Decree No. 27/2003/ND-CP dated March 19, 2003 of the Government on amendment of and addition to a number of articles of Decree 24-2000-ND-CP dated 31 July 2000 providing detailed regulations on the implementation of the Law on foreign investment in Vietnam

DECREE

ON AMENDMENT OF AND ADDITION TO A NUMBER OF ARTICLES OF DECREE 24-2000-ND-CP DATED 31 JULY 2000 PROVIDING DETAILED REGULATIONS ON THE IMPLEMENTATION OF THE LAW ON FOREIGN INVESTMENT IN VIETNAM

THE GOVERNMENT

Pursuant to the Law on the Organization of the Government dated 25 December 2001;

Pursuant to the Law on Foreign Investment in Vietnam dated 12 November 1996 and the Law on Amendment of and Addition to a Number of Articles of the Law on Foreign Investment in Vietnam dated 9 June 2000;

Following the proposal of the Minister of Planning and Investment;

DECREES:

Article 1. To make the following amendments and additions to a number of articles of and Appendix 1 to Decree 24/2000/ND-CP dated 31 July 2000 Providing Detailed Regulations on the Implementation of the Law on Foreign Investment in Vietnam (hereinafter referred to as Decree 24/2000/ND-CP):

1. Article 1 shall be amended and added to as follows:

"Article 1. Scope of application

This Decree makes detailed regulations on the implementation of the Law on Foreign Investment in Vietnam dated 12 November 1996 and the Law on Amendment of and Addition to a Number of Articles of the Law on Foreign Investment in Vietnam dated 9 June 2000 (hereinafter collectively referred to as the Law on Foreign Investment).

This Decree governs foreign direct investment activities in Vietnam comprising activities of transferring capital in cash or any other assets of foreign investors into Vietnam in order to carry out directly production or business activities aimed at earning profit in the forms provided for in the Law on Foreign Investment.

All foreign direct investment activities in Vietnam must comply with the provisions of the Law on Foreign Investment, this Decree and other legal instruments."

2. Clause 2 of article 2 shall be amended and added to as follows:

"2. Domestic medical examination and treatment establishments, education and training establishments and scientific research establishments which satisfy the conditions stipulated by the Government."

3. Article 6 shall be amended and added to as follows:

"Article 6. Business co-operation contract

1. A business co-operation contract is a document which is signed by two or more parties and which stipulates the responsibilities of, and the sharing of business results between, the parties for the purposes of conducting investment and business in Vietnam without creating a legal entity.

An enterprise with foreign owned capital may co-operate with foreign organization(s) or individual(s) to perform a business co-operation contract.

2. Business co-operation contracts for prospecting, exploration and exploitation of oil and gas and a number of other natural resources in the form of production sharing contracts shall be implemented in accordance with the provisions of the relevant law and the Law on Foreign Investment."

4. Article 11 shall be amended and added to as follows:

- The following second paragraph shall be added to clause 1:

"Joint venture enterprise shall include an enterprise with one hundred (100) per cent foreign owned capital which has been established in Vietnam entering into a joint venture with an entity referred to in paragraphs (b), (c) and (dd) of clause 2 of this article."

- Clause 2 shall be amended by way of amending and adding paragraph (dd) and adding paragraph (e) as follows:

"(dd) A joint venture enterprise;

(e) An enterprise with one hundred (100) per cent foreign owned capital."

5. Article 21 shall be amended and added to as follows:

"Article 21. Enterprise with one hundred (100) per cent foreign owned capital

1. An enterprise with one hundred (100) per cent foreign owned capital is an enterprise owned and established in Vietnam by foreign investor(s) which shall by themselves manage the enterprise and take full responsibility for its business results.

An enterprise with one hundred (100) per cent foreign owned capital already established in Vietnam may co-operate with another such enterprise and/or with foreign investor(s) to establish a new enterprise with one hundred (100) per cent foreign owned capital in Vietnam.

2. An enterprise with one hundred (100) per cent foreign owned capital shall be established in the form of a limited liability company, shall be a legal entity in accordance with the law of Vietnam and shall be established and operate from the date of issuance of the investment licence."

6. Article 31 shall be amended and added to as follows:

"Article 31. Re-organization of enterprises

1. The division, demerger, merger or consolidation of an enterprise or the conversion of the form of investment (hereinafter collectively referred to as re-organization of an enterprise) must be approved by the investment licence-issuing body in accordance with the following contents and procedures:

(a) "Division of an enterprise" means the division of the whole of the capital in cash and assets of an enterprise with foreign owned capital (hereinafter referred to as the divided enterprise) in order to establish two or more new enterprises (hereinafter referred to as the new enterprises).

(b) "Demerger of an enterprise" means the transfer of part of the capital in cash and assets of an enterprise with foreign owned capital (hereinafter referred to as the enterprise to be demerged) in order to establish one or more new enterprises (hereinafter referred to as the demerged enterprise(s)).

(c) "Merger of enterprises" means one or more enterprises with foreign owned capital (hereinafter referred to as the merging enterprise(s)) transfer the whole of their capital in cash and assets in order to merge into another enterprise with foreign owned capital (hereinafter referred to as the merged enterprise).

(d) "Consolidation of enterprises" means where two or more enterprises with foreign owned capital (hereinafter referred to as the consolidating enterprises) contribute the whole of their capital in cash and assets in order to consolidate with each other to become one new enterprise with foreign owned capital (hereinafter referred to as the consolidated enterprise).

(dd) "Conversion of the form of investment" means where a project which has been issued with an investment licence in a form of investment provided for in the Law on Foreign Investment converts into another form of investment provided for in the Law on Foreign Investment.

The re-organization of an enterprise must be consented to by the board of management (in the case of a joint venture enterprise) or the foreign investor (in the case of an enterprise with one hundred (100) per cent foreign owned capital), or the business co-operation parties (in the case of a business co-operation contract).

Enterprises to be re-organized shall prepare a file in accordance with the provisions of clauses 2 and 3 of this article and submit it to the investment licence-issuing body for adjustment of their investment licences and/or establishment of a new enterprise with foreign owned capital in accordance with the provisions of the Law on Foreign Investment. Where the conversion results in a Vietnamese enterprise, it must be registered in the form of one of the enterprises referred to in clause 1 of article 2 of this Decree.

2. The application file for re-organization of an enterprise shall comprise the following:

(a) An application for re-organization of an enterprise;

(b) The capital assignment file (in the case of assignment of capital);

(c) The resolution of the board of management of the joint venture enterprise or the decision of the investor (in the case of an enterprise with one hundred (100) per cent foreign owned capital);

(d) The charter of the new enterprise (except in the case of conversion into a Vietnamese enterprise) or the amended charter of the enterprise;

(dd) The joint venture contract in respect of the new enterprise or the amended joint venture contract;

(e) The contract for merger or consolidation of enterprises;

(g) The financial or operational statements of an enterprise prior to re-organization;

(h) An explanatory statement on re-organization of an enterprise;

(i) Documents relating to the right to use land;

(k) Other documents at the request of the investment licence-issuing body.

3. The explanatory statement on re-organization of an enterprise shall contain the following main items:

(a) The name and address of the legal representative; the name and address of an enterprise prior to and after the re-organization of an enterprise;

(b) The objectives of production and business;

(c) A plan for employment;

(d) A plan for dealing with the rights and obligations of an enterprise prior to and after the re-organization of an enterprise;

(dd) The duration of implementation of the re-organization of an enterprise.

4. The decision on re-organization of an enterprise shall be forwarded to creditors and employees within fifteen (15) days from the date when it is passed.

5. Within thirty (30) working days from the date of receipt of a complete and proper file, the investment licence-issuing body shall make a decision to approve the re-organization of an enterprise in the form of an investment licence. Where approval is refused, the investment licence-issuing body must provide reasons in writing. Where a re-organized enterprise satisfies the conditions referred to in article 105 of this Decree, it shall perform the procedures for registration for issuance of an investment licence."

7. Article 32 shall be amended and added to as follows:

"Article 32. Taking over rights and obligations after re-organization of an enterprise

1. After re-organization of an enterprise and issuance of an investment licence, the new enterprise shall assume the rights and obligations of the former enterprise, unless otherwise agreed by the parties and approved by the investment licence-issuing body. Such rights and obligations shall be performed in accordance with the plan for dealing with the rights and obligations of an enterprise as specified in the explanatory statement on re-organization of an enterprise referred to in clause 3 of article 31 of this Decree.

2. After reorganization, and depending on the sector, region, scale and conditions for investment of a re-organized enterprise, incentives which are applicable to the new enterprise shall automatically apply in accordance with the relevant provisions of the applicable laws.

3. A re-organized enterprise shall publish an announcement of the establishment and the termination of operations in accordance with the provisions of articles 27 and 38 of this Decree."

8. Article 46 shall be amended and added to as follows:

- Paragraph (b) of clause 1 shall be amended and added to as follows:

"(b) Production projects other than projects prescribed in clauses 2 and 3 of this article."

- Paragraph (d) of clause 2 shall be amended and added to as follows:

"(d) Production enterprises in industrial zones;"

- Paragraph (d) of clause 3 shall be amended and added to as follows:

"(d) Enterprises engaged in infrastructure development of industrial zones, export processing zones or high-tech zones; export processing enterprises in the field of production;"

- The following new paragraph shall be added to the end of clause 3:

"The preferential conditions stipulated in paragraph (a) of clause 3 of this article shall not be applicable to production projects in industrial zones exporting less than fifty (50) per cent of products, unless such projects satisfy two of the conditions stipulated in paragraphs (a), (b) and (dd) of clause 2 of this article."

- The following new clause 7 shall be added:

"7. Where an enterprise with foreign owned capital or a business co-operation contract invests in several sectors and/or invests in different localities which are entitled to different preferential rates of corporate income tax, if it is able to make separate calculations, the preferential rates applicable to the respective sectors and localities shall apply; if it is unable to make separate calculations, the preferential rates shall apply according to the [relevant] portions of invested capital."

9. Clause 2 of article 48 shall be amended and added to as follows:

"2. The projects referred to in clause 2 of article 46 of this Decree shall be exempt from corporate income tax as follows:

(a) Production enterprises in industrial zones exporting less than fifty (50) per cent of products and failing to satisfy the conditions stipulated in paragraphs (a), (b) and (dd) of clause 2 of article 46 shall be exempt from corporate income tax for two (2) years commencing from the time when their operations start to earn profits.

(b) Other projects which are not referred to in paragraph (a) of clause 2 of this article shall be exempt from corporate income tax for two (2) years commencing from the time when their operations start to earn profits and shall be granted a fifty (50) per cent reduction for the three (3) subsequent years."

10. Article 57 shall be amended and added to as follows:

- Clauses 5 and 6 shall be amended as follows:

"5. Enterprises with foreign owned capital and business co-operation parties investing in projects included in the list of specially encouraged investment sectors or investing in regions with especially difficult socio-economic conditions as provided in the Appendix to this Decree shall be entitled to exemption from import duties in respect of raw materials, supplies and components for production for five (5) years from the time when production commences.

6. Enterprises with foreign owned capital and business co-operation parties investing in the manufacture of mechanical, electrical and electronic components and parts shall be entitled to exemption from import duties in respect of raw materials, supplies and components for production for five (5) years from the time when production commences."

- The following new clause 10 shall be added to the end of article 57:

"10. The Ministry of Trade shall co-operate with relevant ministries and branches to provide written guidelines for detailed classification of raw materials, supplies and components for production which shall be exempt from import duties for five (5) years from the time when production commences as referred to in clauses 5 and 6 of this article."

11. Article 59 shall be amended and added to as follows:

"Article 59 Price for calculation of import duties The price for calculation of import duties in respect of imported goods shall be subject to the provisions of article 1 of Decree 60-2002-ND-CP of the Government dated 6 June 2002 on determining prices for calculation of duties in respect of imported goods on the principles of the Treaty implementing article 7 of the General Agreement on Tariffs and Trade."

12. Clauses 1 and 3 of article 67 shall be amended and added to as follows:

"1. Enterprises with foreign owned capital or foreign business co-operation parties may purchase foreign currency from banks permitted to trade in foreign currency in order to meet the demands of their current transactions and other permitted transactions in accordance with the provisions of the law on foreign exchange control."

"3. The Government of Vietnam shall assure its assistance in the foreign currency balance for enterprises with foreign owned capital and business co-operation parties investing in the construction of infrastructure facilities and some other important projects where banks permitted to trade in foreign currency fail to provide sufficient foreign currency required as referred to in clause 1 of this article."

13. Paragraph 1 of clause 2 of article 81 shall be amended as follows:

"2. The value of technology transferred in the form of capital contribution shall be agreed by the parties."

14. Clause 1 of article 83 shall be amended as follows:

"1. Enterprises with foreign owned capital and business co-operation parties may recruit directly Vietnamese and foreign employees in accordance with the laws on labour."

15. Article 84 shall be amended and added to as follows:

"Article 84. Salaries payable to Vietnamese employees

Minimum wages and salaries of Vietnamese employees working for enterprises with foreign owned capital and business co-operation parties shall be subject to the regulations of the Ministry of Labour, War Invalids and Social Affairs and shall be paid in Vietnamese Dong."

16. Article 85 shall be amended and added to as follows:

"Article 85 Land lease and payment of land rent and payment of land use tax

1. Enterprises with foreign owned capital and business co-operation parties may lease land from the State of Vietnam for the purpose of implementing investment projects and shall pay land rent in accordance with the provisions of the Ministry of Finance.

2. Where the Vietnamese party makes capital contribution in the form of the value of land use rights which originated from a transfer or allocation by the State with land use fee collection but the money paid for the transfer or the land use fee has not originated from the Budget, it shall not be required to convert into the form of land lease, but the Vietnamese party shall continue to be obliged to pay land use tax in accordance with the applicable laws."

17. Article 88 shall be amended and added to as follows:

"Article 88 Authority to decide on lease of land Provincial people's committees shall decide on the lease of land to foreign investment projects in accordance with the laws on land."

18. Article 89 shall be amended as follows:

"Article 89 Compensation, site clearance and land lease files

1. In respect of enterprises to which the State of Vietnam leases land, the provincial people's committee of the locality in which the investment project is located shall have the responsibility to organize compensation and site clearance and to complete all formalities relating to land leasing. Expenses for compensation and site clearance shall be included in the invested capital of the project. Provincial people's committees shall agree with enterprises leasing land on financing sources for conducting compensation and site clearance.

2. Where a Vietnamese party makes capital contribution in the form of the value of land use rights, the Vietnamese party shall be responsible for carrying out compensation and site clearance and completing all formalities in relation to obtaining the land use rights. Expenses for compensation and site clearance shall be included in the capital contribution of the Vietnamese party or otherwise accounted as agreed by the parties.

3. Rates of compensation shall be in compliance with the general provisions of the State.

4. In respect of projects for which provincial people's committees issue investment licences, consideration of land lease shall be carried out at the same time as consideration of the issuance of investment licences.

5. In respect of projects for which the Ministry of Planning and Investment issues investment licences, documents relating to land shall be submitted together with the application file for an investment licence and shall contain the following items:

a. The location and area of land used;

b. The land rent as proposed by the provincial people's committee on the basis of the land rent tariff stipulated by the Ministry of Finance;

c. The plan for compensation and site clearance.

6. The formalities and the file for leasing land or sub-leasing land shall be completed in accordance with guidelines provided by the Ministry of Natural Resources and Environment."

19. Article 92 shall be amended and added to as follows:

"Article 92 Mortgage of value of land use rights and of assets attached to land

1. Enterprises with foreign owned capital may mortgage the value of land use rights and assets attached to land within the term of the lease of land or sub-lease of land with Vietnamese credit institutions which are permitted to operate in Vietnam in accordance with law in the following cases:

(a) Enterprises with foreign owned capital have already paid land rent for several years provided that the remaining period for which land rent has been paid is at least five (5) years;

(b) Joint venture enterprises where the Vietnamese party has made capital contribution in the form of the value of land use rights provided that the remaining period for which capital contribution in the form of land use rights has been made is at least five (5) years.

2. The mortgaged value of the land use rights shall include expenses for compensation and site clearance and land rent already paid minus (-) the land rent for the used period.

3. Files and procedures for mortgage of value of land use rights shall be completed in accordance with the guidelines provided by the Ministry of Natural Resources and Environment and the State Bank of Vietnam."

20. Article 95 shall be amended and added to as follows:

"Article 95. Evaluation of zone planning and architectural plans

With respect to investment projects in the construction sector: bridges, roads, airports, ports; industrial works in Group A, infrastructure facilities of industrial zones, export processing zones and high-tech zones, urban areas, tourism zones, entertainment areas, works for artistic performance; advertising works; residential houses, hotels, offices and apartments; schools; hospitals and sports facilities, the application file for an investment licence must include a drawing of the master plan of the whole site of the project.

The master plan of the whole site of the project shall be evaluated during the process of evaluation of the investment project."

21. Clause 1 of article 98 shall be amended as follows:

"1. Investors shall be responsible before the law of Vietnam for the quality of construction works; for the safety of construction works; for fire and explosion prevention and fighting; for environmental protection; and for occupational safety and hygiene during the period of construction as well as during the whole period of operation of the construction works."

22. Article 105 shall be amended and added to as follows:

- Paragraph (b) of clause 1 shall be amended and added to as follows:

"(b) Conform with the approved planning for development of the industry or planning for products. Where the above planning has not yet been approved, the consent of the ministry in charge of the industry shall be required;"

- Clause 2 shall be amended and added to as follows:

"2. In addition to the conditions stipulated in clause 1 of this article, the projects subject to registration for issuance of investment licences must satisfy one of the following conditions:

(a) Have an export ratio of eighty (80) per cent or more of their products;

(b) Be an investment project in an industrial zone which does not belong to Group A projects, but which is included in the list of sectors in which investment is encouraged or specially encouraged;

(c) Belong to the production sector with an invested capital of up to five (5) million USD."

23. Article 106 shall be amended and added to as follows:

"Article 106. Registration for issuance of investment licences

1. A registration file for an investment licence shall consist of:

(a) An application for registration of an investment licence;

(b) The joint venture contract and the charter of the joint venture enterprise, or the charter of the enterprise with one hundred (100) per cent foreign owned capital, or the business co-operation contract;

(c) Documents verifying the legal status and financial position of the parties.

2. A registration file for an investment licence shall be made in three (3) sets, at least one of which shall be an original and all of which shall be submitted to the investment licence-issuing body.

3. The investment licence-issuing body shall consider the registration file for an investment licence and, if it satisfies all of the conditions and procedures stipulated in articles 105 and 106 of this Decree, shall issue an investment licence without obtaining recommendations from any other body.

4. Within fifteen (15) working days from the date of receipt of proper documentation, the investment licence-issuing body shall notify its decision of approval in the form of an investment licence.

5. The Ministry of Planning and Investment shall provide written guidelines on preparation of project files for registration for issuance of investment licences."

24. Clause 2 of article 112 shall be amended and added to as follows:

"2. Ministries, branches and provincial peoples committees shall obtain opinions of the Ministry of Planning and Investment prior to the issuance of legal documents which fall within their respective competence and which relate to foreign direct investment activities; differences of opinions must be reported to the Prime Minister of the Government for his consideration and decision. Provincial people's committees shall not be permitted to issue any preferential provisions relating to taxation, finance and other preferential treatment beyond their authority."

25. Article 113 shall be amended as follows:

"Article 113. Co-ordination of State administration

1. Ministries, branches and provincial peoples committees and investment licence-issuing bodies in the sectors of banking, insurance, securities and legal consultancy shall exercise State administration and co-ordinate in administering foreign investment activities .

2. Provincial peoples committees shall be responsible for dealing promptly with issues falling within their authority and shall guide enterprises to operate strictly in accordance with their investment licences and the law. During the process of so dealing, any difference of opinion in respect of the same issue between ministries, branches and provincial people's committees must be submitted to the Prime Minister of the Government for his consideration and decision.

3. The Ministry of Planning and Investment shall collect information on the status of foreign investment and provide it to ministries, branches and provincial peoples committees and shall work periodically in the manner of holding work review sessions with the Ministry of Finance, the Ministry of Trade, the Ministry of Natural Resources and Environment, the State Bank and relevant provincial peoples committees in order to resolve promptly any problems arising, to deal with recommendations of enterprises with foreign owned capital or of business co-operation parties, and to propose policies and measures for improving the investment environment."

26. Paragraph (a) of clause 1 of article 114 shall be amended as follows:

"1. The Prime Minister of the Government shall make decisions in relation to Group A projects, comprising:

(a) Projects in the following sectors, irrespective of invested capital:

- Infrastructure construction of industrial zones, export processing zones, high-tech zones, urban areas, BOT, BTO and BT projects;

- Construction and operation of sea ports and airports; operation of sea and air transportation;

- Oil and gas;

- Post and telecommunication services;

- Publishing, printing services (except projects for printing of technical materials, printing of packaging, printing of labels of goods, and printing of normal patterns on textiles and garments, leather and footwear), press; radio and television broadcasting; advertising services together with publication of advertisements; cinematographic activities; artistic performance; conducting games with prizes; medical examination and treatment establishments; pre-tertiary education, college, undergraduate and postgraduate training or equivalent levels; scientific research and production of medicine for humans;

- Insurance, finance, auditing and valuation;

- Exploration and exploitation of rare and precious natural resources;

- Construction of residential houses for sale;

- National defence and security projects."

27. The following paragraphs (d) and (dd) shall be added to clause 2 of article 115:

"(d) Projects in the sectors of culture, education and training;

(dd) Construction and operation of supermarkets."

28. Clause 1 of article 116 shall be amended as follows:

"1. Preparing and promulgating master planning and lists of projects calling for foreign investment within their localities after reaching an agreement with the Ministry of Planning and Investment on the basis of the approved planning for socio-economic development and co-ordination with the relevant ministries and branches; calling for and promoting investment;"

29. Article 117 shall be amended as follows:

- Paragraph (a) of clause 1 shall be amended and added to as follows:

"1. The Ministry of Planning and Investment shall be the co-ordinating body in dealing with matters arising from the promotion, formation and implementation of investment projects, including:

(a) Guiding and co-ordinating ministries, branches and provincial peoples committees in the preparation of master planning, plans and lists of national projects calling for foreign investment; building programs and plans for promotion and calling for investment; making proposals for appointment of officials and establishing representatives of investment promotion organizations in those regions and countries with potential investment in Vietnam for submission to the Prime Minister of the Government; and conducting investment promotion activities;"

- The following clause 3 shall be added:

"3. The Ministry of Planning and Investment shall participate and co-ordinate with the Ministry of Justice in reviewing on a regular basis all legal instruments relating to foreign investment activities, and shall make recommendations to authorized bodies in relation to amendment of, addition to, or repeal of any legal instruments that contravene the laws on foreign investment and other legal instruments of higher validity."

30. Clause 3 of article 121 shall be amended and added to as follows:

"3. Any current provisions which are more favourable than the relevant previous provisions shall apply automatically. The investment licence-issuing body shall, upon request by investors, make amendments to investment licences in order to permit the investors to enjoy such favourable treatment as from the date of effectiveness of the current legal instrument providing for such favourable treatment."

31. Clause 3 of article 123 shall be amended and added to as follows:

"3. Criterion, conditions and procedures for reward shall be in accordance with the regulations of the Government on emulation and reward."

32. Paragraphs (a) and (b) of clause 1 of article 3, paragraph (a) of clause 2, paragraph (b) of clause 3 and paragraph (a) of clause 4 of article 46, clause 4 of article 48, clause 8 of article 57, clause 4 of article 79, clause 3 of article 81, clauses 2 and 4 of article 82, clause 2 of article 87, article 90, clause 3 of article 113 and paragraph (c) of clause 1 of article 117 shall be amended and added to as follows:

- In paragraphs (a) and (b) of clause 1 of article 3, paragraph (a) of clause 2, paragraph (b) of clause 3 and paragraph (a) of clause 4 of article 46, clause 4 of article 48, clause 8 of article 57, the phrase "list of specially encouraged investment projects" shall be replaced with "list of specially encouraged investment sectors" and the phrase "list of encouraged investment projects" shall be replaced with "list of encouraged investment sectors".

- In the last sentence of clause 4 of article 79, the phrase "the General Department of Customs" shall be replaced with the phrase "the Ministry of Finance".

- In the last sentence of clause 3 of article 81, clauses 2 and 4 of article 82 and paragraph (c) of clause 1 of article 117, the phrase "the Ministry of Science, Technology and Environment" shall be replaced with the phrase "the Ministry of Science and Technology".

- In clause 2 of article 87 and clause 3 of article 113, the phrase "the General Department of Land Administration" shall be replaced with the phrase "the Ministry of Natural Resources and Environment".

- In article 90, the word "duration" shall be changed into the phrase "point of time".

33. Appendix I to Decree 24-2000-ND-CP shall be amended and added to as in the appendix issued with this Decree.

Article 2. Implementing provisions

1. This Decree shall be of full force and effect after fifteen (15) days from the date of publication in the Official Gazette. All previous provisions which are inconsistent with this Decree are hereby repealed.

2. Ministers, heads of ministerial equivalent bodies, heads of Government bodies, and chairmen of people's committees of provinces and cities under central authority shall be responsible to provide guidance for implementation of this Decree.

APPENDIX I

I. LIST OF SPECIALLY ENCOURAGED INVESTMENT SECTORS

- Producing, processing for export at least eighty (80) per cent of products;

- Processing agricultural, forestry (except for wood) and aquaculture products from domestic material sources for export of at least fifty (50) per cent of products;

- Producing various kinds of new strains with high quality and high economic efficiency;

- Cultivation of agricultural, forestry and aquaculture products;

- Production of high-quality steel, alloy, non-ferrous metal, special metal, steel billet, sponge iron; iron metallurgy;

- Manufacturing of machinery, equipment and component packs for oil and gas exploitation, mining, and energy fields; manufacturing of large-scale lifting equipment; manufacturing machine tools for metal processing, metallurgy equipment;

- Producing medical equipment for analytical and extractive technologies in medical sector;

- Manufacturing equipment for testing toxicity in foodstuffs;

- Manufacturing new materials and precious and rare materials; applying new bio-technology and new technology for manufacturing communications and telecommunications equipment;

- Manufacturing information technology products;

- High-tech industry;

- Investment in research and development (R&D) of 25% of turnover;

- Producing equipment for waste treatment;

- Treatment of pollution and protection of environment, treatment of waste;

- Producing materials for antibiotic drugs;

- Investment under BOT, BTO and BT contracts.

II. LIST OF ENCOURAGED INVESTMENT SECTORS

- Exploration, mining and down-stream processing of minerals;

- Producing, processing for export at least fifty (50) per cent of products;

- Producing, processing for export at least thirty (30) per cent of products and using many domestic raw materials and materials (with a value of at least thirty (30) per cent of total production costs);

- Regular employment of five hundred (500) or more employees;

- Processing agricultural, forestry (except for wood from domestic natural forest) and aquaculture products from domestic raw materials;

- Preserving foodstuffs; post-harvest preservation of agricultural products;

- Development of petro-chemical industry; construction and operation of oil and gas pipelines, oil storage and ports;

- Manufacturing precision mechanical equipment, equipment for safety examination and control; manufacturing jig and dies for metal and non-metal products;

- Manufacturing high and medium voltage electric devices;

- Manufacturing diesel engines with advanced techniques and technology; manufacturing dynamic and hydraulic machinery, parts and compressing machines;

- Manufacturing automobile and motorcycle parts; manufacturing and assembly of equipment, vehicles and machinery for construction; manufacturing technical equipment for transportation industry;

- Building ships; manufacturing marine engines, equipment and parts for transportation ships and fishing ships;

- Manufacturing communications and telecommunications equipment;

- Manufacturing electronic equipment and components;

- Manufacturing agricultural and forestry equipment, parts and machines, irrigation equipment;

- Manufacturing equipment for the textiles and garment industry;

- Producing various types of materials for pesticides;

- Manufacturing various types of insecticide, plant protection agents and veterinary drugs with a localized value added portion of forty (40) per cent or more;

- Producing basic chemicals of various kinds, purified chemicals and dyes; specialized chemicals;

- Producing materials for cleansing chemicals and additives for chemical industry;

- Producing special cement, composite materials, and sound, electricity and heat insulating materials, and wood-substitute synthetic materials, fire-proof materials, construction plastic and fibreglass;

- Manufacturing light construction materials of various kinds;

- Producing paper pulp;

- Producing special silk, fibres and fabric for industry;

- Producing high-quality raw materials and auxiliary materials for manufacturing footwear and garments for export;

- Producing high-quality packages for exports;

- Producing medicine materials; medicine products for treating humans with international GMP standard;

- Upgrading and developing energy sources;

- Public passenger transportation;

- Construction and upgrading of bridges, roads, railways, airports, ports, railway stations;

- Construction of water plants and water supply and drainage systems;

- Construction and operation of infrastructure facilities of industrial zones, export processing zones and high-tech zones;

- Technical services for agriculture, forestry and fisheries.

III. LIST OF REGIONS IN WHICH INVESTMENT IS ENCOURAGED

IV. LIST OF SECTORS IN WHICH LICENSING OF INVESTMENT IS CONDITIONAL

1. Conditions regarding the investment form:

1.1 Investment only in the form of a business co-operation contract and the Vietnamese Party shall be a specialized entity which is licensed to conduct business in the sector:

- Establishment of public telecommunications networks, provision of telecommunications services; business of domestic or international courier services;

- Press, radio and television activities.

1.2. Investment only in the form of a business co-operation contract or joint venture enterprise:

- Exploitation and processing of oil and gas and precious and rare minerals;

- Air, railway and sea transportation; public passenger transportation; airport and port construction (except for BOT, BTO and BT projects);

- Maritime and aviation business services;

- Culture (except for projects for printing of technical material, printing on packaging, printing of labels of goods, and printing on textiles and garments, leather and footwear; printing of computer graphics onto animated films; entertainment and sports areas);

- Afforestation (except for indirect afforestation via Vietnamese organizations, family households and individuals to which or whom the State assigns or leases land which is located in productive or protective forests and to which investors grant assistance with funding, seedlings, technical assistance, fertilizer or in procurement of products pursuant to contract);

- Travel tours;

- Production of industrial explosives;

- Consultancy services (except for technical consultancy).

2. Conditions for projects to include investment in development of raw material sources:

- Dairy production and processing;

- Production of vegetable oil and cane sugar;

- Processing of wood (except for projects using imported wood).

3. Investment projects in import services and domestic distribution services and offshore fishing and exploitation of sea-products shall be implemented in accordance with separate provisions of the Prime Minister of the Government.

V. LIST OF SECTORS IN WHICH INVESTMENT WILL NOT BE LICENSED

1. Projects which are prejudicial to national security, defence and public interests;

2. Projects which are detrimental to historical and cultural relics, fine customs and traditions of Vietnam;

3. Projects which may adversely affect the ecological environment; projects for treatment of toxic wastes brought into Vietnam from abroad;

4. Projects for production of toxic chemicals or utilizing toxic agents prohibited under an international treaty.