Most Read Contributor in Hong Kong, September 2016
The laws of Vietnam are complex and new legislation is constantly being introduced. What follows is no more than an introductory overview that we hope will assist investors to decide which areas of law they will need to research further.
This summary is, necessarily, selective and is no substitute for detailed legal advice.
1. The essential concept of a BOT Contract is that the foreign sponsors (defined in the legislation as the "investors") contract with a state body to build and operate a facility for a certain period of time. The investors receive an agreed return. At the end of the contract, the investors are required to transfer the facility to the Government without charge.
2. The BOT Contract has to be implemented by a 100 per cent foreign owned company or by a JVC, established in compliance with the Law on Foreign Investment.
3. Decree 87-CP passed in November 1993 pursuant to the Law on Foreign Investment and Circular 333 of 28 February 1994 issued by the State Committee for Co-operation and Investment ("SCCI") set out the relevant legislation relating to BOT Contracts.
4. Briefly, the advantages of a BOT Contract will be:
- the Government's guarantee of' the ability to convert the Vietnamese Dong into foreign currency;
- express provisions relating to security over assets (other than land);
- provisions relating to tax treatment, governing law and jurisdiction which may be more favourable than for other forms of investment;
- the possibility of longer periods for technology licensing than those usually permitted;
- wide ranging exemptions from import duty; and
- exemption from payment of rent for the right to use land.
5. Briefly, the disadvantages of a BOT Contract may be:
- the rate of return will be affected by the fee structure set out in the BOT Contract and this fee structure cannot change without the consent of the SCCI;
- the investors are required to guarantee to the Government the successful completion of the project;
- the investors have to put up a deposit to be refunded when the project is initiated;
- whilst security over Vietnamese assets is available to foreign lenders, it is restrictive in that the lenders (,and any party purchasing secured assets from them) must continue to implement the project;
- the facility must be handed over to the Government at the end of the term without payment.
Other arrangements may be provided for on the termination of a JVC.
6. Lists of projects to be implemented by means of a BOT Contract are issued by the SCCI. The use of a BOT Contract may also, however, be agreed upon by the Government on a case by case basis.
NOTE: 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.
If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".
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