Doing business in Vietnam – 7 prohibited sectors for investors

Foreign investors, when intending to invest and do business in Vietnam, need to learn and choose yourself suitable forms and business sectors of investment. According to the current investment law, not all business sectors foreign investors can make investments, contribute capital, buy shares, and implement investment projects. Therefore, based on the provisions of the Law on Investment 2020 and implementation guiding documents, investors can know the business sectors prohibited for foreign investors. From there, foreign investors can choose for themselves the business sectors following the set business goals.

When investing and doing business in Vietnam, foreign investors may conduct investment activities in one of the five forms specified in Article 21 of the Law on Investment 2020 as follows:

• Invest under a business organization;
• Invest under capital contribution, purchase shares, and purchase contributed capital;
• Implement investment projects;
• Invest under a business cooperation contract;
• New forms of investment and types of business organizations prescribed by the Government’s regulations.

In addition to the need to comply with the investment form specified above, investors will not be able to carry out their business activities if the business sectors on the list of business sectors are prohibited according to regulations. The following is a list of business sectors prohibited.

1. Business in narcotics

According to the United Nations organization, narcotics defines as a substances of natural or synthetic origin. When entering the body, they will change the status psychophysiological ergonomics of the user. Repeated narcotic use will cause users to become dependent both physically and mentally. Physical and mental dependence can lead to many consequences for social safety.

.According to Appendix I of the Law on Investment 2020, 47 types of narcotics prohibited from investment and business are classified into 4 different groups.

The production and use in analysis, testing, scientific research, medical, pharmaceutical production, criminal investigation, security protection national defense shall comply with narcotic substances permitted by competent state agencies to produce and use according to the Government’s regulations on the list of narcotic substances and precursors and the 1961 Uniform Convention against Narcotics and the 1988 United Nations Convention against Trafficking illicit narcotic and psychotropic substances.

2. Business in chemicals and minerals

Appendix II of the Law on Investment 2020 has detailed the list of prohibited chemicals and minerals. According to this list, there are all 18 types of chemicals and minerals objects listed in this category.

The production and use of products specified for analysis, testing, scientific research, medical, pharmaceutical production, criminal investigation, national defense, and security protection shall be carried out as follows: chemicals and minerals prohibited by regulations obtain permission from competent state agencies for production and use under the Government’s regulations on the management of chemicals under the control of the Convention on the Prohibition of the Development, Production, Stockpiling, Use and Destruction of Chemical Weapons and documents guiding the Rotterdam Convention on prior notice agreement procedures for certain hazardous chemicals and pesticides in international trade.

3. Business in specimens of wild flora and fauna; specimens of rare and/or endangered species of wild fauna and flora

This regulation is specified at point c clause 1 Article 6 of Law on Investment 2020, according to which specimens of wild plants and animals originating from natural exploitation are specified in Appendix I of the Convention on International Trade in Plant Species, endangered wildlife; specimens of endangered, precious and rare species of forest plants, forest animals and aquatic products of Group I originating from natural exploitation specified in Appendix III of the Law on Investment 2020.

It should be noted that the production and use of products specified above in analysis, testing, scientific research, medical and pharmaceutical production Criminal investigation, and protection of national defense and security shall be carried out as follows: Competent state agencies permit the exploitation of all kinds of plants and wild animals prohibited by regulations. This exploitation is conducted according to the Government’s regulations on endangered forest plants and animals and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

4. Prostitution business

In addition to the investment law stipulating that prostitution is a profession-prohibited business sector, the criminal law, specifically the Criminal Code 2015, also has provided for the prosecution of criminal liability for acts related to prostitution activities.

5. Human trafficking, tissues, corpses, human body parts, human fetuses

This activity is specified at point dd Clause 1 Article 6 of the Law on Investment 2020. Like prostitution, trafficking in human beings or body parts is considered a crime. Depending on the seriousness and offense, there will be different sanctions from mild to severe.

6. Business activities related to human asexual reproduction

Arising from the risks and undesirable consequences of performing asexual reproduction activities on the human body. Consequently, the State has explicitly prohibited business activities within these specific sectors.

7. Firecracker business and debt collection services business

The above two business activities are prohibited in Vietnam. These activities correspond to g and h, Clause 1, Article 6 of the Law on Investment 2020.

The details outlined above are prohibited business sectors in Vietnam. The above list applies to both foreign investors and Vietnamese individuals and organizations.  Therefore, it is not exclusive to foreign investors. Understanding prohibited business sectors in Vietnam safeguards investors from potential risks. Furthermore, this knowledge facilitates smooth approval processes for investment and business activities.