1. Openness To, and Restrictions Upon, Foreign Investment
Policies Toward Foreign Direct Investment
Since Vietnam embarked on economic reforms in 1986 to transition to a market-based economy, the government has welcomed FDI and recognizes FDI as a key component of Vietnam’s high rate of economic growth over the last two decades. Foreign investments continue to play a crucial role in the economy: according to Vietnam’s General Statistics Office (GSO), Vietnam exported USD 181 billion in goods in 2019, of which 69 percent came from projects utilizing FDI.
In 2019, the Politburo issued Resolution 55 to increase Vietnam’s attractiveness to foreign investment. The Resolution aims to attract USD 50 billion in new foreign investment by 2030 by amending regulations that inhibit foreign investment and by codifying quality, efficiency, advanced technology, and environmental protection as the evaluation criteria. The government has not released further details on this strategy.
While the government does not have laws that specifically discriminate against foreign investment, the government continues to have foreign ownership limits (FOLs) in industries Vietnam considers important to national security. In January 2020, the government removed FOLs on companies in the eWallet sector and made reforms in procedures related to electronic payments made by foreign firms. Some U.S. investors report that these changes have given more regulatory certainty, which has, in turn, instilled greater confidence as they consider long-term investments in Vietnam.
Many U.S. investors cite concerns with confusing tax regulations, retroactive changes of laws – including tax rates, tax policies, and preferential treatment of Vietnamese state-owned enterprises (SOEs). In 2019, members of the American Chamber of Commerce (AmCham) in Hanoi noted that fair, transparent, stable, and effective legal frameworks would help Vietnam better attract U.S. investment. These concerns are echoed by Vietnamese companies.
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 and inform the Prime Minister and National Assembly on trends in foreign investment. However, U.S. investors should still consult lawyers and/or other experts regarding issues on which regulations are unclear.
The Prime Minister, along with other senior leaders, states that Vietnam prioritizes both investment retention and maintaining dialogue with investors. Vietnam’s senior leaders often meet with foreign government and private-sector representatives to emphasize Vietnam’s attractiveness as an FDI destination. The semiannual Vietnam Business Forum includes meetings between foreign investors and Vietnamese government officials; the U.S.-ASEAN Business Council (USABC), AmCham, and other U.S. associations also host multiple yearly missions for their U.S. company members, which allow direct engagement with senior government officials. Foreign investors in Vietnam have reported that these meetings and dialogues have helped address obstacles.
Limits on Foreign Control and Right to Private Ownership and Establishment
Both foreign and domestic private entities have the right to establish and own business enterprises in Vietnam and engage in most forms of legal remunerative activity. Vietnam does have some statutory restrictions on foreign investment, including FOLs or requirements for joint partnerships in selected sectors, including banking, network infrastructure services, non-infrastructure telecommunication services, transportation, energy, and defense. By law, the Prime Minister can waive these FOLs on a case-by-case basis. In practice, however, when the government has removed or eased FOLs, it has done so for the whole industry sector (versus resolution for specific investments).
MPI takes the lead with respect to investment screening. Approval of an FDI project requires signoff by the provincial People’s Committee in which the project would be located. Large-scale FDI projects must obtain the approval of the National Assembly before investment can proceed. MPI’s process includes an assessment of the following criteria: 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 following FDI projects require the Prime Minister’s approval: airports and seaports; casinos; oil and gas exploration, production, and refining; tobacco-related projects; telecommunications/network infrastructure; forestry projects; publishing; and projects with an investment capital greater than USD 217 million.
Other Investment Policy Reviews
The most recent third-party investment policy review related to Vietnam is the OECD’s 2018 Review: https://www.oecd.org/countries/vietnam/oecd-investment-policy-reviews-viet-nam-2017-9789264282957-en.htm
The World Bank’s 2020 Ease of Doing Business Index ranked Vietnam 70 of 190 economies. The World Bank reported that in some factors Vietnam lags behind other Southeast Asian countries. For example, it takes businesses 384 hours to pay taxes in Vietnam compared with 64 in Singapore, 174 in Malaysia, and 191 in Indonesia.
- On February 1, 2019, Vietnam issued a decree that simplifies procedures for FDI related to vocational training;
- On May 13, 2019, the State Bank of Vietnam (SBV) issued a Circular that allows foreign investors to pay for investment collateral in foreign currencies in certain defined circumstances. Previously, foreign investors had to pay collateral in the Vietnamese dong (VND);
- On September 6, 2019, SBV issued a Circular on foreign exchange that simplified certain procedures with respect to foreign investments;
- On November 18, 2019, Vietnam issued a decree that raised the foreign ownership cap on air transportation from 30 to 34 percent;
- Further information can be found at the UNCTAD’s site: .
On May 5, 2020, USAID and the Vietnam Chamber of Commerce and Industry (VCCI) released the Provincial Competitiveness Index (PCI) 2019 Report, showing continued improvement in economic governance: http://eng.pcivietnam.org/ . This annual report provides an independent, unbiased view on the provincial business environment by surveying over 8,500 domestic private firms on a variety of business issues. Overall, Vietnam’s median PCI score improved, reflecting the government’s efforts to improve economic governance, improvements in the quality of infrastructure, and a decline in the prevalence of corruption (bribes).
The government does not have a clear mechanism to promote or incentivize outward investment, nor does it have regulations restricting domestic investors from investing abroad. Vietnam does not release statistics on outward investment, but local media reported that in 2019 total outward FDI investment from Vietnam was USD 508 billion and went to 32 countries. Australia received the most outward FDI, with USD 154 million in 2019, mostly to the dairy industry. The United States ranked second, with USD 93.4 million in 26 projects.