This year marks the thirty-fifth anniversary of the first Vietnamese regulation on Foreign Direct Investment, Law No. 04-HDNN8, a law that represented a turning point in opening up the Vietnamese economy to the world and aimed to establish a favorable regulatory framework for Foreign Direct Investment. Noteworthy aspects of this law include the possibility of setting up a company with 100% foreign capital, albeit limited to 50 and exceptionally to 70 years, and certain sectors; the right to repatriate or transfer profits, royalties, or invested capital; and the guarantee of fair and equitable treatment, providing protection against any confiscation or nationalization processes as the ultimate expression of legal security.
Following successive reforms over the years, Law No. 03/2022/QH15 marked another milestone in this opening process by amending, among other laws, Law No. 67/2014/QH13, eliminating the prior requirement in some cases to have an investment project and obtain a registration certificate for such project; expanding incentives or support for Foreign Direct Investment in other cases; and removing guarantees for the execution of projects involving land allocation, leasing, or change of land use. Additionally, it ended the state monopoly over electricity transmission systems, allowing all types of companies, including those with foreign capital, to invest in and operate these systems.
In line with this liberalizing trend, at the beginning of last month, Vietnamese Deputy Prime Minister Pham Binh Minh signed Decision No. 667 / QD – TTg (Decision 667), approving the National Strategy for Cooperation on Foreign Direct Investment for the period 2021-2030. This decision continues the directives of Resolution 50 – NQ – TW from the Communist Party of Vietnam’s Politburo and Resolution 58 – NQ – TW from the Vietnamese Government on investment matters. So, what does this Strategy aim to achieve? What are its key points? Which sectors does it affect, giving them priority over others if applicable? To what extent could it be attractive to Spanish companies? What should be taken into account in this regard?
The Strategy aims to reaffirm and even increase the significant momentum that Foreign Direct Investment (FDI) is experiencing in Vietnam, as evidenced by reaching USD 14 billion in the first six months of 2022. It seeks to realign investment flows to reduce high-risk and litigious markets and consequently increase capital participation from Asia, Europe, and the United States to reach 70% of total capital invested in Vietnam by 2025 and 75% by 2030. In this regard, it prioritizes countries such as Singapore, South Korea, Japan, China, Taiwan, Malaysia, Thailand, India, Indonesia, and the Philippines from Asia; France, Germany, Italy, Spain, Russia, and the UK from Europe; and the United States (Official Portal of the Government of Vietnam – Foreign Investment Law).
To achieve these objectives, the Strategy aims to improve existing regulations and structures while fostering a strong business sector by providing maximum support to high-tech companies involved in hardware, software, semiconductors, telecommunications equipment, IT services, and startups. Specifically, it plans to implement nine proposals focusing on enhancing the quality, efficiency, and competitiveness of the economy; increasing investment in establishing a science, technology, and innovation ecosystem in line with Resolution 52/ NQ – CP on Industry 4.0; and modernizing and diversifying Foreign Direct Investment promotion.
Although these nine proposals need further development and clarification, they undoubtedly represent progress towards making Foreign Direct Investment an increasingly attractive sector. This is supported by favorable demographic, social, and political factors as well as a projected GDP growth rate between 6% and 7% over the next three years. In this context, sectors worth considering for their business opportunities include logistics, technology (e-commerce, fintech, edtech), public services (clean energy, water supply, waste treatment), healthcare and education, industrial production (parts, packaging, consumer goods), and industrial parks.
Antonio Viñal
Abogado
AVCO Legal
madrid@avco.legal
