ASSESSMENTS OF THE IMPACTS OF VIETNAM'S WTO ACCESSION ON SOME

VIETNAMESE PRODUCTS AND SERVICES

Tran Trung Thuc Deputy- Director, NCIEC - the Lead Consultant

Nguyen Khanh Ngoc Deputy Director of the International Law Department, Ministry of Justice (legal

services)

Ha Huy Tuan Director of the Tax Policy Department, Ministry of Finance (financial services)

Phan Tam Deputy Director of the International Cooperation Department, Ministry of Post and

Telematics (telecom services)

Nguyen Huu Hung International Cooperation Department, Ministry of Construction (construction

services)

Tran Quang Hung Secretary General of the Electronics Association (electronics goods)

Chu Dang Trung Deputy Head of the Law and Policy Section, Vietnam Pharmacy Agency

(pharmaceutical products)

Etude ralise dans le cadre du FSP Intgration Sminaire de diffusion, le 24 aot 2007

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During the negotiation toward WTO membership Vietnam made many commitments to open up its market for foreign goods and services. But, due to the different levels of commitments for market access and the local conditions for competitiveness, individual Vietnamese products or group of products and service sectors or sub-sectors may have different opportunities and face different challenges.

This Study is aimed at assessing the impacts of the WTO accession on some specific product groups and service sectors of Vietnam. As there has been a number of studies on other areas, namely banking services1, maritime services, vegetables and farm produce, steel, cement, automotive industries2 within the FSP 2000-148 Project, this Study focuses on and covers the following services and industries: legal services, financial services (only insurance and securities), telecom services, construction services, electronics goods and pharmaceutical products.

The national independent consultants have carried out the Study in accordance with the study methodology, approach and structural arrangements agreed upon with the international consultants: using qualitative analytical method referred to as SWOT; using quantitative analyses for assessing the goods and services competitiveness referred to as RCA; the Study has been based on the official data and reports of relevant state agencies, WTO negotiation documents, relevant research papers and studies done by international and domestic organizations.

The views and proposals contained in the Study are only of the authors and do not in any way relate to or aimed at reflecting the views of any other agency, organization or individual.

1 See "Study of the Banking Services in the Context of International Economic Integration" by the

National Committee for International Economic Cooperation, published by the National Politics Publishing House, 2006

2 See "Study of the Impacts of the ASEAN-China Regional Free Trade Area on Vietnam" by the

National Committee for International Economic Cooperation, published by the National Politics Publishing House, 2006

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PART I WTO ACCESSION IMPACTS ON LEGAL SERVICES

In the World Trade Organization (WTO), legal services are a sub-sector of the Professional Services in the Business Services heading. Although in international trade legal services do not bring as much financial benefits as some other more important services, such as banking services, financial services, telecom services... do, those who provide legal services - lawyers, have been known to have "clout" or influence and even known to be the "architects" of many legal rules and their interpretation in the WTO. Traditionally, due to many different reasons, including the special nature of the legal profession, legal service market had been highly protected and closed for foreign lawyers. The market has been really opened up only since the end of the Uruguay Round. Therefore, legal services have been in the focus of attention of WTO members: those that have comparative advantages in this area, such as the US, UK, Netherlands or Australia...have pushed the liberalization moves, while the others tend to protect these services for their local lawyers. These conflicting views in the Uruguay Round led to the compromise: the levels of commitments of the WTO founding members in legal services are very different and diverse3. However, the situation has been changed substantially in recent years towards opening up the legal service market for foreign lawyers as witnessed through the relevant commitments of the recently acceded countries4.

Legal services, in the context of international commerce, go normally side-by-side or "follow" the economic, commercial and investment activities. That is why countries which want to attract business and investment from outside need to promote the legal services development, including allowing foreign investors and businessmen to use lawyers at their choice.

In Vietnam, the supply of legal services has become a true legal profession, which has enjoyed development opportunities since the launch of the Doi moi policy. It is to note the important moves by Vietnam in adopting the 2001 Ordinance on Lawyers and the 2006 Law on Lawyers that have created a favorable legal framework for the legal profession in Vietnam. The so called "unilateral" opening up (without any connection with international commitments) the market for foreign legal service providing organizations in early 1990est was a new development toward creating better conditions for legal profession, including the opportunities for local lawyers to learn from and to compete with foreign lawyers. All these have contributed to the gradual positive developments of the legal profession in the country. The pressure of the international economic integration to liberalize the legal service market has emerged only since the implementation of the US-Vietnam Bilateral Trade Agreement (BTA). The BTA implementation and particularly the issuance of the Government Decree 87/2003/N-CP dated 22/07/2003 (Decree 87) have been clear moves toward creating favorable conditions for foreign legal service providers to come and practice in Vietnam. By the end of the year 2006 there were 27 branches of foreign legal service providers and 7 foreign law firms with 90 foreign lawyers registered to practice legal profession in Vietnam5.

3 Generally, almost all WTO founding members have modest or low commitments in legal services.

Particularly, about half of them did not make any specific commitments in these services. See International Trade in Legal Services by Sydney M. Cone.

4 See specific commitments of the recently acceded countries at www.wto.org

5 See Article "Legal Regulations on Legal Services by Foreign Legal Service Organizations and Foreign

Lawyers in Vietnam", Special Edition on Lawyers 2006, Journal Democracy and Law

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The above-mentioned developments have influenced substantially the negotiation of the commitments in legal services during the WTO accession. For example, the WTO potential commitments in legal services could be predicted to be at least as open and liberal as those in the BTA. This was understandable since all WTO members would enjoy automatically all the benefits of Vietnam's commitments in the BTA without any need to renegotiate the commitments due to the most favored nation treatment clause (MFN) of the WTO. It was natural to foresee that WTO members would want something more than BTA commitments.

This part of the Study focuses on two main issues: - What are the WTO commitments of Vietnam in legal services, arbitration

service and conciliation service6? - What are the impacts of the WTO commitments in legal services, arbitration

and conciliation services on Vietnam?

I. VIETNAM'S WTO COMMITMENTS IN LEGAL SERVICES, ARBITRATION AND CONCILIATION SERVICES

I.1 Legal Services To understand the entire WTO commitments in legal services it is necessary to know the

approach and methodology, which are used to express and structure the commitments. Any service sector or subsector mentioned in the Schedule of Specific Commitments needs to be analyzed from three perspectives or dimensions:

o First, the text of the General Agreement on Trade in Services (GATS) and the relevant commitments contained in the accession documents (accession protocol, Working Party Report (the Report) and their annexes, including the one on MFN exemptions);

o Second, the so called horizontal commitments applicable to all service sectors and subsectors, unless otherwise provided in the specific commitments; and

o Third, the specific commitments in the relevant service sectors or subsectors.

The GATS contains 29 articles, which set out a general legal framework for international trade in services, including important principles and rules, such as MFN, national treatment (NT), transparency, domestic regulation... and other annexes. In addition, the Report contains many paragraphs where Vietnam made commitments on its policies on trade in services (which applies to legal services and all other services)7 as well as the general

6 In the WTO, arbitration and conciliation services are not part of the legal services under CPC code

861, but part of the services related to management consulting under CPC code 866. 7 See the Report paragraphs on policies affecting trade in services. For example, paragraphs numbered

506, 507 and 508 of the Report dated 16/10/2006:

506... Viet Nam would publish all laws, regulations and other measures of general application pertaining to or affecting trade in services. Publication of such laws, regulations and other measures would include the effective date of these measures and the general scope of services or activities affected. The

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commitments on framework for making and enforcing policies. This part of the Study does not look at these general commitments on service policies, but notes the entirety and comprehensiveness of the WTO legal regulations on legal services.

With respect to the horizontal commitments in the Vietnam's Schedule of Specific Commitments there are some important notes to bear in mind. These commitments apply to all services for which Vietnam has made specific commitments during the WTO negotiation, including legal services, arbitration and conciliation services. The commitments have been developed in such a way to match the normal foreign investment context (for example, the use

representative of Viet Nam further confirmed that Viet Nam would publish a list of all organizations that were responsible for authorizing, approving or regulating service activities for each service sector. In addition, from the date of accession Viet Nam would publish in the official journal all of its existing licensing procedures and conditions. The Working Party took note of these commitments.

507. With respect to licensing procedures, the representative of Viet Nam confirmed that Viet Nam would ensure that its licensing procedures and conditions would not act as independent barriers to market access. The representative of Viet Nam confirmed that for those services included in its Schedule of Specific Commitments, Viet Nam would ensure that: (a) Viet Nam's licensing procedures and conditions were published prior to becoming effective; (b) in that publication, Viet Nam would specify the timeframe for the relevant authorities' decision on the license; (c) relevant authorities would review and make a decision on licensing within the period specified in official procedures; (d) any fees charged in connection with the filing and review of an application would not constitute an independent barrier to market access; (e) on the request of an applicant, Viet Nam's relevant regulatory authority would inform the applicant of the status of its application and whether it was considered complete. An application would not be considered complete until all information specified in the relevant implementing measure was received. If the authority required additional information from the applicant, it would notify the applicant without undue delay and specify the additional information required to complete the application. Applicants would have the opportunity to cure deficiencies in the application; (f) on the request of an unsuccessful applicant, a regulatory authority that had denied an application would inform the applicant in writing of the reasons for denial of the application; (g) where an application had been denied, an applicant may submit a new application that attempted to address any prior problems; (h) where approval was required, once the application was approved, the applicant would be informed in writing without undue delay; and (i) where Viet Nam required an examination to licence professionals, such examinations would be scheduled at reasonable intervals.

508. The representative of Viet Nam further confirmed that for the service sectors included in Viet Nam's Schedule of Specific Commitments, the relevant regulatory authorities would be separate from, and not be accountable to, any service suppliers they regulated. Further, the representative of Viet Nam confirmed that, except in emergency situations or for regulations and other measures involving national security, specific measures setting foreign exchange rates or monetary policy and other measures the publication of which would impede law enforcement, Viet Nam would (a) publish in advance any regulations or other implementing measures of general application that it proposed to adopt and the purpose of the regulation or other implementing measure; (b) provide interested persons and other Members a reasonable opportunity to comment on such proposed regulation or other implementing measure; and (c) allow reasonable time between publication of the final regulation or other implementing measure and its effective date.

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of the investment forms (business association) of the Investment Law); therefore, there is an important rule that if the specific commitments in specific services are different from the horizontal commitments, the specific commitments prevail. The horizontal commitments contains two following relevant important commitments:

- First, regarding the commercial presence "the conditions of ownership, operation and juridical form and scope of activities as set out in the respective licenses or other form of approval establishing or authorizing the operation or supply of services by an existing foreign service supplier shall not be made more restrictive than they exist as of the date of Vietnam's accession to the WTO". This reflects the "standstill" rule in the WTO negotiation for services.

- Second, the intra-corporate transferee commitments for presence of natural persons.

I.1.1 Scope of Legal Services in the WTO Classifications Service sectors and subsectors in the WTO are classified in accordance with the UN Central Product Classification (referred to as the CPC) to ensure the uniformity and convenience for trade in services. Legal services in the WTO are coded as CPC 861, which are then further classified into smaller sub-sub sectors with 4 or 5 digits, as follows:

CPC861 Legal Services

8611 Legal advisory and representation services in the different fields of law

86111 Legal advisory and representation services in criminal law

86119 Legal advisory and representation services in judicial procedures concerning other fields of law

8612 86120 Legal advisory and representation services in statutory procedures of quasi-judicial tribunals, boards, etc.

8613 86130 Legal documentation and certification services

8619 86190 Other legal advisory and information services

I.1.2. Vietnam's WTO Commitments in Legal Services During the WTO negotiation, certain countries, including the US, EU, Canada,

Australia... expressed interests in the legal service market of Vietnam. All the bilateral accession agreements had been combined and synthetized as specific commitments on legal services to be as follows:

1. BUSINESS SERVICES

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A. Professional Services

LIMITATIONS ON MARKET ACCESS LIMITATIONS ON NATIONAL TREATMENT

(a) Legal services (CPC 861, excluding:

- Participation in legal proceedings in the capacity of defenders or representatives of their clients before the courts of Viet Nam; - Legal documentation and certification services of the laws of Viet Nam)

(1) None. (2) None. (3) Foreign lawyers organizations8 are

permitted to establish commercial presence in Viet Nam in the following forms:

- Branches of foreign lawyers organizations;

- Subsidiaries of foreign lawyers organizations;

- Foreign law firms9; - Partnerships between foreign

lawyers organizations and Viet Nam's law partnerships.

Commercial presences of foreign lawyers organizations are permitted to make consultations on Vietnamese laws if the consulting lawyers have graduated from a Vietnamese law college and satisfy requirements applied to like Vietnamese law practitioners.

(4) Unbound, except as indicated in the horizontal section.

(1) None. (2) None. (3) None.

(4) Unbound, except as indicated in the horizontal section.

Column 1 of the chart indicates the sector or subsector where Vietnam has made committments. So, for legal services Vietnam has accepted committments related to all legal services contained under the code CPC 861, except two categories of services:

i/ participation in legal proceedings in the capacity of defenders or representatives of their clients before the courts of Viet Nam; ii/ legal documentation and certification services of the laws of Viet Nam

8 A "foreign lawyers organization" is an organization of practicing lawyers established in any

commercial corporate form in a foreign country (including firms, companies, corporations, etc.) by one or more foreign lawyers or law firms.

9 Foreign law firm is an organization established in Viet Nam by one or more foreign lawyers

organizations for the purpose of practicing law in Viet Nam.

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Column 2 contains all the limitations on market access for modes used to provide legal services: cross border supply (Mode 1), comsunption abroad (Mode 2), commercial presence (Mode 3) and presence of natural persons (Mode 4). In this column, Vietnam is committed to limitation free for modes 1 and 2. For mode 3, there are four business association forms that can be used by foreign legal service organizations to operate in Vietnam: branch, subsidiary of foreign law firm, foreign law firm and parnership between foreign and Vietnamese law partnerships.

Column 3 contains all the limitations on the national treatment for foreign legal service organizations with respect to the legal services where Vietnam made committments. According to the chart, there is no such limitations; therefore, foreign legal service organizations operating in Vietnam may perform the same services as Vietnamese ones do (except appearance before courts and legal documentation and certification).

For mode 4 - presence of natural person, Vietnam does not have any specific committments in legal services, except the general committments in the horizontal section.

I.1.3. Other International Committments in Legal Services and the BTA Since Vietnam has integrated itself into the world and regional communities, it has made

a number of other international committments in legal services. a. In ASEAN Free Trade Area (FTA): the committments in this FTA are basically the as

liberal as those regulations of the Decree 87, as follows: SECTOR AND SUBSECTOR

CPC CODE

LIMITATIONS ON MARKET ACCESS LIMITATIONS ON NATIONAL TREATMENT

(a) Legal services

excluding practice of Vietnamese law

861 (1) None. (2) None. (3) Foreign lawyers organizations10 are

permitted to establish commercial presence in Viet Nam in the following forms:

- Branches of foreign lawyers organizations;

- Foreign law firms11; - Partnerships between foreign lawyers

organizations and Viet Nam's law partnerships.

(1) None. (2) None. (3) None,

except Foreign lawyers working in foreign legal service presence in Vietnam may not take part in

10 A "foreign lawyers organization" is an organization of practicing lawyers established in any

commercial corporate form in a foreign country (including firms, companies, corporations, etc.) by one or more foreign lawyers or law firms. Foreign lawyers organizations shall be responsible for their activities before the law of Vietnam

11 Foreign law firm is an organization established in Viet Nam by one or more foreign lawyers

organizations for the purpose of practicing law in Viet Nam. Foreign law firms shall be responsible for their activities before the law of Vietnam

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Foreign lawyers working in foreign legal service

presence in Vietnam may not take part in legal proceedings in capacity of defenders or representatives for clients Commercial presences of foreign lawyers organizations are permitted to make

consultations on Vietnamese laws if the consulting lawyers have graduated from a Vietnamese law college and satisfy requirements applied to like Vietnamese law practitioners.

(4) Unbound, except as indicated in the horizontal section.

legal proceedings in capacity of defenders or representatives

for clients

(4) Unbound, except as indicated in the horizontal section.

It is to note that Vietnam's service commitments in ASEAN FTA are exempted from the WTO MFN principle under Article V of the GATS. This means, whatever Vietnam commits in ASEAN shall not automatically apply to non-ASEAN countries.

b. The committments in legal services Vietnam made in the BTA were the most liberal ones by the year 2000. But, these committments later had become less liberal than those regulations of the Decree 87 issued in 2003. The BTA committments are as follows: SECTOR AND SUBSECTOR

LIMITATIONS ON MARKET ACCESS LIMITATIONS ON NATIONAL TREATMENT

Legal services

PCPC 861 (excluding practice of Vietnamese law

(1) None. (2) None. (3) Companies of the US may supply services in the form of branches, company with 100% US invested capital, and US-Vietnam joint ventures. Practicing lawyers of the US are not permitted to participate in legal proceedings in the capacity of defenders or representatives of their clients before the courts of Vietnam. The term of operation of a branch of a law form of the US is 5 years from the date when license is granted and may be extended every 5 years. Branches of US law firms, law firms with 100% US capital, joint venture law firms between Vietnamese law firms and US law firms are permitted to make consultations on Vietnamese laws if the consulting lawyers have graduated from a Vietnamese law college and satisfy requirements applied to like Vietnamese law practitioners.

(1) None. (2) None. (3) None.

(4) Unbound, except as indicated in the horizontal section.

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(4) Unbound, except as indicated in the horizontal section.

c. The WTO negotiation in legal services has been influenced by many factors, including the domestic legal regime on legal services at negotiating time (the Decree 87) and the commitments Vietnam has made in the BTA (under the WTO rule on MFN, the BTA benefits shall be granted automatically to other WTO members; this means BTA commitments in legal services serve as the "floor" or starting point for negotiation). As a result of the negotiation, Vietnam's WTO committments in legal services if compared with the BTA committments, have some following differences:

Firsrt, For column 1 of the charts or schedules of specific committments, it is evident that the WTO shedule contains different scope of committment from the BTA one. Namely, In the BTA, Vietnam excludes entirely the practice of Vietnamese laws from the committment, although it offers an opportunity for practicing Vietnamese law if the consulting lawyers meet all the requirements applicable to the like Vietnamese lawyers (column 2). The BTA format was used by Vietnam to offer its committments in legal services, but faced certain opposition from WTO members as it seemed to lack of consistency between column 1 and column 2. Those members urged Vietnam to change the format by moving the Vietnamese law practice from column 2 to column 1. At first glance, such move looks like of technical nature, but careful look may find that it may change substantially the scope of committment. As a negotiated compromise, the final scope of committment in legal services excludes only two areas: - participation in legal proceedings in the capacity of defenders or representatives of their clients before the courts of Viet Nam; - legal documentation and certification services of the laws of Viet Nam. All those seem to indicate that the scope of committment in legal services in the WTO is broader than the one of the BTA.

Second, there are differences in columns 2 as follow: In terms of business association forms of foreign legal service organizations in

Vietnam, the BTA provides for only three forms: branch, company of 110% US invested capital and US-Vietnam joint venture; while in the WTO foreign legal service organizations may operate in Vietnam under 4 forms: branch, subsidiary, foreign law firm and joint partnership. Generally, for the business form, the WTO committments and BTA committments are the same if a subsidiary of foreign law firm can be understood as a foreign law firm established by a single foreign legal service organization and the partnership form as substitute for joint venture form. But, in the WTO there is no clear committment for joint venture form, except partnerhsips between foreign law firms and local firms.

In terms of business duration, the BTA sets out the term of 5 years renewable for 5 years each for branches; while there is no such limitation in the WTO for branches.

The prohibition for participating in legal proceedings in the capacity of defenders or representatives for clients before the court of Vietnam in collumn 2 of the BTA schedule has been moved to collumn 1 of the WTO schedule. I.2. Arbitration and Conciliation Services I.2.1 Arbitration and Conciliation Services as Clissified in the CPC

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In the CPC classification, arbitration and conciliation services are part of the services related to management consulting coded 866 where the arbitration and conciliation services are coded 86602.

Unlike legal services coded 861, which are divided further into smaller sub sectors with 5 digit codes, the arbitration and conciliation services are of 5 digit code and are not divided into smaller sub sectors.

I.2.2. Vietnam WTO Committments In the WTO negotiation, some WTO members requested Vietnam to open arbitration

and conciliation services. Based on the bilateral accession agreements with the members, the WTO Secretariat has synthetized and developed the following final committments of Vietnam in these services:

Services Related to Management Consulting Limitations on Market

Access Limitations on

National Treatment

Additional Committments

- CPC 866, except CPC 86602 - Arbitration and conciliation services for commercial disputes between businesses (CPC 86602**)

(1) None (2) None (3) None, except ...

- for arbitration and conciliation services for commercial disputes between businesses (CPC 86602**): for the period of 3 years from the date of accession: unbound. Thereafter: none. (4) Unbound, except as indicated in the horizontal section

(1) None (2) None (3) None

(4) None, except as indicated in the horizontal section

Column 1 of the chart shows the services for which Vietnam made commitments. Accordingly, Vietnam has made commitments for the entire arbitration and conciliation services under CPC 86602, but only in connection with commercial disputes between businesses. The interpretation of concepts "commercial" and "businesses" is subject to Vietnamese law and international practice.

Column 2 contains limitations on market access regarding 4 modes of service supply: cross border supply (Mode 1), comsumption abroad (Mode 2), commercial presence (Mode 3) and presence of natural persons (Mode 4). For modes 1 and 2, Vietnam does not have any limitation. This means Vietnam allows Vietnamese businesses to use foreign arbitration and conciliation services for their commercial disputes. For mode 3-commercial presence, after three years from the date of accession, foreign arbitration and conciliation service suppliers are allowed to be established in Vietnam in any forms mentioned in the horizontal section (which is developed based on the Investment Law and Enterprise Law).

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Column 3 contains limitations on national treatment in arbitration and conciliation services for commercial disputes between businesses. Accordingly, foreign arbitration and conciliation service suppliers are allowed to provide the same services as Vietnamese service suppliers do for commercial disputes between businesses. I.2.3. Other International Commitments in Arbitration and Conciliation Services

In other international agreements of Vietnam, including the BTA, Vietnam does not make any specific commitment in arbitration and conciliation services. That means prior to the WTO commitment, the arbitration and conciliation services are entirely regulated by Vietnam domestic law.

II. IMPACTS OF THE WTO COMMITMENTS IN LEGAL SERVICES, ARBITRATION AND CONCILIATION SERVICES II.1. Legal Services

It is to note that the negotiation in legal services in the context of WTO accession was carried out on the basis of the "floor" BTA commitments and the domestic regulations at that time (Decree 87). When Vietnam got the first bilateral accession agreement that contains commitments in legal services (the one with EU) in 10/2004, the commitments with EU becomes fixed new higher "floor". At the end of the negotiation process Vietnam passed the Law on Lawyers of 2006 which enters into legal force on 1/1/2007. The new legal rules on legal practice of foreign service organizations in Vietnam are contained in Chapter VI of the 2006 Law on Lawyers, which are quite different from the Decree 87 in certain aspects. The followings are the assessments of the compatibility of the Law with the WTO commitments in legal services:

First, regarding the scope of practice (column 1), WTO commitments do not allow access to legal proceedings in the capacity of defenders or representatives of their clients before the court of Vietnam. While Article 70 of the Law on Lawyers provides "Branches and foreign law firms operating in Vietnam ...are not allowed to designate a foreign lawyer to take part in legal proceedings in the capacity of advocates, defenders for their clients' interests. representatives of clients...before any Vietnam's legal proceeding agency, but allowed to assign their Vietnamese lawyers working in their organizations to be representatives or defenders for their clients' lawful rights and interests before the court of Vietnam for cases where the branches or firms provide legal advice, except criminal cases.

This means the scope of practice under the WTO commitment is broader than that of the Law on Lawyers: the commitment prohibits only the legal work in legal proceeding before the court of Vietnam. However, the Law on Lawyers allows Vietnamese lawyers working in foreign legal service organizations to participate in legal proceeding before the court of Vietnam, except criminal proceedings - this seems to show that the Law is more liberal than the WTO commitment with regard to legal proceeding before the court.

Second, for legal documentation and certification services, the Law on Lawyers does not set out any specific rules. But, the Law on Notarization adopted at the end of 2006 requires a notary to possess Vietnamese citizenship - this is consistent with the WTO commitment.

Third, regarding the business form, Article 69 of the Law on Lawyers provides that a foreign legal service organization may supply services in Vietnam in one of the following business form: i/ branch of foreign legal service organization; ii/ limited liability law company with 100% foreign capital; and limited liability joint venture company. While the WTO

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commitment allows 4 forms of commercial presence in Vietnam: branch, subsidiary of foreign law firm, foreign law firm and partnership between foreign and Vietnamese law partnerships.

Further, Article 72.1 of the Law defines "A limited liability law company with 100% foreign capital shall be a legal service organization established in Vietnam by one or more foreign legal service organizations". This means that the Law implies the form of subsidiary of foreign legal service organization as a company set up by one foreign service organization.

In short, regarding the business forms for commercial presence, there is only one major difference: the Law provides for limited liability joint venture company, while the WTO commitment mentions partnerhip between foreign legal service organizations and Vietnamese law partnerships (this form of partnership was provided for in Decree 87).

Another note is that legal rules on enterprises do not provide for the form of partnership between different organizations, but only bewteen individuals (natural persons): Article 130.1(b) of the Law on Enterprise states "A partner in a partnership shall be shall be a natural person who must bear personal [unlimited] liability for any obligation of the partnership."

Proposal: Because of differences between the Law on Lawyers and Vietnams commitments on legal services as above mentioned, in the process of adopting Vietnams accession into the WTO, the National Assembly has decided to apply those commitments according to the Resolution No.71/2006/QH11 ratifying the WTO Protocol on Accession of the Socialist Republic of Vietnam to make it consistent with the relevant WTO commitment in legal services. In specific, by ratifying this Resolution, Vietnam has complied with commitments as a Member of the WTO. However, Vietnam should oversee implementation of Vietnams commitments of legal services in order to lay out further appropriate adjustments creating favorable conditions for better contribution of this services into Vietnams development process. II.2. Arbitration and Conciliation Services

According to the current Ordinance on Commercial Arbitration, the only commercial presence form for arbitration organizations in Vietnam is so called arbitration center. The center is a legal entity which has its own seal and bank account. The center maitains its own roster of arbitrators. One of the first conditions for establishing an arbitration center is to have at least 5 founding arbitrators who shall meet all the quanlifications set by law.

Currently, Vietnamese law provides only for the establishment and operation of Vietnamese arbitration centers, but not of foreign arbitration organizations. The current law also does not set out any rule for conciliation of commercial disputes between businesses by foreign conciliation service organizations in Vietnam.

In addition, under the Ordinance an arbitrator must be Vietnamese citizen; therefore, foreigners or stateless persons may not become arbitrators of any existing Vienamese arbitration centers.

Further, as there is no limitation for mode 2 - comsumption abroad, Vietnam allows domestic businesses to recourse to arbitration in foreign countries. The Ordinance on Commercial Arbitration does not have a such specific rule under which the Vietnamese disputing parties (not involving foreign elements) may use foreign arbitration service to solve their disputes.

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The column 2 on limitations for market access indicates that foreign arbitration and conciliation service organizations will not face any restriction regarding the form for commercial presence after 3 years from the date of Vietnam's accession to the WTO.

In short, compared with the relevant WTO commitments, the current law of Vietnam basically does not provide any general rule for the establishment and operation of foreign arbitration and conciliation service organizations in Vietnam.

Proposal: Since there are 3 year transitional period for Vietnam to implement its commitments on arbitration and conciliation services, it is advised to have in the 2008 Legislative Agenda of the National Assembly a Bill on Arbitration and Conciliation (it is possible to divide two issues of arbitration and conciliation into two separate legal texts) to make the current law consistent with the relevant WTO commitment on commercial arbitration and conciliation services. However, before opening up the market for foreign service providers, it is appropriate to issue an early legal normative document to allow commercial conciliation services to be supplied by domestic service providers.

PART II- IMPACT OF THE WTO ACCESSION ON INSURANCE SERVICE MARKET

I. INSURANCE SERVICE MARKET IN VIETNAM

1. Development of Insurance Service Market in Vietnam

Before 1975, there were some insurance companies operating in the South of Vietnam. In the North, Vietnam Insurance Corporation (Bao Viet) was established on January 15, 1965 providing insurance services for import and export goods and maritime insurance services in the first years of its operation.

After 1975, Bao Viet has expanded its market to the South and then nationwide, becoming the biggest and leading insurance company in the insurance market of Vietnam.

On December 18, 1993, Decree No 100/CP on Insurance Business was adopted, marking a milestone for the insurance industry of Vietnam. In 1999, the insurance market rapidly developed with the establishment of 5 foreign invested insurance companies.

Since 2003, there have been many important changes in Vietnam insurance market as follows:

- Vietnam Insurance Corporation (Bao Viet) has been reorganized to become a business group, comprising of financially independent subsidiaries. Vietnam Insurance Company specializes its business operation in non-life insurance services and Vietnam Life Insurance Company specializes in life insurance services;

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- Some State owned insurance and reinsurance companies have been equitized to become joint stock companies;

- Some joint stock insurance companies and insurance brokerage companies have been newly established.

In 2006, Vietnam insurance market was very busy with the presence of 31 insurance companies, varying in shape and size and operating in the fields of life insurance, non-life insurance, re-insurance, insurance brokerage. In addition, the presence of more than 30 representative offices of foreign insurance companies has also facilitated the development of the insurance market.

INSURANCE MARKET STRUCTURE IN THE PERIOD 1993-2005

Market Share 1993 1996 1999 2002 2003 2004 2005 Life insurance enterprises

3 4 4 5 8

Non-life insurance enterprises

1 6 10 13 14 14 15

Reinsurance enterprises

1 1 1 1 1 1

Insurance Brokerage enterprises

1 1 1 2 5 6 7

Total number of enterprises

2 8 15 20 24 26 31

2. Comments on the Development of Insurance Service Market in Vietnam

In recent 10 years, the growth rate of the insurance market has been high. The average growth rate with respect to premium income was approximately 38 % per year in the period 1993-2004. For non-life insurance services and life insurance services, the rates were 23 % and 81 % per year respectively in the period 1999-2004 despite the fact that life insurance services have been provided only since 1996, but it has full potentials for development. However, the growth rate of Vietnam insurance market has been gradually slowing down, equivalent to the rate of insurance markets in the region (16% in Vietnam in comparison with 9 % in the South East Asia in the period 2003-2004). Similarly, in 2005, the growth rate rapidly decreased and lower than the GDP growth rate.

The contribution of insurance services in the GDP rapidly increased in the period 1993-2004. In 1993, income contribution of the insurance industry accounted for 0.37 % of the GDP and that rate increased to 2 % in 2004. Especially, the rate was nearly 1 % in the period 1999-2002.

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In investment activities, insurance enterprises have become a very important channel for mobilizing capital to serve the cause of socio-economic development of the country. In 1999, the capital invested by the insurance sector in the economy was VND 2,662 billion. However, in 2002, the capital amount was VND 9,995 billion or increased by 3.8 times after only 3 years. Especially, in only 1 year, the capital invested was VND 10,000 billion higher than that in 2004. Investment structure has been aggressively changed from short-term investment to long-term investment in the forms of buying Government bonds, directly investing in infrastructure, developing business for serving people.

There is a big work force in the insurance industry. In parallel with the development in quantity and the expansion in business of insurance enterprises, the work force in the insurance industry has also become bigger and bigger. The number of laborers and insurance agents was 1,000 in 1993, increased to 30,000 in 1999 and then to 136,900 in 2004, which was 136.9 times higher than that in 1993.

3. Assessment of Competitiveness of Vietnam Insurance Enterprises

Although Vietnam insurance industry has rapidly developed in recent years, insurance enterprises are still facing some shortcomings with respect to the competitiveness as follows:

a. Lack of Long-term Competition and Development Strategy

Like in China in the first years after its WTO accession, in Vietnam, life insurance companies often compete by employing as many agents as possible, non-life insurance companies often compete by attempting to reduce insurance premium as much as possible. These are not appropriate long-term strategies.

b. Lack of Hospitality in Serving Clients

While foreign insurance companies appreciate the importance of hospitality and care towards clients, domestic insurance companies lack a strategy in building hospitality and care towards clients.

c. Lack of Good Governance

Lack of good governance in insurance companies is partly due to their short time operating in insurance market. Junior personnel can learn basic work skills very fast but senior managers need a long time to learn and experience in practice. It is true for every industry in general and insurance companies in particular.

Managers of domestic insurance companies may be in managing positions for a long time but they still lack of experience and knowledge on market economy. Lack of

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good governance such as delay in making decisions, unclear responsibilities among staff, salary and bonus are not corresponding with work performance, junior personnel has a limited discretion is still popular in domestic insurance companies. It is a popular phenomenon in Vietnam, not only in the insurance industry.

In addition to managing skills, managers also needs specialized knowledge on insurance. However, managers, especially senior ones do not need specialized knowledge much. What is more important is the ability to learn and govern companies and to form and implement long term strategies.

d. Lack of Skills in Structuring Premium

One of the weaknesses in domestic insurance companies is that they lack skills in calculating and structuring premium. In doing so, experts need mathematic skills to identify insurance premium as well as standby amount. Insurance companies cannot compete without such good experts because they need to identify an appropriate premium. If the premium is too low, insurance companies cannot make profits and if the premium is too high, they are not competitive in providing their services.

II. VIETNAMS COMMITMENTS IN THE WTO

Vietnams commitments in the WTO are herein briefed and compared with the current Vietnamese legislation as follows:

Vietnams Committments in the

BTA Vietnam Legislation

Market Access

(1) (2) (3) (4)

(1) (2) (3) (4)

National Treatment

(1) None (2) None (3) None

As of January 2012, foreign insurance enterprises shall be allowed to establish branches provided that prudent criteria issued by the International Insurance Association are observed.

(1) None (2) None (3) Foreign-invested insurance enterprises shall be subject to limitations as follows:

Limited in the scope of operation when providing insurance services to State-owned enterprises and for State-funded works;

The establishment of branches shall be allowed only after certain

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Vietnams Committments in the

BTA Vietnam Legislation

(4) Unbound, except as indicated in the horizontal section.

time frames and with a limited number.

(4) Work permits are required.

Note: : Consistent

(1): Cross-border supply (2): Consumption abroad (3): Commercial presence (4): Presence of natural person

It can be seen that basically, Vietnams WTO commitments are consistent with existing Vietnamese legislation. However, these commitments are high in comparison with that of other WTO member with the same level of development.

III. ASSESSMENT OF WTO COMMITMENTS IMPACTS

1. Positive Impacts

a. Good Approach to International Standards by Vietnamese Legislation

Vietnams WTO Commitments are basically consistent with its legislation. However, in the implementation of these commitments, Vietnam still has to adjust its legal system to make it the most consistent as well as to make the market work safely and effectively. This adjustment is not only necessary for the insurance industry but also for other financial industries in order to improve the legal environment for a better performance of insurance companies. It also creates more and more benefits for insurance companies and their clients when operating under a good legal system.

b. More Foreign Investment Mobilized

In order to develop a safe and effective market, sufficient capital is needed. In the current context of Vietnam, domestic enterprises including State owned enterprises and joint stock enterprises would face difficulties in mobilizing capital. Private enterprises are even more difficult in mobilize big amount of capital. Therefore, Vietnams WTO commitments to an easier market access shall facilitate and attract more foreign investment as an extra source of capital.

c. Risks Are Effectively Managed for Creating a More Attractive Investment Environment in Vietnam

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With commitments for an easier market access, foreign insurance companies, which are well known and experienced in risk assessment and management, shall participate and operate in Vietnam market. Risk assessment and management shall be made not only when insurance companies sign an insurance contract with its clients but also when they invest their capital. The participation of these well known insurance companies shall provide an effective risk assessment and management tool to Vietnam economy in general and Vietnam enterprises and individuals in particular. Effective risk assessment and management shall ensure enterprises and individuals facilitating their business and improving investment environment.

2. Negative Impacts

a. Untargeted Group of Clients

In 2000, the Swiss Re Company released a report on economic study with the expressed concerns that foreign insurance companies may choose to target and provide services to only some groups of clients and therefore, some other groups of clients shall be ignored. Foreign insurance companies shall focus on financially powerful clients and not provide services to other groups of clients, especially who have low income.

b. Domestic Companies Will Lose Market Share and Become Having Less Competitive Advantages Compared with Foreign Companies

It is the most concerned matter in the trend of globalization. Although domestic insurance companies enjoy some benefits from the participation of foreign insurance companies in Vietnam market, they still feel uncomfortable when their market shares are gradually lost. The whole market grows and every company may develop. However, domestic insurance companies desire to develop in terms of both their size and market share. The Government may worry seeing that market shares are transferred from domestic insurance companies to foreign insurance companies. The single Prudential firm may leave the Vietnam Life Insurance Company far behind. At the end of the second quarter of 2005, domestic companies only accounted for 40 % of market share. This percentage tends to decrease further.

IV. RECOMMENDATIONS AND SOLUTIONS FOR VIETNAM INSURANCE COMPANIES

Taking account the Chinese experience, Vietnam insurance companies should establish and develop a long-term strategy. Company income from premium is an important indicator but it is not the most important one in the current context of Vietnam. Insurance companies should establish a development strategy, building human resource development indicators (for example, improving specialized knowledge and management skills) or developing indicators on performance

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effectiveness (for example, standardizing processes and saving working time). Surely, a long-term development strategy shall create a firm base for future development.

Some solutions are recommended to Vietnam insurance companies in the current period as follows:

1. Building a Service Hospitality and Attitude Towards Clients

Studies have shown that domestic insurance companies do not pay attention to hospitality and care towards their clients while foreign insurance companies have built and developed a hospitability and caring strategy in a successful manner in Vietnam. Foreign insurance companies standardize work processes, creating favorable conditions for clients in solving problems, paying premium, requesting information and paying damages. In contrast, domestic insurance companies do not have an appropriate development strategy and an implementation plan for building hospitality and care although they are aware of the importance. Therefore, domestic insurance companies should improve their performance in order to provide better customer care services. In addition, insurance companies should stand in clients shoes to understand clients desire, assess and improve their services and hospitability towards clients.

2. Improving Managing Skills

Managers of domestic insurance companies may be in managing positions for a long time but they still lack of experience and knowledge on market economy. This is a popular phenomenon in Vietnam, not only in the insurance industry. In addition to managing skills in general, managers also need specialized skills in insurance.

Therefore, domestic insurance companies should focus on long-term training. They should employ foreign managers or sell shares to foreign investors in order to bring their experience and managing skills to conduct business in Vietnam. Domestic insurance companies should also look for strategic partners to establish long-term cooperation relationships.

3. Improving Ability to Insure Complex Risks

At present, despite the lack of ability to insure complex risks, domestic companies may still be able to secure insurance contracts with respect to State funded projects, which are almost to be reinsured to foreign insurance companies. In future, limitations on foreign insurance suppliers shall be abolished or removed in accordance with WTO commitments. Therefore, domestic insurance companies should immediately learn skills to insure complex risks by training, employing foreign experts, collecting statistics because this work is very complex and time consuming.

4. Building a System for Collecting, Keeping and Handling Statistics

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Domestic insurance companies should be very active in this work area because it is very crucial to every company.

5. Applying Information Technology

Domestic insurance companies are left far behind by their foreign competitors with respect to the application of information technology (IT). Domestic companies should solve this problem immediately by establishing an appropriate IT strategy to accommodate future changes. Clearly, spending an amount of millions US dollars investment in an IT system is really a big challenge for small companies. However, domestic insurance companies should try their best to have an appropriate IT strategy.

6. Developing a Network of Traditional Clients

Vietnam insurance companies should spare no effort to take advantage of their market experience, knowledge and relations in order to develop a network of traditional clients. It is very important factor supporting these companies to employ resources to implement their strategic development plan and compete with powerful foreign insurance companies.

7. Improving Financial Potentials

In the insurance industry, foreign insurance companies investing in Vietnam are often subsidiaries of powerful and leading financial groups in the world market. To be ready for competition, the local Bao Viet has been reorganized to become a financial group with the support form the State. Other State owned enterprises, joint stock companies or private companies are not entitled to this kind of support. Therefore, they should establish and develop their own strategy to be more financially stable in order to face challenges in the market, then expand and develop. In addition, Vietnam insurance companies should seriously pay attention to possible mergers or cooperation with Vietnam banks as experienced in China.

PART III: IMPACTS OF THE WTO ACCESSION ON SECURITIES MARKET

I. CURRENT STATUS AND COMPETITIVENESS OF SECURITIES MARKET

1. Development History of Securities Market

The State Securities Committee (SSC) was established on November 28, 1996 in accordance with Decree No 75/CP of the Government. At that time, the SSC was an agency attached to the Government, performing the functions of State management for securities and securities market. The SSC played a very important role in creating

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favorable conditions for the establishment of the securities market; mobilizing capital for development investment; ensuring a safe, transparent and effective operation of the securities market; and protecting legitimate rights and benefits of investors.

On February 19, 2004, the Government issued Decree No 66/2004/ND-CP transferring the SSC to the Ministry of Finance in order to improve the effectiveness of coordination works among relevant State authorities in promoting the development of securities market.

In addition to the establishment and operation of the SSC, Ho Chi Minh Securities Trading Center (HoSTC) and Hanoi Securities Trading Center (HaSTC) have also become into operation since July 2000 and March 2005, respectively. The Securities Depositing Center was also established and operated since May 2006.

With respect to legal framework, on June 29, 2006, the Law on Securities was adopted by the National Assembly, which came into force on January 01, 2007.

The practice has shown that the improvement of organization and performance of the SSC as well as Vietnam legislation on securities has had a very good impact on the fruitful development of the securities market in terms of both quality and quantity, which can be seen in the Table below:

Year / Criteria

2000 2001 2002 2003 2004 2005 2006

Number of companies listed

5 5 20 22 26 32 76

Nominal values of listed capital (in billion VND)

321 484 1.000 1.120 1.336 1.918 16.016

Capitalized Percentage of share market (% GDP)

0,28% 0,34% 0,48% 0,39% 0,64% 1,21% 13%

Number of securities companies

3 8 9 11 13 14 21

Number of accounts opened

2.908 8.774 13.520 15.735 21.616 31.316 85.000

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2. Comments on Competitiveness of the Securities Market

2.1. Strengths

As seen in the Table above, the securities market has been rapidly expanding. By November 2006, there were 76 companies listed with the total value of shares of VND 110,000 billion, accounting for 13 % of the GDP (ten times bigger than that at the end of 2005).

In addition, there are nearly 400 types of Government bonds, municipal bonds, and bank bonds listed with the total value of more than VND 70,000 billion, accounting for 8.5 % of the GDP. The total value of both bonds and shares accounts for 21.5 % of the GDP. By January 2007, VN-Index had reached more than 1000 points.

The securities market has initially become a channel for mobilizing long-term capital for the economy. More and more enterprises have mobilized their capital through the securities market. For example, in 11 months of 2006, there were 27 enterprises listed and mobilized capital with the total value of shares and bonds of VND billion 1,300.

Brokerage players have been also established and operated in the economy. By the beginning of 2007, there had been more than 30 investment funds registered and operated in the securities market. In addition, almost securities companies registered and operated in the securities market were established by enterprises conducting business in financial sectors such as banks and insurance companies.

As analyzed above, the legal system for securities market has been established and improved. In 1996, the securities market operated under the framework of a Government Decree but since 2007, the securities market has operated under the framework of the Law on Securities. The transfer of the SSC to the Ministry of Finance has also supported and linked the securities market with other financial activities such as insurance and equalization of State owned enterprises.

The securities market has also attracted more and more foreign investors. In 2000, there were only 3 securities companies established and operated but this number was 40 and then 50 by the end of 2006 and by the beginning of 2007 respectively. In addition, 30 investment funds were also established and operated; thousands of accounts, both foreign and domestic were opened and transacted.

2.2. Weaknesses

The scale and size of the securities market is still small (with respect to contribution to the GDP) although the market has continuously developed. The total value of securities accounts for 0.28 % and 13 % of the GDP in 2000 and by the end of 2006 respectively. However, in countries with the same level of development, that rate were 30 % in Indonesia, 34 % in the Philippines and 27 % in China.

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The transparency is limited. Some companies operating in the market has not updated and sent financial reports in a regular manner as required. There were also some offences against regulations on transaction information in the market. Especially although the OTC market has strongly developed but financial status of companies operating in this market has not been reported and supervised.

The State management on the securities market still has shortcomings. Due to limited number of staff, weak reporting system and needs for improving legal system, the State management, supervision and inspection have mainly focus on handling violations.

In recent years, especially before the merger of the SSC into the Ministry of Finance, the securities market and the SSC had almost operated in isolation with other financial and monetary policies. It led to a situation that the securities market operates in an ineffective and risky manner.

II. WTO COMMITMENTS ON SECURITIES

It may be said that Vietnams WTO commitments on securities are broad and open as follows:

- Vietnam allows foreign investors to conduct business in the Vietnam securities market such as supply of securities settlement and balance settlement services, supply and transfer of financial information (Mode 1). In addition, Vietnam has no limitation on Vietnamese investors conducting business in foreign securities markets (Mode 2).

- With respect to foreign direct investment in Vietnam securities market (Mode 3), Vietnam allows foreign enterprises to establish joint venture with the maximum foreign capital of 49% from the date of WTO accession (at the beginning of 2007) and after 5 years (2012), foreign investors are allowed to establish 100% foreign capital enterprises and/or branches to conduct some types of business.

III. ASSESSMENTS OF THE OPPORTUNITIES AND CHALLENGES

1. Opportunities

The openness of the securities market to international investors shall help Vietnam companies and managers approach in terms of both depth and width with international standards, experience and advanced technology.

In addition, domestic players in the securities market and other financial institutions are required to improve their knowledge and skills and competition ability, thereby improving the competitiveness of Vietnam securities market.

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Through international integration, Vietnam regulators of the securities market shall be required to improve their knowledge, helping the policy making process to approach to international standards and practice.

By implementing the WTO commitments on securities, the securities market shall become an important channel for mobilizing foreign capital in service of the cause of modernization and industrialization of the country. That is the very goal of the establishment and operation of Vietnam securities market.

2. Challenges

The securities market has been in the first years of its operation. Therefore, the policy making process for and the organization and management of this market need to be improved. This challenges become bigger when commitments on market access shall be implemented in accordance with the committed roadmap.

The ability to compete in the marketplace of securities companies is weak. These companies are players in the securities market. Therefore, weak competition ability of securities companies means weak securities market, which may be easily affected negatively by and vulnerable to external factors.

Vietnam economy is not capable of consume a huge source of capital while in a macro level; the State management on the flow of foreign capital is weak. The ability of the State authorities to foresee new developments is limited. These factors have caused financial crisis in many countries. Therefore, the managers of Vietnam securities market should be very concerned on this matter. Since the end of 2006 and in the first quarter of 2007, the foreign capital flows into Vietnam securities market are very big, while the Law on Securities only came into full force and effect on July 01, 2007 with many problems waiting for guidance or implementing regulations to be issued. In addition, the ability by State authorities to warn, to predict or supervise or inspect the market is still limited.

One of the traditional challenges in many countries is that one country may lose its sovereignty due to strict commitments and obligations imposed by other countries. The market may be distorted because of the application of economic principles, which are only suitable to imposing countries but not appropriate for imposed countries. Another challenge is that the ability of being affected by or vulnerable to external crisis or changes. It is called chained effect.

IV. PROPOSED SOLUTIONS

Based on the assessment of opportunities and challenges with respect to the securities market above, some solutions are recommended for implementation as follows:

1. Improving the Legal Framework

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The first urgent work to do is to adopt legal documents guiding the Law on Securities as soon as possible. It is very important but complex because the market in Vietnam is in the first years of its operation but Vietnam regulators must predict and adopt regulations for the market to operate in an effective manner for a long time. Therefore, guiding legal documents should be adopted to ensure investors for a safe legal environment.

In addition, legal documents for both encouraging the development of the market and preventing risks are needed. Clearly, in recent time, many investors have a lot of hope in the market and invest a very big amount in the market. However, a lot of investors are just short-term investors or speculators. The improvement of legal framework to encourage long-term investors and limit unhealthy and speculating investors is very necessary.

2. Harmonizing the Demand and the Supply in the Market

The development in the securities market in recent years has shown an imbalance between the demand and the supply of securities in the market. The supply has been increasing but securities circulated in the market are still limited. Therefore, to make the market operate and develop in a healthy manner, solutions to facilitate the harmonizing and matching the demand and the supply in the market are needed as follows:

- To develop the supply, the State should facilitate and speed up the equalization of State owned enterprises, especially big-sized enterprises. The percentage of capital sold to the public should be increased, as the State does not need to keep 51 % of the capital in every State owned enterprise. In addition, the issuance of bonds should be strongly encouraged by broadening the forms of issuance, improving the method to issue for such bonds to be listed in the securities market.

- To develop the demand, the establishment and operation of institutional investors and professional financial institutions such as banks, insurance and securities companies in the securities market are strongly encouraged. In addition, a clear plan or roadmap for market access by foreign investors in Vietnam securities market should be built, especially in sensitive sectors to serve as a background for developing the demand in a systemized manner and avoiding speculations. A mechanism for linking the securities market with other financial market such as insurance, social insurance should be also built to attract idle sources of capital, investing in the economy.

3. Increasing Transparency in the Market

It is an important solution to avoid unhealthy speculations in the securities market. The transparency should focus on two main matters. Firstly, policies and laws on securities

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should be transparent, stable and predictable for long-term investment. Secondly, the operation of companies registered and listed in the securities market should be transparent in terms of financial reports and disclosure, so that investors can predict their investment. If the financial status of these companies is not transparent, investors and these companies themselves are encouraged to make unhealthy speculations.

4. Improving the IT Infrastructure

This solution is only additional one, supporting the operation of the securities market but it is important because the operation of the market is mainly based on available information. Therefore, a weak IT infrastructure shall have negative impacts on the securities market. In recent time, Vietnam securities market has been affected due to problems from the IT infrastructure overcapacity. This problem shall become more serious when the number of investors increases, the supply is bigger and the number of transactions are many more. Therefore, the improvement of IT infrastructure should be implemented at once.

5. Enhancing the Dissemination and Training

In recent time, in Vietnam securities market, there has been al lot of amateur investors who have gained certain initial benefits from the market. They are short-term speculators who invest as if to follow the positive "movement" (joining the herd). However, if the number of these speculators increases, it is not for the securities market in the long term. The market only operates in an effective manner if investors are dominantly professionals and investments are made in a professional manner (calculating, predicting and taking risks). Therefore, the dissemination and training should be promoted so that all investors in the securities market are knowledgeable and responsible to the market.

6. Improving the Supervision and Inspection of the SSC

The SSC is a center coordinating all activities and operation of securities trading centers in Vietnam or in other words, it is the coordinator for the securities market in Vietnam. Therefore, the capability of the SSC with respect to the supervision and inspection of the market should be enhanced. This capability should be manifested by the work of making policies, laws and regulations; supervising and inspecting the market as well as releasing prediction, assessment and warning on irregular activities of the market, thereby recommending solutions for risk prevention to make the market develop in a healthy manner.

7. Coordinating Policies Making

The operation of the securities market relates to many economic and financial activities in the economy so that the policy making process for the securities market

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should be in close relation with other financial sectors such as monetary policies, policies on issuing shares and bonds, management of flow of foreign capital...

PART IV IMPACTS OF WTO ACCESSION TO TELECOMMUNICATION SERVICES

I. ACTUAL SITUATION AND COMPETITIVENESS Well understanding the important roles of telecommunication services to the

countrys socio-economic development, Viet Nam has made tremendous efforts in developing telecommunication network and services to all areas in the country.

Telecommunication infrastructure Viet Nam has a comparatively modern telecommunication infrastructure. All

telecommunication switching and transmission systems have been digitalized. This is an important advantage for implementation of new applications and upgrade to next generation network (NGN) and IP network. International and backbone transmission lines have been established and modernized country wide by different methods, like optic cables, bronze cables, micro wave, sub-marine cables, etc which have made contribution to improving and ensuring information security. Series of telecommunication and Internet services, voice telephone and mobile phone services have been provided according to customers demand. Modern telecommunication services like 3-G mobile services, television on mobile phones, IP television, etc have been or going to be provided in Viet Nam.

Universal services By the 2nd Quarter 2007, the total number of telephones in Viet Nam reached

40 millions, equivalent to a tele-density of nearly 46% (in 1995 this figure was 1%); there were more than 4 million equivalent Internet subscribers with about 18 million users, reaching the internet density of more than 20%; rural telephone networks achieved high growth rates, nearly 75% of communes have post office-culture points, 32% of which have Internet access points. At those points, besides the supply of post-office, telecommunication services for customers, there are also free reading culture services. Mobile phone networks have nearly 30 millions subscribers linking hundreds of mobile phone networks in more than 50 countries in the world. In other words, Viet Nams mobile phone subscribers bringing their phones can make telephone calls as they are at home in more than 50.

Internet universalisation Internet, after nearly 10 years of development, from the end of 1997, has more

than 18 million users, reaching worlds average internet density. From 2003, Internet has been provided to all schools: secondary schools, secondary vocational schools, colleges and universities. High speed Internet and wideband services have been given

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high priorities in investment and development, especially in schools, research and development institutions, training institutions, creating opportunities to provide services and apply modern multimodel equipments

Telecommunication service market Until now, Viet Nams telecommunication service market is a highly competitive

in all services. Viet Nam has had 6 mobile phone service providers (three GSM service providers and three CDMA service providers), four voice telephone services (VNPT, SPT, EVN Telecom, Viettel), many internet and value added service providers. Different economic sectors have been participating into the telecommunication services, there are many 100% private enterprises or enterprises controlled by the private sector providing non-facilities based services. Telecommunication has attracted more than USD 2 billions in the forms of business cooperation contracts (BCCs).

Thanks to competition, telecommunication service enterprises have better understanding on business effectiveness and market dominance. Enterprises have better knowledge and have been adjusting their organizational activities, production and business management towards increasing competitiveness. In practice, domestic enterprises has been developing quite well in strategic areas, national information infrastructure have been widely developed and modernized to regional level, service fees are reducing and at present are equivalent to or lower than the regional average rates, services are increasingly diversified and their quality is further improved. However, in absolute terms, both network scope and financial capabilities, Viet Nams tele-communication enterprises are only small and medium sized. Their productivity remains lower than that of the region. As a result, to compete and develop when multinational companies enter Viet Nams market presents a considerable challenge.

II. VIET NAMS WTO ACCESSION COMMITMENTS

In WTO commitments on telecommunication services, Viet Nam has made commitments on market access and on management policies for a competitive telecommunication market. Detailed commitments in Vietnamese can be downloaded at the following address: http://www.mpt.gov.vn/details.asp?Object=211054830&news_ID=131161222 or commitment in both Vietnamese and English can be downloaded at: http://www.mot.gov.vn/mot/render.userLayoutRootNode.uP.

II.1. Market access commitments

- Supply of facilities-based services (service suppliers own transmission capacity and bandwidth): In basic telecommunication services (voice telephone services, data transmission services, Private leased circuit services) foreign investors may make investment through establishment of joint ventures with telecommunications service suppliers duly licensed in Viet Nam. Foreign capital contribution shall not exceed 49%

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of legal capital of the joint ventures. With value-added services (electronic mails, facsimile, protocol conversion, etc), Foreign capital contribution shall not exceed 50% of legal capital of the joint ventures.

- Supply of non-facilities based services (service suppliers do not own transmission capacity but contract for such capacity from facilities based service suppliers): Upon accession: foreign investment in the form of joint ventures with telecommunications service suppliers duly licensed in Viet Nam will be allowed. Foreign capital contribution shall not exceed 51% of legal capital of the joint ventures. Three years after accession, foreign investors can freely choose their partners and foreign capital contribution shall not exceed 65% of legal capital of the joint ventures.

Only for virtual private network (VPN) and value added services (electronic mail, internet access, etc) which major partners who have special attention and are provided through facilities controlled by Viet Nam: upon accession, joint ventures shall be allowed without limitation on choice of partner. Foreign capital contribution shall not exceed 70% of legal capital of the joint ventures.

- Cross-border supply of telecommunication services (International telecommunication services): For wire-based and mobile terrestrial services, foreign service supplier must provide services through commercial arrangements with an entity established in Viet Nam and licensed to provide international telecommunication services in order to approach customers in Viet Nam. For satellite based services, three after WTO accession, Viet Nam commits to expand scope of clients to include multinational companies operating in Viet Nam, which are licensed to use satellite-earth stations. Viet Nam also specifies that a multinational is a corporation which: a) has a commercial presence in Viet Nam; b) operates in at least one other WTO Member; c) has been in operation for at least 5 years; d) is publicly listed on the stock exchange of a WTO Member; and e) is licensed to use satellite services in at least one WTO Member (see telecommunication service schedule).

Viet Nam also commits that for consortium submarine cable links where Viet Nam is member, foreign service suppliers shall be permitted to control fully-owned submarine cable transmission capacity (e.g. IRU or consortium ownership) terminating at a licensed cable landing station in Viet Nam, and to provide such capacity to international facilities-based service suppliers licensed in Viet Nam (like VNPT, VIETTEL, VP Telecom). 4 years after accession foreign service suppliers shall be permitted to provide such capacity to international VPN and IXP service suppliers licensed (like FPT, VNPT, VIETTEL, VP Telecom) in Viet Nam.

- Commitment to covert business cooperation contract (BCC): In the telecommunications sector, foreign investors in BCC will have the possibility to renew current arrangements or to convert them into another form of establishment with conditions no less favorable than those they currently enjoy.

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II.2. Annex on telecommunication services

Viet Nam has committed to undertake the obligations in the GATSs Annex on telecommunication services since it signed the Viet Nam-US bilateral trade Agreement, which came to effect from December 2001. GATSs Annex on telecommunication services can be understood as a document containing the most general rights and obligations that parties relating to the supply and use of telecommunication services in WTO Members must comply with:

Rights of service suppliers: - to access to and use of public telecommunication transport networks and

services or services offered within or across the border (including private leased circuits of companies, multinational corporations);

- to purchase or lease and attach terminal or other equipment which interfaces with the network and which is necessary to supply a supplier's services;

- to interconnect private leased or owned circuits with public telecommunications transport networks and services or with circuits leased or owned by another service supplier;

- to use operating protocols of the service supplier's choice in the supply of any service, other than as necessary to ensure the availability of telecommunications transport networks and services to the public generally.

Rights of management agencies:

- To promulgate restrictions on resale or shared use of services; - To promulgate a requirement to use specified technical interfaces; -To promulgate a requirement for inter-connection with such telecommunication

networks and services; -To promulgate requirements, where necessary, for the inter-operability of

telecommunication services; - To promulgate restrictions on inter-connection of private leased or owned

circuits with public networks or services or with circuits leased or owned by another service supplier; or

- To promulgate notification, registration and licensing. With the condition that those measures are necessary to:

- safeguard the public service responsibilities of suppliers of public telecommunications transport networks and services, in particular their ability to make their networks or services available to the public generally (or universal services)

- protect the technical integrity of public telecommunications transport networks or services

- ensure that service suppliers of any other Member do not supply services unless permitted pursuant to licenses

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II.3. Reference Paper Viet Nam also commits to undertake obligations in the GATS/WTO Reference

Paper in the Viet Nam- US bilateral trade agreement, which came into effect since December 2001. This document provides basic principles for the establishment and development of management regulations in the telecommunication sector towards promoting healthy competition and effectiveness.

Transparency in licensing policies: - licensing procedures and conditions will not act as independent barriers to

market access (not more burdensome that necessary); - licensing procedures and conditions are published prior to becoming effective; - relevant authorities will review and make a decision on licensing within the

period specified in official procedures; - any fees charged in connection with the filing and review of an application will

not constitute an independent barrier to market access - on the request of an applicant, Viet Nam's relevant regulatory authority will

inform the applicant of the status of its application and whether it is considered complete. An application will not be considered complete until all information specified in the relevant implementing measure is received. If the authority requires additional information from the applicant, it will notify the applicant without undue delay and specify the additional information required to complete the application. Applicants will have the opportunity to cure deficiencies in the application;

- on the request of an unsuccessful applicant, a regulatory authority that has denied an application will inform the applicant in writing of the reasons for denial of the application;

- where an application has been denied, an applicant may submit a new application that attempted to address any prior problems;

- where approval is required, once the application is approved, the applicant will be informed in writing without undue delay;

- where an examination to license professionals is required, such examinations will be scheduled at reasonable intervals.

To access, use telecommunication networks and services: service suppliers, users are allowed to access and use public telecommunication networks on reasonable and non-discriminatory terms and conditions. This requirement mostly relates to facilities infrastructure suppliers and public telecommunication service suppliers, including access to and use of essential equipment.

Shared use of infrastructure like antenna towers, cable terminals, etc: procedures and steps relating to the shared use must be publicly announced and applied on subjective, timely, transparent and non-discriminatory basis. This requirement mostly relates to facilities-based suppliers.

Competitive safeguard: The following actions are considered as anti-competitive: - engaging in anti-competitive cross-subsidization;

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- using information obtained from competitors with anti-competitive results; - not making available to other services suppliers on timely basis technical

information about essential facilities and commercially relevant information that are necessary for them to provide services.

- attached/parallel sales: This is to link one product/service with another service/product. There are two types of attached sale which have been identified: one company creates a product and service package and refuses to sell the component of the package. By this way, the company refuses to sell one product or service individually unless the customer buys another product of that company. The second case is when a company refuses to sell a product for customers unless the customer buys another product of another company.

- Refuse to supply services: The fact that a telecommunication service company refuses to supply services to another telecommunication may be an anti-competitive action and totally eliminate competitors from market. An example of refusal to supply services is refusal to inter-connection.

Management measures must have active measures to limit such actions.

Interconnection: Viet Nam commits to promulgate legal documents providing for interconnection

regulations, including: - Conditions to ensure interconnection: - Procedures on interconnection negotiations - Sample interconnection agreement

- Dispute settlement procedures for interconnection

Universal telecommunication services:

Any Member has the right to define the kind of universal service obligation it wishes to maintain. Viet Nam commits to manage the supply of universal telecommunication service through the public telecommunication services fund on a transparent, non-discriminatory basis, not creating competitive advantage for universal service suppliers and do not cause burdens for supplying enterprises.

Independent state regulator

Viet Nam commits that the state regulator on telecommunication services will be independent, separate from, and not accountable to, any supplier of basic telecommunications services. The decisions of and the procedures used by regulators shall be impartial with respect to all market participants. Independent regulators will result in objective and impartial management; decisions will be impartial to all enterprises.

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Allocation and use of scarce resources Scare resources are necessary for the exploitation of telecommunication services

like spectrum, numbers and rights of way (can be understood as the right for shared use of infrastructure) should be allocated on a non-discrimination, efficient basis, suitable with public interest. This allocation should balance the competitive interests and security/defense priorities.

Viet Nam commits to carry out allocation and use of scare resources, including frequencies, numbers and rights of way, will be carried out in an objective, timely, transparent and non-discriminatory manner. Practical allocation spectrum must be made public, however, there is no requirement to make public the details spectrum allocated for governments special purposes.

Generally, provisions in GATS Annex on telecommunication and Reference Paper has been legalised in the Post and Telecommunications Ordinance, which came into effect in July 2002, in guiding Decrees of the Government, Plan on national radio frequencies, etc. The Post and Telecommunications Ordinance provides for telecommunication policies, operation and business and management of radio frequencies, creating an important legal framework to liberalize market and a level playing field. Together with this Ordinance, guiding Decrees of the government, circulars and decisions of Ministry of Post and Telematics have been promulgated, providing regulations on interconnection, fees and fees calculation methods, frequencies and national numbers, inspection, dispute and claims settlement. The use of international information terminals and telecommunication networks is provided at Article 43 in the Ordinance and Articles from Article 27 to Article 33, Article 60 of Decree No. 160/2004/ND-CP. Those provisions have been put forward to ensure rights