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Legalities: Hotel & Resort Activity in Vietnam Recent changes in the laws governing foreign participation, sustained strong domestic economic growth, and the optimism reinforced by the country’s recent entry into the World Trade Organisation have been among the many factors combining to produce this whirlwind of activity.
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 Contributed by: Fred Burke, Managing Partner Baker & McKenzie, Vietnam
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These new laws, and Vietnam’s first ever Law on Securities, have also created new financing options for property developers, who have traditionally been very limited in their choices of debt and equity financing. There are still complications arising out of the use of “carried interests” in limited liability companies, but investors can chose from closely held to publicly listed vehicles, all of which can use some degree of pre-sale financing, as well as a variety of debt and mezzanine instruments emerging, with the old 70/30 debt/equity ratio having been abolished. management contract regulation Management contracts for international standard properties are no longer subject to uniform caps on fees and expenses; such contracts can now be negotiated on the basis of party autonomy according to the specifics of the particular property in question. Formerly, the registration of such contracts was a long and painful process, often more difficult than the negotiations between the owner and the manager. The new system also allows for more flexibility in terms of sub-contracts and specialty management contracts for particular facilities. gaming One area that has attracted particular interest, aside from the broad domestic and foreign interest in beach front developments, is gaming. Until recently, given that gambling is a criminal offence in Vietnam, the Government only allowed “electronic games of chance” in international hotels, where only foreign passport holders could participate. Recently, following a serious policy reconsideration stimulated by the new developments in Singapore, Macau and Cambodia, Vietnam is considering allowing a few, geographically separated, large scale “integrated resorts” including live table casinos. However, the number of applicants greatly exceeds the number of licenses the Government is likely to grant, so this remains an area of much speculation. continuing restrictions on sales to foreigners There are also remaining impediments to many of the things investors in the sector would like to achieve. There is demand for villa and condominium ownership in resort projects and for the time being only local Vietnamese citizens can buy what amounts to a form of “freehold” interest in land from either a foreign or domestic developer. Some small steps are being taken to open up the market to resident foreigners and “Overseas Vietnamese”, but these do not show signs yet of developing into an open market for such units. In the meantime, various forms of “virtual” ownership are emerging, and there is plenty of corresponding confusion in the marketplace about what can and cannot be done. In any event, Vietnam’s hotel and resort sector is set for a challenging and exciting period, as supply starts to catch up with demand, and as investors take advantage of the new legal forms of investing now open to them. RFP
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Key title: RFP magazine
Abbreviated key title: RFP mag.
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