15 December 2014
It has been seven years since Vietnam became a member of the World Trade Organisation (WTO). Since its accession, there are a number of service sectors which have been liberalised to foreign investors pursuant to the Specific Commitments in Services of Vietnam to WTO ("WTO Commitments"). A boom of liberalised sectors occurred in 2012, when most of restrictions on foreign investment capital were lifted in accordance with the WTO Commitments. In this Legal Update, we will look at what sectors were liberalised in 2014 and what sectors will further open to foreign investment as we usher in to 2015.
In 2014, a few more service sectors were open to up to 100 percent foreign investment. As of 11 January 2014, Vietnam committed to opening the market to foreign investment with respect to (i) container stations and depot services, (ii) storage and warehouse services (CPC 742), and (ii) freight transport agency services (CPC 748).
"Container station and depot services" means storing containers, whether in port areas or inland, stuffing/stripping, repairing and making them available for shipments.
"Freight transport agency services" includes freight forwarding services. These services include activities such as organising and monitoring shipment operations on behalf of shippers, through the acquisition of transport and related services, preparation of documentation and provision of business information.
These commitments were implemented under Decree No. 140/2007/ND-CP of the Government dated 5 September 2007 providing guidance on logistics services ("Decree 140"). Under Decree 140, the storage and warehouse services include the container station and depot services.
However, there is a discrepancy between the WTO Commitments and Decree 140 with respect of the above sectors. Pursuant to the WTO Commitments, since 2014, wholly-owned foreign companies are allowed to carry out freight transport agency services whereas Decree 140 still requires a joint venture (without limitation on the capital contribution of foreign investors) to perform these services.
As a result of this inconsistency in law, on 18 August 2014 the People's Committee of Ho Chi Minh City issued official letter No 6613/VP-DT suspending the issuance or amendment of investment certificates or investment licenses to100 percent foreign-owned companies operating in the logistics business. As such, the licensing authorities in Ho Chi Minh City will wait for further detailed directives and instructions from the Prime Minister with respect of the logistics business before issuing or amending investment certificates or licenses in logistics.
In 2015, pursuant to the schedule under the WTO Commitments, an additional sector expected to be opened to foreign investors. As of 11 January 2015, wholly owned foreign companies will be permitted to provide hotel and restaurant services, including lodging services (CPC 64110), food catering (CPC 642), and beverage serving services for consumption on the premises (CPC 643) without any further requirements. Previously, provision of these services were limited to foreign-invested companies in parallel with investment in hotel construction, renovation, restoration or acquisition only. Under the schedule of the WTO Commitment, this is the final sector to be liberalised to foreign investment.
Given the dynamics of Vietnam's young, growing population, international food chains will benefit from this liberalisation under the WTO Commitments. However, the devil is in the details and it remains to be seen whether the implementation of domestic regulations will clear the path for liberalisation of this sector.