NEW COMPANY AND FOREIGN INVESTMENT RULES IN VIETNAM

The Asian Business Law Institute spoke to Ms Tran Thi Ngoc Linh on changes in Vietnam's laws on enterprises and investment that are aimed at further facilitating trade and investment.

 

BY CATHERINE SHEN

 

As reported by the Business Times in December 2021, Singapore leads foreign direct investments into Vietnam for the second consecutive year, with the amount of investment totaling S$6.8 billion for the first ten months of 2021. With a rising middle class and growing consumer power, Vietnam is expected to remain one of the fastest growing economies in Southeast Asia and continue to attract investment from the region and beyond. In this context, the Asian Business Law Institute (ABLI) spoke to Ms Tran Thi Ngoc Linh, Senior Partner of LuatViet Advocates and Solicitors in Hanoi, on changes in the country's legal landscape that are aimed at further facilitating trade and investment.

ABLI: On 1 January this year, the revised Law on Enterprises and Law on Investment came into effect in Vietnam. What would you say is the key consideration behind revisions to the old legislation?

Tran Thi Ngoc Linh (Linh): During the five-year period when the old laws were in effect, law makers had always been open-minded and receptive to suggestions from the business community for improving the legal system and business environment. In addition, the rapid evolution of information technology and digital transformation in businesses have also made it imperative that the regulations concerning companies and investment be updated, especially those that are of key concern to foreign investors before they decide to invest in Vietnam.

Among the extensive changes to the Law on Investment, one of the most important may be that except for business activities which are restricted under the “List of Industries and Trades with Restricted Market Access to Foreign Investors”, foreign investors are treated equally as domestic counterparts in all other business activities. I think this change may expand opportunities and market access for foreign investors and simplify the procedures for them to invest. In addition, under the new law, foreign investors are also granted more incentives to invest, such as projects to build public housing, technology incubators, projects on environmental protection and many others.

In terms of the Law on Enterprises, one of the notable changes is that the new law promotes simplification and digitization in the implementation of administrative procedures. For example, under the new law, a newly-established enterprise is no longer required to notify the business registration authority of its seal sample upon incorporation. Business registration documents can now be submitted to the competent authority online via a national business registration portal rather than in person, which is certainly more time and cost-efficient.

ABLI: ASEAN is reported to be the top foreign investor into Vietnam, and Singaporean businesses account for 40% of inflows from ASEAN. What do you think is the appeal of Vietnam to investors from Singapore?

Linh: I am not at all surprised by this statistic. Vietnam is widely known as one of the most promising investment destinations for investors in ASEAN in general and Singaporean investors in particular. From my personal view, the establishment of bilateral diplomatic relations between Singapore and Vietnam in 1973 and also the implementation of the Connectivity Framework Agreement in 2006 have contributed to the tremendous growth in trade and investment between two countries and have been significant factors in fostering robust bilateral ties.

In my opinion, one of the major reasons behind Vietnam's attractiveness to investors from Singapore is that Vietnam offers certain very appealing tax incentives when it comes to business industries and trades that Singaporean investors have taken an interest in, such as high-tech industry. In addition, Vietnam's strategic location, low-cost labour and burgeoning consumer class are all factors that make us attractive to Singaporean and other foreign investors.

With stable growth in foreign investment into Vietnam, we hope that in the near future, apart from sectors such as manufacturing, consumer services, infrastructure and real estate which are traditionally of interest, other emerging areas in the digital space, such as information technology, fintech and e-commerce, will also attract more investment so that we can develop robust ecosystems in Vietnam and take full advantage of our young and dynamic population.

ABLI: If you could only give one piece of advice, what in your opinion is the most important point to bear in mind for investors interested in venturing into Vietnam? 

Linh: Especially given the current complications during the pandemic, I would suggest a foreign investor consider the following four points when contemplating about investing in Vietnam. They are: the method of investment, the industries or business lines to be invested in; the amount of investment; and, the investor's capacity and partners.

Requirements and incentives relating to these four aspects will vary under Vietnamese laws depending on specific investment projects. Since any investment involves a certain degree of risks, I believe it is necessary for foreign investors to make detailed plans around the above four points so that they can more effectively assess and manage potential risks and better seize their opportunities in Vietnam.

ABLI: As a seasoned practitioner, is there any aspect of the legal regime on companies and foreign investment that you wish could be further improved to facilitate foreign investment into Vietnam?

Linh: Under the spirit of the national investment policies issued by the Government, the implementation of laws on investment and business has been generally smooth in Vietnam. Frankly speaking, however, there are still certain administrative procedures or legal issues that are not stipulated explicitly enough for enterprises to follow, leaving them confused. This has also resulted in discrepancy in interpretations from different local authorities on the same legal issue. Personally I believe to further improve the regulations of investment and business in Vietnam, it may be necessary to formulate rules that provide a more flexible approach and are much more detailed, such as by simplifying procedures of investment and business registration for foreign investors.

 

Linh will be speaking at a webinar organised by ABLI at 3pm (SGT) on 9 March for an introduction to company law and foreign investment in Cambodia and Vietnam. Alongside her co-speaker, Mr Jay Cohen, Partner and Director of Tilleke & Gibbins in Phnom Penh, Linh will walk the audience through the key provisions of the Law on Enterprises and the Law on Investment in Vietnam and share her vast experience of advising foreign investors in the country. Sign up by 6 February to enjoy early bird discount of 15% off. SAL members can redeem their SAL C$ for this webinar here.