VI. An analysis on Vietnam’s commitments in FTAs
6.3. Vietnam’s commitment on investment in trade in services chapters
The principles and commitments of member states on services are set out in the Trade in Services Agreement under AKFTA or in the Trade in Services Chapter under AANZFTA and they cover all the services sectors. Meanwhile, Trade in Services Agreement (TiSA) of ASEAN is now still in the negotiation process. Nevertheless, ASEAN Member States have stepped up liberalization of trade in services through their own packages of commitments under the framework of AFAS, which was signed in 1995. In which, financial services and air transports are regulated in separate packages. From 1996 to 2015, ASEAN countries have negotiated and issued 9 packages of commitments for Trade in services, 6 packages for Financial Services and 8 packages for Air Transport Services. The following packages have a higher level of commitment than the Prior Commitment Package to achieve the service liberalization objectives set out in the AEC Blueprint. Generally, with regards to liberalization principles, all three FTAs commit to grant their parties equality and non-discrimination based on MFN and NT provisions. However, specific commitments on market access for commercial presence (Mode 3) in each sectors and sub-sectors are different between them.
There are two techniques that are used to make commitments and exceptions in schedules by parties in each FTA, including positive list and negative list. In the case of positive list approach, a Party specifically lists all sectors and subsectors in which it take on commitments on market access and national treatment, and lists all exceptions or conditions which indicate limitations on market access or national treatment. In the other approach, negative list, a Party list only sectors and subsectors in which it reserves all measures that would limit the effectiveness of liberalization of market access or national treatment principles. All sectors or sub-sectors which are not in the list are opened to foreign suppliers with the same conditions for domestic suppliers. Like the trend of Asian countries, these three FTAs of ASEAN take a positive list approach (bottom-up) for commitments on market access and national treatment,
29 even the agreement with Korea which often take the NAFTA-form with the negative list in its FTAs (Finlay, Ochiai & Dee, 2009). The extent of liberalization actually depends more on the content of the agreement and in particular the sectoral reservations than on its format. However, the use of the negative list will be more transparent than the positive list approach in determining which industries are restricted in an agreement.
In services schedule, horizontal commitments are stated in the first part and must be taken into account in analysis of sectoral commitments because they are applied and affected to all of sectors and sub-sectors in the second part of schedule. Generally, horizontal commitment specifies restriction in each mode of supply, but the more common and significant limitations are usually related to commercial presence (Mode 3) and the presence of natural persons (Mode 4) (WTO, 2018). In case of Vietnam, the horizontal commitments under the three FTAs with regards to direct investment are similar to its commitments under WTO. In which, foreign suppliers are offered full market access to establish commercial presence in form of business co- operation contract, joint venture enterprise and 100% foreign-invested enterprise unless otherwise accorded in each specific sector or sub-sector. Besides that, while Vietnam has committed to allow foreign enterprise to establish representative offices, it has no commitments on establishment of branches. All sectors and sub-sectors of schedule are regulated under these above commitments, unless otherwise stated in each specific sector and sub-sector.
In respect of specific commitments, the commitments of Vietnam under AFAS are considered wider than AKFTA and AANZFTA because Vietnam take greater obligations on market access and national treatment for other ASEAN countries than what they offered in their commitments under their accession to WTO6 and AKFTA, AANZFTA, in term of the numbers of sectors and sub-sectors7 in which it commits to open as well as the degree of liberalization.
In general, most of the services sectors and sub-sectors are committed to open by Vietnam government. However, the extent of liberalization are different between the three FTAs. In particular, Vietnam’s commitments under AKFTA and AANZFTA are just equal or even less
6In the 9 Packages of Commitments of Vietnam under AFAS, the packages from 1st to 7th have lower or just equal degree of liberalization to its commitments under WTO. However, in the 8th packages (2010), some of sectors and sub-sectors have higher commitments than in WTO and new commitments are inscribed in some sub-sectors. The 8th packages is used in this study.
7 Based on the Services Sectoral Classification List (MTN.GNS/W/120 or W/120). W120 is the list of sectors and sub-sectors which are covered under GATS. This WTO document is based on Provisional Central Product Classification (CPC) (1991) which is broad and comprehensive classification covering both goods and services, prepared by United Nations (CPCv2.1)
30 than its commitments under WTO in term of market access of Mode 3 in trade in services. By contrast, despite some commitments made by Vietnam in the accession process of WTO are not committed under AFAS, the openness for investors from ASEAN countries is wider than AKFTA and AANZFTA. In the group of services sectors, sub-sectors that Vietnam has committed to liberalize, the restrictive levels vary, from full to narrow market access.
- Services sectors with commitments on fully market access
Full commitment means that Member does not seek in any way to limit market access or national treatment in a given sector and mode of supply through measures inconsistent with Articles XVI (Market Access) and XVII (National Treatment) of GATS. However, any relevant limitations listed in the horizontal section of the schedule will still apply. Table 1 lists the sectors and sub-sectors with commitment on full of market access in the three FTAs.
Table 1. Sector/Subsector with commitment on full of market access
Sector/Subsector (CPC code) AEC AANZ AK
BUSINESS SERVICES
Legal Services (CPC 861) Accounting, auditing and bookeeping services (CPC 862) Taxation Services (CPC 863)
Architectural services (CPC 8671) Engineering services (CPC 8672)
Integrated engineering services (CPC 8673)
Urban planning and landscape architectural services (CPC 8674)
Consultancy services related to the installation of computer hardware (CPC 841)
Software implementation services (CPC 842) Data processing services (CPC 843)
Data base services (CPC 844)
X X X
Computer and related services (CPC 845; CPC 849) R&D services on natural sciences (CPC 851)
Relating to aircraft (CPC 83104)
Market research and public opinion polling services (864) Management consulting service (CPC 865)
Services related to man. Consulting (CPC 866)
Related scientific and technical consulting services (CPC 86751, 86752, 86753)
31 CONSTRUCTION AND RELATED
ENGINEERING SERVICES
General construction work for buildings (CPC 512)
General construction work for civil engineering (CPC 513) Installation and assembly work (CPC 514; 516)
Building completion and finishing work (CPC 517) Pre-erection Work at Construction Site (CPC 511) Special Trade Construction (CPC 515)
Renting services related equipment for Construction or Demolition of Building or Civil Engineering Works with Operator (CPC 518)
X X X
DISTRIBUTION SERVICES
Franchising (CPC 8929) X X X
EDUCATIONAL SERVICES Higher education services (CPC 923)
Adult education (CPC 924)
Other education services (CPC 929)
X X X
ENVIRONMENTAL SERVICES Sewage services (CPC 9401)
Refuse disposal services (CPC 9402)
Cleaning services of exhaust gases (CPC 94040) Noise abatement services (CPC 94050)
Environmental impact assessment services (CPC 9409)
X X X
Sanitation and similar services (CPC 9403) X O O
Nature and landscape protection services (CPC 9406) X O O
HEALTH RELATED AND SOCIAL SERVICES Hospital services (CPC 9311)
Medical and Dental services (CPC 9312) X X X
TOURISM AND TRAVEL RELATED SERVICES
Hotels and restaurants (incl. catering) (CPC 641- 643) X X X TRANSPORT SERVICES
Maritime Transport Services Customs clearance services
Container station and Depot services
X X X
Services auxiliary to all modes of transport Storage and warehouse services (CPC 742) Freight transport agency services (CPC 748)
X X X
Internal Waterways Transport Rental of aircraft with crew (CPC 734) Aircraft Leasing without Crew
Air Freight forwarding services X
O O
Sales and marketing air products services Narrow Narrow
Computer reservation services (CPC 7523) X X
32 OTHER
Laundry collection services (CPC 97001) Dry cleaning services (CPC 97013) Pressing services (CPC 97014)
O X O
Note: X – Full of market access
Narrow – Narrow market access O - No commitment
The sectors and sub-sectors that Vietnam fully open for all investors under three FTAs are those that require specialized expertise and high skills, such as Professional Business Services sector, or those that Vietnam wants to attract investment for infrastructure development, like construction and engineering services, or those that Vietnam wants to socialize like education, environmental and tourism-related sectors. Besides that, there are sub-sectors that Vietnam commits to fully liberalize under AFAS but not commit under AKFTA, AANZ and also WTO, including Sanitation and similar services (CPC 9403), Nature and landscape protection services (CPC 9406), and sub-sectors in the 7th package of commitments on air transport, including Rental of aircraft with crew (CPC 734), Aircraft Leasing without Crew, and Air freight forwarding services. For Sales and marketing air products services, it opens fully for AEC but still put a limit on under AKFTA and AANZFTA.
- Services sectors with wide market access
Wide market access are committed for the following sectors in 3 FTAs:
Table 2. Sector/Subsector with wide market access Sector/Subsector (CPC code)
Business services
Advertising services (CPC 871)
Technical testing and analysis services (CPC 8676) Service incidental to manufacturing (CPC 884, 885)
Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment (CPC 633)
Distribution services
Commission agents services (CPC 621)
33 Wholesale trade services (CPC 622)
Retailing services (CPC 631 – 632) Tourism and travel related services
Travel agencies and tour operators services (CPC 7471) Educational services (Only AANZFTA)
Higher secondary education services (part of CPC 9222)
Technical and vocational secondary education services (part of CPC 9223)
These are service sectors are not much serious restrictions in operating, limitation capital or form of foreign investors. There are some restrictions, such as access to certain geographic areas may be restricted for national security reasons in Technical testing and analysis services, the establishment of outlets for retail services shall be allowed on the basis of an Economic Needs Test in Distribution services, or foreign investors can provide services in the form of joint ventures with Vietnamese partners without limitation on foreign capital contribution. In educational services, while Vietnam commit narrow market access with limitation of study fields, it offer many more additional fields for investors under AANZFTA. Besides that, it has no commitments on Secondary education services (CPC 922) under three FTAs, but it open only for AANZFTA on Higher secondary education services (CPC 9222) and Technical and vocational secondary education services (CPC 9223).
- Services sectors with narrow market access
Vietnam has a greater number of service sectors, sub-sectors with narrow market access commitments under the three FTAs. Among these sectors, there are many sub-sectors that Vietnam commit to open under AFAS but not under AKFTA and AANZFTA, which are listed in the following table:
Table 3. Sector/Subsector with narrow market access
Sector/Subsector (CPC code) AEC AANZ AK Note
BUSINESS SERVICES
Veterinary services (CPC 932) O x x WTO
Leasing and rental services relating to other
machinery and equipment (CPC 83109) x O O
Production management consulting services (CPC x O O
34 86505)
Services incidental to agriculture, hunting and
forestry (CPC 881) O x x WTO
Services incidental to mining (CPC 883) O x x WTO
Portrait photography services and Special photography services except aerial photography (CPC 87504)
x O O
Packaging services (CPC 876) x O O
Printing, publishing (CPC 88442) x O O
COMMUNICATION SERVICES
Courier services (CPC 7512) x x x
Telecommunication services x x x
Audiovisual services x x x
Motion picture production (CPC 96112,
exclude video tape) x x x
Motion picture distribution (CPC 96113,
exclude video tape) x x x
Motion picture projection service (96121) x x x
FINANCIAL SERVICES
All insurance and insurance-related services (CPC 812**)
Banking and other financial services (excl.
insurance) Securities
x x x
HEALTH RELATED AND SOCIAL SERVICES (other than those listed under 1.A.h-j.)
Other Human Health Services (CPC 9319) x O O
Veterinary Services (CPC 932/9320) x O O WTO
Social Services (CPC 933) x O O
RECREATIONAL, CULTURAL AND
SPORTING SERVICES (other than audiovisual services)
Entertainment services (including theatre, live and circus services) (CPC 9619)
Sporting and other recreational services cultural services (CPC 964)
x x x
TRANSPORT SERVICES Maritime Transport Services
Passenger transportation (CPC 7211) x x x
Freight transportation (CPC 7212) x x x
Rental of vessels with crew (CPC 7213) x O O
Maintenance and repair of vessels (CPC 8868*) x O O
Maritime Agency Services (CPC 7454) x O O
Container handling services (CPC 7411) x x x
Internal Waterways Transport
35
Passenger transportation (CPC 7221) x x x
Freight transportation (CPC 7222) x x x
Maintenance and repair of vessels (CPC 8868*) x O O Air Transport Services
Maintenance and repair of aircraft (CPC 8868**) x x x Rail Transport Services
Freight transportation (CPC 7112) x x x
Maintenance and repair of rail transport equipment
(CPC 8868) x O O
Road Transport Services
Passenger transportation (CPC 7121+ 7122) x x x
Freight transportation (CPC 7123)
Services auxiliary to all modes of transport
Cargo-handling services (CPC 741) x O O
Container handling services, except services
provided at airports (part of 7411) x x x
Container handling services (CPC 7411) x O O
Others (including bill auditing; freight brokerage services; freight inspection, weighing and sampling services; freight receiving and acceptance services;
transportation document preparation services. (part of 749)
x x x
Note: X – Narrow market access O - No commitment
It can be seen the group of services with narrow market access are sectors which are closely related to public interest, like social services, cultural, security; sectors which are sensitive such as communication, human health, financial; or sectors that Vietnam has weak competitiveness like transport services. In this group, there are 15 sub-sectors that Vietnam commits to open for investors of ASEAN under AFAS but not for investors under AKFTA and AANZFTA. They are mainly belong to business services and transport sectors. Besides that, freight transportation (CPC 7112) in rail transport services sector has wider commitments under AFAS (join venture with Vietnamese partners with limitation at 51% of foreign capital) than its commitments under AKFTA and AANZFTA (same form of foreign investors but with limitation at 49% of foreign capital). Whereas, only few subsectors are opened for AKFTA and AANZFTA but not for ASEAN. It is notable that for some subsectors not committed under these FTAs but under WTO, investors from the country which is member of WTO still have market access in these sectors.
36 With regard to form of restrictions remained in the commitments on market access in these service sectors, restriction on form of foreign investors (business cooperation contract, joint venture), restriction on the foreign capital (ranging from 30% to 70%), restriction on the Vietnamese partners and foreign juridical person in relative service sectors are mainly imposed.
- Services sectors without commitments on market access
Although Vietnam’s commitments to open cover most covers most of the services sectors and sub-sectors, there are still many sub-sectors that Vietnam has no commitment under three FTAs. As mentioned earlier, all three FTAs use a positive list approach, meaning that the commitments are applied only to the sectors listed in the schedule of specific commitments of each countries, while sub-sectors not committed to open are not listed. It is, therefore, difficult to exactly determine the sub-sectors without commitments on market access. Based on W/120, Vietnam has not committed to open the following sub-sectors under all three FTAs:
Table 4. Sector/Subsector with no commitment on market access Sector/Subsector (CPC code)
BUSINESS SERVICES Professional services
Services provided by midwives, nurses, physiotherapists and para-medical personnel (CPC 93191)
R&D services on social sciences and humanities (CPC 852) Interdisciplinary R&D services (CPC 853)
Real Estate Services
Involving own or leased property (CPC 821) On a fee or contract basis (CPC 822)
Rental/Leasing Services without Operators Relating to ships (CPC 83103)
Relating to other transport equipment (CPC 83101; 83102; 83105) Relating to other machinery and equipment (CPC 83106 – 83109) Other Business Services
Services incidental to fishing (CPC 882) Services incidental to mining (CPC 5115)
Services incidental to energy distribution (CPC 887) Convention services (CPC 87909*)
Placement and supply services of Personnel (CPC 872) Investigation and security (CPC 873)
Related scientific and technical consulting services (CPC 8675) Building-cleaning services (CPC 874)
Photographic services (CPC 875) Convention services (CPC 87909*)
37 Other (CPC 8790)
COMMUNICATION SERVICES Postal services (CPC 7511)
Audiovisual services
Motion picture projection service (CPC 9612) Radio and television services (CPC 9613)
Radio and television transmission services (CPC 7524) Sound recording
EDUCATIONAL SERVICES Primary education services (CPC 921)
Secondary education services (CPC 922)
TOURISM AND TRAVEL RELATED SERVICES Tourist guides services (CPC 7472)
RECREATIONAL, CULTURAL AND SPORTING SERVICES (other than audiovisual services)
News agency services (CPC 962)
Libraries, archives, museums and other (CPC 963) TRANSPORT SERVICES
Maritime Transport Services
Pushing and towing services (CPC 7214)
Supporting services for maritime transport (CPC 745**) Internal Waterways Transport
Rental of vessels with crew (CPC 7223) Pushing and towing services (CPC 7224)
Supporting services for internal waterway transport (CPC 745**) Air Transport Services
Passenger transportation (CPC 731) Freight transportation (CPC 732)
Supporting services for air transport (CPC 746) Space Transport (CPC 733)
Rail Transport Services
Passenger transportation (CPC 7111) Pushing and towing services (CPC 7113)
Supporting services for rail transport services (CPC 743) Road Transport Services
Rental of commercial vehicles with operator (CPC 7124)
Maintenance and repair of road transport equipment (CPC 6122; 8867) Supporting services for road transport services (CPC 744)
Pipeline Transport
Transportation of fuels (CPC 7131)
Transportation of other goods (CPC 7139)
There are 47 sub-sectors of 160 sectors and sub-sectors listed in W/120 that Vietnam does not have any market access commitments for foreign investors. These sectors are usually related
38 to sensitive issues such as human health, security, transport, real estate. Regardless of the fact that Vietnam has full space to apply any measures that prohibit or restrict foreign investors in the sectors that Vietnam has not committed to open, it does not mean that Vietnam does not allow foreign investors to access these sectors. For example, services provided by midwives, nurses, physiotherapists and para-medical personnel, building-cleaning services (874) or postal services (CPC 7511) are sub-sectors that Vietnam does not commit but in fact full of market access are provided for foreign investors in Vietnamese legislation (VCCI). However, there is still problem that the Vietnam’s policy on these sectors might make obstacles in competitiveness or might be uncertain for foreign investors.