Vietnam Issues Revised Law to Improve Local Investment Climate
HANOI – Vietnam’s Ministry of Planning and Investment has recently announced that it has completed a draft of the country’s amended Investment Law. The goal of the amendment is to continue the process of improving the country’s investment climate.
The amended law is expected to be approved by the National Assembly at the end of 2014.
The new law will:
- Contribute to the restructuring of the economy;
- Aid foreign investors in overcoming bureaucratic bottlenecks;
- Allow investors to determine their investment preferences and have those preferences included on their investment certificate;
- Allow Vietnam to meet its requirements for the opening of its markets;
- Create an equal legal system to attract high-quality projects;
- Prohibit discrimination between domestic and foreign investors;
- Narrow the number of projects that need to follow investment procedures to only those under state management; and
- Include tough sanctions against runaway investors.
Encouraged investment fields and areas will be widened to projects that:
- Create/use cutting edge and green technologies;
- Produce and/or use clean energy;
- Support industry projects;
- Further the development of training, education, and healthcare;
- Invest in forestry, agriculture, fisheries, and rural areas.
Furthermore, projects will be prioritized if they have a major social and economic impact, a high added value, and invest in areas with difficult socioeconomic conditions.
The new law will also separate business registration from investment registration for foreign investors. Foreign investors will first follow regulations for sourcing an investment certificate and then will register their business in order to implement the investment projects.
The Vietnamese government has pledged that incentives for investors will remain despite any legal changes that may be made in the future.
What do the Professionals think?
Tran Hanh Hieu, an Associate in Business Advisory Services at Dezan Shira & Associates in Hanoi, provides her take on the amendments to the Investment Law:
“The 2014 amendment of Vietnam’s Investment Law is a necessary step towards enhancing transparency and competitiveness in the country’s investment environment.
As you know, the Investment Law of Vietnam was adopted by the National Assembly in 2005, two years before Vietnam became a member of WTO. However, some government policies have not caught up with all the requirements of the WTO. This has resulted in the creation of a number of legal decisions intended to catch Vietnam up to the WTO requirements, these include: Decision 10/2007/QD-BTM, Decree 23/2007/ND-CP and its guidance circular 08/2013/TT-BCT.
Unfortunately, the resulting plethora of investment policies resulted in an overly complex system for licensing bodies to follow. Thus, there was a clear need for the new amendment to the investment law which seeks to simplify the entire process.
Firstly, under the previous system, the legal procedures for foreign investors were too complicated, too expensive, and were the cause of much time wasting. This prevented effective investment by the investors and reduced the potential benefits to the state. The proposed changes to the investment procedures shall result in an increase in simplicity, transparency, unity and will meet the requirements of international economic integration.
Secondly, the Investment Law of 2005 did not create a competitive environment for all investors (domestic and foreign). The 2005 law put in place restrictions on foreign investors in a vain attempt to safeguard the policies of the Vietnamese government. The government has now seen the error of its ways and has made the correct choice to loosen these types of restrictions so that the country can attract more foreign investors.
Thirdly, another complication arose for the government during the process of issuing investment certificates. The certification process was too fragmented and complex and resulted in the failure of several major projects and a negative outlook on the future of the country’s investment climate. The amended law will be able to systematize and simplify the certification process; this will result in a vastly improved business environment.”
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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