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OECD Investment Policy Review of Viet Nam31 March 2015, Hanoi

Government of Viet Nam

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1. The OECD

2. The Policy Framework for Investment

3. Investment Policy Review of Viet Nam

Structure of the presentation

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1. The Organisation for Economic Co-operation

and Development

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What is the OECD?

34 members, incl. Japan, Korea, Australia and NZ

Close cooperation with non-members on areas of mutual interest

All policies areas, except defence and sports

250 committees, working groups, expert groups

2500 staff

Better policies for better lives

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How the OECD works

Evidence-based analysis

Promotes reforms by convincing governments thatit is in their own self-interest

Does not disburse grant money

Operates based on consensus

Has no disciplinary powers other than moral suasion

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Recent OECD work with Viet Nam

Forthcoming: OECD Agricultural Policy Review of Viet Nam

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2. The Policy Framework for Investment

Investment policy

Investment promotion and

facilitation

Trade

Competition

Tax

Corporate governancePolicies for

promoting responsible

business conduct

Human resource

development

Public governance

Infrastructure investment

Investment framework for green growth

Financial sector development

Governance: transparency, stability/predictability, coherence, effectiveness

A multilaterally-backed instrument to improve the investment climate,

building on good practices

A comprehensive framework covering

numerous policy areas affecting the investment

climate

The PFI is….

Covers both domestic & foreigninvestment

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Non-prescriptive & non-binding

Flexible

Comprehensive

How the PFI works

Self-assessment by Government

(in cooperation with OECD)

A checklist of questions in key policy areas

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Investment Policy • Market opportunities, risks, exit barriers

Policy areas Affecting investment through multiple channels

Investment promotion & facilitation • Transaction (red tape) and information costs

Trade Policy • Cost of inputs, size of market, competition

Competition Policy• Market opportunities, productivity, benefit sharing

with workers and consumers

Tax policy (incentives) • Returns to investor, benefits to government

Corporate Governance • Corporate efficiency, cost of capital

Responsible Business Conduct • Social and environmental risks,

Human Resource Development • Supply and quality of labour, innovation

Investment in Infrastructure • Cost of inputs, market size, productivity etc.

Financing Investment • Supply, cost and access to capital etc.

Public governance • Regulatory quality and predictability, cost of doing business etc.

Investment for Green Growth • Input costs; environmental externalities

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Investment Policy Reviews– Comprehensive (many policy areas)– Thematic (one policy area, e.g. RBC)– Sectoral (energy, agriculture)

Regional dialogue– ASEAN, SADC, MENA, SE Europe

Capacity building– APEC, ASEAN (CLMV) and at country level

Development assistance– IFC, JICA, Finland

How the PFI has been used

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OECD Investment Policy Reviews since 2006

Sub-Saharan Africa Zambia Burkina Faso Mozambique Botswana Tanzania Mauritius Nigeria

Asia India Cambodia China (2) Viet Nam* (2) Indonesia Lao PDR* Malaysia Myanmar Philippines*

MENA Egypt Morocco Tunisia Jordan

Latin America Peru Costa Rica Colombia

Eurasia Ukraine (2)* Russia Kazakhstan

* On-going or planned

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Updating the PFI

Over 25 countries have used the PFI in IPRs and many more in regional discussions

Need to update the instrument, incorporate new dimensions and receive users’ feedback

Task Force meetings in regions and OECD headquarters, technical revisions in OECD committees, web-based consultations

Task Force co-chaired by Finland and Myanmar

Updated PFI in 2015

• Global landscape of investment has changed (e.g. GVCs, RBC)• New policy challenges, players, priorities

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3. Investment Policy Review of Viet Nam

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Second IPR in 2015-2016:

• New challenges and context

• Evolving policy environment (e.g. consecutive revisions of investment law)

• More in-depth analysis using the updated PFI

• Additional policy areas:

– Responsible business conduct

– Infrastructure investment

– Corporate governance

• Greater focus on how to implement recommendations

First IPR in 2008-2009

• Investment Policy• Investment Promotion

& Facilitation• Trade Policy• Competition Policy• Tax Policy• Financial Sector

Development

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2015

March OECD mission, PFI presentation to the Taskforce

April-July Government prepares answers to PFI questionnaire

JulySecond OECD mission to discuss answers to questionnaire and

for further fact-findingAugust-Dec. OECD prepares draft report. Third OECD mission.

2016January-Feb. Government comments on draft report

MarchOECD-Government Seminar with ministries and stakeholders in

Hanoi to discuss draft IPR of Viet Nam

JunePresentation of draft IPR to OECD Investment Committee in Paris

Revised draft IPR circulated for final comments

September IPR of Viet Nam launched in Viet Nam

Follow-upResults presented at regional or sub-regional level (including the

Regional Policy Network for Investment), other activities

Suggested timeline

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1. Introduction

2. Investment trends and performance

3. Investment policy & horizontal policies affecting investment

4. Investment promotion & facilitation

5. Policies to promote responsible business conduct

6. Infrastructure investment

7. Corporate governance (including of SOEs)

8. Other areas of the PFI– Competition, finance, incentives

Structure of the second IPR of Viet Nam

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• What benefits do the revised laws on bankruptcy, enterprise, investment and land offer?

• How to improve implementation of laws and regulations?

• How to make most effective use of Viet Nam’s participation in on-going and future free trade agreements?

• How to minimise the potential for investment disputes leading to international arbitration?

• How to further diversify inward FDI by sector and by country?

• How to integrate further into GVCs? How to raise local value addition and linkages?

• How to improve the performance of SOEs and the domestic private sector?

• How to further improve the PPP framework?

Some areas to be addressed

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• A whole-of-government approach to investment policy making

• Benchmark relative performance and progress over time

• An opportunity to showcase recent reforms to partner countries and the international investment community

• Recommendations based on good practices in both OECD and emerging economies

• Assistance in implementing reforms through donor agencies and the World Bank

• Capacity building can also be provided on an ad hoc basis where necessary

Benefits to Viet Nam

• Provide guidance in assessing which policies and practices are most likely to create obstacles to domestic and foreign investment

PFI questions and supplemental questions

Supporting investment reform

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OECD Investment Policy Review of Myanmar

“The recommendations from the Review are candid, impartial and highly practical.”

Aung Naing Oo, Director General, Ministry of National Planning and Economic Development, Myanmar

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Challenges identified

Recent and planned reforms

Impact of past reforms

Always refer to – and attach (if possible): legal texts

strategic documents

existing studies

useful websites

other relevant documents

How to answer the questionnaire

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ANNEX

INVESTMENT POLICY

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- Entry and establishment

- Ownership and control

- Operational restrictions

- Authorisation and reporting

- Sectoral limitations

- Standards of treatment (NT, MFN, FET)

- Expropriation

- Transfer of funds

- Dispute settlement

- Transparency

- Etc.

REDUCING

STRENGHTENING

Investment Policy

Regulation Protection

Strategy What is the role of private investment, including by foreigners and SMEs,

within the country’s overall development strategy?

Legislation How is the strategy reflected in the investment law or other laws and in

commitments under bilateral, regional or multilateral agreements?

Implementation Who manages the overall coordination of investment policy making?

Is there a formal process for monitoring and improving the investment climate? Who is in charge of this process?

How is feedback from stakeholders taken into account?

Is there an advocate for investment climate reform within the government?

Investment climate strategy

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Areas covered in investment policy

Legal framework for investment

Non-discrimination and national treatment

Land ownership and registration

Intellectual property rights

Contract enforcement and investment dispute settlement

Expropriation regime

Investment treaty policy

INVESTMENT PROMOTION & FACILITATION

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Investment

attraction

Foreign Investment Agency

Business

facilitation

Integration in

GVCs/RVCs

Co-ordination with other agencies

Regulatory

reforms

Co-ordination with Provinces

Institutional framework for investment promotion and facilitation

Good

policies

Promotion

Facilitation:

Establishment

and post-

establishment

After-

care services

Policy Advocacy investor feedback to policies: surveys,

public-private committees, participation in task force, policy and legal proposals, reporting investor's

perceptions...

Investment promotion and facilitation depends on the quality of policies

Best performing IPAs are good policy advocators

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Strong supplier base is an important investment decision factor

Channel for technology and knowledge transfer;

Proactive measures to promote business linkages and build capacities of SMEs

Efforts by the government to address skills shortages (HRD, training facilities, etc.)

Role of SEZs/IPs Building research, innovation capacity Promoting partnerships with the private sector in skills upgrading Linkages with domestic firms or economic enclaves?

Promotion of business linkagesMaking investment work for development

RESPONSIBLE BUSINESS CONDUCT

Responsible Business Conduct

Responsible business conduct (RBC) means that businesses should:

• a) contribute positively to economic, environmental and social progress to achieve sustainable development and

• b) avoid and address adverse impacts through their own activities and prevent or mitigate adverse impacts directly linked to their operations, products or services by a business relationship. Risk-based due diligence is a key element of RBC by identifying, preventing and mitigating actual and potential adverse impacts.

The RBC chapter of the PFI included questions on promoting responsible business conduct related to:

1. Clear separation of government and business roles

2. Promoting effective two-way communication: law making and other dialogue

3. Providing an adequate framework for corporate disclosure

4. Enlisting business as a partner in the legal and regulatory system

5. Strengthening the business case for responsible conduct

6. Intergovernmental co-operation

Policy Framework for Investment: chapter on responsible business conduct

CORPORATE GOVERNANCE OF STATE-OWNED

ENTERPRISES

OECD Principles of Corporate Governance: The degree to which corporations observe basic principles of good corporate governance is an increasingly important factor for investment decisions

The OECD Guidelines on Corporate Governance of State-Owned Enterprises offers an important complementary set of recommendations

Ensuring accountable, transparent and well-governed SOEs

Corporate governance of SOEs

INFRASTRUCTURE DEVELOPMENT

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• Ensure coherence and support for infrastructure development

– Planning of infrastructure development:

– What are the needs and strategy for infrastructure? Credible project pipeline and clear private sector role?

– What consultation mechanisms are used to ensure projects correspond to needs and expectations?; Do agencies coordinate to ensure coherence?

Infrastructure chapter (1/3)

• Create a suitable enabling environment for investment in infrastructure

– Regulatory & institutional environment

– What is the legal regime for investment in infrastructure (laws and agencies and mandates)? Are these clear and transparent? Regulatory Impact assessments? How is corruption being prevented?

– Is the public procurement system transparent and efficient in promoting competition? Are there still barriers to entry for investors? Are competition laws being enforced?

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• Mitigate risk and ensure value for money

– Selecting and prioritising projects; enhancing implementation

– Are cost-benefit analysis, taking into account alternative modes of delivery, full range of risks, undertaken?

– How are risks identified and allocated? Are fiscal liabilities transparently accounted for in the budget?

– What has been done to improve preparation, selection and implementation of projects (e.g. PPP unit, output based contract specifications; performance monitoring system)?

• Ensure adequate regulation and pricing of infrastructure markets

– Predictability and viability of infrastructure projects

– Are regulatory agencies independent, adequately resourced and accountable? Do SOEs compete on equal terms with private firms?

– How the government strike balance in tariff setting (cost and affordability)? When subsidies are needed, what has been done to use it more efficiently?

Infrastructure chapter (2/3)

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• Increase the supply of financing for infrastructure projects

– Facilitate financing of infrastructure

– What has been done to leverage sources of finance to infrastructure projects and mitigate shortfalls if insufficient cost recovery?

– Is ODA used to mitigate project risks and leverage private investment?

– Are there obstacles for investors to bring in and out international capital if needed?

• Encourage inclusiveness and responsible business conduct

– Predictability and viability of infrastructure projects

– Broad-based stakeholder consultations

– Environmental & social impact assessments

– Ensure resilience of infrastructure to climate change

– Ensure that both public & private providers observe RBC standards and perform adequate due diligence to identify, manage & monitor any environmental & social risks

Infrastructure chapter (3/3)b

THANK YOU!

stephen.thomsen@oecd.org

alexandre.decrombrugghe@oecd.org

fernando.mistura@oecd.org