Foreign investment in Vietnam – a complex legal pathway 2007/02/01 Nguyen Anh Tuan - Managing Partner
Published on Asian Counsel, Vol. 5, Issue 1 - Jan/ Feb 07
This is not a complement, but the issuance of the unified Investment Law of 2005, effectively from July 1, 2006, can be regarded as prominent milestone in the business law making development in the year. The issuance was an important factor helping Vietnam successfully adhered to the WTO rule-based world trade system. The 2005 Investment Law wan born as a result of the marriage between the Law on Domestic Investment Promotion and the Law on Foreign 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 more but there would be still a concern as to whether the legal system of Vietnam would provide a clear or easy-to-understand legal corridor to foreign investors for driving their investment to Vietnam. This article would provide them with an overview of multiple legal pathways for such purpose.
It’s easy to identify that foreign investment in Vietnam is first generally governed by the Investment Law, which puts forward a set of forms of investment, investment guarantee by the Government of Vietnam, rights and obligations of investors, conditions for enjoying investment incentives, general procedures, conditions and documents for licensing, operations, alteration, and liquidation of investment projects. The Investment Law only focuses on matters of investment projects, while establishment of companies by foreign investors for operating investment projects is governed by another law – the Enterprise Law. A set of documents required for incorporating companies is stipulated in this Law. Foreign investors should be noted that the Investment Law and Enterprise Law just stipulate procedures, conditions and documents for them to obtain investment certificates for their investment projects and companies in Vietnam in common business areas only, but not other specific areas which are mentioned hereunder.
Foreign investment projects in other specific business sectors would be governed by different legal corridors stipulated in a couple of other specific laws. Accordingly, they would be subject to different requirements on procedures and required documents for licensing, operations, alterations, assignments, and management thereof. For instance, foreign investment projects in banking and financing area shall be subject to specific conditions set out in the Banking Law; in oil; and gas area shall be governed by specific requirements set forth in Oil and Gas Law; in insurance business area shall be obliged by specific regulations set out in Business Insurance Law ; in trading and distribution services shall be subject to specific provisions stipulated in Commercial Law; in education shall be subject to Educational Law; in healthcare, treatment services and medicines shall be subject to Pharmaceutical Law and People’s Health Protection Law, etc. Among such specific laws, some has connections to the Investment Law and Enterprise Law, such as banking Law, Insurance Business Law.
Take insurance business area for example. A foreign investor whishing to establish a company providing insurance services shall satisfy conditions set out in the Insurance Business law and submit application dossier to Ministry of Finance for investment certificate and insurance business eligible certificate. Whilst, if under the Investment Law and Enterprise Law, foreign investor shall submit application dossier to provincial people’s committee for investment certificate only for establishing a company engaging in common business areas which are not governed by Insurance Business Law and specific laws.
In short, in certain extent, foreign investors can base on the Investment Law and Enterprise law for obtaining investment certificate for establishment of their investment projects and companies engaging in any common business areas which are not governed by specific laws. Otherwise, in case the purview of the Investment Law is likely narrowed due to the possible immoderate swell of specific laws, specific laws should be carefully studied when making investment activities in Vietnam.