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Overview of the investment climate for foreign direct investment in Vietnam

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Posted by Iris Data Driven Agency

5 months ago

After a decade of strong growth with thousands of transactions, Vietnam's M&A market has entered a new era with many Vietnam investment opportunities and challenges ahead. The year 2020 witnessed the Vietnam economic picture continue to have many promising areas, expected economic targets mainly met and exceeded the plan, including foreign direct investment (FDI). In this article, we are concerned with the issues that foreign enterprises invest in a business in Vietnam

Form of the investment industry in Vietnam.

The business investment that foreign investors invest in Vietnam through the establishment of economic organizations, purchase of shares, capital contributions, investment contracts or implementation of investment projects. There are two forms that the investment group Vietnam chooses to invest directly and indirectly.

Direct investment model

1. Establishment of wholly foreign-owned economic organizations.

With this form, foreign investors invest 100% of capital to establish limited liability companies, joint-stock companies, partnerships, and private companies in accordance with the Law on Enterprises.

2. The joint venture between foreign investors and Vietnamese investors.

The joint venture between domestic and foreign investors to establish a new economic organization. Including limited liability companies with two or more members and joint-stock companies, partnerships, and private companies.

3. Invest in business cooperation contracts

With this form, investors cooperate with each other to distribute profits and divide products. Parties participate in establishing a coordination committee to comply with the agreement on the functions, duties, and powers of the coordination board.

Indirect investment model

This is the form of investors contributing capital, buying shares, merging, and acquiring businesses to carry out investment activities. Foreign investors investing in the form of capital contribution, purchase of shares, or capital contributions in an economic organization shall be carried out as follows:

  • Buy first-time shares or additionally issued shares of joint-stock companies.
  • Contribute capital to limited liability companies and partnerships.
  • In addition, foreign organizations can contribute capital to other economic organizations.

Forms of commercial presence.

Foreign investors may establish a commercial presence in Vietnam in the following forms: business cooperation contracts, foreign-invested enterprises, branches, and representative offices.

1. Business cooperation contract

For foreign enterprises, in particular, commercial presence in the form of business cooperation contracts will not establish economic organizations.

2. Foreign-invested enterprises

Depending on the business lines, the State allows foreign investors to set up businesses with 100% foreign-invested capital or force joint ventures with Vietnamese traders according to a certain percentage of contributed capital. 

3. Branches and representative offices

The final form of commercial presence is that investors can set up branches and representative offices in Vietnam.

According to state regulations, foreign investors legally established or legally registered by Vietnamese law, will be granted a license to establish a representative office if they have been operating for no less than 1 year and are allowed to establish. set up branches if not less than 5 years old.

Procedures for foreign investment in Vietnam

When foreign investors invest in Vietnam, they need to understand the investment procedures to comply with the provisions of law. Investment procedures include:

1. Procedures for obtaining investment policy decisions

In case, investors want to implement investment projects in Vietnam, the first thing is to see if the investment projects have to apply for deciding the policy of the Parliament, Prime Minister, People's Committee of the province not. If that is the case, first of all, it is required to follow the procedures for obtaining an investment policy decision in accordance with the provisions of Vietnamese law.

2. Investment registration procedures

After obtaining the decision on investment policies, investors may proceed with the investment registration procedure.

3. Procedures for enterprise establishment registration:

After carrying out the investment registration procedure, if the investment project's content is to establish a business in Vietnam, the investor must follow the business registration procedure in accordance with the Enterprise Law 2014 and the other guiding documents.

Conclusion

In this article, Navigos Search has shown briefly about the forms of investment in the Vietnam market. For investing in new markets, investors need to understand the strengths and weaknesses of the market, the labor force, costs,... In particular, human resources directly affect businesses investing in the model of franchising or establishing new businesses. In case, investors need advice on human resources field or talent recruitment, please leave Navigos Search your request by filling out the form on the contact page or visiting us on the 20th floor, e.town Central Tower, 11 Doan Van Bo, Ward 12, District 4, Ho Chi Minh.