Transparency of the Regulatory System

U.S. companies continue to report that they face frequent and significant challenges with inconsistent regulatory interpretation, irregular enforcement, and an unclear legal framework. AmCham members have consistently said they perceive that Vietnam lacks a fair legal system for investments, which affects these companies’ ability to do business in Vietnam. The 2019 PCI report documented companies’ difficulties dealing with land, taxes, and social insurance issues, but also found improvements in procedures related to business administration.

Accounting systems are inconsistent with international norms, which increase transaction costs for investors. Vietnam has improved the way it accounts for government revenues, and the government’s long-term goal is to have financial institutions and companies using International Financial Reporting Standards (IFRS) by 2020. Currently, Vietnam has its own accounting standards to which publicly listed Vietnamese companies must adhere. Some companies – particularly those that receive foreign investment – already prepare financial statements in line with IFRS.

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 how to implement a law. Individual ministries issue circulars, which provide guidance on how a ministry will administer a law or decree.

After line ministries have cleared a particular law in preparation to send the law to the National Assembly, the government posts the law for a 60-day comment period. However, sometimes, in practice, the public comment period is far shorter than 60 days. Foreign governments, NGOs, and private-sector companies can and do comment during this period, following which the ministry may redraft the law after considering the comments. 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 then 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 agencies often lack the resources needed to conduct adequate data-driven assessments. Ministries are supposed to conduct policy impact assessments that holistically consider all factors before drafting a law, but the quality of these assessments varies.

The Ministry of Justice (MOJ) is in charge of ensuring that government ministries and agencies follow administrative procedures. The MOJ has a Regulatory Management Department, which oversees and reviews legal documents after they are issued to ensure compliance with the legal system. The Law on the Promulgation of Legal Normative Documents requires all legal documents and agreements be published online for comments for 60 days and 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 receive comments for the first draft only and do not provide subsequent draft versions to the public. The centralized location where key regulatory actions are published can be found here: http://vbpl.vn/ .

While general information is publicly available, Vietnam’s public finances and debt obligations (including explicit and contingent liabilities) are not transparent. The National Assembly set a statutory limit for public debt at 65 percent of nominal GDP, and, according to official figures, Vietnam’s public debt to GDP ratio in late 2019 was 56 percent, down 6 percent from 2018. However, the official public-debt figures exclude the debt of certain SOEs. This poses a risk to Vietnam’s public finances, as the government is ultimately liable for the debts of these companies. Vietnam could improve its fiscal transparency by making its executive budget proposal, including budgetary and debt expenses, widely and easily accessible to the general public long before the National Assembly enacts the budget, ensuring greater transparency of off-budget accounts, and by publicizing the criteria by which the government awards contracts and licenses for natural resource extraction.

International Regulatory Considerations

Vietnam is a member of ASEAN, a 10-member regional organization working to advance economic integration through cooperation in economic, social, cultural, technical, scientific and administrative fields. Within ASEAN, the ASEAN Economic Community (AEC) has the goal of establishing a single market across ASEAN nations (similar to the EU’s common market), but member states have not made significant progress. To date, the greatest success of the AEC has been tariff reductions.

Vietnam is also a member of the Asia-Pacific Economic Cooperation (APEC), an inter-governmental forum for 21 member economies in the Pacific Rim that promotes free trade throughout the Asia-Pacific region. APEC aims to facilitate business among member states through trade facilitation programming, senior-level leaders’ meetings, and regular dialogue. However, APEC is a non-binding forum. ASEAN and APEC membership has not resulted in Vietnam incorporating international standards, especially when compared with the EU or North America.

Vietnam is a party to the WTO’s Trade Facilitation Agreement (TFA) and has been implementing the TFA’s Category A provisions. Vietnam submitted its Category B and Category C implementation timelines on August 2, 2018. According to these timelines, Vietnam will fully implement the Category B and C provisions by the end of 2023 and 2024, respectively.

Legal System and Judicial Independence

Vietnam’s legal system mixes indigenous, French, and Soviet-inspired civil legal traditions. Vietnam generally follows an operational understanding of the rule of law that is consistent with its top-down, one-party political structure and traditionally inquisitorial judicial system.

The hierarchy of the country’s courts is: 1) the Supreme People’s Court; 2) the High People’s Court; 3) Provincial People’s Courts; and 4) District People’s 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.

Along with corruption, 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 possible dispute. Vietnamese law allows dispute-resolution clauses in commercial contracts explicitly through the Law on Commercial Arbitration. The law follows the United Nations Commission on International Trade Law (UNCITRAL) model law as an international standard for procedural rules.

Vietnamese courts will only consider recognition of civil judgments issued by courts in countries that have entered into agreements on recognition of judgments with Vietnam or on a reciprocal basis. However, with the exception of France, these treaties only cover non-commercial judgments.

Laws and Regulations on Foreign Direct Investment

The legal system includes provisions to promote foreign investment. Vietnam uses a “negative list” approach to approve foreign investment, meaning foreign businesses are allowed to operate in all areas except for six prohibited sectors (illicit drugs, wildlife trade, prostitution, human trafficking, human cloning, and other commerce related to otherwise illegal activities).

The law also requires foreign and domestic investors be treated the same in cases of nationalization and confiscation. However, foreign investors are subject to different business-licensing processes and restrictions, and Vietnamese companies that have a majority foreign investment are subject to foreign-investor business-license procedures.

In 2019, Vietnam passed a new Securities Law, which stated the government’s long-term intention to remove some FOLs (but did not give specifics) and allows for the sale of certain derivatives. Also, in 2019, Vietnam adopted a new Labor Code, which allows greater flexibility in contract termination, allows employees to work more overtime hours, increases the retirement age, and adds more flexibility in terms of labor contracts. There is a “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors: https://vietnam.eregulations.org/ 

Competition and Anti-Trust Laws

In 2018, Vietnam passed a new Law on Competition, which came into effect on July 1, 2019, replacing Vietnam’s Law on Competition of 2004. The Law includes punishments – such as fines – for those who violate the law. The government has not prosecuted any person or entity under this law since it came into effect, though there were prosecutions under the 2004 law. The law does not appear to have affected foreign investment.

Expropriation and Compensation

Under Vietnamese law, the government 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 expropriation cases involving U.S. firms.

Dispute Settlement

ICSID Convention and New York Convention

Vietnam has not yet acceded to the International Center for Settlement of Investment Disputes (ICSID) Convention. MPI has submitted a proposal to the government to join the ICSID, but the government has not moved forward on this. Vietnam is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), meaning that foreign arbitral awards rendered by a recognized international arbitration institution should be respected by Vietnamese courts without a review of cases’ merits.

Investor-State Dispute Settlement

Vietnam has signed 66 bilateral investment treaties, is party to 26 treaties with investment provisions, and is a member of 12 free trade agreements in force. Some of these include provisions for Investor-State Dispute Settlement. As a signatory to the New York Convention, Vietnam is required to recognize and enforce foreign arbitral awards within its jurisdiction, with very few exceptions. Technically, foreign and domestic arbitral awards are legally enforceable in Vietnam; however, foreign investors in Vietnam do not trust the system will work in a fair and impartial manner. Vietnamese courts may reject foreign arbitral awards if the award is contrary to the basic principles of Vietnamese laws.

According to UNCTAD, over the last 10 years there were two dispute cases against the Vietnamese government involving U.S. companies.  The courts decided in favor of the government in one case, and the parties decided to discontinue the other case.  The Vietnamese government is currently in two pending, active disputes (with the UK and South Korea, respectively). More details are available at https://investmentpolicy.unctad.org/investment-dispute-settlement/country/229/viet-nam.

International Commercial Arbitration and Foreign Courts

With an underdeveloped legal system, Vietnam’s courts are often ineffective in settling commercial disputes. Negotiation between concerned parties is the most common means of dispute resolution. Since the Law on Arbitration does not allow a foreign investor to refer an investment dispute to a court in a foreign jurisdiction, Vietnamese judges cannot apply foreign laws to a case before them, and foreign lawyers cannot represent plaintiffs in a court of law. Vietnam does not have a domestic arbitration body, but the Law on Commercial Arbitration of 2011 permits foreign arbitration centers to establish branches or representative offices (although none have done so).

There are no readily available statistics on how often domestic courts rule in favor of SOEs. In general, the court system in Vietnam works slowly. International arbitration awards, when enforced, may take years from original judgment to payment. Many foreign companies, due to concerns related to time, costs, and potential for bribery, have reported that they have turned to arbitration or asking influential individuals to weigh in.

Bankruptcy Regulations

Based on the 2014 Bankruptcy Law, bankruptcy is not criminalized unless it relates to another crime. The law clarified the definition of insolvency as an enterprise that is more than three months overdue in meeting its payment obligations. The law also provided provisions allowing creditors to commence bankruptcy proceedings against an enterprise and created procedures for credit institutions to file for bankruptcy. Despite these changes, according to the World Bank’s 2020 Ease of Doing Business Report, Vietnam ranked 122 out of 190 for resolving insolvency. The report noted that it still takes, on average, five years to conclude a bankruptcy case in Vietnam. The Credit Information Center of the State Bank of Vietnam provides credit information services for foreign investors concerned about the potential for bankruptcy with a Vietnamese partner.

Investment Incentives

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 are allowed to provide additional tax breaks and other incentives to prospective investors.

Projects in the following sectors are eligible for investment incentives, including lower corporate income tax rates, exemption of some import tariffs, and/or favorable land rental rates: high-tech; 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 some large-scale projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Vietnam has prioritized efforts to establish and develop foreign trade zones (FTZs) over the last decade. Vietnam currently has more than 350 industrial zones (IZs) and export processing zones (EPZs). Many foreign investors report that it is easier to implement projects in IZs because they do not have to be involved in site clearance and infrastructure construction. Enterprises 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. Vietnam also has economic zones which can contain IZs and EPZs. Companies operating economic zones are entitled to more tax reductions as measures to incentivize investments.

Performance and Data Localization Requirements

Vietnamese law states that employers can only recruit foreign nationals for high-skilled positions such as manager, managing director, expert, or technical worker. Local companies must also justify that their efforts to hire suitable local employees were unsuccessful before recruiting foreigners, and their justification must be approved in writing by the local authority and/or the national government. This does not apply to board members elected by shareholders or capital contributors.

Over the last four years, the government has issued decrees that have made it easier for foreign investors and workers to obtain visas, work permits, and residence. The government plans to further streamline this process in 2021.

On January 1, 2019, the Law on Cybersecurity (LOCS) came into effect, requiring cross-border services to store data of Vietnamese users in Vietnam, despite sustained international and domestic opposition to the regulation. The latest draft of the LOCS implementing decree, released in July 2019, sparked concerns among foreign digital services firms regarding the draft decree’s provisions on data localization and local presence for a broad range of services in the Internet economy, from cloud computing to email. Provisions of the LOCS require firms to provide unencrypted user information upon request by law enforcement. However, application of this requirement hinges on issuance of the implementing decree, which is still pending as of May 2020. 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.

On July 1, 2020, the Law on Tax Administration will come into effect and will require foreign entities doing business on digital platforms without permanent presence in Vietnam to register as taxpaying entities in Vietnam. The Ministry of Finance said it would issue guidance on this requirement but had not done so as of May 2020.

There are currently no measures preventing or unduly impeding companies from freely transmitting customer or other business-related data outside of Vietnam.

The Ministry of Information and Communications (MIC) issued Circular 38 on Cross Border Provisioning of Public Information in 2016. Circular 38 does not require localization of servers but does require offshore service providers in Vietnam to comply with local-content restrictions. This includes websites, social networks, mobile phone apps, search engines, and other similar services that 1) have more than one million monthly users in Vietnam or 2) lease a data center to store digital information in Vietnam in order to provide services. MIC’s Authority on Broadcasting and Electronic Information is currently reviewing Circular 38 and related legislation with the goal of revision by late 2020.

MIC released a draft of Decree 72 on Internet Services and Information Content Online for public comment on April 19, 2020. Foreign investors reported concerns regarding Decree 72’s provisions on mandatory licensing requirements for large foreign social networks; tightened regulations on social media companies; compulsory content review; and policies requiring responses to government takedown requests within 24 to 48 hours. The draft Decree requires local Internet service providers to terminate services for companies that fail to cooperate with the new regulations. According to the government’s plan for issuing legal documents, the revised decree is scheduled to go into effect in late 2020.

MIC is also revising Decree 06 on Management, Provision and Utilization of Radio and Television Services, which applies specifically to streaming services that provide online content. The first draft, released August 2019, required onerous licensing procedures, local-presence (including joint venture) requirements, local-content quotas, content preapproval, compulsory translation, and local advertising agents. These requirements are inconsistent with Vietnam’s commitments under the World Trade Organization (WTO).

Real Property

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. 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 passed by the National Assembly in November 2014, the government can take land if it deems it necessary for socio-economic development in the public or national interest and the Prime Minister, the National Assembly, or the Provincial People’s Council approves such action. However, the law loosely defines “socio-economic” development, and there are many outstanding legal disputes between landowners and local authorities – including some U.S. entities. Disputes over land rights continue to be a significant driver of social protest in Vietnam. Foreign investors also may be exposed to land disputes through merger and acquisition activities when they buy into a local company.

Foreign investors can lease land for renewable periods of 50 years, and up to 70 years in some underdeveloped areas of the country. 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.

The government is working on reforms relating to property rights. MONRE is currently drafting amendments to the 2013 Land Law, which would allow foreigners to own homes in Vietnam. MONRE expects to submit the draft law to the National Assembly for review and approval in late 2020.

Intellectual Property Rights

Vietnam does not have a strong record on protecting and enforcing intellectual property (IP). There were positive developments over the past year, such as the issuance of the national IP strategy, public awareness campaigns and training activities, and reported improvements on border enforcement in some parts of the country. However, IP enforcement continues to be a challenge.

Lack of coordination among ministries and agencies responsible for enforcement is a primary obstacle, and capacity constraints related to enforcement persist, in part, due to a lack of resources and IP expertise. Vietnam continues to rely heavily on administrative enforcement actions, which have consistently failed to deter widespread counterfeiting and piracy.

The United States is closely monitoring and engaging with the Vietnamese government on the ongoing implementation of amendments to the 2015 Penal Code with respect to criminal enforcement of IP violations. Counterfeit goods are widely available online and in physical markets. In addition, 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 remain problematic.

Vietnam’s system for protecting against the unfair commercial use and unauthorized disclosure of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products needs clarification.  The United States is monitoring the implementation of IP provisions of the CPTPP, which the National Assembly ratified in November 2018, and the EVFTA, which Vietnam’s National Assembly expects to ratify in late 2020.

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 the implementation of that agreement.

The United States, through the U.S.-Vietnam Trade and Investment Framework Agreement and other bilateral fora, continues to urge Vietnam to address these issues and to provide interested stakeholders with meaningful opportunities for input as it proceeds with these reforms. The United States and Vietnam signed a Customs Mutual Assistance Agreement in December 2019, which will facilitate bilateral cooperation in IP enforcement.

In 2019, the Intellectual Property Office of Vietnam (IP Vietnam) reported receiving 120,793 IP applications of all types (up 10 percent from 2018), of which 75,742 were registered for industrial property rights (up 16 percent from 2018). IP Vietnam reported granting 2,922 patents in 2019 (up 13 percent from 2018). Industrial designs registrations reached 2,172 in 2019 (down 8 percent from 2018). In total, IP Vietnam granted more than 40,715 protection titles for industrial property, out of more than 75,742 applications in 2019 (up 41 percent from 2018). The DMS processed 9,510 counterfeit and IP infringement cases and collected over USD 1.5 million in fines. The most infringed-upon products were clothes, consumer goods, electronics, foodstuffs, fertilizers, pharmaceuticals, cosmetics, construction materials, and bicycle and automobile parts.

The Copyright Office of Vietnam received and settled 15 copyright petitions and five requests for copyright assessment in 2019. In 2019, the Ministry of Culture, Sports, and Tourism’s Inspector General carried out inspections for software licensing compliance and discovered 111 violations, resulting in total fines of USD 150,000 – nearly triple the amount in 2018. For more information, please see the following reports from the U.S. Trade Representative:

• Special 301 Report: https://ustr.gov/sites/default/files/2019_Special_301_Report.pdf 

• Notorious Markets Report: https://ustr.gov/sites/default/files/2019_Special_301_Report.pdf 
• For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Companies are required to publish their corporate social responsibility activities, corporate governance work, information of related parties and transactions, and compensation of management. Companies must also announce extraordinary circumstances, such as changes to management, dissolution, or establishment of subsidiaries, within 36 hours of the event.

Most multinational companies implement Corporate Social Responsibility (CSR) programs that contribute to improving the business environment in Vietnam, and awareness of CSR programs is increasing among large domestic companies. The VCCI conducts CSR training and highlights corporate engagement on a dedicated website (http://www.csr-vietnam.eu/ ) in partnership with the UN.

AmCham also has a CSR group that organizes events and activities to raise awareness of social issues. Non-governmental organizations collaborate with government bodies, such as VCCI and the Ministry of Labor, Invalids, and Social Affairs (MOLISA), to promote business practices in Vietnam in line with international norms and standards.

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 passed in December 2019 recognizes the right of employees to establish their own representative organizations. For a detailed description of regulations on worker/labor rights in Vietnam, see the Department of State’s Human Rights Report (https://www.state.gov/reports/2018-country-reports-on-human-rights-practices/vietnam/).

Vietnam has laws to combat corruption by public officials, and they extend to all citizens. Corruption is due, in large part, to low levels of transparency, accountability, and media freedom, as well as poor remuneration for government officials and inadequate systems for holding officials accountable. Competition among agencies for control over businesses and investments has created overlapping jurisdictions and bureaucratic procedures that, in turn, create opportunities for corruption.

The government has tasked various agencies to deal with corruption, including the Central Steering Committee for Anti-Corruption (chaired by the Communist Party of Vietnam General Secretary Nguyen), the Government Inspectorate, and line ministries and agencies. Formed in 2007, the Central Steering Committee for Anti-Corruption has been under the purview of the CPV Central Commission of Internal Affairs since February 2013. The National Assembly provides oversight on the operations of government ministries. Civil society organizations have encouraged the government to establish a single independent agency with oversight and enforcement authority to ensure enforcement of anti-corruption laws.

Resource to Report Corruption

Contact at government agency responsible for combating corruption:

Mr. Phan Dinh Trac
Chairman, Communist Party Central Committee Internal Affairs
4 Nguyen Canh Chan; +84 0804-3557
Contact at NGO:
Ms. Nguyen Thi Kieu Vien
Executive Director, Towards Transparency
Transparency International National Contact in Vietnam
Floor 4, No 37 Lane 35, Cat Linh street, Dong Da, Hanoi, Vietnam; +84-24-37153532
Fax: +84-24-37153443;
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, they did so in June 2019, when China Coast Guard vessels harassed the operations of Russian oil company Rosneft in Block 06-01, Vietnam’s highest-producing natural gas field.

In April 2016, after the Formosa Steel plant discharged toxic pollutants into the ocean and caused a large number of fish deaths, the 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.

The Labor Code passed in December 2019 will come into effect on January 1, 2021. The CPTPP and the EVFTA helped advance labor reform in Vietnam. In particular, the EVFTA requires Vietnam to publish a timeline for ratifying the two remaining core International Labor Organization (ILO) conventions: Convention 105 (abolition of forced labor) in 2020; and Convention 87 (freedom of association and protection of the right to organize) in 2023. Convention 87, together with Convention 98, would allow trade unions, which are currently dominated by the sole national trade union, the Vietnam General Confederation of Labor, to better represent workers’ interests. Even with new momentum on labor issues, enactment of legal and regulatory changes to improve working conditions in Vietnam will still take years to fully develop and implement.

According to Vietnam’s General Statistics Office (GSO), in the first quarter of 2019 there were 55 million people participating in the formal labor force in Vietnam out of over 72 million people aged 15 and above. The labor force is relatively young, with workers 15-39 years of age accounting for half of the total labor force.

Estimates on the size of the informal economy differ widely. The IMF states 40 percent of Vietnam’s laborers work on the informal economy; the World Bank puts the figure at 55 percent; the ILO puts the figure as high as 79 percent if agricultural households are included.

An employer is permitted to lay off employees due to technological changes, organizational changes (in cases of a merger, consolidation, or cessation of operation of one or more departments), or when the employer faces economic difficulties. There are no waivers on labor requirements to attract foreign investment. COVID-19 has increased the number of layoffs in the Vietnamese economy. In March and April 2020, the Vietnamese government passed measures, including cash payments and supplemental cash for companies, to help pay salaries for workers and offer unemployment insurance.

The constitution affords the right of association and the right to demonstrate. The 2019 Labor Code, that will come into effect on January 1, 2021, allows workers to establish and join independent unions of their choice. However, the relevant governmental agencies are still drafting the implementing decrees on procedures to establish and join independent unions, and to determine the level of autonomy independent unions will have in administering their affairs.

Vietnam has been a member of the ILO since 1992, and has ratified six of the core ILO labor conventions (Conventions 100 and 111 on discrimination, Conventions 138 and 182 on child labor, Convention 29 on forced labor, and Convention 98 on rights to organize and collective bargaining). While the constitution and law prohibit forced or compulsory labor, Vietnam has not ratified Convention 105 on forced labor as a means of political coercion and discrimination and Convention 87 on freedom of association and protection of the rights to organize, although the government states it is currently taking steps toward ratification.

The Overseas Private Investment Corporation (OPIC), the predecessor of the U.S. International Development Finance Corporation (DFC), signed a bilateral agreement with Vietnam in 1998, and Vietnam joined the Multilateral Investment Guarantee Agency (MIGA) in 1995.

On January 8, 2020, DFC CEO Adam Boehler made his first visit to Vietnam and met with the Prime Minister. CEO Boehler noted that the DFC hopes to make a multibillion-dollar commitment to Vietnam in the coming years, with investments in energy, healthcare, education, and small businesses.

* General Statistics Office (GSO)

Table 3: Sources and Destination of FDI
Data not available.