5 key considerations for foreign investors in Vietnam

Despite Vietnam’s numerous investment-friendly policies and more stringent laws regarding foreign direct investment, there are still a lot of restrictions in place. When planning to invest in Vietnam, foreign investors should keep the following considerations in mind.

1. Introduction to direct investment in Vietnam

Investors can explore various avenues when investing in Vietnam, including:

• Establish a company;
• Buy shares or make capital contributions to the company;
• Public-private partnership (PPP) investment is a type of investment in which the investor and project company sign a contract with a competent state agency to operate infrastructure projects or public services;
• BCC contract investment is a type of implementation between domestic and overseas investors to carry out business collaboration.

Direct investment is the process by which foreign investors participate in business activities in Vietnam by establishing a new enterprise or implementing a business cooperation contract. For foreign investors looking to invest in Vietnam, there are several important issues related to business sectors, investment accounts, employees and intellectual property on which they must remain extremely vigilant.

2. Selection of a business investment industry and sectors

When investing in Vietnam, it is important that investors should carefully select the sectors. Also, investors must be aware of restricted industries and sectors. Choosing sectors carefully will help avoid doing business in prohibited industries and sectors by Vietnamese legislation, such as prostitution, debt collection services, firecracker trading, etc.

Beside, many conditional business sectors require investors to obtain sublicenses, practicing certifications or confirmation from relevant authorities. This may delay the launch of commercial operations and incurs significant expenditures for overseas enterprises. Furthermore, market access conditions applicable to foreign investors must be considered in certain instances.

Furthermore, investors must ensure the charter capital ownership ratio of foreign investors in economic entities and the scope of investment activities when planning to invest in Vietnam. With many years of experience in the investment field, PLF assists investors in drawing up their investment projects in full compliance with Vietnamese law, ensuring a legal, effective, and risk-free business setup in Vietnam for those looking to invest in Vietnam.

3. Capital contribution account and capital contribution period

Foreign investors can choose to contribute capital in Vietnamese dong or foreign currency. To contribute capital to an enterprise, investors must do so through a direct investment capital account, referred to as “DICA“. The DICA will be used to manage and perform transactions related to investment capital. This account with the purpose of carrying out transactions related to investment capital including capital contribution, payment of foreign loans, project-related amounts and capital recovery.

Investors need to pay attention to the deadline for contributing capital to the enterprise according to the committed schedule. In case of late investment capital contribution, exceeding 90 days from the date of issuance of the enterprise registration certificate, the enterprise will be fined and must adjust the new capital contribution deadline.

4. Work permit for foreign employees

Currently, Vietnam is applying relatively strict management policies for foreign employees working in Vietnam. Many strict conditions and procedures for recruiting foreign employees make it difficult to apply for actual recruitment. Setting these regulations is consistent with development orientation, prioritizing and protecting employment sources for domestic employees, and minimizing the use and recruitment of foreign employees. However, that has led to many businesses in Vietnam lacking a workforce with high technical expertise and causing difficulties in the business management process because most foreign investors have foreign employees in important positions.

5. Protect intellectual property rights

Up to now, compared to the requirements of TRIPS, Vietnam’s IP protection system has basically been relatively fully formed, with the IP Law clearly delineating into 3 areas: 

• Copyright protection (of cultural works in general);
• Industrial property rights (trademarks, business secrets, geographical indications, industrial designs, …); and 
• Plant varieties.

The enforcement of intellectual property rights remains limited. Additionally, the intellectual property rights protection system lacks effectiveness, transparency, and rigor. Leading to a situation where violations and infringements of intellectual property rights are occurring quite commonly. Almost every type of product has counterfeit goods that violate intellectual property rights. Therefore, investors need to register their intellectual property rights as soon as possible to have a basis to ensure intellectual property rights and protect the image and brand of the business in the best way. These publicly registered intellectual property rights, although difficult to enforce, remain an important deterrent to potential competitors.

6. Vietnam: A Prime Destination For FDI

Vietnam is the destination for many investors who want to expand their business activities, especially investors from Singapore, Korea, Japan and Hong Kong.

Invest in Vietnam to tap into a growing market and enjoy favorable business conditions. However, Vietnam’s legal procedures for foreign direct investment still complicate matters for many foreign investment. Investment legal documents are unstable with continuous changes in tax incentive policies, many licenses and cumbersome administrative procedures, causing businesses to spend a lot of money during operations. With many years of experience in supporting foreign businesses in carrying out investment and business activities, PLF provides its clients with the best possible support to overcome these access difficulties.