Investment Law sparks debate

The latest draft version of the unified Investment Law, which was introduced publicly at meetings in Ho Chi Minh City and the northern province of Vinh Phuc last week, covers a broad range of investment activities: domestic and foreign investment, direct and indirect investment, and overseas investment made by local individuals and organisations.
“Due to its complexity, the law has generated great concern among government officials and the business community, and controversy has been sparked among representatives from certain government ministries,” said a senior official from the Ministry of Planning and Investment (MPI), who asked not to be identified.
“Some argued that the new law should not govern state investment, as the inclusion of state investment in the law would allow government agencies to play the role of investor and regulator at the same time,” he said.
Officials also debated whether stipulations on investment incentives should be included in the new law. “The Ministry of Finance (MoF) argued that it should be not,” said the source.
He said the MoF also suggested that the law not include provisions on investment incentives for investment licences. According to the official, the MPI disagreed, suggesting that including the provisions would help investors discern exactly what incentives they are entitled to.
Under the draft law, foreign investors would be permitted to establish limited liability, shareholding, partnership or fully private businesses, while the current Law on Foreign Investment allows for limited liability companies only.
The draft law would also allow foreign investors to simply register with authorities, rather than going through the current labyrinthine licensing process, the law drafting board told a meeting in Ho Chi Minh City last week held by the MPI, the Vietnam Chamber of Commerce and Industry (VCCI), and UNDP in Vietnam.
The meeting was held to generate feedback from government agencies and business executives before the draft is submitted to the government for discussion later this month and then passed on to the National Assembly for approval at its year-end session.
Under the draft law, foreign investors can register for all business fields not prohibited by the state. In cases where investors want to build factories or other facilities requiring land, the draft will require them to seek a licence and set a fixed operating period.
In terms of the consulting, auditing, design, legal advice and insurance sectors, among others, investors will only need to register, although they will still be required to have practice certificates, just like local companies.
Since the Enterprise Law was introduced in January 2000, it has provided a record boost to the country’s private sector, as domestic investors are simply required to register with authorities to establish businesses instead of applying for licences.
The current Investment Law stipulates that foreign-invested projects can have a maximum lifespan of 50 years, but the draft, which is to replace the 1996 Law on Foreign Investment and the 1998 Domestic Investment Promotion Law, does away with this limit.
The draft stipulates that the duration an investment project can operate in the country will depend on the time limit of the investor’s land rental agreement, meaning an investment project can operate indefinitely if there is no land rental agreement.
Another important part of the draft, which will be applied to all investment activities in Vietnam – including outward investment – is to loosen regulations on foreign companies establishing branches in Vietnam.
The cap on foreign ownership in local companies, which is now 30 per cent, will be raised to 49 per cent under the draft, except in sectors deemed important or sensitive to the state. In other fields, foreign investors can own as much as 80 per cent of a local company. [more specific about which fields]
Pham Manh Dung, head of the MPI’s legal department, said the draft’s 12 chapters and 126 articles will go before the government for discussion later this month and be passed on to the National Assembly at its year-end session, where approval is expected.
Once approved, the common legal framework, whose regulations will be in line with principles of the World Trade Organisation (WTO), will help improve the business climate in Vietnam and ensure equal treatment for enterprises in all economic sectors.
The draft law is viewed as part of Vietnam’s commitment to continuing its economic reform process and speeding up foreign access, in order to create a fair and stable investment environment and offer transparency in all business sectors.
Vietnam has made four changes to its Foreign Investment Law in the last 15 years. These modifications have gradually brought the country’s investment laws in line with international regulations, a development touted as an indication of the government’s determination to develop transparency and fairness in business practices.
Other past improvements include opening local markets for foreign investors, promoting global integration, and removing discrepancies between establishing businesses, management practices, access to local markets, pricing, service fees and other issues.