Vietnam has emerged as one of the fastest-growing economies in Southeast Asia, attracting a significant influx of foreign investment and business ventures. However, amidst the numerous opportunities lie several challenges that investors and businesses must navigate. One of the current issues is the complex regulatory environment, with ambiguous laws and bureaucratic procedures often posing obstacles for companies looking to establish or expand their operations. Another challenge is the lack of transparency, which can contribute to uncertainties and potential corruption risks. Additionally, infrastructure limitations and workforce development gaps also present significant hurdles for investors and businesses in Vietnam. It is crucial for both local and foreign entities to be aware of these issues and strategize accordingly to ensure successful and sustainable business ventures in this dynamic market.
Uncertain requirement to amend Investment Registration Certificate (IRC)
As per Article 3.3 of Decree 09/2018/ND-CP and the Ministry of Industry and Trade’s interpretation (MOIT), foreign invested enterprises (FIEs) are currently not permitted to engage in on-spot import activities. Furthermore, the regulation governing on-spot export and import, outlined in Circular 04/2007/TT-BTM, has expired without any subsequent guidance issued. Consequently, FIEs are presently unable to conduct on-spot imports. We strongly recommend that the Government issue clear guidance that would enable FIEs engaged in trading activities to have the right to conduct on-spot importation.
Market entry conditions applicable to foreign investors
Annex I of Decree 31/2021/ND-CP lists out conditional invsetment sectors applicable to foreign investors. Other than the listed sector, foreign investors should enjoy the same market conditions as domestic investors. However, under specialized documents, foreign investment in unlisted sectors has faced certain restrictions on market access, which is a clear conflict with the mentioned rule in Article 17.1 of Decree 31/2021/ND-CP.
We recommend that it need to carefully identify business sectors prohibited under specialized regulations and to update Decree 31/2021/ND-CP accordingly, as well as to open the market to foreign investors, especially in sectors where Vietnam has not committed to impose any restrictions in international treaties.
Granting investment incentives
Certain authorities have expressed reluctance in providing incentives to foreign investors, citing concerns about their ability to fulfill the necessary criteria for qualifying for these incentives. Furthermore, in some cases, the incentives granted have been negatively impacted by the revision of laws and regulations, which have raised requirements for enterprises.
In light of these issues, we recommend the following:
(i) Laws and regulations need to clearly outline the conditions that must be met for investors to be eligible for incentives.
(ii) Investors should be allowed to continue enjoying the incentives granted to them throughout their operational term or the period specified by law, even if there are changes in laws, regulations, or policies after the incentives have been granted.
Obtaining the IRC for business locations, branches of FIEs
The existing laws regarding enterprise and investment lack comprehensive guidance for foreign invested enterprises (FIEs) when it comes to establishing business locations or branches. As a result, there are inconsistencies in the way different provinces interpret and implement the requirement for a separate Investment Registration Certificate (IRC) for each branch or business location.
As per the Investment Law, foreign invested enterprises (FIEs) are required to submit quarterly and annual reports through the National Portal on Business Registration. When it comes to amending the Investment Registration Certificate (IRC), only reports using Form A.I. 12 are necessary. However, in practice, local Department of Planning and Investment (DPI) offices have been requesting additional reports for all types of investment projects, even those of small scale, apart from the required Form A.I. 12 reports. This has resulted in delays in the process of amending the IRC.
Advice for foreign investors
When it comes to investing and doing business in Vietnam, there are a few current issues that foreign investors should be aware of. One key issue is the lack of clear guidance regarding the establishment of business locations or branches for foreign invested enterprises (FIEs). Inconsistencies in implementation among provinces, particularly regarding whether each branch or business location requires a separate Investment Registration Certificate (IRC), have resulted from this. To address this issue, I suggest seeking guidance from legal experts who possess a deep understanding of Vietnam’s investment laws and regulations. This will help ensure compliance and prevent any unnecessary delays in the process of amending the IRC.
Another issue is the requirement for FIEs to file quarterly and annual reports on the National Portal on Business Registration. However, in practice, some local Department of Planning and Investment (DPI) offices may request additional reports for all types of investment projects, regardless of scale. To address this, it is advisable to maintain clear and accurate records of all financial and business activities to facilitate the amendment process.
Lastly, I suggest building strong relationships with local partners or consultants who have a deep understanding of the business landscape in Vietnam. This will enable you to navigate local regulations, cultural nuances, and potential challenges more effectively. By keeping abreast of current issues and seeking appropriate advice and support, foreign investors can maximize their chances of success when investing and doing business in Vietnam.
Conclusion
In conclusion, while there are current issues surrounding foreign investment and doing business in Vietnam, it is important for foreign investors to approach these challenges with careful consideration and strategic planning. By staying updated on the evolving regulations and seeking guidance from knowledgeable professionals, foreign investors can navigate through the ambiguities and ensure compliance with local laws. Building relationships with local partners and consultants can also provide valuable insights and support in overcoming obstacles. Despite the challenges, Vietnam continues to be an attractive investment destination with its dynamic economy and growing market opportunities. With the right approach and proactive measures, foreign investors can make the most of the potential Vietnam has to offer and thrive in their business ventures.
HMLF is always available to offer assistance in understanding the procedures with authorities.
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn Email: miller@hmlf.vn
