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Foreign investment plays a significant role in the development of Vietnam's economy. The impact of the global pandemic had a negative impact on the volume of attracted investments this year. Thus, FDI into Vietnam decreased 2.4 percent from the previous year to USD 17.2 billion in 2020. The manufacturing and processing sector is set to receive the largest amount of FDI.

Despite the reduction in FDI volumes to Vietnam, the country's authorities still adhere to a strict principle of selection before approving foreign investments in Vietnam. Restrictions on foreign investment are provided for in accordance with Vietnam's obligations in international treaties, domestic laws, including those related to national security, antitrust laws and corporate governance.

After reading this material, if you need advice for investment projects in Vietnam, we recommend that you contact our experts for more detailed information.

FDI control at a glance

When making indirect investments in Vietnam, foreign investors need to open an indirect investment account with a Vietnamese credit institution for making remittances related to indirect investment activities.

If you are planning to register a company with an FDI in Vietnam, then you must open a capital account for direct investment in a Vietnamese credit institution to carry out capital transfer transactions related to the FDI.

Credit institutions in which foreign investors open accounts must comply with the monthly reporting regime established by the State Bank. The Bank evaluates the impact of capital flows on the stability of the foreign exchange market in particular and the economy in general.

Until now, there are still some restrictions on the maximum percentage of foreign ownership or forms of investment in some service sectors. For example, marketing services require a foreign investor to register a JV in Vietnam with a local firm providing this kind of services. Some transportation and financial services have a foreign ownership limit.

A foreign investor must meet certain conditions to conduct an investment business in Vietnam.

Foreign investor means a person with foreign citizenship or an organization established in accordance with foreign laws and investing in a business in Vietnam.

Special rules

If you decide to register a Vietnamese SWF or set up a state-owned enterprise with foreign investment in Vietnam, please note that if a foreign investor wishes to buy shares in a Vietnamese company, he must obtain written permission from the local Investment Department.

If foreign investors have complied with all legal requirements that apply to their investments in Vietnam, they will be allowed to invest in all sectors and industrial zones that are not prohibited by local legislation.

Jurisdictional thresholds

FDI in Vietnam can be carried out only after submitting an application for a new investment project to the authorities of the industrial zone. However, in some investment projects, investors may also need to obtain permits from the highest government authorities, including the Prime Minister.

FDI restrictions

FDIs in Vietnam are being tested to obtain permission on the following points:

  • National security: if you decide to start a M&A deal in Vietnam, regulators will take into account national security considerations;
  • Antitrust law: Generally, a business combination involving a Vietnamese company may have reporting requirements. Conducting acts of economic concentration of enterprises is prohibited if they can potentially restrict competition in the Vietnamese market;
  • Corporate approval: must be obtained in some specific cases to complete the transaction.

Foreign investment in Vietnam can be prohibited or canceled by the authorities if the investor does not fulfill its obligations. Thus, you will be refused an investment certificate. In the case of antitrust law, if foreign investors ignore the prohibition, the violating parties will be subject to administrative fines, and their commercial licenses may be revoked. In the absence of the required corporate approvals, the transaction may be invalid.

Interaction with local authorities

If you decide to register a new investment project in Vietnam, and it is subject to procedures that require approval from the highest government authorities, then this can take a lot of time. In some cases, from three to six months. To shorten the procedure time, foreign investors may (often informally) seek advice from the authorities before submitting an application.

Privacy issues

Registration of a project to attract investment in Vietnam also requires the parties to conclude an agreement on the protection of confidential information. Such an agreement may be concluded subject to a mutual non-disclosure agreement. For non-compliance with it, fines and compensation are imposed.

Trends

Last year, the country's authorities issued a decree on improving the quality and efficiency of foreign cooperation and investment until 2030. One of the key factors when considering FDI is national security issues.

If you decide to invest in Vietnam, do not hesitate to order legal advice on the regulation of the financial sector in Vietnam from our experienced professionals.