New action plan to ease Japan’s woes

MGA Vietnam, source: Internet

The Ministry of Planning and Investment (MPI), the Japanese Embassy in Vietnam, and the Vietnam-Japan Economic Committee under the Japan Business Federation last week signed a memorandum of understanding, kick-starting the seventh phase of the Vietnam-Japan Joint Initiative (VJJI).

“The VJJI is an important policy dialogue between Japanese businesses and Vietnamese government agencies, through which practical proposals and recommendations have been made over the past 15 years, greatly helping improve the local business climate,” said Nguyen Chi Dung, Minister of Planning and Investment.

To be carried out over 17 months, from August 2018 to the end of 2019, the plans of action will cover 10 groups of issues, including those left by the previous phase as well as new content. The issues include regulations for foreign investors in Vietnam as prescribed in the laws on Investment and Enterprises, the Land Law, and others; the reform of state-owned enterprises and the stock market; supporting industry development policies; labour and salary; the legal framework for public-private partnership (PPP); the legal framework

for the construction of gas pipelines; and the establishment of companies and opening of branches in the services sector.

According to the Japanese side, the removal of retroaction for incentives approved in investment certificates and business registration caused difficulties for foreign investors and even unpredictable losses. Besides, while the Law on Investment (LoI) (2005) had regulations to ensure foreign investors’ legitimate rights, the current LoI does not.

Therefore, the new action plan will work on the policies for keeping retroaction for incentives approved in the aforementioned legal documents, while amending Article 13 of the LoI towards adding more subjects to be ensured with legitimate rights.

In regards to salary and labour, overtime and sectors subject to labour leasing remain major problems for Japanese investors, making them insecure about their future developments. Under the action plan, both sides will discuss the possibility of revising these regulations towards allowing them to decide the overtime cap based on their work demands, in line with prevailing rules, while enlarging the list of sectors subject to labour leasing.

As for the PPP legal framework, Japanese investors are concerned about the transformation of public projects into PPP projects, especially when using official development assistance (ODA) funds; incentives for PPP bidders; government guarantees for foreign currency exchanges and conditions for contract cancellations; and land use rights and land-related asset mortgages.

Nguyen Dang Truong, director of the MPI’s Public Procurement Department (PPA), said that the PPA is working with the Japan International Cooperation Agency (JICA) on building a legal mechanism for the use of ODA as Vietnam’s counter-funding in PPP projects, then creating an important foundation for development in the PPP Law, which will be considered at the

National Assembly in November 2019 and is slated to be approved in May 2020.

Launched in April 2003 as a result of the special co-operation between the two governments, the VJJI has been implemented in six phases with a total of 473 plans of action. Over the past 15 years, the VJJI has contributed significantly to increasing Japanese investments in Vietnam, while helping competent Vietnamese agencies fine-tune laws and policies. As shown in the latest survey on the performance of Japanese businesses in Asia and Oceania in 2017, announced in February 2018 by the Japan External Trade Organization’s Hanoi Office, 46.9 per cent of respondents in Vietnam complained about the imperfect legal system and the inconsistent performance of legal documents, down 1.5 percentage points from the year before. In addition, 39.5 and 38.2 per cent expressed concern about complicated administrative procedures and underdeveloped infrastructure, respectively, down 2.3 and 6.2 percentage points.

According to the MPI’s statistics, Japan overtook the heavyweight South Korea to become Vietnam’s biggest foreign investor in the first seven months of 2018 in the country, with the total registered investment capital of $6.88 billion, or 30 per cent of Vietnam’s total registered foreign direct investment capital during the period.