Laws of Vietnam

THE PRIME MINISTER

Pursuant to the Law on Organization of the Government of September 30, 1992;

Pursuant to the Law on Foreign Investment in Vietnam of November 12, 1996;

With the aim of encouraging and creating even more favorable conditions for the activities of the enterprises with direct foreign investments;

At the proposal of the Minister of Planning and Investment,

DECIDES:

Article 1.- Prices of goods and services

To adjust the prices of some following goods and services:

1. Power selling price:

From July 1st, 1999 the selling price of power for production (normal hours, power potential 6KV to 20KV) for foreign-invested enterprises is 7.5 cent/Kwh.

Basing itself on this selling price of power, the Government Pricing Commission shall set the concrete selling price of power for production, business and services of foreign-invested enterprises.

2. Telecommunication prices and charges

- From July 1st, 1999 the price of telephone installation for foreign-invested enterprises and foreigners shall be the same as for domestic enterprises and Vietnamese.

- From July 1st, 1999 telephone subscribers charge for foreign-invested enterprises and foreigners is 10 USD/unit/month. Inner region telephone charge shall apply the same rate as for domestic enterprises and Vietnamese.

- From July 1st, 1999 international telecom-munication charge from Vietnam to other countries shall be reduced by an average of 10%. From July 1st, 1999 telecommunication surcharge from the hotels shall not exceed 15% of the charge at post offices.

Basing itself on the above-said prices and charges, and after consulting the Government Pricing Commission, the General Department of Post and Telecommunications shall provide for the concrete charge for telephone installation, the telephone subscribers charge, the inner region telephone charge and the international telecom-munication charge from Vietnam to other countries.

3. Price of clean water

From July 1st, 1999 the People’s Committees of the provinces and centrally-run cities shall apply the same selling price of clean water for use purpose without distinction of domestic enterprises, foreign invested enterprises, Vietnamese and foreigners as stipulated in Inter-ministerial Circular No. 02/TTLB of April 28, 1997 of the Ministry of Construction and the Government Pricing Commission.

Article 2.- Charges and fees

1. From July 1st, 1999 the same entrance fee shall apply to Vietnamese and foreign visitors at each sightseeing point of the historic, revolutionary and cultural sites.

The Ministry of Finance and the People’s Committees of the provinces and centrally-run cities shall have to guide and inspect the implementation of this regulation.

2. The Ministry of Finance shall propose to the Government for amendments to Decree No.193/CP of December 29,1994 of the Government so that administrative fee shall be collected only for the registration of licenses of foreign invested enterprises as from July 1st, 1999.

3. From July 1st, 1999 the fees for the installation of representative offices of foreign economic organizations in Vietnam shall be conducted at the rate of one million Vietnam Dong, and no fee shall be collected for the extension of permits.

4. Basing itself on Decision No. 04/1999/ND-CP of January 30, 1999 of the Government, the Ministry of Finance shall decide according to its competence or shall propose to the Prime Minister for the reduction or abolition effective from July 1st, 1999 of the charges and fees issued by the ministries, branches or People’s Committees of the provinces and cities directly under the Central Government and the Managing Boards of Industrial Zones at provincial level which do not conform with their competence or with the character and objective of the collection of charges and fees.

Article 3.- Currency unit to determine the prices of services, charges and fees

From July 1st, 1999 the Vietnam Dong shall be used to determine the various prices of services, charges and fees except otherwise provided for in separate regulations. The prices of services, charges and fees set in the US dollar stipulated in Article 1 and Article 2 of this Decision shall be converted into Vietnam Dong at the average exchange rate on the inter-bank foreign exchange market announced by the Vietnam State Bank.

Article 4.- Wages of Vietnamese laborers working at foreign-invested enterprises

1. From July 1st, 1999 the minimum wage and the wages of Vietnamese laborers working at foreign-invested enterprises shall be determined and paid in Vietnam Dong on the basis of the conversion of the current minimum wage and wages set in the US dollar into Vietnam Dong at the average exchange rate on the inter-bank foreign exchange market announced by the Vietnam State Bank.

From July 1st, 1999 when the consumer price index rises by 10% and more compared with the latest readjustment, the minimum wage and the wages of the Vietnamese laborers working at foreign-invested enterprises shall be readjusted accordingly.

2. The Ministry of Labor, War Invalids and Social Affairs shall readjust the areas for application of the minimum wages as stipulated in Decision No. 385/LDTBXH-QD of April 1st, 1996 of the Ministry of Labor, War Invalids and Social Affairs for application as from July 1st, 1999.

The minimum wage as stipulated in this clause shall apply to the projects which are licensed for investment after the date when this Decision takes effect. For the projects which have been licensed before the date when this Decision takes effect, the foreign-invested enterprises and the collectives of laborers there shall agree on the payment of wages as stipulated in this clause on the basis of voluntariness, preservation of stability of production and maintenance of jobs for the laborers.

3. The Ministry of Finance shall propose to the Government to lay down concrete stipulations for the implementation of Point b, Clause 2 of Article 16 of the Trade Union Law. For the foreign-invested enterprises, the regime of deduction of trade union expenditures from the wage fund shall not apply.

Article 5.- Issue of work permits

The Ministry of Labor, War Invalids and Social Affairs shall propose to the Government to amend Decree No. 58/CP of October 3, 1996 of the Government by authorizing the Labor, War Invalids and Social Affairs Services and the Managing Boards of Industrial Zones at provincial level to issue work permits for foreigners to work at foreign-invested enterprises through simple and convenient procedures, effective from July 1st, 1999. The time limit of the work permit shall have to conform with that of the work contract signed between the enterprise and the foreigner laborer.

Article 6.- Recruitment and training of laborers

Foreign-invested enterprises shall recruit Vietnamese labor through Vietnam labor supply organizations. Following a maximum period of 30 days after receiving the request for labor supply of the enterprise if the Vietnam labor supply organization cannot meet the request, the enterprise can directly recruit Vietnamese labor. The Ministry of Labor, War Invalids and Social Affairs shall propose to the Government to amend Decree No. 72/CP of October 31, 1995 and Decree No. 85/1998/ND-CP of October 20,1998 of the Government with a view to the implementation of the above stipulation as from July 1st, 1999.

The Ministry of Labor, War Invalids and Social Affairs shall arrange and strengthen labor supply organizations in order to raise the quality of labor supply for foreign-invested enterprises.

The Ministry of Labor, War Invalids and Social Affairs shall coordinate with the People’s Committees of the provinces and centrally-run cities in organizing job training in order to supply labor for foreign-invested enterprises.

Article 7.- A number of cases where value added tax is applied

1. Foreign-invested enterprises and foreign parties to business cooperation contracts shall temporarily not have to pay value added tax for the raw materials and materials imported to produce export goods during the period when they temporarily do not have to pay import tax as prescribed by the law on export and import taxes.

2. The Ministry of Finance shall propose to the Government to amend and supplement Decree No. 28/1998/ND-CP of May 11, 1998 and Decree No. 102/1998/ND-CP of December 21, 1998 of the Government whereby the following subjects which are imported by foreign-invested enterprises and foreign parties to business cooperation contracts to create fixed assets (exempt from import tax as stipulated in Article 63 of Decree No. 12/CP of February 18, 1997 and Article 10 of Decree No. 10/1998/ND-CP of January 23, 1998 of the Government) are subjects not liable to value added tax:

- Equipment, machinery, specialized means of transport in the technological line to create the fixed assets of the enterprise;

- Construction materials that cannot yet be produced in the country to create fixed assets for the enterprise.

Article 8.- Buying goods from and selling goods to export processing enterprises

1. Except goods banned from export, enterprises and individuals in the country allowed to sell goods to export processing enterprises are exempt from export tax and need only to make a written declaration with the Customs Service of the Export Processing Zone.

2. Export processing enterprises can sell into the domestic market products produced by them:

- Raw materials, semi-finished products for enterprises directly producing export goods.

- Goods on the list of substitutes to essential imports that the country needs to import;

- Discarded materials and discarded products which still have commercial value.

The procedures and payment of import tax for the above-mentioned goods shall comply with current regulations.

Article 9.- Land use right of enterprises at industrial parks and export processing enterprises

Enterprises at industrial parks and export processing enterprises shall be issued with certificates of land use right within the period of the contracts signed with the enterprises building and trading in the infrastructures of industrial parks and export processing zones.

The General Land Administration shall issue necessary documents to carry out the above stipulation.

Article 10.- Encouragement to the building of dwelling houses for workers and infrastructure works out of the fences

Enterprises of all economic sectors and foreign-invested enterprises can lease land at the lowest rent rate and are exempt from or enjoy maximum reduction of taxes so as to invest in the construction of dwelling houses for workers and infrastructure works out of the fences of industrial parks and foreign-invested enterprises (educational, training, medical establishments...)

Article 11.- A number of supplementary measures on investment promotion

1. The foreign-invested enterprises which meet one of the following conditions shall enjoy the same preferences as the projects on the List of projects to receive special encouragement for investment:

a/ Exporting 80% and more of their products;

b/ Exporting 50% and more of their products and using a big work force and a large quantity of raw materials and materials in the country (making up from 30% upward of the production cost);

c/ Investment made in a locality with difficult socio-economic conditions and meeting one of the following conditions:

- Exporting 50% and more of their products in the field of raising, planting and processing agricultural, forestry and aquatic products;

- Exporting 50% and more of their products and using more than 500 laborers;

- Exporting 30% and more of their products and using a large quantity of raw materials and materials in the country (making up from 30% upward of production cost).

d/ Producing components and accessories of engineering, electric, electronic goods with high added value, and using a large quantity of raw materials and materials in the country;

e/ Processing minerals exploited in Vietnam.

2. Projects on the production of components and accessories of engineering, electric and electronic goods are exempt from import tax on production raw materials for 3 years after starting production.

3. Foreign investors investing in mountain areas or deep-lying and remote areas shall enjoy a 5% tax rate on transferring profits abroad.

4. Foreign-invested enterprises that meet difficulties in implementing the projects and have to temporarily suspend construction or operation shall enjoy reduction or exemption from land rental corresponding to the time of stoppage.

5. Foreign-invested enterprises that have been issued with quotas of exporting rice are allowed to directly buy raw material paddy and rice of producers according to the guidance from the Ministry of Trade.

Article 12.- Implementation provisions

1. This Decision takes effect 15 days after its signing.

2. The Ministers, the heads of ministerial-level agencies, the heads of the agencies attached to the Government and the presidents of the People’s Committees of the provinces and centrally-run cities shall have to implement this Decision.

Prime Minister