2012 Investment Climate Statement - Vietnam

2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012

Openness to Foreign Investment

Vietnam encourages foreign investment as part of its development strategy, and the Government of Vietnam (GVN) is committed to improving the country’s business and investment climate. The Investment Law of 2005 provides the legal framework for foreign investment in Vietnam.

Vietnam became the 150th member of the World Trade Organization on January 11, 2007. Vietnam's commitments in the WTO increase market access for exports of U.S. goods and services and establish greater transparency in regulatory and trade practices as well as a more level playing field between Vietnamese and foreign companies. Vietnam undertook commitments on goods (tariffs, quotas and ceilings on agricultural subsidies) and services (provisions of access to Foreign Service providers and related conditions). It has also committed to implement agreements on intellectual property (TRIPS), investment measures (TRIMS), customs valuation, technical barriers to trade, sanitary and phytosanitary measures, import licensing provisions, anti-dumping and countervailing measures, and rules of origin. Vietnam has made solid progress in implementing its bilateral and international obligations; however, concerns remain in some areas, such as protection of intellectual property rights (IPR) and effectiveness of the court/arbitration system.

The GVN holds regular "business forum" meetings with the private sector, including both domestic and foreign businesses and business associations, to discuss issues of importance to the private sector. Foreign investors use these meetings to draw attention to investment impediments in Vietnam. These forums, together with frequent dialogues between GVN officials and foreign investors, have led to improved communication and have allowed foreign investors to comment on and influence many legal and procedural reforms.

Despite the GVN’s commitment to improving the country’s business and investment climate, Vietnam is still transitioning from a centrally planned economy to a more market-oriented and private-sector based model. As indicated by the World Bank’s Doing Business 2012 rankings below, the overall ease of doing business in Vietnam has worsened. An October 2011 survey of the business community in Vietnam showed business morale at a three-year low, although most companies reported being optimistic about Vietnam’s long-term economic prospects. Vietnam still faces development challenges relevant for foreign investors, including poorly developed infrastructure, underdeveloped and cumbersome legal and financial systems, an unwieldy bureaucracy, non-transparent regulations, high start-up costs, arcane land acquisition and transfer regulations and procedures, a shortage of skilled personnel, and pervasive corruption. Most investors make provisions for international arbitration so they do not have to rely exclusively on an under-developed and unreliable judicial system to uphold contracts. Some companies have experienced delays in obtaining investment licenses, and inconsistent licensing practices have been noted among provinces. Investors frequently face policy changes related to taxes, tariffs, and administrative procedures, sometimes with little advance notice, making business planning difficult. Because Vietnam’s labor laws and implementation of those laws are not well developed, companies sometimes face difficulties with labor management issues.

Following are Vietnam’s rankings according to various indices:


2011 Rank

2010 Rank

Change in rank

TI Corruption Perceptions Index




Heritage Index of Economic Freedom:






2012 rank

2011 rank

Change in rank

World Bank’s Ease of Doing Business




Starting a Business




Dealing with Construction Permits




Registering Property




Getting Credit




Protecting Investors




Paying Taxes




Trading Across Borders




Enforcing Contracts




Closing a Business






2011 score and % ranking in low-income peer group

2010 score and % ranking in low-income peer group

MCC Government Effectiveness

0.55 (95%)

0.65 (92%)

MCC Rule of Law

0.44 (81%)

0.50 (85%)

MCC Control of Corruption

0.20 (71%)

0.25 (76%)

MCC Fiscal Policy

-5.3 (14%)

-3.9 (27%)

MCC Trade Policy

79.6 (88%)

68.9 (51%)

MCC Regulatory Quality

0.15 (63%)

0.13 (60%)

MCC Business Start Up

0.96 (77%)

0.96 (75%)

MCC Land Rights Access

0.74 (85%)

0.78 (91%)

MCC Natural Resource Management

80.18 (97%)

80.58 (95%)

Investment Regulation

The 2005 Investment Law, together with its implementing decrees and circulars, regulates investment in Vietnam, including investors’ rights and obligations, investment incentives, state administration of investment activities, and offshore investment. The Investment Law also provides for guarantees against the nationalization or confiscation of assets and applies to both foreign and domestic investors. The Investment Law designates prohibited and restricted sectors for investment, but there are additional laws that apply conditions to investments in sectors such as mining, post and telecommunications, property trading, banking, securities, and insurance.

The Investment Law provides for five main forms of direct foreign investment: (1) 100 percent foreign-owned or domestic-owned companies; (2) joint ventures (JV) between domestic and foreign investors; (3) business contracts (such as business cooperation contracts (BCC), build-and-operate agreements (BOT and BTO) and build and transfer contracts (BT)); (4) capital contribution for management of a company; and (5) merger and acquisitions (M&A). Foreign investors can invest indirectly by buying securities or investing through financial intermediaries.

Vietnam has gradually opened some sectors for foreign investment through M&A. While foreign investors are allowed to buy shares in some domestic companies without limitation, examples where this has occurred are rare. The ratio of total foreign ownership permitted in a project depends on a number of factors, including Vietnam’s international commitments, the economic sector in question, and the type of investor, among others. There are ownership limitations for certain companies listed on the Vietnam stock exchange and service sectors. Foreign ownership cannot exceed 49 percent of listed companies and 30 percent of listed companies in the financial sector. A foreign bank is allowed to establish a 100 percent foreign owned bank in Vietnam but may only own up to 20 percent of a local commercial bank. Individual foreign investors are usually limited to 15 percent ownership, though a single foreign investor may increase ownership to 20 percent through a strategic alliance with a local partner.

Investment Sectors

The Investment Law distinguishes four types of sectors: (1) prohibited sectors; (2) encouraged sectors; (3) conditional sectors applicable to both foreign and domestic investors; and (4) conditional sectors applicable only to foreign investors.

The list of sectors in which foreign investment is prohibited includes cases where the investment would be detrimental to national defense, security and public interest, health, and historical and cultural values.

The list of sectors in which investment is encouraged includes high-technology, agriculture, labor-intensive industries (employing 5,000 or more employees), infrastructure development, and projects located in remote and mountainous areas.

The list of sectors in which investment is conditional applies to both foreign and domestic investors and includes those having an impact on national defense, security, social order and safety; culture, information, press and publishing; financial and banking; public health; entertainment services; real estate; survey, prospecting, exploration and exploitation of natural resources; ecology and the environment; and education and training.

The sectors where certain conditions are applicable to foreign investors only include telecommunications, postal networks, ports and airports, and other sectors as per Vietnam’s commitments under international and bilateral arrangements.

Foreign investors have the right to sell, market, and distribute what they manufacture locally, and to import goods needed for their investment projects and inputs directly related to their production, provided this right is included in their investment license.

Foreign participation in distribution services, including commission agents, wholesale and retail services, and franchising, opened to fully foreign-owned businesses in 2009. Vietnam has excluded certain products from its WTO distribution services commitments, including rice, sugar, tobacco, crude and processed oil, pharmaceuticals, explosives, news and magazines, precious metals, and gemstones. Distribution of alcohol, cement and concrete, fertilizers, iron and steel, paper, tires, and audiovisual equipment opened to foreign investors in 2010.

Investment Licensing

Provincial authorities in Vietnam’s 63 cities and provinces generally have the authority to issue investment licenses. Provincial authorities and the management boards of industrial zones are the issuing entities for most types of investment licensing, with the exception of build-and-operate projects (BOT, BO, BTO), which are still licensed by the central government. Domestic investors with projects of less than VND 15 billion (approximately USD $714,000) do not need to acquire investment licenses.

The procedure to obtain investment certification is complex, requiring investors to get approval from several ministries and/or agencies, depending on ownership (foreign or domestic), size and the sector of investment. Projects deemed to be of “national importance” must be approved by the National Assembly. Key infrastructure projects must be approved by the Prime Minister's Office (see below). Investments in conditional sectors such as broadcasting, mining, telecommunications, banking and finance, ports and airports, and education are subject to a more complex licensing process.

Licensing is required to establish a new investment as well as to make significant changes to an ongoing enterprise, such as to increase investment capital, restructure the company by changing the form of investment or investment ratios between foreign and domestic partners, or add additional business activities.

Decentralization of licensing authority to provincial authorities has streamlined the licensing process and significantly reduced processing times; however, it has also given rise to considerable regional differences in procedures and interpretations of relevant investment laws and regulations.

Investment projects that must be approved by the Prime Minister include:

- All projects, regardless of capital source and size, in airports and seaports; mining, oil and gas; broadcasting and television; casinos; tobacco; higher education; sea transportation; post and delivery services; telecommunication and internet networks; printing and publishing; independent scientific research establishments; and establishment of industrial, export processing, high-tech and economic zones.

- All projects having capital in excess of VND 1.5 trillion (approximately USD $71 million), regardless of foreign ownership, in electricity; mineral processing and metallurgy; railways, roads and domestic waterways; and alcoholic beverages.

- All foreign-invested projects in sea transport, post and telecommunication, publishing, and independent science research units.

Vietnamese authorities evaluate investment license applications using a number of criteria, including the legal status and financial capabilities of the foreign and Vietnamese investors; the project's compatibility with Vietnam's "Master Plan" for economic and social development; the benefits accruing to the GVN or to the Communist Party of Vietnam; projected revenue; technology and expertise; efficient use of resources; environmental protection; plans for land use and land clearance compensation; project incentives including tax rates and land, water, and sea surface rental fees.

The 2005 Commercial Law and the implementing guidelines contained in Decree 72, issued in July 2006, allow foreign firms to establish branches or representative offices. Branches may engage in trading activities, while the representative offices are allowed to liaison with customers, negotiate and enter into contracts on behalf of their parent company, and conduct market research, but not to engage in commercial or profit making activity.

Participation of Foreign Investors in the GVN “Privatization” Program

Foreign investors are allowed to buy shares in State-owned enterprises (SOEs) being “equitized” (converted to joint stock companies, though often not fully privatized) by the GVN. Shares are typically offered through a price auction, although the process is not always clear or transparent. Foreign ownership in certain specified sectors may not exceed 49 percent.

Other Investment Related Legislation

Vietnam's Bankruptcy Law of 2004 provides that parties other than creditors are able to participate in bankruptcy procedures and gives courts authority to deal with insolvent businesses.

The Law on Competition of 2004 aims to create an equitable and non-discriminatory competition environment, and protect and encourage fair competition. The Law acknowledges the importance of the rights of organizations and individuals to compete freely, and addresses anti-competitive agreements, state monopolies, economic concentration, and unfair competition.


Vietnam lowered corporate income tax rates from 28 to 25 percent in January 2009. Corporate income tax for extractive industries varies from 32 to 50 percent depending on the project, and can be as low as 10 percent if an investment is made in selected priority sectors or in remote areas. Incentives are the same for both foreign-invested and domestic enterprises.

Vietnam does not tax profits remitted by foreign-invested companies. However, companies are required to fulfill their local tax and financial obligations before remitting profits overseas and are not permitted to accumulate losses. A new personal income tax regime placing Vietnamese and foreigners on the same tax rate schedule took effect in January 2009. The new law regulates all types of personal income, including income previously subject to other laws such as income from individual businesses and property sales. The lowest and highest marginal tax rates are 5 percent and 35 percent, respectively.

Vietnam and the United States began discussions toward a bilateral agreement on the avoidance of double taxation in December 2010 and will hold their third round of negotiations in March 2012.

Conversion and Transfer Policies

Foreign businesses are permitted to remit profits in hard currency, revenues from joint ventures, income derived from services, technology transfers, and legally owned capital and intellectual property, after paying all relating tax liabilities. Foreigners are also allowed to remit royalties and fees paid for the supply of technologies and services, principal and interest on loans obtained for business operations, investment capital, and other money and assets.

According to the 2005 Ordinance on Foreign Exchange Control, all currency transactions between residents and non-residents of Vietnam shall be conducted freely. Residents are allowed to open foreign currency accounts. Exporters are required to remit all foreign currency earnings into a foreign currency account with an authorized credit institution in Vietnam. Retaining foreign currency earnings overseas requires approval of the State Bank of Vietnam (SBV).

Foreign investors are expected to be "self-sufficient" for their foreign exchange requirements. The laws stipulate that the GVN will assist in balancing foreign currency supplies for foreign investors in transportation infrastructure, energy, and waste management when banks are unable to satisfy their foreign currency requirements.

The SBV publishes daily average interbank exchange rates against the U.S. dollar, and then allows dollar/dong transactions to move in a band around this daily rate. The SBV has maintained a trading band of less than +/- one percent since February 2011.

Dollar shortages were reported at various times between in 2009 and 2011, which the SBV claimed was a result of the global recession and Vietnam’s persistent trade deficits. Many enterprises reported difficulty in obtaining sufficient dollar funds, and claimed they had to purchase dollars at higher black-market rates or pay additional bank fees (approximating black-market rates) for currency conversion. Dollar shortages remained an intermittent problem at the end of 2011.

Expropriation and Compensation

The U.S. Mission knows of no recent instances of expropriation of a foreign investment by the GVN. During 2010, however, there were several incidents in which foreign investors were pressured by the provincial or national government to increase the pace of project development or to raise additional project capital, or risk the loss of their investment licensing. During 2011, one investor filed claims for international arbitration against a provincial government for cancellation of his investment certificate for project delays after the government allegedly licensed mining on the property the investor was developing as a resort.

Under the U.S.-Vietnam Bilateral Trade Agreement (BTA), in any future case of expropriation or nationalization of U.S. investor assets, Vietnam will be obligated to apply international standards of treatment - that is, taking such an action for a public purpose, in a non-discriminatory manner, in accordance with due process of law, and with payment of prompt, adequate and effective compensation.

Dispute Settlement

The hierarchy of Vietnamese courts include: (1) Supreme Court; (2) Provincial Courts; and (3) District Courts. The courts operate in five divisions: criminal, civil, administrative, economic and labor. Parallel to the court systems is the People’s Procuracy, which is responsible for supervising the operation of judicial authorities. The People’s Procuracy can protest a judgment or ask for a review of a case. In addition, Vietnam has a system of independent arbitration centers, established under the Commercial Arbitration Ordinance (2003), which can grant enforceable arbitral awards.

Foreign and domestic arbitral awards are legally enforceable in Vietnam. Vietnam is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning that foreign arbitral awards rendered by a recognized international arbitration institution must be respected by Vietnamese courts without a review of the case's merit.

Under the investment chapter of the BTA, Vietnam gives U.S. investors the right to choose a variety of third-party dispute settlement mechanisms in the event of an investment dispute with the GVN. Vietnam has not yet acceded to the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID), but has asked the United States to provide advice in this area as part of the U.S. technical assistance program designed to assist Vietnam to implement the BTA. The Ministry of Planning and Investment (MPI) has submitted a proposal to the GVN to join the ICSID, which is still under consideration.

Vietnam's legal system, including its dispute and claims settlement mechanisms, remains underdeveloped and ineffective in settling disputes. Negotiation between the concerned parties is the most common and preferred means of dispute resolution.

Under the 2005 Civil Code, all contracts are “civil contracts” subject to uniform rules over all contractual relations, including those with foreign businesses. In foreign civil contracts, parties are allowed to choose foreign laws as reference for their contractual agreement, provided that the application of the law does not violate the basic principles of Vietnamese law. In addition, commercial contracts between businesses are also regulated by the 2005 Commercial Law.

Performance Requirements and Incentives

As part of its WTO accession, Vietnam committed to remove performance requirements that are inconsistent with the TRIMS agreement. The Investment Law specifically prohibits the following requirements: giving priority to the purchase or use of domestic goods or services; compulsory purchase of goods or services from a specific domestic manufacturer or services provider; export of goods or services at a fixed percentage; restricting the quantity, value or type of goods or services that may be exported or which may be sourced domestically; fixing import goods at the same quantity and value as goods exported; requirements to achieve certain local content ratios in manufacturing goods; stipulated levels or values on R&D activities; supplying goods or services in a particular location whether in Vietnam or abroad; or mandating the establishment of head offices in a particular location.

The GVN actively promotes foreign investment in certain priority sectors or geographical regions, such as mountainous and remote areas of the country with difficult economic and social conditions. The GVN specifically encourages investment in production of new materials, new energy sources, metallurgy and chemical industries, manufacturing of high-tech products, bio-technology, information technology, mechanical engineering, agricultural, fishery and forestry production, salt production, generation of new plant varieties and animal species, ecology and environmental protection, research and development, knowledge-based services, processing and manufacturing, labor-intensive projects (using 5,000 or more full time laborers), infrastructure projects, education, training, and health and sports development.

A September 2011 Prime Ministerial Directive further defined the GVN’s foreign investment priorities, encouraging projects that use modern and environmentally-friendly technology, and promote efficient use of natural, mineral, and land resources. The GVN discourages investments that may increase Vietnam’s trade deficit.

Foreign investors are exempt from import duties on goods imported for their own use and which cannot be procured locally, including all equipment, machinery, vehicles, components and spare parts for machinery and equipment, raw materials, inputs for manufacturing and construction materials that cannot be produced domestically. Remote and mountainous provinces are allowed to provide additional tax and other incentives to prospective investors.

Vietnam has also instituted a number of incentives designed to attract investment from Vietnamese expatriates and their families. In 2008, the GVN recognized dual citizenship for Vietnamese expatriates, who are allowed to choose their status as either domestic or foreign investors. Real estate laws permit limited categories of these investors to buy land use rights to build homes.

U.S. citizens of Vietnamese descent may be treated as Vietnamese nationals unless they have formally renounced their Vietnamese citizenship. U.S. investors of Vietnamese origin should consult the U.S. Embassy in Hanoi or the U.S. Consulate General in Ho Chi Minh City for more information.

Foreign businesses view new regulations governing foreign workers in Vietnam as a further obstacle to conducting business activities. Decree 46, which took effect August 1, 2011, increases work permit requirements and requires employers to identify a local Vietnamese apprentice or provide evidence of a formal training plan to replace foreign workers before Vietnam will extend a foreigner’s work permit.

Right to Private Ownership and Establishment

The right to private property was enshrined in Vietnam's Constitution in 1992, recognizing "the right of ownership with regard to lawful income, savings, housing, chattel, means of production funds and other possessions in enterprises or other economic organizations" (Article 58).

Real estate rights in Vietnam are divided into land ownership, which is collective, and land-use and building rights, which can be held privately. All land in Vietnam is owned collectively and managed by the State and, as such, neither foreigners nor Vietnamese nationals can own it. In addition to land, collective property includes "forests, rivers and lakes, water supplies, wealth lying underground or coming from the sea, the continental shelf and the air, the funds and property invested by the State in enterprises and works in all branches and fields - the economy, culture, society, science, technology, external relations, national defense, security - and all other property determined by law as belonging to the State."

The Land Law of 2003 extended "land-use rights" to foreign investors, allowing title holders to conduct real estate transactions, including mortgages. Foreign investors can lease land for (renewable) periods of 50 years, and up to 70 years in some poor areas of the country. Certain foreigners can own apartments, durable construction, durable trees and planted forests for production purposes in Vietnam, but not the associated land.

Protection of Intellectual Property Rights

The basis of the legal system related to property rights includes the 2005 Civil Code, the 2005 Intellectual Property Law, and implementing regulations and decrees. Vietnam has joined the Paris Convention on Industrial Property and the Berne Convention on Copyright and has worked to meet its commitments under these international treaties.

In 2009, Vietnam revised the Intellectual Property (IP) Law and IP-related provisions in the Criminal Code with respect to criminal penalties for certain acts of IPR infringement or piracy. These revisions reinforce previous criminal provisions set out in an Inter-ministerial Circular. The GVN also issued a Decree on Penalties on Infringement of IPR, which increased the maximum fines to VND 500 million, (approximately USD 23,800) plus seizure of any gains deriving from the infringing act.

Although Vietnam has made progress in establishing a legal framework for IPR protection, various forms of infringement and piracy of intellectual property continues to be widespread. Enforcement of administrative orders and court decisions on IP issues remains inconsistent and weak. In addition, the system of administrative enforcement is complex and rights holders have raised concerns regarding inconsistent coordination among enforcement agencies.

Most often, authorities use administrative actions such as warnings and fines to enforce IPR protection because they are less demanding on limited enforcement time and resources. The United States, and other interested countries, has conducted training for enforcement agencies, prosecutors and judges. Some businesses and rights holders have started to assert their rights under the law more forcefully. One positive sign is the growth of Collective Management Organizations, particularly for the music and publishing industries, but the impact of these organizations and their ability to collect royalties on behalf of their members remains weak. In recent years, the government pledged and then successfully implemented a plan to rid government offices of pirated software. Vietnamese enforcement bodies have investigated, and in some cases raided and fined, businesses suspected of using pirated software. However, Vietnam still has one of the highest rates of piracy in the world, and enforcement remains uneven, particularly for software, music and movies. Rights holders continue to seek additional enforcement actions against websites containing infringing digital content; however, to date, very little enforcement action has been taken to punish or prevent digital and Internet piracy.

Substantial compensation for IPR violations is only available under the civil remedies section of the IP Law. However, Vietnam's courts are untested in this regard, and concerns remain as to whether rights holders have adequate access to effective civil remedies under the IP Law. Vietnam has yet to establish specialized IP courts, and knowledge on IP issues within the judiciary remains low. Criminal offenses are prosecuted under the Criminal Code, and criminal proceedings are regulated under the Criminal Procedure Code. In practice, however, criminal prosecutions are rarely used to prosecute IPR violations.

Transparency of the Regulatory System

Vietnam has improved its process for making and publicizing laws, particularly with major national laws and regulations. The Law on the Promulgation of Legal Normative Documents requires all legal documents and agreements to be published online for comments for 60 days, and published in the Official Gazette before implementation. However, there are reports of regulations sometimes being issued without public notification or with little advance warning or opportunity for comment by affected parties.

The Office of Government of Vietnam, with assistance from USAID, has launched a new National Database of Administrative Procedures (AP) to improve and simplify the administrative procedures required to establish and conduct business in Vietnam.

Since June 2010 investors have been able to register new businesses online through a government website, following the Prime Minister’s Decree 43/2010. Although there have been some initial implementation problems, the business community has largely welcomed this new development and expects the business registration process will be more efficient and transparent as a result.

Efficient Capital Markets and Portfolio Investment

Vietnam's financial system is in the early stages of reform, and to date the financial markets remain weak and poorly regulated. A lack of financial transparency and non-compliance with internationally accepted standards among Vietnamese firms is among the many challenges facing the GVN’s plan to expand the domestic stock and securities markets as a venue for firms to raise capital domestically.

The banking sector is underdeveloped and is now the subject of a national restructuring initiative to address low liquidity, high non-performing loans (NPLs), and other structural problems. By the end of June 2010 more than 25 percent of Vietnamese had a bank account. Most domestic banks are under-capitalized and reportedly hold a large number of NPLs, though under Vietnamese accounting standards the official NPL rate was reported at only 3.1 percent as of June 30, 2011. State-directed lending under non-commercial criteria remains a source of concern with state-owned commercial banks.

Vietnam’s banking market is highly concentrated at the top and fragmented at the bottom. The four largest banks (Vietcombank, Vietinbank, the Bank for Agriculture and Rural Development, and the Vietnam Bank for Investment and Development) are state-owned or majority state-owned, accounting for 49% of domestic lending, 43% of capital mobilization, and 38% of the total assets of the banking sector in 2010. Among these, the Bank for Agriculture and Rural Development is the largest with total assets of VND 523 trillion (USD 25 billion). Vietnam’s 38 joint stock commercial banks are smaller than the state-owned commercial banks but growing and gaining market share very quickly.

Vietnamese banks are now required to maintain minimum chartered capital of VND 3 trillion (about USD 143 million).

The GVN has initiated banking reforms intended to improve the stability of the banking system, especially via the equitization (or privatization) of state-owned commercial banks. Vietcombank and Vietinbank conducted initial public offerings (IPO) in December 2007 and December 2008, respectively, and both were listed on Vietnam’s stock market in 2009. The Vietnam Bank for Investment and Development was equitized on December 28, 2011. The state remains the controlling shareholder in these banks.

In 2008, the State Bank of Vietnam for the first time granted licenses to the following wholly foreign-owned banks: HSBC, Standard Chartered Bank, ANZ, Hong Leong and Shinhan Vina. The current ceiling for foreign shareholders and a strategic shareholder and their related parties in a local joint stock bank are set, respectively, at 30% and 20% of the total charter capital.

The Vietnamese stock market includes two stock exchanges: Ho Chi Minh City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX). At the end of 2011, 300 stocks were listed in the HOSE with total market capitalization of approximately USD 22 billion and 393 companies were listed in the HNX with total market capitalization of approximately USD 4 billion. The majority of listed firms are former SOEs that have undergone partial privatization (equitization). A new trading floor for unlisted public companies (UPCOM) was launched at the Hanoi Securities Center in June 2009. At the end of 2011, 133 companies were listed on UPCOM. In September 2009, a separate trading floor for government bonds was established.

Competition from State-Owned Enterprises (SOEs)

The decline in the importance of SOEs can be seen through their steadily diminishing share in factor inputs. In 2000, SOEs reportedly accounted for nearly 68% of capital, 55% of fixed assets (such as land), 45% of bank credit, and 59% of the jobs in the enterprise sector. These percentages have steadily decreased over the past decade. The steepest decline has been in the employment share of SOEs from 59% to 19%, as labor-intensive SOEs have been equitized and domestic private and foreign enterprises have expanded their labor force. By 2009, the share of SOEs in capital, fixed assets, bank credit, and the employment in the enterprise sector had fallen to 39%, 45%, 27%, and19%, respectively. SOEs are still dominant in all strategic sectors, such as oil and gas, telecommunications, electricity, mining, and insurance.

In 2005, the GVN established the State Capital Investment Corporation (SCIC) to represent GVN state ownership in SOEs, with the responsibility to manage, restructure, and trade State interests in SOEs through the process of equitization and privatization. By 2015, the SCIC plans to privatize or equitize more than 1000 state-owned enterprises, but progress has been slow. The SCIC is also charged with accelerating SOE reforms, improving management in companies in its portfolio.

The 2005 Law on Enterprises requires all SOEs to change their corporate structures to operate, as of July 1, 2010, under the same legal and regulatory framework as all other business entities. However, significant additional SOE reform is needed in order to put the private sector on a level competitive field with SOEs.

In 2010, Vietnam experienced the near-bankruptcy of state-owned shipbuilder, Vinashin, due to mismanagement and substantial investment outside its core business sectors. The incident has raised both domestic and international concern about the efficiency and continued viability of an economic model driven by a dominant state sector.

Vietnam allows foreign investors to participate in the equitization process (per Decree 59 issued in 2011), subject to the provisions of other laws that may restrict foreign investors’ participation in the process, such as ceilings on capital ownership. SOEs have only recently been authorized to sell shares to strategic investors before the IPO; however, the floor price for shares sold to strategic investors must not be lower than the price determined by their line authority.

Corporate Social Responsibility

Many multinational companies implement Corporate Social Responsibility (CSR) programs in Vietnam. Although awareness of CSR programs appears to be increasing among domestic companies, only the largest Vietnamese companies implement CSR programs.

Political Violence

The U.S. Mission knows of no incidents of violence against investors in Vietnam.


Vietnam’s 2005 Anti-Corruption Law, considered by the World Bank as among the best legal frameworks for anti-corruption in Asia, requires GVN officials to declare their assets and set strict penalties for those caught engaging in corrupt practices. Implementation, however, remains problematic. The GVN signed the United Nation Convention on Anti-Corruption in July 2009.

The Government has tasked various agencies to deal with corruption, including the Steering Committee for Anti-Corruption (led by the Prime Minister), Government Inspectorate, and line ministries and agencies. However, few corruption cases have been detected, investigated and prosecuted.

The 2011 Transparency International Corruption Perceptions Index ranked Vietnam 112 out of 182 countries. Corruption in Vietnam is due in large part to a lack of transparency, accountability, and media freedom, as well as low pay for government officials and inadequate systems for holding officials accountable for their actions. Competition among GVN agencies for control over business and investments has created a confused overlapping of jurisdictions and bureaucratic procedures and approvals that in turn create opportunities for corruption.

Vietnam’s 2010 Provincial Competitiveness Index (PCI), supported by USAID’s VNCI Project in partnership with the Vietnam Chamber of Commerce and Industry, surveyed 1,155 foreign invested enterprises regarding how much firms had paid in informal charges: 20% of respondents said their firms paid informal fees during business startup, 40% paid commission when participating in bidding and 70% paid “grease” money for customs clearances. There was no significant difference between local companies and foreign invested companies and among foreign companies from different origins.

Bilateral Investment Agreements

Vietnam has 58 bilateral investment agreements with the following countries and territories: Algeria, Argentina, Armenia, Australia, Austria, Belarus, Belgium and Luxembourg, Bulgaria, Burma, Chile, China, Cuba, Czech Republic, Cambodia, Denmark, Egypt, Finland, France, Germany, Hungary, Iceland, India, Indonesia, Italy, Iran, Japan, Kazakhstan, Kuwait, Laos, Latvia, Lithuania, Malaysia, Mongolia, Mozambique, Netherlands, North Korea, Oman, Philippines, Poland, Qatar, Romania, Russia, Singapore, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Tajikistan, Thailand, Ukraine, United Kingdom, Uruguay, Uzbekistan, United Arab Emirates, and Venezuela.

Ongoing negotiations of a Trans-Pacific Partnership free trade agreement (TPP), in which the both the United States and Vietnam participate, address investment issues. In December 2008, Vietnam and the United States began negotiations of a Bilateral Investment Treaty (BIT), concluding the third round of talks in November 2009.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) has a standing bilateral agreement with Vietnam that provides the protections and guarantees necessary for OPIC to operate in Vietnam. Vietnam joined the Multilateral Investment Guarantee Agency (MIGA) in 1995.

On November 9, 2010, the Prime Minister issued Decision 71 to regulate pilot projects under the Public-Private Partnership (PPP) model for infrastructure development. Sectors to have PPP investments include transportation infrastructure, airports, seaports, clean water supply, power plants, hospitals, waste treatment, and other infrastructure projects identified by the Prime Minister. The value of the government’s contribution in a PPP project will not exceed 30 percent of total investment capital.

The estimated annual U.S. dollar value of local currency used by the U.S. Mission in Vietnam is about $55 million. This currency is purchased at the commercial bank rate, which is closely linked to the official government rate. It is not purchased at the black-market/free market rate, which regularly exceeds the official rate by about 10 percent. The SBV devalued the VND by five percent in November 2009, by three percent in February 2010, by another two percent in August 2010, and by nine percent in February 2011. There remains a risk of further devaluations in 2012 as indicated by the VND continuing to trade at the weaker edge of the official trading band.


One of Vietnam's main investment advantages is its labor force, which is large (over 48 million people), literate (GVN reports a literacy rate of 94 percent), inexpensive, and young (nearly 69 percent of the population is under 40). The labor pool is expected to increase by 1.5% annually between 2010 and 2015.

The GVN sets minimum wages depending on the ownership structure and location of the company. As of October 1, 2011, the minimum wage for workers in private businesses ranges from VND1.4 million ($67) to VND 2 million ($95), depending on geographic zone. Businesses in urban districts of Hanoi, Ho Chi Minh City, and neighboring areas are subject to the higher minimum wage. These rates apply to both local and foreign invested enterprises. For 100 percent state-owned companies and government officials, the minimum wage will be 1,050,000 ($50) effective May 1, 2012.

Foreign investors can hire and recruit staff directly, but only after exhausting a 15-day period using a state-run employment and recruitment bureau. In practice, many employers omit this step and hire their personnel directly without going through the bureau. All personnel must be registered with the GVN. The GVN has recently tightened enforcement of foreigner work permit requirements. In August 2011 a new implementing regulation took effect that requires employers to identify a local apprentice or provide evidence of a formal training plan to replace foreign workers before extending a foreigner’s work permit. The legislation also requires employers to advertise job openings in national and local newspapers at least 30 days prior to recruiting foreign employees.

The 2007 revised Labor Code introduced an extensive process of mediation and arbitration to deal with labor disputes. According to the Labor Code, workers cannot go on strike until mediation procedures have been exhausted. In practice, these procedures are often not used. The Code also requires that at least 50% of workers in businesses with less than 300 employees must vote for the strike and 75% in businesses with 300 workers or more.

Vietnam witnessed 896 strikes through October 2011, according to data from the Vietnam General Confederation of Labor (VGCL), more than double the level of strike activity from calendar year 2010, when 424 strikes occurred. Approximately 80 percent of strikes took place in foreign invested enterprises (FIEs) and the remaining 20 percent in domestic private companies. Over two-thirds of FIE strikes occurred in Taiwanese or South Korean owned businesses. The majority of strikes took place in Ho Chi Minh City and surrounding provinces, where most FIEs are located, particularly in the garment, footwear, and furniture sectors. The GVN rarely takes action against "illegal" strikers.

VGCL is required by law to establish labor unions within six months of establishment of any company, a requirement that is not met in many businesses. All labor unions must be affiliated with the VGCL; a state-run organization under the Communist Party-affiliated Fatherland Front that labor experts note has weak capacity at the provincial and enterprise level.

Vietnam has been a member of the International Labor Organization (ILO) since 1992, and has ratified five core labor conventions (Conventions 100 and 111 on discrimination, Conventions 138 and 182 on child labor, and Convention 29 on forced labor). Vietnam has not ratified Convention 105 dealing with forced labor as a means of political coercion and discrimination or Conventions 87 and 98 on freedom of association and collective bargaining, but is considering doing so. Under the 1998 Declaration on Fundamental Principles and Rights to Work, however, all ILO members, including Vietnam, have pledged to respect and promote core ILO labor standards, including those regarding association, the right to organize and collective bargaining. A number of technical assistance projects in the field of labor sponsored by foreign donors, including the United States, are currently underway in Vietnam.

Foreign Trade Zones/Free Ports

Vietnam has 267 industrial zones (IZs) and export processing zones (EPZs), most of which are located in Vietnam’s key economic zones. Projects in IPs and EPZs often enjoy investment incentives by sectors and geographical areas. Enterprises pay no duties when importing raw materials if the end products are exported. Vietnam committed to eliminating prohibited export subsidies on its accession to the WTO.

Many foreign investors note that it is easier to implement projects in industrial zones because they do not have to be involved in site clearance and infrastructure construction. Foreign investment in the industrial zones is primarily in the light industry sector, such as food processing and textiles.

Customs warehouse keepers can provide transportation services and act as distributors for the goods deposited. Additional services relating to customs declaration, appraisal, insurance, reprocessing, or packaging require the approval of the provincial customs office. In practice the level of service needs improvement. The time involved for clearance and delivery can be lengthy and unpredictable.

Most goods pending import and domestic goods pending export can be deposited in bonded warehouses under the supervision of the provincial customs office. Exceptions include goods prohibited from import or export, Vietnamese-made goods with fraudulent trademarks or labels, goods of unknown origin, and goods dangerous or harmful to the public or environment. The inbound warehouse leasing contract must be registered with the customs bond unit at least 24 hours prior to the arrival of goods at the port. Documents required are a notarized copy of authorization of the holder to receive the goods, a notarized copy of the warehouse lease contract, the bill of lading, a certificate of origin, a packing list, and customs declaration forms. Owners of the goods pay import or export tax when the goods are removed from the bonded warehouse.

Foreign Direct Investment Statistics

Foreign Direct Investment 2005-2011
(All amounts in billions of U.S. dollars)

Number of new projects authorized: 1,091
Authorized Investment (including new and extended projects): $11.6
Implemented Investment: $11

Number of new projects authorized: 969
Authorized Investment (including new and extended projects): $18.6
Implemented Investment: $11

Number of projects authorized: 1,155
Authorized Investment: $22.6
Implemented Investment: $10

Number of projects authorized: 1171
Authorized Investment: $64.01
Implemented Investment: $11.5

Number of projects authorized: 1544
Authorized Investment: $21.3
Implemented Investment: $8.03

Number of projects authorized: 833
Authorized investment: $12
Implemented investment: $4.1

Number of projects authorized: 970
Authorized investment: $6.8
Implemented investment: $3.3

Source: GVN's Foreign Investment Agency

Note: GVN authorities routinely revise or revoke investment licenses that have not been utilized, and some investment licenses contain automatic expiration clauses that take effect if a project or phase of a project is not implemented by a certain date. Statistics on the number of licensed projects and the value of licensed projects are then adjusted accordingly.

FDI by Major Sector 1988-2011
(All amounts in billions of U.S. dollars)

Sector: Industry and manufacturing
Number of Projects Authorized: 7,987
Authorized investment: $93

Sector: Real estate
Number of Projects Authorized: 373
Authorized investment: $47

Sector: Hotels and tourism
Number of Projects Authorized: 314
Authorized investment: $11.8

Sector: Construction
Number of Projects Authorized: 839
Authorized investment: $12.5

Sector: Communications
Number of Projects Authorized: 713
Authorized investment: $5.7

Sector: Extractive
Number of Projects Authorized: 70
Authorized investment: $2.9

Sector: Agriculture, forestry and fishery
Number of Projects Authorized: 496
Authorized investment: $3.2

Sector: Transportation and Warehouse
Number of Projects Authorized: 318
Authorized investment: $3.3

Sector: Finance and banking
Number of Projects Authorized: 75
Authorized investment: $1.3

Sector: Education
Number of Projects Authorized: 152
Authorized investment: $0.4

Source: GVN's Foreign Investment Agency

FDI by Top Ten Investors in 2011
(All amounts in billions of U.S. dollars)

Country: Number of new projects/Authorized Investment (in billions of U.S. dollars)

1 Hong Kong 49/$3,093.17
2 Japan 208/$2,438.48
3 Singapore 105/$2,208.22
4 South Korea 270/$1,466.68
5 China 78/$747.80
6 Taiwan 64/$565.68
7 British Virgin Islands 19/$481.00
8 Malaysia 21/$453.45
9 Luxembourg 3/$398.11
10 The Netherlands 13/$396.16

Source: GVN's Foreign Investment Agency

Vietnam’s Overseas Investment
Note: Statistics on Vietnam’s investment overseas are unreliable and inconsistent.

Vietnam committed a total of 10.8 billion USD of investment in 627 projects in 55 countries and territories around the world by the end of 2011. Laos tops the list as the most appealing investment destination, receiving 3.4 billion USD worth of investment, followed by Cambodia with 2.1 billion USD, and Venezuela with 1.8 billion USD. Other countries attracting large-scale investment from Vietnam include Russia, Peru, Malaysia, and Mozambique ranging from 345 to 776 million USD.

In 2011, Vietnam authorized 75 outbound investment projects in 26 countries and territories, and adjusted investment capital for 33 investment projects with total investment capital of approximately 2.12 billion USD, with large-scale projects in the energy and communication sectors in areas targeted by the GVB.

In 2011, Vietnam’s SOEs invested 950 million USD in outbound investment projects in other countries.

PetroVietnam is the highest outbound investor with 347 million USD, followed by Viettel with 185 million USD, the Vietnam Rubber Corporation with 134.6 million USD and Song Da Corporation with 161 million USD.

Total overseas investment by Vietnam
(All amounts in billions of U.S. dollars)

Number of projects: 108
Authorized capital: $2.12

Number of projects: 107
Authorized capital: $2.97

Number of projects: 81
Authorized capital: $1.7

Number of projects: 112
Authorized capital: $3.1

Number of projects: 80
Authorized capital: $1.0

Number of projects: 36
Authorized capital: $0.15 billion

Number of projects: 36
Authorized capital: $0.54 billion