Vietnam Legal Update

May 2002

VIETNAM LEGAL UPDATE May 2002

Part 1 Summary of Selected New Legal Instruments

1.1 Call for Foreign Investment: Decision 62 of the Ministry of Planning and Investment dated 17 May 2002 1.2 Foreign Currency:

Decision 61 of the Government dated 15 May 2002 1.3 Foreign Shareholding:

Decision 260 of the Ministry of Planning and Investment dated 10 May 2002 1.4 Telecommunications Charges:

Official Letter 517 of the GDPT dated 22 April 2002 1.5 Inter-Bank Electronic Payments:

Decision 349 of the State Bank of Vietnam dated 17 April 2002

Part 2 Features

2.1 National Assembly Elections 2.2 Commercial Law

Part 3 Did You Know?

3.1 Foreign Investment Working Group 3.2 Vietnam-US Joint Committee on Economic and Trading Relations 3.3 Visa-Free Stay 3.4 US-Vietnam Textiles and Garments Agreement 3.5 Foreign Investment in Vietnam’s Securities Market 3.6 Import and Distribution 3.7 Accelerating Foreign Investment 3.8 Illegally Imported Cigarettes 3.9 Ordinance on Prices 3.10 Parent Company Expenses 3.11 State Owned Enterprise Reform

Part 4 Phillips Fox Publications

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Vietnam Legal Update: May 2002 3 Part 1 Summary of Selected New Legal Instruments 1.1 Call for Foreign Investment

Decision 62-2002-QD-TTg of the Government dated 17 May 2002 Issuing List of National Projects Calling For Foreign Direct Investment in Period 2001 to 2005 (“Decision 62“) On the basis of the Decision 62 list, the Ministry of Planning and Investment (“MPI”) is responsible to co-ordinate with relevant ministries, branches and local authorities in order to prepare as a matter of urgency a list of projects (and summaries thereof) which will be given priority in calling for foreign direct investment in 2002. Thereafter, priority lists will be prepared on an annual basis. The MPI has reportedly advised that current priorities are projects in applied IT and bio-technologies, oil and gas, electronics, new materials, telecommunications, and infrastructure development. The Decision 62 list (which may be amended subject to requirements of development) includes 228 projects, divided into the following sectors: industry (petroleum, mining, chemicals, steel, mechanical, electronics, software, garment & textiles, paper, construction materials, plastic, and other); agriculture, forestry, fishery & food processing; transport & communications; telecommunications; construction (residential, infrastructure); culture-health-education; and tourism-services, as follows.

Name of project Location Specification Investment form

INDUSTRY

Petroleum industry Post-petrochemical product processing factory

Hoa Khanh IZ, Da Nang USD17 million Joint venture (“JV”) or 100% foreign owned (“100%FOE”)

Industrial gas production factory Hoa Khanh IZ, Da Nang USD10 million JV or 100%FOE Exploration & exploitation of new fields Gulf of Tonkin (Blocks 104 &

107; 110, 113 & 114); Central Vietnam (115-122); Nam Con Son (04.1, 04.2, 05.1B, 18, 19, 20-24); Southwest (41-45)

Production sharing contract or JV

O Mon-Block B gas pipeline Southwest Continental Shelf (bringing gas from Block B to Mekong Delta)

289 km offshore & 43 km onshore; max. capacity 2 billion cm pa; designed capacity 1.5 billion cm pa; USD300 million

JV or business co-operation contract (“BCC”)

Oil Refinery & Petroleum Plant No. 2 Thanh Hoa 6.5 million tons pa; USD1.5 billion JV

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Mining industry Diatomite exploitation & processing Tuy An District, Phu Yen 10,000 tons of products pa;

USD10 million JV

Pigment & ilmenite processing Vung Ang Sea Port IZ, Ky Anh, Ha Tinh

JV

Iron ore exploitation Thach Ha District, Ha Tinh 10 million tons pa JV High-grade sand refinery Suoi Hiep (Dien Khanh),

Khanh Hoa USD30 to 50 million (Export of 100% of products)

JV

Manganese ore exploitation & ferro-manganese processing

Chiem Hoa District, Tuyen Quang

1,000 tons pa (Reserve of 3.2 million tons)

All forms of investment

Feldspar exploitation & processing Son Duong District, Tuyen Quang

300,000 tons of powder pa JV or BCC

Black sand exploitation & titanium dioxide refinery

Ham Tan, Binh Thuan 30,000 to 40,000 tons pa JV or 100%FOE

Bauxite exploitation & aluminium metallurgy

Lam Dong & Dak Lak 1 million tons pa JV

Vietnam-Thailand Zinc Powder JV Bac Kan 26,500 tons pa JV Dong Pao Rare Earth Processing Exploitation JV

Lai Chau 15,000 tons pa JV

Rare earth exploiting Phong Tho, Lai Chau 100,000 tons pa JV Production of artificial rutile & titanium oxide pigment

Central Vietnam JV

Chromium exploitation & processing Thanh Hoa 250,000 tons pa JV Zinc exploitation & refinery Quy Hop, Nghe An 500,000 tons pa JV Quy Xa iron ore exploitation Lao Cai 1.5 million tons pa; USD30 million JV

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Chemical & fertilizer industry Microbiological fertilizer from peat; products from kaolin & clay; garbage treatment & production of synthetic organic fertilizer production factory

Tay Ninh 5,000 tons pa JV or 100%FOE

DAP fertilizer factory Dinh Vu, Hai Phong 330,000 tons pa Production of caustic soda from salt Ninh Phuoc District, Ninh

Thuan 50,000 tons of condensed caustic soda pa

JV or 100%FOE

Refined salt production Ninh Phuoc District, Ninh Thuan

40,000 tons pa JV or 100%FOE

Methyl tertiary butyl ether petrochemical factory (MTBE)

Dung Quat IZ, Quang Ngai 60,000 tons pa; USD12 million JV or 100%FOE

Carbon black petrochemical plant Dung Quat IZ, Quang Ngai 30,000 tons pa; USD43 million JV or 100%FOE Synthetic rubber production factory Dung Quat IZ, Quang Ngai 40,000 tons of BR pa; 50,000 tons

of SBR pa; USD190 million

Colour filtering activated charcoal production factory

Ward 4, Tra Vinh 100 tons of product pa BCC

Industrial alcohol production Son Duong, Tuyen Quang 1.5 million litres pa JV or 100%FOE PS production Central or Southern Vietnam 30,000 tons pa; USD30 million 100%FOE Ethylene & PE production Ba Ria - Vung Tau (Using Etan ethane supplied by

processing plant of gas from Nam Con Son)

Yellow phosphor production Lao Cai 30,000 tons pa JV Welding rod production Ha Tay 20,000 tons pa Phosphoric acid production Lao Cai 450,000 tons pa Soda production Central or Northern Vietnam 150,000 tons pa; USD50 million JV or 100%FOE Manufacture of auto plastic parts & details

Dong Nai 1000 tons pa

Production of formalin for manufacture of joiner’s glue

Vung Tau & Dong Nai 30,000 tons pa

LAB production Hai Phong & Quang Ngai 80,000 tons pa; USD100 million 100%FOE Carbon soot production factory Central or Northern Vietnam 30,000 tons pa Production of caustic soda- chloride-EDC

Central Vietnam Caustic soda: 200,000 tons pa Chloride: 180,000 tons pa

100%FOE

Methanol production Southern VN 660,000 tons pa PTA & BTX production Nghi Son, Thanh Hoa 300,000 tons pa PE production Central or Southern VN 350,000 tons pa; USD320 million JV Styrene Monomer production Central VN (Dung Quat IZ) 210,000 tons pa; USD200 million JV Naphtha cracking Central VN 550,000 tons pa; USD800 million JV PET fibre production Southern VN 300,000 tons pa; USD300 million 100%FOE PA production Southern VN 30,000 tons pa 100%FOE Manufacture of truck & tractor tyres Northern or Central VN 3 million sets pa; USD100 million 100%FOE Long Son bitumen production Plant Ba Ria-Vung Tau 0.2 million tons bitumen pa; 0.9

million tons FO & DO oil pa; USD160 million

JV

Steel industry Blank steel production Quang Ninh or Hai Phong 500,000 tons pa; USD120 million JV or 100%FOE Mui Ron-Ha Tinh Steel Complex Ha Tinh 4.5 million tons pa; USD5,300

million JV or 100%FOE

Special steel production Hai Phong 50,000 tons pa Hot-rolled steel sheet factory Ba Ria-Vung Tau & Dong Nai 1 million tons pa; USD350 million Porous iron Plant (reconstituted in the solid state)

Ba Ria-Vung Tau 1.25 to 1.4 million tons pa; Midrex technology; USD365 million

JV or 100%FOE

Mechanical engineering industry Manufacture of auto & motorbike parts Vinh Phuc & Quang Ninh USD20 million JV or 100%FOE Manufacture of multipurpose engines Ha Tay 300,000 engines pa JV or BCC Manufacture & assembly of construction machinery, equipment & trucks

Ha Noi or Quang Nam, Da Nang

250 trucks pa; 370 construction machines pa

Production of program-controlled machine tools

Dong Nai, Ha Noi 500 to 1,000 units pa

Manufacture of tractors Hai Phong, Vung Tau 50 or more horsepower Manufacture of 4-wheel tractors & small multipurpose ploughs

Ha Tay, Nghe An or Can Tho 2,000 to 5,000 units pa JV or BCC

Manufacture of diesel engines Thai Nguyen, Ha Noi & other provinces

100,000 units pa JV

Manufacture of diesel engines Thai Nguyen or Nghe An 2,000 units pa JV or BCC Production/assembly of electric motors Quang Ninh 1,000 units pa; USD10 million JV Agricultural machines Ha Noi & HCMC Marine engines; other machines for

processing, cultivating, harvesting or drying rice & other cereals

Assembly of construction machines JV or 100%FOE Manufacture of non-standardized components

Tinh Phong IZ, Quang Ngai 5,500 tons of product pa JV or 100%FOE

Manufacture of agricultural equipment & tools of all types

Hoa Khanh IZ, Da Nang USD2 to 5 million JV or 100%FOE

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Manufacture & repair of containers Kenh Giang, Thuy Nguyen, Hai Phong

JV

Manufacture of marine engines Hai Phong & Thai Nguyen 500 marine engines of 80-600 horsepower

Manufacture of machinery & equipment for shipbuilding industry

(Ninh Thuy-Ninh Hoa) IZ, Khanh Hoa

JV or 100%FOE

Long Son Shipyard Ba Ria – Vung Tau Building of ships, drilling rigs, floating cranes (USD170 million; preparation of feasibility study)

BOT or JV

Dung Quat Shipyard Quang Ngai Building of ships (USD430 million; already included in master planning)

BOT or JV

Vung Ang Shipyard Ha Tinh Repair of ships (USD180 million; already planned)

BOT or JV

Building & repair of waterway means Nghi Son, Tinh Gia, Thanh Hoa

USD10 million; 100,000 tons pa JV

Building & repair of ships Hai Phong, Quang Ninh 10,000 DWT or more Manufacture of specialized lifting equipment

Quan Tru Industrial Area, Kien An, Hai Phong

BCC

Manufacture of equipment & parts for production of construction materials

Hai Phong & Dong Nai

Manufacture of power transformers Hai Phong, Quang Ninh 110 KV or more Production of standardized bolts, nuts & parts

Ha Noi, HCMC, Dong Nai

Production of ball bearings of all types Thai Nguyen USD100 million JV Manufacture of mechanical equipment for garment & textile industry

Thai Nguyen USD5 million JV or 100%FOE

Electric-electronic industry Manufacture of electronic printed circuits (multi-layer)

HCMC & Ha Noi USD 17 million JV or 100%FOE

Manufacture of high-voltage insulators Hai Duong Over 110 KV Manufacture of magnetic materials & products

Ha Noi, HCMC, Dong Nai 10,000,000 products pa

Manufacture of sensors, PLC & sets of synchronized metering & automatic control equipment

Ha Noi, HCMC, Dong Nai, Binh Duong, & Hai Phong

Manufacture of ICs Ha Noi, HCMC, Binh Duong, Dong Nai

800 million products pa; USD 110 million

JV or 100%FOE

Electrical control & measurement equipment

Ha Noi, HCMC & Dong Nai 2,5 million equipments pa

Geothermal power plant Central VN 50MW Hai Phong coal-fired power plant Hai Phong 2x300MW JV Quang Ninh coal-fired power plant Quang Ninh 1x300 MW JV A Vuong hydropower plant 170 MW An Khe - Kanak hydropower plant 155MW Manufacture of civil electronic products (aircons, refrigerators)

Khai Quang or Kim Hoa IZ, Vinh Phuc

100,000 pieces of products pa (USD20 million)

100%FOE

Software industry Development of IT software Ha Noi, Hai Phong, Ho Chi

Minh City, & Dong Nai

Leather & footwear industry Leather & sports shoes for export Lang Son, Binh Dinh, Quang

Tri, Ha Nam, Dong Thap, Nam Dinh

JV or 100%FOE

Leather products Izs in Dong Nai Province 10,000 tons pa; USD10 million, for supply to footwear & leather industry

JV or 100%FOE

Garment & textile industry Textiles & garments for export Phu Yen, Thai Binh, Quang

Ninh, Bac Lieu, Binh Dinh, Quang Binh, Ha Nam, Dong Thap, Can Tho

JV or 100%FOE

Spinning & weaving mill Tien Phong IZ, Thai Binh JV or 100%FOE Spinning & weaving mill Thanh Chau IZ, Dong Van IZ,

Ha Nam 4,000 to 5,000 tons yarn pa; 7 million meters fabrics pa

JV or 100%FOE

Artificial leather & raincoat plastic sheets

Hoa Khanh IZ, Da Nang USD10 million JV or 100%FOE

Spinning, weaving & dying plant Nghi Son IZ, Thanh Hoa Yarn: 5,000 to 10,000 tons pa; Textiles: 10 to 40 million meters pa

JV or 100%FOE

Accessories for footwear & garment industries

Dai Ban IZ, An Hai & Hai Phong

JV or 100%FOE

Synthetic fabric weaving factory Nam Dinh USD20 million 100%FOE Silk bleaching, dying & printing plant Bao Loc, Lam Dong Bleaching: 2 million meters pa;

Dyeing: 1.5 million meters pa; Printing: 1.5 million meters pa

JV

Silk knitting mill Bao Loc, Lam Dong 1.5 million meters pa JV or 100%FOE

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Vietnam Legal Update: May 2002 6

SPULSILK spinning mill Bao Loc, Lam Dong 150 tons pa JV Complete spinning, weaving & dyeing plants

Ha Noi, Hai Duong, Hai Phong, Thanh Hoa

Yarn: 2,000-5,000 tons pa; Textiles: 10-40 million m pa; Dyeing: 20-40 million m pa

Garment accessories factory Da Nang & Binh Dinh Yarn spinning, dyeing, weaving & knitting

Binh An Textile IZ USD150 million JV

Polyester fibres Dinh Vu IZ, Hai Phong USD35 million JV or 100%FOE Printing & dying factory Linh Trung IZ, HCMC USD20 million JV or 100%FOE

Paper industry Lam Dong Pulp & Paper Processing Mill

Lam Dong 50,000 to 100,000 tons pa; USD100 million

JV or 100%FOE

Binh Phuoc Paper Mill Binh Phuoc 50,000 tons pa; USD150 million JV or 100%FOE Nghe An Paper Mill Nghe An 100,000 tons pa; USD300 million JV with VN

Paper Corp.

Construction materials industry Kaolin production factory Lao Cai 50,000 tons pa JV Plant for producing plywood from coconut dust

Long Duc IZ, Tra Vinh JV or 100%FOE

Products from sand Suoi Hiep (Dien Khanh) IZ, Khanh Hoa

(50% exports) JV or 100%FOE

Light materials (kezamit) for construction industry

Vinh Cuu District, Dong Nai 100,000 to 200,000 tons pa JV or 100%FOE

Composite products Bien Hoa , Dong Nai 5,000 tons pa JV or 100%FOE Fibreglass-reinforced water pipes Hoa Khanh IZ, Da Nang 7,000 to 10,000 tons pa JV or 100%FOE PVC window frames Binh Phuoc 75,000 square meter pa 100%FOE Okal boards Bac Kan, Thai Nguyen 150,000 cubic meter pa JV Sound- & heat-proof partition & ceiling boards

Hai Phong 120,000 cubic meters pa JV

Alkaline-resistant �iberglass for manufacturing roofing

Quang Nam-Da Nang, Ba Ria-Vung Tau

10,000 tons pa

Plastic industry BOPP films Hung Yen 80,000 tons pa; USD20 million JV Equipment & moulds of plastic industry Hung Yen 80,000 tons pa; USD8 million JV

Other industries High-grade glass factory Phu Vang, Phong Dien, Thua

Thien-Hue 10,000 tons pa; USD6 million

Ba Don high-grade glass factory Ba Don Town, Quang Trach District, Quang Binh

500,000 pieces pa All forms

Sports equipment Da Nang IZ 500,000 units pa JV or 100%FOE Fibreglass fabrics for packaging Phan Thiet IZ, Binh Thuan JV or 100%FOE Upgrading Hai Duong Porcelain Plant Hai Duong 20 million products pa JV Lamp production factory Hai Phong 1 million products pa JV Mineral cotton yarn plant Dong Nai 5,000 tons pa

AGRICULTURE, FORESTRY, FISHERY & FOOD PROCESSING Planting of cassava & processing of tapioca

Vinh Phuc, Kon Tum (Combined projects) JV or 100%FOE

Processing of coffee Quang Tri, Binh Phuoc, Lam Dong, DakLak, GiaLai, HCMC

(Combined projects) JV or 100%FOE

Planting & processing of tea for export Northern mountainous areas (Combined projects) JV Processing of coconut for export Phu Yen, Ca Mau, Binh Dinh,

Ben Tre, Tra Vinh (Combined projects) JV or 100%FOE

Process mushrooms for export Hai Duong, Dong Thap JV or 100%FOE Production of strains of high quality dairy & slaughter (using high bio-technology)

HCMC

Raising of dairy cows & processing dairy products

Lang Son, An Giang, Dong Thap, Quang Nam, Binh Thuan, Dak Lak, Lam Dong, Thanh Hoa, Son La

(Combined projects) JV 100%FOE

Raising of bovine animals & production of high quality beef

Nghe An, An Giang, Quang Tri, Binh Phuoc, Quang Ninh, Vinh Phuc

(Combined projects) JV

Raising of pigs, poultry & processing of meat

Binh Duong, Ha Nam, Da Nang, Thai Nguyen, Vinh Phuc, Hai Duong, Binh Phuoc, Lang Son, Nghe An, Ha Tinh, An Giang, Dong Thap, Bac Ninh, Tay Binh, Can Tho, Tien Giang

(Combined projects) JV fo 100%FOE

Sericulture Ha Nam, Nam Dinh, Hai Phong, Hai Duong, Hung Yen, Thanh Hoa, Can Tho & central provinces

JV or 100%FOE

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Vietnam Legal Update: May 2002 7

Pine plantation/construction of pine resin processing plant

Lang Son, Quang Tri, Kon Tum

JV

Feedstuff production mill Thai Binh, Lao Cai, Lang Son, Quyen Quang, Ca Mau

JV or 100%FOE

Afforestation; construction of paper & wood mill

Hoa Binh, Son La 500,000 ha forest; 50,000 to 100,000 tons paper pa

Produce paint, plywood, organic fertilizer from cashew shells

Dong Nai IZ Investment capital: USD6.1 million JV or 100%FOE

Production of new seedlings by new technology

Phu Tho 10 to 15 million seedlings pa

Planting of cotton Production of plywood from sugarcane & bamboo

Son La 10,000 cub meters pa; USD5 million

Expansion/modernization of anise oil production technology

Lang Son 1,000 tons pa JV

Planting & processing of ginger for export

Lang Son 50,000 ha JV or 100%FOE

Planting & processing of cinnamon Yen Bai, Quang Ngai, Kon Tum

(Combined projects) JV or 100%FOE or BCC

Rice flour & rice starch processing mill Chau Phu District, An Giang 10,000 tons of products pa JV or 100%FOE Planting of ginseng & other medicinal herbs

Dak To, Kon Tum 130 ha JV or 100%FOE

Planting of high-quality rice & building food processing factory

Ha Nam 10-15,000 ha paddy; 30,000 tons of processed food pa

JV or 100%FOE

Development of export-oriented high-yield paddy plantations

Ha Tien & Western Hau River 80,000 ha

Development of breeding pigs & super-lean pigs for export

Nam Dinh JV

Planting/processing of artichoke Da Lat, Lam Dong 120-50 ha Planting/production of pharmaceuticals from quinquina

Lam Dong 350 ha

Processing of cashew nuts for export Phu Yen Planting 7,000-10,000 ha; 5,000-7,000 tons pa

Planting/processing of fruits & vegetables for export

Provinces (Combined projects)

Cultivation/processing of marine products for export

Provinces JV or 100%FOE

TRANSPORT & COMMUNICATIONS Bien Hoa - Vung Tau Railway Bien Hoa - Vung Tau 80 km (USD310 million; pre-

feasibility approved) BOT

Tang Bom - Hoa Hung Railway Dong Nai - HCMC 49 km (USD575 million; pre-feasibility approved)

BOT

HCMC - Long Thanh - Dau Day & Long Thanh - Vung Tau Highways

HCMC, Dong Nai, Ba Ria-Vung Tau

4-6 lanes, 103 km (USD400 million; stage 2: USD250 million)

BOT or JV

HCMC - My Thuan - Can Tho Highway HCMC - Can Tho 176 km, 4-6 lanes (USD785 million; stage 2: USD414 mil)

BOT

Noi Bai - Ha Long Highway Ha Noi-Ha Long 148 km, 4 lanes (USD400 million) BOT Da Nang - Quang Ngai Highway Da Nang, Quang Nam, Quang

Ngai 160 km, 4-6 lanes (USD340 million)

BOT

Ben Dinh - Sao Mai Transhipment Port Ba Ria-Vung Tau Loading & discharging: 25-50 million tons pa (USD637 million)

Van Phong Transhipment Port Khanh Hoa Loading & discharging: 80-100 mil tons pa (USD500 mil)

BOT or JV

Overhead road along Nhieu Loc canal - Thi Nghe & Hoang Van Thu - Dan Chu street

HCMC BOT

Inner city railway HCMC BOT

TELECOMMUNICATIONS Assembling & production of telecom equipment

Ha Noi, HCMC, Dong Nai Producing & assembling telecom equipment of all kinds

CONSTRUCTION Apartment building, Nguyen Van Troi Street, Bien Hoa

Bien Hoa, Dong Nai 5.5 ha, 86,810 sq. m of floor; 1,257 flats

JV or 100%FOE

Housing & new urban area in Cat Bi, Hai Phong

Hai Phong 230 ha; 1,800 flats

High-rise building complex - Vung Tau Trade Centre

Ward 3, Vung Tau 0.7 ha; 14,160 sq. m of floor, 192 flats

JV or 100%FOE

Phap Van residential area, Ha Noi Phap Van, Dong Anh, Ha Noi

50 ha JV or 100%FOE

Ba Diem residential area - Hoc Mon, HCMC Ba Diem, Hoc Mon, HCMC

42 ha; 2,500 flats JV or 100%FOE

Infrastructure facilities of Nghi Son IZ Nghi Son District, Tinh Gia, Thanh Hoa

USD100 million, 1,400 ha JV

Infrastructure facilities of Dung Quat IZ Quang Ngai HCMC Hi-tech Park HCMC Infrastructure facilities of Hung Phu IZ Can Tho 928 ha; USD100 million JV

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Vietnam Legal Update: May 2002 8

HCMC garbage treatment HCMC BOT Garbage treatment & fertilizer production plant

Phan Thiet, Binh Thuan 300 to 500 tons of waste/day JV or 100%FOE

CULTURE-HEALTH-EDUCATION Technical workers training center Long Thanh, Nhon Trach,

Dong Nai 1,000 trainees JV or 100%FOE

Industrial technical high school Long Tho commune, Nhon Trach, Dong Nai

2,000 trainees JV or 100%FOE

Blood bank HCMC International Hospital Hai Phong JV Upgrading traditional hospitals Hai Phong JV or 100%FOE B-Lactam anti-biotic materials production Ha Noi JV or 100%FOE Multi-functional pharmaceutical chemistry Ha Noi JV or 100%FOE Upgrading traditional medicine production Hai Phong, HCMC JV or 100%FOE Production of surgical sutures Ha Noi JV or 100%FOE Production of disposable medical rubber instruments

Ha Noi JV or 100%FOE

Production of medical electronic equipment Ha Noi USD 2 million JV or 100%FOE Production of genetic technology vaccines Technical worker training schools; natural sciences, technology, foreign language colleges & universities

Ha Noi, HCMC, Da Nang

Applied science & new technology research co-operation project

TOURISM - SERVICES Serviced office building Thai Nguyen USD15 million JV or 100%FOE Van Phong Bay resort Hon Gom Peninsula,

Khanh Hoa Tourism complex JV

Coastal tourism villages Hamlet 4, Xuan Hai, Song Cau, Phu Yen

100 ha (USD19 million)

JV or 100%FOE

Tuan Chau Island resort Quang Ninh (USD400 million) JV Upgrading Ham Rong resort Sa Pa, Lao Cai JV Nha Mat - Hiep Thanh resort Bac Lieu 120 ha, USD11.2 million 100%FOE My Khe Resort Son Tinh, Quang Ngai 145 ha (USD15.5 million) JV or 100%FOE Tam Dao 2 Resort Tam Dao town, Vinh Phuc USD20 million JV Thac Mo - Hot water lake eco-tourism area Phu Ngoc, Dinh Quan,

Dong Nai 50 ha; USD20 million JV or 100%FOE

Ham Rong cultural tourism area Thanh Hoa USD40 million JV or 100%FOE Ham Tan - Ham Thuan Nam international resort

Ham Tan, Ham Thuan Nam, Binh Thuan

800 to 1,000 ha JV or 100%FOE

Golf course in South of Nui Coc Lake Thai Nguyen 14-hole golf court; USD20 million JV or 100%FOE Tuyen Lam Lake Resort Da Lat, Lam Dong USD100 million JV Countryside Resort Con Coc, Giong Trom,

Ben Tre 1,200 ha; USD14 million BCC

Entertainment areas Ha Noi, HCMC, Da Nang, Quang Ninh

Developing Son Dao resort & cultural, sports centre

Hai Phong Hotels, villas, & sports, game & cultural areas

Thuan An Sea Resort Thua Thien-Hue 500 rooms, entertainment, sports, service areas; 270 ha

Lang Co Resort Thue Thien-Hue 1,500 to 2,000 rooms & other facilities over 732 ha

Bien Dong Hotel Ba Ria-Vung Tau 300 4-star rooms, 25,000 sq. m; USD20 million

JV

Vung Tau Festival Resort Ba Ria-Vung Tau 4-star hotels, villas & entertainment areas; 92,000 sq. m, USD59 million

JV

Chi Linh Sports-Tour Hotel Ba Ria-Vung Tau 5-star 500-room hotel, 12,400 sq. m, USD30 million

JV or 100%FOE

Thien Cam Resort Ha Tinh Upgrading 150-room hotel; 174 ha; USD17 million

JV

4-star-hotel at 32-34 Tran Phu, Nha Trang Khanh Hoa USD20 million JV Bai Duong Hotel Khanh Hoa 25,000 sq. m; USD10 million JV Canh Duong Sea Resort Thua Thien-Hue 1,720 rooms; other facilities; 445

ha; USD390 million

Tuy Hoa Hotel Phu Yen 3-star hotels of 150 to 200 rooms; 3 ha; USD11.25 million

JV or 100%FOE

Van Tuong Resort Quang Ngai 245 ha; USD15 million JV Tien Long Hotel Quang Ninh 4-star hotels of 200 rooms; USD10

million JV

Ha Long Bay entertainment complex Quang Ninh USD30 million JV

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1.2 Foreign Currency

Decision 61-2002-QD-TTg of the Prime Minister (“PM“) of the Government dated 15 May 2002 (“Decision 61-2002“) on Amendment of Decision 61-2001-QD-TTG of the PM dated 25 April 2001 on Obligations to Sell and Rights to Purchase Foreign Currency of Residents being Organizations (“Decision 61-2001“) Decision 61-2002 amends article 1.1 of Decision 61-2001, lowering the percentage of foreign currency revenue from current transactions which it is compulsory for resident Vietnamese economic organizations, enterprises with foreign owned capital, foreign parties to business co-operation contracts, foreign company branches, and foreign contractors to sell to banks (immediately upon transfer) from 40% to 30%. Decision 61-2002 was effective as of 15 May 2002.

1.3 Foreign Shareholding

Decision 260-2002-QD-BKH of the Ministry of Planning and Investment dated 10 May 2002 Issuing List of Sectors in Which Foreign Investors May Purchase Shares of Non-State Owned Enterprises in Accordance with the Law on Promotion of Domestic Investment (“Decision 260“) Decision 260 provides the following list of sectors in which foreign investors may purchase shares up to 30% of the charter capital of unlisted non-State owned enterprises: I. Agriculture, forestry and fishery:

1. Planting of crop trees or industrial trees (except for afforestation); 2. Breeding (including cultivation of marine products); 3. Provision of services supporting cultivation and breeding; 4. Provision of services to the fishery.

II. Industries and processing:

1. Production and processing of foods and drinks; 2. Production and processing of agricultural or forestry products; processing of marine

products; 3. Production, processing and preservation of meat, marine products, vegetable and fruits; 4. Grinding and production of powder and production of foods for domestic animals; 5. Production of other foods; 6. Production of drinks (except for alcoholic drinks); 7. Production of yarn, weaving of cloth and finishing of textile products; 8. Production of other textile products; 9. Knitting; 10. Production of clothes, tanning and dying of animal skins; 11. Semi-tanning of leather, production of handbags, suitcases, covers of seats and

footwear; 12. Production of paper and products from paper; 13. Production of chemicals and chemical products (except for toxic or harmful chemicals); 14. Manufacture of products from rubber and plastic; 15. Production of glass, products from glass, porcelain, china and construction materials; 16. Production of metal and products from metal; 17. Manufacture and maintenance of machinery and equipment; 18. Manufacture of office equipment and computers; 19. Manufacture of electric equipment and machinery; 20. Manufacture of medical equipment, fine tools, optical equipment and watches of all

kinds; 21. Manufacture of means of transportation; 22. Production of beds, wardrobes, desks, chairs and other products; 23. Construction; 24. Provision of services for repairing belongings and household furniture.

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Vietnam Legal Update: May 2002 10

III. Tourism, hotel and restaurant: 1. Business of hotel and restaurant services.

IV. Transportation, warehouse and communications:

1. Transportation by road or pipelines; 2. Manufacture of telecommunications equipment.

V. Scientific and technological activities; healthcare and education:

1. Production and provision of consultancy services in relation to computer software; 2. Manufacture, repairing and provision of consultancy services in relation to computer

hardware; 3. Hospitals and clinics; 4. Manufacture of articles and equipment for schools.

An earlier list of sectors in which foreign investors are permitted to buy shares was issued with Decision 145-1999-QD-TTg of the Prime Minister dated 28 June 1999 (“Decision 145”). The qualifying sectors under Decision 145 are:

· Textiles and garments; · Footwear manufacture; · Leather processing; · Manufacture and processing of agricultural, forestry and aquatic products; · Manufacture of other consumer goods; · Manufacture of building materials; · Domestic road and water transportation; cargo transportation by container; · Manufacture of study aids; · Manufacture of children's toys; · Commercial services and hotels; · Mechanical manufacture; · Manufacture of exports in above fields.

Decision 260 does not expressly replace the Decision 145 list so it is unclear how the Decision 260 list and the Decision 145 list interrelate. Decision 145 defined “foreign investors” as foreign economic organizations and foreign individuals. Decision 260 fails to define “foreign investors” and it is not clear whether the Decision 145 definition applies to Decision 260. Further, both Decision 145 and Decision 260 are issued pursuant to Vietnam’s domestic investment regulations which only apply to foreign investors in the category of overseas Vietnamese and permanent foreign residents in Vietnam. As a result, it remains unclear exactly which foreign entities are entitled to purchase shares in domestic Vietnamese enterprises. Decision 260 was effective as of 25 May 2002. Foreign shareholding in listed companies in Vietnam’s nascent securities market remains subject to restrictions under Decision 139-1999-QD-TTg of the Prime Minister dated 10 June 1999, including a 20% cap on total foreign shareholdings in any one listed company, a 7% cap on each foreign organization’s shareholding, and 3% cap on each foreign individual’s shareholding.

Phillips Fox

Vietnam Legal Update: May 2002 11 1.4 Telecommunications Charges

Official Letter 517-TCBD-KTKH of the General Department of Posts and Telecommunications (“GDPT“) dated 22 April 2002 on Adjustment of Posts and Telecommunications Charges (“Official Letter 517“)

Official Letter 517 proposes the following reductions in telecommunications charges in an attempt to improve the investment climate, to popularize post and telecommunications and Internet services, and to improve the competitiveness of enterprises in preparation for integration into the world economy: - Charges for connection to the public switch telephone network will replace the previous

charges for telephone installation. - Charges for long-distance calls: The present 8 different zones may be reduced to 3, on the

principle of not increasing charges above the present average charge. - Charges for outgoing international calls will be reduced in 2 rounds, with a total average

reduction of 30-35%. The first round will commence in July 2002, with an average reduction of 15-20%, and the second round will be completed by 31 December 2002. Charges for outgoing Internet Protocol international calls may be similarly reduced. The stated aim is that, by the end of March 2003, charges in Vietnam for international calls will have been scaled down to the equivalent average of other countries in the region.

- Charges for leasing international telecommunications lines will also be reduced in 2 rounds, with a total average reduction of 20-30%. The first round will commence in July 2002, with an average reduction of 10-15%, and the second round will be completed by 31 December 2002. Again, the stated aim is to scale down tariffs in Vietnam by the end of March 2003 to the equivalent average of other countries in the region.

- Charges for leasing domestic telecommunications lines will be reduced by an average of 15-20% in the third quarter of 2002.

- Charges for mobile phones: In the third quarter of 2002, for “pay later” mobile telephone services, the charges for network connection and subscription charges will be reduced by an average of approximately 20-25%; and the charges for telephone calls will be reduced by an average of approximately 10-15%. Charges for "pay in advance" mobile services will also be reduced in the third quarter of 2002 by an average of approximately 10-15% in order to “balance" them with “pay later” charges.

- Charges for Internet services: The GDPT will continue its consideration of adjustment of charges and of a management regime appropriate for the charges of leasing gateways and for indirect Internet access via the public telephone network, and to facilitate Internet Connection Service Providers and Internet Access Service Providers to be more autonomous in fixing their charges, and to strive to reduce prices and charges in order to promote the development of internet services and to encourage people to use them.

On the basis of the proposals in Official Letter 517, the GDPT requests telecommunications and Internet enterprises to calculate their cost prices and to compare them with equivalent charges in the region in order to submit (prior to 20 May 2002) a plan for charges for their services to the GDPT in order for the GDPT to finalise its proposed adjustments. Telecommunications and Internet enterprises may also make recommendations for adjustment of charges for other posts and telecommunications services they are currently providing or plan to provide.

Phillips Fox

Vietnam Legal Update: May 2002 12 1.5 Inter-Bank Electronic Payments

Decision 349-QD-NHNN of the State Bank of Vietnam (“SBV“) dated 17 April 2002 Issuing Regulations on Formulation, Issuance, Management and Utilization of Security Codes in the Inter-bank Electronic Payment System (“Decision 349“) Following the regulations governing electronic payments under Decision 44-2002-QD-TTg of the Prime Minister dated 21 March 2002, the Decision 349 Regulations provide for the application of security codes in the inter-bank electronic payment system in order to ensure confidentiality and safety of electronic data and to control inter-bank electronic payments on computer networks. The Decision 349 Regulations govern: - Security codes for approval: Issued to (i) directors/deputy directors in charge of accounting,

and other persons authorized to conduct the control of electronic documents at the SBV Transaction Department and at SBV branches participating in the inter-bank electronic payment system and (ii) general directors and other persons authorized to conduct the control of electronic documents of members of the inter-bank electronic payment system outside the SBV network.

- Internal security codes: Issued to individuals who are assigned to make payment orders or

conduct internal control. Security codes are included in the list of State secrets in the banking industry and are considered as "top secret". Any person who supplies and installs computer software programs dealing with security codes is responsible for protection of security codes as State secrets. The Director of the SBV’s IT Department is responsible for formulating, issuing and managing security codes for approval. Heads of members and member entities are responsible for formulating, issuing and managing internal security codes. The Decision 349 Regulations provide guidelines for the formulation, delivery, transportation and preservation of security codes; the suspension, change or unsafe utilization of security codes; the responsibilities of security code users for protection of security codes; and dealing with breaches. Decision 349 was effective as of 2 May 2002.

Phillips Fox

Vietnam Legal Update: May 2002 13 Part 2 Features 2.1 National Assembly Elections

The National Assembly (“NA”) is the highest representative body of the Vietnamese people and the highest State authority in the Socialist Republic of Vietnam. The NA is the only body vested with constitutional powers. The NA decides on fundamental domestic and foreign policies (including ratification of international treaties), on national socio-economic, defense and security tasks, and on the main principles governing the organization and functioning of the State apparatus and the social relations and activities of citizens. The NA exercises the right of supreme supervision of all State activities with respect to observance of the Constitution and its laws and resolutions. A new Law on the Organization of the NA was issued by outgoing NA Legislature X on 25 December 2001, replacing the former Law on the Organization of the NA dated 15 April 1992. On 25 May 2002, the NA announced the results of the election of 498 deputies for NA Legislature XI. The results reveal victory for 154 centrally nominated candidates and 344 locally nominated candidates, including 3 independents vetted by the Fatherland Front. A total of 759 candidates in 188 constituencies stood for election at the 19 May poll, compared with 666 candidates vying for 450 seats in the last election in 1997. Most of the candidates were members of the Communist Party, but 13 independents also stood for election, the largest number ever. The printed-paper ballots used for voting were counted by hand. At the polling station, voters received a slip bearing a certain number of candidates' names. Voting was conducted in a closed booth, with voters crossing out names of candidates they did not support, then dropping the paper into a ballot box. Local election officials competed to ensure high turnout for their areas. The vote counting was not public. Mobile polling stations were provided to ensure the elderly and sick could cast their votes. Voters could register a protest vote by crossing out all names listed, writing down new names, or leaving voting slips blank. From a statistical perspective, a number of milestones were achieved: • Women will make up 27.3% of the new Legislature, holding a total of 136 seats. This is a

1.1% increase on the previous number of seats held by women, but does not achieve the target of 30% set by the NA.

• 93.4%, or 465 delegates, have university qualifications.

• 99.7 % of the 49,902,976 registered voters (citizens over 18 years old) voted. The area with

the highest voter turnout (100%) was Cao Bang province.

• 11.2% of delegates elected were under 40 years old. The oldest delegate, Thich Thanh Tu, is 75 years old; the youngest is Ngyuyen Thi Ngoc Anh, 23 years old.

• The highest numbers of deputies come from Ho Chi Minh City (26), Hanoi (21), and Thanh

Hoa (17). The 1st Session of Legislature XI of the NA, to be held from mid-July to mid -August, will address: (i) electing and ratifying the top leaders of the State apparatus (no major change is expected); (ii) reviewing the implementation of the State budget; and (iii) promulgating and considering a number of key legal instruments (anticipated to include a new Ordinance on Economic Arbitration).

Phillips Fox

Vietnam Legal Update: May 2002 14 2.2 Commercial Law

On 24-26 April, Phillips Fox held a 3 day intensive seminar in Hanoi on Commercial Law, Dispute Resolution and Intellectual Property, in co-operation with the Ministry of Trade (“MoT”), sponsored by the Australian Department of Foreign Affairs & Trade (“DFAT”) in response to the Australian Government’s Australian Pacific Economic Co-operation commitments to capacity building in certain aspects of commercial laws across developing economies. The aim of the seminar was to enhance the understanding of the audience of the functions, purposes and jurisprudential basis behind each of the above areas of law, thereby assisting Vietnam to achieve its international goals, in particular accession to the World Trade Organization (“WTO”). Each seminar topic involved introduction to and discussion of basic concepts and related issues in the context of Vietnamese law and the international arena, focusing on identifying blockages in current Vietnamese law to WTO norms. Participants comprised senior officials, experts & draftspersons from the MoT, the Ministry of Justice and the Ministry of Finance, including the Director and Deputy Directors of the MoT Legal Department, the Deputy Head of the Standing Committee for amendments to the Commercial Law, experts from the MoT’s Investment Department, Import-Export Department and Domestic Trading Policy Department, legal officers from the MoT’s Drafting Committee involved in drafting the proposed amendments to the Commercial Law. In-country representatives for DFAT and members of the Vietnamese press were also present. Intellectual Property To achieve WTO accession, Vietnam will be required to bring its protection of intellectual property (“IP”) rights in line with international standards set by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”), to which Vietnam is not yet a signatory. Further, if Vietnam provides for international standards in its domestic laws and enforces such international standards, other countries can rely on a pre-determined standard of protection and will be more likely to favor Vietnam in trade and commerce. Vietnam, however, needs to undertake a wide range of legal reforms to meet international standards. Currently, in the absence of treaties to the contrary, a foreign work is not protected by Vietnamese copyright law unless it is published for the first time ever in Vietnam. In relation to foreign work, a work is considered as a work first published or disseminated in Vietnam if it is published or disseminated within 30 days from the date on which such work is first published or disseminated in another country. These provisions restrict copyright protection to only works of foreign individuals or organizations which publish or disseminate their works in Vietnam within 30 days of the publication or dissemination of those works in another country, thus leaving a majority of foreign works unprotected. This “30 day rule” contradicts the national treatment requirement imposed by TRIPS prohibiting discrimination between a member country’s own nationals and the nationals of other member countries. The relevant Vietnamese laws dealing with copyright protection will require amendment to guarantee foreign owners the same level of protection as domestic owners amongst the member countries of TRIPS. Significant reform is also required with respect to Vietnam’s currently inadequate deterrent enforcement and insufficient remedies for infringement of IP rights. Vietnam’s IP laws offer no guidance on what amount of damages is adequate for copyright infringement. This allows administrative authorities and the courts a broad discretion to award nominal damages that are insufficient to deter piracy. Administrative authorities have been known to award nominal fines (US$50-$100) to commercial pirates. Although there have been some awards of damages from civil courts in some localities, the continuing high piracy rate in Vietnam indicates that these are not at a sufficient level to deter piracy. In contrast, TRIPS provides that damages must be adequate to compensate for the injury suffered by the copyright owner due to the infringement of its rights. Damages include expenses incurred by the owner in halting the infringing act and legal fees. Further, criminal penalties for piracy on a commercial scale include monetary fines which are sufficient to act as a deterrent.

Phillips Fox

Vietnam Legal Update: May 2002 15

Dispute Resolution The MoT is currently developing an Ordinance on Arbitration. As such, the seminar on dispute resolution examined in detail the current draft Ordinance on Arbitration (“draft Ordinance”), highlighting the draft Ordinance’s good points, highlighting significant departures from the United Nations Model Arbitration Law, and suggesting improvements to the draft Ordinance to facilitate WTO accession. In particular: • Article 1 of the draft Ordinance provides for regulatory application to dispute resolution

arising from “business activities”. Business activities is narrowly defined by the draft, and this limitation leaves scope for vagueness and uncertainty as to the extent of regulation. It was recommended that the definition of “business activities” therefore be supplemented to mention specifically all of the activities set forth in the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (“UNCITRAL Model Law”).

• Article 10 of the UNCITRAL Model Law gives parties the freedom to select the number of

arbitrators they wish and makes three the default number. In contrast, Article 22 of the draft Ordinance gives the parties a choice of one or three arbitrators with no chance of increasing the number by agreement. It was proposed that consideration should be given to allowing the parties to select more than three arbitrators if they wish to, in order to allow the flexibility for each party to name an arbitrator in cases where there are many defendants or plaintiffs and the opportunity for the parties to ensure a broad range of experts. Further recommendations included the right to choose foreign citizens to act as arbitrators and a foreign language for arbitration and the right for parties to agree on procedures for objecting to an appointment or dismissal of arbitrators.

Commercial Law The Commercial Law of Vietnam deals with the sale and purchase of goods and certain services. The MoT is currently drafting amendments to the Commercial Law and a number of suggested improvements were made to provide clarity and to bring the law into international conformity. In particular: • Article 55 of the Commercial Law stipulates that a contract is entered into when the offeror

receives the notice of acceptance of all terms stated in the offer. The question raised here, is when the acceptance becomes valid. Normally, a contract is entered into when an offeror receives the acceptance of his or her offer from an offeree. The United Nations Convention on Contracts for the International Sale of Goods (known as the Vienna Convention) provides that a statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Amendments to article 55 to this effect were proposed.

• The Commercial Law provides for liability to pay damages where there is all of: a breach of

contract, physical loss, direct connection between the breach of contract and physical loss and fault of defaulting party. In comparison with English Law, there is no provision for compensation to be paid for other losses which may occur as foreseen by the parties. Proposed amendments therefore include compensation provisions to this effect.

Conclusion As the timing of the seminar coincided with the MoT’s drafting of the amendments to the Commercial Law of Vietnam and its development of an Ordinance on Arbitration, a real opportunity was provided to improve the quality of law-making in Vietnam. This was evident from the high level of interaction and in-depth discussion between Phillips Fox presenters and seminar participants and amongst the participants themselves. Historically,

Phillips Fox

Vietnam Legal Update: May 2002 16

Vietnamese seminar attendees have not typically engaged in this type of dialogue and therefore the interaction level was impressive and very encouraging. Feedback from participants indicates that the main reason for this level of interaction was the clear presentation of the materials and the stimulating content of the materials, including examples which the participants could relate to and were in accordance with Vietnamese thinking. Particularly encouraging was the postponement by MoT of its submission to the Government of its draft amendments to the Commercial Law in order to incorporate benefits derived from the seminar. It is hoped that the knowledge and skills gained from the seminar will also enhance the capacity of key government agencies to draft, interpret, implement and enforce other commercial laws. As a general observation, especially in the context of the recently published "Legal Needs Assessment" of Vietnam, there is a real surge, not confined to the seminar, of genuine desire in Vietnam to take into account international standards in the drafting and implementation of legislation. This is not to say that international norms are about to be adopted across the board. In each case, Vietnam will and should assess carefully all factors before determining what is best for the long-term future of Vietnam as part of the global community.

Phillips Fox

Vietnam Legal Update: May 2002 17 Part 3 Did You Know? 3.1 Foreign Investment Working Group

On 20 May 2002, the Prime Minister (“PM”) agreed to terminate the Working Group on Foreign Investment (“Working Group”), acknowledging its contributions to policies on foreign invested shareholding companies, to the list of projects calling for foreign direct investment and to methods for attracting foreign investment. The Ministry of Planning and Investment has been assigned to prepare an overall report for submission to the PM on the status of implementation of the Government’s policies for attracting foreign investment, highlighting the existing problems and analyzing measures to continue to improve the foreign investment environment. The PM has directed that the following tasks now be undertaken: - The Ministry of Construction must issue decrees amending Decree 60 on home ownership

and ownership of land use rights and Decree 61 on purchase and sale of residential housing (further to Decrees 71-2001-ND-CP and 81-2001-ND-CP on residential housing).

- The Ministry of Education and Training must issue guidelines implementing Decree 06-2000-ND-CP with respect to foreign invested education and training establishments.

- The Ministry of Labour, War Invalids and Social Affairs must issue guidelines implementing Decree 06-2000-ND-CP with respect to business co-operation in the vocational training sector.

- The Ministry of Science, Technology and Environment must issue regulations on high-tech industrial zones and specific regulations on attracting investors into industrial zones and high-tech industrial zones.

- The Ministry of Finance must prepare a plan for amending the current tax system and for attracting foreign investment, and on policies for encouraging the activities of investment funds.

- The Ministry of Trade must issue regulations on foreign invested activities in the sector of the import and domestic distribution services.

- The Department of Land Administration must prepare a plan to permit private pilot tests for foreign investors to sublease land and plans for dealing with land which was the capital contribution to a joint venture which has become bankrupt, has been dissolved, or which converts its investment form.

- The State Bank of Vietnam must issue regulations on foreign exchange applicable to export processing zones, must continue to amend the monetary policy relevant to foreign direct investment, and must research and draft a plan to permit foreign invested enterprises to mortgage the value of their land use rights to foreign credit institutions.

3.2 Vietnam-US Joint Committee for Development of Economic and Trading Relations

On 23 April 2002, the Government established the Vietnam Sub-Committee of the Vietnam-US Joint Committee for Development of Economic and Trading Relations (“Joint Committee”). The Vietnam Sub-Committee comprises the Minister of Trade (chairman), representatives from the Ministries of Trade, Foreign Affairs, Planning and Investment, Finance, and Office of Government (permanent members), and a senior officer of the Office of Government (secretary). Depending on the issues raised at each meeting of the Sub-Committee, the chairman may invite representatives from other ministries and branches. The Vietnam Sub-Committee is responsible for co-ordinating with its US counterpart to implement tasks of the Joint Committee in accordance with the US-Vietnam Bilateral Trade Agreement (“BTA”).

3.3 Visa-Free Stay The Vietnamese Government is reportedly preparing to introduce a five-day, visa-free stay which will be available to all international travelers, irrespective of nationality, and which will apply to all ports of entry (air, sea and road). This may represent the first step towards a full 'visa-upon-arrival' policy that will greatly facilitate increased tourism in Vietnam.

Phillips Fox

Vietnam Legal Update: May 2002 18 3.4 US-Vietnam Garment and Textiles Agreement

The US and Vietnam have recently commenced talks on a US-Vietnam Garments and Textiles Agreement, however no schedule has been determined. Garments and textiles were specifically excluded from the BTA, leaving them subject to quotas and separate agreement. The US has forewarned Vietnam that labour conditions may be attached as a benchmark for increased quotas, as is the case under the US-Cambodia Garment and Textile Agreement (where increases in quotas are subject to annual review by the International Labour Organization that labour standards have improved). Further, Vietnam faces a formidable force in local US garment and textile manufacturers which are under increasing market pressure from NAFTA, WTO, other free-trade initiatives and recent quota concessions to Pakistan (in return for its support in the war against terror) and already lobbying for restrictions on Vietnamese imports.

3.5 Foreign Investment in Vietnam’s Securities Market Vietnam’s securities market opened in July 2000. To date, only one Securities Trading Centre is operating, in HCMC, with 17 listed companies on the board. Foreign investment funds: The Prime Minister (“PM”) issued in-principle approval for the foreign investment fund, Vietnam Frontier Fund, to invest in Vietnam’s securities market in late April 2002. The State Securities Commission (“SSC”), the regulatory body of Vietnam’s securities market, has now licensed the Vietnam Frontier Fund to conduct investment activities under Decree 48-1998-ND-CP of the Government dated 11 July 1998. Vietnam Frontier Fund’s participation in the securities market will be subject to Decision 139-1999-TTg of the Prime Minister dated 10 June 1999 (“Decision 139”), which imposes a cap on total foreign shareholdings to 20% of shares in any one listed company, a 7% cap on each foreign organization’s shareholding, and 3% cap on each foreign individual’s shareholding. Vietnam Frontier Fund was launched in 1994 by Bangkok-based merchant banking group, Finansa. It is listed on the Irish stock exchange and has raised $50 million from international institutional investors. Up to now, it has been investing in projects and unlisted companies in Vietnam and foreign companies with business in Vietnam. Vietnam Frontier Fund will become the second main foreign investor in Vietnam's securities market after British firm Dragon Capital’s Vietnam Enterprise Investment Limited, a Dublin-listed investment fund which has direct holdings in listed and unlisted companies in Vietnam. Dragon Capital and Saigon Thuong Tin Commercial Bank (Sacombank) have reportedly applied to the SSC to establish the first joint venture investment fund in Vietnam to invest in the Vietnam’s securities market, with 49% Dragon Capital/51% Sacombank equity split. In-principle approval has reportedly been granted by the State Bank of Vietnam (“SBV”) for Sacombank’s involvement in a joint venture investment fund. Tax: The Ministry of Finance (“MoF”) has recently confirmed that foreign individuals who invest in securities in Vietnam are exempted from personal income tax in accordance with Decision 39-2000-QD-TTg dated 27 March 2000 providing provisional regulations on preferential tax treatment for securities trading, however foreign companies which invest in securities in Vietnam are subject to tax pursuant to Circular 169-1998-TT-BTC dated 22 December 1998. Upon remittance of profits overseas, both foreign companies and individuals investing in securities in Vietnam must pay 5% remittance tax. (Official Letter 4321-TC-TCT of the MoF dated 7 May 2002)

Future regulations: The PM has delegated to the SSC, the MoF and the SBV the task of drafting regulations on anti-speculation in securities investment and trading activities as a basis for considering licensing foreign investors to participate in investing and trading securities on the securities market under Decision 139. Further, the SSC has reportedly submitted to the Government for its approval a proposal to amend regulations governing the operation of foreign investment funds in Vietnam with the objective of increasing trade on Vietnam’s securities market.

Phillips Fox

Vietnam Legal Update: May 2002 19 3.6 Import and Distribution

Deputy Prime Minister Nguyen Manh Cam has directed the Ministry of Trade to co-ordinate with the Ministry of Planning and Investment and the Ministry of Justice to clarify the issues arising with respect to foreign direct investment in the import and distribution sector and to submit draft regulations to the Prime Minister prior to 10 June 2002. (Official Letter 2630-VPCP-KTTH of the Office of Government dated 20 May 2002)

3.7 Accelerating Foreign Investment

In mid-May, the Prime Minister approved the master plan for attracting foreign investment in the period 2001-2005 recently prepared by the Ministry of Planning and Investment (“MPI”) and directed the MPI to co-ordinate with the Government Committee for Organization and Personnel in order to draft a plan for the establishment of a Division for Accelerating Investment for submission to the Prime Minister for his consideration and decision.

3.8 Illegal Imported Cigarettes

Following the Government’s recent approval of the “Plan for Checking and Controlling Illegally Imported Cigarettes Displayed for Sale on the Market” which nominated Hanoi as the area for a pilot scheme in order to gain experience for nationwide application, the Hanoi People’s Committee (“PC”) issued Directive 18-2002-CT-UB on 16 April 2002 to implement the plan, aiming first to get rid of open display of illegally imported cigarettes for sale in Hanoi. Directive 18 calls for the following measures to be undertaken: - The Market Management Division of the Hanoi Department of Trade, together with the

municipal police, Hanoi Tax Department and district PCs, must (i) work with ward PCs to establish working groups, comprising market management staff, regional police, and tax officials, to obtain written undertakings from family household cigarette retailers not to trade in illegal tobacco or unstamped tobacco; and (ii) conduct investigations at central locations, such as Nguyen Sieu and Hom markets, Station B, and main roads around Hoan Kiem Lake and at other places where cigarettes are sold, such as restaurants and dance halls, and to deal with the big traders in illegally imported cigarettes.

- The municipal police must establish investigative groups and other separate groups to attack professional smugglers and their distribution networks, with a focus on the main illegal transport routes and vehicles.

- The Hanoi People’s Procuracy must bring a number of typical cases to criminal trial in order to admonish people who are deliberately breaching the law.

The Hanoi PC has established Municipal Steering Committee 127-TP to ensure implementation of the above measures and report thereon.

3.9 Ordinance on Prices

According to the Vietnam News (30 May 2002), the Standing Committee of the National Assembly is due to issue an Ordinance on Prices. Mr Khuc Van Anh, Director of the Government Pricing Committee is quoted as saying, somewhat oxymoronically, that the Ordinance will "lay down new forms of price management suitable for a market economy". On the draft Competition Law, Mr Anh notes that "its complexity looks set to impede its early release...therefore the Prices Ordinance must step into the breach". He referred specifically to anti-dumping measures and monopoly price controls as matters to be addressed in the Ordinance. On the latter, he noted that the Ordinance will allow the Government to continue setting prices for public utilities, such as electricity and telecoms, "to protect the legitimate benefits of consumers...until the conditions for competition are established in these sectors".

Phillips Fox

Vietnam Legal Update: May 2002 20 3.10 Allocation of Parent Company Expenses

The Ministry of Finance has again confirmed that general management expenses of a parent foreign company may be allocated to its branch office in Vietnam (according to the ratio of turnover of the parent company and the Vietnam branch) and included in the expenses of the Vietnamese branch for the purpose of determination of taxable income. (Official Letter 1934-TCT-HTQT of the Ministry of Finance dated 15 May 2002 to Credit Agricole Indosuez Bank)

3.11 State Owned Enterprise Reform

Mindful of its undertakings to international bodies in relation to reform of the State owned sector, the Office of Government has again directed ministries, ministerial equivalent bodies, local authorities and corporations 91 to expedite the equitization, transfer and sale of State owned enterprises (“SOEs”) in which the State does not need to hold 100% of capital and the dissolution of loss-making enterprises. The Ministry of Finance is required to direct specialized bodies to complete the calculation of the value of State owned enterprises which are subject to conversion of ownership in the year 2002; and the Ministry of Planning and Investment is required to direct local Departments of Planning and Investment to facilitate converted enterprises in carrying out business registration in accordance with the provisions of the Law on Enterprises. On 24 April, amendments to Decree 103-1999-ND-CP on transfer, sale, contracting out and lease of SOEs were issued under Decree 49-2002-ND-CP, including: - SOE size subject to Decree 103 has been increased from less than VND 1 billion to less than

VND 5 billion. - Decree 103 is now applicable to SOEs in which the State did not want to hold shares and

which are unable to equitize (no longer only those which had a long history of loss-making, as previously).

- Previously, the restructure of SOEs capitalized at more than VND 1 billion had to be decided or authorized by the Prime Minister. Now, ministers, chairmen of provincial people’s committees and chairmen of Corporations 91 are authorized to decide on restructure targets, criteria and implementation plans.

- Sectors in which SOEs will be subject to restructure have expanded to include consultancy, design, and supervision, forestry and agriculture.

- Foreign investors are now allowed to buy or lease SOEs.

On 10 May, the Government issued Decision 58-2002-QD-TTg on new criteria for SOE classification, providing for 3 main classifications: (i) SOEs in which the State will retain 100% ownership:

- SOEs in State monopoly sectors, such as electricity transmission, posts and telecommunications;

- SOEs using advanced technology, having at least VND 20 billion of State capital and having contributed VND 3 billion a year to the State budget for the past 3 years;

- SOEs in special sectors, such as printing and lottery; - SOEs with a role in production and raising living standards in rural and disadvantaged

areas; - SOEs in utility sectors, such as currency printing and flight navigation;

(ii) SOEs to be divested (by equitization, transfer, sale, etc); (iii) SOEs to be liquidated, merged or bankrupted (where long loss-making history). State corporations will be liquidated or merged if they fail to satisfy 4 conditions: having at least VND 500 billion State capital (or VND 100 billion in special sectors), having advanced technology and good product quality, contributing at least VND 50 billion a year to the State budget, and belonging to certain key sectors, including oil and mineral exploitation, petrol and oil trading, electricity supply, telecommunications, aviation and shipping.

Phillips Fox

Vietnam Legal Update: May 2002 21 Part 4 Phillips Fox Publications The following Phillips Fox publications on laws regulating investment and business in Vietnam are available through our offices in Hanoi, Ho Chi Minh City and Melbourne. If you would like to purchase any of these publications please contact us. Foreign Investment Laws of Vietnam Loose-Leaf Subscription Service 12 volume loose-leaf set, including subscription service from 1.1.2002 to 31.12.2002 US$1500.00

(Plus US$100 postage and handling fee for destinations other than Australia and Vietnam)

Loose-leaf subscription service from 1.1.2002 to 31.12.2002 (only) US$600.00 (Postage and handling fee included for all destinations) Foreign Investment Laws of Vietnam CD-ROM

(Only available in conjunction with loose-leaf subscription service) US$100.00 (Postage and handling fee included for all destinations) Additional loose-leaf binders (each) US$35.00

Other Vietnam Laws Publications Labour Code of Vietnam 1994 (English) US$20.00

Labour Code of Vietnam 1994 (Japanese) US$50.00

Civil Code of Vietnam 1996 (English) US$60.00

Commercial Law of Vietnam 1997 (English) US$20.00

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