Hong Kong: Vietnam - A Legal Overview - Introduction

Last Updated: 20 November 1995
Most Read Contributor in Hong Kong, October 2018
The laws of Vietnam are complex and new legislation is constantly being introduced. What follows is no more than an introductory overview that we hope will assist investors to decide which areas of law they will need to research further.

This summary is, necessarily, selective and is no substitute for detailed legal advice.

1. In broad outline, the business structure of most sectors of the Vietnamese economy is that a Ministry has overall responsibility for the sector. Under that Ministry there tend to be large scale State Enterprises and under those come smaller enterprises, both state and private. Added to them are the foreign invested enterprises.

2. Because Vietnam is still very much in transition to a market economy and because of the continuing predominant role of the state in economic enterprises, we would stress the necessity for any investor to be aware of the role of the Ministries. To highlight this, we outline in this Introduction the way in which an investment project may be initiated and progressed.

3. Assuming that the investor has decided upon the project either through contacts through one of the Ministries or independently, it will be common for commercial projects to be "sponsored", in effect, by the local People's Committee of the place where the investment is to be made and/or by the Ministry concerned.

4. Thus, when the application comes to the SCCI for review it will come with the support of, typically, the Vietnamese Joint Venture partner, the Ministry concerned and the local People's Committee.

5. Nevertheless, the SCCI will circulate the application to all concerned Ministries seeking their views and opinions on the project. This has often led to delays in the past, although regulations passed at the end of 1994, which vested the decision making process for certain investments with the Prime Minister's office, were intended also to expedite the granting of approvals.

6. The Ministry of Science, Technology and Environment ("MOSTE") approves (essentially) all technology licensing and related matters. Their consent in principle should be sought, at the same time as the application is made to the SCCI.

7. The role of the Ministries is fundamental. Each Ministry will have a department that deals with co-operation and investment. Investors seeking to make contact through Ministries should contact this department.

8. It is apparent that the Government is encouraging infrastructure projects export industries and import substitute industries. The SCCI and State Planning Committee maintains a list of investments that are seen as import substitutes.

9. Investments in other sectors are not generally discouraged but there are specific restrictions in some sectors and some projects may not be able to generate foreign exchange.

10. Investment in distribution, as such, is not permitted but distribution as part of a manufacturing enterprise is permitted.

11. The Government encourages technology transfer and the skills and training that go with it. The Government discourages investment that involves turnkey projects. The use of second hand equipment is substantially prohibited, unless contributed by the Vietnamese party. Contract bidding by enterprises is expected to be by tender.

12. Vietnam is still a predominantly agricultural country with agriculture representing nearly half the national income and forty per cent of total Output value. Approximately fifty five per cent of all exports come from agriculture and fisheries, which employ nearly two thirds of the country's labour force.

13. The SCCI will often expect new investments to follow the pattern or precedent set by previous investors in the sector.

14. Foreign investors have rarely "bought into" existing Vietnamese businesses as a going concerns. They may expect approval of such investment to be a more complex process than where a new business is created.

15. The Government is seeking actively to reduce the numbers of state companies in each sector and has had some success in doing this. The Government believes that fewer but stronger state corporations are needed. The Bankruptcy Law is allowed to apply to state corporations.

16. Investors should bear in mind that even if they are licensed to do business in a way that will not necessarily generate foreign currency, they may be able to obtain permission from the SCCI/Ministry of Trade to deal in other trades so as to generate foreign currency. They would need a licence from the Ministry of Trade to do so and would also need to include details of their proposals in their Feasibility Studies, which have to be submitted to the SCCI when seeking approval for a project/ investment.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".

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