Vietnam law on foreign investment

On 12/29/1987, Vietnam National Assembly officially approved Vietnam law on foreign investment, the most important legislation formalizing the reception of foreign investment in Vietnam since the innovation process, changing Vietnam economy.

As one of the most remarkable milestones of Vietnam economic reform policy, the law on foreign investment in Vietnam was issued for the first time in December 1987. It became the first basic legal framework concretizing Vietnam Communist Party's views of policy on open-door period and integration. Despite difficulties, the economic sectors receiving foreign investment in particular and foreign economic activities in general show a positive role in accomplishing development growth of Vietnam over the 25 years. It increasingly asserts positive influences on many aspects of building and protecting the country in the near future. To strengthen economic cooperation with foreign countries, improve the industrialization, modernization and development of Vietnam economy based on efficient exploitation and utilization of national resources. Pursuant to the Constitution of the Socialist Republic of Vietnam in 1992, Vietnam law on foreign investment was issued in Vietnam.

General provisions of Vietnam law on investment

According to Article 1 in Vietnam investment law, the Socialist Republic of Vietnam highly appreciates foreign investment in Vietnam with the spirit of mutually respecting sovereignty, independence, and obeying Vietnam law. The foreign investment in Vietnam also based on equality and mutual benefits. The rights to investment in Vietnam and other legitimate rights of investors in Vietnam will be protected by Vietnamese government. Also, Vietnam creates favorable conditions and flexible procedures for investors to invest in Vietnam.

Common terms in Vietnam foreign investment law are described as follows:

- Foreign direct investment: foreign investors use their money or property as capital to invest in Vietnam.
- Foreign investor: foreign economic organization, individual invest in Vietnam.
- Foreign party: includes one or more than one foreign investors
- Vietnamese party: includes one or more than one Vietnamese enterprises in any Vietnamese economic sectors
- Two parties and multi-party: include Vietnamese party and foreign party, Vietnamese party and foreign parties, Vietnamese parties and foreign party, or Vietnamese parties and foreign parties
- An enterprise with foreign owned capital: includes joint venture enterprise and an enterprise with 100% of foreign owned capital

Apart from these above terms, there are other terms in this law; they are joint venture enterprise, enterprise with 100% foreign owned capital, business co-operation contract, joint venture contract, Build-Operate-Transfer contract, Build-Transfer-Operate contract, Build-Transfer contract, Export Processing Enterprise, Industrial Zone, Industrial Zone Enterprise, invested capital, legal capital, capital contribution, and reinvestment.

In the provisions on Vietnam foreign investment, Vietnamese government allows foreign investors to invest in mountainous and remote areas, and regions with disadvantages of socio-economic conditions in main sectors as follows:

- Export products
- Husbandry, farming and processing of agriculture produce, forestry, and aquaculture
- Modern technology, technique, development of ecological environment and investment in research and development
- Materials and natural resources in Vietnam
- Construction of infrastructure and establishment

All investment activities in sectors and regions which have adverse impacts on national defense, security, tradition and ecological environment will be banned in Vietnam.

Forms of investment in Vietnam

Foreign investors invest in Vietnam under the forms of business co-operation contract, joint venture enterprise, and enterprise with one hundred percent of foreign owned capital. Two parties or multi-party cooperate under the basic of business cooperation contract such as production sharing profit, cooperation sharing product, and other forms of business cooperation. Subjects, contents, business duration, rights, responsibility of each party, and relations between parties are regulated, and mentioned in business cooperation contract. Based on the business cooperation contract, joint venture enterprise cooperates with foreign investor or Vietnamese enterprise to establish new joint venture enterprise in Vietnam. The established joint venture enterprise is founded in form of a limited liability company having legal entity according to Vietnam law.

Forms of legal capital of foreign party cooperating in joint venture enterprise are:

- Foreign currency, Vietnam currency from investment in Vietnam
- Facilities, machines, factories, and other construction works
- Values of industrial property rights, technical methods, technological process, and technical services

Meanwhile, Vietnamese party cooperates joint venture enterprise with legal capital as:

- Vietnam currency, foreign currency
- Value of rights to using land in accordance with law on land
- Resources, value of rights to use water surface and sea surface under legal  provisions
- Facilities, machines, factories, and other construction works
- Value of right to industrial property, technique methods, technological process, and technique service

The amount of legal capital of each party is unlimited, but at least 30% of legal capital. To joint venture enterprise with multi-party, the minimum proportion of capital of each Vietnamese party regulated by Vietnamese government. During the operation, enterprise with foreign capital is not allowed to reduce legal capital. The duration operation of joint venture enterprise with foreign capital and duration of cooperation business contract do not exceed 50 years. They can be extended with the maximum of 70 years.

The above-mentioned information is cited partly in investment law in Vietnam. With flexible Vietnam law on foreign investment, investors can choose their suitable forms of investment in Vietnam. Investing in Vietnam does not just help the development of their company or capital generate, but also makes contribution in developing Vietnam economy.