New points of Circular No. 02/2022/TT-BKHDT regulating supervision and evaluation of foreign investments

On February 14, 2022, the Ministry of Planning and Investment issues the Circular No. 02/2022/TT-BKHDT which will take effect on April 1, 2022 (hereinafter referred to as “Circular  02”), providing guidance on the supervision and assessment of foreign investments, replacing Circular No. 09/2016/TT-BKHDT (hereinafter referred to as “Circular 09”).

Our desire to support investors to easily grasp new regulations on investment policies, TTVN Legal has synthesized the difference between Circular 02 and Circular 09 in investment supervision and assessment of foreign investments, there are new points you should pay attention as follows:

Firstly, Clause 1, Article 1 of Circular 02 has replaced the term “monitoring and inspecting” in Clause 1, Article 1 of Circular 09 by collectively referred to as “supervision”. This change to unify terminology, derived from the provisions in Clause 1, Article 3 of Decree No.  29/2021/ND-CP (hereinafter referred to as “Decree 29”). Besides, Clause 1, Article 1 of Circular 02 also eliminated securities activities within the scope of this Circular. Therefore, Circular 02 is defined as a document regulating investment supervision and assessment of foreign investments in Vietnam, it does not include securities investment activities. The supervision and assessment of securities investment activities comply with the provisions of the law on securities.

Secondly, Point b, Clause 2, Article 4 of Circular 02 has changed the regulations on the deadline for submitting annual reports on supervision and assessment of ministries and ministerial-level agencies to the Ministry of Planning and Investment. Specifically, the deadline for submitting reports, that is before March 1 of the year following the reporting year, instead of before February 20 of the year following the reporting year as prescribed in Circular 09.

In addition to the investment registration agency, Circular 02 has recognized another entity competent to monitor investment activities, which is the investment state management agency. In Article 5, Circular 02 stipulates, investment registration agency and investment state management agency are competent to monitor investment activities with specific content and monitoring methods. Specifically, both these agencies are allowed to monitor the situation of projects and economic organizations with investment activities but the investment state management agency can also monitor the implementation of the reporting regime and the observance of handling measures by the investment registration agency. The addition of an entity competent to monitor and expand the content of monitoring investment activities makes the supervision and assessment of investment more multidimensional and effective.

In addition, regarding the reporting of monitoring situation, Circular 02 has abolished the regulation that the investment registration agency must report the monitoring situation to the Ministry of Planning and Investment.

Thirdly, regarding the form of monitoring of investments, Circular 02 briefly summarizes as “Regular monitoring” in the provisions of Article 6, instead of subdividing into direct and indirect forms like Circular 09. This shortening of Circular 02 almost summarizes the activities of “Monitoring through participation in delegations of state agencies” and “Indirect monitoring” specified in Article 8 of Circular 09 into regulations: monitors can “coordinate with relevant units to review and detect problems”.

Fourth, for the content of inspecting economic organizations and foreign-invested projects, Clause 2, Article 8 of Circular 02 has supplemented the inspection for the two following issues:

1. The application of technology to projects to appraisal and comments on technology (applied technology compared with technology already appraised or commented by a competent agencies; the installation of machinery, equipment and technology lines of investment projects);
2. Market access conditions.

Fifth, regarding the inspection of the performance of state management in foreign investment, Clause 7, Article 9of Circular 02 cited the provisions of Clause 2, Article 71 of Decree 29 as an addition to this provision in Circular 09. Specifically, additional contents for this inspection including:

1. The implementation of regulations in the document of decision or approval of the investment policy, the Certificate of investment registration (if any);
2. The project implementation schedule, including the progress of investment capital, including loan capital, and the progress of the project’s objectives;
3. The satisfaction of investment conditions, preferential conditions, investment support and the implementation of commitments of investors (if any);
4. The observance of regulations on investment supervision and assessment and the statistical reporting regime as prescribed;
5. The implementation of measures to deal with the detected problem.

Sixth, the inspection of investments are carried out in three forms: periodical inspection, unexpected inspection and specialized inspection. In which, according to the provisions of Circular 09, unexpected inspection is carried out:

1. On a case-by-case basis, on the basis of management requirements and actual situations; or
2. On the basis of requests and complaints of agencies, organizations and individuals about problems encountered in the process of implementing investment activities or in the process of organizing the implementation of laws and policies on foreign investment.

However, Clause 2, Article 10 of Circular 02 added a case of unexpected inspection, that is when “there are signs of violations in investment activities of foreign-invested economic organizations and foreign-invested projects”.

Seventh, regarding inspection methods, Article 11 of Circular 02 has amended Article 14 of Circular 09 and only recorded three ways in which competent agencies carry out their inspection, including:

1. Through the National Investment Information System;
2. Through the report;
3. Organize inspection teams and working groups.

With this provision, Circular 02 has omitted the inspection of “Approval of preliminary and final review” and “Meeting and briefing”, at the same time, the inspection through the report is no longer required to be done “in writing”. This shortening of Circular 02 has contributed to simplification and flexibility of inspection activities of competent agencies in investment supervision.

Eighth, regarding the announcement of the periodical inspection plan, both Circular 02 and Circular 09 recognize the responsibility to announce and publicly announce this inspection plan on the website of the general agency, the agency in charge of inspection and on the National Investment Information System. However, Clause 5, Article 12 of Circular 02 has added that the time limit for responsible agencies to make public announcement of this plan is 07 days, counting from the plan is approved by the competent agency. The addition of the time limit of Circular 02 makes the announcement of the plan clearer, specifically and more accessible to individuals and organizations related to the inspection plan.

Ninth, for inspection activities through the National Investment Information System, Circular 02 has adjusted three inspection contents, including: content of investment approval/license documents, the reporting of state management agencies and the reporting of economic organizations implementing investment projects. In which, with the examination of the content of the licensing document, Circular 02 has added “Decision approving investment policy” compared to Circular 09. Specifically, the contents of inspection through the National Investment Information System specified in Article 13 of Circular 02 include:

1. Contents specified in the Decision approving the investment policy, the Certificate of investment registration;
2. The implementation of regulations on reports of state management agencies;
3. The implementation of regulations on updating information and reports of economic organizations implementing investment projects.

Tenth, for inspection activities through reports, Article 14 of Circular 02 stipulates that the entity competent to inspect must send a written request to prepare documents to the inspected agency or unit. In normal cases, the time for the inspected agency or unit to prepare the report is at least 20 days from the date of receiving the written request from the competent entity. The time to prepare this report has been adjusted by Circular 02 to be longer instead of the minimum requirement of 07 working days like Circular 09. This change aims to create conditions for inspected agencies and units to best prepare their reports, contributing to the inspection of state agencies to be more effective and comprehensive.

Eleventh, for inspection team organization, Clause 3, Article 15 of Circular 02 has adjusted the time unit from “working day” of Circular 09 to “actual working day”. Specifically, when conducting on-site inspection, the maximum implementation time is 20 days and not more than 30 actual working days in case the inspection is complicated, involving many agencies and locations. The inspection time for each economic organization or project is also adjusted to no more than 03 actual working days and in case of complicated inspection contents, no more than 05 actual working days. In addition, Point c, Clause 2, Article 15 of Circular 02 also adds provisions on document preparation, according to which, the inspected agency has a minimum time of 20 days to prepare documents from the date of receiving the written request. This addition is appropriate and consistent with the regulations on document preparation time of the inspected agencies in Article 14 of Circular 02.

Twelfth, Article 16 of Circular 02 regulates the funding for inspection by state management agencies and invokes the corresponding provisions in Decree 29. Accordingly, Clause 3, Article 88 of Decree 29 has adjusted and concretized the cost norms of investment supervision and evaluation as follows:

1. Expenses for investment supervision carried out by program owners, investors, and agencies signing PPP project contracts are calculated at 10% of program and project management costs;
2. Expenses for investment evaluation are calculated as % of program and project management costs according to current regulations as follows: initial evaluation cost: 2%; cost of midterm or period assessment: 2%; closing assessment cost: 3%; unscheduled assessment costs: 3%.

In case the application of cost norms is not appropriate or the program or project is large-scale or it is necessary to hire a foreign consultant or a joint venture of domestic and foreign consultants to perform the implementation, the organization shall make an estimate to determine the cost.

Besides, Point a, Clause 5, Article 90 of Decree 29 has been adjusted the minimum budget for investment supervision support activities of the community in the commune is 10 million VND/year for a commune instead of the minimum of 5 million VND/year for a commune according to the provisions of Decree No. 84/2015/ND-CP.

Thirteenth, for the reporting of test results, Article 17 of Circular 02 has adjusted the time limit for synthesizing and reporting inspection results to 20 working days, instead of just 10 working days as stipulated in Circular 09. In addition, Circular 02 also stipulates that the draft report on inspection results should not only be sent to the agencies participating in the inspection (in the case of inter-sectoral inspection) or members participating in the inspection team (in case the inspection team is established) but also must be sent to the inspected agency or unit for comments, before submitting to the competent agency for decision.

Note: This article is for informational purposes only and it is not a legal advice. The content of the article represents its own of TTVN Legal, it subject to change without prior notice.