Vietnam – Banking Sector – Current Issues and
Solutions for Banking and Outlook on Major Trade Deals TPP 11 and
EUVNFTA
A. Introduction
Vietnam had an impressive economic growth with 6.7% GDP in the last
year and is therefore one of the best performing economies in the
world. Contributed by a successful monetary and credit policies,
stable FX rate and NPL resolution efforts. With a great
determination the Government, the National Assembly, the State Bank
of Vietnam and other Ministries worked on the Resolution for
Non-Performing Loans to address this core issue of the banking
sector and released capital resources for the private sector to
grow.
B. Issues
One important issue is the digitalization of every sector in the
economy. In this field, the government shows effort, on handling
the coming difficulties. The government should focus in this
relation on the Industrial Revolution 4.0, which will lead to major
changes in the near future. But to handle the upcoming changes
properly the Government needs to support the State Bank of Vietnam
which had taken proactive actions recommended necessary changes on
Vietnams politics.
Also, the non-cash payment strategic plan must be implemented to
make easier ways for payments. The Government should consider
allowing pilot programs similar to the sandbox tool that has been
used effectively by many Governments, for which is Singapore an
excellent example.
The Government and the responsible ministries like the MOF, MO and
MP has not reacted properly on the issue of FDI and the need for a
better liquidity management. However, there is yet any regulation
to enable advanced account structure like pooling in Vietnam. BWG
appreciate SBV hosting workshops for international experts to share
best practices.
2. Simplification of Banking Documentation
A problem in the banking sector is also the FX management
regulation. Due to different interpretations by the banks and law
enforcement agencies over the rules for supporting documentation
checking.
The State Bank and the Government have to show effort on simplify
banking documentation.
3. Bank Accounts of entities who are not legal persons under the
Vietnam Civil Code.
Entities, which are not legal persons under the Vietnam Cicil Code
(VCC), shall not be independent entities to enter civil
transactions contracts (including opening and using bank accounts).
This is an unsolved problem which should be handled as soon as
possible by the Vietnamese lawmakers.
C. Outlook on major trade agreements TPP11 and EUVNFTA
In January 2017, US President Donald Trump decided to withdraw from
the US' participation in the TPP. In November 2017, the
remaining TPP members met at the APEC meetings and concluded about
pushing forward the now called CPTPP (TPP 11) without the USA. The
agreement shall be signed by all member states by the first quarter
of 2018. After that, it has to be ratified in each member state
before taking effect.
The effects of the TPP 11 promising great benefits for banking
sector in Vietnam. The TPP 11 is targeting to eliminate tariff
lines and custom duties among member states on certain goods and
commodities to 100%. This will make the Vietnamese market more
attractive and could cause motivation for foreign enterprises to
settle to Vietnam because the market is becoming more dynamic with
the TPP.
One another notable major trade agreement is the EUVNFTA between
the European Union and Vietnam. The EUVNFTA offers great
opportunity to access new markets for both the EU and Vietnam. It
will help to bring more capital into Vietnam. In addition, the
EUVNFTA will boost the economy in Vietnam.
Furthermore, the Investor State Dispute Settlement (ISDS) will
ensure highest standards of legal certainty and enforceability and
protection for investors. We alert investors to make use of these
standards! We can advise how to best do that! It is going to be
applied under the TPP 11 and the EUVNFTA. Under that provision, for
investment related disputes, the investors have the right to bring
claims to the host country by means of international arbitration.
The arbitration proceedings shall be made public as a matter of
transparency in conflict cases. In relation to the TPP, the scope
of the ISDS was reduced by removing references to "investment
agreements" and "investment authorization" as result
of the discussion about the TPP's future on the APEC meetings
on 10th and 11th November 2017.
Further securities come with the Government Procurement Agreement
(GPA) which is going to be part of the TPP 11 and the
EUVNFTA.
The GPA in both agreements, mainly deals with the requirement to
treat bidders or domestic bidders with investment capital and
Vietnamese bidders equally when a government buys goods or requests
for a service worth over the specified threshold. Vietnam
undertakes to timely publish information on tender, allow
sufficient time for bidders to prepare for and submit bids,
maintain confidentiality of tenders. The GPA in both agreements
also requires its Parties assess bids based on fair and objective
principles, evaluate and award bids only based on criteria set out
in notices and tender documentation, create an effective regime for
complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of
quality and efficient developing processes.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.