CHAPTER X INFRASTRUCTURE 10.1 Public Private Partnerships Key Legislation > Law on Investment (No. 59-2005-QH11) > Decree on Investment on the Basis of Build- Operate-Transfer [BOT), Build-Transfer-Operate (BTO) and Build-Transfer (BT) Contracts (No. 78-2007-ND-CP) ("Decree on BOT") > Law on Tendering [No. 61-2005-QH11) Up till now, the Vietnamese Government has relied primarily on the State Budget and official development assistance CODA") to fund the development of infrastructure in Vietnam. However, given the quick pace at which its economy is growing, these sources of funds are insufficient to satisfy Vietnam's infrastructure development needs. In order to fill this funding gap, Vietnam must look towards the use of Public Private Partnerships ("PPPs"), which involves the collaboration between the Government and the private sector to carry out projects, where the responsibilities and risks are shared by both the Government and the private sector. There is currently no single law specifically governing PPPs in Vietnam, however there are a number of laws and regulations which apply to PPPs, the most important of which are set out in the sections below. 10.1.1 Law on Investment The Law on Investment covers investments from both domestic and foreign sources. Investments are categorized into 'direct investments', where the investor participates directly in the management of the investment activity and 'indirect investments', where the investor only participates passively in the management of the investment activity. The table below sets out the various forms of direct and indirect investments.
Direct investments establishment of wholly foreignowned or domestic-owned companies; establishment of joint venture companies between foreign and domestic investors; investment in contractual forms, including business co-operation contracts, BOT contracts, build-transfer-operate ("BTO") contracts and build-transfer contracts; investment in business development; purchasing shares or contributing capital to participate in the management of investment activities; mergers and acquisitions; and other forms of direct investment Indirect Investments purchase of shares, bonds and other valuable papers; investment through securities investment funds; and investments through other intermediary financial institutions Investors are generally permitted to invest in all sectors and industries which are not prohibited by iaw. Sectors in which investment is prohibited are set out in a 'Prohibited List', while sectors in which investment is subject to certain conditions are set out in a 'Conditional List'. Additionally, conditions provided by the Government also apply to foreign investors in accordance with Vietnam's WTO commitments. The Law on Investment states that investors are permitted to carry out various forms of direct investment, including BCC, BOT, BTO and BT. In relation to infrastructure projects, Article 23(2) of the Law on Investment provides as follows: Investors shall be permitted to sign a BOT, BTO and BT contract with the competent State body in order to implement projects for new construction, expansion, modernization and operation of infrastructure projects in the sectors of traffic, electricity production and business, water supply or drainage, waste treatment and other sectors as stipulated by the Prime Minister of the Government. The Government shall provide regulations on investment sectors; on the conditions, order, procedures and methods of implementation of investment projects; and on the rights and obligations of the parties implementing an investment project in the
contractual form of BOT, BTO and BT." 10.1.2 Decree on BOT, BTO and BT Contracts The Decree on BOT was passed by the Government in May 2007, which replaced the previous existing regulations on BOT, BTO and BT contracts. Under the Decree on BOT, the Government encourages the implementation of projects for constructing and operating new infrastructure facilities or for renovating, expanding, modernizing, operating or managing the following existing works: Roads, bridges, tunnels and relevant utility facilities; Railways and tramways; Airports, seaports, river-ports and ferry-landings; Water plants, drainage, waste or sewage treatment systems; Power plants, power transmission lines; and Other infrastructure project works as decided by the Prime Minister. The Decree on BOT prescribes requires that investors comply with minimum equity requirements for carrying out an infrastructure project based on the total investment capital of the project. The table below sets out the relevant minimum equity requirements: Total Investment Capital Minimum Equity Ratio Less than VND75 Billion 30% Between VND75 Billion to below 20% VND1,500 Billion VND1.500 Billion or more 10% The diagram on the following page sets out the procedure for the identification, preparation, bidding, negotiation and implementation of BOT, BTO, BT projects set out by the Decree on BOT.
ASA organises I competition. ln\ negotiate Project Contract Line Ministries & PPCs (collectively, the assigned state agencies or "ASA") make & approve lists o f potential BOT projects Investor selected by ASA Project lists with basic details sent to MPI & other relevant Ministries & Agencies for comment Investor approves investment proposal in accordance with Law on Construction" Negotiate, signing project agreement and related contracts MPI & other Ministries & Agencies comment within 30 days Any guarantee requirements must submit to Prime Minister for approval Line Ministries / ASA reach agreement with MPI & other Ministries & Agencies on comments ASA leads negotiation with necessary assistance from ASA publishes the lists of projects Investor submits project dossier to MPI ASA appoints consultants to prepare proposals & bidding dossiers MPI sends to other Ministries & Agencies for comments within 3 days Unsolicited project proposals by investors enter system here ASA appraises project proposals & approves them MPI & other Ministries & Agencies submit comments within 15 days to MPI Within 15 days MPI makes decision & issues investment certificate
5.1.3 Law on Tendenng The Law on Tendering does not require that public tendering be carried out for all projects that originate from the State (or one of its agencies). Public tendering is only mandatory where more than 30% of a project is financed by the State. "Finance by the State" is defined to include the use of State Budget funds, Government guarantees for credit facilities, credit facilities for investment and development of the State, investment and development funds of state owned enterprises and other capital funds managed by the State-Certain exceptions apply to the public tendering requirement, including the following: a) limited tendering, in cases where a foreign donor providing the financing source for the project requests for this or where the project is of a highly technical or of a research or experimental nature for which only a limited number of bidders are capable of satisfying the requirements of the project; b) direct appointment, including in cases where a foreign donor providing the financing source for the project requests for this, in special cases such as natural disaster or war, in projects of a confidential nature or national interest where the Prime Minister deems it necessary; c) direct procurement, where a contract was signed for a tender package with similar contents within the previous six (6) months; d) in special cases, with the approval of the Prime Minister. 93 i
.LAW ON INVESTMENT Forms of investment, conditional investment sectors, forms of capital contribution, investment procedure. Investment Guarantee Measures. Termination and Liquidation of investment projects. Hiring management LAW ON INVESTMENT Forms of Investment (LI, Art. 3.2, 3.3 & 21) > Direct investment means a form of investment whereby the investor invests its capital and participates in the management of the investment activity such as enterprise with 100% of foreign/domestic investor, JVE, BCC, BOT, BTO, BT, investment in business development, shares purchase or capital contribution in order to participate in management of investment activities, merger & acquisition of enterprises, and other forms direct investment > Indirect investment means a form of investment by way of the purchase of shares, share certificates, bonds, other valuable papers or by way of intermediary financial institutions such as a securities investment fund and whereby the investment does not participate directly in the management of the investment activities.
8/18/2009 LAW ON INVESTMENT Conditional Investment Sectors > Sectors impacting on national defence and security, social order and safety; > Banking and finance sector; > Sectors impacting on public health; > Culture, information, media and publishing; > Entertainment services; > Real estate business; > Survey, prospecting, exploration and exploitation of natural resources; the ecological environment; > Development of education and training; > A number of other sectors in accordance with law. LAW ON INVESTMENT Applicable to foreign investors, in addition to the above sectors the sectors in which investment is conditional shall include: (Decree 108, Appendix III) - Broadcasting and television. - Production, publishing and distribution of cultural products. - Exploitation and processing of minerals. - Establishment of infrastructures for telecommunications networks, transmission and - provision of Internet and telecommunications services. - Establishment of public postal networks and provision of postal services and delivery - services. - Construction and operation of river ports, seaports, airports and airfields. - Transportation of goods and passengers by rail, air, land and sea and inland - waterways, - Catching of marine resources. - Production of cigarettes. - Real estate business. - Investment in import, export and distribution. - Education and training. - Hospitals and clinics. - Other investment domains in treaties to which Vietnam is a contracting party and - which restrict the opening of the market to foreign investors.
8/18/2009 LAW ON INVESTMENT Investment Capital Contribution: (LI, Art. 25) investors shall be permitted to contribute capital to and purchase shares in companies and branches in Vietnam. >The ratio of capital contribution and purchase of shares by foreign investors in a number of sectors, industries and trades shall be in compliance with the committed schedule LAW ON INVESTMENT Investment procedure: (LI, Art. 45-47) > Not required for domestic investment projects which have an invested capital of below 15 billion VND and which are not included in the list of sectors of investment subject to conditions. > Investment registration for C\) foreign investment projects with invested capital below 300 billion VND, ana (ii) domestic investment projects which have invested capital of 15 billion VND and below 300 billion VND, and which are not included in the list of sectors of investment subject to conditions > Investment evaluation for (i) foreign invested projects or domestic investment projects with invested capital of 300 billion VND or more, and (ii) projects on the list of sectors of investment subject to conditions.
8/18/2009 LAW ON INVESTMENT a Licensing Authority: > The provincial State administrative body shall grant investment certificate for projects subject to the procedure of investment registration. > The Government shall provide regulations on the State body which has authority to evaluate investments and issue investment certificates for projects subject to the procedure of investment evaluation. Q Time for investment certificate issuance > For investment registration: 15 days > For investment evaluation: 30 days (may be extended up to 45 days) LAW ON INVESTMENT Investment Guarantee Measures > The Slate shall provide equal treatment before the law lo all investors from all economic sectors, and as between domestic investment and foreign investment; > Lawful assets and invested capital of investors shall not be nationalized or confiscated by administrative measures > The State shall protect industrial property rights, shall guarantee the lawful inters sis of foreign investors in the activities of technology transfer in Vietnam; > If damaged by the change of Vietnamese law, the Foreign investors shall continue lo enjoy its preferential treatment or the State shall take fair measures such as: Change the operational objectives of trie project: grant tax reduction or exemptions; damage shall be set oft against the taxable income; or fair compensation: > If a newly promulgated law or policy contains greater benefits and incentives than those to which the investor was previously entitled, the investor shall be entitled to the benefits and incentives in accordance with the new provisions as from the date of effectiveness of the new law or policy. If a newly promulgated law or policy affects adversely the lawful benefits enjoyed by an investor prior to the date of effectiveness of such law or policy, the investor shall be guaranteed to enjoy the same incentives provided for in the investment certificate or there shall be resolution by one. a number or all of the following methods; Continuation of enjoyment of benefits and incentives; Deduction of the loss from taxable income; Change of the operational objective of the project; Consideration shall be given to payment of compensation in certain necessary circumstances > Foreign investors shall have the right to transfer abroad: profits from business operations; payments from the provision of technology and services; the principal of and interest on any foreign loan obtained during the course of operation; the invested capital; and other sums of money and assets lawfully owned; and > Foreigners working in Vietnam shall be permitted to Iransfer abroad their lawful incomes after payment of income tax.
8/18/20 09 LAW ON INVESTMENT Termination and Liquidation of investment projects > The operation of an investment project shall be terminated in any one of the following cases: Upon expiry of the operational duration as stipulated in the investment certificate. In accordance with the conditions which will result in termination as stipulated in the contract, the charter of the enterprise or the agreement or undertakings of investors with respect to the project implementation schedule. Where the investor decides to terminate operation of the project. The operation is terminated in accordance with the decision of the State administrative body for investment or a judgement or decision of a court or arbitration body due to a breach of law LAW ON INVESTMENT > If an investment project is terminated, the investor shall notify the investment certificate-issuing body, conduct procedures for liquidation of the investment project, and return the investment certificate > Procedures for liquidation of an investment project shall be as follows: In the case of liquidation of an investment project not associated with dissolution of the economic organization, liquidation shall be carried out in accordance with the law on liquidation of assets and liquidation of contracts; In the case of liquidation of a project associated with dissolution of the economic organization, the investor shall carry out procedures for dissolution of the economic organization in accordance with the provisions of the Law on Enterprises and relevant laws. > The time-limit for liquidation of an investment project shall not exceed six months from the date of the decision on termination of operation of the investment project. The time-limit for liquidation of an investment project may be extended with approval of the authorized State body but shall not exceed twelve (12) months
8/18/2009 LAW ON INVESTMENT Hiring management > An investor shall be permitted to hire a management organization(s) or individual(s) to manage its investments and to manage its business operations in accordance with the operational needs of the investor. > The hiring of a management organization or individual must be carried out pursuant to a management contract between the investor and the organization or individual. The rights and obligations of the investor and of the organization or individual shall be stipulated in the contract. > Management fees shall be as agreed between the parties in the management contract and shall be accounted for as operational expenses of the enterprise. > The hiring of an organization or individual to provide management services must conform with the undertakings in international treaties of which Vietnam is a member LAW ON ENTERPRISES Forms of enterprises Establishment procedure. Corporate Governance Liquidation; bankruptcy and Re-organization of enterprise Transformation of Existing FOE
8/18/2009 LAW ON ENTERPRISES From July 1, 2006 onwards, the establishment, management organization and operation of all kinds of enterprises, including FOE and corporate group shall be regulated by the 2005 Enterprise Law ("EL) which replaces the 1999 Law on Enterprises; the 2003 Law on State Owned Enterprises (completely till July 01, 2010); the provisions on management organization and operation of enterprises in the 1996 Law on Foreign Investment in Vietnam and the 2000 Law on Amendment and Addition to a Number of Articles of the Law on Foreign Investment in Vietnam. (Art. 1 & 171 ) LAW ON ENTERPRISES 15 Forms of enterprises > Limited liability companies witb two or more members (maximum 50 members); > One member limited liability company (the member could be an organization or individual); > Shareholding company (the minimum shareholders shall be 3 and no restriction on the maximum number of shareholders); > Partnerships (having legal entity capacity by the EL); and > Private enterprises. Restrictions on business form of foreign investors are abolished 7
LAW ON ENTERPRISES Establishment procedure > Domestic investors must obtain a business registration certificate for the establishment of an enterprise following the procedures set forth in the EL. > For foreign investors that first invest in Vietnam to set up a company, they must obtain a certificate of investment under the Investment Law which is considered by the EL as concurrently the business registration certificate. (EL, Art. 20) LAW ON ENTERPRISES 17 Corporate Governance > Unanimous Vote: the EL leaves this issue to the company to decide in its charter. > Requirements for a members/shareholders to be the General Director (Director) of a limited liability/shareholding company: must own at least 10% of the legal capital of such company. (EL, Art. 57.1 & 116.2) > For a limited liability company, the Enterprise Law requires the legal representative of the company permanently reside in Vietnam. If the legal representative does not reside in Vietnam for consecutive thirty days he/she must authorize another person to act as legal representative of the company. (EL, Art. 46)
LAW ON ENTERPRISES Transformation of Existing FOE (EL, Art. 170) The transformation is optional. If the FOE is reregistered, the management and operation of the company will follow the EL and related regulations. If not, the company is only permitted to carry out business in accordance with its existing investment license. LAW ON ENTERPRISES Liquidation; Bankruptcy and Re-organization of enterprise > Liquidation Time-limit and procedures for discharging contracts and paying debts of the enterprise; time-limit for paying debts and discharging contracts shall not exceed six months from the date on which the resolution on dissolution is passed» The owner of a private enterprise, the Members' Council or company owner or the Board of Management shall directly organize the liquidation of assets of the enterprise, except where the establishment of a separate liquidation organization is stipulated by the charter of the company " Within a time-limit of seven working days after all debts of the enterprise are fully paid, the legal representative of the enterprise must submit documents relating to the dissolution of the enterprise to the business registration body. Within seven working days from the date of receipt of all valid documents, the business registration body shall remove the name of the enterprise from the business register 19
8/18/2009 20 LAW ON ENTERPRISES > Bankruptcy: (LE, Art. 160) The bankruptcy of enterprises shall be carried out in accordance with the laws on bankruptcy > Re-organization: (LE, Art. 4.16 and Art. 150-155) Re-organization of an enterprise means the division, separation, merger, consolidation or conversion of an enterprise Division/separation procedures *> The Member's Council, the owner of the company or the General Meeting of Shareholders of the company being divided/separated shall pass a resolution on division/separation of the company which shall be sent to all creditors and notified to employees within-15 days from the date of its passing. LAW ON ENTERPRISES Members, owners or shareholders of newly-established/separate companies shall approve the charter, elect or appoint the chairman of the Member's Council, chairman of the company, the Board of Management, director (general director);and carry out business registration for the newlyestablished/separate companies. After the business registration: "'The company being divided shall cease to exist, new companies shall be jointly liable for unpaid debts, labour contracts and other property obligations of the company being divided. s The company being separated and the separate company(ies) shall be jointly liable for unpaid debts, labour contracts and other property obligations of the company being separated. 10
LAW ON ENTERPRISES Merger/consolidation procedure Companies being consolidated shall prepare a merger/consolidation contract and the draft charter of the merged/consolidated company Members, owners or shareholders of merger related companies/companies being consolidated shall approve the consolidation contract and the charter of the consolidated company, elect or appoint the chairman of the Member's Council, chairman of the company, the Board of Management, the director (general director) of the consolidated company; and register the business of the merged/consolidated company. The merger/consolidation contract shall be sent to all creditors and notified to employees within fifteen (15) days from the date of its approval After business registration: The merged/consolidated company shall assume the lawful rights and interest and be liable for unpaid debts, labour contracts and other property obligations of the merging companies/companies being consolidated. 22 LAW ON ENTERPRISES Conversion procedure Limited liability companies may be converted into shareholding companies and vice versa. > The Member's Council, company owners or the General Meeting of Shareholders shall pass a resolution on conversion and approve the charter of the converted company. The resolution on conversion shall be sent to all creditors and notified to employees within fifteen (15) days from the date of its passing. Business registration for the converted company After business registration, the company being converted shall cease to exist. The converted company shall assume all lawful rights and interests and be liable for unpaid debts, labour contracts and other property obligations of the company being converted. Conversion of one member limited liability companies Where a company owner assigns a part of the charter capital to another organization or individual, within fifteen (15) days from the date of assignment, the company owner and the assignee must register the change in the number of members with the business registration body. Where a company owner assigns all of the charter capital to one individual, within fifteen (15) days from the date of completion of the procedures for assignment, the company owner must require the business registration body to remove the name of the company from the business register, and the assignee must register the business as a_private enterprises. 11
8/18/2009 Salary and other rights of employees working in foreign investment enterprises? > Salary: The wage of an employee shall be agreed by the employee and employer in a labour contract. The wage of an employee must not be lower than the minimum wage stipulated by the State. (Labour Code, Art.55) 25 Labour Law The minimum wage rate payable for work by Vietnamese employees doing the most basic work in normal working conditions for enterprises with foreign owned capital shall be as follows: The minimum wage Application Legal documents Not less than 1,200,000 Vietnamese dong per month enterprises operating in Inner Decree 111/2 008/NDcity districtsi of Hanoi and Ha CP, Art. 1.1) Dong City of Hanoi and Ho Chi Minh City (Area 1) 1 2
Labour Law 26 The minimum Application Legal wage documents Not less than enterprises operating Outer city districts of Hanoi being Gia Decree 1.080.000 Lam, Dong Anh, Soc Son. Thanh Tri, Tu Liem, Thuong 111/2008/ND- Vietnamese dong Tin, Hoai Due, Dan Phuong, Thach That, Quoc Oai, and Son Tay CP per month City of Hanoi; Outer city districts of Ho Chi Minh City; Inner city and outer city districts of Hai Phong City being Thuy Nguyen and An Duong; Inner city and outer city districts of Da Nang City;...(Appendix issued with Decree 111] (Area II) Not less than Cities in provinces (except for cities in provinces listed in Area Decree 950,000 II); The remaining outer city districts of Hanoi; Bac Ninh City, Tu 111/2008/ND- Vietnamese dong Son township, and the rural districts of Que Vo, Tien Du and Yen CP per month Phong in the province of Bac Ninh...(Appendix issued with Decree 111) (Area III) Not less than all enterprises operating in the remaining areas Decree 920,000 111/2008/ND- Vietnamese dong CP per month Other rights of employee > Other rights of employee Bonuses: Based on the annual production and business results of an enterprise and the performance of employees, the employer shall pay bonuses to employees. (Labour Code, Art.64) Allowances: Allowances, movements up on the wage scale, and other incentives may be agreed in the labour contract, collective agreement, or the regulations of the enterprise.(labour Code, Art.63) 1 3
Other rights of employee Severance allowance: Where the labour contract of an employee who has been regularly employed in an enterprise or organization or with a body for twelve (12) months or more is terminated, the employer must pay such employee a severance allowance equal to the aggregate amount of half of one month's wages for each year of employment plus wage allowances (if any). (Labour Code,Art.42.1) Unemployment allowance: Where, as a result of organizational restructuring or technological changes, or where an enterprise merges, consolidates, divides, separates, or transfers ownership of, right to manage, or right to use the assets of the enterprise, an employee who has been employed in the business for a period of twelve (12) months or more becomes unemployed, the employer must pay an unemployment allowance equivalent to the aggregate amount of one month's wages for each year of employment, but no less than two months'wages.(labour Code, Art 17.1, Art 31) When are employee unilateral repudiation of a working contract? > An employee who is a party to an indefinite term labour contract has the right to terminate unilaterally the contract. (Labour Code, Art.37.3) > An employee working under a definite term labour contract with a duration of twelve (12) months to thirty six (36) months or a labour contract for a seasonal or specific job with a duration of under twelve (12) months shall only have the right to terminate unilaterally the contract prior to expiry of such duration in the following circumstances: The employee is not assigned to the correct job or work place or ensured the work conditions as agreed in the contract; (Labour Code, Art.37.1.a) The employee is not paid in full or in time the wages due as agreed in the contract; (Labour Code. Art.37.1) The employee is maltreated or is subject to forced labour; (Labour Code, Art.37.1) Due to real personal or family difficulties, the employee is unable to continue performing the contract; (Labour Code, Art.37.1.d) The employee is elected to full-time duties in a public office or is appointed to a position in a State body (Labour Code, Art.37.i.fl) A female employee is pregnant and must cease working on the advice of a doctor; (Labour Code. Art.37.1.e) Where an employee suffers illness or injury and remains unable to work after having received treatment for a period of 03 consecutive months in the case of a definite term labour contract with a duration of twelve (12) months to thirty six (36) months, or for a quarter of the duration of the contract in the case of a labour contract for a specific or seasonal job with a duration of less than twelve (12) months. (Labour Code, Art.37.i.g)
Labour Law U If the employee unilaterally repudiatles a working contract (except they are dismissed), does the employee pre-inform to the employer? Before unilaterally terminating a labour contract pursuant to Art 37.1, the employee must pre- inform to the employer as follow: Circumstances Type of contract Notice Leagal document Stipulated in clauses (d),(d),of Art37.1 a definite term labour contract with a duration of 12 months to 36 months at least 30 days Labour Code, Art.37.2.b Stipulated in clauses (d). (a), of Art 37.1 a labour contract for a seasonal or specific job with a duration of less than 12 months at least 03 days Labour Code, Art37.2.b N/a an indefinite term labour contract At least 45 days Labour Code, Art.37.3 Labour Law In case employees are illegal unilateral repudiation of a working contract, how are they responsible for? Where an employee unlawfully unilaterally terminates the labour contract, he shall have obligations: > paying the employer compensation equal to half of one month's wages and wage allowances (if any) and not be entitled to any severance allowance. (Labour Code. Art.41.2) > paying compensation for costs of training (if any) in accordance with the provisions of the Government. (Labour Code. Art.41.3) > paying the employer compensation, in breach of the provisions on giving advance notice, in a sum equal to the wages which would otherwise have been paid to the employee for those days not notified. (Labour Code. Art.41.3)