Circular No. 02/2001/TT-BKHCN dated February 15, 2001 of the Ministry of Science, Technology and Environment guiding criteria of high-tech industrial projects, projects on production of new materials, rare and precious materials; application of new bio-technologies, new technologies for production of communication and telecommunications equipment; treatment of environmental pollution or waste treatment and processing, which are classified as projects of special investment encouragement; matters related to environmental impact assessment reports; import of used machinery; applicable to foreign-invested enterprises in Vietnam

CIRCULAR

PROVIDING GUIDELINES ON CRITERIA FOR HI-TECH INDUSTRIAL PROJECTS; PROJECTS TO PRODUCE NEW ANDRARE, PRECIOUS MATERIALS; PROJECTS TO APPLY NEW BIOLOGICAL TECHNOLOGY(IES); PROJECTS TOAPPLY NEW TECHNOLOGY(IES) TO MANUFACTURE COMMUNICATIONS AND TELECOMMUNICATIONS EQUIPMENT;AND PROJECTS FOR TREATMENT OF ENVIRONMENTAL POLLUTION OR WASTE, ALL AS PROJECTS TO RECEIVESPECIAL INVESTMENT PREFERENCE(S); ASSOCIATED ISSUES IN REPORTING ENVIRONMENTAL IMPACTS;IMPORT OF USED MACHINERY, FOR FOREIGN INVESTED ENTERPRISES IN VIETNAM.

-Pursuant to Government Decree No.22/CP, dated May 22, 1993, on theduties, powers and organisation of the Ministry of Science, Technology and Environment;

- Pursuant to Government Decree No.24/2000/ND-CP, dated July 31, 2000,including detailed regulations on the implementation of the Law on Foreign Investment inVietnam;

- Pursuant to Government Decree No.175/CP, dated October 18, 1994,providing guidelines for implementing the Environmental Protection Law;

- Pursuant to Government Official Letter No.782/CP-QHQT, dated August23, 2000, providing guidelines for observance of Decree 24/2000/ND-CP, The Ministry of Science, Technology and Environment provides guidelineson:

- Criteria for hi-tech industrial projects; projects to produce new andrare, precious materials; projects to apply new biological technology(ies); projects toapply new technology(ies) to manufacture communications and telecommunications equipment;and projects for treatment of environmental pollution or waste as part of high priorityinvestments;

- Associated issues in reporting environmental impacts;

- Import of used machinery,  For foreign invested enterprises in Vietnam.

Chapter I

GENERAL PROVISIONS

A. SCOPE OF APPLICATION

This Circular is applicable to foreign invested projects following theLaw on Foreign Investment in Vietnam found in Article 1, Government DecreeNo.24/2000/ND-CP, dated July 31, 2000, including detailed regulations on theimplementation of the Law on Foreign Investment in Vietnam.

B. DEFINITIONS

1. Advanced equipment line is a specialsed, mechanised productionline with at least one third of its equipment automated. This assembly line must notrequire heavy manual labour and must follow standards on industrial hygiene, occupationalsafety and environmental protection. Enterprise management must follow an advanced systemwith several stages of operations computerised, such as technological, materials andmarketing administration.

2. "Hi-tech industrial projects" include projects on thelist of hi-tech industrial projects defined by the Ministry of Science, Technology andEnvironment in Appendix 1 attached to this Circular.

3. "New materials" include materials on the list of newmaterials defined by the Ministry of Science, Technology and Environment in Appendix 4attached to this Circular.

4. "Rare, precious materials" include materials on thelist of rare, precious materials defined by the Ministry of Science, Technology andEnvironment in Appendix 5 attached to this Circular.

5. "New technologies" include technologies on the list ofnew technologies defined by the Ministry of Science, Technology and Environment inappendixes 6 and 7 attached to this Circular.

The lists in appendixes 1, 4, 5, 6 and 7 can be amended in compliancewith the requirements of specific periods.

6. "Environmental pollution" refers to the destruction ofthe environment and violations at Vietnam’s environmental regulations.

7. "Treatment of environmental pollution" refers to humanactivities to reduce environmental pollution in observance with Vietnam s environmentalregulations.

8. "Waste" includes discharge as a result of livingactivities, production and other activities in Vietnam. Waste can be solid, gas, liquid orother forms.

9. "Waste treatment" refers to the application oftechnology(ies) and technical approach(es) to turn waste into useful products and/or toreduce environmental pollution.

10. "Environmental protection" refers to activities tokeep the environment clean, to improve the environment, to maintain ecologicalequilibrium, to prevent and treat negative impacts on the environment caused by humans ornature, and to properly utilise and exploit natural resources.

11. "Employee number" as stated in this Circular is thenumber of employees, both Vietnamese and non-Vietnamese in a year, excluding those workingin the country for less than three months.

12. "Revenues" refer to total revenue, calculated based on sales invoicesof complete products and/or hi-tech components and parts manufactured by the enterprise,and/or revenues from hi-tech services, excluding revenues from sales of products and/orcomponents and parts purchased from any sources, revenues from ordinary services and otherrevenues.

Chapter II

CRITERIA OF HI-TECH INDUSTRIAL PROJECTS; PROJECTS TO PRODUCE NEW AND RARE, PRECIOUS MATERIALS; PROJECTS TO NEWBIOLOGICAL TECHNOLOGY(IES); PROJECTS TO APPLY NEW TECHNOLOGY(IES) TO MANUFACTURECOMMUNICATIONS AND TELECOMMUNICATIONS EQUIPMENT; AND PROJECTS FOR TREATMENT OFENVIRONMENTAL POLLUTION OR WASTE

I. SCOPE OF APPLICATION

- Hi-tech industrial projects;

- Projects to produce new and rare, precious materials;

- Projects to apply new biological technology(ies);

- Projects to apply new technology(ies) to manufacture communicationsand telecommunications equipment;

- Projects for treatment of environmental pollution or treatment ofwaste.

II. CRITERIA

1.Criteria of a hi-tech industrial project

a. The enterprise must be a hi-tech product(s) manufacture projectwhose products include electronic, micro-electronic, information technology (IT),telecommunications, automated and precise mechanical products with production and salesrevenues (for those types of products described in Appendix 1 attached to this Circular)accounting for 70 per cent or more of the project s total revenues.

b, The production line must be an advanced system providing products toexport standards or at quality similar to that of imported goods of the same kind. Theenterprise must follow the ISO 9000 quality management system.

c. The value of equipment/employee is US$40,000 or more.

Projects for manufacture of computer software parts shall meet theterms of this clause.

d. The value of hi-tech parts and components manufactured by theproject (local contents) must account for at least two per cent of the project s annualrevenues, or the total value of hi-tech parts and components produced by the project andother industrial enterprises in Vietnam must represent at least 15 per cent of theproject s annual revenues.

e. Project staffing:

+ A hi-tech industrial project must have at least 40 per cent of itsemployees as college and university degree holders provided with professional training inresearch - application and/or production establishments abroad.

+ A hi-tech industrial project must provide technical training for 100per cent of its employees as high school graduates and workers, at least five per cent ofwhom are trained abroad on advanced technology.

g. Funding for research-application and training activities mustaccount for at least two per cent of the project s annual revenues.

Grant research-application and training shall also be counted in thetotal.

For projects with annual revenues of $10,000,000 or more, the annualexpenses for research-application and training activities must be at least $200,000.

Those projects with technology transfer contracts approved by theMinistry of Science, Technology and Environment shall be considered to satisfy terms ofthis clause.

h. Revenues/employee must amount to $70,000 or more.

Projects with a prescribed capital of $30,000,000 or more and more than1,000 employees each shall not be subject to this clause.

i. A hi-tech industrial project must satisfy the Vietnam senvironmental regulations.

2. Criteria of a project to manufacture new or rare, precious materials

a. The products of a project to manufacture new or rare, preciousmaterials must be new materials as described in Appendix 4 attached to this Circular orrare, precious materials as described in Appendix 5 attached to this Circular. The projectmust not include exploitation and processing of rare, precious materials.

b. A project to manufacture new or rare, precious materials must useadvanced equipment line(s).

c. A project to manufacture new or rare, precious materials mustsatisfy Vietnam s environmental regulations.

3. Criteria of a project to apply new biological technology(ies)

a. The project s technology must be new as described in Appendix 6attached to this Circular.

b. The project must use advanced equipment line(s).

c. The project s application of new technology(ies) must createproductive and quality products.

d. A project to apply new biological technology(ies) must satisfyVietnamese, global, regional and Asian biological security standards.

e. A project to apply new biological technology(ies) must satisfyVietnam s environmental regulations.

4. Criteria of a project to apply new technology(ies) tomanufacture communications and telecommunications equipment

a. The project s technology must be new as described in Appendix 7attached to this Circular.

b. A project to apply new technology(ies) to manufacture communicationsand telecommunications equipment must use advanced equipment line(s).

c. The project s application of new technology(ies) must createproductive and high quality products.

d. A project to apply new technology(ies) to manufacture communicationsand telecommunications equipment must satisfy economic and technical terms required in theIT and telecommunications field in the region and the world.

e. A project to apply new technology(ies) to manufacture communicationsand telecommunications equipment must satisfy Vietnam s environmental regulations.

5. Criteria of a project for treatment of environmental pollutionor treatment of waste

a. The project s business lines must be in accordance with thosedescribed in Appendix 8 attached to this Circular. For waste treatment, processingprojects, 50 per cent of the materials or more must be waste.

b. A project for treatment of environmental pollution or treatment ofwaste must be financially independent with 70 per cent of its total revenues or morereaped from production and/or business activities associated with treatment ofenvironmental pollution or treatment and processing of waste.

c. A project for treatment of environmental pollution or treatment ofwaste must satisfy Vietnam s laws on environmental protection.

III. DOCUMENTS FOR REQUESTING INVESTMENT PREFERENCE(S) AND AUTHORITY TOCERTIFY PROJECTS FOR SPECIAL INVESTMENT PREFERENCE(S)

1. Documents for requesting investment preference(s)

a. For new projects:

Apart from terms regulated by articles 106 and 107, Government DecreeNo.24/2000/ND-CP, dated July 31, 2000, with detailed regulations on the implementation ofthe Law on Foreign Investment in Vietnam, documents for requesting investmentpreference(s) include:

- A petition requesting certification as a project to receive specialinvestment preference(s) (using the form provided in Appendix 2 attached to thisCircular).

- The project s technical-economic presentation (this presentation mustfollow criteria described in II of this Chapter; the presentation of projects described in5, II must include descriptions of industrial process(es) to be used for treatment ofenvironmental pollution and/or waste, the rate of waste used as materials for treatmentand processing activities, the rate of revenues from production and business activitiesassociated with environmental pollution and waste treatment, and the similarity of theproject s business lines to those prioritised operations described in this Circular).

b. For ongoing projects

- A petition requesting certification as a project to receive specialinvestment preference(s) (using the form provided in Appendix 2 attached to thisCircular).

- The project s technical-economic presentation (this presentation mustfollow criteria described in II of this Chapter; the presentation of projects described in5, II must include descriptions of industrial process(es) to be used for treatment ofenvironmental pollution and/or waste, the rate of waste used as materials for treatmentand processing activities, the rate of revenues from production and business activitiesassociated with environmental pollution and waste treatment, and the similarity of theproject s business lines to those prioritised operations described in this Circular).

- A legal copy of the project s investment licence.

2. Documents for requesting certification as a project to receivespecial investment preference(s) shall be sent to the investment licence grating body.

3. Authority to certify projects to receive special investmentpreference(s)

a. For projects whose investment licences are granted by the Ministryof Planning and Investment: The Ministry of Planning and Investment, based on the Ministryof Science, Technology and Environment s document certifying that the project stechnology(ies) is(are) consistent with this Circular s regulations, shall outline specialinvestment preference(s) for the project in its investment licence, a copy of which shallbe sent to the Ministry of Science, Technology and Environment.

b. For projects whose investment licences are granted by bodiesauthorised to grant investment licences: Based on the Ministry of Science. Technology andEnvironment s document certifying that the project s technology(ies) is(are) consistentwith this Circular s regulations, local investment licence granting bodies, industrialzone (IZ), export processing zone (EPZ) and hi-tech zone authorities, which have beenauthorised to grant investment licences, shall outline special investment preference(s) inthe project s investment licence, a copy of which shall be sent to the Ministry ofScience, Technology and Environment.

c. For projects which satisfy or do not satisfy terms required forreceipt of investment preference(s), the relevant State science, technology andenvironment authority with its appointed powers (as described in a or b, this section)shall be responsible for outlining or refusing to outline investment preference(s), case;of refusal must provide a statement of reason(s), and sending written notification of itsagreement or refusal to the relevant investment licence granting body within 15 days,commencing from the date of receipt of legal documents for requesting certification as aproject to receive special investment preference(s).

d. In enjoying investment preference(s), commencing from the dateproduction begins, the project developer must send reports (using the form provided inAppendix 3b attached to this Circular) to the relevant investment licence granting bodyand the relevant State science, technology and environment authority on an annual basis.

e. The relevant State science, technology and environment authorityshall conduct inspections and examinations using its authorised powers to assure that theproject fulfill its commitments. In cases where the project has not satisfied terms inthis Circular, the investment licence granting body is authorised to withdraw investmentpreference(s) described in the investment licence and require the project developer torefund the preference(s) it should not have received.

g. A project developer has the right to send claims associated withinvestment preference(s) to the relevant authorities in accordance with regulations in theLaw on Claims and Denouncement;.

Chapter III

REGULATIONS ON REPORTING ENVIRONMENTAL IMPACTS

The establishment and assessment of reports on environmental impactsshall be implemented in observance with regulations in Government Decree No.75/CP, datedOctober 18, 1994, providing guidelines for implementing the Environmental Protection Lawand the Ministry of Science, Technology and Environment s Circular No.490/1998/TT-BKHCNMT,dated April 29, 1998, providing guidelines for establishment and assessment ofenvironmental impacts reports (hereinafter called Circular No.490/1998/TT-BKHCNMT) withthe following amendments:

1. The time for assessing reports on environmental impacts shallnot exceed 45 days, commencing from the relevant State environmental protectionauthority s receipt of legal documents. In cases of illegal documents, the assessment bodyshall be responsible for notifying the project developer of this illegality within fivedays of receiving the documents, and asking him

(her) to complete the documents. No more than ten days after theenvironmental impacts report is approved, the assessment body shall be responsible forissuing a decision approving the project s environmental impacts report.

2. The time for considering registration in observance ofenvironmental standards and granting a relevant certificate shall not exceed 20 dayscommencing from the relevant State environmental protection authority s receipt of legaldocuments. In cases of illegal documents, the assessment body shall notify the projectdeveloper of this illegality while asking him

(her) to complete the documents no later than five days after receivingthe documents.

3. The following projects are added to the list of projectsrequired to submit environmental impacts reports as stated in CircularNo.490/1998/TT-BKHCNMT:

- Waste processing projects.

- Waste and environmental pollution treatment projects.

Chapter IV

REGULATIONS ON THE IMPORT OF USED EQUIPMENT

1. These regulations are applicable to used machinery (individualor complete) used for manufacturing capital goods and other commodities; used means oftransport, loading and unloading vehicles and machinery; used machinery and vehiclesserving project construction; and other used specialised equipment of foreign investedprojects.

Used equipment to be temporarily imported, re-exported, or leased forimplementing goods manufacture contracts or for construction projects by contractors, andused equipment imported in the form of gifts and aid are not subject to this Circular.

2. Imported used equipment must satisfy standards on production,environmental protection and occupational safety and be stated in the project stechnical-economic presentation attached to the documents in request of an investmentlicence.

Excluding used equipment and machinery prohibited from import (on thelist of used equipment and machinery prohibited from import in section 3, as follows), theproject developer shall decide and be held responsible for the technical-economicefficiency and any consequences associated with the import of used equipment andmachinery.

Imported used equipment must satisfy the following terms:

a. Retaining 80 per cent or more of its original quality.

b. Meeting Vietnam s standards on occupational safety and hygiene andenvironmental protection.

Used equipment quality shall be approved through a quality certificategranted by a legal Vietnamese or foreign assessment organisation. This assessmentorganisation shall be responsible before Vietnam s law for its assessment conclusions.

The Ministry of Science, Technology and Environment and/or theinvestment licence granting body, when necessary, can require re-assessment of the usedequipment to be imported.

Resolution of disputes between competing assessments shall be theresponsibility of the Ministry of Science, Technology and Environment.

3. Used equipment prohibited from import

a. Equipment used in the oil and gas processing and power industries;cement production lines, ore treating lines, metal production lines; and equipment usedfor producing basic chemicals, fertilisers and pesticides.

b. Measuring and testing equipment used in the high precisionmanufacturing; and equipment used in the post and telecommunications network.

c. Equipment such as boilers, elevators, nuclear reactor controldevices, testing and control systems.

d. Waste treatment equipment, dam gates and production line equipmentthat may harm the environment.

4. Special cases: Based on the written suggestion of centrallygoverned relevant ministries, branches or municipal or provincial People s Committees, theMinistry of Science, Technology and Environment will consider amending the list of usedequipment allowed or prohibited for import.

Chapter V

IMPLEMENTATION PROVISIONS

This Circular shall take effect 15 days after the date of signing.

For projects observing the Law on Foreign Investment in Vietnam, thisCircular replaces Circular No.2345/1998/TT-BKHCNMT, dated December 4, 1998; CircularNo.1817/1999/TT-BKHCNMT, dated October 21, 1999; Circular No.1818/TT-BKHCNMT, datedOctober 21, 1999; Circular No.2019/1997/QD-BKHCNMT, dated December 1, 1997; and CircularNo.491/1998/QD-BKHCNMT, dated April 29, 1998; all promulgated by the Ministry of Science,Technology and Environment.

Any problems faced in observing this Circular should be brought to theattention of the Ministry of Science, Technology and Environment for resolution.