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Appendix A: Vietnam Real Estate Need Better Framework February 12, 2001 © Copyright 2001, IRED.com, Inc.

Vietnam Real Estate Needs Better Framework

Reporting at a recent seminar on the real estate market in Vietnam, sponsored by the Central Institute of Economics Management Research, experts agreed that tax, administrative and legal reforms are needed to create a thriving real estate market.

According to Asia Pulse, a booming real estate market "would boost national development and solve many social problems." In 1993, a new Land Law was passed and some of the groundwork was laid for the real estate market. Prior to that time, a 1988 Land Law was in place that prohibited many kinds of real estate transactions.

The new law allows land users to rights: land alteration, transfer, lease, inheritance and mortgage. The law also lets the land be valued and have a price, according to Nguyen Khai, the head of the Law Department of the General Department of Land Administration.

The new land law did not solve some of the problems though and there are many "under the table" deals, which are conducted without the state's review. The experts stated that getting around burdensome policies and regulations is the primary reason for these deals. Nguyen Thi Mai of the Ministry of Justice's Department of Civil and Economic Laws, stated that the high taxes and fees discourage people from going through official channels.

Setting up centers for real estate registration would ameliorate this problem one expert, Dang Van Thanh, head of the Policy Department of the Ministry of Finance, suggested. The centers would give participants all of the relevant information and make real estate transfer deals easier and help boost the economy.

Pat Rioux pat@ired.com

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Appendix B: Overview of FDI in Vietnam

Foreign Direct Investment in Vietnam an Overview

1. Vietnam's Policy to Attract FDI The VIth Congress of the Vietnamese Communist Party made a turning-point decision in the country's development strategy to build a market-oriented economy under the state control. The Vietnamese Communist Party and State, while attempting to mobilize all domestic resources, pursue the policy of deepening international economic relations to seek new opportunities for the country's economic co-operation and development. As part of foreign economic relations activities, foreign direct investment (FDI) was put high on the agenda. As domestic capital raising possibilities are limited, FDI constitutes an important part to the Vietnamese economy. On December 29, 1987, at its second session, the VIIth National Assembly passed the Law on Foreign Direct Investment in Vietnam. Up to now, it has been revised four times in 1990, 1992, 1996 and May 2000. The introduction of the Law on Foreign Direct Investment was a landmark in the development of Vietnam's foreign economic relations. The main principles of FDI in Vietnam are stated in Article 1: "The State of the Socialist Republic of Vietnam welcomes and encourages foreign organizations and nationals to invest capital and technology in Vietnam on the basis of respect for national independence and sovereignty, full observance of the Laws of Vietnam, equality and mutual benefit. The State shall guarantee the ownership of the invested capital and other rights of the foreign investors, and extend to the latter favorable conditions and easy formalities." After the introduction of the Law on Foreign Direct Investment, other legal documents were enforced including Decree No.18 in 1993 on the forms of enterprises, international organizations and individuals investing and receiving FDI in Vietnam; Decree No.10/CP in 1998 on the simplification of investment procedures; Decision No. 53/QD-TTg in 1999 on investment priorities... The major goal of Vietnam's FDI policy is to attract capital, advanced technology, and management skills in order to effectively develop the country's potential, increase savings, improve people's living standard and realize the cause of modernization and industrialization. 2. FDI Situation since 1987 Foreign investments in Vietnam are realized under the following forms: + Business Co-operation Contract; + Joint-venture; + 100 % foreign-owned enterprises;

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Appendix B: Overview of FDI in Vietnam (continue) + Other forms such as Export Processing Zone, Build-Operate-Transfer (BOT), Build-Transfer-Operate (BTO), and Build-Transfer (BT). There have been over 2,400 projects worth more than US$ 35 billion invested by hundreds of companies from over 70 countries and territories. The disbursed capital was US$ 15.9 billion. The FDI sector covered 10.5% of Gross Domestic Products in 1999 compared with 3.6% in 1993. FDI now accounts for nearly 30% of the country's investment, 21% of export turnover and creates 300,000 direct jobs. With regard to FDI distribution, up to April 2000, Ho Chi Minh City kept the largest share of FDI with the registered capital amounting to US$ 9.7 billion, followed by Hanoi with over US$ 8.1 billion. So far, 7 cities and provinces have had foreign investment of more than US$ 1 billion namely Ho Chi Minh City, Hanoi, Dong Nai, Binh Duong, Hai Phong, Quang Ngai, and Ba Ria Vung Tau.

3. FDI's role in Vietnam

+ FDI helps adjust the economic structure towards industrialization and modernization, develop production forces and enhance economic competitiveness and efficiency. FDI sector currently accounts for nearly 35% of the industrial output and has considerably contributed to the high growth of industrial production, more than 10% since 1990. The annual growth rate of the FDI industrial sector has been double digit. Many FDI enterprises have advanced technology and modern business operations. FDI has also helped establish the system of Export Processing Zones and Industrial Estates. + FDI plays an active role in the Doimoi process and helps strengthen Vietnam's international economic integration. With the participation of foreign investors in Vietnam, its economic relations have been expanded and its local enterprises' share in the international labour division strengthened, thus facilitating the country's regional and global economic integration. + FDI constitutes important added resources for national economic development. + FDI helps improve the technological level of domestic enterprises. + FDI enterprises help create jobs and develop the human resources. By and large, FDI is an important factor contributing to the high economic growth - more than 8% in the 1991-1997 period - and the development of all economic sectors. Some FDI enterprises' products are now competitive locally and internationally. Important sectors of the economy like telecommunications, oil and gas, and tourism are growing rapidly with the substantial contribution of the FDI sector.

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Appendix B: Overview of FDI in Vietnam (continue)

4. The revised Law on Foreign Investment in Vietnam in May 2000 and FDI policy in the coming years

In recent years, FDI inflow to Vietnam was on the downward trend: the volume of new registered capital was US$ 8.6 billion in 1996; US$ 4.65 billion in 1997; US$ 3.92 billion in 1998 and more than US$ 1.47 billion in 1999. In the first seven months of 2000, the newly invested capital was US$ 609 million. The decline of FDI was partly due to the impact of the 1997 - 1998 regional financial crises. In face of this slowdown, the Government is well aware of the need to reform investment environment to create more favorable conditions for foreign investors. Along with the promulgation of new legal documents granting more preferences to investors such as Decree No. 10/CP, Decision No. 53/QD-TTg, the revised Law on Foreign Investment in Vietnam was approved the X National Assembly last May. This new Law has made revision on 3 major groups of issues. First, there are provisions to remove difficulties and obstacles, and reduce risks for FDI enterprises in which responsibilities for compensation and land clearance are shifted from foreign partners to Vietnamese sides; allow FDI enterprises to mortgage their land use rights to borrow money from credit organizations, and relax currency balance regulations on foreign-invested enterprises. The second group is provisions, which give more autonomy for FDI enterprises and lessen issues that require consensus in the Management Board. Investors are allowed more freely to change the investment forms, re-organize enterprises, and transfer capital. Procedures on Government's FDI management will continue to be improved. Finally, the new Law gives more preferences to foreign investors, which increase the list subject to import tariff exemption and reduction, reduce profit transmittal tax rates from 10%, 7% and 5% to 7%, 5% and 3% respectively, and allow 100% foreign-owned enterprises and foreign partners to the BCC to forward losses. Furthermore, foreign investors will continue to enjoy preferences provided in case of changes in the Vietnamese laws. FDI enterprises will be granted more preferential provisions after receiving investment license. In the 2000 - 2005 period, with the estimated annual growth rate of 7%, Vietnam needs about US$ 60 billion, of which FDI is expected to account for 40%. In the coming years, the Government will continue to improve the investment environment and create more favorable conditions for foreign investors in Vietnam.

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Appendix C: Ketika Investor Menatap ke Vietnam

Ketika Investor Menatap ke Vietnam

Pengantar: Pada tanggal 17-20 November, Warta-wan SH Andreas Piatu diundang bersama rombongan Gubernur DKI, Sutiyoso mengikuti Pertemuan Gubernur, Walikota Kota-kota besar Asia di Hanoi. Berikut ini salah satu catatan ringan dari Ibukota Vietnam itu. JAKARTA-Vietnam merupakan tempat investasi yang menarik. Peluangnya sangat besar karena keadaaanya sangat kondusif. Hanya saja, pemahaman pengusaha Indonesia tentang bagaimana sesungguhnya potensi Vietnam sangat kurang. Kalau pun ada pengusaha Indonesia yang melakukan investasi, sebagian masih menggunakan lisensi negara lain. Pengusaha Indonesia, Ciputra, dalam bincang-bincang dengan SH di Hanoi, baru-baru ini menegaskan Vietnam, negara berideologi sosialis komunis ini, merupakan tempat yang menarik untuk investasi. Peluang investasinya sangat besar karena keadaannya sangat kondusif. Ciputra menambahkan banyak investor yang sebelumnya menanamkan modal di Indonesia ternyata lari ke Vietnam. Seperti pabrik sepatu, ada yang sudah pindah dari Indonesia ke Vietnam. Ciputra sendiri saat ini melakukan investasi di Hanoi di bidang perhotelan yang dikenal dengan Horizon Hotel. Ternyata, Hotel Horizon, menurut pengakuan Ciputra, termasuk yang tak pernah sepi. Paling tidak, setiap hari sekitar 60-70 persen kamar terisi. Pada hari tertentu sampai 100 persen. Apa yang dikemukakan Ciputra bahwa Vietnam tempat yang menarik dan mempunyai peluang besar untuk investasi tidak sekadar basa basi. Berdasarkan data yang dikeluarkan Kedutaan Indonesia pada bulan April 2003, menunjukkan banyak sekali pengusaha yang menanamkan modal di Vietnam termasuk dari Indonesia. Indonesia berada diurutan ke 24 dari negara lainnya yang menginvestasikan modalnya di Vietnam . Dari data yang dikeluarkan keduataan Indonesia menyebutkan, belum banyak investasi Indonesia disebabkan kurang adanya tanggapan pengusaha swasta atau intansi berwenang terhadap perkembangan peluang dan informasi bisnis yang disampaikan. Selain itu ada persepsi bahwa Vietnam kurang potensi dan tidak menguntungkan serta sulit menjalankan bisnis. Indonesia memulai investasi di Vietnam sejak tahun 1990. Menurut data yang sama dari Kedutaan Besar Indonesia di Vietnam, peluang bisnis bagi Indonesia dalam upaya peningkatan ekspor komoditas nonmigas, kayu lapis, clinker, kertas, bahan tekstil, baja, dan kaca untuk konstruksi.

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Appendix C: Ketika Investor Menatap ke Vietnam (continue) Menuju Industri Modern Vietnam dengan penduduk 79,7 juta jiwa pada tahun 2002 ini ingin menjadi negara industri modern dan terkemuka di Asia Tenggara tahun 2020. Pada saat itu, pertumbuhan GDP 8 persen sampai 8,5 persen dengan sumbangan dari sektor industri 36,1 persen, jasa 32,1 persen, dan konstruksi 26,9 persen. Pada tahun yang sama, sumber daya manusia dalam bidang iptek diharapkan meningkat pesat, begitu pula peran dan posisi Vietnam semakin besar dalam percaturan politik regional dan internasional. Apa yang menjadi target pada tahun 2020 menjadikan Vietnam negara industri modern di Asia Tenggara sekaligus dalam upaya merealisasikan ajaran Ho Chi Minh, rasanya bukan suatu mimpi, tapi suatu yang didasarkan pada perencanaan pembangunan yang baik dengan sumber daya alam, keterbukaan, terhadap dunia luar dan perhatian terhadap pertahanan dan keamanan dalam negeri. Data yang diperoleh SH dari Kedutaan Besar Indonesia di Hanoi menunjukkan bahwa Vietnam memiliki strategi pembangunan dalam membawa negaranya dalam percaturan dunia.Vietnam menciptakan suatu iklim yang mendukung bagi dunia usaha, mengganti ekonomi pedesaan, memperluas kemampuan SDM, menyediakan prasarana, meningkatkan kualitas lingkungan, membangun pemerintahan yang modern, dan berintegrasi dengan ekonomi internasional. Dalam rencana pembangunan sosial ekonomi Vietnam tahun 2001-2010, secara tegas dinyatakan, meningkatkan status negara Vietnam keluar dari negara sedang berkembang. Selain itu dalam pembangunan 2001-2010 target yang hendak dicapai adalah pertumbuhan GDP 2010 meningkat menjadi 13,4 persen dari tahun 2000 yang 6,7 persen dan tenaga kerja, sektor pertanian diturunkan menjadi tinggal 50 persen.

Faktor Penunjang Semua program tadi membuat perhatian pemerintahan dalam dunai pendidikan pun besar. Anggaran pendidikan tahun 2000 sebesar 15 persen, tahun 2005 direncanakan 18 persen, dan tahun 2010 menjadi 20 persen. Pada tahun ini diharapkan semua orang dewasa sudah dapat membaca dan menulis, 95 persen anak-anak usia sekolah sudah dapat ditampung di SD, dan 45 persen buruh yang bekerja sudah mendapat pelatihan. Vietnam mempunyai sumber daya alam yang mampu mendukung pembangunan nasional. Sumber daya alam sudah mulai dieksploitasi. Meski demikian, Vietnam yang mempunyai 454 suku dengan terbanyak Suku Kinh, sekitar 68 juta ini, mempunyai program untuk maju dan berkembang dengan membuka diri bagi dunia luar dalam politik dan investasi. Tahun 2001, tercatat 461

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Appendix C: Ketika Investor Menatap ke Vietnam (continue) proyek dengan nilai investasi 3.05 miliar dolar AS dan tahun 2002 menjadi 700 proyek dengan nilai investasi 1.392 miliar dolar AS. Dalam kerja sama internasional atau kerja sama dengan negara lain, Vietnam selalu berpedoman bekerja sama dengan siapa saja atau negara mana saja tanpa memandang ideologi, termasuk negara Timur Tengah. Di Hanoi, ada 12 kedutaan besar negara OKI dan 7 diantaranya dari Timur Tengah, termasuk kedutaan besar Israel. Semua ini dilakukan untuk melindungi kedaulatan negara, mendukung pembangunan nasional, dan memperkuat posisi Vietnam dalam forum internasional, multilateral, subregional, regional dan fou, bilateral. Negara tersebut terdapat 109 perwakilan diplomatik atau kedutaan besar dengan 59 kedutaan berdomisili di Hanoi, 25 perwakilan konsulat, 6 perwakilan atau kantor Honorary Consults dan 16 kantor perwakilan organisasi internasional. Dan tahun 2004 Vietnam menjadi tuan rumah KTT ASEM dan kini sedang berusaha menjadi anggota WTO. Untuk menunjang pembangunan, sistem pertahanan pun menjadi perhatian. Kekuatan tentara reguler 450.000 personel. Bila terjadi perang akan ditambah dengan pasukan cadangan dari pensiunan tentara, milisi, dan pasukan penjaga perbatasan yang semuanya berjumlah 500.000 orang. Pasukan ini sampai di pedesaan. Setiap desa terdapat satu kompi milisi. Bila perang jumlahnya akan ditambah menjadi satu resimen dengan mengerahkan semua penduduk setempat yang terlatih. Angkatan Bersenjata revolusi sosialis Vietnam adalah tentara rakyat Vietnam dan menjadi bagian tidak terpisahkan dari rakyat.

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Appendix D: In Vietnam, Property As Good As Gold

In Vietnam, Property As Good As Gold Vietnam's property boom is spurring demand for gold bars used to pay for homes, bucking a slump in bullion sales across Southeast Asia. Vietnam's gold demand rose 5.4 percent in the third quarter even as total Southeast Asian sales fell 5 percent, the World Gold Council said. In five years, the number of gold shops in Hanoi doubled to about 400, said Vu Duong, deputy director of Kim Quy, a trader of the metal based in the capital city. Economic growth that averaged about 6 percent over the past five years left the Vietnamese with cash to invest, and property is among their favored assets. The price of an inner-city home can total several garbage bags of Vietnamese dong - so gold bars have become a favored currency. "The country's economy is now open," Duong said. "The life of the people has improved, and that's one reason why gold demand increased." While sales of the metal rose in Vietnam in the third quarter, purchases slowed in Indonesia, Thailand, Malaysia and Singapore. "The primary reason that people buy gold here is to buy property," said Brett Ashton, director of the Ho Chi Minh City branch of the property consulting firm Chesterton Petty Vietnam. Vietnam's standard gold bar - known as a tael and stamped for authenticity by companies such as Kim Quy and Saigon Jewelry Co. - has become an alternate denomination in which the price of a house is frequently negotiated. "The inner-city property market revived once more, boosting demand for gold bars which are used in property transactions," the Gold Council said. Property-buying isn't the only spur to gold sales. The Vietnamese have traditionally avoided putting surplus cash into bank accounts that invite the scrutiny of tax officials, and offer low interest and little growth after inflation. Retail investment in gold rose 9.1 percent in the third quarter, the Gold Council said in its "Gold Demand Trends" report. The revival in Vietnamese gold demand was driven in part by a shift to more expensive inner-city property buying after the government introduced regulations to stem rural land purchases and avoid a speculative bubble. Many investors had bought rural and suburban land betting that it would become more valuable.

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Appendix E: State Talks Down ABC Debt Rumors

State Talks down Ciputra Debt Rumors Buyers in the country's largest real estate project can rest easy after authorities dismissed rumours of delays to the $2.1bil Ciputra Hanoi International City, despite a large debt owed by the foreign partner. An affiliate of the Ciputra Group, Development Planning and Investment (DPI), is the foreign partner in the Ciputra Hanoi project. While another Ciputra Group affiliate, Citra Development Indonesia is reported to have an overdue debt of more than $230mil. Whether the debt can be restructured remains unclear and there are fears that if the group and its creditors did not reach agreement, the project was likely to be delayed as has happened to some other property projects in the capital. The Indonesian property group was licensed in 1996 to form the Citra West-lake City Development joint venture with Hanoi-based Urban Development and Investment Company to develop a 368-ha property project with registered capital of $2.1bil. However, construction only started in late 2002 after years of slow progress as a result of the 1997 Asian economic crisis. Hanoi Planning and Investment Department Deputy Director, Nguyen Do Khue, confirmed last week the project was performing well and there were no signs of it being delayed. "I assure you that the project is being implemented on schedule. It has never been delayed," Mr Khue said. He said the authorities knew the financial ability of the Ciputra Group was strong enough to implement the Hanoi project and the debt of one of its affiliates would not impact on its investment in Vietnam. Asked whether the development of the Ciputra City was slower than other housing projects built by Vietnamese firms, Mr Khue said: "This is a huge project that cannot be completed in one or two years. We should look at what the investors are doing now." Citra Westlake City Development Company Director, David Amsdorff, also said the debt of an affiliate company in Indonesia would not affect the progress of the Ciputra project in Hanoi. "The development and construction progress of the project is on schedule," he said, adding that the joint venture would hand over the first houses to customers next month.

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Appendix E: State Talks Down ABC Debt Rumors (continue) Amsdorff said the construction of two apartment towers with total 300 apartments and another 400 houses would be completed by the end of this year. The joint venture said construction of 450 apartments in three more towers and 300 houses would be started within this year. In addition, 10 apartment towers with a total 1,500 apartments and 400 houses will also be under construction by next year. In early next year, construction will begin on the biggest shopping centre in Vietnam on 7.3ha on the Lac Long Quan Road. It will house 1,263 speciality shops, 48 restaurants and cafes, a hyper-market, department stores and entertainment centre. Land acquisition and construction of the main infrastructure for the whole project would be completed by the end of next year, Amdorff said. In total, the company plans to build 50 apartment towers, 2,000 houses, a hospital, schools, a shopping and trade centre and an office complex in the next five years. "With respect to the Vietnamese government and Hanoians, the project will not be delayed and will be completed on schedule," Amsdorff said. Ciputra, also the owner of the five-star Hanoi Horison Hotel, has developed 11 large-scale township projects ranging from 500 to 6,000ha, with office buildings and apartments, shopping centres, hotels, theme parks and golf courses in Indonesia and overseas.

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Appendix F: Foreign Direct Investment: Theory and Strategy

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Appendix F: Foreign Direct Investment: Theory and Strategy (continue)

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Appendix F: Foreign Direct Investment: Theory and Strategy (continue)

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Appendix F: Foreign Direct Investment: Theory and Strategy (continue)

73

Appendix G: Corporate Income Tax

Corporate Income Tax

Corporate Income Tax Rates

Foreign-invested enterprises (FIEs) and foreign parties to business co-operation contracts (BCCs) shall pay corporate income tax at the standard rate of 25% under the Law on Foreign Investment (LFI) in Vietnam while domestic enterprises and foreign contractors not under the LFI shall be subject to a standard rate of 32% on their profits. Preferential corporate income tax rates of 10%, 15% and 20% shall be applicable to projects which can meet certain criteria or in areas and locations in which investment is encouraged. Oil and gas companies are now subject to a 50% tax rate while the tax applicable to the exploitation of other rare, precious resources shall be determined on a case-by-case basis, ranging from 32% to 50%. Overseas Vietnamese investing into Vietnam in accordance with the provisions of the Law on Foreign Investment are entitled to a 20% reduction in payable corporate income tax, except in cases where the 10% rate of corporate income tax is applicable. The rate of 20% shall apply to projects which satisfy one of the following criteria: • Industrial park enterprises engaged in the service sector; • Production projects other than projects subject to the rates of 25%, 15% and 10%. The rate of 15% shall apply to projects which satisfy one of the following criteria: • Included in the list of projects entitled to investment encouragement • Investment in regions with unfavorable socio-economic conditions; • Service enterprises in export processing zones; • Industrial park enterprises exporting 50% of products or more; • Transfer of assets to the State of Vietnam without any compensation upon

termination of operation. The rate of 10% shall apply to projects which satisfy one of the following criteria: • Satisfying two of the criteria of the rate of 15%; • Included in the list of investment projects entitled to special encouragement; • Investment in regions with extremely-unfavorable socio-economic conditions

specified in the list of regions where investment is encouraged; • Enterprises engaged in the development of infrastructure of industrial parks,

export processing zones or high-tech parks; export processing enterprises; • Engaged in the fields of medical examination and treatment, education and

training, or scientific research.

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Appendix G: Corporate Income Tax (continue) The duration of application of preferential corporate income tax rates shall be stipulated as follows: a. The preferential corporate income tax rates shall be applied throughout the life of

investment project in the case of investment projects satisfying one of the following criteria:

• Projects included in the list of projects where investment is specially encouraged;

• Projects located in regions with extremely unfavorable socio-economic conditions specified in the list of regions where investment is encouraged;

• Projects engaged in the development of infrastructure of industrial zones, export processing zones, or high-tech zones;

• Projects investing in industrial zones, export processing zones, or high-tech zones; Projects engaged in the fields of medical examination and treatment, education and training, and scientific research.

b. The corporate income tax rate of 10% shall be applied for a period of 15 years from the date when the project starts its production or business activities, except for projects entitled to preferential corporate income tax rates throughout their whole life. When the preferential rate expires, the standard rate of 25% will apply. Investment projects entitled to this tax incentive must satisfy one of the following criteria:

• Building infrastructure facilities in unfavorable regions. • Investing in mountainous areas, islands, and remote areas. • Afforesting. • Specially encouraged investment projects

c. The corporate income tax rate of 15% shall be applied for a period of 12 years from the date when the project starts its production or business activities, except for projects entitled to preferential corporate income tax rates throughout their whole life. When the preferential rate expires, the standard rate of 25% will apply. Investment projects entitled to this tax incentive must satisfy one of the following criteria:

• Exporting at least 80% of their products. • Investing in metallurgy, base chemical, mechanical engineering, petro-

chemical, and fertilizer industries, manufacturing of electronic devices, motorcycle and auto parts.

• Building and operating infrastructure works (bridges, roads, water supply and drainage systems, power systems and ports).

• Developing perennial industrial crops. • Investing in unfavorable regions as specified by the Government

(including hotel projects). Transferring assets to the State of Vietnam without any compensation upon termination of operation (including hotel projects).

• Projects satisfying two criteria of "point d". d. The corporate income tax rate of 20% shall be applied for a period of 10 years

from the date when the project starts its production or business activities, except

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Appendix G: Corporate Income Tax (continue)

for projects entitled to preferential corporate income tax rates throughout their whole life. When the preferential rate expires, the standard rate of 25% will apply. Investment projects entitled to this tax incentive must satisfy one of the following criteria:

• Exporting at least 50% of their products. • Employing 500 workers or more. • Utilizing advanced technology and investing in R & D. • Sourcing raw materials available in Vietnam; processing and exploiting

effectively natural resources in Vietnam; and producing products with local content of 40% or more.

e. The preferential tax rates of 20%, 15% and 10% shall apply to BOT, BTO and BT projects; IP and EPZ infrastructure development projects throughout the life of the projects.

f. The above-mentioned preferential tax rates are not applicable to hotel peojects (except those located in unfavorable regions, mountainous areas, islands or projects whose assets will be transferred to the State of Vietnam without any compensation); finance, banking, insurance, service and trading projects.

Tax holidays

Exemptions from and reductions of corporate income tax shall be applied as follows: • Projects entitled to the tax rate of 20% shall be exempt from corporate income

tax for 1 year from the date profits are made and shall be granted a 50% reduction for the 2 subsequent years.

• Projects entitled to the tax rate of 15% shall be exempt from corporate income tax for 2 years from the date profits are made and shall be granted a 50% reduction for the 3 subsequent years.

• Projects entitled to the tax rate of 10% and investment projects in regions where investment is encouraged shall be exempt from corporate income tax for 4 years from the date profits are made and shall be granted a 50% reduction for the 4 subsequent years, except for projects which are exempt from corporate income tax for 8 years.

• BOT, BTO, and BT enterprises investing in regions included in the list of regions where investment is encouraged; high-tech industrial enterprises; high-tech service enterprises in high-tech parks; a forestation projects, projects for construction and operation of infrastructure facilities in regions with extremely-unfavorable socio-economic conditions; and large scale projects with a significant socio-economic impact which are included in the list of specially encouraged investment projects shall be exempt from corporate income tax for 8 years from the date profits are made.

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Appendix G: Corporate Income Tax (continue) Refunding of corporate income tax

If profits gained investments in Vietnam are re-invested in the existing projects or invested in new projects, part or all of the tax paid on the profits so re-invested may be refunded, provided that foreign investors can meet the following conditions: • Re-investing in projects entitled to a preferential corporate income tax rate; • Re-investment for at least three consecutive years; • Fully paid legal capital or capital of BCCs as specified in investment licenses.

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Appendix H: Personal Income Tax

Personal Income Tax Liability to personal income tax Vietnamese and expatriates working in Vietnam with high income are subject to personal income tax. Personal income tax rates applicable to Vietnamese employees are graduating from 0% to 60%. Foreigners residing in Vietnam for an aggregate of 183 days or more within a consecutive 12-rnonth period from the first date of arrival will be treated as a resident, unless tax treaties between Vietnam and other countries provide otherwise. These residents are subject to progressive tax rates ranging from 0% to 50%. Meanwhile, foreigners who spend between 30 to 182 days in a consecutive 12 month period are considered as non-tax residents in Vietnam. Non-residents are subject to PIT at a flat tax rate of 10% on their Vietnam- sourced income in the first year. Foreigners staying in Vietnam less than 30 days in a year are not subject to personal income tax. Resident foreigners are required to declare all their worldwide employment income, regardless of where the income is paid. Failure to declare and pay the correct tax may result in either or both a monetary fine and criminal prosecution.

Taxable income Regular income • Taxable regular income includes salaries, wages, remuneration, bonuses and

allowances. • Other regular income earned from production, business and service and those not

subject to corporate income tax. Irregular income • Gifts and presents received from overseas. • Income from transfer of technology, right to use industrial properties, trademarks,

know-how, construction engineering designs, industrial designs and other services.

• Lottery winnings. There is a temporary exemption from personal income tax for interest from bank deposits, saving accounts, and profits from debentures, bonds and shares.

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Appendix H: Personal Income Tax (continue) Non-taxable income • Night-shift allowances, hardship allowances for working in dangerous or remote

conditions • Rewards for technical renovation or invention. • Social allowances. • Payment for social insurance and health insurance. • Income earned in Vietnam by expatriates staying in the country for less than 30

days. Personal income tax rates Regular income

Vietnamese citizens and other individuals residing permanently in Vietnam are subject to the following personal income tax rates:

If the tax payer's remaining monthly income exceeds VND 15 million after

paying personal income tax at the above-mentioned rates, there is a supplement

income tax of 30% payable on the excess.

The rate for non-resident foreigners is a flat 25% on total income.

Foreigners residing in Vietnam and Vietnamese citizens working overseas shall be

subject to the following cumulative tax rates:

Level Average Monthly Income (VN$ Million) Tax Rate (%)

1 Up to 3.0 0

2 Over 3.0 up to 6.0 10

3 Over 6.0 up to 9.0 20

4 Over 9.0 up to 12.0 30

5 Over 12.0 up to 15.0 40

6 Over 15.0 50

Level Average Monthly Income (VN$ Million) Tax Rate (%)

1 Up to 8.0 0

2 Over 8.0 up to 20.0 10

3 Over 20.0 up to 50.0 20

4 Over 50.0 up to 80.0 30

5 Over 80.0 up to 120.0 40

6 Over 120.0 50

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Appendix H: Personal Income Tax (continue) Irregular income • In the case of income of over VND 2 million coming from transfer of technology,

a flat 5% rate is applied. • In the case of lottery winnings of over VN$ 12.5 million, a rate of 10% is applied

on the full amount of each occasion. • For gifts or presents worth over VN$ 2 million received from overseas, a tax rate

of 5% is applied.

Level Average Monthly Income (VN$ Million) Tax Rate (%)

1 Up to 2.0 0

2 Over 2.0 up to 4.0 5

3 Over 4.0 up to 10.0 10

4 Over 10.0 up to 20.0 15

5 Over 20.0 up to 30.0 20

6 Over 30.0 30

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Appendix I: FDI Law 2000 of Vietnam

FDI LAW 2000 THE NATIONAL ASSEMBLY SOCIALIST REPUBLIC OF

VIETNAM Independence – Freedom – Happiness

THE NATIONAL ASSEMBLY

OF THE SOCIALIST REPUBLIC OF VIETNAM1

Legislature X, 7th Session

LAW ON FOREIGN INVESTMENT IN VIETNAM

In order to expand economic co-operation with foreign countries, to serve the work of industrialization [and]2 modernization, [and] to develop the national economy on the basis of efficient exploitation and use of the country’s resources. Based on the 1992 Constitution of the Socialist Republic of Vietnam; This Law sets forth provisions on foreign direct investment in the Socialist Republic of Vietnam. • Chapter 1: General Provisions • Chapter 2: Forms of Investment • Chapter 3: Investment Guarantees Measures • Chapter 4: Rights and Obligations of Foreign Investors and Enterprise with

Foreign Capital Investment • Chapter 5: State Management Over Foreign Investment • Chapter 6: Implementing Provisions Notes: 1. Background: The Law on Foreign Investment in Vietnam was originally adopted on December 29, 1987 by the National Assembly, Legislature VIII, during its 2nd Session (the "1987 FIL"). The 1987 FIL was revised twice on June 30, 1990 and December 23, 1992 respectively. On November 12, 1996 the National Assembly of Vietnam repealed the 1987 FIL in its entirety and adopted its replacement anew ("the 1996 FIL"). The 1996 FIL was amended on June 9, 2000 by the National Assembly under Law No. 18/2000/QH10 ("the 2000 Amendments"). The title of the Law remains unchanged. In this translation, the 2000 Amendments are incorporated into the main body of the 1996 LIF for purposes of convenience. 2. Added words and footnotes: Because Vietnamese and English have very different grammatical structures and because each language possesses its own unique legal and cultural tradition, it is impossible in some instances to have a "perfect" word for word English translation of a Vietnamese legal document. With this in mind, we have taken the liberty of adding words and phrases in this translation where appropriate as to (i) facilitate readability and understanding, and (ii) conform with the English language convention in a manner consistent with the meaning of the original Vietnamese text. Added words are placed in square brackets for easy identification. Furthermore, footnotes and annotations are also added so as to (i)

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Appendix I: FDI Law 2000 of Vietnam (continue) render commentaries on the choice of words and legal terminology in this translation, and give cross-references to related or equivalent legal concepts and terms adopted by common law, and (ii) make notes on legal issues and ambiguous expressions found in the original Vietnamese text of this Law during the course of translation. Punctuation: In the original Vietnamese text of this Law, the drafters often use commas and semicolons instead of writing clearly the words "or", "and" or "and/or". In Vietnamese, the comma and semicolon may be conjunctive or disjunctive. Therefore, the meaning of certain provisions in the original text of this document appears ambiguous. Throughout this translation, commas and semicolons are translated as "and", "or" or "and/or" according to the context. Words added in place of commas and semicolons are placed in square brackets for easy identification.

Hanoi Authority for Planning and Investment 17 Tran Nguyen Han, Hanoi, Vietnam.

Fax: (84-4) 8251733, Email: hapi@hn.vnn.vn Copyright 2001. Feeback

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Appendix J: Land Law of Vietnam Document source: [Version: 15 August 1997] http://coombs.anu.edu.au/~vern/luat/luat.html AVSL, GPO Box 161; BELCONNEN, ACT 2616 Australia and Coombs Computing Unit, Australian Nat. Univ. ------------------------------------------------------------ PROJECT UNDP-VIE/91/004 FEASIBILITY STUDY ON VIETNAM LAND MANAGEMENT SYSTEM LAND LAW OF VIETNAM 1993 oOo ACKNOWLEDGMENTS =============== This 'unofficial' English translation of the Vietnam Land Law 1993 is primarily for the purpose of assisting members of the UNDP Project VIE/91/004, 'Feasibility Study on Vietnam Land Management System', to understand various aspects of the Law. In case of any ambiguity arising from the translation, the Vietnamese text ("Lua^.t DDa^'t DDai", National Political Publisher, Hanoi, August 1993) should be consulted. Generous assistance and valuable comments from Messrs. Gary Bugden and Lesley Wilshusen are gratefully acknowledged. Tran Minh Ha General Department of Land Management, Hanoi, Vietnam. Van Thu La, and Binh Anson, Ph.D. Department of Land Administration, Perth, Western Australia. oOo CONTENTS ======== Preamble Chapter I: GENERAL PROVISIONS Chapter II: STATE ADMINISTRATION ON LAND Chapter III: RULES ON THE USE OF LAND OF DIFFERENT CATEGORIES Division 1: AGRICULTURE LAND AND FORESTRY LAND Division 2: RURAL RESIDENTIAL LAND

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Appendix J: Land Law of Vietnam (continue) Division 3: URBAN LAND Division 4: LAND FOR SPECIALISED USE Division 5: UNUSED LAND Chapter IV: RIGHTS AND OBLIGATIONS OF LAND USER Chapter V: REGULATIONS ON FOREIGN ORGANISATIONS, FOREIGN INDIVIDUALS AND INTERNATIONAL ORGANISATIONS LEASING LAND IN VIETNAM Chapter VI: SETTLEMENT OF VIOLATIONS Chapter VII: IMPLEMENTATION PROVISIONS Appendices: ADMINISTRATION STRUCTURE IN VIETNAM COMMON ENGLISH-VIETNAMESE TERMS IN LAND MANAGEMENT oOo (Note: Where appropriate, the Vietnamese diacritics used in the text follow the VIQR-VietNet convention) --------------------------------------------------------------------------- SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness NATIONAL ASSEMBLY THE SOCIALIST REPUBLIC OF VIETNAM Session 3, Legislature IX (June 16th - July 14th, 1993) LAND LAW 1993 ============= oOo PREAMBLE Land is an extremely valuable national resource, a special production material, the most important part of the environment, and the foundation on which residential areas are distributed, on which economic, cultural, social, security and national defense bases are constructed; Over many generations, our people have devoted an enormous effort, labor and sacrificed our lives to establish and protect the land as it now is; Pursuant to Articles 17, 18 and 84 of the Constitution of the Socialist Republic of Vietnam in 1992; This Law stipulates the land administration and land use system, the rights and obligations of the land users.

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Appendix K: Attendance List

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FIN 810 - INTERNATIONAL FINANCE CHAPTER 15 -FOREIGN DIRECT INVESTMENT: THEORY AND STRATEGY

Many product markets are efficient with the result that fierce competition forces profits to some minimal level. Capital investments earn zero NPVs. Firms must innovate and struggle simply to survive. In less efficient markets, however, competition is less keen and firms can earn positive economic rents (positive NPVs). Firms can establish and defend some competitive advantage to earn above-normal profits. In general, firms prefer to operate in less competitive markets. This chapter looks at the strategies used by multination corporations (MNCs) to create and defend competitive advantage in the pursuit of economic rents.

THE THEORY OF ABSOLUTE ADVANTAGE

• Some countries are better than others at producing certain products and are said to have an absolute advantage. For example, France, Italy, Chile and certain sections of the U.S. appear to have an absolute advantage over most other countries in the production of wine due to climate and soil. Saudi Arabia and Venezuela have an absolute advantage over most other countries in the production of oil. The United States has an absolute advantage over most other countries in the production of wheat and corn. The theory of absolute advantage suggests that countries can achieve a higher standard of living by producing those products where they have an absolute advantage and trade them for products that can be produced more efficiently by other countries.

• The theory of absolute advantage helps explain the existence of international trade, but it is not

complete. It is easy to find countries that actively engage in international trade even though they appear to have no absolute advantage in any area. The theory of absolute advantage does not explain this.

THE THEORY OF COMPARATIVE ADVANTAGE

• The theory of comparative advantage (developed by David Ricardo) states that every country is

relatively more efficient at producing some products than others. For example, a country may be relatively inefficient at producing both beer and wine, but they may be less inefficient at producing beer. Thus, they would have a comparative advantage at producing beer (relative to wine), even if they have no absolute advantage at either. The theory of comparative advantage indicates that countries will increase their standard of living if they produce and export those products where they have a comparative advantage and import those products where they have a comparative disadvantage.

• The theory of comparative advantage helps explain why countries that have no absolute advantage

in producing anything still find it advantageous to engage in international trade. • When David Ricardo developed his theory, comparative advantages were most often associated

with the presence of natural resources, climate or other physical resources that could not easily be created or moved.

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THE IMPORTANCE OF A SUSTAINABLE COMPETITIVE ADVANTAGE • Firms that invest in a foreign country operate at a competitive disadvantage relative to domestic

firms. Thy must overcome cultural, legal and other barriers that favor domestic firms. To survive in spite of this, foreign investors must possess some competitive advantage that domestic firms do not have. They must constantly struggle to protect and expand this competitive advantage. Their competitive advantage could be economies of scale and scope arising from large size, managerial and marketing expertise, superior technology, financial strength, a significant trademark or brand name, a positive reputation for high quality or other desirable feature.

• Size and economies of scale are important for many firms. For some types of products,

substantial economies of scale exist with the result that one must be very large in order to produce at low cost. Often, the largest producer of a product is also the lowest-cost producer. This represents a barrier to entry for new firms, which gives the existing firms a competitive advantage.

• Size may also confer an advantage regarding advertising and promotion, distribution, etc.

Economies of scale are not important in the manufacture of Coca-Cola syrup, but Coke’s size pays off in other areas. The enormous amount they spend on advertising creates an effective barrier to entry for new firms.

• Some firms create competitive advantage by exploiting economies of scope. They use

technology and experience gained in one area to create new or better products in a related industry. For example, defense contractors who develop secret communications technology for the military may also apply some of what they learn to the manufacture of consumer products.

• Aggressive product innovation and the development of new technology confer a competitive

advantage. For many firms, large expenditures for R&D are necessary to create a continuing stream of new products. Without constant innovation, competitors quickly copy existing products and competitive advantage is lost. Sony and 3M are examples of companies that follow this strategy.

• Financial strength and international diversification may confer a competitive advantage.

Individual investors are generally unable to buy common shares on all of the world’s financial markets due to government restrictions, etc. Thus, they find it difficult to diversify their portfolio on a global basis. Consequently, investors may be attracted to MNCs as an alternative way to achieve global diversification. Such investors may be willing to accept lower rates of return on MNC shares, thus lowering the firm’s cost of capital. A low cost of capital is a strong competitive advantage that might lead some firms to become MNCs

• Although firms often prefer to operate in less competitive environments, experience in a very

competitive market is often the key to success. Competing with the industry leaders in the most demanding markets often produces skills that can be transferred to other markets. When Toyota first entered the U.S. market (one of the most competitive at the time), their cars were very simple and appealed only to a small segment of the market. What they learned by competing in the U.S. helped them improve their product and increase their worldwide sales.

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• Some firms use illegal or questionable practices in the search for competitive advantage. Many MNCs have been found guilty of bribing foreign government officials in order to win a contract or achieve some concession. It is illegal for U.S. MNCs to bribe foreign government officials, but most countries do not have laws that discourage their MNCs from this practice.

• Some MNCs attempt to drive out competitors in a foreign market by selling their products below

cost. They are willing to accept losses for several years to eliminate the competition. Once the competition is gone, they raise prices and enjoy monopoly profits. The U.S. has “anti-dumping laws” to discourage foreign corporations from using this practice in the U.S. However, some foreign governments argue that the use of anti-dumping laws in the U.S. is simply an effort to restrict foreign competition.

WHY INVEST ABROAD • Firms that invest abroad usually do so in search of one or more of the following:

1. Markets 2. Raw materials 3. Production efficiency (low labor cost) 4. Knowledge 5. Political safety.

• Market Seekers. There are many different ways to sell a product internationally. The simplest

way is to export. This requires little or no physical presence in the foreign market and is the easiest way to begin. However, exporting to a foreign market has a number of disadvantages. Without production and maintenance facilities in the foreign market, it is often difficult to develop loyal customers through quality service. Therefore, many firms choose to locate significant production and/or marketing operations in the foreign markets they serve. In some cases, it is just impractical for a firm to export their product to a foreign market. Consider Coca-Cola. Without production facilities in a foreign market, it would be all but impossible to sell their product at a reasonable price.

• Raw Material Seekers. Firms in extractive industries often invest abroad in search of raw

materials (oil, copper, gold, etc). Frequently, the material extracted is ultimately marketed in a different country. For example, Freeport McMoran has extensive production facilities in Indonesia, but little of the output is sold or consumed locally.

• Production Efficiency Seekers. Many firms locate production facilities in a foreign country in

order to take advantage of low-cost production inputs (usually labor). Many U.S. firms have factories located in Mexico to take advantage of low-cost labor. Often, the parent will export inputs to the foreign subsidiary, which assembles or processes the inputs and then returns the finished product to the parent. Foreign subsidiaries of this type are often called maquiladoras.

• Knowledge Seekers. Sometimes a firm will locate a subsidiary in a foreign country to learn

about some emerging technology. For example, several Japanese corporations built or purchased facilities in the Silicon Valley of California in order to learn about emerging technology in the computer field. Relatively few international investments are undertaken for this reason.

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• Political Safety Seekers. Firms in a country that is economically or politically unstable may locate production facilities in a more stable foreign country. Examples of this are not common.

HOW TO INVEST ABROAD: MODES OF FOREIGN INVOLVEMENT

• A firm seeking to establish an operation in a foreign country has several different alternatives:

1. A wholly-owned subsidiary, constructed from scratch (a greenfield facility) 2. A joint venture with one or more foreign partners 3. A strategic alliance with a foreign firm 4. An acquisition of an existing foreign corporation 5. A licensing agreement with a foreign firm

• A Wholly owned subsidiary. Many firms that establish operations in a foreign country do so by

establishing a wholly owned subsidiary. They charter a separate corporation in the foreign country (under the laws of the foreign country) and retain 100% of the stock. As the sole owner, the parent has complete control. Large firms that have considerable international experience often use this approach. However, this approach entails considerable risk for small or inexperienced firms.

• A Joint Venture. A joint venture is often a separate organization formed to achieve some

objective and jointly owned by a foreign investor and a local firm. A joint venture is like a marriage – it only works well if the partners trust each other and are compatible. Many large MNCs shy away from joint ventures because they prefer to have greater control over operations. A joint venture may work well if the local partner has knowledge or connections that the MNC does not have and cannot easily acquire.

• Strategic Alliance. A strategic alliance is an agreement between a foreign investor and a local

firm for cooperation in a particular area. The agreement can cover a narrow set of topics (marketing of a single product) or it may be quite broad and eventually lead to a joint venture.

• Merger or Acquisition. An acquisition of (or merger with) an existing firm is one way of

undertaking a foreign investment. This method is often quicker and easier than construction of a greenfield facility, but several problems may result. In many cultures, the acquisition of a local firm by a foreign buyer is often viewed negatively and may create public relations problems. In addition, the existing workers may feel betrayed and fearful.

SAMPLE QUESTIONS

The most important element in determining whether and how a firm should expand overseas is

1. the degree of government subsidies and protection provided 2. whether the firm's competitive advantages can be transferred abroad and, if so, how this can best be

done 3. the correlation between the domestic and world economies 4. the extent of political risk overseas 5. none of the above

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Several years ago, Toyota constructed a factory in the United States to build automobiles. Regarding this investment, Toyota is a …

1. Market seeker 2. Raw material seeker 3. Production efficiency seeker 4. Knowledge seeker 5. Political safety seeker.

Many U.S. apparel firms have factories in Mexico where garments are sewn together. Such firms are likely..…

1. Market seekers 2. Raw material seekers 3. Production efficiency seekers 4. Knowledge seekers 5. Political safety seekers

Which of the following is true regarding the payment of bribes by U.S. firms to government officials in a foreign country?

1. U.S. law does not apply – the laws of the foreign country apply. 2. Under U.S. law, the legality of bribes depends on the culture and customs of the foreign country 3. Virtually all countries (including the U.S.) have laws that make it illegal for a domestic corporation

to pay a bribe to a foreign government 4. U.S. law prohibits paying a bribe to a foreign government, but this practice is legal in many other

countries 5. U.S. corporations may deduct bribes paid to foreign governments as a business expense when

determining their taxes. A U.S. firm has many different ways to undertake an investment in a foreign country. Which of the following is least likely to be used by a small firm that is making its first move into a foreign country?

1. A wholly-owned subsidiary, constructed from scratch (a greenfield facility) 2. A joint venture with one or more foreign partners 3. A strategic alliance with a foreign firm 4. An acquisition of an existing foreign corporation 5. A licensing agreement with a foreign firm

Answers: 2, 1, 3, 4, 1.