If you want to invest
in Vietnam, the starting point is to obtain an "investment
license". Investment licenses are not difficult
to get, as long as the appropriate procedures are complied
with. Processing of applications is efficient, with
authorities required by law to process your application
within 45 days at most.
Potential investments
are divided into 2 groups, A and B, for the purposes
of investment license approvals. The Government considers
Group A investments to be central to the economic development
of Vietnam, and as such they require approval from the
Prime Minister. Your point of contact, however, is still
the Ministry of Planning & Investment.
The following investments
are classified as Group A investments:
- Construction of infrastructure for
an Industrial Zone, Export Processing Zone, High
Technology Zone, Urban Zone; BOT, BTO and BT
projects;
- Building and operating of seaports, airports; and
operating of sea or air transportation;
- Oil and gas activities;
- Post and telecommunication services;
- Publication, printing service (except for projects
of printing technical documents; packing,
trademarks, printing common decorating items on
garment and leather products), press; radio,
television broadcasting; advertisement services
together with advertisement publication; cinema
activities; art performance, trading games with
bonus; facilities for medical examination and
treatment of diseases; general education, training
at college, university, postgraduate and equivalent
levels; scientific research; and production of drugs
for treatment of human diseases;
- Insurance, finance, auditing and inspection;
- Exploration or exploitation of rare and precious
natural resources;
- Construction of residential houses for sale;
- Projects in the field of national defence and
security."
For information
on investment licenses and to get an application form
contact.
Various
Options For Structuring Your Investment
Not every investment
is the same. We know that and that is why the Vietnamese
Law of Foreign Investment provides you with 4
alternative models to structure your business. The model
suitable to any particular investment will depend on
the particular circumstances from case to case, so please
contact your personal advisor for more information on
which model is the most appropriate for your plans.
The most common
model adopted by foreign investors so far is the joint
venture company (JVC). A JVC is set up by one or more
foreign investors with one or more Vietnamese investors.
It operates in much the same way as a "company"
operates in other countries, having a separate legal
identity, limited liability and its own Board of Management.
You can contribute
your share of the JVC’s capital in any manner you like,
including cash, equipment, intellectual property rights,
know how, etc. Note that there is a general requirement
that foreign investors in a JVC contribute at least
30% of the legal capital (equity) of the JVC.
JVCs are also attractive
because your equity in JVCs is transferable. The only
restriction is that you have to give a pre-emptive right
to purchase your share to your other joint venture partners
before you can sell it to a third party.
Enterprise
with 100% Foreign Capital (EFOC)
An enterprise with
100% foreign capital (EFOC) is the second alternative
available to you. With this model you retain complete
control over the management of your investment, there
being no requirement for a Vietnamese partner to be
involved. In most other respects an EFOC is exactly
the same as a JVC in its structure, rights and obligations.
You should note
that there are some restrictions on the sectors in which
investors may establish an EFOC. Decree No.10
says that EFOCs won’t be granted investment licenses in
the following sectors:
-
International
and local telecommunications networks;
-
Oil, gas, and
precious and rare materials;
-
Infrastructure
in special zones;
-
Construction;
-
Air, rail, and
sea transport;
-
Public passenger
transportation;
-
Production of
cement, steel or iron;
-
Production of
industrial explosives;
-
Afforestation
and planting of perennial industrial crops;
-
Tourist trips;
and
-
Culture, sports
and entertainment.
In spite of these
restrictions, EFOCs are still an attractive option in
many other sectors of the economy and should be considered
a real option for your plans.
Business Co-operation Contract (BCC)
The business co-operation
contract (BCC) is the most flexible model that you can
adopt to do business in Vietnam and they are particularly
popular in the oil, telecommunications and advertising
sectors. There is more flexibility in how the "Coordination
Committee" (as opposed to a Board of Management
for a JVC for the project is established,
its role, and profit sharing arrangements, with these
matters generally being left up to the parties.
A BCC is a bit like
a partnership under the common law. It does not create
a separate legal entity, but it does create a contractual
relationship with respect to a specific investment project
undertaken in Vietnam.
Build-Operate-Transfer/Build-Transfer-Operate/Build-Transfer
Projects
The Government is
very keen to encourage foreign investors to get involved
in developing infrastructure, including roads, ports,
water and power projects. To this end it has created
an investment vehicle called the build operate transfer
project (and its variants). Collectively these are often
called BOT projects.
Strictly speaking,
the BOT project is not a fourth business model, as it’s
participants may choose to take the form of a JVC or
an EFOC, but it is listed as a separate option for your
consideration because of the unique incentives that
are available to investors who chose this option.
Highways, bridges,
power plants, water supply projects, ports and other
public utilities are all ideal candidates for a BOT
project. While the BOT project model does see the asset
transferred to the Government at the end of the project’s
life, investors are more than compensated through the
most favorable tax treatment they receive and through
various other mechanisms like being allowed to operate
the asset for a term or being guaranteed investment
approval for another project. BOT projects are also
eligible for Government guarantees of foreign exchange
availability.
Common References on Business Forms
There are a number
of legislative instruments that may be of interest to
you in deciding which model your investment should take.
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