Investment news brief/Cambodia/15.12.14

Malaysian firm looks to invest in Cambodia : Malaysia's Felda Global Ventures (FGV) is planning a US$ 297 millions investment in Cambodia's plantation sector (read more).

Kuwaitis encouraged to invest in Cambodia : Cambodia's Minister of Commerce Sun Chanthol has, while visiting the Kuwaiti Chamber of Commerce and Industry, urged Kuwaiti investors to take advantage of the new economic laws aimed at targeting and encouraging foreign investors notably in the sectors of industry and agriculture (read more).

Cambodia considers sea shore incentives : Cambodia’s Ministry of Tourism may relax regulations for foreign visitors to boost tourist arrivals and encourage investment particularly along Cambodia’s coastline.

The Phnom Penh Post quoted Tourism Minister Thong Khon as saying that visa requirements and rules governing property ownership at Cambodia’s beach areas are under review (read more).

PhillipBank sees the beginning of a new era in Cambodia with hopes of a fruitful season : Arelatively recent entrant to the commercial banking scene in Cambodia, PhillipBank has made it a point to target the Kingdom’s small- and medium-sized business owners . The Phnom Penh Post Special Reports editor Moeun Nhean sat down with bank CEO Han Peng Kwang recently to talk about the different services PhillipBank provides, the reasons behind its rapid growth in the market and its plans for what seems an increasingly bright future(read more).

Free business tools to manage your Intellectual Property Right in South East Asia

Asean IPR SME Helpdesk is an initiative co-funded by European Union. It is a free service

which provides practical, objective and factual information aimed to help European SMEs to

understand business tools for developing IPR value and managing risk. The services are not

of a legal or advisory nature and no responsibility is accepted for the results of any actions 

made on the basis of its services.

For more information, http://www.asean-iprhelpdesk.eu/?q=en

Back to "MediAsian"

By George Lim SC, Wee Tay & Lim, 

JULY 2014, http://whoswholegal.com/news/features/article/31678/back-mediasian/

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Introduction

A long time ago, in a small village in the Malay Peninsula, two neighbours, Mohamad and Abdullah, had a long-standing dispute over the boundary of their respective lands. The dispute caused a huge rift between them and their families. Finally, both parties were persuaded by the community to see the village head to resolve the problem.

A thousand miles away, in a remote Chinese village in what is now known as Hong Kong, Chan and Leung were vegetable farmers who had gone into business together. When they passed away, the business was inherited by their eldest sons, who could not see eye to eye on how to run things. Rather than shut down the business, Chan and Leung’s heirs decided to see the Cantonese clan leader in their village for a solution.

This was how disputes were traditionally resolved in many parts of Asia hundreds of years ago.

 Western Influence

Then arrived Western colonisation and influence. For Singapore, Malaysia, Hong Kong, India and a number of other countries, the British came and conquered. They brought with them the “three Cs”: cricket, the common law and the courts. We adopted the English legal system. Our judges wore wigs and our lawyers donned robes, not unlike their counterparts in England.

Litigation became the primary method of dispute resolution.

The Roscoe Pound Conference 1976

However, litigation had (and still has) its downside. Delays, choked courts and soaring legal costs forced many jurisdictions to look at more effective forms of dispute resolution.

At the landmark Pound Conference held in 1976, Harvard law professor Frank E Sander, considered one of the great pioneers of mediation in the United States, reminded us of “the central quality of mediation”, namely “its capacity to reorient the parties towards each other, not by imposing rules on them, but by helping them to achieve a new and shared perception of their relationship, a perception that will redirect their attitudes and dispositions towards one another.”

After the Pound Conference, mediation gradually grew in popularity and use in the US, UK, Europe, Australia and many other countries in the world.

Mediation in Asia

In the 1990s, mediation, in the more structured form that many of us know today, was “introduced “ in many parts of Asia.

In Singapore, mediation became the primary method of dispute resolution in the subordinate courts (now known as the state courts) in the mid-1990s. In 1997, the Singapore Mediation Centre (SMC) was set up to provide mediation services and training. The SMC has since conducted mediation workshops in Malaysia, Philippines, Thailand, China, Hong Kong, Dubai, Fiji, Vietnam, Bahrain and many other Asian countries.

In Hong Kong, the implementation of the recommendations made by the Working Group on Mediation in 2010 caused a sea change in the mediation movement. Lawyers now have the duty to explain the option of mediation to their clients and costs sanctions can be imposed if parties unreasonably fail or refuse to attempt mediation.

In developing countries, mediation can also be a form of access to justice.  A good example is a programme called “Justice on Wheels” in the Philippines, where buses are sent to remote, outlying areas which have little or no access to the courts.  The mediator sits in the bus, and disputants line up to have their cases mediated in the bus.  What a novel way of bringing justice to those who need it!

AMA

Mediation in Asia received a timely boost on 17 August 2007 when five leading mediation centres in Asia signed a Memorandum of Understanding to set up the Asian Mediation Association (AMA).

The five founding members of the AMA were the Hong Kong Mediation Centre, the Indonesian Mediation Centre, the Malaysian Mediation Centre, the Philippine Mediation Center and the SMC.

Since then, five other mediation organisations have joined the AMA: the Indian Institute of Arbitration and Mediation, the Delhi Mediation Centre, the Fiji Mediation Services, the Bahrain Chamber for Dispute Resolution and the Japan Commercial Arbitration Association.

Together, AMA members aim to: provide access to the best expertise for the management and resolution of commercial disputes in Asia; facilitate cross-border mediations; facilitate co-operation in mediation training; and increase awareness of mediation.

Singapore Working Group on International Mediation

In 2013, a working group was established in Singapore to make recommendations on promoting international commercial mediation in Singapore.

The working group was co-chaired by Edwin Glasgow, QC and myself, and comprised an international (and interesting) mix of members: Michael Leathes; Professor Nadja Alexander; Valerie Thean; Professor Lawrence Boo; Lok Vi Ming, SC; and Josephine Hadikusomo.

Personally, this was one of the most interesting (and fun) working groups that I have been involved in.

The working group made a number of recommendations, chief of which were the following:

•    the setting up of an independent, non-profit entity called the Singapore International Mediation Institute (SIMI) to act as the professional body for mediation in Singapore. The SIMI would not provide mediation services, but would certify the competency of mediators, apply and enforce high standards of professional ethics, require continuing professional development for SIMI-accredited mediators and promote mediation in general;

•    the enactment of a Mediation Act to strengthen the framework for mediation in Singapore by providing for certainty in situations involving the stay of proceedings, enforcement, confidentiality, privilege and the admissibility of evidence;

•    the setting up of the Singapore International Mediation Centre (SIMC) to spearhead the provision of world-class international commercial mediation services. The SIMC would aim to provide differentiated mediation products and services including case management; deal making; post-merger facilitation; dispute process design; online dispute mediation; an e-dossier of profiles of experienced mediators, (including an independently prepared digest of feedback from prior users); and designating authority services.

 The SIMC will be based at Maxwell Chambers with its state-of-the-art facilities, and will work closely with the SMC and the Singapore International Arbitration Centre (SIAC) to provide mediation services to the international business community.  Maxwell Chambers is the world’s first integrated dispute resolution complex housing quality meeting and hearing facilities as well as some of the top international dispute resolution institutions.

An Asian Perspective on Mediation

In their book, An Asian Perspective on Mediation, associate professor Joel Lee and Teh Hwee Hwee have put forward the thesis that in mediating disputes between Asian parties, cultural concepts like “mian zi“ (face) and “guan xi” (connection/relationship) play a more significant role.  

While the story of mediation has evolved, the philosophy of Confucius, the importance of social harmony and the prevalence of “face” concerns continue to lie at the heart of Asian culture.

In the Asian context, face-saving also involves preserving respect, avoiding shame and maintaining overall harmony. Therefore, while modern mediation practice has been institutionalised, mediators in Asia have to develop their own style of mediation which is sensitive to the cultural values and beliefs in play.

In An Asian Perspective on Mediation, Lee and Teh consider the impact of such values and characteristics, and suggest strategies for mediating in an Asian context.  Harking back to the “village head” mediator of the past, the learned authors observed that today, parties continue to look to a mediator for guidance, and respect the mediator’s personal sensibilities and wisdom.  Therefore, the modern mediator in the Asian context may need to be more proactive in generating options for the mutual gain of the parties, as opposed to mere facilitation, which is all too often the model taught and practised in Europe and elsewhere.

Growth in Trade and Investment Opportunities in Asia

Asia is presently experiencing strong economic growth. Foreign direct investment (FDI) hit US$400 billion in 2012, accounting for 30 per cent of global FDI flow. Asia could account for half of global GDP, trade and investment by 2050, according to the Asian Development Bank.

In particular, ASEAN economies have demonstrated significant growth, supported by strong domestic consumption and investment. The combined ASEAN economies grew by 5 per cent in 2013. In the same year, FDI into Indonesia, Philippines, Malaysia, Thailand and Singapore increased by 7 per cent to US$128.4 billion.

Furthermore, ASEAN has plans to form the ASEAN Economic Community (AEC).  When this takes place, the AEC will transform ASEAN into a single regional market.  There will be a better flow of goods, services, investment, skilled labour and capital within the region.

If you have not heard of the Trans-Pacific Partnership (TPP), look out for it. The TPP is a multilateral trade agreement which aims to promote trade liberalisation in goods, services, investments and government procurement.  The 12 TPP countries include the US, Japan, Australia and Singapore.  Together, the TPP countries represent 40 per cent of global GDP and about one-third of all world trade.

The increase in investments and transactions in Asia will likely see a corresponding increase in cross-border disputes.  The business community will require access to cost-effective and timely methods of dispute resolution.

While arbitration currently appears an attractive way to resolve cross-border disputes, mediation is clearly a more timely and cost-efficient method of dispute resolution. In my view, it is only a matter of time before the international business community comes to the realisation that they should routinely attempt mediation before resorting to litigation or arbitration.

Back to “MediAsian”

The future of mediation in Asia is bright. Mediation not only resolves disputes, it can preserve relationships and promote social harmony. Culturally, it is very Asian; I would like to think that mediation has its roots in Asia. Ironically, it took the West to reintroduce mediation to Asia. 

I first used the term “MediAsian” when I was invited to speak at an event at the New York Law School on 28 May 2014, together with a panel comprising representatives from the International Mediation Institute (IMI), a global non-governmental organisation which aims to professionalise mediation worldwide.

I have since come across a blog by associate professor Ian MacDuff (director of the Dispute Resolution Initiative at the Singapore Management University) entitled MEDIASIAN, which explores the role of mediation and dispute resolution in Asia. Serendipity?

I have not discussed the concept of MediAsian with MacDuff. But, in a sense, I suspect that we share the same belief: that we in Asia have come full circle.

Like Marty McFly in Robert Zemeckis’ 1980’s classic film Back to the Future, we are “back to ‘MediAsian!’”.

ICSID claim filed against Indonesian Government

• Herbert Smith Freehills LLP
• Jay Leary
• Indonesia
• July 7 2014
• __________________________________

On 1 July, PT Newmont Nusa Tenggara and its majority Dutch shareholder Nusa Tenggara Partnership BV, announced that they have filed international investment arbitration proceedings against the Indonesian Government to seek relief from export restrictions that have halted production at the Batu Hijau mine and are said to have inflicted hardship and economic loss on PT Newmont Nusa Tenggara’s employees, contractors, and other stakeholders.   

The claimants allege that the government’s imposition of new export conditions, a new export duty and a ban on the export of copper concentrate breach PT Newmont Nusa Tenggara’s Contract of Work with the Indonesian Government, and the bilateral investment treaty between Indonesia and the Netherlands. The claimants have indicated that they will seek interim injunctive relief, so that work at the mine can resume. 

This claim follows an announcement earlier this year that Indonesia intended to cancel all of its 67 bilateral investment treaties, and draw up new treaties. The bilateral investment treaty between Indonesia and the Netherlands was among the first to be cancelled, with effect from July 2015 (though a sunset clause in the treaty means it will continue to apply for a period after that).

Industrial development policy consultation - a prelude to amending the Law on Investment

Published 31 may 2014, http://www.thecambodiaherald.com/opinion/detail/3?token= ZDI4ODdjYjAzNTMwNjRiOGUzNzVmM2FkOTVhZGE2

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PHNOM PENH (The Cambodia Herald) --- The Royal Government of Cambodia will revise the Law on Investment (LOI) only after consideration and adoption of an Industrial Development Policy (IDP). 

This sequencing of legislative enactments was announced by H.E. Sok Chenda, Secretary General of the Council for the Development of Cambodia (CDC) and Senior Minister attached to the Office of the Prime Minister, at a meeting of the Working Group on Law, Tax and Governance on February 19, 2014. 

(The Working Group is part of the system of consultation between the Royal Government and the business community under the aegis of the Government-Private Sector Forum, the preeminent public-private dialogue mechanism in Cambodia.)

In furtherance of the objective of enacting an Industrial Development Policy, a consultation was held with the business community at the CDC on March 17, 2014. 

H.E. Sok Chenda unveiled the draft Industrial Development Policy 2014-2024. Numerous parties had a role in creating the document, including the Supreme National Economic Council (SNEC), a governmental think tank, and the Ministry of Industry. 

The meeting was the first of a series of consultative sessions with members of the private sector.

The 23-page document outlined the current industrial issues of the Cambodian economy, challenges of industrial development, and objectives and targets for the IDP. 

According to the draft IDP:

The key thrust of IDP is to provide a version, policy framework and implementation arrangements to develop a competitive industry in Cambodia – contributing to sustained robust growth, full employment and high income. Its specific agenda is to address structural challenges in industrial development and facilitate investment in key industrial infrastructures. Its approach is to focus on diversification and competitiveness – attracting new industries, retaining more value added, and exploiting new potentials. 

In the draft IDP paper, a number specific issues are addressed, including foreign direct investment (FDI), industrial zoning, SME upgrading and modernization, export promotion and trade facilitation, financing, and technology transfer. 

In reviewing the draft IDP, it is clear that its adoption logically should precede the amendment of the Law on Investment as a considerable portion of the IDP’s objectives and recommendations concerns attracting FDI. 

The LOI and CDC are concerned to a large degree with bringing in FDI, so the adoption of an overarching governmental policy should inform the amendment of the law.

The advocacy of an IDP should come as no surprise to those following the economic policy development of the Royal Government of Cambodia. 

The draft IDP was foreshadowed in the Rectangular Strategy: Phase III, the basic policy document of the Royal Government for the fifth mandate. 

Released in September 2013, two chapters of the Rectangular Strategy discussed the need for a policy to support industrial development. 

Paragraph 93 specifically references the need for an IDP, and paragraph 103 lists a number of the elements that are later given more detail in the draft IDP document.

As mentioned previously, the Royal Government is currently promoting consultation with stakeholders, including the private sector. 

As announced by H.E. Sok Chenda at the March 17 consultation, the aim to is adopt the IDP by June, 2014. 

Therefore, anyone who has questions, comments or recommendations concerning this matter should submit them to the secretariat of the Working Group on Law, Tax and Governance at wgd-ltg@ibccambodia.com. Any submissions will be passed to the Royal Government.

Court to hear Xayaburi case

Phnom Penh Post, 25 june 2014, by Laignee Barron

http://www.phnompenhpost.com/national/court-hear-xayaburi-case

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A Thai court decision yesterday may throw a wrench into the works of a mainstream hydropower dam loudly opposed by neighbouring countries.

Agreeing to what NGOs have called an “unprecedented trial”, the Supreme Administrative Court of Thailand accepted a lawsuit that villagers filed in the hope of seeing the cancellation of utility company Electricity Authority of Thailand’s agreement to buy almost all the power generated by Laos’s 1,285-megawatt Xayaburi Dam.

The $3.8 billion project, which the Post reported in March as being already 30 per cent complete, is the first of Laos’s nine planned mainstream projects. Conservation groups say the Thai bank-funded Xayaburi will cause irrevocable damage to Mekong fish populations, and will drastically impact the 60 million people depending on the waterway, including those in downstream Cambodia.

Last month, the Cambodian Senate lent support to the villagers’ case by also demanding Thailand cancel the purchasing agreement. The letter calls Xayaburi “the greatest trans-boundary threat to date to food security, sustainable development and regional cooperation in the lower Mekong River”.

“By investing in the Xayaburi, state authorities are failing to comply with the Thai constitution including holding proper consultations with the affected people,” Pianporn Deetes, a coordinator at International Rivers, said.

Piaporn added that activists hope the “unprecedented” trial will set a new standard for development along the region’s shared waters.

“We hope dam developers in the future will be more mindful and conduct the necessary impact assessments before starting to build,” she said.

The court order comes just two days before the four Lower Mekong countries meet in Bangkok, where they will consider another controversial Lao dam project, the Don Sahong.

While much smaller than the Xayaburi, the 280-megawatt dam could have enormous repercussions for Cambodia, which lies just 2 kilometres south. Though NGOs have previously threatened to sue the Don Sahong’s developers, they would have to take the case to international courts.

“It would not be the same [as in Thailand]; Cambodia doesn’t have the same laws or type of investment in the Don Sahong,” said Meach Mean, coordinator of 3S Rivers Protection Network. “But it has got us thinking about what could happen with Cambodian dams, like the Lower Sesan II,” he said.

Legal aspect of foreign investments in Cambodia, by Pikol SIENG (in French)

L'aspect légal des investissements étrangers au Cambodge, par Pikol SIENG

Le Cambodge attire de plus en plus l’attention des investisseurs étrangers. Il offre un cadre juridique très attractif. Avec la mise en place d’un marché commun de l’ASEAN à l’horizon 2015, le Cambodge pourrait constituer une porte d’entrée pour les investisseurs français et européens. Une connaissance préalable sur le cadre juridique des investissements est donc nécessaire.

En savoir plus sur http://www.village-justice.com/articles/aspect-juridique-des,17110.html

Cambodia attracts Thai investors

Bangkok Post reported, on june 2nd, 2014 that Although infrastructure is still underdeveloped and the legal system is inefficient, Thai companies will find that Cambodia offers some unique advantages.

Cambodia is one of the most liberalised economies in Asia. The government policy and cambodia's legal framework offer many advantages to the investors whose projects are qualified by the Council for the Development of Cambodia (CDC) - the one stop authority. Foreign investors enjoy the same rights and treatment as the local investors, except land proprety. (read more)

Draft Amendment to Vietnam’s Investment Law Seeks to Improve Business Environment

Posted on May 16, 2014 by Vietnam Briefing

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HANOI – During a recent meeting organized by Vietnam’s Ministry of Planning and Investment, discussions focused on draft amendments to the country’s Investment Law in order to “improve the investment environment and increase benefits for investors and businesses.”

The revision process of the Investment Law is part of the National Assembly’s 2014 program to build more efficient laws and ordinances. 

According to Deputy Minister of Planning and Investment, Dang Huy Dong, while the Investment Law has had a positive effect on the business environment in Vietnam, there were certain parts of the law that needed revising.

These inadequacies include:

• The areas encouraged under the Law are inconsistent and not focused on attracting high quality investment projects;
• Investment procedures and project implementation regulations are still too complicated.

RELATED: State Bank of Vietnam Issues New Circular on Foreign Investment

One key area of confusion in the original Investment Law centered on what the definition of a foreign owned enterprise consisted of. During the drafting process, it was decided that the capital ratio of foreign investors in an enterprise would have to be made much more specific so that it can be clearly determined whether or not an enterprise is foreign owned.

Also present at the meeting was a representative from the Vietnam National Oil and Gas Group who stated that there are a variety of problems that crop up during the stages of business investment and during the granting of an investment certificate. He called for these problems to be fixed immediately.

According to a recent government survey, investors must currently go through an average of 18 procedures related to land, construction, and implementation conditions before they can execute an investment project. Land allocation and construction formalities also remain a problem.

The draft amendment also recommends the principle of equal treatment between domestic and foreign investors with regards to investment fields and incentives.

In dealing with these drawbacks of the original law, Mr. Dong stated that the main goals of the draft amendments were to:

• Perfect mechanisms and policies;
• Create a clear legal framework;
• Create strong transition procedures in the implementation of investment projects;
• Resolve the difficulties in investing activities for enterprises;
• Improve the effectiveness and efficiency of the state management of investment activities;
• Create a legal basis to consolidate and strengthen incentives;
• Protect foreign investment;
• Expand autonomy for investors;
• Improve the investment environment by making it more transparent; and
• Increase benefits for investors and businesses.

The next step in the amendment process will take place in the near future when the country’s lawmakers gather to approve the draft as part of the government’s plan to continue improving the business environment in Vietnam.

Vietnam to Provide Economic Assistance to Foreign Firms Affected by Recent Riots

Posted on May 23, 2014 by Vietnam Briefing

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HANOI – In response to the recent violence against foreign factories in Vietnam, the government has released a number of pieces of legislation aimed at restoring order and helping companies rebuild.  The two main legal documents are Circular 01/CD-BTC and Circular No. 207/TB-VP.

RELATED: Vietnam Government Cracks Down on Protesters, Pledges to Protect Foreign Investors

Relevant Legislation

On May 16^th, the country’s Ministry of Finance released a new Circular on the procedures for ensuring safety and resuming production after workers’ protests. Circular 01/CD-BTC requires the General Department of Taxation, the General Department of Customs, the Insurance Supervisory Authority, as well as local Departments of Finance to provide immediate assistance to foreign businesses which were damaged during the anti-China protests.

A further piece of legislation recently issued by the government came out on May 20^th. Circular No. 207/TB-VP, in which Prime Minister Nguyen Tan Dung orders local authorities to simplify bureaucratic procedures, is intended to encourage firms to resume operations as soon as possible.

The Circular also requires local administrations to act quickly in order to verify and recover necessary documents needed to calculate asset impairments. In the case of loss of a total loss of documents, firms can resort to their own pledges and post-test assessments to evaluate the extent of the damage.

To aid in the completion of these goals, the Prime Minister has required the Ministry of Finance to collaborate with related administrative organs and departments in order to instruct insurance carriers how to underwrite the costs of damages and quickly calculate the coverage.

In response, the Ministry of Finance has steered the General Department of Taxation towards providing a time extension for filing tax returns for transactions originating before May 2014. The maximum duration of this extension period is two years. Firms affected by the riots will not be fined for late payment. The amount eligible for deferral is equal to the extent of the damages suffered.Input VAT for damaged goods and services without compensation are deducted or refunded to the affected firms in case of a loss of documents and invoices. Additionally, the luxury tax will be reduced by up to 30 percent in 2014; however it cannot exceed the value of the damaged property after indemnification.

Additionally, corporate income tax deductions will be allowed for losses or damages not indemnified for (or not covered by insurance); and interest expenses on loans used to contribute charter capital, to the extent these loans are used to pay for losses or damages.

Furthermore, the Circular will provide sales tax reduction and/or exemption on exports and imports of damaged goods and goods to replace those damaged. The customs body will also allow the clearance of export – import shipments of affected firms which owe tax debts.

More assistance will also be provided by the People’ Committees of provinces and municipal cities affected by the riots, these Committees will assist enterprises by providing them with reductions and/or exemptions on their land rents.

In order to ensure a sufficient supply of labor to the affected regions, the Ministry of Labor, Invalids and Social Affairs is simplifying the visa application process in order to make hiring easier for foreign investors and workers.

The original version of Circular No. 207/TB-VP (in Vietnamese) can be found here.

Restoring Confidence

Vietnam and China have had a history of conflict over disputed territories in the region.  The current unrest has come about as a result of provocative actions by China in regards to their locating a US$1 billion deep-sea oil rig in waters near the disputed Paracel Islands.

RELATED: Vietnam Lodges Protest Against Chinese Oil Rig

Initial protests were peaceful in Vietnam, however, later protests turned into riots as bad elements in the crowds began breaking into foreign owned factories, many of which were burned and looted.  The largest of these protests have centered on the industrial parks in southern Vietnam (Binh Duong and Dong Nai provinces) and Ha Tinh province.

Beginning at the end of last week, the Vietnamese authorities became much more aggressive in clamping down on the protest around the country, particularly in Hanoi and Ho Chi Minh City.  The government’s communications department sent a direct message to all Vietnamese mobile phone users from Prime Minister Nguyen Tan Dung urging people to remain calm and refrain from conducting any illegal collective action.

There has been an understandable worry that the recent protests and riots would negatively affect Vietnam’s position in the world’s supply chain – the resumption of operations by companies such as China Steel Corporation and Formosa Chemicals & Fiber Corporation has helped alleviate this anxiety.

“Everything is back to normal. We’ve been given strong indications from the Vietnamese government that they will see that order is restored in due course”, said Jerry Shum, a spokesman for Yue Yuen Industrial Holdings Ltd , the world’s biggest sports-shoe maker which supplies Nike and Adidas.

According the operators of the two Vietnamese –Singapore Industrial Parks in the south of the country, 80 percent of their 326 factories have resumed normal operations. Companies from Hong Kong, Singapore and Taiwan have also announced that their investment strategies in Vietnam remain unchanged.

On a related subject, the Taiwanese chamber of commerce in Vietnam is assessing the extent of damage in order to provide estimates that firms will use for compensation claims. Formosa Plastics Group, the largest Taiwanese investor in Vietnam, has announced that it will seek US$3 million in compensation from the government. DDK Group Co., Ltd, which produces saddles for bicycles, has declared US$4 million in damages – the company’s insurance will cover about US$2 million and the remainder of the loss is expected to be covered through compensation provided by the Vietnamese government.

Despite the unfortunate events of last week, these current governmental actions have been positively viewed by many foreign investors and have helped them continue to maintain their faith in Vietnam’s investment potential.

Indonesia revises its negative investment list for new foreign direct investment

• (original text)
• 
  
• Herbert Smith Freehills LLP, 
• David Dawborn and Haydn  Dare

May 21, 2014

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The Indonesian Government recently issued a new negative investment list in Presidential Regulation No. 39 of 2014 on the List of Business Fields that are Closed to Investment and Business Fields that are Conditionally Open for Investment (“Regulation No. 39/2014”) . This changes the permitted levels of new foreign investment in certain sectors, as outlined below.

1. Background

Indonesia’s Law No. 25 of 2007 concerning Investment mandates that BKPM is responsible for implementation of Indonesia’s investment policies. In performing this role BKPM sets out procedures for foreign entities to obtain a license issued by BKPM (the Investment Coordinating Board) in order to invest in and acquire shares in companies in Indonesia. The Indonesian government has over time issued a series of Presidential Regulations setting out an evolving list of sectors that are either wholly closed to foreign direct investment or in which foreign direct investment is limited to a certain percentage investment in the entity licensed by BKPM (the “Negative List”).

2. Changes to the Negative List

A key change introduced by Regulation No. 39/2014 is the reduction to the level of new permitted foreign share ownership in the trading sector i.e. main distributor activities which previously were open for 100% foreign ownership, have now been restricted to a maximum 33% foreign ownership. Main distributor activities include importing goods for and on behalf of the distributor and distributing goods to local distributors/retailers. Importing services performed for and on behalf of other parties (ie. not for the importer’s own goods) are, however, still open for 100% foreign ownership. Another significant change is that onshore oil and gas drilling is now closed for new foreign investment, whereas previously these services were open for up to 95% foreign ownership. New Offshore oil and gas drilling is also reduced to 75%, previously 95%.

In the telecommunications sector, new foreign investments in data communication systems are now reduced from 95% to 49%. Content services and call centres and other value added telephony services now have their own specific maximum foreign capital ownership limit of 49%, rather than previously being categorized as requiring a “partnership” with a local party (without a specific maximum foreign capital ownership level, but deemed to be permitted to have up to 100% foreign ownership). Internet interconnection services (network access point) is now also restricted to 49% foreign ownership from 65% previously - unless integrated with wired/wireless/satellite telecommunication services in which case the maximum is still 65%.

Restrictions on foreign ownership in some sectors have been relaxed in cases where they are in the context of a government approved PPP (Private Public Partnership) and where the investor company is from an ASEAN member country. For example, Power plants > 10MW, power plant transmission and electricity distribution now are open for 100% under PPP, previously 95%. Seaport facilities services are now opened for 95% if conducted under PPP, previously 49%. Specialist hospital services are now open for 70% ASEAN ownership, previously 67%. The making of film promotion facilities, advertising, posters, still, photos, slides, banners, etc is now open for up 51% ASEAN ownership, previously these were closed.

Set out below are specifics of the changes the new Negative List.

1. Sectors that are now open for foreign investment, but previously closed

• Film promotion facilities and advertising (now 51% ASEAN ownership, previously closed);
• Public opinion polling and market research (now 51% ASEAN ownership, previously closed);
• Motor vehicle periodic testing (now 49%, previously closed);
• Land transportation terminal for passenger construction (now 49%, previously closed);
• Public cargo terminal construction (now 49%, previously closed);

2. Sectors now open to a higher level of foreign investment (including due to Private Public Partnerships – PPP or ASEAN Investor treatment)

• Pharmaceuticals Manufacturing (now 85%, previously 75%);
• Venture capital financing (now 85%, previously 80%, amended to be in line with the existing regulation issued by the Minister of Finance);
• Fish catching integrated with processing (now to open 100%, previously 80%);
• Wired telecommunication services (now 65%, previously 49%);
• Internet service providers, public internet telephony services or other multimedia services (remain 49%, where integrated with wired/wireless/satellite telecommunications services the maximum foreign ownership has now increased 65%);
• Power plant >10 MW (now 100% under PPP during concession period, previously 95%);
• Power plant transmission (now 100% under PPP during concession period, previously 95%);
• Electricity distribution (now 100% under PPP during concession period, previously 95%);
• Provision of Seaport Facilities (now 95% under PPP during concession period, previously 49%);
• Technology development for electric power supply equipment (now unregulated and could be 100%, previously 95%);
• Motel and lodging services
  • now (i) 70% ASEAN Investors, in Bali and Java region only, (ii) 49% ASEAN Investors in other regions, and (iii) 51% for Non ASEAN Investors with an Indonesian small scale business partnership;
  • previously (i) 51% ASEAN Investors in all regions, (ii) 49% for Non ASEAN Investors and (iii) 51% for Non ASEAN Investors with an Indonesian small scale business partnership);
• Golf courses
  • now (i) 100% ASEAN Investors, outside Bali and Java, (ii) 70% ASEAN Investors, in Bali and Java, (iii) 49% for Non ASEAN Investors and (iv) 51% for Non ASEAN Investors with an Indonesian small scale business partnership;
  • previously (i) 100% ASEAN Investors, in Eastern Indonesia, (ii) 51% ASEAN Investors, outside Eastern Indonesia, (iii) 49% for Non ASEAN Investors and (iv) 51% for Non ASEAN Investors with an Indonesian small scale business partnership;
• Specialist/subspecialist hospital services and medical specialist clinics, and dental clinics
  • now (i) 70% ASEAN Investors in all capital cities and (ii) open 67% for all ASEAN and Non ASEAN Investors in other regions;
  • previously 67% for either ASEAN or Non ASEAN Investors in all regions;
• Specialist nursing treatment services (nursing services under CPC93191)
  • now (i) 51% ASEAN Investors in Makassar and Manado, (ii) 70% ASEAN Investors in all capital cities and (iii) 49% Non ASEAN Investors in all regions;
  • previously (i) 49% Non ASEAN investors and (ii) 51% ASEAN Investors in Medan and Surabaya;

3. Sectors that are now expressly opened to foreign investment, previously unregulated

• Biomass pellet producers (now being categorized as requiring a partnership without a specific maximum foreign capital ownership level, but deemed as permitting up to 100% foreign ownership, previously unregulated);
• Survey service for geothermal (now 95%, previously unregulated);
• Futures Broker (now 95%, previously unregulated);
• Management and disposal of non hazardous waste (now 95%, previously unregulated);
• Platform oil and gas construction (now 75%, previously unregulated);
• Wired/wireless/satellite telecommunications services integrated with internet service providers, data communication services, public internet telephony services, internet interconnection services (network access point), or other multimedia services (now 65%, previously not specifically unregulated);
• Multimode transportation (now 49%, previously unregulated);
• Spherical tank (now 49%, previously unregulated);
• Survey service for oil and gas (now 49%, previously unregulated);
• Survey service for geology and geophysics (now 49%, previously unregulated) Offshore pipe line installation for oil and gas (now 49%, previously unregulated);
• Horticulture research venture and horticulture quality test laboratory venture and other horticulture service business (now 30%, previously 95%, amended to be in line with the existing law);
• Security services, namely security consulting, provision of security guards, cash and valuables escort, provision of security services with animals, security system devices, and security education and training (now 49%, previously unregulated);

4. Sectors that are more restricted for foreign investment:

• Import and distribution as main distributors (now 33%, previously 100%);
• Storage, warehousing (now 33%, previously 100%);
• Cold storage (now Java, Bali and Sumatra: 33%, from 100%; East Indonesia/ Kalimantan, Sulawesi and Papua: 67%, previously 100%);
• Horticulture which includes cultivation, seeding and processing (now 30%, previously 95%, amended to be in line with the existing law);
• Data communication system services (now 49%, previously 95%);
• Content services and call centres and other value added telephony services now have a specific maximum foreign capital ownership of 49%, rather than being categorized as requiring a partnership (without a specific maximum foreign capital ownership level, but deemed as permitting up to 100% foreign ownership);
• Internet interconnection services (network access point) (now 49%, previously 65% - unless integrated with wired/wireless/satellite telecommunication services in which case the maximum is still 65%);
• Power plants 1-10 MW (now have a specific maximum foreign capital ownership of 49%, rather than being categorized as requiring a partnership (without a specific maximum foreign capital ownership level, but deemed as permitting up to 100% foreign ownership);
• Offshore oil and gas drilling (now 75%, previously 95%); and

5. Sectors that now confirmed closed, previously open or unregulated

• Onshore/on land oil and gas drilling (now closed, previously 95%);
• Oil and gas well operation and maintenance (now closed, previously not specifically regulated);
• Oil and gas design and engineering service (now closed, previously not specifically regulated);
• Electricity utilisation and installation (now closed, previously 95%);
• Installation of offshore oil and gas upstream production (now closed, previously unregulated);
• Onshore pipe line installation for oil and gas (now closed, previously unregulated);
• Horizontal or vertical tank (now closed, previously unregulated);
• Installation of onshore oil and gas storage and marketing (now closed, previously unregulated);
• Inspection and testing of electrical power installations (now closed, previously unregulated);
• Oil and gas technical inspection service (now closed, previously unregulated);
• Implementation of Alternative Trade (now closed, previously unregulated);
• Retail sale via mail order houses (pos) or via internet (now closed, previously unregulated);
• Textiles retail (now closed, previously unregulated);
• Games and toys in stores retail (now closed, previously unregulated);
• Cosmetic retail (now closed, previously unregulated);
• Footwear retail (now closed, previously unregulated);
• Electronics retail (now closed, previously unregulated);
• Food and beverages retail (now closed, previously unregulated);
• Futures trading (now closed, previously unregulated);
• Manufacture of crumb rubber (now closed, previously 95%);
• Retail of motorcycles and commercial vehicles (now closed, previously unregulated); and
• Passenger land transport on scheduled routes (cross border transport) and unscheduled routes (tourism transport specific destination transport, specific area transport) (now closed, previously unregulated).

3. Impact of the changes

Pursuant to Article 9 of Regulation No. 39/2014, the changes to the Negative List do not apply retrospectively to investment in specified business fields approved prior to the regulation being issued, unless such provisions are of more benefit to the relevant investment.

Indirect or portfolio investment with transactions being made through Indonesia’s domestic Stock Exchange continue to be permitted.

Santi Darmawan and Sakurayuki