FOREIGN INVESTMENT: WHAT YOU NEED TO KNOW
When making an investment in Vietnam, foreign
investors must study the feasibility of the project based on various factors.
One of them is that the investor must make sure if the business sectors they
plan to operate in are permitted by the laws of Vietnam or satisfy regulatory
conditions and requirements.
Foreign direct investment prohibition
In December 2014, Vietnam passed Investment Law No 67/2014/QH13
dated November 26, 2014, (Investment Law 2014) with various changes aiming to
boost the investment environment. Inter alia, a highlight is that Vietnam has
been implementing a “negative list” to replace the “positive list,” as
previously approached, which means that foreign businesses are allowed to
operate in all areas except for six prohibited sectors:
- Dealing with certain types of drugs
- Dealing with certain types of chemicals or minerals
- Dealing with a range of specimens of wild fauna or flora
included in Schedule 1 of the Convention on International Trade in Endangered
Species and specimens of species of endangered and rare wild fauna or flora in
the natural origin Category 1
- Business in prostitution
- Purchase or sale of humans, tissues or parts of the human body
- Activities relating to asexual reproduction
- Firecracker business
The barriers are also
provided in Vietnam’s WTO Commitments. Sectors closed to foreign direct
investment according to Vietnam’s WTO commitments include:
- Refuse collection
directly from households
- Sales and marketing of
air product services, computer reservation services (airlines may provide these
services through their ticketing offices or agents)
- Veterinary services
(natural persons engaging in private professional practice under the
authorisation of veterinary authorities)
- Outbound services of
travel agents and tour operators
Conditional foreign direct investment
In addition to these, Investment Law 2014 promulgates a list of
267 sectors that are opened to foreign investment, provided the investors
satisfy certain conditions, such as the amount of capital, ownership percentage
and investment form, among others, as prescribed by the domestic laws.
Accordingly, foreign investors and foreign-owned companies may be subject to
different licensing procedures and formalities.
Recently, the Foreign Investment Agency of the Ministry of
Planning and Investment published the list of foreign investment conditions on
website.
The website centralises the investment conditions that foreign
investors need to comply with, including details on the conditions applicable
to 18 services and business sectors in which foreign investment is deemed to be
“conditional”.
Foreign direct investment limitation
Foreign investment ownership permitted in a project depends on a
number of factors, including Vietnam’s international commitments and the
sectors in question. Details of the limitation are mainly provided in Vietnam’s
WTO Commitments and some local laws which govern a number of business sectors.
The following sectors are those where foreigner investment ownership is limited
according to Vietnam’s WTO Commitments:
- Advertising services
with no minimum Vietnamese shareholding threshold in the joint venture
- Services incidental to
agriculture, hunting and forestry with minimum Vietnamese shareholding
threshold of 49 per cent
- Telecommunication
services (including basic services and value-added services) with minimum
Vietnamese shareholding threshold ranging from 30 per cent to 51 per cent, and
depending on the relevant services
- Motion picture
production, distribution and projection service with minimum Vietnamese
shareholding threshold of 49 per cent
- Banking services
(foreign investor acquiring shares of a Vietnamese commercial joint stock bank
is only allowed to hold 30 per cent of the charter capital of the target bank,
unless the government has granted special approval for bigger foreign
ownership)
- Travel agencies and tour
operator services with no minimum Vietnamese shareholding threshold in a joint
venture
- Entertainment services
(theatre, live bands and circus services) with minimum Vietnamese shareholding
threshold of 51 per cent
- Electronic games
business with minimum Vietnamese shareholding threshold of 51 per cent
- Operating a fleet under
the national flag of Viet Nam with minimum Vietnamese shareholding threshold of
51 per cent
- Container handling
services with minimum Vietnamese shareholding threshold of 50 per cent
- Customs clearance
services with no minimum Vietnamese shareholding threshold in the joint venture
- Internal waterways
transport with minimum Vietnamese shareholding threshold of 51 per cent
- Rail transport services
with minimum Vietnamese shareholding threshold of 51 per cent
- Freight transportation
services by road with minimum Vietnamese shareholding threshold of 49%.
- Other services auxiliary
for all modes of transport (part of CPC 749) with no minimum Vietnamese
shareholding threshold in the joint venture.
In addition to the list, foreign investment is also subject to a
broad range of conditions and limitations set forth by the local regulations,
especially those that are not specified or provided in detail in Vietnam’s WTO
Commitments. An in-depth research into local laws is highly recommended to
avoid any unexpected situation during the execution of any investment plan.
"Source: Vietnamnews.vn"
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