A tale of the birth, marriage and death of Vietnam investment laws

This is not a complement, but the issuance of the unified Investment Law of 2005, effectively from 01 July 2006, can be regarded as a prominent milestone in the business law making development in the year. The issuance was an important factor helping Vietnam successfully adhered to the rule-based world trade system of the WTO. The 2005 Investment Law was born as a result of the marriage between the Law on Domestic Investment Promotion and the Law on Foreign Direct Investment in Vietnam. The new born law is much welcomed by foreign business community as it lays the foundation for local investors and foreign ones to compete fairly on a level playing field. It also simplifies licensing procedures for certain projects.

Undoubtedly the said merger of laws is regarded as a positive move, but there is still a worry about whether Vietnam has made a clear message on the right tract development of the overall business law making strategy.

Looking at the current legal framework, Vietnam has the Investment Law which is generally governing investment activities, including provisions regulating the activities from the establishment, licensing, alteration, to the liquidation of investment project. Meanwhile, there are a couple of other specific laws governing specific areas, which set forth different provisions with different management and licensing stipulations: the banking and credit institution law governs the establishment and operation of projects in banking area; the oil and gas law governs the conditions, licensing and operation of investment projects and enterprises in oil and gas sectors; the insurance business law governs insurance business enterprises; investment projects in field of wholesale or retail business are governed by the commerce law. It is obvious that the management and licensing authorities under those specific laws are different from those under the unified Investment Law.

In addition, Vietnam has many other laws governing specific investment sectors such as education law, mineral law, civil aviation law, maritime law, etc. which are however governing only some aspects of operation in the relevant sectors. Differently from aforementioned specific laws, the management and licensing authorities of the enterprises operating in those sectors are not differentiated but as same as stipulations of the unified Investment Law. There is a practical tendency found in Vietnam that State management authorities are keen on carrying off more power vis-à-vis managing and issuing licenses to investment projects in their relevant sectors. For instance, the State Bank of Vietnam manages and issues licenses to foreign investment projects in banking sectors; the Ministry of Finance manages and issues licenses to projects in field of insurance; and likewise the Ministry of Trade would have the authority to grant licenses to the projects for doing wholesale or retail business.

Given that the Investment Law, as a general law, generally governs investment activities, prima-facie, there would be overlapping provisions with other specific laws. One example, an enterprise implementing an insurance business project is licensed by the Ministry of Finance, not the licensing authority as stipulated in the Investment Law. The establishment of that project must comply with conditions and procedures under the insurance business law. However, the certain matters during the operation of the project would have to follow the Investment Law. This sometime created complexity.

Another problem is founded. When more specific laws are to be issued, the purview of the Investment Law will be likely narrowed. Investment activities compose of investment in specific sectors. When specific laws govern specific sectors, what would be the position for the governing scope of the Investment Law? The investment law has been experienced a birth, a marriage. One may believe the next scenario would be a death while witnessing its purview is gradually eaten by other specific laws.

In an attempt to better Vietnamese enterprises’ competitiveness to play in the WTO game, a lot of efforts from the Government and legislators are estimated. In anyway, economic and social growth after joining the WTO depends on a highly complex economy which requires sophisticated rules and enforcement procedures across a wide range of activities. The overall business and investment related laws in Vietnam need a refresh direction for master development.