This presentation outlines the investment policy review process that the government of Viet Nam is undertaking in partnership with the the OECD and ASEAN as part of an active programme of investment policy reforms. To find out more visit: http://www.oecd.org/daf/inv/investment-policy/viet-nam-investment-policy.htm

1. Investment policy review of Viet Nam
Hanoi, 2016

2. • Stephen Thomsen, Head of IPRs, OECD
Legal investment framework
Foreign investment liberalisation & other policy areas
Discussion
• Alexandre de Crombrugghe, OECD
Tax Policies
Investment promotion and facilitation
Infrastructure connectivity & green growth framework
Discussion
• Tihana Bule, OECD
Responsible business conduct
Discussion
AGENDA

3. What is the OECD?
3
 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 staffBetter policies for better lives

4. Recent OECD work with Viet Nam

5. OECD Investment Policy Reviews using
the Policy Framework for Investment

6. OECD Investment Policy Reviews
Southeast Asia
Forthcoming 2016
• Cambodia
• Lao PDR
• Viet Nam
2009
2010
2013
2014
2016
Reviews are undertaken jointly by the OECD and the
government in partnership with the ASEAN Secretariat and
based on the Policy Framework for Investment

7.  Investment policy (FDI liberalisation & legal framework)
 Investment promotion & facilitation
 Trade policy
 Competition policy
 Tax policy
 Corporate governance
 Policies for enabling responsible business conduct
 Developing human resources for investment
 Infrastructure investment
 Financing investment
 Public governance
 Investment framework for green growth
Areas covered in the OECD Policy
Framework for Investment
7

8. 2015
April OECD mission, PFI presentation to the Taskforce
April-June Government prepares answers to PFI questionnaire
July
Second OECD mission to discuss answers to questionnaire and for
further fact-finding
August-Feb. 2016 OECD prepares draft report
December Viet Nam participates in SEA Regional Policy Network in Paris
2016
April
OECD-MPI Seminar with ministries and stakeholders in
Hanoi to discuss draft IPR of Viet Nam
April-May Government and stakeholders provide written comments
June Draft IPR discussed during OECD SEA Regional Forum
October Presentation of draft IPR to OECD Investment Committee in Paris
November Revised draft IPR circulated for final comments
December IPR of Viet Nam launched in Hanoi or in ASEAN region
Follow-up Results presented at regional level, other activities
IPR of Viet Nam timeline

9. INVESTMENT TRENDS AND
PERFORMANCE

10. GDP growth rates in ASEAN 4
(Market prices, constant local currency)
Viet Nam has experienced strong, steady
growth over the past 30 years
-15
-10
-5
0
5
10
15
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
VNM IDN THA PHL
Source: World Development Indicators

11. But private, including foreign, investment can
further increase its economic contribution
0
10
20
30
40
50
60
70
80
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
SOE Private Foreign
Investment by type of ownership
(share of total investment)
Source: GSO

12. FDI surged in the 1990s and, as a share of GFKF,
has surpassed IDN, PHL and THA in the past decade
-20
-10
0
10
20
30
40
50
60
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
VNM THA PHL IDN
ASEAN 4 FDI inflows as a share of gross fixed capital formation
Source: UNCTAD

13. Country Number of projects Total registered capital (USD m.) Share
Korea 4 190 37 726 14.9%
Japan 2 531 37 335 14.8%
Singapore 1 367 32 937 13.0%
Chinese Taipei 2 387 28 469 11.3%
British Virgin Islands 551 17 990 7.1%
Hong Kong, China 883 15 603 6.2%
United States 725 10 990 4.3%
Malaysia 489 10 805 4.3%
China, PR 1 102 7 984 3.2%
Thailand 379 6 749 2.7%
Most registered capital in foreign projects
comes from Asia
Source: GSO

14. But export markets are more diversified
Europe, 9% N. America, 6%
ASEAN, 21%
Other Asia, 50%
Offshore
centres, 10%
Other , 3%
US, 19%
EU, 18%
Japan, Korea, 15%ASEAN, 13%
Other Asia, 17%
Other , 18%
Source of FDI Export markets
Source: OECD calculations based on GSO data

15. Sector Projects (number)
Total registered capital
(USD m.)
Share
TOTAL 19 611 274 638
Agriculture, forestry & fishing 556 3 858 1%
Mining & quarrying 92 3 483 1%
Manufacturing 10 480 156 912 57%
Electricity, gas, stream & air conditioning
supply
104 10 003 4%
Water supply, sewerage, waste management 46 1 412 1%
Construction 1 288 12 485 5%
Wholesale & retail trade; vehicle repair 1 640 4 436 2%
Transport & storage 514 3 932 1%
Accommodation & food service activities 402 11 688 4%
Information & communication 1 255 4 201 2%
Financial, banking & insurance activities 85 1 342 0%
Real estate activities 497 51 113 19%
Professional, scientific & technical activities 1 869 2 076 1%
Administrative & support service activities 142 220 0%
Education & training 229 897 0%
Human health & social work activities 103 2 170 1%
Arts, entertainment & recreation 155 3 649 1%
Other service activities 154 761 0%
Manufacturing is the most important sector
for registered capital
Source: GSO

16. Merger & Acquisition markets have also
grown dynamically over the past 10 years
Source: OECD calculations using Dealogic M&A data
M&A deals involving a target firm from Viet Nam, 1995-2015

17. Cross-border M&As are prominent in finance
& insurance, oil & gas, and metal & steel
Panel C. Number of deals (as % of total)
Panel B. Deal value (bln USD)
Panel D. Deal value (as % of total)
Panel A. Number of deals
111
88
61 55 50
379
0
50
100
150
200
250
300
350
400
450
500
0
50
100
150
200
250
300
350
400
450
500
Cross border Domestic
15%
12%
8%
7%
7%
51%
Finance& Insurance Food & Beverage
Computers & Electronics Construction/Building
Oil & Gas Other
23%
19%
14%
13%
7%
24%
Finance& Insurance Oil & Gas
Metal & Steel Food & Beverage
Real Estate/Property Other
4.1
3.4
2.5
2.3
1.3
4.4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Cross border Domestic
Source: OECD calculations using Dealogic M&A data

18. LEGAL INVESTMENT
FRAMEWORK IN VIET NAM

19. • Investment legislation revised many times
• 2005 unified investment law: a milestone towards a
more open and enabling regime
• 2014 revision of the investment law:
– streamlined entry procedures,
– but weakened protection ?
• Gradual improvements in the law-making process
• Implementation remains a major hurdle
Major regulatory improvements
achieved over the past 30 years

20. • Well-balanced guarantee of legal stability
• Commitment to ensure consistency across laws
• Legal guarantee of non-discrimination
• Expropriation provision weaker than in previous law
• Less clear definition of investment in 2014 law
• Very unclear ISDS provision in 2014 law
Current investment protection regime

21. • Investors favour arbitration mechanisms:
– New commercial arbitration law to upgrade the arbitration
framework
– But enforcement of arbitration awards is too often difficult
to obtain
• Not an ICSID member
• No institutionalised investment dispute grievance
mechanism
• No ombudsman to prevent escalation of ISDS cases
Dispute settlement & contract enforcement

22. • Major improvement with the 2015 Land law:
– further opens access to LUR for foreigners
– Provides stronger protection against expropriation
• Outdated registrars at provincial level
• Full computerisation needed to:
– address fraudulent titling
– encourage use of LURs as collaterals
Access to land and protection of
investors’ land rights

23. • Strong improvements to the IP regime:
– New IP law
– Capacity-building
• But weak enforcement of IP rights
• Inconsistent institutional framework:
– Overlapping responsibilities of line agencies
• Strong governmental will to improve IP protection
Protection of Intellectual Property Rights

24. • 40 bilateral investment treaties
• Regional and multilateral trade and investment agreements:
– Trans-Pacific Partnership (TPP),
– FTA with the EU
– Regional Comprehensive Economic Partnership (RCEP)
• Increasingly, FTAs facilitate the establishment of new
investments
• Recent treaties reflect policy innovations:
– more specific language on key provisions to better reflect
government intent
– more detailed regulation of ISDS.
Viet Nam’s International Investment
Agreements

25. FOREIGN INVESTMENT
LIBERALISATION REFORMS

26. 1. Streamlined and narrowed the scope of investment registration procedures?
• Formerly complex and long for foreign investors
• Retained the previous dual-process (ERC + IRC) for foreign and majority foreign-
owned investments (similar statutory time frame, but no “silence is consent”)
• But simplified the regime for domestic and minority foreign-owned projects,
except in conditional sectors (only the ERC apply; if M&A, only the IRC apply)
• Narrowed the scope of the screening/approval process (FDI only is subject to
the PM’s approval in a few specified sectors)
2. Fewer sectors subject to investment conditions (and a negative list approach)
• But does not specify which conditions apply, limiting its transparency
3. Continued commitment to move forward with liberalisation (e.g. liberalisation
in 2015 of foreign majority stakes in a public company , with exceptions)
The recent FDI reform: the 2014 Law on Investment and
Law on Enterprises

27. FDI restrictions have been gradually removed overtime
Source: OECD FDI Regulatory Restrictiveness Index and UNCTAD FDI statistics.
0
10
20
30
40
50
60
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
FDI RR Index FDI Stock (% of GDP)(right axis)
OECD FDI Regulatory Restrictiveness Index (open=0; closed=1) Per cent of GDP
• Right to establish private enterprises
• Law on Foreign Investment amended
• WTO accession (gradual
liberalisation scheduled)
• Foreign acquisitions allowed,
subject to conditions
• Scope of screening and approval
reduced
• FIE land use rights expanded
• Exports and capital repatriation
by foreign-invested enterprises
facilitated
• Constitution of the
Socialist Republic of
Vietnam
• Foreign investors
rights recognised
• Land use rights
allowed to
• Eased capital
repatriation
• 1st Law on Foreign Investment, 1987
• Removal of remaining
restrictions on foreign
acquisitions
• US-VNM Bilateral trade
agreement
• Removal of remaining
restrictions on foreign
acquisitions

28. Reforms have helped to sustain Viet Nam’s
competitiveness vis-à-vis regional peers
Source: OECD FDI Regulatory Restrictiveness Index database, http://www.oecd.org/investment/fdiindex.htm.
Notes: (¹) Data refer to regulatory restrictions on FDI as of end-2015. For all other countries, data refer to the regulatory regime as of end-2014; (²) ASEAN9 refers to the average
scores of the nine ASEAN member states covered. It excludes Brunei Darussalam which is not covered. Data for Lao PDR, Viet Nam, Cambodia, Singapore and Thailand are
preliminary; (³) The OECD FDI Regulatory Restrictiveness Index covers only statutory measures discriminating against foreign investors (e.g. foreign equity limits, screening &
approval procedures, restriction on key foreign personnel, and other operational measures). Other important aspects of an investment climate (e.g. the implementation of
regulations and state monopolies among other) are not considered. All 34 OECD countries and 30 non-OECD countries are covered, including all G20 members.
ASEAN9²
OECD average
Non-OECD average
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Singapore Cambodia Viet Nam¹ Lao PDR¹ Malaysia Thailand Indonesia Myanmar China Philippines¹
OECD FDI Regulatory Restrictiveness Index (open=0; closed=1)

29. 0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
OECD VIET NAM ASEAN9
OECD FDI Regulatory Restrictiveness Index (open=0; closed=1)
Nonetheless, some key services sectors remain partly
off limits to foreign investors
Source: OECD FDI Regulatory Restrictiveness Index database, http://www.oecd.org/investment/fdiindex.htm.
Notes: (¹) Data refer to regulatory restrictions on FDI as of end-2015. for Viet Nam, Lao PDR and Philippines. For all other countries, data refer to the regulatory regime as of
end-2014; (²) ASEAN9 refers to the average scores of the nine ASEAN member states covered. It excludes Brunei Darussalam which is not covered. Data for Lao PDR, Viet Nam,
Cambodia, Singapore and Thailand are preliminary; (³) The OECD FDI Regulatory Restrictiveness Index covers only statutory measures discriminating against foreign investors
(e.g. foreign equity limits, screening & approval procedures, restriction on key foreign personnel, and other operational measures). Other important aspects of an investment
climate (e.g. the implementation of regulations and state monopolies among other) are not considered. All 34 OECD countries and 30 non-OECD countries are covered, including

30. OTHER POLICY AREAS
AFFECTING MARKET
OPPORTUNITIES

31. • Viet Nam’s corporate governance framework has been
reconfigured to account for all firms – public and private,
listed and non-listed
• The 2014 Law on Enterprises has set high standards – the
challenge will be to ensure full compliance
• Some SOEs have attracted foreign investors but their
equitisation slowed down in the past 10 years and total
assets of fully SOEs still account for 74% of GDP
• Preferential treatment (e.g. access to finance) that SOEs
receive impede level playing field with private firms
Improving corporate governance

32. • Viet Nam Competition Agency and Viet Nam Competition
Council are not sufficiently independent
• Market shares are used to determine which cases to
investigate (good practice), but also their outcomes (could
be revised)
• Economic realities are not suitably integrated into the
analysis (e.g. make market definition more flexible)
• Market power are measured only via market shares and
are not considering enough other factors (e.g. barriers to
entry, countervailing buyer power)
Improving competition

33. TAX POLICIES

34. • Viet Nam offers tax incentives to attract investment and a
low corporate tax rate (20% by 2016)
• But tax incentives depend on firms’ business activity,
location or size  Non-uniform treatment of investors
and variation of effective tax rates
• Tax-related issues are dispersed into multiple pieces of
legislation (no single Tax Code exists)
 complexity and lack of transparency
• 173rd on Doing Business for ‘Paying Taxes’ (out of 189
countries)
An attractive, but confusing, tax system

35. • These variations of effective tax rates can lead to tax
planning strategies by investors
• While the budget deficit is widening and the fiscal
position is deteriorating (government receipts
experienced a decline of 20% between 2010-14)
• At the same time, little analysis is conducted to
understand the costs and benefits of incentives
 Erosion of tax base and weakening of macro-
economic fundamentals
Putting pressure on the state’s budget

36. • Granting of tax incentives not always automatic and rules
sometimes inconsistently applied
 discretionary decision-making increases risk of corruption
and limits predictability for investors
• Lack of whole-of-government approach; need more
effective coordination, esp. between MPI and MOF
• Insufficient human and institutional capacity to analyse the
impact of tax reforms and to conduct cost/benefit analysis
Supplemented by governance issues

37. INVESTMENT PROMOTION
AND FACILITATION

38. Investment
attraction
Ministry of Planning and
Investment
Business
facilitation
SME
development
/ skills
Co-ordination with other
ministries/agencies
Linkages
promotion
Regulatory
reforms
Co-ordination with
Provinces
SEZs/IPs
Institutional framework for investment
promotion and facilitation
38

39. • Major efforts by central government and provinces to
improve the business environment, but challenges remain
• Decentralisation of investment-related functions since
2005: reinforced role has been given to provinces
• Rapid growth of industrial parks and other types of SEZs
(80% of manufacturing FDI; 2.5% of total workforce)
• Increasing consultation of the private sector (e.g. VBF)
• Emergence of supporting industries but the level of
business linkages between MNEs and SMEs remains low
• Higher education and vocational training produce basic
skills but there is an increasing risk of skills mismatch
Overview of investment promotion and
facilitation in Viet Nam

40. • Decentralisation encouraged provinces to become more
efficient in investment promotion efforts
• But competition leads to duplication and overlap of efforts
and does not serve the country’s overall interests
• Key role of SEZs in FDI attraction and development but low
occupation rate (65%) and risk of land misuse
• MPI in charge of overall coordination but not sufficiently
• Need to develop a clearer, long-term vision for FDI
attraction
• FIA needs to focus on targeted promotion and providing
support to poorer provinces
Investment promotion: decentralised but
not sufficiently well-coordinated

41. • Reforms at central level to improve business environment
– Project 30 on administrative simplification and regulatory reform
– Simplification of business registration and establishment of ABR
– New investment and enterprise laws 2014
• Viet Nam has improved but still ranks at 119th position
on Doing Business to ‘start a business’ (out of 189)
• Decentralisation was a catalyst for reform in provinces
and has helped improve the business environment
(illustrated by the Provincial Competitiveness Index)
• MPI recognised as a responsive ministry by businesses
Investment facilitation: valuable initiatives
to improve the business environment

42. • Competition leads to large differences between rich and
poor provinces in terms of investment regulation and
services
• Affects both investors’ operations and welfare of provinces
• Lack of institutional capacities and inadequate funding to
implement laws and regulations (e.g. tighter deadlines
with new laws)
• After the rapid pace of reforms, building strong institutions
at central and provincial levels should be a top priority
• More aftercare is needed
Implementation lags behind: need to support
provinces and strengthen institutions

43. Enhancing the development impact of FDI
through business linkages
Domestic firms’ characteristicsForeign firms’ characteristics
Government policies and
institutions
Spillover
potential
FDI spillovers
Absorptive
capacities
Education & training
Access to finance
SME development
Trade policy
Labour market regulations
Investment policy
& promotion
IP rights
Source: OECD (adapted from Farole and Winkler (2014), and paus and Gallagher (2008))

44. Local suppliers in Viet Nam and regional peers
(ranking out of 140 economies), 2015
Absorptive capacities: linkage creation
depends on the availability of domestic SMEs
0 20 40 60 80 100 120 140
Malaysia
Korea
China
Thailand
Indonesia
Philippines
Viet Nam
Lao PDR
Cambodia
Local supplier quantity Local supplier quality

45. • SMEs have boomed since Doi Moi but their level of
competitiveness remains low
• Targeted approach to SME development since early 2000s –
supporting industries as a priority (Master Plan)
• But still few business linkages between MNEs and SMEs
• Continue efforts to establish a sound business environment
for SMEs and increase SME consultation
• Need to further develop industry-specific capacity building
• Make educational and training programme more market
driven by involving businesses in HRD strategy design
Absorptive capacities: SME and skills
development at the centre

46. • Some FDI more likely to generate spillovers and linkages;
some foreign investors are more inclined to source locally
• SEZs tend to generate few linkages – except if they take a
more elaborate cluster focus
– Participation of local firms allowed
– Focus on SMEs
– Involvement of central and/or provincial authorities
– Well-coordinated institutional environment
• Aftercare can help anchor investors in the local economy
• Continue efforts to facilitate information exchanges
(matchmaking events, suppliers databases)
Spillover potential: implications for FDI
attraction

47. INFRASTRUCTURE
CONNECTIVITY

48. Perceived level of highway congestion in Viet Nam relative to regional peers
Source:WorldBank(2014)
Overcapacity in the port system
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
China Thailand Indonesia Malaysia India
Southern Viet Nam Central Viet Nam Nothern Viet Nam
Rating: 1(worst) to 5 (best)
VietNamisworseoffVietNamisbetteroff
Limited road capacity: high congestion
• Intercity truck speeds average 35km/h
• Cost of congestion: USD 1.7 billion
Railway sector is not competitive
• Limited network capacity
• Avg. speed of freight trains: 15-20km/h
Ports: significant excess capacity
• Lack of multimodal planning: poor access
sometimes (e.g. congestion)
• Insufficient water depth for larger modern
vessels
Viet Nam has greatly expanded its infrastructure network
over time, but quality has not always kept pace (1/2)

49. Power
• Access to electricity has
become almost universal
• Growth in power demand
continues to pressure
production
• Electricity prices kept at
historically low levels
hindered the industry's
capacity to invest
Telecommunications
• Infrastructure has expanded
rapidly
• Investments required to
expand broadband access
Viet Nam has greatly expanded its infrastructure network
over time, but quality has not always kept pace (2/2)
Residential Commercial Industrial
Low High Low High Low High
Brunei
Darussalam
3.82 19.11 3.82 15.29 3.82 3.82
Cambodia 8.54 15.85 11.71 15.85 11.71 14.63
Indonesia 4.6 14.74 5.93 12.19 5.38 10.14
Lao PDR 3.34 9.59 8.8 10.36 6.23 7.34
Malaysia 7.26 11.46 9.67 11.1 7.83 10.88
Myanmar 3.09 3.09 6.17 6.17 6.17 6.17
Philippines 21.1 24.83 19.93 22.94 18.15 19.37
Singapore 19.76 19.76 10.95 18.05 10.95 18.05
Thailand 5.98 9.9 5.55 5.75 8.67 9.43
Viet Nam 2.91 9.17 4.38 15.49 2.3 8.32
Electricity tariffs in Viet Nam and ASEAN, 2014
Source: JICA (2014)

50. The government estimates that USD 170 bi is needed over
2011-2020 for the development of essential infrastructure
Source: World Bank (2014)
• Prominent on the agenda
• Historically, investment has been
state-led and high by international
standards
• Yet, estimated investment needs
amount to 10% of GDP 2011-2020
• 10-Year SEDS 2011-2020: need to
create economic conditions for PPI
• Despite the many attempts in the
past, private participation has been
limited
• Limited interest from foreign investors
0.00
20.00
40.00
60.00
80.00
100.00
120.00 Cumulative investment, 2000-2014,2014 US$, Billion
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
20
40
60
80
100
120
China Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Thailand Vietnam
energy telecoms transport water and sanitationand mostly concentrated in the power sectorPrivate participation has been limited…
nvestment, 2000-2014,2014 US$, Billion
70%
80%
90%
100%
energy telecoms transport water and sanitation
Billion
80%
90%
100%
telecoms transport water and sanitation
100%
water and sanitation
90%
100%
transport water and sanitation

51. • State budget, SOEs, ODA, and government bonds estimated to
meet only half of the required investments
• But plan should not be grounded on a fiscal motivation:
‒ PPPs will not solve the infrastructure investment gap (users or taxpayers
still have to pay)
‒ Moreover, government support will likely continue to be needed to
mobilise resources from the private sector
‒ PPI can help to increase the efficiency of infrastructure delivery under
appropriately competitive environment
‒ The case for PPP should rely on its ability to generate greater value for
money than the public provision alternative
‒ In the past, most projects undertaken without competitive tendering
The government expects the private sector to meet nearly
half of estimated investment needs

52. The new Law on Public-Private Partnership: renewed
attempt to modernise the regulatory framework for PPI
• The new framework consolidates the previous fragmented
framework
• Brings some key regulatory and institutional improvements:
– Clearer procedures for project formulation and implementation
– Expanded type and sector scope
– PPP steering committee and PPP unit within the MPI (not a guarantee of
success, but facilitates bringing necessary resources together)
– Project Development Facility (support project preparation and tendering)
– Viability Gap Funding (greater flexibility for its use)
– International competitive bidding as the rule

53. • Success of the new PPP framework will depend on its implementation
– Clarity needed on principles and rules governing some key issues (e.g.
government support, risk allocation, renegotiation and termination)
– Need to be addressed in regulations, guidance documents or standard contract
model
• There is also a need to improve planning and assessment of projects
so as to secure value for money in infrastructure delivery
– In the past, poor prioritisation led to projects with low economic returns
• Continue efforts to bring prices to cost-reflective levels (e.g. electricity)
• Mover forward with the SOE reforms to ensure a level playing field
– Number of SOEs in infrastructure sectors remains high and corporate
governance practices remain deficient sometimes
But some remaining challenges may still constitute a
deterrent factor to attracting more qualified investors

54. • The government has taken some key steps to institute a
policy environment for green investment (e.g. Green
Growth Strategy 2012)
• The Power Master Plan VII is the cornerstone of renewable
energy development; it provides the legal framework and
sets long-term goals for renewable energy investments
• But challenges impede clean energy investments:
• Difficult access to finance
• Lack of competition in electricity markets
• Tariff-setting not systematic
• Fossil fuel subsidies create a barrier for renewable energies
The government is developing a policy
framework for green growth

55. RESPONSIBLE BUSINESS
CONDUCT

56. Scope and importance of RBC
Relevance for policy-making
Responsible business conduct at the OECD
Global developments
Opportunities in Viet Nam

57. • Goes beyond philanthropy
• Focuses on addressing environmental and social impacts of
business operations
• Part of core business and risk management, including in the
supply chain and business relationships
• Important for all businesses
RBC – Focus on Impact
ensuring a positive contribution to overall developmentResponsible
Business
Conduct avoiding and addressing negative impacts
1
2

58. • Urgent need to address issues in global supply
chains
• Need for inclusive and sustainable growth
• Complex issues not solvable by any one actor
alone
RBC – Focus on Impact

59. Clothing exports of selected economies (1990 vs. 2014)
% of total world exports (1990 vs. 2014)
Data source: World Trade Organisation
Mexico
Turkey
China
India
Indonesia
Bangladesh
Viet Nam
Pakistan

60. Textile & Garment Sector Supply Chain
Yarn Spinning
Weaving, knitting
Dyeing, printing,
Finishing
Garment
Manufacturing
Brands, Buying houses,
Trading companies
RetailRaw material
production

61. Textile & Garment Sector Supply Chain
Aggravating factors
Fast fashion & low
prices
Short-term contracts
Purchasing
practices Business
models
Illegal sub-
contracting
Use of temporary
workers,
homeworkers,
migrant workers
Sumangli scheme
Small holder
farmers;
Use of temporary
workers
Inflexible delivery
dates
Business models
Forced & bonded labour
Child labour
Occupational health & safety
Excessive working hours
Freedom of Association &
Collective bargaining
Wages
Chemical use & water
contamination
Example salient risks

62. Multi-stakeholder approach to RBC
Improving the
business
environment
Protecting public
interest and
stakeholder rights
Overcoming country
risk perceptions
Social licence to
operate and risk
management
Compliance/
respecting
stakeholder rights
Competitiveness
and market access
Ensuring
accountability/
respect of rights
Framework to resolve
issues proactively and
constructively
Shared understanding
of responsibilities
Government Businesses Civil Society

63. RBC at the OECD
• OECD Guidelines for Multinational
Enterprises
– Clear role for home governments
– Accountability
– Sector Guidances
• RBC in the Policy Framework for
Investment and other policy areas
– Development policy and co-operation;
corporate governance; competition;
taxation; finance
• Outreach and dialogue

64. • Most comprehensive government-backed international instrument for
promoting responsible business conduct
• Recommendations from governments to businesses operating in or
from adhering countries
• Purpose: to ensure business operations are in harmony with
government policies; strengthen the basis of mutual confidence with
the society; help improve foreign investment climate; enhance
contribution to sustainable development
• Unique implementation mechanism
• Endorsed by business, trade unions and civil society organizations
OECD Guidelines for Multinational
Enterprises

65. Application of the Guidelines

66. Concepts and Principles
General Policies
Disclosure
Human Rights
Employment and Industrial Relations
Environment
Combating Bribery, Bribe Solicitation and Extortion
Consumer Interests
Science and Technology
Competition
Taxation
Scope

67. Implementing the Guidelines:
Shared Responsibility
Implement the Guidelines and
encourage their use by
businesses (domestic and
foreign)
Provide a policy environment
that supports and promotes
responsible business conduct
Set up National Contact Points
for the Guidelines
Maximise positive impacts,
minimise adverse impacts
Carry out due diligence to
identify, prevent and mitigate
actual and potential adverse
impacts
Cover not only impacts related to
own operations; but also in the
supply chain and business
relationships
Responsibilities of
Governments
Responsibilities of
Businesses

68. • One of the main global non-judicial mechanisms
and a significant contribution to improving access to
remedy in case RBC principles and standards are
not observed
• Mandate:
– Help resolve practical issues through dialogue and
consensus
– Promote RBC and actively engage with stakeholders
– Identify areas where additional guidance for
businesses might be needed (i.e. sectors, regions, etc.)
– Report on activities
Implementing the Guidelines:
National Contact Points

69. Implementing the Guidelines:
National Contact Points
1%
3%
3%
3%
3%
4%
4%
4%
4%
6%
6%
11%
17%
34%
Water supply; sewerage, waste management and…
Human health and social work activities
Accommodation and food service
Construction
Transportation and storage
Other
Information and communication
Other service activities
Electricity, gas, steam and air conditioning supply
Agriculture, forestry and fishing
Wholesale and retail trade
Financial and insurance activities
Mining and quarrying
Manufacturing
Percentage of cases by industry sector
1%
2%
3%
5%
6%
8%
15%
21%
24%
45%
55%
Science and technology
Taxation
Competition
Consumer interests
Concepts and principles
Combating bribery, bribe solicitation and extortion
Disclosure
Environment
Human rights
General policies
Employment and industrial relations
Percentage of cases by theme

70. Implementing the Guidelines:
Guidance for Business
OECD Due Diligence Guidance for Responsible
Mineral Supply Chains (2011)
OECD Due Diligence Guidance for Meaningful
Stakeholder Engagement in the Extractive
Sector
OECD-FAO Guidance for Responsible
Agricultural Supply Chains
OECD Due Diligence Guidance for Responsible
Supply Chains in the Garment & Footwear
Sector (forthcoming)
Responsible Business Conduct in the Financial
Sector (forthcoming)

71. • Unifies and help enterprises
observe the OECD Guidelines
and other major agriculture
standards
• Recognition of financial
enterprises as part of the value
chain
• Developed through a multi-
stakeholder advisory group
• Two main sections:
– What - A model enterprise
policy
– How - A five-step framework for
risk-based due diligence
Building Responsible Agricultural
Supply Chains

72. What: Model Enterprise Policy

73. • Establish and maintain, in co-ordination with responsible government agencies
and third parties as appropriate, an environmental and social management
system appropriate to the nature and scale of operations
• Prevent, minimise and remedy pollution and negative impacts on air, land, soil,
water, forests and biodiversity, and reduce greenhouse gas emissions
• Ensure the sustainable use of natural resources and increase the efficiency of
resource use and energy
• Hold good-faith, effective and meaningful consultations with communities
before initiating operations
• Ensure decent wages, benefits and working conditions, that are at least
adequate to satisfy the basic needs of workers and their families
Some examples

74. How: Framework for Due Diligence
• Identify, assess, mitigate, prevent and address actual
and potential adverse impacts
Step 1
• Establish strong company management systems
Step 2
• Identify, assess and prioritise risks in the supply chain
Step 3
• Design and implement a strategy to respond to identified risks
Step 4
• Verify supply chain due diligence
Step 5
• Report on supply chain due diligence

75. Production Aggregation Processing Distribution
On-farm enterprises
Agricultural production and near-farm
basic processing
Downstream enterprises
Aggregation, processing, distribution and marketing of agri-food
products
Financial enterprises
Corporate and institutional investors less directly involved than above but provide them with capital
Cross-cutting enterprises
Tenure rights
Animal welfare
Animal welfare
Human rights Food security &
nutrition
Labor
rights
Health Governance
Environmental
protection &
sustainable use
of resources
Technology &
innovation
CROSS-
CUTTING
RISKS
STAGES
SPECIFIC
RISKS
ENTER-
PRISES

76. • Convergence and coherence on RBC since 2011
– OECD Guidelines for Multinational Enterprises
– UN Guiding Principles on Business and Human Rights
– Core ILO conventions
• Sustainable Development Goals and Paris Agreement
• Integration in numerous international, regional and domestic commitments:
– G7 leaders statement
– UNSC Resolutions
– Trade agreements and bilateral investment treaties
– Market access provisions
– EU CSR Strategy and new directives
– National strategies: UK Modern Slavery Act, French legislative developments, U.S.
regulations/National Action Plan, Dutch agreement on textiles, Chinese guidelines
– ASEAN practice differs country to country
• Increasing integration of RBC in development finance, by investors, stock
exchanges, banks, pension funds, and sovereign wealth funds
Attention to RBC Increasing Globally

77. Promoting and enabling RBC is an
opportunity in Viet Nam
• Awareness of RBC expectations is not wide-spread; some activities undertaken by
private sector/civil society, focus on philanthropy and promotion
• Partial alignment with international principles and standards in areas related to RBC
• State-of-the-art legislation in some areas, but implementation remains a challenge
• Recent international commitments include a reference to and recognition of
importance of RBC
• Primary responsibility for ensuring that investment contributes to inclusive and
sustainable growth and that stakeholder rights are protected rests with the
government of Viet Nam
• International investors should observe the OECD Guidelines and UN Guiding
Principles
• Scope for promoting RBC in export-oriented production; RBC expectations are
prevalent throughout global value chains
• RBC could bring particular advantages as Viet Nam shifts to more value added
sectors; improving skills and building local capacity is a part of RBC

78. stephen.thomsen@oecd.org
alexandre.decrombrugghe@oecd.org
tihana.bule@oecd.org
THANK YOU!