Foreign investment regime
The existing investment regime in Vietnam came into effect on 1 July 2015 and is comprised of a Law on Enterprises (LOE) and a Law on Investment (LOI), which regulate both domestic and foreign investors, for the establishment and operation of corporations and investment in projects.
A foreign investor can invest in the Vietnamese market in several ways, including:
- establishing a new enterprise (either a wholly foreign-owned enterprise (WFOE) or a joint venture company (JVC) between foreign investors (FIs) and local investors (LIs));
- making capital contributions to or purchasing shares or equity capital in companies in Vietnam;
- investing through a business cooperation contract (BCC) between FIs and LIs; and
- investing in a form of a private-public partnership (PPP), using build-operate-transfer, build-transfer-operate or build-transfer contracts, mainly for infrastructure projects or provision of public services.
As an alternative to establishing or investing in Vietnamese enterprises, foreign business entities may set up a branch or a representative office (RO) in Vietnam, which must be licensed by the relevant authorities.
An RO may be established as a dependent unit of the foreign parent company to seek and promote commercial opportunities for the parent company. Many foreign investors opt to establish ROs to explore the local market before deciding to invest in Vietnam. An RO cannot directly conduct profit-generating activities in Vietnam.
A branch may only be established by a foreign business entity in specific sectors, such as banking and insurance. A branch can directly conduct profit-generating activities in Vietnam.
Under the LOI, FIs may invest in all sectors not prohibited by law. Areas prohibited by law include:
- trading of drugs prescribed in an appendix to the LOI;
- trading of chemicals or minerals prescribed in an appendix to the LOI;
- trading of specimens of wild fauna or flora as set forth in Schedule 1 of the Convention on International Trade in Endangered Species of Wild Fauna and Flora; of specimens of species of endangered and rare wild fauna or flora as prescribed in an appendix to the LOI;
- business activities dealing with prostitution;
- purchase or sale of human beings, human tissue or parts of the human body;
- business activities relating to human asexual reproduction; and
- trading of fireworks.
As with all countries, Vietnam reserves its sovereign right to restrict investment in sensitive fields by setting conditions for 'conditional sectors' that investment projects must satisfy for the purposes of national defence and security, social order and safety, social ethics and community health. The LOI includes a comprehensive list of conditional sectors.
FIs are also subject to conditions in relation to foreign ownership limitation, the form of investment and requirements of Vietnamese partners, operational contents and other conditions as stipulated in the international treaties to which Vietnam is a party. The basic conditions are found in the Schedule of Specific Commitments in Services contained in Vietnam's World Trade Organisation accession package (the WTO Commitments). More favourable conditions for FIs from ASEAN countries may be found within the ASEAN Economic Community frameworks.