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CATALOG OF LEGAL UPDATES VIETNAM TRADE POLICY REGIME

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					                                                CATALOG OF LEGAL UPDATES:
                                             VIETNAM TRADE POLICY REGIME
                                                                             15 May 2006

                                                                                     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 and related WTO
disciplines. This is a working document, updated monthly, with new items identified in the margins.



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
MoC             Ministry of Construction
MoCI            Ministry of Culture & Information
MoF             Ministry of Finance
MoI             Ministry of Industry
MoJ             Ministry of Justice
MoNRE           Ministry of Natural Resources & Environment
MoPT            Ministry of Posts & Telecommunications
MoST            Ministry of Science & Technology (formerly Ministry of Science, Technology &
                Environment
MoT             Ministry of Trade
MPI             Ministry of Planning & Investment
NA              National Assembly
SBV             State Bank of Vietnam
SOE             State owned enterprise
USD             United States dollar
VND             Vietnamese dong
                                                TABLE OF CONTENTS

VIETNAM TRADE POLICY REGIME
VIETNAM TRADE POLICY REGIME ................................................................................................... 2
1. Status of Vietnam’s WTO Accession ............................................................................................. 6
    1.1    WTO Accession – Bilateral Negotiations........................................................................... 6
           U.S. Bilateral Negotiations: ............................................................................................... 6
           U.S. Ratification of WTO Accession – Permanent NTR for Vietnam: ................................ 7
           EU Bilateral Negotiations: ................................................................................................. 7
           Concluded Bilateral Agreements:...................................................................................... 8
    1.2    WTO Accession – Multilateral Negotiations ...................................................................... 8
    1.3    WTO Approval of Vietnam's Accession:............................................................................ 9
    1.4    Vietnam Ratification of WTO Accession – Necessary Action by Vietnam: ........................ 9
2. Status of U.S.-Vietnam Bilateral Trade Agreement (BTA) ........................................................... 10
    2.1    Ratification: ..................................................................................................................... 10
    2.2    Consultations: ................................................................................................................. 10
    2.3    Annual NTR Status Renewal: ......................................................................................... 10
    2.4    Duration of the BTA: ....................................................................................................... 11
3. General and Legislative Action Plans for Implementation of BTA and WTO Accession .............. 11
    3.1    Overall Action Plan for Implementation of the BTA: ........................................................ 11
    3.2    Legislative Plan for Implementation of the BTA:.............................................................. 11
    3.3    Legislative Action Plan for WTO Accession: ................................................................... 12
4. Legislative Developments 2002 - 2007........................................................................................ 13
    4.1    Legislative Developments in 2002: ................................................................................. 13
    4.2    Legislative Program 2002 - 2007: ................................................................................... 13
    4.3    Legislative Developments in 2003: ................................................................................. 14
    4.4    Legislative Developments in 2004: ................................................................................. 15
    4.5    Legislative Developments in 2005: ................................................................................. 17
    4.6    Legislative Developments in 2006: ................................................................................. 20
5. Trade in Goods ........................................................................................................................... 22
    5.1    Most-Favored-Nation Status: .......................................................................................... 22
    5.2    National Treatment: ........................................................................................................ 23
    5.3    Tariffs:............................................................................................................................. 23
           MFN Tariffs ..................................................................................................................... 24
           ASEAN Free Trade Area (AFTA) .................................................................................... 24
           ASEAN – China FTA....................................................................................................... 24
           BTA Tariffs...................................................................................................................... 25
           Tariffs – Automobiles and Automotive Components ....................................................... 25
    5.4    Application of Internal Taxes on Imported Goods ........................................................... 26
    5.5    Customs: ........................................................................................................................ 26
           Customs Valuation.......................................................................................................... 26
           Inspection and Risk Management ................................................................................... 27
           Post-Entry Audit .............................................................................................................. 29
           Customs Agents ............................................................................................................. 29
    5.6    Rules of Origin ................................................................................................................ 30
    5.7    Non-Tariff Barriers: ......................................................................................................... 30
           Import Licensing ............................................................................................................. 31
           Quantitative Restrictions / Tariff Rate Quotas: ................................................................ 31
           Import Prohibitions .......................................................................................................... 31
    5.8    Trading Rights: ............................................................................................................... 32
           Foreign Trading Rights ................................................................................................... 32
    5.9    Sanitary and Phytosanitary (SPS) Measures: ................................................................. 34
           Plant Health .................................................................................................................... 35
           Animal Health ................................................................................................................. 35
           Food Safety .................................................................................................................... 35
           Enquiry Point / Notification Point..................................................................................... 37
    5.10 Standards and Technical Barriers to Trade (TBT): ............................................................. 37


                                                                                                                                                 3
              TBT Enquiry Point / Notification Point ............................................................................. 38
              Product Standards & Inspection...................................................................................... 38
              Product Safety ................................................................................................................ 39
     5.11     Industrial subsidies ......................................................................................................... 40
              Investment Incentives Contingent upon Export Performance.......................................... 40
              Investment Incentives Contingent Upon Localization Ratios........................................... 40
              Programs for Textile and Garment Sector....................................................................... 41
              Programs for Hi-Tech, Industrial, and Export Processing Zones..................................... 41
     5.12     Trade Remedies: ............................................................................................................ 42
              Safeguard Measures....................................................................................................... 43
              Anti-Dumping Measures ................................................................................................. 43
              Countervailing Measures ................................................................................................ 44
6.   Intellectual Property Rights.......................................................................................................... 45
     6.1      Intellectual Property Rights Regime: ............................................................................... 45
              International Intellectual Property ("IP") Conventions & Commitments............................ 45
              Legal & Regulatory Framework....................................................................................... 46
     6.2      MFN and National Treatment:......................................................................................... 46
     6.3      Copyright: ....................................................................................................................... 46
     6.4      Industrial Property:.......................................................................................................... 47
              Registration..................................................................................................................... 47
              Licensing ........................................................................................................................ 48
              Inventions and Utility Solutions ....................................................................................... 48
              Trademarks..................................................................................................................... 49
              Geographical indications................................................................................................. 49
              Industrial Designs ........................................................................................................... 49
              Layout Designs of Integrated Circuits ............................................................................. 49
              Plant Varieties................................................................................................................. 50
     6.5      Enforcement of Intellectual Property Rights: [Currently being updated] .......................... 50
              Administrative Measures................................................................................................. 50
              Criminal Procedures ....................................................................................................... 52
              Border Measures ............................................................................................................ 53
7.   Services ...................................................................................................................................... 54
     7.1      MFN and National Treatment:......................................................................................... 54
     7.2      Legal Services (CPC861): .............................................................................................. 54
              Domestic Regulation....................................................................................................... 55
     7.3      Accounting and Auditing Services (CPC 862): ................................................................ 56
              Domestic Regulation....................................................................................................... 57
     7.4      Advertising Services (CPC 871):..................................................................................... 59
     7.5      Communication Services: ............................................................................................... 61
     7.6      Construction Services (CPC 511, 512,513, 514, 515, 516, 517, 518) ............................. 64
     7.7      Distribution Services (CPC621, 622, 631, and 632)........................................................ 65
              Foreign Investors Partaking in Distribution...................................................................... 65
              Foreign Investment in Distribution Services .................................................................... 66
     7.8      Educational Services (CPC 923)..................................................................................... 68
     7.9      Financial Services........................................................................................................... 69
              Insurance ........................................................................................................................ 69
              Banking........................................................................................................................... 71
              Non-Banking Financial Services ..................................................................................... 80
              Securities ........................................................................................................................ 82
     7.10     Transport and Delivery Services ..................................................................................... 86
8.   Investment................................................................................................................................... 88
     8.1      MFN:............................................................................................................................... 88
     8.2      National Treatment: ........................................................................................................ 88
     8.3      Trade Related Investment Measures (TRIMS):............................................................... 89
     8.4      Bilateral Investment Treaties........................................................................................... 90
     8.5      Profit Repatriation: .......................................................................................................... 91
     8.6      Investor-State Arbitration and other forms of dispute settlement..................................... 91
     8.7      Investment Certification .................................................................................................. 92
     8.8      Form of Establishment: ................................................................................................... 93
              Foreign Investment in Non-listed Vietnamese Enterprises.............................................. 96



                                                                                                                                                     4
     8.9    Investment Incentives/Export Incentives ......................................................................... 97
            Investment Incentives for High-tech Zones ..................................................................... 98
            Investment Incentives for Industrial and Export Processing Zones ................................. 98
     8.10   Technology Transfer Issues............................................................................................ 98
     8.10   Land Use Rights ........................................................................................................... 100
            Mortgage of Land Use Rights ....................................................................................... 100
            Land Pricing.................................................................................................................. 100
     8.11   Ownership of Residential and Commercial Property..................................................... 101
     8.12   Portfolio Investment ...................................................................................................... 101
            Remittances.................................................................................................................. 101
            Income Tax ................................................................................................................... 102
     8.12   Grandfathering.............................................................................................................. 102
9.   Transparency ............................................................................................................................ 102
     9.1    Publication of Laws ....................................................................................................... 103
     9.2    Public Commentary:...................................................................................................... 103
     9.3    Administrative Review & Judicial Appeal: ..................................................................... 104
     9.4    Judicial Reform: ............................................................................................................ 104
     9.5    Enforcement of Civil Judgments: .................................................................................. 105




                                                                                                                                                5
1.    Status of Vietnam’s WTO Accession
      Summary
      Vietnam applied for WTO membership in January 1995 and is currently among 24 countries
      (including Russia and Ukraine) seeking WTO accession. Vietnam’s goal is to accede to the
      WTO before the APEC Summit in Vietnam November 2006.

      149 countries (including newly acceded Saudi Arabia) are currently members of the WTO. WTO
      accession for Vietnam involves agreement by Vietnam to accept the WTO rules through bilateral
      negotiations with interested Members on market access for goods and services and multilateral
      negotiations under the with the Working Party structure.

      Through its Bilateral Trade Agreement (BTA) with the U.S. which came into force in December
      2001, Vietnam 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
      expected 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, please visit:
      http://www.usvtc.org/Documents/USVTC%20TA/WTO%20Charts/trade%20commitments%20ch
      art%203Feb04.pdf

      Currently, Vietnam has concluded all bilateral negotiations, including with the U.S. which will be
      signed officially in late May or early June 2006. Vietnam will need to complete the multilateral
      negotiations before the WTO Working Party adopts its accession package. The package will
      then be forwarded to the WTO General Council for ratification. Before Vietnam becomes a full
      member of the WTO, its National Assembly needs to ratify the WTO accession package, and
      U.S. Congress will need to grant Permanent Normal Trade Relations (PNTR) status to Vietnam.

1.1   WTO Accession – Bilateral Negotiations

      U.S. Bilateral Negotiations:
      Vietnam reached an agreement-in-principle with the United States on 14 May 2006. The
      agreement, expected to be signed officially in late May or early June 2006, provides U.S.
      businesses with increased market access in a full range of goods and services. For 94% of all
      industrial goods, tariffs have been reduced to 15% or lower. Tariffs have also been reduced to
      15% or lower for a wide range of agricultural products. Vietnam has also signed on to sectoral
      initiatives lowering tariffs on key products like construction equipment, pharmaceuticals and
      aircraft to between zero and five percent. Vietnam has also committed to improved market
      access in key services of interest to the U.S. including banking, insurance, telecom, distribution,
      express delivery, and energy services.

      As part of the agreement with the U.S., Vietnam has accepted a period of up to 12 years for
      which it will be treated as a Non-Market Economy (NME). It has also committed to the
      elimination of prohibited industrial and agricultural subsidies upon accession. The U.S. has also
      agreed to terminate current quotas on textiles and apparel from Vietnam upon accession.
      However, in exchange, Vietnam will eliminate upon accession prohibited subsidies on textiles
      that are conditioned on exportation or local content requirements. For the first year of Vietnam’s



                                                                                                       6
       accession, there will be an “unprecedented enforcement mechanism” to ensure that Vietnam
       abides by the commitment to eliminate the subsidies. Under that mechanism, if the U.S.
       believes there are prohibited subsidies that have not been eliminated, it can request
       consultations with Vietnam. If the consultations do not result in a resolution, the matter would be
       referred to an arbitrator, appointed through the WTO. The arbitrator will make a determination
       within 120 days. If the determination is that there is a violation, the U.S. would have the right to
       re-impose quotas for one year, at levels that include some growth. However, at the end of the
       first year of Vietnam’s accession, the special mechanism expires and any quotas re-imposed
       would end after one year as well.

       The U.S. was the final country to have concluded an agreement with Vietnam in order for it to
       join the WTO. Commitments made in this agreement will be multilateralized and extended to all
       members of the WTO.

       U.S. Ratification of WTO Accession – Permanent NTR for Vietnam:
       As noted above, Vietnam does not currently have unconditional normal trade relations (NTR)
       status (also known as permanent normal trade relations (PNTR) status) with the United States.
       Unconditional NTR is enjoyed by virtually all U.S. trading partners who are members of WTO.
       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.1

       The U.S. can extend PNTR status to Vietnam by 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. This procedure was used to grant PNTR status to
       Albania, Bulgaria, China, Czech Republic, Estonia, Georgia, Hungary, Kyrgyzstan, Latvia,
       Lithuania, Mongolia, Romania and Slovakia. And Ukraine?? The legislation moves through
       Congress under normal procedures - there are no special or “fast track” 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.

       To date, the following six Jackson-Vanik countries have become full members of the WTO prior
       to the U.S. Congress granting them PNTR status: Romania (original GATT member), Mongolia
       (1997), Kyrgyz Republic (1998), Georgia (2000), Moldova (2001), Armenia (2003), and Ukraine
       (2006).

       For more information on the PNTR process                            for   Vietnam,      please     refer   to
       http://www.usvtc.org/trade/wto/PNTRmemo.pdf

       EU Bilateral Negotiations:
       Vietnam and the EU have 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.

       The EU’s bilateral agreement with Vietnam includes an “early harvest agreement” which came
       into force in January 2005, with some commitments due end of March 2005, and others during
       2005 through 2006. In exchange for quota free access on textile and clothing to the EU,
       Vietnam has reportedly committed to granting companies of EU origin reduced tariffs on yarns,
       clothing, fabrics and made-up articles, fibers, beverages, motorbikes or scooters. Vietnam
       committed to increase market access for service providers in the telecom, cement and clinker
1
    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


                                                                                                                   7
      production, construction, computer, engineering, integrated engineering, architecture, and urban
      planning service sectors. Further market access has also been granted to service providers in
      the life insurance, distribution, shipping, computer reservation system, environmental, and real
      estate service sectors. Significant concessions were also extended to the pharmaceutical
      sector including licenses for toll manufacturers and a reduction in the number of prohibited
      molecules allowed for importation into Vietnam.

      Concluded Bilateral Agreements:
      Vietnam has now concluded bilateral negotiations with all its Working Party Members including
      the EU (October 2004), Chile (November 2004), Argentina (November 2004), Brazil (November
      2004), Singapore (December 2004), Uruguay (April 2005), Japan (June 2005), Canada (June
      2005), China (July 2005), Columbia (July 2005), South Korea (July 2005), Iceland (August
      2005), Norway (August 2005), Switzerland (August 2005), Paraguay (September 2005), New
      Zealand (February 2006), Australia (March 2006), Honduras (March 2006), the Dominican
      Republic (March 2006), Mexico (April 2006), and the United States (May 2006). Negotiations
      with Cuba, Kyrgyzstan, India, Turkey, Bulgaria and EI Salvador have also been concluded.

1.2   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
      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 would
      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
      moved Vietnam’s accession process towards an initial draft report while examining new
      documents and legislation submitted. Of significance, Vietnam committed to the implementation
      of the SPS Agreement upon accession and pledged to speed up the passage of pending bills for
      accession in 2005.



                                                                                                          8
      An informal Working Party meeting was held on 20 May 2005. At this meeting, new Working
      Party Chairman Eirik Glenne urged Vietnam to complete bilaterals in the “next couple of months”
      if it were to hope for accession in December 2005. Eight new commitments and developments
      were presented by the Vietnamese side, including a proposed revision of excise duties to end
      discrimination against imported motor vehicles; a similar proposal for excise duty on beer; the
      elimination of export performance subsidies; a commitment to require supported products made
      in free zones to be subject to normal customs formalities when entering Vietnam; the
      establishment of TBT and SPS enquiry points; the extension of trading rights with exceptions for
      sensitive products, such as petroleum, pharmaceuticals, sugar, tobacco, salt, fertilizers, rice and
      cultural products; and the streamlining of import licensing procedures. The Secretariat also
      received a series of draft laws, including drafts of Commercial Law, Law on Amendments to Law
      on Customs, and Law on Conclusion of, Accession to and Implementation of International
      Treaties as well as a document comparing the draft Law on Export and Import Duties
      (Amended) against the existing Law (all of these draft Laws were subsequently promulgated at
      the May-June 2005 Session of Vietnam's National Assembly, see Section 4.5 below). Drafts of
      Law on E-Transactions, Law on Investment, Law on Intellectual Property Rights (all of these
      draft Laws were approved at the October-November 2005 Session of Vietnam's National
      Assembly, see Section 4.5 below) and Law on Technology Transfer (scheduled for promulgation
      in 2006) were also provided.

      Vietnam’s 10th Working Party was held in Geneva on 15th September 2005 during which in-
      depth discussions were held on Vietnam’s policies towards state trading enterprises, subsidies,
      investment incentives, and tax policies. Positive developments include a new offer on trading
      rights, with Vietnam committing to provide full trading rights to foreign companies and individuals
      no later than 1 January 2007. Reports also indicate that Vietnam’s latest offer on goods include
      commitments to cut tariffs to an average of about 18% (a 4% improvement over the previous
      offer). Issues remain with regard to industrial subsidies for export related industries,
      discriminatory taxation on distilled spirits and farm goods, tariff rate quotas, and import bans on
      certain chemicals and second-hand goods.

      In early December 2005, another round of paperwork was submitted to the Working Party. This
      included revised commitments on trading rights, and industrial subsidies.

      On 27 March 2006, Vietnam’s 11th Working Party was held in Geneva to resolve remaining
      issues such as industrial subsidies, trading rights, and a timetable for the issuance of regulations
      to implement the new Law on Intellectual Property. Working party members agreed to
      accelerate its discussions with Vietnam to produce a revised report in the next few weeks. (The
      second revision of the draft report was circulated among the working party on 21 February
      2006). At the sidelines of this meeting, Vietnam concluded agreements with Honduras and the
      Dominican Republic and held bilateral meeting with the U.S.

1.3   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. If a two-
      thirds majority of WTO Members agree, either at a WTO Ministerial Conference or at a meeting
      of the WTO General Council, Vietnam's accession package will be adopted.

1.4   Vietnam Ratification of WTO Accession – Necessary Action by Vietnam:
      To complete the process, as with the BTA, Vietnam's National Assembly ("NA", Vietnam's
      highest legislative body) will be expected to pass legislation implementing Vietnam’s
      commitments made “upon accession”, ratify the WTO accession package and enact the
      remaining requisite legislation possibly through an omnibus package. The Ministry of Justice
      and other key Ministries are working to revise and keep up-to-date lists of laws and regulations
      including those adopted in the May-June 2005 Session and the October-November 2005
      Session of the National Assembly. Over 200 laws and decrees have been submitted to
      members of Vietnam’s Working Party.




                                                                                                        9
      The full NA typically meets twice a year, with May and November sessions. Vietnam has
      committed to hold additional sessions if necessary, but this has not yet occurred. 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 NA passed the Law on Conclusion of, Accession to and Implementation of
      International Treaties on 14 June 2005. Effective 1 January 2006, this Law governs the process
      of Vietnam's ratification of the WTO accession package and the enactment of implementing
      legislation, Of note, it clarifies the hierarchical order of treaties in the legal system of Vietnam.



2.    Status of U.S.-Vietnam Bilateral Trade Agreement (BTA)
2.1   Ratification:
      Vietnam’s NA (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/trade/bta/summary.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/trade/bta/roadmap.htm

2.2   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.

2.3   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.

      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
      332-91 in favor, in 2001 the vote was 324-91 in favor, in 2002 the vote was 338-91 in favor, in
      2003, 2004, and 2005, no votes were held, therefore renewal continued.

      Further information is available at http://www.usvtc.org/us-vietnam/jackson-vanik/


                                                                                                        10
2.4   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 non-tariff 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.”

      The legal effect of specific BTA provisions after Vietnam accedes to the WTO will depend on the
      particular BTA provision at issue. Specifically:
        BTA provisions that incorporate WTO agreements in full (e.g., WTO Customs Valuation and
        Import Licensing Agreements) or in part (e.g., WTO SPS and TBT Agreements) would remain
        in effect; however, the Parties would most likely address problems and enforce their legal
        rights through the WTO, where binding dispute settlement is available.
        BTA provisions that go beyond current WTO obligations (e.g., the investment chapter as well
        as certain sections of the intellectual property and transparency chapters) would remain in
        effect.
        Many of the BTA’s specific tariff and services commitments will be superseded by any new
        more favorable commitments negotiated as part of Vietnam’s WTO accession. For instance,
        because of the MFN obligation, the United States will automatically receive any tariff and
        services commitments arising out Vietnam’s WTO accession that are more extensive than
        those contained in the BTA.


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 NA's Standing
      Committee, 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.

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



                                                                                                       11
      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
      NA 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 NA on amending the legal system for the
      whole period of the 10th Session NA 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”.

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, a number of which have now been
      promulgated, and many are expected to be expedited to meet Vietnam’s “upon accession”
      commitments, see Section 4.4 and Section 4.5 below on legislative developments in 2004 and
      2005.

      In an attempt to meet Vietnam’s goal of WTO accession, a request by the Government for the
      adjustment of the 2005 NA legislative agenda was proposed during the 26th session of the NA’s
      Standing Committee in early March 2005. The proposed adjustments included simplifying the
      procedures for consideration of drafts; extending the two 2005 sessions of the full NA to allow
      more time for promulgation of laws; and adding an extra session of the full NA in 2005 devoted
      only to laws and ordinances which will service WTO negotiations. The NA’s Standing
      Committee approved unanimously the adjustments in order to expedite the passage of 26 laws
      and 4 ordinances to satisfy the request of WTO Working Party members for Vietnam’s laws to
      be in place upon its accession to the WTO.

      To implement the early March 2005 mandate of the NA's Standing Committee, Deputy Prime
      Minister Vu Khoan issued Official Letter 231-TTg-QHQT instructing the MoJ and the MoT to
      submit proposals on behalf of the Government on the required legislative program for Vietnam’s
      accession to the WTO. As anticipated under Official Letter 231, Directive 08-2005-Ct-TTg of the
      Prime Minister dated 4 April 2005 was issued to implement the Government’s policy to expedite
      the process of and improve the quality of draft laws and ordinances in 2005 (including legal
      instruments issued by local authorities) in support of WTO negotiations and accession. To that
      end, issues that are of greatest importance in support of the WTO negotiation process should be
      focused on and the MoJ must verify draft laws prior to submitting them to the Government.
      Coordination between the MoJ, MoT, MoF, Office of Government, other ministries, branches
      and relevant bodies is required for active and consistent drafting of, amendment of or addition to
      laws and ordinances. Ministries and branches must take the lead in translating draft laws and
      ordinances into English and send them to the National Committee for International Economic
      Cooperation ("NCIEC") for submission to WTO upon request of negotiating parties. NCIEC is
      responsible for co-operating with the MoFA and MoT to ensure the quality of translated versions
      of draft laws submitted to the WTO. The Office of the Prime Minister is responsible for
      monitoring and reminding ministries and branches to ensure timely completion of tasks and for
      regular reporting to the Prime Minister.

      At its May-June 2005 Session, the NA voted to expedite its 2005 legislative program in an
      attempt to achieve the promulgation in 2005 of important laws necessary to support Vietnam's
      bid for WTO accession by the end of 2005 (see Section 4.5 below). The following Laws were
      added for promulgation in 2005: Law on Enterprise, Law on Investment, Law on Amendment of
      Law on Value Added Tax and Law on Special Sales Tax, Law on Amendment of Law on



                                                                                                        12
      Denunciations and Complaints and Law on Practising Thrift to Reduce Expenditure. Laws
      added for consideration in 2005 included: Law on Lawyers and Law on Prevention of HIV/AIDS
      Viral Infection.


4.    Legislative Developments 2002 - 2007
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                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 NA passed Resolution 12-2002-QH11 on Program for Formulation
      of Laws and Ordinances by the National Assembly during Legislature XI (2002 – 2007) and for
      2003. Resolution 12 has since been supplemented (and amended in some cases) by:
      -       Resolution 21-2003-QH11 on Program for Formulation of Laws and Ordinances in 2004
              passed on 26 November 2003;
      -       Resolution 35-2004-QH11 on Program for Formulation of Laws and Ordinances in 2005
              passed on 25 November 2004;
      -       Resolution 42-2005-NQ-QH on Adjustment of Program for Formulation of Laws and
              Ordinances in 2005 passed on 14 June 2005;
      -       Resolution 49-2006-QH11 on Program for Formulation of Laws and Ordinances in 2006
              passed on 29 November 2005.
      Together the Resolutions provide for the passage of over 200 laws, ordinances and resolutions
      by the NA in the 2002-2007 period, including the legislation listed in Sections 4.3 to 4.6 below.




                                                                                                      13
4.3   Legislative Developments in 2003:
      As scheduled under Resolution 12, the following legislation was promulgated in 2003:


                    Legislation                Promulgated     Effective             Notes

       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”

       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
                                                                              “Financial Services –
                                                                              Banking” & 8.10 on



                                                                                                  14
                                                                             “Land Use Rights”

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

       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

       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

       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




                                                                                                     15
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
                                                        2005          procedures for all
                                                                      types of civil legal
                                                                      proceedings
                                                                      (marriage and family
                                                                      matters,    economic
                                                                      and       commercial
                                                                      matters, and labor
                                                                      matters).        See
                                                                      Section    6.5    "IP
                                                                      Rights"

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

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




                                                                                               16
       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:
      As scheduled under Resolution 35 and Resolution 42 (which expedited the 2005 legislative
      program in support of Vietnam's attempt to achieve WTO accession by the end of 2005),
      legislation promulgated in 2005 includes:

       Legislation             Promulgated     Effective         Notes
       Law 33-2005-QH11        14 June 2005    1 January 2006    Replaces its 1995
       Civil Code                                                predecessor. Abolishes the
                                                                 distinction between pledges
                                                                 and mortgages on the basis
                                                                 of whether security assets are
                                                                 moveable or immoveable.
                                                                 Introduces new basic civil
                                                                 rights relating to human organ
                                                                 and corpse donation and sex
                                                                 change. Reforms existing
                                                                 provisions on land-use, IP
                                                                 rights, technology transfer.
       Law 34-2005-QH11 on     14 June 2005    1 October 2005    Replaces number of laws and
       Pharmacy                                                  ordinances. Pharmaceuticals
                                                                 remains a conditional line of
                                                                 business.      Law also deals
                                                                 with     pricing,   registration,
                                                                 quality standards, labelling
                                                                 and packaging rules, and
                                                                 distribution.
       Law 35-2005-QH11 on     14 June 2005    1 January 2006
       Railways of Vietnam
       Law 36-2005-QH11        14 June 2005    1 January 2006    Replaces its 1997
       Commercial Law                                            predecessor. See Sections
                                                                 5.8, 10.10, and 10.11 on
                                                                 “Trading Rights”, “Commercial
                                                                 Contracts”, and “Business
                                                                 Registration & Commercial
                                                                 Rights”
       Law 37-2005-QH11 on     14 June 2005    1 January 2006    Requires publication of the
       State Auditing                                            State Auditor's annual audit
                                                                 report after its submission to
                                                                 the NA
       Law 38-2005-QH11 on     14 June 2005    1 January 2006    Replaces        its     1998
       Education                                                 predecessor. See Section 7.8
                                                                 on “Educational Services”
       Law 39-2005-QH11 on     14 June 2005    1 January 2006
       National Defense
       Law 40-2005-QH11        14 June 2005    1 January 2006    Replaces      its     1990
       Maritime Code of                                          predecessor.   See Section
       Vietnam                                                   7.10 on "Maritime transport
                                                                 Services".


                                                                                                 17
Law 41-2005-QH11 on        14 June 2005   1 January 2006      See Section 1.6 on “Vietnam
Conclusion of,                                                Ratification   of      WTO
Accession to and                                              Accession    –    Necessary
Implementation of                                             Action"
International Treaties
Law 42-2005-QH11 on        14 June 2005   1 January 2006      Amends 2001 Customs Law.
Amendment of Law on                                           See Section 5.5 on “Customs”
Customs
Law 43-2005-QH11 on        14 June 2005   1 January 2006
Amendment of Law on
Compulsory Military
Service
Law 44-2005-QH11 on        14 June 2005   1 January 2006      Replaces 1999 Ordinance on
Tourism***                                                    Tourism.        Includes new
                                                              stipulations on international
                                                              travel business and policies to
*** These 3 Laws were
only scheduled for                                            attract investment into the
consideration at the May                                      hospitality industry.
2005 Session, but were
also approved at that
Session.
Law 45-2005-QH11 on        14 June 2005   1 January 2006      Replaces       its  1991
Export and Import                                             predecessor (as amended
Duties***                                                     1993 & 1998). See Section
                                                              5.5 on "Customs"
Law 46-2005-QH11 on        14 June 2005   1 October 2005      Enshrines new policies for
Amendment of Law on                                           conduct of mineral activities
Minerals***                                                   (e.g. preferential treatment to
                                                              mining projects with on-site
                                                              processing; restriction on
                                                              export of crude raw materials
                                                              or ore concentrate) and new
                                                              State administrative hierarchy
                                                              (MoNRE, MoI, MoC, local
                                                              people's committees).         A
                                                              complete review of Law has
                                                              been deferred until NA
                                                              Legislature XII (2008-2013).
Law 47-2005-QH11 on        14 June 2005   Unknown. Not        Had not been scheduled for
Merits (Revised)                          in text of Law or   promulgation, consideration
                                          State               or even preparation in 2005.
                                          President's
                                          order on
                                          promulgation
                                          dated 27 June
                                          2005.
Law 48-2005-QH11 on        29 November    1 July 2006         Replaces Ordinance on Thrift
Practising Thrift to       2005                               to Reduce Expenditure.
Reduce Expenditure
Law 49-2005-QH 11 on       29 November    1 July 2006         Will replace 1999 Ordinance
Negotiable Instruments     2005                               on Commercial Papers.
                                                              Creates a legal framework for
                                                              securing financial transactions
                                                              without cash, by regulating
                                                              credit bills, debit bills,



                                                                                             18
                                                                  cheques and other negotiable
                                                                  instruments. Provides for
                                                                  individuals to issue negotiable
                                                                  instruments (not just
                                                                  enterprises, as previously).
        Law 50-2005-QH 11 on      29 November    1 July 2006      Implements new IP provisions
        Intellectual Property*    2005                            of 2005 Civil Code (see
NEW!!
                                                                  above). Consolidates
                                                                  provisions of various IP laws.
                                                                  See Section 6.1 on
                                                                  “Intellectual Property Rights”
        Law 51-2005-QH11 on       14 June 2005   1 March 2006     Recognizes the legal validity
        Electronic Transactions                                   of electronic transactions, of
                                                                  data messages and of
                                                                  electronic signatures; protects
                                                                  the lawful interests of
                                                                  organizations and individuals,
                                                                  of the State and of the public;
                                                                  and ensures equality and
                                                                  safety in electronic trading.
        Law 52-2005-QH11 on       29 November    1 July 2006      Amends 1993 Law. See
        Amendment of Law on       2005                            Section 10.5 on
        Protection of the                                         “Environmental Standards”
        Environment
        Law 53-2005-QH11 on       29 November    1 July 2006
        Youth                     2005

        Law 54-2005-QH11 on       29 November    1 July 2006
        People’s Police           2005

        Law 55-2005-QH11 on       29 November    1 June 2006      Replaces 1998 Ordinance (as
        Anti-Corruption           2005                            amended 2000). See Section
                                                                  10.16 on “Anti-Corruption
                                                                  Measures"
        Law 56-2005-QH 11 on      29 November    1 July 2006      Permits organizations and
        Residential Housing       2005                            individuals from all economic
                                                                  sectors to participate (in
                                                                  varying degrees) in
                                                                  investment in development
                                                                  and business of residential
                                                                  housing; expands range of
                                                                  offshore entities permitted to
                                                                  purchase/lease housing;
                                                                  provides for management of
                                                                  housing complexes; provides
                                                                  for certification of ownership
                                                                  of buildings separately from
                                                                  certification of land use rights
                                                                  (see Section 8.10 on "Land
                                                                  use and leasing rights").
        Law 57-2005-QH 11 on      29 November    1 January 2006   The first time in Vietnam that
        Amendment of Law on       2005                            a single Law covers
        Value Added Tax and                                       amendments to two existing
        Law on Special Sales                                      Laws.
        Tax




                                                                                                     19
       (Added to the 2005
       legislative program by
       Resolution 42)
       Law 58-2005-QH11 on          29 November   1 July 2006        Further amends the 1998 Law
       Amendment of Law on          2005                             on Complaints and
       Complaints and                                                Denunciations following the
       Denunciations                                                 first round of amendments in
                                                                     2004 (see Section 4.4 above).
       Added to legislative
       agenda for 2002-2007 by
       Resolution 35. Scheduled
       in 2005 under Resolution
       42.
       Law 59-2005-QH 11 on         29 November   1 July 2006        Introduces a common regime
       Investment                   2005                             for domestic and foreign
                                                                     investment in Vietnam (see
       (Under Resolution 42, re-                                     Section 8.2 on “National
       scheduled to be                                               Treatment”) in tandem with
       considered and passed at                                      new Law on Enterprises.
       October-November 2005)
       Law 60-2005-QH 11 on         29 November   1 July 2006        Introduces a unified 'company
       Enterprise                   2005                             law' for domestic and foreign
                                                                     invested enterprises (see
       (Under Resolution 42, re-                                     Section 8.2 on “National
       scheduled to be                                               Treatment”) in tandem with
       considered and passed at                                      new Law on Investment.
       October-November 2005)
       Law 61-2005-QH 11 on         29 November   1 April 2006       Consolidates the current three
       Tendering                    2005                             decrees on tendering, but few
                                                                     reforms of Vietnamese
                                                                     tendering requirements. See
                                                                     Section 10.3 on "Tendering".
       Ordinance 28-2005-PL-        13 December   1 June 2006        See Section 7.9 on “Banking”
       UBTVQH11 on Foreign          2005
       Exchange

       (Added to 2005 legislative
       program and scheduled
       for preparation (only) in
       2005 by Resolution 35.
       Scheduled for
       promulgation in 2005 by
       Resolution 42.)

4.6   Legislative Developments in 2006:
      Under Resolution 49, the following 11 Laws are scheduled to be passed at the May-June 2006
      Session (having already been considered at the NA's October-November 2005 Session):

       Legislation                        Notes
       Law on Lawyers                     To replace 2001 Ordinance on Lawyers. Scheduled for
                                          preparation (only) in 2005 by Resolution 35. Scheduled
                                          for consideration in October-November 2005 by
                                          Resolution 42. See Section 7.2 on "Legal Services"
       Law on Real Estate Business        Regulates houses, apartments, certain land use rights,
                                          and other construction works (see also Section 8.10 on
                                          "Land Use and Leasing Rights")



                                                                                                    20
Law on HIV/AIDS Prevention        Added to the legislative agenda for 2002-2007 and
and Fighting                      scheduled for consideration in October-November 2005 by
                                  Resolution 42. Will replace the Ordinance on Prevention
                                  of HIV/AIDS. As a result, the Ordinance on Prevention of
                                  HIV/AIDS (Amended) (scheduled for promulgation in 2005
                                  by Resolution 35) is no longer on the NA's legislative
                                  agenda.
Law on Civil Aviation of          Aims include to improve State administration and to
Vietnam (Revised)                 standardize regulations on professional qualifications of,
                                  health requirements for and liability of aircraft pilots, flight
                                  controllers, etc
Law on Social Insurance           See Section 10.4 on “Labor”
Law on Information Technology
Law on Cinematography
Law on Standardization            Scheduled for preparation (only) in 2005 by Resolution 35.
                                  Re-scheduled for promulgation as a Law by Resolutions
                                  42 and 49.
Law on Juridical Support
Law on Securities                 State Securities Commission has released its draft of the
                                  Law. Amongst other things, the draft provides that
                                  securities may only be sold or offered for sale to the public
                                  where purchasers have received a prospectus; and
                                  prohibits the SSC from expressing any opinion on the
                                  quality of any type of securities. See Section 7.9 on
                                  “Financial Services”.
Law on the Organization of the
National Assembly (Revised)
Resolution on criteria of
important national projects for
submission to the National
Assembly for consideration and
decision on guidelines on
investment

Of the 13 Laws scheduled under Resolution 49 to be considered at the May-June 2006
Session and then passed at the October-November 2006 Session, one of the most
controversial (and fundamental to the development of Vietnam's emerging real estate market) -
the Law on Registration of Real Estate - has been deferred. Now, the following 12 laws are
scheduled for consideration at the NA’s May-June 2006 Session and to be passed at the
October-November 2006 Session:


Law on Sending Employees to
Work Abroad
Law on Tax Management
Law on Occupational Training
Law on Equality of the Sexes
Law on Dykes
Law on Physical Education and
Sports




                                                                                                     21
       Law on Donation of Human
       Organs
       Law on Associations
       Law amending Labor Code           Amendments relate to strikes
       Law on Residence
       Law on Technology Transfer
       Law on Notarization

       1 law is to be considered and passed at the NA’s October-November 2006 Session:

       Code on Enforcement of
       Judgments

      12 laws are scheduled for consideration at the NA’s October-November 2006 Session and
      expected to be passed in 2007:

       Law on Personal Income Tax        To replace 2001 Ordinance (as amended 2004)
       Law on Territorial Waters of
       Vietnam
       Law amending Law on the
       Organization of the
       Government
       Law on Quality
       Law on Prevention of Violence
       in Families
       Law on Health Insurance
       Law on Referendums
       Law on Prevention of Infectious
       Diseases.
       Law on Complaints and             Complaints currently dealt with in same Law as
       Resolution of Complaints          denunciations
       Law on Denunciations and          Denunciations currently dealt with in same Law as
       Resolution of Denunciations       complaints
       Law on Public Services



5.    Trade in Goods
5.1   Most-Favored-Nation Status:

      International Trade Commitments
      Under the BTA, Vietnam committed to extend to U.S. products the same treatment as products
      produced by other countries. However, exceptions to the MFN principle include special
      treatment accorded to other countries within a free-trade area, such as AFTA or NAFTA and
      special procedures for border trade.

      This concept of MFN sets the basis for Vietnam’s MFN obligations undertaken for its WTO
      accession.




                                                                                              22
      Legal & Regulatory Framework
      Ordinance 41-2002-PL-UBTVQH10 on MFN and National Treatment in International Commerce
      dated 25 May 2002 codifies 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.

5.2   National Treatment:

      International Trade Commitments
      Under the BTA, Vietnam committed to treat U.S. imports no less favorably than they treat like
      goods produced domestically.

      This concept of providing non-discriminatory treatment sets the basis for Vietnam’s national
      treatment obligations undertaken for its WTO accession.

      Legal Framework
      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.

5.3   Tariffs:

      International Trade Commitments
      Vietnam’s primary tariff reduction obligations stem from its WTO accession (MFN tariff rates),
      the ASEAN Free Trade Agreement (AFTA), and the ASEAN-China FTA (2005). The latter two
      agreements include tariffs based on a preferential scheme. Vietnam has also committed to
      reducing tariffs under the BTA for a range of 244 line items over a three year period.




                                                                                                      23
       MFN Tariffs
       For the purposes of negotiating tariffs for its WTO accession, a new MFN tariff schedule was
       issued under Decision 110-2003-QD-BTC of the Ministry of Finance dated 22 July 20032, listing
       10,721 items.3 These tariffs were based on HS 2002 and the ASEAN Harmonized Tariff
       Nomenclature (AHTN). Simple average tariff rates are approximately schedule is 29.37% for
       agricultural goods and 17.03% for non-agricultural goods. 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). Decision 97-2005-QD-BTC of the Ministry of Finance dated 15
       December 2005 provides for the MFN tariff schedule issued under Decision 110 (as amended)
       to contine to apply under the new 2005 Law on Export and Import Duties.

       Vietnam’s        current       MFN           tariff    schedule        is     available   at:
       http://www.itpc.hochiminhcity.gov.vn/en/trade_guide/vietnam_customs_tariff_schedule_2006.
       To date, eighty nine countries and territories enjoy MFN status with Vietnam.

       ASEAN Free Trade Area (AFTA)
       Under the ASEAN Free Trade Agreement ("AFTA") Common Effective Preferential Tariff
       (CEPT) Scheme, Vietnam commited to the elimination of all import tariffs in its Inclusion List by
       2015. It also commited to phase into its Inclusion List goods classified in its Temporary
       Exclusion Lists, Sensitive & Highly Sensitive Lists over time (by 1 Jan 2013).             AFTA
       commitments do not apply to a General Exception List - a list of products permanently excluded
       from the CEPT scheme due to national security, public morals, and health reasons. These
       products represent about 1.09% of all ASEAN’s tariff lines.

       By 2003, Vietnam had brought into force 80% of its CEPT tariff reductions. The MoF estimates
       that the average rate of CEPT fell to 9.3 per cent in 2003 and is expected to be 3.0 per cent in
       2006.

       Goods from ASEAN countries must have a Certificate of Origin (Form ‘D’) as required under
       Circular 14-2006-TT-BTC4. Circular 14 among other things clarifies that if the existing MFN
       import duty rate is lower than the CEPT rate, the MFN rate applies. Vietnam's Supplementary
       Explanatory Notes (SEN) are issued under Circular 85-2003-TT-BTC of the Ministry of Finance
       dated 29 August 2003.

       ASEAN – China FTA
       The ASEAN-China Free Trade Agreement (ACFTA) of which Vietnam is party to provides
       market access for goods and services of Chinese origin. Negotiations on the Trade in Goods
       Agreement are concluded and came into effect on 1 July 2005. Under this agreement, tariffs
       are to be gradually reduced as follows:

       Normal Track Goods (which covers 90% of all goods)
       - Vietnam: Tariffs are to be eliminated gradually by 2015 for most products
       - China: Tariffs are to be progressively eliminated by 2010. By July 2005, at least 40% of its
       Normal Track is to be less than 5%. This is to be up to at least 60% by July 2007.

       Sensitive track goods
       - Vietnam: Tariffs to be 0-5% by 2020
       - China: Tariffs not more than 5% by 2018

       Highly sensitive track:
       - Vietnam: not more than 50% by 2018

2
    Replacing Decision 1803-1998-QD-BTC of the Ministry of Finance dated 11 December 1998
3
    As of 10 November 2005, the duty rates of some products stipulated in Decision 110, Decision 71-2004-QD-
    BTC dated 31 August 2004 and Decision 90 above have been replaced under Decision 69-2005-QD-BTC
    dated 13 October 2005. These include production materials such as iron and non-alloy steel, chemicals, food
    preparations, vehicles for transporting goods, and air-conditioners for cars. These are applicable to all
    declarations registered with the customs office from its effective date.
4
    Circular 14-2005-TT-BTC dated 28 February 2006 providing guidance on Vietnam’s preferential import tariff to
    implement ASEAN CEPT Scheme Circular 14 replaced Circular 42-2005-TT-BTC dated 31 May 2005 and
    Circular 45-2005-TT-BTC dated 6 June 2005


                                                                                                             24
- China: not more than 50% by 2015

BTA Tariffs
Under Annex E of the BTA, Vietnam reduced tariffs on a range of goods (approximately 244
tariff lines) of US origin over a period of three years. On average, Vietnam’s tariffs were
reduced by one-third to one-half. 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.

Tariffs – Automobiles and Automotive Components
To implement its ASEAN commitments for the import of automobiles, the Ministry of Finance
has proposed the following plan for the Government’s approval:

                           MFN             2007    2008    2009      2010
9-seat CBU cars            90%             20      10      5         5
< 9 seat CBU cars          90%                     20      10        5

Vietnam’s AFTA commitments provide that duties on tires, engines and other automobile,
motorcycle, and bicycle parts be reduced to no higher than 20% in 2004, 10-15% in 2005 and,
no more than 5% in 2006. These commitments were codified in Decree 213-2004-ND-CP dated
24 December 2004. The duty reduction is available retrospectively for imports of ASEAN origin
from 1 January 2004. MFN tariff rates for these items currently range from 30 - 100%.

Under Vietnam’s 2010 - 2020 plan for the development of the automotive industry, tariffs for
automotive products are to be determined based on individual imported parts or components,
instead of completely knocked down units (CKDs) or incompleted knocked down units (IKDs).
During a one year transition period, businesses are now allowed to choose whether to apply the
preferential tariffs levied on CKD components, or the tariffs based on different component sets.
Decision 57-2005-QD-BTC dated 10 August 2005 and Circular 14-2006-TT-BTC dated 28
February 2006 regulate this from 1 January to 31 December 2006. Businesses which choose to
apply ASEAN tariff rates based on the imports of CKDs must be able to show different
commercial invoices for such imported goods, or the MFN tariff rate applies. From 1 January
2007, ASEAN CEPT rates are applicable only to the imports of IKD automobile components.

 - Used Automobiles
Beginning 1 May 2006, under Decree 12-2006-ND-CP of the Government dated 23 January
2006, imports of secondhand automobiles of all kinds (except for right-had drive autos,
ambulances, and re-confiigured autos) will be permitted into Vietnam. These must be no more
than five years from the date of manufacture. Guidelines on the import of used passenger autos
of less than 16 seats under Decree 12 were issued with Inter-ministerial Circular 03-2006-TTLT-
BTM-BGTVT-BTC-BCA dated 31 March 2006 by MoT, Ministry of Transport, MoF and Ministry
of Public Security.

A fixed sum, or absolute tax is set to be imposed on used cars under Decision 69-2005-QD-TTg
of the Ministry of Finance dated 28 March 2006, effective 1 May 2006. Accordingly, the
absolute tax will range from US$3,000 to US$25,000 per unit up to a maximum level of 642% of
its price. By and by, the Ministry of Finance is to adjust, increase, or reduce this tax within a
20% margin of the promulgated values below:

                            Engine size                           Absolute tax
     Under 5 seats           under 1,000 cc                       $3,000
                             1,000 cc and under 1,500 cc          $7,000
                             1,500 cc and under 2,000 cc          $10,000
                             2,000 cc and under 3,000 cc          $15,000
                             3,000 cc and under 4,000 cc          $18,000
                             4,000 cc and under 5,000 cc          $22,000
                             from 5,000 cc                        $25,000




                                                                                              25
              From 6 to 9 seats           under 2,000 cc                          $9,000
                                          2,000 cc to under 3,000 cc              $14,000
                                          3,000 cc to under 4,000 cc              $16,000
                                          from 4,000 cc                           $20,000
              From 10 to 15 seats         under 2,000 cc                          $8,000
                                          2,000 cc to under 3,000 cc              $12,000
                                          from 3,000 cc                           $15,000

5.4     Application of Internal Taxes on Imported Goods

        Excise Taxes
        The application of excise taxes is currently governed by the Law on Special Sales Tax 1998 (as
        amended 2003 and 2005). Effective as of 1 January 2006, under Amending Law 57, all
        discriminatory excise taxes have been eliminated.

        Law 57 and its implementing Decrees 156-2005-ND-CP of the Government dated 15 December
        2005 and Circular 115-2005-TT-BTC of the Ministry of Finance dated 16 December 2005
        introduce the following reforms:
        - Adjustment of excise tax rates applicable to both locally produced and imported automobiles
             of 5 seats or less, automobiles of 6 to 15 seats, and automobiles of 16 to under 24 seats to
             50%, 30% and 15% respectively (down from 80%, 50% and 25 respectively).
        - Adjustment of excise tax rates applicable to spirits of 40% or more to 65%. (down from
             75%).
        - Adjustment of excise tax rates applicable to cigarettes in 2006-2007 and from 2008 (with or
             without filter) down to 55% and 65% respectively.
        - Increases the excise tax rates for draught beer and barrel beer to 40% beginning in 2008.

5.5     Customs:

      International Trade Commitments
      Under the BTA, Vietnam committed to adopt a system of customs valuation based on GATT
      standards by 10 December 2003. Under Vietnam’s Action Plan to the WTO Working Party,
      Vietnam has committed to the full implementation of the WTO Customs Valuation Agreement
      upon accession.

      Legal Framework
      In June 2001, Vietnam introduced several GATT based policies and measures under a new Law
      on Customs. In June 2005, the NA passed a new Law on Amendments to the Law on Customs,
      which became effective on 1 January 2006. In June 2005, Vietnam’s NA also ratified a new Law
      on Export and Import Duties, which makes corresponding adjustments to several aspects of
      customs procedures to be in line with WTO and other best practices, also effective as of 1
      January 2006.

      Customs Valuation
      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.5 This system
      of valuation was abolished by Circular 87-2004-TT-BTC of the Ministry of Finance dated 31
      August 2004 providing guidelines on implementation of the Law on Export and Import Duties.



5
    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.




                                                                                                                    26
Effective as of 1 January 2006, the Law on Customs 2001 (as amended 2005) brings Vietnam
fully in line with the WTO Agreement on Customs Valuation by shifting to a single method of duty
calculation for valuation. Specific guidelines on customs valuation have been provided under
Decree 155-2005-ND-CP of the Government dated 15 December 2005. Decree 155 contains
detailed provisions on method of (1) transaction price, (2) identical goods, (3) similar goods, (4)
deductible values, (5) calculated value, and (6) fallback value. The order of the application of the
valuation methods can be reversed upon request of the declarant if provided in writing.

The 2005 Law on Customs imposes strict prohibitions on smuggling, commercial fraud, and
bribery on both customs declarers and State customs officers (in the case of the latter, they are
expressly prohibited from causing inconvenience or creating difficulties during customs clearance
procedures).

To speed up the overall valuation process, the 2005 Law limits the determination of customs
values to the same day on which a declarant registers its declaration or the day on which
customs makes the decision on determination of the customs value, if the valuation is
determined by customs. In addition, customs is required to ensure goods clearance, at the
request of declarants, if the declarant provides sufficient guarantee in the form of a surety, a
deposit or some other appropriate instrument, covering the ultimate payment of customs duties
for which the goods may be liable.

Correspondingly, the 2005 Law on Export and Import Duties shifts to a single method of duty
calculation based on valuation as provided for under the WTO Agreement on Customs Valuation.
This replaces current rules which allow several methods of duty calculation based on contract
values or minimum price tables. Also, the new 2005 Law enshrines the principle of conducting
tax declarations in parallel with customs procedures and removes the State imposition of taxes
payable by businesses through tax notices. Instead, businesses will bear responsibility for
declaring, calculating and paying taxes on their own. In order to create a more level playing field
for domestic and foreign businesses, the new 2005 Law unifies all regulations on tax exemption
and reduction found in the Law on Foreign Investment, Law on Domestic Investment, Petroleum
Law, Law on Science and Technology, and other Laws. The new 2005 Law also provides
regulations on late payment of taxes and fines. In the case of a late tax refund to businesses due
to the fault of State authorities, interest will be paid on the amount of the late payment. This is
intended to provide fair treatment to both tax offices and businesses. Decree 149-2005-ND-CP
of the Government dated 8 December 2005 and Circular 113-TT-BTC of the Ministry of Finance
dated 15 December 2005 provide detailed regulations and guidelines for implementation of the
2005 Law on Export and Import Duties.

The MoF and the GDC are currently drafting guidelines to address undervaluation by importers,
and considering a system for keeping customs authorities up-to-date with world commodity
prices.

Inspection and Risk Management
Effective 1 January 2006, the Law on Customs 2001 (as amended 2005) moves to a system of
minimized customs inspection, where inspection will be conducted on the basis of an analysis of
information and an assessment of compliance with law by the goods owner and the level of risk
of a breach of the law on customs. Decree 154-2005-ND-CP of the Government dated 15
December 2005 and implementing Circular 112-TT-BTC of the Ministry of Finance dated 15
December 2005 provide detailed guidelines on the level of inspection.

According to the new regime, reliance on post-entry auditing is to increase. Imports and exports
will be exempt from actual inspection if they fall within one of the following categories goods
being exported, except goods being exported which were manufactured from imported raw
materials and goods being exported subject to conditions (previously, only exported agricultural
or aquatic products were exempt from inspection); goods from overseas brought into free
commercial zones, transit ports and customs bond warehouses (as previously); goods in transit;
emergency relief goods; specialized use goods directly servicing national defence and security;
humanitarian aid goods; and goods temporarily imported for re-export within a specified time; and
goods being imported which are machinery and equipment to form fixed assets and which are tax
exempt as part of an investment project.



                                                                                                  27
In addition, goods being imported or exported by goods owners with good observance of the law
as well as importers of goods in special categories pursuant to a decision of the Prime Minister
will also be exempt from inspection of actual goods. Where there are indications of a breach of
the law of customs (either with respect to goods of a goods owner who has breached the law of
customs on a number of occasions or goods exempt from inspection), an inspection of the entire
shipment will occur. Otherwise, actual inspection will only be conducted where an analysis of
information from the database processing system and from a reconnaissance by Customs and
information from bodies, organizations, individuals and Customs in other countries establishes
that there is a possibility of a breach of the law of customs.

If no violation is found, the actual inspection shall be decreased, but to no less than 10% of the
shipment. For the exported and imported goods which fall under exemption categories, but is
found to be in violation or related to a high risk importer, actual inspection shall be conducted for
10% of the shipment. Random checks are to be conducted on les than 5% of total customs
declarations and inspections are to be conducted on no more than 5% of the shipment.

In an important step forward for transparency in the customs clearance and risk management
process, customs declarers now have the right to request the customs office to provide written
verification of any requirement to present or add to a customs file or to provide documents other
than those required by the laws on customs.

Under these new regulations, 70 per cent of all imports are being waived from actual inspection.
Customs clearance for exports is now said to on average take between 5-60 minutes, an
improvement of 28%. Customs clearance for imports is said to range between 10-150 minutes,
which is about half the time of previous import procedures.

E-Customs
To eradicate paper-based customs services and cut down on the costs and time needed for
customs clearance procedures, Vietnam will officially introduce e-customs services, following the
conclusion of a two-year pilot program on customs e-declarations. According to Decision 149-
2005-QD-TTg of the Prime Minister dated 20 June 2005, the new e-customs system will be
implemented in three stages from 2005 to 2007 in accordance with regional and international
modern customs standards. The first stage is to be carried out in 2005 in the Ho Chi Minh City
and Hai Phong city customs departments. In the second stage, some other local customs
departments will be selected to implement the pilot e-customs should they satisfy specified
conditions. The final phase - trial reporting and reviewing - will last from September 2006 to
February 2007. The MoF will release lists of selected enterprises and import and export goods
that are eligible for the trial program of filing applications with customs offices online.

Enterprises are required to retain their e-customs documents for five years after import/export.
To allow the successful application of technology, the following steps have been recognized: (i)
customs procedures are carried out by electronic devices through electronic data processing
system of the customs offices, (ii) e-customs dossiers shall be in full, in standard format and have
the legal value equal to paper ones, and (iii) implementation of the regulation on self-assessment
of tax and other fees by declarers. Customs fees are to be settled on monthly basis. Three types
of documents will be able to be submitted and processed electronically to expedite customs
clearance: applications for exemptions, pre-customs clearance documents, and pre-customs
clearance inspections. Businesses will be allowed to declare and pay duties and other payable
amounts electronically. Customs clearance and inspection procedures will be conducted based
on the e-customs declaration submitted by businesses and on a data analysis from the customs
database and other sources.

Guidelines to implement Decision 149 have been issued under Decision 50-2005-QD-BTC of the
Ministry of Finance dated 19 July 2005 providing regulations onpilot implementation of electronic
customs procedures for imported and exported goods. Decision 50 promulgates a number of
forms for e-customs registration, e-customs declarations forms and annexes, and inspection
results. The pilot e-customs service is available to enterprises of various economic sectors and
applicable to imported and exported goods via the Ho Chi Minh City and Hai Phong customs
departments and other local customs departments approved by the MOF for the pilot electronic


                                                                                                  28
customs. To codify Decision 149, the MoF has submitted to the Government a draft Decree on
Electronic Customs Clearance which will authorize agents or enterprises to implement customs
procedures online.

The move to e-customs clearance procedures is provided for throughout (and expressly
encouraged in) the Law on Customs 2001 (as amended 2005), effective as of 1 January 2006,
reflecting the success of the two year pilot of customs e-declarations.

- Express Carriers
On 27 April 2005, the General Department of Customs issued Decision 652-TCHQ-QD-GSQL
issuing Regulations on e-customs declaration and customs examination procedures applied to
imported and exported goods and articles that are sent through express delivery services.
Accordingly, beginning on 12 May 2005, every business will be permitted to make e-customs
declaration and examination procedures for their imported and exported goods through express
delivery services if they can meet be linked electronically with any express services carrier and
their authorized customs counterparts. E-declarations are also applicable if express carriers are
able to classify incoming cargo into the green (for documents), yellow (for taxable goods), and
red lanes (for goods requiring inspection and sectoral management).

Post-Entry Audit
To facilitate customs clearance, the GDC is gradually introducing and phasing-in post-entry audit
procedures for importers.

Under the Law on Customs 2001 (as amended 2005), effective 1 January 2006, Vietnam will
move to a system of minimized customs inspection and increased reliance on post-entry audit of
importers. Decree 154-ND-CP of the Government dated 15 December 2005 provides guidance
on this. Accordingly, post-entry audit shall be conducted only when (1) Customs finds signs of
violation or based on risk analysis concludes that audit ought to take place, and (2) when a
periodical audit is required to review overall compliance. Signs of violation (according to Circular
114-2005-TT-BTC of the Ministry of Finance dated 15 December 2005) include illegal or invalid
customs declarations, unreasonable tariff duties, commercial and tax fraud, and invalid import
and export licenses for those goods which fall into the sectoral management.

Post-entry audit shall be conducted at (1) the Customs’ office to compare declarations with
information, analysis and related Customs law, or (2) at the office of enterprises to compare
customs declarations with accounting records of the importer. Actual inspection of the cleared
goods shall be conducted if necessary.

Customs Agents
Decree 79-2005-ND-CP of the Government dated 16 June 2005 on Conditions for Registration
and Operation of Agents for Customs Clearance Procedures governs the activities of Customs
Agents in Vietnam. Effective as of 1 July 2005, to act as an agent for customs clearance
procedures and represent importers and exporters of goods in the completion of customs
clearance procedures, a business entity must satisfy all the following conditions: (i) have lawful
business registration; (ii) have the business line of import and export goods handling services or
customs declaration services stated in the business registration certificate; (iii) have at least one
staff member who is a customs agent; and (iv) satisfy the conditions for electronic linking to
customs offices in order to conduct e-customs clearance procedures.

Prior to commencing operation, a customs agency must register prescribed documents with the
provincial customs division in the place where it has its head office (or where the customs agency
will regularly operate). Only Vietnamese citizens may be customs agency staff members. A
number of conditions must be satisfied for the issuance of customs agent identity cards by the
Customs office. Of note, customs agencies are responsible for verifying that customs agency
staff members satisfy these conditions. Customs agencies may conduct clearance procedures
and other authorized work. Customs agencies are subject to inspection and supervision by
Customs offices. Customs offices are to provide free assistance in establishing electronic
linkages, advice on applicable customs procedures and duty rates, and updates and training on
new customs regulations. Guidelines to implement Decree 79 have been issued under Circular
73-2005-TT-BTC of the Ministry of Finance dated 5 September 2005. Circular 73 provides



                                                                                                  29
      guidelines on conditions for registration and operation of customs agencies and their staff,
      including necessary training and examinations.

5.6 Rules of Origin

      International Trade Commitments
      For Vietnam’s WTO accession, Vietnam has targeted full implementation of the Agreements on
      Pre-Shipment Inspection and Rules of Origin.

      Legal & Regulatory Framework
      Vietnam’s new Commercial Law 2005 (effective 1 January 2006) and Decree 19-2006-ND-CP of
      the Government dated 20 February 2006 making detailed provisions on implementation of
      Commercial Law with respect to origin of goods (effective 16 March 2006) provide for the
      determination of the origin of imported and exported goods and including certificate of origin
      requirements. The origin of goods is defined as the country or territory where goods were entirely
      manufactured or, in the case of goods for which a number of countries or territories participated in
      the manufacturing process, where the final, fundamental processing stage was implemented.
      This information is crucial for entitlement to tax incentives and other preferential treatment under
      international agreements. To receive preferential treatment under an international treaty of which
      Vietnam is a member, the origin of imported or exported goods will be as determined in
      accordance with the relevant international treaty and related legislation implementing such treaty.

      Certificates of origin are to be presented to the Customs in the following cases:
      -     If the importer wishes to avail of preferential treatment under Vietnamese law or
             international treaties of which Vietnam is a member;
      -      If the goods originate from a country which is entitled to MFN duties (if there is no certificate
             of origin, the importer must provide an undertaking that the goods originated in an eligible
             country and will be liable for the accuracy and truthfulness of such undertaking);
      -      If the goods are in the category subject to compulsory import management (either under
             Vietnamese law or an international treaty of which Vietnam and the country/group of
             countries from which the goods originate are members);
      -      If the goods are in the category announced by Vietnam or international institutions be
             currently dangerous, i.e. potentially harmful to social safety, to the health of the citizens or
             to environmental hygiene, and need to be controlled;
      -      If the goods are imported from countries in the category to which Vietnam is currently
             applying antidumping or anti-subsidy duties, self-protective measures, tariff quotas or
             discriminatory quantitative restrictions.

      If an importer needs advance confirmation of the country of origin of a consignment of goods
      which is about to imported, it must lodge the relevant documents and data requesting verification
      with the customs office. After customs office receives the import declaration by an importer, it
      will consider and determine the country of origin of the imported goods. Where there is any
      doubt about the authenticity of source documents or about the level of accuracy of information
      relevant to the country of origin of goods, the customs office may request an inspection (to be
      completed within 150 days). While awaiting the inspection results, goods will not be entitled to
      tariff preferences but will be cleared by customs in accordance with normal customs procedures.
      The MOT is the responsible for administration of origin of goods, or may authorize the Vietnam
      Chamber of Commerce and Industry and other organizations to issue certificates of origin.
      Decree 19 enshrines the rights of applicants to lodge a complaint about the issuance of
      certificates of origin of exported goods or for recognition of origin of imported goods.

5.7    Non-Tariff Barriers:

       International Trade Commitments
       Vietnam committed under the BTA to eliminate all non-tariff barriers, including import and export
       restrictions, quotas, licensing requirements, and controls for all products and service categories
       over a period of 3 to 7 years after the BTA's entry into force, depending on the products.




                                                                                                           30
       Legal Framework
       Effective as of 1 May 2001, 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 products remained, Decision 46 sought to streamline Vietnam’s
       trading regime through the general elimination of non-tariff barriers, import and export licensing,
       and quantitative restrictions. By Decision 323-2005-QD-TTg of the Prime Minister dated 7
       December 2005, Decision 46's effectiveness was extended to 30 April 2006.

       Effective as of 1 May 2006, the lists of goods the import or export of which is prohibited, goods
       the import and export is subject to issuance of a permit, and goods subject to specialized
       management are issued with Decree 12-2006-ND-CP of the Government dated 23 January
       20066. Goods subject to specific management regimes are also regulated under Decree 12.

       Import Licensing
       Under Decision 46, 7 items (petrol, glass, iron, vegetable oil, sugar, motorbikes, and nine-seat
       motorized vehicles) were on the mandatory import license list. Under Decree 12, the following
       goods are subject to compulsory import permit: (1) goods the import of which needs to be
       controlled pursuant to international treaties or agreements which Vietnam has signed or in which
       it participates, as announced by the Ministry of Trade from time to time; (2) two-wheeled and
       three-wheeled vehicles from 175 cm3 and above; (3) sports weaponry.

       Quantitative Restrictions / Tariff Rate Quotas:
       Vietnam has since 2001 been phasing out the use of quantitative restrictions on imports. Eggs,
       tobacco raw materials (quantity - 29,774 tonnes), and salt (quantity - 200,000 tonnes) remain
       subject to import quotas (at 2005 levels) under Decree 12, Circular 04-2003-TT-BTM,7 and
       Circular 10-2004-TT-BTM.8 Under Decree 12, refined and raw sugar have moved from being
       subject to a compulsory import permit to being subject to import quotas. Tariff quotas applicable
       to imports in 2006 are prescribed in Decision 03-2006-QD-BTM of the Ministry of Trade dated
       13 January 2006.

       Quantitative limitations on exports in most sectors have been eliminated, with the exception of
       textiles and garments. The trading of petroleum is subject to annual licensing and price
       regulations under Decision 187-2003-QD-TTg of the Ministry of Finance dated 15 September
       2003.

       The MoT grants permits to traders authorized to import (or export) 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. A corporation is allowed to register and receive
       import quota for its subsidiaries.

       Import Prohibitions
       Vietnam maintains bans on the commercial importation of the following products: weaponry,
       ammunition, explosive materials (not including industrial explosives), military technical
       equipment and facilities; equipment that interferes with traffic speed measuring devices,
       prohibited cultural products, firecrackers; a wide range of second-hand consumer goods,
       including used information technology products; right-hand drive motor vehicles; used auto parts

6
    Decree 12-2006-ND-CP of the Government dated 23 January 2006 making detailed provisions on
    implementation of Commercial Law with respect to international purchases and sales of goods and agency for
    purchases and sales, processing and transit of goods involving foreign business entities (replacing Decree 57-
    1998-ND-CP of the Government dated 31 July 1998 making detailed provisions on implementation of 1997
    Commercial Law on import and export, processing and sales agency involving foreign business entities and
    amending Decree 44-2001-ND-CP of the Government dated 2 August 2001).
7
     Circular 04-2003-TT-BTM dated 10 July 2003 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
8
     Circular 10-2004-TT-BTM dated 27 December 2004 providing guidelines for the 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


                                                                                                               31
      and tires, bicycles, ambulances, and re-configured autos; scrap and waste materials;
      refrigeration equipment using chloroflurocarbons (CFCs); asbestos materials under the
      amphibole group; various encryption devices; encryption software; and toxic chemicals identified
      by the Chemical Weapons Convention.

5.8   Trading Rights:
      Under Decree 12, all domestic enterprises have full trading rights ie the right to import and
      export goods irrespective of the lines of business for which they have business registration,
      except goods on the list of prohibited and restricted imports/exports. They are not required to
      apply for an import license, except for goods for which the MoT requires a non-automatic import
      license.

      Foreign Trading Rights
      Foreign enterprises currently do not have full trading rights, although licenses have occasionally
      been granted on a case-by-case basis. Foreign investors are however allowed to import goods
      used as inputs in the manufacturing process, as well as machinery, equipment, transportation
      means, and materials used in the construction and installation of their project in accordance with
      their investment license.

      International Trade Commitments
      Under the BTA, Vietnam has committed to open its trading (import-export) sector to non-state
      and U.S. companies. The BTA 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 trading activities
      beginning in December 2008.

      Vietnam is currently considering the extension of trading rights to all its trading partners for WTO
      accession. At a Working Party meeting in September 2005, it offered to provide full trading
      rights to foreign entities by 1 January 2007. The offer was submitted with requests for
      exemptions applied to a small item of sensitive goods which would still be subject to State
      trading - petroleum products, pharmaceuticals, sugar, tobacco, salt, fertilizers, rice, and cultural
      products.

      Legal & Regulatory Framework
      Vietnam began to take steps to codify its trading rights (and distribution) commitments in June
      2005, with the ratification of a new Commercial Law. The 2005 Commercial Law (effective 1
      January 2006) enables foreign branch offices and FIEs to be licensed to engage in "commercial
      activities" only (i.e. not invest in production but solely conduct commercial activities) and
      enables existing FIEs in the manufacturing sector to engage in "commercial activities". Of note,
      there is no specific reference to "import/export" or "distribution" in the 2005 Law's definition of
      "commercial activities". However, the MoT has informally advised that the general catch-all
      "other activities for profit making purposes" is expected to be interpreted to encompass import-
      export and distribution activities.

      The 2005 Law provides for a separate regulatory framework for FIEs "specializing" in import and
      distribution activities (i.e. where no manufacturing is undertaken) under the control of the MoT.
      FIEs undertaking commercial activities in addition to manufacturing will remain under the control
      of the MPI. As currently, foreign branch offices remain under the control of the MoT.

      Decree 12 (the first of the Government decrees issued for implementation of the 2005
      Commercial Law) liberalizes trading rights in Vietnam, adopting many WTO principles, such as
      internationally accepted tariffs and automatic import/export rights.            While Vietnamese
      businesses with no foreign invested capital have full trading rights, foreign invested businesses,
      foreign companies and branches of foreign companies in Vietnam still only have limited trading
      rights.

      Legislative Developments
      In last August 2005, the Ministry of Trade made public a number of draft decrees set to
      implement the Commercial Law with respect to foreign trading and distribution rights, including



                                                                                                       32
the draft decree on representative offices and branches of foreign traders and the draft decree
on trading enterprises with foreign invested capital.

- Representative Offices and Foreign Branches
The draft decree on representative offices and branch of foreign traders, now under review by
the MoT, addresses the trading and distribution of goods by branches of foreign companies
under the purview of the MoT. The most recent draft of this decree was released in mid-March
2006.

According to this draft decree, branches of foreign trading companies may be established to
conduct trading activities. However, this right will only be available as scheduled in Vietnam’s
international undertakings, and the right to open a branch office under this draft decree still
awaits MoT announcement of particular goods and services sectors that are opened to trading
by foreign branches. The licensed duration of a branch office is limited to 5 years but is
extendable. The Prime Minister will decide on the continuation of existing, licensed branch
offices which engage in commercial activities beyond the above limited range of goods. New
branch offices will be licensed by the MoT.

- Commercial Foreign Invested Enterprises
The draft decree on trading enterprises with foreign invested capital addresses foreign
investment in the trading and distribution sector (i.e. the establishment of commercial foreign
invested enterprises ("Commercial FIES") that only deal with import/export and distribution); and
the ability of other FIEs (e.g. foreign invested manufacturers) to import/export and distribute
goods. A few challenges are presented in this draft decree. First, the process for approving
commercial FIEs is heavily based on discretionary licensing and criteria and not the more
straight-forward process of investment registration as applies to domestic companies, with
overlapping authorities (MoT and MPI). Second, the regulations for amending a current foreign
investment license to allow existing investors to engage in trading and distribution, and whether
or not prior approval from the MOT is required, are unclear. Also, the very existence of this
decree indicates that foreign companies are not being granted national treatment in these
sectors.

Under the latest draft decree, commercial FIEs may be established in the forms of JVEs or
100% FOEs. They may conduct the following activities: (i) wholesale of goods, (ii) retail of
goods, (iii) agency for buying and selling goods and/or services, (iv) commercial franchising, and
(v) import and export of goods. The range of goods in which commercial FIEs may conduct
activities is restricted. First, restrictions on goods under international treaties (e.g. Annexes B, C
and D of the BTA will apply). Second, the following goods are excluded: petroleum, petroleum
products, gas, fertilizer, insecticide, beer, spirits, cigarettes, medicine, precious metals and
stones, explosives, rice and wheat flour, and other goods for which export is prohibited.

The draft decree provides for licensing of commercial FIEs in accordance with the terms of and
timetable for Vietnam’s commitments under international treaties. Licensing is within the
authority of the MoT. The Prime Minister’s approval will be required for the licensing of
commercial FIEs where the foreign business entity is incorporated in a country with which
Vietnam has not made a treaty commitment with respect to trading and distribution rights. Once
established, if the enterprise wishes to also conduct manufacturing, it must comply with the new
investment regime under the new 2005 Law on Investment.

The draft decree also provides for existing, licensed FIEs to engage in the activities (i) to (v)
above subject to amendment of their investment license. It is expected that the amendment of
their investment licenses will be restricted by the corresponding terms and timetable for
introduction of new commercial FIEs. The draft decree is not clear on this but it is anticipated
that the amendment of investment licenses of existing FIEs so that they may conduct distribution
(as well as their licensed activities) will be performed by a foreign investment licensing body. It
is also unclear whether approval from the MoT is required before the amendment of investment
licenses.

Under the draft decree, conditions apply to licensing of commercial FIEs. Some conditions are
objective, such as mandatory legal capital level (stipulated by law). Other conditions are



                                                                                                   33
      subjective, such as requirement to have "normal" financial status. Foreign investors must apply
      for licensing and the MoT must obtain opinions from relevant ministries, branches and provincial
      people's committees before licensing - the draft decree does not provide for automatic
      registration (see Section 8.7 below on "Investment Registration"). Applications must include a
      list of total assets and auditor certified annual financial statements for the 2 immediately
      preceding years. This excludes new companies from establishing commercial FIEs in Vietnam.
      A licensing fee of VND15million (approx USD945) is payable.

      The draft decree imposes various restrictions on the operations of commercial FIEs, including:
      -      the maximum licensed duration will be 50 years (there is provision for extension, but no
             details);
      -      the director and deputy directors of the commercial FIEs must be registered at the local
             Department of Trade or industrial zone management board;
      -      any change in the following must be approved in writing: name of FIE; charter capital;
             location of head office, representative office, branch or retail sales outlet; operational
             contents and duration of operation; assignment of shareholding or capital contribution
             amounting to 10%or more of the charter capital; change of chairman of the board of
             management or of the general director (director); division, demerger, merger,
             consolidation, dissolution or conversion of form of enterprise.

      Commercial FIEs may open representative offices and branches in other provinces or overseas
      (no restriction on number), subject to MoT approval in the case of establishing branches in
      Vietnam. However, commercial FIEs may only open one branch office or one retail sales outlet
      (whether a supermarket, shop, fixed retail sales outlets, vending machine, or other location for
      the receipt of orders). The timing and terms of a commercial FIEs entitlement to open a branch
      office or a retail sales outlet will depend on Vietnam's commitments under international treaties,
      as determined on a case-by-case basis by the MoT. There is no limit on the number of
      overseas branch offices which may be opened, subject to MoT approval.

      The draft decree prescribes penalties for breaches, including fines as high as VND50-70million
      for signing a contract for the purchase and sale of goods or for the provision of services which
      is inconsistent with the operational contents of the FIE; dealing in goods or services outside the
      list of goods and services in which a commercial FIEs is permitted to conduct business in
      Vietnam; and opening a branch or retail sales outlet in Vietnam without prior approval.

       - BTA Implementation
      Due to Vietnam’s consideration of trading & distribution rights for its WTO accession, legislation
      implementing the opening up of this sector for U.S. companies in accordance with the BTA has
      been delayed. As an interim measure, the MoT issued a Diplomatic Note dated 28 July 2005 re-
      asserting Vietnam’s trading rights commitments under the BTA and as agreed to during the BTA
      Joint Committee session on 17 June 2005 in Washington DC. The Diplomatic Note also
      provides the following point of contact for US companies seeking to import and distribute their
      products in Vietnam:
            Ms. Hoang Tuyet Hoa, Department for Investment and Planning, Ministry of Trade
            31 Trang Tien Street, Hanoi, Viet Nam
            Tel: 84-4-826 5826
            Fax: 84-4-826 4696
            E-mail : hoanghoa@mot.gov.vn

      It is not yet known whether the restrictions proposed in the draft decree will be imposed on
      currently established US investors seeking to import and distribute their products in Vietnam.

5.9   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.

      International Trade Commitments
      Under the BTA, Vietnam committed to apply SPS measures which are consistent with the
      provisions of GATT 1994, to the extent necessary to protect human, animal, or plant life and
      health and when based on scientific principles supported by sufficient evidence and risk


                                                                                                     34
assessment. For its WTO accession, Vietnam has committed to full implementation of the WTO
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 are regulated under Ordinance 36-2001-PL-UBTVQH10 on
Plant Protection and Quarantine dated 25 July 2001 and Decree 58-2002-ND-CP of the
Government dated 3 June 2002 Administrative offences in plant protection and quarantine are
now governed by Decree 26-2003-ND-CP of the Government dated 19 March 2003 and Circular
71-2003-TT-BNN of the Ministry of Agriculture and Rural Development dated 25 June 2003.

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
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.

Decree 33-2005-ND-CP implements a number of articles of Ordinance 18. Decree 33
introduces new detailed regulations on the prevention of epidemics for animals, quarantine
tasks, phytosanitary controls, control of poultry slaughtering, veterinary sanitation examination,
administration of veterinary medicines. It also provides some specific regulations on the
organizational system of State agencies permitted to operate in the veterinary sector.

Food Safety
Issues relating to food safety are regulated by the Ordinance on Food Safety and Hygiene,
passed by the NA on 26 July 2003, effective 1 November 2003. The Ordinance aims to ensure
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



                                                                                               35
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 (see below), State certification of satisfaction of conditions for foodstuffs safety and
hygiene is required. The Ordinance also regulates the proclamation of food standards and the
advertising and labeling of foodstuffs.

Implementing the Ordinance, Decree 163-2004-ND-CP of the Government dated 7 September
2004 specifically identifies and regulates in detail the 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.

"High-risk" foodstuffs are prescribed in detail in Decision 11-2006-QD-BYT of the Ministry of
Health dated 9 March 2006. The 10 groups of foodstuffs include: meat, egg, milk, and products
made of meat, egg, milk; fresh and processed aquatic products; various kinds of ice-cream, ice
water, natural mineral water; functional foodstuffs and foodstuffs increasing nutritional vitamins,
additional foodstuffs, food additives; fast foods and drinks; frozen foodstuffs; soya milk and
products made from soya; various kinds of fresh vegetables, tubers and fruits for instant use.

An inter-ministerial steering board for food hygiene and safety was established under Decision
48-2005-QD-TTg of the Prime Minister dated 8 March 2005. The board has the tasks to study
and propose to the Prime Minister policies, measures, and regulations on State management of
food hygiene and safety, to assist the Prime Minister to manage operations of relevant ministries
and bodies in resolving matters related to food hygiene and safety. The principle of
decentralization of State administration of foodstuff safety and hygiene has been enshrined in
Decision 12-2006-QD-BYT of the Ministry of Health dated 9 March 2006.

Decree 126-2005-ND-CP of the Government dated 10 October 2005 stipulates the penalties for
administrative offences in relation to the measurement and quality of goods. Under Decree 126,
penalties will be imposed on individuals and organizations when they intentionally or
unintentionally commit an administrative offence relating to the measurement and quality of
goods (not otherwise amounting to a criminal offence). The limitation period for imposing
penalties is 1 year from the offence (except in the case of the offence of trading in imports and
exports on the list of goods for which a quality test is compulsory, where is the limitation period
is 2 years). The penalties under Decree 126 are higher than under previous legislation in order
to deter the commission of offences and to encourage organizations and individuals to comply
seriously with goods measurement and quality regulations. In addition, a number of new
offences are prescribed, such as the offence of failure to apply initial quarantine regime for
imported measurement devices before putting them into circulation and the offence of importing
measurement devices without permission from State administrative authorities in charge of
measurement.




                                                                                                36
     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.

     Vietnam has now officially established a national sanitary and phytosanitary notification authority
     and enquiry point – “SPS Vietnam” - to provide services that meet WTO requirements. “SPS
     Vietnam’s” task will be to co-ordinate the implementation of the WTO Agreement on Sanitary
     and Phytosanitary Measures on behalf of the Ministry of Agriculture and Rural Development. It
     will also obtain information about the inspection procedures, risk evaluation and the other
     sanitary and quarantine requirements of WTO member countries. This enquiry and notification
     point will be responsible for notice and comment procedures as required by Annex B of the
     WTO Agreement on Sanitary and Phytosanitary Measures.

     Vietnam's SPS Notification Authority and Enquiry Point has been established at:
           SPS Vietnam, 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

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

5.10 Standards and Technical Barriers to Trade (TBT):

     International Trade Commitments
     Under the BTA, Vietnam committed to not use or to create obstacles to trade or to protect
     domestic production, and must be applied so that import receive the same or better treatment as
     like domestic products. Vietnam has committed to the full implementation of the WTO TBT
     Agreement upon accession without a transition period.

     Legal & Regulatory Framework
     Prime Ministerial Decision 444-2005-QD-TTg governs the implementation of the WTO TBT
     Agreement. According to Decision 444, the aim of the project is to ensure Vietnam fulfils all its
     obligations under the TBT Agreement after joining the WTO, develops trade with WTO member
     countries and obtains national targets in socio-economic development and international
     economic integration. Decision 444 requires the implementation of the TBT Agreement,
     including technical regulations and standards as well as assessment procedures, to be in line
     with Vietnamese laws and to meet the basic principles of the TBT Agreement, including the
     principles of non-discriminatory treatment, removing obstacles to trade, and transparency.
     Additionally, the Prime Minister directed agencies and ministries to build and recheck
     Vietnamese Standards (TCVN) and Sector Standards (TCN) in accordance with international
     standards in order to ensure socio-economic interests and promote the competitive capacity of
     Vietnamese businesses when Vietnam becomes a full member of the WTO. The Prime Minister
     also defined the duties, measures and pace of implementation, and funding for the project.
     Decision 444 became effective as of 17 June 2005.

     Vietnam has established an Inter-ministerial Committee in charge of TBTs, regulated under
     Decision 07-2006-QD-BKHCN of the Ministry of Science & Technology dated 20 March 2006.




                                                                                                     37
TBT Enquiry Point / Notification Point
Vietnam's TBT Enquiry and Notification Point was formally established in March 2003 (Decision
356-QD-BKHCN of the Ministry of Science & Technology) in the offices of the STAMEQ under
the MoST. 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:

       Viet Nam 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

Vietnam’s TBT network includes a National Notification Agency and Enquiry Point (NA & EP) on
measurement and quality (the Vietnam TBT Office) within STAMEQ under the MoST. The
Vietnam TBT Office is the key agency in the network. Its obligations are to notify and answer all
enquiries on technical regulations, standards and conformity assessment procedures and other
TBT issues. In particular, it must notify other WTO members through the Secretariat about
technical regulations, conformity assessment procedures which may obstruct trade with WTO
members, and to receive notifications sent by TBT NAs of ministries and localities, and to
process these notifications before sending out. The Vietnam TBT Office will also provide upon
request technical regulations, standards, conformity assessment procedures being applied and
to be applied in Vietnam to other WTO members and interested WTO members and agencies in
the country, and to coordinate activities and provide assistance in notification and enquiry skills
to other NAs & EPs in the network.

NAs and EPs will also be established within the Ministries of Trade, Industry, Construction,
Transportation, Post and Telecommunications, Natural Resources and Environment, Labour,
Health, Agriculture and Rural Development, Fishery, Culture and Information. (NAs & EPs at the
ministerial level are titled: TBT-abbreviation of ministry.) These NA&EPs have notification and
enquiry obligations with respect to technical regulations and conformity assessment procedures
relating to issues which are under the management of the particular ministries. They must notify
the Vietnam TBT Office of agreements signed with respect to technical regulations, conformity
assessment procedures within the management of their ministries. NAs and EPs at the level of
provinces and cities under central authority will be located with the Department of Science and
Technology (NAs & EPs at the provincial level are titled: TBT–abbreviation of province.) These
NAs and EPs are responsible for notifications and enquiries within the scope of their localities,
under the supervision of the Vietnam TBT Office.

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.

Product Standards & Inspection
Ordinance 18-1999-PL-UBTVQH10 on Quality of Goods, effective as of 1 July 2000, 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


                                                                                                38
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.

The Department for Standards & Quality (“STAMEQ”) under the Ministry of Science &
Technology ("MoST") has responsibility for administration of standards, measurement and
quality of commodities and products. Domestic, imported and exported goods subject to
mandatory quality control and inspection are listed on STAMEQ’s website
(http://www.tcvn.gov.vn). The most recent list was issued under Decision 50-2006-QD-TTg of
the Prime Minister dated 7 March 2006. Mandatory registration of product quality was abolished
in early 2001, replaced by a regime of self-declaration. 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.

Decree 179-2004-ND-CP of the Government dated 21 October 2004 details 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 mandatory 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 prescribed 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 (ie certification by a qualified quality inspector or having a quality assurance
certificate or medal granted by the exporting country and acceptable to the Vietnamese
Government). 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
details the responsibilities of the MoST and other relevant Ministries and branches with respect
to goods quality inspection; the responsibilities of quality certification bodies; and offences with
respect to goods quality.

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.

The provisional system of self-declaration and evaluation of goods quality standards introduced
as of 1 January 2001 under Decision 2424-2000-QD-BKHCNMT dated 12 December 2000 and
Decision 2425-2000-QD-BKHCNMT dated 12 December 2000 has now been adopted
permanently. Under Decisions 03-2006-QD-BKHCN and 04-2006-QD-BKHCN of the Ministry of
Science and Technology dated 10 January 2006, businesses producing goods at an industrial
scale (other than goods subject to compulsory standards) must declare their quality standards to
STAMEQ Divisions (no fee payable) and then declare their compliance with those standards
after self-evaluation (following testing) or after certification by a quality testing body registered
with the line ministry (such body may be the producer itself).




                                                                                                  39
     Mutual 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).

     Legislative Developments
     Vietnam is currently drafting an Law on Standardization due for promulgation by the NA at its
     May-June 2006 Session in anticipation of WTO accession.

5.11 Industrial subsidies

     International Trade Commitments
     Under rules stipulated by the 1995 WTO Agreement on Subsidies and Countervailing Measures
     (SCM), all countries are to commit in principle to eliminating prohibited industrial subsidies and
     incentives such as those which are contingent upon the requirement to export, or contingent
     upon the use of local content. Members are also required to notify all actionable and non-
     actionable subsidies annually to the WTO Committee on Subsidies.

     For its WTO’s accession, Vietnam has committed to not introduce any new prohibited subsidies
     on accession but has requested an overall transition period to eliminate prohibited subsidies that
     have been granted over the years to existing domestic and foreign companies such as the
     granting of preferential income taxes based on export performance.

     Under the BTA, Vietnam has committed to eliminating all local content requirements by
     December 2006 or upon its accession to the WTO, whichever comes earlier.

     Legal Framework
     The 2005 Law on Investment, effective as of 1 July 2006, addresses, amongst other issues, the
     topic of support for investors (both domestic and foreign) by way of investment incentives,
     including tax incentives, exemptions from import duties, credit support, technology transfer
     incentives, and export incentives in export processing zones and hi-tech zones.

     Subsidy Programs

     Investment Incentives Contingent upon Export Performance
     Vietnam currently provides a number of incentives to investors based on their export
     performance. These incentives are applicable to both domestic and foreign investors that
     manufacture and export their products. A broad range of industries are eligible for these
     incentives, including those in processing, mining, agriculture and forestry, construction, and
     fisheries.

     For domestic businesses that export at least 30% or 50% of their total output, subsidies
     provided include exemption from and reduction of land use payment; exemption from and
     reduction of land rental, exemption from and reduction of land use tax; preferential corporate
     income tax treatment; and exemption from import duties in respect of the equipment, and
     machinery imported to form fixed assets of an enterprise.

     Foreign invested enterprises that export at least 50% or 80% of their output, and those located
     in export processing zones are also entitled to preferential corporate income taxes, and
     preferential import duty treatment for up to five years.

     Under WTO rules, these subsidies are contingent upon export performance and are specific
     within the meaning of Article 2 of the SCM, and therefore deemed prohibited subsidies.

     Investment Incentives Contingent Upon Localization Ratios
     Vietnam administers a program contingent upon localization ratios for the electronic industry but
     has committed to eliminating this program upon its accession to the WTO, or by December



                                                                                                    40
        2006 per the BTA. The program provides prefential import tariff rates to manufacturers of
        electronic products if local content is used. This program is also a prohibited subsidy under the
        WTO.

         Programs for Textile and Garment Sector
         Vietnam aims to develop the textile and garment industry into one of their key export industries
         and ratify the strategy for development of Vietnam’s textile and garment industry till the year
         2010 with the leading role of the state run economic sector as the core. Under Decision 55-
         2001-QD-TTg of the Prime Minister dated 23 April 2001, a number of mechanisms and policies
         have been granted for the development of this sector:
        -    State support funds from the budgetary source and/or ODA for the development plan of raw
             materials regions, cotton and mulberry growing and silkworm rearing; investment in waste
             water treating facilities; planning of textile industry clusters; construction of infrastructure of
             new industrial clusters; training and research activities of specialized textile and garment
             research institutes, schools and centers
        -    State credit capital for Investment projects in fiber production, finished weaving, printing and
             dyeing, textile materials, garment auxiliary materials, and textile and garment mechanical
             engineering of which 50% shall enjoy an interest rate equal to 50% of the currently
             prescribed interest rate at the time of capital withdrawal, with a term of 12 years and a
             grace period of 3 years; the remaining 50% shall be borrowed according to the regulations
             of the Development Assistant Fund.
        -    Enjoy investment preferences provided for by the Law on Domestic Investment Promotion.
        -    VAT reduction applicable to home-made fabrics and apparel auxiliary materials which are
             sold to Vietnam-based units engaged in the production and/or processing of exports.
        -    Government guarantee for the SOEs engaged in fiber production, finished weaving, printing
             and dyeing, textile raw materials, apparel auxiliary materials and textile and garment
             mechanical engineering in the deferred payment procurement of equipment and/or
             borrowing of commercial loans from suppliers or financial organizations at home and
             abroad. Capital use levy for the five year period (2001-2005) for reinvestment shall be re-
             allocated, and given priority in the additional allocation of 30% of working capital in lump
             sum to each enterprise.

        To support the development of textile industry in general and industrial cotton plant in particular
        for the 2001-2010 period, under Decision 17-2002-QD-TTg of the Prime Minister dated 21
        January 2002, State budget funds will be contrbuted for investment in building irrigation works,
        upgrading cotton plant research institutes, conducting scientific and technological research,
        agricultural promotion activities. Price subsidies are given for commodity strains for peasants
        for a duration of two years, the subsidy levels for the first year shall be 60% of the price at that
        time, and that for the second year shall be 50%. The State development investment credit shall
        be given to projects on the upgrading and renewal of technology and equipment, building of
        cotton-ginning, cotton oil-extracting plants. Cotton growers shall be borrowed capital from
        commercial banks and credit institutions. The level of input deduction for VAT upon the
        purchase of seed cotton shall be considered by the MOF, Agricultural land use tax shall be
        exempted and reduced for areas cultivated with industrial cotton plant. In addition, industrial
        cotton price support fund shall be established to provide price subsidies for domestic cotton
        when the cotton prices on the world market fall.

        Programs for Hi-Tech, Industrial, and Export Processing Zones

        High-Tech Zones ("HTZs")
        Preferential treatment available to domestic and foreign investors in HTZs and to the
                                                                                           9
        Vietnamese and foreign individuals working for investment projects in HTZs is 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.

9
    Decision 53-2004-QD-TTg of the Government dated 5 April 2004


                                                                                                             41
    -      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 Zones ("IZs") and Export Processing Zones ("EPZs")
    Decree 152-2004-ND-CP dated 6 August 2004 provides for preferential CIT treatment to which
    newly established investment projects in IZs and EPZs are entitled.
     -     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.

5.12 Trade Remedies:

    International Trade Commitments
    Under the BTA, Vietnam agreed to consult about market disruption that may occur due to rapid
    increases in imports originating from the US cause or threaten to cause or material injury to the
    domestic industry. In the event Vietnam is unable to remedy the problem through consultations,
    Vietnam will protect its domestic industry by imposing so-called safeguard measures on imports,
    in the form of quantitative restrictions, increased tariffs or other restrictions, to counteract the
    disruption.

    For its WTO accession, Vietnam has committed to complying with the WTO Agreement on
    Antidumping and WTO Agreement on Safeguards upon accession.

    Legal & Regulatory Framework
    The following trilogy represents 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:
    -      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;
    -      Ordinance 20-2004-PL-UBTVQH11 Against Dumping of Imported Goods in Vietnam
           dated 29 April 2004 and its implementing Decree 90-2005-ND-CP of the Government
           dated 11 July 2005;
    -      Ordinance 22-2004--PL-UBTVQH11 on Measures Against Subsidized Goods Imported
           into Vietnam and its implementing Decree 89-2005-ND-CP of the Government dated 11
           July 2005.

    An Ordinance on Countervailing Measures was expected to be added to the trilogy, but is not
    scheduled to be passed by the NA's Standing Committee in 2006.



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Under Decree 04-2006-ND-CP of the Government dated 9 January 2006, the Council for
Dealing with Anti-dumping, Anti-subsidy and Self-protection has been established under the
MoT. Its functions, duties, powers and organizational structure are prescribed in Decree 04.

Safeguard Measures
Regulations and procedures on trade remedies through safeguards are governed by Ordinance
42 and Decree 150. 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 MoT 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
Effective as of 1 October 2004, 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



                                                                                                  43
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.

Decree 90 provides detailed regulations with respect to:
-     Basis for determination of a “major proportion of the total volume, quantity or value of
      similar goods manufactured domestically” and “direct relationship between domestic
      manufacturers manufacturing similar goods and any organization or individual exporting
      or importing goods which are the subject of the request for application of anti-subsidy
      measures”
-     Composition of the anti-dumping commission under the MOT and its duties and powers,
      qualifications of investigators and council members and their duties and powers.
-     Types of persons participating in anti-dumping proceedings and their rights and
      obligations.
-     Application files requesting anti-dumping investigation; procedures for commencement of
      investigation, matters to be investigated and verified; conclusions of investigations,
      procedures for application of anti-dumping measures.

Countervailing Measures
Effective on 1 January 2005, 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;



                                                                                                   44
       -     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
      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.

      Decree 89 provides in detail for the following matters:
      -     Bases on which “volume, quantity or value of subsidized goods imported into Vietnam”
            will be deemed insignificant.
      -     Basis for determination of a “major proportion of the total volume, quantity or value of
            similar goods manufactured domestically” and “direct relationship between domestic
            manufacturers manufacturing similar goods and any organization or individual exporting
            or importing goods which are the subject of the request for application of anti-subsidy
            measures”
      -     Composition of the anti-subsidy commission under the MOT and its duties and powers,
            qualifications of investigators and council members and their duties and members.
      -     Types of persons participating in anti-subsidy proceedings and their rights and obligation.
      -     Application files requesting anti-subsidy investigation, procedures for commencement of
            investigation, matters to be investigated and verified, conclusion of investigations,
            procedures for application of anti-subsidy measures.


6.    Intellectual Property Rights
6.1   Intellectual Property Rights Regime:

      International Intellectual Property ("IP") Conventions & Commitments
      Vietnam is a party to the Paris Convention for Protection of Industrial Property, the Madrid
      Agreement on International Registration of Marks. It joined the Convention Establishing the
      World Intellectual Property Organization in 1976 and the Patent Cooperation Treaty in 1993.
      The Government is now preparing for its accession to the Brussels Convention Relating to
      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 Protection of Artists, Performers, Phonogram Producers and
      Broadcasting Agencies and the Madrid Protocol.

      Effective October 2004, provisions of the Berne Convention on Copyright Protection for Literary
      and Artistic Works now apply in Vietnam (by Official Letter 163-BQTGVHNT-QLBQ of the
      Ministry of Culture and Information dated 16 July 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 other member nations, and will have
      reciprocal protection for Vietnamese works in those nations.

      Effective as of 6 July 2005, the Geneva Convention for Protection of Producers of Phonograms
      Against Unauthorized Duplication of Phonograms applies in Vietnam (following Vietnam's official
      accession to the Geneva Convention on 6 April 2005). member nations. Under the Geneva
      Convention, Vietnam must extend copyright protection for sound recordings from other member
      countries, and will have reciprocal protection for Vietnamese sound recordings in those nations
      (and vice versa).

      Vietnam has bilateral agreements on IP protection with the EU, Switzerland and the U.S.


                                                                                                    45
        Through the BTA, Vietnam has committed to most obligations covered by the WTO TRIPS
        Agreement and, in the working party meeting in Geneva on 20 May 2005, it committed to full
        implementation of the TRIPS Agreement upon WTO accession.

        Legal & Regulatory Framework
        As of 1 January 2006, the fundamental principles of IP rights - the nature of IP rights, the basis
        of IP rights and the transfer thereof - are governed under Part VI of the Civil Code of Vietnam
        dated 14 June 2005. As of 1 July 2006, IP rights are regulated in detail under the Law on
        Intellectual Property dated 29 November 2005.

        Until 1 January 2006, IP rights were governed under the IP provisions of the 1995 Civil Code,
        implementing Decree 76-CP of the Government dated 29 December 1996 on Copyright, 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).

        The MoST is the primary Government body responsible for administration of Vietnam's IP
        regime. The MoST has jurisdiction over industrial property rights. The MoCI has jurisdiction
        over copyright. The Ministry of Agriculture and Rural Development ('MoARD") has jurisdiction
        over rights to plant varieties.10

        Protection and enforcement of IP rights (the main aspect of Vietnam's IP regime which lagged
        behind international standards) is now dealt with in the 2005 Law on Intellectual Property. Civil,
        administrative and criminal remedies are available. Civil remedies are provided for in detail in
        the 2005 Law on Intellectual Property. Administrative remedies (including customs intervention)
        are also provided for, but penalties will be detailed in implementing legislation. Criminal IP
        violations are dealt with in accordance with Vietnam’s Criminal Code.

        Technology transfer is also regulated under the Part VI of the 2005 Civil Code. A Law on
        Technology Transfer is scheduled for consideration at the NA’s May-June 2006 Session and to
        be passed at the October-November 2006 Session. See Section 8.9 "Technology Transfer
        Issues".

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 IP rights and any benefits derived
        thereof from organizations and individuals of the country.

6.3     Copyright:
        Copyright in literary, artistic and scientific works (including architectural works) and in
        performances, sound recordings, visual recordings, broadcasts and satellite signals carrying
        coded programmes is protected under Part VI of the 2005 Civil Code and the 2005 Law on
        Intellectual Property. An author's personal rights (to title a copyright work, to put the author's
        name or pseudonym to it, and to protect such work) are protected indefinitely. The personal
        right to publish a copyright work and the property rights (eg., to copy a copyright work) are
        protected as follows:
        -       cinematographic works, photographic works, dramatic works, works of applied art and
                anonymous works are protected for 50 years as from the date of first publication;



10
     Under Official Letter 147-VPCP of the Office of Government dated 9 January 2003, the Government was
     considering the establishment of one authority for uniform State administration of the IP regime, but this has
     not been adopted.


                                                                                                                46
      -      other works are protected for the whole life of the author and for 50 years after his/her
             death (in case of co-authored works, 50 years after the death of the last surviving
             author).
      Works of foreign individuals and organizations are protected under Article 774 of the 2005 Civil
      Code, including (i) works first published or disseminated in Vietnam, (ii) works published or
      disseminated in Vietnam within 30 days of publication in another country, (iii) works created and
      taking a definite form in Vietnam, and (iii) works protected in Vietnam under international
      copyright conventions of which Vietnam is a member.

      Based on the Berne Convention, the MoCI has tightened regulation of copyright in musical and
      theatrical works from 1 October 2004. Radio and TV stations, publishing houses and
      professional organizers are responsible for ensuring that the use of any foreign musical and
      theatrical works comply with 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 the 2005 Law on Intellectual Property. Copyright
      registration applications are processed by the Copyright Office under the MoCI. Copyright
      registration certificates must be issued within 15 days. Registration is not a compulsory
      condition for enjoyment of copyright. However, registration certificates are proof of copyright
      ownership in disputes (unless rebutted). Registration certificates are valid throughout Vietnam
      and will be recorded in the national register of copyright and associated rights.

      Licensing and Royalties
      Assignment and licensing of copyright is regulated in detail in the 2005 Law on Intellectual
      Property. Copyright assignment and licensing contracts must be in writing and include
      prescribed contents.

      New regulations on copyright royalties are expected to be issued following the 2005 Law on
      Intellectual Property. Currently, copyright royalties are regulated under Decree 61-2002-ND-CP
      of the Government dated 11 June 2002.

6.4   Industrial Property:
      Industrial property rights in inventions, industrial designs, layout-designs of semi-conducting
      integrated circuits, business secrets, trademarks, trade names and geographical indications (as
      well as rights to crop seeds) are protected under Part VI of the 2005 Civil Code and the 2005
      Law on Intellectual Property. The conditions for protection and the grounds for ownership of
      industrial property rights are prescribed in detail in the 2005 Law on Intellectual Property. The
      contents of and procedures for application for certificates of protection are also set out.

      Registration
      Registration of industrial property rights is the basis for ownership and protection in Vietnam.

      The right to register an invention, industrial design, or lay-out design belongs to the creator
      thereof or to the investor in the creation thereof. The right to register a trademark or trade name
      belongs to the organization or individual producing the relevant goods or providing the relevant
      services. The right to register a Vietnamese geographical indication belongs to the State, and
      the State allows producers of good bearing such indications to exercise such right to register
      (but they do not become the owner thereof).

      The registration system is based on the first-to-file principle. Registration applications are
      processed by the National Office for Industrial Property (“NOIP”) under the MoST.

      Certificates of protection (eg., patents in the case of inventions) are issued to recognize
      ownership of industrial property rights. Certificates of protection are valid throughout Vietnam as
      follows:
      -       Invention patents: for 20 years from the filing date;
      -       Utility solution patents: for 10 years from the filing date;




                                                                                                         47
-      Industrial design patents: for 5 years from the filing date (renewable for two consecutive
       terms, each of 5 years);
-      Certificates of registered layout-designs: for the earliest of 10 years from the filing date,
       10 years from the date the layout-designs were first commercially exploited anywhere in
       the world by persons having the registration right or their licensees, or 15 years from the
       date of creation of the layout-design;
-      Certificates of registered marks: for 10 years from the filing date (renewable for multiple
       consecutive terms, each of 10 years);
-      Certificates of registered geographical indications: for indefinite validity from the issuance
       date.

Industrial property rights of foreign individuals and organizations are protected under Article 775
of the 2005 Civil Code where a certificate of protection has been issued for such rights.

Issuance of certificates of protection, the principal contents thereof, any amendment, termination
or invalidation thereof, and registration of any transfer contracts are all recorded in a national
register of industrial property by the NOIP.

Fees are payable to maintain validity of certificates of protection. Since 31 January 2005, a
single-tier pricing structure has applied to registration fees under Circular 132-2004-TT-BTC of
the Ministry of Finance dated 31 December 2004.

Licensing
Assignment and licensing of industrial property rights is regulated in detail in the 2005 Law on
Intellectual Property. Contracts for transfer of industrial property rights must be registered with
the NOIP.

Under the 2005 Law on Intellectual Property, the right to use an invention may be restricted due
to prior user rights (Article 134) or compulsory licensing (Articles 145-147). Compulsory
licensing may be order where:
-       The use of the invention is for public and non-commercial purposes or in service of
        national defense, security, disease prevention and treatment and nutrition for people or
        other urgent needs of the society;
-       The holder of the exclusive right to use such invention fails to fulfill the obligations to use
        such invention for 4 years from the date of filing the invention registration application or 3
        years from the date of issuance of the patent;
-       A person wishing to use the invention fails to reach an agreement with the holder of
        exclusive right to use such invention on the terms for a licensing contract despite its
        efforts made within a reasonable time for negotiation on satisfactory commercial price
        and conditions;
-       The holder of the exclusive right to use such invention is considered to have performed
        prohibited anti-competitive practices.

The MoST is responsible for granting and suspending compulsory licences. Rights of appeal
against compulsory licensing decisions are available. The grantee of a compulsory license must
pay remuneration to the owner. The patent owner is entitled to request the termination of the
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.

Inventions and Utility Solutions
Invention is defined as a technical solution in the form of a product or a process which is
intended to solve a problem by application of laws of nature. An invention may be protected by
issuance of an invention patent if it satisfies the following conditions: (a) Being novel; (b)
Involving an inventive step; (c) Being susceptible of industrial application. An invention may be
protected by issuance of an utility solution patent if it satisfies the following conditions (unless it
is common knowledge): (a) Being novel; (b)/ Being susceptible of industrial application. The
2005 Law on Intellectual Property provides substantive guidelines on what constitutes "novelty",
"inventiveness" and "susceptibility of industrial application".




                                                                                                    48
Subject matter excluded from protection includes: (1) Scientific discoveries or theories,
mathematical methods; (2) Schemes, plans, rules and methods for performing mental acts,
training domestic animals, playing games, doing business; computer programs; (3)
Presentations of information; (4) Solutions of aesthetical characteristics only; (5) Plant varieties,
animal breeds; (6) Processes of plant or animal production which are principally of biological
nature other than microbiological ones; (7) Human and animal disease prevention, diagnostic
and treatment methods.

Patent applications are subject to examination as to form and substance. Time limits for
processing of applications have not yet been prescribed (formerly, they ranged from 3 to 18
months).

Trademarks
Trademark is defined as sign used to distinguish goods and/or services of different
organizations or individuals. Protection is available for certification marks, collective trademarks,
affiliated trademarks and well-known trademarks. Trademarks must satisfy the following
conditions: (1) Being a visible sign in the form of letters, words, drawings or images, including
holograms, or a combination thereof, represented in one or more colors; and (2) Being capable
of distinguishing goods or services of the mark owner from those of other subjects.

Geographical indications
A geographical indication is defined as a sign which identifies a product as originating from a
specific region, locality, territory or country. Protection is available if the geographical indication
if it satisfies the following conditions: (1) The product bearing the geographical indication
originates from the area, locality, territory or country corresponding to such geographical
indication; (2) The product bearing the geographical indication has a reputation, quality or
characteristics mainly attributable to geographical conditions of the area, locality, territory or
country corresponding to such geographical indication.

The following will not be protected as geographical indications: (a) Names or indications which
have become generic names of goods in Vietnam; (b) Geographical indications of foreign
countries where they are not or no longer protected or no longer used; (c) Geographical
indications identical with or similar to a protected mark, where the use of such geographical
indications is likely to cause a confusion as to the origin of products; (4) Geographical
indications which mislead consumers as to the true geographical origin of products bearing such
geographical indications.

The 2005 Law on Intellectual Property addresses issues relating to the recognition and
registration of geographical indications, including the delicate relationship between applications
for protection of trademarks and protected geographical indications and translations of
geographical indications. In this area, Vietnam has written its law in accordance to recent WTO
rulings on geographic indications. Specifically, a geographic indication conflicting with a prior
trademark must be refused protection; and a geographic indication cannot be used to block the
use or registration of a prior applied for, used, or registered trademark. The law however does
not include a statement saying that a registered geographic indication can only be used in the
form as registered and not in translated form or any other linguistic variation.

Industrial Designs
An industrial design is defined as a specific appearance of a product embodied by three-
dimensional configurations, lines, colors, or a combination of these elements. Industrial designs
may be protected if they satisfy the following conditions: (1) Being new; (2) Being creative; (3)
Being susceptible of industrial application. The 2005 Law on Intellectual Property provides
substantive guidelines on what constitutes these criteria. Protection as an industrial design is
note available for: (a) Appearance of a product, which is dictated by the technical features of the
product; (b) Appearance of a civil or an industrial construction work; (c) Shape of a product,
which is invisible during the use of the product.

Layout Designs of Integrated Circuits
Layout designs were first protected in Vietnam under Decree 42-2003-ND-CP of the
Government dated 2 May 2003, based on the Washington Treaty on IP in respect of Integrated



                                                                                                    49
      Circuits (“IPIC Treaty”) and the TRIPS Agreement’s wording. Similarly, the 2005 Law on
      Intellectual Property defines layout-design of integrated circuit as three-dimensional disposition
      of circuit elements and their interconnections in a semiconductor integrated circuit, where
      integrated circuit is defined 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 semi-conducting material and which is intended to
      perform an electronic function, which is synonymous with integrated circuitry (“IC”), chip, micro-
      electronic circuit.

      Plant Varieties
      Protection is available for plant varieties which have been selected and bred or discovered and
      developed, are on the list of State-protected plant species issued by MoARD, and are new,
      distinct, uniform, stable and designated by proper denominations (these aspects are detailed in
      the 2005 Law). Protection is only available upon registration, on the basis of the 'first-to-file'
      principle. Plant Variety Protection Certificates are issued and recorded in the national register of
      industrial property. They are valid throughout Vietnam for 25 years in the case of timber trees
      and vines or 20 years for other plant varieties, calculated from the date of issuance (as under
      Ordinance 15 below). Limitations on rights to plant varieties are prescribed in the 2005 Law.
      Foreign individuals and organizations are allowed to apply for plant patent protection in Vietnam.

      In preparation for Vietnam’s accession to the UPOV Convention, the NA’s Standing Committee
      on 24 March 2004 passed Ordinance 15-2004-PL-UBTVQH on the Protection of Domestically
      Developed New Plant Varieties. According to Ordinance 15, plant varieties first imported into
      Vietnam could be protected as new plant varieties if they meet all legal requirements.
      Ordinance 15 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.
      The Ordinance provided 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 MoARD and the Ministry of Fisheries. The tests shall be
      made under a contract between the applicant and the testing organization. Ordinance 15
      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.

6.5   Enforcement of Intellectual Property Rights: [Currently being updated]
      Under Vietnamese law, IP right holders whose IP rights are 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).

      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 12-1999-ND-CP of the
      Government dated 5 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
      (USD330-1300), and include suspension from circulation, confiscation and destruction of goods
      and compulsory compensation.




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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).

Under Official Letter 2404-CV-VPCP dated 9 May 2005, the Prime Minister assigned the MoST
to coordinate with relevant ministries and state agencies to build and soon submit the draft law
on intellectual property and to study modifying the contents written in Decree 12 regulating
administrative breaches against intellectual property rights in accordance with the current
regulations.

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.

As of 1 January 2005, the conduct of legal proceedings for all types of civil disputes, including
marriage and family, business and commercial, and labor matters ("civil proceedings") is
governed by the new Civil Procedure Code 24-2004-QH11 dated 15 June 2004 (replacing the
Ordinance on Procedures for Civil Cases dated 29 November 1989). The court of jurisdiction
over IP infringements or disputes in Vietnam is the people's court of the city or province where
the defendant's residence or head office is located (or, in prescribed circumstances, where the
plaintiff's residence or head office is located, where disputed property is located, or as elected
by the plaintiff) ("provincial people's court"). The plaintiff bears the burden of proving the alleged
IP infringement. The complaint submitted to the court must be accompanied by documentary
evidence of the IP rights concerned and proof of the infringement. In certain cases, the judge
may take prescribed measures to gather evidence. Litigants are entitled to representation by a
lawyer.



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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 to protect evidence or to prevent possible serious consequences,
including: prohibition on dealing with disputed property, freezing of bank accounts or assets,
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 plaintiff, 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.

In December 2001, Vietnam’s Supreme Court issued specific guidelines to ensure uniform
application of the 1995 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), was 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 violated the patent of American company
Spirit Science USA Inc. The NOIP concluded that Fushico was practicing 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. 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.

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.

A revised Criminal Procedure Code was passed by the NA 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 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



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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 Interministerial Circular 58-2003-TTLT-BVHTT-BTC of the Ministry of Culture and
Information and the Ministry of Finance 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 consignment-by-consignment 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.

Complementing Circular 58 above, specific guidelines on the implementation of border control
measures for imports and exports subject to IP rights were issued under Circular 129-2004-
TTLT-BTC-BKHCN of the Ministry of Finance and the Ministry of Science and Technology dated
29 December 2004. Owners of IP rights (who may request customs offices to suspend customs
procedures for imported and exported goods which are suspected of infringing their IP rights)
include assignees of IP rights and licensees (with the co--operation of licensors). An owner
being a Vietnamese legal entity may directly lodge an application; a foreign investor in a FIE in
Vietnam may lodge an application via its FIE; a foreign legal entity with a certificate of IP
protection in Vietnam but without any representation in Vietnam must lodge its application via an
IP services organization. Applicants may register for general detection of infringements (for one
year) in the case of "brand name" IP rights or for short-term protection (for 3 months) in cases of
specific identified consignments of infringing goods. (The time-limits for protection may be
extended by a further one year or 2 months respectively, but not beyond the duration of
protection of the relevant IP. Customs offices must respond to applications for short-term
protection within 24 hours (time-limit of 30 days applies for applications for long-term protection).
Both types of application require the payment of a security sum of 20% of the value of the
consignment or, if the value is unknown, a minimum security sum of VND20 million (or a bank
guarantee to same value) to compensate the goods' owner for all expenses and damages if the



                                                                                                  53
      goods are found not to infringe IP rights. If an infringement is detected, a temporary suspension
      decision will be issued for a 10 day period, during which time all parties have the chance to
      inspect the goods to collate evidence. Further action will only be taken if the applicant lodges
      another application requesting that the infringement be dealt with. If so, the customs office must
      (within 10 days) check the legal status of IP rights and decide if the goods in fact infringe those
      rights. The temporary suspension decision may be lifted in prescribed cases if the owner of the
      goods so requests, a sample is taken to provide a basis for dealing with the matter afterwards,
      and a security sum of 20% of the value of the goods as stated in the contract is paid.

      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
      building of brand names and protection of IP rights in Vietnam, the establishment of Vietnam
      Anti-Counterfeiting and IP Protection Association ("VACIP") was approved by the Ministry of
      Interior on 5 January 2005 under Decision 12-2005-QD-BNV. VACIP held its inaugural meeting
      in Hanoi on 12 April 2005. Under the management of the MPI, VACIP represents foreign
      invested businesses (currently close to 20 members, from pharmaceutical companies to
      software companies) in their dealings with functional agencies, such as market management
      bodies, economic police, customs, State IP bodies and the courts, to fight the production and
      trading of counterfeit goods.

      By Directive 13-2005-CT-TTg dated 8 April 2005 On A Number Of Solutions Aimed At Creating
      New Changes In The Work Of Attracting Foreign Direct Investment To Vietnam, the Prime
      Minister has directed the MoST to (in 2005) build a system for supply of information about IP via
      the Internet.


7.    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):

      International Trade Commitments
      Under the BTA, Vietnam committed to allowing U.S companies to provide legal services in the
      form of 100% U.S. invested companies, joint ventures, and branches. U.S. lawyers may not
      appear before Vietnamese courts. However, U.S. invested law firms, joint ventures and
      branches may advise on Vietnamese law if they hire persons with Vietnamese law degrees who




                                                                                                      54
satisfy the requirements applied to like Vietnamese practitioners. Licensing of branches is for 5
year periods (renewable).

These obligations are expected to be formally multilateralized and extended to all Vietnam’s
trading partners under the WTO framework. Vietnam’s current legislation does not provide U.S.
law firms preferential treatment.

Legislative & Regulatory Framework
Vietnam’s Ordinance on Lawyers dated 25 July 2001, Decree 87-2003-ND-CP of the
Government dated 22 July 2003 on Practice by Foreign Lawyer Organizations and Foreign
Lawyers in Vietnam, and implementing Circular 06-2003-TT-BTP of the Ministry of Justice dated
29 October 2003 regulate the provision of foreign legal services in Vietnam. 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 permissible
forms of foreign law practices in Vietnam and their scope of operation to meet requirements of
the BTA.

Market Access
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). Decree 87 provides for
offshore foreign law firms to operate in Vietnam in the following 3 forms of foreign law practice:
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 (previously limited at
two), however each branch may have only one office in each province/city under central
authority. Decree 87 provides for existing foreign law branches to be re-licensed as branches or
to convert into onshore foreign law firms or partnerships.

Fees relating to licensing of foreign law practices and registration of foreign lawyers are
regulated under Decision 75-2004-QD-BTC of the ministry of Finance dated 16 September
2004.

Domestic Regulation
Foreign law practices are permitted to advise on foreign and international law in the fields of
business, investment and commerce. They are also permitted to “provide legal consultancy
services and other legal services”, including consultancy on Vietnamese law where they a)
employ a Vietnamese lawyer or b) employ 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).

Circular 06 does not 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 and therefore 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).

Foreign law practices in Vietnam may employ Vietnamese lawyers and Vietnamese trainee
lawyers. 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. 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.




                                                                                                55
      Participation by foreign lawyers in Vietnamese court proceedings is prohibited and, by Decree
      87, that prohibition now extends to Vietnamese lawyers and trainee Vietnamese lawyers
      employed by foreign law practices.

      Circular 06 provides detailed guidelines for implementation of Decree 87 with respect to:
      -      Applications to establish foreign law practices in Vietnam;
      -      Mandatory elements of the name of any foreign law practice in Vietnam;
      -      Licensing of foreign law practices in Vietnam;
      -      Consolidation and merger of onshore foreign law firms;
      -      Certification of foreign lawyers advising on Vietnamese law; and
      -      Inspection of and reporting by foreign law practices in Vietnam.

      Legislative Developments
      A draft Law on Lawyers was submitted to the National Assembly for consideration at its
      October-November 2005 Session. The proposed Law will replace the Ordinance on Lawyers
      2001 (pursuant to which the above Decree 87 and Circular 06 are issued). With respect to
      foreign lawyers, the proposed Law enshrines (as the Ordinance does now) the principles for
      practising as lawyers; the basic conditions, forms and scope of practice of foreign law practices
      and foreign lawyers in Vietnam (as well as their rights and obligations); and provisions on
      remuneration and payment of costs. The Law is expected to be ratified by the National
      Assembly at its June 2006 Session.


7.3   Accounting and Auditing Services (CPC 862):

       International Trade Commitments
      Under the BTA, Vietnam agreed that, for 3 years after entry into force (ie until December 2004),
      licenses would be granted on a case-by-case basis, with the number of service providers
      decided by the MoF 'based on the development of the market of Vietnam'.. To be eligible for
      licensing consideration, service companies must employ at least 5 persons with CPAs either
      issued or recognized by the MoF and more than one year experience in practice. For 2 years
      after entry into force (ie until December 2003), U.S. invested accounting and auditing service
      providers were only allowed to supply services to FIEs and foreign funded projects in Vietnam.

      To achieve WTO accession, Vietnam is expected to multilateralize its BTA commitments in this
      service area. Current legislation does not provide preferential treatment to U.S. service
      accounting or auditing services.

       Legislative & Regulatory Framework - General
      Vietnam’s Investment Law, effective 1 July 2006, oversees foreign direct investment in all
      sectors (not prohibited by law) including the accounting and auditing services sector. The Law
      on Accounting and Law on Statistics, both dated 17 June 2003 and effective as of 1 January
      2004, regulate the provision of accounting and auditing services in Vietnam and are applicable
      to FIEs, foreign company branches and foreign company representative offices, individuals
      involved in accounting, as well as most Vietnamese entities.

      Accounting Services

      Legislative & Regulatory Framework
      Detailed regulations for implementation of the Law on Accounting with respect to accountancy
      services and accounting responsibilities were issued under Decree 129-2004-ND-CP of the
      Government dated 31 May 2004, effective as of 30 June 2004.

      Market Access
      Decree 129 provides for accountancy firms to be established and operate in Vietnam in one of
      three forms: limited liability company, partnership, or private enterprise. A certified practising
      accountant may register a sole practice. The forms in which foreign service providers may
      provide accounting services in Vietnam are not specified, but in practice comprise joint ventures
      and 100% FOEs.




                                                                                                     56
In order to be issued an accountancy practising certificate, a foreigner must satisfy the following
standards and conditions: (i) be permitted to reside in Vietnam; (ii) have a certificate as an
accounting expert or an accountant’s certificate issued by a foreign or international accountancy
organization recognized by the MoF; (iii) pass examinations held by the competent State body
in Vietnamese law on economics, finance and accounting.

Domestic Regulation
The Law on Accounting regulates what (and how) accounting work must be performed by
entities in Vietnam and the organization of accounting departments, accounting staff and
professional accounting activities. 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
foreign currency transactions. 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 personnel, the Law includes detailed provisions on standards, rights
and responsibilities of accountants; duties, standards and conditions for chief accountants; and
accountancy practice, accountancy practicing certificates; professional accountancy
associations. 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.

New detailed regulations on issuance of accountant practising certificates were issued under
Decision 59-2004-QD-BTC of the Ministry of Finance dated 9 July 2004. Persons issued with
an auditor’s certificate are permitted to register for the business of accounting services under
Decree 129. (For more on Decision 59, see Auditing below).

Corporate governance
The accounting practices of FIEs, foreign branch offices and representative offices of foreign
companies operating in Vietnam, as well as SOEs and private Vietnamese entities, are
regulated in detail under Decree 129. Appointment of a qualified chief accountant is mandatory.

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
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
MoF.
(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.)

Implementing Decree 129, Circular 13-2005-TTLT-BKC-BLDTBXH of the Ministry of Finance
and Ministry of Labour, War Invalids and Social Affairs dated 7 February 2005 provides detailed
guidelines on the standards, conditions, procedures for appointment and removal, and



                                                                                                57
determination of salary of the chief accountant or person responsible for accounting in business
organizations.

Circular 122-2004-TT-BTC of the Ministry of Finance dated 22 December 2004 provides
guidelines for implementation of the accounting (and auditing) regimes applicable to FIEs,
foreign law branch offices; commercial branches; foreign petroleum contractors; and permanent
establishments in Vietnam of foreign companies and other foreign organizations and individuals
conducting business in Vietnam. All of these entities must apply the Vietnamese accounting
system. To apply another accounting system or an adjusted version of the Vietnamese
accounting system, the prior approval of the MoF is required. Circular 122 provides in detail for
this application process, as well as reiterating many of the accounting and auditing obligations
prescribed in the Law on Accounting and Decree 129.

Administrative offences in the accounting sector are governed by Decree 185-2004-ND-CP of
the Government dated 4 November 2004. 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 practicing
certificate, have been prescribed.

Auditing Services

Legislative & Regulatory Framework
Auditing service providers are governed by Decree 105 of the Government dated 30 March
2004 on Independent Auditing (as amended by Decree 133-2005-ND-CP of the Government
dated 31 October 2005, effective 22 November 2005) and implementing Circular 64-2004-TT-
BTC of the Ministry of Finance dated 29 June 2004.

Market Access
Auditing enterprises may be established and operate in the form of limited liability company,
partnership company, private enterprise, and FIE. An auditing enterprise must announce
publicly its form during the process of its trading and operating. Auditing enterprises may no
longer be established in the form of SOEs or shareholding companies (and any auditing SOE or
shareholding company licensed prior to 21 April 2004 must convert to one of the above forms by
21 April 2007). The MoF is responsible to provide specific guidelines on the criteria and
conditions for establishment of a limited liability auditing company. Decree 105 requires an
auditing firm to have at least 3 certified practising auditors, 1 of whom must be involved in
management of the firm.

Foreign auditing firms must establish FIEs in order to participate fully in the auditing sector in
Vietnam. However, foreign auditing firms may also participate in the following limited manners:
 (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.




                                                                                                58
      Domestic Regulation
      Decree 105 and Decree 133 govern the auditing profession in Vietnam as well as the auditing of
      accounting materials, data and financial statements of enterprises in Vietnam, including FIEs.

      Decree 105 expanded 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. Of note, 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.

      New regulations on auditor entrance examinations and issuance of auditor certificates were
      issued under Decision 59-2004-QD-BTC of the Ministry of Finance dated 9 July 2004.
      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 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
      the services prescribed in Decree 105.

      Under Decree 105 and Decree 133, all FIEs, banks, insurance companies, listed firms, SOEs
      and balance sheets of projects in nationally important Group A must be audited. 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; 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
      USD300,000. Both domestic and foreign auditing firms must have at least 10 auditors on the
      payroll, meet regulated standards, have been established and operating in Vietnam for at least 5
      years, and have at least 30 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.

      Regulations on independent auditing of credit institutions are governed by Decision 121-2005-
      QD-NHNN dated 2 February 2005. To qualify to audit a credit institution, an auditing business
      must meet prescribed requirements, including minimum chartered capital of VND3 billion for
      domestic auditing firms and USD300,000 for foreign auditing forms and at least 10 qualified
      auditors, of whom at least 3 must be assigned to audit the credit institution and the firm must
      have been operating in Vietnam for at least 3 years.

      Circular 122 (see Accounting above) provides guidelines for implementation of the auditing
      regime applicable to FIEs, foreign law branch offices; commercial branches; foreign petroleum
      contractors; and permanent establishments in Vietnam of foreign companies and other foreign
      organizations and individuals conducting business in Vietnam. Circular 122 reiterates many of
      the auditing obligations prescribed in the Law on Accounting

7.4   Advertising Services (CPC 871):

      International Trade Commitments
      Under the BTA, U.S. companies may only establish a commercial presence in the form of joint
      ventures or business cooperation contracts with Vietnamese partners who are lawfully permitted
      to provide advertising services, with U.S. equity capped at 49% until December 2006, then
      capped at 51% until December 2008. As from December 2008, there will be no restrictions on
      U.S. equity ownership. The BTA denies market access on advertising for wines and cigarettes.




                                                                                                       59
Legal & Regulatory Framework
Advertising services and advertisements are governed by the Ordinance on Advertising dated
16 November 2001, Decree 24-2003-ND-CP of the Government dated 13 March 2003, and
implementing Circular 43-2003-TT-BVHTT of the Ministry of Culture and Information dated 16
July 2003.

The provision of commercial advertising services (and other commercial enhancement services,
such as promotions, display of goods and services, and trade fairs and exhibitions) is now also
regulated under the 2005 Commercial Law, effective as of 1 January 2006. The provisions of
the 2005 Commercial Law are consistent with the Ordinance on Advertising and its
implementing legislation.

Market Access
The Ordinance on Advertising introduced the framework for the establishment of branch offices
to engage directly in advertising activities. However, under Decree 24, the following conditions
are required to be satisfied for a foreign advertising service provider to establish a branch: (i)
having valid business registration for advertising business in its home jurisdiction; (ii) being in
operation for at least 5 years as from the date of its business registration; and (iii) having had a
representative office in Vietnam for at least 7 years (calculated from December 2001) and not
having breached the laws of Vietnam. This last condition (iii) delays the licensing of foreign
advertising branch offices in Vietnam until December 2008 at the earliest. This is consistent
with the BTA.

The Ordinance on Advertising provides for foreign advertising service providers to co-operate
with domestic advertising service providers to invest in the Vietnamese advertising market.
However, Decree 24 limits such co-operation as follows:
 -     Foreign direct investment may only be in the form of a BCC or JVE.
 -     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
Advertising (on all types of media) is tightly regulated in Vietnam. Advertisers, advertising
service providers and advertising distributors are subject to the Ordinance, Decree 24 and
Circular 43. Advertising permits are required to be issued for a range of advertisements. Both
the content and form of advertisements is micro-regulated.

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.

Decree 24 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, 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.




                                                                                                 60
      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.

      Circular 67-2004-TT-BTC of the Ministry of Finance dated 7 July 2004 regulates fees for
      issuance of advertising permits. Fees are currently capped at VND1 million.

      Sub-regulations on advertising in the Ho Chi Minh City area were issued under Decision 108-
      2002-QD-UB of the HCMC People’s Committee dated 25 September 2002. They reiterate the
      provisions of the Ordinance but also prescribe specific restrictions on size, location and length of
      time of advertisements, etc. Permits will be only issued by the Department of Culture &
      Information (or the district people’s committee, in some cases) in accordance with the master
      plan for advertising in HCMC.

      With respect to commercial advertising services, the 2005 Commercial Law regulates (primarily)
      the relationship between a commercial advertising service provider and the business hiring such
      services. Amongst others, the 2005 Commercial Law regulates the form of contract for
      provision of commercial advertising services and the rights and obligations of the contracting
      parties and commercial advertisement publishers.

7.5   Communication Services:

      Postal Services
      Vietnam’s incumbent service supplier Vietnam Post retains a monopoly with respect to provision
      of postal services to the public but domestic mail delivery services have been opened to
      enterprises from all economic sectors.

      International Trade Commitments
      Vietnam has thus far not made any international trade commitments on the provision of postal
      services. For WTO accession, Vietnam is expected to make commitments in the express
      delivery services sector, allowing foreign entities to participate in the international and domestic
      provision of mail and parcel delivery services. Depending on the outcome of the Doha Round
      negotiations, as a member of the WTO, Vietnam may also be required to establish an
      independent postal regulator and undertake commitments to not engage in cross-subsidization.

      Legal & Regulatory Framework
      The postal services sector is governed by Ordinance 43-2002-PL-UBTVQH10 on Posts and
      Telecommunications dated 25 May 2002 (effective as of 1 October 2002) and implementing
      Decree 157-2004-ND-CP of the Government dated 18 August 2004.

      Market Access
      Vietnam Post (“VNP”) retains its monopoly over the public post network throughout Vietnam.
      Other enterprises are permitted to engage in domestic and international mail delivery only. To
      do so, such enterprises must satisfy the conditions prescribed in Decree 157 and apply for a
      license from the Ministry of Posts & Telecommunications. All FIEs are excluded from engaging
      in domestic mail delivery.

      Only JVEs are permitted to engage in international mail delivery. The capital contribution ratios
      of the foreign and Vietnamese parties in a JVE engaging in international mail delivery will be as
      determined by the Prime Minister. VNP and enterprises conducting international mail delivery
      are entitled to be agents of foreign mail delivery enterprises subject to approval of the MoPT.
      Circular 01-2005-TT-BBCVT of the Ministry of Posts and Telecommunications dated 6 May
      2005 provides guidelines for implementation of Decree 157 with respect to international mail
      delivery services.




                                                                                                       61
      A Plan for Development of Vietnam's Postal Sector till 2010 was issued with Decision 236-2005-
      QD-TTg of the Prime Minister dated 26 September 2005. The plan pushes for the
      mechanization, automation and computerization of the sector and sets ambitious targets for
      expansion of the sector. To achieve this, the plan provides for all economic sectors (including
      foreign invested) to participate in postal service in a fair and transparent 'competitive'
      environment, with 100%FOEs envisaged where high-technology transfers are involved. The
      supply of public utility post services will remain the domain of VNPT, but the plan provides for
      the postal sector to be independent from telecommunications by 2007. The plan envisages
      postal service businesses participating in supplying telecommunication services in form of
      reselling services and acting as agents for telecommunication businesses with respect to
      administrative services (eg, invoicing) or internet services.

      For more information on postal services, see Section 7.10 on Express Delivery Services.

      Telecom Services

      International Trade Commitments
      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. For value-added services, such as email,
      voicemail, fax services, data and code services, Vietnam has agreed to permit U.S. companies
      to establish 50% U.S. equity JVEs with Vietnamese partners beginning in December 2003. This
      commitment phased-in in December 2004 for internet services. Vietnam also committed to
      adopt the WTO Basic Telecom Agreement’s Reference Paper.

      For WTO accession, Vietnam is expected to at least multilateralize these commitments.

      Legal and Regulatory Framework
      Vietnam’s telecommunication services sector is governed by Ordinance 43-2002-PL-
      UBTVQH10 on Posts & Telecommunications dated 25 May 2002 (effective as of 1 October
      2002) and implementing Decree 160-2004-ND-CP of the Government dated 3 September 2004.
      Ordinance 43 and Decree 160 regulate telecommunication networks and services, operations of
      service providers and users, licensing procedures, establishment of service provider networks,
      public telecom services and service 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.

      Vietnam’s Ministry of Post & Telecommunications ("MoPT") is the telecom services industry’s
      regulator and performs the functions of licensing service providers, regulating access and inter-
      connection, regulating charges & tariffs, quality control, and dispute settlement.

      Market Access

      Facilities Based Operators (FBOs)11
      While there is no longer a monopoly on the telecommunications network infrastructure, the
      facilities based market is still restricted to SOEs or State controlled enterprises. Currently, only
      SOEs or an enterprise in which the State holds controlling shares or special shares may be
      licensed to establish telecom networks.




11
   Facilities based operators are operators which deploy any form of telecommunication networks, systems and
facilities outside of their own property boundaries to offer telecom services to third parties, which may include
other licensed telecom operators, business customers or the general public.


                                                                                                                    62
      Services Based Operators (SBOs)12
      Cross border supply and foreign invested commercial presence for provision of basic telecom
      services (defined as fixed and mobile calls, including calls via satellite, data transmission, video
      transmission, leased channels, telex and maritime television) is currently restricted to BCCs with
      Vietnam’s gateway operators authorized to provide basic telecom services. Foreign investment
      in the provision of value-added telecom services is also currently restricted to BCCs with
      Vietnamese partners authorized to provide such services.

      Internet Services
      Restrictions on the provision of internet services were eased under Decree 55-2001-ND-CP of
      the Government dated 23 August 2001. Effective 7 September 2001, non-State owned or
      controlled enterprises are eligible to provide internet access services in Vietnam and the former
      monopoly of the General Department of Post & Telecommunications ("GDPT") over provision of
      internet connection services was abolished. 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.

      Vietnam’s incumbent gateway and internet bandwidth provider is Vietnam Data Corp ("VDC").
      The MoPT has recently 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)
      were licensed by 2005, as were 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.

      Of note, under Vietnam's Investment Law, effective 1 July 2006, foreign investment in the (very
      broad) sector of "culture, information, press and publishing" (which is expected to extend to the
      internet) is "conditional" and subject to evaluation (rather than the simpler investment
      registration).

      - Internet Telephony
      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 the 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. The four enterprises 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).

      - Internet based Banking Services
      Implementing Decree 55, Circular 09-2003-TT-NHNN of the State Bank of Vietnam dated 5
      August 2003 governs the provision of banking services on the internet (for which permission
      from the SBV 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
      must be managed by a specific-purpose management committee established within the
      organization or entity).

      - Internet Content
      Content on the internet is strictly controlled.   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

12
  Services based operators are operators which lease telecom network elements (such as transmission capacity
and switching services) from FBOs in order to provide their own telecom services, or to resell telecom services of
FBOs to third parties.


                                                                                                                63
     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, amongst other things, a detailed plan on supplying information on
     the website and the CVs of persons responsible for the website content. A time-limit of 30 days
     is fixed for the processing of permit applications. .

     Advertisements on the Internet are also subject to regulation, under Circular 43-2003-TT-BVHTT
     of the Ministry of Culture & information dated 16 July 2003 (for more details, see Section 7.4 on
     Advertising above).

     Cost-based Pricing
     Effective as of 14 November 2003, Decision 217-2003-QD-TTg of the Prime Minister dated 27
     October 2003 lowered post and telecoms fees to ensure cost-based pricing in the telecom
     sector. 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 seeks to prevent unfair
     competition by regulating the charges of services provided by long-time big players to
     newcomers. Telecoms connection charges for corporate clients will 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 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.


7.6 Construction Services (CPC 511, 512,513, 514, 515, 516, 517, 518)

     International Trade Commitments
     Under the BTA, Vietnam committed to opening up the market to 100% U.S. owned construction
     service providers, but restricted them to providing their services to FIEs only for their first three
     years of operation. Branches of U.S. companies are not permitted. No commitments were
     made in the provision of cross border services due to the lack of technical feasibility.

     Vietnam’s WTO accession is expected to at least mutlilateralize these market access
     commitments.

     Legal & Regulatory Framework
     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. 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.

     Market Access
     Foreign contractors must be issued with a contractor’s permit in order to operate in Vietnam. A
     contractor's permit is 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).
     Circular 05-2004-TT-BXD of the Ministry of Construction dated 15 September 2004 outlines the
     administrative procedures for issuing permits. According to Circular 05, the Ministry of



                                                                                                       64
      Construction issues/withdraws permits to/from foreign contractors, 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.

      Domestic Regulation
      Implementing the new Law on Construction, Decree 16-2005-ND-CP of the Government dated 7
      February 2005 on Management of Investment Projects for Construction of Works provides
      guidelines on formulation and implementation of investment projects for construction of works;
      on contracts in construction activities; and on conditions applicable to capability of organizations
      and individuals for project formulation, for survey and design, and for execution and supervision
      of execution of building works.

      Controversially, Decree 16's rules for tendering for and management of construction projects
      differed from the corresponding rules for projects for procurement of assets and selection of
      consultants. The most significant reform under Decree 16 was the abolition of the requirement
      for JVEs and BCCs with 30%+ State interest to conduct tendering for construction projects in
      accordance with Vietnamese tendering rules. However, following the issuance of the new Law
      on Tendering 2005, it is expected that this reform under Decree 16 will be repealed - currently, it
      is suspended by official letter only (for more information on tendering, see Section 10.3 on
      "Tendering"). Guidelines on a number of matters relating to formulation, appraisal and approval
      of construction projects and dealing with implementation of Decree 16 were issued under
      Circular 08-2005-TT-BXD of the Ministry of Construction dated 6 May 2005.

7.7   Distribution Services (CPC621, 622, 631, and 632)

      International Trade Commitments
      Under the BTA, Vietnam committed to allow, beginning 3 years after entry into force (ie
      December 2004), U.S. companies to establish JVEs with Vietnamese partners to engage in
      distribution services, with up to 49% U.S. equity. Beginning 7 years after entry into force (ie
      December 2008), 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).

      Vietnam’s commitments on distribution services are expected to be accelerated and
      multilateralized for its WTO accession. The list of goods subject to additional distribution
      restrictions or exemptions are also expected to be narrowed.

      Legal & Regulatory Framework
      Effective as of 1 January 2006, Vietnam’s new 2005 Commercial Law regulates foreign
      participation in the distribution sector, as well as franchising.

      The 2005 Commercial Law provides for a separate regulatory framework for FIEs "specializing"
      in import and distribution activities (i.e. where no manufacturing is undertaken) under the control
      of the MoT. FIEs undertaking commercial activities in addition to manufacturing will remain
      under the control of the MPI. The necessary legislation to implement these reforms has not yet
      been issued. For more information on the Commercial Law and its draft implementing
      regulations, please refer to Section 5.8 on “Trading Rights – Foreign Enterprises.”

      Market Access
      To date, foreign investment licenses in the distribution sector have been issued on a case by
      case basis. Detailed regulations outlining market access for the distribution services sector
      under the 2005 Commercial Law are yet to be issued.

      Foreign Investors Partaking in Distribution
      FIEs undertaking import and distribution activities in addition to manufacturing will remain under
      the control of MPI. The regulations for such entities are currently being drafted by the MPI in the
      context of Vietnam's new Investment Law which will come into effect on 1 July 2006.



                                                                                                       65
Foreign Investment in Distribution Services
Regulations implementing the 2005 Commercial Law applicable to FIEs “specializing” in import
and distribution activities are currently being drafted by the Ministry of Trade.

- Franchising
As of 1 January 2006, franchising is regulated under the new 2005 Commercial Law.
Franchising is defined as a commercial activity whereby a franchisor authorizes and requires a
franchisee to conduct on its own behalf the purchase and sale of goods or provision of services
in accordance with the following conditions: 1. the purchase and sale of goods or provision of
services must be conducted according to the method of business organization specified by the
franchisor and be associated with the trademark, trade name, business know-how, business
mission statements, business logo and advertising of the franchisor; 2. the franchisor has the
right to control and offer assistance to the franchisee in the conduct of the business.

Detailed provisions implementing the 2005 Commercial Law with respect to franchising were
issued under Decree 35-2005-ND-CP of the Government dated 31 March 2006, effective as of
26 April 2006. Decree 35 regulates franchising activities involving Vietnamese business entities
(in the capacity of franchisor or franchisee) and foreign business entities (apparently, in the
capacity of franchisor only, but this is one of many aspects of the new regime yet to be
confirmed). The range of Decree 35 captures: inbound franchising (from a foreign country into
Vietnam, domestic franchising (within the territory of Vietnam), and outbound franchising (from
Vietnam to foreign countries, but only with respect to the Vietnamese franchisor where the
franchisee is a foreign business).

Prescribed conditions for businesses to grant franchises include:
-   The franchisor business must be a lawfully established/recognized enterprise (either in
    Vietnam or foreign country);
-   The franchised business system must have been in operation for at least one year (in the
    case of a foreign franchisor granting a primary franchise to a Vietnamese business entity,
    such Vietnamese business entity must operate the franchise business in Vietnam for at
    least 1 year before sub-franchising);
-   The franchising must be registered (see below); and
-   The goods and services which are the subject of the franchise contract must be allowed to
    be franchised (ie not be prohibited from circulation in Vietnam or, if circulation is
    restricted/conditional, the necessary conditions for circulation must be satisfied, eg business
    license to deal in gold).

Of note, Decree 35 restricts a FIE specializing in trading and distribution to only conducting
franchising in lines of goods in which such FIE is permitted to provide distribution services.

Franchisees are subject to the following conditions: (a) must be a lawfully established enterprise
in Vietnam (contrast first condition above); and (b) must have business registration appropriate
for the franchise business.

All franchising must be implemented on the basis of a written contract or 'other legally equivalent
form'. Where Vietnamese law is the governing law of a franchise (ie for inbound and domestic
franchising), the main contents of the contract must comply with Decree 35. In the case of
outbound franchising, the parties have the option to apply a foreign governing law and the
contents of the contract are not restricted (subject to the always troublesome proviso that the
foreign governing law must "not be contrary to the provisions of Vietnamese law"). Franchising
contracts are required to be in the Vietnamese language, except in the case of outbound
franchising (where the parties have the option of a foreign language). The term of a franchise
contract will be open to negotiation by the parties (the draft provision for a statutory minimum
duration of 5 years has not been adopted). Franchising fees are also open to negotiation
between the franchisor and franchisee.

Franchising activities must be registered in advance by the franchisor (not each franchising
contract). To register, prescribed documents (not including specific contracts) must be
submitted to the MoT for inbound and outbound franchising, and the Department of Trade of the



                                                                                                66
province or city under central authority in which the franchisee is located for domestic
franchising. Applications must include a 'franchise description document'. The licensing of any
industrial property rights in a franchise contract must be registered (separately and additionally)
in accordance with Vietnamese industrial property laws. Any material changes (yet to be
defined) to the franchising arrangements must be notified by the franchisor to the relevant
registration body within 30 days. Of note, any current franchising activities will be required to be
registered under Decree 35 within three months of its effectiveness (ie by 26 July 2006).

The MoT is expected to issue a circular implementing Decree 35 in April. The pro-forma for a
"franchise description document" (which appeared as an appendix to the draft of Decree 35) will
be issued with the MoT's circular.

- Multilevel Distribution
Multi-level selling (more commonly known as pyramid selling) is regulated under the Law on
Competition dated 3 December 2004, 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.

Detailed guidelines on multi-level selling were issued under Decree 110-2005-ND-CP of the
Government dated 24 August 2005 on Supervision of Multi-level Selling of Goods. For goods to
be permitted to be sold by multi-level selling, they must satisfy prescribed conditions, such as
compliance with standards stipulated by law on product quality, safety and hygiene. Goods
prohibited from multi-level selling include counterfeit goods; illegal imports; human medicines; all
vaccines and biological products; medical equipment; veterinary drugs; disinfectants used in
domestic home sector and health sector; raw materials for manufacture of medicines; and all
types of toxic chemicals. Under Decree 110, an enterprise may only retail its product by multi-
level selling after registering with and obtaining a certificate of satisfaction of business conditions
from the local Department of Trade. A fee is payable. Five business conditions must be
satisfied. One condition is the payment of a deposit of 5% of the enterprise’s charter capital (but
not less than VND1 billion) to a commercial banks operating in Vietnam. This deposit is security
for payment of commissions and bonuses to participating sellers and for the cost of re-acquiring
goods from participating sellers in the event that the multi-level selling enterprise is unable to
pay such amounts. Foreign individuals and overseas Vietnamese must have a work permit in
order to multi-level sell in Vietnam. Multi-level selling enterprises must report to the local
Department of Trade every six months on the number of participants, on turnover, and on the
amount of tax paid by the enterprise, including personal income tax on behalf of participants.
Damages are payable by a multi-level selling enterprise or by a participant for loss caused by
any breach by them respectively (eg., providing untruthful information to consumers, failing to
provide complete information when sponsoring a new participant to a multi-level sales network).
Decree 110 required all existing multi-level sellers to register within 3 months of its date of
effectiveness (ie by end of 2005).

Effective as of 1 December 2005, Circular 19-2005-TT-BTM of the Ministry of Trade dated 8
November 2005 provides guidelines for implementation of a number of aspects of Decree 110,
in particular, registration of multi-level selling schemes, sample multi-level selling participation
contracts and multi-level selling networks. Where an enterprise develops its network in
provinces and cities beyond that in which its head office is located, it must inform the
Department of Trade in those other provinces or cities of the expansion. Decision 92-2005-QD-
BTC of the Ministry of Finance dated 9 December 2005 prescribes the fees for registration for
multi-level selling.




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7.8 Educational Services (CPC 923)

    International Trade Commitments
    Under the BTA, U.S investment in the education services (technical, natural science and
    technology fields) sector may only be in the form of JVE, until 7 years after entry into force (ie
    December 2008) when 100% U.S. invested schools will be permitted. Foreign teachers of
    education units with U.S. invested capital must have 5 years teaching experience and be
    recognized by the MoET.

    Legal & Regulatory Framework
    All education projects (including foreign invested projects) are subject to the 2005 Law on
    Education, effective as of 1 January 2006. 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 and Circular 14-2005-TTLT-BGD&DT-
    BKH&DT of the Ministry of Education and Training and Ministry of Planning and Investment
    dated 14 April 2005, notwithstanding that they were issued pursuant to the soon-to-be-defunct
    Law on Foreign Investment, are expected to be maintained as the key pieces of legislation
    regulating foreign investment in this sector. 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 Circular 15 of the Ministry of Education and Training dated 31 March 2003.

    International co-operation 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, primarily in the form of ODA and foreign
    non-governmental aid funded cooperation projects and programs, but also encompassing
    exchange of information and experience in education sector and international conferences,
    meetings and seminars on domestic and foreign education, is regulated under Decree 165-
    2004-ND-CP of the Government dated 14 September 2004.

    Market Access

    For-Profit Education Projects
    Under Vietnam's new Investment Law, effective 1 July 2006, foreign investment in the (very
    broadly described) sector of "development of education and training" is "conditional" and subject
    to evaluation (rather than the simpler investment registration). (Under the soon-to-be-defunct
    Law on Foreign Investment, projects at the pre-tertiary, college or university level are subject to
    Prime Ministerial approval; projects at all other levels are subject to licensing by the MPI.)

    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 (nursery school through to university and postgraduate, and
           including short-term training) for foreigners currently living and working in Vietnam;
    (b)    High school education (students in grades 10 to 12) for foreigners and Vietnamese;
    (c)    Specialized (not vocational) secondary schooling and short-term training (foreign
           language teaching and upgrading professional skills and qualifications) for foreigners and
           for Vietnamese;
    (d)   Tertiary (college, university and postgraduate) education for Vietnamese and foreigners.

    Projects may take the following forms:
    -      JVEs, BCCs and 100% FOEs to undertake (a), (c) and (d) above;
    -      Pilot JVEs and BCCs in Hanoi and HCMC to undertake (b).

     The conditions for establishment and operation of foreign invested educational projects include:
     -      The educational project must accord with the strategy for the development of education
            and the master plan for the network of education and training establishments of
            Vietnam as approved by the authorized State body. Also, there must be written
            approval for the project from the local people's committee of the province or city under
            central authority.




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     -       They must have qualified teaching staff as stipulated by the law of Vietnam and
             maintain prescribed staff-to-student ratios.
     -       They must have technical infrastructure, facilities and equipment commensurate with
             the scale and level of education and training.
     -       They must have appropriate curricula and curricula content as stipulated by the Law on
             Education and other relevant provisions.
     -       Investors must have sufficient financial capability to implement the investment project.
             Prescribed minimum investment rates apply.

     Non-Profit Educational Projects
     Under Decrees 18 and Circular 15, the following types of not-for-profit foreign invested
     educational establishments (“FEEs”) are permitted in the areas of pre-school education,
     primary and secondary school, tertiary and post-graduate education:
     -      Representative office, to promote and formulate co-operative projects and programs in
            the education sector; and to activate and supervise implementation of co-operation
            agreements in education already signed with Vietnamese educational organizations;
     -      Joint FEE, established on basis of international treaty, or an agreement between a
            foreign party and a Vietnamese educational organization;
     -      Independent FEE, constructed and managed at cost of foreign educational organization.
    FEEs encouraged in the following sectors: training technicians; training scientific and
    management personnel to a high level in fields of economics, technology, technical sciences,
    natural sciences and environment; and training experts in fields of culture, fine arts, music and
    information. 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
    MoET). The MoET has licensing authority with respect to other FEEs.

    Domestic Regulation
    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.
    Where they provide education for students who are Vietnamese citizens, the curricula and
    curricula content must be approved by the authorized State body and a number of specific
    requirements are imposed under Circular 14. Of note, Circular 14 prohibits foreign invested
    educational establishments from teaching religion.

7.9 Financial Services

    Regulatory Framework - General
    Responsibility for regulation of the financial services sector is delegated to various Government
    bodies. The MoF is responsible for fiscal policy and the SBV is responsible for monetary policy.
    The MoF regulates the insurance sector. The State Securities Commission ("SSC") regulates
    the securities sector - the SSC was originally established as a stand-alone entity, but it was
    transferred into the MoF under Decree 66-2004-ND-CP of the Government dated 19 February
    2004. The SBV regulates the banking and finance industry.

    Insurance

    International Trade Commitments
    Under the BTA, Vietnam agreed to:
    -       Unlimited market access for cross-border supply of insurance services to FIEs and
            foreigners working in Vietnam, reinsurance services, insurance services in international
            transportation, insurance brokering and reinsurance brokering services, as well as
            advisory, claim settlement and risk assessment services.
    -       3 years after entry into force of the BTA (ie December 2004), U.S. companies permitted
            to form JVEs with licensed Vietnamese insurance businesses, subject to maximum 50%
            U.S. equity.
    -       5 years after entry into force (ie December 2006), elimination of percentage limitations
            on U.S. equity.
    -       3 years after entry into force (ie December 2004) in the case of U.S. invested JVEs and
            6 six years (ie December 2007) in the case of 100% U.S. FOEs, elimination of




                                                                                                  69
        prohibition on providing motor vehicle, construction and other types of “mandatory”
        insurance.
-       For 5 five years after entry into force (ie until December 2006), reinsurance by U.S.
        invested JVEs and 100% FOEs and branches of U.S. insurance companies must be
        conducted through the Reinsurance Company of Vietnam with the minimum proportion
        of 20%.
-       Establishment of branches is subject to Insurance Law.

For WTO accession, these commitments are expected to be improved and extended to all
members of the WTO.

Legal & Regulatory Framework
Vietnam’s insurance industry is regulated by the Law on Insurance Business dated 9 December
2000 and 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. A Strategy for
Development of the Vietnamese Insurance Market from 2003-2010 was issued with Decision
175-2003-QD-TTg of the Prime Minister dated 29 August 2003.

Market Access
Foreign insurance companies and insurance brokers may be licensed to conduct full business
operations in Vietnam in the form of 100% FOEs or JVEs. Licensing is subject to approval of
the Prime Minister, irrespective of invested capital. Under the 2003-2010 Strategy, licensing of
foreign invested insurance businesses in Vietnam is subject to consistency with the scale of and
need for market development, with the schedule for integration and with the international
commitments of Vietnam. Preference will be given to insurance businesses with financial
capacity, technological skills, and experience in conducting insurance business, which will
contribute to the development of the Vietnamese insurance market, and which are from
countries which have a trading and investment relationship with Vietnam. Foreign invested
insurance businesses which invest their collected insurance premiums in Vietnam will be entitled
to investment mechanisms and policies available to domestic insurance businesses and will be
entitled to expand the content and scope of their operations and increase their charter capital if
they satisfy conditions prescribed by law.

Representative offices may also be established, but may not conduct business operations.
Foreign insurance businesses may not yet establish branches in Vietnam. Cross-border supply
of insurance is only permitted where insurance businesses in Vietnam do not provide the
relevant type of insurance product or where a treaty of which Vietnam is a member provides
otherwise.

As at 15 March 2006, 100% foreign owned players in Vietnam’s insurance market are as
follows:
-        Six 100% FOEs have been licensed to provide life insurance services in Vietnam - AIA,
         Prudential, Manulife Financial Corporation, ACE, Prevoir (France) and New York Life.
-        Three 100%FOEs have been licensed to provide non-life insurance services - Allianz
         (since sold to QBE), Groupama (France) and AIG.
-        Three 100%FOEs have been licensed to provide insurance brokerage services - AON
         Inchinbrook, Gras Savoye (France, since May 2003) and Marsh Inc (U.S.).
-        Only one 100%FOE has been licensed to provide investigative services to insurance
         companies, self-insured companies and government entities - U.S. based Crawford
         Company.
-        Liberty Mutual (U.S.) is currently seeking 100% foreign owned license to sell insurance
         directly to the Vietnamese market.

Since 2004, the MoF has reportedly been drafting new regulations and criteria for licensing of
foreign invested insurance businesses with the aim of de-politicizing the market entry process
into Vietnam.




                                                                                               70
Domestic Regulation
Under the Insurance Law, types of insurers comprise State owned, shareholding, mutual and
foreign invested. To be licensed by the MoF, all insurance businesses (domestic and foreign
invested) must: (1) have paid-up charter capital no less than the level of legal capital stipulated
by law (ie at least USD10 million); (2) have qualified and experienced management personnel;
and (3) provide operational plan for first 5 years, specifying economic benefits of establishing
the new business. The range of insurance products which may be provided is strictly regulated.

Effective as of 1 January 2005, Circular 98 introduced various reforms, including:
-       Applicants for a license are not permitted to use their real estate holdings to prove
        financial capacity.
-       Simplification of registration of insurance rules, terms and conditions, and premium
        rates, in that the MoF no longer automatically checks the contents thereof, however the
        insurance business remains liable for the legality of same.
-       More onerous documentary requirements for insurance businesses to obtain approval of
        life, health and personal accident insurance products prior to underwriting same.
-       For the first time in Vietnam, the requirement for appointed actuaries of life insurers
        (who must satisfy prescribed conditions and be approved by the MoF ), applicable as of
        1 January 2006, with the aim of making the life product design stage more professional
        and raising the quality of financial management of insurers. Of note, an earlier draft
        requirement for an appointed actuary to have Vietnamese citizenship was not adopted.
-       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 financial regime applicable to insurance businesses is regulated by Decree 43-2001-ND-CP
of the Government dated 1 August 2001 and Circular 99-2004-TT-BTC of the Ministry of
Finance dated 19 October 2004. Circular 99 introduced various reforms consistent with
international market practice, including in relation to establishment of insurance reserves and to
disclosure of information by insurance businesses to the public and purchasers of insurance. A
new system of "watchdog" indicators designed to detect as early as possible any risk of
insolvency of an insurer was introduced under Decision 153-2003-QD-BTC of the Ministry of
Finance dated 22 September 2003.

Administrative offences in the insurance sector are regulated under Decree 118-2002-ND-CP of
the Government dated 13 October 2003. Insurance businesses may be fined up to VND30
million for breaches of capital investment restrictions and solvency requirements and up to
VND70 million for any insurance business which fails to maintain solvency at any time during its
operation.

In 2005, the necessary implementing regulations to allow for establishment of mutual insurance
organizations in Vietnam were issued under Decree 18-2005-ND-CP of the Government dated
24 February 2005. Detailed guidelines for establishment, organization and operation of mutual
insurance organizations in the sectors of agriculture, forestry and fisheries were issued under
Circular 52-2005-TT-BTC of the Ministry of Finance dated 20 June 2005.

Banking

International Trade Commitments
Under the BTA, Vietnam agreed to:
-       U.S. financial service providers are permitted to provide services in the forms of U.S.
        bank branches and joint venture banks (as already permitted under the Law on Credit
        Institutions)
-       Until 9 years after entry into force (ie until December 2010), U.S. equity in joint venture
        banks may be between 30% and 49% only. After December 2010, U.S. banks will be
        permitted to establish 100% foreign owned subsidiary banks.
-       Limit on a national treatment basis the level of equity of U.S. banks in privatized State
        owned banks to the same level as applicable to domestic banks.
-       Until 8 years after entry into force (ie until December 2009), the right of U.S. bank
        branches to accept VND deposits will be restricted.



                                                                                                 71
        -       As of 8 years after entry into force (ie after December 2009), U.S invested credit
                institutions will be allowed to issue credit cards on a national treatment basis.
        -       U.S. bank branches may not establish automatic teller machines at locations other than
                at their offices until domestic banks are permitted to do so. U.S. bank branches may not
                establish any other transaction points.

        For its accession to the WTO, Vietnam is expected to make deeper commitments in the banking
        sector, including permitting the establishment of foreign owned subsidiaries and increased
        market access for retail banking.

        Legal & Regulatory Framework
        Banking services in Vietnam are governed by the Law on Credit Institutions dated 12 December
        1997 as amended by the Law on Amendment of and Addition to the Law on Credit Institutions
        dated 15 June 2004 (effective as of 1 October 2004). Foreign banking services in Vietnam are
        governed by Decree 22-2006-ND-CP of the Government dated 28 February 2006 on
        Organization and Operation of Foreign Bank Branches, Joint Venture Banks, Banks with One
        Hundred (100) Per Cent Foreign Owned Capital and Representative Offices of Foreign Credit
        Institutions in Vietnam13. Decision 42-2003-QD-NHNN of the State Bank of Vietnam dated 13
        January 2003 outlines plans for reform in Vietnam’s banking sector.

        Market Access
        Under Vietnam's Investment Law, effective 1 July 2006, foreign investment in the (very broad)
        sector of "banking and finance" is "conditional" and subject to evaluation (rather than the simpler
        investment registration).

        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. Under the
        Law on Credit Institutions (As Amended 2004), all banking licenses are subject to the demand
        for banking operations within the relevant locality.

        Under the Law on Credit Institutions (As Amended 2004), the forms in which foreign commercial
        banks are permitted to establish a commercial presence in Vietnam were expanded from joint
        venture banks ("JVBs"), foreign bank branches ("FBBs") and representative offices to also
        include 100% foreign owned banks (100% FOBs"). Decree 22, effective as of 24 March 2006,
        provides for 100% FOBs to be established by foreign banks (minimum 50% of charter capital)
        and other foreign entities. Decree 22 places a 50% cap on a foreign bank's capital contribution
        ratio to a JVB although it does provide for exceptions to this rule in special cases as decided by
        the Prime Minister. Only domestic banks - not other domestic non-banking organizations - are
        permitted to partner with foreign banks in JVBs also remains.

        - Acquisitions
        As of 1 October 2004, under the Law on Credit Institutions (As Amended 2004) - and re-iterated
        in Decree 22 - foreign credit institutions are permitted to contribute capital to and purchase
        shareholdings in Vietnamese banks. According to the SBV's January 2006 draft of the
        proposed new regulations14, the cap on total foreign shareholdings in Vietnamese banks
        remains at 30%. The cap on any one foreign credit institution shareholder is 10%. However, a
        'strategic' foreign credit institution may be permitted to purchase up to 20%.

        Under the draft regulations, share purchases by foreign credit institutions in equitized
        Vietnamese banks (i.e. former SOEs) must be approved by the Prime Minister; share purchases
        in joint stock commercial banks ("JSCBs") must be approved by the SBV Governor. To sell
        shares to a foreign credit institution, a Vietnamese bank must satisfy all of the following
        conditions: 1) Minimum charter capital of VND500 billion; 2) Healthy financial status; 3) Efficient
        management apparatus, operators, and internal check and inspections; 4) Not in breach of the
        regulations on safety during banking operations. To purchase shares, a foreign credit institution
        must satisfy all of the following conditions: 1) One of top/leading 500 banks in the world; 2)

13
     Decree 22 replaces Decree 13-1999-ND-CP of the Government dated 17 March 1999.
14
     This draft will replace Decision 228-QD-NH5 of the State Bank of Vietnam dated 2 December 1993


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International operating experience in the banking sector and is internationally credit rated as
stable or higher; 3) Gives written undertaking to the SBV on readiness to provide assistance
regarding banking finance, technology, management and operation. Foreign credit institution
shareholders will have right to participate on the board of management, board of controllers and
board of executives of the Vietnamese bank. When the new regulations will be issued is still not
certain.

Pending the new regulations, the SBV is considering approval of share purchases by foreign
banks on a case-by-case basis only. Australian bank ANZ was the first foreign bank to obtain
SBV approval to buy shares in a Vietnamese bank, in this case 10% of Sacombank. Standard
Chartered Bank purchased 10% of ACB and HSBC purchased shares in Techcombank.

- Licensing
Authority for licensing foreign credit institutions is vested in the SBV. Under Decree 22, in order
to receive a licence to open a FBB, the foreign parent bank must have total assets of at least
US$20 billion in the year prior to applying for the licence; to open an 100% FIB or a JVB, the
foreign parent bank must have total assets of at least US$10 billion. The foreign parent bank
must also satisfy a number of other conditions: (a) No serious breach by the parent bank of
banking regulations in its home country during last 3 years; (b) International operational
experience and satisfactory classification by an international credit rating institution; (c) Meeting
requirements of international custom regarding minimum capital safety ratio and other prudential
ratios; (d) Supervision of operations by competent regulatory and inspecting body of the home
country, with undertaking to co-operate with the SBV in administering and supervising
operations. Additional specific conditions apply for each form of foreign credit institution in
Vietnam. The maximum duration of foreign banking licenses is now 99 years (previously, under
Decree 13, only 20 year licenses were available for foreign bank branches, 30 years for joint
venture banks). Representative office licenses are available for the life of the parent bank
(previously, 5 years, but renewable). Decree 22 appears to allow FBBs to establish automatic
teller machines at locations other than at their offices, but these remains to be clarified in the
SBV's implementing guidelines.

Vietnam has thus far issued FBB 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 FBB licenses include ANZ (in Hanoi and Ho Chi Minh City), Hong Kong
& Shanghai Bank Corporation (in Ho Chi Minh City), and Singapore’s United Overseas Bank (in
Ho Chi Minh City).

- Corporate and Consumer Lending & Payment Services
The SBV has drafted a proposed Decree on Banking Operations of Non-Credit Institutions. The
draft decree provides for non-credit institutions to be licensed by the SBV to provide (corporate
and consumer) lending and payment services. Licensing conditions include: being established
under Vietnamese law; the licensed banking operations are the core and frequent businesses of
a non-credit institution specializing in banking operations or are conducted frequently and relate
closely to the core businesses of a non-credit institution with banking operations; meeting
statutory chartered capital requirements; having feasible business plan, adequate infrastructure
and experienced personnel for the banking operations.

Prudential and Supervisory Requirements
Compulsory reserve obligations of credit institutions with respect to VND deposits and foreign
currency deposits (and the interest rate on compulsory reserve deposits of credit institutions) are
regulated by the SBV.

Vietnam is currently not a party to the 1998 Basel Capital Accord – a commitment by financial
authorities from particular countries to apply a minimum capital requirement to internationally
active banks. The SBV has never indicated any official intention to adopt principles of Basel II –
the new framework to update the capital adequacy rules of Basel I and which is currently in draft
form only (expected to apply from 2007).

Regulations on minimum capital prudential ratios in the operations of credit institutions fall under
Decision 457-2005-QD-NHNN dated 19 April 2005. Accordingly, credit institutions must



                                                                                                  73
maintain a minimum ratio of 8% of their equity over their total assets in credit at risk. FBBs are
not subject to this requirement. Credit institutions are required to abide by credit limits for
customers. The total amount of loans made to a single client must not exceed 15% of the equity
of the credit institution. Of note, there are a number of new lending limits introduced including:
   -   the total amount of loans and guarantees made to a single client must not exceed 25% of
       a credit institutions’ equity;
   -   the total balance of loans made by a credit institution to a group of related clients must
       not exceed 50% of a credit institution’s equity;
   -   the total balance of loans and guarantees made to a group of related clients must not
       exceed 60% of a credit institutions equity’s;
   -   the total level of finance leases to a single client must not exceed 30% of the equity of the
       finance leasing company;
   -   the total level of finance leases to a group of related clients must not exceed 80% of the
       equity of the finance leasing company.
There are exceptions to these lending limits, such as provision of loans to the Government of
Vietnam and loans fully secured by cash deposits. Further, loans exceeding the 15% threshold
may be exempted by a specific decision of the Prime Minister, loans and guarantees exceeding
the 25% threshold may be exempted by the written approval of the SBV.

Decision 457 also stipulates in details the payment ability ratio, maximum ratio of short-term
capital funds which a credit institution is permitted to use to provide medium and long-term
loans, and the limit on capital contribution and share purchase where credit institutions may use
up to 40% of their charter capital and reserve funds to make commercial investments with a
maximum of 11% for any particular investment. The total cap represents an increase of 10% for
banking credit institutions. Exemptions are permitted with prior written approval of the SBV. Of
interest, for the first time, and in accordance with core Basel recommendations, equity is divided
into two tiers of which tier 1 being shareholders’ equity and retained earnings and tier 2 being
additional internal and external resources available to the credit institution. Tier 1 equity is used
as the basis for fixing limits on the purchase of and investment in fixed assets of the credit
institution.

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.

Limitations on VND Deposits
Under the BTA, Vietnam has agreed to an 8 to 10 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 VND 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. This commitment was restated in Official Letter 404-NHNN-CNH of
the State Bank of Vietnam dated 22 April 2003 as follows:

 As of 10        From Vietnamese legal entities with       From Vietnamese individuals with
 December…       which it does not have a credit           which it does not have a credit
                 relationship                              relationship
 2002            100%                                      100%
 2003            250%                                      250%
 2004            400%                                      350%
 2005            600%                                      500%
 2006            700%                                      650%
 2007            900%                                      800%
 2008            Full national treatment                   900%
 2009                                                      1000%
 2010                                                      Full national treatment

As of 1 March 2005, the SBV further eased limitations on VND deposits in the case of foreign
bank branches from EU countries. Under Decision 210-2005-QD-NHNN dated 28 February
2005, an EU foreign bank branch is now allowed to accept VND deposits up to 400% of its
charter capital from Vietnamese legal entities without a credit relationship with the bank branch
and up to 350% from Vietnamese individuals with which it does not have a credit relationship.


                                                                                                  74
Previously, under Decision 327-2004-QD-NHNN of the State Bank of Vietnam dated 1 April
2004, the cap on VND deposits from both categories of depositors was raised to 250% for EU
foreign bank branches (compared to 50% for non-U.S and non-EU foreign bank branches). This
initial offering in 2004 of equal treatment of EU foreign bank branches with US foreign bank
branches was granted 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
Foreign currency is currently regulated under Decree 63-1998-ND-CP of the Government dated
17 August 1998 on Foreign Exchange Control (as amended 17 January 2001 and 18 October
2005). The latest amendments under Decree 131-2005-ND-CP of the Government dated 18
October 2005, effective as of 8 November 2005, formed part of Vietnam’s efforts to join the
WTO, pending the new Ordinance on Foreign Exchange (see below). Decree 131 liberalized a
number of controls on international current transactions. In light of Decree 131, on 8 November
2005, the IMF officially announced Vietnam's acceptance of Article VIII of the IMF's Articles of
Agreement.

As of 1 June 2005, foreign currency will be regulated under Ordinance 28-2005-PL-UBTVQH11
on Foreign Exchange dated 13 December 2005. Ordinance 28 enshrines the various reforms
under Decree 131 including:
-      The fundamental principle that all transactions being payments and remittance of money
       relating to current transactions between residents and non-residents shall be conducted
       freely.
-      Expanded scope of payments and remittances for international current transactions to
       include:
        - Payments relating to export/import of goods/services, other current transactions,
            short term loans from banks and on credit;
        - Payment for net income from direct and indirect investments, depreciation from direct
            investment capital (if applicable);
        - Payments for interest and gradual repayments of principal from foreign loans;
        - One way payments for consumption and other similar purposes.
-       Residents are entitled to purchase, remit or carry personally foreign currency abroad to
        meet their legitimate demands without presentation of documentation of satisfaction of
        tax liabilities to the Vietnamese Government.
-       Non-residents and residents being foreigners having foreign currency in their accounts
        are entitled to remit it abroad; and if they have lawful VND revenue sources, they are
        entitled to purchase foreign currency to remit it abroad.

The requirement for persons wishing to carry foreign currency out of Vietnam to seek prior SBV
approval has been abolished. Banks are free to sell foreign currency to customers after making
their own evaluation that there is a legal use purpose. The invoice for purchase of foreign
currency will be sufficient proof of the validity of the source of the cash and its use purpose -
persons departing Vietnam will not be required to show any other documents to Customs.

Ordinance 28 does not prescribe the cap on the amount of foreign currency permitted to be
carried abroad - the USD7,000 cap under Decision 921-2005-QD-NHNN of the State Bank of
Vietnam dated 29 June 2005, effective as of 18 July 2005, continues to apply (a significant
increase from the USD3000 limit applicable since October 1998). Under Ordinance 28, prior
SBV approval must still be obtained for export of amounts exceeding the above limits (or
exceeding the amount declared upon entry into Vietnam).

Restrictions on foreign currency transactions within the territory of Vietnam have not been
liberalized.   Direct foreign currency transactions remain prohibited (unless specifically
exempted). Transactions in foreign currency (whether current or capital) must still be conducted
only through banking entities authorized to conduct foreign currency exchange. Residents
wishing to retain foreign currency overseas must obtain SBV approval.



                                                                                              75
Ordinance 28 retains the power of the Government to impose obligations to surrender current
income in foreign currency, but only in exceptional cases to maintain national monetary and
financial security. Vietnam imposed an obligation to surrender foreign currency on Vietnamese
economic organizations, FIEs, foreign BCC parties, foreign company branches and foreign
contractors in September 1998 at 80%, then gradually decreased the obligation 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 46-2003-QD-TTg of the Government dated 2 April 2003.

Domestic investors entitled to conduct offshore investments are permitted to borrow or buy
foreign currency for their investment, as well as use foreign currency in their foreign currency
accounts opened at authorized credit institutions. Any remittance abroad must be conducted
through a bank account registered with the SBV in Vietnam.

The SBV gave the currency market more freedom to operate under Decision 679-2002-QD-
NHNN of the State Bank of Vietnam dated 1 July 2002 on Foreign Currency Trading by Credit
Institutions Authorized to Conduct Foreign Currency Trading. Decision 679 broadened the
trading band for banks to set their 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.

By Decision 1452-2004-QD-NHNN of the State Bank of Vietnam dated 10 November 2004 on
Foreign Exchange Transactions by Credit Institutions Permitted to Conduct Foreign Exchange
Operations in Vietnam, the SBV updated Vietnam's regulations on foreign exchange
transactions by credit institutions, provided for spot forward and swap transactions, as well as
regulating 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 fees 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.

Under Official Letter 78-NHNN-QLNH of the State Bank of Vietnam dated 21 January 2003,
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. Under Decision 293-2004-QD-NHNN of the State Bank
of Vietnam dated 22 March 2004, FBBs and JVBs are 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).




                                                                                             76
Foreign Currency Lending - Onshore
In a boost for resident developers, the SBV amended the categories of residents permitted to
borrow 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 and then Decision 996-2003-QD-NHNN
dated 22 August 2003. Under Decisions 343 and 966, the purposes for which foreign currency
loans may be made by credit institutions in Vietnam to resident borrowers were expanded.
Under Decision 966, 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.

Foreign Currency Lending - Offshore
Effective as of 22 November 2005, the control of foreign currency loans obtained from offshore
lenders (known in Vietnam as 'foreign loans') is now regulated under Decree 134-2005-ND-CP
of the Government dated 1 November 2005. Decree 134 retains the policy of close control by
the SBV of borrowing, guarantee and repayment of foreign loans by the State of Vietnam, the
Government and resident Vietnamese organizations (from SOEs to FIEs). Decree 134 does not
regulate the foreign loans of resident individuals. Any loan borrowed by a resident from a non-
resident (whether international financial institution, foreign Government, or other
organization/individual) constitutes a foreign loan. As well as other forms of foreign loan,
Decree 134 regulates the borrowing of foreign loan capital via issuance of international bonds.

The most significant reforms under Decree 134 relate to the management of the national foreign
debt and, in particular, of the public sector foreign debt. For management of the national foreign
debt, a number of new specific reporting tools are introduced. With respect to public sector
debt, the reforms are based on the policy that the borrowing of all foreign loans to be used in the
public sector (excluding by SOEs) should be implemented by the method of loans being made
to the Government (actually the MoF) and the Government then re-lending to the public sector.
SOEs are permitted to borrow foreign loans directly subject to prescribed conditions and
registration requirements. Government guarantees may now only be given by the Government
via the MoF (previously, also by the SBV). The entities eligible for consideration for issuance of
a Government guarantee now comprise domestic enterprises, economic institutions and credit
institutions from all economic sectors (not just SOEs as previously). New conditions for
Government guarantees apply. New Regulations on Issuance and Control of Government
Guarantees for Foreign Loans are expected soon to accommodate the reforms in Decree 134.

With respect to private sector foreign loans, Decree 134 includes more abbreviated principles for
control than under the previous regime (Decree 90-1998-ND-CP of the Government dated 7
November 199 and Circular 09-2004-TT-NHNN of the State Bank of Vietnam dated 21
December 2004), but offers no real reforms. As previously, all private sector foreign loans are
subject to supervision and monitoring by the Government via mandatory conditions which must
be satisfied, registration with the SBV and regular reporting to the SBV. Short-term loans (ie
loans with a term of up to 1 year) are required to comply with prescribed conditions. Medium to
long-term loans (ie loans with a term of more than 1 year) are required to be registered with the
SBV. Drawdown and repayment of foreign loans must be carried out through authorized banks,
except in prescribed cases. Private sector enterprises are fully liable for repayment of foreign
loans in accordance with the undertakings in loan agreements, the laws of Vietnam and (now
also expressly) international legal practice. Possibly some reforms may be introduced when
new implementing guidelines (to replace Circular 09) are issued, such as a relaxation of the
mandatory prescribed conditions (eg conditions as to loan purpose and amount) applicable to
the borrowing of short-term loans and medium to long-term loans; relaxation of the registration
requirements applicable to medium to long-term loans,

Of note, where a private sector foreign loan is guaranteed by the Government or some other
public sector institution authorized to issue guarantees (such as a State owned financial or
credit institution), the control and supervision of the loan will be as applicable to foreign loans of
SOEs. Interestingly, Decree 134 includes provisions on bank guarantees for foreign loans of
SOEs only, not also for private sector foreign loans as previously.




                                                                                                   77
Loan Security
Security for loans from credit institutions in Vietnam is regulated under Decree 178-1999-ND-CP
of the Government dated 29 December 1999 (as amended by Decree 85-2002-ND-CP of the
Government dated 25 October 2002) and implementing Circular 07-2003-TT-NHNN of the State
Bank of Vietnam dated 19 May 2003. The most important reforms since 2002 are that assets
attached to land may be mortgaged separately from the associated land use rights. independent
sections; the relaxation of the "one lender” rule, now allowing a single asset to be used as
security for multiple obligations to multiple lenders; and the relaxation of conditions for banks to
provide loans without collateral. The autonomy in loan decision-making granted to credit
institutions in 2002 has since been enshrined in the Law on Credit Institutions (As Amended
2004).

Bank Guarantees
New regulations on bank guarantees were issued under Decision 112-2003-QD-NHNN of the
State Bank of Vietnam dated 11 February 2003 and apply to guarantees provided by JVBs,
FBBs and other Vietnamese credit institutions. The conditions for bank guarantees have been
simplified, giving credit institutions larger decision-making powers. Entities seeking bank
guarantees are now subject to more general conditions, such as (a) the purpose for which the
guarantee is provided must be lawful and (b) the entity must have the financial capacity to
discharge the guarantee obligation within the time-limit promised. 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.) Whether or not security will be taken
for a bank guarantee is now at the complete discretion of the bank and its client, except that 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).
Detailed procedural requirements for joint guarantees are no longer stipulated.

Land Use Rights ("LURs") as Collateral for Offshore Loans
LURs may not be used as collateral for loans provided by offshore banks. Legislative reforms to
allow FIEs to use LURs as collateral for offshore loans were proposed 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, however, the new 2003 Law on
Land did not introduce the reform. Reportedly, the Government was considering allowing FIEs
to use LURs as collateral for overseas loans on a trial basis only, but no legal instrument
enabling a trial has been issued. Of note, the new Investment Law (to become effective as of 1
July 2006) maintains the status quo - only onshore mortgages of land use rights will be
permitted.

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 issues monthly decisions setting the basic interest rate for
VND loans for market reference purposes.

The SBV increased the maximum interest rates for USD deposits of legal entities at credit
institutions to new all-time highs under Decision 1247-2005-QD-NHNN of the State Bank dated
26 August 2005, effective from 1 September 2005. For USD on-call deposits, the maximum
interest rate is now 0.5% per annum (up from 0.3% per annum). For USD term deposits up to 6
months, it is now 1.2% per annum (up from 0.7% per annum). And for USD term deposits over



                                                                                                     78
6 months, it is now 1.5% per annum (up from 1.0% per annum). 0.7% per annum (from 0.4% per
annum) and term deposits over 6 months to 1% per annum (from 0.8% per annum).

Interest Swaps
Under Decision 1133-2003-QD-NHNN of the State Bank of Vietnam dated 30 September 2003,
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
allowed FBBs of U.S. Citibank to provide the service to Holcim Vietnam (the FIE of the Swiss
cement producer) 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 previously). 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 USD/VND
exchange rate for a longer period.

Factoring
A legal framework authorising credit institutions to undertake factoring activities (the process of
purchasing commercial accounts receivable (invoices) from a business at a discount) was
introduced by Decision 1069-2004-QD-NHNN of the State Bank of Vietnam dated 6 September
2004. A number of restrictions and exclusions apply. To undertake factoring activities, a credit
institution must: have approval from the SBV; have overdue debts of less than 5% of its total
loan balance; not be in violation of any regulations on banking safety; not be under any
investigation; and, if import-export transactions are involved, have a permit to deal in foreign
exchange.

Issuance of bonds, short-term or long-term deposit certificates and promissory notes
Decision 1287-QD-NHNN of the State Bank of Vietnam dated 22 November 2002 allowed credit
institutions (such as State owned credit institutions, State and People’s shareholding credit
institutions, the Central People’s Credit Fund, JVBs and other foreign credit institutions
operating in Vietnam) to issue valuable papers beginning 1 January 2003. In order to implement
Article 46 of the Law on Credit Institutions (As Amended 2004), Decision 1287 was replaced by
Decision 02-2005-QD-NHNN of the State Bank of Vietnam dated 4 January 2005 issuing
Regulations on Issuance of Valuable Papers by Credit Institutions to Raise Domestic Capital.
Under Decision 02, advance permission from the SBV is no longer required for the issuance of
short-term valuable papers by credit institutions; however, conditions for issuance of valuable
papers still apply and advance notification of SBV is required. In the case of long-term valuable
papers, SBV approval of a plan for issuance of valuable papers by credit institutions is required.

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
regulates issuance of bonds within Vietnam. 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 foreign
investors in Vietnam to fund key national projects upon the Prime Minister’s approval. Decision



                                                                                                79
66-2004-QD-BTC of the Ministry of Finance dated 11 August 2004 provides regulations for
implementation of Decree 141. Issuance of international bonds (by the Government,
commercial banks and SOEs) on overseas markets is regulated under Decree 23-CP of the
Government dated 22 March 1995.

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.

The equitization (conversion into a shareholding company) of Vietcombank (Vietnam's largest
State owned bank) was authorized under Decision 230-2005-QD-TTg of the Prime Minister
dated 21 September 2005 and is expected to occur in 2006. Importantly, Vietcombank is
authorized to hire an international consultancy firm to appraise its corporate value and to issue
bonds to increase capital under Official Letter 3120-VPCP of the Prime Minister dated June
2005. Official permission for pilot equitization of the Bank of Foreign Trade of Vietnam was
issued under Decision 230-2005-QD-TTg of the Prime Minister dated 21 September 2005. And
the pilot equitization of Mekong Delta Housing Development Bank (“MHB”) was authorized
under Decision 266-2005-QD-TTg of the Prime Minister dated 27 October 2005. Of note,
whereas Vietcombank will undergo its equitization in two stages, MHB is permitted to conduct its
equitization immediately. Decision 266 allows all foreign and local investors to buy shares of
MHB subject to applicable Vietnamese law (see above). MHB will also be able to hire an
international consultancy firm to audit and evaluate its assets (including intangible assets), to
formulate the pilot privatization scheme, and to assist in the issue of shares as well as the
selection of strategic investors.

Non-Banking Financial Services

International Trade Commitments
Under the BTA, U.S. financial service providers are permitted to provide services in the forms of
100% U.S. owned and joint venture financial leasing companies.

Legal & Regulatory Framework
Non-banking financial services in Vietnam are governed by the Law on Credit Institutions dated
12 December 1997 as amended by the Law on Amendment of and Addition to the Law on
Credit Institutions dated 15 June 2004 (effective as of 1 October 2004). Under the Law on
Credit Institutions (As Amended), “non-banking credit institution” ("NBCI") is defined as a form of
credit institution permitted to conduct a number of banking activities as its principal and regular
business operations but which is not permitted to receive demand deposits and to provide
payment services. NBCIs include finance companies, finance leasing companies, and other
non-banking credit institutions.

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 and Decree 16-2001-ND-CP of
the Government dated 2 May 2001 on Organization and Operation of Finance Leasing
Companies (as amended by Decree 65-2005-ND-CP of the Government dated 19 May 2005)
provides for the establishment and operation of finance leasing companies in Vietnam.

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 under Decision 24-QD-NHNN dated 7
January 2003. Decision 24 only applies to branches and offices located in Vietnam operated by
NBCIs established in Vietnam.

Regulations on Organization and Operation of the Board of Management, Inspection Committee
and (General) Directors of Non-Banking Credit Institutions were issued under Decision 516-



                                                                                                80
2003-QD-NHNN of the State Bank of Vietnam dated 26 May 2003. Effective as of July 2003,
the Regulations 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 NBCIs); and b) joint venture NBCIs and
100% foreign owned NBCIs (collectively referred to as NBCIs involving foreign elements).
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.

Market Access
Under Vietnam's Investment Law, effective 1 July 2006, foreign investment in the (very broad)
sector of "banking and finance" is "conditional" and subject to evaluation (rather than the simpler
investment registration).

Finance companies
Decree 79 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. “Finance company”
is defined as a NBCI 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 for successive 50 year
durations). 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: 1) shareholders, shares, share certificates and charter capital (including
capital contribution ratios, capital assignment and profit distribution); 2) conditions and
procedures for licensing of a finance company (including additional conditions applicable to the
foreign party in a joint venture finance company and 100% foreign owned finance company); 3)
requirements for commencement of operations; 4) changes in finance companies requiring SBV
approval; 4) 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.

In order to enable “small-scale finance activities” to be provided to low income people and
households, micro-finance organizations may now be established by social, political and trade
organizations, charitable and social funds and non-governmental organisations under Decree
28-2005-ND-CP of the Government dated 9 March 2005 on Organization and Operation of
Small-Scale Finance Organizations in Vietnam. Decree 28 provides for other domestic and
foreign organizations and individuals to contribute capital to micro-finance organizations.

Finance Leasing
Decree 16 (as amended by Decree 65) provides for the establishment and operation of finance
leasing companies in Vietnam, including joint venture and 100% foreign owned finance leasing
companies. “Finance leasing” is defined as medium or long term credit operations carried out
on the basis of a finance leasing contract entered into between the lessor (being the credit
institution) and the lessee. Amendments under Decree 65 include:
-         New criteria for recognizing finance leasing transactions (ownership upon lease expiry;
          lease duration; sum of total lease payments);



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-      New provisions for taxation of purchase and lease-back by finance leasing companies;
-      Provision for operating lease services by finance leasing companies;
-      Provision for finance leasing companies to sell items receivable from finance leasing
       contracts and to transfer debts being overdue lease payments;
-      Requirement for the foreign credit institution owning a 100% foreign owned finance
       leasing company to conduct inspections of internal operations of the finance leasing
       company in Vietnam, and to notify the SBV in advance of such inspection and to report
       to the SBV after the inspection;
-      New provisions on recovery of leased assets, including assets which are the subject of a
       registered security transaction. Both the Law on Credit Institutions and Decree 16
       provide for a finance leasing company to recover leased assets if a lessee breaches the
       contract, however, they do not specify how to deal with the assets recovered, how to
       deal with conduct preventing recovery of the assets, the obligations of the competent
       bodies, and other matters. As a result, almost all finance leasing companies have
       difficulties in recovering leased assets when disputes arise. The amendments under
       Decree 65 address these problems.

New guidelines for implementation of Decree 16 (as amended by Decree 65) were issued under
Circular 06-2005-TT-NHNN of the State Bank of Vietnam dated 12 October 2005.

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 on conditions for finance leasing companies to undertake finance leasing
transactions in foreign currency. Conditions 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 do so (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).

Effective as of 16 July, Circular 03-2005-TT-NHNN of the State Bank of Vietnam dated 25 May
2005 provides guidelines on restructuring terms for repayment and on transfer of overdue debts
applicable to finance leasing activities of finance leasing companies.

Securities

International Trade Commitments
The BTA provides minimal commitments for securities services. Accordingly, only non-bank
securities services may establish a representative office in Vietnam. Vietnam does not allow the
cross border supply of securities services.

Legal & Regulatory Framework
Vietnam's securities market is regulated under Decree 144-2003-ND-CP of the Government
dated 28 November 2003 on Securities and Securities Market. Decree 144 is the first update of
the original legislation establishing the securities market (Decree 48-1998-ND-CP of the
Government dated 11 July 1998).

The SSC is responsible for licensing, supervision and dealing with offences in the securities
sector, amongst other things. Its functions, duties, powers and organizational structure are
regulated under Decision 161-2004-QD-TTg of the Government dated 7 September 2004.

Vietnam's first Securities Trading Center opened in mid-2000, in HCMC. Vietnam's second
Securities Trading Center opened in Hanoi in March 2005. To date, only 40 companies are
listed in HCMC or registered for trading in Hanoi.


Market Access
Foreign participation in Vietnam's securities market is regulated under Decision 238-2005-QD-
TTg of the Government dated 29 September 2005 and Circular 90-2005-TT-BTC of the Ministry
of Finance dated 17 October 2005, and subject to various limitations.



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The total securities holdings of foreign investors in listed Vietnamese companies is capped at
49% of the total listed shares of any one company, under Decision 238 (up from 30% cap
applicable since August 2003 and, before then, 20% cap applicable since mid-1999). Specific
caps on total shareholdings of any one foreign organization or individual no longer apply
(abolished in August 2003). Foreign investors may hold up to a cap of 49% of the total
investment fund certificates which have been listed or registered for trading of a securities
investment fund. Foreign investors may hold an unlimited percentage of bonds issued by any
issuing organization.

There is divided opinion as to whether foreigners may purchase shares in any listed Vietnamese
company or only in listed Vietnamese companies operating in the limited range of sectors
prescribed in Decision 260-2002-QD-BKH of the Ministry of Planning and Investment dated 10
May 2002. It is assumed (but not confirmed) that foreigners are free to purchase up to 49% of
listed shares of a company irrespective of the sector in which the company is operating (and that
Decision 260 only limits the range of non-listed companies in which foreigners can purchase
shares). This assumption is supported by the recent purchase by foreigners of shares in a
Vietnamese hydroelectric power enterprise traded at the Hanoi Securities Trading Center,
because the power sector is not a prescribed sector in Decision 260 (See Section 8.8 on
Foreign Investment in Non-listed Vietnamese Enterprises below). For information on foreign
banks purchasing shares in Vietnamese banks, see "Financial Services - Banking Services"
above.

Under Decree 144, foreign securities businesses may be licensed to invest in securities
companies, securities investment funds and fund management companies, subject to
satisfaction of prescribed criteria. Under Decision 55-QD-BTC of the Ministry of Finance dated
17 June 2004 issuing Regulations on Organization and Operation of Securities Companies, 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 238, foreign securities trading organizations may contribute or
purchase shares up to a cap of 49% of the charter capital of a joint venture securities company
or securities investment fund management company.

Under Decision 83-2004-QD-BTC of the Ministry of Finance dated 11 November 2004, a cap of
3 has been imposed on the number of representative offices which may be established in
Vietnam by foreign securities trading organizations 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 office licenses will be valid for five years only,
extendable upon application for successive 5 year periods.

Of the foreign-owned funds established to invest in Vietnam’s securities market, Vietnam
Enterprise Investment Limited was the first and Vietnam Frontier Fund was the second to
partake in such activity.

Domestic Regulation

Listings
Decree 144 is more sophisticated and extensive than the original securities legislation issued
under Decree 48 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
introduced 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. 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



                                                                                               83
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
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, see Section 10.2.) Stricter disclosure
and insider trading provisions are reassuring.

Issued under Decision 528-QD-TTg of the Prime Minister dated 14 June 2005 is the list of SOEs
which are permitted to sell their State owned shareholdings by auction at a Securities Trading
Centre (66 SOEs in total, including three SOEs under the Ministry of Transport and
Communications) and the list of shareholding companies which are permitted to list at the
HCMC Securities Trading Centre or register for trading at the Hanoi Securities Trading Centre
(161 companies in total).

Foreign securities purchases
Sales to foreign investors of shares in listed Vietnamese companies are regulated in detail
under Circular 73-2003-TT-BTC of the Ministry of Finance dated 31 July 2003. Sales must be
public, via the securities market, and 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 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.”




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Investment funds
The organization and operation of securities investment funds and fund management
companies is regulated under Decision 73-2004-QD-BTC of the Minister of Finance dated 3
September 2004 (as amended by Decision 71-2005-QD-BTC of the Minister of Finance dated
21 October 2005). The criteria for an investment fund to list units on the stock market are also
prescribed. 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. Decision 71 regulates fund management companies established under and controlled
by an insurance company. Under Decision 62-2005-QD-BTC and Decision 63-2005-QD-BTC of
the Ministry of Finance dated 14 September 2005, regulations have been issued for the
accounting regime applicable to the fund management companies and securities investment
fund respectively.

Foreign Exchange
Under Decision 998-2002-QD-NHNN of the State Bank of Vietnam dated 13 September 2002
on Foreign Exchange Control Applicable to Purchase and Sale of Securities by Foreign
Organizations and Individuals at Securities Trading Centers, foreign individuals and institutions
investing in the Vietnamese securities market may 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 (ie until
December 2004). 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 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).

Taxation
To encourage participation in Vietnam securities market, collection of the following fees
applicable to securities business is suspended: 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, under Official
Letter 14365-TC-TCNH of the Ministry of Finance dated 31 December 2002.

Guidelines on the application and calculation of VAT and CIT for securities business have been
provided under Circular 100-2004-TT-BTC of the Ministry of Finance dated 20 October 2004.
Under Circular 100, securities brokerage, 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) will now enjoy the CIT rate of
20% for the remaining period of their first 10 years in operation.

Under Official Letter 11924-TC-CST of the Ministry of Finance dated 20 October 2004,
preferential CIT treatment is available for companies with listed securities.

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 VND70 million may be
imposed. To implement Decree 161, the MoF issued Circular 130-TT-BTC dated 29 December
2004.




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     Foreign Invested Shareholding Companies
     Foreign invested shareholding companies ("FISCs") are permitted to list on the Vietnamese
     securities market and on overseas securities markets (the latter subject to approval from the
     responsible authority). Guidelines on listings of FISCs have not yet been issued. However
     Decision 238 (see above) now clarifies how the 49% cap on foreign securities holdings will apply
     in the case of a FISC. Under the FISC regime, foreign investors may hold up to 100% of the
     shares of a FISC. If a FISC lists or trades its shares at a Securities Trading Centre, Decision
     238 provides for the 49% cap to apply only to the total shares offered to the public. So if the
     founding foreign investors of a FISC retain 90% of shares and offer 10% to the public, the 49%
     cap will apply only to the 10% - with the result that a maximum of 4.9% of the FISC's shares
     may be purchased by other (non-founding) foreign investors. For more detail on FISCs, see
     Section 8.8 on “Legal Entity Restrictions.”

     Legislative Developments
     A Law on Securities is scheduled to be passed by the NA at its May-June 2006 Session.
     Amongst other things, the draft provides that securities may only be sold or offered for sale to
     the public where purchasers have received a prospectus; and prohibits the SSC from
     expressing any opinion on the quality of any type of securities. It allows only fund management
     companies to manage portfolios for investors, with securities firms no longer allowed to offer
     such a service. The draft also suggests not allowing securities firms to provide corporate
     finance consulting services. Public companies having shares owned by more than 100
     individual investors will be required to publicise their reports and other financial information like
     the current bourse-listed firms do. This move aims to force more companies to trade shares on
     the market. According to "Youth" Online report dated 17 January 2006, the draft Law provides
     that SOEs undergoing equitization must apply to the SSC for a permit to offer securities to the
     public. In response to the needs of investors for disclosure of information about share sales, the
     SSC will be able to control disclosure of information when such files are submitted. However
     this provision has been criticised by both enterprises and investors, in particular the Vietnam
     Association of Financial Investors (VAFI) which says that there will be approximately 500 files
     annually which enterprises undergoing equitization will have to file with the SSC for approval, so
     this will cause extra costs and unnecessary difficulties for both enterprises and for the
     administrative body. VAFI proposes that it is only necessary to amend the current regulations of
     the Ministry of Finance on disclosure of information so that enterprises undergoing equitization
     will be obliged to disclose the whole of their financial reports for the three years prior to
     equitization instead of announcing the basic details as they are currently required. The Law is
     proposed to become effective as of 1 January 2007.

7.10 Transport and Delivery Services

     Maritime Transport Services

     International Trade Commitments
     Vietnam did not make any commitments in this sector under the BTA.

     Under the EU-Vietnam Market Access Agreement dated 3 December 2004 and the EU-Vietnam
     Agreement on WTO Accession dated 9 October 2004, Vietnam agreed to permit one 100% FOE
     maritime transport service provider to be established. This commitment is expected to be
     mutilateralized when Vietnam formally becomes a member of the WTO.

     Legal & Regulatory Framework
     Effective as of 1 January 2006, the new Maritime Code of Vietnam dated 14 June 2005
     regulates Vietnamese and now also foreign seagoing ships. It allows a broader range of
     maritime activities for foreign ships, including inland transportation in prescribed cases. The
     2005 Maritime Code allows registration of (inter alia) foreign ships leased by a Vietnamese
     entity under bareboat charter/finance lease. In principle, the 2005 Maritime Code provides for
     foreign investment in seaports.

     Market Access
     Foreign shipping lines are allowed to set up JVEs with domestic partners. Currently foreign
     investors in this sector are restricted to a 49% interest in a JVE or BCC at best.



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However, in late March 2005, Danish company Maersk A/S was licensed by the MPI to establish
a 100% FOE in Vietnam for "supply of goods transportation by sea agent service, including the
activities: representing goods owners, goods delivery and reception activities, warehousing,
goods transportation by sea service; preparation of transportation documents, customs
documents". This is the first 100% FOE licensed to participate in the freight forwarding business
in Vietnam.

There is no-discrimination between domestic and foreign commercial ships on docking,
warehousing, piloting and cargo handling charges.

Express Delivery Services

International Trade Commitments
The BTA does not have any commitments in the express delivery services sector.

Vietnam’s WTO accession process is expected to address increased market access, including
the permitting of 100% FOEs in this sector over a phase-in period.

Legal & Regulatory Framework
Responsibility for State administration of express delivery or courier services is vested in the
Ministry of Posts and Telecommunications ("MoPT"). Under Decision 190-2004-QD-TTg of the
Prime Minister dated 8 November 2004, the MoPT has jurisdiction over:
-   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.

Market Access
Previously, all express-delivery companies in Vietnam were required to work under the auspices
of “Agency Agreements” with the MoPT. 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, JVEs are permitted but
must be authorized by the Prime Minister (whereas corresponding foreign investment laws still
limit foreign investment in this sector to BCCs). Only one JVE license has been granted in this
sector (to TNT).

Circular 01-2005-TT-BBCVT of the Ministry of Posts and Telecommunications dated 6 May
2005 provides guidelines implementing Decree 157 with respect to issuance of business
licenses for mail delivery services and registration of agents for foreign mail delivery
organizations. Circular 01 clarifies that JVE are permitted but imposes significant additional
licensing requirements and barriers.

Domestic Regulation
With respect to issuance of licenses for provision of mail delivery services: Under Decree 157,
100% FOEs are not allowed to engage in the business of domestic and international mail
delivery services. JVEs are allowed to engage only in the business of international mail delivery
services, defined to include (a) collecting mails in Vietnam for delivery abroad, (b) collecting
mails abroad for delivery in Vietnam, or (c) a combination of (a) and (b). Under Circular 01, an
additional license for provision of (international) mail delivery services is required. Documents
evidencing a JVE's experience in provision of international mail delivery services (at least 5
years experience under Decree 157) must be presented in a license application file, under
Circular 01. Licenses are for 10 years (extendable). Under Circular 01, if JVEs do not satisfy
the 5 years experience condition, they must undergo a trial period under a "trial" license, with a
term up to 1 year, at the end of which they may apply for a "full" license.

With respect to registration of agents for foreign mail delivery companies: Circular 01 provides
for JVEs which are licensed to provide international mail delivery services to act as agents for
foreign mail delivery companies subject to registration with the MoPT. JVEs wishing to act as



                                                                                               87
      agents for foreign mail delivery companies must obtain 3 specialized documents: a foreign
      investment license, a license for provision of international delivery mail services, and a
      registration from the MoPT.

7.11 Real Estate Services (CPC 821)

      Legal Framework
      A Law on Real Estate is currently being considered by the National Assembly and is expected to
      be passed in 2006. The current draft law governs the following types of real estate: houses,
      apartments, certain land use rights, and other construction works. It defines "real estate
      business" as investing in the development of real estate for sale or lease; purchase, sale and
      lease of real estate; assignment of real estate for purpose of profit; and "real estate related
      services" as comprising brokerage, organization of transaction floor, consultancy, valuation,
      auction, advertisement, and management of real estate.

      Market Access
      Foreign invested enterprises will only be permitted to engage in the following real estate
      activities: investing to develop housing and construction works for sale or lease; brokerage; and
      real estate management. Individuals and enterprises engaged in real estate activities (ie real
      estate business and real estate related services) will be required to register their business and
      satisfy prescribed conditions. Individuals (including staff of real estate businesses) who are
      engaged in valuation and brokerage will be required to have a professional practice license.
      Pre-sale of real estate will be recognized, but will be subject to conditions.
      Individuals/enterprises engaged in real estate business must conduct their sale, lease and
      assignment at transaction floors. All contracts relating to real estate activities (including related
      services) must follow standard forms to be prescribed by the Government.
      Notarization/certification of sale/lease contracts will only be required if agreed by the parties and
      subject to other laws.


8.    Investment
8.1   MFN:

      International Trade Commitments
      Vietnam’s BTA commitments oblige Vietnam to provide U.S. investors treatment no less
      favorable than that accorded to other investors. Vietnam’s MFN exemptions are listed in Annex
      G (for Services) and Annex H of the BTA.

      Legal & Regulatory Framework
      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:

      International Trade Commitments
      Under the BTA, Vietnam has committed to providing U.S. investors non-discriminatory treatment
      with some exceptions. Vietnam’s National Treatment exemptions are listed in Annex G (for
      Services) and Annex H of the BTA.




                                                                                                        88
      Legal & Regulatory Framework
      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.

      As of 1 July 2006, a single Investment Law will regulate both foreign and domestic investment.
      In tandem with this new Law on Investment, a new Law on Enterprises will introduce a unified
      'company law' for domestic enterprises, FIEs and SOEs. The Law on Investment will regulate
      investment guarantee measures, investment sectors and regions which are encouraged,
      investment procedures and investment incentives that will apply to domestic and foreign
      investors. The Law on Enterprises will regulate the establishment forms and procedures,
      organization and management, and dissolution of enterprises in all economic sectors.

      Elimination of Dual Pricing
      Vietnam has eliminated its dual pricing system in many areas, including: tourism-related fees;
      air, road, rail transportation, seaport charges; customs charges; intellectual property registration;
      standards testing for medicinal and cosmetic products; TV advertising; utilities such as
      telephone charges, water and electricity tariffs.

      Dual pricing continues on the leasing of land from the State. For land prices, the MoF has
      proposed a single-pricing system applicable to both Vietnamese enterprises and FIEs leasing
      land from the State. However, Decree 142-2005-ND-CP of the Government dated 14 November
      2005 on Land Leasing and Collection of Land Rent continues to distinguish between
      Vietnamese lessees and foreign invested lessees with respect to application of rent frameworks
      (see Section 8.10 on "Land Use and Leasing Rights").

8.3   Trade Related Investment Measures (TRIMS):

      International Trade Commitments
      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.

      Legal & Regulatory Framework
      The new 2005 Law on Investment enshrines (article 8.2) a State guarantee that an investor will
      not be compelled to undertake the following requirements (effective as of 1 July 2006):
      -    To give priority to the purchase or use of domestic goods or services; or to purchase
           compulsorily goods from a specific domestic manufacturer or services from a specific
           domestic service provider;
      -    To export goods or services at a fixed percentage; to restrict the quantity, value or type of
           goods or services which may be exported or of goods which may be manufactured
           domestically or services which may be provided domestically;
      -    To import goods at the same quantity and value as goods exported, or to self-balance
           compulsorily foreign currency from sources obtained from exported goods in order to satisfy
           their import requirements;
      -    To achieve certain localization ratios during manufacture of goods;
      -    To achieve a stipulated level or value in their research and development activities in
           Vietnam;
      -    To supply goods or provide services in a particular location whether in Vietnam or abroad;
      -    To establish its head office in a particular location.




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        - 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 (as
        stipulated in their investment licenses) to export 80% of output.

        - Foreign Exchange Controls
        Foreign exchange controls for importation of products by foreign investors have been eased
        over the years. FIEs and foreign BCC parties may 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.

        Foreign exchange activities relating to capital contribution to or purchase of shares in
        Vietnamese enterprises by foreign investors are regulated under Circular 03-2004-TT-NHNN of
        the State Bank of Vietnam dated 25 May 2004.15
        Foreign exchange controls applicable to purchase and sale by foreign investors of securities
        listed at Securities Trading Centers are regulated under Decision 1550-2004-QD-NHNN of the
        State Bank of Vietnam dated 6 December 2004, see Section 8.11 on "Portfolio Investment".

        - Local Content Requirements
        Vietnam continues to require or provide incentives for some foreign investors to use local
        content. This is so for the electronics manufacturing sector where preferential import tariff rates
        are provided contingent upon the use of local content. Vietnam has however committed to the
        termination of this program upon its WTO accession or by December 2006.

        Some other sectors requiring the use of local raw material include cane sugar, paper
        processing, vegetable oil, wood processing, and milk. These local content requirements are
        also expected to be eliminated upon Vietnam’s WTO accession.

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

15
      In order to contribute capital to or purchase shares in Vietnamese enterprises, foreign investors
     must open a special-purpose “capital contribution-share acquisition in Vietnamese dong” account at
     a commercial bank operating in Vietnam (and register it with the SBV within 2 working days from
     the date of opening). All transfers and other activities relating to capital contribution or purchase of
     shares by foreign investors must be conducted via this account. Circular 03 provides for conversion of foreign
     currency into VND and conversion of VND dividends and profits into foreign currency for remittance abroad.


                                                                                                                90
        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 Agreement appendix of industries and sectors to be
        excluded from the regulations imposed by the compact is still under consideration.

8.5     Profit Repatriation:

        Legal & Regulatory Framework
        Vietnam’s 2005 Law on Investment, effective 1 July 2006, entitles foreign investors to remit
        abroad, after discharging in full any financial obligations to the State of Vietnam, the following:
        -    Profits derived from business activities;
        -   Payments received from the provision of technology and services and from intellectual
            property;
        -    Principal of and any interest on foreign loans;
        -    Invested capital and proceeds from the liquidation of investments;
        -    Other sums of money and assets lawfully owned by an investor.

        Foreign workers in Vietnam are entitled to remit abroad lawful income after fulfillment of
        personal income tax obligations.

        As of 2004, withholding tax is no longer payable by foreign investors when remitting profits
        abroad.16

        Procedures for profit remittances abroad (including determination of the amount of profits
        permitted to be remitted abroad) are regulated under Circular 12417. Prior to any remittance of
        profits abroad, foreign investors are required to prepare a Declaration of Remittance of Profit
        Overseas and to submit it to the tax office directly managing the foreign invested enterprise from
        which the foreign investor derived its profits. The tax office must certify the correct payment of
        tax and record such certification on the Declaration. On the basis of this certification, the bank
        at which the foreign investor has opened its account will conduct the remittance. Profit
        remittances may be made annually (after termination of financial year), provisionally during the
        financial year every quarter or every 6 months (in prescribed cases), and/or upon termination of
        business activities in Vietnam. New regulations on profits remittance are expected to be issued
        in 2006 for conformity with the new 2005 Law on Investment

8.6     Investor-State Arbitration and other forms of dispute settlement

        International Trade Commitments
        Under the provisions of the Investment Chapter in the BTA, Vietnam has consented to allow
        investors (if conciliation fails) 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 or tribunals of Vietnam, to previously agreed dispute settlement
        procedures, or to international arbitration (including ICSID arbitration).

        ICSID
        Vietnam is not a member of the 1965 Washington Convention, also known as the Convention of
        the International Center for Settlement of Investment Disputes ("ICSID Convention"). It is
        however working on submitting a plan to the Government for its accession.

        Legal & Regulatory Framework
        Effective as of 1 July 2006, the new 2005 Law on Investment (article 12) provides that
        investment disputes to which one party is a foreign investor or FIE or disputes as between
        foreign investors may now be resolved by foreign/international/ad-hoc arbitration, or by a



16
     Prior to the 2004 tax year, profit repatriation was taxed at 2-7%. Such tax is no longer payable under the 2003
     Law on Corporate Income Tax and implementing regulations.
17
     Circular 124-2004-TT-BTC of the Ministry of Finance dated 23 December 2004 providing guidelines for
     implementation of provisions on profit remittance by foreign economic organizations and individuals investing
     under the Law on Foreign Investment in Vietnam


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      Vietnamese court or arbitration body.18 Only investment disputes between domestic investors or
      between a domestic investor and a State body of Vietnam must be resolved at a Vietnamese
      arbitration body or court. This makes foreign invested projects much more “bankable” – the
      process of obtaining finance from international lenders who require international arbitration
      clauses in project documents will be easier and costs will be lower. Disputes between a foreign
      investor and a State administrative body of Vietnam relating to investment activities in the
      territory of Vietnam may be resolved by offshore arbitration if so provided in an international
      treaty of which Vietnam is a member (e.g. ICSID Convention) or if so provided in a contract
      signed between a representative of a competent State body of Vietnam with the foreign investor
      (otherwise it must be resolved by a Vietnamese court or arbitration body).

8.7   Investment Certification

      International Trade Commitments
      Under the BTA, Vietnam has committed to transitioning from an investment licensing regime to
      one that involves the more automatic and non-discretionary practice of registration for most
      sectors. The first small steps towards an investment registration regime were introduced in
      March 2003.

      Legal & Regulatory Framework
      Under Vietnam’s new 2005 Law on Investment, as of 1 July 2006, investment registration is
      available for a wider (but still restricted) range of foreign direct investment projects. The regime
      for investment evaluation/registration differs for domestic projects and for foreign projects.
      Some domestic projects are subject to business registration procedures only; some are subject
      also to investment registration-certification procedures; others are subject also to investment
      evaluation-certification procedures. All foreign invested projects are subject to investment
      registration-certification procedures at a minimum; many are subject to investment evaluation-
      certification procedures.       For foreign invested projects, whether subject to investment
      registration or evaluation, investment certification constitutes business registration, so the 2005
      Law on Investment perpetuates the current 'one-stop shop' policy. Unfortunately for domestic
      projects, the 2005 Law on Investment represents a backward step, as investment registration-
      certification procedures are in addition to and separate from business registration procedures.
      Following is a table of the new investment procedures as of 1 July 2006:

                       Who is entitled?                 What investment              What investment document is
                                                        procedure applies?           issued?
       Business        Domestic investment              None, unless recording of    None, business registration
       registration    projects with invested           investment incentives is     certificate issued under the
       (only)          capital below VND15 billion      desired (in which case,      2005 Law on Enterprises
                       (USD943,990), excluding          investment registration-
                       conditional projects             certification   must    be
                                                        carried out)
       Investment      Domestic         investment      Registration of investment   For        foreign        projects,
       registration-   projects    with    invested     on sample form at            investment certificate (which is
       certification   capital from VND15 billion       provincial State             also     business      registration
                       to below VND300 billion;         administrative body for      certificate in the case of initial
                       Foreign invested projects        investment, accompanied      establishment of economic
                       with invested capital below      by prescribed                organization);
                       VND300                 billion   documentation (more
                                                                                     For       domestic        projects,
                       (USD18,880,000);                 onerous for foreign
                                                                                     investment       certificate,     if
                       excluding        conditional     projects)
                                                                                     requested                (business
                       projects                                                      registration must be carried out
                                                                                     separately)




18
  Previously, the foreign investment regulations under Decree 24-2000-ND-CP of the Government dated 31 July
2000 (as amended 19 March 2003) required disputes between FIEs or between Vietnamese enterprises and
FIEs to be resolved by Vietnamese arbitration or Vietnamese courts.


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          Investment      Conditional projects in:          Application file submitted    For foreign projects,
          evaluation-     -   Sectors     impacting   on    to central State              investment certificate (which is
          certification   national defence and security,    administrative body for       also business registration
                          social order and safety;          investment, with contents     certificate in the case of initial
                          - Banking and finance sector;     depending on sub-             establishment of economic
                          - Sectors impacting on public
                                                            category of project: (i)      organization);
                          health;
                          - Culture, information, the       projects below VND300         For domestic projects,
                          press and publishing;             billion which are in          investment certificate
                          - Entertainment services;         conditional sectors, (ii)     (business registration must be
                          - Real estate business;           projects over VND300          carried out separately)
                          - All aspects of natural          billion which are in
                          resources;     the   ecological   conditional sectors, and
                          environment;                      (iii) projects over VND300
                          - Development of education
                                                            billion which are not in
                          and training;
                          - A number of other sectors in    conditional sectors.
                          accordance with law.
                          (For foreign investors, the       The criteria for evaluation
                          range      of     “conditional    are only stated in general
                          projects” is wider still,         (expected to be detailed
                          depending on conditions in        in implementing
                          Vietnam's        international    regulations).
                          treaties.)
                          Projects     with invested
                          capital of VND300 billion
                          (USD18,880,000) or more

        The Ministry of Planning and Investment is the central-level State administrative body for
        Investment.     Departments of Planning and Investment are the provincial-level State
        administrative body for Investment.

8.8     Form of Establishment:

        Legal & Regulatory Framework
        Under the new 2005 Law on Investment, effective as of 1 July 2006, when foreign investors first
        invest in Vietnam, they will be required to establish an economic organization and to conduct
        investment certification procedures (which will also act as their business registration certificate).
        Thereafter, it is just their new investment projects (if any) that need to be certified - they are not
        required to establish a new enterprise for each project. An exception is made for BCCs, which
        are only required to carry out investment certification procedures as no legal entity is ever
        established.19

        Under the new duo of the 2005 Law on Investment and the 2005 Law on Enterprises (also
        effective as of 1 July 2006), foreign direct investors are permitted to establish enterprises in any
        form available under the Law on Enterprises, ie limited liability company, shareholding company,
        partnership or private enterprise (except where the law restricts the form of establishment in a
        particular sector). Such enterprises may exist in perpetuity (but the projects they invest in
        remain of a limited duration as stipulated in their investment certificate). Currently, foreign
        invested enterprises ("FIEs"), comprising joint venture enterprises ("JVEs") and 100% foreign
        owned enterprises ("100%FOEs"), are a 'special' form of enterprise peculiar to the Law on
        Foreign Investment in Vietnam - investors own "capital contribution" not shares, the FIEs have a
        limited license duration, and the FIEs subject to separate 'company law' than applies to
        Vietnamese enterprises.

        Legal Developments
        Decrees to implement the Law on Investment are currently being drafted.

        One of the most important implementing decrees for existing foreign investors is the proposed
        decree to regulate the transition of existing FIEs from the old investment-enterprise regime to
        the new regime, in particular the conversion or non-conversion of existing FIEs to other forms of

19
     This exception is provided in the draft decree discussed below (albeit not explicitly for BCCs). Of note, it is not
     clear what form of enterprise a BCC is under the new 2005 Law on Enterprises.


                                                                                                                          93
        enterprise available under the 2005 Law on Enterprises. Existing FIEs which wish to convert
        must register to do so. It will not be compulsory for FIEs to convert their form. The option of
        conversion is only available for 2 years (until 30 Jun 2008). Existing JVEs have the sole option
        to convert into limited liability companies with two or more members. Existing 100% FOEs have
        the options to convert into limited liability companies with one member or with two or more
        members. Existing FISCs (see below) have the sole option to convert into shareholding
        companies. FIEs that do not convert will remain subject to the old investment-enterprise regime
        and will be subject to various other restrictions (eg they will not be permitted to amend their
        investment licenses nor extend their duration).

        The other most important implementing decree is the principal implementing decree. The MPI
        released its Draft 9 at the start of May. The principal decree covers direct investment only.
        Notable aspects include:
        -      As of 1 July 2006, the term "foreign invested enterprise" signifies (not just) enterprises
               established by foreign investors to carry out investment activities in Vietnam but (now
               also) Vietnamese enterprises in which foreign investors hold more than 50% of the
               chartered capital (discussed further below).
        -      In principle, investors are free to choose their form of investment, however the decree
               introduces a number of restrictions:
               -     Foreign investors in the sectors of health care, education and training, or scientific
                     research in Vietnam are limited in their choice of form of investment (as noted
                     above) to the following: limited liability company, shareholding company or
                     partnership.
               -     Joint ventures may only be established in the form of limited liability companies with
                     two or more members, shareholding companies or partnerships. 100% FOEs may
                     be established in the form of limited liability companies, shareholding companies,
                     partnerships or private enterprises.
               -     And all foreign investors are limited in their choice of form of investment, scale of
                     investment, sector of investment and ratio of capital investment, etc, by any
                     relevant international treaties of which Vietnam is a member.
        -      Investment activities regulated under specialized legislation, such as banks, insurance
               companies and securities houses, are not subject to the new 2005 Law on Investment
               and do not require an investment certificate. Similarly, indirect investment does not
               require an investment certificate.
        -      Contents of joint venture contracts and charters as well as contents of charters for 100%
               FIEs and contents of BCCs are prescribed in the investment decree (with little change
               from the old investment regime) - how these documents reconcile with the new 2005 Law
               on Enterprises is unclear.
        -      For the first time, the investment decree provides for establishment of foreign invested
               holding companies and subsidiaries, but leaves the Government to make detailed
               provisions thereon in separate legislation.20
        -      The list of sectors in which investment is subject to conditions is appended to the
               investment decree and includes:
               -     Sectors in which both foreign and domestic investment is subject to conditions,
                     such as explosives manufacture, advertising, telecommunications, horseracing, real
                     estate business;
               -     Sectors in which just foreign investment is subject to conditions, such as
                     transportation, tourism, trading and distribution, and other prescribed sectors in
                     international treaties.
        -      Investment approval authority is vested in the Prime Minister for 'national projects', for a
               wide range of projects irrespective of capital level (from sea ports to telecommunications
               - and almost everything in between) and others with capital over VND 800 billion (from
               car manufacturing to real estate). The MPI issues the necessary investment certificate.
               For all other projects, investment approval authority is vested in provincial-level people's
               committees, with the local Department of Planning and Investment issuing the necessary
20
     As a pilot test of the concept of a parent company with foreign invested capital in Vietnam, on 3 August 2005,
     Matsushita Corporation was licensed by the MPI (with the approval of the Prime Minister) to establish a 100%
     FOE to manage its equity investments in 2 existing investment projects in Vietnam. This is the first (and
     expected to be the only) pilot of the parent-subsidiary company model in Vietnam's foreign invested sector
     prior to legislation implementing the new Law on Investment and Law on Enterprises.


                                                                                                                94
                 investment certificate. Procedures for investment registration and evaluation for
                 certification are set out in detail.
        -        Investment registration/evaluation files and procedures as well as implementation of
                 investment projects are regulated in detail.

        Forms of establishment as of 1 July 2006
        As of 1 July 2006, the options for foreign investment in Vietnam are as follows:
         -     Existing BCCs, JVEs, 100% FOEs and foreign invested shareholding companies
               ("FISCs", see below) under the Law on Foreign Investment in Vietnam which do not
               convert (see discussion above). Such FIEs and FISCs have a limited future; they cannot
               amend the terms of their investment licenses and will terminate upon expiry of limited
               duration stipulated therein.
         -     Existing BCCs, JVEs, 100% FOEs and FISCs which convert to operating under the 2005
               Law on Investment and Law on Enterprises As noted above, the forms into which
               existing FIEs may convert are proposed to be limited (in contrast to new FIEs, see
               below).
         -     Newly-established FIEs operating under the 2005 Law on Investment and Law on
               Enterprises in the form of limited liability companies, shareholding companies,
               partnerships or private enterprises.
         -     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. Indirect investment in the form of purchases of shares, bonds and other
               valuable papers; and through securities investment funds and other intermediary
               financial institutions is regulated under Vietnam's securities regulations (see Section 7.9
               on “Financial Services - Securities” above).

        Foreign Invested Shareholding Companies (FISCs)
        As the first step in Vietnam's effort to unify the laws governing foreign and domestic investment,
        the option for FIEs to convert into FISCs was introduced in 2003.21 The option was only
        available to a narrow range of JVEs and 100%FOEs.22 The first round of conversions approved
        by the Prime Minister (as recommended by the MPI) comprised 6 FIEs (Taya, Interfoods,
        Austnam, Taicera, Tung Kuang and Royal International) and the second round comprised 4
        FIEs (Chang Yih Ceramic, Full Power, Viet Cans and Ural-Trac Construction JV). This number
        was much lower than the target of 20-25 participants set by the MPI.

        FISCs are a hybrid form of foreign investment. They must implement the approved investment
        project of the former FIE and are 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 a FISC are governed by the 1999 Law on Enterprises - the same as
        for domestic shareholding companies - except with a number of special rules.23


21
      Decree 38-2003-ND-CP of the Government dated 15 April 2003 and implementing Joint Circular 08-2003-
     TTLT-BKH-BTC of the Ministry of Planning & Investment and Ministry of Finance dated 29 December 2003
22
      To qualify for conversion, a FIE had to satisfy a number of conditions: operating for at least 3 years in the
     industrial, agricultural or services sectors; profitable in the year immediately preceding conversion; fully paid-up
     legal capital. Excluded from eligibility for selection were: 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; iv) any FIE with total investment capital exceeding USD70 million or below USD1
     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.
23
      Under Decree 38 and Circular 08 above, a FISC must have a minimum of 3 shareholders (individuals or
     organizations), with at least one foreign founding shareholder. The total shareholding of the foreign founding
     shareholder(s) must be at least 30% of charter 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.


                                                                                                                      95
        For FISCs that convert (see discussion above), as well as newly-established foreign invested
        shareholding companies, they will be governed by the 2005 Law on Investment and Law on
        Enterprises as of 1 July 2006. Under the draft decree (discussed above), foreign invested
        shareholding companies must have at least one founding shareholder being a foreign investor.

        The FISC legislation provides for FISCs to list on the Vietnamese securities market, with listings
        on overseas securities markets being subject to approval from the responsible authority.
        However, given the new investment-enterprise regime as of 1 July 2006, it is not known whether
        the necessary enabling legislation will now be issued24 and, even if it is, whether FISCs that do
        not convert will be able to take advantage of it. Of note, Decision 238-2005-QD-TTg of the
        Government dated 29 September 2005 (see Section 7.9 on Securities above) now clarifies how
        to reconcile the maximum 100% foreign shareholding permitted under the FISC regime with the
        maximum 49% cap on foreign shareholding in listed Vietnamese companies.25

        Foreign Investment in Non-listed Vietnamese Enterprises
        Foreign26 shareholdings in/capital contribution to Vietnamese enterprises which are not listed on
        the Vietnamese securities market is currently regulated under Decision 36-2003-QD-BKH of the
        Government dated 11 March 200327 and Circular 73-2003-TT-BTC of the Ministry of Finance
        dated 31 July 200328. The range of Vietnamese enterprises in which foreign investors may
        purchase shares/contribute capital is restricted.29 The maximum share purchase/capital
        contribution by any one or more foreign investor is capped at 30%. Other restrictions also apply,
        such as: foreign shareholdings/capital contribution must be recorded at the business registration
        body; offshore executives of a foreign investor are not permitted to participate in management,
        even though Decision 36 entitles foreign shareholders to 'the same rights and interests as other
        Vietnamese shareholders'.         (Guidelines on foreign exchange controls for capital
        contributions/share purchases in unlisted Vietnamese enterprises were issued in May 2004, see
        Section 8.3 above.)

        Following an announcement by the MPI in early March 2005 and the Prime Minister's Instruction
        04-2005-CT-TTg dated 17 March 2005 on Acceleration of Equitization of State Owned
        Enterprises, the cap was expected to be abolished in most sectors (but not in prescribed areas,
        such as finance, banking and telecommunications) by the end of April 2005. In Instruction 04,
        the Prime Minister instructed the MoT to issue a new and expanded list of sectors in which
24
      Of note, in advance of enabling legislation, the FISC Taya Vietnam (100% Korean owned telecom cable
     company) launched a public share issue on HCMC's Securities Trading Center on 27 May 2005 and was listed
     in mid-February 2006. Capitalized at VND183 billion, Taya sold off 15% (over 2.44 million shares were sold, at
     VND18,000-29,100).
25
      If a FISC lists at a Securities Trading Centre, the 49% cap will apply only to the total shares offered to the
     public. So, eg, if the founding foreign investors of a FISC retain 90% of shares and offer 10% to the public, the
     49% cap will apply only to the 10% - with the result that a maximum of 4.9% of the FISC's shares may be
     purchased by other (non-founding) foreign investors. Under the FISC regime, a minimum of 30% of share
     capital of a FISC must be retained by the founding foreign investors and can never be traded, and is therefore
     always excluded from the listing of a FISC. So a maximum of 70% of share capital of a FISC may be listed, of
     which foreign investors would be permitted to hold and trade up to 49% of that 70%.
26
      In this context, 'foreign' comprises: (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. FIEs are
     not considered to be 'foreign' because they are Vietnamese business entities; however, until 1 July 2006, FIEs
     are not permitted to purchase shares or contribute capital to other enterprises (and only FIEs that convert or
     that are newly-established after 1 July 2006 will be permitted to do so).
27
      Decision 36 regulates procedures for capital contribution and sale/purchase of shares, selling price, and
     confirmation of shareholding or capital contribution.
28
      Circular 73 provides guidelines on the conduct of capital contributions/share sales, including on 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.
29
      Restricted to Vietnamese enterprises (including SOEs conducting equitization) 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, including agriculture, forestry and fishing; industry and processing; hotels and
     tourism; transport; storage; communications; technology & science; medical care and education. Under
     Decree 80-2005-ND-CP of the Government dated 22 June 2005, foreign investors are permitted to buy into
     equitized SOEs operating in sectors in which foreign investors are allowed to make 100% foreign investment
     or joint ventures.


                                                                                                                   96
        uncapped foreign shareholding would be permitted and instructed the MoF to submit by the end
        of June 2005 to the Government for its approval revised regulations on share purchases by
        foreign investors in Vietnamese businesses. Neither of these occurred (however, the cap on
        foreign securities holdings was lifted, see Section 7.9 "Financial Services - Securities" above).

        As of 1 July 2006, there will no longer be a 'cap' on share purchase/capital contribution by any
        one or more foreign investor. However, the level of foreign investment in a non-listed
        Vietnamese enterprise will determine whether the enterprise is a 'foreign invested enterprise' or
        a 'domestic enterprise' for the purposes of the 2005 Law on Investment and its regulatory
        requirements (in particular with respect to investment certification, see Section 8.7 above). If
        foreign investment is over 49%30, the enterprise falls into the category of 'foreign invested
        enterprise'. Foreign investors are permitted to be founding shareholders, as well as acquire
        shares from existing shareholders. Offshore executives of foreign shareholders are now
        permitted to participate in management. Under the draft decree (discussed above), foreign
        share purchases/capital contribution are subject to 'explanation' of a number of prescribed
        matters to the investment certification body (presumably, foreign shareholders also remain
        subject to registration at the business registration body).

8.9     Investment Incentives/Export Incentives

        International Trade Commitments
        For Vietnam’s accession to the WTO, it is expected to eliminate all incentives contingent upon
        export performance and local content requirements upon accession.

        Legal & Regulatory Framework
        Vietnam’s new Law on Investment includes provisions on incentives offered to new and existing
        and expanding prohects. Incentives are recorded in the certificates of (only) domestic projects
        subject to investment registration/evaluation and certification and in the certificates of (all)
        foreign projects. If domestic projects subject to business registration only wish to have their
        incentives recorded by the State administrative body for investment in an investment certificate,
        they must submit to the procedures for investment registration and certification.

        Vietnam’s Law on Corporate Income Tax and other relevant Decisions also govern the range of
        incentives made available to inestocrs.

        Investment Incentives
        A full range of investment incentives exist for domestic and foreign investors. These are
        currently being revised in light of Vietnam’s WTO commitments to eliminate all prohibited export
        contingent and local content based subsidies. For the 2003-2004 period, Vietnam notified the
        following investment incentives based on such criteria.

        - Preferential import tariffs contingent upon the use of local content for electronic goods
        manufacturers.
        - Land use, rental & tax exemptions/preferences, corporate tax preferences, import duty
        exemptions for domestic investors based on export performance
        - Preferential corporate tax for foreign investors based on export performance
        - Preferential development credit based on export performance
        - Preferential development credit based on local content for auto manufacturers
        - Preferential development credit, investment incentives, and trade promotion programs for the
        textile sector until 2010




30
     Of note, the cap on foreign securities holdings is currently 49%, see Section 7.9 "Financial Services -
     Securities" above.




                                                                                                         97
        Investment Incentives for High-tech Zones
        Preferential treatment available to both domestic and foreign investors in high-tech zones
        include31:
        -      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.

        Investment Incentives for Industrial and Export Processing Zones
        The following preferential treatment is available to newly established investment projects in
        industrial zones and export processing zones:32
         -      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.

        Government Guarantees
        The new 2005 Law on Investment offers a range of guarantees that can be given by the
        Government to support important investment projects, as currently under the Law on Foreign
        Investment. As of 1 July 2006, Government guarantees are available to guarantee loans,
        supply of raw materials, sale of products, payment and performance of other contractual
        obligations of important projects.

8.10 Technology Transfer Issues

        Legal & Regulatory Framework
        As of 1 January 2006, technology transfer (from abroad into Vietnam; forming capital
        contribution to a foreign investment project; from Vietnam to abroad; or domestic transfers) is
        regulated under Part 6, Chapter 36 of the Civil Code of Vietnam dated 14 June 2005.
        Registration of technology transfer contracts ("TTCs") remains mandatory. Until the proposed

31
     Decision 53-2004-QD-TTg of the Government dated 5 April 2004
32
     Decree 152-2004-ND-CP dated 6 August 2004 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;
     Circular 88-2004-TT-BTC dated 1 September 2004.


                                                                                                         98
        Law on Technology Transfer is passed (see below), Decree 11-2005-ND-CP of the Government
        dated 2 February 2005 and Circular 30-2005-TT-BKHCN of the Ministry of Science and
        Technology dated 30 December 2005 must be relied on for detailed regulations on technology
        transfer.

        Under 2005 Civil Code, and Decree 11, objects of technology transfer comprise: technological
        know-how and knowledge e.g. technological processes, formulae, technical specifications,
        technical diagrams, computer software, technical information and data in relation to the
        technology transferred, either accompanied or unaccompanied by machinery or equipment;
        solutions for rationalization of production and/or renovation of technology; support services for
        technology transfer in order that the transferee achieves the technological capability to produce
        products and/or services of the quality specified in the contract, e.g. selection of technology,
        installation and/or operating instructions, trial operations of equipment; consultation in relation to
        technology or business management, staff training; licenses for special business rights33.

        Decree 11 introduced a number of significant reforms as of 2 March 2005, all of which have
        been retained in the current draft of the proposed Law on Technology Transfer:
        -      All maximum limits on technology transfer fees are abolished in the case of private
               companies.
        -      Limits on technology transfer fees are no longer prescribed in the case of transferees
               using State funds (presumably including JVEs with State owned enterprises) but such
               fees must be approved.

         Decree 11 enshrined the significant reform introduced in July 2002 when the requirement for
         approval of TTCs was replaced with the requirement for registration (at the MoST or the local
         Department of Science and Technology) in the following cases: domestic TTCs; TTCs for
         technology from abroad to Vietnam with respect to investment projects not funded by State
         owned capital; and TTCs for technology 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.

        The maximum duration of a TTC remains capped at 7 years (or 10 years in prescribed special
        cases where technology is advanced).

        Capital Requirements
        The restriction that any legal capital (equity) in the form of technology transfer to a foreign
        invested project must not exceed 20% of legal capital was abolished in April 2003 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. This
        reform was enshrined in Decree 11. Now, the value of technology to be contributed as capital is
        subject only to agreement by the parties.

        Appraisal of Projects - Technology
        Technology is one aspect of (both foreign and domestic) investment projects that is subject to
        appraisal during the investment evaluation-certification process. Detailed criteria for technology
        appraisal under the new investment-enterprise regime as of 1 July 2006 have not yet been
        issued.34

        Legal Developments
        A Law on Technology Transfer has been drafted and is scheduled to be considered at the NA's
        May-June 2006 Session and then passed at its October-November 2006 Session. Various
        commentators have opined that the proposed Law is in fact now unnecessary and redundant,

33
     Decree 11 refers to "grant of franchise to use the commercial name, trademark and know-how of the transferor
     in order to conduct business activities in the commercial service sector". This was the first time franchising
     was expressly regulated under Vietnamese law. As of 1 January 2006, franchising is now regulated in detail
     under the 2005 Commercial Law, see Section 5.8 on “Franchising” above. The intended meaning of 'license
     for special business right" under the 2005 Civil Code will remain unknown until the Law on Technology
     Transfer is passed.
34
      Currently, guidelines on appraisal of technology and environment of investment projects (both foreign and
     domestic investment projects) are found in Circular 55-2002-TT-BKHCNMT of the Ministry of Science,
     Technology and Environment dated 23 July 2002.


                                                                                                                99
         as many aspects of it already regulated under more sophisticated laws, such as the Law on
         Intellectual Property 2005 (eg copyright in software), Commercial Law 2005 (eg franchising)
         and Competition Law 2004. The proposed Law perpetuates the State's tight control over
         technology imported from abroad into Vietnam by retaining the current requirement for
         registration (quasi-approval) of TTCs. Amongst other things, the proposed Law fails to
         distinguish between outright transfers of technology and limited-duration licenses to use
         technology; it introduces sub-licenses for technology service providers (eg technology appraisal
         services) at a time when the trend is to abolish sub-licenses (and it may well exclude foreign
         technology service providers from the Vietnamese market). Of concern, the Law suggests that
         the use of a technology service provider will be compulsory to obtain registration of TTCs.

8.10 Land Use Rights

        International Trade Commitments
         Under Annex H of the BTA, Vietnam has committed to creating favorable conditions for
         exercising the mortgage and transfer of land use rights. For up to three years upon entry into
         force or up to December 2004, U.S. investors are not allowed either to mortgage land use rights
         at foreign credit institutions operating in Vietnam or to transfer land use rights, except for the
         case of transfers of invested assets associated with the land within the lease period.

        Legal Framework
        Vietnam’s 2003 Law on Land governs land ownership and land use rights ("LURs"). All land in
        Vietnam is the property of the people and administered by the State. The State grants LURs to
        (foreign or domestic) organizations and individuals by issuing a certificate of LURs. Domestic
        organizations and individuals may be granted LURs by way of allocation or lease, and have the
        right to transfer, lease/sub-lease, bequeath/inherit or mortgage LURs. Foreign organizations
        and individuals are more restricted - they may only be granted LURs by way of lease of land
        from the State, and their rights to transfer or sub-lease LURs are restricted. Various decrees
        have been issued for implementation of the 2003 Law on Land.35

        Mortgage of Land Use Rights
        Since November 2002, FIEs have been permitted to mortgage the value of LURs with
        Vietnamese banks, joint venture banks, foreign bank branches and other credit institutions in
        Vietnam. 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 attached
        to land and associated land-use rights separately.36 Offshore lenders are currently permitted to
        take security over fixed assets such as buildings and factories in Vietnam, but are not permitted
        to take mortgages over LURs.37

        Land Pricing
        Pricing for land leasing is regulated by Decree 142-2005-ND-CP of the Government dated 14
        November 2005 on Land Leasing and Collection of Land Rent. Decree 142 applies to all
        individuals and economic entities, including FIEs, which directly lease land from the State. The

35
     Decree 181-2004-ND-CP of the Government dated 29 October 2004, effective on 16 November 2004 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. Decree 181 is supplemented by Circular
     01-2005-TT-BTNMT dated 13 April 2005, covering matters such as how to deal with various cases where an
     investor receives an assignment of LURs, leases LURs or receives LURs as capital contribution in order to
     implement a project, mortgages or guarantees using LURs in the case of a sub-lease of land in an industrial
     zone, high-tech zone or economic zone. Other decrees include: Decree 182-2004-ND-CP of the Government
     dated 29 October 2004 dealing with administrative penalties for breaches of the Law on Land; Decree 188-
     2004-ND-CP dated 16 November 2004 on methods of determination and frameworks of land prices; Decree
     197-2004-ND-CP dated 3 December 2004 on compensation, assistance and resettlement; and Decree 198-
     2004-ND-CP dated 3 December 2004 on land use fees.
36
     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.
37
     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 revised 2003 Law on Land. Reportedly, the Government was considering the
     introduction of this significant reform on a trial basis only. Of note, neither the new 2005 Law on Investment
     nor its implementing decree provides for this important reform.


                                                                                                                  100
        unit price for land lease rent applicable to Vietnamese enterprises is from 0.25% to 0.7% of the
        land price framework promulgated by the provincial people’s committee depending on the
        specific type of land. The land rent rate for a specific foreign invested project shall be decided
        by the provincial department of finance based on the list of land rent rates issued by the
        provincial or municipal people’s committee. The land rent under this Decree will not apply to
        foreign invested projects in which the Vietnamese party has been allowed to contribute that
        value of leased LURs as capital (e.g. joint ventures). Projects shall be exempt from land rent
        collection when they satisfy the 2 criteria of being engaged in especially encouraged investor
        sectors and being located in regions having especially difficult social and economic conditions,
        and projects for building houses for workers in industrial zones.

8.11 Ownership of Residential and Commercial Property
     Although foreign entities are not permitted to 'own' land (only lease LURs), they may own
     housing and other building works "attached to" land in Vietnam. Ownership is certified by the
     Ministry of Construction (rather than the MoNRE which certifies LURs) in a Certificate of
     Ownership of Housing. To be eligible for a certificate, a foreign individual must be permitted by
     law to own housing or construction works in Vietnam (very limited range) and a foreign
     organization must (i) have legal entity status, established and operating under Vietnamese law
     and (ii) lawfully own housing and construction works by way of investment in construction,
     purchase, acceptance of gift, donation, acceptation of inheritance, transfer.38

8.12 Portfolio Investment

        Remittances
        Decision 1550-2004-QD-NHNN of the State Bank of Vietnam dated 6 December 2004 regulates
        foreign exchange controls applicable to purchase and sale of securities by foreign organizations
        and individuals, including with respect to: (i) the 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.

        All purchases and sales of securities by foreign investors must be implemented in VND. Foreign
        currency funds may be converted in the following ways into VND for use towards purchases of
        securities, or the following VND sources may be used: (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; (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 SBV.

        For the purchase and sale of securities, a foreign investor must open a VND securities trading
        account at a securities company. Specialized, on-call foreign currency and VND deposit
        accounts must be opened at an authorized bank in Vietnam. No foreign currency conversion
        guarantee is provided to foreign securities investors.

        Decision 1550 does not govern foreign exchange transactions by foreign investors relating to
        foreign direct investment projects in Vietnam under the Law on Investment nor foreign exchange
        transactions by foreign investors relating to capital contribution to and purchase of shareholding
        in unlisted Vietnamese enterprises. For such guidelines, please refer to Section 8.3 on “TRIMS
        – Foreign Exchange Controls” above.




38
     Decree 95-2005-ND-CP of the Government dated 15 July 2005 provide for certification of ownership of
     housing and other building works, effective 10 August 2005; Law 56-2005-QH 11 on Residential Housing,
     effective 1 July 2006.


                                                                                                             101
        Income Tax
        Foreign individuals investing in securities (or making capital contribution/share purchases in
        Vietnamese enterprises) are exempt from personal income tax.39 Since 1 January 2004,
        withholding taxes for the repatriation of income have been abolished (see Section 10.6 on
        “Taxation” below for more details).

8.12 Grandfathering

        Investors must wait until the new 2005 Law on Investment's principal implementing decree is
        issued to know what grandfathering provisions are finally made. But the current draft decree
        (discussed in Section 8.8 above) mirrors current regulations, which expressly provide that any
        new legal provisions which offer foreign investors more favorable treatment than previous ones
        will apply automatically, from the date on which the legal provision providing for such favorable
        treatment comes into effect.

        Under the MPI's draft of the proposed decree regulating the conversion of existing FIEs to the
        new investment-enterprise regime as of 1 July 2006 (see Section 8.8 above), it is not
        compulsory for FIEs to convert their form - conversion of FIEs is at the discretion of investors.
        However, of note, FIEs that do not convert will be unable to amend their investment licenses or
        extend their duration.

        The 2005 Law on Investment provides the following investment guarantees in the event of
        changes in law or policies:
          -   Continuation of enjoyment of rights and incentives for a specified period in accordance
              with regulations of the Government;
          -   Deduction of the loss from taxable income in accordance with the law on tax;
          -   Change of the operational objective of the project;
          -   Consideration…[of]…paying compensation in necessary circumstances


9.      Transparency
        International Trade Commitments
        Under the BTA, Vietnam committed:
        -      to publish all laws, regulations and administrative procedures pertinent to economic and
               business matters, and to ensure that measures will be enforceable only if published;
        -      to allow opportunities for public comment during the formulation of such measures, and
               to provide access to economic and trade data;
        -      to designate an official journal for the publication of all measures
        -      to administer such measures in a uniform, impartial and reasonable manner
        -      to maintain administrative and judicial tribunals for the prompt review of administrative
               action relating to matters governed by the BTA, and the right to appeal adverse
               decisions.




39
      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. 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.


                                                                                                                102
9.1      Publication of Laws
         Implementing its commitment to ensure the publication of all legal instruments and regulations,
         a number of important reforms were introduced at the end of 2002 by amendment of the Law on
         Promulgation of Legal Instruments 1996. The 1996 Law (as amended 2002) and implementing
         legislation Decree 161-2005-ND-CP40, Decree 104-2004-ND-CP41 and Circular 04-2005-TT-
         VPCP42 require the mandatory publication of all legal instruments issued in Vietnam.

         All Vietnam's national-level legal instruments and agreements to international conventions are
         now published in the Cong Bao (or Official Gazette). To achieve this, the Government has
         increased expenditure to modernize the Official Gazette. The Official Gazette is now published
         daily in both hard copy and electronic form. All 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 of publication in the Official Gazette (unless a later effective date is stipulated in the legal
         instrument). Only in the case of a legal instrument of the Government or of the Prime Minister
         which provides for implementing measures in an emergency situation may an earlier effective
         date be stipulated.

         The 1996 Law (as amended 2002) and its implementing legislation provide for close and
         compulsory interaction between legislative bodies and Official Gazette offices. Any body
         promulgating a legal instrument must forward a copy to the Office of Government within 2 days
         of promulgation; and the Office of Government must publish such legal instruments in the
         Official Gazette within 15 days of promulgation.

         Foreign language translations of the index of the Official Gazette (and some legal instruments
         published therein) are also published, but are for reference only.

         Publication of legal instruments of provincial-level bodies is regulated under the Law on
         Promulgation of Legal Instruments of People's Councils and People's Committees 200443.
         Such legal instruments must be published in provincial-level Official Gazettes. Circular 03-
         2006-TT-VPCP44 provides detailed procedures for establishment and operation of provincial-
         level Official Gazette offices and for publication of provincial-level Official Gazettes.

        Vietnam is considering the establishment of an Electronic Gazette ("E-Gazette"). A pilot of the
        E-Gazette is scheduled for the end of 2006. The E-Gazette will post approved and draft laws as
        well as implementing regulations. It will provide a template and space for provincial-level Official
        Gazettes to be posted on the national webpage, and will offer a searchable database for official
        legal instruments in Vietnam to improve transparency in Vietnam.

9.2      Public Commentary:
         With the aim of improving the quality of legal instruments, the 1996 Law (as amended 2002)
         and its implementing legislation provide for the gathering of public and other opinions on draft
         legal instruments in Vietnam. During the drafting process, depending on the nature and
         substance of a draft legal instrument, the drafting body must facilitate (by sending copies
         directly to) other bodies, organizations and individuals to participate by providing their opinions.
         Decree 161-2005-ND-CP provides guidelines on responsibilities, form and methods of
         gathering opinions on drafts of national-level legal instruments (including public opinion on draft
         laws and ordinances of the NA). The Vietnam Chamber of Commerce and Industry has been
         assigned a key role in collating opinions of enterprises. Other means of gathering opinion
         include direct solicitation, conferences and seminars, and via the mass media and internet. The
         body gathering opinions must allow minimum 20 days for bodies, organizations and individuals

40
     Decree 161-2005-ND-CP of the Government dated 27 December 2005 Making Detailed Provisions for
     Implementation of certain articles of Law on Promulgation of Legal Instruments 1996 (As Amended 2002)
41
   Decree 104-2004-ND-CP of the Government dated 23 March 2004 Implementing the Law on Promulgation of
   Legal Instruments 1996 (As Amended 2002)
42
   Circular 04-2005-TT-VPCP of the Office of Government dated 21 March 2005
43
   Law 31-2004-QH11 on Promulgation of Legal Instruments of People’s Councils and People’s Committees
   dated 3 December 2004
44
   Circular 03-3006-TT-VPCP of the Office of Government dated 20 February 2006 on Organization and
   Operation of Provincial Official Gazettes


                                                                                                          103
      directly affected by the legal instrument to contribute their opinions. Such opinions must be
      considered when finalizing the legal instrument. A summary of opinions gathered must be
      included in the dossier for the final draft legal instrument when it is submitted to the competent
      authorities for consideration and approval.

9.3   Administrative Review & Judicial Appeal:
      Individuals and organizations are entitled to lodge petitions and appeal against administrative
      decisions or actions to Vietnam’s administrative courts under the 1998 Law on Complaints and
      Denunciations (as amended 2004 and 2005)45 and the new 2004 Civil Procedure Code46. The
      amendments to the Law on Complaints and Denunciations meet the fundamental BTA/WTO
      obligations that there be an effective right to appeal for government decisions.

      A complainant must first lodge its complaint with the body which issued the administrative
      decision. The deadline for lodging a complaint is 90 days from the date of receipt of the
      administrative decision. The first complaint must be dealt with within 30 days of receipt (in
      complicated cases, may be extended to 45 days; in remote and distant areas, the time-limit is
      45 days, extendable to 60 days). If the complaint is not dealt with within the time-limit, the
      complainant may proceed to lodge its complaint with the superior administrative body or initiate
      legal proceedings at an administrative court. The same process applies for denunciations of
      actions of administrative bodies. Issues relating to customs, taxes, licensing fees and charges
      are all under the purview of administrative courts.


      Legislative Developments
      A new Law on Complaints (scheduled for first reading at the NA's October-November 2006
      Session and then approval at its May-June 2007 Session) is expected to introduce independent
      Administrative Tribunals. The Administrative Tribunals are expected to operate as a unified
      executive-branch institution at the national, provincial and local levels, independently of
      ministries and people’s committees. The Tribunals will handle complaints by citizens and
      businesses against government decisions; and its rulings can be appealed to Vietnam's
      administrative court.

      To accommodate the reforms allowing for appeal of almost all administrative decisions to the
      courts, Vietnam’s administrative court procedures must be upgraded and modernized. To this
      end, an Ordinance on Procedures for Dealing with Administrative Cases is being drafted. It is
      expected streamline administrative court procedures in the next several years.

9.4   Judicial Reform:
      In 2002, judicial tasks were transferred from the MoJ to the Supreme Court of Vietnam in an
      effort to develop a more independent judiciary.47 Vietnamese courts and the judiciary now have
      greater autonomy both in dealing with substantive matters brought before them and in arranging
      the funds for their operation.48 But, in an effort to limit corruption and restore public confidence
      in the judiciary and procuracy, the activities of judges and prosecutors are prescribed.

      Amendments 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.

      In July 2005, Vietnam's Supreme Court recently published all decisions (103 in total) made by
      the Judges' Council in civil, commercial and labour cases in the years 2000-2004. This is an
      important step towards transparency. Also, it enables other courts to refer to the Supreme
      Court's decisions. Vietnamese law requires the publication of Supreme Court decisions, but it
      had never in fact occurred before. Decision 49 of the Politburo dated 2 June 2005 dealing with
      legal reform requires that judgments to be published from now on.

45
   Effective as of 1 October 2004 and 1 July 2006 respectively.
46
   Effective as of 1 January 2005.
47
   Resolution 08-2002-NQ of the National Assembly dated 2 January 2002 on Key Reforms in the Judicial Sector
48
   Ordinance on Judges of People's Courts and Ordinance on Prosecutors of the People's Procuracy, October
   2002


                                                                                                         104
9.5   Enforcement of Civil Judgments:
      Since 2002, Vietnam has attempted to improve the enforcement of civil judgments, particularly
      in the provinces.49 Effective as of 1 July 2004, a new Ordinance on Execution of Civil
      Judgments50 provides for the 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.

      Legislative Developments
      A new Code on Enforcement of Judgments is currently being drafted to address ineffective
      enforcement of court decisions in Vietnam. It will deal with enforcement of both criminal and
      civil judgments. It is scheduled to be considered and passed at the NA's October-November
      2006 Session.




49
   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
50
   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 predecesso)


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