuant to the Law on Complaints and Denunciations, individuals and organizations
      are entitled to lodge petitions and appeal administrative decisions or actions to courts if they
      consider such decisions or actions illegal. The procedures for lodging petitions or appealing
      cases to courts are as follows:

      The complainant lodging the first petition shall send the petition to the agency issuing the
      administrative decision. The period available for lodging the petition is 90 days from the date of
      receiving the administrative decision (Article 30). The period for settlement of the first petition or
      denunciation shall be 30 days from the date of receiving the petition or denunciation. In
      complicated cases, the settlement period may be extended but shall not be longer than 45 days;
      in remote and distant areas, the above period shall be 45 days and 60 days respectively.

      Within 30 days from the date of terminating the settlement period but the petition is not settled,
      or from the date of receiving the decision on settlement of the first petition, the complainant is
      entitled to either continue lodging the appeal to a superior administrative body or to bring the
      case to an administrative court. Issues relating to customs, taxes, licensing fees and charges
      are all under the purview of such administrative courts (Article 11).

      The amendments to the Law on Complaints and Denunciations and the new Civil Procedure
      Code which were passed by the National Assembly on 15 June 2004 (effective as of 1 October
      2004 and 1 January 2005 respectively) deal with many of the issues relating to the right to
      appeal, including the right to appeal without penalty and the right to appeal to a judicial body.


10. Other
10.1 Textiles:

      Quota Administration
      The MoT, MPI and Ministry of Industry issued Circular 08-2002-TTLT-BTM-BKHDT-BCN dated
      12 August 2002 guiding the granting and implementation of quotas and garments and textiles
      exported to EU countries, Canada and Turkey for 2003. Circular 08 provides guidelines and
      procedures governing quota allocation while stipulating lists of maximum industrial quotas and
      quotas for export of textile products assigned to enterprises. The deadline for the registration of
      the export of domestically manufactured clothing products and industry quotas is 30 May 2003
      and 15 May 2003 respectively. Circular 08 states that unmet quotas are to be returned to the
      MoT or the Provincial People’s committee for reassignment. Under this new regime, export
      licenses for 70% of garment categories will be granted automatically to avoid situations of
      depleted export quota. The remaining quota will be allocated to the People’s Committees in Ho
      Chi Minh City, Hanoi, Hai Phong and Da Nang, and other businesses.



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The MoT issued regulations governing export quota allocations for textiles and garments under
Decision 1191-2002-QD-BTM dated 4 October 2002, changing the process of applying for
export quotas from an automatic granting of licenses to an auction. A board chaired by the MoT
will be set up to regulate maximum quota volume for each firm and lowest bidding invitation
price for each category. All Vietnamese enterprises that have business registration certificates
and registered codes of enterprises for importing and exporting may participate in the bid, as
may FIEs. Decision 1191 regulations only apply to goods which are signed for export from 1
January - 31 December 2003.

U.S.-Vietnam Textile Agreement
On 25 April 2003, the U.S. and Vietnam concluded a bilateral textile agreement setting export
quotas for Vietnam for several categories. The Agreement is to begin on 1 May 2003 and be
effective through 31 December 2004. The Agreement will roll over for another year unless the
Parties terminate or re-negotiate the Agreement by 1 December 2004, or by 1 December of any
subsequent year, until Vietnam becomes a member of the WTO. The Agreement includes
Flexibility Adjustments with a 6% annual swing. Vietnam will issue visas for all categories
subject to quotas.

To address fraud relating to transshipment, the Ministry of Trade recently issued Decision 0285-
2004-QD-BTM dated 8 March 2004 on Establishment of the Permanent Working Group in
Cooperation with the U.S. in Terms of Control of Trade Frauds in the Process of Implementation
of Vietnam-U.S. Garment and Textile Agreement.

On 13 May 2004, the U.S. Department of Commerce announced a 4.5% cut in textile quotas in
response to the above investigation.     A report on the investigation is available at
http://www.doc.gov

The U.S. and Vietnam have recently signed a memorandum of understanding on the extension
of the bilateral textile agreement for the period 1 January 2005 to 31 December 2005. The U.S.
reportedly agreed to increase quotas of 2004 to the allowed maximum level as regulated in the
textile agreement. The new extension helps exporters who have already sold most of their quota
by letting the country borrow from next year's quota with an increase of up to 8 per cent.

Tariff Reductions for U.S. Textile Products
To implement tariff reductions in the U.S.-Vietnam Bilateral Textile Agreement, the Ministry of
Finance issued Decision 19-2004-QD-BTC dated 16 February 2004 issuing the list of goods and
import duty rate to implement the schedule of reduction of import duties under the Agreement on
trading of Textile and garment products signed between Vietnam and the US for the period
2003-2005.

Textile Quota Allocation (US Market)
 Under Circular 02-2003-TTLT-BTM-KHDT-CN of the Ministry of Trade, Ministry of Planning &
Investment and Ministry of Industry dated 27 May 2003 on granting and implementing quotas for
garment and textile exports to the U.S. market for 2003, the quota for the U.S. market will be
temporarily allocated as follows:
 -     65-70% of the total quota will be given to enterprises depending on their export outcomes
       for the year of 2002 and the first three months of 2003;
 -     23-28% of the total quota will be given to those that have large production and export
       capacity but have started to export their product at the end of 2002 or at the beginning of
       2003, and to those that have yet to export for the year of 2002 and first three months of
       2003 but have obtained export contracts for 2003;
 -     3% of the total quota will be given to those that sign direct production and export
       contracts with the leading U.S. distribution import groups;
 -     7% of the total quota will be given to those who use domestic materials. Accordingly, the
       first period will allocate 80% of total quota on 31 May and at the end of June 2003.

Garment makers that are not able to fulfill their quotas must inform the MoT in writing as soon as
possible so it can transfer them to other enterprises. Enterprises, which fail to meet their quotas
but return them to the Ministry before October 1, will have those same quotas allotted next year.



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     Those who fail to inform the Ministry will be granted no such corresponding quotas. The sale,
     transfer or substitution of quotas is not allowed.

     Further, all categories of garment and textile exports are required to have visas as of 1 July
     2003. The following regulations govern the issuance of visas:
       - Circular 03-2003-TT-BTM of the Ministry of Trade dated 5 June 2003 providing guidelines
         for granting visas for garment and textile exports to the USA in accordance with the US-
         Vietnam Garment and Textile Agreement;
      - Decision 0665-2003-QD-BTM of the Ministry of Trade dated 4 June 2003 on granting visas
         for garment and textile exports to the USA (under which the MoT authorizes the Import-
         Export Departments of Hanoi, Hai Phong, Da Nang, HCMC, Vung Tau and Dong Nai to
         grant visas for garment and textile exports to the USA, effective as of 1 July 2003);
      - Official Letter 1183-TM-XNK of the Ministry of Trade dated 4 June 2003 on quota of
         garment and textile exports to the USA;
      - Circular 07-2003-TT-BTM of the Ministry of Trade guiding the allocation and implementation
         of export quotas for garments and textiles to the U.S. in 2004.

     Under Official Letter 1766-TM-XNK of the Ministry of Trade on the Exchange of Garment Export
     Quotas Among Local Textile Exporters, business with export quota but do not yet have export
     contracts shall be required to return the quotas, which then could be granted to other
     businesses lacking sufficient quota to fill export contracts. Businesses that have returned quota
     shall be re-granted with additional quotas in 2004 in line with the respective rate. Businesses
     which have been provided with additional quotas in 2004 shall not receive the same quotas
     allocated for next year. Lending of quotas can conducted via mutual agreement between two
     businesses. According to Official Letter 1766, the directors of the two businesses are required
     to sign the documents of the loaned quotas and send such to the MoT. When proceeding with
     procedures to obtain the quotas, the borrowing business is only required to produce the signed
     documents of lending to the local export-import managing department without the MoT’s
     approval.

     To further supplement the management of textile quota to the U.S., the Ministry of Finance
     recently issued Decision 16-2004-QD-BTC dated 12 February 2004 issuing Tariff for Quotas for
     Textiles and Garments for Export to the EU and US Markets. Decision 16 became effective as
     of 10 March 2004 and replaces Decision 83-2003-QD-BTC of the Ministry of Finance dated 17
     June 2003 issuing Tariff for Export Quotas for Textiles and Garments to the US market and
     Decision 118-2002-QD-BTC of the Ministry of Finance dated 25 September 2002 issuing Tariff
     for Export Quotas to EU market.

10.2 Competition and Monopoly Pricing:
     Ordinance 40-2002-PL-UBTVQH10 of the National Assembly dated 26 April 2002 codifies and
     consolidates a number of items of legislation on prices and price controls, effective as of 1 July
     2002. Detailed regulations on pricing were issued under Decree 170-2003-ND-CP of the
     Government dated 25 December 2003 and became effective as of 14 January 2004. Applicable
     to all foreign and domestic organizations and individuals engaged in production or business
     activities in Vietnam ("businesses"), Ordinance 40 provides for:
      (a)     State management of the stability of market prices of important and essential goods and
              services (prescribed in Decree 170 as including petrol, oil, liquefied gas, cement, iron,
              steel, rice, coffee, cotton, sugar cane, salt, and certain kinds of medication);
      (b)     Determination by the State of prices of land, water surfaces and important natural
              resources, State owned assets to be sold or leased out, goods or services subject to
              monopoly (including electricity, transportation and post and telecom services), and
              goods and services important for national welfare and people’s livelihood (including
              petrol, treated water, basic medicines, bus transportation and subsidized commodities);
      (c)     Evaluation of prices of State owned assets;
      (d)     Control of monopoly prices (defined as the price of goods or services fixed by any one
              seller or purchaser organization or individual in the market, or the price of goods or
              services of multiple organizations and individuals co-operating in a monopoly, holding a
              major share of the market and having the power to dominate market prices);
      (e)     Control of price monopoly co-operation (price-fixing);
      (f)     Prohibition on dumping;



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 (g)    Other prohibitions on businesses with respect to pricing.

Decree 170 limits the definition of "price monopoly co-operation" to price-fixing agreements
between businesses aimed at dominating the market exceeding the market share stipulated by
law (italicized words do not appear in Ordinance 40). But the new regulations do not stipulate
the relevant market share. Of note, the price-fixing provisions of the current draft of the Law on
Competition prescribe a market share threshold of 30%. Decree 170 expressly prohibits the
following conduct deemed to be price monopoly co-operation:
 -      agreement between businesses to fix prices, control prices, change prices for sale of
         goods and services aimed at restraining competition, infringing the legal interests of
         other businesses or of consumers;
 -      sudden sale of one (identical or similar) type of goods or services at one uniform price by
         several businesses at one particular point of time;
 -      agreement between businesses to create scarcity of goods by way of limiting production,
         distribution, transportation, sale of goods or supply of services; destructing or damaging
         goods; or taking advantage to speculate and increase prices;
 -      agreement between businesses to apply conditions of sale or purchase of goods and
         supply of after-sale services which affect prices of goods and services;
 -      agreement between businesses to change prices of sale and purchase of goods and
         services in order to eliminate or force other enterprises to co-operate with them or
         become their affiliates.

Implementing Decree 170, Circular 15-2004-TT-BTC of the Ministry of Finance dated 9 March
2004 provides detailed guidelines on regulation of petrol, oil, liquefied gas, cement, iron, steel,
rice, coffee, cotton, sugarcane, salt and some medications (effective as of 6 April 2004). Of
note, Circular 15 prescribes the circumstances in which prices will be deemed to have
"abnormally fluctuated", for the purposes of State management of stability of market prices.
Circular 15 does not provide any further guidelines on price monopoly co-operation. In August
2004, the Prime Minister issued a directive on measures to control the rate of price growth in the
immediate future. By Official Letter 11026-TC-TCT dated 29 September 2004, all tax
departments are now under instructions from the MOF to, among other things, check regularly
the sale pries declared by foreign invested enterprises as well as domestic shareholding
companies and limited liability companies) producing and trading petrol, iron and steel, and
cement to verify if their increases in market prices are appropriate. All tax departments are
required to submit monthly and quarterly reports on the above checks. Under Decree 169-2004-
ND-CP of the Government dated 22 September 2004 on Dealing with Administrative Offences in
Pricing Sector, any domestic or foreign organization or individual engaged in production or
business activities in Vietnam and breaching the provisions on price stabilization will be subject
to a VND5-10 million fine. Circular 110-2004-TT-BTC of the Ministry of Finance dated 18
November 2004 which provides guidelines for implementation of Decree 169 imposes a fine of
VND12.5 million on organizations and individuals engaging in price monopoly co-operation
within a single province or municipality. If the offence extends to more than one province or
mucicipality, a fine of VND17.5 million will be imposed.

How the price-fixing provisions of Ordinance 40 and Decree 170 interrelate with the Law on
Competition awaits clarification.

A Law on Competition was approved by the National Assembly of Vietnam on 9 November 2004
and will be promulgated upon the close of the National Assembly's November 2004 Session
(scheduled for 4 December). The Law on Competition applies to: business organizations and
individuals (“enterprises”), including overseas enterprises with activities in Vietnam (which is
understood to include: foreign commercial presences such as branch offices; existing foreign
investors; and foreign contractors with an office or directly supplying services in Vietnam), as
well as professional and trade associations with activities in Vietnam. Effective as of 1 July
2005, the Law on Competition will regulate agreements in restraint of competition, abuse of
dominant or monopoly market position, economic concentrations (mergers and acquisitions),
and unfair competitive acts. A review of the Competition Law is available on our website at
http://www.usvtc.org/Documents/Vietnam%20Laws/CompetitionLawUpdateDec2004.pdf.




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     In anticipation of promulgation of the Law on Competition, a new Competition Management
     Department has been established under the MoT, which will exercise the function of State
     administration of competition (Decree 29-2004-ND-CP of the Government dated 16 January
     2004 on Functions of Ministry of Trade). Consistent with the Government's administrative
     reform policy aimed at streamlining Vietnam's bureaucracy, this new Department is expected to
     also have responsibility for MFN and anti-dumping issues. During the National Assembly's
     debate of the Law on Competition, its Economics and Budgetary Committee acknowledged that,
     in the long term, it will be necessary to form a State administrative body for competition which is
     independent of the MoT.

10.3 Tendering:
     Vietnam’s tendering regulations were most recently revised by Decree 66-2003-ND-CP of the
     Government dated 12 June 2003 (effective 16 July 2003). The revised tendering regulations
     represent the fourth update of Vietnam’s tendering regulations since 1996. The original
     tendering regulations were issued in July 1996 and then amended in August 1997. New
     tendering regulations were issued with Decree 88-1999-ND-CP of the Government dated 4
     September 1999 and subsequently amended by Decree 14-2000-ND-CP of the Government
     dated 5 May 2000 and now by Decree 66. New guidelines for implementation of Decree 66
     were issued under Circular 01-2004-TT-BKH of the Ministry of Planning and Investment dated 2
     February 2004 and became effective as of 20 February 2004. Suspended for most of 2004, the
     information disclosure requirements introduced by Decree 66 are now being enforced by the
     MPI. An Ordinance on Tendering is scheduled to be passed by the National Assembly in 2005.
     For more information on the Decree 66 tendering reforms, please refer to the link below:
     http://www.usvtc.org/Documents/Vietnam%20Laws/Tendering%20Update%20%20July%202003
     .pdf"

10.4 Labor:
     56 amendments to the Labor Code were passed by the National Assembly on 2 April 2002 and
     became effective as of 1 January 2003. Changes include: (i) Foreign companies are allowed to
     recruit employees directly (no longer required to use labor supply agencies); (ii) Social insurance
     contributions are mandatory for all employees employed under labor contracts with a term of 3
     months or more (previously, only mandatory where an employer employed over 10 employees);
     (iii) A national unemployment insurance scheme is provided for. Since April 2002, the
     Government has issued a raft of decrees and circulars implementing the new provisions of the
     Labor Code (Amended). The national unemployment insurance scheme provided for in the
     Labor Code (Amended) is expected to be detailed in a new Law on Social Insurance, which is
     scheduled to be prepared in 2004 and likely to be passed in 2005.

      Under Decree 105-2003-ND-CP of the Government dated 17 September 2003 Providing
     Detailed Guidelines for Implementation of a Number of Articles of the Labour Code With
     Respect to Recruitment and Management of Foreign Employees Working in Vietnam, the
     Government has imposed a maximum limit on the number of foreign employees who may be
     employed by Vietnamese enterprises operating under the Law on Enterprises, by SOEs and by
     FIEs. No more than 3% of the total number of employees may be foreign employees - up to a
     maximum of 50 foreign employees.             Other employers in Vietnam (including foreign
     representative and branch offices) are not subject to this maximum limit but the approval of the
     chairman of the relevant people's committee is required for the employment of foreigners. Work
     permits are required for all foreigners employed for 3 months or more, except in a small number
     of prescribed cases (including foreign lawyers registered in Vietnam). Any foreign employee
     who does not have a work permit by March 2004 may be deported.

     Implementing Decree 105, Circular 04-2004-TT-BLDTBXH of the Ministry of Labour, War
     Invalids and Social Affairs dated 10 March 2004 provides guidelines on how to calculate the 3%
     cap on foreign employees, as well as on applications for, issuance of and extension of work
     permits. In the spirit of the Government's Resolution 01-2004-NQ-CP of January 2004 which
     attempted to soften the impact of the cap, Circular 04 provides for a number of exceptions to the
     cap. Due to the protests of the foreign invested community, it is likely that the cap will be
     relaxed (or even abolished) in the near future. Following Decision 51-2004-QD-TTg of the
     Government dated 31 March 2004 which specifically instructed the Ministry of Labour, War
     Invalids and Social Affairs ("MoLISA") to "investigate amendments to the policy on employment



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     by extending rights of companies in recruiting employees especially foreign employees", Official
     Letter 3668-VPCP-VX of the Office of Government dated 15 July 2004 directs the MPI and the
     MoLISA to co-ordinate to investigate and submit to the Government an amendment to article 3.1
     of Decree 105 in the direction of an increase in the percentage of foreign employees working in
     enterprises in all economic sectors in Vietnam.

10.5 Environmental Standards:
     A new list of environmental standards for local and foreign enterprises and individuals
     conducting business in Vietnam was issued under Decision 35-2002-QG-BKHCNMT of the
     Ministry of Science, Technology and Environment dated 25 June 2002 and became effective as
     of 1 January 2003. The new list includes compulsory standards on air quality, noise, water
     quality, land quality and vibration.

10.6 Taxation:
     Amendments to the Law on Corporate Income Tax ("CIT"), Law on VAT and Law on Special
     Sales Tax became effective as of 1 January 2004.

     Corporate Income Tax
     Under the Law on CIT (Amended), a single standard tax rate of 28% now applies to domestic
     enterprises and new foreign invested businesses, representing a 4% reduction for domestic
     businesses (from the current 32%) but a 3% increase for new foreign invested businesses (from
     the current 25%). Preferential rates of 20%, 15% and 10% will be available. Existing foreign
     invested projects will continue to be subject to the former standard tax rate of 25% and any
     other already approved preferential tax treatment. Enterprises operating in the fields of
     prospecting, exploration and exploitation of oil and other rare and precious natural resources
     remain subject to a higher CIT rate of between 28% and 50% (as determined by the Prime
     Minister on basis of the production and business situations of each enterprise). Decree 164-
     2003-ND-CP of the Government dated 22 December 2003 and Circular 128-2003-TT-BTC of
     the Ministry of Finance dated 22 December 2003 provide guidelines on the CIT reforms. Decree
     152-2004-ND-CP of the Government dated 6 August 2004 provides for amendment of Decree
     164 with respect to preferential CIT treatment. In addition to the preferential treatment for
     industrial zones and export processing zones (see 8.13 above), Decree 152 provides for the
     following preferential treatment for specially encouraged foreign investment projects and
     medical treatment, education, training and scientific research institutions: 10% CIT rate for 15
     years, 4 year CIT exemption and 9 year 50% CIT reduction. Decree 152 became effective as of
     29 August 2004 and is applicable as from the 2004 taxation period. By Circular 88-2004-TT-
     BTC dated 1 September 2004, the MoF provides for amendment of Circular 128 for consistency
     with the amendments under Decree 152.

     Personal Income Tax (PIT)
     Amendments to the 2001 Ordinance on Income Tax of High Income Earners were promulgated
     by the Standing Committee of the National Assembly on 24 March 2004. The following reforms
     became effective as of 1 July 2004:
     -     Income tax rates for Vietnamese individuals have been drastically reduced. The income
           tax threshold has been raised to average monthly income of VND5 million (up from VND3
           million). Income tax brackets have been broadened and the number of brackets has
           been reduced to 5 (from 6). The top tax bracket is average monthly income of over
           VND40 million and subject to 40% tax. Additional income tax rate of 30% has been
           abolished. Only 75% of the taxable income of singers, circus artistes, dancers,
           footballers and professional sportsmen and sportswomen is subject to personal income
           tax (ie 25% of their taxable income is tax-free).
     -      Income tax rates for foreigners with average monthly income up to VND80 million remain
           unchanged. The previous top tax bracket of average monthly income over VND120
           million, subject to 50% tax, has been abolished. The top tax bracket is now average
           monthly income of over VND80 million and subject to 40% tax.
     -      The former tax exemption for income derived in Vietnam of non-resident foreigners
           remaining in Vietnam for less than 30 days has been abolished. Now there are only 2
           categories (down from 3) of foreigners for personal income tax purposes: (1) foreigners in
           Vietnam for over 183 days and subject to tax tariff and (2) foreigners in Vietnam for less
           than 183 days and subject to fixed rate of 25%.



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      -      Income derived from scientific or technical services, income derived from the transfer of
             technology, income from the licensing of rights to use inventions or trademarks, IT
             services, consultancy or training services or agency services; income from royalties; and
             broking commissions are now expressly included as forms of regular income subject to
             income tax (previously, these were categorized as irregular income).
      -      Gifts or donations in kind sent by overseas residents are no longer included as irregular
             income subject to income tax.
      -      Irregular income tax threshold has been raised to VND15 million (from 2 million). Only 2
             tax rates now apply to irregular income (down from 6 rates): 5% applies to irregular
             income derived from transfer of technology; and 10% applies to irregular income from a
             lottery win.

      Detailed provisions for implementation of the Ordinance have been issued under Decree 147-
      2004-ND-CP of the Government dated 23 July 2004 and Circular 81-2004-TT-BTC of the
      Ministry of Finance dated 13 August 2004.

10.7 Commercial Arbitration:
     Ordinance 08-2003-PL-UBTVQH11 on Commercial Arbitration dated 25 February 2003
     (effective as of 1 July 2003) represents a vast improvement on previous Vietnamese arbitration
     law, even though the new Ordinance falls short of UNCITRAL Model Law. Notable features of
     the Ordinance include:
      -      The Ordinance governs arbitration of disputes relating to all commercial acts by business
             organizations or individuals, including the purchase or sale of goods or the provision of
             services; commercial distribution, representation or agency; bailment; leasing out or
             leasing; hire-purchase; construction; consultancy; technical activities; licensing;
             investment; finance and banking; insurance; exploration and exploitation; transportation
             of goods and passengers. Previously, Vietnamese arbitration law was limited to
             resolution of disputes relating to economic contracts, disputes between a company and
             its members, disputes between members of a company, and disputes relating to the sale
             and purchase of shares and debentures.
      -      The provisions on form and validity of arbitration agreements of the Ordinance break new
             ground. As previously, an arbitration agreement must be made in writing. However, the
             Ordinance clarifies that an arbitration agreement may be an arbitration clause in a
             contract or a separate document, including a letter, telegram, telex, facsimile, electronic
             mail or any other written form which clearly shows the parties’ intention to resolve
             disputes by arbitration.
      -      Disputes may be resolved by (i) an arbitration tribunal organized by an arbitration center
             or (ii) an arbitration tribunal established by the parties. The arbitration tribunal may be
             made up of three arbitrators or a sole arbitrator as agreed by the parties. Although the
             Arbitration Ordinance is a great improvement on previous law (which only contemplated
             (i) above), it is not consistent with the UNCITRAL Model Law which gives parties the
             freedom to determine the number of arbitrators and makes three the default number. The
             ability of disputing parties to select more than three arbitrators allows the flexibility for
             each party to name an arbitrator in cases where there are many defendants or plaintiffs
             and the opportunity for the parties to ensure a broad range of experts. Importantly, under
             the Ordinance, the selection of arbitrators by the disputing parties or a court is no longer
             restricted to arbitrators on the lists of arbitrators of Vietnamese arbitration centers.
      -      Any Vietnamese citizen may be selected to act as an arbitrator provided that conditions
             prescribed in the Ordinance are satisfied. The new condition requiring a Vietnamese
             arbitrator to have a university degree and at least 5 years’ work experience in his or her
             area of expertise alleviates the shortcoming of the previous law which allowed citizens
             who were only experienced (not qualified) in law or economics to be arbitrators. Although
             the MoJ is responsible for State administration of arbitration in Vietnam (in coordination
             with the Vietnam Lawyer’s Association), it no longer has authority over the selection of
             arbitrators.
      -      The Ordinance, for the first time, permits foreign citizens to act as arbitrators in Vietnam
             for the resolution of any dispute with a foreign element, defined as "a dispute arising from
             commercial activities in which a participating party is a foreign individual or legal entity; or
             where the grounds for establishing, altering or terminating a relationship the subject of a
             dispute arise abroad; or where assets relating to the dispute are located abroad". To be



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            appointed as arbitrators in Vietnam, foreign citizens must be qualified to act as arbitrators
            under the law of their home country. Further, in a dispute with a foreign element, the
            disputing parties are entitled to agree that (i) a foreign law will be the substantive law to
            resolve the dispute, provided that such foreign law is not inconsistent with the
            fundamental principles of the law of Vietnam; (ii) the arbitration tribunal will apply
            procedural rules other than those provided for in the Ordinance; (iii) the arbitration
            proceedings will be conducted in a foreign country or in Vietnam; and (iv) the arbitration
            proceedings will be conducted in a foreign language or in Vietnamese.
      -     The Ordinance prescribes the conditions and procedures for licensing and operation of
            arbitration centers in Vietnam, which are defined clearly as non-government
            organizations with legal entity status, which may establish branches and representative
            offices. The Ordinance does not impose any limit on the duration of an arbitration centre,
            subject only to termination pursuant to the provisions of its charter or license revocation.
            Previously, Vietnamese law limited the duration of licenses for arbitration centres to 5
            years only (with extension available upon application).
      -     The Ordinance includes more detailed and improved provisions than previously provided
            by law on procedural rules with respect to statements of claim, statement of defense,
            counter-claims, limitation periods for initiating proceedings for dispute resolution by
            arbitration, default procedures for arbitration, evidence, injunctive relief, stay of
            proceedings, conciliation, etc.
      -     The Ordinance provides more detailed and improved provisions on enforceability,
            cancellation and enforcement of arbitration awards. Importantly, the Ordinance provides
            for an award creditor to apply for enforcement of an arbitration award (including awards
            made prior to 1 July 2003) by the judgment execution body in the area where the award
            debtor has its office or residence or assets. The provisions of the law on execution of
            civil judgments will apply to the enforcement of arbitration awards. Previously,
            Vietnamese law did not provide for enforcement of domestic arbitration awards.
            Enforcement of Vietnamese arbitration awards is now expressly provided for in
            Ordinance 13-2004-PL-UBTVQH11 of the Standing Committee of the National Assembly
            dated 14 January 2004 on Execution of Civil Judgments (see Section 9.6 on
            “Enforcement of Civil Judgments”).

     Under the Ordinance, like other arbitration centers established prior to 1 July 2003, the Vietnam
     International Arbitration Center (established under the auspices of the Vietnam Chamber of
     Commerce and Industry and currently having 76 arbitrators specializing in economic and legal
     disputes) is not required to apply for a new operational license but is required to amend and
     supplement its charter and procedural rules for consistency with the Ordinance by 1 July 2004,
     failing which its license will be revoked.

     Detailed provisions for implementation of a number of articles of the Ordinance have been
     issued under Decree 25-2004-ND-CP of the Government dated 15 January 2004 and became
     effective as of 6 February 2004. Decree 25 provides in detail for the jurisdiction of commercial
     arbitrators; the procedures for establishment, registration of operation and termination of
     arbitration centres; the procedures for establishment of branches and representative offices of
     arbitration centres; the fees for arbitration; dealing with breaches; and State administration of
     arbitration.

     A new consolidated Civil Procedure Code was passed by the National Assembly on 15 June
     2004 and became effective as of 1 January 2005. The Code introduces new regulations
     governing recognition of foreign court judgments and foreign arbitration awards in Vietnam.

10.8 Secured Transactions:
     Vietnam’s National Registration Agency of Secured Transactions ("NRAST") officially came into
     operation in Hanoi on 12 March 2002. Officially established in July 2001, the NRAST's entry
     into formal operation was long awaited in order to allow credit providers to register their security
     transactions (mortgages, pledges, guarantees) as required by law. The first branch office of
     NRAST was opened on 26 August 2002 in Ho Chi Minh City. Other branch offices are planned
     to be opened throughout Vietnam.




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             Detailed guidelines for implementation of Decree 165-1999-ND-CP of the Government dated 19
             November 1999 with respect to signing and performance of security contracts and realization of
             security property were issued under Circular 06-2002-TT-BTP of the Ministry of Justice dated 28
             February 2002. The tariff of fees for registration of security transactions and for information
             relating to registered security transactions was issued under Joint Circular 33-2002-TTLT-BTC-
             BTP of the Ministry of Finance and the Ministry of Justice dated 12 April 2002. Any security
             transaction entered into prior to 27 April 2002 is exempt from payment of fees for registration
             provided it is registered prior to end of July 2002.

             Significant reforms relating to security were introduced under Decree 85-2002-ND-CP of the
             Government dated 25 October 2002. Effective as of 10 November 2002, Decree 85 relaxed the
             "one lender" rule - a single asset may now be used as security for multiple obligations to multiple
             lenders if the following conditions are satisfied: (i) all security transactions relating to the single
             item of property must have been registered at the office for registration of security transactions;
             (ii) all of the lenders must agree in writing on the appointment of a representative to obtain retain
             the original documentation relating to the security property and to realize the property to recover
             the debt if the borrower fails to reply; (iii) the value of the security property (now, as fixed at the
             time of signing of the security contract) must exceed the total value of the secured obligations,
             unless otherwise provided by the law. Decree 85 also allows offshore lenders to take security
             over fixed assets (for more information, see 8.10). For details of Circular 07-2003-TT-NHNN of
             the State Bank of Vietnam dated 19 May 2003 providing guidelines for implementation of a
             number of provisions on security for loans from credit institutions, see Section 7.9 on “Financial
             Services – Banking” above.

        10.9 Printing and Publishing:
             Aimed at improving the business environment, Decree 59-2002-ND-CP of the Government
             dated 4 June 2002 abolishes (amongst other things) the requirement for licenses for printing
             “technical instructions on production; introduction of products; instructions on use of goods;
             leaflets on instruction of products, goods or enterprises” effective as of July 2002.

             Under Decision 28-2002-QD-BVHTT of the Ministry of Culture & Information dated 21 November
             2002 issuing Regulations on Publication of Newsletters, Documents, Prospectuses; Issuance of
             Press Notices; Publication and Distribution of Newsletters in Electronic Form by Foreign Bodies
             and Institutions in Vietnam (effective 6 December 2002), conditions must be satisfied and
             permits obtained from the MoCI prior to publication of newsletters, documents, prospectuses,
             issuance of press notices or publication and distribution of newsletters in electronic form
             (referred to together as "newsletters and other documents") by foreign bodies and institutions in
             Vietnam. Foreign bodies in Vietnam desiring to publish a newsletter or other documents must
             satisfy the following conditions: (i) operating lawfully in Vietnam; (ii) having qualified person duly
             responsible for publication of the newsletter or other document; (iii) determining clearly
             information content, objective, term of publication, size, numbers of page, quantity, place of
             printing, subject of the newsletter or other document; (iv) having official head office and
             necessary conditions for publication of the newsletter or other document. The application for
             MoCI permission must comprise: (i) standard form application (issued by MoCI); (ii) notarized
             copy of investment license, representative office license, or other documents certified by
             competent Vietnamese authorities for lawful operations in Vietnam; (iii) draft, model of
             newsletter or other document. Decision 28 also prescribes the content and form of newsletters
             and other documents as well as the conditions and procedures for permits for foreign
             representative bodies, foreign delegations and international conferences.

             A revised Law 30-2004-QH11 on Publishing was passed by the National Assembly on 3
NEW!!        December 2004 and will become effective as of 1 July 2005, replacing the Law on Publication
             dated 7 July 1993. Despite a number of reforms, publishing still remains a highly regulated
             sector in Vietnam.

        10.10 Commercial Contracts:
             The MoT is currently drafting a revised version of Vietnam's 1997 Commercial Law. It is
             expected that the proposed revised Commerical Law will reconcile differences between
             Vietnamese commercial law and international commercial laws in order to accommodate
             requirements arising from the BTA and other international agreements. Currently, business



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     contracts may be governed by the Commercial Law, the Civil Code or the Ordinance on
     Economic Contracts. It is highly anticipated that the difficult inter-relationship of the above
     legislation will be addressed by repealing the Ordinance on Economic Contracts. The MoT is
     awaiting National Assembly approval of a complete revision of the Commercial Law (not just
     issuance of amendments to the Commercial Law). For more details on amendment of the
     Commercial Law, see Section 5.8 on “Trading Rights” above.

     Decree 175-2004-ND-CP of the Government dated 10 October 2004 on Dealing with
     Administrative Offences in the Field of Commerce provides for administrative sanctions for a
     wide range of offences in the field of commerce (being either intentional or unintentional
     offences, which are not serous enough to warrant criminal prosecution (by organizations and
     individuals including breach of regulations on (1) management and use of business registration
     certificates, (2) establishment and operation of representative offices and branches of foreign
     traders in Vietnam, (3) circulation and trading of goods and services in the market, (4) trade
     promotion, and (5) import-export of goods and services. Decree 175 imposes high fines for
     breaches of regulations on foreign traders in Vietnam (up to as high as VND70 million
     depending on the nature and seriousness of the offence) and for breaches of regulations on
     goods and services the trading and circulation of which is prohibited in Vietnam (up to as high
     as VND100 million depending on the seriousness of the offence).

10.11 Business Registration and Commercial Rights
     The Law on Enterprises dated 12 June 1999 governs companies’ commercial rights and in its
     application extended both trading and distribution rights to all Vietnamese enterprises
     (previously restricted to only State trading entities).

     Decree 02-2000-ND-CP on Business Registration and Decree 03-2000-ND-CP on the
     Implementation of the Law on Enterprises, both dated 3 February 2000 further streamlined and
     eliminated business-licensing procedures in many sectors. As many as 62,300 companies with
     total investment capital of US$7.4 billion have been established since the Law on Enterprises
     became effective on 1 January 2000. More licensing requirements, including with respect to
     publishing, pharmaceuticals, film production, trading of medical equipment and advertising, have
     since July 2003 been abolished or relaxed. Moreover, a new online system and the
     establishment of the Enterprise Information Centre have made business registration in Hanoi,
     Hai Phong and Ba Ria-Vung Tau significantly faster (from 7-8 days to as little as one hour) and
     cheaper. Registration time for the establishment of a business has been shorted from 15 days
     to 7 days or even 3 days in Ho Chi Minh City. Businesses can also register and track the
     process online through Ho Chi Minh City’s Service of Trade website.

     Effective as of 29 April 2004, Decree 02 has been replaced by Decree 109-2004-ND-CP of the
     Government dated 2 April 2004 on Business Registration. Decree 109 revises the duties and
     powers of business registration offices ("BROs") and the rights and duties of organizations and
     individuals registering their businesses. Of note, separate District BROs will only be established
     if merited by the specific requirements of business registration work in the district. Grounds for
     revocation of business registration certificates have been revised. The MPI's former duty to
     publish bulletins on establishment, dissolution and bankruptcy of enterprises, on any alteration
     of business registrations and on legal information relating to business has been replaced by the
     new duties to supervise and inspect business registration work, to check legal instruments on
     business registration and identify any which are ultra vires or contrary to the Law on Enterprises
     or Decree 109, and to resolve such matters. Decree 109 provides for stricter regulation of the
     names of businesses. Decree 109 permits individuals and households to register business in
     the form of sole traders provided that they employ no more than 10 employees, have one
     trading place and comply with other prescribed restrictions. A sole trader must convert into an
     enterprise if it employs more than 10 employees or has more than one trading place. As
     previously, sole traders being street vendors and the like are not required to register their
     business.

     Effective as of late June 2004, Decree 03 has been amended by Decree 125-2004-ND-CP of
     the Government dated 19 May 2004. Of note:
      •    When foreign organizations and non-resident foreign individuals contribute capital to and
           purchase shares in domestic enterprises, the change in charter capital and change in



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           membership of the domestic enterprise must be registered at the BRO where the
           enterprise is registered. (Foreign organizations and non-resident foreign individuals
           remain excluded from founding a domestic enterprise.)
       •   Foreign organizations and non-resident foreign individuals contributing capital to, or
           purchasing shares in, a domestic enterprise have the right to:
           -     authorize a Vietnamese citizen to act as a member of the members' council
                 corresponding to their share of equity, in the case of a limited liability company; or
           -     nominate a person (not restricted to Vietnamese citizen) to the board of management,
                 in the case of a shareholding company, in accordance with the provisions of law or
                 the charter of the company.
           This is a welcome clarification of the right of major non-resident and corporate foreign
           shareholders to participate in management of domestic shareholding companies.
           However, the continued limitation on who may be board members (restricted to resident
           foreign individuals, overseas Vietnamese or Vietnamese citizens) remains a disincentive.
           Further, the number of board members that a major shareholder is entitled to nominate is
           subject to the decision of the General Meeting of Shareholders. Curiously, where the
           number of candidates nominated by a major shareholder is less than the requisite number
           decided by the General Meeting of Shareholders, the remaining number will be nominated
           by the board - not by the major shareholder.
       •   Shareholding capital of founding shareholders must be fully paid up immediately after
           issuance of a business registration certificate, and they will be liable for debts and other
           financial obligations of the company within the value of their share of equity in the
           company as recorded in the register of founding shareholders registered at the BRO.
       •   Public declarations of prescribed related interests of members and management personnel
           of limited liability companies and shareholding companies are compulsory, thereby
           facilitating greater transparency in Vietnam's corporate environment.
       •   Specific guidelines on a number of rights and obligations of members of limited liability
           companies have been added.
       •   With respect to conditional lines of business, the founder of an enterprise and its legal
           representative are responsible for strict implementation of all business conditions in
           accordance with regulations and the board members and partners etc will be jointly liable
           for any business operations carried on without having satisfied all conditions. With respect
           to lines of business which are subject to legal capital requirements, board members and
           partners etc are jointly liable for the truthfulness and accuracy of the certified amount of
           capital at the time of establishment of the enterprise and throughout the course of
           business operations of the enterprise.

10.12 Electronic Commerce:
     Legislation on e-commerce was originally scheduled to take the form of an ordinance. The MoT
     had drafted an Ordinance, based on the UNCITRAL Model Law, which facilitated the use of e-
     commerce by giving legal standing to electronic contracts and electronic signatures as well as
     allocating the responsibilities of parties with respect to the transmission and receipt of electronic
     data. The National Assembly's 2005 legislative program now schedules for a Law on Electronic
     Transactions to be considered at the May 2005 Session of the National Assembly and then
     passed at its October 2005 Session.

10.13 General Fees and Charges:
     A detailed list of charges and fees was issued with Decree 57-2002-ND-CP of the Government
     dated 3 June 2002 providing in detail for implementation of the Ordinance on Charges and Fees
     (replacing Decree 04-1999-ND-CP of the Government dated 20 January 1999 on fees and
     charge under the State Budget). Under implementing Circular 63-2002-TT-BTC the Ministry of
     Finance dated 24 July 2002, competent authorities are entitled to collect only those charges and
     fees listed in Decree 57. Competency to fix charges is as follows: the Government is
     responsible for fixing some important charges with large revenue and in connection with the
     socio-economic policies of the Republic; provincial people's committees are responsible for
     fixing charges related to management of land and natural resources within their jurisdiction; and
     the MoF fixes the remainder. As for fees, competency to fix important fees with large revenue
     and international legal significance belongs to the Government while the MoF is in charge of the
     remainder. Circular 63 also makes detailed provisions on levels of charges and fees;
     management and utilization of charges and fees collected; exemptions and reductions of



                                                                                                      104
     charges and fees; responsibilities of the State bodies on management of charges and fees.
     Circular 63 replaces Circular 54-1999-TT-BTC of the Ministry of Finance dated 10 May 1999 (as
     amended by Circular 21-2001-TT-BTC of the Ministry of Finance dated 3 April 2001).

10.14 Penalties and Fines:
     Ordinance 44-2002-PL-UBTVQH10 on Dealing with Administrative Offences dated 2 July 2002
     stipulates the kinds of penalties, the bodies empowered to impose penalties and the procedures
     for imposing penalties on individuals and organizations breaching State administrative
     regulations (not constituting a crime). Ordinance 44 deals with administrative offences in a
     range of sectors, including labor, goods quality, accounting, justice, social insurance (with fines
     of up to VND20 million); commerce, customs, environment, construction, securities, banking &
     technology transfer (fines of up to VND70 million); and IP, maritime, natural resources and
     taxation (fines of up to VND100 million). Implementing guidelines were issued under Decree
     134-2003-ND-CP of the Government dated 14 November 2003.

10.15 Constitutional Amendments:
     Amendments in December 2001 of the 1992 Constitution of Vietnam introduce improvements in
     administrative functions that will assist in making Vietnam’s administrative bodies more effective.
     The Constitution (as amended) also for the first time provides that “the State shall adopt
     consistent policies on the development of a socialist-oriented market economy.” (Article 15) - a
     significant development since reference to the term “market economy” has never been made
     before. The foreign investment sector is also recognized for the first time as a legitimate sector
     of Vietnam’s economy.




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