Thailand continues to generally welcome investment from all countries and seeks to avoid dependence on any one country as a source of investment. However, the Foreign Business Act (FBA) prescribes a wide range of business that may not be conducted by foreigners without additional licenses or exemptions. The term “foreigner” includes Thai-registered companies in which half or more of the capital is held by non-Thai individuals and foreign-registered companies. Although the FBA prohibits majority foreign ownership in many sectors, U.S. investors registered under the United States-Thailand Treaty of Amity and Economic Relations (AER) are exempt. Nevertheless, the AER’s privileges do not extend to U.S. investments in the following areas: communications; transportation; fiduciary functions; banking involving depository functions; the exploitation of land or other natural resources; domestic trade in indigenous agricultural products; and the practice of professions reserved for Thai nationals.

The Board of Investment (BOI) assists Thai and foreign investors to establish and conduct businesses in targeted economic sectors by offering both tax and non-tax incentives. In recent years, Thailand has taken steps to reform its business regulations and has improved processes and reduced time required to start a business from 29 days to 6 days. Thailand has steadily improved its ranking in the World Bank’s Doing Business Report in the last several years and was 21 out of 190 countries in the 2020 ranking, trailing only Singapore (2) and Malaysia (12) in the ASEAN bloc. Thai officials routinely make themselves available to investors through discussions with foreign chambers of commerce.

U.S. entities planning to invest in Thailand are advised to obtain qualified legal advice. Thai business regulations are governed predominantly by criminal, not civil, law. Foreigners are rarely jailed for improper business activities, yet violations of business regulations can carry heavy criminal penalties. Thailand has an independent judiciary and government authorities are generally not permitted to interfere in the court system once a case is in process.

Various Thai laws set forth foreign-ownership restrictions in certain sectors. These restrictions primarily concern services such as banking, insurance, and telecommunications. The FBA details the types of business activities reserved for Thai nationals. Foreign investment in those businesses must comprise less than 50 percent of share capital, unless specially permitted or otherwise exempt.

The following three lists detail FBA-restricted businesses for foreigners.

List 1. This contains activities non-nationals are prohibited from engaging in, including newspaper and radio broadcasting stations and businesses; agricultural businesses; forestry and timber processing from a natural forest; fishery in Thai territorial waters and specific economic zones; extraction of Thai medicinal herbs; trading and auctioning of antique objects or objects of historical value from Thailand; making or casting of Buddha images and monk alms bowls; and land trading.

List 2. This contains activities related to national safety or security, arts and culture, traditional industries, folk handicrafts, natural resources, and the environment. Restrictions apply to the production, distribution and maintenance of firearms and armaments; domestic transportation by land, water, and air; trading of Thai antiques or art objects; mining, including rock blasting and rock crushing; and timber processing for production of furniture and utensils. A foreign majority-owned company can engage in List 2 activities if Thai nationals or legal persons hold not less than 40 percent of the total shares and the number of Thai directors is not less than two-fifths of the total number of directors. Foreign companies also require prior approval and a license from the Council of Ministers (Cabinet).

List 3. Restricted businesses in this list include accounting, legal, architectural, and engineering services; retail and wholesale; advertising businesses; hotels; guided touring; selling food and beverages; and other service-sector businesses. A foreign company can engage in List 3 activities if a majority of the limited company’s shares are held by Thai nationals. Any company with a majority of foreign shareholders (more than 50 percent) cannot engage in List 3 activities unless it receives an exception from the Ministry of Commerce (MOC) under its Foreign Business License (FBL) application.

Aside from these general categories, Thailand does not maintain a national security screening mechanism for investment, and investors can receive additional incentives/privileges if they invest in priority areas, such as high-technology industries. Investors should contact the Board of Investment [ https://www.boi.go.th/index.php?page=index ] for the latest information on specific investment incentives.

The U.S.-Thai Treaty of Amity and Economic Relations allows approved businesses to engage in some FBA restricted sectors; however, the Treaty does not exempt U.S. investments from restrictions applicable to: owning land; fiduciary functions; banking involving depository functions; inland communications & transportation; exploitation of land and other natural resources; and domestic trade in agricultural products.

To operate restricted businesses as defined by the FBA’s List 2 and 3, non-Thai entities must obtain a foreign business license. These licenses are approved by the Council of Ministers (Cabinet) and/or Director-General of the MOC’s Department of Business Development, depending on the business category.

Every year, the MOC reviews business categories restricted by the FBA. In 2022, the MOC announced it plans to remove four additional businesses – banking, bank branches, life insurance and non-life insurance – from List 3 by the end of the year.

American investors who wish to take majority shares or wholly own businesses under the FBA may apply for benefits under the U.S.-Thai Treaty of Amity. https://2016.export.gov/thailand/treaty/index.asp#P5_233 

The U.S. Commercial Service, U.S. Embassy Bangkok is responsible for issuing a certification letter to confirm that a U.S. company is qualified to apply for benefits under the Treaty of Amity. The applicant must first obtain documents verifying that the company has been registered in compliance with Thai law. Upon receipt of the required documents, the U.S. Commercial Service office will then certify to the Foreign Administration Division, Department of Business Development, Ministry of Commerce (MOC) that the applicant is seeking to register an American-owned and managed company or that the applicant is an American citizen and is therefore entitled to national treatment under the provisions of the Treaty. For more information on how to apply for benefits under the Treaty of Amity, please e-mail ktantisa@trade.gov .

The World Trade Organization conducted a Trade Policy Review of Thailand in November 2020 ( https://www.wto.org/english/tratop_e/tpr_e/tp500_e.htm ). The Organization for Economic Cooperation and Development (OECD) concluded its Investment Policy Review for Thailand in January 2021 ( https://www.oecd-ilibrary.org/sites/c4eeee1c-en/index.html?itemId=/content/publication/c4eeee1c-en ).

The MOC’s Department of Business Development (DBD) is generally responsible for business registration. Registration can be performed online or manually. Registration documentation must be submitted in the Thai language. Many foreign entities hire a local law firm or consulting firm to handle their applications. Firms engaging in production activities also must register with the Ministry of Industry and the Ministry of Labor (MOL).

A company is required to have registered capital of two million Thai baht per foreign employee in order to obtain work permits. Additionally, foreign companies may have no more than 20 percent foreign employees on staff. Companies that have obtained special BOI investment incentives may be exempted from this requirement. Foreign employees must enter Thailand on a non-immigrant visa and then submit work permit applications directly to the MOL’s Department of Employment. Work permit application processing takes approximately one week. For more information on Thailand visas, please refer to https://www.thaiembassy.com/thailand/work-permit-requirements

In February 2018, the Thai government launched a Smart Visa program for investors in targeted industries and foreigners with expertise in specialized technologies. Under this program, foreigners can be granted a maximum four-year visa to work in Thailand without having to obtain a work permit or re-entry permit. Other relaxed immigration rules include having visa holders report to the Bureau of Immigration just once per year (instead of every 90 days) and providing the visa holder’s spouse and children many of the same privileges as the primary visa holder. More information is available online at https://smart-visa.boi.go.th/home_detail/general_information.php .

Outward investment from Thailand has increased rapidly in recent years and Thailand has become one of the largest outward investors in ASEAN. During 2020 and 2021, Thai companies continued to expand and invest overseas despite the pandemic. These investments primarily target neighboring ASEAN countries, China, the United States, and Europe. A relatively stable domestic currency, rising cash holdings, and subdued domestic growth prospects are driving outward investment. Faced with the effects of the pandemic, the government may prioritize domestic investment to stimulate the economy.

Previously, food, agro-industry, energy, and chemical sectors accounted for the main share of outward flows. Purchasing shares, developing partnerships, and making acquisitions help Thai investors acquire technologies for parent companies and expand supply chains in international markets. Thai corporate laws allow outbound investments to be made by an independent affiliate (foreign company), a branch of a Thai legal entity, or by any Thai company in the case of financial investments abroad. BOI and the MOC’s Department of International Trade Promotion (DITP) share responsibility for promoting outward investment. BOI focuses on outward investment in ASEAN (especially Cambodia, Laos, Myanmar, and Vietnam) and emerging economies. DITP covers smaller markets.

Generally, Thai regulations are readily available for public review. Foreign investors have, on occasion, expressed frustration that some draft sub-regulations are not made public until they are finalized. Comments stakeholders submit on draft regulations are not always taken into consideration. Non-governmental organizations report; however, the Thai government actively consults them on policy, especially in the health sector and on intellectual property issues. In other areas, such as digital and cybersecurity laws, the Thai government has taken stakeholders’ comments into account and amended draft laws accordingly.

U.S. businesses have repeatedly expressed concerns about Thailand’s customs regime. Complaints center on lack of transparency, the significant discretionary authority exercised by Customs Department officials, and a system of giving rewards to officials and non-officials for seized goods based on a percentage of the value of the goods. Specifically, the U.S. government and private sector have expressed concern about inconsistent application of Thailand’s transaction valuation methodology and the Customs Department’s repeated use of arbitrary values. Thailand’s latest Customs Act, which entered into force on November 13, 2017, was a moderate step forward. The Act removed the Customs Department Director General’s discretion to increase the Customs value of imports. It also reduced the percentage of remuneration awarded to officials and non-officials from 55 percent to 40 percent of the sale price of seized goods (or of the fine amount) with an overall limit of five million baht ($160,000). The 2017 changes, however, have not fully satisfied those concerned that Customs officials problematic incentives to manufacture violations under the system.

The Thai Constitution requires the government to assess the environmental impact of a wide range of undertakings, including by holding a public hearing of relevant stakeholders. The Ministry of Natural Resources and Environment (MONRE) is responsible for determining which projects, activities, or actions are required to have an environmental impact assessment report and for prescribing the regulations, methods, procedures, and guidelines in preparing an environmental impact assessment report. Additional information can be found here: http://www.onep.go.th/eia/.

Inconsistent and unpredictable enforcement of government regulations remains problematic. In 2017, the Thai government launched a “regulatory guillotine” initiative to cut down on red tape, licenses, and permits. The initiative focused on reducing and amending outdated regulations in order to improve Thailand’s ranking on the World Bank “Ease of Doing Business” report. The regulatory guillotine project is still underway and making slow progress.

Gratuity payments to civil servants responsible for regulatory oversight and enforcement remain a common practice despite stringent gift bans at some government agencies. Firms that refuse to make such payments can be placed at a competitive disadvantage to other firms that do engage in such practices.

The Royal Thai Government Gazette ( www.ratchakitcha.soc.go.th ) is Thailand’s public journal of the country’s centralized online location of laws, as well as regulation notifications.

Thailand is a member of the World Trade Organization (WTO) and notifies most draft technical regulations to the Technical Barriers to Trade (TBT) Committee and the Sanitary and Phytosanitary Measures Committee. However, Thailand does not always follow WTO and other international standard-setting norms or guidance (e.g., Codex Alimentarius maximum residue limits for pesticides on food) but prefers to set its own standards in some cases.

Thailand’s legal system is primarily based on the civil law system with strong common law influence. Thailand has an independent judiciary that is generally effective in enforcing property and contractual rights. Most commercial and contractual disputes are generally governed by the Civil and Commercial Codes. The legal process is slow in practice and monetary compensation is based on actual damage that resulted directly from the wrongful act. Decisions of foreign courts are not accepted or enforceable in Thai courts. Most legal cases in Thailand will be under the jurisdiction of the Courts of Justice; however, there are also specialized courts that handle specific or technical problems: the Labor Court, the Intellectual Property and International Trade Court, the Bankruptcy Court, the Tax Court, and the Juvenile and Family Courts. Thailand also established the Criminal Court for Corruption and Misconduct Case to specifically handle corruption cases.

The Foreign Business Act or FBA (described in detail above) governs most investment activity by non-Thai nationals. Other key laws governing foreign investment are the Alien Employment Act (1978) and the Investment Promotion Act (1977). However, as explained above, many U.S. businesses enjoy investment benefits through the U.S.-Thailand Treaty of Amity and Economic Relations (often referred to as the ‘Treaty of Amity’), which was established to promote friendly relations between the two nations. Pursuant to the Treaty, American nationals are entitled to certain exceptions to the FBA restrictions.

Pertaining to the services sector, the 2008 Financial Institutions Business Act unified the legal framework and strengthened the Bank of Thailand’s (the country’s central bank) supervisory and enforcement powers. The Act allows the Bank of Thailand (BOT) to raise foreign ownership limits for existing local banks from 25 percent to 49 percent on a case-by-case basis. The Minister of Finance can authorize foreign ownership exceeding 49 percent if recommended by the central bank. Details are available at  https://www.bot.or.th/English/AboutBOT/LawsAndRegulations/SiteAssets/Law_E24_Institution_Sep2011.pdf .

In addition to acquiring shares of existing (traditional) local banks, foreign banks can enter the Thai banking system by obtaining new licenses. The Ministry of Finance issues such licenses, following consultations with the BOT. The BOT is currently preparing rules for establishing virtual banks or digital-only banks (no physical branches), a tool meant to enhance financial inclusion and keep pace with consumer needs in the digital age. Digital-only banks can operate at a lower cost and offer different services than traditional banks. The guidelines are expected to be released by mid-2022.

The 2008 Life Insurance Act and the 2008 Non-Life Insurance Act apply a 25 percent cap on foreign ownership of insurance companies. Foreign membership on boards of directors is also limited to 25 percent. However, in January 2016 the Office of the Insurance Commission (OIC), the primary insurance industry regulator, announced that Thai life and non-life insurance companies wishing to exceed these limits could apply to the OIC for approval. Any foreign national wishing to hold more than 10 percent of the voting shares in an insurance company must seek OIC approval. With approval, a foreign national can acquire up to 49 percent of the voting shares. Finally, the Finance Minister, with OIC’s positive recommendation, has discretion to permit greater than 49 percent foreign ownership and/or a majority of foreign directors, if the operation of the insurance company may cause loss to insured parties or to the public. While OIC has not issued a new insurance license in the past 20 years, OIC is now contemplating issuing new virtual licenses for firms to sell insurance digitally without an intermediary. Full details have not yet been announced.

The Board of Investment offers qualified investors several benefits and provides information to facilitate a smoother investment process in Thailand. Information on the BOI’s “One Start One Stop” investment center can be found at http://osos.boi.go.th .

Thailand’s Trade Competition Act covers all business activities, except state-owned enterprises exempted by law or cabinet resolution; specific activities related to national security, public benefit, common interest and public utility; cooperatives, agricultural and cooperative groups; government agencies; and other enterprises exempted by the law. The Act’s definition of a business operator includes affiliates and group companies, and subjects directors and management to criminal and administrative sanctions if their actions (or omissions) resulted in violations. The Act also provides details about penalties in cases involving administrative court or criminal court actions.

The Office of Trade Competition Commission (OTCC) is an independent agency and the main enforcer of the Trade Competition Act (2018). The Commission advises the government on issuance of relevant regulations; ensures fair and free trade practices; investigates cases and complaints of unfair trade; and pursues criminal and disciplinary actions against those found guilty of unfair trade practices stipulated in the law. The law focuses on the following areas: unlawful exercise of market dominance; mergers or collusion that could lead to monopoly; unfair competition and restricting competition; and unfair trade practices.

The Thai government, through the Ministry of Commerce’s Central Commission on Price of Goods and Services, has the legal authority to control prices or set de facto price ceilings for selected goods and services, including staple agricultural products and feed ingredients (such as, pork, cooking oil, wheat flour, feed wheat, distiller’s dried grains with solubles (DDGs), and feed quality barley), liquefied petroleum gas, medicines, and sound recordings. In 2022, there are 56 goods and services under the price-controlled products list, which can be found here . The controlled list is reviewed at least annually, but the price-control review mechanisms are non-transparent. In practice, Thailand’s government influences prices in the local market through its control of state monopoly suppliers of products and services, such as in the petroleum, oil, and gas industry sectors.

Thailand’s Constitution provides protection from expropriation without fair compensation and requires the government to pass a specific, tailored expropriation law if the expropriation is required for the purpose of public utilities, national defense, acquisition of national resources, or for other public interests. The Investment Promotion Act also guarantees the government shall not nationalize the operations and assets of BOI-promoted investors.

The Expropriation of Immovable Property Act (EIP), most recently amended in 2019, applies to all property owners, whether foreign or domestic nationals. The Act provides a framework and clear procedures for expropriation; sets forth detailed provision and measures for compensation of landowners, lessees and other persons that may be affected by an expropriation; and recognizes the right to appeal decisions to Thai courts. However, the EIP and Investment Promotion Act do not protect against indirect expropriation and do not distinguish between compensable and non-compensable forms of indirect expropriation.

Thailand has a well-established system for land rights that is generally upheld in practice, but the legislation governing land tenure still significantly restricts foreigners’ rights to acquire land.

Thailand’s bankruptcy law is modeled after the United States. The Thai Bankruptcy Act (1940) authorizes restructuring proceedings that require trained judges who specialize in bankruptcy matters to preside. Thailand’s bankruptcy law allows for corporate restructuring similar to U.S. Chapter 11 and does not criminalize bankruptcy. The law also distinguishes between secured and unsecured claims, with the former prioritized.

Within bankruptcy proceedings, it is also possible to undertake a “composition” in order to avoid a long and protracted process. A composition takes place when a debtor expresses in writing a desire to settle his/her debts, either partially or in any other manner, within seven days of submitting an explanation of matters related to the bankruptcy or during a time period prescribed by the receiver. Despite these laws, some U.S. businesses complain that Thailand’s bankruptcy courts in practice can slow processes to the detriment of outside firms seeking to acquire assets liquidated in bankruptcy processes.

The National Credit Bureau of Thailand (NCB) provides the financial services industry with information on consumers and businesses. The NCB is required to provide the financial services sector with payment history information from utility companies, retailers and merchants, and trade creditors.

The Board of Investment:

The Board of Investment (BOI) offers investment incentives to qualified domestic and foreign investors. To upgrade Thailand’s technological capacity, the BOI presently gives more weight to applications in high-tech, innovative, and sustainable industries. These include digital technology, “smart agriculture” and biotechnology, aviation and logistics, automation and robotics, medical and wellness tourism, and other high-value services.

The most significant privileges offered by the BOI for promoted projects include:

• corporate income tax exemptions; tariff reductions or exemptions on imports of machinery used in the investment; tariff-free treatment on imported raw materials used in production for export.
• permission to own land; permission to bring foreign experts; and visa and work permit facilitation.

The Thai government is developing a National Energy Plan which will supersede the current Alternative Energy Development Plan that sets a 20 percent target for renewable energy by 2037 and has established a special committee, under supervision of the Deputy Prime Minister and Minister of Energy, to support increased investment in clean energy, electric vehicles, and related industries. In support of these policies, electricity producers can access tax and non-tax incentives from Thailand’s BOI. The tax incentives include a corporate income tax holiday of six or eight years, depending on the type of power production used in electricity generation. Tax incentives also include custom duty exemptions for the import of new equipment.

Thailand also has a feed-in-tariff (FiT) program and additional tax and investment incentives to meet the 20 percent renewable energy electricity supply target by 2037. The FiT program, launched in 2015, replaced the previously offered “adder” scheme. With declining investment costs across various renewable energy technologies, especially solar and onshore wind installation, in 2015, the government moved to competitive bidding with FiT set as the ceiling price.

In February 2022, Thailand joined the U.S.-led Clean Energy Demand Initiative, in which the Thai government agreed to pursue policies that will increase access to alternative energy for the private sector. Electric vehicles are another key focus area for the Thai government. In 2022, the Thai government approved a suite of measures to increase foreign investment in EVs, including a range of tax incentives, subsidies, and other mechanisms.

Investment projects with a significant R&D, innovation, or human resource development component may be eligible for additional grants and incentives. Moreover, grants are provided to support targeted technology development under the Competitive Enhancement Act. BOI offers a one-stop service to expedite multiple business processes for investors.

For additional information, contact the Office of Board of Investment (662-553-8111 or website at www.boi.go.th.)

Office of the Eastern Economic Corridor:

Thailand’s flagship investment zone, the “Eastern Economic Corridor (EEC),” spans the provinces of Chachoengsao, Chonburi, and Rayong (5,129 square miles). The EEC leverages the developed infrastructure networks of the adjacent Eastern Seaboard industrial area, Thailand’s primary investment destination for more than 30 years. The Thai government’s goal is to develop the EEC as a primary investment and infrastructure hub in ASEAN and a gateway to east and south Asia. Among the EEC development projects are smart cities; an innovation district (EECi); a digital park (EECd); an aerotropolis (EEC-A); a medical hub (EECmd); and other state-of-the-art facilities. The EEC is targeting twelve key industries:

• Next-generation automotive
• Intelligent electronics
• Advanced agriculture and biotechnology
• Food processing
• Tourism
• Advance robotics and automation
• Integrated aviation industry
• Medical hub and total healthcare services
• Biofuels and biochemicals
• Digital technology
• Defense industry
• Human resource development

The EEC Act authorized investment incentives and privileges. Investors can obtain long-term land leases of 99 years (with an initial lease of up to 50 years and a renewal of up to 49 years). The EEC Act shortens the public-private partnership approval process to approximately nine months.

The BOI works in cooperation with the EEC Office. BOI offers corporate income tax exemptions of up to 13 years for strategic projects in the EEC area. Foreign executives and experts who work in targeted industries in the EEC are subject to a maximum personal income tax rate of 15-17 percent.

For additional information, contact the Eastern Economic Corridor Office (662-033-8000 and website at https://eng.eeco.or.th/en).

The Industrial Estate Authority of Thailand (IEAT), a state-enterprise under the Ministry of Industry, develops suitable locations to accommodate industrial properties. IEAT has an established network of industrial estates in Thailand, including Laem Chabang Industrial Estate in Chonburi Province and Map Ta Phut Industrial Estate in Rayong Province in Thailand’s eastern seaboard region, a common location for foreign-owned factories due to its proximity to seaport facilities and Bangkok. Foreign-owned firms generally have the same investment opportunities in the industrial zones as Thai entities. Although the IEAT is required to consider and approve the amount of space/land bought or leased by foreign-owned firms in industrial estates, there is no record of disapproval for requested land. Private developers are heavily involved in the development of these estates.

The IEAT currently operates 15 estates, plus 50 more in conjunction with the private sector, in 16 provinces nationwide. Private-sector developers independently operate over 50 industrial estates, most of which have received promotion privileges from the Board of Investment. Amata Industrial Estate and WHA Industrial Development are Thailand’s leading private industrial estate developers. Most major foreign manufacturing investors, including U.S. manufacturers, are located in these two companies’ industrial estates and in the eastern seaboard region.

Thailand Free Trade Zones have two main types – General Industrial Zone (either under private-sector or the IEAT) and Special Economic Zones. The IEAT has established 12 special IEAT “free trade zones” reserved for industries manufacturing exclusively for export. Businesses may import raw materials into, and export finished products from, these zones free of duty (including value added tax). These zones are located within industrial estates, and many have customs facilities to speed processing. In addition to these zones, factory owners can apply for permission to establish a bonded warehouse within their premises to which raw materials, used exclusively in the production of products for export, may be imported duty-free.

Thai Customs Act also allows the Customs Director General to grant permits for companies to establish “free zones” for industries and sectors deemed beneficial to the country. Goods imports and exports through free zones are exempt from customs duties, and import duties are also waived for machinery, equipment, tools, appliances, and components necessary for the operation of the business or assembly, installation, or operation of the equipment. To date, there are established free zones at Don Muang Airport, Suvarnabhumi Airport, U-Tapao Airport, Special Economic Development Zone, and in the Eastern Economic Corridor.

The Thai government also established Special Economic Zones (SEZs) in ten provinces bordering neighboring countries. Business sectors and industries that can benefit from tax and non-tax incentives offered in the SEZs include: logistics; warehouses near border areas; distribution; services; labor-intensive factories; and manufacturers using raw materials from neighboring countries. These SEZs support Thai government goals for closer economic ties with neighboring countries and allow investors to tap into abundant migrant labor; however, these SEZs have proven less attractive to overseas investors due to their remote locations far from Bangkok and other major cities.

Thai Customs implemented various measures to improve trade and customs processing: Pre-Arrival Processing (PAP); an “e-Bill Payment” electronic payment system; and an e-Customs system, National Single Window System (NSW) that reduces the use of paper and enhance single stop service in the custom process. The measures comply with the World Trade Organizations (WTO) Trade Facilitation Agreement (TFA), which requires WTO members to adopt procedures for pre-arrival processing for imports and to authorize electronic submission of customs documents, where appropriate. The NSW was also developed in conjunction with the ASEAN Single Window, which is a regional initiative that will connect and integrate NSW of ASEAN member States to expedite cargo clearance and enable electronic exchange of border-trade related documents. The measures have also improved Thailand’s ranking in the World Bank’s “Doing Business: Trading Across Borders 2020” index.

The Thai government does not have specific laws or policies regarding performance or data localization requirements. Foreign investors are not required to use domestic content in goods or technology, but the Thai government has encouraged such an approach through domestic preferences in government procurement proceedings. In March 2021, Thailand announced the “Made in Thailand” initiative, which will direct government agencies to procure at least 60 percent of their goods from local producers.

There are currently no requirements for foreign IT providers to localize their data, turn over source code, or provide access to surveillance. However, the Thai government in 2019 passed new laws and regulations on cybersecurity and personal data protection that have raised concerns about Thai authorities’ broad power to potentially demand confidential and sensitive information. IT operators and analysts have expressed concern with private companies’ legal protections, ability to appeal, or ability to limit such access. IT providers have expressed concern that the new laws might place unreasonable burdens on them and have introduced new uncertainties in the technology sector.

In 2021, the National Cybersecurity Agency (NCSA) published implementing  regulations for the CSA that define critical information infrastructure (CII) and establish a national coordination center to monitor and resolve cyber threats. The seven sectors classified as CII are national security, essential government services, banking and finance, information technology and telecommunication, transportation and logistics, public utilities (electricity, petroleum and natural gas, water utilities), and health. Legal experts have raised concerns that the implementing regulations lack clear CII criteria and will grant sector regulators broad authority to classify additional essential services to be CII, creating uncertainty for businesses in those sectors. In addition, there are concerns that the law gives NCSA broad powers to enter premises and to monitor, test, freeze, or seize computers without sufficient protections or opportunities to appeal, and that cybersecurity awareness and systems to prevent cyberattacks at public sector organizations remain weak and outdated. While the laws on Personal Data Protection remain unaffected as the government is still in the process of considering the implementing regulations. Thailand has implemented a requirement that all debit transactions processed by a domestic debit card network must use a proprietary chip.

Property rights are guaranteed by the Thai Constitution. While the government provides fair compensation in instances of expropriation, Thai policy generally does not permit foreigners to own land. There have been instances, however, of granting such permission to foreigners under certain laws or ministerial regulations for residential, business, or religious purposes. Foreign ownership of condominiums and buildings is permitted under certain laws. Foreigners can freely lease land. Relevant articles of the Civil and Commercial Codes do not distinguish between foreign and Thai nationals in the exercise of lease rights. Secured interests in property, such as mortgage and pledge, are recognized and enforced. Unoccupied property legally owned by foreigners or Thais may be subject to adverse possession by squatters who stay on that property for at least 10 years.

The National Committee on Intellectual Property Policy sets Thailand’s overall Intellectual Property (IP) policy. The National Committee is chaired by the Prime Minister with two Deputy Prime Ministers as vice chairs while 18 heads of government agencies serve as committee members. In 2017, this Committee approved a 20-year IP Roadmap to reform the country’s IP system. The Department of Intellectual Property (DIP) is responsible for IP-related administration, including registration and recording of IP rights and coordination of IP enforcement activities. DIP also acts as the secretary of the National Committee on Intellectual Property Policy.

Thailand has a robust legal and enforcement regime for IP rights. Thailand is a member of the Patent Cooperation Treaty (PCT). Thailand’s patent regime generally provides protection for most new inventions. The process of patent examination through issuance of patents is slow, taking on average six to eight years. The patent approval process, particularly for non-pharmaceutical products, has been significantly reduced to one year from 5 to 6 years prior to 2020 as the DIP increased substantial number of patent examiners and streamlined the process. However, the patenting process may take longer for certain technology sectors such as pharmaceuticals and biotechnology.

Thailand protects trademarks, traditional marks, and sound marks. As a member of the “Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks” (Madrid Protocol), Thailand allows trademark owners to apply for trademark registrations in Thailand directly at DIP or through international applications under the Madrid Protocol. DIP historically takes 10 to 14 months to register a trademark. As Thailand is a member of the “Berne Convention,” copyright works are protected automatically. However, copyright owners may record their works with DIP to establish proof of ownership. Thailand joined the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled in January 2019. Thailand’s Geographical Indications (GI) Act has been in force since April 2004. Thailand protects GIs, which identify goods by their specific geographical origins. The geographical origins identified by a GI must be directly attributable to the reputation, qualities, or characteristics of the good. In Thailand, a registered trademark does not prevent a similar geographical name to be registered as a GI.

As of March 2022, Thailand remained in the process of amending its Patent Act to streamline the patent registration process, to reduce patent backlog and pendency, and to help prepare for accession to the Hague Agreement Concerning the International Registration of Industrial Designs. Furthermore, Thailand has increased the number of examiners to reduce the patent backlog. The February 2022 amendment of the Copyright Act will enhance mechanisms to protect copyrights in the digital environment and prepare Thailand for accession to the WIPO copyright treaty (WCT); it will enter into force on August 23. The amendment expanded the term of protection for photographic works, adopted liability exemptions for Internet Service Providers (ISPs), and added criminal offences for circumventing of technological protection measures (TPMs).

DIP adopted voluntary registration of copyright (collective management) agents and Code of Conduct (CoC) for Collective Management Organizations (CMOs) to curb illegal activities of rogue agents and fine-tune the regulations to conform with international standards. To register, an agent must meet certain qualifications and undergo prescribed training. The roster of registered agents along with associated licensed copyrights and a list of CMOs that comply with the COC are available on the DIP website. The Central Committee on Goods and Service also issued the new implementing regulation requiring the CMOs to update music and copyright fees (including song name, songwriter, right-owner, copyright fee, copyright expiration date) on its website. Thailand also organized an MOU in January 2021 between internet platforms, DIP, and rightsholders, to streamline the process of removing IP-infringing and counterfeit goods from the country’s most popular online marketplaces. Regular meetings with the signatories were held and signatory e-commerce platforms have set up channels for receiving reports on sales of IPR-infringing goods in accordance with the MOU.

Thailand maintains a database on seizures of counterfeit goods ( https://www.ipthailand.go.th/en/ipr-enforcement-operation.html ). In 2021, the Royal Thai Police conducted 1,381 raids and seized 854,716 items, the Department of Special Investigation conducted four raids on trademark violations resulting in 2,922,630 items being seized, and the Customs Department had 1,869 seizures that stopped 1,347,022 IP-infringing items from entering Thailand.

Thailand’s Central Intellectual Property and International Trade Court (CIPIT) is the court of first instance with jurisdiction over both civil and criminal intellectual property cases and the appeals from DIP administrative decisions. The Court of Appeal for Specialized Cases hears appeals from the CIPIT. According to data from Thailand’s Intellectual Property and International Trade Court, the number of IP criminal cases filed at the court significantly dropped compared to previous years while the IP civil cases slightly declined. This trend has encouraged rights-owners to file civil cases in addition to criminal cases, which is in line with the government’s data.

Thailand remained on the Special 301 Watch List in 2021. USTR highlights Thailand not being a party to major international IP treaties, the unauthorized activities of collective management organizations, online piracy from streaming devices and applications, the use of unauthorized software in the public and private sectors, and a continued backlog in pharmaceutical patent applications as the main challenges confronting the country’s protection of intellectual property rights.

For additional information about national laws and points of contact at local IP offices, please see the DIP website at https://www.ipthailand.go.th/en/  and WIPO’s country profiles at http://www.wipo.int/directory/en/ .

The Thai government maintains a regulatory framework that broadly encourages and facilitates portfolio investment. The Stock Exchange of Thailand, the country’s national stock market, was established under the Securities Exchange of Thailand Act in 1992. There is sufficient liquidity in the markets to allow investors to enter and exit sizeable positions. Government policies generally do not restrict the free flow of financial resources to support product and factor markets. The Bank of Thailand, the country’s central bank, has respected IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

Credit is generally allocated on market terms rather than by “direct lending.” Foreign investors are not restricted from borrowing on the local market. In theory, the private sector has access to a wide variety of credit instruments, ranging from fixed term lending to overdraft protection to bills of exchange and bonds. However, the private debt market is not well developed. Most corporate financing, whether for short-term working capital needs, trade financing, or project financing, requires borrowing from commercial banks or other financial institutions.

Thailand’s banking sector, with 15 domestic commercial banks, is sound and well-capitalized. As of December 2021, the gross non-performing loan rate was low (around 2.97 percent industry wide), and banks were well prepared to handle a forecast rise in the NPL rate in 2021 due to the pandemic. The ratio of capital funds/risk-weighted assets (capital adequacy) was high (19.9 percent). Thailand’s largest commercial bank is Bangkok Bank, with assets totaling USD 112 billion as of December 2021. The combined assets of the five largest commercial banks totaled USD 494 billion, or 71.9 percent of the total assets of the Thai banking system, at the end of 2021.

In general, Thai commercial banks provide the following services: accepting deposits from the public; granting credit; buying and selling foreign currencies; and buying and selling bills of exchange (including discounting or re-discounting, accepting, and guaranteeing bills of exchange). Commercial banks also provide credit guarantees, payments, remittances and financial instruments for risk management. Such instruments include interest-rate derivatives and foreign-exchange derivatives. Additional business activities to support capital market development, such as debt and equity instruments, are allowed. A commercial bank may also provide other services, such as bank assurance and e-banking.

Thailand’s central bank is the Bank of Thailand (BOT), which is headed by a Governor appointed for a five-year term. The BOT serves the following functions: prints and issues banknotes and other security documents; promotes monetary stability and formulates monetary policies; manages the BOT’s assets; provides banking facilities to the government; acts as the registrar of government bonds; provides banking facilities for financial institutions; establishes or supports the payment system; supervises financial institutions; manages the country’s foreign exchange rate under the foreign exchange system; and determines the makeup of assets in the foreign exchange reserve.

Apart from the 15 domestic commercial banks, there are currently 11 registered foreign bank branches, including three American banks (Citibank, Bank of America, and JP Morgan Chase), and four foreign bank subsidiaries operating in Thailand. To set up a bank branch or a subsidiary in Thailand, a foreign commercial bank must obtain approval from the Ministry of Finance and the BOT. Foreign commercial bank branches are limited to three service points (branches/ATMs) and foreign commercial bank subsidiaries are limited to 40 service points (branches and off-premises ATMs) per subsidiary. Newly established foreign bank branches are required to have minimum capital funds of 125 million baht (USD 3.8 million at 2021 average exchange rates) invested in government or state enterprise securities, or directly deposited with the Bank of Thailand. The number of expatriate management personnel is limited to six people at full branches, although Thai authorities frequently grant exceptions on a case-by-case basis.

Non-residents can open and maintain foreign currency accounts without deposit and withdrawal ceilings. Non-residents can also open and maintain Thai baht accounts; however, in an effort to curb the strong baht, the Bank of Thailand capped non-resident Thai deposits at 200 million baht across all domestic bank accounts. However, in January 2021, the Bank of Thailand began allowing non-resident companies greater flexibility to conduct baht transactions with domestic financial institutions under the non-resident qualified company scheme. Participating non-financial firms that trade and invest directly in Thailand are allowed to manage currency risks related to the baht without having to provide proof of underlying baht holdings for each transaction. This will allow firms to manage baht liquidity more flexibly without being subject to the end-of-day outstanding limit of 200 million baht for non-resident accounts. Withdrawals are freely permitted. Since mid-2017, the BOT has allowed commercial banks and payment service providers to introduce new financial services technologies under its “Regulatory Sandbox” guidelines. Recently introduced technologies under this scheme include standardized QR codes for payments, blockchain funds transfers, electronic letters of guarantee, and biometrics.

Thailand’s alternative financial services include cooperatives, micro-saving groups, the state village funds, and informal money lenders. The latter provide basic but expensive financial services to households, mostly in rural areas. These alternative financial services, with the exception of informal money lenders, are regulated by the government.

Thailand does not have a sovereign wealth fund and the Bank of Thailand is not pursuing the creation of such a fund. However, the International Monetary Fund has urged Thailand to create a sovereign wealth fund due to its large accumulated foreign exchange reserves. As of December 2021, Thailand had the world’s 14th largest foreign exchange reserves at USD 246 billion.

Thailand’s 52 state-owned enterprises (SOEs) have total assets of USD 448 billion and a combined gross income of USD 131 billion (end of 2021 figures, latest available). In 2021, they employed 255,397 people, or 0.65 percent of the Thai labor force. Thailand’s SOEs operate primarily in service delivery, in particular in the energy, telecommunications, transportation, and financial sectors. More information about SOEs is available at the website of the State Enterprise Policy Office (SEPO) under the Ministry of Finance at www.sepo.go.th .

A 15-member State Enterprises Policy Commission, or “superboard,” oversees operations of the country’s 52 SOEs. In May 2019, the Development of Supervision and Management of State-Owned Enterprise Act (2019) went into effect with the goal to reform SOEs and ensure transparent management decisions. The Thai government generally defines SOEs as special agencies established by law for a particular purpose that are 100 percent owned by the government (through the Ministry of Finance as a primary shareholder). The government recognizes a second category of “limited liability companies/public companies” in which the government owns 50 percent or more of the shares. Of the 52 total SOEs, 42 are wholly-owned and 10 are majority-owned. Three SOEs are publicly listed on the Stock Exchange of Thailand: Airports of Thailand Public Company Limited, PTT Public Company Limited, and MCOT Public Company Limited. By regulation, at least one-third of SOE boards must be comprised of independent directors.

Private enterprises can compete with SOEs under the same terms and conditions with respect to market share, products/services, and incentives in most sectors, but there are some exceptions, such as fixed-line operations in the telecommunications sector.

While SEPO officials aspire to adhere to the OECD Guidelines on Corporate Governance for SOEs, there is not a level playing field between SOEs and private sector enterprises, which are often disadvantaged in competing with Thai SOEs for contracts.

Generally, SOE senior management reports directly to a cabinet minister and to SEPO. Corporate board seats are typically allocated to senior government officials or politically affiliated individuals.

The 1999 State Enterprise Corporatization Act provides a framework for conversion of SOEs into stock companies. Corporatization is viewed as an intermediate step toward eventual privatization. [Note: “Corporatization” describes the process by which an SOE adjusts its internal structure to resemble a publicly traded enterprise; “privatization” denotes that a majority of the SOE’s shares is sold to the public; and “partial privatization” is when less than half of a company’s shares are sold to the public.] Foreign investors are allowed to participate in privatizations, but restrictions are applied in certain sectors, as regulated by the FBA and the Act on Standards Qualifications for Directors and Employees of State Enterprises of 1975, as amended. However, privatization efforts have been on hold since 2006 largely due to strong opposition from labor unions.

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;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

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.

Thailand is among the top 10 countries most vulnerable to climate change and the world’s 20th largest emitter of greenhouse gases.  At the 2021 United Nations Climate Change Conference (COP 26), Prime Minister Prayut Chan-o-cha announced that the country will reduce greenhouse gas emissions by 40 percent in 2030, achieve carbon neutrality by 2050, and become greenhouse gas neutral by 2065.  In line with these ambitious goals, Thailand is in the process of updating its Nationally Determined Contribution (NDC) and other related plans, which as of this writing are expected to be announced before COP 27 in November 2022.

Thailand is also drafting a new Climate Change Act that will help ensure stronger interagency coordination among authorities and solidify Thailand’s Climate Change Master Plan, which will be revised every five years.  Other notable components of the draft law include establishment of a greenhouse gas emissions database, reporting requirements for government and private sector entities (along with penalties for non-compliance), and guidelines for use of the Thailand Environment Fund.

Clean energy technology is featured prominently in Thailand’s climate landscape, since the energy sector is currently the main source of greenhouse gas emissions.  The Thai government is actively pursuing foreign investment related to clean energy, electric vehicles, and related industries. Thailand is currently developing a National Energy Plan that will further increase the 2037 target of renewable energy from 20 percent in order to meet the new climate goals and align energy production with the government’s “Bio-Circular Green Economy” model.  Private sector investment is a key driver of success.

The Thai government has established a special committee, under supervision of the Deputy Prime Minister and Minister of Energy, to support increased investment in this area.  In support of these policies, electricity producers can access tax and non-tax incentives from Thailand’s Board of Investment (BOI).  The tax incentives include a corporate income tax holiday of six or eight years, depending on the type of power production used in electricity generation.  Tax incentives also include custom duty exemptions for the import of new equipment.  Thailand also has a feed-in-tariff (FiT) program and additional tax and investment incentives through the BOI. The FiT is designed to accelerate growth in renewable energy investment by offering a guaranteed, above-market price for long-term power purchase agreements (20 – 25 years).  The FiT is currently offered for solar, solar with energy storage, wind, biomass, biogas, and waste-to-energy power production.

In February 2022, Thailand joined the U.S.-led Clean Energy Demand Initiative, in which the Thai government agreed to pursue policies that will increase access to alternative energy for the private sector.  Electric vehicles are another key focus area for the Thai government and its “30@30” policy aims to have 30 percent of domestic vehicle production be electric vehicles by 2030.  To achieve this, the Thai government in 2022 approved a suite of measures to increase foreign investment in electric vehicles, including a range of tax incentives, subsidies, and other mechanisms.

Transparency International’s Corruption Perceptions Index ranked Thailand 110th out of 180 countries with a score of 35 out of 100 in 2021 (zero is highly corrupt). Bribery and corruption are still problematic. Despite increased usage of electronic systems, government officers still wield discretion in the granting of licenses and other government approvals, which creates opportunities for corruption. U.S. executives with experience in Thailand often advise new-to-market companies to avoid corrupt transactions from the beginning rather than to stop such practices once a company has been identified as willing to operate in this fashion. American firms that comply with the strict guidelines of the Foreign Corrupt Practices Act (FCPA) are able to compete successfully in Thailand. U.S. businesses say that publicly affirming the need to comply with the FCPA helps to shield their companies from pressure to pay bribes.

Thailand has a legal framework and a range of institutions to counter corruption. The Organic Law to Counter Corruption criminalizes corrupt practices of public officials and corporations, including active and passive bribery of public officials. The anti-corruption laws extend to family members of officials and to political parties.

As of February 2022, the Thai government is working on an Anti-SLAPP law (strategic lawsuit against public participation) proposed by the Thai National Anti-Corruption Commission. The new law provides a legal definition of SLAPP lawsuits as cases where the plaintiff intends to “suppress public participation in defense of the public interest in good faith” or has the purposed of intimidation, suppressing information, negotiating, or ending litigation” and empowers law enforcement to file Anti-SLAPP charges in court.

Thai procurement regulations prohibit collusion among bidders. If an examination confirms allegations or suspicions of collusion among bidders, the names of those applicants must be removed from the list of competitors.

Thailand adopted its first national government procurement law in December 2016. Based on UNCITRAL model laws and the WTO Agreement on Government Procurement, the law applies to all government agencies, local authorities, and state-owned enterprises, and aims to improve transparency. Officials who violate the law are subject to 1-10 years imprisonment and/or a fine from Thai baht 20,000 (approximately USD 615) to Thai baht 200,000 (approximately USD 6,150).

Since 2010, the Thai Institute of Directors has built an anti-corruption coalition of Thailand’s largest businesses. Coalition members sign a Collective Action Against Corruption Declaration and pledge to take tangible, measurable steps to reduce corruption-related risks identified by third party certification. The Center for International Private Enterprise equipped the Thai Institute of Directors and its coalition partners with an array of tools for training and collective action.

Established in 2011, the Anti-Corruption Organization of Thailand (ACT) aims to encourage the government to create laws to combat corruption. ACT has 54 member organizations drawn from the private, public, and academic sectors. ACT’s signature program is the “Integrity Pact,” run in cooperation with the Comptroller General Department of the Ministry of Finance and based on a tool promoted by Transparency International. The program forbids bribes from signatory members in bidding for government contacts and assigns independent ACT observers to monitor public infrastructure projects for signs of collusion. Member agencies and companies must adhere to strict transparency rules by disclosing and making easily available to the public all relevant bidding information, such as the terms of reference and the cost of the project.

Thailand is a party to the UN Anti-Corruption Convention, but not the OECD Anti-Bribery Convention.

Thailand’s Witness Protection Act offers protection (to include police protection) to witnesses, including NGO employees, who are eligible for special protection measures in anti-corruption cases.

International Affairs Strategy Specialist
Office of the National Anti-Corruption Commission
361 Nonthaburi Road, Thasaai District, Amphur Muang Nonthaburi 11000, Thailand
Tel: +662-528-4800
Email:  TACC@nacc.go.th 

Dr. Mana Nimitmongkol
Secretary General
Anti-Corruption Organization of Thailand (ACT)
44 Srijulsup Tower, 16th floor, Phatumwan, Bangkok 10330
Tel: +662-613-8863
Email:  mana2020@yahoo.com 

Street clashes between anti-government protesters and police occurred regularly in a major Bangkok intersection in the early months of 2021. Several protesters were injured by rubber bullets, two of whom later died.

Violence related to an ongoing ethno-nationalist insurgency in Thailand’s southernmost provinces has claimed more than 7,000 lives since 2004. Although the number of deaths and violent incidents has decreased in recent years, efforts to end the insurgency have so far been unsuccessful. The government is currently engaged in preliminary talks with the leading insurgent group. Almost all attacks have occurred in the three southernmost provinces of the country.

In 2021, 38.6 million people were in Thailand’s formal labor pool, comprising 66 percent of the total population. Thailand’s official unemployment rate stood at 1.6 percent at the end of 2021, interestingly, workers with university degrees have the highest unemployment rate compared with other groups. The working hours in the private sector are still below the pre-Covid era with the average working hours of 45.6 hours per week.

The Thai government is actively seeking to address shortages of both skilled and unskilled workers through education reform and various worker-training incentive programs. Low birth rates, an aging population, and skill mismatch, are exacerbating labor shortage problems in many sectors. Despite provision of 15 years of free education for every child in Thailand, Thailand continues to suffer from a skills mismatch that impedes innovation and economic growth. Thailand also has a shortage of high-skill workers such as researchers, engineers, and managers, as well as technicians and vocational workers. The statistics from the Office of the National Economic and Social Development Board show that 49.3 percent of new graduates are in the fields of business and social science.  

Regional income inequality and labor shortages, particularly in labor-intensive manufacturing, construction, hospitality, and service sectors, have attracted millions of migrant workers, mostly from neighboring Burma, Cambodia, and Laos. At the end of 2021, there were more than two million migrant workers registered with the Ministry of Labor.

Employers may dismiss workers provided the employer pays severance. When an employer temporarily suspends business, in part or in whole, the employer must pay the employee at least 75 percent of his or her daily wages throughout the suspension period.

At the end of 2021, there were a total of 1,432 labor unions in Thailand with 364 of them located in Bangkok. Thai law allows private-sector workers to form and join trade unions of their choosing without prior authorization, to bargain collectively, and to conduct legal strikes, although these rights come with some restrictions. Noncitizen migrant workers, whether registered or undocumented, do not have the right to form unions or serve as union officials. Migrants can join unions organized and led by Thai citizens.

In 2020, the Department of Labor Protection and Welfare issued a ministerial regulation on occupational safety, health and working environment for diving work; the regulation sets a minimum age of 18. In March 2022, the Ministry of Labor issued a regulation regarding the Protection of Fishery Workers to provide additional protection for the workers’ rights in this industry. Additional information on migrant workers issues and rights can be found in the U.S. Trafficking in Persons Report, as well as the Labor Rights chapter of the U.S. Human Rights report.

* Source for Host Country Data: Bank of Thailand (http://bot.or.th/)

U.S. Embassy Bangkok
Economic Section
BangkokEconSection@state.gov 

FDI continues to play a key role in upholding the country’s economy. Vietnam Customs reported that FDI companies exported $247 billion worth of goods in 2021, representing 73.6 percent of total exports, a 21.1 percent increase over 2020. The government, at both central and municipal levels, actively seeks to welcome FDI.

The Politburo issued Resolution 55 in 2019 to increase Vietnam’s attractiveness to foreign investment. This Resolution aims to attract $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 Law of Investment 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 electronic payment 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). U.S. companies also reported facing difficulties in extending/renewing investment certificates – citing prolonged periods of non-responsiveness from government agencies. In 2021, a survey by the American Chamber of Commerce (AmCham) in Hanoi listed the need for “administrative reforms that streamline regulations and promote transparency” as the top key element of a roadmap for a sustainable growth in Vietnam.

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 legal counsel and/or other experts regarding issues on regulations that are unclear.

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.

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. The new Decree 31/2021/ND-CP dated 26 March 2021 provides a list of 25 business lines in which foreigners are prohibited to invest and 59 other business lines subjected to market access requirements. 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 required approval by the People’s Committee in the province in which the project would be located. By law, large-scale FDI projects must also obtained 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 2021, the government removed the requirement that the Prime Minister needs to approve investments over $271 million or investments in the tobacco industry.

Recent third-party investment policy reviews include:
WTO’s 2021 Trade Policy Review  
World Bank’s Review from 2020  
OECD’s 2018 Review  
UNCTAD Investment Policy Review  

The Government of Vietnam has several initiatives in progress to implement administrative reforms, such as building e-Government platforms and single window services. 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. 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.

Vietnam’s nationwide business registration site is here. In addition, as a member of the UNCTAD international network of transparent investment procedures, information on Vietnam’s investment regulations can be found online (Vietnam Investment Regulations Website). The website provides information for foreign and national investors on administrative procedures applicable to investment and income generating operations, including the number of steps, name, and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal and regulatory citations for seven major provinces.

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. According to a preliminary report from the General Statistics Office, Vietnam invested $819 million in 134 projects abroad in 2020. By the end of 2020, total outward FDI investment from Vietnam was $21 billion in more than 1,400 projects in 78 countries. Laos received the most outward FDI, with $5 billion, followed by Russia and Cambodia with $2.8 billion and $2.7 billion, respectively. The main sectors of outward investment for Vietnam are mining, agriculture, forestry and fisheries, telecommunication, and energy.

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) oversees administrative procedures for government ministries and agencies. 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 .

The Ministry of Finance has provisions laws instructing public companies to produce an annual report disclosing their environmental, social and corporate governance policies. In 2016, the State Securities Commission of Vietnam, in cooperation with the International Finance Corporation, published an Environmental and Social Disclosure Guide which encourages independent external assurance. While almost all public companies in Vietnam now perform an environmental and social impact assessment when investing in a new project, many see this exercise as merely procedural.

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 at the end of 2021 was 43.7 percent – down from 53.3 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.

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, though in recent years the country has begun gradually introducing elements of an adversarial 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.

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 Ministry of Planning and Investment enacted Circular No. 02/2022/TT-BKHĐT, which came into effect on April 1, 2022, guiding the supervision and investment assessments of foreign investment activities in Vietnam, providing a common template. It also examines the implementation of financial obligations towards the State; the execution of legal provisions on labor, foreign exchange control, environment, land, construction, fire prevention and fighting and other specialized legal regulations; the financial situation of the foreign-invested economic organization; and other provisions related to the implementation of investment projects.

The 2019 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 Law on Investment, revised in June 2020, stipulated that Vietnam would encourage FDI through financial incentives in the areas of university education, pollution mitigation, and certain medical research. The 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 public-private partnerships.

Vietnam has a “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors.

The Vietnam Competition and Consumer Authority (“VCCA”) of MOIT reviews transactions subject to complaints for competition-related concerns. In 2021, VCCA reported that 125 merger control notifications, most of which related to real estate, have been submitted since 2019. Thirty percent of cases notified involved offshore transactions. The VCCA clarified that the Vietnam merger control regime seeks to regulate only relevant transactions that may have an anticompetitive impact on Vietnamese markets, especially those that enable enterprises to hold a dominant or monopoly position and heighten the risk of an abuse of dominance.

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.

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 five years on average 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.

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.

Vietnam’s Ministry of Industry and Trade (MOIT) is seeking to implement a Direct Power Purchase Agreement (DPPA) pilot scheme which, for the first time, will enable renewable energy generators to directly sell clean electricity to private-sector customers. Under current electricity regulations in Vietnam, Electricity Vietnam (EVN) has a statutory monopoly over the transmission, distribution, wholesale, and retail of electricity and is also the sole off taker in the market. The pilot scheme is expected to run from 2022 to 2024 and support Vietnam’s transition in the liberalization of Vietnam’s wholesale and retail electricity markets. It is anticipated that DPPAs will be introduced into the market on a permanent basis from 2025 onwards.

Vietnam has prioritized efforts to establish and develop different kinds of foreign trade zones (FTZs) over the last decade. Industrial Zones (IZs) are dedicated areas for industrial activities; Export Processing Zones (EPZs) are specific kind of IZ, focused on export-oriented production and activities.  Vietnam currently has more than 350 IZs and EPZs. Many foreign investors report that it is easier to implement projects in IZs than in other types of zoned land 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.

According to the Law on Investment (LOI) 2020, Article 11 “Guarantees for business investment activities,” the State cannot require investors to:

• Give priority to purchase or use of domestic goods/services; or only purchase or use goods/services provided by domestic producers/service providers;
• Achieve a certain export target; restrict the quantity, value, types of goods/services that are exported or domestically produced/provided;
• Import a quantity/value of goods that is equivalent to the quantity/value of goods exported; or balance foreign currencies earned from export to meet import demands;
• Reach a certain rate of import substitution;
• Reach a certain level/value of domestic research and development;
• Provide goods/service at a particular location in Vietnam or overseas; and
• Have the headquarters situated at a location requested by a competent authority.

There are additional market entry requirements and limitations for investments in “conditional” sectors listed in Appendix IV of the LOI. As of March 2022, MPI and respective ministries and regulatory agencies are working to specify detailed conditions for each sector. All investors, foreign or domestic, 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.”

In addition, the LOI 2020 also introduces the regulation of sectors “with market entry restrictions,” including: (i) Percentage ownership limits; (ii) Restrictions on the form of investment; (iii) Restrictions on the scope of business and investment activities; (iv) Financial capacity of the investors and partners; and (v) Other conditions under international treaties and Vietnamese law. As of March 2022, MPI is drafting additional guidance to specify conditions for each sector.

In addition to market access conditions, the LOI 2020 adds two additional conditions for foreign investors investing in or acquiring capital/share in a Vietnamese company as follows:

• The investment must not compromise national defense and security of Vietnam; and
• The investment must comply with the conditions relating to the use of sea-lands, borderlands, and coastal lands in accordance with the applicable laws.

The term “national defense and security” is not defined under the LOI 2020; this ambiguity gives regulatory agencies considerable flexibility to restrict investment activities in sensitive sectors or locations. Future investment projects could also be ratified based on other laws, National Assembly Resolution, Ordinance, National Assembly Standing Committee’s Resolution, Government Decree and international treaties, which has been creating complexity and volatility in Vietnam’s business investment.

For existing investment projects, the extension of the investment term will not be granted to any project using outdated technology, having any potential negative impact on the environment, or involving any exploitation of natural resources.

On January 1, 2019, the Law on Cybersecurity (LOCS) came into effect, requiring cross-border services to store data of Vietnamese users in Vietnam and establish local presence, despite sustained international and domestic opposition to the regulation. The government committed to consider comments from the U.S. government, companies, and trade associations and promised to consult with the U.S. government before finalization. In September 2020, the Ministry of Public Security (MPS) released a partial draft Decree to guide the implementation of the LOCS, which requires foreign services providers to localize their data and establish local presence only when they violate Vietnamese laws and fail to cooperate with MPS to address their violations. However, local companies must comply with data localization requirements, which would cause unnecessary burdens for local companies and foreign business partners. The draft Decree is also expected to prescribe procedures for law enforcement to handle digital evidence, which may include source code and/or access to encryption, to serve criminal investigation. As of March 2022 the latest version of the draft Decree is reportedly with the Office of the Government for the Prime Minister’s approval.

In early 2020, the MPS released a draft outline of the Personal Data Protection Decree (PDPD) and then published the first full draft in February 2021 for public comment. 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 heavy-handed regulations of cross-border transfer of personal data would affect a wide range of Internet companies. In February 2022, Deputy Prime Minister Vu Duc Dam announced that the GVN sent the draft Decree to National Assembly, specifically to the National Assembly Standing Committee, for further review. The Prime Minister set out the deadline of May 2022 for the approval of the Decree and also tasked the MPS to start developing a new Law on Data Privacy.

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.

Vietnam does not have a strong record on protecting and enforcing intellectual property (IP). Fractured authority and lack of coordination among ministries and agencies responsible for enforcement are the primary obstacles, and capacity constraints related to enforcement persist, in part, due to a lack of resources and IP expertise. Vietnam has no specialized IP courts and judges, thus continuing 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. The 2005 IP Law is currently under revision with amendments planned to be passed in May 2022. It is expected that the law would bring Vietnam’s IP regulations in line with its commitments under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA). 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 Penal Code, particularly with respect to criminal enforcement of IP violations. Counterfeit goods are widely available online and in physical markets. In addition, issues 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, and the EVFTA. 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.

For more information, please see the following reports from the U.S. Trade Representative:

• Special 301 Report
• Notorious Markets Report

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles .

The government generally encourages foreign portfolio investment. The country has two stock markets: the Ho Chi Minh City Stock Exchange (HOSE), which lists publicly traded companies, and the Hanoi Stock Exchange, which lists bonds and derivatives. The Law on Securities, which came into effect January 1, 2021, states that Vietnam Exchange, a parent company to both exchanges, with board members appointed by the government, will manage trading operations. Vietnam also has a market for unlisted public companies (UPCOM) at the Hanoi Securities Center.

Although Vietnam welcomes portfolio investment, the country sometimes has difficulty in attracting such investment. Morgan Stanley Capital International (MSCI) classifies Vietnam as a Frontier Market, which precludes some of the world’s biggest asset managers from investing in its stock markets.

Vietnam did not meet its goal to be considered an “emerging market” in 2020 and pushed back the timeline to 2025. Foreign investors often face difficulties in making portfolio investments because of cumbersome bureaucratic procedures. Furthermore, in the first three months of 2021, surges in trading frequently crashed the HOSE’s decades-old technology platform, resulting in investor frustration. Vietnam put into place the HOSE’s interim trading platform in July 2021, provided by FPT Corporation – Vietnam’s largest information technology service company – that has addressed HOSE’s overload issues while awaiting the new trading system purchased from the South Korean Exchange (KRX). The new system is expected to begin official operations in late 2022 and meet the requirements for Vietnam’s stock trading, including market information, market surveillance, clearing, settlement and depository and registration.

There is enough liquidity in the markets to enter and maintain sizable positions. Combined market capitalization at the end of 2021 was approximately $334 billion, equal to 92 percent of Vietnam’s GDP, with the HOSE accounting for $250 billion, the Hanoi Exchange $21 billion, and the UPCOM $60 billion. Bond market capitalization reached over $64 billion in 2021, the majority of which were government bonds held by domestic commercial banks.

Vietnam complies with International Monetary Fund (IMF) Article VIII. The government notified the IMF that it accepted the obligations of Article VIII, Sections 2, 3, and 4, effective November 8, 2005.

Local banks generally allocate credit on market terms, but the banking sector is not as sophisticated or capitalized as those in advanced economies. Foreign investors can acquire credit in the local market, but both foreign and domestic firms often seek foreign financing since domestic banks do not have sufficient capital at appropriate interest rate levels for a significant number of FDI projects.

Vietnam’s banking sector has been stable since recovering from the 2008 global recession. Nevertheless, the State Bank of Vietnam (SBV), Vietnam’s central bank, estimated in 2020 that 30 percent of Vietnam’s population is underbanked or lacks bank accounts due to a preference for cash, distrust in commercial banking, limited geographical distribution of banks, and a lack of financial acumen. The World Bank’s Global Findex Database 2017 (the most recent available) estimated that only 31 percent of Vietnamese over the age of 15 had an account at a financial institution or through a mobile money provider.

The COVID-19 pandemic increased strains on the financial system as an increasing number of debtors were unable to make loan payments. However, low capital cost, together with credit growth rally, increased bank profits in 2021 by 25 percent compared to 2020. At the end of 2021, the SBV reported that the percentage of non-performing loans (NPLs) in the banking sector was 1.9 percent, up from 1.7 percent at the end of 2020.

By the end of 2021, per SBV, the banking sector’s estimated total assets stood at $651 billion, of which $268 billion belonged to seven state-owned and majority state-owned commercial banks – accounting for 41 percent of total assets in the sector. Though classified as joint-stock (private) commercial banks, the Bank of Investment and Development Bank (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), and Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) all are majority-owned by SBV. In addition, the SBV holds 100 percent of Agribank, Global Petro Commercial Bank (GPBank), Construction Bank (CBBank), and Oceanbank.

Currently, the total foreign ownership limit (FOL) in a Vietnamese bank is 30 percent, with a 5 percent limit for non-strategic individual investors, a 15 percent limit for non-strategic institutional investors, and a 20 percent limit for strategic institutional partners.

The U.S. Mission in Vietnam did not find any evidence that a Vietnamese bank had lost a correspondent banking relationship in the past three years; there is also no evidence that a correspondent banking relationship is currently in jeopardy.

Vietnam does not have a sovereign wealth fund.

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.

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  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.

The Extractive Industries Transparency Initiative was introduced to Vietnam many years ago but the government has not officially participated in it. 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 contracts 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 2020 Human Rights Report.

Vietnam participates in the OECD Southeast Asia Regional Program since its launch in 2014 and has cooperated in several policy reviews with the OECD, notably Investment Policy Reviews (2009 and 2018), Clean Energy Finance (2021), and the Vietnam Economic Review (forthcoming). Vietnam also participates in the OECD-Southeast Asia Corporate Governance Initiative. Engagement with businesses will include activities in the agriculture (with a focus on seafood), garment and footwear sectors, and building resilient supply chains. Vietnam doesn’t have any domestic measures requiring supply chain due diligence for companies that source minerals that may originate from conflict-affected areas.

Vietnam’s Law on Consumer Protection is largely ineffective, according to industry experts. 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 came into effect on January 1, 2022, states that environmental protection is the responsibility and obligation of all organizations, institutions, communities, households, and individuals. The law also specifies that manufacturers bear two responsibilities, including responsibility for waste recycling and responsibility for waste treatment.

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 $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 impacts on human rights by commercial activities – 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;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

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.

At COP 26, the Prime Minister announced Vietnam’s commitment to net zero emissions by 2050. Right after the event, Vietnam established a National Steering Committee on Implementation of COP 26 Commitments headed by the Prime Minister. The Prime Minister has requested all relevant ministries to study and develop programs to fulfill Vietnam’s commitments. Vietnam issued a climate change strategy in 2011 that will be valid through 2030, with “a vision” to 2050, and it has reviewed implementation for the 2011-2020 period. Vietnam is revising the strategy to achieve the net zero commitment, with the new version expected to be released by the end of 2022. The country is also updating its Nationally Determined Contributions in line with its net zero emission commitment.

On October 1, 2021, Vietnam issued its National Strategy on Green Growth in the 2021-2030 Period, with a Vision to 2050. The strategy sets specific goals on GHG reductions and tasks various Ministries to develop specific plans and strategies. The strategy also targets at a 35 per cent green procurement proportion of the total public procurement.

On February 7, 2022, Vietnam approved the National Biodiversity Strategy for the 2021-2030 period. Vietnam will increase the size of its protected and restored natural eco-systems under the new strategy, aiming to conserve and use biodiversity as a sustainable response to the effects of climate change.

The New Decree 08/ND-CP issued in January 2022 regulating in details the implementation of the 2020 Environment Protection Law has specified three groups of environmental businesses that will be qualified for incentives, including businesses involved in the waste collection, treatment, re-use or recycling; businesses manufacturing or supplying technologies, equipment, products and services serving the environmental protection and non-business operations related to the environmental protection such as application of best technologies earlier than regulated, installation of waste water, air quality monitoring systems earlier than scheduled. The incentives listed under the Decree include investment capital support from Environmental Protection Funds, Vietnam Development Fund, preferential terms for taxes, fees and charges, and land support.

Vietnam has laws to combat corruption by public officials, and they extend to all citizens. Communist Party of Vietnam General Secretary Nguyen Phu Trong has made fighting corruption a key focus of his administration, and the CPV regularly issues lists of Party and other government officials that have been disciplined or prosecuted. Trong recently expanded the campaign to include “anti-negativity,” described loosely as acts that can cause public anger or reputational harm to the CPV. Nevertheless, corruption remains rife. 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 General Secretary Trong), 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.

Contact at the government agency or agencies that are responsible for combating corruption:
Mr. Phan Dinh Trac
Chairman of Communist Party Central Committee Internal Affairs
4 Nguyen Canh Chan, Ba Dinh, Hanoi
Tel: +84 0804-3557

Contact at a watchdog organization:
Ms. Nguyen Thi Kieu Vien
Executive Director ,Towards Transparency International National
Floor 4, No 37 Lane 35, Cat Linh Street, Dong Da, Hanoi, Vietnam
Tel: +84-24-37153532
Fax: +84-24-37153443
Email: kieuvien@towardstransparency.vn 

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 killed a large number of fish, 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.

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 (VGCL). 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 2019 Labor Code, including decrees on procedures to establish and join independent unions, and to determine the level of autonomy independent unions will have in administering their affairs. MOLISA expects to issue this guidance in 2022.

Vietnam has been a member of the International Labor Organization (ILO) since 1992 and has ratified seven of the core ILO labor conventions (Conventions 100 and 111 on discrimination, Conventions 138 and 182 on child labor, Conventions 29 and 105 on forced labor, and Convention 98 on rights to organize and collective bargaining). In June 2020 Vietnam ratified ILO Convention 105 – on the abolition of forced labor – which came into force July 14, 2021. The EVFTA also requires Vietnam to ratify Convention 87, on freedom of association and protection of the right to organize, by 2023.

Labor dispute resolution mechanisms vary depending on situations. 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. Only interest-based collective labor disputes may legally be pursued via demonstration, and only after undergoing through conciliation and arbitration. However, in practice strikes organized by ad hoc groups at individual facilities are not uncommon, and are usually resolved through negotiation with management. In 2021 there were 105 strikes nationwide, 20 fewer than in 2020 as reported by VGCL.

According to Vietnam’s General Statistics Office (GSO), in 2021 there were 50.7 million people participating in the formal labor force in Vietnam out of over 74.9 million people aged 15 and above, around 1.4 million lower than 2020. The labor force is relatively young, with workers 15-39 years of age accounting for half of the total labor force. 61.6 percent of women in the working age participate to the labor force in comparison to 74.3 percent of men in the working age while 65.3 percent of people in the working age in the urban areas participate in the labor force in comparison to 69.3 percent in the rural areas.

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 dismiss 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 for disruptive behavior in the workplace. There are no waivers on labor requirements to attract foreign investment.

Economic Section
U.S. Embassy
7 Lang Ha, Ba Dinh, Hanoi, Vietnam
+84-24-3850-5000
InvestmentClimateVN@state.gov