GOV.UK recently released a guidance on the risk while doing business oversea. This aricle will be focus on the risk of Vietnam, which aims to provide information on this page on the key security and political risks which UK businesses may face when operating in Vietnam.
1. Political
Vietnam is a one-party state ruled by the Communist Party of Vietnam (CPV) which provides strategic direction and decides all major policy issues. The country is led by the so-called “four royal pillars”: CPV General Secretary, State President, Prime Minister and National Assembly Chair. Policy, which includes promoting stability, retaining the political status quo, domestic economic development and international integration, is made on a consensus basis by the Politburo. Regional security, especially in relation to the South China Sea, is a major foreign-policy priority for the CPV.
Party leaders and the leaders of the government, are selected every 5 years at the National Party Congress. The most recent Congress was held in January 2016 and in May 2016 a national election was held to elect the 500 Deputies who make up the National Assembly, Vietnam’s legislative body.
Vietnam is one of the more politically stable countries in South East Asia. Its leadership does not welcome dissent. Internal conflict is rare although in 2016 and 2017 there were a small number of high-profile protests including in relation to an environment disaster in Central Vietnam. Land rights also continue to be a source of social unrest. There are strict restrictions on freedom of speech which can affect internet usage, particularly the use of social media and personal blogs, access to which can be blocked without notice. Mainstream media outlets remain fully under the control and direction of the Communist Party so many people follow independent bloggers for their news updates. Many bloggers suffer harassment, arrest and imprisonment for criticising the Communist Party.
2. Economic
In recent years economic growth averaged 6.2%. Vietnam’s economy grew at 6.8% in 2017. GDP per capita has increased by 350% since 1991 (2nd only to China) and Vietnam now has the fastest-growing middle-class in South East Asia. Although slowing in recent years, growth has now ticked up again, led by the foreign-invested manufacturing sector.
The country has long been an attractive FDI destination, particularly for Japan, South Korea, Taiwan and Singapore. FDI inflows average 8% of GDP annually, the highest among major emerging markets in ASEAN and proportionately larger than China. More than half of total FDI stock is in manufacturing. Electronics and mobile phones, in particular, have since 2010 attracted large investments; around 70% of Samsung’s smart-phones are now made in Vietnam. Most manufacturing outputs are for overseas markets.
In 2017 total exports were valued at £171 Bn (ex-rate USD/GBP =0.8) with mobile telephones and spare parts being the greatest (21% – Samsung has a large manufacturing facility) followed by textiles and garments (12%). Imports were valued at £168 Bn with machinery and spare parts being the largest (18%) followed by electronics, computers and spare parts (16%).
Total UK good exports to Vietnam were £482m in 2016, led by machinery and transport equipment. Imports from Vietnam totalled £3.78Bn with the largest being computers, electrical goods and mobile phones. The UK is one of the most active EU investors in education and training and financial services.
Total trade already amounts to 180% of GDP. Negotiations on the EU-Vietnam FTA were concluded in August 2015 and ratification is expected in 2018. Vietnam was a member of the Trans-Pacific Partnership (TPP) and made significant commitments to domestic reforms mainly to secure better US market access. Since US withdrawal from TPP Vietnam has signed the CPTPP.
The state’s presence in the economy remains large in Vietnam: it maintains full ownership of more than 700 SOEs. Under the light of fiscal deficit, the Government is keen on boosting the participation of non-state sectors in the economy including privatising several major SOEs and increasing the use of PPPs for infrastructure development. The recent commitment to sell some of the most lucrative SOEs with a more transparent (and credible) timeline is estimated to pump USD 7 bil to the State Budget. In late 2017, Vietnam’s government successfully divested 53.59% of its shares in Sabeco, the largest beverage company in Vietnam. The deal is expected to generate USD 4.8bil and substantially bolster the state budget.
Vietnam is ranked 68th (out of 190) in the World Bank’s (WB) “Doing Business 2018” report, increase by 14 places in overall rank in comparison with the previous year. The significant improvement recognises the efforts of the new leadership elected in early 2016, who have continuously sent a strong commitment to create a favourable condition for the business environment.
Read the World Bank’s more in-depth publication on the issues of Doing Business in Vietnam.
Vietnam is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, otherwise known as the New York Convention, and its provisions are incorporated into Vietnamese law. However, unofficial statistics suggest that international arbitration awards are recognised in only approximately 50% of cases within the country.
Further, businesses have expressed disappointment with how the Court process operates. There are issues of transparency and enforcement of judgments as well as litigation being expensive and lengthy.
3. Business and Human Rights
Until 30 June 2018 ‘British Citizen’ passport holders travelling for tourism or business can enter Vietnam for up to a maximum of 15 days without a visa. If you have a different type of British nationality – for example ‘British national (overseas)’ –- you’ll need to get a visa before entering Vietnam. You must get a visa before you travel to Vietnam if you want to stay for longer than 15 days and/or if you wish to re-enter Vietnam within 30 days of your departure. If you plan to leave Vietnam and re-enter from another country make sure you get a multiple visit visa before travelling. Make sure you know before you travel the type of visa you need for the purpose and duration of your trip. If you’re travelling for business reasons you should contact the relevant Vietnam government department in advance to check whether any licenses are required to carry out your duties.
The right to freedom of association and to collective bargaining remains restricted in Vietnam. But under the EU-Vietnam Free Trade Agreement, the Vietnamese Government has committed to ratifying the three key ILO conventions on collective bargaining (ILO98), on freedom of association (ILO87) and forced labour (Convention 105). Vietnamese workers are not currently free to join or form independent unions and all unions must be affiliated with the Vietnam General Confederation of Labour (VGCL). Vietnam has also ratified three further ILO Conventions : ILO100 – Equal Remuneration for Work of Equal Value, ILO111 – Discrimination in Employment and Occupation, ILO138 – Minimum Age for Employment and ILO182 – Worst Forms of Child Labour Convention. In June 2012 the Vietnamese National Assembly approved a revision of the Labour Code which included a number of important provisions including: extending maternity leave to six months; setting out the requirement for a minimum wage; preventing employees from working more than 50 percent over their official working hours in a day; reducing the maximum term of work permits for foreign nationals working in Vietnam from three years to two years and removing the work permit exemption rule for foreign workers coming to Vietnam to work for less than three months. The National Assembly is currently reviewing an updated version of the Labour Code which is scheduled to pass in 2018.
In recent years the National Assembly has also passed an amended version of the Law on Trade Unions, which defines the responsibilities of officially recognised trade unions to protect workers’ rights. The amended law did not remove the requirement for all trade unions to be officially affiliated to the Vietnam General Confederation of Labour (VGCL) nor the restriction on foreign workers from joining unions.
Female participation in the workplace is high but women still face institutionalised discrimination. For example, despite significant economic growth the gender pay gap has widened in recent years. Women are also much more likely to be employed in vulnerable employment with vulnerability and informality highest among ethnic minority communities. Job advertisements for senior positions often indicate a gender preference for men despite this being illegal.
Vietnam is one of the most progressive countries in South East Asia for LGBT rights. In 2015 Vietnam abolished regulations that prevented same-sex marriage and Vietnam has also passed a law allowing trans-gender individuals to receive gender reassignment surgery and to register under their preferred gender. Hanoi also hosts an annual Viet Pride event. But despite the legal reforms cultural discrimination of the LGBT community still persists.
For more information about the UK’s approach to business and human rights see the UK’s action plan on business and human rights.
4. Bribery and Corruption
Under the UK Bribery Act 2010, it is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to offer a bribe anywhere in the world.
In addition, a UK commercial organisation can be considered liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
British companies should not engage in any activities regarded as corruption under the UK Bribery Acts. Not only are there issues of business integrity to bear in mind, but it is also illegal. Invariably, corruption is related to lack of professionalism and control, all of which are damaging to long-term business.
Corrupt practices are widespread in Vietnam. Anyone engaged in business in Vietnam may encounter, and at the very least should prepare for, the challenges of corruption in one form or another. Practices such as facilitation payments, bribes and giving and receiving expensive gifts in order to develop business relationships are still common. There is also very little judicial independence in Vietnam and corruption remains a serious problem in the court system.
The Party Leadership and Government have publicly committed to addressing corruption and have taken a number of concrete actions, including adopting and improving anti-corruption laws, developing anti-corruption strategies, strengthening relevant institutions and ratifying the UN Convention against Corruption (UNCAC). Vietnam’s score on Transparency International’s 2017 Corruption Perceptions Index improved by two points to 35/100, putting Vietnam 107th out of 180 countries in. This increase, although modest, reflects the Government’s renewed efforts to tackle corruption, including a new Law on Access to Information. But this has only translated into limited action on the ground as prevention and enforcement activity remain weak.
The business community and civil society in Vietnam are seeking to promote clean business in Vietnam. For example Towards Transparency, a Vietnamese NGO, works with foreign companies to share best practice on business integrity with Vietnamese partners in the value chain so that they all operate in line with international standards. The Governance and Integrity Working Group (GIWG) of the Vietnam Business Forum (VBF), a platform for high-level dialogue between the Vietnamese government and the business community, also promotes greater business integrity in Vietnam through its work with the UK and other international donors. The British Business Group Vietnam plays an active role in this process. Under the FCO’s Prosperity Fund, the British Embassy is working closely with the Vietnam Chamber of Commerce and Industry (VCCI) and IBLF Global, a UK-based NGO, to develop a Government-Business Integrity Initiative which will provide a platform for business and the government to work together more closely to address corruption in the private sector and promote business integrity.
5. Terrorism Threat
There is a low threat from terrorism, but you should be aware of the global risk of indiscriminate terrorist attacks which could be in public areas, including those frequented by foreigners.
See our Reduce your risk from terrorism while abroad page.
6. Protective Security Advice
Please read the information provided on our Protective Security pages.
7. Intellectual Property
When exporting to Vietnam, it is essential to register your rights there as soon as possible in order to be able to defend and enforce them. IP rights are territorial in nature which means that registrations in the UK or another country’s jurisdiction are not automatically enforceable in others.
Following accession to the World Trade Organisation (WTO) in January 2007 Vietnam has updated its IP laws to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Vietnam is a signatory to the following:
- the Paris Convention – for the protection of industrial property;
- the Madrid Protocol – Protocol relating to the Madrid Agreement concerning the International Registration of Marks;
- the Rome Convention – for the protection of Performers;
- the Patent Cooperation Treaty (PCT) – International Convention for the Protection of New Varieties of Plants;
- the Berne Convention – for the protection of Literary and Artistic works.
Under EU – Vietnam FTA, concluded in December, 2015, Vietnam commits to a high level of protection, going beyond the standards of WTO TRIPs agreement. With this agreement, EU innovations, artworks and brands will be better protected against being unlawfully copied, including through stronger enforcement provisions.
Among others, the EU pharmaceutical sector will benefit from improved data protection and of the possibility to get an extension of the patent up to two years if there are delays in the marketing authorisation. In a specific annex on pharmaceutical products, the Parties have agreed to a set of other provisions facilitating trade in these products, which are of great importance in the EU-Vietnam trade (second export item, amounting to about 9% of total EU exports to Vietnam). Vietnam has also taken commitments concerning procurement of pharmaceutical products and has allowed foreign-invested companies to import and sell medicines to distributors and wholesalers within the country.
There are still concerns, however, in particular on enforcement. Some surveys have identified deficient enforcement and coordination between IPR enforcement agencies, lack of trained IPR officials and awareness of consumers and public still as the main weaknesses of the system.
Vietnam is actively trying to address concerns by raising awareness of intellectual property rights and the penalties attached to infringements, through its work with international partners. Mainly enforcement on IPR is done through administrative measures and now Vietnam is putting in place heavier fines and penalties for copyright infringement.
However, concern is rising among rights holders that Vietnam’s IP enforcement system has not yet developed sufficiently to control the rapid growth of piracy and counterfeiting despite the substantial legislative work completed over the past several years. Vietnam is a priority country for the UK and remains in the 3rd category of priority countries for the EU.
IP Top Tips for businesses:
Most IP disputes are handled by administrative authorities instead of courts (although Vietnam is looking to develop and increase IP courts). However the expertise to deal with complex cases is limited. It is important to obtain expert opinions to facilitate the resolution of the case.
Certain objects, such as logos, can be protected as both a copyright and a trademark – this can give an extra avenue to enforce IP rights.
Vietnam works under a first to file system, meaning he first person to file an IP right there will own that right when granted. This means an earlier user may find they are infringing a later filed registration.
Vietnam is part of the ASEAN Patent Examination Co-operation (ASPEC), a regional patent work-sharing programme among 9 participating ASEAN Member States (AMS). The purpose of this programme is to share search and examination results between the participating offices to allow applicants in participating countries to obtain corresponding patents faster and more efficiently. ASPEC is free of charge and operates in English.
Customs registration in Vietnam is relatively simple but can be very effective. As levels of counterfeiting and piracy can be high, it is recommended that businesses register with Vietnamese customs.
Businesses are generally encouraged to learn more about IP issues relevant to their specific industry sector and to consider defensive measures early in their plans to enter the Vietnamese market.
The UK Intellectual Property Office has an IP attaché based in Singapore with specific focus on providing support and advice to UK companies in Vietnam.
Useful information can also be found at:
- the Intellectual Property Office – a UK Government agency providing free and impartial advice on protecting and registering your IP in the UK and abroad;
- the ASEAN IPR SME Helpdesk, a project funded by DG Enterprise and Industry of the European Commission to provide free information and training for European SMEs in the ASEAN region;
- the National Office of Intellectual Property (NOIP);
- the National Copyright Office of Vietnam (NCO).
Source: UK.GOV
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Of course, there are many other options when it comes to company formation, including other company structures (such as a Joint Stock Company) and activity codes (including ECommerce). Contact Metasource or GBS, the strongly recommended business and legal services firms in for further information on the establishment of a company in Vietnam.
About GBS:
Global Business Service (GBS) Co., Ltd is a leading commercial law firm in Vietnam providing business legal services, investment consulting, and other business support service (company formation, license arrangement, commercial agreements, mergers and acquisitions, shareholder arrangements and disputes, work permit, employment contracts, tax, consulting and financial advisory and executive search services).
Contact: Email: info@gbs.com.vn , iMessage | SMS | Whatsapp | Viber | Call: +84903189033 or visit: https://gbs.com.vn
Related contents:
http://vietnaminsider.vn/guide-to-register-company-in-vietnam/