Lawyer in Vietnam Dr. Oliver Massmann Automotive Industry Government Policies Challenges Opportunities - what you must know !

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DR. OLIVER MASSMANN - Partner, General Director
DUANE MORRIS VIETNAM LLC
VIETNAM’S AUTOMOTIVE INDUSTRY:
Government’s policies and opportunities /
challenges for investors
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AGENDA:
• OVERVIEW ON VIETNAM AND ITS AUTOMOTIVE
INDUSTRY
• RECENT GOVERNMENT’S POLICIES ON
AUTOMOTIVE INDUSTRY
• OPPORTUNITIES AND CHALLENGS FOR INVESTORS
• CONCLUSION
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Vietnam 2017 Economy at a glance
• GDP: US$220.3 billion
• GDP per capita: US$2,385
• GDP Growth: 6.81% (record breaking in 10
years)
• Inflation: 1.41%
• Population: About 91.70 million
• Labor force aged 15 and above: 54.61 million
• Total export and import turnover: : >US$420
billion (7.1% increase)
• Regional Minimum wage (Region I): VND
3.980 million (US$ 175) per month (Jan
2018)
• Vietnam’s average age: 29 years old
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Vietnam to be Asia’s second fastest growing country
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Asia’s second fastest growing
country, only after India
Vietnam tops 6 European countries
in the Global Competitiveness
Index

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Vietnam’s super rich population is growing
faster than anywhere else….
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… and is on track to continue leading
the growth in the next decade

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Communist Vietnam Has More Millionaires
Than Capitalist Philippines
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Vietnam has the fastest-growing middle and
affluent class in the region
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VIETNAM’S AUTOMOTIVE INDUSTRY
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Main market players
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Vietnam’s automobile sales volume (Jan - Mar ’18)
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According to the Vietnam Automobile Manufacturers Association (VAMA) report issued
on March 10, automobile sales (including non-VAMA manufactures) in Vietnam were
down 29.7% year on year to 12,394 units in February.

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Source: Solidiance

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A war on car prices
• All of Complete built-in vehicles made and imported from any
ASEAN country are taxed at 0% from Jan 2018.
• Vietnamese people tend to wait and buy cars after Jan 2018 as a
chance to buy cheaper cars.
• All brands participate in the sale program due to significant pitfalls
in sales volume in 2017.
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Vingroup is in the industry – Vinfast brand
• Vinfast manufacturing factory in Cat Hai, Hai Phong with
investment value of USD 5 billion.
• Hiring top management personnel from Bosch Vietnam and GM
Global.
• Start selling cars from Sep 2019.
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RECENT GOVERNMENT POLICIES ON
AUTOMOTIVE INDUSTRY
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Decree No. 116/2017/ND-CP and Circular No.
03/2018/TT-BGTVT
• Requirement of submitting a Certificate of eligible imported motor
vehicle class issued by a foreign competent authority. This is said
to be not possible as most of the exporting countries do not issue
such document for types imported into Vietnam.
• Each shipment will be inspected by the quality management
authority. The model of each motor vehicle class in each
shipment will also be inspected or tested. This is new requirement
as previously, only one model of each motor vehicle class in one
shipment is tested. The next shipments of the same type were not
subject to any testing/ inspection.
 Takes time and cost for importers --> consumers have to bear
higher cars price
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Decree No. 116/2017/ND-CP (cont.)
• The inspection/ testing measure at issue is conformity assessment
procedures and falls under the scope of the WTO Agreement on
Technical Barriers to Trade (“TBT”).
• The measure at issue could be a violation of the TBT national
treatment as:
– The cars importers are treated less favorably than the local cars
assemblers / producers. In particular, local cars assemblers/ producers
are not subject to inspection if there is no change to technical and
environmental safety parameters used for the previous certificate on vehicle
class. However, imported cars have to be inspected in every shipment even
in case there is no change to technical and environmental safety parameters.
– The measure constitutes a de facto discrimination as it is more
difficult, even impossible for cars importers to meet the requirement. The
exporting country can only issue the certificate based on its standards,
which may be not the same as those in Vietnam.17

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WTO
dispute
settlement
process

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How long to settle a WTO dispute?
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WTO dispute
60 days Consultations, mediation, etc.
45 days Panel set up and panelists appointed
6 months Final panel report to parties
3 weeks Final panel report to WTO members
60 days Dispute Settlement Body adopts report (if no appeal)
Total: 1 year (without appeal)
60-90 days Appeals report
30 days Dispute Settlement Body adopts appeals report
Total: 1 years 3 months (with appeal)

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Decree No. 125/2017/ND-CP
• Most of imported automobile spare parts are subject to 0%
import duties on the conditions that the cars manufacturers/
assemblers must meet the output target for each brand.
• This is clearly a sign (in addition to Decree 116 requirements)
that the Government supports and protects local automotive
industry.
• Reduced import duties for imported spare parts are driving
factors of lower priced assembled cars compared with
imported cars.
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Proposal to waive special consumption tax
• The MOIT proposed in June 2017 to remove special consumption
tax on value added in Vietnam.
• Added value in Vietnam includes machinery, equipment, labor,
factory costs, etc.
• Local assemblers who invest more in factory, local spare parts, etc.
will be able to reduce cars price, thus being more competitive with
imported cars.
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SOLUTIONS FOR FOREIGN INVESTORS
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Solutions
• Work with the Ministry of Transport in its proposal to remove the TBT
requirements in Decree 116 and Circular 03 as the requirements could be
considered as inconsistent with the WTO laws. Otherwise bring the case
to the WTO for settlement.
• In the long run, consider investing in manufacturing and assembling
activities in Vietnam instead of importing. This will contribute to
Vietnam’s economy and is encouraged by the Government.
• Focus on manufacturing and assembling brands whose major factories
have not been located in South East Asia. Increase the localization rate
to take advantage of zero import duties when exporting to other
ASEAN countries.
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Questions & Answers

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CONNECTIONS ARE BUSINESS
PLEASE CONNECT WITH ME ON
LINKEDIN:
OLIVER MASSMANN
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WHEREVER YOU ARE - BE ALL THERE
Jim Elliot
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DUANE MORRIS VIETNAM LLC
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References (1)
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References (2)
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References (3)
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References (4)
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