Ministry of Finance proposes simplifying procedures for overseas investment

The Ministry of Finance has proposed simplifying procedures for overseas investment

In the draft proposal for the Law on Investment (amendment), the Ministry of Finance (MoF) has suggested abolishing the procedure for approving investment overseas policies under the authority of the National Assembly, the prime minister, and the MoF. Instead, investors will register with the State Bank of Vietnam (SBV) to transfer funds abroad.

The MoF stated that managing overseas investment activities will be more substantive. Specifically, when investors register with the SBV, they will already have investment approval documents from the foreign country (investment licence, certificates of business establishment, or contracts for capital contributions or share purchases in foreign companies). This will make the investments more “certain” and “authentic”.

At the same time, abolishing this procedure will significantly reduce administrative processes, saving time and costs for investors, contributing to promoting and enhancing the competitiveness of Vietnamese enterprises, and facilitating faster access to investment opportunities overseas. This will help expand markets, develop raw material sources for domestic production, and contribute to the national economy, especially in the context of rapid technological advancements.

This approach will also enhance state management by overseeing foreign exchange. The SBV will be able to quickly compile and monitor the status of investment capital implementation and repatriation of funds through the banking system, enabling timely assessments and adjustments when there are impacts on the balance of payments or foreign exchange reserves. The banking system will have tools to promptly address non-compliance with reporting regulations (such as suspending fund transfers or freezing capital investment accounts in emergencies).

According to the MoF, the current Law on Investment regulates a broad scope for authorities issuing certificates for overseas investment registration, covering objectives, scale, location, scope of activities, total investment, etc.

This regulation is unclear about the objectives of state management (whether it is to manage the capital transferred abroad or the entire project) and is not feasible since overseas investments must comply with the laws of the host country.

The SBV currently manages indirect overseas investment. Therefore, it is appropriate for this unit to manage direct overseas investments to comprehensively monitor Vietnam's capital invested abroad. Additionally, the SBV's verification of capital transfers for investment will facilitate and enhance the effectiveness of anti-money laundering efforts.

Investing abroad is increasingly becoming a common trend among Vietnamese enterprises looking to proactively integrate into global production chains and serve as an important means to import technology, develop markets, and seek customers, bringing significant benefits to market expansion.

However, alongside these positive aspects, overseas investment procedures have revealed certain exclusions in both state management and investor implementation.

The first thing is that investors going abroad typically use their private capital to invest and comply with the laws of the host country. However, Vietnamese state authorities have to approve numerous details, such as form, scale, location, project implementation progress, overseas investment capital, and capital sources, which is not entirely reasonable. This affects the freedom of business for enterprises and investors and does not clearly distinguish between matters governed by Vietnamese law and those under the jurisdiction of the host country.

Moreover, these overseas investment procedures make it difficult to hold investors accountable after they have completed transferring funds abroad. Continuing the current overseas investment management mechanism is no longer suitable as it hinders and limits investors' ability to seize overseas investment opportunities.

In practice, many countries worldwide only control the flow of funds transferred abroad for investment activities and impose bans or restrictions on fund transfers in certain cases to ensure macroeconomic balance and the legality of the funds. These do not include managing the entirety of investment activities, as these are conducted in the host country and must comply with its laws.

Currently, only Vietnam and Laos still issue certificates of overseas investment registration, while China also issues such certificates but has relaxed regulations, only managing large projects and specific sectors. Other countries have shifted to a mechanism that declares investors and registers the investment capital transferred abroad with the banking system. Therefore, abolishing the regulation on issuing overseas investment registration certificates in Vietnam is necessary.