Vietnam: Indochina Notes

Last Updated: 25 February 2010
Article by Tony Foster and Milton Lawson


New BOT Decree

Infrastructure is creaking in Vietnam. A staggering 95 per cent of respondents to a recent survey named it as the biggest obstacle to investment in Vietnam.

Unfortunately the recent amendments to the legal framework applicable to investments in the form of contracts for Build–Operate–Transfer, Build–Transfer– Operate and Build–Transfer (collectively BOT), will do little to improve the situation. Decree 108 of the government dated 27 November 2008 contains no significant developments and does not address the significant legal issues bedevilling foreign investors in BOT projects. Decree 108 contains new requirements on levels of equity capital, new approvals to be obtained from the Prime Minister for the investment project report, new rules applicable to performance bonds and a new set of approvals to be obtained from the Ministry of Planning and Investment (MPI) for an array of issues including amendments to the BOT contract and new bidding requirements.

Further details in relation to Decree 108 will be contained in one of our forthcoming Sector Updates.

SOE reform

The state-owned enterprise (SOE) reform leitmotiv of the last 15 years is welling up again. In Decision 1715 dated 26 October 2009 the Prime Minister, attempting yet again to bring order to disputing factions in Valhalla, waived his baton over the 'reform plan for the management and adjustment to the management and operations of SOEs with a view to improving their efficiency'.

Like prior Wotanic pronouncements, the nobility of the policy statements is only slightly tarnished by the thinness of details. But if one grants the composer a bit of artistic licence, there are no 'distinctions' in Vietnam in relation to the treatment of enterprises based on whether the form of ownership is state, foreign or private, and equality exists between enterprises with different forms of ownership.

Decision 1715 stipulates the development of a concrete wall separating state ownership from state regulatory agencies. Relevant state agencies are to identify enterprises providing public utility services, which should be interesting.

In addition to general policy mandates, Decision 1715 contains more specific provisions relevant to SOE reform, including a requirement for specified ministries and state agencies to complete the drafting and issuance of legal instruments relating to the re-organisation, dissolution and bankruptcy of SOEs. Given the onerous nature of this task, Decision 1715 kindly does not contain any timelines for completion. Nor does it elaborate upon:

  • the identity of the state authorities competent to determine that an SOE should be dissolved or enter bankruptcy;
  • whether insolvency would qualify an SOE for dissolution or bankruptcy; or
  • whether an actual bankruptcy filing or liquidation decision would be required prior to the prohibition or financial support becoming effective.

Given the absence of a timeline, the ambiguous assignment of responsibility and the complexity of the unresolved issues, the leitmotiv will no doubt reappear in fine fettle in the future.

Taxation of employee stock bonuses and options

Bonuses may have come under attack on Wall Street but in the halls of the Ministry of Finance (MOF), the rewards that await those that endeavour to push boulders up mountains are beginning to demonstrate that Sisyphus may have been too weak-willed.

Official correspondence 14169 of the MOF dated 7 October 2009 (OC 14169) provides 'guidance' on the personal income tax (PIT) obligations of individuals that receive stock bonuses and options from onshore or offshore employers. Under OC 14169 an employee's PIT liabilities in relation to stock bonuses and options will only arise when the employee transfers the stock (or transfers stock of the same class). The amount of taxable income will be determined by reference to the book value of the stock at the time the bonus or option was awarded to the employee. Upon transfer of the stock an employee's liability for two separate and distinct tax obligations will be triggered.

  • First the employee will be liable for PIT on employment income, taxed at progressive rates. Generally an employee's payment of the tax due will be deferred from the date of transfer until the year end, with the exception that employees that transfer stock option rights will be subject to PIT at the time of transfer.
  • Second the employee will be liable for PIT on securities transfers payable at the time of the transaction and calculated as follows:
    • for stock bonuses as either 0.1 per cent of the total transfer value or 20 per cent of the difference between the transfer value and book value; and
    • for stock options as 20 per cent of the difference between the transfer value and the arm's length purchase price.

Minimum salary levels

Meanwhile away from the ratified world of bonuses, the one-two punch of continued inflation and periodic currency devaluations has affected many families. The government has responded with another increase of minimum salary levels.

Under Decree 97 dated 30 October 2009 (applicable to labourers working for Vietnamese companies), minimum monthly salary levels were increased to VND980,000 (previously VND800,000), VND880,000 (previously VND740,000), VND810,000 (previously VND690,000), VND730,000 (previously VND650,000) for employees in zones 1, 2, 3 and 4 respectively.

Under Decree 98 dated 30 October 2009 (applicable to labourers working for foreign-invested companies), the minimum monthly salary levels were increased to VND1,340,000 (previously VND1,200,000), VND1,190,000 (previously VND1,080,000), VND1,040,000 (previously VND950,000), and VND1,000,000 (previously VND920,000) for employees in zones 1, 2, 3, and 4 respectively.


There is a looming danger that airline passengers in Vietnam arriving at the airport on time will no longer be amused by a series of random explanations for the delays that they encounter. Under the provisions of Circular 26 of the Ministry of Transport dated 28 October 2009, airlines will be required to provide delayed passengers with certain 'minimum levels' of service and treatment, which will no doubt be equally amusing in practice. Circular 26 also requires:

  • airlines in Vietnam to issue standard terms and conditions of service and register the same with the Vietnam Civil Aviation Authority (CAAV);
  • approval by CAAV of contracts relating to the use by an airline of names, International Civil Aviation Organisation (ICAO) or International Air Transport Association (IATA) codes, or other trademarks of another airline in Vietnam, for the promotion, sale and operation of flights;
  • airline forwarding companies to register secondary bills of lading with the CAAV before providing services at an airport in Vietnam;
  • approval by CAAV of aircraft leases, as well as reports to CAAV of any breach or earlier termination of such leases; and
  • for foreign ownership calculation purposes, shareholdings of all affiliates will be grouped together.

Real estate

In our November issue of Indochina Notes we discussed the five-in-one-go law (the 'Law on amendment of a number of articles in the Law on Construction, Law on Tendering, Law on Enterprises, Law on Land, and the Law on Residential Housing' (the Law of Amendments)). We outlined the overlapping legal regimes that had resulted in separate regimes for legal title to land on the one hand and legal title to housing on the other hand. In summary, under the Law of Amendments the 'red book' title for land sites and the 'pink book' title for structures attached to land, will be replaced by a single 'Certificate of Land Use Rights and Ownership of Housing and Other Assets on the Land' (the Certificate). The government has since moved swiftly to provide further details relating to the issuance of the Certificate.

Decree 88 of the government dated 19 October 2009 provides that the Certificate will replace not only the 'red book' and the 'pink book', but it will also replace the certificate of construction work ownership.


The tendering regulations seem to change as regularly as irregularities are identified. Some of the more significant differences between Decree 85 dated 15 October 2009 and its predecessor, Decree 58 dated 5 May 2008, are found in provisions that purport to 'ensure the competitiveness' in the tendering process (a euphemism for 'avoiding the most obvious conflicts of interest' in the tender award). Decree 85 includes criteria to be employed to make determinations of whether bidders are independent from each other, as well as whether the project owner is independent from the bidders. Under Decree 85 bidders will not be deemed independent unless they are independent under Vietnam's enterprise laws, or if the bidders belong to a single governing body such as a state corporate group, or if a bidder holds more than 30 per cent of the share in the other.

Paradoxically Decree 85 expands the criteria for tender packages that are immune from competition and that may proceed with the direct appointment of contractors. Direct appointment can now be used, amongst other things, for the following:

  • consultancy services of VND3bn or less (previously VND500m);
  • the procurement of goods of VND2bn or less (previously VND1bn);
  • construction and installation of VND5bn or less;
  • projects that are state secrets or involve emergency circumstances (eg epidemics, serious environmental pollution); and
  • the favourite catch-all, other special projects as decided by the Prime Minister.


Ninh Thuan nuclear power project

Nuclear energy is enjoying a resurgence of popularity around the world. Never slow to jump when a bandwagon is sighted, the National Assembly has passed Resolution 41 dated 25 November 2009 (Resolution 41) approving two nuclear power plants in Ninh Thuan province on the coast of south central Vietnam. The National Assembly anticipates that, based on current foreign currency rates, the total investment capital to establish the two nuclear power plants (combined capacity 4000MW), will be about $11bn. Resolution 41 establishes 2014 as the target for commencement of construction on the first plant and 2020 as the target date for the first turbine to come into operation.

Although the track record suggests that plans for multibillion dollar projects are not always accurate indicators of actual activity, Resolution 41 represents a serious policy objective of the government. On 3 December 2009 the International Atomic Energy Agency (IAEA) announced that it would send two integrated nuclear infrastructure review (INIR) missions to Vietnam to review the preparations for introducing nuclear power. The INIR missions will collaborate with Vietnam's Atomic Energy Commission and other relevant agencies to evaluate the status of nuclear infrastructure in Vietnam and identify areas where further work is required. The INIR mission will also carry out a comprehensive assessment of Vietnam's ability to plan nuclear power programmes, as well as Vietnam's safety regulations, security issues and safeguards.

Resolution 41 indicates that the National Assembly is aware that human resources may be a constraint. Current estimates suggest Vietnam will need more than 1,000 highly-trained technicians by 2020 to operate the plants and 6,000 to 10,000 specialised labourers by 2015 to construct them. With a current nuclear power workforce of only 800 at the Vietnam Atomic Energy Commission there is a need to train domestic technicians and, perhaps more realistically, recruit foreign technicians.

The problem here is that although beautiful beaches in Ninh Thuan province are sometimes sufficient to attract the occasional lawyer for an extended weekend, the medical, educational and entertainment infrastructure of Ninh Thuan province is unlikely to lure too many expatriate experts.

Oil and gas – windfall tax

During the 2008 rise in global commodity prices, the price of a barrel of oil surged in July 2008 to about $147 before plummeting to about $30 a few months later. At the same time the MOF was fighting an indigenous inflation and currency crisis that pre-dated the preglobal financial recession. It was desperately in need of additional revenue, particularly foreign exchange. The MOF seized the opportunity of surging oil prices to increase taxes sharply on oil exported from Vietnam. The new tax rates were several times higher than the tax rates set out in the Investment Certificates of oil companies already producing in Vietnam and therefore led to significant objections.

New investors will take little solace from the lessons apparently learned from this episode. With the issuance of Decree 100 of the government dated 3 November 2009 on surcharge fees applicable to profits on oil in cases of increases in the oil price (Decree 100), the government has established in law a mechanism to share in 'windfall profits' resulting from increases in the price of crude oil. Decree 100 will only apply to Petroleum Contracts entered into after 1 January 2010. Under Decree 100 if there is an increase of between 20 to 50 per cent of the average oil price in a particular quarter, then the surcharge will be:


The MOF is also looking to the mining sector for a fillip to the state budget.

Environmental protection fee

More entities will now have to pay environmental protection fees. In the July 2008 edition of Indochina Notes, we discussed Decree 63 of the government dated 13 May 2008 relating to the environmental protection fees applicable to organisations exploiting certain kinds of minerals, including stone, feldspar, gravel, sand, earth, coal, natural mineral water, ilmenite, metal minerals, apatite, crude oil and natural gas. With Decree 82 dated 12 October 2009, the government has amended Decree 63 to include organisations exploiting coal gas and other types of minerals. The environmental protection fee for natural gas (and the newly-added coal gas) is reduced from VND200 per ton to VND50 per ton. For natural gas exploited during the process of crude oil exploitation, the applicable environmental protection fee is VND35 per ton.

Fees for mineral licences

The official fee for issuance of mineral licences has been increased by Circular 184 of the MOF dated 15 September 2009. The chart below provides a comparison of a number of official fees for issuance of mineral licences under Circular 184 against the official fees under the previous Circular 20 dated 16 March 2005:

Fee for usage of state data and information

The government does not want to subsidise the gathering and use of information and data for mineral prospecting and exploration activities. Accordingly the MOF and the Ministry of Natural Resources and Environment have issued joint Circular 186 dated 28 September 2009 guiding the calculation of fees for use of state data and information in mineral prospecting and exploration activities.

Banking and capital markets

Money laundering

Vietnam introduced its first money laundering legislation in 2005. Shortly afterwards Decision 1002 of the State Bank of Vietnam (SBV) dated 8 July 2005, established the pugnaciously-named 'Centre of Prevention of and Fighting Against Money Laundering'. However, for almost a year the fight was somewhat shadowy because the centre was not officially staffed. Four years later, a less belligerent body, the Anti-Money Laundering Department under the Banking Inspectorate, has been established by Decision 1654 of the SBV dated 14 July 2009.

The SBV also issued Circular 22 dated 17 November 2009 setting out specific anti-money laundering measures that must be undertaken by credit institutions including:

  • to have internal rules on anti-money laundering covering the following issues:
    • procedures for accepting customers;
    • procedures for confirming customer identification and updating client information;
    • reporting of suspicious transactions;
    • contacting and dealing with suspicious customers;
    • information storage and confidentiality;
    • application of temporary measures;
    • co-ordination with money-laundering fighting authorities;
    • training; and
    • internal audits.
  • to report to the Anti-Money Laundering Department customers with cash deposit and withdrawal transactions with a value of more than VND200m per day; and those depositing and withdrawing more than VND500m per day from a savings account; and
  • to identify and report suspicious transactions if:
    • the telephone number provided by the customer is not contactable or does not exist;
    • a customer regularly changes low denomination money into high denomination money, with each transaction valued over VND200m;
    • a monetary transaction is carried out by a customer who has been reported by the media as being involved in illegal transactions;
    • information on the source of capital is not clear or transparent; or
    • information on the source of the secured assets is not clear or transparent.

Tender offers for shares

The circumstances in which tender offers for shares are required have been clarified by new regulations on public offers of securities set out in Circular 194 of the MOF dated 2 October 2009. This Circular requires a tender offer for shares in the following circumstances:

  • organisations and related persons who are holding less than 25 per cent of shares of a public company wish to acquire additional shares resulting in an ownership of 25 per cent or more of the voting shares of the public company;
  • organisations and related persons holding 25 per cent or more of the shares in a public company wish to make an additional acquisition of shares in such public company resulting in an ownership level of 51 per cent, 65 per cent or 75 per cent; or
  • a public company purchases its own shares to reduce its chartered capital in accordance with a plan approved by its shareholders.

Under Circular 194 the following are not subject to the tender offer requirements:

  • acquisition of newly-issued shares resulting in an ownership of more than 25 per cent of the shares of a public company in accordance with an approved plan of the general meeting of the shareholders;
  • an investor acquires shares from an existing shareholder and the transfer is approved by the general meeting of the shareholders; or
  • an intra-group transfer between affiliates.

Circular 194 also sets out restrictions on the offer price of the tender:

  • if the shares of the public company are listed, then the offer price cannot be less than the average listed price of the shares over the period of 60 consecutive days prior to the public offer; and
  • if the shares are not listed, then the offer price must not be less than either:
    • the average price of shares that are published by at least two securities companies over the period of 60 consecutive days prior to the registration date for the public offering with the State Securities Commission; or
    • the most recent public offer price of the shares of the public company.

    The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions