Revising key laws to lead Vietnam into the new era

The draft amendments to the Law on Investment and the Law on Enterprises feature notable changes and are expected to bring forward a more favourable investment climate when it is scheduled to take effect in 2021. 

revising key laws to lead vietnam into the new era

Investment incentives are just one addition to the changes

As a foreign investor looking for opportunities in Vietnam, Hong Nam-Pyo, representative of South Korea’s Gomax remarked that it was important for investors like him to look at a list of sectors and trades in which foreign investors are subject to market access conditions in Vietnam, as well researching business lines which are not allowed for investment in Vietnam.

“In addition, clear regulations would help businesses make decisions faster. We need procedures to be less complicated, the rules to be fairly enforced, and companies to compete on their merits, including for access to land and opportunities,” Nam-Pyo said.

This is the main purpose of the draft amendments to the Law on Investment and the Law on Enterprises that are being discussed at the National Assembly (NA), and the topic is the centre of attention for both foreign and local investors.

According to Minister of Planning and Investment Nguyen Chi Dung, who presented to the NA proposals on changes of these important laws, the amended Law on Enterprises would create favourable conditions for individuals and organisations to start businesses. It would cut administrative steps, costs, and time for newly-established firms and help raise Vietnam’s ranking by 25 places in the World Bank’s Doing Business Report. In addition, the rights, obligations, and benefits of shareholders, investors, and members of the company would be protected while the quality of corporate governance would be improved.

Meanwhile, the amended Law on Investment aims to improve the quality and efficiency of attracting domestic and foreign investment resources in accordance with the planning and development orientation of industries, fields, and localities on the basis of ensuring security, sustainable development, and environmental protection.

Positive movement

New lines added to the conditional business list

Six new business lines are added to the conditional business list, including:

- Data centre service business;

- Import press distribution service business;

- Fishing vessel registry;

- Electronic identification and authentication services;

- Training crew members of fishing ships, and providing architectural services.

Thus, in this latest draft law, Vietnam will have 236 conditional investment and business sectors.

Law firm ASL LAW remarked that one of the highlights of the draft amendment to the Law on Investment is the abolition of 12 conditional investment lines while six lines are being added. The draft law will therefore be very significant to foreign investors in Vietnam in the coming time (see chart).

The draft also contains additional conditional market access business lines for foreign investors. Specifically, as to implement the policy on the attraction of overseas investment under the Politburo’s Resolution No.50-NQ/TW on orientations to perfect the efficiency of foreign investment by 2030, the draft investment law introduces a list of conditional market access business lines. With respect to unlisted business lines, foreign funders are afforded the same conditions as domestic investors. Other important additional regulations involve investment incentives.

Accordingly, it includes new preferential investment business lines: manufacturing and trading of products formed from science research, college education, manufacturing of goods or services provision creating and participating in a value chain or sector clusters, and innovation startups.

Resolution 50 has comprehensively assessed the situation of attracting and using foreign investment capital over the past 30 years, which clearly indicates the limitations and shortcomings in activities of attracting capital sources, such as: quality, efficiency of revenue, imbalance in attracting and using foreign capital, links between foreign and domestic investment sectors, and inspection and supervision of foreign investment activities. Meanwhile foreign investors, especially those who were involved in merger and acquisition deals in Vietnam over the past year, will see advantages as the draft on amending the Law on Investment proposes to remove the need for M&A approval if the relevant transaction does not result in an increase of the foreign investors’ ownership ratio in the target economic organisation. This applies even if such target economic organisation operates in the business sectors subject to market access conditions applicable to foreign investors.

 
revising key laws to lead vietnam into the new era

More propositions

The NA’s Economic Committee said it found it necessary to review and revise regulations on investment incentives and support. However, the committee proposed supplementing cases in which investors do not comply with investment commitments, adding they must have sanctions to recover incentives. Chairman of the NA’s Economic Committee Vu Hong Thanh stated that it is necessary to continue reviewing regulations on incentives and investment support to overcome the situation with different interpretations on the scope and subject of application.

It is also required to supplement criteria and conditions for the effectiveness and continuity of the investment project as a basis for determining the incentive, and ensuring clear and convenient procedures for enjoying investment incentives and support, especially for scientific, technical, and technological transfer support.

Some members from the committee suggested the government should design regulations in the direction of offering incentives to legal entities instead of projects to prevent transfer pricing between projects of the same investor, removing obstacles in tax administration for projects, especially M&A projects that have different incentive durations.

Meanwhile, Dang Duong Anh and Tran Thi Ha Phuong from Vietnam International Law Firm wrote to VIR previously about another hurdle. Specifically, the proposition involving Article 48.2 and Article 112.1 of the Law on Enterprises requests full contribution of charter capital within 90 days for the first time after enterprise registration certificate issuance.

The lawyers explained that the draft Law on Enterprises does not address this issue as such a short timeline should be extended for first time charter capital contribution.

There should also be clarity on the timeline for contributing charter capital as aforementioned to a plausible timeframe to support the investors and at the same time provide the authorities ample time with a clear legal base to manage the paperwork.

Nguyen Viet Ha Managing director, BowerGroupAsia Inc’s Vietnam Office

revising key laws to lead vietnam into the new era

Given the rapid economic development in recent years, Vietnamese regulators have been spending significant efforts on reviewing and revising laws and regulations to catch up with and facilitate economic activities.

Nevertheless, frequent regulatory changes could cause negative impacts on existing business and investment activities. Investors are concerned that the current laws on investment and enterprises have not yet protected investment activities against regulatory changes.

Article 13 of the Law on Investment only provides a guarantee for incentives in case of regulatory changes. Such guarantees would not be meaningful if such investors cannot continue their activities, because the governing laws or regulations change.

Therefore, it is strongly expected that the new Law on Investment will expand its scope of protection against regulatory changes in order to cover not only incentives, but also terms and conditions which have been duly granted under the investment license or business registration certificates.

Pham Duy Khuong - Managing director, ASL LAW

revising key laws to lead vietnam into the new era

Some provisions of the Law on Enterprises are not compatible with the changes of relevant laws.

For example, there is an incompatibility between this law and the Law on Competition regarding procedures for notifying competition authorities in cases of mergers and acquisitions. This has many major consequences including time wasted, missed investment opportunities, and increasing costs. The new laws should focus on protecting the rights of shareholders. For example, one of the notable new points is to adjust the regulation stating that shareholders who own only 1 per cent of capital of an enterprise have the right to stand for election to the board, together with a number of other rights.

However, it is necessary to have feedback in accordance with the proposed 1 per cent, though it should be consistent with specific characteristics of Vietnamese businesses.

Dau Anh Tuan - Director of Legal Department Vietnam Chamber of Commerce and Industry

revising key laws to lead vietnam into the new era

There will be many legal documents that need to be reviewed and amended in conformity with the international commitments. Reasonableness, consistency, feasibility, and transparency are the most vital elements contributing to the quality of a legal document. New legislation solutions should remove non-transparent regulations, continue to reduce barriers to market entry, protect business freedom, fight against interest groups and overlapping laws, and further consult the opinions of businesses and individuals.

The shortened drafting process should not be applied to influential laws in order to ensure involvement of all relevant stakeholders. Thus, during the drafting process of legal documents to ensure participation and involvement of all citizens and businesses, the use of fast-track drafting process should be minimised.

Alain Cany - Country chairman, Jardine Matheson Vietnam

revising key laws to lead vietnam into the new era

The predictability of legal decisions is quite essential. Investment has to be protected against regulatory changes which may affect it in an unforeseeable and adverse way.

Rather extensive protections would need to be preferable, covering also the terms and conditions which have been granted to an investor under its investment license or business registration certificate.

We have to be sure that we can pursue our duly commenced, licensed, and retained business without interruption by later ­regulatory alterations. The aim of long-term investment in Vietnam corresponds with long-term clarity and legal certainty.

Mark Grillin - Head of the Tax & Custom Working Group, Vietnam Business Forum

revising key laws to lead vietnam into the new era

Based on international experience of the do’s and don’ts of a policy-drafting process, the first step that legislative bodies should pay attention to is identifying and sticking to specific objectives. Then, the drafting agency should identify the relevant stakeholders, ensure their involvement during the policy drafting process, and understand their interests and the importance of those issues to them. This avoids a situation in which a policy is made to serve the interests of single or several stakeholder groups while posing risks to others.

Therefore, a range of alternatives can be determined to avoid zero sum decisions when the loss to one stakeholder does not cause a proportional gain for others and vice versa. All relevant stakeholders, including enterprises in the industry and also in the supply chains and auxiliary industries, should be viewed as partners of legislative bodies during the policy development process to figure out the best solutions. VIR

Nguyen Thu 

Law on Enterprises needs greater reforms

Law on Enterprises needs greater reforms

Vietnam must continue to improve on its Law on Enterprises, experts and researchers said at a law conference in Hanoi yesterday.

Draft Law on Investment adds incentive sectors

Draft Law on Investment adds incentive sectors

Numerous sectors were added to receive incentives under the Draft Law on Investment to ensure it matches the new FDI strategy.

 
 

Other News

.
Japanese woman cares for children cancer patients in Hue
Japanese woman cares for children cancer patients in Hue
FEATUREicon  01/12/2019 

Over 20 years ago, a Japanese woman visited the central city of Hue and fell in love with the place.

She has returned many times to support children fighting cancer.

Vietnamese lacquer is business inspiration for La Sonmai
Vietnamese lacquer is business inspiration for La Sonmai
FEATUREicon  01/12/2019 

To enhance the value of Vietnamese handicrafts, especially lacquer products, two young men have started their own business creating lacquer phone cases.

Vietnam named second in ASEAN in fintech funding in 2019
Vietnam named second in ASEAN in fintech funding in 2019
FEATUREicon  29/11/2019 

Vietnam’s fintech firms secured two of the top three largest funding deals in ASEAN in 2019.

Ownership dreams out of reach with land hike?
Ownership dreams out of reach with land hike?
FEATUREicon  29/11/2019 

Recent proposals in several cities to increase land prices, together with the current restrictions placed on new projects by local authorities, are expected to cause headaches for real estate developers.

Modern pharma grows more colourful
Modern pharma grows more colourful
FEATUREicon  29/11/2019 

The modern pharmacy retail segment is welcoming an exciting new entrant in Japanese drug and cosmetics retailer Matsumotokiyoshi Co., Ltd, urging existing players to dust down their racing goggles.

African swine fever rocks meat industry
African swine fever rocks meat industry
FEATUREicon  28/11/2019 

African swine fever remains at large in Vietnam, restricting pork supply and pushing up the price of live pigs, with livestock groups facing serious damage, and even the largest ones forced to close facilities.

Building a global gateway for foreign trade in Mekong Delta
Building a global gateway for foreign trade in Mekong Delta
FEATUREicon  27/11/2019 

PM Nguyen Xuan Phuc has asked the Transport Ministry to complete the revised planning of the Soc Trang seaport system and Tran De Port, so that they can be assessed together with the Master Plan on National Seaport System. 

Banking M&As set to flourish
Banking M&As set to flourish
FEATUREicon  25/11/2019 

Merger and acquisition activities in Vietnam's banking sector are expected to grow in the years to come despite certain regulatory barriers hindering foreign investors.

Villager dedicates his life to the forest
Villager dedicates his life to the forest
FEATUREicon  23/11/2019 

Dao ethnic minority man Trieu Tai Cao has devoted his life to nurturing more than 30ha of precious ironwood trees by arterial road 279 which connects northern mountainous provinces.

Releasing potential of quality labour
Releasing potential of quality labour
FEATUREicon  23/11/2019 

The Fourth Industrial Revolution brings not only new issues, but also possibilities for Vietnam’s education and training sector to improve its quality in order to overcome the thirst for high-level labour.

Heated hospitality segment for M&As
Heated hospitality segment for M&As
FEATUREicon  21/11/2019 

Merger and acquisition activity is growing across Asia Pacific's real estate market, and in Vietnam there are signs that institutional investors are continuing to increase their allocations in the industry.

Students turn discarded plastic bags into bricks
Students turn discarded plastic bags into bricks
FEATUREicon  24/11/2019 

Tonnes of plastic waste, particularly discarded plastic bags threaten our planet with environmental pollution, and by now almost everybody knows it.

VN aviation industry seeks private investment amid explosive growth
VN aviation industry seeks private investment amid explosive growth
FEATUREicon  20/11/2019 

The booming aviation sector in Việt Nam needs investment from the private sector to ensure that it has adequate airport infrastructure for continued...

Turning traditional paper into works of art
Turning traditional paper into works of art
FEATUREicon  23/11/2019 

When his parents gave him a book that taught him how to fold paper into dinosaurs and other prehistoric creatures at the age of seven, Nguyen Hung Cuong found his passion – origami.

Vietnamese peacekeepers make barren Bentiu greener
Vietnamese peacekeepers make barren Bentiu greener
FEATUREicon  18/11/2019 

Just over a year ago, the station where Vietnamese military doctors are based as part of the UN Peacekeeping Mission in South Sudan was surrounded by barren land.

Vietnam’s banking sector becomes more attractive to investors
Vietnam’s banking sector becomes more attractive to investors
FEATUREicon  18/11/2019 

Growing attractiveness of Vietnamese banks' shares is thanks to a positive revamp and strong outlook of the sector, particularly as Vietnam is accelerating global economic integration.

Something in the air
Something in the air
FEATUREicon  17/11/2019 

Hanoi and HCMC both have some serious air quality issues to grapple with.

Coffee on the run
Coffee on the run
FEATUREicon  17/11/2019 

The way coffee is bought and consumed in Vietnam is changing as new players work hard to get their name out there.

Appeals for sturdy sandbox direction
Appeals for sturdy sandbox direction
FEATUREicon  15/11/2019 

The new economic models of transportation, lodging services, fintech, energy, and digital entertainment are expected to drive the sharing economy in Vietnam if regulatory sandboxes become more readily available. 

Nine celebrity quotes about Vietnam
Nine celebrity quotes about Vietnam
FEATUREicon  14/11/2019 

So we all know how cool, amazing and wonderful Vietnam is.

 
 
 
Leave your comment on an article

OR QUICK LOGIN