1. Openness To, and Restrictions Upon, Foreign Investment
Policies Toward Foreign Direct Investment
Since Vietnam embarked on economic reforms in 1986 to transition to a market-based economy, the government has welcomed FDI, recognizing it as a key component of Vietnam’s high rate of economic growth over the last two decades. Foreign investments continue to play a crucial role in the economy: according to Vietnam’s General Statistics Office (GSO), Vietnam exported USD 281 billion in goods in 2020, of which 72 percent came from projects utilizing FDI.
The Politburo issued Resolution 55 in 2019 to increase Vietnam’s attractiveness to foreign investment. This Resolution aims to attract USD 50 billion in new foreign investment by 2030. In 2020, the government revised laws on investment and enterprise, in addition to passing the Public Private Partnership Law, to further the goals of this Resolution. The revisions encourage high-quality investments, use and development of advanced technologies, and environmental protection mechanisms.
While Vietnam’s revised Investment Law says the government must treat foreign and domestic investors equally, foreign investors have complained about having to cross extra hurdles to get ordinary government approvals. The government continues to have foreign ownership limits (FOLs) in industries Vietnam considers important to national security. In January 2020, the government removed FOLs on companies in the eWallet sector and reformed electronic payments procedures for foreign firms. Some U.S. investors report that these changes have provided more regulatory certainty, which has, in turn, instilled greater confidence as they consider long-term investments in Vietnam.U.S. investors continue to cite concerns about confusing tax regulations and retroactive changes to laws – including tax rates, tax policies, and preferential treatment of state-owned enterprises (SOEs). In 2020, members of the American Chamber of Commerce (AmCham) in Hanoi noted that fair, transparent, stable, and effective legal frameworks would help Vietnam better attract U.S. investment.
The Ministry of Planning and Investment (MPI) is the country’s national agency charged with promoting and facilitating foreign investment; most provinces and cities also have local equivalents. MPI and local investment promotion offices provide information and explain regulations and policies to foreign investors. They also inform the Prime Minister and National Assembly on trends in foreign investment. However, U.S. investors should still consult lawyers and/or other experts regarding issues on regulations that are unclear.
The Prime Minister, along with other senior leaders, has stated that Vietnam prioritizes both investment retention and ongoing dialogue with foreign investors. Vietnam’s senior leaders often meet with foreign governments and private-sector representatives to emphasize Vietnam’s attractiveness as an FDI destination. The semiannual Vietnam Business Forum includes meetings between foreign investors and Vietnamese government officials; the U.S.-ASEAN Business Council (USABC), AmCham, and other U.S. associations also host multiple yearly missions for their U.S. company members, which allow direct engagement with senior government officials. Foreign investors in Vietnam have reported that these meetings and dialogues have helped address obstacles.
Limits on Foreign Control and Right to Private Ownership and Establishment
Both foreign and domestic private entities have the right to establish and own business enterprises in Vietnam and engage in most forms of legal remunerative activity in non-regulated sectors.
Vietnam has some statutory restrictions on foreign investment, including FOLs or requirements for joint partnerships, projects in banking, network infrastructure services, non-infrastructure telecommunication services, transportation, energy, and defense. By law, the Prime Minister can waive these FOLs on a case-by-case basis. In practice, however, when the government has removed or eased FOLs, it has done so for the whole industry sector rather than for a specific investment.
MPI plays a key role with respect to investment screening. All FDI projects require approval by the provincial People’s Committee in which the project would be located. By law, large-scale FDI projects must also obtain the approval of the National Assembly before investment can proceed. MPI’s approval process includes an assessment of the investor’s legal status and financial strength; the project’s compatibility with the government’s long- and short-term goals for economic development and government revenue; the investor’s technological expertise; environmental protection; and plans for land use and land clearance compensation, if applicable. The government can, and sometimes does, stop certain foreign investments if it deems the investment harmful to Vietnam’s national security.
The following FDI projects also require the Prime Minister’s approval: airports; grade 1 seaports (seaports the government classifies as strategic); casinos; oil and gas exploration, production, and refining; telecommunications/network infrastructure; forestry projects; publishing; and projects that need approval from more than one province. In the period between this year’s Investment Climate Statement and last year’s, the government removed the requirement that the Prime Minister needs to approve investments over USD 271 million or investments in the tobacco industry.
Other Investment Policy Reviews
Recent third-party investment policy reviews include the World Bank’s Review from 2020: https://openknowledge.worldbank.org/handle/10986/33598
And OECD’s 2018 Review: https://www.oecd.org/countries/vietnam/oecd-investment-policy-reviews-viet-nam-2017-9789264282957-en.htm
UNCTAD released a report in 2009: https://unctad.org/webflyer/investment-policy-review-viet-nam
The World Bank’s 2020 Ease of Doing Business Index ranked Vietnam 70 of 190 economies. The World Bank reported that in some factors Vietnam lags behind other Southeast Asian countries. For example, it takes businesses 384 hours to pay taxes in Vietnam compared with 64 in Singapore, 174 in Malaysia, and 191 in Indonesia.
In May 2021, USAID and the Vietnam Chamber of Commerce and Industry (VCCI) released the Provincial Competitiveness Index (PCI) 2020 Report, which examined trends in economic governance: http://eng.pcivietnam.org/ . This annual report provides an independent, unbiased view on the provincial business environment by surveying over 8,500 domestic private firms on a variety of business issues. Overall, Vietnam’s median PCI score improved, reflecting the government’s efforts to improve economic governance and the quality of infrastructure, as well as a decline in the prevalence of corruption (bribes).
The government does not have a clear mechanism to promote or incentivize outward investment, nor does it have regulations restricting domestic investors from investing abroad. Vietnam does not release periodical statistics on outward investment, but reported that by the end of 2019 total outward FDI investment from Vietnam was USD 21 billion in more than 1,300 projects in 78 countries. Laos received the most outward FDI, with USD 5 billion, followed by Russia and Cambodia with USD 2.8 billion and USD 2.7 billion, respectively. SOEs like PetroVietnam, Viettel, and SOCB are Vietnam’s largest sources of outward FDI, and have invested more than USD 13 billion in outward FDI, per media reports.
3. Legal Regime
Transparency of the Regulatory System
U.S. companies continue to report that they face frequent and significant challenges with inconsistent regulatory interpretation, irregular enforcement, and an unclear legal framework. AmCham members have consistently voiced concerns that Vietnam lacks a fair legal system for investments, which affects U.S. companies’ ability to do business in Vietnam. The 2020 PCI report documented companies’ difficulties dealing with land, taxes, and social insurance issues, but also found improvements in procedures related to business administration and anti-corruption.
Accounting systems are inconsistent with international norms, and this increases transaction costs for investors. The government had previously said it intended to have most companies transition to International Financial Reporting Standards (IFRS) by 2020. Unable to meet this target, the Ministry of Finance in March 2020 extended the deadline to 2025.
In Vietnam, the National Assembly passes laws, which serve as the highest form of legal direction, but often lack specifics. Ministries provide draft laws to the National Assembly. The Prime Minister issues decrees, which provide guidance on implementation. Individual ministries issue circulars, which provide guidance on how a ministry will administer a law or decree.
After implementing ministries have cleared a particular law to send the law to the National Assembly, the government posts the law for a 60-day comment period. However, in practice, the public comment period is sometimes truncated. Foreign governments, NGOs, and private-sector companies can, and do, comment during this period, after which the ministry may redraft the law. Upon completion of the revisions, the ministry submits the legislation to the Office of the Government (OOG) for approval, including the Prime Minister’s signature, and the legislation moves to the National Assembly for committee review. During this process, the National Assembly can send the legislation back to the originating ministry for further changes. The Communist Party of Vietnam’s Politburo reserves the right to review special or controversial laws.
In practice, drafting ministries often lack the resources needed to conduct adequate data-driven assessments. Ministries are supposed to conduct policy impact assessments that holistically consider all factors before drafting a law, but the quality of these assessments varies.
The Ministry of Justice (MOJ) is in charge of ensuring that government ministries and agencies follow administrative procedures. The MOJ has a Regulatory Management Department, which oversees and reviews legal documents after they are issued to ensure compliance with the legal system. The Law on the Promulgation of Legal Normative Documents requires all legal documents and agreements to be published online and open for comments for 60 days, and to be published in the Official Gazette before implementation.
Business associations and various chambers of commerce regularly comment on draft laws and regulations. However, when issuing more detailed implementing guidelines, government entities sometimes issue circulars with little advance warning and without public notification, resulting in little opportunity for comment by affected parties. In several cases, authorities allowed comments for the first draft only and did not provide subsequent draft versions to the public. The centralized location where key regulatory actions are published can be found here: http://vbpl.vn/ .
While general information is publicly available, Vietnam’s public finances and debt obligations (including explicit and contingent liabilities) are not transparent. The National Assembly set a statutory limit for public debt at 65 percent of nominal GDP, and, according to official figures, Vietnam’s public debt to GDP ratio in late 2020 was 55.3 percent – down from 56 percent the previous year. However, the official public-debt figures exclude the debt of certain large SOEs. This poses a risk to Vietnam’s public finances, as the government is liable for the debts of these companies. Vietnam could improve its fiscal transparency by making its executive budget proposal, including budgetary and debt expenses, widely and easily accessible to the general public long before the National Assembly enacts the budget, ensuring greater transparency of off-budget accounts, and by publicizing the criteria by which the government awards contracts and licenses for natural resource extraction.
International Regulatory Considerations
Vietnam is a member of ASEAN, a 10-member regional organization working to advance economic integration through cooperation in economic, social, cultural, technical, scientific and administrative fields. Within ASEAN, the ASEAN Economic Community (AEC) has the goal of establishing a single market across ASEAN nations (similar to the EU’s common market), but member states have not made significant progress. To date, AEC’s greatest success has been in reducing tariffs on most products traded within the bloc.
Vietnam is also a member of the Asia-Pacific Economic Cooperation (APEC), an inter-governmental forum for 21 member economies in the Pacific Rim that promotes free trade throughout the Asia-Pacific region. APEC aims to facilitate business among member states through trade facilitation programming, senior-level leaders’ meetings, and regular dialogue. However, APEC is a non-binding forum. ASEAN and APEC membership has not resulted in Vietnam incorporating international standards, especially when compared with the EU or North America.
Vietnam is a party to the WTO’s Trade Facilitation Agreement (TFA) and has been implementing the TFA’s Category A provisions. Vietnam submitted its Category B and Category C implementation timelines on August 2, 2018. According to these timelines, Vietnam will fully implement the Category B and C provisions by the end of 2023 and 2024, respectively.
Legal System and Judicial Independence
Vietnam’s legal system mixes indigenous, French, and Soviet-inspired civil legal traditions. Vietnam generally follows an operational understanding of the rule of law that is consistent with its top-down, one-party political structure and traditionally inquisitorial judicial system.
The hierarchy of the country’s courts is: 1) the Supreme People’s Court; 2) the High People’s Court; 3) Provincial People’s Courts; 4) District People’s Courts, and 5) Military Courts. The People’s Courts operate in five divisions: criminal, civil, administrative, economic, and labor. The Supreme People’s Procuracy is responsible for prosecuting criminal activities as well as supervising judicial activities.
Vietnam lacks an independent judiciary and separation of powers among Vietnam’s branches of government. For example, Vietnam’s Chief Justice is also a member of the Communist Party’s Central Committee. According to Transparency International, there is significant risk of corruption in judicial rulings. Low judicial salaries engender corruption; nearly one-fifth of surveyed Vietnamese households that have been to court declared that they had paid bribes at least once. Many businesses therefore avoid Vietnamese courts as much as possible.
The judicial system continues to face additional problems: for example, many judges and arbitrators lack adequate legal training and are appointed through personal or political contacts with party leaders or based on their political views. Regulations or enforcement actions are appealable, and appeals are adjudicated in the national court system. Through a separate legal mechanism, individuals and companies can file complaints against enforcement actions under the Law on Complaints.
The 2005 Commercial Law regulates commercial contracts between businesses. Specific regulations prescribe specific forms of contracts, depending on the nature of the deals. If a contract does not contain a dispute-resolution clause, courts will have jurisdiction over a dispute. Vietnamese law allows dispute-resolution clauses in commercial contracts explicitly through the Law on Commercial Arbitration. The law follows the United Nations Commission on International Trade Law (UNCITRAL) model law as an international standard for procedural rules.
Vietnamese courts will only consider recognition of civil judgments issued by courts in countries that have entered into agreements on recognition of judgments with Vietnam or on a reciprocal basis. However, with the exception of France, these treaties only cover non-commercial judgments.
Laws and Regulations on Foreign Direct Investment
The legal system includes provisions to promote foreign investment. Vietnam uses a “negative list” approach to approve foreign investment, meaning foreign businesses are allowed to operate in all areas except for six prohibited sectors – from which domestic businesses are also prohibited. These include illicit drugs, wildlife trade, prostitution, human trafficking, human cloning, and debt collection services.
The law also requires that foreign and domestic investors be treated equally in cases of nationalization and confiscation. However, foreign investors are subject to different business-licensing processes and restrictions, and companies registered in Vietnam that have majority foreign ownership are subject to foreign-investor business-license procedures.
The new Labor Code, which came into effect January 1, 2021, provides greater flexibility in contract termination, allows employees to work more overtime hours, increases the retirement age, and adds flexibility in labor contracts.
The Investment Law, revised in June 2020, stipulated Vietnam would encourage FDI, through incentives, in university education, pollution mitigation, and certain medical research. Public Private Partnership Law, passed in June 2020 lists transportation, electricity grid and power plants, irrigation, water supply and treatment, waste treatment, health care, education and IT infrastructure as prioritized sectors for FDI and private public partnerships.
Vietnam has a “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors: https://vietnam.eregulations.org/
Competition and Antitrust Laws
In 2018, Vietnam passed a new Law on Competition, which came into effect on July 1, 2019, replacing Vietnam’s Law on Competition of 2004. The Law includes punishments – such as fines – for those who violate the law. The government has not prosecuted any person or entity under this law since it came into effect, though there were prosecutions under the old law in the early 2000s. The law does not appear to have affected foreign investment. On March 24, 2020, Decree 35, the second decree to implement the Law on Competition, came into effect. Decree 35 addresses issues on anti-competitive agreements, abuse of dominance, and merger control. For merger control, the decree replaces the single market share threshold for when parties must notify a merger with an approach that puts forward four alternative benchmarks based on the value of assets, transaction value, revenue, and market share. The decree also provides details on merger filing assessment.
Expropriation and Compensation
Under the law, the government of Vietnam can only expropriate investors’ property in cases of emergency, disaster, defense, or national interest, and the government is required to compensate investors if it expropriates property. Under the U.S.-Vietnam Bilateral Trade Agreement, Vietnam must apply international standards of treatment in any case of expropriation or nationalization of U.S. investor assets, which includes acting in a non-discriminatory manner with due process of law and with prompt, adequate, and effective compensation. The U.S. Mission in Vietnam is unaware of any current expropriation cases involving U.S. firms.
ICSID Convention and New York Convention
Vietnam has not acceded to the International Center for Settlement of Investment Disputes (ICSID) Convention but is a member of UN Commission on International Trade Laws for the period 2019-2025. MPI has submitted a proposal to the government to join the ICSID, but the government has not moved forward on it. Vietnam is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), meaning that Vietnam courts should recognize foreign arbitral awards rendered by a recognized international arbitration institution without a review of cases’ merits.
Investor-State Dispute Settlement
Vietnam has signed 67 bilateral investment treaties, is party to 26 treaties with investment provisions, and is a member of 15 free trade agreements in force. Some of these include provisions for Investor-State Dispute Settlement. As a signatory to the New York Convention, Vietnam is required to recognize and enforce foreign arbitral awards within its jurisdiction, with few exceptions. Technically, foreign and domestic arbitral awards are legally enforceable in Vietnam; however, foreign investors in Vietnam generally prefer international arbitration for predictability. Vietnam courts may reject foreign arbitral awards if the award is contrary to the basic principles of domestic laws. The new Investment law provides that only Vietnam arbitration and courts can solve disputes between investors and government authorities, while investors can select foreign or mutually agreed arbitrations to solve their disputes.
According to UNCTAD, over the last 10 years, there were two dispute cases against the Vietnamese government involving U.S. companies. The courts decided in favor of the government in one case, and the parties decided to discontinue the other. The government is currently in two pending, active disputes (with the UK and South Korea). More details are available at https://investmentpolicy.unctad.org/investment-dispute-settlement/country/229/viet-nam.
International Commercial Arbitration and Foreign Courts
With an underdeveloped legal system, Vietnam’s courts are often ineffective in settling commercial disputes. Negotiation between concerned parties or arbitration are the most common means of dispute resolution. Since the Law on Arbitration does not allow a foreign investor to refer an investment dispute to a court in a foreign jurisdiction, Vietnamese judges cannot apply foreign laws to a case before them, and foreign lawyers cannot represent plaintiffs in a court of law. The Law on Commercial Arbitration of 2010 permits foreign arbitration centers to establish branches or representative offices (although none have done so).
There are no readily available statistics on how often domestic courts rule in favor of SOEs. In general, the court system in Vietnam works slowly. International arbitration awards, when enforced, may take years from original judgment to payment. Many foreign companies, due to concerns related to time, costs, and potential for bribery, have reported that they have turned to international arbitration or have asked influential individuals to weigh in.
Under the 2014 Bankruptcy Law, bankruptcy is not criminalized unless it relates to another crime. The law defines insolvency as a condition in which an enterprise is more than three months overdue in meeting its payment obligations. The law also provides provisions allowing creditors to commence bankruptcy proceedings against an enterprise and procedures for credit institutions to file for bankruptcy. According to the World Bank’s 2020 Ease of Doing Business Report, Vietnam ranked 122 out of 190 for resolving insolvency. The report noted that it still takes, on average, five years to conclude a bankruptcy case in Vietnam. The Credit Information Center of the State Bank of Vietnam provides credit information services for foreign investors concerned about the potential for bankruptcy with a Vietnamese partner.
4. Industrial Policies
Foreign investors are exempt from import duties on goods imported for their own use that cannot be procured locally, including machinery; vehicles; components and spare parts for machinery and equipment; raw materials; inputs for manufacturing; and construction materials. Remote and mountainous provinces and special industrial zones are allowed to provide additional tax breaks and other incentives to prospective investors.
Investment incentives, including lower corporate income tax rates, exemption of some import tariffs, or favorable land rental rates, are available in the following sectors: advanced technology; research and development; new materials; energy; clean energy; renewable energy; energy saving products; automobiles; software; waste treatment and management; and primary or vocational education.
The government rarely issues guarantees for financing FDI projects; when it does so, it is usually because the project links to a national security priority. Joint financing with the government occurs when a foreign entity partners with an SOE. The government’s reluctance to guarantee projects reflects its desire to stay below a statutory 65 percent public debt-to-GDP ratio cap, and a desire to avoid incurring liabilities from projects that would not be economically viable without the guarantee. This has delayed approval of many large-scale FDI projects.
Foreign Trade Zones/Free Ports/Trade Facilitation
Vietnam has prioritized efforts to establish and develop foreign trade zones (FTZs) over the last decade. Vietnam currently has more than 350 industrial zones (IZs) and export processing zones (EPZs). Many foreign investors report that it is easier to implement projects in IZs because they do not have to be involved in site clearance and infrastructure construction. Enterprises in FTZs pay no duties when importing raw materials if they export the finished products. Customs warehouse companies in FTZs can provide transportation services and act as distributors for the goods deposited.
Additional services relating to customs declaration, appraisal, insurance, reprocessing, or packaging require the approval of the provincial customs office. In practice, the time involved for clearance and delivery of goods by provincial custom officials can be lengthy and unpredictable. Companies operating in economic zones are entitled to more tax reductions as measures to incentivize investments.
Performance and Data Localization Requirements
Vietnamese law states that employers can only recruit foreign nationals for high-skilled positions such as manager, managing director, expert, or technical worker. Local companies must also justify that their efforts to hire suitable local employees were unsuccessful before recruiting foreigners, and local authorities and/or the national government must approve these justifications in writing. This does not apply to board members elected by shareholders or capital contributors.
The government has implemented entry suspension and quarantine regulations for foreigners since March 2020, as a measure to contain COVID-19. Vietnam’s borders are closed for all foreign nationals with only few exceptions for diplomatic, experts, and special cases determined by the government. Foreign nationals travelling to Vietnam are subject to testing, quarantine, and lockdowns with little or no advance notice.
On June 17, 2020, the National Assembly passed the Law on Investment (LOI) 2020, which prescribes market entry conditions for foreign investors, particularly in “conditional” sectors. All investors, foreign or domestics, must obtain formal approval, in the form of business licenses or other certifications, to satisfy “necessary conditions for reasons of national defense, security or order, social safety, social morality, and health of the community.” These sectors are listed in Appendix IV (“List of Conditional Investments and Businesses”) of the Law.
LOI 2020 includes two conditions for foreign investors investing in or acquiring capital/share in a Vietnamese company:
- The investment must not compromise national defense and security of Vietnam; and
- The investment must comply with the conditions relating to the use of islands, border areas, and coastal areas in accordance with the applicable laws.
The LOI does not define “national defense and security.”
On January 1, 2019, the Law on Cybersecurity (LOCS) came into effect, requiring cross-border services providers to store data of Vietnamese users in Vietnam – despite sustained international and domestic opposition to the regulation. The July 2019 draft of the LOCS implementing decree by the Ministry of Public Security (MPS) sparked concerns among foreign digital services firms regarding the draft decree’s provisions on data localization and local presence for a broad range of services in the Internet economy – from cloud computing to email. Provisions of the LOCS require firms to provide unencrypted user information upon request by law enforcement. However, application of this requirement hinges on issuance of the implementing Decree, which is still pending as of April 2021.
In September 2020, MPS released a revised LOCS decree draft, which requires all local companies to comply with data localization requirements and forces foreign services providers to localize their data and establish local presence when they violate Vietnamese laws and fail to cooperate with MPS to address violations. U.S. companies complain that the data localization regulations are impractical, and if implemented, would be unnecessarily burdensome.
The 2019 Law on Tax Administration, which came into force July 1, 2020, requires foreign entities that employ digital platforms without a permanent physical presence in Vietnam to register as tax-paying entities in Vietnam. The Ministry of Finance released a draft circular with guidance on implementation of the Law in March 2021, and is working to revise the law based on stakeholder comments, as of April 2021. American companies have expressed concerns that the original draft circular included unnecessarily complex and unclear regulations of Corporate Income Tax (CIT) and Value Added Tax (VAT) collections, and does not address areas that overlap with Vietnam’s international tax treaties already in force.
In early 2020, the Ministry of Public Security (MPS) released a draft outline of the Personal Data Protection Decree (PDPD) and published the first full draft in February 2021 for public comment with an expected effective date of December 1, 2021. Industry and human rights activists have major concerns about data localization provision for personal data, including requirements for local presence, licensing, and registration procedures. If implemented as written, the regulations of cross-border transfer of personal data would affect a wide range of companies.
The Ministry of Information and Communication (MIC) released a draft of Decree 72 on Internet Services and Information Content Online for public comment on April 19, 2020. Foreign companies reported concerns regarding the draft Decree provisions on mandatory licensing requirements; tightened regulations on social media companies; compulsory content review; and policies requiring responses to government takedown requests within 24 to 48 hours. The draft Decree requires local Internet service providers to terminate services for companies that fail to cooperate with the new regulations. The revised decree is scheduled to go into effect in late 2021. The Ministry of Public Security has applied the broadest possible definition of “data,” in the decree, which could threaten some activities of U.S. payment and financial services companies.
MIC is also revising Decree 06 on Management, Provision and Utilization of Radio and Television Services, which applies specifically to streaming services. The first draft, released August 2019, required onerous licensing procedures, local-presence requirements, local-content quotas, content preapproval, compulsory translation, and local advertising agents that are inconsistent with Vietnam’s commitments under the World Trade Organization (WTO). The latest, December 2020, draft continues to include licensing requirements for cross-border over-the-top (OTT) services providers and pre-check content censorship.
5. Protection of Property Rights
The State collectively owns and manages all land in Vietnam, and therefore neither foreigners nor Vietnamese nationals can own land. However, the government grants land-use and building rights, often to individuals. According to the Ministry of National Resources and Environment (MONRE), as of September 2018 – the most recent time period in which the government has made figures available – the government has issued land-use rights certificates for 96.9 percent of land in Vietnam. If land is not used according to the land-use rights certificate or if it is unoccupied, it reverts to the government. If investors do not use land leased within 12 consecutive months or delay land use by 24 months from the original investment schedule, the government is entitled to reclaim the land. Investors can seek an extension of delay but not for more than 24 months. Vietnam is building a national land-registration database, and some localities have already digitized their land records.
State protection of property rights are still evolving, and the law does not clearly demarcate circumstances in which the government would use eminent domain. Under the Housing Law and Real Estate Business Law of November 2014, the government can take land if it deems it necessary for socio-economic development in the public or national interest if the Prime Minister, the National Assembly, or the Provincial People’s Council approves such action. However, the law loosely defines “socio-economic development.”
Disputes over land rights continue to be a significant driver of social protests in Vietnam. Foreign investors also may be exposed to land disputes through merger and acquisition activities when they buy into a local company or implement large-scale infrastructure projects.
Foreign investors can lease land for renewable periods of 50 years, and up to 70 years in some underdeveloped areas. This allows titleholders to conduct property transactions, including mortgages on property. Some investors have encountered difficulties amending investment licenses to expand operations onto land adjoining existing facilities. Investors also note that local authorities may seek to increase requirements for land-use rights when current rights must be renewed, particularly when the investment in question competes with Vietnamese companies.
Intellectual Property Rights
Vietnam does not have a strong record on protecting and enforcing intellectual property (IP). Lack of coordination among ministries and agencies responsible for enforcement is a primary obstacle, and capacity constraints related to enforcement persist, in part, due to a lack of resources and IP expertise. Vietnam continues to rely heavily on administrative enforcement actions, which have consistently failed to deter widespread counterfeiting and piracy.
There were some positive developments in 2020-2021, such as the issuance of a national IP strategy, public awareness campaigns and training activities, and reported improvements on border enforcement in some parts of the country. Overall, however,IP enforcement continues to be a challenge.
The United States is closely monitoring and engaging with the Vietnamese government in the ongoing implementation of amendments to the 2015 Penal Code, particularly with respect to criminal enforcement of IP violations. Counterfeit goods are widely available online and in physical markets. In addition, issues continue to persist with online piracy (including the use of piracy devices and applications to access unauthorized audiovisual content), book piracy, lack of effective criminal measures for cable and satellite signal theft, and both private and public-sector software piracy..
Vietnam’s system for protecting against the unfair commercial use and unauthorized disclosure of undisclosed tests or other data generated to obtain marketing approval for pharmaceutical products needs further clarification. The United States is monitoring the implementation of IP provisions of the CPTPP, which the National Assembly ratified in November 2018, and the EVFTA, which Vietnam’s National Assembly ratified in June 2020. The EVFTA grandfathered prior users of certain cheese terms from the restrictions in the geographical indications provisions of the EVFTA, and it is important that Vietnam ensure market access for prior users of those terms who were in the Vietnamese market before the grandfathering date of January 1, 2017.
In its international agreements, Vietnam committed to strengthen its IP regime and is in the process of drafting implementing legislation and other measures in a number of IP-related areas, including in preparation for acceding to the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty. In September 2019, Vietnam acceded to the Hague Agreement Concerning the International Registration of Industrial Designs, and the United States will monitor implementation of that agreement.
The United States, through the U.S.-Vietnam Trade and Investment Framework Agreement (TIFA) and other bilateral fora, continues to urge Vietnam to address IP issues and to provide interested stakeholders with meaningful opportunities for input as it proceeds with these reforms. The United States and Vietnam signed a Customs Mutual Assistance Agreement in December 2019, which will facilitate bilateral cooperation in IP enforcement.
In 2020, the Intellectual Property Office of Vietnam (IP Vietnam) reported receiving 119,986 IP applications of all types (down 0.7 percent from 2019), of which 76,072 were registered for industrial property rights (up 1.7 percent from 2019). IP Vietnam reported granting 4,591 patents in 2020 (up 63 percent from 2019). Industrial designs registrations reached 2,054 in 2020 (down 5.4 percent from 2019). In total, IP Vietnam granted more than 47,168 protection titles for industrial property, out of 76,072 applications in 2020 (up 15.6 percent from 2019). The General Department of Market Management in 2020 detected 7,442 cases relating to counterfeit goods on physical and online markets, copyright and IP violations, imposing fines of USD 5 million. The Copyright Office of Vietnam received and settled 12 copyright petitions and five requests for copyright assessment in 2020. In 2020, the Ministry of Culture, Sports, and Tourism’s Inspector General carried out inspections for software licensing compliance, resulting in total fines of USD 23,000. For more information, please see the following reports from the U.S. Trade Representative:
- Special 301 Report: https://ustr.gov/sites/default/files/2020_Special_301_Report.pdf
- Notorious Markets Report: https://ustr.gov/sites/default/files/2020_Special_301_Report.pdf
- For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at .
7. State-Owned Enterprises
The 2020 Enterprises Law, which came into effect January 1, 2021, defines an SOE as an enterprise that is more than 50 percent owned by the government. Vietnam does not officially publish a list of SOEs.
In 2018, the government created the Commission for State Capital Management at Enterprises (CMSC) to manage SOEs with increased transparency and accountability. The CMSC’s goals include accelerating privatization in a transparent manner, promoting public listings of SOEs, and transparency in overall financial management of SOEs.
SOEs do not operate on a level playing field with domestic or foreign enterprises and continue to benefit from preferential access to resources such as land, capital, and political largesse. Third-party market analysts note that a significant number of SOEs have extensive liabilities, including pensions owed, real estate holdings in areas not related to the SOE’s ostensible remit, and a lack of transparency with respect to operations and financing.
Vietnam officially started privatizing SOEs in 1998. The process has been slow because privatization typically transfers only a small share of an SOE (two to three percent) to the private sector, and investors have had concerns about the financial health of many companies. Additionally, the government has inadequate regulations with respect to privatization procedures.
8. Responsible Business Conduct
Companies are required to publish their corporate social responsibility activities, corporate governance work, information of related parties and transactions, and compensation of management. Companies must also announce extraordinary circumstances, such as changes to management, dissolution, or establishment of subsidiaries, within 36 hours of the event.
Most multinational companies implement Corporate Social Responsibility (CSR) programs that contribute to improving the business environment in Vietnam, and awareness of CSR programs is increasing among large domestic companies. The VCCI conducts CSR training and highlights corporate engagement on a dedicated website ( http://www.csr-vietnam.eu/ ) in partnership with the UN.
AmCham also has a CSR group that organizes events and activities to raise awareness of social issues. Non-governmental organizations collaborate with government bodies, such as VCCI and the Ministry of Labor, Invalids, and Social Affairs (MOLISA), to promote business practices in Vietnam in line with international norms and standards.
Vietnam is not a part of the Extractive Industries Transparency Initiative.
Overall, the government has not defined responsible business conduct (RBC), nor has it established a national plan or agenda for RBC. The government has yet to establish a national point of contact or ombudsman for stakeholders to get information or raise concerns regarding RBC. The new Labor Code, which came into effect January 1, 2021, recognizes the right of employees to establish their own representative organizations, allows employees to unilaterally terminate labor contract without reason, and extends legal protection to non-written contract employees. For a detailed description of regulations on worker/labor rights in Vietnam, see the Department of State’s Human Rights Report ( https://www.state.gov/reports/2018-country-reports-on-human-rights-practices/vietnam/).
Vietnam’s Law on Consumer Protection is designed to protect consumers, but in practice the law is ineffective. A consumer who has a complaint on a product or service can petition the Association for Consumer Protection (ACP) or district governments. ACP is a non-governmental, volunteer organization that lacks law enforcement or legal power, and local governments are typically unresponsive to consumer complaints. The Vietnamese government has not focused on consumer protection over the last several years.
Vietnam allows foreign companies to work in private security. Vietnam has not ratified the Montreux Documents, is not a supporter of the International Code of Conduct or Private Security Service Providers, and is not a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).
Vietnamese legislation clearly specifies businesses’ responsibilities regarding environmental protection. The revised 2020 Environmental Protection Law, which will come into effect on January 1, 2022, states that environmental protection is the responsibility and obligation of all organizations, institutions, communities, households, and individuals.
The Penal Code, revised in 2017, includes a chapter with 12 articles regulating different types of environmental crimes. In accordance with the Penal Code, penalties for infractions carry a maximum of 15 years in prison and a fine equivalent to USD 650,000. However, enforcement remains a problem. To date, no complaint or request for compensation due to damages caused by pollution or other environmental violations has ever been successfully resolved in court due to difficulties in identifying the level of damages and proving the relationship between violators and damages.
In the past several years, there have been high-profile, controversial instances of private sector impact on human rights – particularly over the revocation of land for real estate development projects. Government suppression of these protests ranged from intimidation and harassment via the media (including social media) to imprisonment. There are numerous examples of government-supported forces beating protestors, journalists, and activists covering land issues. Victims have reported they are unable to press claims against their attackers.
Department of State
- Country Reports on Human Rights Practices ();
- Trafficking in Persons Report ();
- Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities () and;
- North Korea Sanctions & Enforcement Actions Advisory ().
Department of Labor
- Findings on the Worst forms of Child Labor Report ( );
- List of Goods Produced by Child Labor or Forced Labor ();
- Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World () and;
- Comply Chain ().
Vietnam has laws to combat corruption by public officials, and they extend to all citizens. Corruption is due, in large part, to low levels of transparency, accountability, and media freedom, as well as poor remuneration for government officials and inadequate systems for holding officials accountable. Competition among agencies for control over businesses and investments has created overlapping jurisdictions and bureaucratic procedures that, in turn, create opportunities for corruption.
The government has tasked various agencies to deal with corruption, including the Central Steering Committee for Anti-Corruption (chaired by the Communist Party of Vietnam General Secretary), the Government Inspectorate, and line ministries and agencies. Formed in 2007, the Central Steering Committee for Anti-Corruption has been under the purview of the CPV Central Commission of Internal Affairs since February 2013. The National Assembly provides oversight on the operations of government ministries. Civil society organizations have encouraged the government to establish a single independent agency with oversight and enforcement authority to ensure enforcement of anti-corruption laws.
Resource to Report Corruption
Contact at government agency responsible for combating corruption:
Mr. Phan Dinh TracChairman, Communist Party Central Committee Internal Affairs4 Nguyen Canh Chan; +84 0804-3557Contact at NGO:Ms. Nguyen Thi Kieu VienExecutive Director, Towards TransparencyTransparency International National Contact in VietnamFloor 4, No 37 Lane 35, Cat Linh street, Dong Da, Hanoi, Vietnam; +84-24-37153532Fax: +84-24-37153443; firstname.lastname@example.org
10. Political and Security Environment
Vietnam is a unitary single-party state, and its political and security environment is largely stable. Protests and civil unrest are rare, though there are occasional demonstrations against perceived or real social, environmental, labor, and political injustices.
In August 2019, online commentators expressed outrage over the slow government response to an industrial fire in Hanoi that released unknown amounts of mercury. Other localized protests in 2019 and early 2020 broke out over alleged illegal dumping in waterways and on public land, and the perceived government attempts to cover up potential risks to local communities.
Citizens sometimes protest actions of the People’s Republic of China (PRC), usually online. For example, in June 2019, when PRC Coast Guard vessels harassed the operations of Russian oil company Rosneft in Block 06-01, Vietnam’s highest-producing natural gas field, Vietnamese citizens protested via Facebook and, in a few instances, in public.
In April 2016, after the Formosa Steel plant discharged toxic pollutants into the ocean and caused a large number of fish deaths, affected fishermen and residents in central Vietnam began a series of regular protests against the company and the government’s lack of response to the disaster. Protests continued into 2017 in multiple cities until security forces largely suppressed the unrest. Many activists who helped organize or document these protests were subsequently arrested and imprisoned.
11. Labor Policies and Practices
Vietnam’s new Labor Code came into effect on January 1, 2021. The CPTPP and the EVFTA have helped advance labor reform in Vietnam. In June 2020, EVFTA helped push Vietnam to ratify International Labor Organization (ILO) Convention 105 – on the abolition of forced labor – which will come into force July 14, 2021. EVFTA also requires Vietnam to ratify Convention 87, on freedom of association and protection of the right to organize, by 2023. Although Vietnam has made some progress on labor issues in recent years, including, in theory, allowing the formation of independent unions, the sole union that has any real authority is the state-controlled Vietnam General Confederation of Labor. Workers will not be able to form independent unions, legally, until the Ministry of Labor, Invalids, and Social Affairs (MOLISA) issues guidance on implementation of the Labor Code.
According to Vietnam’s General Statistics Office (GSO), in 2020 there were 54.6 million people participating in the formal labor force in Vietnam out of over 74 million people aged 15 and above. The labor force is relatively young, with workers 15-39 years of age accounting for half of the total labor force.
Estimates on the size of the informal economy differ widely. The IMF states 40 percent of Vietnam’s laborers work on the informal economy; the World Bank puts the figure at 55 percent; the ILO puts the figure as high as 79 percent if agricultural households are included. Vietnam’s GSO stated that among 53.4 million employed people, 20.3 million people worked in the informal economy.
An employer is permitted to lay off employees due to technological changes, organizational changes (in cases of a merger, consolidation, or cessation of operation of one or more departments), when the employer faces economic difficulties, or when the employees are harassing others at work. There are no waivers on labor requirements to attract foreign investment. COVID-19 increased the number of layoffs in the Vietnamese economy. In March and April 2020, and again in September 2020, the government provided cash payments and supplemental cash for companies, to help pay salaries for workers and offer unemployment insurance.
The constitution affords the right of association and the right to demonstrate. The 2019 Labor Code, which came into effect on January 1, 2021, allows workers to establish and join independent unions of their choice. However, the relevant governmental agencies are still drafting the implementing decrees on procedures to establish and join independent unions, and to determine the level of autonomy independent unions will have in administering their affairs.
Labor dispute resolution mechanisms vary depending on the situation. Individual labor disputes and rights-based collective labor disputes must go through a defined process that includes labor conciliation, labor arbitration, and a court hearing.
Vietnam has been a member of the ILO since 1992, and has ratified six of the core ILO labor conventions (Conventions 100 and 111 on discrimination, Conventions 138 and 182 on child labor, Convention 29 on forced labor, and Convention 98 on rights to organize and collective bargaining). While the constitution and law prohibit forced or compulsory labor, Vietnam has not ratified Convention 105 on forced labor as a means of political coercion and discrimination and Convention 87 on freedom of association and protection of the rights to organize.