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Vietnam: What happened in 2019 and significant events in 2020

Vietnam Law: Year in Review 2019 and Year to Come 2020 captures the key legislative and decree changes announced in 2019 and indicates the expected changes for the year to come. There are links to further reading, where available.

Vietnam introduced a number of new laws and implemented regulations on a wide range of topics during 2019. At the same time, the passing of several important pieces of legislation has been delayed due to a great deal of debate.

Explore our overview of key developments below.

Updates in

11

key areas in 2019 and 2020

Significant legal and regulatory events in 2019

Explore the tabs below to review the key developments you need to be aware of from 2019

Competition

Substantial changes introduced in Competition Law: The new Competition Law took effect from 1 July 2019, introducing substantial changes to the competition legal framework. Notably, it widens the scope of application and grants extensive regulatory power to the competition authority. The key changes include: (i) extra-territorial application to acts by Vietnamese or foreign individuals or entities; and (ii) replacement of the market share test under the old regime with a test based on the impact on competition of vertical and horizontal agreements in determining prohibition against cartels, and with a test based on the significant and incurable impact on competition in determining prohibition against economic concentration. Nonetheless, its implementing decree is yet to be issued, causing confusion as to how the new law should be applied in practice. One of the key points to be provided in the implementing decree is for the specific merger filing thresholds to be applied. Meanwhile, a new decree on administrative penalties to be imposed for breaches of the competition law was issued with effect from 1 December 2019.

Capital Markets

More relaxed conditions for bond issuance but with a stringent disclosure regime: The new decree on corporate bonds came into effect from 1 February 2019, relaxing the conditions for bond issuance. The decree removes the previous requirement for issuers to have one year of profitability and three years of profitability before the issuance for domestic bonds and international bonds, respectively. Furthermore, issuers are now permitted to directly issue bonds to investors, which was only applicable to credit institutions under the old regime. However, issuers are now subject to a more stringent disclosure regime in relation to the bonds they issue: notably, including more detailed disclosure of the bond transactions; extraordinary disclosure within 24 hours of changes to the plan for the use of bond proceeds; and registration and deposit of the issued bonds with a licensed custodian.

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Clearer guidance on opening and use of direct investment capital accounts: In June 2019, the State Bank of Vietnam issued a new circular on foreign exchange control for foreign direct investment activities in Vietnam. The circular clarifies ambiguities in the previous regulation and the resulting difficulties in its implementation in practice. One of the key changes is the clarification of which entities are subject to the mandatory requirement of opening and using direct investment capital accounts.

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Banking

Guidance on the book building method in state divestment: In April 2019, the Ministry of Finance issued a circular providing guidance on use of the book building method. This method was first introduced in connection with privatisation of state-owned enterprises in 2017. However, until the issuance of this circular, there was neither precedent for nor guidance on its implementation. Generally, book building is a process where the state determines a cut-off price, which is the price per share payable by investors by reference to market demand. Compared with the traditional public auction method, this is expected to attract more investors to participate in the privatisation process, since the cut-off price reflects the market demand and, as a result, the success rate of the privatisation is likely to be higher.

New guidelines and new template power purchase agreement for wind power projects: The Ministry of Industry and Trade issued a circular introducing a new power purchase agreement (PPA) template and providing detailed guidance for the development of wind power projects, with effect from 28 February 2019. The new PPA generally adopts a more buyer-friendly approach (ie more favourable to the national utility, EVN) than the previous one. Compared with the previous regulation, this new circular also introduces a number of important changes to the development of wind power projects, including more stringent requirements in several respects.

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Significant legal and regulatory events in 2020

Explore the tabs below to review the key developments you need to be aware of from 2020

Law on Enterprises and Investment

Law on Enterprises and Investment: The Law amending the Law on Enterprises and Law on Investment is expected to be passed in 2020. The key changes proposed in the latest draft of the Law on Investment include: (i) that while an Investment Registration Certificate (IRC) for outbound investment by Vietnamese investors is still required, the circumstances under which the Vietnamese investors have to amend/update such an IRC are limited; (ii) clarification that investment in a public company will be subject to the Law on Securities; and (iii) removal of the requirement for an IRC of foreign investors establishing innovative small or medium-sized start-up enterprises.

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Capital Markets

Draft Law on Securities: The latest draft of the new Law on Securities is tabled in the National Assembly for passing by the end of this year and expected to take effect from 1 January 2021. In addition to the key changes reported last year, others include: (i) convertible bonds and shares being able to be privately placed to both strategic investors and professional investors, but a public company only being able to privately place non-convertible bonds to professional investors; (ii) prohibition on a public company from conducting any share offering within six months from completion of its share redemption, except for conversion of convertible bonds into shares; and (iii) security over shares of a public company being able to be registered with the Vietnam Securities Depository, rather than the National Registration Agency for Secured Transactions.

Employment

Draft amended Labour Code: The long-awaited revised Labour Code was passed on 20 November 2019 and will take effect from 1 January 2021. The key changes include (i) employees having, for the first time, the right to establish and join an organisation, other than a trade union, to represent and protect their rights; (ii) expansion of the right of employees to unilaterally terminate their labour contracts without cause by providing prior notice, to capture not only labour contracts with an indefinite term (as in the current Labour Code) but also labour contracts with a definite term; and (iii) expansion of the scope of circumstances in which an employer is permitted to unilaterally terminate a labour contract.

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Public-Private Partnership Law

Draft Public-Private Partnership Law: The Government has recently submitted to the National Assembly for comment a draft Public-Private Partnership (PPP) Law, which has attracted much debate both in relation to the positive and negative changes affecting investors. Importantly, most of the key incentives and protections in the existing regulations for foreign investment in build-operate-transfer/PPP projects remain in the draft law.

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Data

Draft implementing decree on cybersecurity: After the Cybersecurity Law came into effect on 1 January 2019, the Government continued its quest to put together detailed regulations for its implementation. However, progress so far has been sluggish. The first revision of the decree on this subject has been debated for nearly a year and its issuance may well be delayed until 2020. Among the provisions awaiting guidance, the business community is paying special attention to a data localisation requirement applicable to domestic and foreign service providers in cyberspace.

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Energy

Proposed new FiT for solar power projects: The premium feed-in tariff (FiT) rate of 9.35 US cents/kWh for solar power projects expired on 30 June 2019 (except for Ninh Thuan). The Government has yet to approve a new FiT policy applicable to solar power projects coming into operation from 1 July 2019. According to the latest available information, there will likely be a fixed FiT applied to rooftop projects, but the Government has indicated that the FiT rate for other types of solar power projects will only be applied to those projects that already have signed PPAs and are to be put into operation within 2020.

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Explore our Year in Review 2019 and Year to Come 2020 series across 20+ jurisdictions and a number of topics.

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