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Solutions for Foreign Investors in Case the Location of the Business must Seek Opinions on Affecting National Defense and Security

Solutions for Foreign Investors

“Currently, due to the provisions of the Law on Investment 2020, there is no specific regulation on which places are considered to affect national defense and security. This is affecting foreign-invested projects that are applying for investment certificates at competent agencies which are  prolonging the processing term and have no direction for a solution. This situation has a significant impact on the business plans of enterprises, and creates fear among foreign investors who want to join the Vietnamese market.”

So, what do investors need to do to avoid or to solve the problem when facing the above situation?

Some projects have affected the state of national defense and security of the locality; such as a project that was established and built in the area of security and defense in Ngu Hanh Son district, Da Nang. This project has a height that affects the defense and security activities of the region. Another similar situation is the clean vegetable growing project in Hoa Vang district, Da Nang which is also located in the area affecting the defense sector. These projects have been suspended or have been referred for the opinion of security and defense agencies.

Based on practice, the Ministry of Politics requires the development of security assessment mechanisms and security reviews for foreign investment projects and activities that affect or may affect national security.

Currently, the Law on Investment 2020 is promulgated and there are new regulations on the competence to approve investment policies of provincial-level People’s Committees. According to Article 32.1.(d) of this Law, the provincial-level People’s Committees are competent to approve investment policies for projects in other areas affecting national defense and security. This regulation was prescribed but there is no guideline to determine which places are considered to affect national defense and security in order to determine whether the project is subject to the approval of investment policies of the provincial People’s Committee. This situation lasts from the time the Investment Law 2020 was issued until Decree 31/2021/ND-CP providing the guidelines for the enforcement of a number of provisions of the Law on Investment was issued on 26th March  2021. During this time, the agencies having competence to grant investment licenses had to seek the opinions of other agencies such as the Command and the police agencies where the investment location is intended to be established. The time for requesting opinions of these agencies was neither specified in accordance with the regulations nor specifically mentioned in the written request for comments. This led to investors’ embarrassment, anxiety, bewilderment and inability to determine the specific time at which the project is licensed to operate.

Due to the above concerns, now, some investors have chosen indirect investment scheme, instead of direct investment scheme through the procedure of submitting applications for investment registration certificates. According to this plan, the investors will invest in the form of capital contribution, share purchase or capital contribution purchase.

In fact, some investors have submitted dossiers in the form of direct investment and are waiting for feedback from the consulted agencies where the investment location is intended to be established and the competent authority granting investment licenses. However, this process takes too long, affecting the business plan. To solve this problem, many investors have accepted the adjustment to the investment scheme by withdrawal of dossiers, and then carried out in the form of capital contribution, purchase of shares or purchase of contributed capital. Before proceeding with this plan, the investors need to check specifically at the investment licensing agency on whether the project in the form of capital contribution, share purchase or purchase of contributed capital must be consulted with agencies such as the Command or the police agency where the investment location is intended to be established. Perhaps, internal procedures as well as policies of investment registration agencies in each locality may be different.

However, if the investors are granted an investment registration certificate in the form of capital contribution, share purchase or purchase of contributed capital, the investors’ capital will be updated on the Enterprise registration certificates. In addition, PLF also alerts that in case the investors withdraw the application submitted at the investment registration agency, there is a risk that after withdrawing the dossier, the investment registration agencies may have begun their internal process and may continue the licensing process. Thus, it can be seen that each option has its own advantages and disadvantages. Investors need to consider their operational objectives to choose the appropriate implementation plan.

Until now, there have been no specific regulations on determining which areas are considered other areas affecting defense and security. The investment licensing agencies also do not have a specific internal procedure to process existing documents as well as new investment projects. Therefore, investors need to consider  their goals to choose the appropriate investment plan. Which form, i.e. the form of capital contribution, share purchase or purchase of contributed capital is bringing more advantages than applying for investment registration certificates.

Writing time 17:10 on 12/04/2021.

The article is based on the current laws at the time of drafting as noted above and may no longer be appropriate at the time the reader accesses this article due to changes in applicable law and specific cases that the reader wants to apply. Thus, the article is for informational reference only.

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