Legal & Regulatory
Government eases restrictions for rice exporters
Vietnam’s Ministry of Industry and Trade (MOIT) approved an agreement easing restrictions on rice exporters. Under the previous regulation, the maximum number of rice exporters was capped at 150, who were all required to meet certain standards on storage and factories. Companies holding licenses to export rice were required to have at least one warehouse with a minimum capacity to store 5,000 tons of rice and a rice husking factory with a minimum capacity of 10 tons of paddy per hour. The facilities also had to be in planned areas.
Due to these restrictions, companies developing their own rice were forced to use intermediaries rather than having the ability to export directly. Companies with rice export certificates were required to export at least 10,000 tons of rice per year or 20,000 tons of rice in two years in case the first year quota was not reached. The abolition of the regulations is in line with the government’s plan of removing unsuitable laws as per the Investment Law 2014. The move has been lauded by rice export companies.
New Guidelines in Effect for Issuing Work Permits
The Ministry of Labour, Invalids and Social Affairs (MOLISA) issued Circular No. 40/2016/TTBLDTBXH providing guidance on implementation of Decree No. 11/2016/ND-CP, effective December 12, for work permits issued to foreign workers in Vietnam. The key change is the transfer of authorization from The Department of Labour, Invalids and Social Affairs (DOLISA) to MOLISA for certain types of enterprises. MOLISA will be responsible for approving proposals for using foreign laborers, identifying unlicensed foreign workers, reusing and revoking work licenses and deportation of unlicensed foreign laborers.
The organizations under the authority of MOLISA are state agencies, business associations established based on legal regulations, foreign non-governmental organizations, foreign entities in Vietnam, operational offices of international organizations in Vietnam and projects with foreign investment. Public organizations functioning under the ministries, ministerial-level agencies, organizations established by the government and the Prime Minister, also fall under the scope of MOLISA. DOLISA will still be the authority for approving demand for foreign laborers from contractors. Employers are therefore required to inform either MOLISA or the Chairman of the Provisional People’s Committee 30 days prior to hiring foreign laborers or if there is a change in demand for such workers.
By: Dezan Shira & Associates
Editor: Mike Vinkenborg
As in many countries across the world, instituting changes at a corporate level in Vietnam requires the approval of a majority of shareholders during a shareholder meeting. The Law on Enterprises outlines matters that can be discussed and decided during these meetings, what is required to convene shareholder meetings, and what percentage of shareholders, or members, are required to successfully pass decisions.
The latest update of the Law on Enterprises was passed in late 2014 and has been effective since July 2015, bringing with it some changes to the way shareholder meetings are being held. This article outlines how shareholder meetings in Vietnam are used, what can be achieved during these meetings, and how meetings differ between corporate structures.
Given the significant growth of foreign investment seen in recent years, in conjunction with market opportunities emerging each day, navigating the ins and outs of shareholder meetings will be an important consideration for new market entrants when structuring their holdings in Vietnam.
Vietnam, New Zealand to Continue Strong Ties
Vietnam and New Zealand are expected to continue forging close ties. New Zealand has reiterated its committed to providing Official Development Assistance (ODA) to Vietnam particularly in education, human resources, agriculture and rural development. The developments came about during talks between New Zealand’s Foreign Minister Murray McCully and Vietnam’s Foreign Minister Pham Binh Minh in Auckland on December 2. New Zealand also wants to increase imports and exports from Vietnam. This will be done by assessing the risk value of Vietnamese fruits while easing the sale of Vietnamese farm products and seafood in the market.
Officials also want to strengthen co-operation on national defense and security, education, people-to-people exchange and labor issues. Direct flights between Ho Chi Minh City and Auckland were already increasing tourism between both countries. Additionally, the countries want to extend the current Action Programme, effective until the end of 2016, to 2019. The Action Programme is an agreement between the two countries to support each other in regional and global forums. In addition, bilateral economic and trade is expected to reach US$1.7 billion by 2020 between the two countries.
Editor’s Note: This article was originally published on August 30, 2016, and has been updated as of November 25, 2016, to include finalized wages passed by the Vietnamese National Assembly.
By: Anh Ta
Vietnam’s National Wage Council has decided upon a modest 7.3 percent average increase in monthly minimum wages across the country for 2017. From January, workers must be compensated between minimums of VND 2.58 million (US$113) to VND 3.75 million (US$165). This is the lowest annual increase since 1997 and seems to be a compromise between the employers’ proposed increase of 5 percent and that of workers which pushed for an 11 percent increase. The decision also seems to be in response to competition from fellow manufacturing powerhouses in the region and hence primarily an effort to maintain its attractiveness to foreign investors and businesses.
Vietnam to Increase Minimum Wages from January
The Vietnamese government issued Decree 153 on November 14 to raise regional minimum wages to US$ 115-167 from January 2017 for workers with labor contracts. The wages will increase by around US$8-11 compared to existing levels. For Region 1, there will be a salary hike of US$166 (VND 3.75 million), US$147 (VND 3.32 million) for Region 2, US$128 (VND 2.9 million) for Region 3 and US$114 (VND 2.58 million) for Region 4. Businesses must also pay minimum wage workers in normal conditions at least 7 percent higher than skilled and trained workers.
Reducing extra payments for those working overtime or at night while doing hazardous work will not be allowed. Urban areas in Hanoi and Ho Chi Minh City come under Region 1, while Region 2 includes the Hanoi and Ho Chi Minh City’s rural areas and urban parts of Can Tho, Da Nang and Hai Phong cities. Region 3 includes provincial cities and districts in Bac Ninh, Bac Giang, Hai Duong and Vinh Phuc provinces. Region 4 consists of the remaining areas in the country.
Authorities Introduce Specialized Decree for Da Nang
Vietnamese authorities introduced a special decree in Da Nang regulating investment, finance, budget and decentralized administration in a bid to boost the city’s economic development. Authorities in Da Nang will be able to borrow domestic investment funds, via the issuance of local government bonds, under the law and can re-borrow funds the government has borrowed for local lending. These type of loans cannot exceed 40 percent of the local budget revenue or the ratio for the state budget deficit.
The government will also prioritize using part of its budget to support public-private partnership (PPP) projects. The Da Nang City People’s Committee can approve project lists and decide to receive grants for specific projects. The government will give Da Nang 70 percent of initial government funds for cities and provinces to pay outstanding debts in capital construction, infrastructure investment projects, high-tech parks, national defense and security and social safety among others. The above developments will help the city be an industrial, commercial and service center catering to its 1 million strong population.
Vietnam Cuts Imports Taxes Under Free Trade Agreement with the Eurasian Economic Union
The Vietnamese government has issued a decree to cut import taxes for the 2016-18 period under the free trade agreement between Vietnam and the Eurasian Union (EAEU). The reductions will be implemented in the following three stages and result in import taxes on 4,959 tariff lines being dropped to zero:
- Stage 1 – Runs from October 5 to December 31, 2016
- Stage 2 – Runs from January 1, 2017 to December 31, 2017
- Stage 3 – Runs from January 2018 to December 31, 2018
Goods that will benefit include input material for production, like textile, garments, leather, footwear and plastic as well as key export products such as shoes, garments, seafood, electronic products, tea, coffee, vegetables, rubber, milk, steel, chemical products and machinery and equipment. The Vietnam-EAEU FTA came into effect on October 5 and bodes well for Vietnamese industries. Vietnam remains a key exporter to the EU; seafood exports in 2015 reached US$1.2 billion worth of fish products – 46 percent of which consisted of shrimp.
By: Dezan Shira & Associates
The Office of Vietnam’s Prime Minister, Nguyen Xuan Phuc, recently expanded the Lào Cai boarder-gate economic zone through the issuance of Decision 40/2016/QD-TTg. Issued on September 22nd, it clarifies the boundaries of the economic zone, which includes additional districts previously excluded from the zone’s coverage. Companies operating or establishing within the Lào Cai province will be the most likely to benefit from the expansion and should note that adjustments to the zone will take effect from November 15th.
Prior to the expansion, the Lào Cai border-gate economic zone was geographically limited by Decision 44/2008 QD-TTg to the Lào Cai border-gate international area and the Muong Khuong border-gate area. Annulling previous decisions on the matter, the Prime Minister’s latest announcement maintains coverage of previous location while including a number of new localities. Under the updated guidelines, companies operating in any of the following areas will be eligible for the zone’s incentives:
By: Dezan Shira & Associates
Vietnam’s state bank (SBV) has published a draft circular which looks set to limit the ability of foreign nationals to open and deposit within Vietnamese bank accounts. With significant interest rate differentials on the side of investors, as well as a healthy appetite for capital on the part of many governing officials, the announcement has naturally been met with mixed reactions.
Understanding Banking Limitations
Under the draft circular, it is stated that “depositors of Vietnamese and foreign currencies” would be open to Vietnamese citizens. While not explicitly banning foreigners, the specific nature of the regulation does bring into question the prevailing state of affairs with regard to banking within the country. Currently, given the proper documentation – usually a passport and valid visa – foreign nationals are permitted to open and operate vietnamese bank accounts. However, in recent years, the operation of these accounts has seen increased regulation. As per a decree released in 2014, foreign accounts have been restricted to denomination in Vietnamese Dong. It is feared that the omission of foreign nationals under the latest draft Circular would effectively end the ability of foreign nationals to deposit within the country all together.