To: Ministry of Planning and Investment

Transcription

1 MINISTRY OF INDUSTRY AND SOCIALIST REPUBLIC OF VIETNAM TRADE Independence-Freedom-Happiness Ref. No. 3491a/BCT-KH Hanoi, Apr. 21, 2016 Re: follow-ups on issues raised at Annual VBF 2015 To: Ministry of Planning and Investment In response to Official Letter No. 175/BKHDT-DTNN, dated Jan. 11, 2016, of the Ministry of Planning and Investment, requesting updates on the Annual Vietnam Business Forum 2015, the Ministry of Industry and Trade hereunder files in its responses on issues which fall under the Ministry of Industry and Trade s roles and responsibilities in the attachment to this Official Letter. We kindly request the Ministry of Planning and Investment to include these reponses in the consolidated report to the Prime Minister. C/c: - As listed on top; - Filing: Corres. Planning (02) MINISTER Tran Tuan Anh

2 MINISTRY OF INDUSTRY AND SOCIALIST REPUBLIC OF VIETNAM TRADE Independence-Freedom-Happiness RESPONSES TO COMMENTS AND RECOMMENDATIONS OF THE WORKING GROUPS IN RELATION TO INDUSTRY AND TRADE SECTOR (Attachment to Official Letter 3491a/BCT-KH dated April 21, 2016) 1. Development of renewable energy: To meet its need for energy that is increasing at a rate of 15% per year, Vietnam currently prioritizes low-cost energy sources such as hydropower and thermal power. These energy sources need up to 10 years for project design, construction and operation. It may be time for Vietnam to develop renewable energy. With a clear policy scheme and direction, wind power in Vietnam may attract substantial private sector investment, both domestic and international, and help create jobs along the way. Over the years, the Ministry of Industry and Trade (MOIT) has been searching for, studying, releasing or advising the Prime Minister to release various policies to promote the development of renewable energy, to be specific: a) Policies developing renewable energy Fossil fuels are exhausting, and the potentials for primary energy in Vietnam are few, so to guarantee energy security and contain coal import for energy generation in the future, the Vietnamese government has had in place policies for renewable energy (RE) development, including: - Decision No. 2068/QD-TTg, dated Nov. 25, 2015, approving the National strategy for RE development by 2030 and vision to 2050, which defines the goals, stated policies, directions and pathways for RE development in Vietnam; - The Prime Minister requested that MOIT reviewed and revised the national master plan for power development, , with a vision to 2030 (Revised Power master plan VII) which was approved by the Prime Minister in Decision No. 428/QD-TTg, dated March 18, Under this Decision, RE as a percentage of the total generation capacity as well as RE output will increase over time, to be specific: + By 2020, the RE will account for 9.9% of the total generation capacity and RE output will account for 6.5% of the total power output. + By 2025, RE will account for 12.5% of the total generation capacity and RE output will take up 6.9% of the total output. + By 2030, RE will account for 21.0% of the total generation capacity and RE output will account for 10.7% of the total power output. - Over the years, MOIT has had in place several regulations aimed to promote RE development, including a Decision on wind power development support in Vietnam (Prime Minister s Decision No. 37/2011/QD-TTg, dated June 29, 2011); a Decision on biomass power development in Vietnam (Prime Minister s Decision No. 24/2014/QD-TTG, Mar. 24, 2014); a decision on support for power generation using solid wastes in Vietnam (Prime Minister s Decision No. 31/2014/QD-TTg, dated May 5, 2014), and Decision No. 942/QD-BCT of the Minister of Industry and Trade, providing the feed-in tariffs for biomass power projects in 2016, dated Mar. 11, The Minister of Industry and Tarde also released implementing circulars for the above mentioned decisions, including Circular No. 32/2012/BCT-TT, Circular No. 06/2013/BCT-TT on wind power, Circular No. 29/2015/BCT-TT and Circular No. 32/2015/BCT-TT on solid waste power and biomass electricity, among others. b) Wind energy in RE generation - The RE master plan sets specific objectives for wind power growth at 2.32 TWh ~ 1,160 MW ( ), and 13.5 TWh ~ 6,750 WM ( ).

3 - Revised Power master plan 7 (March 2016): wind power expected to increase from the current 140 MW to 800 MW by 2020, about 2,000 MW by 2025 and 6,000 MW by Vietnam is also looking for special mechanisms to promote RE development, including wind power, along the line of the approved objectives. - Following the Prime Minister s guidelines, MOIT is rescanning on-going wind power projects to re-assess whether the power tariff under the Prime Minister s Decision No. 37/2011/QD-TTg, June 29, 2011, at 7.8 US cents per kwh is the right one, or a new tariff needs to be proposed to safeguard investors interests while leveraging the full potentials for wind power development in Vietnam. 2. Long-term industrial policies: Vietnam has been entering into multiple international treaties such as the Vietnam-EU free trade agreement or TPP. Lower tariff will expose Vietnam to more intense competition from other countries in the region. That requires Vietnam to have in place viable long-term industrial development policies to attract investment in manufacturing. Vietnam has been signing many Free trade agreements, including TPP, EVFTA and others. While on the one hand, lower tariff will expose Vietnamese firms to more intense competition from foreign companies, on the other hand, through these FTAs, Vietnamese businesses will also be able to gain easier access to major markets around the world like USA, Japan and EU countries, which is a good chance to promote production. In the years to come, when the regulatory framework and business environment settle down, maintaining long-term policies in line with international commitments will be a matter of course, and the Vietnamese government also believes that having a stable regulatory environment is a selling point to attract foreign investment in Vietnam. MOIT will take into account this recommendation in the making of policies for local industrial development and proposes that relevant organizations and stakeholders, including EuroCham, JBAV and others to strongly support, cooperate, consult, discuss and share information with us in the process of policy making and implementation to ensure that industrial policies in Vietnam work effectively and best support business activities of any parties involved. 3. Popularizing modern retail business: for retail businesses to enter the market, Vietnam needs to provide clear checklists, criteria and procedures for ENT, as well as articulate the inspection checklists and criteria of the Police Department, Health Department and the sector s master plan; and disclose information on how to apply for a store license, percentage of such a license successfully obtained, assessment time, among others. a) Economic needs testing (ENT) This requirement has been made clear in regulatory documents related to foreign investment in goods distribution, including Decree No. 23/2007/ND-CP, dated Feb. 12, 2007, providing details on the Trade Law regarding goods trading and activities directly associated with goods trading by companies with foreign equity in Vietnam; Circular No. 08/2013/TT-BCT, dated Apr. 22, 2013 of MOIT, providing details on good trading and activities directly associated with good trading by companies with foreign equity in Vietnam. Accordingly, setting up a retail establishment other than the first retail store by an FDI enterprise is subject to ENT requirement, taking into account the number of existing retail outlets, market stability, population density and the size of the rural/urban district where the retail outlet is expected to be located. The provincial People s Committee (PC) will set up an ENT board to consider the justification for having a retail outlet other than a first one. The provincial level PC is the top local

4 government agency responsible for the functioning of the ENT board in line with applicable laws, and guarantee the objectivity of the board s ruling. In recent years, most decisions of economic needs testing board support FDI distribution going concerns that have significant contribution to Vietnam s development. To make it easier for FDI companies in their business enterprises, Vietnamese laws rule out ENT requirement for retail outlets with a space of less than 500 m 2 located at a site designated for goods trading and with established infrastructure. This rule opens the door for distribution business at even a higher extent than Vietnam s WTO commitments, and is a new step forward on the path of simplifying procedures and lifting over time barriers for foreign investment in the distribution sector. b) Inspection checklists and criteria of the Police Department, Health Department, and site s overall zoning plan Regulations associated with other sectors such as the police (fire control), Health Department (food safety), Natural Resources and Environment Department (environment) do not just apply to FDI companies but any retailers. c) Disclosure of information on store licensing and review time Administrative procedures and review time related to setting retail outlets by FDI companies have been specified in the regulatory documents listed in section 1 above, and publicly posted on the MOIT s website ( 4. Foreign investment in logistics: allowing foreign wholly-owned enterprises providing CPC 742, 748 services is recommended. Refusal by HCMC Planning and Investment Department to license companies doing business in this field may constitute a breach of WTO commitments. Following the Prime Minister s guidelines set forth in Official Letter No. 3054/VPCP-QHQT, May 5, 2015, on Sep. 24, 2015, MOIT released Circular No. 9911/BCT-KH to Planning and Investment Departments, Authorities of industrial parks, export processing zones, economic zones and hi-tech zones, in line with the country s pathway for opening the local logistics market to foreign investment. On March 10, 2016, MOIT had Official Letter No. 2050/BCT-KH sent to HCMC People s Committee regarding investment registration certification for foreign wholly-owned enterprises doing business in the logistics sector, which specifies that: a) According to Article 2, Resolution No. 71/2006/QH11, Nov. 29, 2006, of the National Assembly, adopting the Protocol for accession to the World Trade Organization s Articles of Association, in case Vietnamese laws and regulations are inconsistent with the provisions of the World Trade Organization s Articles of Association, this Protocol and enclosed Schedules, the provisions of the World Trade Organization s Articles of Association, this Protocol and enclosed Schedules shall apply. b) As such, for freight agency services (CPC 748), so far foreign investors can still set up foreign wholly-owned enterprises in Vietnam to provide these services. Amendments and updates to Decree No. 140/2007/ND-CP have been integrated by MOIT in the government s agenda for 2016 and are expected to be submitted to the government in November While the draft is being finalized before being submitted to the government for review and release of a revised Decree No. 140/2007/ND-CP, provisions of Resolution No. 71/2006/QH11 and MOIT s guidance provided in Official Letter No. 9911/BCT-KH shall apply.

5 5. Issues related to insurance policies a) Procedures for registration and application processing at MOIT: procedures will be kept as simple as possible, while guaranteeing transparency and minimizing cost for applicants. MOIT has now applied information technology systems in accepting and processing registration applications, and is providing Level 4 (highest level) on-line public services in this regard. Applicants needing to register using the sample contract and general transactional criteria may submit applications by s or postal mail, rather than hand delivery at consumer protection offices. The entire internal application acceptance and review process will be done on electronic and software systems, which helps improve transparency and avoid hassles for service users. To make it more convenient for applicants and life insurance firms in particular, as for updates of applications, MOIT has also made clear in the regulations that a rejection notice must enclose a detailed list of deviations from the rules and how to correct such discrepancies to help applicants finalized their applications. In addition, on Dec. 25, 2015, MOIT, through Official Letter No. 1040/QLCT-P8, informed life insurance businesses on common mistakes related to insurance terms and codes, and correction guides to help applicants save time and be more autonomous in the way they lodge applications to MOIT. b) While doing its job, MOIT always tries to make the best efforts to best facilitate businesses activities. Along the line of applying Decision No. 35/2015/QD-TTg, the Ministry of Finance (MOF) and Vietnam Insurance Association had made proposals in writing to the Prime Minister requesting considerations and support to ease bottlenecks and challenges for businesses. Based on petitions from MOF and Vietnam Insurance Association, and in follow-ups of Vice Prime Minister Hoang Trung Hai s guidelines, MOIT had Official Letter No. 1538/BCT-QLCT, dated Feb. 24, 2016, reporting to the Prime Minister on the outcomes of applying Decision 35. In the meantime, MOIT also made a few recommendations to help tackle the problems raised by MOF and Finance Association, including suggestions to the Prime Minister to extend registration timelines for insurance firms that filed registration applications on time but have not been able to complete the registration process pending amendments and updates of policies to adhere to applicable laws and ensure protection of consumers interests. In response, the Prime Minister stated his position in Letter No. 2039/VPCP-KTTH, dated Mar. 28, 2016, on applying Decision No. 35/2015/QD-TTg, Aug. 20, 2015, regarding amendments and updates of the Prime Minister s Decision No. 02/2012/QD-TTg, dated Jan. 13, 2012, releasing the List of essential goods and services subject to registration of sample contracts and general transactional criteria, in which he emphasized that involved parties should strictly comply with Decision No. 35/2015/QD-TTg, and tasked MOIT to review and give specific guidance on the timeline to finish contract registration for insurance firms that filed registration applications on time, to stay in line with existing rules. MOIT is now working with MOF and relevant agencies to follow the Prime Minister s instructions, and jointly set in place registration schemes that both make it as easy as possible for businesses to complete the procedures, and safeguard consumers interests and compliance with designated laws and regulations.

6 6. Corporatization of specific companies affiliated to MOIT including PetroVietnam, Vinacomin, EVN and GENCO3: the business community is concerned about the pace of this corporatization process, both in terms of numbers and quality. While some companies had engaged in equity offering transactions, the government still holds on to more than 75% of the equity, thus take full control of the business. There is a need for a pathway to increase private sector s holding in companies that the government does not necessarily need to hold controlling shares. Offering shares to a strategic investor in some companies has not been done, or the what is going on with the corporatization process or share offering transactions is not disclosed. Progress of corporatization and divestment at MOIT affiliated companies: MOIT has taken steps for specific ministry s corporations to go public in line with the schedule approved by the Prime Minister, with the following outcomes to date: In , MOIT advised groups of companies (PVN, EVN, TKV, Vinachem and others) under its jurisdiction to start rolling out the Plan for state-owned enterprise restructuring approved by the Prime Minister for Corporatization: MOIT has finished restructuring, reform and corporatization of nearly 50 companies (including 35 businesses affiliated to a parent company or umbrella corporation, 15 businesses affiliated to the ministry, one of which is a group of companies). Some of these firms had achieved high performance, such as Vietnam Chemicals Corp., TKV, Vietnam Textile and others. Some are in the IPO stage and finishing up steps to go public within Q2/ Divestment: Groups of companies and corporations under MOIT have been doing a good job in terms of divestment from non-core businesses (finance, banking, insurance, real property etc.). By far, these groups of companies and corporations have finished divestment from more than 110 businesses (Vietnam Textile 23 companies; TKV 18 companies; PVN 12 companies; Vietnam Chemicals 17 companies, and so on), with 100% of plan achievement. In respect of the comment that some companies had started offering shares, but the government still holds more than 75% of the equity and full control of the business. There should be a roadmap to increase private equity in companies that do not necessarily need to be controlled by the government. As it started the corporatization process, MOIT strictly followed the provisions of the Prime Minister s Decision No. 37/2014/QD-TTG, June 18, 2014, providing criteria for classification of stateowned enterprises ( Decision 37 ). The decision rules that the private sector may get involved in many vital sectors, where the government only holds on to its controlling status in some industries or sectors that are directly involved with defense and national security, or as defined by the government. To continue divestment from lines of business that the government does not necessarily need to hold a controlling share, the Prime Minister is advising amendments of Decision 37 in ways that allows further reduction of sectors and equity that the government is holding. Comment: offering shares to a strategic investor in specific companies has not happened, or details about the corporatization process or transactions are not disclosed When it comes to disclosure and transparency in corporatization and divestment in companies affiliated to MOIT, the provisions of Decree No. 59/2011/ND-CP, July 18, 2011, on converting government wholly-owned enterprises to joint stock companies have been strictly adhered to. Nevertheless, a few companies,

7 due to the lack of a strategic investor as they tried to go public, has encountered some challenges in share offering. The restructuring, reform and corporatization process often faces the following obstacles: - Valuation is difficult or lengthens given the particular nature of assets a few companies hold, while mechanical manufacturing firms working in agriculture and rural development often had poor performance, thus not appealing to investors when they try going public. - As companies that go went public are mostly large firms, serving niche markets and being subject to sales prices control by the government, preparation time needed for them to go public or get out of existing troubles often lengthens. Actions to be taken going forward: - Concentrated review and restructuring of manufacturing and trading businesses within groups of companies and corporations so as to focus on core businesses, while putting inefficient or unnecessary projects and investments on the market for acquisition and merger to pool resources for core businesses; - Tracing and rolling out the successor of Decision 37 that is about to be released by the Prime Minister; determining the exact holdings and divestment scale in the companies; having in place plans and pathways for divestment in groups of companies and corporations from non-core businesses, especially in finance, insurance, banking and securities that are closely associated with the current financial market restructuring plan; - In the near term, MOIT will hold an international forum calling on foreign investors to participate in the corporatization process of businesses in the industry and trade sector, buy shares from companies that went public, acting as strategic investors to support firms in transforming and restructuring governance, finances, technology, brand names, product quality and so on, and ensuring good performance for the firms (the forums are expected to launch in Hanoi and HCMC in Q2/2016). - MOIT will invite business participants to these forums and provide sufficient information on companies of interest by international norms to foreign investors. - Face-to-face dialogues with foreign investors looking for opportunities of partnership or equity financing in Vietnamese firms, and interested in becoming strategic investors; - Inviting relevant ministries, line agencies and the government to these events to respond to questions and concerns on mechanisms and policies from foreign investors interested in buying shares from Vietnamese companies. 7. Automobile industry a) As for the local automobile industry, MOIT has advised the government to introduce specific policies to support and promote the growth of the local automobile industry, including: - Prime Minister s Decision No. 1168/QD-TTg, July 16, 2014, approving the Master plan for the automobile industry in Vietnam by 2025 and vision to 2035; Prime Minister s Decision No. 1211/QD- TTg, July 24, 2014, approving the Zoning plan for the automobile industry in Vietnam by 2020 and vision to (?). The Master plan and Zoning plan for the automobile industry in Vietnam give preference to (i) trucks and passenger cars of 10 seats or more; (ii) passenger cars with up to 9 seats; (iii) specialized vehicles; and (iv) supporting industries. - Prime Minister s Decision No. 229/QD-TTg, Feb. 4, 2016, on mechanisms and policies to roll out the Master plan and Zoning plan for the local automobile industry, with details on support and incentives granted to preferred cars and other policies to promote the growth of the local automobile industry.

8 b) Excise tax, tariffs etc. On April 6, 2016, at the 11 th session of the National Assembly Term XIII, the National Assembly passed the Excise Tax Law which will come into effect on July 1, Accordingly: - The excise tax rate for CBU 9-seater or smaller passenger cars, with a 1,500 cc engine or smaller will have the tariff cut from the current 45% to 40% from July 1, 2016, before sliding down to 35% from Jan. 1, The tax rate for cars with 1,500-2,000 cc engine cars will remain at the current 45% till Dec. 31, 2017, before dropping to 40% from Jan. 1, Cars with 2,000-2,500 cc engines will have their rates remain at the current 50%. - While cutting taxes for smaller engine cars, the National Assembly seems determined to raise taxes for cars with 2,500 cc or larger engines: + To be specific, the excise tax rate imposed on cars with engines larger than 2,500 cc 3,000 cc will increase from the current 50% to 55% from July 1, 2016, before further increasing to 60% from Jan. 1, % will be the tax rate applied to cars with engines of over 3,000 cc 4,000 cc, and 110% is applied to over 4,000-5,000 cc engine cars; 130% for over 5,00o-6,000 cc engine cars, and 150% for over 6,000 cc engine cars. - New tax rates will go live from July 1, 2016, while all these cars are now subject to a common rate of 60%. - For motorhomes regardless of engine size, 70% will be the applicable rate from July 1, 2016, which will go up to 75% from Jan. 1, In addition, MOIT has also advised the government to release Decree No. 111/2015/ND-CP, dated Nov. 3, 2015, on developing supporting industries, of which, car assembling will be one of the six preferred industries in this Decree. Policies related to the automobile industry tend to center on preferred cars. Specific incentives for supporting industry development will be considered by the government on a case-by-case basis, depending on the project size and localization pathways wheeler industry As for the 2-wheeler industry, the market in Vietnam has entered into a stable and sustainable stage with mostly motorcycles of 150 cc engines or smaller. The market total consumption is about 2.8 units per year, with a localization rate of more than 95%, meeting the domestic demand (for less than 150 cc engine bikes). Honda Vietnam alone exports about USD300 million in components and parts a year. Regarding the recommendation to consider reducing excise tax for over 125 cc engine bikes, which are mostly imported for domestic consumption, any excise tax cut for over 125 cc engine bikes through specific roadmaps will need careful considerations, assessments and review of the local market developments, followed by recommendations made to the Ministry of Finance for further reporting to relevant authorities for consideration and decision making on whether excise tax for over 125 cc engine bikes should be cut. 9. International economic integration

9 Communication and dissemination of information on international economic integration, particularly on the negotiations and commitments under free trade agreements (FTAs) are a constant priority and a high item on the agenda of MOIT. In various FTA negotiations, MOIT has actively disclosed information in line with prevailing rules, especially the Prime Minister s Decision No. 06/2012/QD-TTg, Jan. 20, 2012, on business community engagement in relation to international trade agreements; with specific activities conducted including (i) consultation with the business community in the drafting of negotiation plans; (ii) inviting representatives of business associations and firms to participate in specific sideline activities in the negotiations to capture information and make visible the standpoints of the associations or subsectors; and (iii) providing updates on MOIT s websites when each negotiation round completes. Immediately after completion of FTA negotiations, MOIT actively articulated key information about the commitments made, through (i) posting FTA agreements on MOIT s websites; (ii) holding various meetings and workshops in provinces/cities to explain the key contents of the FTAs, such as the Trans-Pacific Partnership (TPP) and Vietnam-EU Free trade agreement (EVFTA); and (iii) answering questions from the public on the mass media and other press publications or websites. Once FTAs are signed, MOIT would start education and communication efforts in a professional manner in each municipality or by specific sectors, such as textile, footwear, fishery, electronics, agriproducts, finance-banking and so on. MOIT would also send representatives to face-to-face dialogues with the business community and other stakeholders to help companies understand any commitments made related to taxation, tariffs, services, rules of origin and other regulations that may apply to their lines of business, so as to identify specific opportunities and challenges that they may face, thus have in place viable production and trading plans, enhance competitiveness for their products, and take advantage of the benefits created by FTAs. As for preparation time needed by companies, it should be noted that Vietnamese firms have the opportunities to understand and get familiar with the commitments made in the FTA that Vietnam is a signatory to. In the negotiations for new generation FTAs, the government s approach is to open up the local goods market over a year span rather than immediately when the FTA comes into effect. Negotiating for such a long period is to give local businesses enough time to get prepared, improve their capacity and get used to competition pressure from outside.