Vietnam’s health system has continued to develop in recent years as a result of steady liberalization. In particular, access to medicines has been significantly improved for the masses. On the other hand, extreme environmental pollution continues to be a problem, especially with motorcycles in large cities. The government has recently tried to solve this and other health issues by various laws. To what extent they are capable and whether they are in line with TPP 11 and EUVNFTA trade agreements is questionable.
- Healthcare
- a) Conferences and seminars
With the help of Decree No. 54/2017 / ND-CP, the regulations of the Pharmaceutical Law could be implemented as far as possible. However, the pharmaceutical industry is unclear as to whether representative offices are allowed to organize seminars and conferences, or invite physicians to such events for informational purposes.
Such industry gatherings play a major role in selling the latest medicines and to get the information out about their mode of action which is of great interest to companies.
According to Decree 54 No. 22 (of 08.05.2017), the current legal situation stipulates that this right only applies to pharmaceutical business establishments. By contrast, Circular No. 13/2009 / TT-BYT (dated 1st September 2009) also guarantees this right to the representative offices.
- b) Development of pharmacy in Vietnam
Vietnam has one of the most cost-effective health care systems in the world, reaching 81% of the population: the highest in Southeast Asia.
In addition, Vietnam is one of the most advanced countries in the field of generics. The generic drugs reach 97% of the population and provide low costs compared to other ASEAN countries. However, due to the long treatment and waiting times, more and more people are discovering medical tourism for themselves. Another problem is the low accessibility of new molecular structures in Vietnam’s healthcare system. Only 6% reach Vietnam within the first three to seven years after market entry.
Problems persist in global trade. Although the regulations have already been set by the WTO and EUVNFTA, they have not yet been fully implemented. In particular, foreign invested enterprises (FEE) have problems with importing. The pharmaceutical decree (effective since 1st July 2017) now allows importing, but at the same time creates a number of restrictions. In addition, through a broad interpretation of “distribution”, which is reserved for domestic companies, more than 20 years existing companies may be forced out of business. The EUVNFTA also requires the lifting of all restrictions on drugs that go beyond the ICH guidelines. In contrast, despite the introduction of the Pharmaceutical Law, the government has not yet abrogated the obligation to submit clinical trials for vaccines.
- Social Security
Since 1st January 2018 the salary is divided into salary and other supplemental payments, such as bonuses or expenses. According to Article 103 of the Labor Law fuel costs, telephone, travel costs and child care are exempted from these supplemental. This type of payroll division is unusual and difficult to define by international standards.
- Consumer protection
- a) Motor bikes
The National Assembly is currently negotiating a bill to increase VAT from 10% to 12% for vehicles and their spare parts and accessories. Should this proposal come into force at the beginning of 2019, this would hit the poorest of the population in particular and weaken the automobile industry. Therefore, such a tax increase should be brought in the long term, in line with the economic development of the country.
A proposal submitted on 4th of July 2017 provides for the phasing out of motorcycles in Hanoi until the year 2030. Similar suggestions are available for big cities such as Da Nang and Ho Chi Minh City. The aim is to reduce traffic jams and air pollution. Since the motorbike is and will remain the means of transportation that is affordable for a broad mass of people at present (and presumably also in ten years’ time), the enforcement of this proposal, even for lack of alternatives, would be detrimental to Vietnam. A good example is Jakarta, the capital of Indonesia, where the ban had to be lifted again, because public transport was not met the demand among the population, and as a result heavy transport was heavily affected. Instead of a ban, Taiwan’s politics can be taken as a model here. There the traffic could be drastically improved. Public transport and motorcycles exist side by side. A ban is only useful for outdated models.
Another problem is the lack of enforcement of copyright in Vietnam. Motorcycles of well-known international brands are counterfeited. This makes international investors uncertain and is now also a violation of the EUVNFTA. Here, improved cooperation between law enforcement and administration is necessary.
- b) Wines and spirits
In addition, the introduction of a tax on wines and spirits has been required. Experience from other countries, however, show the frequent abuse of such earmarked funds. Exemplary for Vietnam is the tobacco tax, which is controversial and part of the public discussion for the reasons mentioned.
- tax and other legal and administrative reforms
- a) review of the investment law
No. 59 of the Investment Act should be removed. Debt trading services is a common business that does not harm the public interest.
In addition, Article 4 of Decree No 109/2010 / ND-CP, which concerns rice export, needs to be revised. It is not clear why an exporter specializing in rice has to comply with minimum requirements for a 5,000 ton storage room or a rice mill with a capacity of ten tons per hour.
- b) draft decree on business conditions
With the decree 118/2015 / ND-CP, the government set the goal to simplify the requirements that companies have to fulfill for business creation under the Investment. The term “business conditions” is very broad, so at least one reference to laws or decrees would be necessary to capture the scope.
Also causing confusion is the phrase “business lines in which investment is conditional”. This formulation could allow the authorities to make sublicenses or business requirements that are not provided for under the Investment Law. Therefore, it requires a reference to the investment law.
Further inaccuracies arise from articles 8.2 paragraph 1, article 10, article 17 and article 29. Here, urgently change are needed before the adoption of the law.
- c) information from tax authorities
According to company feedback, tax authorities provide only very general tax information. This leads to uncertainties regarding VAT reimbursement, tax refunds, etc. This circumstance should be improved in order to increase confidence in the Vietnamese tax system.
- Charges
Regarding transportation fees, the MOJ, MOT and MOF need to work together to point out what kind of services are included and how to do this in terms of withholding tax.
In addition, the possibility of electronic filing of documents should be strengthened.
Another problem is corruption in Vietnam. A survey of entrepreneurs at the 12th Anti-Corruption Dialogue of the VCCI showed that 70% offered bribes voluntarily. The other 30% had experiences with officials who pointed out the possibility of bribery. Otherwise, delays in procedures may occur.
- Outlook on major trade agreements TPP 11 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 healthcare and foodl 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%. With the National and Most-Favored Nation Treatment principle, the TPP is ensuring a fair competition which will attract new foreign investment, also in the sector of healthcare and foods. Furthermore, the investors gain some securities due to prohibition of expropriation, so that, Vietnam cannot expropriate intellectual property rights from motorbike producers.
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 most economic sectors in Vietnam. In particular, the agreement will impose new foreign direct investment in Vietnam but there still remain problems regarding lack of infrastructure and low technology. On the other hand, it will also give the chance for better transfer of technology from Europe to Vietnam. Furthermore, the low labor costs in Vietnam are a big advantage for European investors to do business.
Lastly, the EUVNFTA is removing all additional requirements for all pharmaceuticals, biologics and drugs.
Additionally, with both, the TPP 11 and the EUVNFTA, two further instruments will be enrolled.
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! 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.
The second instrument is the Government Procurement Agreement (GPA)
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.
If you have any question on the above, please do not hesitate to contact Dr. Oliver Massmann under [email protected] . Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
Thank you very much!
