Vietnam continues to welcome foreign direct investment (FDI) and the government has policies in place that are broadly conducive to U.S. investment. Factors that attract foreign investment to Vietnam include ongoing economic reforms, new free trade agreements, a young and increasingly urbanized population, political stability, and inexpensive labor costs.
Vietnam attracted USD 143 billion in cumulative FDI over the past 10 years (2010-2019 inclusive). Of this, 59 percent went into manufacturing – especially in the electronics, textiles, footwear, and automobile parts industries – as many companies shifted supply chains to Vietnam. In 2019, Vietnam attracted USD 20.3 billion in FDI. The government approved the following significant FDI projects in 2019: Beerco Limited’s USD 3.9 billion acquisition of Vietnam Beverage; Center of Techtronic Tools’ project to develop a USD 650 million research and development center in Ho Chi Minh City; Charmvit’s USD 420 million for an amusement park and horse racing field in Hanoi; and LG Display’s USD 410 million expansion.
In 2019, Vietnam advanced some reforms to make the country more FDI-friendly. In particular, the government issued Resolution 55, which aims to attract USD 50 billion of foreign investment by 2030 by amending regulations that inhibit foreign investments and by codifying quality, efficiency, advanced technology, and environmental protection criteria. In addition, Vietnam passed the 2019 Securities Law, which states the government’s intention to remove foreign ownership limits (but does not give specifics) and the 2019 Labor Code, which adds flexibility for labor contracts.
Despite the comparatively high level of FDI inflows as a percentage of the GDP (8 percent in 2019), significant challenges remain in the business climate. These include corruption, a weak legal infrastructure and judicial system, poor enforcement of intellectual property rights (IPR), a shortage of skilled labor, restrictive labor practices, impediments to infrastructure investments, and the government’s slow decision-making process.
Although Vietnam jumped 10 spots – from 77 to 67 – in the World Economic Forum’s (WEF) 2019 Global Competitiveness Index, WEF recommends that Vietnam continue reforms to improve its attractiveness to foreign investors by simplifying legal procedures and streamlining the bureaucratic process related to decision making.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into force in Vietnam on January 14, 2019, and Vietnamese officials have said they will approve the EU-Vietnam Free Trade Agreement (EVFTA) in late 2020. These agreements will facilitate FDI inflows into Vietnam, provide better market access for Vietnamese exports, and encourage reforms that will help all foreign investors. However, while these agreements lower trade and investment barriers for participating countries, they may make it more difficult for U.S. companies to compete.
COVID-19 buffeted Vietnam’s economy in early 2020, resulting in layoffs and unemployment, decreased consumption, and a projected decrease in the country’s growth rate. In March 2020, the government started enacting fiscal and monetary policies to counter the effects of the pandemic, including a stimulus worth USD 30 billion and monetary policy designed to inject upwards of USD 11 billion into the economy.
|TI Corruption Perceptions Index||2019||96 of 175||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||70 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||42 of 129||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||USD 2,010||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2018||USD 2,360||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
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.
3. Legal Regime
Transparency of the Regulatory System
U.S. companies continue to report that they face frequent and significant challenges with inconsistent regulatory interpretation, irregular enforcement, and an unclear legal framework. AmCham members have consistently 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.
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.
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.
4. Industrial Policies
Foreign investors are exempt from import duties on goods imported for their own use that cannot be procured locally, including machinery; vehicles; components and spare parts for machinery and equipment; raw materials; inputs for manufacturing; and construction materials. Remote and mountainous provinces 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).
5. Protection of Property Rights
The State collectively owns and manages all land in Vietnam, and therefore neither foreigners nor Vietnamese nationals can own land. However, the government grants land-use and building rights, often to individuals. According to the Ministry of National Resources and Environment (MONRE), as of September 2018 – the most recent time period in which the government has made figures available – the government has issued land-use rights certificates for 96.9 percent of land in Vietnam. If land is not used according to the land-use rights certificate or if it is unoccupied, it reverts to the government. 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/ .
6. Financial Sector
Capital Markets and Portfolio Investment
The Vietnamese government generally encourages foreign portfolio investment. The country has two stock markets – the Ho Chi Minh City Stock Exchange, which lists publicly traded companies, and the Hanoi Stock Exchange, which lists bonds and derivatives. 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 is improving its legal framework to reach its goal of meeting the “emerging market” criteria in 2020 and attracting more foreign capital. However, exogenous events may make this difficult: in the first quarter of 2020, foreign investors withdrew USD 500 million in portfolio assets from Vietnam due to the COVID-19 pandemic.
There is enough liquidity in the markets to enter and maintain sizable positions. Combined market capitalization at the end of 2019 was approximately USD 189 billion, equal to 73 percent of Vietnam’s GDP, with the Ho Chi Minh City Stock Exchange accounting for USD 141 billion, the Hanoi Exchange USD 8 billion, and the UPCOM USD 40 billion. Bond market capitalization reached over USD 50 billion in 2019, the majority of which were government bonds, largely 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 Vietnamese banks do not have sufficient capital at appropriate interest rate levels for a significant number of FDI projects.
Money and Banking System
Vietnam’s banking sector has been stable since recovering from the 2008 global recession. Nevertheless, the SBV estimated in 2018 that half 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.
Although the banking sector was stable during 2019, COVID-19 may challenge the sector. Ratings agency Moody’s reported, on April 7, 2020, that “the consumer finance industry in Vietnam is vulnerable to disruptions given its risky borrower profile,” and noted that layoffs, underemployment, and business closures resulting from COVID-19 further decrease the creditworthiness of borrowers. At the end of 2019, the SBV reported that the percentage of non-performing loans (NPLs) in the banking sector was 1.9 percent, a significant improvement from the 2.4 percent at the end of 2018.
The banking sector’s estimated total assets stood at USD 519 billion, of which USD 222 billion belonged to seven state-owned and majority state-owned commercial banks – accounting for 42 percent of total assets. 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.
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.
Foreign Exchange and Remittances
There are no legal restrictions on foreign investors converting and repatriating earnings or investment capital from Vietnam. A foreign investor can convert and repatriate earnings provided the investor has the supporting documents required by law and has applied to remit money. The SBV sets the interbank lending rate and announces a daily interbank reference exchange rate. SBV determines the latter based on the previous day’s average interbank exchange rates, while considering movements in the currencies of Vietnam’s major trading and investment partners. The Vietnamese government generally keeps the exchange rate at a stable level compared to major world currencies.
Vietnam mandates that in-country transactions must be made in the local currency – Vietnamese dong (VND). The government allows foreign businesses to remit lawful profits, capital contributions, and other legal investment earnings via authorized institutions that handle foreign currency transactions. Although foreign companies can remit profits legally, sometimes these companies find difficulties bureaucratically, as they are required to provide supporting documentation (audited financial statements, import/foreign-service procurement contracts, proof of tax obligation fulfillment, etc.). SBV also requires foreign investors to submit notification of profit remittance abroad to tax authorities at least seven working days prior to the remittance; otherwise there is no waiting period to remit an investment return.
The inflow of foreign currency into Vietnam is less constrained. There are no recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.
Sovereign Wealth Funds
Vietnam does not have a Sovereign Wealth Fund.
7. State-Owned Enterprises
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 companies and continue to benefit from preferential access to resources such as land, capital, and political largesse. In the 2019 PCI report, however, the percentage of surveyed firms agreeing with the statement “SOEs find it easier to win state contracts” dropped to 21 percent from 27 percent in 2015.
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 has historically transferred only a small share of an SOE (two to three percent) to the private sector, and investors have had concerns about the financial health of many companies. Additionally, the government has inadequate regulations with respect to privatization procedures.
8. Responsible Business Conduct
Companies are required to publish their corporate social responsibility activities, corporate governance work, information of related parties and transactions, and compensation of management. Companies must also announce extraordinary circumstances, such as changes to management, dissolution, or establishment of subsidiaries, within 36 hours of the event.
Most multinational companies implement Corporate Social Responsibility (CSR) programs that contribute to improving the business environment in Vietnam, and awareness of CSR programs is increasing among large domestic companies. The VCCI conducts CSR training and highlights corporate engagement on a dedicated website (http://www.csr-vietnam.eu/ ) in partnership with the UN.
AmCham also has a CSR group that organizes events and activities to raise awareness of social issues. Non-governmental organizations collaborate with government bodies, such as VCCI and the Ministry of Labor, Invalids, and Social Affairs (MOLISA), to promote business practices in Vietnam in line with international norms and standards.
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
10. Political and Security Environment
Vietnam is a unitary single-party state, and its political and security environment is largely stable. Protests and civil unrest are rare, though there are occasional demonstrations against perceived or real social, environmental, labor, and political injustices.
In August 2019, online commentators expressed outrage over the slow government response to an industrial fire in Hanoi that released unknown amounts of mercury. Other localized protests in 2019 and early 2020 broke out over alleged illegal dumping in waterways and on public land, and the perceived government attempts to cover up potential risks to local communities.
Citizens sometimes protest actions of the People’s Republic of China (PRC), usually online. For example, 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.
11. Labor Policies and Practices
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.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
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.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) (millions USD)||2019||USD 262||2019||USD 261||General Statistics Office (GSO) for Host Country and IMF for International Source|
|Foreign Direct Investment||Host Country Statistical source*||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country ($M USD, stock positions)||2019||USD 9.382||N/A||N/A||BEA data available at
|Host country’s FDI in the United States ($M USD, stock positions)||2019||N/A||N/A||N/A||BEA data available at
|Total inbound stock of FDI as % host GDP||2019||N/A||N/A||N/A||UNCTAD data available at
* General Statistics Office (GSO)
Table 3: Sources and Destination of FDI
Data not available.
|Portfolio Investment Assets|
|Top Five Partners (Millions, current US Dollars) (From MPI)|
|Total||Equity Securities||Total Debt Securities|
14. Contact for More Information
7 Lang Ha, Ba Dinh, Hanoi, Vietnam +84-24-3850-5000