Currently, according to Appendix IV issued together with the Law on Investment 2020, Vietnam has over 200 business sectors and industries that impose conditions on both foreign and domestic investors. Accordingly, conditional business sectors refer to sectors or industries where the investment activities must meet the necessary conditions as prescribed by law for reasons of national defense, national security, public order, safety, social ethics and public health.
Conditions for investment in conditional business sectors
According to the provisions of Clause 6, Article 7 of the Law on Investment 2020, business investment conditions are applied in the following forms:
- Licenses such as trading licenses, investment certificates, operation licenses for transportation services;
- Certificates such as certificates of food safety and hygiene, certificates of public order and security;
- Professional certificates, such as lawyer practicing certificates, chief accountant certificates, and auditor certificates.
- Written confirmation or approval documents such as investment project approval;
- Other requirements that foreign investors must meet to conduct investment activities without the need for written confirmation from competent authorities include requirements on land area, statutory capital conditions (the required capital of the auditing business is 5 billion Vietnam Dong, the prize-winning electronic game business for foreigners requires a minimum charter capital of 500 billion Vietnam Dong).
In addition to the aforementioned conditions, for sectors and industries that restrict access from foreign investors, Vietnamese law also stipulates additional specific conditions, including:
- Ratio of ownership of foreign investors’ charter capital in economic organizations;
- Investment form;
- Scope of investment activities;
- Capacity of investors and partners participating in investment activities;
- And other conditions according to relevant laws or international treaties signed or joined by the investor’s home country and Vietnam.
Apply international treaties
In today’s world, in response to needs and global trends, countries including Vietnam place great emphasis on attracting foreign investment while maintaining a balance in their economic components. Joining international treaties is one of the steps taken to bring Vietnam’s economy closer to the global economy. Vietnam has become a member of numerous bilateral and multilateral treaties and has joined various trade organizations, such as:
- The World Trade Organization (WTO) along with compliance with Vietnam’s General Commitments on Services in the WTO;
- The Association of Southeast Asian Nations (ASEAN) with the ASEAN Framework Agreement on Services (AFAS) and the ASEAN Comprehensive Investment Agreement (ACIA);
- The Vietnam – EU Free Trade Agreement (EVFTA);
- Free trade agreements FTAs such as the Vietnam – Korea Free Trade Agreement, the Vietnam – Japan Economic Partnership Agreement, etc.
In cases where Vietnamese laws and regulations regarding investment and business operations in conditional sectors or restricted sectors for foreign investors contradict international agreements of which Vietnam is a member, priority shall be given to the application of international treaties, if they do not conflict with the fundamental principles of Vietnamese law.
For investment sectors that Vietnam has not committed to in the schedule of commitments on services in the WTO or for which there are no provisions in international treaties of which Vietnam is a member, Vietnamese law shall be applied.
Determine the specific conditions of the industry or profession in which the investor wants to invest and do business
In addition to the general provisions of the Law on Investment 2020, international treaties to which Vietnam and the country of which the foreign investor is a member, to determine the conditions of an investment-specific industry or profession, foreign investors need to learn more about the provisions of specialized laws governing such specific industries and professions such as maritime law, road traffic law, postal law, shipping law and broadcast.
This can pose some difficulties for foreign investors who do not know the laws of the host country. Therefore, seeking advice from reputable legal experts is essential to ensuring compliance with the provisions of the law.
State management of conditional business sectors
According to the current legislation, the state management of conditional business sector, lines of business with conditional market access for foreign investors and oversees compliance with the conditions of business activities of enterprises under the jurisdiction of specialized agencies by specialized laws (Clause 8, Article 7 of Decree No. 01/2021/ND-CP).
Hence, when conducting investment activities in Vietnam, foreign investors should pay attention to meeting the conditions of the conditional business sectors in which they operate. This requires an understanding of Vietnamese legal regulations and relevant international treaties. Enterprises must meet and maintain business conditions throughout their operations. Any violation may result in the suspension of operations or revocation of the relevant license by the competent state authorities.