2009 investment guidebook vietnam

MINISTRY OF PLANNING AND INVESTMENT OF VIETNAM
FOREIGN INVESTMENT AGENCY - FIA

VIETNAM INVESTMENT GUIDE

2009

FOREWORD

In recent years, Viet Nam’s economy has benefited from its Government’s open-door
policy. With a stable political environment and its economic potentials, Viet Nam is an
attractive destination for foreign investors.
The Vietnamese Government has been endeavouring to create a favorable investment
environment by continuing to complete Viet Nam’s legal system and introducing
important incentives for foreign investors.
To provide an overview of the investment environment in Viet Nam, the Foreign
Investment Agency, Ministry of Planning and Investment has cooperated with Vilaf –
Hong Duc and the PricewaterhouseCoopers Viet Nam to compile and issue this
guidebook.
The book is divided into three main sections, the first two sections aim to provide
foreign investors with an overview of Viet Nam and the economy; the third section
provides the legal guide for investing in Vietnam involving such matters as investment
procedure, taxation, land, employment, foreign exchange, intellectual property, dispute
resolution etc.
The purpose of this book is not to provide a detailed analysis of Viet Nam’s economy
or its foreign investment forms in Viet Nam, but to give a general introduction and
supply the necessary information to foreign investors who are looking at potential
opportunities of investment in the country.
We believe that this will be a helpful guidebook for foreign investors in Viet Nam

FOREIGN INVESTMENT AGENCY
MINISTRY OF PLANNING AND INVESTMENT

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Why Invest in Vietnam?
POPULATION
• 86.5 million people (13th largest in the ECONOMIC GROWTH
world) expected to grow to 100 million • Remains one of the fastest-
in 2020 with an annual growth rate of growing Asian economies, with
1.2%. foreign investment a key driver of
• 50% of the population is 25 years or growth.
younger. • High GDP growth in recent years,
• Competitive labor cost. based on the power of FDI & the
• Literate & well-trained workforce. private sector.

NATURAL RESOURCES SECURITY & POLITICS
• Abundant mineral & natural resources. • It is widely acknowledged that
• Potential in oil & gas reserves. Vietnam has a stable political and
• Competitive advantage in maritime social environment.
ports & marine transportation.
LEGAL ENVIRONMENT
• Vietnam’s legal environment has
GEOGRAPHIC LOCATION significantly improved in recent
• Vietnam is located in the center of years in compliance with
Southeast Asia, the fastest growing international practices.
economic region in the world. GLOBAL INTEGRATION
• Vietnam has a 3,260 km of coastline • As the 150th member of the
and many sea ports which are ideal for World Trade Organization since
international trade. January 2007, Vietnam enjoys
vast opportunities for economic
growth.

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ABBREVIATION

100% FOC Wholly foreign-owned company
AALT Asset Administration and Liquidation Team
ASEAN Association of Southeast Asian Nations
BCC Business co-operation contract
BOM Board of Management of IZs, EPZs, HTZs and EZs
BOT Build-operate-transfer (including its derivative forms,
BTO and BT)
BT Build-transfer
BTO Build-transfer-operate
CEPT Common Effective Preferential Tariff Scheme
CIT Corporate income tax
CPC Civil Proceedings Code
DOLISA Department of Labour, War Invalids and Social Affairs
under a provincial People’s Committee
DPI Department of Planning and Investment under a
provincial People's Committee
DTA Double Tax Agreement
EIAR Environmental impact assessment report
EL Enterprise Law
ENT Economic needs test
EPC Environment protection commitment
EPZ Export processing zone
EU European Union
EVN Vietnam Electricity Group
EZ Economic zone
FIC Foreign-invested company
FCT Foreign contractor tax
FOB Free on board
HTZ High-tech zone
IL Investment Law
IZ Industrial zone
JVC Joint venture company
JSC Joint stock company
LLC Limited liability company
LTT Law on Technology Transfer
LUR Land use rights
LURC Certificate of land use rights
MFN Most Favoured Nation
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MOF Ministry of Finance
MOIT Ministry of Industry and Trade
MOLISA Ministry of Labour, War Invalids and Social Affairs
MONRE Ministry of Natural Resources and Environment
MOST Ministry of Science and Technology
MPI Ministry of Planning and Investment
NOIP National Office of Intellectual Property
ODA Official development assistance
PCT Patent Cooperation Treaty
PIT Personal income tax
RO Representative Office
SBV State Bank of Vietnam
SCT Special consumption tax
SOE State-owned enterprise
TTC Technology transfer contract
USD United States of America dollar
VAS Vietnamese accounting system
VAT Value-added tax
VCAD Vietnam Competition Administration Department
VIAC Vietnam International Arbitration Centre
VND Vietnamese Dong
WTO World Trade Organisation

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TABLE OF CONTENT

PART I: VIETNAM: COUNTRY AND PEOPLE .................................................... 1
1. Key facts ...................................................................................................... 1
2. Political structure ........................................................................................ 2
3. International Relations ................................................................................ 3
4. Infrastructure ............................................................................................... 4
4.1. Highway system ................................................................................ 4
4.2. Railway ............................................................................................... 5
4.3. Inland Waterways .............................................................................. 6
4.4. Ports ................................................................................................... 7
4.5. Airports and Civil Aviation ............................................................... 7
4.6. Industrial Zones, Export Processing Zones, High-Tech Zones and
Economic Zones.............................................................................................. 8
5. Energy ........................................................................................................ 11
6. Telecommunications ................................................................................. 13
PART II. THE ECONOMY .................................................................................. 14
1. Overview .................................................................................................... 14
2. Principal economic sectors ...................................................................... 15
3. External Trade ........................................................................................... 18
4. Foreign Direct Investment ........................................................................ 20
5. Equitization of State-owned enterprises ................................................. 22
6. Viet Nam’s WTO Accession ...................................................................... 22
PART III. LEGAL GUIDE FOR INVESTING IN VIETNAM ................................. 24
I: INTRODUCTION ........................................................................................ 24
1. Overview ............................................................................................ 24
2. Licensing ........................................................................................... 24
3. Licensing Authority .......................................................................... 27
4. Corporate Forms ............................................................................... 29
5. WTO Update ...........................오류! 책갈피가 정의되어 있지 않습니다.
II: TAXATION ................................................................................................. 29
1. Corporate Income Tax ...................................................................... 30
2. Capital Transfer Tax ......................................................................... 33
3. Value-Added Tax ............................................................................... 33
4. Personal Income Tax ........................................................................ 33
5. Import and Export Duties ............................................................... 37
III: LAND LAW .............................................................................................. 38
1. Land Use Rights and Land Use Right Certificate........................... 39
2. Land Lease ........................................................................................ 39
3. Land Price ......................................................................................... 41
4. Lease of Commercial Property ........................................................ 41
5. Land Clearance ................................................................................. 41
6. Sale of Apartments ........................................................................... 41
7. Lease of residential houses by foreigners ..................................... 42
IV: FOREIGN EXCHANGE AND LOANS ....................................................... 42
1. Foreign Exchange ............................................................................ 42
2. Loans................................................................................................. 45
V: EMPLOYMENT........................................................................................... 46
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1. Recruitment ....................................................................................... 46
2. Labour Contracts .............................................................................. 47
3. Termination of Employment ............................................................ 48
4. Wages, Overtime Payments, and Statutory Minimums ................. 49
5. Work Permits ..................................................................................... 50
6. Collective Labour Agreement .......................................................... 50
7. Trade Unions ..................................................................................... 50
8. Employment Funds........................................................................... 51
VI: COMPETITION LAW ................................................................................ 52
1. Unfair Competition............................................................................ 52
2. Practices in Restraint of Competition ............................................. 52
3. Agreements in Restraint of Competition ........................................ 53
4. Monopolies and Market Dominance ................................................ 54
5. Economic Concentration ................................................................. 55
6. Competition Authorities ................................................................... 56
VII: ENVIRONMENT ....................................................................................... 56
1. Strategic Environment Assessment Reports ................................. 56
2. Environmental Impact Assessment Report .................................... 57
3. Environmental Protection Commitment ......................................... 58
VIII: INTELLECTUAL PROPERTY ............................................................ 58
1. Protection of Intellectual Property Rights in Vietnam ................... 59
2. Trademarks ....................................................................................... 61
3. Patents ............................................................................................... 62
4. Industrial designs ............................................................................. 63
5. Copyright ........................................................................................... 63
6. Transfer of Intellectual Property Rights .......................................... 64
7. Enforcement of Intellectual Property Rights .................................. 65
IX: TECHNOLOGY TRANSFER ..................................................................... 66
1. General Principles ............................................................................ 67
2. Technology Transfer Contract ......................................................... 67
3. Governing Law .................................................................................. 68
4. Registration ....................................................................................... 68
5. Pricing................................................................................................ 68
6. Confidentiality ................................................................................... 69
X: DISPUTE RESOLUTION ............................................................................ 69
1. Conciliation and Mediation .............................................................. 69
2. International Arbitration ................................................................... 69
3. Foreign Courts .................................................................................. 70
4. Domestic Arbitration ........................................................................ 70
5. Vietnamese Courts ........................................................................... 71
6. Enforcement Process ....................................................................... 72
XI: REPRESENTATIVE OFFICE IN VIETNAM............................................... 72
1. Establishment Conditions................................................................ 72
2. Application Procedure...................................................................... 73
3. Press Announcement ....................................................................... 73
4. Licensing Authority .......................................................................... 73
5. Time Limit for Licensing and Licensing Fee .................................. 73
6. Operation ........................................................................................... 73

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7. Permitted Activities .......................................................................... 74
8. Reporting ........................................................................................... 74
9. Termination ....................................................................................... 74
APPENDICES..................................................................................................... 76
APPENDIX I - SUMMARY OF WTO COMMITMENTS ................................... 76
APPENDIX II - List of major legal document relating to the business activities
of foreign investors in Vietnam .................................................................... 80
APPENDIX III - LIST OF SECTORS ENTITLED TO INVESTMENT INCENTIVE
85
APPENDIX IV - List of geographical regions of investment incentives .... 91
APPENDIX V - List of conditional investment sectors applicable to foreign
investors ........................................................................................................ 96
APPENDIX VI - USEFUL CONTACTS AND ADDRESSES IN VIETNAM ...... 97

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PART I: VIETNAM: COUNTRY AND PEOPLE
1. KEY FACTS
- Official name: The Socialist Republic of Viet Nam
- Capital: Hanoi
- Location: Viet Nam is located in the eastern part of the Indochina peninsula,
bordered by China to the North, Laos and Cambodia to the West, the East Sea
and Pacific Ocean to the East and South.
- Area: 331,689 square kilometers. Three quarters of the country consists of
mountains and tropical forests.
- Coastline: 3,260 km
- Major cities:
North: Ha Noi (capital), Hai Phong
Centre: Hue, Da Nang, Quy Nhon
South: Ho Chi Minh City, Nha Trang, Can Tho
- Typography:
The North consists of highlands and the Red River Delta. The South is divided
into coastal lowlands, central highlands with a high plateau and the Mekong River
Delta.
The two “Rice baskets” are the Red River Delta (15,000 sq. km) and the Mekong
River Delta (40.000 sq. km)
Inland waterways: total length of 41,000km, total annual flow of 3,000 billion m3
- Climate:
Viet Nam is located in both tropical and temperate zones. The whole country is
affected by a strong monsoon influence, with a considerable amount of sunshine
and a high rate of rainfall and humidity. The average annual rainfall is around
223cm
The climate is tropical in Southern and Central Viet Nam, with a wet and a dry
season, and warm and humid weather all year round.
In the North, there are four seasons with a distinct winter.
- Natural Resource:
Energy resources (oil, gas, coal and hydropower); minerals (bauxite, iron ore,
lead, gold, precious stones, tin, chromate, anthracite, construction materials,
granite, marble, clay, white sand and graphite); sea and tropical forestry
resources and agricultural potential.
- Population: 86.5 million (2009), expected to grow to 100 million in 2020 with an
annual growth rate of 1.2%.
- Ethic groups:
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Vietnam Investment Guide 2009

There are 54 ethnic groups, of which the largest are Kinh (or ethnic Vietnamese,
comprising 87.17% of the population), Tay, Thai, Muong, Chinese and Khmer.
- Official language:
Vietnamese (for business purposes English, French, Russian, Chinese, Japanese
and German are also commonly spoken)
- Education and Literacy:
In 2003 Vietnam’s literacy rate was 94 percent, including 95.8 percent for men and
92.3 percent for women. In the 2006/2007 academic year there were 279,593 schools,
12% more than in 2000/2001. In 2006/2007 more than 16 million pupils attended
primary, lower secondary and upper secondary schools. The national average of
graduates from upper secondary schools is 93.7%. At the same time close to 1.5
million students attended the 253 public universities and colleges and 210,000 were
enrolled in the 46 non-public institutions. In comparison, in 2000, there were only
800,000 students in the public and only 100,000 students in the non-public
universities and colleges.
2. POLITICAL STRUCTURE
Viet Nam is a socialist country operating under the leadership of the Communist Party.
A nationwide congress (“National Congress”) of Viet Nam’s Communist Party is held
every five years to determine the country’s guiding strategies and adopt its chief
policies on solutions for socio-economic development. The National Congress elects
the Central Committee which in turn elects the Politburo. The last congress was held
in April 2006.
National Assembly
The National Assembly is the highest law-making body in the country. It comprises
delegates who are elected for a five-year term from various strata of the population
including different ethnic groups from all around the country. The National Assembly
is both the supreme state authority and the unique legislative body and has the power
to promulgate and amend the Constitution and Laws. The National Assembly meets
twice yearly. The Standing Committee of the National Assembly is the permanent
executive body of the National Assembly. Its principal functions are the interpretation
of the Constitution, Laws and Ordinances, the control of their implementation and the
supervision of the activity of the Government, the Supreme People’s Court and the
Supreme People’s Procuracy.
The President of Viet Nam
The President, as the Head of State, is elected by the National Assembly from its
members to represent Viet Nam in domestic and foreign affairs for a five-year tenure.
The President has the right to proclaim Laws and Ordinances passed by the National
Assembly and the Standing Committee. The President is the commander-in-chief of
the armed forces and Chairman of the Council of Defence and Security. In foreign
affairs, the President has the authority to appoint ambassadors and to sign
international agreements and treaties. The President appoints and dismisses the
Prime Minister and the members of the Government on the basis of resolutions of the
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National Assembly or its Standing Committee. Furthermore, the President has the
right to nominate key officials such as the Chief Justice of the Supreme Court and the
Chief Procurator of the Supreme Procuracy, subject to the National Assembly’s
approval. The current president of Viet Nam is Mr Nguyen Minh Triet and the current
Prime Minister of Viet Nam is Mr. Nguyen Tan Dung.
The Government
The Government is the highest executive organ of the State. The Prime Minister is the
leader of the Government. The Prime Minister is responsible for the day-to-day
operations of the Government. The Vietnamese Government currently has 18
ministries and 4 ministerial-level bodies.
The People’s Councils and People’s Committees
Viet Nam has 58 provinces (*) and 5 cities directly under central authority (including
Hanoi, Ho Chi Minh City, Haiphong, Da Nang, and Can Tho). Provinces are
subdivided into districts, provincial cities and municipalities. Districts are further
divided into communes and townships. Cities directly under the central authorities are
made up of districts. Urban districts are divided into precincts, and rural districts are
made up of communes.
People’s Councils of various administrative levels are elected by the population of the
locality. People’s Councils are responsible for the supervision of the implementation of
the laws, policies and tasks at the local level, and for taking decisions on local socio-
economic development programs and budgets.
People’s Committees of various levels are the executive arm of the People’s Councils.
They are also local administrative authorities, and report to the People’s Councils of
the same level. Chairmen, vice chairmen and members of the People’s Committees
are elected by People’s Councils.
(*) Hanoi expansion: On 29th May 2008, the National Assembly approved the
expansion of Hanoi into the neighbouring HaTay province, Melinh district of Vinh Phuc
province, and four communes in Luong Son district of Hoa Binh province. The
expansion took effect from 1st August 2008. With this expansion the area and
population of Hanoi have increased to 3,344.7 sq. km from 921.8 sq. km and 6.44
million from 3.39 million, respectively.
The People’s Courts and People’s Prosecutors
The Constitution establishes a three-level judicial system comprising District Courts,
Provincial Courts and the Supreme People’s Court. In addition, there is a system of
people’s organs of control acting as a procuracy or public prosecutor to oversee the
observance of laws by judicial bodies and to exercise the power of public prosecution.
3. INTERNATIONAL RELATIONS
At present, Viet Nam has established diplomatic relations with 172 countries, and it
has economic and trading relations with about 165 countries and territories. Vietnam
holds membership in 63 international organizations and over 650 non-governmental
organizations

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Viet Nam joined the United Nations in 1977, became an official member of the
Association of South East Asian Nations (ASEAN) in 1995, and has concluded a
cooperation agreement with the European Union. Relationships with multi-national
financial institutions such as the World Bank (WB), the International Monetary Fund
(IMF) and the Asian Development Bank (ADB) have been re-established. Viet Nam
has been participating in the ASEAN Free Trade Area (“AFTA”) since 1996 and
became a member of the Asia Pacific Economic Cooperation Forum (APEC) in 1998.
Viet Nam signed the bilateral trade agreement (BTA) with the United States in 2000.
Besides aspects of international trade, the BTA covers a variety of other areas,
including intellectual property rights, trade in services, development of investment
relations, business facilitation and the obligation to ensure transparency of laws and
regulations. The BTA essentially constitutes a commitment by both countries to open
their markets to each other. In October 2004, Vietnam hosted the 5th Asia-Europe
Meeting (ASEM). In November 2006, Vietnam hosted the APEC Summit. On 11
January 2007 Viet Nam became an official member of the World Trade Organisation
(WTO), and in January 2008 the country started a two-year term as an elected non-
permanent member of the UN Security Council.
4. INFRASTRUCTURE
Infrastructure has always been considered a crucial element of the Vietnam’s national
development and competitiveness. Being aware of the decisive role infrastructure
plays in the country’s economic development process, the Vietnamese Government
determines that for Vietnam to become a modernized industrial nation by the 2020s,
infrastructure has to take a significant step forward with large-scale projects, and
consistently be developed and connected with the nation’s key economic regions.
It is estimated that about VND400,000 billion (about USD25 billion) is needed for the
infrastructure development of Vietnam in the period between 2006-2010. This is
equivalent to 18% of the total investment of the society. To realize this target, besides
promoting the effective use of the investments from the State budget and ODA fund,
promoting the participation of the private sector in infrastructure development is also a
priority of the Vietnamese Government.
4.1. Highway system
Vietnam has a dense road system extending over 251,786 km country-wide. The road
system is divided, by administrative levels, into:
- National Roads (17,295km) which are administered by the central level,
linking the country’s cities and provinces together as well as with Vietnam’s border
gates with neighboring countries (China, Laos and Cambodia); and
- Local roads, which include Provincial Roads (23,138km) managed by the
provincial level, linking the province’s districts; District Roads (54,962km), managed
by the district level, linking the district’s communes; Commune Roads (141,442km)
managed by the commune level; Urban Roads (8,536km) managed by cities and
towns; and specialized roads (4,414km) used for special purposes.

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The most important road pivot in the Vietnamese road system is the North-South pivot,
which includes 2 routes: the 1A National Highway and the Ho Chi Minh Highway. The
1A National Highway is 2,260km in length with Lang Son province and Ca Mau
province at its two ends running through 31 cities and provinces of Vietnam.
The Ho Chi Minh Highway is to the west of the 1A National Highway, designed to be
3,167km in length to connect Cao Bang province in the North with Ca Mau province in
the South. Phase 1 of the Ho Chi Minh Highway running from Hoa Lac (Ha Noi) to
Ngoc Hoi (Kon Tum province) with a total length of 1,234km was completed in 2005.
4.2. Railway
The rail network of Vietnam has a total length of 2,632 km of which the meter gauge
(1,000mm), standard gauge (1,435mm) and mixed gauge are 2,169 km, 178 km and
253 km, respectively.

Vietnam Rail Network Regional Rail network
:

The length of Vietnam railway network and gauge are represented in the following
table

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The length of Vietnam railway network

Main routes Length
Track gauge
(km)

Ha Noi - Ho Chi Minh 1726 1000 mm

Ha Noi - Hai Phong 102 1000 mm

Ha Noi - Lao Cai 296 1000 mm

Ha Noi - Dong Dang 163 dual gauge (1435 &1000 mm)

Ha Noi - Quan Trieu 75 dual gauge (1435 &1000 mm)

Kep - Uong Bi - Ha
106 1435 mm
Long

Kep - Luu Xa 57 1435 mm

(Source: Vietnam Railway Corporation – VRC)
There are 278 stations in the rail network country-wide. The longest and most
important route is the Hanoi – Ho Chi Minh City line, which stretches for 1,726 km.
This line is now serviced by an express train, which makes the journey in
approximately 29.5 hours.
Vietnam’s railways is linked to China in two lines, one from Lao Cai province to
Yunnan province, and one from Lang Son province to Kwangsi province of China.
Construction of the railway lines connecting with Laos and Cambodia has been
included in the Government’s development strategy for the Railway industry of
Vietnam.
4.3. Inland Waterways
The inland waterway system offers a cheap and flexible mode of transport. Viet Nam
has more than 2,300 rivers and canals with total length of 198,000 km. Currently, the
inland waterway has a system of over 61,000 km The two major inland waterway
systems serve as major transportation outlets. The first major inland waterway system
is in the Red River area in the north which stretches for approximately 2,500 km.
Along this system there are five main ports, of which Hanoi is the largest. The second
major inland waterway extends 4,500 km along the Mekong River and its tributaries in
the South and boasts about 30 ports, including Ho Chi Minh City.
Inland waterway transport in Vietnam is very developed, and ranked the second in
domestic passenger and cargo transport (especially coal, rice, sand, stone, gravel,
and other usually high weight low value goods), accounting for 25-30% of total
domestic transported volume, especially in the Mekong river delta, and reach 60-70%

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in some provinces, contributing significantly to the socio-economic development of the
region and the country.
4.4. Ports
Vietnam has a 3,260km coastline, a strategic position close to international shipping
routes and favoured natural conditions of foundation, sea depth, current, tidal,
sedimentation and channels for developing seaport business. There are currently
119 seaports which are organised into 8 geographical groups:
1. North: Quang Ninh to Ninh Binh
2. North of Central: Thanh Hoa to Ha Tinh
3. Middle of Central: Quang Binh to Quang Ngai
4. South of Central: Binh Dinh to Ninh Thuan
5. Ho Chi Minh City - Dong Nai - Ba Ria - Vung Tau
6. Mekong Delta
7. Phu Quoc
8. Con Dao and international transhipment groups
In May 2004, the government endorsed the master plan to address major
shortcomings: a lack of deep seaports, in particular, and to raise the competitiveness
of local facilities to the standards of other countries in the region. Vietnam is planning
to boost the development of seaports from now until 2020 to meet the increasing
demand for cargo handling and transport in the future. Some key regional ports which
require investment include Hai Phong and Cai Lan in the North; Nghi Son, Cua Lo,
Vung Ang, Chan May in the North of Central; Da Nang, Dung Quat in the Middle of
Central; Quy Nhon, Nha Trang, Van Phong in the South of Central; and Ho Chi Minh
City, Vung Tau and Can Tho in the South.
Meanwhile, existing ports will be upgraded and some will be built in focal economic
zones to accommodate vessels of more than 30,000DWT. Ports for containers, loose
goods, liquid commodities and international transhipment will also be developed.
Under the plan, the maritime sector will complete the upgrading and expansion of 10
key ports namely Cai Lan, Hai Phong in the North; Cua Lo, Da Nang, Dung Quat, Quy
Nhon, Nha Trang in the Central region; and Thi Vai, Ho Chi Minh City and Can Tho in
the South. In addition, the sector will develop key projects including the Lach Huyen
Seaport in the city of Haiphong, the Lien Chieu Seaport in the central city of Da Nang,
and the Cai Mep-Thi Vai Seaport in the southern province of Ba Ria-Vung Tau.
4.5. Airports and Civil Aviation
Vietnam is divided into 3 air traffic regions. There are four international airports, two in
the North (Hanoi and Dien Bien Phu), one in the centre (Da Nang) and one in the
South, (Ho Chi Minh City) and 19 domestic airports. Six airports are located in the
North, eight in the Centre and nine in the South.
Currently, the Government has significantly upgraded international airports to handle
the increase in the volume of traffic associated with Viet Nam's invigorated economy.
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A new international terminal of the Tan Son Nhat airport in Ho Chi Minh City, capable
of handling up to 10 million passengers a year was opened in December 2007. Noi
Bai airport in Hanoi was upgraded, enlarged and completed for operation in 2002,
construction of a second terminal is expected to be completed in 2010. Four new
international airports are planned to be constructed in Phu Quoc, Dong Nai, Lao Cai
and Quang Ninh provinces. Preparations are underway for the new Long Thanh
International Airport, 40 kilometers from Ho Chi Minh City in Dong Nai province. The
airport is scheduled to open in 2010 and by 2015 it will be further expanded to reach
an annual transportation capacity of 80 to 100 million passengers, becoming one of
the biggest airports in the region.
Apart from the state-owned Vietnam Airlines, three private Vietnamese airlines have
received operational license in 2007 and 2008 (i.e. Jetstar-Pacific Airlines, VietJetAir,
Indochina Airlines), and Phu Quoc Air is expected to hand in its application for a
license shortly.
The government has opened-up for foreign investment in airports and airport
construction (BOT and other models) as a necessary means to accelerate the
modernisation of this important service industry.
4.6. INDUSTRIAL ZONES, EXPORT PROCESSING ZONES, HIGH-TECH ZONES
AND ECONOMIC ZONES
In 1991, the Vietnamese Government introduced a policy to develop these special
administrative zones, including Industrial Zones, Export Processing Zones, High-Tech
Zones and Economic Zones, in an effort to geographically diversify investment
locations, to accelerate export, and to create more jobs.
Since then, the “zones” system has been developed across the country, playing an
important role in attracting foreign investment to Viet Nam. There are currently over
190 IZs have been licensed with 11 IZs established by 100% foreign-owned entities,
19 established by joint venture enterprises, and 160 by Vietnamese enterprises. The
total land area available for industrial development in the zones amounted to close to
29,800 hectares, almost 50% of which has been leased out. In addition, thirteen
economic zones have also been licensed with a total area of over 270,000 hectares.
The majority of investment in the zones has been in the manufacturing sector, initially
in textile and garment, but increasingly also in other higher value added sectors such
as consumer electronics, as the recent investments from Intel, Foxconn and Nidec
show.
The most important factor contributing to the success of the zones is the higher
quality of infrastructure. In addition, transport and telecommunications infrastructure
has also been improved in and around the zones. Another key factor is the availability
of land. The zones offer already cleared and registered-for-industrial-use land by the
time the investor is ready to build its factory. The Government has not only made the
zones easily accessible to investors, but also offers fiscal incentives to zone investors
(details are given below). Many zones also offer more expedited licensing process
and consultative services that help investors prepare applications.
Industrial Zone & Export Processing Zone
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Industrial Zone (“IZ”) is a zone in which enterprises specialising in the production of
industrial goods and the provision of services for industrial production are
concentrated.
Export Processing Zone (“EPZ”) is an industrial zone specialising in the production of
goods for export and the provision of services for such production and export activities.
Investment in IZs and EPZs is generally regulated by Decree No. 29/2008/ND-CP of
the Government dated 14 March 2008 providing Regulations on Industrial Zones and
Export Processing Zones (“Decree 29”).
Developers of IZs and EPZs and investors operating and doing business in these
zones (collectively referred to herein as “IZs Developers,” “IZ Enterprises,” and “EPZ
Enterprises,” respectively) are granted the following preferential treatment:
* Import duties and value-added tax: IZ Developers, IZ Enterprises and EPZ
Enterprises may be exempt from payment of import duties and value-added tax on
goods imported for the establishment and implementation of their investment projects.
* Land use:
- Incentives include preferential land rental rates, exemption from payment of
land use fees for the land area allocated to the investor by the State, or, in
the case of a land lease, exemption from payment of land rental for the life
of the projects.
- Where IZ Developers, IZ Enterprises and EPZ Enterprises pay their land
rental on an annual basis, they have the right to: (i) mortgage or use as a
guarantee assets attached to land; (ii) sell or contribute as capital assets
attached to land; (iii) sell or lease out factories, offices and warehouse built
in the IZ; and (iv) sub-lease the land area on which infrastructure facilities
have been completed (please note that the right mentioned in (iv) is only
applicable to IZ Developers).
- Such IZ Developers, IZ Enterprises and EPZ Enterprises who pay the land
rental for the entire term of their lease at once are entitled to additional
rights. In particular, during the term of their land lease or sub-lease, they are
permitted to: (i) assign the value of their LUR and assets attached to the
land leased out to them; (ii) sub-lease LUR and assets attached to land; (iii)
contribute the value of LUR and assets attached to land as capital to joint
ventures; (iv) mortgage or use as a guarantee LUR and assets to credit
institutions operating in Viet Nam.
High-Tech Zone
A High-Tech Zone is multi-function economic-technical zone with a defined boundary
established in accordance with a decision of the Prime Minister to conduct high-tech
research, development and applications, to nurture high-tech enterprises, to train
high-tech human resources and to manufacture and trade high-tech products1.

1
High-tech products are defined as “products created on the basis of application of high technology”. “High technology” is
defined as “the technology integrated from achievement of advanced technology and science which has the ability to create a
9

Investment in high-tech zones is subject to the Regulations on High-Tech Zones
(“HTZs”) as stipulated in Decree No. 99/2003/ND/CP of the Government on 28 August
2003 (“Decree 99”) and Decision 53/2004/QD/TTg of the Government dated 5 April
2004.
The Vietnamese government strongly encourages investment in the following high-
tech sectors:
Information technology, communications, and computer software technology;
- Bio-technology serving agricultural, aquaculture and medical sectors;
- Microelectronic, fine mechanical, mechanical-electronic, optical-electronic
and automatic technologies;
- New material technology and new energy technology; and
- Other special technologies.
Under the applicable laws of Viet Nam, foreign and domestic investors operating and
doing business in HTZs and foreign and Vietnamese individuals working for
investment projects in HTZs are entitled to the following preferential treatment:
- CIT: newly-established projects in HTZs are entitled to: (i) the preferential
CIT rate of 10% for 15 years; (ii) a 4-year CIT exemption beginning from the
year taxable income is earned; and (iii) a 50% CIT reduction for the
following 9 years.
- Land use: A uniform land lease pricing applies to both foreign and domestic
investors in HTZs. Exemptions of land rent may be granted to those
investors of projects on research and development of technology or on
high-level skills training in science and technology. During the term of
leasing or sub-leasing land, investors are allowed to sub-lease, assign and
mortgage land use rights and assets attached to their leased land plots to
credit institutions operating in Viet Nam.
- Housing: Favourable conditions may be made available to the investors and
workers in HTZs in terms of their housing and residence.
- Visas: Multiple-entry visas with a term compatible with the term of
employment are issued to foreign individuals and overseas Vietnamese
who invest or work in HTZs.
- Credit assistance: The Development Assistance Fund of Viet Nam is ready
to extend medium or long-term credit with soft interest rates and issue loan
guarantees to Vietnamese manufacturers in HTZs. In addition, all investors
directly exporting their products may be entitled to an export credit
assistance and an export award.
- Additional incentives may be granted to the investors in “especially
important projects.”

sudden increase in labour productivity, features, quality and added value of products, to form new production or service
industries with high socio-economic effectiveness,
a great effect on socio-economic development and national defence and security.”
10

Economic Zone
An Economic Zone (“EZ”) is a zone that has an economic area separate from the
general investment and business environment and with especially favourable
conditions for investors.
An EZ is an identified geographical zone with privileges regarding the investment
environment, preferential stable policies, and flexible management, creating the best
conditions for the business activities of the domestic and foreign investor.
Investment in EZs is currently regulated by Decree 108 and special Decision issued
by the Prime Minister.
Developers of EZs and investors operating and doing business in these zones
(collectively referred to herein as “EZs Developers” and “EZ Enterprises”) are granted
the following preferential treatment:
- CIT: newly-established projects in EZs are entitled to: (i) the preferential
CIT rate of 10% for 15 years; (ii) a 4-year CIT exemption beginning from the year
taxable income is earned; and (iii) a 50% CIT reduction for the following 9 years.
- Import duties and value-added tax: EZ Developers and EZ Enterprises are
entitled, for a term of 5 years from the commencement of their operations, to: (i) an
exemption from payment of import duties on materials, equipment, components and
semi- products that have not yet been produced domestically and that must be
imported for the purpose of production within the EZ.
Import and export duties are not levied upon the following imports and exports:
(i) Goods imported from abroad to a non-tariff area;
(ii) Goods exported from a non-tariff area abroad;
(iii) Goods transferred from or sold by a non-tariff area to an EPZ or any
enterprise; and
(iv) Goods not subject to export duty, with Vietnamese origin, and transported into
a non-tariff area.
* VAT: Goods produced and services provided in non-tariff areas and goods imported
and services provided from abroad to non-tariff areas are exempt from VAT.
* Special sales tax (“SST”): Goods produced and services provided in non-tariff areas
and goods imported and services provided from abroad to non-tariff areas are exempt
from SST (except for certain types goods or services).
5. ENERGY
Vietnam is a net energy exporter, and is expected to remain such for the foreseeable
future. The country is endowed with offshore oil and gas resources in the south, coal
in the north, and hydroelectric power resources in the mountains running from north to
south along the country's western regions. Hydro power accounts for close to 40% of
the electricity generating capacity of Viet Nam. Gas fired turbines generate around
37% of electricity and coal accounts for 11%. The remaining needs are met by various
oil fuelled plants and also by imports. In line with further industrialization and
11

electrification, growth in demand is likely to remain very strong and accordingly the
government has set high priority for significant investments in the sector. While the
electricity industry is currently run by the state owned Electricity of Viet Nam
Corporation (“EVN”), foreign companies have entered the market in the form of Build-
Operate-Transfer (BOT) projects. Other players such as Vinacomin, Petrovietnam
have recently entered the power production market. Furthermore, the Electricity Law
of 2004 envisages a competitive market in the future and draft roadmaps indicate
competition to the wholesale market could be introduced possibly in 2014.
Electricity output in 2006 reached 59 billion kWh with Foreign Invested Enterprises
accounting for 5.6%. The EVN aims to generate about 70-78 billion KWh in 2010 and
as high as 167-201 billion kWh in 2020. Achieving this goal requires the development
of approximately 32 to 37 new power generation projects, totalling 12,400 MW in
capacity, including up to 20 hydroelectric plants with 4,000 MW capacity; eight gas or
oil power plants (5,200 MW), and seven coal-fired plants (3,200 MW). Implementation
of these projects also requires the construction of about 15,000 km of 110 – 500kV
transmission lines, together with 300,000 km of low medium and low voltage
distribution lines. In order to achieve the above targets, the annual power growth
during 2000-2020 should achieve 8.8% to 10% to keep pace with the annual GDP
growth of 6.6% to 8%. The annual investment required to achieve the set target is
estimated to be US$1.5 to US$2 billion per year. Over the last few years, an array of
large capacity power plants were built and put into operation, such as Pha Lai Thermo
Power Plant with capacity of 440MW, Tri An Hydroelectric with a capacity of 400MW
and Hoa Binh Hydroelectric Power Plant with a capacity of 1,920 MW. Build-Operate-
Transfer (BOT) projects are also in operation including the 715-MW Phu My 2-2 plant
commencing operations in January 2003 and the similar capacity Phu My 3 Plant that
commenced operations in March 2004. These plants in Ba Ria Vung Tau are fuelled
by gas from the Nam Con Son Basin. Further large power plants are under
construction or to be constructed, such as the Ca Mau gas fired power complex with a
capacity of 1,500 MW, O Mon gas fired power complex with a capacity of 2,640 MW
Yaly Hydroelectric with capacity of 720 MW, Mong Duong coal fired Power Complex
with capacity of over 2,000 MW. In addition, a 3,600 MW hydropower complex at Son
La in the North is also under construction.
Furthermore, Viet Nam plans to complete its first nuclear power plant by 2020 as an
alternative means on meeting electricity demand. The primary sources of finance for
investment in the power sector are from Official Development Assistance (ODA)
grants and loans committed by such international donors as the World Bank (WB), the
Asian Development Bank (ADB), bilateral funds from various foreign governments,
and funds from the Vietnamese Government. Other crucial sources of finance over
the next decade include foreign suppliers’ credits and EVN’s retained earnings. In the
recent years, a number of domestic investors have entered the power production
market such as Vinacomin focussing on small size coal fired power plant with capacity
of below 600 MW (e.g. Uong Bi, Mong Duong 1, Son Dong, Cam Pha 2, Na Duong)
and PetroVietnam focusing on gas fired power plant (e.g. Ca Mau 1 & 2, Nhon Trach
1&2). Local commercial banks have been active in providing finance for power
generation projects developed by EVN and other state-owned enterprises. Viet Nam
12

has signed up for a US$165 million loan from the WB and the ADB to finance the
rehabilitation of the electricity transmission and distribution systems in Ho Chi Minh
City, Hanoi, Nha Trang and Hue. Soft loans and aid from foreign governments are
also being spent to improve the system.
Additionally, Viet Nam has great potential of renewable energy, and its consumption is
on the rise. Under the solar power cooperation program between France and Viet
Nam, a solar station was installed in Ho Chi Minh City to provide electricity for the
provinces Gia Lai, Quang Nam, and Binh Phuoc.
6. TELECOMMUNICATIONS
Viet Nam has made great strides in upgrading its telecommunications systems. In the
last six years, the annual growth of the telecommunication market in Viet Nam
reached 30%. To date, Vietnam has achieved more than 30 phones per 100 people
with 19 million mobile subscribers. The Government’s relaxation with regard to
international calls made over the internet and the spread of mobile phone
subscriptions have further improved the telecommunications landscape, especially in
rural areas. Internet usage has also rapidly risen and by the end of 2008 there were
over an estimated 21.5 million users. The bigger growth is seen in the mobile sector
and wireless networks. Viettel is the largest mobile service provider in Vietnam. The
second largest provider is MobiFone followed by Vinaphone. Both MobiFone and
Vinaphone are VNPT subsidiaries. Other service providers are S-Fone, EVN Telecom
and Ha Noi Telecom.
The table below illustrates the rapid development.

Vietnam’s demand for IT and Telecommunications is expected to continue to increase
over the next 5 years in line with continued growth in disposable incomes. Entry to the
World Trade Organisation (WTO) in January 2007 has provided the industry with
more private competition which will increase the number of actors in the market. This
makes telecommunications and technology services cheaper and more
accessible. The government has already promised to lower telecoms charges and
Internet access fees in the country by 2010. The government is also planning to
upgrade the country’s information, communications and technology (ICT)
infrastructure. Furthermore, the government is trying to break the virtual monopoly of
the state-owned telecoms company, Vietnam National Post and Telecommunications
13

(VNPT), by licensing other state-owned and joint-stock telecommunications’ firms and
to partly privatise some of VNPT’s market leading subsidiaries. Currently, foreign firms
are allowed to own 51 % of the shares in Vietnamese telecommunications firms. In
2010 this limit will be raised to 65%.
Today, almost every commune in Vietnam has at least limited access to the fixed-line
telephone network, compared to less than 60 % ten years ago. The government plans
to improve the quality of access through a rural telecommunications’ development
project that will make use of the existing Code Division Multiple Access (CDMA)
network.
The PC penetration rate has risen in recent years. The number of Internet users has
more than doubled since 2005. Most people who are interested in using the Internet
do so through Internet cafés, which are common in urban areas. The number of
Internet users is expected to continue to rise and the government hopes that around
25%-30 % will use the Internet by 2010

PART II. THE ECONOMY
1. OVERVIEW
Viet Nam has undertaken a remarkable economic transformation over the past 20
years. Confronted with the failure of the centrally planned economy, which had been
put in place after the country’s reunification in 1975, the Government of Viet Nam
launched the “Doi Moi” (“Renovation”) initiative in 1986. Doi Moi sought to revive
economic growth and development by starting a gradual transition from central
planning to a market-based economy, and by progressively integrating into the world
economy. Reforms under Doi Moi have gradually removed the dominance of the
public sector in the economy and allowed private investment and initiative. Key
measures include the transfer of agricultural land from large State-owned farms to
household farms, price liberalization and private ownership in industry and commerce.
Viet Nam also started reforming its State-owned enterprises (SOEs) and gradually
opened to foreign direct investment (FDI).
Helped by a strong culture of entrepreneurship and high literacy rates, the economy
responded strongly and rapidly to Doi Moi. The private sector took off at once from a
virtually non-existent base. To date, there are about 240,000 registered national
14

private companies. The Vietnamese non-State sector represented approximately 45
per cent of Vietnam’s GDP, compared with 40 per cent for the State sector and 15 per
cent for the foreign-invested sector.
As a result of Doi Moi and the development of the private sector, annual real gross
domestic product (GDP) growth averaged 6.8 per cent in the period 1986–2006, with
relatively little volatility and moderate inflation. Viet Nam has become one of the
fastest-growing economies in the world, averaging around 8.4% annual gross
domestic product (GDP) growth from 1990-1997, 7.5% from 2000 to 2006, and 8.5%
in 2007. The economy grew by a multiple of 10 from the late-1980s to 2006, reaching
$61 billion and making Viet Nam the 58th largest economy in the world, up from 76th
in 1986. In addition to growing rapidly, the economy also diversified significantly. In
1990, agriculture represented over 30 per cent of GDP; by 2006 it had declined to
under 19 per cent. In contrast, industry increased from 25 per cent to 41 per cent over
the same period, creating a large number of jobs in the industrial sector (see below
figure).

The economic transformation and high growth rates have been accompanied by
unprecedented progress in poverty reduction. The poverty rate plunged from 58 per
cent in 1993 to 37.4 per cent in 1998 and 19.5 per cent in 2004. Similarly, the World
Bank estimates that the population living with less than $1 a day was only 2 per cent
of the total in 2002. It also estimates per capita GDP on a parity of purchasing power
(PPP) basis at $3,384 in 2006, up from $941 in 1990.
2. PRINCIPAL ECONOMIC SECTORS
GDP Growth Rate by Economic Sectors (%)

15

200 200 200 200 200
2000 2002 2005 2007
1 3 4 6 8

8.4
GDP 6.7 6.8 7.0 7.3 7.6 8.4 8.23 6.18
8

Agriculture,
3.4 4.0
aquaculture, forestry 4.0 2.7 4.1 3.6 3.5 4.0 3.69
1 7
& fishery

Industry & 10. 10. 10. 10.3 10.
10.4 9.4 10.6 6.11
construction 1 4 2 8 6

8.6 7.1
Services 5.6 6.1 6.5 6.4 7.4 7.5 8.29
8 8

Source: General Statistics Office
Agriculture/aquaculture – as one of the bases for Viet Nam's socio-economic
development, this industry has continued to maintain its stable growth rate of over
3.8% annually over the past five years. This has helped contribute to the maintenance
of socio-economic stability and the provision of improved support to the hunger
eradication, poverty alleviation and employment generation programs. The crop
structure has also changed and agricultural productivity has increased in many
regions. In recent years aquaculture has increased rapidly, and in 2008 accounted for
23.63% of the total value of agricultural/aquacultural production. Export income from
aquatic products has also been increasing considerably, reaching USD 4.6 billion in
2008.
Industry - Difficulties and challenges in the industrial sector have been overcome,
bringing about positive results. The industrial growth rate averaged 17% over the last
five years. In 2007, industrial production value increased by 17.1%, with a growth rate
in private businesses of 20.9%. This is attributed to the encouraging policies and
positive impacts of the former Enterprise Law. Production capacity has risen in
several industries, resulting in increased exports. The industrial structure has changed
considerably, by 2007, manufacturing accounted for 87.6% of industrial production, of
which the food processing industry accounted for 20.6%. Power supply and
distribution (5.2%) and water supply (0.4%) accounted for 5.6%. mining and quarrying,
particularly the extraction of oil and gas accounted for 6.8% of the total value of
industrial production.

Industrial growth (% increase on 1994 price)

Total By ownership
16

State Non-state FDI

1996 14.2 11.6 11.5 21.7

1997 13.8 10.8 9.5 23.2

1998 12.5 7.7 7.5 24.4

1999 11.6 5.4 10.9 21.0

2000 17.5 13.2 19.2 21.8

2001 14.6 12.7 21.5 12.6

2002 14.8 12.5 18.3 15.2

2003 16.8 11.9 23.3 18.0

2004 16.6 11.9 22.3 17.4

2005 17.2 8.7 24.1 20.9

2006 17 9.1 23.9 18.8

2007 17.1 10.3 20.9 18.2

2008 14.6 4 18.8 18.6

Source: General Statistics Office

Services - The services sector has maintained its operations despite various
difficulties, and has still improved its quality, meeting the demands of economic
growth and the people. Trade has increased relatively well. Markets are more open
and transparent with the participation of all economic sectors. Business methods have
become more diversified, and there has been an annual average increase of about
20.1% in total retail sales. Further progress has been recorded in the tourism industry.
Numerous tourist attractions have been built, upgraded or renovated, and the types of
tourism have diversified, resulting in a continuous increase in tourism revenue. In
addition to business conferences, very notably Viet Nam hosted the APEC summit in
November 2006. International arrivals in 2007 were estimated at 4.23 million, up by
18% against 2006. Generally, transport services are meeting the basic demands of
cargo and passenger transportation. However in certain parts of the country road
congestion is an increasing problem. Floods and other natural disasters also cause
difficulties from time to time. The physical infrastructure of the transport sector has
improved in recent years, albeit trailing the rate of economic growth. More
achievements are expected in the next few years with improved roads and port
facilities. Post and telecommunications services have developed rapidly. The basic
17

telecommunications network has been modernised. During 2008, the number of
telephone subscribers grew by 27.6 million reaching over 79.4 million. The mobile
sector is particularly vibrant with a number of ambitious local companies competing for
subscribers. The insurance services market has grown rapidly with the participation of
state-owned, joint-stock, joint-venture and wholly foreign-owned companies. Total
premiums increased more than five times from approximately USD 190 million in 2000.
Non life premiums in 2007 were USD 522 million, 30% higher than in 2006 and life
premiums at USD 600 million were 12% higher. Total premiums represent
approximately 1.5% of GDP and the government targets 4.2% by 2010. Currently,
there are 37 businesses from all economic sectors operating in the insurance sector,
of which 8 cover life insurance, 1 composite, 21 non-life and 8 in brokerage. In
addition, there are approximately 30 representative offices of foreign insurance
companies operating in Viet Nam. As of January 1, 2008, pursuant to the nation's
WTO commitments, foreign insurers are allowed to provide compulsory insurance
products.
In 2007, the total value of services increased by 8.7%. The total revenue from the
retail sale of domestic goods and services increased by 23.3% compared to 2006,
with private domestic business accounting for 85%, foreign invested enterprises
accounting for 4.1% of turnover and State Owned Enterprises for 10.9%.
3. EXTERNAL TRADE
During the 2002-2008 period, total export revenue increased by 23.8% per year. Both
the composition and quality of exports have improved significantly. The proportion of
industrial products has risen considerably. The five biggest export categories are oil,
textiles, footwear, seafood and wood products. During the same period, total imports
have increased by 25.5% per year.
Exports reached US$62.9 billion in 2008, an increase of 29.5% compared to 2007.
However, due to considerable imports of equipment and materials used for the
industrialisation and modernisation process, and for foreign investment projects, the
trade deficit has increased over the past three years. Imports in 2008 reached
US$ 80.4 billion. Trade relations with foreign countries, especially other countries in
the region, have expanded. In 2008, the biggest regions and countries buying from
Viet Nam were America US$ 11.6 billion, ASEAN US$ 10.2 billion, the European
Union US$ 10 billion, and Japan US$ 8.8 billion.

Figure 1:Export, Import and Trade deficit

18

90000
80000
70000
60000
50000 Export
40000 Import
30000 Trade deficit

20000
10000
0
-10000
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
20
20
20
20
Figure 2: Major economic indicators

35%

30%

25%

20%

15%

10%

5%

0%
2000 2001 2002 2003 2004 2005 2006 2007 2008

GDP Growth rate (%) Inflation (%) Export growth rate (%)

19

Figure 3: Top 10 export markets of Vietnam in 2008 and prior year comparables

2008 2007 2006

14,000

12,000

10,000
USD Million

8,000

6,000

4,000

2,000

0
USA Japan China Australia Singapore Germany Malaysia Philippines Korea UK

Figure 4: The Top 10 import markets of Vietnam in 2008 and prior year
comparables

2008 2007 2006

18,000

16,000

14,000

12,000
USD million

10,000

8,000

6,000

4,000

2,000

0
China Singapore Taiw an Japan Korea Thailand USA Hongkong Malaysia India

4. FOREIGN DIRECT INVESTMENT
Since the introduction of the Law on Foreign Investment in 1987, leaving aside
projects which have expired or been withdrawn, by the end of 2008, there have been
over 9,800 active licensed projects with a total registered capital of close to
US$ 149.8 billion. To date, investors from 84 countries and territories have committed
investments in Viet Nam. Asia accounts for 69.8%, Europe 16.7%, and America 6% of
the total FDI, with other areas totaling 7.5%. Taiwan, Malaysia, Japan, Republic of
Korea and Singapore are the top five countries and territories investing in Vietnam,
accounting for 61% of the licensed projects with a total investment capital account of
57.8% of the total foreign investment capital of Viet Nam. The next five countries and
territories are British Virgin Islands, Hongkong, Thailand, Canada and Brunei
20

Darussalam. These “top ten” countries and territories account for over three quarters
of the total licensed projects and foreign registered capital in Viet Nam.

Figure 5: FDI Flow into Viet Nam in the period 1988-2008

To tal investment Disbursement No . of project
64 ,0 0 0
1800
60,000
1600

50,000 1400
1200

No. of project
40,000
US$ million

1000
30,000 800
21,3 4 7 600
20,000
8,0 3 6 11,50 0
400
10,000
200
0 0
1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008
Since 1996 there has been a tendency towards investment in producing goods for
export, infrastructure construction, producing import substitutes and in labour-
intensive industries. There are more than 6,303 projects in the manufacturing and
construction industries with a total capital of about US$87,7 billion, accounting for
58.6% of the registered capital.
While there are foreign invested projects in most provinces and cities in Viet Nam,
most investment has been in the key economic areas in the South including Ho Chi
Minh City, Dong Nai, Binh Duong, Ba Ria, Vung Tau, and in the North including Hanoi,
Hai Duong, Hai Phong and Quang Ninh.
Particular focus has been in Hanoi and Ho Chi Minh City which have more developed
infrastructure, higher purchasing power and a more skilled labour force. With the
development of the first oil refinery in Dung Quat and the implementation of an
effective investment promotion policy, Da Nang is becoming a new key economic
area – the third link in an emerging economic triangle.
In recent years there has also been an increase in 100% foreign owned projects.
These projects now account for 77% of the total licensed projects and 58.5% of the
registered capital, while joint venture enterprises make up 20% and 34% respectively.
There are also 9 licensed foreign invested BOT projects in Viet Nam (water supply
and electricity plants) with a total registered capital of US$1.75 billion.
The foreign invested sector has seen rapid growth, gradually asserting itself as a
dynamic component of the economy, and has made an important contribution to
enhancing the competitiveness and efficiency of the economy. In 2008, the foreign
21

invested sector has accounted for 29.8% of the country's total investment, 40.2% of
industrial output, 40% of the national export, and 22% (2007) of the GDP of Viet Nam.
5. EQUITIZATION OF STATE-OWNED ENTERPRISES
Since the undertaking of Doi Moi initiative, together with encouraging national private
investment and progressively opening the economy to foreign investors, the
Government of Viet Nam has pursued its reform program for the State-owned
Enterprises (SOEs) with an aim to improve their productivity and efficiency. The
reform has been conducted in three phases (restructure, renovate and develop)
through the implementation of 4 key measures:
(i) reform of SOE management;
(ii) reorganise and reinforce state owned general corporations;
(iii) SOE equitisations;
(iv) Transferring, contracting, leasing and selling of SOEs.
The equitization process, which consists of transforming SOEs into shareholding
companies and selling part or all of the capital to employees and/or private investors,
was initiated in 1991.To date, over 3,800 SOEs has been equitised accounting for
25% of the state-owned capital and 70% of the total SOEs in the list to be equitized.
There are now 1,720 wholly state-owned enterprises (100% SOEs) including 7
Groups, 86 General Corporations, 4 state-owned commercial banks2 and over 1,000
independent SOEs.
Since 2005, the equitisation is not only limited to small and medium SOEs, but also
covers large General Corporations. It is estimated that the remaining 2,000 SOEs still
account for 40% of GDP and over 50% of tax revenue. It is planned that 70 state
owned general corporations are to be equitised over the period 2007 to 2011.
Particularly notetable are the equitisation of the National Insurance Corporation (Bao
Viet) in July 2007 and Vietcombank in December 2007. Other General Corporations
and State Owned Commercial Banks which have been or will be equitised include
beer companies Sabeco (Saigon Beer–Alcohol–Beverage JSC) and Habeco (Hanoi
Beer–Alcohol–Beverage JSC), Vinatex (Vietnam National Textile Garment Group),
Mobifone (Vietnam Mobile Telecom Services Company), BIDV and Vietinbank.
6. VIET NAM’S WTO ACCESSION
Viet Nam officially joined the WTO on 7 November 2006 and put the commitments
into effect on 11 January 2007. A summary of the WTO commitments is attached at
the end of this book.
In the commodities market, Vietnam pledged to maintain the average level for all
(10,600) tariffs and, on average, reduce tariffs from the current level of 17.4 % to
13.4% within five to seven years. The average tariff level for agricultural products
would decrease from the current level of 23.5% to 20.9% within about five years. With
regard to industrial products, the average level would drop from 16.8% to 12.6%

2
Bank for Investment and Development of Vietnam (BIDV), Vietnam Bank for Industry and Trade (VietinBank), Vietnam Bank for
Agriculture and Rural Development (AgriBank) and Mekong Housing Bank (MHB).
22

within five to seven years. In the services sectors, Vietnam has committed to open 11
out of 12 services categories, including 110 sub-categories, in conformity with WTO
regulations. These include several important services such as: business services,
telecommunications, distribution, insurance, banking, stock exchange, transportation,
health service, education, culture and the environment. Besides, Vietnam also
commits to follow the WTO’s strict requirements in transparency, including
transparency in the formulation process and enforcement of legal documents as well
as of the conditions and procedures for investment licensing.
One of the most important positive influences for Vietnam after joining the WTO is the
drive this created for the government to continue to improve the business
environment and increase foreign investment. This is a clear signal that the WTO
entry has provided Vietnam with motivation to further socio-economic development.
Despite the short time, the business environment has improved as confirmed by the
international community and partly shown in some global reports like the Word Bank
report on business environment. Owing to the improvement in business environment
and legal system, Vietnam has had two years of impressive FDI inflows in 2007 and
2008. In addition, exports also saw a very impressive growth of over 20% in 2007 and
2008.

23

PART III. LEGAL GUIDE FOR INVESTING IN VIETNAM
I: INTRODUCTION
On 1 July 2006, the investment regime comprised of a unified Enterprise Law (“EL”),
which regulates corporations, and a common Investment Law (“IL”), which regulates
investment, came into effect. The promulgation of these two important legislations is
considered a significant watershed for improvement of the legal environment on
investment activities and corporate governance in Vietnam.
1. Overview
To do business under the IL and EL, foreign investors are required to obtain
investment certificates from an appropriate Licensing Authority.
Under the IL, investors may invest in all sectors not prohibited by law. Areas
prohibited by law include:
• investment projects detrimental to national defence, security, and the public
interest;
• investment projects detrimental to historical and cultural traditions and the ethics
or customs of Vietnam;
• investment projects harming people’s health or destroying natural resources and
the environment; and
• investment projects treating toxic waste imported to Vietnam and investment
projects manufacturing toxic chemicals banned by international law.
2. Licensing
Investors must follow the licensing and registration steps depending on the size and
the sector of the investment project.
Conditional sectors: In common with all countries, Vietnam reserves its sovereign right
to restrict foreign investment in sensitive fields, namely the “conditional sectors”.
Investment projects in conditional sectors must satisfy certain conditions in order to be
licensed. Conditional sectors include:
• Broadcasting and television.
• Production, publishing and distribution of cultural products.
• Exploration and exploitation of minerals.
• Establishment of infrastructure for telecommunications network, transmission
and provision of internet and telecommunications services.
• Establishment of public postal network and provision of postal services and
express services.
• Construction and operation of river ports, sea ports, terminals and airports.
• Transportation of goods and passengers by railway, airway, roadway and sea
and inland waterways.

24

• Catching of aquaculture.
• Production of tobacco.
• Real estate business.
• Import, export and distribution business.
• Education and training.
• Hospitals and clinics.
• Other investment sectors in international treaties of which Vietnam is a member
and which restrict the opening of the market to foreign investors.
Most importantly for foreign investors, “conditional sectors” also include all
“investment fields under international treaties to which Vietnam is a member
committing to limited market access to foreign investors”. For example, this covers the
market access roadmaps contained in Vietnam’s WTO accession package.
For business sectors that are made “conditional” by international commitments,
Decree No. 108/2006/ND-CP dated 22 September 2006 of the Government, which
implements certain provisions of the IL (“Decree 108”), provides that the applicable
requirements are those specified in the treaty or other agreement relating to
international commitments. For example, under WTO commitments, investors from
WTO member countries are permitted to establish engineering firms in Vietnam on the
condition that for 02 years after the date of Vietnam’s accession, 100% foreign-owned
companies may only provide such services to other foreign investment enterprises in
Vietnam.
For sectors which are declared conditional but are not mentioned in international
agreements, investors must look at domestic laws to find the applicable conditions.
For example, the relevant conditions for investment in “real estate business” are
contained in the Law on Real Estate Business.
Level 1 (Business Registration): Domestic enterprises with an invested capital of less
than VND15 billion that do not operate in the conditional sectors are only subject to
“business registration”.

Business Registration

Domestic investment
projects with invested
capital of less than VND15
billion

25

Level 2 (Investment Registration): Foreign investment projects with a total invested
capital of less than VND300 billion not falling in a conditional sector are subject to
“investment registration” and foreign investors of such projects must carry out the
procedures for investment registration in order to be granted an investment certificate.
The investment certificate also serves as the business registration of the corporate
entity.
Domestic investment projects with a total invested capital from VND15 billion to less
than VND300 billion are also subject to “investment registration”. Subject to a request
of the local investor, the Licensing Authority will issue an investment certificate to
such investor.
Enterprises can subsequently register additional investment projects without the need
to create a separate entity.

Investment Registration

Investment Domestic
Certificate investment
projects with
total invested
capital from
Foreign VND15 to less
investment than VND300
projects with total billion
invested capital of
less than VND300
billion

The procedure for “investment registration” is set out in Decree 108. According to
Decree 108, the investor must submit application documents for investment
registration to the Licensing Authority. The Licensing Authority shall check the
documents and issue the investment certificate to the investors within 15 working
days of receiving the valid application.
Level 3 (Investment Evaluation): Any investment project with a total invested capital of
VND300 billion or more or investment projects falling in conditional sectors must
undergo “an investment evaluation” by the Licensing Authority and other relevant
authorities. There are two different types of evaluation:
• evaluation for investment projects regardless of total invested capital falling into
conditional sectors; and
• evaluation for investment projects with total invested capital of VND300 billion or
more that do not fall into conditional sectors.
26

For the evaluation of investment projects with total invested capital of VND 300 billion
or more, along with the application documents, the applicant must also submit an
“economic - technical explanation” of the investment project to the Licensing Authority.
This covers the economic – technical explanatory statement, objectives, scale,
location, investment capital, implementation schedule, land use needs, and
technological and environmental solutions of the investment project.
For the evaluation of investment projects falling in conditional sectors, in addition to
the application documents, the investor must also demonstrate compliance with
requirements specific to that conditional sector.
When assessing the application documents, the Licensing Authority may liaise with
other relevant Ministries and authorities in evaluating the proposed investment project.
Items to be evaluated shall comprise:
• compliance with master planning/zoning for technical infrastructure, master
planning/zoning for land use, master planning for construction, master planning
for utilization of minerals and other natural resources;
• land use requirements;
• project implementation schedule;
• Environmental solutions.
The IL stipulates that the time-limit for evaluation of investment shall not exceed thirty
(30) days from the date of receipt of a complete and valid file. In necessary cases, the
above time-limit may be extended, but not beyond forty five (45) days.

Investment Evaluation

Foreign and domestic Foreign and domestic
investment projects investment projects with
regardless of total total invested capital of
invested capital falling VND300 billion or more
in conditional sectors not falling in conditional
sectors

3. Licensing Authority
3.1 The Board of Management (“BOM”) of industrial zones (“IZs”), export
processing zones (“EPZs”), high-tech zones (“HTZs”), and economic zones
(“EZs”) are responsible for licensing foreign investments within their zones.
3.2 BOT projects are licensed by the Ministry of Planning and Investment (“MPI”).
3.3 The Provincial People’s Committee is the authority responsible for all other
foreign investments. Licensing applications shall be submitted to these bodies,

27

who will consult with other relevant governmental authorities (where so
required) before issuing final approval.
3.4 The Prime Minister will approve the following investment projects:
(a) The following investment projects, irrespective of the source of investment
capital and scale of investment:
- construction and commercial operation of airports; air transportation;
- construction and commercial operation of national sea ports;
- exploration, mining and processing of petroleum; exploration and mining of
minerals;
- radio and television broadcasting;
- commercial operation of casinos;
- production of cigarettes;
- establishment of university training establishments; and
- establishment of IZs, EPZs, HTZs and EZs.
(b) The following investment projects, irrespective of the source of investment
capital but with a total invested capital of VND 1,500 billion or more in the
following sectors:
- business in electricity, processing of minerals, metallurgy;
- construction of railway, road and internal waterway infrastructure; and
- production and business of alcohol, beer;
(c) The following projects with foreign-invested capital in the following sectors:
- commercial operation of sea transportation;
- construction of networks for and supply of postal and delivery,
telecommunications and internet services, construction of wave transmission
networks;
- printing and distributing newspapers and printed matter, publishing; and
- establishment of independent scientific research establishments.
In cases where the investment projects stipulated above are included in the master
plan approved by the Prime Minister (or by an entity authorized by him) and satisfy
the conditions in accordance with the laws of Vietnam and international treaties to
which Vietnam is a member, the Licensing Authority will issue an investment
certificate to the investor without making a submission to the Prime Minister for
deciding an investment policy.
In cases where the investment projects stipulated above are not included in the
master plan approved by the Prime Minister (or by an entity authorized by him) or do
not satisfy conditions in international treaties to which Vietnam is a member, the
Licensing Authority will obtain opinions from the relevant Ministries, MPI and other

28

relevant bodies in order to collate and submit them to the Prime Minister for his
decision on investment policy.
In cases where the investment projects stipulated above are in a sector for which
there is no master plan yet, the Licensing Authority will obtain opinions from the
relevant Ministries, MPI and other relevant bodies in order to collate and submit them
to the Prime Minister for his decision on investment policy.
4. Forms of Investment
Under the “Law on Investment” and the “Law on Enterprises” foreign investors may
choose the following forms of investment in Viet Nam:
a) Business cooperation contract
A contractual BCC entails a written contract between a foreign investor and a
Vietnamese party to jointly conduct one or more business projects in Viet Nam, based
on mutual allocation of responsibilities and the sharing of production, profits or losses,
without creating a separate legal entity. The contract should stipulate the terms and
conditions for the business as well as the rights and obligations of each party.
b) Limited Liability Company
Limited Liability Company, which is currently the standard form of investment for
foreign investors in Viet Nam, is a legal entity. The liability of the company and the
Members is limited to the amount of capital registered and displayed in the business
registration certificate as charter capital.
A LLC may be established by one or more Members, which may be individuals or
organizations. The maximum number of Members is limited by law to a maximum of
fifty. Members generally share profits and losses in accordance with their capital
contributions.
c) Shareholding Company/Joint Stock Company
A shareholding company, also known as joint stock company (JSC), must have a
minimum of three shareholders and has legal entity status. The company may issue
securities (debt and equity) to the public in accordance with legislation on securities,
but is not required to be listed at a stock market. The shares may be freely assigned
to other persons except for preferred shares as for example voting preference shares.
Shareholders are liable for debts and other liabilities of the company within the
amount of capital that they contributed.
d) Partnership
A partnership is defined as an enterprise with at least two partners with unlimited
liability. Additionally partners with limited liability can be incorporated. As the term
29

suggests, unlimited liability partners are liable for the obligations of the partnership
with all of their personal assets, limited liability partners are only liable up to the extent
of their capital contribution. A partnership is prohibited from issuing securities of any
type. From the day of issuance of the Business Registration Certificate the
partnership shall enjoy legal entity status
e) Private Enterprise/Sole proprietorship
A private enterprise is an economic organization owned by an individual above the
age of 18 being liable for all activities of the enterprise to the extent of all his or her
personal assets.

II: TAXATION
The following taxes may affect foreign-invested projects and foreigners working in
Vietnam:
• Corporate Income Tax;
• Capital Transfer Tax;
• Value-Added Tax; and
• Personal Income Tax.
1. Corporate Income Tax
1.1 CIT rates
With effect from 1 January 2009, the new Law on CIT introduces a standard CIT rate
of 25% (as opposed to 28% previously applicable to FICs and foreign parties to
BCCs) for both local enterprises operating under the Law on Enterprises and FICs,
including foreign parties to BCCs. FICs and foreign parties to BCCs which obtained
investment licences or certificates before 1 January 2009 will continue to enjoy the
preferential tax incentives as stipulated in their investment licence or certificate.
Preferential rates
Other than the standard rate, preferential rates of 10% and 20% apply to a number of
investment projects which satisfy certain conditions such as investment in certain
fields of business and/or encouraged geographical locations. Specifically:
(a) CIT at 10% for 15 years:
The preferential tax rate applies to newly-established FICs from investment
projects in areas with specially difficult socio-economic conditions as listed in
the Appendix issued with Decree No.124/2008/ND-CP dated 11 December
2008 (“Decree 124”) and in EZs and HTZs or newly-established FICs from
investment projects in the sectors of (i) high-tech; scientific research and
technological development; (ii) investment in development of water plants,
power plants and water supply systems; in bridges, roads and railways; in
airports, seaports and river-ports; in air fields, stations and other specially
30

2009 investment guidebook vietnam

2009 investment guidebook vietnam

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