The Investment Law of Vietnam, after opinions were obtained from both domestic and foreign parties, took effect on July 1, 2006.
The provisions and articles in this Law show the intension of the Vietnamese State to create a policy that will promote fair treatment of domestic and foreign investors. Provision 2 of Article 4 regarding investment policy reads as follows: “The State will treat investors in all business sectors, both domestic and foreign, equally, and encourage or create conditions favorable to investors.”
Within the Law is a separate chapter regulating means to ensure investment, capital and assets. It is clearly stated that investment capital and legal assets cannot be nationalized or confiscated. In the event that the State does feel the need to take an investor’s assets, it will pay the investor the market price at the time that the State takes possession. In such a case, “ payment or compensation must be fair and each investor must be treated equally.”
In addition, the Law contains wording regarding intellectual property rights (IPRs), transfer of capital and property overseas, investment guarantee in the event that laws and policies change, and settlement of disputes.
Regarding the dual fee system under which foreign investors have been charged more than domestic investors, the new Investment Law states, “investors in Vietnam will all be assessed one price for fees, goods and services that are under State control.”
As for foreign investors, the State has committed to an itinerary under which the investment market is to be opened. In this Investment Law, the State makes it clear that foreign investors are not obliged to buy or use domestic goods or services, to export any set percent or amount of product, to use local materials, to provide any particular goods or services or to locate their head office in any government mandated area.
The fairly open and transparent regulations in this Law reflect the Vietnamese Government’s commitment to deep and broad integration into the world economy. The law is a step towards meeting the negotiation commitments Vietnam has made and will bring it closer to the principles adopted by the World Trade Organization (WTO).
Those commitments include abiding by agreements made so that Vietnam can become ‘a most favored nation’, national treatment, openness and transparency, and the Agreement on Trade-Related Investment Measures (TRIMs) concerning WTO investment which means changing investment-related policies and lowering trade barriers that are contrary to WTO regulations.
In this light, this is Vietnam’s first Investment Law to address equal opportunity for and conditions of competition. All exceptions and specific conditions to be applied to domestic or foreign investors have been identified, while an itinerary for eliminating them has been set forth.
Resettlement
The Investment Law is certainly a new move for Vietnam as the country moves towards improving ‘soft’ infrastructure, i.e. reforming laws and administrative procedures, in addition to ‘hard’ infrastructure, including transportation and service information, to create the best environment for investors.
Although the Investment Law sets forth many clearly defined regulations, foreign investors question when and how the Law can and will be applicable. After contributing their ideas to the Draft Investment Law and waiting for the National Assembly to approve the draft law, investors now want to see the law actually come into effect.
Vietnamese lawmakers do recognize that a number of Governmental legal documents need to be drawn-up, passed and approved, documents that will guide the implementation of the Law.
A draft decree is being made to provide unified and transparent guidelines for implementing the Law. Those who are preparing the draft are now conferring with various organizations and individuals.
The new Law is sure to affect foreign investment in Vietnam. There has been no wave of investment in the early months of this year because foreign investors were waiting to see when the new Law would go into effect. Still, hope for a future open and transparent investment environment draw US$3.4 billion in foreign direct investment (FDI) to Vietnam in the first seven months of this year, a 26 percent increase against the same months last year.
Since the first Foreign Investment Law went into effect in 1986, over 6,000 FDI projects have gone forward in Vietnam, with total registered capital of over US$52 billion, with US$35 billion actually having been invested.
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Vietnamese
